So How Did Bill Gates REALLY Start To Build His Fortune?

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.

So, why is Bill Gates so wealthy? Well, it’s not exactly what you might think -- although starting a company has something to do with it. Here is a surprising reason why Gates is so fabulously successful...

William Henry Gates III (even though he was the fourth person with the name) 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 him when they saw how interested he was in computers.

Bill Gates attended an exclusive prep school while growing up, and then he attended Harvard, although he didn’t get very far. He spent most of his time with computers. In fact, from the time he first saw a computer while at prep school, he was fascinated with computers and spent as much time as possible with them.

When the time came that he wanted to start a company with some of his old school fellows, Gates turned to his parents, who provided support for him. Even though Gates’ company probably would have been successful anyway, and even though there were plenty of partnerships, the fact that Gates had wealthy parents to fall back on 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.

Now that Gates has tens of billions of dollars to his name, it’s possible for him to put it to work effectively so that his money earns more money. 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 to Gates, along with providing him a way to support causes he is interested in. Gates also partners with his billionaire friends on projects.

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.

But where else does Gates put his money? One of the most interesting facts is that, now that Gates is 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.

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, he still got a head start in life thanks to his rich and successful parents.