Microsoft is a classic American story. If you want to know why Microsoft is the best in some people’s minds, it helps to start with that. But two people can look at the same set of facts about Microsoft and come to very different conclusions. That makes Microsoft interesting to follow, but at times confounding.
Microsoft’s story is basically the story of a string of successes, in sequence. The details matter, but in a nutshell, people’s opinion about Microsoft is generally shaped by their opinion about that success.
Microsoft: An American story
Microsoft is the story of two college dropouts, Bill Gates and Paul Allen, starting a business writing computer software. They saw a new industry forming, positioned themselves to be in the right place at the right time, and built a market-leading computer language in 1975. As other computers came to market, Microsoft produced versions for those computers as well.
In 1980, IBM approached Microsoft wanting two things: their Basic computer language they sold to everyone else, and an operating system. That in itself is a long story, but Microsoft ended up providing IBM with both. And by 1981, Gates and Allen were millionaires. Allen was 28. Gates was 26.
Microsoft licensed DOS to IBM but also had the foresight to license it to other companies like Compaq, which led to the creation of the PC clone market and made MS-DOS the most popular computer operating system of the 1980s and early 1990s. Later, Microsoft built a graphical user interface, Windows, that ran on top of DOS, giving PCs a Mac-like capability. Microsoft also created a GUI-based word processor and spreadsheet, called Word and Excel, for Windows. Those became the basis for Office, which also became a bestseller. And for a time, Internet Explorer was the most popular web browser, with a staggering 95 percent market share in 2004.
Bill Gates eventually became the richest man in the world. Paul Allen left Microsoft in 1983, but remained a serial entrepreneur most of his life.
Is this good or bad?
For someone who believes in capitalism, especially unfettered capitalism, this is the best thing about Microsoft. I didn’t point out the company’s missteps up there, but generally speaking, when they misstepped, they revised the product and eventually got it right. And they were right often enough to make billions of dollars. Failing enough times to get it right is admirable, especially if you do it while fighting off competitors.
To people of a certain persuasion, that’s why Microsoft is the best. Rugged individualism. Never back down.
The same reason Microsoft is the best is the reason Microsoft is the worst
So why do so many people not like Microsoft? Same reason. Just a different philosophy.
In the United States, it is legal to have a monopoly. We actually have lots of them. Most utility companies in the United States are monopolies. What’s illegal is to use your monopoly in one area to try to get a monopoly in another area. There is absolutely no question Microsoft did that, several times. If you think that law is dumb, you admire Microsoft. If you don’t like them, you probably point to that law.
And the people who had to deal with not-ready Microsoft products in prime time tend to be a bit less sympathetic of it. Never giving up is admirable. Having to pay for the privilege to find things wrong with your products is less so.
This is the reason that the company tends to get extreme reactions out of people. To some extent, the market has defanged and declawed Microsoft, so it’s no longer the brutal monopolist it once was. You can’t compete with Microsoft using their strategy, but Apple and Google both found other strategies for competing with them.
But being the most popular means they’re best, right?
It’s not usually the best product that wins the market, but rather, a cheap-enough, good-enough product, especially if that product arrives fairly early.
And Microsoft is the most popular in certain categories. Certainly not all of them. Windows is the most popular operating system for desktop computers. It’s also an extremely popular server operating system, though it’s not as dominant there, and it’s a little bit harder to measure server market share. Exchange is an extremely popular mail server, and Office remains an extremely popular software product.
Markets grow in a predictable cycle, and it tends to come in waves. Once you achieve 18% market penetration, there’s much less resistance to get the next 33 percent. The 33 percent after that probably has less resistance still. It’s only that last 16 percent, the laggards, that will probably give you a fight.
That’s what happened to Microsoft in the 1980s. The IBM PC came into a fragmented market with no clear leader. Apple was the most popular computer in schools. Radio Shack and Atari were the most popular in homes. In business, a myriad of companies selling somewhat-compatible computers running the CP/M operating system dominated, but no single company was the undisputed thing to buy.
It didn’t take long for IBM to get 18 percent of the business market, and take Microsoft along with it. Within a few years, IBM and IBM-compatible computers had the majority there.
The home market was tougher, because even clone PCs were expensive at first. That started changing at mid-decade when prices came down. Microsoft had a significant presence in homes by the late 1980s, but clear dominance didn’t come until the 90s.
The rise of Windows
In the mid 1980s, it looked like Microsoft’s days might be numbered, or at least, Microsoft might have to make significant changes. It started with the Mac and its graphical user interface in 1984, but a year later, Atari and Commodore came out with their own systems that also used mice and icons. None of them used an Intel CPU or Microsoft operating system.
Microsoft released Windows 1.0 in 1985, which brought mice and icons to PCs. It didn’t catch on. PCs that were capable of running it well were too expensive, and if you had that kind of money, one of the competing standards was better anyway, so you’d buy that and some nice software.
By 1990, PC hardware had caught up to a point where it could hold its own with other standards, and Windows had grown up to a point where it could hold its own as well. The market fell like dominoes over the course of the next five years. But Windows was demonstrably less capable than some of the technologies it displaced. It reached approximate feature parity around 2001, with Windows XP. But XP’s quality came years after Microsoft had already achieved market dominance.
Microsoft is anything but inept. It’s nearly a trillion-dollar company, and it runs that enterprise using its own software. Its products are capable.
The Department of Justice’s antitrust actions in the late 90s tamed Microsoft to a large extent. Microsoft saw a world coming where the web browser, rather than the OS, would be the focus. Microsoft was trying to stop Google from happening. The DOJ’s actions allowed Apple to recover and catch up, and allowed Google to come into being. A free-market type would point at the current situation and say the market sorted out the problem. That’s true, the market did sort out the problem. But it had help.
The Microsoft of today, under Satya Nadella, is reformed. It doesn’t act like the Gates- or Ballmer-era Microsoft. And that’s a good thing.