Remember that there's HN'ers who never worked at Microsoft :-)
At the time Japan dominated video consoles with the last western attempt being the disaster which was the 3DO. Thus Microsoft was going "nuke the japanese industry" and gain a foothold.
For further irony the Xbox was in effect was a spiritual successor to Sega's Dreamcast. That Microsoft went with such a distasteful name despite partnering with Sega highlights their cultural issues. Issues which have continued to prevent Xbox from building relationships with Japanese studios.
It wasn't about consoles but gaming in general. Programming Games for DOS required a lot of assembly knowledge (at least, if you wanted something fluid) and deviation from industry norms only increased development cost (thinking things like High res support necessitating VESA code, to say nothing of sound support in DOS.)
Devs hated dealing with all this extra work, extra compatibility, extra libraries (old gamers may recall MILES or DMX setup screens in some titles.) The libraries for Windows 3.1 were... not at all up to the task.
Thus, DirectX was created. Not so much to create a console competitor, as to show PCs as superior to consoles overall.
Which, when one thinks about it, may explain why Eric/etc were not big fans of the XBox; in some ways it conceded defeat on a level.
He actually comes across a mix of interesting and unpleasant in this interview. It takes me back to the nineties when he and St. John were routinely pissing off people including myself.
But in the end people are complicated.
Ironically, the two men arguably most responsible for the success of the Xbox were strongly opposed to the entire “Manhattan” project at the time.
Eric was instrumental in the DirectX runtime design that Microsoft ended up porting to the original Xbox hardware with shared high level components.
The other guy was Dave Cutler, who led the NT and hypervisor groups at the time. Xbox v1 borrowed heavily from Dave’s work on modular, stable-userspace NT. 360 was basically running a full-fledged NT iirc. Dave, like Eric, hated the Xbox project early on.
In today’s terms, it would be like Facebook deciding to make a search engine or mobile OS, so their reactions were hardly surprising. Word was that even BillG was hesitant, but Ballmer really wanted more product lines.
Eric will be dearly missed.