The bill gates problem, p.1
The Bill Gates Problem, page 1
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About the Author
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For S.S. and S.S.
Prologue
This is a difficult book to write because it is about a difficult man—one of the world’s richest men and one of the most deeply secretive.
Bill Gates did not respond to multiple interview requests for this book, nor did anyone at the Gates Foundation ever agree to an interview at any point in my reporting on the foundation. Even before I published my first article on Gates in early 2020—or established myself as a journalist who would report on the Gates Foundation as a structure of power, not an unimpeachable charity—the foundation refused to sit for any interviews. As I published my investigations in the Nation, the British Medical Journal, and Columbia Journalism Review, the Gates Foundation always assumed a posture of nonengagement.
This silent treatment isn’t unique to me. The foundation, as a rule, does not put itself or its leaders in a position where they might be pushed to explain contradictions in its work or forced to answer critical questions. Like any powerful organization, the $54 billion Gates Foundation engages with the media on its own terms.
At the same time, because so many people and institutions today depend on Gates’s charitable dollars, many sources are reluctant to speak out for fear of professional consequences. You will find many unnamed sources in this book, and you should not doubt the reasons for their having requested anonymity. “It would be suicidal for someone who wants a grant to come out and publicly criticize the foundation,” Mark Kane, a former head of Gates’s vaccine work, noted in 2008. “The Gates Foundation is very sensitive to PR.”
I also want to state up front why Melinda French Gates does not appear on an equal footing with Bill Gates in this book. It’s because she is not an equal to Bill Gates at the Bill & Melinda Gates Foundation. I know this to be true because I’ve spoken to foundation staff who have made clear that Bill Gates is the alpha and the omega. And I know this because the foundation itself announced it in 2021. Following the Gateses’ divorce, the foundation reported that Melinda, not Bill, would step down from the foundation after a two-year trial period if they could not agree to a power-sharing arrangement. It is Bill Gates’s vast fortune from Microsoft that funds the foundation, and it is Bill Gates who ultimately is in charge of how the money is spent. This is not to say that Melinda doesn’t have a very powerful voice or major impact on the foundation, and I do profile her work throughout the book.
Finally, one note on language: Technically speaking, the Gates Foundation is incorporated under tax rules as a private foundation. I use this term throughout the book, but I also refer to the Gates Foundation as a philanthropy and a charity.
Introduction
You might not recognize the name “Paul Allen.”
Allen was a vital spark plug who helped ignite the corporate engine of what became one of the most influential companies in the world, Microsoft. And, for a time, he was both the business partner and the best friend of one of the most powerful men ever to walk the earth.
The name “William Henry Gates III” you also may not immediately recognize. It’s a grand name befitting a man who comes from generational wealth and privilege, a man born on third base. Bill Gates’s mother came from a well-to-do banking family, and his father was a prominent lawyer in Seattle. As Gates described his upbringing, it was “Okay, this is the governor coming to dinner, or here is this political campaign, let’s get involved in this.” The family’s network of influence afforded Gates unusual opportunities growing up—like serving as a page in both the Washington State legislature and the U.S. Congress.
Paul Allen, by contrast, was a middle-class son of a librarian—his family had to make sacrifices to get him into Seattle’s most elite private school, Lakeside, where he befriended Bill Gates. “I was thrown into a forty-eight-member class of the city’s elite: the sons of bankers and businessmen, lawyers and UW professors. With scattered exceptions, they were preppy kids who knew each other from private grammar schools or the Seattle Tennis Club,” Allen, now deceased, wrote in his autobiography.
Lakeside’s wealth meant students there had special privileges, like access to a computer—a rarity in the late 1960s. It was in the school’s computer room that Allen formed an unlikely friendship with Gates, two years his junior. “You could tell three things about Bill Gates pretty quickly,” Allen remembers. “He was really smart. He was really competitive; he wanted to show you how smart he was. And he was really, really persistent.”
The boys’ passion for computers quickly turned entrepreneurial as they recognized ways to monetize their burgeoning programming skills. The work also proved competitive. When Allen secured a gig working on a payroll program, he thought he could do it without Gates’s help. Gates sent him an ominous message. “I said, ‘I think you’re underestimating how hard this is. If you ask me to come back, I am going to be totally in charge of this and anything you ever ask me to do again,’” Gates recalled. Allen, in fact, did end up needing help on the project, and as Gates explained, “It was just more natural for me to be in charge.” With help from his father, Gates went on to legally incorporate their growing computer programming business, naming himself president and claiming a share in the company’s earnings four times larger than the share he gave Allen.
After the two boys graduated, they remained close but went in different directions—Allen to the decidedly nonelite public school Washington State University, Gates to Harvard. Allen’s unfocused academic career quickly fizzled, and he recounts Gates pushing him to move out East, where the two of them could turn their love of computers into something special. Allen dropped out of college and headed to Boston.
Allen describes himself as the “idea man”—he was constantly bouncing business plans off Gates, who played the role of the boss, and who usually shut Allen down. As Bill Gates remembers it, “We were always talking about, ‘Could we stick a lot of microprocessors together to do something powerful? Could we do a 360 emulator using micro controllers? Could we do a time-sharing system where lots of people could dial-in and get consumer information?’ A lot of different ideas.”
After months of throwing the dart, Allen eventually hit upon a bull’s-eye idea that Gates liked: writing a programming language for one of the world’s first widely available home computers, the Altair. Gates cold-called the company’s headquarters in New Mexico from his Harvard dorm room and, in classic Gates fashion, bluffed that he had new software for the Altair in development, nearly up and running. The company invited him to fly out to demonstrate the product. Gates and Allen spent a grueling eight weeks working to pull the program together. When it came time to meet with Altair, Paul Allen took the flight. Though he wasn’t the dead-eyed bullshit artist Gates was, he at least looked like an adult. Gates, even well into adulthood, was renowned for his boyish appearance, which Microsoft later leaned into, promoting him as a whiz kid.
The business deal went through and brought enough success that Gates eventually dropped out of Harvard to focus on his new company. And it was his company, as Allen quickly learned. Even though Allen had played a vital and central role in the Altair deal—he also coined the name “Microsoft,” a portmanteau of microprocessor and software—Gates immediately insisted on majority ownership, taking 60 percent of the company. Allen remembers being taken aback by his business partner’s assertion of power, but he didn’t argue.
Gates, apparently realizing how easy that deal had been, shamelessly brought Allen back into negotiations, where he claimed an even larger share. “I’ve done most of the work … and I gave up a lot to leave Harvard,” he said. “I deserve more than 60 percent.”
“How much more?”
“I was thinking 64–36.”
Allen writes that he didn’t have the heart to dicker with Gates, but the deeper truth, as I read it, was that he couldn’t accept what was really happening: his best friend was screwing him. “Later, after our relationship changed, I wondered how Bill arrived at the numbers he’d proposed that day. I tried to put myself in his shoes and reconstruct his thinking, and I concluded that it was just this simple: What’s the most I can get?… He might have argued that the numbers reflected our contributions, but they also exposed the differences between the son of a librarian and the son of a lawyer. I’d been taught that a deal was a deal and your word was your bond. Bill was more flexible.”
As Microsoft grew, eventually relocating to Seattle, Allen continued to be an idea man. He recounts coming up with an important work-around that enabled Microsoft software to work on Apple computers, using a hardware device called the SoftCard. The product opened up a broad new market for Microsoft and drove millions of dollars in much-needed revenue in 1981. Allen, still wanting to believe th at he and Gates were partners and peers, decided to use the success of SoftCard as leverage to press Gates for a larger share of the company. If Gates could renegotiate their percentages, why couldn’t he?
“I don’t ever want to talk about this again,” Gates told him, shutting him down. “Do not bring it up.”
“In that moment something died for me,” Allen reflects. “I thought that our partnership was based on fairness, but now I saw that Bill’s self-interest overrode all other considerations. My partner was out to grab as much of the pie as possible and hold on to it, and that was something I could not accept.”
In a final ignominy, Allen, while recovering from treatment for the non-Hodgkin’s lymphoma that eventually took his life, overheard Gates discussing a plan to dilute his shares, further diminishing his ownership stake in the company. After having strong-armed Allen to reduce his share in the company from 50 percent to 40 percent and then to 36 percent, Gates still wanted more.
“I replayed their dialogue in my mind while driving home,” Allen said, “and it felt more and more heinous to me. I helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. It was mercenary opportunism, plain and simple.”
It’s a devastating denouement in Allen’s autobiography, which, though ostensibly an account of his unlikely path to becoming a multibillionaire, could also be read as a crushing reflection on his failed relationship with Bill Gates—a man he loved but who was himself incapable of true friendship because he saw himself as without equal. As Allen describes it, Gates’s truest self is a man driven constantly to prove his superiority, “who wanted not only to beat you but to crush you if he could.”
Dozens of books have been written about Gates, virtually all of them in the 1990s and early 2000s, and they widely describe his domineering spirit and his intensity. These accounts also profile his brash, belligerent, arrogant, and bullying behavior—seemingly toward everyone, whether friend or foe. Gates was not simply a passionate man but also a deeply emotional man, often described as childlike in his inability or unwillingness to control his temper. He seemed to relish dressing down subordinates at Microsoft. In the 1990s, Playboy described his style as “management by embarrassment—challenging employees and even leaving some in tears.”
Paul Allen describes Gates’s constant “tirades,” “browbeating,” and “personal verbal attacks” as not only acts of bullying but also a major suck on corporate productivity. With his focus on negative reinforcement, Gates became known for the famous catchphrase, “That’s the stupidest fucking thing I’ve ever heard.”
Some might argue that this kind of narcissism and intensity are required of an industry captain at the level Gates was operating in the global economy. Whatever the rationalization, Gates ruled his company with an iron fist—and also came to view the wider computer industry as his dominion. And the body count quickly piled up. “Bill would go to a very senior person at these other [computer companies] and yell at them or tell them it had to be this way, or if you don’t do this we’ll make sure our software doesn’t run on your box. What do you do if you’re one of these … guys? You’re screwed. You can’t have Microsoft not support your hardware so you better do what they say,” recounts an early Microsoft employee, Scott McGregor. As another software executive noted in the 1990s, “It’s part of Bill’s strategy. You smash people. You either make them line up or you smash them.”
Microsoft’s biggest business coup came in the early 1980s, when IBM, then one of the world’s most powerful companies, asked the comparatively tiny Seattle-based software upstart to write an operating system for its personal computers. Most news outlets reported this improbable deal as the product of nepotism. Gates’s mother sat on the board of the United Way, one of the world’s most prominent charities, alongside the head of IBM, a relationship that may have helped grease the wheels for her son. Gates’s father had also been helping his son’s software company over the years; his law firm’s largest client eventually became Microsoft.
The problem with the IBM deal was that Microsoft didn’t have an operating system. So, it found a firm that did and acquired the software. IBM’s market power made the newly minted “MS-DOS” the industry standard, laying the groundwork for Microsoft’s multibillion-dollar dominion over the computer industry. Decades later, most computers around the world still run on Microsoft’s operating system, now called Windows. Bill Gates had turned his corporate mantra—“A computer on every desk and in every home running Microsoft software”—into a reality.
What this episode shows is that if there is a genius to Gates, it is not as an innovator or inventor or technologist. Rather, it’s as a businessman; it’s in his ability to understand the business dimensions of technology and innovation, to network and negotiate, and to stop at nothing until he controls the way it all works.
Over time, Bill Gates became one of the most feared industry captains. As Microsoft grew and grew, it began expanding beyond the narrow confines of computer software. It considered buying Ticketmaster, the monopolistic force selling tickets to concerts and sporting events. Then Gates made a high-profile appearance at a newspaper industry conference, sending shock waves around potential media acquisitions. (Microsoft went on to launch Slate magazine and MSNBC, from which it has since divested.) “Everybody in the communications business is paranoid about Microsoft, including me,” media tycoon Rupert Murdoch said at the time.
At a point, Microsoft began to seem like less a monopoly and more an empire, viewed by businesses the way the U.S. military is by many governments. With the simple maneuvering of an aircraft carrier in one direction or the other, the Pentagon can quietly send a powerful message: Your future is in our hands.
“I’ve competed against Microsoft for years, but I never quite appreciated how big Microsoft has become, not just as a company, but as a brand and as part of the national consciousness,” Eric Schmidt, then an executive at Novell (and later the CEO of Google), noted in 1998. “It’s the products, the Microsoft marketing juggernaut, Bill Gates’s wealth, all those magazine cover stories. It’s everything.”
The Microsoft juggernaut, however, was not impregnable. The company made a series of major missteps under Gates’s leadership, failing to recognize the potential existential threat that the World Wide Web posed to Microsoft’s market share. To play catch-up, Microsoft clumsily hatched a plan to bury the dial-up internet service provider America Online, in which Paul Allen personally had a large investment stake. Gates casually told an acquaintance of Allen’s, “Why would Paul want to compete with us? I’m just going … to keep losing money every year until we have the number-one market share in online. How does it make sense to compete with that?” Allen saw the writing on the wall and divested.
Gates and Microsoft also aimed their attention at internet browsers, dominated by Netscape. Microsoft put the screws to computer manufacturers, pushing them to sell units preloaded with its own browser, Internet Explorer, alongside its operating system, Microsoft Windows.
This proved the beginning of the end for Gates at Microsoft. A high-profile antitrust court case followed, with the Department of Justice accusing the company in 1998 of exercising monopoly power. In an inexplicable act of hubris, Gates decided that he could personally outwit government prosecutors, agreeing to sit for a videotaped deposition—a deeply embarrassing performance that proved damaging to his company. For days, Gates played the role of an arrogant Mr. Know-It-All, tediously rearranging every question he was asked—he even debated the definition of the word definition—and constantly seeking to diminish the intelligence of the lawyers opposing him. (Videos of the deposition are available on YouTube.) It was a prime-time showcase of Bill Gates’s capacity for evasion and unhinged god complex. Paul Allen—and the rest of the world—watched Gates’s public dissembling with a mixture of fascination and horror.
“Anti-Microsoft sentiment became widespread and intense, and it cut Bill to the core,” Allen noted. “He’d been the darling of the business press, the craft entrepreneur and technology genius. Now the media portrayed him as a bully who’d bent the rules and probably broken them.”
