The Changing Landscape of Wealth

This article explores the evolution of wealth creation, focusing on how the rise of companies, particularly tech companies, has drastically changed the distribution of wealth compared to the past.

• In 1982, inheritance was the dominant source of wealth, with 60 out of the 100 richest Americans inheriting their fortune.
• By 2020, this number had halved, with only 27 out of the top 100 fortunes attributed to inheritance. This shift indicates a significant increase in new wealth creation.

The Rise of Companies as Wealth Generators

The article highlights that the primary source of new fortunes is starting companies, particularly in the technology sector.

• In 2020, 56 out of the 73 new fortunes were derived from founder or early employee equity in companies.
• Tech companies now account for a significant portion of the new wealth, with 30 out of the 73 new fortunes attributed to such companies.
• These tech companies stand out due to their innovative technology, differentiating them from traditional businesses.

The Shift From Oil and Real Estate to Technology

The article compares the traditional sources of wealth like oil and real estate with the rise of technology.

• In 1982, oil and real estate accounted for a significant portion of new fortunes, but this has drastically changed.
• By 2020, only 6 out of the 73 new fortunes were linked to oil and real estate.
• This shift reflects the growing influence of technology on the economy and its ability to create new wealth.

Why Startups Are Flourishing

The article explores the reasons behind the surge in startup activity and their contribution to wealth creation.

• The article argues that the 1982 landscape was an anomaly, with a period of consolidation in the economy hindering startup growth.
• The post-World War II era saw a dominant corporate structure that limited opportunities for new companies.
• The breakdown of this corporate structure, driven by deregulation and the rise of microelectronics, allowed for a resurgence of startups.

The Impact of Technology on Startup Costs and Growth

The article emphasizes how technology has significantly impacted the cost and growth rate of companies.

• Technology has made starting and scaling companies cheaper and faster, allowing for rapid growth and higher valuations.
• This shift has changed the power dynamics between founders and investors, with founders gaining more leverage due to lower startup costs.
• The article provides examples of how companies like IBM, Hewlett-Packard, and Microsoft took longer to reach certain revenue milestones compared to today's startups.

The Gini Coefficient and the Impact of Startups

The article explains why the increasing number of startups and their rapid growth are contributing to rising economic inequality, reflected in the Gini coefficient.

• The article argues that the Gini coefficient is rising because more people are starting more valuable companies, leading to a concentration of wealth.
• This trend is a natural consequence of the changing economic landscape and the increasing role of technology in wealth creation.

The Future of Companies and Wealth Creation

The article concludes by suggesting that the future of wealth creation will continue to be dominated by companies, particularly startups.

• The article expects both the number and wealth of founders to grow as technology continues to make starting companies easier and cheaper.
• This trend signifies a return to a more entrepreneurial environment, where wealth creation is driven by innovation and technology.