The Rich 100: The frugal billionaire

David Cheriton's long, winding road to riches

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Getting rejected by the University of Alberta's music program may have been the best thing to ever happen to David Cheriton. Instead of becoming a music teacher, Cheriton earned a PhD in computer science from the University of Waterloo, co-founded a computing company and, through an early investment in Google, became a billionaire.

Computing was far from his mind growing up in Edmonton. Cheriton, now 55, was an amateur classical guitarist, but the more musicians he met, the more he realized he wasn't so talented in comparison. The music program rejection led him to a math degree at the University of British Columbia, where he became enamoured with the “artistic beauty” of numbers.

After finishing his formal education, Cheriton set out for Palo Alto, Calif., in 1981, to teach at Stanford University, a breeding ground for computing innovations. Andy Bechtolsheim and Jim Clark were busy founding Sun Microsystems and Silicon Graphics, respectively, and Cheriton worked as a consultant for the latter. In 1995, he co-founded tech firm Granite Systems with Bechtolsheim, and computing giant Cisco Systems snatched it up for US$220 million a year later. “That changed my existence quite a bit,” says Cheriton who, though a multimillionaire, didn't live like one. For him, a US$75-a-month parking pass at Stanford was extravagant.

His financial situation would change again when two Stanford PhD students, Larry Page and Sergey Brin, popped into his office one day in 1998 to discuss their Internet search technology. They returned a few months later seeking advice about forming their own company, Google. Cheriton was so impressed when his first query (“Canadian exchange rate”) on an early version of the search engine returned useful results, that he invested US$200,000 to help launch the company. That seed money has made him a billionaire: Google's 2004 IPO price of US$85 per share has increased some 478%.

Cheriton is still getting used to his wealth. When the University of Waterloo asked him in 2005 about making a $25-million donation to the school, he thought the idea was ludicrous. “It took me a few months to realize it wasn't something that was going to land me in the poor house,” he now says, and decided to give an equivalent value in Google shares to the computer science school last fall. His donation was intended not only to show gratitude, but to attract top talent. “Computing is so central to a lot of things we're doing, and there are a lot of challenges that remain,” he says. At Stanford, Cheriton is tackling one of those problems: producing more reliable software, since society's reliance on complex software only increases the number of potential disasters.

As Cheriton works toward a solution, his lifestyle hasn't changed much. He's lived in the same house since 1981 and he owns two modest vehicles — a 1986 Volkswagen van and a 1993 Honda Accord. Campus parking for the frugal billionaire remains a problem, though: “I still don't have a permit.”