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Why Bill Gates is Richer Than You


Well-Known TRIBEr

Why Bill Gates is Richer than You

part of the Career Guide for Engineers and Computer Scientists by Philip Greenspun

The Short Answer (to "Why Bill Gates is Richer than You")

"Bill [Gates] is just smarter than everyone else," Mike Maples, an executive vice-president of Microsoft, says. "There are probably more smart people per square foot right here than anywhere else in the world, but Bill is just smarter."

The New Yorker, January 10, 1994

"The obvious mathematical breakthrough would be development of an easy way to factor large prime numbers."

Bill Gates, The Road Ahead, Viking Penguin (1995), page 265

The Family Answer

A lot of immigrants look up to Bill Gates as proof that the American Dream is achievable by anyone. They don't seem to realize that William Henry Gates III comes from one of the wealthiest families in the Pacific Northwest (see "How to Become As Rich As Bill Gates"). Another way to look at this is that the birth of Jennifer Katherine Gates on April 28, 1996 proved that America is still a country where anyone, regardless of race, creed, color, or software quality, can go from having a rich white Anglo-Saxon Protestant daddy to being a rich white Anglo-Saxon Protestant daddy.

"To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable"
-- Edgar Bronfman

"Money is the seed of money, and the first guinea is sometimes more difficult to acquire than the second million."
-- Jean Jacques Rousseau

What the Government Should Do About Microsoft

"My experience tells me that, instead of bothering about how the whole world may live in the right manner, we should think how we ourselves may do so. We do not even know whether the world lives in the right manner or in a wrong manner. If, however, we live in the right manner, we shall feel that others also do the same, or shall discover a way of persuading them to do so."

"Non co-operation with evil is as much a duty as co-operation with good."

Real Swaraj will come, not by the acquisition of authority by a few, but by the acquisition of the capacity by all to resist authority when it is abused.

-- Mahatma Gandhi

Should the government be suing Microsoft for violating antitrust laws? Perhaps. But doesn't it seem kind of odd for government lawyers to be typing Microsoft Word documents about how bad Microsoft is? If the federales were serious about increasing competition in the world of software it would be much more effective simply to convert government operations to open-source software. For very small organizations it may not make sense to use open-source software. The cost of hiring a programmer to add a feature or two to Linux or Star Office, for example, can't be recovered if you only have five employees to use the feature. But the U.S. Government has millions of employees. Whatever it costs to improve the open-source software that the feds use will be much less than the government currently pays to Microsoft in license and upgrade fees. And, by releasing those improvements back to the community, the U.S. Government will greatly strengthen the market for open-source software and support.

Will Society Free Itself?

In the absence of government intervention, is there any hope of society freeing itself from the Microsoft monopoly? Perhaps. Consider Microsoft's mainstay product: the desktop computer system that costs $10,000 per year to administer and lets you work by yourself. What most users want, though, is a cheap simple device that lets them collaborate with others. Successful collaboration with others typically requires that someone run a big reliable server (see Chapters 1 and 17 of Philip and Alex's Guide to Web Publishing). Thus the market for computing may in the end boil down to simple stuff to be used by consumers and reliable stuff to be operated by professional IT staff. Windows is way too complex for most consumers and difficult to justify on the server side when you can run Linux for free.

Microsoft Corporation will survive of course. By acquiring WebTV, a simple Internet appliance, they've got a toehold into the future of the desktop. By acquiring Hotmail they've got a toehold into the future of server-based applications. But to sustain their position as one of the most valuable companies in the world they may need to develop valuable services that people will want to use every day. Historically the most valuable company on the American stock market was AT&T. They had a monopoly on telephony, something that most people needed to use a few times every day. Whether Microsoft Corporation is creative enough to develop something similarly essential, in the absence of the legal monopoly held by AT&T, is an interesting question.
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Alex D. from TRIBE on Utility Room


Well-Known TRIBEr
How to Become As Rich As Bill Gates

a strange offshoot of the Bill Gates Personal Wealth Clock by Philip Greenspun

As a graduate student in computer science at MIT earning a $1600/month research stipend, I feel amply qualified to instruct the entire Internet on the art of becoming as rich as Bill Gates (check the Wealth Clock to see how much he has right now). I get my confidence from Dr. Leo Buscaglia, author of Love, Born for Love : Reflections on Loving, Living, Loving and Learning, and Bus 9 to Paradise. Dr. Buscaglia, our nation's most prominent lecturer on the subject of love, turns out to be divorced ("it was a very loving divorce").

Lesson 1: Choose Your Grandparents Carefully

"There are three ways to make money. You can inherit it. You can marry it. You can steal it."
-- conventional wisdom in Italy

William Henry Gates III made his best decision on October 28, 1955, the night he was born. He chose J.W. Maxwell as his great-grandfather. Maxwell founded Seattle's National City Bank in 1906. His son, James Willard Maxwell was also a banker and established a million-dollar trust fund for William (Bill) Henry Gates III.

In some of the later lessons, you will be encouraged to take entrepreneurial risks. You may find it comforting to remember that at any time you can fall back on a trust fund worth many millions of 1998 dollars.

Lesson 2: Choose Your Parents Carefully

"A young man asked an old rich man how he made his money. The old guy fingered his worsted wool vest and said, "Well, son, it was 1932. The depth of the Great Depression. I was down to my last nickel. I invested that nickel in an apple. I spent the entire day polishing the apple and, at the end of the day, I sold the apple for ten cents. The next morning, I invested those ten cents in two apples. I spent the entire day polishing them and sold them at 5 pm for 20 cents. I continued this system for a month, by the end of which I'd accumulated a fortune of $1.37. Then my wife's father died and left us two million dollars."

William Henry Gates, Jr. and Mary Maxwell were among Seattle's social and financial elite. Bill Gates, Jr. was a prominent corporate lawyer while 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.

Remind your parents not to send you to public school. Bill Gates went to Lakeside, Seattle's most exclusive prep school where tuition in 1967 was $5,000 (Harvard tuition that year was $1760). Typical classmates included the McCaw brothers, who sold the cellular phone licenses they obtained from the U.S. Government to AT&T for $11.5 billion in 1994. When the kids there wanted to use a computer, they got their moms to hold a rummage sale and raise $3,000 to buy time on a DEC PDP-10, the same machine used by computer science researchers at Stanford and MIT.

Note: Recall that in the 1980s we venerated Donald Trump and studied his "art of the deal". 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.

Lesson 3: Acquire Research Results by Hiring and Buying

Conventional (loser) economic wisdom holds that monopolies should spend heavily on research because they are in a position to capture the fruits of the research. But if you want to become as rich as Bill Gates, you have to remember that it is cheaper to wait for a small company to come up with something good and then buy them. In the old days, antitrust laws kept monopolies from buying potential competitors. But not anymore. When Microsoft products were threatened by network computers and Web-based applications, they simply bought WebTV and Hotmail.

Another good strategy is to hire the right people. Some of the guys who wrote Microsoft Windows had previous worked on window systems at Xerox PARC. So Xerox paid for the research; Microsoft paid only for development.

In the long run a tech company without research probably can't sustain its market leadership. So you'll eventually need to build something like research.microsoft.com (check out netscan.research.microsoft.com to see some interesting online community research).

Lesson 4: Let Other People Do the Programming

If you're a great engineer, it can be frustrating to rely on other people to translate your ideas into reality. However, keep in mind that the entire Indian subcontinent is learning Java. And that if Microsoft, Oracle, SAP, and Sun products simply worked and worked simply, half of the world's current IT workers would be out of a job. You're not going to get rich being "just a coder." Especially working in painful low-level imperative languages such as C or Java. It might be worth writing your own SQL queries and HTML pages since these tend to be compact and easier than precisely specifying the work for another person to do. But basically you need to get good at thinking about whether a piece of software is doing something useful for the adopting organization and end-user. Bill Gates does code reviews, not coding.

[If you aren't sure that you need to be filthy rich and like to do some coding, see http://www.arsdigita.com/asj/professionalism for more about what it might mean to be a great software engineer.]

Lesson 5: Train your new CEO

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.

Note that this is a principle that Old Economy companies have long understood. Jack Welch joined GE in 1961 and became CEO 20 years later. Sometimes an Old Economy company may pull in a few outsiders to senior positions but, because they have such stable bureaucracies underneath, they can more easily afford this than startups.

See Charles Ferguson's High Stakes, No Prisoners (1999) for a longer explanation of how hired-gun CEOs manage to kill software products companies.

Lesson 6: Focus on Profit

"At Hewlett-Packard, people, materials, facilities, money, and time are the resources available to us for conducting our business. By applying our skills, we turn these resources into useful products and services. If we do a good job, customers pay us more for our products than the sum of our costs in producing and distributing them. This difference, our profit, represents the value we add to the resources we utilize."
-- David Packard in The HP Way

Remembering to make a profit was tough in the dotcom 1990s but it turns out that Hewlett and Packard's ideas were right. Most of the management teams at dotcom businesses, by being disorganized, unintelligent, and ignorant, were subtracting value from the resources that they controlled.

How does one make money in the software products business? Simple. The necessary step is to build something that becomes part of information systems that generate value for organizations and end-users. Once you've created value you can extract a portion in lots of ways. You can be closed-source and charge a license fee. You can be open-source and charge for training, service, support, and extensions. But if you aren't getting your software product into important information systems, you don't have a prayer, no matter how slick your marketing materials.

If you're creative and diligent the software products business is extremely lucrative. If you're losing money, ask yourself what you're doing wrong. The answer is probably "plenty".

Lesson 7: Let the Venture Capitalists Schmooze Wall Street ...
... but don't let them run your company.

A profitable Microsoft Corporation brought in venture capitalists (VCs) at the last minute. They didn't need or spend the money but used the VCs to boost their valuation at the initial public offering, thus getting more money for the shares that they sold. Venture capitalists are dangerous because even the most successful might not know anything about business. Remember that there are tens of thousands of venture capitalists in this world. Assuming that they make random choices of companies in which to invest there will be a Gaussian curve of performance. Some firms will do consistently better than average even if everyone is guessing. Imagine that thousands of monkeys are flipping coins; some of the monkeys will get 10 heads in a row. These are the monkeys that will be celebrated for their insight. These are the monkeys whose track records will lead to uncritical cheerleading by underwriters and public investors. In bull markets such as we had in the 1990s nearly all the monkeys will be fairly consistent winners. But remember your next-door neighbor who made money in the stock market in 1985. He convinced himself that he had special insight and ability when actually he was only holding high-beta stocks in a rising market. So his foray into the commodities futures market wiped him out in the crash of '87.

Bottom line: successful software products companies spend most of their time listening to their customers and users rather than to venture capitalists.

[See "Money, Money, Money (and Investing)" for how the Gaussian curve works for mutual fund managers and also read Princeton Professor Burton Malkiel's A Random Walk Down Wall Street.]

Lesson 8: Self-Esteem is Not Job 1

Gentility, politesse, decorum, and high self-esteem are wonderful. You can achieve all of these things within your organization. And then watch it be destroyed by competitors where frank and, if necessary, harsh criticism is encouraged. Technical people, even (and especially) those fresh out of school are always convinced that whatever they've developed, no matter how hare-brained, is perfect. It takes a technical person with good judgement to notice the flaws and it may require repeated and increasingly harsh delivery for the, uh, pinhead to realize his or her mistake.

Example: I once encountered a group of 6 people who called themselves "engineers." To solve what they thought was a new problem, they were going to build their own little database management system with their own query language that was SQL-like without being SQL. I pointed them to some published research by a gang of PhD computer scientists from IBM Almaden, the same lab that developed the RDBMS and SQL to begin with in the 1970s. The research had been done over a five-year period and yet they hadn't become aware of it during several months of planning. I pointed them to the SQL-99 standard wherein this IBM research approach of augmenting a standard RDBMS to solve the problem they were attacking was becoming an ISO standard. They ignored it and spent another few months trying to build their enormously complex architecture. Exasperated, I got a kid fresh out of school to code up some Java stored procedures to run inside Oracle. After a week he had his system working and ready for open-source release, something that the team of 6 "engineers" hadn't been able to accomplish in 6 months of full-time work. Yet they never accepted that they were going about things in the wrong way though eventually they did give up on the project.

An 1994 New Yorker article about Microsoft relates "If he strongly disagrees with what you're saying, [Gates] is in the habit of blurting out, 'That's the stupidest fucking thing I've ever heard!'". Jennifer New, a former Microsoft contractor, writes "Meetings with Bill or one of his top people are often replete with a barrage of expletives and other disdainful comments." (Salon, September 1997) My friends who work or have worked at Microsoft tell similar tales. But how different is this from other elite organizations?

When I arrived at MIT as a first-year graduate student in electrical engineering and computer science, I asked a professor for help with a research problem. He said "The reason that you've having trouble is that you don't know anything and you're not working very hard." A friend of mine was a surgery resident at Johns Hopkins. He complained to one of his teachers that he was having trouble concentrating because he'd been up all night for several nights in a row. The professor replied "Oh... does your pussy hurt?" According to Business Week, Jack Welch "encouraged near-brutal candor in the meetings he held [at GE]".

The bottom line: self-esteem is great but beware of creating a cozy home for unproductive people with bad ideas.


TRIBE Member
1. Being born rich does not necessitate STAYING rich.

2. Increasing your income exponentially is a good indication of knowledge of economic, social and general structures that surround you.

3. Evolution, is shifting from being able to camouflage ourselves and the ingenuity to feed from raw materials, to the ability to manipulate and control the various phillosophical stratas that the homo-sapien resides in.

4. The human equivalent of the silver-back male is Bill Gates.

5. Can you see the shift in perception?


TRIBE Member
Originally posted by SelfExel
3. Evolution, is shifting from being able to camouflage ourselves and the ingenuity to feed from raw materials, to the ability to manipulate and control the various phillosophical stratas that the homo-sapien resides in.

A. It's Homo sapiens

B. The switch from cryptic behaviour to a reliance on cognitive abilities occurred many millions of years ago.

C. Evolution does not 'switch.' It is an ongoing process with no predetermined direction, and thus cannot change direction.

D. I hope you're joking.
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Well-Known TRIBEr
I just love this....

Bill Gates, The Road Ahead, Viking Penguin (1995), page 265

The obvious mathematical breakthrough would be development of an easy way to factor large prime numbers.

Temper Tantrum

TRIBE Member
The only thing I like about Bill Gates is the fact that he developed the XBOX upon which I have wasted away many potentially productive hours!

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Well-Known TRIBEr
Originally posted by green_souljah
I honestly did not know that Gates came from money

There aren't many young billionaires that didn't come from at least a nice cushy upper middle class lifestyle. The cushion, whether needed or not, gives them the ability to take risks, whereas someone from a poorer background grows up being frugal, with mental blocks against making a lot of money.

Making lots of money always entails taking risks that most people aren't comfortable taking. I am included in this, for now, and I won't become a millionaire until I can remove certain blocks that have been embedded in my thinking.


TRIBE Member
A lot of his wealth may have arised through circumstance but there's no denying Bill Gates is a VERY SMART MAN.

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