Microsoft's misunderstood era: Ben Gilbert of 'Acquired' on the tech giant's most pivotal years

This episode explores Microsoft’s transformation through its often misunderstood middle years, discussing key business strategies and technological innovations.

1. Microsoft's middle era was pivotal in transitioning from a dominant software provider to a multifaceted tech giant.
2. Early initiatives in mobile and internet technology set the stage for later successes despite initial setbacks.
3. The episode highlights the significant impact of legal challenges on Microsoft’s business strategies.
4. It emphasizes the importance of understanding historical context to appreciate Microsoft's current status and future potential.
5. The discussion reveals insights into strategic decision-making within large tech companies during periods of intense change.

1: Introduction and Guest Introduction

Host Todd Bishop introduces the episode and guest Ben Gilbert, discussing the focus on Microsoft's often overlooked middle years. They set the stage for a detailed exploration of this critical period in Microsoft's history. Todd Bishop: "Welcome to GeekWire, I'm your host Todd Bishop. Today, we're diving into Microsoft's misunderstood era with special guest Ben Gilbert."

2: Deep Dive into Microsoft's History

The chapter details Microsoft's transitions through its formative years, focusing on its strategic decisions and the broader impacts of these on the tech industry. Ben Gilbert: "Microsoft has these three distinct chapters. The middle one, often misunderstood, is where some of the most pivotal shifts occurred."

3: Discussion on Microsoft’s Legal and Business Challenges

This section covers the antitrust challenges Microsoft faced and how these influenced their business practices and technology development. Ben Gilbert: "The antitrust challenges really made Microsoft reconsider and refine their approach to technology and competition."

1. Embrace change and learn from past missteps to guide future strategies.
2. Stay informed about industry history to better understand current market dynamics.
3. Consider the broader implications of legal and regulatory challenges in business planning.
4. Leverage historical insights to anticipate future technological shifts and opportunities.
5. Encourage a culture of innovation that can withstand external pressures and challenges.

This week on the GeekWire Podcast, our guest is entrepreneur and investor Ben Gilbert, co-founder and co-host of the hit podcast Acquired.

Ben and his colleague David Rosenthal have developed a huge following for their deep-dive, long-form podcasts telling the stories behind some of the most successful companies in the world, and they recently released Microsoft Volume II, the second installment in their epic exploration of the Redmond-based technology giant.

We talk about Microsoft's misunderstood era, with help from some archival highlights from GeekWire co-founder Todd Bishop's interviews with Bill Gates over the years. It’s a timely topic given Microsoft’s 50th anniversary in 2025 and the company's resurgence as one of the most valuable and relevant companies in the tech industry with the rise of AI.

Before we jump in, we ask Ben to catch us up on all things Acquired. The podcast is the talk of Silicon Valley and Wall Street, as documented in a Wall Street Journal profile. Acquired just announced a live arena show coming up on Sept. 10 featuring Mark Zuckerberg at Chase Center in San Francisco, the home of the Golden State Warriors.

People

Bill Gates, Steve Ballmer, Ben Gilbert, Todd Bishop

Companies

Microsoft

Books

None

Guest Name(s):

Ben Gilbert

Content Warnings:

None

Todd Bishop
Ben, I have to say, and I apologize for going down the journalistic history lane here, but one of my favorite moments was from the Windows Vista era. I got an email from somebody who was upgraded on his computer from, I believe, Windows XP to Windows Vista. I think against his will or something, he had gone from XP to Vista and he was not happy about it and he was unable to get his printer to work with Windows Vista. So I went out and I visited with him. I connected him with a Microsoft engineer who went out and found fixed it, like from Redmond.

And I wrote about it. And my headline was, man gets Windows Vista to work with printer.

Ben Gilbert
I didn't know you wrote for the Onion.

Todd Bishop
Welcome to Geekwire. I'm Geekwire co founder Todd Bishop. We are coming to you from Seattle where we get to report each day on what's happening around us in business, technology and innovation. What happens here matters everywhere. And every week on this show we talk about some of the most interesting stories and trends in the news.

This week, I'm very excited to welcome a special guest, Ben Gilbert, the co founder and co host of the hit podcast acquired. Ben, it's great to see you. You too, Todd. This feels like a homecoming of sorts. You've been doing acquired for a while.

I've been following it almost since the beginning. I've been on an episode. And for folks who are not familiar with acquired, Ben and his colleague David Rosenthal have developed a huge following for their deep dive, long form podcasts that tell the stories behind some of the most successful companies in the world. And they recently released Microsoft Volume two, the second installment in their epic exploration of the Redmond based technology giant. Ben.

I'm really looking forward to talking about Microsoft for reasons that will become clear to the uninitiated as we go. And I know that you've had a lot fund now doing your second deep dive into the company. Yeah, it's funny to me. Microsoft has these three distinct chapters. There's the early days, which is ancient history that people know a few stories from, but, you know, really is almost 50 years old.

Ben Gilbert
There's this middle era, which I think is fundamentally misunderstood, and everyone seems to be just completely willing to misunderstand it. And then there's this third era where everyone knows, oh, Microsoft is so unbelievably successful and they're the most, you know, valuable company in the world. And Satya is this incredible leader. So I kind of felt like going into this, the first story would be fun. The third story almost doesn't need the acquired treatment or not yet, at least in this middle story, I found way more there than I was expecting.

I was expecting it to be boring. And actually it needed to be our longest episode ever. I was looking up before we started talking the definition and the parameters of a traditional three act play. And I was not a drama person in high school, but it is a setup, confrontation and resolution. And it just strikes me that's exactly what Microsoft is.

That's a great point. That's a great framing. We are going to be doing our own deep dive into Microsoft later on. And it's cool because we'll have the help of some archival clips of my own interviews with Bill Gates over the years. And this is a timely topic given Microsoft's 50th anniversary coming up next year in 2025.

Todd Bishop
And of course, Microsoft's resurgence is one of the most valuable and relevant companies in the world today and the tech industry, especially given the rise of AI. But Ben, before we do that, I've followed acquired over the years so much that I'd really like to ask you a few questions. Acquired is really the talk of Silicon Valley and Wall street in a lot of ways. There was an amazing feature about you in the Wall Street Journal that I'll link to from the show notes. And you just announced a live arena show coming up on September 10 featuring Mark Zuckerberg at Chase center in San Francisco, which is the new home of the Golden State warriors.

Catch us up. What have you been up to? What have you and David been up to? You know, compounding is a funny thing, because at no moment has it seemed dramatically different than the moment before. And yet nine years in, we're doing a podcast in a basketball arena.

Ben Gilbert
I mean, with Mark Zuckerberg, it's crazy, right? That's totally nuts. Yeah. On the one hand, it feels unbelievable. On the other hand, it's happened so gradually that this must be what product market fit feels like.

Todd Bishop
I love that. I love that. Because one of my questions for you is how all of your work, studying and researching these companies and business leaders has influenced your own approach to business and investing. Because in a lot of ways, you spend your days diving in and learning from some of the most successful companies in the world, not just from their successes, but from their mistakes. Has that influenced how you approach your own business and your own mindset as an entrepreneur yourself?

Ben Gilbert
Yeah, absolutely. I mean, acquired is, David and I like to talk about it as a small business on the Internet. It's a two person shop. We have a product that we make the magic of the Internet is that it's distributable at zero marginal cost to as many people are interested. And never before in history could you build something with a million people who tune in every month and are interested.

That I can do from my basement. David does it from his basement. And we occasionally get together when we're interviewing Jensen or Howard Schultz or someone. This is a very unique time in history when this is possible. And so one of the biggest lessons we've learned has been lean into the power of the Internet.

And the biggest way this shows up is do one thing and do it well, and figure out how to be as counter positioned as possible to everything else that exists. Because eventually everyone who is interested in your thing will find you. It's not like the olden days where when you open a bakery, your total addressable market is the neighborhood. The total addressable market is 7 billion people. So kind of figure out what the segment is.

People who are interested in long form, exhaustive explorations of what made these titanic businesses successful. And if you do it long enough and you encourage the audience, hey, you should share this with someone else, you kind of can address all the people in the whole world who are interested in that one thing, no matter how esoteric it is. Obviously it'll take a long time unless you blitz the world with marketing. But if you really, really stand for something and you're the only person in the world doing it, you let time and word of mouth do its thing. Looking back over the past few years, especially, were there any habits or decisions or specific turning points that you see in hindsight having led to acquired's breakout moments?

Yeah, we discovered something pretty weird in our data, which was whenever we would do an episode with a guest, it would always have fewer downloads than the most recent episode we had done. That was just David and I. And that always puzzled me, because conventional wisdom and podcasts have guests on release on a weekly schedule. Try to do weekly or twice a week, encourage the guests to share, because that's the way to get the most virality. Keep it short so people can make it a part of their routine.

We just did none of those things when we had guests. It actually made our numbers worse. And that was this sort of flashing red light of, hey, you have product market fit with this thing that the two of you can create together without any external dependencies, which is this tremendous gift. I mean, most interview shows, you are wildly at the whim of whoever you are interviewing. Our format works worse when we're interviewing someone.

And so we realized, well, actually, what if we just did twelve episodes a year, take a whole month, make the best episode? We can do it just with us, where we can have every ounce of control that we want over the whole thing. And this led us to the belief that we should always try to be n of one. And anything that we do, try to figure out how to do it in a way that only acquired does or only acquired can do. And the cool thing about being Ben and David, the co hosts of acquired, is there are not other Ben and David, the co hosts of acquired.

So lean into that and lean away from more commoditized things like interviews. Now, occasionally you indulge yourselves and something comes along and you're like, of course, I'm gonna fly down and interview Jensen at Nvidia's headquarters after we studied the business for 10 hours. But that should be the exception, not the rule. Yeah. Hey, if your title sponsor calls up and says, we wanna put you in a basketball arena, interviewing Mark Zuckerberg, I think you say yes.

Right. Right. So it's keep the main thing, the main thing, but embrace exceptional circumstances. It strikes me that the name has become something of a misnomer at the same time that it's become a strong brand. Have you and David, who started really exploring acquisitions?

Todd Bishop
I mean, that was the idea behind. Acquired technology, acquisitions that actually went well. That was the original title, yes. And now, of course, it's these deep dives on businesses. Have you thought about changing the name?

It's kind of a classic branding dilemma, similar to the kinds of things that some of the companies you've podcasted about have faced. Well, Todd, Apple doesn't sell fruit. And so in all seriousness, we have talked about this a bunch. It is a misnomer. It's a little bit of a strange expectation when someone comes in and we get a lot of emails from PR firms who want to talk about their head of Corp Dev, which is always funny to me.

Ben Gilbert
It's not exactly what we do anymore, but there's so much brand equity built around it and it's a great name. It's short, it's tight. Podcast players for a long time and many still do sort alphabetically. So we got very lucky and we're just at the top of a lot of lists because of that. So I don't think that plays a role anymore.

But it definitely is a surprising secret that we took advantage for a while. Yeah. Somehow I don't think you could sell out a basketball arena with the head of M and A for Salesforce. Nothing against that person, I'm sure they're very important. And yet you're on a whole different level at this point.

Thanks. All right, Ben, enough with the preamble here. Yeah. You've got these archival recordings of bill Gates giving interviews 20 years ago that have never been released. And here you are talking about our podcast.

Let's get into it. Okay, let's do that. When we come back, you're listening to geekwire. And we will be right back. Technology moves fast.

I need to move faster. WGU's competency based education puts me in control of how fast I move through my IT degree program. I can accelerate my program by applying what I already know to my courses and focusing on the things I need to learn. Earn a respected, accredited degree that propels your career in the it field. Learn more at wgu.edu, itserts included.

Todd Bishop
Welcome back. It's Todd Bishop. My guest this week is Ben Gilbert, the co host and co founder of Acquired, the podcast that just released its part two of its deep dive into Microsoft. Ben, before we get to the archival audio, let's talk about this section of Microsoft's history in the podcast that's out now and people can find it. At acquired fm, you explore 1995 through 2014.

And I loved how you set this up in the show. And this is not a spoiler necessarily, but your comment was that Microsoft in this era had a lot of great ideas, not a lot of great timing. I'm paraphrasing you there. Can you give me a sense for what the company was grappling with in this second act? Yeah.

Ben Gilbert
So great ideas. Mobile, there's a real opportunity for an operating system on mobile touch computing with a natural user interface. Search, consumerization of music in the form of MP3 s gaming. That one actually went pretty well. Xbox, absolutely.

Todd Bishop
And Windows PC gaming, too. Yes. And we should say the enterprise, embracing the personal computer in a big way. That one also went tremendously well. But everything else that we just talked about was either too little, too late, slightly wrong implementation 20 years too early.

Ben Gilbert
I mean, it's crazy hearing Bill Gates talk about the natural user interface literally decades before the iPad came out, before the iPhone came out, before multitouch was in the conversation. And so this era, the first era, is essentially riding Moore's Law's wave of, oh my God, there can be a real software industry and we can create the platform at the center of it. And the second wave is, okay, everyone knows about the software industry. In what ways is technology going to move into more parts of our lives, more devices, software that, you know, we wouldn't have dreamed of 20 years ago, and what can it do now? And frankly, what are the business models around those going to be?

Todd Bishop
You and David set this up so well, and I won't ruin the episode. I highly encourage everybody to go check it out. There are so many things happening so quickly. That was one of the things that struck me right in the era of 1995. You've got some great anecdotes about Steven Sinofsky, the eventual Windows chief, identifying this Internet web thing that all these students in Ithaca were basically enamored with, and Jay Allard, who ended up going on to be the father of Xbox in a lot of ways, recognizing that this Internet thing, this web thing was going to be big because of Marc Andreessen's mosaic browser.

It's just a really good reminder in a lot of ways, even for people who lived through this era or have studied it. And at the same time, you have this benefit of hindsight pointing out in a lot of the cases where the company went wrong, where it was early, where it totally missed. And to me, the other big issue which we'll get into as part of this conversation was the comeuppance that the government, especially in the US, but also in Europe and in other countries around the world, delivered to Microsoft in the form of antitrust scrutiny toward the end of this era or toward the middle or end of this era. So, Ben, you talked about some of the product issues overall. What are some of the bigger challenges and opportunities that Microsoft faced in this era?

Ben Gilbert
Well, the funny thing is, despite every headwind coming at them, all the consumer misses. We talked about everything from the Department of Justice trial they were, and all credit really, to Steve Ballmer on this, figuring out how to sell technology to the enterprise and establish Windows NT, SQL Server Exchange, active directory. Like, I can feel people's eyes glazing over right now when I talk about this. But it was sort of like nothing else mattered because of what an incredible, incredible business the enterprise became for Microsoft. And so there were lots of things going on in this era.

I mean, the government, I don't know if people remember literally the ruling from a federal judge was Microsoft will be broken up into two companies. There's the Windows company and then there's the applications company, including Internet Explorer and Office and everything. And for, I think over a year, that final ruling stood before the appeal came down and reversed that order. You've got Windows 98 being released, Windows 2000 being released, trying to unify on the NT kernel for the eventual Windows XP release, all happening at the same time that the company is told, prepare to be broken up. We await your plan of who's going where, which company is Bill going to, which company is Steve going to.

I mean, imagine trying to innovate and predict the future and communicate with an organization. Well, that is the state your company is in. It's so crazy. And just a little point of local trivia as well. Folks may not remember this, but Microsoft bought a huge tract of land out in Issaquah.

Todd Bishop
It was called the Issaquah Highlands. And they never said this explicitly, but it was clear that that was going to be the campus likely for the. I believe it was for the applications group. Oh, yeah. Oh, I had no idea.

Issaquah Highlands. And the whole idea there was that, you know, just as a contingency plan, hey, to your point, there was actually a breakup order. And if not for the appeal and the eventual settlement, that would have happened if they had just decided to go with it. I mean, this was a reality for these folks. Let's listen to our first audio clip.

This is an interview that I did with Bill Gates back in 2005 at what was then known as the Professional Developers Conference. This was the predecessor effectively to Microsoft's build conference. Today. Do you envision Windows being as central to the PC industry in ten years. As it is today?

Bill Gates
Well, the PC industry is itself broadening to embrace all the different devices. What do you call it when you're in the car using Windows automotive? What do you call it when you're on your smartphone connecting up using the Windows mobile software we have there? We've always been the most prolific in terms of doing software for all the devices. Our IPTV effort is doing the next generation of setup box.

We're doing Xbox on the video game. So this wave is very user centric and we actually started talking about that all the way back in the year 2000, that you are going to have many devices. The full screen device will always play a special role. If you want to write a document, edit a document, you're going to sit at 2ft and do that. That's the PC.

And the PC, we're able to take notes as we get. This is the tablet. I don't know if you've seen this motion machine. Yeah, I have. But just think of that two years from now, four years from now, in terms of the thinness, the cost, every student, instead of having textbooks, they're going to have a tablet PC.

And so the PC is very significant. We use the word windows, actually to encompass not only the PC client software, but also the phone client software and the automotive. And so because of the broad way we talk about the Windows platform, I can say yes to your question, but it's because Windows is not static, because you'll have Windows platforms, services for backup and email, as well as the local capabilities. Okay, I want to get your take on that. Ben.

Todd Bishop
First off, you mentioned IPTV, which is a really good and somewhat obscure example of what you're talking about in terms of the right idea, the wrong time. And then he also talked about tablet PCs, which are another example of it. What strikes you from that clip? Well, you can almost feel Bill's concern about future technology platforms in how he describes the PC. Microsoft wanted the PC to include post PC devices.

Ben Gilbert
I mean, post PC. Oh, there's a phrase I haven't heard in a while. Keep going. I was just immersed in this era, so I'm like full of the vocabulary. But if you think about it, if you own the software that makes all the hardware and all the applications interoperate in the world on the current most popular technology, and you realize there's going to be five new technology platforms in the future.

Cars, tablets, phones, television, you really want your platform to also sort of encompass and be the platform on those other next generation waves. And so it's funny, Bill even uses the words with the Broadway. We talk about Windows. Well, unfortunately, talking about Windows is very different than is that the bits that create the desired user experience on those platforms? And it's so interesting that I'm going to go upstairs after this or tonight and turn on my Apple TV and stream Netflix.

That's IPTV. Obviously, we're all walking around with iPhones and Androids. Most people are walking around with iPads or Android tablets. There are some really great Windows tablet devices, but that's not the dominant when people refer to tablets, that's sort of not what they're thinking about. Tesla and Android Auto and CarPlay are really fantastic car operating systems.

And so despite seeing that these were the platforms of the future in Microsoft being a platform company, it is remarkable that they didn't end up, Windows did not end up being the platform that integrates hardware, software, applications and services on any of those future platforms. It's a fascinating case study. Android open source, Apple coming in with the iPad, strong brand. It feels in those respects like Microsoft was caught in between, in kind of a no person's land where it was proprietary, and yet it didn't have the broad consumer appeal. And you can see how it shook out into mobile operating systems.

Todd Bishop
And Microsoft was here applying its model of OEM hardware. And it's funny in that clip he points out, hey, did you see this motion device? I mean it was not a Microsoft device. It was a third party PC platform that he was promoting. And in hindsight you can see where they missed the mark by being in the middle.

Ben Gilbert
It's amazing how they're almost hamstrung by the success of Windows because it's, I was trying to put myself in the seat of being Steve Ballmer or Bill Gates in this era. If you had a great idea for what the right experience was for a future looking device, you know, say it's kin, say it's courier, but you have all these developers like your whole world is Windows. And so every time you make some amount of momentum on this new idea that you have for the future, you're like, but why wouldn't we make windows that? Why wouldn't we make this thing a version of Windows? We can bring all of our advantages along with us.

And it turns out that those future platforms, it sounds like a good idea, but you sort of corrupt the good idea by trying to bring your past into it. I mean you look at, I think this is the case with Windows eight. Microsoft was right about touch, and I know we're flashing forward a few years here, but it turned out that the way that people want to use tablets is with a dedicated tablet operating system, which was a scale up from phone operating systems, not a scale down from PC operating systems. And it was the fact that, well, we own the PC operating system. So can we figure out how to make this thing a PC, more like a PC than a phone?

And that didn't work. And I think it's this very classic case of all the spreadsheets. And all the logic would tell you that you should bring your ecosystem with you, that you should leverage all your core strengths and often that's the very thing that holds you back from succeeding. The other thing going on is there's new business models that these new technology companies are using that are not really your competitors. But their business model, if you follow it forward a few steps, it might make your business model obsolete in the next era.

And to illustrate it, you know, Google launches in 1998, they go public in 2002 ish. They make a web page, it's ten blue links, it's got ads on it like they're not selling software licenses, they're not selling operating systems, they're not making productivity software. So they're competing for talent, but that's it. They're really not a competitor yet. But if you really think about if Google has this unbelievable business model in search and they're able to monetize a user better than you're able to monetize them by selling them software, well, if they're really ambitious and they're full of really smart people, what are they going to do?

Well, what they should do is make sure they never ever lose those search queries. And what do you do to make sure you never lose the search queries? You make sure that you own the front door to search. And what do you do to make sure you own the front door to search? You either deal your way there like they do with Apple being the default search engine from iOS, or come out with a very compelling operating system where you own the search bar.

And so there's this crazy thing where you sort of could have reasoned your way to. Microsoft will fail in mobile if they try to use their existing license based business model because there will be a strong competitor who wants to give it away for free. And that's like a decade and a whole bunch of leaps to make and counting on your competitor to be operationally excellent. But if you made all those, then you sort of could have predicted, shoot, Windows Phone isn't going to stand a chance against Android. Well, that is a perfect segue, Ben, to the next clip.

Todd Bishop
This was 2005. It was actually a joint interview with both Bill Gates and Steve Ballmer I at what was then known as Safeco Field. I don't know if you picked up on this in the audio. Yeah, of course. It's funny.

Our podcast producer and editor, Kurt Milton was joking that perhaps my first interview that we played there was recorded on a wax cylinder. It kind of sounded like it, but this one had all sorts of issues with the audio. But this was a clean clip from it. And to your point, I'm there as a newspaper reporter kind of trying to provoke a response from these guys. And so I asked what really was kind of a ridiculous question just to see how they would react.

So let's listen to that. Now, a lot of people dance around this question, but I want to give you guys a chance to answer it directly. Is Google going to put Microsoft out of business? Well, directly, no. And why not?

How do you see them? How do you see yourself stacking up against an emerging company like Google? Well, I get the firm know what, you talk about my voice? Yeah, sure. I do want to say here just real fast here.

So Ballmer this is classic. Ballmer had lost his voice at this point because this had been a 30th anniversary celebration at Safeco where they were pumping up the crowd. So conveniently he's able to say to Bill Gates, hey, Bill, you answer this ridiculous question from this dumb reporter. Go ahead. Google's actually pretty narrow in what they're doing today.

Bill Gates
Now they're going to probably go into some new areas, but the idea of great developer tools, great operating system, great productivity tools, they're not in any one of those areas. They're not digital entertainment. And so it is amazing how, you know, what would it have been eight, nine years ago would have been the browser where people say, hey, that, which is a piece of windows and an important piece of windows that because we had somebody else who was challenging us there doing work there that, you know, at one point an executive there said, hey, that would eliminate windows. And, you know, it simply wasn't the case. There were many other capabilities and windows that we continue to improve, listen to the feedback and do things with.

Google is a, is a company that hires software talent. Many of our competitors think more in terms of hardware. You know, Apple, who's a great company, but generally tries to package things up as hardware offerings. IBM thinks in terms of services as well as, what do we call it, human services instead of hardware as well as the software piece they have. So there's some similarities.

We both believe in hiring smart people, but the breadth of what they're working on is not nearly as broad as what we do. They will provide us competition in some areas. The one that there's really only one that they've done something, a leadership thing in, which is in search. And search today is very poor compared to what it will be even to year or two years from now. Their search, our search, everybody's search.

And so, you know, there's so much room to do better to have that work well with the other offerings. So we view it a lot like we viewed any smarteen competitor coming in. It's invigorating. We have to do something that's quite a bit broader and better. So much there.

Todd Bishop
And I know that was a bit of an extended clip, but there was so much there. First off, I love the fact that he points out that they both hire smart people because there's other companies that are just cornering the market for the dumb engineers when he says stuff like that. Google and Microsoft did both build their brand on we have the gauntlet interview. It really meant something in Microsoft heyday and for Google's first probably 15 years if you were a Microsoft engineer or a Google engineer, and I'd argue a Facebook engineer after that. Am I hearing that correctly in hindsight, to take Bill Gates somewhat downplaying the competitive threat from Google?

Is that too much to say? How did you take that clip? Well, the job of a CEO or a chairman of the board talking to a reporter, which will create a product that gets consumed by Wall street, is to downplay competition. Famously, Steve Ballmer has whatever quote he has when the iPhone was launched, saying it'll never work at this price point. I mean, whatever Steve thought of the iPhone when it launched, that's what he should have said to a reporter in an interview.

Ben Gilbert
And then they should have gotten to work immediately on figuring out how to address the competitive threat. But I wouldn't expect either of them to come out and say, we are in a knife fight against Google. I will tell you, it is getting dicey out there. Anything else from that clip strike you as particularly relevant in hindsight or in the context of the analysis that you and David have done recently about Microsoft? Well, the funniest thing is they're right about Google.

From a what produces the profits perspective, they still are a one trick pony. They show ads on search pages, and that is like the greatest business model ever created in human history. And I mean, they have a, I don't know the formal definition of monopoly, but they have a very large share of a incredibly high gross margin business where everybody in the world wants to perform that activity. So on the one hand, like they're a one trick pony. On the other hand, I would take that trick or that pony or whatever you want to refer to it.

Interestingly, Microsoft, he talks about the breadth of their offering today has three thriving businesses in, I don't remember the segment names, but effectively productivity apps with office azure cloud, and windows with operating systems. And like, when you look at them, they're somewhere around a third. A third, a third. It is very rare for a business of this size and scale to actually be diversified. Most of them truly ride their initial innovation forever and then have a bunch of either lost leaders or speculative side projects going on sort of around the core business forever.

Todd Bishop
We've got a few more clips to listen to with Ben Gilbert from acquired, and this might be the worst teaser ever, but I'm going to say it coming up next. Windows Vista.

Welcome back. It's Todd Bishop. I'm here with Ben Gilbert. He is the co host and co founder of Acquired. You can listen to their latest episode all about Microsoft's part two at acquired FM.

Okay, let's jump into our next clip. This is fast forwarding a few years. This is with Bill Gates at another of Microsoft's conferences in 2008. A year ago here you debuted Windows Vista and your sales volume has been good. You're announcing tonight 100 million licenses sold.

On the other hand, it doesn't seem to have really won the hearts and minds of the computing public, perhaps to the degree that you might have. Well, I think a lot of people would say it was the best product of the year in terms of the neat new things they're using in it. They also have very high expectations in terms of having all the drivers there and the compatibility. And there's some of those areas where we definitely, as the year went on, we did a better job on those things. And then there's a bit of a lesson learned there.

Bill Gates
This is a very, very successful product. We're very proud of it. And I think you're starting to see people talk more about the things that they really enjoy in it. You're seeing a lot of hardware that's taking advantage of it. We're hard at work on the next big version of Windows, and it is the product that the industry tends to build its new applications on.

Ben Gilbert
He is not wrong there. Windows is the product that the industry tends to build its applications on. It's also the best new product of the year in terms of the neat new things that people are doing with it. Come on, Todd, what did you want him to say? They hadn't released an operating system in five years.

The next one was three years away. This is the product they had to sell at that point in time. You get on stage and you try to sell it. Absolutely. This is the challenge that we always face and it's one of the reasons why.

Todd Bishop
Asked a little bit more of a provocative form of the question in the clip we played prior to the break about is Google going to put Microsoft out of business? Because I wanted to shake them up a little bit and get them out of that mode. This is an era that's easy to laugh about for a lot of these reasons. It was a difficult era. At the same time, for reasons that we'll get into a little bit later, this was creating the underpinnings for Microsoft to become at times the most valuable company in the world in 2024.

Depending on the day and the trading in the market, what do you take away from this era? And based on your research, what did they learn from it and how did they recover from it? Again, I think it was that their enterprise sales motion, their bundling of all the enterprise products together, the enterprise agreement, Steve's passion around solutions for the enterprise, it got the company through. I mean there were zero interested like indie developers or excitement in the developer community developing Vista apps. That was not a thing at that point in time.

Ben Gilbert
People who are up and coming developers, I mean, I remember this is when I was learning PHP and I was trying to make interactive websites that used a MySQL database and Ajax was becoming a thing. And actually Internet explorer pioneered quite a bit of these technologies. But Windows as a target development platform outside of enterprise business apps was a wasteland. I mean, why? There was just really no incentive there other than the fact that they were going to sell a lot of copies of Vista because that was as many businesses tried to hold on to XP service pack two for a long time.

But when you couldn't hold on anymore, then you bought Vista. And so there was a big installed user base. But I wouldn't say that's where any up and coming developer excitement was, or frankly user excitement. I also think what was going on inside the company was you had five years between XP and Vista and I'll save you the long explanation and if you're interested, we go into it on the episode. But basically a whole bunch of interesting technologies were attempted in Longhorn.

There was a lot of organizational disaster, I mean just mismanagement and kind of spiraling out of control and bad project management. And what they ended up shipping was nothing like any of the ambitious stuff. They tried a regression in many ways and you heard it at the end of that clip, Bill saying, and we are hard at work on the next version of Windows, not a great message right after your current operating system comes out. Microsoft, when they introduced Longhorn, which was really not the beta version of Windows Vista so much as it was the precursor to Vista, because the Vista that shipped Washington as I remember it, not what they introduced with Longhorn, but this whole idea of winfs, the Windows file system, and this idea of information at your fingertips, which Bill Gates had been talking about at that point for many years, was something that they were trying to implement in what became Longhorn. And it just kind of fell flat.

Todd Bishop
And it really struck me just to bring this totally to the current modern era when Microsoft announced, recall this whole AI snapshot which has had its own issues, but the idea that they would take periodic snapshots of what you're doing on your screen and allow you to search it. This is in many ways, yeah, going at it for decades and decades. And in fact, Ben, in our next clip, we might as well jump ahead to this. Bill Gates references this whole concept of search and information at your fingertips. This is from 2008 as well.

So let's go ahead and do that. Microsoft is competing with Google and search and Apple and music players sort of on their own turf, on these other companies own turf. Why put the resources there instead of into improving Microsoft's core software business? Well, Microsoft, everything we do is about software. And we do software for businesses, we do software for consumers.

Bill Gates
And that's part of our strength is that you can take the software you use in the office, say Microsoft office or anything else, go and use that at home, or you can learn the new version at home. Your kid can teach you how to use it, you can go to work and be more productive. And so we're very interested in all the things that software can have an impact on. Finding information. If you think of the speech I gave a long time ago, information at your fingertips, that's one of the most interesting software problems there is.

It's not the only one because you want to act on the information and edit and compare and things like that. But if you take search in the broad sense of I want to find something in my business or on my computers or, you know, of course we have to be contributing to advances in that kind of software. We need to do it. How does that clip strike you, Ben? What are you thinking about after hearing that?

Ben Gilbert
Well, it's funny. Information at your fingertips is one of the most useful things in the world. I mean, I use perplexity all day, every day. That is information at my fingertips for sure. It is far more effective than Google search.

When I asked the question what was Microsoft's revenue in 2005? It is much easier to use than the SEC's search website, than Microsoft's annual reports, than digging through old PDF's. I mean, the AI era is literally information at my fingertips. Search is also one of the hardest computer science problems. I mean, this distributed systems scaled search engine, it is a remarkably hard technology problem and Microsoft went at it in various ways over decades.

Winfs is in a sense a search problem. They were trying to come up with a new file structure, a new way of implementing a file system that made it super fast to search and query and recall information. Never shipped. It never shipped in Cairo, it never shipped in longhorn. And yet it is still.

The dream of computing is being able to take a natural user interface that you have with you that is the most easy to use at that moment and instantly pull up information. Microsoft during that era continues to have the right ideas, even if the way that they go about implementing them or the business that they try to enter with them is not right. It strikes me there was a venture capitalist in the Seattle area, unfortunately recently passed away. Tom Huseby and my colleague John Cook always quotes him in saying that one path to success is just sticking around for as long as you possibly can. And I'm paraphrasing there, but it strikes me that in many ways the fact that Microsoft lived to fight another day through all of this was the key ingredient.

Todd Bishop
Just stuck with it. I actually think that's a huge thing that people miss when they're evaluating Steve Ballmer's tenure as CEO. There are other things that we haven't talked about yet, why I actually think he did a great job. But one of them is when this new technology wave came, when cloud came, when AI came, Microsoft was still in the fight. Microsoft still had their talent base.

Ben Gilbert
They were still relevant enough. And you can't say that about a lot of other companies of Microsoft's age, or frankly even the competitive set in the nineties. Who was dominant in the nineties when the transition from Bill to Steve happened. A lot of them are dead. And Microsoft not only didn't die, but tripled revenue.

Found this very real current business in the enterprise and a very real next business in cloud, which Ray Ozzy and Steve willed into existence in the 2006 to 2010 timeframe, even four years before Satya took over. It's funny, Ben, we are almost an hour into recording our conversation and it strikes me, as you mentioned, Ray Ozzy, there is so much to this story. So I do encourage folks, just as one more reminder, to go to acquired FM, check out the part two of the Microsoft story there, because if you're into this stuff, I'm having to stop myself from talking about Ajax and Outlook web access. From reference to your earlier thing, there's just so much here that's rich and worth exploring. So I encourage you to check out the acquired episode.

Todd Bishop
One last clip, Ben, because it's hard not to talk about Microsoft in this era without hearing from Bill Gates about antitrust. My colleague at the time, Tom Paulson, who was covering the Gates foundation, and I were privileged really to get to sit down with Bill Gates in 2008, in June for one of his final interviews on one of his last days in the office. I'm actually planning to revisit that in more depth in conjunction with our coverage of Microsoft's 50th anniversary over the next year. But I wanted to at least play this clip because it does frame this huge challenge that Microsoft faced in this era. In the words of Bill Gates, if you look back for some people in society, one of the things that stands out most about Microsoft over the years is the antitrust cases against the company, particularly in the US.

As you look back at that time at your behavior and at the company's business practices, would you have done anything differently? I don't know why I highlight the US. I mean, why not highlight Japan, Korea, Europe, you know, come on, we're a global company.

Every once in a while his dry sense of humor comes out and so good, just surprises you. Yes, there are a few moments like that in this interview, but okay, let's keep going. You can't. During the period, the late nineties, you know, take 98, 99, 2000, there were a lot of things going on there in terms of startups, Internet bubble, my deciding, the way I ran the company, that for the scale we'd achieved, that the way I was doing it wasn't going to be right. And therefore, my turning to Steve and say, hey, you got to take over, but not just take over, come up with a whole new way that we think.

Bill Gates
And he created the business divisions and the SLT and all the things that have led to such fantastic success from 2000 to 2008. Among the things going on in the 98, 99, the lawsuit was definitely one of them that made the job more complex, the way people looked at startups and were giving money to them. I think a lot of the ways we rededicated ourselves to our research work, to our long term investments, we knew that it was our honeymoon period was kind of over sometime between 95 and 98. We went from being the company that if we had purple rugs, everybody thought that was how businesses succeeded. And they got purple rugs to ask who's next kind of a thing.

And it is an important maturation of a company that when you're not in this honeymoon spotlight type thing, that you can motivate people and do the good long term work. And Steve and I really had to double down and he drove. A lot of it was the lawsuit and some of the things we might have done better there. You know, that is a, hey, you know, we're so successful now, we have to think through the complexities of how people react to what we do even more than we have in the past. Yes, there were some lessons that came out of that, but you can't really separate all the things going on in that period.

Part of the strength of Microsoft today is learning from some of the challenges of that tough period, some of the. Things we could have done better there. That's one of those classic phrases I. Like the antitrust was one thing going on at that period of time. It's like the presidential election is one thing that's happening in politics this year.

Todd Bishop
Ben, when you look back at this era, how do you assess the impact that the antitrust case, especially in the US, but also, as he noted globally, had on Microsoft? What's so funny? So I'm absolutely going to spoil a big piece of the acquired episode now, but if you lived in the Seattle area, you know the answer. Microsoft didn't get broken up. Internet Explorer did become the dominant browser on basically all computers.

Ben Gilbert
And the requirements for Microsoft were largely procedural and documentation related. So what impact did antitrust have? I mean, the case was resolved six years after Windows 95 and ie shipped. It had no impact on that generation. And you could say it had an impact on future technology generations, but not directly.

It's not like there were any rulings that said Microsoft, you can no longer XYZ that were material to the future technology generations. The biggest impact is cultural on the company. It's this incredible drag that was introduced into the development process. I literally mean drag in terms of a wind tunnel, that the company was slower and more deliberate and had to think through things at a deeper level. A very smart person recently told me when you're below $100 billion in market cap, the hardest thing is figuring out how to make money.

And once you're above that, the hardest thing is figuring out your right to keep it. I think that really encapsulates this era of Microsoft is growing up into a trusted partner of enterprises and governments around the free world, not being the cowboy anymore. And truly the development drag that that creates on your ability to create groundbreaking, innovative products, plus the culture that comes along with the rest of the world no longer being excited about your company, it means that your stock price isn't going anywhere.

You have this tough situation where nobody has seen evidence that the company can become more valuable no matter how hard you work or how innovative you are. And so what you start doing is trying to steal pieces of pie from other people since the pie doesn't seem to be growing. And so that's a really hard kind of thing to dig out of too. And again, fast forwarding to 2024, you have a whole new wave of technology companies, Amazon, Google, Apple, coming under their own version of regulatory scrutiny. Microsoft is not entirely out of it.

Todd Bishop
They certainly are getting scrutiny of their own, not only on the acquisition front, on the competition front, but also in terms of security. Perhaps in a singular way, they are under scrutiny for the problems with their security flaws these days, which is a whole other thing that we haven't even gotten into. Ben, from the era that you just have been studying about Microsoft. Microsoft, big picture. What lessons can people take away from this era of Microsoft's business?

Ben Gilbert
I think the biggest one that occurs to me is Bill Gates was right. Technology moves so fast that the biggest risk, if you are a major technology platform inventing and creating the platform of the future, is that the next one's right around the corner and you're not really any better position to capture it than any young upstart. I mean there's always a Google and there's always a Facebook after that. And I don't believe that the big five tech companies today are just forever the big five tech companies. I think OpenAI is this great example.

A lot of people five years were arguing. I think Ben Thompson had this great sort of examination of are we at the end? Are the big companies solidified? And no, the next generation of technology broke through everything and completely rearranged all the chairs. And so to me I think I'm just fascinated by the free market and the relentless pace of technology innovation, constantly throwing a wrench into any business leader trying to build this impenetrable moat around their business.

Nothing is impenetrable. And to foreshadow a bit, because obviously I assume that there will be a part three to the acquired series on Microsoft at some point in good time. It may be a little bit too early at the moment. In what ways did this era of Microsoft's business, this period from 1995 to 2014, set the company up for the current one? Cloud, cloud, cloud.

I mean, from 2006 forward, I think in zero five, Rayazi had this really disruptive memo in 2007. Eight. Somewhere in there there was Project Red Dog that became Azure incubated and raised little group outside of the core product group of Windows Server. Eventually in 2010, Steve Ballmer really got religion around it again before the rest of really Microsoft did and went and did that speech at the University of Washington and then followed it up with an interview with Ed Lazowska. I think there was just so much product and political capital spent on we are becoming the cloud company, not to mention the actual talent and building blocks required.

You had Xbox Live, which is this at scale real time gaming service. You had Bing, which wasn't a market leader, but did build this big distributed computing backend for search. You had outlook slash Hotmail. You had the remnants of MSN, which was once a many hundred million person messenger and social network. There actually was the know how at Microsoft to do a lot of the things that you need to do to succeed in the cloud era.

And I think that all those building blocks like, you know, tens of billions of dollars spent on making sure that they were well situated to create the Azure business today. Ben, I could talk to you for hours. I know you and David do talk for hours about these things, but I'm going to let you go and just encourage folks to check out acquired FM. Subscribe to acquired in your favorite podcast app. It really is a deep dive.

Todd Bishop
I think of it less like a podcast and more like an audiobook in my mind because I treat it that way. As a listener, I'll come back to it. I'll think, oh, this is my acquired Microsoft part two week, or this is my acquired Costco week, or, you know, whichever brand you happen to be focusing on for that episode, and it just happens to be that you're putting it out on this platform that people otherwise listen to 2030 60 minutes shows on. Well, thanks so much. It's funny you say that.

Ben Gilbert
We literally think about it as our phrase is a conversational audiobook, and we hope that's something that other people adopt and catch on too, because long form communicated in a narrative, conversational way can be just really, I think, really powerful. And you're right. The best way we have to distribute it right now is a podcast player, even though that's not quite what they're built for. It's not quite an audiobook either. So we'll take it for now.

Todd Bishop
Ben Gilbert, thank you very much for speaking with me. My pleasure. Thanks for having me. Thanks for listening, everybody. Kurt Milton edited and produced this episode.

I'm Geekwire co founder Todd Bishop. We'll be back next week with a new episode of the Geekwire podcast.