Not every mistake happens out of negligence. What can we learn from Gary Kildalls incredible (but sad) story?
First, a disclaimer: this won’t be a feel-good read. In fact, what I’m about to reflect on is probably one of the saddest stories in computer history. Few people know about Gary Kildall, though his contributions to the world of personal computers were invaluable.
Back in the early 80s, IBM decided to create their own PC brand but there was only one problem: they didn’t have an operating system. Young 25-year-old Bill Gates had recently created his company, Microsoft. IBM turned to Gates to see if he could come up with a solution to their problem.
At that time, Gary Kildall was already known for creating the first-ever operating system, the Control Program for Microcomputers, or CPM. Gary was a computer scientist, holding a degree in Mathematics and a Ph.D. in Computer Science, had an already established company, Digital Research Incorporated (DRI), and was 13 years older than Gates.
When IBM approached Microsoft, Bill first pointed them to Kildall. Being under a strict non-disclosure agreement, he then called Gary and said: “Someone is coming to see you. Treat them well, they are important people.”
The story says that Kildall, who was more of an inventor than a businessman, didn’t take Bill’s advice too seriously and was out flying one of his private planes when IBM showed up at his doorstep. Seeing he wasn’t home, they proceeded to pressure his wife, Dorothy, to sign an NDA stating that IBM was never here. She refused.
Feeling angry and frustrated, they returned to Bill Gates and pressed him again to see if Microsoft could develop an OS for the IBM PC. Bill was not about to give Gary a second chance and he accepted the deal.
But here’s what Gates did: he bought a program from a small software company called the Quick and Dirty Operating System (or Q-DOS), for the price of 75,000$. Q-DOS was, in fact, a ripoff of Gary’s CPM program.
He then changed its name to MS-DOS (Microsoft DOS) and licensed it to IBM. A year later, IBM’s personal computers entered the market and MS-DOS was sold alongside each one of them.
Realising what Microsoft had done, Gary threatened to sue IBM for copyright infringement. This prompted the company to strike a deal with him and DRI: CPM would now be offered for sale alongside MS-DOS. The terms seemed fair and Gary was satisfied: customers could now choose which operating system they wanted on their machines…
But there was a catch: CPM was offered to customers alongside MS-DOS, yes, but while MS-DOS sold for 40$, CPM sold for the steep price of 240$. This price discrepancy caused CPM’s death.
Now, Gary Killdal is remembered mostly for being “the man who could’ve been Bill Gates”. His “mistake” of not being home the day IBM came to visit him is referred to as “one of the biggest business failures in history”.
The story of how Microsoft came to acquire the operating system that propelled its meteoric rise is shrouded in some mystery but reveals Bill Gates’ business acumen. Here’s a look at the fateful deal that changed the course of tech history.
In 1980 IBM was developing a personal computer and needed an operating system. The dominant OS at the time was Gary Kildall’s CP/M but talks between IBM and Kildall’s company Digital Research faltered. IBM turned to Microsoft for languages, and Gates recommended they speak to Kildall about an OS. But with no deal struck with DRI, IBM came back to Microsoft.
Sensing an opportunity, Gates licensed an existing OS called 86-DOS (aka QDOS) from Tim Paterson of Seattle Computer Products for a mere $50,000. This became the basis for Microsoft Disk Operating System, MS-DOS. Microsoft retained rights to license MS-DOS to other hardware makers, a prescient move by Gates. When cloned “PC compatibles” running MS-DOS emerged, Microsoft was positioned to dominate business computing.
The Deal That Shaped An Industry
Microsoft’s purchase of 86-DOS for five figures and subsequent licensing to IBM was a landmark deal, the ripples of which shaped the whole computer industry. Gates showed business savvy by securing the rights to sell the OS to other companies even as IBM’s influence waned. This decision paved the way for Microsoft’s rise.
But how much did Microsoft really pay for the OS that changed its fortunes? Details are murky due to conflicting accounts. The purchase price was estimated at $50,000-$75,000, considered paltry even then. Yet this shrewd acquisition catalyzed Microsoft’s growth into a behemoth.
Kildall and the CP/M – IBM Deal That Never Happened
Gary Kildall’s CP/M was the leading OS when IBM launched its PC project. IBM approached Kildall about licensing CP/M, but for unclear reasons, talks collapsed. Kildall claimed IBM demanded he sign a one-sided NDA, which he refused. Others suggest Kildall missed meetings with IBM reps.
With no deal on the OS, IBM turned to Microsoft for languages and Gates pointed them to Kildall. But DRI and IBM failed to agree on licensing terms. This failure to capitalize on CP/M for the PC remains a Lost Opportunity for Kildall.
Seattle Computer Products and the Origins of QDOS
With CP/M a dead end, IBM had to look elsewhere. Enter Tim Paterson of Seattle Computer Products. Earlier Paterson had developed a prototype 8086 computer and coded an OS for it he called QDOS, for “Quick and Dirty Operating System.”
When IBM came back to Microsoft desperate for an OS, Gates acquired QDOS from Paterson for that paltry sum, possibly as low as $50,000. This became MS-DOS, the OS that came with every IBM PC.
The Deal of The Century…for Microsoft
Gates fully capitalized on the opportunity. Under the IBM deal, Microsoft retained rights to license MS-DOS to other companies. When PC clones emerged, Microsoft was positioned to supply them the OS, locking in its dominance.
This breathtakingly forward-thinking contract with IBM was arguably Gates’ smartest early move. For a tiny outlay, Microsoft gained the OS that made its fortune. The $50,000 or so Gates paid for QDOS may be the most brilliant deal in tech history in terms of return on investment. It catapulted Microsoft’s rise to the top.
Kildall’s Questions Over Copyright
In later years, Kildall accused IBM and Microsoft of copyright infringement, claiming QDOS lifted code from CP/M. Paterson denied this, stating he only used CP/M manuals for compatibility.
Kildall threatened legal action but none materialized. The complexity of proving infringement claims made lawsuits problematic. But Kildall held firm in assertions that QDOS mimicked CP/M’s functions.
DOS Established Microsoft’s Dominance
MS-DOS being bundled with IBM PCs – and crucially, licensed to other manufacturers – firmly entrenched Microsoft in the market. As IBM PC clones running MS-DOS proliferated, Microsoft prospered from licensing revenues.
Once again, Gates displayed business acumen by retaining MS-DOS licensing rights, despite creating DOS for the IBM PC. This transforming deal enabled Microsoft’s rise as the preeminent software company.
Lasting Impact
The purchase of QDOS for peanuts and subsequent licensing to Big Blue was a watershed moment in computing history. Gates’ shrewd maneuvering with DOS checkmated competitors and positioned Microsoft to dominate PCs for years. Prescient decisions like this propelled the company’s rapid growth and enduring success.
What Can We Learn From Gary’s Incredible (But Sad) Story
Deep down, probably many of us are scared to think we could make a similar mistake out of laziness or negligence. But hearing the way his co-workers talk about him can give us a completely different perspective.
At the time of these events, Microsoft was only a small startup company. It makes sense to think that someone so early in his career would see a deal with IBM as a huge opportunity, especially someone concerned more by the financial success of the company than driven by a desire to innovate.
On the other hand, Gary was already highly respected for his numerous contributions (besides CPM, he’s also responsible for developing the BIOS system and the CD-ROM technology containing the first-ever digital encyclopedia). Is it possible he chose to act according to his stellar work ethic by treating each opportunity equally?
Maybe Gary’s eagerness to openly share his knowledge and excitement about his inventions is sadly what made his downfall. Or maybe his mistake came in sharing his work with the wrong people.
Gary died at the age of 52, plagued by incessant judgments on his way of handling the IBM deal, driving him to depression and alcoholism.
The year prior to his death, he wrote a book called “Computer Connections” in which he apparently exposes his version of the story. Unfortunately, he passed away before it could go to print. The manuscript now belongs to his children who chose not to publish the book, apart from the first few chapters.
Is there more to this story than what we now remember?
In 1995, a TV documentary was released as a tribute to Gary’s life, who passed on July 11, 1994. In it, there are direct accounts of people who knew him personally and have their own take on the events of that day:
- Gary was, indeed, flying one of his private planes, but not because he disregarded the importance of the meeting. He was attending another important meeting with one of his employees, Tom Rolander. They then returned to Gary’s house and were, in fact, present when IBM arrived but their non-disclosure terms seemed so unacceptable, they refused to sign it.
- Gary’s friends and co-workers say he was someone with an incredibly open-minded work ethic. He was way ahead of his time in that matter and his ethics resembled more the one of the open-source community today, rather than one of a competitive businessman.
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Did Bill Gates Invent DOS?
FAQ
How much did Bill Gates pay for MS-DOS?
A company called Seattle Computer Products was given $50,000 by Bill Gates to sell 86-DOS, a copy of CP/M. Gates paid that company for the exclusive rights to QDOS. He then renamed it as MS-DOS. He then licensed MS-DOS to IBM for them to use in their soon to be released personal computer.
How much was DOS purchased for?
Microsoft purchased 86-DOS, allegedly for US$50,000. This became Microsoft Disk Operating System, MS-DOS, introduced in 1981. In just one year, Microsoft sold licenses for MS-DOS to more than 70 other companies. These companies used it as the operating system for their own hardware, sometimes under their own names.
How much did IBM pay for DOS?
The clause was Microsoft would provide IBM an operating system, named PC DOS. Gates agreed to sell IBM the Operating System for a lot less than $50,000 USD, but it wasn’t an exclusive deal for royalties. This meant Microsoft could sell the OS to anybody they wanted.
How did Bill Gates acquire DOS?
However, Gates did something different. He paid $75,000 for a program from a small company called the Quick and Dirty Operating System (or Q-DOS). Q-DOS was, in fact, a ripoff of Gary’s CPM program. He then changed its name to MS-DOS (Microsoft DOS) and licensed it to IBM.
Why did Bill Gates give IBM a license?
Problem: IBM wanted to pay a one-time fee of $200,000 to get a license that would never charge them any royalties. Kildall wanted more. Bill Gates came up with a similar operating system. Giving DOS to IBM for $50,000 was a smart move because he thought he could make a lot of money by selling licenses to other computer companies. Kildall was bitter.
Why did Bill Gates buy 86-DOS?
IBM approached a young Bill Gates for help. Gates shared plenty of ideas with IBM and even told them he’d write an operating system for them. Instead of writing one, Gates reached out to Paterson and purchased 86-DOS from him, allegedly for $50,000.
Did Gates sell Qdos to IBM?
Allen got in touch with Rod Brock, the owner of Seattle Computer Products, and agreed to sell QDOS for $10,000 plus a $15,000 fee for each company that bought the software. It is written in Big Blues: The Unmaking of IBM that Sams said Gates told him about QDOS and offered it to IBM. Sams asked, “Do you want to buy it or do you want me to buy it?”
Did Bill Gates fly on a business trip?
According to Fire in the Valley: The Making of the Personal Computer by Paul Freiberger and Michael Swain, Gates said that day, “Gary was out flying.” Kildall always denied this, telling the authors of Hard Drive: Bill Gates and the Making of the Microsoft Empire that he had actually flown to the Bay Area for business.
How much did IBM Pay Microsoft?
Allen says that IBM agreed to pay Microsoft a total of $430,000 in November of that year. This included $45,000 for what would become DOS, $310,000 for the different 16-bit languages, and $75,000 for “adaptions, testing, and consultation.” “.
Why did IBM buy 86-DOS?
When IBM wanted a 16-bit OS to run on its first PCs, it called Microsoft and asked them to make one. This purchase is important to history. It looks like Microsoft decided it would be smarter to buy a solution than to make its own. At first, it licensed what was then called 86-DOS, or QDOS, from Seattle Computer Systems without being the only company that could use it.
