In the late 19th century, the Gilded Age quietly came, bringing unprecedented prosperity and affluence to the US. This era not only witnessed the vigorous development of the American economy but also gave birth to a group of world-renowned business tycoons, such as Rockefeller and Carnegie. Industries, including factories, railways, coal mining, and steel production, thrived during this time and became the pillars of the American economy. Many people made good fortune out of the industries.

Over the past two decades since 2000, we have seen another splendid era where billionaires have amassed an astonishing amount of wealth, like in the Gilded Age. Driven by rapid globalization and industrialization, American entrepreneurs have leveraged the power of technology and led the way in the new Internet era, boasting global tech giants such as Microsoft and Amazon. Outside of technology, many have also astutely seized new opportunities in the financial sector and accumulated vast fortunes by establishing hedge funds and private equity funds. Globally speaking, especially in Europe, the consumer goods industry has played a vital role in generating immense wealth. In addition, the rapid rise of Asian and other emerging market economies has propelled robust development in infrastructure and real estate, further fueling the wealth growth of billionaires in these sectors.

In this article, we will review the past two decades, hailed as the Second Gilded Age, delve into the changing distribution of billionaires across various industries and geographical locations, and share intriguing and thought-provoking observations.

To Be Named the World's Richest

In 1987, Forbes magazine published the now highly anticipated Forbes Billionaires List for the first time. This list, compiled through in-depth analysis of shareholder information, company financial statements, and real-time exchange rates, identifies billionaires with net assets exceeding USD 1 billion annually. In its inaugural edition, Forbes identified a total of 140 billionaires, with 96 hailing from countries outside the US. The first-time billionaires featured on the list had predominantly amassed their enormous wealth through sectors such as real estate (24 individuals), manufacturing (17 individuals), and retail (15 individuals). Notably, Yoshiaki Tsutsumi, the owner of Japan's Seibu Group, held the top spot on the global billionaire list from 1987 to 1990 and again from 1993 to 1994 with a fortune of nearly USD 20 billion. This reflected the prominent position traditional industries, particularly real estate, held on the wealth rankings back then.  

Starting in 1995, Bill Gates, the founder of Microsoft and an influential figure in the U.S. technology sector, claimed the top position on the world's billionaire list with a net worth of USD 12.9 billion. He dominated the rankings for an impressive 13 consecutive years, symbolizing the onset of the riches brought by American internet startups. Subsequently, the "Oracle of Omaha,” Warren Buffett, and Mexican telecommunications magnate Carlos Slim took turns to be the world's richest. However, as the 2010s unfolded, technology giants like Bill Gates, Jeff Bezos, and Elon Musk mostly occupied the throne of the world's richest, which showcased the massive influence the tech industry has had on wealth creation in recent years.

The Second Gilded Age

In just two short decades, the second Gilded Age has profoundly transformed the global population of billionaires. Until 1980, the concentration of billionaires was primarily in the United States and Europe. However, over the past ten years, steady economic growth in the US and the remarkable ascent of Asia have provided multiple avenues for entrepreneurs to amass wealth. In the 1996 edition of the Forbes Billionaires List, there were only 423 billionaires worldwide, with no presence from China. However, in the latest ranking in 2023, the number has skyrocketed to a staggering 2,781, with China alone boasting 495 billionaires, second only to the US. Even after adjusting for inflation's impact on billionaire assets, the global billionaire population still far exceeds the level of twenty years ago.

From a geographical perspective, the growth of self-made billionaires in the US has been particularly rapid. Among them, the financial services industry has nurtured the highest number of self-made billionaires, accounting for a significant 30%. This proportion is notably higher than that of Europe (10%) and other developed countries (20%). Within the financial industry, hedge funds stand out as highly profitable vehicles. Hedge funds originally accounted for less than 10% of the wealth within the financial industry in 2000, but the number surged to 22% by 2015. Notably, over 80% of hedge fund billionaires globally originate from the US.

Since the Internet revolution in 2000, the technology sector has presented unprecedented opportunities in the US. The technology industry has rapidly emerged as the second-largest cradle for US billionaires, accounting for a substantial 27.3%. With its lower employee count and fixed capital requirements, the software industry has provided an effective pathway for rapid expansion. Tech billionaires have an average wealth of USD 7.8 billion, far surpassing the average wealth of USD 4.5 billion for financiers. Regarding residency, the two most concentrated cities for US billionaires are New York and San Francisco, the country's financial and technological centers respectively. This geographical distribution pattern confirms the dominant position of the financial and tech industries among U.S. billionaires.  

In Europe, the consumer goods industry dominates, both in terms of the number of self-made billionaires (accounting for 49.5%) and average wealth (USD 5.7 billion). Numerous entrepreneurs have accumulated tremendous wealth by establishing large-scale retail enterprises, for example Bernard Arnault(LVMH Group), and Amancio Ortega( Zara Group). These billionaires have benefited from the strong global consumer demand driven as a result of globalization. In contrast, the technology industry has a smaller share of billionaires in Europe, accounting for only 9.7%, with an average wealth of USD 3.8 billion. Europe has more inherited wealth than the US, where wealth is increasingly concentrated in the finance and high-tech industries. It is the birthplace of the oldest fortunes, with over half of European billionaires inheriting their wealth, compared to only one-third in the United States.

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Over the past two decades, the rapid economic growth of Asia has created countless opportunities for self-made billionaires. Asian billionaires account for 36% of all self-made billionaires, second only to the US. Among them, the consumer goods industry is their primary source of wealth, with a 19.8% share and an average wealth of USD 3.2 billion. At the same time, the booming real estate market in Asia has provided fertile ground for billionaires, accounting for 12.9% and ranking second in terms of quantity. The average wealth of this group is USD 2.7 billion. Asian countries started developing their economies late, so the characteristics of the region's emerging billionaires differ from those in other regions. For instance, 25% of Asian billionaires have grown up in impoverished environments, a significantly higher proportion compared to 8% in the US and 6% in Europe. Moreover, self-made billionaires in Asia are relatively younger, with an average age of 57, nearly a decade younger than their counterparts in the US and Europe.

Although the US still has the largest number of billionaires in the world, the gap between Chinese billionaires and their American counterparts narrowed to double digits in 2021. For China, 2011 data shows that the manufacturing industry had the highest proportion of billionaires at 32.4%, followed by real estate at 19.5%. This result aligns with expectations, as China has gradually become a global leader in manufacturing over the past 20 years thanks to its low labour cost. The wealth brought by flying economic growth, high household savings rates, and capital controls have all contributed to the flow of funds into the real estate industry. In contrast, the main sources of wealth for American billionaires during the same period were the technology and media industry (23%) and the financial industry (20%). The vibrant tech industry and the mature financial intermediaries, such as venture capital, complement each other, stimulating the continuous growth of both sectors. Conversely, the real estate industry accounts for a smaller proportion, approximately 7.5%, and there are no billionaires directly involved in manufacturing on the list. The US has historically embraced a “free market,” offering abundant opportunities, while China's financial industry is dominated by state-owned banks and heavily regulated. Therefore, it is not surprising to see that there are few billionaires profiting directly from financial activities.

To catch up with the US, the Chinese government has been striving to make China a technology powerhouse over the past decade. In 2020, the government announced an investment of approximately USD 1.4 trillion over the next five years to support critical technology projects such as next-generation wireless networks, artificial intelligence, robotics, cloud computing, and data analysis. In fact, the government's fast and large-scale infrastructure upgrades have often laid the foundation for the ever-changing landscape of tech billionaires. As expected, the 2021 list of Chinese billionaires is predominantly dominated by entrepreneurs in high-tech and green technology (one of the government's key supported areas). Entrepreneurs in these supported sectors made full use of the government's funding and preferential policies and grew their companies at a rapid rate. For instance, Zhang Yiming(ByteDance), surpassed the once richest individuals in China, Jack Ma(Alibaba) and Pony Ma(Tencent), in terms of wealth in 2021.  

Summary

We took a retrospective look at the industries and countries in which billionaires have thrived over the past two decades, along with intriguing data pertaining to these ultra-wealthy individuals. When billionaires achieve remarkable success, how do they navigate the realm of investments to preserve their wealth? What sets their investment strategies apart from the rest? Stay tuned for our upcoming edition of Poseidon’s Foresight next week.