There are few things that Ellison loathes more than hypocrisy. It’s one of the reasons that people often find him objectionable—he almost never says the politically correct thing, whether the subject is dating Oracle employees or how he spends his money. If he thinks he’s in danger of sounding sanctimonious, he’ll suddenly shut up in the middle of a conversation. More than anything, it was Gates’s hypocrisy about the “right to innovate” that infuriated Ellison: “I didn’t despise Bill for destroying Netscape, which wasn’t very nice—or legal, for that matter. Bill just calculated he could smash his competitors by breaking the law and get away it. Who knows? Maybe he can. But when Bill defended Microsoft’s murderous behavior by saying, ‘All I ask is the right to innovate,’ that kind of pushed me over the edge. Netscape did the innovation, Bill—that’s why you killed them! All you did was copy the innovation and destroy the innovator. To kill the innovator in the name of innovation was such an incredible lie, such a cynical piece of deception, such hyperhypocrisy, I just couldn’t stand it. If Bill had said, ‘We killed Netscape because they were in our way; they weren’t tough enough to survive, so fuck ’em. Hey, Andreessen [Marc Andreessen founded Netscape when he was twenty-one], welcome to the software industry, punk. I’ve got a little present for you; it’s a pine box and a bullet with your name on it. That’ll teach little kids to stay the fuck out of my neighborhood. Mess with Microsoft, you die.’ Okay, cool. That’s still not very nice, but at least it’s honest.”4
For a couple of years—between 1990, when Microsoft did its deal with Sybase, and 1992, when Oracle 7 arrived to save his bacon—Ellison regarded Gates as a direct competitor. But for most of the time, at least until Ellison launched his attack on the PC in the wake of the release of Windows 95, these were profound differences between Oracle and Microsoft—one was a desktop company, the other was server-based; one was Windows, the other largely UNIX; one believed in the proprietary software route, the other was committed to standards—actually made it easier for the two men to get along. Ellison says, “Bill and I used to be friends, insofar as Bill has friends. Back in the eighties and early nineties, all the people in the PC software industry hated Bill because they feared Bill.5 But Oracle didn’t compete with Microsoft very much back then, so we got on pretty well. As I got to know Bill, I developed a great respect for the thoroughness of his thinking and his relentless, remorseless pursuit of industry domination. I found spending time with Bill intellectually interesting but emotionally exhausting; he has absolutely no sense of humor. I think he finds humor an utter waste of time—an unnecessary distraction from the business at hand. Scary stuff. I don’t have anything like that kind of focus or single-mindedness.”
One telephone conversation with Gates in 1993 sticks in Ellison’s mind. “It was the most interesting conversation I’ve ever had with Bill, and the most revealing. It was around eleven o’clock in the morning, and we were on the phone discussing some technical issue, I don’t remember what it was. Anyway, I didn’t agree with him on some point, and I explained my reasoning. Bill says, ‘I’ll have to think about that, I’ll call you back.’ Then I get this call at four in the afternoon and it’s Bill continuing the conversation with ‘Yeah, I think you’re right about that, but what about A and B and C?’ I said, ‘Bill, have you been thinking about this for the last five hours?’ He said, yes, he had, it was an important issue and he wanted to get it right. Now Bill wanted to continue the discussion and analyze the implications of it all. I was just stunned. He had taken the time and effort to think it all through and had decided I was right and he was wrong. Now, most people hate to admit they’re wrong, but it didn’t bother Bill one bit. All he cared about was what was right, not who was right. That’s what makes Bill very, very dangerous.
“Most people are so in love with their own ideas that it confines their thinking—creates boundaries and limits their ability to solve problems. Bill, however, has this Asian-like ability to manage his intellectual vanity and take ideas, regardless of where they come from, and put them to work for Microsoft.6 The terrifying thing about Bill is that he’s smart enough to understand what ideas are good—what’s worth replicating—and he has the discipline and resources to get on with it and make it just a little bit better. That’s very Japanese. That’s very scary. Add that to Bill’s ruthless perseverance and the fact that Microsoft has more money than God, and you get a most formidable foe—the ultimate foe, the perfect enemy. We pick our enemies very carefully. We decided to pick a fight with the biggest, most dangerous bully in the schoolyard. There’s no way to avoid this fight, so let’s start it.”
Ellison’s decision to start attacking Microsoft in 1995 was based on the same reasoning as today’s attacks by Oracle on IBM: “If I want to make a point, I have to compare it to a counterpoint. I can’t explain hot without comparing it to cold. In fact, there’s no such thing as hot without cold. Everything’s relative. So I attacked Microsoft: this is what they think, this is what we think. Constant comparison between our Internet-centric server technology and their Windows-centric desktop technology provided increasing clarity. The battle lines were now clearly drawn. It was Microsoft versus the Internet—the common heritage of all mankind. We were part of Team Mankind, the last, best hope to prevent total world domination by the evil empire in Redmond. Very colorful stuff. Anyway, it made it interesting for journalists, analysts, and customers. We got a lot of press. It was supposed to be a battle between two rival computing architectures. It wasn’t supposed to degenerate into a me-versus-Bill thing, but people are more interested in personalities than technologies, so that’s what it became: Billionaire A versus Billionaire B. I got onto the cover of Fortune magazine as ‘software’s other billionaire.’ Oracle’s technical ideas and products went along for the ride. The ‘battle of the billionaires’ was good brand building for Oracle. At that time the company we wanted to be compared to was Microsoft.”
To what extent had Ellison really believed that his network computer was going to take over the world, or had it always been more of a stick to beat Microsoft with and a way to dramatize philosophical differences about computing architecture? “When I introduced our new Internet computing architecture, I emphasized what was new about it; how it was different from the client/server architecture that came before. What was different was that we stored the application software on the server, not the desktop client PC. One implication of running the application on a server is that you no longer need a desktop PC to access the application; all you need is a simple device running a standard Internet browser. Now, we make our money selling server software, so I wanted to talk about the server aspects of our new architecture. But the press wasn’t interested in our architecture or any other difficult-to-photograph concept. They wanted to see the new, simple device—the Network Computer. The NC story just exploded beyond anything I imagined. It took on a life of its own. Some hardware companies even started manufacturing network computers. Then people started asking me how we were going to make money with the network computer. We’re not, I told them. We make money selling server software. As long as the application is on the server, I don’t care what’s on the desktop.7
Almost everyone now sees this Network Computer episode as an example of Ellison’s shooting his mouth off and getting it embarrassingly wrong. When I asked him whether he’d put much real thought into it, he just laughed and made a zero sign. I pointed out that I’d never seen him using a network computer (or, for that matter, a Mac). “Well, my desktop PC has this big, beautiful screen. That plus the speed of my network connection is about all I care about. Ninety percent of the time I’m either in e-mail or on the Internet. In other words, I use my PC as if it were a network computer about ninety percent of the time. And when this book is done, that will go to ninety-nine percent of the time. Right now I’m spending more time in Word than I’d like, plus I still read the occasional PowerPoint file or Excel spreadsheet. That’s a complete list of what I do on my PC. As for the network compute
r, I don’t care about it at all. Why should I? It makes no difference to me what computer people have on their desk: a network computer, a Mac, or a PC, just so long as their shared applications are on Oracle’s application server and all their data is in Oracle’s database. The only applications that belong on your PC are personal productivity tools [e.g., Office], an e-mail and calendar interface [e.g., Outlook], an Internet browser [e.g., Explorer], and games, if you play games. All shared applications and all your data, all of it, belongs on a database server. You should never have any data stored on your desktop PC that isn’t also stored in a database, unless you don’t mind losing it.8 Everyone’s adopting the Internet server architecture or at least says they are. Look at PeopleSoft’s new Version 8—one hundred percent of the user interface is via an Internet browser, and all the applications are on a server. Siebel’s not there yet, but they say they are, which means that they know they should be, they just haven’t gotten the programming done yet. But Tom knows what’s hot, so that’s what he sells. Anyway, the debate’s over. The Internet computing architecture has won; the client/server architecture is dead.”
I put it to Ellison that although the war had unquestionably been largely on the architectural front, he had been wrong about two things: the ability of the PC industry, through its extraordinary volume efficiencies, to turn out full-featured boxes for little more than the price of a stripped-down network computer and the reluctance of people to give up having their personal productivity software running on their local hard drive. Ellison’s response was that he hadn’t been alone in underestimating how the price of PCs would fall. He recalled a conversation with Intel’s Andy Grove in 1996.9
“My idea for a $500 Network Computer had been heavily ridiculed in Intel’s internal magazine. They ran a mock ad showing ‘Larry Ellison’s magic $500 box.’ It was an orange crate containing two tin cans connected by a string. Andy Grove, Intel’s CEO, carefully explained to me that people wanted more powerful PCs and they were willing to pay for them. He said that PCs would keep getting more powerful and their selling price would stay about the same, around $2,500 for the foreseeable future; PCs would keep getting better but not cheaper. He compared my cheap NC to an inexpensive but unpopular car called the Yugo. I can still see Andy disdainfully spitting the word ‘Yugo’ at me as I responded back with my most adolescent smirk. Fine, I thought. A $500 NC will compete quite well with a $2,500 PC.”
Unfortunately for both Grove and Ellison, the foreseeable future didn’t last very long. A variety of competitive pressures forced PC prices to drop to around $700. Ellison says, “That $700 PC surprised the hell out of Intel, killed the NC, and made me look stupid. But it didn’t cost me any money. Oracle’s server software business was unaffected. However, for the PC hardware companies it was an extinction-level event. Most of them saw their margins drop, their profits disappear, and their life expectancy shorten to that of a fruit fly.”
The implication was that if even Andy Grove, one of the founders of the PC industry, hadn’t foreseen $700 machines with ten times the performance of high-end PCs of only a few years ago, why should Ellison, an enterprise software guy, have read it any better? As for Microsoft’s Office, Ellison concedes, “Microsoft’s real stranglehold monopoly has turned out to be Office, not Windows. Like everyone else, I could easily move to desktop Linux if Microsoft Office ran on Linux. But it doesn’t. Microsoft maintains their desktop monopoly with Office; Windows isn’t nearly as important.”
One of the things that made Bill Gates so livid about the government’s antitrust case was the active support it received from powerful commercial rivals, such as Oracle and Sun, which he considered to be no less ruthless in the way they competed than Microsoft. In June 2000, it emerged in the press that Oracle was employing private detectives to root through Microsoft’s garbage for evidence that apparently independent, but pro-Microsoft, institutes with names such as Americans for Technology Leadership and Association for Competitive Technology were just front organizations, set up and entirely funded by Microsoft. Ellison’s so-called Dumpster diving hit the headlines when Oracle passed the information it had gathered to the newspapers. Later the same week, Ray Lane’s departure from Oracle was tersely announced. According to the rumor mill, Lane had left after fighting with Ellison over his “inappropriate” behavior. Far from being embarrassed or chastened, a grinning Ellison had appeared before the cameras dressed in a blue suit, red tie, and white shirt (intentionally invoking the flag) and had spoken proudly of having done nothing more than his patriotic duty in helping to expose Microsoft’s wrongdoing.
He still feels pretty good about it: “I’m an American. I think it’s important that America’s technology is competitive. Absolutely. But I don’t think we stay competitive by killing off innovative companies like Netscape and RealNetworks, which was Microsoft’s modus operandi. So why were they warning all patriotic citizens that anything that hurt Microsoft would hurt America? It was all part of Bill’s Big Lie. Whatever’s good for Microsoft is good for America? Microsoft’s freedom to innovate must be protected? What? I think Bill must be some kind of reincarnation of Milo Minderbinder from Catch-22.10 Microsoft was bankrolling all these bogus operations, such as the Independent Institute, which was neither ‘independent’ nor an ‘institute.’ But we had to find proof that Microsoft was paying them off to parrot the Microsoft party line. So we found a bunch of invoices and canceled checks in the garbage proving Microsoft was paying all these phony front organizations. Why should I be embarrassed about that? We didn’t break the law. They did.”
Back in late 1997, when Netscape, the target of Microsoft’s aggression, was already on the ropes and the Department of Justice had begun to take action against Microsoft, I had asked Ellison whether Oracle might buy Netscape. If Netscape was so important, surely it was in Oracle’s or Sun’s interest to offer it protection. Ellison’s answer then had been that Netscape didn’t have any technology that Oracle wanted, his “cat could write a browser,” that it was terribly overvalued, and that, anyway, Microsoft was going to kill it. I came away with the impression that perhaps Netscape was more valuable to Oracle as a very public victim than as a going concern. Even now, it’s hard to gauge Ellison’s real feelings about Netscape. “Netscape was the most innovative Silicon Valley start-up during the nineties. Netscape’s Navigator browser ushered in the Internet age. They single-handedly changed the Valley. eBay, Yahoo!, and all the other Internet companies exist because of Netscape. But Netscape had a big problem. It’s just not very hard to write a browser. Andreessen wrote Mosaic [the Mosaic browser was the precursor of Navigator] in his spare time when he was in college. So there was no technical barrier preventing Microsoft from writing a competing browser. To emphasize that point, I said that my cat, the one that recently died, could write a browser. For some reason that made Jim Barksdale [Netscape’s CEO] and Marc very angry at me. I don’t know why. She was a very smart cat. The two cats I have left, incidentally, can’t program worth a damn.
“Okay, I accept that most people don’t believe that a cat, even a smart one, can write a browser—all by herself, anyway. Reasonable people can disagree. But there’s no question that a team of competent programmers can build a pretty darned good browser in about a year. And that’s exactly what Microsoft did. When they bundled it with Windows for ‘free,’ Netscape’s days were numbered. They were just this little itty-bitty company—just a few kids and Jim Barksdale—in a fight to the death with Microsoft, for God’s sake. They had no chance at all. Bill liked to say, and I quote, ‘If Microsoft gives away all of its Internet software and Netscape gives away all of its Internet software, I like Microsoft’s chances of survival better than Netscape’s.’ Yeah, no kidding. The most powerful company on Earth had decided to kill off a little newborn company called Netscape. No holds barred. It was Godzilla versus Bambi—and Godzilla didn’t bother to play by the rules.”
On the question of whether Oracle should have bought Netscape, Ellison rep
eated that under the circumstances, the company had been horribly overvalued. “There was this big Netscape acquisition meeting at Oracle shortly before they sold out to AOL. John Doerr, Jim Barksdale, and Marc Andreessen represented Netscape. The gap between what they thought Netscape was worth and what I thought Netscape was worth was gigantic. They thought they were the heartbeat of Silicon Valley; I thought they were a corpse on the dark side of the moon. They wanted five to ten billion for the company. I thought that Netscape was near worthless. They were a money-losing proposition, and I couldn’t figure out what we could have done to save them. If we had immediately open-sourced the Navigator browser, then browser revenue would have instantly gone to zero. What’s the point of that? We would have paid billions for nothing. Some people at Oracle didn’t agree. They thought that we should buy Netscape just to make certain that Microsoft wouldn’t have the only browser in the market. But I really didn’t feel like paying a $5 billion entry fee into a one-sided browser war. It’s a colossal mistake for us to battle with Microsoft over desktop software for one very simple reason: desktop software will not determine the ultimate winner of the software wars. It’s not a desktop browser war, it’s a server software war. I don’t think that we can beat Microsoft on the desktop, and I don’t care. We’re a server software company. The Internet is all about network server software. Oracle is CBS, and Microsoft is Sony. We run the network, they make television sets. We make much better server software than Microsoft. Server software is a battlefield where we can fight them and beat them. We do it every day. Let them have the desktop. They can build all the television sets they want.”11
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