Many of the rising top companies today are entrepreneurial companies. In addition to providing millions of jobs, these companies continue to amaze us with their innovations and creativity. In this paper, we analyze job growth and salary increases across industries. We also compare these metrics between entrepreneurial companies (as defined by the ERShares proprietary Entrepreneur Factor) and the S&P 500.
Identify Job growth
Entrepreneurial companies have created jobs for Americans throughout the years. With the information provided, we were able to identify the jobs growth in the ER30 index (the ER30 Index or Entrepreneurial 30 Index is a selection of 30 well-established entrepreneurial companies that are publicly traded) in comparison to the S&P 500.
Table 1
S&P 500 vs. ER30 Job Information
Table 1 shows the total jobs each year from 2011-2019, the number of new jobs created these years, and the year-over-year (YoY) job growth percentage in both the S&P 500 and ER30. Comparing the job growth data of the S&P 500 and ER30, it is surprising to see how many more jobs are being created by entrepreneurial companies over the years. It is important to note that the job data excludes major acquisitions. This means that entrepreneurial companies grow organically and not through mergers and acquisitions. Specifically, from 2011 to 2019, the companies included in the ER30 grew in jobs by around 1000%, while the S&P by a little less than 50%. This result illustrates how fast the entrepreneurial companies create organic job growth.
Table 2
Year-over-year Job Growth Comparison
Table 2 shows the year-over-year job growth rate for the S&P 500 after removing any the ER30 company which is also included in the S&P 500
Figure 1
Figure 1 visualizes the job growth of the ER30 companies, comparing them to the total job growth of the S&P 500 and the whole U.S. (the table with the information found on the reference page). We observe that on a year over year basis, entrepreneurial companies have been the dominant leaders in terms of job growth, and the trend doesn’t seem to be slowing down.
Which Companies Created the Most Jobs?
Amazon.com employs over 1,298,000 people as per their fourth quarter’s earnings report. This number dwarfs any other in the list. It is also important to note that this number excludes contractors and temporary personnel. Moreover, with year-over-year growth of 63 %, it has created, by far, the most jobs out of any other S&P 500 company. Part of Amazon’s explosive job growth in 2020 can be attributed to the Covid-19 pandemic, which accelerated e-commerce in a big way. From Amazon Web Services to Amazon Prime streaming services, several revenue streams benefited from the pandemic, lifting Amazon’s worth to almost 1.65 trillion U.S. dollars. It is not an exaggeration to state that Amazon’s success is vastly owed to Bezos’ entrepreneurial mindset and the entrepreneurial culture he has created in Amazon, allowing Amazon to disrupt every industry it has entered.
Another example of entrepreneurial success is Alphabet Inc., Google’s parent company, which ranks second in job creation in the past decade. Currently, Alphabet employs almost 140,000 as per their latest press release (2021 first-quarter report). Google created more than 16,000 jobs in just the first quarter of 2021, with most of those employees working on Google Search and Google Cloud.
In addition to being one of the most prominent employers, Google boasts the highest average salary in the technology sector.
Which Industry Created the Most Jobs?
Among all industries, the service-providing industry has seen the most growth in recent years. Especially, services that have to do with data processing, information technology operations, and related consulting have surged even during the pandemic. The new work-from-home culture entirely benefits from online systems technology. In the Information and Technology sector, e-commerce and Fintech are among the fastest growing industries.
In addition to that, the U.S. Bureau of Labor Statistics states that healthcare and social assistance is the fastest-growing major sector in the economy, which includes five out of the 20 fastest growing industries for the next decade. Specifically, the Bureau of Labor Statistics projects that employment in healthcare occupations will grow 15 percent from 2019 to 2029. The rate of growth is much greater than the average for all occupations and represents about 2.4 million new jobs created.
Compared to the rest of the sectors, the outperformance can be attributed to the aging population due to longer life expectancy and the constant increase in patient numbers with chronic conditions.
Which industries lost the most jobs?
Growth within industries has often fluctuated depending on the popularity or trends.
Formerly successful industries are way past their hay days. The manufacturing industry experienced the greatest job decline before the COVID-19 pandemic.
Furthermore, looking beyond the pandemic, even though manufacturing itself might not be declining, machinery and automation is reducing jobs on a big scale. Another industry that has undergone an interesting transformation is the information industry. A distinction can be made now between digital and print information.
The following table shows that newspaper, periodical, book, directory publishers, cable and other subscription details, and wired telecommunications carriers, are the most in decline.
Today, it is easier to find news on social media or company websites, as most news is published on digital platforms. The cable industry has also suffered due to services such as Apple TV, Netflix, and Hulu.
COVID-19 has fundamentally altered the way industries work today. Every industry and industry sector experienced a dramatic shift.
Sectors such as retail, hospitality, and leisure have been struggling, while technology companies have prospered. Some of the industries seem to be coming back to the pre-pandemic levels of operation; however, it is very plausible that the pandemic has affected specific industries irreversibly.
Which companies created the highest paying jobs?
Five companies in the ER30 rank in the top ten highest paying salaries according to CNBC.[4] Salesforce ranked number nine with median compensation of $150,379. First was Nvidia in number two in the list, with a median compensation of $170,068. Next, was Twitter ranking third with median compensation of $162,852. Alphabet, then ranked number five with a median compensation of $161,254. Facebook was eighth with a median compensation of $152,962.
In light of this report, the success of entrepreneurial companies is also evident in the extraordinary ability of these companies to provide employment and growth in the economy.
How much of the job growth is created by entrepreneurial companies?
In Table 5, we can observe a widening gap over the years between the job growth achieved by entrepreneurial companies and the rest of the S&P 500.
In 2019, we can see that 43.46 percent of jobs created by the S&P 500 that year came from companies listed in the ER30 index.
Table 5
Percent of ER30 New Jobs when compared to New Jobs in S&P 500
In figure 2, we notice that over this past decade, the total new jobs created in ER30 increasingly influenced the total increase of jobs in the S&P 500. Specifically, in 2019, companies in both ER30 and S&P 500 are credited for a little less than half of the new jobs created in the S&P, which is impressive. This finding is also evident in table 6
Figure 2
Table 6
Percent of ER30 Jobs in S&P 500
In table 6, we report the total jobs per year in the S&P 500 and the Total ER30 Jobs in the S&P 500. We observe that in 2019, the ER30 companies employed almost 1 million people or 3.66% of the total jobs in the S&P 500. That percent has grown since 2011, when it was only 0.64%.
After years of academic research demonstrating that entrepreneurial companies create more jobs than non-entrepreneurial companies, we believe this will be the case in the future as entrepreneurial companies continue to create more value in our societies compared to traditional companies.Despite the difficulties and challenges companies had to face over the past decade, such as COVID-19, the employment opportunities offered by entrepreneurial companies have been increasing fast over the years. Through innovation and dedication, entrepreneurs have succeeded time and again in creating wealth through their fast growth and providing employment opportunities while raising salaries at the same time, thus, benefiting the economy.
China is rolling out a digital yuan, making the world’s second-largest economy the first major country to create its own digital currency.
That move could have implications for an array of assets, fintech and otherwise.
The digital yuan could disrupt the digital payments industry (which itself is a disruptive industry when compared with traditional payments processing). One can open a PBOC digital wallet with nothing but a cell phone number—you don’t even need a name. The Chinese government even plans to fund these wallets with extremely targeted stimulus payments. The immediate use case could be to supplant Alipay and WeChat Pay in the domestic Chinese market.
“China is the first country to develop a Digital Currency. We will see increased Volatility in the Crypto markets as different Countries develop their own Digital Currencies,” said Eva Ados, COO and Chief Investment Strategist for ERShares, in an interview with Bloomberg.
The Digital Yuan Beyond China
With the backing of the central bank of one of the top economies in the world, the digital version of the yuan could see global adoption. Digital payments were already on the rise amid social distancing measures, but this new digital currency could up the ante.
“With the extraordinary direct public offering of Coinbase, sporting a valuation representing a high multiple of revenues/future earnings and at its peak reaching a market cap equal to NYSE and NASDAQ combined, we are all waiting to see how this will all unfold in the coming months,” adds ERShares.
Some existing exchange traded funds tap into shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
“Ados expects increased significance to the economy, in case the digital yuan takes over global transactions. Climate cost associated with cryptocurrency -such as bitcoin mining- indicates unfixed callings on how far the asset class can go. New regulation interventions are dawning with the cryptocurrency’s skyrocketing carbon footprint,” according to ERShares.
Coinbase’s record direct public offering (DPO), favorable equity markets, and increased cashflow into the marketplace add up to a good environment for investors, according to Eva Ados, COO and Chief Investment Strategist of ERShares, in an interview with Yahoo! Finance.
Coinbase (Nasdaq: COIN) was the biggest DPO in history; within the first 10 minutes of trading on Wednesday, April 14th, it had reached $105 billion of market capitalization.
“To put that in perspective, that’s 4 times the Nasdaq and 1.5 times the NYSE,” said Ados.
It is important to remember, added Ados, that Coinbase is also an exchange, which means it can trade 50 cryptocurrencies at a time.
It’s “a great entrepreneurial growth story” that shows potential for the future for crypto assets and exchanges, she added.
Elsewhere in the market, Ados believes that Fed support, good earnings announcements, low unemployment numbers, persistently low interest rates, and vaccination rollouts will all lead to a strong economic comeback, especially in the tech sector.
The “least risky category” in tech, said Ados, are the FAANGs, which are showing 10% growth year-to-date. Other opportunities lie in “hyper-growth” companies with strong earnings, such as Square (NYSE:SQ) and Roku (NASDAQ: ROKU), and even hyper-growth companies with no or negative earnings, such as Cloudflare (NYSE:NET). One-third of the U.S. tech sector is compromised of hyper-growth companies with no earnings, said Ados.
She also stated that bond rates may have overshot and will continue to drop as they course-correct, with Fed support. Bond market yields, she noted, are coming down; the yield on 10-year Treasury notes was down to 1.58%, from 1.64% the previous week. “We believe it’s not a good time to be in the fixed income space,” said Ados, adding that flows are moving toward equity markets.
ERShares isn’t currently concerned with inflation, with Ados stating that they may pay closer attention as the year draws to a close. But with support from the Fed and the recent round of stimulus payments helping to bolster the economy, there is increased cash flow to the markets. Record numbers of retail accounts with Robinhood and Schwab have been opened as Millennials flock to tech stocks—especially the “growth stories that Millennials love”—all adding more money to the marketplace, she added.
There’s nothing but “blue skies ahead. It’s a great time to be an investor,” concluded Ados.
Big tech stocks have notched big gains, but they still have room to move even higher throughout May and the rest of 2021, said Joel Shulman, founder and CIO of ERShares, in an interview with Fox Business.
Despite setbacks for some major companies, selected FAANGS are performing strongly thus far, said Shulman. “It’s unbelievable, these companies [Facebook (FB)Amazon (AMZN) and Google (GOOGL)] are $4.5 trillion and yet they’re still growing 40-50%.”
All three companies have pivoted to perform exceedingly well in the midst of the pandemic, he pointed out, with Amazon’s EBIT increasing by 36%: “we haven’t seen this type of company ever.”
While many companies outperformed expectations, Shulman believes that some value stocks or high fliers “may be in trouble,” as exemplified by Twitter (TWTR) last week and Pinterest (PINS).
Changes in the capital gains tax could also introduce some “choppiness” into the markets, he said.
Earnings Season Takeaways
First quarter reporting saw 95% of tech stocks beating earnings, noted Shulman, but their recent volatility has made it difficult for analysts to predict what to expect next.
Analysts are “having an extremely hard time” predicting the trajectory of even well-known companies like the FAANGS, where predictions were way off. Avis Car Rental (CAR) is a value stock that personifies this; it is currently at an all-time high after being close to bankruptcy a few months ago.
“Unfortunately, with earnings so far, the guidance hasn’t been very helpful,” he added.
Individual Investors Holding More Stock Than Ever
New reports indicate that individual investors are holding more stock than ever; in April alone, stock holdings comprised 41% of total financial assets for U.S. households.
Individual investors’ money will “help fuel the markets” and encourage growth, argued Shulman,
“We saw what happened last year,” he said, noting that individual investors opened up accounts with Robinhood, Schwab, and IBKR en masse. But “there’s still a lot of cash on the sidelines.”
Individual investors are putting their money into Coinbase and Bitcoin, as well as high growth stocks, which have taken a hit recently.
Consequences of the Higher Capital Gains Rate
When asked if he was worried about the Biden administration potentially gearing up to push higher taxes, Shulman acknowledged that corporations and entrepreneurs could encounter more issues.
“As we’ve seen in the past, when corporate rates go up, it encourages companies to go offshore,” he said.
That’s because increasing capital gains taxes encourages companies and entrepreneurs to find ways to cut taxes, either through avoidance or evasion.
Specifically speaking to the entrepreneurial sector, Shulman said that entrepreneurial growth could be inhibited, because as taxes increase, founders and CEOs are going to “scale back on some of their growth in the organization development” as well as “the R&D and the properly planning equipment expenditures they’ve been making.”
Overall, however, Shulman remains positive on the outlook for the rest of the year. “We think we’re going to end the year higher,” he concluded.
Though the markets currently possess several vulnerabilities, there remains plenty of potential for investors, said ERShares’s COO and chief investment strategist Eva Ados in an interview with TD Ameritrade.
“It’s a stock picker’s market right now,” she said. “There are opportunities in value, and there are opportunities in growth.”
In the current markets she recommends a selection of the FAANGS: specifically, Facebook (FB), Google (GOOGL), and Amazon (AMZN). These companies are the “best of both worlds” in terms of growth and value, and they have been able to capitalize on the switch to e-commerce because of the pandemic, said Ados.
They’re “behaving like a regular growth stock,” with modest P/E ratios and valuations coupled with extraordinary growth. Facebook reported 50% revenue growth with a P/E of 25, Google reported 30% revenue growth with a P/E of 28. Meanwhile, Amazon reported 45% revenue growth and an EBIT growth of 35%.
“You have extraordinary margin when it comes to Amazon, and all of these companies,” said Ados.
Few Earnings Surprises for Tech
Broadly speaking, the tech sector isn’t participating much in earnings winnings, because earnings were coming from such a high base already. “It’s really hard to see earnings surprises” right now, said Ados.
As a result, investors are chasing value stocks still offering tantalizing earnings, but Ados warns that the value factor is coming from a low base.
“The danger there,” she explains, “is that we are pushing them to frothy levels.”
These tech stocks may never reach the levels they were at before the pandemic because our behaviors have changed, putting their business models at risk of high debt leverage, drastically decreased revenues, and even bankruptcy.
“We don’t think that chasing value companies just on the basis of earnings surprises is the right thing to do right now,” she added.
Risks Persist in the Market
The market has swung from growth to value quickly, says Ados. Hyper growth tech peaked on February 20th; then in mid-March deep discount value peaked; and now the broader indexes have peaked, hitting all-time highs.
“As a result, now the system is very vulnerable to any shock,” she added. The risks in the short-term include new mutations of the coronavirus, and whether or not vaccinations will work on them.
Another concern is the behavior of the retail investor. The recent record influx of retail investors to platforms such as Robinhood has led to markedly increased investing around specific companies. Millennials tend use online forums and social media to communicate about their ideas “and as a result they crowd the same names,” explains Ados.
These investors have collectively pushed specific growth companies higher. The thing to watch for, she adds, is a potential mass exodus from these same companies, causing them to “drop significantly.”
Artificial intelligence (AI) isn’t just a standalone investment theme; it’s a technology that could potentially “expedite the automation and cost-saving of every industry” through a deep learning revolution, according to ERShares.
ERShares’s flagship fund, the ERShares Entrepreneurs ETF (ENTR), offers exposure to a range of disruptive technology sectors—including robotics and AI.
With its emphasis on high growth companies driven by strong leaders, ENTR offers access to several AI-driven stocks with an entrepreneurial twist.
Alphabet
For example, Alphabet (Nasdaq: GOOGL), has robust robotics and AI divisions working to integrate both technologies into everyday life.
Via TensorFlow, an open source end-to-end machine learning platform, Google has endeavored to make its own machine learning platforms accessible to both beginners and experts, as well as an extensive library and models for experimenting with, per the TensorFlow website.
In addition, Google’s Gradient Ventures, a venture fund that is AI-focused, targets early-stage tech start-ups. It utilizes Google’s experience as tech founders and entrepreneurs to help tech start-ups launch successfully. To date, Gradient Ventures has funded over 67 start-ups ranging across industries from fintech and insurtech, to healthcare and life sciences, per the Gradient Ventures website.
Though Alphabet is a massive company, it remains entrepreneurial in spirit, through consistent leadership by co-founders Larry Page and Sergey Brin, who remain board members and controlling shareholders, and by its commitment to support tech start-ups. Currently ENTR holds 7.09% of its portfolio in Alphabet.
NVIDIA
Another robotics and AI mainstay is computing hardware manufacturer NVIDIA (Nasdaq: NVDA), which was co-founded by current President and CEO Jen-Hsun “Jensen” Huang.
NVIDIA’s graphics cards power the machinery of everyday life, from computers to cell phones; the company makes powerful graphics processing unites (GPUs) dedicated to artificial intelligence and deep learning applications. The company has also developed a massive cloud-based software suite to bring artificial intelligence applications into enterprise settings.
ENTR holds 3.57% of its portfolio in NVIDIA.
FedEx
Finally…Fedex?
Yes, FedEx (NYSE: FDX), the delivery company, has integrated AI and robotics into every step of its delivery and sorting models.
Founded by current chairman and CEO Frederick Smith, FedEx has also partnered with several other companies to stay on the cutting edge of technology in its industry.
One such partnership is with Mercedes-Benz Vans to develop Coros, an AI package delivery tracking system. Coros, or Cargo Recognition and Organization System, is installed into the cargo space of the delivery vehicles and utilizes automatic barcode scanning and cameras to track packages in the cargo hold, giving real-time updates on their whereabouts. It also helps optimize sorting by using an LED system that indicates prime package placement.
FedEx Express has also partnered with Plus One and Yaskawa to install four robotic arms for sorting small packages and letters in its Memphis hub, per the FedEx website. This technology is among the first in its industry and is working to increasingly automate and enhance performance.
At ERShares, we position our firm to be a thought leader and have taken measurable actions to encourage companies we invest in to consider ESG angles. We realize that beyond the encouragement of particular ESG initiatives to the preceding companies, it is far more critical and impactful to bring awareness of the ESG issues at hand.
Bitcoin’s energy consumption and environmental impact now have extremely significant unintended consequences than mainstream stories suggest. Therefore, our team has worked to frame the issue and stand against Bitcoin as it uses a considerable amount of energy, the proportion of renewable energy utilized remains unclear, and regulations regarding cryptocurrency overall remain nebulous.
Bitcoin Mining Electricity Usage, Emissions Too High
Blockchain technology, although an incredible technological advancement, has astonishing and evident environmental footprints.
The energy consumption is rooted in the “crypto mining” that makes digital currencies energy-intensive as they are. Researchers estimate that “mining Bitcoin, the most popular blockchain-based currency, uses more electricity than entire countries like Argentina” (NY Times).
Although it makes up a small portion of the world’s total transactions, the carbon footprint involved compares to entire nations’ carbon footprints. Bitcoin energy emissions alone can further exacerbate global warming well beyond levels that can potentially lead to even more detrimental effects of climate change.
Gradually, the cryptocurrencies’ environmental impact is starting to vex climate policy. “If left unchecked, Bitcoin mining in China— where an estimated two-thirds of the world’s blockchain mining takes place—could make it difficult for the world’s largest polluter to meet its climate goals. China’s Inner Mongolia region said recently that it was moving to ban the practice because it was hampering the province’s efforts to meet the new carbon-emissions goals set by the national government” (NY Times). Hence, governments worldwide are beginning to crack down on crypto mining and lock in new climate change policies.
ERShares’s Stance On Bitcoin
ERShares has set its own standards by upholding a clear policy not to invest in Bitcoin for this very reason. In extension to this, most of our employees have adopted this policy for their personal portfolios for the same reason.
Our team also spreads awareness to the public through our media streams. For instance, Coinbase (COIN) made history as the first major cryptocurrency company to list its shares on a stock exchange in the United States, pushing its valuation close to $100 billion. (NY Times) Although hailed as a landmark moment for global digital currencies, we have also addressed the stock’s negative impact on the environmental and regulatory issues on the rise since its recent debut.
Within the financial industry, digital currency’s energy consumption can be overlooked as trivial compared to the implications of traditional banking. Therefore, we work to ensure that investors are more conscious of the Bitcoin system and its indirect effect on ESG.
There are efforts to make cryptocurrency technology more environmentally sustainable. Still, until they are enacted, ERShares will continue to oppose Bitcoin and bring awareness as a thought leader within the global financial industry.
Entrepreneurs: “Conscious Of Long-Term Consequences”
Behind the companies we invest in are entrepreneurs who work as thought leaders, much aligned to our own team culture. These companies are created by entrepreneurs who identified pain points in their personal lives and continue to develop new solutions. Our academic research also goes back twenty years and demonstrates the consistent outperformance of competition due to entrepreneurs creating a unique culture. Overall, they are conscious of long-term consequences and harness their resources in a productive and allocative manner.
Beyond the fundamental issue of Bitcoin, entrepreneurs think about innovation differently and consider the potential negative implications of the innovation disruption. Thus, we firmly believe that the companies we invest in and present to our investors as opportunities work to incorporate the same level of awareness within their organizations as we do internally at ERShares.
In this paper, we analyze the wealth creation amongst the 50 wealthiest individuals in the world, eventually narrowing its focus to the ones that are both self-made and entrepreneurs. Since those who are self-made might not necessarily be entrepreneurs considering both are of vital importance. For example, Warren Buffet is both self-made and entrepreneurial, but not an entrepreneur by definition we have opted for and will expand on in this paper. Similarly, Steve Ballmer, the ex-CEO of Microsoft, is self-made but was essentially an employee of the company. He is the only “employee” amongst the top 50.
We begin the analysis of the scale, source, and characteristics of wealth today. We then go on to tackle the highly contested title of “self-made,” eventually recognizing the relativism of the term and settling for a scale to measure it, as opposed to the binary thinking generally employed; that is, “people either are or are not self-made,” which is untrue. Next, we analyze the ones that aren’t self-made, amongst whom there is a varying degree of success post-inheritance. Then, the paper analyses the Forbes billionaire index to identify the top 50 self-made entrepreneurs and share their notable characteristics and insights into their success. After this, we compare the wealth of the list members to a metric that underlines the scale of money being discussed – countries’ GDPs. Moving forward, the report analyzes not just the individual, but the organizational wealth generated by the diverse range of entrepreneurs using the market capitalization of their companies. Ratios are created to identify the entrepreneurs’ wealth for the other stakeholders in their companies and those who use their products. The report concludes by identifying entrepreneurship as the direct or indirect source of the wealth generated by most members of the top 50.
Identifying and Understanding the Wealthy:
Table A presents the top 50 wealthiest individuals as of November 27th, 2020 (all story and financial data were sourced from Forbes on this date) . Some of the most important highlights of the table are as follows:
.
The number of centi-billionaires continues to grow, from 2 in 2019 to 5 in 2020. The exclusive club consists of four technology entrepreneurs from the United States, supporting the fact that technology-entrepreneurship is the most explosive vehicle of wealth creation. The single outlier was LVMH boss Bernard Arnault, a French Citizen and in the luxury goods space. His power in France was recently put on display when he managed to get the French Government involved in Tiffany’s turbulent acquisition.
Nearly half the list is from the United States (23). China claims 11 spots; France and Japan are claiming three spots each; Germany and Hong Kong are claiming two spots each; and Spain, India, Austria, Italy, Canada, and Mexico are claiming one spot each. Notably, all three French nationals on the list generated/inherited their fortunes in the luxury cosmetics (Bettencourt – L’Oreal) and luxury goods (Arnault – LVMH and Pinault – Kering) industry, capitalizing on France’s historical designation as the global center of fashion.
66
The average age of the members of the list was 66. The youngest member was Facebook Founder and CEO Mark Zuckerberg (36), while the oldest spot was shared by both the Hong Kong billionaires on the list – CK Hutchinson’s Li Ka-Shing (92) and Henderson Land Development’s Lee Shau-kee (92). While the Asian billionaires’ wealth stems from traditional industries like ports and properties, their heirs are preparing to take over soon and displaying their business acumen via more modern and exciting bets through family-funded VC arms and SPACs. The most notable is Richard Li’s SPAC bet with Peter Thiel.
Together, the group controls an estimated $2.863, T, with the average member worth $57.26 B. This represents approximately 30% of the total 9.435 T owned by the 1.8% of the world’s 2,825 billionaires (2019 figures from Wealth-X’s 2020 Billionaire Census)
The wealthiest individual on the list was Amazon’s Founder and CEO, Jeff Bezos, at $186.5 B.
$26.9 B
Entry into the top 50 required a whopping net worth of $26.9 B. The lowest position is currently occupied by Giovanni Ferrero, the scion and executive chairman of his family’s namesake Ferrero Group, the confectionery giant behind hits such as Nutella, Kinder, and Tic-Tacs.
Problem: Who holds the “self-made” title and who doesn’t?
The term “self-made” has been the cause of much controversy over the last few years as its definition isn’t fixed. Most notably, when then 21-year-old Kylie Cosmetics founder Kylie Jenner was named the world’s youngest self-made billionaire in 2019. She threw the media into a frenzy over how someone that had capitalized on her family’s fame could ever be considered “self-made.” Another notest by assigning self-made scores – a scale from 1 to 10, which indicates the degree to which a person qualifies as self-made. A 10 means you’re entirely self-made, whereas a one means you inherited your wealth and did nothing to grow it. So, yes, turning an upper-middle-class upbringing and $250,000 into a $186 B fortune classifies you as self-made, with a score of 8. Kylie Jenner, who was discussed earlier, was given a 7. However, Georgable but less contested example is the world’s wealthiest individual, Jeff Bezos, who got his parents to invest approximately $250,000 in Amazon in 1995.
Solution: The Self-Made Score
In reality, the concept of being self-made is very relative. In truth, the concept of being self-made is very relative. This is best explained through Forbes’s explains this be Soros “who survived the Nazi occupation of Budapest, fled Hungary under Communist rule and worked his way through the London School of Economics as a railway porter and a waiter,” is a perfect ten on the scale. Interestingly, Soros is worth $8.3 B today but would have made the top 50 list had he not donated $32 B to the Open Society Foundations.
On the other hand, Charles Koch ($44.9 B), the Chairman and CEO of Koch Industries (a company he inherited from his father), received a score of 5, indicating that he was involved in growing his wealth but isn’t self-made by any stretch of the imagination. Comparatively, Julia Koch ($44.9 B), the widow of Charles’ brother David, received a score of 1 as she had done little to grow her inherited wealth yet. The term “yet” is critical in the previous sentence as scores can change, provided the person goes on to generate wealth. Lukas Walton ($17.5 B), the grandson of Sam Walton (Walmart’s Founder), currently has a score of 1, but at the age of 34, he has his life ahead of him to change that.
Read more about the Forbes Self-Made Score (awarded to those on the Forbes 400) here.
An excerpt from the article above about the Forbes Self-Made Score reads as follows:
“The score ranges from 1 to 10, with 1 through 5 indicating someone who inherited some or all of his or her fortune; while 6 through 10 are for those who built their company or established a fortune on his or her own.”
In line with the statement above, to identify self-made, we looked for a score of 6 and higher. Since Forbes only awards a score to those in the US, identifying self-made US citizens was simple. For non-US members of the list, we identified Founders who didn’t inherit a sizable/identifiable fortune ($100M +) as self-made.
We see that amongthe top 50, 37 individuals are self-made, whereas 13 inherited their wealth.
The Non Self-Made Wealthiest Individuals
1 – Mukesh Ambani: The most exciting inclusion in the top 50 who isn’t self-made is Mukesh Ambani ($73.7 B), the wealthiest man in Asia, who is currently competing with Amazon’s Jeff Bezos for the digital market of the world’s largest democracy, India. Mukesh Ambani inherited half of Reliance, the conglomerate his father Dhirubhai Ambani founded, while his brother Anil Ambani took the other half. The fairness of the firm’s division is up for debate as the brothers’ fortunes, which once stood at approximately $40 B a-piece, have diverged to the point where Mukesh has nearly doubled his wealth, while his brother Anil is filing for bankruptcy. Mukesh Ambani is arguably the most successful of those who weren’t self-made, managing to diversify his fortune away from petrochemicals to retail and technology (via Jio, India’s largest technology venture). Today, he is essentially the gatekeeper of all meaningful foreign investments in India.
More about Ambani’s legendary mid-pandemic fundraise of $20 B for Jio here and here.
2 to 13 – Other Family Business Heirs: AfterAmbani, the wealthiest heir on the list is the heiress to the L’Oreal fortune, Francoise Bettencourt Meyers ($72.5 B). She is followed by three members of the Walton clan, who collectively form the world’s wealthiest family with a combined net worth of approximately (and ever-fluctuating) $215 B. After them come the two Kochs, the Albrecht siblings (heirs to the Aldi retail fortune), and David Thomson, the head of the media and publishing empire founded by his grandfather. The most notable holding in the Thomson clan’s portfolio is Thomson Reuters. Next, in the 42nd spot is Yang Huiyan, the heiress to Chinese real-estate firm Country Garden Holdings. She is closely trailed by two Mars fortune members, whose assets stem from success in the confectionery industry. Finally, the last spot on the list is occupied by a long-time industry rival of the Mars family, the Ferrero family’s head, Giovanni Ferrero.
The top 50 wealthiest self-made entrepreneurs were defined as the individuals who have created their wealth (not purely inherited) and categorized as entrepreneurs (identified as a founder of the source company or a significant contributor to launching a start-up idea). The following table, Table B, illustrates the top 50 wealthiest (self-made) entrepreneurs according to Forbes’ data as of November 27th, 2020, showing the net worth of each self-made entrepreneur to this date.
The worth of the top 50 self-made entrepreneurs combined is $2,255.6 B. Their average age is 55.8 years old. Approximately 68% of the top 50 individuals represent countries outside the United States. The top three geographic regions represented include the following: United States (32%), China (24%), and France and India (4%) each. The top 50 self-made entrepreneur billionaires are generally from the United States and made their money in the technology industry. Out of the top 50 individuals, only one is female – Wu Yajun, CEO of Longfor Properties. However, it is critical to note that below the top 50, there are relatively more women joining the self-made entrepreneur wealth creation path than ever before.
Most notably, the billionaires enjoy a high degree of achievement relating to innovative technology, including recent disruptive innovations such as cloud computing and e-commerce. All the top 10 self-made entrepreneur billionaires have brought innovation that binds their wealth creation success. Other achievements include getting welfare and employment despite the shift to advanced technology. For example, many companies, including Amazon, have hired more employees than ever during the world’s time of need during the pandemic that has left many jobless. They have also achieved great success in diversification and maintaining the wealth that they have created. Many of these self-made entrepreneurs continue to develop and adapt to innovations. They have also achieved the ability to work in a wide range of geographic regions while working under global regulations.
Certain controlled factors contributing to their success are their skills, expertise, and background in their fields before founding their successful businesses. This includes the ability to receive the appropriate education in the field to gain work experience that fits with their passion. A critical uncontrollable variable that has contributed to self-made entrepreneurs’ success is the ability to take risks and start a venture of their own.
Jeff Bezos is the founder and CEO of e-commerce Amazon since 1994. He started this out of his garage in Seattle. He currently holds the highest net worth in the world in real-time. He is also known for being the Washington Post owner and founder of the space exploration company Blue Origin. He always showed a great interest in how things work, such as transforming his parents’ garage into a laboratory as a child. His success runs from a diversified realm of business ventures, making him one of the world’s wealthiest. He began his education at Princeton University and afterward worked on Wall Street, later becoming the youngest Senior VP at D.E. Shaw investment firm. It was only a few years after that he decided to quit his job, and start his own online bookstore business, Amazon.com. He took a risk when he decided to leave his finance career at D.E. Shaw and get into the world of e-commerce. Bezos consistently created wealth through his diversification of Amazon’s offerings for users and major acquisitions such as Whole Foods grocery chain for $13.7 billion in cash. He has also worked to bring donations and help bring more jobs despite the vast innovations of e-commerce. During the current pandemic, Amazon hired approximately 175,000 additional employees.
Elon Musk is a South African-born American self-made entrepreneur who founded SpaceX and Tesla. He became a multimillionaire in his late 20s after selling his start-up company Zip2 to Compaq Computers. Elon Musk has worked to revolutionize the current innovation in history both on Earth and in space. Although he grew up with a family full of entrepreneurs that are now successful on their own, he created his own success at the time without enough money to provide for himself when he immigrated to Canada at age 17 and later to the US. Musk changed his plans considerably by deferring his attendance to Stanford and launching the first business venture, Zip2. He used the money he earned from sales, approximately $22 million, to found X.com merged with a company now known as PayPal.
Ortega began his career manufacturing textiles through a small family company in 1963. He is one of the top self-made retail entrepreneurs who launched the brand Zara in Spain. He has invested his dividends into real estate in many countries, including the major city-states in the United States. He highlights an exciting and innovative way to approach the retail reserve in Spain. He has always stayed away from the media for several years while working to amass a personal net worth of approximately $77 billion (as of November 27th, 2020 net worth). His unique success stands with his ability to upend the retail world aggressively and effectively by getting clothes on racks faster than anyone within the market, starting what is currently known as “fast fashion.” His self-made success begins with being born to a low-income family, due to which he had to leave school at the age of 14 to start making money. He is known for the continuation of innovation and believes that success is never guaranteed, so it is critical not to focus on innovating.
Eric Yuan is another notable wealth profile that has recently gained a tremendous amount of wealth through his company, Zoom Video Communications. He is the founder and CEO of this video conferencing company that heavily runs on cloud computing technologies. He saw success by starting with an idea while finding better ways to communicate with his friends and family. He helped build WebEx as VP before starting his own company, Zoom. He had the necessary skills and expertise in this industry before launching Zoom. His net worth moved 112% to approximately 7 billion dollars in the last three months of 2020 due to the current pandemic. He continues to incorporate new technologies and fix issues such as privacy and security issues immediately at hand before continuing to innovate its features. Zoom has demonstrated Yuan’s success by being a top cloud computing technology provider that began with an idea to address his own needs.
Understanding the Scale of Wealth Generated by the Self-Made Entrepreneurs:
To understand the scale of the assets generated by the top 50 self-made entrepreneurs, we compared their wealth and business impact to a scale that would force perspective – the IMF’s top 50 countries by GDP, from the United States ($20.8 T) to Peru ($195B). We compared these entrepreneurs and countries through four different methods.
If the top 50 entrepreneurs were a country, where would they rank in terms of GDP? The combined wealth of these top 50 entrepreneurs identified was $2,225 billion. This amount would rank as the 8th largest country by GDP– surpassing Italy’s tally of $1,848 and shy of France’s $2,551 billion.
How many countries’ GDP would the entrepreneur’s combined wealth equate to? It would take the nine nations with the lowest GDP on this list (of the top 50 countries) to edge past the combined wealth of these 50 billionaires. The combined GDP was $2,244 billion and included South Africa, Pakistan, Finland, Colombia, Romania, Chile, Czech Republic, Portugal, and Peru.
What percentage of their GDP do the entrepreneurs (grouped by origin) make up? These 50 entrepreneurs come from 15 different countries – 7 of which had only one representative. The only GDP comparisons of note are the US and China. The United States has the most entrepreneurs, with their 17 billionaires reaching a combined $1,099 billion relative to the country’s GDP of $20,807 billion or roughly 5% of the total. China has the second most with 13 entrepreneurs amassing $465 billion compared to the country’s GDP of $14,860 billion or 3% of the total.
Given that GDP is not the money made by a country but just the domestic product’s value, it is more akin to a company’s revenue. Hence, how do the revenues of some of the entrepreneurs’ companies compare to GDPs? Amazon’s revenue of $280 billion is just shy of South Africa’s 40th ranked GDP of $282 billion. Another intriguing comparison is between Google’s revenue of $162 billion and Kazakhstan’s GDP of $165 billion (which is not in the top 50 countries; it is 54th).
How Much Wealth (Personal and Organizational) has been Created by Top 20 Entrepreneurs?
To fully understand wealth creation, it is essential to recognize how much wealth is being created by these world-renowned entrepreneurs, including those they don’t make for themselves. From Table B, we can identify the Top 20 wealthiest entrepreneurs ranked by net worth. From American Jeff Bezos and his Amazon empire to Chinese He Xiangjian and his home appliance powerhouse, enormous wealth is being created in both personal and organizational means. For simplicity, we will define personal wealth as wealth that contributes to their net worth, and organizational wealth contributes to their company’s market capitalization.
The total net worth of the top 20 entrepreneurs adds up to $1.54 trillion. Over a third of this total is contributed by these five centi-billionaires: Jeff Bezos (Amazon), Bernard Arnault (LVMH), Elon Musk (Tesla), Bill Gates (Microsoft), and Mark Zuckerberg (Facebook). While the total net worth is an important indicator of these entrepreneurs’ wealth, it does not show the full picture. To see it, we need to take a look at the wealth that their companies are generating. Table C below shows the market capitalization of each of these top 20 entrepreneurs’ ventures. To keep this model simple, we are only including the primary entrepreneurial company associated with each person. In total, these entrepreneurs’ venture valuations amount to $19.55 trillion. This is almost 12 times the amount of wealth that these entrepreneurs have created for themselves.
Table C
Source
Market Cap ($B)
Amazon
$1,599
LVMH
$250
Tesla
$555
Microsoft
$1,627
Facebook
$791
Oracle
$174
Google
$1,210
Inditex
$108
Google
$1,210
Alibaba
$742
Nongfu Spring
$748
Tencent
$720
Bloomberg LP*
$60
Pinduoduo
$173
Nike
$211
Kering
$76
Rocket Companies
$45
Fast Retailing (Uniqlo)
$8,588
Dell Technologies
$52
Midea Group
$617
Table D
Name
Wealth Created for others ($B)
% Made for Them
% Made for Others
Jeff Bezos
$186
11.63%
88.37%
Bernard Arnault & family
$108
56.78%
43.22%
Elon Musk
$423
23.79%
76.21%
Bill Gates
$1,508
7.34%
92.66%
Mark Zuckerberg
$689
12.89%
87.11%
Larry Ellison
$95
45.37%
54.63%
Larry Page
$1,131
6.50%
93.50%
Amancio Ortega
$31
71.17%
28.83%
Sergey Brin
$1,134
6.32%
93.68%
Jack Ma
$679
8.46%
91.54%
Zhong Shanshan
$686
8.34%
91.66%
Ma Huateng
$663
7.93%
92.07%
Michael Bloomberg*
$5
91.50%
8.50%
Colin Zheng Huang
$122
29.45%
70.55%
Phil Knight & family
$160
24.01%
75.99%
François Pinault & family
$29
61.49%
38.51%
Daniel Gilbert
$2
95.11%
4.89%
Tadashi Yanai & family
$8,548
0.47%
99.53%
Michael Dell
$13
75.00%
25.00%
He Xiangjian
$580
5.92%
94.08%
*Bloomberg LP is a private company, and hence the values are estimates.
Taking a deeper dive into these numbers, we can subtract the $1.54 trillion that the entrepreneurs personally created to be left with a total of $18.01 trillion created for others by this group of entrepreneurs. Looking at Table D above, we can see the exact numbers of how much wealth has been created by each individual through their company for themselves and others. The column “Wealth Created” takes the market cap of each entrepreneur’s primary venture and subtracts out their net worth to see how much excess wealth is generated. An interesting feature of this data is that 12 of these 20 entrepreneurs have created over 75% of their company’s wealth for others. This serves as evidence that forming partnerships and finding good investors generates more wealth for everyone in the long run, as opposed to running a company alone (without partners or investors) to hoard the equity.
These entrepreneurs create not only personal and organizational wealth but also compound wealth. For example, Jeff Bezos’s Amazon enables others to sell on their platform, allowing them to generate wealth. Third-party sellers on Amazon contributed to more than half of the firm’s 2019 revenue at $280 billion. Another entrepreneur-built platform that is seen in this top 20 list is Facebook. Facebook, which owns Instagram, enables influencers to make a living through the marketing and sales and their sponsor’s products. By simply appreciating these platforms’ scale, we can see how they create wealth for their parent companies and founders and their users.
Conclusion:
Entrepreneurship is indeed the singule best vehicle for wealth creation, whether the wealth is directly or indirectly created. Among the list of the world’s 50 wealthiest individuals, 30 of them were entrepreneurs. However, we find that even those that weren’t entrepreneurs often have indirectly benefited from entrepreneurship; those from family businesses often have the entrepreneurial spirit of their previous generations to credit for their enormous wealth today; those who were investors tend to bet on entrepreneurial companies to generate value; those who were employees were led by entrepreneurs and encouraged to operate as start-ups do; even those who were divorced and widowed happened to be in the lives of those who had found wealth, directly or indirectly, from entrepreneurship.
The pursuit of entrepreneurship will continue to be the single greatest wealth creation source, enabling those with grit, drive, and other such characteristics to out-do any pre-existing wealth generated. To conclude, we would like to share an example of the previous statement: Today, the Waltons, who hold the title of the wealthiest family in the world (excluding monarchies and hyper-fragmented families), are worth $215 B. Jeff Bezos is worth $186.5 B. It is only a matter of time before he surpasses the collective Walton family, simply through wealth generation via the success brought by entrepreneurship ahead.
