Aspire | Action | Acquire
Aspire | Action | Acquire

The self-made myth

An overwhelming majority of today’s large corporations are independent of family control. Primarily, this is a function of the financial capital required to scale a large organization. Another is choice, as was Andrew Carnegie’s. The late Ewing Kauffman, whose business, Marion Laboratories, was worth $1.5 billion in 1987 purposely excluded family so to attract and retain the most capable managers. When interviewed for the book The Ultra Rich, Kauffman boasted that “Eighty-three senior people have stock worth more than a million dollars.”[1] Kauffman’s legacy is a private foundation to facilitate entrepreneurship education.

At the same time as the leveraged buyout mania, that fed the 1987 stock market crash and the recession that followed in early 1990s, another “remarkable force” was also sweeping America. Some 7,000 companies with nearly 10 million employees were granting direct stock ownership; thus giving a foot in the door that was historically open only the wealthy.[2] This was a significant departure from a practice initiated a century earlier by Andrew Carnegie, and later Pierre S Du Pont, who granted shares to a select number of management employees.

By the 1990s, the impact of employee share ownership became most pronounced in the then emerging information technology industry. In How to be a billionaire, Martin Fridson cites the title of a 1994 magazine article: “Nowhere on earth do more millionaires and billionaires go to work every day than do so here.”[3] The Business Week article confirmed what the The New York Times had reported two years earlier. Nearly one in five employees at Microsoft were millionaires. At the age of 36, co-founder Bill Gates was worth $7 billion. Microsoft had created more millionaires than the Wall Street takeover frenzy.[4]

In The self-made billionaire effect, its authors very perceptively identify “producer” and “performer” partnerships at Bloomberg, Facebook, and eBay. Further validations can be found at Google, when Eric Schmidt was employed as CEO, and at Apple; where Steve Wozniak was the founding producer and Steve Jobs the performer. The importance of the distinction between producers and performers is that it divides an earlier distinction made by Vanderbilt, Carnegie, Rockefeller, and Ford between “producers” and “promotors.”

Promotors, typically comprising stockbrokers and banks, are discussed in a separate article.

A central acknowledgement in The self-made billionaire effect is the multiple empirical studies dating back to the 1990s identifying that companies with typically two or more founders are more successful than those founded by a sole entrepreneur. This can be seen as a specific trait of Bill Gates whose first partnership was formed as a teenage student developing a class-timetabling program. By contrast, J D Rockefeller’s first partnership to build a refinery in Cleveland was with Samuel Andrews, a fellow churchgoer. Like Gates, whose most acknowledged partnership was with Paul Allen, Rockefeller’s was that with Henry Flagler.

What distinguishes Microsoft’s enabling equity participation from previous generations is that it went beyond key managers and former owners of acquired businesses. In a book about the du Pont family, its author states that Du Pont Company established a bonus plan in 1905 to permit key employees to purchase and pay for shares out of dividends. This was not dissimilar to what Carnegie had done. Carnegie confined partnerships to actively participating workers. For Du Pont the bonus plan had the added attraction of creating a secondary market for the shares of retiring partners whose businesses had been acquired.


[1] Vance Packard. The Ultra Rich: How Much is too Much. Boston, Mass: Little, Brown, 1989, 151

[2] Vance Packard. The Ultra Rich: How Much is too Much. Boston, Mass: Little, Brown, 1989. 335

[3] Martin S. Fridson. How to be a Billionaire: Proven Strategies from the Titans of Wealth. New York: Wiley, 2001. 113.

[4] Timothy Egan. “Microsoft’s Unlikely Millionaires (published 1992)”. New York Times 1992. < https://www.nytimes.com/1992/06/28/business/microsoft-s-unlikely-millionaires.html >