Idea man

MENTION Microsoft and most people think of Bill Gates, but technology buffs will remember his quiet partner Paul Allen as the one who closed the deal for DOS and ensured the company’s dominance in the personal computer industry —and enormous wealth for the two men. This and many other stories are told in Idea Man (Penguin, 2011), a memoir by Microsoft’s less public co-founder.

Some of the stories have been told before in industry histories such as Fire In The Valley (Freiberger and Swaine) or Accidental Empires (Cringely), but Idea Man tells them from Allen’s unique perspective.

As you might expect, half the book deals with Allen’s years in Microsoft, starting from its founding in Albuquerque, New Mexico, in 1975, to his resignation from the company’s board in November 2000.

Allen provides an insider’s perspective of the people and events that shaped the PC business, particularly his relationship with Gates. It is fascinating to read, for example, how Gates had insisted on carving out a bigger share of the company for himself early on (60-40 at first, then 64-36) because he felt he had done more work and made bigger sacrifices, and how he refused to even discuss a revised equity split with Allen later.

Allen also relates how in 1982, he overheard Gates and Steve Ballmer discuss how they might dilute his equity in the company.

He writes: “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.’ I was speaking to both of them, but staring straight at Bill. Caught red-handed, they were struck dumb. Before they could respond, I turned on my heel and left.’”

He also quotes from a handwritten letter from Gates apologizing for the incident—a last-ditch attempt to get him to stay when his mind had already been made up to leave. Then, when it was clear Allen was set on leaving, Gates made one more pitch: a low-ball offer for his stock at $5 a share, an offer Allen wisely declined.

Allen’s memoir is also notable for his insights into his former company’s prospects for survival in the age of mobile devices.

In the mid-90s, Allen writes, Microsoft prospered by being a “fast follower,” studying its competition, studying and watching them from every angle, and, in the words of chief executive Steve Ballmer, taking every one of their good ideas and turning it into their own.

But as the pace of innovation accelerated, fast following became more difficult.

“Today, for the most part, the best opportunities now lie where your competitors have yet to establish themselves, not where they’re already entrenched. Microsoft is struggling to adopt to that new reality,” Allen writes.

For example, Zune came out five years after the original iPod from Apple, and Bing, Microsoft’s first credible challenge to Google Search, wasn’t launched until 2009, and is still a distant second in search.

“Complacency has taken its toll, most tellingly in the newest competitive areas of smart phones and tablets, like the iPad. Platforms made Microsoft… The PC software platform… led our young company to dominance. History shows that you ignore emerging platforms at your peril, because one of them might make you irrelevant,” Allen says.

Still, by mid-2010, Microsoft had slipped to fourth in high-end smart phones, behind Apple, Google and RIM. “The Android mobile operating system is Bill’s old bete noire, the open-source version of Unix called Linux,” Allen observes. “Google essentially gives it away free to manufacturers for the same reason Microsoft once sold MS-DOS on the cheap: to dominate a market.”

If it is to take on Apple and Android phones that keep getting better, Microsoft needs a strategy to win, Allen concludes. It needs a quicker development cycle (Windows Vista took five years), a qualitatively better mobile operating system and a few features to set Windows smart phones apart.

“Above all, the company needs somehow to return to its cutting-edge roots,” he writes. “To win the mobile wars, the company needs first and foremost to produce phones and slates that consumers will love from the moment they use them.”

The alternative to catching up in the mobile market, he adds, “is a long, slow slide.”

There is more to Idea Man than Microsoft, however. The second half of the book deals with Allen’s passions in other fields, made possible by the tremendous wealth he generated from Microsoft.

These include his purchase of the Portland Trailblazers’ NBA franchise for $65 million in 1988 and the Seattle Seahawks National Football League team for $200 million in 1996. There are also chapters on his involvement in space flight, the cable industry, the movie business, neuroscience and his affinity with rock musicians.

Allen’s tone is straightforward and unassuming. “People ask how wealth has changed me…. There are times when I feel unaffected, and then I wonder if I’m kidding myself,” he writes. “The manifestations of wealth—homes, boats, planes—have clearly altered how I live and get around. More important, though, are the doors of possibility thrown open to me, the opportunities I’ve enjoyed.”

Through Idea Man, we get a rare peek through those doors.

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