Secrets of How the Ultra-Wealthy Invest Their Money
Three types of investments to help elevate status, sophistication and social levels.
There’s a big difference between what the 1% invest in, and what the .001% invest in. For the uninitiated, the gulf between these two are measured in the hundreds of millions of dollars. But the value systems that drive the .001% are beyond anything financial or economic.
When you look at the ultra-wealthy, the .001%, what are they really buying into? They’re already financially well-established, so what are they really buying at this point? Legitimacy. That's what they're buying. They invest in things that elevate their status, sophistication and social levels. This is expressed in continuing legacy and evolution into the upper echelon of society and wealth. This is how they exert their status and identity. It's a function of their personal brand; it's an expression of who they are and how they want to be branded into perpetuity.
For entrepreneurs looking to exert identity, elevate personal status and play in this sandbox, here are three areas where you should be looking:
Sports team ownership
When you look at NFL team owners, they’re looking to network with others and for a way where money is not just the only barrier to entry, it’s reputational. If you're in, you're in. It’s a network that is probably much more prestigious than anything like it on earth. It transcends all industries; you have venture capitalists, real estate developers, everyone coming together to invest in these assets. It's a statement. It's beyond the nouveau riche Ferrari. Behind your back, your friends and family say they know the owner of this NFL or NBA team.
And this is global. Professional sports leagues, European sports unions, any basketball, soccer or other major league sports team in any major city.
Class A office buildings
When it comes to office buildings, it could be Class A real estate in any country. According to AreaDevelopment.com, “These buildings represent the newest and highest quality buildings in their market. They are generally the best-looking buildings with the best construction and possess high-quality building infrastructure. Class A buildings also are well-located, have good access and are professionally managed. As a result of this, they attract the highest quality tenants and command the highest rents."
Making revenue from leasing and renting is secondary, it’s already baked in and expected with corporate tenants who are household names with far better credit and balance sheets than most tenants. But someone's going to jump from this asset to the skyscraper because it gives them an opportunity to look good in front of their friends, and on social media.
Fine art is another, it’s always been the legitimacy maker for many emerging families. They invest in art and start a collection. They like to talk about the history, but really, it's something that they own that nobody else does. These are world class statement assets that haven't lost value in decades, centuries in some cases. To them, art is not only a wise investment, but it's a very prestigious investment. It's a statement asset.
Extremely valuable fine art has lasted hundreds of years, it's always going to be around, it's strong world-class collateral if you know what you're doing and people play in those circles just to say that they're involved in fine art.
Making an impact today and in the future
The .001% like to invest in things that will make a difference. Making an impact is investing in something great that helps humanity but could also reward you with an outsized return on an investment that most will never experience in their lifetimes. That’s because the impact you’re making or attaching your brand to is so prolific.
Space exploration, as well as cures for virus and disease are what’s next. These types of investments have been and will continue to be the ultimate sport of privilege. For decades, NASA, academic interests and their limited budgets controlled American space exploration and travel. Sir Richard Branson, Jeff Bezos and Elon Musk are no different than John D. Rockefeller in the late 1800s because of their vast amount of wealth. In Rockefeller’s day, there were perhaps 12 billionaires. Now, there are almost 3,000. These billionaires can gather the resources together to undertake these projects. Also, it helps the government, because they give private enterprise tacit approval to initiate their efforts for they are assuming the risks.
There are more people who have more wealth than ever before in the history of the world. Think about it, there are 24-year-old Instagram influencers who have used media as a lever to create wealth faster and easier than ever before in history. They're the ones who are going to continue to grow, who will be the next leaders because they own their own media.
People who own their own media today are the ones who are ultimately going to control a substantial amount of wealth and influence capital flows. We’re in the greatest time of humanity right now, where there's just so much wealth that people can do ridiculous things (like NFTs) and succeed when it couldn’t have been done before.
It's no different than the way Rockefeller or Carnegie Mellon affected how society is shaped today with the founding of educational institutions and charitable foundations. That's why their names go so far, because they've branded themselves to be able to make an impact or they have an impact statement they follow that’s clear and congruent.
Entrepreneur Leadership Network Contributor