In the 1970s, the prevailing culture was that software should be free and openly shared. Gates's deeply contrarian vision was to build a "software factory," creating an entirely new business model based on the conviction that the demand for high-quality, paid software would become nearly unlimited.
Initially, Microsoft's go-to-market strategy was not to displace competitors but to displace customers' own internal development teams. They framed their software's price as a fraction of a company's fixed in-house engineering budget, a powerful value proposition that defined a new category of B2B sales.
Oracle founder and fierce competitor Larry Ellison believed that while many people were smarter than Bill Gates, almost no one could match his relentless focus and endurance. This singular drive, not just raw intelligence, was the key differentiator that allowed Gates to dominate the software industry.
Gates didn't allocate energy incrementally; he was either completely uninterested in a subject or pathologically obsessed. This all-or-nothing approach enabled him to channel his immense energy into a few high-leverage areas, like reading and programming, and ignore everything else, a key to his deep work capacity.
In an early deal with MITS, a young Gates insisted on the term "best efforts" over the weaker "reasonable efforts" for sub-licensing. This seemingly minor detail won Microsoft a critical lawsuit years later when MITS's new owner failed to promote their software, giving them full ownership and freedom.
A core tenet of Gates's management philosophy was extreme financial conservatism. He insisted on keeping enough cash in the bank to cover all expenses for a full year, even if revenue dropped to zero. This survival-focused mindset provided a massive strategic advantage and independence from outside capital.
Bill Gates and Paul Allen deliberately hired young, enthusiastic programmers, often straight from university with bachelor's degrees. They believed it was better to get talent "before they were ruined by working somewhere else." This strategy allowed them to mold a unique, high-intensity engineering culture from scratch.
Gates employed a zero-sum competitive mindset. He believed losing a $50,000 contract wasn't just a $50k loss for Microsoft, but a $100,000 negative swing because the competitor gained that same amount. This mental model fueled his ruthless drive to not just win, but to eliminate opponents from the market.