Does wealth make us rich anymore: Resolution
The End of an Era?
Wealth isn’t what it was. This UNLIMITED series has underlined that concepts of wealth are changing for individuals, governments, and even companies. A focus on the acquisition of material and financial possessions is gradually giving way to a broader vision of what it means to be rich.
UBS is adjusting to this. More of our clients are aware that their investments can make the world a better place, as well as providing sustainable returns. This is something we are committed to encouraging. Earlier this year UBS raised USD 471 million for a fund geared towards innovative cancer treatments, the largest such vehicle in the healthcare sector. Our Global Visionaries initiative puts investors in touch with social entrepreneurs who are addressing pressing global problems. These include individuals like Shaffi Mather, founder of MUrgency, an ambulance company plugging the often fatal gap in India’s emergency care system. It has transported around 6 million people to hospital since it was founded in 2004.
This approach to wealth brings to mind the ancient Greek concept of eudemonia, which has been loosely translated as a fulfilling and purposeful life.
A shift back to this ancient idea is particularly evident among the younger generation. Almost nine in ten millennials believe that wealth is about something other than material possession, according to research commissioned for this project. Most strikingly, a life of fulfilling experiences is a clear priority. Over a third consider this to be the closest embodiment of a wealthy lifestyle. This attitude is embodied in the UNLIMITED interview with polar explorer Ben Saunders, who says he feels wealthiest when reflecting on his expeditions.
Even from a more traditional perspective, as individuals the ties that bind us to our possessions seem to be loosening. The sharing economy is making it possible to own less and still experience a lot – whether by renting apartments by the night or cars by the hour. CD and DVD collections have given way to monthly subscriptions. The appeal of renting is even being felt at the top end of the income scale. In London, the number of luxury houses for rent — those valued at over GBP 10 million – has doubled since 2011, according to estate agency Knight Frank. So over coming years we may see further evidence that developed nations have hit ‘peak stuff’ – a plateau in the volume of material goods bought and sold.
For companies too, the composition of wealth is in flux.
As with individuals, the need for physical assets has been declining and may well continue to do so. More of the titans of the stock markets are now low capital intensive firms. Uber has swiftly become the world’s largest transport company and yet owns no cars. WhatsApp had just 55 employees when it was purchased by Facebook for around USD 19 billion. Meanwhile, a rising share of a company’s wealth is tied up in its brands and reputation. The potential loss of value from corporate malfeasance is on the rise, as was illustrated by the slide in Volkswagen shares in 2015 following allegations that it had been evading emissions tests. By contrast, there is evidence that firms that embrace strong corporate governance and diversity create more value. To take just one example, companies that have at least two women at board level or where at least 20% of top executives are female, outperformed the MSCI World index by around 2% a year between 2011 and 2015, based on recent UBS research.
Finally, even governments are starting to take a broader approach to wealth. For example, the value of ecological assets is coming to be more widely appreciated. Peculiar as it may seem, placing a price tag on natural assets can provide an impetus to preserve them. It is estimated that farmers worldwide get USD 190 billion a year of ‘free’ service from pollinating bees, based on what it might cost to pollinate fruits by hand. And India realized too late that its vultures were worth about USD 30 billion. After their population was decimated by agricultural chemicals an excess of rotting animal carcasses around the country caused an explosion of the dog population followed by a costly surge in rabies, as recounted by Tony Juniper in his book “What has Nature Ever Done for Us? “. A full realization of the value of ecological wealth could prove crucial in protecting our natural riches.
And it is not just the remote state of Bhutan that has started to view life satisfaction as a credible policy goal. France and the UK have also started collecting data on wellbeing. The United Arab Emirates’ recently appointed minister of happiness said that “the role of government is to create an environment where people can flourish, reach their potential, and choose to be happy.” This is no easy task for governments accustomed to pursuing easily quantifiable goals, such as strong economic growth or low unemployment. But it is more in line with the common Millennial vision of a life rich in opportunity and experiences. We could well see more governments defining national wealth in a different way over coming years.
At UBS our goal is to protect and expand wealth across generations.
To do so, it is no longer sufficient to simply focus on markets and financial data. Managing wealth is fast becoming more than just money. What we now deem valuable encompasses altruism, connections, experience and legacy. It is crucial that we anticipate this changing nature of wealth.