The Microsoft Story: How the Tech Giant Rebooted Its Culture, Upgraded Its Strategy, and Found Success in the Cloud

ACKNOWLEDGMENTS

Writing a book is a solitary and collaborative process, all at the same time. I’m grateful for the chance to speak with Mario Juarez, who spent decades as a communications leader at Microsoft; Nathan Myhrvold, formerly Microsoft’s chief technology officer; Microsoft Chief Storyteller Steve Clayton; and longtime tech and video game journalist Dean Takahashi—your insights were so helpful to me.

Thanks goes to HarperCollins and Kevin Anderson & Associates for the opportunity to write about such a fascinating company.

I’m forever grateful to those who’ve helped me along the way, especially my parents.

To Suzy and Dean, your love and support mean the world to me.

Dan

INTRODUCTION

Microsoft isn’t cool. The company, founded in 1975, has a reputation for humdrum business-oriented products and capitalizing on market advantages. It didn’t develop its own desktop personal computers or invent the first word processors, spreadsheets, or graphical user interfaces. It wasn’t the first company to create an internet browser or email service or video game system, and was surpassed in mobile phones and search engines and cloud technology and social media.

And yet, Microsoft finds itself one of the greatest business success stories in United States history—a global tech giant with its own line of PCs in the Surface; and killer apps with Microsoft Word and Excel; and its benchmark interface, Windows; and the Internet Explorer browser; and the Outlook email platform; and Xbox for video games; and the Bing search engine; and Microsoft Azure cloud technology; and LinkedIn for social media. The 148,000-employee Microsoft was worth nearly $1.4 trillion in early 2020, neck and neck with Apple for the world’s most valuable company. But beyond market value, its impact can be measured in the ability to empower people and businesses to fulfill their purpose and achieve more.

Which makes Microsoft pretty damn cool, after all.

In the pages that follow, we will take a deeper look at the story of Microsoft, charting its creation by two childhood friends to its rise into one of the world’s most successful—and yes, coolest—companies.

Microsoft finds itself one of the greatest business success stories in United States history—a global tech giant with its own line of PC s in the Surface; and killer apps" with Microsoft Word and Excel; and its benchmark interface, Windows; and the Internet Explorer browser; and the Outlook email platform; and Xbox for video games; and the Bing search engine; and Microsoft Azure cloud technology; and LinkedIn for social media.

I was a sponge, soaking up knowledge wherever I could. All of us were sponges then.

—PAUL ALLEN,

Cofounder of Microsoft

CHAPTER ONE

THE EARLY

YEARS

The future was here. Paul Allen rushed through Harvard Square to reach his friend Bill Gates to show him the January 1975 issue of Popular Electronics, the magazine devoted to gadgets and gizmos.

The gizmo on the cover would change computers forever—and inspire the creation of one of the world’s most influential companies.

World’s First Minicomputer Kit to Rival Commercial Models . . . Altair 8800

The article about the Altair 8800 picked up on page thirty-three.

The era of the computer in every home—a favorite topic among science-fiction writers—has arrived! It’s made possible by the POPULAR ELECTRONICS/MITS Altair 8800, a full-blown computer that can hold its own against sophisticated minicomputers now on the market. And it doesn’t cost several thousand dollars. In fact, it’s in a color TV-receiver’s price class—under $400 for a complete kit.

The Altair 8800 is not a demonstrator or souped-up calculator. It is the most powerful computer ever presented as a construction project in any electronics magazine. In many ways, it represents a revolutionary development in electronic design and thinking.¹

The computer’s front panel included rows of switches and LEDs. Behind the lid, the Altair featured an 8-bit parallel processor and 65,000 words of maximum memory, along with a new LSI chip and seventy-eight basic machine instructions (as compared with forty in the usual minicomputer). This means that you can write an extensive and detailed program, the authors wrote.² But someone would have to write that program. Allen and Gates thought they might be the people to do it. The pair had been teaming up ever since their days at the Lakeside School, a private boys’ school in Washington State. Allen, a multifaceted dreamer, was born in 1953. Gates, a bookish, driven pragmatist, came along two years later. They both were drawn to computers and coding while attending the Lakeside School.³ At the time, computers were massive and clunky and expensive and exclusive, generally only available to government agencies or major companies or academics in math and science disciplines.

Lakeside had a Teletype Model ASR-33 (for Automatic Send and Receive) terminal with a paper tape reader that linked over the school’s phone line to a GE-635, a General Electric mainframe computer in a distant, unknown office, Allen recalled decades later.

"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 had to be lined with white corkboard for soundproofing. But though it was noisy and slow, a dumb remote terminal with no display screen or lower-case letters, the ASR-33 was also state-of-the-art. I was transfixed. I sensed that you could do things with this machine."⁴

The school’s Mothers Club held a rummage sale and used the proceeds to buy the Teletype and computer time on the GE computer. But computer time was expensive—whoever was using it had to be efficient and creative. You would type the programs off-line on this yellow paper tape and then put it into the tape reader, dial up the computer, and very quickly feed in the paper tape and run your program, Gates said. They charged you not only for the connect time, but also for storage units and CPU time. So, if you had a program that had a loop in it of some type you could spend a lot of money very quickly. And so we went through the money that the Mothers Club had given very rapidly. It was a little awkward for the teachers, because it was just students sitting there and zoom—the money was gone.⁵

The system used a computer language called BASIC that was developed in 1964 by Dartmouth College math professors John Kemeny and Thomas Kurtz (BASIC, speaking to its ambitions for widespread use, stands for Beginners’ All-purpose Symbolic Instruction Code).⁶ Computers needed language to run, and even if computers weren’t readily available for public use, BASIC created the potential of computer programming for the masses.

Allen and Gates Meet

It was in that Teletype room, amid the Gatling gun of the paper-tape punch and ka-chacko-whack of the printer keys, that Paul Allen and Bill Gates first connected. The pair reflected an image of contrasts. The older Allen, with his long sideburns and stocky build, looked a decade older than the boyish, gaunt Gates.

"It was in that Teletype room, amid the Gatling gun of the paper-tape punch and ka-chacko-whack of the printer keys, that Paul Allen and Bill Gates first connected. The pair reflected an image of contrasts.

Where Allen’s family struggled to afford tuition but wanted to challenge him (his father was a University of Washington librarian and his mother was a schoolteacher),⁷ Gates, nicknamed Trey as a child, had been raised in a prominent family—his father was a successful lawyer and his mother was involved with the boards of nonprofits.⁸

Despite all of their differences, they also had many similarities. They both were drawn to the limitless potential of computers and felt like a wave of opportunity was approaching. Companies such as Hewlett-Packard and Intel Corporation were emerging, and developments in memory storage and word processing were on the horizon.

Something big was happening. And Allen and Gates wanted to be a part of it.

The Lakeside Programming Group

Gates and Allen joined two other students—Ric Weiland and Kent Evans—as the most consistent visitors to the computer room. The older Allen and Weiland often paired up together, and the younger Gates and Evans quickly became best friends, reading business magazines and planning their future companies.

We were always creating funny company names and having people send us their product literature, Gates said. Trying to think about how business worked. And in particular, looking at computer companies and what was going on with them.⁹

As the group kept burning through the Mothers Club’s computer budget, a new opportunity emerged—a time-sharing company called the Computer Center Corporation, or C-Cubed, opened in Seattle and needed testers for its Digital Equipment Corporation PDP-10 computer, since its TOPS-10 operating system was known to crash.¹⁰

C-Cubed offered the teens unlimited free time as testers on the company’s terminals. There, they began studying code and mastering different machine language such as BASIC, COBOL (Common Business-Oriented Language), and FORTRAN (Formula Translation). Computer pioneers at C-Cubed would loan Gates and the other teens system manuals and teach them about assembly code in drips and drabs. Other times, Allen and Gates would go dumpster diving through the trash to find discarded operating system listings. Gates’s weight made it easier for Allen to propel him.

It was so exciting to get a little glimpse and beginning to figure out how computers were built, and why they were expensive, Gates recalled decades later. I certainly think that having some dimension, when you’re young, that you feel a mastery of, versus the other people around you is a very positive thing.¹¹

After testing of the PDP-10 was completed, C-Cubed began charging the teens for computer time. One month, Allen’s charge came to $78, which would amount to more than $500 in 2019. I know you’re learning, but can’t you cut back? his father asked him.¹²

Gates and Allen tried to tap into C-Cubed’s internal files in hopes of finding a free account. Instead, they got caught, and they lost their C-Cubed privileges for the summer. That fall, Allen—in exchange for free computer time—was tasked with trying to improve C-Cubed’s BASIC compiler, a program that translates source code.¹³

Allen pored through the assembly code like an apprentice watchmaker squinting at the tiny wheels to understand their interplay, he wrote, piecing the code together word by word and becoming a BASIC virtuoso.¹⁴

C-Cubed taught the boys another lesson in 1970 when it closed. The company never established a solid business model. There was money to be made through computers, but you couldn’t fund a company on the strength of free computer time.

With C-Cubed closed, the teens branched out. Allen, then a high school senior, began spending his time at the University of Washington’s graduate computer science lab. I was a sponge, soaking up knowledge wherever I could, he said.¹⁵ All of us were sponges then.

That fall, a time-sharing company in Portland hired Allen and his three colleagues—Gates, Weiland, and Evans—to write a payroll program in COBOL, the high-level language, and the Lakeside Programming Group was born.

That fall, a time-sharing company in Portland hired Allen and his three colleagues"—Gates, Weiland, and Evans—to write a payroll program in COBOL, the high-level language, and the Lakeside Programming Group was born.

The project was sprawling and cumbersome. Evans and Gates did much of the heavy lifting, but after Allen and Weiland worried there wouldn’t be enough work to go around, the upperclassmen decided they could take on the project alone.

I’m sure their friends thought it was weird that we were coming around at all, and then they decide they just want to do it. So they kicked both Kent and I off the project, Gates said. And I said, ‘I think you’re underestimating how hard this is. If you ask me to come back, I am going to be totally in charge of this and anything you ever asked me to do again.’¹⁶

Soon enough, Allen was asking Gates to rejoin the project, and just as he said, Gates took ownership. It was just more natural for me to be in charge, he said.

Gates had an innate ability to synthesize information quickly. When confronted with a situation, he’d rock forward and backward, forward and backward in his chair, a means of focusing and centering himself. But Gates’s analytical mind couldn’t help his friends secure computer access.

In March 1971, computer lab director Dr. Hellmut Golde kicked Allen and his high school friends out of the lab. Their work has caused a number of complaints and tends to disrupt the intended use of the laboratory, Golde wrote in a letter to Allen, citing the noise level and their removal of an acoustic coupler without leaving at least a note. Such behavior is intolerable in any environment. Allen published the letter in a 2017 LinkedIn post announcing that the university’s Department of Computer Science & Engineering was being elevated to a school and would bear his name.¹⁷

Allen began taking classes at Washington State University that fall after graduating from Lakeside, pledging a fraternity, and playing intramural sports, while Weiland attended Stanford, majoring in electrical engineering. The youngest members of the Lakeside Programming Group, meanwhile, were tasked with solving a new problem. Their school had merged with a local all-girls school, and Lakeside’s principal needed a program to organize the class schedules.

But in May of 1972, before they could begin the project, tragedy struck. Kent Evans, Gates’s closest friend, was taking a mountaineering class when he slipped and fell down a slope and died. He was seventeen years old.

It was so unexpected, so unusual, Gates said.¹⁸

A Strong Pair

A grieving Gates asked Allen to help him with the scheduling program, and the friends fell into a routine, working around the clock, sleeping on cots, and going to the movies for breaks.

I was impressed by how cleanly Bill broke the job into its component parts, and especially how he ‘preloaded’ himself into an English class with a dozen or more girls and no other boys, Allen wrote in his memoir, Idea Man. Bill and I became closer that summer. Our age gap no longer seemed to matter; we had what I call high-bandwidth communication.¹⁹

That high-bandwidth communication continued with their next opportunity, which involved data processing about traffic flow—Gates called the program Traf-O-Data, playing off of the term jack-o’-lantern.²⁰

Allen was drawn to the potential of the microprocessor, the heart of the computer. A colleague, Paul Gilbert, helped build a machine around an Intel 8-bit 8008 microprocessor.

The pair were also enlisted for early 1973, Gates’s final