I was Mr. Slow Burn, like Walter Matthau to Bill’s Jack Lemmon. When I got
mad, I stayed mad for weeks. I don’t know if Bill noticed the strain on me,
but everyone else did. Some said Bill’s management style was a key
ingredient in Microsoft’s early success, but that made no sense to me. Why
wouldn’t it be more effective to have civil and rational discourse? Why did
we need knock-down, drag-out fights?

Why not just solve the problem logically and move on?

Logging Off
As we grew, our need for more help became glaring. Neither Bill nor I had a
lot of experience as managers, and both of us had other areas of
responsibility—Bill in sales, I in software development. Steve Wood had
filled in admirably as general manager, but he, too, was a programmer by
background. Bill came to see that we needed someone to help him run the
business side of things, just as I ran technology. He chose Steve Ballmer,
a Harvard classmate who’d worked in marketing at Procter & Gamble and was
now studying at Stanford’s business school. Bill sold him hard to me:
“Steve’s a super-smart guy, and he’s got loads of energy. He’ll help us
build the business, and I really trust him.”

I had run into Steve a few times at Harvard, where he and Bill were close.
The first time we met face-to-face, I thought, This guy looks like an
operative for the N.K.V.D. He had piercing blue eyes and a genuine
toughness (though, as I got to know him better, I found a gentler side as
well). Steve was someone who wouldn’t back down easily, a necessity for
working well with Bill. In April 1980, shortly before leaving town on a
business trip, I agreed that we should offer him up to 5 percent of the
company, because Bill felt certain that Steve wouldn’t leave Stanford
unless he got equity.

A few days later, after returning from my trip, I got a copy of Bill’s
letter to Steve. (Someone had apparently found it in the office’s Datapoint
word-processing system, and it made the rounds.) Programmers like Gordon
Letwin were furious that Bill was giving a piece of the company to someone
without a technical background. I was angry for another reason: Bill had
offered Steve 8.75 percent of the company, considerably more than what I’d
agreed to.

It was bad enough that Bill had chosen to override me on a partnership issue
we’d specifically discussed. It was worse that he’d waited till I was away
to send the letter. I wrote him to set out what I had learned, and
concluded, “As a result of discovering these facts I am no longer
interested in employing Mr. Ballmer, and I consider the above points a
major breach of faith on your part.”

Bill knew that he’d been caught and couldn’t bluster his way out of it.
Unable to meet my eyes, he said, “Look, we’ve got to have Steve. I’ll make
up the extra points from my share.” I said O.K., and that’s what he did.

It began in the summer of 1982 with an itch behind my knees at the Oregon
Shakespeare Festival, where my parents would take us to see nine plays in
seven days when I was in junior high. Not like a rash you got from the
wrong soap—this was an agony that had me clawing at myself.

After the itching stopped, the night sweats began. Then, in August, I became
aware of a tiny, hard bump on the right side of my neck, near my
collarbone. Over the next several weeks, it grew to the size of a pencil
eraser tip. It didn’t hurt, and I didn’t know that any lump near the lymph
nodes was a warning sign. I felt as bulletproof as most people under 30; I
took my health for granted.

On September 25, doctors at the Swedish Medical Center, in downtown Seattle,
performed a biopsy. After I came out of anesthesia, my surgeon entered my
room looking grim. “Mr. Allen,” he said, “I took out as much as I could,
but our initial diagnosis is lymphoma.”

Then, good news: they’d caught my disease in Stage 1-A, before it had
spread. Early-stage Hodgkin’s lymphoma is one of the most curable cancers;
I’d drawn a scary card, but hardly the worst. I began a six-week course of
radiation, five days a week. Halfway through therapy, my white-cell count
dropped so low that they had to stop for several weeks. But by then the
tumor was shrinking. There was no guarantee of a cure, and I still felt
sick and debilitated, but I began to be encouraged.

After resuming the radiation, I was in Bill’s office one day talking about
MS-DOS revenues. Our flat-fee strategy had helped establish us in several
markets, but I thought we’d held on to it for too long. A case in point:
We’d gotten a fee of $21,000 for the license for Applesoft BASIC. After
sales of more than a million Apple II’s, that amounted to two cents per
copy. “If we want to maximize revenue,” I said, “we have to start charging
royalties for DOS.”

Bill replied as though he were speaking to a not-so-bright child: “How do
you think we got the market share we have today?” Then Steve came by to
weigh in on Bill’s side with his usual intensity; it would have been two on
one, except I was approximately half a person at the time. (Microsoft later
switched to per-copy licensing, a move that would add billions of dollars
in revenue.)

Not long after that incident, I told Steve that I might start my own
company. I told Bill that my days as a full-time executive at Microsoft
were probably numbered, and that I thought I’d be happier on my own.

One evening in late December 1982, I heard Bill and Steve speaking heatedly
in Bill’s office and paused outside to listen in. It was easy to get the
gist of the conversation. They were bemoaning my recent lack of production
and discussing how they might dilute my Microsoft equity by issuing options
to themselves and other shareholders. It was clear that they’d been
thinking about this for some time.

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.

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