The Bill
Gates Interview
Copyright (C) Playboy Enterprises, Inc. 1994
Page 4 of 6
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PLAYBOY: How long do you anticipate staying active with Microsoft?
GATES: At least for the next ten years, I see myself being in very much the role I am in today. Then there will be a point where somebody younger, probably younger, should be given the prime role here. I'd still have a role, but it wouldn't be as CEO.
PLAYBOY: Does depending on someone else's vision make you nervous?
GATES: No, I just have to pick the right person.
PLAYBOY: Would that have to be somebody like you?
GATES: No. You have to be open-minded. Somebody could do it differently and still do it well. You can't have this bias that they need to do things the same way. Of course, it'll be somebody who understands technology very well and has high energy and likes to think ahead. There are certain requirements.
PLAYBOY: Like your management style? We hear you're brusque at times, that you won't hesitate to tell someone their idea is the stupidest thing you've ever heard. It's been called management by embarrassment challenging employees and even leaving some in tears.
GATES: I don't know anything about employees in tears. I do know that if people say things that are wrong, others shouldn't just sit there silently. They should speak. Great organizations demand a high level of commitment by the people involved. That's true in any endeavor. I've never criticized a person. I have criticized ideas. If I think something's a waste of time or inappropriate I don't wait to point it out. I say it right away. It's real time. So you might hear me say, That's the dumbest idea I have ever heard many times during a meeting.
PLAYBOY: What do you mean when you say something is random?
GATES: That it's not a particularly enlightened idea. [Sarcastically] So, how do you have a successful software company? Well, you get me and Microsoft executive vice president Steve Ballmer and we just start yelling.
PLAYBOY: Do your employees stand up to you?
GATES: Oh, sure.
PLAYBOY: In the beginning, why did you and Paul Allen decide to do only software when everyone else was doing hardware?
GATES: Paul and I believed that software would drive the industry and create substantial value. And we understood it best.
PLAYBOY: Didn't Paul originally want to do hardware?
GATES: Hardware and software, and I thought we should do only software. When you have the microprocessor doubling in power every two years, in a sense you can think of computer power as almost free. So you ask, Why be in the business of making something that's almost free? What is the scarce resource? What is it that limits being able to get value out of that infinite computing power? Software. Another way to look at it is that I just understood a lot more about software than I did about hardware, so I was sticking to what I knew well and that turned out to be something important.
PLAYBOY: Your big move into operating systems was when you did the 16-bit MS-DOS operating system.
GATES: We always knew that we were going to do operating systems, though we initially thought just high-end. When we were helping to design the original IBM PC hardware, the question was whether we would do the operating system.
PLAYBOY: And now MS-DOS runs on more than 90 percent of all personal computers, or about 100 million, and it made Microsoft. Was the partnership the key to winning?
GATES: Our restricting IBM's ability to compete with us in licensing MS-DOS to other computer makers was the key point of the negotiation. We wanted to make sure only we could license it. We did the deal with them at a fairly low price, hoping that would help popularize it. Then we could make our move because we insisted that all other business stay with us. We knew that good IBM products are usually cloned, so it didn't take a rocket scientist to figure out that eventually we could license DOS to others. We knew that if we were ever going to make a lot of money on DOS it was going to come from the compatible guys, not from IBM. They paid us a fixed fee for DOS. We didn't get a royalty, even though we did make some money on the deal. Other people paid a royalty. So it was always advantageous to us, the market grew and other hardware guys were able to sell units.
PLAYBOY: By 1986, DOS had won.
GATES: Right. Subsequently there were clone competitors to DOS, and there were people coming out with completely new operating systems. But we had already captured the volume, so we could price it low and keep selling.
PLAYBOY: Has DOS peaked?
GATES: I don't know. DOS continues to be sold on a high percentage of PC's. But within a few years it will be replaced by a next-generation operating system. This is a case where we're obsoleting our own product I hope. Or somebody else will. Actually, it would have been obsolete some time ago if we hadn't come along with Windows and sort of built it on top of DOS, to renew its capabilities. The fact that we did that as an add-on to DOS allowed people to keep running DOS applications. We thought that would be of some benefit to people.
PLAYBOY: And to yourself. Perhaps to buy time.
GATES: No. People wanted to run their DOS applications. Believe me, it would have been a lot easier to write Windows so it didn't run DOS applications. But we knew that we couldn't make the transition without that compatibility. In fact, the next version of Windows further enhances our ability to run DOS applications.
PLAYBOY: What happened to IBM? According to one book, you supposedly told a group of Lotus employees over too many drinks that IBM would fold in seven years. IBM is still here, of course, but it's restructuring and streamlining. So you were partially right.
GATES: In this business, by the time you realize you're in trouble, it's too late to save yourself. Unless you're running scared all the time, you're gone. IBM could recover, but in terms of what it was, it'll never have a position like that again. It was during the glory years, its years of greatest profit and greatest admiration, that it was making the mistakes that sowed the billions of dollars of losses that came later.
PLAYBOY: What were those mistakes?
GATES: The idea of how you run software development properly is not something you can capture in a few sentences. It's how you hire people, organize people, how you plan the spec, how you let it change, how you do the testing, how you get feedback from customers. IBM's only real software success had been with mainframes, where they were the only choice. Consequently IBM didn't develop those processes very well.
PLAYBOY: Could that be happening to Microsoft now? In terms of corporate power, your company has been called the new IBM.
GATES: I've thought about that, but I don't think so.
PLAYBOY: That's what IBM said.
GATES: That's right. But did IBM try to renew its vision, did it really look at the early signs that things weren't going right? Did management really focus on those things, or did they let themselves get a little complacent about their success? Were they working hard, were they hiring new people? And remember, when IBM was run by its founder it thrived and for several generations of management after that. When you have a founder around, or if that founder picks the right successor, companies can do well. But we have to prove ourselves. I can't prove that decay hasn't set in. Five years from now you can call me and say, Well, Bill, it looks like the decay didn't set in. At least I hope the evidence will show that.
PLAYBOY: What was your first meeting like with Lou Gerstner, IBM's new chief?
GATES: It was my chance to tell him what Microsoft is.
PLAYBOY: He didn't know?
GATES: I'm not saying that. I wanted to talk more about the company. It was a bit awkward because when I went there they said, Thank you for coming, Mr. Manzi. [Laughs] Jim Manzi [current head of Lotus, a Microsoft rival] and I don't look alike, so that set me back a little. Then we went into this room, the famous Tom Watson Library, a place I'd been probably a dozen times and know the history of pretty well. Gerstner took some time explaining it to me, though I already knew. I wasn't sure whether I was supposed to stop him or not. We eventually talked about the business. I did not endeavor to give him any advice. He knew I'd been talking to the board and chided me a little about that.
PLAYBOY: Do you expect to get along?
GATES: Microsoft and IBM are perfectly complementary companies with the exception of one small group IBM has that does PC system software.
PLAYBOY: Where does the relationship stand today?
GATES: IBM is our best customer. It's porting a lot of its key software into the Windows environment. Every month we find more and more things we can do together.
PLAYBOY: Over the years, have your youthful looks been more help or harm?
GATES: Its hard to say. If you're asking whether I intentionally mess up my hair, no, I don't. And certain things, like my freckles, they're just there. I don't do anything consciously. I suppose I could get contact lenses. I suppose I could comb my hair more often.
PLAYBOY: We are talking about knowing that your youthful, or can we say nerdish? looks would throw potential competitors and partners off balance and give you an advantage going in.
GATES: [Smiles] I think that my looks were a disadvantage, at least back then. But once our competitors had to admit we knew what we we're doing, they had a hard time knowing what category to put us in. We were young, but we had good advice and good ideas and lots of enthusiasm.
PLAYBOY: You recently got married, an event many of your competitors have fervently wished for. Now, they say, you'll concentrate less on work.
GATES: They're just joking. If they really think I'm going to work a lot less just because I'm married, that's an error.
PLAYBOY: Isn't there a kernel of truth in any joke?
GATES: Married life is a simpler life. Who I spend my time with is established in advance.
PLAYBOY: You were one of the world's most eligible bachelors. No doubt there are many women who would love to be in Melinda's place.
GATES: What? They want to do puzzle contests with me? They want to go golfing with me? How do they know its interesting to be around me? They want to read the books I read?
PLAYBOY: What was it that attracted you to Melinda?
GATES: Oh, I don't know. That's probably too personal. Even before I met Melinda, if someone asked me a question like that I'd always say I was interested in people who are smart and independent. And I'm sure I'll continue to meet lots of interesting, smart, independent people.
PLAYBOY: Something about Melinda must have made you turn the corner. Don't tell us you're just getting older and it was time.
GATES: There's some magic there that's hard to describe, and I'm pursuing that.
PLAYBOY: Can you describe how she makes you feel?
GATES: Amazingly, she made me feel like getting married. Now that is unusual! It's against all my past rational thinking on the topic.
PLAYBOY: We know you're kidding and not kidding. Let's go back farther. Which parent most influenced you?
GATES: My mom was around more, but my dad had the final say on things. They were both major influences. I was raised pretty normal. We didn't get to watch TV on weeknights. We were encouraged to get good grades. Our parents talked a lot about the challenges they were dealing with and treated us as though we could understand and appreciate those things. My parents took us around and traveled some. When we were young our grandparents read to us a lot, so we got into the habit of reading. My sister is two years older than I am and we learned a lot of stuff together.
PLAYBOY: How were you encouraged to get good grades?
GATES: We got 25 cents for an A. It was kind of funny because there was a whole period when I got terrible grades and my sister got straight A's. That was until I was in eighth grade. Then my sister discovered boys. She never got straight A's again. My grade point average went from a 2.2 to a 4.0 over the summer. I wanted to get straight A's. I decided to get straight A's.
PLAYBOY: Why?
GATES: There was no reason. It takes a little bit of effort. I guess I didn't want people to think I was dumb. And when you get straight A's once, its easier.
PLAYBOY: Were you a discipline problem?
GATES: People thought I was a goof-off, a class clown at times. That was OK, not really a problem. Then I went to private school, and there was no position called the clown. I applied for it, but either they didn't like my brand of humor or humor wasn't in that season. In fact, I didn't have clear positioning for a couple of years. I was trying the no-effort-makes-a-cool-guy routine. When I did start trying, people said, Whoa, we thought he was stupid! Better reassess.
PLAYBOY: Did your parents wonder if you might be stupid?
GATES: Oh, no. They just thought I was underachieving dramatically. When I did get into trouble in school, they sent me to this psychiatrist. He gave me a little test and books to read, and he would talk to me about psychological theories just getting me to think about things. He said some profound things that got me thinking a little differently. He was a cool guy. That's why I always liked the movie Ordinary People, because this guy was just like the psychiatrist in that movie. I only saw him for a year and a half, and never saw him again, and I haven't been to anybody like that since. But my mind was focused appropriately.
PLAYBOY: What did he say to you?
GATES: I said, Hey, I'm in a little bit of a battle with my parents. He said, Oh, you'll win, don't worry. I said, What? What's the story here? He said, You'll win. They love you and you're their child. You win.
PLAYBOY: And the implication was?
GATES: That if you think you need to put more effort into winning with them, don't. It's a fake battle. It's ridiculous. It was enough to get me to think, Hmm, that's interesting. He also had me read all this Freud stuff.
PLAYBOY: How old were you?
GATES: I was 11. But he was an enlightened guy. He was always challenging me. He would ask me questions, but he would never tell me whether my answer was right or not. He would say, That's an OK answer. Then our time would always be up and he'd give me more stuff to read.
PLAYBOY: Ever wonder what might have become of you if you had gone to public school instead of Lakeside, where you met Paul Allen and fell in love with computers?
GATES: I'd be a better street fighter.
PLAYBOY: When did you know you had something special to offer? When did you become aware you were different?
GATES: [Big raspberry] I have something special to offer, Mom! Mom, I just figured it out: I have something special to offer! So don't make me eat my beans.
PLAYBOY: You know what we mean.
GATES: When I was young we used to read books over the summer and get little colored bookmarks for each one. There were girls who had read maybe 15 books. I'd read 30. Numbers two through 99 were all girls, and there I was at number one. I thought, Well, this is weird, this is very strange. I also liked taking tests. I happened to be good at it. Certain subjects came easily, like math. All the science stuff. I would just read the textbooks in the first few days of class.
What do your Parents think of your Money?-> ... 1, 2, 3, 4, 5, 6
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