Wednesday, March 23, 2011

The Microsoft Strategy

Andrew Stevens writes:
Just to clarify, it seems to be FLG's opinion that once Gates set up the initial operating system agreement that Microsoft was going to enjoy a monopoly forever and ever, amen, without any effort on their part. Nothing could be further from the truth. The Internet did take Gates a bit by surprise, but that was his first misstep (other than the stupid paper clip) in fifteen years and he didn't make many afterward either. He has, in fact, a remarkable track record in keeping on top of a rapidly changing field.

FLG's opinion is that once Gates setup the initial operating system agreement, then it set the foundation for a monopoly for a really long time. Everything Microsoft has done outside of that is to pour money into endeavors trying to catch up with other people.

Microsoft has MS-DOS in 1981. If FLG remembers correctly, it licensed MS-DOS to IBM that same year.

In 1983, Apple releases the Lisa, the first PC with a graphical user interface, but really hits its stride in 1984 with the Macintosh. Microsoft doesn't produce a competitive GUI interface until Windows 3.0 in 1990. And FLG might argue that it was really with 3.1 in 1992.

Right about the time, in 1993, the University of Illinois released the first web browser, Mosaic. The very next year Marc Andreessen, who wrote Mosaic, started a company called Netscape, which would create the first widely-accepted web browser.

So, in the early-90s Microsoft is just catching up in the GUI space and as FLG mentioned previously Bill Gates is going around talking about home libraries of CD-ROMs containing tons of information, Netscape is taking off.

What happens? Microsoft acquires SpyGlass, another company affiliated with the University of Illinois Mosaic project, and starts pouring money into the development of Internet Explorer. Eventually, as Microsoft poured enough money into IE, Netscape couldn't keep up.

Smart business? Absolutely. Did it take a genius? No. It took a lot of resources and the ability to leverage the operating system monopoly.

This saga repeats itself over and over. MacIntosh->Windows, Netscape->IE, Lotus 123->Excel, Wordperfect->Word, Sybase->MS SQL, Java->C sharp, iPod->Zune, Yahoo->MSN, Google->Bing, PlayStation->XBOX. FLG could go on and on. Some successful, some failures.

But even the successes aren't due to some great insight by Bill Gates. Bill Gates, and the entire Microsoft strategy, has always been to take the monopoly rents they earn and pour them into development of a competing product. Now, in many cases (Windows, IE, Office, MSSQL, etc) this can be a very successful strategy. But it doesn't take some fantastic managerial insight. Given enough resources, you should be able to do anything. Given the amount of resources Microsoft pours into these projects, all of them should have been successful.

Just to be clear here, this isn't about copying. Apple copies as well. Steve Jobs saw the first GUI operating system at Xerox PARC. The iPod wasn't the first mp3 player. It's that as far as FLG can tell nobody at Microsoft has no unique capabilities. They just deploy massive amounts of resources at the problem. Again, this can be a successful strategy. But it doesn't make Bill Gates some sort of corporate strategy genius. In fact, FLG sees Gates as almost always behind the curve and the times when it has tried to be ahead of the curve (to name just to examples, Windows CE/Windows Moble and tablet PCs) it has failed pretty miserably.


Withywindle said...

Andrew probably has a more full-throated defense, but: isn't being a successful copy-cat, only a few years behind the competition, with products that work sufficiently well more often than not, itself a rare talent?

Andrew Stevens said...

I had a very long reply eaten by Blogger. If it's recoverable, please recover. If not, I'll try to reconstruct it.

Anonymous said...

My idea that Gates has Asperger's was based on what I've heard or read about him -- how the people who work for him - back in the early days - described him. I never think of Asperger's as a disorder but as a syndrome. Gates has clear people issues.

I recall back in summer of '91 a friend from Seattle telling me how he missed his greatest business opportunity of a lifetime. It was some black tie charity auction event that he didn't want to fork over the $$$$ for the tickets and then having to chatter socially with folks he did his best to avoid most days. What he missed he found out later - no one knew the items up for auction - one item - an afternoon on Bill Gates' boat with Bill himself - that was it. Just plain old Bill Gates on his boat - yacht for the afternoon cruising around the islands of Seattle.

Do you know how much that went for?

5 grand.

No one among Seattle's best and wealthiest wanted to spend an afternoon alone with Bill on his boat.

Something's off with Gates. It may not be Asperger's but it's something. And he gets more off with age but that may now be money doing the trick. I've know incredibly intelligent and highly -functioning people who have been defined by the medical world as Autistic or having Aspergers. Thomas Sowell has written a fair amount on incredibly brilliant kids being diagnosed as such. Wrongly diagnosed and indicative that we still do not understand gifted people. Gates is gifted - highly gifted - no question.

Mrs. P

FLG said...


Your comment wasn't in any of my comment moderation queues for me to recover it.

Andrew Stevens said...

My defense of Gates lies on three major fronts:

1) His successful defense of the operating system monopoly. Just as Gates has overtaken such products as Netscape and Lotus, it is not a foregone conclusion that no OS can rise to defeat Microsoft. Microsoft has had to constantly stay ahead of any would-be competitors. One instructive story is in the creation of Windows. When creating Windows, the developers discovered that the DOS version of Sim City just kept crashing. They disassembled it and discovered that it used memory right after freeing it. This is a major no-no in programming, but it happened to work in DOS. How to make it backwards compatible in Windows where such a thing really wouldn't work? Simple. They added special code to see if Sim City was running and then had Windows run in a special mode where you could use memory after freeing it. That's how seriously backwards compatibility was taken and that's how seriously it had to be taken. Otherwise, Sim City would have crashed and everybody would have told their friends, "Don't bother with Windows. It keeps crashing." These sorts of lengths were routinely taken by Microsoft back in the days before they could count on legions of programmers working for free to build emulators and the like. Very few other companies would have done this.

2) Risk management. Gates always has several horses running. If people had decided to abandon computers and use TVs instead, Gates had WebTV. If people abandoned computers for console games, Gates has Xbox. Most of these little Microsoft side projects look like pointless and unprofitable activities, but Gates is hedging his bets to try to prevent a precipitous fall. He did stumble a bit on the Internet, but he was able to recover and right himself. Very few companies, even market-dominant companies, do this, by the way. E.g. Blockbuster didn't see Netflix coming until they were just about bankrupt.

Andrew Stevens said...

3) Gates makes very few errors. Netscape's fall was far from inevitable. They still had quite a lead on Microsoft at one time, and then decided that their codebase had become over-complicated and buggy and chose to rewrite it from scratch. By the time they were done, Microsoft had eaten their lunch. So far (leaving aside the paperclip), Gates has never made a mistake like that. And mistakes like that are a dime a dozen in the software field.

I agree with Withywindle that doing what Microsoft has done in terms of the copying is also difficult and an impressive achievement, though I would credit that more to Gates's willingness to pay top dollar for top talent. He doesn't write the code himself or anything. I guess my major argument is that Gates uses his resources because he knows he's standing on a precipice. A great many CEOs would have just pocketed the certain profits instead of expending them in the manner Gates has done and would own a company not nearly so successful today.

As for Asperger's, I wasn't aware there was a distinction between a disorder and a syndrome. The diagnostic criteria for Asperger's requires a "significant impairment in day-to-day living" which Gates obviously doesn't have.

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