Hard Drive: Bill Gates and the Making of the Microsoft Empire

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Like Gates, Davidoff neglected his studies to work full-time on his part of the project. He would become the forgotten man of BASIC. Years later, when Gates began appearing on the cover of national magazines, and reporters wrote stories about how the Harvard dropout and his sidekick Allen developed the industry’s first BASIC and became rich and famous, there was never any word of Monte Davidoff. He was mentioned once, just briefly, in the book Fire in the Valley. But even then, his first name was misspelled as "Marty."

"The first time I saw Bill on the cover of Time magazine, and it said he and Paul wrote this and it didn’t mention me, I was a little upset," said Davidoff. "But I’ve gotten over it."
Gates and Allen were about four weeks into the project when Davidoff joined the team. They had already talked several times with MITS engineers in Albuquerque, seeking information about the Altair not found in the Popular Electronics article. Roberts wanted to know how soon they could come to Albuquerque to demonstrate a working BASIC. Gates had initially told Roberts he could have the BASIC to him in three or four weeks. It would not be the last time he seriously underestimated how long it would take to develop a product. Gates did write the initial program in about three weeks, but he spent four more weeks polishing the rough edges until it was as tight and fast as he wanted it. But since they didn’t have an Altair, they had no way of knowing if it would really work.
By late February they felt they were ready. Allen would be the one to fly out to MITS. On the eve of Allen’s appointment with Roberts, Gates told his friend to go home and get some sleep so he would have his wits about him the next day. Gates remained in the computer room, making last-minute fixes in the program. He barely had it ready in time for Allen to catch his early morning flight out of Boston’s Logan International Airport.

As his plane was on its final approach into Albuquerque, Allen suddenly had a horrible thought. "Oh my God!" he cried out loud, startling the passenger seated next to him. He and Gates had forgotten to write what’s known as a "bootstrap," a program that would instruct the Altair how to load BASIC. Writing on a piece of paper in complicated 8080 machine language, Allen had the program completed before the jet’s wheels peeled rubber on the runway of the Albuquerque airport. (Later, Allen and the always competitive Gates would have a contest to see who could write the shortest loader program. Gates won.)

Ed Roberts met Allen at the airport. He was driving an old pickup truck.
Allen had not been sure what he would find when he arrived in Albuquerque. He certainly wasn’t prepared for the giant who was there to greet him. But he was in for an even greater shock when Roberts took him to MITS.
Micro Instrumentations & Telemetry Systems Inc. was located just off famous Route 66, in a string of businesses that passed as a downtown mall. There was a massage parlor on one side, a laundromat on the other. Roberts told Allen he wanted to wait until the next morning to test the BASIC, so after a short visit he drove Allen to the most expensive hotel in town. The future billionaire didn’t have enough money to pay for his hotel room. He had to borrow extra cash from Roberts.
That night, Allen called an anxious Gates waiting back in Cambridge. He told his friend about the guy who had picked him up in a run-down pickup, told him about the low-budget operation he had seen that afternoon. They were both disappointed... and worried. They had thought all along they were doing business with a big, successful company. Had their efforts been wasted?
The next morning, Roberts came by to get Allen, and they returned to MITS. It was time to test the BASIC. The code was on a paper tape. Unlike the Altair kits that would be sold to the public, the machine at MITS had several perks unavailable on the public models. This Altair Was running on 7K of memory. And it was connected to a teletype. Allen would not have to read the flashing lights to understand output from the Altair. But best of all, this Altair was hooked into a paper tape reader. Allen could feed his BASIC tape directly into the machine. Otherwise, it would have meant flipping the toggle switches on the front of the Altair approximately 30,000 times in proper sequence. The only thing Allen had to key into the machine was the loader program.

Allen crossed his fingers. This was the first time he had ever touched the Altair. Any mistake he and Gates had made along the way, either in designing the 8080 simulator or coding the BASIC itself, would now mean failure.

Suddenly, the Altair came to life. It printed "memory size?" Allen entered "7K." The machine was ready for its first instruction. Allen typed "print 2 + 2." The Altair printed out the correct answer: "4."
"Those guys were really stunned to see their computer work," Allen said. "This was a fly-by-night computer company. I was pretty stunned myself that it worked the first time. But I tried not to show much surprise."
Recalled Roberts of that historic moment when his machine was turned into a useful computer: "I was dazzled. It was certainly impressive. The Altair was a complex system, and they had never seen it before. What they had done went a lot further than you could have reasonably expected. I’d been involved with the development of programs for computers for a long time, and I was very impressed that we got anywhere near as far as we did that day."
Later that morning, Allen found a book of 101 computer games, and ran a Lunar Lander program on the Altair. It was very similar to the program Gates had written back at Lakeside when his interest in computers was first piqued by the teletype machine in the school’s computer room. The game required the user to make a soft landing on the moon before expending all the fuel in the spacecraft. It was the first software program ever run on what would become known as Microsoft BASIC.

The personal computer revolution had begun with a game played on a small blue box with blinking lights named after the brightest star in the constellation Aquila. Thirty years earlier, people in Albuquerque had witnessed the sun come up in the south when the world’s first atomic bomb exploded in the predawn darkness near Alamogordo a hundred miles away, heralding the nuclear age. Now, another age had dawned in Albuquerque. It began at a ragtag company located next to a massage parlor. Its prophets were two young men not yet old enough to drink, whose computer software would soon bring executives in threepiece suits from around the country to a highway desert town to make million-dollar deals with kids in blue jeans and t-shirts. Gates and Allen had ignited a technological revolution that would spread like wildfire, from the apricot and plum orchards of the Santa Clara Valley, where dreams born in garages would flourish in a great concrete expanse known as the Silicon Valley, to the lush forests of the Pacific Northwest, where Gates would eventually return home to become the youngest billionaire in the history of America.

When Allen got back to Boston, he and Gates celebrated by going out for ice cream and softdrinks. Gates had his usual Shirley Temple, the liquorless drink of 7 Up and grenadine usually given to kids who want to feel more grown up.
"We were both real, real excited," said Allen.
They talked about what kind of licensing agreement they should make with Roberts for their BASIC. They had worked 20-hour days, sometimes longer, for eight weeks. Now it was time to make some money.
As he ate his ice cream and sipped his Shirley Temple that day in Cambridge, Gates knew there was still a lot of work to do before BASIC was ready for the marketplace. Bugs needed to be found and removed. Refinements and enhancements had to be made. Gates returned to the Aiken Computer Center, while Allen went back to work at Honeywell. But Gates soon faced a problem that could not be solved with his programming wizardry. Harvard officials had found out that he and Allen had been making extensive use of the university’s PDP-10 to develop a commercial product. The officials were not pleased.

The PDP-10 that Gates and Allen had used to develop their BASIC had an interesting history. In 1969 it was destined for shipment to Vietnam when Professor Cheatham got a call asking if Harvard wanted the machine. Since a PDP-10 cost several hundred thousand dollars, and the university didn’t have one, Cheatham naturally said yes. But how to get it on campus without causing a riot? The computer was crated and packed away in the back of a two-and-a-half-ton U.S. Army truck. This was at the height of the Vietnam War. The Army was not exactly Big Man On Campus. At Harvard, glass windows had been replaced with plastic after repeated antiwar demonstrations. An Army truck rolling down these Ivy League streets was the last thing the Harvard administration wanted to see. So the truck snuck in on a Sunday morning, about 4:00 a.m. It pulled up in front of the Aiken Computer Center, unloaded its cargo, and left before the first student saw the crimson rays of the morning sun.

Even though Harvard now had possession of the PDP-10, the military strings had not been cut. The computer was being funded by the Department of Defense through its Defense Advanced Research Projects Agency, better known as ARPA. The little-known agency was created in 1958 to find long-term military applications from civilian research projects. For a while, it was known as ARPA. The word "Defense" was later added by Congress to underscore its military mission. Many of the military’s high-tech toys have come from DARPA-funded computer research, including the Stealth fighter and so-called smart weapons used in the recent Persian Gulf War.
Although DARPA was funding the PDP-10 at Harvard, there was no written policy regarding its use.
"The attitude here was that the kids could use the machine for personal use," said Cheatham. "But after the Gates incident,. there was tighter supervision."
It’s not clear how much trouble Gates got into for using the computer for personal gain, or for allowing Allen, an outsider with no connection to Harvard, to use the machine. Cheatham refused to talk about the incident. But another professor said Gates was reprimanded and threatened with expulsion. Gates, however, denies this.
"There was no formal reprimand, just an admonishment for bringing Paul in on a regular basis," said Gates. He later wrote a letter to the university administration, complaining about the lack of guidelines. Why could professors use the Harvard library to do research for books that brought them royalties, but students could not use the computer for commercial work? asked Gates in his letter. By the next year, a written policy was in place: If a student used the computers for a commercial product, Harvard had to be cut in on any profits that resulted.

After the computer flap, Gates and Allen bought computer time from a timesharing service in Boston to put the finishing touches on their BASIC.

Allen had been in constant touch with Roberts since flying to Albuquerque to test the BASIC. Soon after the trip, Roberts had asked Allen if he wanted to come work for MITS. In the spring of 1975, Roberts offered Allen the job of MITS software director. Allen accepted and left for Albuquerque. Gates went back to playing poker with the boys, and thinking more seriously than ever before about his future.

CHAPTER 3


The Microkids
The Sundowner Motel in Albuquerque New Mexico was in a sleazy part of town noted for its prostitutes and all-night coffee shops rather than its high-tech businesses. It was located just off Central Avenue, which is what Route 66 was called as it passed through this torrid desert town on the Rio Grande. When Paul Allen checked into the budget motel in the spring of 1975, he told the manager he was not sure how long he would be staying, but thought likely until his friend at Harvard could join him in a couple of months. Allen didn’t care about the cheap accommodations or the motel’s seedy surroundings. The important thing was that he was only a five-minute walk from MITS, where he would be spending most of his time getting BASIC ready for the Altair. Bugs had to be found and removed from the language before it was ready to be sold commercially.

Compared to his job at Honeywell in Boston, Allen had walked into a buzzing hive of disorder at MITS. Although his title was MITS’ software director, in fact Allen was the entire software department. The others employed by the company were furiously working on hardware for the Altair. The response to the Popular Electronics article had been nothing short of phenomenal, firing the imagination of electronics hobbyists and computer hackers across the country who had dreamed of one day owning a computer. And now they could, for the very affordable price of $397.

"You’ve got to remember that in those days, the idea that you could own a computer, your own computer, was about as wild as the idea today of owning your own nuclear submarine. It was beyond comprehension," said Eddie Curry, who joined MITS as executive vice-president soon after Allen arrived. They quickly became friends. "Computers were things that were housed in big buildings and took up several floors and had a staff to maintain them and a priesthood to watch over them. A large part of the success of the Altair and the microcomputers that followed was the desire of people just to own one. It didn’t really matter if they could do anything with the computer. Everybody knew you could do something with them, but nobody knew what. The mere fact that you owned a computer was very prestigious."
Curry, a childhood friend of Roberts, was in graduate school when Roberts told him his idea of a small computer for the masses. They talked a lot on the phone, running up hundred-dollar-a-month bills. Although they alternated payment of the bills, Curry couldn’t afford such extravagance while in school, so he and Roberts began exchanging tapes, which turned into sizeable creative productions, complete with sound effects, background music, comedy skits, and dramatic readings.
"We got into this sort of running discussion of where we were going in life," said Curry, "and I asked him on one tape what his goals were for MITS and what he wanted to do with MITS. He told me his dream was to build a computer kit so everyone could have their own computer." He and Roberts had detailed, technical discussions via tape throughout the development of the computer, even down to how much Roberts should charge for the Altair.

With MITS near bankruptcy, Roberts gambled everything on the Altair. He haLes Solomon, the short, bald-headed technical editor of Popular Electronics who had put the dummy Altair on his magazine’s cover, described the reaction that followed publication this way in the book Hackers, by Steven Levy: "The only word which could come to mind was ‘magic.’... Most people wouldn’t send fifteen cents to a company for a flashlight dial, right? About two-thousand people, sight unseen, sent checks, money orders, three, four, five hundred dollars apiece, to an unknown company in a relatively unknown city, in a technologically unknown state. These people were different. They were adventurers in a new land. They were the same people who went West in the early days of America. The weirdos who decided they were going to California, or Oregon or Christ knows where."
In its ads, MITS promised delivery of a computer kit within two months. But the company was unprepared for the staggering number of orders it received. It could not possibly keep up with demand. Anxious customers who sent in money for an Altair called repeatedly to find out what had happened when their machine did not arrive in the mail as promised. They were told MITS had a huge delivery backlog and they would have to wait. One frustrated hacker drove across the country and lived for several weeks in a trailer parked near MITS, waiting to take delivery of his Altair.

For their $397, these adventurers didn’t get much. The Altair came in a kit, which wasn’t for the faint of heart. The customer had to figure out how to put it together, which took many hours and was not easy. Most of the kits were never properly assembled. And even if the computer did work when it was assembled, the Altair couldn’t do very much. The first machines sold in early 1975 did not have interface boards that allowed for a teletype hookup. Memory expansion boards also were not yet available, so the Altair was all but brainless, with only 256 bytes of memory. Crude programs in complicated binary machine language could only be entered into the computer by flipping the toggle switches on the front panel hundreds of times in proper sequence. One mistake meant the user had to start over from scratch.

The 8080 BASIC computer language that Gates and Allen were creating at Harvard was not yet finished when the first Altair computer kits were shipped. Even if the software had been ready, MITS hadn’t yet designed working memory boards that would provide Altair owners enough additional memory to run BASIC. Paul Allen’s responsibility as the MITS’ software director in 1975 was to continue making enhancements to BASIC and get it ready for shipment. He and Gates talked constantly by phone on technical problems that cropped up. They both realized a new software market had been born with the Altair, and they hoped to make a lot of money from the sale of their BASIC. What they now needed was a formal partnership.
For some time, Gates had tried to prepare his parents for the fact that he might eventually drop out of Harvard to form a computer business with Allen. But this latest news took his parents by surprise. He wanted to start a company not in Seattle, his hometown, where he would be close to his family, but in Albuquerque, of all places, way out in the deserts of New Mexico.
As Mary Gates saw it, her 19-year-old son was about to commit what amounted to academic suicide. She was dead set against her son leaving school before getting his degree. Dan Evans, the governor of Washington (and a close family friend who had once helped Gates paint the lines on the family’s pic-kleball court), had just named Mary Gates to the University of Washington Board of Regents, one of the most prestigious political appointments in the state. How would it look for her son to drop out of Harvard now, she wondered. His father was also strongly opposed to Gates starting a company before finishing his education. But though he and Mary urged their son to remain in school, both recognized that they did not have the technical background to analyze the business soundness of starting a software company.

So Mary Gates turned to a new friend, Samuel Stroum, an influential and respected business leader she had met during a United Way campaign, for help with her son. She arranged for Bill to talk with Stroum, in the hope that Stroum would convince her son to drop the idea of starting a company, at least for the time being, and continue his education at Harvard.

A self-made multimillionaire, philanthropist, and civic leader, Samuel Stroum’s advice was often sought, even by the region’s most powerful movers and shakers. Like Mary Gates, he is a regent at the University of Washington. Stroum never went to college. After World War II, he founded an electronics distribution company in Seattle and later amassed a fortune from the sale of Shuck’s Auto Supply, the Northwest’s most popular auto-parts chain. In 1975, he was one of the few people in Seattle’s business community who not only understood computer technology but had the vision to see where the computer industry was heading.
While Gates was home from Harvard on break, Stroum took him to lunch at the Rainier Club, the city’s center of power and business. Founded in 1888 and steeped in tradition, the private club was considered the place for lunch among Seattle politicians, powerbrokers, and corporate high-flyers. "I was clearly on a mission," recalled Stroum of the couple hours he spent picking Gates’ brain. "He explained to me what he was doing, what he hoped to do. I had been involved in that industry since I was a young boy. He just talked about the things he was doing... Hell, anybody who was near electronics had to know it was exciting and a new era was emerging."
Gates talked about the vision he and Paul Allen shared. The personal computer revolution was just beginuning, he told Stroum. Eventually, everyone would own a computer. Imagine the money-making possibilities.... a zillion machines all running on his software.

Not only did Stroum not try to talk Gates out of his plans to start a business, but after listening to the enthusiastic teenager he encouraged Gates to do so. "Mary and I have kidded about it for years," said Stroum, now 70. "I told her I made one terrible mistake—I didn’t give him a blank check to fill out the numbers. I’ve been known as an astute venture capitalist, but I sure didn’t read that one right."

When Gates finished his sophomore year at Harvard, he joined Allen in Albuquerque, though he still had not made up his mind about dropping out of school. It was a decision he would not finally make for another year and a half.
Microsoft—an abbreviation for microcomputer sofware— was born in the summer of 1975. (The name was originally "Micro-Soft;" the hyphen in the name was soon dropped.) Some accounts have reported that Gates and Allen created Microsoft out of Traf-O-Data by simply changing the name. That was not the case. The two companies were always separate legal partnerships. The initial Microsoft partnership agreement called for a 60/40 split in favor of Gates, since he argued that he had done more of the initial development work on BASIC. This was later changed to a 64/36 split. (By the time Microsoft went public in 1986, Gates owned more than 11 million shares of the company’s stock and Allen more than six million shares.)
Although Gates was independently wealthy from his parents and the trust fund left him by his grandparents, he was determined to make it on his own and not dip into that money to help finance his and Paul Allen’s new business. His parents and grandparents had taught him to be financially conservative, and that was the way he intended to run his company. There would be no unecessary overhead or extravagant spending habits with Microsoft. When Gates arrived in Albuquerque, he and Allen shared a room at the Sand and Sage Motel, which was only a slight improvement over the Sundowner. Later, they moved into an inexpensive downtown apartment.

Early that summer, MITS took the Altair on a show-and-tell road tour. Several of the company’s hardware engineers crowded into Roberts’ blue mobile home and headed across America, travelling from city to city to spread the word about Altair. The MITS-mobile, or Blue Goose, as it was quickly dubbed, carried a working Altair complete with bells and whistles not available with the computer kits being sold to hobbyists. This Altair was connected to a teletype and paper tape reader, and ran the 4K version of BASIC developed by Gates and Allen. It was a public relations show on wheels. Wherever the MITS-mobile stopped, Altair demonstrations were set up. Seminars were held in motel rooms. Hobbyists who turned out were encouraged to form computer clubs, and many did, in garages, basements, wherever they could meet to feed an insatiable appetite for information about computers and to share a passion for this new revolution and its possibilities. The MITS caravan also served as a kind of traveling MASH unit, with hardware experts offering technical surgery to frustrated Altair owners who could not get their machines to work. Gates himself made one of the song-and-dance tours in the MITS-mobile his first summer in Albuquerque. He felt it was a good marketing strategy to spread the word about BASIC as well.

The MITS-mobile was not the only marketing tactic used by Roberts to promote the Altair. He and David Bunnell, the company’s technical writer, formed a nationwide computer club with free memberships to Altair owners. Bunnell also began publishing a newsletter called Computer Notes. Roberts wrote a regular column for the newsletter, and Gates and Allen became frequent contributors with articles about their software. Bunnell, who had left a teaching job on a Sioux Indian reservation in South Dakota to join MITS in 1972, became good friends with Gates. Bunnell designed Microsoft’s first logo and letterhead. He would go on to become one of the country’s leading publishers of personal computer magazines.

Gates, when he was not on the road in the MITS-mobile, pulled all-nighters with Allen to further enhance BASIC. By midsummer, they had an 8K BASIC to go with the 4K version, and they were working on an "extended" BASIC that required 12K or 16K of memory. On July 22, 1975 they signed a formal licensing agreement with Ed Roberts regarding the rights to their BASIC for the 8080 computer chip. The agreement, prepared by Gates with help from his father and an Albuquerque attorney, broke new legal ground. Gates, only 19 years old, understood not only the complex technology but the cutting-edge legal issues involved in licensing software. The agreement, which was to run for ten years, gave MITS exclusive, worldwide rights to use and license BASIC, including the right to sublicense BASIC to third parties. MITS agreed not to license BASIC to any third party without first obtaining a secrecy agreement that prohibited the unauthorized disclosure of BASIC. What would later turn out to be the most important part of the agreement was a paragraph that stated: "The Company (MITS) agrees to use its best efforts to license, promote, and commercialize the Program (BASIC). The Company’s failure to use its best efforts... shall constitute sufficient grounds and reasons to terminate this agreement...." The contract with MITS would serve as a model for future software licensing agreements in the growing microcomputer business, and it helped establish industry standards.

Gates and Allen received $3,000 from MITS on the signing of the agreement. The agreement provided for royalties from the licensing of BASIC, with or without the accompanying sale of MITS hardware. Microsoft received $30 for each copy of its 4K version of BASIC licensed by MITS as part of a hardware sale, $35 for each copy of their 8K version, and $60 for each copy of the "extended" verion. When MITS licensed any version of BASIC without hardware, Gates and Allen received 50 percent of the sale. They also received 50 percent of the money received from the licensing of the BASIC source code. The source code would allow companies that licensed BASIC to modify it to their needs and develop application software to run on top of the high-level language.
Although the licensing agreement was a good one for Microsoft, it would never make Gates or Allen rich men. They could only earn a maximum of $180,000 in royalties according to the terms of the contract. But for the time being, they needed MITS to help market BASIC with the Altair.
As Microsoft grew, Gates sought out trusted friends to join him in his crusade. His recruiting forays often led back to Lakeside School in Seattle and to his old friends from the computer room.
That first summer in Albuquerque, when it became clear he and Allen couldn’t do all the programming work themselves on BASIC, Gates contacted Chris Larson, his young prot6g6 at Lakeside. Larson was only a sophmore, but he had the same energy, passion, and commitment as his mentor. In the two years since Gates had left Lakeside for Harvard, Larson had taken over Lakeside’s computerized scheduling project. He was also looking after Bill’s sister Libby, who now attended Lakeside.

Larson, four years ahead of Libby, saw to it that she got the classes she wanted. Larson and his friends got the classes they wanted, as well. "I guess there was an unwritten understanding between us and the faculty that we wouldn’t overly abuse the situation, or obviously we would have had the job taken away from us," recalled Larson. (Two years later, as a senior at Lakeside, Larson scheduled himself in a class with all girls—a nifty bit of programming wrongly credited to Bill Gates.)

Gates recruited Larson for the summer, and found a second programmer for the summer from Harvard—Monte Davidoff, who had developed the math package for BASIC. When Larson and Davidoff arrived in Albuquerque, they shared an apartment with Gates and Allen, often sleeping on the living room floor. All four kept late hours, and became familiar with every late-night pizza place and coffee shop in the neighborhood. The MITS software office where the Microsoft employees worked was separate from the company’s main administrative office, located next to a vacuum cleaner shop. While MITS hardware engineers worked on memory boards and refinements for the Altair, Gates and his team worked on BASIC and various software programs that allowed the Altair to be used with a teletype, printer, or paper-tape reader.
The people employed by MITS and Microsoft were youthful computer fanatics, religious zealots who worshipped The Machine. "It was almost a missionary kind of work in the sense that we were delivering something to someone they never thought they could have," recalled Eddie Curry. "There was a kinship that you wouldn’t normally see in commerical enterprise between not only the people in the company but between the people in the company and the customer base. People would work from early in the morning until the end of the day. Then they’d rush home to get dinner, come back and work until late at night. Typically, there were people at MITS 24 hours a day, seven days a week."

Curry got a call one day from an executive who said he had been trying for a week to get hold of Gates or Allen. The executive was excited because he felt he had stumbled upon what he thought was a little known industry secret—software people only came out at night. Gates sometimes slept at the Microsoft offices, just as he had slept in the computer lab at Harvard at times rather than returning to his room at the Currier House. One day Ed Roberts was taking a group of visitors on a tour through MITS when he stepped over a body in the software area. It was Gates, curled up on the the floor, sound asleep.

"Bill and Paul were very, very intense," said Curry. "They had a clear understanding of what they were doing, in the sense that they had a vision of where they were going. It wasn’t just that they were developing BASIC. I don’t think most people ever really understood this, but Bill, certainly, always had the vision from the time that I met him that Microsoft’s mission in life was to provide all the software for microcomputers."
Gates, Allen, and the other programmers got along with Curry, but not, curiously, with Roberts. The Microsoft employees had long hair and kept strange hours. They listened to rock’n’roll music while Roberts preferred easy-listening music. "As soon as Roberts would leave," recalled David Bunnell, "they’d switch to rock’n’roll. I couldn’t see how they ever got any work done with that acid rock music blaring out all the time, day and night."
In addition, Roberts considered Gates something of a smartass. They were both extraordinarily well-read, and would often debate issues unrelated to computers. Should the United States have dropped the atomic bomb on Japan? Regardless of what side Gates took on an issue, Roberts took the opposite... seemingly out of spite rather than conviction. The gangly teenager clearly got under Roberts’ skin. It was inevitable the two would clash about more serious matters, as well, and they did, often and angrily. The burly Roberts, who could be surly, authoritative, and intimidating, was used to getting his way. No one at MITS got along in complete harmony with Roberts. Employees either did things his way, or encountered fierce opposition.
Gates, on the other hand, didn’t back down regardless of how formidable Roberts could be.
"Bill could be fairly prickly," said Nelson Winkless, the first editor of Personal Computing magazine. "He had his own view of what MITS ought to be doing and how they should do it. He was very much self-possessed."

Although he wasn’t old enough yet to order a beer legally, the 5-feet-ll Gates stood his ground with Roberts, often going jaw to jaw with the huge, gruff man 13 years his senior. Roberts weighed close to 300 pounds, and at 6-feet-4 towered over Gates. "Bill was brash, very intelligent, and energetic," recalled Bunnell. "I knew of no one who would go to the wall with Ed until I met Bill Gates."

In Gates’ mind, every good idea at MITS was only half executed, and he didn’t hesitate to let Roberts know how he felt. "MITS was run in a very strange way," he said, "and everyone there felt very poorly.... We all thought, gee, this thing is a mess. And there was a vacuum of leadership. It was actually kind of unusual. Even though I was never formally an employee or anything—I was just doing my software stuff—I had some thoughts on how it ought to be run, so we’d all sit around and talk about this stuff and people would actually kind of egg me on to stand up to Ed. We always thought we might do something to improve the way things were run."
The company’s foul-ups drove the business-minded Gates up the wall, especially the problem MITS was having with dynamic memory boards for the Altair. These high-tech circuit boards gave the Altair enough brain power to run BASIC, and were essential to the sale of BASIC, which required a minimum of 4K of memory. But the boards seldom worked. Gates wrote a software program to test the boards and didn’t find one that worked as advertised. "It was irritating, as well as an embarrassment to everybody, including us," said Curry. This was particularly so since many of the faulty memory boards were delivered to Altair customers already frustrated that it had taken so long to get one of the computer kits. Other hardware companies, seeing an opportunity in the young microcomputer field, were soon making and shipping memory boards that did work, which irritated and embarrassed Roberts enormously. Gates ranted and raved at Roberts about the problems he saw. He and Allen needed cash flow to fund their young company’s growth. How could they expect royalties from their agreement with MITS when things at MITS were so screwed up?

Although Roberts respected Gates’ technical abilities, he didn’t care for Gates’ confrontational style. "We got so we didn’t even invite him to meetings where we were trying to come up with a new software approach or something like that because he was impossible to deal with," Roberts recalled. He was a spoiled kid. He literally was a spoiled kid, that’s what the problem was. Paul Allen was much more creative than Bill. Bill spent his whole time trying to be argumentative and not trying to come up with solutions. Paul was exactly the opposite."

At the end of that first summer in Albuquerque, Larson went back to school at Lakeside, and Davidoff returned to Harvard. Gates, too, decided to go back to Harvard that fall. He was still wrestling with his future, and his parents continued to pressure him to finish his education. For the next year and a half, Gates would divide his time between school and poker at Harvard and creating software and negotiating deals for his new business in Albuquerque.
With Gates, Larson, and Davidoff back in school, Allen was left alone to deal with Roberts and MITS. He had his hands full. MITS had been the first company to hit the market with an affordable microcomputer, but others quickly followed. A couple startup companies were working on a microcomputer that used Motorola’s new MC6800 microchip instead of the Intel 8080, the mathematical engine in the Altair. Roberts wanted MITS to build a new Altair around the Motorola chip. Allen argued otherwise. It would mean rewriting the BASIC software, and putting out competing hardware products in the marketplace. But Roberts, as usual, got his way. Allen brought in Richard Weiland, one of the founding members of the Lakeside Programmers Group, to write the 6800 version of BASIC. MITS later did produce an Altair known as the 680b, though as Allen had predicted, it was not very successful.
In late 1975, MITS decided to release a floppy disk-storage system for the Altair 8800. As a result Allen, as software director, was asked to develop a disk BASIC, quickly. Magnetic disks that stored data had been used for years in mainframe machines and minicomputers, but it was not until after the Altair hit the market that floppy diskettes were designed for microcomputers. Disks were a much more efficient way to store data than paper tape.

Even before MITS had announced its intentions to market a disk-based version of Altair BASIC, Allen, anticipating the need for such a product, had asked Gates to write the new software code. But Gates had been busy on other projects and pushed the request aside. Now Gates had no choice. When the fall semester ended, Gates flew to Albuquerque and checked into the Hilton Hotel with a stack of yellow legal pads. Five days later he emerged, the yellow pads filled with the code of the new version of BASIC. Gates then went to the software lab at MITS to iron out the new BASIC, instructing the others that he was to be left alone. In another five days, Gates had what would become known as DISK BASIC running on the Altair. That, at least, is the "official" version of Chairman Bill’s feat of programming prowess, as recounted in the preface to the company’s bible, the MS-DOS Encyclopedia. Although Gates is generally thought of as the father of Microsoft BASIC, which became an industry standard and was the foundation on which his software company was built, there are those in the industry who believe Allen deserves at least as much credit as Gates, and possibly more. According to them, the legend of Gates has risen to such Olympian heights that it sometimes overshadows reality. Ed Curry, for one, felt Allen never got the credit he should have for his work on BASIC.

"What was delivered to us initially there in Albuquerque," said Curry, "was what came to be known as the 4K version. And it had no file management capability and was, you know, very restrictive, about as restrictive a subset of BASIC as you could have and still call it BASIC. It was Paul who began to flesh it out.... When you read things about Bill writing BASIC, for example, to me, that’s a little bit of a joke. He was part of a team. I think it’s accurate to say that if you went back and looked at BASIC three or four years later and said, ‘Okay, who made the most significant contribution?’ it was Paul Allen. The initial hack was a very important piece of work. Undoubtedly it was very challenging and very difficult, but... You know, I don’t want this to come out that I said Bill Gates didn’t write BASIC. That’s not what I’m saying. Bill was part of a team effort. He made very imporant contributions. But if any one person were to be said to be the author of BASIC, I would think it would be Paul. If you asked who was the driving force behind BASIC, it was Bill and Paul. If you asked who solved the hard problems, it was Bill and Paul. But in terms of who sat down and did the work for BASIC as we know it today, it’s got to be Paul who did the lion’s share."
Those patient enough to have actually received an Altair kit, skilled enough to have assembled the pieces, and lucky enough to have gotten the machine up and running could have cared less who authored BASIC. They just wanted to use it, and when they couldn’t get it, many resorted to "stealing" this prized piece of software that gave them the programming power to turn $397 worth of electronic parts and an Intel 8080 chip into a useful computer that could do more than just flash two rows of red LED lights.

These computer hackers were the first "software pirates," a somewhat romantic description suggesting high-tech swashbucklers who hack their way across computer screens like Errol Flynn. But as far as Bill Gates was concerned, they were unprincipled thieves. And he called them as much in an infamous letter published in the Altair newsletter, which was reprinted in other computer magazines and ended up as dartboard material in computer clubs from New York to California.

Gates wrote his stinging denunciation in early February of 1976, but the larceny problem and what to do about it had been eating away at him for months, after he learned that unauthorized copies of BASIC were being handed out like so many free raffle tickets at computer club meetings across the country. What happened one night at a gathering of the Homebrew Computer Club in Northern California was typical.
The computer clubs fueled the revolution that had begun in Albuquerque with the Altair and was sweeping across the country like an out-of-control prairie fire. The clubs were technological communes for those who loved computers. Gates himself had toured in the MITS-mobile to encourage some of the clubs to organize. And they did, in garages, warehouses, homes, schools, offices... anyplace members could meet and talk about computers. The clubs were organized by engineers, technicians, hobbyists, hackers, electronics buffs, gadget freaks... energetic people fascinated by the seemingly limitless possibilities for microcomputers. Probably no computer club in the country reflected this communal spirit more than Homebrew. From its ranks would come numerous industry pioneers who blazed their own trails through the Silicon Valley and a new multibillion-dollar industry.
Homebrew started in a garage on a rainy night in early March of 1975, in the town of Menlo Park, next to Palo Alto and Stanford University, on the edge of the. Silicon Valley. More than thirty people turned out for the first meeting, including an electronics whiz kid working in the calculator division of Hewlett-Packard named Steve Wozniak.. Within a year, Wozniak, with Steve Jobs, would build a personal computer of his own, the Apple I, which would transform the computer industry.

In June of 1975, the MITS Mobile Caravan was out on the West Coa$t for the National Computer Conference. One of its stops was Rickey’s Hyatt House in Palo Alto. By then, a number of Homebrew members had ordered an Altair. When the MITS-mobile arrived, about two hundred people crowded into the Hyatt’s Edwards Room to look at the Altair. They discovered an Altair with features not available on the machines they had ordered. It was connected to a teletype and a paper-tape reader, and was running the 4K version of BASIC developed by Gates and Allen. At this point, no one at Homebrew who had ordered an Altair had received a copy of BASIC, though they had sent MITS their money for the program. According to one account, someone from Homebrew picked up the punched paper tape containing BASIC lying on the floor near the Altair. Someone else later ran off copies of the tape, and at the next Homebrew meeting a large box of tapes were passed out to anyone who wanted one. Gradually, then exponentially, BASIC spread from computer club to computer club like a virus. And no one was paying for it.

When Gates learned what was going on, he was beside himself. No wonder he and Allen were receiving so little money from their royalty agreement with MITS, he thought. One day he stormed into Roberts’ office and threw one of his fits that many around MITS had become accustomed to. "I vividly remember the conversation," recalled Roberts, "him coming into my office that first summer and screaming and yelling at the top of his lungs that everyone was stealing his software, and he was never going to make any money, and he wasn’t going to do another thing unless we put him on the payroll."
Roberts said he put Gates on the company’s payroll for about a year, and paid him about $10 an hour. Gates, however, later claimed he never worked for MITS. Technically, he was right. According to David Bunnell, the salary Gates received for the hours he worked enhancing and selling BASIC was actually an advance against royalties. He was never on the MITS staff.

Gates eventually became convinced that BASIC wasn’t selling very well because so many people had obtained copies without paying for them. At one point, frustrated and demoralized, Gates offered to sell Roberts all rights and ownership to BASIC for about $6,500. In hindsight, it would have been the bonehead deal of the century. "Clearly, it would have been a bad decision on Bill’s part, because there might not be a Microsoft today," said Eddie Curry. But Roberts decided not to take Gates up on the offer. He later told Curry that he liked both Gates and Allen and didn’t want to take advantage of them because they were so young. In truth, Roberts decided it made better business sense to continue paying royalties to the two, and reap whatever benefits came from the enhancements they were making with BASIC. Had Allen quit as MITS’ software director, which he almost certainly would have done if he and Gates no longer had a financial interest in BASIC, then there would have been no one to make the badly needed upgrades in the language. "In retrospect, said Curry, "it worked out in a way that I don’t think Ed is very happy about today, but at the time was the right decision based on what everybody knew."

Gates decided the best thing he could do to stop people from stealing his software was to strike back publicly at the thieves. He asked Bunnell to publish a letter in the Altair newsletter, Computer Notes. Entitled "An Open Letter to Hobbyists, Gates noted that the most important thing inhibiting computer hobbyists was the lack of good software.
Almost a year ago, Paul Allen and myself, expecting the hobby market to expand, hired Monte Davidoff and developed Altair BASIC. Though the initial work took only two months, the three of us have spent most of the last year documenting, improving, and adding features to BASIC. Now we have 4K, 8K, EXTENDED, ROM and DISK BASIC. The value of the computer time we have used exceeds $40,000."
Gates noted that while feedback from enthusiasts was strong, he'd noticed two things: "1) Most of these "users" never bought BASIC (less than 10 percent of all Altair owners have bought BASIC), and 2) The amount of royalties we have received from sales to hobbyists makes the time spent on Altair BASIC worth less than $2 an hour."
He then accused hobbyists of stealing software programs. "Is this fair? One thing you don’t do by stealing software is get back at MITS for some problem you may have had. MITS doesn’t make money selling software. The royalties paid to us, the manual, the tape and the overhead make it a break-even-operation. One thing you can do is prevent good software from being written. Who can afford to do professional work for nothing?... The fact is, no one besides us has invested a lot of money in hobby software... but there is very little incentive to make this software available to hobbyists."
He went on to add that those who resell BASIC software "give hobbyists a bad name, and should be kicked out of any club meeting they show up at.

"I would appreciate letters from any one who wants to pay up, or has a suggestion or comment.... Nothing would please me more than being able to hire ten programmers, and deluge the hobby market with good software." The letter was published on February 3, 1976. Bunnell not only printed the diatribe in the Altair newsletter, but he made sure it ran in most of the major industry publications, including the newsletter of the Homebrew Computer Club.

Gates’ letter caused quite a stir. The Southern California Computer Society, which had been visited by the MITS-mobile in early 1975 and by now had several thousand members, threatened to sue him. "They were upset that Gates had called them thieves," said Bunnell. "They were not all thieves... just most of them." Only a handful of people who possessed pirated copies of BASIC sent Gates money as he had asked them to do in his letter. Some fired off their own angry letters in return. What was the difference between making copies of BASIC and taping music off the air rather than buying the recording artist’s music, some wanted to know? Others argued the altruistic position that BASIC belonged in the public domain, an argument that had some merit since Gates and Allen had created BASIC using the PDP-10 at Harvard, a computer funded by the Defense Advanced Research Projects Agency. In other words, these people argued, the computer time they had used was paid for with taxpayers’ money.
Regardless of what philosophical rationalizations hobbyists used to justify why they had not paid for BASIC, they did have one legitimate beef: MITS was partly to blame by engaging in a pricing policy that all but assured Altair owners would do anything possible to avoid paying for BASIC. No one wanted the memory boards MITS was turning out. But everyone wanted BASIC. So early on the company had decided to charge $500 for BASIC alone, about a, hundred dollars more than the Altair itself cost. But for only $150, a customer could get a memory board plus BASIC. Of course, word quickly got around that most of the boards didn’t work, and MITS knew this, which is why it priced BASIC out of reach of many hobbyists. MITS was forcing customers who wanted BASIC to buy the atrocious circuit boards.

Gates did not stop the antipiracy campaign with his letter. In late March, he spoke out on the piracy issue at the World Altair Computer Convention in Albuquerque in his first industry speech. The convention, the first ever for microcomputers, was the brainchild of Roberts and Bunnell. By then, MITS had annual sales of well over a million dollars and Roberts wanted to showcase the company with a convention that would bring together key people in the industry. Bunnell organized and promoted the convention, which was held March 26-28, 1976, in a hotel near the Albuquerque airport. Several hundred people came, including a few uninivited competitors who crashed the party. One of these competitors was Processsor Technology, a startup hardware firm producing 4K memory boards that could be used with the Altair. The company had wanted to set up a display booth at the convention, but Roberts, who had become increasingly paranoid about competition, vetoed their request. The boards produced by Processor Technology not only worked, but were selling very well, much better than the faulty circuit boards designed by MITS. The only reason customers bought a MITS board at all was to get a copy of BASIC for the $150 package price.

When Roberts told Processor Technology founder Bob Marsh he could not have a display booth at the MITS-sponsored Altair convention, Marsh rented the hotel’s penthouse suite and posted hand-written signs in the hotel lobby directing convention goers to his company’s suite. Later, Roberts published his own diatribe in the Altair newsletter, describing Processor Technology and other companies who dared produce memory boards for his computer as "parasites." In the end, he only damaged himself in the industry further.
The three-day convention, which included guided tours of MITS, was more of a conference than a trade show. There was no hardware on display, except in the penthouse suite. Most sessions were held in a large room in the hotel where attendees listened to speeches and talked about microcomputers. When Gates spoke, his speech was another belligerent attack on those hobbyists who he said were "ripping off" his software. At the time, Gates was fairly unknown in the industry. He was better known as the author of the scathing letter in Computer Notes than as the author of BASIC. Now twenty years old, he looked more like fourteen. His hair was uncombed and hung helter-skelter over his eyebrows and ears, and his thick, oversized glasses accentuated his childlike appearance. His high-pitched voice underscored his youthfulness. But Gates did have a certain charisma. His words crackled with the authority of someone much older and wiser. After his talk, people crowded around him to ask questions. Although he came off as brash and arrogant to many, Gates did have his supporters. "I was very much in sympathy with his attitude," recalled Winkless, the Personal Computing magazine editor. "How do you get your investment back?"

Roberts later asked his friend Eddie Curry to talk with Gates and persuade him to write a second letter, in the hopes of undoing some of the public relations damage. Roberts had been furious with Gates over the first letter because it had been written on the MITS stationery. "It looked like we were accusing all our customers of being crooks.... I was very, very upset," Roberts said.

Gates acknowledged that he had made a mistake by using MITS letterhead, and he agreed to work with Curry on a suitable second letter. "In retrospect, it really didn’t help anything to accuse people of being thieves," said Curry. "All it did was to work against Bill. He didn’t feel he had done some terrible thing, but in the calm light of day he understood it was not the most prudent thing to have done."
Gates’subsequent effort, entitled "A Second and Final Letter," ran in the Altair newsletter in April: "Since sending out my "Open Letter to Hobbyists" of February 3rd, I have had innumerable replies and an opportunity to speak directly with hobbyists, editors and MITS employees at MITS’ World Altair Computer Convention, March 26-28," Gates wrote. "I was surprised at the wide coverage given the letter, and I hope it means that serious consideration is being given to the issue of the future of software development and distribution for the hobbyists...."

Gates then went on to say, "Unfortunately, some of the controversy raised by my letter focused upon me personally and even more inappropriately upon MITS. I am not a MITS employee and perhaps no one at MITS agrees with me absolutely, but I believe all were glad to see the issue I raised discussed. The three negative letters I received objected to the fact that I stated that a large percentage of computer hobbyists have stolen software in their possession. My intent was to indicate that a significant number of the copies of BASIC currently in use were not obtained legitimately and not to issue a blanket indictment of computer hobbyists. On the contrary, I find the majority are intelligent and honest individuals who share my concern for the future of software development.... Perhaps the present dilemma has resulted from a failure by many to realize that neither Microsoft nor anyone else can develop extensive software without a reasonable return on the huge investment in time that is necessary."

Gates ended by saying he considered the pirating matter closed. He predicted BASIC would become the foundation for the development of new and exciting application programs for microcomputers.
The BASIC that Gates and Allen had written in those eight frantic weeks at Harvard a year earlier had now spread all over the country, thanks in large measure to the very actions of hobbyists Gates had so bitterly denounced. BASIC had become a de facto standard in the young microcomputer industry. When new computer companies joined the revolution and needed a BASIC langauge, they came to Albuquerque and did business with Gates and Microsoft. And they came with pockets stuffed with money.


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