Bill Gates Soft Icon

Not Long Ago, on one of his infrequent vacations, William H. Gates III lay soaking up sun on an exotic Brazilian beach, surrounded by a sea of distractions, including Brazil's fabled women. Normally, it would be an idyllic setting for an eligible bachelor, particularly one who is America's youngest self-made multibillionaire. A chance to swim and party with some of the locals--but most of all, a chance to relax and let his mind go blank.

Unless you're Bill Gates.

For the 35-year-old chairman of Microsoft, the world's largest computer-software company, vacations are a problem. Once, he considered them a sign of weakness, occasions to miss out on irretrievable opportunities for Microsoft to outdo the competition. Now he'll grudgingly take pleasure trips, but only after assigning them motifs.

"One of our trips had a physics theme," remembers Ann Winblad, a former girlfriend. "We collected tapes of guys like Richard Feynman and read all sorts of books." In Brazil, while the sun shone and beautiful women cavorted around him, Gates buried his nose in Molecular Biology of the Gene, by James D. Watson.

The single-mindedness that drives Gates to turn a vacation into study hall has also made him--and his company--the most powerful force in the world of computer software. Microsoft will probably generate sales of 1.6 billion dollars this year, more than its top four competitors combined. "He's the single most influential figure in the computer industry," said The Wall Street Journal.

"Gates reminds me of the 19th Century industrial barons who, by force of will and business genius, built the oil, steel and banking monopolies," wrote analyst Stewart Alsop.

The computer industry is also full of people who think that Gates has become too successful for his own good--and theirs. Apple Computer is suing Microsoft, claiming its bestselling Windows 3.0 program violates Apple's copyright. Gates's lengthy alliance with IBM, which served as the bedrock for Microsoft's success, has been severed, and IBM has switched from patron to competitor. But those are minor inconveniences compared with the biggest problem Gates faces. The Federal Trade Commission has launched an investigation into Microsoft's alleged monopolistic and unfair business practices.

While the FTC won't comment and Microsoft claims the probe is limited to one development arrangement it had with IBM that has since been disbanded, other software publishers claim to have been interviewed by the FTC. They say the investigation is much broader and a few even predict that omnipotent Microsoft may ultimately be split into two weaker companies. That prospect, while grim to Gates, has left some competitors smiling.

"Bill Gates is a megalomaniac," one software manufacturer told the Los Angeles Times when the FTC probe was announced. "[He] wants to win at everything he does."

"Bill wants to have as much of the software industry as he can swallow," said another. "And he's got a very big appetite."

"Microsoft throws its weight around in unpleasant ways sometimes," added an industry analyst. "But just being successful isn't illegal."

From the outcry against him, you'd think Gates was the robber baron of the information age. But not everyone agrees with that assessment.

"He's one part Albert Einstein, one part John McEnroe and one part General Patton," says Heidi Roizen, a friend and competitor.

Gates pauses for a moment when told that description. "That's very complimentary," he says with a smile. "Must be somebody who likes me."

•

Go ahead, call Bill Gates a nerd. The Wall Street Journal did. Twice. On its front page.

Gates wears thick, boxy glasses; his characteristically uncombed sandy brown hair shrouds his forehead and obscures his eyebrows. His face has lost some of its boyishness from years of obsessive overwork. His chin doubles and he could use some color to offset the gray indoor pallor. It's not likely he'd be noticed across a crowded room.

"His mom used to color-coordinate his clothes, like Garanimals-type things, pin them together," recalls Winblad fondly. "So he'll be beige one day, green the next. Sometimes his clothes are even the wrong size." Once, Gates arrived at Winblad's North Carolina beach house for a vacation--without a suitcase. She took him shopping at the Ben Franklin store in Kitty Hawk, purchasing four pairs of four-dollar shorts. "He wore those shorts for two years," she says.

Not surprisingly, most meals are consumed at Gates's desk. At home, he gravitates toward take-out pizza and SpaghettiOs, and when he does go out for dinner, he doesn't travel far, usually hitting a Thai restaurant near the Microsoft headquarters in Redmond, Washington. He hasn't eaten meat for four years--one of his self-imposed tests of discipline, like not watching TV. Over the years, as befits a billionaire, he has developed at least one sophisticated habit: drinking Dom Pérignon. He keeps half a dozen bottles in his refrigerator at all times. But if you spill some around him, don't be surprised if he quickly estimates the dollar value of your waste. (The average faux pas is approximately seven dollars.)

Actually, Gates is more prototype than stereotype; he's the nerd fully matriculated. He isn't uncoordinated, bereft of social graces or shy with women. But he is eccentric. Steve Ballmer, a senior Microsoft executive and close friend, remembers when he and Gates (continued on page 146) Bill Gates (continued from page 134) were at Harvard. "He never put sheets on his bed. He went home for Christmas vacation with the door to his room open, the lights on, money on the desk, the windows open."

Or, as one Los Angeles software retailer put it, "Gates is the ultimate propeller head."

You wouldn't know that Gates is America's ninth richest person by visiting his home. At the moment, he dwells austerely in a modest house in Seattle. He still leaves his bed unmade. When he's home--after a 12-to-15-hour workday--he reads. He can recite pages from Catcher in the Rye and The Great Gatsby. When an author engages him, Gates will consume the entire oeuvre. When he turns on the tube, it's not to watch TV but to check out his massive film collection on video. He started by buying every Best Picture Oscar winner. He used to spend Saturday nights watching video tapes of university physics lectures.

"I have nothing against TV," he explains. "It's purely a time-allocation decision."

•

Much of Gates's impact, at least at the outset, had a lot to do with his appearance. For years, executives were shocked to walk into a meeting chaired by someone who looked like a teenager. But Gates quickly demonstrated to everyone who met him--from the blue suits at IBM to the computer guerrillas--that, juvenile looks notwithstanding, he was consumed with winning, he hated to be wrong, he thrived under pressure. This was a predatory capitalist brainiac who saw business strategy in terms of global corporate geopolitics. He was committed to the long term and loved to play corporate chess. He was a master at forming alliances between Microsoft and rival business factions, leveraging one against the other.

"Bill is simply a lot smarter than anyone else," says Paul Maritz, one of the company's handful of top-level programmers, called architects, who, like scientific cabinet ministers, advise Gates on how to fulfill Microsoft's grand corporate mission: to write the software that puts a computer on every desk in every home. "We're not talking about ordinary mortals. We're talking genius level. He's able to process tremendous amounts of information and talk to you intelligently on almost any topic."

Although beset by massive responsibilities as C.E.O., Gates relishes nothing as much as disassembling the bits and bytes of computer code with his programmers. He easily holds his own in the technological trenches. "He won't get any respect because he's Bill Gates," says Maritz. "He gets respect because he can take those guys to the cleaners."

And yet, according to Bill Machrone, editor and publisher of PC Magazine, the most widespread conception of Gates remains that he's 19 years old. Even as he edges toward middle age, he is still called the boy billionaire. Of the two words, Gates clearly favors the former. "I like to think of myself as youthful and willing to challenge the way things have been done," he says. The latter is unsettling. "Billionaire is, uh, mathematically accurate, but it has a tendency to imply that the reason I like my job has something to do with the economic value it's created, which would be completely off the mark."

So what's in it for Gates? "The whole notion that you can create a company and have a lot of impact is fun," he says.

•

The episode that made Gates a computing cynosure is already part of industry mythology. In 1980, Microsoft cut a deal to provide IBM with the basic operating software (MS-DOS--Microsoft Disk Operating System) for all its personal computers. If you own or use an IBM or IBM-compatible PC, you can't live without Gates. And neither can your computer.

At the time, Microsoft was a 38-person company and the leader in providing programming languages for personal computers, which it supplied to IBM. It could not, however, supply the basic operating system, so Gates sent IBM to a competitor, Digital Research, Inc. DRI was already well established with CP/M, the operating system that ran many early eight-bit desktop computers. IBM was also planning to base its PC on an eight-bit CPU (central processing unit, the chip at the computer's heart). Gates, in a secondary strategy move, persuaded IBM to use the more powerful 16-bit chip, the Intel 8088, in its new PC.

Next, his partner, Microsoft co-founder Paul Allen (currently owner of the Portland Trailblazers), found some operating-system software that had been recently developed by a small firm, Seattle Computer Products. Microsoft bought it for $50,000 and hired the creator. Gates told his mother she wouldn't see him for six months because he was going to work 24 hours a day to get the IBM business. When IBM was ready to negotiate the operating-system deal--luckily for Gates, DRI's top man was unreachable in Europe on vacation--the nod went to Gates. This time, Microsoft--and its operating system--was ready.

In 1981, IBM designated MS-DOS (renamed PC-DOS 1.0) as the soul of its new machine. Microsoft would collect a royalty on each copy sold, as well as on the MS-BASIC programming language it provided. And both were included with every personal computer. Today, MS-DOS runs on 60,000,000-plus machines world-wide, and the royalties are estimated at $200,000,000 per year.

But Gates didn't want to be dependent only on IBM's annuity. In a bold move, he asked if he could license MS-DOS to other PC manufacturers. IBM allowed it, hoping the spread of its operating system would help deflect Apple Computer's inroads into the PC market. But Gates did more than lobby other manufacturers to buy MS-DOS. He eventually persuaded some, such as Compaq Computer--the most successful computer start-up company of the Eighties--to make their machines truly IBM compatible, so that any software written for the IBM could run on all such machines. The PC clone market was born, and MS-DOS sold like crazy.

That steady revenue enabled Gates to take the next step, a slow and steady expansion into the software market.

Today, Microsoft makes more than 40 products for the IBM-compatible PC and the Macintosh, including word processors, programming languages, MS-DOS, integrated business packages, data bases, spread sheets, presentation graphics and networking solutions.

It is Microsoft's latest triumph--Windows 3.0, the graphical environment that makes computers "friendlier"--that, ironically, is causing much of its current grief. It's the source of the copyright-infringement case filed by Apple and it hasn't made IBM very happy, either. Until recently, IBM and Microsoft were working together to create a version of OS/2, the new-generation operating system for PCs that, like Windows 3.0, was more user-friendly. But when Windows 3.0 took off and sold more than 3,000,000 units in one year while OS/2 languished, selling only 300,000 units since its inception in 1987, the deal fell through. IBM didn't like the fact that Microsoft had moved most of its programming muscle to Windows 3.0. Now IBM is developing (continued on page 166) Bill Gates (continued from page 146) one version of OS/2, Microsoft another.

Through it all, Microsoft has had the luxury of being able to keep tinkering with products that were not always bug-free or fully realized when released. Unlike most software companies, which operate on shoestring budgets, Microsoft was never forced to live or die by initial market response. The result is a hefty piece of the software industry, which has grown to a 100-billion-dollar-a-year business world-wide. And although much of the hardware and chip manufacturing has moved to Japan and elsewhere, Fortune magazine pointed out that "the role of DOS as a unifying component of most PCs has helped entrench the U.S. as the epicenter of world software."

Gates says plainly, "Microsoft changed the computer world in a big way."

•

He's the biggest, he's the baddest, he's the ultimate power in software. But to hear Bill Gates tell it, neither he nor Microsoft is a danger to anyone, especially other software companies.

"Ask the guys at WordPerfect if they think competition is at an end," snaps Gates, and he has a point. Although Microsoft is the largest combined provider of major application software such as spread sheets, word processors and data bases, its products in each category run a distant second. Lotus 1-2-3 outsells Microsoft's Excel. WordPerfect towers over Microsoft Word. And Ashton-Tate's dBase is more popular than Microsoft's Multiplan.

Business Month magazine wrote that Microsoft's success was mostly due to luck and Gates's ability to "recover the fumbles" of his even more inept rivals and industry peers. The magazine quotes an unnamed software executive who claimed, "Gates is supposed to be so technical. But Microsoft's secret is that it is not an innovator. Bill is just a systems guy who's been able to fund a wide range of 'me, too' applications on the basis of one extremely lucrative product practically handed to him ten years ago by IBM. All he's done since is hang in."

Gates will admit, when pressed, that serendipity certainly played a part in his success. But he will never agree that he just got lucky. "If they are saying that they were just as likely to have ended up in my situation," he says matter-of-factly, "then they're ignoring other significant elements, like my being into computers, my intensity, my energy.

"This backlash is a natural result of success," he claims, citing his foresight in developing software for the Macintosh computer, the success of Microsoft's Flight Simulator program, the impact of the Excel spread sheet (for both the Mac and PCs) and the buying spree for Windows 3.0. "I feel responsible for maintaining an attitude of innovation. I do. That's what makes it fun for me."

Gates estimates that DOS accounts for as much as 25 percent of Microsoft's profits. "But believe me, those profits go to the bottom line. If we weren't very profitable, you could say we were using DOS to fund the other stuff. The fact is, everything here is very profitable--except multimedia and networking, which are still in an investment mode. I guarantee that if we start writing crummy products, the bottom will drop out."

However Gates's success is figured, he is "disappointed" by the resentment and hurt expressed in some of the comments. "Negative guys say I cheated my way here," he complains. "Positive guys say I must have overwhelmed everyone with my I.Q. Both are gross oversimplifications of what have been interesting years."

The hurt is worse, of course, when old friends, such as Lotus founder and former C.E.O. Mitch Kapor, seem to turn on him. "The revolution is over," said Kapor. "Bill Gates has won. [Today's software industry is] the 'Kingdom of the Dead.'"

"Mitch is obviously down on me," says Gates, sighing. "I mean, 'Kingdom of the Dead'? Where do I go from there?"

•

Bill Gates was born into a well-to-do Seattle family. His father, William H. Gates II, is an attorney. His mother, Mary--the smart one, they all say--sits on the University of Washington Board of Regents and is a director of First Interstate Bank. Gates remains close to his folks and doesn't hesitate to consult them for business advice.

As a teenager, he attended Lakeside School, an academically rigorous private school, and it was there that he met Paul Allen, who shared his interest in science fiction. Gates was also the resident math whiz (he would later score 800 on his math S.A.T.), bypassing seventh-grade math classes because he'd already read the high school texts. He took his math quite personally: "The thing I liked about math was that you were either right or wrong; so even some guy who nobody liked could come up with some math proof and you had to say, 'Hey, this guy is right!'"

When the Lakeside Mothers Club donated the proceeds of a rummage sale to buying time on a local mainframe, Gates and Allen became members of the Lakeside Programming Group. Their activities included skipping gym classes, sneaking into the computer center at night and rummaging through trash cans for computer-program listings. By Gates's eighth-grade year, the Lakeside Programmers were working for real money: They computerized the school's payroll system and counted holes punched in cards by machines that monitored highway traffic. The rechanneled profits went into more computer time. Two years later, the group formed a company, Traf-O-Data, with Gates as president, to sell the traffic-counting system to local communities.

Gates missed much of his senior year, because he was by then working full time at TRW as a $20,000-a-year programmer. When he went to Harvard in 1973, Allen transferred East from the University of Washington. Their first winter, they picked up an issue of Popular Electronics and read an article about the Altair, a kit computer based on the new 8080 microprocessor from Intel. It had a 4K memory and the manufacturer, MITS, said it needed a computer language written so the machine could be programmed. Gates and Allen were shocked. "We had been predicting this thing and then to have somebody doing it; there it was happening without us. So I called them from the dorm room and said, 'Hey, we have a [condensed version of the language] BASIC that will work on your machine. Do you want it?'" MITS said yes.

Now all Gates and Allen had to do was actually write it.

Three weeks later, they flew to Albuquerque, checking the program simulation one last time on the plane. Had they read the manual incorrectly, nothing would have functioned. But it worked. "For the first time," says Gates, "they saw their computer actually do something."

In June 1975, Gates dropped out of Harvard. He and Allen moved to New Mexico to work with MITS and started Microsoft. Originally, Allen wanted to move into hardware, but Gates was adamant that software would drive the industry and persuaded Allen to see things his way. MITS eventually folded, but Microsoft had acquired other clients, and in 1979, the company moved near Seattle. In 1980, IBM came calling and the modern PC era began.

From a staff of eight people in 1975, Microsoft has grown to more than 5200 employees. Yet, because Gates likes to think of Microsoft as a collection of separate enterprises under one umbrella, the business retains a small-company feel. Headquarters are a pastoral, campuslike setting of low-rise buildings near Seattle. A small pond on the grounds has been dubbed Lake Gates. In the cafeterias, all beverages are free. And employees can buy the latest reflections of corporate culture: Microsoft T-shirts, jogging shorts, knapsacks. Workers even get a free membership at a local health club. Although Microsoft workers are generally paid less than they could make elsewhere--Gates himself receives only a $ 190,000 salary--and toil longer than standard hours, they remain loyal to the company for many reasons, which include a generous discount-stock-purchase plan and the chance to be part of Gates's goal of global software domination.

For fun, there are picnics and parties. An annual bash, called Microgames, is sometimes held at Gates's home or at the family compound that he bought for his folks. Last year's theme was Africa. Everyone did the limbo, shot blow darts, tried to fill in the names of African countries on a giant map (Gates had a map of Africa on his garage wall for months in advance, to prepare), raced canoes and played Jungle Jeopardy on Macintosh computers in the rain.

Employee turnover is extremely low at Microsoft and both morale and profits are high. Microsoft was the first software manufacturer to gross more than one billion dollars in a year.

•

Today is a beige day. Gates wears light-brown loafers, beige slacks, a predominantly beige madras shirt and a beige cashmere sweater. His beige hair is a mess.

Night has fallen and Gates picks at the remains of take-out Thai food from white cartons and aluminum dishes set on the rug. "One thing I'm not good at is keeping my office clean," he says, embarrassed. "Seriously. If I had a subordinate whose office looked like this, I would really wonder what was going on."

He's surrounded by his notion of corporate decor: a Microsoft product poster from Germany, another touting DOS 4.01 in Russian, a Teddy bear; a beer stein, a Casio mini-TV left by some Japanese visitors, a globe and a coffee table covered with yellow legal tablets, a yellow Koosh ball, a cassette of Chicago IX and other paraphernalia. Near his desk is an award for winning the 1990 Computer Bowl--a brisk competition among prominent techies.

There are also some more revealing mementos--an assortment of personal photographs. One shows Gates sleeping on a park bench with a Scientific American on the ground, just beyond his outstretched finger tips. Another is of Winblad. A third features Gates and Allen, in 1983, back at Lakeside. They'd built a math and science building for the school and Gates got the Alumnus of the Year award. The final photograph is the "Picture of Eight," a Seventies portrait of scraggly counterculture types--the original Microsoft group--who look as if they're straight off the commune. Gates, looking about 13 years old, anchors the lower left corner.

Gates is asked what he thinks when he looks back at those days. "I hope I look the same," he says blankly, obviously uncomfortable with much personal reflection. OK, then, what does arouse sentiment? "There are milestones, like when we first moved onto this campus or started buying more land. Or at our five-year anniversary, we looked back a little bit. On our ten-year anniversary," he adds, "we looked back." Let's try this: Does he wander the deserted halls at night? "I kind of walk around sometimes and see what things they've got posted on the walls. Maybe run into somebody who's got something running on a machine." So, no sitting in his office, in the dark, contemplating what he has wrought? "Nah," says Gates, "I don't turn the lights off much. The cleaning people might start coming in and vacuuming."

Gates is so indistinguishable from Microsoft--in his mind, at least--that any plans to marry and begin a family are always on hold. Gates faces a quandary familiar to any young lion: Can he handle two wives when one is the company? "Sure I can," assures Gates. "But it's not something you can schedule." Even so, the clock ticks and the gossip flies. Competitors wish he'd get started, because it might give them a chance to catch up. Gates insists he has no shortage of "dance partners." So think of him as Bill Gates, rock star, says a friend. "Think of anybody in a position of power. Gates is rich. He gets letters from women all over the U.S. and the world. Once you've got the rep, it's easy." A woman from Mensa once wrote to Gates, asking him for software for her Mac. He delivered, then met her in Atlanta later.

Gates is not always so charming. His confrontational style at work has been called management by abuse. When anyone presents programming codes or ideas that he feels are the result of haphazard and sloppy thinking, he won't hesitate to say, "How can you be so stupid?" Another favorite reproach: "That's totally random." If you listen carefully, you'll hear these Gatesisms, and others, echoing campus-wide.

Microsoft's most senior programmers claim they've learned not to take the insults personally. "Bill has toughened us up," says Jeff Harbers. "He used to just beat us up, and we went away feeling bad. You have to be able to take this abuse and fight back. If you back down, he loses respect. It's part of the game."

But Harbers claims that since returning from his recent vacation in Thailand, Gates has mellowed out. "Oh, that's the most bullshit I've ever heard," says Gates. "I have always been as friendly or as unfriendly as I am now. Maybe I've changed a little over the past ten years. I'm a little smarter about when I'm going overboard." And apparently, he is willing to take what he dishes out. "I believe in feedback. I encourage people I respect, my parents and my business associates or my friends, to tell me when I'm a little out of control. If I haven't combed my hair for two weeks, they might say, 'Hey, a little more often.'"

A pet project these days is Gates's $10,000,000, 37,000-square-foot new home now under construction on the shores of Lake Washington, in suburban Seattle. It will include a swimming pool, a trampoline, a game room, a movie theater, a beach, underground parking for 20 cars, a 14,000-book library and a dining pavilion that will seat 100. He'll also install high-definition-TV monitors in most rooms to constantly display images from a massive collection stored on computer. "We'll have images of most of the famous art, cars, plans, maps, boats," Gates told one reporter. "If you type in French Sculpture, you'll see French sculpture. If someone says to you, 'Russia's so bleak,' you can say, 'I don't think so,' and type in Russia and take a look."

His other indulgence is fast cars. One, a $300,000 Porsche 959 (now worth $1,000,000), sits on a dock in Oakland, California. The Government won't let it through Customs without a crash-test safety certification. But the cars are too expensive for Porsche to sacrifice the four models required for testing. Gates and Allen each own one, and they've been concocting a way of simulating the crash on a computer in order to satisfy the safety requirements.

Both the house and the car are well within Gates's budget. When he took Microsoft public in 1986, holding 40 percent of its stock, Gates became worth in excess of $300,000,000. Today, that figure is near four billion dollars.

"Yes," Gates confesses, "I have a bunch of money and the freedom to do whatever I want."

It is interesting, then, to note what Gates chooses not to do. On his frequent business trips, he won't charter a private plane or even buy a first-class ticket--unless circumstances absolutely demand it. He is happy flying coach, often covering his head with a blanket or a coat and catching a cat nap. (He's an instantaneous sleeper.) He also likes to arrive for flights just seconds before the gate doors shut in his face.

There are no limos or chauffeurs in his life. Gates drives himself everywhere, in a Lexus. For years, until the company insisted, he didn't even want his own parking space at work. Unfortunately, without an assigned spot, he sometimes had to park four blocks from his office on days when the lots were filled. Once, he was harassed after hours by a disgruntled security guard. He has since relented and accepted not one but two slots under the main building. "So I got one for my company president, too," he says. Gates parks his Lexus next to Microsoft president Mike Hallman's big Mercedes.

Why resist so many of the perks of power? "He's worried what people will think," says Harbers. "If he's not a regular guy, he thinks people will not respect him as much."

Gates agrees, insisting that the notion of specialness is dangerous and wouldn't enhance whatever contribution he's capable of making. "It's screwed up. It sets a bad example. I think eventually you get used to those things, then you're just abnormal. I'm afraid I'd get used to it."

But Gates is clearly not a regular guy--no matter how many all-night poker fests he attends, or coach airline tickets he buys, or bachelor parties he throws, or suits he won't wear. And sometimes, he has to be reminded of that fact.

Not so long ago, Gates and some friends were drinking Dom Pérignon and partying late. They decided they were starving and wanted pizza. Gates made the phone call but was told there were no deliveries after one A.M. "He looked up at us," remembers a friend, "and said, 'They don't deliver this late.' We said, 'Bill, you're Bill Gates, one of the richest men in America. Do something about it. How much is it worth to you to have that pizza?' And he thought for a minute and said, 'Two hundred forty-two dollars.' So he got back on the phone and said, 'This is Bill Gates and it's worth two hundred forty-two dollars for me to have that pizza!'

"We got the pizza."

"As one Los Angels software retailer put it, 'Gates is the ultimare propeller head.

"Mitch is obviously down on me,' says Gates. 'I mean, "Kingdom of the Dead"? Where do I go from there?'"