It was a sunny and pleasant San Diego morning in May 1998 when Tom Fragala arrived at the University of San Diego, a private Catholic institution not far from the Mexican border. Fragala, an entrepreneur and former soccer player, was there to attend his then girlfriend’s graduation. It was to be an outdoor event, and chairs were arranged in three orderly sections. Fragala made his way to the section on stage right and picked a seat in the second row. He took casual note of the VIP sign blocking off the first row.
As he soaked up the sunshine, waiting for the festivities to start, a man and a woman walked up to the VIP row. The man, who looked to be in his forties, was in a business suit. The woman wore a floral dress and sun hat that made Fragala think of Julia Roberts in Pretty Woman. The couple sat down, with the man taking the chair directly in front of Fragala. It took him a moment to realize that he was sitting behind Bill Gates and Melinda French Gates. That month, the Department of Justice, the top U.S. antitrust regulator, and 20 states had filed suit against Microsoft, accusing the technology giant of using its dominance in one market to prop up its budding business in another, which it alleged was an abuse of monopoly power. By then, Gates was regularly pilloried in the press as a twentieth-century John D. Rockefeller Sr., the oil monopolist of the Gilded Age. It was not a good time for the Microsoft cofounder.
The moment Gates sat down, he cracked open a thick, hardcover book he appeared to be in the middle of reading. Fragala estimated it might weigh a few pounds. For the next two hours or so, as the graduation ceremony started, amid the pomp and applause, as diplomas were handed out, Gates never once looked up, barely moving except to cross and uncross his legs. About 15 minutes in, Fragala began to wonder: What could Gates be reading that so engrossed him? He tried to peek over his shoulder but only caught sight of the splintered plastic ends of his glasses. He noticed a little dandruff, but no luck with the book title. Fragala deliberately dropped his program on the floor, hoping to catch a view of the book’s spine. No dice: Gates had removed the dust jacket.
About 90 minutes into the festivities, a young man, diploma in hand, came up to the couple. Clearly, they were there for his graduation. Gates remained absorbed in his book. French Gates, who had been following the program closely, her posture erect, stood up to greet and congratulate the young man. As she did, she elbowed her husband in a practiced move. Startled, Gates too stood up, hastily resting the book on the ground against the leg of his chair. Fragala saw his chance. He bent down quickly to peek and finally saw the title. Gates was reading Titan: The Life of John D. Rockefeller, Sr., by Ron Chernow. It took Fragala a moment to recognize the irony.
Chernow’s exhaustive and exquisitely detailed biography of Rockefeller, running at more than 800 pages, had arrived in bookstores in May 1998, just as the furor about Microsoft’s monopolistic behavior had reached its crescendo. The book was notable not only for its heft but for its “eerie timeliness,” as one reviewer put it.1 Roughly a century earlier, the U.S. government had attacked Standard Oil, the company built by Rockefeller that at one point controlled 90 percent of the oil refining market, for engaging in monopolistic practices. The high-stakes trial, one of the most riveting of that era, had led in 1911 to the breakup of Standard Oil into 34 smaller entities. The trial had demonized Rockefeller, one of a handful of the Gilded Age’s robber barons—so called because of their ruthless business practices and their willingness to stop at nothing, including bribing and flouting the law, to promote the interests of the massive companies they had created.
Comparisons between Gates and Rockefeller had existed for at least a decade, but they never got much traction. Mitch Kapor, the founder of Lotus Development Corporation, was one of the earliest to compare the Microsoft cofounder to the nineteenth-century oil titan. Kapor had railed against Gates since the 1980s, after Gates muscled Lotus 1-2-3, along with WordPerfect and other applications, out of the market. In 1984, Microsoft had made a bid to buy Lotus, whose spreadsheet and software programs led the market at the time. Kapor turned it down. Four years later, he told The New York Times that Gates was “an empire builder, someone who wants to build the Standard Oil of computing.”2 In the same article, Gates shot back at Kapor, calling him a “completely nontechnical guy who knows enough to sound technical.”
By the mid-1990s, reporters and columnists had begun writing more frequently about Microsoft’s bullying tactics. In a 1995 essay for The New York Times Magazine entitled “Making Microsoft Safe for Capitalism,” the author James Gleick essentially suggested that Microsoft be broken down.3 Gleick quoted a number of Microsoft’s enemies in the piece, prompting Gates to write a letter in response defending his company and its products, and arguing that the PC industry remained competitive. Gates didn’t see himself as a “grasping monopolist,” but as Microsoft got snagged in the slowly grinding maw of government scrutiny, the comparisons with Rockefeller helped create an easy but resonant narrative of the Microsoft chief executive as a villain.4 The Silicon Valley lawyer Gary Reback, whose clients were among the companies worried about Microsoft’s dominance, gleefully embraced that line of attack. “The only thing J. D. Rockefeller did that Bill Gates hasn’t done,” Reback would tell anyone who cared to listen, “is use dynamite against his competitors!”5 With the trial looming, the idea that Gates was indeed a monopolist of what many had christened the second Gilded Age certainly didn’t hurt the case that lawyers for the Justice Department were making.
The comparison is worth investigating. Rockefeller and Gates were the richest men of their eras. The circumstances of their ascents were similar: Standard Oil floated to the top in the 1880s, when industrial activity was buzzing and humming.6 Microsoft helped set off the personal computing revolution in the 1980s, shaping an industry that was similarly vibrant. Rockefeller was born poor and Gates came from affluence, but both displayed an unerring instinct for business, leveraging developments in science and technology with business acumen in pursuit of profit and scale. Like Rockefeller, who created many of Standard Oil’s corporate practices out of a sense of self-preservation, Gates too was terrified of Microsoft losing its edge.
Between 1870 and 1880, Standard Oil went from being a small company based in Cleveland, Ohio, to conquering more than 90 percent of the petroleum market. Its size not only brought economies of scale but allowed it to secure price concessions from railroads to move its barrels.
Gates, too, had become untamable, according to his critics. Microsoft’s flagship Windows software operated roughly nine out of 10 personal computers, and the company had used its dominance in personal computing software to offer discounts to computer hardware manufacturers. Now, it was parlaying that dominance to control the emerging market for applications and bundling Microsoft’s Internet Explorer browser into every copy of Windows 95 and later versions of the software and displaying it prominently. That allowed its browser to become the preferred way to surf the internet, while strangling Netscape, its fledgling competitor in the browser market. Netscape’s Navigator may have been more popular, but it didn’t have Microsoft’s dominant software platform. At the same time, Gates portrayed the decision as an efficient one that customers could use easily. The strong-arm tactics used by Rockefeller, America’s first billionaire, caught the attention of the public, particularly after a 19-part magazine exposé about the corrupt and unethical practices of Standard Oil by the investigative journalist—called a “muckraker”—Ida Tarbell. Microsoft too was accused of strong-arming competitors and rapacious conduct and called the “Standard Oil of the Information Age.”
Microsoft pushed back on the comparisons. Its practices were not monopolistic, Microsoft argued, because it was defending intellectual property. Unlike petroleum, which was a scarce resource because there was a finite amount of it in the world, there were no limits to IP. How could Gates be controlling a sector where the barriers to entry were so low that anyone with a new idea could patent it and reshape the industry? But the barrage of negative news, spurred by a systematic campaign by Silicon Valley to taint Microsoft’s reputation, found some receptive ears in Washington.
On August 24, 1995, Gates stood onstage with fellow Microsoft executives as “Start Me Up” played in the background. The occasion was the launch of Windows 95, the latest iteration of Microsoft’s software. Gates, dressed in a beige polo shirt, didn’t dance to the guitar riffs of Keith Richards so much as shuffle to them. Steve Ballmer, the president of Microsoft, was less restrained. The company had shelled out several million dollars to the Rolling Stones to use their 1981 hit as part of an extravagant $300 million campaign to drum up enthusiasm for Windows 95. The Empire State Building was lit up in Microsoft’s colors of blue, green, yellow, and red. Jay Leno, the era’s top television host, was recruited to create buzz and cohost the launch with Gates. Jennifer Aniston and Matthew Perry, two of the stars of the 1990s era sitcom Friends, gave the world a tutorial on Windows 95 in a faux episode arranged by Microsoft. The arrival of the software, marketed as consumer friendly and easy to use, created the kind of fervor that has come to symbolize the launch of a new iPhone. Around the world, people lined up to get hold of a copy. It was inescapable. As The New York Times asked, “Haven’t heard of Windows 95? Where have you been hiding?”7 Gates was a rockstar in the business world, inviting the kind of adoration reserved for Hollywood celebrities and sports stars. He may not have looked the part, with his tousled brown hair and suits that never quite fit right, but he was striding down the corridors of corporate America in full mogul mode. Five years earlier, Microsoft had become the first software company in history to cross more than one billion dollars in annual sales. By 1994, Microsoft would make nearly five times as much, dominating the desktop market. Microsoft’s soaring stock had made it the most valuable company in the world, making Gates the youngest billionaire in history to have made his own fortune. He would end 1995 atop the Forbes billionaires list.
Microsoft’s success also transformed Seattle, Gates’s hometown, creating new wealth for thousands of employees and changing the region’s economics. The Seattle that Gates, who was born on October 28, 1955, grew up in was a small city with a tightly knit community that portrayed itself as innovative and forward-thinking. It had a big aerospace industry anchored by Boeing. The Space Needle, a famous landmark, opened in 1962 for Seattle’s World’s Fair. Its futuristic design—the top resembles a UFO—complemented Seattle’s ambitions to become a hub of technology and science. The second of three children, Gates, along with his sisters Kristianne and Libby, grew up with all the accoutrements of an upper-middle-class existence. There were games of tennis, carefree summers spent at vacation homes. His parents were well-known in the local community. His mother, Mary Gates, served on the board of United Way, the charity. His lawyer father, William Gates Sr., was closely involved in civic affairs. As a child, Gates was highly intelligent, and highly argumentative. His older sister, Kristi, once said of him: Bill “didn’t see that he was not normal. He didn’t perceive himself as different because he was so introverted.”8 Gates’s parents thought he was underachieving in school, and when he got into trouble as an 11-year-old, they sent him to see a psychiatrist.9
Gates attended Lakeside, one of Seattle’s most prestigious private schools, where he was introduced to computers at an early age, befriended Allen, and took to programming with an obsession. In Allen’s telling, Gates liked to show people that he was smart.10 He also identified in his friend and business partner an early competitive streak. Whether it was chess, games, or math, Gates hated to lose.
In 1979, he relocated Microsoft’s headquarters from Albuquerque to Seattle. Before moving to the Emerald City, Gates had considered Silicon Valley, but decided against it because he felt that it would be harder to protect business secrets in a small and gossipy community, and hard to retain talent because there would be greater poaching.11 That decision benefited Seattle handsomely, especially after Microsoft’s initial public offering, which created hundreds of millionaires in the city. Unlike Seattle’s old-school wealthy—the Nordstroms, the Weyerhaeusers—the so-called Microsofties stood out for their nonconformity. Many dressed modestly and expressed the view that they embraced technical careers not for the money but for the potential to change the world. “The Microsoft class may well make up the first large group of American millionaires from technical backgrounds,” wrote Timothy Egan in The New York Times in 1992.12 Thousands of newly minted Microsoft millionaires drove such a frenzy of consumption, from houses to horses, that it temporarily threw the Seattle economy off kilter.13 The city has long had a “nerdy DNA,” said Leonard Garfield, director of Seattle’s Museum of History and Industry. Its transition to a largely knowledge-based economy started in the 1980s with Microsoft, but Gates’s influence was generational, because the first wave of Microsoft millionaires went on to create a whole set of subsidiary businesses, attracting more talent to Seattle, according to Garfield. That in turn attracted other technology companies, including Amazon and Expedia, making Seattle one of the fastest growing cities in the United States, with a population of more than 708,000 and median income of $85,654 as of 2021, far above the national median income of $59,611.14
When Robbie Cape joined Microsoft in 1993 as a 23-year-old engineer on the Visual Basic team that was developing a programming language, he quickly picked up on two things. One, Microsoft was centered on individual achievement rather than collaborative work. And two, people at the company, especially young engineers like him, worshiped Gates. Between his junior and senior years at Princeton University, Cape had interned at Microsoft, so the company’s culture wasn’t entirely a surprise when he joined full time. A Canadian who grew up in Montreal, he came to the United States for college and never went back. “I fell head over heels for Microsoft, for the Pacific Northwest, and for Bill and Steve,” he said, referring to Ballmer, a top executive and friend of Gates’s who would later become the company’s chief executive. “Like a lot of young people who joined the company in the 1980s and 1990s, I’d say we deified them,” Cape recalled. “The leaders all wanted to lead just like him. Young people like me wanted to grow up to be just like him. He was a technologist, a visionary, a businessman, and a leader.” Hundreds of starstruck young programmers joined Microsoft because of Gates, known inside the company as “BillG.” Even if they were too far down the ranks to meet him, they hoped to learn at his feet.
Although Microsoft was nearly a 20-year-old company when Cape joined, with about 15,000 employees, its internal culture was very much a reflection of Gates’s relentless, hard-charging attitude. Long known for his competitive streak and his maniacal devotion to work, Gates was notorious for not taking vacations. In Microsoft’s early days, he memorized the license plates of his employees’ cars so that he could keep tabs on when people were coming and going—now a piece of lore woven into the company’s informal history. Many Microsoft meetings would go on for hours without a break, as he drilled down into the minutiae of a product, peppering his engineers with questions. He was prone to expletive-laden fits of rage, often berating colleagues if he didn’t think their work met his exacting standards. There was “definitely a culture at Microsoft of being the smartest person in the room,” Cape said. Now an entrepreneur who helps run two start-ups, one of which is investing in regenerative farming—“I like meat but consider it a vice, so [I’m] trying to find healthier ways to grow and manage livestock,” he said—Cape retains idyllic memories of his time at the company. In his telling, Microsoft was a place with no limits on ambition.
The business culture at Microsoft was “intensely masculine,” said Margaret O’Mara, a historian of Silicon Valley, in an interview. It was called a “frat house,” she said, but was not too different from other tech companies. In its early decades, she said, Microsoft “behaved like an overgrown start-up. Gates was sharp-elbowed, very argumentative, it was all about ‘show us what you’ve got,’ intensely gendered, and the whole company took on the tone of the 20-something young man who was still behaving as though you had to be incredibly aggressive to get a toehold in the market.”
Although that sort of corporate environment has since come to be frowned upon, many say that Gates and Ballmer embodied and normalized that internal culture. That led to Microsoft’s push for what Cape called “excellence, even at a high cost.” As an entry-level worker, Cape only saw Gates from afar, except for a few big meetings, but the company was awash in tales of interactions that more senior executives and team leaders had with Gates, and “the way individuals would end up being almost deposed.” Cape interpreted these secondhand stories as examples of Gates’s push for excellence. Cape ascribed a purity of intent and a nobility to Gates’s mission, whereas many others crumpled under the intense—and sometimes terrifying—scrutiny applied by him. “Compassion was not part of the culture of Microsoft,” he said.
The experience of senior executives who worked more closely with Gates was sometimes different. In one email exchange, a Microsoft executive wrote to another that Gates was being “amazingly, unnecessarily rude.”15 Gates once sent a long email to the developers of a Microsoft program called Movie Maker—a rant, dripping with sarcasm, about his frustration at not being able to download the software. Gates may not have acknowledged it publicly, or even thought about it privately, but stories about his ruthlessness and arrogance were feeding into his growing image as a business bully. To Gates, free markets rewarded competition and innovation, and if a company took its eyes off the ball and stopped improving its products and innovating, it would quickly lose the race. “We can’t rest for a second,” he told Playboy magazine.16
Michael Cusumano, the SMR Distinguished Professor of Management and deputy dean of the Sloan School of Management at the Massachusetts Institute of Technology, studied Microsoft’s business strategy extensively in the 1990s. Cusumano observed that Gates was influenced by the ideas of Andy Grove, the founder of Intel with whom he worked closely. In his famous book Only the Paranoid Survive, Grove wrote about how swift change can turn a successful company into a has-been, but managed right, change can also present an opportunity for the leader of the business to redirect the company’s course. That business philosophy makes sense because the technology industry often has low barriers to entry, which was Microsoft’s main argument, and tech companies can sometimes die if they aren’t flexible and innovative enough. However, Microsoft’s problem was that it underestimated its own size and influence. “They were really not as vulnerable as they thought they were,” Cusumano said in an interview. As a result, according to Cusumano, “they continually broke the law or came right up to the line—and they did it multiple times.”
Beginning in the 1990s, Microsoft had begun to look for ways to leverage its dominance in personal computers to enter new areas of business. It wanted to control the electronic gateway from the home to the world and charge fees for just about every recurring revenue product imaginable that could fit onto a desktop computer. What it couldn’t build, it tried to buy. Microsoft had already made a habit of acquiring the top company in fields it wanted to enter: Softimage, a maker of computer animation programs; Forethought, which brought it PowerPoint; and others. Between 1994 and 1999, Microsoft’s prolific deal-making had resulted in its owning all or part of 130 companies.17
In 1995, Windows 95 launched to much fanfare. Windows 95 was the latest version of a software product that Microsoft had begun building in the 1980s, borrowing the idea of a graphical user interface from Apple, its closest competitor. Microsoft had also been building an operating system in partnership with IBM called OS/2, but in 1989, it launched its own updated software called Windows 3.0, leading to a feud with the hardware giant.
In its June 5, 1995, issue, Time magazine put Gates on its cover, with the title “Master of the Universe.” Gates was courted by heads of state looking to bring Microsoft’s business to their countries. President George H. W. Bush had awarded him the National Medal of Technology in 1992 in recognition of his contributions. He golfed with President Bill Clinton on Cape Cod.
The paranoia inside Microsoft predated the Windows 95 launch. Based on his conversations with Microsoft executives in the early 1990s, Cusumano found that the central tension was between whether the company was a “platforms and applications” company that focused on building versatile products for different operating systems, or whether the entire ecosystem would continue to grow around its core Windows product. When some executives made the argument that it was the former, Gates disagreed, and his key lieutenants had to abide by his decision. As it turned out, Microsoft’s dominance was its failing, in the sense that Windows became such an enormous stream and source of power in the industry—with Office attached to it—that they had to protect it.
Microsoft’s business tactics had not endeared it to rivals or regulators. One of its practices involved “per processor” contracts with computer manufacturers. The company used its dominance in the software market to lure hardware makers into restrictive, long-term contracts. Microsoft offered discounts on its operating system licenses to those manufacturers in exchange for them giving Microsoft a royalty payment for every computer they shipped that used a certain kind of microprocessor, even if that computer didn’t use Microsoft’s operating system. That put computer manufacturers in a difficult spot, given that they wanted to offer customers the industry’s dominant software, and dissuaded them from carrying other operating systems. The move effectively stifled competition in the market for operating systems at a time when demand for personal computers was exploding. If you wanted to use a PC, chances are you would have to use Microsoft software. As applications for the operating system developed—spreadsheets, word processors, graphics—developers of applications began to complain that Microsoft gave its own application developers an advantage by sharing with them what the next version of the operating system would look like.
It wasn’t long before regulators began sniffing around Microsoft’s business practices. The United States enacted antitrust laws to rein in future excesses in the aftermath of the nineteenth-century robber barons like Rockefeller, when a wave of industrialization after the Civil War led to the formation of massive companies known as trusts. Now, the same law that broke up Standard Oil in 1911 would be used by the Department of Justice to build its antitrust case against Microsoft.
In July 1994, Microsoft signed a consent decree with the Federal Trade Commission, agreeing to limit certain business practices related to its licenses for operating system software. U.S. Attorney General Janet Reno played up the settlement, announcing it on national television. The decree was the result of a nearly four-year investigation by the FTC, which had alleged that Microsoft used restrictive licensing practices to keep rival software makers out of the market. Some critics of Microsoft were disappointed with the settlement because it was narrowly focused on operating system licenses when the company was trying to leverage its dominance in the software market to control the emerging market for applications that could be built atop that software.
Microsoft too saw the FTC settlement as a victory. So, it was little surprise that just three months later in October, Microsoft announced that it planned to buy Intuit, a maker of personal finance software, for $1.5 billion. Microsoft would use its stock to pay for what was going to be the software industry’s biggest acquisition ever. Microsoft’s interest in Intuit was understandable. Based in Menlo Park, at the heart of Silicon Valley, Intuit had been founded in 1983 after Scott Cook had the idea for a personal financial software program, following his wife’s complaint about the tedious nature of paying bills and balancing checkbooks.18 The company went public in 1993, one of the early Valley success stories when people were still figuring out what personal computers could be used for beyond basic documents and word processing. Intuit’s software was essentially an “application” that could be integrated into Microsoft’s Windows operating system.
Electronic commerce and online banking were nascent, but the financial and technology industries could see their potential, expecting that one day, people would use their computers to do everything from transferring money and paying others to shopping from home. Microsoft wanted not only to ascend to the top of the market with Intuit, but also beat banks and credit card companies that saw the opportunity. Seven million people—or roughly 70 percent of users—used Intuit’s Quicken software to file taxes, track their spending, do personal banking, and make other financial transactions.19 Microsoft had launched its own version of the product, called Money, in 1991, but Quicken was by far the most popular. Although Money was the second-largest player in the personal finance software market, it was woefully behind, with less than a quarter of the market and about one million users.
In the mid-1990s, the Valley had yet to achieve the reputation it enjoys today as the center of technological innovation. Although companies like HP, Fairchild Semiconductor, and Intel had built headquarters there, followed by Apple, Oracle, and others in the 1970s, tech behemoths including Alphabet, the parent company of Google, and Meta, the parent company of Facebook, hadn’t yet been born. Instead, it was a hub of fledgling companies that for years had watched Microsoft copy or demolish their businesses or buy them outright. Many entrepreneurs also found Microsoft unpalatable and bellicose; the company’s executives were known to call venture capitalists with lowball offers to buy their portfolio companies, and if they didn’t want to sell, the Seattle giant’s attitude was: “Fuck you, we’re going to crush you,” in the words of one former Microsoft executive. The arm-twisting left many young companies—which often had little more than some technology and the makings of a business plan—and their backers quaking. One surefire way for a start-up to not get funding was to put in its pitch deck that Microsoft was one of its main competitors.
There was good reason for companies to feel that way, according to O’Mara, who wrote in The Code, a book about the tech industry, that many start-ups came close to being annihilated by Microsoft’s dominance in that decade. “Microsoft was the 800-pound gorilla, it was ‘the software industry’ for a while,” O’Mara said in an interview. “If there had to be one bad guy, [Gates] was it. It was about nimble start-ups versus the bigness of Microsoft. It fell into a very familiar American narrative.” When Microsoft announced its intention to buy Intuit in the fall of 1994, it was as though the shark was at the Valley’s door, jaws open and ready to bite. Intuit was a homegrown Valley darling and many of the company’s managers did not want to see it swallowed by Microsoft. Not long after Microsoft and Intuit agreed to merge, a group of Silicon Valley companies—they remain unnamed—hired Reback, the lawyer who had loudly compared Gates to Rockefeller, to explore how they could thwart Microsoft.20 A graduate of Stanford and Yale Law School, Reback worked at the prestigious Valley law firm of Wilson Sonsini, which specialized in antitrust law. Then in his mid-forties, Reback retained a boyish, youthful look and had an appetite for a fight. His first move was to write a friend-of-the-court brief on behalf of his anonymous clients, complaining that Microsoft was violating the terms of its 1994 consent decree with the Federal Trade Commission. Under the Tunney Act of 1974, courts are required to periodically review such settlements to ensure that the companies are abiding by their terms.
In his brief, filed in early 1995, Reback argued that the consent decree was too narrow and wouldn’t stop Microsoft from using its dominance in the market for operating systems software to control new and emerging applications. Microsoft’s proposed acquisition of Intuit, Reback wrote, would allow it to enter a new market and create a monopoly in electronic commerce and online banking. In other words, Microsoft could easily stick the popular Intuit applications atop its Windows operating software and crowd out other personal finance app developers.
In April 1995, officials at the Justice Department said they would investigate the planned Intuit acquisition, citing antitrust concerns. The deal was valued at nearly $2 billion at the time, because of the appreciation in Microsoft’s stock. Anne Bingaman, who led the department’s antitrust division, said that the combination would stifle innovation and raise prices for consumers. But she also listed a greater worry, echoing Reback’s argument: that Microsoft could use its dominant position in personal computing to seize markets of the future, including home-based banking. “To give you a sense of antipathy involved, on the day the news broke the government said they were gonna sue him to block the acquisition of Intuit—there was wild celebration on the Intuit campus, cheering literally from each of the buildings,” Reback recalled. “They didn’t want to work for [Gates].” Three weeks later, Microsoft abandoned the deal. Today, Intuit is a giant in personal financial and business financial software, with a market capitalization of more than $150 billion. Esther Dyson, a former tech analyst and a venture capitalist, told The Washington Post at the time that the deal’s failure would likely make Microsoft look “a little less nasty, a little less invincible,” and that it would humble the tech giant.21
The humbling would take a few more years. While Microsoft was focused on the software market, a different sort of excitement was spreading in the Valley. Young entrepreneurs were captivated by what they considered the future of computing and communication: the World Wide Web. They could see the commercial potential of the internet and were beginning to bet their futures on it. In addition to Netscape, Jerry Yang, a young Taiwanese American graduate of Stanford, cofounded an internet website called Yahoo along with David Filo in 1994. Companies such as Infoseek and Lycos, hoping to grab the new opportunities offered by the internet, were springing up by the dozen, funded by eager venture capitalists. They wanted to protect this new thing they’d found from the beast in the Northwest, but the distance that Gates kept from Silicon Valley meant that he didn’t see the internet coming.
Of course, the Microsoft cofounder had paid some attention to the internet. In April 1994, he published a memo called “Internet Strategy and Technical Goals” that he had written during his annual “think week,” when he went to a secret hideaway cottage every February to read prodigiously and delve deeply into Microsoft papers.22 He also sent a confidential memo to a group of Microsoft executives describing the rise of electronic communication as a “sea change” that the company was going to lose out to rivals on.23 But he considered it a side project inside Microsoft. The internet was going to be a free service, and there was little money to be made, he told Microsoft executives and board members. He expected the PC and not the internet browser to be the gateway to future products and services that could be offered to consumers. Also, Microsoft executives were preoccupied with testing and perfecting Windows 95, which had already suffered from multiple delays.
Gates’s first book, The Road Ahead, was an instant bestseller. Coauthored with Microsoft’s chief technology officer Nathan Myhrvold and Peter Rinearson, a company vice president, and published in 1995, the book laid out Gates’s vision for the future of the digital revolution, although it barely mentioned the internet. Published simultaneously in multiple countries, it had an initial print run of 850,000 copies. Gates donated the $2.5 million advance he got for the book. But many critics were scathing in their reviews. Writing in The New York Times, the journalist Joseph Nocera called the book little more than a “positioning document” for Microsoft, lacking any real vision of what a future based on the internet might look like and more about the software giant’s short-term business plans. “If this book really represents the sum of his vision for the future, then his own road ahead is going to be a long, hard slog,” Nocera wrote.24
Sometime between 1994 and 1995, Gates suddenly changed his mind about the internet. He had initially failed to foresee how quickly and profoundly the internet would change the future of computing. But the more closely he followed its swift rise, the more troubled he was by what he saw. The PC was not going to be the center of the next generation of computing. Rather, it was the internet, which ran on a network of connected computers that delivered information and emails to users. The gateway to the internet was a browser, and Microsoft was nowhere in that market. Just three months before the launch of Windows 95, Gates wrote a long memo to employees called “The Internet Tidal Wave” that laid out, in precise detail, how computing was evolving under their very eyes, and how Microsoft would have to pivot to incorporate web-based features into all its products and applications. Caught flat-footed and recognizing that Microsoft had to catch up to rivals, Gates pushed his employees—nearly 18,000 of them—to build their own product while also trying to find ways to defang the competition. The “tidal wave” memo would later come to be seen by the government as evidence of Gates’s monopolistic intentions. However, the contents of the memo also catapulted him to oracular status for its clear-eyed ability to visualize how the digital revolution would unfold. When Gates realized that the world could move on without Windows because the internet was a neutral platform, he wouldn’t stop.
In June 1995, Reback got a call from Jim Clark of Netscape, which was building its Navigator browser to run atop different kinds of operating systems, including Windows. Clark told Reback that Microsoft was withholding technical information that Netscape needed to write a version of its browser for Windows 95. Instead, Microsoft had offered to let Netscape put its browser on other operating systems and older versions of Windows while keeping its own browser, Internet Explorer, on Windows 95. If Netscape agreed to it, the deal would effectively divide the market and ensure that Netscape could never become the browser of choice for the biggest chunk of consumers. After Netscape had said no, Microsoft eventually provided it with the information it needed after Windows 95 launched.
The first version of Internet Explorer, Microsoft’s browser, launched alongside Windows 95 as part of a special package. But within the next year, the browser was loaded into every copy of Windows 95 for free, offering customers a way to hook up to the internet. That hurt Netscape’s Navigator because it suddenly had a tougher route to the user. In a 1996 memo to employees, Gates talked about how Microsoft had reorganized itself around building internet software while retaining a focus on Windows. That memo would also become part of the Justice Department’s evidence as it built its antitrust case. Elsewhere, Microsoft used the word “jihad” to describe its attitude toward the browser wars. There was an urgency to Gates’s memos and emails and a barely concealed sense of alarm that the world was changing faster than Microsoft could.
Clark would later compare Gates to the “Wagnerian dragon” Fafnir who, in Nordic mythology, is a symbol of greed, having slain his father for treasure. “For all his nerdy ways and offbeat charm for the press, I feel Bill Gates is happiest when he is crushing the life out of companies that dare establish territory on the borders of Microsoft’s sprawling dominion,” Clark wrote.25
By then, a chorus of Silicon Valley companies—which some took to dubbing the “noise coalition” and included companies ranging from Sun to Netscape to Oracle—had started becoming deeply uncomfortable about Microsoft’s ambitions. Reback and his colleagues, who had written a brief explaining how Microsoft was extending its dominance in the operating system into the applications market, now wrote a white paper on behalf of Netscape saying that the company was repeating those behaviors to dominate the browser market and shut Netscape’s browser out. Microsoft, the paper said, offered computer manufacturers discounted prices, cash payments, and other incentives that made it hard to feature Netscape’s browser on Windows. The two documents would doom Microsoft and change Gates’s path forever.
Reback, once unleashed, was virtually unstoppable. With a flair for narrative and hyperbole, and a willingness to engage with the press, he was for a time the face of Silicon Valley’s brewing deathmatch with Microsoft. As Microsoft continued to push into new markets and threatened some young companies with its ambitions, Reback became their attack dog. “I came to be kind of a symbol for that, but it really wasn’t me,” Reback said. He attributed his role as Microsoft’s chief nemesis at least partly to the fact that Wilson Sonsini’s client roster included some of the biggest names in the Valley. Reback wasted no time in knocking Microsoft at every opportunity—using the press, writing court briefs, and attacking Microsoft’s practices. Reback in court briefs in the 1990s said Microsoft engaged in promoting “vaporware,” or announcing products that didn’t exist, particularly in hopes of stopping the competition.26
Even decades later, Reback relishes recounting the stories of working on his clients’ behalf to discredit Microsoft. “If you didn’t live in Silicon Valley, it’s hard to understand the antipathy toward Gates and Microsoft at this time,” he said. Once, his synagogue was interviewing rabbis for a position. When one candidate, who had flown in from New York, happened to mention Microsoft favorably, “people started to hiss,” Reback said. They were joking, he said, but “it gave you an idea.” Another time, Reback attended an event at which a government lawyer spoke and implied that Microsoft wasn’t so bad. “You could see the ice crystals forming on the windows of the room,” Reback said. “Here’s this guy who wants to take away our future. When Gates at that point said he was going after Intuit, and the banks were dinosaurs and he was the ultimate disrupter, being bred on Valley culture I understood it.”
Inside Microsoft, though, the view couldn’t have been more different. The message to workers was that the company was under attack and had to defend itself. Bob Muglia, who was a senior executive during Microsoft’s troubles with the government, said the company tripped up because “we just didn’t know any better.” Muglia, now retired, said the culture inside Microsoft was “go, go, go” all the time, with not a moment to stop and think. “The first time I was called a monopolist by a customer, I was shocked,” he recalled. Microsoft took a long time to learn that the world was looking at the company and its practices very differently than the company did from the inside out, Muglia added. “You can’t behave as a small company does when you’ve grown so large.”
At the time, Gates dismissed the claim that Microsoft was trying to shut out the competition by saying that his vision of the personal computer had always included the idea that it would be a tool through which to communicate. It was just that the idea hadn’t caught on until the internet came along and there were new standards set, driving PC sales because people had a lot of information at their fingertips. And although he identified the internet as an important piece of Microsoft’s future in 1994, the internet grew so fast that he had no option but to call the troops to war. “You can’t just keep doing the same thing you were doing. You have to take your skills and attack the new frontiers,” he told Charlie Rose in 1995. “It was our biggest opportunity and biggest challenge.”
Starting in 1997, as lawmakers and regulators slowly turned up the heat on Microsoft, bringing things to a boil with the antitrust suit in April 1998, Gates seemed personally wounded. Lawyers from the Justice Department had crafted a narrative around Gates as an evil monopolist who would stop at nothing to beat competitors. He could not understand it. Microsoft was a source of American pride. The Seattle computing giant had created tens of thousands of jobs. With a market capitalization of more than $200 billion, it was one of the biggest technology companies in the world. It was an innovator. The consternation that Gates felt was palpable to many of his close advisors. “This makes no sense to me at all,” Gates would say, in the words of one former Microsoft employee who spoke with him often on the company’s media strategy. “I don’t understand how your government comes for you when you’re one of the bright lights and contributing to the economy.”
Gates, the son of a lawyer, and given to a black-and-white way of thinking, saw the government case purely as a legal one that would be won or lost on its merits, and he insisted that the government’s case had no merit. If anything, the very things Justice was attacking Microsoft for—such as offering its internet browser as part of its Windows software—were essential to a better customer experience, his thinking went. Almost naively, he didn’t quite grasp the power of politics and optics to overtake logic and erode image. The more others painted him a villain, the more he thought himself a victim. “Bill was confused into thinking [by Microsoft’s lawyers] it was a legal case, when it was always political. Bill didn’t understand that,” said Muglia, who was among the senior executives called on to testify at the trial. He reflected that Gates had a tough time processing the way things had turned out, and that in his view Microsoft’s lawyers did a poor job of outlining the dynamics and politics that were driving Justice, especially the campaign by the “cabal” in Silicon Valley, including Netscape, Sun, and Oracle. “It really hurt Bill. It was a personal attack on him,” he said.
The Microsoft trial captivated the entire country. Gates was, after all, the richest man in the world, starring in the biggest antitrust case of the era. He didn’t help his case, and was by turns indignant and contemptuous of questions about Microsoft’s business practices. But nothing could compare to the three-day deposition Gates gave as part of the trial. As David Boies, the primary lawyer for the government, interrogated Gates, the Microsoft cofounder wore a disdainful expression, his mouth shaped into a sulky, inverted U. On occasion, he shrugged as if to disagree with the premise of a question. He rocked back and forth in his chair, as he often did, but his combative approach only made him look like a petulant child. At one point, he debated the meaning of the word “if.” Gates rejected the very notion that the government had a legitimate case and argued that by blocking his company’s ability to design and incorporate new products, it was stifling innovation in a rapidly changing technology landscape, where it’s hard to retain monopolies anyway. “He did look like he was going through a root canal,” Cusumano said of Gates. “I suppose it would be hard to find a performance that is worse, unless someone just said they are pleading the fifth.”
By 2000, Gates’s image was badly tarnished. The trial also devastated the company, former employees said. “It completely changed everything inside the company, consumed the executive team for multiple years,” Muglia said. By 2001, Microsoft had been sued more than 200 times in the United States because of the antitrust conduct highlighted by the Justice Department.27 It settled in 2002 and agreed to restrictions, including living with a special master to oversee its conduct for the next 10 years. Every manager underwent antitrust training. Its cases with Europe took several more years to settle. But it was a very critical juncture for the world, given the rise of the internet and the shift to online computing.
Gates did turn out to have been right about two things. First, he was correct in predicting that Microsoft’s “dominance was ephemeral in many ways,” Cusumano said. He saw that the internet would become an alternative computing platform, providing a new way to launch apps and threatening the future of Windows. Gates also saw and understood the development of mobile platforms as a big threat. In the meantime, the browser wars had moved on.
In April 2018, some 20 years after Bill Gates’s disastrous run-in with the government, Mark Zuckerberg found himself thrust into the middle of a crisis. Two years earlier, during the 2016 presidential election, a researcher got hold of the personal information of millions of Facebook users and sold them to Cambridge Analytica, a firm hired by the Trump campaign that specializes in psychological targeting, which it then used to build psychological profiles of voters. Facebook, cofounded in 2004 by Zuckerberg out of a Harvard dorm room, had already morphed from a cheery social network where friends and family could connect, to a hive of misinformation. Its other platform, Instagram, had become a site where gun sellers were advertising their weapons, and where pedophiles could track child-sex content. Lawmakers had begun to look closely at the company. The Cambridge Analytica revelations pushed Facebook further into an image crisis, turning the Silicon Valley company’s platforms into something far more sinister than anyone had anticipated. Amid calls to #deleteFacebook and lawmakers pushing for more information on the mishandling of customer data, Zuckerberg was called to testify in front of Congress.
As he dealt with the crisis, Zuckerberg sought advice from one person he knew had gone through a similar experience: Gates. Zuckerberg, who, like Gates, is a Harvard dropout and considers the Microsoft cofounder a mentor, sought his advice on how to manage the public relations disaster and build bridges with politicians, according to news reports and two people who worked at Facebook at the time. Gates suggested that Facebook hire someone like Brad Smith, the longtime Microsoft executive who has been at the company for close to three decades; Smith became Microsoft’s general counsel in 2002 and has been its president and vice chairman since 2021. Affable and skilled at building relationships, he played a key role in expanding Microsoft’s presence in Washington following its bruising antitrust trial.28
“Who’s our Brad Smith?” was a question a former Facebook employee recalled being bandied about inside the company. Eventually, Facebook (now known as Meta) settled on Nick Clegg, hiring the former deputy prime minister of the United Kingdom in October 2018 as vice president for global affairs and communications. Clegg started in the thick of the Cambridge Analytica scandal and eventually became the company’s voice on data privacy issues, and he is now its president of global affairs.
When Zuckerberg went to testify in Congress in April 2018, answering questions from lawmakers about misinformation and the use of personal data by outside firms that was not authorized by Facebook, the setup had echoes of the Gates antitrust hearing. But whereas Gates had taken a tone of condescension and refused to concede a single point, Zuckerberg was far more conciliatory and deferential, apologizing to lawmakers often and messaging that he would be open to making changes.
Many technology industry executives and analysts say that Gates’s behavior in front of Congress became an example of what not to do for founders and chief executives of a later generation of tech giants. Along with Zuckerberg, top executives of Google and Google’s parent Alphabet, Amazon, Apple, and others who have been hauled to Congress several times in recent years have remained civil and humble even when they have provided little information to lawmakers. In the summer of 2020, Zuckerberg, Jeff Bezos, Tim Cook, and Sundar Pichai testified in front of the House Judiciary Committee on whether technology companies have too much power. As lawmakers accused the executives of everything from abusing their dominance to right-wing bias, they each sat upright without slumping, their facial expressions showing no emotion. Bezos began many of his responses to lawmakers with the phrase “with all due respect.” No matter how combative the hearing got, and how evasive the executives turned with their responses, it never got to the point of arguing about the meaning of the word “if” as it had with Gates.
Tech executives have been thoroughly advised by people with experience in politics—as well as former Microsoft executives who now work at companies like Meta and Alphabet—about what not to say and do, even when lawmakers have asked questions that are not technologically savvy, according to people who have studied or worked on these issues. In 2020, when the Justice Department filed a complaint against Google, employees were also advised not to leave a paper trail discussing business strategies that could be entered into evidence, and not to speak about matters of antitrust, especially by using language such as “crush” the competition, according to a New York Times report.29 Emails that Gates had sent Microsoft employees about the nature of its fight against emerging internet companies were part of the evidence the Justice Department used in its case against the company.
Microsoft influenced the younger generation of tech companies in other ways. There was a palpable we’re-not-Microsoft sentiment that drove the early approach to business of Sergey Brin and Larry Page, who founded Google in 1998 out of a Stanford dorm. The young company’s “do no evil” motto was very self-consciously anti-Microsoft, according to O’Mara. They sought to build a product based on open-source software and a free flow of information, rather than license it for a fee, as Microsoft had done. In those early years, Google even hired communications professionals to privately badmouth Microsoft to reporters. The kinder, gentler appearance of tech giants, and the insistence by their executives that the primary motive of their companies is to make the world a better and more connected place, rather than maximize profits, is at least partly a direct reaction to Microsoft’s behavior as a capitalist bully hell-bent on protecting its turf.
In the first decade of the twenty-first century, regulators looked at the emerging crop of technology companies, like Google, Facebook, and Amazon, as the next harbingers of innovation. New products and services, many of them convenient and free to use, were changing people’s lives and habits. There were few worries that these companies would become big enough to merit government scrutiny. Rather, the approach from lawmakers was, “what can we do to help this new industry flourish?” O’Mara said.
But just as Microsoft had risen swiftly from a nonentity to a dominant tech company in a decade and half, many of the tech companies of the past two decades appear to have reached escape velocity before the mood against them shifted, and lawmakers started poking around. It took a while for people to realize that today’s tech industry is almost full of near monopolies or duopolies, and along the way, many of these companies have destroyed jobs and entire industries. Alphabet’s Google controls more than four-fifths of the search engine market. Meta has long dominated social media and messaging through its massive acquisitions of Instagram and WhatsApp.
Even older companies like Apple and Microsoft have conquered new markets. Apple, which controls more than half of the smartphone market in the United States and is the single biggest player in the global market, controls the iPhone’s entire ecosystem, from hardware to software and applications, and takes a meaningful cut of the revenues of any app developer that wants to offer its product on the app store. Amazon redefined the consumer retailing business, becoming a trillion-dollar company with its razor-sharp focus on logistics and cutting costs—including using its power as a dominant buyer squeezing its suppliers and slashing worker pay—to fatten its profit margins. Its Amazon Web Services unit is one of two giants in the business of providing cloud computing services to business—the other being Microsoft Azure. Some of this dominance is the natural outgrowth of network effects—the idea that the more people use something, the more value is created because others want to be on the same platform. Om Malik, writing in The New Yorker, points out how in Silicon Valley, it’s almost all “winner takes all” now.30
Mitch Kapor, the founder of Lotus whose feud with Gates in the 1980s is well documented, said in 2013 that he didn’t see Zuckerberg and Page as all that different from Jobs and Gates. “I think that in all generations… leaders in the industry had a very complicated mix of motives that are partly idealistic, partly pragmatic, and partly Darth Vader.”31 The key difference is how powerful their companies have become. “What you do isn’t just affecting 5 or 10 million nerds and geeks, it’s everybody and everything,” he said.
Sensitive to the criticisms and government scrutiny, some of the largest tech companies have increased their lobbying armies in Washington. In 1998, the year Microsoft faced its trial, it had 61 lobbyists and spent just under $4 million. Recognizing that its inconsequential presence in Washington, D.C., may have hurt its case, the company hired an additional 107 lobbyists in 2000, according to data from OpenSecrets. In the last two decades, it has employed, on average, 111 lobbyists every year; in 2023, Microsoft spent $10.5 million on lobbying.32 Andy Jassy, who has been Amazon’s chief executive since 2021, has made it a point to visit lawmakers and other government officials in Washington, D.C., often, and the company has increased its lobbying spend from about $2.5 million in 2012 to $21.4 million in 2022.33 Similarly, Meta has steadily increased its lobbying expenditure from $8.7 million in 2016, the year the Cambridge Analytica scandal unfolded, to about $19.2 million in 2022. Broken down into markets that Alphabet plays in, its biggest lobbying spend as of the first quarter of 2023 was tied to Google’s business and the internet.
During his first term in the White House, President Joe Biden signaled that regulating the technology industry was a priority by appointing Lina Khan, one of the harshest critics of “Big Tech,” as his chief antitrust enforcer. Khan, the youngest-ever head of the Federal Trade Commission, shot to fame in academic and policy circles after her influential 2017 paper “Amazon’s Antitrust Paradox,” in which she argued the dominant framework through which antitrust law had been applied for decades—the notion of consumer harm—was inadequate and compared it to the trusts of the Gilded Age. Biden also appointed Tim Wu, a professor of law at Columbia University, as a special assistant to the president for competition and tech policy in 2021. Three years earlier, Wu had drawn a through line from the trusts of the Gilded Age built by Rockefeller and his cohort of robber barons to Microsoft’s aggressive acquisition, or kill-the-competition, tactics, and on to the twenty-first century’s tech giants. “The tech industry became essentially composed of just a few giant trusts: Google for search and related industries, Facebook for social media, Amazon for online commerce. While competitors remained in the wings, their positions became marginalized with every passing day,” Wu wrote in a 2018 article.34 Wu spent nearly two years helping the White House figure out how to employ antitrust law more forcefully.
In the fall of 2023, the FTC and seventeen states accused Amazon of “illegally maintaining monopoly power” through strategies that squeezed rival merchants from offering lower prices on platforms other than Amazon’s and of promoting its own products, thus harming consumers. Amazon has denied the accusations. Also in 2023, Google went to trial three years after the Justice Department accused it of cutting off competitors to maintain its dominance in search and advertising—the first big tech company trial since Microsoft. In March 2024, the Justice Department laid the groundwork for a Microsoft-style antitrust spectacle when it sued Apple, accusing it of maintaining an illegal monopoly in the smartphone market. In remarks accompanying the suit, Assistant Attorney General Jonathan Kanter said that the department’s successful litigation against a “different platform monopolist,” meaning Microsoft, had helped to foster the growth of mobile phones. But now, Apple—one of the biggest beneficiaries of the smartphone revolution—was, according to the DOJ, essentially engaging in the same kind of behavior to protect its iPhone ecosystem.
The companies have routinely said that their activities are not anticompetitive, borrowing the same argument that Gates had used during Microsoft’s trial: Barriers to entry are low in the technology industry, and competitive edges can easily be lost. Microsoft, whose market capitalization briefly crossed $3 trillion in early 2024 as it jousted with Apple for the title of the world’s most valuable company, itself is undergoing renewed scrutiny. In the aftermath of its antitrust trial, as Gates stepped away from his daily duties, the battered and bruised company lurched around unable to find its footing and falling behind in the race to capture the consumer internet. In 2014, the Indian-born Satya Nadella took the reins at Microsoft and pushed the company in a direction beyond Windows. He focused on becoming a lead provider of office productivity tools, and building Azure, its cloud-based software for enterprises. He also began turning around its internal culture. Where Microsoft had once been driven entirely by individual success, Nadella encouraged more collaboration, both internally and externally, becoming an ally to Valley companies rather than the tyrant from the Northwest that the company had been under Gates. For instance, Microsoft struck a partnership with VMware, once a fierce software rival. Its deepening ties to the Valley also meant that it landed the biggest coup of all: a big stake in OpenAI, the artificial intelligence company—although that too could face regulatory scrutiny after Khan said her office will focus closely on the emerging field of artificial intelligence, as the biggest tech companies rush to define and grab the market.35
The FTC and the European Union, which has always taken a tough antitrust stance, had also blocked Microsoft’s acquisition of the video-game giant Activision Blizzard, but the $75 billion deal went through in May 2023 partly on the ground that the video-game market is a small one.
In a 2019 interview, Gates mused about the situation that tech founders and their companies found themselves in then—and still do today—drawing similarities with his own experience. “As soon as tech became important, with the personal computer and the internet, there was certainly a duality where people were saying, ‘Oh my God, this is brilliant stuff,’ but they were also looking at me, or other leaders in the industry, and saying, ‘What motivates their work? Do they understand the potential negative side effects?’ I’m sort of the poster boy of that original duality. By some measures I was extremely popular and by some measures I was extremely—you know, people worried what Microsoft was up to. What’s happening now is more of a mainstream thing. The concerns are legitimate, and they’re touching more areas of life now.”36