June 19, 1995 12:00 PM

PEOPLE IN WEDGWOOD, WASH., a middle-class suburb of Seattle, remember Paul Allen pretty much the same way—as a smart, likable, introverted youngster who studied hard and late, his stereo pumping rock and roll into the night. “I remember always seeing the lights on in Paul’s room at 3 a.m.,” says neighbor Lamont Benson. “He would be up there with that Gates kid, working on computer stuff.” From what Benson can tell, Allen—who still drops by to check up on the old family home—hasn’t changed. “Paul will say hello, real pleasant like. He still doesn’t say much.”

Allen may speak softly, but these days he wields a stick almost as big as that of his old buddy Bill Gates, with whom he founded Microsoft 20 years ago, jump-starting the Information Age. Since the dynamic duo split amicably in 1983, the driven, market-savvy Gates has dominated desktop computing as Microsoft’s chairman, while Allen has invested $1.2 billion of his $4 billion net worth in more than 20 information-and entertainment-related companies. His goal is to bring closer what he calls the Wired World, in which a “core convergence” of computers, online services and video will turn homes into multimedia nerve centers. To help do that, Allen paid $500 million last March for an 18 percent share of Dream Works SKG, the new entertainment company founded by Steven Spielberg, Jeffrey Katzenberg and David Geffen. “At some point there is so much money, what do you do with it all?” he told the Los Angeles Times last month before answering his own question: “Deals like Dream Works, where you can get involved with other people to do exciting, new, creative things.”

The big deal has turned the spotlight on Allen, whose shyness and obsession with privacy—he rarely gives interviews—have made him something of an enigma. Several CEOs of the firms he bankrolls have never met Allen. Yet colleagues at his office in Bellevue, outside Seattle, describe him as an affable soul who shows up daily in his black leather jacket. A pop-culture maven, he waxes rhapsodic over Jimi Hendrix and flies business associates and old friends on his Challenger 601 jet to home games of the NBA’s Portland Trail Blazers, which he owns. A frequent guest on the plane is Allen’s widowed mother, Faye, 73, who has her own house on his $30 million Seattle-area estate. “Paul,” says Paul Andrews, who wrote the 1993 biography Gates, “is the nicest billionaire you’ll never meet.”

Growing up in Wedgwood, Allen was one of those brainy, bespectacled boys who holstered his pens in a pocket protector and always had his nose in a book. His parents, Kenneth and Faye, both librarians at the University of Washington, made sure that Paul and his younger sister, Jody got a full dose of culture by constantly taking them to plays, museums and concerts. But what really fired Allen’s imagination were books, which his mother began reading to him when he was only 3 months old. “Stories are so much a part of Paul’s life,” says Faye, who recalls that her son’s favorites were Swiss Family Robinson and the adventures of Tom Swift, the popular boy inventor. “Tom Swift was very futuristic—he went to outer space, and there were rockets and submarines and all kinds of machines. He was a role model for Paul.”

At Seattle’s exclusive Lakeside School, Allen befriended another diehard, sci-fi fan, Bill Gates. In 1967, when the math department brought in a teletype connected to an off-campus mainframe computer, the two friends started dodging homework and classes—anything to clear more time for hacking at the keyboard. By 1974, Allen had dropped out of Washington State University and was working as a programmer for Honeywell in Boston, across the river from Harvard, where Gates was a sophomore.

That December, Allen had his epiphany. On his way to visit Gates, he saw a Popular Electronics cover on the Altair 8800, one of the first microcomputers sold to the public. What was needed, Allen realized, was software. By the time he reached Gates’s dorm, he had decided that they should write a version of the programming language BASIC that would be the soul of the new machine. Within the next two months they sold their product to Altair’s manufacturer for $3,000 plus royalties and formed the partnership they called Microsoft.

They returned to Seattle in 1978 and business boomed ($32 million in annual sales by 1982), thanks in part to the partners’ complementary styles. “I’m more aggressive and crazily competitive…running the business day to day,” Gates once said, “while Paul keeps us out front in research and development.” (Company veterans credit Allen for brainstorming and championing their biggest hits, including MS-DOS, Windows and Microsoft Word.)

Then came Allen’s second turning point. While in Paris on business in September 1982, he noticed lumps on his neck. He flew home, where he was diagnosed with Hodgkin’s disease and immediately began the radiation treatment that would save him. “Building Microsoft, Paul felt invincible,” says Ann Winblad, a California venture capitalist who became friends with Allen while dating Gates in the mid-’80s. “But the Hodgkin’s was motivation for him to say, ‘Gee, there are other things I’d like to do.’ ” In March 1983, Allen quit Microsoft, though he retained a 13 percent share of the company, now worth $3.9 billion. By November, Allen had begun a two-year jaunt through Europe, scuba diving, yachting and skiing.

He came back to the semi-wired world in 1985, when he started his first company on his own, the multimedia software-maker Asymetrix. Though Asymetrix reportedly has lost $50 million, that hasn’t stopped Allen from plunging into other investments—spending $100 million to launch Interval Research, his own private think tank, $300 million for 80 percent of Ticket master and $30 million for 25 percent of America Online (which he sold last fall at a $28.5 million profit).

Associates are divided about Allen’s management style. “He’s very open-minded to other people’s ideas,” says John Dewan, CEO of the sports information firm STATS Inc., in which Allen has a minority share. “He isn’t oriented toward immediate results.” The former hierarchy at the Portland Trail Blazers, which Allen purchased in 1988, thinks otherwise. Last year Allen conducted a purge, firing coach Rick Adelman, who had taken the Blazers to two NBA finals, and team doctor Robert Cook, among others. Some observers believe that Allen acted with the impulsiveness of a typical fan. But Cook—echoing the feelings of many people in the organization who feel the atmosphere has turned cold and ruthless—says, “Allen is irresponsible and insensitive. He is so insulated by his wealth, it’s like he’s from another planet.”

Allen’s personal solar system is centered on Mercer Island, on Seattle’s Lake Washington, where he lives in a six-acre compound with a pool, an art gallery, a movie theater, a tennis court, a garage for his Lamborghini and four Ferraris, and a $6 million sports complex replete with basketball court, where he plays pickup with pals. Allen unwinds by jamming with his five-man band, the Threads, in his private studio in downtown Seattle—and by forging ahead with plans to build a $60 million Jimi Hendrix museum to display a 6,000-piece collection of guitars, gold records and other Hendrix memorabilia. He also spends a lot of time with his sister Jody Patton, 37, a close aide, and her sons Duncan, 5, and Gardner, 1. Since breaking up with a longtime girlfriend last year, Allen, who would like to raise a family, has been dating occasionally.

Allen’s primary passion, though, is the digital revolution—as evidenced by his throwing in with Dream Works, where he will sit on the board and offer advice on computer technology and designing interactive films. Just how he and the Dream team will interact—the company will have to be worth $8 billion by the year 2000 for Allen to make a reasonable profit—remains to be seen. Whatever the outcome, it is virtually certain Allen will keep taking the plunge. The union of video, computer and online technology is a “sea change,” he has said. “You try to ride the incredible wave that’s coming.”


LORENZO BENET in Los Angeles, BILL DONAHUE in Portland, MIRO CERNETIG in Seattle and DON SIDER in Miami

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