When two school friends set up their own software business, one of them didn’t expect it to become one of the most successful companies the world has ever known. The other one was keen to work every waking hour and be the figurehead for an iconic business. But Paul Allen didn’t mind that. His vision involved staying in the shadows and keeping out of the limelight…
By Darren Parkin
VERY few people go to a rock concert to see the drummer of the band. Virtually every ticket in the stadium is sold on the strength of the lead vocalist, swaggering around the mic-stand with hair swishing like a shampoo commercial.
Does the drummer care? More often than not, they couldn’t give two beats of a crash cymbal. They’re getting paid handsomely for their efforts, doing something they love, even if half the audience don’t actually know their name.
Yet, without them, there wouldn’t be an audience. A singer couldn’t perform without an audible tempo, the crowd would have no idea what rhythm to dance to, and rock music without a drumbeat is, frankly, ridiculous.
If Microsoft were a band, Paul Allen would be the drummer.
Ask anyone in the street who they think created Microsoft and you’ll hear the response ‘Bill Gates’ repeated back many times over.
Without Paul Allen, however, Microsoft wouldn’t exist. Bill Gates, in all likelihood, would still be a remarkably wealthy genius, but it is doubtful the name Microsoft would feature on his CV.
Paul Allen and Bill Gates – born two years apart – went to the same Lakeside school near their native Seattle. With a wealth of shared interests, they became best friends and, even as young teenagers would discuss plans to one day run one of the world’s most recognisable brands. For Allen, it was a soft-focus, delicately-lit pipedream that he enjoyed laughing off, but he knew his slightly younger friend had a much more serious view on it.
“Bill came from a family that was prominent even by Lakeside standards,” recalls Allen.
“I remember the first time I went to Bill’s big house – a block or so above Lake Washington – feeling a little awed. His parents subscribed to ‘Fortune’, and Bill read it religiously.
“One day he showed me the magazine’s special annual issue and asked me ‘What do you think it’s like to run a Fortune 500 company?’. I said I had no idea, and Bill said: ‘Maybe we’ll have our own company someday’.
“He was 13 years old, and already a budding entrepreneur.”
In June 1975, almost 10 years later, Allen founded Microsoft with Gates. His intention was to design software for the emerging wave of personal computers. The pair were brilliant within their field, and by the time Allen had bought the Q-DOS operating system for just over $50,000, Microsoft was already making a name for itself supplying software to the fledgling tech start-ups of Commodore and Apple.
With Q-DOS in their hands, the two friends reworked, reprogrammed and reinvented the system. It became MS-DOS and was installed in IBM’s PCs – the home computers which claimed the majority market share shortly after their release in 1981.
Microsoft’s rise, although not unexpected, was sudden and rapid. And while the business went from strength to strength, their friendship did not.
By 1982, the pair were barely on speaking terms. Allen found his business partner overbearing, too controlling, and intimidating to everyone they worked with. He thought back to the time when they had signed a formal business partnership agreement in 1977. Paragraph 12 was about ‘irreconcilable differences’, and made it clear that Gates, as the majority stakeholder, could demand Allen withdraw from the company.
“I wondered how Bill had arrived at the numbers he’d proposed that day,” he recalls.
“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? I think Bill knew that I would balk at a two-to-one split, and that 64 percent was as far as he could go. 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; he felt free to renegotiate agreements until they were signed and sealed. There’s a degree of elasticity in any business dealing, a range for what might seem fair, and Bill pushed within that range as hard and as far as he could.”
Allen and Gates spent much of their work time arguing. Bill Gates was a man who liked to argue his point, but he always sought closure – often in the form of having the last word. Despite dozens of common traits between the two, this wasn’t one of them. Paul Allen was wired a little differently. He was never one to back down in an argument for the sole purpose of putting an end to it.
The two of them were renowned for having verbal showdowns that could last for hours, disrupting the work of staff within earshot. The stress of daily disputes was taking its toll on Allen.
Working every waking hour was something that came as second nature to Bill Gates, but for his partner Paul Allen, it was a gruelling experience. He was becoming tired, weak, and feeling persistently ill. Unbeknown to his family or himself, there was an underlying medical condition, no doubt exacerbated by the strain of his failing business relationship, causing him to falter.
Just before the two geniuses behind Microsoft had their final showdown, Allen was diagnosed with early stage Hodgkin’s Lymphoma. Luckily, it had been caught in time, but it still required gruelling treatment in the form of radiotherapy. During the recovery period, Allen had been thinking about leaving Microsoft to start up his own company.
A gaunt shadow of himself, he returned to the Microsoft offices where he heard shouting coming from behind Bill Gates’ door. Listening in, he could clearly hear Gates with Steve Ballmer. Ballmer was an old associate who the two had hired as a general manager to alleviate some of the pressure of running a business – something neither of them agreed they were much good at.
The heated conversation was bristling with complaints about Allen’s lack of effort over the previous few weeks while he was undergoing treatment. They were even discussing how to dilute his equitable stake in Microsoft by distributing the options among themselves and key shareholders.
Allen couldn’t take any more. He burst open the door, shouting: “This is unbelievable! It shows your true character, once and for all.” Gates and Ballmer stood frozen with shock. Allen just turned and walked away.
After weeks of not speaking, Paul Allen and Bill Gates met once more. Gates offered to buy his partner out. $5 per share. Allen stuck to his guns. He was leaving, but he wasn’t giving up his equity.
His resignation became official a month after their meeting – February 18 1983 to be precise. Retaining his seat on the board, he was quickly appointed vice-chairman as a testament to the work he had done in not only setting Microsoft up, but keeping its course true. He remained on the board until 2001, and still holds a staggering 100 million shares in Microsoft.
Now worth an estimated $17bn, and inspired by the health scare that saw him split from Bill Gates, he spends most of his time chasing adventures and donating to philanthropic causes. The 55th wealthiest man in the world, he’s used his funds wisely to invest in tech companies, art and property while having a lot of fun at the same time. His rock and roll parties – where he often plays rhythm guitar and, without irony, the drums – are legendary affairs. He owns numerous yachts and an impressive collection of sports teams, most notably the Seattle Seahawks and Portland Trailblazers.
His over-the-top lifestyle may well be the result of a health scare and a desire not to be a part of a cut-throat world where Bill Gates would argue for hours at a time just to have the last word, but who would argue that Paul Allen is having the last laugh in this broken relationship?
*References: ‘Idea Man: A Memoir by the Cofounder of Microsoft’.