The Forbes Asia-Pacific Billionaires The Average Net Worth of the billionaires and the linear law

The dominant effect of China, India, and Hong Kong Summary

For the Asia-Pacific billionaires, in general, the average net worth U decreases as the N number of billionaires increases (if we exclude Hong Kong and India, and a few countries with less than 5 billionaires). Also, the combined net worth of all the billionaires in a country increases as the number of billionaires increases, following a simple linear law, of the type y = hx + c, where x is the number of billionaires and y their combined net worth. This linear relation was also observed with the net worth data for the billionaires of the Americas (which has been discussed separately in a related article). This also means that the average net worth y/x = h + (c/x) can either increase (h > 0, c < 0) or decrease (h > 0, c > 0) as the number of billionaires increases. This explains the generally observed trend (for the Asia-Pacific region) of decreasing average net worth with increasing number of billionaires. The opposite trend is also observed and explains the data at the very low billionaire levels.

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The main purpose here is to discuss some interesting trends for the average net worth of the billionaires for the Asia-Pacific region in the Forbes 2013 Billionaires List. A mapping of the wealth of the worlds billionaires from the Forbes 2013 Billionaires List, and the detailed regional maps are now available and may be found in Refs. [1-3]. The data for the number of billionaires N in each country, from Ref. [1], and the combined net worth data for the Asia-Pacific countries, from Ref. [2] and has been compiled and presented in Table 1. The totals, 386
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billionaires with a combined net worth of $1.16 trillion agree with those given by Geromel in Ref. [2]. A detailed listing of the net worth data for the Top 10 Hong Kong billionaires is also provided below Table 1 for later discussion.

Table 1: Asia-Pacific Billionaires Net worth data

Combined net Average net Country worth, UN (or y) worth, U = y/x $, billions $, billion China 122 $262.96 $2.155 Australia 22 $73.1 $3.323 Japan 22 $68.4 $3.109 Hong Kong 39 $193.1 $4.951 Taiwan 26 $72.8 $2.800 India 55 $193.6 $3.520 Indonesia 25 $55.25 $2.210 S. Korea 24 $56.35 $2.348 Philippines 11 $39.85 $3.623 Malaysia 10 $48.75 $4.875 Singapore 10 $31.6 $3.160 Thailand 10 $38.6 $3.860 Kazakhstan 5 $9.2 $1.840 N. Zealand 3 $9.15 $3.050 Nepal 1 $1 $1.000 Vietnam 1 $1.5 $1.500 Total 386 $1155.21 $2.993 The average net worth in the row with the total is for all 386 billionaires Billionaires, N (or x)

The Top 10 Billionaires from Hong Kong

Forbes rank 8 24 26 44 98 115 145 166 233 262 Net worth, Uk 31 20.3 20 16 10.7 9.5 8 7 5.3 4.8 Combined net worth UN = $132.6 B and the average net worth U = $13.3B

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Average net worth U = y/x [$, billions]

8.0

6.0

Hong Kong

4.0

India
2.0

NZ

China Kazakhstan
0.0 0 20 40 60 80 100 120 140 160

Number of billionaires, x

Figure 1: The average net worth U of the billionaires of the Asia-Pacific region is found to decrease with increasing number of billionaires, as revealed by the falling hyperbola with the general equation y/x = A + (B/x). Quite interestingly, a graphical representation of the average net worth values from the last column in Table 1, indicates a generally down trend as illustrated in Figure 1. When the number of billionaires x becomes very large, the average net worth seems to be leveling off to the value observed for China. Clear exceptions to this overall trend are Hong Kong and India and a few countries with very low billionaire counts: Kazakhstan (5), Nepal (1), and Vietnam (1). The numerical values of the constants A and B in the mathematical equation for the (downward sloping or falling) hyperbola can be readily deduced as follows. Since y/x = A + (B/x), it follows that y = Ax + B. Hence, the graph of the combined net worth y (or UN in Table 1) versus the number of billionaires x (or N in Table 1) must be a straight line with the slope A and intercept B. This is illustrated by the graphs prepared in Figures 2 and 3.

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Combined net worth, y [$ billions]

$400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 0 20 40 60 80 100 120 140

Hong Kong

India

China

(xm , ym)

y = 2.11x +10.93 r2 = 0.975

Number of billionaires, x
Figure 2: Graphical representation of the combined net worth data for the billionaires of the Asia-Pacific countries in the 2013 Forbes list. The solid blue dot has the co-ordinates (xm , ym) the average values of x and y in the data set (with the exclusions noted). The straight line here is the best-fit line determined using linear regression analysis (method of least squares). This bestfit line always passes through the point (xm , ym); see Refs. [8,9] for a worked example which shows how to calculate the slope h and intercept c.

A total of 16 countries are represented in Figure 2, with China (122), India (55) and Hong Kong (39) leading the way. The equation of the best-fit line was determined by excluding Hong Kong and India from the regression analysis. Thus, y = Ax + B = 2.11x + 10.93. This also leads to the conclusion that the average net worth y/x = 2.11 + (10.93/x) decreases as the number of billionaires x increases. Indeed, the downward sloping hyperbola in Figure 1 is the graph of the mathematical equation just deduced.
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Although China has the highest number of billionaires, the average net worth of the Chinese billionaires ($2.155B, see Table 1) is significantly lower than the average net worth of the billionaires from Hong Kong ($5.920B) and India ($3.520B). This can be readily understood if we consider the ranking of the billionaires from these three countries. Hong Kongs Li Ka-shing is ranked number 8 in the worldwide list (see The Top 20 in Forbes Billionaires, March 25, 2013, Special Issue, Ref. [4]) The Top 10 billionaires from Hong Kong have an average net worth of $13,3 B (see the list below Table 1) compared to $6.84 B for the Top 10 from China. Indias billionaires also rank higher than the Chinese billionaires, with Mukesh Ambani ranked at 22 and Lakshmi Mittal ranked at 41. The highest ranked Chinese billionaire in the worldwide list, Zong Qinghou, holds the 86th spot. Furthermore, the average net worth of the top 10 Indian billionaires is $10.22B compared to $6.84B for China, see Ref. [5], or click here). Hence, it is hardly surprising that the (x, y) pairs for both Hong Kong and India are well above the best-fit line. (Politically speaking, Hong Kong is now a Special Administrative Region of China. It was handed over to China by Great Britain on July 1, 1997. In Hurun Rich List, Hong Kong is combined with China, see Ref. [6,7], and this is at least one reason for the higher Chinese billionaire count in that list. These political issues need not distract us and readers are urged to look at these as merely convenient groupings of billionaires. Country affiliation is quite incidental and does not affect the main conclusions of the present analysis.) The following linear regression equations, see Refs. [8,9], were determined to describe the overall linear trends observed for the Asia-Pacific countries. All countries: y = 2.37x + 14.94 Without HK: y = 2.27x + 11.65 Without HK and India: y = 2.11x + 10.93 with r2 = 0.851 with r2 = 0.929 with r2 = 0.975

All these equations are of the type y = hx + c, where h is the slope and c the intercept made on the vertical axis (y-axis, y = c when x = 0). Hereafter, we
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will use the notations h and c for the slope of the straight line on the x-y graphs and A and B for the constants associated with the hyperbola on the U-x graphs (where U = y/x). The slopes h are slightly different and has its lowest value when the best-fit line pivots away from the India and Hong Kong data points towards the China data point, to reduce the vertical deviations dictated by the least squares method. Also, as expected, the linear regression coefficient increases and we find a nearly perfect correlation coefficient of r2 = 0.975. The solid blue dot in Figure 2 is the average point for the data set, after Hong Kong and India are excluded. The best-fit line passes through this point and this choice of the slope (h = 2.11) also reduces the vertical deviation of the (x, y) pair for China.

Combined net worth, y [$ billions]

$400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 0 20 40 60 80 100 120 140

y = 3.723x 6.036 r2 = 0.889 Hong Kong India (xm , ym) China

Number of billionaires, x
Figure 3: Graphical representation of the combined net worth data for the billionaires of the Asia-Pacific countries in the 2013 Forbes list. In this alternative view of the overall trend, the (x, y) pair for China has been excluded
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from the regression analysis, while Hong Kong and India have been included. The best-fit line has the equation y = 3.723 x 6.036. The slope h is steeper and practically passes through the (x, y) pair for India. Correspondingly, the intercept c now has a small negative value. This also leads to the conclusion that the average net worth, y/x = 3.723 (6.036/x) increases as the number of billionaires x increases. This also means that, statistically speaking, the combined net worth and the average net worth for the billionaires in the Asia-Pacific region (with the exceptions noted for Hong Kong and India) are consistent with the net worth for the Chinese billionaires. An alternative line of reasoning would be to include both Hong Kong and India in the linear regression analysis which would then make China the outlier. This alternative viewpoint is illustrated in Figure 3. The Chinese (x, y) pair now falls well below the best-fit line which has a significantly higher slope of h = $3.723 B (per billionaire). Also, the higher slope h yields a small negative value for the intercept c, instead of the small positive value observed earlier. This change in the sign of the intercept c also implies that the average net worth U = y/x = 3.723 (6.036/x) will increase with increasing number of billionaires and will level off to the value of the slope h = $3.723B at high billionaire levels. Both the upward and downward trends are illustrated in Figure 4. The rising hyperbola also explains some of the data observed at very low billionaire levels. Finally, in a related article, Ref. [10] on the billionaires of the Americas (North and South taken together), an exactly similar relation was reported between the number of billionaires x and their combined net worth y when the billionaires are grouped together first by country of citizenship (first level of aggregation) and then by different regions of the world (second level of aggregation). A graphical representation of the x-y data for the US (x = 442), the Americas without USA (x = 129) and all of the Americas (x = 571), reveals

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a nearly PERFECT straight line relation, y = 4.221x + 23.15, with a linear regression coefficient of r2 = 0.9998.

Average net worth U = y/x [$, billions]

$6.0

Malaysia
$5.0

Hong Kong

$4.0

$3.0

India China Kazakhstan

$2.0

$1.0

$0.0 0 20 40 60 80 100 120 140 160

Number of billionaires, x
Figure 4: The average net worth U of the billionaires of the Asia-Pacific region reveals both an increasing trend and a decreasing trend with increasing number of billionaires. The rising trend explains some of the results at low billionaire levels not explained by the downward sloping hyperbola. These differences are again seen to be the consequence of the dominance of China, India, and Hong Kong, yielding different viewpoints to compare the data relative to these larger billionaire groups (in terms of numbers N and also combined total worth UN). Thus, for the Americas, as for the Asia-Pacific, the average billionaire net worth y/x = 4.221 + (23.15/x) decreases as the number of billionaires increases. Since the numerical value of the nonzero intercept c is quite small, the average net worth is roughly constant and equal to about $4.22 B. The small differences in the average net worth between the groups is due to the
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nonzero term (c/x). The contribution to the average net worth due to this term decreases as the number of billionaires x in the group increases. Thus, the theoretical maximum value of the average net worth y/x = h, the slope of the x-y graph (for the case h > 0 and c > 0).
$250.00

Combined net worth, y [$ billions]

The Americas (USA excluded)

$200.00

Brazil

Mexico
$150.00

y = 3.94x 2.75 r2 = 0.964

$100.00

Chile
$50.00

Canada

$0.00 0 10

Peru

(xm , ym)
20 30 40 50 60

Number of billionaires, x
Figure 5: Graphical representation of the combined net worth data for the billionaires of the Americas (with the exclusion of the United States which dominates the list at x = 442 and y = $1872.3 B. The US data point is well outside the scale of this graph. The solid blue dot has the co-ordinates (xm , ym) the average values of x and y in the data set. Mexico was excluded in this calculation since it is clearly an outlier, being dominated by the net worth of the worlds richest person, Carlos Slim Helu. (Without Helu, the 14 billionaires of Mexico will have a much lower combined net worth, see Table 4 in Ref. [10].) The straight line superimposed here on to this plot is the best-fit line determined using linear regression analysis (method of least squares). This best-fit line always

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passes through the point (xm , ym); see Refs. [8,9] for a worked example which shows how to calculate the slope h and intercept c. The same linear law is also observed when we consider the data for ten countries that constitute the South American group along with Canada (29) and Mexico (15). This is illustrated in Figure 5. The South American group includes eight countries: Brazil (46), Chile (14), Peru (10), Colombia (5), Argentina (5), Venezuela (3), Belize (1) and St. Kitts and Nevis (1). Without Canada, the Latin American group, viz. Mexico plus the eight South American countries, have exactly 100 billionaires. For this group, y = 3.935x 2.751 with r2 = 0.9635. Also, the slope h = $3.935 B is comparable to the high slope of h = $3.723 B deduced for the Asia-Pacific region.

Number of billionaires by Country

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Courtesy: Mapping the Wealth of the Words Billionaires, by Luisa Kroll,

http://www.forbes.com/sites/luisakroll/2013/03/09/mapping-the-wealth-of-the-worldsbillionaires/ This Infographic, Ref. [1], maps the number of billionaires N by

country; created by Bob Mansfield and David Lada, March 9, 2013.

Courtesy: Bob Mansfield and David Lada, April 1, 2013, see Ref. [3]. http://www.forbes.com/sites/ricardogeromel/2013/04/01/forbesbillionaires-asia-pacific-map/
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Reference List
1. Mapping the Wealth of the Words Billionaires, by Luisa Kroll, http://www.forbes.com/sites/luisakroll/2013/03/09/mapping-thewealth-of-the-worlds-billionaires/ The Infographic provided here maps the number of billionaires N by country; created by Bob Mansfield and David Lada, March 9, 2013. This is integrated with the combined net worth data from Refs. [2] and [3] for the analysis presented here. 2. Forbes Billionaires Asia-Pacific Map, by Ricardo Geromel, April 1, 2013 http://www.forbes.com/sites/ricardogeromel/2013/04/01/forbesbillionaires-asia-pacific-map/ Provides combined net worth data for each country. 3. Forbes Map of Billionaires of Latin America, by Ricardo Geromel, March 22, 2013, Provides combined net worth data for each country,
http://www.forbes.com/sites/ricardogeromel/2013/03/29/mappingbillionaires-in-the-americas/

4. Forbes Billionaires, Special Issue, March 23, 2013, Profiles of the Top 20 Billionaires on pages 86 to 89. 5. The Average Net Worth of the Top 10 Billionaires in a Country, Published March 11, 2013, http://www.scribd.com/doc/129863162/Average-Worth-of-the-Top-10Billionaires-in-a-Country 6. The Hurun Report, http://www.hurun.net/hurun/aboutusen.aspx 7. Hurun Global Rich List, http://www.hurun.net/usen/Default.aspx A Microsoft Excel with the full list of 1453 billionaires is available at this website, which was downloaded, sorted by country of citizenship, and analyzed to prepare this article. 8. Legendre, On Least Squares, English Translation of the original paper http://www.york.ac.uk/depts/maths/histstat/legendre.pdf 9. Line of Best-Fit, Least Squares Method, see worked example given in http://hotmath.com/hotmath_help/topics/line-of-best-fit.html The formula for h used in this example is an actually approximate one and was used, before the advent of modern computers, since it only involves the
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determination of x2 and xy and the sum of all the values of x, y, x2 and xy. The exact formula, is given below, with xm and ym denoting the mean or average values of x and y in the data set, and ym = hxm + c since the bestfit line always passes through the point (xm , ym). h = (x xm)(y ym)/ (x xm)2 Determine the deviations of the individual x and y values from the mean, or average, (x xm) and (y ym). Determine the product (x xm)(y ym) and their sum. This gives the numerator in the expression for h. Determine the square (x xm)2 and the sum. This gives the denominator in the expression for h. This also fixes the intercept c via ym = hxm = c . Then, using the regression equation, determine the predicted value yb on the bestfit line and the vertical deviation (y yb) and the squares (y- yb)2. The sum of these squares is a minimum. This can be checked by assigning other values for h (using any two points) and allowing the graph to pivot around (xm, ym). The regression coefficient r2 = 1 - { (y- yb)2 / (y- ym)2 } is a measure of the strength of the correlation between x and y (or y/x versus x). For a perfect correlation, when all points lie exactly on the graph, r2 =+1.000. 10. The Average Net Worth of the Forbes 2013 Billionaires: Summary of the Regional Analysis, Published March 31, 2013, http://www.scribd.com/doc/133321333/The-Average-Net-Worth-of-theForbes-2013-Billionaires-and-Summary-of-the-Regional-Analysis See also additional references to related articles on the billionaire problem provided here.

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About the author V. Laxmanan, Sc. D.

The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the groundbased experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by Planck, referred to here as the generalized power-exponential law, might
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actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton. Finally, during my professional career, I also twice had the opportunity and great honor to make presentations to two Nobel laureates: first at NASA to Prof. Robert Schrieffer (1972 Physics Nobel Prize), who was the Chairman of the Schrieffer Committee appointed to review NASAs space flight experiments (following the loss of the space shuttle Challenger on January 28, 1986) and second at GM Research Labs to Prof. Robert Solow (1987 Nobel Prize in economics), who was Chairman of Corporate Research Review Committee, appointed by GM corporate management.

Cover page of AirTran 2000 Annual Report

Can you see that plane flying above the tall tree tops that make a nearly perfect circle? It requires a great deal of imagination to see and to photograph it.

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