Bill Gates (3 page)

Even as Windows 3.1 was being released in 1992, the final papers in the IBM/Microsoft divorce were at last being signed. Microsoft retained the rights to the NT (for New Technology) software it had developed. (This was used for allowing networks of PCs to work together, and would become increasingly important in the years ahead. It would be incorporated into Windows 95, and its successors would be crucial to Microsoft’s move into the corporate PC market in 1997.) IBM was given use of Windows code, but only until late 1993. And Microsoft was also given a royalty on OS/2 sales—which would prove to be small potatoes when Windows 3.1 took over the market. Microsoft did pay IBM a flat fee, reported to be in the neighborhood of $25 million, for the use of some IBM patents. But given the eventual success of Windows 3.1, it is clear in hindsight that Microsoft took IBM to the cleaners on this resolution of their partnership.

The popularity of Windows 3.1 can be measured by the fact that it was installed on seventy million personal computers that already had been bought worldwide at the time of its 1992 introduction, and on ninety percent of the new computers bought between then and the August 1995 introduction of Windows 95. In terms of personal computer software, Microsoft had not merely achieved dominance, it had over
whelmed the competition. From 1992, Bill Gates was on a steady climb, not just year by year, or month by month, but week by week, toward becoming the world’s richest man.

Developing the successor to Windows 3.1 proved to be arduous. For one thing, it moved from 16-bit processing to 32-bit processing, made possible by the increasing speed and capacity of Intel’s Pentium chips. This was a new ball game, which made it feasible to introduce a wide range of new features but greatly complicated the writing of code and also increased the number of bugs in the system. In addition, Windows 95 was delayed by Microsoft’s belated recognition of the importance of the Internet.

Windows 95 took off “like a bat out of hell,” to use an old phrase that sums up the attitude of Microsoft’s competitors. Between its August 24, 1995 release date and the end of the fiscal quarter on September 30, 1995, it sold an estimated seven million copies. This was a much higher number than either the computer industry or Wall Street analysts had expected. Microsoft itself had announced that it expected to sell thirty million copies in the first year; at this rate, it would reach that number in less than five months. There had been enormous media coverage of the Windows 95 launch, and from now on, Bill Gates, who had hardly been ignored in the past, would become one of the most heavily profiled and interviewed men on earth, commanding almost as many magazine covers as movie and music stars.

But he was hardly resting on his laurels. His book,
The Road Ahead
, surged immediately to the top of the best-seller lists at the end of 1995. The book contained a bound-in envelope containing a CD-ROM, which included, to quote the jacket description, “the complete book text with hundreds of multimedia hyperlinks, a special interview with Bill Gates, video demonstrations of future technology, a
World Wide Web browser and more.” The book was cowritten with Nathan Myhrvold, Microsoft group vice president, Applications & Content Group, and the Pulitzer Prize-winning journalist Peter Rinearson. Gates’s own profits from the book were used to fund “a grant for technology in education administration through the National Foundation for Improvement in Education.”

In 1996, Microsoft joined with NBC to create MSNBC, linking the Microsoft Web Network with a broadcast cable television entity. In 1996 and 1997 Microsoft also acquired or made significant investments in company after company that offered possible keys to the development of the coming information highway, including makers of set-top boxes that would allow the integration of television and the Internet, and of audio systems linking PCs and the Internet. These investments were proceeding at such a pace that by the summer of 1997, a few Wall Street analysts began suggesting that if Microsoft had any weakness it was the possibility that it might be spreading itself too thin. Bill Gates did not see it that way, of course. He had pointed out again and again that the information highway was still in the formative stage, and that there were several different directions in which it could go. Indeed, most analysts looked on his acquisitions and investments as a wise policy, protecting Microsoft’s interests on several fronts and thus making it a player no matter what happened. As Microsoft edged closer to the entertainment world with MSNBC and various technical investments that had potential entertainment linkages, Gates had to put down rumors and questions about the possibility of his going so far as to buy a movie studio. Perhaps noting the problems that Sony had run into with its acquisition of Columbia Pictures, Gates squelched any such idea.

But if Gates was showing increasing interest in the en
tertainment aspects of the emerging information highway, he was also moving aggressively on the computer software front. In mid-1997 he garnered several magazine cover stories on his major push into the networked business computer market. The May 1997
Fortune
had a huge, grainy close-up of the center of Bill Gates’s bespectacled face, with a slight grin that could easily be read as rapacious, featuring the headline “Gates’ Greatest Power Grab (It’s Working).” Gates believes that Microsoft’s Windows NT will, combined with its BackOffice software package, eventually displace the UNIX system as the preferred choice for corporate computer networking. UNIX servers, the chief product of Sun Microsystems, have been the backbone of corporate computer systems, running as many as sixty-four processors simultaneously. The current Windows NT can run only eight computers at once, far too few for such things as hotel and airline reservation systems. But Microsoft’s initial aim is to capture the small business market, and it is selling Windows NT for what
Fortune
calls a “cutthroat $625.” Microsoft has as much as $1 billion in advanced research currently under way, the vast majority of it devoted to increasing the number of processors Windows NT can run. And for smaller companies, the Windows NT/BackOffice combination has already displaced UNIX. The chip manufacturer Intel, which has worked closely with Microsoft on many projects, as well as most of the PC manufacturers, see an enormously profitable future in the development of NT software. The overall business market is estimated at nearly $60 billion. Thus, if Microsoft succeeds in the business PC world in any measure that even approaches its domination of the individual PC market, Microsoft stands to become not just a behemoth but an unstoppable juggernaut.

Over the years, competitors and some PC users have
suggested that Microsoft’s enormous success has been a marketing one rather than a technical one. The claim is made that there have been better software products produced by other companies, but that Microsoft’s “steamroller” sales tactics have squashed such superior alternatives flat. These complaints overlook two important facts. The first is that when users or software reviewers in specialized or general interest publications take note of deficiencies in Microsoft products, the problems get fixed, sometimes right away, sometimes in the next upgrade of the product. In addition, as Bill Gates likes to note, his company’s products have won numerous prestigious awards. As far back as 1983, Microsoft’s Multiplan application for Apple II was chosen by
InfoWorld
as the software program of the year. Such awards have come regularly over the years, but 1994 was a particularly triumphant one. Its Office 4.0 and Windows NT 3.5 won the annual
PC Magazine
awards for technical excellence in the categories of applications and systems software, while Word was named best word-processing product, and Access—an entry-level database management program for individual users—was cited as best database product. Access, it is important to note, was originally purchased by Microsoft; it is sold both separately and as a part of Office. That hardly serves as an example of squashing the competition—Microsoft saw a good product and acquired it to make its own product better. Some will inevitably charge that such acquisitions are power grabs, but millions of customers are more likely to feel gratitude that the Access database is part of the most popular office suite on the market.

The phrase
corporate campus
can be applied to the headquarters of many major businesses around the world, at least in terms of their layout and general appearance. They are a further refinement of the “industrial parks” that began appearing in the 1970s, low-lying buildings scattered across considerable tracts of suburban land, separated by carefully tended swards of grass and shaded by clumps of trees. The original industrial parks were usually home to several businesses, deliberately designed to meld with the nearby residential suburbs, and standing in sharp contrast to the central city office towers that so many corporations were leaving behind.

But the corporate campus, home to a single company, has become particularly associated with high-technology firms, especially those in the computer field. These parklike headquarters do resemble the campuses of many small colleges and seem in tune with the laid-back, informally dressed image of the young technical wizards who inhabit them. But for all the tossing of Frisbees between the trees, and the rec rooms and gyms that are available for use, corporate campuses are home to some of the most prodigiously dedicated workers in the world. At computer companies like Apple and Microsoft, the serene, almost bucolic appearance of the workplace masks the extraordinarily intense, stressful work being done. When a major new product is in development—which is most of the time—employees are expected to put in working hours that early-twentieth-century reformers and union leaders would look upon with horror. In the final months before a crucial and much-ballyhooed product like Windows 95 is launched, many programmers may be found sleeping on office couches at the end of eighteen-hour workdays, not even bothering to go home. Of course, these people, unlike the workers of
the industrial revolution, are often able to purchase stock in the company they work for, and love what they are doing for a living.

The Microsoft corporate campus covers two hundred and seventy acres—it is constantly referred to as “sprawling”—in Redmond, Washington, a suburb of Seattle. Its scattered buildings of different sizes mean that small groups can work off in a far corner of the campus, or several groups can be brought together in a larger building when the need arises. There is a clear intent to play down the idea that working in any particular building carries greater status, but, from all reports, there is inevitably a special aura around Building 8, where Gates has his own office. However, in keeping with a company where corporate jockeying is discouraged by having numerous people hold the same title, Gates’s office is far from the luxurious showplace favored by many CEOs. According to
Time
, the furniture is “standard-issue” and the decorative touches are minimal, dominated by an enormous photo of a Pentium chip. As might be expected, there are photographs of Leonardo da Vinci and Einstein, as well as one of Henry Ford. That one is of special interest. By Gates’s own testimony it is there not so much to remind him of Ford’s famous goal of seeing to it that every American family owned a car—a goal that Gates and others have proclaimed for the personal computer—but to remind him of the fact that Ford’s stubbornness and lack of vision on several fronts eventually allowed many competitors to steal a march on him.

Gates is profoundly aware of the conventional wisdom that the leader in any great leap forward in technology will fail to see the next one coming. “Success is a lousy teacher,” he wrote at the beginning of the third chapter of
The Road Ahead
, titled “Lessons from the Computer Industry.” “It seduces smart people into thinking they can’t lose.” In that chapter he goes on to discuss the failure of first- and second-wave computer giants like IBM, Digital Equipment Corporation, and Wang Laboratories to see the coming personal computer revolution. Gates not only saw it coming while he was still a teenager but he also understood the crucial role that software would play in that revolution. His worst fear seems to be that someday someone will be writing about him as he does about Ken Olsen and An Wang—as a man who missed the next great development. In several speeches and interviews over the years, Gates has spoken of “running scared” or being “scared all the time,” in terms of staying ahead of the game. In recent years, however, he has downplayed those earlier remarks, apparently feeling that the word “scared” is a little too colloquial and adolescent; he has taken instead to talking about meeting new challenges and emphasizing the “fun” he still derives from beating competitors to the punch.

Nevertheless, the way Microsoft runs is clearly designed to avoid the possibility of missing the next big turn in that road ahead. It starts with the people Microsoft hires. The phrase that keeps popping up in respect to the kind of employee the company favors is
intellectual bandwidth
. According to many observers, the company looks for IQ, an open and inquiring mind, and a gift for ingenious problem solving more than for already acquired knowledge. In some ways this goes against the grain of the stereotypical image of the narrowly focused “computer nerd.” The Microsoft philosophy appears to reflect the idea that it is easier to train a brilliant mind to do new kinds of work than it is to train someone with great technical knowledge to think creatively. This doesn’t mean that already acquired
knowledge is disparaged, but rather that the person who has it must also demonstrate an ability to seek new knowledge.

Some say flatly that the company looks for “Bill clones.” Indeed, several journalists who have been allowed to sit in on the meetings that Bill Gates constantly holds with project groups have reported that his programmers often rock back and forth when they are thinking, just as Gates does. They also note, however, that these meetings are very democratic, and that those present are encouraged to challenge and debate statements made by their boss. To have him yell “That’s the stupidest thing I’ve ever heard”—which he often does—is taken not as a rebuke but as a badge of honor. The vast majority of the young programmers are male, although there are numerous women who work in other areas.

It is central to the way Microsoft is run that Bill Gates is himself a programmer of genius. Nathan Myhrvold, the head of Microsoft’s advanced research division and a man of great intellectual breadth, told
Time
, “There are two types of tech companies, those where the guy in charge knows how to surf, and those where he depends on experts on the beach to guide him.” Gates is a preeminent example of the guy who knows how to surf. That means that the average of three meetings a day he holds with project groups can be run with great dispatch. No time need be wasted on explaining what even the most technical matter involves, and that in turn cuts down on the necessity to “schmooze,” which the other kind of CEO often must do to create loyalty and respect. Office politics are not one of Bill Gates’s interests.

One particular aspect of office politics that Gates particularly dislikes is the shifting of blame. He has made it clear
in several articles and speeches that he has tried to avoid that kind of situation at Microsoft. Mistakes are to be learned from, he insists, and instead of wasting time and energy on assigning blame, he wants the focus to be on fixing the problem. In one of his newspaper columns, Gates tells about the discovery of a bug in the Macintosh spreadsheet software called Multiplan, developed by Microsoft and released in 1983. The Multiplan team asked if a free corrected version should be sent out to those who had already purchased Multiplan. Even though that was twenty thousand customers, Gates immediately said yes. From his point of view there was no discussion necessary, even though it cost $250,000 to ship the corrected version.

Gates went on to point out that he had made his own mistake on the original 1981 version of Multiplan, taking out some features so that it could run on the Apple II, as well as on the higher-powered IBM PC. That opened the way for a new company, Lotus, to bring out its own superior spreadsheet, and Lotus 1-2-3 knocked the original Multiplan flat. Everyone, Gates believes, makes mistakes sometimes, often expensive ones, and it is particularly easy to make such an error in an industry that is constantly exploring new areas. So he sees no point in the blame game.

On the other side of the coin, Gates does sometimes worry about the fact that Microsoft has had so few real failures that it may encounter problems dealing with them when they do occur. For that reason, he notes, he hired Craig Mundie in 1992. Mundie knew all about failure. He had been a cofounder of a supercomputer business named Alliant Computer Systems, which had gone under as the market had changed. Gates notes that “Mundie under
stands his mistakes and drew keen lessons from them,” becoming a particularly able asset to Microsoft.

Microsoft now has more than twenty thousand employees, including a modest number overseas. In 1992 alone, it hired twenty-five hundred people. This is a far cry from the early days, when Gates initially balked at Steve Ballmer’s insistence on hiring an additional fifty employees on top of the thirty-five that then worked for the company. But with $9 billion in cash on hand, Gates doesn’t have to worry about becoming overextended in the way he once did, and by comparison with many companies, Microsoft is a fairly lean organization. It does have offices in a number of foreign countries, and parcels out certain work to foreign technical people. In the summer of 1997, the company also announced a million-dollar joint venture in advanced research with Cambridge University in England, a center of scientific thought for centuries, where the celebrated physicist Stephen Hawking, whose son works for Microsoft in Redmond, holds the same university chair that originally was created for Sir Isaac Newton.

But while Gates has been willing to greatly expand his workforce, he has assiduously avoided the IBM model of having many different research centers scattered across America. He has stated that when Microsoft was working directly with IBM, he was struck by the “wasteful intersite rivalry” and “pointless contention” between the various IBM laboratories. A closer association with Hewlett-Packard in recent years has somewhat lessened Gates’s concern about the multi-site model, however. He says that Hewlett-Packard, by giving a particular lab a set agenda that does not change and then enlarging or shrinking that lab on the basis of its success, is able to keep that kind of rivalry under control. It has been suggested that the Hewlett-Pack
ard example lies behind Gates’s willingness to enter into the Cambridge University venture, but at least for now Gates has no plans to open other Microsoft sites in the United States.