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Like many in their generation, they were influenced by society emphasis on science and technology. Though both dropped out of college, both were avid students in the emerging fields of electronics and computers. Family Backgrounds William Henry “Bill” Gates Ill was born on October 28, 1955, in Seattle, Washington to William Henry Gates Jar. And Mary Maxwell Gates. Bill’s ancestors were among the first to settle in this part of the Pacific Northwest. His great grandfather, William Henry Gates Sir. Migrated from Pennsylvania to Washington in search of fortunes westward, and upon hearing news of the discovery of gold in Alaska, picked up his family and belongings and proceeded north to None. Bill’s father served in the IS. S. Army during World War II, and after his discharge, attended the University of Washington wrought the financing available under the GIG Bill. 3 At college, Bill’s father met his future wife Mary, a sorority president from a prominent banking family in Southwest Washington that was active at the local level in the organization now known as the united Way.
The two married in 1951, the year that the U. S. Census Bureau received a UNIVAC, the first computer capable of handling both numerical and textual inputs. (See Exhibit 1 – Computers, Computer Systems and Languages Timeline, 1935-1999. ) Bill was their second of three children – his older sister, Kristin Gates was born in 1953, and his monger sister, Lobby Gates was born in 1964. Steven P. “Steve” Jobs was born on February 24, 1 955, in San Francisco, CA, and was raised from birth by adoptive parents, Paul and Clara Jobs. Paul Jobs hailed from a strict Calvinist farm family Lecturer Anthony J.
Mayo, Director, Leadership Initiative, and Research Associate Mark Benson prepared this case. This case was developed from published sources. HOBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright 0 2006, 2007, 2008, 201 0 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 021 63, or go to http://whim. BSP. Harvard. Due. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-”electronic, mechanical, photocopying, recording, or otherwise-”without the permission Of Harvard Business School. 407-028 from Indiana. Pall’s life was greatly impacted by the Great Depression and he wind storms that created the barren lands known as the Dust Bowl. Paul Jobs dropped out of high school, then spent the next few years as a migrant farmer in the Midwest, when he could find work.
After a few years as an itinerant farmer, Paul decided to move to the West Coast and become an engine mechanic in the U. S. Coast Guard. After serving in World War II, Paul Jobs settled in San Francisco, where he met his future wife Clara, and the novo married in 1946. After a brief effort to return to farming in Indiana, they quickly decided to go back to the West Coast and San Francisco, where Paul kook a job as a collection specialist for an automobile repossess. The Jobs family adopted another child, patty, in 1958.
Primary Education and Childhood Experiences Bill Gates was the fastest in his class at answering math drill questions, and his fourth grade teacher, Hazel Carlson, encouraged his talents. With Carillon’s permission, Gates also spent his recess time indoors helping the school librarian track down missing library books. Gates had time to take on this sleuthing because he had already read the entire World Book Encyclopedia on the library shelf. Recalling this and Agate’s habit Of wearing is pants high and buttoning his shirt to the top, Carlson said, “Bill was a nerd before the term was invented. 4 Afternoons after elementary school, Gates arrived home to his grandmother Adele Maxwell, as his mother was often on the road as a full-time volunteer. Mary was the President of the Seattle Junior League and served on the boards of several non-profit and other local organizations, including Pacific National Bank, where her husband was corporate counsel. “Game” as Gates called his grandmother, was a competitive card player, who typically played bridge with her grandson, whom she nicknamed, “Trey. When Trey was stumped on his turn, Game would remind him, “think smart, think smart. When his parents would ask what he was doing in his room after dinner, he often responded, “I’m thinking, I’m thinking. “5 Gates struggled with the teaching methods and authority at Valley Ridge and his grades slipped, prompting his parents to encourage him to join a special club for bright students in sixth grade. One of the activities in this club was an economics assignment that Gates used to create a proposal for a new business, Gateway Incorporated. Agate’s business was focused on marketing a coronary care system to hospitals.
The technology involved a heart defibrillator like that sold by physic-Control, a company with whom his father had a relationship as a banker. Gates concluded his sales pitch with the following assertion: “If my idea is good and I am able to raise enough money, I should be successful. “6 Similar to Gates, Steve Jobs demonstrated an early intellectual curiosity, but did not always apply it successfully. Some early missteps included trying to taste the poisonous part of an ant and sticking a wire into an electrical socket.
Able to do grade level work with ease, Jobs became upset with his teachers, ND refused to do assignments he felt were wasting his time, leading to disciplinary action and eventually expulsion from his first elementary school in Mountain View, a suburb outside of Palo Alto, CA. At a new school, Jobs connected with a fourth grade teacher, Imagine “Teddy’ Hill, who made learning seem worthwhile. “She would say, ‘I really want you to finish this workbook. I’ll pay you five bucks if you finish it. ‘ That really kindled a passion in me for learning things. 7 That passion manifested itself in Job’s interest in learning about electronics and computers in his spare time. Many of the parents living in Job’s childhood neighborhood were engineers at one of the major aerospace and electronics firms in the Palo Alto area, who spent their spare time tinkering with radios and circuit boards in their garages and basements. One fjord’s neighbors brought home a microphone from work and invited Jobs to help him take it apart in order to see how it worked.
When that effort was complete, the neighbor rewarded Jobs by giving him the microphone to keep. 8 2 For the exclusive use of Y. Chem.. Due to the encouragement of Hill, Jobs quickly advanced beyond his grade bevel and was double promoted to sixth grade and placed in an accelerated student class at Christened Middle School. Christened was rife with fist fights and dangerous behaviors, prompting Jobs to quit school again, this time with his parents’ blessings. Paul and Clara Jobs then decided to move to Los Altos, home to many more engineers and technicians.
Important Friendships Gates and Jobs each had close friends at important early stages, friends who became at times a mentor, at other times, a collaborator. For Gates, that friend was Paul Allen, whom Gates met while they were students at Lakeside Prep School. For Jobs, it was Steve “Wok” Woozier, whom Jobs met in the garage of a mutual friend while taking apart circuit boards. Gates and Jobs each became business partners with these close friends – Gates and Allen co- founded Microsoft, while Jobs and Woozier co-founded Apple. Gates and Allen In 1 968, Gates and Allen were both students at Lakeside, Gates was an eighth grader, Allen, a sophomore. They met through a student computer group. With the help of Agate’s mother, the group had access to an early computer available at a General Electric facility, a Teletype machine that could be aerogramme using BASIC. Gates and Allen became obsessed with the Teletype, but in different ways: Gates wanted to create programs to make the computer do calculations, while Allen was intrigued by the internal components of the Teletype.
Gates and Allen soon became part of a new club: C-Cubed, a name based on the three CSS in the name of the new computer lab built on the campus of the university of Washington run by the Computer Center Corporation. C-Cubed members spent their Saturdays at the facility and successfully pushed to make it a 24-hour, seven day a week operation to satisfy C-Cubed Club embers’ demands for more time. Gates would often sneak out of his bed at night and take a bus to the University of Washington to practice programming, often returning home just before his alarm clock sounded to start the following day of high school.
The Computer Center Corporation could not support itself financially, prompting C-Cubed to find another way to access computers. Gates and another friend, Kent Evans, came up with a solution: approaching a local firm, SIS, and offering to create a payroll program in return for use of SIS’S computers when staff were out Of the office. The program was written in COBOL, the standard business computing language at the time, and was tough to master and apply to the task, though Gates, Evans, Allen and another friend from C-Cubed, Rice Welling, were able to make it work.
Due to the degree of difficulty, Gates and Evans decided that SIS should pay them for their services in addition to offering the free computer time. Allen disapproved and was so upset that he stole the computer tapes and hid them. Later, Allen relented and returned the tapes to Gates, but Allen never cashed his share of the money from the SIS deal. Jobs and Woozier Like Gates and Allen, Jobs and Woozier met through their computer hobbling activities.
As a freshman at Homestead High School, Jobs befriended a classmate in an electronics class, Bill Fernando, who invited Jobs to his house to see a computer he and his friend Wok were building in 3 This document is authorized for use only by Hay Chem.. In MGM-671 : Technology and Innovation Management taught by Virtual Ottoman from February 2014 to August 2014. Freshener’s garage. It was there that Jobs and Woozier became friends, sharing a love for computers and electronic hi-jinx.
One of their capers was figuring out how to make a Blue Box, a device that would mimic the right computer sounds in a telephone line to generate free telephone calls. Jobs, Woozier and others had stumbled onto the discovery that you could get the right pitch by using whistles sold as prizes in boxes Of Cap’s Crunch brand cereal. Jobs saw a way to make money on the idea, and urged Woozier to go into business with him to build Blue Boxes. Woozier, then a junior at the University of California-Berkeley, balked at first.
However, Jobs started demonstrating the device to Berkeley students and they asked to eve their own. Jobs agreed to sell them at $300 apiece and offered free repairs if there were any problems or difficulties with the device. Woozier finally relented and turned his Berkeley dorm room into an electronics shop and cranked out the devices. 10 Gates Heads East Gates started college in September 1973, moving to the East Coast to enroll at Harvard University, home of an advanced computer laboratory directed by professor Thomas Chatham. 1 Chatham recalled Gates during his years at Harvard. In terms of being a pain in the ass, he was second in my whole career here. Has an obnoxious human being… Had put people down when it was not necessary, and [was] just generally not a pleasant fellow to have around the place. 12 In his dorm, Gates met Steve Babbler, who shared Agate’s proclivity for put- downs and was also more interested in his extracurricular activities than his studies. 3 Babbler was the manager of the Crimson football team, published a literary magazine and had a high mathematical aptitude: he actually outscored Gates on the annual Putnam national math exam as a high school senior. Gates and Babbler also shared a love for games, both the new imputer video games like Pong and Breakout and card games for significant financial stakes. Allen remained Agate’s friend and was living and working nearby. After graduating from Washington State University, Allen accepted a job offer at Honeywell in Waltham, Massachusetts, a few minutes down the road from Gates in Cambridge. 4 While browsing through technical magazines at a Harvard Square newsstand in December 1974, Allen spotted a copy of the January 1975 edition of popular Electronics and read the article inside On the Altair 8080, touted as the most powerful microcomputer ever invented, ratified by an Intel brand 8080 microprocessor. Allen bought a copy of Popular Electronics, brought it to Gates, and they immediately agreed to put their savings together to buy an Altair kit from its manufacturer, MITTS, Micro Instrumentation Telemetry Systems, headquartered in Albuquerque, New Mexico. 5 At the outset, MITTS encouraged programmers to design and develop a BASIC computer language program for the Altair. The first to develop a viable BASIC program would secure a contract from MITTS which Included payment for each factory installed copy of BASIC on every Altair sold. Gates and Allen were driven to be first. For the next month, Gates worked in the Harvard Computer Lab nearly 24 hours a day, seven days a week, trying to come up with a workable program on the PDP, which had the same Intel microchip as the Altair. Allen joined Gates in the Lab at night after his daytime shift at Honeywell.
Harvard placed Gates on academic probation for using school computers for, among other things, a business enterprise and for inviting Allen, a non-student, to use school facilities. Having made significant progress a month into the project, Gates convinced Allen to set up a meeting with De Roberts at MITTS to demonstrate their program. Given that the program would be added to a chip with a small amount of Random Access Memory or RAM space, Gates worked 4 feverishly for the next couple of weeks to streamline the BASIC program so that it would allow other programs to be stored and run on the same chip.
After Gates and Allen postponed a few meeting dates, Roberts issued an ultimatum, and Allen flew to New Mexico to present their program. When the program worked, Roberts rewarded Allen and Gates with executive positions at MITTS. Their first task – to work out the bugs in their winning program. Soon after joining MITTS, Gates and Allen decided to form a corporate readership they called Micro-Soft. The new company’s initial revenues included the royalties they were promised by MITTS. Microsoft’s customers soon included General Electric and National Cash Register (NCR).
Midway through his sophomore year, Gates dropped out of Harvard to work with Allen full time at Microsoft in New Mexico. While the company had its own office space, it had no computers of its own, so it made a time sharing arrangement with the Albuquerque public school system to use its PDP-1 Jobs Stays in the West In the early sass, Jobs bounced around from one opportunity to another. L didn’t know what wanted to do with my life,” Jobs said, in retrospect. “l knew there was this spirit, but I didn’t know the form of it. “1 6 While Jobs was often on the road, he did not usually stay away from Freshener’s garage for too long.
Jobs, Fernando and Woozier were curious and inquisitive about electronics and computer technology. They worked with what they could afford or find, whether it was an Altair clone rather than an actual Altair, or some circuit boards and microchips rather than a version of the first minicomputer, Digitalis PDP-8 or a Data General NOVA. 17 With the encouragement of his parents, Jobs enrolled in Reed College in September 1972, but Jobs stopped taking classes after his first semester. Though he had officially dropped out of a degree program, Jobs remained on campus.
He audited classes and lived with friends still attending Reed, often sleeping on their dorm room floors. It was at this time that Jobs cultivated a spiritual interest in Buddhism and adopted a vegetarian, then a fruit-only diet. To generate cash, Jobs took a variety of odd jobs, including putting on a costume for a character from Lewis Carol’s children’s tale Alice in Wonderland to entertain kids at a local theme park. Jobs joined the Homebred Computer Club in early 1975, where there was a free flow of information and frank discussions of complex technical problems.
The initial recruitment flyer for the Homebred Computer Club stated: Are you building your own computer? Terminal? TV Typewriter? 1/0 device? Or some other, digital black-magic box? Or are you buying time on time-sharing service? If so, you might like to come to a gathering of people with likened interests. Exchange information, swap ideas, talk shop, help work on a project, whatever 1 8 One computer historian explained: “Presidents of omitting companies and chief engineers would gather there to argue design philosophy and announce new products.
Statements made at Homebred changed the directions of corporations. Homebred was a respected critic of 19 microcomputer products. ” Jobs was eager to find work in the computer industry, though his iconoclasm clashed with certain interviewers. Woozier had already completed his undergraduate degree and had a salaried position at Hewlett Packard. Jobs received his first break in the computer industry in 1 975 when Nolan Bushnell, top executive at the video game company Atari, hired Jobs to work s a programmer.
It is rumored that Jobs was a difficult employee, though rather than firing Jobs, Atari placed him on the night shift to keep him away from as many employees as possible. 20 5 Nevertheless, Jobs worked productively with Woozier. After a day of work at HP, Woozier joined Jobs at night, often to play the latest Atari game, Grand PRI Racer. Woozier also helped Jobs with the programming for a new video game for Atari that they called Breakout. With the success of Breakout, Jobs ascended from entry-level programmer to top computer executive – not at Atari, but as co-founder of Apple with Woozier.
Building Software and Hardware Businesses in the Early Computer Age Right after incorporating Microsoft, Gates and Allen hired Monte Davidson, a friend from Harvard, to update the design of the BASIC program for the Altair. Davidson completed the task in two months, then Gates and Allen collaborated with Davidson to debug the program and develop versions that could be used on all three Intel microprocessors on the market -” one with K of memory, another with K, and an Extended Memory microprocessor.
Gates estimated their work consumed $40,000 of computer time, yet Microsoft’s total sales in 1 975 were just $16,005. Although Gates grew up as part of a computer culture that encouraged free information sharing he decided to take a stand against this general principle. In the winter of 1 975, Gates drafted what he called “An Open Letter to Hobbyists” which was copied and sent special delivery mail to computer publications nationwide. Gates argued why software should no longer be free: The feedback we have gotten from the hundreds of people who say they are using BASIC has all been positive.
Two surprising things are apparent, however. 1) Most of these “users” never bought BASIC (less than 10 percent of all Altair owners have ought BASIC), and 2) The amount of royalties we have received from sales to hobbyists makes the time [we] spent on Altair BASIC less than $2 an hour. Why is this? As the majority of hobbyists must be aware, most of you steal your software. Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid? Is that fair? 21 Gates then stated the implications of continuing with the status quo. One thing you do is prevent good software from being written. Who can afford to do professional work for nothing? ” Gates concluded by inviting “letters from anyone who wants to pay up,” as, “nothing would please me more than to hire ten new programmers and deluge the hobby market with good software. “22 Agate’s letter was a major topic of discussion at the first ever National Altair computer convention in Albuquerque in March 1976. In responding to fans and critics of his letter, Gates emerged as a persuasive speaker.
He said that “software makes the difference be;en a computer being a fascinating tool for years and being an exciting enigma for a few months and then gathering dust in a closet. “23 Intel and other microchip manufacturers – Motorola and NCR – paid Microsoft for a license for Microsoft BASIC, so they could add the software to their latest microchips. This angered Roberts and the executives at MITTS, who claimed that the intellectual property rights to Microsoft BASIC belonged exclusively to MITTS for use in its Altair.
Now that Gates was employed by MITTS, Gates recognized the company was in financial trouble, and that a more lucrative option would be to license his product to other computer and microchip manufacturers. Though MITTS filed suit against Gates, Gates received legal help from his father and the lawyers he recommended. Eventually, Roberts sold the company and the new owners entered binding arbitration with Microsoft, the result of which was a ruling in favor of Microsoft, giving the company legal sanction to continue to sell its BASIC program to other computer and microchip manufacturers.
As Microsoft sought new customers, Welling, his friend from C-Cubed and now a Microsoft employee, contacted Jobs, who was a customer for a 6502 chip manufactured by MOSS Technology. Jobs was dismissive. Jobs was a 6502 customer because it was cheap at $25 each, and he was building 6 a computer with Woozier because they could not afford to buy an Altair kit. Jobs, however, mentioned none of this to Welling, stating instead that Woozier and he were capable Of making their own BASIC program rather than buying one from Microsoft.
Commodore International, a calculator manufacturer, brought a personal computer to market before Jobs did. The Commodore Personal Electronic Translator (PET) was the first PC that a customer could take out of the box and get up and running without any additional hardware or software. The Commodore PET included a monitor, keyboard and a central processing unit (CPU), with a circuit board and software needed to run the computer. Microsoft sold its BASIC programs to Commodore. After returning from a spiritual trek to India, Jobs and Woozier finished a computer prototype that they modeled on the Commodore PET, called the Apple l.
The Apple l, like the PET, was designed as ready to run out of the box. Woozier and Jobs were able to convince Paul Terrible, a Homebred Computer Club member and the founder of the computer retail store chain The Byte Shop, to order 500 Apple I computers at $500 each. Jobs then took the order and knocked on the door of every company or bank he thought might offer him a loan or a line of credit to purchase the components to make the 500 nits. Crinklier Electronics agreed to offer Jobs a line of credit.