The story of Bill Gates inventing Microsoft and becoming the richest man in the world usually goes like this: super smart kid drops out of school and makes a computer in his garage. But it's...not that. Like all billionaires, it's a story of privilege, selfishness, greed, betraying friends, using people, and shrewd lawsuits.

William Henry Gates the third was born on 10/28/55. His father was a corporate lawyer and his mother was on the board of directors for the bank First Interstate BancSystem. His mom's dad was J.W. Maxwell, who founded Seattle's National City Bank in 1906. When Gates turned 13 in 1968, he went to the Lakeside School. Lakeside's tuition at the time was $5000. Harvard's tuition in '68 was around $1760. Lakeside was able to have kids learn computers on a DEC PDP-10, the same computer that leading researchers at Stanford and MIT were working on.

Gates, with a near perfect 1590 SAT score, got into Harvard in '73. In '75 he dropped out to work on software (a BASIC interpreter) with his high school friend Paul Allen and Harvard classmate Monte Davidoff for MITS' newest computer, the Altair 8800.

They got the job by cold-calling MITS founder Ed Roberts and asking him if he'd like to see a demonstration of the BASIC interpreter for the new Altair 8800, despite not having developed one yet...or even having an Altair 8800. Roberts said yes, so Gates and Allen made a company called Micro-Soft and got to work. Gates and Allen fantasized about owning a company together one day in high-school, and always saw it as 50/50. But Gates argued for 60/40 in his favor and Allen went along with it.

First problem: they needed an Altair 8800. Well, Paul Allen had previously written an emulator of the 8800 for their high-school project Traf-O-Data (a program that counted traffic). Second problem: they needed a computer. They installed Allen's emulator program on Harvard's PDP-10 computer so they could get to work. Harvard was not pleased when they found out Gates and Allen had used school resources in this manner. Third problem: they needed a math based module of the program to handle floating-point numbers. Gates and Allen hired Davidoff as a freelancer to write some ground-breaking unique program routines that set apart their demonstration from rest. Roberts was impressed with the demonstration and hired Micro-Soft (Gates & Allen, not Davidoff) to continue work on it. 

At MITS Gates and Allen developed 5 versions of the program that sold for as much as $350, or, if they were bundled with the purchase of a MITS Altair computer, $60. Computer hobbyists copied and shared the software and that made Gates mad. He wrote a letter about it. Sidenote: ex-coworker Davidoff would wind up on the other end of the debate, making a career working on open-source programs UNIX and LINUX and PYTHON.

Micro-Soft would write and sell BASIC software for MITS' hardware until 1977. At this point Altair was a $2 million dollar company and Ed Roberts decided to sell to a company called Pertec, which thought it was buying Micro-Soft's BASIC rights as part of the deal. Pertec stopped paying royalties to Micro-Soft for BASIC sales, operating under the understanding that they owned the company. Gates sued Pertec and Roberts, I don't think the papers from the private arbitration are online anywhere but here's a summation from Roberts in a Forbes article from 1997:

"Gates was selling BASIC to our competitors," says Roberts, who is now a small-town doctor in Cochran, Ga. "The bottom line is that we paid them what we owed them up to the cap. I wrote the contract myself, so I should know what it said."

According to Roberts, the contract gave Gates and Allen a 10% royalty for every copy of BASIC that was sold with the Altair, up to $150,000. Once that threshold was reached, the version of BASIC that Gates and Allen created would belong to MITS.

"When we were in litigation, Bill told me that the courtroom was a game," Roberts recalls.

Roberts talks more about Gates and the case in this Times article from 2001 if you're interested. Gates won the case based on a buried contract stipulation clause that MITS was supposed to "use its best efforts to promote and commercialize BASIC". This first win was a big one for Gates and Microsoft, and would be the first of many, many times Gates made significant gains through lawsuits about licensing agreements.

So let's recap everything to this point: Gates got into an exclusive, expensive school because of wealthy parents. Gates, who couldn't have got the MITS job without the work by high-school friend Paul Allen and Harvard classmate Monte Davidoff, bullied Allen into accepting a minority stake in their new venture and left Davidoff behind. Oh, while using school resources without permission. Then, not even 2 years into the gig, Gates, the son of a corporate lawyer, sues his way into making his first fortune.


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$137.4 BILLION