One Family's Finances: How Bill Gates Invests His Money Like a lot of people, he's got stocks, bonds, and a money manager. But there are differences. For one thing, his personal portfolio is the size of a large mutual fund.
By Andy Serwer Reporter Associate Jeanne Lee

(FORTUNE Magazine) – On the eastern shore of Lake Washington, halfway between Seattle and Microsoft's sprawl over in Redmond, sits a modest, three-story office building inhabited by some pretty remarkable characters. Two of Seattle's hottest venture capital firms are there. Down the hall is the billionaire cellular visionary Craig McCaw. On the same floor is Teledesic, McCaw's futuristic satellite company. But perhaps the most intriguing person of all works behind a door marked only by a tiny sign that reads "BGI." Inside is a boyish-looking 39-year-old with a brush cut who could well be the most powerful man on Wall Street you've never heard of.

His name is Michael Larson. And BGI stands for Bill Gates Investments. Larson is Bill Gates' private money manager. He runs the entirety of Gates' fortune not invested in Microsoft stock. That sum, which sits in Gates' personal account and in two huge foundations, now amounts to $11.5 billion, and counting. Though this is a fraction of Gates' wealth--his 18.5% stake in Microsoft is worth some $76 billion today--it is still by any measure a huge chunk of money. About $5 billion of the $11.5 billion that Larson manages is in Gates' personal investment portfolio: that is roughly the same size as the Fidelity Value fund, a big mutual fund with 412,000 shareholder accounts.

As for Gates' foundations, well, the combined $6.5 billion he has sent their way in recent years has swiftly elevated them to the ranks of the very largest foundations in the world. His William H. Gates Foundation, with an endowment of $5.2 billion, is right up there with those founded by Ford, Kellogg, and Mellon. But while it took those pre-info age giants decades and decades to create the kind of wealth necessary to fund a great foundation, Gates has amassed his fortune in less than 13 years. His foundations, practically nonexistent at the beginning of Bill Clinton's second term, suddenly are sitting on endowments so large that they will have to give away some $325 million a year just to comply with tax laws on charitable giving. That figure is more than the median net income of the companies in the FORTUNE 500 last year.

The most amazing thing about Larson's job, though, is that it's really just beginning to gear up. As you've probably heard, Gates says he plans to give away nearly all of his wealth in his lifetime. It's an outrageously large fortune, the largest the world has ever known in current terms, and disposing of it presents huge challenges. "Giving away $1 billion is tricky," says one wealthy philanthropist. "Ted Turner is giving that much to the U.N., and you can always give to a major university, but they would just put up new buildings. There just aren't that many organizations that can really do the right job with that kind of money." Says Gates: "Effective philanthropy requires a lot of time and creativity--the same kind of focus and skills that building a business requires."

To give his money away, of course, Gates will have to dispose of huge chunks of Microsoft stock. In fact, Gates has already begun his big push. As first reported by in early February, Gates recently gave some $3.3 billion to his two charitable organizations, the William H. Gates Foundation and the Gates Learning Foundation. And now FORTUNE has learned that Gates has given another $1 billion to the William H. Gates Foundation.

These are staggering sums of money, among the biggest charitable gifts ever made, and they bring to mind an interesting paradox. With all the turbulence swirling around Microsoft these days--the trial in Washington and the prospect that PCs might become obsolete, to name just two--a simple fact about this company is sometimes overlooked. Microsoft continues to be one of the great stocks of our time. Since Microsoft went public in March 1986, the stock has compounded 59% annually, with much of its fastest growth coming over the past five years. For instance: In August 1995, rival Netscape Communications went public at $28 a share. Since then, that company's stock is up 151%. During that same stretch, Microsoft shares climbed 584%. And believe it or not, Microsoft's stock is up some 56% since its antitrust trial began in Washington this past October. Today, Microsoft's market capitalization is around $400 billion, making it the most valuable company in the world. Thousands of investors have become ridiculously wealthy buying and holding MSFT.

Until very recently, Bill Gates wasn't the richest man in the world; he was just a really rich software CEO. If you go back six years, Gates' Microsoft stock was worth around $7 billion. Gates had no foundations or philanthropic infrastructure then. As for his personal wealth, well, that was managed very informally. But as his wealth continued to grow exponentially, those arrangements became problematic.

On the philanthropy front, critics began muttering that Gates was miserly. And then, on the money-management front, came a real blow. On March 4, 1993, the Wall Street Journal published a story reporting that Gates' money manager at the time, Andrew Evans, along with his wife, Ann Llewellyn, had years earlier been convicted on charges related to bank fraud. Evans was an old friend of the Microsoft CEO, and Gates was said to be helping him out by employing him. In any event, the article created an uproar. Gates' mother, Mary, a powerful influence on Bill, was said to be disturbed that her son had a former jailbird running his personal portfolio. Evans had to go. Gates needed to find a new money manager.


This new portfolio manager would have to be smart. He would have to have a killer track record. But Gates was looking for more than that. "Since Microsoft is my primary focus, I wanted someone who could operate on their own," he says. "I also wanted someone with a conservative philosophy about investing. I needed to have complete faith in the person I picked, since I didn't ever want to have to look over their shoulder." One more thing about the new money manager: After the Evans imbroglio, he would have to be as clean as a whistle. So Gates didn't mess around. He hired a headhunter named Bert Early, a former executive director of the American Bar Association. Early heard about Larson, then 33, from some investors in Tacoma and gave him a call.

Michael Larson, the son of an industrial engineer, grew up in North Dakota and then in Albuquerque. When he graduated from high school, he wanted to join the Coast Guard but couldn't because he was only 16. He attended Claremont College, finishing in three years with a degree in economics, and then went directly to the University of Chicago, where he picked up an MBA at the age of 21. From there Larson went to work for Arco doing mergers and acquisitions. Then he shifted gears and joined Putnam Investments in Boston, managing bond funds. After two years he struck out on his own. He was trying to buy a money-management firm in Chicago, without much luck, when Bert Early rang him up.

"He told me I would be working for a wealthy guy in the Pacific Northwest," Larson says, in his office in front of a huge window with a view of the rain-swept lake. "I actually thought it was Craig McCaw." No, Early told him, it's Bill Gates, and could he please have the names of 13 references. "I thought it was the old FBI trick," chuckles Larson, "you know, ask for 13 and randomly pick three. But Bert called all 13 and kept each of 'em on the phone for an hour." Apparently Larson didn't have as much as an unpaid parking ticket in his file (has he considered running for office?), because Early gave him the thumbs-up.

"Actually, when I heard it was Bill, I wasn't sure I wanted the job," says Larson. "I think he had just fired some people, and I thought he would be difficult to work for. But I had to meet him." So he came out, and the two men hit it off. They talked about Albuquerque--Microsoft's hometown in the early days--about risk management, and about investing, of course. "The interview was what really sold me on Michael," says Gates. "He's bright and very inquiring, and has a strong performance record."

Though the wired-in Larson works out of this Lake Washington office, he has become Bill Gates' eyes and ears on Wall Street. The two men e-mail each other frequently and meet to talk investing every six weeks.

You might think that running the investment portfolio of the world's richest man would make a person squirrelly or vain. Larson is neither. He's relaxed, grinning all the time. His demeanor lies somewhere between "gee whiz" and "gosh" (the latter is a favorite utterance). "A lot of people in Larson's position would let the job go to their head," says Silicon Valley superinvestor Roger McNamee, who runs money for Gates farmed out through Larson. "But Michael's level of humility is amazing." Says Larson, trucking around his office with a megamug of Starbucks: "You hear people say this sometimes, but for me it's really true: I have the best job in the world. It's pure investing. No marketing. Not much management. And client relations is limited to one guy."

The word on Wall Street about Larson is frankly admiring, and not just because everybody wants a piece of his business. Last year Larson outperformed the Dow, even though he had over half his money in cash (some trick). "I think Gates is incredibly lucky to have Larson," says John Griffin, a top New York hedge fund manager. "He's really good. And he's someone Bill can really trust."

When he signed on with Gates in 1994, Larson set up a company called Cascade to be the principal vehicle for Gates' investments. Why the name Cascade? "It's real generic-sounding in the Pacific Northwest," says Larson. (Sort of a Seattle version of Acme.) At that point Gates' non-Microsoft portfolio was about $400 million--barely enough to achieve critical mass in the investment-management business--but Gates assured Larson that if Microsoft continued to grow, so would the assets in Cascade. Meanwhile, Larson explained to Gates--who insists on knowing how everything works--some of the fine points of modern portfolio theory. Larson drew a pie chart for Gates with a single tiny sliver carved out of it. The pie is your Microsoft stock, Larson said to Gates, and the tiny sliver is Cascade.

Of course, that sliver is now a multibillion-dollar fortune in its own right. So how does Larson invest that money? "Well, I'm not a risk taker," he says. In fact, he's an old-fashioned value investor with a macro view. Larson doesn't restrict himself to stocks; he looks at bonds, currencies, commodities, land, and direct investments in companies--we'll get to the details presently. "My most important job is asset allocation," he says. "That's where the real money is made." Larson is iconoclastic yet fundamentally conservative, which, if you think about it, is a pretty good description of his only client.

Wired in though he is, Larson keeps a very low profile. His business card has no company name on it. The voicemail at his office says that you've reached "the investment office." As recently as a few years ago he'd call a Wall Street firm and identify himself, only to be asked, "who the heck are you?" But now that he's been around for a few years with all that money under management, he's finding that happens less often. He's been hitting the conference circuit too. He goes to Herb Allen's Sun Valley mogul-fest and Salomon's annual infotainment gathering. A golf freak with a ten handicap, Larson recently came back from a conference at which he played a round with Paul Hornung and Jake ("The Snake") Plummer. Wayne Huizenga flew him over in a helicopter to play on Huizenga's private course in Florida.

With the hiring of Larson, Gates had solved his money-management problem, but his philanthropy efforts were still undeveloped. For this problem, though, Gates didn't have to employ headhunters. He had a solution much closer to home.


"Basically, requests [for charity] would end up coming to my office," says Bill Gates' father, a retired lawyer. "I told Trey [a family nickname for Bill] that we needed to set up a real foundation." Bill Gates' dad, as you might expect, is a formidable guy. A spry 73 and about 6-foot-6, he's taller and bigger than his son, though their faces are mirror images, 30 years apart. Bill's dad actually was born William H. Gates Jr. (Bill is William H. Gates III.) But as the son became nearly as famous as Michael Jordan, he became known as the junior Gates, and his dad was called Gates Sr.

While Gates the younger can come across as the ultimate icy computer wonk, Gates Sr.--even though he was a corporate lawyer--seems folksy, even warm and fuzzy. He can't hide his pride in his son--the two have always been close--and chokes up when talk turns to his late wife, Mary. And the elder Gates likes nothing better than to go for coffee down at the Burgermaster near the University of Washington campus. (The shakes there are pretty good too.) Senior, along with Mary, had always been active in charity--both led United Way campaigns. So as he stepped back from his work--he retired at the end of 1997--it was only natural that he head up his son's philanthropy.

If building a great fortune is like scaling a mountain, then figuring out how to give it away is like climbing down. That is to say, the disposition of great wealth has its own set of risks. The problem isn't just being flooded with requests. Take the issue of planning how much money to give away. How do you figure that out when your wealth is growing the way Microsoft's stock has? Consider that in 1994, when Gates and his father set up the William H. Gates Foundation (the Gates Learning Foundation was established in 1997), Microsoft stock traded at between $10 and $15 a share, split adjusted. It now trades around $160, though it had slipped a bit as FORTUNE went to press. "Of course we never imagined it would get this big," says Gates Sr. with a slightly awed look on his face. "No one could have."

When Gates made his first gift to the William H. Gates Foundation--$106 million in 1994--an informal protocol was established. Gates Sr., working out of his basement office, would screen grant proposals and send the promising ones on to his son. The younger Gates would pick from his dad's picks--usually approving them--and send them back to Gates Sr., who would then send a fax to Larson requesting that he draw up the checks. The system worked, and so even though the assets of the foundation have now grown to some $5.2 billion, that's basically how things operate today.

There have been a few changes. Gates' wife, Melinda, has become an equal partner in deciding which grant requests are worthy of funding. Last year Gates Sr. drew down a salary for the first time--$40,000 a year, plus $2,520 for expenses--and he now has an assistant, Suzanne Cluett, an old friend of the family. Of course the number of proposals keeps growing. Cluett says she now receives about 100 requests for grants every week (and responds to every single one). "We send about 25 to Bill and Melinda every three months or so." The dollar amounts of the grants have climbed too. By federal law, a charity must distribute at least 5% of its assets each year. Ergo: "We will be giving about $325 million each year," says Gates. "And we will be increasing the size of these foundations over time."

No matter how much Gates gives away, though, critics are bound to make him a target. Remember, they bashed him at first for not giving enough away. Then, after he made initial donations of software, PCs, and services, they cried that this was a ploy to get future generations hooked on Microsoft products. Now, as he pushes his philanthropy into the big leagues, he is accused of using charity as an expensive PR campaign to soften his cold-blooded monopolist image and to influence the outcome of the trial in Washington. Is that true? "Baloney," says Warren Buffett, a close friend of Gates, who has discussed philanthropy with him at length. Gates Sr., in an interview in his old law offices at Preston Gates & Ellis, says, "All I can say is that it ain't true. It just doesn't have anything to do with it." One goad that seems to have had an impact, Gates Sr. says, was Ted Turner's challenge to other wealthy Americans to be as competitive about giving as they are about accumulating. "Trey never said anything to me, [but] the Ted Turner thing may have had some effect," he says.

So why did Gates wait so long before he gave money? "Most people do not start giving significantly until they are late in their career or retired, or when their will comes into force," says Gates. "Five years ago, I thought I would wait until I was in my 60s to do major giving. However, as I learned more about opportunities to make a big difference now, I decided not to wait." Buffett says it's a good thing Gates waited as long as he did. "If he had given away 90% of his money ten years ago, it would have been at a huge cost to society," says Buffett. "Giving away that money early on might have cheated the world out of $100 billion. Instead he has been running the best-performing endowment fund in the world." The counter-argument is that there is a time value of money to charity as well. That is, if Gates had given away, say, $50 million ten years ago to eradicate a disease, and that money had found a cure, and the cure had saved 100,000 lives, let alone saved $1 billion in health-care costs, how do you assign a value to that? There is no right answer, of course.

Already, the value of the assets in the William H. Gates Foundation places it squarely in the top ten largest American family foundations (see table). If Gates does in fact give nearly all his wealth to his foundations, he will easily top the list, unless of course Microsoft's business is completely eclipsed, which isn't likely anytime soon.

Gates' two foundations have very distinct goals and functions. The William H. Gates Foundation is a trust, with Gates the sole trustee. It's a grant-making organization--it doesn't implement programs--with three basic thrusts: world health, education, and giving in the Pacific Northwest. The list of grants is a bit of a hodgepodge, ranging from smallish gifts, like $10,000 to Girls Inc. of Sioux City and $1 million to the Oregon Shakespeare Festival Association (Gates Sr. is on the board), to $20 million to Duke University (Melinda was a Blue Devil), to the recently announced $100 million children's vaccine program. To date, the William H. Gates Foundation has given away, or committed to give, some $222 million. "We give to projects we think can improve the lives of people," says Gates. "Our goal is that millions of people will receive the benefits of new medicines and the empowerment of access to information."

Consider Gordon Perkin and his organization, PATH (Program for Appropriate Technology in Health), located right in Seattle. PATH develops inexpensive, easy-to-use medical tools for developing countries, like home birthing kits for women in Nepal and low-cost tests for infectious diseases. The William H. Gates Foundation has pledged or given to PATH some $3 million--and has asked it to oversee the $100 million children's vaccine program. In fact, PATH may well become the conduit through which much of Gates' giving on health will flow, and Perkin has become Gates' chief consultant on world health issues. Since that is a primary focus of the William H. Gates Foundation, PATH and other groups could transform Seattle into a new center of medical programs and research.

Gates' other philanthropy, the $1.3 billion Gates Learning Foundation, is headed by Patty Stonesifer, a hard-charging former Microsoft executive who ran the company's consumer-products group before stepping down 2 1/2 years ago to spend more time with her kids. Unlike the William H. Gates Foundation, the Learning Foundation is an operating entity, which means it runs most of its own programs. During the past two years the Learning Foundation has given more than $32 million--mostly in the form of computers, support, and services--to bring information technology and access to the Internet to libraries in low-income areas in the U.S. and Canada. (Gates calls it an "Internet Peace Corps.") "We used Census Bureau numbers to target areas, and then we went in and worked with the librarians to implement the technology," says Stonesifer, sitting in the foundation's offices next door to a pawnshop in Redmond.

It's no coincidence that Gates' focus on libraries matches the interest of one of the nation's greatest philanthropists, steel baron Andrew Carnegie. The Scottish immigrant built more than 2,500 libraries--1,700 in the U.S.--between 1881 and his death in 1919. Gates has studied Carnegie and read his classic book, The Gospel of Wealth. In fact, Gates has already wired some libraries that Carnegie built. So far, Stonesifer's troops have hooked up libraries in 28 states. Now Gates and Stonesifer have plans to carry the project beyond libraries to community centers and even farther afield. "We're giving it a more global focus," says Gates, "and seeking other partners to bridge the gap between the haves and have-nots."


As Gates converts billions of dollars of Microsoft stock into philanthropic tender, Michael Larson will be shepherding the funds every step of the way. He will manage the foundation portfolios until the dollars are expended on syringes, scholarships, and software. "People have no idea the kind of pressure that Michael Larson operates under," says Roger McNamee. "For one thing, he's running money for two of the largest foundations in the world. The better he does, the more good works can be done."

Here's how Larson's job works. He's in charge of three large pots of money: the two foundations and the $5 billion or so in Gates' personal portfolio, which is mostly invested through Cascade, though there are other smallish accounts also under Larson's auspices. Each of these three pools is discretely managed, with its own objectives and investments. And there's one thing both Gates and Larson want to make perfectly clear. "Michael and I talk regularly about general investment matters, but he has full discretion over the portfolio." Gates says. Larson, his usual grin gone for a second, says, "I wish everyone understood that. When people find out that Cascade has made an investment in something, that's not Bill Gates. I'll call Bill about something I'm buying if he needs to know, but Bill might not have any idea what Cascade owns." (There are exceptions to this rule. For instance, Gates makes his own investments in biotech--more on that later.)

So what's in the portfolios? The Learning Foundation is the simplest. Because Patty Stonesifer and her crew have a fairly constant need for cash, Larson keeps this portfolio mostly in short-maturity U.S. government and corporate fixed-income securities. The William H. Gates Foundation is a little more complicated. Though it may have a smattering of stocks at any given time, it too is almost entirely in bonds--about 75% short-term U.S. governments and corporates. "The portfolio is pretty conservatively positioned right now for a couple of reasons," says Larson. "First, it reflects my view of the markets. And second, we just had an inflow of a couple of billion dollars." Another reason bonds are attractive to Larson is that as new money streams in, scaling up in the fixed-income markets is much easier than in stocks.

As for the other 25% of this foundation's assets, Larson has made investments running the whole gamut of the bond market. He holds some inflation-protected Treasury bonds called TIPs, and plain-vanilla corporate bonds like Ford, Du Pont, and Time Warner (parent of Time Inc., FORTUNE's publisher). He also has a position in junk bonds and foreign government bonds--Danish, German, Canadian--as well as foreign corporates, gobs of mortgage-backed securities, and all sorts of hedging investments. Larson farms out some 15% of the overall portfolio to bond managers at Morgan Grenfell, PIMCO, Miller Anderson & Sherrerd, and Western Asset Management. "These guys have discretion over the money we give them, but if I don't agree with their take on interest rates or the yen, I'll override them by hedging," Larson says.

Gates' $5 billion personal portfolio is another matter. First, there is the question of how much Microsoft stock Gates should own. "The money I have outside Microsoft is less than 10% of the total," says Gates. "Since we are obviously heavily weighted with Microsoft, we will sell stock periodically in order to get more diversity. It's basically the same strategy most individual investors engage in." (As if!)

Because Microsoft stock has soared over the past few years, Gates and Larson have had to sell huge amounts of stock to maintain even the semblance of a diversified portfolio. Since the company went public, Gates has sold an average of five million Microsoft shares a quarter, adjusted for splits. That works out to around 80,000 shares every single trading day, though Larson sells through a "blind program" during legal windows to avoid insider-trading charges. Larson tries to sell as quietly as he can through his favorite brokers, including DLJ, Goldman Sachs, and Allen & Co. Gates has sold some 256 million (split-adjusted) shares of Microsoft stock over the past 13 years, for about $5.16 billion. He has given away another 76 million shares.

If Gates continues to sell and give away Microsoft stock, will he still hold sway over the company? "Losing control of Microsoft isn't an issue as I give the money away," says Gates. "No one person controls Microsoft. The board and the shareholders decide whether they want to have me as CEO." (Sure, Bill.) Actually, Gates' ownership of the company has declined steadily over the years. At the time of the IPO, he owned 44.8% of Microsoft's stock. He now owns just about 18.5%. About half of that decline is due to dilution, brought about by the issuance of millions of shares to Microsoft employees exercising options, while the other half is due to stock sales and gifts.

As for the actual content of Gates' $5 billion portfolio (drum roll, please), it turns out to be not that exciting. And for good reason. "If you think about it, 90%-plus of Bill's wealth is in a single technology stock. He really doesn't need much, if any, equity exposure at all," says Larson. "Right now his portfolio actually looks somewhat like a big old bond fund." In fact, a recent snapshot of Gates' personal portfolio looks like this: Larson has 70%, or $3.5 billion, invested in short-term governments and corporates, with a small weighting in foreign bonds. He also owns some emerging-market debt and high-yield issues. "Basically we are short on the yield curve right now," Larson says, again reflecting his wary view of the markets.

What about the other 30%, or $1.5 billion? About half of it--$750 million--is in what Larson calls private equity; that's buyout funds and direct investments, such as Gates' stake in Teledesic, McCaw's satellite company (Larson is on its board). That figure also includes funds run by outsiders. About 5% of Gates' portfolio is farmed out to managers like McNamee's Integral Capital Partners and Blue Ridge Capital, a New York hedge fund run by John Griffin, former right-hand man of Julian Robertson at Tiger Management. Larson also has a significant amount of money in short positions--actually more than usual right now--which reflects his view that many stocks are fully, if not overly, valued. He also has a small amount of money with Bill Fleckenstein, who runs a short-selling fund.

Of the nonbond portion of Gates' portfolio, another $250 million is in what Larson calls "real stuff." He means real assets, like commodities (he's been in and out of crude oil futures) and real estate, such as investments in the Reserve, a real estate and golf course development near Palm Springs, and in the Cliveden hotels in England.

The remaining $500 million is in stocks. Given Gates' huge position in Microsoft, why does Larson own equities at all? "Because I think some stocks have behavior patterns that run counter to Microsoft," says Larson. "For instance, if and when the air comes out of tech stocks, food and oil stocks could hold up real well. The other reason we do equities is because we have some expertise in certain areas, and we make money at it." It so happens that one of Larson's interests is media stocks. He favors cable stocks such as TCI and Liberty Media, as well as Cox Communications and Barry Diller's USA Networks. Larson also holds Berkshire Hathaway--he owned 300 shares last year and recently bought a bunch more--which he thinks became particularly attractive after its Gen Re acquisition. "Gen Re was in the S&P 500. Berkshire isn't. So after the deal, index managers had to sell Berkshire, depressing the price."

Gates does make his own investment decisions in biotech. Says he: "I've always been interested in science--one of my favorite books is James Watson's Molecular Biology of the Gene. I'm an investor in a number of biotech companies, partly because of my incredible enthusiasm for the great innovations they will bring. I serve on the board of ICOS [which develops drugs to fight inflammatory diseases]. I continue to make a number of investments in this area." At various points Gates has owned stock in other biotechs--including PathoGenesis, Targeted Genetics, and Chiroscience--but he is out of all those stocks now. He recently bought a stake in a company called Advanced Medicine, a private biotech firm.

As for tech stocks, "we pretty much don't own 'em," Larson says, "not with Bill's other asset." It could be awkward, of course, if Cascade owned, say, 3% of a small tech company that Microsoft's strategic planners later decided they wanted to gobble up. Or if that small company felt inclined to sue Microsoft at some point. Gates does, however, own some tech stocks through his investments in McNamee's partnerships. And Larson concedes that he might be short some tech names. "I do think the market is high right now, and there is an awful lot of excitement about tech stocks," says Larson. Whoa! Does that mean he thinks Microsoft is overvalued? "I wouldn't bet against [Microsoft]," he says.

Larson continues: "I just think at some point the cycle is going to turn. We'll have some rotation. There will be some trigger event that will change the equity market's point of emphasis. Agriculture, for instance, will come back. Stocks like Deere & Co. [which he owns a bit of] will make out. Oil looks interesting. There are some opportunities in that sector, and I don't think oil has to go back to $20 a barrel [for oil stocks to work out]."

What about interest rates? "I think they will trend higher. It's true we don't see much inflation now, but wage inflation is evident, and everything is in such high gear right now. I think long rates could climb 100 basis points, which could be a shock to the market. It could also make for a real nice buying opportunity." But Larson knows he has to go easy. "Sure, I could torque up the portfolio," he says, perhaps a little wistfully, "but that's not what I'm paid to do. The point wasn't for Bill to become richer than the Sultan of Brunei." No, but that happened anyway, not because of anything Larson did but because of Microsoft's explosive growth (and a little imploding on the Sultan's part).

The point is that the real growth engine is Microsoft. Just how big will the company, and therefore Gates' fortune, become? How much will Gates end up giving away? No one knows, of course, not even Gates. But consider this: If Microsoft's stock compounds over the next 20 years by merely 10%, Gates' fortune, even assuming some selling, could be worth $400 billion. Impossible, you say? Well, what would you have said 13 years ago--the day of Microsoft's IPO, when Gates' holdings were worth $234 million--if someone had told you he would be worth $80 billion before the end of the millennium? Impossible.

Andrew Carnegie was regarded in his day not just as a robber baron but--after the Homestead Strike of 1892, in which hired guards killed seven striking steelworkers--as a plutocrat with blood on his hands. He reshaped his image by giving away most of his fortune during his lifetime, and today he is remembered less for the strike than for his phrase "the man who dies disgraced."

Today, Bill Gates is known variously as the creator of Microsoft, as the richest man in the world, and as a monopolist hell-bent on world infotech domination. Hard as it may be for some people to swallow, future generations may remember Bill Gates instead as the greatest philanthropist the world has ever known.