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NATIONAL BESTSE JAMES WALLACE SJIM ERIGKSON "Adisquietingbutcaptivatingportraitofacomplexpersonality.HardDrivespinsa fascinating yarn ofthe extremes ofadmiration and hatred that such single- mindednesscaninspire." —SanFrancisco Chronicle Praise for HARD DRIVE byJamesWallace andJim Erickson "Astupendoussuccess story. Thisisthe mostinformativebookyet onBillGatesandMicrosoft." —WashingtonPost "Remarkable....[HardDrive] will almostcertainlyleaveyouwistful. No, notwishing thatyou worked forMicrosoft, which sounds like whatyoumight experience ifyou combined Marine bootcamp, a fraternity party, and, a trip to the zoo. The book will make you wonderwhyyoudidn'tbuyMicrosoftstockwhenitwentpublic." —Wall StreetJournal "Wallace andErickson display anadmirable sense ofjournalistic detachmentanddetail, plumbingthedepthsofGates's experience toseewhatmakes himtick. Everyone from Gates ondown tohis ex-Scoutmasterseemstohavechattedwiththe authors." —San Francisco Chronicle "This well-written book deserves an audience beyond the com puterliterate. Packedwith anecdotes, HardDrivehelps showthat from thebeginning ofhis career totoday, Gates has always been somethingmore thana98-poundmegalomaniac." —DetroitFreePress "An engaging, almost classic tale ofaboywho finds poweringad gets andthenwon'tletgo." —LosAngeles Times "An exciting tale, toldinracy style, with plenty ofdetail andwell researched quotations, all focused ontheenigmaticpersonalityof Bill Gates." —London FinancialTimes "Abitingbiographyandcomputerindustryexpose." —Publishers Weekly "Captivatingreading,moreenthrallingthananythriller''—Nature HARD DRIVE Bill Gates and the Making of the Microsoft Empire JimEri £(cid:127) HarperBusiness ADivisionofWarperCoWmsPublishers Tomymotherandfather;andtoLindaJoyceBuzbee, becauseapromiseis, afterall, apromise. James Tomymother,father, andtoNancy. Jim Ahardcovereditionofthisbookwaspublishedin1992byJohnWiley&Sons, Inc. Itis herereprintedbyarrangementwithJohnWiley&Sons,Inc. harddrive. Copyright©1992byJamesWallace andJim Erickson. Allrightsreserved. PrintedintheUnitedStatesofAmerica.Nopartofthisbookmaybeusedorreproduced inanymannerwhatsoeverwithoutwrittenpermissionexceptinthecaseofbriefquota tions embodiedincriticalarticles and reviews. Forinformation address HarperCollins Publishers,Inc.,10East53rdStreet,NewYork,NY10022. HarperCollinsbooksmaybepurchasedforeducational,business,orsalespromotionaluse. Forinformationpleasewrite:SpecialMarketsDepartment,HarperCollinsPublishers,Inc., 10East53rdStreet,NewYork,NY10022. FirstHarperBusinesseditionpublished1993. LibraryofCongressCataloging-in-PublicationData Wallace,James. 1947- Harddrive:BillGatesandthemakingoftheMicrosoftempire/JamesWallace,Jim Erickson.—1stHarperBusinessed. p. cm. Reprint.Originallypublished:NewYork:Wiley,1992. Includesindex. ISBN0-88730-629-2(pbk.) 1.Gates,Bill,1956- .2.MicrosoftCorporation—History.3.Businessmen—United States—Biography.4.Computersoftwareindustry—UnitedStates—History. I.Erickson,Jim.II.Title [HD9696.C62G3378 1993] 338.4'70053'092—dc20 92-54845 96 97 98 VRRDH 10 Acknowledgments This is not a book about computers or the dazzling tech- nology that sparked one ofthe world's great revolutions lessthan two decades ago.Rather, it is astory about people, a remarkable collection ofindividuals led by one man, BillGates, whose drive, genius, vision, and entrepreneurial spirit created one ofthe greatsuccessstoriesinthe historyofAmericanbusi ness.We wanted to write abook that would appeal asmuch to those who know nothing about computers asit would to those who regardthese machinesasthe most important thing in their lives. We hope we have done that. The book grew out ofa series ofstories on Gates and Mi crosoft published in the Seattle Post-Intelligencer newspaper in Mayof1991. The subsequent project, abook-length profile of Gates, took the better part ofa year to complete and was un dertaken withoutthe help orcooperationofMicrosoft.Even so, more than 150 people, many ofthem pastandcurrent employ ees and executives ofMicrosoft, were interviewed. We are in debted to everyone who helped us tell this story, regardless of how much ofwhat they told us found its way into the book. We would like to begin by thanking J.D. Alexander, exec utive editor of the Seattle Post-Intelligencer, who not only al lowed usthe time to research andwrite this bookbut alsogave his support and generously allowed some ofthe paper's pho tographs ofGates to be reprinted in the book. ACKNOWLEDGMENTS Others at the paper we would like to thank are Lytton Smith, whohelpedwiththeresearch, andall the peopleinsys tems, who provided technical assistance. Wearedeeplygratefultoourpublisher,JohnWiley &Sons, who saw the possibilities of such abook andgave us the op portunity to do it. No one deserves more credit, or thanks, than our editor, RogerScholl, whose patience, editorial guidance, hard work, andencouragementwereinvaluable. Anyonewhowritesabook should be sofortunate to have such an understanding editor. Thisbookwouldnothavebeen possiblewithout the tireless eflForts ofseveralothers atJohnWiley&Sons, including Marcia Samuels,production manager, andElizabeth Doble, director of production. Our appreciation goes to all those at Impressions in Madison, Wisconsin, whospentmanyhourscopyediting. Finally, special thanks to many good friends who saw us through the months this project took, and who continuously offeredtheir support—in particular, to Mary Williams, Angelo Bruscas, Ceceilia Dominique, and Dick Clever. In additionto interviews, our researchwasbasedon anum ber ofbooks, national magazines, newspapers, andtradepub lications. The books includedFire inthe Valley by Paul Frei- bergerandMichael Swaine; HackersbyStevenLevy;BlueMagic by James Chposky andTedLeonsis; The Making ofMicrosoftby Daniel Ichbiah andSusan Knepper; andProgrammers at Work by Susan Lammers. The newspapers uponwhichwe basedour research included the Seattle Post-Intelligencer, Seattle Times, New York Times, WallStreetJournal, Washington Post, LATimes andSanJoseMercuryNews. NationalmagazinesincludedForbes, Fortune, Money,Time,Newsweek,and BusinessWeek,aswell as the trade publicationsPCWeek andInfoWorld. For those curiousabout suchthings, this book waswritten on a Leading Edge compatible PC with an 8088 chip and XyWrite word processing program. JamesWallace and Jim Erickson Seattle, February 1992 Contents Prologue 1 1 The Early Years 5 2 "It's Going to Happen" 53 3 The Microkids 85 4 Hitching a Ride with Big Blue 139 5 Growing Pains 207 6 King of the Hill 319 Index 421 HARD DRIVE PROLOGUE The Winds of Fortune W illiamGatesIII, chairman of the largestcomputer soft ware company onearth, stood nervously atthe front of the ballroomofthe 308-foot cruise yacht New Yorker. He was about to unveil Microsoft's fifth and latest version ofthe most popular piece of software evercreated, acomputer operating system known asMS-DOS. It wasto be the biggestlaunch of a software product in computer industry history. More than 500 people had turned outonahumidTuesdayeveninginNewYorkCityinthesummer of 1991toboardthe yacht—playfully dubbed "DOS Boat9'-to listento Gates andhiscorporate sidekick, Microsoft operating systems chiefSteve Ballmer, make an impassioned sales pitch for MS-DOS 5.0. Bothindustryanalysts andthe presshadgath ered for the gala event, which promised free food, music by jazzmasterDaveBrubeck, andafive-hour cruiseontheHudson River andaroundthe New York City harbor. Computer hard ware and software executives had flown in from around the countryto getaglimpse ofGates andtolistentothe industry's HARDDRIVE enfant terrible andbiggest star announce where he,and Micro soft, were headed. At 35, Gates was atthe pinnacle of his young career. In 1990Microsoft, thecompanyheandchildhoodfriendPaulAllen had founded barely sixteen years before, hadbecome the first software company to sellmorethan abilliondollars worth of productsinasingle year. Gateswastheundisputedmastermind of that success, abrilliant technocrat, ruthless salesman, and manipulative—some saiddevious—businessman. His company's astounding ascension had justafew years earliermade himthe youngest billionaire inthehistory ofAmerica. By1992 his net worth stood at more than $4 billion, making him the second richest maninthe country. His word had become the closest thing to gospel in the godless computer industry. A month earlier in Atlanta, at an industry trade show known asComdex where Gates was the keynote speaker, people lined up for twocityblocks to hear himspeak onthe future oftheindustry. Executives inbusiness suits spilled outinto theaisles arid sat cross-legged onthe floor when the seats were filled. But on this June evening inthe Big Apple, asGates movedstifflytothemicrophones atthepodium ontheNew Yorker, powerfulandopposing forces were gathered across the Hudson, inArmonk, New York, headquarters ofIn ternational Business Machines. Gates straightened his 5-foot-l1-inch frame and began his pitch, acondensed version ofthehistory ofMS-DOS. * "In the last ten years, DOS hasbecome the foundation of the PC industry and has sold more than ten times any other software package," Gates intoned in his oddly high-pitched voice, whichcrackedoccasionallylikeanervousteenager's, de spitethe extensive speechlessons he hadtaken months before. Microsoft's operatingsystem,he went on,wasnow installedon more than 60 million personal computers, which represented about 75 percent of all the personal computers in the world. He predictedthat another 18million copies of DOSwouldbe