Inside The Deal That Made Bill Gates $350,000,000

March 15, 2011 6:27 PM

Inside The Deal That Made Bill Gates $350,000,000
posted by JeffL (61 comments total)

For Gates, that's pocket change.
posted by Chocolate Pickle at 6:45 PM on March 15, 2011

It is now. Probably not so much back then.
posted by antifuse at 6:45 PM on March 15, 2011 [1 favorite]

Remember when that sounded like a lot of money for one person to have? Today that number is at least an order of magnitude larger.
posted by 2bucksplus at 6:50 PM on March 15, 2011

Wow, I feel old.
posted by strixus at 6:52 PM on March 15, 2011

*ding*

Congratulations! This link is the winner of best mixed metaphor of the day, for "He speaks in the pungent tones of New York City...".
posted by carsonb at 6:53 PM on March 15, 2011 [2 favorites]

Accounting for splits, each $21 share would be worth $7,312.32 today.
posted by weapons-grade pandemonium at 7:03 PM on March 15, 2011 [4 favorites]

Make a crappy product, get insanely rich. I was lied to as a child.
posted by localroger at 7:05 PM on March 15, 2011 [7 favorites]

Ummm....the product was the best out there when it came out.....it had competitors, but people actually were able to find primitive versions of Word/Excel/Powerpoint more useful than the rest. Tons of programs were created for early versions of Microsoft. By 1989 computers were making domestic living easier. But, that's beside the point.

More curious if 25 years later, anything much about the process changes....would it be a series of men who run investment banks who get in on such a deal? The public still gets slices of IPOs but think about how the process could be run if truly public and open competition and bidding was had upon it at the start.

Lastly, I'm not sure what utility the banks really add to the whole process other than making a fee on a transaction that has to occur anyways. I feel Gates was on to their uselessness also.
posted by skepticallypleased at 7:10 PM on March 15, 2011 [7 favorites]

Bro Uttal sounds like the name of a fratty monk from outer space.
posted by Bromius at 7:23 PM on March 15, 2011 [4 favorites]

Steven A. Ballmer, 30, a vice president sometimes described as Gates's alter ego, came up with so many scenarios for Microsoft's demise that one banker cracked: ''I'd hate to hear you on a bad day.''

And he seems intent on making sure each one occurs these days.
posted by KingEdRa at 7:37 PM on March 15, 2011 [7 favorites]

That was really well-written. Thanks.
posted by grouse at 7:38 PM on March 15, 2011

Young Gates reminds me of Young Zuckerberg.
posted by vidur at 7:44 PM on March 15, 2011 [1 favorite]

They said he wrote DOS with Paul Allen, but the TV movie on the subject clearly had them purchasing from someone for a 15K a year license. Then there was that scene where they had access to the software for windows from Xerox, with Jobs later claiming that they both "borrowed" it from the same place.
posted by Brian B. at 7:45 PM on March 15, 2011 [1 favorite]

Wikipedia on 86-DOS.
posted by grouse at 7:51 PM on March 15, 2011

That was pretty interesting, I really didn't know a damn about IPO's before reading that. I liked best at the very end when they mentioned some of the employees and what they were going to do with their windfalls. A different era.

Gates used part of the $1.6 million he got to pay off a $150,000 mortgage and may buy a $5,000 ski boat -- if he finds time. One vice president who raked in more than $500,000 can think of nothing to buy except a $1,000 custom-made bicycle frame; a programmer who received nearly $200,000 plans to use it to expand his working hours by hiring a housekeeper.
posted by marxchivist at 8:10 PM on March 15, 2011 [1 favorite]

skepticallypleased: “Ummm....the product was the best out there when it came out.....it had competitors, but people actually were able to find primitive versions of Word/Excel/Powerpoint more useful than the rest. Tons of programs were created for early versions of Microsoft. By 1989 computers were making domestic living easier. But, that's beside the point.”

Nonsense. Every one of the things you mention was a ripoff of something else; that's how it was in those days. DOS was a really bad port of CP/M, as grouse's wikipedia link points out. And Excel/Multiplan was a lookalike of VisiCalc.

Those were different times, software-wise; they were times when you won if you positioned yourself well, not if you wrote good code. There was no internet distributing software. The deal that really made Gates that money was the deal with IBM six years earlier. After that, it was pretty much money in the bank that Microsoft would at least have a strong foothold in the industry.
posted by koeselitz at 8:13 PM on March 15, 2011 [2 favorites]

They said he wrote DOS with Paul Allen, but the TV movie on the subject clearly had them purchasing from someone for a 15K a year license.

Sorta both, they licensed it but then had to port it to the IBM PC architecture.
posted by octothorpe at 8:22 PM on March 15, 2011

How did Word manage to kill off the market leader WordPerfect? Because of shadiness or because it was easier to use than remembering what Ctrl-Shift-F7 did?
posted by smackfu at 8:25 PM on March 15, 2011

...the deal that made Bill Gates, age 30, $350 Million

At 39 (and well into it) I'm beginning to worry that I'm not going to catch up.
posted by nanojath at 8:44 PM on March 15, 2011 [6 favorites]

Gates was a good programmer. He was an excellent businessman. (quality of product and slimy tactics notwithstanding)
posted by starman at 8:46 PM on March 15, 2011

Heh, if I could go back in time, I would smack the shit out of 1979 me. And again in 1983. Then I'd hang around and make sure I didn't screw anything else up, till about 1988.
posted by Xoebe at 8:53 PM on March 15, 2011 [2 favorites]

How did Word manage to kill off the market leader WordPerfect? Because of shadiness or because it was easier to use than remembering what Ctrl-Shift-F7 did?

As far as I know a combination of easier to use, and having a Windows version out earlier. Certainly by the time I was using Word for Windows 2 in Uni, no one I know was even thinking about WordPerfect.
posted by markr at 8:59 PM on March 15, 2011

Had I been a purchaser for a large office in the mid-80's, I might have gone with Microsoft too - software with critical mass running on a cheap clone. I think corporate America was always a bit suspicious of Apple. Various companies had great stuff in the home market (Amiga!), but it was always fragmented, and the overwhealming dominance of the PC in the business market allowed it to eventually colonise the home as well.

While I'm at it, Pirates of Silicon Valley is a very entertaining film.
posted by kersplunk at 8:59 PM on March 15, 2011

No one person should have that much money.
posted by regicide is good for you at 9:00 PM on March 15, 2011

WP made the transition from a DOS program to Window extremely poorly. Word 6.0, the recently merged codebase of Word 5.x (DOS) and Word for Windows killed it in stability and start-up curve for new users. It wasn't until WP 7 or 8 that WP caught up andby then it was too late; they had lost most of the big customers. It's not a whole lot more complicated than that.
posted by bonehead at 9:02 PM on March 15, 2011

no one I know was even thinking about WordPerfect
My department uses WordPerfect for all of its reports to this day.
...And we have to attach a copy in Word if it's going interdepartmental.
posted by battleshipkropotkin at 9:14 PM on March 15, 2011

WP would have died long long ago if it wasn't the tool of choice for all lawyers. I never could figure out why that is.
posted by rocket88 at 9:15 PM on March 15, 2011

Bonehead snuck that in while I was writing almost exactly the same comment. Only with MORE WORDS.
posted by sneebler at 9:16 PM on March 15, 2011 [1 favorite]

WP is still firmly embedded in a number of industries; and it's WP5.1 for DOS, no less. It's still hugely popular in medical and legal transcription. I still get a fair bit of work on the side, making word- and line-counting and reporting macros for transcriptionists, and making the old beast work with new printers.
posted by xedrik at 9:38 PM on March 15, 2011

Those were different times, software-wise; they were times when you won if you positioned yourself well, not if you wrote good code.

Wait — this changed?
posted by Ratio at 9:52 PM on March 15, 2011 [1 favorite]

WP would have died long long ago if it wasn't the tool of choice for all lawyers. I never could figure out why that is.
posted by rocket88

WP has the ability to display line numbers on the left side, and while Word might be able to do that I've never seen it done. I, too, have only seen it at some of my client's legal offices.
posted by tmt at 10:04 PM on March 15, 2011

And Word still doesn't handle tables as well as WP5.1 does.
posted by Mitheral at 10:23 PM on March 15, 2011

WP has the ability to display line numbers on the left side, and while Word might be able to do that I've never seen it done.

Well, Word 2007 has the ability for sure. Look under Page Layout -> Line Numbers.
posted by vidur at 10:28 PM on March 15, 2011

WP also had reveal codes. I veered away from WP because of backward compaability issues.
posted by jadepearl at 10:32 PM on March 15, 2011

I have never used the line numbering feature, but my google-fu tells me that it has existed at least since Word 97.
posted by vidur at 10:33 PM on March 15, 2011

A Portrait Of The Artists As Young Men
posted by dancestoblue at 11:50 PM on March 15, 2011 [2 favorites]

No one person should have that much money.

I'm pretty happy when the person decides basic healthcare, education, and feminism are the things to spend it on.
posted by rodgerd at 1:59 AM on March 16, 2011 [6 favorites]

dancestoblue: "A Portrait Of The Artists As Young Men"

Wow, that's a great picture. Really captures their personalities (or at least their public ones).
posted by octothorpe at 6:17 AM on March 16, 2011

Young Gates reminds me of Young Zuckerberg.

Yeah, except Young Gates could code rings around Zuckerberg. Gates didn't write DOS, but he did write the BASIC interpreter for the original Altair when he was 19. Paul Allen actually wrote the bootstrap program for it on an airplane while heading down to the meeting with the Altair execs. He wrote it on an airplane, in 8080 machine language.

In programming parlance, we call that serious chops. Zuckerberg wrote a PHP script. Completely different leagues.
posted by Civil_Disobedient at 6:40 AM on March 16, 2011 [3 favorites]

Great Gates quote…

Gates feared that a public offering would distract him and his employees. ''The whole process looked like a pain,'' he recalls, ''and an ongoing pain once you're public. People get confused because the stock price doesn't reflect your financial performance. And to have a stock trader call up the chief executive and ask him questions is uneconomic -- the ball bearings shouldn't be asking the driver about the grease.''

posted by Civil_Disobedient at 6:50 AM on March 16, 2011 [3 favorites]

he did write the BASIC interpreter for the original Altair when he was 19.

Zuckerberg was also 19 when he wrote Facebook. Yeah, it's just PHP, but we live in a different world now.
posted by smackfu at 6:57 AM on March 16, 2011

He was 19 when he wrote Facemash. The current Facebook has some pretty impressive engineering, but Facemash did not.
posted by grouse at 7:28 AM on March 16, 2011

Gates and Zuckerberg are probably similar as far as ego goes, but that's probably about it.
posted by Blazecock Pileon at 7:30 AM on March 16, 2011

Gates didn't write DOS, but he did write the BASIC interpreter for the original Altair when he was 19. Paul Allen actually wrote the bootstrap program for it on an airplane while heading down to the meeting with the Altair execs. He wrote it on an airplane, in 8080 machine language.

Gates also wrote BASIC in the Commodore Pet and Gate's 6502 BASIC was an option on the Apple in 1977.

And Microsoft had been selling of version of UNIX as well in those early days--XENIX.

And DOS worked fine. It did exactly what it was supposed to do, which is make using computer software easy for hundreds of millions of people who had no interest in computers but needed to use them for work. In 1986, how are you going to tell a 52 yr old administrative assistant how to print out a spreadsheet if she's using a mac? "Click the icon." What's an icon? What do you mean click? Click and hold it down? Click-hold-release? Quickly click-and-release? etc. "Double click"? But don't move the mouse in between clicks? Good luck with that.

The nice thing about a command line is that its operation is very linear and sequential, which makes explaining it to others very straighforward. It's a lot easier to stick a post-it note on the edge of the margin that reads:

1. Insert Lotus 1-2-3 into disk drive
2. Turn on PC and monitor
3. Press f1. Press down arrow until "LOAD" is highlighted. Press enter/return.
4. Move cursor onto spreadsheet filename you want and press enter.
5. After it finishes loading (the red light turns off), press f7 ("PRINT") and press enter.


Also, everyone seems to be ignoring the fact that in Microsoft is the only company from that period that didn't make their hardware. It's a lot easier to build an operating system if you can specify exactly the hardware it will run on. It's another thing entirely to write an operating system that has to work across a myriad of combinations of peripherals and hardware, much of which was not available when you wrote the OS.

And all this said, windows 7 is awesome.
posted by Pastabagel at 7:36 AM on March 16, 2011 [1 favorite]

How did Word manage to kill off the market leader WordPerfect?

Perhaps because WordPerfect sucks fucking balls.

As for why law firms use it, it seems some courts (perhaps still, perhaps used to) use it preferentially, because they, being government agencies with limited budgets, are technologically backwards and beholden to no one.
posted by adamdschneider at 7:54 AM on March 16, 2011

When I had a remodel done in late 2000, one of the older carpenters mentioned that he was retiring. He had bought about $10,000 worth of MS stock within a day of its going public and was going to sell it all. It was worth nearly $10,000,000. He sold it in February of 2001, paid some big taxes and moved to Arizona.
posted by bz at 8:27 AM on March 16, 2011 [1 favorite]

It wasn't until WP 7 or 8 that WP caught up and by then it was too late; they had lost most of the big customers. It's not a whole lot more complicated than that.

It's true that WordPerfect underestimated the popularity of Windows, but there are some more complicated bits:

Windows 3.0, followed by the wildly successful Windows 3.1, caught them (as well as IBM) flatfooted. Microsoft already had applications tuned for the operating environment when it shipped, and ISVs had to play catch up. It didn’t help when Microsoft used hidden API calls in their applications, which made them much faster than competitors who used only official Windows APIs.

Also, everyone seems to be ignoring the fact that in Microsoft is the only company from that period that didn't make their hardware.

What hardware were Digital Research making?
posted by robertc at 8:52 AM on March 16, 2011

Also, everyone seems to be ignoring the fact that in Microsoft is the only company from that period that didn't make their hardware.

I'm not sure what year you mean by that period but I can't think of any time since CP/M first came out when that would have been true. There were, just as their are now, all sorts of companies developing software.
posted by Mitheral at 9:43 AM on March 16, 2011 [1 favorite]

No one person should have that much money.

I'm pretty happy when the person decides basic healthcare, education, and feminism are the things to spend it on.

I'm pretty tired of the idea that all we need to do to give dignity to working people's lives is pray that the people who took their money will give a teeny bit of it back.

I'm sure Gates is probably a really great guy. You generally have to be, to be a successful businessperson. But this isn't really about him - one just doesn't get that rich without a lot of other people being poor. So pardon me for being unimpressed if Gates occasionally slaps a pallet of bandaids on the problem his sort of lifestyle perpetuates.
posted by regicide is good for you at 10:10 AM on March 16, 2011 [2 favorites]

Pastabagel: “And DOS worked fine. It did exactly what it was supposed to do, which is make using computer software easy for hundreds of millions of people who had no interest in computers but needed to use them for work. In 1986, how are you going to tell a 52 yr old administrative assistant how to print out a spreadsheet if she's using a mac? "Click the icon." What's an icon? What do you mean click? Click and hold it down? Click-hold-release? Quickly click-and-release? etc. "Double click"? But don't move the mouse in between clicks? Good luck with that.”

I agree with what you're saying about the command line; and I have some nostalgia about DOS (my father still gets wistful about it, and keeps his old DOS manual above the computer back home) – but I think history has misremembered this part. The triumph you're talking about – making computers of many different processors accessible and usable by people of many different positions in lots of different companies – wasn't a triumph of Microsoft's (Q)DOS; it was a triumph of CP/M. It was CP/M that introduced all of these things that were familiar to us for a decade and a half, and some things that are still with us: three-character file type extensions (like .txt, for example); the terms DOS and BIOS; and general portability between machines. Microsoft's version of CP/M – DOS – took off largely because they got the most important contract: a distribution deal with IBM in 1980.

Furthermore, CP/M, like almost every command line system of the 70s and 80s, owed a hell of a lot to UNIX. But that's another story.
posted by koeselitz at 10:22 AM on March 16, 2011

The myth about Microsoft using "hidden" API calls for performance still circulates. I worked at Microsoft during that era, in the Applications division. In the Windows 2.0 timeframe, I specifically remember that an internal audit was made to find if there were any useful APIs in Windows that were undocumented. A few were found--none that gave any particular speed advantage--they were wrappers that saved having to reproduce the code in Windows in our own program.

These useful APIs were then documented for the next version of Windows (no web back then for instant gratification). The Systems division was henceforth insistent that the Applications division not use any APIs that weren't public, and renamed Windows-internal APIs between versions just to make sure that nobody internal or external to Microsoft was using them.

Windows actually had more problems because companies such as Lotus were using undocumented internal APIs. Microsoft wound up having to document and support those APIs to keep from having damaging press saying that the next version of Windows intentionally broke Lotus, when it was Lotus that was violating the rules.

The reason Microsoft's Applications programs ran well on Windows is that if I had a question about how Windows worked, I could go have lunch with the guy who wrote that part of Windows and talk about how to write my code to work efficiently using the publicly published APIs.
posted by Xoc at 10:36 AM on March 16, 2011 [9 favorites]

Back then, articles that mentioned Goldman Sachs said good things about them.
posted by Obscure Reference at 11:07 AM on March 16, 2011

Microsoft's version of CP/M – DOS – took off largely because they got the most important contract: a distribution deal with IBM in 1980.

Kildall coulda been a conteda!

In my view, essential context to the story in the post, happenning only a few years later.
posted by bonehead at 11:16 AM on March 16, 2011 [1 favorite]

Stopped in to say that my mom (a medical transcriptionist) still uses WP 5.1 from the DOS command line, and has for almost 15 years now. She refuses to switch because she doesn't like the medical dictionaries/spellcheckers for Word; also, there are built-in switching costs because her macros don't port over.

So pardon me for being unimpressed if Gates occasionally slaps a pallet of bandaids on the problem his sort of lifestyle perpetuates.

Sweatshop jobs, while decidedly not humane or acceptable in the long term, are superior to the alternative (usually debt peonage/sharecropping/subsistence farming at best) and an important step in the development of poorer societies. The US had our fair share of sweatshops for a good bit back in the late 1800's and early 1900's.

I understand what you're saying, but certainly Gates is not the kind of plutocrat you should be after. He really did earn all that money; his company's products are used by almost every computer user on the globe.
posted by downing street memo at 11:28 AM on March 16, 2011 [1 favorite]

He really did earn all that money

This is the kind of definition of "earn" that gets people nodding unconsciously as they read Karl Marx.
posted by localroger at 1:14 PM on March 16, 2011 [4 favorites]

Sweatshop jobs, while decidedly not humane or acceptable in the long term, are superior to the alternative (usually debt peonage/sharecropping/subsistence farming at best) and an important step in the development of poorer societies.

Because their primitive brains will explode if they're given well-paying jobs and labour rights? I understand you mean well but take a minute to think about how this may actually be a completely odious and condescending argument. There's no natural or physical law which prevents a company who operates "overseas" from paying people living wages. There's only the de-facto economic law that the higher up the pyramid you are, the more you should get paid, even if you do much less work.

And which "poorer societies" are we talking about here? I thought we were all one society now. We certainly are when multinationals feel like moving their fatories elsewhere, outsourcing work, or or enforcing downward harmonization of health and safety standards. So why not when it comes to wages and dignity?

I understand what you're saying, but certainly Gates is not the kind of plutocrat you should be after.

Every plutocrat is the kind I should be after. His wealth is obscene.

He really did earn all that money; his company's products are used by almost every computer user on the globe.

Who builds the computers? Who packages the discs? Who cleans the offices? Who staffs the tech support lines? Who does all the stuff that actually makes Microsoft able to make a profit at all? Is it Bill personally with his Brain-O-Tron Ray?
posted by regicide is good for you at 3:22 PM on March 16, 2011

downing street memo: “Stopped in to say that my mom (a medical transcriptionist) still uses WP 5.1 from the DOS command line, and has for almost 15 years now. She refuses to switch because she doesn't like the medical dictionaries/spellcheckers for Word; also, there are built-in switching costs because her macros don't port over.”

Wow. What's she on – MS-DOS 8, or something open (and easier to obtain) like FreeDOS?
posted by koeselitz at 4:05 PM on March 16, 2011

Because their primitive brains will explode if they're given well-paying jobs and labour rights? I understand you mean well but take a minute to think about how this may actually be a completely odious and condescending argument. There's no natural or physical law which prevents a company who operates "overseas" from paying people living wages. There's only the de-facto economic law that the higher up the pyramid you are, the more you should get paid, even if you do much less work. And which "poorer societies" are we talking about here? I thought we were all one society now. We certainly are when multinationals feel like moving their fatories elsewhere, outsourcing work, or or enforcing downward harmonization of health and safety standards. So why not when it comes to wages and dignity?

Labor rights just don't pop up out of nowhere, you know. It took a long time for US society to develop the notion that workers could and should bargain as a unit, and I think it's condescending that a) you think we can export our notion of labor solidarity to other societies wholesale and b) you assume that individuals in less-developed societies have no agency and are being exploited against their will.

This is Marxist thought so you probably reject the entire paradigm of neoclassical and Keynesian economics, but for others who are interested, check out Paul Krugman, from 1997, on sweatshops as engines of development.
posted by downing street memo at 9:11 AM on March 17, 2011

Wow. What's she on – MS-DOS 8, or something open (and easier to obtain) like FreeDOS?

Not sure - the computer is actually that old, too, it's a 1994-vintage Packard Bell. According to Wiki it'd be MS-DOS 6.xx.
posted by downing street memo at 9:14 AM on March 17, 2011

I think it's condescending that a) you think we can export our notion of labor solidarity to other societies

Bu it's not condescending to export the sweatshop jobs. Right.
posted by regicide is good for you at 9:51 AM on March 17, 2011

@regicide is good for you: Gonna go out on a limb here and agree with downing street memo that sweatshops, no matter how morally repugnant, are essential in third-world countries. Your proposal of well-paying jobs and labour rights are goals we ought to work to, but are often unworkable in the present climate of third-world countries.

These people have nothing to compete with the rest of the world save on the basis of cheap labour. Without anything to compete on, there's not going to be any significant inflow of money into the economy, which you need to invest in its people. But investment in education, technical skills and the like take time. It's not going to happen with a snap of the fingers. Until that happens, they have to earn something. No matter how low sweatshop wages are compared to wages in the developed world, they are worth something to the workers. And I stand on the side of something > nothing, even if that something is meagre. That wage has very real uses - providing for food, healthcare (debatable, I know, but still) etc. It does serve its purpose.

I don't begrudge Bill Gates his wealth. He has given most of his wealth back to society by way of the Bill and Melinda Gates Foundation, which invests in malaria research and a whole host of other projects with wide-ranging social impacts. I can respect that. Together with Warren Buffett, he has chosen to give away most of his wealth to charitable causes (real ones, mind you, unlike Ingvar Kamprad's foundation). How much more should the world reasonably expect of him?
posted by titantoppler at 6:19 AM on March 18, 2011