I Am John Galt (21 page)

The Lakeside kids became such power users that eventually C-Cubed enlisted them to find bugs in its system during off hours in exchange for all the free computer time they could use. In other words, Bill could now try to crash the system by pushing it, and himself, to the limit—for free. All he had to do was report any bugs he discovered to the engineers to find and fix later. As a result, C-Cubed got a robust, crash-resistant commercial product to offer during business hours, while Bill and his friends got to log more computing hours than most NASA engineers of the day.

According to one study, it takes 10,000 hours of deliberate practice to become an expert at almost any task or profession, from playing the violin in Lincoln Center to scoring touchdowns on the National Football League (NFL) gridiron.
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By the late 1960s Bill and his night shift at Lakeside were well on their way to vaulting that mark a full half-decade before even the most rudimentary personal computer was introduced, and during a time when the very terms
software
and
hardware
were unknown to most of the population.

It wasn't long before Bill's far-ranging young mind began seeking out ways to profit commercially from his newfound passion. “I was the mover,” Gates said. “I was the guy who said, ‘Let's call the real world and try to sell something to it.'”
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In early 1971, he found his first real business opportunity.

A computer time-share company in Portland, Oregon, needed a payroll program written for one of its clients, and had heard through the grapevine about a talented group of students up in Seattle with experience coding for the PDP-10. With legal help from his father, Gates formed the Lakeside Programmers Group with Paul Allen, Richard Weiland, and Kent Evans as partners, then boarded a bus to Oregon to meet their new client. Bill hammered out a creative royalty agreement to guarantee his group a residual income stream instead of a standard fixed price or hourly rate. In a matter of months they had a finished product coded in COBOL. At a mere 16 years of age, Bill had negotiated his first commercial deal with a maturity and foresight beyond his years and then led his team to execute a complex task on a demanding time line.

Paul Allen graduated from Lakeside later that year and enrolled at nearby Washington State to study computer science. By then, he and Gates had already gone on to their next moneymaking venture in the form of a business they dubbed Traf-O-Data. The idea was as obscure as its name—and brilliant.

Municipalities at the time used mechanical punch-tape machines to record traffic volume on main roads in their jurisdictions. These tapes were then tediously hand-transcribed into useful data and presented to city engineers for use in timing stoplights for optimal traffic flow. Paul and Bill built their own elementary computer using an Intel 8008 chip, attached a paper tape reader, and then programmed it to transcribe the data. The process could be done for a fraction of the time and cost of manual transcription, and they successfully pitched it to a series of paying clients. The business reportedly grossed around $20,000,
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or the equivalent of more than $100,000 today. It's an impressive start for high school kid.

Before Gates graduated from Lakeside, he and Allen completed a series of other commercial ventures. They coded a school scheduling program. They worked a full-time, short-term assignment rescuing a moribund project for defense giant TRW to computerize a regional power grid using PDP-10s. No task was too big or too small as long as it involved solving problems with computers. Bill and Paul talked seriously about forming their own software company, but the idea would have to wait. Mary and Bill Jr. insisted that Trey at least try his hand at college to gain some exposure to other students and the world of higher academics. In the fall of 1973, Bill was off to Harvard.

This was a career detour that Henry Rearden didn't take. But Gates didn't stray for long from the path of Rand's self-made industrialist hero. He would outgrow Harvard in just two years.

Origins of Empire

Officially enrolled in Harvard's prelaw program, Gates was still searching for direction among competing influences. “I was always vague about what I was going to do, but my parents wanted me to go to undergrad school,” Gates would recall. “They didn't want me to go start a company or just do graduate work.”
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So he took a respectable class load during his first year at Harvard, including a mix of undergraduate- and graduate-level courses. He scored top marks in one of the university's most difficult math courses, but not
the
top mark. He tended to focus his energy only on subjects that interested him, yet still scored well in other areas simply because of his considerable intellect.

Computers continued to pull on him, and he was often found hacking away in one of several university labs with access to his old friend the PDP-10. Over the summer, he and Allen both landed jobs at Honeywell in Boston. Allen would stay on as an employee that fall while Gates returned to Harvard for his second year. Recharged by his summer months back in the computer industry, Gates became increasingly uninterested in academics and spent more and more time on two passions—one old, programming, and one new, poker. “Bill had a monomaniacal quality,” said Andy Braiterman, his roommate at the time. “Perhaps it's silly to compare poker and Microsoft, but in each case, Bill was sort of deciding where he was going to put his energy and to hell with what anyone else thought.”
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It was also during this time when Gates met and became friends with hall-mate Steve Ballmer, whom he'd regale with his poker exploits in a rapid-fire dialogue they'd term “high-bandwidth communication.”
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Gates was also talking more and more with Allen about starting another business. They were both convinced that the world was on the cusp of a gigantic sea change—the democratization of computing power for the masses—and they believed they could play an important part in that revolution. But how? Hardware was interesting, but ultimately, having tried his hand at building the Traf-O-Data machine, Allen felt it was a “black art.”
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For Bill, software was the soul of the machine and the area of expertise where he and Paul had invested nearly half of their young lives.

Then one December day in 1974, Paul Allen picked up a copy of
Popular Electronics
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on his way to visit Bill on Harvard's campus. The issue's cover showed a rectangular box about the size of a small home stereo unit labeled “Altair 8800” under a bold red headline proclaiming, “PROJECT BREAKTHROUGH! World's First Microcomputer Kit to Rival Commercial Models.” Inside, the cover story, written by H. Edward Roberts of Albuquerque-based Micro Instrumentation and Telemetry Systems (MITS), began, “The era of the computer in every home—a favorite topic among science-fiction writers—has arrived!”

Billing the Altair 8800 as “the most powerful minicomputer project ever presented” and “a revolutionary development in electronic design and thinking,” Roberts went on to describe the unit as a “complete system” that could hold a full 256 bytes in memory (equivalent to the length of his two opening sentences), which would allow its user to input “an extensive and detailed program . . . via switches located on the front panel, providing a LED readout in binary format.” The article included sample schematics and a full parts list taking up less than one column of side text. A mailing address was provided along with instructions for ordering an unassembled kit for $397, or a fully assembled unit for $498. MITS would also send along a free set of circuit board etching guides and assembly information for the cost of a 40-cent stamp and an 8½ × 11 envelope. Suggested uses among “thousands of possible applications” included a “digital clock with all time-zone conversion” and a “brain for a robot.”

While today the article reads like a spoof of pretechnological naïveté, it fired the imaginations of already eager Gates and Allen by convincing them that the tipping point of the consumer-computer revolution had indeed arrived. When the next month's follow-up article spent two pages of text laying out a detailed nine-step procedure of complicated switch flips merely to enter a program on the Altair for adding two numbers together, Bill and Paul had a brilliant idea. They both were already familiar with the machine's Intel 8080 central processor from their experience with Traf-O-Data, and Bill was a consummate expert in one of the relatively user-friendly programming languages of the day known as BASIC. Why not piggyback off of the Altair's hardware distribution and provide the software that would unlock its potential by bridging the gap between binary machine and human language?

With characteristic entrepreneurial confidence, Gates picked up the phone and dialed Roberts at MITS in New Mexico, offering a version of BASIC that would run on the Altair. Roberts later recalled, “We had at least 50 people approach us saying they had a BASIC, and we just told everyone, including [Gates and Allen], whoever showed up first with a working BASIC had the deal.”
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For the next eight weeks, Bill abandoned his classes to hunker down with Paul. They spent every waking hour in the computer room working on the project, trying to beat the unknown competition they knew was nipping at their heels to steal the prize.

There is such a moment in the life of every man or woman who succeeds in business—the moment when one decides to win, whatever the personal cost. For Henry Rearden, “He was fourteen years old and it was his first day of work in the iron mines of Minnesota. He was trying to learn to breathe against the scalding pain in his chest. He stood, cursing himself, because he had made up his mind that he would not be tired. . . . [P]ain was not a valid reason for stopping.”

Just because writing code ensconced behind ivy-covered walls at Harvard wasn't exactly digging in an iron mine, don't underestimate the vast challenges that faced Gates, or the courage it took for him to take them on. For starters, some experts at Intel didn't even believe that running a high-level programming language on the 8080 chip was possible. In addition, while Roberts provided schematics for the Altair, the only working model at the time was sitting in his offices in Albuquerque, so Gates and Allen had nothing to program or test their work on.

Undeterred, the duo studied the technical specifications of the Intel central processing unit (CPU) and developed an emulator program on the PDP-10 to virtually replicate the functioning of a working Altair. Drawing on all of their reserves built up from long hours on the night shift at C-Cubed, Traf-O-Data, TRW, and Honeywell, Gates and Allen accomplished the seemingly impossible: a working copy of BASIC that Allen flew out to Albuquerque encoded on a paper punch tape.

When Roberts first beheld his box of chips and toggles turned into a useful computer by Gates and Allen's efforts, he remembers, “I was dazzled. It was certainly impressive. The Altair was a complex system, and they had never seen it before. What they had done went a lot further than you could have reasonably expected.”
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After a brief celebration in Boston, Allen headed back to New Mexico to work out the bugs in BASIC and prepare for a coming road show to promote it. Gates joined him during the summer after his sophomore year at Harvard was complete. He would never return to college.

MITS already had preorders for thousands of machines, and the hardware team was struggling to keep up. It must have been this kind of demand for even such a rudimentary machine that confirmed Gates's conviction that the appetite for personal computing was virtually unlimited. Soon thoughts of returning to school in the fall had faded like a sunset over the New Mexico desert. In fact, he would never complete any degree. That summer he and Allen, with legal help from Bill's father and a local attorney, formed Micro-Soft (the hyphen was later removed)—an abbreviation of “microcomputer software”—and struck a licensing agreement with MITS for their version of BASIC. It wasn't just a technology tour de force, but a business one as well. At only 19 years old, Gates helped craft a sophisticated agreement that anticipated many of the key issues in software licensing, including exclusivities, sublicensing, and confidentiality.

BASIC sold briskly at first in tandem with Altair shipments, but soon software volume began to drop in relation to hardware. The reason was simple: Most computer owners at the time viewed hardware as something to buy, but software as a something to copy and share.

In response Gates published “An Open Letter to Hobbyists” in early 1976,
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accusing his would-be customers of outright theft and laying out a Randian argument for the protection of intellectual property. “Who can afford to do professional work for nothing?” he asked. Without adequate compensation for valuable work done, he argued, “there is very little incentive to make this software available.” The moochers who take something for free in the short term are only hurting themselves in the long run. “One thing you do [by stealing] is prevent good software from being written.”

Over the next few years as the computer market grew, Gates realized he needed to get out from under an increasingly overwhelmed and inefficiently operated MITS to begin building software for the proliferation of new, competing hardware systems if he ever wanted to realize his dream of Microsoft on every desktop. After relocation from Albuquerque to a new permanent headquarters near his hometown in Washington, the company was beginning to build momentum. Early programmer Steve Wood explains some of the company's early success.

We were always a year or two ahead of where the demand was really going to be. But we were generally guessing right. A lot of it was Bill's and particularly Paul's ability to see where some of the stuff was going to go. A lot of people are able to see things like that, but we had just an enthusiasm, a real high level of drive and ambition. There wasn't anything we couldn't do. Okay, so no one has done this for a personal computer before, so what? We can do it. No big deal. . . . We overcommitted ourselves. We missed deadlines. We consistently underestimated the time it would take to do a project, and we committed to too many of those projects at a time. But we always got it done.
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