Bill Gates Page 12

  Under U.S. law, a judge is allowed to form an exceptionally strong opinion against a firm when based upon the evidence in an existing trial. Jackson believed that Microsoft and its unnamed “senior management”—which would include Gates—would not follow the rule of law if that were to benefit the company. And finding that Microsoft leadership was less-than-forthcoming in the antitrust trial would be allowed based upon the evidence. The problem would be if these opinions of Microsoft would prevent Jackson from evaluating cases involving the firm fairly in the future: “Only if the judge’s opinions reflect “deep-seated and unequivocal antagonism that would render fair judgment impossible” in such circumstances is recusal required for actual personal bias or prejudice.”47

  Jackson believed his conduct had not risen to that level but the popular perception was to the contrary, noting that comments he made outside the courtroom had been rebuked by the court of appeals.

  I do not believe my lingering impressions of Microsoft rise to that level. I must acknowledge, however, that extra-judicial comments attributed to me, when viewed in light of the public disapproval thereof expressed by the court of appeals at oral argument of the Microsoft cases appeal, have created an appearance of personal bias or prejudice.48

  The Appellate Court returned the case back to the U.S. District Court, without Judge Jackson, on June 28, 2001, to seek a new round of litigation. However, Microsoft was still deemed by the Appeals Court to have used monopoly power against almost every conceivable company and vendor in the computing industry at the time, ranging from hardware producers to Internet providers to authors and software companies: “Microsoft, the Appeals Court found, unfairly used its monopoly power to strong-arm computer manufacturers, Internet access providers, Internet content providers, independent software venders, and companies like AOL, Apple, Intel, and Sun Microsystems.”49

  Judge Colleen Kollar-Kotelly was the third judge randomly assigned to the case (after Sporkin, then Jackson). She entered the final judgment50 against Microsoft on November 12, 2002, agreeing to what—after many years of proceedings and negotiations—was referred to as the TRPFJ (“Third Revised Proposed Final Judgment”) in the accompanying order.51

  As we know now, Microsoft was not required to break up and was primarily using a settlement that had been inherited from the DOJ as composed in the Clinton administration. The judge faced some criticism for not imposing greater sanctions on the company to stop some behaviors by Microsoft, but she quickly dispelled critics by noting that Microsoft could not be punished for actions that had not been proven at trial or at the Appeals Court; that was outside the scope of her charge when the case was returned.

  While noting that Microsoft had broken the law, she found that the company had abused its power in the market but had not abused the customers. “Judge Kollar-Kotelly did note that Microsoft ‘has a tendency to minimize the effects of its illegal conduct’ and had showed a ‘paternalistic view’ toward consumers.”52

  The judge did make two new innovative components of the settlement, though. The first consent decree applied only to consumer versions of Windows, but the judge ruled the second consent decree would also apply to versions of Windows that ran on servers. The second addition from the judge required Microsoft Windows to allow applications created by other firms to run when the computer is started.

  At least one Microsoft competitor voiced enthusiasm for Judge Kollar-Kotelly’s decision. RealNetworks said the judge’s requirement that Microsoft allow competing programs to start automatically when a computer is booted up could be a useful edge for the company’s audio and video playback software. That obligation goes beyond what was required of the company in the settlement.53

  Microsoft accepted the settlement and knew that the future looked a lot better as a result of avoiding the break-up proposed by Judge Jackson: “While putting new responsibilities on Microsoft, this settlement also gives us the freedom to keep innovating for our customers,” Microsoft’s chairman, Bill Gates, said at a news conference at the company’s headquarters in Redmond, Wash. “We’re pleased to put another step of this case behind us.”54

  Gates spent years defending the actions of his company against the government, when he felt consumers were benefiting from the products Microsoft created. And the efforts took a toll on him. After leading the firm for more than two decades, he was quoted in Microsoft Rebooted as saying “by ’99 a combination of the lawsuit and some impact of the lawsuit going on…meant that I was enjoying my job less than I had in previous years…. I still…loved the job. It’s just that I didn’t feel like I was on everything as I like to be.”55 The competitive nature of Gates found the work rewarding but not at the same intensity as in the past.

  His family also noticed changes in Bill, with the stress and energy expended in the trial. Father Bill Gates Sr. was similarly quoted in Microsoft Rebooted, admitting to feeling “a sense of relief after what he went through” throughout the process of the trial.56 While Microsoft had largely defined Bill Gates over a period of 25 years, he still had other projects and work to undertake.

  LEGACY OF BILL GATES, IMMEDIATELY POST-TRIAL

  After the bruising Microsoft trial, threat of the company being split, and his departure as chief executive officer, one might think that Gates would not be treated well by history, or historians, or even business historians. In fact, shortly after the 2002 Microsoft settlement, McCormick and Folsom conducted a survey to assess who business historians would evaluate as the greatest entrepreneurs and businesspeople in U.S. history.

  Entrepreneurs were defined as risk-takers and creators, while the businesspeople were defined as managers or financiers. In their survey of 58 historians asking about the greatest entrepreneurs and businesspeople throughout the entirety of American History, Bill Gates placed second on the ranking behind only Henry Ford. More surprisingly, Bill Gates was the only living person listed in the top 14 (and Warren Buffett was not on the list at all as a businessperson). None of the top five entrepreneurs in the ranking system (Ford, Gates, Rockefeller, Carnegie, or Edison) were college graduates.

  One of the respondents to their survey had noted the importance of entrepreneurs; while politicians were often given credit and ranked highly, politicians could do nothing without the resources created by the risk-takers over time:

  When it comes to our standard of living and quality of life, most Americans ascribe far too much to politicians and far too little to our great entrepreneurs. The latter take the risks and push the envelope, conquering obstacles, and enriching our lives every day of the week. Politicians, even the best of them, can [only] rearrange and redistribute the good things that entrepreneurs create….57

  THE END OF SANCTIONS UNDER THE SECOND CONSENT DECREE

  One might be surprised to learn that Microsoft was under sanctions for a very long time after the Microsoft antitrust trial was finally “settled” in 2002. In fact, some monitoring processes from the DOJ were extended, and Microsoft was not released from sanctions until May 12, 2011: 16 years after Judge Jackson inherited the Microsoft case, 13 years after Bill Gates’s deposition, 11 years after Bill Gates vacated the CEO position for Steve Ballmer, and 3 years after Gates had retired from full-time work with Microsoft. The DOJ then stated:

  Microsoft no longer dominates the computer industry as it did when the complaint was filed in 1998. Nearly every desktop middleware market, from web browsers to media players to instant messaging software, is more competitive today than it was when the final judgment was entered. In addition, the final judgment helped create competitive conditions that enabled new kinds of products, such as cloud computing services and mobile devices, to develop as potential platform threats to the Windows desktop operating system.

  The core allegation in the original lawsuit, upheld by the U.S. Court of Appeals in June 2001, was that Microsoft had unlawfully maintained its monopoly in PC operating systems by excluding competing middleware that posed a nascent threat to the Windows operating system. Sp
ecifically, the court of appeals upheld the district court’s conclusion that Microsoft engaged in unlawful exclusionary conduct by using contractual provisions to prohibit computer manufacturers from supporting competing middleware products on Microsoft’s operating system, prohibiting consumers and computer manufacturers from removing access to Microsoft’s middleware products in the operating system, and reaching agreements with software developers and third parties to exclude or impede competing middleware products.58

  On the occasion of the expiration of the second consent decree (and extensions), Microsoft released the following statement: “Our experience has changed us and shaped how we view our responsibility to the industry. We are pleased to bring this matter to successful resolution, and we are excited to keep delivering great products and services for our partners and customers.”59

  Upon the expiration of the sanctions on May 12, 2011, Microsoft was no longer under any monitoring process from the DOJ but had spent more than two consecutive decades—over half the corporation’s lifetime-to-date—under investigation or a consent decree, a rarity in corporate history.

  Chapter 7

  STEVE JOBS AND BILL GATES

  For all of the belief that Microsoft and Apple were long-term competitors, in fact the relationship between Bill Gates and Apple’s cofounder Steve Jobs went back decades, from the dawn of the micro-computing age in 1975 through Jobs’s death in 2011. Microsoft even developed software for Apple, and the biggest innovations for each firm were inspired by Xexox’s PARC (Palo Alto Research Center) site, where each was able to see early versions of graphical user interfaces (GUIs) for computers, the predecessors to the computers we use today rather than screens that only create output in terms of text.

  This does not mean that Apple and Microsoft were always friendly, or that the nature of their competition never changed. In fact, the two companies were most closely integrated during the timeframe Jobs was at Apple, rather than the 11-year period between 1985 and 1996 when Jobs had been exiled from his own company. After Gates decided to leave the role of CEO, he frequently interacted with Jobs, showing appreciation for the capability and renaissance Jobs led at Apple as well as verbal jabs when needed to defend his company.

  THE iERA OF PRODUCT EVOLUTION

  Publicly, Bill Gates had to defend the company he cofounded against major innovations created by Apple under the Steve Jobs–led resurgence. First came the iPod in 2004, allowing consumers to take digital music anywhere with a small device. Despite Gates’s contention that the iPod was within Microsoft’s capability and that consumers would likely look for alternatives rather than an identical device, the media product created by Microsoft as an alternative—the Zune—was far less successful than the iPod. Gates dismissed the initial iPod with:

  There’s nothing that the iPod does that I say, “Oh, wow, I don’t think we can do that.” “There’s often, early in the new market, a few products that help get the category to critical mass. In the long run, people are going to buy what gives them the right price, performance, and capabilities. And does everybody want to have exactly the same thing? Probably not”1

  The next major Apple release of the first decade of the 2000s was the iPhone. A Microsoft engineer inadvertently—and indirectly—launched that idea. The engineer, who developed the tablet PC, was married to a friend of Steve Jobs. The engineer kept talking about the tablet PC he developed for Microsoft at a birthday party that was attended by both Gates and Jobs. Neither Gates nor Jobs was happy, according to Isaacson, but for different reasons. Gates did not like disclosing intellectual property.

  “He’s our employee and he’s revealing our intellectual property,” Gates recounted.2

  Jobs was unhappy hearing about the Microsoft tablet project and the insistence from Gates’s staff that using a stylus as pen was the direction of the future for tablets, so he ordered his staff to create a touch screen. Apple then realized the phone might have more immediate appeal than the tablet. Apple really created the touch-screen interface that was first used for the iPhone, then iPad, because Steve Jobs was upset at listening to a Microsoft engineer at an event attended by Bill Gates.

  Gates seemed to appreciate the level of innovation and sophistication of the iPhone in 2007, which had the touch screen that Jobs ordered his staff to create after the party, although Gates may not have known the original source of Jobs’s inspiration for the touch screen at the time. Instead of Gates lobbing a missive at Apple’s product, Microsoft CEO Steve Ballmer took the lead in disparaging the iPhone before it was released:

  There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.3

  Microsoft did not do well in creating a market for phones running Windows, eventually buying Nokia in 2013. The next stop for Apple was the iPad in 2010, which Gates did not appreciate at all. Still preferring a netbook plus that stylus he saw as important—instead of a touchscreen—he admitted that the iPhone from 2007 was much scarier to him than the iPad:

  “You know, I’m a big believer in touch and digital reading, but I still think that some mixture of voice, the pen and a real keyboard—in other words a netbook—will be the mainstream on that,” he said. “So, it’s not like I sit there and feel the same way I did with iPhone where I say, ‘Oh my God, Microsoft didn’t aim high enough.’ It’s a nice reader, but there’s nothing on the iPad I look at and say, ‘Oh, I wish Microsoft had done it.’”4

  GATES AND JOBS APPRECIATION PROGRAM

  In 2007 at the All ThingsD Conference, Gates and Jobs sat on a stage for a joint interview, where each was able to easily recognize the achievements of the other and contribution to the industry. Jobs started by saying that the concept of a software company really did not exist before Gates: “Well, you know, Bill built the first software company in the industry and I think he built the first software company before anybody really in our industry knew what a software company was, except for these guys.”5

  Gates similarly expressed opinions on the early Apple computers introduced in the 1970s:

  What Steve’s done is quite phenomenal, and if you look back to 1977, that Apple II computer, the idea that it would be a mass-market machine, you know, the bet that was made there by Apple uniquely—there were other people with products, but the idea that this could be an incredible empowering phenomenon, Apple pursued that dream.6

  Jobs was able to articulate that Microsoft benefited from the partnership with Apple; in fact, Microsoft only focused on programming languages and operating systems before developing software applications for the Mac, as Lotus was the biggest name for software on the PC. Jobs also brought up the partnership that was initiated in 1997, joking that he had been married to Gates for the past decade. Jobs also realized the importance of working with Gates and what the role of Apple had to be at that time to improve the company’s future: “But Apple didn’t have to beat Microsoft. It had to remember what Apple was. Microsoft was the biggest software developer around, and Apple was weak. So I called Bill up.”7

  Reflecting a comment Gates had made elsewhere about the micro-computing revolution, Jobs saw that he had gone from being the youngest person in the room in 1975 to the oldest in the room in 2007. And if Jobs had lived longer, we might have seen what he had meant by the expression “a phone as a post-PC device.”

  Gates also showed that he continued to expect innovations to come from outside Microsoft, and that those innovations are beneficial to promoting the continued use of personal computers: “Well, there’s always going to be great new things that come out of other companies, and you want to be in a position to benefit from those, to have those inventions drive demand for Windows and personal computers and then some of those upstream things you want to participate in.”8


  LAST TALK AMONG FRIENDS

  Of the last time Bill Gates and Steve Jobs talked before Jobs’s death, Gates made an astute observation that had been clearly connected to the success cycles of Apple over the years. Apple had made a reputation for designing and putting together hardware and software into packages, with Gates adding, “The integrated approach works when Steve is at the helm. But it doesn’t mean it will win many rounds in the future”;9 Gates saw that his model of working with many hardware configurations had worked well for Microsoft, but Jobs was the sole reason the combination of function and design on hardware and software was successful.

  On the death of Jobs in October 2011, Gates posted a small note on his personal website, noting the impact of Jobs in the nearly 30 years the two had been acquainted.10 In fact, Gates and Jobs had known each other for more than 30 years as early innovators in the industry, and Jobs was 56 (Gates was about to reach his 56th birthday); IBM had launched the PC just over 30 years prior. In an interview with Gates shortly after the death of Jobs, ABC News’ Delawala brought up a statement attributed to Jobs in Isaacson’s biography Steve Jobs, which had just been released: “Bill is basically unimaginative and has never invented anything, which is why I think he’s more comfortable now in philanthropy than technology. He just shamelessly ripped off other people’s ideas.” Graciously, Gates accepted the criticism and noted that each had made complimentary—and not so complimentary—statements about the other. “Over the course of the 30 years we worked together, you know, he said a lot of very nice things about me and he said a lot of tough things. We got to work together. We spurred each other on, even as competitors. None of that bothers me at all.” Gates even accepted the fact that Jobs felt that Apple was good and Microsoft was evil, saying “at various times, he felt beleaguered, he felt like he was the good guy and we were the bad guys, you know, very understandable.”11