Bill Gates

So I tried to figure out as much as I could from financial statements. And I got to thank Alex at the Science of Hitting, it's a great sub stack, for helping me with this. If you look, there was a division called Entertainment and Devices that was part of their old reporting structure. And if you look at the E&D reporting over time, let's start back in 2006.

So I tried to figure out as much as I could from financial statements. And I got to thank Alex at the Science of Hitting, it's a great sub stack, for helping me with this. If you look, there was a division called Entertainment and Devices that was part of their old reporting structure. And if you look at the E&D reporting over time, let's start back in 2006.

They generated $4 billion in revenue, lost $1.4 billion operating loss. So this is five years after the Xbox has come out loss-making. 2008, they do $8 billion in revenue, $400 million in profit. So even as it's becoming a real business at steady state... Yeah, as 360 is coming into... Teeny margins.

They generated $4 billion in revenue, lost $1.4 billion operating loss. So this is five years after the Xbox has come out loss-making. 2008, they do $8 billion in revenue, $400 million in profit. So even as it's becoming a real business at steady state... Yeah, as 360 is coming into... Teeny margins.

2009, $8 billion in revenue, $100 million in operating income. 2010, another $8 billion in revenue, $700 million. This is $700 million to Microsoft. In this time frame, they do call it $20 billion of profit. Yeah. What's 600, you know, 700 million?

2009, $8 billion in revenue, $100 million in operating income. 2010, another $8 billion in revenue, $700 million. This is $700 million to Microsoft. In this time frame, they do call it $20 billion of profit. Yeah. What's 600, you know, 700 million?

Yes, David, that is exactly the right point. Microsoft, since year two or three, has never been capital constrained. And Bill Gates says this in an interview, anytime we've thought about making an investment, it's just, do we have enough talented people to pull that off?

Yes, David, that is exactly the right point. Microsoft, since year two or three, has never been capital constrained. And Bill Gates says this in an interview, anytime we've thought about making an investment, it's just, do we have enough talented people to pull that off?

On any given year, I can't deploy all of the dollars available as a CEO, as a capital allocator, because I'm constrained by the amount of smart people we have to pull it off. That is a much different position than most businesses are in.

On any given year, I can't deploy all of the dollars available as a CEO, as a capital allocator, because I'm constrained by the amount of smart people we have to pull it off. That is a much different position than most businesses are in.

Yep.

Yep.

Right. In fact, you're making my point for me. If I had to make the case of why Xbox has been somewhat of a folly and perhaps not worthy of a full acquired episode, it would be there was a lot of Microsoft's best people worked on Xbox. Right. This is a group of people that went and created Xbox Live that by 2012 had 40 million subscribers.

Right. In fact, you're making my point for me. If I had to make the case of why Xbox has been somewhat of a folly and perhaps not worthy of a full acquired episode, it would be there was a lot of Microsoft's best people worked on Xbox. Right. This is a group of people that went and created Xbox Live that by 2012 had 40 million subscribers.

So people who built a core competency of running a big online service. I mean, these are some of the best product people. The aesthetics of Xbox from a physical perspective, but also the software. I just think it was a sinkhole of some of Microsoft's best product people. And just hardest working people.

So people who built a core competency of running a big online service. I mean, these are some of the best product people. The aesthetics of Xbox from a physical perspective, but also the software. I just think it was a sinkhole of some of Microsoft's best product people. And just hardest working people.

The culture at Xbox was so hard driving to produce, at least in this point in history, up to the 2010 timeframe, very little in the way of contributing to Microsoft's business, but soaking up a huge amount of the talent. Imagine if that sort of product design sensibility was deployed across the rest of Microsoft.

The culture at Xbox was so hard driving to produce, at least in this point in history, up to the 2010 timeframe, very little in the way of contributing to Microsoft's business, but soaking up a huge amount of the talent. Imagine if that sort of product design sensibility was deployed across the rest of Microsoft.

I mean, yes. I think there are two gigantic benefits. Look, the gaming market is massive and important. And if you could try to own one market in the world today, in the world of entertainment, it's gaming. I'm just saying Microsoft didn't up until that, at least this point in history. But it's the right market to go after.

I mean, yes. I think there are two gigantic benefits. Look, the gaming market is massive and important. And if you could try to own one market in the world today, in the world of entertainment, it's gaming. I'm just saying Microsoft didn't up until that, at least this point in history. But it's the right market to go after.