15 Secrets Only Billionaires Know

Summary

This video script from alux.com reveals the strategies and mindsets of billionaires, highlighting that most do not own 100% of their businesses, emphasizing the importance of using other people's money to scale and the significance of private equity. It also touches on the role of art as a store of value, the power of buy low-sell high in various forms, and the importance of decision-making and persuasion skills. The script dispels myths about wealth accumulation through stocks and luck, and it underscores the reality of wealth creation during crises and the advantage of enterprise deals over consumer ones.

Takeaways

• 😀 Wealth concentration: Most billionaires do not own 100% of their businesses, instead, they own a significant but smaller percentage of a much larger, more valuable business.
• 🏘️ Real estate vs. Private Equity: While real estate can make you a millionaire, private equity investments are often the path to billionaire status, as they represent a larger share of a billionaire's net worth.
• 💼 Leveraging other people's money: Billionaires often use other people's money to grow their wealth, starting with small investments and scaling up through various funding rounds.
• 📈 Buy low, sell high strategy: The core principle of wealth accumulation for billionaires is buying low and selling high, applied across various scales and industries.
• 🎨 Art as a store of value: Art is a favored asset class for the ultra-wealthy due to its portability, potential for high returns, and ability to be easily moved or stored.
• 📊 Stocks and luck limitations: Stocks may not be sufficient for reaching billionaire status, and luck can help achieve millionaire status but not necessarily billionaire.
• 🤝 Network and influence: New billionaires often bring others along with them, turning early investors into millionaires through their success.
• 💸 Liquidity misconception: Most of a billionaire's wealth is not liquid; they often use assets as collateral for loans rather than selling their holdings.
• 🌐 Crisis as opportunity: Billionaires view economic crises as opportunities to acquire assets at discounted prices, setting themselves up for future growth.
• 🧐 Expertise and mentorship: Billionaires rely on a network of experts to minimize risk and maximize returns, often employing executive coaches to maintain focus and clarity.
• 💼 Enterprise over consumer: Most of the wealth in business comes from enterprise deals rather than direct-to-consumer sales, emphasizing the importance of B2B relationships.
• 🚀 Starting advantage: Many billionaires had a head start due to their family's wealth, education, and connections, which provided them with the means to take risks.
• 🛠️ Exploitation in supply chains: The wealth of industry tycoons is sometimes built on the exploitation of cheap labor, particularly in the extraction of resources like cobalt.
• 🤑 Obsession with wealth: A common trait among billionaires is an intense focus on wealth and success, often at the expense of other aspects of life.
• 🧠 Decision-making and persuasion: The most valuable skills for high-level success are the abilities to make sound decisions and to persuade others effectively.

Q & A

How much of their businesses do billionaires typically own, and why is this significant?

Billionaires typically own a smaller percentage of their businesses, often under 50%. For example, Jeff Bezos owns 12.7% of Amazon, and Elon Musk owns 13% of Tesla. This is significant because owning a smaller percentage of a large, multi-billion dollar business is often more lucrative than owning 100% of a smaller business.

What is the difference between how millionaires and billionaires invest in real estate and private equity?

Millionaires often invest heavily in real estate, with 35-50% of their net worth tied up in it. In contrast, billionaires primarily invest in business interests and private equity, which make up over 70% of their net worth.

Why do billionaires prefer using other people's money to grow their wealth?

Billionaires use other people's money to leverage and scale their businesses. By raising funds from investors at various stages of growth, they can accelerate their business expansion without using their own money, which increases the company's valuation and their own wealth.

What is the fundamental principle behind the 'Buy Low, Sell High' strategy used by billionaires?

The 'Buy Low, Sell High' strategy involves purchasing assets or businesses at a low cost and selling them at a higher price. Billionaires optimize their profits by focusing on markup and scale, conducting many transactions with a small margin (like Amazon) or fewer transactions with a high margin (like Tesla).

How do billionaires use art as a store of value?

Billionaires invest in blue-chip art as a way to store value that can easily be moved. Art is less susceptible to inflation compared to cash and can be used as collateral or leased to museums, providing both appreciation in value and liquidity.

Why won't stocks alone make someone a billionaire?

Stocks require a large time horizon and substantial initial investment. While they can build significant wealth over time, they lack the rapid scaling potential that other investment vehicles, like private equity or business ownership, provide.

How do new billionaires contribute to creating other millionaires or billionaires?

New billionaires often bring along early investors who believed in their vision. For instance, Peter Thiel's initial $500,000 investment in Facebook turned into $628 million after its IPO. Similarly, early investments in promising startups can yield substantial returns for investors.

What is the liquidity situation of most billionaires' wealth?

Most billionaires have less than 5% of their wealth in liquid assets. Instead of selling their assets when they need cash, they use their holdings as collateral for low-interest loans, avoiding the need to sell and incur taxes on their wealth.

Why do billionaires see crises as opportunities?

Billionaires view crises as opportunities to buy valuable assets at discounted prices. They focus on long-term strategic moves, making a few significant investments per decade that yield substantial returns during economic downturns.

What role do experts play in the success of billionaires?

Billionaires rely on experts to minimize risks and increase returns. They hire top accounting, legal, and managerial talent to handle various aspects of their business, allowing them to focus on high-level strategic decisions and exponential growth.