Documentary: Download - The True Story of the Internet (part 1) (Browser Wars)
Download: The True Story of the Internet is about a revolution — the technological, cultural, commercial and social revolution that has radically changed our lives. And for the first time on television, we hear how it happened from the men and women who made it possible.
From the founders of eBay, Yahoo, Amazon, Netscape, Google and many others, we hear amazing stories of how, in ten short years, the Internet took over our lives. These extraordinary men and women tell us how they went from being geeky, computer obsessed nerds to being 21st-century visionaries in the time it takes most people to get their first promotion. And, how they made untold billions along the way.
The style of the story-telling is up close and personal. With first-hand testimony from the people that matter, we tell a story that has all the excitement of a thriller — full of battles and back-stabbing, moments of genius and moments of sheer hilarity. You will never surf the net in the same way again.
Download is hosted by technology journalist John Heileman. He’s an edgy, combative, hi-energy New Yorker who never takes anything at face value. He’s also a personal friend of most of Silicon Valley’s most important characters and he revels in the craziness of it all. After all, this is a story in which 20-year-olds become overnight billionaires, create, destroy and re-create more wealth in ten years than the human race has ever seen, and still struggle to get a date.
From the founders of eBay, Yahoo, Amazon, Netscape, Google and many others, we hear amazing stories of how, in ten short years, the Internet took over our lives. These extraordinary men and women tell us how they went from being geeky, computer obsessed nerds to being 21st-century visionaries in the time it takes most people to get their first promotion. And, how they made untold billions along the way.
The style of the story-telling is up close and personal. With first-hand testimony from the people that matter, we tell a story that has all the excitement of a thriller — full of battles and back-stabbing, moments of genius and moments of sheer hilarity. You will never surf the net in the same way again.
Download is hosted by technology journalist John Heileman. He’s an edgy, combative, hi-energy New Yorker who never takes anything at face value. He’s also a personal friend of most of Silicon Valley’s most important characters and he revels in the craziness of it all. After all, this is a story in which 20-year-olds become overnight billionaires, create, destroy and re-create more wealth in ten years than the human race has ever seen, and still struggle to get a date.
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TechTranscript
00:00You know, us humans, we've been pretty busy these past few millennia, since whenever it
00:15was we stopped dragging our knuckles on the ground and made the great leap forward from
00:19chimpanzee to homo sapiens.
00:20We've made a lot of mischief, that's for sure, but we've also created some pretty cool gear,
00:25which kind of got me thinking.
00:28Billions of years from now, when learned scholars gaze back and try to list the most important,
00:33transformative, world-changing inventions in the history of humanity, what's likely
00:38to make the cut?
00:40The electric light bulb, the steam engine, the internal combustion engine, the aeroplane,
00:48the automobile, and of course, sliced bread.
00:51But right up there in the pantheon, alongside all that stuff, is a more recent breakthrough,
00:55a new invention that came out of nowhere, and in a few short years, whipped through
01:00all our lives like a Bengali typhoon.
01:03The invention in question is, of course, the World Wide Web, an amazing and surreal universe
01:08that spawned huge fortunes, upended countless industries, and changed the way that much
01:13of the world works, plays, communicates, shops, and even falls in love.
01:20My name's John Heilemann, and I'm here to tell you the story of the web's rise from
01:23obscurity to global ubiquity.
01:26It's a tale I know like the back of my hand, because as a journalist, I had a ringside
01:30seat for the whole shebang.
01:32For more than a decade, I was right here in Silicon Valley, witnessing up close the moments
01:36that shaped the internet age.
01:39That age began with a vicious power struggle to decide who would control the future of
01:43the just-emerging web.
01:45Jim Clark starts literally pounding the table, and he's like, we have to take this thing
01:48public.
01:49We have to take it public right now.
01:50Close of trading.
01:51I had made $663 million.
01:53A struggle that would end with an epic courtroom battle.
01:56I have no idea what you're talking about.
01:57And that would forever be remembered as the browser war.
02:00We were like a deer in the headlights with Microsoft in front of us, so, you know, what
02:04do we do?
02:05What do we do?
02:06It was all hands on deck.
02:07This is not a drill.
02:08They're going to crush us.
02:09They're going to crush us.
02:10We have to destroy this company.
02:23Today we're all used to the web with its fancy video and graphics and sound, where
02:26one mouse click can send us rolling down a new path.
02:30Who knows where you'll end up?
02:33But back in the early 90s, the web was very different.
02:36It was basically just an obscure research network invented a few years earlier by an
02:40English scientist called Tim Berners-Lee.
02:43There were precious few web pages, and the ones that did exist consisted of nothing but
02:47line after line of boring text.
02:51You had to be a big-time geek to get all excited about this thing.
02:55But one of those geeks, a visionary University of Illinois computer science student named
02:59Mark Andreessen, had a crazy idea.
03:02He imagined a future where everyone, including regular people like you and me, would use
03:06the web as part of our daily lives.
03:09Andreessen worked in a cubicle near me, and he was working on a different product.
03:12And then he got all wild-eyed about this thing called a web.
03:16The Internet at that point was really only for nerds.
03:18It was really only for academics and researchers and scientists.
03:21And there wasn't anything that ordinary people could do on it.
03:23But it was so useful to the people who were using it that I always figured everybody should
03:26be able to use it.
03:27He was like, yeah, man, this stuff is going to change the world.
03:29It'll be great.
03:30You know, it's global hypermedia.
03:31And so I was just like, yeah, OK, whatever.
03:35Andreessen may have been the most excitable, but soon enough, he and a bunch of his college
03:39programming pals were working on making the web easier and more intuitive to use, adding
03:44images, pictures, audio, and video capabilities.
03:49The fruit of their labors was this, a dead simple piece of point-and-click software,
03:53the world's first graphical web browser.
03:56And every time you surf the Internet today, you're using one of its descendants.
04:00In the fall of 1993, the Illinois Geeks posted Mosaic online and made it a freely downloadable
04:06gift to humanity.
04:08And what a gift it turned out to be.
04:10Well, we first posted the announcement on a news group, on a user news group at that
04:14point.
04:15And I just had to say, does anybody want to be a part of a beta effort?
04:18And I got back 12 responses.
04:19And so I sent the browser to 12 people.
04:21And then it just spread virally from there.
04:23So it spread from 12 to 100 to 1,000 to 10,000 to 100,000 to a million.
04:27This was the moment when the Internet went from obscurity to ubiquity, from a toy for
04:31geeks and a tool for scientists to a bona fide mass media.
04:35A bunch of 20-something, code-crunching, burger-guzzling kids had kick-started a revolution.
04:40But before Mosaic could go truly global and imperil Bill Gates and Microsoft, it needed
04:45one more ingredient, a giant heaping pile of cash.
04:50This extremely expensive building was a gift to Stanford University from this man, one
04:55of its former professors, Jim Clark.
04:59A poor kid from West Texas, Clark was a high school dropout who turned himself into a computer
05:03science professor at Stanford, then founded a company called Silicon Graphics that made
05:07him a legend in the valley.
05:08He had a taste for fast cars, expensive wine, and mid-air debt-defying antics, like flying
05:13a stunt plane.
05:14The first time we met, in fact, he took me on a helicopter ride and nearly killed us
05:17both.
05:18And having just left Silicon Graphics, Clark was looking for something new, something big.
05:23And when he saw Mosaic, he quickly became convinced that he'd found it.
05:28I had spent a lot of years thinking about the convergence of different kinds of media
05:33with digital technology.
05:35And so it just sort of crystallized in my mind that the Internet and the World Wide
05:40Web were going to be the thing that ushered in that convergence.
05:46Wasting no time, Clark contacted Marc Andreessen, who had graduated from college and hightailed
05:52it out of Illinois, straight to a job in Silicon Valley.
05:54February of 94, I'm at work and I get an email from Jim Clark saying, I'm thinking of starting
05:59a new software company.
06:00Do you want to get together and talk?
06:01So I said, you know, well, this is interesting.
06:03So I broke my normal rule of not getting up before noon and got up and had breakfast with
06:07him at 7 a.m.
06:08In the months that followed, Marc and Clark became inseparable as they plotted how to
06:12turn Mosaic into the basis of a business venture.
06:15But this obviously wasn't something that they could do by themselves.
06:19They needed a team.
06:20And soon they were on a plane for Illinois on a recruiting trip that would spark the
06:23start of the Internet age.
06:26We hopped on a plane and arrived late one evening and met everyone at a pizza parlor
06:31and sat there and had a beer and some pizza and just kind of talked about generally what
06:36we thought.
06:37Well, I think we were all a little intimidated, to tell the truth, because he's, he was this
06:42big Silicon Valley guy, relatively famous and founded a very large computer company.
06:48Everyone knows he's got a lot of money and, you know, he's coming out here and he, he
06:53listened.
06:54I didn't have a concept of how we would make money at the time.
06:58But it's like so many other things.
07:00If there are that many people using something and it had grown to a million users in a period
07:05of nine months, there's going to be a way to make money out of it.
07:08But these guys had no, no clue.
07:10What Clark cared about right now was getting the Illinois geeks on board.
07:14So he made them an offer beyond their wildest dreams.
07:18Each of us comes back a little starry eyed, a little dazed, you know, and for me, just
07:22in junior year of university, you know, I was just like, yeah, you know, getting a full
07:26time job offer before I've even graduated for that kind of money.
07:29It's like, oh, wow.
07:30Yeah, man.
07:31Why would I turn that down?
07:32You know?
07:34In hindsight, it might seem obvious that the web browser would change the world, but although
07:38Jim Clark may have grasped that insight, most people didn't, including the one person you
07:42would have expected to get it immediately.
07:45Bill Gates.
07:46Gates, of course, was the co-founder and CEO of Microsoft, the most important and fantastically
07:52profitable high tech company of them all.
07:54Over the course of two decades, Microsoft had established a near monopoly over PC operating
07:59systems and had used that monopoly to gain a vice-like grip over the entire computer
08:04industry.
08:05The web was cyberspace as a wide open road, fast moving and exhilarating, and it would
08:09take you absolutely anywhere that your curiosity led you.
08:12But Bill Gates thought that the information highway should be a toll road on which Microsoft
08:16controlled all the toll booths and we would all have to pay to drive.
08:21Thanks a lot.
08:24Gates's online system was called, surprise, surprise, the Microsoft Network, and in 1994,
08:29lots of smart people assumed that he would succeed in foisting on the world like he usually
08:34did.
08:35Here was the information superhighway that futurists had been predicting for years.
08:39And although Gates didn't realize it yet, his worst nightmare was about to come true.
08:43A gang of kids as young and ambitious as he himself had once been were about to threaten
08:48everything he stood for and everything that Microsoft had achieved.
08:59Brilliant, the spectacle that obsessed with computers since his boyhood, Bill Gates's
09:10journey to becoming the most powerful figure in technology began in 1975 when, at the age
09:16of 19, he dropped out of Harvard to start Microsoft with his high school pal, Paul Allen.
09:23Gates's vision was simple and wildly ambitious, a PC on every desktop in every home and every
09:28office, and every one of those PCs running Microsoft software.
09:32By 1993, his dream was tantalizingly close to becoming reality.
09:36About 90% of the world's PCs were running Microsoft Windows.
09:41Gates and the army that he'd amassed on Microsoft's sprawling campus in suburban Seattle worked
09:45insanely hard, and they played very rough with their rivals.
09:49The company's rise had left a trail of corpses in its wake.
09:53There was Lotus.
09:54There was WordPerfect.
09:55There was Borland.
09:56There was Novell.
09:57And mighty IBM, all brought to their knees.
10:01Gates was now one of the richest and most influential men on earth, and he knew it.
10:05One night at a dinner party, he and some friends were discussing the election of Bill Clinton
10:08as president, and Gates blurted out, I have as much power as the president does.
10:12His wife kicked him under the table when she heard that, but the truth of it was, he might
10:16have been right.
10:21To many, Gates's power was seductive, irresistible.
10:25If you were a young, hungry software engineer, like Thomas Reardon, or Hadi Partovi, or a
10:30seasoned executive like Sam Jadalla, Microsoft was the place to be, a place where it didn't
10:36matter if you were handsome or athletic, a place where smartness, measured by the ability
10:41to crank out killer code, was the only thing that counted.
10:44In other words, nerd nirvana.
10:48In the early 90s, the Microsoft campus was a very dynamic culture.
10:52You'd have many of the smartest people in computer science at all different ages, but
10:56it was a surprisingly young company overall.
10:59The average age of the company was probably 26, 27.
11:03Microsoft was not the biggest software company in the world, but in a weird way, it was the
11:06hottest, and it was clear.
11:09There was a vibe when you walked in the door, a kind of cockiness that perfused every kind
11:15of job at Microsoft.
11:16It wasn't just the engineers.
11:17I joined Microsoft in 1987, and this was a group of people who wanted to win.
11:23This was a group of people who were very aggressive about the competition.
11:31Microsoft's behavior was certainly extreme, but it was driven less by arrogance than by
11:35fear and insecurity.
11:37Gates knew that at any moment, some puny little startup in a garage somewhere could rise up
11:41and topple Microsoft, just as they'd done to others.
11:46And along with his trusted lieutenant, Steve Ballmer, he was determined not to let that
11:50happen.
11:52Unlike Gates, the college dropout, Ballmer had actually been to business school, where
11:56Gates was Microsoft's superego, skinny and cerebral.
12:00Ballmer was its raging id, beefy and emotional.
12:03But it was nothing compared to Gates himself, the smartest of the Microsoft smart guys,
12:07a brainiac who never suffered fools gladly, if he even suffered them at all.
12:12That's ridiculous.
12:13I'm not doozing this thing.
12:14No, no, no, no, no.
12:15Somebody's confused.
12:16Somebody's just not thinking.
12:17I mean, there's no way.
12:18We'll figure it out.
12:19You guys never understood.
12:20You never understood the first thing about this.
12:21In all the times that I've met Gates, there's only been one consistent element.
12:27The moment when he looked at me and said that something I'd said was the stupidest thing
12:30you'd ever heard.
12:32And I didn't even work for the guy.
12:34But Thomas Reardon did, and he remembers his first meeting with Gates as one of the most
12:39unnerving experiences of his life.
12:42He is not one known to throw out compliments.
12:45It was just sort of a, it's good, looks good.
12:51Yeah, we'll probably need to do more of this.
12:54And that was about the about the feedback that I felt like we got.
12:57And it wasn't that he was disinterested.
12:59I think I learned at the time, really, you feel like you've had a major victory if you
13:03haven't been shredded.
13:07If he hasn't called you an idiot 19 times, guess what, you had a good bill meeting.
13:12With Microsoft's minions under his spell, billions of dollars in his bank account, and
13:16the launch of Windows 95 looming on the horizon, the Bill Gates of 1993 was on the verge of
13:21becoming the world's high-tech emperor.
13:23Less than two years later, though, Gates would be forced to make one of the sharpest U-turns
13:27in corporate history, because Clark and Dreesen and their team were about to enter the picture
13:32and throw a giant roadblock in their path.
13:42Certain parts of the world have always been magnets for certain types of people.
13:56L.A. is for actors, Las Vegas is for gamblers, Paris is for artists.
14:01This 30-mile stretch between San Francisco and San Jose has always been a magnet for,
14:05shall we say, the technologically inclined.
14:08In the summer of 1994, this place had become home base for Jim Clark and his renegade band
14:13of young web browser pioneers.
14:15In the next few months, they would launch the fastest-growing software company the world
14:19had ever seen, Netscape Communications.
14:23Under the watchful eye of Clark, the Netscape guys were adherents to the cause of spreading
14:27the reach of the still-embryonic web, and hopefully getting rich in the process.
14:35But first, they had to deal with a severe case of culture shock.
14:39I've never been out to California before, and when I got here, I was like, how come
14:43no one told me about this place before?
14:45This is the Mecca.
14:47Yeah, this is kind of the Disneyland for geeks out here.
14:50It was also a brilliant move to take a bunch of guys, move them out of their home environments,
14:55and just drop them into a new company, because we didn't know anything else except work.
15:01The plan was simple.
15:03Back in Illinois, the gang had created the first graphical web browser, Mosaic.
15:07Now they would work like maniacs to build a new browser based on that, and turn the
15:12internet into the future of commerce and communication.
15:16Just another day at the office, right?
15:19I think the mission as communicated to me and the rest of the group was to take over
15:23the world as quickly as possible.
15:25You know, nothing big, nothing really grand, just go out there and make software so compelling
15:30and so great that you'd have to be an idiot not to want it.
15:36But everyone at Netscape knew that time was of the essence.
15:39The web was becoming more popular with every passing day.
15:42The fear was that another, more powerful company would see its potential and launch a browser
15:47before Netscape had a chance to.
15:49I was on about a 36-hour cycle, so I'd work for about 24 hours and sleep for about 12
15:53hours, fueled in those days primarily by Skittles and Mountain Dew.
15:56There was an extreme sense of urgency once we started.
16:00Because we all knew that this wasn't a hard thing to do.
16:04And they were right to be worried, because back in Seattle, even though Bill Gates still
16:08had his doubts about the web, some Microsofties were aware of Netscape.
16:12Thomas Reardon at one point contacted the young company to sniff around for information
16:16and found that whatever their inner fears, Netscape gave off a different public vibe,
16:21one of supreme arrogance.
16:23We were kind of aware of them at a distance, so called up and talked to an executive there
16:29and basically got told to go pound sand.
16:32And I was like, wow.
16:33Every company I called was like, wow, Microsoft's calling.
16:37Netscape, 15 minutes and just told me to, not interested, and not just not interested,
16:44but don't even try calling back.
16:47When you're at Microsoft, you kind of get used to being kind of lords of the industry
16:52and everybody paying you some homage at some point in time, nothing.
16:58It's clear that Netscape culturally already perceived Microsoft as the people to take out.
17:08On the 13th of October, 1994, after months of feverish nonstop coding, Netscape's new
17:14web browser, Navigator, finally hit the streets.
17:20From this moment, conflict was inevitable, with Netscape cast as the upstart David and
17:24Microsoft as the mighty Goliath.
17:25Now, you might not think that David would have much of a chance in this fight, but from
17:29the moment Netscape's browser, Navigator, was launched, it was an instant runaway success.
17:33The night of the first release, we set up in one of the conference rooms, we set up
17:36a computer to watch the downloads, and we had a sound effect where there'd be a cannon
17:40shot every time somebody downloaded the software.
17:42And, you know, after a while, it sounded like a war, because there was just cannon shots,
17:44you know, just continuous cannon shots.
17:46Soon, the web was spreading like wildfire around the globe.
17:50The internet age had truly begun, and it had nothing to do with Microsoft.
17:55We'd never seen anything like this in the history of software.
17:58In 30 days, 90% of the people who were on the web switched from Mosaic to Netscape.
18:05That just doesn't happen in software, nothing, ever, ever.
18:09There was a point probably when Netscape got a million downloads, and suddenly we thought,
18:15what's going on?
18:16A million downloads?
18:17That's a pretty big number.
18:19But the truth is that Microsoft's worries about Netscape ran a lot deeper than its little
18:23browser, and to understand why requires just a little technical understanding.
18:27In the computer business, the companies that have the most power control what's known as
18:31a software platform.
18:33That's the software on which other programs run on top.
18:37With its near monopoly over the Windows operating system, Microsoft controlled the ultimate
18:40platform.
18:41It was the one on which the whole computer business rose and fell.
18:44And for years, it was impossible to imagine that anyone could ever challenge its supremacy.
18:50But now Bill Gates' many rivals in Silicon Valley began to imagine a different future.
18:54A future where the browser could be an alternative platform.
18:58One where you could carry out all your computing needs online, thereby leveling the playing
19:02field in the industry and rendering Windows, the most profitable software in the history
19:06of man, completely irrelevant.
19:10Suddenly we realized, wow, we've got a kink in the armor.
19:14There is a way that somebody could dislodge the Windows franchise, and there are scenarios
19:19that could become popular where suddenly we'd lose our leadership position.
19:25Netscape's sudden success was impossible for Microsoft to ignore.
19:29Suddenly Bill Gates got it.
19:31Not just the importance of the web, but the scale of his own strategic blunder and the
19:35need to rectify it right now.
19:39Late one night, Gates sat at his computer and pounded out a memo to his troops entitled
19:43The Internet Tidal Wave.
19:45He declared that the web was, quote, the single most important development in computing since
19:49the PC.
19:51And he wrote about Netscape as, quote, a new competitor born on the internet.
19:55A competitor that Microsoft absolutely had to, quote, match and beat, which meant to
20:00destroy.
20:01This was a just complete take a right turn, everybody right now, starting not like next
20:07week or next month, but starting tomorrow, figure out how your job changes.
20:11Bill's message to the company was, let's go find lots of ways for us to now engage in
20:19this new battle.
20:20That's probably, you could argue, the beginning of the browser war.
20:34In 1993, the internet was unknown and unloved outside a tiny circle of hardcore computer
20:39hackers and scientists.
20:40But by 1995, the situation had changed dramatically.
20:45Now thanks to the wizardry and the manic energy of a bunch of engineers here in Silicon
20:49Valley, the internet was becoming a full-scale phenomenon, a technology being compared in
20:54its importance to television and the printing press.
20:57Leading the charge was Netscape.
20:59Its browser was quickly becoming the gateway to the web for millions of people.
21:03The company had just hired a respectable CEO and revenues were rolling in.
21:08The future looked incredibly rosy, or did it?
21:15This man certainly didn't think so.
21:17His name is Gary Reback, a well-known antitrust lawyer in Silicon Valley, who back in the
21:22summer of 1995 was limbering up for the fight of his life.
21:26Like many in the Valley, he knew that Bill Gates would be coming after the internet.
21:29And he knew better than most, from a career of clashing with Microsoft on behalf of his
21:34Valley clients, that when Gates came after your business, one thing was certain, there
21:38would be blood.
21:42Now Reback had been hired by Netscape, and right away he saw that the young company had
21:47grossly underestimated the threat that it was facing.
21:52Netscape's business plan assumed that Microsoft would either obey the law or someone would
21:59force them to obey the law.
22:01Now I suppose that's not an unreasonable assumption.
22:03After all, if you start a business, you don't expect a competitor to just burn your plant
22:09down.
22:10You don't expect a competitor to go to your distributors and threaten to put them out
22:13of business if they carry your product.
22:16But you know what?
22:17That's exactly what Microsoft did.
22:19The problem for Netscape was that Microsoft and Bill Gates now perceived the young company
22:22to be the primary threat to their continued dominance.
22:25In the opening salvo of a high-tech war, Gates dispatched a special group of envoys, including
22:29Thomas Reardon, for a face-to-face powwow behind enemy lines here at what back then
22:34was Netscape's corporate headquarters.
22:36What resulted was a meeting that would be one of the most controversial in the history
22:40of modern business.
22:41That the Microsoft-Netscape meeting took place here, that much we know for sure.
22:45But what actually happened behind closed doors remains the subject of intense and bitter
22:48debate.
22:49The Microsoft version goes something like this.
22:54We go down there in June of 95, and we had this free-roaming discussion with them about
23:01how we would work with Netscape, how would we work with them on web servers and on browsers
23:05and how Microsoft Word could work with Netscape software, etc.
23:09It was a broad discussion that went on, I think, for six hours, a whole day of discussions.
23:15It was interesting.
23:16I thought it was a really collegial, easygoing meeting.
23:18Hey, that doesn't sound so bad, but Netscape's version of events was just a little bit different.
23:26They came to the meeting and they made them an offer.
23:28And the offer was, I win and maybe you're there, or I win and you're not there at all.
23:35Those are the two choices, basically.
23:36It was kind of like that scene from The Godfather.
23:39I mean, Netscape got made an offer they couldn't refuse.
23:43I was a baby, and me and some of the other kids there went down and, yeah, Godfather-style
23:48threatened Netscape.
23:49It's just, it's absurd.
23:50It's absurd on its face.
23:52Microsoft offered us $1 million for unlimited access to all our technology, and it'd be
23:57a one-time fee.
23:59So essentially they said, we'll buy your whole business for $1 million, take it or leave
24:03it, because if you leave it, we're just going to copy everything you do.
24:06I remember thinking at the time, if this isn't illegal, it should be.
24:12If what Netscape claimed was true, it meant that Microsoft had broken the law, American
24:16antitrust law to be precise.
24:18The point of that law was to constrain the behavior of companies that held monopolies,
24:22which most sane experts agreed Microsoft had with its Windows operating system.
24:29Within hours of the meeting, Netscape instructed Gary Rehbach to alert the U.S. Justice Department
24:33about what had taken place and to start laying the groundwork for a lawsuit against Microsoft.
24:40But Thomas Reardon smelled a rat.
24:44Why did Netscape have antitrust counsel, not just any antitrust counsel, but the legendary
24:49Gary Rehbach, the guy known, famous for going after Microsoft for years, trying to stir
24:56up a government suit against Microsoft?
24:58You know, effectively, we had been had, the meeting had been set up.
25:03A paranoid theory?
25:05No doubt.
25:06At the time, Netscape was the hottest young company in high technology.
25:09So why would it need to try and set up Microsoft?
25:13On Wall Street, analysts and bankers had begun to sing its praises, talking about the bright
25:18prospects ahead if Netscape were to launch an IPO.
25:21I looked at our projections for Netscape and realized that there was a chance that
25:27Netscape could be the fastest growing software company ever.
25:30Jim Clark starts literally pounding the table and he's like, we have to take this thing
25:33public.
25:34We have to take it public right now.
25:35And everybody in the room was like, really?
25:38Are you sure?
25:39You could just almost predict that we were going to have something between 60 and 80
25:42million in revenues for the year.
25:46Now hold on here.
25:47Wait a minute.
25:48Let's think about this.
25:49Before Netscape, the standard rule on Wall Street was that a company needed to have at
25:53least a year, and preferably two, of strong and growing profits before it could even think
25:57about going public.
25:58But Netscape in August of 1995 had only been in existence for a year.
26:02It didn't have a dime of profits and it had no idea how it was going to make them.
26:05And as Jim Clark told me at the time, the only reason that he wanted to go public so
26:08fast was because he needed a giant windfall so he could build the world's biggest computerized
26:13yacht.
26:14So under these circumstances, going public was lunacy for Netscape, right?
26:19Wrong.
26:25On the day of the IPO, Netscape's stock went through the roof, igniting the internet boom
26:30that would rage for the rest of the decade.
26:39I was on the trading floor and I went over to talk to our trader, David Slane.
26:45And Matt DiSalvo, who ran our trading desk, literally stepped in front of me and prevented
26:49me from getting close to Dave.
26:51And I said, what's going on?
26:53And he said, there's a lot of volume in the trading and the shares and Dave, you know,
26:57Dave needs all the focus that he has.
26:59And he starts saying, you know, biggest IPO ever, you know, biggest rise, it's like all
27:03this crazy stuff.
27:04I was like, wow, people really like this, I guess.
27:07The internet went from nothing to, you know, the biggest story to hit the media and sort
27:12of consumer consciousness in a long time.
27:15And just, you know, at that point, then the level of attention just, you know, escalated
27:18off the charts.
27:19I invested $5 million in the company.
27:21And on the day of the IPO, the close of trading, I had made $663 million.
27:28Just about enough for Clark to buy his yacht and enough for Netscape to become a public
27:32company with shares trading at $120 and an overall valuation of more than $2 billion.
27:39The Netscape engineers, young men in their 20s, were now filthy rich celebrity nerds.
27:45Sure enough, it went straight to their heads.
27:48High on their own fumes, the Netscapees began to think they were invincible.
27:51They treated even their allies with arrogant indifference.
27:54And as for their enemies, one in particular, they violated one of Silicon Valley's cardinal
27:58rules, don't moon the giant.
28:01Back in the days when no one would give the finger to Microsoft, here was Marc Andreessen
28:04in the press over and over heaping scorn on the company.
28:08Marc Andreessen was very clear on many occasions that he didn't think much of Microsoft, he
28:13didn't think much about the quality of Microsoft software, and he thought that Windows was
28:17dead.
28:18Windows is going to be a bag of poorly debugged device drivers was one of his sort of most
28:21notable quotes.
28:22A poorly debugged set of device drivers?
28:25What does that even mean?
28:26To people who speak English like you and me, it doesn't sound so bad.
28:29But if you're an engineer, the kind of person who speaks geek, Marc Andreessen's comment
28:33was the equivalent of a slur on Bill Gates' mother.
28:37And it played straight into Gates' hands, spurring Microsoft on in their burgeoning
28:42war against Netscape.
28:45For the developers in Windows, who were some of the best developers in the world, to have
28:50their baby thought of as a set of poorly debugged device drivers was maddening.
28:56And it was insulting, and it got them motivated.
29:02I actually personally postered the walls of our hallways with pictures of the top executives
29:07from Netscape and some of the quotes that they made simply to motivate people to know
29:11you know these are the faces of the people you're fighting against.
29:13Then you started actually reading articles where people are like, Netscape?
29:16The new Microsoft?
29:17They're like, no, we're the Microsoft, we're the new Microsoft.
29:22With his engineers spoiling for a fight and emotions running high, on December 7th, 1995,
29:29Gates let the world know that he had Netscape in his sights.
29:32Microsoft planned to drive Clark and Andreessen's startup to an early grave with a web browser
29:36of its own, Internet Explorer.
29:40Microsoft hastily arranged a press and analyst meeting in Seattle.
29:46They did it by design on the anniversary of the attack on Pearl Harbor, and it was called
29:51the Pearl Harbor Day.
29:53And the view was they were going to attack Netscape with all that they could.
30:00Every company at Microsoft, every last group, every last product was lined up and focused
30:04against Netscape.
30:07We could say it was focused on the internet, but it was against Netscape.
30:12That was it.
30:13It was everything.
30:14It was all hands on deck.
30:16This is not a drill.
30:17We have to destroy this company.
30:19With traffic on the information highway accelerating rapidly, Gates had pulled out all the stops,
30:24pouring millions of dollars into the web, and turning Internet Explorer into a do or
30:28die cause at Microsoft.
30:30The sleeping giant had awakened, was how he put it, and now Netscape was about to find
30:34itself in a world of trouble.
30:36So maybe, just maybe, it had been a mistake to moon that giant and get its dander up.
30:41Maybe Andreessen should have been just a little bit less confrontational.
30:46If you want to explore that with other people, I'm fine with it, but I'll take a pass.
30:51Andreessen announcing that Windows would be irrelevant was probably not such a hot idea.
31:00By 1996, the internet was exploding.
31:09With billions of dollars at stake, Microsoft and Netscape were locked in a titanic power
31:12struggle over who would become the dominant force in the brave new world of the web.
31:16And now it was entering its final, its most dramatic, and for Netscape, its most devastating
31:21phase.
31:23Despite Netscape's head start, Microsoft's Internet Explorer team had some real advantages.
31:28With vast financial resources and reserves of coding talent, and a leader, Bill Gates,
31:32who's willing to do anything, up to and including breaking the law, to annihilate Netscape,
31:37the fresh-faced company that now ruled the web, captured the public's fascination, and
31:42threatened to finally undermine Microsoft's rule of fear.
31:46I remember going back to college and talking to some friends and telling them, you know,
31:51I was working on building a Microsoft competitor to Netscape, and people just laughing at me,
31:55thinking, you know, what are you thinking, there's no way.
31:59Microsoft's plan was straightforward.
32:01Analyze Netscape's every move and imitate it.
32:04Release version after version of Internet Explorer, and slowly chip away at Netscape's
32:08lead in browser market share, one percentage point at a time.
32:12My typical day was I'd get up, feed the kids breakfast, maybe, you know, take them to daycare,
32:18get to work around, let's say, 9.30 in the morning, and then I'd stay till 3.30 in the
32:23morning.
32:24I'd come home, get about four hours of sleep, get up, have breakfast, take kids, go to work,
32:29and then work 9.30 to 9.30.
32:31We didn't get any extra pay compared to other Microsoft employees.
32:34We were just scared for our product would lose.
32:39And it wasn't just the engineers who were working as if their lives depended on it.
32:42Gates also had at his disposal another formidable weapon, his shadowy army of salesmen.
32:47Secretive, relentless, and sometimes underhanded, their mission was clear.
32:52To put Netscape Navigator out of business by whatever means necessary.
32:56To cut off its air supply, as one Microsofty put it, and to shove Internet Explorer down
33:00the throat of every Microsoft customer.
33:02The people who sold software to PC manufacturers were like a dark cult of people who you just
33:10knew just kept making money in ways that maybe we didn't even want to know how they were
33:15making money.
33:16They're like ninjas.
33:17They're like, you don't ask them what they do, they go in and they do these deals.
33:20They're, you know, half billion dollar deals.
33:23These are big, big, multi-year sales deals.
33:26And they would do whatever it is they did and I didn't want to know and people around
33:30me didn't want to know.
33:32Gates' army of silent salesman assassins used all kinds of sharp-edged tactics to stop PC
33:38manufacturers from installing anything other than Internet Explorer.
33:42They had told Compaq that if they distributed our browser, they would cancel, that Microsoft
33:48would cancel the Windows license.
33:49Well, Compaq couldn't be in business without the Windows license, so therefore they weren't
33:54going to distribute our browser.
33:56Whatever else might be said about Microsoft's dirty pool, it was working.
34:01As both companies went head-to-head with version after version of their browsers, the market
34:05share of Internet Explorer steadily grew, and Netscape started to feel Microsoft breathing
34:10down its neck.
34:12Your room for mistake is zero.
34:14You know, you sleep one deadline, the guy is right on your heels, right?
34:20So it was hard.
34:21We were like a deer in the headlights with Microsoft in front of us, so what do we do?
34:25What do we do?
34:26You know, they're going to crush us.
34:27They're going to crush us.
34:28Netscape's sense of impending doom was heightened by one final factor.
34:32If the company was going to live up to its potential, it needed to make profits, so every
34:36dime of revenue was precious.
34:39But Microsoft had billions of dollars in the bank, which led it to do something extraordinary.
34:44Rather than charging money for its web browser, as Netscape had to, Microsoft was able to
34:48give Internet Explorer away for free, bundled and seamlessly integrated into the Windows
34:52operating system.
34:54With IE4, it was over.
34:56I mean, it wasn't, oh, we're going to win.
34:58With IE4, we had 80-plus percent of all browser users, everybody.
35:05By September 1997, the browser war was over.
35:08Microsoft had emerged triumphant, Netscape was reeling, its business on the ropes, its
35:12very survival in doubt.
35:14To mark the launch of Internet Explorer 4, Bill Gates decided to throw a party for the
35:18software warriors who'd created his new browser.
35:20But rather than throwing it here in Seattle, he decided that the more delicious menu would
35:25be here in San Francisco, the very heart of Netscape territory.
35:29During the celebration that followed, Thomas Reardon and his drunken colleagues noticed
35:33a 9-foot-tall Internet Explorer E symbol standing in the lobby of the party venue and were seized
35:39by a devilish, if inebriated, idea.
35:42We hoisted that big, huge, I don't know, several-hundred-pound E up onto this truck
35:47and couldn't really get it roped down to the truck at all.
35:51Having secured the giant E in the back of a truck, the drunken Microsofties paid a driver
35:55to take them down Highway 101 into Silicon Valley.
35:57Then they dumped it here in the Netscape fountain and staggered their way back to the hotel.
36:04A juvenile prank, absolutely, but a fitting symbol, too.
36:08From that point on, it was all downhill for Netscape.
36:11A year later, its market share now in single figures and dwindling, the company that ushered
36:15in the Internet age was acquired by a bigger, but much uncooler company, AOL.
36:20You know, there was a sense that we were building something to last, and then at that point
36:24seeing it get rolled into AOL, it's like, you know what?
36:26It's gone.
36:27That's it.
36:28It's not going to last.
36:29And that was pretty hard.
36:32Jim Clark, too, was bummed about Netscape's demise, but he had a few, or rather a few
36:37million ways to console himself.
36:39I invested five million in the company, and in the end made close to two billion.
36:46And that's a little bit more return than you need.
36:51All of the original Netscape engineers made their millions, too, but in the end were left
36:56to ponder what might have been.
36:59You know, we were no saints either.
37:02We were much better.
37:03We were much better, yes.
37:05We would have been benevolent rulers.
37:07No, we would have been evil.
37:10I just know that now, but I mean, we never got the chance to be truly evil.
37:15Okay.
37:19Jim Clark and his gang of coding misfits may have been defeated, but at least for them,
37:22the war was over.
37:24For Microsoft and Gates, however, quite the opposite was true.
37:27Now they were about to face a foe far larger and more implacable than Netscape.
37:31It was an enemy unlike any the Gates had ever tangled with before.
37:35It didn't reside in Silicon Valley, and it barely knew software from sausages, but it
37:39would threaten to tear Microsoft in two.
37:41The enemy was the United States government, which had come to believe that Gates wasn't
37:45a hero, but a kind of high-tech terrorist.
37:56It's 1998, and the United States Department of Justice, prodded by Microsoft's enemies
38:01in Silicon Valley, and particularly by Netscape, and the Rottweiler lawyer, Gary Reback, has
38:07launched a historic antitrust lawsuit against Bill Gates' company.
38:11The government has accused Microsoft of using its Windows monopoly to engage in a wide variety
38:16of predatory and exclusionary business practices to prevent consumers from accessing Netscape's
38:22products and thus to put the pioneering startup six feet under.
38:27Now with Microsoft's future hanging in the balance, the man who had declared himself
38:31as powerful as the president saw his company hauled into court, accused of being law-breaking
38:36miscreants, and had himself been forced to endure a marathon videotaped deposition.
38:42They had asked him questions and filmed his answers before the trial, and I think this
38:48was something new for Bill Gates, somebody asking him real hard questions that he couldn't
38:53refuse to answer.
38:54You type in here, importance, colon, high.
38:58No.
38:59No?
39:01No, I didn't type that.
39:04Um, who typed in high?
39:11A computer.
39:12Here was the world's richest man, as the public had never seen him before, petulant and passive
39:17aggressive, obfuscatory and obscurantist, as a quibbler, a pedant, an amnesiac, a baby.
39:24I've never seen a stamp like that, I've never used a stamp like that.
39:28Haven't you seen stamps like that in every single one of the documents that you've been
39:32shown during this deposition?
39:34Can you get, get me all the exhibits?
39:36Just a waste of time.
39:37It is a waste of time.
39:39I have no idea what you're talking about when you say ask.
39:42And so he came across in those tapes as not quite being truthful.
39:51In court, the government showed Gates on screen, denying any knowledge of the infamous June
39:571995 meeting with Netscape, saying indeed at the time, quote, I had no sense of what
40:03Netscape was doing.
40:05But then the court was shown an email sent by Gates to some of Microsoft's top brass
40:09a few weeks before the meeting, outlining his strategy for dealing with Netscape.
40:14Gates declared that he thought there was, quote, a powerful deal to be done with Netscape,
40:19and that maybe Microsoft should, quote, buy a piece of them or something, adding that
40:23he, quote, would really like to see this happen.
40:26Did we have people who pushed it and, and did deals that probably in retrospect they
40:31shouldn't have?
40:32I would say, yeah, I think that we did.
40:35That made it very tough on our competitors because we took advantage of our position.
40:41And clearly, unfortunately, that's what, you know, became the dark cloud over Microsoft.
40:49To have an anti-competitive lawsuit brought against you really meant that what we were
40:53trying to do was make things worse for consumers, whereas my day-to-day job was always around
40:57building a better product so that the people I knew and my mother and my brother and friends
41:02and so on would use my product because it was better.
41:06In June of 2000, the federal judge in charge of the Microsoft case issued his final verdict.
41:12Guilty, guilty, guilty.
41:14And he recommended that the company be broken up, causing its stock market value to plunge
41:19by $30 billion overnight.
41:23The verdict brought the highest-kite's Internet Explorer team crashing down to earth.
41:27But it was even harder on Gates himself.
41:30The trial had taken a tremendous toll on Microsoft's boss.
41:33It wore him out, beat him down, made him physically sick.
41:38At one point, I was told by some Microsoft board members, Gates had even broken down
41:42in tears at a company board meeting.
41:45Eventually, however, a federal appeals court, though it agreed with the judgment that Microsoft
41:51had indeed systematically broken the law, decided the verdict was too harsh and rescinded
41:56the order to split the company in two.
41:59To many people, it seemed as if Microsoft had gotten away with murder yet again.
42:03But now, a few years later, standing here at Stanford in front of the Gates Computer
42:07Science Building, ironically just around the corner from the building that Jim Clark paid
42:11for, the story doesn't seem quite that simple.
42:14As the trial concluded, Gates handed over his position as Microsoft's CEO to his number
42:19two, Steve Ballmer.
42:20And soon he began to focus more and more of his time and effort on his philanthropic
42:24interests housed at the Gates Foundation.
42:27What's clear is that very much like J.D. Rockefeller, that robber baron of an earlier age, Gates
42:32may wind up changing the world as much with his charity work as he did at Microsoft.
42:39What's equally clear is that Microsoft is no longer the force it once was.
42:42The cowboy swagger and bravado that defined the company in its golden years is gone.
42:47Although Microsoft won the browser war, the revolution sparked by Netscape unleashed a
42:51new generation of startups, companies like Google, that have made Microsoft look old
42:55and clueless and lumbering, just as Microsoft and Gates made IBM look two decades ago.
43:00And so an eternal lesson of the high-tech world has been proven true again.
43:03It's pure.