Donald Luskin by I Am John Galt

Author:I Am John Galt
Language: eng
Format: mobi
Publisher: John Wiley & Sons, Ltd.
Published: 2011-04-21T05:00:00+00:00

Act I: DOS Kapital

Although now famous for the nearly ubiquitous DOS and later Windows operating systems, Microsoft nearly missed out on this most fundamental layer of the computer software hierarchy—the intellectual capital on which the Gates fortune, and thanks to Gates so many others as well, is built.

As the 1980s dawned, a company called Digital Research headed by Gary Kildall all but owned the operating system market for Intel 8080-based computers with a product called CP/M (or Control Program for Microcomputers). An InfoWorld interview in May 1981 quotes Kildall as claiming “a couple hundred thousand CP/M users out there now,” with usage tripling each year.47 In fact, Gates had partially enabled the standard by actively promoting CP/M while singularly focused on the programming language layer, including BASIC. The advantage seemed obvious at the time. After all, it was easier to code his language for one operating system than hundreds. So, for example, Microsoft licensed CP/M from Digital Research and created a hardware product called SoftCard, allowing Apple users to run CP/M-compatible programs on their otherwise incompatible computers.

Then IBM called. And that call turned out to be one of the most critical moments in the history of American business.

In 1980 Big Blue was engaging in a secretive project to rapidly launch its own personal computer based largely on off-the-shelf components and the new 16-bit Intel 8088 processor. The project was on a fast track and IBM had no time to develop its own software, so it started searching for likely providers. One morning in July, Gates got a call from IBM’s Jack Sams asking for an introductory meeting.

“What about next week?” asked Gates.

“What about tomorrow?”48 responded Sams. Despite Gates’s youthful appearance and their seemingly diametrically opposed corporate cultures, the companies quickly found common ground in the language of technology, and the initial meeting went well. Sams returned in August to talk turkey accompanied by a corporate attorney bearing a nondisclosure agreement (NDA), which Gates signed with little fanfare.

With Gates sworn to secrecy, IBM proceeded to unveil the blueprint of the initiative, dubbed “Project Chess.” IBM needed high-level languages like BASIC, COBOL, FORTRAN, and Pascal for the new 16-bit platform. Could Microsoft create them? Absolutely, replied Gates with his typical can-do, competitive attitude.

But what about the operating system? Could IBM also sublicense the CP/M source code Gates used in his Apple SoftCard? Unfortunately, that was going to be a problem. Not only did Microsoft not have the rights to sell or license the CP/M source code to IBM, but Digital Research didn’t even have the necessary 16-bit version of the operating system to offer in the first place. If IBM wanted CP/M, it would have to talk to Kildall.

Gates set up a meeting for IBM with Digital Research, and the boys in suits flew out the next day. “The meeting was a fiasco,”49 recalls Sams. To start with, Kildall didn’t even show up. Instead, he left his wife in charge of the proceedings, and she, together with a Digital Research attorney, refused to sign IBM’s NDA.

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