I was planning to write about the psychology of a person, Alwaleed bin Talal, who has ‘withdrawn’ from Forbes because it said his wealth was ‘only’ $20 billion, a full $9.6 billion below his own estimate. Yet John Gapper had already written about this in the Financial Times.
Many of us libertarians and advocates of the market economy are attacked by the left for our views, and often the number of billionariares is used as evidence of greed and the evils of the market.
What many of these attackers don’t realise is that many of these billionaires made their money with the aid of the State - they became rich on the back of government, not because of their own entrepreneurship.
Take the richest man on the list, Carlos Slim, who acquired Telmex when it was privatised thanks to his political connections and then has used the government to protect his telecommunications monopoly from competition. He is rich because of the Mexican Government.
Talal himself made money from his acquisition of Citigroup in 1991 in the middle of a debt crisis when Citigroup had taken substantial risks. Fortunately for Talal, Uncle Sam rode to the rescue and bailed Citigroup out. The market wasn’t allowed to punish the company and its executives for their bad decisions.
As Gapper writes:
Prince Alwaleed bin Talal is unhappy with Forbes magazine, accusing it of prejudice in estimating his wealth at $20bn – a mere 26th among the world’s 1,426 billionaires. The Saudi investor has broken off his “longstanding relationship with the Forbes billionaires list” and sought comfort in the Bloomberg Billionaires ranking.
The prince has traditionally occupied a high position on the Forbes list, since he bought an $800m stake in Citigroup in 1991 and prospered as the bank recovered from a debt crisis. Forbes has accused him of exaggerating the price of Kingdom Holding, his investment company, to retain a top 10 place, which he indignantly denies.
The question is: why on earth does the prince care so much? The answer is: because most of us care, too. The billionaires’ list is Forbes’ most lucrative and popular franchise, and Bloomberg has energetically tried to beat it – uncovering 90 “hidden billionaires” since last year. The wealthy fascinate us, and are trailed by an industry of wealth managers, lawyers and tax advisers.
We are all deluded because such rankings are bad measures of a bad metric. They are guesstimates of wealth, which is a flawed proxy for people’s merit or whether they have done anything useful. Some – including several in the technology industry – are great entrepreneurs. Others are oligarchs, and some are lucky, or were born well.
…
A glance at the Forbes or Bloomberg rankings shows what a mixed bag they are. The Bloomberg top 100 (updated in real time to keep Prince Alwaleed on alert) includes many who built businesses with wit and imagination, such as Sergey Brin and Larry Page of Google, Jeff Bezos of Amazon and Stefan Persson of Hennes & Mauritz.
But the “self-made” category also includes Russian and Middle Eastern wealth acquired more by being in the right place at the right time and getting close to the right government official when the spoils were being allocated than beating others in a free market. These billionaires are also exceptional, but not all their qualities are admirable.
Carlos Slim, the world’s richest man, gained his biggest break by acquiring Telmex when Mexico’s state telecoms company was privatised in 1990, and then defeating all legal challenges to its lucrative monopoly. “Slim has made his money in the Mexican economy in large part thanks to his political connections,” argue Daron Acemoglu and James Robinson in their book, Why Nations Fail.
The Bloomberg top 100 features 28 people who simply inherited wealth – including all 12 of the women. If one adds to this those in the energy, metals and mining, finance and property sectors, which are based more on acquiring and trading assets than innovation, along with the most oligarchal of the “diversified” sector, one gets to 50. Only half of the top 100 billionaires, in other words, are classic entrepreneurs.
…
The prince has responded by insisting on his rightful claim to his old place. Whether he is worth $20bn or $28bn, as Bloomberg estimates, his will prove a losing battle in the long term – these days, there is always another billionaire contender. Nor does the status necessarily confer respectability.
You’ve left out the best example: Hugo Chavez(may he not rest in peace), who enriched himself to the tune of at least $1 billion (and reports suggest more) at the expense of his people, all under the guise of being some kind of socialist idol.
Milton Von Smith
7 Mar 13 at 9:25 pm
Milton – an excellent example of greed, corruption and hypocrisy writ large. I imagine there is a special place in Hell reserved for the late Chavez.
Samuel J
7 Mar 13 at 9:31 pm
When I’m a billionaire, and as I rise, I will take as many precautions as possible to stay out of any spotlight. With skill and luck nobody but my family and friends will know my name. It would suck to be a public figure.
James
7 Mar 13 at 9:44 pm
Closer to home – Therese Reine also made her money from government contracts – here and in UK.
Old woman of the north
7 Mar 13 at 10:09 pm
Frankly I’m shocked. Huggy CHavez had an eye for money? Naaaaa.
I read somewhere he was a huge cokehead too.
Jc
7 Mar 13 at 10:11 pm
Talk about an Arab Spring!
I wonder how your rating amongst the wild tribes is once you have lost a mere US$9.6 billion?
Ahh well… there is always Syria or Egypt to fuck.
Naah… lets go for Europe.
Easy money….
I bet he is back, if he is not dead, next year with double the tithe!
NoFixedAddress
7 Mar 13 at 10:29 pm
I feel a buyout of Forbes coming on!
NoFixedAddress
7 Mar 13 at 10:31 pm
And whom owns Bloomberg?
NoFixedAddress
7 Mar 13 at 10:32 pm
Agreed. If I were ever that rich I certainly wouldn’t want a bunch of people knowing about it. It’s none of their business. I have zero desire to be famous.
tbh
7 Mar 13 at 10:50 pm
If someone makes a $billion by working a government what is wrong with that? So long as they have not broken any laws they are just as worthy as any other billionaire. This is a case of shooting the messenger.
kelly liddle
7 Mar 13 at 11:59 pm
It raises questions of cronyism and political favours. Not necessarily illegal but shady in some or maybe even most cases. Most of us who have a libertarian leaning regard it as mooching.
tbh
8 Mar 13 at 12:04 am
Mooching may not be the right word. Patronage perhaps.
tbh
8 Mar 13 at 12:04 am
So sayeth the defender of taxi licensing.
Generally when you use the government to hand you a fortune, you do it at the expense of consumers and other producers. Nobody wins but you and the government mates getting the kickbacks. For most of us, that’s a bad outcome. It’s not the wealth that is bad, it’s the way it was obtained.
Bill Gates made his money with the government actively working against him. They made BS arguments about monopolies and attacked him for it. Meanwhile, other people build real monopolies and use the power of government to protect them, and nobody says squat.
brc
8 Mar 13 at 12:09 am
There are lots of Forbes lists, my favorite is the richest comic book characters.
I think Scrooge McDuck was unfairly treated in previous lists when they refused to convert his 1950s fortune into modern dollars.
On a less seriousn note, see Burton Folsom’s book The Myth of the Robber Barons for the crucial difference between political entrepreneurs and market entrepreneurs.
Poor Old Rafe
8 Mar 13 at 12:15 am
tbh
That might be so but it has nothing to do with the person gaining from the government. If you knew how to get a million dollars legally off the government and did not take that opportunity I would call you a fool. The government is at fault. If you want to take that belief to an extreme level about these things you might actually have to cut yourself out of whole sectors of the economy.
kelly liddle
8 Mar 13 at 12:17 am
brc
What do you do and are you an investor at all?
kelly liddle
8 Mar 13 at 12:18 am
@Poor Old Rafe
What!
Isn’t Scrooge McDuck the richest?
It makes me think that the ACCC only supports the entrenched.
NoFixedAddress
8 Mar 13 at 12:20 am
There are a whole range of reasons that I would be reluctant to contract to the government and principle is only one of them. It’s a dead end anyway, because governments only take money out of the economy — they don’t generate any wealth in and of themselves.
tbh
8 Mar 13 at 12:31 am
Lefties never get this concept.
Gab
8 Mar 13 at 12:34 am
kelly it may be correct that governments should be blamed for the success of political entrepreneurs but you need to realise that between them they caused the GFC. So I don’t think you should admire them or apologise for them. They are a kind of vermin that feed on Big and Weak governments, at our expense.
Poor Old Rafe
8 Mar 13 at 12:35 am
Rafe
But taking my own personal view I only look for return when investing or risk return. It doesn’t mean I won’t advocate against allowing me to do that. I would actualy argue that many of the billionaires who made that money through certain government policies would still make money in other ways if that choice was not open to them, they only care about return.
kelly liddle
8 Mar 13 at 12:48 am
Yes they do.
They learned it well and use it and abuse it.
Just as Righties do.
If some cock sucking holy moler fucking big noise businesswoman or businessman now stands up (I am talking about all the members of the RBA) and tells me how bad the ABC is or how bad the Carbon Tax is or how bad lack of GST on imports is…. or how much we either need the 4 banks or not need the 4 banks…
and more particular how much we need to look after the teachers or the disabled or the fucking unions or that a piece of paper that you get from some university like Melbourne University is important….
hah….
I wait until the lefties pick up mobile phones and bring the whole of the so called Australian Stock Exchange to a crashing halt.
What is truth and law anymore?
NoFixedAddress
8 Mar 13 at 12:51 am
How curious. His name is Walid bin Talal not Alwaleed. It’s like calling Sinc The Sinclair.
Which works, I suppose.
[/digression]
Abu Chowdah
8 Mar 13 at 12:58 am
That would be The Sinclair.
Gab
8 Mar 13 at 1:02 am
Gab – you say the nicest things.
Sinclair Davidson
8 Mar 13 at 1:05 am
@kelly liddle,
When I was presented with the WA solar rebate scam I said that is moral theft from the ordinary taxpayers.
I believe there is a common law that can stop all the cute ‘widdle’ subsidies in every state in Australia.
I have cut myself off from whole sectors of the economy because I know a fools paradise when I see it.
Get your government to make the laws that you want… global warming for you…. not a problem!
What… the value of your home just disappeared because the government are still screaming at you how they have a surplus coming real soon now.
And you trust the RBA?
Have you looked at who is on that board?
NoFixedAddress
8 Mar 13 at 1:05 am
I am so delusional that the next thing you will be telling me is that Red Ted should still be Premier of Victoria and there is no way that forest burning would have saved the high country of Australia!
NoFixedAddress
8 Mar 13 at 1:10 am
That is an interesting one because any investment in residential property is underwritten by immigration policy. Yes I do have a very small residential/student accomodation investment. Guaranteed by government policy. Anybody who has a residential investment is relying on government policy.
kelly liddle
8 Mar 13 at 1:11 am
The whinings of a petulant child, to whom any number of billions will never be enough.
If we are talking about people who use the power of government to obtain and spend money, then Barack Obama should be the first multi-trillionaire. Of course all that’s on paper and not in realisable asssets…
perturbed
8 Mar 13 at 1:28 am
Check out his new plane here. With a garage big enough to park his Rolls Royce.
Samuel J
8 Mar 13 at 3:46 am