Microsoft

Ed Fries interview — From building games for the original Xbox to investing in gaming startups

Join gaming leaders, alongside GamesBeat and Facebook Gaming, for their 2nd Annual GamesBeat & Facebook Gaming Summit | GamesBeat: Into the Metaverse 2 this upcoming January 25-27, 2022. Learn more about the event.  Without good games, the original Xbox would have crumbled in defeat before the gaming might of Sony and Nintendo. While Microsoft is…

Join gaming leaders, alongside GamesBeat and Facebook Gaming, for their 2nd Annual GamesBeat & Facebook Gaming Summit | GamesBeat: Into the Metaverse 2 this upcoming January 25-27, 2022. Learn more about the event. 


Without good games, the original Xbox would have crumbled in defeat before the gaming might of Sony and Nintendo. While Microsoft is a solid contender in game consoles today with a stable of 25 game studios and more than 2,500 game developers, it seemed kind of puny two decades ago.

When the original Xbox launched, the company had barely 400 people spread across 10 studios. And while it had Age of Empires and Microsoft Flight Simulator for the PC, it had virtually nothing in games. The task of building a portfolio of console games fell to Ed Fries, who was head of Microsoft Game Studios from 1995 to 2004.

Fries was the fifth person at Microsoft to sign on to create the original Xbox more than 20 years ago, and he figured prominently in both of my books, Opening the Xbox and The Xbox 360 Uncloaked. We had a chance to catch up on his memories of those days and his role in greenlighting games such as Halo, Forza, Project Gotham Racing, Gears of War, and many more.

Talking to Fries and other Xbox veterans like Seamus Blackley, I appreciated the challenges of having to build the console, support PC gaming, and acquire console gaming talent at a time when Microsoft didn’t have the budgets or experience that the other console makers had. Fries eventually felt the pressure of that impossible task — of beating rivals while holding costs low — and he parted ways with Microsoft. And today, he is now the founder of 1Up Ventures, which is investing in game studios.

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Fries and I spoke for nearly an hour about the good old days at the recent WN Seattle event.

Here’s an edited transcript of our interview.

Above: Dean Takahashi and Ed Fries at the WN Seattle conference.

Image Credit: Dean Takahashi

GamesBeat: People assume Microsoft’s success in the game business was preordained. It’s good to have Ed here to remind us how difficult it was and how much heavy lifting had to be done by so many people. You’ve been sharing all this swag on social media about your Xbox days. Why did you keep it all? What’s gotten the best response so far?

Ed Fries: I was worried my wife was getting more followers on Instagram than I was! But no, why did I keep it all? I don’t know. I think Xbox is just such a part of my life that it infected every part of my house as well. It seemed like every cupboard I opened or shelf I looked on, there was something related to Xbox. Today was the very last post. It was kind of bittersweet. But it was fun to get people’s reactions. I’ve been a bit of a collector myself, like with arcade machines. I probably have a bit of a collector’s mindset. I know that collectors have seen the wooden Xbox cut from Japan, and they’re going to be out there scouring the world to find one of those. Anyway, it was just a very fun project.

GamesBeat: You had about 30 days’ worth of things to show?

Fries: I think I did 45 or so. I did a bunch. Some of them were just, “Here’s a bunch of shirts.” Some are better than others, for sure. As far as the best response, definitely the custom Xboxes, and the Japanese Xbox signed by Bill Gates for my son. The Japanese launch was February 22, 2002, and my first son was born on March 21, 2002. Bill knew I was having a kid, but didn’t know his name, so he just wrote, “Ed Junior’s First Toy” on that Xbox and signed it. That was a good one.

GamesBeat: To refresh people about some of your career, I’ll read some things here, but maybe you can chime in about what some of this early experience was like in games back then. You joined Microsoft as an intern in 1985 and as an employee in 1986. Worked on Office and Excel. Took over the games division in 1995 when it had 150 developers. People said, “Why are you throwing your career away?”

Fries: If I can go back a bit before that, I started writing games in high school. I was in high school starting in 1979, and we had the first Apple IIs at school. I was lucky enough to get an Atari 800, and I taught myself to program, first in BASIC and assembly. I started writing games. I wrote an assembly version of Space War, and then a version of Frogger called Froggy. Someone saw it at a company called Romox down in California. They somehow found me. I have no idea how. All it said was “By E. Fries.” But they tracked it back to me.

It was my dream at that time to go into games. I worked for them through the end of high school and the first couple years of college. I was in college in 1984 when the game industry famously melted down. All these game companies went out of business, including the one I worked for. I had to get a real job, so I went to work at Microsoft. They put me on the first version of Excel for Windows. I was the youngest of seven programmers. We had a really difficult task to fight Lotus. Lotus 1-2-3 was the biggest PC software product in the world, and Lotus was the biggest PC software company. They were bigger than Microsoft. It was fun to be this kind of rebellious underdog group trying to go against the big guys. Which was sort of the theme of my career.

Above: The original Xbox prototype shown off at GDC 2000.

Image Credit: Microsoft

I did that for five years. I worked my way up from youngest programmer to co-lead programmer. That was called the technical lead at Microsoft. Then I moved over to run Word, where we were battling WordPerfect. We tried to do to them what we did to Lotus, which is build a better product and beat them. Spent five years doing that. Then basically my bosses approached me and said, “The next step for you is to run a business. You should look around the company and find something that would fit.”

They suggested I go down to visit PowerPoint, so I went down to California and visited them. There was a job doing a search thing. I looked at this inactive TV thing with Hank Vigil. Anyway, a bunch of stuff. But then I stumbled on the games job. The head of the games group was leaving. They were looking for someone to run it. To me that was perfect. I was super excited about taking that job. I talked to my bosses and they said–multiple VPs called me into their offices. One said I was committing career suicide. Another told me, “Why would you leave Office, one of the most important parts of this company, to go work on something no one cares about?” That’s what they said about the games business in the mid-’90s.

Fortunately I didn’t listen to them. I stuck to it and said, “This is what I really want to do.”

GamesBeat: In 1995 they already had 150 developers, though? That was Flight Simulator?

Fries: They had–I think they only had about 60 full-time employees at the time. It was about the same size as the group that I managed on Word. But they had a bunch of contractors, which was a way people in Microsoft, especially in that part of the company, would get around headcount limits. They did have quite a few contractors. As you alluded, they had just acquired BAO Corporation in Chicago, the makers of Flight Sim. One of the first things I did was move them out here and get them settled in Seattle.

GamesBeat: Back in the days when you could move developers around the country.

Fries: We moved Bungie years later, of course.

GamesBeat: You had a lot of things to invest in. You bought companies like Bungie, Ensemble Studios, Rare–

Fries: FASA, many others.

Above: Bungie’s Halo made the original Xbox a success.

Image Credit: Microsoft

GamesBeat: It turned out Age of Empires was the ticket into the real game industry.

Fries: The first year, of course I wasn’t starting from scratch. They had a group of products in development, most of which I’m guessing nobody here could name. But games like Close Combat and Deadly Tide. Hellbender. I was a big Command and Conquer player, and when I came to interview they showed me an early version of Ensemble’s Age of Empires. I was excited to see they were doing something in realtime strategy. Ensemble was great to work with. The second year I was there they launched that game, and it became our second big hit alongside Flight Simulator. The games press especially didn’t ever really give us credit for Flight Sim as a game. Age was even more important in the sense that it gave us some credibility as makers of hardcore games.

GamesBeat: You were kind of the adult supervising the games area. You had these four renegades–well, first there was the whole Alex St. John thing. But you had the renegades coming to propose this Xbox thing. You were the fifth person to sign on to it. What was it that made you believe in the plan?

Fries: Now we’ve moved all the way up to the late ‘90s. By then we had made more acquisitions like FASA, MechWarrior, Crimson Skies, things like that. Our share of the PC gaming business was growing. As our share grew it got harder and harder to get that next point of share. By then I thought of EA as the competitor. We wanted to get bigger than them some day. We’d tried to buy Blizzard. We’d tried to buy Westwood. I thought I had a done deal to buy Westwood, went on my honeymoon, and when I came back the deal fell apart. EA bought them while I was gone. Stuff happens.

I had just started to think about–maybe it would be easier to grow our business in the console side of things. We could take some of our PC games and move them over to console. When these guys from the DirectX team wanted to meet with me, I knew Seamus Blackley.

GamesBeat: Seamus Blackley, Kevin Bachus, Otto Berkes, and Ted Hase. [The original Xbox instigators].

Fries: They came to my office with this crazy idea. They were from the DirectX group, and so of course they wanted to make this thing called the DirectX Box, or Xbox for short. It was very different from what we shipped. It was a Windows PC that was in a box that made it look more like a console, and then pretended to be a console. You would stick a PC game in it and it would quietly install it in the background then it would run. It would behave like putting in a disc to play a game. That was the original proposal.

Naively I thought, “Yeah, this would be great. We have all these PC games we could easily port to this machine.” Which isn’t at all what ended up happening. But I put my support behind that project.

GamesBeat: And you were kind of the adult in the room that gave this project more credibility.

Fries: Well, by then I had a team of maybe 400, 500 people. Those guys were a small group of evangelists on the DirectX team. Having a general manager behind them certainly helped.

GamesBeat: They were very attached to it as a project. They were putting all of their emotions into it. But from your level, how did you see it as well? Did you feel as invested in it as they were?

Fries: It’s funny you ask that. They were actually kind of mad at me. Rick Thompson came over. He was the VP in charge of hardware at the company. His group had made mice and keyboards and things like that. Even controllers. Everybody on that early team they were forming left their job to go. Everyone quit their job but me to focus on Xbox. I said, “No, I can do my day job and participate in this.” They didn’t feel like I was as invested as they were. But none of them had a group that big to deal with either. I was definitely ready to fall back on my PC game business, to not walk away from that.

GamesBeat: It didn’t seem, even at this stage, like a foregone conclusion, right? There was still some–

Fries: To me it still seemed like a pretty wacky idea. We had no idea if we were going to get approval for it.

Above: Bill Gates gave Ed Fries an autographed Xbox before Fries’ first son was born.

Image Credit: Ed Fries

GamesBeat: There was the big beauty contest. There was the battle with the folks from the WebTV side, a little internecine fight at Microsoft over which project to approve.

Fries: Right. They proposed something very much like–completely custom hardware, custom software, effectively a PlayStation. We proposed something that was very much like a PC. Ultimately what shipped was somewhere in between.

GamesBeat: Even so, it was interesting how you–you got the support of the whole company. You got Bill and Steve Ballmer approving it. But it still seemed like a struggle in different ways. I remember–this is much later in the timeline, but when you bought Rare for $375 million, some of the feedback you got from your boss was, “Okay, what else are you going to cut? You’re spending way more on this thing than anything else.”

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Market Veteran Raoul Pal Predicts Ethereum Comeback Against Bitcoin with Donald Trump’s Victory

Crypto market expert Raoul Pal believes Trump could create a more favorable regulatory environment, which might help Ethereum outperform Bitcoin. Pal compares Ethereum to Microsoft in its early days, saying its reliability and widespread adoption make it a top choice for traditional finance institutions. Pal acknowledges that while Ethereum has strengths…

Crypto market expert Raoul Pal believes Trump could create a more favorable regulatory environment, which might help Ethereum outperform Bitcoin.
Pal compares Ethereum to Microsoft in its early days, saying its reliability and widespread adoption make it a top choice for traditional finance institutions.
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Microsoft’s decision on Bitcoin could trigger shareholder lawsuit

Key Takeaways Microsoft shareholders will vote in December on a proposal driven by the NCPPR regarding Bitcoin investment. NCPPR warns that Microsoft’s decision not to invest in Bitcoin could lead to shareholder litigation if Bitcoin’s value rises. Share this article Microsoft shareholders will vote in December on whether the company should assess investing in Bitcoin

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  • Microsoft shareholders will vote in December on a proposal driven by the NCPPR regarding Bitcoin investment.
  • NCPPR warns that Microsoft’s decision not to invest in Bitcoin could lead to shareholder litigation if Bitcoin’s value rises.

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Microsoft shareholders will vote in December on whether the company should assess investing in Bitcoin, a proposal driven by the National Center for Public Policy Research (NCPPR).

According to a report by Cointelegraph, the NCPPR warns that Microsoft could face shareholder litigation if it decides against Bitcoin investment and the digital asset’s value subsequently rises.

“If Microsoft publicly decides it’s not in shareholders’ best interest to buy Bitcoin, and then Bitcoin’s value rises, shareholders may have grounds to sue,” Ethan Peck, deputy director of NCPPR’s Free Enterprise Project, told Cointelegraph.

Microsoft’s board has recommended shareholders vote against the proposal, stating they already evaluate a “wide range of investable assets,” including Bitcoin.

In its proposal to Microsoft, the NCPPR highlighted MicroStrategy’s Bitcoin investment strategy, noting that it has outperformed Microsoft by over 300% this year despite conducting a fraction of Microsoft’s business volume.

The research center also highlighted increasing institutional adoption through spot Bitcoin ETFs.

In October alone, BlackRock’s Bitcoin ETF reportedly acquired $4.6 billion in Bitcoin, bringing the ETF’s total valuation to $31 billion, according to data from Farside Investors and Arkham.

Collectively, Bitcoin ETFs now hold over $72 billion in market cap, underscoring the growing interest from institutions.

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With Decentralized AI and Tokenized Ownership, We Can Fight ‘The Six’

Opinion Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email With Decentralized AI and Tokenized Ownership, We Can Fight ‘The Six’ Orthodox venture capital will never provide the resources for decentralized AI to take on Microsoft, Alphabet, Apple, et al. The only way is to supplant equity financing with user-owned, token-based

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With Decentralized AI and Tokenized Ownership, We Can Fight ‘The Six’

Orthodox venture capital will never provide the resources for decentralized AI to take on Microsoft, Alphabet, Apple, et al. The only way is to supplant equity financing with user-owned, token-based systems, says Michael J. Casey, Chairman of The Decentralized AI Society.

By Michael J. Casey|Edited by Benjamin Schiller
Updated Nov 1, 2024, 7:20 p.m. Published Nov 1, 2024, 7:16 p.m.
(Pixabay)

The past two days’ share price moves for the six most heavily capitalized companies in the U.S. tell you all you need to know about why we must urgently decentralize the artificial intelligence economy.

The first headlines were that the third-quarter profits and revenue from Microsoft, Alphabet, Apple, Meta and Amazon all beat or met expectations. Yet, with the exception of Amazon’s on Friday, Big Tech’s shares all sold off in response to their earnings announcements, dragging down with them chip-maker Nvidia, the sixth member of the group, whose quarterly reporting is scheduled a month later.

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What spooked investors were some daunting capital expenditure numbers on AI computing power and model development. Alphabet, for one, said it did $13 billion in capex last quarter and expects to do the same in this one while Meta upped its full-year projected spending to $38-40 billion. The giants are in a spending war as each tries to outrace the others toward AI supremacy. Each one of them stands to lose profit margins if it gets out of control.

Let’s be clear: between them, The Six are booking $1.8 trillion in annual revenues, a number that would put their combined inflows in 10th place of global country rankings if we viewed them as a proxy for national GDP – just behind the gross output of Brazil’s 220 million people. Meanwhile, The Six have a combined market capitalization of $15 trillion, capturing an astounding one third of the entire S&P 500 index. Despite – or perhaps because of – this unprecedented scorecard, these companies are relentlessly competing for world domination. Doing what great American companies have always done, they’re unleashing a competitive instinct that, in a normal capitalist economy of diversified goods and services, is the core driver of technological progress.

So, don’t worry about The Six. Worry about us. Because our problem amid the dizzying advance of AI is definitely not one of a shortfall in technological progress. It’s that this particular form of technological progress comes with risks to human autonomy and safety. And to mitigate them, the question of who controls AI’s development and whether their incentives are aligned with the broadest base of humanity is fundamental.

Just as was the case for Alphabet’s Google, Meta’s Facebook and Amazon’s marketplace, the development of these six companies’ large language models (LLMs) and other AI machinery is occurring within closed, black-box systems.They’ve ingested the troves of data we all unwittingly poured into internet sites, and have built highly complex codebases into which no one has visibility. Between them, they dominate all layers of the AI stack: the storage (Amazon Web Services), the chips for computation (Nvidia), the AI models (Microsoft, with its investment in Open AI), the data (Alphabet and Meta) and the devices we use to interact with AI services (Apple). They might be competing with each other, but they form a vertically diversified oligopoly. Or rather, given the undeniable power that their technology can wield over people’s lives, they’re an oligarchy. Indeed, the secrecy around the means by which they exercise that power is characteristic of most oligarchical dictatorships.

Toward the latter phase of the Web2 era, people eventually came to understand Bruce Schneier’s memorable observation that we are not the internet platforms’ customers; we are their products. With that awareness, we’re now also finally opening our eyes to how these companies have long been incentivized to modify people’s behavior in unhealthy ways to maximize shareholder returns. It is no longer controversial to talk of the psychological harm done by the algorithms of Facebook, YouTube, Tik Tok and their ilk, which were blatantly designed to exploit dopamine releases to encourage continued, addictive engagement.

When Frank McCourt and I published Our Biggest Fight in March 2024, we were overwhelmed by parents’ horror stories of the harm social media had done to their kids. And then a Harris Poll coordinated by NYU Professor Johathan Haidt found that young people are just as concerned: nearly half of Gen Z wishes that TikTok and X (Twitter) never existed, even as 83% of the same cohort said they spend four hours a day or more on social media.

So, if we now know of the harms, why on earth would we extend the same oligopolistic control structure into the AI era? AI will put the Web2 oligopoly on steroids.

This is why I believe the creation of distributed, collectively owned open-source AI is a vitally important use case for Web3 and blockchain technology. It’s the only way to avoid the problem of misaligned incentives.

Sure, there are technical challenges, such as the latency that, for now, makes distributed machine learning inefficient, the capacity limits of on-chain data, or the privacy risks inherent to public blockchains. But innovators are already hard at work on outside-the-box solutions to these problems, motivated by the huge economic and reputational payoff promised by overcoming them. And when they do, the inherent information advantages enjoyed by open systems over closed systems will give decentralized AI a fighting chance. Achieve that, and “DeAI” will represent not only the right moral path but also the economic winner.

Here’s the rub: time is not on our side. And the fight is heavily lopsided. As cited above, The Six have an unprecedented $15 trillion war chest. In the 2000s, Facebook and Google learned that their high-value share prices gave them a currency with which to relentlessly acquire startups that could either enhance or threaten their dominance. Now, The Six have even greater capacity to buy up and integrate whatever breakthroughs in AI are coming, be it in independent AI agents or more efficient systems of compute. Their financial clout means that the most important innovations, those that offer the best hope for a more decentralized AI economy, are at risk of being subsumed into their centralized system. Remember, they’re competing with each other and are incentivized to do whatever it takes to win.

To fight their centralized approach, we must flip the paradigm. Orthodox venture capital will never provide anywhere near enough resources for decentralized competitors to take on the big guys. The only way is to supplant equity financing models with full user-owned, token-based systems. In the future, when your home devices provide the compute and deliver your privacy-preserved data into open-source models that are proven to act in your interests, you will earn tokens for that work. And, with that currency, you will pay for all the cool services delivered by your personal AI agent. It’s a new, distributed financing and payments system for a new, decentralized AI economy. It is the only way.

Yet, to succeed, the crypto and blockchain industry has to reimagine itself. If startup founders see DeAI merely as a new source of get-rich-quick token-pump opportunities, or if the leaders of the Layer 1 platforms now turning to the field are fixated more on applications that temporarily drive up the dollar value of their tribe’s cryptocurrency rather than on those that address real, economy-wide problems, this movement will fail. To win this fight, this industry must become more interoperable. It must become more collaborative.

This is not to say we should squash the competitive instincts that are vital to innovation. But it is to acknowledge a need for better cross-industry organization. Through collaborative bodies such as the new Decentralized AI Society, different stakeholders can work with each other to advance common interests around standards, reference architectures, taxonomies, policy objectives and open-source, cross-chain protocols that everyone can use regardless of the token they hold. We’re not building to pump our bags or take our token “to the moon.” We’re building to create a new decentralized AI economy for the benefit of all humanity.

Come join the fight.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

Opinion
Michael J. Casey

Michael J. Casey is Chairman of The Decentralized AI Society, former Chief Content Officer at CoinDesk and co-author of Our Biggest Fight: Reclaiming Liberty, Humanity, and Dignity in the Digital Age. Previously, Casey was the CEO of Streambed Media, a company he cofounded to develop provenance data for digital content. He was also a senior advisor at MIT Media Labs’s Digital Currency Initiative and a senior lecturer at MIT Sloan School of Management. Prior to joining MIT, Casey spent 18 years at The Wall Street Journal, where his last position was as a senior columnist covering global economic affairs.

Casey has authored five books, including “The Age of Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order” and “The Truth Machine: The Blockchain and the Future of Everything,” both co-authored with Paul Vigna.

Upon joining CoinDesk full time, Casey resigned from a variety of paid advisory positions. He maintains unpaid posts as an advisor to not-for-profit organizations, including MIT Media Lab’s Digital Currency Initiative and The Deep Trust Alliance. He is a shareholder and non-executive chairman of Streambed Media.

Casey owns bitcoin.

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TLDR Metaplanet purchased 156 additional BTC, bringing total holdings above 1,000 BTC Company stock rose 6.06% following the announcement Metaplanet achieved 116% Bitcoin yield in October 2023 Company raised 10 billion Yen through Stock Acquisition Rights Microsoft considering Bitcoin investment, subject to shareholder approval Metaplanet, Asia’s largest corporate Bitcoin holder…
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