Bill Gates
Page 2
Allen had graduated Lakeside School and was going to Washington State University. Gates did much of the writing of the Traf-O-Data program while traveling across the state by bus to confer with his friend and business partner. Allen was bored by college and wanted to form a new company as soon as Gates graduated in 1973—a company with a broader purpose than Traf-O-Data’s. But Gates’s parents insisted that he enroll at Harvard; he had been getting top marks since the ninth grade, when he had “decided to get all As without taking a book home,” as he puts it. When he placed within the top ten in the country on a math aptitude test, his rebellious period ended.
* * *
It’s considered cool these days to be wired into the worlds of computers and communications, but I’m not sure anyone wants to be thought of as a “nerd.” If being a nerd means you’re somebody who can enjoy exploring a computer for hours and hours late into the night, then the description fits me, and I don’t think there’s anything pejorative about it. But here’s the real test: I’ve never used a pocket protector, so I can’t really be a nerd, can I?
—BILL GATES, 1996
* * *
Much has been made of the fact that at Harvard Bill Gates did “unconventional” things like going to the lectures for classes he wasn’t taking instead of the ones he was. But in fact this kind of behavior was not all that peculiar at Harvard. Students were expected to attend small seminar-type classes where student discussion was important, but otherwise it was the grades that counted, not class attendance or study habits. Gates has admitted that his habit of procrastinating until the last moment before an exam and then cramming frantically was not a good precedent for running a business.
In the fall of 1974, Gates’s sophomore year, Paul Allen drove across country in his old Chrysler and took a job programming for Honeywell, located near Boston. That meant he and Gates could brainstorm to their hearts’ content about the future of computers and the place they were now sure they would have in that world. But the letters they sent out netted them very little interest. Then, just before Gates flew home for Christmas, the January 1975 edition of Popular Electronics came out. The two friends perused it while standing in the freezing cold at the Harvard Square newsstand. The cover was topped by the following headline: “Project Breakthrough! World’s First Microcomputer Kit to Rival Commercial Models…‘Altair 8800’ Save over $1000.”
Altair was a distant star that had come to be known to millions because it had been visited by the starship Enterprise in a Star Trek episode. The two young men saw that the Altair was little more than a toy with switches and blinking lights, since it had no keyboard or display panel, and no software to run it. But they were taken aback to discover that it did have the new 8800 chip brought out by Intel the previous spring, which was ten times as powerful as the 8008 they had used for their Traf-O-Data program. Their reaction was one of dismay that the future was already happening without them, that people would be writing genuine software for that chip, making the Altair 8800 something more than a toy after all. They didn’t have either an Altair microcomputer or an 8800 chip. Paul Allen, as Gates writes in The Road Ahead, “studied a manual for the chip, then wrote a program that made a big computer at Harvard mimic the little Altair. This was like having a whole orchestra available and using it to play a simple duet, but it worked.” The two then spent five exhausting, almost sleepless weeks writing a BASIC program for the Altair.
* * *
I had done a lot of work after the age of thirteen studying microsoftware and I became a fantastic developer, but I kept asking great developers to look at my code and show me where it could be better, how it could be different. I’d move to a new level. When Microsoft started, there was a lot of camaraderie of challenging each other. “Can you tighten up this code? Can you make this better?” It was an era of great craftsmanship. It was a different world.
—BILL GATES, In the Company of Giants, by RAMA DEV JAGER and RAFAEL ORTIZ, 1997
* * *
They then managed to persuade MITS, the manufacturer of the Altair, to sell their program. MITS was a very small company, located in out-of-the-way Albuquerque, New Mexico. But Gates and Allen didn’t care; they were in on the ground floor of what they were convinced was the computer wave of the future. MITS offered Allen a job and gave the two young men space in their offices in a strip mall. Allen quit his job at Honeywell, and Gates took a leave from Harvard. He discussed the move thoroughly with his parents. Recognizing his ability and his intense desire to have his own company, they went along with their son’s wishes. Leaving Harvard is something Gates still finds himself having to discuss regularly. It comes up in the numerous interviews he gives, and it has been a frequent subject of inquiry on the part of young computer whizzes sending questions for his newspaper column. Gates always points out that he enjoyed Harvard and discourages those who think they’re smart enough to skip going just because he did. He emphasizes that his taking a leave was in large part a matter of timing—something brand new was happening that he was certain he could be an important part of. He is too modest—or too politic—to make the obvious statement that he had a special genius that not too many people possess. More broadly, he tries to indicate that he had quite broad interests and was already remarkably well educated in the liberal arts.
* * *
I’ve always rejected the term entrepreneur because it implies that you’re an entrepreneur first and a software creator second. I didn’t say, “Oh, I’ll start a company. What will it be? Cookies? Bread? Software? No. I’m a software engineer and I decided to gather a team together. The team grew over time, built more and more software products, and did whatever was needed to drive that forward. Entrepreneurship is to me an abstract notion.
—BILL GATES, In the Company of Giants, 1997
* * *
Both Gates and Allen had some savings when they started out. Allen had made good money at Honeywell. Gates, in addition to what he had earned as a programmer during the past few summers, had managed to amass a fair amount of money playing poker at Harvard, a fact he seems almost boyishly proud of. At the time, of course, he was in some ways little more than a boy—only nineteen—and Allen was only two years older. Gates has duly noted that in many other countries, both the business world and the public at large are much less receptive to very young entrepreneurs than in the United States, and that he was fortunate to have been born an American, at just the right time for his abilities.
There is some confusion about which of the partners came up with the name Microsoft. Gates has said that he did, but Allen, even in joint interviews, sometimes gives the impression that the final decision was his. At the beginning, however, the name was a little different: Micro-Soft. Gates told Fortune that the credit line in the source code of their first product was “Micro-Soft BASIC: Bill Gates wrote a lot of stuff; Paul Allen wrote some other stuff.” They had also considered calling the company Allen and Gates, but the example of IBM and others suggested that a more generic name was better in terms of a company’s longevity, at least in the computer world. Allen and Gates, they thought, sounded too much like a law firm. It was not until 1981 that they finally got around to incorporating as Microsoft.
* * *
It may seem ironic, considering that I didn’t get my degree, but Microsoft focuses its hiring for most positions on college graduates. We believe that the maturity and learning that a college education offers are invaluable, and we’ve seen that people with liberal arts educations bring wider knowledge of the world to bear on their jobs.
I’ve said it before and I’ll say it again: “Go to college.”
—BILL GATES, 1996
* * *
In Albuquerque they continued to live much like college students, sometimes going to a movie but mostly working, often very late; Gates not only slept under his desk at the office but sometimes fell asleep in meetings. Allen, who would go home to their motel to sleep, often had to be routed out of bed with a phone call from Gates. Bo
th men admit that they had to learn business practices as they went along. All decisions were made mutually, often after hours of discussion, but they agree that Allen was the one to take the lead in suggesting new products, while Gates was out in front on the business end. They both wrote code in those days, with Allen doing more of it but Gates showing a particular flair for solving knotty problems, as had always been the case.
The press has long reported that the relationship between Gates and Allen had a tendency to erupt into huge fights. That problem goes back to the very beginning. When they were still at Lakeside School, Allen tried to go it alone on a paid project, and then found that he needed Gates’s coding input, after all. Time has reported that Gates replied, “OK, but I’m in charge, and I’ll get used to being in charge, and it’ll be hard to deal with me from now on unless I’m in charge.” Although they encountered serious difficulties later, both men say that the Albuquerque days were relatively free of argument. In part this may have been because they were too excited and too busy to fight.
It took them a while to realize that the low bids they were using to ensure landing a contract with companies like Texas Instruments could be raised without fear. Most companies, it turned out, were willing to pay more than they asked. They had bid $99,000 on a Texas Instruments job simply because they didn’t quite have the guts to go to six figures. But they got over their shyness in that department quickly, as they realized that their competitors often simply couldn’t manage to do the job as fast or as well.
* * *
Next door was a vacuum-cleaner place, then a massage parlor. To get to our offices, you had to walk past the vacuum-cleaner guy. We stayed in this motel down the road called Sand and Sage. We’re talking real sage, not some hypothetical thing. Every morning all the cars in the parking lot had all this sagebrush and tumbleweed that blew underneath them.
—BILL GATES, recalling the early days for Fortune, 1995
* * *
At the same time, however, they also found themselves promising product they hadn’t even developed yet, and having to play very serious catch-up. The Japanese company Ricoh once sent a man over just to sit in their offices and make sure they were working on an overdue project for Ricoh and not something else. By agreeing to develop software that they hadn’t yet fully thought through, they not only pushed themselves to the limit but also challenged themselves in ways that kept them ahead of their competitors. There are critics of the computer industry in general today, and of Microsoft in particular, who say that the intensely competitive nature of the industry has led to a bad habit of overpromising and of hyping new features that are hardly a gleam in anyone’s eye. Microsoft has often been accused of heralding new features not even in real development simply in order to scare off the competition. Some competitors say, “See, they were doing it even back in Albuquerque.” But Microsoft denies that it does that today, and Gates and Allen point out that in the early days the software industry was so new that it was perfectly natural to ask a hardware manufacturer what they wanted and agree to provide it with only the sketchiest idea of how to fulfill the request. They were dealing with virgin territory, and exploring it often meant saying yes to something when the path through the woods wasn’t yet clear. It was necessary to “hack” their way through in more ways than one.
* * *
Controlling expectations—whether about deliveries, product features, or stock value—is often wise in a technology business. It’s a lot better to underpromise and overdeliver.
—BILL GATES, 1996
* * *
While there were certainly crises in terms of developing new software, the most frightening episode in the early history of Microsoft proved to be a business matter. The initial contract they had signed with MITS called for that company to sell the Gates/Allen BASIC to their customers, rather than Microsoft’s selling it to computer owners and buyers directly. That seemed to be a smart move, since it cut down on the sales effort for Microsoft. But the contract only called for MITS to make a “best effort” to sell the software, and they soon stopped making almost any effort. The problem was that the Gates/Allen BASIC was being widely pirated, which mostly meant that people were getting the software from a friend.
The two partners went into arbitration to try to make MITS honor the contract. But the arbitration took nine months, and while it was taking place, MITS withheld payments from Microsoft. Gates and Allen say flatly that MITS was trying to “starve” them to death. As they couldn’t even pay their lawyer, they almost accepted a settlement, but a decision to hold out paid off when the arbitrator finally came down foursquare on their side. Had they lost the arbitration, they would have had to begin all over again. Both say it was a very scary period, but in the end it taught them valuable business lessons about keeping control of their own destiny; future contracts had many safeguards built into them. Microsoft is often charged with being tough to the point of ruthlessness, but Gates and Allen learned the hard way that toughness was essential to survival.
Other companies had started entering the personal computer market, including Commodore and Radio Shack, but it was the Apple II that really took off. MITS, a small company with less vision and talent, had been left behind by the end of 1978. In addition, in 1978, Gates had entered into an agreement with a go-getting Japanese entrepreneur named Kazuhiko Nishi, or Kay. He had contacted Microsoft, and he and Gates, who were the same age, had hit it off immediately. Gates describes Kay in The Road Ahead as “flamboyant,” something Gates himself never was but which he clearly appreciated in his new colleague. With Kay as a go-between, Microsoft was now doing almost half its business with Japanese companies. MITS was fading away, so there was no longer any reason to remain in Albuquerque. On the first day of 1979, Gates and Allen moved their business home to the Seattle area, settling into the suburb called Belvue. They had almost a dozen employees, and almost all of them made the transfer to the new base.
* * *
If somebody had foreseen that personal computers were going to be a huge business, the obvious investment would have been in PC manufacturers. But the vast majority of PC manufacturers failed, although if you had happened to pick Compaq or a few others you would have done well.
—BILL GATES, on the risks of investing in the Internet, 1995
* * *
Ensconced in Seattle, the company grew quickly. By early 1980, there were thirty-five employees, and Gates and Allen knew they needed management help. It had become impossible for the two of them to spread themselves thin enough to review all the new code that was being written. Gates decided to turn to an old friend from his two-year Harvard career, Steve Ballmer. Ballmer had lived down the hall from Gates their sophomore year, and they had taken courses together in mathematics and economics. As Ballmer once told Time, Gates would “play poker until six in the morning, then I’d run into him at breakfast and discuss applied mathematics.” Like so many others, Ballmer thinks Gates is the smartest man he’s ever met. But he wasn’t initially too sure he wanted to join Microsoft, at least right then. After Harvard he had joined Procter & Gamble as a product development manager, and then entered business school at Stanford University in California. He’d only finished one year when he was contacted by Gates, and thought he’d rather finish taking his degree. Gates asked his mother, a very persuasive woman, to talk to Ballmer, and clinched the deal by offering Ballmer part ownership of Microsoft. By 1995, Ballmer’s percentage of the company was five percent, worth $2.7 billion, and the value of his shares has substantially increased since then.
* * *
If you think you’re a really good programmer, or if you want to challenge your knowledge, read The Art of Computer Programming by Donald Knuth. Be sure to solve the problems…It took incredible discipline, and several months, for me to read it. I studied twenty pages, put it away for a week, and came back for another twenty pages. You should definitely send me a resume if you can read the whole thing.
—BILL GATES, 1995
Ballmer is credited by both Gates and impartial observers with having played a major part in the company’s success, and in the years since Paul Allen’s departure from Microsoft, Ballmer became increasingly close to Gates, serving as best man at Gates’s January 1, 1994 wedding. But the beginning was somewhat rocky. After only three weeks of getting to know how Microsoft worked, Ballmer insisted that they needed to hire another seventeen people immediately and fifty within short order. Gates was horrified. He wanted the company to be “lean and hungry” having seen other computer companies go bankrupt practically overnight, he wanted a cash cushion large enough that Microsoft could run for a year without any money coming in.
Ballmer was adamant about the need for new people. In addition, he was so angry at having his judgment questioned—right after being brought in to supposedly make just this kind of decision—that he moved out of the house he and Gates were sharing. Gates’s father stepped in to calm things down, and Bill Gates relented, permitting the new hirings to go through. It was just as well that he did. The new people, and many more, would be needed soon.