On an average week, Toorak Village Newsagency, situated smack bang in the middle of Melbourne’s wealthiest residents, sells about 12 copies of BRW. But tomorrow, the annual BRW Rich List edition — BRW Rich 200 — will hit the shelves, all 400 copies of it.
Toorak Newsagency sold 285 copies of the Rich List last year. Double Bay newsagency sold roughly 350. The average suburban newsagency sells about 5-6 copies.
The rich love to read about the rich, but as many rich listers and interested observers suspect, the compilation of BRW Rich 200 isn’t a particularly accurate process.
A former BRW insider reveals:
Compiling the Rich List is not a very scientific process. It’s also a gigantic headache.
Every year, just after Christmas as the process begins to grind into gear, the sighs from BRW staff in the office are audible. It’s a horrendous exercise. Everybody on staff is involved in the list and then they also bring in researchers — often up to ten MBA students in Sydney and Melbourne, who in their innocence think they’re going to learn how to get rich when really, they find out, at its worst, the process involves a bunch of journalists trying to guestimate a bunch of rich people’s fortunes.
Everyone who makes the list is contacted. At that point they might say, “get lost” or “you guys never pay attention to tax, or how many loans or debts I have”.
Some people are very extreme, some scream down the phone at you. Some people are very unco-operative. The Packers never co-operated, and they’re number one on the list, so that was hard, they’d never confirm or deny anything.
Artists, actors and musicians hate it. It damages their cred for everyone to know how filthy rich they are. Gerry Harvey had no problem with it.
The people who don’t want to be on the list, will be reluctant for two reasons: the first one is tax. But that’s probably only a minor amount of people because these days the tax office has just about everyone.
The second reason is ex wives. Often these guys, and they are very big guys, don’t necessarily stay married to the same person forever and consequently they don’t want everyone to know how much they’re worth. Often in family empires there would be ferocious fighting, ex wives, illegitimate children. Around one in seven don’t want to be on the list.
Then there are the people who would call you and try to shove themselves up higher in the list, telling us that we got it wrong last year and they “want to help” us.
But when it comes to estimating someone’s fortune, even the most accurate entries have lots of question marks because you have no idea what sort of debt they have, or how much tax they owe.
There are roughly two different types of fortunes. One is sharemarket and one is private. Most people can be divided into one of those two.
The sharemarket fortunes are relatively accurate. You count how many shares they’ve got multiplied by share prices and then you call up the subject in question and get verification.
But the private fortune is terribly problematic. We really have no idea at all how much these people are worth. They’re not listed on the sharemarket, so you have some old guy who owns a bunch of properties, you ring a valuer, get them to value it, estimate how much they’re worth and then add them all up.
With private companies you have no idea, they don’t report anything really. All they have to do by law is report their annual revenue. You look at this person and all you know is the annual revenue of the companies they allegedly control.
For example, if it’s an IT company, what you would do is ask yourself — how much are IT companies selling for at the moment? You work out that they’re selling at a certain multiple of revenue and then you tack that amount onto the guy in question.
Of course it depends on the person in question. The easy ones are the really high profile ones with interests in the stockmarket like Kerry Stokes, but even Kerry Stokes is incredibly difficult to track because there are all these other interests in private companies and art. Then you have people like Richard Pratt giving away ten million a year to charity, and you have no idea how much it takes, so no-one really knows. Their own accountants wouldn’t be able to put an accurate wealth estimate on them too easily.
But BRW has got a monopoly on this process, no-one else does it because it’s a huge exercise and subsequently, it’s a huge seller. It’s the flagship.
No-one has ever managed to rival it because it is such a big exercise, you need the database. BRW has been compiling this information since the 80s so the database is like the Holy Grail. It’s the mother lode. The ATO would have a field day if they could get their hands on it. As it is, they pour over The Rich List every year — they love it.
The current cut-off rate in terms of fortune to make the list is reportedly around $180 million. During the leaner years, like after the dotcom bust, they’d lower the cut-off by around 5%.
The issue of May 2000 was a nightmare because the IT fortunes were disappearing as the list was being compiled, so the fortunes were going down and it was hard to tell which business was going to last from one minute to the next.
Then there are the old guys who very inconveniently die while you are compiling the list. There was always a terror that some superannuated reclusive tycoon might have gone to the great beyond and still be on the list — the majority of very wealthy people are very old. That’s the nature of wealth.
So if, for instance, Number 44 dropped off, it can get a bit difficult. The first thing you have to do when updating the list each year is to check that the entrants are still alive. But rather than having a section crudely called Deaths, they very discreetly named it Departures, which conjures up images of the Qantas Business Lounge.