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Abu Dhabi, UAEMonday 25 June 2018

Amazon's Bezos is rich but not the richest yet 

He tops the list of wealthiest but his riches are lower than Gates and Buffett if their charity is added to their net worth 

The shares of Amazon ended 2017 with a rise of 52.8 per cent, taking its market value to US$571 billion and the fortune of Jeff Bezos, its founder and chairman, through the $100bn mark. Susan Walsh / AP.
The shares of Amazon ended 2017 with a rise of 52.8 per cent, taking its market value to US$571 billion and the fortune of Jeff Bezos, its founder and chairman, through the $100bn mark. Susan Walsh / AP.

The shares of Amazon ended 2017 with a rise of 52.8 per cent, taking its market value to US$571 billion and the fortune of Jeff Bezos, its founder and chairman, through the $100bn mark. That means he made $33bn, or over $600 million a week, in 2018 alone and now ranks number one on the Bloomberg index of the richest people on earth.

But, he is not yet the richest in history: Bill Gates holds that honour. Gates, still only 62, has a current net worth of $86.8bn , but his fortune would top $150bn if he hadn’t given away almost 700 million Microsoft shares and $2.9bn of cash and other assets to charity since 1996.

Unlike both Gates and the world’s third-richest man, Warren Buffett, Bezos has so far given relatively little of his fortune to charity - $500m (at current prices) – since 2002. But he is just starting out: in June last year he tweeted a request for ideas on how to help people and, no doubt, has been inundated since. He also said that he has been selling $1bn of his Amazon stock every year to fund his space business, Blue Origin, which I suppose will benefit human-kind at some point on its journey through space.

Bezos’s fortune has come with such alarming speed that he did not have much time to adopt a new philanthropic career. In 2014, Amazon shares went through $400 level for the first time, $600 year later, then $1,000 and have opened 2018 at $1169.

Compare that to Buffett who hit some milestones of his own in the past year.

Almost exactly 55 years ago this week, Buffett bought his first shares in Berkshire Hathaway for $7.50 each. Those same shares are now above the $300,000-level, up 20 per cent over the year, and – if you really want to do the calculation – by four million per cent since he first bought them. Analysts reckon that President Trump’s proposed 20 per cent corporate tax rate will add about $27bn, or 9 per cent, to the book value of Berkshire.

In his typically quirky way, Buffett refuses to split the shares so they now officially rank as the most expensive publicly traded equity in the US -- and probably the world although I haven’t been able to measure that.

Buffett still owns 17 per cent of Berkshire stock, which is valued at $85bn. He originally owned 30 per cent, so he, like Gates, would top Bezos’ fortune comfortably if he had been less philanthropic.

The Sage of Omaha, as he is known to his millions of admirers – more like disciples to their investment god – has made the price of his stock something of a fetish. For years, he has argued that splitting the shares would attract “the wrong kind of investor” who would see it as “a worthwhile reason to invest in the company”. In fact, it has turned into a reason to do precisely the opposite and even Buffett himself regards the share price as an accomplishment by itself.

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Read more:

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“I can gear my life by the price of Berkshire,” he told his biographer Alice Shroeder in Snowball in 2008.

When he first began buying the shares, it was a struggling textile company; today it is a massive conglomerate that runs a railroad, power plants, trucking companies, car dealerships, real estate brokers, jewellery stores and much more.

Two years ago it bought the HJ Heinz company, one of the pillars of Pittsburgh for more than 150 years, and at the low point of the banking crisis in 2008, it saved the day by investing $5bn in Goldman Sachs’ stock – on which it has shown a huge profit since, even if that wasn’t the reason Buffett bought them at the time. If Goldman had gone down, then so would the whole banking system.

As always, he is setting a trend on Wall Street. High stock prices are increasingly regarded as a status symbol and share splits among companies in the S&P 500 have fallen sharply in recent years. In 2017 the Google parent Alphabet and an insurance company that is often compared to Berkshire, Markel Corporation, saw their share prices go through the $1,000 mark for the first time. Bezos’s Amazon has now joined that exclusive club too and it will be interesting to see if he follows the Buffett road.

For students of the world’s wealthiest people – and it is always an interesting exercise in identifying where the real economic power lies – the action is now in China.

The wealth of the property tycoon Hui Ka-yan soared by $32.7bn last year, almost as much as Bezos’s, according to Forbes magazine, making the Evergrande chair China’s richest man with a total net worth of almost $43bn. Pony Ma, founder of the tech giant Tencent, is number two with a net worth of $39bn, up 60 per cent in 2017; Alibaba’s Jack Ma has held on to his number two place with a fortune of $38.6bn. Wang Jianlin, last year’s richest Chinese, saw his fortune slashed from $33bn to $25bn, dropping him to fourth in the list.

It will be interesting to watch how they perform in 2018. But I would put my money on one of them at least taking Bezos’s crown away within the next few years.