Farewell Bill Gates

Bill Gates is unusual for not only making a mark on the world, but for making three of them. To PC users, he’s most famous for Windows, which has dominated personal computing for 15 years. Among the general public, he’s famous for being one of the world’s richest men, with a net worth that once exceeded $100 billion. Now he’s focusing on his next great endeavour, which is not only to be the world’s greatest philanthropist, but to transform philanthropy through modern business techniques. One day, millions of people might owe him their lives.

All these things are related, of course, but none was inevitable. Plenty of programmers have developed market-leading software without achieving Bill Gates’ success in business. There are plenty of multibillionaires with a rich diet of fast cars, private jets and football clubs, but they don’t devote their time and money to saving the lives of Third World children.

That’s what Gates will be doing from July. Two years ago, he announced he was going to stop devoting around 80% of his time to Microsoft and 20% to his charitable foundation, and do it the other way round. He’ll still be chairman of Microsoft and its largest shareholder, and will continue working on pet projects. But he’ll be giving up the job he loves in order to do something he now considers more important.

The Gates dynasty

Nobody who spotted the tousle-haired young programmer on the side streets of Albuquerque, New Mexico, in 1975 would have predicted his future. It depended on Gates taking a string of high-risk bets and winning almost all of them. One of the first was dropping out of Harvard to follow the dream of a PC industry that had barely been born. If he hadn’t, you would probably be reading instead about William Henry Gates III, a distinguished Seattle lawyer, just like his father.

As the name suggests, Gates was born into a well-to-do family. His mother, Mary Maxwell Gates, was a director of First Interstate Bank and the United Way charity. Young William was a keen boy scout, and went to Lakeside, an exclusive prep school in Seattle, which gave him a head start in the computer business. At the time, most young teens wouldn’t have had any direct contact with computers, but the Lakeside mothers raised the money to buy a Teletype terminal and computer time on a remote machine. Gates became hooked on programming, taking the time to read and learn from the source code of the programs he was using (open source advocates may well note the irony here).

Gates wasn’t just a talented programmer, he was a commercial one. Information Sciences Inc was impressed enough to hire some Lakeside students to write a payroll program in COBOL, and when he was 14 Gates and his friend Paul Allen launched a company called Traf-O-Data to perform automated traffic counting. They reportedly earned $20,000 in their first year.

That commercial instinct was also evident after Microsoft was founded in 1975. Gates and Allen got into the business by writing a version of the BASIC language for the MITS Altair computer, which they’d never seen. It worked and MITS hired Allen, while Gates dropped out of Harvard and moved to Albuquerque, where MITS was based. Gates soon noticed that many hobbyists were using copies of his BASIC interpreter without paying for it. In February 1976, he wrote an open letter to hobbyists accusing them of theft. “Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid? Is this fair?” Gates asked, rhetorically. “Who can afford to do professional work for nothing?”
Gates didn’t invent the PC software business, but has undoubtedly been a champion in its fight against piracy. He would never have invented open source.

MITS lasted until 1979, when Microsoft moved to the Seattle area, creating languages and porting them to a variety of PCs. From there, it expanded into operating systems, applications, books, mice, keyboards and more. In the early days, Gates is said to have reviewed every line of code and rewritten things he didn’t like. Clearly, he set the technical direction for the company. However, he soon acquired a partner in Steve Ballmer, a buddy from Harvard.

Ballmer had finished his degree and worked for Proctor & Gamble on such hi-tech gadgets as the Coldsnap Freezer Dessert Maker. To get him to join the tiny Microsoft as “assistant to the president” in 1980, Gates had to pay Ballmer $50,000 a year, and hand over 5-10% of the company. That’s why Ballmer is worth a cool $15 billion today.

This caused resentment among the staff, some of whom had worked under Gates’ tight-fisted regime since Albuquerque. The company was run by programmers for programmers, and this guy wasn’t a programmer! With hindsight, however, it could be the smartest appointment Gates ever made.

Slow start

As a company, Microsoft made slow progress initially, going from three employees in 1975 to 40 in 1980. Even after Ballmer joined, it took another five years to reach 1,001 staff, and annual sales in 1985 were still only $140 million. By comparison, after Google’s first decade, it had 10,674 staff and revenues of $10.6 billion.

Part of Microsoft’s problem was that it was beholden to IBM. When in 1980 Microsoft did a deal to supply IBM with PC-DOS for its new personal computer, Big Blue was one of the world’s biggest corporations. Its main concern was that Microsoft might be too small, too fragile a company to deal with, although being “Mary Gates’ boy” helped. As recorded in the book Blue Magic, IBM’s investigating team reported that: “Bill Gates may look like a kid but he doesn’t act like one. He is, without a doubt, brilliant at developing software and programming languages. He’s smart and he knows it – but he’s not a smart aleck. We like him. We can work with him.”

IBM bought Gates’ BASIC for its PC, and when IBM failed to do a deal with Digital Research for its CP/M operating system, he provided PC-DOS as a substitute for a small one-off charge. The actual deal was that Microsoft would “convert SPD-DOS to act as the machine’s operating system”, as Blue Magic puts it, because the base code was coming from another small local company, Seattle Computer Products. What IBM didn’t appreciate was that this piddling little company was going to take over IBM’s rightful monopoly of the PC industry.

Gates thought the next operating system after DOS would be Unix, and Microsoft popularised its own version, Xenix. IBM wouldn’t have it. In search of independence, Gates committed Microsoft to writing applications for Apple’s Mac, telling Business Week in 1984: “The next generation of interesting software will be done on the Macintosh, not the IBM PC.” Gates even tried to get Apple to license Mac OS to make it an industry standard, which would have created a bigger market for Microsoft’s Mac apps, such as Word and Excel. Apple refused, but Gates and others were already creating Mac-like systems for the IBM PC. Digital Research had GEM; Microsoft’s was called Windows.

Still, throughout the 1980s, IBM was Microsoft’s major customer and the customer was always right. The book Gates, by Stephen Manes and Paul Andrews, reveals that “doing things The IBM Way for OS/2 came to be known by the acronym BOGU – Bend Over and Grease Up – and was symbolised by the jar of Vaseline a group of programmers gave Ballmer for one less-than-happy birthday”. In the foreword to the OS/2 Programmer’s Guide, Gates wrote: “I believe OS/2 is destined to be the most important operating system, and possibly program, of all time.”
Things changed in 1990, when Microsoft finally had a viable alternative: Windows 3. This was soon recognised as the de facto standard graphical add-on for DOS, leading to a hockey stick uptake in PC sales. Since OS/2 sales were still, to quote Gates, “dismal,” IBM was no longer Microsoft’s major customer and its love was now directed towards firms such as Compaq and Dell, and consumers. IBM and Microsoft went through an acrimonious divorce in 1990, and IBM spent the next half dozen years trying to kill the upstart. “We’re going to burn Bill’s butt,” IBM told me.

Total domination

Although plenty of people have been rude about Windows, Microsoft has never been accused of acquiring its Windows monopoly unfairly (what the company did when it got there is, of course, another matter). It won in the marketplace against the likes of OS/2, DR’s GEM, IBM’s TopView, Quarterdeck’s DESQview, Berkeley Softworks’ GeoWorks (GEOS), BeOS, Unix and a number of non-PC systems such as Acorn’s Archimedes.

People needed a standard and Microsoft provided one that was cheap, widely available on clone PCs, easy to adopt and had at least a few bits of decent software. And Solitaire.

The success of Windows 3 and, allied to that, Microsoft Office helped turn Gates into a minor public figure. The blockbuster launch of Windows 95 turned him into a superstar. He gave keynote speeches to open the Comdex trade show in Las Vegas every year from 1996, and later started keynoting the Consumer Electronics Show. Sometimes more than 15,000 people would turn up to watch an awkward guy with a scratchy voice and a bad haircut talk about a computer on every desk and in every home. In Vegas! Can anyone imagine people queuing for hours to see Ballmer dance?

Partly, of course, people wanted to be close to the World’s Richest Man. This was something Gates achieved mainly by accident, and it made him uncomfortable. “I wish I wasn’t,” he told The Guardian in 2006. “There is nothing good that comes out of that.” Gates achieved his unwanted distinction because he never wanted venture capital, and he didn’t want to go public, putting it off until 1986. At that point, Gates, Allen and Ballmer – unlike most entrepreneurs – still owned most of the company. When Microsoft’s share price rocketed following the success of Windows, they all became absurdly rich.

But life wasn’t all roses. The IBM divorce – which divided the code and appeared to divide the PC market between Windows and OS/2 – attracted the attention of the US Department of Justice. Microsoft was investigated and arrived at a settlement in 1995 that specifically allowed it to add features to the operating system, although not to tie other products to it. The agreement was a disaster for all concerned. Having built Internet Explorer into Windows, Microsoft faced another antitrust suit in 1997. Microsoft took a legal hammering, and numerous security issues meant users were made to pay, too.

The case tarnished Gates’ image, particularly when he was shown on video being evasive under questioning. Previously, Gates had been seen as running an exciting company that was bringing computing to a wider public. In businesses, it was helping to liberate users from the clutches of the Evil Empire, the giant mainframe-orientated IBM Corporation. Now Microsoft was the Evil Empire.

This must have come as a shock because Gates still liked to see Microsoft as the scrappy underdog, running scared to cope with the challenges of rivals and the might of IBM. And notoriety can’t have pleased the quiet family man whose idea of fun is playing bridge with his richlist buddy, Warren Buffett.
Either way, it looks as though Gates decided he’d had enough, and Steve Ballmer became Microsoft’s chief executive officer in January 2000. Gates took on a lower-profile role as chief software architect, a made-up job title that reflected his preference for the programming side of the business. That year, he also changed his philanthropic Gates Foundation into the Bill and Melinda Gates Foundation.

In spite of Microsoft being under the constant close supervision of the US Justice Department, and attacks by the European Commission’s Neelie Kroes, the business hasn’t done badly under Ballmer. Microsoft’s turnover for the financial year ending in 2000 was $23 billion, and in 2007 it was $51 billion. With that track record, Ballmer looks virtually invincible.

Life without Bill

But it’s Gates who deserves the lion’s share of the credit for turning a 4K BASIC and an accidental deal for DOS into a sustainable global corporation. And it’s high time he left that corporation to plough on without him, according to Gartner analyst Brian Gammage. “Microsoft stood at the centre of the move to [software] integration,” he says. “Now we’re kind of unbundling software and turning it into something more modular: it’s all about componentisation instead of integration. The business rules are changing, and perhaps we need different kinds of general for different kinds of battle.”

Kevin Werbach from the Wharton Business School agrees. “Microsoft needs Bill Gates to move on as much as Gates needs to move on from Microsoft. It’s not that Gates doesn’t appreciate the move from PC software to network-based services – he gets it as well as anyone. It’s that Microsoft needs an infusion of new leadership to break out of its old patterns and embrace the new environment. That’s why it brought in Ray Ozzie.”

Even Ballmer admitted, at the Mix08 conference, that he didn’t know how it was going to pan out. But he did say that, as smart as Bill is, “the notion of having one all-knowing, all-seeing” leader had gone. “We need a different way to get harmony and synergy and for the whole to be greater than the sum of its parts,” he said. That will come from Ozzie, Craig Mundie, Ballmer and “five or six” others working together.

Yet, not everyone agrees they will find it easy to replace Gates. “I don’t see Ozzie as being as good as Bill was on the technical side, nor do I see Ballmer as being as effective as Bill was on the business side,” says analyst Robin Bloor. It’s certainly hard to imagine Gates gambling Microsoft’s cash to acquire a struggling company like Yahoo.

And at least one important thing will be missing: the famously scary BillG Review. Although Gates could no longer keep an eye on most of the company’s software, he could still delve deeply – and critically – into parts, as Fog Creek Software’s Joel Spolsky described in his entertaining story, My First BillG Review (www.joelonsoftware.com/items/2006/06/16.html).

As “Mini-Microsoft”, a Microsoft employee who tells the inside stories on his blog, argues: “What is life at Microsoft going to be without upcoming BillG Reviews to get all stressed out about? Nothing helped teams calibrate down to what mattered more than a BillG Review. It’s as if a high standard is being removed and replaced by… what? Nothing. Emptiness. Some organisations might have a moral compass; BillG has served as our IQ compass. No offence to Mr Ozzie, but there’s just no way to fill those shoes.”
Others believe Bill will be missed for more than the odd rollocking. “Gates’ legacy is immense,” says Werbach. “It’s hard to remember just how improbable it was that the operating system would become the economic centre of the computer industry. The operating system was a low-level utility for scheduling resource allocation, which Microsoft turned into the engine for perhaps the most successful company in the history of capitalism.

“Gates is also the model for all of today’s leading internet entrepreneurs: even once he was successful and fabulously rich at an early age, he didn’t slack off because he kept seeing new challenges for the company. One can only hope the tech billionaires who came after Gates follow in his footsteps in trying to make the world a better place as well.”

Next: Bill’s 10 biggest hits

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