The Top 5 Ways Ultra-High Net Worth Individuals Made Their Money
These are the most common avenues that the Ultra-High Net Worth took to accumulate their significant sums of wealth.
It is no coincidence that the most well known billionaires of the world like Jeff Bezos, Elon Musk, and Bill Gates all gained their wealth from owning some of the largest and most successful companies in the world. Over 55% of UHNW individuals created their wealth through starting, owning, and operating businesses. These businesses range from technologies companies that seek to disrupt the way we live and provide for transformational changes to society, all the way to the local plumbing company that has been family owned and operated for 30 years. Equity in assets, particularly in cash flow generating companies, is the number one way to create generational wealth in the world. However, this is not the only path to achieve a net worth in excess of $25MM.
Below, we will explore the top 5 ways in which the wealthiest individuals and families have created their wealth.
1. Entrepreneurs and Business Owners
Entrepreneurship and business ownership is most common way UHNW individuals have created their wealth. These individuals are often referred to as "self-made" because they built their wealth through their own efforts, rather than inheriting it or acquiring it through other means. They created their wealth through the following ways:
Risk-Taking and Innovation
Entrepreneurship is often associated with large amounts of risk and creating new and exciting products. Successful entrepreneurs are willing to take calculated risks to pursue their vision, and they're constantly looking for ways to innovate and disrupt traditional industries. They're not afraid to challenge the status quo and come up with new solutions to old problems.
Hard Work and Persistence
Entrepreneurship is not for the faint of heart. Starting a business takes a lot of hard work, dedication, and persistence. Entrepreneurs often work long hours, sacrifice their personal time and resources, and face numerous obstacles and setbacks along the way. However, their drive and determination are what ultimately lead to their success.
Creating Value for Customers
Successful entrepreneurs are focused on creating value for their customers. They're passionate about solving problems and meeting customer needs, and they're constantly looking for ways to improve their products or services. By providing value to their customers, they can build a loyal customer base that can prove to be one of their greatest assets.
Building a Strong Team
No entrepreneur can succeed alone. Successful business owners know that building a strong team is critical to their success. They hire talented individuals who share their vision and values, and they empower their team to make decisions and take ownership of their work. By building a strong team, entrepreneurs can delegate responsibilities, scale their business, and focus on their strengths. Ultimately, if a strong team is in place this can create more capacity for the founder/owner to pursue additional ventures or enjoy the opportunities and lifestyle their wealth affords them.
Giving back to the community
Many successful entrepreneurs are also philanthropists who give back to the community. They use their wealth and influence to support charitable causes and make a positive impact on society. By giving back, they can make a meaningful difference in the lives of others and leave a lasting legacy.
While entrepreneurship is not easy, the rewards can be significant, both financially and personally. Buying or investing into an existing business requires less initial risk up front and can be just as profitable as starting a company from scratch. There is no specific industry, product, or structure that is better than the other. Significant wealth can be created through business ownership as long as the owner and leadership is focused on the right objectives.
Investments are another popular way for UHNW individuals to create their wealth. By investing in public securities, real estate, venture capital, private equity, and other asset classes, they can generate significant returns and build a diverse portfolio of assets. These individuals usually risk significant amounts of their own capital to create their fortunes and often never truly step away from their work. Some of these investors accelerated their careers through large compounded returns, some through homerun investments, and others by taking consistent and systematic approach to continual investing.
UHNW investors may invest in residential or commercial properties, either directly or through real estate investment trusts (REITs), funds, or other vehicles. Real estate investments can provide UHNW individuals with a steady income stream, capital appreciation, and portfolio diversification along with the potential for preferential tax treatment. Successful real estate investors have a strong understanding of market trends, property valuation, financing options, and local regulations. They also have a disciplined approach to investing, conduct thorough due diligence, and build a strong network of industry professionals.
Over the past two decades, the rise of private equity has created numerous billionaires. Those that have created their wealth through private equity typically work act as a general partner (GP) in a fund. Private equity involves investing in privately held companies, often with the goal of growing and eventually selling them for a profit. Successful private equity investors have a deep understanding of business operations, financial analysis, and deal-making. They are also skilled at identifying promising companies, negotiating favorable terms, and providing operational and strategic support to help them achieve their growth goals. Many UHNW investors that created their wealth in other ways choose to invest as limited partners (LPs) in private equity funds.
Individuals who have created their wealth through venture capital invest in early-stage, high-growth companies with the potential to disrupt industries and create substantial value. Venture capital investments offer significant returns but also involve high risks. Successful venture capitalists usually make their wealth off of one or two companies that generate homerun returns while their other investments may result in a total loss. These investors often work closely with portfolio companies, providing mentorship, network access, and expertise to help them scale and achieve success.
Public Market Investors
These investors are the most common type and invest across a very broad group of assets. It include those that manage strategies like Hedge Funds, Mutual Funds, or ETFs. It also covers the traditional investor that routinely saved their income and invested in Apple or Amazon in the early 2000's and had held on ever since. There are an infinite number of ways to create significant wealth by investing in publicly traded securities and the barriers to entry are by far the lowest out of all of the other categories mentioned above.
The common theme amongst all of these categories of investors is that they are all risking their money, and often times other peoples as well, to generate significant returns over time. These investors all take different approaches to do so with varying amounts of risk, but their goal is similar at the end of the day and many have created large sums of wealth from doing so successfully.
Inheritance is another way that some UHNW individuals have accumulated significant wealth. Inheritances can take many forms, including cash, investments, real estate, businesses, and other assets. In some cases, individuals may inherit substantial wealth from their parents or other family members, which can provide them with a significant head start in building their own wealth. However, inheritance is not a guaranteed path to UHNW status, and many individuals who inherit wealth also face unique challenges, such as managing family dynamics, navigating complex tax and legal issues, and finding ways to grow and preserve their inherited wealth over time.
Despite these challenges, some of the largest family fortunes in the world have been passed down through generations. For example, the Walton family, heirs to the Walmart fortune, has a combined net worth of over $200 billion, making them one of the wealthiest families in the world. Other notable examples include the Mars family, heirs to the Mars candy company, and the Koch family, heirs to Koch Industries. In these cases, successful wealth preservation and management strategies, as well as a strong focus on family values and legacy, have helped these families maintain and grow their wealth over multiple generations.
4. Entertainment and Media
The entertainment industry includes film, television, music, and other forms of entertainment, while the media industry includes publishing, broadcasting, and digital media. Successful entertainers and media executives have a unique combination of talent, creativity, and business acumen, which can translate into significant financial success. For example, media moguls like Rupert Murdoch, founder of News Corp, and Oprah Winfrey, media personality and entrepreneur, have built substantial fortunes through their respective media empires. Similarly, entertainers like George Lucas, creator of the Star Wars franchise, and Tyler Perry, actor and filmmaker, have leveraged their creative talents into lucrative businesses. Many famous actors and musicians have also used their fame to launch other brands or products like Dr. Dre with headphone company Beats and George Clooney with the tequila Casamigos.
However, the entertainment and media industry is also highly competitive and unpredictable, with rapid changes in technology and consumer behavior. As a result, many UHNW individuals in this sector face unique challenges, such as managing reputational risk, navigating intellectual property rights, and adapting to changing industry dynamics. Nevertheless, the potential rewards for success in entertainment and media can be significant, not just in terms of financial wealth but also in terms of cultural impact and influence.
Sports and athletics are the final way in which many individuals have created their wealth. Athletes and coaches in professional sports leagues can earn high salaries and endorsement deals, particularly in the most popular sports such as football, basketball, and soccer. Cristiano Ronaldo and Lionel Messi, two of the world's most successful football players, have a combined net worth of over $1 billion. Similarly, coaches like Bill Belichick and Gregg Popovich, who have achieved significant success in their respective sports, can earn salaries in the tens of millions of dollars. Successful athletes and coaches must combine talent, dedication, and hard work with the ability to navigate the competitive and unpredictable world of professional sports.
In addition to athletes and coaches, team owners in professional sports leagues can also create significant wealth. Team ownership has provided substantial returns on investment, particularly as the value of sports franchises has increased in recent years. The Dallas Cowboys, owned by Jerry Jones, are valued at over $5 billion, making them the most valuable sports franchise in the world. However, owning a sports franchise also comes with unique challenges, such as managing player contracts, navigating league rules and regulations, and dealing with the unpredictable nature of sports performance. There is also an incredibly high barrier to entry in purchasing a major franchise now. Often times it takes numerous high profile UHNW individuals to purchase a franchise.
In summary, Ultra-High Net Worth individuals have created their wealth through a variety of means. Many have started or owned successful businesses, leveraging their entrepreneurial skills to build thriving companies. Others have achieved significant wealth through investments, including private equity, venture capital, and real estate. Inheritance has also played a role for some UHNW individuals, with some of the largest family fortunes in the world passed down through generations. In addition, the entertainment and media industry has created significant wealth for UHNW individuals who have leveraged their talent and business acumen to build successful careers in these sectors. Finally, sports has provided opportunities for talented athletes and coaches to earn large sums of money while following their passions. There is not one best way to create your wealth and earn a significant amount of money, but these are some of the most common and well traveled paths that hopefully provide inspiration or a framework to achieving it yourself.