In early 1976, Bill Gates, the then 20-year-old co-founder of Microsoft Corp., of Bellevue, Wash., published, in a hobbyists' newsletter, an impassioned attack on the practice of software piracy. Gates, a veteran hacker, Harvard College dropout, and self-confessed "hard-core technoid," hunkered down to his keyboard and wrote, "As the majority of hobbyists must be aware, most of you steal your software. Hardware must be paid for, but software is something to share. Who cares if the people who work on it get paid?"
Coming from a renegade techie who once boasted of "crashing" several state-of-the-art mainframes, the ethics lesson seemed a bit shrill. But Gates was no longer just one of the boys. In 1974, he, along with Paul Allen (co-founder of Microsoft) had become the first to adapt successfully BASIC computer language to microprocessors. Ten years later, company sales hit $100 million, making Microsoft the largest independent microcomputer software manufacturer in the land and Gates, a Time magazine cover boy, the darling of end-user programming. Getting paid is no longer his paramount worry.
Building a company, however, remains a major focus. "When we got up to 30 [employees]," remembers Gates, "it was still just me, a secretary, and 28 programmers. I wrote all the checks, answered the mail, took the phone calls -- it was a great R&D group, nothing more. Then I brought in [Steve] Ballmer, who knew a lot about business and not much about computers. For three months, he and I sat around saying, 'Whoa, what are we doing here?' I wanted to open up the end-user, retail market, so we became the first microcomputer software company to have its own sales force.
"But I've always enjoyed that aspect: taking good technology and building a business around it. To me, 100,000 people happily using your product is the most concrete form of positive feed-back you can get."
As a manager, Gates hasn't always earned quite such warm praise. Today, Microsoft has 660 employees ("I know all 140 programmers, but I don't know everyone else anymore" laments Gates,) and has seen two new chief operating officers in the past two years. The incumbent, a former Radio Shack vice-president, Jon Shirley, hired on last year to run the company. Shirley, 46, followed James Towne, late of Tektronix Inc., who left Microsoft after 11 months. Admitting that he and Towne "were not a great match," Gates concedes that his high standards can make him demanding. "I'm very involved in my work, and I take it seriously. If something goes by me of inferior quality, I don't say, 'Hey, let's go get a beer,' or, 'Hey, how about a vacation?"
"I've got no problem working with Bill," offers Shirley. "His strengths are product development and marketing. But he can't do it all. As our business gets more competitive, for instance, we have to know the advertising message before we even develop the product. The margin for making errors is infinitely smaller than it used to be."
Microsoft's profit margin (about 15% on 1983 income), meanwhile, is infinitely greater than it was during the heyday of software larceny. "Saying there are thousands of software companies out there who can make it is a joke," says Gates. "Apart from the small niche companies, only Lotus [Development Corp.], ourselves, and a couple of others are truly profitable."
The megaprofits he has reaped from Microsoft have not entirely changed Gates's workstyle, however. At heart, he is still a hacker. "My house is full of microcomputer magazines," Gates allows, "and I still come home every night to my IBM-PC. I don't play the violin, you know."