The Formula That Opened the Gates to a Brave New World

Bill Gates is not just Microsoft's patriarch, but also the premier philosopher of the modern information processing industry.

Last month, Forbes magazine disclosed the world's best known financial fact: Bill Gates is the richest man on the planet. Gates, Forbes noted, has held this title for 10 straight years, and is now worth $46 billion - it is as though the 48-year old has accumulated close to a billion dollars during each year of his life.

Showing genuine business acumen, Gates built a model company. Few know, however, that he is not just Microsoft's patriarch, but also the premier philosopher of the modern information processing industry. He planted the seed of this industry in 1976, when he was just 21. At that time, a year after he founded an obscure company, he disseminated a public letter among student computer buffs, in an act of brazen arrogance. This letter, drafted in a pompous, self-important vein, changed the shape of the world.

Gates established Microsoft the year in which the first personal computer, Altair, hit the markets. Those unfamiliar with this gadget, and who see a picture of it, will think of it simply as a box that had blinking lights. In fact, that impression is on target: the Altair was a box that didn't do anything. Nonetheless, computer and electronic wizards went wild when they heard about it, and rushed to purchase it. These were the days when having access to a computer was akin to entering a nuclear facility - only a select few had the honor of doing so.

Quickly groups of computer hackers sprouted on universities, exchanging information and taking part in the craze. "If you knew someone who had an Altair, you'd tell your friends," recalls Apple co-founder Steve Wozniak, who belonged to Stanford University's Homebrew club. "If someone added something to his computer, everyone would immediately take it apart, to understand what the addition did, and how it worked."

In the computer world, it's been the same way ever since: New information passes on by word of mouth, stimulating the appetite of hackers, who have a drive to learn, and who share new knowledge.

Gates, along with his friend Paul Allen, quickly grasped that the new computer would need an operating system; so they wrote such a system for Altair, calling it Basic. Some claim that the code they used was "borrowed" from other programs. Others argue that Basic was worked out on computers belonging to Harvard University, which were financed by taxpayers. Gates, for his part, demanded from Micro Instrumentation and Telemetry Systems, the makers of the Altair, a $500 fee for each copy of his program.

Computer hackers paid little heed to Gates' claim. They freely distributed Basic among themselves. Gates was furious. On February 3, 1976, he sent a letter to computer hacker groups, flatly accusing them of being thieves. In Gates' view, the fact that the hackers believed that they could freely distribute his program on the basis of bizarre concepts such as freedom of information turned them into crooks. That somebody would write a program simply as a hobby, Gates maintained, was inconceivable, and he hinted that if the hackers refused to pay for operating systems, they would receive lousy programs.

The extent to which this letter shocked its readers would be difficult to exaggerate. Then, as now, a computer without an operating system was simply a pile of useless chips. Then, as now, people dipped into their saving accounts in order to purchase computers. The idea that a consumer would have to pay for a system that runs the hardware in the computer was simply unfathomable. Does anybody pay separately for the operating system of a washing machine? Does anyone spend NIS 10 to buy a soccer ball, and then add another NIS 4 to purchase the air needed to fill it up?

These analogies meant nothing to Gates. He was the first to articulate the new business formula: The moment he wrote a new operating code, it belonged solely to him, and consumers could use the code only on his terms. The fact that most people in the world are willing to relinquish proprietorial-copyright claims the minute they are offered hefty salaries by large firms, means nothing. Nor does the fact that the cost of producing the program once it is written is negligible. A program equals money. Stealing the program means stealing money. That's the Gates formula.

At the age of 21, Gates set the foundations for the information processing industry, and this sphere has indeed been built up in his image. A declaration in his letter drew the line in the sand: A large number of hackers were thieves because they wanted to help friends and neighbors, and so installed word processors on their peers' computers. The minute they did so, they were "pirates."

What would have happened had other formulas ruled the computer world? Try this for a cognitive exercise: What would the world look like in 2003, had young Bill Gates decided to follow in his father's footsteps, and become a lawyer?