Co-founder of Microsoft Corp.
"Ultimately, the PC will be a window to everything people are interested in-and everything we need to know."-Bill Gates
Some see him as an innovative visionary who sparked a computer revolution. Others see him as a modern-day robber baron whose predatory practices have stifled competition in the software industry. Regardless of what his supporters and detractors may think, few can argue that Bill Gates is one of, if not the most successful entrepreneur of the 20th century. In just 25 years, he built a two-man operation into a multibillion-dollar colossus and made himself the richest man in the world somewhere along the way. Yet he accomplished this feat not by inventing new technology, but by taking existing technology, adapting it to a specific market, and then dominating that market through innovative promotion and cunning business savvy.
Gates' first exposure to computers came while he was attending the prestigious Lakeside School in Seattle. A local company offered the use of its computer to the school through a Teletype link, and young Gates became entranced by the possibilities of the primitive machine. Along with fellow student Paul Allen, he began ditching class to work in the school's computer room. Their work would soon pay off. When Gates was 15, he and Allen went into business together. The two teens netted $20,000 with Traf-O-Data, a program they developed to measure traffic flow in the Seattle area.
Despite his love and obvious aptitude for computer programming, and perhaps because of his father's influence, Gates entered Harvard in the fall of 1973. By his own admission, he was there in body but not in spirit, preferring to spend his time playing poker and video games rather than attending class.
All that changed in December 1974, when Allen showed Gates a magazine article about the world's first microcomputer, the Altair 8800. Seeing an opportunity, Gates and Allen called the manufacturer, MITS, in Albuquerque, New Mexico, and told the president they had written a version of the popular computer language BASIC for the Altair. When he said he'd like to see it, Gates and Allen, who actually hadn't written anything, starting working day and night in Harvard's computer lab. Because they did not have an Altair to work on, they were forced to simulate it on other computers. When Allen flew to Albuquerque to test the program on the Altair, neither he nor Gates was sure it would run. But run it did. Gates dropped out of Harvard and moved with Allen to Albuquerque, where they officially established Microsoft. MITS collapsed shortly thereafter, but Gates and Allen were already writing software for other computer start-ups including Commodore, Apple and Tandy Corp.
The duo moved the company to Seattle in 1979, and that's when Microsoft hit the big time. When Gates learned IBM was having trouble obtaining an operating system for its new PC, he bought an existing operating system from a small Seattle company for $50,000, developed it into MS-DOS (Microsoft Disk Operating System), then licensed it to IBM. The genius of the IBM deal, masterminded by Gates, was that while IBM got MS-DOS, Microsoft retained the right to license it to other computer makers.
Much as Gates had anticipated, after the first IBM PCs were released, cloners such as Compaq began producing compatible PCs, and the market was soon flooded with clones. Like IBM, rather than produce their own operating systems, the cloners decided it was cheaper to purchase MS-DOS off the shelf. As a result, MS-DOS became the standard operating system for the industry, and Microsoft's sales soared from $7 million in 1980 to $16 million in 1981.
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Microsoft expanded into applications software and continued to grow unchecked until 1984, when Apple introduced the first Macintosh computer. The Macintosh's sleek graphical user interface (GUI) was far easier to use than MS-DOS and threatened to make the Microsoft program obsolete. In response to this threat, Gates announced that Microsoft was developing its own GUI-based operating system called Windows. Gates then took Microsoft public in 1986 to generate capital. The IPO was a roaring success, making Gates one of the wealthiest people in the country overnight.
When Windows was finally released in 1985, it wasn't exactly the breakthrough Gates had predicted. Critics claimed it was slow and cumbersome. Apple wasn't exactly pleased either. They saw Windows as a rip-off of the Macintosh operating system and sued. The case would drag on until the mid-1990s, when the courts finally decided that Apple's suit had no merit.
Meanwhile, Gates worked on improving Windows. Subsequent versions of the program ran faster and froze less frequently. Third-party programmers began developing Windows-based programs, and Microsoft's own applications became hot sellers. By 1993, Windows was selling at a rate of 1 million copies per month and was estimated to be running on nearly 85 percent of the world's computers.
Microsoft solidified its industry dominance in the mid-1990s by combining Windows with its other applications into "suites" and persuading leading computer makers to preload their software on every computer they sold. The strategy worked so well that by 1999 Microsoft was posting sales of $19.7 billion, and Gates' personal wealth had grown to a phenomenal $90 billion.
But with success has come scrutiny. Microsoft's competitors have complained that the company uses its operating system monopoly to retard the development of new technology-a claim Gates soundly refutes. Nevertheless, the U.S. Justice Department filed an antitrust lawsuit against the company in 1998 over its practice of bundling software with Windows.
In November 1999, a U.S. District Court ruled that Microsoft indeed had a monopoly in the market for desktop-computer operating systems. The court also found that Microsoft engaged in tactics aimed at snuffing out any innovation that threatened its dominance of the multibillion-dollar computer industry. A federal mediator was appointed to oversee "voluntary" settlement talks between the government and the software giant. (As of press time, a settlement had not yet been reached.)
Attempting to explain his tremendous success, industry experts have pointed out that there are really two Bill Gateses. One is a consummate computer geek who can "hack code" with the best of them. The other is a hard-driven businessman who, unlike most of his fellow Silicon Valley superstars, took readily to commerce and has an innate instinct for the marketplace. This combination enabled Gates to see what his competitors could not. While they were focusing on selling software, Gates was focusing on setting standards, first with MS-DOS and later with Windows. The standards he helped set shaped the modern computer industry and will continue to influence its growth well into the next century.
As a child, Bill Gates' two favorite games were "Risk" (where the object is world domination) and "Monopoly."
Microsoft's Other Billionaire
Bill Gates has become the singular face of Microsoft, but the company wouldn't be what it is today without Paul Allen. It was Allen who primarily wrote Microsoft's first program, and according to Microsoft veterans, he championed the company's biggest successes, including MS-DOS, Windows and Microsoft Word. But Allen reached a turning point in 1983, when he was diagnosed with Hodgkin's disease.
Forced to rethink his priorities, Allen resigned from his day-to-day duties at Microsoft and resolved to spend more time enjoying the luxuries his great wealth could afford. He pursued the good life for two or three years, during which time the cancer went into remission. Rather than return to Microsoft, however, he plunged into another start-up, founding Asymetrix in 1985, and has since gone on to become one of the country's most successful high-tech venture capitalists.