The Secret Lesson of Gates' and Buffett's Extreme Wealth

NEW YORK (TheStreet) -- It's hard out there for a Carnegie -- or a Gates or a Buffett.

A century ago the great Andrew Carnegie was busy giving away the last of his estimated $10 billion fortune.

Your town probably has a Carnegie library in it. I have a nephew whose band will play at Carnegie Hall soon. Carnegie Mellon University and dozens of other universities owe their lives to his generosity.

But extreme wealth can have a self-sustaining quality to it. It can keep growing, even when you're trying hard to give your wealth away. Carnegie's philanthropy began after he sold his company to become part of U.S. Steel (X) for $480 million in 1901 dollars. He wound up giving away 10 times that much.

That's also the secret behind Bill Gates' return to the top of Forbes' billionaires list

It's also the secret of Warren Buffett's continuing relevance.

Gates didn't hang around the office much in 2013. Instead he spent most of his time at his Gates Foundation working to end dread diseases, aid developing countries and improve education -- to become a 21st century Carnegie.

Despite this, he managed to take back his title of world's richest person from Mexico's Carlos Slim. (Gates has $76 billion vs. Slim's $72 billion.) American media celebrated like we'd won something.

His was not a case of special genius, however. Gates mainly stayed invested in the stock of the company he co-founded in the 1970s, Microsoft (MSFT). The shares rose over 35% during the year, from the mid-$20s to the mid-$30s, and his fortune increased by $9 billion as a result.

This may be Gates' last appearance at the top of the charts, however. He's moving from the passive role of chairman to a more active role as adviser to incoming CEO Satya Nadella. Last year's gains may prove hard to sustain as the cloud grows, as Microsoft devices continue to struggle and as the PC market continues to shrink.

Buffett, meanwhile, clocked in at number four on the billionaire hit parade, with $58.2 billion.

Buffett hopes to give his fortune away through Gates' foundation, but that job gets harder as the hoard gets bigger. Imagine -- Gates now has to find a way to put over $130 billion to work for good causes. What 2013 shows is that job may actually grow.

Buffett's annual letter to Berkshire-Hathaway (BRK.A) shareholders shows him taking a very conservative tack. His big investments are in insurance, regulated utilities, financial companies and manufacturing. He admits to not understanding technology and his one big tech investment, IBM (IBM), lost money.

That conservatism is also reflected in his advice. At 83, he still emphasizes long-term value, he still likes index funds and bonds over more active investments, he still invests mainly in America and he still doesn't like pundits, even though reporters insist on treating him like one.

During good years -- and 2013 was a very good year -- fortunes rise almost by themselves. It's important to realize when you're counting your own wins from last year that it takes no special genius to make money during a boom.

The real lesson Buffett wanted to emphasize this year was staying the course in a bust. He described in detail two real estate deals he made during the course of his long career. Both were distressed properties managed by government. Avoiding panic during a panic is the real key to getting wealthy, he wrote.

But the deeper lesson of both Gates and Buffett is this. Anyone can look smart when things are going well. When things are going well, wealth can grow faster than it can be given away.

Gates and Buffett have barely begun to give, and the result of that giving will transform the world of your grandchildren, as Carnegie's giving transformed the world for Buffett and Gates.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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