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The New Polarisation Of Wealth

Despite the crisis, the global population of billionaires has hit a new high of 2,189, with tech billionaires rapidly growing their fortunes.

Technology billionaires like Elon Musk have done particularly well during COVID-19 as the world seeks to rapidly digitalise.

For billionaires this year has truly been one of divergence, where the pioneers of certain industries like technology and healthcare pulled ahead of industries like entertainment and real estate.

According to a report from Swiss bank UBS and accounting firm PwC, the billionaire population hit a record 2,189 this year, despite the effects of COVID, up from 2,158 in 2017. Total billionaire wealth reached US$10.2 trillion at the end of July 2020, touching a new high after the year's V-shaped rebound in asset prices. This level surpassed the previous peak of US$8.9 trillion, reached at the end of 2017. 

But the challenges and opportunities of lockdowns polarised those who were able to deploy technology to be among the leaders of a growing digital economic revolution. During 2018, 2019 and the first seven months of 2020, entrepreneurs in the tech, healthcare and industrials sectors pulled ahead of their peers.

During 2018, 2019 and the first seven months of 2020, technology billionaires’ total wealth rose by 42.5 percent to US$1.8 trillion, supported by the surge in tech shares. Meanwhile, healthcare billionaires’ total wealth increased by 50.3 percent to USD 658.6 billion, boosted by a new age of drug discovery and innovations in diagnostics and medical technology, as well as latterly COVID-19 treatments and equipment.

Compare this to the smaller increase for the billionaire class as a whole. It rose by 19.1 percent to USD 10.2 trillion over 2018, 2019 and the first seven months of 2020. Meanwhile the net wealth of billionaires in entertainment, financial services, materials and real estate sectors lagged the rest of the universe, with increases of 10 percent or less.

"While the COVID-19 crisis dominated 2020, the potential for transformative innovation has never been greater, as the pipeline of fresh technologies grows by the day. From AI to 3D printing, from nanotechnology to biotechnology, there is a wealth of emerging technologies that scientists and serial entrepreneurs are just beginning to apply, to develop radically new products and services, as well as to leapfrog incumbent businesses," said the report. 

Indeed, some point out that the COVID-19 crisis could mark the border between the old and the new economy, which may give the opportunity to create a better economic environment focusing on sustainable growth and efficiency with less bureaucracy and procedures.

Even well-established billionaire-controlled technology firms are overhauling their businesses from the inside: for instance, software giants like Microsoft and Oracle – both having been the alma mater of several billionaires – are rapidly growing in areas like AI, cloud computing and software as a service.

Healthcare billionaires have also experience big gains, especially in China, who have ridden new demand for the country’s drug and medical devices industries. In particular, Hansoh Pharmaceutical listed its shares on the Hong Kong Stock Exchange last year, which moved its founder Zhong Huijhan, a former chemistry teacher, to become the world’s richest healthcare billionaire.

Tech pioneers have also prospered, like Elon Musk, of Tesla and SpaceX, which are respectively pioneering the mass-market electric car and private space travel. Meanwhile in China, engineer Frank Wang is the world’s first drone billionaire, as CEO of tech company DJI, the world’s largest maker of commercial drones. One of Europe’s leading young innovators is Patrick Collison, an Irish computer programmer who cofounded the Stripe software platform for internet businesses with his brother in 2010.

For Richer, For Poorer

The report also showed that the 'poorer' the billionaire, the less likely they were to have prospered during COVID. Looking at billionaires who had been worth at least US$2 billion in 2009, 153 were no longer billionaires by the end of the decade. Almost half of them, 70, dropped out of this elite wealth bracket in the decade’s last two years. EMEA suffered the greatest wealth erosion, followed by APAC and then the Americas.

Indeed a report from Wealth-X showed that for the UHNW (those with US$30m and above), as opposed to billionaires, the COVID period had been a different story. 

The sudden stop to large parts of the global economy, a slump in financial markets and sharply heightened consumer, business and investor caution resulted in an 18 percent decline in the UHNW population over the first three months of 2020. At the end of March, the ultra wealthy class totaled 238,060 individuals, a drop of almost 53,000 from its level at the end of 2019.

The hit to UHNW wealth was severe, with collective net worth plunging by 28 percent. This was the equivalent of virtually the entire UHNW wealth stock in Asia being wiped out over the space of three months, said the report. "The nature of the crisis meant that almost all asset classes suffered — but the main channel of wealth loss was via the stock market as investors made a huge ‘flight to safety’," said the authors of the Wealth-X report.

Clearly even the wealthiest innovators must keep on reinventing their businesses, and reinvesting their gains into new ventures.