Citizen Gates

It’s Friday, so let’s have some fun. Let’s talk about Bill Gates.

Since I started covering him (in 1983), Bill has gone from geek to god to myth to legend. A few months ago he was poised to become the world’s first 12-figure man. (That’s a fortune of $100,000,000,000, folks.) These days he’s poised in the mid-eight figures (just below Larry Ellison on the wealth chart), and falling.

What has happened is that Bill fought the law and the law won. But Bill doesn’t believe the law has won. Bill’s still fighting the law. Bill’s lawyers and flacks insist (and so does he) he’ll win in the end. But it’s the fight that’s killing him, the steady wearing away of battle. The government, you see, can always try again.

Only two other entrepreneurs have ever dominated their industries like Bill Gates does his. Let’s look at his “peers.”

John D. Rockefeller lost control of what was called the “Standard Oil Trust” at age 72, when the U.S. Supreme Court ordered its dissolution. By that time he had been away from his business for 15 years. (His first key philanthropic advisor, by the way, was the Rev. Frederick T. Gates.)

What was the rest of the story? The competing pieces of the old Standard empire like Standard of New Jersey (Esso), Standard of New York (Mobil), Standard of Illinois (Amoco), and Standard of California (Chevron) competed fiercely, found immense new deposits and made Rockefeller’s heirs (and charities) richer than his wildest schemes. J.D. Sr. lived to age 98.

Thomas Watson Jr. was a second-generation entrepreneur. His father, Thomas Watson Sr., had been put in charge of a host of operations under the IBM name in 1915. (Watson Sr. created IBM’s corporate culture.) Watson Jr. told this story movingly in the book “Father, Son & Co.”, revealing (among other things) how the IBM 360 Project in the 1960s actually cost him the succession of his brother Dick.

When faced by the U.S. Justice Department, Watson and his successors fought for 30 years, and won. But it was a Pyrrhic victory. By the mid-1980s IBM was so laden with lawyers and flacks it was vulnerable to the first kid with a clue who came along. The kid (of course) was Bill Gates.

Neither Rockefeller nor Watson achieved Bill’s success at the age he achieved it. (He’s younger than I am, for crying out loud!) Given some Rockefeller luck, some good genes (Bill’s dad is still among us), and a tailwind from technology, Bill should have half his life to live yet.

But there’s an important lesson here. When an entrepreneur faces what he considers an Inquisition, his heart says fight when his head should go for a settlement.

Take a look at this chart, which I whipped up on CNBC.com. It shows the fates of IBM and AT&T shareholders since 1984, when AT&T split itself into eight parts under threat from the trustbusters. Note how AT&T shareholders have done better than IBM shareholders, who, as I noted, kept their firm together.

Now consider that, had you owned AT&T before the break-up and held on, you would also be sitting on shares in Lucent, in four Baby Bells, in NCR, and in the new AT&T Wireless unit. (I’m not even counting those cellular franchises.)

Bill Gates can be like Watson or like Rockefeller. He can tie himself to lawyers or he can let what he’s built work for him. It’s still his choice.

Related reading

/IMG/853/275853/gmail-logo-2013-320x198
activist
facebook-organic-reach
YouTube-logo-full_color
<