Microsoft's Odd Couple
http://www.vanityfair.com/business/features/2011/05/paul-allen-201105?printable=true¤tPage=all
Microsoft's Odd Couple
LIFE 2.0 Paul Allen in his office at the headquarters of his venture-capital firm, Vulcan, in Seattle, Washington.
Adapted from Idea Man, by Paul Allen, to be published this month by Portfolio, a member of the Penguin Group (USA) Inc.; © 2011 by the author.
My high school in Seattle, Lakeside, seemed conservative on the surface, but it was educationally progressive. We had few rules and lots of opportunities, and all my schoolmates seemed passionate about something. But the school was also cliquish. There were golfers and tennis players, who carried their rackets wherever they went, and in the winter most everyone went skiing. I'd never done any of these things, and my friends were the boys who didn't fit into the established groups. Then, in the fall of my 10th-grade year, my passion found me.
My honors-geometry teacher was Bill Dougall, the head of Lakeside's science and math departments. A navy pilot in World War II, Mr. Dougall had an advanced degree in aeronautical engineering, and another in French literature from the Sorbonne. In our school's best tradition, he believed that book study wasn't enough without real-world experience. He also realized that we'd need to know something about computers when we got to college. A few high schools were beginning to train students on traditional mainframes, but Mr. Dougall wanted something more engaging for us. In 1968 he approached the Lakeside Mothers Club, which agreed to use the proceeds from its annual rummage sale to lease a teleprinter terminal for computer time-sharing, a brand-new business at the time.
On my way to math class in McAllister Hall, I stopped by for a look. As I approached the small room, the faint clacking got louder. I opened the door and found three boys squeezed inside. There was a bookcase and a worktable with piles of manuals, scraps from notebooks, and rolled-up fragments of yellow paper tape. The students were clustered around an overgrown electric typewriter, mounted on an aluminum-footed pedestal base: a Teletype Model ASR-33 (for Automatic Send and Receive). It was linked to a GE-635, a General Electric mainframe computer in a distant, unknown office.
The Teletype made a terrific racket, a mix of low humming, the Gatling gun of the paper-tape punch, and the ka-chacko-whack of the printer keys. The room's walls and ceiling were lined with white corkboard for soundproofing. But though it was noisy and slow, a dumb remote terminal with no display screen or lowercase letters, the ASR-33 was also state-of- the-art. I was transfixed. I sensed that you could do things with this machine.
That year, 1968, would be a watershed in matters digital. In March, Hewlett-Packard introduced the first programmable desktop calculator. In June, Robert Dennard won a patent for a one-transistor cell of dynamic random-access memory, or DRAM, a new and cheaper method of temporary data storage. In July, Robert Noyce and Gordon Moore co-founded Intel Corporation. In December, at the legendary "mother of all demos" in San Francisco, the Stanford Research Institute's Douglas Engelbart showed off his original versions of a mouse, a word processor, e-mail, and hypertext. Of all the epochal changes in store over the next two decades, a remarkable number were seeded over those 10 months: cheap and reliable memory, a graphical user interface, a "killer" application, and more.
It's hard to convey the excitement I felt when I sat down at the Teletype. With my program written out on notebook paper, I'd type it in on the keyboard with the paper-tape punch turned on. Then I'd dial into the G.E. computer, wait for a beep, log on with the school's password, and hit the Start button to feed the paper tape through the reader, which took several minutes.
At last came the big moment. I'd type "RUN," and soon my results printed out at 10 characters per second—a glacial pace next to today's laser printers, but exhilarating at the time. It would be quickly apparent whether my program worked; if not, I'd get an error message. In either case, I'd quickly log off to save money. Then I'd fix any mistakes by advancing the paper tape to the error and correcting it on the keyboard while simultaneously punching a new tape—a delicate maneuver nowadays handled by a simple click of a mouse and a keystroke. When I achieved a working program, I'd secure it with a rubber band and stow it on a shelf.
Soon I was spending every lunchtime and free period around the Teletype with my fellow aficionados. Others might have found us eccentric, but I didn't care. I had discovered my calling. I was a programmer.
One day early that fall, I saw a gangly, freckle-faced eighth-grader edging his way into the crowd around the Teletype, all arms and legs and nervous energy. He had a scruffy-preppy look: pullover sweater, tan slacks, enormous saddle shoes. His blond hair went all over the place. You could tell three things about Bill Gates pretty quickly. He was really smart. He was really competitive; he wanted to show you how smart he was. And he was really, really persistent. After that first time, he kept coming back. Many times he and I would be the only ones there.
Bill came from a family that was prominent even by Lakeside standards; his father later served as president of the state bar association. I remember the first time I went to Bill's big house, a block or so above Lake Washington, feeling a little awed. His parents subscribed to Fortune, and Bill read it religiously. One day he showed me the magazine's special annual issue and asked me, "What do you think it's like to run a Fortune 500 company?" I said I had no idea. And Bill said, "Maybe we'll have our own company someday." He was 13 years old and already a budding entrepreneur.
Where I was curious to study everything in sight, Bill would focus on one task at a time with total discipline. You could see it when he programmed—he'd sit with a marker clenched in his mouth, tapping his feet and rocking, impervious to distraction. He had a unique way of typing, sort of a six-finger, sideways scrabble. There's a famous photograph of Bill and me in the computer room not long after we first met. I'm seated on a hard-back chair at the teleprinter in my dapper green corduroy jacket and turtleneck. Bill is standing to my side in a plaid shirt, his head cocked attentively, eyes trained on the printer as I type. He looks even younger than he actually was. I look like an older brother, which was something Bill didn't have.
Getting with the Program
When Bill got the news that he'd been accepted at Harvard University, he wasn't surprised; he'd been riding high since scoring near the top in the Putnam Competition, where he'd tested his math skills against college undergraduates around the country. I offered a word to the wise: "You know, Bill, when you get to Harvard, there are going to be some people a lot better in math than you are."
"No way," he said. "There's no way!"
And I said, "Wait and see."
I was decent in math, and Bill was brilliant, but by then I spoke from my experience at Washington State. One day I watched a professor cover the blackboard with a maze of partial differential equations, and they might as well have been hieroglyphics from the Second Dynasty. It was one of those moments when you realize, I just can't see it. I felt a little sad, but I accepted my limitations. I was O.K. with being a generalist.
For Bill it was different. When I saw him again over Christmas break, he seemed subdued. I asked him about his first semester, and he said glumly, "I have a math professor who got his Ph.D. at 16." The course was purely theoretical, and the homework load ranged up to 30 hours a week. Bill put everything into it and got a B. When it came to higher mathematics, he might have been one in a hundred thousand students or better. But there were people who were one in a million or one in 10 million, and some of them wound up at Harvard. Bill would never be the smartest guy in that room, and I think that hurt his motivation. He eventually switched his major to applied math.
Through the spring semester of 1974, Bill kept urging me to move to Boston. We could find work together as programmers, he said; some local firms sounded interested. We'd come up with some exciting project. In any case, we'd have fun. Why not give it a try?
Drifting at Washington State, I was ready to take a flier. I mailed my résumé to a dozen computer companies in the Boston area and got a $12,500 job offer from Honeywell. If Boston didn't work out, I could always return to school. In the meantime, I'd sample a new part of the country, and my girlfriend, Rita, had agreed to join me. We had grown more serious and wanted to live together as a trial run for marriage. Plus, Bill would be there. At a minimum, we could put our heads together on the weekends.
Rita and I had come to New England knowing two people. One was a brilliant, troubled Lakesider who would insinuate that he was working for the Mafia. Then there was Bill. Rita had roasted a chicken one night for dinner and couldn't take her eyes off him. "Did you see that?" she said after he'd left. "He ate his chicken with a spoon. I have never in my life seen anyone eat chicken with a spoon." When Bill was thinking hard about something, he paid no heed to social convention. Once, he offered Rita fashion advice—basically, to buy all your clothes in the same style and colors and save time by not having to match them. For Bill, that meant any sweater that went with tan slacks.
Each time I brought an idea to Bill, he would pop my balloon. "That would take a bunch of people and a lot of money," he'd say. Or "That sounds really complicated. We're not hardware gurus, Paul," he'd remind me. "What we know is software." And he was right. My ideas were ahead of their time or beyond our scope or both. It was ridiculous to think that two young guys in Boston could beat IBM on its own turf. Bill's reality checks stopped us from wasting time in areas where we had scant chance of success.
So when the right opportunity surfaced, as it did that December, it got my full attention: an open invitation by the MITS company, in Albuquerque, to build a programming language for their new Altair microcomputer, intended for the hobbyist market.
Some have suggested that our Altair basic was remarkable because we created it without ever seeing an Altair or even a sample Intel 8080, the microprocessor it would run on. What we did was unprecedented, but what is less well understood is that we had no choice. The Altair was little more than a bare-bones box with a C.P.U.-on-a-chip inside. It had no hard drive, no floppy disk, no place to edit or store programs.
We moved into Harvard's Aiken Computation Lab, on Oxford Street, a one-story concrete building with an under-utilized time-sharing system. The clock was ticking on us from the start. Bill had told Ed Roberts, MITS'S co-founder and C.E.O., that our BASIC was nearly complete, and Ed said he'd like to see it in a month or so, when in point of fact we didn't even have an 8080 instruction manual.
In building our homegrown basic, we borrowed bits and pieces of our design from previous versions, a long-standing software tradition. Languages evolve; ideas blend together; in computer technology, we all stand on others' shoulders. As the weeks passed, we got immersed in the mission—as far as we knew, we were building the first native high-level programming language for a microprocessor. Occasionally we wondered if some group at M.I.T. or Stanford might beat us, but we'd quickly regain focus. Could we pull it off? Could we finish this thing and close the deal in Albuquerque? Yeah, we could! We had the energy and the skill, and we were hell-bent on seizing the opportunity.
We worked till all hours, with double shifts on weekends. Bill basically stopped going to class. Monte Davidoff, a Harvard freshman studying advanced math who had joined us, overslept his one-o'clock French section. I neglected my job at Honeywell, dragging into the office at noon. I'd stay until 5:30, and then it was back to Aiken until three or so in the morning. I'd save my files, crash for five or six hours, and start over. We'd break for dinner at Harvard House of Pizza or get the pupu platter at Aku Aku, a local version of Trader Vic's. I had a weakness for their egg rolls and butterflied shrimp.
I'd occasionally catch Bill grabbing naps at his terminal during our late-nighters. He'd be in the middle of a line of code when he'd gradually tilt forward until his nose touched the keyboard. After dozing for an hour or two, he'd open his eyes, squint at the screen, blink twice, and resume precisely where he'd left off—a prodigious feat of concentration.
Working so closely together, the three of us developed a strong camaraderie. Because our program ran on top of the multi-user TOPS-10 operating system, we could all work simultaneously. We staged nightly competitions to squeeze a sub-routine—a small portion of code within a program that performs a specific task—into the fewest instructions, taking notepads to separate corners of the room and scrawling away. Then someone would say, "I can do it in nine." And someone else would call out, "Well, I can do it in five!"
A few years ago, when I reminisced with Monte about those days, he compared programming to writing a novel—a good analogy, I thought, for our approach to Altair BASIC. At the beginning we outlined our plot, the conceptual phase of the coding. Then we took the big problem and carved it into its component chapters, from the hundreds of sub-routines to their related data structures, before putting all the parts back together.
By late February, eight weeks after our first contact with MITS, the interpreter (which would save space by executing one snippet of code at a time) was done. Shoehorned into about 3,200 bytes, roughly 2,000 lines of code, it was one tight little BASIC—stripped down, for sure, but robust for its size. No one could have beaten the functionality and speed crammed into that tiny footprint of memory: "The best piece of work we ever did," as Bill told me recently. And it was a true collaboration. I'd estimate that 45 percent of the code was Bill's, 30 percent Monte's, and 25 percent mine, excluding my development tools.
All things considered, it was quite an achievement for three people our age. If you checked that software today, I believe it would stack up against anything written by our old mentors. Bill and I had grown into crack programmers. And we were just getting started.
As I got ready to go to Albuquerque, Bill began to worry. What if I'd screwed up one of the numbers used to represent the 8080 instructions in the macro assembler? Our BASIC had tested out fine on my simulator on the PDP-10, but we had no sure evidence that the simulator itself was flawless. A single character out of place might halt the program cold when it ran on the real chip. The night before my departure, after I knocked off for a few hours of sleep, Bill stayed up with the 8080 manual and triple-checked my macros. He was bleary-eyed the next morning when I stopped by en route to Logan Airport to pick up the fresh paper tape he'd punched out. The byte codes were correct, Bill said. As far as he could tell, my work was error-free.
The flight was uneventful up until the plane's final descent, when it hit me that we'd forgotten something: a bootstrap loader, the small sequence of instructions to tell the Altair how to read the BASIC interpreter and then stick it into memory. A loader was a necessity for microprocessors in the pre-ROM era; without one, that yellow tape in my briefcase would be worthless. I felt like an idiot for not thinking of it at Aiken, where I could have coded it without rushing and simulated and debugged it on the PDP-10.
Now time was short. Minutes before landing, I grabbed a steno pad and began scribbling the loader code in machine language—no labels, no symbols, just a series of three-digit numbers in octal (base 8), the lingua franca for Intel's chips. Each number represented one byte, a single instruction for the 8080; I knew most of them by heart. "Hand assembly" is a famously laborious process, even in small quantities. I finished the program in 21 bytes—not my most concise work, but I was too rushed to strive for elegance.
I came out of the terminal sweating and dressed in my professional best, a tan Ultrasuede jacket and tie. Ed Roberts was supposed to pick me up, so I stood there for 10 minutes looking for someone in a business suit. Not far down the entryway to the airport, a pickup truck pulled up and a big, burly, jowly guy—six feet four, maybe 280 pounds—climbed out. He had on jeans and a short-sleeved shirt with a string tie, the first one I'd seen outside of a Western. He came up to me, and in a booming southern accent he asked, "Are you Paul Allen?" His wavy black hair was receding at the front.
I said, "Yes, are you Ed?"
He said, "Come on, get in the truck."
As we bounced over the city's sunbaked streets, I wondered how all this was going to turn out. I'd expected a high-powered executive from some cutting-edge entrepreneurial firm, like the ones clustered along Route 128, the high-tech beltway around Boston. The reality had a whole different vibe. (On a later trip to Albuquerque, I came down from a plane and got hit in the head by tumbleweed on the tarmac. I wasn't in Massachusetts anymore.)
Ed said, "Let's go over to MITS so you can see the Altair." He drove into a low-rent commercial area by the state fairgrounds and stopped at a one-story strip mall. With its brick façade and big plate-glass windows, the Cal-Linn Building might have looked modern in 1955. A beauty salon occupied one storefront around the corner. I followed Ed through a glass door and into a light industrial space that housed MITS's engineering and manufacturing departments. As I passed an assembly line of a dozen or so weary-looking workers, stuffing kit boxes with capacitors and Mylar circuit boards, I understood why Ed was so focused on getting a BASIC. He had little interest in software, which he referred to as variable hardware, but he knew that the Altair's sales wouldn't keep expanding unless it could do something useful.
When I arrived, there were only two or three assembled computers in the whole plant; everything else had gone out the door. Ed led me to a messy workbench, where I found a sky-blue metal box with ALTAIR 8800 stenciled on a charcoal-gray front panel. Modeled after a popular minicomputer, with rows of toggle switches for input and flashing red L.E.D.'s for output, the Altair was 7 inches high by 18 inches wide. It seemed fantastic that such a small box could contain a general-purpose computer with a legitimate C.P.U.
Hovering over the computer was Bill Yates, a sallow, taciturn string bean of a man with wire-rimmed glasses—Stan Laurel to Ed's Oliver Hardy. He was running a memory test to make sure the machine would be ready for me, with the cover flipped up so I could see inside. Plugged into slots on the Altair bus—an Ed Roberts innovation that was to become the industry standard—were seven 1K static-memory cards. It might have been the only microprocessor in the world with that much random-access memory, more than enough for my demo. The machine was hooked up to a Teletype with a paper-tape reader. All seemed in order.
It was getting late, and Ed suggested that we put off the BASIC trial to the next morning. "How about dinner?" he said. He took me to a three-dollar buffet at a Mexican place called Pancho's, where you got what you paid for. Afterward, back in the truck, a yellow jacket flew in and stung me on the neck. And I thought, This is all kind of surreal. Ed said he'd drop me at the hotel that he'd booked for me, which I'd thought would be something like a Motel 6. I'd brought only $40; I was chronically low on cash, and it would be years before I'd have a credit card. I blanched when Ed pulled up to the Sheraton, the nicest hotel in town, and escorted me to the reception desk.
"Checking in?" the clerk said. "That will be $50."
It was one of the more embarrassing moments of my life. "Ed, I'm sorry about this," I stammered, "but I don't have that kind of cash."
He just looked at me for a minute; I guess I wasn't what he'd been expecting, either. Then he said, "That's O.K., we'll put it on my card."
The following morning, with Ed and Bill Yates hanging over my shoulder, I sat at the Altair console and toggled in my bootstrap loader on the front panel's switches, byte by byte. Unlike the flat plastic keys on the PDP-8, the Altair's were thin metal switches, tough on the fingers. It took about five minutes, and I hoped no one noticed how nervous I was. This isn't going to work, I kept thinking.
I entered my 21st instruction, set the starting address, and pressed the Run switch. The machine's lights took on a diffused red glow as the 8080 executed the loader's multiple steps—at least that much seemed to be working. I turned on the paper-tape reader, and the Teletype chugged as it pulled our BASIC interpreter through. At 10 characters per second, reading the tape took seven minutes. (People grabbed coffee breaks while computers loaded paper tape in those days.) The MITS guys stood there silently. At the end I pressed Stop and reset the address to 0. My index finger poised over the Run switch once again …
To that point, I couldn't be sure of anything. Any one of a thousand things might have gone wrong in the simulator or the interpreter, despite Bill's double-checking. I pressed Run. There's just no way this is going to work.
The Teletype's printer clattered to life. I gawked at the uppercase characters; I couldn't believe it.
But there it was: MEMORY SIZE?
"Hey," said Bill Yates, "it printed something!" It was the first time he or Ed had seen the Altair do anything beyond a small memory test. They were flabbergasted. I was dumbfounded. We all gaped at the machine for a few seconds, and then I typed in the total number of bytes in the seven memory cards: 7168.
"OK," the Altair spit back. Getting this far told me that 5 percent of our BASIC was definitely working, but we weren't yet home free. The acid test would be a standard command that we'd used as a midterm exam for our software back in Cambridge. It relied on Bill's core coding and Monty's floating-point math and even my "crunch" code, which condensed certain words (like "PRINT") into a single character. If it worked, the lion's share of our BASIC was good to go. If it didn't, we'd failed.
I typed in the command: PRINT 2+2.
The machine's response was instantaneous: 4. That was a magical moment. Ed exclaimed, "Oh my God, it printed '4'!" He'd gone into debt and bet everything on a full-functioning micro-computer, and now it looked as though his vision would come true.
"Let's try a real program," I said, trying to sound nonchalant. Yates pulled out a book called 101 BASIC Computer Games, a slim volume that DEC had brought out in 1973. The text-based Lunar Lander program, created long before computers had graphics capability, was just 35 lines long. Still, I thought it might build Ed's confidence. I typed in the program. Yates launched his lunar module and, after a few tries, settled it safely on the moon's surface. Everything in our BASIC had worked.
Ed said, "I want you to come back to my office." Through a flimsy-looking doorway, I took a seat in front of his desk and the biggest orange glass ashtray I had ever seen. Ed was a chain-smoker who'd take two or three puffs, stub the cigarette out, and light the next one. He'd go through half a pack in a single conversation.
"You're the first guys who came in and showed us something," he said. "We want you to draw up a license so we can sell this with the Altair. We can work out the terms later." I couldn't stop grinning. Once back at the hotel, I called Bill, who was thrilled with the news. We were in business now, for real; in Harvard parlance, we were golden. I hardly needed a plane to fly back to Boston.
Micro-manager
In the life of any company, a few moments stand out. Signing that original BASIC contract was a big one for Bill and me. Now our partnership needed a name. We considered Allen & Gates, but it sounded too much like a law firm. My next idea: Micro-Soft, for microprocessors and software. While the typography would be in flux over the next year or so (including a brief transition as Micro Soft), we both knew instantly that the name was right. Micro-Soft was simple and straightforward. It conveyed just what we were about.
From the time we'd started together in Massachusetts, I'd assumed that our partnership would be a 50-50 proposition. But Bill had another idea. "It's not right for you to get half," he said. "You had your salary at MITS while I did almost everything on BASIC without one back in Boston. I should get more. I think it should be 60-40."
At first I was taken aback. But as I pondered it, Bill's position didn't seem unreasonable. I'd been coding what I could in my spare time, and feeling guilty that I couldn't do more, but Bill had been instrumental in packing our software with "more features per byte of memory than any other BASIC we know," as I'd written for Computer Notes. All in all, I thought, a 60-40 split might be fair.
A short time later, we licensed BASIC to NCR for $175,000. Even with half the proceeds going to Ed Roberts, that single fee would pay five or six programmers for a year.
Bill's intensity was nonstop, and when he asked me for a walk-and-talk one day, I knew something was up. We'd gone a block when he cut to the chase: "I've done most of the work on BASIC, and I gave up a lot to leave Harvard," he said. "I deserve more than 60 percent."
"How much more?"
"I was thinking 64-36."
Again, I had that moment of surprise. But I'm a stubbornly logical person, and I tried to consider Bill's argument objectively. His intellectual horsepower had been critical to BASIC, and he would be central to our success moving forward—that much was obvious. But how to calculate the value of my Big Idea—the mating of a high-level language with a microprocessor—or my persistence in bringing Bill to see it? What were my development tools worth to the "property" of the partnership? Or my stewardship of our product line, or my day-to-day brainstorming with our programmers? I might have haggled and offered Bill two points instead of four, but my heart wasn't in it. So I agreed. At least now we can put this to bed, I thought.
Our formal partnership agreement, signed on February 3, 1977, had two other provisions of note. Paragraph 8 allowed an exemption from business duties for "a partner who is a full-time student," a clause geared to the possibility that Bill might go back for his degree. And in the event of "irreconcilable differences," paragraph 12 stated, Bill could demand that I withdraw from the partnership.
Later, after our relationship changed, I wondered how Bill had arrived at the numbers he'd proposed that day. I tried to put myself in his shoes and reconstruct his thinking, and I concluded that it was just this simple: What's the most I can get? I think Bill knew that I would balk at a two-to-one split, and that 64 percent was as far as he could go. He might have argued that the numbers reflected our contributions, but they also exposed the differences between the son of a librarian and the son of a lawyer. I'd been taught that a deal was a deal and your word was your bond. Bill was more flexible; he felt free to renegotiate agreements until they were signed and sealed. There's a degree of elasticity in any business dealing, a range for what might seem fair, and Bill pushed within that range as hard and as far as he could.
Microsoft was a high-stress environment because Bill drove others as hard as he drove himself. He was growing into the taskmaster who would prowl the parking lot on weekends to see who'd made it in. People were already busting their tails, and it got under their skin when Bill hectored them into doing more. Bob Greenberg, a Harvard classmate of Bill's whom we'd hired, once put in 81 hours in four days, Monday through Thursday, to finish part of the Texas Instruments BASIC. When Bill touched base toward the end of Bob's marathon, he asked him, "What are you working on tomorrow?"
Bob said, "I was planning to take the day off."
And Bill said, "Why would you want to do that?" He genuinely couldn't understand it; he never seemed to need to recharge.
Our company was still small in 1978, and Bill and I worked hand in glove as the decision-making team. My style was to absorb all the data I could to make the best-informed decision possible, sometimes to the point of over-analysis. Bill liked to hash things out in intense, one-on-one discussions; he thrived on conflict and wasn't shy about instigating it. A few of us cringed at the way he'd demean people and force them to defend their positions. If what he heard displeased him, he'd shake his head and say sarcastically, "Oh, I suppose that means we'll lose the contract, and then what?" When someone ran late on a job, he had a stock response: "I could code that in a weekend!"
And if you hadn't thought through your position or Bill was just in a lousy mood, he'd resort to his classic put-down: "That's the stupidest fucking thing I've ever heard!"
Good programmers take positions and stick to them, and it was common to see them square off in some heated disagreement over coding architecture. But it was tough not to back off against Bill, with his intellect and foot tapping and body rocking; he came on like a force of nature. The irony was that Bill liked it when someone pushed back and drilled down with him to get to the best solution. He wouldn't pull rank to end an argument. He wanted you to overcome his skepticism, and he respected those who did. Even relatively passive people learned to stand their ground and match their boss decibel for decibel. They'd get right into his face: "What are you saying, Bill? I've got to write a compiler for a language we've never done before, and it needs a whole new set of run-time routines, and you think I can do it over the weekend? Are you kidding me?"
I saw this happen again and again. If you made a strong case and were fierce about it, and you had the data behind you, Bill would react like a bluffer with a pair of threes. He'd look down and mutter, "O.K., I see what you mean," then try to make up. Bill never wanted to lose talented people. "If this guy leaves," he'd say to me, "we'll lose all our momentum."
Some disagreements came down to Bill and me, one-on-one, late at night. According to one theory, we'd installed real doors in all the offices to keep our arguments private. If that was true, it didn't work; you could hear our voices up and down the eighth floor. As longtime partners, we had a unique dynamic. Bill couldn't intimidate me intellectually. He knew I was on top of technical issues—often better informed than he, because research was my bailiwick. And unlike the programmers, I could challenge Bill on broader strategic points. I'd hear him out for 10 minutes, look him straight in the eye, and say, "Bill, that doesn't make sense. You haven't considered x and y and z."
Bill craved closure, and he would hammer away until he got there; on principle, I refused to yield if I didn't agree. And so we'd go at it for hours at a stretch, until I became nearly as loud and wound up as Bill. I hated that feeling. While I wouldn't give in unless convinced on the merits, I sometimes had to stop from sheer fatigue. I remember one heated debate that lasted forever, until I said, "Bill, this isn't going anywhere. I'm going home."
And Bill said, "You can't stop now—we haven't agreed on anything yet!"
"No, Bill, you don't understand. I'm so upset that I can't speak anymore. I need to calm down. I'm leaving."
Bill trailed me out of his office, into the corridor, out to the elevator bank. He was still getting in the last word—"But we haven't resolved anything!"—as the elevator door closed between us.
I was Mr. Slow Burn, like Walter Matthau to Bill's Jack Lemmon. When I got mad, I stayed mad for weeks. I don't know if Bill noticed the strain on me, but everyone else did. Some said Bill's management style was a key ingredient in Microsoft's early success, but that made no sense to me. Why wouldn't it be more effective to have civil and rational discourse? Why did we need knock-down, drag-out fights?
Why not just solve the problem logically and move on?
Logging Off
As we grew, our need for more help became glaring. Neither Bill nor I had a lot of experience as managers, and both of us had other areas of responsibility—Bill in sales, I in software development. Steve Wood had filled in admirably as general manager, but he, too, was a programmer by background. Bill came to see that we needed someone to help him run the business side of things, just as I ran technology. He chose Steve Ballmer, a Harvard classmate who'd worked in marketing at Procter & Gamble and was now studying at Stanford's business school. Bill sold him hard to me: "Steve's a super-smart guy, and he's got loads of energy. He'll help us build the business, and I really trust him."
I had run into Steve a few times at Harvard, where he and Bill were close. The first time we met face-to-face, I thought, This guy looks like an operative for the N.K.V.D. He had piercing blue eyes and a genuine toughness (though, as I got to know him better, I found a gentler side as well). Steve was someone who wouldn't back down easily, a necessity for working well with Bill. In April 1980, shortly before leaving town on a business trip, I agreed that we should offer him up to 5 percent of the company, because Bill felt certain that Steve wouldn't leave Stanford unless he got equity.
A few days later, after returning from my trip, I got a copy of Bill's letter to Steve. (Someone had apparently found it in the office's Datapoint word-processing system, and it made the rounds.) Programmers like Gordon Letwin were furious that Bill was giving a piece of the company to someone without a technical background. I was angry for another reason: Bill had offered Steve 8.75 percent of the company, considerably more than what I'd agreed to.
It was bad enough that Bill had chosen to override me on a partnership issue we'd specifically discussed. It was worse that he'd waited till I was away to send the letter. I wrote him to set out what I had learned, and concluded, "As a result of discovering these facts I am no longer interested in employing Mr. Ballmer, and I consider the above points a major breach of faith on your part."
Bill knew that he'd been caught and couldn't bluster his way out of it. Unable to meet my eyes, he said, "Look, we've got to have Steve. I'll make up the extra points from my share." I said O.K., and that's what he did.
It began in the summer of 1982 with an itch behind my knees at the Oregon Shakespeare Festival, where my parents would take us to see nine plays in seven days when I was in junior high. Not like a rash you got from the wrong soap—this was an agony that had me clawing at myself.
After the itching stopped, the night sweats began. Then, in August, I became aware of a tiny, hard bump on the right side of my neck, near my collarbone. Over the next several weeks, it grew to the size of a pencil eraser tip. It didn't hurt, and I didn't know that any lump near the lymph nodes was a warning sign. I felt as bulletproof as most people under 30; I took my health for granted.
On September 25, doctors at the Swedish Medical Center, in downtown Seattle, performed a biopsy. After I came out of anesthesia, my surgeon entered my room looking grim. "Mr. Allen," he said, "I took out as much as I could, but our initial diagnosis is lymphoma."
Then, good news: they'd caught my disease in Stage 1-A, before it had spread. Early-stage Hodgkin's lymphoma is one of the most curable cancers; I'd drawn a scary card, but hardly the worst. I began a six-week course of radiation, five days a week. Halfway through therapy, my white-cell count dropped so low that they had to stop for several weeks. But by then the tumor was shrinking. There was no guarantee of a cure, and I still felt sick and debilitated, but I began to be encouraged.
After resuming the radiation, I was in Bill's office one day talking about MS-DOS revenues. Our flat-fee strategy had helped establish us in several markets, but I thought we'd held on to it for too long. A case in point: We'd gotten a fee of $21,000 for the license for Applesoft BASIC. After sales of more than a million Apple II's, that amounted to two cents per copy. "If we want to maximize revenue," I said, "we have to start charging royalties for DOS."
Bill replied as though he were speaking to a not-so-bright child: "How do you think we got the market share we have today?" Then Steve came by to weigh in on Bill's side with his usual intensity; it would have been two on one, except I was approximately half a person at the time. (Microsoft later switched to per-copy licensing, a move that would add billions of dollars in revenue.)
Not long after that incident, I told Steve that I might start my own company. I told Bill that my days as a full-time executive at Microsoft were probably numbered, and that I thought I'd be happier on my own.
One evening in late December 1982, I heard Bill and Steve speaking heatedly in Bill's office and paused outside to listen in. It was easy to get the gist of the conversation. They were bemoaning my recent lack of production and discussing how they might dilute my Microsoft equity by issuing options to themselves and other shareholders. It was clear that they'd been thinking about this for some time.
Unable to stand it any longer, I burst in on them and shouted, "This is unbelievable! It shows your true character, once and for all." I was speaking to both of them, but staring straight at Bill. Caught red-handed, they were struck dumb. Before they could respond, I turned on my heel and left.
I replayed their dialogue in my mind while driving home, and it felt more and more heinous to me. I helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. It was mercenary opportunism, plain and simple. That evening, a chastened Steve Ballmer called my house and asked my sister Jody if he could come over. "Look, Paul," he said after we sat down together, "I'm really sorry about what happened today. We were just letting off steam. We're trying to get so much stuff done, and we just wish you could contribute even more. But that stock thing isn't fair. I wouldn't have anything to do with it, and I'm sure Bill wouldn't, either."
I told Steve that the incident had left a bad taste in my mouth. A few days later, I received a six-page, handwritten letter from Bill. Dated December 31, 1982, the last day of our last full year together at Microsoft, it contained an apology for the conversation I'd overheard. And it offered a revealing, Bill's-eye view of our partnership: "During the last 14 years we have had numerous disagreements. However, I doubt any two partners have ever agreed on as much both in terms of specific decisions and their general idea of how to view things."
Bill was right. Our great string of successes had married my vision to his unmatched aptitude for business. But that was beside the point. Once I was diagnosed with Hodgkin's, my decision became simpler. If I were to relapse, it would be pointless—if not hazardous—to return to the stresses at Microsoft. If I continued to recover, I now understood that life was too short to spend it unhappily.
Bill's letter was a last-ditch effort to get me to stay, and I knew he believed he had logic on his side. But it didn't change anything. My mind was made up.
In January, I met with Bill one final time as a Microsoft executive. As he sat down with me on the couch in his office, I knew that he'd try to make me feel guilty and obliged to stay. But once he saw he couldn't change my mind, Bill tried to cut his losses. When Microsoft incorporated, in 1981, our old partnership agreement was nullified, and with it his power to force me to accept a buyout based on "irreconcilable differences." Now he tried a different tack, one he'd hinted at in his letter. "It's not fair that you keep your stake in the company," he said. He made a lowball offer for my stock: five dollars a share.
When Vern Raburn, the president of our consumer products division, left to go to Lotus Development, the Microsoft board had voted to buy back his stock for three dollars a share, which ultimately cost him billions of dollars. I knew that Bill hoped to pressure me to sell mine the same way. But I was in a different position from Vern, who'd jumped to Lotus in apparent violation of his employment agreement. I was a co-founder, and I wasn't leaving to join a competitor. "I'm not sure I'm willing to sell," I countered, "but I wouldn't even discuss less than $10 a share."
"No way," Bill said, as I'd suspected he would. Our talk was over. As it turned out, Bill's conservatism worked to my advantage. If he'd been willing to offer something close to my asking price, I would have sold way too soon.
On February 18, 1983, my resignation became official. I retained my seat on the board and was subsequently voted vice-chairman—as a tribute to my contributions, and in the hope that I would continue to add value to the company I'd helped create.
(via Instapaper)
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