Microsoft Founded: The Digital Age Dawns

Bill Gates was 19 years old and Paul Allen was 22 when they officially founded Microsoft on April 4, 1975, in Albuquerque, New Mexico. They chose Albuquerque because that was where MITS, the manufacturer of the Altair 8800 microcomputer, was headquartered, and their first product was a BASIC programming language interpreter for the Altair. The company's name, a portmanteau of "microcomputer" and "software," was Allen's idea. Gates wanted to call it "Micro-Soft," with a hyphen, which appeared in early correspondence before being dropped. The Altair 8800 had appeared on the cover of Popular Electronics in January 1975, and Gates and Allen recognized immediately that this machine, and the personal computers that would follow, needed software. They contacted MITS founder Ed Roberts and claimed to have a working BASIC interpreter for the Altair, which was a lie. They wrote the software over the next eight weeks, with Allen famously finishing the bootstrap loader on the flight to Albuquerque. The demonstration worked on the first try, and MITS agreed to distribute their software. Gates's strategic genius revealed itself early. Rather than selling the BASIC interpreter outright, he licensed it, establishing the business model that would make Microsoft the most profitable software company in history. His "Open Letter to Hobbyists," published in 1976, argued that software piracy would destroy the incentive to write programs, a position that was wildly unpopular with the hobbyist community but prescient about the software industry's future economics. Microsoft moved to Bellevue, Washington, in 1979 and landed the contract that would define the company's trajectory. When IBM needed an operating system for its upcoming personal computer in 1980, Microsoft purchased QDOS (Quick and Dirty Operating System) from Seattle Computer Products for $50,000, adapted it, and licensed it to IBM as MS-DOS. Crucially, Gates retained the right to license MS-DOS to other manufacturers, which meant every IBM-compatible PC sold by any company needed Microsoft's software. By 1986, Microsoft's IPO made Gates a billionaire at age 31, the youngest self-made billionaire in American history at the time.