Even Billionaires Have a Long Tail -- Thanks to Hedge Funds
Just when you thought there was nothing more to be said about the Forbes 400 other than to marvel at the ever-increasing volume of the wealth, The Guardian comes up with this clever info-graphic showing how even billionaires are distributed in Long Tail fashion with a "head" of double-digit billionaires and a "tail" of the single-digit variety.
The other interesting tidbit from the Guardian's Charles Arthur is this list of sectors and companies that create the biggest chunks of wealth. Traditionally, the Walton heirs have held top spots. But this year, the Koch brothers have gained position and so has Michael Bloomberg. But despite the surging value of Facebook and the presence of old-line family money like the Cargill fortune, the Mars family and even the Dorrances who own Campbell foods, it's hedge funds that account for the most wealth in America:
[H]edge funds are responsible for the largest slice of wealth, at $103.2bn; then it's Walmart ($89.6bn). After that is Microsoft ($67.1bn plus some of Paul Allen's $12.7bn - part of which comes from his own investments); Google manages $35.5bn, Oracle $27bn, Dell $14bn, Amazon $12.6bn, SAS Institute $10.3bn, Facebook $9.4bn, Apple/Pixar $6.1bn, Intel $3.5bn - just ahead of the $3.2bn of Star Wars (why hello Mr Lucas!) - Yahoo $2.2bn.There are a few different ways to look at these two bits of information. The first would be simply to shake one's head at the outsized rewards that accrue to non-productive financial players. Hedge funds especially do nothing more than exploit anomalies in the financial markets, that's what the Daily Beast's Randall Lane thinks. Our collective national frustration with Wall Street often alights on the big numbers that these traders post. But the hedge fund industry has been vocal in pointing out that they live and die by their own wits. No one has bailed out a hedge fund, they say. For the most part, that's been true (though hedge funds have benefited from the government's desire to protect counter-parties during the depths of the financial free fall.)
Another way is to remark upon the way that hedge fund money populates the long tail of billionaires. Without it, the head would be more pronounced and the tail would be thinner. The hedgies are generally worth $2 to $7 billion with the occasional outlier like Soros or John Paulson. Take them out of the 400 -- and there are 26 whose wealth comes from hedge funds along with another 60 who thank the buyout, private equity and investment businesses for their good fortune -- and you would have to let in a whole bunch of non-billionaires to the list.
In that sense, financial intermediaries are spreading around some of our industrial wealth. Remember that for all the money each player is worth, they've made four times as much for their investors. (They generally get paid 20% of the profits they make; the other 80% goes back to investors which are primarily pension funds for working people.) So maybe the hedgies are the unsung heroes of our age of income inequality and this new Forbes list is their celebration.