January 1975 issue of Popular Electronics

On the magazine’s cover was a photograph of a very small computer, not much larger than a toaster oven. It had a name only slightly more dignified than Traf‑O‑Data: the Altair 8800 ("Altair” was a destination in a Star Trek episode). It was being sold for $397 as a kit. When it was assembled, it had no keyboard or display. It had sixteen address switches to direct commands and sixteen lights. You could get the little lights on the front panel to blink, but that was about all. Part of the problem was that the Altair 8800 lacked software. It couldn’t be programmed, which made it more a novelty than a tool.

What the Altair did have was an Intel 8080 microprocessor chip as its brain. When we saw that, panic set in. “Oh no! It’s happening without us! People are going to go write real software for this chip” I was sure it would happen sooner rather than later, and I wanted to be involved from the beginning. The chance to get in on the first stages of the PC revolution seemed the opportunity of a lifetime, and I seized it.

Twenty years later I feel the same way about what’s going on now. Then I was afraid others would have the same vision we did; today I know thousands do. The legacy of the earlier revolution is that 50 million PCs are sold each year worldwide, and that fortunes have been completely reordered in the computer industry. There have been plenty of winners and losers. This time lots of companies are rushing to get in early while change is taking place and there are endless opportunities.

When we look back at the last twenty years it is obvious that a number of large companies were so set in their ways that they did not adapt properly and lost out as a result. Twenty years from now we’ll look back and see the same pattern. I know that as I write this there’s at least one young person out there who will create a major new company, convinced that his or her insight into the communications revolution is the right one. Thousands of innovative companies will be founded to exploit the coming changes.

In 1975, when Paul and I naively decided to start a company, we were acting like characters in all those Judy Garland and Mickey Rooney movies who crowed, “We’ll put on a show in the barn!” There was no time to waste. Our first project was to create BASIC for the little computer.

We had to squeeze a lot of capability into the computer’s small memory. The typical Altair had about 4,000 characters of memory. Today most personal computers have 4 or 8 million characters of memory. Our task was further complicated because we didn’t actually own an Altair, and had never even seen one. That didn’t really matter because what we were really interested in was the new Intel 8080 microprocessor chip, and we’d never seen that, either. Undaunted, Paul studied a manual for the chip, then wrote a program that made a big computer at Harvard mimic the little Altair. This was like having a whole orchestra available and using it to play a simple duet, but it worked.

Writing good software requires a lot of concentration, and writing BASIC for the Altair was exhausting. Sometimes I rock back and forth or pace when I’m thinking, because it helps me focus on a single idea and exclude distractions. I did a lot of rocking and pacing in my dorm room the winter of 1975. Paul and I didn’t sleep much and lost track of night and day. When I did fall asleep, it was often at my desk or on the floor. Some days I didn’t eat or see anyone. But after five weeks, our BASIC was written–and the world’s first microcomputer software company was born. In time we named it “Microsoft.”

We knew getting a company started would mean sacrifice. But we also realized we had to do it then or forever lose the opportunity to make it in microcomputer software. In the spring of 1975, Paul quit his programming job and I decided to go on leave from Harvard.

I talked it over with my parents, both of whom were pretty savvy about business. They saw how much I wanted to try starting a software company and they were supportive. My plan was to take time off, start the company, and then go back later and finish college. I never really made a conscious decision to forgo a degree. Technically, I’m just on a really long leave. Unlike some students, I loved college. I thought it was fun to sit around and talk with so many smart people my own age. However, I felt the window of opportunity to start a software company might not open again. So I dove into the world of business when I was nineteen years old.

From the start, Paul and I funded everything ourselves. Each of us had saved some money. Paul had been well paid at Honeywell, and some of the money I had came from late‑night poker games in the dorm. Fortunately, our company didn’t require massive funding.

People often ask me to explain Microsoft’s success. They want to know the secret of getting from a two‑man, shoestring operation to a company with 17,000 employees and more than $6 billion a year in sales. Of course, there is no simple answer, and luck played a role, but I think the most important element was our original vision.

We glimpsed what lay beyond that Intel 8080 chip, and then acted on it. We asked, “What if computing were nearly free?” We believed there would be computers everywhere because of cheap computing power and great new software that would take advantage of it. We set up shop betting on the former and producing the latter when no one else was. Our initial insight made everything else a bit easier. We were in the right place at the right time. We got there first and our early success gave us the chance to hire many smart people. We built a worldwide sales force and used the revenue it generated to fund new products. From the beginning we set off down a road that was headed in the right direction.

Now there is a new horizon, and the relevant question is, “What if communicating were almost free?” The idea of interconnecting all homes and offices to a high‑speed network has ignited this nation’s imagination as nothing has since the space program. And not just this nation’s–imaginations around the world have caught fire. Thousands of companies are committed to the same vision, so individual focus, understanding of the intermediate steps, and execution will determine their relative successes.

I spend a good deal of time thinking about business because I enjoy my work so much. Today, a lot of my thoughts are about the highway. Twenty years ago, when I was thinking about the future of microchip personal computers, I couldn’t be certain where they were leading me either. I kept to my course, however, and had confidence we were moving in the right direction to be where we wanted to be when everything became clear. There’s a lot more at stake now, but I feel that same way again. It’s nerve‑wracking, but exhilarating too.

All sorts of individuals and companies are betting their futures on building the elements that will make the information highway a reality. At Microsoft, we’re working hard to figure out how to evolve from where we are today to the point where we can unleash the full potential of the new advances in technology. These are exciting times, not only for the companies involved but for everyone who will realize the benefits of this revolution.