What the richest Americans all have in common

Matthew DiLallo, The Motley Fool | The Motley Fool

Show Caption Hide Caption What the richest Americans all have in common There are now 513 billionaires in America, according to Forbes, and it's just one of the many signs that the rich just keep getting richer.

There are 513 billionaires in America, according to Forbes, though only 400 of those make its annual list of the richest Americans. It's just one of the many signs that the rich just keep getting richer. In fact, the wealth of the top 400 richest Americans totaled an astounding $2.29 trillion last year, which is $270 billion higher than the year before. Meanwhile, the average member of that list has a net worth of $5.7 billion, which is $700 million more than the previous year. Suffice it to say, the richest Americans are better off than they have ever been.

Strangely familiar stories

Driving their staggering net worth is one undeniably common trait. They each own business assets that have become "compounding machines," as Warren Buffett likes to call them. Some of them started these businesses themselves, while others inherited or acquired their wealth creating businesses. What is clear from looking over the list is that no one on the list became a billionaire by being a salaried employee, unless of course that salary carried with it copious stock options giving them an outsized ownership stake in the business.

One place where we see that is at Microsoft(NASDAQ:MSFT). Founded in 1975 by Bill Gates and Paul Allen, the company turned Gates into the richest man in the world.However, it also made billionaires out of Allen and longtime CEO Steve Ballmer, who joined the company in 1980 as employee No. 30. He's one of the few of the elite who became wealthy as an employee. However, his wealth stems from his large ownership interest in the company -- granted to him via stock options -- as he is now the largest shareholder after Gates pared down much of his stake over the years to diversify his holdings and give money away to charity. Over the years Microsoft has been a wealth-making machine for its owners, as it has not only made Gates, Allen, and Ballmer billionaires, but it has also produced 12,000 millionaires out of employees who received large stock option grants over the years.

It isn't the only tech giant that has blessed the richest Americans with an abundance of wealth, as three other tech founders -- Oracle's (NYSE:ORCL) Larry Ellison, Amazon.com's (NASDAQ:AMZN) Jeff Bezos, and Facebook's (NASDAQ:FB) Mark Zuckerberg -- are among the top 10 richest Americans. That said, founding a tech company isn't the only path to the top, as Buffett turned a struggling textile company into the insurance, energy, and railroad powerhouse Berkshire Hathaway(NYSE:BRK-A)(NYSE:BRK-B), while the Koch Brothers turned an equally disparate group of businesses owned through their inherited Koch Industries into a wealth-compounding machine.

What's interesting is that if one goes through Forbes' list of the richest Americans, they'll find individuals who made billions on all types of businesses. Many made vast wealth off rather unexciting businesses, including candy, self-storage, beer, tires, plumbing products, real estate, and cheese. Some made their billions by starting these companies from scratch, while others took their family's business to another level. Others bought into great businesses and held on for years.

On the other hand, what isn't found on the list are people who made billions working a 9-to-5 job. Neither are there any on the list who won the lottery or made a killing in Vegas. That's because those earnings will never compound like the earnings from owning a stake in a great business will over time. Instead, more often than not, these earnings are typically spent instead of invested to grow wealth.

What we can learn from the richest Americans

There are two very clear lessons to be learned from the richest Americans. First, the net worth of America's wealthy is directly related to the assets they own and not the salary they collect. The elite might use their earnings to buy fancy cars, nice houses, and art collections, but the bulk of their wealth is derived from owning business assets that have compounded its value for years. The second lesson is that these individuals held these assets for years. While some do buy and sell businesses quite regularly, the top of the top-tier elite have owned their compounding machines for years and have no plans to let it go.

The takeaway for those who would like to have a higher net worth is clear: Either become an entrepreneur and start a business in hopes of joining the elite, or buy a stake in great businesses started by others. Both carry a lot of risk, as 80% of new businesses fail within the first 18 months, while the economy and the stock market can be volatile and burn investors. However, with great risks can come great rewards.

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Matt DiLallo and The Motley Fool own shares of, and The Motley Fool recommends, Amazon.com and Facebook. Matt also has the following options: long January 2017 $135 calls on Berkshire Hathaway and short January 2017 $145 calls on Berkshire Hathaway. Finally, The Motley Fool recommends Berkshire Hathaway and owns shares of and Oracle. Needless to say, we like the stocks that made the richest Americans rich. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. The Motley Fool has a disclosure policy.

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