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8 Billionaires = 3.6 Billion Poor

By Shlomo Maital  

 8-billionaires

   Oxfam is a British-based philanthropic organization that provides support for the poor world-wide. It is politically identified with the Left.   From time to time Oxfam generates reports showing the extreme inequality of world wealth distribution. The latest report claims that only 8 billionaires, the richest people in the world, hold wealth equal to the entire holdings of wealth of the poorest 3.6 billion people, or half the world’s population.

   Not long ago, this annual report claimed that 62 billionaires = half the world’s population.   So the rich have grown richer, the poor have grown poorer. Indeed, half the world has little or no wealth at all, per capita.   Oxfam uses Forbes Billionaire List data, and publishes its report to coincide with the Davos World Economic Forum, where the world’s makers and shakers meet.

            Here are the eight super-billionaires.

1.Bill Gates, the founder of Microsoft, led the list with a net worth of $75 billion. He is scheduled to speak at the forum in Davos this year. 2. Amancio Ortega Gaona, the Spanish founder of the fashion company Inditex, best known for its oldest and biggest brand, Zara, has a net worth of $67 billion.   3. Warren E. Buffett, the chairman of Berkshire Hathaway, $60.8 billion. 4. Carlos Slim Helú, the Mexican telecommunications magnate, $50 billion. 5. Jeff Bezos, the founder of Amazon, $45.2 billion. 6. Mark Zuckerberg, Facebook’s creator, $44.6 billion. 7. Lawrence J. Ellison, the founder of Oracle, $43.6 billion. 8. Michael R. Bloomberg, the former mayor of New York and founder of the media and financial-data giant Bloomberg L.L.P., $40 billion.

What can we learn from the Oxfam report, even if it is partly inaccurate?

* None involve inherited wealth. All did it on mainly their own.   * Gates and Buffett are committed to giving away all their wealth and their foundations are well on the way to doing this. * Bloomberg became a highly effective mayor of New York, and was close to running for President. * A majority built wealth in the world of high-tech. * Some have created a lot of jobs:   Zara, a retailer, and even Amazon, which is now hiring.

     With a billionaire now President of the United States, it is time to ponder these questions:   Is it healthy for society that individuals can accumulate vast fortunes? Do they use tax avoidance to build wealth, and is their philanthropy to some degree part of tax avoidance? Should there be a strong inheritance tax, so the playing field is levelled at least once a generation?  

Jeff Bezos Follows the Money

By Shlomo Maital

 Bezos

 Have you been following Jeff Bezos’ remarkable reinvention of Amazon? Ignore his purchase of a new toy, The Washington Post – that isn’t part of the reinvention.

   Bezos is doing what many successful companies fail to do.   As Peter Drucker explained decades ago, companies fail not because they do things wrong, but because they do the wrong things… they do the right things for too long until they BECOME wrong. Amazon became a market leader in on-line book sales, then broadened to selling everything, was highly successful – and while it was successful, Bezos is reinventing it, a highly difficult task. (“If it ain’t broke, why fix it? How many CEO’s believe that, and die with their company).  

   According to David Streitfeld (NYT April 4, p. 15), Amazon Fire TV “is part of a multi-billion-dollar effort by Amazon to move from selling goods produced by others, (low margin), to presiding over the entire process of creation and consumption (downloads and streaming).”  

Amazon is now selling a device, Amazon Fire TV, that lets consumers watch Amazon’s video library, as well as play games, on their TV sets.

   Recall that very quietly, Bezos positioned Amazon as a major supplier of cloud services, leaving Microsoft, IBM and other huge technology companies behind.

   Bezos is using what Bain & Co.’s Orit Gadiesh called “profit pools” – a tool that shows profit margins at each stage of the value chain, and asks senior managers to ask, ‘where is the money [today]?’ and ‘where will the money be in 5 years?’?   This is precisely what Bezos asked. His answer: creating download content. And he is able to move Amazon, with alacrity and skill, to where the money will be.

     Bezos may well slip and fall in future. But until now, his strategic moves have been alacritous and visionary. And risky – he is not afraid to risk billions.

     He’s worth watching carefully, to learn how to innovate tomorrow even when what you innovated yesterday is a big success.

Internet for the World: Facebook & Drones!

By Shlomo Maital

Drone facebook

Hard to believe, but the World Wide Web is only about 23 years old. In 1993, only 20 million people were on the Internet. In 1999 only four per cent of the world’s population of 6 billion people, or 240 m., were Internet-linked. Today 40 percent of the world’s population of over 7 billion people, or some 2.8 billion people, is Internet-connected! The Internet has changed our lives massively and permanently. That is – those of us who are connected.

   But what about the remaining 4.2 billion, or 60 per cent of the world? Google and Facebook are both racing to find ways to connect them. It is not easy. Most of those 4.2 billion people live in countries with minimal infrastructure. How can it be done?

   According to Vindu Goel, writing in today’s New York Times, Facebook is pulling an “Amazon” (remember Jeff Bezos’ recent pitch, that Amazon will deliver packages with drones) and is hiring as many as 50 aeronautical engineers and space scientists, to “figure out how to beam Internet access down from solar-powered drones and other ‘connectivity aircraft’.”   This will be done in a new Facebook Connectivity lab and a project called Internet.org. Part of Mark Zuckerberg’s goal, apparently, is to make (and keep) Facebook the most cool, interesting place to work.  He is fighting against the curse of scale – big companies lose their creative drive, and their creative people, as they scale up and bureaucratize.

   Earlier, Google too announced a drive to connect those unconnected 4.2 billion. Google’s approach currently focuses on high-flying balloons.  Facebook is also working on compressing Internet data, cutting the cost of Internet mobile phones and finding ways to hook up remote areas.

   Neither Facebook nor Google seem to have a clear business model in mind for their balloons or drones. The advertising model probably won’t work, because most of those unconnected 4.2 billion people are quite poor – although the late C.K. Prahalad pointed out, in his book, Fortunes at the Bottom of the Pyramid, that collectively, they form a huge market.

   Many analysts are very critical of both Google and Facebook for their ‘connect everyone’ efforts.

   Maybe we are missing the point. Maybe Google, and Facebook, are trying to connect everybody, because – it’s just the right thing to do. Maybe this is a new face of capitalism? Could it possibly be?   Maybe an exlusive  capitalism that leaves out over half the world will eventually crumble, taking Google and Facebook with it..and maybe Sergei Brin, Larry Page and Mark Zuckerberg realize it?  Maybe inclusive capitalism is cool?!

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
February 2017
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