Time to log off: Bill Gates steps down from the top job at Microsoft
In 1975, he declared it his ambition to put 'a computer on every desk and in every home'. As Bill Gates today steps down from the top job at Microsoft, and focuses instead on his extraordinary philanthropic legacy, Stephen Foley examines how this geek from Seattle changed our world
Friday 27 June 2008
When future historians put pen to paper, finger to laptop, or who-knows-what to who-knows-what device, Bill Gates will be up there as one of the most influential business leaders and philanthropists of the modern age, a John D Rockefeller for the turn of the 21st century.
Future generations will balance the monopolist against the philanthropist, the copycat against the visionary. With the specs, the jumpers, and the nasal voice, Gates was never going to pull off a Rockefeller-esque swagger, but this is, after all, the era in which the geek inherited the earth. Like the legendary oilman a century before him, he saw a new technology, shaped it, dominated it, milked it – and then quit to devote the rest of his life to giving it all away.
Today, Gates is retiring from his day-to-day role at Microsoft, the company he founded 33 years ago. As far as titles go, he is merely swapping "executive chairman" for "non-executive chairman". But he is also swapping, finally, the role of technology-industry pioneer and hard-edged business leader for a new role as the world's philanthropist-in-chief, spending his remaining days guiding the work of his $39bn charitable foundation.
It is, to be sure, a moment in history, and a moment to reflect that it is impossible to imagine our lives without Bill Gates. Without him, they would be completely different. Without Microsoft... well, what exactly?
There was always something about William Henry Gates III. Born on 28 October 1955, to a wealthy Seattle family, he spent all his spare time as a teenager fiddling with computers. He and his high-school buddy Paul Allen were captivated by the school's Teletype machine, which connected with a local computer, for which they wrote software. By the time he was 17, Gates had created a school timetable program that marshalled teachers and pupils, resolved clashes and magically, suspiciously steered a large number of girls into Gates's own classes. The school paid him for the program; whether the skinny, young-for-his-age Gates actually achieved any additional success with the girls as a result of his enterprise is not recorded.
A little over three decades later, and Gates is worth $58bn. For 13 years he has been the richest man on the planet, losing the title only this year after he started to hand money over to his foundation and watched the markets take down the value of his remaining Microsoft stake. Microsoft itself is worth $264bn, packing annual sales of $60bn. Its Windows operating system is the bedrock of almost all the personal and corporate computers in the world, fulfilling exactly the role that Gates famously predicted in his youth, mediating between the gubbins inside the box and the unsophisticated user at the keyboard, and opening up a world of technological possibilities. As the company grew through the Nineties, computer users queued around the block in major cities to buy each Windows upgrade on its release, as if it were a Harry Potter book or a coveted concert ticket.
In one of technology's most enduring feuds, Apple founder Steve Jobs fought Gates through the courts for years, claiming that Apple was the inventor of the style of graphical interface adopted by Windows.
Apple was the pioneer, sure, but Microsoft prevailed in claiming there was no copyright infringement. Both men had borrowed off earlier pioneering companies, Gates claimed, firing back: "Hey, Steve, just because you broke into Xerox's house before I did and took the TV doesn't mean I can't go in later and take the stereo."
Beyond Windows, Microsoft's word-processing software is ubiquitous (every article in today's Independent will have been written using it, for example), its business tools a must for most big firms. The company's Internet Explorer is the world's most widely used window on the internet and Microsoft has even been carving out a piece of the net itself through its MSN email and entertainment business, and through services for lucrative online advertisers.
Of late, its 30-year rivalry with Apple has bubbled back into life, with all those "I'm a Mac, I'm a PC" commercials adding a little piquancy, and it faces a challenge as never before from Google. But today, Gates is nevertheless handing over control of the broadest, most powerful technology company in the world. A company that has become too dominant, its critics still say.
In 1994, an internet joker circulated a fake press release,claiming that Microsoft had bought the Catholic Church. "The combined resources of Microsoft and the Catholic Church will allow us to make religion easier and more fun for a broader range of people," fake Bill Gates said in the release. The Church had been an "aggressive competitor" of other religions, "leading crusades to pressure people to upgrade to Catholicism, and entering into exclusive licensing arrangements in various kingdoms whereby all subjects were instilled with Catholicism, whether or not they planned to use it". This, said the fake release, echoed the Microsoft vision of "a computer on every desktop and in every home". The company saw fit to put out a denial.
The teenage Gates and Allen were pitched into an era where hardware and software development was proceeding apace, but in a disjointed way. Down in California, Steve Jobs and Steve Wozniak were starting to bat around the ideas that would become Apple. But when a company called MITS invented the Altair, the first mass-produced microcomputer, in 1974, and advertised for hobbyists to invent a programming language for it, Gates jumped at the chance, set up a meeting for him and Allen – and only then scrambled to invent something. They were hired, and their work formed the basis of Micro-soft, the company they founded the following year, with an impatient Gates dropping out of Harvard University to devote himself to the firm.
That was when Gates saw that future of "a computer on every desk and in every home". His was the genius to realise that a common operating system for computers would make them more useful for a wider range of tasks than seemed possible at that point in the Seventies.
With this vision, he persuaded his Harvard pal Steve Ballmer to commit to the company as Microsoft's first business manager, and the two have been side by side at the helm ever since.
Gates sniffed the future – but he sniffed it with a hard business nose. That operating system would be valuable. Furious to discover hobbyists were copying Microsoft's Altair Basic software, he fired off an infamous open letter. "Without good software and an owner who understands programming, a hobby computer is wasted. Will quality software be written for the hobby market? Most of you steal your software. One thing you do is prevent good software from being written. Who can afford to do professional work for nothing?"
It is the paradox at the heart of Microsoft, and the reason people debate whether the company's influence on the development of the PC market has been for good or ill.
George Colony, chief executive of the consulting firm Forrester Research, calls it "constructive monopolism", and rather than to Rockefeller, he likens Gates to Thomas Edison, pioneer of the use of electricity in everything from the light bulb to the electric stove: "Unlike oil, pharmaceutical, or steel, monopolies are a necessary ingredient in the technology business," Colony says. "It's only when de facto standards like Windows or de jure standards like HTML become dominant that usefulness soars. Bill had the vision to see this future and he possessed the competitive drive to force his technologies into monopoly positions in the marketplace.
"He has not been an innovator in technology – in polite circles we would call him derivative, in less genteel terms we would call him a plagiarist. Gates has been a business innovator, not a technology innovator."
Rockefeller's Standard Oil was eventually broken up in 1911, after years of skirmishes with the courts. Rockefeller could teach everyone a thing or two about monopolistic practices, threatening to put rivals out of business unless they sold to him, and ultimately dominating 90 per cent of the US oil refining industry. Microsoft nearly went the same way in 2000, when a US judge ruled that Gates and co had flouted competition laws in their five-year battle to establish Internet Explorer as the web's dominant browser and to crush the upstart Netscape in the process.
Gates always argued that packaging together Windows and its other programs helped users, by making the PC experience more seamless. On both sides of the Atlantic, competition authorities found a monopoly. The US ruling – stunningly – called for Microsoft to be broken apart, pulling Windows from the rest of the software business, but an appeal tempered the punishment.
Instead, Microsoft has been on a more-or-less bad-tempered probation in the US and Europe ever since. The European Union just this year fined it a record €899m for failing to comply with demands that it open up its source codes to other developers – source codes that are the progeny of that primitive software Gates railed was being stolen by the hobbyists decades before.
The irony is that these days, Microsoft is as likely to be alleging competition law infringements by rivals (for which, read Google) as it is fighting claims against it. The explosive growth of Google, which was barely a dorm-room computer project for founders Sergey Brin and Larry Page a decade ago, has created a rival dominating the internet as thoroughly as Microsoft dominates the market for software that comes in a box. Messrs Brin and Page have seen the future, too, and it is offering software that consumers and businesses can operate directly over the internet, rather than having to faff about installing on their computers.
Google, with billions pouring in from advertising on its search engine, is ahead in this arms race for the new era of so-called "cloud computing".
Some bearish analysts in the tech industry even wonder if there is any growth in the future for sclerotic old Microsoft – which took five years to bring out a new version of Windows that has turned out to be barely an improvement on the last version, and whose belated attempt to compete with iPod, the Microsoft Zune digital player, has disappeared without trace.
As long as Gates has been the figurehead, it has managed to keep a semblance of geeky innovation in the corporate spirit, but observers fear an exodus of the company's brilliant scientists without him. It is a tricky time.
So it's the end, but the moment has been prepared for. Well prepared for. It is a full two years since Gates announced he would gradually reduce his commitments to Microsoft and gradually increase those to the foundation. Even before then, he had ceded operational control of the business to Ballmer and concentrated on technological innovation. Since June 2006, figures like Ray Ozzie, creator of Lotus Notes email, and Craig Mundie have been pushed forward as the new visionaries, but the handover is carefully calculated.
There is a bit of an end-of-term feel. There will no doubt be toasts, laudatory emails and hagiographies in the coming days. A comedy video, recorded by Microsoft's bigwigs to entertain the crowds at the big consumer electronics conference in Las Vegas this year, parodies Gates's likely last day, in the style of The Office. Steve Ballmer deadpans: "I think Bill's ready for his last day. He's worked hard, saved a little bit."
Gates has never been afraid to take the mickey out of himself. He didn't say, as often reputed, "be nice to nerds – chances are you'll end up working for one", but he's said plenty of similar things. In the Vegas video he plays with Star Wars figures at his desk ("Never doubt the magic of software, listen to Chewbacca") and imagines a retirement regime under a personal trainer. ("That's good, Bill, one in a row, you'll be getting sexiest man alive next year." "Am I ready to take my shirt off now?" "Not yet.")
Yet the clip made a serious point, too. Ballmer ends by saying they will all miss seeing him in the hall every day, then turns to Gates as he exits with his belongings in a box: "Hey buddy, see you tomorrow at the board meeting."
The last thing that Microsoft needs right now, in these uncertain times, is for its visionary founder to walk off the set entirely.
Where are they now? Microsoft's original whizz kids
1 Steve Wood, 56, worked as a programmer for Microsoft before leaving with his wife in 1980. Wood worked with Paul Allen (see below) on a few projects before going on to found SinglePoint, a wireless software provider for mobile phones. Wood is now president and chief executive of Dategrity Corporation, a data security company. He is married to MarIa Wood (see below), and the couple are worth an estimated $15m.
2 Bob Wallace was at Microsoft until 1983, when he left to start up Quicksoft, another software business – but this one wasn't a success, and Wallace sold it on before embarking on psychedelic drug research through the Promind Foundation, founded jointly with his wife. Wallace died of pneumonia in 2002, aged 53 and worth $5m.
3 Jim Lane joined Microsoft as a project manager, and as a result of his work in collaboration with Intel, is credited with creating the relationship between the software giant and the computer hardware manufacturer. Jaded with the business, Lane left in 1985, going on to run his own software consultancy. He now lives in Washington state with his wife and children, and is worth an estimated $20m.
4 Bob O'Rear, now 64, is renowned for running the project which got the first MS-DOS operating system on an IBM PC. He quickly moved up the ranks from chief mathematician to director of international sales and marketing, before finally leaving in 1993. Nowadays, he is the business side of a family cattle ranch operation in Texas, while also serving on the boards of several hi-tech firms, and is worth an estimated $100m.
5 Bob Greenberg worked at Microsoft from 1977 to 1981, but went on to make a fortune with his family through the Cabbage Patch Dolls. With an estimated worth of $20m, Greenberg now lives in Florida with his wife and three children, developing golf software.
6 Marc McDonald was Microsoft's first employee, working with Bob Greenberg on the Basic programming language. Disgruntled with corporate culture, he left in 1984, taking with him share options worth $1m, before going to work with Paul Allen (see below) at Asymetrix Corp, a software design specialist. McDonald now lives in Seattle, and works as chief software scientist with the software firm Design Intelligence, now owned by Microsoft.
7 Gordon Letwin worked at Microsoft for longer than anyone other than Gates himself. He left in 1993 to spend more time with his wife. Worth an estimated $20m, Letwin now divides his time between his Seattle home and Arizona ranch.
8 Bill Gates, 52, founded Microsoft with Paul Allen in 1975 and propelled it into a lead position in the software market. He is now the third richest man in the world, worth an estimated $58bn.
9 Andrea Lewis was Microsoft's first technical writer, before leaving in 1983 to become a freelance journalist. She lives in Seattle with her husband and children, where she built a literary centre in the former home of the poet Richard Hugo that offers a haven for writers. From the shares she took with her on leaving Microsoft, she is estimated to be worth $2m.
10 Marla Wood worked for Microsoft in administration until 1980, when she left with her husband, Steve, after filing a sex discrimination suit against the company. This was settled out of court. She now looks after her children and works as a volunteer.
11 Paul Allen, 55, founded Microsoft with Bill Gates in 1975. In 1983, he left after ill health due to Hodgkin's disease. Until 2000, he still served on the company's board, but then left to pursue his own business interests. He is now chairman of Vulcan Inc, an investment management company that he founded, as well as being the owner of three sport teams – the Seattle Seahawks (American football), the Seattle Sounders (Major League Soccer) and the Portland Trail Blazers (basketball). Allen has amassed a fortune of about $16bn, helped in no small part by his investment portfolio.
12 Miriam 'Mama' Lubow, the much-loved Microsoft secretary, was unable to attend the 1978 shoot after being trapped in her home by a snowstorm, but was brought out of retirement for the new photo.
Office romance: how Bill met Melinda
In summer 1986, freshly graduated from Duke University with a degree in computer science and economics, Melinda Ann French was working as an intern for IBM. She told a recruiter she had one more interview – with a new company called Microsoft. The recruiter was keen. "If you get a job offer from them," she said, "take it, because the chance for advancement there is terrific."
Indeed. Six-and-a-half years later, Melinda Ann had advanced through the company, from software marketing tyro to general manager of information products such as Expedia and Encarta; more significantly, she had advanced to a senior role in the heart of the chief executive, Bill Gates, soon to become the world's richest man. Today, she is one half of the world's top charity foundation, with personal jurisdiction over the spending of $80bn (£40bn). Clever, raven-haired, strong-featured and tough as nails, she brings equal amounts of compassion, common sense and business nous to the small matter of alleviating world sickness and poverty.
Born in 1964, she grew up in Dallas, Texas, the daughter of Ray French, an engineer and house-rentals agent. At school, Melinda was earnest, driven and goal-orientated. Her introduction to the cyber-world came at 14, when her father brought home an Apple II, one of the first consumer computers available. She was soon playing computer games, and learning the Basic programming language.
It has always amused Bill Gates that his wife is better educated than him – he is America's most famous college drop-out. They met in 1987, four months into her job at Microsoft, when they sat next to each other at an Expo trade-fair dinner in New York. "He was funnier than I expected him to be," she reported, neutrally. Months went by before, meeting her in the Microsoft car park, he asked her out – in two weeks' time. She said, "ask me nearer the time." He had to explain to her the ceaseless daily flood of meetings.
Whatever first attracted Ms French to Bill Gates, he was struck by her forthrightness and independence. It was she who first spurred him into impulses of charity. After their engagement in 1993, during Melinda's "wedding shower", her mother Mary, suffering from breast cancer, read her an admonitory letter whose gist was, "from those to whom much is given, much is expected". Mary died months later, but her advice provoked the William H Gates Foundation. Run by Bill's father, its aim was to put laptops in every classroom. Then the couple decided that the most pressing issue in the US was reforming the education system.
Then, after their wedding in Hawaii (on New Year's Day 1994) Melinda read in The New York Times about the millions of children in developing countries dying of malaria and TB. She made world poverty their priority concern.
Melinda now spends 30 hours a week on foundation work, as she and Bill assess the charity presentations that flood in. Of the 6,000 requests the foundation receives each year, they read only the ones asking for $40m or more. "We go down the chart of the greatest inequities, and give where we can effect the greatest change," she told Forbes magazine, in a tone that suggests she doesn't regard it as rocket science. The foundation also links up with other charities and companies like Glaxo on more ambitious projects – like the Global Alliance for Vaccines and Immunisations, which kicked off with donations of $1.5m from each of 17 governments.
It's hard to keep sight of the woman behind the world's top charity: the high-achieving schoolgirl who loved complicated jigsaws and once scaled the 14,000ft Mount Rainier with ropes and crampons; the mother of three; and the devout Catholic who visited Calcutta to talk to Aids sufferers in Mother Teresa's Home for the Dying. But it's clear that the Foundation needs her clarity and good sense. Time magazine, when it put Bill Gates and Bono on the cover as "Person[s] of the Year," included Melinda Gates because she is the heart, as well as the brains, of the organisation. "Lots of people like Bill – and I include myself – are enraged," said Bono, "and we sweep ourselves into a fury at the wanton loss of lives. We need a much slower pulse to help us to be rational. Melinda is that pulse."
Home comforts: the house that Bill built
The Gates family home is a 40,000 sq ft mansion in the exclusive suburb of Medina, on the shores of Lake Washington. The "lodge" has a library, with a domed reading room, a pool, a garage with enough space for 30 cars, speakers hidden beneath the wallpaper, portable touch pads that control everything from TV sets and the lights to the temperature. The total value of the house is estimated at $113m – the annual property tax is just over $1m.
It took seven years for the Gates mansion to be constructed and much of the house has been built underground, into the hillside. The house was originally the ultimate bachelor's pad, with a trampoline room, a cinema with a popcorn machine and so many gadgets that Gates' wife Melinda described it as like living in a videogame. Shortly after the wedding, Melinda got her own architect in and changed the house into a tranquil family home for them and their three children, with more cosy spaces and fewer boys' toys.
"The home has a stillness to it," Bono, a family friend, has said. "It's got a sort of Zen-like quality."
Bill's billions: the big giveaway
'The man who dies rich," the Scottish-born American magnate Andrew Carnegie wrote in 1889, "dies disgraced." Practising what he preached, Carnegie subsequently gave up his day job running the US steel industry and dedicated his last two decades, at the start of the 20th century, to spending his vast fortune on building public libraries in Britain and the US, founding the University of Birmingham, and erecting New York's celebrated Carnegie Hall.
His example set the benchmark for all philanthropists who came after him – including, in Carnegie's lifetime, that other high-minded titan, John D Rockefeller, and more recently Bill Gates. Like Carnegie, Gates is determined to give away during his lifetime the billions he has made since setting up Microsoft in 1975. His chosen vehicle is the Bill and Melinda Gates Foundation, established in 2000 to bring together the couple's various charitable initiatives. And like Carnegie, Gates plans, henceforth, to run the Seattle-based charity personally.
Despite his best efforts, Dunfermline-born Carnegie didn't quite manage to empty the vaults before meeting his maker. The Carnegie Corporation continues to this day as a source of charitable funding. Gates may well have taken note of that particular failure, for he and Melinda decreed last year that they want every last penny from their foundation spent within 50 years of their deaths. It is a commitment that has been reinforced by Warren Buffett, another American billionaire, who announced in 2006 his plans to direct the vast majority of his estimated $44bn into the Gates Foundation.
Some philanthropists prefer to give anonymously. The late David Astor spent his life giving away his inherited millions, insisting only that his donations should not be acknowledged publicly. That, you may argue, is the true meaning of charity, but it is rarely heard of. Carnegie's millions bought him a kind of immortality, but by one of those quirks of history, he is best remembered not for his business acumen, but for his public buildings.
What mark, then, will Bill Gates have left 100 years hence? Well, if he has his way, not as the software visionary we know today, but as a humanitarian par excellence. His legacy will not be so much buildings that carry his name, but the less tangible contribution he has made to the sum total of human happiness.
The Bill and Melinda Gates Foundation has two principal areas of work in pursuing its commitment in its mission statement to "innovation in health and learning to the global community". There is its largely US-based public education work – investing heavily in the state school network and bringing new technology to out-of-date libraries. And then there is its international programme to combat disease and poverty in the developing world. The latter makes up 60 per cent of the total, tackling both the causes and the consequences of malaria, TB and Aids, among others, around the world.
At present the foundation's endowment amounts to $37.3bn, with a total of $16.5bn spent already, and a staggering $2bn distributed in grants in 2007 alone by the foundation's 543-strong team. No wonder then that in 2005 Bill and Melinda Gates, along with the rock star, Bono, were named by Time magazine as their "Persons of the Year".
But such a huge and public commitment to charity brings with it its own problems. There is, for a start, the clout all those billions carry. In an interview, Dame Barbara Stocking, head of Oxfam, talked about how traditional charities were now as intent on lobbying the Gates' Foundation as they were national governments.
And, however pure and laudable your motives, you cannot help but be drawn into political controversy. So in 2003, when the Gates Foundation gave a grant of $250m to promote research into genetically modified vitamins and protein-enriched seeds to combat hunger in the developing world, they were accused of having a hidden agenda to boost the US food industry in overseas markets. Earlier this year, a senior official at the World Health Organisation complained publicly that the amount of money the Gateses were putting into one particular area of malaria research was sidelining all alternative theories. And in America, their Millennium Scholarships to help those from disadvantaged ethnic backgrounds to get a college education has been attacked as racist because it excludes Caucasians.
Such controversy seems set only to increase now Gates is dedicating himself full time to the foundation. For there remain many in the third sector who are deeply suspicious, if not hostile, to the idea of a businessman who doesn't want simply to hand over his cash to charity professionals, but who also insists on playing a hands-on role in managing how it is spent. The market disciplines that have made Microsoft a world leader, some complain, just cannot be applied to charitable work, especially in areas like third-world development, where commitment needs to be long-term, persistent and tolerant of endless setbacks that mean strategic goals are rarely achieved. For all his evident good intentions and spending power, Bill Gates may just find himself taking on his biggest challenge yet.
Peter Stanford is the chairman of the spinal injury charity Aspire and a columnist in 'Third Sector' magazine
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