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


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In negotiating with Tandy to supply BASIC for the TRS-80, Gates had met John Roach, at the time a vice-president in charge of marketing. He and Gates hit it off. Roach became something of a mentor to Gates, teaching his young and eager student business and marketing strategy. Within four years, Roach became the president of Tandy.

Not only did Microsoft hook up with Tandy in 1977, but the company also licensed BASIC 6502 to Apple for the Apple II computer. Microsoft had begun to set the industry standard with its software. And that’s exactly what Gates had wanted, what he pushed for in meetings with his programming team. "We Set the Standard" became the company’s motto in Albuq-ueque. It represented Gates’ basic business philosophy. Of course, trying to be first out of the gate with a new software product just to create an industry standard sometimes caused problems. Too often Gates set unrealistic goals for product development. Deadlines were missed, products weren’t always well-designed, and contracts had to be revised due to unforeseen obstacles or delays.
"Bill’s approach, and you can still see it now in things like Windows, was always to go for creating a standard, to get the market share," said Wood. "He just hated to turn down business. If it meant we had to drop our price to get the business, he was typically much more willing to argue that we do that....
"In Albuquerque, whenever we had pricing discussions or arguments, the way we would decide how much to charge an OEM customer is we would sit down and say, okay, what are they asking for? How long is it going to take us to do that? Of course, we would always underestimate that. Then we’d sit down and say, okay, how much do we think these guys will pay? How much can we get out of these guys? How much is reaonable to expect them to pay? How bad do we want this business? Bill would always be arguing for a lower price and a more aggressive schedule. ‘Oh, we can do that in three months. Let’s just charge them fifty thousand because we really want to get the contract.’ Paul would argue for a higher price, saying, ‘Let’s try and get more money from these guys.’ We usually ended up somewhere in between."

Although Gates spent most of his time taking care of business, he still involved himself with some of the technical work at Microsoft. He loved programming and would compete with his employees, occasionally participating in some of the informal contests the Microkids held to see who could write a program in the fewest lines.

In the book Programmers At Work, Gates is quoted as saying: "In the first four years of the company, there was no Microsoft program that I wasn’t involved in actually writing and designing. In all those intial products, whether it was BASIC, FORTRAN, BASIC 6800 or BASIC 6502, not a line of code went out that I didn’t look over."
Gates acknowledged his style rubbed some of his programmers the wrong way. "It’s kind of painful sometimes if you have somebody else working on the project. They never code stuff exactly the same way you like to see it coded. I remember when we were working on BASIC, I’d go back and recode other people’s section of code, without making any dramatic improvements. That bothers people when you go in and do that, but sometimes you just feel like you have to do it."
It was bad enough that Gates rewrote other programmers’ code. But at least once he also got credit for their work. When Microsoft published the MS-DOS Encyclopedia, the preface to this huge technical manual credited Gates for developing Standalone Disk BASIC. In fact, the program was developed by Marc McDonald for National Cash Register in 1977. McDonald had since left the company, but when he read the preface he fired off a blistering letter to Gates. "When I saw that in the DOS Encyclopedia," McDonald recalled, "I said to myself, ‘What is this bullshit!?’ Bill knew damn well I did that." The Disk BASIC developed by McDonald used a revolutionary file management technique known as the FAT, or file allocation table. According to McDonald, Gates did not write any of the code for Standalone Disk BASIC. It was much faster and more efficient than the Disk BASIC Gates wrote for the Altair while holed up for five days at the Hilton Hotel in Albuquerque.

"Bill has a very convenient memory," McDonald said of Gates. Subsequent editions of the encyclopedia gave McDonald, rather than Gates, credit for Stand-alone Disk BASIC. Before he left Microsoft, McDonald helped develop a version of Standalone Disk BASIC that was widely used on Japanese computers, as well.

Gates began to go aggressively after the Japanese market in 1977 and got a huge jump on the competition. "I went into Japan only two years after I started Microsoft knowing that in terms of working with hardware companies, that was a great place to be," he said. "A lot of great research goes on there. And also, it was the most likely source of competition other than the U.S. itself. I didn’t want to leave that market so that companies would grow up using the domestic market and then come and be that much stronger to compete with us on a worldwide basis." (Today, Japan is Microsoft’s second largest market, after the U.S.)
The point man for Microsoft’s push into Japan and the Far East was Kuzuhiko Nishi, a silver-tongued salesman and hyperactive computer whizkid the same age as Gates. Although physically short and chubby, Nishi was brilliant and flamboyant. He would become known as the "Bill Gates of Japan." For a while he and Gates were as close as brothers.
Their backgrounds were remarkably similar, and they travelled parallel paths on opposite sides of the planet until a fateful meeting in Dallas, Texas in 1977. Both came from well-to-do parents, developed an early passion for computers, and dropped out of college to form their own companies. Nishi grew up in the Japanese port city of Kobe, where his family founded a private girls’ secondary school. At age nine, he would sneak into his father’s study late at night and play with an old Wang computer. By the time he entered prestigious Waseda University, he had become as obsessed with computers as Gates. He dropped out after two years to start a computer magazine, but he sold the magazine after a dispute with the publisher. He then started another publication, ASCII, which would become the largest software company in Japan.

His friendship with Gates and partnership with Microsoft began in early 1977, when Nishi placed a call from Japan to New Mexico to talk with "the people who designed BASIC." Several companies in Japan were thinking of entering the microcomputer field and Nishi wanted to help design their computers and supply the software. He and Gates talked for a while, and Nishi offered him a first-class ticket to fly immediately to Japan to talk business. Gates explained that he could not get away, but they agreed to meet for an hour at the upcoming National Computer Conference in Dallas, Texas. When they met, they talked for eight hours. Gates had found a computer soul mate who shared the same vision of the personal computer as he and had the same intensity and energy. Afterwards, they signed a one-page agreement to'do business together, and Nishi became Microsoft’s first Far East agent. That agreement would soon produce millions of dollars for both Nishi and Microsoft.

The 1977 National Computer Conference had been cochaired by Portia Isaacson (who years later would join Microsoft’s board of directors). She had bulldozed NCC organizers into allowing microcomputers into the Dallas show as well as the "real" computers. Booths displaying the microcomputers were located downstairs in a hot, miserable hall without windows, while the "real" machines were located in an air-conditioned hall upstairs. Most of the attendees at the convention, however, were to be found downstairs in the small hall.
"It was really interesting," said Nelson Winkless. "It finally penetrated the computer establishment that these things were for real."
When the show was over, a number of industry people took the same flight to Albuquerque to do business with either MITS or Microsoft. The flight was two hours late, so the microcomputer group, including Gates, passed the time on the airport terminal floor by playing a dice game called "Petal Around the Rose." Gates had not played the game before, but he was eager to try his competitive hand. The game had been developed by students at the University of Southern California. Five dice are thrown, and the player is told three things: the name of the game is "Petal Around the Rose," the answer is always even, and there is a correct answer for each throw of the dice. The player is told nothing else. If someone gets the right answer five times in a row, it’s considered prima facie evidence they understand the game and they are then sworn to secrecy.

It’s a difficult game. Some catch on after only a few throws of the dice, others need weeks, and a few never get it. Frustrated players falling into the last category have resorted to running computer simulations. Gates was one who never figured the game out. He did get the right answer five times in a row, but not because he understood what he was doing. He actually didn’t have a clue. But with his photographic memory, Gates was able to remember each correct answer from a previous roll by another player. With five dice, it was quite a feat of memorization.

Nelson Winkless realized that Gates was faking it when he picked up a piece of paper Gates inadvertently dropped in the aisle of the plane near his seat. On it Gates had written, "peddle around the roses." Knowing the proper spelling of the name of the game was essential to solving the puzzle. His poor spelling guaranteed he would never figure it out.
The computer fairs and trade shows were very important to young companies like Microsoft. They were an opportunity to see what was happening in the industry, exchange information, promote catchy new products, meet people face to face, and do some valuable networking. They could also be a lot of fun. At a trade show in Las Vegas in 1977 that he attended with David Bunnell and Richard Weiland, Gates spent the night at the craps table. About four o’clock in the morning, with Gates down a couple thousand dollars, Bunnell and Weiland decided to go back to their hotel; Gates, however, had locked the car keys in the trunk of the rental car. A locksmith had to be summoned to cut a hole in the trunk to get it open, which did not please the employees at the car rental agency, who charged Gates an extra $300. "He thought it was very funny," said Bunnell.
They rented a private plane for the flight back to Albuquerque. Weiland flew, Bunnell navigated, and Gates curled up in the back seat, pulled a blanket over his head, and went to sleep.

The character and flavor of Microsoft today is not all that different from the character of the company in suite 819 at Two Park Central Tower in Albuquerque in 1977. The personality of the company very much reflected its youthful leader. Although the company has grown since these formative years, the corporate culture is still much the same: the work ethic, intensity, hard drive, creativity, youthfulness, and informality were woven into the very fabric of Microsoft from the start. People wore what they wanted to work, set their own hours, and had a variety of outside interests. But they were part of a team, a family. They shared a common goal and purpose, and it emanated first and foremost from Gates—work hard, make better products, and win.

"We were just having fun and working really hard," said Steve Wood, who took over as general manager in the fall of 1977 when Rick Weiland left. "When I think about it, I’m amazed. You look back then and we were just five or six people. Now, Microsoft is nearly a two-billion-dollar-a-year company." In its first year, as noted previously, Microsoft made about $100,000. By the end of 1976, revenues had more than doubled. Even though the court restraining order sought by Ed Roberts and Pertec prevented Microsoft from licensing its popular 8080 BASIC for much of 1977, there was still enough money coming in for the company to hire several more people, including another full-time programmer, Bob Greenberg, whose father was president of Coleco Industries, an electronic game and toy company back East that was just getting into the microcomputer field. Also joining the Microsoft team in 1977 was Andrea Lewis, who had helped David Bunnell run Computer Notes over at MITS. She was hired by Microsoft to write the technical manuals for the company’s software products. Chris Larson and Monte Davidoff came back for the summer as well.
One of the best hires Microsoft made in 1977 turned out to be Miriam Lubow, who didn’t know a thing about computers and had never heard of software. Lubow was a 42-year-old mother of four who spotted a "help-wanted" ad in the local paper for a secretarial job at Microsoft. She became the office "den mother," who held everything together and took care of the young programmers almost half her age. Her duties included typing, filing, bookkeeping, purchasing, and payroll.

Gates had been away on business when Lubow interviewed for the job with Wood. One morning, after only a few days at work, Lubow rushed into Wood’s office with the information that some "kid" had just zipped past her desk and gone into the office of "Mr. Gates" and was playing with the computer terminal. That kid, Wood told her, was Gates. A few minutes later, Lubow came back in to see Wood.

"How old is he, Steve?"
"Twenty-one," Wood replied.
Lubow took a special liking to Gates. She became his surrogate mother, reminding him to get an occasional haircut and making sure his hair was combed when he had important visitors. Worried that he never seemed to eat, she brought him his favorite food, hamburgers, for lunch. She also tried to make sure he got to the Albuquerque airport on time for his business trips.
Gates was travelling a lot by that time, making deals with OEM customers around the country. His habit was to leave the office for the airport, which was only a couple miles away, as close as possible to his departure time—never more than ten minutes and usually closer to five. He often caught the plane just as the flight attendant was closing the door. It was a game he played, one that he still plays today. Gates simply liked pushing things to the edge. "That’s where you most often find high performance," he once said. "I don’t like to waste time. I have a very full schedule, and I travel enough that I think I am very efficient at getting to the airport and understanding how much time to set aside. I’m not the kind of guy who goes an hour before the flight leaves, let’s put it that way. That would seem like a waste of time." There is also the challenge of beating the clock. And winning. Lubow began to tell Gates that the departure time of his flight was 15 minutes earlier than it actually was so she would not have to worry about him.
Gates often would be gone two or three days negotiating deals and selling the company’s software. He would then return to Albuquerque, work all night, and go to a meeting the next day. Lubow would sometimes find him sleeping on the floor of his office when she came to work.

"He could revive pretty fast," one of the Microkids recalled. "It would just take a cup of coffee or something like that and he’d be into whatever the meeting was about. It was a good thing he was only 21."

The atmosphere at Microsoft was extremely casual unless out-of-town "suits" were expected for an important meeting. All the employees, including Lubow, usually took off their shoes and went around barefoot. The guys wore jeans and sport shirts. There was always a supply of free Coca-Cola around, a tradition that continues at Microsoft today. (The company provides free soft-drinks, milk, and juice to its more than 8,000 employees.) There were personal computers of various sorts around the office and boxes scattered everywhere—companies shipped their hardware to Microsoft to be fitted with software, and later the hardware was shipped back in the same box. Typically, programmers would show up for work by late morning. Because the timesharing computer system was so slow, they wrote code on yellow legal pads and made sure it was reasonably well-organized before typing it into a terminal. Only four of the terminals were connected to the PDP-10 in the school administration building the company shared time with, so not everyone could work at the same time. Once or twice a day, an employee went down to the school to pick up computer printouts or "listings." Any program debugging had to be done directly on the PDP-10, and once the program was working properly it was downloaded to the computers at Microsoft.
Although the office atmosphere was casual, it could also be confrontational. Gates was very demanding and the work was intense.
"Bill was always pushing," said one programmer. "We’d do something I thought was very clever, and he would say, ‘Why didn’t you do this, or why didn’t you do that two days ago?’ That would get frustrating sometimes."

But the Microkids expected to be challenged. And they expected to be able to challenge Gates. In fact, he wanted them to argue with him. His confrontational style of management helped Microsoft maintain its edge, its mental toughness. It made those who worked for him think things through. These are qualities that continue to distinguish Microsoft to this day. It is a culture that never gives employees a chance to get complacent because as soon as they do, someone is going to challenge them. Gates was not afraid to change his mind if someone made a convincing argument, a quality that Steve Wood came to admire. "Bill is not dogmatic about things. He’s very pragmatic," Wood said. "He can be extremely vocal and persuasive in arguing one side of an issue, and a day or two later he will say he was wrong and let’s get on with it. There are not that many people who have the drive and the intensity and the entrepreneurial qualities to be that successful who also have the ability to put their ego aside. That’s a rare trait."

Because the Albuquerque school computer would get busy in the afternoon, and the response time was so terrible, most of the Microkids worked late into the night. The work ethic at Microsoft did not come from Gates—it was self-imposed. There was an unstated expectation that the kids would work as many hours as it took to get the job done.
"There were times, not that infrequently, that I’d be going home for a few hours of sleep about the time Marla (Wood’s wife) was getting up," recalled Wood. "We’d often be there 24 hours a day, trying to meet a deadline for another OEM or getting a new product out. We noticed the long hours, but it wasn’t a burden. It was fun. We weren’t doing it because someone was standing over us with a whip saying, ‘You guys have to do this.’ We were doing it because we had stuff to do and we had to get it done." But no one could sit in front of a computer terminal all night without a break. Gates and Allen became late-night movie buffs. Albuquerque was no cultural Mecca, but one thing it did seem to have was movie theaters, more in fact per capita than any other city in the country. Gates and Allen saw every new movie that came out. Murder mysteries were their favorites, and they competed to be the first to figure out "whodunit."
"We’d go out to see a movie and then go back to work again," said Allen.
Late night was also the time Gates hit the back roads of Albuquerque in the green Porsche 911 he had bought with some of the profits from Microsoft. Gates liked to drive fast, testing the limits of himself and his machine. It was his way of relaxing or thinking out a problem. Paul Allen relaxed by playing his guitar.

The Mustang Gates owned in high school had an automatic transmission. Neither Gates nor Allen knew how to drive a stick-shift when they first arrived in Albuquerque. They learned in a parking lot, after Allen went to a Chevy dealership and bought a Monza. The two spent an entire afternoon trying to learn to shift gears without making the Monza lurch forward and die. "It was hilarious," recalled Allen.

Not long after he bought the Porsche 911, Gates took it back to the Albuquerque dealer to complain that it would only do 125 miles per hour—not nearly as fast as the manual promised. Gates had a very heavy foot. Miriam Lubow worried that she would pick up the newspaper one morning and find that Gates had been arrested for outstanding speeding tickets. She constantly found tickets for him in the mail.
Gates told a friend that he was hauled off to jail once when he was stopped for speeding in Albuquerque. Allen was a passenger in the Porsche, and he and Gates got out of the car and tried to confuse the officer about who was actually driving. As Gates was the registered owner, he was taken to jail, and bail was set at a thousand dollars. It so happened that Gates had more than enough money on him to post bail: immediately. For several days afterwards, police tailed Gates around town, thinking he was a drug dealer. They couldn’t believe someone as young as Gates could drive a Porsche, have a wallet full of cash, and own a legitimate business.
Everyone who knew Gates in Albuquerque had at least one hair-raising adventure with him and his beloved Porsche 911. "Riding with Bill was a frightening experience," remembered Eddie Curry. "He never went anywhere at less than 80 miles an hour." Curry, who drove a lumbering station wagon, attempted to follow Gates out of Microsoft’s parking lot one day for a meeting across town. "He‘went roaring out, and I went roaring out after him when suddenly I realized I was in the middle of an intersection driving an old Chevrolet, and he was rolling down the road in a Porsche, and I was going to get killed because I couldn’t get out of the way of the traffic fast enough."

David Bunnell had a wild ride to the Albuquerque airport with Gates. "We were on a street where the speed limit was 35 miles an hour, and we were doing more than 80."

One day, Gates picked up an important Japanese visitor at the airport and drove him downtown to Microsoft’s office. "He was white, just white," recalled Allen. "He asked me, ‘Mister Gates, he always drive so fast?’ "
With Gates, everything turned into some form of competition, and that included his skills as a driver. He and Allen had regular contests to see who was first to arrive at an Albuquerque destination. Since Allen drove a Monza, a much slower car, he got very good at figuring out back-alley shortcuts around town. "When Bill drives a car, he really likes to test the limits of what it can do," said Allen. "But he’s an incredible driver. He would push things to the limit but he was always in control."
During the summer of 1977, Gates often went out at 3:00 a.m. after hours of programming and drove around for an hour with his friend Chris Larson. One of his favorite roads was a narrow, twisting two-lane ribbon of highway a few miles east of town off Interstate 40 that led to an abandoned cement plant. Here, the finely tuned engine of the green Porsche could often be heard whining into the desert night as Gates smoothly negotiated one curve after another with each high-pitched shift of gears. On one of these wild summer rides with Larson, however, Gates did not maintain control. He spun out, and the Porsche crashed into a dirt embankment. "The way Chris described it," said Steve Wood, "they were going about 120 miles an hour [forward] and then they were going 120 sideways." Neither Gates nor Larson was injured, and there was only minor damage to the car.

Larson was Gates’ partner again on late-night shenanigans at a road construction site east of Albuquerque in the Sandia foothills, where unsuspecting workers would leave the keys in the heavy equipment when they went home for the day. Gates and Larson would sneak into the site, and by trial and error they learned to operate the complex machinery and drive it around the site. Usually, it was by error. Gates once came within a few inches of backing over his Porsche with a bulldozer. After they mastered the machinery, there was the usual friendly competition. One night, Gates and Larson held a bulldozer race, engines revving, stacks belching black smoke, determined to find out whose machine was faster. Neither would claim to be the winner. The bulldozer race became part of Microsoft folklore.

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