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BILL GATES
A Biography
Michael B.

Becraft
GREENWOOD BIOGRAPHIES
 by ABC-CLIO, LLC
All rights reserved. No part of this publication may be reproduced, stored in a
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Library of Congress Cataloging-in-Publication Data
Becraft, Michael B.
Bill Gates : a biography / Michael B.

Becraft.
pages cm — (Greenwood biographies)
Includes index.
ISBN (hardback) — ISBN (ebook) 1.
Gates, Bill, – 2. Microsoft Corporation—History. 3. Businessmen—United
States—Biography. I. Title.
HDU62G
′—dc23
[B]
ISBN:
EISBN:
18 17 16 15 14 1 2 3 4 5
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 CONTENTS
Series Foreword
Preface
Acknowledgments
Timeline: Events in the Life of Bill Gates
Chapter 1 Bill Gates before Automated Computing
Chapter 2 Early Days in Computing
Chapter 3 Early Days of Microsoft
Chapter 4 Development of Products Used Today (–
)
Chapter 5 Why Was Microsoft So Successful with Bill
Gates?
Chapter 6 Microsoft Trial
Chapter 7 Steve Jobs and Bill Gates
Chapter 8 Bill Gates in Writings
Chapter 9 Family and Home of Bill
Chapter 10 Role in Corporate Governance, Activism, and
Outside Interests of Bill Gates
Chapter 11 Bill and Melinda Gates Foundation and Giving
Pledge
Conclusion
Notes
Further Reading
Index
 SERIES FOREWORD
In response to school and library needs, ABC-CLIO publishes
this distinguished series of full-length biographies specifically
for student use.

Prepared by field experts and professionals,
these engaging biographies are tailored for students who need
challenging yet accessible biographies. Ideal for school
assignments and student research, the length, format, and
subject areas are designed to meet educators’ requirements and
students’ interests.
ABC-CLIO offers an extensive selection of biographies
spanning all curriculum-related subject areas, including social
studies, the sciences, literature and the arts, history and
politics, and popular culture, covering public figures and
famous personalities from all time periods and backgrounds,
both historic and contemporary, who have made an impact on
American and/or world culture.

The subjects of these
biographies were chosen based on comprehensive feedback
from librarians and educators. Consideration was given to both
curriculum relevance and inherent interest. Readers will find a
wide array of subject choices from fascinating entertainers like
Miley Cyrus and Lady Gaga to inspiring leaders like John F.
Kennedy and Nelson Mandela, from the greatest athletes of
our time like Michael Jordan and Muhammad Ali to the most
amazing success stories of our day like J.

K. Rowling and
Oprah.
While the emphasis is on fact, not glorification, the books are
meant to be fun to read. Each volume provides in-depth
information about the subject’s life from birth through
childhood, the teen years, and adulthood. A thorough account
relates family background and education; traces personal and
professional influences; and explores struggles,
accomplishments, and contributions.

A timeline highlights the
most significant life events against an historical perspective.
Bibliographies supplement the reference value of each
volume.
 PREFACE
In fewer than three decades, Bill Gates led Microsoft from a
start-up in the era of no home computers to almost ubiquitous
computing, becoming the world’s richest person and using the
accumulated wealth to improve the global good.
At the leading edge of the movement toward personal
computing, Mr.

Gates dropped out of Harvard to become co-
founder of Microsoft. Over a period of three decades at
Microsoft, Mr. Gates became the world’s richest person while
serving as a senior executive, technology visionary, and public
face of the firm until July , and non-executive chairman
from that point until February Mr. Gates’s efforts are
now directed toward the Bill and Melinda Gates Foundation,
the world’s largest charitable foundation.

This philanthropic
effort is similar to the Andrew Carnegie and Cornelius
Vanderbilt charitable focus, using the wealth built over each
individual’s lifetime.
This book is not intended to be a history of Microsoft nor a
history of the Bill and Melinda Gates Foundation, but a
concise biography of Bill Gates. His story is inextricably
linked to these two organizations, and those organizations will
continue to be shaped by him for years to come.
The story of Bill Gates is exceptionally complicated, but the
book was written with six major objectives.

The first is to
illustrate the evolution of Bill Gates from budding
entrepreneur to computer programmer to billionaire to
philanthropist. Most readers have perceptions of the subject as
a billionaire and philanthropist. Second, the book demonstrates
that Gates’s success was based on a profound understanding of
the potential of technology.

Third, the book attempts to capture
the stages of evolution within Microsoft from inception until
the point Mr. Gates left day-to-day control of the company, as
this helps us understand how computers moved from objects
owned by only the largest of businesses to a nearly ubiquitous
item. Fourth, the book takes an approach that recognizes
accomplishments as well as failures, praise as well as
criticism.

In fact, Gates has faced four decades of criticism in
some form, despite possessing what many would perceive as
traditional measures of success (family, work,
accomplishment, and civic engagement). Fifth, the book
addresses the motivation of Mr. Gates to use his vast financial
wealth to improve the health and education of the poor around
the world.

Finally, the book attempts to expose the reader to
concepts related to the business applications inherent in Mr.
Gates’s work in global organizations, in nontechnical language
and tone.
Along the way, we discover that Bill Gates was—and
continues to be—exceptional with positive traits as well as
flaws.

He was exceptionally fortunate to have been born at the
right time to get computer experience and understand at a
young age where the industry could go; when he cofounded
Microsoft, he was He understood when to take risks and
saw many trends in the marketplace, although he also missed
many trends along the way. We also see an individual who was
competitive, yet always stating that his reason for this
competitiveness was the risk of failure; success was never
assured in his mind.

Gates saw the need for software
companies to have firm intellectual property rights and
s in the first year of Microsoft’s existence and was
exceptionally challenging to work for, but also recognized
when others provided the most valuable insight. He firmly
believed that the products being developed could readily be
overtaken by competitors, that he would never have been able
to retire from Microsoft if he waited until no competitors
would remain, and that work to improve the lives of others
with his amassed wealth could be just as rewarding as being
the CEO of Microsoft.
 ACKNOWLEDGMENTS
Any major activity or undertaking requires the confidence and
beliefs of others.

I have been exceptionally fortunate
throughout my education—formal and informal—to have
encountered individuals who have permitted me to gather
experiences and skills that many in the United States, and the
vast majority worldwide, could not imagine. Out of a
persistent fear of omitting someone of critical importance on a
list of acknowledgments, I prefer to say “thank you” as I meet
each.
I also hope readers know that each of us can be involved in
bettering the lives of others in our communities and worldwide
with fewer financial resources than Mr.

Gates; in the
annual letter released by Bill and Melinda Gates on behalf of
their foundation, he states, “If you’re looking to donate a few
dollars, you should know that organizations working in health
and development offer a phenomenal return on your money.”
If you are interested in service that greatly improves the lives
of others—such as the initiatives of Bill, Melinda, and Bill Sr.
—there are dozens of options to commit to helping others.

Bill
Sr. and I share a common connection as Rotarians involved in
the aim to end polio, and Rotary International has participation
options for all ages.
 TIMELINE: EVENTS IN THE
LIFE OF BILL GATES
William Henry Gates III is born on October 28, to
William Henry Gates II and Mary Maxwell Gates.

As
the younger Gates later becomes famous as “Bill Gates,”
his father eventually adopts the name “Bill Gates Sr.”
Bill Gates has his first experience with a computer of
the time at his private high school.
The first software partnership of Gates and Paul Allen,
along with friend Paul Gilbert, is the Traf-O-Data
machine.
Paul Allen sees the January issue of Popular
Electronics, which features the Altair
Gates and Allen move to Albuquerque, New Mexico,
to found Micro-Soft, initially writing the BASIC
programming language for the Altair ; Gates stops
attending Harvard to lead the new firm at the age of
Gates writes the Open Letter to Hobbyists, his first
attempt at protecting the intellectual property of
Microsoft.
Microsoft officially becomes a partnership between
Gates and Allen, with Gates owning 64 percent of the
company.
Microsoft wins arbitration hearing against the maker of
the Altair , allowing the company to sell BASIC to
many different computer manufacturers.
Microsoft moves to Gates’s and Allen’s home state of
Washington (initially Bellevue, a suburb of Seattle).
 In another attempt to protect intellectual property,
Gates states that “no one is getting rich” writing
software in an interview.

Gates hires Steve Ballmer—
the person who would eventually become the second
CEO—to Microsoft.
The first version of MS-DOS is the operating system
for the new IBM PC; the core of the software was
bought from another company.
Allen leaves Microsoft after overhearing a
conversation between Gates and Ballmer. Gates and
Ballmer write the Applications Strategy Memo,
committing Microsoft to writing for the Apple
Macintosh as well as for the PC.
Gates is ranked as one of the 50 Most Eligible
Bachelors.

Microsoft signs an agreement with IBM to
write the OS/2 operating system and releases the first
version of Windows.
Microsoft becomes a publicly traded company, and Bill
Gates’s holdings make him quantifiably rich.
Bill Gates meets Melinda French, whom he would later
marry.
Apple sues Microsoft for using the graphical user
interface each company had learned about from Xerox
PARC.
Bill Gates founds the company now known as Corbis,
a venture outside of Microsoft he still fully owns.
Windows is released and becomes an immediate
success.
Bill Gates marries Melinda French; his mother passes
away later in the year.

He also purchases the Codex
Leicester, the only notebook from Leonardo da Vinci
 that is owned by an individual (rather than a university
or museum).
Bill Gates writes The Internet Tidal Wave memo,
declaring that the Internet is the most important concept
since the IBM PC was released in Microsoft
agrees to a consent decree with the U.S.

Department of
Justice related to anticompetitive behavior. Windows 95
comes out later that year with Internet Explorer
Gates releases the first edition of his co-authored best
seller, The Road Ahead.
Gates releases the second edition of his co-authored
best seller, The Road Ahead. He and Melinda welcome
first child Jennifer Katharine, and he starts his first
major philanthropic project.
Bill Gates and Steve Jobs announce an investment by
Microsoft in a struggling Apple.

The U.S. Department
of Justice files a contempt motion against Microsoft
from the consent decree.
While entering a building in Belgium, Gates is hit in
the face with four pies.

Biography of bill gates book Bloomsbury Publishing. Author Michael B. You can listen to audiobooks purchased on Google Play using your computer's web browser. Bill Gates has been instrumental in creating and developing the home computing era that has thoroughly transformed nearly every aspect of our lives, from work to commerce to communication.

Ralph Nader suggests that Bill
Gates and Warren Buffett should convene a conference
of billionaires for philanthropic purposes. The antitrust
trial against Microsoft begins, with Bill Gates’s
deposition a critical component of the government’s
case.
Gates releases his second co-authored best seller,
Business the Speed of Thought.

U.S. District Court
judge Thomas Penfield Jackson declares Microsoft to be
a monopoly. He and Melinda welcome second child
Rory John.
Ballmer becomes CEO of Microsoft, while Gates
remains chairman and chief software architect. As the
 legal remedy in the Microsoft trial, Judge Jackson orders
a break-up of the firm.
In an appeal by Microsoft, comments made by Judge
Jackson against the firm and Gates become public,
leading the judge to leave the case.
U.S.

District Court judge Colleen Kollar-Kotelly
places Microsoft under a new consent decree, without
ordering the break-up of the company. Bill and Melinda
welcome third child Phoebe Adele.
Gates is elected to the Board of Directors of Berkshire
Hathaway, the investment company run by his friend
Warren Buffett.
Gates gives the Commencement Address at Harvard
University.
Gates has his last day as a full-time employee of
Microsoft to focus on the work of the Bill and Melinda
Gates Foundation as his primary responsibility.
The Giving Pledge—a group of billionaires who
dedicate at least half of their wealth to philanthropic
purposes—is initiated by the two people recommended
by Ralph Nader, Bill Gates and Warren Buffett.
Immediately after the death of Steve Jobs, the public
learns much about the relationship between Gates and
Jobs over the past three decades.
Gates resigns from the role of chairman of the board at
Microsoft but announces that he will be spending more
time at the firm, mentoring the newly appointed third
CEO of Microsoft (Ballmer’s successor, Satya Nadella)
in the role of technology advisor.
 Chapter 1
BILL GATES BEFORE
AUTOMATED COMPUTING
Well, I was lucky in many ways.

I was lucky to be born
with certain skills. I was lucky to have parents that
created an environment where they shared what they
were working on and let me buy as many books as I
wanted to. And I was lucky in terms of the timing. The
invention of the microprocessor was something
profound. And it turned out only if you were kind of
young and looking at that could you appreciate what it
meant.

And then I had been obsessed with writing
software. It turned out that was the key missing thing
that would allow the microprocessor to have this
incredible impact…. It is unusual to have so much luck
in one life, I think. But it’s been a major factor in what I
have been able to do.1
Upon his birth on October 28, , to a successful family,
William Henry Gates III—now widely known as Bill Gates—
could easily have been expected to follow in the paths of either
of his parents.

His father, William Henry Gates II (–
present), and mother, Mary Maxwell Gates (–), each
were professionals with advanced formal educations. His
father was an attorney with a successful practice, which
allowed his mother to transition from work as a schoolteacher
into other activities with civic and charity impacts.
As relayed by his father, Bill Gates’s maternal grandmother
and great-grandmother quickly found that a nickname would
be required for the younger Gates.

A concern was raised that
both father and son would be referred to as Bill, which would
be overly confusing. As a result, the younger of the two was
nicknamed Trey2 (as in “three” or “third”), and this nickname
is still used when father refers to the son. As his son became
far better known globally as “Bill Gates” instead of Trey, his
father later adopted the name “Bill Gates, Sr.,” retiring from
his law firm Preston Gates & Ellis in
Gates’s mother was a graduate of the University of
Washington, where she would later serve on the Board of
Regents from to Originally a schoolteacher, Mary
Gates maintained an exceptional level of civic involvement
after her husband’s law practice became successful.

Mary was
clearly connected to the University of Washington. Not only
did she meet her husband there, but her parents both graduated
from the University of Washington. Per a dedication ceremony
at the University of Washington after her death, she also
served on multiple boards for the university, including the
University of Washington Foundation Board, the University of
Washington Medical Center Board, and the School of Business
Administration’s Advisory Board.
Among her achievements, she served on the board of
United Way of King County (–88) and many other
nonprofit and corporate boards.

Her work with United Way
led to national recognition of her leadership. She served as
a member of the board of directors of United Way
International (–) and was the first woman to chair
the executive committee of that board (–87).4
While serving in the United Way International role, she is
reported to have spoken to the chairperson of IBM in a talk
that potentially provided support to Bill Gates’s software
company, which was very small at the time.

As Gates
frequently recalls in his talks, luck would come into play
multiple times in the coming decades.5
GROWING UP BILL
His father wrote a book, with a chapter detailing what he
learned from Bill and his two sisters. Young Bill Gates was the
second of the three children, with one older sister and one
younger sister.

Older sister Kristi was 10 and Bill was 9, when
youngest sister Libby was born. His father noted Bill was
usually the last one to the car or be ready for an event, as he
was usually in his room reading or thinking. He described Bill
as reading almost nonstop, and mentions that his son’s
competitive nature was likely assisted over the summers by a
contest run by his school: “One contributor to Trey’s nonstop
reading was the fact that every summer the teachers at his
school gave their students a summer reading list and there was
a contest to see who could read the most books.

Trey was so
competitive he always wanted to win and often did.”6
Not only did Bill read an entire set of encyclopedias from
front to back, his parents paid for any—and every—book he
wanted.7 Reading for young Bill was connected to another
capability his father noted later in life: the ability to read
massive quantities and still retain almost all the information
from that reading.

He wrote that Bill “seems to remember
everything he reads and is, at times, eager to share what he’s
learned with the next person he encounters,” and that his son
was always intellectually curious.8 When asked of the best
advice he had ever received from his father, Bill stated:
Well, my dad and my mom were great at encouraging me as
a kid to do things that I wasn’t good at, to go out for a lot of
different sports like swimming, football, soccer, and I
didn’t know why.

At the time I thought it was kind of
pointless, but it ended up really exposing me to leadership
opportunities and showing me that I wasn’t good at a lot of
things, instead of sticking to things that I was comfortable
with.9
AN EXCEPTIONALLY HARD TRANSITION
The experience of the Gates family became much more
challenging when Bill Gates was about “The first stage—
argumentative young boy—‘started about the time he was 11,’
Mr.

Gates Sr. says in one of a series of interviews. That’s about
when young Bill became an adult, says Bill Sr., and an
increasing headache for the family.”
In Robert Guth’s words, Gates was “a boy who appeared to
gain the intellect of an adult almost overnight” and was
challenging his parents on a daily basis, especially his
mother In another interaction, she asked:
“What are you doing?”
“I’m thinking,” he shouted back.
“You’re thinking?”
“Yes, Mom, I’m thinking,” he said fiercely.

“Have you ever
tried thinking?”11
Another day, young Bill was having a nasty argument with
his mother at dinner. So his father threw a glass of water into
his son’s face, to which he responded, “Thanks for the
shower.”
This was followed shortly thereafter by consultations with a
therapist and year-old Bill.

And the advice to his parents
was to give him more leeway, rather than less, as young Bill
would be claiming his independence at some point in the near
future. Even today, his father states: “He has very fixed ideas
of some things…. The dynamic of the family is that you don’t
cross him on those things, because it’s a waste of time.”12
SEEDS OF CIVIC INVOLVEMENT EARLY IN
LIFE
In many works, Bill relates the experiences he encountered
while growing up in the Gates family.

For instance, he
describes extensive volunteer involvement of both of his
parents, setting the framework for his later philanthropic
efforts but also being exposed to a wide variety of activities,
holding discussion in a way that allowed him and his two
sisters to be exposed to advanced concepts within those
organizations and how decisions were made from a very
young age.
We learned from our parents what they were trying to do,
whether it was United Way or a volunteering activity or the
world of business.

I felt very equipped as I was dealing
with adults to talk to them in a comfortable fashion because
my parents had shared how they thought about things
When I was growing up, my parents were almost (sic)
involved in various volunteer things. My dad was head of
Planned Parenthood. And it was very controversial to be
involved with that.

And so it’s fascinating. At the dinner
table my parents are very good at sharing the things that
they were doing. And almost treating us like adults, talking
about that. My mom was on the United Way group that
decides how to allocate the money and looks at all the
different charities and makes the very hard decisions about
where that pool of funds is going to go
This civic involvement was present in all three children,
although Bill would receive the inclination latest.

His older
sister, Kristianne Gates Blake, was born in and owns an
eponymous accounting firm, also graduating from the
University of Washington like mother and father She now
serves as a regent for the University of Washington like her
father: “The biggest lesson I learned from my dad,” she said,
“is to have a passion for all that you do.”16
Younger sister Elizabeth (Libby) Gates Armintrout was born
in , and served as president of the board at the Lakeside
Academy—the same school attended by Bill Gates.

She is a
board member of the UW Carlson Leadership and Public
Service Office and is an active volunteer and contributor
Each sibling found their own career path but also was
involved in service, like their parents. For Kristianne, that was
an appointment to the Board of Regents at the University of
Washington, and for Libby, that was involvement with Make-
A-Wish Foundation, the Lakeside Clinic, the Alliance for
Education, and the Susan B.

Komen Race for the Cure18 before
becoming a regent for Pomona College Bill’s civic
involvement comes decades later but becomes the most
important aspect of his life.
 Chapter 2
EARLY DAYS IN COMPUTING
Very early in his learning of computers, Bill Gates suddenly found
himself involved with a group that solved computing problems for
his high school in the late s, when very few organizations had
computers and even fewer had the technical capability to actually
use computers—programming expertise was essential.

It was
through this experience that Bill Gates met his first critical
collaborative partner—Michael Eisner wrote in Working Together,
Why Great Partnerships Succeed that Bill Gates always has at least
one exceptionally capable partner. From through , the first
of these exceptional everyday partners for Bill Gates was Paul
Allen.1
At the Lakeside School, he had a lot of opportunities and
encouragement from a young age, seeking a means of growth that
would give him the independence the therapist stated was coming
very soon.

He and Paul Allen also had access to a lot of resources
that were very rare at that time. For instance, Gates had access to a
type of computer that had been invented just a few years before, and
the teachers at the school weren’t the most capable at programming
those computers. In addition to being allowed to read ahead and
receiving books from teachers, Gates said of his teachers and school
that their ideas on using computers were revolutionary.

Rather than
allow the computer to be disused (as too confusing), the school
allowed the students to take the lead. As Gates said later, “most
schools would have just, I don’t know, shut the thing down or
something.”2
Bill Gates’s first programming experience came in at
Seattle’s Lakeside School when the Mothers’ Club bought the school
access to a time-sharing system.

That summer, year-old Bill and
his friend Paul Allen, who was two years older, made $4, writing
an academic scheduling system for the school.3
A high school student who wrote the scheduling software for the
school could very easily decide which classes he would be placed in.
Bill decided to modify the software he and Paul had written to be
placed in classes that were entirely filled with girls, which he saw as
a clear sign of success for high school students.

He later stated, “It
was hard to tear myself away from a machine at which I could so
unambiguously demonstrate success. I was hooked.”4
Although he was the youngest on the team of students, he very
early established that his involvement in the project would be
contingent upon him being in charge of the initiative: “Look, if you
want me to come back you have to let me be in charge.

But this is a
dangerous thing, because if you put me in charge this time, I’m
going to want to be in charge forever after.”5
A criticism of Bill Gates over the decades was that the final
responsibility for decisions in settings where he was involved in
day-to-day operations rested solely with him. This characteristic has
been present in descriptions of Gates from the time he was 12; at
times, this attribute was a benefit and at other times a significant
failing.
Living up to his father’s statements about his son’s ability to recall
information, Bill Gates is easily able to recount the teachers who had
the biggest influence in his early high school days, a testament to
their influence on Bill over 40 years ago.

In an interview with
Serwer, he recalled three of those exceptional individuals from his
high school days by name: Fred Wright, Gary Maestretti, and Paul
Stocklim.6
Success as a computer programmer—in the late s and today—
is highly dependent upon a skillset in science, mathematics, and
logic. Gates credits his teachers in science and mathematics as key
influences in his success, simultaneously noting that he ignored the
most important aspects of biology due to the poor quality of his high
school teacher.
Well, I think it all comes down to how good the teachers are in
5th through 12th grade….

If I hadn’t had great teachers during
those years I wouldn’t have learned how cool science and math
are. In fact, I had a bad biology teacher and it’s only as an adult
that I’ve realized, hey, biology might be the most interesting
science of all.

Biography of bill clinton: Bill Gates has been instrumental in creating and developing the home computing era that has thoroughly transformed nearly every aspect of our lives, from work to commerce to communication. The cofounder of Microsoft, Bill Gates helped transform society by ushering in the era of ubiquitous personal computing. This is a test. You can pause it, speed it up and slow it down.

But I stayed away from it. So the science is
interesting, and yet it can be made very uninteresting.7
Twenty years after Paul Allen’s departure from Microsoft, Gates and Allen speak at a
Portland Trail Blazers game; the NBA team is owned by Allen. (AP Photo/Elaine
Thompson)

And due to this extensive background in science and mathematics,

he was able to get the experience he needed with computer software
and hardware, at a time when an obsessive level of engagement in an
activity of interest was important: “The hard-core years, the most
fanatical years, are thirteen to sixteen.”8
Gates read extensively while in school, learned advanced practices
in computer programming before the concept of personal computers
existed, and took advantage of the opportunities that were available,
both in high school and in computers elsewhere.

Although Gates
never completed the college degree he started in , he did have a
strong educational background from his elite private school, his
reading, and his inquisitive nature.
ACCESS TO COMPUTERS
In addition to the computer available at the Lakeside School, Gates
did have access to other computers.

Most of those computers were
based upon time-sharing—having to buy time on computers was
what got Bill Gates and Paul Allen into software programming; the
pair quickly figured out that their ability to find problems in the
software written by others could be used to trade for even more
computer time. While Gates and Allen both knew how to program,
Allen knew far more about the hardware of the day.9
 Gates recalled the computers he used at the University of
Washington in an e-mail communication much later, and how the
University of Washington had unfettered access to a type of
computer located at Computer Center Corporation (CCC) that
became very important to Gates and Allen in creating future
software.

At first, the pair started using a computer that required
entering data via punch cards, but then they progressed through
various buildings, using the resources available. This included
calculators, remote computers via teletypes, and even a physically
present PDP that the group would use after Paul Allen discovered
the computer was available for about six hours per day when it was
not processing data.

Although those hours were in the middle of the
night, Gates wrote that a “friend had a key to the Physics Building
so we went up there a lot of times.”10
Gates and Allen quickly figured out a system where they could
have almost unlimited access to computers for experimentation—as
long as this was done in the middle of the night when the other
processing was completed.

The teletype system further allowed the
pair to access CCC’s computers and run programs by sending
messages over the telephone, common in the early days of shared
computers with limited processing power. Using the array of
machines at the University of Washington helped Gates and Allen
learn about solving problems in various languages and operating
systems, and led to their first business outside of the Lakeside
School.
TRAF-O-DATA
Gates, Allen, and a friend—Paul Gilbert—began work on a project
called Traf-O-Data when the Intel chip was released.

In ,
governments were already measuring the amount of traffic that
flowed down streets by placing rubber hoses across a key point, and
those hoses were connected to a box on the side of the road.
Although this process continues today, the method of evaluating the
data has changed substantially. The s’ versions of highway
traffic measurement had a box on the side of the road filled with a
roll of paper tape that was punched with a hole each time a vehicle
drove by; those paper tapes had to be unrolled, and traffic counts
were calculated by hand.
 Allen knew more about computer hardware than Gates but still
didn’t know how to build a computer that would process the data on
the paper tapes.

So Paul Gilbert became the third partner. The
company would build a computer using the processor as well
as software that would process all the traffic tapes. The plan was to
sell this machine to every state and local government as a time and
cost-saving tool. Allen had come across a new concept in computer
science called emulation; although Gilbert had not yet built their
Traf-O-Data computer, Allen wrote a program for the PDPs to
behave as if the computer was running on an processor.
Effectively, Allen was using the computer access the team had to
write software for a computer that had not yet been built.

This skill
in emulation gave Gates and Allen another big break three years
later when the announcement that would lead to the creation of
Microsoft was made
Once Allen had written the software, Gilbert finished building the
small computer with a brand new processor. The system was able to
process the paper tapes that had previously been processed manually,
and the trio was ready to seek their first sale.

As Gates’s father
noted, “after many successful kitchen-table practice sessions my son
convinced some employees of the City of Seattle to come to the
house for a demonstration.” The tape reader did not work on the day
of the demonstration, which frustrated Bill immensely While the
group continued to work on Traf-O-Data, the project was solely
passed on to Gilbert before the one—and only—functional machine
was sold in
Allen later recalled how important the development of Traf-O-Data
was to creating their next software initiative: “Even though Traf-O-
Data wasn’t a roaring success, it was seminal in preparing us to
make Microsoft’s first product a couple of years later.

We taught
ourselves to simulate how microprocessors work using DEC
computers, so we could develop software even before our machine
was built.”13
As he was closing up his high school years, Gates served as a page
in the Washington State Legislature in Olympia and later as a
Congressional page in Washington, D.C
 Yet Gates was still a problem at times for his parents, admitting
that he was exceptionally headstrong and that his father made a
surprising—yet liberating—choice on behalf of his son in high
school.

Despite knowing that he was a difficult child for his parents,
he was allowed to take time away from high school in order to work:
“I got a job offer and it would take me away from school, and I was
amazed that my dad, after meeting with the headmaster and getting
all the data, said, ‘Yeah, that’s something you can go and do.’”15
In his final year of high school, Bill Gates was allowed by his
parents to work full time in computer programming before starting
college.

The job he was offered, as a programmer at TRW, is the
only time in his life that he has officially had a supervisor or boss.
In an era where all operations on a computer had to be
programmed by the user, Gates admits that his high school years
were when he became addicted to programing. Leaving the Lakeside
School and headed to Harvard, he personally felt that he had already
become committed to being involved in software.

While many
individuals attend college and change majors, the admission of being
a software person as a law major creates a potential conflict in
purpose. The result was a student who rapidly completed the
advanced mathematics and computing classes offered by Harvard
between and
Gates’s intellectual curiosity was both a positive aspect and a
negative aspect; like with the example of enjoying the sciences and
mathematics, he also described sitting in classes in college where he
was not registered as a student and not attending the classes for
which he had registered: “Harvard was just a phenomenal
experience for me.

Academic life was fascinating. I used to sit in on
lots of classes I hadn’t even signed up for.”16
At Harvard, he found the intellectual challenges he was looking
for, whether he went to the correct classes or not. Entrepreneurs and
businesspeople often share ideas and skills, which lead to many
companies in the same industries—or requiring the same skill set—
choosing to locate in the same area.

Silicon Valley in California is
one such example today, where many computer-oriented firms
maintain their headquarters. Networks are critical today and were in
 It was at Harvard that Gates also met Steve Ballmer, who
became his best friend.
“He [Ballmer] was the opposite of me,” recalls Gates. “I didn’t go
to classes much, wasn’t involved in campus activities.

Steve was
involved in everything, knew everyone. Steve was general
manager of the football team, head of the lit[erary] magazine, ad
manager of the Crimson [newspaper]. He got me to join the Fox
Club, a men’s club where you put on tuxedos, smoke cigars, drink
too much, stand up on chairs and tell stories, play pool. Very old
school.”17
BORN AT THE RIGHT TIME
Was Bill Gates born at precisely the right time to become a leader in
the computing revolution?

Malcolm Gladwell suggests that he was.
Gates and Allen had acquired a tremendous amount of expertise in
computers that only the largest firms would possess, knew how to
write programs, and had solved problems for other companies in
exchange for computer access. In addition, Allen had figured out
emulation—how to write software for a computer he did not own
(and often had never even seen).
And at the time the story of the Altair was published in late
December (although listed as the January issue of
Popular Electronics), the names that became preeminent in
computing—both at Microsoft and at Apple—were all between the
ages of 18 and Bill Gates and Steve Jobs were 19, Paul Allen
was 21, and Gates’s good friend at Harvard University (and his one-
day successor at Microsoft) Steve Ballmer was 18, coming off of
those fanatical high school years described by Gates:
Bill Gates: October 28,
Paul Allen: January 21,
Steve Ballmer: March 24,
Steve Jobs: February 24,
Malcolm Gladwell also wrote about Gates’s good fortune
throughout his life, suggesting the combination of Gates’s skill and
luck could have been replicated if resources were allocated
differently.

Gates readily admits that he encountered more “luck”
than anyone should expect in life. Gladwell noted that “our world
only allowed one thirteen-year-old unlimited access to a time-
sharing terminal in If a million teenagers have been given the
same opportunity, how many more Microsofts would we have
today?”
Nathan Myhrvold, one of Gates’s future collaborators at Microsoft
and in both versions of The Road Ahead, is quoted of the
opportunity to pursue writing Altair BASIC:
“If you’re too old in nineteen seventy-five, then you’d already
have a job at IBM out of college, and once people started at IBM,
they had a real hard time making the transition to the new world,”
says Nathan Myhrvold, who was a top executive at Microsoft for
many years.

“You had this multibillion-dollar company making
mainframes, and if you were part of that, you’d think, Why screw
around with these little pathetic computers?”18
Along with close partner Paul Allen, Gates had to make a choice
when the MITS Altair was introduced, along with the chip that
was inexpensive and was capable of allowing home computers, first
among smaller groups of users called “hobbyists.”
At the time, the Altair was designed to just show results in a
series of 16 LED lights and had 16 switches to enter data.

That
Altair qualified as a computer in /, even without an
operating system or programming language available. Users had the
opportunity to purchase external terminals (or build their own) to
operate like rudimentary monitors for the products, or even use a
telephone to connect directly to a more powerful, time-sharing
computer.
If an individual were to purchase the Altair Minicomputer in
, the first step would have been to assemble the parts of the
computer itself.

No monitor, keyboard, or mouse; the assembly
process would have included the individual boards, connectors, and
switches within the case. The next step would have been to either
test the computer or begin to write programs in the language of the
time. Using only zeroes or ones to type in the entire computer
program, this was not a user-friendly process.

For instance, the
following steps were listed in the February issue of Popular
Electronics to tell the computer how to take two numbers (one from
input channel 6 and one from input channel 30), add those two
numbers, and then return the sum result in output channel
Table —published in Popular Electronics—was to suggest that
the revolutionary Altair was user-friendly in allowing one to add two
numbers.

In fact, one of the proposed uses for the Altair was to build
one’s own scientific calculator, a device that costs a few dollars now
without the need for programming expertise. In , a device that
was solely used for scientific calculation was very expensive.
Table Machine Instructions

Source: Re-created from Popular Electronics, February , p.

In order to see the potential for widespread use of a system such as
this, one had to be a very clear visionary.

There were multiple people
who saw the potential of this system, including Bill Gates, Paul
Allen, and the early employees of Microsoft (originally called
Micro-Soft) who were willing to work for Gates’s upstart firm. The
system and chip also drew the attention of Steve Jobs, who went on
to become a founder of Apple with Steve Wozniak using different
hardware.
 So why was the Altair so important for early computing?

In
January , the minimum wage increased to $ per hour A
basic minicomputer like the Altair was still rather expensive as
a discretionary purchase at $ However, this was a major jump in
affordability in terms of computing, and individuals could have their
own computer at home for the very first time. The Altair cost less
than $ and could fit on a desk, the PDP was the size of a
refrigerator and cost almost $20,, and the early teletypes Gates
and Allen had used required leasing time at $40 per hour.
Comparatively, the Altair was extremely affordable.
DROPPING OUT OF HARVARD TO WORK ON THE
ALTAIR
Although it is common knowledge that Gates dropped out of
Harvard to work on the MITS Altair, he did not drop out until his
partner Paul Allen had demonstrated that the Altair BASIC worked
and had secured a contract from MITS.

With the benefit of
hindsight, Gates was able to admit that the company he and Allen
founded could have been delayed, probably for another year or so.
Of the fear of missing out on the opportunity presented by the Altair:
In our case, Paul Allen and I were afraid somebody else might get
there before us. It turned out we probably could’ve waited
another year, in fact, because things were a little slow to start out,
but being on the ground floor seemed very important to us
However, Gates and Allen did not know at the turn of that the
early days of their firm would be slow.

So why did Gates and Allen
feel that immediate action was required? The founder of MITS had
been hearing from a lot of people about developing a version of the
BASIC programming language that was a small enough file that it
would function on the Altair’s limited memory. Like most items
Gates was able to commercialize over his life, the concept of the
BASIC programming language already existed; someone just had to
figure out how to make it work on the limited space available on the
Altair and be the first to do so:
He (Ed Roberts of MITS) was getting ten calls a day from people
who had a BASIC “almost ready,” and his stock response was,
“The first person who shows up with a working BASIC gets the
contract.”
 Gates and Allen had never seen an Altair; they had never even
seen the Intel microprocessor at the heart of the Altair.

But a
couple of years earlier Allen had written a program on a
mainframe computer that emulated the operation of a previous
Intel microprocessor, and this time around they did the same
thing.
With an Intel manual at his side, Allen sat down at a
Harvard PDP computer and wrote the emulator and software
tools necessary to do the programming.

Meanwhile Gates stopped
going to classes and devoted himself to designing the BASIC,
using every trick he knew to get the size down below four
kilobytes
With this urgency placed, Gates and Allen were now attempting to
rush through the development of a programming language for a
computer neither had seen, for a processor they had never touched,
without the ability to test on that computer model or processor along
the way.

Writing the software based upon Allen’s emulator skills
alone—without the ability to test—was a large leap of faith but
necessary in the minds of the two young developers. If others were
actively working on Altair BASIC, their opportunity would be gone
if their project was not finished first. Eventually—in the coming
days or the very near future—someone was going to develop Altair
BASIC, and the first one to the finish line would benefit.
Why was the 4-kilobyte restriction so necessary for the Altair?

In
the early days of computing, processor power and speed were far
below even basic electronic devices we see today. Four kilobytes
was the technical limitation of the computer chip. In order to first
run the BASIC programming language and then any program written
in BASIC, there had to be space left in what was a very limited
memory capacity.

The 4-kilobyte restriction would require writing
all parts of the BASIC programming language in under 4,
characters, where letters, numbers, spaces, and punctuation marks all
counted as characters. And the Altair had no operating system,
so the BASIC had to function as both the operating system and the
programming language: “At the time Altair BASIC was written no
operating systems, good or bad, existed so it had to be stand-
alone.”23
 As a point of reference on the limited amount of characters Gates
could use, imagine typing an essay today with a total of about 50
lines of text; that’s how much space Gates had to write his version of
the entire programming language that also served the function of the
operating system (like Windows today): “The finest pieces of
software are those where one individual has a complete sense of
exactly how the program works.

To have that, you have to really
love the program and concentrate on keeping it simple, to an
incredible degree.”24
As Gates mentioned himself in The Road Ahead, second edition,
the combination of having a microcomputer available, at a
reasonably affordable price, with an acceptable chip but no software
was an opportunity he did not see lasting very long.

With no
programming languages available, it was not a useful tool although
Gates and Allen saw the potential future. He even went so far as to
suggest that he and Allen had a bit of panic at the time:
What the Altair did have was an Intel microprocessor chip
as its brain. When we saw that, panic set in. “Oh no! It’s
happening without us!

People are going to go write software for
this chip.” The future was staring us in the face from the cover of
a magazine. It wasn’t going to wait for us. Getting in on the first
stages of the PC revolution looked like the opportunity of a
lifetime, and we seized it
Actually, Gates and Allen—the pair—had to seize the opportunity,
although the part about Allen was omitted in the first edition of The
Road Ahead but was “corrected” for the second edition.

Others
suggest there was more than a fear about the development of the
Altair. In fact, Gates was described in Microsoft Rebooted as
paranoid someone else would take the lead on writing a version of
BASIC for Altair, noting:
Lacking software, the Altair could not be programmed, depriving
it of practical value.

To perform more complicated tasks, the
Altair needed a user-friendly programming language. Gates and
Allen decided to pursue the writing of such a language even
though one mini-computer firm had argued that it was impossible
to write a high-level language that would run on a personal
computer
 Once Allen had demonstrated the Altair BASIC and the software
worked, the pair had a choice.

Gates realized that if his company
were to grow once the Altair BASIC was available, he would have
to leave Harvard, and soon:
We realized that things were starting to happen, and just because
we’d had a vision for a long time of where this chip could go and
what it could mean didn’t mean the industry was going to wait for
us while I stayed and finished my degree at Harvard
Allen was already living near his friend Gates in Boston but was
not a student at Harvard.

He was working as a programmer at
Honeywell after dropping out of college himself; he had already
completed two years of college and entered the workforce as he was
two years older than Gates. By the standards of an era, Allen had
landed a job with an industry giant:
Drifting at Washington State, I was ready to take a flier.

I mailed
my résumé to a dozen computer companies in the Boston area
and got a $12, job offer from Honeywell
A move to support their version of Altair BASIC would impact
both, and the way to support the Altair would most likely require a
move to be near MITS. Bill Gates decided to take a leap of faith,
although a very difficult choice.

In , at the age of 19, he stopped
out of Harvard to cofound Micro-Soft, dropping out completely the
next year. As a result of this choice, Gates took control of the
company from the first day. According to Gates, Allen’s money for
the startup came from working at Honeywell, while some of his own
money to fund the start-up company had come from playing poker at
Harvard
FAMILY PERCEPTIONS OF THE COLLEGE
DROPOUT
“Gates’s parents were devastated.

His mother was ‘very, very
apprehensive’ about his future, says his father.”30 In his own book,
Bill Gates Sr. noted, “Of course, Mary and I were sick when Trey
told us he planned to leave college to take advantage of a window of
opportunity he believed would be long gone by the time he
graduated from Harvard.

However, he promised us that he would go
back to Harvard, ‘later’ to get his degree.”31
 The precise circumstances of Gates’s final departure from Harvard
are a little unclear, and some have suggested the true reason for
Gates’s departure was disciplinary rather than willing choice. While
it is well known that Gates and Allen worked on their Altair BASIC
during Gates’s time at Harvard, there is some debate as to whether
Gates left the school voluntarily or was subject to administrative
pressure, discipline, or reprimand from the university.

Given the
U.S. federal law that protects student records (FERPA, or Family
Educational Records and Privacy Act) passed in , the university
will never be able to state whether Gates was subject to any form of
discipline.
At question was the use of the computers at Harvard by Gates and
Allen for a potential commercial purpose. The question is whether
the pair was indeed using a computer paid for by the government in
an attempt to make a personal profit.

Given the cost of using
computers at the time—$40 an hour—and that the funding for the
computer time was coming from the federal government, this could
be seen as an inappropriate use of a government resource.
In an article by Golden and Yemma for The Boston Globe32
about fund-raising efforts that resulted in a donation of $15 million
from Gates to put his mother’s name on a new facility (she had
passed in ), the writers even quoted Gates’s father as suggesting
that there was some form of conflict between Gates and the
administration of Harvard:
Gates has said that he withdrew from Harvard to pursue his
career.

However, according to interviews, he left after a dispute
over alleged rules violations at the Aiken lab, including using its
computers for private business.
“There was a flap, no question about it,” says his father,
William Gates Sr., who now runs his son’s charitable foundation.
“My son felt a little put upon by the Harvard administration’s
attitude.”
Gates lived in Currier House at Radcliffe, but the Aiken lab was
his true Harvard home, where he often worked through the night.
His troubles began when a lab administrator discovered that
Gates was using the Aiken computer to write computer code for a
New Mexico company.

Because the federal government was
 funding the computer time, the administrator felt that Gates was
misusing not just a Harvard facility but also public funds.
Later in their article, they describe much of the motivation that
Gates would possess to continue involvement with Harvard in the
future, despite never earning a degree from the institution.

While
Gates had become widely successful and grown a company from the
beginning of an industry into a name known around the world, he
always understood failing to meet his family expectations of
completing his degree. The desire to name a facility after his mother
was initiated out of his acute awareness of that perceived failing:
“After Gates’s mother, Mary Maxwell Gates, died in June ,
Rudenstine (Harvard official) sent a sympathy note.

According to
sources, Gates responded that his mother’s greatest disappointment
was that he had not graduated from Harvard.”33
Gates never did earn a degree at Harvard, although he returned to
the university on two very notable occasions. The first time was in a
speech to a group in , when he inspired Facebook cofounder
Mark Zuckerberg, in the audience.

The second time was when he
gave the Commencement Speech in and was awarded an
honorary doctorate by the university. Although his mother had
passed away 13 years before and his degree was honorary rather
than earned, he was able to joke about the “promise” he had made to
his father: “I’ve been waiting more than 30 years to say this: ‘Dad, I
always told you I’d come back and get my degree.’”34
For a college dropout, Bill Gates believes extensively in the value
of a college education as a basic credential needed to succeed in the
workplace today.

While he indeed never finished college, he does
believe that a college degree today is a basic requirement for
employment, much like a high school diploma was at one time. His
success as a billionaire entrepreneur without a college degree is not
easily copied, although there are a limited number of individuals—
including in the technology sector—who meet that characteristic
(Paul Allen of Microsoft, Steve Jobs of Apple, and Mark Zuckerberg
of Facebook are examples).

Later in life, he would get involved in
educational initiatives at all grade levels through a charitable
foundation, always stressing that he had received an exceptional
education despite leaving college early and that a college degree was
a minimum credential to promote future success.
 Chapter 3
EARLY DAYS OF MICROSOFT
Gates would not have been able to succeed at Microsoft
without his partnerships and talented people.

He confirmed
that in a talk much later in life, when he said that the single
best business decision he had ever made was going into
business with Paul Allen in , followed by hiring his
Harvard friend Steve Ballmer. Gates and Ballmer—who joined
the company in —pushed Allen out of the firm by early
“In my case, I’d have to say my best business decisions
have had to do with picking people.

Deciding to go into
business with Paul Allen is probably at the top of the list, and
subsequently, hiring a friend—Steve Ballmer—who has been
my primary business partner ever since.”1
On Gates’s and Allen’s move from Cambridge,
Massachusetts (home of Harvard) to Albuquerque, New
Mexico (home of MITS, the maker of Altair), historian Paul
Ceruzzi wrote, “Their move set in motion not only the
founding of one of the country’s biggest corporations, but it
also led to the digital computer moving from its initial place as
an expensive, specialized device affordable only by big
businesses, government agencies, or scientific labs, to a
technology that has spread first to the desktops and now the
pockets of consumers around the world.”2
The company was named Micro-Soft (with the hyphen, and
later with no space) at the suggestion of Paul Allen, because
the company was making “microcomputer software” instead
of working on large mainframe computers.

So the firm had a
name that would remain with limited variation over time. At
the founding in , the company’s address was in
Albuquerque, New Mexico, at Two Park Central Tower.
 His parents were not very sure of this business venture
controlled by their son. At the time, the Gates family did
believe that Bill would return to Harvard one day.

And in the
early days of Microsoft, there were many tenuous times when
the business was indeed capable of failing. The company was
attempting to start an industry from a computer that was seen
by others as difficult to use and only acceptable to a user with
very precise knowledge of how computers worked at a
fundamental level.

These people were called hobbyists; micro-
computers were a hobby rather than an occupation.
When Microsoft was founded, Bill Gates was very young
(age 19). However, he needed to be self-convinced that the
development of the firm would be beneficial to himself and he
also needed to have the ability to persuade others that his
vision for the future was practical.

For Gates, Allen, and the
friends who decided to join Microsoft at the founding, there
was significant uncertainty: working to develop a new industry
as well as the change of setting from the familiar state of
Washington or Harvard University in Massachusetts to the city
of Albuquerque, New Mexico.
Starting a new business in an entirely new industry was more
than a little daunting.

The earliest Microsoft employees were
Gates, Allen, and many of their friends. How does a year-
old convince friends that his vision of the software would lead
to a successful firm?
There become a few magic moments where you have to
have confidence in yourself…. When I dropped out of
Harvard and said to my friends, “Come work for me,” there
was a certain kind of brass self-confidence in that.

You
have a few moments like that where trusting yourself and
saying yes, this can come together—you have to seize on
those because not many come along.3
That “brass self-confidence” is seen as a characteristic of the
Masters of Enterprise as conceptualized by H. W. Brands. Of
the 25 masters he identified—and Gates was one—the
commonalities were good health and abundant energy, hunger
and passion for the work, a close and intense identification
with work, the ability to persuade others to buy into their
personalization, and a creative vision.4 People did follow
Gates, and he was the public face of Microsoft for many years;
many still associate him with the firm despite leaving all day-
to-day operations in
Along the way, the CEO of this new small business—after
convincing his friends to accept job offers—had to worry
about paying those same friends.

In the early days of
Microsoft, the cash flow to pay employees was sometimes
imperiled.
The thing that was scary to me was when I started hiring
my friends, and they expected to be paid. And then we had
customers that went bankrupt—customers that I counted on
to come through. And so I soon came up with this
incredibly conservative approach that I wanted to have
enough money in the bank to pay a year’s worth of payroll,
even if we didn’t get any payments coming in.

I’ve been
almost true to that the whole time.5
Gates believed that the move from Harvard to start a
software company was time-sensitive. Others who saw the
same issue of Popular Electronics may be actively looking to
develop software, and some of these new software
developments would be based upon copying the software
made by Microsoft.

This created a number of rationalizations
within his mind; the protection of his corporation’s intellectual
property would always remain important and Microsoft would
have to create exceptional new innovations in order to succeed
over the long term.
There certainly were a lot of other software companies.
Within two or three years of our being started, there were
dozens of companies.

Some of them tried to do better
BASIC. And we made darn sure they never came near to
 what we had done. There were competitors in other
languages. They didn’t quite take the same long-term
approach that we did, doing multiple products, really being
able to hire people and train them to come in and do great
work, taking a worldwide approach, and thinking how the
various products would work together.6
Bill Gates was always contemplating the future in some way.
And even though the Altair was a box without even a
programming language in early , Gates had an idea of the
future that involved using computers for reading, note-taking,
and other tasks: “The early dream was a machine that was easy
to use, very reliable, and very powerful.

We even talked back
in about how we could make a machine that all of your
reading and note taking would be done on that machine.”7
Of course, this was a challenge given computers of the day,
where all calculations and operations had to be programmed
once a language like Microsoft’s Altair BASIC was written,
using very precise syntax.

Without Microsoft’s Altair BASIC,
every single character—letter, number, or space—had to be
entered in by hand, with a series of 0s and 1s; eight switches
had to be flipped for every character printed. In order to get to
a point where average people would be able to conduct
reading and note-taking on a computer, there would be a
number of major evolutionary steps required.
First, someone had to create an operating system for the
computer, such as the version of DOS—Disk Operating
System—that Microsoft provided to IBM in the early s.
The Altair already had a rudimentary operating system, which
required programming in binary (the 0s and 1s).

Today,
Windows is the operating system that is associated with
Microsoft. Second, software companies had to create
programming languages for each computer, such as the Altair
BASIC that was the original focus of Microsoft; while this
was the initial focus of the company, few computer users
actually use programming languages today.

Microsoft’s
earliest expertise is still present on every computer, although
not commonly used by those who purchase a computer with
Microsoft software. Finally, the software companies had to
create applications for that operating system that would be
intuitive enough for the average user. Applications like
Microsoft Office are taken for granted today and are how the
vast majority of computer users know their computers, yet
these were missing in the earliest days of computing.

Gates
and Allen wrote the programming languages—the second part
—so individuals could write their own applications. Microsoft
has evolved to being known for every part of the chain except
the part that led to the firm’s founding.
Combined, these steps took very few years from the
founding of Microsoft in , although the operating system
we know now as Windows, with graphics and the ability to
click/select icons, did not come into being for almost a decade.
In fact, Apple was a much bigger company than Microsoft
until the introduction of Windows.

And Gates was not alone in
his vision of using computers in the way described back
in ; Xerox’s PARC (Palo Alto Research Center) had been
founded in based upon a belief of a paperless office
coming by the year Although Xerox had an incorrect
idea of the future, its work at PARC greatly influenced the
industry.

Xerox—which had started as a photographic
company but made its biggest impact on the world through the
introduction of the photocopier—was greatly worried about a
world where paper was no longer needed. Later, Xerox would
influence Apple and Microsoft into developing a lot of the
innovations still used in computers today, like graphical
displays and computer mice or pointers.
SUCCESS BASED UPON QUICK
TURNAROUNDS
We didn’t even obey a hour clock, we’d come in and
program for a couple of days straight.9
In the early days of software development, the early mover
advantage was critical.

The first company to create a product
that could be marketed would develop easy partnerships with
other firms (as Microsoft did with MITS). With the same
urgency that led Gates to leave Harvard in order to found
Microsoft, we also see that the company was necessarily
committed to working long days to meet deadlines with the
hardware providers to whom they had made commitments.
Time became an abstract concept for the employees of the
company shortly after founding, with Gates actively involved
in programming projects.
Gates and Allen were among the earliest to recognize that
computers would become everyday appliances and had a
shared vision of the capability of the programmers at
Microsoft.

However, Gates greatly misunderstood the global
scope of computing and the number of employees that would
be needed at the firm as the growth rate of the firm
accelerated. Not only did Gates personally know many of the
earliest employees, he had also hired these individuals. And
Gates firmly believed that a company of people—or fewer
—could create enough software to supply the entire global
market.

This underestimation meant that the firm quickly grew
past the point where Gates could know all the employees, and
even all the managers of products under development at
Microsoft.
We thought the world would be like it is now in terms of
the popularity and impact of the PC, but we didn’t have the
hubris to think that our company would be this size or have
this kind of success.

The paradox is that we thought, “OK,
we can just have this 30 person company that will be
turning out the software for every PC.”10
If you had asked me at any point how big Microsoft could
be, Paul and I once thought we could write all the software
in the world with people
 Gates also understood that at the founding of Microsoft, the
key players in the industry were all about the same age.
Malcolm Gladwell also noted this characteristic in his book
Outliers, where the major players in Microsoft and Apple were
all born in a very short timeframe, around the age of 20 when
these two firms were formed to become major enterprises
based upon a piece of technology that could change an
industry.

In fact, Gates didn’t recall working with anyone over
the age of 30 in the early days of micro-computing, a
statement reiterated by Apple’s Steve Jobs at an event in
“It’s funny,” says Bill Gates. “When I was young, I didn’t
know any old people. When we did the microprocessor
revolution, there was nobody old, nobody.

They didn’t
make us meet with journalists who were old people. I didn’t
deal with people in their 30’s. Now there’s people in their
50s and 60s. And now I’m old and I have to put up with
it.”12
Microsoft was married to MITS, creating various versions of
BASIC for specialized purposes by necessity; the firm could
not make versions of BASIC for other companies until other
companies decided to make micro-computers requiring
BASIC.

This meant that the early success of Microsoft was
solely driven by how many copies of Altair BASIC were sold
by MITS, as Microsoft only received a percentage of each
license that was sold. Soon, Gates would fight his first battle to
protect Microsoft’s intellectual property, as he learned that
MITS was selling very few licenses for Altair BASIC.
THE OPEN LETTER TO HOBBYISTS
More than 25 years before Napster was shut down to comply
with a court order about infringement, Bill Gates
faced his own issues in protecting intellectual property.

The
firm founded by him and Paul Allen had written the Altair
BASIC programming language that was sold by MITS.
Computers at the time were limited in scope to major research
institutions and small groups of individuals called hobbyists.
Bill Gates noticed that less than 10 percent of all Altair
computer purchases had an accompanying sale of Altair
BASIC to run on the computer.
Effectively, the vast majority of users of Altair BASIC had
used the software without ever purchasing a license to do so.
This upset Bill Gates, who crafted an open letter that was
mirrored by many artists and performers 25 years later in the
cases against Napster and other peer-to-peer file sharing
services (which were clearly illegal by the year , copying
software was not clearly illegal in ), raising many salient
questions.

If a software company is not compensated for costs
required to develop the software, would that prevent other
individuals and organizations from undertaking the effort to
develop the software to make computers truly usable?
Gates and Allen had taken a significant risk in starting
Microsoft, feeling that personal computers would be
absolutely meaningless without good software.

As he notes,
even with the Altair BASIC his company created, the
computer still required programming skills to use—the
average consumer could not (yet) effectively use the device.
Based upon his company’s revenues he was able to determine
that for each 10 Altair computers purchased, less than one
license for his company’s Altair BASIC was being purchased.
At the same time, he was getting enthusiastic notes and
feedback from more BASIC “users” than the number of
licenses MITS had sold.
As a software company, his firm clearly benefits from the
sale of licensed copies.

This relates to the concept of marginal
cost in economics; the initial development costs are very high
but the cost of selling additional copies of the software is very
low. However, the corporation could fail if the development
costs of the software are never made back by selling licenses.
Gates recognized that with the amount spent on developing the
versions of BASIC, the revenue to his company was less than
$2 per hour, about half of the minimum wage at the time.

If his
product development costs consistently exceeded the cost of
his employees’ time and labor, Microsoft would likely rapidly
fail, and there would be little incentive for other companies to
develop software for computers. Furthermore, he declared that
those computer hobbyists who used the software without
purchasing were guilty of theft, also identifying a nuance of
the software market at the time.

While more than 90 percent of
the users were not buying the official software through MITS,
some of the users were paying for unofficial software from
people who had copied the software without putting any time
or effort into the development process. Of this group, he had
particular disdain, stating “They are the ones who give
hobbyists a bad name, and should be kicked out of any club
meeting they show up at.”13 He invited suggestions (and
payments) to an apartment address in Albuquerque, New
Mexico.

The apartment in question still exists, near Kirtland
Air Force Base and the city’s commercial airport (now called
the Albuquerque International Sunport), and the text of the
letter—as printed in many of the magazines and newsletters
available to computer users in —is available through
many forms of electronic media.

Fun fact: People did write to Bill Gates (now age 20)
and a few even included a check for the cost of Altair
BASIC.

Most assuredly, Gates would not include his
mailing address on a communication sent to computer
users today.

While Gates was insistent that Microsoft should be

compensated for the time and effort placed into developing the
software, he was incorrect on a major conceptual component
in the letter. At the time, protection in the United
States did not extend to computer programs, so anyone
copying his software was technically not infringing on his
 (and thus not a thief), although selling a copy made
might be against the law in an individual state.
A legal case in might be created based upon a state’s
“unfair competition” laws.

Those laws—when available in a
state—would apply only to a business or individual who was
making a profit by reselling the work of Microsoft. The aspect
of making a profit was key; members of the clubs who were
giving away copies clearly would not be deriving a profit, and
thus were not competitors. And unless an individual had
signed a nondisclosure agreement specifically with Microsoft
or MITS (selling Microsoft’s products), there would be no
violation of trade secrets.

The ability of Gates—and the
leaders of all other software producers—to gather profit from
producing and selling software in the s was imperiled.
Given a total of 60, Altair computers were sold over the
lifetime of MITS, the ability of Microsoft to sell its BASIC to
a higher percentage of users was critical to the firm’s
survival
EARLY ADOPTION OF POWER
While Microsoft started in , Gates and Allen officially
formed their partnership on February 3, According to
Allen, the agreement contained two very important clauses.
While the agreement was between only two people, there was
a clause that a partner would not have to work if attending
school as a full-time student and another clause that in an
irreconcilable dispute, Gates could force Allen out of the
firm Gates had the majority stake in the firm with 64 percent
of all the shares, was clearly the controlling partner in
Microsoft, and still—even at some low level—considered the
possibility of returning to Harvard in the future.
Gates also understood early on the power of a single
operating system to allow other organizations in the computer
hardware and software industry to work effectively together.
As early as , he spoke about having one standard
operating system for computers to make the job of computer
programmers much easier.

At the time he made the statement
in writing, he did not know that he was speaking of his own
company’s future; he believed a standard operating system
would be desirable (like Windows today), but his company
was not focused on writing operating systems. In fact, his
company had not even written an operating system at the time
he wrote that the industry would benefit from a single OS:
The best thing for users would have been if all the
manufacturers of personal computer hardware had got
together years ago and decided on a standard OS.

Every
time a new device was introduced the driver needed in the
standard OS would have to be included with the hardware.
Software houses would write programs to run under the
standard OS and wouldn’t have to worry about multiple
versions. The source of the OS would be widely available
and everyone could make suggestions for its
enhancement
Gates wasn’t selling MS-DOS, Windows, or Microsoft
Office at the time; those products did not exist as of yet and
that was not Microsoft’s market.

Gates’s company was one of
the software companies that developed programming
languages only; he had never hired anyone with expertise in
operating systems or applications. In fact, Microsoft was still
four years from “developing” its own operating system, where
“developing” meant “purchasing from another company.” Yet
according to Cringely, Gates consistently would state “we
want to monopolize the software business” in the s At
the time, Gates was still in his early 20s, and Microsoft was
small.

Once Microsoft was large enough to have a public
relations staff, he was probably counseled against stating that
he wanted to form a monopoly, as that usually draws the
attention of the federal government.
DISPUTE WITH MITS THREATENS THE
COMPANY
Microsoft’s growth was constrained by a dispute with Altair
builder MITS over license agreements and the total amount of
royalties, as Ed Roberts was trying to sell his company.

This
created a very possible failure point for the company, as
Microsoft was looking to sell modified version of the BASIC
programming language to other competitors, while MITS was
attempting to take ownership of the full rights to the Altair
BASIC developed by Microsoft. Losing access to the one
product created by the firm would have spelled the end of
Microsoft in , many years before Windows was created.
MITS had a judge enforce the arbitration clause in the original
contract, which meant that Microsoft was in a critical holding
pattern.

The company was not receiving any revenue from
MITS, the company was paying lawyers, and the company
was forbidden to sign contracts until the arbitrator made a
decision. When the arbitrator finally decided, Microsoft was
able to sign many contracts with other vendors previously
negotiated, and take all of the money from those contracts,
without revenue-sharing with MITS.
By the beginning of September, the arbitrator sent down
word in no uncertain terms: MITS had violated the
agreement in what Paul Allen remembered the arbitrator
calling “one of the worst cases of corporate piracy I’ve ever
seen.” Although MITS could continue to sell Microsoft’s
BASIC for its own machines, its exclusive license
was officially terminated.

MITS would no longer share in
future third-party royalties, and Microsoft was free to sell
the product to all comers
At this point, Microsoft’s future looked much brighter. The
company didn’t have to share any revenue from sales of Altair
BASIC with MITS, owned the complete rights to its software
under the contract, and could sign all the agreements that were
placed on hold during the arbitration hearing.

This sudden
inflow of cash saved the firm and started another key pattern
of Microsoft under Gates’s leadership; as Microsoft was not
building the actual computers, he was willing to sell revised
versions of BASIC for every company that did decide to build
computers. Even early Apple and Commodore computers ran a
version of BASIC written by Microsoft.

Customizing one
product for every participant in the early market for micro-
computers provided Microsoft the revenue to grow, and soon
relocate from Albuquerque. Microsoft would not begin to
work on operating systems or applications in earnest until after
the move to the state of Washington, first in Bellevue in
January
Working at Microsoft was never easy, and many early
employees left.

Of the Albuquerque dozen a few weeks before
the move to Washington—11 people immortalized in the
December 7, , company portrait plus a 12th person who
missed the photo due to a snowstorm19—Bill Gates and just
two others would still work at the firm in the s
INTELLECTUAL PROPERTY WHEN NO ONE IS
GETTING RICH
After the Open Letter to Hobbyists in , Gates had hoped
the issue of had been solved by revisions to
laws.

He was sadly mistaken. The laws on
s had been modified slightly since Gates wrote the
widely disseminated Open Letter to Hobbyists in February
, within the first year of Microsoft’s existence. However,
Gates and Microsoft were still in an important battle to protect
their intellectual property. The interview with Dennis
Bathory-Kitsz was incorporated into an article called Have the
Courts Smashed Software ?

in 80 Microcomputing
magazine. The magazine was named after the TRS
computer, which also used a form of BASIC written by
Microsoft. And Gates understood that the current model of
software being used endemically without licenses created little
incentive to pay for a licensed copy:
 There’s nobody getting rich writing software that I know
of
In an interview where Gates strictly defended the rights of
his firm to protect Microsoft’s intellectual property from being
copied, he truthfully—at the time—described the state of the
industry as not being particularly lucrative for the developers
of software.

He had already learned from his experiences with
competitors and users when his only product was Altair
BASIC. Given no legal disincentive to using the software
written by Microsoft without buying licenses, the company’s
product would be copied and/or resold without the firm
receiving a commission on those sales.

In order for Microsoft
to grow, there was a need for a substantial change in the way
the intellectual property of software was treated by the
government of the United States, although those same
protections would come much later in some of the markets
entered by Microsoft.
The year was a critical point for software developers in
the early age of computing.

In fact, many software developers
thought the interpretation of laws had taken a step backward.
The revisions to laws in had asked for a
commission (CONTU, or Commission on New Technological
Uses of ed Works) to write a report about software
stored on various electronic media and whether photocopies
violated ; the commission had suggested a process
such that software would be covered by .

Although
Congress had not yet acted on the report from the commission,
many assumed that the issue had been resolved for computer
programs. Then a firm named JS&A was sued for selling a
product called “JS&A Chess Computer,” which was an exact
replica of Data Cash’s “Compu-Chess” product. Although
JS&A was selling software created by another firm, a federal
judge ruled in that copying and selling the program did
not violate law at the time.
 Given his stance in the Open Letter to Hobbyists just four
years previously, the thoughts of a year-old Bill Gates on
the issue were very predictable.

If a precedent-setting ruling
from a federal judge stated that software stored on electronic
media was not protected by , there would be few
legal mechanisms available to stop any computer program
from being copied, re-labeled, or resold without any revenue
to the creator of the work. Widespread copying of software
quickly became prevalent, and Bathory-Kitsz noted, “Stated
very simply, the laws, the most general form of
protection for authors and artists, may not apply to the final
version of programs as prepared and sold on magnetic media
—disks, tapes, wafers—or in read-only-memories (ROMs).”22
At the time of the Open Letter, Bill Gates noted that $40,
was spent in developing the Altair BASIC.

Microsoft had
grown from that time, and expenses in software development
were far greater. Without the ability to use patents or
s, he described how Microsoft tried to protect the
company’s products. “We spend millions of dollars a year
creating software programs, and we are protecting those in
several ways.

There’s the trade secret laws where we get non-
disclosure—that’s how we handle our source codes and our so-
called commercial packages that are high-priced.” Yet not all
software was high-priced, and Gates still believed “if the law
wasn’t going to protect it, there wouldn’t be any software
written,” consistent with the Open Letter.
When informed by Bathory-Kitsz that someone had taken
source code created by Microsoft and republished the material
elsewhere, Gates was insistent that his rights had been
violated.

“He certainly has because that’s my material. Whose
does he think it is? Does he think that he has the right to go out
and commercially profit by republishing something that we
created? I mean, that’s ludicrous! Why should he be making
money from that? All he did was take our stuff.”23
 Although this was Gates’s second major round in protecting
the intellectual property created by Microsoft, it would not be
the last.

The issue with federal law gets resolved
within a few years, whereas charges of unfair competition and
violation of intellectual property did arise in the future,
including charges against Microsoft and other firms controlled
by Bill Gates.
HIRING PERSONNEL TO GROW
As the s rolled over into the s, Gates recognized that
his company would benefit from hiring superstars in computer
science and software development.

He also recognized the
converse; if the best programmers he had already attracted
started to leave the firm, then others would as well. Microsoft
had to become a destination for the most exceptional
programmers, despite being a small company when compared
to the likes of Apple or IBM. And the demanding Gates was
clear that his employees had to be very talented, where the
vast majority of the population would be unqualified for his
work: “The key for us, number one, has always been hiring
very smart people.

There is no way of getting around, that in
terms of I.Q., you’ve got to be very elitist in picking the
people who deserve to write software. Ninety-five percent of
the people shouldn’t write complex software.”24
Gates’s reputation for being a challenging boss is well
earned. As a software programmer himself, he clearly
understood that the majority of people should not be involved
in developing new software.

The key understanding of Gates
was not that software developers need to graduate from the
most prestigious colleges; neither he nor Allen had graduated
from college at all. He did know that software developers
should consistently be high IQ individuals.
—Hiring Steve Ballmer
The second of Bill Gates’s exceptional everyday partners was
Steve Ballmer, from through near the present day,
overlapping with Paul Allen from through in
Eisner’s model First, Gates had to convince Ballmer to join
the firm as the business manager, in an era when Gates was
already known for both his technical capability and controlling
knowledge of everything done by his firm.

Waters wrote
decades later that the young Gates:
once ruled Microsoft with a command of detail and
intellectual intensity that led to the kind of culture that was
capable of dominating the tech world—even as it tipped
over into behaviour that brought a regulatory backlash. “I
was a kind of hyper-intense person in my twenties and very
impatient,” he says.

“I don’t think I’ve given up either of
[those] things entirely.”26
In , the young Gates had very little measured intensity.
He was simply intense. Persuading Steve Ballmer to come to
Microsoft was an undertaking. Although a long-time friend of
Gates, Ballmer was in graduate school at Stanford after getting
his baccalaureate degree in mathematics and economics at
Harvard So Gates worked somewhat on impressing Ballmer
in the recruitment and interview process, even bringing in his
mother and father for an assist: “Inviting Ballmer to Seattle,
Gates wined and dined his college friend, getting him together
with his parents, Bill Sr.

and Mary, and giving him a tour of
the city.”28
The recruitment and interview process was a high priority of
Gates but not his highest priority at the time. Years later,
Ballmer would reveal that Gates left for vacation during the
interview; Gates already knew who he wanted at the
company
Ballmer also received partial ownership of the company to
come to Microsoft on June 11, As the first business
manager of Microsoft, the market would see the first IBM
personal computers launch a year later, each running MS-
DOS, the first commercial operating system for PCs.

Gates
then realized that hiring exceptional programmers would be
the next step in growing Microsoft. And in his case, he started
by hiring Dr. Charles Simonyi from Xerox PARC—the group
that had been working on advanced computing techniques
starting in because Xerox feared the paperless office that
could occur by
Gates knew that attracting very good programmers made it
easier to attract others of the same caliber.

Stars sought to
work wherever the best in their fields congregated. Gates in
had recruited Charles Simonyi from Xerox PARC as
one of the first “really bright guys I hired in software
development.” The presence of Simonyi, who can be
regarded as the father of Microsoft Word, in turn helped to
lure others. This was only one of the many virtuous cycles
that were the centerpiece of Gates’s management
philosophy.

The converse was also true. If Microsoft were
to lose its best programmers, others would begin thinking
about leaving, too. Thus Microsoft had to pay ongoing
attention to retention as well as recruitment
Like with the example of Traf-O-Data, where Allen knew far
more about hardware than Gates, Bill was at a decision point
for Microsoft.

Although he had been programming extensively
for the firm in terms of programming languages, he “knew
very little about applications and admitted it.”31
Even much later, Gates recognized the importance of his
most talented employees among a staff of thousands, saying
“Take our twenty best people away, and I will tell you that
Microsoft would become an unimportant company.”32
Although reported as exceptionally demanding, Gates
understood that he needed to attract and retain the highest-
quality employees in a company of exceptionally bright
people.
—Selling an Operating System Requires an
Operating System, IBM and QDOS
Bill Gates had a connected family and likely benefited from
those connections in the earliest days of Microsoft.

His mother
was on the board of the United Way of America at the same
time as the chairman of International Business Machines
(IBM). That company was looking to develop a computer that
would be affordable to home users but not compete with the
cherished, high-profit commercial market. And Microsoft was
fortunate, as there were two projects where the suspected lead
candidate did not win.

Per the obituary of Mary Gates, she
may have provided Microsoft’s most critical connection:
In , she discussed with John R. Opel, a fellow
committee member who was the chairman of the
International Business Machines Corporation, the business
that I.B.M. was doing with Microsoft.
Mr. Opel, by some accounts, mentioned Mrs.

Gates to
other I.B.M. executives. A few weeks later, I.B.M. took a
chance by hiring Microsoft, then a small software firm, to
develop an operating system for its first personal computer.
The success of the I.B.M. P C gave Microsoft and its MS-
DOS (for Microsoft Disk Operating System) a lift that
eventually made it the world’s largest software company for
personal computers
Microsoft was still specializing in programming languages at
the time, including FORTRAN, BASIC, and COBOL.

IBM
started by asking Microsoft for BASIC, which Microsoft was
already selling to everyone else. Gates even made the
recommendation on what chip IBM should use for the
computer IBM asked for an operating system, and Bill Gates
knew of a firm—and a programmer—that IBM did not know
about.
After securing the rights to provide a Disk Operating System
(DOS) to IBM, Microsoft and Bill Gates encountered a
significant quandary.

The company had never before
developed an operating system for a computer, focusing on
programming languages instead. In a business sense, Gates
had a choice between three very different alternatives in order
to meet the IBM deadline. The firm could develop the
operating system internally with existing programmers, the
company could acquire another firm with the expertise to
develop an operating system, or the company could essentially
buy the rights to an existing operating system that was not
used on other devices.
At the time, few people understood the importance of the
IBM product that was being created.

Bill Gates was one of the
individuals who did understand the importance. For IBM, with
a long-standing interest in mainframe computers rather than
reaching household consumers, the project was not envisioned
for the revolution that it would cause. Not only would IBM-PC
compatible computers quickly overtake Apple computers in
the home market, but Microsoft would benefit by being able to
sell a single product to IBM as well as IBM’s competitors.
On July 27, , for the amount of $50,, Microsoft
bought the complete license for the product developed by the
Seattle Computer Products called DOS (previously QDOS
—Quick and Dirty Operating System).

While the purchase
agreement was signed by Microsoft vice president and
cofounder Paul Allen, the official point of contact for all
inquiries from that date forward was “William H. Gates” at
Microsoft’s Bellevue, Washington address. The IBM PC was
introduced two weeks later, on August 12, , and
Microsoft had complete rights to the operating system used on
the prevalent computer processor at the time.

What had
been called “DOS Disk Operating System for the —
Version ”35 was now Microsoft’s MS-DOS, and Microsoft
had a product that would lead to phenomenal revenue growth.
 The contractual Agreement of Sale between Seattle
Computer Products and Microsoft contained resolution for
some issues related to intellectual property that had plagued
Microsoft in the early days and discussed and described by
Bill Gates, both in the Open Letter to Hobbyists and the later
interview in Microcomputing.

Seattle Computer Products
was allowed to continue selling copies of the operating system
along with processors, paying a royalty to Microsoft for each
computer sold in a legally binding contract. Most notably, all
purchasers of a product with the operating system now owned
by Microsoft had to sign a “Registration and Non-Disclosure
Agreement” that precluded the ability to copy the software
without violating the trade secrets of Microsoft, specifically:
The party above named and below signed agrees that it is
receiving a copy of the above named software for use on a
single computer only, as designated on this registration
form.

The party agrees to fill out and mail this registration
form to MS before making use of the software. The party
agrees to make no copies of the reference software except
for the purpose of backup for the above specified computer
and to strictly safeguard the original software and backup
copies against disclosure to persons not specifically
authorized by MS.

The party further agrees that
unauthorized copying or disclosure of this software will
cause great damage to MS and Seattle Computer Products
and that this damage is far greater than the value of the
copies involved
Microsoft had clearly made an intentional move to say that
computer software was associated with a single computer, and
that the operating system necessary for using the computer
was inherently tied to a single machine.

As the number of
computers in place throughout the world increased, this would
become a very lucrative business model: one that eventually
begins to draw the attention of competitors and the U.S.
Department of Justice.
 The day the IBM PC was announced was a critical point in
the history of Microsoft. If one had an invitation to the IBM
press conference and were looking for Bill Gates the day the
PC with MS-DOS was announced, he would not have been
seen.

He was not at the IBM ceremony, as the device was not
seen as important enough to invite anyone at all from
Microsoft, no less the CEO of the firm. On the day of the IBM
announcement in , Gates happened to be at Apple
headquarters. Of the personnel at Apple looking at the
announcement: “They didn’t seem to care,” he said. “It took
them a year to realize what had happened.”37
The IBM press conference described the innovation of the
PC, with a brief mention of Microsoft.

Students could now
write papers, businesspersons could use accounting software,
and the manuals provided meant that almost anyone could start
using the computer within hours, and then begin personalizing
their own programs. The computer was still about a decade
away from the ability to simply plug in, turn on, and use:
IBM has designed its Personal Computer for the first-time
or advanced user, whether a businessperson in need of
accounting help or a student preparing a term paper.

An
enhanced version of the popular Microsoft BASIC
programming language and easily understood operation
manuals are included with every system. They make it
possible to begin using the computer within hours and to
develop personalized programs quite easily
Why was this event such an important event in the history of
Microsoft?

Almost all of the , computers running the
previous operating system (CP/M) were replaced by 10 times
as many computers running MS-DOS This was a
tremendous deal for a Gates-led Microsoft; he revisited the
same business model as he had with BASIC. Any time a new
manufacturer wanted to compete against IBM, he had a
customized version of MS-DOS available.

And now that he
had an expert in developing applications, each manufacturer
buying a customized version of MS-DOS could also purchase
applications customized to the customized MS-DOS.
Effectively, Gates could sell a slightly different operating
system and slightly different applications to every computer
manufacturer, including Apple.

No matter which manufacturer
ultimately succeeded, Microsoft would get paid.
Immediately after the release of MS-DOS on the IBM PC,
there was trouble on another project for which Gates was
providing a version of BASIC, the TRS Model III. In the
confusion as to whether Radio Shack or Microsoft was the
primary contributor to the problem, Gates received the
reputation of being nonresponsive at times.

Even in , that
elicited the statement “Bill Gates (president of Microsoft) is
notorious for not being reachable by phone and for not
returning phone calls.”40
/—CRITICAL ILLNESS OF ALLEN
In , with the company located in a Seattle suburb, the
leaders of Microsoft were honored by the Lakeside School
with the Distinguished Alumni Award; Gates was in the high
school class of and Allen in the class of Later
that year, Allen was diagnosed with a form of lymphoma that
could have caused his death at a young age if not treated
aggressively.
During his recuperation, cofounder Allen was slowed in his
work due to chemotherapy treatments.

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He overheard a talk
between Bill Gates and Steve Ballmer in December As
Allen relayed himself in Vanity Fair, Gates and Ballmer were
conspiring to reduce Allen’s ownership of the company
without his involvement, and Allen was not pleased. Back in
, Microsoft was found as a partnership where Gates could
remove Allen from the firm at any time.

That partnership
agreement was no longer in place—Microsoft became a
corporation on June 25, —and Allen could hold on to his
ownership interest in the company as long as he wanted, even
if he chose to leave.
Allen notes Gates as trying to end the year with an
olive branch, writing in a note on New Year’s Eve, “During
the last 14 years we have had numerous disagreements.
However, I doubt any two partners have ever agreed on as
much both in terms of specific decisions and their general idea
of how to view things.” The next month, Gates and Allen
exchanged offers to buy out the departing Allen’s shares in the
firm.

Allen rejected Gates’s initial offer, Gates rejected Allen’s
counter-offer, and Allen left the company with his shares of
Microsoft stock
With Allen’s offer to sell his shares at a set price rejected by
Gates, most would think the interaction was detrimental to
Allen.

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In fact, Allen was exceptionally fortunate. The buyout
of his portion of the company would have netted a few million
dollars if Gates had accepted Allen’s price. Microsoft’s
explosive growth came much later, which made Allen a
billionaire while he was off pursuing other interests, at his own
pace, to protect his post-lymphoma health.

Borsook labeled
Allen the “accidental billionaire” and wrote “his wealth is a
lucky trick of time and place, and particularly of his
involvement with Bill Gates. While Allen was co-responsible
for the early creation and early technical successes of
Microsoft, his tremendous wealth came later. Gates made them
both billionaires after Allen left off an active involvement with
Microsoft.”43
—GATES AND MEMORANDUMS TO
STAFF
June saw a famous memorandum that was co-written by
Bill Gates and Steve Ballmer.

This was the Applications
Strategy Memo, which told staff that Xerox PARC’s vision
was the future of Microsoft, and that the existing operating
systems—those without graphics or mice—would not be
developed in the future:
Microsoft believes in mouse and graphics as invaluable to
the man-machine interface.

We will bet on that belief by
focusing new development on the two new environments
with mouse and graphics…Macintosh and Windows.
…
Microsoft will not invest significant development
resources in new Apple II, MSX, CP/M or character-
based IBM PC applications. We will finish development
and do a few enhancements to existing products
What was most insightful about this message?

That not only
was Microsoft going to be working on Mac applications and
then Windows, but that the Macintosh applications would
actually be developed first.
The Mac was a very, very important milestone. Not only
because it established Apple as a key player in helping to
find new ideas in the personal computer but also because it
ushered in a graphical interface.

People didn’t believe in
graphical interface. And Apple bet their company on it, and
that is why we got involved in building applications for the
Macintosh early on. We thought they were right.
—Bill Gates45
—GATES’S INTELLECTUAL PROPERTY
WIN WAS ACTUALLY BY APPLE
Gates had maintained from the creation of his firm that the
software created was his work, and should be protected under
protection.

Despite the revisions to the law
governing in , the legal setback in that
suggested electronic media was not covered persisted a few
more years until And the case that finally put to rest the
idea of wasn’t about the software developed by
Gates or Microsoft, but software developed by Apple. August
30, , was the significant date in the case Apple Computer,
Inc.

v. Franklin Computer Corporation, which was sent to the
U.S. Court of Appeals Third Circuit after an adverse ruling
against Apple in the same case three days prior.
Franklin attempted a novel defense in the case when Apple
presented evidence that the software used was almost identical
to that used in the Apple II. In fact, Franklin had not even
bothered to change some references to Apple and Apple
employees encoded in the software, so denying the copies
would be impossible.

As noted in the court opinion comparing
the Apple II and Franklin’s ACE computer:
Apple produced evidence at the hearing in the form of
affidavits and testimony that programs sold by Franklin in
conjunction with its ACE computer were virtually
identical with those covered by the fourteen Apple
s. The variations that did exist were minor,
consisting merely of such things as deletion of reference to
Apple or its notice.

(5) James Huston, an Apple
systems programmer, concluded that the Franklin programs
were “unquestionably copied from Apple and could not
have been independently created.” He reached this
conclusion not only because it is “almost impossible for so
many lines of code” to be identically written, but also
because his name, which he had embedded in one program
(Master Create), and the word “Applesoft,” which was
embedded in another (DOS ), appeared on the Franklin
master disk.

Apple estimated the “works in suit” took 46
man-months to produce at a cost of over $,, not
including the time or cost of creating or acquiring earlier
versions of the programs or the expense of marketing the
programs
And the changes Franklin made were exceptionally minimal,
such as changing the eight letters that spelled “Apple II” when
booting the computer to instead read “ACE ” So what was
Franklin’s defense that was promptly rejected by the judge at
the appeals court?

Franklin argued that operating systems
would not be covered by , and that copying Apple’s
operating system was further permissible because Franklin did
not have the capability of developing its own similar operating
system: “Franklin did not dispute that it copied the Apple
programs. Its witness admitted copying each of the works in
suit from the Apple programs.

Its factual defense was directed
to its contention that it was not feasible for Franklin to write
its own operating system programs.”
The judge promptly rejected Franklin’s contention that an
operating system was not covered by . And Bill
Gates immediately knew how important this ruling was for
Apple, Microsoft, and all other firms developing various
software applications and operating systems; in fact, Microsoft
was extensively involved with many providers, including
Apple.

Gates took the opportunity the next month to write a
celebratory “Opinion” piece that was published in the New
York Times. Gates knew that if Franklin had won, then the
future of Apple, Franklin, and Microsoft would be imperiled
by copies of their software freely made by companies in other
countries. He celebrated that the court had ruled “all computer
software, whether it appears on a floppy diskette or is etched
into the silicon chips deep inside a computer, is protected by
United States laws.” Gates had been claiming for
years that software development would (eventually) stop in the
United States without the protection, and that courts in Europe
had already decided that software could be ed.

Gates
noted that the software industry was still nascent and
computers would be easier to use given more investment by
the various competitors in the market. He also described a very
fragmented industry, with thousands of competitors—not a
limited few competitors—working to reach the market with
their software: “Imagine the disincentive to software
development if after months of work another company could
come along and copy your work and market it under its own
name ….

Without legal restraints on such copying, companies
like Apple could not afford to advance the state-of-the-art.”47
At this point, there was room for Apple’s Jobs and
Microsoft’s Gates to celebrate; the U.S. judicial system had
finally—for good—decided the software critical to each firm’s
success was protected.
As PCs were taking off and millions of new users were
becoming familiar with MS-DOS, Gates participated in a
Apple event that was set up as a game show.

In one of the
many contradictory public statements he made over time, he
described the Macintosh to be released in January as the
most revolutionary idea. That Macintosh initiative was being
led by Steve Jobs and Gates said:
to create a new standard takes not just making something
that’s a little bit different, it takes something that’s really
new and captures people’s imagination.

And the Macintosh,
of all the machines I’ve ever seen, is the only one that
meets that standard
Microsoft was also working on a project for IBM-PCs in
It was called “Windows.”
—The original Macintosh was released on January 24,
, with an iconic commercial shown a few days before
during the Super Bowl.

Microsoft was firmly connected with
Apple, Gates was developing ideas for Windows, and Apple
and Gates were both building off the work at Xerox PARC,
which had not been able to make innovations related to a
paperless office into a successful business.
They showed that it was easier to instruct a computer if you
could point at things on the screen and see pictures.

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They
used a device called a “mouse,” which could be rolled on a
tabletop to move a pointer around on the screen. Xerox did
a poor job of taking commercial advantage of this
groundbreaking idea, because its machines were expensive
and didn’t use standard microprocessors. Getting great
 research to translate into products that sell is still a big
problem for many companies.

Microsoft CEO Bill Gates in (age 28 or 29), nine years after the founding of
the firm.

(AP Photo)

We worked closely with Apple throughout the

development of the Macintosh. Steve Jobs led the
Macintosh team. Working with him was really fun. Steve
has an amazing intuition for engineering and design as well
as an ability to motivate people that is world class.
It took a lot of imagination to develop graphical computer
programs.

What should one look like? How should it
behave? Some ideas were inherited from the work done at
Xerox and some were original
As was drawing to a close, Gates was again supporting
the Macintosh in the media over the IBM PC.
 Chapter 4
DEVELOPMENT OF
PRODUCTS USED TODAY
(–)
—ELIGIBILITY (DATING AND BUSINESS
PARTNERSHIPS)
In early , Bill Gates was rated by Good Housekeeping
magazine as one of the “50 most eligible bachelors.”1 There
was at least one error in the magazine’s description; he was 29
years old rather than the listed
In June , Microsoft signed a Joint Development
Agreement with IBM to make an operating system called
OS/2, signed by William H.

Gates on page Microsoft did
the development but was also working on versions of
Windows in the background. So we have Microsoft selling
MS-DOS to anyone making a computer similar to an IBM,
software to Apple, an operating system to IBM, while working
on its own operating system and selling applications to any
consumer with a checkbook.

No matter who wins this round of
the technology evolution, Microsoft will again profit.
Although Windows was announced in , the first release
came on November 20, Microsoft had become known
for quick turnarounds on projects, so some computer experts
began to believe that Windows was vaporware in the years
between the announcement and the release.

The term
vaporware has many connotations—it can be a product the
company wants to release but became a lower priority or not
technologically feasible. Vaporware can also be a product that
was never intended to exist, in which case it is announced to
confuse competitors or nudge a competitor out of the market.
As Microsoft announces: “On November 20, , two years
after the initial announcement, Microsoft ships Windows
Now, rather than typing MS–DOS commands, you just move a
mouse to point and click your way through screens, or
‘windows.’ Bill Gates says, ‘It is unique software designed for
the serious PC user.’”3
Apple did not think Windows was unique enough.

And
Steve Jobs was no longer at Apple, although he would return
in The company had hired a CEO to be the business face
of Apple in ; John Sculley was famously recruited by
Jobs with the line, “Do you want to spend the rest of your life
selling sugared water, or do you want a chance to change the
world?” The Macintosh did not meet sales projections and the
battle between Jobs and Sculley led to a battle where Jobs was
left with no team.

In fact, Jobs took the removal of his staff as
being fired in a very harmful way:
I was out—and very publicly out. What had been the focus
of my entire adult life was gone, and it was devastating.4
Jobs was “devastated” for part of but recovered quite
well. He responded by starting another computer company
called NeXT and a computer-based animation company called
Pixar, which would create many popular movies three decades
later.

And those responses meant his path with Apple—and
with Microsoft—would intersect again.
—MICROSOFT SELLS STOCK AND
BECOMES PUBLICLY TRADED
In , Microsoft became a publicly traded company and
thus everyone could buy and sell shares in the company at
will. For Gates, this was a major change in a company he had
firmly controlled for more than a decade already; he would
now be accountable to others who had queries about Microsoft
stock.

And he was not happy about the prospects, although
selling shares of stock would allow Gates to take money out of
Microsoft whenever he wished:
“The whole process looked like a pain,” he recalls, “and an
ongoing pain once you’re public. People get confused
because the stock price doesn’t reflect your financial
performance.

And to have a stock trader call up the chief
executive and ask him questions is uneconomic—the ball
bearings shouldn’t be asking the driver about the grease.”5
So why does a firm decide to become publicly traded on a
stock market, especially a firm where the chief executive
officer (Gates) had expressed little desire to be involved in a
process allowing individuals or businesses to call and ask
about the company and the company’s prospects?

There are
multiple reasons for becoming a publicly traded company.
On the initial sale of stock by Microsoft to the public, the
firm would receive a substantial inflow of cash. The amount of
that inflow would be the product of the number of shares sold
times the price per share (less a commission to the banking
firms that helped sell the shares).

Acquiring cash through a
stock sale can be viewed as safer than acquiring cash through
borrowing money (debt), which would require periodic
interest payments. While there would be more owners of the
firm—a share of stock is a partial ownership of the firm—the
company would now be able to use the cash raised from the
initial stock sale to make investments that allow expansion and
new products.
A side effect of becoming a publicly traded company, with a
listing on a stock exchange, is that the founders or existing
owners now have an easy way to sell part—or all—of their
ownership in the company.

The founders of Microsoft, such as
Gates and Allen, immediately held shares of stock that were
worth many millions of dollars as part of the initial public
offering (IPO) process. These shares can be sold by the major
executives of the firm in the future, as long as those executives
follow rules that prevent individuals with insider knowledge
from trading shares on upcoming good (or bad) news.
MICROSOFT AS AN INCREDIBLE WEALTH
GENERATOR
In order for a corporation to grow, the products or services
offered by the corporation have to be desired by customers
(whether business or individuals).

For the first 11 years of
Microsoft’s existence, the company was very closely held and
never had issued an IPO, which means there were no shares of
stock issued that could be bought and sold readily. The
average investor could not purchase stock in Microsoft until
the official IPO on March 13, , when a single share of
MSFT stock sold for $ Shares of Microsoft can still be
bought or sold by individuals on the NASDAQ stock market
under the symbol MSFT.
Microsoft used the proceeds from selling the IPO shares at a
fortuitous time in the development on technology for
businesses of all sizes as well as consumers.

Due to the rapid
creation of wealth in the firm, one share bought on the first
day Microsoft was available would have grown to shares
if held for the entire growth spike in Microsoft’s first 25 years
as a public company.6 Like many fast-growing companies,
Microsoft issued routine stock splits to keep the price
accessible to more investors.

The extensive growth in
computing—and Microsoft—in this era made many Microsoft
investors and employees quite wealthy.
The growth of the company made Bill Gates—the largest
shareholder and CEO—an exceptionally wealthy individual,
often listed as the wealthiest person in the world over the past
two decades.

In fact, the position of wealthiest individual in
the world has only been held by three people over the past two
decades: each year, the listing has been topped either by Bill
Gates, his good friend Warren Buffett (of Berkshire
Hathaway), or Carlos “Slim” Helu (of Mexican
telecommunications firm América Móvil).
OS/2 AND WINDOWS RELEASED
The first version of OS/2 was released in December per
the agreement with IBM.

The second version of Windows was
also released in December Both of these products were
written by Microsoft, so the firm again benefitted no matter
which product was more successful. In , Gates suggested
that OS/2 could be the most important operating system of all
time, another intrinsically contradictory statement:
I believe OS/2 is destined to be the most important
operating system, and possibly program, of all time.

As the
successor to DOS, which has over 10,, systems in
use, it creates incredible opportunities for everyone
involved with PCs.7
Microsoft, under Gates, was a clear beneficiary of having
multiple “most importants,” considering he had extolled the
virtues of MS-DOS, Apple’s MacIntosh, Microsoft Windows,
and now IBM’s OS/2.

Independent of which platform became
dominant Microsoft would benefit and continue to grow as
long as the market for home computers continued to grow.
APPLE COMPUTER INC. VERSUS MICROSOFT
CORPORATION
In , Apple filed a lawsuit against Microsoft based upon
the use of the graphical user interface (GUI) in the Windows
operating system.

Bill Gates was not amused, and his
relationship with the new Apple CEO (Sculley) was not as
strong as his relationship with Jobs.
A step back in history reminds us that Steve Jobs (of Apple)
and Bill Gates (of Microsoft) were not the originators of the
GUI that was the focal point of the lawsuit. In fact, both
learned about the concept of a GUI from Xerox’s Palo Alto
Research Center (PARC).

Xerox, as the owner of PARC in the
s, examined its strategic options in the market for
operating systems and did what any potential rights owner of
that invention would do.
Xerox filed a lawsuit against Apple the next year.
Industry observers immediately thought that was a little
late, as the Macintosh was no longer a “new” item on the
market.

Why would Xerox not file a lawsuit against both
Apple and Microsoft? That was a simple business matter.
Microsoft never claimed ownership of the idea of the GUI,
while Apple was attempting to own the rights to the concept.
If the courts decided that Apple “owned” the rights to all
operating systems with a GUI, Apple would receive licensing
revenue for what had been an idea developed by Xerox.

This
scenario took a while to sort out; Xerox sued Apple for using
its invention, while Apple sued Microsoft for ostensibly
stealing an idea both firms derived from Xerox.
This story has roots that had gone back at least three years.
Steve Jobs had been pushed out of influence at Apple by John
Sculley and the board of directors.

And Sculley didn’t like the
idea that Microsoft would be releasing Windows Even
years later, Gates’s disdain was apparent in talks with Jim
Carlton related to the first legal nudges before the lawsuit.
Carlton captured the thoughts of both Gates—who knew of the
same GUI at Xerox PARC as Steve Jobs saw in November
—and Charles Simonyi, the software application expert
Gates had specifically hired from Xerox PARC.

Gates knew
that both companies had been similarly inspired, and that
Apple intentionally withheld information that would have been
trade secrets to actually be within dispute.
Gates was hopping mad. He had not stolen anything from
Apple, he insisted then and continues to insist now. The
whole idea of GUIs had originated not with Apple, he
points out, but with Xerox.

“The father of the Mac is
Xerox. The father of Windows is Xerox,” Gates says.
Charles Simonyi, Microsoft’s in-house GUI maestro,
 compares the similarities between Windows and the
Macintosh to those found in different automobile models.
“When you decide to build an automobile, you’re not going
to change the steering wheel,” Simonyi says.

“They all
have common ancestry. This was such a silly and pointless
argument that they were falling into.”8
No one ever disputed that the idea of a GUI came from
Xerox. If Xerox had immediately sued, the outcome might
have been different. Xerox lost the case against Apple, Apple
lost the case against Microsoft, and the escapade ended in
, with each of the three firms spending a lot of money on
lawyers but essentially making no progress.
MICROSOFT WAS USING E-MAIL IN THE s
In a interview with Success Magazine, Gates noted that
Microsoft was already using electronic mail: “We have
electronic mail here—that is, we send messages to each other
electronically over our computers.

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So, if you have a
brainstorm all of a sudden, you can send your idea out
immediately, and only to the people you think should be
involved.”9
SMALL-MARKET WINDOWS IS A BIG
SUCCESS
On May 22, , Windows came out, rapidly surpassing
sales of OS/2. In , Gates noted that OS/2 became an IBM-
only initiative: “We always thought the best thing to do is try
and combine IBM promoting the software with us doing the
engineering.

And so it was only when they broke off
communication and decided to go their own way that we
thought, okay, we’re on our own, and that was definitely very,
very scary.”10
At some time near this point, Microsoft adopted an HR
practice called stack ranking, which the company confirmed as
being in place for multiple decades when cancelled in
Under that evaluation system, supervisors had to grade every
team member on a ranking scale from 1 to 5, and a
predetermined proportion of team members had to be rated as
unacceptable.

This practice was described later as leading to
dysfunction among teams and high-achieving workers
intentionally avoiding work with other high achievers,
specifically to avoid the possibility of low rankings
In , there was debate whether Microsoft was too
powerful. Gates describes the market for server hardware:
“‘This is a hypercompetitive market,’ Gates says.

‘Scale is not
all positive in this business. Cleverness is the positive in this
business.’”12
He goes on to note that due to the cost of development,
applications were now generating more profit than operating
systems, although that was only a very recent pattern in
Microsoft’s history. Windows in —the product that
relegated OS/2 away from Microsoft into an IBM-only project
—was the operating system that brought Microsoft Word to
the mass market.

Even a former IBM executive who became
the CEO of another firm commented at the time that the fear
of Microsoft in the software market should dissipate over time:
“Today, everyone is in fear of Microsoft. But in the end,
everyone will compete. There are thousands of Bill Gateses
out there who will find pieces of this market and win them.”13
Bill Gates with Intel CEO Andy Grove in Microsoft’s software runs
extensively on Intel processors.

(AP Photo/Barry Sweet)

THE INTERNET (WHICH MAY BE A TIDAL

WAVE)
Microsoft’s awareness that something very dramatic was
going on around the Internet really came from
employee[s]…so he became a change agent at Microsoft…
And people looked at that, they looked at the other memos
they had saying similar things, and we said, boy, this is
profound
On May 26, , Bill Gates sent forward an e-mail
memorandum called “The Internet Tidal Wave” to the
executives of Microsoft and the staff who reported to him
directly.

In that memo, Gates made some very strong claims
about the implications of the Internet and Microsoft. In many
respects, he was correct while assigning the Internet “the
highest level of importance,” going forward to say the
“Internet is the most important single development to come
along since the IBM PC was introduced in ” For a
company known extensively for operating systems, that would
be a huge development.

And he clearly understood the concept
of reinforcing feedback in terms of what would lead to an
explosion in the growth rate of Internet use, stating that he
believed almost all computers would be used to connect to the
Internet and: “Most important is that the Internet has
bootstrapped itself as a place to publish content.

It has enough
users that it is benefiting from the positive feedback loop of
the more users it gets, the more content it gets, and the more
content it gets, the more users it gets.”15
He got some aspects of the Internet entirely wrong. Although
he saw that HTML would dominate, he thought that other
existing protocols, “FTP, Gopher, IRC, Telnet, SMTP, NNTP,”
would still be used.

Most personnel in the computer industry
have not used four of those six protocols since shortly after
Gates’s memo in (if ever).
What bothered Gates most about using the Internet early in
? Even before the founding of Google, he said “it is easier
to find information on the Web than it is to find information on
the Microsoft Corporate Network.” While surfing the Internet
of , he did find a lot of Apple QuickTime files online for
movie advertisements, as well as Adobe PDF files—even the
government was using them—but not a single file type with a
Microsoft extension (e.g., a Word document).
And then there was Netscape, where Gates wanted to get
people to switch to Microsoft’s alternative, saying “we need to
offer a decent client (O’Hare) that exploits Windows 95
shortcuts.

However this alone won’t get people to switch away
from Netscape.” O’Hare, we find out later, was Microsoft’s
code-name for the very first version of Internet Explorer. And
he also talked about Blackbird, which was intended to be an
alternative to the HTML pages we see on the web daily
(although he already conceded that HTML would be the
standard).
Gates also mentioned a specific fear.

And that was common
in his talks throughout time. Even when Microsoft was
market-dominant, he did not believe that the success of the
company was fully assured. He believed the Internet could
lead to the generation of very cheap products that would
essentially allow for limited capabilities like the browsing of
the Internet: “One scary possibility being discussed by Internet
fans is whether they should get together and create something
far less expensive than a PC which is powerful enough for
Web browsing.”16
Funny that Gates should mention the possibility of a PC
alternative that would be far cheaper and have the capability of
using the web.

While basic computers with Windows 95
capability started around $1,, the idea of an alternative had
already been postulated by Larry Ellison, one of the other stars
of the early days of micro-computing, CEO and cofounder of
Oracle software:
“Here’s what I want,” said Ellison. “I want a $ device
that sits on my desk.

It has a display and memory but no
hard or floppy disk drives.

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On the back it has just two ports
—one for power and the other to connect to the network.
When that network connection is made, the latest version of
the operating system is automatically downloaded. My files
are stored on a server somewhere and they are backed up
every night by people paid to do just that.”17
Consumers did find a product similar to the one Gates feared
in and that Ellison had mentioned.

The product just took
18 more years to arrive, with the Google Chromebook that did
not run Windows, updated automatically, stored information in
the cloud, and was a cheap means of connecting to the Internet
for approximately $, rising from a “negligible” share of the
reseller notebook market in to 21 percent in
Windows 95 was the first version of Windows that a user
would associate with Windows today.

The product was
released on August 24, , and was one of the largest
product launches in history. Gates took the stage to introduce
the brand new operating system, and avoiding the marketing
campaign was all but impossible. In fact, Segal noted that the
advertising campaign for Windows 95 was believed to be the
single largest advertising campaign in history through that
point in time, with rumors suggesting that the Rolling Stones
made a fortune simply for licensing one of their songs for the
product launch: “Twelve million dollars was spent simply
securing the rights to a theme song for the hoopla, the opening
chords of the Rolling Stones hit ‘Start Me Up.’”19
At the time, Segal noted exceptionally costly marketing
campaign could be risky, and implied that expensive launches
have been accompanied by massive failures in the past,
including the Ford Edsel.

He also passed along the rumor—
ostensibly started by the Rolling Stones—that Microsoft paid
$12 million to use one of their songs (the real total was “only”
$3 million). The potentially risky campaign paid off
immediately. Windows 95 would sell 40 million copies in the
first year after being released, plus Microsoft was able to sell
its applications—like MS Word—that were optimized for the
operating system This was an exceptionally lucrative bet for
Microsoft and was a central theme of the trial that began in

—GATES FEARING FAILURE
Customers tell me they worry that Microsoft, by definition
the only source for Microsoft operating system software,
could raise prices of slow down or even stop innovation.

But
if we did, we wouldn’t be able to sell our new versions.
Existing users wouldn’t upgrade, and we wouldn’t get any
new users. Our revenue would fall, and other companies
would come in and take our place. The positive-feedback
mechanism helps challengers as well as the incumbent. A
leader can’t rest on its laurels because there’s always a
competitor coming up from behind
—GATES VIEWING WINDOWS AS THE
ONLY OPTION
Gates was worried that Sun was becoming a competitive threat
with Java, and was having a meeting with developers who
were asked to test coding an application for the Internet
instead of writing the code to operate within Windows.

A team
leader who was speaking for the Internet team’s attempt
started his presentation and encountered Gates’s temper before
leaving the very first slide, as Windows had yet to be
mentioned: “Why don’t you just give up your options and join
the Peace Corps?” Mr. Gates is said to have thundered.
“Hasn’t anybody here ever heard of Windows?

Windows is
what this company is about!”22
This was a little harsh for Gates, who is known for frequently
being abrasive in meetings. In fact, there’s one phrase a
presentation can elicit from Gates that is described as proudly
adopted by the recipients: “‘That’s the stupidest thing I’ve ever
heard,’ and victims wear it as a badge of honor, bragging
about it the way they do about getting a late-night E-mail from
him.”23
MICROSOFT’S APPLE INVESTMENT
August 6, While Bill Gates maintained a multiple-
decade run as CEO of Microsoft, Steve Jobs had previously
been ousted from the company he had cofounded.

Jobs had
been completely detached from Apple for more than a decade
( until ), when Apple acquired the second computer
company Jobs founded, NeXT. Now Jobs was in-charge of
Apple again, albeit as the Interim CEO, and the firm was in a
difficult financial downturn.
In the lead-up to the Microsoft antitrust trial that would
define the firm in the late s, what occurred next would
seem unthinkable to many.

Microsoft made a cash investment
in Apple at a time when Apple needed cash
And the symbolism of the event—Microsoft helping a
struggling Apple after previous lawsuits from Apple, while
Microsoft was already under judicial sanctions—was not lost
on many observers, as Jobs was standing on stage and Gates
was projected on a large movie screen above him.

Not only
did observers comment about the event, Jobs did as well. Rick
Webb noted:
In in Boston I had the pleasure of witnessing in
person what Steve Jobs called “my worst and stupidest
staging event ever.”
Onstage at Macworld Boston, Jobs announced his
settlement of legal disputes and a partnership with
Microsoft.

And in a move eerily reminiscent of his
landmark advertisement, Bill Gates’ satellite-
broadcast image filled the hall, a looming face looking
every bit the overlord out of place. He was the Orwellian
big brother we had come to despise. People booed as he
spoke. In the end, the deal was probably a good thing, but
the symbolism was catastrophic
The advertisement referenced was shown during the
Super Bowl in The ad was a takeoff of George Orwell’s
book of the same title, and the symbolism was that the Mac—
to be released that week as a project of Steve Jobs—would be
a form of revolution.

Given the more recent history between
Apple and Microsoft, the Apple fans at Macworld Boston
booed Bill Gates, even as Gates was announcing the provision
of software and technology resources for Apple, as well as a
non-voting investment of $ million in company stock to
ease the company’s financial pain:
• Microsoft will develop and ship future versions of its
popular Microsoft Office productivity suite, Internet