Shiftdisturbers Episode #2.5 (Mini-Episode): Where do the World's Billionaires Live?

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Transcript of the podcast:

Ian Gormely: Hello, and welcome to Shiftdisturbers, the MPI podcast where we highlight the people, research, and ideas that change the way we think about the world. I’m your host Ian Gormely, coming to you from the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management.

On today’s mini-episode MPI’s very own director of cities Richard Florida, talks about the cities teams new report, the geography of the global superrich, which tracks the geography of the world’s billionaires. Richard tells us what he and his team discovered including whether the world’s wealthiest people live, why they live there, and how they can affect the neighbourhoods and cities that they call home. For the full report check out martinprosperity.org, and to make sure you never miss an episode of Shiftdisturbers, please hit the subscribe button. Happy listening.

Richard Florida: You know what has been one of the most signal issues of the past decade or certainly since the economic and financial crisis of 2008, it’s been the rise of the global one percent. The fact that there is this new class of the global super rich who have taken advantage, financially, economically, and have caused a lot of pain, not just economic pain but a lot of dislocations we’re seeing in the world. We can go on and on about the rise of this global one percent. And people bandied that term around. And there’s some conversation about how big it is, how much money they have.

But no one has ever looked where billionaires are located. Who would qualify as the global one percent? More than that, in my own field, there’s been a lot of conversation about the super-rich becoming incredibly mobile, driving up housing prices in New York. New York City having blackened apartment buildings; lights out buildings, London, you know it’s just something that I thought, well people are talking about it but no one has ever done research on it.

I’d always known that Forbes does a listing of the world’s billionaires. But what we were able to discover is that we could find the locations. We knew the name. We could look at biographies that tell you what the primary resident. There are 1800 billionaires in the world and I think we were able to find locations for about 99.5&percnt of them. You could have 12 homes but we wanted to know their primary city of residence. We did that. We coded this data by geography and we did it by city and metropolitan area. And of course we linked it to whether the wealth was self-made or inherited which the Forbes data tells us. What industry that billionaire, he or her, made their money on.

[00:02:50]

And so we’re able to get a pretty clear geographic picture of where the global super rich live. What is their geography? For me that was pretty exciting since no one had ever done it before. Two U.S. cities have the leading number. Number one is New York, number two is San Francisco. A financial center on the one hand and a tech centre on the other hand. The next one was Moscow which we discovered is declining because Russia has been hard hit…the oil crisis has hit resources and all the issues of Russian politics…Hong Kong and then L.A. and then roughly London. So on one hand billionaires are heavily concentrated in these kinds of cities.

But what really surprised me are two things; one is that billionaires are not as concentrated as far as we can tell as say the financial industry. We actually compared the location of billionaires to global financial centers. And while they are associated financial markets are much more concentrated in certain places like New York and London than our billionaires.

The second thing we found is that small places, Jackson Hole Wyoming, parts of Montana, small places in Europe, for a whole variety of reasons. They may offer a tax hedge; they may be a place where a billionaire family was long ago, that there are small places that you would never expect; the place in Arkansas where the Walton’s, the Walmart family is, Omaha Nebraska where Warren Buffett is from. You find all of these, kind of odd, if you will outlying small places.

And when we looked at it, it’s not simply that it’s bifurcated between big and small. The number one source of billionaire wealth globally wasn’t tech and it wasn’t finance. It was fashion and retail. So places like Paris and Milan. Food and beverage another…Miami a major center of this…real estate, you know you can make money in real estate just about anywhere. What we found is that billionaires, they’re not just moving to New York and London. A lot of billionaires are making money in their industries wherever they are in the world. And those places have billionaires. So billionaires are concentrated and spikey but I think they are less concentrated and spikey than the high tech industry or the financial markets are. Don’t get me wrong. Billionaires track the size of a city. The bigger the city is the more likely it is to have more billionaires

[00:05:15]

But they don’t track things like density.

Like one of the things I would have thought is that denser cities would have more billionaires. But there’s only a very small association between the density of the city and billionaires. Billionaires are totally associated with the economic output, the GDP of the city. But they’re not at all associated with the kind of GDP per capita which would be kind of how wealthy that city is on aggregate. So I think the pattern is a little bit confounding of what you would think. Billionaires are spikey but they have this kind of unique pattern which many of them are tied to places where they made their wealth. In some cases that goes back generations. Millionaires and billionaires, generally speaking do not migrate for tax rates. Yeah there’s always the anecdotal example, but it’s not like billionaires and millionaires migrate just as a hedge on taxes. And billionaires and millionaires are tied to industries. And those industries require them, and those companies require them to live near the companies and industries and places they make wealth. So it’s not so…maybe a hedge fund manager who’s trading on a set of desktops or laptops can move. But for most people their wealth is tied to like an actual set of organizations, industries, factories, places. It’s hard for them to move away. So we don’t see a lot of migration of billionaires.

And the other thing our study shows which I thought was really interesting, we had all sorts of indicators of quality of life and quality of place. None of them were positively and significantly associated with a billionaire location. So that’s interesting to me. Yes there are billionaires living in Jackson Hole Wyoming and other beautiful…Miami, they are attracted there by weather or taxes.

But when you look across all 1800 there’s not a clear signal that large segments or large concentrations of them are being attracted by quality of life. It’s by size, economic size, population size, competitiveness, high tech base, maybe financial industry performance but not so much quality of place variables.

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This podcast was produced by the Martin Prosperity Institute at the Rotman School in 2018.