That LVMH’s Bernard Arnault can get richer than Microsoft’s Bill Gates is a sign of how the world of business is evolving. Creation of wealth is about symbols no less than software
One multibillionaire in second place, or third, on a list of the few whose dollar net-worth runs into 12 digits, should make little difference to the rest of the world. Yet, such lists can be barometers of business performance, in particular, and social behaviour in general. France’s Bernard Arnault, CEO of luxury products group LVMH—derived from Louis Vuitton-Moët Hennessy—has displaced Microsoft’s Bill Gates on the Bloomberg Billionaires Index as the world’s second-richest man, just a month after he entered the rarefied $100 billion club. LVMH shares have made record gains this week on the back of a 16% revenue growth in the first quarter of 2019 over the same period last year, pushing Arnault’s personal wealth to nearly $108 billion. Gates is worth $107 billion on the chart. When one thinks of the world’s richest, one usually thinks of technology successes. That the creator of a luxury empire could get richer than the founder of a software major speaks of value generation of a far fuzzier kind—enabled by a world increasingly devoted to wealth and its symbols. Luxury is a market where anything that signals membership of a global elite commands an eye-popping premium.
The number of millionaires worldwide has been rising as entrepreneurs create consumer-centric technology businesses, marking a shift from the industrial era. This year, the number of people with $1 million, or more, in net assets is expected to exceed 20 million for the first time, according to a Global Data Wealth Insight report. While the fortunes of these folks are based on entrepreneurial acumen, hard work and a favourable business environment, easy taxation regimes have played a significant role. In Arnault’s France, for instance, the taxation structure is regressive, as economist Thomas Piketty and others have shown, with the top groups paying lower effective tax rates than those below them. Of the world’s three richest men, who happen to be the only ones with 12-figure fortunes—Amazon founder Jeff Bezos ($124 billion), Arnault and Gates—only one has signed the Giving Pledge, and reports have pointed out that Gates would still be in second place if he hadn’t pledged $35 billion to his philanthropic foundation. Arnault’s LVMH group publicly pledged €200 million for the reconstruction of Notre Dame, but has stumped up only €10 million so far, and that too, after getting some flak for being stingy. In India too, the number of millionaires and billionaires has been growing rapidly—up 11% in 2018, by some estimates—fuelled by a stock market boom and rising consumption, but income inequality is worse than ever before. Unfortunately, philanthropy is not picking up. Since 2014, philanthropic contributions of over ₹10 crore by ultra-high net worth individuals, excluding Wipro’s Azim Premji, have declined 4%, notes Bain and Company’s India Philanthropy Report 2019.
Some of that may be because upward mobility is a phenomenon that reaches all the way to the top. No matter how rich you are, someone is always richer. Since being well-off is relative, there is no end to the aspiration curve. This sentiment exerts a powerful influence at the upper echelons of the socioeconomic pyramid, especially among those who are near the top, but not at the peak. For them, there is always something fancier to buy—and flaunt. Arnault, it seems, knows that only too well.
