What would you do with 44 billion dollars? Solve world hunger? Fund the U.S. Climate Budget? Pay for 3 Hubble Space Telescope missions? Buy a social media platform…? Last week we saw the latest billionaire buyout, with Elon Musk securing the privatization of Twitter for 44 billion dollars. Most reports this week have focused on the controversy of this individual event, but if you take a step back, there is something more significant going on. Billionaires are idolized for their net worth and their Forbes ranking. We see wealth on a scale like never before and, at the same time, inequality like never before. Why are everyday Americans idolizing capital so much?
What does it mean to be a billionaire?
To be declared a billionaire, you need to have a take-home salary of more than $1,000,000,000. That’s 1 thousand millions. According to Forbes’ 2021 list of billionaires, there are 2,578 billionaires worldwide – the U.S. has the most billionaires with 724, followed by China with 698. This makes up more than 50% of all billionaires on earth. The U.S. is also home to the two wealthiest billionaires: Elon Musk ($219billion) and Jeff Bezos ($171billion). You’ve probably heard the elite wealthy be referred to as the 1% – billionaires are in the 0.1-0.01% range.
Connotations of billionaire status are often associated with either old money or new money – inherited or “self-made.” In describing Forbes’ rich list, much of contemporary media categorizes them explicitly under these labels. In fact, Forbes even gives their billionaires list a self-made score. This rating and the title “self-made” often get mixed up in the problematic world of “self-made culture”. Self-made culture is the overemphasis on attributing a person’s success to their individual effort downplaying their privilege or network. A high-profile example of recent years is Kylie Jenner, who Forbes cover magazine called the youngest self-made billionaire. Her success is undoubtedly commendable, but she grew up in fame, security, and a high-status family. Her success occurred in the context of privilege. Calling her self-made suggests that anyone can achieve billionaire status if they work hard enough.
“Concentration of wealth yields concentration of political power. And concentration of political power gives rise to legislation that increases and accelerates the cycle.”Noam Chomsky
Regardless of where a billionaire’s money comes from, their capital and status gain them their influence. Billionaires have a stake by proxy in national and international politics, social equity, and ultimately the face of the planet. Financial journalism calls out this billionaire infiltration of politics, comically calling it Casino Washington. The ultra-wealthy fund their way into American politics in overt and covert styles. Some have entirely self-funded their way into elections, like Michael Bloomberg or Jon Corzine. Others fund specific candidates, often in a narrow direction towards a favored policy, e.g., pharmaceutical drug prices.
Why idolize impact over capital?
To have wealth, in general, is not a problem. The power that billionaires gain by proxy of their capital for largely unregulated self-serving influences is the issue. Just think of U.S. tax laws. According to a Pew Research Center survey, Americans’ views about billionaires have grown somewhat negatively since 2020. Young adults were considerably more likely to report that having billionaires is bad for the country. It seems that billionaires are here to stay for the upcoming generation, with 86% of the existing billionaires from 2020 being wealthier than they were the year before. So, what can be done?
If the ultra-rich are here to stay, we need to shift our value messaging as consumers. We need to start recognizing the difference between someone whose wealth serves only them and someone whose wealth reaches far beyond their personal projects to the betterment of social and environmental causes. There are, broadly speaking, three approaches to wealth management of the ultra-rich.
- Self-serving: all about the capital, growing their wealth, and furthering leverage in politics or public platforms for the sole purpose of getting richer
- Philanthropic: donating proportions of wealth to good causes. This can be self-serving for image or altruistic intentions.
- Impact focused: all about the impact, placing their wealth in industries or causes that make the most difference and growing their wealth this way, using political leverage for social good.
At FLIT, we believe that you can grow your wealth without compromising your values by leading impact first. That’s not just true for our users; it’s an approach most accessible to billionaires. Impact first is what we should be idolizing, not net-worth or just % of income donated. What’s the real impact these people are making? How are they using their position and privilege to make the world a better place? When will Forbes start to rank their billionaires by social impact…?
WARNING! Impact Washing
We can’t say prioritize impact over capital without giving you a warning too – beware of impact washing. This is the impact version of greenwashing, where companies, banks, portfolios, celebrities, etc., phrase their work in a way that sounds better than it is and without acknowledging the damaging things they are doing alongside.
As mentioned in our article What is Sustainable Investing? you need to be eagle-eyed when it comes to impact washing. When a high net-worth individual claims to be making a difference in the world, ask yourself: what is the impact of their action? How is that impact measured? What other things are they involved in? Impact measurement is a challenge faced within the investing community and in the transaction of money at large (like billionaires buying and donating to things). Given there are no set regulations, we have to decide which framework we use. In the finance world, a couple of named frameworks for impact measurement include IRIS by the Global Impact Investing Network and the Operating Principles for Impact Management developed by public and private sector participants. Another framework more accessible to the everyday person is considering how this high net-worth individual is making a difference according to the UN Sustainable Development Goals. You can learn about them very easily at their website and look at the targets and indicators for each goal. There are 17 goals in total. They cover a range of issues such as gender equality, climate change, poverty, and quality of education. When Elon Musk buys Twitter which SDG is he contributing $44billion to? When the Oscars provide $100,000 gift bags to celebrities, which SDGs are they contributing to? When applauding the ultra-rich and idolizing their success, we need to shift our message. The impact should be specific, targeting a selected issue and resulting in real change – throwing money at the problem is also not the answer. These individuals need to make informed and intentional choices with their donations.
Where does that leave you? You may not be a billionaire, but you can still make an impact because, in the end, to make a difference in the world, you need to do more than hoard your money in a virtual piggy bank. FLIT helps you make an impact while building capital but being impact-led means we don’t compromise on values. If a billion dollars gets you in the decision-making pool, then instead of 1 person with a billion dollars, let’s get tons of people to make up a billion dollars and have more people voting in the world with their dollars. This is the age of the financial activist. This is the decade of action.