Today Microsoft's Market Cap Hit $4 Trillion. Bill Gates Should Be Worth $1.4 Trillion. Instead, He Took Warren Buffett's Horrendous Advice

Earlier today, Microsoft became the second company in history to cross the $4 trillion market cap threshold. Microsoft joins NVIDIA in the ultra-exclusive club. NVIDIA reached the milestone just a few weeks ago.

Microsoft's rise in just the last few years has been nothing short of astonishing. The company crossed a $1 trillion market cap in April 2019, hit $2 trillion in June 2021, and surged past $3 trillion in January 2024.

And if you want to go alllllllll the way back in time, Microsoft went public on March 13, 1986, at a $780 million market cap. So, if you were smart/lucky enough to purchase $10,000 worth of Microsoft shares at the IPO, today that investment would be worth $55 million.

Now imagine if you were smart/lucky enough to be an early Microsoft employee. And, in addition to salary, you were given a stock package equal to just 1/10th of 1% of the company. Today, that sliver of equity would be worth $4 billion.

Now imagine you were smart/lucky enough to be the company's co-founder and therefore you owned a HUGE chunk of equity at the IPO. That's obviously Bill Gates' real life. And in a slightly different universe, Bill should be worth an absolutely insane amount of money at today's $4 trillion market cap. He's still very, very, very rich now, obviously. But oh… what could have been had he not taken Warren Buffett's horrendous advice…

Bill Gates and Phoebe Gates (Photo by Sean Zanni/Patrick McMullan via Getty Images)

The Worst Fourth of July Barbecue in Financial History

When Microsoft went public in 1986, Bill Gates owned 45% of the company. He was 30 years old.

The company ended its first day of trading with a market cap of $780 million. So, Bill's 45% stake gave him a paper net worth of $350 million. Within a year, he was a billionaire.

By the end of 1990, Bill Gates was flying high. Microsoft's IPO had been a wild success. Windows 3.1 was a smash hit. And his 45% stake in the company gave him a paper net worth of $2.5 billion.

That's where Gates stood on a fateful Fourth of July weekend in 1991, when Warren Buffett happened to be in Seattle visiting friends. One of those friends knew Bill's parents and suggested they invite Warren over to a casual family barbecue. Bill would be there too.

Bill had zero interest in meeting Warren Buffett. In fact, he had less than zero. He thought of Buffett as a parasite—someone who profited off stock market inefficiencies without contributing anything of tangible value to the world. In Gates' mind, guys like Warren weren't builders or innovators. They were financial scavengers.

But everything changed after a single conversation.

Buffett didn't ask about Microsoft. He didn't try to talk tech. Instead, he asked what Gates later described as "amazingly good questions that nobody had ever asked." One of those amazing questions was something along the lines of:

"How are you planning to diversify your wealth?"

At the time, literally 100% of Bill's net worth was his 45% stake in Microsoft. And as crazy as this sounds in hindsight, at the time Bill – and lots of really smart people – thought the software business was in a very precarious position. It wouldn't take all that much capital for a startup to produce a superior operating system or suite of software products that blew Microsoft out of the water. It had happened over and over, creating a graveyard of once-dominant early software tech companies.

So, unfortunately… as time would eventually prove… Warren's question hit Bill hard and, within months began undertaking a massive financial pivot.

It was a prudent move. It made Gates safe. But it also cost him the biggest bag in financial history.

All Shares Must Go!

Not long after that 1991 BBQ encounter, Bill started selling huge chunks of his Microsoft stake. He used the proceeds to fund a new private investment firm called Cascade Investments that would serve as his umbrella wealth diversification vehicle. Over the next three decades, Cascade would go on to acquire major stakes in hundreds of companies across multiple industries. For example, Cascade owns 71% of the Four Seasons hotel brand, as well as large stakes in waste management company Republic Services, Canadian National Railway, Ecolab, AutoNation, and Deere & Company, just to name a few.

By 1997, Gates had reduced his ownership from 45% to 26%.

On the day Bill stepped down as CEO in 2000, he owned 14%. And he never stopped selling. Today, he owns just 1.3% of Microsoft. That 1.3% stake is worth around $52 billion, constituting roughly 40% of his current $122 billion net worth.

What Could Have Been…

Warren wasn't giving Bill bad advice, but Bill took it way too far. Bill easily could have sold off a solid amount of shares to generate billions in liquid wealth to find Cascade, while still retaining 30% or even 35% of Microsoft.

Had Gates simply held onto 35% of Microsoft—a perfectly reasonable amount for a founder, today his stake would be worth $1.4 TRILLION. Not only that, he would be receiving around $9 billion in dividends every year. Instead, he took Buffett's advice and diversified himself right out of the trillionaire club—one that never even got a chance to exist.

If that sounds crazy, consider this:

Larry Ellison is the founder and CEO of Oracle. Oracle went public on March 12, 1986. That's one day before Microsoft's IPO. On the day of the IPO, Larry owned 39% of Oracle's equity. Unlike Gates, Ellison doubled down. After decades of buybacks and personal purchases, he now owns 42% of Oracle—more than he did at IPO.

With Oracle trading at an all-time high today, the company's market cap is $715 billion. As a result, Larry's net worth is $300 billion right now, enough to make him the second richest person on earth. Bill's $122 billion fortune makes him #12.

Don't Forget Ballmer!

When Steve Ballmer joined Microsoft, he was NOT given any equity. He was given a generous compensation package that entitled him to a bonus based on the company's revenue growth. That bonus structure quickly became extremely expensive for Microsoft. So, ahead of the IPO, Steve agreed to give up the bonus structure in exchange for 8% of the company. Today Steve Ballmer owns 4% of Microsoft, roughly 333 million shares. He is the company's largest individual shareholder. Steve has revealed in various interviews that he barely sold any shares over the decades. His first major sale occurred in 2014, ahead of his $2 billion purchase of the Los Angeles Clippers NBA team. Today, roughly 90% of Steve's net worth is his Microsoft shares. At today's $4 trillion market cap, Steve's 33 million shares are worth $177 billion. His overall net worth is $183 billion. That makes him the FIFTH richest person in the world. And YES, if you do the math, Ballmer's net worth is 96% Microsoft stock!

The Lesson?

Bill's trillion-dollar folly proves one thing: building generational wealth doesn't always require ten monitors, algorithmic trading models, or timing the market.

Sometimes, the biggest fortunes are made by doing something incredibly simple: Buy enough of the right company… and never sell.