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


Photograph by Kjetil Ree (Wikimedia Commons).

Steve Jobs and Bill Gates were born the same year.

Both dropped out of college.

Both started companies with good friends: Gates founded Microsoft with Paul Allen in April 1975; Jobs founded Apple with Steve Wozniak exactly one year later.

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 less than the 26% stake that he emerged with after the first serious round of fundraising in 1977.

At today's price, by comparison, those stakes would be worth upward of $54 billion and $127 billion, respectively.

Had he not sold shares along the way, in other words, Jobs would have been the world's richest person by leaps and bounds, as Gates' current net worth is estimated at $78 billion.

Now, 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 particularly optimistic about Apple in 1985, given the circumstances of his ouster -- not to mention 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, revitalized with money and technology, and subsequently sold 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, however, is to demonstrate the power of buy and hold.

Sure, I would love to be as rich as Steve Jobs was -- or even to have a net worth a fraction of his. But Jobs had contemporaries who, like Gates, wanted more.

In order to get more, 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.

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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.

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