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According to a new Oxfam International report, the world’s ultra-rich are becoming much wealthier, with the first trillionaire predicted to arrive in less than ten years.

According to Oxfam International, the five richest individuals in the world—billionaires Elon Musk, Bernard Arnault, Jeff Bezos, Larry Ellison, and Warren Buffett—have seen their huge fortunes treble since the COVID-19 pandemic began in 2020.

The research notes: “We could have our first trillionaire in 10 years, but at current rates, it will take 230 years to end poverty.”  This highlights the astonishing net wealth of the five men as well as growing inequality.

A possible trillion-dollar portfolio could appear unimaginable if the top five’s wealth in the hundreds of billions already seemed inconceivable. However, specialists have developed methods for understanding the wealth of the 1% in more precise terms—even though their calculations are only based on discrete moments in time – according to Northeastern Associate Professor of Finance John Bai.

Because the top five obtained the vast majority of their wealth through owning businesses, the key is to look at the market value of those companies, and their ownership stakes, Bai says.

“They own a certain percentage of their firm, and when a magazine like Forbes or any other website tries to compute their wealth, they will simply multiply that percentage by the firm’s estimated market value on a specified day,” Bai says.

Bai notes that because of stock price volatility, net worth calculations “must be interpreted with a clear timestamp on them.”

Measuring a person’s net worth isn’t a measure of income, which, in financial terms, is part of their cash flow. Rather, it’s a ballparked value of their assets minus liabilities, says Alvaro Cuervo-Cazurra, professor of international business strategy at Northeastern.

The billionaires identified by Forbes “have not ‘earned’ the money in the sense of income, which is the money one gains over a period of time, usually a year, such as a salary,” Cuervo-Cazurra says.

“Wealth is a measure of the value assets they own, typically a share of large firms whose value increases over the year.”

The value of a firm is a measure of the “expected value” that the company will generate in the future, he says.

In the race to become the first trillionaire, Bai says he thinks Musk could come out ahead if Tesla’s self-driving vehicle technology powered by artificial intelligence proves to be successful. Indeed, the company’s stock market valuation turns in part on its investors’ belief that Musk will lead the industry toward a driverless future.

The majority of Musk’s wealth is a product of Tesla stock, which is easily computable, Bai says.

“So for Musk, who is relatively very concentrated in his wealth and overall investments, it’s easier” to gauge his net worth, he says. “But compared to someone like Bill Gates, who owns less than 1.5% of Microsoft at this point in time. The majority of Gates’ holdings are diversified away.”

If the term ‘trillionaire’ is still befuddling to you, let’s put that into perspective. If a trillionaire spends $1 for every second that ticks by, they will only run out of money after 31,688 years.

[source:northeastern.edu]