Rodney Ohebsion

A Biography of Bill Gates and History of Microsoft

Bill Gates was born in Seattle, Washington in 1955. Intellectual, motivated, and competitive from an early age, Gates became obsessed with computers when he was 12, and wrote his first software program within a year. He attended a private high school school with plenty of computers, and he formed and lead a group of programmers that computerized the school's payroll system. They soon formed a company called Traf-O-Data, and sold computer system traffic counting to local governments. The venture lost money, but was a valuable experience for the ambitious Gates. It showed him that computers needn't be confined to major organizations with large budgets. He was one of the first people to realize that computers had the potential to be a somewhat commonplace item within a decade or so.

After high school graduation, Gates seemed intent on focusing on computers as soon as possible--but his parents planned otherwise, which prompted him to somewhat reluctantly head to Harvard University in 1973. He would later remark that he arrived at Harvard expecting to learn from people who were more brilliant than he was, but soon found that his classmates fell way short of his expectations. There was one one person, however, who not only was Gates's intellectual equal, but also matched his passion for computers. That man was Paul Allen, a Harvard student who had also attended high school with Gates and been involved in Traf-O-Data. In 1975, the two of them teamed up and pursued various computer programming ventures for microcomputers, also known as personal computers or PCs.

Both Gates and Allen clearly foresaw the future impact of the personal computer, and realized that the dominant computer companies of that time did not understand the rapidly evolving nature of the technology and the industry. Gates and Allen were always a few years ahead of the game, while most established companies seemed a few years behind. It was clear that even the most powerful companies in the field were vulnerable to being overtaken by someone who had their finger on the true pulse of the PC environment.

Gates and Allen became major players in the industry when they took the existing BASIC PC computer programming language, made modifications to it, and sold the modified version to various PC companies. One of their clients was Altair--the maker of the first commercially successful personal computer, the Altair 8800.

Gates soon dropped out of Harvard in order to devote himself to the Gates / Allen PC software company, which they gave the name Microsoft--an abbreviated version of "microcomputer software." With an internal company slogan of "we set the standard," and a vision of "a computer on every desk in every home, running Microsoft software," Gates and Allen hired a select group of many of the industry’s elite young programmers, and licensed Microsoft's PC software to many customers, including industry leading PC manufacturers such as Tandy and Apple.

In the early 1980s, Microsoft purchased an operating system known as QDOS for $50,000. The company altered and developed the program, renamed it MS-DOS, and sought to make it the industry-wide standard in PC operating system software. Gates was aware that the dominant position in the industry was up for grabs, and that the company to strike first and establish itself with a wide user base would have an easy time maintaining its popularity. This being the case, he set his sights on winning the contract to supply industry giant IBM with MS-DOS. At the time, IBM was an old school company that dominated the macrocomputer hardware industry, but was not succesful in the new arena of personal computers. They had made a failed attempt to market an IBM PC in 1975, which prompted them to exit the PC business altogether. Shortly afterwards, Apple Computers established itself as the leader in personal computers--and by 1980, IBM was eager to reenter the market after witnessing Apple's growth and realizing that PCs would become mainstream. The company decided to focus on mainframe hardware, thinking that it was the only lucrative component of the PC business. Of course, Bill Gates and Paul Allen had a much different view on the matter, and felt that software could be just as profitable as hardware. Gates devoted himself to becoming IBM's exclusive provider of PC operating system software, thinking that a good relationship with IBM could quickly estbalish Microsoft as a powerful company in its own right.

At first, IBM signed non-exlusive deals with both Microsoft and Digital Research Inc, the latter of whom owned the operating system for the popular Apple II computer. Eventually, however, Gates's relentlessness helped him outmaneuver Digital Research and strike a deal to make MS-DOS the standard operating system for the IBM PC. The terms of that deal with IBM were extremely favorable to Microsoft--so much so that IBM was required to fund the software's development, and Microsoft was permitted to license the software to other companies. With the deal in hand, Microsoft was in position to become one of the most succesful companies in the rapidly growing PC market.

The IBM PC quickly gained popularity in the early 80s, earning Microsoft a steady stream of royalties from its software. And as the personal computer market grew, many other computer makers entered the field and manufactured IBM compatible PCs--most of which used MS-DOS software. In other words, just as Gates expected, MS-DOS became the industry's standard software.

During the 80s and 90s, Microsoft's only major competitor was Apple, which produced its own operating system software for its computers. Although Apple hardware and software had a good reputation with computer enthusiasts, Apple was soon relegated to the status of an alternative brand, while the IBM and IBM compatible PCs took the dominant position. And almost every non-Apple PC used MS-DOS software. There was really no notable competitor in the field, as people had already gotten used to MS-DOS, and other computer programs were designed to be compatible with it. Even when IBM was no longer contractually obligated to use Microsoft softare, they stuck with Microsoft and Gates.

In the early 90s, Microsoft became even more dominant with the popularization of its next level PC operating system, the mouse-based Microsoft Windows, which helped the company maintain its lead over Apple's innovative product offerings. (Windows was first made available in 1985 with Windows Version 1.0--but it wasn't until the 1992 release of 3.1 that the program caught on with the masses.) Microsoft also began making other types of software like word processors and spreadsheets, and soon became the industry leader in those catogories as well, gaining a lead over the formerly popular WordPerfect and Lotus 1-2-3.

By the mid 90s, Microsoft's operating system and office programs were generating billions of dollars in sales--and since the company's expenses were minimal outside of research and development, the net profit on those sales amounted to nearly $3 billion annually. The late 90s saw even more growth for personal computers and continued dominance for Microsoft--and by the year 2000, Microsoft was making nearly $10 billion annually on sales of close to $25 billion.

As for IBM, although its sales of PC mainframe hardware were strong in the 80s and 90s, the company never really made money from those sales, as expenses were high, and profit margins were in the 0% range. Microsoft made billions on software, IBM made nothing on mainframe hardware. Furthermore, IBM outsourced its microprocessor manufacturing to a company named Intel--and like Microsoft, that company made tens of billions of dollars in the 90s.

These days, Microsoft makes an average of almost $20 billion a year. The company has, however, not done particularly well in the internet and smartphone industries, as competitors like Google and Apple have come to dominate those fields. In fact, although Apple made almost no money at all from 1995 to 2005, it is now the most profitable company in America, with earnings of over $50 billion in 2015. And in an ironic twist, Microsoft has sort of taken on the roll that IBM did in the 80s and 90s. Back then, IBM was the established computer company that couldn't turn a profit in the newer field of PCs. And now Microsoft is the established computer company that struggles to make money in newer fields like the internet and smart devices. This prompted Tino LaGuardia to once state, "If you want to learn from Bill Gates, learn from the pre-2000 Bill Gates, who built and expanded an empire, and made a lot of money. The post-2000 Bill Gates is just some guy who owns stuff, and that's it."

The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution

Idea Man: The Autobiography of Microsoft Cofounder Paul Allen

Walter Isaacson's Biography of Steve Jobs