Bill Gates

One
     The Biggest Day Yet

Two
     A New World Beckons

Three
   The Rise of a Juggernaut

Four
      Running Microsoft

Five
     Tough Competition

Six
       The Microsoft/Apple Story

Seven
   The Personal Side

Eight
    A Vision of the Future

Copyright

About the Publisher

AUGUST 24, 1995

It would not rain on this day in Redmond, Washington, which was not far outside Seattle. Just in case, however, an enormous tent had been erected for the ceremony, scheduled for 11:00
A.M.
Rain was an ever-present threat in the Seattle area, and it wouldn’t do for the twenty-five hundred assembled guests to get wet. They included journalists from all over the world, the chief executive officers and technical geniuses from dozens of computer hardware and software manufacturers, political bigwigs, and even a surprise guest—Jay Leno of
The Tonight Show
. Hundreds of those in attendance were millionaires, including Leno, of course, and a very few were, like the host of this party, billionaires.

The host, William Henry Gates III, had organized this occasion to launch the latest and most important software product ever created by his company, Microsoft, which he had founded in 1975 at the age of nineteen with his boyhood friend Paul Allen. Allen left the company in 1984 after a serious bout with Hodgkin’s disease, but he was still on the board, still a close friend, a billionaire in his own right, and very much present on this day of days, which was seeing the release of Windows 95, the most innovative upgrade yet of Microsoft’s operating system for personal computers. Its predecessor, Windows 3.1, issued
in 1991, was already installed on seventy-five million personal computers around the globe. The betting at Microsoft was that most of those computer users would want the new, improved version, with its fifteen million lines of code and numerous new features, including access to Microsoft’s recently established Internet service. More than that, Windows 95 was expected to cause enough excitement that millions of people intrigued by the wild and wooly expansion of the Internet itself would purchase personal computers for the first time. Microsoft had predicted that it would sell thirty million copies of its new product in the first year. While that left the company’s direct competitors grinding their teeth in envy and fury (many of them thought Windows 95, like its predecessor, would be far from the best possible technology), it was also the reason there were fourteen other, smaller tents on the vast Microsoft grounds that day. In those tents, computer manufacturers and software companies that had tailored their own new products to Windows 95 would be showing their wares to the assembled press.

Having predicted first-year sales of thirty million units, Microsoft was taking no chances in publicizing its new product. The hype had been going on for weeks. Bill Gates himself had given more than two dozen television interviews, from
Today
to
Larry King Live
. Gates had arranged with his friend Rupert Murdoch, owner of the
London Times
, to give away every copy of the newspaper printed on the day before the official Redmond party, with an ad proclaiming: “Window 95. Office 95. So good even The Times is complimentary.” And in New York City, the Empire State Building was lighted up with Microsoft colors, red, yellow, and green. In Australia, Microsoft was giving five hundred dollars in cash to the first ninety-five babies
born on August 24. This kind of publicity campaign needed a theme song that would resonate around the world. Bill Gates wanted the Rolling Stone song “Start Me Up,” but the legendary rock group had never before allowed one of its songs to be used for commercial purposes. They made Microsoft pay big time for the privilege: several million dollars, with estimates on the price running as high as $12 million. But, after all, that was just small change in a total publicity budget of a quarter of a billion dollars.

Windows 95 was to go on sale to the public at 12:01
A.M.
on August 24, as that date arrived by stages around the globe. Computer stores in major cities around the world opened their doors at midnight to accommodate the expected rush of those who couldn’t wait until daylight to get their hands on the latest wonder of the computer world. According to James Wallace, author of
Overdrive
, the very first copy was sold in the not very big city of Auckland, New Zealand, to a business student. Reuters, the international news service, reported that a woman in Chicago, Illinois, said, “For computer people, this is their Woodstock.” In New York City, a single Comp USA store had nine hundred people waiting in line at the magic hour.

As for the celebration under the tent in Redmond, Washington, that was a great success, too. When, in 1993, Bill Gates’s engagement to Melinda French was announced, Jay Leno noted the event in his monologue by posing the question, “What’s Bill Gates like after sex?” His answer: “Micro soft.” But here Leno was in Redmond, being paid a handsome sum to tease Bill Gates some more by noting that he’d gone over to Gates’s house and found the VCR blinking 12:00—some technical genius, that Gates. The crowd loved it and so, from all signs, did Gates. He might be worth $20 billion (and Windows 95 would help to al
most double that amount within two years), but he always seemed to have a sense of humor.

In fact, Bill Gates was very tired. Some friends would later suggest that on that August day in 1995 he was on the verge of exhaustion. Within a couple of weeks, he and his wife, along with a group of friends, including fellow billionaire Warren Buffett and his wife, would take a two-week nonworking vacation in China, playing bridge as their train crossed the spectacular landscape to the famed Great Wall. Gates had every reason to be tired, despite his already legendary workaholic habits, which in earlier years had often meant sleeping under his desk. The release of Windows 95 had originally been scheduled for two years earlier, but numerous technical problems, along with the unexpected rise of the Internet—a turn in the road that Gates almost missed entirely—had twice delayed its launch. In addition, Gates had spent the last five years fending off extremely close antitrust scrutiny by the federal government.

But the biggest day yet had finally come. Beyond the tents on the emerald green grass of the Microsoft campus, a Ferris wheel had been installed, adding a gaudy note to the festivities. But there was plenty to celebrate, after all. As the Microsoft press pack revealed, even before the launch of Windows 95, sales of Windows 3.1 and its associated software had reached the point where somebody, somewhere on the planet, was using a newly purchased Windows product on the average of every 1.5 seconds.

Unlike such earlier giants of capitalism or innovation as Andrew Carnegie or Thomas Edison, Bill Gates was born, in 1956, into upper-middle-class comfort. His father, William Henry Gates II, was a highly successful lawyer, and his mother, Mary, the daughter of a banker, served on the boards of educational institutions, charities, and banks. Their Seattle home, with a view of Lake Washington, was large and comfortable, and their three children—Kristi, older by a year than Bill, and Libby, nine years younger—were given every advantage.

Bill Gates gives his parents a lot of credit for their style of raising their children and says that he hopes to emulate their blend of openness and discipline in bringing up his own children. But he himself was not an easy child to raise. It has been widely reported that by the time he entered sixth grade, young Bill had become so rebellious, particularly toward his mother, that he was put into counseling. Gates says that he enjoyed the experience, in part because the counselor gave him psychology books that were quite advanced for a twelve-year-old. Being treated like a grown-up apparently helped Bill calm down to some extent, but at the end of a year of sessions, according to
Time
, the psychologist bluntly told Mary Gates there was no use in trying to control her son; he was too competitive, and Mary would have to do the adjusting. In fact, some adjusting clearly took place on both sides, as Bill grew up to be very close to his mother.

Beginning with junior high, young Bill Gates was enrolled at the Lakeside School, a private school in Seattle. He was, in the words of his father, “small and shy,” and it was also felt that a private school would be better able to respond to his very active intellectual needs. It was at the Lakeside School that Gates met Paul Allen, with whom
he would found Microsoft only seven years later. At the time they met, Gates was twelve, Allen two years older. As Gates acknowledges, it is unusual for boys that age to become friends when more than a year separates them, but they shared a number of interests; in particular, both boys were fascinated by the computer terminal that was bought for the school by its Mother’s Club, which also raised money to buy computer time on a mainframe. The terminal didn’t even have a screen. The students had to wait for answers to come clacketing out of a noisy printer.

Using the terminal, Gates wrote his first program at the age of thirteen. It was only a computerized tic-tac-toe game that could have been played much more rapidly with pencil and paper, but the boys were already entranced with the sense of power that came from making a machine carry out their commands. Gates, Allen, and a third boy, Kent Evans, who was Bill Gates’s best friend, formed the Lakeside Programmers Group. This grown-up sounding name helped them get an actual spare-time job writing a payroll system for a small Seattle company. They were learning to become businessmen at a very young age, but they were also soon confronted with an adult-level tragedy: Kent Evans was killed in a mountain climbing accident. Gates has said that for “two weeks I couldn’t do anything at all.”

In the aftermath of Kent Evans’s death, Gates and Allen became even closer. There was a playful side to some of their collaborations, including writing a program for playing the board game Risk—although Gates’s critics take pleasure in pointing out that the object of the game is world domination. But they were also learning—fast—and they put their ever-increasing expertise to use in a number of programming jobs for local firms. These ventures helped Bill Gates develop greater confidence, and he began to
demonstrate an increasing social poise, as well, which must have pleased his mother, who had that quality in abundance. Gates is particularly fond of recalling that he even was given the lead in a school production of Peter Shaffer’s famous farce
Black Comedy
, taking a role originated at England’s Chichester Festival by Tom Courtenay, the British actor most famous for his role in the movie
The Loneliness of the Long Distance Runner
. In one of his newspaper columns, Gates squelched the idea that he had a “photographic memory,” but said that he still remembered all of his lines from
Black Comedy
twenty-five years later because he had been so afraid of forgetting them during performance that he had “burned them” into his head.

One job that he and Paul Allen had was a young hacker’s dream. A company had bought a new computer that didn’t have to be paid for until the bugs were eliminated. “The company saved money,” Gates remembers, “by commissioning us to find ways to crash its system—fun for eager young programmers.” Gates goes on to warn, however, that unauthorized attempts to do that today are criminal offenses. On another job that he and Allen and some other boys had, they were paid what he notes was an “extraordinary” amount for a teenage summer job—$5,000—although some of it was paid in computer time instead of cash. He found himself working on a program that scheduled classes for his own school, and by adding a “few instructions,” he saw to it that he was almost the only boy in a class full of girls. In part it may have been this kind of stunt that causes some schoolmates to remember him less than fondly.

Both Gates and Allen, however, pinpoint the real start of their business collaboration as having taken place in the summer of 1972. In the magazine
Electronics
, way in the
back pages, Paul Allen found an article about the Intel 8008 microprocessor chip. This was Intel’s second chip, twice as powerful as the first one they had produced the year before, and Allen immediately realized that such chips would get more powerful quickly. Indeed, in 1965 Intel cofounder Gordon Moore had predicted that chips would double in capacity every year. This prediction came true, and by the late 1970s, engineers were referring to Moore’s Law.

Gates and Allen ordered an Intel 8008 chip the summer of 1972, paying $360 for it. Gates had thought he could work out a form of BASIC (Beginner’s All-purpose Symbolic Instruction Code) to run on the 8008 chip, but he discovered it just wasn’t powerful enough; it didn’t contain enough transistors yet. But they were able to use the chip to run a program they developed for traffic-volume-count analysis, and they envisioned selling computers for that purpose. To do so they formed their first company, called Traf-O-Data. Paul Allen notes that the company “wasn’t a roaring success.” Their prototype machine, although it worked well enough, attracted no buyers; the fact that its designers were teenagers probably didn’t help. The boys did get a few customers to make use of the program itself, but the most important aspect of Traf-O-Data was that it gave them some real business experience.

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.

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.

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 dis
courages 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.