In 2008, Gates told PC Magazine that ‘I really had a lot of dreams when I was a kid’. His reluctance to ever put limitations on his imagination proved invaluable when it came to launching a business in a sector as unmapped as the software industry was in the 1970s.
Gates never let fear of the unknown hold him back or constrain his ambition. It is perhaps telling that one of the early suggestions he and Allen considered for their company name was Unlimited Limited.
While it may have been Apple that coined the phrase ‘Think different’, it was a philosophy equally shared by Gates at Microsoft. ‘Our business strategy from the beginning was quite different than all the computer companies that existed when we started,’ Gates told an audience at San Jose State University in 1998. ‘We decided to focus just on doing the high-volume software, not to build hardware systems, not to do chips, just to do software …’ Strange as it might sound in this age of myriad software developers, such a move took enormous courage, but Gates did not flinch for a moment.
While pragmatic and occasionally ruthless in his business dealings, he did not get into the game simply to make fast bucks. Like most truly great entrepreneurs, he has always worked to a long-term strategy. In his 2008 PC Magazine interview, he continued, ‘We [Microsoft] have a longer time horizon than anyone else.’ Furthermore, although a natural businessman, he regards himself as a scientist and innovator first. In 1994, for instance, he said in an interview with Playboy magazine, ‘I devote maybe 10 per cent to business thinking. Business isn’t that complicated. I wouldn’t want to put it on my business card.
I’m a scientist.’ Two years later, he was quoted in Randall E. Stross’s The Microsoft Way as saying, ‘… the future is what matters, which is why I don’t look back too often.’
It was his mix of determination and vision (allied with Allen’s, too) that saw Microsoft establish a foothold in the emerging industry during the late 1970s and early 1980s. The pair quickly built a team of nine core employees and by 1980 the company had a staff of thirty-two. Deals with the likes of MITS, Commodore and Apple ensured there was plenty of work for busy hands. Then Gates made the deal of his life (see here) with the then undisputed giants of the computer industry, IBM. At the time, IBM had a workforce in excess of 300,000, giving a ratio of approximately 10,000 staff to each one at Microsoft. It was a commercial engagement of David-and-Goliath proportions, yet Gates had the foresight to demand terms that would see Microsoft eventually outstrip IBM in terms of market value many times over.
In 1983, Time magazine broke with its custom of anointing a ‘Person of the Year’ by instead choosing the computer as ‘Machine of the Year’. Gates and Jobs were the individuals most identified with the revolution then in full swing. A year later Gates featured on a Time cover for the first time in his own right. Two years after that, Microsoft went public, propelling Gates towards becoming the youngest billionaire in the world. It was an extraordinary rise, from naval-gazing college dropout to global icon in just over a decade. Yet it was not, perhaps, anything beyond what Gates had hoped for himself back in 1975, when he and Allen discussed their dreams for the future, epitomized in the quotation at the beginning of this section: ‘a computer on every desk and in every home’.
What had appeared mere sci-fi to some was rapidly turned into reality by Microsoft.
And still Gates aspired to more. The introduction of the graphical Windows operating system in 1985 (imperfect as it was in its early guises) alongside the Office suite of software applications (including Word for word processing and Excel for spreadsheets) saw the company go from strength to strength. By the mid-1990s it had secured utter world domination (a term used advisedly) of the software market and then, albeit a little belatedly, rode the internet wave. Such success allowed for yet more dreaming. ‘We can afford to make a few mistakes now, and we can’t afford not to try,’ he was quoted as saying by Brent Schlender in Fortune in 1995. ‘… Everything’s about big horizons at Microsoft now. But, hey, we can tackle big horizons. We’re expected to tackle big horizons. We love big horizons.’ A taste of his vision of the future was reported in the same publication by Randall Stross two years later: ‘The future of computing is the computer that talks, listens, sees and learns.’
In more recent years, Gates has brought the same level of vision to his philanthropic activities and to addressing the biggest challenges our planet faces. Consider his take on fighting climate change by developing renewable energy sources, as reported by Wired in 2011: ‘If you’re going for cuteness, the stuff in the home is the place to go. It’s really kind of cool to have solar panels on your roof. But if you’re really interested in the energy problem, it’s [massive solar plants] in the desert.’ The words of a man who never dreams small.
MICROSOFT’S BIG DEAL
‘I was the mover. I was the guy who said, “Let’s call the real world and try to sell something to it.”’
BILL GATES, QUOTED BY JAMES WALLACE IN HARD DRIVE, 1992 In 1980, Gates struck the deal that elevated Microsoft from an emerging player in the software industry to a global super-company. From annual turnover of around $2.5 million, it would soon be doing business in terms of billions.
The opportunity came when the world’s most recognizable name in computers at the time, IBM, decided to dip its toe into the personal computer market. There is no doubting that IBM was quite brilliant in its traditional areas of expertise: providing technological hardware for businesses and large organizations. But this was something entirely different.
By the 1980s the company was such a giant that it struggled to be quick and agile – two characteristics that the youthful Microsoft had in spades.
It was an open secret in Silicon Valley that IBM was struggling to create a satisfactory operating system for its personal computer. Gates and the Microsoft team had inevitably come on to their radar and the IBM management decided to approach them as they sought an out-of-house solution. Gates might still have been only in his mid-twenties, but they recognized him as an emerging master in their sector, blessed with an old commercial head on young shoulders.
It is said that when Gates first met with the suited-and-booted IBM team, he turned up in a rather dishevelled state, sporting trademark slacks and a cotton-knit shirt. Everyone felt suitably awkward so that the next time they met, Gates broke with tradition to wear a shirt and tie while his counterparts opted to dress down Gates style! Regardless of their disconnect when it came to clothing, Gates did his best to offer them useful advice. In the first instance he suggested IBM approach one of Microsoft’s regular commercial partners, Digital Research Inc., since Microsoft did not have an operating system of its own to offer them.
Sadly for Digital Research, but not for Gates and his team, negotiations fell through, so the IBM execs returned to plead for help from Gates. He agreed to develop an operating system on their behalf. Just as with the MITS deal a few years earlier, Gates had promised something not yet in his possession, so adopted a suitably pragmatic approach as he sought to keep up his side of the bargain.
He contacted a Seattle programmer by the name of Tim Patterson, who had recently created an innovative operating system called Q-DOS (Quick and Dirty Operating System). Gates paid him a one-off fee for rights to the product. Though estimates differ on the exact amount, it is thought to have been in the region of $50,000, which was surely among the best money Gates ever spent (especially given that it now barely even counts as small change in his world). Microsoft then set to work on recon figuring Q-DOS for IBM’s needs, and unveiled it as MS-DOS (Microsoft-Disk Operating System). Relieved, IBM signed it up and marketed it as PC-DOS.
Gates knew the pressure IBM was under and if he had been of different character might have attempted to extract the greatest possible immediate financial benefit from them.
Instead he took a quite different approach, anchored in his belief that the real rewards would come by engineering the deal to establish a dominant share of the operating systems market. Therefore, he struck a bargain in which IBM got MS-DOS for a relatively low, one-time up-front fee. Crucially, though, Microsoft retained copyright of the product.
Gates was taking a punt, but he wagered that lots of companies would begin manufacturing machines on the IBM model and when they did, he would have a ready made operating system solution to sell them. It was a calculated risk, and it paid off handsomely.
The IBM PC retailed with a choice of three software packages, of which PC-DOS was one. By letting IBM have it at little expense, it was also the cheapest of the options. This was critical to Gates’s long-term plan, since he knew ultimate success relied on first becoming the IBM PC package of choice. Sure enough, its low price point helped PCDOS assume top spot among consumers. Given its clout in the computing field, IBM inevitably shifted a lot of units and sales escalated, with Microsoft’s name spreading as the go-to software people. PC-DOS became the industry standard. Furthermore, just as Gates hoped, other manufacturers (over 100 of them) soon came knocking to licence MS-DOS.
Meanwhile, other major hardware manufacturers including Sony, NEC and Matsushita asked Microsoft to provide them with their own bespoke systems. In monetary terms, the company’s sales more than doubled between 1980 and 1981. Before long, Microsoft was far and away the leading name in the booming global software business.
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