Microsoft Co-Founder Paints a Brutal Picture of Bill Gates

Last Updated Apr 6, 2011 7:16 PM EDT

Microsoft Cofounder Paints a Brutal Picture of Bill GatesA new book by Microsoft Co-Founder Paul Allen paints a surprisingly unflattering picture of his old friend and former partner, Bill Gates. Allen - listed by Forbes as the 57th richest man in the world with over $13 billion in assets - seems to be bitter about how things went down before he left Microsoft way back in 1983.

At least, that's what some reports say. But I think Allen's portrayal of Gates as a confrontational taskmaster with a ruthless competitive nature is not only accurate but also well-known. I wouldn't think anyone has forgotten the Justice Department's antitrust suit in United States v. Microsoft, not to mention all the companies Microsoft put out of business.

Ironically, I think the book sheds far more light on the author than on Gates, although what comes to light is a decidedly complicated picture that brings to mind some interesting questions:
  • Did Allen really come up with the one big idea that made Microsoft more money than just about any business in history?
  • Why should anyone be surprised that Allen paints Gates as a brutally competitive business man who eats chicken with a spoon?
  • Is Allen's recollection of events accurate or a revisionist take on history, as some reports suggest?
  • With all due respect, what business does the man have whining about stuff that happened decades ago that, incidentally, made him one of the richest men in the world?
Now, I don't know Allen or Gates, but I know people who do. And I worked for a couple of companies that had significant - let's call them interesting - dealings with Microsoft back in the 90s. So I think I can answer those questions and provide some insight into the behavior of these unfathomably successful and controversial leaders.

Let's take a look at a few select excerpts from the book, "Idea Man: A Memoir by the Co-founder of Microsoft," which goes on sale on April 17. The excerpts are from Vanity Fair and the Wall Street Journal.

The Die is Cast
Never would the contrast between these two men be more pronounced or obvious than when they first met in a private Seattle school:
His parents subscribed to Fortune, and Bill read it religiously. One day he showed me the magazine's special annual issue and asked me, "What do you think it's like to run a Fortune 500 company?" I said I had no idea. And Bill said, "Maybe we'll have our own company someday." He was 13 years old and already a budding entrepreneur.

Where I was curious to study everything in sight, Bill would focus on one task at a time with total discipline. You could see it when he programmed-he'd sit with a marker clenched in his mouth, tapping his feet and rocking, impervious to distraction.

I was O.K. with being a generalist.
The die was cast for these two men early in life. It's easy to see how Gates would someday maintain a razor-like focus on making Microsoft successful over decades while Allen's interests would take him away from the partnership relatively early in the game.

Gates's Nasty Habits
While his lack of interest in personal habits and social convention is legendary, this story of Gates's first dinner with Allen and his girlfriend is priceless:
"Did you see that?" she said after he'd left. "He ate his chicken with a spoon. I have never in my life seen anyone eat chicken with a spoon." When Bill was thinking hard about something, he paid no heed to social convention.
That's classic Bill Gates.

The Name Micro-Soft
Allen makes a point to say that he, not Gates, came up with the name: Micro-Soft. Yawn.
50-50 Partners? Not So Fast
What really seems to be eating at Allen is that Gates didn't think he deserved half the company. What's sort of contradictory is that, in the end, Allen says he thought 60-40 was fair. And I agree, it was. So what's the beef?
From the time we'd started together in Massachusetts, I'd assumed that our partnership would be a 50-50 proposition. But Bill had another idea. "It's not right for you to get half," he said. "You had your salary at MITS while I did almost everything on BASIC without one back in Boston. I should get more. I think it should be 60-40."

At first I was taken aback. But as I pondered it, Bill's position didn't seem unreasonable. I'd been coding what I could in my spare time, and feeling guilty that I couldn't do more, but Bill had been instrumental in packing our software with "more features per byte of memory than any other BASIC we know," as I'd written for Computer Notes. All in all, I thought, a 60-40 split might be fair.
Later, when establishing the company as a formal partnership, Gates pushed Allen even further to a 64-36 split, reflecting his concerns that Allen wasn't as committed to the business as he was. Since that was more or less true, Allen again agreed.

Gates the Confrontational Taskmaster
Clearly, Allen had a big problem with Gates's management style. He also poses the age-old question about whether a highly confrontational CEO who fosters knock-down, drag-out fights is actually good for a company.
Microsoft was a high-stress environment because Bill drove others as hard as he drove himself. He was growing into the taskmaster who would prowl the parking lot on weekends to see who'd made it in. People were already busting their tails, and it got under their skin when Bill hectored them into doing more.

Bill liked to hash things out in intense, one-on-one discussions; he thrived on conflict and wasn't shy about instigating it. A few of us cringed at the way he'd demean people and force them to defend their positions.

And if you hadn't thought through your position or Bill was just in a lousy mood, he'd resort to his classic put-down: "That's the stupidest f---ing thing I've ever heard!"

Some said Bill's management style was a key ingredient in Microsoft's early success, but that made no sense to me. Why wouldn't it be more effective to have civil and rational discourse? Why did we need knock-down, drag-out fights?

Why not just solve the problem logically and move on?
Good question. Unfortunately, none of us will ever know if Microsoft would have been as successful as it was if Gates had a different management style. The same goes for Steve Jobs at Apple, Larry Ellison at Oracle, and other similar CEOs. You just never know.

Enter Steve Ballmer
In 1980, the two partners agreed to offer Steve Ballmer - a close friend of Gates from Harvard - 5 percent of the company to join. But Gates gave Ballmer 8.75 percent of the company. Allen was furious because Gates went behind his back, but when he confronted him, Gates said, "Look, we've got to have Steve. I'll make up the extra points from my share." Allen said O.K. and that's what Gates did.

Apparently, Gates felt he needed Ballmer and had to negotiate to get him while Allen was out of town. His instincts were right; Ballmer has always been a great complement to Gates. Agreeing to make it up out of his own share was standup, but still, I can see why Allen was POd about it.

A Really Big Idea
The one real revelation, and it is a big one, is that, according to Allen, it was his idea to charge per copy royalties for DOS instead of a flat license fee. While he was overruled by Gates and Ballmer at the time, the company did make the change later. That was a brilliant business move that would ultimately add billions to the company's revenues.

The Straw That Broke the Camel's Back
After being diagnosed with Hodgkin's lymphoma in 1982, Allen overheard a heated conversation between Gates and Ballmer. According to Allen:
They were bemoaning my recent lack of production and discussing how they might dilute my Microsoft equity by issuing options to themselves and other shareholders.
After listening outside for some time, Allen burst in, confronted the two, then stormed out.
I replayed their dialogue in my mind while driving home, and it felt more and more heinous to me. I helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. It was mercenary opportunism, plain and simple.
Even after a call that evening from Ballmer and a six-page letter from Gates a few days later - both apologizing - the bloom was off the rose for Allen.
Once I was diagnosed with Hodgkin's, my decision became simpler. If I were to relapse, it would be pointless-if not hazardous-to return to the stresses at Microsoft. If I continued to recover, I now understood that life was too short to spend it unhappily.

My mind was made up.
Irony Is Its Own Reward
Once Allen decided to leave the company in 1983, Gates wanted to buy back his shares for $5 a pop. Allen wouldn't take less than $10 so the two were at a stalemate. Ironically, had Gates given in on $10, Allen would never have made the vast majority of his fortune from Microsoft stock.

Bottom Line
I have to admit to being a little baffled as to why, after all these years, Allen chose to write what the Wall Street Journal calls:
... a revisionist take on some details of Microsoft's history and the relationship between Mr. Gates and his former partner, the two of whom have long been viewed as cordial if not close friends.
Even Mr. Allen says Mr. Gates was one of his "most regular visitors" when Mr. Allen was recovering from chemotherapy two years ago from non-Hodgkin's lymphoma, describing him as "everything you'd want from a friend, caring and concerned."

The book has created a rift between Messrs. Gates and Allen, say people who know both men.
After all, as one of the richest men in the world, Allen has had the kind of life that ordinary people can only dream of. He has a multibillion dollar investment portfolio, owns two professional sports teams, funded the first suborbital commercial spacecraft, has numerous large-scale philanthropic projects, and maintains a controlling interest in Charter Communications, one of America's largest cable companies.

What in the world does the man have to be bitter about?

Perhaps this will give us a clue. Last year, in contrast to his apparently altruistic and affable nature, Allen filed a patent infringement suit launching what some have called a patent war against AOL, Apple, eBay, Facebook, Google, Netflix, Yahoo, YouTube and others over four patents he owns from a now-defunct venture.

That move surprised the heck out of everyone. The same goes for the book. Maybe we should just say Allen is a complicated man and call it a day.

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Images: courtesy Paul Allen, Microsoft

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