Steve Ballmer

And the other engineer, on their own, just went through and thought of an implementation. And they have no idea if it's the same implementation. So it's not breaking any sort of infringement. They're basically saying, I'm just seeing the requirements for this product, and I'm coming up with my own implementation of that product.

They basically figured out how to exactly clone the IBM PC and buy the very same operating system. And to go back to quoting Ben Thompson, because this is from his great piece again, the result was a company that came to dominate the market.

They basically figured out how to exactly clone the IBM PC and buy the very same operating system. And to go back to quoting Ben Thompson, because this is from his great piece again, the result was a company that came to dominate the market.

Compaq was the fastest startup to ever hit $100 million in revenue, then the youngest firm to break into the Fortune 500, then the fastest company to hit a billion in revenue. And by 1994, Compaq was the largest PC maker in the world.

Compaq was the fastest startup to ever hit $100 million in revenue, then the youngest firm to break into the Fortune 500, then the fastest company to hit a billion in revenue. And by 1994, Compaq was the largest PC maker in the world.

Is it just cheaper? Like, basically, this is the IBM PC, but for less money?

Is it just cheaper? Like, basically, this is the IBM PC, but for less money?

And so begins the race to the bottom of PC hardware. Completely undifferentiated, all the value accrues to the software layer.

And so begins the race to the bottom of PC hardware. Completely undifferentiated, all the value accrues to the software layer.

Microsoft used IBM to generate demand for their software, and then they used every other PC manufacturer to capture the value that all that demand created.

Microsoft used IBM to generate demand for their software, and then they used every other PC manufacturer to capture the value that all that demand created.

Yes. And they combined two magical principles together, this infinite replicatability, zero marginal costs of software, and becoming the linchpin of the ecosystem. They are now the software that everyone needs to target, which gives them pricing power.

Yes. And they combined two magical principles together, this infinite replicatability, zero marginal costs of software, and becoming the linchpin of the ecosystem. They are now the software that everyone needs to target, which gives them pricing power.

So that pricing power raises your top line, and you have no costs. It's unbelievable.

So that pricing power raises your top line, and you have no costs. It's unbelievable.

So it says a lot about this period in time that you could do a 1x revenue deal in a high margin software company. I mean, I actually don't think this shows a weakness in Microsoft. Oh, they didn't have leverage or something like that. That wasn't it at all. It was just the deals sucked.

So it says a lot about this period in time that you could do a 1x revenue deal in a high margin software company. I mean, I actually don't think this shows a weakness in Microsoft. Oh, they didn't have leverage or something like that. That wasn't it at all. It was just the deals sucked.

Now, you know, it's only 5%. So good on Microsoft. Spoiler alert, this is the only dilution that they would ever take. So that's also extremely different than today. But yes, a $20 million valuation at this stage is frankly ludicrous.

Now, you know, it's only 5%. So good on Microsoft. Spoiler alert, this is the only dilution that they would ever take. So that's also extremely different than today. But yes, a $20 million valuation at this stage is frankly ludicrous.

That's exactly right.