In 1989 only 21% of the people on the Sunday Times Rich List had made their money themselves, the rest were heirs to great wealth. Now, in 2013 the Rich List has essentially flipped, with 80% of those on the list earning their fortunes themselves.
A new study from Barclay’s says that globalization and technology have created a path for entrepreneurs to earn vast fortunes of the type that were once restricted to wealthy heirs.
The outcome of these twin forces of globalisation and technology has been an explosion of entrepreneurship around the world and a decline in inheritance as a determinant of future wealth. Economist Emmanuel Saez points out that the world’s wealthiest individuals today tend to be what he calls “the working rich.” “The evidence suggests that top income earners today are not ‘rentiers’ deriving their incomes from past wealth but rather are ‘working rich,’ highly paid employees or new entrepreneurs.”
Some of the newly wealthy have problems dealing with their changed status.
At its most extreme, the newly wealthy may suffer from “sudden wealth syndrome,” a term coined by Psychologist Stephen Goldbart in the dotcom era to refer to the mixed feelings that can often accompany the experience of becoming rich very quickly. These can include anxiety, guilt, identity confusion, overspending and difficulties making decisions. “The quicker you acquire wealth without really educating yourself and getting a sound team in place, the more likely the chances that you are not going to hold onto it,” says Dr. Traeger-Muney.
Perhaps the survey’s most interesting finding is the different ways entrepreneurs earn wealth in different areas of the world. In developed markets savings through earnings were the chief way of accumulating wealth, while in developing markets selling a business or property were responsible for much of the gains in wealth. That would indicate that many of the newly wealthy in these countries are self-made entrepreneurs, while in developed markets many of the wealthy are working for other businesses. This illustrates a vast difference in the way wealth is accumulated in the developed and developing worlds.