The Incompetent Billionaire

How Bill Gates fumbled the future of Microsoft
By David Bank

There's an expression used by parents on their smart aleck kids -- "if you're so smart, how come you aren't rich?," that repeatedly comes to mind while reading David Bank's new book How Bill Gates Fumbled the Future of Microsoft.

Accusing one of world's greatest technology visionaries - and by far its richest self-made man -- of fumbling, is a daunting challenge. The burden of proof on the accuser, a burden Bank's fails to discharge in this otherwise insightful and well-researched work.

The charge is that between 1997 and 2000, Gates blew a unique opportunity to establish an independent Internet platform for developers using open standards - separate from Windows - which would operate on competing systems.

Set loose from obsolete and bulky Windows code, this new platform would give Microsoft programmers an opportunity to take on Internet service rivals like AOL by competing for clients on the software's merits, rather than relying on its operating system dominance to coral users.

"At the moment of his greatest opportunity, Gates chose to retrench," writes Bank. "Rather than rising to the challenges of the new Internet model, he chose to resist them. Rather than embracing the new wave of innovation, he sought to slow it down to preserve Microsoft's old dominance."

Far from its reputation as a nimble competitor Banks paints a picture of Microsoft as a growing, lumbering bureaucracy loaded with infighting. Numerous splits emerge such as those between "Windows hawks" and Internet doves, and between "Bill guys" - proteges of Gates -- and "Steve guys" - those loyal to Microsoft CEO Steve Balmer.

Banks portrays Gates as increasingly out of touch with Microsoft programming hotshots eager to avoid contact with the declining king, who they fear will meddle in software development and stifle innovation.

According to Banks, Gates's relinquishment of the CEO spot to concentrate on software development was really a kick upstairs, and one of the company's best managed public relations coups.

Banks who covers Microsoft for the Wall Street Journal draws much of his evidence from E-mail correspondence made public after the company's anti-trust trial, and relies extensively on interviews with -often bitter -ex-employees.

The charges are serious, and difficult to prove. The problem is that Windows is Microsoft's meal ticket. Not only is the operating system a cash cow, its dominance has consistently allowed the company to crush competitors such as Netscape, Borland, and Word Perfect whose programs must integrate or die.

Banks is based in Southern California, a region littered with Microsoft detractors, competitors and dead bodies the company left behind on its ascent, and their opinions heavily influenced his work.

Bank's argument is centered on the prediction that the software world is heading away from the closed standards of the 1980s and 1990s to an open environment where freeware such as the Linux operating system and Java sever-based programs prevail. In that world the Internet browser will increasingly dominate as the main user interface.

If that happens, then Windows will be increasingly relegated to what Netscape co-founder once famously called "a partially debugged set of device drivers" Its second famous cash cow Office will be also be challenged as free word processing and spreadsheet alternatives make themselves available via the Net.

But these predictions are a pipe dream in the short term. Linux is basically an upgraded version of Unix, which has been around for decades. Most people don't have the time or the inclination to learn how to install and use it, even if it is free.

It is Gates who has consistently shown a more mature understanding of the Internet's potential. Even before the NASDAQ technology bubble, Gates warned in his book The Road Ahead that most people overestimate the Internet's potential over the next two years, and underestimate its effect in the next ten.

A go-slow Internet strategy has proven to be correct. Sure Microsoft doesn't dominate every software category such as handsets and other portable devices. Nor should it expect to. But for now and the foreseeable future the company dominates the desktop, which is where the action remains.

As for competitors such as Sun and Oracle -- in computers the threat always comes from below. And as Moore's law makes its effects felt with microprocessors, communications power and memory getting cheaper, both are in far more immediate danger from PCs than the reverse.

But while Bank far from proves his case-- and even tacitly admits it with a prediction that Gates will prevail in the end -- his work is a good account of Microsoft's Internet dilemma during a crucial stage in its evolution.

Peter Diekmeyer is a Montreal-based business writer. He can be reached at peter@peterdiekmeyer.com

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