Forget the Great Depression and the “great recession”. For the world’s richest entrepreneurs, this has been the year of the great destruction. The release late this week of the Forbes annual list of the world’s billionaires has finally confirmed the incredible wealth destruction experienced by the world’s wealthiest entrepreneurs in the past 12 months.
The number of billionaires on the list (you need $US1 billion to qualify) has crashed from 1125 to 793, with their total wealth plunging from $US4.2 trillion to $US2.2 trillion – a fall of just over $3 trillion in Australian dollars.
Few entrepreneurs have been spared. The world’s richest person, Bill Gates, watched his fortune slump by $US18 billion to $US40 billion, while Warren Buffett slipped to second place on the list after his wealth dropped by $U25 billion to $US37 billion.
Mexican entrepreneur Carlos Slim (wealth of $US35 million), Oracle founder Larry Ellison ($US22.5 billion) and Ikea founder Ingvar Kamprad ($US22.5 billion) round out the top five, although all lost money in the past year.
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But while these well-established billionaires have been hit hard by the crisis, it is the emerging wealth centres of Russia and India that have taken the biggest pounding.
Last year Russia had 89 billionaires; this year 55 departed as commodity prices plunged and the cheap and easy debt that most had used to expand dried up.
India‘s billionaire ranks have been similarly hit, with 29 of the 52 billionaires on last year’s list waving goodbye. Indeed, the biggest fall on the list in dollar terms was posted by India’s Anil Ambani, head of Reliance Communications, Reliance Power and Reliance Capital. In 2008, his fortune jumped by $US23.8 billion to $US42 billion. But in the past 12 months he has lost a staggering $US32 billion, and is left with $US10 billion.
The number of Australians on the list has fallen from 10 to 13, with WorleyParsons chief John Grill, West Australian investor Stan Perron and Australia’s retail king Gerry Harvey all falling under the cut-off. Frank Lowy takes the title of Australia’s richest person, with $US2.7 billion, just in front of James Packer ($US2.5 billion) and Gina Rinehart ($US1.9 billion). Every Australian on the list has lost money in over the past year.
But let’s forget about the doom and gloom and the big losers. Wealth lists are all about celebrating the most world’s successful entrepreneurs, wealth creators and business builders.
It’s time to look at the billionaires who actually made money in the last 12 months.
Not surprisingly, it’s a pretty short list. Just 44 of the 793 billionaires on the list managed to increase their fortunes in 2008, but there are a few key themes that all wealth watchers and investors should take note of.
Profit from the problems of others
New York City mayor Michael Bloomberg was this year’s biggest winner, having boosted his fortune by $US4.5 billion to $US16 billion. The reason was a jump in the value of his stake in his financial data firm Bloomberg. In July last year, Bloomberg swooped on a 20% stake in the company offered up by dying bank Merrill Lynch. He paid $4.5 billion, but got a bargain.
Going against the crowd
Most of the financial engineers, money men and hedge fund managers have been obliterated by the global financial crisis, but one stands out as a genius. The US hedge fund manager John Paulson decided back in 2005 – when markets were surging and banking profits were soaring – that the US economy was heading for a crash and started making massive bets against housing and banking stocks.
In 2007, he reportedly made a personal profit of $US3.5 billion short selling stocks related to sub-prime credit. Last year his fund returned 38% and he is also believed have made another $US400 million in the last few weeks betting against British banking stocks. Paulson’s total wealth increased by $US3 billion to $US6 billion in the past 12 months.
Satisfy the bargain hunters
Given the disastrous performance of the Japanese economy in the past year, it’s hard to believe that a Japanese billionaire could have actually increased their fortune.
But Japan’s Tadashi Yanai boosted his wealth by $US2.4 billion to $US6 billion thanks to the strong performance of his discount clothing chain Fast Retailing. The notoriously frugal Japanese love his UNIQLO stores, and shares in Fast Retailing are up more than 40% in the last 12 months.
Feed the masses
Remember in early 2008 when the global food crisis seemed more important than those little credit problems? Well, feeding the masses is still a big problem around the globe, and food-related entrepreneurs continue to do well.
Liu Yongxing owns East Hope Group, one of China’s biggest feed producers. His fortune rose $US1.1 billion to $US3 billion over the past year as demand for meat in China helped push up demand for feed.
Fellow Chinese billionaire Tsai Eng Meng increased his wealth by $US1 billion to $US2.6 billion thanks to the strong performance of big Chinese food brand, Want Want.
Help the aged
As the world’s population ages, the opportunities for health-focused entrepreneurs should increase.
Patrick Soon-Shiong is the doctor who invented cancer drug Abraxane. He boosted his fortune by $US2 billion to $US5.5 billion by selling part of his pharmaceuticals empire for $US5.6 billion, giving him a personal profit of $US3 billion. He dropped $US1 billion on other investments, but the good doctor has still had a good year.