On Millionaires and Billionaires

David MoonBlog

by David Moon

When I was nine-years-old, my family moved into a bigger, nicer house, prompting me to ask my parents if we were rich. As would most parents, my mother began to deflect my line of questioning. “Son, we are rich in many ways. Our family, our health…”

I interrupted her. “No; I mean how much are we worth? If you subtract all of our debt from how much money we have, do we have a million dollars?”

My youthful curiosity and accounting skills far exceeded my sense of logic, scale and reasonableness.

Long before I understood the concept of “millionaire,” I wanted to be one. Don’t read too much into that; I also wanted to be a professional wrestler.

Like being a pro wrestler, being a millionaire isn’t anything like most people imagine. In the late 1960s, fewer than 100,000 Americans had a net worth in excess of $1 million. Today there are more than 17 million millionaires in the U.S., spread across 10.4 million households. That is, one in 12 American households has a net worth in excess of a million dollars. (Source: US Census Bureau, Spectrum Group.)

There is a millionaire in every middle-class neighborhood in America. Probably several. As a result, today’s nine-year-old would-be Howard Hugheses and Bill Gateses don’t dream of being millionaires; they want to be billionaires.

Unlike millionaires, billionaires are rare. Forbes says they are only 540 of them in the U.S., none in my old home state of Alabama. There are so few billionaires in the U.S. that taxing their estates at 100 percent would be meaningless to the finances of our country; their combined net worth of $2.4 trillion would run the federal government for about 230 days.

China has 213 billionaires; the entire continent of Africa has 29. California has 124.

A study by wealth researchers at Wealth-X finds that 89 percent of billionaires are male. Most did not inherit their wealth; 68 percent are self-made.

The general source of uber-wealth has changed in the past couple hundred years. Billionaires (in today’s dollars) from the 19th to the mid-20th century were most likely to have been in a capital-intensive business, either natural resources or finance. Oil, coal and international finance generated the fortunes of the Gettys, Rockefellers and Mellons.

Today’s billionaires create new technologies, leveraging intellectual capital rather than natural resources or money. Think Bill Gates, Steve Jobs and Elon Musk.

U.S. billionaires are much more likely to be married (88 percent) than non-billionaires (56 percent.) I’m not sure which the cause is and which is the effect.

Of the numerous studies of the backgrounds, habits and other characteristics of billionaires, one finding regularly repeats: almost none of them ever had the goal to be a billionaire—or, I suspect, being a pro wrestler.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN)