Microsoft Volume II

**Ben Gilbert** (0:00)
I'm a little hoarse today, so hopefully we don't have to do a lot of talking.

**David Rosenthal** (0:06)
Good luck with that.

**Ben Gilbert** (0:09)
All right, let's do this. welcome to season 14, episode 6, the season finale of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

**David Rosenthal** (0:37)
I'm David Rosenthal.

**Ben Gilbert** (0:38)
We are your hosts. Well, listeners, here we are, Microsoft Volume 2 at long last. After the ancient history of Volume 1, we now get to the stuff that you grew up with. The Internet, Windows XP, Xbox, the browser, search, and mobile. And in this era, Microsoft had a lot of the right ideas, with a lot of the wrong timing and execution on everything from the Zune to Bing. But despite that, from 1995, where we start our story to 2014, where we will end this episode, Microsoft grew their annual revenue from 6 billion to 80 billion. They became a phenomenally successful company and really cracked the code on selling enterprise software. I began the research thinking, our part one episode would be about the rise and this episode would be about the fall. Cultural problems, failed consumer products, antitrust. But it's really not that straightforward. And after spending months unpacking it all, I actually don't think that's the right framing anyway. And on Microsoft's 1998 antitrust suit against the Department of Justice, everyone knows of this case, but most people really have no idea what actually happened. Did Microsoft lose? Well, not really. But the answer is nuanced. Finally today, we dive into it all. Oh, and listeners, we have just one announcement for you here today.

**David Rosenthal** (2:07)
Yes.

**Ben Gilbert** (2:08)
We told you before that September 10th, we are doing the biggest thing in Acquired's history, and we're doing it in the city of San Francisco.

**David Rosenthal** (2:15)
We're doing a live Acquired show at the Chase Center, which is the brand-new basketball arena here in San Francisco where the Warriors play. We're putting it on with our good friends at JP. Morgan Payments, and as you can imagine, they know a few people at the Chase Center.

**Ben Gilbert** (2:29)
Yeah. It'll be a night to remember with a few different phases of the evening. There's going to be lots of opportunities to meet other Acquired listeners from around the world, and a big show like this deserves a big special guest, and that special guest is the one and only Mark Zuckerberg. In addition to being the central figure in some of the greatest acquisitions of all time that we have covered right here on Acquired, Mark and Meta are also playing a big role in defining the next decade of computing with AI too. It's shaping up to be a total blast. We really hope you can join us.

**David Rosenthal** (3:03)
Yeah. Tickets will be available soon, and you can sign up at acquired.fm slash SF to get emailed as soon as they go live.

**Ben Gilbert** (3:10)
We're pumped. We'll see you there. This show is not investment advice. David and I may have investments in the companies that we discuss, and so do all of you if you own index funds, and this show is for informational and entertainment purposes only. Okay, David, the middle chapter of Microsoft.

**David Rosenthal** (3:27)
The middle chapter, indeed, and boy is there a lot to discuss. Ben, you covered this in your intro, but I think everybody knows the narrative about what happened to Microsoft between call it 1995 and 2014 when Satya took over. There's even a quote from Satya himself in the very first paragraph of the book that he wrote in 2017 called Hit Refresh, which, I mean, that title kind of gives it away right there. He writes, I joined Microsoft in 1992 because I wanted to work for a company filled with people who believed they were on a mission to change the world. But after years of out distancing all our competitors, something was changing and not for the better. Innovation was being replaced by bureaucracy. Teamwork was being replaced by internal politics. And we were falling behind. And then he references the famous gun pointing org chart by cartoonist and software engineer, Manu Cornet, that probably listeners, many of you are familiar with. We will link to that in the show notes. And you can sum this kind of whole narrative up as Microsoft was winning and then it sucked for a long time. And then it is now winning again. And that's all thanks to Satya.
And the question we sort of asked as we were doing our research was, is this true? And what we ended up learning from the literally dozens and dozens of people that we talked to surprised us a lot. And I think we'll probably surprise listeners too.