Why did Steve Jobs' rivals end up wealthier?

SlateAugust 5, 2013 

One is dead, and the other has long since departed the corporate world for charitable pursuits. The rivalry between Steve Jobs and Bill Gates that dominated the computer industry for decades is over. And it's clear that Gates won. With his net worth of $66 billion, Gates sits atop the Forbes 400 list of richest Americans, as he has since 1995. Founding the most successful technology company in the world has its rewards. In fact, Microsoft's victory over Apple was so decisive that current CEO Steve Ballmer and third co-founder Paul Allen, sitting on $16 billion and $15 billion, respectively, are substantially wealthier than Jobs' widow, who must subsist on a mere $11 billion.

Except of course, that Microsoft isn't a more successful company than Apple. Not even close.

Microsoft is a vastly profitable company. Its $5 billion in net income last quarter is a ton of money, and its $260 billion stock market capitalization is impressive. But Apple dwarfs those numbers with $8.8 billion in profit and a $400 billion market capitalization. Comfortable with its lead in PCs, Microsoft has never been able to follow Apple into the world of mobile devices such as phones and tablets.

So why are Microsoft founders so rich even as their company's lost pole position? Because meritocracy is a myth, even at the highest levels of the U.S. economy. Good fortune and random chance are huge influences everywhere. And market rewards accrue to those who are good at making money rather than those who are good at doing things.

Microsoft's founders did a great job of retaining a huge amount of the company's stock after its initial public offering, and that allowed them to turn its success into a vast fortune. Jobs, by contrast, blundered and got rid of most of his Apple shares in a fit of pique after he was forced out of the company. He then made a whole new fortune for himself by obtaining a majority stake in Pixar in 1986. He came back to Apple relatively cheaply by selling Next Software in a $400 million acquisition that left Jobs owning a far smaller slice of Apple than is typical for a high-tech founder. A few years after his return to Apple, the company tried to reward him by illegally backdating stock options but got caught in the process. After that, he worked for $1 a year.

As of his death, the Jobs fortune was mostly Disney stock obtained when the studio bought Pixar — unrelated to his role in founding and managing the world's most successful technology company. Even Michael Dell, the founder and longtime CEO of a distinctly less successful computer manufacturer, had a higher net worth.

Not even the biggest Pixar fan would think animated feature films are Jobs' most important legacy. But merit is one thing and financial savvy another, even in the world of business.

Companies on such parallel trajectories as Apple and Microsoft are rare, but the same dynamic plays out throughout the economy. Chick-fil-A is a perfectly fine chain when it's not stumbling into political hot water, but nobody would mistake it for the dominant fast-food brand in the United States. Yet its founder, S. Truett Cathy, has a $4.2 billion fortune that far outpaces anyone else in the food game. Howard Schultz — the other solo restaurant founder on the Forbes 400 list — brought us the ubiquitous and socially transformative Starbucks and is getting by on a measly $1.5 billion. H&M has similar profits and more revenue than Inditex (the parent company of Zara and related brands), but Amancio Ortega is about twice as rich as Stefan Persson. Carlos Slim, the Mexican billionaire whose fortune rivals Gates', didn't invent or create anything particularly noteworthy. Oracle and Amazon are worth similar amounts, but Oracle's founder is worth about $20 billion more than Amazon's. The results, again, are driven by the nitty-gritty of financial dealmaking, not the success of the businesses as enterprises.

The disjoint between the two is a reminder that, despite 30 years of supply-side myths, it's difficult to understand action at the top as driven by financial incentives. Jobs didn't come back to Apple for the money — he was already rich and agreed to try to save the company without insisting on a huge share of the upside. And Ballmer, who's even richer, doesn't keep plugging away at Microsoft in search of an extra billion or two. Money counts for something, of course. But the real rivalries are about more than a desire to be the boy with the most cake — it's a competition for fame, prestige and the ability to shape the future of technology.

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