Paul Allen’s advice for Microsoft

April 19, 2011, 2:37 PM UTC

FORTUNE — For decades, Microsoft (MSFT) co-founder Paul Allen kept a low profile, or at least as low as his $14 billion fortune probably allowed. He’s occasionally spotted on his $162 million private yacht, palling around with Brad and Angelina, and taking in a Seattle Seahawks or Portland Trail Blazers game — he owns both teams, of course — but by and large, he’s shied away from the spotlight.

Not anymore. Allen is everywhere now: a scintillating book excerpt in
Vanity Fair
about how co-founder Bill Gates and current CEO Steve Ballmer plotted to dilute his company shares, a 60 Minutes sit-down, even an appearance at the 92nd Street Y in New York City over the weekend. It’s all to promote Idea Man, a tell-all spanning his days as a teen hanging out around his school’s Teletype Model ASR-33 computer terminal with a gangly, freckle-faced — but no less driven — Gates to the present day.

Allen told Fortune he hasn’t seen the 60 Minutes segment which recently aired, a brief, but fascinating peek into his rarefied lifestyle. Currently single, Allen comes across as brilliant, if isolated, surrounded by extravagance, sheltered in an awesome glass loft space hundreds of feet above street level, to the point where interviewer Leslie Stahl compares him — twice — to Howard Hughes.

“I’m doing so much TV right now, and sometimes I like to just blast through it,” he says. “We shot it a few weeks ago, so it’s done and it’s out there, and I’m just trying to be fresh for these next few things.”

To be fair, Idea Man isn’t just about Microsoft. There are wholly unrelated chapters dedicated to other aspects of his life, like his investments in space tourism, AOL or Metricom, a failed broadband mobile data provider. But the reason most people will pick it up will be to learn more about his complex relationship with Gates, one that started fine enough but lost equilibrium as Microsoft quickly grew into a software giant and Ballmer, a Harvard classmate of Gates’s, joined to handle the business side. As we now know, shouting matches between Gates and Allen were common, and Allen even went so far as to compare that time as “being in hell.”

“I think there were different personality styles involved there,” Allen reflects. “I’m a very logical, thoughtful person when you’re talking about trying to decide something. Whether it’s Bill or Steve Ballmer, they’re much more high volume. Intense. They’ll kind of argue something through and then come to a conclusion. After some years in that, it wore me down.”

But he’s also quick to point out that despite all their disagreements, he and Gates had a rapport that simply worked.

“We had this ability to be kind of a yin and yang on problems: one guy would say that’s unsolvable, and our roles would flip back and forth. In the book, I talked about that first version of BASIC that we wrote in under 2 months back in Boston. Bill said that was probably the best piece of pure technical coding we ever did … That was a lot of fun, and we were very complementary. But there this was kind of trajectory which happens in companies where over time, where roles change and people’s styles don’t mesh as well. That’s why I ended up leaving.”

In the years since, he’s kept tabs on Microsoft as it came to dominate the PC market with the Windows operating system and then more recently, struggle to keep up in areas like mobile and search where Apple (AAPL) and Google (GOOG) respectively excel. (“Now everybody is scrambling in both hardware and software.”) On the subject of Windows Phone 7, he implies more work needs to be done.

“It’s not bad for a first release, but to get people to stop using their iPhones… Years ago, I went over to Microsoft to put in my two cents. Look, people are going to walk into a phone store, and you want something they’re going to hold in their hand, and they’re going to get excited about it immediately because there’s something unique in the interface or the way it feels in their hand. Or its capabilities. So it’s a big challenge, but they’re pulling out all the stops.”

In his book, Allen attributes Microsoft’s current problems to the company’s leadership, scale, and mediocre culture. On the subject of under-performers for instance, he writes that one executive complained, “I wish I could shoot every fourth one.” These culture problems are presumably behind some  of the company’s sub-par product releases.

“Even before Bill left, there was a period when Vista and some of these other products like IE [Internet Explorer], well, they weren’t great products,” he says. “There wasn’t the intense focus on doing products for the consumer, but now they’ve internalized that a lot more.” To boot, he points to Kinect for the Xbox 360, a motion-sensing hands-free game controller that’s sold 10 million units since launch last November.

If there’s anything he’s learned all these years, it’s that a lot of factors need to be in place for success: the right team, the right ideas, the right areas for innovation. But when asked what Microsoft needs to do to succeed today, Allen’s answer is relatively simple: “be ready for the competition, and have some agility to react.”

Good advice for the company he helped build from scratch.

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