Decisions that changed the world:

Bill Gates pulls a Microswiftie

Paul Allen, left, and Bill Gates in 1970

Inspiration sometimes begins as accident. Bill Gates hadn’t intended to become the wealthiest man in the world, nor had he expected to play a pivotal role in the technological revolution that brought computers to the masses. He was simply trying to fulfill an order for some software he had promised to a customer. 

Gates was a computer kiddie, one of the first generation to encounter computers in school. When he was in eighth grade his Seattle school installed a teletype terminal connected to a General Electric mainframe. Gates and schoolmate  Paul Allen soon were spending more time writing programs in the appropriately named BASIC language and otherwise poking around the computer than on their regular school work. 

Gates and Allen impressed GE's security team by hacking past the limits set on student activities. “Our official position was one of concern,” a GE representative said later. “But in the back room, it was ‘Holy mackerel! If kids can do this, imagine what somebody who knew something could do.’” 

Most of the kiddies were hobbyists, but Gates and Allen made a business of their avocation. They wrote a program to monitor traffic, which they sold to some towns in the Seattle area. They landed a gig writing software for the Bonneville Power Administration, the federal agency that produces most of the electrical power in the Pacific Northwest. Gates was a senior in high school, Allen two years older. 

Gates started college at Harvard but dropped out during his freshman year. He reentered but then dropped out again, finally becoming convinced that what he was doing with computers was more interesting than what he was learning in the lecture hall. 

Allen had moved to Albuquerque for a job; Gates joined him there and they elaborated their partnership, which they called Micro-soft, into a real business. “We would just work until we dropped,” Allen recalled. “I used to joke that Albuquerque is a repeating pattern of a gas station, a 7-Eleven and a movie theater.” At the time Gates, who had talked his way into being head of the company, with an ownership share of 64 percent to Allen’s 36 percent, informed their few employees that much was expected of them. “If some deadline or discussion or interesting piece of work causes you to work extra time some week, it just goes with the job.”

Gates could be a tyrannical boss. “That’s the stupidest thing I’ve ever heard!” he frequently yelled at people who considered themselves pretty smart. Nearly everyone at Microsoft (the hyphen having disappeared) told stories of Gates’s temper. One described a common Gates technique for dealing with an employee who hadn’t got the message the first time Gates articulated it; Gates would simply repeat the same words, louder. “You know, like ‘You stupid idiot. This is what I said. Just listen to what I say.’” For effect Gates would bang his head on the table, screaming, “You think I’m an idiot! Don’t use that logic on me.”

Allen wasn’t exempt from the Gates treatment. An early Microsoftie remembered an argument that began in an office and continued into the hallway and onto an elevator, at which point it went beyond the earshot of the observing employee. But a minute or so later he saw Gates and Allen leave the building on the ground floor and keep yelling at each other across the parking lot, where they shouted and gesticulated for another half hour.

Gates got away with his antics because he was usually right. “You may think you have everything totally prepared,” said one employee, “and the one area you weren’t quite sure about, somehow he just finds it right away and asks you the one right question. He’ll know intricate low-level detail about a program, and you wonder, ‘How does he know that? He has no reason ever to get to that level.’ Some piece of code, or some other technology Microsoft isn’t even involved in—you just shake your head.”

Gates’s combination of expertise and explosiveness somehow brought out the best in those who stuck around. “For a guy who’s allegedly a brainy nerd, Bill is extremely charismatic,” said one. “He can really make you want to please him.” Gates expected great things from those he worked with, and he let them know it. “When he’s not happy, it usually seems like disappointment, like he thought that maybe you understood along with him a direction towards a vision, and grand architecture of some kind, and then you came back to him with something flawed.”

If Gates failed to convey his vision, it was partly because he hadn’t figured it out himself.  For the first several years of Microsoft’s existence, the computers the company wrote software for were comparatively few. Only with the introduction of the IBM Personal Computer—PC—in the early 1980s did Microsoft’s market expand significantly.  At that point Gates made a decision that would transform the world of computing, besides making him and Allen extremely wealthy. 

IBM needed an operating system for its PC, and Gates promised to provide one. Microsoft didn’t have one, but Gates knew someone who did. By this point Gates and Allen had moved Microsoft from Albuquerque back to Seattle, and Gates was aware that Seattle Computer Products, another startup, had an operating system, called the Quick and Dirty Operating System, or QDOS. Gates and Allen bought QDOS, without informing Seattle Computer what they were going to use it for. They relabeled it as Microsoft DOS, or MS-DOS, and delivered it to IBM.

They did so on very different terms than those by which they had acquired it. Instead of selling it, they licensed it, and they retained the right to license it to other computer manufacturers. This was the critical decision, as Gates later explained. “Our restricting IBM’s ability to compete with us in licensing MS-DOS to other computer makers was the key point of the negotiations,” he said. “We wanted to make sure only we could license it. We did the deal with them at a fairly low price, hoping that would help popularize it.” IBM occupied the top of the pecking order in computers in those days. “We knew that good IBM products are usually cloned, so it didn't take a rocket scientist to figure out that eventually we would license DOS to others. We knew that if we were ever going to make a lot of money on DOS it was going to come from the compatible guys, not from IBM.”

The reason Gates knew IBM products would be cloned was that Big Blue, as the company was called, made the designs of its hardware available to others. IBM specialized in business applications software—the programs that ran accounting, inventory control and the like for corporations. Computers were needed to run the software, but the software was where IBM’s profits lay. Encouraging clones, through its open architecture for the PC, would expand the market for IBM software.

Things played out just as Gates envisioned, only better and faster. Compaq, Dell and others built clones that outsold IBM’s PCs; they all ran MS-DOS, which was soon the lingua franca of personal computing. Gates and Allen became millionaires, then centimillionaires, then billionaires. By the mid-1990s Gates was reckoned to be the richest man in the world.

Microsoft improved the product to exploit the advancing capabilities of computers. DOS evolved into Windows, and Microsoft added its own business applications—spreadsheets and word processing, followed by presentation software and an internet browser after the emergence of the World Wide Web.

Microsoft’s success won Gates the envy of his competitors, who likened Microsoft’s monopoly of software to John D. Rockefeller’s monopoly of petroleum refining a century earlier. The federal government brought antitrust proceedings against Microsoft; the lawsuit went on for years before being dropped at the start of the 21st century.  The company’s much smaller rival Apple mocked Microsoft and Gates as dull and nerdy while lauding Apple and its boss Steve Jobs as cool and charismatic. Meanwhile computers that ran Microsoft code outsold Apples by 20 to 1.

Apple had its revenge when smartphones captured the fancy of the computing world; in the 2010s the iPhone became in the mobile market what Windows and Microsoft Office were in the market for personal computers.

By then Gates was devoting most of his time to philanthropy, following the lead of another nineteenth-century mogul, steel man Andrew Carnegie, who spent his first fifty years making money and the rest of his life giving it away.

Like Rockefeller and Carnegie, Gates could look out on a world he had had a large part in creating. Gates and Microsoft furnished the code that launched the revolution in personal computing. An industry expert put Gates’s accomplishment into a few words. “Microsoft really isn’t in the software business,” he said. “It’s in the standards business. Microsoft succeeds not because it writes the best code but because it sets the best standards.”

Setting the standards—this was the essence of Gates’s achievement. It’s what revolutions are made of. And it came from that moment of inspiration, or accident, when he and Allen decided to license DOS to IBM rather than sell it outright.