But while Gates has been willing to greatly expand his workforce, he has assiduously avoided the IBM model of having many different research centers scattered across America. He has stated that when Microsoft was working directly with IBM, he was struck by the “wasteful intersite rivalry” and “pointless contention” between the various IBM laboratories. A closer association with Hewlett-Packard in recent years has somewhat lessened Gates’s concern about the multi-site model, however. He says that Hewlett-Packard, by giving a particular lab a set agenda that does not change and then enlarging or shrinking that lab on the basis of its success, is able to keep that kind of rivalry under control. It has been suggested that the Hewlett-Packard example lies behind Gates’s willingness to enter into the Cambridge University venture, but at least for now Gates has no plans to open other Microsoft sites in the United States.
* * *
Our top executives have an annual retreat, a tradition that began when my company had only twenty employees. These retreats have proved invaluable over the years. For instance, during the days of Microsoft’s partnership with IBM, one of the small breakout groups would always examine the question, How should we prepare ourselves in case our most important partner decides not to work with us any more? Having gone through that exercise over a period of five years, we were more prepared to cope when IBM pulled out of the partnership in 1992.
—BILL GATES, 1996
* * *
Microsoft employees are fairly well paid. More important, however, is the fact that they can acquire stock options in the company. It has been estimated that more than twenty-five hundred present and former Microsoft employees are now millionaires due to exercising their stock options. But employees of the company are kept on their toes by regular reorganizations, which have taken place about every two years from the beginning. Gates views reorganizations as vital to keeping his company’s employees creative, challenged, and efficient. He sees them as a way to renew people’s intellectual juices. He particularly likes the idea of moving people back and forth between product development and customer-related jobs, if the individuals have capabilities in both areas, because it helps to “conceive and deliver better products” in a customer-driven industry. While he recognizes the risk of having both jobs less well executed, and of losing some managers who aren’t happy with a new position or aren’t right for it, he feels such drawbacks to reorganization are acceptable, within limits. To lose too many people or have too many jobs less well done is another matter—and one that Microsoft has been able to avoid, in part perhaps because computer technology continues to change and grow so rapidly that there is a built-in excitement to moving into a new area for most employees. Gates clearly does not want workers whose eyes are chiefly fixed on climbing a hierarchical ladder.
Despite the regular reorganizations and the flexibility Gates sought to sustain, Microsoft was becoming a much larger company, hiring thousands of new employees every year in the early 1990s. Big companies, as Gates was all too well aware, can get complacent, flabby, or unwieldy very easily. Trying to stay ahead of the game, Microsoft was developing new products in many different areas. The most important project in the first half of the 1990s was Windows 95, originally code-named Chicago. This operating system was designed not just to preserve Microsoft’s domination of the market for personal computer operating systems but also to blow its competitors out of the water. The next research and development priority was the so-called information highway, which had been a redhot media topic since the 1992 election, when Al Gore had started pushing it. This gateway to the communications future was to be based on interactive television (including a putative choice of five hundred channels) controlled through a box on the top of television sets. The race was on to develop both the hardware and software for this wave of the future. Media hype (driven in part by the fact that television itself was at the center of the projected highway) had driven up public expectations to a high pitch, with much loose talk about it becoming a reality in two or three years. Gates himself tried to tone down the hype, saying this revolution was further down the line than magazine cover stories suggested. He was fully aware that there were enormous technical problems to be overcome on the hardware end of things, and that it was impossible to develop software for nonexistent hardware.
* * *
Reorganizations are expected around Microsoft. But that doesn’t mean they don’t create anxiety. They do, for almost everyone affected—including me. My concern is whether or not we’re making the right decisions, and whether key employees will be enthusiastic about their new roles. I gain confidence about a potential reorganization when I see that it makes clear what every group is supposed to do, minimizes the dependencies and overlap between groups, and offers developing employees larger responsibilities.
—BILL GATES, 1996
* * *
Even so, Microsoft was working hard on the basic software, which could subsequently be adjusted to whatever hardware came into existence, as well as investing in and forging alliances with companies that were likely to play crucial roles in the eventual highway. And because of this concentration on the information highway, Microsoft was slow on the uptake in realizing the importance of another communications revolution that was already happening—the Internet. The beginnings of the Internet went back as far as 1969, when the U.S. Department of Defense set about designing a computer network that would not be put out of business by a nuclear attack. Instead of having government computers linked to a central point, the new system, created by ARPANET (Advanced Research Project Agency), made it possible for individual computers to communicate directly with one another. That way, all surviving computers after an attack would still be in touch, even if they were widely scattered. The next step in broadening usage of what would become the Internet occurred when, as James Wallace describes in his 1997 book Overdrive, Tim Berners-Lee, a researcher at the European Laboratory for Particle Physics in Geneva, Switzerland, designed a new kind of document description language known as Hyper-Text Markup Language, or HTML. The language, which consisted of a set of codes that were added to a document, was a way to format a document to enable the embedding of graphics, sound clips, or other multimedia, and to link a document with any other document on any other computer on the Internet.
* * *
Before we can enjoy the benefits of the applications and appliances, the information highway has to exist. It doesn’t yet. This may surprise some people, who hear everything from a long-distance telephone network to the Internet described as “the information superhighway.” The truth is that the full highway is unlikely to be available in homes for at least a decade.
—BILL GATES, 1995
* * *
HTML became a favored way for scientists at laboratories around the world to exchange information, but it required scientists to make use of the complex UNIX code, which limited what became known as the World Wide Web to a relatively small number of users. The development of a simplified Internet “browser” was undertaken by a twenty-one-year-old software writer at the University of Illinois at Urbana-Champaign’s National Center for Super-computing Applications. The young man’s name was Marc Andreessen, who would go on to become one of the best known and most controversial of a new generation of “computer geniuses.” Without telling their superiors, Andreessen and a friend named Eric Bina, along with a few others on the staff of the center, spent two months creating a browser they called Mosaic. It was then distributed free over the Internet, as HTML had been earlier. Suddenly, the World Wide Web was accessible to people who were not computer experts. It was the spring of 1993, and the entire world of computers was about to change.
* * *
It has been clear for years that gigantic changes await societies once people can easily exchange large amounts of digital information across distances. Many of us have long expected that the combination of powerful but inexpensive PCs and drastically falling communications costs would eventually set off an explosive
positive-feedback cycle, in which the growth in the number of users and in the amount of valuable content would feed each other. The same spiraling dynamic has driven the stunning growth of the computer industry.
—BILL GATES, 1996
* * *
Gates would later say that his first introduction to the Internet through a Mosaic browser took place in April of 1993. But he didn’t pay all that much attention and, according to several sources, didn’t take another look until October. At this point he was still focused, as were the media, on the information superhighway. He was concerned about the fledgling on-line services, Prodigy, CompuServ, and America Online, which were rapidly signing up subscribers to their offerings of various information services provided by magazines, newspapers, scientific journals, and multimedia companies like Time-Warner. The smallest of the three companies at the time, America Online, had been sounded out by Microsoft about being taken over and made a part of Windows 95, but the company’s chairman, Steve Case, had ambitious plans and didn’t want to sell. Gates thus gave the go-ahead for Microsoft to develop its own on-line service to be included in Windows 95, although he worried that there wasn’t time to get it ready for the planned June 1994 release of Windows 95. That release date would ultimately be pushed back twice, first to December 1994, and finally to August of 1995.
Even as work got under way to develop a proprietary Microsoft on-line service (code-named Marvel, a fact that Marvel Comics got wind of and objected to), there were a few people at Microsoft who believed that it was vital to recognize the broader potential of the Internet, and to capitalize on it as quickly as possible. One of the strongest believers in the explosive nature of the Internet was Ron Glaser, who was actually on leave after ten years at Microsoft and in the process of planning his own company. But Bill Gates persuaded him to come in as a consultant to the Marvel project for perhaps a dozen hours a week. As James Wallace reports in Overdrive, Glaser recruited Russ Siegelman, who lobbied for the Marvel project and was put in charge of it.
* * *
At Microsoft, we have hundreds of people whose job it is to create the software that will make the information highway an idea worth having. The way in which you find and interact with information will change. It’s not going to change tomorrow…but when that day comes, we will be a major player in delivering the software that makes it go.
—BILL GATES, 1993
* * *
It was Glaser’s intention to push for a nonproprietary Internet site with Siegelman, but shortly before the two were scheduled to meet, Siegelman had a brain aneurysm that required an operation. He would be sidelined until December 1993. Glaser is quoted by Wallace as saying, “I did not want to randomize the team while Russ was out getting well. So I decided to basically teach his staff Internet 101.” But the lesson didn’t take, and Glaser didn’t want to go directly to Gates on the matter while Siegelman was out. He did give his “Internet 101” material to Gates’s technical assistant, Steve Sinofsky, and he and two senior programmers, James Allard and Ben Slivka, would ultimately play crucial roles in getting Microsoft into full-scale Internet involvement.
Although Bill Gates was given a major demonstration of what was taking place on the Internet by Steve Sinofsky, it would take the arrival of Netscape’s Mosaic Navigator in October of 1994 to fully galvanize the vast resources of Microsoft behind the creation of a major Internet presence. Netscape was a tiny company, formed by Jim Clark, the former head of Silicon Graphics (the Jurassic Park computer effects company), from which he had resigned in February of 1994 following differences with other executives over the company’s direction, and Marc Andreessen, the whiz kid who had been the principal developer of Mosaic at the Urbana-Champaign campus of the University of Illinois. Andreessen had just graduated, in December of 1993, with a bachelor’s degree in computer science. Clark tracked him down and sent him an e-mail. The two of them then persuaded Andreessen’s friend Eric Bina, as well as a number of others who had worked on the first Mosaic project, to join the company. The company was formed in early April of 1994, and had its first version of its new browser ready just six months later.
* * *
The surging popularity of the communications network called the Internet is the most important single development in the computer industry since the IBM PC was introduced in 1981…. Like the PC, the Internet is a tidal wave. It will wash over the computer industry and many others, drowning those who don’t learn to swim in its waves.
—BILL GATES, 1995
* * *
As James Wallace recounts, “By the fall of 1994, when thousands of computer users began downloading Netscape’s new browser, the number of people using the Internet was exploding by about ten percent a month. Many of these new users were interested in just one area of the Internet—the World Wide Web. From some fifty commercial sites in January 1993, by October the Web had about ten thousand.” Microsoft had had a small browser development team in place since August, and was talking to two companies, Booklink Technologies and Spyglass, about the possibility of licensing their browsers. Spyglass had the rights, ironically, to the original Mosaic developed at the University of Illinois by Marc Andreessen and his cohorts, while Booklink had developed its own system. To make maters more complicated, Netscape had just taken this new name in the fall of 1994. It had originally been called Mosaic Communications, a name to which the University of Illinois violently objected. In addition to changing the name of the company to Netscape Communications Corporation, Clark and Andreessen had had to pay $2.7 million in damages, which was split between the university and Spyglass, according to James Wallace.
* * *
Most media today is financed through advertising, and I expect the Internet to follow this same pattern. But interactivity is an advantage that Net advertising will have over the traditional kind. The initial message will need only to attract attention. Users will be able to click on ads to get additional information, and advertisers will be able to measure how often viewers are doing so. Accurate measurement of advertising’s effectiveness has been a long time coming, and the Internet will finally provide it.
—BILL GATES, 1996
* * *
Microsoft came close to making a deal with Booklink for its browser, but the tough terms caused Booklink to switch at the last moment to an offer from America Online. Microsoft now was placed in a difficult position. It was clear that in order to have a browser as part of Windows 95 (already twice delayed) for its August 1995 release, it would have to license a browser and incorporate it in a somewhat changed form into Windows 95 instead of developing one from scratch. Bill Gates finally signed the contract with Spyglass on December 16, 1994.
By the time Windows 95 came out in August of 1995, Netscape was sufficiently well established that it has been able to remain a major player in the browser market. But by turning his company around in a single year to take advantage of the Internet phenomenon, Bill Gates was able to see to it that his company did not miss out entirely on this important turn in the road. Gates himself has become one of the foremost promoters of the Internet, more than making up for his initial lack of focus with a broad vision of the Internet’s place in the future development of computer technology. Indeed, in a step that nicely completed the circle, Microsoft made a sizable but undisclosed investment in July 1997 in another Seattle area company, Progressive Networks. The company specializes in enabling software for Web-based audio presentations and very low-speed video. The company was founded by and is headed by none other than Ron Glaser, the former Microsoft executive who worked so diligently to make Microsoft executives fully aware of the importance of the Internet.
CHAPTER FIVE
TOUGH COMPETITION
* * *
Just because somebody with a calculator recently deemed me the richest businessman in the world doesn’t mean that I’m a genius. My success in business has largely been the result of my ability to focus on long-term goals and ignore short-term distractions. Taking a
long-term view doesn’t require brilliance, but it does require dedication.
—BILL GATES, 1995
* * *
No one in the business world can become as successful and as powerful as Bill Gates has without acquiring enemies. And Gates has many enemies. Few of them seem to care all that much about his enormous wealth; most of them have made fortunes themselves and have, like Gates, started giving money away. They do not begrudge Gates his success in the usual envious terms, either. What makes some of them very angry is that they believe Microsoft, because of its market dominance in operating software, which began with MS-DOS and became even greater with the Windows series, is able to squeeze companies with better systems into a marginal position and put them out of business entirely. It is, ultimately, the power to do that which creates the anger.
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