Transcript

#290 Bill Gates

0:00 This is not a book about computers. It is a story about people. A remarkable collection of individuals Led by one man. Bill Gates.

0:08 who's drive genius Vision. An entrepreneurial spirit created one of the great success stories In the history of American business. At thirty five years old, Gates was at the pinnacle of his young career.

0:19 Microsoft The company that he and Paul Allen had founded sixteen years earlier. Had become the first software company in history. To sell more than a billion worth of products. In a single year.

0:30 Gates was the undisputed mastermind of that success. His company's astounding ascension. The youngest billionaire in the history of America. A most unlikely captain of industry, he looked as if he could have been twenty five years old or younger.

0:44 No one underestimated Bill Gates, though. Too many people had done that in the past. Most people already knew Microsoft's history. In nineteen eighty.

0:53 The company had sold the MS DOS operating system to IBM. The revenue from that partnership gave Gates a guaranteed income stream And the push he needed to make his vision. Microsoft software on every desktop PC. Come true.

1:07 Not long after he made the deal with IBM. The fiery Competitive gates slammed his fist into his palm and vowed to put several of his major software competitors out of business. By nineteen ninety one. Many of those competitors

1:21 We're in full retreat. That is an excerpt from one of my favorite biographies in the book that I'm going to talk to you about today, which is Hard Drive, Bill Gates. and the making of the Microsoft Empire and it was written by James Wallace and Jim Erickson. I first read this book almost three years ago for episode one forty, and the reason it's one of my favorite biographies is because it covers The first thirty six years

1:40 Of Bill Gates' life. It is about the beginning of the company. And more importantly, it is about the young version of Bill Gates that built the foundation. That the Microsoft Empire rests upon today. And the young version of Bill Gates is nothing like the version of Bill Gates that you see in the media today. And after I read the book the first time, the way I described it was that a young Bill Gates Was like Genghis Khan.

2:00 In a Mr. Rogers costume. And so let's jump into his early life and how he was when he was a kid, spread throughout the first chapters, all these different descriptions. From people that knew Bill when he was younger, some are friends, classmates, family members. And so I'm just gonna give you a couple of examples.

2:16 Aggressive and stimulated by conflict. Prone to change moods quickly. A dominating personality with outstanding powers of leadership. If left to his own devices, a young Bill Gates would just sit in his room and read nonstop. Gates read the encyclopedia from beginning to end.

2:32 When he was only seven or eight years old. That is going to be a recurring theme throughout the entire book, just how much he reads. And this is a description of Bill from his mother, Mary. Mary Gates in describing her son. has said that he has pretty much done what he wanted since the age of eight. And here's another description of a young Bill Gates. Even as a child, Gates had an obsessive personality and a compulsive need to be the best.

2:52 Any school assignment. be it playing a musical instrument or writing papers. Whatever. He would do at any or all hours of the day. Everything Bill did, he did to the max.

3:03 That's actually a great one sentence summary. of the the Bill Gates that's present in this book all the way up until the age of thirty six. Everything Bill did, he did to the max. What he did always went well. Well beyond everyone else. A few pages later, Gates loved competing. He hated losing.

3:19 Everything he did, he did competitively and not simply to relax. He was a very driven individual. When Bill was going into seventh grade his parents did something that was important. They transferred him from a public school to a private school. This private school is called Lakeside. The reason that is important is because Lakeside is the first place. Where Bill ever sees a computer. This is going to be the start of Gate's obsession. This is where he gets access to a PDP 10 mini computer.

3:43 So it says the PDP ten lakeside. used was owned by General Electric. Which build lakeside for computer time. And so the parents at the school they raise about three thousand dollars thinking, Okay, this is gonna be this should be enough For the kids to learn how to use a computer, right?

3:57 So it says they raised about three thousand dollars, figuring that the amount would be enough to last the rest of the school year. What they didn't realize was how seductive a mistress the machine would become. Bill Gates was about to develop a very expensive addiction. And this event in Bill Gates' life is important for at least two reasons. The first thing that popped to mind when I was rereading the section. Was this excellent advice that Charlie Munger gives to increase your likelihood of success? And he said you should maneuver yourself into doing something.

4:25 In which you have an intense interest. The key word being intense. Intense is exactly what a young Bill Gates obsession with the computer was and the second reason was He's about to meet Paul Allen, which is going to be a few years from now.

4:38 He's co founder of Microsoft. Gates was immediately hooked. Whenever he had free time, he would run over to get more experience on the system. But Gates was not the only computer crazed kid at Lakeside. He found he had to compete for time on the computer with a handful of others. Among them was Paul Allen, who was two years older than Gates. Seven years later,

4:55 The two classmates would form Microsoft. And so this is more about Bill's intense interest. It also makes me think of one of my favorite quotes ever from Jeff Bezos. He says we don't choose our passions, they choose us. It says Bill Gates cannot explain why he reacted as he did to the computer. But it triggered a deep passion.

5:11 An obsession in him. And this is what obsession looks like. Gates devoured everything he could get his hands on. Concerning computers and how to communicate with them. Often teaching himself as he went. The faculty knew next to nothing about computers.

5:23 Gates and the other kids hanging out. Day and night in the computer room were pretty much on their own. Within weeks. Most of the three thousand dollars raised was gone. And so we're about to see how a young Bill Gates solves problems. He's like, Okay, well

5:36 I wanna use a computer. I can't use a computer because we're out of money. So I need to find some other way to get more time on the computer. So in his mind the logical thing is okay, let's figure out how to hack into the system. And just change the amount of time that we're using. Gates and a couple other boys broke into the PDP ten security system.

5:51 And obtain access to the company's accounting files. They found their personal accounts and reduce the amount of the time the computer show that they had used. They were quite proud of this ingenious accomplishment. Until they got caught.

6:04 And so at first they get in trouble and then they get a job which leads them to getting Unlimited computer time. The company that they were paying for their computer time had a problem with their software crashing all the time. Bill and a couple of the other boys at Lakeside. We we're really actually good at identifying and fixing bugs.

6:20 And so they saw Gates and his friends as a solution to what they called their reliability problem. And so says so so the company hired a herd of friendly users. And they became the unofficial night shift. They offer gates and the other Lakeside computer junkies An opportunity to try to crash the систе.

6:35 They would get all the free computer time that they wanted. And this is the first time the book talks about a theme that's going to be repeated over and over again for the next four hundred pages. And that is Bill Gates' desire to be hardcore. He uses the term hardcore. Over and over and over again. It was often past midnight when the boys finished their work. That's insane.

6:53 Because they're in middle school at this time. It was when we got that free time that we really got into computers gate set. I mean, then I became hardcore. It was day and night. Gates was thirteen. Gates and Allen not only look for bugs, but they also look for any information that might help them learn more about computers. Operating systems and software.

7:10 Gates would go through garbage cans so he could poke around for important tidbits of information left behind on the day shift. I'd get the notes out of the trash. With coffee grounds on them and study the operating systems. And there's a line in here that made me think of something I read last week when I read Brunella Cucinelli's autobiography for episode two eighty nine and he talks about when he was getting started, right? He had no money.

7:31 But he had a ton of enthusiasm and he actually thought That enthusiasm helped. Other people want to help him. Uh I think the line in the book says he he was he was describing himself, he says I was a young man with no money and tons of enthusiasm. We see that with both Bill Gates and Paul Allen in this book right now.

7:46 Gates and Allen stood out from the other kids because of their enthusiasm. And so as I'm rereading the book for the second time, I'm like, wow, this is like really Uh but Bill Gate's parents had like a lot of foresight. Like they're letting their thirteen year old kid work on these computers. Till after midnight. Nope.

8:00 They were worried about his obsession too. His parents became increasingly concerned about their son. The computer seemed to have an almost supernatural hold on him. Although he was only in the ninth grade, he was already obsessed with the computer, ignoring everything else and staying out all night. So they order him to stop using computely, which he complies with.

8:17 Temporarily at least, but this is the interesting thing about Bill Gates. He has to direct his energy and his enthusiasm and his passion in some direction. So he directs it back into books. He said there was an infinite amount to read. There was at least nine months there when I did nothing with computers. Read he did with the same kind of commitment he had made to computers. He consumed a number of biographies.

8:38 Franklin Roosevelt and Napoleons, among others. To understand How the great figures of history thought. So young Bill Gates is doing exactly what you and I are doing right now. In addition to rereading this book, I also watched this documentary on Netflix for the second time.

8:52 About Bill Gates. It's called In Bill Gates Mind. And he talked about this time in his life and why he was so obsessed with reading these biographies. He said The idea that some people were super successful was interesting. What did they know? What did they do?

9:08 What drove those kinds of successes? So those are the questions that he's reading to try to answer for himself. Back to more descriptions about a young Bill Gates. Bill Gates was never just one of the boys. His drive, intensity, attitude. And intelligence made him stand out. Nothing about Bill Gates was normal. He had a hard nose confrontational style.

9:25 His intensity at times simply boiled over into raw, unthrottled emotion. And he was definitely introverted, but he also had a small group of really close friends. This is how they would describe Bill Gates at this point in his life. To those who knew him best, Bill Gates was hardly the social outco outcast he may have appeared to be from a distance. He had a sense of humor and adventure. He was a risk taker. A guy who liked to have fun and who was fun to be with. He had an immense range of knowledge and interests and he could talk at length

9:52 This in this part that jumped out to me. says he was a risk taker. I read his co founder's autobiography, Paul Allen. Long uh Paulin's autobiography a long time ago, it's all the way back on episode forty four, and there was something in that book. said about Bill Gates by Paul Allen's mother that I never forgot.

10:09 And she called Bill Gates an edge walker, which is a fantastic term. This is a quote. Paul Allen's autobiography. He says my mother had a term for adrenaline junkies, people who would court risk For the thrill of it. That person she'd say.

10:21 is an edge walker. Bill Gates. Was an edge walker. Where I was wary of danger. Bill seemed to enjoy it.

10:29 So so far we have an extremely tense, intelligent driven Focus person. Obsessed with learning. And then another part that we have to add to understanding Bill Gates is He knew he wanted to be very, very rich and he said so at a very early age.

10:42 This is just a first example of many times he repeated stuff like this to people around him, even when he was like a kid. So says although Gates may not have known what he was gonna do with his life, he seemed confident that whatever he would do would make him a lot of money. He made such a prediction about his future on several occasions. Gates told his friend that he would be a millionaire By the time he turned thirty.

11:02 He told another friend. I'm gonna make my first million by the time I'm twenty five. It was not said as a boast or even a prediction. He talked about the future as if his success. was predestined. And one idea that Bill and Paul arrived at early was the fact that hey

11:16 Uh learning how to create software is really valuable. Like we can make a lot of money doing this. And so there's gonna be two examples of how they actually made real money. when they were still in high school by programming. And so the very first company that they start together was this company called Trafo Data. And the premise is very simple.

11:33 If you ever drive on these roads, it says uh almost every municipality used metal boxes linked to rubber hoses. To count cars. So this system is producing data, they're like, Hey, we're just gonna make this data look better. So you can actually analyze it easier. Gates and Allen figured that they could program a computer to analyze a traffic counter.

11:49 than sell the information to municipalities faster and cheaper than their competition. The software program turned turned the data into easily readable traffic flow charts. They grossed about twenty thousand dollars from this. They're still remember, they're still in high school. The company eventually folded though after Gates went off to college. So at this point in the story, Gates is a senior in high school and this is where he's gonna get a full time job.

12:10 And this is how that happened. Gates received a phone call one day from a man from TRW. The giant defense contractor. TRW was offering a full time job with a salary. They needed help with a project to computerze The power administration's power grid for the North West.

12:25 So why would they be calling a high school senior? They did not know they were calling a high school senior. Their project was uh was behind schedule. Because the PDP ten software was infested with bugs. TRW went looking for bug hunting experts. with PDP ten software.

12:40 So the people at TrW are going to discover this book. from that company that was giving them free time to find bugs. at night and as a result you had unlimited uh Gates and his friends had unlimited time on the computer. And so TRD comes uh comes across uh this book called the Problem Report Book. And it says the names of two bug hunters appeared on nearly every page, Bill Gates and Paul Allen.

13:02 So TRW decided to contact Gates by phone. And then it says Gates received permission to miss part of his senior year so he could work full time at TRW. And so Bill's gonna graduate high school, he's gonna go off to Harvard. But at the same time, him and Alan have these ongoing discussions about what they should do together in the future. said he and Alan began to talk seriously about forming their own software company.

13:22 For some time now they had shared the same vision. That one day the computer would be as commonplace in the homes as a television. And that these computers would need software. Their software. We always had big dreams, Alan said.

13:35 So Bill arrives at Harvard, keeps the same level of intensity, the intensity he had when he's a kid. that he had in high school, that he had in college, that he's gonna have his entire time running Microsoft. There's just one line in here that made me laugh, though I have to read to you first. Bill Gates would later tell a friend he went to Harvard University to learn from people smarter than he was. And he left disappointed. So most of his time in college was not spent on his classes, was actually spent

13:57 programming and playing poker. And so it says that Gates would fall asleep in his class was not surprising. He was living on the edge. It was not unusual for him to go as long as three days without sleep. His habit Was to go for thirty six hours or more at a stretch.

14:11 Collapse for ten hours, then go out, get a pizza, and go back at it. And if that meant he was starting again at three o'clock in the morning, then so be it. And so there's a ton of stories in the book in the early days of Microsoft that people would just walk in The office in the morning? And they trip over like Gage to sleeping on the floor or sleeping on his desk or curl up in the corner.

14:30 And so Gates doesn't think he's getting a lot out of Harvard. He at the same time he's having all these phone conversations. With Paul Allen. And he's telling Alan he I'm thinking about dropping out of Harvard. And Gates had been telling his parents that I might drop out of Harvard and me and Paul are gonna start our own computer company. They did not like that idea. And this is the thinking of Paul on and Bill Gates on like why would you they would both take a risk of dropping out of college to do this thing.

14:51 And said Gates and Allen were convinced that the computer industry was about to reach critical mass, and then when it exploded, it would usher in a technological revolution of astounding magnitude. They were on the threshold of one of those moments when history held its breath and jumped. as it had done with the development of the car and the airplane. They could either lead the revolution or be swept along by it. And this might surprise you that

15:12 Gates may never have dropped out of college if it wasn't from the constant push. From Paul Allen. Allen was much more eager to start a company than Gates. who was worried about the reaction from his family if he dropped out of school. Paul kept saying, Let's start a company. Let's do it. He kept saying, It's gonna be late. We'll miss it.

15:29 And so we see from this section of the book, he's at the right place, at the right time in history, with the right set of skills, and yet he's still re needed. A push from Paul. What's so fascinating about this time in Bill's life is he just wasn't sure Where to direct. His

15:42 Monomaniacal Focus. This is one of my favorite paragraphs in the entire book. Bill had a monomaniacal quality. He would focus on something and really stick with it. He had a determination to master whatever it was he was doing. Bill was deciding where he was gonna put his energy and to hell.

15:59 With what anyone else thought. And so he's looking at all these options, trying to figure out okay, where am I gonna direct this monomoniacal focus? He makes a decision, which is one of my favorite things that Edwin Land Ever said. And it had a huge influence on my own decision on like where I'm gonna direct my energy. He says don't do anything.

16:16 That someone else can do. Bill is going to arrive at a very similar conclusion that Edwin Land did. It says at Harvard Bill was one of the top math students. But he was not the

16:25 Best. V is italicized. He had met several students better than he was at math. Gates eventually gave up any thoughts of becoming a mathematician. If he couldn't be the best in his field.

16:36 I met several people in the math department Who were quite a bit better than I was, said Gates. It changed my view about going into math. It made and this is why. It made the odds much longer.

16:47 That I could do some world class thing. Bill wanted to be the best. Not one of the best, not kinda best. Not Top five, top ten. He wanted to be the best at what he did. And so he's going through all these options. Okay, mathematician, that's out.

17:01 He says, uh there were so many choices, my mind was pretty much open. Maybe being a lawyer would be fun. I thought working our art ar artificial intelligence would be fun. I thought theoretical computer science would be fun. I really had not zeroed in on something.

17:13 But this sentence is very important in how he made his decision. Gates may not have been the best math student at Harvard. Бо іно пірс і комп'ютер сайс. And then the decision was made obvious when Paul Allen walks by a magazine stand And sees the latest edition. of popular electronics magazine

17:31 And on the cover is the world's first mini computer. And it says on a cold winter day in December nineteen seventy four, Alan was walking across Harvard Squ Square on his way to visit Gates. When he stopped at a kiosk and spotted the issue of popular electronics, that issue sent his heart pounding. On the cover was a picture of the Altair. Eighty eighty.

17:48 It said world's first microcomputer kit to rival commercial models. I bought a copy, read it, and raced back to Bill's dorm to tell to talk to him. I told Bill, Well here's our opportunity to do something with basic. Basic's a programming language at the time. Allen was a student of Shakespeare and was reminded of what Shakespeare wrote in Julius Caesar. There's a tide in the affairs of men.

18:06 Which, taking at the flood, leads on to fortune. omitted all of the voyage of their life is bound in the shallows and in miseries. On such a full sea We are now afloat, and we must take the current. When it serves

18:19 Or we'll lose our ventures. Gates knew Allen was right. It was time. The personal computer miracle was going to happen. And so this is gonna be the first project of what turns into Microsoft And so they call up the maker of the computer. It's this company out in Albuquerque, New Mexico called MIT S. He needed somebody to write software for the computer and he tells Paul.

18:39 And Bill, whoever shows up first with a working version of basic We'll get the deal. And so I'm skipping ahead to after their program worked. This is how the author describes the importance of this event and this is just absolutely excellent writing. The personal computer revolution had begun with a game play on a small blue box with blinking lights named after the brightest star in the constellation, that's the Altair.

19:00 Thirty years earlier, people in Albuquerque had witnessed the sun come up In the south. When the world's first atomic bomb exploded in the pre dawn darkness. A hundred miles away. Heralding the nuclear age.

19:12 Now another age had dawn in Albuquerque. It began at a ragtag company. Located next to a massage parlor. It's profits were two young men.

19:22 Not yet old enough to drink. Whose computer software would soon bring executives in three piece suits from around the country to a highway desert town. To make million dollar deals. With kids in blue jeans and T shirts. This is happening forty five years ago. I think this paragraph gives you context to why this is so important.

19:43 You have to remember that in those days the idea that you could own a computer Your own computer. Was about as wild as the idea today of owning your own nuclear submarine. It was beyond comprehension.

19:56 And so this is where Gates is gonna drop out of Harvard for the first time. He actually winds up going back. for like one other semester and then dropping out uh permanently. But what was fascinating is this is what I mentioned earlier, how his parents did everything they could to try to talk him out of this. So they had a family friend that was a founder, an investor. They send him over they're like, Hey can you talk to Bill? Can you please tell him not to do this?

20:16 His name's Samuel. He's having this conversation with Bill Gates. And so not only did he not talk him out of it, He thought it was a great idea. Not only did Samuel not try to talk Gates out of his plans to start a business, but after listening to the enthusiastic teenager He encouraged Gates to do so. Mary, which is Bill Gates' uh

20:32 Mom, Mary and I have kitted about this for years, said Samuel, who's now seven years old when he's given this interview for the book. Mary and I have kitted about this for years. I told her I made one terrible mistake. I didn't give Bill a blank check. To fill out the numbers. I had been known as an astute venture capitalist.

20:48 And I sure didn't read that one right. And so Bill drops out of Harvard, moves to Albuquerque, where MITS is headquartered. And this is another main theme that is repeated over and over and over again. In the book. І just how financially conservative.

21:04 Bill Gates was when he was running Microsoft. Even many years into the future, when Microsoft is printing money, he was very financially conservative. Microsoft was unbelievably capital efficient. They got from founding to IPO.

21:17 without needing to take venture capital money. When they did take an investor in. They did they did it for advice and they said they just took whatever I think it was like a million dollars, maybe two million dollars. They're like, Oh, we just took that million or that two million. And just put it in the bank with all the rest of our millions. And this so this is the first time it's mentioned in the book, but it's repeated over and over again. His parents and grandparents had taught him to be financially conservative.

21:37 And that was the way he intended to run his company. There would be no unnecessary overhead or extravagant spending habits with Microsoft. When Gates arrived in Albuquerque, he and Alan shared a room. And so even from the very beginning, they had these giant goals that Paul Allen uh referenced early in the book when they w they talked about in high school that they're saying, Hey

21:55 The P C is going to be everywhere, it's gonna be as common as television and we want our software on all of them. And so this is a description of the very, very early days at Microsoft. Bill and Paul were very, very intense. They had a clear understanding of what they were doing in the sense that they had a vision of where they were going. It wasn't just that they were developing basic. I don't think most people ever really understood this, but Bill certainly

22:14 Always had the vision from the time that I met him. Then Microsoft's mission in life was to provide all the software. For microcomputers. And this is a description of a lot of the early employees. uh Microsoft part of made Microsoft so successful during the company's embassy

22:30 was the team of programmers that Gates and Allen began to assemble in the spring of nineteen seventy six. They became known as the micro kids. High IQ insomniacs who wanted to join the personal computer crusade. Kids with a passion. For computers who would drive themselves to the limits of their ability and endurance.

22:48 So the agreement that Microsoft has with MIT S at the time. Is that hey, you're going to pay us a license fee for every computer that you sell that contains our basic And there's gonna be a dispute on how exclusive this license agreement should be. Gates is out there selling it to a bunch of other hardware makers.

23:02 But Ed Roberts, the founder of M ITS. gets in the way constantly. And so the first time I got to this section of the book, I wrote This does not seem like a situation that Bill would put up for very long. And it's not. And part of the reason is that Bill thought that MIT S was a po was very was a poorly run company. And he had no intention.

23:18 Allowing anybody else to limit the amount of licenses that he could sell. And so this disagreement goes on for a while. What happens is m Microsoft says, Okay, we're gonna terminate the license agreement. This is going to lead To M ITS suing Microsoft.

23:31 Their contract said that any dispute had to be s resolved by arbitration, so that is what they're waiting for. This leaves Microsoft in kind of a limbo. And so it says until the licensing dispute was resolved, Microsoft could not license its basic. It would take several months to resolve the matter.

23:46 And for what Would be the only time in the company's history that is a crazy line. And what be what would be for the only time in the company's history Microsoft faced money problems. And so what was interesting is while this dispute is happening

23:59 Ed Roberts actually sells his company, he sells MITS. To this other company called Per Tech. And that leads to one of the funniest paragraphs in the entire book, which gives you a great idea of who Remember this this entire book, this entire podcast is about Young Bill Gates.

24:15 And this is gonna give you a great insight. To how a young Bill Gates was to somebody that was working with him for years. A bit his In many ways, his very first business partner outside of Paul Allen. Listen to how he describes him. When the chief counsel uh for Per Tech came to Albuquerque to assess the situation and talk with Gates.

24:32 He took one look at the long haired scraggly twenty one year old and decided that this legal battle against Microsoft was going to be easy. It's not easy. Not only was it not easy, they went up losing. Roberts had warned Pertek That it would have its corporate hands Full with gates.

24:46 But no one listened to him. Pertek kept telling me I was being unreasonable and that they could deal with this guy. It was a little Like Roosevelt telling Churchill that That he could deal with Stalin.

24:58 He's comparing a twenty one year old Bill Gates. to Joseph Stalin And he wind up being correct. Pertek winds up losing this. uh this arbitration because they also said that hey

25:09 Uh they had sent Bill a letter. and they said it they would no longer market basic or allow it to be licensed because it considered all other Hardware companies competitors. And so that letter winds up being a key piece of evidence. And this is the result after the Protect decision came down and the log jam of customers waiting for basic broke loose, Microsoft never

25:28 Had to worry about money again. And so again, I just have to reiterate how lean Bill Gates ran Microsoft four years in. They're just eleven employees. They're about to move from Albuquerque to Seattle.

25:40 Before I get there, there's just one line that made me laugh. It said Gates had read business books like other male students read Playboy. He wanted to know everything he could about running a company. And so again we see this insatiable desire of knowledge that is so common. With the people that you and I study on this podcast. And so right before they move the company from Albuquerque, they take this uh company portrait.

25:59 You can actually see this if you type in Microsoft eleven portrait on Google Images. It says a few weeks before the move they decided that Microsoft needed a company portrait. The picture of the Microsoft eleven taken that day would later become famous. appearing in magazines across the country. And so they're all packing their stuff up and they're gonna drive from Albuquerque to Seattle. And the way that Bill drives is also the way that he built his company. One of the last employees to leave, Bob Wallace.

26:22 While driving along Rouxty six toward Seattle and his Honda Civic noticed a green dot appear in the rear in his rear view mirror. Moments later it shot past him. At well over a hundred miles per hour. It was Bill Gates and his Porsche. He was anxious to get moving.

26:35 All this driving was a waste of time. You couldn't be programming. And so I think a lot of people might find how Bill spent his time in the early years of Microsoft surprising. He was their main salesman. He prioritized sales over everything. What sustained the company was not Gates' ability to write programs. Gates sustained Microsoft through tireless salesmanship. For several years, he alone made the cold call and haggled.

26:58 Cajoled, browbeat, and harangue the hardware makers Of the emerging personal computer industry convincing them to buy Microsoft services and products. He was the best kind of salesman there is. He knew the product and he believed in it. He approached every client.

27:13 with the ze with the zealotry of a true believer. From the day he first articulated the Microsoft mantra. A computer on every desktop and Microsoft software in every computer. And this is Bill describing Microsoft when he was twenty five years old. When we got up to thirty employees, it was still just me.

27:31 A secretary and twenty eight programmers. I wrote all the checks. Answer the mail. Took the phone calls. So since the first five years of Microsoft's history

27:41 There was more than two hundred different brands. of microcomputers that had been brought to the market. That is who Bill Gates is selling into. That is the first wave that Microsoft is going to ride. The second one is going to be IBM. And so this is what's gonna set the stage for IBM and Microsoft to work together. Many of those working at IBM did not believe it was possible

28:01 For them to develop its own successful personal computer. given the existing structure and culture of the company. So it's talking about at this page. in IBM's career it's very it's a it's just a giant bureaucracy. The personal computer had been created out of an entrepreneurial spirit that did not exist at IBM. And so what IBM does is essentially they set up this lab in Boca Vertone, Florida, that's supposed to be set it's still owned by IBM, but it's supposed to be like more like a startup culture.

28:24 outside of IBM's headquarters in New York. And so I'm gonna get into why if they're building their own hardware, why didn't they just build their own software too? But I found a note that I left the first time I read this book. And I just found it again, I and I wrote, Oh, this is still a good note almost three years later. And it's this guy from IBM meeting a very young Bill Gates.

28:42 And this is how he described him. He says, I knew Bill was young, but I had never seen him before. When someone came Uh to take us back to his office. I thought the guy who came out was the office boy. It was built. Well I'll tell you or anybody else.

28:53 That by the time you were with Bill for fiftin minut. You no longer thought about how old he was or what he looked like. He had the most brilliant mind. That I had ever dealt with. And so this is the note I left myself many years ago and I thought the one that I thought was still good.

29:08 Bill overcame his weakness, which was that he looked young. By relying on his strength. His mind and the passion he had for his work. Lean into your strengths. And so they wind up making this agreement that Microsoft's gonna provide the software

29:22 for IBM's PC. And this is very interesting why they had to do this. Actually I'll get there in one second. This before I get there, th this this decision for Bill not to cap His upside. maybe the most important business decision he ever made in his life. IBM had talked to Gates about a fixed price for an unlimited number of copies of the software and Microsoft license to IBM.

29:41 The longer Gates thought about this proposal, the more he became convinced it was bad business. Microsoft would may be making a huge financial investment in this project. And a lump sum payment from IBM would not give the young company much of a return. On its investment Over time.

29:56 Gates had decided to insist on a royalty arrangement. with IBM. That royalty arrangement was referenced in the introduction of the book when it says that the revenue from the partnership gave Gates a guaranteed income stream stream.

30:09 And the push he needed to make his vision, which was Microsoft's so software on every desktop PC, come true. Another part of the agreement, which is what I was just representing earlier and why it's super important, was That Microsoft would retain ownership. Of whatever software it developed. And so the reason that IBM is not writing its own software and saying Microsoft can keep

30:27 ownership of the software that it creates. is because for the last ten to fifteen years, through three different presidential адміністрацій The government had been investigating IBM as a monopoly. Three separate presidential administrations

30:41 had investigated and tried to break up IBM. So once Bill has a signed agreement with IBM, he actually goes and buys The operating system. And there's a few things interesting about this deal. The first one is

30:53 that you see that Bill wants to receive license royalties. He does not want to pay them. He just insisted IBM pay him a royalty and not a flat fee. Now when he's doing this deal with Seattle Computer Products. It says Gates personally went through the document in his own handwriting and changed key language to specify a sale.

31:09 of DOS instead of an exclusive license. Gates signed what would prove to be the key financial agreement that made him a billionaire. And many of those working for him millionaires for only fifty thousand dollars. Gates bought all the rights to eighty six DOS. Previously owned by the Seattle Computer Products Company, it was the bargain of the century.

31:27 And why do they say it's the bargain of the century? Because just a few years later, I think this is like maybe eight, maybe ten years at the most. Says the operating system that once belonged to Seattle Computer. had by then become an industry standard. By nineteen ninety one Microsoft was making more than two hundred millian a year. Just from sales of MS DOS.

31:43 And so the book goes into a lot more detail about the development of the partnership. between Microsoft and IBM. It was top secret. Eventually they wind up finishing the work for IBM, then it becomes publicly announced that IBM's building a PC and then Microsoft software is going to be running it. And Microsoft's reactions as major milestone in the corporate history is fascinating, reminding me of something that uh Michael Jordan said in his autobiography, I'll get there in one second. So he says there was a little celebrating back at Microsoft when the big day came.

32:08 Steve Bomber took the newspaper clipping. Uh and post it on the front door. There were smiles. handshakes and pats on the back. But no wild partying.

32:17 No champagne corks popping. There was still a lot of work to do. A new version of DOS was already in the works. This is the turning point in Microsoft's history. And when I read that part On episode I think it was two thirteen.

32:30 of uh Michael's autobiography driven from within. He talks about this. This mentality that you see in Microsoft, he talks about it, he had this mentality, he's extreme winners have this mentality. It's this idea of uh being uncompromised. And so this is what Michael said about that. You have to be uncompromised in your level of commitment to whatever you're doing, or it can disappear as fast as it appeared. So that the way I think about this is if you go to sleep on a win, you wake up with a loss. Michael continues. Look around, just about any other person or entity achieving at a high level.

32:57 has the same focus. The morning after Tiger Woods rallied to beat Phil Mickelson at the Four Championship in two thousand five, He was in the gym by six thirty AM to work out. No lights, no cameras, no glitz or glamour. Uncompromised. So Microsoft's revenue and profit growth from here is just absolutely parabolic.

33:15 This is where he brings in quote unquote adult advice. Imagine Imagine being able to buy five percent of Microsoft for a million dollars. I think they buy like nine hundred and eighty five thousand shares for a million dollars. Uh, I think it mentions this later in the book as well. Then in a carefully planned move that had been under discussion for some time, Bill sold five percent of Microsoft for a million dollars to technology venture investors. It was a venture capital firm in Menlo Park, California.

33:40 Uh David Marcart, I think is how you pronounce uh the guy. He was a general partner in T VI was made director of Microsoft's new board. Microsoft did not need The venture capital. Gates was essentially hiring the firm's expertise. It was Steve Ballmer who convinced Gates to sell off a small part of the company as a long term investment in the future. We just threw that million dollars into the bank.

34:01 With all of our other millions. And so we go back to this main theme that repears over and over again in the book. over and over again in documentaries about the early days of Microsoft. Bill Gates was ruthless. This is why I say he reminds me of Genghis Khan.

34:13 Gase wanted to eliminate his opponents from the playing field. Bill learned early on that killing the competition is the name of the game. There just aren't as many people later to take you on. In game theory You improve the probability you're going to win if you have fewer competitors. And so there's a ton of anecdotes in this book just like this. We're gonna put digital research out of business.

34:32 Slamming his fist into the palm and his other hand. So there's actually a sequel to this book that I that I did uh all the way back for uh episode one seventy four. It's called Overdrive. And it's like the next like five years or maybe six years of the history of Microsoft. And there is a story in that book. That stuck with me the for the very first time.

34:51 that I read it or from the very first time that I read it. Да рили дескed. Bill Gates was of eliminating his competitors. You have to understand. If he didn't think this is how this is he this is something he repeats in this book over and over again. If this the way he thought if you lost

35:06 A fifty thousand dollar contract, he considered it a hundred thousand dollar loss. Because he lost the fifty thousand from the revenue. Of the contract. And the other competitor, the other company, got the fifty thousand dollars. And so in that book, Overdrive, it goes into even more detail, I think, than this book does about like their obsession

35:23 with their competitors and eliminating the competitors, they would like uh create like T shirts talking about their competitors, like to rally them up to like try to destroy them. Okay, that's fine. I'm sure other people have done that. I'm not sure if I've ever heard another story like this.

35:36 Keep in mind at the time of this story, this comes from overdrive. Uh episode one seventy four. Bill Gates is a multi billionaire. Microsoft is undeniably the the leader in its category, right? Philippe Khan.

35:48 ran a software company, they were competitors or like frenemies, right? But they would like talk to each other at industry events. So Philippe Khan tells a story. That he winds up walking over The they're both at an industry conference. Gates is sitting alone in a corner.

36:03 Right. Looking at a photograph in his hands. Філіп Кон вакс овер. To say hi to Bill Gates. And realizes

36:11 That Bill. Is looking at a picture. By himself in the corner, staring at a picture. Of Philippe Khan. That is some serial killer shit.

36:22 So this obsession to eliminate players Other players from the board cannot be understated. It's also why the US government hits Microsoft in a few years. Uh with the Antitrust suit. But Bill was obsessed. with knowing everything that was happening in his industry. This is another example of this is a few pages later.

36:39 If you talk to Bill about any software company or any hardware company, there's a very high probability that he will be able to tell you who the CEO is. What their revenues were last year. What they're currently working on, what the problems are with their products. He's very, very knowledgeable and he prides himself on knowing what's going on in his industry. And so a major criticism people would fling at a young Bill Gates was that oh he's arrogant, he's cocky, he thinks he's smarter than everybody else. Everybody really says that he's arrogant, but you ought there's also a ton of examples where

37:05 He knew where he was weak. And he would listen to others. So at the time Microsoft's doing this massive expansion into another huge category for them, which is we're gonna write our own applications, okay? And so they're actually developing what is eventually gonna turn into Microsoft Word.

37:19 Before it was called Microsoft Word. Bill Gates wanted to call it multi tool Word. But we see that he's willing to listen to other people and if their idea is better, he's willing to use their ideas.

37:31 Word was originally going to be released as multi-tool word. Which would just be a continuation of the multi two application product line that Microsoft was developing at the time. So there's a guy named Hanson that's working in there. He says, No, that's a bad idea. Hanson suggested a different product naming strategy. It was important This is actually good advice for products for naming products and the importance of brand.

37:48 Talks about the brand has to be the hero. Hansen suggested a different product naming strategy. It was important for the product to be identified by its brand name. He pointed out Uh the Microsoft had to get its name associated with its products. And so he elaborates on why this is an important concept. He says, If you look back at some of the old articles that were written in the industry You'll see the word multipl, but no Microsoft associated with it.

38:08 That was be cool, because multiplane was a standalone name. Just like WordStar. So Word Star is the application they're trying to compete against and trying to displace, okay? Uh people who wanted a word processing program knew the name Word Star, but they could not have told you that MicroPro was the company that had made it. And Hansen's point is like we want the consumer to know that it's made by Microsoft.

38:29 The brand is the hero, Hansen said. People start to associate certain images with the brand. And that becomes much more important than any single product. What the consumer goods companies realized years ago was that products come and go. You're gonna have a product and it's gonna rise and fall. But if you create a halo around a brand name and create equity in a brand.

38:46 When you introduce new products under that brand Halo, it becomes much, much easier to create momentum. We decided that we needed to make Microsoft the hero. Gates immediately saw the logic of Hansen's argument. And that is an important idea behind this concept of you have to know what you're not good at. It appears over and over again in the book. This is a summary of that. As you watch your house this this is coming m many pages later.

39:09 As you watch how Microsoft has developed, what you see is Gates realizing well in advance what he's not good at and going out and finding exactly the right person to do the job. This is so rare. I've been following startup companies for years. I can't tell you how rare this is. And so then I gotta tell you about something that I missed the first time I read the book or I couldn't tie it together yet. Because the first time I read this book was for episode one forty. Well, on episode one fifty five, I read this fantastic book called Invent and Wander. The collected writings of Jeff Bezos.

39:35 And Jeff says something in that book that's very fascinating and he talks about like how important speed is in business. Like the importance of speed is something that appears over and over again in these conversations that you and I have, right? Let me read this quote though. From Uh, Jeff Bezos, Invent and Wonder, episode one fifty five. Okay. Hopefully you have that book. It's all of Jeff Bezos' shareholder letters and then transcripts of all of his important speeches. It's absolutely excellent. If you don't have it, I'd order it right now.

39:58 Uh it's definitely. Did millions, if not billions of dollars in that book. And this is what Jeff says. You can drive great people

40:05 Away by making the speed of decision making really slow. Why would great people stay in an organization where they can't get things done? They look around after a while and they're like, Look, I love the mission, but I can't get my job done because our speed of decision making is too slow. And so at this point in history where we're in the Bill Gates book is that Steve Jobs and Bill Gates are just taking a ton of ideas from the from Xerox Park.

40:25 Which is a research and development company in Palo Alto owned by Xerox. And not only they're taking ideas, but they're taking people away from them. Why? Because they move too slow. Finding Xerox defectors wasn't difficult. So Bill Gates is his company's growing like crazy. He needs his bottleneck, and in many cases, it's like talent, right? So he's finding talent. Because this other company is just too damn slow. Uh, finding zero artifactors wasn't difficult.

40:49 I'm gonna skip over the names. They had grown grown disillusioned with the fact that so many good ideas developed by Xerox Park never got to market. Xerox was the epitome. of corporate culture, said one of these people that he's recruiting. Everything was run by committee. And there was not too much individuality. Microsoft On the other hand, was a bunch of individualists with the whole show.

41:07 Run minute to minute. By Bill Gates. He was in on every decision from top to bottom. And this is something that's also repeated. multiple times in the book.

41:17 It's gonna echo one of my favorite quotes that I've told you over and over again. It's in this book called Inside Steve Jobs Brain. I think that's episode two oh four. And it's the fact that Apple is just Steve Jobs with ten thousand lives. the founder's personality is going to be embedded into the company and we see this Explicitly in Microsoft's early history, Microsoft just hired clones of its leader Over and over and over again.

41:40 One of the greatest lines that I've ever had in conversation came from my friend Seth Bannon, who was describing to other founder named Alexis Revis, who's also a friend of mine. And he said that Alexis is intolerant of slowness. I just absolutely love that term. I think I go into more detail on the Alexander the Great episode that I did. That's episode two thirty two. But here's another great line. So we have intolerant of slowness and now we're gonna have Bill Gates version.

42:01 Intolerant of distractions. I love this. Gates was extremely focused and did not tolerate distractions. He didn't own a television. And he dis and he had disconnected the radio in his car. There's this great quote from Warren Buffett.

42:17 uh that I heard one day where him and Bill are having I think lunch with Bill's dad. So Bill Gates senior, right? Bill's dad. And Warren said something that was fascinating. He said Bill Gates Senior posed the question to the table. What factor did this is the question Bill had for uh his son and Warren Buffett. What factor did people feel was the most important in getting to where they've gotten in life?

42:40 And I said Focus. And Bill. Said the same thing. Gates was extremely focused.

42:47 and did not tolerate distractions. So eventually Bill realizes there's no avoiding Microsoft has to go public. He didn't want to go public. This is the financial performance of Microsoft the year before they go public. And Bill is thirty years old when this is happening. And it said Microsoft had revenues of a hundred and forty million dollars.

43:07 Its profits were thirty one point two Million. And that's in nineteen eighty five dollars adjusted for inflation. That'd be like if you had a private company And your company was doing eighty seven million dollars a year in profit. And so this is what Bill had to say about going public. I hate the whole thing. All I'm thinking and dreaming about is selling software.

43:25 Not stock. And I thought this was excellent. This is what Bill Gates was doing when Microsoft went public. On the day Microsoft went public, Bill Gates was off the coast of Australia. On a fifty six foot sailing vessel reading books. He had chartered the boat for five days.

43:40 This was to be one of his reading vacations in which he spent Time alone. Plowing through as many books as possible. So that's something that he still does to this day. He calls them reading weeks. Uh, these vacations are called reading weeks. And we actually see that in the documentary on Netflix as well.

43:56 He'll take a bag full of books, go to like this remote cabin by himself. just to be able to read and think. And he did this throughout this entire time he was at Microsoft as well. A year after Microsoft goes public, Bill Gates becomes a billionaire. So says at age thirty one, Bill Gates was officially a billionaire. No one in American history From the great industrial barons and financiers of the nineteenth century to the modern day corporate raiders.

44:15 Had ever made so much money at such a young age. And so I mentioned earlier, one of the reasons that I love this book so much is'cause like ninety, ninety five percent of it is just about Microsoft before w before it IPO'd. Then the book ends. And Bill Gates is only thirty-five or thirty six. And so when I got to this part, I thought uh what I love about it is like it's a snapshot in time of this company history, right?

44:38 But when I got to this part, when I got to the end. I sat and thought I was like What is the chance? That this version of Bill Gates, this thirty five or thirty six jerk. What

44:49 Ever believe that seven years from now. Seven years from where we are in this book. that he would no longer be running the company that he gave his entire Young Life

45:01 Two. I would love To be able to have lunch or dinner. To be able to talk to Bill and ask him about the times Not contained in this book.

45:10 But after stepping down From the head of Microsoft in the year two thousand. I hope he writes an autobiography. One day. And goes into detail the difference between

45:22 His life as the founder and Complete control of Microsoft. After And so these will be the last words that we'll cover from a young Bill Gates. It's impossible to imagine Microsoft

45:34 Without gates. At the controls. Those who know him best Say he is as driven as ever. We have this vision of where we're trying to go and we're a long way away from it, Gates said during a recent interview in his office.

45:45 A large window looks out. Over part of Microsoft's huge campus. But Bill Gates is not the kind of CEO who spends valuable time Admiring the view. You gotta watch out for the anti climax, he said.

45:57 In a response to a question about what it felt like to be running the world's largest software company. I mm we are not on top. Of the networking heap. Of the spreadsheet heap.

46:05 Or the word processing heap. Computers are not very easy to use. We don't have information at our fingertips. Yes, our revenues are bigger than anybody else's. But if we don't run fast and do things.

46:17 His voice trailed off. Leaving the sentence unfinished. Believe me, he said. Staring out the window and saying, Isn't this great? Is not the solution to pushing things forward.

46:29 You've got to keep Driving hard. And that is where I'll leave it for the full story. Highly recommend buying this book. I think this book should be in every entrepreneur's library. It is a book I plan on rereading again in the future. And if you're gonna buy the book, use the link that's in the show notes on your podcast player are available at founderspodcast.com.

46:47 And if you buy the book using that link, you'll be supporting the podcast at the same time. Another way to support the podcast is to sign up for Founders Premium. Where you can only ask me questions directly, but you can also listen to the AMA, the Ask Me Anything episodes that I make on that private feed. And last but not least, if you want me to email you my top 10 highlights from every book that I read. You can join my email list for free.

47:08 All the links that I mentioned are down in the show notes on your podcast fair, but you can also find them by going to founderspodcast.com. That is two hundred and ninety books down. One thousand ago. And I'll talk to you again soon.