Behind the Staying Power of Wealth Creation in Europe Family, Long-Lived and Long-Term- Oriented

BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE FAMILY, LONG-LIVED AND LONG-TERM- ORIENTED

IN ASSOCIATION WITH: CONTENTS

Introduction ...... 2

Key Findings ...... 3

The Big Picture: Europe’s Ability to Craft Fortunes Over Time ...... 4

Interview With Michael Otto ...... 8

Longevity of Fortunes: Western Europe ...... 10

Notable Achievers From Europe’s Longstanding Fortunes ...... 14

Interview With Dr. Stephan Schmidheiny ...... 18

Longevity of Fortunes: Emerging Europe ...... 20

Interview With Adam Goral ...... 24

A Look Into the Future ...... 26

Methodology ...... 27

Appendix ...... 28 INTRODUCTION

“Behind the Staying Power of Wealth Creation in Europe” analyzes wealth creation in Europe and the longevity of its fortunes over the last quarter-century. Western Europe emerges as a bulwark of stability in its fortunes, having the highest longevity rate in the world. The staying power of European fortunes is based on its tastemaker brands, and on keeping businesses private and in the family. Overall, Europe has had a strong pace of growth in wealth creation, having been aided by the emerging markets of Central and Eastern Europe. However, the momentum may have slowed, which raises the question: Can Europe hold on to its share of wealth creation based on its old strengths?

Forbes Insights and Societe Generale Private Banking would like to thank the following individuals for their time and expertise:

• Adam Goral, founder and president of the management board, Asseco, Poland • Michael Otto, head of the Otto Group, Germany • Stephan Schmidheiny, industrialist and philanthropist, Switzerland

2 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE KEY FINDINGS

EUROPE HAS EXPANDED ITS SHARE OF THE WORLD’S LARGEST FORTUNES:

Over the last 25 years, Europe has increased its share of the number of the world’s biggest fortunes, from 27% to 29%. The aggregate worldwide share of wealth held by Europe’s richest rose from 24% a quarter-century ago to 30% today. See page 4. Europe had the second-highest increase in the number of fortunes, after the Americas, and the second-highest increase in the aggregate growth of fortunes held by the wealthiest individuals. See page 5.

WESTERN EUROPEAN FORTUNES ARE THE LONGEST-LIVED WORLDWIDE:

Of the fortunes that have been on the Forbes Billionaires lists for at least a quarter of a century, Europe has the highest survival rate, 78%, followed by the United States at 73%. See page 11. These longest-surviving European fortunes are mostly private (67%) and family controlled or owned, with the majority (52%) being managed or owned by third and fourth generations. See page 12. Retail is how the biggest group of these long-lived fortunes (30%) were generated. Many of them also are based on very strong brands and worldwide tastemaker status.

EUROPE OWES ITS PACE OF GROWTH IN FORTUNE CREATION OVER THE LAST 15 YEARS TO EMERGING EUROPEAN MARKETS:

Emerging Europe accounts for 42% of the number of Europe’s largest fortunes, and 39% of wealth held by Eu- rope’s richest individuals, with the majority of these fortunes being held by Russians (27%) and Turks (11%). See pages 6 and 28. Back in 2002, Germany was the country in second place for most billionaires by country, after the United States. It was overtaken by Russia in 2008. (Russia has since been overtaken by China.) See page 5.

MOST RECENTLY, EUROPE HAS BEEN GENERATING NEW FORTUNES AT A MODERATE PACE:

Europe has generated 26% of the world’s new fortunes over the last two years, behind the Americas (35%) and Asia-Paciﬁ c (34%). Within Europe, more of the newest fortunes have been generated in Western Europe than in emerging Europe. See page 26. The good news is that Europe can bank on its creativity. Many of the new fortunes rely on tastemaker brands. However, the question remains: how “new” are these new European fortunes? Research shows that many Western European fortunes are the result of the second generation reaching billionaire status based on companies started years ago. And in emerging markets, some new fortunes still harken back to the post-communist asset privatizations. See page 26.

Looking back a quarter of a century, to around the time when Forbes started tallying the biggest fortunes in the world, there was a total of 193 billionaires, with Europe accounting for 53, or 27% of them (Fig. 1). In total they were worth $350 billion (equivalent to $677 billion today after adjusting for inﬂ ation), with Europeans accounting for 24% of that.

How has the continent fared over the past 25 years? Overall, the world’s billionaire class is much big- In this section of the report, Forbes Insights examines ger today, with 1,426 billionaires, or 620% more than the longevity of the region in terms of producing for- a quarter-century ago, with a combined net worth of tunes. In this case longevity is understood to mean the $5.4 trillion. Europe has grown in terms of its share region’s ability to mint fortunes, as compared with of billionaires, to 29%, and in its share of wealth, to Asia, the Middle East and Africa, and the Americas. 30% (Fig. 2). All parts of the world Europe has kept pace with the rest of the world in have undergone seismic terms of fortune creation (Fig. 3). In fact, it has recorded economic upheavals over the second-highest growth in aggregate worth of for- Europe has kept pace with the last quarter-century, tunes, or the value of all billionaire fortunes combined the rest of the world in both positive and nega- (Fig. 4). Europe owes this pace of wealth creation to terms of fortune creation. tive. The opening up of a large degree to the emerging European economies, post-communist Europe, mostly Russia and Turkey, which by now account for the economic opening of 42% of the total number of fortunes (Fig. 5) in Europe China and the economic and 39% of the wealth held there (Fig. 6). growth of some parts of Africa are among the positives. The recent fi nancial crisis and its global repercussions are among the negatives. How have these long- and short-term developments aff ected wealth creation in Europe as compared with other regions?

Figure 1. European fortunes as a Figure 2. European fortunes as a percentage of total number percentage of total wealth

25 years ago: 27% European 25 years ago: 24% 29% 27% 30% 24% Today: 29% Fortunes Today: 30%

4 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE The milestones of the Forbes Billionaires list illus- Forbes Billionaires list 25 years ago with two billion- trate well the progress of emerging Europe. Back aire families, Sabanci and Koc. Both families are still in 2002, Germany was the country in second place on the list today. for most billionaires by country. It would enjoy this The other two European countries that experienced spot for six years, to be overtaken by Russia in 2008. high growth rates in the number of billionaire fortunes (Russia has since fallen to third place, having been over the last 25 years are Spain and the United Kingdom. overtaken by China.) Then in 2011, Moscow became Given that Spain is a smaller economy than some the city with the most billionaires. Western European stalwarts, Spanish fortunes don’t yet Among the countries that were represented on the have the staying power of British or German fortunes, Forbes Billionaires list 25 years ago, Turkey has had the and over the years there have been bigger fl uctuations in highest growth in the number of fortunes over the last the number of Spanish fortunes due to economic condi- quarter of a century (Fig. 7a). Turkey is still an emerg- tions. Larger economies have an edge in terms of fortune ing economy, hence the high growth rate. Its markets stability. In many cases fortunes in these countries have opened up in the early 1980s, when Turgut Ozal was been amassed for such a long time that they have devel- prime minister. In fact, the country debuted on the oped a cushion against economic upheavals.

Figure 3. Europe as a fortune generator (in terms of number of fortunes) over the last 25 years

REGION Number of Number of Growth rate fortunes in 1989 fortunes in 2013 The Americas (excl. U.S.) 14 129 820% United States 55 442 700% Europe (with Russia) 53 409 670% Europe (without Russia) 53 299 460% Asia-Pacific 59 386 550% Middle East & Africa 12 60 400%

Figure 4. Growth in aggregate worth of fortunes over the last 25 years

REGION Aggregate worth Aggregate worth Percentage in 1989 (bil) in 2013 (bil) increase United States $96 $1,872 1,850% Europe $85 $1,627 1,814% The Americas (excl. U.S.) $32 $572 1,688% Middle East & Africa $15 $205 1,267% Asia-Pacific $122 $1,146 839%

COPYRIGHT © 2014 FORBES INSIGHTS | 5 The United Kingdom has also recorded high markets, and now increasingly to emerging markets. growth in the number of fortunes. While the UK is European creativity should continue to fuel brand cre- a mature economy, it is also entrepreneurial in spirit, ation, and worldwide demand for it should continue. with as many as 81% of its billionaires being self-made, On the fl ip side, it is a disadvantage that so many as compared with 33% in Germany or 43% in France, European fortunes are indeed tied to brands. It points according to the Forbes Insights/Societe Generale to the fact that Europe is not as diverse in terms of report, “Global Wealth and Family Ties.” The UK has wealth creation as other regions. Europeans haven’t old fortunes that made it into the Forbes Billionaires been able to build new fortunes based on technology to list 25 years ago. These are David Sainsbury, of the same degree as other regions. Russia’s Yuri Milner retailer Sainsbury’s, and Gerald Grosvenor, 6th Duke was a big backer of U.S. tech companies, and there is of Westminster, whose wealth is based on real estate France’s Internet king Xavier Niel, but otherwise there holdings dating back to the 1600s. But the country also aren’t too many recent homegrown European tech for- manages to create fortunes from scratch at a faster pace tunes, while there are multiple technology fortunes in than many other Western European countries. the U.S. and now also in Asia. France has had a relatively moderate growth rate of In this regard, Europe may be wise to look back new fortunes (Fig. 7a). That is, however, due partly to and learn from its own history. At one time, it had the fact that among mature European countries, France a big impact in technology, with companies like has the highest percentage (64%) of fortunes run with Siemens, founded in Germany in 1847, where the fam- family involvement, including family ownership. As ily remains involved to this day. Or more recently, will be explained later, this puts France at a disadvan- Computer Associates, founded by Walter Haefner, who tage when counting individual fortunes, which is the was present on the Forbes Billionaires list 25 years ago basis of the Forbes Billionaires list methodology. and whose descendants remain on the list today. Western European advantage in fortune accumu- It is not considered easy to build a fortune in Europe lation has traditionally been in creating very strong as, by worldwide standards, the tax structures and the brands, which have been and continue to be desired general approach to entrepreneurship is not considered worldwide. In fact, as will be explained later in this progressive. report, many longstanding European fortunes are tied to such brands. This has given old businesses new growth opportunities in exporting fi rst to Asian

Figure 5. In terms of number of fortunes Figure 6. In terms of wealth held

Western Europe Western: 58% Western: 61% 42% 58% versus 39% 61% Emerging: 42% Emerging Europe Emerging: 39%

6 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE Figure 7a. Growth in number of fortunes from 1989 to 2013

Netherlands Sweden

3—>6 3—>14

6—>37 Germany

19—>58 France Austria 6—>24 1—>8

Spain

3—>20 Switzerland Italy Turkey

4—>13 6—>23 2—>43

Figure 7b. Growth in aggregate wealth from 1989 to 2013 (in billions)

Netherlands Sweden

$7—>$21 $8—>$88

$9—>$121 Germany

$31—>$296 France Austria $7—>$143 $1—>$27

Spain

$4—>$100 Switzerland Italy Turkey

$5—>$50 $10—>$113 $3—>$74

MICHAEL OTTO

Michael Otto is the majority owner of the Otto Group, a German holding company with 123 companies that derives about 80% of its sales from online commerce, putting it in second place worldwide behind Amazon.com. Born in 1943, Otto was a refugee from West Prussia at the end of World War II. His father, Werner Otto, founded the business as a catalog company; today Forbes values his son’s worth at more than $14 billion (as of March 2013), No. 61 on the Forbes list of the top 100 billionaires. He projects a modest personal style and spends much of his time and money promoting environmental and social causes, such as sustainable cotton farming in Africa.

Forbes Insights: Do you think growing up in those cir- In your father’s book, he wrote that intelligence can- cumstances makes you more frugal with your money, not replace experience, and so he said that as an older even though now you could aff ord to buy whatever man he knew a lot of stuff that he did not realize when you want? he was a younger man.

Otto: Yes. It’s true. I think it’s better to do things for soci- Over time there was, of course, always a lot of learning ety with money. It makes more sense to me, and also for by trial and error. In a lifetime you make so many mis- me it feels better to do intelligent things—perhaps it’s takes, so you know what could happen. And therefore, too much to say good things—with money rather than when the members of the executive board are talking just spend it on things that are not very interesting for about their overall strategy, they come to me and we me. An entrepreneur also has a responsibility to society. discuss, and there I can help a lot with my experience.

Of course you need both. Intelligence is not unimport- ant. In former times, when I had teams together for projects, I always had a mixture of young people, who bring in new thinking because they are not burdened with too much experience.

8 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE “If an entrepreneur cannot accept mistakes, then he really should not become an entrepreneur.”

People say that they have to read your unhappiness Since I became CEO of our group in ’81, every two years because you are so calm on the surface. I have made a trip to the United States with the IT member of our executive board for eight to 10 days. We visit It is extremely seldom that I bang on the table, be- small and big IT companies, software and hardware cause I think it must be possible to solve problems in a companies. I was just interested, not in what they would very human and civilized way. One must accept that if present at the next fair, but what they are working on somebody is making an error, or if he makes a presen- in laboratories, and what would be interesting in two or tation that is really not good, he is nevertheless trying ﬁ ve years. Therefore, I made many decisions quite early to do his best. in our group, just before products entered the market.

Very often, I think, it is a sign of weakness, to show that You will tolerate mistakes if they are for a good reason? I am the boss and therefore I have the right to tell you what is right and wrong. If a boss is not accepted by the I think the biggest mistake is not to make decisions or force of his personality, but because he acts aggres- not to develop new concepts. sively, I have a problem with this. I don’t have to defend my position, so, of course, that makes it easier. Of course, it is important that a majority of the decisions will be right. But nevertheless, there are also a lot of er- You don’t always have the latest gadgets, and you rors. And if one cannot bear errors, one must look for don’t love gadgets the way some people do. another job. If an entrepreneur cannot accept mistakes, then he really should not become an entrepreneur. That’s right. Of course, I have an iPhone and an iPad, but it is true that I don’t have to have the latest gadgets every six months. What I think is even more important is that I have a very deep understanding of technical development.

Interview conducted by Andrew Tanner

WESTERN EUROPE

After looking at how Europe stacks up against other regions of the world, let us zero in on speciﬁ c fortunes. Are European fortunes long-lasting as compared with those of other regions? In other words, does a European billionaire have a better or worse chance of holding on to his or her billionaire status over the years? How have these initial 53 fortunes that were on the Forbes Billionaires list 25 years ago evolved over the years? Of course, the statistics address only Western European countries, as emerging markets started appearing on the Forbes Billionaires list only in the 1990s. (Turkey is a special case, as it started emerging in the early 1980s.)

Before the statistics, some explanation about why Second, the families keep information about how Western Europe, as opposed to the U.S. or other the fortunes are allocated among its members confi - regions, has two diff erent categories of fortunes: indi- dential. Fortunes are often based on private companies, vidual and family fortunes. Forbes lists tally only and even if not, families keep controlling stakes in individual fortunes. In other words, to appear on the some public companies in pools. It is only when a fam- list each individual has to have a net worth of at least $1 ily member decides to break ranks that information billion. There are two reasons why it’s harder to be tal- about allocation becomes public. lied as an individual billionaire coming from Europe. Such was the case with Maja Oeri, a descendant of First, many of the European families are older than Fritz Hoff mann-La Roche, the founder of drug giant in other parts of the world, some coming on fi fth or Roche, who recently joined the world billionaire sixth generations. Already, a quarter of a century back, ranks, debuting with an estimated individual fortune when Forbes fi rst started to tally the world’s fortunes, of more than $1.6 billion, according to Forbes.com. Europeans were unique. Her entrance was due to her 2011 decision to pull her While roughly 60% of 5% stake in bearer shares out of the family pool. While It is only when a family these fi rst classes were she reportedly said at the time that she had no falling self-made, only Europe out with her family, her decision reduced the family’s member decides to break had predominantly old, longstanding majority control of Roche. Other mem- ranks that information about inherited money. bers of her family, eight relatives in all, control, along allocation becomes public. That means more with a nonprofi t foundation, 45% of Roche, worth family members among $15.1 billion. whom wealth is divided, There are, of course, cases when inheritance is resulting in dilution of transparent. Walter Haefner, one of the members of the wealth, which means that while families may have bil- Forbes Billionaires list in 1989, died in June 2012. At lions, individual members of these families may not, or the time, he was the oldest billionaire in the world, at it’s impossible to determine individual allocations. 101 years old. Haefner was the largest individual share- As an example, when last writing about the Dutch holder of software maker CA (formerly Computer Brenninkmeijer family in 2003, whose ancestors Associates). His son and daughter inherited their founded C&A retail stores in the UK, Forbes esti- father’s stake in CA, in addition to other holdings, and mated that the family had some 200 members. And the joined the Forbes billionaire ranks with a net worth of German Von Siemens family, whose ancestor Werner nearly $2 billion each, according to Forbes.com. von Siemens co-founded the diversifi ed electrical engineering giant in 1847, had some 180 family members when Forbes last looked at it a decade ago.

10 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE To account for the fortunes that are less clear about group defi nitely keeps up with the times, as it bills itself apportioning wealth after founders’ deaths or are as the second-largest Internet retailer worldwide, after diluted among multiple family members in Europe, Amazon.com. Forbes Insights added a category for families. If looked The sustainability of wealth in Europe is not based on as individual billionaires, European fortunes have on the choice of industry per se, however, as Fig. 9 only a 41% survival rate over a quarter-century. shows a wide variety of industries and particular sectors However, after accounting for dilution among family that fortunes have been built on. What is most impor- members, the survival rate jumps to 78%. tant is that in each of these areas the fortunes are based on brands that over the years have seared themselves into a global buying psyche. Figure 8. 25-year survival rate

Europe (Incl. Families) 78% Europe (Individual) 41% Figure 9. Survivors by industry United States 73% The Americas 57% Retail Middle East & Africa 50% 30% Food and Beverages Asia-Pacific 22% 11% Automotive 8% THE SECRET OF THEIR SUCCESS Banking What does it take for an individual fortune to sur- 8% vive—and prosper—for a quarter of a century? Forbes Media Insights looked at the industries that generated the 8% wealth. In cases where the families diversifi ed their Real Estate holdings, we classifi ed them by the source of their wealth or their main or most prominent asset. Italy’s 5% Agnelli family, for example, whose holdings have been Technology diversifi ed to include Cushman & Wakefi eld, the New 5% York-based manager of global real estate, among oth- Packaging ers, is classifi ed as automotive. 3% Looking at Europe’s longest-standing fortunes, it Building and Construction becomes clear that retail is what has kept the core of 3% them thriving for generations. Among some of these retail billionaires is the German Albrecht family, whose Oil and Exploration members own giant discount retailers Aldi Sud and 3% Aldi Nord as well as the U.S. discount grocery retailer Home Care Products Trader Joe’s. Altogether, the chains have some 10,000 3% stores globally. In a bow to tradition—and frugality, Beauty which perhaps shows the philosophy behind building 3% a fortune on discount retail—Aldi stores do not accept Jewelry and Accessories credit cards in order to keep costs low, according to 3% Forbes.com. Another one of these retailers is the Otto Group (see interview with Michael Otto on page 8). Michael Otto and his four siblings share ownership of Otto Group, the parent of more than 122 companies active in retail- ing and fi nancial services in 20 countries. Started by Werner Otto in 1949, the company’s management ranks now are occupied by the third generation. The

COPYRIGHT © 2014 FORBES INSIGHTS | 11 “The story in Europe has been for some time, and Indeed, Forbes Insights research confi rms that a vast continues to be, that people around the world really majority of these survivors are privately owned, with look to Europeans to be the tastemakers, to create two-thirds of them being private companies and a third brands, to create products,” says Luisa Kroll, Forbes public companies. In the end, even families who have wealth editor. “When you look at Europe’s longstand- tested the public markets may also believe that private ing fortunes, you’re struck by the number of fortunes ownership will allow them to run their businesses bet- tied to brands that originated in Europe, but that ter, especially in tough times. The Benetton family have become popular and trendsetters for everybody took its namesake company private again in 2012 after throughout the globe.” a quarter-century trading as a public company, quoting Among these brands—which have made and sus- the “required fl exibility in the medium- to long-term tained European fortunes for a quarter-century or to take the actions necessary to meet the challenges longer—are BMW cars, Ferrero chocolates, L’Oreal arising from the changed competitive environment.” beauty products, Tchibo coff ee, Nivea cream, Swarovski While by staying private these fortunes have pro- crystals and Louis Vuitton luggage, to name just a few. tected themselves from the scrutiny of the public “This is where Europe is strongest and where it markets and everything that goes with them—short- can rely on its Old World strengths and a sense of class termism, enhanced disclosure and regulations, for that is unique to Europeans and European fortunes. example—they have also been striving to protect This will continue to be an advantage, as there will themselves from themselves, so to speak. be sustained demand for European brands in emerging The majority of the survivors are family-owned markets,” says Kroll. businesses, some already in their fi fth or sixth gener- Keeping it in the family is the most important ations (Fig. 11). That alone already defi es the famous factor in these companies’ success. Many of these com- saying “shirtsleeves to shirtsleeves in three genera- panies are still controlled by the families of the original tions,” which in some form or another exists in many founders. “The idea [among European business fami- diff erent cultures, and means that the fi rst generation of lies] is that you want to preserve what you created and a family business makes it, the second one maintains it, parcel it out, and maintain family control of a com- and the third one loses it. pany,” says Tatiana Serafi n, Forbes wealth analyst. “Families try to keep the businesses from going into public hands, in order to keep control.”

Figure 10. European survivors by company type Figure 11. European survivors by generation

15%

2nd: 15% Private: 67% European 33% 67% 33% 3rd or 4th: 52% 52% Public: 33% Survivors 5th or older: 33%

12 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE According to statistics, only 30% of businesses make it to generation two, and a mere 3% generate proﬁ ts in generation three.

According to statistics, only 30% of businesses make With fortunes that stayed within families, in many it to generation two, and a mere 3% generate profi ts cases they have been divided into branches among chil- in generation three. This puts European survivors in dren early on, such as was the case with the brothers a very exclusive group. Forbes wealth analyst Caleb Schmidheiny. Thomas and Stephan Schmidheiny’s Melby notes the importance of the second generation great-grandfather owned a brick factory, and their for the continuance of a family business. “As soon as grandfather worked in cement. When their father Max the fi rst-generation wealth creator passes that fortune carved up his estate in 1984, Stephan Schmidheiny on to the second generation, protecting that fortune got construction company Eternit, and Thomas got and hopefully growing it in the second generation Holcim, the world’s second-largest supplier of cement becomes the primary objective of that second genera- and concrete. Forbes Insights spoke with Stephan tion and carries on to the third generation,” he says. Schmidheiny about the role of family in business, and He also observes the diff erence between Europe, how his part of the inheritance aff ected his life (see where the tradition of holding on to, passing and mul- interview, page 18). tiplying fortunes through generations mostly lives on, In other cases families have had to contend with and the U.S., where the Giving Pledge idea—or the diff erent views about how to position the business and, pledge of the wealthiest individuals to give away the of course, have had to make provisions for those fam- majority of their fortune to charity, which has so far ily members who have preferred to follow their own been signed by 112 mostly American multimillionaires passions and wished to opt out of the family business. and billionaires—is changing the tradition of passing In some cases, this threatens to dilute the family own- on wealth to younger generations. ership stake and can lead to loss of control. To this This is still not popular among European families, end, German retailer Aldi Nord is owned by a family which tend to carry on family tradition in business. foundation, which pays dividends to the benefi ciaries. There are, however, exceptions. As an example, no The purpose of the foundation is to keep the company descendants of Otto Beisheim, the founder of the intact and prevent it from being split apart by diff erent retailer Metro AG, are involved in the management of branches of the family. the company or hold ownership shares. A 9.1% stake in the retailer is held by the two Otto Beisheim founda- tions in Germany and Switzerland. However, for the majority of European business fortunes, the challenge has been to grow the companies, often while facing ownership claims of tens and some- times hundreds of descendants of the original founders.

Sustaining a fortune for 25 years—and in many cases much longer—is an achievement in itself. Some industries or individual circumstances have presented some of these wealth creators with tough choices. In many cases, these dilemmas were not of their making. They inherited family fortunes and fought hard for their legacies. They not only kept these fortunes going for many years, but also made a mark—on their companies, families, industries or countries. Here are the top ﬁ ve notable achievers from among the European “survivors” whose fortunes were present on the Forbes Billionaires list 25 years ago:

JOHN ELKANN The automobile industry is dominated by family-controlled fi rms—espe- for transformation of Fiat cially in Europe. The Peugeots at PSA/Peugeot-Citroen, the Piechs at Porsche and Volkswagen, the Quandts at BMW and the Agnellis at Fiat-Chrysler are all examples of how family control can bring long-term stability to businesses, especially cyclical ones like the car industry. Of these families, Agnelli heir John Elkann has stood out for his skill at snatching Fiat from near-oblivion in 2004, and for his strategic vision of building Fiat from an Italian player into a global competitor with its risky investment in Chrysler in 2009. (As of this writing, a deal had been announced for Fiat to acquire the remaining shares.) The Agnelli family has been able to remain at the forefront of the car industry 115 years after founding Fiat because Elkann’s great-great-grandfather Giovanni Agnelli had the foresight to decide in the late 1920s that control of the company should be passed along to a single heir. This simple insight saved the company from the type of dynastic infi ghting that was on display at Peugeot in late January 2014, when the family was split over whether to sell part of its stake to Chinese and the French government, or to issue new capital. Elkann, 37, was named vice chairman of the carmaker 10 years ago, when it was nearly bankrupt. His formative years were spent studying engineering in Turin, with a front-row seat to watch Fiat’s slow collapse. The experience impacted him deeply, he has said. Fiat has been able to compete with larger and deeper-pocketed rivals because of two key insights from Elkann. His “aha” moment was the fi nancial crisis of 2008, when he realized that Fiat would need a transformational partnership to survive. Elkann sensed that the family had to risk losing control of Fiat in order to transform it from a European to a global player. It helped, of course, that Fiat Chief Executive Offi cer Sergio Marchionne already had one turnaround under his belt and was confi dent he could make the unlikely partnership work. Elkann’s vision is unpopular in Italy. But it has safeguarded the future of the company. Elkann also streamlined the corporate structure of Exor, the Milan-listed family holding company that controls Fiat. As a result, the value of the family’s stake has tripled in the past 10 years.

14 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE INGVAR KAMPRAD It is not an exaggeration to say that IKEA changed the way we shop for fur- for the retail niture and how we live. It has clearly delivered on its mission of democratic revolution that is IKEA design—allowing the not so rich to enjoy high-quality design. Started by Ingvar Kamprad in 1943 in a small village in a poor region of Sweden, IKEA is now present in 43 countries. According to Forbes: “At age 86 Kamprad’s great love remains IKEA and the culture he built that made IKEA one of the world’s most successful brands and retailers. Known for his relentless pursuit of effi ciency, Kamprad introduced the fl at-pack in 1953, moved production to Soviet Poland in 1961 to minimize labor costs and publishes the Furniture Dealer’s Testament or the ‘IKEA Bible,’ which includes maxims such as ‘wasting resources is a mortal sin at IKEA.’” When Kamprad irrevocably transferred the majority of his economic stake in global furniture retailer IKEA to entities beyond his economic control and benefi t decades ago, later selling them the balance, his net worth took a drastic slide, according to Forbes.com. That may have been a thrifty approach to han- dling taxes or as the company says the wish to “create an ownership structure that stands for independence and a long-term approach.” The profi ts can only be reinvested, used for charitable purposes through the IKEA Foundation or kept as a fi nancial reserve for future investments in the business. But with the exception of his winery in Provence, Kamprad has historically shown little interest in the trappings of wealth anyway. He reportedly drives a Volvo 240 GL he has owned for over two decades. Were it not for the ownership structure of his holdings, his wealth would have made him the richest person in Europe.

LUDWIG MERCKLE* Germany’s Ludwig Merckle inherited a debt-plagued fortune from his for restoring his father, billionaire Adolf Merckle, and has executed an impressive turnaround. father’s legacy His most valuable holding is pharmaceutical distributor Phoenix, one of Europe’s largest. His father Adolf committed suicide in early 2009 at age 74. Though hardly known in Europe or even within Germany, Adolf Merckle was once one of Germany’s wealthiest men. In 2007 Forbes pegged his fortune at $12.8 billion. Merckle’s grandfather founded the company in 1881. His father took over in 1915, and Adolf Merckle in 1967. Merckle’s holding company, VEM, included pharmaceuticals, machinery and cement companies. At the time of his death, it had billions in debt and was seeking bridge loans to give it time to restructure. Ludwig took over his father’s VEM Holding in mid-2009 and resumed restructuring. He began selling assets to pay off debt. In the fall of 2009 he signifi cantly cut his stake in HeidelbergCement. The following year he sold generic drug maker Ratiopharm to Teva Pharmaceuticals for $5 billion. Ludwig still owns snowcat maker Kaessbohrer and drug wholesaler Phoenix, which had to borrow heavily to stay in business but is now paying down its debt. Today, Ludwig Merckle is back on the list with a net worth of $7.4 billion.

*15-year survivor.

COPYRIGHT © 2014 FORBES INSIGHTS | 15 LILIANE BETTENCOURT The Bettencourt family fortune, based on a more than 30% stake in L’Oreal, AND FAMILY is today worth more than $30 billion. This makes the family members the high- for the biggest gain over est gainers among all Western Europeans who were on the Forbes Billionaires list in 1989. the last quarter-century At age 91, Liliane Bettencourt is the world’s richest woman, and has returned to the richest 10 people in the world for the fi rst time since 1999. Her and her family’s fortunes benefi ted from the recent runup in L’Oreal’s stock, which is up by 15% over the last 12 months. Her father, Eugène Schueller, built a beauty empire based on a hair color dye that he developed back in 1907. Today his great-grandson Jean-Victor Meyers sits on the company’s board. From that base L’Oreal has developed into the world’s second-largest personal care manufacturer, after Procter & Gamble, according to a report from Euromonitor. Compared with its rivals, L’Oreal tends to be focused more narrowly on beauty, which has enabled the company to make more precisely targeted investments in R&D and advertising, says the same report. The company’s main strengths are its innovation capabilities and a portfolio of products in all price categories. L’Oreal has continued to add to its portfolio of products through acquisi- tions, even during the recent European fi scal crisis. For example, in 2012 it bought Urban Decay, a California-based beauty brand, which appeals to edgy yet affl uent younger women. The company has also expanded aggressively in emerging markets, including Asia and Latin America. In China, L’Oreal has been growing by double digits. In January 2014, the company announced it is acquiring Magic Holdings International Limited, a specialist in cosmetic facial masks, which is listed on the Hong Kong Stock Exchange. News about L’Oreal stock can be expected in April 2014, when the two major shareholders, the Bettencourt family and Nestlé, currently the second-largest shareholder in the company, will no longer have fi rst refusal on each other’s stakes. According to Nestlé, “The principal terms [of the agree- ment between Nestlé and the Bettencourt family] are that the Parties cannot increase their stake in L’Oréal during the lifetime of Mrs. Liliane Bettencourt and six months after that. As of April 29, 2009, the Parties are free to sell their shares, each of them having conceded the other a fi rst right of refusal until April 29, 2014. After that date, the Parties are free to off er the shares to any third party.”

16 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE DAVID SAINSBURY Lord David Sainsbury of Turville inherited a stake in Sainsbury’s, one of for contributions in the UK’s largest supermarket chains. He served as chairman and CEO but politics and economics withdrew in 1998 when he was appointed to the government. It is his work in government as minister of science and innovation, as well as his contributions to economic thinking that followed, that earns him a spot on Forbes Insights’ Notable Achievers list. “He [Sainsbury] has earned the respect of the science and engineering community by showing real interest in our work and presiding over unprecedented increases in the science budget,” according to Peter Cotgreave, director of the Campaign for Science and Engineering. That was not Sainsbury’s fi rst nod to science. In 1987, he established the Sainsbury Management Fellowship Society to prepare engineers from the UK to become eff ective C-level executives and corporate leaders. The program provides $472,000 in MBA scholarships to young, qualifi ed engineers in the UK. After eight years in government, Sainsbury wrote “Race to the Top,” in which he concludes that “the best way for the UK to compete, in an era of glo- balisation, is to move into high-value goods, services and industries.” He also calls for a major campaign to improve science, technology, engineering and mathematics teaching in schools, support for early-stage technology companies and more government focus on regulations to encourage innovation. Sainsbury’s view of government is not that it should be big or small, but that it should be smart. He presents his views in his book Progressive Capitalism, published in 2013. “David Sainsbury’s thoughtful manifesto for a progressive capitalism draws on his experience in both business and government to off er an alternative political economy to that of the dominant, and dominat- ing, neo-liberalism of recent decades,” according to Joseph Stiglitz, the Nobel Prize-winning economist.

DR. STEPHAN SCHMIDHEINY

Stephan Schmidheiny is a Swiss industrialist turned philanthropist and environmentalist. Forbes estimates his net worth at $3 billion. In 1976 Schmidheiny became president of the board of his father’s Swiss Eternit Group, a construction materials manufacturer, diversifying the company away from asbestos long before it was a banned substance. Since February 2012, he has been appealing a guilty verdict in a lengthy criminal trial related to alleged asbestos-related illnesses in a company associated with Schmidheiny’s Swiss Eternit Group. (Eternit Italia was a public company, and Schmidheiny’s Swiss Group was the biggest single shareholder for a couple of years within the 80-year history of Eternit Italia.) In 2003, Schmidheiny donated all shares of his forestry ﬁ rm Grupo Nueva, worth $1 billion, to his Viva Trust, whose proﬁ ts are used to promote causes like sustainability and education. Schmidheiny is an art collector who favors contemporary painters Richter and Warhol.

Forbes Insights: You are one of the long-lived for- One of the common features of European fortunes tunes—with family descendants present on the that have thrived for a quarter of a century or more Forbes Billionaires list in 1989 and present today as is that they are mostly family-owned. Has family leg- well. What is the secret of your success? acy/ownership played a role in your success as well? How so? Schmidheiny: Our family has traditionally and over generations adopted a long-term view. Our endeav- Family ownership of a company means more than a ors have not been about short-term income but rather legal title to wealth. It is a form of life, one that is de- about long-term capital formation and preservation ﬁ ned by passionate dedication to a task and by one’s of wealth. A relatively thrifty lifestyle and a sense of personal fortunes being intertwined with those of the responsibility to the community have helped to pre- business. In our case the family ownership has deﬁ - serve and increase the family wealth over good and nitely and substantially contributed to the success of bad times. Also, keeping controlling ownership of the our business. business in the hands of those who actually manage it has helped to avoid some of the problems of broader family ownership.

18 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE “My personal leitmotiv has always been: respect the successful traditions of the past, but let the better be the enemy of the good!”

Do you feel that having/managing a fortune for so business strategies and practices respecting their so- many years is an advantage or disadvantage? In other cial and natural environment. Also, I donated my Lat- words, how does having resources, inheritance and tra- in American holdings to the Viva Trust to establish a dition weigh against newness and starting a business working model of the vision of sustainable develop- without much capital or help from outside resources? ment, both at the business and the philanthropy levels.

Creating something new is often seen as destroying the What are the biggest challenges of being part of a existing. Family values are about avoiding destruction. vast fortune in areas outside of business? Thus, combining the virtues of a conservative approach to business with an open-minded, creative and innova- Passing family ownership from one generation on to tive spirit is one of the most complex challenges facing the next is always a very critical point. Apart from the privately owned companies. My personal leitmotiv has tax burden, which may be very substantial and may in- always been: respect the successful traditions of the deed jeopardize continuity of private ownership, there past, but let the better be the enemy of the good! are issues of governance—how to move from a one- entrepreneur command structure to a broader gover- Many of the European long-lived fortunes have been nance—and frequently also issues of values that inevi- visionary in terms of entering new areas of business or tably change when the world around you experiences forming interesting joint ventures. What are the exam- profound changes. Also, the burden of responsibility ples of the visionary aspects of your fortune/business? of an owner-manager at the top is a state of mind that one can only experience over time to fi nd out wheth- My case has been extreme in this respect, because the er one feels comfortable and confi dent carrying this business I inherited from my father involved the use weight on one’s shoulders. of asbestos. Very early on it became clear to me that, while at the time controlled, safe use of asbestos ap- Is Europe, as compared with other parts of the world, peared to be possible and was regulated in developed a good place for wealth creators? countries, this was not going to be the basis for my future business. Thus, I embarked on a far-reaching di- I think Europe has a solidly established tradition of versifi cation program and got involved, for example, in creating and conserving wealth. This is a cultural issue the rescue of the Swatch company, the merger of ABB, in our genes and part of our upbringing and educa- the Leica company and extensive forestry operations tion. The legal and regulatory framework for business in Latin America. generally has refl ected this, for example, in the way privately owned businesses and their inheritance are What are examples of such visionary activities outside treated. Only in the recent past have U.S.-style short- the business areas? term-oriented and consumption-driven patterns of business conduct taken root in Europe; it remains to From my forebears I inherited not only business owner- be seen what this means for the future of European ship but also the inherent sense of responsibility. In this family companies. spirit I founded the World Business Council for Sustain- able Development and coined the term eco-effi ciency to motivate business leaders at a global scale to adopt Interview conducted by Tatiana Serafi n

The longevity of Western European and emerging European fortunes is not comparable. Some of the Western fortunes date back hundreds of years. Emerging European fortunes, on the other hand, have been accumulated starting in the early 1980s in Turkey, and then in the early 1990s in Russia and other Eastern and Central European countries, as free markets spread across these regions. Research for this section is based on the Rich Lists compiled by local-language editions of Forbes based in European emerging markets. Such lists have been compiled for several years by Forbes Poland, Forbes Russia, Forbes Romania and Forbes Ukraine.

The late Forbes Russia editor, Paul Klebnikov, wrote in 2004, upon the publication of the fi rst Forbes Russia Rich List, of the RUSSIARUSSIA phenomenon of inheritance Russian-style: “Though Russia emerged from communism just 13 years ago and therefore one Survival rate can’t speak of any inherited family fortunes, most of the members of the Forbes Russia 100 inherited natural resources and enterprises from a whole country: the Soviet Union. This kind of 38% inheritance forms the basis of the net worth of 66 members of our [2004] list. Only 34 individuals made their fortunes by starting Aggregate change in the some fundamentally new business—mostly in the telecommuni- wealth of the Richest 100 cations sector, construction, food and beverage production or the 2004: $140 billion creation of retail chains. The scarcity of new sources of wealth in Russia indicates to what an extent the Russian economy still 2013: $417 billion relies on the achievements of the past.” Increase: 200% It seems safe to be on top. Of the original top 10 Russian billionaires in 2004, all are business survivors except for Mikhail Khodorkovsky. Russian billionaires are now at a stage when they The richest person are transforming their Soviet family legacy into a real family 2004: $15.2 billion legacy. One such Russian billionaire focused on passing on his wealth is Vagit Alekperov, from the original top 10. He heads 2013: $17.6 billion Lukoil, Russia’s largest independent energy company. In 2013 he Increase: 16% willed his stake in Lukoil, nearly 21%, to his only son, Yusuf, with the caveat that his son will not have the right to sell this stake, so that Alekperov’s family will remain Lukoil’s biggest shareholder.

20 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE Despite Ukraine’s sluggish growth since the 2008 global ﬁ nancial crisis, which plunged the country’s economy into a downward spiral, Ukraine’s wealthiest have managed to hold on to their wealth while consolidating assets as government privatization continues

Despite Ukraine’s sluggish growth since the 2008 global fi nancial crisis, which plunged the country’s economy into a UKRAINE downward spiral, Ukraine’s wealthiest have managed to hold on to their wealth while consolidating assets as government Survival rate privatization continues (e.g., coal mines were privatized in the latter half of 2013). This speaks to the underlying strength of Ukraine’s base—after Russia, Ukraine was the most important 87% economic component of the former Soviet Union. Ukraine’s economy has been struggling since the global fi nancial crisis in Aggregate change in the 2008, which is refl ected in the relatively fl at fortunes tracked by wealth of the Richest 100 Forbes Ukraine during 2011-2013. 2011: $56 billion 2013: $55 billion Decrease: 2%

The richest person 2005: $2.4 billion 2013: $15.4 billion Increase: 542%

POLAND Forbes Poland fi rst published a list of the 100 richest Poles in 2006. All of the original top 10 from 2006 are survivors, while nine of the bottom 10 are gone. This indicates that the Survival rate longer the business is in operation, the higher the probabil- ity that it will continue. Even more so in that many of these 77% original top 10 started their business before 1989, the year of the fall of communism in Poland. Though they ran very small Aggregate change in the companies, they were entrepreneurial, and they were ready to wealth of the Richest 100 go big when free markets were introduced. As noted in the 2013 Forbes Insights/Societe Generale 2006: $19 billion wealth report, it is easier to become a billionaire in an emerg- 2013: $30 billion ing market than to create or manage a large global company. It is even more diffi cult to create an internationally recog- Increase: 58% nized brand. Polish entrepreneur Adam Goral, founder of Asseco, achieved just that by creating proprietary enterprise The richest person software. While it’s not the type of name that is recognized as a consumer brand, having a proprietary product recognized 2006: $2 billion by corporations is an equally solid foundation for a lasting 2013: $3.5 billion business. (See interview on page 24.) Increase: 75%

22 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE Forbes Romania’s fi rst Rich List of the 500 richest Romanians dates back to 2009. Of the 500 enlisted in 2009, 374 of them are ROMANIA also in the 2013 list, a 75% survival rate. In 2009 the aggregate worth of all fortunes of the 500 richest Survival rate Romanians amounted to $39 billion. As of 2013 they were worth about $27 billion, or a 31% drop. In 2009, the average fortune was $78 million, and in 2013, the average was $54 million. 75% This slide is due to a slow emergence from the global reces- sion, and a 2013 that Adriana Halpert, former editor of Forbes Aggregate change in the Romania, refers to as a year of “total disappointment in great wealth of the Richest 500 expectations.” The fi nancial crisis is still putting pressure on access to fi nancing for Romanian companies. They also face tax 2009: $39 billion burdens and a lack of predictability in governmental decisions. 2013: $27 billion Decrease: 31%

The richest person 2009: $3 billion 2013: $1.5 billion Decrease: 50%

Forbes identifi ed the fi rst Czech billionaire, Petr Kellner,ellner, in 2006 with a fortune of $3 billion. Today Kellner’s fortunertune is over $10 billion. Forbes Czech Republic published its fi rstt RicRichh LisListt CZECH last year, too early for longevity analysis. The common thread among REPUBLIC the richest Czechs identifi ed by Forbes Czech Republic is that they got their start in the Czech voucher privatizations in the 1990s. Under the system, every citizen was given the opportunity to buy, for a moderate The richest person price, a book of vouchers that represented potential shares in any state- 2006: $3 billion owned company. The voucher holders could then invest their vouchers, increasing the capital base of the chosen company. This is in contrast to 2013: $10.4 billion Russian privatization, which consisted of sales of communal assets to Increase: 347% private companies rather than share-transfer to citizens. The number of the Czech Republic’s billionaires is sure to grow over time, benefi ting from the fact that the nation boasts one of the most developed industrialized economies, and is one of the most pros- perous post-communist states in Central and Eastern Europe. Now, having grown their wealth base, many of the richest Czechs are focusing on giving back. Zdenek Bakala and Andrej Babis are active politically; Babis’s ANO (Czech for Yes) Party was a close second in November’s general election, and as a result, Babis has become the fi nance minister and deputy prime minister for economic aff airs.

ADAM GORAL

Adam Goral, who has been present on the Forbes Poland Rich List from the very beginning, has built an international business from scratch. He is the founder of a software house, Asseco. Back in the late 1980s, Goral was a university informatics professor. He started Asseco in 1991, and began to expand internationally in 2004. With $1.8 billion in revenues (2012), Asseco now operates in most European countries as well as Israel, the U.S., Japan and Canada and is Europe’s sixth-largest software producer. Asseco Group companies are listed on the Warsaw Stock Exchange, the Tel Aviv Stock Exchange and on NASDAQ Global Markets.

Forbes Insights: How did you come to run your own impossible. Whereas Americans, apart from assessing business? What skills encouraged you to do that? the situation, always tried to fi nd a solution. I realized that our education, in particular during the communist Goral: I have always showed certain leadership skills period, was oriented towards unproductive criticism. that helped me attract and unite people. At the end of Hence, when free market opportunities opened up, not the 1980s, I worked as a university teacher, specializing everyone was able to fi nd their place in the new reality. in statistics, econometrics and information technology. So I had a natural interest in the IT industry, which be- I took advantage of my experience to develop Asse- gan to develop dynamically after the economic system co. When the fi rst of my employees were assigned to changed in Poland. implement software for a bank, I informed them that I did not want to hear that people at the bank were not Before you started, you visited the United States. How prepared. Information technology was a novelty, and it did it infl uence your activity? was clear that many people would not comprehend it at all. Our responsibility was to help them go through this I came to understand the diff erences between our ap- initial stage and prepare them to be able to use new proach and the American approach to problem solving. technologies. I owe such an approach to the Ameri- Back in 1991, when I was involved in a group of people cans—when they criticize something, they always say who cooperated with the representatives of American why and come up with an idea for how to change it. business and science, I noticed that we, as Poles, re- sponded to most of the questions by saying that it was

24 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE “I am proud that, despite so many changes, Poles were able to maintain great stability and today we live in a safe country, which has made huge economic progress over the last two decades.”

What were the most important points in your career? Are you ever tempted to sell your company?

One of the most important moments was the decision I have never come to think that I would like to fi nish to focus on software development. At that time the this project and sell it. I feel very responsible for a large money was earned mainly from computer hardware, group of people who believed in my idea and joined so opting for the software business was not a simple me. This building process is my true passion. choice at all. Yet this strategy works great to this day. That was the real beginning of building this company. Our country has paid a high price for its political changes. We wanted to build everything as soon as possible The next step was to show other customers that as we and opened too much for privatization. We gained for- managed to complete one project, we would also cope eign capital, but many Polish brands have become part with another 50 implementations. In this way, we have of global companies and their role has been margin- become the number one provider of IT solutions for alized. To build a strong Polish company in the global small banks. Our competitors, who started with large market will not be a matter of a few years, and that is fi nancial institutions, deliberately pushed us into this why deeply I care about the success of this project. We market. So we had to fi nd the fi rst client who would be- are becoming the leaders of a truly international group lieve that we were able to serve a medium-sized bank of companies. as well. Once we achieved that, we strived to enter the large banks market. What are the biggest challenges of being part of a vast fortune in areas outside of business? Then we decided to go international and build a power- ful IT group in the region. We wanted to take advan- We are the fi rst generation of Polish entrepreneurs af- tage of the opportunities off ered by our growing local ter the economic transformation who were given the economy and rapidly developing capital market. Con- opportunity to develop their businesses and prosper. sequently, our company conducted an IPO on the War- I am proud that, despite so many changes, Poles were saw Stock Exchange and raised the necessary capital able to maintain great stability and today we live in a to build a large organization. We are now present in 39 safe country, which has made huge economic progress countries around the world, and Poles are at the fore- over the last two decades. Perhaps because of that, be- front of this unique project. ing a public fi gure and a wealthy person is no longer anything unusual in Poland.

Interview conducted by Jacek Pochlopien

Where is the momentum in the world in terms of wealth creation? Forbes Insights analyzed the newcomers to the Forbes Billionaires lists over two years (2012 and 2013). In all, 336 new billionaires joined the list.

As the chart below shows, Europe is slightly behind to the era of privatization of state assets. One outstand- the Americas and Asia-Pacifi c in terms of current for- ing example of a new billionaire who made his fortune tune creation. Within Europe, the momentum seems to independently is Russia’s Arkady Volozh, founder of be on the side of Western Europe, which has generated search engine Yandex, Russia’s Google. Another exam- 17% of all new fortunes over two years, as compared ple, in Turkey, is that of Hamdi Ulukaya, the founder with 9% generated in emerging Europe. of Chobani Inc., the maker of Chobani Greek yogurt. But the question remains—how “new” are these European families have mastered the art of keeping new European fortunes? successful companies going for generations, and much Detailed analysis of the 56 newcomer fortunes from of the newest crop of fortunes from the region shows Western Europe shows that few of them have been that this phenomenon goes on. But does Western started recently, are fi rst generation, result from new Europe also need another type of entrepreneur—one industries such as technology or, in the case of some for- independent of family ties and going beyond the tra- tunes in emerging Europe, are free of ties to previously ditional area of being the world’s tastemaker? Will state-owned assets. While the lack of these attributes emerging Europe continue to generate momentum is not a negative per se, they do point to the fact that once the wave of fortunes based on post-privatization business is done more or less the way it has always been deals has played out? done, with relatively little dynamic change. Among the newest fortunes created in Western Europe, just under half are actually fi rst generation. The Figure 12. Where have most of the newest majority of the fortunes that are new to the Billionaires fortunes been created? list were started a couple of generations ago, and the new additions to the list are family members achiev- ing billionaire status based on these older businesses. The Americas In some cases, this is the fi rst time that the holdings 35% of some very old businesses are becoming public. For Americas (without U.S) U.S. example, France’s Nicolas Puech, an eighth-generation 17% 18% descendant of Thierry Hermès, founder of Hermès, joined the Hermès supervisory board in 2012, which Asia-Pacific resulted in the company’s making public Puech’s hold- 34% ing of 6 million shares in its annual report. Among some of the truly “new” Western European Europe billionaires is Claude Dauphin, chairman of commodi- 26% ties trader Trafi gura Beheer BV. It is also interesting Western Europe Emerging Europe that many of these new billionaire fortunes, such as 17% 9% those of Domenico Dolce and Stefano Gabbana, the founders of Dolce & Gabbana, or Renzo Rosso, the MENA founder of Diesel, are in fashion, a traditional area of 5% European strength. The majority of new fortunes from emerging Europe, which are mostly from Russia and Turkey, are fi rst generation. Some of them, however, still hark back

26 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE METHODOLOGY

The information in this study is based on an exclusive analysis of ultra high net worth individuals in Europe conducted by Forbes Insights, as well as interviews with European industrialists and experts on European wealth creation. The analysis involved the study of Forbes Billionaires data collected over the last 25 years. Also analyzed was data from the Rich Lists created by Forbes Russia, Forbes Ukraine, Forbes Poland, Forbes Romania, Forbes Czech Republic and Forbes Turkey.

EXPERTS

Jennifer Clark, author, Mondo Agnelli: FIAT, Chrysler and the Power of Dynasty, John Wiley & Sons, 2012 Burcak Guven, editor, Forbes Turkey Adriana Halpert, former editor in chief, Forbes Romania Maxim Kashulinsky, CEO, Slon.ru, Russia Luisa Kroll, senior editor (wealth), Forbes magazine Caleb Melby, Forbes wealth analyst Claire O’Connor, staff writer, Forbes magazine Tatiana Seraﬁ n, Forbes wealth analyst Jacek Pochlopien, deputy editor, Forbes Poland Katya Soldak, editorial director international editions, Forbes Andrew Tanner, fellow, department of government, Harvard University Christina Von Zeppelin, wealth analyst

Figure 13. Average fortune size growth over the last 25 years

REGION Average Average Percentage fortune size fortune size increase in 1989 (bil) in 2013 (bil) The Americas (excl. U.S.) $2.3 $4.4 91% Asia-Pacific $2.1 $3.0 43% Europe $1.6 $4.0 150% Middle East & Africa $1.3 $3.4 162% U.S. $1.8 $4.2 133%

Figure 14. How many European fortunes now come from emerging Europe, in terms of number of fortunes, aggregate fortune size and average fortune size (in absolute terms and percentage-wise)?

COUNTRY Number of fortunes, Aggregate Average and share of wealth (bil) and fortune European fortunes share of Europe size (bil) Czech Republic 4 (1%) $15 (1%) $3.7 Georgia 1 (0.2%) $5.3 (3%) $5.3 Poland 4 (1%) $9.8 (0.6%) $2.5 Romania 1 (0.2%) $1.1 (0.06%) $ 1 .1 Russia 110 (27%) $427 (27%) $3.9 Turkey 43 (11%) $74 (5%) $1.7 Ukraine 10 (2%) $32 (2%) $3.2

28 | BEHIND THE STAYING POWER OF WEALTH CREATION IN EUROPE ABOUT FORBES INSIGHTS

Forbes Insights is the strategic research and thought leadership practice of Forbes Media, publisher of Forbes magazine and Forbes.com, whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management.

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