There is a rather wonderful story about billionaires. According to this story, a small number of exceptionally gifted and hard-working people, through their own talent and dedication, create and build businesses which both enrich themselves and hugely benefit the rest of the world: their customers, their employees, their suppliers and the rest of society (via the taxes they pay). In this story, their wealth is a fair reward for their hard work and intelligence, and only those consumed by the politics of envy would have concerns about their activities: all right-thinking people would welcome and celebrate their success.
It is a heart-warming and inspiring story, but unfortunately it is not a description of the real-world:
- In real life, it is almost impossibly difficult to become a billionaire by following the story;
- None of the UK’s 20 richest match the story;
- The real story is far more disturbing.
It is difficult to become a billionaire following the story
In the archetypal version of the story, you start with next to nothing, a small business in your garage, for example. Your product is so awesome that your business grows, and you take on employees and the business really explodes. You expand the business as fast as you can, and before you know it, you have become a billionaire.
To understand why this is so difficult, let’s take a look at the man often regarded as the world’s greatest investor: Warren Buffett. The chart below shows how far Buffett’s company, Berkshire Hathaway managed to outperform the S&P500 index of leading US stocks.
Essentially nobody has a better long term track record than Buffett: his investment return was 20% per annum sustained over a 60-year period (against 10% per annum for the S&P500). In fact, hardly anybody even gets close.
But let’s assume that you are a normal 25-year-old with a normal amount of wealth for your age but a brilliant business idea that you are prepared to invest in. Where would you be at the age of 65 if you could replicate Buffett’s performance? Your starting wealth would be less than £12,000 according to the Office for National Statistics (ONS). If you invested all of that in your new business idea and managed to grow it at 20% per annum, by the time you reached 65, you would be a very wealthy man or woman: your wealth would be around £15 million. That is a great deal of money, but it is not close to £1 billion. And that would only happen if you were able to replicate Buffett’s performance – it is an insanely optimistic scenario.
What about if you are just so good at your job that your pay is astronomical? Suppose you invest a good proportion of your salary each year and obtain returns which match the market as a whole. Let’s say you are a top professional earning £3 million per annum from the ages of 25 to 65 and you live frugally enough to save £1 million of it each year. What will you have by the time you reach 65? If the stock market returns 10% per annum for all of that time (the UK stock market has not done that), you will end up with a wealth of £630 million (or around £370 million in today’s money) – that is much closer to £1 billion, but still a long way short. Unfortunately, the ONS does not have data on very high earners, so we cannot be sure how many people might be able to follow this route to becoming near-billionaires. But data from Statista suggests that the number might be around 6,000 people (out of a workforce of around 30 million) – that is about 0.02%.
For contrast, let’s consider someone who starts from a wealthy background: Donald Trump, for example, who has always described himself as a self-made man. The New York Times investigated his claim and reached a rather different conclusion:
“Trump received the equivalent today of at least $413 million from his father’s real estate empire, starting when he was a toddler and continuing to this day. … By age 3, Mr. Trump was earning $200,000 a year in today’s dollars from his father’s empire. He was a millionaire by age 8. By the time he was 17, his father had given him part ownership of a 52-unit apartment building. Soon after Mr. Trump graduated from college, he was receiving the equivalent of $1 million a year from his father. The money increased with the years, to more than $5 million annually in his 40s and 50s.”
To be conservative, let us assume that Trump had inherited wealth of $75 million (not in today’s money) by the age of 25 and then nothing further. If he reinvested it at 10% per annum returns, by today, his wealth would by now have increased to around $8 billion – without any requirement for intelligence or hard work. Forbes estimates his wealth today to be around $4 billion – around half what a normal person would have achieved from that starting point. As Mitt Romney commented,
“But wait, you say, isn’t [Trump] a huge business success that knows what he’s talking about? No he isn’t. His bankruptcies have crushed small businesses and the men and women who worked for them. He inherited his business; he didn’t create it. And what ever happened to Trump Airlines? How about Trump University? And then there’s Trump Magazine and Trump Vodka and Trump Steaks, and Trump Mortgage? A business genius he is not.”
Trump is a self-unmade man.
A similar mechanism exists in certain types of finance where you can get a share of someone else’s investment returns. This is not quite the same as being given starting capital as inheritance, but it can be equally lucrative. Many Private Equity and Hedge Funds, for example, charge “2 and 20”: this means a 2% charge on all assets under management, plus a 20% performance fee for outperforming a benchmark (eg the S&P500). If you can persuade wealthy people to invest their money with you, you get 20% of their excess returns. If you are investing billions on behalf of others, you can be paid hundreds of millions or even over $1 billion in a good year.
The archetypal garage story is essentially impossible (at least if you start with anything like the average wealth for your age); the supremely well-paid individual is possible, but will not get you to £ 1 billion and the chances of being that well paid are around 0.02% – but if you have a head start, via someone else’s money, becoming a billionaire is easy.
None of the UK’s 20 richest match the story
The table below summarises the Top 20 entries in the Sunday Times Rich List for 2024.
| Name | Wealth (£ billion) | Sector | Origin of wealth |
| Gopi Hinduja and family | 37.1 | Industry and finance: Hinduja Group | Inherited |
| Sir Leonard Blavatnik | 29.2 | Investment, music and media: Access Industries | Oligarchy |
| David and Simon Reuben and family | 24.9 | Property and internet: Reuben Brothers | Property |
| Sir Jim Ratcliffe | 23.5 | Chemicals: Ineos Group | PE / Hedge fund |
| Sir James Dyson and family | 20.8 | Technology: Dyson Group | Inventor |
| Idan Ofer | 14.9 | Shipping and industry: Israel Corp | Inherited |
| Lakshmi Mittal and family | 14.9 | Steel: ArcelorMittal | Inherited |
| Guy, George, Alannah and Galen Weston Jr and family | 14.4 | Retail: Primark | Inherited |
| John Fredriksen and family | 12.8 | Shipping and oil services | Oil trading / shipping |
| Kirsten and Jorn Rausing | 12.6 | Inheritance and investment: Tetra Laval | Inherited |
| Alex Gerko | 12.0 | Finance: XTX Markets | PE / Hedge fund |
| Michael Platt | 12.0 | Hedge fund: BlueCrest Capital Management | PE / Hedge fund |
| Charlene de Carvalho-Heineken and Michel de Carvalho | 11.7 | Inheritance, brewing and banking: Heineken | Inherited |
| The Duke of Westminster and the Grosvenor family | 10.1 | Property: Grosvenor Group | Inherited |
| Barnaby and Merlin Swire and family | 10.0 | Industry, transport and property: Swire Group | Inherited |
| Marit, Lisbet, Sigrid and Hans Rausing | 9.2 | Inheritance: Tetra Laval | Inherited |
| Carrie and François Perrodo and family | 9.2 | Oil, gas and wine: Perenco | Inherited |
| Nicky Oppenheimer and family | 7.9 | Diamonds and mining: De Beers | Inherited |
| Lord Bamford and family | 7.7 | Construction equipment: JCB | Inherited |
| Denise, John and Peter Coates | 7.5 | Gambling: Bet365 | Inherited |
Of the 20 entries, at least 17 benefited from other people’s money: 13 are there because they inherited wealth, three got their wealth from hedge funds or private equity, one was a Russian oligarch, one was in property investments, one in oil trading and shipping, and one was an inventor.
That lone inventor – James Dyson – sounds as if he might be an example of the archetypal story. And certainly Dyson is keen to protect his reputation. But he lost a libel case against the Mirror which described him as “the vacuum-cleaner tycoon who championed Vote Leave due to the economic opportunities it would bring to British industry before moving his global head office to Singapore [to avoid tax].” He subsequently lobbied during COVID for an exemption to the tax rules “in support of this national emergency” and moved his tax residency back to the UK. It is unclear if the ventilators achieved regulatory approval, and it was announced that they were no longer required. And his company recently had to abandon a libel case against Channel 4 and ITN after “Dyson sued Channel 4 and the makers of the programme, ITN, after the programme reported on appalling conditions in factories in Malaysia where Dyson products were being manufactured.” So the part of the story where everyone benefits does not seem to fit.
That is not to say that there are zero billionaires in the world who do represent the story told at the top of this article – but it suggests that, if there are any, they are rare.
The real story is far more disturbing
It is already disturbing to many people to realise that the comforting story they have heard so many times bears so little relationship to the real world. But the most disturbing aspect is the risk that such extreme concentration of wealth poses for democracy, in the UK and around the world.
By no means all billionaires are opposed to democracy, but a substantial number are market fundamentalists who, like Peter Thiel, “no longer believe that freedom and democracy are compatible.” By freedom, they mean their own freedom to do whatever they want to become even richer; they do not mean our freedom from poverty, disease and needless death. Or even our freedom of speech or right to fair elections.
The global rise of far right-wing parties is enabled by their backers: wealthy market fundamentalists using all their resources to distort democratic politics and to ensure that parties supportive of their objectives win whenever possible. And the resources they have at their disposal are immense.
They include all forms of media, lobbying groups and political parties themselves whose policies they can buy through their donations.
In the UK, more than 60% of readers consume media owned by one of four off-shore, tax-avoiding billionaires with a strong vested interest in a far-right government being in power. And the broadcast media follow the lead set by the press.
Social media are even worse: Facebook, which as Carole Cadwalladr revealed was complicit in the Brexit disinformation campaign, is owned by Mark Zuckerberg and Peter Thiel sits on its Board. Twitter, which was bought by Elon Musk, partner of Peter Thiel in PayPal, has since become a vehicle for far-right disinformation. Musk claims to be a ‘free speech absolutist’ but while he has made sure that extreme right-wing content is now permitted under his rules, he removes accounts which are critical of him. It is a strange version of free speech he supports.
Meanwhile, the far-right think tanks in Tufton Street are still able to claim charitable status as they put forward extreme right-wing policies like these:
- The Adam Smith Institute believes that Britain needs more slums;
- The Centre for Policy Studies has a plan to help with the cost-of-living crisis by removing the green levy from energy bills (despite the climate emergency and instead of price caps on energy companies), by reducing standards of childcare to reduce cost and by unilaterally abolishing all import tariffs;
- The Global Warming Policy Foundation claims that ‘Empirical Observation shows no Evidence of “Climate Crisis”’; and
- The Institute for Economic Affairs (IEA) wants to abolish the NHS; and
- The Taxpayers Alliance called for benefits to pensioners to be slashed because “some of the people… won’t be around to vote against you in the next election [and the rest] might have forgotten by then.”
That would not matter if these think tanks were treated as fringe groups and ignored by politicians and the media, but the opposite is true: every recent candidate to lead the Conservative Party has been a protégé of one or more of these think-tanks. Truss’s disastrous mini-Budget was hugely influenced by the IEA. And the media give them a far greater platform than many far more reputable sources of political commentary.
As we wrote before the election, the far right may have lost the battle, but they have no intention of losing the war.
Conclusion
The majority of the UK population is fighting for its interests against a small number of far-right billionaires whose combined influence is huge.
To win the war, we need the new government to deliver. And to have a realistic chance of delivering, they will need to change gear fast:
- Abandon the small target strategy – anything radical needs to be done while the mandate is fresh;
- Carry out constitutional repair;
- Tackle the rewiring of Britain’s institutions while they can;
- Think radically about how to reduce leakage and boost growth;
- Ensure that there are no blunders on voters’ top two issues: the cost-of-living crisis and the NHS.
The five actions set out in Chapter 15 of the book 99%: Mass Impoverishment and How We Can End It and briefly summarised in this article give a framework for rebuilding the UK’s governance and social contract.
If you would like to be sure your MP is thinking about this, please tag them into this article and share it widely using the buttons below.
And take a look at the 99% organisation and join us.
