Carlos Slim is now the
richest person in the world. Congratulations, Mr Slim. In honor of the news,
let’s generalize wildly from this one datapoint.
- Slim, like the man he ousted, made the bulk of his fortune in what investment
bankers like to call TMT: technology, media, and telecommunications. Mainly
the phones. His bank is tiny, his land holdings are negligible; the overwhelming
part of his wealth is basically on paper, in the form of stock in his companies
– or, as it’s also known, future profits. You could make a billion dollars
a year for an entire working lifetime and still not become as rich as Carlos
Slim: in order to get this kind of wealth, earning money isn’t enough. You
need to build and own a company, ideally with…
- A monopoly. But while Microsoft’s monopoly was global, Slim’s monopoly is
very local – it’s basically confined to Mexico. And a very large part
of his wealth comes from his holdings in other countries or other industries,
where he has no monopoly at all.
- Is it surprising that the world’s richest person is Mexican? Yes. Mexico
is not particularly huge, nor is it off the charts in terms of inequality,
nor does it have massive oil wealth. (And insofar as it does have
oil wealth, that doesn’t seem to have helped Slim very much.) Mexico is not
a fast-growing emerging market like China, nor is it an established superpower
like the US. Really, it’s just another second-tier country, from a big-picture
geopolitical point of view.
- But what about Nafta? And Mexico’s position neighboring the US? Surely that
helped Mr Slim? Again, not really. When Slim expanded internationally, he
looked south, not north. And although he does own some manufacturing companies
which export to the US, again they’re pretty small in comparison to the rest
of his holdings. Indeed, by far the single largest portion of Slim’s wealth
can be put down to one thing:
- Prepaid, pay-as-you-go cellphones. When the rest of the world was trying
to lock everybody they could into long-term cellphone contracts, Carlos Slim
was making billions from Mexicans paying for their calls in advance. It’s
a business model which has only ever been niche in
the US, but it’s huge in Latin America, and it has made América Móvil
the envy of other cellphone companies around the world.
Which means that Carlos Slim is basically a very astute businessman.
He’s not some kind of synecdoche for the 21st Century Globalized World; he’s
just really smart, as well as (of course) lucky in terms of being in the right
place at the right time when Telmex was privatized. But Telmex alone would never
drive Slim to Number One on the global wealth chart. That position is entirely
due to América Móvil, which was Slim’s creation from day one.
Update: A loyal reader points me to a survey
by the UK telecommunications regulator, Ofcom, which says that in 2003 71% of
mobile phone users in the UK used a prepaid package, while only 26% had a monthly
contract. (The other 3% had an all-in-one package.) So pay-as-you-go seems to
be just as popular in Europe as it is in Latin America.