Burning the Ships: Intellectual Property and the Transformation of Microsoft

Chapter 5. Leadership Starts at the Top

On February 3, 1976, a then-20-year-old Bill Gates wrote an "Open Letter" that, more than any other single act of the Microsoft founder and chairman, illuminated his singular vision of the role that intellectual property would play in the creation of a software industry that has today become one of the most powerful engines of the world economy.

The letter was addressed to the Homebrew Computer Club, an organization of hobbyists that had formed one year earlier in Silicon Valley following the introduction of the world's first personal computer, the Altair 8800, which was sold as a mail-order kit through advertisements in Popular Electronics and other hobbyist magazines. Gates at that time was running a small firm with his old high-school classmate Paul Allen in Albuquerque, New Mexico, and according to Gates, the moment he and Allen saw the ad for the Altair kit computer in Popular Electronics, they realized that the price of personal computers would likely drop to the point where they could become ubiquitous in society. If so, this would create a lucrative new business opportunity in selling the software that could transform such devices from hobbyist toys into powerful communications and productivity tools for consumers and businesses alike. So Gates and Allen designed a version of the BASIC programming language to run on the Altair.

The problem was, most computer hobbyists at the time saw software as the inseparable (yet separately valueless) ...