Gates knows when to fold them

The news that Bill Gates plans to cease being a full-time Microsoft employee in July 2008 was anything but surprising. It's been apparent for some time that Microsoft's founder and chairman (a title he will retain) is more energized by the work of the Bill & Melinda Gates Foundation than by the day-to-day churn of the software business. Taking on the world's many inequities and diseases has clearly emerged as a higher calling for a man whose single-minded focus has often been the key to his success.

An additional clue to Gates' thinking might be his early love of poker. Although he is almost always portrayed as the classic software nerd, Gates is really more about winning than technology, believing that a truly great executive, like a great poker player, will eventually get the edge no matter what cards he is dealt. Poker also teaches us a much more famous lesson: Know when to hold them and when to fold them. Gates has decided to get out of the software game much earlier than most players would. To help see why, consider the overall arc of Microsoft's fortunes as summarized below:

-- Harvard junior Gates drops out of school to pursue the potential of microcomputers.

-- Everybody loves the underdog, as Gates outwits his rivals and IBM to control MS-DOS.

-- David defeats Goliath, as Microsoft fends off IBM's OS/2 counterattack.

-- Microsoft's monopoly is consolidated through the success of Windows and Office.

-- Wintel heads into the enterprise, as Novell is crushed and NT is established.

-- Tyrannosaurus Gates destroys Netscape and dominates the browser business.

-- With visions of grandeur, Microsoft invests in MSNBC, Teledesic, Cox, Slate and so on.

-- The inevitable and debilitating antitrust suits in both the U.S. and Europe begin.

-- Microsoft faces increasing bureaucratization and the loss of new markets to Google, eBay, Yahoo, etc.

-- There is danger on all fronts -- open-source, software as a service, advertising, cell phones, etc.

As the last two items make clear, the Microsoft story is far from over. Windows and its successors might remain the underlying platform for home, school and enterprise applications, with Microsoft raking in vast profits for literally decades. On the other hand, open-source and online services could reign, with Microsoft becoming just another large base of legacy code. Given the potentially major battles ahead, one wonders whether Gates will really be able to stay on the sidelines, especially if his baby gets in trouble. Like athletes, many CEOs have announced their retirements and then changed their minds.

But perhaps Gates' poker instincts say that the odds are increasingly stacked against him and now is the best time to leave this particular game. After all, his old chum Scott McNealy has already stopped playing and probably wishes he had done so sooner. Even Larry Ellison doesn't seem to be having as much fun as he used to. At various times, Gates has been underestimated, loved, admired, feared, hated and even deemed irrelevant. Now, it's time for him to find a new game. As it happens, the one he has chosen is big enough to challenge both his and Warren Buffett's wallets.

One of the great ironies of modern capitalism is that most people instinctively believe that monopolies are bad for society and are therefore best eliminated. But without them, where would we get the surplus wealth that funds the great private libraries, museums, foundations, parks, and cultural and scientific institutions that take us beyond our workaday lives? Let's hope that Gates uses the operating systems and applications money we have all given him over the past 25 years to do something truly great. In this grander, more important game, we should be rooting for him to win once again.

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