Founders - #401 How Bill Gates Works

Episode Date: September 24, 2025

This episode is about Bill Gates' obsessive drive and hardcore work ethic. Bill Gates had the rarest entrepreneurial talent—the ability to see the leverage point in a new industry, seize it with relentless intensity, and *will* Microsoft into one of the most successful companies in human history. To make this episode I read Bill's new autobiography, Source Code: My Beginnings, and pulled ideas and notes from 4 more books about his singular career: Hard Drive: Bill Gates and the Making of the Microsoft Empire Overdrive: Bill Gates and the Race to Control Cyberspace Idea Man: A Memoir by the Cofounder of Microsoft In the Company of Giants: Candid Conversations With the Visionaries of the Digital World Episode sponsors: Ramp⁠⁠⁠⁠⁠⁠ gives you everything you need to control spend, watch your costs, and optimize your financial operations —all on a single platform. Make history's greatest entrepreneurs proud ⁠⁠⁠by going to Ramp and learning how they can help your business control your costs and save time and money.⁠⁠⁠ ⁠⁠⁠https://ramp.com⁠⁠⁠ Automate compliance, security, and trust with Vanta. ⁠⁠⁠Vanta helps you win trust, close deals, and stay secure—faster and with less effort⁠⁠⁠. ⁠⁠⁠Find out how increased security leads to more customers by going to Vanta⁠⁠⁠. Tell them David from Founders sent you and you'll get $1000 off. ⁠⁠https://www.vanta.com/founders⁠⁠ ⁠Collateral⁠ transforms your complex ideas into compelling narratives. Collateral crafts institutional grade marketing collateral for private equity, private credit, real estate, venture capital, family offices, hedge funds, oil & gas companies, and all kinds of corporations. Storytelling is one of the highest forms of leverage and you should invest heavily in it. You can do that by going to ⁠https://collateral.com

I want to start with a quote, by Bill Gates, on Bill Gates. And then I want to tell you this excellent Larry Ellison quote on Bill Gates that I found. So first, this is Bill Gates on Bill Gates. He says a key advantage I had was being fanatical. That is taking all of my capabilities day and night and just focusing on how do you write good software. I loved being a fanatic. Eventually, I reveled in it. I didn't believe in weekends.

I didn't believe in vacations. For a lot of people, it wasn't an ideal place to work. We were pretty frantic and demanding. And then here's the quote from Larry Ellison on Bill Gates. Keep in mind, Larry Ellison and Bill Gates were very fierce competitors. This is what Larry Ellison said. Bill Gates is one of the most remarkable business people I've ever met. Some people say Bill is the most brilliant guy that they've ever met.

There are a lot of really brilliant scientists in our business. Forgive me, there are a lot of people in the world smarter than Bill Gates. There are very few people in the world that have his focus and endurance. Someone once said Bill wants people to think that he is Thomas Edison, when he is really Rockefeller. If he was Edison, he would be less dangerous. He is utterly relentless. He is indefatigable.

He is absolutely focused and he wants it all. Barry Diller said he is young and he's mean and he's not tired. That's a high compliment coming from Barry Diller. Bill is tough and he wants it all and I have incredible respect for that man. So recently, Bill Gates just wrote an autobiography. It's called Source Code. It covers his early childhood and his life up until founding Microsoft in a few short years after that. And so originally this episode was just going to be about what I learned by reading source code.

So what I decided to do instead is I want to make a How Bill Gates works episode. very similar to the How Elon Works episode I just did. And so I grabbed all the notes and highlights from source code and four other books that I've read on Bill Gates. And then I stripped away everything that wasn't his approach to building his company. And so I'm going to go through book by book. So let's start with source code. A lot of this that I pulled off from source code is you see one of the things that the genius things that Bill Gates did is he designed a company that was natural to him that benefited for. from his innate talents and personality.

So it says by the time I was in my early teens, my parents had accepted that I was different from many of my peers and had come to terms with the fact that I needed a certain amount of independence in making my way through the world. From a very early age, Bill Gates discovered that he liked being, what did he say earlier? I was a fanatic.

He liked being obsessed. And fortunately, the school he went to, which is called Lakeside, had access, which is extremely rare at this point in history, to a computer. Lakeside had set up a way for students to connect with a big mainframe computer over a phone line. It was incredibly rare back then for teenagers to have access to a computer in any form. And so as soon as Bill discovers us, he says, we really took to it.

We devoted all of our free time to writing programs. And he found the perfect activity and hobby that aligned with his innate personality. He says programming fit me because it allowed me to define my own measures of success and it seemed limitless. The logic, focus and stamina needed to write long, complicated programs came, naturally to me. I would retreat into my own thoughts. I would picture computer code in my mind. And one of the things that young Bill Gates is going to discover, like many of history great entrepreneurs did before him, is that constraints are your friend. Small was key. Computers back then had very little memory, which meant programs had to be lean, written using as little

code as possible, so not to hog memory. Like the famous line, I would have written a shorter letter, did not have time. It is easier to write a program in sloppy code that goes on for pages than to write the same program on a single page. This goes back to an idea that has popped up the last few weeks with you and I. When we talked about James Dyson, believe that lean engineering is good engineering. Elon Musk would say the same thing. Bill Gates would say the same thing. Lean engineering is good engineering. Now, what is so fascinating about this is that you will see that Bill also ran his business this way. He has a visceral, like disgusting reaction. He just hates waste and inefficiencies.

And one of the ways this manifested was Bill was obsessed with cost control and he is constantly hounding everyone in the company about it. This will come up many, many times in every book that you read about Bill Gates and Microsoft. Actually, one of my favorite stories about this is I got to spend a bunch of time with John Mackey, who's the founder of Whole Foods. And during one of our conversations, John told me one of the craziest things that anyone has ever said about this podcast because before by time me and John met, he had listened

to over 100 episodes of founders and he told me that if founders existed when he was younger, that Whole Foods would still be an independent company that since the podcast and all of history's greatest entrepreneurs are constantly emphasizing the importance of controlling expenses, he would have put more of a priority on it, especially

during good times, during boom times. It is very natural for a company and really for human nature to just not watch your costs as closely because everything is going so well. That is something I was talking about with my friend Eric, who's the co-founder and CEO of Ramp. Ramp is the presenting sponsor of founders. And way before they were the presenting sponsor of founders, I had known

all the co-founders of Ramp and had spent a bunch of time with them. They all had listened to the podcast and they picked up on the fact that the main theme, one of the main themes of founders, is the importance of watching your costs and controlling your spend and how doing so gives you a massive competitive advantage. This is something Bill Gates understood intuitively and implemented incessantly. Wait till we get to these parts. I think it's going to blow your mind. Warren Buffett said that a good manager of a business should be a demon on costs. Bill Gates was exactly that. And that is a main theme for Ramp. The reason that Ramp exists is to give you everything you need to control your spend. Ramp gives you everything you need

to control your costs. They give you easy to use corporate cards for your entire team, automated expense reporting and cost control. Ramp helps you run an efficient organization, which Bill Gates was obsessed with doing. And Ramp does this all on a single platform. Make history's greatest entrepreneurs proud by going to Ramp.com to learn how they can help your business today. That is Ramp. So in addition to having a distaste for inefficiency, a distaste for waste, having the ability to hyper-focus, two other traits of Bill Gates that are present in his early childhood, that will never leave him and are very present as he's building Microsoft is the fact that he is ruthlessly competitive and full of energy.

And so he would tell stories in the book and source code about the fact that even when he was a kid, he had sisters, that they would play all kinds of board games. so monopoly risk card games and he says they had to turn everything into a competitive sport that they would buy two copies of the same puzzle and then they'd race to see who would finish first and then he says this other notable early trait was excess energy he says i rocked rocking while you'll see this in any interviews there's also a great documentary on bill gates on netflix where he's constantly rocking so he says i rocked rocking while seating rocking while standing anytime i got to really thinking about something rocking was like a metronome for my brain and and it still is. And then another trait that's really important to understand about Bill Gates because he, again, all we're talking about is how what the ideas he used and the personality traits he used to build his business. He is incredibly combative.

And the first main person that he was combative with was his mother because she tried to control him. Bill Gates is unmanageable. And eventually his parents figured this out. He says, my parents knew that the rhythm of my mind was different from the other kids. My sister did what she was told. She played easily with other kids. And from the start got good grades.

I did none of these things. I was an aggressive, rebellious child. He would be the same kind of founder. I was described as hyperkinetic, brainy, contrarian, and temptuous. My teachers and my parents noted at an early age of what was to come, I channeled intensity into anything that interested me and nothing that didn't. Bill Gates lives in binary states. This will pop up over and over again.

He is either totally apathetic. are completely obsessed and one of his first obsessions like many of history's greatest entrepreneurs was reading by elementary school I was reading a lot

on my own at home I was learning how to learn by myself and I liked the feeling of being able to quickly absorb new facts and entertain myself with books

school felt slow in comparison reading was my default state when I read hours flew by I tuned out the world I was in my own head books were the one thing

my parents never questioned spending money on. One of our greatest treasures was a set of the world book encyclopedia. I read through every volume A to Z. Again, I have to point this out. The maximum I have for this is they devour entire shelves. This idea of reading every single book on a subject, reading entire libraries, reappears over and over again in these biographies of great people that did great things. Thomas Edison, Winston Churchill, Elon Musk, Edwin Land, Bill Gates, they devour entire shelves. If they are interested in the topic, they must. I think they're compelled. They can't even help themselves. They must read every single thing they can get their hands on

about it. I had growing confidence in my own power of my own intellect. With this confidence also came a feeling that the intellectual divide between adults and me had collapsed. My father would later say that this change happened abruptly. He said I became an adult overnight, an argumentative, intellectually forceful and sometimes not very nice adult. I was nine. A lot of people ask me for a top 10 list. I was like, just give me the top 10 of all the books that you read

and I'll just read your top 10 list. I don't know what that list would look like. All I know is there's one book on Bill Gates that has to be on that list. One of my favorite books I've read is called Hard Drive, Bill Gates in the making of a Microsoft Empire. I've read it twice. I've done two episodes on it.

And the reason that I'm, and I'm going to go through a bunch of highlights for you in a little bit on the book. And one of the reasons I find that book so interesting is because it focuses on Bill Gates' ability to focus. And he talks about this in source code. He says, I was very deliberate about what I put energy into. I think that is a huge difference between people that accomplish great things and people that want to but never do. You have to be very deliberate about what you put your energy into.

I felt most at home in my own head. I could go days without speaking. Emerging from my room only for meals and school, this got to be such a big problem. They had like a therapist, like a family therapist. And it was really the therapist was there to try to moderate the relationship between Bill and his mother. And the reason I bring this up is because there's going to be so many times throughout young Bill Gates' life where older adults realize this kid is special. He's got an iron will and it's just not going to work. Essentially what happens is the therapist tells his parents you have to loosen your grip on him.

you are going to break before he does. And later on in the book, when Bill Gates is already running Microsoft or this is a different book, later on in the podcast, I'll tell you about this. You know, he talks about the fact that he's been running Microsoft at that time for like 20-something years. She's like, I don't understand.

This is fantastic. Why is it so rare for people to run a company they founded for multiple decades? Goes back to that legendary endurance and focus that Larry Ellison observed him in. And so this is the end result of family therapy. My father later shared what Dr. Cressy said. Give it up, he told my parents.

he's going to win ease up don't force it give your son more freedom and so any adult that came in contact with the young bill gates it said bill had a lot of innate self-confidence he had a high opinion of himself from a young age that i think this is one of the most important things i absolutely loved michael dell's autobiography that i've told you about a million times you know i've listened to the audiobook three times before i made the episode on that book and one of my favorite things that michael dell shared in the book was you know the idea that i'm going to try to take on the world's biggest company with a thousand dollars from my dorm room and he says was i a little full of myself at nineteen sure i was i think you have to be to do anything important very similar to the line in this book

bill had a lot of innate self-confidence he had a high opinion of himself from a young age and one of the smartest things that bill did from young age is he started consuming a ton just he said he consumed stacks of biographies and he named some in the book like franklin delano roosevelt douglas mccarthy Napoleon, Henry Ford, etc. He said, we spent, him and his friend were doing this together. He said, we spent hours on the phone dissecting their lives. We analyzed the past they followed to success with intensity. Again, he can't do anything.

If he's doing anything, he's doing it with intensity. Goes back to his love of computers and really picking a business that would come naturally to him, one he could do for many, many decades. I loved how the computer forced me to think. It was completely unforgiving in the face of mental sloppiness, again, which really disturbs him. It demanded that I'd be logically consistent and pay attention to details. One misplaced comma or semicolon and the thing wouldn't work. This feedback loop was addictive.

He's like 13 at this point in the story. The feeling of getting better and better was a rush. Writing programs flowed from a combination of skills that came easy to me. Logical thinking being one and an ability to focus intensely for long periods being another. Programming also stoked the persistent need I had to prove me. myself. I was an eighth grader confident in my brain power and convinced that my intensity meant that I could do anything the older guys could do if not better. The way he ends this paragraph speaks back to his hyper competitiveness. I was determined to not let anyone get anything

on me. And so this is when he's going to meet his future. He meets his future co-founder Paul Allen at Lakeside. Paul Allen's two years older than him. And there's something that Bill Gates says in a few different books. He was attracted to a field where there's like no path. There's like no track in front of you. You kind of have to figure this out for yourself. And one way he would talk about this later when he was asked to give advice, you know, if we were starting over, if you're a young person, what would you do today? You obviously wouldn't start Microsoft today. And he says you should look for virgin territory to identify opportunity. And that is exactly what we find where we're on the story because he says there's no instruction. We knew more than our teachers. And we were

forced to try to piece together how to write our first programs on our own. Later on, I'll talk about, you know, we couldn't watch YouTube tutorials on how to code because there was no internet. There was no internet. So he says, as the week's been went by, a lot of the kids who first played around with the terminal, the computer, lost interest and drifted away, leaving a small group of hardcore adherence. That is Bill Gates' favorite word by far, hardcore. And this is the key. Everyone is here. It is. human nature. They give up on everything. Remember what Larry Ellis said about Bill Gates. There are very few people in the world that have his focus and endurance. And I think he is

14 years old when he gives into this obsession and it actually gives him the way that he's going to work for the rest of his life. There's a great line in that book hard drive I just told you about where it says everything Bill did he did to the max. And so there's an example of that in source code because he's working all day at the computer and they have access to this computer lab at night called C-Cubed, but then he'd be home at like 10 o'clock at night, and he's like, why am I going to go to sleep? Like, I should just be working on the computer. So he would sneak out of his room at home, climb out his bedroom window, and go and catch

the bus. Go into C-Cube and work all night on the computer. He says that would be the first of many nights I'd sneaked out and for years after. And this is really important that he did this. This is one of my favorite lines in the entire book. He says, a lot of successful people I've met have described how after falling in love With their chosen field, they had to put in a period of hard, focused work. It's the time in which raw interest is transformed into real skill.

That is so important. This period, which was really just about four months, minted a work style for me that would last for decades. Unconstrained by cost or time, I'd fall into a zone of total focus. As fast as I completed a section of a program, I could ask the computer to run it, giving me an instant answer whether I was right or wrong. Try something. See if it works. If it doesn't, try again with something different.

We couldn't watch YouTube tutorials on the internet. There was no internet. And guidebooks were rare. Him and Paul Allen are so hungry for knowledge, they would dive in dumpsters. So this is like the way I think about this, how bad do you actually want it? How bad do you actually want it? Because there's somebody out there like a Bill Gates or like a Michael Dell that wants it deeply and are willing to do whatever is necessary to get the information they need that would help them accomplish their goals. At the end of every day, someone would take out the trash. Included in that trash would be used computer paper, printed with lines of code, whatever the C-Cube engineers are working on that day. At night, when the employees had all gone home, Paul and I went out to the back of the building

to see what we could find in the dumpster. I was 13 years old learning on my own terms with a $500,000 machine as my teacher. And when he says he minted a working style, this is what he means. I'd fall asleep at the terminal more times

than I can remember. My nose meeting the keys for an hour or two. Then I'd wake up and immediately start coding again. So that is high school, that is Harvard, that is Microsoft. Everyone who runs into Bill reports seeing him do this. My approach was rapid fire in your face. Bill loved conflict when building his company.

Another thing that I'll have in common with a lot of history to case entrepreneurs, I could read 50 quotes to you about this, but I think the best quote that describes this is from Jeff Bezos, who also was like this. If I have to choose between agreement and conflict, I'll take conflict every time. Why? Conflict always yield.

it's a better result. Back to Bill Gates. I was a kid working like a maniac late into every night. I broke my record for sustained work. One's not leaving for nearly 100 hours straight. That meant not showering and hardly eating for nearly four days. And so when you think about why all these founders want conflict, they want conflict because they want to win.

They want improvement. They desperately need to be the best. So I'm thinking Steve Jobs will talk about the benefit of conflict. Jeff Bezos talked about the benefit of conflict. Bill Gates talks about it. And so in one case, Bill runs into, he quickly starts becoming the best programmer out of his group of friends, but then he runs into an older programmer with a lot more experience.

And you'll see his reaction to this. Someone had gone through and like a school teacher corrected my work. The person had completely torn it apart. He wasn't just fixing issues, but the whole structure and design of what I had written, normally my first reaction would have been to defend myself. If anyone at Lakeside tried to critique my code, I might snap. No way, you're wrong. But this time, as I sat reading his comments, studying the code, I thought to myself,

oh, wow, this guy is so right. I had never met anyone as vigilant and sharp about computer coding. He consistently returned my work with corrections that raised it to levels that I didn't know existed. That is such an important line. He consistently returned my work with corrections. I raised it to levels I didn't know existed. Norton opened a completely new level to me. And so this idea that he wants you to push back, he wants to be right.

Akio Marita, who I've told you about a million times, he's the founder of Sony. It's remarkable how many of these people that we admire, like a Bezos or Jobs or James Dyson, studied Akio Marita and Sony. And one of the most interesting ideas that Akio Marita wrote about in his autobiography, which is a book called Made in Japan, was the fact that. that he believed more companies should hire a paid critic. And so when Akeo discovered this, at the time, Sony was making audio equipment. And so he found somebody that had a very advanced ear, somebody that loved Sony and wanted their products to be as good as possible. And at the time, he was just a college student.

And so Akeo gives him a job. And his job is, hey, we're going to put this new product out. And you're going to rip it to shreds and tell us what and how it can be better. That paid critic that starts out as a college student eventually becomes the president of Sony. What Akeo would tell you, and what Bill Gates is discovering, that you should hire people and you should use tools that make you better. One of my partners makes such a tool. Vanta is a very powerful tool to get more sales. Vanta's value prop is very clear. Vanta helps your company prove that you're secure so more customers will use your product or service. Many companies won't sign contracts unless you're certified, and this is called.

causing you to lose out on sales. That is why the average Vanta customer reports a 526% return on investment after becoming a Vanta customer. You can think of Vanta like an intelligent security assistant that helps your company pass audits without tons of manual work. So not only do you make more money with Vanta, but you also save more time. Manual compliance is slow and painful and doing everything by hand takes months. The best companies will not tolerate wasting valuable company time, doing something

with labor when technology can automate it. That is a very old and powerful idea that you and I see over and over and over again in these biographies. Vanta will help you win trust, close deals, and stay secure faster and with less effort. Go to vanta.com, 4 slash founders, and you'll get $1,000 off. That is vanta.com forward slash founders. And so when Bill Gates goes to Harvard, he goes back to the exact same working style. I do myself into a daily rhythm that worked for me, even if it seemed extreme to my friends. Between studying and programming, I could be away for 36 hours at a stretch.

Whenever exhaustion took over, I would crash for 12 or more hours, fully clothed with my shoes still on. I repeated this routine for months. And so him and Paul are talking about what kind of business they want to start. And the idea of making hardware never appealed to Bill Gates. He says, I was increasingly cooling on the idea of building hardware. The business of manufacturing computers seemed too risky to me. We'd have to buy parts, hire people to assemble the machines, and find lots of space to pull

it off. Software was different. No wires. no factories writing software was just brain power and time again goes back to his early childhood what does he like to do he likes to be in a room by himself super focused for 36 straight hours and that is what we know how to do what made us unique it was where we had an advantage i believe we could even lead the way that idea he wants to pick a field where he can be the absolute best when he went to harvard he thought oh maybe i'll study math and then he gets to harvard he realizes

oh there's a lot of people that are better than me at math so i need to find a different field go into. And so the opportunity to start a software company actually comes because Paul Allen runs into Bill Gates' dorm room at Harvard. And in his hand, he's holding the January 1975 issue of popular electronics. And it says for three years, Paul and I had been talking about how new computers that exploited the exponential improvement of chips could change everything. On the cover of that magazine was the Altair, which was a personal computer made by this company out in Obelkirk in New Mexico called Mitz, Mitz. So Paul and Bill decided to cold call Ed Roberts, who's the president of Mitz. because Ed Roberts needs somebody to write software for his hardware.

And so Bill says, I explained that we were almost finished writing a version of Basic, which is they're going to be their first product for the Altair, and we'd like to show it to them. Roberts told me that he had already gotten calls from people claiming to have the same software. He said the first person who could produce a working version would get the deal. Two important parts of this. One, Bill Gates said they didn't have any software written.

He says we were all faking our way along. And two, the reason I've been hounding on this guy, the way that Bill works, that he just focuses on the task until it's done, that he's willing to work to the edge of exhaustion and collapse in his clothes with his face in the keyboard and then jump back up and go right back to work. This was important.

Many, many years after he developed that habit because they, that's exactly what he's going to do to write their version of basic. They are going to get there first. And so Paul Allen's actually going to move to Albuquerque, start working at myths. Bill's going to go back and forth to Harvard But this is the most important thing

This is the wave that they are writing This is why he eventually is going to drop out Because he realized that there is a technological phenomenon That is going to leave them in the dust If they don't take advantage of it right now He says computing had always been a scarce protected resource Though no one could fully grasp it at that time That scarcity was about to give way to plenty

And computers would very quickly be available to millions of people and there are all these hints that they're on to something. Here's a hint that you're on to something. The real diehard fans drove hundreds and even thousands of miles to Albuquerque to pick up their altar. Coming to work in the morning, it wasn't unusual to find RVs camped out on the corner waiting for their altar like it was takeout pizza. That office in a strip mall surrounded by a check cashing place, a laundromat and a massage pauler was ground zero. for what would come to be called the personal computer revolution. Ed Roberts had the right idea,

but he vastly underestimated its popularity. He had forecast that they might find 800 customers a year willing to shell out the money for their own computer. Instead, in the first few months, they sold thousands. Again, I have to repeat this because it just pops up over and over again. It drives me insane that so few people are willing to study history and learn from human nature. for an innovative product markets are often larger than you can predict for some reason our species has a hard time grasping that fact for a innovative product markets are often larger than you can predict you see it over and over again i talked about last week on the dyson episode he did it with the vacuum cleaners akia marita did it with the sony walkman steve jobs did it with the iphone for an innovative product markets are often larger than you can predict here's another crazy thing that just blows my mind i sit here and think about this again i

told you this before. Like, I, I don't like when people speed through books or podcasts or anything else. Sometimes it could be a sentence or a paragraph and I, you just, I just stare at it. And you read it over and over again. And you just stop. You don't go anywhere else. And you just think about what the hell is going on. How important this one paragraph can be. I'm about to read you one. It is so odd that Bill goes back to, you know, the ego and having a lot of confidence that I mentioned that Michael Dell said and that Bill Gates, you know, everybody around him reported seeing him when he was earlier. There's something to this.

The idea that Bill even thought that you could start a pure software company. These are the conditions. This is the culture at the time in which Bill had this very unusual idea. It was generally accepted that software should be free. Software was something to be copied from a friend, openly shared or even stolen. It had always been free. Why shouldn't you give it away? But Paul and I wanted to build a business, our conviction,

arrived at over many late-night talks was that as personal computers got cheaper and cheaper and spread into businesses and homes, there would be a nearly unlimited corresponding demand for high-quality software. That is the end of the paragraph. How much software in the world on an annual basis is sold now? Do you know how fucking crazy this is? That paragraph is crazy. There is no such thing as a pure software company. Your customers don't even believe that your product should be paid for almost nobody has a personal computer but bill gates has belief he has conviction that is why it's dangerous to rush through things and to skip over things i reread that paragraph probably 15 times before i just read it to you it is one of the craziest things to understand in this story and then i

told you i've read i don't know five other books on bill gates i've never heard him describe it this way we wanted to make a software factory we would provide a broad range of products that would be regarded as the best in the business. And if things went really well, I thought that maybe we could have a big team of skilled programmers working for us. Microsoft was going to be a software factory. We're going to have many, many products from the jump.

We wanted to get our software on every personal computer in the world. Software companies didn't exist. Again, this is insane. Our product was something customers thought should be free. But we had one customer and faith that we could build from there. That one customer is this, tiny little company in

Albuquerqueam in New Mexico in a strip mall surrounded by a check a check cashing place and a massage partner. That is the humble beginnings of what will be one of the most successful companies ever created. Now, he's a young, inexperienced entrepreneur and he makes a bad

deal. He winds up saving his ass later on, but the deal that they signed with Mitz gave them the exclusive rights to sub-licensed our software to any other company that wanted to use the 80 B-80 Basic in their products would have to get the source code, which he describes as the recipe to basic, through Mitz and not Microsoft. This is a bad deal.

They're going to wind up in a lawsuit over it. It almost kills Microsoft in the cradle, too. Now, I want to go back to this reoccurring theme that Bill Gates wanted to be hardcore. He wants to be a hardcore person. This is the way he's going to work. He talks about himself out of everybody, out of his co-founders, out of all the people working Microsoft. He was the taskmaster.

He was also the one that was so concerned. and scared. I was always worried that we weren't moving fast enough or working hard enough. As I started this journey into turning our ideas about software into a viable business, I found a role model in Digital Equipment Corporation's founder Ken Olson. He learned as he went and over time became a master of his business. I reasoned that he and by extension I could pick up whatever skills and knowledge were needed. So he holds up Ken Olson as a role model. He's holding up Ed Roberts. They're embedded inside of myths. And he's like, oh, this is, we're learning a ton because this is a really poor.

run company. Mitz was at the center of a booming new industry, and yet it was a frenzy of confusing initiatives, half-baked strategies, constantly shifting plans, and ultimately sometimes angry customers. Even some of the most senior people laid the blame on their boss, Ed Roberts, and they were frank about why everyone was scared to raise their concerns. It's implied, but not explicitly stated. Ed Roberts is no Bill Gates, and the problem is he built a company culture, which is the opposite of what most great founders want. They want you to fight back. They will not respect you if you are a sycophant. Everybody was scared of Ed Roberts, so therefore what happens?

No one tells you the truth. Everyone except Bill Gates. Ed found Bill Gates very confusing because everybody else is kissing his ass and you have this young kid that's like getting in his face and yelling at him. He appeared bemused by my whole affect, the energy and the intensity, my need to hash it out now personality. I had excited, always on intensity. And he says, I was hardcore from.

Day one. Anytime I wasn't sleeping, I was coding or writing a letter to drum up business. My mind was locked on the next step, people to hire, deals to cut, and new customers to find. And then I already mentioned this earlier. Bill tracked every penny and he goes and rips his co-founders and the early employees when they fail to do the same. So he writes his business plan on seven pages. He says, my guiding principles, not getting ahead of ourselves and drowning in costs. That's the first sentence. Our two main goals I wrote were, number one, grow in size and reputation and two make money. That letter marked the next phase of a concerted effort

to establish ourselves as an independent company. What does he mean by independent company? He has one customer. They're working very close with them. And it's a crappy run company. We've got to diversify away from this guy as soon as we can. Another smart thing Bill did. It worried me that we were still so reliant on Mitz

and they start having these fights since Mitz held worldwide rights to 80-80. basic. Anytime we found a customer for the source code, the contract would have to go through mitts. If we signed a deal, then we had to split the revenues with them. Bill is going to fight back. He's going to get himself out of this deal. Another thing that was important to him, he wanted to be around other high energy intense people. By then, I could instantly recognize other people who emitted my kind of excess energy. Steve Ballmer had it beyond anyone that I'd ever known. So he wants to be around high energy intense people. Again, another way he works. He

pays attention to everything. The focus was Microsoft in all the things that were falling through the cracks, travel expenses, employee oversight, customer follow-up and contract negotiations. I grouse that they still hadn't lined up a company credit card. Today, that would be a no-brainer. They just go to RAMP.com. And it goes back to this letter he's writing them. I wrote, we spent $14,000 since I left and not thinking about cash flow or taking care of the memory royalty is a way to send us down the tube. For all to talk about hard work and long hours, it's clear that you guys haven't talked about Microsoft together or even thought about it individually, at least not nearly enough.

As far as putting out our last measure, the commitment just isn't being met. And when he's commenting on this letter and these talks he's having with the people he's working with, this is what he says. I've always been the taskmaster, the one who incessantly worried about losing our lead and fearing that if we weren't careful, we'd be sunk. We watched C-Cube. Remember when he was sneaking out night, taking a bus, and working on the computer? That was a startup he was working at.

It was C-Cube. It says, we watch C-Cube go from a promising startup to having creditors drag the furniture away 18 months later. And we were witnessing the growing trouble at Mitz, which had the lead but seemed to lack the management rigor to maintain it. This is very interesting to me how much of the book is talking about how worried he was. Steve Jobs said that victory in our industry is spelled survival.

It's very clear from his actions that Bill Gates agreed. knew the core job of developing software. I worried, there's that word again, I worried we weren't learning everything else fast enough. He's always worried. And so there's this company that comes in called Pertek. Pertek is going to buy Mitz for $6 million. And at the time, it looked like one of the worst things that happened to Microsoft. One's being the best because what happens is after they buy, everything Microsoft related stopped completely. So Pertek stops paying Microsoft royalty payments. The licensing deal stopped. They refused to sell our basic to any other company. They were making no efforts to sell our software, and they were blocking

deals even as more and more companies were soliciting us. This is going to cause the lawsuit. Now, there's another sentence in that book Hard Drive that I told you about earlier. That is one of my favorite descriptions of a young Bill Gates, and it talks about this lawsuit because, you know, Ed Roberts sold his company to Pertek. But he had warned them about Bill Gates is not this average dude. He's not some little 21-year-old punk. Roberts had warned Pertec that it would have its hands full with gates, but no one listened to him. Pertek kept telling me I was being unreasonable and they could deal with this guy, Roberts said.

It's a little like Roosevelt telling Churchill that he could deal with Stalin. And so this idea that I've already repeated a few times that he just pays attention to every little detail, he was the one that had negotiated the contract with them to begin with. And so he says it became increasingly clear to me that Pertek had no intention of paying us back royalties or sub-licensing the 88 Basic to any other companies. Yet now I wondered if they had even read our contract. We didn't transfer ownership of the software to Mitz.

We licensed it to them. And they were obligated by the contract to make its best efforts to sub-license the software to other companies. This is really, really important. When a company agrees to make its best efforts, it agrees to do everything in its power to make good on whatever is stipulated in contract. I said we agreed to the exclusive license if Mitz agreed to make best efforts to license our source code. Their lawyers push back saying that nobody agreed to best efforts. they would consider instead the term reasonable efforts, but I wouldn't agree. So he wouldn't sign the contract unless the best efforts was in the contract.

This is, again, years before they're fighting in the lawsuit. That was so important. Best efforts it was. That decision is going to save Bill Gates' ass later. And so he says our central challenge was to convince the arbitrator that, number one, many companies wanted to license our product. Number two, per tech and mitts was blocking those licenses when they were contractually obligated to make their best efforts at facilitating them.

They almost ran out of money. This is again why Bill Gates is so, he was so focused on this. He wanted a one-year buffer. He says, we're going to have enough money in our bank account that if no one pays us for a year, we're going to survive. And so the arbitrator sides with Microsoft. He terminated our exclusive license with Mitz, clarifying definitively that we owned our source code.

We immediately called all the companies that had been waiting for the software. Within weeks, we had money coming in from five or six clients. And then he goes back. the importance of having this hardcore focus. Like one of those watertight hatches on a submarine, I could shut out the rest of the world. Driven by the sense of responsibility I felt for Microsoft, I had closed the hatch door and locked the wheel.

No girlfriend, no hobbies. It was the one way I knew to stay ahead, and I expected similar dedication from others. We had this huge opportunity in front of us. Why wouldn't you work 80 hours a week in pursuit of it? Yes, it was exhausting, but it was also exhilarating. I needed a 24-hour-a-day business partner. He's realizing that Paul is not going to be his long-term partner,

a peer who would hash out and argue through big decisions with me, someone who would pour over scribbled lists of which customers might or might not pay and discuss what our bank account would look like as a result. Steve Balmer joined in 1980 and became the 24-hour-a-day partner I needed. And so the book Source Code ends when they relocate from Albuquerque to Washington. And so he is driving back.

And I think this is one of the most important things that, again, reappears over and over again in these biographies, in these autobiographies. When you have extreme success like Bill Gates has had, there's no way that they could have possibly predicted the scale of their success. He has no idea what is ahead of him. It wasn't just me moving back.

It was Microsoft, the company that a friend and I had co-created with that motley group of employees and a growing, profitable business and which from that point on would be an integral part of who I was. My path was set. I could hardly imagine how far it would take me. So Bill is going to write two more autobiographies. The second one is going to be focused on building Microsoft.

Obviously, when that comes out, I will read and make an episode on immediately. And the third one will be on his philanthropy and his foundation. So what I'm going to do now is just pull out a couple other ideas and highlights from four other books that I read on Bill Gates. and the first book is Hard Drive, Bill Gates and Making the Microsoft Empire, still my favorite book that I've ever read on Bill Gates. The storytelling in that book is absolutely phenomenal, and it's because of the phenomenal storytelling that the ideas are implanted in your brain and you remember them.

This is a very important theme that recurs over and over again, the fact that people buy stories. Steve Jobs said that storyteller is the most powerful person in the world. Don Valentine, founder Sequoia, says the art of storytelling is critically important. Most of the entrepreneurs who come to talk to us cannot tell a story, learning to tell a story is incredibly important because that's how the money works. The money flows as a function of the stories. And that is exactly what my new partner, Collateral, does.

Collateral transforms your complex ideas into compelling narratives. I need you to remember their website, which is easy to remember because it's Collateral.com. And what Collateral does is they craft institutional grade marketing collateral, and they do this for private equity, private credit, real estate, venture capital, family offices, hedge funds, oil and gas companies, all kinds of different businesses. I have friends that have used collateral for their marketing collateral that have raised billions of dollars of capital and have made hundreds of millions of dollars. Why?

Because storytelling is one of the highest forms of leverage and you should invest heavily in it. And you can do that by going to collateral.com. And so the first highlight from hard drive that I'm going to talk to you about is the fact that by 1990, remember they're having these starting Microsoft late 70s, 76, 77. They're like, you know, we want to make a pure software company. All our customers think it should be given away for free. There's no such thing at the time. Well, by 1990, Microsoft had become the first software company in history

to sell more than a billion dollars worth of software in a single year. There's a great quote from Bill Gates and Hard Drive. He says, I can do anything I put my mind to. Bill was 11 when he said this. Everything Bill did, he did to the max. What he did always went well, well beyond everyone else. Everything he did, he did competitively and not simply to relax. he was a very driven individual.

The computer triggered a deep passion and an obsession in him. He devoured everything he could get his hands on concerning computers and how to communicate with them, often teaching himself as he went. It was often after midnight when he finished his work. It was when we got free time that we really got into computers, Bill said. I mean, then I became hardcore. It was day and night. So keep in mind when he's saying that he's describing a point of his life when he was 13 years old.

And again, he's using his favorite word, hardcore. This is the way that his friends in high school, and college would describe him. He was sure of himself. He was aggressively, intimidatingly smart. He didn't have any social graces. He was one of those guys who knew he was smarter than everyone else, and he knew he was right all the time.

He was hard-nosed, confrontational. His intensity would boil over into raw, unthrottled emotion. He had a sense of adventure. He was a risk-taker, a guy who liked to have fun and who was fun to be with. He had an immense range of knowledge and interest and could talk at length on any number of subjects. He also knew that he wanted to be rich. Although Bill did not know what he was going to do with his life after high school,

he seemed confident that whatever he would do would make him a lot of money. He had made such a prediction about his future on several occasions. I'm going to make my first million dollars by the time I'm 25. It was not said as a boast or even a prediction. He talked about the future as if his success was predestined, as if it was a given, as certain as the mathematical proof that one plus 1 equals 2. Bill Gates would later tell a friend that he went to Harvard to learn from people smarter than he was and left disappointed. One of the books that I have a bunch of highlights

about Bill that I want to share with you is actually Paul Allen's autobiography, but it's really interesting. Paul Allen and his mom are in this book hard drive. And Paul Allen's mom would warn her son about Bill Gates. He said that he was an edge walker. This is an example of that. Gates would fall asleep in class was not surprising. He was living on the edge. It was not unusual for him to go as long as three days without sleep. His habit was to do 36 hours or more at a stretch, collapse for 10 hours, go get a pizza, and then get back at it. And if that meant that he was starting at 3 o'clock in the morning, then so be it. Bill had a monomaniacal quality. He would focus on something and really stick with it. He had a determination to master

whatever was he was doing. Bill was deciding where he was going to put his energy into hell with what anyone else thought. And what's interesting is how much Bill needed Paul Allen to push him over the edge. I don't think Bill Gates would have dropped out of Harvard without Paul Allen. And Paul Allen was a lot. He had like a little more broader interest than Bill. Bill just wanted to make software and sell software and do that forever. And so I thought it was really funny is that Paul Allen actually quotes Shakespeare to

convince Bill that now is the time to start their own company and that it has to be right now or we're going to miss it. And this is the quote from Shakespeare that. Paul Allen read to Bill Gates. There is a tide in the affairs of men, which taken at the flood leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat, and we must take the current when it serves or lose our venture. Gates knew Alan was right, and that the personal computer miracle was going to happen,

and it was going to happen with or without them. Now, I already mentioned this a few times, but I think it's, again, really important to reiterate. Not a lot of people know that how cautious Bill Gates was with Microsoft's money. He wanted a one-year buffer. He didn't need to raise venture capital. Microsoft was a money printing machine then and now. He was financially conservative, and that was the way he intended to run his company. There would be no unnecessary overhead or extravagant spending habits at Microsoft.

And he had giant goals from day one. Bill always had the vision from the time that I met him that Microsoft's mission in life was to provide all the software for microcomputers. and it goes back to his preference to keep it lean. You just need a small group of ridiculously smart people the way they would describe the early employees at Microsoft. They called them microkids. Part of what made Microsoft so successful during the company's infancy

was the team of programmers that Gates and Allen began to assemble in the spring of 1976. They became known as the microkids. They were high IQ insomniacs who wanted to join the personal computer crusade. Kids with a passion for computers who would drive themselves to the limits of their ability and endurance.

This was one of the most surprising things when I read this book for the first time, just how Lean Microsoft was. Four years in, and they had just 11 employees. I think they might have 12 because they take that picture, that famous Microsoft picture when they're moving from Albuquerque to Seattle.

There's only 11 people in the photo, but I'm pretty sure there was one guy that missed the photo session. But in any case, four years in, they either have 11 or 12 employees. And this is Bill Gates at 24. It had only been a year and a half since they'd moved from Albuquerque to Seattle.

Now, Microsoft, the company with $7 million in annual sales, had fewer than 40 employees, and it was about to go into business with IBM, an international giant with revenues approaching $30 billion a year. Bill prioritized sales over everything. What sustained the company was not Bill's ability to write programs. Bill sustained Microsoft through tireless salesmanship. For several years, he alone made the cold calls and haggled, cajoled, browbeat, and harangued the hardware-making. convincing them to buy Microsoft services and products. He was the best kind of salesman there is.

He knew the product and he believed in it. He approached every client with the zealotry of a true believer. He was also hell-bent on moving fast. And one tactic he used to move fast is you have to prioritize personal performance over management. Here's an example of that. Gates came into Smith's office one day and shouted at him. How can you possibly take this much time working on this contract? Just get it done.

Smith recalled of this short but educational meeting with his much younger boss. I think what I realized was that I needed to focus, that the money and the opportunities were simply there, and I needed to close contracts with customers. So I focused on personal performance over management. Initially, I was dealing more with management issues as a guy with an academic background coming out of a large company, but it took me a couple of meetings to realize that personal performance was what mattered. This is another mind-blowing stat.

when we got this is this is bill gates describing what microsoft looked like when they had just 30 employees when we got up to 30 employees it was still just me a secretary and 28 programmers i wrote all the checks answer the mail took the phone calls another great idea bill overcame his weakness that he looked young by relying on his strength which was his mind in the passion that he had for his work and so one of their early customers describes coming to the office one day And he says, when someone came out to take us back to his office, I thought the guy who came out was the office boy. It was Bill.

Well, I'll tell you by the time you were with Bill for 15 minutes, you no longer thought about how old he was or what he looked like. He had the most brilliant mind that I ever dealt with. And he was absolutely ruthless. Bill believed that if you lost a $50,000 contract, he considered it a $100,000 loss because Microsoft lost to 50 and his competitor gained the 50. Gates wanted to eliminate his opponents from the playing field. Bill learned early on that killing the competition is the name of the game.

There just aren't as many people later to take you on. In game theory, you improve the probability you're going to win if you have fewer competitors. And Bill would relentlessly study his competitors. If you talk to Bill about any software company or any hardware company, there's a very high probability that he would be able to tell you who the CEO is, what their revenues were last year, what they're currently working on, and what the problems are with their products. He's very, very knowledgeable

and he prized himself on knowing what's going on in his industry. This combination of ambition and wanting to win every single day is what Bill Gates referred to as being hardcore. And so I mentioned earlier that Microsoft did not need VC. In a carefully planned move

that had been under discussion for some time, Bill sold 5% of Microsoft for a million dollars. Can you imagine? 5% of Microsoft for a million dollars to TVI, which is technology venture investors. Microsoft did not need the venture capital. Gates was essentially hiring the firm's expertise. There's a great line that I'll share with you later from this interview from 1997

that Bill talks about the money they raised in the IPO that they never touched. They just put it in the bank and it's still sitting there with the other $5 billion that Microsoft has. So he really prided himself on just making not only just a phenomenally financially efficient company and one that just absolutely printed cash and absolutely loved what he said about this because he knew that Microsoft had to go public but he didn't want to. And a year before they go public, he said, all I'm thinking and dreaming about is selling software, not stock. And so that leads us to the third book that I'm going to talk to about, which is actually the sequel from hard drive. It's called Overdrive.

It's not a great book. I mean, it's not bad. I guess maybe want to read it once. Honestly, I don't even know maybe not read it once. Maybe just reread hard drive a second time is probably a better use of your time. But there are just a handful of ideas in here that I do think, like, I'm going to pull out. And I think it's interesting because now we've fast forwarded in Microsoft's history. and we see that this focus and intensity is still there.

Neither marriage nor fame nor fortune had diminished the white-hot competitive fire that consumed him. And so one of my favorite parts of this book is just, again, it goes into this ruthless competitive drive that Bill Gates had. This is how a competitor described Bill. This guy names Philippe Khan. Philippe would later say Gates looks at everything as something that should be his.

It can be an idea, market share, or a contract. There is not an ounce of conscientiousness are compassion in him. The notion of fairness means nothing to him. The only thing he understands is leverage. And again, the reason I bring that up,

obviously your competitors probably not going to say nice things about you, right? But the important thing is Bill liked to fight. And you can actually learn a lot about his personality because he was giving interviews back then

and he's in the middle of the fight. And so he would describe what he called his disgruntled competitors. This is from an interview that Bill gave to a major publication. Lotus lost ground because it was very late in catching the two biggest technology waves, the Macintosh and Windows.

Borland International is too distracted with its bad merger. Philippe Khan is good at playing the saxophone and sailing, but he's not good at making money. Word Perfect is truly a one product company. Our most successful software is for the Macintosh. We have a much higher market share on the Mac than anywhere else. And how does Apple help us? Will they sue us in court? In the future, maybe our competitors will decide to become more

competent deep competitive fires drove bill gates goes back to this insane level of focus for many years gates had refused to even own a tv preferring instead to spend his time reading books and magazines there's a great story told by michael moritz where he's interviewing bill gates and he he tells the story he's like oh my god somebody broke into your car and and stole your your radio and bill's like no they didn't i took that out myself and bill says something like you know from my house to the office is a seven minute drive from the office to the airport it's like an 11 minute drive and then he does his math of like how much he's in the car between the office and his house and the airport he's like you know that's an

extra five hours a month where instead of listening to music i can just be thinking about Microsoft another interesting and i would say smart idea that that bill had he would keep a list of mistakes and it was a top 10 list and he'd reread that to make sure they don't make the same mistakes in the future. Now, I have not read Overdrive in probably, I don't know, four years, I would guess. But even though it's been that long, this is the one story in the book that I have never forgotten. It's one of the craziest stories I've ever heard. For years, Bill Gates had Philippe Conn in his sights. In the mid-1980s, when Borland's Turbo Pascal, this is Con's company, was blowing away Microsoft's competing product. Gates held meetings that became known

around Microsoft as the Borland War Councils, during which him and his staff plotted how to beat the Frenchman, being Philippe Kahn. Gates reportedly walked into one such meeting and threw Kahn's picture down on a table and said, How can I get rid of this guy? They would pass out T-shirts that read Delete Philippe. But this is by far the craziest story in the book. Philippe Kahn recalled that he had once found. Bill Gates at an industry conference in the late 1980s

sitting alone in a corner looking at a photograph in his hands. Philippe walks up to Bill Gates and Philippe says it was a picture of me. That's one of my favorite Bill Gates story because it's just such a hardcore crazy thing to do. Bill Gates' burning desire to win and fear of failure compel him not only to beat his competitors but to destroy them. Okay, so that leads us to Paul Allen

autobiography that he wrote shortly before he died is called Idea Man. As you can imagine, there's a bunch of interesting stories and anecdotes about Bill Gates in it. I mentioned this earlier, the fact that Bill lived in binary states. He was either bursting with nervous energy, drinking a dozen Diet Coke a day, or he was completely dead to the world. He'd work until drained and then curl up on the floor in his office and be asleep within 15 seconds. Sometimes I return in the morning and see Bill's feet sticking out of his office doorway.

Bill and Paul were very different, and I think there's a story Michael Dell's autobiography that's similar to the story that's told in Paul Allen's autobiography in the sense that Michael had an older, more experienced person that he hired to be president of Dell, and the guy only lasted four years. He said by the time, it isn't a very early history of Dell, by the time, you know, four years was up, he's like back hurt, he's had stomach problems, he was losing all his hair, he was just like dying. And he's like, I'm, this distress is literally killing me.

And Michael's like bouncing to the office every day. day and it's like super excited. It's exactly the same with Bill Gates and Paul Allen. Obviously Bill playing the role of Dell and Paul Allen playing the role. I think the guy's name was Lee Walker. But he talks a little about this. Microsoft was a high stress environment because Bill drove others as hard as he drove himself. He was growing into a taskmaster who would prowl the parking lot on weekends and see who made it in. In addition to rereading the source code and all my highlights and everything from these other five books, I also watched a documentary on Bill that I mentioned earlier, it's on Netflix,

and Bill would go out and he'd memorize the license plates of the cars in the Microsoft parking lot in the early days. That's what he's talking about. And one thing that Bill would do is he never thought it was good enough. You should always be pushing. You should always be pushing. So this is Bob Greenberg once put in 81 hours in four days, Monday through Thursday. When Bill touched base

towards the end of Bob's marathon, he asked him, what are you working on tomorrow? Bob said, I was planning to take the day off. And Bill said, why would you do that? He genuinely couldn't understand it. He never seemed need to recharge. Bill liked to hash things out in intense one-on-one discussions. He thrived on conflict and he wasn't shy about instigating it. A few of us cringed at the way he would demean people and force them to defend their positions. If what he heard displeased him, he'd shake his head and say sarcastically, oh, I suppose that means we'll lose the contract and then what? 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 is the stupidest fucking thing I've ever heard. Bill came on like a force of nature. Bill liked it when someone pushed back and drilled down with him to get to the best solution. He wouldn't pull rank to end an argument. He wanted you to overcome his skepticism, and he respected those who did. And I love this comparison of Bill Gates from Paul Allen. I've seen just one other person up close who compared to him,

who wanted not only to beat you, but to crush you if he could. Those two stood apart for raw competitiveness. That was Bill Gates and Michael Jordan. And then it goes back to this just relentless focus. He knew bits and pieces of popular culture, but he was thinking about the software business first, second, and third. And then I'm so glad I rereaded my highlights for this book because I had forgotten this.

So Ross Perrault tried to buy Microsoft in 1979 for, quote, mid seven figures and this is what bill gates said bill gates said no i want to remain independent now keep in mind Microsoft's revenue that year was just 2.4 million dollars when i reread that i thought about this conversation i had with this founder so a lot of people ask me like they think because i've done all this reading like i have some kind of like predictive ability which i don't believe i have like what are like the young founders now that that you know are going to be one of the greats and i don't believe i have any kind of predictability you know time will tell. But there is one person that I've gotten to know that just gives me young Bill Gates

vibes. And it's the founder of cognition. His name is Scott Wu. And many people in the tech industry will know who Scott is. Many people out of it will not. And if you're one of the people that don't, I would definitely look into him and just pay attention to his career. He's still young. He's still in his 20s. And he's running one of the most important AI companies today. And so I absolutely love that little piece of, you know, Microsoft trivia. It's like, nope, we're not selling the company for, you know, a couple million dollars. So then Paul goes into Bill's thinking on their most important deal in the early days of Microsoft, which obviously there's a deal with IBM that's been covered over and over again. So I don't want to rehash that. I just do want to tell you

how they think, how they thought about it and Bill's really great decisions that he was making around this time. Says Bill and I were willing to forgo per copy royalties if we could freely license the DOS software to other manufacturers. This was our old strategy for the Altair Basic. Already enmeshed in antitrust litigation, IBM readily bought this non-exclusive arrangement. They'd later be slammed for giving away the store, but few people at the time discerned how quickly the industry was changing, and no one, including us, for saw that the IBM deal would ultimately make Microsoft the largest tech company of its day, or that Bill and I would become wealthy beyond our imagining. Paul continues, Microsoft's biggest asset wasn't the

version that we'd made specifically for IBM PCs. The real Bonanza was the compatible system that we called MS. DOS, the product that could be sold over and over again. worldwide under our own name to companies that would follow IBM's flying wedge into the 16-bit market. It is a product that they bought from this company called Seattle Computer Products. So Microsoft is going back and forth with Seattle Computer Products on this. And this part is really interesting because they're willing to license to customers, but they want to buy from suppliers. We proposed an outright purchase, which they say no to when customers ask. to outright purchase their software.

And that was a sales agreement that we signed with Seattle Computer Products. That contract laid the foundation for what Microsoft would become. It was a free and clear DOS, a very valuable asset. And as I stated in a deposition sometime later, Bill was very adamant. This is the most important part. This is why I just read this entire section to you. This is the part that you should remember. Bill was very adamant that we should make the contract an agreement of sale.

Bill thought we should have complete ownership and control of the product. He felt it was always better if you wanted to control and benefit from the evolution of a product, to own it as compared to license it. Paul then gives us insight into how Bill hired. Bill thought it was better to get programmers when they were young and enthusiastic, before they were ruined by working somewhere else. We wanted freshly minted bachelor degrees. Above all, we were after the brightest lights.

a great programmer can outproduce an average one by 10 to 1. With a genius, the ratio might be 50 to 1. And then Paul talks about the different way that he saw Microsoft compared to Bill. Bill saw Microsoft as a part of himself. Paul had other interests. Bill so utterly identified with Microsoft that he'd get confused about where the company let off and he began. By the late 1990s, Microsoft was the largest and most profitable software company in history, growing at the same rate as the personal computer industry.

Very rapid growth. Yet Bill saw the glass as seven-eighths empty. Again, another thing that Bill shares with almost all of his history case entrepreneurs. No resting on laurels, no sleeping on winds, make something great, and then do it again. They are never, ever satisfied. And they all also do the following. Bill was rigorous about weeding out underperformers. Okay, so then the last book that I want to talk to you about is a book that I've told you over and over

again that everybody should buy. It's incredible. I think it's episode 208 of founders. It might be episode 204. It's called In the Company of Giants. Two Stanford MBA students wrote it back in 97. They interview 16 technology company founders. And the book is just the transcripts of the interviews edited. It's incredible. So all the words you're about to hear are just Bill Gates in 97. And at this point, Bill has 20,000 employees and a net worth of around $20 billion. He says everyone else was doing hardware and software. We focused just on software. That was our advantage. The insight to do a dedicated software company was key because other companies like Wang or DEC or IBM, who had lots of software expertise, didn't

have that vision. They didn't treat their software skill as a key business. And then he talks about one of the main benefits he had and that led to a lot of early success with sales. There's this idea that you should, you have to know what you compete with, not just who. So let me give you a little background here. That maxim came from this guy named Herb Kelleher, who was the founder of Southwest Airlines. Southwest Airlines was the most successful airline in history. It was profitable for 40 straight years. And it was originally started as just to be a airline that was only going to operate in the state of Texas. And so Herb Kelleher tells this great story in one of the books I read on him where you'd have one of his investors come up to me like, hey, you know, you should raise your prices. Like, your competitor

is selling a flight from, let's say, Austin to Houston for $80. We're charged. In 2016, certainly we can bump up the price a little bit. And Herb was at me. He's like, no, you don't understand. You think I'm competing with XYZ airline. I'm not competing with them. My real competitor is ground transportation. You think you know who we're competing with.

And I'm telling you what we're competing with. And so Bill Gates talks about this in the early days our sales approach was to say, if you had to write the software in-house, your fixed engineering budget would be X amount of dollars. And Microsoft's price is less than half of X dollars. We competed against in-house engineering budgets. And what you got from us was more powerful than if they had done it themselves. And then he goes back into that key insight that he made, you know, 20 years previously. Software is a very unusual business.

The development work is not that capital intensive. The first year, we generated cash like mad, even though we had many customers who went bankrupt. In other words, we had a wide margin for error. I always wanted to have enough money in the bank so that if nobody paid us for a year, we would be okay. And he was still like that. He says, the money we got from going public is in the bank. That along with another $5 billion.

And then I mentioned this already once, but I think it's important to repeat. I used to have this memo that I updated every year called the 10 great mistakes of Microsoft. Many of our mistakes relate to the markets we didn't get into as early as we should have. But the constraint was always the number of people we could hire, how to manage everything,

and then ensuring everything that we made met all of our delivery commitments. We were always on edge. I think that's something I should have told you multiple times that's in all these books. Bill Gates, if you actually read between the lines of what he's saying, you know, we're always on edge.

As your company scales, everything's going to feel like it's broken. Everything feels like it's going to be late. Everything is going to feel like it's not good enough. He's 20 years, in 21 years, I think, into his company, he still feels that way. He reiterates this idea that, hey, everything's going to be slight lung,

a little later on in the interview. It was a real challenge because the demand for our capabilities exceeded what we could do. Everything Bill sees, the glass is always seven-eighths empty. Bill says we never talk about the things we've been successful at. We always talk about the challenges ahead. There is no finish line. You will never go into a Microsoft meeting and hear somebody say, we won. And that sense of urgency, that no resting on laurels, something he talks about. Again, large companies are never easy to maintain at a high level of excellence. It becomes the daily task. There is a huge. This is remarkable because I mentioned, you know, even with 20,000 employees and a $20 billion net worth at this point, Bill knew that it was just the beginning. Listen to what he says here. This is 1997. There is a huge business out there in terms of getting to the market potential. It's all in front of us. We're a software company and we think software will continue to be valuable. There's an opportunity to make about $55 billion out there. And even. that. Bill Gates couldn't have predicted what Microsoft's going to be doing, you know, 20, 30 years later.

Last year's revenue was something like $280 billion. So he says there's an opportunity to make about $55 billion out there. Great software will become more valuable. You must keep the main thing, the main thing. We sell software, not stock. My job is the best job. I am more committed to my job than most. Nobody is going to get me interested in some other job or activity. There's a big difference between myself and a lot of the people who fade away. They just aren't as interested. in what the next stage requires and fitting into the role it requires in terms of starting a company and running it 21 years later. It's surprising that this is not more common. And I love what he says here. I've always rejected the term entrepreneur because it implies that you're

an entrepreneur first and a software creator second. I didn't say, oh, I'll start a company. What will it be? Cookies, bread, software? No, I'm a software engineer and I decided to gather a team together. That team grew over time, built more software products, and did whatever was needed to drive that forward. You've got to enjoy what you do each day for itself and for its excellence. And then one of the questions he was asked was about, you know, you have a very aggressive reputation for your competitors and other people in their industry. And his answer was, what's aggressive? Shipping a good product? That's aggressive? Lowering the price of the product so more people can get it? That's aggressive? Those are good things. We're here making good

products, taking all the phone calls, meeting with users, hiring smart people. That's all our business is.