Season 3, Ep. 26 – TWiTH: The government sues Microsoft, with Haley Harris, Product Manager at Gun.io
Once upon a time, Microsoft tried its hardest to become a major player in the personal finance world by buying Intuit, the brand most well known for its QuickBooks software. The federal government thought Microsoft was up to no good with this move, and sued to block the sale, setting the stage for future mergers to come under scrutiny, as Haley and Faith discuss in This Week in Tech History.
(THE FRONTIER THEME PLAYS AND FADES OUT)
Hi, Haley. How are you?
I was thinking the other day, when you said you just closed on a new house, is that right?
Yeah, yeah. It’s like five minutes away from where we are now. So…
So exciting. (Haley: Yeah.) But I was thinking I’m gonna miss your green wall. (Faith: Yeah.) I love this room so much <laugh>.
Oh, don’t worry. There will be green walls in the new house. It was funny, we went to Lowe’s the other day to start picking out paint colors, and we each like, did it independently and then came together and it was like, (Faith: Oh, fun.) <laugh> the exact same colors in our house right now. So…
No way <laugh>.
I shudder to think what would happen if I did that with my boyfriend.
Yeah. It’s a fun experiment <laugh>.
Yeah. I’m excited to have like, a garage or something (Hayley: Yeah.) that I can let him really get crazy with. (Hayley: Mm-hmm <affirmative> <laugh>.) But in the meantime, like, that can be my job. You can have an opinion about like, AV and all that in the house, but I’ll own the aesthetic <laugh>.
Yeah. Everyone has their strengths.
Have you been? How’s your week going?
I feel like I’ve been in the weeds for a while with engineering, (Faith: Mm-hmm <affirmative>.) so I’m happy to be starting some like, research phases for new projects.
That’s always my favorite part is the “blue sky implementation be damned”, (Hayley: Mm-hmm <affirmative>, <mm-hmm <affirmative>.) like, “what should we be working on” phases. So, yeah. That’s fun. Today’s historical event has to do with a lot of like legal jargon that I…
Oh, I researched it <laugh>.
Oh my gosh. Okay, well, you’re one step ahead of me. (Haley: <Laugh>. Yeah.) I finished my last podcast five minutes ago, so…(Hayley: Oh, no. Okay.) maybe I will depend on you to be an expert, but…
Okay. We’ll see <laugh>.
Let’s get into it. (RETRO SYNTHESIZER MUSIC FADES IN) This week, April 27th, 1995, the Justice Department sued to block Microsoft’s purchase of Intuit who were the makers of Quicken financial software. They said that the deal could lead to higher software prices and diminish innovation. So essentially that’s like antitrust, (Haley: Mm-hmm <affirmative>. right? I listened to that day in the 9th grade civics (Haley: Yeah.)
It’s own personal finance software called Microsoft Money had been able to dent Quickens popularity. So to pave the way for the Intuit acquisition, Microsoft agreed to give the Microsoft Money program to rival Novell Corporation, yeah, very sneaky being like, “Well, we just want this one.” (Haley: “We’ll just give it away.”) That seems super sketchy. Okay, while purchasing Intuit, via a $1.5 billion, roughly $3 billion today, stock swap. Unfortunately for Microsoft, a judge valued Quicken at closer to $2 billion and said that Microsoft taking over the ownership of the product and its 75% stake in the personal finance market was a no-go, especially considering Microsoft only held 5% of the market at the time. That makes sense. I don’t think of Microsoft as a financial service.
Yeah. Not at the time.
This ultimately led to stricter scrutiny by antitrust regulators and helping to shape future mergers by establishing precedent, future failed acquisitions based on these antitrust laws, including AT&T’s acquisition of T-Mobile. In 2011, Qualcomm’s proposed acquisition of NXP semiconductors, blocked by China. What? China’s entered the chat, okay. And Broadcom’s proposed acquisition of Qualcomm, also blocked by the U.S., both in 2018, and Facebook’s acquisition of Giphy, which the UK government blocked in 2020. Wild. So much drama. I know. Giphy, I mean, it’s Giphy. (Haley: Yeah. I…) Who else wants it?
What could Giphy’s valuation possibly be? It’s like $200 million.
(RETRO SYNTHESIZER MUSIC FADES OUT) No way. (Haley: Yeah.) Good for those people. (Haley: Yeah.) Rock on, Giphy. I mean, listen, proud Giphy user. Have I ever paid anything to use Giphy? Absolutely not, so…
Yeah, exactly <laugh>.
<Laugh>. But I probably would, if I needed to. Okay. Haley, it feels like antitrust laws, based on the story we just read, are rock solid. However, despite these laws, mergers still happen. Ones that come to mind, Microsoft buying LinkedIn, Facebook buying Instagram, Google buying DoubleClick. So I’m asking this both as a like, “let’s just imagine” and also like, do you actually know the answer? Why are these mergers and acquisitions able to go forward, whereas Microsoft’s purchase of Intuit was blocked?
Mmm <affirmative>. Well, politics is certainly at play, so…<laugh>.
I mean, I feel like whenever that’s the case, you know, lobbying and (Faith: Mm-hmm <affirmative>.) influence certainly has something to do with it. When I was looking over those cases that have been able to go through since this Microsoft case, I feel like the one that feels the most egregious to me now, with what we’ve seen Facebook, and Instagram, Meta evolved into, is you just look back and you’re like, “How was that possible?” (Faith: Right.) They were, you know, it’s two social media giants, now, but really back then, you know, Instagram was emerging and Facebook was seemingly at its peak, so I don’t know how that passed. But what I did find is that the Federal Trade Commission also feels the same way I do, and a couple of years ago, (Faith: Really?) they issued a complaint, an amended complaint, that said, “With the information we know now, we would never have let this go through 10 years ago.” (Faith: Mmm <affirmative>.) So, seems like it’s, while the precedent does exist, it’s not a science, at least when they’re reviewing these cases.
Yeah. And I’m sure, you know, there’s always loopholes. There’s always ways to make something go through if you just like, understand the laws well enough (Hayley: Mm-hmm <affirmative>.) So obviously, I’m not an M&A attorney, but…
What, you’re not?
<Laugh>. No, no. (Haley: <Laugh>.) Weirdly, I’m a lot of other things, but I’m not an M&A attorney. Yeah, but I think part of it is also like, kind of, not a wolf in sheep’s clothing play, but kind of like, this facade of “our company’s actually much smaller than it actually is”, right? Because if you take up less of the market, then you know, it’s not gonna smell too fishy. But I mean, it sounds like the play for mergers and acquisitions is like, “Okay, we’ll have to acquire companies at a younger stage,” right, (Hayley: Mm-hmm <affirmative>.) to not come up again against these laws. Is that good for small companies? Like, is that what we want? Or, you know, what does that mean for innovation at small companies?
I mean, I know and have worked at startups where our exit strategy was get acquired by Microsoft, even. That was one of the plays that we were making. (Faith: Mmm <affirmative>.) And so, if that’s woven into the DNA of the company, is that that’s their exit strategy and what they’re building towards, I think, certainly, it changes the decisions that you make at a business level. But yeah, I don’t know. I’ve never personally gone through an acquisition, so…
Mm-hmm <affirmative>. Yeah. I can’t help but think, like you said, the roadmap for a decent acquisition is very different than the roadmap to IPO. (Haley: Yeah.) And the decisions you make, the growth strategies you pursue are going to be very different, depending on which of those paths you take. And obviously, if your path is IPO, and you’re committed to your brand, your business, remaining independent, well, as much as you can be independent these days, (Haley: Yeah.) then the opportunity for innovation and, obviously, just ownership over what you’ve created is much greater, I guess it’s to each their own, right? It’s hard for me to say, without like, years of economic data and interviewing, (Hayley: Right.) you know, several dozen founders, if it’s good or bad, but it’s certainly two very different choices. And I do think that, you know, the earlier stage acquisition play has obviously become more popular, and I think, this year aside and our weird economic environment aside, I think that’s true today, as well, right?
Yeah. There’s, I mean, even this year, I, I know of a couple of acquisitions that have gone through for much smaller companies than Microsoft, (Faith: Mmm <affirmative>.) but I think the ones that I know of, personally, that seem like they wouldn’t raise the eyebrows of the FTC are ones where the products that are being merged or acquired, they touch similar customer bases, but they’re not necessarily the same product. (Faith: Mmm <affirmative>.) That’s where it seems like there could be customer benefit to some mergers and acquisitions is, you know, if you can have a bunch of the products that you already use in your business or your personal life under one umbrella, you know, maybe that is an efficiency gain or a benefit to some people.
Yeah. I mean, both of us have spent a good part of our career working at startups, (Haley: Mm-hmm <affirmative>.) right? And so the environment that we’re in is like, emerging brands, emerging products, and naturally the context of that is our competitors are often folks who have been acquired by huge companies (Haley: Right.) and have very different resources (Haley: Mm-hmm <affirmative>.) than what we’re work working with. And you work in product, I work in marketing, so I think we’ve got kind of an interesting perspective here. Like, what does it take for emerging smaller brands like us to be competitive against our competitors who’ve been acquired?
One of the reasons that I certainly have stuck to startups, and probably the same for you, is that just baked into the DNA of it, is we get to be scrappier, and we’re expected to move faster, (Faith: Mmm <affirmative>.) and there’s not as much red tape. I mean, I just imagine working for a company like Microsoft or Google and trying to do product there. It’d be months or years before some of the ideas or initiatives that I could be, at one part, one member of, might see the light of day, if ever at all. (Faith: Right.) For smaller companies who are emerging, finding the secret sauce of like, getting very close to your users and being able to ship things quickly in response to that feedback is pretty much the only edge you have against the competition that has, you know, 5X more resources on engineering and all of that.
Yeah. And even if the competitive landscape isn’t full of much larger companies, I think that’s just a really solid foundation to keep yourself in, as a startup is like, our edge of speed. Like, whoever ships faster is probably the person who’s gonna win, because I mean, we know the rules of landing in the market is less about like, getting lucky (Haley: Mm-hmm <affirmative>.) and happening to like, do the right thing, but more about just trying everything that you need to try to figure out what’s right faster, right?
Yeah. And not staying stuck. I mean, for our business, (Faith: Yeah.) specifically, the hiring landscape changes super fast <laugh>, and so (Faith: Mm-hmm <affirmative>.) the products we built last year are not the same products we’re talking about building this year. So yeah, being able to move fast is huge.
And you’re totally right that, I mean, I talked to my friends who are at FANG companies or, you know, other massive corporations, and their job is so specific, it’s like, we might have the same title, but they’re like, literally all I do is optimize subject line copy. Like, that’s what I do. And it’s like, how…yeah. Things just inevitably move slower when that’s kind of the structure that you’re working with. I’m happy that my winding path brought me to startups, instead of that life, because I think I would get very impatient <laugh>.
Okay. So consequences aside, let’s assume that the FTC doesn’t exist, which companies do you wish would just merge to make our lives easier?
This one, I had to think about quite a bit, and we had a heated debate in my household about it. I feel like what would be so nice for me, personally, maybe not the rest of the world, but if TikTok and Pinterest were the same applications (Faith: Whoa.) or had the same functionality. Like, you know, I’m in the middle of a house renovation, and I used both of those platforms for like, all of my recipe planning, and I love the ability to organize all of that (Faith: Yeah.) and categorize it in Pinterest. And I don’t do that in TikTok. So maybe that’s just a…if anyone from TikTok is listening, there’s a feature suggestion for you.
Or Pinterest, right? Let’s get on short form videos.
Right. But those are, you know, two massive content engines, absolutely would not fly through the FTC, especially with the current scrutiny on TikTok.
Mm-Hmm. <affirmative>. Yeah. For me, it’s less about two companies. I’m more about this category of my life. (Haley: Hmm <affirmative>.) Connecting hardware is the bane of my existence.
I know you’ve done that recently <laugh>.
That’s why I’m wearing headphones, like, my 2008 headphones, I still use, because I cannot get my AirPods to connect to my laptop, and those are from the same company, but like, oh, wow. My Sonos system in the house, (Haley: Mm-hmm <affirmative> my Nest system in the house, and my WiFI, like, it’s all different, and I just wish there was one company <laugh> (Haley: Mm-hmm <affirmative>.) that, you know, made sure that it all worked together and made setup just a little bit easier.
Oh, that would be nice.
Because then you get down the rabbit hole. Like, the other day, we played music through Spotify onto our Sonos, (Haley: Mm-hmm <affirmative>.) and it happened on both of our phones. No matter what we did, we’d click a playlist, and it would play the first three songs and then just stop. And we’re like, “Is this a Spotify bug? Is it a Sonos bug? Is it a bug with the API? Like, and whose side of the API?” Like, it’s just, it becomes impossible as a consumer to like, bug fix on your own.
And that’s even considering, you come from a place where you are acquainted with the concept of bug fixing <laugh> and what an API is, so ( Faith: Right.) for the average user, yeah, that has to be impossible.
Oh my gosh. There was another one I was just…oh, WiFi providers. (Haley: Yes.) This is, maybe it’s actually the opposite of (Haley: Yeah.) of merging, but I just feel like there is zero pressure to do it right.
We have Google Fiber, and once a month, I have a whole day with no internet and I’m like, it’s 2023. This is like a basic utility.
Yeah. What is that called when, you know, yeah, it’s the opposite of competition? Well, I guess it kinda is like, if there’s a lack of competition, they have no (Faith: Mm-hmm <affirmative>.) need to provide and give excellent service.
Right, but you think about like, what it takes to compete in the internet space. At least, in Nashville, we’ve got two internet providers, right? (Hayley: Mm-hmm <affirmative>.) We’ve got AT&T and Comcast, and I think those are different, (Haley: Mm-hmm <affirmative>.) but it’s so much infrastructure that you have to be either crazy or Google (Haley: Right <laugh>.) to do something that competes, and so…
Yeah, that’s true. The infrastructure startup cost is just impossible.
Absolutely astronomical, unless you’re like, building a hyper localized network just for like, East Nashville or something.
My backup answer to that was going be, okay, imagine a world where every show and movie that you wanna watch is just (Faith: <Sigh>.) available to you for one price through one provider on your TV, and then I was like, “Oh, I’ve just described cable television,” <laugh> “and we are moving backwards.”
But is it cable television? Like, can you go back and search and…
Well, I mean, at least cable TV, when, what was it…it’s so long since I’ve had cable, I’m forgetting the words (Faith: Same.) for when you gotta like, TiVo or record shows.
Oh, yeah, yeah.
But yeah, I mean, the news yesterday about HBO Max coming out with their new tier pricing plan, I’m not gonna not watch the show I wanna watch, but this is just getting ridiculous. So…
Because it does, like…it’s such a silly thing to disdain, right, but I hate sitting down on the couch and being like, “Oh, I think I wanted to watch this show. I have no idea what it’s on. I could just pick up my phone and search, but instead, I’m already here, the remote’s in my hand, I’m just gonna go to every single provider and see if it’s on the homepage,” and it takes like, 20 minutes. So I’m with you. That’s a good one. Haley, how fun. (THE FRONTIER THEME FADES IN) I trust that neither of us will be leaving our jobs anytime soon to become M&A attorneys, but it’s, (Haley: Hard pass.) who knows? Hard pass, yeah. This was not the entree that I thought it would be, so kudos to everybody who does this for a living. Seems real hard, and thank you for making sure that we have some competition, because that is why we get to exist and do what we do, so…
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