Bill Gates – Admirable and not so Admirable
I love and admire Bill Gates. I love him for his philanthropy and fundamental goodness. I admire him for his persistence and good fortune (not his fortune). I can’t say that I know him, although we’ve met a couple of times. That was before he was rich and famous. But then, for most of us who got our start in the microcomputer business in the mid-70s, Bill was a presence that was hard to miss.
My microcomputer start was in 1976 and I was the proud owner of a MITS Altair 8800 (yup, the one with switches), a Heath H-8 (yup, “split-octal), an Ohio Scientific Challenger 1P (graphics!), a SC/MP based development kit (NS Introkit), an early TRS-80, and an Apple II (before the +). I was in the micro-computer business early and enjoyed the era before the big names in microcomputing got BIG. Thus, I first met Bill at COMDEX when you could actually stop by and say “Hi”. But then, I also had the opportunity to meet other key people in the business and sat in on discussions regarding its future. In 1977, for example, one of the major issues was Bill’s dispute with MITS and his “Open Letter to Hobbyists” (of Feb. 3, 1976).
In what many considered to be significant hypocrisy, Bill essentially accused “hobbyists” of stealing BASIC. To understand why they thought this, we should take a quick look at BASIC. The beginner’s all-purpose symbolic instruction code set was invented at Dartmouth College in 1963 by John George Kemeny and Tom Kurtzas as a teaching tool for undergraduates. It was developed over time as a student project largely funded via public (NSF) grants. Thus, it was open source “shareware” from the start. When Bill and Paul read about the MITS computer (above), they (like many) say its market potential and thought that some computer language was needed to make more functional and appealable. MITS founder Ed Roberts agreed and accepted an offered demonstration. But Bill and Paul didn’t have a product – so they “stole” Dartmouth BASIC, modified it using stolen computer time (at Harvard) and sold an unfinished product to MITS.
MITS hired Bill Gates and Paul Allen to maintain and improve it, causing Gates to take a leave of absence from Harvard. They hired a fellow Harvard student (Monte Davidoff) to write floating-point arithmetic routines for the interpreter, the key feature differentiating their BASIC from Dartmouth BASIC. As expected, Altair BASIC was MITS's most popular interpreter with hobbyists. Unfortunately, they viewed it as share-ware and thought nothing of freely copying the BASIC interpreter and distributing it. (MITS didn’t really care because they weren’t making money on the language anyway). Thus, the strongly-worded Open Letter to Hobbyists issued by Bill in 1976 accused them of “theft”. Interestingly, Bill’s position was based upon an argument that no one would develop computer software unless people paid for it. The hobbyists rejected that idea and reminded Bill that the BASIC he had stolen was produced without a profit motive. (The text of the letter is below).
Micro-soft became the primary supplier for BASIC interpreters  and it remained the core of Microsoft's business until the early 1980s when it decided to enter the operating system market. That story also requires a bit of historical background.
The early personal computers used cassette tapes as magnetic storage media to hold both programs and data. They required manual entry of bootstrap code each time you started the computer so it knew to go to a data port and load the information from the tape (which you played manually). Then, a “cassette operating system” was loaded onto ROM (built in permanent memory) so that machines knew to start a cassette player automatically when needed (you still had to select “Play” or “Record” manually). Finally, along came somewhat affordable disk drives and the genius of Steve Wozniak who wrote a self-booting program for Apple computers that knew how to load a “disk operating system” or “DOS” each time the computer was started. Apple DOS was fairly capable, simple, and reliable.
Independently, Gary Kildall (with Digital Research, Inc.) produced a disk operating system called “CP/M” (Control Program for Microcomputers) which focused upon a different microprocessor (Intel) and different “bus” (S-100) than Apple. CP/M emerged as an early "industry standard" for professional microcomputer applications into the mid-1980s largely because its design reduced the amount of programming required to develop and install applications on new “platforms”. CP/M greatly increased the functionality of micro-computers and thus the market size for related hardware and software; enough so that the industry giant decided to get involved.
When IBM decided to enter the microcomputer arena (1980 – the IBM Personal Computer), most experts thought that the newest version of CP/M (“CP/M-86”) would be IBM’s choice as its standard operating system. However, negotiations between DRI and IBM never got past development and licensing terms and so IBM went shopping. Microsoft didn’t have an operating system, but contracted with IBM to provide one.
Microsoft (the name was changed to remove the hyphen) then went to Tim Paterson of Seattle Computer Products and purchased his “Quick and Dirty Operating System" (QDOS - written for the Intel 8086 based computer) for $50,000 (not mentioning the IBM deal). Paterson apparently didn’t mention that he had purchased a DRI CP/M technical manual and produced QDOS in only six weeks – a ridiculously short time. The experts at Microsoft ignored the obvious fact that many of the basic concepts and internal mechanisms of QDOS were almost identical to those in CP/M. The made some worthy improvements (especially the “FAT” or file attribute table structure) mostly to make it easier to port products from CP/M to MS-DOS. (In 1981, Tim Paterson quit Seattle Computer Products and found employment at Microsoft. He later claimed that Microsoft had dealt with him unfairly and they settled out of court).
Kildall confronted IBM, which at the time claimed that PC-DOS was its own product, and threatened to sue. Instead IBM persuaded him that they would offer CP/M-86 with their PC in exchange for a release of liability. But it was too late – the industry impetus went to PC-DOS. To his credit, Bill had talked IBM into letting Microsoft retain the rights to market MS-DOS separate from the PC-DOS and Microsoft had a new chief money maker and a strangle-hold on the personal computer marketplace.
But wait, we’re not done yet. Another strange thing happened on the way to the marketplace…
By the mid 1980’s, the personal computer marketplace was becoming a three-way race: there was IBM (PC-DOS), Apple and everybody else (rapidly moving to MS-DOS). But the wizards at Xerox’s Palo Alto Research Center (PARC) were working on a new idea known as a graphical user interface (or “GUI”). Steve Jobs, co-founder of Apple, visited PARC in 1979 (after buying Xerox stock) and was impressed by their GUI (windows, pull-down menus, clickable buttons, scroll bars, icons, images ,the mouse and graphics based interaction). He wanted to buy the idea, but Xerox had no intended use for it and said he could use it freely.
Jobs took the concept back to Apple where they were in early stage development of their first business oriented computer named LISA (Local Integrated Software Architecture). Jobs and the Apple engineers (some from PARC) added the drop-down menu bar, multi-tasking, a hierarchal file system, the ability to cut and paste, and “folders”. Apple invested $50 million in Lisa’s hardware development and $100 million in its software. (Only 10,000 Lisa’s were ever sold – one to the author). Luckily for Apple, two things happened: they hired John Scully away from Pepsi-Co and a different team was working on a personal computer using the same GUI – the “Macintosh”. With the magic of a different marketing approach (starting with the famous “1984” commercial in 1983) and a different target audience, Apple re-created the personal computer marketplace. Microsoft could see the “writing on the wall” and the end of MS-DOS.
In November of 1983 Microsoft announced Microsoft Windows, their GUI based operating system interface for IBM-PC type computers, and promised that it would be on the shelf by April 1984. Microsoft finally shipped the unworkable Windows 1.0 in November of 1985 – having successfully eliminated competing GUIs (such as GEM by DRI) by repeatedly telling third-party developers that Windows was “almost ready”. And then, of course, there were the claims that Microsoft had stolen ideas from Apple. Bill responded with his odd thinking - I think it’s more like we both had a rich neighbor named Xerox and when you broke in to steal their TV and found out I'd been there first, you said: "Hey that's no fair! I wanted to steal the TV set!” (Bill's response to Steve Jobs’ accusation, partially paraphrased).
In the ensuing lawsuit (late 1985), Bill pulled out another victory from defeat when Apple settled for an agreement that Microsoft would license MacIntosh technology in Windows 1.0 while leaving the door open for the future use of that technology. Therein, Apple lost its exclusive rights to certain key design elements of their greatly improved Xerox GUI. By March of 1986, Microsoft was ready to “go public” and Bill was suddenly worth $350,000,000 just on his 45% stock holding. Some thought Microsoft’s public offering was perfectly timed – Microsoft was “riding the bubble” of Windows before the public really had a chance to use it.
Windows 1.0 was a terrible product (slow, buggy, and awkward) that floundered on the market until January 1987. Fortunately for Microsoft, Aldus’ PageMaker 1.0 was released as the first WYSIWYG (what you see is what you get) desktop-publishing program for the PC. It was, as they say, a “game changer”. People began to see the potential for Macintosh-like features on their cheaper PCs. Later in 1987, Microsoft released “Excel”, their Windows-compatible spreadsheet (an idea some thought was stolen from the Lotus 1-2-3 product). And then, in December of 1987, Microsoft released Windows 2.0 that looked much more like the Macintosh software. It had icons to represent programs and files and better hardware support. Apple filed a lawsuit against Microsoft in 1988 alleging that Microsoft had broken the 1985 agreement.
Apple claimed that Microsoft had infringed on 170 Apple copyrights, but the court said that the licensing agreement gave Microsoft the rights to use all but nine of the copyrights and subsequently held that the remaining nine copyrights would not be covered by copyright law. I hope that Microsoft made Judge Walker a major share-holder. Windows was set to dominate the PC marketplace and Bill was set to become the world’s richest man – based mostly upon BASIC taken from Dartmouth, MS-DOS taken from DRI, and Windows taken from Xerox and Apple. Enjoy that thought the next time you see the “blue screen of death” or have to re-install Windows after an update from Microsoft.
Just to complete the picture, I will add a few summary notes. Within the industry, Microsoft is viewed as a company that uses its customers as test subjects – repeatedly introducing products before they’re ready just to get a jump on their competition and to reduce their costs. They are viewed as product and idea thieves because they take freely from the work of others. When they can’t get away with blatant theft of such, they tend to bully a sale to gain rights to intellectual properties. They force competitors out of the market with underhanded tactics and bully the marketplace with their monopolistic practices. Yes, Microsoft is the company we love to hate – and envy.
So, kudos to Bill for changing his fortune and gathering his fortune through smarts, shrewdness, ruthlessness, and more than a little ethical inversion. For whatever cause, I sincerely applaud him for using his wealth wisely and somewhat responsibly. And, I still think he’s fundamentally a “nice guy” who you don’t want to have to negotiate against.
AN OPEN LETTER TO HOBBYISTS
By William Henry Gates III
February 3, 1976
An Open Letter to Hobbyists
To me, the most critical thing in the hobby market right now is the lack of good software courses, books and software itself. Without good software and an owner who understands programming, a hobby computer is wasted. Will quality software be written for the hobby market?
Almost a year ago, Paul Allen and myself, expecting the hobby market to expand, hired Monte Davidoff and developed Altair BASIC. Though the initial work took only two months, the three of us have spent most of the last year documenting, improving and adding features to BASIC. Now we have 4K, 8K, EXTENDED, ROM and DISK BASIC. The value of the computer time we have used exceeds $40,000.
The feedback we have gotten from the hundreds of people who say they are using BASIC has all been positive. Two surprising things are apparent, however, 1) Most of these "users" never bought BASIC (less than 10% of all Altair owners have bought BASIC), and 2) The amount of royalties we have received from sales to hobbyists makes the time spent on Altair BASIC worth less than $2 an hour.
Why is this? 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 worked on it get paid?
Is this fair? One thing you don't do by stealing software is get back at MITS for some problem you may have had. MITS doesn't make money selling software. The royalty paid to us, the manual, the tape and the overhead make it a break-even operation. One thing you do do is prevent good software from being written. Who can afford to do professional work for nothing? What hobbyist can put 3-man years into programming, finding all bugs, documenting his product and distribute for free? The fact is, no one besides us has invested a lot of money in hobby software. We have written 6800 BASIC, and are writing 8080 APL and 6800 APL, but there is very little incentive to make this software available to hobbyists. Most directly, the thing you do is theft.
What about the guys who re-sell Altair BASIC, aren't they making money on hobby software? Yes, but those who have been reported to us may lose in the end. They are the ones who give hobbyists a bad name, and should be kicked out of any club meeting they show up at.
I would appreciate letters from any one who wants to pay up, or has a suggestion or comment. Just write to me at 1180 Alvarado SE, #114, Albuquerque, New Mexico, 87108. Nothing would please me more than being able to hire ten programmers and deluge the hobby market with good software.
General Partner, Micro-Soft
 With the first 8K “Micro-soft” BASIC.
 With the extended (12k) Benton Harbor BASIC (an adaptation of Dartmouth BASIC that included PEEK, POKE, PIN, OUT, sin, cos, log and a user function to permit access to machine language routines). In BH BASIC all arguments were expressions and the extended version included strings and a number of other unique functions.
 Microsoft 8K BASIC in ROM.
 With three versions of BASIC - Level I based upon Tiny BASIC, Level II was a condensed 16K Microsoft BASIC (to fit in the available 12 KB RAM), and Level III was Microsoft’s cassette based enhanced BASIC (16K).
 With Wozniak’s Integer BASIC (and Sweet16) in ROM and later with Applesoft BASIC from disk.
 Under the terms of the original agreement between MITS and Micro-soft, MITS was to receive the rights to the interpreter after a set amount of royalties had been paid ($180,000?). However, Micro-soft developed other versions of the interpreter and when they left MITS a dispute arose over whether the set amount had been paid and whether the agreement applied to the other versions. The dispute went to an arbitrator who surprisingly decided in favor of Micro-soft.
 If Steve’s integer BASIC had included floating point operations, Micro-soft might not have made it as a business.
 Some sources claimed that Kildall’s wife refused to sign a non-disclosure agreement and negotiations failed early. But better sources state that negotiations were conducted and settlement could not be reached on royalties.
 The all-important file-handling data structures and programming interface were “identical”.
 For an interesting re-write of history, see Tim’s comments at http://dosmandrivel.blogspot.com/. He went from his BS in Computer Science (June of 1978) to author a “new” operating system by August of 1980 – which he started in April of 1980. That’s a striking accomplishment for someone who admitted to not “hav[ing] much experience in the computer industry,” being a “hardware guy”, and whose “hands-on experience with operating systems was limited to those I had used on microcomputers.” [Emph. added].
 In 1985, Apple tried dropping the Lisa’s price in half, renamed it “Macintosh XL” and bundled it with the MacWorks software, but it still wouldn’t sell.
 The original name of the product was “Interface Manager”, but Rowland Hanson convinced Bill that “Windows” was a better name.
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