Michael Girdley describes Microsoft's February 2000 meeting where Bill Gates and Steve Ballmer clashed over launching Xbox despite warnings of $5-6 billion annual losses. Over 25 years, Microsoft spent roughly $100 billion on the console and still loses money, a decision Girdley argues was driven by fear of Sony's PlayStation dominance.
On February 14th, 2000, one of the most fascinating meetings in the history of Microsoft, or business for that matter, happened. It was called the Valentine's Day Massacre. The team that had been incubating the Xbox, the gaming console that Microsoft was bringing to market in order to basically penetrate everybody's living rooms, well, they were having an internal strategy decision meeting to decide whether to build it or not. Coming into the meeting, Bill had gotten a copy of their strategy PowerPoint, and there was a problem with it. They didn't put Windows on the Xbox, and Bill, he was livid. Microsoft's strategy at the time was to dominate the world by having Windows It was everywhere. And it was made worse that Steve Ballmer, who was number 2 to Bill at the time and who would soon be the CEO, was questioning the $5 to $6 billion a year in losses it would take to bring the Xbox to market. But remember, at the time, Microsoft was terrified that somebody else would come in and own every home's technology in America by coming into the living room. And that's what they feared about Sony's PlayStation. And over the coming decades, Bill and Steve, their intuition would actually prove right. Nobody was going to really come into living rooms via gaming consoles. They were going to do it through our individual cell phones. Heck, most of us watch TV these days with cell phone in our hand. But 25 years later and $100 billion invested in Xbox and buying up gaming studios, Microsoft is now a force in the gaming publishing business and still losing money like crazy on their console business. So while Bill and Steve agreed to go along with the Xbox plan and get into gaming totally out of fear, turned out, well, that wasn't a good fear at all. It was totally misguided. Logic told them one thing for Steve and Bill, but their little stomach and the fear that they had that they might lose out to Sony in the household, well, that caused them to do something different. It's cost Microsoft billions. Goes to show that even the smartest, most successful people, business people in the world succumb to making decisions emotionally, and we all do it. The thing to realize about it is just give yourself some grace when you do it because it's just part of being a person. If you want a deep dive on the rise and fall of the Xbox console and how Microsoft has lost billions of dollars on it and it's dying today, I did a whole video on it. There's a link to it in the comments below. Talk to you soon.
