#44 A Memoir by the Cofounder of Microsoft



In the early days of Microsoft, co-founders Paul Allen and Bill Gates shared a dynamic partnership, with Allen's big ideas complementing Gates's business acumen. Their venture began with a shared passion for computer programming, leading to the creation of software for early microprocessors, a failed business called Traf-O-Data, and eventually the pivotal development of BASIC for the Altair 8800. Despite initial skepticism from peers, their belief in the microcomputer revolution was vindicated by burgeoning sales. However, as Microsoft grew, the partnership became strained, with Allen feeling marginalized by Gates's aggressive business tactics. After a cancer diagnosis, Allen realized life was too short for unhappiness, leading to his departure from Microsoft. Despite their differences, Gates and Allen remained lifelong friends. Allen's post-Microsoft life was characterized by pursuing a wide range of interests, affirming the importance of loving what you do—a lesson he carried from his father and his own experiences.

Summary Notes

Early Life and Career Beginnings of Paul Allen

  • Paul Allen walked towards Harvard Square in December 1974, feeling uncertain about his future.
  • At 21, Paul was dealing with a breakup, a dead-end job at Honeywell, and a subpar living situation.
  • His consistent companion was Bill Gates, whom he had known since their school days at Lakeside.
  • Together, Paul and Bill had learned to dissect computer code and had started a failed business.
  • They worked on professional programming jobs as teenagers and had entrepreneurial aspirations.
  • Bill Gates had convinced Paul to move to Massachusetts for a tech firm opportunity, but then Bill returned to college.
  • The duo continued to search for a viable commercial project, confident in their software development skills.
  • Paul Allen reflects on a conversation with Bill Gates about the potential size of their future company, imagining a team of 35 programmers as ambitious.

"Since we'd met at Lakeside school when he was in 8th grade and I was in 10th, Bill and I learned how to dissect computer code."

This quote highlights the early collaboration between Paul Allen and Bill Gates, marking the beginning of their long-term partnership in technology.

Idea Man: A Memoir by Paul Allen

  • The book "Idea Man" by Paul Allen is a memoir of the Microsoft co-founder.
  • Paul Allen was preparing a podcast episode about the book when Allen unexpectedly passed away.
  • The podcast host emphasizes the importance of listener support for the ad-free podcast, offering membership for exclusive content.
  • "Founders Notes" is introduced as a service providing key ideas from company builders in a condensed format.

"Idea Man, a memoir by the co-founder of Microsoft."

This quote introduces the book that the podcast episode is centered around, providing context for the discussion about Paul Allen's life and work.

Paul Allen's Approach to Innovation

  • Paul Allen describes his process for coming up with big ideas, which starts with a stage-setting development followed by critical questions about the leading edge of discovery and unmet needs.
  • He reflects on his moments of insight, which involved combining elements to create new technologies for a broad audience.
  • Paul and Bill Gates had a natural working relationship, with Paul as the idea generator and Bill refining and realizing the best ideas.
  • Their collaboration was mostly productive despite some inherent tension.

"My really big ideas have all begun with a stage setting development."

This quote encapsulates Paul Allen's method for innovation, emphasizing the importance of a foundational development that sparks further questioning and ideation.

The Genesis of Microsoft

  • Paul Allen recalls the moment he considered using a microprocessor for running a high-level programming language.
  • He and Bill Gates decided on using BASIC (Beginner's All-purpose Symbolic Instruction Code) for their programming endeavors.
  • Despite initial skepticism from Bill Gates about the feasibility of BASIC for the Intel 8008 microprocessor, they were intrigued by the potential of faster chips.
  • Paul Allen's excitement was reignited upon seeing an advertisement for the Altair 8800, which he shared with Bill Gates, leading to their decision to attempt writing software for the new personal computer.
  • They contacted MITS, the company behind the Altair 8800, and claimed to have a nearly finished BASIC, despite not having written any code yet.
  • Paul admired Bill's boldness in the phone call to MITS and recognized the challenge ahead, but their youthful optimism led them to believe in their potential success.

"What if a microprocessor could run a high level language, the essential tool for programming a general purpose computer?"

This quote reflects the initial idea that would eventually lead to the creation of Microsoft, showcasing Paul Allen's forward-thinking approach to technology.

Early Influences and Finding Passion

  • Paul Allen reflects on his father's advice to pursue a job that he loves, which was a lesson from his father's own career regrets.
  • Paul's passion for programming was discovered in the 10th grade, which he found more creative and endlessly complex.
  • His English teacher recognized Paul's irresponsibility in other areas when gripped by his enthusiasm for programming, suggesting that Paul's focus might be justified.
  • Paul thrived in a professional environment as a 16-year-old, working on something he enjoyed, which was a valuable experience for him.

"When you grow up and have a job, do something you love. Whatever you do, you should love it."

This quote from Paul Allen's father emphasizes the importance of passion in one's career, a message that greatly influenced Paul's life choices.

Early Influences and Education

  • Paul Allen attended a prestigious private school where he met Bill Gates.
  • He was labeled a bad student due to boredom with the subject material, despite being bright.
  • Paul Allen was interested in subjects that he found engaging, leading to deep dives into those areas.
  • He was particularly obsessed with programming, which he learned at Lakeside School.

"But this is the interesting point. And I think this is very common for a lot of people where it's. And my qualms with standardized schooling is that you could have somebody that's incredibly bright but incredibly bored by the subject material and they're labeled a bad student, when most of the time we just have to find schooling should be adapted to the person."

This quote emphasizes the disconnect between traditional schooling and the needs of individual students, particularly those who are bright but not engaged by the curriculum.

University of Washington and Programming

  • Paul Allen spent time at the University of Washington's computer science library despite not being a student there.
  • He attended graduate-level programming classes and had access to computers, which were scarce resources at the time.
  • A professor allowed him to stay and learn without being registered or paying for school.

"Having haunted the stacks of UW's computer science library for some time, I naturally became the research arm of the Lakeside programming group."

Paul Allen's self-directed learning at the University of Washington's library led him to become an integral part of the Lakeside programming group, showcasing his initiative and passion for programming.

Diverse Interests and Academic Approach

  • Paul Allen had a wide range of interests, as evidenced by the variety of books he read.
  • He was driven more by curiosity than by the compulsion to get good grades.
  • His academic approach was characterized by deep engagement with material that interested him, while he struggled to maintain interest in subjects that did not.

"When it came to civil war trivia or the conjugations of language, I had trouble faking interest."

This quote illustrates Paul Allen's selective focus on topics that genuinely interested him, rather than a universal academic engagement.

Early Career and Traf-O-Data

  • Paul Allen and Bill Gates took a programming job with the Bonneville Power Administration, working on a software project for the electrical grid.
  • They learned about their abilities by working on a challenging project with experienced programmers.
  • Before Microsoft, they started a business called Traf-O-Data, which aimed to automate traffic data analysis.

"In hindsight, traffic data was a good idea with a flawed business model."

This quote reflects on the lessons learned from the Traf-O-Data venture, highlighting the importance of market research and the difficulty of competing with free services.

Moving to Boston and Honeywell

  • Paul Allen moved to Boston after Bill Gates encouraged him to find work together.
  • He received a job offer from Honeywell but was open to exploring new opportunities.
  • His parents supported his decisions, even if they did not always agree with them.

"I mailed my resume to a dozen computer companies in the Boston area and got a $12,500 job offer from Honeywell."

This quote shows Paul Allen's willingness to take risks and explore new opportunities in his career, leading him to move to Boston.

Partnership with Ed Roberts and MITS

  • Paul Allen and Bill Gates worked with Ed Roberts, founder of MITS, to develop software for the Altair.
  • They formalized their business relationship with MITS and started selling their software, Basic.
  • Paul Allen moved to Albuquerque to work more closely with MITS and oversee software distribution.

"We want you to draw up a license so we can sell this with the Altair."

This quote marks the beginning of a formal business partnership with MITS, which was a pivotal moment in the development of Microsoft.

The Early Days of Microsoft

  • The company's name, Microsoft, was chosen to reflect their focus on microprocessors and software.
  • Paul Allen and Bill Gates had different ideas about their partnership split, with Gates proposing a 60-40 split in his favor.
  • Microsoft quickly grew, leading to the division of labor between the partners, with Gates focusing on business and Allen on product development.

"Our one product was 8080 Basic, and MITS was our only customer."

This quote captures the early focus of Microsoft and the importance of their relationship with MITS, which was the foundation for their future growth.

Unequal Co-Founders and Growth

  • Paul Allen realized that Bill Gates did not view them as equal co-founders, which led to several adjustments in their partnership.
  • Microsoft's rapid growth necessitated a move to a proper headquarters and the need to navigate changing business relationships.

"In the life of any company, a few moments stand out. Signing the original basic contract was a big one for Bill and me."

This quote highlights the significance of formalizing their business arrangements and setting the stage for Microsoft's future success.

Microsoft's Early Days and Trademark Registration

  • Paul Allen and Bill Gates worked to spread their software as widely as possible.
  • Paul resigned from MITs to focus on Microsoft full-time.
  • The trade name "Microsoft" was registered with the state of New Mexico.
  • Microsoft expanded by leasing four new offices and was at full strength early in 1977.

"In November, I resigned from MITs and moved full time to Microsoft, the trade name we had registered with the state of New Mexico around that time."

The quote signifies Paul Allen's commitment to Microsoft by leaving his previous engagement and the formal establishment of Microsoft as a registered entity.

Unequal Co-Founders and Partnership Agreement

  • Bill Gates felt he deserved more than a 60% share due to his work on BASIC and leaving Harvard.
  • Paul Allen considered Bill's intellectual contribution and agreed to a 64/36 split.
  • The partnership agreement included provisions for Bill possibly returning to college and a clause for irreconcilable differences.

"I've done most of the work on basic, and I gave up a lot to leave Harvard. He said, I deserve more than 60%."

Bill Gates asserts his greater contribution to Microsoft's success, justifying a larger share in the partnership.

  • Microsoft's business grew, leading to the unequal co-founders part two.
  • A falling out with Ed Roberts led to a major win for Microsoft in a legal case.
  • Microsoft retained all rights to BASIC, allowing them to sell to anyone and keep all revenue.

"The ruling was a total victory for Microsoft. Our contract with MITs was terminated, with Pertech held accountable for all unpaid royalties."

This quote explains the outcome of the legal dispute where Microsoft emerged victorious, gaining full control over their BASIC software.

Microsoft's Early Culture and Move to Seattle

  • Microsoft's office culture was informal, with a young and single staff.
  • Paul Allen and Bill Gates decided to move the company from New Mexico to Seattle.
  • The move was influenced by the difficulty in recruiting in Albuquerque and personal preferences.

"After three years in New Mexico, I was ready to move. It was hard to recruit top flight programmers to Albuquerque not exactly a hotbed of research or technology."

Paul Allen's quote highlights the strategic decision to relocate Microsoft to a more technologically vibrant location.

Microsoft's Success and Reflections

  • Microsoft staff were excited about their future, captured in a group portrait.
  • Paul Allen reflects on the early days at Microsoft with fondness and notes a pattern of melancholy in success stories.

"When I look at that iconic photograph today, I see a group of young people excited about their future."

This quote captures the spirit and enthusiasm of the early Microsoft team, reflecting on their beginnings with nostalgia.

The Unequal Co-Founders Part Three

  • Paul Allen felt the partnership split was unfair after his contributions.
  • Bill Gates refused to renegotiate the equity split, straining their partnership.
  • The division in their partnership foreshadowed future changes.

"Under the circumstances, I felt that our 64/36 partnership split was out of whack."

Paul Allen expresses his discontent with the partnership equity distribution, highlighting the tension between the co-founders.

The IBM Deal and MS-DOS

  • Microsoft negotiated a non-exclusive arrangement with IBM for DOS.
  • The deal allowed Microsoft to license DOS to other manufacturers.
  • Paul Allen and Bill Gates foresaw the potential of MS-DOS as a cornerstone of personal computer technology.

"Bill and I were willing to forego per copy royalties if we could freely license the DOS software to other manufacturers."

The quote demonstrates Microsoft's strategic decision to prioritize widespread distribution of DOS over immediate per-copy royalties.

Acquisition of DOS and Foundation of Microsoft's Fortune

  • Microsoft purchased exclusive rights to DOS from Seattle Computer Products.
  • The decision to own rather than license DOS was foundational to Microsoft's success.
  • Bill Gates insisted on complete ownership for control and evolution of the product.

"Bill thought we should have complete ownership and control of the product. That's literally the foundation of their fortunes."

This quote emphasizes the significance of owning the software outright, a decision that was critical to Microsoft's future prosperity.

  • Brock sued Microsoft for control over the operating system he sold.
  • Microsoft settled due to the uncertainties of a jury trial.

"Five years after the PC's rollout, Brock fell on hard times and sued Microsoft in an attempt to regain control over the operating system that he had sold us."

This quote highlights the legal dispute between Brock and Microsoft, where Brock, after facing financial difficulties, attempted to reclaim rights over the operating system he had previously sold to Microsoft.

Company Growth and Dynamics

  • Microsoft transitioned from a small group of programmers to a larger company with diverse roles.
  • The growth required balancing innovation with supporting existing products for profit.
  • Paul Allen emphasizes the difficulty of maintaining this balance as the company expands.

"As a technology company grows, it must balance the need for innovation with the imperative to bolster existing products and keep the profits flowing."

Paul Allen points out the challenge of maintaining innovation while also ensuring that current products remain profitable, a balancing act that becomes more difficult as a company grows.

Paul Allen's Departure from Microsoft

  • Paul Allen experienced high stress and diminishing morale due to conflicts with Bill Gates.
  • His role at Microsoft was reducing, and he felt his grievances were unresolved.
  • Allen decided to leave Microsoft, as detailed in a letter he wrote to Bill Gates.

"I can no longer tolerate the brow beating or tirades that characterize almost every attempt I make to discuss any subject that is controversial."

This quote illustrates the intense and negative interactions Paul Allen had with Bill Gates, which contributed significantly to his decision to leave Microsoft.

Paul Allen's Health Crisis

  • Paul Allen was diagnosed with early-stage Hodgkin's lymphoma.
  • The diagnosis and treatment were a turning point in his life and career.
  • He realized that life was too short to spend unhappily, influencing his decision to leave Microsoft.

"If I were to relapse, it would be pointless, if not hazardous, to return to the stresses at Microsoft."

Paul Allen acknowledges that returning to the stressful environment of Microsoft could be detrimental to his health, especially if his cancer were to return.

Equity Dilution Incident

  • Paul Allen overheard Bill Gates and Steve Ballmer discussing diluting his Microsoft equity.
  • This incident occurred while Allen was undergoing chemotherapy.
  • The experience confirmed Allen's decision to leave Microsoft.

"Unable to stand it any longer, I burst in on them and shouted this is unbelievable. It shows your true character once and for all."

The quote captures Paul Allen's reaction to overhearing a conversation that revealed plans to reduce his share in the company, reinforcing his decision to leave.

Realizations Post-Microsoft

  • Paul Allen reflects on his achievements and regrets, emphasizing the importance of enjoying life.
  • He pursued a variety of interests after leaving Microsoft.
  • Allen's wealth from Microsoft enabled him to explore new ventures aligned with his passions.

"But my second act, in all its range and variety, is truer to my nature."

This quote summarizes Paul Allen's feelings about his life after Microsoft, where he found fulfillment in a wide range of activities that were more aligned with his true interests.

Relationship with Bill Gates

  • Despite difficulties, Bill Gates and Paul Allen remained friends.
  • Gates was supportive of Allen during his health struggles.
  • The complexities of their relationship did not diminish their mutual support.

"One of my most regular visitors was Bill Gates. He was everything you'd want from a friend, caring and concerned."

This quote reflects the enduring friendship between Paul Allen and Bill Gates, showing that despite professional conflicts, their personal relationship remained strong.

Lessons from Paul Allen's Life

  • Paul Allen's journey emphasizes the importance of following one's passion.
  • His experiences with Microsoft and his subsequent ventures taught him about the risks and rewards of the creative path.
  • Allen's reflections offer insights into living a fulfilling life without regrets.

"The creative path is rocky, with the risk of failure ever present and no guarantees. But even with its detours and blind alleys, it's the only road that I find fulfilling."

Paul Allen shares his perspective on the importance of pursuing creative endeavors, despite the inherent risks and challenges, as the path to personal fulfillment.

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