Why Wealthy Tycoons Keep Working: Unveiling the Secrets Behind Billionaires' Reluctance to Retire
, by Unboxify, 5 min reading time
Why Billionaires Refuse to Retire 🌟💼
Most people alive today will never be able to retire. Almost half of all Americans report having no dedicated retirement accounts at all. Combined with rising living costs, Millennials will need more than a million dollars saved to retire comfortably. It's a bleak outlook for most, but there are people with enough money to live several lifetimes in extreme luxury without ever needing to work again. Yet, they still choose to work, even at the expense of their health, family life, and overall net worth. So, what stops so many billionaires from retiring?
The Elderly Billionaire Demographic 👴💰
According to Bloomberg, the average age of a global billionaire is now 63 years old, and it's slowly getting older every year as wealthy people live longer lives. Specific breakdowns show male billionaires are on average 63.7 years old, while female billionaires average 62.4 years old. Female billionaires trend younger because several have inherited their wealth or benefited from divorce settlements at a younger age.
Billionaires Who Keep Busy 💼⌛
Billionaires working into their twilight years isn't just a trend attributed to an obsession with wealth accumulation. Many would actually be richer if they took a step back. For instance, a report by the Associated Press found that Donald Trump would be worth as much as $1.13 billion if he had taken his $400 million inheritance in 1988 and passively invested it into the S&P 500.
Financial Motivations: Why Keep Working? 💳📈
1. Job Attachment 🌐🎢
A study conducted by Chicago Booth Professor Steve Kaplan and Joshua R. Stanford found that 69% of billionaires on the Forbes 400 list started their own business. The remaining 31% sourced their fortunes from inheritance, lucky investments, or through pay packages as top company executives. For example, Steve Balmer, the sixth richest man in the world, made most of his fortune working as the CEO of Microsoft after Bill Gates stepped down. The success of some companies heavily relies on a few key people, often the founders who are billionaires on paper.
2. The Burdens of Liquidating Assets 💱🏦
If you start a business that becomes so successful that your stake in it is worth a billion dollars, you still can't retire unless you have a way to liquidate your position. There are three ways to achieve this:
- Sell your shares through an acquisition or take your company public.
- Generate enough positive cash flow to pay yourself a dividend and live on that income stream in retirement.
- Use the equity in your company as collateral for a personal loan to fund your retirement.
According to data compiled by Morgan Stanley, the size of private equity funds that specialize in buying businesses from their founders has increased by 800% in the last 20 years. You could also go through an initial public offering (IPO), but that comes with restrictions on how quickly you can sell your shares. No matter who buys your shares, they probably aren't going to want you to quit the second you cash out, which is why a lot of private equity deals include earnout clauses.
3. Founders’ Commitment 🏢⏱️
The average earnout period is getting longer, and the average time a founder needs to stay with the company after selling it is now between 1 and 3 years. Selling shares takes time, making a business cash flow enough to pay dividends takes more time, and using your company as collateral for a loan still requires repayment. Scaling a company to a billion-dollar valuation takes around 5.5 years according to Flexim, and the median time is much higher. Finding a buyer can take more than a year as well. So, most successful founders find it quite hard to ride off into the sunset.
The Psychology of Wealth 🚀💸
Another significant factor in understanding why billionaires refuse to retire lies in their psychology. Someone who becomes a billionaire from founding a business would have turned down offers to cash out for tens or hundreds of millions of dollars—life-changing amounts of money for almost anybody. If they believe in their company so much or are just so addicted to watching a number go up, retirement isn't something they'd consider.
Plus, anybody happy with a reasonable amount of wealth would have cashed out well before they became a billionaire. Tom from Myspace sold his stake for $580 million in 2005 and currently lives a leisurely life. Compare that to Mark Zuckerberg, who could have also sold a stake in Facebook at the same age for even more money.
The Allure of Power and Influence 💼🏛️
Another reason why elderly billionaires refuse to retire is the allure of power and influence. According to a report by the Harvard Business Review, the average CEO works around 62.5 hours per week, only slightly more than the average salaried employee working 9 hours of unpaid overtime every week. CEO roles at large companies are more about big strategic decisions and high-profile appearances than mundane management tasks, and this flexible, high-paying, influential role is tempting to keep.
For individuals driven enough to become billionaires, such a role is hard to give up, especially when they can tailor their responsibilities and be surrounded by people who admire or at least pretend to admire them.
Conclusion 🎓🔚
Billionaires refuse to retire for a complex combination of reasons including financial necessities, personal commitments, and the psychological allure of power and influence. For many, letting go isn't an option, even when they have enough wealth to retire comfortably. The interplay of these factors means we'll continue seeing more billionaires working well into their old age.
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