On my homepage, I told you one SHOCKING truth about why the richest of the richest of the richest people on earth are so rich. You've heard about millionaires but on this page, we are talking about the richest billionaires in the world. People to the likes of Mark Zuckerberg, Bill Gates, Larry Ellison, Jeff Bezos.... I think you get the idea.
They are so rich because they own shares of a company. And I mean lots and lots of shares.
You can have a business which generates lots of income for yourself, but ultimately you can only be super rich if you list your company on the stock exchange. Before the listing, you get hundred of millions of shares and when the stock goes public, it rises, double, triple, quadruple and sometimes go up by 100 X over 10 years.
When I was younger, I used to ask myself, why did successful business owners list their company on public stock exchanges? If you have a great business, why not keep it to yourself and swallow all the profits? Worse of all, if you list your company on the stock exchange and only get 35% ownership of the company, sooner or later you might get a hostile takeover. That might or might not happen but it could you know.
But as I look at the many people who bring their businesses to IPO and list their company on stock exchanges, I realize that it is far easier to become a billionaire when you have a wild public that gives an irrational pricing to the value of your company.
If your company is private, it might be worth $500 Million. But if you list it in the stock exchange, an excited public might push your company's stock price up by 10 times its real value. Therefore, the millionaire who has $500 Million now becomes a billionaire worth $5 Billion.
A brief check of the list of the wealthiest people in America will reveal the heirs of the Walmart Empire at the top. Sam Walton who founded Walmart left his shares of Wal Mart in the hands of his son and daughters.
According to Forbes, the heirs of WalMart; Jim Walton, Alice Walton, S Robson Walton and Christy Walton each now own huge amount of Wal Mart shares (ticker symbol WMT) which are worth more than $30 Billion each. As the Wal Mart empire grows, so does the wealth of this family grows. Making them the richest family in America.
I bet they do not need to work a single day of their lives. Living off the dividends they receive from the enormous amount of shares is more than enough. The dividends each of them receive each year is more than what most Americans will earn in their lifetime.
Having gone through many rich people, I have come to the conclusion that the richest of the richest (multibillionaires) have at least one company that is listed in the stock exchange. When you share your company with the world, you become the biggest owner of a company whose share price may be pushed to irrational levels by the public.
A good example is Jeff Bezos whose company Amazon is listed on the stock exchange under the ticker symbol AMZN. As far as I know, Amazon does not generate as much profit as many other companies. They use the money to expand and expand pouring whatever profits back into the business. However, the investing public seems not to be bothered too much about profits and continue to attach a very high price to Amazon's shares despite its small earnings. This made Jeff Bezos one of the richest people in America.
The lesson for us is this.
If you want to be rich, start a company. If you want to be super rich, list your company on the stock exchange.
I bet if you are a billionaire who just happen to read this, you will certainly agree with me.