There's a simple question I have trouble wrapping my head around.
Years ago, before I knew about finance, I thought the all-time top earners were heart surgeons, neurosurgeons, and top corporate lawyers. As I understood they each had the potential to make $500K - 750K a year, and that was the absolute top bar. Over the past few years, I learned about different areas of banking, consulting, and trading, and found out that MDs, top traders, and top consultants routinely make millions, and hedge fund managers can approach hundreds of millions. As far as I understand, top HF guys can make close to/over a billion - but I believe I read there were five such people last year.
I still can't wrap my mind around how people make billions. With the exception of top hedge fund managers, of which there are few enough that I can understand, I just don't know how people do it. If I work my ass off, study hard, get really lucky, I can see myself making a few million a year (best case scenario!) and maybe leave this world with a net worth of $100M (again, being extremely optimistic here!) But I have no idea how I'd go about making a billion.
Lloyd Blankfein's net worth is 550M. I'm sure he's got more stashed away, but how much more? And Lloyd runs one of the most prestigious companies ever. Steve Schwarzman is worth $4.7B, but he's one in a million. One in a hundred million.
The question is simple, but I just can't wrap my mind around it: how do people make the jump from a million to a billion?
Start their own firm that kills it.
Do what they are good at. Make millions. Use millions to do what they are good at on a bigger scale. Make billions.
Keep in mind its not like these people actually "make" billions of dollars. Like the poster above said, a lot of billionaires start a company and as it grows so does their net worth. Let's take Zuckerberg for example, he was listed on the Forbes billionaires list years ago, but I doubt he had even a million in cash or hard assets before the Facebook IPO.
the key to getting rich is using other people's money to get rich (re: hedge funds)
The millionaires are using other people's money, but the billionaires own that money.
Leverage the millions that you have, and be damn good at it
Ever read 'The Greatest Trade Ever'? If memory serves me right, John Paulson (not the treasury secretary) made $4 billion in one year better against the subprime mortgages. He didn't make it with his own money. He used extremely high levels of leverage to fund his transactions; and so do all HF managers.
The upside is, if they are right, the amount of profit they can rake in can increase exponentially. The downside is, you make a mistake, you can go bust. The downside is what happened to a HF called Long Term Capital Management. Try looking up these names on Google.
Farmerbob, you have any idea how many rounds occurred before the IPO and you dont think MZ had any liquidity or hard assets before the IPO? Guess his pre- IPO house wouldn't count as an asset. Most founders take some form of dilution in exchange for liquidity and/or more capital.
you realize the US has only 425 billionaires in a population of 300 million... it's extremely rare to be raking in that much.
Take risks, own a business. Those are the only two ways (for the most part) to be exorbitantly rich
I've learned that living safely can make you rich, have good solid income etc. But working for someone else you are always subject to the salary they give you or think you're worth. Own your own business and really the sky is the limit.
But still a billion dollar salary...you better be taking some extravagant risks. But ideamakers are the ones who really pull in money.
You need to work in a scalable profession.
Move to Russia and steal all ex-Soviet-government-owned factors of production. Profit.
Luck. Lots of it.
It's called luck.
The total world population: 7,000,000,000 Total known billionaires: 1,226
You can improve your odds by starting your own business, but even then it's about being at the right place, at the right time, and being prepared
Seriously yeah, luck. And then often also some combination of effort, determination, good ideas, etc... But luck is the biggest part of it.
Facebook was a TON of luck. I still never understood whether the idea actually was his or not, but either way, a large number of things fell into place and it became successful. He could have just as easily became one of the many other sites that end up going nowhere.
Bill Gates was smart, worked hard, and took a chance.
You can buy a piece of paper for 1 or 2 dollars and then become a millionaire..... luck
You can also be in the wrong place at the wrong time, and/or get a disease/disorder of some type, and find your life over.... unlucky
Anything can happen to anyone, but you have the ability to help out your chances by working hard, meeting the right people (social effort but at least some luck), having the right ideas (good for you for coming up with the ideas, but luck is involved), and seriously, to be overly repetitive, LUCK.
zuckerberg or zuckerbust bro
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