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Steve handed us a signed Clippers jersey with Acquired on the back, so we joked about where it belongs and then set the stage: we’re at his philanthropy office to revisit Microsoft’s rise, the misses, the wins, and yes, a bit of Clippers and the new arena.
We noted the wild investing stat: by simply holding his Microsoft shares after stepping down in 2014, his net worth soared, and we teed up the conversation you’re about to hear.
You even sent us slides at ten o’clock last night—why did you prep so hard?
I wanted to reflect on what I learned about building businesses at Microsoft and with the Clippers, so I put together a few points to frame the discussion.
Is it fair to call you the architect of Microsoft’s enterprise business, which powers so much of the company today?
There were many hands on that wheel, but I’m proud of my role; we started as consumer first, built Office to earn enterprise trust, and I regret we let our consumer muscle atrophy while the enterprise side got strong.
Take us back: before the IBM PC, what was IBM to the industry?
IBM was the entire cosmos—hardware, software, services—while DEC nipped at their heels; against that backdrop, IBM approached us about an operating system.
You didn’t have an OS then, so how did MS‑DOS happen, and why was the contract so pivotal?
We bought a CP/M‑like system from Seattle Computer Products, licensed it to IBM non‑exclusively, and initially charged fixed fees; that openness, plus IBM’s BIOS story, let a clone market form and gave us leverage we didn’t fully foresee, with luck playing a real part.
When did you realize Microsoft, not IBM, could be the layer that tied PCs together?
Much later; through the 80s and even into the 90s, IBM still felt like the bear we had to ride, and GUIs and other shifts kept us on our heels.
Walk us through OS/2 versus Windows and the split.
We co‑built OS/2 with IBM in a convoluted joint effort while still pushing Windows; in 1990 IBM cut ties, and with Windows still immature, it was a jolt that forced us to own our destiny.
Who was actually using Windows then, and how did that shape your move into enterprise?
It spread bottom‑up—individuals buying software at retail and bringing it into work—while we had almost no formal enterprise presence; I leaned in on enterprise sales, recruited Dave Cutler to build NT with a Windows‑compatible surface, and scrambled to assemble the back‑end pieces businesses needed.
You often talk about building muscle before you need it—was that already your mindset?
Paul Allen pushed us to do all the key software and to invest in apps leadership like Charles Simonyi; that spirit of capability‑building started early and paid off later.
So when did enterprise really take off at Microsoft?
Ninety‑two to ninety‑eight was Windows and apps liftoff, not true enterprise; customers still told us we weren’t an enterprise company well into the 2000s, which fueled my determination to prove otherwise.
Why attack enterprise so aggressively in the early 90s?
Because IBM could squash us if we stayed consumer‑only, and the real revenue lived in businesses that demanded features, support, and procurement models suited to IT.
How did the enterprise agreement come about?
Our first “select” licensing was an honor system that broke on complexity and upgrade pricing, so we created a three‑year, per‑machine subscription with included upgrades and, later, all‑you‑can‑use bundles to deliver predictability and simpler admin.
You also bundled adjacent products people might not use right away—why did IT like that?
IT leaders want peace of mind—coverage, support, and no surprises—so bundling functioned like insurance, and with near‑zero marginal cost we could deliver breadth and integration.
When did the full Microsoft stack become a real enterprise flywheel?
The email boom in the late 90s into the 2000s pulled everything together—Active Directory, Exchange, Windows, Office—so we even formed Avanade with Accenture to scale deployments.
Let’s revisit your famous developers chant—what was the context?
We were fighting on many fronts—Linux on servers, open source on apps, Notes in collaboration, and antitrust in the background—so I needed to signal to external developers and our own teams that third‑party ecosystems mattered as much as first‑party apps.
You’ve said apps can be platforms too; how did the “platform company” mindset help or hurt?
Extensibility is the point of a platform, and you also need a great first‑party app to pull it, but we later got stuck thinking we were only a platform company, which blinded us to building new, non‑Windows experiences.
Was “Windows everywhere” the misstep?
We tried to shove Windows into places it didn’t belong—phones, cars, even the TV UI—out of fear and overconfidence, instead of treating those like true startups with different UI, chips, and business models.
What’s the general lesson for incumbents moving into a new wave?
Be explicit about what’s truly different and build the missing capabilities—with phone we should’ve gone all‑in on a distinct approach, while hardware design we built for Xbox and Surface later became vital for Azure’s data centers.
Did relying on Windows hurt search too?
We were late, spread thin on portals and verticals, and leaned too much on Windows integration and the Windows Live brand when the real game was generic search at massive scale.
On mobile, was the real competitor Android, not iPhone?
Yes; there was a brief Verizon window where we lacked the right product and Android seized it, and if we’d been less dogmatic about being “a platform company,” we might even have shipped a Microsoft‑flavored Android device to learn faster.
Surface felt like you breaking model to win the high‑end PC—why do it?
OEM economics couldn’t create a premium, visible PC that inspired users, so we had to do our own hardware to shape the experience and brand.
How did Azure start inside Microsoft?
The cloud wasn’t a surprise—we had Exchange Online and the Energizer vision—so around 2005 to 2006 I pulled in Dave Cutler and Amitabh Srivastava to build a platform, initially as platform‑as‑a‑service, which reflected our Windows mindset at the time.
Why incubate it outside Server and Tools?
You protect a new thing away from the incumbent, and Ray Ozzie needed operating room; it later rejoined, but starting separately helped it grow.
You also made a public “all‑in on cloud” speech—was that aimed at your own people?
Absolutely; external declarations can reset culture when internal emails won’t, and it took years of grind before Azure hit real momentum.
You’ve got a “two‑trick pony” framework—how do you score Microsoft?
Desktop and back‑office were two distinct locomotives that had to be moved to the cloud, with gaming a half trick; most giants are two tricks, and Android, for Google, is really lead‑gen for the search trick.
Beyond products, what are your biggest leadership wins and lessons?
We invented modern enterprise go‑to‑market for software and carried it into the cloud; financially, profits grew far more than the headline suggests once you account for option expensing and our shift to stock awards during the dot‑com hangover.
How did antitrust and the stock collapse affect culture?
Morale took a real hit—comp felt different, the case felt personal, and we had to reshape an executive offsite on the fly to address integrity concerns that leaders like Orlando Ayala voiced openly.
You tripled revenue but the stock was flat for a decade—why didn’t Wall Street reward that?
We dampened expectations by design, didn’t do quarterly calls or guidance, inherited a bubble peak that reset narratives, and I was vocal about spending to win, which investors don’t love.
It felt like you were willing to spend big to win, while Amy brought tight discipline to make every dollar earn its keep.
Investors saw me as a spender, worried about Windows, and the stock went nowhere; by the end I couldn’t credibly rebrand myself, and a clean slate probably required a new CEO.
It looked like it stopped being fun for you near the end.
The hardest stretch was Vista and the early 2000s with antitrust, plus a year when Bill and I barely spoke as we figured out CEO and founder roles.
We made big mistakes with Longhorn, under‑challenged our assumptions, and fought over hardware like Surface, phone, and HoloLens; Xbox was a win, but we were doing too much.
A drawn‑out transition for Bill was a mistake; after he left I did some of my best work on cloud, Surface, Windows improvements, and Bing.
Tell us the Qi Lu story.
Satya, Harry, and I flew to recruit Qi; after meeting him, Satya and Harry said we should hire Qi and have them report to him, which told me Satya put the company first.
Qi professionalized search, and Bing eventually threw off real cash; it also let me broaden Satya’s scope by moving him to Server and Tools as part of succession planning.
Why did you resign?
Phone ate at me; I believed we had to own hardware, had even explored buying HTC, and when the board said no—amid a bad process tied up with Bill—I decided it was time.
Cloud needed new muscles and operating metrics focused on gross margin, and if we couldn’t land a true consumer locomotive—mobile or search—I wasn’t the right person to lead that next phase.
Then why did they buy Nokia after you left?
I don’t know; our Nokia partnership needed real capital, and without owning the device economics, the math didn’t work—either buy it or walk away.
You kept all your shares and stayed the largest individual holder; how did that feel?
I had to detach emotionally, gave some to a donor‑advised fund, sold a little, and then decided loyalty mattered more; I was fine living with the upside or the downside.
Dividends plus other assets fund our giving, so I didn’t need to sell more stock; outside Microsoft I mostly hold index funds, the Clippers and arena, and a stake in Stagwell.
Charlie Munger once joked he knew I wasn’t that smart for holding, but for me it came from the heart and a view that the worst case was still okay for my family and philanthropy.
Are the Clippers and the Intuit Dome paid off?
I cleared the team debt long ago; the arena carries attractive financing by design to broaden the buyer pool someday, and I used some margin debt to avoid selling shares, which I’m paying down with dividends.
Teams behave a bit like art—people buy them for passion, not cash flow—and LA is one of the most durable markets; I’m not selling.
What surprised you most about owning the Clippers?
It feels a lot like software: major releases in summer via the draft and free agency, mid‑season patches at the deadline, and constant game‑plan iteration like agile development.
It’s also different—there’s a union, you cooperate with rivals on the league, and career ladders are finite—plus accountability is brutal because every possession is public and measured.
Real teamwork means in‑the‑moment feedback and everyone making everyone else better, which is why at Microsoft I pushed values around openness, respect, and elevating others instead of vague ‘teamwork’ talk.
How do you hire in sports compared with tech?
Reference checks are exhaustive—coaches, teammates, practices, film—especially for the draft, where you’re projecting nineteen‑year‑olds into their mid‑twenties.
Where does analytics actually create edge?
It’s most useful in game planning if coaches and analysts truly sync; for drafting and trading it’s helpful but constrained because fit is contextual and college data varies in quality.
The raw tracking data and vendor tools are largely common across teams, so edge comes from questions asked, integration with coaching, and judgment.
What’s the core idea behind the Intuit Dome?
Build the ultimate home for hardcore basketball fans, especially Clippers fans, with energy, intimacy, and no compromises for other sports.
We created a steep, continuous wall with a standing ‘Swell’ behind the visitor basket, huge 4K halo screens, and no hockey layout, all to crank up home‑court advantage.
Those seats are affordable but come with expectations—stand, cheer, no visiting gear—and the early data shows it rattles opponents at the line.
We took a revenue hit to make it basketball‑first, added lots of restrooms, frictionless concessions, a simple menu everywhere, and top‑tier facilities for players, refs, and media.
The building is me—focused, loud, loyal—and it matches a fan base that’s stuck with us; we’ll keep grinding in LA for our fair share, and we want to beat the Lakers every time we play.
Thank you, Steve.
That was a blast; the job he had was insanely complex—products, developers, Windows’s future, people, the board, and a tough CEO transition.
When we started this show, it wasn’t obvious Microsoft would become what it is now; Steve had planted enterprise seeds and saw the cloud early, but the world hadn’t caught up.