Steve Ballmer

And so there's always this like saying of Microsoft doesn't have a very good first or second version, but the third version of something is typically pretty good. And I think that fact pattern definitely follows.

I was, but it was such a different era in that 2012 to 14 era. It's not, I guess, 2011 is when I started as an intern. I'll have a lot of thoughts on it next episode.

I was, but it was such a different era in that 2012 to 14 era. It's not, I guess, 2011 is when I started as an intern. I'll have a lot of thoughts on it next episode.

Which, of course, if you own the hardware, you definitely think of it more of like, well, we ship them the big cabinet of things and we install it and we fix it if it's broken, but we sold them hardware. The software is required to run it, but the thing we sold them is the hardware. And if you're a pure software company, you think about the world differently.

Which, of course, if you own the hardware, you definitely think of it more of like, well, we ship them the big cabinet of things and we install it and we fix it if it's broken, but we sold them hardware. The software is required to run it, but the thing we sold them is the hardware. And if you're a pure software company, you think about the world differently.

You're like, well, I can always ship you another CD, another floppy disk, you know, over the internet. It's obviously very different. But because there weren't really software companies before them, of course, people didn't come from that mindset.

You're like, well, I can always ship you another CD, another floppy disk, you know, over the internet. It's obviously very different. But because there weren't really software companies before them, of course, people didn't come from that mindset.

Yeah, that's true.

Yeah, that's true.

Yes. So listeners who are new to the show, we do this section based on Hamilton Helmer's seven powers framework. And the question is, what is it that enables a business to achieve persistent differential returns, or to put it another way, to be more profitable than your closest competitor and do so sustainably?

Yes. So listeners who are new to the show, we do this section based on Hamilton Helmer's seven powers framework. And the question is, what is it that enables a business to achieve persistent differential returns, or to put it another way, to be more profitable than your closest competitor and do so sustainably?

And the seven are counter-positioning, scale economies, switching costs, network economies, process power, branding, cornered resource. And David, I am pretty sure I could make a case somewhere between 1975 and 1995 at Microsoft for all seven of these.

And the seven are counter-positioning, scale economies, switching costs, network economies, process power, branding, cornered resource. And David, I am pretty sure I could make a case somewhere between 1975 and 1995 at Microsoft for all seven of these.

It's one of the most defensible businesses that they built in history. So of course they would have all seven of the powers.

It's one of the most defensible businesses that they built in history. So of course they would have all seven of the powers.

Great. Counter-positioning. I think the biggest example of this comes through where Microsoft was basically willing to jump on the microcomputer revolution before the incumbents were. IBM did not want microcomputers to happen. And then when they started to happen, IBM tried to figure out how to slow it down and reintegrate it into their old business model. And Microsoft basically had no baggage.

Great. Counter-positioning. I think the biggest example of this comes through where Microsoft was basically willing to jump on the microcomputer revolution before the incumbents were. IBM did not want microcomputers to happen. And then when they started to happen, IBM tried to figure out how to slow it down and reintegrate it into their old business model. And Microsoft basically had no baggage.

And I mean, this is kind of classic innovators dilemma stuff. They could say, well, we don't need to make any money on hardware. We don't need to even make hardware. We are free to become the whole point of integration for the entire ecosystem just by shipping bits. And that is crazy. Yeah.

And I mean, this is kind of classic innovators dilemma stuff. They could say, well, we don't need to make any money on hardware. We don't need to even make hardware. We are free to become the whole point of integration for the entire ecosystem just by shipping bits. And that is crazy. Yeah.

We keep talking about Microsoft as the point of integration or choke point or dependency or standard for the whole ecosystem. Given that, it is quite remarkable how much value they created on top of the platform versus just captured for themselves. There's that famous sort of Bill Gates line, you want your ecosystem around you to be generating more revenue than you are taking for yourself.