As spectator sports go, reading rich lists is a pretty grim one. Poring over stories about others peoples’ billions is an odd pastime, vulgar and vaguely dirty, which seems to appeal to the sort of boggle-eyed saddo who is obsessed with money for its own sake. There’s also a 300-foot-high flashing neon question-mark over whether they are even accurate.
A classic example of the genre was the recent Bloomberg story about Lynsi Torres, heiress of the In-N-Out burger chain, who was dubbed “the US’s youngest female billionaire” after she came into ownership of the family business on turning 30. There are several problems with the story.
For a start, the way the business’s value is calculated is head-hurtingly complicated. The result? That it is worth $1.1 billion (€845 million), just enough to qualify Torres for what is depressingly known as the “10-figure club”.
And secondly, Torres has only inherited half the business anyway, and will get the rest when she turns 35. Even if the valuation were true, she is only half a billionaire. Surely the fact that she is young, blonde, has been married three times and is a drag-racer did not influence the story.
Bloomberg makes a big deal of its billionaires’ list, but there is evidence that it’s not entirely accurate. Amusingly, last year it realised that Elaine Tettemer Marshall had been the fourth-richest woman in America – worth $12.7 billion, by Bloomberg’s calculation – since 2006. She inherited her husband’s stake in Koch Industries when he died that year, but Bloomberg hadn’t noticed. How many other secret billionaires are out there, hiding in plain sight?
Whenever these stories come out the subject, if they offer a quote, always say that the calculation of their wealth is way off. Tettemer Marshall called hers “ridiculous”. (An amusing footnote here is the case of Saudi Arabia’s Prince Alwaleed bin Talal, who recently and bad-temperedly “severed ties” with the Forbes rich list after he said it undervalued his wealth by $8 billion. Such are the problems of the super-rich.)
There are three deeper points here. Firstly, as the case of Tettemer Marshall makes clear, there are some people who just aren’t on the Forbes/Bloomberg radar. It’s a characteristic of business reporting to focus on quoted businesses – quarterly results make for news. These lists are blind to businesses, including many family businesses, that chug along unspectacularly and don’t court attention. That matters because it underestimates their importance, which means the whole way people think about business is skewed and inaccurate.
And secondly, how do you calculate the value of a family business? No doubt if you clack your abacus for long enough you could come up with a figure, but it is really meaningless. Take Ikea, whose owner Ingvar Kamprad is regularly said by Bloomberg to be worth over $40 billion. That is based on the assumption that he owns the entire business, which he doesn’t. So it’s not accurate. But really, what does it mean anyway? Nobody could buy Ikea, and if it were broken up the parts would be worth less. Any valuation is a fantasy.
The third point is: why would you want to calculate the value of a family business? Most family business owners don’t even think about how much their firms are worth – that’s just not the point of the business. In many cases, their aim is to be a good steward and pass it on to the next generation, not cash out. Family businesses are valuable because of the money they generate, but not only because of that. What the reductive rich lists fail to grasp is that the most valuable things are more than the sum of their parts.