I don't think anecdotes are that helpful at understanding Gates's message here. Yes, today there are open source versions of pretty much all developer tools (and that's something to celebrate, since I remember when a "cheap" C compiler was $500). But there's still plenty of software that has no open source equal; if we had a world where nobody paid for software, much of it wouldn't have ever been written.
When looking back at letters like this, its important to be at least aware of the context. I don't think ignoring the context of the letter is helpful at all in understanding why it was written by Bill Gates.
Taken outside the context, one can surely have a discussion about how much software would be made if developers can't use government help as basis for their business model.
