How Bill Gates Almost Lost Microsoft’s Only Client

Hey subscribers,

Let’s go back to the very beginning of Microsoft — when the company was only a few months old and run by a 19-year-old student named Bill Gates. He was still studying at Harvard, but in his spare time, he was trying to build a business that would one day take over the world.

At that moment, Microsoft had just one important partner: a company called MITS, which made one of the first personal computers — the Altair 8800.

Microsoft had written a simple programming language called BASIC for that machine. BASIC was what let people actually write software on the computer. Without it, the machine was just blinking lights.

Here’s the deal: MITS didn’t just use BASIC on their own computers. They also had the right to sell Microsoft’s software to other companies. For every copy of BASIC they sold, Microsoft earned money — these were called royalty payments. It was Microsoft’s only income.

Then one day, everything stopped. 🛑

MITS was about to be bought by another company called Pertec, and as soon as those talks started, Microsoft got cut off. No more royalty payments. No more deals with other companies. No communication. Silence.

This was a huge problem. Microsoft was young, small, and completely dependent on that one deal.

At the same time, things got worse. Ric Weiland, one of Microsoft’s first employees — and the person writing BASIC for another client, Commodore — told Bill he wanted to quit. He was tired and ready to move on.

Bill managed to convince him to stay just a little longer. It was enough to finish the project and keep the Commodore deal alive. It wasn’t a dramatic move — but it was a smart one.

But MITS and Pertec still weren’t selling Microsoft’s software, even though other companies were now asking for it. Microsoft was stuck. People wanted their product, but they couldn’t sell it directly — only MITS could. And MITS wasn’t helping.

Bill had a big decision to make. He was still officially a student, planning to go back to Harvard that fall and graduate in 1978. But he knew the computer industry was growing fast. He also knew that if he didn’t focus on Microsoft now, the opportunity might disappear.

So he made the choice: school could wait. Microsoft couldn’t.

💡 What can we actually learn from this?

✔️ Don’t confuse control with ownership.
Microsoft had built the product — but didn’t control the pipeline. MITS owned the relationship. Gates learned early that distribution is leverage, and he felt the pain of not having it.

✔️ You don’t need power to negotiate — just position.
Gates had no legal strength, no capital, and no team to fight Pertec. But he had demand. Other companies wanted BASIC. That gave him enough edge to stay in the game while others tried to shut the door.

✔️ The right decision at the wrong time is still wrong.
Gates could have gone back to Harvard. On paper, that was the smart move. But markets don’t wait. He saw that tech was tilting, and he acted. Most people wait. Builders move.

👉 Curious how it all ended with MITS and Pertec? Drop a comment — I’ll explain it there.

Inspired by events described in Bill Gates’ book Source Code.