Various traits differentiate entrepreneurs from non-entrepreneurs, making the former successful and the latter more likely to face failure in their ventures. Some of these traits include leadership skills, risk-taking initiatives, openness to organizational change, and perseverance in the face of challenges and failure. Two of the most accomplished entrepreneurs are Jeff Bezos, who founded Amazon, and Bill Gates, who co-founded Microsoft. These entrepreneurs have shown remarkable leadership and transformed their startups into some of the largest corporations in the world. They have achieved this feat by rallying their followers to support and implement their vision. This report has evaluated the traits and strategies used by Gates and Bezos and compared them with those used by non-entrepreneurs to develop important insights on what it takes to excel in entrepreneurship.
The report explains that successful entrepreneurs should be willing to take calculated risks, embrace strong leadership skills, practice perseverance, learn from failure, and engage in corporate social responsibility to strengthen their brands’ public image. Additionally, successful entrepreneurs should develop strong networks and create a continuous improvement and innovation culture to pivot and exploit market opportunities. However, non-entrepreneurs are known to be characterized by a fear of taking risks, weak leadership skills, impatience, lack of intense social and professional networks, and an organizational culture resistant to change.
Why Entrepreneurial Companies Outperform the Competition
Introduction
Although entrepreneurs usually face challenges in the path to success, they can generally overcome the obstacles they face and transform their startups into large companies with a comprehensive market presence. Some of the globally-renowned entrepreneurs include Bill Gates and Jeff Bezos. They have excelled in entrepreneurship and are billionaires who have grown their companies from startups into multi-billion and trillion-dollar corporations. Therefore, it is essential to evaluate their entrepreneurship strategies and personal traits that differentiate them from non-entrepreneurs to understand what it takes to succeed. This paper will provide a background on these entrepreneurs and their crucial life lessons, analyze their entrepreneurial traits, how they innovate and overcome obstacles, and how they handle failure.
Outstanding Entrepreneurs and Key Lessons in Life
One outstanding entrepreneur is Jeff Bezos, the founder and former CEO of Amazon. His company focuses on e-commerce, digital streaming, cloud computing, and artificial intelligence (Amazon, 2020). He started the business in 1994 from his garage in Washington as an online bookstore and gradually grew it into a $1.71 trillion company by 2021 (Amazon, 2021). Currently, Bezos is the world’s richest person. One of the valuable key life lessons from Bezos is applying the “regret minimization framework.” This is a concept where people picture themselves at an advanced age, try to imagine their biggest regret in life during the old period, and then work backward to take actions that will prevent remorse.
Bezos applied this framework when deciding whether to quit his former job at Wall Street and start an internet company. He realized that he would regret missing out on entrepreneurship opportunities on the internet, so he quit his job and started Amazon (Bayers, 1999). Bezos used the same framework when choosing an appropriate leadership style, and he embraced transformative leadership, where leaders work with teams to create a vision and implement change (Fridson, 2001). Bezo’s actions show that successful entrepreneurs should not only embrace risk and follow their vision but they should also use leadership to inspire followers to adopt change.
The second entrepreneur is Bill Gates, the co-founder of Microsoft Company, which develops and manufactures computer electronics, computer software, personal computers, and other technology products. Gates and his co-founder (late childhood friend) Paul Allen invented the first product, the rudimentary computer, in 1972. Since then, he has provided leadership at Microsoft as CEO, and the company’s value surpassed the trillion-dollar mark and is currently worth in excess of $2 trillion. (See Exhibit 2). One of Gates’s most important life lessons is the importance of continuous innovation by taking risks and thinking ahead of time.
Gates had a vision of becoming the most successful software company. Despite intense competition from established firms such as IBM, he ventured into the competitive software industry when he released the software product Xenix in 1980 (Microsoft, 2020). He took a fundamental risk by dropping out of Harvard to create Microsoft Company in 2008 (Fridson, 2001). This demonstrates that successful entrepreneurs have a solid vision and are persistent in achieving that vision regardless of their circumstances or obstacles. Gates applies both autocratic and transformational leadership, required in the rapidly changing tech world where accurate decisions need to be made promptly.
Traits Entrepreneurs Share Which Make Them Perform Better than Non-Entrepreneurs
Taking Risks
Entrepreneurs often take risks in their quest to pursue and achieve their vision. They tend to act quickly and decisively to make the most of the opportunities that they have identified. For example, Gates and Bezos took risks by leaving education and employment opportunities in prominent organizations to pursue their vision. When entrepreneurs take such significant risks, they are likely to work hard and remain focused on their image since failure is no longer an option. For example, Bezos knew that he had to make Amazon successful since he quit a lucrative job opportunity on Wall Street. He had to remain focused to achieve his vision and not have regrets in life at an old age (Bayers, 1999).
Persistence and Perseverance
Many entrepreneurs embody these two traits: aggressively work hard to pursue a vision and overcome obstacles they face in their path. Gladwell (2008), in the book Outliers, discusses the concept of the 10,000-hour rule, which states that people should perform deliberate practice for 10,000 hours before they can become world-class in a field. This entails pushing one’s skill as much as a person can in the quest to excel in a specific area. Gates, Bezos and Plank, have all accomplished the 10000-hour rule, which is a manifestation of their persistence and perseverance in pursuing their visions (Kouzes & Posner, 2007). Persistence and determination are closely related to handling failure, and many entrepreneurs who face loss will learn from it and improve their future outcomes.
Strong Leadership Skills
One of the most common traits associated with successful entrepreneurs is strong leadership. All entrepreneurs require strong leadership skills to rally their followers towards a shared vision and goal (Gladwell, 2008). Many successful entrepreneurs such as Jeff Bezos apply transformative leadership to build solid teams and use charismatic traits to inspire them to embrace transformative change. Bill Gates has been known to use the autocratic leadership style when making important, sensitive, and time-barred decisions. Ventures owned by non-entrepreneurs stagnate in terms of innovation, and they are unable to respond to the constantly changing needs of customers. Ultimately with this type of organizational behavior, such ventures fail.
Corporate Social Responsibility
Finally, many successful entrepreneurs implement corporate social responsibility (CSR). For example, Bill Gates created the Bill and Melinda Gates Foundation, the largest private foundation globally (Bill and Melinda Gates Foundation, 2020). It invests in health, social welfare, and education (See Exhibit 3). Bezos also contributes to charity, and for example, he made a $10 million donation to Seattle’s Museum of History and Industry in 2011 (Market Realism, 2020). Corporate social responsibility creates a positive public image of entrepreneurs’ companies and attracts consumers to a brand.
Exhibit 3: Bill and Melinda Gates Donations past 20 years
How Entrepreneurs Pivot as Compared to Non-Entrepreneurs
Creating a Culture of Continuous Innovation and Improvement
Entrepreneurs usually pivot by creating a culture of continuous innovation and improvement within the company. Constant innovation ensures that a venture takes advantage of any market opportunities to improve the existing products, launch new products or target new market segments. Most successful entrepreneurs usually invest heavily in research and development to identify existing market opportunities and diversify their product portfolio. For example, Bezos has created a culture of continuous innovation at Amazon and has grown its brand portfolio to over 75.1 million products sold on Amazon as of March 2021. (See Exhibit 4). However, non-entrepreneurs usually fail to create a culture of continuous improvement, generally due to a lack of strong leadership. As previously discussed, weak leaders are unable to inspire followers to adopt change initiatives that create value. An example is Kodak Company, which failed to embrace digital photography opportunities since its culture was not receptive to change and continuous improvements, which led to its collapse (Buchia, 2015).
Exhibit 4: Estimate of the number of products currently selling on the Amazon US website:
“However, he viewed failure as an opportunity to learn from mistakes, and he implemented improvements when innovating new products in the future. (Haralambous, 2018).” Entrepreneurs recognize the importance of social and professional networks in enabling them to understand and exploit market opportunities
Many successful entrepreneurs surround themselves with people who complement their areas of weakness and better understand the industry they operate in. Moreover, one of Bill Gates’ well-known quotes is, “Surround yourself with people who challenge you, teach you and push you to be your best” (Buchia, 2015).
How Entrepreneurs Handle Failure
Entrepreneurs usually understand that they will experience failure at certain points in life and create an opportunity to better themselves for future initiatives. Entrepreneurs do not give up when faced with failure. Instead, they seek lessons that will help them achieve a better outcome in the future. Jeff Bezos has faced failure several times, and many products introduced to Amazon fail to be successful.
Conclusion
This report evaluates and highlights the strong traits of successful entrepreneurs such as Jeff Bezos and Bill Gates. Some of the main factors that differentiate entrepreneurs from non-entrepreneurs are their ability to exercise strong leadership, take risks, create a continuous improvement culture, invest in networking opportunities, and handle failure well. These leaders could transform their vision into reality, and they grew their startups into multi-billion and trillion-dollar corporations.
The ERShares Entrepreneurs ETF (ENTR) is a fund investors will want to consider this year, particularly those looking for a fresh take on factor-based strategies.
ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).
The exchange traded fund is a relevant consideration at a time when investment decisions are changing due to this current global health crisis. As more people are choosing or forced to stay home, work in a home office, and shop from their coaches, the recent short-term shifts could lay the groundwork for long-term ramifications.
Multiple Tailwinds for the High-Flying ‘ENTR’
ENTR can capitalize as many firms are changing the way they run businesses. Companies that are more nimble and capable of capitalizing on this increasingly digital age have stood out.
Furthermore, more companies are growing more efficient in handling sales through an online outlet, potentially finding new ways to limit costs and maximize their businesses. This increased proficiency could further weigh on sectors like traditional brick-and-mortar retail.
ERShares’ ETF “incorporates a bottom-up investment orientation, powered by artificial intelligence (AI), that stands above other investment factors such as: momentum, sector, growth, value, leverage, market cap (size) and geographic orientation. Moreover, with the aid of AI and Thematic Research, ERShares incorporates a macro-economic, top-down approach that integrates changing investment flows, innovation entry points, sector growth and other characteristics into a dynamic, global perspective mode,” according to ETFdb.com.
A Treasury market gone haywire is weighing on riskier assets, but equity declines could bring opportunity with the ERShares Entrepreneurs ETF (ENTR).
ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).
The Entrepreneur Factor
ENTR selects the most entrepreneurial, primarily US Large Cap companies, that meet the thresholds embedded in the ERShares proprietary Entrepreneur Factor (EF).
There has been a thematic approach to investing in entrepreneurs. Investors can tap into the entrepreneurship economy with a targeted strategy to enhance an investment portfolio with quickly rising companies.
So, what is an entrepreneurial company, and how is it different from others? Entrepreneurial companies are led by a main founder. From decades together, founder-run Entrepreneurial companies have shaped the economy by investing in their people and in general innovation, leading to exceptional growth. Many entrepreneurial companies are run by Founder-CEOs.
Their presence is reflected in the company’s performance, and having the right Founder-CEO can make an important difference. The differential between the period with the Founder-CEO still in the company and the period without the founder is approximately 7% in excess return. Entrepreneurs typically provide the difference between success and failure and wealth creation versus wealth destruction. In another sense, disruptive innovation moves at a rapid pace, and only the most capable leaders survive.
“Ultimately, companies will shift to tax havens such as Ireland or UAE, where higher taxes won’t hurt them,” according to the issuer. “Ados encourages investors to keep an eye on entrepreneurial companies as they emerge from the economic recovery. She believes they are the best hope in developing effective growth strategies to offset potential tax rate increases.”
Taming Taxes with ‘ENTR’
Many entrepreneurial companies have long duration cash flows, meaning they should benefit as interest rates remain low.
Citing an economic recovery in tow, the Fed recently decided to keep rates steady while forecasting stronger guidance for the next couple of years.
“As widely expected, the Fed held interest rates steady at a near-zero level in its latest meeting,” a Nasdaq article said. “U.S. interest rates have been this low since March 2020. Federal Reserve officials continued to project near-zero interest rates at least through 2023, while boosting economic growth expectations on vaccine and stimulus optimism.”
For once, value stocks are getting all the love, but that doesn’t mean growth fare should be glossed over. The ERShares Entrepreneurs ETF (ENTR) is an asset that can position investors for a growth rebound while maintaining some value exposure.
The fund is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards.
The economy is currently in the nascent stages of the traditional recovery cycle, and investors should not let short-term noise distract them from growth opportunities. While there are the obvious plays in large tech stocks, investors shouldn’t overlook additional growth opportunities that often fly under the media’s radar. ENTR is an avenue for capitalizing on those opportunities.
Along with expectations of a rebound in profit growth this year and a recovery in economic activity, many market observers are arguing that the foundation for further stock market gains is in place.
Breaking Down the ‘ENTR’ Thesis
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.
Growth stocks may be seen as exorbitant and overvalued, causing some investors to favor value stocks, which are considered undervalued by the market. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain priced compared with their competitors.
Service-providing industries, including IT, management, and healthcare, have seen the biggest job growth in recent years, even during the COVID-19 pandemic, finds new research from ERShares.
In a new white paper, “Entrepreneurial Companies Create More Jobs,” the authors investigate which industries have shown the largest increases in job creation, as well as the industries that are losing jobs.
In particular, the tech sector —including information technology operations, data processing, and related processing—has spurred significant job growth even during the pandemic. It’s predicted to continue adding jobs.
IT, Healthcare to Lead in Job Growth
According to the paper, in the ten years ending 2029, the management, scientific, and technical consulting services industry is projected to grow by 334,200 jobs. Computer systems design and related services is projected to grow by 574,500 jobs over the same time period.
These industries all have a robust entrepreneurial presence. Prominent companies include Alphabet (GOOGL) and NVIDIA (NVDA), which continually press forward with investments in new technologies.
Within the information technology sector, fintech and e-commerce are two of the fastest growing sectors. Entrepreneurial companies such as Amazon (AMZN) are leading these industries with robust growth.
Another sector predicted to have exponential growth in the next decade is healthcare and social assistance. Data from the U.S. Bureau of Labor Statistics finds that healthcare and social assistance encompasses five of the 20 fastest growing industries, with employment predicted to grow 15% in the next decade. That represents roughly 2.4 million new jobs created.
Industries in Decline: Information, Retail, Hospitality
Meanwhile, automation will continue to reduce the necessary workforce size in certain industries, such as manufacturing, which was already in decline before Covid-19 hit. However, the robotics industry creating the machines automating much of the manufacturing work should continue its growth.
The “information industry” has seen a division, with digital information on the rise and print information on the decline. Newspapers, periodicals, books, cable TV, and other subscriptions, as well as wired telecommunication carriers, are receding the most. Between the printed news, books, and wired telecommunication carriers, over 200,000 jobs are estimated to be lost between 2019-2029.
Retail, hospitality, and leisure have all struggled during the pandemic, while technology companies have thrived. It’s too early to tell what the lasting impact of COVID-19 will be on these sub-sectors, especially as some of the industries are beginning to show signs of recovery. However, it is likely that these industries will be irrevocably changed because of the pandemic.
Capitalizing on a Changing Economy
The ERShares Entrepreneurs ETF (ENTR) offers investors a way to capture the shifting trends in the U.S. economy, as founders work to disrupt and drive their industries forward.
ENTR, which tracks U.S. large cap companies, is based on the company’s proprietary Entrepreneur Factor, which combines thematic research and artificial intelligence technology to identify high growth potential entrepreneurial companies.
ENTR offers an almost 95% exposure to sectors that are currently showing high job growth.
This includes information technology (36%), healthcare (23%), communication services (17%), and consumer discretionary (12%).
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.
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.
