How to Become as Rich as Bill Gates (1999) | Hacker News Reader

How to Become as Rich as Bill Gates (1999)

philip.greenspun.com

58 pointslarrys48 comments

> Bill Gates does code reviews, not coding.

That's just wrong:

In 1983 Microsoft had revenues of $55 million and a headcount of 500. Bill was the CEO. And yet, according to Gates talking about the Tandy TRS-100, "part of my nostalgia about this machine is this was the last machine where I wrote a very high percentage of the code in the product. I did all the design and debugging along with Jey."[1].

Gates was CEO of a company of 500 with revenue of $55 million, and still producing large amounts of serious code. That's impressive (or misspent time, however you want to think about it.)

[1] http://www.nausicaa.net/~lgreenf/bill.htm

The article is from 1999, not 1983.

What does that have to do with anything? I'm not suggesting Gates still wrote meaningful code in 1999, and the article was very dismissive of Gates coding abilities and the impact they had on his success. He did not restrict his criticism to 1999.

    > If Donald Trump had taken the millions he inherited
    > from his father and put it all into mutual funds, you'd
    > never have had to suffer through one of his books. But
    > he'd be just about as rich today.

I made a half-hearted attempt to run the figures on that a few months ago — I'd be very grateful if anyone was sufficiently more diligent than me and ran the figures.

http://www.moneytalksnews.com/why-youre-probably-better-inve...

"Imagine Trump had retired in 1982, sold his real estate holdings and invested his $500 million in the S&P 500 — that is, 500 stocks representing the American stock market.

"From 1982 through the end of 2014, the S&P 500 index had an annualized return, including reinvested dividends, of 11.86 percent, according to MoneyChimp’s S&P 500 Compound Annual Growth Rate calculator.

"Per this calculator, every dollar invested in January 1982 would have been worth $40 by December of 2014. That means Trump’s initial $500 million would have grown to $20 billion. That’s twice what Trump says he’s worth today."

If you subtract 15% capital gains taxes every year, this 'only' comes out to $12 billion. (Which is why billionaires hate taxes.)

Those taxes only apply if you sell though. If not, you get the full $20B, less 15% at the end (i.e. $17B) if you decide to quit cold turkey and convert it all to cash on the final day.

You only pay capital gains taxes when you realize gains, not every year.

Trump would pay 15% of $20B = ~$3B, so his net worth would be $17B. And this is assuming that his stock investments don't pay qualified dividends that are reinvested. So, yeah, he'd have much more than $12B.

If you buy a stock and hold it, you don't have to pay capital gains along the way. But if you buy a mutual fund and hold it, capital gains will pass through to you whenever the manager sells stocks to adjust the portfolio. There are "tax efficient" mutual funds whose mission is to minimize that churn, but no fund can keep it at zero. I don't know how many tax efficient mutual fund options there were in 1982.

It's of course even more drastic when you consider that the two (arguably) most authoritative sources on billionaire wealth measurement - Forbes [1] and Bloomberg [2] - consider Trump to be worth closer to $3 or $4 billion. He exaggerates his brand's value by about $6 billion.

[1] http://www.forbes.com/sites/erincarlyle/2015/06/16/trump-exa...

[2] http://www.bloomberg.com/politics/articles/2015-07-28/here-s...

This calculation seems to ignore slippage. Donald Trump can't drop $500M into the S&P and get the same price per share that I can get if I drop $5k into it.

Yes he can, or at least nearly the same price with very little slippage.

The S&P is not a single illiquid penny stock but a collection of 500 of the most liquid investments in the world, and 500 million dollars is a pittance compared to its capitalisation even back in the 80s. Sure, if he had to invest it in half an hour he would move markets - but if he had a year? No slippage from adding 2m a day distributed over 500 stocks...

It also assumes he consumed zero dollars from then til now. If he wanted to have a wealthy lifestyle, and can you really blame him, these passive returns drop quickly.

With a $40M - $200M estimated net worth and taking Sequoia's 30 year fund IRR of ~ 12%.

Let's assume he started with $40M and inherited it in 1970 (45 years ago). If he dumped it into a 12% IRR Mutual Fund his net worth would be: (1.12)^45 * $40,000,000 = $6.6B

which is greater than his $4B net worth.

This of course is presumptuous at a lot of levels, but the math does make sense.

The above, even if true, ignores the fact that if you love what you do (whether it be business or programming) not working or being involved is simply not as nice a life for certain types of people.

Working toward and earning what you eventually end up is way more satisfying than simply being passive and finding yourself in later years with the same amount or more money. Of course I can see how someone who doesn't understand the love that someone has for what they do saying that.

Yeah but he created tens of thousands of jobs and built some big buildings which I guess was the primary reason he was doing it not the money. As it is with many entrepreneurs, if not the vast majority of them.

Besides at the time his father died in 1999 he was already a billionaire. And Fred Trump left about 200 mil to 4 kids and wife... as far as I know Donald got about $20 - $40 mil. Put that in the stock market at the peak of the tech bubble - not a great idea.

Articles like this are evidence that people are still surprised that capital grows faster than labour. At least in fair capitalist society the surest way to become wealthy (statistically speaking) is to understand:

- The total wealth of the world is expected to keep increasing - Capital grows faster than labour - Taxes and disasters redistribute wealth

This is why investing in index funds that don't pay dividends is such a good idea.

OT: If an index fund doesn't pay dividends, what happens to the dividends? Presumably the fund owns shares in every stock in the index, so there should be dividends?

Does it just go towards paying the fund overheads? What about for an ETF index fund?

I misphrased above. The index fund will pay out a dividend if the underlying stocks do. Fortunately for investors, Companies are paying dividends less and less frequently, preferring to do stock buybacks (which improve the stock value) instead. Dividends are also "qualified" if you've held the stock long enough, so you pay the lower capgains rate.

Dividends and stock buybacks are both ways companies enrich their stock holders. But I view them as largely the same thing. When a company doesn't have new markets, then it doesn't create new products or services, so it literally doesn't know what to do with the money, so it just plows it back to shareholders, and these are just two ways that happen.

Buybacks are much more tax efficient though. If you would have reinvested all dividends (after paying taxes on them), with a buyback you instead do nothing and pay no tax.

> stock buybacks (which improve the stock value)

That's a misconception. Stock buybacks create value only if the stock is undervalued.

Capital only grows if it can be deployed in new endeavors that generate more revenue (and as a by-product usually increase the amount of labor at work). That's part of the problem. Not enough public companies know what to do with the excess cash, and therefore don't end up creating more value.

Companies with excess cash do not store currency in a vault. They invest it, usually in short term investments convertible to cash, but investments nevertheless.

That you need millions to make bajillions? Doubt that folks are surprised ... angry may be. That first million requires hard-toil labour often deliberately prevented from ever being obtained by the same moneyed class.

The only other practical way, like the article says, is to steal.

>is to steal

That's an unpopular opinion here on HN but I would agree, looking at the histories of great fortunes.

I am including the "stealing" of wealth gained by under-compensating labor for its full value when I agree with you.

Some past appearances:

2 years ago 88 comments https://news.ycombinator.com/item?id=6546325

6 years ago 31 comments https://news.ycombinator.com/item?id=553776

Will I be as rich as he was in '99, or as he is now?

Screw it, doesn't matter.

> When Microsoft products were threatened by network computers and Web-based applications, they simply bought WebTV and Hotmail.

Back when WebTV was considered a good idea?

For what it's worth I'm happily using the modern incantation of WebTV, my FireTV Stick.

I have my 'TV' on demand, whenever I want it, I can run some web related apps, even hacked something together for controlling my lights.

I don't think WebTV was a bad idea. I think it was just too early and lacked that critical video on demand concept.

In the UK there was a gap for a long time that was filled by 'Smart' functions of Sky TV's digibox. This used a modem to upload content, and allowed for receiving of good quality video from sat, as a result you could watch the 'latest' films, for around £3 and only have to wait a few minutes before it would start. Automatically from the box interface, rather than via a call centre. But this was just the start, shopping was possible, you could order products and the like.

Now we live in a world where Amazon Instant isn't even on my desktop web browser, instead needing an 'app' for a phone, and apparently mine isn't even supported. There are lots of people who want to consume 'web' functions from a device other than a computer.

One brings the Web on the TV (Web TV) the other brings TV on the Web (Streaming, Netflix) which you end up watching on your TV. Turns out people like watching TV on their TV.

One word: ROI.

Radio. On. Internet. :-)

    > *Lesson 4. Let Other People Do The Programming*
    > ...
    > Bill Gates does code reviews, not coding.

The same is true of Linux Torvalds, ironically.

I mean, it hasn't always been true of either of them. But I posted it because I find the idea of sitting down for a code review with Bill Gates today (or, on Monday) pretty amusing!

Oh man, you should read: http://www.joelonsoftware.com/items/2006/06/16.html It's a brilliant account of the process!

Thanks!

this excerpt I find striking:

> If you're an intelligent curious person it can be painful to run a company of more than 50 people. You spend more time than you'd like repeating yourself, sitting in boring meetings, skimming over long legal documents in which you know there are errors but aren't sure how serious, etc. The temptation is to hand over the reins to the first "professional manager" who comes along. And that's what the standard venture capitalist formula dictates. But Bill Gates didn't do that. He hired Steve Ballmer in 1980 and gave him the CEO job 20 years later. Making money in the software products business requires domain expertise and a commitment to solving problems within that domain. Great tech companies are seldom built by non-technical management or professional managers who aren't committed to anything more than their paycheck. Adobe is another good example. The two founders were PhD computer science researchers from Xerox PARC who were passionate about solving problems in the publishing and graphics world. They are still guiding operations at Adobe.

"Choose your parents carefully" has got to be one of the most pessimistic and cynical perspectives in existence.

Instead, you could say "treat your children well", which is basically the same thing, except a lot less selfish.

How exactly is describing reality selfish?

The difference in the views expressed is that one takes all of the blame for your circumstances and puts them on your parents, and the other is taking the responsibility of providing good circumstances for your children. In the end, the meaning is about the same, but the undertones are a bit different.

The meaning isn't close to the same; talking about your children's well being has nothing to do with talking about your own well being. And saying your parents matter isn't blaming them, it's simply an accurate description of reality. Having rich parents vs having poor parents has far more to do with how you turn out than your own effort does[1], that is the reality of this world, like it or not.

[1] http://thewireless.co.nz/articles/the-pencilsword-on-a-plate

The meaning is not the same because it's very difficult for poor and less educated parents to give their children what rich and more educated parents give them. My kids went to a high school that had a considerable socio-economic range and I was fairly involved in some stuff there, and it was clear there were plenty of poorer, less educated parents who were working really hard to give their kids everything they needed, but it was almost impossibly difficult for them.

This is not an argument against treating your children well, but the reality is that having parents who are well-off and educated buffers you against all kinds of mistakes and issues that would sink other kids. Moderating (not eliminating, which is neither possible nor desirable) social inequality is important precisely because we can say with as much certainty as we can say anything that there are kids out there today as talented and driven as Bill Gates who don't have anything like the resilient support system that he had, and without it they are likely going to be a drag on society rather than contributors to it.

> treat your children well

The point the author was making was that Bill Gates' parents were extremely wealthy and also very influential, which gave Gates a uniquely preparatory childhood, the means to make pretty much whatever risks he wanted, and easy access to capital (and the people behind it).

Not everyone has that kind of influence and money to pass down to their children.

I see it repeated frequently that Bill's parents were very or extremely wealthy. Where's the proof of that?

His father was a prominent lawyer by the mid 1970s, yes. They were an upper class family, that is well known. As far as I'm aware, having read a lot about Bill Gates over the years, there isn't much evidence to stipulate just how wealthy they were. If his father earned a higher level lawyer salary in the 1960s, it does not necessarily mean great wealth had been accumulated. I'd argue it would be extremely unlikely at that point in time, as his father would have been merely 40 years old in 1965 when Gates was 10. Try accumulating "extreme" amounts of wealth in just a few years as a lawyer, it's nearly impossible.

By the time Gates was 25, he was already richer than both of his parents combined.

Sure, fine, they were "only" upper class. I'm not really sure what the appropriate response here is when Gates went to the best private schools.

Anyways, influence is as important as wealth:

Mary Maxwell was a board member of First Interstate Bank and Pacific Northwest Bell. She was also on the national board of United Way, along with John Opel, the chief executive officer of IBM who approved the inclusion of MS/DOS with the original IBM PC.

If they could afford 3 meals a day without ever having to skip a meal because of lack of money, then they were richer than most people on the planet. If they were middle-upper class in the U.S. - that's not extremely wealthy by U.S. standards but it's quite filthy most anywhere else. That's winning the birth lotto.

There are millions of Americans like that, but only one Bill Gates. You can't just assign his success to his parents.

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