How the wealthiest people in the world got so wealthy?

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AlexGTV

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People like Bill Gates and Warren Buffett are extremely wealthy and I understand it comes from their super profitable companies and vast economies of scale but still I thought they were confined by their salaries. Accordind to their fortunes these people earn figures of 80 million dollars a month. No matter how important a person is are you telling me the shareholders will let him decide upon his salary?

I appreciate the fact that many, as these two, are not spending their money mindlessly but donate to charity and they make investments creating jobs and economic growth etc. But I cannot comprehend how these funds can be concentrated in one person. As you know in business the dominant party is the company which is a legal and economic entity and I would expect for there to be in place some barriers that would prevent a single stakeholder, even the highest ranking, to earn this much.

Even if you see it ethically can anybody's work be valued at 80 million a month? In the meantime the majority of the greatests scientists, doctors, politicians and activists will not earn this much in their lifetime.

My question is how, practically, they got these sums? Did they have a white card pass to their companies' reserves? And also do you believe they should be allowed to do that, even if their purposes are good?
 
Stocks and various other investments. Often times you will see people even invest in their main competition.
 
That, and they don't flaunt their wealth. Buffet lives in the same home he built 30 years ago, and drives an '86 Volvo.
 
This is what you get with a capitalist society. An open market leaves it open for some people to make ridiclous amounts of money, whereas people who may work even harder (nurses, teachers and such) earn much less money, if this didn't happen then you have communism.
 
As I understand it, personal wealth is worked out by the value of all the persons assets if they were to sell everything they own off. Bill Gates does not earn $80m per month (or whatever) but Microsoft could increase in value by $160m that month (for this example we'll assume Bill Gates owns 50% of the company), so his personal wealth would increase by $80 million even though he is not actually receiving any money until he decides to sell some his shares off, by which time they could have increased further of fallen. Many of the worlds richest people don't have (relative to their total wealth) a lot of money in their bank accounts ready to access.
 
AlexGTV
No matter how important a person is are you telling me the shareholders will let him decide upon his salary?
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The shareholders are usually the ones (more or less) that decide the salaries of top executives. Note that Bill Gates isn't really even an executive at Microsoft anymore.

AlexGTV
I would expect for there to be in place some barriers that would prevent a single stakeholder, even the highest ranking, to earn this much.
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Why would there be? So long as they aren't embezzling anything there is nothing wrong with making money.

Keep in mind that the overwhelming majority of the net worth of people like Bill Gates and Warren Buffet comes from personal investments and shares of businesses. Not from salaries paid by the company that they work for/own.
Bill Gates is rich (as are Paul Allen and Steve Ballmer) because Microsoft is a very powerful, very expensive company experiencing constant financial growth which pays dividends on its stock that Gates happens to own a large part of. He isn't rich because Microsoft has been sending him checks for a billion dollars every year.
For example, Steve Ballmer only makes $650,000 as a base salary as CEO of Microsoft, yet he is worth well over $10 billion because of his percentage of ownership of the company.

AlexGTV
Even if you see it ethically can anybody's work be valued at 80 million a month?
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I don't see how it is an issue of ethics at all.

AlexGTV
And also do you believe they should be allowed to do that, even if their purposes are good?
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They should be allowed to make as much money as they possibly can. Just because the sums are high doesn't mean they should be some line drawn in the sand.
 
Peterram430
As I understand it, personal wealth is worked out by the value of all the persons assets if they were to sell everything they own off. Bill Gates does not earn $80m per month (or whatever) but Microsoft could increase in value by $160m that month (for this example we'll assume Bill Gates owns 50% of the company), so his personal wealth would increase by $80 million even though he is not actually receiving any money until he decides to sell some his shares off, by which time they could have increased further of fallen. Many of the worlds richest people don't have (relative to their total wealth) a lot of money in their bank accounts ready to access.
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In Sir Allan sugars book, he talked about this and said how he is technically one of the richest people in the world because he has access to his money unlike bill gates as said who would have to sell of microsoft to get that amount of money.
 
lbsf1
This is what you get with a capitalist society. An open market leaves it open for some people to make ridiclous amounts of money, whereas people who may work even harder (nurses, teachers and such) earn much less money, if this didn't happen then you have communism.
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No, you instead give people to reason to aspire to this level, and thus an ocean of mediocrity. Simply punishes exceptional ideas and execution.

I really don't understand the mindset of "well, it doesn't seem right that they make this much money." So they made some good choices, got lucky since there was no doubt some risk involved, and then invested the money well and didn't squander it on stupid crap. Honestly, seems more like envy veiled in "social justice" more than anything else.
 
Its no problem. I was just kind of confused where you were coming from. Did you think that these people were making this money purely from paid salaries?
 
Toronado
Its no problem. I was just kind of confused where you were coming from. Did you think that these people were making this money purely from paid salaries?
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As a first thought. Kind of assigning a percentage of the net profits for themselves. No.

But surely their disposable income must be but a tiny fraction of their alleged fortunes. Not even a billion. What do you say?
 
AlexGTV
As a first thought. Kind of assigning a percentage of the net profits for themselves. No.

But surely their disposable income must be but a tiny fraction of their alleged fortunes. Not even a billion. What do you say?
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Interest, dividends, and their salary as CEO - Provided they haven't pulled a stunt like Steve Jobs. Even then, the first 2 work quite well.
 
When you get into levels of wealth like that, most of those people don't even bother dealing with disposable income. You just buy something, and you have someone else whose only job is to manage your money work out the details of how to pay for it. That is why athletes and musicians tend to declare bankruptcy. They convert most of their net worth into cash or cash equivalents, then they just burn through it like they have an infinite amount of it.


But yeah, the people who are worth hundreds of millions and billions of dollars usually barely have any truly liquid assets of note. Any money that they make on a schedule they usually just dump into various investments or they give it away.
 
lbsf1
This is what you get with a capitalist society. An open market leaves it open for some people to make ridiclous amounts of money, whereas people who may work even harder (nurses, teachers and such) earn much less money, if this didn't happen then you have communism.
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Even communism (after Stalin took power) had people who made ridiculous amounts of money, whereas people who may work even harder (nurses, teachers and such) earned much less money
 
lbsf1
This is what you get with a capitalist society. An open market leaves it open for some people to make ridiclous amounts of money, whereas people who may work even harder (nurses, teachers and such) earn much less money, if this didn't happen then you have communism.
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Not exactly...but,

family linkage helps with wealth too.
 

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