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The next billionaire boom

March 31, 2009 16:41 IST

It's hard to see them with all the gloomy news, but they're out there. Working away in the shadows of the global recession, a slew of future billionaires are quietly tinkering with the ideas that will help fuel the future economy -- and make them very rich.

President Obama is banking on these entrepreneurs to eventually help turn the economy around. In a speech he gave a few weeks ago, the president stressed the importance of nurturing small businesses during tough times: "Hewlett-Packard began in a garage. It was a small business. Google began as a research project. Small business. The first Apple computers were built by hand, one at a time. Small business. McDonald's started with one restaurant."

So where will the next Bill Gates, Warren Buffett and Steve Jobs come from?

R.J. Kirk's money is on biotech. The pharmaceuticals tycoon, whose $1.5 billion fortune ranked him 468th on Forbes's most recent list of the World's Billionaires predicts "genetic engineering will produce a number of billionaires" in the years to come.

Kirk rattles off genetic engineering's myriad applications: "agronomy, materials science, the food industry and the energy industry."

Finding a substitute for oil-based energy could also mint several 10-figure fortunes. President Obama's budget features more than $150 billion in alternative energy spending over the next decade, a boon that he claims has the potential to create 5 million jobs.

Last May, shares of renewable energy outfit First Solar swelled to an all-time high of $311, lifting the value of Michael Ahearn's stake in the firm to $950 million. With more than $380 million in (pre-tax) cash from prior stock sales, Ahearn became the world's first solar billionaire.

First Solar shares have fallen more than 50% since last spring amid increasing doubts over the long-term sustainability of solar subsidies. But Ahearn and other solar and wind titans remain on the billionaire watch list.

Getting these inchoate industries off the ground will require training--like at the Wind Technology Boot Camp at Cerro Coso Community College, where eight weeks of study and $1,000 in tuition can lead to a job repairing the mammoth wind turbines that are sprouting up across the country. Entrepreneurs who create education-based businesses should flourish.

Education "is probably one of the only sectors that could and should grow during this decline," says billionaire investor Nicolas Berggruen, who bought up nine vocational colleges in 2005.

Apollo Group, parent company of Phoenix University, reported a 40% surge in earnings in the quarter ended Nov. 30, padding the fortune of John Sperling, who founded the for-profit education outfit in 1976. Apollo's shares are up more than 55% since last spring.

Facebook founder Mark Zuckerberg is no longer a billionaire as private company valuations have plummeted with their publicly traded counterparts. Still, the low costs of starting a dot-com business may appeal to recession-wary entrepreneurs -- especially since Internet users often grow tired of their social-networking sites after a few years.

In Japan, two social-networking gurus are well on their way to billionaire-hood. Yoshikazu Tanaka took GREE public in December. The stock popped more than 50% on the first day of trading; Tanaka is worth at least $750 million today. Kenji Kasahara, who founded Mixi -- Japan's most frequented social-networking site -- is worth at least $300 million.

Several billionaires will be created the old-fashioned way: investing in distressed assets. Opportunistic investors like David Bonderman and Ronald Perelman made billions during the last financial crisis, buying up distressed mortgages and financial assets at cut-rate prices from bankrupt firms in the 1980s -- in some cases, with funding supplied by Uncle Sam -- and selling them for big profits years later.

In the past three months billionaire Gerald Ford, who partnered with Perelman on a string of successful deals in the wake of the savings and loans crisis, has signed non-disclosure agreements with several community banks, allowing him glimpses into their finances. So far his bids for those banks have been topped by rival suitors, but he says he's going to keep kicking the tires of a bank until he gets one.

"We don't know how long this is going to go on," says Ford, citing a stalemate between investors who want to buy financial assets and the banks that keep them at bay by refusing to mark down their assets sufficiently. "But to the extent that we can judge the timing and execute on the business model, there will be opportunities."

Duncan Greenberg and Tatiana Serafin, Forbes