It is rare to see a company owning up to their mistakes but in a Techcrunch interview published yesterday ex-Microsoft CEO and founder Bill Gates just did, calling losing the smartphone market to Google’s Android his “greatest mistake.”

Gates said:

You know, in the software world, in particular for platforms, these are winner-take-all markets. So, you know, the greatest mistake ever is the whatever mismanagement I engaged in that caused Microsoft not to be what Android is, [meaning] Android is the standard non-Apple phone form platform. That was a natural thing for Microsoft to win.

It really is winner take all. If you’re there with half as many apps or 90% as many apps, you’re on your way to complete doom. There’s room for exactly one non-Apple operating system, and what’s that worth? $400 billion that would be transferred from company G [Google] to company M [Microsoft].

And it’s amazing to me, having made one of the greatest mistakes of all time — and there was this antitrust lawsuit and various things that, you know, our other assets, Windows, Office, are still very strong. So we are a leading company. If we got that one right, we would be the company. But oh well.

So this idea that just small differences can magnify themselves doesn’t exist for a lot of businesses. You know, if you’re a service business, it doesn’t exist. But for software platforms, it’s absolutely gigantic. And so that’s partly where you have the mentality of every night you think, ‘Am I screwing this up?’ And eventually, we did screw up a super important one.

There are several notable points here – Gates notes that while Microsoft is doing well, they could have been even bigger, in Gates’s words “THE company.”

He put a value of $400 billion on Google’s Android dominance and explains the network effect – why not winning from the start will mean you will never win – a feature of platform wars rather than services business.

He also owes up to mismanagement – it was a war which Microsoft could have won – Windows Mobile preceded Android by nearly 10 years, but Microsoft never understood the importance of mobile, never gave it adequate resources, was distracted by desktop priorities and was constantly changing direction.

Gates notes that he is amazed that Microsoft survived the mistake – something I think many in the first half of this decade doubted, with many pundits predicting for example that iPads will replace PCs and that the nature of work will change so that it is possible to do everything on a smartphone.  Neither of these things happened, but it has not been due to the foresight and wisdom of Microsoft’s actions.  Microsoft’s main achievement was to pivot to growth businesses which were less competitive, but which was adjacent to their existing monopolies.

The point of this article is not to replay the past, but to counter this view expressed by those who take Microsoft’s current share price as proof that losing mobile was actually a happy accident:

Share price is a measure of confidence in a company, and this can evaporate as easily as it appears.  Look at the last trillion dollar company, Apple. Owning the largest mobile platform, like Google does, is however forever, something which Bill Gates clearly understands.

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