Bill Gates

Yes. And enterprises love that. And we're going to put a pin in this right now, and we're going to bring it back toward the end of this episode in a really illustrative way that it can deeply, deeply hold you back if you are Microsoft and you have built an entire brand and reputation around your backwards compatibility.

Yes. And enterprises love that. And we're going to put a pin in this right now, and we're going to bring it back toward the end of this episode in a really illustrative way that it can deeply, deeply hold you back if you are Microsoft and you have built an entire brand and reputation around your backwards compatibility.

Yes. Wow.

Yes. Wow.

By 2007. So, I mean, it was really the first seven years of Steve's tenure as CEO. Yes. Already tipped the balance into majority.

By 2007. So, I mean, it was really the first seven years of Steve's tenure as CEO. Yes. Already tipped the balance into majority.

Yeah, it's funny. I wasn't going to bring this up here, but since you brought up OEMs, the OEM business model is completely transformational for Microsoft. When they figured out, actually, we shouldn't be just selling software directly to consumers. Instead, we should be selling them to the PC maker, and the PC maker should do our distribution. So here's a couple stats.

Yeah, it's funny. I wasn't going to bring this up here, but since you brought up OEMs, the OEM business model is completely transformational for Microsoft. When they figured out, actually, we shouldn't be just selling software directly to consumers. Instead, we should be selling them to the PC maker, and the PC maker should do our distribution. So here's a couple stats.

In the 90s, the box software that Microsoft would use to sell Windows... Their gross margin on a copy of Windows was 29%. Oof, that's not good. They had to print the disk, which had actual real costs, especially on floppies. You had to put it in the box. You had to ship it to the retailer. You had to split profits with the retailer. You had to pay the sales and marketing costs.

In the 90s, the box software that Microsoft would use to sell Windows... Their gross margin on a copy of Windows was 29%. Oof, that's not good. They had to print the disk, which had actual real costs, especially on floppies. You had to put it in the box. You had to ship it to the retailer. You had to split profits with the retailer. You had to pay the sales and marketing costs.

I mean, it's like real material. This is not a zero distribution cost, zero marginal cost business in the box software retail world. But when they're selling through an OEM channel, their gross margin was 75% because you just ship the bits to the OS once and then the PC manufacturer takes it from there. Not only is it amazing because you get that 75% versus 29% of gross margin, but

I mean, it's like real material. This is not a zero distribution cost, zero marginal cost business in the box software retail world. But when they're selling through an OEM channel, their gross margin was 75% because you just ship the bits to the OS once and then the PC manufacturer takes it from there. Not only is it amazing because you get that 75% versus 29% of gross margin, but

It's also an amazing way to scale because you do a deal with every OEM, you know, as you're going down the line, it's the Visa networks of networks thing that I think we alluded to this last episode too. You just get each of them scaling on their own can accrue to you without you doing additional work to do the scaling yourself. And so, David, it's interesting.

It's also an amazing way to scale because you do a deal with every OEM, you know, as you're going down the line, it's the Visa networks of networks thing that I think we alluded to this last episode too. You just get each of them scaling on their own can accrue to you without you doing additional work to do the scaling yourself. And so, David, it's interesting.

You're talking about how 85% of the business by 2007 was either enterprise sales of the EA or OEM. I mean, they'd basically kicked the can to the curb on that crappy retail box software model, and they're just doing the whale hunting with their sales force and doing these enterprise agreements, which of course have great margin structures, and the OEMs.

You're talking about how 85% of the business by 2007 was either enterprise sales of the EA or OEM. I mean, they'd basically kicked the can to the curb on that crappy retail box software model, and they're just doing the whale hunting with their sales force and doing these enterprise agreements, which of course have great margin structures, and the OEMs.

Exactly. Way better business model in every way. They pivoted the whole business to the two best ways to sell software and completely eliminated the bad way to sell software.

Exactly. Way better business model in every way. They pivoted the whole business to the two best ways to sell software and completely eliminated the bad way to sell software.

Yeah. what was going on with Windows releases during that time. And I think through storytelling the Windows releases, we can then understand the state of the company. So, Windows XP. Why was Windows XP such a big deal?

Yeah. what was going on with Windows releases during that time. And I think through storytelling the Windows releases, we can then understand the state of the company. So, Windows XP. Why was Windows XP such a big deal?