+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

How to become a billionaire

Jan 23, 2024, 21:57 IST
Business Insider
Mark Cuban has said there's no downside to being a billionaire.Getty/ABC
  • Mark Cuban once said there is no downside to being a billionaire.
  • So, how do you become one?
Advertisement

Billionaires are controversial these days. Some people admire them. Others blame them for society's ills.

But, according to one friendly billionaire, Mark Cuban, there's no downside to being one.

So, how does one become one?

There are three legal ways.

The first is inheritance. According to last year's Forbes 400 list, about 30% of the 400 richest people in the US got their billions that way. So if you don't think you're up for making a billion yourself, just cheer on your parents.

Advertisement

Marrying billions is also an option. By Forbes' count, there are 735 billionaires in the US. Most are probably married, but that can be temporary. And there are always some single up-and-comers.

But by far the most common way to become a billionaire in the US is to make tons of money. 70% of the billionaires on the Forbes 400 did that.

So, how do you make billions of dollars?

Except in rare cases, you don't earn or save your way there. Even spectacularly well-paid people, like former NFL superstar Tom Brady, would struggle to get there on paychecks alone. Brady's new sportscasting deal, for example, will reportedly pay him $375 million over 10 years. After taxes, that might net him, say, $20 million a year. If that were Brady's only income, and he saved all of it, it would still take him 50 years to become a billionaire.

Instead, the way to make billions is to own assets that become worth billions.

Advertisement

For most billionaires, these assets take the form of stock (equity) in companies. Others are shares of partnerships (hedge funds or private-equity funds, for example) or licensing agreements (like billionaire Michael Jordan's deal with Nike).

Some billionaires do get paychecks, like the rest of us, but they usually contribute only a tiny fraction of the billionaire's net worth. For example, Warren Buffett famously gets paid $100,000 a year by Berkshire Hathaway. His wealth comes from the Berkshire stock he bought and owns — a stake that, over the past six decades, has grown in value from a $450,000 investment in his pre-Berkshire partnership to about $122 billion today. This isn't just true in America, by the way: A study of wealth creation in Norway found the same thing: "A very small fraction of people become rich through labor earnings" (e.g., paychecks).

So, that's the key point to remember:

Create or buy something and then make it worth billions.

The Forbes 400 list offers a helpful reminder. Scroll through it, and you'll see lots of familiar companies that were once worth zero and have since created one or more billionaires: Tesla, Microsoft, Oracle, Google, Facebook, Bloomberg, Berkshire Hathaway, Dell, Airbnb, Nike, Amazon, Walmart, etc.

Advertisement

Most of the richest billionaires on the Forbes list made their money in tech companies. But as you work your way down, you'll see companies from across the economic spectrum: Money management, retail, media, food, oil and gas, football, auto parts, real estate, gas stations, insurance, cable TV, restaurants, candy, pet food, medical equipment, hospitals, communications, sporting goods, supermarkets, construction, mining, cruises, etc. One guy even became a billionaire by buying car dealerships.

Many of the companies you see on the Forbes list, moreover, produce multiple billionaires. So you don't necessarily have to start or buy a company by yourself. You just have to join the company when it's worth little, vest into or buy a decent-sized stake, and then hold onto it long enough for it to become worth billions.

Other takeaways:

  • Time and focus help. Most self-made billionaires have been at it for a while and have kept doing the same thing. Car-dealership-guy, for example, started in his 30s with one used-car lot, and he's now 72. Amazon, Google, Microsoft, Oracle, and other billionaire factories are decades old. It took Warren Buffett three decades to become a billionaire. And four more to become a centi-billionaire.

  • Luck helps — a lot. Mark Cuban also recently said that becoming a billionaire is all about luck. This is a refreshing perspective, one that you probably won't hear from most billionaires. And luck does play a much bigger role in success than most people think. But it's not just luck, obviously — Cuban and other self-made billionaires started companies and then made them successful, something most people don't do.

  • Living in America helps. There are 2,640 billionaires in the world, according to Forbes. About 735 of them live in the US — which is a higher number than in any other country or territory, Forbes found.

So, in short, if you're not going to inherit or marry billions, your most tried-and-true path to billionaire status is this:

Start or buy a little company and make it a huge one.

Advertisement

No one is born knowing they can do that, by the way — or knowing how to do that. So, just because you don't know those things yet doesn't mean you can't learn.

Have career and job questions? Please send them to me at askhenry@businessinsider.com. And please see more of my career advice here.

You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article