Eventually, Bill Gates would settle with the government. In some sense it was a pragmatic business decision, and mostly a win for Microsoft. But in another sense it was a moral collapse—the victim himself granting a moral sanction to his tormentors—just what Henry Rearden said not to do, warning that “if we value our lives, we must not give it to them.” But when it was done, Gates went on strike, just like Henry Rearden finally did when he couldn’t take the pain any longer. In 2000, Gates handed over operations to longtime business partner Steve Ballmer, who would shift the company’s focus from playing hard to playing nice.
Ultimately in a sad diversion of his productive brainpower, Gates turned aside from creating economic value, and instead began to give away the value he’d created in the past. Gates and his wife endowed the Bill & Melinda Gates Foundation with billions in Microsoft stock, and now the world will just have to wait to see whether it will be better off with Gates donating his wealth to sponsor talk shows on National Public Radio, among other purposes, rather than keeping it at work building Microsoft.
Should Americans aspiring for a better life for themselves, their families, and their nation be proud that their government forced one of the most productive minds in history to stop producing? Here’s how Gates would answer that question: “Americans should wish that every business was as competitive as the personal computer business,” he says.29 “This lawsuit is fundamentally about one question: can a successful American company continue to improve its products for the benefit of consumers?”30
Ayn Rand would agree, but she’d have another answer as well, operating on a philosophical level, rather than just a pragmatic one. Yes, the unfettered competition of pure capitalism does produce wealth. But even if it didn’t, it is still the morally correct way for society to organize economic life. Rand once wrote, “Capitalism is a social system based on the recognition of individual rights . . . the only rational and moral system in mankind’s history.”31
Without it we will all be poorer, no matter how much of his fortune Gates gives away to the poorest. Without it we will be less free, knowing that any of us smart enough and lucky enough to change the world the way Gates did will be targeted for destruction as Gates was.
A Hero from the Start
William Henry Gates III was born on October 28, 1955, to a family that was well off, although certainly not rich by the standards he himself would later set. His parents nicknamed their son “Trey”—a play on his name’s suffix. It was a moniker that would stick among his family and close friends for the rest of his life. His father, Bill Gates Jr., was the first member of his own clan to graduate from college, as an honorably discharged Army lieutenant after World War II. Bill Jr. then went on to law school and later became a partner in a Seattle practice. Trey’s mother, Mary, came from a socially prominent banking family. While comfortably wealthy, Trey’s family disdained pretentious displays of affluence. Instead its focus was on substance, education, making a positive impact on the world, and focusing on creative production as opposed to a lust for money itself. It is a value system that young Bill would carry forward throughout his adult life.
Much has been made—mostly by spiteful critics—of Gates’s privileged upbringing and supposed million-dollar trust fund as the origin of his eventual business success. The truth is that he bootstrapped his business endeavors from day one. And even if he hadn’t, the world abounds with trust fund kids who created small fortunes by frittering away large ones.
Gates’s biggest asset was not an inheritance, but an amazingly powerful mind supercharged by early access to leading-edge technology. Born at the dawn of the computer era, he experienced the synergy of high-octane experience coupled with strong mental horsepower that few could match. Yet while these initial benefits translated into a strong starting position, the race would prove to be long and arduous. Only Bill’s sustained efforts of constant work, endurance, competitive drive, and obsessive focus would decide the winner.
Trey was an energetic child who learned to rock his own cradle and spent hours incessantly doing so. Later as an adult, Bill’s characteristic rocking back and forth in his office chair and in the boardroom would become legend in the computer industry. While some explain the habit as bleeding off stress or a sign of intense mental focus, the rocking behavior is also associated with conditions along the autism spectrum32—a classification that can include highly gifted savants.
The evidence that Bill’s brain functions differently than most was apparent very early on. At age 7 he read all 20 volumes of the World Book Encyclopedia from beginning to end. At age 11, he could perfectly recite the entire Sermon on the Mount unaided and, according to his flabbergasted youth minister, displayed a deep understanding of its meaning well beyond mere rote memorization.33
In the fourth grade, his classmates labeled him “eccentric” for his oddball work habits that bordered on the obsessive. When assigned to write a four-page report, Trey would turn in 30 pages. On the playground, he played pickleball as though the fate of the world were at stake. A day at the swimming pool would turn into lap races. A jigsaw puzzle became a contest to see who could place the most pieces. While it may have seemed like eccentric behavior in grade school, looking back we might regard Bill’s behavior as indicative of a fiercely competitive spirit and a drive to win. Even leisure activities weren’t merely for relaxation—they were opportunities to push the limits of one’s potential, to test, stretch, strengthen, and grow.
By the middle of 1968 the United States was retaking the lead in the space race against the Soviet Union. The Apollo moon landing, borne on the wings of newly developed electronic computing power, was tantalizingly close to fruition. Stanley Kubrick’s epic 2001: A Space Odyssey played in theaters nationwide, offering a believable futuristic vision featuring a sentient supercomputer named HAL 9000 as a central character. Amid these influences, Gates’s high school, Lakeside, vowed to expose its students to this new world of computers. The only question was how to do it.
Early mainframe computers could be owned only by large corporations or government agencies. With footprints measuring in square yards, such systems cost millions of dollars to buy and support. Even with annual tuition at Lakeside at a relatively steep $5,000 per student, these sums were clearly out of reach. Instead, Lakeside purchased a relatively inexpensive teletype machine and remotely linked it to one of the several corporate mainframes in the area with spare capacity on a time-share basis—first from General Electric, then from a Seattle start-up called Computer Center Corporation, or C-Cubed. The machine on the other end was a PDP-10 mainframe manufactured by Digital Equipment Corporation and specifically designed with architecture to support multiple remote users.
The first time Gates sat at the Lakeside terminal and typed in a short command, he was thunderstruck. Just think—a hulking silicon-based intelligence formed of transistors and copper wiring, sitting in a building miles away, interpreted the electrical impulses he himself transmitted with his own fingers and then, without any carbon-based human intervention of any sort—it responded! This was like an open door to a whole new world of vibrant possibilities, a place where the very nature of physical reality was harnessed and coupled with abstract logic and mathematics to produce something useful and wondrous. He was hooked.
Bill and a handful of like-minded students began spending every minute of their free time in the computer room exploring the system while testing their own reasoning and problem-solving skills. Among these early adherents was an upper-classman named Paul Allen. Despite their age difference, Bill and Paul discovered an affinity in their love of computers and their insatiable appetite for knowledge. They soon became fast friends. It was the beginning of a partnership that, along with several other Lakeside classmates, would become the founding programmers core of the Microsoft empire.
Gates devoured everything he could find about computers, but the field was so new, so undocumented, that he and his fellow computer freaks had to mostly learn by doing.
They poked and peeked, observing the results. They posed ad hoc problems to each other that they would then compete to solve. Bill taught the computer to play tic-tac-toe. He created a lunar landing simulation. He programmed the computer to play Monopoly and then had it run thousands of game scenarios to find winning strategies. In the process, he discovered things even the professional computer experts at the time didn’t know. Perhaps it’s not as romantic as the young Henry Rearden laboring in an iron mine at the birth of his career—but Gates’s dedication and efforts as a youth were no less intense, and in any field that’s what it takes to launch yourself toward the very top.
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.34 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.’”35 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 $20,000,36 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.”37 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.”38 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.”39
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.”40 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 Electronics41 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 “di
gital 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.”42
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.”
Donald Luskin Page 17