William Gates III was born in 1955. The son of an attorney and a teacher, Gates grew up in Seattle with his two sisters. He began dabbling in computer programming at age 13 and sold his first program to a school for about $4,000. As a teenager, he befriended Paul Allen, and the two both left Seattle to attend Harvard University. While at Harvard, they formed a company specializing in computer software, which they named Microsoft. They trademarked the name in 1976.
College Dropout: Gates did not finish his education at Harvard. He dropped out in his junior year to devote himself to Microsoft. Gates and Allen saw huge growth potential in the personal computer industry and thought Microsoft could write the necessary software to run personal computers. The company made its first big strike in 1980, when IBM agreed to let Microsoft write the operating system for its new personal computer. This language became known as MS-DOS.
Microsoft's Growth: The early years of Microsoft were much like that of any startup firm. Everyone wore multiple hats – from answering phones to writing code. In fact, there are reports that in the early years Gates insisted on proofreading every line of code that was used in a finished project and would often change his colleagues’ work.
Much of Microsoft’s growth can be attributed to a contractual clause Gates included in his 1980 deal with IBM. The stipulation allowed him to license MS-DOS and sell it to other personal computer companies. MS-DOS spread quickly throughout the personal computing arena. Allen left the company in 1983 after a serious illness, although he remained a member of Microsoft's board of directors for many years. In 1985, Microsoft Windows 1.0 was introduced. A year later, Microsoft was listed on the New York Stock Exchange, with Gates attaining billionaire status.
Format Wars: When MS-DOS was released, it was one of three operating systems available on the market, but it quickly became the leader, partially because of Microsoft’s relationship with PC heavyweight IBM. It was seen as very basic. When rival Apple Inc. released the first Macintosh computer in 1984, its operating system was seen as more sophisticated and user-friendly. The operating system format wars between Microsoft and Apple began.
Network Effects: Ultimately, Microsoft would become the ruling system because of a condition known as “network effects.” Originally, computers needed to use the same operating system to communicate across a network. The value of MS-DOS increased with every additional MS-DOS user, and decreased with every new Apple user. MS-DOS was entrenched, and the switching costs for users too high. Microsoft, with its Windows system, would continue to win the format wars with Apple during the 1990s.
Innovative or Lucky?: While the success of Bill Gates can’t be denied, the creative genius of Bill Gates has been challenged. Computer Science Professor David Gelernter of Yale University wrote in Time magazine in 1998 that he believes Gates is overrated as a pioneer and entrepreneur. Gelernter contends that Microsoft often makes products by combining ideas that already exist in the marketplace. Gates was criticized in the 1990s for not recognizing the power and potential of the Internet. Even Gates admits he did not embrace the Web until 1996, two years after browsers debuted.
Microsoft Antitrust Litigation: The U.S. Justice Department brought an antitrust lawsuit against Microsoft in 1998, in which it was alleged Microsoft engaged in anticompetitive behavior by bundling Windows with Microsoft’s Internet Explorer browser. The company contended the two items were essentially the same product. The court initially ruled against Microsoft and ordered the company to be broken up into an operating system division and a browser division. However, this sentence was changed on appeal, and the company settled with provisions that some code be made available to outside parties.
Current Position and Philanthropy: Gates stepped aside as CEO of Microsoft in 2000 with Steve Ballmer, another Harvard friend, taking over that role. Gates remains the chairman of Microsoft, although in 2006 he announced he plans to back away from day-to-day Microsoft operations by 2008.
Gates has taken a considerable amount of his wealth and funneled it into philanthropic causes. His post-Microsoft plans include devoting more time to charity. His most well-known project is the Bill and Melinda Gates Foundation, which he started with his wife. The foundation was formed in 2000 and aims to reduce global poverty, improve global health and increase technology awareness in American schools. Gates also donated the proceeds from books he authored to nonprofits that work to improve the application of technology in educational settings. The Gates Foundation is reported to be worth more than $30 billion.
