Within weeks Gates had created his own software for the Altair, demonstrated it to the computer’s manufacturer, and dropped out of Harvard to create his own company: Micro-Soft.
Two years later the newly rich Gates was jailed for racing his Porsche 911 through the New Mexico desert. And two decades after that, he was the richest man on Earth.
Along the way, of course, Gates helped to bring about the biggest change in global business culture since the invention of the telephone or internal combustion engine. “I think it’s fair to say that personal computers have become the most empowering tool we’ve ever created,” as Gates once said.
The incalculable nature of Gates’s influence makes comparisons difficult. The most obvious is to John D. Rockefeller, the tycoon who virtually created the modern oil economy and later devoted his vast wealth to medicine and education.
But not all comparisons have been flattering. The federal judge Thomas Jackson once accused Gates of having “a Napoleonic concept of himself and his company — an arrogance that derives from power and unalloyed success”.
As Gates, now 50, prepares to give up everything but the honorary role of chairman at Microsoft to concentrate on philanthropic work, the history of the world’s most successful company will again come under scrutiny. Was Gates a visionary who single-handedly created the software market? Or was he a modern-day Oliver Twist, picking the pockets of rivals such as Apple Computer and passing off the spoils as his own?
It all began with the Altair 8800. Although Gates boasted that he could use the BASIC programming language on the computer, he didn’t have the necessary interpreting software — or an Altair to work on. Gates’s solution? He co-wrote the interpreting software with a school friend, Paul Allen, using an Altair emulator.
When the pair managed to sell their work, it was Allen, two years Gates’s senior, who convinced him to drop out of Harvard. The first use of the name Microsoft, without the hyphen, is contained in a letter between the two men dated November 29, 1975. Gates soon realised that he didn’t always have to write the software himself to be successful. When IBM was looking for an operating system for its new PC in 1980, it struggled to agree on the terms of a licence for the most popular operating system of the time, known as CP/M.
Gates, fast becoming a canny businessman, had an audacious idea: Microsoft would purchase a licence for a similar operating system called QDOS (“Quick and Dirty Operating System”), rebrand it as PC-DOS, then resell it to IBM. Because QDOS was compatible with CP/M, there shouldn’t be a problem.
The strategy was a massive success.
Over the next few years, when the computer market became flooded with inexpensive clones of IBM’s PCs, Microsoft again rebranded PC-DOS, this time to MS-DOS, and quickly became the world’s leading home software provider.
Gates capitalised on Microsoft’s strength by launching Microsoft-branded hardware (the Microsoft Mouse), a technical book publishing division, and a word processor, initially called Multi-Tool Word and later just Word.
None of this success made Microsoft popular. When Gates launched Windows, which replaced geeky DOS commands with clickable icons and a menu bar, many said it was an inferior copy of software pioneered by Xerox and Apple.
But poor reviews didn’t matter: Gates concentrated on getting Windows pre-installed on PCs, assuming that few would go to the hassle and expense of buying an alternative system. Some claim that Microsoft’s business practices verged on bullying. Nevertheless, the strategy paid off spectacularly: after Windows 3.0 was launched in 1990, it sold ten million copies in two years.
Paul Allen, meanwhile, resigned from Microsoft in 1983 because of Hodgkin’s disease, which was treated with radiation therapy and a bone marrow transplant. Allen survived, and still holds a large interest in Microsoft – although his lifestyle is the opposite of Gates’s, what with his yachts, sports teams and rock star friends.
After gaining control of the home computer market, Gates turned his attention to the business market in the 1990s. With Windows now pre-installed on most office PCs, Microsoft succeeded in making its expensive Office programs (Word, Excel, PowerPoint) the default choice of most corporations.
By the time Windows 95 was launched Gates was the richest man in the world. First-day sales of Windows 95 have since been estimated at $700 million. Microsoft followed this with rapid expansion online, including the launch of MSN and MSNBC (a television news network) and a $150 million investment in Apple, along with an agreement by Apple not to sue over patent infringements.
By the late 1990s, however, Gates looked set to suffer the same fate as Rockefeller: a damaging trial for abusing America’s anti-monopoly laws.
The central issue: was Microsoft allowed to “bundle” its flagship Internet Explorer web browser with Windows? The trial began in 1998, with videotape evidence showing that removing Explorer from Windows caused slowdowns and malfunctions. The judge, Thomas Jackson, ruled that Microsoft should be broken in two — with one unit producing Windows, and another producing other software.
Gates appealed, and the D.C. Circuit court of Appeals unanimously overturned Judge Jackson’s rulings, largely because of the judge’s inappropriate behaviour, his jibe about Napoleon and other off-the-record comments to the press. It was an extraordinary stroke of luck.
Although one antitrust element of the judge’s rulings was upheld, Microsoft settled the case with the Department of Justice. As part of the deal, Microsoft agreed to share its programming with rival companies.
Since the case, Gates has been making more headlines for his philanthropy than his business tactics. In 1999 he made a $6 billion donation to his charity, The Bill and Melinda Gates Foundation (which he founded after marrying Melinda French in 1994). This was followed by another $5 billion in 2000. Today the Gates family’s charitable endowment is worth $29.1 billion.
By choosing to involve himself in unglamorous, messily political issues such as global healthcare, Gates has found a technical challenge every bit as complex as the Altair 8800. But Bono, the rock star, told Time: “When Bill Gates says you can fix malaria in ten years, they know he’s done a few spreadsheets.”
Regardless of whether Gates enjoys solving the world’s more mundane problems, he may feel he has no choice. As Andrew Carnegie, that other great philanthropist, put it: “He who dies rich dies disgraced.”
TOP THREE
Business greats of the 20th century from Fortune magazine 1999
1. Henry Ford (1863-1947)
“No fewer than three of the biggest management brainstorms of the century happened in Ford’s head: the idea of a moving assembly line, the idea of paying workers not as little as possible but as much as was fair, and the idea of vertical integration”
2. Bill Gates (1955-)
Microsoft Windows, and its predecessor, the MS-DOS PC operating system, were the high-tech equivalents of Ford’s Model T. “They may not have been the sleekest or most elegant pieces of software, but Gates figured out how to make them almost universally used, and they transformed the entire IT world”
3. Alfred P. Sloan Jr (1875-1966)
Created the modern, divisionalised corporation and showed the world how to make it work. As president of General Motors, he invented the art of managing a large corporation
