Donald Trump - Real Estate, Media
Starting from almost nothing, Warren Buffett and George Soros became billionaires by earning average annual returns of about 25% over their lifetimes. Although most people don't often think of Bill Gates and Larry Ellison's successes this way, they also became billionaires by investing in a single stock.
More recently, companies that have spawned billionaire founders include Dell Computer, EBay and Google. Understanding how it's done is simple even if replicating it isn't. You start a company. The potential for success is sufficient enough to support a public offering while still leaving you with significant ownership. Combine spectacular sales with a little investor speculation and soon you're a paper billionaire.
Among the most successful technology stocks ever was Cisco Systems. If you invested $50,000 in Cisco systems in March of 1990, in ten years you ended up with over $33 million. That average annual return of about 90% almost doubles your money every year.
During the dot-com bubble of the late 1990s, company founders reached outrageous levels of paper net worth with companies that had little to no earnings. Some, such as Mark Cuban of Broadcast.com (eventually sold to Yahoo!), retained their worth by having their companies acquired while still at top valuations.
In comparison, becoming a billionaire in real estate isn't as easy. Even in highly leveraged deals, earning sustained returns of over 25% for a period long enough to create a billion-dollar net worth is almost impossible. Building wealth requires some high-risk bets with big payoffs.
A law of finance stipulates that higher returns require more risk. If safe and high returns existed, why aren't they available to everyone? One reason is that you have to look for them. Another is that not everyone will have the resources and connections to make the deal happen.
In his 1987 semi-autobiographical book The Art of the Deal, Donald Trump stated that he specialized in finding deals with potentially high upsides and only limited downsides. He used his father's connections as one of the top real estate developers in New York City to make his first deals happen. Once his reputation was established, he used his negotiation skills to make deals work in his favor.