It wasn’t obvious at first. Windows users could still use Navigator as they always had—and Netscape’s products remained a favorite of many—but right there, on the opening screen of every Windows PC, was the Internet Explorer icon. An arms race ensued, with both Microsoft and Netscape releasing new and improved versions as they battled for market share. A PR war raged at the same time, as Pam Edstrom and her troops repositioned Gates as the seer of the Internet age and Netscape’s team promoted Marc Andreessen as the Internet’s chief poster boy. Gates wrote a bestselling book on the online future called The Road Ahead. Andreessen, a twenty-four-year-old multimillionaire, posed playfully on a gilded throne on the cover of Time in February 1996. Gates smiled out from the same cover seven months later, over a headline that asked, “Whose Web Will It Be?” Time’s editors seemed to know the answer. “He conquered the computer world. Now he wants the Internet,” declared the subtitle. “If Microsoft overwhelms Netscape, Bill Gates could rule the Information Age.”9
And rule he did. Microsoft had been late to the online party, but the ubiquity of Windows allowed it to catch up very, very fast. With every version, Microsoft ate further and further into Navigator’s once-dominant market share. Netscape’s browser business fell to 20 percent of its revenues. Its dreams of becoming the everything platform for the Internet era were abandoned. By the end of 1997, Netscape was badly missing earnings estimates. It soon had to lay off 360 of its 3,200 employees. The Internet era’s shooting star had crashed to earth in less than four years. It was a remarkably short arc, even in an industry where things always moved faster than usual. Jim Clark was characteristically blunt. “If I’d known four years ago what I know now—that Microsoft would destroy us and that the government wouldn’t do anything about it for three fucking years—I never would’ve started Netscape in the first place.”10
TRUST AND ANTITRUST
The way Silicon Valley responded to the browser war not only revealed the Northern California tech industry’s complicated and increasingly acrimonious relationship with Microsoft. It also was yet another demonstration of the industry’s contradictory politics, a strange mixtape of antipathy toward central authority and a deep, familiar relationship with certain parts of the political establishment. It wasn’t the first time that the computer industry had used the courts as a weapon in gaining a market edge—the Seven Dwarfs of the mainframe industry had egged on the DOJ’s antitrust case against IBM, for example—and it wouldn’t be the last. Antitrust law might not move at Internet speed, but it was a useful tool for slowing the growth of a market leader; when a company got big enough—IBM, Microsoft, and later Google and Facebook—a large target would appear on its back.
Netscape was Silicon Valley in miniature: funded by a venture capital enterprise started by one of the original Traitorous Eight; represented by the Valley’s most iconic law firm; its executive ranks filled by Valley veterans. Never mind that—for all the years of fierce market combat—Microsoft had always been closely intertwined with Silicon Valley, drawing on its talent pool and having long-term partnerships with Valley investors and corporate partners. (Gates in fact had tried to hire Jim Barksdale as CEO only months before Barksdale joined Netscape.) Never mind that Netscape really didn’t have a Plan B if their browser strategy failed. In the minds of many who made their lives and fortunes in the Valley, Microsoft was the grasping software-should-be-paid-for capitalist, maker of vaporware, shipper of crappy first-generation products. And it now was the evil empire that had brought Netscape low. It had to be stopped before it did any further damage.11
For all the competitive spin when it came to talking about who had the best product, however, Netscape and its allies didn’t want to draw much public attention to their campaign to get the government to help. At first, they lobbied very quietly. Even though the TechNet crowd was persuading Congress to side with them on nearly every issue those days—from more tech-worker visas to R&D tax credits to e-commerce sales taxes—they initially didn’t get much headway when it came to their case against Microsoft. The White House had little relish for going up against a booming tech giant whose founder was one of the richest and most admired men in America. The thirteen-year slog of the IBM suit further dampened government interest in high-tech antitrust, as did the case of the existing Microsoft consent decree, which already was outdated by the time it went into place. The tech world simply moved too fast.
But political momentum gradually increased over the course of 1997, spurred in good part by a data dump of a white paper prepared by Reback and his Wilson Sonsini partner Susan Creighton that enumerated all that Microsoft had done to dominate the browser business. Right before Halloween, the DOJ at last made its move. Flashbulbs popped and reporters crowded in to hear Attorney General Janet Reno and antitrust chief Joel Klein announce that Microsoft was in violation of the consent decree, and that the DOJ would fine the company $1 million per day until it stopped its browser bundling practices. Bill Gates was flabbergasted, and his allies remained defiant. “These people,” declared Ann Winblad, “have no idea who they are dealing with.”12
Microsoft v. the trustbusters now became headline news. Three weeks after the DOJ lowered the boom, consumer advocate Ralph Nader hosted a Washington conference to address the Microsoft menace. It was hardly a populist uprising—organizers charged $1,000 a head to “help support Nader’s future investigations into the high-tech industry”—but it drew in an eclectic crowd. Gary Reback was on the program, pointing out the flattering entries about Gates in Microsoft’s online encyclopedia, Encarta. Netscape lawyer Roberta Katz warned that Microsoft was boxing competitors out of its new online shopping center. Ralph Nader’s star had been fading, but the fight against Bill Gates gave him a way to reclaim his old mantle as America’s #1 fighter for the little guy. The software giant was unsafe at any speed, Nader warned, and it should not be allowed to take over the online future.
“Not content with its enormous market share in PC software, Microsoft wants to hold our hand as we navigate the information superhighway,” Nader wrote, “and to push us—not so subtly—toward its own partners or subsidiaries by strategically placing desktop or browser links to its products and services.” Somewhat blunting his argument about the danger that Bill Gates’s company posed to consumer choice and free expression, Nader published these words in the Microsoft-owned online magazine, Slate.13
Despite the battering, not everyone agreed that Microsoft was the problem. Ordinary Windows users liked the features and convenience of Microsoft’s software. “I think their products are top-of-the-line,” one told a reporter. Admiring biographies of Gates continued to flow into bookstores and libraries; one aimed at the elementary-age market, Bill Gates: Billionaire Computer Genius, hit the shelves right as the U.S. prepared to announce its case. Perhaps the bad guy wasn’t Gates, argued libertarian-leaning voices. “The U.S. government is a far worse monopoly than Microsoft,” said one Valley engineer. The Libertarian Party condemned the “bureaucratic Lilliputians” trying to bring Microsoft down; the Cato Institute released a fifty-page brief attacking the DOJ’s action. Said one Cato economist, “This is a choice between big government and big business. And we know where we come down on that one.”14
Scott McNealy had been a longtime donor to Cato, but his love for liberty was matched by his hatred for the way Microsoft had stomped, Godzilla-like, through two decades of high-tech history. It had chewed up Netscape, and now it was again going after Sun, demanding a Windows-only version of Java that wouldn’t run across other platforms. Java’s power as a programming language came from that ubiquity. “We want freedom of choice—not freedom from choice,” McNealy declared at Nader’s conference. As Netscape went into its death spiral and other Valley companies continued to hesitate to openly criticize the world’s largest software company, the libertarian McNealy became the loudest Valley voice in support of the government’s move.15
The two-year long trial that ground out
in D.C. circuit court from 1998 to 2000 battered Microsoft’s reputation, tore apart Gates’s carefully crafted public image, and cut the company’s stock price in half. The judge presiding over the trial, Thomas Penfield Jackson, became a media celebrity, his delight in the press attention as obvious as Gates’s resentment at being dragged into the courtroom. In a two-part deal announced soon after the case began, AOL acquired Netscape and then teamed up with Sun to build up an Internet software juggernaut that could keep up with Microsoft’s dominance of business and consumer markets. Microsoft counsel Bill Neukom cried foul—how could the DOJ call Microsoft a monopoly when its competitors were all banding together to take it on? The government was “five steps behind the industry.”16
Y2K
While Microsoft was getting skewered, Silicon Valley was riding high—not just on a soaring Wall Street, but especially in Washington, where politicians flocked toward the combined allure of gee-whiz technology and new-economy wealth. Scandal and partisan intrigue ruled the day in Washington, as Clinton’s transgression with young White House intern Monica Lewinsky turned from titillating gossip to fodder for a special prosecutor to an impeachment vote by the GOP-led House. (The Senate didn’t follow suit, and the ensuing infighting among House Republicans led to Newt Gingrich’s getting kicked out of the Speaker’s chair.)
The spiral of scandal in Washington only reinforced tech’s golden-child reputation. About the only thing the two parties could agree upon was that Silicon Valley was a place of high-tech wonder, a miracle of economic growth, and a marvelous place to raise campaign contributions. Encouraging their glowing view of the Valley and its leaders: the fundraising prowess of TechNet’s newly minted political action committees, one for the Democrats and another for the Republicans, that had started to shovel considerable campaign cash eastward from Atherton’s cul-de-sacs and Woodside’s country lanes.
“They are stars,” said Billy Tauzin, a Louisiana Republican who now ran the telecom subcommittee. “You have to work hard to make technology issues Democrat or Republican, liberal or conservative,” added Ed Markey. Long past were the fractious days of the Communications Decency Act, when so many lawmakers considered the Internet a porn-filled waste of time. They could look at the NASDAQ and read the papers; high-tech was a political winner. When each party started its own high-tech working group, members rushed to sign up. “We’re the prettiest girl at the dance right now,” said one industry lobbyist.17
Ironically, the amazing growth curve of the 1990s boom wasn’t entirely due to the Internet economy over which politicians were fawning. It instead resulted from a flaw in the computers themselves, one baked into the system a half century earlier. The creators of the first computer languages, eager to save every bit of RAM and little imagining that the code they wrote might still be in use in the year 2000, had programmed in a two-digit date stamp. A four-bit “1974” became a two-bit “74,” for example.
As the new millennium neared, this efficiency hack now presented a disaster scenario as fearsome as any dreamed by Hollywood. What would the computers do at the stroke of midnight on December 31, 1999, when all the stamps switched to “00”? The world was now governed by computers. If the machines thought we’d returned to the year 1900, everything from electrical grids to air traffic systems would go haywire. “The new millennium heralds the greatest challenge to society that we have to face as a planetary community,” warned The Times of India ominously. The industry estimated that eliminating the “Millennium Bug” would cost $1.5 trillion. Perennially cash-strapped governments faced a hefty bill as well; governments ultimately would spend $6.5 billion on the fix.18
The thing that was a bane for big cities and big companies was a windfall for the software services business, and the rush to reprogram created a white-hot demand for coders that far exceeded supply. Faced with high bills and a shortage of talent, corporate giants and governments looked overseas—to the large, educated, and often English-speaking workforce of India, a country whose own tech sector had exploded in size as its national government deregulated its economy over the previous decade. India also had spent heftily on broadband infrastructure, meaning that cities like the high-tech hub of Bangalore had more reliable Internet connectivity than electricity, and its homegrown software services companies could easily take on the job of programming computers on the other side of the globe. The Y2K flurry also grew the already large numbers of engineers heading across the Pacific. Over 130,000 new H-1B visa holders came to the U.S. between the spring of 1998 and the summer of 1999. Forty percent of them were Indian computer specialists.19
PLAYING OFFENSE
The ever-tightening friendship between John Doerr and the man he affectionately called “the commander-in-geek,” Al Gore, epitomized the warm relations between high-tech and political capitals in those waning days of the twentieth century. With Clinton weakened by scandal, the Dudley Do-Right Vice President became increasingly visible, taking on an enlarging portfolio of issues as he prepared for his own presidential run. Gore’s plans to follow Clinton into the Oval Office had never been much of a secret, and by the last years of Clinton’s term his staff considered nearly everything Gore did through the filter of the 2000 campaign. The Veep met regularly with whomever John Doerr asked him to; he remained intensely curious about technology, but he also knew the good optics of hobnobbing with young stars like Marc Andreessen and Kim Polese. Silicon Valley also meant gold-plated fundraising, and Doerr was particularly helpful on that count as well. The tech executives who endorsed Clinton and Gore in 1992 had only given about $1,000 apiece. Now, they gave very generously. Between the 1994 and 2000 cycles, the amount of money Democrats raised in Silicon Valley grew by a factor of ten.20
Doerr’s visibility as Gore’s political wingman attracted plenty of notice on both coasts. “Gore-Doerr” campaign buttons popped up by the hundreds, printed jokingly by Stewart Alsop, founder of the dot-com era’s most influential conference, Agenda. Doerr often got serious questions about his political ambitions. “No way. I wouldn’t be good at it,” he told the San Francisco Chronicle. “Everyone is out to kill you. I don’t have a thick skin.” But he did have an appetite for going deep on policy, including an increased interest in the environmental issues about which the Vice President was so passionate. Gore gave him an “environmental awakening,” Doerr remembered, and the two men talked increasingly about how technology might address the looming climate crisis—and how “green tech” might be the Valley’s next wave.21
Yet the embrace of the Valley by D.C.’s political establishment was not always reciprocated. Silicon Valley contained a wide range of political ideologies whose only common threads were a disdain for traditional gatekeepers and an ardent belief in the world-changing power of well-designed technology. The open-source ethos that had propelled the creation of the EFF still ran strong, especially among ordinary hackers and programmers, who remained deeply suspicious of both big government and big corporations.
Meanwhile, the relations between Washington, D.C., and Redmond, Washington, got even frostier. Judge Jackson ultimately was not persuaded by Microsoft’s protestations that it was not a monopoly, and that the tech industry moved too fast to follow old rules. In the summer of 2000, his verdict came down: Microsoft must break itself into two companies—one with its OS business, the other with its applications and Internet business.
In the end, however, Jackson’s appetite for publicity became Bill Gates’s saving grace. After discovering that the judge had talked to reporters before he delivered his verdict, the D.C. Circuit’s Court of Appeals overturned his ruling one year later. “Public confidence in the integrity and impartiality of the judiciary,” scolded the court, “is seriously jeopardized when judges secretly share their thoughts about the merits of pending cases with the press.”22
The new IBM of Microsoft remained intact, but it was a different company: humbled by the courts, battered by the market, its revenues still dependent o
n the PC-era money machines of Windows and Office. The case profoundly reshaped the Seattle company’s attitude toward playing politics—and it reshaped the attitude of other technology companies as well.
In the 1990s, Microsoft’s D.C. government affairs operation was a one-man shop carved out of a sales office in suburban Chevy Chase. The tech giant’s lobbyist had to shuttle back and forth into the city so frequently that he kept most of his files permanently stacked in the back of his Jeep Cherokee. The coming of the lawsuit showed Microsoft that lobbying no longer could be a back-of-the-Jeep afterthought. As the battle with the DOJ escalated, the company boosted the size of its D.C. office, hired a phalanx of political heavy hitters from both parties, and began shoveling six-figure donations toward both sides of the political aisle.23
As the Clinton years came to a close, many of the White House appointees who’d spent the past eight years on the NII and wiring schools and cybersecurity now rolled into lobbying firms, working the same issues from the industry side. Lobbying hadn’t been this visible since the chip wars with Japan, and this time around there was a significant difference: in addition to the continued presence of trade associations old (SIA and AEA) and new (TechNet), the largest tech companies became lobbying forces in their own right. “Microsoft was a poster child for our industry,” one tech lobbyist noted. It was the beginning of a new era.24
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