Understanding the Differences Between Forbes and Bloomberg Billionaires' Lists

In the world of finance and wealth tracking, Forbes and Bloomberg are among the most respected sources for billionaire rankings. However, there are notable differences in their methodologies and updates, which can lead to discrepancies in the net worth estimations they provide.

The Discrepancy in Net Worth Estimates

For example, compare the rankings of Azim Premji in the two lists:

Forbes ranks Premji at the 210th position with a net worth of $11 billion. Bloomberg, on the other hand, lists him at the 40th position with a net worth of $38.4 billion.

Similarly, for Elon Musk:

Forbes estimates his net worth at $275 billion. Bloomberg values his net worth at $288 billion.

These discrepancies highlight the complexities involved in accurately estimating the net worth of billionaires given the fluid nature of their assets and market conditions.

Methodologies and Updates

The primary difference lies in the methodology and frequency of updates between the two sources. Forbes updates its billionaire rankings on a daily basis, while Bloomberg also updates its rankings in response to changes in the share market. This difference in frequency can lead to variations in estimated net worth.

Forbes Updated Daily

Forbes updates its rankings daily, reflecting recent market changes and ensuring the most current estimates of net worth. For instance, if on a given day, Elon Musk is estimated to have a net worth of $200 billion, by the time Bloomberg updates its index, that number might have changed slightly due to market fluctuations.

Thus, when comparing Forbes and Bloomberg, it’s not uncommon to see subtle differences in net worth figures, especially for highly liquid assets like publicly traded shares.

Bloomberg - A Dynamic Measure

Bloomberg, through its Bloomberg Billionaires Index, provides a dynamic ranking of the world's richest people. Bloomberg News aims to offer the most transparent methods for calculating net worth. Each billionaire's profile includes a detailed analysis of how their wealth is calculated. The index is updated every business day at 5:30 p.m. in New York, reflecting changes in market values and economic conditions.

Publicly traded company stakes are valued using the most recent closing price, and valuations are converted to U.S. dollars at current exchange rates. For closely held companies, various methods are used, such as EBITDA multiples or price-to-earnings ratios, depending on the company's industry and size.

Methodological Differences and Transparency

While Forbes updates its rankings daily, Bloomberg takes a more comprehensive, transparent approach. Bloomberg News provides detailed breakdowns and justifications for their valuations, making their calculations more understandable to the public.

There are instances where certain assets cannot be verified, leading to exclusions from the rankings. For closely held companies, specific valuation methods are outlined in the billionaire's profile, ensuring transparency.

Bloomberg's approach also includes applying a 5% liquidity discount to most closely held companies, recognizing the potential difficulty in selling these assets quickly. Public stakes are not subject to such discounts, and in some cases, a country risk discount is applied, based on the billionaire's geographic concentrations of assets and ease of liquidation.

Conclusion

Understanding the differences between Forbes and Bloomberg’s rankings is crucial for anyone interested in tracking the wealth of the world’s billionaires. While there may be discrepancies, both sources provide valuable insights into the state of wealth and market conditions. Forbes and Bloomberg, in essence, offer two different views on the same issue, each reflecting the distinct methods and time frames involved in calculating net worth.

As you delve deeper into these rankings, remember that they are dynamic and reflect different methodologies. Forbes updates daily, capturing real-time market changes, while Bloomberg offers a more comprehensive and transparent analysis. Both sources can be invaluable for staying informed about the world's richest individuals.