Prince Alwaleed bin Talal is unhappy with Forbes magazine, accusing it of prejudice in estimating his wealth at $20 billion – a mere 26th among the world’s 1426 billionaires. The Saudi investor has broken off his "longstanding relationship with the Forbes billionaires list” and sought comfort in the Bloomberg Billionaires ranking.
The prince has traditionally occupied a high position on the Forbes list, since he bought an $800 million stake in Citigroup in 1991 and prospered as the bank recovered from a debt crisis. Forbes has accused him of exaggerating the price of Kingdom Holding, his investment company, to retain a top 10 place, which he indignantly denies.
The question is: why on earth does the prince care so much? The answer is: because most of us care, too. The billionaires’ list is Forbes’ most lucrative and popular franchise, and Bloomberg has energetically tried to beat it – uncovering 90 "hidden billionaires” since last year. The wealthy fascinate us, and are trailed by an industry of wealth managers, lawyers and tax advisers.
We are all deluded because such rankings are bad measures of a bad metric. They are guesstimates of wealth, which is a flawed proxy for people’s merit or whether they have done anything useful. Some – including several in the technology industry – are great entrepreneurs. Others are oligarchs, and some are lucky, or were born well.
Bill Gates, one of the former, has a better idea with the Giving Pledge that he founded with Warren Buffett, who comes third after Gates on this year’s Forbes list. They want to persuade their fellow billionaires to give away most of their money in their lifetime. In return, the donors enjoy a glow of virtue, while their generosity is proclaimed.
Billionaires can be jealous of their status even in the Giving Pledge. One to whom I chatted this year in Davos (as one does) told me that its members had privately discussed whether to relax the rules to let in someone with only $800 million in liquid assets. No, they concluded, best to keep the club exclusive.
Such status anxiety at least has a purpose – to squeeze as much as possible from those in the best position to donate. An ego-related incentive for the richest of the rich to give it away is preferable to a Saudi prince fretting over whether his assets are appreciated.
A glance at the Forbes or Bloomberg rankings shows what a mixed bag they are. The Bloomberg top 100 (updated in real time to keep Prince Alwaleed on alert) includes many who built businesses with wit and imagination, such as Sergey Brin and Larry Page of Google, Jeff Bezos of Amazon and Stefan Persson of Hennes & Mauritz.
But the "self-made” category also includes Russian and Middle Eastern wealth acquired more by being in the right place at the right time and getting close to the right government official when the spoils were being allocated than beating others in a free market. These billionaires are also exceptional, but not all their qualities are admirable.
Carlos Slim, the world’s richest man, gained his biggest break by acquiring Telmex when Mexico’s state telecoms company was privatised in 1990, and then defeating all legal challenges to its lucrative monopoly. "Slim has made his money in the Mexican economy in large part thanks to his political connections,” argue Daron Acemoglu and James Robinson in their book, Why Nations Fail.
The Bloomberg top 100 features 28 people who simply inherited wealth – including all 12 of the women. If one adds to this those in the energy, metals and mining, finance and property sectors, which are based more on acquiring and trading assets than innovation, along with the most oligarchal of the "diversified” sector, one gets to 50. Only half of the top 100 billionaires, in other words, are classic entrepreneurs.
It is impossible to draw a neat line between good” and "bad” members of the elite. As James Lawson, a director of Ledbury Research, says: "To become a billionaire, you have to be a pretty exceptional person.” Entrepreneurs such as Larry Ellison of Oracle are often bare-knuckled fighters, and some of those who inherited wealth have used it to build their own businesses.
One thing, however, is clear: it is easier to become a billionaire than it used to be – and not simply because of wage inflation. The Forbes list has expanded from 476 billionaires with a total wealth of $1.4 trillion a decade ago to today’s 1426, with $5.4 trillion to their names. Whatever their provenance, they have multiplied. As Chrystia Freeland writes in her book, Plutocrats, the western middle class "is being buffeted by two gilded ages at the same time”. One of these ages came as western entrepreneurs gained access to a global consumer market – and to a pool of cheap labour – as barriers to trade and communications fell.
The second gilded age has been in emerging economies, aided by transfers of state-owned property and high commodity prices, as well as local entrepreneurship. Prince Alwaleed once occupied a unique position on the Forbes list – the top 10 in 2003 comprised him, the Albrecht brothers who founded discount retailer Aldi, and eight Americans. He now faces stiffer competition.
The prince has responded by insisting on his rightful claim to his old place. Whether he is worth $20 billion or $28 billion, as Bloomberg estimates, his will prove a losing battle in the long term – these days, there is always another billionaire contender. Nor does the status necessarily confer respectability.
It would be better for the prince, who has a philanthropic foundation, to refocus his ambitions on a more worthy club – the billionaires who give away their wealth. He can still get into that one.
Copyright The Financial Times 2013.