Hasn't Bill Gates mostly been focused on spending his fortune as effectively as he can on philantropy for the last decade or so? In that light it's more amazing it took that long.
his wealth has barely beaten the s&p 500 since he left though. The growth is more to do with the bull market in general than the specific feats of his money manager
Yes -- especially because just about every diversification strategy being promoted over the past 20 years involves putting money into other asset classes that have under-performed the S&P by large amounts. And the arguments for diversification are everywhere. Hard to ignore them.
Wealthfront, for example, currently cites a 3-year annualized return of 5.67% on its best batch of portfolios (ie tax-advantaged), and a 5-year annualized return of 9.44%.
By contrast, a pure S&P play would have provided 10.09% annualized over 3 years and 15.17% over five. Links are here:
I don't believe BillG had all his money in S&P index funds. But he and/or his managers were able to find other investments that did even better. That's not easy to do, given markets of recent years, as the Wealthfront data indicates.
About one third of managers beat the market. The problem is that there is no correlation between year-to-year performance of managers: the manager who beat the market this year is no more likely to beat it next year than any other manager.
It occurs to me that maybe the way to beat the S&P is to focus on the losers and not the winners.
That is, if you could figure out which listed companies were going to fare the worst and build a partial index fund with the rest, you'd beat the index.
Similar research style to short selling but with less downside.
In order to beat the market, you have to know something it doesn't already know. But eventually, it's (they're) going to learn that, too, so you'll have to learn something new. The only way to keep beating the market is to gather information faster than the "average" and keep up with the information that it has, relative to what you invest in, although usually you can accomplish most of the work in the latter half (beta, IIRC) by watching the market itself. In brief, as Martin Shkreli put it: invest in yourself...
Unexpected takeovers make this much harder than it seems.
For example, Twitter's prospects on its own don't look so great right now. But if that induces you to avoid owning Twitter, you miss out on a quick profit (perhaps even a big one!) if some larger company decides to buy it.
I don't think it's any easier to find companies that will under preform. Apple stock seems over priced right now with P/E:17.66 and not so great growth prospects, but so does Amazon and Facebook and the rest of the S&P 500 when you take a close look.
I wasn't able to find actual data on his performance, what I found is that: "Cascade does not publicly disclose its performance results". If someone has actual numbers I'd be happy to see them.
By managers I mean professional portfolio managers.
Individual investors pretty much all do worse than market.
EDIT: obviously that means there is skill involved. But it seems that professional managers are close enough in skill that luck is the dominant factor.
He's surely been spending many billions of dollars in that time period though, we can't know how much but I think it would be more than enough to be significant.
Aside from the fact that he's been aggressively donating his personal assets to philanthropy rather than accumulating them in recent years, it's very difficult to beat the S&P when you're talking about tens of billions of dollars.
At that scale, the S&P isn't even a good benchmark, because it's not like a single investor can just dump that much in an index fund or even in the underlying companies directly.
SPY and the Vanguard version together represent half a trillion dollars of wealth under management. And that's just the top two. So yes, you can dump that much in index funds.
From other comments: Vanguard's 500 index manages ~500 billion (dmoy), Gates is worth ~100 billion (kevindqc). Even so, Vanguard can't just increase their fund by 20% like that.
Right you're sorta missing the point though. Vanguard outside of the s&p 500 has another 3.5 trillion or something. They could absorb bill gates net worth.
Vanguard's 500 index alone represents 550 billion under management. (It's split into 4+ expense ratio classes depending whether you have 0, 10k, 5m, 50m, 5b or whatever)
matching the S&P 500 with billions of personal assets is reallllly hard. Almost nobody in that position would just put $30B in NEA with Vanguard and wait - not diversified enough.
If you've got $30B in personal assets, it's hard to imagine any investment situation short of the complete collapse of the monetary system that wouldn't leave you as immensely wealthy until you die.
Indeed. I've always preferred using one billion seconds as a way of understanding just how much a billion is (hint: it's 31 and change years).
The average American lifespan is 2.4 billion seconds.
If you were shoveling 100 dollar bills, you could actually do some damage in the relatively short term (you could probably reasonably shovel $5k-10k/10s, or $500-1k/s, so you could burn through a billion every 1.5-3 weeks (assuming you never sleep or eat).
If you were working a 40hr week shoveling hundreds, it would take 6-12 weeks to burn through a billion.
If you were doing the same but with singles it would take 6-12 _years_ to burn through a billion.
So if you started with $30B - it would take between 180 and 360 years to get rid of all that money by shoveling it into a furnace.
You could literally have a few generations of heirs whose job is shoveling money into a furnace and they would be considered significantly wealthy for most of those generations.
Of course. It's a ludicrous amount of money, you could just keep it in cash and not worry about it. That wasn't in any way the topic of conversation - it was why is it difficult to beat the market (or even match the market) managing that much money for one person as a money manager.
Wikipedia almost always classify every billionaire as philanthropist for no good reason. The only exception is Bill Gates who is trying to make this world a better place.
>The only exception is Bill Gates who is trying to make this world a better place.
I hardly call being a eugenicist "making the world a better place". The Nazis tried it too. They also thought they were "trying to make the world a better place". Bill Gates is a notorius eugenicist.
Are you kidding me? Did you see how many articles there are in that search result? Over 30 at the very least. What I was implying by giving the link was, there is overwhelming evidence, not that I'm lazy, but that people who ask "for a source" are often too damn lazy to even type into a search engine. I might as well have sent a LMGTFY link. I would expect a little more intellectual effort out of ycombinator readers, but I suppose that's how it goes these days. Everyone wants a hand out.
Isn't this site basically run by programmers? Ya'll can't type into a search engine though? I mean really?
Of course there are articles. Of course I could read them. But I could not judge them since I'm not knowledgeable in the subject. For example, I don't know the affiliations of the sources involved, so I cannot judge if they just want to throw some shit at Gates over a decades-long personal feud or something.
Why? What is the return that he will make on his efforts to eradicate polio and malaria?
You could perhaps argue that his work in education will lead to a more capable tech workforce in the future, but even then, the returns won't go to him.
I don't understand what you gain by using the term "philanthropic investing" over "charity" if there are no monetary returns.
Edit: I'm just trying to understand why you think it's more precise to label what Bill Gates is doing as "philanthropic investment" as opposed to "giving money away."
I should clarify that I don't really have a horse in the race; I was just providing an example of why "giving money away" might be in quotes.
For example, consider the following scenarios:
- I pay for my college.
- I pay for my son's college.
- I pay for my niece's college.
- I pay for a stranger's college.
- I pay the university directly so that more strangers can attend.
Most people would be comfortable calling the first "investing" in yourself, and would think it ludicrous to call it "giving money away." Probably still mostly true for the second (though some would have switched camps). What about the fourth?
It doesn't seem like there's a hard line anywhere. Probably just two ways of looking at the same thing, which for me anyway has an effect on how I use my money (I don't want to "give it away" but am happy to "spend it" on making others' lives better).
I am easy to classify as an anti-microsoft zealot and I am convince Gates is doing immeasurable good with his work in Africa against malaria. I haven't really looked into in the past year or so though.
Apparently he is worth 90 billions. Let's assume he has donated 2 more billions in the last 4 years to make it 30 billion. That means he donated 25% of his worth to his foundation. I'm sure he has donated money to other things.
