Why you’ll never be a billionaire
We aspire to the heights of wealth and luxury, but a rigged system keeps them up there and us down here
Back in high school, I was hanging out at the Waffle House late one night, as kids in ditchwater towns are wont to do. My classmate and I ended up sharing a booth with an older friend of his who was maybe in his early 30s. He bragged to us: “I’m gonna be the next Bill Gates.” My critique of capitalism wasn’t too sophisticated back then, but I knew enough about the mechanism by which wealth is created to see that the prospects of him becoming a mogul were virtually non-existent. Bill Gates owes his success to an irreproducible combination of factors, of which brains, ambition and talent were the least decisive.
I expressed my skepticism to my new acquaintance and he brushed me off with a “You’ll see.”
For some reason, this encounter stuck with me. Over the years, I’ve met lots of aspiring Bill Gateses, a few wannabe Steve Jobses and more than my fair share of future Elon Musks.
There are about 500 billionaires in the United States, so a crude estimate based on population places your chances of becoming one at 650,000-to-1. By comparison you have a 700,000-to-1 chance of getting hit by lightning.
However if you consider that only 35 percent of billionaires started from middle class or poorer backgrounds—versus 95 percent of the general population—the odds are around 1.8 million-to-1. In other words, you’re more than twice as likely to get struck by lightning than you are to strike it rich.
There’s a uniquely American delusion that a person becomes fabulously wealthy because they possess a 1.8 million-to-1 talent—not that they were born in 1.8 million-to-1 circumstances. Pew Research found more Americans attributed wealth to hard work than to advantages in life. Among Republicans, the split was 71 percent to 18 percent.
Despite all evidence to the contrary, the majority of Americans think we live in a meritocracy, and this belief is foundational to the ideology of capitalism.
It’s no coincidence that Horatio Alger’s stories about street urchins who go from “rags to riches” through “pluck and luck” appeared during the Gilded Age, when industrialization was creating vast fortunes for a handful of robber barons and abject poverty for just about everyone else.
The heirs to Alger’s Ragged Dick are the wunderkinds supposedly who started multibillion-dollar corporations in their garages. On the surface, the fawning profiles in Forbes seem more plausible—their “humble beginnings” are in the suburbs rather than literal gutters—but dig a little deeper, and it’s fairly clear that most of them started far from the bottom.
Even those “self-made men” who built their empires “from scratch” most often started out from positions of privilege.
Bill Gates was the grandson of a prominent banker who left him a million-dollar trust fund. While attending Seattle’s top prep school, Gates had access to a university mainframe through the school’s Telex machine at a time when computers were rare in the classroom. His mother sat on the board of a charity with an IBM executive, who helped Gates secure Microsoft’s first big contract.
While he might not have been born on third base, like his Harvard nemeses the Winklevoss twins, Mark Zuckerberg’s parents—a psychiatrist and a dentist—were well off enough to send him to Phillips Exeter Academy, where the tuition is higher than the median annual income.
Zuckerberg’s father hired a private coding tutor and offered to stake his son in a McDonald’s franchise upon graduation, which costs anywhere between $1 million to $2 million.
Many—if not most—of those aspiring to be the “next Bill Gates” are probably equal to or better than him in terms of ability, work ethic and ambition. By most accounts, Gates was an average programmer. Paul Allen was clearly the more gifted of the two, and he got the short end of the stick throughout their rocky partnership.
There are literally millions of people across who would have the potential to be Bill Gates if they only had his privileged background and the same historical opportunity that will never again repeat itself.
The allure of being the visionary who comes up with the “next big thing” is seductive, but the notion that all one needs is a good idea and the drive to make it happen is quixotic. For every disruptive technology a person can dream up, there are hundreds of others with the exact same dream—and the capital to make it a reality.
There are several bottlenecks to billionairehood, and one’s personal background is only the first. Some 90 percent of startups fail in their first year. In the unlikely event that one finds themself in that lucky 10 percent and manages to secure venture capital backing, the chance that you’ll be canned by VC sharks is between 20 and 40 percent, according to Harvard Business Review.
But failure is just a part of it, right? Fortune favors the bold. Nothing ventured nothing gained. Pick whatever trite adage you like.
We take it on faith that capitalism rewards risk, but it would be more accurate to say that capitalism rewards those who can afford to take risks.
Risk is relative. It’s proportional to the amount of wealth one has to begin with. Take for example, opening a coffee shop. For Starbucks, the risk of opening a new location is negligible since they have such a world-renowned brand as well as a standardized business model and supply chain.
Consider a college classmate of mine, who put all of his money into starting a coffee shop. He spied an opportunity in the small college town just south of where we went to school, which had a serious shortage of places to get a cup, so he took out a small business loan to rent a space and buy equipment.
He wasn’t out to become a billionaire or even modestly rich; he just wanted to start a simple business to support his wife and kid.
We had worked together on activist campaigns at the university and I knew him as a beautiful person with a strong social conscience. Unlike most so-called job creators, he actually cared about his employees and paid them a living wage even at the expense of his own bottom line.
After a couple of years, the coffee shop failed. For Starbucks, this would be no big loss—a red number on a balance sheet—but to him, it was devastating. Deeply in debt, he decided to take his own life.
Risk means something entirely different when you’re not risking it all. Many of those on the Forbes 400 list have only ever failed upward. Before he stumbled ass-backward into the presidency, Donald Trump filed for bankruptcy six times and managed to bankrupt casinos, one of the biggest turnkey cash cows there is.
Dan Snyder, owner of the Washington Redskins, owed $3 million to an angel investor after his college magazine Campus USA failed in the mid-90s. He was able to bounce right back with a loan from his father and assistance from his sister, who maxed out her $35,000-limit credit card. His next company took off.
Conventional wisdom would have us to believe that the function of billionaire success stories is to inspire us to work hard and actualize our fullest potential. But it would be more accurate to say that the purpose of these 21st century Horatio Alger myths is control.
Just as the promise of heavenly reward regulated behavior in eras past, the prospect—however small—that we might ascend into the elite creates a powerful incentive to, say, work long hours for little or no pay to get in on the ground floor at an up-and-coming startup.
Economist Steven Levitt documented this phenomenon in his 1998 study of a large-scale “corporate” drug gang. One of the research questions that most interested him: Why someone would take such a high-risk job that pays so little?
The foot soldiers only made $3.30 an hour, but the middle managers made incomes in the low six figures and the “executives” were approximately half a million each year. Having the chance to move up the ladder was in itself a form of compensation.
Of course, not everyone actually aspires to be extremely wealthy or to achieve anything more than a modestly secure and comfortable life. Still, the mythology of the “self-made” billionaire has an enduring effect.
Nature and a perfectly functioning free market replace God in this secular version of feudal society’s divinely ordained social order. There’s a durable belief among Americans that billionaires have earned their place within the hierarchy or otherwise deserve it because of extraordinary natural talents.
Despite growing distrust of billionaires and support for redistributive tax policies, the vast majority of Americans still believe they should nevertheless exist. According to a YouGov poll, only 20 percent of US citizens agreed that “billionaires are a policy failure.” In the United Kingdom, that figure is slightly more than half.
The United States is somewhat of an outlier in terms of its blind faith in meritocracy. According to the International Social Survey Programme, nearly 70 percent of Americans agreed with the statement that “people get rewarded for intelligence and skill,” while 61 percent thought that effort pays off. The median scores for 25 countries surveyed were 39 percent and 36 percent, respectively.
Only 19 percent thought that having a wealthy background was “essential” or “very important” to getting ahead versus an average of 28 percent. It’s also telling that Americans were the least likely to think that income inequalities were too large (62 percent vs. 85 percent).
This belief has persisted despite the fact that social mobility has steadily declined in the past 50 years—a testament to the effectiveness of our indoctrination in the American ideology.
Ironically, this faith in meritocracy leads to its opposite: a mediocracy at best or at worst, a kakocracy, i.e. rule by the awful. It’s tautological. We believe that the people at the top must have gotten there by merit, therefore the fact that they are there is proof that they are meritorious.
Trump is this dynamic taken to its logical conclusion. Our political and economic systems are rapidly ossifying into something resembling a hereditary aristocracy.
The American Dream—to the extent that it has ever existed—has become a nightmare in which the prerequisites for success are neither pluck nor luck but rather a privileged birth and a sociopathic indifference to the suffering of others.