18 Aug 2008
How to get rich? What are the main features of a winning idea to make your millions?
In response to a listener’s request for a show that will inspire him with a cracking
idea to make him rich, Guy Kingston and John Richards pick through what he means
to be rich, how to prepare and how to pick a business that will get you there.
Should money be the sole objective? Will turning something you love into a business
inevitably lead to riches?
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The word “rich” is essentially meaningless.
One man may feel prosperous simply because he has enough to pay all his bills and
to finance a lifestyle he considers comfortable. Another may have the same amount
of cash but still be dissatisfied and pathetically obsessive about seeking more
It is not about spending power. Few of the truly wealthy spend up to the level of
their fortune. Many are in fact positively frugal, having become rich in the first
place by saving and investing when others splurge.
Certainly it is true to say that, beyond a certain point, money is just a way of
keeping score – and not a very good one at that.
One suspects that very few of those actually on the Forbes 400 or the Times Rich
List take them seriously.
Such lists are based largely on market valuations of known landholdings and shareholdings.
They cannot, of course, take into account unknown assets.
Nor do they account for unknown liabilities. Personal loans are secret, so while
an individual’s shares in a public company are a matter of record, the money he
borrowed to buy those shares is not.
Then there is the matter of nominees. This cuts both ways. A discreet millionaire
might disguise his wealth by putting shares and land in the names of others. Equally,
one who is on the books as a very rich man may be sitting on someone else’s money.
Above all, market valuations are usually over-valuations, especially given the inflated
property and stock markets of recent years. It would be very difficult, in fact
practically impossible, to turn the nominal assets of the wealthy into anything
like an equivalent sum in cold, hard cash.
This is particularly true at the very highest levels. A gratifying number of those
at the top of the Forbes list are self-made entrepreneurs, whose nominal wealth
consists in large part of substantial or controlling interests in major enterprises
they founded or run.
They could never turn their nominal shareholdings into anything like as much in
cash. Any sale of shares has the effect of reducing the share price. This effect
would be particularly noticeable if a significant block of shares suddenly came
on the market.
The psychological impact would be multiplied when it was discovered that the one
doing the dumping was the company’s founder or another major player in its affairs.
So while Bill Gates and Warren Buffett, nominally the two richest men in the world,
may be worth over $100,000 million between them on paper, they would not be able
to turn their assets into cash for anything like that amount.
If Gates sold all his Microsoft stock and Buffett his third of Berkshire Hathaway,
the effect on the share prices of both companies would ensure they would clear only
a fraction of their current nominal value.
Indeed, it should be noted that these two gentlemen’s huge donations to Mr Gates’s
charitable foundation have been structured in a way that avoids such dumping on
the market: just because they are being generous does not mean that they have suddenly
Even Forbes magazine cannot take the whole Rich List thing too seriously. It publishes
an occasional Forbes Fictional 15, comparing the estimated wealth of characters
It appears that Scrooge McDuck is wealthier than Ming the Merciless. That puts it
all in perspective.
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