THE SEVEN SECRETS OF SPECTACULARLY RICH PEOPLE

Want to be spectacularly rich? Learn to understand the intricacies of laws, says

Wilkin.

In 1991 there were about 270 billionaires in the world. Today there are more than
1,800, and 290 were added to the rolls in the past year alone. In other words, more
people became billionaires in the past year than the entire number of billionaires in
1991. A negative person might say that's further evidence the rich are getting richer.
A positive, go-getting person would say, "well, it's easier to become a billionaire than
ever before!" And it is. I've made a comprehensive study of self-made billionaires,
and here's a list of some of their (economic) secrets.

1. Don't be the best. Be the only

A lot of experts on personal financial success will exhort you to be the best. They will
advise you on routes to self- improvement and personal growth. Business books will
tell you how to make your business great or excellent. These are all pretty much
dead ends.

The difference between the technology and finance sectors highlight why: companies
in many sectors are innovative. But companies in the financial sector cannot patent
their innovations, so they must look for profits in other ways.

Technology companies are profitable because they have patents; and patents give
them miniature monopolies. If any competitor attempts to imitate a technology
company in a way that is protected by patent, the government will rough them up a
bit.

Growth isnt the ultimate achievement of business strategy; having ones competitors
hanged is the ultimate achievement of business strategy.

2. Bigger is still better

A few visionaries understand that bigger really is better, because it is still a wealth
secret; you just have to find a way to make scale advantages apply.

In the India of Dhirubhai Ambani, Indias richest man and founder of the Reliance
empire, scale was the secret to winning in the licensing regime. Scale efficiencies
could be used to convince bureaucrats to grant licenses for production capacities so
large that it became very difficult for any competitor to enter.

Indeed, scale is still a wealth secret in most emerging economies including

modern- day India in part because in most of these countries, domestic capital
markets are not yet developed to the point where they could fund a truly huge,
unprofitable enterprise for the years or even decades that are necessary for it to grow.
3. The worst place to do business is really the best

Most businesspeople are instinctively attracted to the largest, most lucrative

markets.

They see a number with a lot of zeros at the end and it overwhelms their common
sense. They think that if they can get even a little bit of that huge sum of money, they
will be rich. Following this line of reasoning, they conclude that going global is the
ultimate achievement of business strategy, because going global increases the
number of markets they are in.

They are totally wrong. Yes, going for a huge market is tempting, but then you will
be forced to price competitively and probably wont make much money. You might
have a small share of a huge market, but it wont be worth much. It is much better to
go for a large share of a tiny market. There, you can turn the screws.

4. When lenders can't lose, you win

Finding reliable ways to misuse peoples money and still attract more of it is a
modern wealth secret breakthrough.

The secret was exploited by those Wall Street banks that became too big to fail. One
might expect that in the wake of the global financial crisis, banks would have fallen
on hard times. If anyone was under the illusion risk management systems in banks
were working, they probably dont harbour that illusion any more.

But then, that was never the point. The point was that the banks were invincible.
While you might expect the global financial crisis to have drained money from banks
by publicly demonstrating they were taking extraordinary risks, in fact the crisis and
its aftermath had the opposite effect. The crisis proved unequivocally that some
banks were too big to fail. So people (and other banks) became even more eager to
entrust their money to those banks.

5. You've got to own it, baby

Taken together, property rights are the basis for a wealth secret that appears often on
the Forbes Global Rich List. Among the top fortunes in advanced economies, 75
percent are attributable to either hedge funds or intellectual property rights.

On the broader Forbes list, of over 1,600 billionaires, including emerging markets
fortunes, there is more diversity. But fortunes attributable to property rights in
general nonetheless appear frequently. For instance, about 130 of the roughly 1,600
fortunes are in real estate. A further 40 or so are in oil and gas or mining. About 120
are in fashion or retail, where companies often own not only valuable brands but
valuable properties. Roughly 65 are in pharmaceuticals or health care, 90 or so are in
technology, and about 70 more are in media.
In other words, on a rough estimate, at least a third are property rights fortunes of
some kind. And that is without trying to factor in the fortunes gained in the post-
Soviet collapse. Own it baby, own it.

6. Spin laws into gold

Understanding the intricacies of legal regulations can be boring, but it can also be
profitable. It is what the American humorist P. J. ORourke called dictatorship by
tedium.

As he put it, government officials can do anything they want, because anytime
regular people try to figure out what gives, the regular people get hopelessly bored
and confused, as though theyd fallen a month behind in their high school algebra
class.

7. Network, network, network

What Cornelius Vanderbilt discovered when he effectively assumed control of all of

New Yorks railways in the 1860s was that the value in railways could come from
controlling network connections, not just the traditional focus of point-to-point
routes. In effect, he was able to control New Yorks connection to the nations rail
network. It was a wealth secrets breakthrough. By 1870, Vanderbilts merged railroad
was paying the largest dividend of any company in US. history. Following a market
crash in 1873, most railroads were no longer making profits, but Vanderbilts line
kept up the dividends.

Even today, network effects can be a little scary. The industries most likely to
develop into natural monopolies on a local or even global scale tend to be network
businesses of one kind or another.

Network businesses continue to do well. There are a lot of telecoms-related fortunes

on the Forbes global billionaire list , especially in emerging markets.