Prologue

Witness the Transformation!

On the otherwise unremarkable day of May 22, 1990, William Henry Gates—often called III, in actuality IV, and legally just William Henry—was about to transform the computer industry one more time. As he rocked back and forth in the wings of Manhattan's City Center Theater, the hyperkinetic, tousle-haired thirty-four-year-old computer programmer, tycoon, Harvard dropout, and multibillionaire was about to deliver the most important presentation of his presentation-filled career. Bill Gates, co-founder, chairman, and chief executive officer of Microsoft, number-one personal computer software company in the known galaxy, was about to announce the latest incarnation of Microsoft Windows. It was a product that had been released four or five times before to less than stunning success. But now . . .

Witness the transformation!

It was the theme of the day, the slogan for the biggest, splashiest software rollout yet concocted. It was emblazoned on posters, flyers, buttons. It sounded like the mantra of some bizarre religious cult—which in some ways it was. When you got right down to it, this whole Windows thing had been basically an act of faith, Bill Gates's faith in his vision of the future of computers—a faith that had taken him to the very top of the industry and transformed him into a national figure in the class of such inventor-promoter plutocrats as Thomas Edison, Henry Ford, and Howard Hughes.

As the throng of press, industry-watchers, analysts, and customers filed into the auditorium, the giant screen above the stage displayed only the classic C:> prompt that signified dull old MS-DOS. That essential "operating system" software served as a sort of butler for other programs, controlled virtually every IBM PC and compatible ever made, and had long been the underpinning of the Microsoft fortune. Now Windows was designed to wipe that prompt off the screen and take DOS into the future.

With Japanese long-term tenacity, Bill Gates had steered this pet project through half a dozen incarnations over seven itchy years to response that had been anything but deafening. It wasn't easy to get people excited about a program designed, like DOS, mainly to run other programs, and that was pretty much what Windows was. Yet as he waited near a loudspeaker pumping out the mindlessly hard-driving music common to porn films and business "events," the high-stakes poker player in Gates knew he was about to turn up an ace.

Witness the transformation!

Transformation? Gates had seen his share of it, had created his share. On the day he was born in 1955, fewer than 500 electronic computers had existed in the entire world, their total retail value amounted to less than $200 million, and the term "software" had not yet been coined. Over the years since his junior high school days in 1968, when he first laid hands on a computer terminal, Bill Gates had transformed himself and his company again and again, bending over backward and sometimes forward to create the business, get the business, keep the business. Now Gates was personally worth more than $2 billion, his company was valued at more than $7 billion, and he owed it all to an electronic revolution he had helped create.

In the world of 1990, computers were virtually everywhere you might look—and many places you couldn't. Gates and his company had little influence on the refrigerator-size modules that symbolized Big Computing's past and still hulked in air-conditioned chambers crunching data for banks and underwriters and universities and government agencies. Microsoft and its CEO had virtually nothing to do with the millions upon millions of tiny single-chip computers—microprocessors—hidden in the guts of cars, TV sets, VCRs, radios, fax machines, copiers, telephones, popcorn poppers.

But the man and the company had made an unmistakable mark on the millions and millions of microprocessors inside the machines that had come to epitomize the word "computer" in the 1980s. To most people, "computer" now meant "personal computer," a machine that fit on desk or lap—a screen, a keyboard, a disk drive or three, perhaps a mouse, all hooked up to anything from a scanner that could decipher printed words, to a printer that could produce typographically elegant pages, to a plotter that could render architectural drawings, to a modem that could send documents across the world in a flash. And some nine out of ten of those computers—it was probably closer to ten out of ten—ran software from Bill Gates's Microsoft.

Witness the transformation!

Forget chips and circuit boards and capacitors and controllers: What transformed all that mere hardware into a device that could actually do something useful was an intangible set of commands, an intellectual product that determined whether a given machine would manipulate words, calculate sums, animate pictures, do all three at once, or do something else entirely. That behind-the-scenes puppeteer, that intellectual product, that command set, was software.

Computer software had been around since World War II, though the term was largely unknown as late as 1960. But back in 1975, Gates and his partner Paul Allen had been the very first to commercialize software for the just-born personal computer. And commercialize was the word: Whereas much early software had been developed for the sheer challenge and shared like some favorite toy, the Gates/Allen edition of BASIC—the first personal computer language—was from the outset a business proposition, something people were supposed to pay for. That idea did not sit well with the pioneer hobbyists whose lame little machines needed BASIC to become something more than high-tech doorstops.

It had been Bill Gates himself who first challenged the freebie software ethic, in a truculently capitalistic letter bemoaning that his BASIC had been ripped off, unconscionably copied, and then blithely distributed among computer hobbyists without so much as a thank-you to its authors. Never mind that young Bill had a less-than-spotless past when it came to computer freebieism, had been chastised for manipulating accounts on a time-sharing system as an eighth grader and investigated by Harvard University for running up hour upon hour of academic computer time while developing that very same for-profit BASIC. Those had been mere errors of youth. Software was business.

And what a business! From Bill's initial BASIC, the microcomputer software industry had grown to become one hell of a business, an $8 billion business heading into the stratosphere, a business with profit margins undreamed of in the world of hardware, a business that at Microsoft alone had turned hundreds of programming weenies into millionaires.

And billionaires. As the house lights dimmed in the City Center, the sometimes-boyish man waiting offstage was without doubt the wealthiest, most influential computer mogul of them all. Bill Gates owned 36 percent of the company he had co-founded, an international enterprise with a wildly diversified product line that was grossing over a billion dollars a year with no debt at all and a war chest of nearly half a billion dollars in cash. He was planning a state-of-the-art electronic whizbang of a house whose site alone cost $5 million and whose construction might take a couple of dozen million more. He was scouting investments in electronic art displays and artificial intelligence and biotechnology and who knew what else. And, most amazingly of all, in a decade of mere money-movers like Ivan Boesky and Michael Milken, Gates had earned his fortune from a company that actually made things.

Gates's reign over the kingdom of the soft extended far across the border of the hard. His decisions on which machines to back and which to ignore helped make companies and break them. Heads of firms that created computers and microprocessors—hardware—regularly made pilgrimages to Microsoft's wooded headquarters in Redmond, Washington, to sit at the feet of the master. Indeed, the company had even set an industry standard with its Microsoft Mouse—hardware.

Lavish product-rollout extravaganzas like this one had once been the almost exclusive domain of hardware companies, the IBMs and Compaqs and Apples of the industry that pushed hefty boxes of metal and plastic and silicon at thousands of bucks a pop. Today, for the first time ever, a mere hundred-dollar software program ($150 list, but only fools would pay that) was being launched with the hoopla and backing—a cool $2 million—formerly reserved for hardware costing multiple kilobucks.

Some of that $2 million had financed the satellite links that were now beaming the City Center event to Boston and Chicago and Dallas and San Francisco and Los Angeles and Toronto and Washington, D.C. Some of it had financed what the audience was watching now: Microsoft's filmic short course in computer history. The on-screen parade through the past included mostly hardware—no sense hyping the competition—yet the passing glimpses of Richard Nixon, Michael Jackson, and E.T. subtly emphasized the essential point: At bottom, software was no longer merely the offstage puppeteer that manipulated hardware. Software had become the star.

Just as the music (software) on a compact disc was the important thing and the player a mere device to extract it, just as the movie (software) on a videotape was the important thing and the player a mere device to deliver the sound and picture, computer software had become the important thing, nothing less than what you played on hardware. There was word processing software to make you a better writer, spreadsheet software to give those bottom lines panache, database software to endow you with the digital intelligence of the CIA. Desktop publishing software promised to turn you into a Gutenberg, multimedia software sounded neat even if nobody could say exactly why, business presentation software could transmogrify you into—well, a Bill Gates. Software determined what hardware was worth. Software defined hardware. Software made hardware.

Gates had been instrumental in making this software revolution happen. In the fifteen years since he had welcomed the dawn of personal computing, software had gone from drab functional tools custom-written for big companies to eye-popping, shrink-wrapped, hype-slathered, mass-market manna generating profit margins that bordered on the outrageous. Hardware? With few exceptions, hardware was just plain boring, a mere commodity, a fungible item of no more interest than a VCR or TV set and sold at margins almost as slim.

And if you didn't want to take Microsoft's word for it, you could believe the popular press, which had picked up on the idea that the computer industry had become the New Hollywood, complete with enormous paydays, gossip columns, stars. Among those stars, the press's designated Personal Computer Visionary had until recently been Steve Jobs, the co-founder of Apple Computer and most recently of NeXT Inc.—a hardware guy! For years the headlines had read Steve Jobs Says This, and Steve Jobs Says That, and Steve Jobs Says the Other Thing, and every once in a while Bill Gates Says Something Else Entirely. But now Steve Jobs, whose fortune was counted in mere millions with an m, was out in Silicon Valley hustling his latest change-the-world machine, trying to relive the dream maybe once too often, and the press's attention had passed to Bill Gates—a software guy, the software guy.

Now the Windows rollout would cement Bill's position as the media's designated superstar. Before the media frenzy was over, dozens of national magazines would feature him and/or Windows on their covers. "Good Morning America," "Today," Time, Newsweek, Fortune, People, USA Today, and nearly every computer rag on the planet would be touting Bill Gates and his wonder product.

Under the able guidance of his public relations counselors, Gates was being propelled into a curious kind of nerdy celebrityhood riddled with contradictory stories about wild womanizing on the one hand and an inability to get a date on the other, about fast cars and speeding tickets mixed with monkish workaholism, about a thirst for Dom Perignon in private but hamburgers and french fries in public. Reportedly a voracious reader, he insisted his favorite books were two novels, The Catcher in the Rye and A Separate Peace, popular largely with pimply adolescents. Described as oblivious to wealth, he was quoted boasting "I have an infinite amount of money." Although he clearly enjoyed his fame and notoriety—at his thirtieth birthday celebration he came dressed as Jay Gatsby—he was nonetheless fiercely private, choosing to dole out to the press a collection of random fabrications, exaggerations, and facts that left Gates-watchers with the same question that appeared with a photo of him in his high school yearbook: "Who is this man?"

His multiple contradictions remained unexplored. Gates, the roving bachelor, remained so close to his parents and sisters that he built a secluded vacation compound for them yet designed it to double as a site for corporate retreats. Gates, the corporate bigwig, would discuss Microsoft business over dinner with employees and then blithely split the check with them. Gates, the terrible-tongued pragmatist, remained fiercely loyal to his oldest friends, maintaining jobs for them, standing by them even through conviction and imprisonment. Bill Gates's story was never rags to riches, a Harvard friend once remarked, but riches to riches—though the initial affluence, embellished to include such fictions as a million-dollar trust fund, was now utterly insignificant.

A "high-bandwidth" intellect capable of discussing gene splicing with high-powered biotech scientists, a business wizard who at the age of twenty-three could rebuff a buyout offer from Ross Perot, Gates could just as easily lock his keys in the trunk of his rental car, lose his credit cards, and burn out car engines by ignoring the "low oil" light. Gates owned a limited-edition Porsche 959 he'd bought for $380,000 and whose value had more than doubled even though the U.S. Government deemed it unroadworthy, yet he flew coach whenever possible. Charming one minute, rude the next, Gates was hard to sum up in a sound bite, a Binary Bill of polar contradictions beginning with public shyness and private aggressiveness—some said ruthlessness—that even longtime associates found difficult to reconcile.

Witness the transformation!

On the City Center screen, a splashy MTV-style extended commercial featured a trip into a Windowsland where computing would be transformed into child's play. Microsoft called Windows an "operating environment," meaning it was designed mainly to run other programs—programs that could take advantage of its graphical user interface—"GUI," as it was known in the industry, "gooey," as it was pronounced.

A GUI gave you a symbolic representation of your desktop right up there on your computer screen, complete with little pictures called "icons"—a sheet of paper to signify a data file, a fanciful trademark to represent a program. When you worked with a document on your screen, it would look pretty much like what would emerge from your printer. You'd manipulate it all with a pointing device called a mouse. And if you were so inclined, you could divide your screen into areas called—yes!—"windows."

The GUI concept was invented neither by Bill Gates nor by Microsoft. Windows was a descendant—some would say "ripoff" —of earlier graphical user interfaces, most notably the experimental versions from Xerox's Palo Alto Research Center, better known as PARC, and the best-known and best-loved GUI of them all, the commercial version from Apple Computer's Macintosh. Compared to these rather elegant renderings of the concept, the first versions of Windows had been gauche, ugly poor relations. But now, as the mantra pointed out, Windows had undergone major cosmetic and internal surgery and emerged looking fit, trim, glamorous. Under the guidance of Windows, stodgy IBM PCs and clones would be magically transformed into lovable Macalikes.

And why not? After all, Bill Gates had been in on both the IBM PC and the Macintosh from their very inception. He was among the few people in the world who had played with both machines when they were mere prototypes, little more than circuit boards with wires sticking out all over them. So who better to perform this transformation than . . . .

. . . "Ladies and Gentlemen: Bill Gates!" Despite his ill-fitting pinstripe suit and bunched-up red tie, the Boy Genius looked more like a classic businessman than ever and less like a boy. As he strode to the stage and pushed his glasses back on his nose in a characteristic gesture, he actually looked his age. On the giant screen above his head, his visage gazed out over the silent auditorium.

Gates grinned awkwardly. "Well, I'm glad to hear it's ready. This would have been a very extravagant way to announce a delay in our schedule." Even in a room ready for an icebreaker, the joke fell flat. Windows 3.0 had not been officially announced until now, but it had been delayed so often that it had become the worst-kept secret in the computer industry. The first Windows announcement, back in the PC cobwebs of 1983, had taken place a few blocks away, at the Plaza Hotel, more than two full years before the product was actually delivered. The original Windows release was so late that it was responsible for the popularization of the term "vaporware"—software that exists primarily in the minds of its developers.

But seven years in the computer business was such ancient history that few in the audience even remembered the initial delays. Over those seven years, the Windows story had been one of tepid reviews, backhanded compliments, empty hype, sluggish sales. After half a dozen incarnations, Windows was supposed to be in its grave.

Lawyers might have sounded the death knell. The very Macintoshness of Windows was the subject of a celebrated and protracted Apple lawsuit against Microsoft.

IBM might have dealt the death blow. Big Blue had refused to go along with Windows no matter how hard Bill pitched it. Instead a succession of blue suits insisted on defenestrating Windows in the process of creating the jointly developed OS/2, a bigger, stronger, more powerful system intended to do all the things Windows and MS-DOS did and many more besides.

Still, IBM was a big, loyal customer, and Bill and his old Harvard buddy, best friend, and prime lieutenant Steve Ballmer agreed they wanted its business. So Microsoft said yes, customer, you are right, we'll do it your way. In the inmost circles of Microsoft, doing things The IBM Way for OS/2 came to be known by the acronym BOGU—Bend Over and Grease Up—and was symbolized by the jar of Vaseline a group of programmers gave Ballmer for one less than happy birthday.

Now, after all these years, Windows was more alive than ever. If anybody in American business could afford the luxury of a Japanese-style long view, it was Billion-Dollar Bill. Of all the young microcomputer pioneers, he was virtually the only one left in control of his original company. Alone in the spotlight, with his face filling the screen overhead, the owlish Young Achiever with a developing middle-age wattle executed his performance stiffly, awkwardly, talking about how complicated and boring the PC had become and how the graphical Windows interface was going to transform the desktop computer into something cool, great, neat, super. Right, wags muttered: a lot like what the Macintosh had been for years now.

Theatrical smoke and flashing lights heralded a demonstration. Look, Bill said in his deadpan way. You could switch between programs without having to exit and reload. You could cut numbers from one program and paste them into another one. You could "hot-link" two programs together so that changing a number in a spreadsheet would change a total in a form letter. You could, of course, have done all those things with earlier versions of Windows, but never mind. Now there were more colors! Fancier icons! Cleaner borders! Snazzier fonts! Sexy 3-D buttons! And now you could write and run really big programs.

Gates even called his old buddy and colleague, the bearded, heavyset Paul Allen, to the stage for a sentimental but overscripted public reunion. After a bout with Hodgkin's disease in 1982, Allen had gone off to form Asymetrix, a new software company, and his lack of interest in publicity had made him something of a forgotten man, even though he owned a street-illegal Porsche just like Bill's, even though he was building a house as grand as Bill's, even though he owned vast property tracts in Hawaii and the Portland Trail Blazers basketball team—forgotten, perhaps, because his net worth was only half of Bill's, a paltry billion. Now, after a welcome return to Microsoft's board of directors, he was bantering awkwardly with his old friend in a rare public appearance as he demonstrated ToolBook, his software intended to make programming and animation easier. "We've come a long way in fifteen years!" Bill read from the teleprompter.

Next came the grand finale: a videotaped parade of computer-industry heavyweights, fellow hardware and software giants, even members of the computer press, praising the new Windows in unstinting gush. Even Borland's Philippe Kahn, a longtime Microsoft archenemy, joined the fun, announcing: "Windows is an important platform for the future. I never thought I would say that with a straight face!" The final shot caught Bill Gates in shirtsleeves staring at the camera, pushing his glasses back on his nose yet again, and uttering a single word: "Cool!"

The taped Gates dissolved into the real Gates, who called out the entire Windows development team, a motley crew united by their official Windows polo shirts—scraggly-haired, blue-jeaned young Smart Guys (and a couple of Gals) wandering through the aisles brandishing copies of Windows 3.0. In the days that followed, Egghead Discount Software stores would find lines of eager customers waiting outside their front doors to buy the new Windows.

Windows or OS/2? Let the market decide! It wouldn't be long before Boom-Boom Ballmer, Gates's prime lieutenant, would be pounding his fist on the tables of America's corporate boardrooms, leading not the tired old cheer—OS/2! OS/2! OS/2!—but the stirring new one: Windows! Windows! Windows! By the end of its first year on the market, Windows 3.0 would sell more than 4 million units—more than all the Apple Macintosh computers sold since the machine was introduced in a similar hellzapoppin' rollout with a dramatic Super Bowl third-quarter TV ad in January 1984. Windows, however, would do it without TV; Bill Gates had so little interest in broadcast television that his home set and VCR did not include tuners.

Microsoft's success was so immediate and dramatic that Apple found itself beleaguered by cheap PCs running Windows and scrambled to contrive a new line of low-cost Macintoshes. Independent software developers began deserting OS/2 in droves to write Windows applications. And then came the backlash. Windows wasn't as easy to use as the initial claims led some to believe. Windows was slow. Windows didn't always work quite right. And Microsoft's emphasis on Windows made IBM feel queasy about OS/2 and the future of its relationship with Bill Gates. Windows was a home run, but a home run of a special kind—the kind that broke the neighbor's windows.

Within months the most popular industry sport would become Bill-bashing, grumbling and mumbling about unfair business practices at Microsoft—welshed deals, misinformation, disinformation. On the cover of Business Month, Gates's head would be satirically airbrushed onto a weight lifter's torso above the legend "The Silicon Bully: How Long Can Bill Gates Kick Sand in the Face of the Computer Industry?" Inside, competitors would compare him to GM's discredited Roger Smith, and Lotus 1-2-3 creator Mitch Kapor would call Microsoft products "unimaginative, tone-deaf, and slow."

With that issue, Business Month expired, but that didn't stop the talk. Competitors would bitch about how Microsoft sent teams of developers to software companies to steal corporate secrets, about how the company would get others to divulge their product plans and then go off to develop competitive products of its own. A small mouse maker would sue, howling antitrust. The Federal Trade Commission would launch an antitrust investigation, with the implied threat of breaking up Gates's carefully constructed empire. IBM and Microsoft, their relationship already on the rocks, would file formal separation papers. It would get so bad that industry luminaries would refer to Bill Gates as the Prince of Darkness, his employees as Hitler Youth.

And then it would get better. By early 1992 the stock market would value Microsoft at more than $22 billion, making Bill Gates, at more than $7 billion, the richest person in America. A single golden share of Microsoft's first private stock issue worth roughly $1 in 1981 would be worth more than $1,500; a $25 share from the 1986 initial public offering would be worth more than $750.

But all that was for later. On the day of the Windows rollout, Bill Gates and Microsoft were on top of the computer world. You could calculate your corporate budget with a Microsoft spreadsheet, display it as a slide with Microsoft presentation software, turn it into a report with Microsoft word processing software. And if software weren't enough, you could buy Microsoft Press books, read a Microsoft magazine, wear Microsoft T-shirts, even—was it the snide joke of the Harvard dropout?—attend Microsoft University. Insiders who knew Bill's ability, his luck, his hubris, his shrewdness, his chutzpah, his downright fearlessness were certain that no matter what happened, Billion-Dollar Bill would find a way to slap a Microsoft label on it and make a buck off it.

In the audience at City Center, his mother was beaming. This transcontinental, international presentation was a significant improvement over one she remembered from fifteen years ago. At that demonstration, in the family living room, everything had gone awry, and her son had invoked her assistance in front of the baffled customer: "Tell him, Mom! Tell him it worked last night!"

No, this time everything had worked just fine. At a celebration that evening, Mary Gates told a reporter "This is the happiest day of Bill's life."