The Only Two Ways to Become a Billionaire
Method 1: Create or Produce Something a Large Proportion of Humans will Use
When we think of ‘billionaire’ names like Jeff Bezos ($181.4 Billion), Bill Gates ($118.4B), Mark Zuckerberg ($99.1B) or Elon Musk ($104.5B) might spring to mind (for the names of all billionaires, have a look here). These are all people who have gone down the ‘classic’ route and produced something which a large proportion of humans use.
It might sound obvious to say ‘make something everyone needs and sell it’ but it’s not quite that simple, if it was the world would be full of billionaires.
Creating something everyone needs is often a very difficult thing, because most needs already have something readily available to fill them. If they didn’t, the world wouldn’t turn. It’s obvious we all need food, clean water and shelter, and if early opportunity-seizers hadn’t built houses, farms or water treatment plants, we would’ve already found other ways to fill those needs.
It’s not easy finding a common need which as-of-yet hasn’t been filled, but quite often billionaires create something which they don’t yet know will fill such a humongous gap. Amazon, for example, started life as an online bookstore. At its inception Jeff Bezos probably didn’t envisage it turning into the world’s default online one-stop-shop.
Same with Facebook; Zuckerberg started it as a photo-sharing site just for college kids, not the globally-dominating platform it became, which is so powerful it’s had a hand in swaying elections.
These people started by seeking to fulfil some small type of need. They didn’t know how far their creations would go, but the key to success seemed to lie in successfully adapting as times changed. After all, this is the basis of evolution, which is the ultimate key not only to survive, but also to thrive.
Social media became huge with time, it existed when Zuckerberg started Facebook but it wasn’t massive. Equally, e-commerce wasn’t common (or even trusted) when Bezos started Amazon, but the two avenues grew with time and these two products adapted with them.
It should also be noted Facebook and Amazon significantly contributed to the growth in the social media and e-commerce spaces — as more people used them the markets they were within grew.
A billionaire becomes a billionaire quite often because they produce, create or own something many, many people use. Deliberately trying to create something like this is very tough — you won’t be able to find a completely untapped market or be able to predict the meteoric success of any venture.
Seek to solve a problem many people face and do it in a space which, as of yet, isn’t already saturated with solutions. After that it’s key to adapt with the changing times (and have fun with it too, that’s very important).
Method 2: Make Money from Assets
The other commonly associated name with the word ‘billionaire’ is Warren Buffett. Known as the world’s most successful investor, he made his billions by spending money to make money.
This means buying and owning assets:- spending money on things which will eventually be worth more. The trick here, of course, is to figure out what to buy now which will be worth more in the future. Much easier said than done.
Buffett has been investing since he was 11, it just so happens his passion in life is investment and he started very, very early. His company, Berkshire Hathaway, owns stakes in a multitude of businesses. Generally speaking, Buffett buys assets he believes will increase in value over time.
Investing is all about the numbers. Realistically, every investment you make won’t be a runaway success. Each one won’t make 10,000% return on your initial investment. Most may be moderately successful, perhaps 5–20% return on investment, and some may lose altogether.
Investing, just like life, has inherent risk attached, and there is a very real possibility of losing some or all of your money. Generally speaking; the safer the investment, the lower the chance of losing money but the lower the possible return; the riskier the investment, the higher chance of losing money but the higher potential return.
How do you become a billionaire through investment though?
Well, if you have $10,000 to invest and an average return is 10%, you’ll have to make a helluva lot of $1,000 returns to reach $1,000,000,000 (a million $10,000 investments, to be precise). You’ll essentially need an astronomical amount of money to start with to make anywhere near a billion.
Right, so you need to be a billionaire in order to have enough money to invest to become a billionaire. Great.
They invested in assets which grew over the long term (years, not months); they used other people’s money in addition to their own to invest; and they kept re-investing their returns (this one’s called compound interest, which is key for wealth-creation).
Starting off alone, you will never have enough money of your own to invest to make it to a billion (let alone a million, probably). The wealthiest investors in the world use other people’s money to invest, then either pay them a premium for the privilege or take a cut for putting their own work in (this is part of how the banking system works — but we won’t get into that here). They then keep reinvesting the profits for even more profits.
It’s possible to become a billionaire from investing, Warren’s shown us that. But it’s not easy (understatement), and it’s highly risky.
Combine the Two
The world’s billionaires are not cash-rich. They don’t have billions just sitting in the bank (because they know that’s one of the worst ways to hold wealth) — their billionaire status is tied to the value of the assets they hold in their name.
The vast majority of Jeff Bezos’ wealth, for example, is tied to how much Amazon is worth. Jeff’s had a great 2020, since so many more of us are flocking to Amazon to shop. This boom has raised Amazon’s value, which has added $68 billion to Bezos’ personal net worth, in a single year(!).
He created something which a large proportion of humans use and the value of his ownership in his creation (his assets) is what defines his net worth.
It’s tough to become a billionaire, especially if you’re not born into it, and when they got started many of today’s billionaires wouldn’t have thought “I’m going to do this to make billions!”
The most important thing is to solve a problem which a large number of people face. Is there something people need which they don’t have yet? Is there a process you can make more convenient, more efficient, which someone hasn’t done yet?
Provide a solution, adapt with the times and make sure you own enough of your own creation.
Happy billionaire-ing :)