How does Forbes calculate the net worth of billionaires for its list?
There is a lot of buzz when world’s top billionaires bump each other in the Forbes list of World’s Richest Billionaires. The most recent buzz came last month when Amazon CEO Jeff Bezos overtook Microsoft’s Bill Gates to become the richest man on earth with a net worth(NW) of $112 billion. There are people who joined the list many years ago and forgot to leave. There are also newcomers every month. They lose millions and billions of dollars of NW in a single day to get a new rank at the end of the day. Its the most popular list worldwide as it talks about trillions of dollars but do we know how people at Forbes actually arrive at these startling figures. Let’s find out today!
In my research, I found out that as many as 50 reporters and investigators from around 20 countries work in compiling the rankings. Their main job is to meet with the potential candidates throughout the year, along with handlers and employees, rivals, attorneys and financial advisors to know as much as they can. Not an easy job to track every move that a billionaire takes, the deals he negotiates or the painting he buys or the land he sells, as well as the causes they donate to. All these are looked upon to reach at a solid valuation of that person's listed assets.
NW is the amount of money left after you sell all your assets and pay all your debts. It simply takes us back to that basic accounting rule from Standard 11 in school which goes:
Wealth or Capital = Total (Assets - Liabilities)
So, valuation of these is the single most important task to compile the list. An individual's assets including his stakes in public and private companies, real estate, cars, horses, yachts, art, cash in hand and bank, gold and his debt are to accounted for. People do try to peek into their private balance sheets but not every billionaire is as cooperative as Donald Trump who views the list as a competition and provides unsolicited information to Forbes. It gets easy to determine values when wealth is mostly in public companies such as Microsoft, Facebook, Amazon and Berkshire Hathaway. (see a pattern there?)
Private asset value estimation takes a lot of time and efforts of reporters to go through publicly available documents. People like Vladimir Putin (who is likely the richest person in the world) are extremely hard to investigate. Expert opinions are required in such cases to reach close to an accurate net worth.
However, it’s worth noting that none of the methods discussed is foolproof or give the exact result due to hugely expensive but undisclosed holdings of people. We may get close, even very close, but may never who is the richest person on this planet.. So, chill.
