Darrell M. West, vice president of the Brookings Institution’s governance studies department, is the author of “Billionaires: Reflections on the Upper Crust.”
Billionaires can be fascinating — and not just because of the fortunes they amass. They buy islands and media organizations, experiment with space travel, and have larger-than-life personalities. They also become proxies in national political debates about economic growth, inequality, taxes and fairness. Misconceptions abound about their beliefs, businesses and influence. Let’s explore five of the most common myths.
1. Billionaires can buy elections and change public policy.
Billionaires get a lot of attention for their outsize campaign contributions: According to ProPublica, Sheldon Adelson and his wife, Miriam, spent at least $98 million during the 2012 election cycle. And Charles and David Koch are reportedly spending $290 million in the 2014 cycle to help Republicans regain control of the Senate and to push policies that limit the role of government.
But money doesn’t always equal political power. Recent elections have been littered with failures on the part of billionaires. Conservative financiers didn’t defeat President Obama in 2012, despite spending hundreds of millions of dollars to do so. Former New York mayor Michael Bloomberg, News Corp. chief executive Rupert Murdoch and Facebook founder Mark Zuckerberg have failed to persuade members of Congress to pass comprehensive immigration reform. This year, Bloomberg is devoting $50 million to lobby legislators to adopt relatively mild measures designed to reduce gun violence, but so far the campaign hasn’t produced much legislative action. Conservatives have not gotten Congress to repeal Obamacare, despite numerous ads and outreach activities publicizing its defects. There has been no meaningful entitlement reform, even though many billionaires, including Peter Peterson and Stanley Druckenmiller, warn about the dangers of high debt levels and the need to address long-term deficits.
Despite all the coverage of national political and policy advocacy, some of the most successful billionaire efforts have taken place at the state and local levels. Peter Lewis invested millions in lobbying to legalize marijuana in Colorado and Washington. Paul Singer, Seth Klarman, Bill and Melinda Gates, and Jeff Bezos (who owns The Washington Post) have supported same-sex marriage in various states. John and Laura Arnold have backed public pension reform in California, Rhode Island, Utah, Illinois and New Jersey.
2. Most billionaires are conservative anti-tax and small-government advocates.
A number of prominent billionaires are free-market conservatives who want to limit the government’s role in the economy. Yet my analysis of Forbes magazine data shows that the 492 billionaires in the United States have varied interests. For example, James Simons and Jeffrey Katzenberg supported Obama’s reelection effort, and have financed moderate and liberal causes. Warren Buffett believes that, as a billionaire, he should be taxed at a higher rate than his secretary and has joked that “if you have trouble living on $500 million, I’m gonna put out a book, ‘How to Live on $500 Million.’ ” Others, like David Rubenstein, have spoken out about the need to address income inequality. And in terms of state advocacy, there are a number of libertarian billionaires, such as Peter Thiel, whose efforts to keep the government out of personal affairs lean conservative on tax matters but liberal on social issues.
3. Most billionaires inherited their wealth.
According to Wealth-X and UBS Financial Services, which track high-net-worth individuals, about 65 percent of billionaires are self-made. A surprising number, including Steve Jobs and Marc Andreessen, have come from modest or middle-class backgrounds. They started out with few financial resources, but through innovative ideas and far-sighted thinking, they built successful companies and became tremendously wealthy. Being self-made colors their perspective and often generates a mentality that they deserve to keep the fruits of their labor.
This is one reason many of them were upset when President Obama talked about all the help businesspeople get from the government in his 2012 “You didn’t build that” campaign speech, in which he declared that “if you’ve been successful, you didn’t get there on your own.” Self-made individuals in the United States take pride in their initiative and hard work — and don’t like being characterized as getting government help through tax policy, investments in education and infrastructure expenditures, even though many of them have benefited from public policies. For instance, tax rates on capital gains from long-term financial assets tend to be lower than those on ordinary income, and estate taxes have been slashed over the past decade. These policy decisions have helped wealthy individuals grow and keep their fortunes.
4. All they care about is making money.
There is little doubt that money is a major motivator, yet many billionaires also have nonmaterial goals. People like George Soros, Sheldon Adelson, and Pierre and Pamela Omidyar see policy problems in the country and around the world, and want to contribute their ideas. Soros, for example, has funded grass-roots organizations that advocate for prison reform and freedom of expression. Adelson is a strong supporter of pro-Israel causes. The Omidyars have backed new media platforms designed to improve public understanding of government surveillance.
Unlike previous generations of wealthy individuals who did the bulk of their philanthropy upon their deaths, a number of the current billionaires are engaging in serious philanthropy through foundations or nonprofit organizations. Nearly 10 percent — including Sara Blakely, Richard Branson, and Steve and Jean Case — have signed the Giving Pledge, agreeing to donate more than half their fortunes to charitable causes during their lifetimes or in their wills. They see it as a way to give back to a society that provided them with so many opportunities.
5. The best way to become a billionaire is to work on Wall Street.
Graduating college seniors line up at Wall Street firms hoping to land lucrative positions in finance. Many people think this sector holds the best chance for generating wealth. However, my tabulation of the Forbes billionaire list shows that only 9 percent of billionaires made their fortunes through finance and banking. The more common avenues for wealth are diversified companies (18 percent of all billionaires); real estate, construction and hotels (15 percent); and retail and consumer goods (14 percent).
Based on my analysis of young billionaires, 42 percent earned their wealth through technology firms. This has spawned what Wealth-X chief executive Mykolas Rambus calls “technopreneurs.” Tech billionaires such as Mark Zuckerberg, Larry Page, Sergey Brin, Paul Allen and Sheryl Sandberg are well-placed to transform other parts of society, from education and health care to philanthropy and academic research. They love to disrupt the status quo; many of them already are pioneering new approaches to charity. They will have a dramatic influence on the future of the world — and virtually none of them came from Wall Street.