Christmas time, one thousand nine hundred and seventy Paul Allen skims the newest issue of popular electronics at a newsstand in Harvard Square on the magazine's cover is a photo of the world's first personal computer, the Altair eight thousand eight hundred it's a full gray, metal box, trimmed in blue with rows of switches and small red lights. Allen read the headline worlds: first, many computer kit to ride commercial models. Oh no. We can't miss out on this Alan days for the magazine and charges through the slush tored, the dorm room of his childhood friend nineteen year old Bill Gates or Harvard sophomore in hello, computer, Savannah, Allen's, so good at programming. He dropped out of college back in Washington State to work for a company called Honeywell in Boston. He barged

vindicates room. Well, this thing is happening without us. What thing Alan hands in the magazine wait to read the article rocking back and forth as he does, whenever he's lost in thought, Alan paces Gates finishes and tosses the article on the desk in front of him. The article says they don't have an operating system for the altair. Yet right now it's just a hunk of metal. I bet peep, we're still buying it, though, because it's small and affordable is the first real home computer man, but it's basically useless, think about the which is, you have to flip, to get it to perform even the simplest task, which means they. Still time for us I know, but this, breakthrough machine bill. We have to move fast, we gotta be the ones to make the first personal computer software hum I guess I see where you're going with this. I agree someone's going to make history here and I know you're right.

No one is going to remember who comes in second. They draft here to the company that produces the Altair micro instrumentation telemetry systems, better known as mitts gates, is right, so the altair is generating tremendous buzz. It's pretty much ashless without an operating system gates takes crack at the letter. Ok, how does this sound? Dear bitch? We are writing to inform you. We've written the code for an operating system for the altair they're bluffing either is coded a single line yet, but admits is interested gates and Allen will figure it out. Gates, anxiously checks the mail for the next two weeks, no letter and no call turns out that in their excitement, they'll eh the wrong phone number on their letter head, but they haven't figured that out yet gay Bates tires of waiting. Let's call them

you're two years old. Are you do it now? You do it you're better at this kind of thing, so gates calls and pretends to be Alan. If he can can Vince Mitch to give him a chance, then will be the one to fly to the company headquarters in Albuquerque at least Allen has a threadbare beard gates. Read then, with a freckled baby face looks like a high school sophomore gates gets through Miss Founder Ed Roberts. My name is Paul Allen. My teams, based in Boston, were on just finished, with an operating system for the altair and we'd like to show it to you. Yeah we've been getting a lot of. These calls tell you what the person to walk through my door in Albuquerque, with a working operating system gets the contract. How about that gage hangs out. He turns to Allen we got to get going. They code day and night gates pushes aside classes and homework

they have one shot at this failure is not an option. From wondering I'm and brown- and this is business wars in the last episode- software designer MARC andreessen- liberated the internet from dull lines of text, with his browser Netscape, allowing users to jazz up web pages with visuals, and they were find a jubilantly. The no number of users in pages online explodes Netscape,

won't have a monopoly for long. However, at this moment, Microsoft is barely a glimmer in the eyes of Allen and Gates the head to head browser wars or still years away, but It's Allen have no inkling they're about to launch a trillion dollar personal computer industry that will set a revolution in motion. And one day of plucky startup called Netscape will be in their crosshairs. This is episode three poker face gates the phone with Mitch founder, Ed Roberts, but before they get any further Allen points out one big problem: they don't have access to an altair to test their code, even if you could buy an altair and it's four hundred dollars. It can get here in time for us to beat the competition. What if we

computer simulation of the altair by reading the manual? Yes, that could work gates, scrolls code in the computer programming, language known as basic. He works as if in a trance rocking back and forth in his seat when play crystallizes, he jots down code on the stack of yellow legal pads, his fingers stained from felt tip pens in a rainbow of colors his way since he was a teenager when gay spent nights at the computer lab at the University of Washington there. He codes his first computer program, the version of TIC tac toe against the computer. Once high school recognizes his talents for computer programming. They asked gates to write a scheduling program which she's secretly alters to ensure he's placed in classes, within his words, a disk number of interesting girls by the time seventeen. He starts a bit finish with Alan Riding, a code to follow

traffic patterns in Seattle, and he sells his first payroll program to accompany for four thousand two hundred dollars he's a young man in a hurry. He just does know where he's going at Harvard gates, majors in applied math but skips lectures and required courses. So he can audit other classes. He finds interesting. The host, regular poker Ames in his dorm room, sometimes winning, but more often losing hundreds of dollars a night in the process. This, though he learn, had bluff skill that will come in handy later, behind coke bottle, glasses and babyface hides it devilishly keen mind he dazzled friends and classmates with his vision. He tells them in the future. Everyone will own a computer that will give them access to a vast universe of knowledge. Now he and and spend all of their time in the gray New England Winter cooped up in the lab

pounding out code for the Altair as the sun's starting to rise. One morning, Alan as gates asleep at the computer terminal. In the middle of a line of code, his head forward until his nose touches the keyboard bell you're just going to wing it on your exams. Aren't you no time to study? We got so much to do and we got to squeeze our operating system into four kilobytes, so it work on the Altair by comparison, a smartphones have millions of times the memory. After eight weeks, they kill operating system down to three point two kilobytes a couple of weeks later the two sit in the library at the school's mainframe computer, about the size of a dishwasher. The sky outside is pitch black. It's simple, another team is beating them to the punch, but gate is feeling hopeful that should do it.

I think the code is solid. We must gotten something I I just don't know what tell me now or forever hold your peace, I'm just probably being neurotic probably it's. It's a few keys on the mainframe spits out the final coat on a punch, a strip of paper with pattern of holes. It represent commands for the computer program, Allen X, the tape, gingerly, theatrically and packs way for his trip to Albuquerque. Alan settles into his seat on his flight. He goes over his pitch mentally prepping himself for the demo Suddenly he realizes, what's bothering him, they forgot to you, write a loader, the code that tells that Peter this is software. Without it, their coach. The operating system is junk just random data. It won't work, there's no, I'm from a himself Allen.

The seat, tray table down and hunches over it on a yellow legal pad He scribbles the loader code from memory finishing just for the plane's wheels hit. The desert tarmac doesn't have a way to test it. Al walk into the Albuquerque offices of minutes, no idea whether the program will run or not mid c e Roberts is waiting for Alan at the airport in his pickup truck welcome. Albuquerque. This is which drives into a hotel. He sneaks side glances at the young Alan. He thinks Geez. I own jeans that are older than this kid. Alan looking out the window watching a plants and cactuses with buys they speed through the hills spine of mountains lose to the east of the city. Dust is everywhere. Alan tries to hide his fidgeting and nervousness

it's good to be here. I think you're going to like this demonstration well you're the first to deliver. If when your partner did what you said you could do. There will be a lot of happy Ltr users I'll tell you that, not to mention a lot of happy Altair programmers Let's say the business talk for tomorrow: how about that? Here's, your hotel, they both how to pick up and head into the lobby wow, it sure is nice. In fact, it's the! nicest hotel in town when Alan tries to check in he realizes he doesn't have enough money to cover the room. He to add Roberts, Mister Roberts hi. I don't think I brought enough cash with me- use a credit card. What I don't have a credit card, sir. Alright, I'll cover the room. The following morning admits headquarters,

search, Allen, stop at a desk displaying the Altair eight thousand eight hundred the altair is spare then, in Alan's eyes, beautiful is the first time he's seen one in person. He plays it cool yeah, they should work. Just fine Alan doubles the switches. Then it's ten minutes for the tape reader to load. The code bridge doesn't know what to make of this youngster. Given he couldn't then cover one nights: hotel stay, rob doesn't hold out much hope. The code will actually work. He leans back on the next desk arms folded and watches Alan who looks nervous. In some keys and the computer makes a couple of beeps. He holds his breath a few away from the altair and connected by a cord, the Tele.

What kind of electronic typewriter that processes commands from the altair just lies? There silent, there's an uncomfortable pause, Alan Studies, the front panel on the Altair computer, then toggles a few switches back and forth. Still nothing Roberts is losing faith by the second. Finally, pal checks, the connection on the teletype machine, he Jekyll's the court and suddenly it Klax to life. Hey did it towards something? No one is more surprised than Alan gathers himself enough to yank a piece of paper coming out of the teletype machine. Alan reads from the paper it's asking for memory size. He types and answer the amount of memory space gates in his program will need to run on the altair, which is four kb. The alt response K:

Alan inhales sharply. He types two two, the simplest questions, but it will test not only his engage coding, but also the system's mathematical capabilities out, spits out answer from the teletype machine for. My god it printed four, I knew it would work It would be hard to say who is more excited at this moment. Roberts or Alan Roberts Company was on the brink of collapse. He took further into debt on the wild bet. He could create a computer that a home hobbyist could use and afford bank on someone else, creating the operating system, Roberts and Allen. Are witnesses to history being made. For the first time I saw where program runs on a commercially viable home computer

Roberts brings Allen into his office and agrees to license their operating system. Roberts writes a con. The gives gates and Allen a ten percent royalty for every copy of Altair basic that is sold with the altair up to a k of one hundred and fifty thousand dollars. Once that threshold is reached, the version of basic that gates and Allen created will belong to MIT's right, which thinks he's gotten. The best of these two Nayef's Alan turns to his hotel, which doesn't seem quite so expensive anymore. He calls gates we're in business. It get the next how to Albuquerque get the next one. You can only the opera. The system will give Roberts the edge to control the market for personal computers. Roberts is ecstatic, but before long The thrill will be gone. I used to look at calendar first thing in the morning and think there's no way I'm getting all this done.

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Then, when you're ready to launch use the offer code Bw to save ten percent on your phone, purchase of a website or domain that square space dot. COM, Slash Bw, offer code, VW. Jim By twenty second one thousand nine hundred and seventy five Albuquerque Bill Gates and Paul Allen or gathered in Ed Roberts Office, they can hardly can and their excitement there about to sign a contract with Roberts company to license their software. The first purse will computer software ever created Roberts over the terms. One more time. As it states here, you'll receive royalties for each copy of basic sold and a little money up front and myths

will get an exclusive worldwide license to the program for ten years and exclusive rights to sublicense the program to others, but before he signs gates wants to be crystal clear about the agreement. And mitts agrees to use its best efforts to license promote an commercialize our program Right Roberts nods. The deal is done, but the piece that gates his Fly- Fact that minutes will do its best to market their software will come back to Roberts for now Dates- has taken a leave of absence from Harvard and and Alan have taken up residence at a hotel across the street from it's there they mold their near future. I took we maybe beam its employees, but that doesn't mean we shouldn't start our own company within the company. Then week keep developing our version of the basic software yeah, but we need a name yeah,

something sounds cool, but reflects what we're doing something that combines computers and software, not computers, micro computers, bill right, like Microsoft, Microsoft, Microsoft that yeah, let's, let's register it, which they do with the hype between micro and sod, eventually they'll jettison. The hyphen in the world will recognize Microsoft as one word once the contract is signed, Mitts Bunda, the basic software with this computer hardware, sales customers, who search the computer can buy Altair basic for only seventy five dollars. The stand price is five hundred dollars. For gates and Allen. This is an early introduction to the power of bundling is a way to popularize of program. They still Maximize profit, of course, but they learned grabbing a hold of market share is essential to building a lasting business

after buying the altair and basic add on, though many obvious simply copy the software and handed out to their friends for free when they it happens. Neither admits nor Microsoft receives a penny gates senses that Microsoft's revenue stream will suffer from this arrangement, so he the ends licensing the operating system to other personal computer companies. Roberts, who is also suffering from pirated software discs, is incensed. He confronts the boy Genie Bill. I understand that you've been a licensing basic out to companies other than out here. As a matter of fact, I have the it's not part of our arrangement. We have exclusive rights. That arrangement isn't working very well for Microsoft, It seems mostly like our deal, ensures that we sell fewer copies at a lower price and then those

puppies get passed around for free, and you know something. That's not really. The model Microsoft wants to follow. Be that as it may build the just the model. Microsoft is contractually obligated to follow that. So junk contract in micros. But isn't going to let itself be bled dry bill. Get this straight. You and Paul Our employees, here by cell turn, off right to our competitors, you're going to put it's out of business, we just to make sure we have as much flexibility as possible at boy looks aside. Gates can be ruthless In one thousand, nine hundred and seventy seven, the two companies go into arbitration to settle their dispute Roberts states his case First bill gates and Paul Allen are my employee and they are selling basic to our competitors in violation of our contract, and I

put the contract myself. So I should know what it says. Gates was expecting this that car track that Mister Roberts refers to also obligates minutes to market our software with their best efforts. Clearly they have not done that if they have, but why have we been able to sign up so many licensees on our own? How many licenses as he lined up, let me count them for you Huai, none why you smug pimply faced kid. This is all good game to you. Isn't it business that courtroom life I honestly don't know if I should spank you or fire you gates. His argument carries the day. After winning an arbitration gates and Allen? Free to license their software to whomever they want, they may back to Seattle along with another, Harvard classmate that brash and voluble Steve Ballmer, who becomes there head of marketing in

one thousand nine hundred and eighty one company licenses its operating system to run on IBM's new personal computers, which turns both companies into juggernauts. Microsoft, ten licenses, the software to other companies as well, and the cash in four years. Microsoft releases the operating system windows. It includes a graphical point and click interface that replaces the old text commands users had to type into MS dos and operate system. Microsoft developed for the new generation of personal computers. The following year. At the age, thirty one build states becomes a billionaire within a decade, win those catapults Microsoft into position as the world's leading personal computer software, company power and profit follow when Bill Gates turns forty. He is named the

richest man in the world, but the escape is not clear for gates Netscape launches its browser called the nav later. In nineteen ninety five by this time, Microsoft has revenues of nearly six billion dollars an employees. Seventeen thousand people worldwide company sees an opportunity, they're already end, so many homes, they seem ubiquitous. What if they could cut out the middleman and make the browser themselves? Who will stop them? Next time on business wars, Microsoft releases a competing browser to Netscape's, which leads to a showdown at Netscape's headquarters, one that andreessen likens to a visit by Don Korleone. He half expect find a bloody computer monitor in its bed. The next morning to combat the my soft red Netscape gets big fast

and the digital titans go to war from wondering this is big. This works. We hope you enjoyed this episode and we invite you to subscribe on Apple podcasts, Spotify, Google, podcast, Stitcher Iheartradio, or every listen to podcast you'll find a link on the episode notes and you can just tap or swipe over the cover. Art you'll also see some offers from our sponsors and we hope you'll support our show by supporting them. If you like what you heard, we love it. If you could give us a five star rating and tell your friends how to subscribe to there's another way, you can support, answer short survey at one three dot com, slash survey and don't forget to tell us what business war stories you'd like to hear a quick note about the conversations that you've been hearing. We can't know exactly what was said with this. Dialogue is based on our best research. I'm your host

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