Bill Gates (6 page)

Microsoft itself, in spite of a dominance that drives both competitors and the government to worry about monopolistic practices, has created opportunities for dozens of other companies to develop specialized applications for its own products. Just as Microsoft was given an enormous push forward by its association with the then dominant IBM in the 1980s, so many smaller companies in the 1990s have been able to prosper, or indeed have come into being, because of the standards Microsoft has set. Rivals may launch lawsuits or push the government to take antitrust action, but they may also suddenly find themselves cooperating with Microsoft because it makes good business sense for everybody.

Again and again Bill Gates has defended his company’s practices, sometimes testily, sometimes in lofty terms. When asked by
Time
whether Microsoft was trying to create a monopoly by embedding its Internet browser into Windows, he replied, “Any operating system without a
browser is going to be f——-out of business. Should we improve our product or go out of business.” In softer terms, he told Charlie Rose, “Well, what Microsoft does is we ship software products and we keep trying to improve them. And so in that sense, yes, we are relentless. We’re always hiring smart people. When you ship a great software product, there’s nothing tough about it. There’s nothing mean about it. People take it, put it in their computer and they decide if they like it and it’s word of mouth that drives that.”

It is also important to recognize that saying bad things about Bill Gates does not mean that he’ll never work with you again. Ron Glaser, the former Microsoft executive who was instrumental, as a subsequent part-time consultant, in pushing Gates to recognize the importance of the Internet in 1994, said of his former boss in January of 1997, “He’s Darwinian. He doesn’t look for win-win situations with others, but for ways to make others lose. Success is defined as flattening the competition, not creating excellence.” While Glaser also said he admired Gates’s vision, such remarks might be expected to cause Gates to seek retribution, right? Wrong. Seven months later, Microsoft announced a significant but undisclosed investment in Glaser’s own company, which specializes in computer sound systems. Gates may get angry, and he sometimes says harsh things about people who attack him, but he doesn’t hold the kind of grudge that prevents him from making a subsequent deal if he sees it as good for Microsoft.

As stated before, Gates sometimes had a combative relationship with Microsoft cofounder Paul Allen, and Allen can still be critical at times, but that does not interfere with their friendship of a quarter century. Gates is a combative person. It’s worth recalling that when he was sent to a
psychologist as a teenager, the therapist ended up telling his mother that she would never win a battle with him and had to take another approach. In the long run, Gates became extremely close to her. It should also be kept in mind that when Gates shouts “That’s the stupidest thing I ever heard” in meetings with his employees, it is taken as a badge of honor. It means Bill Gates is paying attention. That kind of person may sometimes be difficult to deal with, but the business world is full of people who just smile at you and then stab you in the back when you least expect it. Many people would rather deal with Bill Gates’s frontal assaults.

One of those who knows all about both the difficulties and rewards of dealing with Bill Gates is Andy Grove, the head of the chip manufacturer Intel. Grove, nineteen years older than Gates, was born in Hungary, where he survived the Nazi horrors of a World War II childhood only to find himself living under the yoke of Stalinism. He was twenty when he escaped to the west after the 1956 Hungarian uprising, eventually getting a Ph.D. from the University of California at Berkeley. He and Gates first met when Allen and Gates dropped by to introduce themselves in 1978, when Microsoft was still located in Albuquerque. Two years later, giant IBM hired Intel to provide the chips and Microsoft to create the software as they tried to play catch-up with Apple in the new field of personal computers.

There were some rough patches between the two men early on. In a 1996 joint interview, they told
Fortune
about a dinner at Groves’s home that turned into a table-pounding shouting match. Groves recalled, “It was not a pleasant evening. I remember the caterer peeked into the room to see what all the ruckus was about. I was the only one who finished my salmon.” For a while after that Groves and
Gates had contact only through other representatives of their two companies. But they got past that period and began to meet on a regular basis, two or three times a year, as their companies became more and more entwined with one another on many developmental projects. In part, they were drawn together because IBM broke with both of them. IBM invested in Intel, but sold its last interest in the company in 1987; it had refused to invest in Microsoft the previous year. “As these things happened,” Grove said, “instead of being two junior partners of a senior partner, we became equal players without that senior partner being present.”

The results of the relationship between the two companies have been profoundly beneficial to both, and have been instrumental in keeping computer development moving ahead at an extraordinary pace. The two men have continued to have disagreements on many issues, but they have usually proved to be fruitful ones. Both men acknowledge that they get input from different sources. This sometimes causes friction, but more often it leads to showing each other the best way forward in an area that one or the other has failed to grasp clearly. Gates and Grove also are very complimentary about one another’s companies. Gates says, “It’s fun to hear Intel’s plans, because when they decide to do a next-generation processor, the execution is amazing. There’s so much behind it in terms of capital and design and testing and the like.” Grove returns the compliment: “What I’m most impressed with about Microsoft is that they are superb tacticians. They zigzag very, very well…if they are wrong they can be very, very pragmatic. What they are doing in the Internet field is phenomenal. I don’t think any other large company could have turned as profoundly and as broadly…”

This is not to say that they wouldn’t decide to work with a different partner if someone came up with better chips than Intel, or better software than Microsoft. They tend to agree that the PC and the television set will merge, and that the network computer or Internet terminal, cheaper and simpler and being pushed hard by Larry Ellison of Oracle, will fall between stools. But if things go the other way and Oracle’s vision of the future proves correct, it is perfectly possible that Microsoft and Intel might find themselves at odds in dealing with that development. Microsoft’s continued success depends on the ongoing dominance of the PC, even though Gates has made recent investments in a few companies that could give him an escape hatch. But Intel, as a chip maker, is in the more flexible position. Whatever new technology arises, it will need chips; it might not need Windows. But regardless of what happens, Gates and Grove are in agreement that the synergy that has existed between their two companies has been remarkable and close to unique since the start of the industrial revolution more than two centuries ago.

The relationship between Bill Gates and Andy Grove shows the degree to which Gates can be cooperative when there is a common ground. But it is worth noting that the two businesses are complementary rather than competitive with one another. In this sense, the relationship mirrors Gates’s personal life. His closest friends are, with one exception, people intimately tied to Microsoft: cofounder Paul Allen, Steve Ballmer, who keeps everything running smoothly, and Nathan Myhrvold, head of Microsoft’s Advanced Research Division and a coauthor of
The Road Ahead
. The exception, of course, is Warren Buffett, older than Gates and nearly as rich, who has almost nothing to do with the computer world. He bought a few shares of
Microsoft early on and laughs that he should have bought a lot more, but his primary investments are in other fields. Perhaps exactly because Buffett is not a part of the frenetic computer society, Gates may be at his most relaxed and playful with this billionaire who is neither a collaborator nor a competitor.

Having a friend from outside the computer industry to relax with probably seemed particularly felicitous to Gates in the fall of 1997, when a number of business problems coalesced. On September 15, Microsoft confirmed rumors that the latest version of its operating system software, Windows 98, would be delayed from the first to the second quarter of 1998. While Windows 95 had been nearly two years late, this fresh announcement caused Microsoft stock to fall by five percent that day, with a share falling by $7.25, although its stock still stood at fifty times the company’s earnings and rallied the following day. Windows 98, it had been announced previously, would include Microsoft’s browser, Internet Explorer, as an integral part of Windows for the first time. That plan would shortly be challenged on two separate fronts.

On October 7, 1997, Sun Microsystems, Inc. filed a suit in the Federal District Court of San Jose, California, charging that Microsoft was essentially attempting to “steal” Sun’s Java software standard by including a conflicting version of that software language in its new Internet Explorer 4.0 browser program. Microsoft had licensed the use of the Java language in April of 1996, four months after it was released by Sun, after five months of negotiation. Java is a programming language at base, but its design also allows it to be used as an all-purpose computer operating system—in other words, a potential alternative to Windows. Because it can run a wide range of different computer sys
tems, Java was intended to bypass vexing compatability problems in the computer industry—indeed, Sun touted it with the phrase “Write once, run anywhere.” In addition, it was designed to mitigate security problems, particularly those caused by viruses, on computer network systems. Because Java can run on almost any system, it is not necessary to have the kind of extended linkage that makes a whole network vulnerable.

Sun has been attempting to have Java adopted as an international standard, a move that industry analysts have seen as a threat to the domination of Microsoft’s Windows operating system, since Java lessens the need for Windows in several important areas, including the retrieval of information from the Internet. What’s more, a Microsoft application like Word could be used with Java instead of with Windows. In developing its Internet Explorer 4.0, therefore, Windows changed the Java language to make it less versatile, removing two crucial standards established by Sun. That, Sun maintained in its suit, was a violation of the licensing agreement. Microsoft, of course, said that it had not violated anything at all and that it had also made improvements to the Java standard that Sun had not yet gotten around to making but that were beneficial to all computer users. Exactly because Java is so broadly compatible, it is open to improvement by customization to a specific operating system like Windows. Microsoft made some forty changes over all, which simultaneously made Java more useful to Windows users but less compatible with other software products from rival companies. The
New York Times
quoted David Yoffie, a professor at the Harvard Business School, as saying that “Microsoft’s optimization is a risk for Sun. But if Sun can slow down Microsoft’s
advances with the software developers, this will prove to be a good strategy.”