Founders - #44 A Memoir by the Cofounder of Microsoft

Episode Date: October 30, 2018

What I learned from reading Idea Man: A Memoir by the Cofounder of Microsoft by Paul Allen ---I was 21 years old and at loose ends (0:01)how Paul Allen works (4:09)coming up with the idea for Microsoft (4:48)admiring Bill Gates' bravado (7:56)advice from his father: do something you love (12:30)"Paul is an 'enthusiast' and when in the grip of an enthusiasm is almost totally irresponsible in other areas. How can one help such a student to see the error of his ways ? I don't know. He could even be more right than we, who knows ?" (18:30)Going deep on subjects that interested him (20:56)Paul's first jobs (24:14)Paul Allen and Bill Gates first business (26:44)New Mexico and the start of Microsoft (31:37)We were certain that the tech establishment was wrong and we were right (34:40)Unequal cofounders (37:29)Starting to grow Microsoft (39:00)Unequal cofounders part two (41:00)Early Microsoft culture: When I talk about the early days at Microsoft, it's hard to explain to people how much fun it was.( 46:43)Turning down a millions of dollars from Ross Perot (53:37)Unequal cofounders part 3 (56:54)The deal that led to Microsoft becoming the largest tech company of its day (58:00)Health crisis and Paul Allen leaves Microsoft (1:05:30)His most important realization (1:09:27)How Paul makes $75 million from AOL (1:13:00)I start from a different place , from the love of ideas and the urge to put them into motion and see where they might lead (1:18:10) ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

As I walked toward Harvard Square on a December weekend afternoon in 1974, I had no inkling that my life was about to change. I was 21 years old and at loose ends. My girlfriend had left a few weeks earlier to return to our hometown of Seattle, 3,000 miles away. I had a dead-end job at Honeywell and a crummy apartment. The one constant in my life those days was a Harvard undergraduate named Bill Gates, my partner in crime since we'd met at Lakeside School when he was in eighth grade and I was in tenth. Bill and I learned how to dissect computer code together. We started one failed

business and worked side by side on professional programming jobs while still in our teens. It was Bill who had coaxed me to move to Massachusetts with a plan to quit school and join him at a tech firm. Then he reversed field to return to college. Like me, he seemed restless and ready to try something new. Bill and I kept casting about for a commercial project. We figured that we'd eventually write some software where we knew we had some talent. We fantasized about our entrepreneurial future.

One time I asked Bill, if everything went right, how big do you think our company could be? He said, I think we could get it up to 35 programmers. That sounded really ambitious to me. So that was from the introduction of the book that I'm going to talk to you about today, which is Idea Man, a memoir by the co-founder of Microsoft. So this book was on my list. I have, I think, last time I counted, something like 34 books lined up for future episodes of Founders. And so this was probably in the middle of the pack somewhere in there. And then a few weeks ago, Paul Allen surprisingly passed away.

So I decided he passed away while I was working on the podcast about D. Hawk, the founder of Visa. So I decided to push it up and to learn a little bit more about his life. So before we get into the rest of the book, let me just remind you that I need your support for this podcast. Once we get going, once we get back into the book, I'm not going to interrupt the podcast with any ads. And the only way I'm able to do that is if you support my work directly. So the easiest way to support my work is becoming a paid founders member.

I still don't have a better name than member. Unfortunately, I'm sure I'll come up with one. So if you become a member, it's a great way to support the podcast. In return, you get access to extra podcasts for me every week. And these podcasts are available nowhere else. I only send them to members. So if you want to sign up and help me out, I'd very much appreciate it. You can go to founderspodcast.com forward slash support or the link is also in the show notes available in the podcast player that you're using to listen to this. And if you sign up today, you'll automatically unlock eight members only podcasts that I've done in the past. Plus, you'll get a new members only podcast every Monday. And the second way you can support the podcast is signing up for Founders Notes.

So Founders Notes is basically my podcast notes. I listen to podcasts with company builders, write down the key ideas and email them to you every Sunday. And the result is you have tweet sized bits of knowledge from some of the smartest people in the world talking about what they learned from building their business. And it's really simple to sign up. Just go to foundersnotes.co, put in your email address. And if you like what you see, please upgrade to a paid subscription. It'll save you a lot of time. What would take you 10 to 20 hours to listen to is distilled down into valuable ideas you can read in 10 to 20 minutes. Okay, so let's get back into Idea Man. And this is a little bit about, this is Paul speaking about how he works and how he comes up with the ideas that he worked on. So he says, my really big ideas have all begun with a stage setting development.

Then I ask a few basic questions. Where is the leading edge of discovery headed? What should exist but doesn't yet? How can I create something to help meet the need? And who might be enlisted to join the crusade? Whenever I had a moment of insight, it has come from combining two or more elements to galvanize a new technology and bring breakthrough applications to a potentially vast audience. Bill and I had already found a groove together. I was the idea man, the one who conceived the things out of whole cloth.

Bill listened and challenged me and then homed in on my best ideas to help make them a reality. Our collaboration had a natural tension, but mostly it worked productively and well. Okay, so this is Paul writing about how he came up with the idea for what would eventually become Microsoft. So he said, a few months after the 8008 was announced, this is a microprocessor from Intel, one of those brainwaves came to me. What if a microprocessor could run a high-level language, the essential tool for programming a general-purpose computer? It was plain to me from the outset that we'd use BASIC, BASIC stands for Beginners All Purpose Symbolic Instruction Code, that relatively simple language that Bill

and I learned back at Lakeside in our first computer experience. And so I asked Bill, why don't we do a BASIC for the 8008? He looked at me quizzically and said, because it would be dog slow and pathetic, and BASIC by itself would take up almost all the memory, there's just not enough horsepower. It would be a waste of time. After a moment's reflection, I knew he was probably right. Then he said, when they come out with a faster chip, let me know. So a few weeks after that, Paul is reading the magazine Popular Electronics, and he sees an advertisement for the Altair 8800.

And so now this is him talking about how he reacted to seeing that. I slapped down 75 cents and trotted the half dozen slushy blocks to Bill's room in Harvard's courier house. I burst in on him cramming for finals. You remember what you told me, I said, feeling vindicated and a little breathless. To let you know when somebody came out with a machine based on the 8080? Yeah, I remember. Well, here it is, I said, holding out the magazine with a flourish. Check it out. As Bill read the story, he began rocking back and forth in his chair, a sign that he was in deep concentration.

I could tell he was impressed. We were looking at the first commercial personal computer. So they decide to send letters to the manufacturer of the Altair 8800. It's this little company in Albuquerque, New Mexico. They don't receive any word back, so they decide to call. And they're going to call to see if they can write the software for the Altair 8800. And so it says, we followed up with a phone call. You should talk to them. You're older, Bill said. No, you should talk to them you're older bill said no you should do it you're better at this kind of thing i said we compromised bill would make the call but he would say he was me when it came time to meet with mitts mitts mits is the name uh is the company

that's making the the altair 8800 and um it's an acronym. It stands for micro instrumentation and telemetry system. So it says when it came time to meet with mitts face to face, our thinking went, I'd be the one to make the trip. I had my beard going and at least look like an adult. While Bill, who'd routinely get carded into his 30s, could still pass for a high school sophomore. Ed Roberts. This is Paul Allen in Boston, Bill said. We've got a basic for the Altair that's just about finished, and we'd like to come out and show it to you. I admired Bill's bravado, but worried he'd gone too far

since we yet to write the first line of code. So this is really interesting. Without saying anything to Paul in advance, he's just telling this guy, yeah, we're almost done, and we want to come out and show it to you. We learned, obviously, what Paul said in the last sentence. We haven't even written our first line of code. So I bring that up because as I was reviewing all the notes and the highlights getting ready for this podcast, podcast on Paul Allen that is full of stories about Bill Gates because of he had very, um,

what he would call Bill, Bill was obsessed with being hardcore. He was very, he had a very, he just has a very eccentric personality. Like you can see in this, in, uh, in, in just like this little phone call here. So what I did is instead of anytime there was a highlight where it talked about Bill and Paul working together, well, that makes sense to put it inside of a Paul Allen podcast. But what I did is this week's Founders Only podcast, I took all my highlights that are just about Bill's eccentric personality and the stories that Paul has about him in this book, which is really, really funny in many cases and really extreme in a lot, and just put it into a podcast where it's very similar to if you've left reviews for this podcast

and I sent you the reviewer-only podcast where there's all these stories. One of the podcasts I did was all these stories about Steve Jobs from Ed Catmull. And in case you haven't listened to the Ed Catmull episode of Founders yet, Ed Catmull was the co-founder of Pixar, a genius in his own right. And he had the longest working relationship with Steve Jobs.

They worked together for 26 years uninterrupted until Steve Jobs' death. And as such, Ed had a lot of stories that I put into a podcast about Steve Jobs that even after reading two books about Steve Jobs, I hadn't heard anywhere else. So Paul Allen having a lot of experience with Bill Gates, it's very similar here. He's got a lot of interesting stories. So if you want to hear that and support my work, please think about signing up and you can unlock it immediately. All right, so let's go back to this. We're in the middle of this Bill's, like what's Paul saying? He's admiring Bill's bravado on this phone call. So it says, I admired Bill's bravado, but worried

that he'd gone too far since we'd yet to write the first line of code. Roberts was interested, but he was getting 10 calls a day from people with similar claims. So I think I talk about it later in the podcast, but it's definitely mentioned many times in the book. If it wasn't for Ed Roberts, the guy they're talking to right now, there would be no Microsoft. That's how important character he is in understanding the formation of this company. So it says Roberts was interested, but he was getting 10 calls a day from people with similar claims. He told Bill what he told everyone else. The first person to walk through his door in Albuquerque with a basic that worked would get the contract for the Altair. The whole conversation took five minutes. Think about how crazy it is. If what I just said was true, that there would be no

Microsoft without Ed Roberts, the first interaction we'd have, and that sets them on the path to founding what eventually becomes Microsoft, took all of five minutes. When it was over, Bill and I looked at each other. It was one thing to talk about writing a language for a microprocessor and another to get the job done. If we'd been older or known better, Bill and I might have been put off by the task in front of us. And this is a really important point that I think is made multiple times.

Not only when you hear of founding stories from other entrepreneurs, but the books that I've read for this podcast. And he says, but we were young and green enough to believe that we just might pull it off. Okay, so that is the end of like the introduction of the first chapter So now the book flashes back to his earlier life Until we catch back up to the beginning of the Microsoft, which is where the book starts Okay, so we're gonna go backwards And as always, I'm extremely interested in the early lives of these entrepreneurs What they were like as kids, what they were like in school,

some of their first jobs, the first ideas they had. Because you see a lot of the things that happen in your young life that are carried over with you. And a lot of them become part of the culture or the reason that they're creating the company they are. So I'm just going to hit some highlights here. This is really important. And this is advice he got from his father. And there's several examples that we've talked about on the podcast where it's like you can find out how to do something by seeing it done the wrong way. So we're going to see a regret that surfaces in his father's life that he's now trying to instill in his son to basically saying, hey, do as I say, not as I have done. And it says, I was still young when my father first asked me what I wanted to do with my life. It was his way of imparting his laconic

wisdom. He was a man of very few words. When you grow up and have a job, do something you love. Whatever you do, you should love it. He'd repeat this to me over the years with conviction. Later, I had figured out what he meant. Do as I say, not as I've done. Much later, my mother told me that my father had wrestled with his career choice. He suspected he might be happier coaching football than managing libraries. He would manage libraries for colleges.

But he finally chose the safe and practical route, a nine-to-five life under fluorescent lights. Lots of men from his generation did the same, but he wanted me to choose better. So this week while I was taking notes on one of my favorite entrepreneurs that I covered, Danny Meyer. If you go back and listen to the podcast I did on his book, Setting the Table. And I think I talked about it on this this podcast but he talked in the podcast i did about the book but he was on um masters of scale and he was talking about the night before he was selling he was you know semi-successful he's a really good salesman he's selling these um like electronic tags that stop shoplifters making six figures being able to live in new york but

then he said hey i need to figure out what next to do. So I'll just go take, I'll just be an attorney. So he registers for the LSAT. And the night before he takes the LSAT, he's having dinner with his family, aunt, uncle, all these people. And he's just in a really crappy mood. And his uncle's like, what's wrong with you?

And he's like, well, I have to take the LSAT tomorrow, but I don't want to be a lawyer and so his uncle says to him he's like you realize that you're going to be dead way longer than you are alive basically saying hey you have such a short time period that you actually are alive why are you going to waste it doing something you don't love and he says the quote is uh why don't you open a restaurant and danny's like why would i do that and he's like you fool like your whole life you've been obsessed with restaurants that's why you should open one like you talk about them constantly and so he takes his uncle's advice and that that one conversation winds up being a turning point into his life. And then

what happens is it prepares him. He starts one restaurant, waits a few years, and then he builds up Union Square Hospitality Group, which is successful. Then eventually, in case you don't know who Danny Meyer is, he founds Shake Shack. And now Shake Shack is a massive public company. So it's just really interesting that this advice over and over again usually comes from people that, in many cases, didn't even take their own advice. And in Paul Allen's case,

it's his father saying, hey, just do something you love because he had a job, he could support his family, but he's not going to love managing libraries if his passions were elsewhere. So just think it's hugely hugely um important to internalize that message and i always like i find it fascinating that our lives can turn so rapidly um whether it

be a five-minute phone call with ed roberts our conversation with your uncle our advice that you remember your dad or parents giving you when you're younger. It's just fascinating to me the twist and turns of lives and how they're spawned by these little moments. So we're going to skip ahead and we're going to go to where he actually finds his passion. And every time I read about somebody finding a passion ever since, I think it was in the Everything Store, but it was definitely in Space Parents, the podcast I did on Jeff Bezos and Elon elon musk a few weeks ago that quote that jeff said stuck out to me it's like why do you why did you found like why are you selling a billion dollars a year in amazon stock and funding a rocket company and his response is that your our passions choose us we don't choose our passions and since

he was five years old, he was just very extremely passionate about rocket technology. So he's taking what he calls his lottery winnings from Amazon and applying it to his true passion. So we're going to find Paul Allen's passion is programming. And he says, then in the fall of my 10th grade year, my passion found me. This is a very interesting wording. My passion found me. It kind of goes in line with what Bezos was saying. I didn't find my passion. It found me. Programming resonated with my drive to figure out whether things worked or not and then to fix them. I'd long marveled at the innards of things. He was just talking about that. From transistors and integrated circuits.

But crafting my own computer code felt more creative than anything I've tried before. I sensed that there would always be more to learn, layer upon layer of knowledge and techniques. Others might have found us eccentric, but I didn't care. I had discovered my calling. I was a programmer. My English teacher, dismayed by my chronic indifference to homework, he turned philosophical. Excuse me. And this is a great, well, let me read it first and then I'll tell you what I like about it. And this is his English teacher describing him. Paul is an enthusiast. And when in the grip of enthusiasm is almost totally irresponsible in other areas.

How can one help such a student to see the error of his ways? I don't know. He could even be more right than we. Who knows? So first of all, it's a great teacher because he's accurately describing Paul, but he's not heavy on let me discipline this guy. Let me tell him what I know what he needs to know. He's like, how do you help a student see the error of his ways? I think you're making a mistake by disregarding the rest of your homework, but I don't know.

That's his next word. He could even be more right than we. And it turns out he was because he went on and took his enthusiasm for this and started a company that changed his life. What I was going to say before I read that, though, I think if you think about what you're working on or what you're spending your time on, or maybe you're not in that position yet, but you're trying to get there soon, if somebody can describe you as an enthusiast about what you're working on, I think that's a recipe for a way more fulfilling life than, say to what paul allen's dad like the path he went down so it's not easy it's definitely uh very i would even say it's

more rare for for people to find that but think about like i try to think about that like what am i enthusiastic about what am i gonna do going to do regardless whether it's a job or not? What do I focus on and spend time doing at the detriment to everything else? Yeah, I think that's a really, and I like the term enthusiast. I just like that idea. Okay, so in fact, I was thriving in a professional environment, working hard at something I took joy in. What better experience could there be for a 16-year-old? So we just found out from his English teacher that when he's gripped in his enthusiasm, he's kind of indifferent to homework. He's not really doing the things he should do, even though he's going to Lakeside. Lakeside's a very expensive, prestigious private school that he's going to, and that's where he obviously emails Bill Gates.

But this is the interesting point, and I think this is very common for a lot of people where it's – and my qualms with standardized schooling is that you could have somebody that's incredibly bright but incredibly bored by the subject material and they're labeled a bad student. When most of the time, we just have to find – schooling should be adapted to the person. And so this is him going deep. The note I left myself is going deep on subjects that interested him. So we're going to see the juxtaposition here between not doing homework to being obsessed and if he's obsessed he's going to spend as much time as he wants really uh having like these deep dives into subjects that he he wants like he's actually interested in learning about so it says having haunted the stacks of uw's computer science library for some time so you don't uw's university of washington um before this uh he was obsessed with programming learned at Lakeside, and then he just started walking into graduate-level programming classes at University of Washington.

And eventually, because they had access to a lot of computers, at the time, there were scarce resources, so that's the way he would be able to learn is to get access to these machines. And then he finds out, the professor's like, hey, I don't recognize you. Are you in any of my classes? And he's like, no, I'm not even registered here. And the professor's like hey i don't recognize you are you in any of my classes and he's like no i'm not even registered here and the professor's like that's fine you'd like it's he just let him stay and and learn even though he wasn't technically paying for the school so having haunted the stack that's the context of where what part of the book we're in having haunted the stacks of uw's computer science library for some time i naturally became became the research arm of the Lakeside Programming Group. So the Lakeside Programming Group is a bunch of other nerds. And I mean that affectionately, him, Bill Gates,

and some other guys. I spent countless hours buried in periodicals like datamation or computer design, keeping up with the latest mainframe trends. I dived into esoteric technical reports from MIT and Carnegie Mellon, dense theoretical stuff that ranged from artificial intelligence to the latest algorithms. When I found something interesting, I'd check it out and show it to the group. As my senior yearbook shows, I was reading other things as well. There's a picture and it says, my chin rests atop a stack of 11 books, among them Joyce Dubliner's Modern University Physics, The Mexican War, and The Holy Bible. I'm guessing that the photo was posed to satirize how much work our teachers threw at us.

Still, it was a good illustration of my breadth of interest at the time. I was driven more by curiosity than by compulsion to get good grades. When it came to Civil War trivia or the conjugations of language, I had trouble faking interest. And he's going to be writing in his own journal at the time, and he says, I am also very absent-minded and lazy toward things from which I derive no active or contemplative pleasure. But give me a dynamic teacher and engrossing material,

and I'd be insatiable. So while he's in school, now in this case he's in college, he's going to a local school. I don't think it's the University of Washington. I actually didn't write it down, so I don't remember. But he gets a programming job, and Bill Gates is obviously super smart.

He gets all of his – he's still in high school, so he gets most of his senior work done early, so he can go down to Vancouver, Washington, and take a programming job with Paul Allen. And this is what they're working on. So this might be Paul's first actual job. So it says, A massive software project for the Bonneville Power Administration's electrical grid was behind schedule.

And Bud, Bud's the guy that's running the project, was scouring the region for programmers who knew their way around a PDP-10. That's what he learned how to program on. It says, I was not quite 20 and Bill was only 17, but age was not a criterion. And you're going to be on salary, Bud said. Bill said, how much? And Bud replied, $165 a week. $4 an hour was a pittance for an experienced programmer, even then. But Bill and I couldn't believe our good fortune. We found a cheap two-bedroom apartment and showed up for work on Monday in January 1973. Our employer was TRW, a big aerospace company that had contracted with the Department of Interior to set up a real-time operating and dispatch system. So it's

going to be referred to as RODS from here on in. So it's real time operating dispatch dispatch system more than a year into the project the project was overrun with penalties soaring trw's new software was still full of bugs wheeling into crisis mode management went out to recruit every able-minded programmer they could find to get rods up and running by the time we got there more than 40 people were working on it around the clock and this is the uh the reason i included this this section of the book is because the lesson that they pull from this which is really important in uh developing the confidence in their own abilities especially the confidence to do your own thing it says bill and i were the youngest workers there and surely the lowest paid but we learned that we could hold our own with some of the top programmers around.

So while this is going on, they come up with an idea for their first business, which a lot of people don't realize they started a business before Microsoft. And it's called Traf-O-Data, and Traf is short for traffic. So he's going to describe it a little bit here. He says, in describing our work on Traf-O-Data, my resume stated, I designed and put together a system for traffic engineers to study traffic flow. The system is built around Intel's MCS-8008 microcomputer. The software and hardware setup had been fully tested using a prototype. Demonstrations to customers are planned for may 1974. and this is the business model that they were doing so um you might have seen this uh if you'll be driving in a road and there'll be these

like long black wires across from it and it's usually the city or the the state that you're in and they're trying to count traffic patterns well they were doing that even back in the 1970s, except they would have to add everything manually. So Bill and Paul, along with another person, they started a company which would automatically analyze that data for you. And so it says, charging $2 per day of data collection, we found three clients, two smaller counties near Seattle and a district in British Columbia. They mailed their traffic tapes to Paul Gilbert's house, that produced the graphs of hourly car flow. But just as we were getting underway, Washington joined a number of other states in offering the same service to cities for free. We didn't give up easily, even attempting to sell our

wares in South America. According to six years of tax returns between 1974 and 1980, Trafo data totaled gross receipts of $6,631 and net losses of $3,494. In 1982, when we closed our checking account, I received a distribution of $794. By that time, Bill and I were preoccupied with running another company in Seattle, of course, that being Microsoft, but this is the lesson from here. In hindsight, Traffodata was a good idea with a flawed business model. We had done no market research. We hadn't foreseen how hard it would be to get municipalities to make capital expenditures

or that officials would be reluctant to buy machines from students. For Bill, Traffodata's failure would serve as another cautionary tale. Above all, we learned that it was hard to compete with free. Bill took that lesson to heart. Years later, he'd become obsessed with Linux, the open-source operating system. But there were positives too. TrafoData bolstered my conviction that microprocessors would soon run the same programs as large computers at a far lower cost. Looking ahead, my development tools for the 8008 would give us an invaluable foundation when that next generation chip came along. But that's the next generation chip is the one that they used to write BAS ed roberts altair um it says in 2002 i purchased the one and only traffic data machine from paul gilbert and installed it in our startup gallery at the

museum of natural history and science in albuquerque i wanted to pay homage to an obscure piece of hardware that played a critical role in the microprocessor software revolution in my experience each failure contained this is his takeaway it's really important part in my experience, each failure contains the seeds of your next success if you are willing to learn from it. Bill and I had to concede that our future wasn't in hardware or traffic tapes. We'd have to find something else. So skipping ahead, now we're going about two years after this, and this is moving to Boston. Through the spring semester of 1974, Bill kept urging me to move to Boston. We could find work together as programmers, he said. Some local firms sounded interested.

We'd come up with some exciting project and maybe something new. In any case, we'd have some fun. And why not give it a try? Still at washington state all right so that's the college he's going to i was ready to take a flyer i mailed my resume to a dozen computer companies in the boston area and got to get a 12 500 job offer from honeywell if boston didn't work out i could always return to school in the meantime i'd sample a new part of the country plus bills there and at a minimum we could put our heads together on the weekends and It says he's talking about his dad's reaction to this he's like my dad was less than enthusiastic This software work seems to be a distraction. He said I don't agree with your choice, but you're old enough to make your own decisions

Regardless of what they thought my parents always did what they could do to support me. And this is actually an important point. I left a note to myself that you can't choose what type of parents you get, but you can choose what type of parent you're going to be. And this example of Paul's parents, I think being a supportive and encouraging parent seems like a good idea to me.

So now we're back, we're done with the flashbacks and we're back to the part of the book where they have already made the call to Ed Roberts. They wind up doing all the hard work. Bill does a lot of it and they get the basic ready. And they're going to fly out to New Mexico. And they have to test it on the machine. And they wind up testing it. And it winds up working out. And we're going to pick up right there in the story.

And this is Ed Roberts, the founder of MITS, talking. And he says, you're the first guys who came in here and showed us something, he said. We want you to draw up a license so we can sell this with the altair we can work out the terms later i couldn't stop grinning once back at the hotel i called bill who was thrilled with the news we were in business now for real so now he flies back to boston and he trying to, they're trying to like help Ed with the production of the software into his hardware, but they're doing it remotely. So he's on the phone and it says from Honeywell, I'd call Ed periodically with updates. One day he interrupted

me. Stop, stop. How would you like to move down here to New Mexico and run our software group? Albuquerque felt foreign to me. I'd only just learned that it wasn't in Arizona. But the salary was $16,000, a bump from what I was making at Honeywell, and it was hard to refuse an offer to work on the code we'd created. Besides, Bill and I agreed that one of us probably needed to be there to service our customer, the customer being MITS, and ride herd over software distribution. I was the freer agent and the one who received the invitation, so it fell to me. I called Ed back and said, when do you want me to start? So he puts in his notice.

Honeywell at the time was like your normal everyday corporation. And he's going to learn something a little bit about human nature he's younger than the people at honeywell he's more um risk on as opposed to being risk averse and he's a little upset by the the response he gets but i it it it's just a good lesson for all of us in human nature it says to a man my co-workers declared that it was making a big mistake it was crazy they said to ditch It was crazy, they said, to ditch an established firm for some fly-by-night startup selling hobbyist kits in the desert. Remember this term, hobbyist kits, because it's thrown at them over and over again. You guys don't know what

you're doing. This is just a fad, and we'll see how they knew that was incorrect in a minute. Your job's safe at Honeywell, they kept telling me. You can work here for years. I knew that my move was a risk, but I was disappointed in my colleagues. I wanted to hear something like, good luck, young fellow, and more power to you. So he makes the move. Things are going really well. He moves out to New Mexico. Later, Bill joins him. It says, after Harvard left out for the summer, Bill and this other guy, Monty, joined me in Albuquerque. We rented a furnished two-bedroom apartment that was a five-minute drive from MITS. And this is another example of,

instead of reasoning by analogy, thinking from first principles. So what does that mean? Like, what do you know is true? And it says, inoston and the bay area in labs and corporations like honeywell microcomputers were viewed as a passing fad but the doubters didn't phase us we were certain this is such an important part we were certain that the tech establishment was wrong and we were right. And the proof came each day in the mail sacks, bulging with orders for the Altair and our basic.

In that little ramshackle building in Albuquerque, it felt as though anything was possible. So what do I mean about first principles thinking? Why would I even know? What do you know it's true? So everybody's saying, hey, you guys are stupid for doing this. Microcomputers are a fad. You're wasting your time out there in the desert.

But they know something that other people from the outside don't. So MITS, to get the funding from banks to build the Altair, before they went to the bank, MITS said, okay um we could probably sell 200 machines a year they had to lie and tell the bank that to get the money that they're going to sell 800 a year so that's 4x their initial projection right that one article that paul allen saw back in boston from that article they got 2 000 orders at 400, from that article, they got 2,000 orders at $400 each from one article in the magazine. So outsiders saying,

oh, this is a fad, you don't know this. Skeptics don't know this, right? But Paul and Ed and Bill know that they're getting thousands of orders and every hardware is coming with Microsoft, what is soon to be Microsoft software. So the idea says that the doubters didn't faze us. We were certain that a tech establishment was wrong and we were right.

How did they knew that? The proof came each day in the mail sacks, bulging with orders for the Altair and the R basic. There's a lot of times when you're doing something new, the consumer behavior is unpredictable because if it was already predictable, somebody else would have already been doing it. So I just, I love that little, that paragraph a lot. So something Bill taught Paul over and over again was that we need to retain ownership.

And so they're talking about after all these orders are coming in, this is the state of what soon has become Microsoft. Our one product was 8080 Basic, and MITS was our only customer. Our interests were aligned, and this will obviously change. We'd been working on a handshake with Ed for months, but now we were ready to formalize the relationship. After some back and forth on the numbers, Bill went to a local attorney to have the papers drawn. In return for the exclusive right and license to sell our BasicASIC worldwide for 10 years, MITS would give us $3,000 upfront plus per copy royalties of $30-60 depending on the

version. We'd receive 50% of gross receipts from BASIC licenses bought without hardware sales, and sub licenses to third party OEMs, the original equipment manufacturers who made their own computers would also be divided 50-50. Since Bill and I retained ownership of our software, we were free to initiate these deals. And so that's exactly what's going to happen at the very beginning of Microsoft. Paul's going to spend his time making sure everything's working out. He's working at MITS. He's overseeing software integration for their only customer at the time. And then Bill goes out and he's going to be selling their basic to other computer manufacturers. But before I get there,

there's going to be several parts in the book where Paul has a realization. Remember, Bill is extreme. He's hardcore, his own words. And there's going to be several times that Paul has to learn that Bill does not view them as equal co-founders. So the note I left myself is this is unequal co-founders part one. And there's going to be several examples I'm going to tell you about throughout the podcast. And this is a very true sentence. It says, in the life of any company, a few moments stand out. Signing the original basic contract was one was a big one for

bill and me now our partnership needed a name we considered allen gates but it sounded too much like a law firm my next idea micro dash soft for microprocessors and software we both knew instantly that the name was right micro soft was simple and straightforward. It conveyed just what we were about. From the time we'd started together in Massachusetts, I'd assumed that our partnership would be a 50-50 proposition. But Bill had another idea. It's not right for you to get half, he said. You had your salary at MITS while I did almost everything on BASIC without one back in Boston. I should get more. I think it should be 60-40. At first, I was taken aback.

But as I pondered it, Bill's position didn't seem unreasonable. So in this instance, Paul agreed with him, and they agreed a 60-40 split. And so this is how they started to grow Microsoft. Our business was growing fast. Over time, as Microsoft became the language development company for the personal computer industry, its partners divided the labor to play to their strengths. Bill focused on legal and contract issues, drummed up new business, and navigated our license sales. Whenever I pointed him to a new microcomputer, he'd be all over it to try to sell our software. It was my task to guide our programmers as we crafted BASIC. I did a good deal of the

grunt work myself and made sure that our products got delivered and properly implemented and upgraded. But my most vital charge was to chart our future. Where Bill eyed tomorrow's markets, I looked to a more distant horizon. What would our customers want six months or a year from now? And what did we need to do to get it to them before anyone else? By October 1976, Microsoft had outgrown our living room. This is the living room of the two-bedroom apartment they were renting. We ordered swivel chairs and desks from a discount house and moved to our first real headquarters, a leased suite of four offices just off Central Avenue. This is still in Albuquerque. The decor was modest and the offices small.

And this is really important around this time. As business pressures weighed on Ed Roberts, our interests grew less complimentary. To maximize Microsoft's revenue, we needed to distribute our software as widely as possible. But in Ed's perfect world, we'd sell it to all Terra owners exclusively. In November, I resigned from MITS and moved full-time to Microsoft, the trade name we had registered with the state of New Mexico around that time,

saying that they registered the trademark for Microsoft, and now it's without the hyphen. With Bill about to quit college for good and Chris Larson back on board, one of the recruits, we leased another four offices early in 1977. We were at full strength now. Our forces joined, ready to rock and roll. And now right around this time, as the business continues to grow, this is the unequal co-founders part two. When Bill asked me for a walk and talk one day, I knew something was up.

We'd gone a block when he cut to the chase. I've done most of the work on basic and I gave up a lot to leave Harvard, he said. I deserve more than 60%. How much more? I was thinking 6436. Again, I had that moment of surprise, But I'm a stubbornly logical person, and I tried to consider Bill's argument objectively. His intellectual horsepower had been critical to BASIC, and he would be central to our success moving forward. That much was obvious. But how to calculate the value of my big idea, the mating of a high-level language with a microprocessor, or my persistence in bringing it to Bill to see it?

What were my development tools worth to the property of the partnership? Or my stewardship of our product line? Or my day-to-day brainstorming with our programmers? I might have haggled and offered Bill two points instead of four, but my heart wasn't in it. That's such an important sentence right here. But my heart wasn't in it. That's such an important sentence right here, but my heart wasn't in it. So I agreed. Now, I remember going back to the advice from his father, make sure you love it. If you're going to spend your life doing it, make sure you love it. Now we're hearing, even at the very beginning, my yourself's doing okay, but his heart's not in it.

At least now we can put this to bed i thought and it says our formal partnership agreement signed on february 3rd 1977 had two other provisions of note paragraph 8 allowed an exemption from business duties for a partner who is full a full-time student and that was a clear clause geared to the possibility that bill might go back to get his degree and then this is the important part the more important part i should say I should say. And in the event of irreconcilable differences, paragraph 12 stated that Bill could demand that I withdraw from the partnership. So this is an idea we've talked about a few times on the podcast before, when you just notice, you see these stories over and over again, that there's a lot of companies that start out maybe two, three, four co-founders,

but it usually comes down to one. There's one really, really strong person that views the company almost as an extension of their identity. That's explicitly stated in this book, how Bill Gates had a really hard time separating himself from Microsoft. And so you see at the very beginning, he really feels it's his company, even though in its inception, it was founded as a 50-50 partnership. As time goes on, Bill being the extreme person he is, he exerts more and more influence over this. So I'm skipping way ahead now because I think this is interesting. They have a falling out with Ed Roberts, and it actually leads to a major win for Microsoft. And I think the note I also

left myself is it's a cautionary tale. So let me give you some background before we jump into the book. So Ed's having a problem with hardware. He was the original leader in the industry. A lot of people start copying, erodes into his market share, erodes into his margins. Hardware being as hard as it is, he decides he's going to take the opportunity to sell his company. So he sells this company, he sells MITS to Pertek. But the weird thing is Pertek thinks they are buying not only the hardware, but the rights to BASIC. And Microsoft's like, no, no, no, we own this software.

You have the license agreement we have, but you don't own the software. You're crazy. So the case goes to arbitration and per tech loses that's why i said following up with ed leads to a major win for microsoft so it says uh this is now paul talking he says ed roberts was a man of huge vision but weak execution he'd set off the revolution but couldn't keep his company in front most of all ed lacked a relentless price cutting mindset you need in a company selling to mass market. The hearing was grueling. It was disquieting to see Pertek line up their three lawyers against R1, and tough to watch Ed testify against us.

The ruling was a total victory for Microsoft. Our contract with MITS was terminated, with Pertek held accountable for all unpaid royalties. Most crucially, Bill and I recovered all rights to our basic interpreter and could now sell it to whomever we pleased. And better yet, keep all the revenue. Remember, they had that 50-50 split for a while, or at least for 10 years. Our one big roadblock was gone. Though he lived a rich life after MITS, he felt bitter to be left out of the history books. This is Ed talking.

We created an industry, and I think that goes completely unnoticed. He was half right. Ed did indeed create the first truly commercial and personal computer, the first widely affordable general purpose machine. He spearheaded, this is the cautionary tale part, he spearheaded every aspect of microcomputer marketing, from publications and conventions to a retailer-dealer network. His imagination was boundless. The Altair even debuted a digital camera interface back in 1976, and he gave two college dropouts the opportunity

of their young lives. There may never have been a Microsoft without Ed Roberts. So this was, well, this is now Paul explicitly saying the lesson that he learned from this. So he says, our near disaster and arbitration was one more lesson for us. Going forward, we would aim for maximum market share in any sector we entered. You could never have too many customers. And this is a little bit about the early Microsoft culture. And it says, freedom of my obligations to MITS,

I fell into the programmer's natural cycle and coded long into the night. When distractions are fewest and you could submerge into a problem. Then I'd crash for six or seven hours and drag in close to noon. Our office culture was much of the same as, excuse me,

our office culture was much as the same as it was at MITS with loud rock and roll and casual attire. We weren't much for corporate trappings. We had close to a dozen people on staff, and most of us were single and in our early 20s. We had our share of characters. Bob Wallace was a wily jokester who later helped originate shareware and funded research on psychedelic drugs. Jim Lane owned a broadsword and rarely missed a medieval fair.

But no one was more idiosyncratic than Gordon Lewton, a brilliant nerd's nerd, who would lock himself in his office and generate reams of flawless code. Gordon trusted nobody. He would use a different name on every magazine subscription. A. Gordon Lewton. Lew-L a different name on every magazine subscription. A. Gordon Lewin. Lewton.

Lew. Lewin. I think that's how you pronounce his name. B. Gordon Lewin. And so on, just to track down the source of any junk mail. He married a woman named Rose, and they adopted a baby pig that they treated like a member of the family. The pig grew to be 70 pounds or more and would blast through its pig door into their home like a fullback going off tackle. Years later, I heard that Gordon was taking it around the world with him on his Learjet. With the company en route to its first million dollar year and having outgrown the bank building,

Bill and I faced a decision. Stay or go. After three years in New Mexico, I was ready to move. It was hard to recruit top flight programmers to Albuquerque, not exactly a hotbed of research or technology. And after the sale of MITS to Pertec, there was no real business reason to stay. I miss the green of the Pacific Northwest, and I miss my family too. Bill came to my house to discuss our options. He was dead set against moving to the barrier. So he's saying he came to his house like a year after they rented a um an apartment together he rents paul rents his own house because he couldn't live with bill anymore he was just too intense to to live with him and to work with him all the time he'd see uh so he talks about um he was dead set against oh this is a really important interesting point that bill's making think about he's making this in 1970s, and I think it's probably even more true today. He was dead set against moving to the Bay Area. He'd seen how

people in Silicon Valley changed jobs every year or two, which couldn't be good for our long-term projects. That left Seattle because Bill missed his family too. We could fly out to the Bay Area customers in 90 minutes. We agreed to finish our lease and move home at the end of the year that is the story of how seattle inherited what is now its second largest employer um and this is well let me tell you what i think of it after i read it to you on pearl harbor day 1978 the microsoft microsoft staff convened on the second floor of a shopping center for a group portrait. Despite a rare and raging snowstorm in Albuquerque that day, 11 of the 13 employees made it. When I look at that iconic photograph today, I see a group of young people excited about their future.

Back in Boston, Bill and I had been searching for the next big thing, little knowing that we'd find it in this remote city in the southwest. Now we had a real time behind us, or excuse me, a real team behind us and a firm sense of direction. In four years, we had come a long way. And I especially underlined and highlighted this part. If you look closely at that photo, you'll see just about everyone smiling. That captures our spirit back then.

When I talk about the early days at Microsoft, it's hard to explain to people how much fun it was. Even with the absurd hours and arguments, we were having the times of our lives. And so the note I left myself, just again, it's a pattern that keeps popping up in these books. And I've also heard it in interviews and podcasts. And this feeling happens over and over again. And it makes me wonder if we're doing something wrong. And we, this feeling of this,

you look back at the early, the earliest days of the company with like a fondness and a longing, and there's like a melancholy in these stories as they look back, a deep regret. And so if this feeling happens over and over again, like, I do wonder if we're doing something wrong we grow away from this feeling this small intimate company at the beginning of something amazing and many people regret growing away from this feeling and i wonder if this is another example of us not as a species not being able to predict what will actually make us happy so we start something new we're full of excitement and it has success and so it grows and whether it's in because you want to make more more money or it grows with people and suddenly that feeling that he's talking about

this photo is gone and it's gone forever um so i just wonder, I think about the words of Phil Knight at the end of the book, I think he's 78 years old when he's writing it, he's still alive, but he's at a very advanced age, and he's just like, I've already got the exact words, I don't have it in front of me,

he was just like, my God, what I wouldn't give to do it all over again, to live that time again. When he's starting out and he has no idea, he's just traveling the world, he wants to sell shoes, he's in Japan trying to figure things out.

It's very similar to the statement that Paul's making. And there's other examples that you could pull out. I don't know. I don't want to forget this because I don't want to look this i don't because i don't want to look back you know nothing lasts forever we're temporary beings right but um i don't know i just like what if you could have that feeling in perpetuity like what if you didn't have to grow your company and maybe you should like you have to be like what ray dalio said last week like

you have to be who you are like you have to have to follow your nature. And his nature was extreme, you know, so extreme person, you're not going to want to keep things small and intimate. But I just wonder if that that that intimacy that that knowing and having these bonds with people that you just don't have in a large company, you know, if that's even possible to maintain. So a random thought, but I obviously wanted to share that with you because I thought it was important. Interesting anecdote, I didn't know. They turned down a millions of dollars purchase agreement

or purchase offer from Ross Perot. Our growing confidence made it easier to reject a mid-several figure purchase offer that summer from Ross Perot. Our growing confidence made it easier to reject a mid-several figure purchase offer that summer from Ross Perot, the Dallas billionaire. It just felt way too soon for us to cash out. Our conclusion is that at present, we wish to remain independent, Bill wrote. That's when he's rejecting the offer. We see the potential to double the size of our organization and earn over $2 million per year before taxes. Think about that. $2 million per year. That was their goal. Bill was on the mark. Microsoft year end revenues would total $2.4 million in 1979 and our staff would more than double to 28. The reason I say think about that is because $2.4 million in 1979,

compare that to Microsoft's 2017 revenue of $89 billion. So Paul comes through with a breakthrough product. And for the members-only podcast this week, I read not only what Paul Allen thought about Bill Gates, but I found the letter that Bill Gates published. And you can just Google this. You can read it yourself if you want. Bill Gates published after the death of Paul Allen a few weeks ago, and it talks about this, what Paul Allen did for Microsoft, and it's coming up with this product, and it's mentioned in Bill Gates' letter. So it says, we bundled the soft card with diskettes and our basic interpreter and priced it at $349.

It started shipping that fall to strong demand, as we thought it might. So basically they made a way to make their software compatible with the rising. At this time, Steve Jobs introduces the Apple II. It takes off rapidly. The background that I skipped over, they're at a trade show. They see Jobs there, and he has the Apple II running with VisiCalc, which is one of the most famous early Apple programs. It's written about a lot.

But anyways, so it says Jobs had nearly a year's head start before the spreadsheet was developed for other microprocessors, and he exploited his lead well. The Apple II went from 35,000 units in 1979 to 210,000 units two years later and made a notable dent in the small business market. So the reason I'm talking about this is because this is the punchline. My invention, Paul speaking, allowed Microsoft to share in that success. We sold approximately $25,000 soft cards, that's the name of the product I made, in 1981 alone, worth about $8 million in sales

and continued our strong run into 1983 before imitators cut into our margins. So he winds up, they were doing 2 million a year in 79. Now in 81, they're doing 8 million a year, largely in part to Paul Allen's invention. So Paul has the idea, he's like, hey, well,

if our partnership percentages should decrease or increase based on the contribution, maybe I should go back and say, hey, I just made this huge contribution. And this is the final part, the unequal co-founders part three, and we're going to see the eventual dissemination of their partnership. Under the circumstances, I felt that our 64-36 partnership split was out of whack. Bill had set a precedent by claiming extra equity for his work on Altair Basic, another exceptional contribution. Now is time, I thought, to augment my share. A modest adjustment in the ratio seemed only right. But when I made my case, Bill would have none of it. I don't ever want you to talk about this again, he said.

Do not bring it up. In that moment, something died for me. I thought that our partnership was based on fairness, but I now saw that Bill's self-interest overrode all other considerations. My partner was out to grab as much of the pie as possible and hold onto it, and that was something I could not accept.

I didn't have it out with Bill at that time. I sucked it up and thought, okay, but one day I'm out of here. And now skipping a little bit ahead, this is the famous deal that led to Microsoft becoming the largest tech company of its day and there it's how they come up with the operating system that eventually is licensed to uh ibm so this is bill and i were for they're talking about the negotiations here bill and i were willing to forego pery royalties if we could freely license the DOS software to other manufacturers.

This is the same old strategy for Altair Basic. The conversation that's taking place right now is with IBM in the negotiations because IBM wanted to make a personal computer and they needed software to run on it. So that's what Microsoft is doing. 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, foresaw 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. Microsoft, the largest tech company of its day, or that Bill and I would become wealthy beyond our imagining. Microsoft's biggest plum, it's apparent, it became apparent, excuse me, wasn't the version we'd made specifically for IBM PCs. The real bonanza was the compatible system that we call MS-DOS, the product that could be sold over and over and over again worldwide under our own name. Between the interest in Japan, Japanese electronics manufacturers wanted to use

Microsoft software in their hardware, and IBM's domestic ripple effect, we began to realize that MS-DOS would be the international centerpiece of personal computer technology. So it was crucial for us to gain as much control over DOS as we could. The original DOS was made by a person that was actually trying to sell hardware and no one could make them an operating system. So he created a really rough version of it that he called Quick and Dirty Operating System. So it's QDOS. They renamed that to MS-DOS.

And this is them now buying and making sure that, again, if you go back to what Bill was saying earlier, that it's really important to maintain ownership. So it says, in June, I returned to Seattle Computer Products to try to modify our deal for 86 DOS, offering a flat fee of $30,000 for any future licensing. The guy that he's negotiating with, his name is Rod Brock. So it says, Rod Brock countered by asking for $150,000 for an exclusive license. I upped our purchase offer to $50,000 for exclusive rights and then proposed an outright purchase. This is an extremely important idea that Bill came up with. That was a sales agreement that Brock and I signed on July 27th, 1981, a contract that laid the foundation for what Microsoft would become. I knew it was a coup and that a free and clear DOS would be a valuable asset, but I cannot say that we knew just how

valuable it would be. As I stated in a deposition sometime later, 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. That's literally the foundation of their fortunes. It's such an important decision. 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. He said it would just make everything cleaner. If Brock had known about IBM, because they're negotiating with IBM and him at the same

time, it's actually really impressive they would do this in their 20s, he undoubtedly would have held out for more, and we certainly would have upped our offer but he was happy to sell he had been hit by the by the recession and needed cash and no one twisted his arm five years after the pc's rollout brock fell on hard times and sued microsoft in an attempt to regain control over the operating system that he had sold us given the uncertainties of a jury trial, Microsoft settled. Now, skipping a little bit ahead. Well, this is before I get there. Before, I was going to get to the part where it's the beginning of the end of Paul Allen's time at Microsoft. But he actually has this idea that's useful.

Let me read this paragraph. It's Paul Allen and what a company needs to do as it grows. In our farewell company photograph back in Albuquerque, 90 to 11 people were programmers, a bunch of young hackers having fun together. That changed in Seattle as we brought in MBAs to support an increasingly lucrative set of product lines. Many were hired for sales and advertising. Others handled end-user testing on new features. This was basic business practice, but inevitably funneled resources away from development. As a technology company grows, it must balance the need for innovation with the imperative to bolster existing products and keep the profits flowing. As Microsoft expanded far, far beyond the 35 programmers that once seemed like a pipe dream, remember from the beginning, it would get more and more difficult to keep that balance.

Okay, so now we're going to get to what is really important, especially with now we know that you know he died younger than he wanted to 65 years old um so this is the beginning of the end at paul of paul allen's time at microsoft when someone threatened to quit bill took it personally did all he could to change that person's mind whatever what he never considered though was that he might lose me whenever we locked horns i'd have to raise my intensity and my blood pressure to meet Bill's, and it was taking a toll. Some people can vent their anger, take a breath, and let it go, but I wasn't one of them. My sinking morale sapped my enthusiasm for my work, which in turn could precipitate Bill's next attack. Interesting choice of words there, his next attack.

Top executives like Steve Ballmer had their share of friction with Bill too, but none shared our long and complex history. I had known the CEO long before there was a Microsoft, and we started the company on equal footing. Now my role was diminishing. Bill stopped seeking me out on a regular basis, and I went to see him less and less. Too angry and proud to make an emotional appeal, I never went in and told Bill point blank, some days working with you is like being in hell.

So my grievances hung in the air, unstated and unresolved. That's not a good idea. On June 1st, 1982, to get my point across without being distracted by counter arguments and rationales, I decided to write Bill a letter. Here's a few excerpts from that. About two months ago, I came to the painful conclusion that the time has come for me to leave Microsoft. Steve convinced me that I should wait to discuss it with you when you were not in the middle of a series of trips. As I'm sure you realize, there is one primary reason that is the basis for my decision. I can no longer tolerate the browbeating or tirades

that characterize almost every attempt I make to discuss any subject that is controversial. The kind of personal verbal attacks that you use have cost many hundreds of hours of lost productivity in my case alone. Over the years, the result of these and other incidents have been the gradual destruction of both our friendship and our ability to work together. The camaraderie of the early days is long since gone. So around this time, he has his first health crisis, which you may not know.

He actually gets diagnosed with non-Hodgkin's early stage lymphoma. Let me just read this part instead of jumping ahead. He began that summer with an itch behind my knees. After the itching stopped, the night sweats began. Then in August, I became aware of a tiny hard bump on the right side of my neck near my collarbone. Over the next weeks, it grew to the size of a pencil eraser tip. It didn't hurt, and I didn't know that any lump near the lymph nodes was a warning sign. I felt as bulletproof as most people under 30. So I took my health for granted. He winds up going in to people. Hey, you should get that checked out. So it says the surgeon entered my room looking grim. Mr. Allen, he said, I took out as much as

I could, but our initial diagnosis is lymphoma. I knew that was cancer, but not much else. As I found out more, I got terrified. In those days, even early stage lymphomas had a 50-50 chance of killing you. I tried to make sense of the possibility that I might soon die. I had 29 good years, but I couldn't help feeling cheated. I had so much more to explore and experience. My father, a testicular cancer survivor, told me, son, none of this stuff is pleasant, but you have to take it like a man. That might sound cold and prince, but knowing that he'd gotten through it

was comforting to me. I couldn't give in to panic or despair. I had to tough it out. That's probably good advice not only for health issues but work as well. Then, good news. They caught my disease in stage 1A before it had spread, and it was misdiagnosed the first time. Early stage Hodgkin's lymphoma is one of the most curable cancers.

I'd drawn a scary card, but hardly the worst. And so with that context, we're now going to go to the part where it says the end of Paul Allen's time at Microsoft. One evening in late December 1982, I heard Bill and Steve speaking heatedly in Bill's office and paused outside to listen in. That's Steve Ballmer. It was easy to get the gist

of the conversation. They were bemoaning my recent lack of production and discussing how they might dilute my Microsoft equity by issuing options to themselves and other shareholders. Now, keep in mind, he's going to chemotherapy and they're talking about his productivity's down so that's that's just a terrible thing to do um it was clear they've been thinking about this for some time unable to stand it any longer i burst in on them and shouted this is unbelievable it shows your true character once and for all i was speaking to both of them but staring straight at bill caught red- red-handed, they were struck dumb. Before they could respond, I turned on my heel and left. I replayed their dialogue in my mind while driving home, and it felt more and more heinous to me. I helped start the company and was still an active member of

management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. It was mercenary opportunism, plain and simple. But from that unpleasant experience becomes his most important realization. And honestly, hit the most important realization of the entire book. So Paul Allen's going to quit. Bill writes him a letter, doesn't want him to.

And this is shortly after reading the letter, he comes to this important realization. He says, Bill was right. Our great string of successes had married my vision to his unmatched aptitude for business. But that was beside the point. Once I was diagnosed with Hodgkin's, my decision became simpler.

And now this sentence is the most important part of, most important point of the book, in my opinion. If I were to relapse, it would be pointless, if not hazardous, to return to the stresses at Microsoft. If I continued to recover, I now understood that life was too short to spend it unhappily. Bill's letter was a last ditch effort to get me to stay, and I knew he believed he had logic on his side, but it didn't change anything. My mind was made up. Sometimes it seemed that Bill was so utterly identified with Microsoft that he'd get confused about where the company left off and he began. I didn't feel quite the same way. The business was hugely important for me,

but it did not define me. I wasn't sure what the future held or even how much of it I'd get to enjoy, but I looked forward to a new phase. I had never forgotten my father's advice. Whatever you do, you should love it. My dad was happy for me when I'd returned to Seattle four years earlier, full of ideas and enthusiasm. It seemed to him that I'd found my calling, and I thought I had too, but now it was time to go. With my Hodgkins in remission, I didn't know what to do next. I just knew that I wanted to enjoy life. I would literally stop in my tracks to look at a flower or the sky or consciously savor a moment with family or friends. It's amazing how important the little things are in light of death. Though my Microsoft

shares were not yet liquid, I was in decent financial shape. I had a nice house and enough money in the bank to pay my bills for a while and travel. Losing the camaraderie and the creative work at Microsoft left a hole in my life. I missed the good times with Bill, when we'd spur each other on to bigger and better ideas. Though the occasions had grown fewer toward the end, I never felt tempted to reconsider my departure. It was like a failed romance parts of the relationship had been wonderful but i remembered the negatives too and i could not go back so a few years after this we lead to the ipo this is in march 13 1986 microsoft issued its initial public offering. I sold 200,000 shares and kept the rest, roughly 28% of the company. Overnight, I was $175 million richer. For some time, I resisted

advice to sell the stock and diversify. Given how fast computers were improving, I figured that a dominant, well-run technology company like Microsoft would outperform just about anything else I'd be proven right by the dizzying rise of the company's market cap by 1990 at age 37 I had become a billionaire in 1996 I'd be won ten times over So that's gonna be the bulk of the podcast there's a few other things i want to hit on just because he has some important realizations that you know he's writing this book he wrote this book about four or five years ago so towards the end of his life and towards the end of life is

usually when you have a lot to teach other other people which is kind of the entire point of this podcast so um but there's some interesting stories from the book that I still want to talk about. I didn't know. How about this one? You could call this story how Paul Allen made $75 million from American Online or how Paul Allen lost $40 billion from American Online.

So this is a really surprising story. Let me just read this to you. The genius of American Online was its accessible online experience for computer novices. Simple to install, it was the internet with training wheels, a one-stop shop for proprietary content, news, weather, games, stock quotes, plus embedded links to other companies' storefronts

before the dawn of modern websites. As the engine for the public's early embrace of email, American Online also helped introduce chat rooms and instant messaging. Convinced that the stock market had underestimated the value of connecting tens of millions of users, I began building my position in earnest that summer, just buying a bunch of AOL stock. Ten months later, I owned 15% of the company. My hope was for American Online to move from a low-bandwidth dial-up network to the inevitable high-speed future. In the spring of 1993, I traveled to Virginia to meet with CEO and Chairman Steve Case and his team. As I laid out my ideas for a broadband network, I could feel the chill in the air. Case and I were oil and water. As I laid out my ideas for a broadband network, I could feel the chill in the air.

Case and I were oil and water. He was wedded to his dial-up walled garden, even if it meant limiting content to what an analog network could handle, and found my ideas about broadband too far ahead of his game plan. It probably didn't help that I was still Microsoft's second biggest stockholder and a member of its board. Though Microsoft had yet to do much of anything online, Case perceived it as its greatest threat. Actually, he had it backward. I wanted to use my stake in American Online as a hedge against my holdings in Microsoft. It's interesting because I was a little too young at this time when this was all going on. But this whole thing about everybody at the time seeing Microsoft as this huge threat, it reminds me of the podcast on Jim Clark, where every time

he'd start a new business because he'd be worried that Microsoft was going to come in at any minute and destroy them. A year earlier, I attended a meeting at Microsoft where Bill had told Case that he was thinking about buying all or part of American Online or that he might decide to bury the smaller company. This is more of Bill Gates' hardcore behavior. Now it sounded like Bill had settled on a burial. I could see Steve Case trapped in a two-front war, besieged on one flank by Microsoft and the other by emerging World Wide Web, meaning a non-walled garden. Suddenly, my state seemed less attractive, especially without any synergy between American

Online and my other ventures. I dumped my stock and took a $75 million profit. Everybody would be happy with that, right? Well, check this out. This is crazy. In January 2000, five years after I'd sold my stock, AOL announced the acquisition of Time Warner. When I first heard the rumors, I thought AOL's market cap was outlandish at $163 billion. Still, one hard fact remains. Had I held on to my 24.9% of American Online, I would have been sitting on a $40 billion bonanza, more than all the money I'd make for my stake in Microsoft. That's amazing.

So I'm going to skip way ahead towards the end of the book. And so remember, he had Hodgkin's lymphoma when he's 29. Now in 2009, he's got a lot of health issues, which is such a now looking in retrospect, he definitely made the right decision to leave Microsoft because he still made billions of dollars and he was free to pursue other passions which he talks about some in the book but in 2009 he finds out he has stage four non-Hodgkin's lymphoma which is what he's going to die from um and even before that he had to have like open heart surgery he was just there's a lot of health issues um I just feel it sounds funny funny is not the right word but like i feel bad for him and people are like oh how could you feel bad he's worth 20 billion dollars yeah but

what does 20 billion dollars get you he died at 65 from cancer you know like it just he and it's not you don't choose health issues and to have the health care 29 you know i guess could be a blessing in disguise given how his life turned out but um you know having open heart surgery and thinking his 50s it's just there's a lot of stuff that was going on he had to have a pacemaker just all all stuff's talked about in the book it's just really really sad so um the he's going through chemo in 2009 and there's just one paragraph i want to include in there because, you know, people think they had a falling out. They were main light. Bill Gates and Paul Allen remained lifelong friends. So let me demonstrate that here. They just you know, he's talking honestly like you can with anybody.

So Bill Gates is hard to work with. So he said throughout this difficult period, meaning 2009, he's going doing all this chemo for stage four non-Hodgkin's lymphoma. He said one of my most regular visitors was Bill Gates. He was everything you'd want from a friend, caring and concerned. I was reminded of the complexity of our relationship and how we always rooted for each other, even when we were barely speaking. It seemed that we'd be stuck with one another for as long as we lasted. And now the note i left myself this is the gonna be the last thing i share this is the summary the most important realizations of of life this is very similar to uh again i don't maybe he knew maybe he knew it

but you know paul's writing this at the time he's writing this, he knows he had cancer. So just like Sam Walton before and Phil Knight and these other people, they're writing books at the end of their life, the time to reflect, and then pass their lessons on. And they have very important – I think one of the most valuable things you could do is study the regrets that people, humans typically have towards the end of their life and understand that you could wind up there if it's present.

And you see a lot of examples like that. Like it's something that we have to be aware of. So we don't, you know, you don't want to be dying and be filled with regret. I can't imagine what that feels like. So it said, I found my own path when I helped create the Altair Basic in that two-month rush of creativity back in 1975. Later, when the IBM PCs shipped with our operating system at its core, it struck me that the code I had helped to write would fundamentally change the way people worked, played, and communicated.

Having that kind of impact forever changes your sense of purpose in life. It's a feeling you always want to find again. When I became gravely ill in my 20s, I found myself regretting that my life was so narrowly focused. But after I recovered and traveled the world, I soon became restless. I discovered that what I missed most was creating things. And so I went back to work. If there's any irony to my life, it's that my time with Microsoft was atypically one-dimensional. When I was younger, I immersed myself in rockets, robots, music, and chemistry.

An omniverse reader, I thrilled to the exploits of pilots and explorers. I was inspired by Thomas Edison and Alexander Graham Bell. My curiosity was boundless. I went on to spend eight driven years with the single purpose of making Microsoft the leader of the personal computer revolution. And it happened. Far beyond what I could have hoped or expected, but my old passion still tugged at me. Deferred, but not forgotten. They were squeezed into playing along with Hendrix at three in the morning, he was a very good guitar player, or stealing a weekend from coding to watch a momentous space flight. After I left Microsoft, the wealth that I helped create

there and then the company's explosive growth freed me to pick up where I'd left off. At times, I cast my net too widely, but my choices of ventures wasn't arbitrary. Most of them were seeded long ago in my youth. Over the last 27 years, I've been able to do things I once only imagined. I have now lived half my life post-Microsoft. What we achieve there will always be a source of pride, but my second act, in all its range and variety, is truer to my nature. Some people are motivated by the need for recognition, some by money, and some by a broad social group. I start from a different place, from the love of ideas and the urge to put them into motion and see where they might lead. The creative path is rocky, with the risk of failure ever present and no guarantees,

but even with its detours and blind alleys, it's the only road that I find fulfilling. at founderspodcast.com forward slash books. And if you're listening this far and you enjoy the podcast, you learn something from it, please support my work directly by going to founderspodcast.com forward slash support and becoming a paid member. You'll immediately unlock, you'll get a new members only podcast every week

and you'll immediately unlock all the eight previous ones I've done, including the one on Bill Gates from the eyes of Paul Allen. Thank you for listening. Thank you for telling your friends. Thank you for sharing the podcast on social media. I will talk to you next week.