Steve Jobs got a small part of the Giant Turnip at Apple and a large part of it at Pixar

When Steve Jobs died in 2011, Matt Yglesias said that he was a net-worth failure compared to other computer executives like Michael Dell and Bill Gates:

The rivalry between Steve Jobs and Bill Gates that dominated the computer industry for decades is over. And it’s clear that Gates won. With his net worth of $66 billion, Gates still sits atop the Forbes 400 list of richest Americans, as he has since 1995. Founding the most successful technology company in the world has its rewards. In fact, Microsoft’s victory over Apple was so decisive that current CEO Steve Ballmer and third co-founder Paul Allen, sitting on $16 billion and $15 billion, respectively, are substantially wealthier than Jobs’ widow, who must subsist on a mere $11 billion… Except of course, Microsoft isn’t a more successful company than Apple. Not even close. …Microsoft is a vastly profitable company. Its … $260 billion stock market capitalization is impressive. But Apple dwarfs those numbers with … a $400 billion market capitalization…

If productivity were related to pay, then Jobs should have been richer than Bill Gates because Jobs created a far more valuable company, but Bill Gates had six times more money than Jobs at his death. Jobs was more successful in business by every measure, but net wealth at that point. Jobs not only started Apple, the world’s most valuable company, but then he left it in 1985 and then it faltered. When he returned in 1997, Apple was on the verge of bankruptcy and Jobs deserves considerable credit for helping resurrect it to become a market dominating company again. Whereas Microsoft was a copycat company that used its monopoly power over Windows to invade markets others had established, Apple was an innovator that created entire markets and changed the way we live and do business today. Jobs sometimes said that his goal was to, “put a ding in the universe” and he made a bigger ding that most CEOs. His company pioneered the microcomputer revolution, the smartphone revolution, the computer interface that we all use with icons and a mouse, tablet computers, and digital music players (which were later subsumed by smartphones). Along the way, Apple’s digital audio systems revolutionized the entire music industry, bringing the world away from CDs into digital music with the Itunes store and transformed talk radio into a podcasting industry.

Despite all of that success, Jobs got very little of his fortune from Apple. Most of his wealth came from a lucky break with a relatively small investment he made in a business that he bought as a side hobby. After leaving Apple and cashing out his stock there, in 1986, Jobs bought the computer graphics division of George Lucas’ company for $10 million which he renamed Pixar. Pixar was a money loser for the first decade and Steve Jobs was only involved in a very part-time manner while he focused on his main business venture, NeXT, a struggling computer hardware startup that never became successful. Tim Ott says that Pixar, “was only being kept afloat through [Jobs’] personal checks, amounting to some $50 million through 1991… Pixar remained something of a side project; day-to-day operations were left to Lasseter and CTO Ed Catmull, the boss only showing up about once per week.” But then Pixar came out with Toy Story in 1996 which was hugely profitable and over the two decades that Jobs owned Pixar, it produced a grand total of five more movies after Jobs returned as CEO of Apple. When Jobs sold Pixar to Disney for $7.4 billion in January 2006, that was where the vast majority of his fortune came from. It wasn’t from the NeXT company that he worked so hard at nor at Apple where he put a ding in the universe while sometimes only drawing $1 in salary per year. It was by buying an animation company that merely produced six cartoons over the two decades he owned it and has only produced about one cartoon a year since then.

If pay were related to productivity, then Steve Jobs would have been the richest man in the business world, but pay is determined more by bargaining power than productivity.  Jobs didn’t bargain for a large share of Apple’s wealth while he was busy putting a ding in the universe there. Jobs got most of his wealth from Pixar because he got a huge share of its value even though it was only about 2% as big as Apple and didn’t put much ding in the universe.

Posted in Labor, Managerial Micro

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