Gates went along without much complaint. He was already getting used to the fact that, as he put it, Jobs could “play fast and loose,” and he suspected that the unbundling would actually help Microsoft. “We could make more money selling our software separately,” Gates said. “It works better that way if you’re willing to think you’re going to have reasonable market share.” Microsoft ended up making its software for various other platforms, and it began to give priority to the IBM PC version of Microsoft Word rather than the Macintosh version. In the end, Jobs’s decision to back out of the bundling deal hurt Apple more than it did Microsoft.
When Excel for the Macintosh was released, Jobs and Gates unveiled it together at a press dinner at New York’s Tavern on the Green. Asked if Microsoft would make a version of it for IBM PCs, Gates did not reveal the bargain he had made with Jobs but merely answered that “in time” that might happen. Jobs took the microphone. “I’m sure ‘in time’ we’ll all be dead,” he joked.
At that time, Microsoft was producing an operating system, known as DOS, which it licensed to IBM and compatible computers. It was based on an old-fashioned command line interface that confronted users with surly little prompts such as C:\>. As Jobs and his team began to work closely with Microsoft, they grew worried that it would copy Macintosh’s graphical user interface. Andy Hertzfeld noticed that his contact at Microsoft was asking detailed questions about how the Macintosh operating system worked. “I told Steve that I suspected that Microsoft was going to clone the Mac,” he recalled.
They were right to worry. Gates believed that graphical interfaces were the future, and that Microsoft had just as much right as Apple did to copy what had been developed at Xerox PARC. As he freely admitted later, “We sort of say, ‘Hey, we believe in graphics interfaces, we saw the Xerox Alto too.’”
In their original deal, Jobs had convinced Gates to agree that Microsoft would not create graphical software for anyone other than Apple until a year after the Macintosh shipped in January 1983. Unfortunately for Apple, it did not provide for the possibility that the Macintosh launch would be delayed for a year. So Gates was within his rights when, in November 1983, he revealed that Microsoft planned to develop a new operating system for IBM PCs featuring a graphical interface with windows, icons, and a mouse for point-and-click navigation. It would be called Windows. Gates hosted a Jobs-like product announcement, the most lavish thus far in Microsoft’s history, at the Helmsley Palace Hotel in New York.
Jobs was furious. He knew there was little he could do about it—Microsoft’s deal with Apple not to do competing graphical software was running out—but he lashed out nonetheless. “Get Gates down here immediately,” he ordered Mike Boich, who was Apple’s evangelist to other software companies. Gates arrived, alone and willing to discuss things with Jobs. “He called me down to get pissed off at me,” Gates recalled. “I went down to Cupertino, like a command performance. I told him, ‘We’re doing Windows.’ I said to him, ‘We’re betting our company on graphical interfaces.’”
They met in Jobs’s conference room, where Gates found himself surrounded by ten Apple employees who were eager to watch their boss assail him. Jobs didn’t disappoint his troops. “You’re ripping us off!” he shouted. “I trusted you, and now you’re stealing from us!” Hertzfeld recalled that Gates just sat there coolly, looking Steve in the eye, before hurling back, in his squeaky voice, what became a classic zinger. “Well, Steve, I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.”
Gates’s two-day visit provoked the full range of Jobs’s emotional responses and manipulation techniques. It also made clear that the Apple-Microsoft symbiosis had become a scorpion dance, with both sides circling warily, knowing that a sting by either could cause problems for both. After the confrontation in the conference room, Gates quietly gave Jobs a private demo of what was being planned for Windows. “Steve didn’t know what to say,” Gates recalled. “He could either say, ‘Oh, this is a violation of something,’ but he didn’t. He chose to say, ‘Oh, it’s actually really a piece of shit.’” Gates was thrilled, because it gave him a chance to calm Jobs down for a moment. “I said, ‘Yes, it’s a nice little piece of shit.’” So Jobs went through a gamut of other emotions. “During the course of this meeting, he’s just ruder than shit,” Gates said. “And then there’s a part where he’s almost crying, like, ‘Oh, just give me a chance to get this thing off.’” Gates responded by becoming very calm. “I’m good at when people are emotional, I’m kind of less emotional.”