Millard Grimes: How to be a billionaire

April 5, 2014 

Forbes magazine has published its 28th annual guide to the world's wealthiest individuals. It is a remarkable edition that not only features the 1,645 billionaires its researchers identified, but also gives facts and figures (and perhaps some fiction) about the nations, companies and remarkable career paths that led them to the ranks of the richest.

A quick summary: the 1,645 billionaires are worth a total of $6.4 trillion, up 18 percent from a year ago; the minimum worth of the top 20 was $31 billion. The United States has the most billionaires, 492, which are worth a total of $2.3 trillion in an overall economy of $16 trillion, the highest of any nation by far. China is second at $9 trillion.

How do you become a billionaire? Mainly through the right investments. The billionares either inherited lots of stock or developed concepts that became huge enterprises in which they owned much of the stock.

Bill Gates is the prime example. In 2013 he regained his position as the richest man in the world when Microsoft stock rose to an all-time high, pushing his worth to $76 billion. Warren Buffett came in second at $58 billion, with a stock folio much more diversified.

The most remarkable billionaire's story in undoubtedly Jan Koum's. His name is one of the least familiar on the list and he is only 38, and at $6 billion his personal worth ranks pretty far down the list, behind Anne Cox Chambers and Jim Cox Kennedy of Georgia, among others. But you have to consider that as recently as 2008, Koum was on food stamps.

Koum is an American citizen but he was born in Ukraine, a country much in the news of late. He grew up in a house with limited electricity and plumbing. In 1992, when Jan was 16 he and his mother immigrated to the U.S. to escape the uncertain political and anti-Semitic atmosphere of the Ukraine.

His father had died and they had little money and spoke broken English. She took baby-sitting jobs and Jan worked at a small grocery store.

He knew enough English by then to attend high school, but drooped out at 18 and began teaching himself computer programming from manuals borrowed from a used book store.

Koum's incredible rise from poverty to billionaire is also a dramatic illustration of what is bad and good about the capitalist system as it has developed in the U.S. today.

He became proficient at infrastructure repair and a friend got him a job at Yahoo in 1998, where Koum worked for nine years, learning more about the business of computers. He and another Russian immigrant developed what Koum called WhatsApp and spent months updating it so that it could link up with phone numbers throughout the world.

By late 2009 WhatsApp had 250,000 active users, most of them in countries other than the U.S. By February 2013 the number of users had risen to 220 million. The company still brought in little revenue and Koum and his partner did not pay themselves in its early years.

Then in the spring of 2012, Koum got an email from Mark Zuckerberg, founder and major shareholder in Facebook. Zuckerberg was a WhatsApp user and asked Koum to have dinner with him.

The two met and two years later, in early 2014, Facebook bought WhatsApp for $4 billion cash and $12 billion in Facebook stock, which was 8 percent of the whole company.

Koum, who arrived in the U.S. from Ukraine with a few dollars in his pockets, netted $6.8 billion after taxes and a seat on Facebook's board of directors. His business partner picked up $3 billion.

It was the biggest financial transaction in technological history and one that poses serious questions about the future economy. WhatsApp has only 56 employees; its total revenue in 2013 was less than $20 million. It had no assets such as a building or expensive equipment. But to Facebook the attraction was its 470 million users. Zuckerberg told Koum there would be no pressure on WhatsApp to "make money." He simply wants to keep increasing its users, with a goal of 4 to 5 billion people in the next five years.

As it is with the incomes and net worth of all billionaires, the totals become rather meaningless after the first six zeros, but the global economy still respects dollars and the amounts must be compared to something.

For instance, Ukraine's Gross National Product is about $182 billion, with a population of 45 million. It can boast of nine billionaires, not including Koum who is an American citizen.

Last week the U.S. Congress speedily approved a $1 billion loan guarantee to Ukraine and Ukraine is borrowing $18 billion from the International Monetary Fund.

In the past, companies worth $20 billion provided jobs to hundreds, even thousands of people - WhatsApp employs 156. It produces no material product, and there are many other companies which produce nothing but deals and information, but few jobs. We constantly hear of the "jobless recovery" in our economy but the reasons are seldom explained.

Jan Koum is the ultimate Horatio Alger story - but how many jobs has he created? Why did he pay a lower percent of tax on his huge windfall than Warren Buffett's secretary? Can the economy sustain so many billionaires, who according to Forbes comprise only 0.0000001 percent of the population?

Millard Grimes, editor of the Columbus Ledger from 1961-69 and founder of the Phenix Citizen. is author of "The Last Linotype: The Story of Georgia and Its Newspapers Since World War II." A profile of Grimes can be found in the Georgia Encyclopedia, www.georgiaencyclopedia.org.

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