Veteran Barron’s scribe Andrew Bary serves as a reminder of a lesson my late father repeatedly drilled into me: There is no substitute for experience. Bary joined Barron’s more than three decades ago, when it was still a must-read, market-moving publication known for its contrarian views. Barron’s, in a story by my longtime Canadian-born friend Jack Willoughby, was responsible for blowing up the dot-com bubble when the rest of the business press was still touting those stocks.
Barron’s has lost its way over the years, touting bogus socially responsible metrics known as ESG and forever promoting GM and CEO Mary Barra. Meanwhile, Bary is still quietly cranking out insightful, critical stories I wonder if even his editors appreciate. One of those was his recent story explaining how Larry Ellison briefly overtook Elon Musk as the world’s richest man.
Ellison’s time at the top didn’t last: Musk quickly reclaimed the crown and widened his lead, thanks in part to his nearly $1 billion Tesla stock purchase disclosed on Monday.
Simply put, Ellison achieved a big chunk of his wealth by artificially inflating the stock price of Oracle, the database company he founded nearly half a century ago. By contrast, Musk created his wealth by building companies — Tesla and SpaceX — whose value is tethered to their business prospects. Ellison created billions in paper value; Musk created factories, batteries, cars, and rockets.
Bary reported that Oracle has bought back almost 45% of its stock over the past 15 years — the most aggressive reduction of any major tech company. Apple cut its share count by 35%. Microsoft, Meta, and Alphabet trimmed about 10%. Ellison, meanwhile, held on to his Oracle stock, which increased his stake in the company to 41% from 23% without having to fork out a penny.
If Oracle had kept its share count flat since 2010, Bary calculated, Ellison’s holdings would be worth around $215 billion, not the more than $380 billion they’re valued at today. That extra $165 billion wasn’t born of innovation but rather financial engineering.
GM of Silicon Valley
Oracle was once dismissed as the GM of Silicon Valley, a lumbering low-growth giant. That perception depressed its stock price, making buybacks cheap and enticing.
How did Oracle pull it off? Debt — and lots of it. In 2021, Oracle borrowed tens of billions through bond sales to keep the buyback machine running. Moody’s flagged the practice, warning that Oracle’s “aggressive use of debt to finance large shareholder returns, and lack of any long-term financial policy goals” was unusual for an investment-grade company.
To his credit, Ellison held onto his shares, even when buybacks artificially boosted their price in the short term. That’s a marked contrast to GM’s Mary Barra, who recently dumped 40% of her holdings while shoveling billions into buybacks — a master class in hypocrisy.
Tesla, by contrast, went the other way. Its share count has risen about 70% over the past 10 years, and more than doubled in 15. Investors tolerated the dilution because Musk used the money to grow the business. Today, Tesla’s valuation — sky-high though it may be — reflects real products on the road and infrastructure in the ground.
Cheating Uncle Sam
Stock buybacks, once illegal, aren’t just financial sleight of hand — they’re also a tax dodge. The Congressional Research Service noted that dividends are taxed immediately, while buybacks “allow shareholders to defer taxation until shares are sold, and possibly avoid it altogether through stepped-up basis at death.”
If Oracle had paid massive dividends, Ellison would have had to cut massive checks to the IRS every year. Instead, his fortune quietly compounds, largely untouched by the taxman.
Notably, taxpayers have also subsidized both companies. Oracle ranks No. 23 on Good Jobs First’s list of corporate handouts, having received $2.3 billion. Tesla ranks even higher, at No. 17, with $2.8 billion in public subsidies.
Unicorns and Rainbows
Oracle’s market cap last week surged by nearly $400 billion on the back of a single announcement: OpenAI agreed to spend $60 billion a year on Oracle’s computing power. The Wall Street Journal pointed out the alarming disconnect — OpenAI itself is losing billions annually and expects only $13 billion in revenue this year. Oracle’s supposed newfound riches rest on the optimistic assumption that Sam Altman’s AI revolution will deliver stratospheric exponential growth.
Undermining that assumption: A McKinsey survey found eight in ten companies reported no meaningful bottom-line benefit from AI. An MIT study similarly reported little revenue or profit impact. Oracle’s valuation is built more on Altman’s hype than on proven results.
Musk, by contrast, has far more control over his financial destiny. His wealth is tied to businesses he oversees — cars rolling off Tesla assembly lines and rockets launching at SpaceX — not to whether AI lives up to someone else’s lofty projections.
Dueling Egos
The Financial Times reported Ellison and Musk are close, often dining together at Nobu in Palo Alto. Both men thrive on proving doubters wrong. Ellison was dismissed as arrogant when academics predicted Oracle’s business model would fail. Musk was ridiculed when no one thought Tesla would ever turn a profit. Both delivered.
They also share a flair for exaggeration. In 1997, journalist Mike Wilson published The Difference Between God and Larry Ellison, profiling Ellison’s brilliance, ruthless tactics, and “half-truths and outright fabrications.” Musk likewise is infamous for bluster, including his 2018 “funding secured” claim about taking Tesla private, which earned him a $40 million SEC fine and loss of his Tesla chairmanship.
On philanthropy, Ellison arguably outshines Musk. In 2016, he gave $200 million to USC to launch the Ellison Institute for Transformative Medicine, and through his foundation has long funded research into aging and age-related diseases. Musk made headlines for donating $5.7 billion in Tesla stock in 2021, but didn’t disclose the entity that received the shares. Ellison’s giving is at least visible, focused, and institution-building.
Behind Every Great Man …
Both men benefit from women who are arguably the real operators. SpaceX president Gwynne Shotwell has been with Musk since the company had six employees and is widely credited with its success. Former Tesla executive Rebecca Tinucci oversaw the expansion of the company’s charging network.
At Oracle, Safra Catz, a lawyer and former investment banker, drove its aggressive buybacks and was elevated to sole CEO in 2019. She’s done well herself: Catz’s net worth is estimated at $3.3 billion.
Ellison and Musk both built empires on audacity. The difference is in the foundations. Musk diluted himself to build factories and expand his businesses. Ellison fattened himself by shrinking his company’s share count. One fortune rests on risk and invention; the other on debt and accounting.
Larry Ellison is the poster boy for paper wealth creation. Elon Musk achieved his wealth the great old-fashioned American way.