#174 Bill Gates (Overdrive)

What I learned from reading Overdrive: Bill Gates and the Race to Control Cyberspace by James Wallace. ---- There would be an industry breakthrough unimagined at the time, and it would be made by a company that didn’t yet exist. [7:55] Another corollary to Joys Law of Innovation was that the number of bright people in any company went down as the size went up. [10:47] As Apple founder Steve Jobs liked to say: When you are at simplicity, there ain’t no complexity. [12:49] Gates looks at everything as something that should be his. He acts in any way he can to make it his. It can be an idea, market share, or a contract. There is not an ounce of conscientiousness or compassion in him. The notion of fairness means nothing to him. The only thing he understands is leverage. [17:21] I became convinced that Microsoft was building the last minicomputer. That the Microsoft Network was based on the notion that your competitors were the model — proprietary online services like America Online — and that the reality was that the Internet was going to be such a fundamental paradigm shift, that you needed to think about your strategies fundamentally differently. [28:08] The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas. — Zero to One [29:25] Most college kids knew much more than we did because they were exposed to it. If I had wanted to connect to the Internet, it would have been easier for me to get into my car and drive over to the University of Washington than to try and get on the Internet at Microsoft. [31:12] For years , Gates had Kahn in his sights. Kahn recalled that he once had found Gates at an industry conference in the late 1980s sitting alone in a corner, looking at a photograph in his hands. “It was a picture of me,” said Kahn. [41:16] It’s not in Microsoft’s bones to cooperate with other companies. [42:47] ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  A few years earlier, there might have been great concern among Microsoft's senior managers about the condition of Bill Gates when he showed up the next morning. After a restless night before the launch of Microsoft Excel in New York City in May 1985, Gates had shown up for the big event without sleep, without a shave, and without a shower. He looked as bad as he smelled. There was no need to worry this time. Gates had been 29 years old that day in New York City. Now, he was a couple of months shy of his 40th birthday. The computer geek, once ridiculed for his personal appearance, had cleaned up, literally. The personal changes in Gates had been as dramatic as the increase in his wealth, which

• 0:41David Senra?

  was now approaching a staggering $20 billion. Forbes had recently named him the world's richest individual. He was also one of the world's most powerful. He was so well-known internationally that he conducted his own foreign policy, calling on China's president and other world leaders during business trips. He socialized with Warren Buffett. He played golf with the president. He wanted to be taken seriously as a visionary, as a statesman, and as an adult. But for all the changes, he was still very much that intense, young, college dropout who had founded Microsoft at age 19.

• 1:22David Senra?

  Neither marriage, nor fame, nor fortune had diminished the white-hot competitive fire that consumed him. That was an excerpt from the book that I'm going to talk to you about today, which is "Overdrive: Bill Gates and the Race to Control Cyberspace" by James Wallace. As you can probably tell from that subtitle, this is a very old book. This actually, this book was published all the way back in 1997. And the way I found this book is because James Wallace was also one of the authors that wrote the book that I talked to you about, "All the Way Back on Founder's Number 140." And that book... Is called Hard Drive: Bill Gates and the Making of the Microsoft Empire. It is one of my favorite books that I've read for the podcast so far. If you haven't listened to it, I highly recommend listening to that episode, but also reading the book.

• 2:07David Senra?

  It's fantastic. It covers the first 35 years of Bill Gates' life, all the way up until Microsoft's IPO. So he wrote, James Wallace, wrote, this is a sequel of sorts, and this is going to cover, this is going to cover the next five years of Bill Gates' life as he continues to build Microsoft after the IPO. That excerpt that I just read to you, the note I left myself was different but the same. So his fortunes have grown, the company's way larger, he's got a lot more pressure now, but he still has that, that white-hot competitive fire. I think in the podcast on Hard Drive, the way I would describe the, the intensity that a young Bill Gates had, which he even says, like, if you listen to him, if you listen to modern-day Bill Gates talk, he's like, you know, the younger version of me would

• 2:52David Senra?

  be disgusted with, with who I am now, because he's obviously calmed down a lot. He's not nearly as intense as what he said, or I guess the word he would use is hardcore. And I think the way I described him on Founder's Number 140 was if Genghis Khan wore a Mr. Rogers costume. Okay, so there's two main things that are happening in Bill Gates' life at this time. And you have one, one is a mistake. The first thing is that he completely missed the internet, which is surprising, given how pivotal the internet was, or is, and how smart Bill Gates is, right? And the second thing is that he's being investigated, he and Microsoft are being investigated for monopolistic and anti-competitive behaviors by the, both the Justice Department and the FTC.

• 3:35David Senra?

  Most of the highlights that I have, what I found most interesting and what I think we can learn the most from, is this, how he recovers from this mistake and the competition that he's going to have with, there's a bunch of other companies, but primarily it's from Netscape, which is the company that Jim Clark and Marc Andreessen founded that grew out of Marc Andreessen's invention of the Mosaic browser. Which is the first modern, you can think of it as the first modern web browser. Okay. So the author is going to talk about the surprising area where Microsoft's facing the most intense competitor or competition because they're focused on the large known competitors. And really, the way to think about this is that the benefit that startups have because they can focus on one product, they are not burdened with legacy.

• 4:20David Senra?

  And I'm going to read this quote from Overdrive, but then I want to read a quote from Becoming Steve Jobs, that book I did, I think, all the way back on Founder's Number 19. So it says, "Microsoft faced a new and even greater enemy. A bunch of wise-ass kids from an upstart company called Netscape, a company that did not even exist two years earlier, had been keeping Bill Gates up at night." And we're going to see a lot of parallels between the early days, it's between Microsoft and Netscape, and then what was taking place, let's say 15, maybe 20 years earlier, between IBM and Microsoft. So this is just something that's going to repeat throughout history. And the quote I want to read you that comes from Becoming Steve Jobs is the benefit that startups have because they can focus on one product and are not burdened by legacy.

• 5:05David Senra?

  It says, "Most great Silicon Valley startups start out lean and simple. The advantage they have over established companies is the focus they can bring to a single product or idea. Unencumbered by bureaucracy or a heritage of products to protect, a small group of talented folks is free to attack a concept with speed and smarts." And this is more about Bill Gates missing the internet. "The internet represented a true paradigm shift in the computer industry. Remarkably, Gates had missed it, and Microsoft now found itself far behind." I think by the time they start developing, and I'll get into more what they were focused on and the mistakes they were making, I think by the time they started developing their own browser and realizing, oh, wait, Netscape actually has this correct, Netscape had five or six million people using their browser.

• 5:50David Senra?

  And the interesting part, and the reason I think this is so important, is because it's not like Bill Gates is some ignorant person. He spent a lot of time studying the industry. He knew the history of the industry, and he knew that... Very few, or excuse me, no companies had ever successfully transitioned from one technological shift to the next. So it says Gates was all too aware of what had happened to once mighty IBM during the last paradigm shift in the computer industry at the dawn of the personal computer revolution. IBM lost its dominance to another upstart company with a bunch of wise-ass kids in pizza-stained t-shirts, and that company was Microsoft. So I found that very interesting, that the author drew our attention to the parallel, that the same thing that is happening to Microsoft in this short time in their history happened.

• 6:35David Senra?

  They were the ones actually instigating the change against a larger, much more established player in IBM. And the author does a great job of describing, like, it's not that other people in the industry did not know what was happening, right? It's just that Microsoft was so myopically focused. And this is actually something that I thought about a lot as I read the book, is, you know, we talk about the power of focus, how distraction is very costly, your attention is extremely valuable, and yet, there's a dichotomy there, because you can be, what if you're maintaining focus? Microsoft was laser-focused, but they were laser-focused on the wrong thing. So it's not as simple as saying, oh, you've just got to keep focused. You have to keep focused and make sure you're focused on the right thing. So this is an example, one of Sun Microsystems' founders, this guy named Bill Joy, gave

• 7:20David Senra?

  a series of talks where he was identifying, this is back in the early 1990s, about the weaknesses of Microsoft, right? So this is going to show you that other people were aware that Microsoft was vulnerable. And I'm going to, he, Bill has, and actually, Bill Joy, has a lot of interesting observations. So I'm going to spend a little bit of time with this talk that he gave. So it says, "In early 1990, Bill Joy, a Silicon Valley legend, known sometimes as the other Bill, made what would prove to be a most remarkable prediction. Joy said Microsoft would continue to dominate for the next five to seven years." So he's saying this in 1990, okay? So it says, "Microsoft's going to dominate for five to seven years, then everything would change. There would be an industry breakthrough unimagined at the time, and it would be made by a company that didn't exist yet." So that's the Internet, and that's Netscape, right?

• 8:06David Senra?

  The reclusive Joy, one of the four co-founders of Sun Recosystems, had been preaching the gospel of simplicity for some time. That's another main theme. You've got to remember, everything I'm saying here, remember this for later on in the book, because this is going to come full circle. Joy had retreated, so it talks about, okay, first, you're going to dominate for a number of years. Your vulnerability is not going to be to a competitor that is already known that you think you're competing with, right? It's going to become the breakthrough that has not yet been invented by a company that does not yet exist, right? And then he's going to talk about the importance of simplicity. So he says he'd been preaching the gospel of simplicity for some time. He had retreated to run a research lab that he called Small Works, which is dedicated

• 8:48David Senra?

  to the proposition that a successful software system did not have to have 10 zillion lines of code. After all, he reasoned, successful large systems were once successful small systems. He's going to draw parallels, this is, he does something really smart in this talk. He's going to draw parallels from the history of other industries. Joy felt Microsoft was cruising for a bruising. They were big and arrogant and trying to take over everything. Worst of all, their software just wasn't very good. I'm going to pause actually here, because when he said that, one, that's, we have to realize that a lot of things are subjective, but a lot of people said, you know, Microsoft's, they're great at copying. We've heard this critique over and over again. You know, their software's not very good, et cetera, et cetera.

• 9:33David Senra?

  That's fine, let's say we agree with his statement, even though it's a subjective statement. Really, the main point of me bringing this to your attention is because we have to remember that products don't compete and that companies do. And you have a company like Microsoft that has better distribution, more resources, even if you think their product's not as good. Usually, history tells us that those companies are more likely to win than not, right? So it says Joy compared, just summarizes that section, that sentence, what he's talking about, products don't compete, companies do. Joy compared Microsoft software to the cars built by, this is what I mentioned, what I was trying to get to, where he's drawing, the smart thing he does by drawing parallels from other industries, right? The history of other industries. Joy compared Microsoft's software to the cars built by General Motors before the Japanese entered the market.

• 10:18David Senra?

  The General Motors cars were breaking down all the time. Then Honda came along with a quiet, reliable car and changed the rules for success in the auto industry. We're not done with this Joy talk, though. He's talking about why, why is Microsoft vulnerable? And he says, it says, Joy had a few laws of his own. So it's this thing termed Joy's Law of Innovation. Right. This is very fascinating. I'm going to draw a parallel between what Joy is saying now in the early 1990s and what we've learned from other people. Joy's Law of Innovation was that the number of bright people in any company went down as the size went up. So we've seen this over and over again. Steve Jobs called this, calls this a bozo explosion.

• 11:03David Senra?

  Couple podcasts ago, when we covered the early days of SpaceX, the book called Liftoff, Elon Musk personally interviewed the first 3,000 employees of SpaceX for this exact same reason. The number of bright people in any company go down as the size go up. So Elon Musk knew this. Steve Jobs knew this. He has a great quote, obviously think of it as bozo explosion. Paul Graham, the founder of Y Combinator, I remember him saying something. I went and searched for it. I could not find it. So I'm going to go off memory, but he paraphrased saying that there should be more thought into why the early days of startups are so successful. Due to the, due to the very beginning, you have a, most of the, the employees of a startup

• 11:48David Senra?

  are actually the founders. So what I took away, and again, I don't know his exact quote, but saying like, you know, maybe the reason it's successful is because, my interpretation was if you think about it as talent per capita, right? Let's say you have two really talented co-founders and you're the only employees of your company at the very beginning, right? It's not going to stay like that. You're eventually going to grow, you're going to hire more people. But as, as far as a, a talent level, based on the actual, actual task that your company or the problem your company solves, you're never going to have a higher concentration of talent than when you have two people that are really good at what you're doing, right? You're going to eventually have to scale up. But on a per capita basis, what Paul Graham was saying is like, You're never going to have a higher concentration of talent. And inevitably, as a company grows, the talent per capita is going to decrease.

• 12:32David Senra?

  But anyways, I'm going off on an unneeded tangent. Let's go back to his law of innovation. The number of great people in any company went down as the size went up. Microsoft's size and dominance, like that of IBM at the dawn of the personal computer revolution, would spell its own demise. This is Bill Joy speaking, okay? Microsoft would not be able to adapt and would be blocked out of new markets. Simplicity would win over complexity, small over big. As Apple founder Steve Jobs liked to say, when you are at simplicity, there ain't no complexity. I've read a lot of books, six books so far on Steve Jobs. I don't remember coming across that quote, but that's fantastic. When you're at simplicity, there ain't no complexity. Microsoft was too big, its software too complex. The great, the next great innovation, Joy said, would make Microsoft's complex software irrelevant. You've got to remember that part for the end.

• 13:16David Senra?

  The next great innovation would make Microsoft's complex software irrelevant. Okay, so now we're going to get into who they're competing with. I've done podcasts on both of these people. So P. Marka, Marc Andreessen, was founder's number 50, if I'm not mistaken. And his co-founder, Jim Clark. If you're looking for a book to read that's really easy to read and you're learn and not even realize you're learning because their writing's so good. It's the one I did for, I think it's founder's number 23. It's The New New Thing, A Silicon Valley Story, written by Michael Lewis, and it's about Jim Clark. And it is written about the time what's going on with this book. It's actually written, I think, in the year 2000, 2001. So the events that happened in this book have already played out. So anyways, let me go back to Marc Andreessen in college.

• 14:00David Senra?

  It says 21-year-old Marc Andreessen had made up his mind that he and his friend would work around the clock as long as it took to create the next great software program. This is going to be the Mosaic browser. Andreessen enrolled, I'm giving you pre-history, the pre-history of Netscape, okay? Andreessen enrolled in the Electrical Engineering Department, but like Bill Gates, when Gates attended college, Andreessen often cut classes, and when he did go, he paid little attention. Now, this is going to give you, this is where he stumbles across the idea that he could create a browser. And really, when I read this part, I thought of Jeff Bezos's quote, that we don't choose our passions, they choose us. Andreessen took a job for $6.85 an hour writing software for three-dimensional scientific visualizations. He's still in college when he's doing this, okay?

• 14:43David Senra?

  Although he was surrounded by supercomputers, Andreessen found the work boring. It was in the physics lab that something finally caught his attention. The phenomenon of scientists sharing information around the globe over something called the internet. So at the time, there's just text-based browsers. Mosaic is the first image, I think they call it graphical browser, I can't remember the exact term. But this is where he gets the idea, he's like, I'm going to work day and night until I have something up and running. This is when they developed Mosaic. Over the next two months, Andreessen and Beena worked day and night, living on milk, chocolate chip cookies, Mountain Dew and Skittles. A handful of other hungry, young, and super smart programmers from the department, I think this is in Illinois, I can't remember the name of the college at the moment, but

• 15:28David Senra?

  it's the NCSA, it's the department that they're working with, or working in. So it says, "A handful of other young, hungry, super smart programmers were recruited help." Andreessen was the team leader and didn't tell anyone in management what they were up to. And this is where the author does a great job of drawing the parallel between Andreessen and his small group of computer programmers developing Mosaic, to Bill Gates doing something very similar, what is that, 16, 17 years before? Nearly two decades earlier, at Harvard, Bill Gates and his childhood pal Paul Allen had hungered down in the computer center and spent eight weeks working day and night to develop a high-level computer language for the first microprocessor chip. Their software program, which was called BASIC, would become the foundation of a company called Microsoft.

• 16:11David Senra?

  The internet browser that Andreessen and his team designed in a similar eight-week marathon was Kristin Mosaic. A year later, Andreessen and Jim Clark would found a startup called Mosaic Communications Corporation, which they would have to rename later to Netscape because of, due to the lawsuit. And Mosaic contained only 9,000 lines of computer code, thus validating Bill Joy's prediction that the next great innovation in software would be simple. And they use the comparison because what Microsoft's focused on at the time, they're developing Windows 95. So mosaics, 9,000 lines of computer code. Windows 95 is something like 10 or 15 million. Okay, so I'm going to go back to Netscape. I'm going to go back and forth between what's happening in Microsoft and Bill Gates' mind at the time to what's happening in Netscape.

• 16:55David Senra?

  But I want to talk about, there's a lot of quotes in this book because of all this anti-competitive behavior that's being investigated. So we learn about Bill Gates through the eyes of his competitors. And we're also going to, I'm going to read some great quotes from Bill Gates, too, so we could see his personality definitely shines through. This is how a competitor thought about Bill. This guy's really interesting, and one of the funniest parts of the book is going to happen with Bill Gates' obsession with this guy later on. So it says, "Philippe Kahn would later say that Gates looks at everything as something that should be his." This is why I compare him to Genghis Khan dressed as Mr. Rogers, okay? Gates looks at everything as something that should be his. He acts in a way, he acts in any way he can to make it his. It could be an idea, market share, or a contract.

• 17:40David Senra?

  There is not an ounce of conscientiousness or compassion in him. The notion of fairness means nothing to him. The only thing he understands is leverage." Okay, so now I'm going to, there's some quotes that we're going to see from Gates to see his personality. And again, this is young, the younger Bill Gates. This is the Bill Gates that built Microsoft. When you listen to interviews of Bill Gates today, he doesn't talk like this anymore. So it says, "When asked about the FTC investigation, Gates had remarked that the worst thing that could happen to him was that he could trip going up the steps of the FTC building." Here's another quote. Gates said in an interview that the complaints of Microsoft's rivals were a case of sour grapes. "Our greatest success is due to one single fact, that I was willing to bet the whole company on the graphical interface," Gates said.

• 18:27David Senra?

  Another one. Gates said of his disgruntled competitors, "Lotus lost ground because it was very late in catching the two biggest technology waves, the Macintosh and Windows." "Borlin International is too distracted with its bad merger." "Philippe Kahn is good at playing the saxophone and sailing, but he's not good at making money." "WordPerfect is only a one-product company." "Our most successful software is for the Macintosh. We have a much higher market share on the Mac than anywhere else. And how does Apple help us? Well, they sue us in court." This is his punchline here. "In the future, maybe our competitors will decide to become more competent." Now, it's gonna be funny that he says maybe his competitors should be more competent. Now, yes, this is a book about Microsoft's mistakes. He overcomes them, though, so it's not like I'm gonna dwell too much on them.

• 19:12David Senra?

  Microsoft is, even to this day, the financial success. I know a lot of people poke fun at their products, whatever the case is, but it's a money-making machine. Like, he built a very wonderful business, right? But what's funny is he's like, "Oh, maybe our competitors will be more competent." This is gonna blow your mind. How did Gates miss? These are personal notes to myself, right? "How did Gates miss the internet?", question mark. "Gates thought TV would be the future?" What? And then another note, what the hell? This is, I can't believe this. "For many years, Gates had refused to even own a television, preferring instead to spend his time reading." Okay, that's fine. "Now he saw in the future a marriage between television and the personal computer." Wait till I get to the punchline here.

• 19:57David Senra?

  So, the future now is television and the personal computer, right? "The television, he believed, would become the general-purpose entertainment and information device. It would be a newspaper, a TV guide, a phone book, and a textbook for kids." So, instead of using the term "internet", he's gonna talk about "information highway." This is what they're talking about. And he says, "The information highway is going to be good, is going to happen on the TV, and Microsoft's gonna lead the way." Okay, so it says, "Gates was planning ahead for the eventual marriage of the computer and the entertainment business." So, he's talking about all these meetings that he's having. He goes and, it says, "Gates met secretly with Michael Ovitz." That name will sound familiar because on Founder's Number 53, I read his autobiography, who was Mike Ovitz,

• 20:42David Senra?

  who was then the chief of Creative Artists Agency and the most powerful man in Hollywood, to talk about interactive computing. So, he talks about the information highway, which he's not talking about the internet. And interactive computing, which is not, weirdly enough, this is why it's gonna blow your mind, it's not gonna happen on the computer, it's gonna happen on the TV. Alright, so it says he was just planning ahead for the eventual marriage of the computer and entertainment business and most of those people, and most people in the entertainment business lived in Hollywood. Gates was especially interested in Time Warner's pilot project to bring interactive television to approximately 5,000 Orlando homes, sometimes in 1994. So I want to pause there, okay? Again, he thinks the future of, the future, the way people are going to access the information

• 21:26David Senra?

  highway, which not going to be on the internet, it's gonna take place on the TV, a device he didn't even own. You see how ridiculous that is? As opposed to computers, which he spends all his time thinking about connected to the internet. How does, how is that mistake, how does that even happen? How did you arrive at that conclusion? And that's part of the point of reading the book, is to find out, like, how the, how the hell do you make a mistake like this? You don't even own that device, and now you're convinced, and you spent the last 25 years of your life obsessed. He is a compulsive, passionate computer user. And you think, no, no, no, forget the computer, it's gonna happen on the TV? What? And so this is based on this, this, this, he gives like this two hour long talk in

• 22:09David Senra?

  Orlando, right before this, this interactive television project is gonna launch, right? And again, he completely misses the internet. As Gates talked about the future that night, uh, excuse me, Gates talked about the future that night, not once in his two hour talk did he ever mention the internet. Internet savvy computer users around the country were by now discovering the wonders of the world wide web through the simplicity of the Mosaic browser. This is what I mean, like, there's, there's two parallel stories in this book. One is how Microsoft is distracted about everything, except the internet, and how Mosaic, Netscape, is focused only on the internet. I think that's the main point, the main lesson here, right? Gates, meanwhile, was cruising along the quote unquote "information highway," focused

• 22:51David Senra?

  on the promise of interaction, interactive television, and no doubt, for myself, this, I left myself on this page, it's just bizarre. I don't understand this. And it's, again, this is what Gates, Gates is running the company, he's got 20,000 employees at the time. He's pushing everything. But there's people at Microsoft that are spending time on college campuses like, hey, guys, we need to focus on this. And this is an example, this guy named Glazer. Glazer had dialed into the net after downloading an early version of Mosaic. "It was amazing, absolutely amazing," remembered Glazer of the first time he used Mosaic, sounding like a teenager retelling the story of his first sexual experience. With Mosaic's point-and-click ease of exploring the internet, Glazer realized just how powerful the new medium could be. "All the light bulbs went on for me.

• 23:34David Senra?

  I honestly thought, this is the future. This was my, this was an epiphany, if you will." Okay, so you have people, at this time, inside Microsoft, they have access to Mosaic. They're like, this is amazing. What is Microsoft instead, instead building? And this is where it talks about like, the problem with, a lot, I'm gonna bring up a bunch of, a bunch of, I guess, quotes of the fact that Microsoft, they copy. That's what they do. And when you copy, you're always behind, right? That doesn't mean you can't win from a financial basis, like I said earlier. If you have better distribution, you have more resources, you probably still will win. I understand why they did that. But, but if you're following, if you're following somebody and that person's going down the wrong path, then you're just going down the wrong path. And so what they're doing is they're realizing, hey, there's all these companies this time.

• 24:18David Senra?

  American Online, Prodigy, CompuServe. These are proprietary systems that connect to the internet, right? And so that's what Gates wants Microsoft to build. They're trying to build this thing called Microsoft, is it Microsoft Network? I can't remember the name, but it's essentially Microsoft's version of American Online, okay? It says it would prove, it would prove to be the wrong strategy. And strangely, and, excuse me, and a strategy that Glazer had recommended against. This wrong strategy would end up costing Microsoft millions of dollars, as well as time it could not afford to lose. So that is what Microsoft's building, Microsoft Windows 95. They're building Microsoft Network. They're fighting the Justice Department, and they're doing, and they're thinking about

• 25:03David Senra?

  interactive TVs, as opposed to, that's all the stuff they're focused on, as opposed to what Mosaic, remember, they don't have to protect their, any legacy products, they could just focus on one thing. And this, this is going to be codenamed Project Marvel. Okay, more about that. "Little did they know that they were creating a product that would be obsolete before it was finished." Glazer tried to tell them that when he came over to make, to make his internet, his internet pitch. "Change your strategy," Glazer told the team leader. So he's talking- Glazer, let me, I wasn't clear here. Glazer is going over to the people that are running Project Marvel. That is the proprietary internet system, online system that Microsoft is, is building, right? Because they're copying what everybody else is doing. They're like, oh, American Online, Prodigy, CompuServe.

• 25:48David Senra?

  You know, they have something like, they're doing really well individually. As I think they, they're, each of them have somewhere around like, let's say, two to three million subscribers at the time. So Microsoft's like, hey, we're gonna have way more. We'll, we'll build our own network and then we'll bundle it with Windows 95 and then we'll beat all these other guys. And that'll be the future, right? And so Glazer goes to this, to, to the team at Project Marvel and they're like, no, no, you gotta use internet. Like, if you use Mosaic, you're gonna realize what you're building is obsolete. Like, why, why are you investing resources? Let's just switch our strategy here. And he says no one was listening. Other than the occasional story that ended up being buried inside the local paper, the national media in 1983 took little notice of the internet. Before I finish that, actually, let me finish the sentence.

• 26:29David Senra?

  Like Gates, the media were focused on the information highway. Interactive television. Again, they think information highway, let's think of that as the internet of, as what we know today. And that information highway is gonna take place on the TV. We obviously are living in the world that, that they did not see coming. The real main point of that paragraph and the reason I brought it to your attention is because you don't get an edge by consuming the same information as everyone else. Everybody else was, everybody's reading the same stories, the same media, doing all the same dumb crap, right? And there being, what, what's happening is everybody's focused. Everybody's focused on the wrong idea. Everybody's reading about, hey, it's gonna be the information highway, not the internet, the information highway and the TV.

• 27:12David Senra?

  And so all, and the book goes into more detail about every single company's doing the exact same thing that Microsoft is doing. They're trying to build, I think even Jim Clark makes this, if I remember correctly, when I read The New New Thing. He even, because his, his original company, the company that he was, he developed before Netscape, Silicon Graphics, was developing like these cable boxes, these, these connected cable boxes that would give more functionality to your TV. So, again, a lot of people are making the same mistake. The main lesson is you don't get an edge by consuming the same information as everyone, as everyone else. Let's go back to Glazer though, because Glazer, he's not done. He's trying to sound the alarms and no one in Microsoft is listening, yet. That will change. What was clear to Glazer was that the Internet had produced a radical change in the computer industry.

• 27:55David Senra?

  The last such change had occurred in the late 1970s when the development of the personal computer triggered a revolution that gave rise to companies like Microsoft and altered the fundamental power structure of the industry. Gates believed the same thing was about to happen because of the Internet, and he was beating the drum loudly. He says, "I became convinced that Microsoft was building the last mini-computer. In other words, you're doing something well that's not worth doing at all." Right? So going back to Glazer, the Microsoft network was based on the notion that your competitors were the model, that you should copy proprietary online services like American Online. And the reality was that the Internet was going to be such a fundamental paradigm shift

• 28:36David Senra?

  that you needed to think about your strategies fundamentally differently. So he's saying you cannot copy, you can't go off of a formula, you have to think from first principles. They were focused on copying their competitors. And here's an example of that. Glazer might have hoped that the Marvel team was buying into his vision of the Internet, but he might as well have been shouting into the wind. This is now a manager working on Project Marvel, and this is a quote from him. "We were not thinking about the Internet at all. At the time, our competition was Prodigy and CompuServe and American Online, and that's what we were focused on." There's that word, "focus," right? "A proprietary online service." After that Internet talk, it was like, "Okay, great. Now let's get back to work."

• 29:19David Senra?

  So before I go back to why Microsoft couldn't think about the Internet, let me go back to that idea. The fact that they're not thinking from first principles, they're trying to follow a formula. That reminds me of a quote from the book Zero to One. "The single most powerful pattern I've noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas. A formula that already exists, it's something you're copying, right? Instead of saying, 'What is the best experience for the customer?'" And if you start from that question and say, "I'm going to design that experience, I'm not going to think about what everybody else is doing. What is my best idea that's best for the customer?" Glazer's point is like, best for the customer is the Internet. It's using a browser, making a browser like Mosaic, which is eventually they're going to do, they're just not doing yet.

• 30:04David Senra?

  Now, this is more about why Microsoft could not think about the Internet. Somebody else had to think about it first, right? This is going to sound a lot like Facebook today. This is now the project, this is another quote from that same Project Marvel manager. "And frankly, that is Microsoft's forte. A competitor comes in and does something interesting, then we come in and basically clone it. We do it marginally better and throw some marketing cloud behind it, then relentlessly make it better over the years. That's our strategy, and it has worked damn well." Okay, so I want to draw your attention to something that's really interesting, too, because you have professional programmers, Microsoft has resources, and yet they, college kids, have better access to the Internet than the programmers at Microsoft do.

• 30:49David Senra?

  This is fascinating. So this is an employee from Microsoft, goes back and visits his alma mater, I think this is happening at Cornell, maybe. And that's, I guess, not important. "What he found confirmed his growing concern that Microsoft was sliding the Internet phenomenon that was sweeping across the land. College kids were exchanging email, they were sharing information with friends and colleagues at universities all over the world. They were even accessing their course lists off the net. These college kids were on the Internet, exploring a world to which many of the top computer programs in the country at Microsoft's campus did not have access to." It's a different employee by Microsoft, observing the same phenomenon. "Most college kids knew much more than we did, because they were exposed to it.

• 31:31David Senra?

  If I wanted to connect to the Internet, it would have been easier for me to get into my car and drive over to the University of Washington than to try to get on the Internet at Microsoft." And again, I want to make sure, like, I'm being clear here, there's not a single reason that Microsoft missed the Internet. There's a collection of them, and here's a couple, there's two more examples of this, which I've already covered, I guess, one of which I've already covered. "Should Microsoft have been smarter about understanding these overall trends? Well, yeah, they probably should have been. However, it's really easy to get tunnel vision on something you're focusing on." So that's a quote from Glaser. He's saying, "Yeah, I understand, I tried to explain to them, but I understand why they missed it.

• 32:14David Senra?

  It's because Gates preached being focused, it's just we were focused on the wrong thing." And then part of this had to do with ignorance combined with arrogance. That they're used to, they, a quote, a motto at Microsoft at the time was like, "We set the standard." So it's saying like, they took one look at the internet, realized it's not an environment where we were going to be able to control. So Microsoft chose to ignore it, partly out of ignorance and partly out of arrogance. Another reason is they were focused on competitors. He was worried about all these other people trying to take some revenue away from Microsoft. And again, really, the lesson here is that the threat usually comes not from known competitors, but from a new company. Gates had nothing to fear from the merger of Novell and WordPerfect.

• 32:58David Senra?

  The real threat would come from Netscape, a company that Microsoft took little notice of until, little notice of until it was almost too late. So let's go back to the prehistory, the beginning of Netscape, because I think it's very interesting. It's also going to tie into this idea, this new growth theory. And new growth theory is, it's talked about a lot in that book, The New New Thing, the Silicon Valley Story, written by Michael Lewis. I'm just going to read one, two sentences from it, give you an idea. "New growth theory argued that wealth came from the human imagination. Wealth wasn't chiefly having more of old things, it was having entirely new things." And it also is tied to the fact that human desires are unlimited, so there's always opportunity for new companies to fulfill that desire. Okay? There's more in the book and more in the podcast, if you're interested. So it says, "Jim Clark sent an email to 22-year-old Mark Andreessen, whom he had found while clicking

• 33:43David Senra?

  through a series of mosaic pages on the internet." And this is what he wrote, "Any way that we might be able to collaborate would be of interest to me." In his email, Clark explained that he was thinking of starting a new company and wanted to kick around some ideas. Could they meet and talk? At the time, Clark knew next to nothing about the internet or mosaic, but he had heard of Andreessen and his work. And Andreessen had heard of Clark. In fact, he had been involved in an effort by IBM to take over Clark's turf. In 1990, while he was a student at the university, Andreessen worked for two semesters for IBM on a project to develop 3D graphics with the intent of wrestling the market from Silicon Graphics, which was Clark's company at the time, right? IBM's product turned out to be slower and more expensive than the machines produced

• 34:28David Senra?

  by Silicon Graphics, and Andreessen returned to University of Illinois to complete his undergraduate degree." This is another example of more companies copying each other instead of creating something new, right? So going back to the prehistory of Netscape. For the next month, they exchanged emails about the kind of company they should start. One possibility to discuss was an online network for the game company Nintendo. Andreessen even wrote a white paper outlining for the project. He also suggested a company built around Mosaic. This is such an important sentence. Though he wasn't sure about the future of the browser, this is a quote from Andreessen. The internet was a toy then. There's that word again, toy. Just like, was it last week? On the Lewis B.

• 35:10David Senra?

  Mayer, the podcast about the early days of the movie industry. They're, all these companies are making a lot of money with silent films. And they thought of the addition of sound to films as nothing more than a novelty, nothing more than a toy. But when you hear that word, toy, that could be the foundation for entirely new industries. And what was very interesting is even though he already developed Mosaic browser at the time, he was, Mark Andreessen, a young version of Mark Andreessen, was still getting confused by hype, which is very, you know, we are naturally, it's, we have a biological imperative to copy those around us. We have to be aware of that. So he says, this is when, this is now a quote from Andreessen, this is when the whole interactive TV thing was peaking. One of those frenzies the industry indulges in when it loses sight of what's happening in the real world.

• 35:54David Senra?

  So I wasn't sure about the browser. So what is he saying? He's saying, I'm getting, I'm getting confused by hype. Big companies are saying the network TV is the next new thing, right? But college students and nerds are making the internet grow quietly. So if we're ever in a situation where we have, okay, large people, large companies and large media saying this is next, this is next, and it's in direct conflict with what nerdy or outlier people are doing, there's a more chance that you have to bet on passion. The people that were in the early days of the internet were extremely passionate, way more passionate than the large companies just trying to bank and trying to get an extra $1 billion or $2 billion or $10 billion of revenue by making your TV slightly more functional. So eventually Andreessen and Clark said, okay,

• 36:38David Senra?

  we're going to go all in on Mosaic. On Tuesday, April 5th, Clark and Andreessen formed Mosaic Communications Corporation. Now, at the exact same day, or day before, on April 4th, two events occurred on the opposite side of the country, right? That shows Microsoft was still wavering as to the course they would chart. Bill Gates and his top managers met for an internet briefing, right? So we have April 4th, Bill Gates and his managers are going to talk about, hey, what's this internet thing? So they're having an offsite. April 5th, Jim Clark and Marc Andreessen found Mosaic Communications. They already have the idea of a product. They can't take the same code because Andreessen made it at University of Illinois. So they have to take the same idea and rewrite it. But they knew what they were going to do, right?

• 37:20David Senra?

  And then the second thing, which is shows how distracted Microsoft is. In New York City, the Penguin Group, the publisher, announced that it had purchased the rights to a book written by Bill Gates about the information highway. The entire book, it's going to be published, I think, in 1997, right? Maybe 1998. It never mentions the internet. So how would I summarize what I just told you? Big companies waiver, small teams focus. Big companies waiver, small teams focus. So there's also something in the book that was surprising, that illustrates this idea that history doesn't repeat, human nature does. There's this company that Elon Musk is starting to build now. Maybe it's already being built. I think it's within, inside of SpaceX. It's called Starlink.

• 38:04David Senra?

  It's this idea, let's give everybody internet access all over the globe, 24/7, through satellites that are in low Earth orbit. Bill Gates tried to do the same thing in the 1990s. Gates and McCall had been working on a celestial information highway that would bring video, voice, and data transmissions to millions of people in the most remote parts of the world using satellites in low Earth orbits. That was just surprising. Another tangent I want to take because I love I did a podcast on this guy. He's, I still didn't even understand him. His, his intense curiosity is just beyond my understanding. And I should, I should read another biography on him. It was Leonardo da Vinci. I think his founder's number 15, if I remember correctly. The book by Walter, I think it's this giant.

• 38:45David Senra?

  I should, I, I will. I'll find another biography and read because he's such a fascinating person. But Gates is also at this time that he's fighting all these battles on all these fronts. He spends like $30 million buying one of these notebooks from, of Da Vinci's. So let me read this because this is fascinating. Gates bought the Codex Hammer, a 72-page manuscript of Leonardo da Vinci's diagrams and notes. He paid $30 million. Leonardo da Vinci was one of Gates' personal heroes. Remember Gates was obsessed. He's doing exactly what you and I are doing right now. He learned from biographies over and over again. He's read everything. And so one of the people that he studied from history, he studied almost all, all the main people in history.

• 39:29David Senra?

  It's Leonardo da Vinci. Gates greatly admired his scientific genius and vision. He had known the history of the codex, which is Latin for book or bound manuscript, for some time. And he told his friends that if it ever became available, he planned to buy it. The codex contains Leonardo's scientific thoughts and predictions and includes more than 300 illustrations. The major theme of the manuscript is the behavior of water, but it also includes Leonardo's thoughts on many other topics, including astronomy, geology, and meteorology. It offers advice on flood control, dams and canals. The manuscript predicts the invention of the steam engine and the submarine, and explains the presence of marine shells and fossils on mountains and plains far from the sea. It also explains why waves curl and the sky is blue.

• 40:13David Senra?

  Leonardo wrote the text of the manuscript backwards. This guy is so, he's so bizarre, and I mean that in the greatest, the most positive aspect ever. Leonardo wrote the text of the manuscript backwards, apparently to disguise his theories. And thus it is only legible when read in a mirror. The notes were composed between 1508 and 1510, when he was almost 60 years old. So we're about to see a complete 180 shift in Gates' opinion of the Internet. He's gonna realize, not only does he realize how important it is, he completely, and you have to give him props for this, like, he takes a giant company and completely changes it and turns it, like, turning this giant battleship and completely focuses on the Internet. Before I get to that point, this is just, this is whatever I'm saying, this is one

• 40:56David Senra?

  of the funniest stories in the book, okay? So Gates is obsessed, remember, he talks about in hard drive, like, he thought about game theory, like, if I knock out my competitors early, there'll be fewer competitors later on and all, I can dominate more. He's a Genghis Khan character, that's just the way I would describe him. And so this is just really, really funny, when you think about how Gates spends his time and how fanatically competitive he was. For years, Gates had Philippe Kahn in his sights. In the mid 1980s, Kahn's company was, created this product called Turbo Pascal. When Turbo Pascal was blowing away Microsoft's competing product, Gates held meetings that

• 41:38David Senra?

  became known around Microsoft as Borlin War Councils, because the name of the company Kahn had at the time was Borlin, okay? So he's holding these meetings, they're known as Borlin War Councils, during which the staff plotted how to beat Philippe Kahn. Gates reportedly walked into one such meeting, threw Kahn's picture down on a table, and said, "How can I get rid of this guy?" A product group at Microsoft passed out T-shirts that read, "Delete Philippe." Now, this is the craziest part, and the part that just I found extremely humorous. Kahn recalled that he once found Gates at an industry conference in the late 1980s, sitting alone in a corner, looking at a photograph in his hands.

• 42:23David Senra?

  "It was a picture of me," said Kahn. I don't even know, I don't know what to say there. All right, I'm gonna move on, that just struck me as wild. So, Microsoft, at this point in the book, they're like, okay, we gotta go all in on this. They try to buy Netscape, they say no, then they try to buy, I think, a percentage of Netscape. So this is Jim Clark's response to Microsoft offering to buy 20% of the company. And he said, "Jim Clark added that the offer was nothing more than an attempt by Microsoft to try to control the internet as it did with the desktop. It is not in Microsoft's bones to cooperate with other companies," he said. And even though they wasted a few years, several millions of dollars, they were distracted by a bunch of other stuff, you have to, this is where Gates is realizing, okay, I'm completely

• 43:06David Senra?

  focused on the internet, and this is where he fixes the mistake. And he does something smart, they talk about in the book, that he keeps a list of the mistakes. This is way before the internet, by the way. But there's a series of missteps that Microsoft had done in its 15 or 17-year history up until this point, and so Gates would keep a list of the mistakes, and he'd look at it constantly to remind himself. I thought that was really interesting. So this is Gates, this has become like a pretty famous memo. So it says, "Gates sent a memo to his executive staff to signal that he had finally set his watch to internet time. Microsoft was about to become a very different company. In the memo titled 'The Internet Title Wave,' Gates wrote, 'I have gone through several stages of increasing my views on the internet's importance,' he wrote. Now I assign it the highest level of importance."

• 43:51David Senra?

  So I'm going to read an excerpt from the memo. "I want to make clear that our focus on the internet is critical to every part of our business. The internet is the most important single development to come along since the IBM PC was first introduced in 1981. It is even more important than the arrival of the graphical user interface. The PC analogy is apt for many reasons. The PC wasn't perfect. Aspects of the PC were arbitrary or even poor. However, a phenomenon..." That's a really good observation by him, because that's how you describe the early days of the internet, right? "However, a phenomenon had grew up around the IBM PC that made it a key element of everything that would happen in the next 15 years." This is the most important part of the memo, in my opinion.

• 44:34David Senra?

  "Companies that tried to fight the PC standard often had good reasons for doing so, but they failed because the phenomenon overcame any weakness that resistors identified." I want to read that to you again, because I think it's so important. "Companies that tried," and it's not specifically about the PC, obviously, we're using this as a metaphor for many other things. "Companies that tried to fight the PC standard often had good reasons for doing so, but they failed because the phenomenon overcame any weakness that resistors identified."

• 45:07David Senra?

  We're almost at the end here. This was just hilarious. Read, I know myself as read biographies, but don't ignore the kids. A lot of this is talked about, the changes in his personal life. I think there's an entire chapter based on like him being a bachelor and then eventually getting married. I'm not very interested in that. But this says, "Hoping to plant the marriage seed in Bill's mind, she invited Lotus founder Mitch Kapoor, his wife, and their three-year-old baby for a visit. Gates totally ignored the child, preferring to keep his nose on a biography of Henry Ford instead." So read biographies. It's not his kid, so it's a little different, but you know, not at the expense of paying attention to the children. And finally, this is where I'll close, bringing everything full circle. Back in 1990, Bill Joy, one of Sun's founders, had predicted that by 1997, a wonderful new

• 45:52David Senra?

  technology would transform the computer industry and that it would be the undoing of Microsoft's dominance. Joy was right about the technology, but wrong about Microsoft. The company born of the personal computer revolution had executed in an amazing turnabout in response to the next great upheaval, the internet. Like IBM before it, Microsoft could have been left behind. But driven by Bill Gates, whose burning desire to win and fear of failure compel him not only to beat his competitors, but to destroy them, Microsoft's dominance seems secure for a long time to come. And that is where I'll leave it. If you want the full story, read the book.

• 46:32David Senra?

  I would have to say, this is more like a partial sequel to the other book, to Hard Drive. So if you're only going to read one book, I would definitely read Hard Drive over this book. If you read Hard Drive and you want more, then I would read this book. But I would not read this book before the first one. Hard Drive is absolutely fantastic. This book is very different. It's shorter. Again, I was just much more, I think Hard Drive's the better book. There is still interesting things to learn in Overdrive, but I can't recommend Hard Drive enough. So if you're looking for a book, and if you want to buy either of these books and you want to support the podcast at the same time, there's a link in the show notes. It's available to your podcast player. It's also available at founderspodcast.com. If you buy a book using one of those links, you're supporting the podcast at the same time.

• 47:17David Senra?

  If you want to see- Like it's almost like a visual representation of every single book that I've covered for the founders in or for founders in reverse chronological order. You go to amazon.com/shop/founderspodcast and you can see all 100 and if you include the bonus episodes, we're like 181, maybe something like that, 181 books up there. And you can do that. That link's also in the show notes for you as well. And last but not least, a lot of people are finding the podcast because people are buying friends and coworkers gift subscriptions. So if you want to do that, there's an easy way. I leave a link in the show notes as well. You're obviously supporting your friend, but you're supporting the podcast at the same

• 48:01David Senra?

  time if that's something you want to do. There's 174 books down. I know the number's larger, but we're going to go with the episode numbers. 174 books down, 1,000 to go, and I'll talk to you again soon.