| I agree with this skepticism. There is no strict link between high risk and high return. Microsoft was not high risk (as noted by Gates), and it provided a return that is so large it might as well be off the scale for the purposes of this discussion (their market cap was recently up around $1.3 trillion; Gates will have pulled over a hundred billion dollars out of his ownership in the company over ~45-50 years). - Microsoft had very high margins from the beginning. They operated thin and were very cash rich within the first few years. Just a few years in, Gates had Microsoft hoarding multiple $500,000 government bonds (~$1.5m in today's money) from accumulated profit, because they were already very profitable (there is a story about the secretary misplacing one of these bonds). - Microsoft was founded for relatively little money - $10,000 - and with zero outside VC money. Gates & Allen came up with that capital from working various industry jobs in the prior years. - They nailed down a serious customer (MITS) and then founded a company, rather than the other way around (found a company and then try to find business for it). - Sales went from $16,000 in 1976 (first months of operation), to $8m for 1980, and $17m in 1981 with 40 employees ($17m is $50m inflation adjusted). Three years in they were gushing cash. |