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So there is clearly a very big surge in anti-billionaire sentiment. I don't think that we should have billionaires. It is so much money in a moment of such inequality. We need a tax system that truly accounts for the fact that there are people who have amassed huge wealth. But what we have found is that there's a growing number of billionaires that are deriving their wealth mainly by providing genuinely useful goods and services or employing millions of people rather than by taking advantage of the system. So there's a lot of anti-billionaire sentiment, but not all of it's warranted. How did you reach that conclusion?
The first thing to say is this bit of research was not about whether billionaires are good or bad. We're just looking at whether they're getting better or getting worse over time. And to do that, we look at where billionaires' wealth comes from. And broadly speaking, we divide the source of their wealth into the sort of worst kind and the better kind. Now the worst kind is when someone's made a lot of money from, say for example, being in the mining industry or being in natural resources, being in casinos, that kind of thing. The kind of industry where you need political favors to get stuff done. And we also in that bucket, we include people who've inherited um all of their or the or most of their wealth.
Then in the other bucket, we have the kind of good the good or the better billionaires. And now these are the billionaires who have made their money by creating goods and services and companies that people genuinely like and do kind of deliver some good to the world. You can think of it as um on the one hand, uncompetitive wealth, the oligarchs, the heirs. And then on the other hand, the competitive billionaire wealth. So people like Taylor Swift, Lionel Messi, the founder of Uniqlo. And basically what we find is that the competitive sector is becoming more and more important over time, and the uncompetitive sector is becoming less and less important over the So these competitive billionaires, those who have made the money for themselves,
hopefully without ties or gaming the system, where have they made their money from? So, it's a bunch of different sectors. You might think it was all to do with tech. Um and yes, there are a lot of um people in tech who've made billions of dollars. I mean, Elon Musk being obviously the most obvious example, but there's loads of them. But, what I found quite surprising is that actually um the tech share of billionaire wealth is not at an all-time high. It's actually slightly lower today than it was in the early 2000s. And so, what is actually happening is that it's a range of different sectors
that people are making vast fortunes in. So, yes, you do have the people in entertainment broadly defined in music and sports. Uh they're one sector. You have a lot of people in uh in finance who've done extremely well. But, then you have a bunch of people who have made vast fortunes in industries that don't get a lot of attention. So, for example, the founders of Panda Express are multi-multi-billionaires. Panda Express is the kind of place that you get like noodles and rice for a kind of $15, $10, $10, $15. The founder of Uniqlo has tens of billions of dollars. So, it's it's it's lots and lots of people like this rather than it all
being tech or all being kind of oligarchs. So, if it's not the system, why are we seeing such a rise in the self-made billionaire? It's a very good question, and this is the thing that um kind of caused me to puzzle the most. I mean, China is clearly one thing. Um China has uh you know, grown rapidly over the past uh 25 years as everyone knows. Um the consumer sector has uh increased very significantly. So, you've got a bunch of people who've become uh billionaires that way. Um you've also
got the fact that we've had just very strong market returns, especially in the US, for the past kind of 25 years. And that has just minted a lot of people who, say, work in hedge funds and private equity, that kind of thing. But also, if you founded a technology company, um you know, the value of the company that you own or you founded has gone up a lot. And what you've what you can see is that there's a bunch of people who founded tech companies in like the '80s or '90s or 2000s who were billionaires back then, but have become way richer in recent years because the value of their companies has gone up a lot. So, that's another thing that's going on. And then the other thing I think is mobile first, um internet. What you can see in our data is that the
the kind of competitive uh share of billionaire wealth starts to really inflect upwards from the middle of the 2010s. And that, perhaps not by coincidence, is the time when global phone usage really took off. And what phones basically allowed people and businesses to do was to scale an idea incredibly fast. So, you think of companies like ByteDance in China or Spotify or Stripe. Like, these are companies that went from zero to 100 very, very fast. So, that's another reason why we have so many self-made billionaires coming to the market. You say that these self-made billionaires aren't rich because of the system. But surely there are some things about the system that you could still be gaming even if you haven't got your wealth through, you know, bribing
someone or through being getting a whole sector of the economy. For example, you could be paying yourself a lot. You could be not paying taxes. You know, we see a rise in inequality of wealth creation and in the amount of tax that people pay. Where does all that come into this? So, I say a few things. Um so, one is if you look at the sort of most egregious forms of billionaire accumulation, those clearly are becoming less powerful, okay? So, for example, if you consider billionaires in post-Soviet Russia. They are perhaps 20% less wealthy than they were at their peak in the late 2000s.
So, clearly in that sense we have clear progress. There's there's still a huge amount of wealth that's been accumulated illegitimately, but it is less than it was. So, that's that's one thing. Then there's the question of like, are people you know, taking advantage of poor competition policy or screwing over their suppliers or whatever? And that is really a question that pertains to the economy at large rather than just the billionaires. I think the evidence is kind of unclear as to whether the global economy has become meaningly less meaningfully less competitive over the past 20 years. And then you have the question of taxes, which again is a subject of a lot of debate. My read of the evidence in the at least in
the US, which has the best data on this, is that billionaires do pay a large share of their income in tax. So, if you're looking at say the top 4 to 500 people in the US ranked by wealth, they have an effective tax rate of like 45 to 50% a year. Now, you might say it should be a lot higher than that and you know, in this particular bit of research we're not kind of approaching that question, but it's not kind of clear from looking at the evidence that you know, gaming the economy or gaming the tax system is why so many billionaires are being minted. And yet of course wealth taxes are still a really hot topic. Does the fact that more and more billionaires are self-made from competitive means, they haven't inherited it, they haven't gained the
system, mean that there's less of a case for a wealth tax? Okay, so I can see one way in which it makes no difference and two ways in which it does make a difference. So, one is if you're concerned about very rich people having a lot of influence on politics, it doesn't matter where their money came from. It's bad if it's bad, it's bad. But then the other two things, so one is um there's a sort of justice argument. It feels much more legitimate to tax someone very heavily if they've accumulated their wealth illegitimately by, you know, stealing stuff than it does if they've made their money, you know, uh in a good way. And then the other thing is that the economic cost of taxing these people uh is potentially higher. So, if they move
away, you are using you are losing genuine entrepreneurs rather than people who've just screwed over the system. Lionel Messi moves away from your country because the tax system is unfavorable to him, you do lose something. Like your country's football team will be worse. And if you lose the owners of Panda Express, you're going to have worse quality takeaway Asian food than you did before. So, there's there's clearly more of a kind of cost of doing this. So, I think in that sense, too, the argument for wealth tax does become less powerful. Callum, thank you very much. Thanks, Daisy.
