Steve Ballmer, Microsoft’s CEO from 2000 to 2014, was instrumental in scaling the company from a small 30-person startup to one of the most valuable companies on the planet. Ahead of Microsoft’s 50th anniversary, I had the chance to catch up with my former boss. We talked about the early days of Microsoft and the pitch that convinced him to take a chance on a small company in a new industry. We also discussed how three traits—irrational confidence, realism, and persistence—have helped him succeed at Microsoft and today as the owner of the LA Clippers.
Steve Ballmer, Microsoft’s CEO from 2000 to 2014, was instrumental in scaling the company from a small 30-person startup to one of the most valuable companies on the planet. Ahead of Microsoft’s 50th anniversary, I had the chance to catch up with my former boss. We talked about the early days of Microsoft and the pitch that convinced him to take a chance on a small company in a new industry. We also discussed how three traits—irrational confidence, realism, and persistence—have helped him succeed at Microsoft and today as the owner of the LA Clippers.
Click here for the episode transcript.
Steve Ballmer: After I'd been here, I don't know, two or three weeks, I went to Bill and said, "Look." We were 30 people at the time, and I said, "We need 18 people." "Steve, I didn't ask you to drop out to bankrupt this company." And I was living with Bill and we didn't speak for three days.
Brad Smith: That's Steve Ballmer, Microsoft CEO from 2000 to 2014, and my former boss. As Microsoft celebrates its 50th anniversary. I sat down with Steve. We talked about his 34-year tenure at the company, a time when it went from having only 30 employees, to becoming one of the most valuable companies on the planet.
We discuss how growing up as a shy kid still influences how he develops relationships with everyone, from software engineers to the players on the LA Clippers. My conversation with Steve Ballmer up next on Tools and Weapons.
Well, Steve Ballmer, Steve, thank you for coming by. Microsoft's second CEO, we're approaching our 50th anniversary as a company, and I just have to say thank you and a great opportunity to have a conversation together, so thank you.
Steve Ballmer: Thanks. I'm real excited to be here and to just spend some time with you, Brad.
Brad Smith: So let's start with 1980. You're a business student, MBA student at Stanford, life brings you up to Microsoft here in Redmond. Tell us about that.
Steve Ballmer: Yeah. I was business school at Stanford's a two-year program. I was interviewing for various jobs, trying to decide what to do, and then I get this call from Bill and Bill says, "Hey, how you doing? Haven't talked for a while. Hey, we're looking for a business person." Steve says, "Yeah, too bad you're at school." And I said, "Yeah, I got another year." And then Bill says, "Ah, too bad you don't have a twin. It'd be great to have you up here. Goodbye." "Goodbye."
And I thought about it. There was no more obvious flirtation than that. I thought about it and said, "Ah, Bill's the smartest guy I know, this might be a cool thing to work with Bill." We worked it out and the deal was I'd come, drop out and be here, but if by the end of the first summer either he was unhappy with me, he could fire me, no harm, no foul, and if I was unhappy, I could quit, no harm, no foul, at least in terms of our personal relationship. And 34 years I was here.
Brad Smith: And there was still a thought process I think that got you to stay here. Bill talks about the work he had to actually invest to make sure that you stayed. And being as young as he was, he didn't rely only on his own devices, I think he turned a little bit to his parents as I recall.
Steve Ballmer: Yeah, Bill and I had an interesting slash difficult first month. After I'd been here, I don't know, two or three weeks, I was talking to all the people in the company and there was more work than we could honor for our customers, and I went to Bill and said, "Look." We were 30 people at the time, and I said, "We need 18 people."
"Steve, I didn't ask you to drop out to bankrupt this company." And I was living with Bill and we didn't speak for three days.
Brad Smith: Oh my gosh.
Steve Ballmer: Three days we didn't speak, but after three days, okay, we talked and Bill says, "Prove to me you can hire one good person and then we'll worry about the other 17."
But in the process right before that, I decided, "I'm not dropping out of business school to be the bookkeeper essentially for a 30 person company." That didn't fit with me, and so I talked about going back and we were having this argument about people and I can't remember, it was right before or right after the argument, Bill's dad and I go out for dinner, I still remember it was a place called The Butcher that was here in Bellevue, and Bill's trying to convince me to stay. And Bill's dad is an imposing, serious character, six foot seven or whatever he was. Yeah, a little more imposing, but I think it was that dinner where Bill said, "Steve, Steve, you don't get it, we're going to put a computer on every desk and in every home."
That was the sales pitch as I remember it. And of course, that became a company motto for many, many years, and I wound up buying a house a few weeks later and staying.
Brad Smith: And the rest is history.
Steve Ballmer: So to speak.
Brad Smith: You played such a role in creating that history. And Bill, when I was talking to him, was reminding me, he's reminded everybody through his recent book, that he loved to code, he loved math. You two had in common this love of math, but you took that love of math to what I would almost characterize as every aspect of what's needed to run a great business, the marketing, the product development, the sales. How did you develop the breadth of, I'll just say, the range that you ended up pursuing?
Steve Ballmer: Look, I was blessed with some numerical skills, and I was extra motivated twice in my life to get good at math. In second grade, my dad got transferred overseas and we spent one month in the international school in Brussels, where I think I dragged you one time [inaudible 00:05:39].
Brad Smith: Yeah.
Steve Ballmer: And my second grade teacher told my parents, "Steve is addled. Because of math he will have trouble in the third grade."
Brad Smith: Wow.
Steve Ballmer: So, I spent the summer between second and third grade studying math, because I did not want to be failing in third grade. I spent three weeks in third grade because I had studied so hard, and then they put me in fourth grade. So, but it was all because I felt like I was failing the math.
Brad Smith: Interesting.
Steve Ballmer: I transferred to, I moved back to the US, after eighth grade I got a scholarship to go to this private school, I get to the private school and I'm a year behind in math. Everybody else has had one year of algebra, I haven't. And so, I'm feeling very behind again, and I had a nurturing math teacher who in March said, "I think if you wanted to we could do algebra two while we're finishing up algebra one, and then you would catch up with the rest of the kids." So, I was behind again in math.
Brad Smith: Wow.
Steve Ballmer: So math, I had a lot of my motive force, if you will, in math. I'm good at it. I majored for a while until I switched to applied math when I was in college. But math to me is something that describes pictures, it's not just sets of numbers. Not every picture can be described in numbers, but many pictures that are important can be described in numbers, in my opinion. And it's always about seeing the forest for the trees. People would come, they'd come to meetings, they'd be afraid I wanted to go in some tiny little... Because I always asked about numbers. It wasn't do you actually memorize the number, but do you see a picture? This is the picture I see, let me ask you couple of questions to verify whether my picture of the situation is right, and people would think it was about the numbers.
No, it was about the pictures that the... What do the pictures really tell us about what customers we're weak with? What's going on? Where's our revenue? Are we weaker in, I don't know, small businesses? Are we suffering in the transportation industry with this particular set of products. Numbers tell stories.
Brad Smith: I want to go to your years as CEO, starting in 2001, 2000, I guess, it was 2000.
Steve Ballmer: January of 2000.
Brad Smith: Yeah. Having been... I started reporting to you directly in November of 2001, it was an extraordinary period, going all the way up to basically February of 2014. The company enjoyed really uninterrupted growth. The company's revenue tripled, depending on how you account for stock compensation, the company's profit grew even more.
But there were so many challenges as well, because by then Microsoft was on the king of the hill, and there were so many people always trying to knock us off that pedestal. How do you think about what the most rewarding triumphs were, the hardest challenges during that period of time?
Steve Ballmer: Bill and I flipped. I became CEO, Bill became chief software architect, and then you realize there's a difference mentally that nobody can prepare you for, which is absolutely the buck stops with you. You own, no matter what you think, when you're not CEO you wind up deferring. When you are CEO, it is your job to listen, but you can't defer. You can agree with somebody else's recommendation, but you're not deferring, you're agreeing. And so, that's the difference, but I didn't really feel like I had more skin in the game.
Brad Smith: Interesting.
Steve Ballmer: It just had a different role as it relates to things. So, yeah. Was it hard to build our enterprise business? Well, we started that in the late eighties. It didn't really come into fruition really, where people would say, "Yeah, they're an enterprise company." Till the late 2000s or so, maybe even early 2010s. Of course now people don't even think of Microsoft as a consumer company, but that's really where we grew up. So, a lot of business in general is about innovation, but it's also about competition.
And there's all kinds of ways to understand, to build a great product and fail, and there's all kinds of ways to copy and fail, and there's all kinds of ways to succeed on the flip side of those things, and really sorting that through and where are you? It was a fabulous, fabulous run as CEO, but no more fabulous than the run before I was CEO. Just the buck stopped with me in that instance.
We had a new kind of competition, new for the company, called free software, and that time it took the form of something, Linux and something called OpenOffice, which I'm sure most employees of Microsoft today probably haven't even heard of, to be fair. I did a piece of math that said since I left in 2014, I'll bet there's only about, of the total population of Microsoft today, it would be between five and 10% of the people here today were here when I was here.
And then I think about things and they are ancient history, but they're important. So, you say you go from competition to competing against something free. Wow. That was a different way to have to think about things, it was a different... How do you beat free? And price isn't the only thing, but we went through that, and thank God we were successful. If we're not successful, the company's not sitting here with an Office business, let alone a Windows business, let alone a server business. Because Linux and OpenOffice, that was the heart and soul of a competitive attack.
And our ability to be a learning organization, to be able to throw off... People would always say, "Well, that's not the way Microsoft does things. That's not our business model. We're a platform company." Whatever the rhetoric was. If the company has that too locked and loaded, it helps, but when you're going to do new things, you really do have to be able to think differently.
I get a little fired up about things, and I'll tell you there's not much that gets me more fired up than the chance to start selling, delivering and letting customers enjoy Windows 7.
Brad Smith: I do think there's some, I will almost say, some life lessons that I, in my own opinion, speak to anybody, whether they were at Microsoft, or whether they've never even worked in tech at all. To be successful for the period of time that you were here, or for say 50 years, especially once one is a diversified company, requires a lot of resilience. Because by definition, not every year is a success, and once you have four or six or more businesses, you're never at a point where every single one of them is, say, firing on all pistons at the same time. You're likely to have some things that are doing better than others.
What's the mindset that you think is indispensable for that kind of approach?
Steve Ballmer: Yeah, I think you have to have some combination of irrational confidence and realism. Irrational confidence that says, "Yeah, everything's a mess right now, but it's going to be okay. We are smart enough. I'm smart enough. We're going to fix this. Yes." But if you're not realistic about where you are, your irrational confidence cannot carry you through.
It's something I've seen in basketball. You have to have a level of irrational confidence to be great. Sometimes you can call it cocky, but it doesn't have to manifest itself that way, you have to have some irrational confidence. So, for example, we were nothing, as you know, in the enterprise business. Through talking to customers, me, many others, we developed a really clear view of the offering. It was product, the way they go in together, it was service, it was support, it was pricing. It wasn't one thing, but we had a model and we had irrational confidence, with the presence of IBM and Oracle and others, we were going to be the enterprise software company, and guess what? It may have taken us 15 years. So, it takes us realism, it took irrational confidence, and it took a hell of a lot of persistence.
Brad Smith: Persistence.
Steve Ballmer: Does that always work? I've learned it doesn't. It doesn't always, but it can work in many instances. Microsoft's got a good search business today, I'm proud of what we did, but we had an irrational confidence that we were going to have over 50% share. And the irrational confidence can't come from we're just going to follow our model, and it always works.
So we're Microsoft, we give this thing a little bit of Windows flair, and a little bit of synergy with Windows, which is where the company was coming from at the time. Obviously, the business still... Windows is an important piece, but things have rotated. But just saying our model succeeds with everything gets the realism part of it out of the equation. Irrational confidence and realism, I think, are the distinguishing factors. Oh, and persistence.
Brad Smith: Yeah. In roughly 11 years since you stepped down as CEO of Microsoft, you've pursued this fascinating array of things. Owner of the Clippers, the basketball team, USAFacts, really sharing information with the public. The work that you and Connie, your wife do, when it comes to philanthropy. Are there parallels between business and basketball that you've found?
Steve Ballmer: Oh, yeah. More parallels than anybody would ever think of. Okay. Businesses want to be accountable, basketball teams and players are far more accountable than any business I've ever known about or run.
Why? Every 24 seconds you're getting a report card. We either scored, we didn't score, the other team scored or didn't score. Every 24 seconds, you get a report card. Then the game's over, you either won or lost. It's not like even a business card, "Hey, we're going to get it back next quarter. We got stuff in the labs to fix the situation." No, you can't pretend, you can't hide. Every movement, every player's made, every statistic about how fast they were running, what they were doing, how they played, you're not going to find a place of higher accountability.
And I'm not bashing business, but I learned more about accountability, lessons that might have been useful for me actually when I was running Microsoft. I think both basketball players and companies have to get in the weight room. Now, what do I mean by that? You need to develop new skills, weight room, gym, you have to be developing new skills before you know you need them necessarily. Look, I'm going to assert that Microsoft would have a whole lot of problems and a whole lot of things it does if we hadn't been investing in the hardware through a variety of lenses.
Go back to the old mouse, go through what we were doing with Xbox, but the core capabilities and people and talent building that muscle started with people who worked on things like Xbox. I can't remember exactly, but I think the Silicon team, at least I was reading the Silicon team that works on things that'll be important for AI and Azure, I'm pretty sure those people started working on Xbox, I think, if I read correctly, because there was an ability to develop skills to grow, to grow in a context. And I think that's another, you have to be constantly building new skills and reinventing yourself even before you know what the ultimate application, otherwise you can't jump into new areas.
Brad Smith: One of the biggest decisions that you were involved in was actually playing that role of member of the board, the existing CEO on who your successor would be, Satya Nadella, an engineer. An engineer who you had to say, can he do it all? Be the person who can run this diversified company. How do you think back about that thought process and that decision?
Steve Ballmer: Let me just say something in my mind. Satya is a very technical person, and one of the things that was important to him, to the company, later to the board, was we were able to get him a lot of different experiences, and he did well at all of them. So we said, "Hey, you don't really know anything about an area called general ledger and accounting, but why don't you go run this thing called Dynamics?" Probably called Great Plains at the time, I can't even remember.
"Okay, then what about..." Very rapidly, we moved him quite rapidly, we said, "We got to get this search thing together." This is the high potential guy, this is a guy who can learn new things. He's technically minded. Boom, throw him a new problem, and he's building new skillsets along the way. Machine learning, the notion, a different sort of style. Old programs, were supposed to generate the right answer, many new programs are supposed to generate the statistically best answer, and you only know after whether it was precisely the right answer.
And so, in that sense he had all these experience. He clearly had good people skills. He clearly had an affinity for product. He clearly had a knack for understanding how to think about particularly our enterprise selling operation. I knew we needed to give him even more stuff. So actually me, Bill agreed, our senior leadership team, this is a guy we should be thinking about for the future of the company.
And so, when it came time to find my replacement, I knew upfront, we've been grooming this guy for about 10 years, 15 years, this guy is really talented, so he gets the job, obviously. I had one great conversation with him, which was quote, an interview, and he told me a story about his dad. And his dad was a senior official in government who worked with people who became the prime ministers in these top jobs, and he told me the story, his dad told him, "Look, Satya, a lot of people come to the leadership positions in government and they're just not ready. But guess what? They learn what they don't know pretty well on the job."
Brad Smith: Interesting. Yeah.
Steve Ballmer: But the key there was he realized that. He could recognize, there was a combination, I guess I'll say, of the irrational confidence, which I can get there, partly backed by his father's experience, as well as a lot of realism about where he was. He had huge skills in many areas of the business, more than anybody else. He knew not only software companies, but he knew more of the breadth of this place than anybody.
He's done an incredible job with the company. They remain a Microsoft booster. I never know whether I'm supposed to say we or you or they when I talk about Microsoft. I lapse into we pretty easily, I will say. And if you look, we had a cloud business that we had was, I'll call it, nascent when I left. That thing didn't have to succeed. It didn't.
It succeeded because Satya was able with the team, of course, but to give it what I'll call the jet fuel that's propelled it.
Satya Nadella: This company's had three CEOs, they're all right here, this is all...
Steve Ballmer: Satya is thoughtful, Satya is cool, and is absolutely the perfect choice as our new CEO.
Brad Smith: The last thing that I want to ask you about is picking up on that, because you made a thoughtful decision, or a bet on Satya as the CEO, now 11 years ago. Typically somebody in your position would have handed over the keys, so to speak, said, "Good luck. I wish you well, and I'll maybe follow you from afar or a little closer."
You have continued to bet on the people of this company, from Satya on down, every day since, in a way that is truly extraordinary. And many people would have left and said, "That chapter of my life is done. I'm going to sell my stock, or I'm going to sell most of my stock." And you have not.
Steve Ballmer: I believe in the people, I believed in what we could do, I believed in the mission, I had a lot of loyalty. A little anecdote I'll tell you. I joined a golf club in LA, I'm retired, I get to play golf and stuff. But they organized a little panel where a friend of mine studied up, interviewed me, fireside chat-ish, and then they opened for questions. And Charlie Munger, Warren Buffett's former partner, famous investor, he had said beforehand, "Hey, if you call on me I have a question."
Okay. So, he i not very mobile, he's in his nineties, but he puts his hand up and he says, "Steve, I have a question for you. Why is it that when your partners and compatriots around there were selling their stock, you held onto yours? I know you're not that smart." And I said, "No, but I'm that loyal."
Brad Smith: Well, let me just conclude by saying thank you for, call it the 10% of employees who are here today, and were here when you were CEO, and call it the 90% who have come since. Because I think you've captured here everything that you've given to this company and to all of us, the 10% or the 90%. And a great reminder, it does take this persistence, this acumen, this commitment, but I think this interpersonal set of human dimensions that maybe starts when you're a grade schooler and don't think you can do math or make friends, and then you find out you can actually do both if you work hard, and along the way actually that loyalty to people is so important.
Steve Ballmer: Can I give you one more thing?
Brad Smith: You bet.
Steve Ballmer: There's something for the newbies who are on this call, I call you newbie if you weren't here at least 10 years ago, I used to say something repeatedly, it's still true, I love this company. Don't let yourselves down. Don't let me down. Go Microsoft.
Brad Smith: I'll second that.
Steve Ballmer: Thank you, Steve.