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How Billionaire Bill lost his company, and other stories

June 27, 2002

Microsoft’s chairman may hope the spooky similarities with an earlier entrepreneur end now

 

MAYBE YOU ARE already familiar with this story. Some time ago, a young American high-tech pioneer dropped out of his east coast Ivy League college to go into business. He formed a company near Seattle, Washington, at the very top left hand corner of the US, to exploit a fast emerging new global technology market.

 

This man, known to friends, employees and rivals alike, as Bill, drove the development of his company with such ruthless determination that it became the largest supplier in the world, dominating all of its competitors. And not only did his company design and supply the base technology, it also became the major supplier of the added value services that ran on it, making it very difficult for rivals to compete. Eventually the US government passed antitrust laws which forced the break-up of the company into several independent businesses.

 

In disgust at this action, Bill sold all his stock in the business and abruptly left the company which he had founded. Despite this, the separate businesses went on to thrive, becoming dominant suppliers in turn in their own individual markets.

Wait a minute ... that last hit hasn’t happened yet. Or has it?

 

Sure it has, for that was a summary of the career of William E — Bill — Boeing, the founder of the Boeing Aircraft Company. For in building up the Boeing business, Bill Boeing also set up a major airline and an engine manufacturer, and today these business are known respectively as the Boeing Aircraft Corporation, United Airlines, and the Pratt & Whitney jet engine company.

 

It is fascinating to make comparisons between this story and the strangely similar path taken, around 75 years afterwards, by Bill Gates, the founder of Microsoft. Like his Pacific Northwest predecessor, Mr Gates has used his technological expertise and business determination to build a company that has become the dominant supplier in its newly emerging market. And just as in 1934, when the Roosevelt administration decided that the Boeing company was potentially abusing its leading position to squash rivals, Microsoft is attracting similar attention from the government’s anti-competition lawyers.

 

It remains to be seen what will happen. Will the courts agree with a previous ruling that Microsoft should be split up, or will they instead force Microsoft to adopt dramatic new policies, such as opening up the source code of the Windows operating system for others to use?

 

And, if they do order drastic action against Microsoft, how will Mr Gates react?

 

Mr Gates, the richest man in the world, did not get that way by being soft, gentle, and sensitive to the feelings of others. He is ruthlessly competitive. His friend and fellow billionaire, Warren Buffet is said (by Rupert Murdoch) to have commented that if Bill Gates “saw a competitor drowning, he would push a hose down his throat to be sure”.

 

Fortune magazine once noted that Bill Gates has a signed picture of Henry Ford on his office wall, but not, as you might suppose, because he sees the pioneer of the mass-manufacture automobile industry as a hero. In looking at the picture of Ford, Mr Gates is reminded of an individual who, like him, had pioneered an industry but then lost out to a rival. Henry Ford lost the leadership of the motor industry to Alfred P Sloan’s General Motors, and he never won it back. Mr Gates is determined not to allow what happened to Henry Ford to happen to him.

 

A couple of years ago, he handed day-to-day management of Microsoft over to his old friend Steve Ballmer, and the new “cuddly” boss has been declaring that Microsoft is changing. It will no longer be as fiercely aggressive, it will start paying attention to providing more reliable software, and it will cooperate better with partners. Since most people in the industry think Mr Ballmer is about as cuddly as a polar bear that hasn’t eaten in a week, they are reserving judgment about whether Microsoft has changed.

 

And this month, as the lawyers were presenting their closing statements at the Microsoft anti-trust trial, Mr Gates chose to sell a hefty l0m of his Microsoft shares, yielding around $500m (£327m).

 

It’s a pretty weird thought - but if Microsoft loses and is split up, would Bill Gates be so disgusted that, just like Bill Boeing, he might walk away from the company that he founded? 

 

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