Elon Musk is one of those visionary entrepreneurs who always manages to surprise people. He is the mastermind behind Tesla and SpaceX, among other very innovative firms. His net worth has increased considerably during the last years, boosted by the outstanding performance of his companies. Although he is projected to possibly become the world’s first trillionaire in 2027, that could be called an ambitious goal only if several factors come into play, such as market conditions and further growth of businesses.
Musk’s wealth story is nothing short of fantastic. At the start of 2020, his net worth was $28.5 billion, while towards the end of the year, that figure surged to $167 billion, and by September 2024, his fortune grew even further to an estimated $265 billion. The most decisive factor of this incomparable growth has been the meteoric rise of Tesla’s stock. Starting in 2020, shares of Tesla traded at roughly $30 per share, surging to near $300 a year later in January 2021, ballooning Musk’s fortune.
And, of course, Tesla’s standing in the EV market, together with its phenomenal performance during the pandemic, saw this explosion of wealth reach critical mass. With Tesla being a potential trillion-dollar company soon enough, along with Musk’s other ventures such as SpaceX and Neuralink becoming ever so clear to the investor spectrum, his path to trillionaire status has turned more realistic, arguably than ever.
Musk’s wealth growth is a function of broader economic principles that explain why the rich often get richer. There is exponential growth through investments. The rich, like Musk, invest in high-growth assets such as stocks and venture capital, which show returns on returns. Middle-income households typically invest in slower-growing assets like real-estate.
The other critical factor is one of long-term financial planning. Billionaires tend to think ahead and allow their investments to mature in time, reaping monstrous rewards. They have various streams driving them forward, be it through bonuses, stock options, or business profits. The rich also benefit from tax efficiencies, as usually their investments open doors for them to minimize taxable income, retaining more of their earnings.
As American Enterprise Institute economic policy analyst James Pethokoukis explained, “If you look at the richest Americans, like Musk or Jeff Bezos, they grow wealthy because they start a company that produces something people want. These companies continue to grow, and so does their wealth.”.
A closer look at the wealth gap reveals that billionaires like Musk have a plethora of advantages over middle-income households, and these advantages are primarily investment-based. In fact, according to Federal Reserve data as of mid-2024, 50% of all U.S. stocks are held by the wealthiest 1%, while the bottom 50% hold a paltry 1%. The massive growth in market booms witnessed in stock investments further widens the wealth gap.
John Sabelhaus, fellow at the Brookings Institution: “Wealth inequality is greatly determined by asset prices. Wealth concentration will grow with a rising stock market.”.
Apart from the role of technological change, tax policy is another driving force for the growth in wealth inequality. Loopholes and investment strategies ensure that the ultra-wealthy pay an overall low tax rate compared with middle-income earners. Most Americans generate income from traditional wages, but billionaires like Musk often draw compensation through bonuses and stock options, which are not taxed at the same rate as regular income.
Sabelhaus writes, “Changes in tax policy over the past quarter-century have made it much easier for the wealthy to avoid paying taxes. It’s not as simple as their income comes in the form of a paycheck, and much of it never shows up as taxable income.
Musk’s wealth is also a product of complicated pay deals, often rejecting simple salaries in favor of performance-related rewards. The deals prevent Musk from having higher and increasing tax rates when in the form of stock that would buoy his wealth.
Still, Musk embodies the combination of innovation, strategic investment, and tax efficiency that has powered the astronomical growth of today’s ultra-wealthy. As Musk continues to push boundaries with technology and entrepreneurship, it might be a case of when, not if, he becomes the world’s first trillionaire by 2027.
