How Bil Gates Earn Money?
How does Bill Gates earn more than $ 1 million every day by doing nothing?
Some of the companies listed on the stock exchange, such as Microsoft, distribute part of its profits in each quarter or year to shareholders in the form of dividends.
For years, the computer giant has been paying dividends to its shareholders. For example, in 2014, a shareholder who bought Microsoft shares receives $ 1.24 in annual dividends for each share owned in the company.
This puts Bill Gates' annual income in the form of dividends at around $ 370 million (298,000,000 shares * $ 1.24). That translates to more than $ 1 million a day in income!
Bill Gates doesn't need to do anything but keep his Microsoft stocks to make that money. Also, it doesn't include other multi-billion dollar investments and revenues that far exceed what he owns in Microsoft.
Microsoft's IPO
The 1980s saw many entrepreneurs who sometimes had not yet reached their thirties suddenly find themselves a member of the million dollar club. The key to such enrichment is a specific event: an IPO carried out with skill.
The late 1970s favored the emergence of a new breed of investor: venture capitalists. Converted businessmen, financial experts attracted by the substantial gains resulting from a judicious investment, they try to marry several skills: a flair allowing them to detect the technologies promised with a major success, a knowledge of the mechanism of the companies which brings them to be able to intervene actively in the management and to suggest the recruitment of experienced executives and finally the control of the passage on the public market.
By definition, the venture capitalist seeks to make a profit, and very often withdraws from a business once he has been able to preside over the IPO. On this occasion, they can convert the shares they acquired when the company was in formation into cash and, in the best case, multiply by ten or more their initial investment. By the way, the founders themselves see their fortunes grow exponentially.
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Apple went public in December 1980. Overnight, Steve Jobs immediately found himself in possession of assets amounting to $ 256.4 million, while Steve Wozniak earned $ 135.6 million.
When Ashton-Tate entered the public market in August 1983, its founders George Tate and Al Lashlee saw their personal fortunes rise to around $ 50 million. In October of the same year, Lotus did the same, bringing Mitch Kapor to enjoy a $ 104 million jackpot.
Ben Rosen, one of the venture capitalists involved in financing the company, saw his investment of 2.1 million convert to 70 million. Rosen then had a particularly happy hand: a few months later, the enthronement of Compaq on the Place de Wall Street operated the same transmutation, the 2.5 million engaged in the adventure generating a windfall 32 times greater.
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The only one absent on the stock market
In 1986, Microsoft is one of the few major micro-computing companies that has not yet given in to ritual. It is true that unlike Apple, Compaq, Ashton-Tate or Lotus, it is under no pressure from venture capitalists eager to see their contributions grow on a large scale. It has grown essentially on its equity and the only outside investor - David F. Marquardt - owns only 6.2% of the company.
Financially, the company is in good health: it makes a profit corresponding to 34% of turnover and has no need of external funds.
However, in order to attract talented executives and programmers, Bellevue's company has the practice of offering them, in addition to an attractive salary, "stock options", that is to say preferential options on the shares of the company.
The new recruit is given a quantity of shares that she can buy at a minimum price - which was initially around the paltry value of $ 1. In addition, so that the employee can acquire an attractive number of shares, Microsoft lends him the necessary money. Steve Ballmer has borrowed more than five hundred thousand dollars from the company and is in possession of 1.7 million shares. Many executives find themselves in potentially profitable situations.
Jon Shirley owns four hundred thousand shares and Charles Simonyi just over three hundred thousand. However, these holdings remain virtual as long as Microsoft is not listed on the public market. Jon Shirley and David Marquardt have repeatedly encouraged Gates to follow the example of Apple, Compaq and Lotus.
But, despite the fact that he holds more than 49% of the shares in his company - 11 million two hundred thousand shares - Bill shows a deep disinterest in such an eventuality and tries to postpone this painful event as far as possible. Mitch Kapor, president of Lotus, portrayed the formalities of this transaction in a bleak light. The yuppies that strut on Wall Street belong to another culture: they essentially feel concerned by the greenbacks, and therefore, arouse only contempt among software enthusiasts.
The Securities Exchange Act enacted in 1934 requires a company to register vis-Ã -vis the Security and Exchange Commission (SEC) once it has distributed shares to five hundred or more employees. It then becomes by force of circumstances a company listed on the public market. Such forced introduction is rarely desirable, as it is not controlled. If it occurs at a time when the company is temporarily suffering from stunted growth or the threat of competition, it may find itself largely undervalued. As things evolve, Microsoft should reach the threshold of five hundred employees holding shares around the end of 1986. Bill Gates knows therefore that it is necessary to undertake sooner or later the IPO and resolves himself to such a possibility in April 1985.
However, the period does not appear ideal for the MS-DOS editor. Microsoft is on the eve of three major events. The Excel spreadsheet for the Macintosh is about to be announced. On the PC, Windows sees its release date go back indefinitely without it being possible to perceive the end of the tunnel. Finally, IBM should conclude a new contract relating to the writing of an Advanced DOS for the PC. It is crucial to ensure the success of the above three points: the Microsoft title will then appear in a cheerful light in the eyes of investors.
In the absence of such a prerequisite, the financial specialists will not fail to attack the company on these points. Another subject is bothering Bill. It has so far managed to avoid too much staff turnover, unlike most other software companies. In the event of an IPO, certain key figures may be tempted to abandon the company after having sold their shares at the appropriate time. He therefore wishes to conduct his little investigation and conditions his final agreement to what he will have detected.
Where does Bill Gates’s billions come from?
A cascade of dollars
His actions at Microsoft therefore represent only 17% of his fortune. Where does the remaining 83% come from, a whopping $ 67.16 billion? Much less known than Microsoft, his company Cascade is actually one of its main sources of income, or more precisely of wealth. This investment firm, created by Bill Gates almost twenty years ago, holds shares in numerous companies around the world. The billionaire has indeed sold many times a part of his Microsoft shares in order to reinvest them either in his Bill and Melinda Gates foundation, or in Cascade, knowing that the foundation anyway does not hesitate to spend its money in the same companies than Cascade.
The immediate problem is that this investment company hardly reveals its secrets. Financial details regarding this business are therefore scarce. Two Wall Street Journal journalists have also devoted an article to Michael Larson, the man who pilots Cascade Investment LLC and who made the fortune of Bill Gates, increasing it from 5 billion to more than 80 billion in the space of two decades.
And my colleagues at the WSJ confirm that it is extremely complex to obtain information on the investments made by Cascade. The latter makes very few public announcements and therefore keeps most of the financial information secret. It is however possible to obtain some details by looking well.
Read on to Know How Bill Gates Earn Money?
For example, we know that Cascade owns 45% of Four Seasons Hotels and Resorts, a company specializing in luxury hotels and present worldwide. The Toronto-based hotel, according to the Hotel Association of Canada, had revenues of $ 4.1 billion. However, this data dates from 2012 and today the value of the company is probably even higher.
Cascade is also FEMSA, whose real name is Fomento Económico Mexicano, S.A.B. of C.V. It is a company partially owned by Coca Cola (minority) and leader in Latin America in the sector of beverages such as beers, juices and soft drinks. According to Zonebourse, Cascade Investment LLC owns 12.9% of the shares listed in New York. And right now, FEMSA from C.V. is worth more than $ 6.9 billion, or nearly $ 900 million for Cascade.
My colleagues from the Wall Street Journal have also learned that Bill Gates, still via Cascade, owns at least 100,000 hectares of farmland in several American states. The investment company also owns 12% of the Canadian National Railway, a company today valued at more than $ 58 billion on the New York Stock Exchange. The company also owns 14% of the automobile giant AutoNation ($ 6 billion on the stock market) and 1.4 million shares of the waste management specialist Republic Services ($ 13.85 billion). This does not include investments in various luxury properties.
In all and for all, Cascade's investments would be worth more than $ 24 billion according to the WSJ. So the account is not there. By combining Cascade with Microsoft stocks, Bill Gates would weigh "only" about $ 38 billion. There remains therefore 43 billion to find.
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However, you should know that over the past 20 years, the founder of Microsoft has sold about $ 40 billion worth of his own company's stock. A significant part was transferred to its foundation while another was reinvested in Cascade. These share sales therefore do not explain his current fortune as calculated by Forbes.
The business newspaper has certainly added the significant dividends paid by Microsoft in recent quarters. For example, in its latest financial statement, the Redmond company said it will pay a dividend of 31 cents per share for the current quarter. For Bill Gates, this still represents $ 92 million. Knowing that dividends from previous quarters were around 28 cents and 23 cents a year ago, according to our calculations, in two years, the billionaire has recovered more than $ 500 million by this means. But that still doesn't explain the $ 43 billion balance.
An investor-foundation
The key is actually found in the multiple investments made by Bill Gates. Because in addition to Microsoft and Cascade, there are also personal investments, this without counting the billions invested by its foundation. Now what do we notice after research? These personal investments, those of Cascade and those of the Bill & Melinda Gates foundation are often made in the same companies. It is sometimes difficult to differentiate which entity owns which shares, especially since the one who runs the foundation's business is none other than ... Michael Larson, the very one who heads Cascade. The circle is complete.
We know, for example, that in total, the founder of Microsoft owns more than 72 million shares of Berkshire Hathaway Inc., the investment firm of his billionaire friend Warren Buffett. However if the action of the Redmond firm took 40% in one year, Berkshire Hathaway also progressed (+ 22%). As a result, Bill Gates, whether through Cascade or its foundation, owns about $ 15 billion just from this company, more than Microsoft. Of course, the $ 15 billion can't be attributed directly to Bill Gates, and Forbes probably doesn't take it into account. However, this possession should be remembered, even if it takes place mainly through the foundation.
It is not finished, however. Bill Gates, again through three different means, also owns more than 11.6 million shares of Walmart (the world's No. 1 retailer), 11.2 million shares of Caterpillar (construction machinery), 10.8 million shares of McDonald's, 8.1 million shares of Exxon Mobil, 34 million shares of Coca Cola, 6% of the Spanish FCC / Fomento de Construcciones y Contratas SA (construction), 10 , 3% from Switzerland Givaudan (perfumery), 25% from Ecolab, 18.6 million shares at Waste Management Inc, 3 million shares at FedEx, etc.
Without being able to make a complete list of the investments made by Bill Gates on his behalf, via Cascade or via his foundation, here is a summary that I was able to make after many hours of research. Numbers are rounded and amounts are in US dollars
- Berkshire Hathaway shares: 15 billion (partly thanks to donations from Buffet to the fundation)
- Microsoft shares: 13.8 billion
- Ecolab shares: 8.7 billion
- Canadian National Railway shares: $ 7 billion
- Deere & Company shares: 2.4 billion
- Four Seasons Hotels and Resorts shares: 2 billion
- Givaudan shares: 1.5 billion
- Coca Cola shares: 1.4 billion
- Caterpillar shares: 1.1 billion
- McDo shares: $ 1 billion
- FEMSA shares: 900 million
- Walmart shares: 880 million
- Waste Management shares: 880 million
- AutoNation shares: 840 million
- Exxon Mobil shares: 760 million
- Televisa shares: 570 million
- FedEx shares: 480 million
- Crown Castle International shares: 430 million
- BP shares: 320 million
- Liberty Global shares: 250 million
- FCC shares: 150 million
- Republic Services shares: 55 million
Knowing that some of Cascade's investments are being kept secret, it is not impossible that some of the above amounts may be undervalued. We must also add the forgotten investments and other sources of income of Bill Gates. Not to mention the money he has in his bank account and whose value is unknown. This explains why the total amount is "only" 60 and a few billion dollars.
Note that this article is not intended to directly address the case of investments by the Bill and Melinda Gates Foundation, or the impacts of the various investments of the billionaire. However, this could be the subject of future papers since there is a lot to be said, in particular on the relations between the foundation and certain pharmaceutical groups.
How much is Bill Gates' fortune?
Forbes magazine publishes the list of the richest men in the world every year. According to the rankings released in the first quarter of 2019, Bill Gates is among the top three with Jeff Bezos and Warren Buffett. The fortune he has amassed over the years amounts to several billion dollars. The question that arises is how can a man raise so much money without having been in a dynasty.
From high school to creating the famous Microsoft, his journey is quite extraordinary and also explains how he got there. Back on the path of this man who is one of the pioneers of IT and his fortune. How much does he earn with all his activities?
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