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Why billionaires are rare in finance

Why billionaires are rare in finance
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First Published: Sat, Mar 08 2008. 12 20 AM IST
Updated: Sat, Mar 08 2008. 12 20 AM IST
Warren Buffett is a credit to the finance industry. The sage of Omaha has been anointed as the world’s richest man by Forbes magazine, displacing Microsoft’s Bill Gates.
Buffett made his fortune from investing in Berkshire Hathaway Inc., which started out its life as a textile company but rapidly moved into the investment business. Buffett’s skill at finding winners and dodging troubles—including, as yet, the current financial troubles—is legendary.
But Buffett has few mega successful investors to keep him company on the list. Only eight of the world’s richest 100 made their fortunes in finance. And just three of these—Carl Icahn (46 in the rankings), Petr Kellner (91) and George Soros (97)—used Buffett-style investment acumen. The other four sell something to actual investors: Michael Bloomberg’s terminals, the Johnson family’s Fidelity fund management and August von Finck’s German private banking services. The brokers’ yachts seem to be bigger than the customers’.
The best way to make great big money these days is to build a fortune in a poor country. Some 15 of the Top 20 and 42 of the Top 100 on the list are developing-world entrepreneurs—from the Mexican telecom kingpin Carlos Slim (2) to Abdul Aziz Al Ghurair (100), the leading banker of the United Arab Emirates, which was poor when he started to make his fortune.
That pattern makes sense. There’s usually a shortage of sophisticated competitors in poor countries, so it’s easier to garner mega profits. Political connections also seem to be more attactive in developing economies. Financial markets are at the other extreme. They are highly competitive, open to all and, by the standards of the developing world, quite transparent. Many of them are zero-sum games, in which gains are matched by losses. No wonder financial multi billionaires are so rare.
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First Published: Sat, Mar 08 2008. 12 20 AM IST