There's a lot of people who are forecasting that there'll be software stores just like there are record stores today, and that there'll be thousands and thousands of those. And I think I'd have to agree with that. Microsoft.
Odds are that if you have used a computer, played video games, made a video call, or just gone on the internet, then at some point in your life you have used a Microsoft product. It is this ubiquity of its products in everyday society that has led Microsoft to becoming a trillion dollar company today. Microsoft Mechanics But like with most large companies, this story started out with very humble beginnings. In fact, it started out with a couple of teenagers in high school.
This is the story of Microsoft. 1968, Lakeside School, Seattle. Four teenagers at this school had drawn interest towards their school's new computers.
One of these computers was called the Teletype Model 33. They wanted to use this new machine to build computer programs that could potentially allow them to do things like play tic-tac-toe. or even make their own class schedules. The trouble was that you needed to rent computer usage time, which was a hefty $40 an hour. So instead of paying that $40 an hour, they decided to exploit some bugs in these computer systems in order to use the computers for free.
And for a while, things were great, and these students were able to freely program whatever they wanted. But eventually, the Computer Center Corporation caught them stealing computer usage time, And the company immediately banned these students from using their computer systems. The four students that were banned were named Kent Evans, Rick Weiland, Paul Allen, and Bill Gates. Soon after they were banned, they decided to form their own group called the Lakeside Programmers Club in order to make some money from their programming abilities while helping companies fix bugs in their computer systems.
And the club's first customer was the Computer Center Corporation. The very same company that banned them the previous year for exposing bugs in their computer systems. Several years later, a 17-year-old Bill Gates and a 19-year-old Paul Allen made a new venture together called TrafoData, which used the newest Intel processor to turn raw traffic data into comprehensive and easy-to-read reports.
The business didn't last very long because Bill Gates left to Harvard University to enroll in a pre-law program, and Paul Allen left for Washington State University to pursue a computer science degree. In 1975, Popular Electronics Magazine featured a new computer called the Altair 8800 microcomputer. This was a revolutionary product that was viewed as the first commercially successful personal computer.
Now both Paul Allen and Bill Gates had caught a glimpse of the Altair issue of the Popular Electronics Magazine. So the two called each other up and discussed making a basic programming language interpreter for the computer. And soon after this call ended, They ended up talking to the inventors of the Altair, who were MITS, where Gates and Allen claimed to have a working interpreter for the computer ready to go, even though this wasn't true at all. But MITS was quite interested and wanted this interpreter.
So Gates immediately started working on the interpreter while Paul Allen built a simulator for the interpreter. On the way to presenting their product to MITS, The boot up system for the interpreter still wasn't ready, so the last bit of code was actually written on the way to the meeting with MITS. And by the time they arrived at the meeting with MITS, they still hadn't run a full test of the interpreter that they had just built. So during the actual meeting, they ran their first full test where it worked perfectly.
After the meeting, MITS agreed to sell Gates and Allen's interpreter product as Altair Basic. Little did the two college students know that this would be the very first product that was created by their newly named company called Microcomputer software known today as Microsoft over the next couple of years the success of the Altair basic made Microsoft a multi-million dollar company in 1980 Microsoft's revenue was nearing 30 million dollars when they decided to open up their first International office in Japan a year later Gates and Allen began negotiating with the giant of the computer industry I IBM, in order to try and make Microsoft the main operating system on IBM's upcoming personal computer. Both sides agreed to a deal, but there was a problem.
Once again, Gates and Allen did not have an operating system ready before making the actual deal. So what they ended up doing was buying out a standard operating system from a local computer company called Seattle Computer Products. And they bought this operating system for... $75,000 and promised to pay a small royalty to the company as well.
The operating system that Microsoft had bought from Seattle Computer Products was called 86DOS, which was quickly renamed by Microsoft to MS-DOS. About a year later in 1981, IBM launched its personal computer, which became an immediate success and made MS-DOS the dominant operating system operating system in the world. And Microsoft didn't just license its operating system to IBM, it also licensed the operating system to over 70 other computer companies, including Compaq Computers.
The only real computer company that didn't use MS-DOS at the time was another medium sized startup computer company run by two other young men. That company was Apple Computers. Now the dominance of MS-DOS ended up propelling Microsoft's revenue and valuation.
However, there was one major setback. In 1983, just as Microsoft passed 1 million installs of MS-DOS, Paul Allen was diagnosed with Hodgkin's lymphoma and decided to leave the company. Allegedly, Bill Gates thought that Allen's stock in Microsoft should be diluted at the time because he was not working hard enough and would no longer be able to contribute to the company. Regardless, Gates didn't have too much time to focus on problems outside of Microsoft. as the company was working on a word processing program called Word, a spreadsheet program called Excel, and a graphical user interface called Windows.
Now, in 1983, Apple was the only major computer company that had a graphical user interface for its computers, and Microsoft knew they needed to make their own. So two years later, Microsoft released Windows 1.0 in order to compete with Apple's operating system. However, Windows 1.0 wasn't a complete product and gained very little popularity at the time. And it would take many years before Windows would begin to pay dividends for the company, both figuratively and literally. But we will come back to that in a little bit.
On March 13th of 1986, Microsoft had its initial public offering where the company was valued at $350 million. This made Bill Gates'net worth jump to about $150 million overnight while making many of his employees millionaires. And after the IPO, Microsoft kept adding to its software product lineup by acquiring a company called Forethought, who were known for their one key product called PowerPoint.
After the acquisition of Forethought, Microsoft finally felt like they had enough individual software products to launch a package of these products called Microsoft Works, which would later inspire what is known today as Microsoft Office. This package would include Microsoft Word, Excel, PowerPoint, and a few other applications. This package was also the first Microsoft product that was truly cross-platform and was available on a variety of computers like Apple computers.
Software CEO number three, describe your ideal relationship with Apple. Well, we'll be selling our software independently, so the key thing is that Apple gets a lot of consistent standard machines out there quickly. The success of Microsoft Office, along with the growth of Windows and Microsoft as a whole, made Bill Gates a great business man. a billionaire. In fact, he became the world's youngest self-made billionaire in history at 32 years of age in 1987. Over the next several years, Microsoft would continue to grow, expand its products line, and release new versions of Windows every single year. And this all came to a head in 1995 when Microsoft released Windows 95 to the public.
Windows 95 was viewed as a revolutionary software product for its time, and it is known by many as the birth of modern-day operating systems. It was also responsible for one of the largest marketing campaigns in computer history. Microsoft spent $300 million leading up to the launch of Windows 95, and some of their advertisements were very unique, to say the least. For example, they bought 1.5 million copies of The Times and were giving them away for free.
They spent money to turn the Empire State Building's lights into the colors of the Windows 95 logo. They hung a 328-foot banner from the CN Tower in Toronto. They created a 30-minute sitcom with Jennifer Aniston and Matthew Perry while making Windows 95 a primary plot point of the sitcom. And they also spent quite a bit of money licensing the song Start Me Up from the Rolling Stones and paying Jay Leno to appear at one of the most memorable product launches in history. And all of this marketing was a success as the company sold 1 million copies of the operating system within four days while doubling the company's valuation over the next couple of months.
This explosion of capital allowed Microsoft to start venturing out into other areas during the 1990s. For example, one year after the launch of Windows 95, Microsoft launched a news channel that most of you probably don't know was 50% owned by Microsoft. The Microsoft National Broadcasting Channel, also known as MSNBC, was launched in 1996. They then created an internet browser called Internet Explorer as their standard internet browser.
They invested $500 million in a new and unproven startup company called DreamWorks. They bought out nearly 10% of Apple while making... Microsoft products available on Apple computers once again. The era of setting this up as a competition between Apple and Microsoft is over as far as I'm concerned.
This is about getting Apple healthy, and this is about Apple being able to make incredibly great contributions to the industry to get healthy and prosper again. And eventually they created a few smaller subsidiaries like MSN and Expedia in 1996. Now during this time when Microsoft was expanding into all of these other areas, Their core software business was still growing rapidly. In fact, between 1996 and 1998, Microsoft's valuation had nearly quadrupled to $261 billion while making Bill Gates the richest person in the world. However, this all came at a cost. You see, Microsoft was packaging its Internet Explorer browser with all of its Windows operating systems while allegedly pressuring all other computer manufacturers to conform to making Windows its main operating system.
This gave Microsoft between a 95% and a 98% market share of the operating system market, as well as having a similar market share for its web browser, Internet Explorer. And because of this, the United States government decided to take Microsoft to court over its monopoly-like business practices. The two sides eventually reached a settlement where Microsoft conceded that it had to open up its Windows operating system to third-party companies.
The court case lasted several years and took a real toll on the company's CEO, Bill Gates, who later anointed longtime Microsoft employee Steve Ballmer as the new CEO of Microsoft. Under the guidance of both Steve Ballmer and Bill Gates, who was now the chief software architect, Microsoft launched the Xbox, Windows XP, and the programming languages.NET and C Sharp, which are used to program many websites and modern-day video games. At this point, Microsoft seemed invincible and had their hands in nearly every industry, except one. The mobile phone.
Now today you are probably using a phone that is either running on iOS or Android. And these operating systems are relatively new and weren't really created up until 2007 and 2008. But way back in 2003, Microsoft launched its mobile operating system that was called Windows Mobile. And at the time, people were predicting that Microsoft could potentially start a monopoly. in the mobile phone market in a similar way to how they created their monopoly for the personal computer operating system market. But there were two things that prevented this.
The first of which was that Bill Gates and Microsoft didn't think that the mobile phone market would blow up as much as it did. In fact, Bill Gates was saying at a tech conference in 2007 how people weren't going to have one single device that would do everything that you needed to do. He thought you would have one computer device for solely computer tasks, one gaming console for games, one tablet for fun, one... one phone solely for calling people or maybe browsing the web, and so on. I don't think you'll have one device.
I think you'll have a full screen device that you can carry around, and then you'll have the device that fits in your pocket. You'll have your living room, which is your 10-foot experience, and that's connected up to the internet. And there you'll have gaming and entertainment.
And then in your den you'll have something a lot like you have at your desk at work. Meanwhile, someone else thought a little bit differently about the mobile phone industry. And that brings us to the second reason as to why Microsoft did not become a giant of the phone industry. Steve Jobs.
You see, when Steve Jobs returned to Apple in the late 1990s, Apple was a dying company and was weeks away from going bankrupt. But slowly, with several innovations such as the iPod, iTunes, the power Macintosh, the iMac, and the iTouch, Apple had gained significant ground in the personal computer and computer accessories market. So in the early to mid-2000s, Windows was no longer the only operating system available on the market, as Apple had a resurgence and was able to take about a 10% share of the operating system market.
And because of this resurgence, Apple had enough capital to invest in a new product, that could merge all of your devices into one. That was the iPhone. Every once in a while, a revolutionary product comes along that changes everything. We're introducing three revolutionary products of this class.
These are not three separate devices. This is one device. And we are calling it... iPhone.
Today Apple is going to reinvent the phone. The iPhone was released in 2007 and immediately took the world by storm. And for the first time in nearly three decades, Microsoft no longer had the most popular operating system in the world, nor did it have the most popular web browser in the world.
This was because the likes of iOS, Android, Safari, and Google Chrome had entered the industry during that time. Now Microsoft... Microsoft eventually tried to release its own smartphone in 2010 called the Windows Phone.
However, they were three years too late and the market was already saturated, so the phone was discontinued. Bill Gates and Steve Ballmer called missing the smartphone market as their biggest regret in business. However, they were able to create other products during that time.
For example, they released Windows Vista, Windows 7, Bing, Xbox 360, Xbox Live, Microsoft Surface, Microsoft Outlook, and Microsoft Azure. They also acquired some big companies at the time like Skype and Nokia. Now, when 2013 came around, Microsoft was still worth hundreds of billions of dollars, but it was becoming more of a backseat thought to the other tech companies like Google, Apple, Facebook, Netflix, and Amazon. It was at this point that Steve Ballmer decided to step down as CEO and appoint Satya Nadella as the new CEO of the company. And right after he became CEO, the company decided to purchase a gaming company called Mojang, who are the creators of Minecraft.
The company also decided to purchase the programming platform, GitHub, as well as the social network, LinkedIn. Now, during all of these acquisitions, Satya was laser-focused on one part of Microsoft's business, cloud computing. You see, Microsoft Azure has grown at an insane rate over the last few years, like really insane.
There have actually been some quarters where Azure has grown 100% in sales. And it is the growth of Azure that has made Microsoft one of the leading cloud computing companies in the world behind Amazon. Because of the success of Azure along with Microsoft's other businesses, Microsoft was able to reclaim the title of the most valuable company in the world in 2019. But it hasn't all been positive news. Paul Allen resigned from the board of Microsoft in 2000 and hadn't really spent too much time at Microsoft past this date.
However, he did have several other business ventures apart from Microsoft. Like in 1997, he bought a young startup company called Ticketmaster. He also invested several billion dollars into real estate and purchased the Portland Trailblazers and Seattle Seahawks, all of which grew Allen's net worth by billions of dollars.
Unfortunately, Allen's lymphoma returned in 2009, which was treated successfully until it unexpectedly returned in 2018, where he finally succumbed to the disease. But his legacy will live on. And to think that all of this...
the gaming systems, the revolutionary operating systems, the battles with the United States government, the youngest billionaire in history, the internet browsing revolution, the cloud computing giant, a major cable network, tablets, search engines, word processors, office packages, all of this was created from a couple of teenagers in a computer club. If you want to support this channel, please check out my upcoming business venture where I'm creating a video game from scratch called Attica Origins, which you can check out in the link below. Also, please subscribe to see more business documentaries like this.
And for now, that's all. And I will see you guys next week.