Ballmer: I am a startupper too

“I was 23 and I told: I’m gonna join my friend Bill’s startup” Steve Ballmer and the lessons he learnt from his startup experience

Steve Ballmer was in Rome yesterday to attend the event “Building the Vision”. This is his speech, the last one in Italy as CEO of Microsoft. He wanted to tell us his startup experience in Microsoft and the lessons he learnt from it.

Steve Ballmer

The theater… I’ve never actually stood in a real life theater like this and given a speech. And I suspect there are some people up there but I can’t see you, so I’m gonna focus very much on the group right here.

It is a real honor and privilege for me to have a chance to be here with you today. Amongst my most favorite things to do is to talk to students and to talk to people who are starting businesses. And, in a sense, the energy, the rush, the enthusiasm that you get from folks who are in those phases of life is really, really incredible. In fact, it often, of course, makes me think about the old days, so to speak, old days at Microsoft. And I’ve been around essentially since the start of Microsoft. I did not start Microsoft, I lived down the hall from Bill Gates the year he started Microsoft. And I remember I just met this kind of crazy guy, a mutual friend thought we’d like each other because we were both a little crazy. And he was all hours of the night leaving to go to the computer lab and write programs. Some of you look like “What’s a computer lab?”. In the old days you had to go someplace to write software. And essentially what had happened, in our start-up, is Bill Gates and Paul Alan had been excited, really since they were about fourteen years old, about the power of a microprocessor. There was the theory that you could take one of these microprocessors and mix it with the magic of something called software, and essentially do almost anything. Now for people who are young you say, well, of course, that’s the world in which we live! But, about five years later, Bill was trying to get me to drop out of school to join him in this small start-up, still only about 30 people at Microsoft when I joined. I was 23 years old and I called my mother and father, who themselves had never gone to college, and I said: “I think I’m gonna drop out and go join my friend Bill’s start-up”. Drop out was not a good word… drop out, mmh…drop out. My father said: «That’s a very bad idea! People who are successful don’t drop out!» And they said: «Well, what does your friend Bill – whoever that is, they’d never met old Bill – what does your friend Bill’s start-up do?» And I said: «Well, I can’t tell you anything about it, but they do software for personal computers». And my father who didn’t go to college but he was a smart guy: «What’s software?», said my father. And then my mother said: «No no no, Freddie, I’ve got an even more important question. Why would a person ever need a computer?»

That was the vision, if you will, behind the start-up that I joined. We were 30 people at the time at Microsoft, we had done about 2.5 million in revenue – just as a reminder we are at almost 80 billion in revenue now and we have a hundred thousand people. And if there’s a lesson to be learnt, it’s if you have the right idea, you’re at least 50 or 60% of the way to a successful start-up. You need the right idea, you need the right timing, you need the right luck, you need the right hard work and energy. You need a lot of things to go right for you, in fact, but a powerful idea almost can’t be stopped. And not every idea is going to be as powerful as “Let’s be the first people to do software for microprocessors”.

Paul Alan actually said to Bill Gates: «Hey, isn’t this great? We’ll write all the software anybody will ever use on these machines!». Obviously that was a little bit overstated, but the power of the concept is very, very important. I dropped out, as I told you, I’d been at Microsoft about two months and two things were happening.

Number one: I didn’t know what I was supposed to be doing, because the company wasn’t very well organized. And number two: I thought that the company needed more people. And so Bill Gates and I started fighting a little bit. We are like brothers, we find ways to argue. And I said, we need to add 10 people. He said, we’ll go bankrupt if we add 10 people. Eventually he said yes, but I started to have reservations. Maybe I should drop back into school, this was just at the end of the summer break, I could have gone right back to school. I said: «Bill, I’m going back to school, I need to tell you that». He grabbed his father, who was that tall and me, and we went out to dinner and he said to me: «Steve, you don’t get it. You really don’t get it». I said: «What don’t I get, Bill?» He said: «We’re gonna put a computer on every desk and in every home». He invented that kind of his own mantra for us, as a way to capture the vision. Because at the time I was thinking there just wasn’t anything big enough and exciting enough about Microsoft.

So having the ability, in a start-up or with a new idea, not just to see a product, but to see a whole path to change some walk of life, I think is very, very important. In fact, that’s one of the exciting things about being in the technology business, is we still get the opportunity – at Microsoft or folks doing start-ups – to think about dramatically transforming the way people work and the way people live.

So the first grand vision for Microsoft was all around microprocessors’ software, the power of software with microprocessors. As we were running hard, and Paul Alan wanted us to do all of the world’s software, a second compelling technology was being invented, that we decided we were going to embrace. Because it would fundamentally change our company and our start-up. And that was the power of graphical user interface. It’s hard for people to remember, but there was a day when all you could put on a computer screen was simple letters: a, b, c, d, *. The first computer games I ever wrote were miniature golf games, where you had to guess how many asterisks between your ball and the asterisk that represented the hole. That was computer gaming in about 1979-80-81. So along came graphical user interface. And it didn’t change the fundamental vision of the company. What it did was introducing new technology that could supercharge the vision that Bill and Paul had had. And really it was on the power of graphical user interface that cheap, affordable, easy to use computers came into common usage. That didn’t happen ‘til about 1995, late Nineties really.

So as you sit there, looking at your start-up, thinking about what you wanna do, you’ra gonna have to remember two more lessons.

You need a big idea, you may have to stay with it a long time, and you’d better keep it current with the most modern technologies that are coming to market. Some of you will say: «Fifteen years, Steve, come on, don’t you understand? We work in Internet time out here!» And the truth is, things do move faster, the world does move faster than at the time we were doing our start-up. But even with that said, most of the great companies do take a while to really build their momentum, to really get their formulas figured out. There are very few companies that go from nothing to something in 2, 3, 4, 5 years. With the rapid success of Twitter or Facebook you could make certain assumptions, but you take a look at Amazon…  probably ten years before it really took off. Microsoft, 10 or 15 years before it really took off. Even Google, 8-9 years before it really took off. So, a powerful idea, kept current and refreshed and pursued with great tenacity.

It’s not much written, but I actually was involved in a second start-up at Microsoft. And that’s the whole notion of Microsoft as an enterprise company. Today most people say, oh yeah, that’s what Microsoft is, they sell to IT people, enterprise, blah blah blah. But in the late 1980’s we didn’t sell anything to the enterprise. In fact, we had a bunch of people saying you’re just a small little company, nobody in a business would ever really want to buy your stuff. And yet the power of the idea of taking this microprocessor and not just putting it in personal computers, but putting it in the backend, in the data center, in corporate computers, was also quite powerful. Today if you look at our revenue and our profit, something like 2/3 to 3/4  would come on the power of the microprocessor data center. Now, why do I mention it? Because again, as you’re driving forward, keeping your mind open, looking for other new applications of the fundamental vision, the fundamental technology, the fundamental power of your ideas, I think is very very important. Knowing when to do that’s also very important. There’s an expression that I’m sure I won’t get right that came from Hewlett&Packard in the old, old days. They say more companies die of indigestion than overeating. And the concept is more companies and start-ups die because people try to do too broad a set of things, as opposed to really doing a focused set of things very well.

I’ll tell you a little bit we’re in the middle now – and I’ve been at Microsoft 33 years, Microsoft’s about 38 years old – and now we’re finding ourselves having to start up again. It’s kind of the ultimate lesson in the technology business, which is frankly, in our industry, unless you’re constantly inventing something new, your ideas get old and tired. Technology companies, in a sense, must be continuously in start-up mode. Ten plus years ago we started up XBox, and later this month we’ll launch the XBox 1. We’re in the process of starting up a new company focused in on devices and services. You’d say Steve, isn’t that the basic vision for Microsoft at this stage? And the answer is yes! But we’re a company that was born as software company, but today we’re having to remake ourselves for a world in which all software either gets delivered as a set of cloud services out of the Internet, or as a set of embedded capabilities in phones, in tablets, in PCs and other devices. So this notion of starting up and recreating yourself and continuous invention is a continual part of what we do. Along the way we learnt one other I think valuable lesson that I’ll stress. (It’s funny there’s just enough angle there to trick me. I bet when they get stage actors there, they’re more adapt than I am).

The one other thing that really, that we’ve learnt about business start-ups, is you do have to, in a sense, focus in on something that’s important to somebody. We call that the high value activities which define us. And what’s high value to people is quite variant. I have a 14 year old son. If you ask what’s high value to him, he’ll say almost anything that involves videogames. I don’t view those as high value for him – high value for Microsoft,  but not high value for my little boy. On the other hand, serious fun is something that people will really engage in, pay for to play to. What we found along the way was we had a key ability to focus in on making people more productive. Productivity is a core part of our value. Serious fun became a core part of our value. Focusing in on the productivity of IT people and software developers became a core part of our value.

So I’d say to all of you, you need to start with a sort of a big idea, keep it technologically fresh, stay after it, know when to add something new, but at all times you have to be able to say: what am I doing in my start-up, in my software, in my application, that some group of people is gonna find of high value. Because value is where the business is, get created. Many start-ups get off the road with some kind of an idea, but start-ups that really stay on the road recognize that they need to find customers who have extreme value in the work that they do.

Today, if you look at the Microsoft product line, it’s quite different than the product line when we were a start-up. We had products called Basic Fortran, Cobol, we actually had our first hardware product when I joined, it was called the “soft card”. It was essentially an Intel computer you could plug into an Apple computer. It was kind of like the old world equivalent of parallels on the Mac today or something. But even back then, there were concepts. Today we’re defining next generations of PCs through Windows, tablets through Surface, phones through the work that we’re doing, and that we actually hope to acquire with Nokia. We’re trying to provide services that are of high value to people in their personal lives: Bing, Skype, Office for home work, And at the same time, continue to focus in on the tools of productivity and communication and IT management that are very, very valuable in the enterprise. Everything’s being remade into a device or a service, that is the future. I’ve got some good news, actually when I landed here in Italy, I noticed that our Windows phone share… first country in the world where Windows phones surpassed the iPhone. I don’t know how long it’ll last, but we’re gonna hopefully go north from there, and I thank every Italian citizen for that performance. In a way you could say even Windows phone is a start-up. Well financed start-up, but a start-up. And we appreciate each of our emerging customers.

We’re gonna do a little bit of a demonstration of some of our stuff and how it comes together. We’re gonna have the chance to listen from other start-ups later who are going to pitch some of their  ideas, but because it’s our event and we still think a little like a start-up and love our stuff, we wanted to show you some of the most recent Microsoft products working together in full harmony to make people more productive and more valuable.

Since we have folks from start-ups in the room, people writing software, etcetera, I thought we ought to do just one more thing, it’s kind of a lesson actually for start-ups. What is the most important thing to do, other than to have a vision, pursue it with tenacity, know where your customers are gonna derive value, remake yourself…? It’s to sell! You gotta sell something, so I have to sell something in this presentation, and since you’re all developers I thought I would just highlight some of the great opportunities to write your software, to build and extend  Microsoft’s platforms, to build for the Windows phone, to build for Windows tablets and PCs, to use our Azure infrastructure to bootstrap and bring high productivity, high reliability cloud services to the market. You won’t be alone, we have in our stores today over 200.000 applications , but some of the big ones have been missing. Facebook just launched, Instagram, Flipboard, Rai TV has launched. We think there will be incredible  opportunity for all of you, as developers, to embrace our platforms, to use Azure on the backend and to support the kind of rich client environments. So it’s a time of unprecedented opportunity for developers, and a time of unprecedented opportunity for Microsoft, as we attack our new start-up.

If I could boil it down and leave you with three ideas: the power of you idea matters, have a clear idea and pursue it, you’re gonna have to have passion, because the road is not simple, whether it’s the road to sell something, to find value, the time it really takes to build a great idea, and certainly to stay tenacious. I respect and admire all of you who are on this journey of software development and start-up, I can assure you’ll get the best support and partnership that we can provide as a company and we certainly wish you all the luck and all the success in the world. If our team here in Italy can help, let them know, and if they’re not somehow able, [email protected], I’m always looking forward to hearing from aspiring young entrepreneurs. Thank you very much for your time today, I appreciated it.