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How did the wealthiest Americans make a fortune?

Thursday, May 2nd, 2013
Bill Gates

Bill Gates

With income inequality rising in the United States, there are two popular conceptions about which people make up the wealthiest one percent of Americans: that they were born into wealth or that they mainly include the CEOs of the largest public companies. Both of these are wrong.

Instead, self-made billionaires, many of whom forged a fortune from information technology and other entrepreneurs in retail such as Amazon’s Jeff Bezos, now make up a significant portion of the nation’s richest people.

New research from Joshua Rauh, professor of finance at Stanford Graduate School of Business, and Steven Kaplan, professor of entrepreneurship and finance at the University of Chicago Booth School of Business, finds that only a small fraction of America’s wealthiest fall into either of these two categories, and in both instances, the numbers are falling over time. Consider:

  • In 1982, 60 percent of the people on the Forbes 400 list of wealthiest Americans came from wealthy families, compared with 32 percent in 2011.
  • In 2004, top executives of publicly traded companies made up only five percent of the top one percent of the wealthiest people in the United States — a sliver of the population whose members earned individual salaries of at least $7.2 million per year that year.
  • The combined yearly income of the top 25 hedge fund investors exceeded the combined income of the CEOs of the Standard & Poor’s 500 index in 2009.

What explains the shift? Technology and scale.

“The Forbes 400 of today also are those who were able to access education while young and apply their skills to the most scalable industries: technology, finance, and mass retail,” Rauh and Kaplan write in their most recent study, “Family, Education, and Sources of Wealth Among the Richest Americans, 1982-2012.”

A six-screen Bloomberg Terminal.

A six-screen Bloomberg Terminal.

The explosion of information technology has created an entirely new class of the very rich, many of them self-made. It’s no coincidence that three of the 10 wealthiest people in the United States – Bill GatesLarry Ellison, and Michael Bloomberg – built their fortunes on information technology that barely existed in the 1980s. (Bloomberg’s fortune was built upon the “Bloomberg Box,” an advanced desktop computer running on a sophisticated data network.)

IT the foundation of 15 percent of fortunes

Drill down a bit more, and you’ll see that information technology is the foundation of 15 percent of the fortunes on the list, and that figure actually understates the importance of technology. Rauh and Kaplan found that on a weighted basis, roughly 25 percent of the businesses owned by the wealthiest people had a sizable technology component.

One sector grew even faster than technology as measured by its contribution to the incomes of those on the list: retail, including restaurants. Fifteen percent of the Forbes 400 fortunes are based on that industry.

Amazon's Jeff Bezos

Amazon’s Jeff Bezos

Retail is a sector in which technology and the ability to scale up operations has helped major players transform the landscape, making billions for entrepreneurs including Jeffrey Bezos of Amazon in e-commerce, and the Walton family with the more traditional Wal-Mart. The other growing sectors are medical technology, hedge funds, private equity, money management, and venture capital.

Old standbys less important

Meanwhile, old standbys, including real estate, energy, and media, have become significantly less important. Energy, for example, used to play a role in about 21 percent of the fortunes represented on the Forbes list; now it accounts for about half that much.

It’s noteworthy that the technology billionaires did not inherit vast amounts of wealth, though they were hardly paupers. Microsoft founder Bill Gates, for example, grew up in an upper-middle-class household, his father a successful lawyer. About half of the Forbes 400 grew up in circumstances similar to Gates’, compared with about 30 percent in 1982.

Some of the people on the Forbes list did follow a conventional path (for the very rich, that is) of inheriting wealth and then taking over the family business. The 10 richest people on the list include David and Charles Koch, whose fortune is based on the energy industry, and the Walton siblings, members of the family that owns Wal-Mart.

Taking the entrepreneurial route

Others took an entrepreneurial route, starting businesses that were far removed from what their parents had done. Kaplan and Rauh found that 69 percent of those on the list in 2011 started their own businesses, compared with only 40 percent in 1982.

Wall St. signThere’s a tendency to link runaway CEO salaries with rising income inequality. But here, too, the truth is more complex, as Rauh and Kaplan discussed in their 2010 paper, “Wall Street and Main Street: What Contributes to the Rise in the Highest Incomes?” (The authors are conducting a research project that will update the 2010 paper. Some data from that work in progress is quoted here.)

In 2010, the median pay for CEOs was $10 million, down from a high of $18 million in 2000. But even their peak salaries are small change compared with the average compensation of $1 billion for the 25 highest-paid hedge fund managers in 2009, says Rauh. Behind that astronomical compensation is scale. Hedge funds are handling money on a scale that was never even thought of in the past, he says.

Now consider the fortunes of professional athletes like Buster Posey of the San Francisco Giants, who just signed a nine-year contract worth $167 million. How is that possible? It’s another example of scale, says Rauh.

Intellectual fire power

Baseball and other sports now reach tens – in some cases hundreds – of millions of people around the world, making the market for a professional athlete’s skills much richer than ever before. Athletes like Posey, the professor says, are using their skills to get a larger share of the increased profits.

Commenting on how economic and technological change has shaped the formation of America’s upper class, Rauh puts it this way:

“Being superrich no longer requires being born wealthy, but wealth does confer advantages, particularly in access to education,” says Rauh. “The new order is that those with some wealth and a lot of intellectual firepower and ambition can take their talent and apply it to a much larger pool of resources than in the past.”

And that, he says, makes them even wealthier.

Business leaders trust news media more than politicians

Monday, October 22nd, 2012
Warren Buffett

Business leaders admire Warren Buffett by a wide margin in Speakeasy Trust Survey.

Business people tend to trust the news media more than politicians, according to the 2012 Speakeasy Trust Survey, and that’s saying something, considering that news media only scored 3 percent of the votes.

Politicians? No one voted for them.

The survey showed that the most trusted business leader is Warren Buffet, no surprise there, considering his public candor, and the most trusted company is Google.

Speakeasy, Inc., a nearly 40-year old executive communication consultancy that helps business leaders to develop more powerful and strategic communication, conducted the 2012 Trust Survey among business people at varying levels of responsibility within a broad range of industries, in September 2012.

asked to select who they trust most when receiving communication, respondents were given a choice between business associates, politicians, salespeople, celebrities or news media. The most votes were received for people we know personally, with 97 percent of respondents selecting business associates.

“Given the choices, it stands to reason that people would most trust the coworkers they see and interact with on a daily basis,” said Scott Weiss, CEO, Speakeasy.

“The real surprise is that politicians scored no votes while the news media scored three percent of the vote. What this says to me is that politicians need to take a good look at what they really represent in the public eye. Exacerbating the issue is the disturbing need to run every word uttered by a politician through a fact-checking process in order to validate their honesty.”

Buffett top business leader

Asked to provide a write-in answer for which business leader they trust most and why. Warren Buffett was the overwhelming winner, with 14 percent of respondents writing in his name. Among the reasons: “he is plain spoken,” “he is authentic,” and “it’s clear that his motivation is not just about money.

Other business leaders named in the survey include S. Truett Cathy (Chick-Fil-A), Bill Gates (Microsoft, The Bill and Melinda Gates Foundation) and Richard Branson (Virgin), each of whom earned six percent of votes. Regardless of the leader who was named, the reasons why didn’t differ much. The most common themes, says Speakeasy, were the leaders’ abilities to inspire people, their authenticity, their transparency, and their abilities to connect on a human level.

asked to provide a write-in answer for which company they trust most and why. Google, scoring eight percent of votes, edged out Starbucks, which was named six percent of the time. A common theme around Google was its customer focus. Google is “motivated to create useful products,” “is focused on the customer” and “values honesty.”

“Delivering consistently high quality products and customer service is the hallmark of a successful company, but in order to build enough equity to be named the most trustworthy, companies must bring something more to the equation,” added Weiss.

“Google and Starbucks are ubiquitous and reliable, and both have very public social programs with which people like to align themselves.”

Other companies that received multiple write-in votes in the survey were American Express, Target, State Farm, Chick-Fil-A and Amazon.

One week left to apply for NW Arkansas accelerator challenge

Monday, June 11th, 2012

By Allan Maurer

Northwest Arkansas probably does not come instantly to mind as a tech hub, admits Jeannette Balleza , director of The ARK Challenge Technology Accelerator.

But, NW Arkansas is cultivating its own startup ecosystem, building on its core strengths. The longstanding home to the corporate headquarters of Walmart, Tyson Foods, and J.B. Hunt Transport Services, Northwest Arkansas is recognized worldwide for leadership and world-class expertise in the retail, food and logistics industries.

The ArkIn addition, Balleza points out, NW Arkasas has the easy networking climate and reasonable costs of a small town but big city amenities demanded by a young, tech savvy workforce.

Tech companies – which do not have to be from Arkasas – have one week left to apply for a spot in the 14-week ARK challenge program. It seeks firms that can build a mobile app or Internet product attractive to one of the above clusters – retail, logistics, food processing – in time to demonstrate it to potential customers and investors following the program.

Up to 15 selected companies will receive over $18K each in seed funding, promotion, invaluable networking with advisors and potential funders, as well as intensive mentoring from a group of community-based and national mentors during a 14-week entrepreneurial bootcamp starting August 2012.

Each of the selected companies also will benefit from services of Innovate Arkansas, a program of the Arkansas Economic Development Commission and Winrock International that encourages technology-based innovations and job creation in Arkansas. Two of the selected startups will be eligible for an additional $150,000 in funding.

The ARK Challenge’s 60+ mentors include:

Inspired by innovation across the heartland—Detroit, Austin, Raleigh and Silicon Prairie of the Midwest, Northwest Arkansas is cultivating its own startup ecosystem, building on its core strengths. The longstanding home to the corporate headquarters of Walmart, Tyson Foods, and J.B. Hunt Transport Services, Northwest Arkansas is recognized worldwide for leadership and world-class expertise in the retail, food and logistics industries.

Additionally, The ARK Challenge has conducted interviews with representatives in each of these key industry clusters to identify the newest playgrounds for innovation for technology entrepreneurs. The resulting five-page technology assessment report is available for download here.

Bazella says ARK has received applications from seven countries and 11 states, some of them “exciting ideas in media social analytics.”

Visit for additional details and to apply, or contact The ARK Challenge Director Jeannette Balleza at or 479.595.6063.

Bill Gates: better than Batman? (infographic)

Friday, January 13th, 2012
Bill Gates

Bill Gates

Now and then I’ve heard a few save-the-world types disparage Microsoft and Bill Gates and felt it necessary to point out that Gates and his wife have done more to ease world hunger and fight global disease than all the people who sat around talking about it put together.

I probably wouldn’t go quite so far as to say Gates is better than Batman, but then again, we live in the real world, not Batman’s imaginary Gotham City. — Allan Maurer

Our friends at Frugal Dad have created this infographic to point out the charitable side of the Gates legacy:

microsoft infographic



Apple’s Steve Jobs dead at 56 (links)

Wednesday, October 5th, 2011

Steve Jobs, who led Apple Inc. from near disaster to becoming the second most valuable company in the world, has died at age 56.

U.S. President Barack Obama issued a statement saying “The world has lost a visionary. And there may be no greater tribute to Steve’s success than the fact that much of the world learned of his passing on a device he invented.”

One time rival, later investor, Microsoft’s, Bill Gates said, “For those of us lucky enough to get to work with him, it’s been an insanely great honour,”

Apple Inc issued a statement: “Steve’s brilliance, passion and energy were the source of countless innovations that enrich and improve all of our lives. The world is immeasurably better because of Steve,”

Jobs, who worked until only six weeks ago, fought a long battle with cancer, had a liver transplant, and never seemed to lose his entrepreneurial spirit even as his body showed the ravages of his battle with illness.

We worked exclusively on Macs for more than a decade. They were the tool in publishing and graphics (and in many cases, remain so for graphics intensive professions). They were cool right from the start, too. We recall getting a kick out of seeing a Mac in the corner of Seinfeld’s apartment in the TV show.

They’re still cool, you have to say that. At TechMedia events, Macbooks, iPads and iPhones are frequently in evidence as tools of choice among the tech-savvy speakers and presenters.

Those early Apple computers – the small ones with the handles – empowered many of us in many ways. You could make a living with one. In our field, by designing newsletters and publications, starting a magazine, word processing and freelance writing and editing.

But you could also do a great deal more.

We wonder how many businesses owe their existence to a Mac or two and an entrepreneur?

The user interfaces of all the technological devices we enjoy now are better for the Apple influence.

But Jobs himself was neither a designer nor a software code writer. He was, as many stories say right up in the headlines, a visionary leader. It’s hard to write a story about Jobs without adding, he’ll be missed. — Allan Maurer

Links to stories about Jobs’ life and death:

Tech Leaders Reflect on Jobs (Huffington Post)

New York Times

VentureBeat: Farewell to Steve Jobs

Wall Street Journal


Zuckerberg # 1 among Tech’s top 10 philanthropists

Thursday, September 8th, 2011

Time Mark ZuckerbergPeakYou is at it again: it has tallied the PeekScore of tech’s ten top philanthropists. Honestly, seeing Mark Zuckerman’s name at the top of this list, equalling Bill Gates, was a surprise.

Think what you will of Microsoft or Gates as a business leader, but he and his wife have done more to alleviate human suffering through their foundation than most of the people sitting around talking idealistically about world problems.

A PeekScore is a tool that ranks people based on the prominence of their web profile and media coverage.








Best Known For


1   Mark Zuckerberg Facebook 10.00 / 10.00
2   Bill Gates Microsoft 10.00 / 10.00
3   Larry Ellison Oracle 8.34 / 10.00
4   Marc Benioff Salesforce 8.07 / 10.00
5   Pierre Omidyar eBay 8.06 / 10.00
6   Paul Allen Microsoft 7.20 / 10.00
Steve Kirsch Mouse Systems 6.35 / 10.00
8   Gordon Moore Intel 6.30 / 10.00
9   Ming Hsieh Cogent Systems 6.20 / 10.00
10   Irwin Jacobs Qualcomm 5.48 / 10.00