Lars has stumbled upon a shortcut method for studying how the rich get rich. With 2012 being such a good year for making tax-saving gifts, he has early in the year made a list of 32 clients he'll follow up with specially. They are candidates for making large gifts and therefore rich people. It might not be a perfect sample for his new study, but it's a sample. He is Lars-type excited to test his real estate hypothesis, and learn other things. His initial tally is supportive: 17 of the 32 have mostly real estate.
Of the 17, he finds four especially interesting: a lawyer, a physician, and a two CPAs each of whom started out in those fields, began buying real estate, and used their professional incomes to feed it and keep buying more. Three of the four actually kept their hourly jobs for decades. Lars wonders: how do people have the energy to do this? He feels pretty consumed by his CPA practice and family life.
He sees that another 11 of the 32 have made their money on what he calls "business": things like banking, wholesaling, insurance, and employee stock options. A few of the 32 are just plain hard to characterize.
What is the nature of real estate success? One finding is that very few of Lars's 17 inherited much. How about the relative success of residential and commercial real estate? It's pretty evenly balanced in this group, with maybe a slight tilt to the residential. Within the residential category, there is more multi-family (apartments) than homebuilding. Residential seems to Lars a little more of a sure thing than office space: commerce ebbs and flows, but we all need a place to live. But that's beyond this study, at least so far.
Among the business successes, it is mostly local, with few current or former execs of big companies. This is probably because Lars lives and works in a medium-sized city that doesn't have many national or even regional corporate headquarters. Lars is amazed to read of the annual incomes of big-company execs; that's a different league.
As he found in the real estate group, there is again little inherited wealth among his rich business owners. A few of them took over a small business from a parent and made it much bigger; Lars doesn't really consider this inherited wealth. He probably would have guessed that more wealthy people got it from their families; almost all his 32 are self-made. He wants to give a little more thought to this.