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ACQUIRED · EXTRACTED

Microsoft Volume I

How a college dropout turned one IBM licensing clause into the best business model in history.

▶98K views on YouTubePreview, 1 of 8 tactics free

With Ben Gilbert & David Rosenthal

"He was really smart, he was really competitive, he wanted to show you how smart he was, and he was really, really persistent." — Paul Allen
Ben Gilbert & David Rosenthal, on the episode

The popular picture of early Microsoft is the shy nerd who got lucky with DOS. That picture misses the actual machine. Bill Gates was a ferocious competitor with a finance brain who saw the exponential before almost anyone. The wins that built Microsoft were structural: who owned the rights, who set the standard, and who controlled their own destiny.

Tactic 01

Ben Gilbert & David Rosenthal, Acquired

Keep The Rights And Let The Giant Build Your Market

The play

Accept a fixed fee but keep the rights to license your work to everyone else.

Ben Gilbert & David Rosenthal says

IBM paid Microsoft $430,000 fixed, bundled together from $775,000 for testing consultation, $45,000 for DOS, and $310,000 for an array of 16bit language interpreters and compilers. There was no ongoing obligation and no per copy royalties. Microsoft retained the rights to own DOS and its languages and license them to anyone else at any price on any terms. Once application developers started targeting the operating system distributed through IBM's PC, that operating system became the one every other OEM and computer maker also wanted and needed, and they had to come to Microsoft to buy it.

Try this

When negotiating a deal with a larger partner, accept a fixed fee but explicitly retain rights to license your work elsewhere.

Tactic 02

Price For Ubiquity, Not Margin

Ben Gilbert & David Rosenthal says

Microsoft sold Apple eight years of access to its BASIC for $31,000. The play was to make it a no-brainer for…

Episode quotes and Try this

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Tactic 03

Put A Best-Efforts Clause In Every Distribution Deal

Tactic 04

Hedge Every Platform Bet Until One Wins

Tactic 05

Win On Version Three

Tactic 06

Let Bottom-Up Adoption Carry You Into New Buyers

Tactic 07

Go Global Before You're Ready

Tactic 08

Stay Capital Efficient To Keep Control

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