William Gates III
updated 08/20/1990 AT 01:00 AM EDT
•originally published 08/20/1990 AT 01:00 AM EDT
In 1974, when the world's first commercial microcomputer was unveiled in a hobbyists' magazine, Gates and his boyhood friend Paul Allen immediately saw the potential of the thing, and Gates dropped out of Harvard at age 19 to co-found the world's first microcomputer software company.
All these efforts have paid off. Gates's tennis game improved. He is mastering African geography. And his stock in the Microsoft Corp., of which he is chairman and chief executive officer, is worth $2.5 billion. A phenomenal burst of growth has taken the company from 38 employees in 1980 to some 5,000 today, and due to Gates's generous stock option program, a number of his workers are paper millionaires.
Few of them put in longer hours than the boss. Gates has happily devoted his life—in year after year of seven-day weeks and 15-hour days—to building Microsoft from a shaky student venture into a billion-dollar-a-year giant. A brilliant programmer, he wrote key portions of early Microsoft software and still spends much of his time with company programmers, critiquing their work and contributing his own ideas. But unlike such other computer whiz kids as Apple's Steve Jobs and Mitch Kapor of Lotus, who were not entirely comfortable in the corporate world. Gates is also a masterful business strategist. In the early days of the PC industry, when companies were opening and folding daily (12 of his initial clients went bust). Gates's conservative administration kept Microsoft solvent, with enough surplus cash to finance its own growth. Gates also forged a series of alliances with computer hardware manufacturers, most notably IBM, that gave him a powerful role in shaping—and getting a big share of—the microcomputer software industry.
Today Microsoft's MS-DOS ("disk operating system"—the program that controls a computer's basic functions) is used with 50 million IBM-compatible desktop computers. The company is also a leader in applications software, with such entries as Microsoft Word, a word-processing program, and Excel, a spreadsheet. In May, after earlier versions faltered, it brought to market Windows 3.0, a wildly successful program that gives IBM-compatible machines the ease of use of the (generally more expensive) Apple Macintosh. "One of our big problems," says recently retired Microsoft president Jon Shirley, "is what to do with all the cash we generate."
Success, or perhaps advancing age—Gates is, after all, now pushing 35—has slowed him down a little. He rarely pulls all-nighters at the office anymore. He takes weekend evenings and most Sundays off. Last winter he even took a Caribbean vacation, although he takes pains to point out that the trip involved only five days away from work. "There were nine days," he concedes, "[but] with weekends on the ends."
For Gates, nothing is as much fun as running Microsoft. "It's a pretty neat job." he says in his typically youthful lingo. His enthusiasm for computers and software is still that of a bright 13-year-old—which is what Gates was when the Mothers' Club at his private school in Seattle bought time on a mainframe computer for the students. Intrigued, Gates, a math whiz, could soon write a program to play ticktacktoe.
He and like-minded friends, including Paul Allen, began hanging out at a local computer company, where they were so eager to learn how the machines worked that they would root around for scraps of paper left by programmers. "Paul would hoist me up on the garbage cans, and I'd get the notes out with the coffee grounds on them and study the operating system," Gates recalls. "We were total addicts," Allen says.
But unlike his hacker friends, Gates—whose father is a prominent Seattle attorney and whose mother sits on the boards of the University of Washington and several corporations—had a head for business too. "I was the mover," Gates says. "I was the guy who said, 'Let's call the real world and try to sell something to it.' " He and his friends wrote a payroll program for a computer time-sharing company, then started a company called Traf-O-Data, which analyzed traffic patterns for city and county governments. Traf-O-Data hired seventh graders to transcribe the information from those black hoses laid across highways. Then Traf-O-Data executives (including Gates, age 14) fed the data into a computer.
During the last half of his senior year in high school, Gates got permission to forgo classes in favor of working 170 miles away as a full-time, $30,000-a-year computer programmer at TRW. He drove home for graduation and then, two months later, set off for Harvard, where he went into a bit of a funk. "At my high school I was kind of unique," he says. At Harvard he wasn't: there were lots of very bright kids around. Gates had thought he might become a math professor—until he met other students who were better at math than he was.
Gates passed his time playing pinball, bridge and poker in all-night games where players could win or lose $2,000. He speaks gleefully of the economics exam he aced, through a last-minute burst of studying, without ever going to class—and can even remember the questions. He also earned a reputation as an eccentric. "I heard about this crazy guy," recalls Steve Ballmer, a dormitory neighbor who is now a senior Microsoft executive. "He never put sheets on his bed. He went home for Christmas vacation with the door to his room open, the lights on, money on the desk, the windows open, and it was raining, and Bill was in Seattle."
In December 1974 Paul Allen, who was working near Boston, spotted an article about the world's first home computer, the Altair 8800, in Popular Electronics. By today's standards it was laughably primitive, with only 256 bytes of memory (most computers today come with at least 640.000). It also had no software—programs that would enable it to do something. Seeing an opportunity, Gates and Allen called the manufacturer, MITS, in Albuquerque, N. Mex., and told the president they had written a version of BASIC, a popular computer language, for the Altair. When he said he'd like to see it, Gates and Allen, who had written nothing, started working night and day in Gates's dormitory room. Making the program fit in the Altair's tiny memory was a major challenge, but Gates, who wrote most of it, succeeded. "That's the coolest program I ever did." he says. "We just had this book that described the machine. If we had read the book wrong, or the book was wrong, we were hosed."
Instead, the program worked perfectly. Allen moved to Albuquerque, and Gates soon dropped out of Harvard and followed. Together they founded Microsoft. But it was hard to sell microcomputer software in a world with few microcomputers, so Gates set about lobbying major electronics firms to manufacture the new devices. Executives who came to Albuquerque were surprised to walk into meetings and be confronted by a bunch of long-haired youths. "You could see it on their faces," recalls Steve Wood, an early Microsoft employee. "Their first reaction was, "Who are all these kids? Where's the leader?' Then Bill would take charge of the meeting and, within 10 minutes, that wouldn't be an issue anymore."
Gates lost no opportunity to corner a market. In 1980, when he learned that IBM was having trouble obtaining an operating system for its new PC, Gates bought some software from a small Seattle company for a reported $50,000, developed it into the MS-DOS program and provided it to IBM on a royalty basis. IBM's clout made MS-DOS the world standard, and royalties from the program still bring Gates some $200 million a year. Next, Gates expanded into applications software until Microsoft led the PC software industry in sales. "We have a maniacal work ethic here." says Scott Oki. a Microsoft senior vice president. "Everyone has a sense of participating in a crusade."
Gates is their natural leader. It is only fitting for a company filled with software engineers to be headed by a man who has twice been described on the front page of the Wall Street Journal as a "nerd." And Gates does fit that bill. For years a favorite Saturday night pastime was watching videotapes of university physics lectures on his VCR. But Gates also has a quick sense of humor—asked how the prosperity of Microsoft has affected his personality, he replies. "I smile when I tell people to work harder"—and an engaging personality. "A nerd couldn't be a good manager and a good leader of a company," he says. His peers agree. Gates is treated like an elder statesman in the computer industry, his pronouncements pored over for keys to the future.
Gates has made his employees comfortable on the four-year-old Microsoft office campus, a cluster of low-rise buildings around a pond (dubbed Lake Gates) in a woodsy suburb of Seattle, and he looks and lives like one of the guys. He buys his suits off the rack, flies coach and, for late-night snacks, calls out for pizza or opens a can of SpaghettiOs (as a "random test of discipline." Gates hasn't eaten meat for three years). He employs a part-time housekeeper who replenishes the larder. He could, of course, have pâté flown in nightly from Paris if he cared to. His wealth, he acknowledges, is "effectively infinite in terms of 'what do I decide to do.' " Paul Allen, who left Microsoft during a bout with cancer in 1982 but still owns more than $1 billion in stock, has founded his own software company and purchased the Portland Trail Blazers basketball team with some of his discretionary cash. Gates's main indulgence in the past has been cars; he owns two Porsches (one a million-dollar limited edition), a classic Mustang and a Lexus. Now he's doing a little catching up by building a new house.
"I'd like a home that's more interesting than most homes," he says. So Gates is building it into the side of a hill on five adjacent lots on the shore of Lake Washington. Its 37,000 square feet of living space will include a swimming pool, a trampoline, a library for 14,000 books, a game room, a movie theater, a beach, underground parking for 26 cars and a pavilion that will comfortably seat 100 for dinner.
Planning ahead, Gates has included bedrooms for five children. He has said in the past that he would like to marry and have a family. He occasionally takes a couple of days off—usually at Thanksgiving—to walk on the beach and think about his personal life, although he admits that business does cross his mind. At those times, he says, "I've had mixed-mode thinking." His competitors in the software business can't wait for him to settle down. Willard Peterson, executive vice president of the WordPerfect Corp., recently told the Wall Street Journal, "We'd love to see Bill get married and have a few kids. We'd love to see him mellow out."
Neither mellowness nor children appear imminent, although Gates does have a girlfriend, whom he declines to name. "She's someone in the industry I met because of work," he says. She accompanied him to the Caribbean last winter. So did several books on scientific topics, which Gates reads for fun. (He is especially interested in biotechnology, which he describes as his hobby.)
Gates's new house will have high-definition TV monitors in most rooms, but not for watching Geraldo ("Who's Geraldo?" Gates asks) or even science lectures. Instead they will display images from a collection of several hundred thousand stored in a computer. "We'll have images of most of the famous art, cars, planes, maps, boats," says Gates. "So if you type in 'French sculpture,' you'll see French sculpture. If you type in 'snow resorts,' you'll see snow resorts.... You're sitting at a table and someone says, 'Russia's bleak.' So you say, i don't think it's so bleak,' type 'Russia' and take a look."
Pushing a button on a penlike pointer will superimpose explanatory captions on the screens. "Say I was going to Brazil," Gates says. "I could type 'things that relate to Brazil.' And the week before I go, whenever I'm walking around, I'm seeing pictures and maps and people and art from Brazil." Which would, of course, be a very efficient use of his time.