I was planning to write about the psychology of a person, Alwaleed bin Talal, who has ‘withdrawn’ from Forbes because it said his wealth was ‘only’ $20 billion, a full $9.6 billion below his own estimate.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.