Rainer Zitelmann is a German historian and political scientist who has applied his empirical and statistical research methods to the study of how the ultra-wealthy achieved their economic success. His research is published in a new book called “The Wealth Elite.” In the interview transcribed below, he shares some of his findings with Seeking Alpha readers.
Dr. Zitelmann, in your research you identify the key character traits and habits associated with those who have become exceedingly wealthy. Are these traits the sort of things we’d expect, the sort of things that Benjamin Franklin recommended – “early to bed, early to rise” – or have you uncovered some surprises?
I don't know whether I’d say these things were so surprising, but a lot of these things were very interesting. I found a lot of [their distinguishing characteristics] they had in their youth, when they were in university. They tended to engage in entrepreneurial activities, they sold things. These [extracurricular] things were more important than their academic studies. Their grades were not better than the non-super rich. The other thing that surprised me a bit was that half [of the wealth elite under study] were competitive athletes, they were very active in sports. Also, gut feeling is much more important for [the wealth elite].
These qualities make sense. But of course, many who have them have not become ultra-wealthy. How do folks with the right character traits reach the wealth summit, and what role does luck play in all of this?
Not everyone who has [these qualities] becomes super-rich. One thing very important to mention is that [the wealth elite] like to swim against the stream; I call them non-conformists. One billionaire gave me a beautiful example. He earned his money in the milk industry, which is where this example comes from. You've got a 100 cows walking on a path; on the left there is a lush field and on the right it is quite dry and nowhere near as lush; 99 cows go to the left and only one cow goes to the right. This [single] cow gets to eat and eat and eat long after there is no grass left on the field on the left. [The wealth elite] are people who love to do things absolutely different from the majority.
Another important things is how they deal with crises and setbacks. Everyone has serious crises and setbacks in their lives. For most people, if they have success in something, they take responsibility for the success. But if they have failure or setbacks, then they blame others. [The wealth elite] blame only one person — themselves.
Building wealth and keeping it can be two different things. People often take big risks to accumulate wealth, whereas they might want to avoid excessive risk to keep it. Does your study probe the issue of wealth retention?
I asked everyone about their risk propensity, on a scale from -5 to +5; -5 is very risk-averse and +5 are people who take a lot of risk. Most were between +3 and +5. That was not very surprising. Then I asked whether this has changed during their lives and most people told me that during their lives they lowered their risk profile. Maybe those who didn't lower their risk profile wouldn’t be interviewees for me because they would have lost their money.
The problem with a lot of books about success is they all ask what do [the wealthy] all have in common and imply that if you do it the same way, you will be successful. This is not only wrong but it's too easy. Because if I go to a casino and ask our winners what have you done and everyone tells me ‘I took very high risk,’ then I go to the losers and ask what have you done and they tell me the same thing, ‘I took a lot of risk.’ And so I think it's really important that they took a lot of risk in their early entrepreneurial phase, and later in life they reduced their risk profile. Maybe they invested a lot of their money in their company [at an early stage], then in a later stage of life, they started to take some of the profits and invest in real estate or something else as a means of diversification.
Do you have some sense as to what these wealthy people do with their money?
They are all very active and invest most of their money in their business. [Besides that, their preferences differed greatly.] Some wanted to buy houses and cars and some weren't interested in spending at all. But when I asked them what money means to them, they had just one thing in common. They thought the most important thing was freedom and independence; everyone worked a lot, but not everyone had to work. And that was what money meant to them – they connected the idea of having a lot of money with the idea of freedom and independence.
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