WORLD WAR 3.0: Microsoft and Its Enemies
By Ken Auletta
Random House, 436 pages, $27.95
In the greed decade of the 1980s, Chinese warlord Sun Tzu enjoyed popularity in boardrooms and cubicles around the country. Business people who had grown tired of quoting Machiavelli or Cardinal Richelieu loved adapting Sun’s “know your enemy” strategies to business.
At Microsoft Corp. headquarters in Redmond, Wash., nobody needed to read Sun or Machiavelli or Richelieu, because the world’s biggest software company had its own warrior-king in residence: William H. Gates III. And it was Gates’ approach to business — summed up in his favored two-word phrase, “hard core” — that became the driving force for Microsoft’s remarkable climb to dominance and its sharp fall last year at the hands of government anti-trust regulators.
Anyone who thinks business is dull or laden with decorum never studied Gates.
Gates is the one who shattered the tone of a clubby conference of media-industry chief executives with raw aggression toward three main rivals. ” ‘I’m going to destroy three companies: Sun Microsystems, Oracle, and Netscape,’ ” he vowed. Gates’ zeal reportedly prompted one of his underlings to threaten to “cut off Netscape’s air supply.” And even after the government sued in 1998 to stop Microsoft’s monopolistic practices, Gates vowed about competitor Nokia Corp., “If . . . these guys are really at [war] with us . . . we should do the most extreme things we can.”
Even so, Gates manages to retain a Bill Clinton-like resiliency among the American public. People admire and like him even though they might abhor his behind-the-scenes conduct. Gates still routinely ranks as one of the country’s most admired business leaders, and his personal popularity remains high despite a brutal, two-year monopoly trial. Against Gates’ growing reputation as a “hard core” competitor, people still cling to their folk-hero notions of Gates as the Harvard dropout who trounced computer giant IBM and ultimately became the wealthiest person in the country.
The contradictions of Bill Gates are at the core of “World War 3.0: Microsoft and Its Enemies,” by media writer Ken Auletta. The book ostensibly is about the U.S. government’s landmark monopoly lawsuit against Microsoft, the most celebrated anti-trust case since the court-ordered bustup of John D. Rockefeller’s Standard Oil.
But Auletta, since 1992 the author of the “Annals of Communication” feature for The New Yorker, goes far beyond covering the trial. With countless high-level interviews, keen insight and a just-the-facts journalistic style, Auletta explores Microsoft’s decline from a world-conquering software giant to an isolated, embittered and enfeebled also-ran in the age of information explosion.
It’s not a pretty sight.
The end result can be summed up with the title of Auletta’s final chapter: “Microsoft Loses Even If It Wins.” By the end, the trial result seems almost irrelevant. Gates has failed in his mission to insulate his company from the costly and distracting legal tangle. Competitors are circling, and potential partners are wary of teaming with a company that will be hamstrung by legal fights for years to come.
In the new world of Palm Pilots and broadband Internet access, of megamergers like the America Online-Time Warner deal, and of anti-Microsoft alliances engineered by rivals at Sun and AOL, Microsoft is no longer the mighty monopolist. As U.S. District Judge Thomas Penfield Jackson orders a breakup of Microsoft that will split its Windows operating system from the rest of the company, Microsoft’s future in this hotly competitive marketplace seems very much in doubt.
Still, the heart of the story-and the chief path toward Microsoft’s morass-is the trial itself.
Auletta describes in detail the miscalculations that led Microsoft to go to trial rather than settle at the outset. He explains why the legal team led by Microsoft lawyer Bill Neukom got trounced by the cunning and the courtroom theatrics of the Justice Department’s hired gun, David Boies, a player who became well known as Al Gore’s advocate during the presidential postelection fight.
And, most revealingly, Auletta shows that Microsoft’s gravest miscalculation may have been its underestimation of Jackson. The judge knew little about software at the start, but he did know how to steer a trial to the result he wanted. He nimbly engineered the end game-breaking his ruling into virtually incontestable findings of fact and the more vulnerable findings of law-in a way that seemed specifically designed to thwart Microsoft’s efforts to ultimately win the case on appeal.
The trial is at once the book’s reason for being and also at times its weakest link. As Auletta correctly notes, anti-trust trials rarely have Perry Mason moments, and Auletta sometimes finds it difficult to avoid a simple serial recap of the trial’s witness-by-witness exposition of the government’s Microsoft monopoly story.
Auletta describes how Jackson and the press sometimes are lulled to sleep by the proceedings. Unfortunately, his recap can also have that effect on the reader, no matter how concisely he writes. These dull moments are the exception, though, in a narrative that has some masterful character description and moments of drama. Auletta captures the hubris and “flabby lawyering” that led Neukom and trial lawyer John Warden to blow their case by focusing far too narrowly on their dubious interpretation of “facts.” Boies emerges as a shrewd tactician and spinner, who wins mainly by attacking the credibility of Gates and Microsoft.
The crux of the trial was the government’s contention that Microsoft tried to leverage its monopoly in the software that runs personal computers into domination over other markets, especially the Internet. To defeat Internet rival Netscape, Microsoft gave away its Internet browser for free. Yet Microsoft insisted all along that Netscape was not in its cross hairs.
Auletta wonders, provocatively, whether Microsoft might have fared better at trial had it admitted that it was out to hurt Netscape. “They might have said: What’s wrong with that? That’s the competitive marketplace at work . . . We were not about to act as IBM once did and become complacent. We’re fighters.” Instead, Microsoft denied that its actions were compelled by its lust for dominance. The trial probably was lost in Gates’ videotaped deposition, dolloped by Boies piecemeal throughout the proceedings. Rocking in his chair, reflexively sipping a soft drink, the famously competitive Gates petulantly dodged questions while claiming he was motivated solely by his desire to serve customers and to save Microsoft from impending doom.
Still, Auletta is best when he gets outside the courtroom and describes the behind-the-scenes maneuvering in the trial and in the broader business world. In this, he exhibits the same skill that made best sellers of his book “Three Blind Mice: How the TV Networks Lost Their Way” and his take on New York City’s financial debacle of the 1970s, “The Streets Were Paved With Gold.”
Auletta’s best work on “World War 3.0″ (the title is a pun on an early version of Windows) is his probing reporting of the settlement talks mediated by U.S. Appeals Judge Richard Posner in Chicago. Auletta captures the excruciating sense of frustration at Microsoft and the Justice Department when talks break down at the last moment, with the two sides ” Ofive words apart,’ ” because state attorneys general who also were party to the lawsuit reject the deal.
Auletta also develops a knowing take on Microsoft’s rivals. America Online founder and CEO Steve Case is exposed as a hypocrite when he quickly changes from an advocate for open competition to a protector of the ruling class the moment he forges a merger with media giant Time Warner. And Sun Microsystems CEO Scott McNealy talks a good free-market game while cleverly deploying government trust-busters to beat Microsoft in the courts when he can’t match it in the marketplace.
Most importantly, Auletta gets a bead on Gates. Whether it is Gates fulminating at a meeting of business leaders in Davos, Switzerland, or his self-absorbed habit of serving himself a Coke and ignoring the needs of visitors to his office, or the go-for-the-throat rallying cries in his voluminous e-mails, Auletta seems to understand the essence of Gates. In Auletta’s hands, the master of Microsoft emerges as a hypercompetitive, untamable, adolescent force of nature in the pursuit of domination and economic profit.
Microsoft’s misdeeds are the predictable result of Gates’ approach to business and life, Auletta concludes:
“[P]reach paranoia, and inevitably employees may overreact and take radical measures because the company’s very existence feels endangered. Couple the paranoia with youth, and you have a recipe for potentially extreme behavior.”
In the library of Gates’ famously huge home near Microsoft’s headquarters, he has inscribed a quote from one of his favorite books, “The Great Gatsby”: “He had come a long way to this blue lawn and his dream must have seemed so close he could hardly fail to grasp it.”
Auletta chooses a Gatsby quote, too, to sum up his book. It’s about the characters Tom and Daisy Buchanan, and it’s probably not one Gates would like:
” ` They were careless people, Tom and Daisy — they smashed up things and creatures and then retreated back into their money or their vast carelessness.’ “
Gates still has plenty of money. But given all the troubles he has ahead, he won’t soon have the luxury of retreating into carelessness, or anywhere else.
