Hard Drive: Bill Gates and the Making of the Microsoft Empire (6 page)

“We did all the normal, nutty things that kids do as teenagers, said Edmark. “Bill. . . was exceptionally normal. . . . We would talk about CD technology. We were both interested in technical things. . . . But we would never say, Tm going to be this or I m going to be that.’ We really didn’t know what we were going to do with our lives.”

In their sophomore year, Edmark had a summer job working in a Seattle bank. One day, an elderly woman came in and deposited several thousand-dollar bills into her account. Edmark had never seen a thousand-dollar bill before. That night, he told Gates. “Well, let’s get one,” Gates said. The next day, he gave Edmark a huge wad of twenty-dollar bills, and Edmark took the money to one of the bank’s managers, who gave him a thousand- dollar bill.

That night, Edmark and Gates went to Dick’s, a popular hamburger hangout noted for serving the greasiest fries in town. The two boys ordered cheeseburgers and fries. When the order came, Gates nonchalantly opened his wallet and handed the cashier the crisp thousand-dollar bill. She looked at the bill, then looked up at Gates, repeating her eye motion several times. Finally she went to get the manager.

“Got anything smaller?” the manager asked with a straight face when he came out. Gates, looking five years younger than his age, shook his head solemnly. “No, nothing else,” he said, determined to play out the scene for all it was worth.

Well, after lunch we might have been able to break this. But not now,” replied the manager.

Gates and Edmark burst into laughter. They finally paid for their food with a couple of bucks and headed off in the Mustang into the night.

Although Gates may not have known what he was going to do with his life during high school, he seemed confident that whatever he did would make him a lot of money. He made just such a prediction about his future on several occasions to other students and teachers at Lakeside. In the 11th grade, Gates told his friend Paul Carlson that he would be a millionaire by the time he was 30 years old.

“That is something that might sound like arrogance,” said Carlson. “Some might just say it to brag. Some might say it as if they had the measure of themselves. Bill was in that second category.”

When Gates got back into computers in late 1970, he began exploring new ways to make money. While Gates was on his nine month sabbatical, Paul Allen had been busy finding new computers to play on at the University of Washington, where his father worked at the campus library. Allen knew his way around. He found a PDP-10 computer in the physics department, and a PDP-11 in the university’s hosptial. He discovered other computers in the engineering department. By the time Gates was back in the fold, the Lakeside Programmers Group had moved operations to the university, where the boys were keeping hours all night.

“We hacked around on all of those machines,” Gates said. “We hung around the university to find any computer we could get free time on. Once C-Cubed went out of business, it was just finding time on anything.”

There were rumors that Gates crashed Cybernet, a national computer network run by Control Data Corporation, by hacking his way into the system on a CDC computer at the university.

Two books,
Fire in the Valley
and
The Making of Microsoft,
reported that Gates received strong reprimands from CDC engineers who discovered his tracks. But like the stories of his hacking exploits at C-Cubed, this story appears more apocryphal than factual. Control Data Corporation was one of the so-called Seven Dwarfs that made mainframe computers in the 1960s in the shadow of the Giant, IBM. The University of Washington did indeed have a CDC computer that Gates had access to. But it was not connected to Cybernet, so there would have been no way for Gates to break the network, according to a systems programmer who installed the CDC computer at the university in 1968.

Said Gates of the story: “We learned about peripheral processors on the CDC at the university. But I was not involved in crashing the Cybernet .. . although I know some people who say they did.”

The Lakeside Programmers Group received an important business opportunity in early 1971. Information Sciences Inc., a Portland, Oregon, timesharing computer company similar to C-Cubed, contacted the group about writing a payroll program for one of its clients. ISI had a PDP-10 computer and its president, Tom McLain, was aware the Lakeside kids had a lot of experience writing programs on the machine. Dick Wilkinson, one of the partners who organized C-Cubed, had sold the PDP- 10 computer system to ISI while he was regional sales manager for Digital Equipment Corporation. Allen and Richard Weiland decided they didn t need their younger colleagues and asked Gates and Kent Evans to bow out of the ISI project.

Recalled Gates: “Paul and Rick decided there wasn’t enough work to go around so they told us ‘We don’t need you guys.’ But then they got sidetracked. They weren’t even writing the payroll program. So they asked me to come back in and I said to them, ‘Okay, you want me to come back in, then I’ll be in charge of this thing. ... Kent and I ended up writing most of the payroll program, a COBOL program. We got free computer puter time to do the work, and as compensation we got free computer time. It ended up being a good deal for everybody.

The payroll project was actually “pretty boring,” according to Gates. “You had to understand state taxes, payroll deductions . . . that kind of stuff.”

The business deal with ISI meant the Lakeside Programmers Group would have to become a formal partnership. Gates’ dad helped with the legal formalities and also assisted with the ISI contract. He became the group’s principal legal adviser. Gates and Evans were 15 years old. Evans kept a journal of the ISI project, and it gives a rare insight into kids who, when it came to business, were wise beyond their years. Wrote Evans in one entry: “We’ve been writing a very complicated payroll program. March 16 is our deadline. This is very educational because we’ve learned a lot by working in a business environment and dealing with government agencies. During the past few weeks we’ve been frantically trying to get it done. Tuesday we go to Portland to deliver the program, and as they have put it, ‘Hammer out an agreement on future work.’ Everything so far has been done for its educational benefits and for large amounts of expensive computer time. Now we want to get some monetary benefits, too.”

Gates, Allen, Evans, and Weiland boarded a bus to Portland when the program was done for a meeting with ISI’s executives. After the meeting, Kent wrote,
“...
we all were given pencil and paper to write resumes to aid them in hiring us . . . money had not been mentioned. Paul, Bill and I didn’t want to be paid hourly rates, so we mentioned piece rates for programmed products or royalty arrangements. The royalty scheme went over big. We get about ten percent of the money ISI gets because of one of our programs—we get more in the long run and the company doesn’t need to tie up any of its capital.”

It’s not clear how much, if anything, the group made in royalties from their payroll project, but ISI gave them about $10,000 worth of free computer time.

, “If anybody wants to know why Bill Gates is where he is today, in my judgment it’s because of this early experience cutting deals,” said Marvin Evans, Kent’s father.

Allen graduated from Lakeside in 1971 and enrolled that fall at Washington State University, majoring in computer science. But he and Gates were already working on another moneymaking project involving their own company, which they called Traf-O-Data.

The idea behind their enterprise was ingenious. Almost every municipality used metal boxes linked to rubber hoses that stretched across the roadway to count cars. These traffic boxes contained a 16-channel paper tape (twice as wide as the 8-channel tape used in old teletype machines), and each time a car passed over the rubber hose, the machine punched the tape with the binary numbers zero and one. The numbers reflected time and volume. Municipalities hired private companies to translate this raw data into information city engineers could then use, for example, to determine how long a traffic light needed to be red or green for the best traffic flow.

But the companies providing these services were slow and expensive. Gates and Allen figured they could program a computer to analyze the traffic-counter tapes, then sell the information to municipalities faster and cheaper than the competition. Gates recruited seventh and eighth graders at Lakeside to transcribe the numbers from the traffic tapes onto computer cards, which he then punched into the CDC computer at the University of Washington. His software program turned the data into easily readable traffic-flow charts.

Chris Larson, four years behind Gates, was one of a handful of students hired at low wages to transcribe numbers from the traffic tapes onto the computer punch cards. His cousin, Brad Augustine, was also hired for the Traf-O-Data work. Several other students helped out, as did a few mothers when the kids were overwhelmed with homework.

Once Traf-O-Data was up and running, Allen decided he and Gates should build their own computer to analyze the traffic tapes directly, thus eliminating the need for manual work. It proved a difficult task. They hired a Boeing engineer to help with the hardware design. Gates came up with $360, and he and Allen purchased one of Intel’s new 8008 microprocessor chips, one of the first of the chips sold through a distributor anywhere in the country. They connected a 16-channel paper tape reader to their “computer,” and fed traffic-counter tapes directly into the machine.

It was not nearly as capable as the microcomputers that would come later, but the Traf-O-Data machine worked—most of the time. Mary Gates once recalled her son demonstrating his traffic machine to a city official in her dining room. When the computer crashed, and the official lost interest, Bill pleaded with his mother, “Tell him mom, tell him it really works!”

Gates and Allen reportedly grossed about $20,000 from Traf-O-Data. But the enterprise was never a great success, and it eventually folded after Gates went off to college.

During his junior year at Lakeside, while finding business for Traf-O-Data, Gates came up with other money-making schemes. He and Evans formed another computer group, called Logic Simulation Company, and they sent out student flyers to drum up business and a cheap labor force.

One of their letters to Lakeside students said: “LPG and LSC are two computer-oriented computer organizations involved in a number of attempts to make money. These include class scheduling, working on traffic volume studies, producing cookbooks. ... We want to expand our work force, which now has five Lakesiders. It’s not just for computer freaks. We think we will need people who can type and do drafting and architectural drawings. If interested, see Kent Evans or Bill Gates or Chris Larson.”

The letter mentioned “equal opportunity for males and females,” and included a form for interested students to note how many hours they might be able to work, their availability for summer employment, and their computer experience.

In May 1972, near the end of their junior year, Gates and Evans were approached by the Lakeside administration about computerizing the school’s class schedule for its nearly 400 students. The scheduling system had long been a time-consuming mess. Lakeside wanted the new computer program ready for the start of the 1972-73 school year in the fall. A former Boeing engineer who had been hired as a math teacher at Lakeside had been working on the project, but he was killed in a plane crash. The job now fell to Gates and Evans.

Tragically, less than a week later, on May 28, Memorial Day weekend, Kent Evans was killed in a mountain-climbing accident. A few months after Evans died, the school learned he was among its 11 semifinalists in the National Merit Scholarship Test. Gates, too, made the list (the next year he would be a finalist). After Evans died, a shaken Gates asked Allen to help him with the class scheduling project. They agreed to do it that summer when Allen returned from Washington State University.

(In 1986, Gates and Allen gave Lakeside $2.2 million to build a science and math center named after them, dedicating the building’s auditorium to Evans.)

The first month or so of that summer, as a kind of farewell tribute to Evans, who loved politics as much as computers, Gates went to Washington, D.C., as a page in the U.S. House of Representatives. His parents had gotten him the job through Brock Adams, who was now a congressional representative. Gates quickly showed his talent for making business deals. He bought 5,000 McGovern-Eagleton buttons for a nickel each—$250 worth. When George McGovern dropped Thomas Eagleton from the presidential ticket, Gates sold the scarce buttons as collector s items for $25 each, making several thousand dollars in profit.

When Congress adjourned for the summer recess, Gates returned to Seattle to help Allen with the class-scheduling work. They wrote their program using the free computer time they had accrued from Information Sciences Inc. Lakeside paid them for that computer time as well, and they made a couple thousand dollars in spending money. The scheduling program they designed is still used at Lakeside, although it has been refined over the years.

The schedule proved a big hit with students that fall, particularly to some members of the senior class who—thanks to Gates and some creative scheduling—didn’t have any classes on Tuesday afternoon. The group of seniors wore silk-screen T- shirts, with “Tuesday Club” printed on the shirts over the outline of a keg of beer.

Girls had been admitted to Lakeside at the start of Gates’ junior year, when Lakeside merged with St. Nicholas, an
all girls
school. Gates signed up for a drama class during his senior year that included some of the first female students to attend Lakeside. As a result, Gates landed leading roles in two school plays,
The Night the Bed Fell,
by James Thurber, and
Black Comedy,
by English playwright Peter Shaffer. The Thurber play required that Gates memorize a three-page monologue. Gates, with a nearly photographic memory, merely glanced at the pages for a few seconds and had the material memorized.

“I thought to myself,” recalled Anne Stephens, who directed Gates in both plays, “how’s this gawky guy going to carry this off? It’s a very dry piece. But he did a delightful job in the play. He was absolutely charming.”

With the success of the class-scheduling project, Gates continued to look for money-making opportunities during his senior year. He sent letters to area schools, offering to computerize their schedule. He offered a system that he said was 95 percent conflict-free.

“We use a unique scheduling service developed by Lakeside,” his letter said. “We would like to provide scheduling for your school as well. A good job at a reasonable cost—$2 to $2.50 per student. We would appreciate opportunities to discuss this with you.”

Gates was able to land a job writing the first computer program for class registration at what was known as the Experi
mental College at the University of Washington. The school was staffed by UW students and provided alternative courses at affordable fees. It was run not by the university but by the university’s student government association.

Gates was hired for the programming job by the association. One problem arose, however, and it did not have to do with the program he wrote. His sister Kristi, a student at the University of Washington at the time, was an officer on the student government association. When the campus paper learned her brother had received the scheduling contract, it accused the association of nepotism. In the end, Gates made very little money from the project, about $500.

As he entered the second trimester of his senior year, Gates was still looking for a way to use his computer experiences to earn “real” money. He didn’t have to wait long.

One day Gates received a call from a man from TRW, the giant defense contractor. Moments later, Gates was on the phone to Washington State University in Pullman, trying to reach Paul Allen with the news.

TRW, Gates hurriedly explained to Allen, wanted the two of them to go down to Vancouver for a job interview as soon as possible. “Paul, it’s our chance to finally make some real money! We gotta do it.”

Paul Allen didn’t need any coaxing. Although he was only in his second year at Washington State University, Allen was weary of college life, and restless. He wanted to get out in the real world, apply what he knew about computers, and make some money. Perhaps he and Bill might form their own software company. They had talked about doing just that many times.

Up to now the payback from their business ventures had been mostly in the form of free computer time, first at C-Cubed and then at Information Sciences. But TRW offered a full-time job with a salary.

The giant government defense contractor was in trouble. TRW was in the midst of a project to computerize the Bonneville