From the Archives: Bill Gates

(Editors' Note: This article originally appeared in the March 25, 1997 issue of PC Magazine.)

Remembering the Beginning

PC MAGAZINE: 15 years is a surprising amount of time in some ways. Obviously the PC industry goes back further, but the IBM PC changed it a lot. It changed the way people thought about computers.

BILL GATES: It absolutely did. For the IBM PC, the key market was a hobbyist market. We'd gotten floppy disks, so we'd start to get into some more serious applications. But, both the power of the machine, because it was the first 16-bit machine, and the endorsement by IBM of using a personal computer, and then the critical mass of software and distribution and peripherals that came along with that, makes it the biggest milestone in the history of personal computing. It was a sea change.

Of course, one of the big developments around it was that before the IBM-PC came along, machines were essentially incompatible with each other. In those first few years, [we saw] the whole notion of how compatible was compatible, there were many different levels there. And a lot of hardware manufacturers still felt they had more freedom to deviate a little bit and do things that couldn't be virtualized by a common software interface.

So, in those first two years a lot of key things were established: the idea of compatibility; MS-DOS as the primary system as opposed to CP/M-86 or UCSD P-System which were the prime competitors; and the whole thing about a broad software industry and using indirect distribution channels. Anyway, it was a monumental change.

PC MAGAZINE: Let's go back -- go back to that first 1982 PC Magazine interview. You know, "The Man Behind the Machine." Microsoft was involved with IBM to what at the time was an unprecedented degree. You had written software for lots of other machines at that point, not operating systems but BASICs and things like that. How different was it?

BILL GATES: Well, for IBM it was extremely different because this was a project where they let a supplier -- a partner, whatever you call us -- shape the definition of the machine and provide fundamental elements of the machine. When they first came to us, their concept was to do an 8-bit computer. And the project was more notable because they were going to do it so quickly and use an outside company. It wouldn't be a high-volume product.

Their charge was to do a home and a very low-end business machine. They had the Data Master, which was 8085-based at the time, that they felt was covering part of the business market. Then they had the 5100, the machine that had both an APL and a BASIC interpreter, which was covering another part of the business market. So it was sort of a home-down business machine. And it was a very small team in Boca that wanted to prove that IBM could do a product, any kind of product, in about an 18-month cycle. And that was the most novel-that was going to be the novel thing was: could you work with outsiders, which in this case was mostly ourselves but also Intel, and do it quickly?

And the key engineer on the project, Lou Eggebrecht, was fast-moving. Once we convinced IBM to go 16-bit (and we looked at 68000 which unfortunately wasn't debugged at the time so decided to go 8086), he cranked out that motherboard in about 40 days. It's one of the most phenomenal projects because there were very small resources involved and we had to ROM the BASIC which meant that it was essentially cast in concrete, so you couldn't make much in the way of mistakes. We actually did this clever thing where for disk versions of the system, we put enough hooks in the ROM that you could place reasonably modular parts of the ROM. So it was very lucky when it turned out about a year after the machine shipped, there was a floating point bug and the New York Times ran it, we could just issue a disk that patched out that part of the floating point package because virtually all the machines that had been shipped were disk-based,. What I had done was made the dispatch table hookable. It was a very tricky project because the machine had to boot running only BASIC, or if it detected a disk, it had to boot with the operating system. And if only the BASIC came in, the we had to do file management against the audiocassette. And they insisted that it run in a 48k configuration which was pretty tricky; we were hoping they'd insist on 64k. Now, it turned out most people bought 128k versions of the machine.

PC MAGAZINE: Didn't the original machine come out with 16k?

BILL GATES: The cheapest machine you could buy -- yeah you're right, you're right: if you were cassette only, it was 16. And then if you got the disk you could be 48. And, it was actually fairly complicated because the ROM is up in very high memory, that is, it's at a different segment address. The whole idea of where we use long addresses, where we use short addresses. The 8086 architecture -- now that we have flat memory model, people forget that a segmented memory model is a fairly complex thing to work with. It actually got worse before it got better. We went to the 286 which was very segment-oriented before we finally got just straight, linear address space in 1986.

PC MAGAZINE: And not in the operating system until after that.

BILL GATES: That's right.

PC MAGAZINE: That's significant.

BILL GATES: Well, people had written applications to use real addresses -- DOS applications depended on the fact that there was not a level of indirection: that is that you simply shifted the segment value and added it in.

So we had to keep running Real Mode Applications-I mean today you can buy an IBM PC and run a Real Mode Application. I mean it'd actually be interesting to take those applications that shipped with the original PC and plug them in. I'm pretty sure they'd work. I admit I haven't tried it. The first applications were an adventure game from us, a typing tutor from us, and then VisiCalc.

PC MAGAZINE: Yes and Easy Writer.

BILL GATES: Was Easy Writer there at the very beginning? I think it was. So none of the early applications have successful follow-ons. Now the early language tools included our BASIC compiler, our FORTRAN, and actually at those times we offered a PASCAL and a COBOL compiler as well.

PC MAGAZINE: Obviously, back then you were talking about DOS as the standard. I mean you were telling people to write to MS-DOS, not to go around it to the hardware and all that. Of course, the programs that became most successful in those days of the applications, did go around it. IBM became hardware-dependent, which of course was then copied a lot. Was that a surprise to you?

BILL GATES: No, not at all. I mean, remember we were the big promoters of the bit-map graphics. We were really against this- there were two video cards. There was CGA, which we pushed for, unfortunately only got 640 by 200 graphics into it and the palette was limited. It was just at the last minute they gave us a tiny bit of a palette where color 0 could be mapped to 16, and colors 1, 2 and 3 had a flip where they could be one set or another. Anyway, the character cells on the CGA were 8 by 8 so they didn't look as good as the Character Mode Only card. Because that was actually, although it didn't have bit-map graphics, what IBM calls All Points Address (APA) graphics. So it was actually 640 by 350 so the character cells were much larger and looked a lot better. It was the Display Writer character cell size. So IBM thought a lot of people would buy that character mode card, which meant you couldn't do graphs and things.

But the only way to do graphics was to [write code directly to the hardware.] So all our applications that did graphics did that as well. It was only later that we decided we could provide some high-level services and get enough efficiency that graphics applications would go through the operating system.

The definition of what it means to be a graphics application changed. In the early days it meant you had a mode where a chart would come up. Like when you ran Lotus 1-2-3, most of the time you were in character mode, where the scrolling was very fast. Now at days we have processors that are fast enough to scroll the bit map display and you don't even think about it. Back then, just scrolling the display in graphics mode, was noticeably, significantly, painfully slower than scrolling the display in character mode because you have eight times as many bits to push around and these processors were quite slow processors.

Working with IBM

PC MAGAZINE: No question that a lot of things have changed. In the beginning you had a really tight relationship with IBM. And that changed actually fairly quickly. In '83 when you announced Windows, IBM was the notable exception among those supporting it. And then of course you got back together after that with a joint development agreement. What was it like working with IBM at those points?

BILL GATES: Well, in the early days we had more people working on the project than IBM did, and we were just working with them to get the thing done. They weren't really IBM; they were a renegade group inside IBM.

Then right after the product got launched, there was a struggle to see whether the group in Austin who had these various business computers, would take over the group in Boca. And much to everybody's surprise, IBM management decided that Boca would take over Austin. So Don Estridge was put in charge of the whole thing. So he went from having a group of 50 people over a period of two years to having a group of 5,000 people. Even for the people inside IBM-in the whole nature of the project and the ease of doing new things-getting things done got pretty complicated.

Right after the machine came out we started on the version of DOS that had the hierarchical file system--version 2. And that was the hard disk. They came out with a 10MB hard disk and then a 20MB hard disk, the so-called XT machine. By the time we got to the AT, IBM had a very large group and they had started up various projects to displace Microsoft. People were doing their own operating systems. And there are some good stories about that because actually Mike Maples, who we later hired, was in charge of one of these new operating system efforts. So it was a little trickier working with IBM. We still had quite a close relationship.

The fact that they chose to do Top View-there was some work in their lab, which was a character-mode windowing system. And it had some nice things. It had sort of indirect dispatch, now people call it object-oriented--actually they called it object-oriented at the time--it had a certain extensibility. But because it was character-oriented, we thought it was a dead end. IBM was nice enough to let us really come in and talk to them about that.

They listened hard about Windows. And the fact we were doing Windows, they were doing Top View, that wasn't a big problem with our relationship. They did get into a period with the AT though where they thought they were going to do their own operating system. In fact, there was a special key on the AT, SysReq, which was to call their HyperViser in. And so it was going to be like VM on top of multiple DOS machines.

Unfortunately, there was a problem, a technical problem that it didn't work. Then they called us in to help them solve the technical problem, which was a speed problem and we were able to improve it a lot. But it was never possible really to do a HyperViser on the 286. Anyway, it was still fun to work with IBM. It was a challenge to stay up with all the politics inside the various groups and understand what we needed to do to be the top supplier.

But as it got larger and larger, it was just a very different organization. And there was a real change in their mentality in 1986 because they'd had 70 or 80 percent share of the market. And people like Compaq that had sort of been on the fringes -- but then by the time you get up to 1986, IBM share was dropping quite a bit. I think that's the year they dropped below 50 percent. So their whole view that they have to do something that was totally unique and would put the other guys out of business, that changed. And there were big debates within IBM.

But to the degree they wanted to do super-proprietary things working with us didn't make us because we had chosen to be a supplier to all the different hardware manufacturers. And so there was some tension having to do with that, including whether the big multitasking system, whether they would work with us or not.

During its development it wasn't called OS/2, but when it was introduced as part of PS/2 the week before it was introduced we found out that that was the brilliant name that had been, they'd come up with.

PC MAGAZINE: What did you hope it was going to be called?

BILL GATES: Oh, we didn't care that much about the name. IBM did the contract so that we didn't have very good rights to the name. So then later when we went our own ways, when they divorced us, much to our disappointment, we'd been working on the 32-bit version which was called OS/2 3.0. And so all the advance work was here, OS/2 3.0. But we had to rename OS/2 3.0 Windows NT.

Now, by then there was a certain logic to that because Windows was gaining marketplace acceptance and OS/2 was not gaining marketplace acceptance. So they kept the name because the way they structured the contract. We had very limited rights to the name. And we even debated whether or not the other licensees should use that name or not. Eventually decided they should. Anyway, it was a tricky, tricky problem.

Acknowledging the Internet

PC MAGAZINE: You had a bit of a scare, a bit of a change of direction, when other companies saw the Internet and started doing things like browsers before you did. In some respects, you changed a lot of strategies around the last few years. What did it feel like to see other companies doing things ahead of you?

BILL GATES: Well, I think the Internet is probably the most dramatic example of where we've had to change strategy. But I think our ability to stay ahead is throughout the years has been due to having a lot of flexibility. Take graphic interfaces. Xerox created, and deserves the credit for, the basic concept of graphic interface. Now, it turns out they didn't exploit it very well, and it was Apple and Microsoft who were able to do that.

In the case of the Internet, it wasn't any existing companies who were doing good things. It was the phenomenon inside the universities and Netscape, which was started by people who had been part of that university phenomenon. So as that wave got going, that's where they were.

The Internet was fascinating for us because as early as late '94, we actually shipped an add-on to Word to do HTML support. And we had started building TCP/IP into the system and decided that was going to be the standard protocol. But every time we'd go out and do an Internet retreat, we'd increase our view of what Internet things we want to do. But they were never the top priority: getting Windows 95 done was the top priority, getting Windows NT to critical mass in the market was the top priority.

And it wasn't until really late '95, when we looked up and said, "Wow, the Internet is the vision of PCs as a communication tool coming true." It's coming true with protocols that are 20 years old, and we wouldn't have guessed that that would be the case, and some nice things have been added on top of it. But fundamentally, the cost of communication coming down had lead, at least in pockets, to this critical mass being achieved.

And so we said, "Let's make it the top priority." And "What would we change if it's the top priority?" You know. How would MSN change? How would our browser strategy change? How would our server strategy change? What new groups, like Merchant Server, would be put together? So that was a pretty big shift. Now our employees, because they'd been out surfing the net, were pretty in tune with what needed to be done. So a lot of good ideas came along and it only took a month or so before we had an internal plan. And then December '95 was when we articulated to the world all the steps we were going to take during '96 which we were able to execute better than I would have expected. The Internet is still full of surprises. It's not like you say "OK, we're done with the Internet."

The Internet is the place where all the neat new things are happening. So whether it's multicast or better video compression or security technologies or 3-D browsing, personalization servers, server development, site tracking. Anyway, there's more to be done on the Internet than has been done to date. The success of Windows NT, the success of Office, the success of Windows 95, those give us a good basis to build on because our strategy is whenever possible to integrate Internet functionality into those products, and that's a primary thrust. So that when somebody buys a PC, and they want to use the Internet --whether they want to use it for collaboration or voice telephony or document sharing, whatever they want to do--we want that built-in, so that they don't have to go out and try and integrate another piece of software.

PC MAGAZINE: Over the years you've talked about a number of products and a number of projects and things like that and a lot of them of course don't show up exactly when you think they're going to. They come up a little later. Is predicting when this stuff is going to happen getting easier or getting harder?

BILL GATES: Well, as Microsoft has gotten larger, we've gotten the ability to fund a pure R&D group. So we can have very risky products that you can't predict a date for.

Take voice recognition. If you go over to the lab you'll meet some guys over there who think "Hey, in two years, no problem." Now, because it's their job, they're allowed to be optimistic. But our business plans aren't -- you won't find that dependency written in. And we're willing to fund that work for however long it takes to get it done.

We've got people working on vision; we still have people working on handwriting, which most people got excited about and then decided it was a hopeless thing. We still believe that that will get conquered. So we have more luxury in being able to pursue a longer time horizon and therefore a more uncertain time horizon, and even to have research projects that don't pan out.

The industry continues to move very rapidly, so you're going, there are going to be surprises. In terms of hardware breakthroughs, nowadays it's real easy for us to go to Japan and tour all the big company labs and see what's going on there. And people are very anxious to come and talk to us about what they are doing, as people are coming up with better digital cameras or flat panel displays or as DVD has been coming along, because people see an opportunity to work with us to get great support for those things in Windows. There aren't too many surprises on the hardware side.

Take Intel. We're collaborating with Intel on P7, the 64-Bit Merced, IS-64 HP thing, many, many years before that comes out. We've got a team doing that, larger than the team we had working on the IBM PC. But numbers are all different nowadays.

PC MAGAZINE: Windows was later than you thought, so was Windows 95. For years you have talked about getting software on a more predictable schedule, like every year there'd be a new version of Office, or something like that. Is that getting easier to do? Is it getting harder to do? Obviously now you can do things like deliver pieces over the Internet.

BILL GATES: I think there are groups like the Windows NT group that have been delivering on a very predictable schedule. It always depends on whether you set the schedule as the key thing or if you pick a very ambitious set of features. In that case, you're going to need to take the time to do the beta test and during that beta test you might hear about some additions or improvements that you think are worth making. Nowadays it's pretty nice because we have two ways of getting products out. One is to get them out on the Internet in a component by component type fashion. And then the other is to take all those advances, really test them as a full system, get the user interface to be nicely integrated, go out to developers and explain how that's going to be out there in very large numbers and then make a very large release. NT 4 was very much like that-we have upcoming versions of Windows it'll be like that as well.

So you really get the best of both worlds. You get the neat new things are out there on the Internet, and the things where the foundation's really changing and the way the pieces relate to each other are changing, those come depending on the product something like every couple of years. We'll still have products that are ambitious enough that we can't predict the date exactly two years in advance. The Office group has done very very well with their predicting when they are going to do things.

The Coming of Cairo

PC MAGAZINE: A while back, you talked about an object-oriented system that you called Cairo, and at one point it was going to be a product. At least it certainly sounded that way. Now it's like a set of technologies some of which are here, some of which are very soon, some of which aren't here. The overall combination seems like it's a long way off. Is it still a goal?

BILL GATES: Almost all of it is here today. And like all good things in technology, people take it for granted.

Object orientation is in the system.You can put an object of any type in a Word document, an Excel spreadsheet. The standards for how you do that are very straightforward. Eight years ago we were talking about that was going to be a very tough thing and now it's just the way software's developed. It's components that fit into containers and it makes things very very extensible.

And we've come up with things like the Microsoft Foundation Classes that make it quite easy for programmers to do those things. For Visual Basic programmers, they just take it for granted that if they want to do a Rich Form, they can go to a third party and get a control and embed that control into a form. The reason that works, that's object orientation. There's a class protocol that's developed for how that control relates to its container, and it's richer and richer all the time.

The only thing of all that vision that's not in the marketplace is the file system and directory -- the rich file/system directory combination which is now part of the NT 5 product. We actually put a developers' release of that in people's hands in November in a professional developers conference we had... And so later this year that'll go into beta testing.

Having the rich storage system with the directory -- that was part of that Cairo vision. And so although a lot of the Cairo things have been done, that's the one that we're still working on. Today when you think about storage, you think about storing messages as one thing or addresses as another thing or user objects, machine objects as another thing. Anyway there's just too many ways that people are storing things and having to learn utilities and different security, different replication, different enumeration, query. Right now there's two grand unifications taking place: all the presentation is being unified around a sort of a super browser that takes over the shell, and then all the storage is being unified around a sort of a super file system that takes over a lot of those functions. The storage unification is the harder of the two, but they're both very important and will make the system more powerful and easier to work with.

Windows APIs

PC MAGAZINE: You look at Windows today, and Windows is now available in various flavors from CE up to NT Server and various kinds of devices. Are there limits as to how far you can adapt Windows? At some point do you need to transition to a completely new set of API's? I mean CE has a limited subset; NT has the Superset at this point. At some point does it have to transition completely?

BILL GATES: NT is the only from-scratch commercial operating system that's been done in the last decade, and it was done based on the latest ideas of how you make things multi-processor and very extensible. And we put the more money into advancing NT than is put into any operating system whether it's MVS or all the different flavors of UNIX put together. That's a very fresh piece of technology and this year it'll get things like clustering and 64-bit.

And the question of whether PCs can take on the toughest computing tasks will be answered for once and for all. People still see UNIX as being higher end or mainframes as being higher end, but this is the year where the pieces fall into place in both hardware and software advances that that will change. NT will be the foundation for the next decade. It's a very flexible, extensive base to be building on.

Over time, a lot of the operating system will become visual recognition, speech recognition and actually the logic representing those very advanced input systems would be more complex than even what you think of the operating system being today. You'll still have that operating system there, in fact it will be even better than what we have now, but this whole new element will come in to focus on the kind of adaptation that's necessary for the rich input systems.

Setting Hardware Standards

PC MAGAZINE: In the early days, you pretty much set a lot of the software standards. But IBM was clearly defining the hardware standards at that point, in terms of the AT bus, EGA, VGA, 31/2 inch floppies. No one hardware vendor does that these days. Why do you think that happened?

BILL GATES: Well there's Intel.

PC MAGAZINE: There's Intel, but. . .

BILL GATES: No, seriously, when it comes to PCI, Intel deserves the credit for that. Now they're doing AGP, which is a good advance to get graphics performance up to a whole new level. Yes, some are on the boundary between software and hardware like ACPI, which is the power management that it's us working with Intel, or Plug-and-Play. That's one that actually Compaq got involved with and helped out quite a bit.

The two companies who really want to grow the market the most are going to be Intel and Microsoft, so it's in our interest to create these new frameworks. And we have a whole conference called The Windows Hardware Engineering Conference that we do around the world which is to call people together to talk about what are we missing.

What should be done for the PC? Because the attendees there have the magic of semiconductors and there's literally hundreds of very smart companies coming in and we get great ideas about where should audio go or where should 1394 go.

USB is another one where Intel was the primary driver. 1394 is a more broad thing because that's one where we're bringing in the consumer electronics industry as well as the PC industry. So companies like Sony will be very important there.

I think there's as much or more leadership at the center of the industry as there's ever been. It's always pretty informal, whoever has great ideas is welcome to come along with it. But where there's a clear vacuum Intel and Microsoft are going to step in.

PC MAGAZINE: You've talked about some things lately in the graphics area like Talisman and things like that. And there are occasions when Intel is saying one thing, you're saying another, some of those areas like that. Is that OK? Is that just the way people toss ideas back to figure out which ones are best for the market?

BILL GATES: We're pretty in-line with Intel in most things. We're working together on USB, 1394, AGP, MMX. Those are all very important extensions.

There have been times where Intel will go off in a little direction other than we do, and it's not the end of the world. In the worst case, you end up with two choices that people have. And very often those things after a period where people sort of see the merit of the two approaches, sometimes you come up with a blended approach where you get the best of the two different things there. I think it's fine that we're not always in lock-step. We do a lot to keep the companies communicating.

Intel would say they really got into this ProShare [videoconferencing] thing early on, and that they were kind of pushing us on that and now with the Internet we've really picked that up and taken it to a new level. So we benefit from each other's independence.

In the area of performance we are always pointing out to Intel are they using the most optimistic benchmarks to look at things and what are the real world mix of applications; making sure that the product groups there have a clear view of what the performance equation looks like. That's a case where our independence helps them get a good view of what they're doing.

Product Transition

PC MAGAZINE: Most of what we're seeing now is building on top of the architecture that we've had for the past 15 years step by step. Apple at one point had to transition from the Apple 2 to the Mac, from the 68000 Mac to the PowerMac. Will we need to see similar changes in PCs?

BILL GATES: Well, the 32-bit address space will let you go up to 4 gigabytes of physical memory, and not many people have that today. You say a typical machine is 32 megabytes, then you've got a factor of 128 of expansion which if you double every two years, that would be 14 years before you run out.

Now, people who are really pushing the limits, like servers, will run out before the 14 years, but that's the only thing where we have to do more than just keep scaling the performance. Of course, Intel's already very hard at work on P7. There's a tricky way to use Pentium Pro where you can actually get more than 4 gigabytes of physical memory. I don't know if that'll become important enough because by the time people are pushing that limit, the marketplace may be moved over to the P7-type approach.

But often when you get to the end of an architecture, there's clever ways to push it, and the Pentium Pro does allow for more than 32 bits of physical address. I don't know if you've looked at that. Unless you have lots and lots of memory, it's not that important.

The Need for Spped

PC MAGAZINE: Machines are getting faster and faster. You have competitors who are pushing the idea that with the Internet and things like that you won't need all that new processing power and you won't need all the operating system complexity. Yet, you look at the processor road map and we're going to have a fair amount of processing power. There's no signs of that slowing any time soon. Do we need that processing power that's going to be there? You've got things to do with it.

BILL GATES: I think the biggest use of processing power will be speech recognition, speech synthesis, visual recognition, handwriting recognition, and pattern recognition that is noticing what you're interested in and learning from that.

Those are all very deep problems where more RAM and more MIPS make a lot of difference. In the near term, just moving up to having MPEG2, 3D graphics, better video, those things will help a lot. Just one point about complexity: there's a pretty important change coming this year is we allow you with the PC to logically to keep software up on the server but from a performance point of view it actually gets pulled down onto your disk. It's part of this Zero Admin[istration] Windows thing. So basically the PC is Stateless. You can get a new PC or you can walk over to a new PC, and because your User Profile says what application you use and what you like on your desktop and everything, you're immediately up and running (although if it's a machine that the applications you like have never been used on, it's a little bit slow at first because they're coming down from the server to that local disk.) Anyway, that's just one of many simplifications that will be going through. Although underneath, the PC is going to have a lot of code working on your behalf, we can hide the complexity. There's a lot of stuff you see in the file system that you shouldn't have to worry about. And deinstalling an application is just too complicated to know; did you really clean up your system, if you want to go back to a previous version, it's very complicated. So things like that -- there's exciting innovation in those areas for even just the next twelve months.

But, processing cycles, they're going to be there. The question is how creative [we can be] about taking advantage of them and that's a question for the whole industry.

It's partly why we've increased our R & D as much as we've had. We've asked Nathan Myhrvold to really be very ambitious in assuming computing power and show us what can be done with it.

Excitement from Software

PC MAGAZINE: Let me ask one thing. In that very first PC Magazine interview, you talked about how personally excited you get about when you get a project done, saying it's a combination of artistry and engineering, and when you finally get it done it's like a part of you that you finally get put together. Do you still get that excited from software or have you done so many programs now it's not quite the same thing?

BILL GATES: I think my job is more interesting now than ever because of the incredible impact that PCs are having. Whether it's empowering people, letting them communicate a new way-the big change element in business, entertainment, education, it's the PC, connected up to the Internet, that's thriving on that. So it's very exciting.

In terms of actual product creation, we pick exactly the people who love creating these products and listening to the customers and building them. I'm at a different level of management where I just get to feed in some ideas and give them some feedback and help make sure that what the groups are doing are very complimentary. So I get a little bit of pleasure out of a broad range of products we're doing. I do envy sometimes the people who get to come in everyday and just work on a product and craft that product and make it great. I can see that kind of excitement. And that's the excitement that leads to the very best work. It's where people push their limits and come up with new ideas.

So, my job is to create a place where it's really fun and really easy to come in and do that. I get a lot of pleasure out of sitting down with these groups. That's why I make sure the majority of my time is spent with product groups. That's what I like and that's where I think I can make a contribution. So the fun is still there, and software creation is still as much a mix of artistry and science as it's ever been.

Milestones

PC MAGAZINE: There are some critical points in the history of the industry where if something happened differently, the whole industry might have been a little different. Is there one crucial point, say, in the relationship with IBM when if IBM had done something differently or you had done something differently Microsoft wouldn't be as dominant of a company as it is today?

BILL GATES: We're certainly a strong company. I mean, we don't like the word dominant. The first milestone was when they came out to work with us. It is important to remember that the PC project inside IBM was not an important project, not a major project, not considered something that really would effect the company. It was a little foray by a small group, and they were more interested in proving they could do something quick than exactly what happened with the product.

So it was rather stunning when later this PC took over the word processing group there, the Display Writer, all the other small business activities they had. After that, the group at IBM we were working at was so large that there were many projects to replace Microsoft, where IBM wanted to do those things internally. There was a major milestone where they adopted a strategy called SAA, Systems Application Architecture, and decided everything on all their computers should be more consistent. Unfortunately that meant the mainframe graphics group, which was in England and had a thing called GDDM, got to say the new PC operating system should use their standards instead of what we'd been doing with Windows.

So we went to IBM and said, "We've got to be able to work with you. You want to do GDDM. We think that's a mistake 'cause it's not consistent with Windows , but we'll be glad to work with you on that." If OS/2 had been built to be a superset of Windows then, OS/2 could have caught on earlier. And there were many points where we tried to get things moving in that direction.

Actually at first with OS/2 they wanted Top View compatibility; we even bought a company to have Top View compatibility and then they finally realized none of their customers really wanted it. It was more a matter of pride on their part. Fortunately, the company we bought was headed by Nathan Myhrvold so he and his sharp people -- just having them at Microsoft was well worth what we paid for them. Actually that was a favor IBM did for us, they gave us reason to bring that group on board.

A big milestone was that IBM didn't trust the 386. They didn't think it would get done. So we encouraged Compaq to go ahead and just do a 386 machine. But that was pretty scary because people thought "Well the standards are all set by IBM, so how could somebody go ahead when IBM hasn't shown how they're going to use the 386." So that was a big milestone.

That was the first time people started to get a sense that it wasn't just IBM setting the standards, that this industry sort of had a life of its own, and companies like Compaq and Intel were in there doing new things that people should pay attention to. It took a while to break this idea that all these non-IBM machines really were compatible. That 1986 milestone was a big part of that.

Then the next milestone was when IBM gets really confident they can do the software themselves. And so they keep the OS/2 name, and they don't end up using all the work we'd been doing to make OS/2 really strong, which became Windows NT.

The whole time we we're working with IBM we expected to set networking standards. Part of the reason we worked with IBM was that clearly they were in a position to set standards. All the things you think of today as Internet standards, most of those are things you would have expected them to come up with, and retain some degree of control and leadership over those things.

Take office productivity software; everybody thought IBM would be the primary supplier there. They had a product called Office Vision which was going to be the centerpiece of making OS/2 popular. But Office Vision eventually just got shut down because it just didn't work. A certain irony that many years later IBM comes back and buys Lotus to fill that hole in their strategy.

Choosing the 8086

PC MAGAZINE: It's interesting. Let's go back a little bit earlier. You had talked about how you helped convince IBM to use the 8088/8086. Some people at IBM have said that they had already made the decision before they came to visit you.

BILL GATES: Oh, no chance. No one says that. Go ask Jack Sams, the guy who would know. It was all about doing an 8-bit machine. It was Bill Lowe. Bill Sydnes was his engineering manager, and Lou Eggebrecht was doing all the real engineering work. And they wanted to do a machine better than the Apple II. When they first came up to visit on the preliminary visit, Intel hadn't made the commitment that they would do a low price 8088. An 8-bit machine seemed like, in terms of the schedule they had which was hard core, it would have been the right choice. By doing a 16-bit machine, they took some schedule risks.

Now, Lou really wanted to do it. In fact Lou went down to Motorola -- cause we were excited about the Linear Address Space of the 68000 - but it just wasn't debugged enough to make the schedule. Intel did come in with the good price and so then it became a 16-bit machine. Actually, it was a rival division had gone to Matsushita to get a machine, which was a Z80 based machine. This machine had many code names. One of its code names was Chess. In the Far East Procurement Project through IBM Japan, was code-named Go. We delivered software for Matsushita for that-then they decided the work in Boca would prevail.

Selling DOS to IBM

PC MAGAZINE: When IBM came to visit you that first time there are a couple of different stories about what happened with DRI [Digital Research] and all that. Did you send them to DRI at one point or did you know when they came there that you could get this operating system? Obviously, you bought QDOS later.

BILL GATES: No, I called Gary [Kildall] and said that I had Jack Sams from IBM with me and Jack was in the office at the time and that Jack wanted to come down and visit him. We had been talking a lot with Digital Research about their 16-bit work cause we'd done a stand-alone BASIC that had its own file system and we were running that on various 8086 machines. That previous June -- we had gone with Seattle Computer Products and shown the standalone 8086 BASIC at the National Computer Conference.

So Gary said OK, he'd meet with Jack Sams. On a lot of these CP/M deals, we had done the adaptation for the machine... because Digital Research just didn't do that. So we talked about were they serious about the 8086. That got hung up. The IBM guys flew down there and they couldn't get the non-disclosure signed. Because IBM non-disclosures are pretty unreasonable. It's very one-sided. And we just went ahead and signed the thing. But they didn't.

That's when we said, "Boy, actually it'd be a real mistake for us to do 80 percent of the software but not do this DOS piece, so we should find a way to do the DOS piece." And that's when Paul Allen and Steve Ballmer closed the deal to get the work that Tim Patterson had done, which at the time was called QDOS, and we hired Tim Patterson. So Tim is the creator of MS-DOS; working with some people at Microsoft he created MS-DOS version 1.

Subsequently, Digital Research woke up to the fact that this was a pretty important project and convinced IBM to also offer their product. But they priced it very high and because they came in really late, some of the applications IBM had gotten were on MS-DOS.

So then there was about a two-year competition between us. I was trying to get more applications to be done on MS-DOS and CP/M-86. I would chart every issue of PC Magazine; I'd look at all the ads to see how many for our program would say just CP/M-86, how many would say just MS-DOS, and many of them would say both.

This evangelization was born as part of this competition. A major coup was that I got to know Mitch Kapor [of Lotus], and they decided not to put Lotus 1-2-3 on CP/M-86. So that's how we convinced DEC. They had been about to do a CP/M only machine, and we convinced them they needed to offer MS-DOS. So there were many twists and turns and it took about two or three years before people could see clearly that MS-DOS was the primary operating system.

There was even the UCSD P-system, which was the only operating system IBM licensed to put on the Display Writer as well which had a pretty big installed base. They paid those Soft Tech guys a huge amount of money -- like 20 million, which back in those days was an unbelievable amount of money -- and we didn't get paid nearly that. But we retained the rights to do the licensing to people doing compatible machines. That was the key, the key issue on our contract, that they wouldn't be able to license the other people, that only we could do that.

Succeeding at Software

PC MAGAZINE: So many of the major companies of the early 80's aren't around any more. Was it the law of averages? Or was it some failure of vision? Or was it just the presence that you and some of the other larger companies had?

BILL GATES: At any milestone in our industry, you look at the companies still around, and the turnover rate is pretty unbelievable. You look at the early PC hardware companies; most are gone. Take the guys who did 8-bit machines: IMSAI, MITS, Processor Technology -- they disappeared -- Northstar. Then there was a wave of PC guys: Columbia, Dyna, Mindset. The same in the software field. Look at the first issue of PC Magazine and 90 percent of those software companies aren't there.

But it's not unique to the PC; look at the first issues of Macworld magazine and 90 percent of those companies aren't around. Take the Internet, now. The early pioneers on the Internet- there's already quite a bit of a turnover and it's still early days. When you get these highly uncertain markets and everybody's sort of rushing in, you get very few big successes and lots of people who don't end up with enough customers to make it work.

In our case, we had a focus on doing software and a pretty long-term approach to how we wanted to build up our software expertise. The vision that software would be a key element of unlocking the power of the machine turned out to be right. So I'd say there's a lot of things: there's the focus we had, the approach we had, certainly an element of luck in terms of who we were able to hire. We had a clear sense of key design wins. How important it was, whether it was IBM or Japan or large corporate users, that you really could test yourself by saying, "look, if this guy doesn't buy, it must be your product's not good enough, so just keep making it better."

Microsoft's Image

PC MAGAZINE: There are a fair number of people in the industry who don't particularly like Microsoft. There's an image in the industry about Microsoft. I'm sure you hear at least as much, if not more than, I do. Why do you think that's there? Do you think there's an element of truth that Microsoft is sometimes is a little pushy?

BILL GATES: If you survey the software industry, which we do quite a bit, most of the companies build on our platform. And most of them-because of the technical support we give with our Developer's Network, and the fact we've created this standard platform for them to target-most software developers love Microsoft. There's a few large guys who are very competitive with us, or intimidated by our success or the breadth of our product line, and would love to say anything that could slow us down.

But the reason there are so many successful companies is because of the framework and standards that we created and the support that we put behind that, and that's why we see in the breadth of software companies, incredibly positive attitudes towards Microsoft.

This is an industry when people come in to do things-you know, how do you internationalize software, how do you build an international distribution network, how do you avoid piracy being a problem. A lot of the investments we've made are for the success of the industry. Name a country; we were the first people to bring a lawsuit about software copying, and make sure the distribution structure went into those countries, and helped other software developers get into those countries to help grow the market for us and the industry as a whole. It's a very positive story.

In computing in the last 20 years, think of who's been successful. It's Microsoft's partners who have been successful. And there are no exceptions. You know, Intel and Microsoft working together: there's no story of two companies who've been able to share ideas and help grow the market and each do so well.

And I'd say the same thing about Compaq, and our partners in distribution-tens-of-thousands of small companies that come in and put these systems together and build solutions. We have competitors and they're there.

Competition

PC MAGAZINE: Lots of software companies are building on your platform but still competitive with some part or another of your strategy.

OS/2 or Windows

PC MAGAZINE: One of the big issues is about the OS/2/Windows era. You were working on Windows and OS/2 but you were really beating the drum for OS/2 Presentation Manager. Anyway, OS/2 didn't take off and Windows did. Do you think there was a way, in retrospect, of better communicating to the developers your thinking about OS/2 when there was a doubt? Because so many feel-or felt at the time, at least -- that they had been misled.

BILL GATES: It's nonsense. I want to meet the guy who can say that to me. We were out pushing them to do Windows applications and we were clear as day exactly what Microsoft was doing. We were the only developer who explained exactly when we were going to release Windows versions of our applications and when we were going to do OS/2 versions.

Now it turns out we did the first OS/2 spreadsheet, which was OS/2 Excel. We did the first OS/2 word processor, which was OS/2 Word. And we were the ones who got in there and supported OS/2. But we were clear every step of the way that those versions would come out after the Windows versions. The big issue here is that the other developers in productivity tools didn't believe in a graphical user interface. And so what happened on Mac, what happened on Windows, what happened on OS/2 was Microsoft dominated all three. Of the OS/2 productivity applications ever sold, we sold over 90 percent of them. Now, compared to the Windows number, it's a tiny little number. But, that was our success. Nothing unusual there.

People thought there was one operating system that just Microsoft are backing, there's one that Microsoft and IBM are backing. In those days they thought that meant the one IBM was involved in had a better chance of succeeding. Now, based on that situation, they view that you've guaranteed that would not be successful. And they just weren't serious about graphical interface. When they finally did get their OS/2 applications out, which was very, very late, they just weren't competitive. Just like the Macintosh applications; they were not competitive. We have a higher market share on Mac then we have on the Windows platform, because of the early days where they just didn't care about it.

Apple's New Platform

PC MAGAZINE: Let's talk about Apple for a minute here, talk about the future in terms of where it's going. What do you think of about Apple in the future of handling the NextStep adoption? Will that create new opportunities for Microsoft on that platform? How will that impact how Microsoft develops for that platform?

BILL GATES: I was just meeting with Gil Amelio and Steve Jobs yesterday. Steve was saying, "You took a chance on us once and it worked well." And I said, "You're absolutely right, Steve. And then the next time you asked me to do it, I didn't. And that worked out pretty well, too!" And so we were just joking around about what the history had been. Apple did a lot for the industry in taking the Xerox graphics work and creating a volume product that was a great implementation of the graphical interface. And Microsoft was the software company there from the beginning.

We continue have a lot of resources focused on Macintosh and doing new things for our customers. We did a lot of new neat browser work, we're hard at work moving Office 97 over to the Macintosh. So, right now we're focused on System 7 and new deliveries there. In terms of this Rhapsody, which is where they take the Next Step product, or Open Step product, and put that on their hardware, we're going to take a hard look at that. That's why we're meeting with Apple and Apple's doing a good job reaching out to us.

You'll see in the press that we've been very supportive of Apple. Our applications made it possible to have a mixed environment, because Excel on the Mac and Excel on Windows, the interface was very similar and you could exchange data files. That allowed for a lot of coexistence so the Mac could take it's strengths in things like publishing and move into corporate environments.

Top Ten Technologies

PC MAGAZINE: As part of our anniversary issue, one of the things we're doing is picking ten technologies we think will have the biggest impact on the industry in the next 15 years. What would you say are the technologies you expect to have the most impact over the next 15 years?

BILL GATES: Speech Recognition. Natural Language Understanding, Automatic Learning, Flat Screen Displays, Optic Fiber. Those are the key ones. I'd say those are the key technologies.

PC MAGAZINE: Fifteen years from now will there still be a concept of the PC? Or will PC technology be in so many different devices that people won't even think about it?

BILL GATES:

We'll certainly have a device with a large enough screen that you sit down and read information and create information on that device.

Then, anywhere you go, if you find a screen, you can just log in and your personal environment will be there. If you're in a waiting room in an office, they've got a little flat screen there you can just pick it up, log on and use it. You won't necessarily always have to take hardware with you, because the network will retain the things that you care about.

Computing will be ubiquitous so that you'll have the pocket device, the wall-size device, and depending on how you set things up, you'll be able to talk to the computer when you're not really paying attention to it. So the term PC will call up a different image than it does right now.

But what you thought of 15 years ago when you said the term PC and what you think of now are vastly different. These sleek little notebooks that people carry around with so much power are just so radically different from the Compaq sewing machine that's less than 15 years old.