Culture Club

BILL GATES ISN'T HAPPY. Partly it's the weather, a chilly day in May. "A low-IQ day," the chairman of mighty Microsoft complains. He coughs pneumatically into his fist, rocks in his chair. Forward, back, forward, back, his toes rhythmically slapping the carpet some an metronome. "This is a disaster," he tells his nervous staff, crammed into a small conference room at Microsoft headquarters. "A disaster." The problem is Money, the company's personal-finance software. Gates hopes it will help lure millions of people into Microsoft's lane of the coming Information Highway: home banking, home shopping, entertainment and electronic mail.

But it won't, at least not yet. Because Gates is right. It is a disaster. Tiny Intuit, that upstart from Menlo Park, is eating Microsoft's lunch. It gets all the press, too, with its popular financial-management program, Quicken. "Jeez," says Bill, shaking his head in frustration, not understanding why Microsoft can't get it right. He hacks again into his fist, rocking, rocking, rocking...

This is not the Bill Gates the world admires and fears. It's not the Gates who so brilliantly foretells our electronic future, who bulldozed IBM and holds the future of America on his computer keyboard, who sits courtside at the Seattle SuperSonics and booked practically all the hotels and rental cars in Hawaii so no one could snoop on his wedding. After all, this is $4.5 billion Microsoft, the greatest technology company of our age, the very model of the 21st-century American corporation, built to compete and win in the global economy. That Bill Gates couldn't possibly be worried. So why is he?

Lots of reasons. One, Justice Department investigators are probing complaints about Microsoft's "monopoly" of the software industry-and could take action against the company soon (page 43). For another, Microsoft's market is changing. Software is not just bits and bytes anymore, not the operating systems and utilitarian spreadsheets that have buoyed Microsoft for so long. The future, increasingly, is Hollywood: "edutainment," home videos, home everything. To fend off onrushing new competitors and create the products demanded by the new market, Microsoft itself must change. To stay on top, it must retool-redirect-the combative, in-your-face culture that has carried the company so far. Otherwise, as Steve jobs has a tad wishfully predicted, Microsoft might become "the IBM of the '90s."

The only savior is Bill Gates, the heart and soul of Microsoft. At 38, he is still the boy billionaire, the bratty Harvard dropout who loves thumbing his nose at established authority. As all the world knows, he was only 19 when he left college to start Microsoft with a few chums. Even then he had an uncanny knack for sensing opportunities others did not. It was Gates who saw the potential of a clunky little program called DOS-Disk Operating System-and licensed it to IBM. That was the first step to Windows, which today dominates the industry. Along the way, he rolled over IBM, Apple and most other rivals. Now he's worth some $8 billion, the second richest man in America. He uses pocket money to indulge a few hobbies-sponsoring advanced biotech research, for instance, or shelling out seed money for his own worldwide satellite network.

Gates is first and foremost a businessman, an empire builder more than a technologist. Critics say his ambition is unbridled, as overweening as his fortune is large. "He wants to be Henry Ford, Andrew Carnegie and the Rockefellers all rolled together," says one. "He's beyond workaholic," says another. "He never, ever stops thinking about the industry and Microsoft's place in it." Certainly, Gates possesses extraordinary intensity. Recently married, he has cut back his workday - from 2 or 3 in the morning to midnight. He turns vacations into "Think Weeks," occasions to plot strategy and scope the competition. (He got sick during the latest and thought, "Great, it's highly efficient to get sick when on vacation.") To guard against complacency, he keeps a memo to himself, Microsoft's Greatest Mistakes. (No. 1 is letting a bitter rival, Novell, grab the networking market.) "It all comes from the top," his people tell you again and again. Microsoft is made in Gates's image: raw, confrontational, aggressive, fast, creative, organized and impatient.

To understand what it's like to work for Bill Gates, it helps to meet a woman we'll call Cynthia. Vice president of a leading computer company in Silicon Valley, she visited Microsoft for a job interview. With scarcely a hello, Gates began machine-gunning her with questions. Where do you see the business going? What are your competitors' strengths and weaknesses? Who's better than we are, and why? To this last, coupled with a request or numbers supporting her position, Cynthia replied:

"I don't know. I need to do some research."

Forget that, Gates replied. "Why don't you have an answer. Are you stupid?"

This is the essence of Microsoft, something called the "Microsoft way." it demands that you be on top of your material, to think through every angle, to cover all your bases at all times. If you're a product manager at Microsoft, and don't have all the information, Gates can't make decisions fast-the key to beating out rivals. "I need more intelligence, more IQ," he might complain. On the other hand, if you know your stuff, and Gates can't rattle you or poke holes in your plan for creating and bringing a product to market, then you "win." He trusts you as a "smart guy," maybe even a "technology guy," the ultimate Microsoft accolade. Then he lets you have your way. Because giving talented, driven people their way is what Microsoft is all about.

It's deceptive, the leafy "campus" in Redmond, near Seattle. Birds twitter in the pines, fountains spangle amid neatly tended tulip beds. A few Microsofters, in shorts and T shirts, sling a Frisbee on the soccer field before going in to work; others leaf through notebooks as they stroll along the tree-lined walks. To the east, the snow-capped Cascade Mountains glint in the blue distance. It's hard to imagine that this idyllic place, so outwardly tranquil, could be so driven, so "hard core" and "focused," as they say on campus.

Yet visit around 8 any morning, and the parking lots will be nearly fall. Ten hour later, as many people will be going into their offices as out. The cafeterias are open until midnight, on a discount meal plan. ("Anything with caffeine is free," jokes one Microsofter.) After a hard day's grind, there might be a Trash Movie Nite. Everyone will go. "Your co-workers are your best friends," says Brad Silverberg, head of Microsoft's 300-man Chicago project. "Microsoft is not a job; it's a way of life." He should know. Silverberg thinks "interfaces" while mountain-biking in the Cascades. Like most Microsofters, his is the passion of the believers.

Microsofters take pride in their change-the-world esprit. They come to Microsoft, they say, to be at the center, to shape people's lives, to make lots of money. They bridle at being described as "Microserfs," droning away for the greater good of the hive. People work hard, they say, because they want to, because it's exciting, even addictive. "It feels good to be around really bright people, to be part of the energy, the growth, all that money," says Ray Bily, who left Microsoft several years ago to start his own company. As for the screaming, the confrontations, that's merely intelligent discourse, a way to reach decisions, a feature of the landscape. An encounter with Gates? "Oh, God," says Karen Fries, one of the company's top recruiters. "It's like going to a haunted house. Scary, but fun. Bill loves people who stand up to him. He hates yes people." At Microsoft, she adds, everything depends on how well you "defend your point of view."

That's what's going on now, in that conference room in Building 8 where Gates was rocking, rocking, rocking-and so very unhappy at getting slam-dunked by Quicken. We're nearly two hours into a product review-a "Bill"-where Gates grills his folks to see whether they're on top. This is where Karen Fries has "fun," where Gates might grump, "That's the DUMBEST thing I ever heard!" It's what makes Microsoft tick.

Gates liked the first product, Complete Baseball. He's certain it would be a huge success, possibly the best-selling CD software of the year. One Microsofter proposes moving, within the week, to lock up rights to other sports: basketball, football, even soccer and international auto racing. Another suggests buying a leading sports magazine to beef up Microsoft's new "sports desk." "A no-brainer," Gates advises. "Full speed ahead."

Not so for Money. A new cast of twenty- and thirtysomethings has come in, and it's a lot less casual. No Cokes, no jokes, no sneaks propped on empty chairs. Gates is querulous, almost plaintive. Microsoft isn't used to being No. 2. What's wrong? The team's "presenter," a young woman named Leslie, talks fast. She has the hunted look of a small animal, cornered. Gates "drills down," demanding numbers. Leslie explains how tiny Intuit has outspent, outhustled and outdone Microsoft on every front. "They're hard core," she says. Ouch! That's what Microsofters are supposed to be.

Jabe Blumenthal, product manager for both Baseball and Money, leaps into the fray. Clad in parachute pants and a "Jurassic Park" sports shirt, he's a shade older and more formal than the others. Lean, hawk-eyed, predatory in manner, Microsofters call him "the Raptor." The news isn't good, he concedes, but the team has a strategy: sacrifice Microsoft's leading market position in Europe, the better to improve Money (and eventually "leapfrog" Intuit) at home. Gates can't believe it. Give up where you're No. 1? That could be strategically "expensive," he objects. But he can't budge Blumenthal, who "owns" Money. A long pause, as if Gates were contemplating the history of the universe. "OK," he says finally, without emotion.

Then comes a strange moment, the sort of thing that happens often at Microsoft, which seemingly within moments turns disaster into salvation. Talk has turned to broader trends in banking. Where's it going, what's in it for us. Banks are dinosaurs, says Gates. We can "bypass" them. The Raptor is unhappy with an alliance involving a big bank-card company. "Too slow." Instead he proposes a deal with a small-and more easily controllable-check-clearing outfit. "Why don't we buy them?" Gates asks, thinking bigger. It occurs to him that people banking from home will cut checks using Microsoft's software. Microsoft can then push all those transactions through its new affiliate, taking a fee on every one. Abruptly, Gates sheds his disappointment with Money. He's caught up in a vision of Microsoft at the center of the "transformation of the world financial system." It's a "pot of gold," he declares, pounding the conference table with his fists, triumphant and hungry and wired. "Get me into that and goddamn, we'll make so much money!"

Here is Microsoft in action. In just three hours, it laid plans to buy at least two companies, ditched an alliance with a major financial institution, opted for another and made major moves into "two incredible new worlds," as Gates put it-home banking and sports entertainment. Another company might take months to accomplish as much. The secret, explains Michael Murray, director of human resources, is that Microsoft pushes decisions far into the ranks. Small teams, often only three to five people, "own" the products they develop, market and ship. "If Microsoft were a car," he says, "it would have a large gas pedal and a small but workable brake. It would not have a rearview mirror."

Insiders say that's why Microsoft works so well. But does it? For years, Microsoft has been speeding along, determined to get to the future faster than anybody out there. Now, suddenly, there are potholes along the road, traffic hemming in on the left and right. Maybe Microsoft could use a bigger brake, maybe even some air bags.

Some of the problems are easy to identify. As Microsoft pushes into new markets, it's finding that many are dominated by well-entrenched competitors-such as Intuit. In the children's market, the target of Microsoft's fastest-growing consumer division, for instance, there are skads of formidable rivals. Broderbund, Electronic Arts and Knowledge Adventure, among others, boast "killer apps" so good that people buy computers just to run their programs. Can Microsoft's "technocrats," mainly engineers and programmers, make the creative leap to "Hollywood," asks Mark Williams, now at StarPress and until recently head of Microsoft's multimedia group?

Other problems grow out of Microsoft's success. "It's the best 15,000-person company in the country," says one ex-employee echoing grumbles that the company has gotten too big, too bureaucratic. Then there's the adage of how "A" people hire other "A"s, but that "B"s who sneak in hire mostly "C"s. Soon, the company goes to heck. Karen Fries sees that danger in her recruiting. "We've just grown so fast," she says. "The real challenge is to find people who have the religion."

Meanwhile, the earlier generation of Microsofters is aging, getting married, having kids, getting lives. (Long gone are the days when Steve Ballmer, Gates's No. 2, prowled the halls seeing who was at work on Sundays and complaining: "The trouble with this place is too many wives, women and girlfriends.") And Microsoft has made some 2,000 of them millionaires. When the company's stock drops, Microsofters notice.

You can see the tensions popping up between the old generation and the new. Just listen to Nancy McCarthy, a recent hire from Apple-who lasted three months. It wasn't just her age, though at 45 she felt lost among 20-year-olds. It was more a discomfort with the culture, and in particular something Microsoft calls its Marketing Managers Boot Camp, a three-week training course in How We Do It. "It was like camp," she recalls. "You all wear company T shirts, go through brainwashing on The Way." At Microsoft, she complains, everything is "templated," fitted into a regimented master plan marked by "Milestones." Yes, the Microsoft Way is extraordinarily efficient. "But it's an assembly line. A software assembly line." It's the Microsoft Way, or no way.

What to do if you're Bill Gates and you want to cleave to the way? For starters, you try to break down bureaucracy. You keep teams small, force Microsoft's fiercely competing groups to work more closely-to communicate, design features for their products that work seamlessly with others. You also think "young."

The average Microsofter is only 31, but that's too old for Gates. Half his employees are now hired right from college. He'd like that to be 80 percent, as it was when Microsoft began. "Young people are more willing to learn, come up with new ideas," he says. After all, when pushing the frontiers of technology, going where no one has gone before, experience doesn't count for a lot.

Gates's vision is "a computer in every home," and he'll need a re-energized work force to get there. If he has his way, "Microsoftware" will be everywhere-from the phone and fax machines in your office to "wallet PCs" containing everything from electronic money and credit cards to your driver's license. Of course, that's assuming competitors and the Feds let Microsoft run free. According to justice Department sources, investigators want Microsoft to sign a consent decree tempering some of its alleged predatory business practices. If Microsoft doesn't sign, sources say, Justice will file a formal complaint. Microsoft won't comment, but Gates complains, "We've sent them so much paper, it's mind-blowing." In less restrained moments, he calls the trustbusters "communistic."

His pique is understandable. After all, these are crucial times for Microsoft. Technology changes fast. The stakes along the Information Highway are huge. It's going to take all of Gates's energy and intellect to keep Microsoft as powerful this decade as it was in the last. And here are these benighted meddlers...But enough of that. The day's meetings are done, big decisions have been made. Gates sits behind the glass doors of his office, hunched over his keyboard, tapping out e-mail and prepping for tomorrow's "Bill." it's barely 7 p.m. The day isn't near over. There are people to see, things to do. And all around, the hive is buzzing.