The New, Entrepreneurial Richby
How do the rich get that way? Increasingly, it’s through starting and running businesses, rather than inheriting money from wealthy families, especially in the developing world, a new report from Barclays suggests.
The bank surveyed 2,000 people worth at least $1.5 million—“high net worth individuals,” is the report’s term of art—from around the globe. Two hundred of them had at least $15 million. More than 750 called themselves entrepreneurs. When researchers asked group members where their money came from, here’s what they said:
Earnings and personal investments are the biggest sources of wealth, but entrepreneurship is next. Just a quarter said they inherited their cash.
Now, we might expect wealthy people, asked about how they got their money, to emphasize their own industry and downplay their luck and pedigree—call it the “born on third base” factor. But the report cites research showing a real trend: In the U.S., inheritances account for a shrinking portion of household wealth.
Around the world, survey respondents cited entrepreneurship most often as a source of wealth in Latin America, Asia, and South Africa. Of course, developing countries by definition have less entrenched, familial wealth to pass on.
Author and Reuters editor Chrystia Freeland has chronicled the growth of this new, entrepreneurial elite and the consequences for everyone else:
Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.
Whether a rich elite of self-made entrepreneurs is better than the old aristocracies is yet to be seen. As Freeland points out, the shift has been tough for workers in wealthy countries, whose jobs are most likely to be outsourced or made obsolete:
Meanwhile, the vast majority of U.S. workers, however devoted and skilled at their jobs, have missed out on the windfalls of this winner-take-most economy—or worse, found their savings, employers, or professions ravaged by the same forces that have enriched the plutocratic elite. The result of these divergent trends is a jaw-dropping surge in U.S. income inequality.