On Becoming a Billionaire

Recently Forbes magazine came out with its 32nd annual list of the 400 wealthiest people in America. Current price of admission? $1.3 billion. And, for the 32nd consecutive year, I was not on the list. I hate it when that happens.

You might wonder what the general process was for these relative few to gain their outsize net worths, so let's think about what was involved in achieving their nosebleed numbers.

First, we need to get our arms around the order of magnitude that we are talking about. Many late-career docs who have done any planning have accumulated a seven-figure net worth for their lifetime of hard work, saving and dedication. But the people that I am talking about have a 10-figure sum, over 1,000 times more than your used-to-be-rich, now average, millionaire. Another way to think about the enormity of an individual's billions is to realize that just the annual interest on their annual interest is equivalent to winning the lottery.

No one, not even Donald Trump, can set out to be a billionaire. The numbers are too big to rationally plan on. It takes smarts, devotional hard work excluding all else, a key factor I call "the multiplier" that I will get into in a minute, and, most importantly, considerable luck to be in exactly the right place at the right time.

Billionaires usually acknowledge luck's role when interviewed and we can see why. Lots of folks have smarts and work hard and long, but almost always end up with much lesser results. Whether they start with inherited money (Trump had $30 million) or, as most billionaires did, boot-strapped themselves, all just wanted to do the best that they could at the start to build their business/career.

Billionaire status thus usually comes as a surprise because of its sheer magnitude. (I will exclude the relatively small percentage who inherit this appellation. Foolishness, philanthropy and multiple children can rapidly whittle even the greatest fortune.) Each knew that they would succeed, they absolutely meant to succeed as best as circumstances would allow, but as I mentioned, luck and single-minded dedication alone are known to be necessary, but not sufficient for billionaire status.

In addition to hard work and good luck, all of this distorted accumulation of wealth requires what I call "the multiplier effect." The multiplier effect simply means that through ownership and/or others working for you (I will exclude crime, for propriety's sake), an individual can acquire money and value exponentially beyond his/her direct activity.

Owning something, a company, real estate, stock, etc., which increases in valuation every time that someone becomes a customer is a multiplier. You only had to establish ownership once but the payoff can be enormous because the returns continue, day and night, waking or sleeping, seven days a week.

Doctors have no multiplier. We do custom, one-patient-at-a-time work. We do what we can. We complain, but we get along. One doctor who I did spot on the Forbes billionaire list owns a medical devices company. The multiplier effect for him is machines stamping out his widgets, salespeople distributing them — the whole enterprise's value is multiplied many times by its sales and/or profitability through the stock market. Voila! A physician billionaire.

They didn't tell us that part in anatomy class.