It was 30 years ago today...

It's that time of the year when the infamous Bill Gates letter is pulled out and dusted off. So let's read this letter and take a moment's pause to think about the man and his company, Microsoft.
February 3, 1976

An Open Letter to Hobbyists

To me, the most critical thing in the hobby market right now is the lack of good software courses, books and software itself. Without good software and an owner who understands programming, a hobby computer is wasted. Will quality software be written for the hobby market?[1]

Almost a year ago, Paul Allen and myself, expecting the hobby market to expand, hired Monte Davidoff and delivered Altair BASIC. Though the initial work took only two months, the three of us have spent most of the last year documenting, improving and adding features to BASIC. Now we have 4K, 8K, EXTENDED, ROM and DISK BASIC. The value of the computer time we have used exceeds $40,000.[2]

The feedback we have gotten from the hundreds of people who say they are using BASIC has all been positive. Two surprising things are apparent, however. 1) Most of these "users" never bought BASIC (less than 10% of all Altair owners have bought BASIC), and 2) The amount of royalties we have received from sales to hobbyists makes the time spent of Altair BASIC worth less than $2 an hour.

Why is this? As the majority of hobbyists must be aware, most of you steal your software. Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid?

Is this fair? One thing you don't do be stealing software is get back at MITS for some problem you hay have had.[3] MITS doesn't make money selling software. The royalty paid to us, the manual, the tape and the overhead make it a break-even operation. One thing you do do is prevent good software from being written. Who can afford to do professional work for nothing? What hobbyist can put 3-man years into programming, finding all the bugs, documenting his product and distribute it for free? The fact is, no one besides us has invested a lot of money into hobby software. We have written 6800 BASIC, and are writing 8080 APL and 6800 APL, but there is very little incentive to make this software available to hobbyists. Most directly, the thing you do is theft.

What about the guys who re-sell Altair BASIC, aren't they making money on hobby software? Yes, but those who have been reported to us my lose in the end. They are the ones who give hobbyists a bad name, and should be kicked out of any club meeting they show up at.

I would appreciate letters from any one who wants to pay up, or has a suggestion or comment. Just write me at 1180 Alvarado SE, #114, Albuquerque, New Mexico, 87108. Nothing would please me more than being able to hire ten programmers and deluge the hobby market with good software.

Bill Gates
General Partner, Micro-Soft
  1. From Wikipedia:
    "In December 1975, Dick Whipple and John Arnold created an interpreter for the language that required only 3K of RAM. Bob and Dennis decided to publish this version and corrections to the original design documents in a newsletter dedicated to Tiny BASIC, which they called "Dr. Dobb's Journal of Tiny BASIC Calisthenics and Orthodontia". The newsletter's title was changed to Dr. Dobb's Journal of Computer Calisthenics & Orthodontia for the second issue. In the 1976 issues several versions of Tiny BASIC, including design descriptions and full source code, were published."

    From Wikipedia:
    "Forth is a procedural, stack-oriented, reflective programming language and programming environment. It was initially developed by Chuck Moore at the US National Radio Astronomy Observatory in the early 1970s, formalized as a programming language in 1977, and standardized by ANSI in 1994. It features both interactive execution of commands (making it suitable as a shell for systems that lack a more formal operating system), as well as the ability to compile sequences of commands for later execution. Some Forth versions (especially early ones) compile threaded code, but many implementations today generate optimized machine code like other language compilers.

    Forth is so named because Moore considered it appropriate for fourth-generation computers (i.e. microcomputers), and the system on which he developed it was limited to five-letter filenames."

  2. From "Gates", by Stephen Manes and Paul Andrews, 1994 edition:
    page 92: "And wasn't the $40,000 of computer time Gates mentioned a gross exaggeration? In fact, noted the editor of the Micro-8 Newsletter, 'rumors have been circulating thru the hobby computer community that imply that developement [sic] of the BASIC referred to in Bill Gates's letter was done on a Harvard University computer provided at least in part by government funds and that there was some question as to the propriety if not the legality of selling the results.'"

  3. From "Gates", by Stephen Manes and Paul Andrews, 1994 edition:
    page 92: "Nobody, of course, wanted to condone piracy, but counterarguments suddenly seemed to be flying around like evils from Pandora's box. Wasn't the MITS official policy of requiring you to sign some sort of legal document just to get a copy of BASIC - something the hobbyists were unaware was a contractual demand from Gates and Allen - needlessly draconian? And how dare anyone connected with MITS complain about unethical practices, given the company's track record of what Micro-8 Computer User Group Newsletter termed 'misleading advertising and failure to deliver mail order products as advertised in a reasonable time.'"
Personal Background

I was 22 in 1976. Four years out of high school, two years out of Ga. Tech and two years into becoming An Artist. It was one year before the release of the original "Star Wars" movie. I remember seeing the Altair in Popular Electronics and thinking that 1) it was too expensive for a struggling artist like me to afford, and 2) it was junk (the Intel 8080 was brain-dead), because I knew what Real Computers looked like through my exposure to an IBM 360 at Fernback Science Center in Atlanta and a Univac 1108 at Ga. Tech. Through those machines I learned to use two Real Computer Languages: APL and FORTRAN.

Final Thoughts

First, let's get some perspective. Microsoft is now the worlds largest software producer. For the quarter ending December 2005, their revenue was US$11.8 billion, while their net income is US$3.6 billion. Microsoft's current market cap as of Friday, February 3rd, 2005 is US$293.15 billion. What software company comes even close? To begin to give you a comparison, Redhat's current market cap from the same date is US$5.06 billion. Redhat's market capitalization is two orders of magnitude less than Microsoft. And Redhat is the most profitable of the true open source companies by far (and I'm deliberately ignoring IBM because IBM is still heavily proprietary).

Bill Gates and Co. have won. They sealed their victory 11 years ago with the release of Windows 95. It might be fun or therapeutic to point to Bill Gates's 1976 letter and rant about his behavior then, but face it: Bill Gates built a business from scratch and followed his instincts until both his business and he himself are the richest entities in the US, if not the world. I've had a ring-side seat to this circus from 1976 on, and I'm aware of all the players and what they did and didn't do.

Face it. Bill Gates Won. Now get over it.


  1. I know how much the F/OSS community likes to use this letter when talking the usual anti-Microsoft. However, given the context, I really do have to say I see Bill G's point of view on this one.

    At a time when the market was small, he was trying to build a business on software development. The rampant copying at the time was hurting his company. For what MS produced, there only was a hobbyist market.

    Now, flash forward many years, and I see a whole different paradigm. Today, the hobbyists really aren't a target market. Rather, they are a breeding ground for new commercial users. As such, I honestly believe that piracy has become interwoven into the fabric of hobbyist computing.

    Today, there are many software products that are priced for the commercial market. They are not useful enough at home for hobbyists to justify paying "real money" for them. However, hobbyists still have a use/need for them. As a result, many hobbyists just pirate said software. But unlike before, this isn't profits totally down the drain. As a result of illegal hobby use, the software becomes far more likely to be legally used in the commercial sector.

    Furthermore, it actually enhances vendor-lock that all commercial software entities ultimately would benefit from. How? Well, why would anyone bother to mess with cheap/free alternatives if you can just "get a free copy of the real thing"?


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