How Elon Musk became the second richest person in the world

Everyone’s favourite tech entrepreneur Elon Musk recently scooped up the number two spot on the world’s rich list. Just a few short weeks ago, the South-African born Canadian-American businessman, inventor, and investor overtook Bill Gates to reach this milestone, surpassing the US$127 billion net worth of the Microsoft co-founder. Though Musk wears a multitude of hats and frequently takes on new projects, this wealth mainly comes from his involvement in Tesla Motors, SpaceX, and SolarCity.

According to the Bloomberg Billionaire Index, which ranks the world’s 500 richest people, Musk has added over $100 billion to his net worth this year alone. The Tesla CEO secured second place largely in thanks to the increasing market value of the popular electric car company, which recently soared to over $500 billion. These shares, along with Gates’ philanthropic efforts throughout the years – he has donated over $27 billion to the Gates Foundation since 2006 – helped the Tesla boss beat out the Microsoft leader, reaching a worth of $128 billion in late November.

Finding his fortunes

So how did the 49-year-old make his billions to reach this status? As mentioned, Musk loves a new project and is always finding new business ventures to latch his name onto. With degrees in both business and physics, Musk has involved himself in a vast array of enterprises throughout the years, ranging from city guides and financial services in the early ages of the internet, to the more well-known ventures within space exploration and electric automobiles. The last two have proven to be the most successful ventures for the businessman, with Musk owning roughly 20% of Tesla’s outstanding shares and 48% of the privately-held SpaceX.

Founded in 2002, Space Exploration Technologies Corporation, more commonly referred to as SpaceX, was the third company established by Musk. With the intention of building spacecraft for commercial space travel, SpaceX was well-established by 2008 with NASA contracting the company to handle cargo transport for the International Space Station. These plans for space travel further came to fruition in 2012, when the company made history by launching a Falcon 9 rocket into space with an unmanned capsule.

Musk’s next venture into the business world came in 2003 with the creation of Tesla Motors. The automobile company was originally founded by Martin Eberhard and Marc Tarpenning, dedicated to producing affordable, mass-market electric cars. As one of the company’s first employees, along with Ian Wright and J.B. Straubel, Musk was retroactively named a co-founder, leading to his eventual fame and fortune.

A year to remember

It is these shares in Tesla that have contributed the most to Musk’s wealth, with about three-quarters of his net worth coming from the innovative company. While Tesla’s brand has progressively grown over the past few years, the company’s stock has particularly flourished the most this year, despite a global pandemic. This is largely contributed to worldwide investors rushing to buy shares in the company in an effort to wean the world off its reliance on fossil fuels, as well as the debut of Tesla on the S&P 500 Index later this month.

These shares have risen more than six-fold this year. Since the announcement of the electric carmaker’s addition to the S&P Global, shares have increased more than 57%, sitting near record highs and establishing Tesla as the most valuable car company in the world. This status comes from the company’s $611 billion market cap, which interestingly enough determines Musk’s net worth more than one would think.

Despite being CEO, Musk actually takes no salary from Tesla. Rather, he forged a highly unusual but extremely lucrative compensation plan tied to Tesla’s market cap milestones. With no time restrictions, as the company reaches each new $50 billion milestone – there are 12 in total – Musk rakes in billions of dollars in bonuses. With the company smashing these milestones out of the park this year alone, Musk has increased his net worth substantially over the past 12 months, rising through the rich list ranks at a speed never before seen.

Conclusion

Starting the year in 35th place, Tesla’s near 650% share price growth has contributed to Musk adding around $120 billion to his fortune alone in 2020. In less than a year, the entrepreneur has surpassed some of the leading tech billionaires in the world today, including Google co-founders Larry Page and Sergey Brin, former Microsoft CEO Steve Ballmer, and Facebook CEO Mark Zuckerberg. The one giant he is yet to exceed is Amazon CEO Jeff Bezos, who is comfortably sitting atop the list with a cool $185.5 billion.

With his current net worth already sitting around the $150 billion mark, this goal could potentially come quicker than expected. While he might be comfortable claiming the title of second wealthiest person on the planet for now, it sure will be an interesting 2021 for the man whose wealth just continues to skyrocket.