Monday, August 4, 2014

A Lesson in Entrepreneurship: Do You Know the Name of the Guy who Actually Wrote the DOS Program that Bill Gates Bought for $50K?

Robert Ringer makes a lot of important points below, including the importance of marketing. I see many, including strangely some in the libertarian movement, who look down at marketing, which I think is pretty bizarre and one reason their efforts tend to fail. Wasn't it Mises and Hayek, who taught us that advertising is important and that not all knowledge is dispersed throughout the world to everyone simultaneously?  Marketing is about dissemination of knowledge, to diss marketing, or even to fail to understand the very important role of marketing, is just another example of  how knowledge, in this case knowledge about the value of marketing, is not dispersed to all minds equally. In fact, such dispersion is not even close the occurring equally and it never will.

In this essay Ringer also discusses the role of the "dealmaker." What Ringer calls the dealmaker here, I would consider the essence of entrepreneurship. It is not necessarily about "creative destruction," "disruption" or about putting risk capital to work. These factors all have roles in an economy, but the essence of entrepreneurship, in my view, is one that is similar to the view held by Israel Kirzner (SEE: Competition and Entrepreneurship). It is a kind of arbitrage between where assets are and where they can be employed more productively (i.e. profitably). -RW

By Robert Ringer

If you look at the great entrepreneurs throughout history, the one thing they've all had in common is that they were, and are, great dealmakers. They understand the efficacy of hiring others to handle their day-to-day operations while they work on identifying and closing lucrative deals. Andrew Carnegie set the standard in this regard.

All across the occupational spectrum, entrepreneurs have used their dealmaking prowess to build great empires. Wolfgang Puck is undoubtedly a
great chef, but his cooking skills alone would not have been enough to put him where he is today. Clearly, it was through his dealmaking expertise that he was able to transform himself from a gourmet chef into a culinary empire.

Ditto Howard Schultz, the man who built Starbucks into a global phenomenon. Start a chain of coffee shops? What a terrible idea. After all, coffee sales in the U.S. had been declining for years. Nevertheless, Schultz forged ahead with his idea, and even had the audacity to charge $3 for a cup of the world's dullest and most common drink — and served it in a paper cup, to boot!

And this came about at a time when the world appeared to be moving too fast for people to slow down, relax, and enjoy a cup of coffee, as they did in the good old days. Now, with more than $30 billion in sales, Schultz leaves the day-to-day management to others while he focuses on making deals to further expand Starbucks' worldwide reach.

I could go on and on ... Steve Riggio, who built Barnes & Noble into a retail giant and, in the process, transformed the way bookstores do business ... Martha Stewart, who built an empire by teaching women how to excel at being good housewives ... George Lucas, who created a one-man industry based on a single science-fiction story. The list of great dealmaking empire builders is endless.

The Dealmaking Adventures of A Super-Nerd

But even these giants pale in comparison to Bill Gates. Many people think of Gates as a computer geek who achieved super success because of his awesome hi-tech skills. But Gates is much more than a computer maven. The real roots of his success lie in his incredible dealmaking abilities.

Gates did not invent the DOS operating system that launched Microsoft into the stratosphere. But what he did do was make the deal of the century when he negotiated the purchase of DOS (referred to it at that time as "86-DOS") for what turned out to be pocket change — $50,000.

Funny how life works. I'll bet you don't even know the name of the guy who actually wrote the DOS program (for a now-defunct company called Seattle Computer Products). It was a twenty-two-year-old programmer by the name of Tim Paterson, and he accomplished the feat in — get this — four months!

Paterson earned a pittance for his efforts, while Gates, the great dealmaker, parlayed the acquisition of Paterson's creation into becoming the wealthiest person in America. All this might tempt one to say that life isn't fair, but if you're over twenty-one years of age, you already know that.

Of course, Gates was just getting started. He then turned right around and set up a meeting with top execs at IBM. At that now-historic session, the IBM corporate types wore pin-striped business suits, while Gates showed up in a stained T-shirt. According to one observer who was at the meeting, he looked like a seventeen-year-old kid negotiating with grown men.

But underneath that nerdy-kid persona was a master dealmaker. Gates managed to negotiate yet another deal of the century when he got the guys in the pin-striped suits to agree to install DOS on all of IBM's PCs.

But he still wasn't through. Perhaps an even more masterful dealmaking accomplishment was that Gates reserved the right for Microsoft to license DOS to other companies (which, in dealmaking parlance, I like to refer to as a "throwaway bonus" — something the other side doesn't see as a particularly big item to agree to when negotiating). This single dealmaking coup laid the foundation for Microsoft's worldwide domination of the software business ... and, to use a fitting cliché, the rest is history.

The World's Highest-Paying Profession

When I was a young real estate broker, a wealthy builder ("Al") once said to me, "Though it goes against conventional wisdom, I can tell you with certainty that having the best product or service in your industry doesn't guarantee success. The twin keys to making money are dealmaking and marketing. And it's important to understand that dealmaking is what makes marketing possible."

I was fascinated by Al's comments, and anxiously began to pursue the subject with him. When I asked him which businesses lent themselves best to dealmaking, his answer not only surprised me, it had a major and permanent impact on my approach to business.

"The nature of the business is irrelevant," Al said. "I like to think of dealmaking as a profession unto itself — the world's highest-paying profession. Things don't just fall into place by accident. A good dealmaker understands that it's his job to finesse things into place. And that's true in any kind of business."

His words were nothing short of life-changing. They've been indelibly stamped on my forebrain for three decades, and have paid huge dividends for me — in the real estate business ... in the cellular-telephone business ... in the newsletter business ... and in scores of other businesses and one-off deals that I've been involved in over the years.

ROBERT RINGER is the author of three #1 bestsellers, two of which have been listed by The New York Times among the 15 best-selling motivational books of all time.

In addition to the millions of people who have profited from his classic works, his articles appear regularly in numerous newspapers nationwide.

Ringer also hosts the highly acclaimed Liberty Education Interview Series, which features interviews with top political, economic, and social leaders on the most vital issues of the day.

He has appeared on numerous national television and radio shows, including The Tonight Show, Today, The Dennis Miller Show, Good Morning America, ABC Nightline, The Charlie Rose Show, Fox News, and Fox Business.

Ringer has also been the subject of feature articles in such major publications as Time, People, The Wall Street Journal, Fortune, Barron's, and The New York Times.

Clearly, good marketing is crucial to business success, but adept dealmaking must precede marketing. Why? Because if you don't make the deal, there's nothing to market! Bill Gates is the poster nerd for this. He's proven to be both a great businessman and savvy marketer, but he never would have been in a position to market DOS had he not first negotiated it away from Seattle Computer Products.

It's easy to see this same principle at work in every kind of business one can think of. For example, anyone who's had any experience in buying and selling real estate knows that the money is made at the time a property is purchased. Meaning that if you buy a property at the right price, your profit is locked in before you even try to sell it. Your marketing ability then determines how long it will take for you to cash out.

It's a Fact:
Great Dealmaking Skills
Lead to Seven-Figure Incomes

Al's insights into dealmaking proved to be the spark that catapulted me to seven-figure income as a real estate broker, while still in my twenties, by becoming a whiz at marketing large apartment developments. But the most important reason for my success was my ability to locate makeable deals, persuade the owners to sign my listing agreements, and, finally, close the deal once I had a serious buyer lined up.

Years later, Al's dealmaking insights were also responsible for my becoming a bestselling author. Now, you might be wondering, "But wasn't the quality of your writing important?" Of course it was. Quality is important in every business.

In fact, the most gratifying aspect of being a writer is receiving letters and e-mails from readers who tell you how much your work has impacted their lives. Feedback from readers tells you whether or not you are delivering value to your customers.

Nevertheless, had I not become a master dealmaker early in my business career, I never would have been in a position to share my writing with millions of readers around the world. Everything that has happened to me in what may now appear to be a charmed life is a direct result of my dealmaking and marketing efforts.

On more than one occasion, I've been asked if I view dealmaking as an art or a science. It's an interesting question. While it's true that some of the basics are scientific, dealmaking, on the whole, is an art form. And the only way to excel at an art is to learn the best techniques possible, then practice those techniques over ... and over ... and over again.

Problem: Unlike dancing, painting, or playing a musical instrument, you can't practice dealmaking at home. The only way to become a profit-producing dealmaker is to jump in and "do deals." There's no spring training, no preseason, no practice sessions. You can do a certain amount of preparation for each deal — which you should — but you cannot practice the art of dealmaking itself. When it comes to dealmaking, it's strictly baptism by fire.

And that means being willing to jump in and get your feet wet ... which, in turn, translates into rejection, embarrassment, and, yes, lots of failure. The willingness to fail is important because no matter how good you become at the nuances of dealmaking, your bottom-line results are tied to the law of averages. Which is to say that the more you work at dealmaking, the better you get at it and the more deals you close.

In other words, there is no shortcut to dealmaking success. No sitting at the kitchen table in your underwear, pecking away on a laptop and watching the money roll in. (The only thing that should roll when you read ads filled with such tripe is your eyes.) Professional dealmaking is a finely honed skill and should be approached in a serious manner.

The Money Is in the Details

In many of my books, I relate stories about various deals I've made through the years, but I'm always careful not to get into too much detail, because I know how impatient readers can be.  I'm the same way when I read. I like authors who cut to the chase. But when it comes to dealmaking, the devil is in the details. More to the point, the money is in the details.

In other words, superficial knowledge isn't enough when it comes to dealmaking. In fact, as many entrepreneurs have discovered to their chagrin, a little bit of knowledge can actually be dangerous. Which is why it's absolutely essential to possess an in-depth knowledge of the intricate details of dealmaking.

That's why I made the decision to put together a compact, three-hour audio series that would allow me to discuss an array of dealmaking strategies and techniques I have personally used to reap huge profits over the years. My objective is to teach listeners more about dealmaking in three hours than they've learned in everything else they've read and heard on the subject combined. I call it Fast Track to Dealmaking Fortunes.

To learn more about Ringer's audio series,  Fast Track to Dealmaking Fortunes, click here.

ROBERT RINGER is a New York Times #1 bestselling author who has appeared on numerous national radio and television shows, including The Tonight Show, Today, The Dennis Miller Show, Good Morning America, ABC Nightline, The Charlie Rose Show, as well as Fox News and Fox Business. His books includeMillion Dollar Habits: 10 Simple Steps to Getting Everything You Want in Life and To Be or Not to Be Intimidated?: That is the Question 

To sign up for a free subscription to his mind-expanding daily insights, visit
Copyright © 2014 Robert Ringer


  1. Life is not fair.

    But the real reason Bill Gates is rich is the government enforcement of monopoly privilege misleadingly called "Intellectual Property". This IP regime usually gets the actual inventors, programmers, writers, singers, etc. getting a pittance while the cronies like Bill Gates get to earn billions.

  2. You're not supposed to expose the connections. It discourages the little people and their productivity falls off. They are supposed to believe that their lack of success comes from some personal failing or not working hard enough or fast enough.

  3. that story isn't correct either the guy who had the best operating system at that time was a guy called Gary Kildall (who Gates reffered IBM who for whatever reason could get a deal together with IBM (hard to say why now as Kildall's business manager now has brain cancer and the IBM exec can't remember either (the short, amusing, probably wrong story was that Kildall blew off IBM to go flying)
    But this is the interesting thing, Tim Patersons Qdos was remarkably similar to Kildall's CP/M , e time and such unexplored territory

  4. and one other thing ip as it stands might give a bit of a leg up but if you aren't signing agreement and working on your stuff to keep it ahead of the pack then no amount of government legislation will help you.

  5. Bill Gates does come from a connected family. So what. This deal was pure entrepreneurship all the way.

    What would Tim Paterson have done with QDOS (not 86-DOS) if IBM approached him? Given what actually transpired, he would have sold the rights exclusively or entirely to IBM. What is not likely is that he would've done what Bill Gates did. If IBM had an exclusive, the clone industry might not even exist. Or be delayed for years and years, mired in lawsuits etc. IBM would've litigated to death almost any small startup attempting to clone PC-DOS.

    Bill Gates' reputation preceded this story. He bluffed his way into the lock on languages by selling a non-existent BASIC (before it became Basic) to MITS.

    Regarding Kildal, yeah, the plane ride myth is untrue (and also unfortunate as it reflects so unjustifiably poorly on him). I vaguely remember reading material since then that sheds more light on what actually transpired.