Here's Why Bill Gates Was So Much Richer Than Steve Jobs

Even though Bill Gates and Steve Jobs started massively successful technology companies, Gates' wealth ultimately exceeded Jobs' by a factor of six. Here's why.

Feb 19, 2014 at 6:29PM

Bill Gates with his wife, Melinda. Photo: Kjetil Ree via Wikimedia Commons.

Steve Jobs and Bill Gates were born in the same year. 

Both dropped out of college.

Both started companies with good friends: Gates founded Microsoft (NASDAQ:MSFT) with Paul Allen in April 1975, while Jobs founded Apple (NASDAQ:AAPL) with Steve Wozniak exactly one year later.

Steve Jobs

Photograph by Matt Yohe (Wikimedia Commons).

And both got rich -- extremely rich.

But it's here where things diverge, because at the time of Jobs' untimely death in 2011, his $11 billion net worth was a fraction of Gates' $66 billion. This discrepancy may strike you as odd, given that Apple's market capitalization at the time was $132 billion greater than Microsoft's.

So how do you explain this?

If you're familiar with Jobs' story, then you already know the answer: He sold all but one of his original Apple shares in 1985, the year he was ousted from the company by then-CEO John Sculley and its board.

Jobs' 11% stake in Apple was worth somewhere in the neighborhood of $130 million at the time. And, for the record, this was considerably smaller than the 26% stake he emerged with after the first serious round of fundraising in 1977. 

At today's price, those stakes would be worth more than $69 billion and $162 billion, respectively. In other words, had he not sold shares along the way, Jobs would have been the world's richest person by leaps and bounds, as Gates' current net worth is estimated at $79 billion.

Don't get me wrong. I'm not trying to be critical -- far from it, in fact.

In the first case, Jobs had no reason to feel optimistic about Apple in 1985, given the circumstances of his ouster -- not to mention the fact that Apple may have gone the way of the dodo bird without Jobs' eventual return.

Moreover, there's every reason to believe that, had Jobs not left when he did, we wouldn't have Pixar, which he purchased from Lucasfilm in 1986 for $10 million. He revitalized it with money and technology, and then sold it to Disney in 2005 for $7.4 billion of the House of Mouse's stock -- thereby becoming the entertainment company's largest individual shareholder.

What I am trying to do is demonstrate the power of buy and hold investing.

Sure, I would love to be as rich as Steve Jobs was -- or even to have a fraction of his net worth. But Jobs had contemporaries who, like Gates, wanted more. And when it comes to building wealth, as Gates' experience illustrates, there are few better tools than time and compounding returns -- both of which, by the way, are equally accessible to us mere mortals.

Of equal importance are brilliant ideas that are identified in their infancy. 

Countless investors have become millionaires virtually overnight by riding the wave of technology driven by the likes of Gates and Jobs. In the process, these investors' lives have been radically transformed. Making money is no longer their objective; their challenge now is spending it on a lifestyle once thought unimaginable.

The key to these investors' success isn't the ability to recognize promising trends; all of us can do that. The key instead is the courage and conviction to put money on the line when you inevitably encounter a transformative idea.

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John Maxfield owns shares of Apple. The Motley Fool recommends Apple and Walt Disney. The Motley Fool owns shares of Apple, Microsoft, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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