Season 2, Episode 7: PowerPoint

0:00 Now my video is taking up half the screen and your video is taking up half the screen. Good. How do you even uh can you snap it or so Oh, there we go. That's kinda cool. Can I make your video small? That's kind of like why what is the use case for this? I'm looking at an enormous version of myself and you're small on the corner now. Yeah. It's uh it's Skype for narcissists.

0:22 Mm-hmm. Welcome to Season 2, Episode 7 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today we are digging into the historical archives to cover the acquisition of a company you've probably never heard of, but a product that you absolutely have used. Probably hundreds or maybe thousands or maybe you've even gotten your ten thousand hours.

0:58 This piece of software. I feel sorry for you if you have. I think I may have. I think I may have. I definitely have. Investment banking.

1:08 All right, listeners, today we are covering Microsoft's nineteen eighty seven acquisition of Forethought Incorporated. The makers of PowerPoint. This has the honor. I was gonna say dubious honor, but this really is an honor. This was Microsoft's First acquisition. And

1:26 Apple's first investment in another company. For strategic investment. Not only that They were within like three months of each other. I know.

1:36 Most people don't even know that PowerPoint wasn't home grown. I mean Word and Excel were were home grown applications, but PowerPoint was an acquisition. Yep, an acquisition. Not just an acquisition, a completely separate business line, as we will get into. Which is not to say that that is necessarily how we will categorize it, on acquisition category, but Microsoft kept it as a business line, uh, separately based in Silicon Valley, actually on Sand Hill Road.

2:03 In Silicon Valley. That's where PowerPoint was developed. It all comes full circle. All right, we will dive in more, but before we do that Listeners, if you like the show. If you've been listening for a while, if you're new and you happen to like this episode, either way, we would love a review on Apple Podcasts. It helps us grow the show and it helps us create more great content. So please take a moment. You can in in fact you could even pause right now and do it. Um we we don't mind, seriously. If you are new to the show, you can check out our Slack at acquire.fm.

2:32 All right listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora. The agentic operating system that is redefining how the world's best legal teams work. Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Lagora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do.

3:05 operate with obsessive customer focus. They embedded inside a massive law firm. For months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's Bet Here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work.

3:35 and do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Ligora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Ligora numbers essentially speak for themselves. When they have a head to head pilot with their top competitor, they win seventy percent of the time. Lagora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries. And crazily, they went from one million

4:25 to a hundred million in ARR. In about. Eighteen months. truly insane numbers. And that is the real test.

4:33 Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at Lagora.com slash acquired. And just tell'em that Ben and David sent you. So David, we had much teasing of the plot ahead in the intro. Do you want to take us in? How did how did Fore Thought get started? How did Microsoft buy it? How is PowerPoint the essential part of Microsoft Office today?

5:09 Or actually, you know, office three sixty five a a part of the um Microsoft Cloud Strategy. How did it all get started? Well like So many other things. But like but like basically

5:20 everything in modern computing. Uh the origins of PowerPoint. can be traced back to Steve Jobs Historic Visit.

5:31 Uh some might say on Xerox Park. Headquarters in late nineteen seventy nine. After Zerox had made a

5:41 Small investment in Apple Computer. And Steve got to peak behind the kimono. Famously and go see. The Palo Alto Research Center.

5:51 Where they were developing prototypes of their vision of the office computing environment of the future. And that was famously park was where The graphical user interface was developed, uh, the mouse, the idea of networking, which of course would lead to

6:08 The Internet and Podcasting and us recording on Skype and this moment right now in history. All comes back there. But no, so how does this relate to PowerPoint? So Once Steve had seen the future of the graphical univer user interface, he brought it back to Apple and basically decreed that this was the direction the company was going in. But of course, Apple had been around for many years before then. There were other product lines in Apple, other computers they made. that were command line interface, um like like

6:48 DOS before Windows and those product groups, you know, didn't just shut down. They kept going. There was the Apple Two and the Apple Three that were both um being uh continued to be. But David, why join the Navy when you could be a pirate? Exactly. Exactly. You're referring, of course, to the the famous Mac group that Steve starts within Apple where he flies the pirate flag in the building. People who were working on the Apple Two and the Apple th and the Apple Three were talented people. They sort of saw the writing on the wall, too, that Apple was going in the direction of the graphical user interface and first the Lisa and then the Mac. But also they themselves realized that not just was Apple going in this direction, the whole industry was eventually going to go in this direction. And in particular, two folks

7:36 The product marketing manager for the Apple three is Taylor Pullman and the software marketing manager for the Apple II. Rob Campbell. They see this feature and they decide to leave Apple and start a startup. to pursue

7:53 this graphical user interface feature,'cause they know it's not on The products they're currently working on. You know, when we first start doing our research and we start on Wikipedia or we start reading, you know, um, the comprehensive history of this company, you always see the name of the founders, but very rarely do they actually go back before they were the founders of that company. And it seems like without fail, when we start to dig in, and particularly David, when you start doing your research, like who were these people before? They were ex Apple, they were ex General Magic, or they they were at Stanford Research, you know, that there's a very small number of places they could have come from. And it's amazing, you know, where technology in the whole field is today, the world was just not that big. There were not that many institutions or companies, like everybody spun out of the same few places.

8:39 There really weren't. I mean there were The number was in the thousands of people who worked in the technology industry, or at least the software industry. It just wasn't that many people and there weren't that many companies back in the day. So Taylor and Rob, they leave and and they they see the power of the future of, you know, the Xerox Park Vision, the graphical user interface, uh interacting with applications that business users are are working with directly instead of separate, you know, computer divisions with punch cards and whatnot. But they think that that the Mac and Apple

9:10 Maybe they're a little bitter because Steve kinda uh kneecapped their products, but they think that the Mac is not the future. They think the future is bringing the graphical user interface to the massive numbers of IBM PC clones that are out there already and shipping in in the enterprise. And it turns out that they were right about that. It just wasn't forethought the company that they founded that went would do that. Um they leave Apple. It's the hard part about being a venture investor, David. You can be right about everything, but if you, you know, pick the wrong horse, pick the wrong timing, pick the wrong specific nuance You end up with PowerPoint. Uh it's a nice consolation prize. Usually you don't get the consolation prize. So Robin Taylor, the end of nineteen eighty two. They leave, they start This company, they call it forethought. This is foreshadowing the graphical user interface to come. The vision is they are going to develop an operating system that is going to

10:06 Like I said, bring a graphical approach, almost a Windows like approach, some might say, to IBM clone PCs. So they raise$700,000 right after they leave. There's a lot of people that are really excited about this. Shortly thereafter, they raise another two and a half million dollars from VCs. They attract some great folks, new enterprise associates, NEA invests, uh Dick Cramlich, who was um uh one of the one of the founders of NEA, uh very well known VC at the time. Uh he invests, he joins the board. Also as an independent board member, they get Bob Metcalf, who was the inventor of Ethernet at Xerox Park, and by that point in time he was the chairman of Threecom. So he's their independent board member, literally like Bob Metcalf of Metcalf's Law, uh is the independent board member of this company. There were like eleven people in technology. Like this is incredible. It's totally incredible. So high flying.

11:01 Huge vision. There's just one problem. That a year later. Microsoft announces. Windows.

11:08 while this is now the fall of nineteen eighty three, they've been working on this for a year. And while Windows wouldn't actually ship for uh Windows one point oh, I believe until nineteen eighty five. Yeah, it still doesn't seem like a good bet. U what do you do, right? What do you do? And and and and in particular in the case of forethought, it's not just that uh the eight hundred pound gorilla just stepped into the ring with you and is definitely going to crush you even if you could compete. Apparently development is really not going well and uh it's kind of a mess. And the foundation was the name of the operating that they were building. It wouldn't even compile. They couldn't demonstrate it. It was just in development.

11:47 Hell. So at this point, they've burned through about two million dollars of the three million dollars, just over three million dollars that they had raised. They've made no meaningful progress. They have no prospects. The VCs uh and the board, basically they issue an ultimatum. They say you have to this is now the spring of nineteen eighty four. We're gonna schedule essentially a demo day. You are going to demonstrate this operating system that you are building, we are going to evaluate it, we're gonna bring in outside experts, and we're going to see if there's anything here. that we can use. Those VCs, man, they really they really hold your feet to the fire. They do the demo day. There's there's nothing. But there is there is some tiny, tiny flicker of good news. And exactly how this happens, even even though he wrote a whole book on on the topic, I s I'm still not entirely clear. But somehow there's a guy who doesn't even work at the company named Robert Gaskins.

12:36 And he's a mid level manager at Bell Northern Research, which is sort of the California division of of Bell. It's one of the five companies in technology in this. Yeah, one of the five companies in technology. he gets connected with the folks at at Fourthought. And again, he's not he's like a mid level manager. He's not part of the company, but he's really excited also about the future of the graphical user interface. Uh and he wants to join the company. So even though you know the market for the company has just been completely swooped in by by Microsoft and and the coming Windows product. The product is in development hell. He he wants to join and he has a vision for what he thinks

13:17 can be a sort of uh quote unquote restart of the company. The term pivot wasn't uh wasn't around yet, but that he wants to bring to the company. And this is a good time to say to to Bob, thank you so much for being super gracious in in emailing with us to to help us research this episode for for folks who haven't read it, and I would imagine if you are as surprised as I was when I first found out that PowerPoint was an acquisition, you probably haven't read it, but Bob wrote a fantastic book about how this all went down. and kind of PowerPoint as a case study and really forethought as a case study and has uh gave us some really gr great quotes that uh that we'll pull out later in the the narrative. So if you're interested in what we're talking out here about here, definitely check out Bob's book. Yeah, we'll we'll link to all of it. It's uh I love the title. It's called Sweating Bullets. And it's So good. The definitive history of building PowerPoint. And uh and Bob is just um

14:08 Well, he's uh a few more words about Bob because he's a pretty interesting guy. He had been a grad student at Berkeley and he was doing an interdisciplinary PhD in English, linguistics, and computer science, uh, which is quite the combination. He ends up dropping out to join Bell Northern Research because he wants to go work in industry in in computer science. This is the mid seventies. Uh he knows this is gonna be the future. It's sort of like um Massa and uh when he met with the uh uh of Softbank when he met with the head of McDonald's and go work in go work in technology. This is actually at Berkeley kinda right around the same time. And then after PowerPoint, he'd go on, he retired. Uh, he becomes sort of like the world historical expert in um the concertina, which is a musical instrument that was developed in England in the eighteen hundreds. He's he's really like a Renaissance man. Uh so big thank you to Bob for writing this book and all the blogs that uh All of this all of this material for for this episode comes from him and it's all primary source from him, so thank you. So Dick Cramick, who, as I mentioned, of NEA, was on the board.

15:11 And he says, you know, I I can totally empathize this uh with this being in a V C in a a company that, you know, is going nowhere, but there's something and there's someone who wants to do something interesting. He says Yeah, sure. You know, this guy Bob, like He may not be the most accomplished manager or had the best resume, but like He's got some sort of vision to do something, and like, rather than just taking the one million dollars that's left in the company back, like, let's see what you can do. The board makes the decision to hire

15:39 Bob in the yeah. And they give him five percent of the company and they Basically turn him loose on creating his vision for what an application is. for the graphical user interface could be. But there's just one one kinda twist to that, which is that

15:55 Rob Campbell, who was one of the original founders and was the CEO. He doesn't leave. He remains the CEO of the company of Fore Thought. And Rob basically goes and builds A wholly company doing software publishing. Cause remember this is back in the day when to actually distribute software. Uh, it wasn't just like you developed it and then you like put it on the internet or in the app store and anyone could buy it. You had to

16:20 Actually You know. market it. Literally ship it. You had literally had to you had to get discs. manufactured, put in boxes with paper manuals and shipped to computer stores. And so there was actually a publishing industry, just like there's a publishing industry for, you know, authors and books to do all this. So Rob goes and he starts a publishing

16:42 Division. of forethought. Now the idea was that the company would build up the muscle in software publishing by publishing other developer software so that by the time the application that That Bob Gaskins was working on the U.S. uh was ready, they would be able to publish it themselves without having to have a third party publisher.

17:01 That was the idea. So Rob goes, he he gets a couple developers that he's gonna publish their software. The first two don't really work out. Uh and then he signs up a database program for DOS called Nutshell that they were gonna repurpose and And re distribute for the Mac. And they decided to come up with the name for it, of FileMaker.

17:22 FileMaker. And for any longtime Apple nerds out there, you're this should be a name that's come across your desk a few times. If you go to FileMaker.com today, it still exists. The website informs you that it is FileMaker an Apple subsidiary. FileMaker is now owned by Apple. One of the very few Apple subsidiaries and and a long, long time subsidiary. It's kind of incredible they keep it a subsidiary and run it under its own brand. Like this is like this weird corner of Apple that you never hear about when you think about their, you know, four products and three sizes that are neatly shrink wrapped and and well understood. Four products, three sizes.

18:00 Plus FileMaker. And uh so the the history on FileMaker, I mean, this is kind of incredible, that within one roof, now the developers of FileMaker were always a a third party company and Fourth was just publishing the software. But FileMaker would go on to be acquired by Claris, which was the spin out from Apple that was run by Bill Campbell, uh the coach Bill Campbell, who is one of the most legendary figures in the valley. Uh again, it all comes there were there were I wonder there weren't even thousands of people. There were probably like ten people working in technology at this point in time. Bill would uh would then acquire the developer of uh a file maker and file maker into Apple uh a few years actually I think within a year of when Microsoft acquired PowerPoint and forethought. But that is a story for another day. For today.

18:44 Back to the application side of of forethought. So it turns out that Bob was not just had, you know, any vision for the company. He actually had the right vision for the company. So what he saw was that

18:59 Everybody knew that graphical operating systems, graphical user interfaces and operating systems were coming, but this was going to enable essentially a huge wave that would wash across the whole technology industry. And you would be able to on top of that build applications that were enabled by now having a graphical computing environment that you couldn't do before. And The vision of what application to build that he comes up with is business presentations.

19:27 Up until this point, when you made a business presentation, you would do it using You know, slides literally. uh photo slides like overhead projector, you know, put the slides in like the the scene in Mad Men with the uh the Kodak carousel. You had an art department, a corporate art department that would make presentation slides and then you would put it in your Kodak projector and like that's how you would lead a meeting. It's nostalgia, David. It's nostalgia. The carousel. Uh It might be the best scene in in television. Like flat out. It's so good.

20:01 It's so good. But Bob, so he sees this and he says, the carousel is, you know, going the way of madman. This is gonna be the future. People are going to make these presentations themselves, enable the business user who's the uh it it feels weird even to describe this to in that there was once another way of doing this. Like If you are the presenter, you are making the presentation, you can actually now make it yourself and present it yourself when you used to have an art department have to do it for you. There's this thing called absolute power point by Ian Parker. It's like a

20:34 super old website floating around. Or d or did you find the uh the thing at all about Whitfield Diffy? No. Okay, so there's a guy named Whitfield Diffie. And I believe he was in the Bell Northern Research Center. folks who've studied computer science may may know Diffy from Diffie Hellman encryption. I'm gonna probably get the details, but if I remember right, it was a precursor to the RSA encryption, which is the sort of basis of of most secure transactions that happen today. But

21:05 There's a great great excerpt from this piece. At Bell Northern, Diffie was researching the security of telephone systems. In 1981, preparing to give a presentation with 35mm slides, he wrote a little program tinkering with some of the graphic software designed by a BNR colleague that allowed you to draw a black frame on a piece of paper. And then it goes on to to point out with a few days of effort, Diffie had pointed the way to PowerPoint. And it was it's i incredibly at Bell Northern research sort of coming up with this concept of maybe software can help us do this thing that you know, we have to do manually right now. And and use a little bit of software to get there.

21:43 Wow. That's I can't believe I missed that in all the research. Uh'cause that is literally I mean, Gaskins comes from B and R. That's the germ of the idea right there. So The first thing Gaskins does

21:54 The board basically he's not the CEO, but he's basically given CEO like oversight of the core part of the the development part of the company, the non publishing part of the company. He fires everyone except for one person because all the engineers that they have, they're all systems engineers that are all, you know, coding in machine language trying to build up this uh this operating system. He keeps one.

22:17 And then he hires a really great developer that he knew that he had tried to recruit into BNR named Dennis Austin. And then Dennis and Bob go on to the two of them basically in like a Previewing the modern like lean startup team, like they basically build PowerPoint together with with Bob as as the PM and Dennis as the engineer. Dennis at the time.

22:39 was actually working at another NEA portfolio company that had just shut down. Uh Dick wasn't on the board. One of one of his partners was on the board. And then this this tells you about the prospects for four thought and and what NEA thought of the company. The board member at the other company that had just shut down that Dennis was working at tried to stop Dennis from going to Fore Thought because he was like, That is a sinking ship. You don't want to join that. Our firm has no faith in this company. You're throwing your career away. Um But Gaskins was still able to recruit him, uh and and he writes about this Because

23:14 Well he was able to do it because there just weren't that many companies out there that were working on applications for graphical user interface operating systems. So if you believe that was the future, you know, you're only bet. And and Bob also talks about this is why he joined Fore Thought himself, despite it being a sinking ship, there just really weren't that many opportunities to do this. It was like when the iOS, you know, app store launched and you needed there were only like three places where you could write, you know, IOS apps. Um Which ki there kinda were. Like

23:45 Yeah, there was Craig Hawkingberry at the icon factory, you know, th there was like actually just a few people that it was whoever made uh Super Monkey Ball. Yes, Supermontie Ball. Which it wasn't that was a port from consoles, I think, actually. I didn't know. Yeah, I wonder what it'd be fun to go back and see like what the first like native Companies and apps for

24:07 You know you know why Twitter if it came out so early? Yeah. Icon Factory, uh Twitter client. No, what?

24:14 So Craig Hawkingberry, when Apple announced their sweet solution uh for developers to be able to build web apps and there not being an app store, Craig was one of the people who basically cracked open the iPhone and and figured out how to um reverse engineer the API surface and know what the Apple engineers were doing to build the native apps and he wrote Twitter if as a jailbroken app. So then he was sort of already'cause when they released the SDK, I mean it was a much more So he had already been essentially building uh before the SDK comes out. They just had to rebuild it on public documented APIs.

24:53 That's awesome. Yeah. Yeah, yeah. Uh, what would be the equivalent today? I mean I guess that's the billion dollar question. I mean it depends if you're long crypto or not. Good question. Yeah. Probably also a topic for another episode. We we definitely have to find some crypto transactions to cover.

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27:01 All right, back to the PowerPoint story. So It takes them about three years to develop PowerPoint. within Forthought, beginning with just Bob and and Dennis. um and then eventually growing the team over time.

27:15 But because they're doing this In a startup. you would think they're also publishing FileMaker. FileMaker becomes a very successful um software on the Mac, but unfortunately they don't have a really great deal with FileMaker. They're actually losing money on it and they're losing money on the other uh on the other software they're publishing too. Not good deals. They keep having to raise money All along. So from NEA and their existing investors, new investors, they're basically constantly pitching. Bob is spending his time either laying off people, pitching for money, or building PowerPoint. Probably in in that order. Wow. Do do you know how much money they raised? I actually don't know the total amount that they raised, but when they

27:54 do finally sell the company to Microsoft, uh the total price of the sale is fourteen million and the VCs get twelve million. So only two million goes to Common. I don't think that was all twelve million of liquidation preference. Like there was probably some participation in there too. But you have to imagine they raised at least Six million if uh if not more if they're if they're gonna get twelve million the preference. Or quickly catapulting uh toward I wonder what they they raised from Apple's strategic investment group. Well, right. So they're raising money. They're talking with Apple all along, because Apple is starting to launch this strategic investment group. But Apple's worried that they're not going to be able to actually ship the product. So they don't want to invest unless they're actually going to ship this strategic product for Mac. Uh so they keep waiting and waiting. And Apple actually only finally ends up investing uh just about I think two or three months before Microsoft acquires the company. Yeah.

28:50 Jan January of eighty seven. January of eighty seven. They ship the product in February of eighty seven. Uh, and then the acquisition happens over the summer. Really really uh believing in them, Apple. Until it's absolutely clear that they are literally printing z uh floppy discs and shipping them in one month. That's when we will invest in you. Mm Sounds like most VCs, right? Yeah. I mean at that point I it's impressive that they managed to get there without getting the check.

29:19 Yeah. And I guess they took the check on, you know, we'll need to ramp production after this first run. Well, it's also like are you really gonna turn down Apple, which is at that point in time the only platform that you are shipping your software for, because developing for Windows is a nightmare, especially at that day and age. So Apple invests January eighty seven. February of nineteen eighty seven, they do a big launch event. They're finally ready to ship what was initially presenter, uh was the the name for the project. Over the past few years.

29:51 But then they had a trademark issue right before they were about to ship, so they changed the name to PowerPoint. Shocking that you pick a term as generic as presenter and expect that to skate through trademark review. Yeah. But it's again it's like, you know, back to um Back to the early days of iOS apps, remember like Camera Plus and like all the, you know, super basic named apps? So they changed the name to PowerPoint right before they ship the product.

30:15 So February nineteen eighty seven, they do a launch event. They haven't actually shipped it yet. Uh Microsoft and Bill Gates Get wind of uh the momentum that's building behind this product. And They actually

30:28 reach out and very explicitly say they want to acquire the company even before the product ships. And to be clear, what the product is at this point, like when we say on the product ships, it's software that allows you to make Black and white printouts on transparencies so that you can put them on overhead projectors. Yes. Like the PowerPoint you're envisioning is very different than this PowerPoint. Like we talked about thirty five millimeter slides. They're not even there yet. They're not even in color yet. Like This is a program that helps you lay out

31:00 Your transparencies for overhead projectors. Yes. But Apparently, up until this point in time. Microsoft and Bill Gates

31:09 Of course. uh software applications for graphical user interface operating systems were going to be a huge market. They were working on many of them internally, like Word and Excel. Bill Gates also knew that presentations was going to be a big market. His vision for how Microsoft was going to attack it was they were going to add the option to print an outline to Word. In word. That's so great. So so Jeff Rakes is the executive at Microsoft.

31:38 Um there's a great excerpt here that that Jeff Rakes wrote. He goes, I thought software to do overheads, that's a great idea. I came back to see Bill. I said, Bill, I really think we ought to do this. And Bill said, no, no, no, no. That's just a feature of Microsoft Word. Just put it into Word. And I kept saying, Bill, no, it's not just a feature of Microsoft Word, it's a whole genre of how people do these presentations. And to his credit, he listened to me and ultimately decided to go forward and buy this company in Silicon Valley called Forethought for the product. known as PowerPoint. And here we are today. It's like It's how freaking businesses communicate internally. Like it's how every it's how the military communicates. It's how like it is the de facto way for people to get ideas across to other people.

32:21 You can hate that, you can love that, it can be your tool of choice, or you can be your nemesis in an organization. You know, it's not that long ago. Like it's it's the late eighties and the belief was, eh, that's that's a feature of a word processor. It's a feature of word, yeah. Well, it's so I was gonna save this till till the end,'cause I think it's like the most fun idea to this whole thing. Forehought has is this like tragic history of a company. They're always perpetually raising money. They're doing bridge round after bridge round after bridge round. It's impossible to raise money. The irony is that Because of PowerPoint, like PowerPoint becomes the vehicle by which more money is raised in the history of humankind over the next thirty years than has ever been raised in the you know, in in mankind's history until that point. And the irony is the company that made it could not raise money.

33:15 Oh so great. But it also reminds me of uh of the Dropbox episode and you know, Steve Jobs telling Drew Halston that, you know, it's a feature, not a product. Ten billion dollar feature. I guess there was no Jeff Rakes around in in Apple in in whenever it was two thousand ten to still tell Steve that uh no this this is a product, not a feature. No. No no. Did your research get into the talks that Microsoft was having with another potential company?

33:43 Only a little bit. They supposedly there were two other companies that they were evaluating once Jeff Riggs had convinced Bill Gates that This actually needed to be a product within the suite of applications that Microsoft productivity applications Microsoft would make for Windows, but they evaluated the the PowerPoint was the best. So apparently Dave Weiner had a company called More, capital M O R E, and Microsoft actually issued a letter of intent to purchase them. And ended up walking that back. They uh basically took it back the same day that they gave Forethought their their offer to acquire them. And basically.

34:19 On april twenty eighth, nineteen eighty seven, this is right after Fore Thought had shipped the the first run of PowerPoint, a group of Microsoft senior execs went and spent a day at Fore Thought to hear about the initial PowerPoint sales on Macintosh and what their plans for Windows were, and that day, as soon as they all got back to Redmond, that next day they they sent the letter withdrawing their earlier letter of intent to to purchase. Which is Interesting, interesting. Totally crazy. Well That makes sense because uh what I did research was the back and forth on the acquisition from the Forthought side. So this was end of February, Microsoft reach out reaches out to Fore Thought says We want to get into this market.

34:57 We wanna buy you. We wanna do this fast. couple weeks later in mid March Jeff Rakes and John Shirley, who is then the president of Microsoft, come down to Silicon Valley. Four thought is based in Sunnyvale at this point, and they have dinner, they offer 5.3 million to buy the company in cash. The Fore Thought board meets and decides they haven't shipped the product yet. This is still a couple days before they ship the product. And

35:23 Decides. Uh You know That's not that much money. The VCs had probably put at least that much money into the company, though like We'll roll the dice. We'll ship the product. They ship the product in mid March.

35:35 And it's a huge success. It sells a million dollars in its first month. Uh, which is it's just so crazy to be literally sold out. Sorry, you you can't get the bits anymore. They're sold out. They're sold out. Only so many bits. Uh Um So then after that That's when Microsoft comes back down and meets with them in April.

36:02 And then uh immediately after that I guess they cancel the L O I that they had with Moore. to acquire them, they decide PowerPoint is What they've been looking for. They need to acquire. For thought. Uh and then they come back with a much improved offer. Can you imagine

36:17 Like being Dave Weiner in that situation, what a bummer. Oh total bummer. What could have been? Uh what would have happened otherwise. So interestingly though, uh the offer that they come back with, uh this is you know, VCs sometimes uh Do things to hurt themselves.

36:36 Uh, they come back with an offer to acquire Fore Thought for twelve million dollars, but in Microsoft stock. The board is happy with the offer, but they believe that Microsoft stock is overvalued because it was up six X in the past year. And they didn't want to take Microsoft stock. They wanted cash. Now were they public? Yeah, Microsoft had gone public the year before. Like what's the big deal? Of course. Of course you could sell the stock. Or you could hold the stock and make billions of dollars, but you know. There we are. VCs. Cash is king, dude. Cash is king. Cash is king. Cash is king. So the board says, No, we don't want this billions of dollars of upside in Microsoft stock. Uh and they call themselves venture capitalists. There also were a bunch of other weird terms in there, like they particularly they wanted the whole company to move up to Redmond and join Microsoft uh in Redmond in in in Seattle. Uh the team didn't want to do that. They wanted to stay in Silicon Valley.

37:33 So back to Microsoft. They have the boards negotiate, uh,'cause there's still VCs on the Microsoft board at this point in time. And Microsoft comes back with fourteen million in cash and the acquisition gets done in early summer. And in particular, the company and Forethought, uh, as part of the negotiation, they get to stay in Silicon Valley, not just keep developing PowerPoint. themselves there, but they get made into a whole official business unit of Microsoft the graphics business unit of the applications division, and they have a mandate to hire and build and run that whole division.

38:08 Silicon Valley. So after the acquisition closes, as we mentioned at the top of the show, they move the company from Sunnyvale. uh up to Sand Hill Road, to Tony Sand Hill Road, where all the venture capitalists are, uh right next to right next to Stanford, and they move into the Quadris complex on Sandhill Road. uh take over the whole complex. That then is the complex after Microsoft leaves where benchmark uh has their I think their first and longtime office. Shasta's there.

38:39 Uh many other many other VC August Capital is there, and August Capital was the VC investor in Microsoft. are all there in uh in that that complex. It had been something else before Microsoft move, but Microsoft made it into a into a tech complex. Wow. Wow. And there's a big lesson in here. I mean, this is this is one of the great quotes from from Bob that he sent over. I don't think I'm spoiling anything here in this opening line. I think you guys know the end of the story, but PowerPoint has been so very successful after its acquisition, and mostly, as far as I can see, because Microsoft in nineteen eighty seven lacked any technology or experience to try to manage us

39:17 manage its first distant location, and so accidentally avoided smothering its new product while providing what was really vital to us. Money, industry clout, strategic tips from Bill Gates and Mike Maple Sr during confusing times for Windows developers. Uh and was never. Um Yeah, we uh we have to say once again thank you thank you, Bob, to for your email to us and uh and writing the book about this. Uh You listeners, you can tell we're we're geeking out over this,'cause uh it's so cool to have such primary sources for For a quiet.

39:50 So yeah, that's that's what happens. I mean Microsoft really does leave PowerPoint alone. Uh it's the original Facebook style acquisition. And even though PowerPoint would ultimately come to be in nineteen ninety with the launch of Windows three point oh. uh the office bundle is introduced and PowerPoint comes to be bundled with Word and Excel um and sold together as a set. Which actually was launched first for the Mac in 1989. The three bundle together, yes, my PowerPoint became a a component of the Office Suite. for Mac and then in nineteen ninety for Windows.

40:26 Ah, interesting. Well that was because Windows three point oh didn't launch until nineteen ninety. Uh Bob also talked about this is really getting into the weeds of, you know, both history and technology here, but before Windows three point oh, like it was impossible to develop for Windows. Like it was nobody outside of Microsoft essentially could write applications for it. It was so buggy. And so the PowerPoint group, again being independent, refused to ship a version of PowerPoint for Windows until a stable version of Windows came out. So you could get Word and Excel on Windows Two point oh. But you couldn't get PowerPoint simply because Bob and the whole group was like, No, we're not shipping for this piece of crap operating system. And and the amazing thing is it took a while to get it

41:09 to get it all integrated. So you had Word and Excel that felt very similar, but then you had PowerPoint four that, you know, was starting to actually converge, but it still looked quite different from the, you know, the original um Word and Excel on Windows. And it wasn't actually until um PowerPoint ninety five, which used the version number of PowerPoint seven point oh, um, where they actually totally converged and used the same version number. And the reason it went from four to seven was was to catch up with the Excel and Word version number. So there was never a PowerPoint five or six. Five and six. Yeah. It's it's the uh Windows nine of uh of PowerPoint. The iPhone ten. The iPhone nine. The iPhone nine. Yeah. Oh boy. Yeah. Well, that is the story, more or less, uh, of PowerPoint. And I'll I'll throw out a few numbers just to just to like understand the ram here a little bit. So PowerPoint has been phenomenally received since day one. So it was overhead projectors, and then it was thirty five millimeter slides and it was in color.

42:13 And then they started to actually um find a way to to, you know, make it I think it was actually it was like a a video, basically, that that was projected out. Let's see, the third version for Windows and Mac in 1992 introduced video output of virtual slideshows to digital projectors, which would over time, of course, completely replace physical transparencies and slides. But the sales numbers are quite staggering. So that first 10,000 uh at a hundred bucks a pop sold out right away. That was in eighty seven and eighty seven and then it comes out and only for Mac and only for Mac. It comes out in in Office in eighty nine.

42:49 Um and then for Windows in in nineteen ninety. By the last six months of nineteen ninety two, PowerPoint revenue alone, not office bundled, was running at a rate of over a hundred million dollars annually. Incredibly fast growing business. In nineteen ninety seven, there's a couple more great stats here. So fast forward another five years, there's over twenty million copies of PowerPoint in use, and that the total revenues from PowerPoint over its first decade from eighty seven to ninety six was over a billion dollars.

43:17 I'm gonna stop before we get to a cloud world because that's when the accounting gets a little funky inside of Microsoft. But um in two thousand nine, there was a uh an a group called MBD, which was uh Microsoft Business Division, I believe, which included Dynamic CRM, but that was a smaller group, did eighteen point nine billion in revenue. And twelve billion in operating income. So you know, enormous behemoth it's a it's a freaking Windows sized business for Microsoft having Office All Up. This is the power of If you recognize

43:50 a massive wave like this, which is like the deployment of a fundamentally new You know. technology mode of interaction and what that can enable.

44:01 You can build enormous businesses as an application on top of it. I mean, this is the same story as Uber, right? This is the same story as Instagram. Uh it's just in an office environment and with PCs. It's incredible that there was instant product market fit even as the product changed so dramatically. the world wanted exactly what PowerPoint was the first, second, and third times and it just it just Yeah.

44:27 it not only was the the niche enormous, the the market for digital presentations, but PowerPoint right now. owns ninety five percent of that market. That is that is un Unreal. Which is funny. Like in tech we think like, oh you know, lots of people use keynote now and like

44:45 You know, keynote's great. Like we use keynote at wave, but like We're such a small piece of the overall market. And you know, it's funny, uh while I love keynote and while I've I've dabbled in Google Slides I end up using PowerPoint more often than anything else because I know that if I'm working on a deck and somebody else is gonna come in and work on it too, they probably have a history of using and understanding PowerPoint. I don't wanna throw them into a new tool set. I mean it is just it is the the power of lock in and network effects and standards and it it it Just hard to shake. Yep. If you send it to someone else as a

45:23 PowerPoint file not as a PDF. You know that they're gonna have PowerPoint installed on their machines. One one quick thing I wanna say. Just on the the idea of this massive wave coming and then building uh conceiving and building an application to ride that wave. really, really recommend everyone go read Bob's book, The Sweating Bullets Book.

45:44 It's just it's so good and so fun from a history perspective. But he also goes into great detail and he kept detailed notes throughout the development of PowerPoint, you know, about his how the idea came together, how he did market research for it, uh how they Basically feature prioritize. um why they thought that they could beat competition. And it's really a great example of how to think about really a business plan for for a new uh application product in a in a new technology paradigm. So really great case study. Yeah. Worth reading.

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47:53 Who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale. Go check out service now dot com slash acquired and tell'em that Ben and David sent you. Should we move on to category? So I have this as a product.

48:10 It was its own business unit and it was a self-sustaining or I don't know about sustaining, but it was a a product that they were selling and was selling well and you know they had the whole channel to sell it. Ultimately. Microsoft was gonna figure out a way to integrate this into every other piece of their business and just make it a product that used the Microsoft sales channel, the Microsoft sort of distribution relationships. It only took him a couple of years to really build the the the ultimate bundle in Microsoft Office out of it. My assessment is product. Yeah.

48:45 Hundred percent. Like It's a artifact of history that it was officially a business line for Uh a number of years. A cool one given all the externalities it produced in in on Sand Hill Road and in Silicon Valley. But uh A hundred percent of product. Also, we didn't talk about this uh

49:02 In the history, but this is a good point for it. We joke on this show about the old quote that like there's two ways to make money in business, you know, bundling and unbundling. The bundling of Word, Excel, and PowerPoint into Office. Was one of the best And most genius.

49:18 business decisions of all time because When they did it. Each of those products was selling separately for five hundred dollars. So you would have had to pay fifteen hundred dollars to buy all three. All three of them had competitors in each of their, you know. word processing presentations and spread sheets that sold for about the same price.

49:38 But when Microsoft bundled all three of them, they sold the three of them together for a thousand dollars. And there was no user who needed one of those, but not the others. Like if you were an office user, you needed all three of them. So now you had the choice of you could pay a thousand dollars for all three of them. from the you know, made by the company that also made your operating system. Or you could buy inferior versions separately. for fifteen hundred. And they just completely mopped up the whole market. And there's a great Bill Gates quote here that is complete with an ultimatum. So here's an internal memo by Bill Gates um announcing the plan to integrate the applications themselves. And this is in February of nineteen ninety one.

50:18 at the end of PowerPoint 3.0 development as they're starting to shift toward working on a sort of integrated platform. Another important question is what portion of our application sales over time will be a set of applications versus a single product. Please assume that we stay ahead in integrating our family together and evaluating our future strategies. The product teams will deliver on this. I believe that we should position the Office as our most important application.

50:46 Boom. And I'm not just I'm not just justifying my career here,'cause I um I served when I was at Microsoft both in my internship and in my first job, I s I served on a shared team. So we basically built shared components across the web apps and then later the the iPad and Mac apps. But The notion of of sharing between the products to promote the business the the business of selling a bundled product group uh dates back to nineteen ninety one. Well That is the sound of

51:14 many other mid nineties software companies and startups going out of business. And and as one of my managers said In the nineties. There were seven forty sevens flying cash to Redmond. It was just full of cash. Oh man. It's it's so funny, like that seems like

51:34 Such a different world. It is like that is a totally different world from the world we live in today. Uh but it was not all that long ago. Like I remember all that. You worked there, you know? Yeah, and there's still, you know, I haven't worked there in five ish years now or four years, but You know, the the there was still a very strong culture of of memory around that and of of wounds from the Department of Justice days and the cultures that are created by these things and the the memory of tapping that incredible product market fit w well and and just knowing what that feels like and and feeling like you're invincible, they last for Two decades, three decades. Unfortunately.

52:13 They tend to outlast their useful life. Yeah, culture's a hard thing to shake. Yeah. Well, um should we do what would have happened otherwise on the sure? Yeah, so I've got three of'em.

52:24 We've basically covered'em, but Jeff Rakes' team, before they identified Moore and before they identified uh PowerPoint, they were working on an internal version of this. And it wasn't, you know, I don't it it certainly wasn't exactly this, but they had a thesis around sort of graphics based presentation computing that they were gonna do no matter what. when Jeff was heading the marketing for the application division, um, they sort of put pen to paper on what what a presentation product look like. And uh that's that's sort of when they started looking around to to to acquire. So it could have been built internally. Who knows if it would have been as successful. I'm not sure how much nuance there was to nailing the exact right product at this point because I just don't think there were that many products in the market. So I think

53:13 had they built it internally, they they probably would have still been able to define the market. Yeah. There were no other products in the market by the time PowerPoint shipped with Windows three point oh in nineteen ninety, they were still it was the first. This is incredible, like the first Graphical presentation software for Windows. Um, what were the other people in the market doing? Yeah, now there'd be three other venture back companies, somebody doing it on blockchain, and like a hundred and fifty knockoff Chinese clones by the time like you wake up the next morning and you're like, Oh my god. Oh that's so true. That's so true.

53:50 My other two, yeah. They they could have built it into Word, um, and they could have bought uh Dave Winer's more. It seems like there wasn't no way that Microsoft wasn't going to attack the market at this point. Who knows, but I don't think history would have been any Different really. whether they had acquired PowerPoint or not, or taken any of those paths. Like they would have ended up

54:11 one way or another, with the right product in market. They would have Bundled it with Word in Excel, or it would have been a part of Word or w whatever. Like Microsoft was going to own Business productivity.

54:23 application software on top of Windows. Like that was gonna happen regardless. Yeah, I I I think so. I mean The biggest difference is it probably wouldn't be called PowerPoint. I mean maybe there's a world where it wouldn't be a separate application and then maybe slide culture and powerpoint culture wouldn't have grown up in quite the same way, but

54:43 The question is if they if they built it into Word. Is there any way that somebody else would have come out with this format. and uh had it become dominant and large. Like I I there just weren't enough

54:56 companies capable of making and distributing software at that point. I I think Microsoft could have like Screwed around for a couple more years and then and then nailed it by either acting on the street. other places went to forethought. Um was like if you wanted to do this kind of stuff, there'd

55:17 Just weren't many places to do it. Do you move into tech themes? Yeah. Yeah, so I mean we talked about it a little bit, but keeping any companies separate to make them more successful, I think that's a huge one here.

55:31 avoid smothering, so provide the resources that are helpful. don't trample and then figure out when bundling makes sense. You sort of see the same thing with Instagram, um bundling the uh add units to advertisers between Facebook and Instagram. And the um network too. Like I mean, Instagram bootstrapped. the social connection network off of Twitter initially.

55:53 But then when it became part of Facebook and like Facebook started pumping it into the newsfeed and then uh both bi directionally of like Instagram appearing in the newsfeed and on Instagram like oh your Facebook here, you know, connects with your Facebook friends. Yeah, that's a Huge example to me too of of that bundling. Yeah, it's interesting. I think we're starting to identify a trend of um

56:15 Like keep the development team separate. Poor resources on. allow sort of uh separate cultures at least for a time, but figure out how to bundle customers. And ultimately you need to do more integration with the product teams in order to get there. So you're not sort of shipping your org chart in weird ways, but I think that's important.

56:38 Are there other good examples of making an acquisition, keeping the team separate, keeping the product separate and Bundling for customers. Amazon and Audible is a is a decent one. The the the audible team's still entirely separate and yet you can buy your Audible books sort of through the Amazon product page. Yep.

56:58 I'm having a hard time thinking of really successful Instances of this. Outside of Instagram PowerPoint.

57:08 You could argue maybe uh Lucasfilm. by keeping Lucasfilm completely separate creatively But Providing the Both the

57:18 resources to make more films and more content. And then the distribution. Um, that Lucasfilm didn't have on its own. It's almost like there's different levels of this. Like the the keep'em separate and pour the right resources on and share the right learnings is like table stakes, but it's like this total home run scenario if you could figure out how to bundle the front end to customers. Like have you, um have you noticed if you if you're a Prime subscriber now, you become a Twitch Prime subscriber. And you have one subscription to a to a streamer that comes with that. Sort of an interesting example.

57:49 Although they're cross pollinating the teams a lot more than uh Well, it's a few years in now, so it's not so different than this. I think we should keep an eye out for that in future episodes, though. You know, the only other theme that I have is one that um That Bob mentions in his in his blog posts and and in in the book.

58:07 The quote that he has is a year or two is an eternity in a rapidly exploding market. And that's so true. Like the amount of time that passes in between all like throughout this history is is fairly short. And the the time that the window is open to create a PowerPoint like product or to create a you know Uber like product or an Instagram like product.

58:29 It's very, very short like they These windows don't come along very often. When they do, like you need to be delivering the product into market like in that window, or if you're too early, like the market's not gonna be ready to adopt. It really was Windows three point oh shipping

58:48 Getting mass adoption. Uh and having PowerPoint ready and shipping with that. Like before that Fore thought probably would have been fine and PowerPoint would have been okay if it were just on Mac, but like whoever shipped first with the first mass adopted version of Windows was gonna win. You know, and similarly you know, with uh with the iPhone and and Android, like, you know, when you were the first application that just worked.

59:14 That was a major new, you know, category enabled by The competing paradigm, that was the time to win. Yeah, and as I'm reflecting on it a little bit in starting companies and trying to make bets on these platform waves. You sort of have to believe two things. You have to believe that that platform is gonna become super dominant. And that, you know, it's gonna be totally pervasive.

59:38 And change consumer behavior and have incredible um just sort of traction in the market. But you also have to believe that you can build a standalone venture scale business by just being on that platform. And by being an app on that platform. And like for Windows three point oh, there was Tons of money to be made by or even 3.1. Like if you're the first to market on that incredibly pervasive expanding platform.

1:00:05 you also have to have the faith that Microsoft is going to allow you to monetize on their platform enough so you can be a venture scale business. You know, the Instagram's a kind of a bad example of that because they weren't monetizing when they sold to Facebook, but it's the question we ask ask ourselves a lot when we're trying to make a bet on a new emerging platform is is it gonna be huge and are we gonna be able to singularly be here and build a big business. And I think those are the two questions you have to ask about VR. I remember when the Apple TV developer platform came out probably three years ago, I I was considering making a bet there. Uh it I don't think it sort of changed consumer behavior or became dominant enough, but it we were thinking, is this a new is this a new app store or is this a new iOS? And it's it's hard to know when those two characteristics are are present. And I think you know, that's why they call'em bets. You gotta

1:00:57 You gotta put your your chips down a little. Well what What's interesting about this though is like this uh wave and and then mobile and then potentially, you know, VR Or even blockchain in the future. are the same in that like it was back in nineteen eighty two, eighty three, eighty four

1:01:14 when people knew people in the tech world knew that the graphical user interface was the next wave, but it wasn't until nineteen ninety when Windows three point oh shipped that that was the right window to be hitting the market. You know? So like that's a six to eight year gap there. And I feel like VR is kinda like in the same Point.

1:01:34 Everybody who's you know used VR, who's been in Rec Room, you know, knows that this is the future. Right, but like We're now like Maybe we're in like nineteen eighty six, you know, or eighty seven. But th there was that article that just came out uh this past weekend that Apple is working on a

1:01:51 VR and AR headset scheduled to ship in twenty twenty, currently. Like maybe that's the point. Maybe that's the Windows three point oh. Of A R and V R like we know it's coming, but the window is not yet Rape to build the You know.

1:02:05 To realize the massive opportunity. You know, as we work on companies at PSL, one of the ways to think about do we know enough about th the space yet to start a company. We've seen it come to fruition a few times where One characteristic to prioritize in the early stage is ability to adapt to change rather than certainty about your your plan and making it a good plan, because there's a few times where we've seen a company that just needed to get into market to both learn about the market

1:02:34 and uh uh sort of develop that sixth sense about a trend of where they need to be in a year or two that you really wouldn't be without operating in this space. And so it's can I only raise a little money? Can I stay super lean and nimble? And can I be first to jump onto new opportunities when they they emerge and there's a sea change in the market. with with forethought, I think they felt around in the dark for a while to kinda get there and then it wasn't that great of a venture outcome where it was a Terrible venture outcome. But You know, it it does speak to like Well it would no, it was it was like an okay venture. Okay. Was a lot more than it's a

1:03:13 It was an okay. But I think it does speak to the merits of uh if you're already loosely operating there and you have the agility to sort of move around to where the market is going, you're in an amazing place to catch on to one of these rocket ship platforms as they're taking off. Where you want to be is is where PowerPoint was was having enough experience in the market to have the product right. Yes. And still be able to hang on until the window opened. And then when the window opened Open's just shoot through it.

1:03:44 It's a delicate art. Yeah. I've got one more before we get to greeting on um tech themes. Listeners who haven't heard us talk about this, acquired started because David and I were getting drinks and we would we would like get drinks and catch up maybe every other month or so and we wanted partially wanted a reason just ha hang out and talk more. But the other part of it was uh we were sitting there and I David, I I pitched you on two podcast ideas. One was like we should cover acquisitions that actually went well,'cause the trope is that none of them ever go well and they implode. The other one was Why don't we do a podcast series where every episode is about the

1:04:21 rare company that manages to have a billion dollar plus innovation Twice. That's right. I remember that. And we decided not to do that because there just weren't that many. It would be a very short, very short podcast uh series. Yeah, and I and I think our thesis was basically like companies have the magic moment just just once because they're so rare. that they find that product market fit, the monetization, where like just everything works. And then Uh after that companies keep finding ways to

1:04:52 grow and expand that thing, but they generally fail to find a second complete one of those, and particularly one that works under the same roof and doesn't interfere with the other main business. Microsoft did it. Like they're one of the few in the world. So look let's look at like two thousand nine, two thousand ten,'cause it's a it's the last time that the business was kind of cleanly broken out where you could see Office and you could see Windows, and they didn't have insane ways of grouping and and reporting the financials for these these divisions, but both both of them were doing eighteen to twenty billion dollars a year. Yes, they built each other up and yes, there's reasons why the Department of Justice intervened because they were propping each other up and Windows was using Office to create lock in and and Office was creating a a big moat for Windows, but In a lot of ways.

1:05:44 You know, th these were two completely separate multi, multi, multi billion dollar businesses. Office a as I was trying to do some of the math, they they've probably done over three hundred billion dollars of revenue. since the beginning of office. And

1:06:00 Wow. Just office. Not including Windows. Wow. And wow. Uh that that that's just completely mind blowing. Like that. That is better than the vast majority of companies could ever hope to do alone, and this was

1:06:15 Just shipping a really incredible bundle. I don't think it would be where it is today without having PowerPoint. I mean it is so de facto the way that that people communicate. we'd be missing an entire paradigm of the way that people communicate ideas, and that's a huge piece of what office is all about. Yeah, and I'm glad you brought that up before right before grading. Not to load it or anything. Not to load it or anything, but uh

1:06:41 Well, okay, should we go into grading? Yeah, let's do it. Okay, I'm gonna go first. With what I was gonna do before Hearing that um Argument.

1:06:51 I was gonna give this a B plus Which is funny, we we say we we need to stop giving B pluses. B pluses are like the standard grade on unacquired B plus A minus. Because like, yeah, it was great, like super good execution, like, you know PowerPoint was the right thing to do, buying it versus building it was the right thing to do.

1:07:11 But like like we talked about a minute ago. This would have happened anyway, I think. But what if it hadn't happened anyway? Like what if um You know, what if Bill Gates hadn't listened to Jeff Rakes and like had shipped A feature in Word.

1:07:26 And This whole A paradigm wouldn't have been created, but like having the three products and being able to bundle them as three was key to

1:07:38 winning. Like if it were only two, if it were only Word and Excel, competitors, they wouldn't have been able to reduce the price of the bundle enough that competitors to those products also wouldn't have been able to reduce their prices. And so by like having the three of them and literally knocking the price of a full product Yeah.

1:08:00 Like no competitor could keep up. Well, no competitor could keep up anyway,'cause no one else owned the platform. I Lo Lotus had its time, but I mean, they were making such ridiculous margins on these things that that and they were selling so many that the fixed costs were completely de minimis. I don't think it was like uh we lowered our prices so much by having a third app that we could put the other guys out of business because our prices were so low. I think it was like we had every competitive advantage in the world because everyone was using it on our operating system and we had all the sales channels and we invented enterprise software.

1:08:34 That's true. But like word perfect. Had a l enormous market share in the DOS era and brought a lot of that market share into the Windows era. Uh and it's true. It's very true. And the feature checkboxes wars where you know it was Lotus and WordPect and and Office all against each other and it was who could add more buttons on their toolbars. Yeah. Yeah.

1:08:56 Alright, I'm gonna go um um Gonna rest my pen at B plus. You're so harsh. This is an A. This is so clearly an A. They turned$14 million into hundreds of billions. I was arguing your case a minute ago, and now you're arguing my case. I I see why it's a B plus because what when I was thinking through it, the question is in our grading, should we consider

1:09:26 Not only the opportunity cost of the Capital. Like So if you consider they turned four fourteen million into one hundred billion, over a twenty five, thirty year lifespan, whatever it is. Like i holy crap, how's that not an A plus? The only reason why I would knock it down a little bit is

1:09:45 it wasn't actually the insight of buying this particular company and bringing in this particular team and product. It was it was a incredible insight that this was just a puzzle piece of in the same way that um when we did the Siri acquisition, when we did the sound jam acquisition, it looks actually a lot more like an Apple acquisition where this was a thing they were gonna do anyway, and then this was a building block on which they sort of shaped it into their vision. Now I don't know if if Bob would agree with us, and maybe there was a lot more to PowerPoint and and how the PowerPoint actually ended up shaping the the unique and special thing that was the the large scale successful PowerPoint, but I'm gonna go A not A plus because it wasn't uh a thing that they wouldn't have been able to do without buying it. There we have it. All right, some divergence finally. No. I I'm I'm we need some we need some more

1:10:41 Divergence. Uh, if for no other reason than to keep it interesting. There we have it. Should we move on to carve outs? Let's do it. You want to go first? No, you

1:10:49 By all means. Right. I read a really great hacker news thread a couple of weeks ago. Well, I feel like it's like uh Two thousand eight or nine, I read a really great hacker news thread. This is a throwback episode that way, so

1:11:05 We'll link to uh uh both the comment that I'm gonna describe and the the other comment that recommends the book, but there's two comments in this this uh thread that are amazing. One recommends the book Mindfulness in Plain English. I'm a complete and total novice to this, and I would claim no no wisdom or or serious practice, uh, but I'm I'm very interested in the topic and looking for more resources of mindfulness and meditation. And it is a book that explains the uh vipasana meditation in a way that is completely non-woo-woo. It is very much like how you can wrap your logical mind around this process, and let's say you don't you don't want to hear any of the sentences that leave you staring off into space and go, I have no idea what they just said. And I find that completely meaningless, though it sounds cool. This book doesn't have any of that. And it's got a r a lot of really great sort of if you're a engine or or type A or analytical person who's listens to this show and you've thought about meditation, I this is a really, really cool and interesting book.

1:12:06 So basically probably a hundred percent of our audience. Yeah. Yeah. And then the the other piece in that uh in that thread was somebody who was describing uh and this is another analytical engineering type person, describing their experience with uh meditation and and sort of what the process is in the terms of an audio engineer. And he basically said that meditation is like turning down the gain knob because when you're truly sort of silencing your mind and keeping your thoughts focused, really crazy things are gonna happen and you can't have that happen to you when you're outside in the world when the sort of gain knob is all the way up, or you could basically blow out your speakers.

1:12:50 It's it's too intense. And so why you why you meditate is to sort of turn down the game knob or the volume knob so you can experience all this crazy stuff in a really controlled, quiet experience, but then the goal is as you become more of a master of this to to turn it up over time and be able to be mindful in real world settings without sort of the danger of quote unquote blowing out your speakers. And I thought that was like the coolest way to think about it and the first time that this sort of arena of of thought and practice uh made sense to my my analytical brain. What a cool analogy. I like that a lot. Yeah, I thought so too.

1:13:28 So we'll link both of those in the uh in the show notes so you can check it out for yourself'cause there's a there's a few more paragraphs in there about the um the metaphor that I'm not doing justice to. Wow. Well that's a Deep and um uh noble uh carve out.

1:13:44 Well, on the surface mine's gonna be completely the opposite of that. But fits in with the theme of the show with um you know, waves and applications coming to the waves. Ben. Have you been riding electric scooters? Over the past few weeks.

1:13:59 I haven't. They're they're not up in Seattle. I've been riding uh riding a lot of the bikes. You gotta buy one. So many of the electric scooter sharing companies are now in San Francisco. Uh this is the phenomenon that started About eight months ago in LA in Santa Monica with Bird And is sharing just like, you know, bike sharing companies like Ofo and Linebike and

1:14:22 uh the companies in China that do bike sharing, but for electric scooters that are literally like razor scooters with batteries in them and electric motors in the wheels. And these things are amazing. You can, you know, ride it around the city. Get where you're going, you just leave it on the sidewalk. Somebody else in the app finds them with GPS location.

1:14:41 Goes, picks it up, rides it to wherever they're going, leaves it where Where that is. Okay, so cities are up in arms about this because there's like litter of, you know, electric s skateboards or electric uh electric scooters all over the sidewalks. But that aside. This is like the most amazing transportation innovation, I think, that I've seen, you know, since Uber. It's so cool. Like the form factor is perfect. They just nailed it. It's the Windows three point oh of light electric vehicles. And it's great because like

1:15:12 Unlike an electric skateboard where like you're on a skateboard, you have to know how to write a skateboard. And even if you know how to write a skateboard, like you still can feel a little out of control on it. With a scooter, you've got the handlebars, so you have a lot more control. And at the same time, it only takes up the space of a skateboard and is collapsible and is lightweight and portable. It's great. I've been riding all over the city on these things. And so much so I actually bought my own. I bought my own, yes. So on Amazon.

1:15:41 Amazon Prime delivered in two days. You can get a nine bot Electric scooter, ES1 electric scooter. This thing goes thirteen miles an hour, has about a fifteen well, depending on how much you weigh, because that can have a big impact on it, ten to fifteen mile range on a charge. It's great. It's Is this the one you'd recommend? Should we I I would highly recommend it. Two ninety nine.

1:16:03 On Amazon. Delivered free. You know, prime. And it's great. Like I basically don't use my car or my bike anymore. Wow, and listeners can't even see all the weight you've gained.

1:16:14 Ha ha ha. Uh Well maybe I'll have to do some, you know, meditation and mindfulness to like think about exercising. Mm. Oh, that's cool. I g yeah.

1:16:28 In Seattle, I don't know if it'll work as well as San Francisco because what you the one time you don't want to be writing these things is in the rain. Yeah. Well They could be huge in the summer. It's still pretty cool. Like

1:16:41 Even on the hills of San Francisco, like there's enough torque in these things that like You can With the really steep hills you have to kick a little bit in addition to the motor. But You can go up hills like

1:16:52 What's pretty cool. What's the magic here? Like like we've had sort of e bikes and scooters and stuff forever. Like is there something now where mass production is is cheap and better for certain parts. Is it the lithium I on batteries? Like why now with the the scooters? I think it's a couple things. It's batteries and range. at a certain minimum acceptable power and torque that you can deliver. It's the hub electric motors in the wheels. So these things don't have traditional electric motors, they have literally like very tiny motors built into the small seven or eight inch wheels.

1:17:30 Um so that keeps the size and weight. Down. And then I think it's also just like figuring out that this is the form factor that once you hit those minimum requirements, like it's so much better than a bicycle because It's so much smaller. So like when you're writing it, you only take up the width of a

1:17:47 Human being. You know, and you're then the like rel mass of a human being plus like fifteen pounds. Whereas when you're on a bike, like a bike is big, it's bulky, you can't fold it up and bring it inside, you know, you gotta ride in bike lanes, like all this stuff. Whereas a scooter, it's literally it's just like making The human more efficient. Bionic man. Indeed. It's like a bicycle

1:18:09 For a bicycle. On that note. All right listeners. Now is a great time to talk about one of our Favorite companies, Statsig. Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale.

1:18:32 Yeah. In the crazy speed of today's AI world. Shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers.

1:18:49 And how fast you can use that signal to guide what you ship next. This is where StatSIG comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. All right, listeners, if you are not subscribed and you want to hear more, you can subscribe from your favorite podcast client. If you feel so inclined, we'd love a review on uh on Apple Podcasts or a comment on Breaker. Or a tweet or a uh

1:19:31 Whatever the kids are doing these days. We appreciate it listening and uh and hope you enjoyed the show. We'll talk to you soon. Mm-hmm.

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