How are billionaires different?

Summary #

Billionaires are not different from ordinary people. They are not smarter or work harder than ordinary people. They become billionaires by taking advantage of rare business opportunities.

Explanation #

Billionaires are entrepreneurs who start large companies. They own a big share of these companies. The share market value of their ownership share is the source of their multi-billion dollar wealth. For example, Jeff Bezos’ 117 billion dollar wealth is from his 11% share in Amazon.com. There are millions of successful entrepreneurs in the world. But very few of them are billionaires. A regular entrepreneur acquires wealth through the profits of his/her company. A billionaire acquires his wealth by the value of shares of his company. This is the difference between an average entrepreneur and a billionaire.

Not every entrepreneur can get high value (price) for shares of his company. External investors determine the price of shares. The price is high only if a company has enormous growth potential. This is because investors get a big return on their investment when a company grows quickly. The share price of a growing company rapidly increases. Investors sell their shares at a higher price and make a big profit.

Companies that have huge growth potential are rare. Such companies have an unlimited demand for their products/services and no competition. Such market conditions are very rare. It happens when there is a demand for a new product/service in society. The first company to meet this new demand will grow quickly. Its quick growth will give no chance for competing companies to survive. The general public will become loyal to the company. The company’s name will become synonymous with the product/service it provides. Billionaires are entrepreneurs who take advantage of such market conditions. They are in the right place at the right time. They start companies that become huge on the back of the demand for a new product/service. For example, John D. Rockefeller (Oil), Andrew Carnegie (Steel), Bill Gates (Computers), Larry Page/Sergey Brin (Internet search), Mark Zuckerberg (Social Networking). These entrepreneurs capitalized on the demand for a new product/service using their intellect and hard work. But still, they were lucky to be at the right place and the right time to meet the demand. So a big part of the reason they become billionaires is luck. They are not smarter, more insightful, or work harder than regular entrepreneurs. But that doesn’t mean that they acquired their wealth unfairly. They didn’t get any special treatment from society. They played by the same rules which applied to everyone else. They just got lucky.