How Did Bill Gates Get Rich and Powerful?

Updated September 11, 2020
posted on 06-07-2019

If you wanted to invest like the richest person in America, what would you do?

Bill Gates is the richest man in America and, as of March 2013, the second-richest man in the world. His net worth was right around $67 billion in March.

Well, it’s not exactly what you might think (although starting a company has something to do with it).  

Was Bill Gates Born Rich?

William Henry Gates III was born in Seattle, Washington, to wealthy and successful parents. Originally, his parents wanted him to be a lawyer – like his father – but they were supportive of his interest in computers.

Bill Gates attended an exclusive prep school while growing up, and then he attended Harvard, although he is a famous drop out of the prestigious school. 

Were Bill Gates’ Parents Rich? 

When he decided to start a company with some of his old school fellows, Gates turned to his parents to provide a loan. Even though Gates’ company probably would have been successful anyway (with plenty of partnerships), Gates' wealthy parents helped immensely as he built one of the most successful companies in the world.

But he hasn't spent his time and money simply accumulating more wealth

Bill Gates’ Charitable Work 

Now that Gates has tens of billions of dollars to his name, it’s possible for him to earn more on investments and interest. However, he doesn’t put it all to work for his own benefit: With his wife, Bill Gates established the Bill and Melinda Gates Foundation in 2000, a charitable effort that funds a number of initiatives, many of them dedicated to eradicating disease or improving conditions for women in developing countries. It’s worth noting that Warren Buffett is one of the three trustees for the Bill and Melinda Gates Foundation and plans to leave a bulk of his wealth to the charity.

Running a charitable foundation (the endowment is at $36.4 billion) provides certain tax benefits and a way to support the causes he is interested in. 

He joined Buffett (someone he plays bridge with) in encouraging the uber-wealthy to give to charitable causes. He also partnered with Carlos Slim (the world's current richest man, according to Forbes) to build an agricultural research center in Mexico. There are plenty of projects to fund, and Gates is considered by many the world’s most generous person due to his efforts.

Where Else Does Gates Put His Money? 

One of the most interesting facts is that – now that he's no longer involved in the running of Microsoft – a large portion of his wealth has nothing to do with Microsoft’s performance.  Indeed, less than one-fifth of his wealth comes from his 5% stake in Microsoft.

Instead, Gates spreads his investments across stocks, private equity, and bonds. A large amount of his wealth is managed by Cascade Investment LLC, and the large positions held by Cascade are considered somewhat stodgy: shares of Republic Services (operating trash collection companies and landfills, along with recycling facilities) and AutoNation. Gates also invests in Ecolab, a hygiene tech company, and FEMSA, the largest beverage company in Latin America.

Invest Like a Professional

The Investing Answer: While Bill Gates protects his wealth through diversified investments and doesn’t rely too much on his company stock. And while his foundation provides charitable help to others, having wealthy parents certainly didn't hurt.