Asymmetrical Information

It's like in all the movies where the bad guy has the hero caught, is about to kill him, and then delivers a ten minute monologue explaining his scheme. This, of course, always allows the hero to devise a successful escape plan.

Netscape Inc. should have paid some attention to Sun Tzu "Art of War":

All warfare is based on deception.
Hence, when able to attack, we must seem unable; when using our forces, we must seem inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.

Hold out baits to entice the enemy. Feign disorder, and crush him.

If he is secure at all points, be prepared for him.

If he is in superior strength, evade him.

If your opponent is of choleric temper, seek to irritate him. Pretend to be weak, that he may grow arrogant.

If he is taking his ease, give him no rest.

If his forces are united, separate them.

Attack him where he is unprepared, appear where you are not expected.

These military devices, leading to victory, must not be divulged beforehand.

Well, there is an explanation for it that goes beyond stupid and arrogant. It's that the primary business of most dot coms (including Netscape) was to raise their stock price or their prospects for an offering. Given that, self-assertions that they were Microsoft killers made sense, if they thought the market would buy it. Since it did for so many, it strikes me as making far more sense than Jane gives it credit for. Jim Clark and his backers did walk away with a lot of money, after all.

The real business of venture capital driven business in the 1990s was getting to liquidity. It never was about new technology platforms, pet food, or anything else, except as a means to that end.

Jane:

they'd kept their mouths shut for a couple of years, Bill Gates might not have noticed them quickly enough to move into their market and slash prices below cost, a venerable Old Economy trick which quickly brought Netscape to its knees.

Are you referring to predatory pricing? I was under the impression that this wasn't true in the MS case (despite what the court said) since the cost of producing the next unit of IE was zero. I've also been led to believe that predatory pricing simply isn't feasible since you have to recover your costs at some point, thus being required to raise prices well above marginal cost in order to recoup your losses. Is that wrong?

Sorry, a little OT, but I was curious.

I think there's a strong case to be made that Microsoft was engaging in predatory pricing; they've held costs to zero near permanently in order to make the market for browsers completely commercially unattractive. Netscape (or their investors, as Pblsh argues) doesn't seem to have understood that Microsoft would do nearly anything, given that Netscape was threatening to destroy its core business, and that it could thus afford to hold the price down to zero indefinitely with operating system revenues sustaining it, which Netscape couldn't beat -- Netscape needed to monetize its single product in order to get money for R&D, while Microsoft essentially uses IE as a loss-leader for its profitable OS product.

However, my understanding is that predatory pricing isn't illegal unless you can prove that the company ultimately intends to raise prices above where they would otherwise be, which no one has been able to do in Microsoft's case. And the anti-trust court specifically ruled that giving something free to consumers, which they would otherwise have to pay for, was not an actionable crime by Microsoft.

Another important aspect is that Netscape attempted to commercialize what had been up to that point shareware or freeware. A few ISPs had their own proprietary browsers, such as Netcom's Netcruiser that also packaged a TCP/IP stack. (Remember when there were OSes that didn't have it built-in? Seems so distant now.) Those were essentially freeware that came with the service, a means to the end of enabling clients to participate.

The atmosphere has changed so much since then. If the first attempt to commercialize browsers came today that company would be widely mocked and probably compared to SCO.

Are you referring to predatory pricing? I was under the impression that this wasn't true in the MS case (despite what the court said) since the cost of producing the next unit of IE was zero.

Marginal cost for IE is zero. Fixed cost (i.e., R&D) is most definitely not zero.

Jane, you seem surprised by entrepreneurial optimism. It's always seemed to me that that's why they're entrepreneurs in the first place.

Optimism is not all bad. But the ideas of the visionaries at the top of a company need to be placed in check by the cold and calculating realists that serve as advisors. Perhaps the biggest mistake of management was not keeping these advisors around (or not listening to them). Homogeneity of ideas is rarely a good thing. It leads rapidly to myopic decisions and error. In this respect, many of the decisions of the Bush administration could be considered the result of such thinking as well.

Preannouncing non-existent products, aka "vaporware", is a time-honored tradition in the computer biz, and MSFT played its share of that. Keeping your mouth shut is not always the most viable option.

Yes, but MS can get away with announcing vaporware because it doesn't have a dramatically more powerful nemesis who has an interest in seeing that the vaporware never makes it to market.

pblsh makes a lot of sense. I worked for several start-ups and it took me a while to understand that it was not about the technology but about the IPO. Short cuts were taken that would prevent the viability of the long term product in order to grab market space. It was assumed that the details would be worked out later. Most likely after the original investors had made there money and gotten out.

"All warfare is based on deception"

Microsoft could actually sell all their software at a loss and still make money on their publishing business, training courses and certification processes. My father likes to say, "McDonalds isn't in the resturant business, they are in the real estate business." Hard to say.

Jim English

Good point, Jim. And there is another maxim: a good warrior always respects his enemy. What was suprising about dotcom was its utter lack of humility. Which they ended up paying dearly for, obviously.

Interesting post, but I disagree with the implication that if Netscape had just kept its big mouth shut it would have triumphed. First, Microsoft had caught on to the Internet before Netscape really started its trash talking: Bill Gates's famous memo was sent in 1994, and Microsoft started talking up the Internet at Comdex 1995; Netscape didn't get really megalomaniac until after the IPO in late 1995. Second, when it came down to it, Netscape and Java just weren't competitive as a development platform to Windows and Internet Explorer, and there were structural issues within Netscape the company which made it very difficult for it to overcome that problem. Charles Ferguson's "High Stakes, No Prisoners" (amazon link) is the canonical reference for this part of Netscape's problems.

But beating Microsoft is difficult because they're sufficiently smart to work out your plan even if you don't tell them what it is.

People had these ideas that big, old companies are dumb, lumbering dinosaurs incapable of competition because the majority of big, old companies are dumb, lumbering dinosaurs incapable of competition. I worked a few years for one of them. I watched it lumber, dumbly. The world changed around it, its sales dried up, and it lumbered, big and dumbly, into slow disintigration. People had these ideas for a reason.

The problem was not that the bet against any particular company was wrong: We selectively remember when it was wrong, but not when it was right -- remember the Microsofts but not the Lucents, the IBMs but not the Digitals. What was wrong with the new-economy bet is that it only takes one or two big companies not lumbering into new-economy extinction to completely screw a disruptive newcomer. The new companies are betting against not one lumbering dinosaur but a dozen.

Look at Netscape. Companies did die right and left in their path. How many dozen walled-garden ISPs dried up and blew away when faced with the amazing usefulness of the web browser? But Netscape's problem was that that level of success wasn't good enough -- it only took one company not dying to completely throw their business plan into the toilet.
--G

What killed Netscape was trying to rewrite its entire codebase from scratch rather than refactoring repeatedly and preserving the knowledge crystallised in that code. See, for example

http://www.joelonsoftware.com/articles/fog0000000027.html

Although, having said that, Mozilla has turned into a very nice browser.

That may have been what killed Netscape as a widely-used product. Netscape as a company was already dead.

That may have been what killed Netscape as a widely-used product. Netscape as a company was already dead.

Arg, double-post, sorry.

That arrogance is quite possibly what killed Netscape. If they'd kept their mouths shut for a couple of years, Bill Gates might not have noticed them quickly enough to move into their market and slash prices below cost, a venerable Old Economy trick which quickly brought Netscape to its knees. But the Netscape-ites were convinced they were riding the tail of The Next Big Thing, and they couldn't wait to tell the world that they were going to cut Microsoft down to size. They learned a very Old Economy lesson: buzz is no substitute for power.

This really doesn't make much sense if you look at the facts. Even if Netscape would have toned down their rethoric, they were destined to be crushed by Microsoft. BillG missed the boat on the internet, but there was no huge technological hurdle to overcome for them to catch up on the browser arena.

Either Netscape was going to be bought by MS or simply destroyed by MS, there were no other options. Specially, when they integrated the browser with the OS.

Now I like Denbeste's stuff a lot, but this current comparison is a poor one.

His anti-Java rant also makes little sense given how wide the adoption of Java is, even though Sun is in financial trouble. He paints Java as a technology that was beaten by MS, when in reality is being used a lot. So much so that MS had to copy it with C#, which still has a long way to go before it catches up.

I think Steven thinks Microsoft is a technologocal powerhouse of innovation and savy business practices, but geez, for a second he's comparing Netscape/Sun to the Islamofacist factions.

Get a grip!

Didn't MS and it's apologists predict the death of Apple many times? Only to imitate yet another Apple inovation.

Apple will never 'beat' MS, but it doesn't have to. All or nothing philosophies have ended.

Didn't MS and it's apologists predict the death of Apple many times? Only to imitate yet another Apple inovation.

Apple will never 'beat' MS, but it doesn't have to. All or nothing philosophies have ended.

Since my trackback ping didn't seem to work, here is my post:
http://www.corante.com/bottomline/archives/000618.html

I think there's a strong case to be made that Microsoft was engaging in predatory pricing; they've held costs to zero near permanently in order to make the market for browsers completely commercially unattractive.

One could argue that it's also because Microsoft (correctly) viewed the browser not as a separate application, but as a user-interface component as part of the underlying architecture.

What was suprising about dotcom was its utter lack of humility.

The lack of humility was unfortunate, but I wouldn't call it surprising. The love of money, and so forth.

Didn't MS and it's apologists predict the death of Apple many times? Only to imitate yet another Apple inovation.

Which one? Or did you mean immitate another Xerox innovation after watching Apple do it? Bear in mind that the GUI, the laser printer, the mouse, the desktop computer, and Ethernet all trace back to the Xerox PARC.

In the movie, "The Good, The Bad, and The Ugly", after Tuco (Eli Wallach) kills some garrulous opponent, he comments "If you're gonna shoot, shoot! Don't talk about it!"

Netscape /was/ trying to become "another MicroSoft" - and they failed. This is what companies do, if they can. Software is too important to be left to the exclusive control of corporations (or government for that matter). This is why open-source software and Linux is so important - while companies like Red Hat, Oracle and IBM can ride (and promote) OSS to their benefit, the fate of the software does not ride on the fate of the company, and the company cannot exert exclusive control to make stupid and limiting changes for purely marketing reasons. This demolishes the whole monopoly model that the (old) IBM and MicroSoft exemplify.

It is like the saga of the Ring in LOTR: instead of replacing one dark lord for another, the ring must be destroyed.

How soon they forget. In the time period from 1992 to 1995 Microsoft's nemesis was IBM and the OS/2 operating system. Netscape wasn't even a blip on the radar until 1996 or so, and before then MS was caught up in a no holds barred deathmatch with IBM's attempt to penetrate the desktop market. Now, IBM's lack of succesful consumer marketing is legendary and figures mightily in what happened, but their technical prowess was never in doubt. In 1994 IBM released OS/2 V3 (aka, Warp), which was light years ahead of Windows 3.1 and the 1995 release of Windows 95, and which wasn't really matched by MS until Windows NT4. Warp was released with a dialup TCP/IP stack, full internet utilities, a web browser, a powerful and complete scripting language, preemptive multitasking, blah blah blah. The 94 release was perfectly timed to catch the initial Internet wave and caught MS totally flat footed-they didn't have anything like it and had no idea that TCP/IP networking was going to be the Next Big Thing. Microsoft's reaction during the 94-95 time period as a result of the Warp release is a masterpiece and should be mandatory study for any business exec on just how one can beat back a technically superior competitor. The famous 94 MS memo was written at least in part because of OS/2-they sure as hell suddenly understood that the Internet was going to be it for the next few years and they didn't need IBM to steal a march on them. By 1996~97 IBM had thrown in the towel, but MS certainly didn't sit back and immediately turned on Netscape as amply discussed above. Whatever one thinks about the Netscape/MS war there is an earlier history to consider-IBM played it's part in alerting MS to the threat and possibilities posed by the Internet.

P.S. Add link for stupid and limiting changes. For example.

I personally think Bill Gates started lurching headlong into the "unbeatable" category because of the power of the embedded base.

The tipping point for Windows came, ironically, because of the Internet. Once everyone started sharing files with clients and co-workers via the Internet, they simply had to send files that the other person could open (in other words, PowerPoint, Excel, and Word).

That's one aspect of the embedded base: compatibility. The other is familiarity. People learn how to use certain tools, and they then become reluctant to learn new tools.

Entrepreneurs who start high-tech companies always assume that their bright, shiny new thing will overcome the need for compatibility and tendency to cling to the familiar. But it takes more than a shiny new thing to make people shift, especially now that they have learned that shiny new things still have bugs in them and are often notoriously under-supported.

Customers have learned these lessons. Many entrepreneurs have been slower to catch on to the customer dynamics that determine the success or failure of a product.

So, Microsoft followed the philosophy of evaluating a threat based on capabilities, not intentions. They realized Navigator had the potential to become a desktop replacement long before Andressen mouthed off about "poorly debugged device drivers" although they weren't sure yet if that's what Netscape wanted to do.

So they tried to make them an offer to become the Windows web browser, with support, funding, etc. Microsoft gave them a chance to join up and make gobs of money (MS was struggling with IE 1.0 at the time).

But, Barksdale had bigger plans and essentially told them to buzz off. That's when the war really started, and frankly, that's when Netscape lost it. They were too greedy, they didn't want to settle for huge profits by helping to make the existing desktop world better - they wanted to shoot for astronimical profits by destroying the existing desktop and replacing it with their own. Can't really blame them for being audacious.

But they lost.

I just wish Microsoft realized then what sort of creature Barksdale was. It's all perfectly clear in hindsight - he came from heavily regulated industries and it should've been obvious that he would turn to the government at some point, since that's how his previous companies competed - by winning favorable regulatory treatment rather than by providing better value propositions to paying customers.

Oh well. An interesting time was had by all.

But, my point is - even if you keep your mouth shut, the other side may realize what you *could* do anyway, and react accordingly.

One of the big problems with OS/2 is that many IBM divisions treated it as competition to their products and still others who were in the PC software business didn't produce native software for IBM's own PC OS. I was at a mid-90's CES where IBM had a large booth promoting a new line of consumer software. It was all for DOS and Windows. Most of it would run in the compatibility modes of OS/2 but none was native. When I asked a VP in the booth why this was he said plainly he had to show a profit with this stuff and without any major incentives he was not going to let the problems of the OS/2 folks be his problems, too.

The same kind of behavior at Microsoft would get your ass fired very quickly. There are lots of mini-empires in Redmond competing to get their version of a product as the one that gets funded for real development but once a product is real everyone is expected to get behind it.

Another big problem was one that a lot of us remember from a certain Comdex. IBM was very proud that their SDK for OS/2 was a mere $600 while Microsoft was foisting SDK CD sets on anyone who wandered near their booth. Microsoft has always understood the critical need to entice developers that has eluded so many other companies.

ElCapitanAmerica,

Java is widely used but the wisdom of a company that is primarily in the business of selling big hardware promoting a thing that enable hardware independence is questionable at best. Sun has never released exact figures but many analyst believe they are in negative numbers for their investment in developing and promoting Java. Other companies like Oracle have enkoy much greater benefit from Java but this hasn't translated into any reciprocal benefit for Sun. Hell, even Microsoft might be shown to have benefitted more from Java since it greatly enhanced the client functionality for web based applications and for quite a long time Microsoft had the strongest Java platform.

BTW Eric Coe, your link points to silly and apocryphal nonsense. Lotus' failure to sustain its position in the spreadsheet market has much more to do with major mistakes at Lotus than any misdeeds by Micrsoft. One notable debacle was Lotus' overpromising and underdelivering on the Mac, leaving that system wide for Excel to establish MS as a major player in spreadsheets where the earlier Multiplan had been an also-ran.

"the people at Netscape were technically talented"

Speaking of Netscape (and to a certain extent of Sun) in general, I beg to differ. Look at, for instance, Javagator, Netscape's attempt to create a Java-based browser. Anyone who had any knowledge of Java would see that it would either require lots of work, or lots of non-Java help. For various reasons - ideological and technical - they tried to create it, and eventually shelved it.

Even worse was Netscape's Big Plan For How The Internet Should Work. All this HTML crap on top of HTML crap, with some Javascript and this and that and dot this and slash that.

And, Sun's and Netscape's focus is on Unix and not on Windows or Mac. Which indicates that they're living in a dream world. In the Big Netscape Documentary, a Teenager Who Wants To Save The World From Bill Gates gets work (paid?) at Netscape to work on their browser. In his employment interview, he tells the guy he wants to spend extra time making the Unix version of Navigator work good. The interviewer gives him a high five. Me, I would have asked him to take a piss test.

If you want to see who's who, read some of Sun's comments about the differences between Netscape's and MS's technical abilities vis-a-vis implementing Java. Check comp.lang.java.advocacy for abuse at tolstoy dot com with words like presspass for those really interested in links to the original docs.

For instance, this message. The links in that article might have changed however. Note that those are subpoenaed docs from Sun, not from MS even though they're on MS's site.

Steven Den Beste has a long post. . . .

Isn't the word "long" redundant here? This is den Beste you're referring to, bless his verbose heart.

Eric Pobirs: It's not nonsense, it's just never been proven in a court of law - big difference. I am sure that Lotus made their own share of mistakes - the point is not to explain the decline of Lotus, although the use of unfair advantages like this certianly is not a help. The point is that practices like that and the more well-known practices like undocumented-DOS and undocumented-Windows API calls (which themselves have been fully proven to exist via. reverse engineering and general practice) (and many other things that I don't care to get into in this tiny comment box) are hostile actions taken solely for the commercial benefit of Microsoft. They weaken the utility of the platform for everybody else, including the consumer.

My point is that if it wasn't Microsoft, it would be someone else playing the same games. I consider that unacceptable, no matter who is currently top dog. Hence OSS.

Just a note. Microsoft didn't develop Internet Explorer--they bought it from Spyglass (who bought it as Mosaic from NCSA). There's a difference:

"Now that I've retired, I can finish my book."
"I didn't know you were writing a book."
"Not writing, reading!"

Just a note. Microsoft didn't develop Internet Explorer--they bought it from Spyglass (who bought it as Mosaic from NCSA). There's a difference:

"Now that I've retired, I can finish my book."
"I didn't know you were writing a book."
"Not writing, reading!"

Greg Bear gave a talk Slime vs Silicon that had an extremely good bit on Silence, and signals...

Hoo great stuff!

The pendulum is starting swing the other way now.

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