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The Guardian - UK
The Guardian - UK
John Naughton

Like Bill Gates before him, Mark Zuckerberg is having a ‘Pearl Harbour’ moment

Bill Gates sitting on a stage, silhouetted against a Windows 95 logo
Bill Gates at the Windows 95 launch event in August 1995, the month of Netscape’s successful IPO. Photograph: AP

The great thing about history is that it often repeats itself – though not necessarily as Marx envisaged it. Here’s a story about the tech industry that illustrates the point.

Act one begins in the spring of 1993, when Marc Andreessen and Eric Bina released the first graphical browser for the emerging world wide web. They called it Mosaic and it was a runaway success because it was the thing that enabled ordinary people to understand what this internet thingy was for. In 1994, Andreessen and Jim Clark set up a company that eventually became Netscape and in October that year released a new, improved browser called Netscape Navigator, which in three months had 75% of the nascent browser market. In August 1995, Netscape went public in a frenzied IPO that triggered the first internet boom.

As their company thrived, Andreessen and co started to muse about an even brighter prospect. If web browsers really were the future, they reasoned, and since the operating system (OS) of a PC was effectively just a life-support system for a browser, who needed a complex and expensive OS such as Microsoft’s MS-DOS?

At this point, Bill Gates, Microsoft’s co-founder and CEO, woke up. For Microsoft’s core assets were its world-dominant OS and the Office software suite that ran on it. Accordingly, on 26 May 1995, he issued what came to be known as his “Pearl Harbor” memo to all staff about the “internet tidal wave” and how Netscape’s increasing dominance of it represented an existential threat for Microsoft. “One scary possibility being discussed by internet fans,” he wrote, “is whether they should get together and create something far less expensive than a PC which is powerful enough for web browsing.” His conclusion: Microsoft needed to turn on a dime to face the threat: “We need to move all of our internet value… into Windows 95 itself as soon as we possibly can with a major goal to get OEMs [ie PC manufacturers] shipping our browser preinstalled.”

The clear aim was to destroy Netscape by giving all PC owners a free Microsoft browser built in and it succeeded. But it also nearly destroyed Microsoft, because it triggered an antitrust suit that went within a hair’s breadth of breaking up the company.

For act two of our cautionary tale, we need to spool forward to the present. Meta (née Facebook) has enjoyed the same kind of global dominance in the field of social networking as Microsoft once had in the PC market. But now it seems to have twigged that it could be facing, if not an existential threat, then very serious problems.

Of these, the biggest is probably TikTok, the Chinese-owned, video-hosting platform to which young users are stampeding from Instagram. But the list of other headaches is intimidating too. They include: the fact that Apple’s decision to enable iPhone users to turn off tracking has slashed Meta’s ability to profit from them; the plunge in Meta’s market cap from $1.1tn to $450bn (£375bn) in 10 months; quarterly profits are down for the second consecutive quarter; revenues likewise; the ballooning costs of Zuckerberg’s crackpot bet on the metaverse project (the hardware division of which apparently lost $3bn last quarter); increasing interest from regulators and governments in Meta’s business practices; the persistent bad smell given off by Facebook’s incessant problems with privacy, toxic content and misinformation; and, to cap it all, there’s a global recession coming that is (rightly) obsessing the company’s CEO.

There are signs that some of these problems are beginning to bite. Meta has dramatically reduced its recruitment of engineers – down from 10,000 a year to 6,000 – for example. And it’s been making panicky changes to core products. Instagram is morphing from a photo platform to one that privileges short-form videos – just like TikTok. The older people who increasingly seem to constitute Facebook’s core users are now being offered two options for their news feeds: one a “discovery” tab that provides an algorithmically curated feed of items from all over the world, the other a chronological list of posts by their friends. Less dramatic (but perhaps more revealing) are small changes to the perks enjoyed by employees: no more free laundry or dry-cleaning services, for example. Or the fact that starting time for free dinners has been moved back from 6pm to 6:30pm!

But perhaps the clinching clue that Mr Zuckerberg has reached his “Pearl Harbor” moment is the fact that he summoned Meta executives from all over the world to a rapidly organised meeting in San Francisco earlier this month. Before they turned up, they were required to read a discourse from their boss. But unlike the 5,584-word memo that Bill Gates used to wake up his colleagues, Zuckerberg’s executives had to sweat their way through a 122-page slide deck on “operating with increased intensity”. It’s almost enough to make one feel sorry for them. Almost.

What I’ve been reading

Poor laws
If you tend to assume that barristers are always wealthy professionals, then a post by Joanna Hardy-Susskind on the Law and Policy blog might give you pause. It certainly had that effect on me.

Hitch up
Moderation or Death, Christopher Hitchens’s magisterial 1998 review of Michael Ignatieff’s biography of Isaiah Berlin, is on the London Review of Books site.

Permanent pandemic
Endemic Covid-19 Looks Pretty Brutal is a sobering New York Times piece by David Wallace-Wells.

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