The Sunday Times Rich List

The Sunday Times Rich List is an endless source of entertainment, particularly looking up one’s friends and seeing how much they are estimated to earn. Estimated is the vital word, because it is so difficult for outsiders to know precisely what anybody else has in their piggy bank. This has become even more difficult given the increasing number of people, including the very, very rich, whose empires are entirely private. Seven of the ten richest of all, moreover, have overseas origins that no doubt further confuse the true picture of their vast fortunes.

One of the difficulties is finding out exactly how much debt the rich have and on what terms the money has been borrowed. The late Robert Maxwell, for example, was once ranked above Rupert Murdoch by a significant amount of loot. This seemed absurd to me, because Murdoch’s media assets, from his British newspapers and digital broadcasting to his American TV interests, were obviously much more valuable than Maxwell’s. The truth was that the lesser (but fatter) tycoon was grossly indebted to every banker he could lay his hands on.

Because these debts were private, none of the lenders knew how much Maxwell debt other banks had on their books. Maybe they shared the general assumption that Maxwell had a huge fortune tucked away in Lichtenstein. Funnily enough, Maxwell always used to tell his associates that his piggy-bank in the principality held no money at all. Of course, nobody believed him. After his mysterious death, it was revealed that, on this one matter, Maxwell had actually and for once told the truth - the cupboard was bare.

The first and fifth richest men have one thing in common: Lakshmi Mittal and Philip Green both owe their vast fortunes (£15 billion and £5 billion respectively) to their penchant for buying up assets that nobody else wanted and rapidly converting these sows’ ears into silk purses. Mittal’s speciality is steel, where he has efficiently exploited the distaste of conventional investors for this uninspiring smokestack industry. Green used debt to pick up valuable retail properties that had been under-exploited for decades.

The interesting question is why these opportunities were not spotted by public companies in heavy industry or by other big-time retailers. The reason is similar to the forces that encourage takeover bids in bull markets, when prices are not only higher, but likely to be too high. When everybody’s doing it, the temptation to jump on the bandwagon is irresistible. On the other hand, buying something that nobody wants guarantees you a better value - but that is not apparent to fashion-conscious industrialists. It’s a foolish strategy which readily explains the poor record of mergers and acquisitions in public companies.

Commentators have been unable to avoid the Rich List’s report that the combined wealth of the top thousand has risen from £99 billion nine years ago, when Tony Blair came to power, to over £300 billion. ‘The rich have got much richer under Labour than ever they did in percentage terms under a Tory Government.’ No comment - and no surprise, either.