You can tell that a rich-list is designed for Chinese consumption when it includes its the Chinese zodiac signs of all the world’s billionaires. Apparently 9.5% are snakes, while 7.2% are roosters. Is this significant? Who knows?
Of course, it’s not surprising that the 2015 list by Hurun - a Shanghai property development firm - has a Chinese slant, but it sheds some interesting light on the role of families in creating super-wealth.
This year’s list includes a “self-made” score on a scale of 1-5 explaining to what degree the billionaires made their own money. This is how it works: 5 means “self-made without parental financial support”, 4 is “self-made but with parental help, eg private education”, 3 means “inherited a small business and grew it big time”, 2 is “inherited, but active in the business” and 1 is “Inherited and not actively involved in the business”. So Warren Buffett is a 5, Mark Zuckerberg a 4, and Rupert Murdoch a 3. Liliane Bettencourt of L'Oreal is a 2, and Steve Jobs' daughter Lisa Nicole Brennan-Jobs is a 1.
If you think that being self-made is an admirable thing (as presumably a lot of Hurun’s audience do), China comes out pretty well with the most fives - 388 of its 427 billionaires were entirely self-made. It's notable that five of the top 10 cities for billionaires are in China, and 14 of the 17 billionaires whose wealth doubled this year are Chinese.
But taking this at face value would give you a distorted picture of entrepreneurs’ role in creating extreme wealth. Looked at slightly differently, the list also reveals the role of family businesses. Here are some bulletpoints:
- Overall, 650 of the 2,089 billionaires were from family firms (they were either 3s, 4s or 5s). That is 31%.
- Of the 31% who inherited their wealth, 19% inherited and grew a business, 8% inherited and are active in a large business, and just 4% inherited and are inactive.
- 82 billionaires (or 4%) are from the fourth generation or more, and they come from 52 companies.
Overall, there is a misleading bias towards self-made wealth in this list due to the peculiarities of China, which no businesses to speak of prior to 1978. A disproportionate number of businesses in China are in the founder stage.
If you crunch the numbers, you see just how distorting China is.
China is quite clearly a special case. So what happens when you exclude it? This:
So including China, 31% of the super-rich are from family firms. Without it, 37% are. And far fewer very rich people are entirely self-made - 17% compared to 30%. This also doesn’t take into account the intention of the newly wealthy to pass on their wealth. to their children - some of the Chinese 1s have already created dynasties, such as Wang Jialin of the property group Dalian Wanda, whose son is deeply involved in the business.
Assuming wealthy Chinese people do what everyone else does, and bring their children into their empires, families will come to dominate the rich lists again very soon - even Chinese ones.