Master architects of great wealth and lasting legacies

The past 35 years have been a period of extraordinary wealth creation by billionaires. Only the ‘Gilded Age’ at the beginning of the 20th Century bears any comparison. Then fortunes were created from industrial innovation, in sectors such as steel, cars and electricity. Now they are being made from the consumer industry, technology and financial innovation in the US and Europe, as well as consumer products, globalization, industrialization and infrastructure booms in Asia and other emerging markets.

We have looked back over the latter half of what we call a second ‘Gilded Age’ and found that 917 self-made billionaires have created fortunes of more than US$3.6 trillion in this period. Along the way, they have driven the development of the internet and its ecosystems, perhaps the greatest innovation of our time, led Asia's consumer products revolution, and developed Asia's factories, infrastructure and real estate. They have also set up some of the hedge and private equity funds that have revolutionized finance.


Our report is one of the most comprehensive studies of this historic era of wealth generation. We analyze data covering more than 1,300 billionaires, looking back 19 years. The data surveys the 14 largest billionaire markets, which account for 75% of global billionaire wealth. Additionally, we have conducted face-to-face interviews with more than 30 billionaires.

Notably, we believe this period of extraordinary wealth generation may soon decelerate. While this analysis is historical, our belief is that the conditions in which billionaires thrive are cyclical. The response to rising inequality, increasing taxes and asset price deflation may all play a part in slowing the current cycle. At the same time, scientific innovation in fields such as biotechnology, artificial intelligence, robotics, nanotechnology and cyber security, as well as the growing needs of an ageing population, suggest that some new opportunities for aspiring billionaires will emerge.

From a demographic point of view, the current generation of billionaires is ageing. Two thirds of them are in the corridor of wealth transfer, with many of them still facing the decision of what their legacies will be. We expect a major upsurge in philanthropy, perhaps even surpassing that at the end of the first ‘Gilded Age’.

Second ‘Gilded Age’ The world is in a second ‘Gilded Age’, comparable to the first ‘Gilded Age’ at the beginning of the 20th Century.

The majority of the world’s billionaires have made their wealth in the past 20 years, when they have created more than 
US$3.6 trillion. US entrepreneurs have created most wealth, leading a wave of innovation in technology and finance. Asia’s new industrialists, consumer product tycoons and real estate investors have also participated, seizing opportunity from rapid macro-economic growth, globalization and urbanization. Rising real estate and capital markets have played a strong role in the creation of new billionaires.

Levelling off likely Contrary to some observers of our time, we believe this second ‘Gilded Age’ is unlikely to go on forever but will level off.

Just as economies grow in cycles, so the opportunities that led to this most recent exceptional period of wealth generation are likely to come to an end. Tax, social equality initiatives, asset price deflation and geopolitical tensions – there are approximately 40 civil wars and armed conflicts raging – will likely have significant consequences for great wealth creation.

Youthful starts Self-made billionaires tend to launch their first ventures at a young age, although few attain billionaire status before their 40th birthdays.

 

23% launched their first venture before the age of 30, while a total of 68% did so before reaching 40.

 

Against the current myth of billionaire dropouts, 82% of all self-made billionaires have a college degree.

Personality traits Distinct personality traits allow creators of great wealth to thrive, according to our research.

Billionaires typically have three characteristics in common: an appetite for clever risk taking, business focus and determination. But while some highly visible entrepreneurs excel in risk taking and starting up businesses, they are often less good at running and scaling a business which explains why they often team up with strong partners. Others are able to both build and sell as they observe a niche that is not covered and fill it.

Sustainable legacies As this generation of self-made billionaires ages, they have to decide what their legacies will be.

Almost two thirds of billionaires are over 60 years old and have to choose how to preserve their achievements and to transfer their wealth effectively either to future family generations, to philanthropic causes or some combination of the two. Without a clear and sensible governance and strategy, wealth can swiftly dilute over generations, through death, divorce and taxes.

Planning and structuring for the long term are critical, and some billionaires are setting up sophisticated structures (i.e. family offices) with the characteristics of private equity to safeguard their legacies. Increasingly, large billionaire families are held together through meticulously drafted charters dealing with critical governance issues.

Great philanthropy We expect an unprecedented wave of philanthropy in its many forms – foundations, endowments, socially-focused investing, the arts and education.

Following the first big wave of US philanthropy at end of first ‘Gilded Age’ (Carnegie, Rockefeller), this can already be seen in the US with the most visible example being Bill Gates’ ‘Giving Pledge’, where more than 100 billionaires have pledged more than 50% of their wealth to philanthropic causes.

However, we also expect philanthropy to grow in other countries, where its particular form is and will be adapted to the regional and cultural context.

Download the full report

UBS commissioned PwC to develop a report to examine the differences between billionaires’ wealth creation, preservation and philanthropic practices across the U.S., Europe and Asia. The study examines what is happening in the wealthiest markets globally, which account for 75% of all wealth. We looked at over 1,300 billionaires in 14 countries and how their profile has changed in the last 20 years.

Welcome to the UBS/PwC 2015 Billionaire Report, which sheds new light on the story of great wealth – how it's created, preserved and how it breeds philanthropy.