When Michael Dell, the CEO and founder of Dell Computer, laid his head on his pillow the night of Feb. 25, he must have been one tired chief executive. In the previous seven days he had made $830 million, enough to exhaust anyone (in the best way, of course).

Dell was not, however, the most tired CEO in the land that evening. And in fact, his income for the previous week was not even one-fourth that earned by Microsoft's own Bill Gates, who was $3.8-billion richer when he fell asleep on the 25^th than he had been a week before. (It has to be difficult resisting those impulse purchases of new Porsches when you're able to say to yourself: "What the hell, I made $4 billion last week. I can probably splurge a little.") Still, $830 million is no shabby performance, and Dell certainly slept the sleep of the innocent--or at least of the successful--that night.

Of course, neither Dell nor Gates actually saw any of these hundreds of millions of dollars, since their gains were reaped entirely on paper in the form of sharp increases in the stock prices of both Dell and Microsoft. We've grown accustomed, in recent years, to CEOs being worth billions of dollars. But actually this is a relatively recent development in American business, and while the financial success of Michael Dell is a fine expression of the American dream, the lessons the business world has drawn from that success are less salutary.

The curious phenomenon that Dell's and Gates' enormous wealth points to is a resurgence in American business of what's often called "proprietary capitalism"--a system in which the people who run corporations are also the people who own them. The traditional story of industrial capitalism's development in the United States is that it had its roots in family-owned enterprises, but that it quickly evolved into a system where the people who owned companies delegated the responsibility for running them to managers. The genius of American business, in fact, lay in this embrace of managerialism, of the idea that you didn't actually have to own stock in a company to do an excellent job managing it. Alfred Sloan of General Motors, who never made $830 million in his life, owned only a tiny sliver of GM, but he still managed it as if it were his.

There were always exceptions to this reign of the managers, to be sure, including Ford, where the Ford family kept tight control at least through the end of World War II; IBM, which was run by founder Thomas Watson and his son for most of the century; and DuPont. But even these corporations saw the authority of the founders dissipate as the enterprises grew larger and more ambitious in their appetite for capital. The more money you borrow, and the more shares of stock you issue, the more people you give a share in your business. As a result, except for the media business, where many large companies are still owned by individuals or families, most powerful U.S. corporations have fit a particular model. The ownership of stock has been diffuse, and the management of the company has been professional, in the sense that it has had no substantial personal stake in the corporation.

What's striking, then, about Michael Dell and Bill Gates is that they, and their enormous personal fortunes, hearken back to an older model, where a personal stake in a company was a guarantee of one's devotion to it. Dell owns almost 20 percent of Dell Computer, while Gates owns 22 percent of Microsoft. Larry Ellison, Gates' nemesis at Oracle, has a sizable minority stake in his company. And Steven Jobs, having learned his lesson at Apple, where he was forced out by professional manager John Sculley, owns 71 percent of his new company, Pixar (makers of Toy Story), thereby ensuring that no one will ever push him around again. In the financial-services industry, Fidelity Investments is still run by the Johnson family, while Charles Schwab is the largest shareholder in the company that bears his name. The Walton family owns a sizable chunk of Wal-Mart, while Phil Knight, founder of Nike, owns one-third of that company. Of course, that means Knight lost $310 million on Feb. 24, but such are the perils of ownership.

The older managerial model is certainly still alive and well, as proved by the extraordinary number of new CEOs who have been hired from outside corporations in the last three years. But the return to the owner-manager model is real. In part, this is a function of the enormous entrepreneurial boom in the computer industry over the last two and a half decades. The key word in Silicon Valley has always been "equity," and the best company leaders have clung to as much of it as they could. In fact, with the notable exception of Compaq--there is, shockingly, no family with the last name Compaq--the best technology companies have been those in which the people who started the company have continued to run it and to own much of it. Not coincidentally, these are the companies that have made people into billionaires.

But the return to the owner-manager model is also connected to an important transformation in the way American business understands incentives. During the glory days of the post-World War II boom, it was assumed that a high salary and meaningful responsibility were enough to motivate executives to do the best they could. In the wake of the near-collapse of many U.S. corporations in the 1970s, though, people began to think that the real problem was that managers needed to be more like owners. That helps explain the explosion in the use of stock options since the 1980s. Give managers a stake in their companies, the thinking went, and they'll perform better. After all, look at Dell and Microsoft.

Insofar as it assumed that people already being paid millions of dollars will work extra-hard only if given still more financial incentives, the options boom was a glorious product of the Reagan era. The idea of linking an executive's pay to performance is, on its own terms, obviously a good one. But too often stock options are just gravy, tossed in on top of a huge base salary to satisfy the demands of executive privilege. Piles of options by themselves do not make CEOs act like owners--though they can make them ridiculously wealthy.

T here's a dramatic difference between someone like Michael Dell and someone like Al Dunlap. Dell's financial health is completely wrapped up with the company he started and still owns. Dunlap, for his efforts in wrecking--that is, restructuring--corporations, is rewarded with huge chunks of options that he immediately exercises so he can pocket the cash, not so he can invest in the future of the company. More than that, the lesson of Dell's success has been misunderstood. Since Michael Dell has been a great manager and has made billions of dollars, corporations have imagined that he's been a great manager because he's made billions of dollars. But it's more likely that Dell has been a great manager because he's been running a company that is, in some important sense, his. Not that he's walking away from the billions of dollars, of course.

True, the owner-manager model, successful as it has been, is not the only possible model for success. But in Dell's case, it's clearly the ownership, not the accompanying financial reward, that has really mattered. Most corporations, with their skyrocketing pay to CEOs, seem to have turned that formula on its head, believing that they can compete successfully only by duplicating the enormous financial gains someone like Dell has reaped. In confusing stock options with ownership, corporations confuse trappings with substance. Unfortunately, these are trappings that come with billion-dollar price tags attached.