Hard Drive - Bill Gates and the Making of the Microsoft Empire
by James Wallace & Jim Erickson
The Winds of Fortune
William Gates III, chairman of the largest computer software company on earth, stood nervously at the front of the ballroom of the 308-foot cruise yacht New Yorker. He was about to unveil Microsoft’s fifth and latest version of the most popular piece of software ever created, a computer operating system known as MS-DOS.
It was to be the biggest launch of a software product in computer industry history. More than 500 people had turned out on a humid Tuesday evening in New York City in the summer of 1991 to board the yacht—playfully dubbed "DOS Boat"—to listen to Gates and his corporate sidekick, Microsoft operating systems chief Steve Ballmer, make an impassioned sales pitch for MS-DOS 5.0. Both industry analysts and the press had gathered for the gala event, which promised free food, music by jazz master Dave Brubeck, and a five-hour cruise on the Hudson River and around the New York City harbor. Computer hardware and software executives had flown in from around the country to get a glimpse of Gates and to listen to the industry’s enfant terrible and biggest star announce where he, and Microsoft, were headed.
At 35, Gates was at the pinnacle of his young • career. In 1990 Microsoft, the company he and childhood friend Paul Allen had founded barely sixteen years before, had become the first software company to sell more than a billion dollars worth of products in a single year. Gates was the undisputed mastermind of that success, a brilliant technocrat, ruthless salesman, and manipulative—some said devious—businessman. His company’s astounding ascension had just a few years earlier made him the youngest billionaire in the history of America. By 1992 his net worth stood at more than $4 billion, making him the second richest man in the country.
His word had become the closest thing to gospel in the godless computer industry. A month earlier in Atlanta, at an industry trade show known as Comdex where Gates was the keynote speaker, people lined up for two city blocks to hear him speak on the future of the industry. Executives in business suits spilled out into the aisles and sat cross-legged on the floor when the seats were filled. But on this June evening in the Big Apple, as Gates moved stiffly to the microphones at the podium on the New Yorker, powerful and opposing forces were gathered across the Hudson, in Armonk, New York, headquarters of International Business Machines.
Gates straightened his 5-foot-l 1-inch frame and began his pitch, a condensed version of the history of MS-DOS.
"In the last ten years, DOS has become the foundation of the PC industry and has sold more than ten times any other software package," Gates intoned in his oddly high-pitched voice, which cracked occasionally like a nervous teenager’s, despite the extensive speech lessons he had taken months before. Microsoft’s operating system, he went on, was now installed on more than 60 million personal computers, which represented about 75 percent of all the personal computers in the world. He predicted that another 18 million copies of DOS would be sold with computer systems in 1991. "It’s not just that number that’s astounding, it’s the whole phenomenon behind it."
Gates did not depart from the prepared text or interject words like "cool" or "super," which normally were part of his standard vocabulary.
Make-up, hurriedly applied so his face would not shine into the television cameras that would beam his presentation via satellite to some 300 locations around the United States, hid the acne to which he was still prone. Lights glared off his oversize glasses, blotting out his blue eyes. His mop of dishwater blond hair was, uncharacteristically, neatly combed. But those who looked closely could see the small flakes of dandruff on the shoulders of his black suit. The joke around the industry was that Gates never went anywhere without his dandruff.
A most unlikely captain of industry, he looked as if he could have been 25, or younger. There was an engaging, boyish charm about the former computer hacker whom many in the press had once described as a nerd. No one underestimated Bill Gates, though. Too many people had done that in the past. Most of the guests in the audience already knew Microsoft’s history. In 1980 the company had sold the MS-DOS operating system to IBM when it made its irresistible entry into the desktop computing marketplace and established industry standards that have yet to be supplanted. The revenue from that partnership gave Gates a guaranteed income stream and the push he needed to make his vision—Microsoft software on every desktop PC—come true. Not long after he made the deal with IBM, the fiery, competitive Gates had slammed his fist into his palm and vowed to put several of his major software competitors out of business. By 1991, many of those competitors were indeed in full retreat under a barrage of Microsoft products.
But Gates had made a great many enemies along the way. He had stepped on too many toes on his way to the top, and subjected countless colleagues to his abrasive, childish rants and intellectual browbeatings. The Federal Trade Commission, acting on anonymous complaints, had begun investigating Microsoft for possible anti-trust violations. Many competitors wanted to see Microsoft dismantled the way the federal government had carved up Ma Bell into so many Baby Bells. Even Microsoft’s enormously profitable and long-running marriage with IBM was threatening to unravel into a messy divorce. In a magazine article about Gates entitled "The Silicon Bully," one unnamed IBM official was quoted as saying he would like to put an icepick in Gates’ head.
Retribution was in the wind. While Gates spoke, across the Hudson in Armonk executives from IBM were huddled with the top brass of onetime archrival Apple Computer. The two giants of the computer world, threatened by Microsoft’s domination of the software industry, were plotting to form an alliance to create their own operating system, a new standard that would supplant DOS and wrest control of the industry away from Gates.
Outside "DOS Boat," a thunderstorm had gathered in the muggy evening air above the harbor. Gates and Ballmer had finished their monologues and were now fielding questions from the audience. A reporter fired three quick questions designed to put Gates and Ballmer on the spot over the rift with IBM.
Before either could answer, something—a rogue wave from the storm, the passing wake of a freighter—disturbed the New Yorker. The huge yacht lurched sickeningly.
"Our boat is rocking here in New York," a startled Ballmer said into the microphone for the benefit of the closed-circuit TV audience.
"IBM has great powers" piped up someone from the audience. The crowd began laughing, then burst into applause.
Gates, a silly grin across his face, seemed to roll with the punch. But it was as if some invisible force had landed a couple of solid body blows to Microsoft’s euphoria, auguring darker things to come.
CHAPTER 1 The Early Years
The earth fell away, and the city spread out beneath the sandy-haired, 11-year-old boy, as the elevator hurried higher and higher into the last light of a beautiful fall day. Glass windows on the tallest downtown buildings caught what was left of the sunlight and tossed back hues of crimson and gold. Far below to the west a ferry boat glided across Elliott Bay, with the rugged Olympic Mountains in the distance beyond.
Though there was a strong breeze blowing across the Sound, from this height the cold, dark waters looked like smoked glass, and the only sign that the ferry was moving was the lighter-colored green water left behind in its wake.
The thin, gawky boy squeezed past the elbows and legs of the adults and other kids around him until he could stand unobstructed against the glass side of the elevator for a better view.
"Welcome to the Space Needle," the elevator operator intoned. "You are in the west elevator travelling at ten miles per hour, or 800 feet per minute. The Space Needle was built as part of the 1962 World’s Fair, known as the Century 21 Exposition...."
But Bill Gates heard none of this. His thoughts were 3,000 miles away, blasting off from Cape Canaveral in a rocket ship of his imagination, fueled by the stories of Edgar Rice Burroughs and Isaac Asimov and a dozen other science fiction writers who had carried him on so many voyages of fantasy and discovery.
Forty seconds after liftoff, the view and the daydream were over as the elevator slipped into its berth at the Space Needle Restaurant 600 feet above Seattle. The dinner at the Space Needle was part of the Reverend Dale Turner’s annual treat for all those who had accepted and met his yearly challenge. And in 1966, none had done it better than Trey, as Bill Gates was called.
The evening marked a tradition going back to Reverend Turner's teaching days at the University of Kansas in Lawrence. At the beginning of each school year, he would challenge his students to memorize chapters 5, 6, and 7 of the Book of Matthew, which are better known as the Sermon on the Mount. Turner had left Lawrence in 1958 and was now pastor of the University Congregational Church in Seattle’s University District, across the street from the University of Washington. Founded nine years before! the turn of the century, the church is one of the oldest in the city.
The Gates family were regulars in the congregation, and Bill Gates was enrolled in Turner’s confirmation class. One Sunday morning, Turner threw down his yearly challenge to the class—he would buy dinner at the Space Needle Restaurant for anyone who memorized the Sermon on the Mount. It was the same challenge he made to the full congregation.
The Sermon on the Mount is a difficult passage to put to memory. The words do not rhyme, the sentence structure is disjointed, and it is very long—the equivalent of nearly four standard newspaper columns of type.
Twenty-five years later Turner can still remember the afternoon he sat down with Gates in the living room of the Gates’ home, to hear him recite the passage.
"And seeing the multitudes," the young boy began, "He went up onto a mountain, and when He was set, His disciples came unto Him, and He opened his mouth, and taught them, saying:
"Blessed are the poor... Blessed are the meek... Blessed are the merciful..."
Listening to Gates, Turner was astounded. No one, in all his years in the ministry, had been able to make it through the entire passage without stumbling over at least a few words or lines. But Gates had recited the passage nonstop from the beginning, never missing a line.
"I needed only to go to his home that day to know that he was something special," Turner later recalled. "I couldn’t imagine how an 11-year-old boy could have a mind like that. And my subsequent questioning of him revealed a deep understanding of the passage."
Thirty-one others from the University Congregational Church that year stuttered and stammered their way through the passage, and in the fall Reverend Turner took his 32 disciples to the plush, revolving restaurant on top of the Space Needle.
At dinner that night, "Trey" Gates feasted his eyes on the region where he would later make his mark. To the northeast was the University of Washington and the nearby residential district of Laurelhurst, where the Gates family lived, along the shores of Lake Washington. To the south, the Seattle waterfront jutted into the Sound, with its ships, piers, seafood restaurants, and curiosity shops. To the southeast rose the skyscrapers of the city, with 14,410-foot Mt. Rainier looming like a sentinel in the distance. To the east, against the backdrop of the Cascade Mountain range on the horizon, were the suburbs of Bellevue and Redmond, where 13 years later Gates would build his computer software empire.
That evening, as Gates looked out on the city, the suburbs, the mountains, and the waters of the Sound, he was oblivious to his destiny slowly revolving around him. Although he had memorized the Sermon on the Mount and received his free Space Needle dinner, the boy would never become a regular in the church. He would soon find himself spending most of his free time immersed in the exciting new world of computers. He and Turner, however, would remain friends in the coming years.
"He loved challenges," Turner said, remembering his bright charge. Even though a Space Needle meal was enticing back then, a lot of kids, on hearing my challenge, weren’t ready to pay the price. Trey was."
As Gates had told the pastor that day in his house, "I can do anything I put my mind to."
If bloodlines are an indication of future success, then Bill Gates was born into a family generous with its gifts.
His great-grandfather on his mother’s side of the family, J.W. Maxwell, was a nationally prominent banker. Born on an Iowa farm in the nineteenth century, he decided to seek his fortune behind a bank teller window rather than toil in poverty behind a plowshare. He left home for Lincoln, Nebraska, at age 19—the same age at which his great-grandson would found Microsoft nearly a century later—to begin a career in banking. In Lincoln, he became good friends with William Jennings Bryan, the orator and politician, and John J. Pershing, who would command the nation’s armies during World War I.
In 1892, heeding the advice of editor and political leader Horace Greeley, Maxwell headed west with his wife to the town of South Bend in Washington State. There he continued his banking career, was elected mayor, and served in the state legislature. The family moved to Seattle in 1906, where Maxwell founded National City Bank and gained a national reputation in the banking industry.
Maxwell’s son, James Willard Maxwell, began his own banking career in 1925 as a messenger in his father’s bank after graduating from the University of Washington. At the university he met his future wife, Adelle Thompson, a smart, spirited, athletic woman from Enumclaw, a hamlet nestled in the foothills of the Cascade Mountains southeast of Seattle. She had been a star forward on the women’s high school basketball team and class valedictorian.
The younger Maxwells became one of Seattle’s most socially prominent families, active in numerous community organizations, including United Good Neighbors, the predecessor of United Way. Willard Maxwell enjoyed both wealth and power in Seattle, eventually becoming vice president of Pacific National Bank (which later became First Interstate, the nation’s ninth largest bank). Several decades later they would leave their grandson a million dollar trust fund. Despite their wealth, the Maxwells disdained ostentation, a trait that has been passed down through the family.
Their daughter Mary was born in Seattle in 1929. A vivacious young beauty she grew up among some of the most prominent families in the Northwest. Like her mother before her, Mary Maxwell met her future husband, a tall, athletic, prelaw student by the name of Bill Gates, Jr., while she was a co-ed at the University of Washington. A school cheerleader, Mary was as outgoing and gregarious as Bill was shy and reserved. A mutual friend, Brock Adams, had introduced the couple while Adams was student body president, and Mary was an officer in the student government association. (Adams went on to a career in politics, serving as secretary of transportation under President Jimmy Carter. He is currently one of Washington’s U.S. senators and remains a close friend of the Gates family.)
While Bill Gates, Jr., did not have the wealthy and prominent family background of his wife, he did have the same drive and ambition. He was born in Bremerton, Washington, an hour’s ferry ride from Seattle, where his father owned a furniture store. Upon graduation from high school in 1943, Gates enlisted in the Army. By the end of World War II two years later, he was enrolled in officers’ training school at Fort Benning, Georgia.
Discharged in 1946 as a first lieutenant, he promptly enrolled at the University of Washington, where he became the first member of his family to graduate from college.
After getting a law degree from the university in 1950, Gates returned to Bremerton as assistant city attorney. Mary Maxwell, a couple years behind him in college, graduated in 1952, and they married shortly afterward. But a Navy homeport like Bremerton, with its ubiquitous sailors, fast-food restaurants, and tattoo parlors, was not the place to climb social or legal ladders, so the couple moved to Seattle, where Mary taught school and Gates went into private practice, eventually becoming a partner in the firm of Shidler, McBroom, Gates & Lucas.
In 1954, Mary Gates gave birth to a daughter, Kristi. A year later, she gave birth to their only son.
William Henry Gates III was born on October 28, 1955, shortly after 9:00 p.m. His parents nicknamed him "Trey," reflecting the III after his name. The moniker stuck—no one in the family ever called him anything else. He was born under the sign of Scorpio, and the traits ascribed to his astrological sign would prove eerily correct: aggressive and stimulated by conflict; prone to change moods quickly; a dominating personality with outstanding powers of leadership. Scorpios are known for having the respect, rather than the affection, of others, according to the World Book Encyclopedia. Trey Gates read the encyclopedia, from beginning to end, when he was only seven or eight years old.
Trey was an unusually energetic child, even as a baby. He learned to make the cradle rock on his own and would rock incessantly for hours at a time. When he was old enough, his parents bought him a rocking horse, which was akin to feeding sweets to a hyperactive kid. Even today, his rocking habit is legendary in the computer industry, as much of a signature of the man as Arnold Palmer hitching up his pants as he strolls down the fairway or Michael Jordan sticking out his tongue as he drives for a basket. It has become part of the corporate culture at Microsoft among programmers trying to re-create themselves in the chairman’s image. Gates often rocks himself in a chair, elbows on knees, to contain his intensity, especially when the talk is about computers; it’s not unusual to walk into a room of Microsoft managers and find most of them rocking in sync with him during an important meeting.
His rocking addiction notwithstanding, Trey Gates had a fairly typical childhood. After her son was born, Mary Gates gave up teaching to raise the family while her husband established his legal practice. As an alternative to teaching, she followed her mother’s lead and became a community volunteer. One of her first volunteer jobs, working on behalf of Seattle’s Museum of History and Development, involved going to area schools and giving short talks on the region’s culture and history. Trey, who was only three or four years old, would accompany his mother and sit on the desk in front of the class while she showed museum items to the students.
A recent book, The Making of Microsoft by Daniel Ichbiah and Susan Knepper, gave short shrift to what the authors described as Gates’ "uneventful" childhood, other than to leave the impression he was a deeply introspective child who stayed in his room most of the time in intense, reflective thought. Gates was certainly an introspective child, but he hardly grew up like a hermit in his room. For one thing, it is unlikely even Gates could have tolerated being cooped up for long periods of time in his room—it was usually in a state of chaos. His parents couldn’t train him to pick up his clothes. Eventually they tried taking his clothes away from him. When even that didn’t work, they finally gave up, requesting that he at least keep the door to his room closed so no one else would have to look at the mess.
Mary Gates, in describing her son, has said that he has pretty much done what he wanted since the age of eight. Trey’s closest childhood friend was Carl Edmark, whom Gates met in the fourth grade. Edmark said of him "He was very eccentric even back then." The two went to elementary school together, graduated from high school together, and continued to be good friends for years afterward. Their families were also good friends; Edmark’s father was a prominent Seattle heart surgeon who had invented a defibrillator that corrected abnormal heart rhythms during surgery.
Even as a child Gates had an obsessive personality and a compulsive need to be the best. "Any school assignment, be it playing a musical instrument or writing papers, whatever, he would do at any or all hours of the day." said Edmark. What seemed like eccentric behavior to fellow fourth graders, however, was likely nothing more than his competitive spirit. One of the first major assignments in his fourth grade class was to write a four or five page report on a particular part of the human body. Gates wrote more than 30 pages. Later, the class was told to write a short story of no more than two pages. Trey’s story was five times that length.
"Everything Bill did, he did to the max," said Edmark. "What he did always went well, well beyond everyone else."
Gifted children—those with IQs near or above the genius level—sometimes grow up to be socially inept, due to limited childhood interactions and experiences. Bill and Mary Gates were determined to see that that didn’t happen to their son. They tried to expose him to as many opportunities and experiences as possible. When he was old enough, he was encouraged to join Troop 186 of the Boy Scouts. His father had been an Eagle Scout as a youth, and understood the value of Boy Scout activities and camaraderie. The troop met at an elementary school not far from the Gates’ neighborhood. Trey stayed with the Scouts not only because he liked the outdoors, but because being a Scout fulfilled a need.
"His father was an attorney and very busy, and Bill needed a lot of companionship, which he got from the other boys," recalled Scoutmaster Don Van Wieringen.
One year during a Boy Scout jamboree—where Scouts from around the state gather to show off knot tying and fire building skills—Gates and a friend rounded up computer equipment and set up a hands-on demonstration of what a computer could do. At that time, few of the boys had even heard of a computer, much less used one. Today, thanks in part to Gates’ software systems, computing can earn Scouts a merit badge.
Unlike some Scout troops, which cared more about selling light bulbs and candy at Christmas, Troop 186 made year round efforts to hike and camp in the woods.
On one 50-mile summer hike, Gates demonstrated the persistence and tenacity that was to be his trademark later in life. Gates showed up for the week-long hike in a new pair of hiking boots that were not suited for hiking eight miles a day. By the end of the first day, his heels had been rubbed raw and his toes badly blistered. By the end of the second day, his feet were raw and bleeding openly. One of the adults on the trip, who was a doctor, gave him some codeine for the pain. The next day some of the Scouts carried his equipment, and Trey continued on, limping along until he reached the halfway checkpoint on day four, where hikers could bail out in an emergency. At that point, he could no longer walk. His mother had to be called in Seattle to come get him. One of the adults on the hike recalled that when she arrived, Mary Gates was not a happy camper. "She was busy being a socialite," he said, "and thought Bill was taken care of for the week."
Mary’s passion for education fueled a desire to return to teaching, but her career plans changed with the birth of a second daughter, Libby, nine years after Trey. Instead, she continued with her volunteer public service, which led to a seat on the boards of several of the Northwest’s largest corporations, including First Interstate Bank and Pacific Northwest Bell. Mary Gates was a quick study with a strong will, incisive intelligence and good business instincts.