Microsoft was never the place new ideas and true innovation came from. But they did once have the power to shut down people who had them. They no longer do; that's what's changed.
At least they invented and marketed OLE. The importance of this technology seems to be underestimated. OLE for windowed environments is the same as the streams/pipes philosophy in UNIX. In fact OLE/COM is something that's still missing in UNIX (and don't tell me about gtk which is a shitty and buggy piece of software).
From GUI perspective MS did a lot of things that X and MacOS "adopted" or tried to adopt silently, so to say.
After all, MS does hire talented staff. Just don't underestimate them.
Can you explain the power Microsoft had to shut down people where "true innovation" came from? and who or what stopped them from doing this?
What is the difference between "true innovation" and -- I don't even know how to ask this exactly -- "untrue innovation"?
They had the ability to throw their weight around -- and they did. One popular example: competing browsers such as Netscape or Opera hardly stood a chance against an integrated IE in Windows. What changed this landscape? A few things, one of which was US v Microsoft.
Lotus 123 and WordPerfect were also crushed by Microsoft.
and Microsoft developed a superior office package. They were at one point behind 123 and WP.
but ironically. the browser should be integrated in the core of the OS.
Startups are the ones with fresh ideas because larger companies don't want to take the risks. Larger companies could later acquire those cutting-edge startups when it is more apparent that their ideas are good ones.
What does it mean to be dead then?
What I think Paul Graham is saying, and this is underscored by the notion of "being dangerous," is that Microsoft is no longer the place where new ideas and true innovation is going to come from. Startups are born from fresh ideas, and the companies that are dangerous to them are places like Google which seem to being designed to produce competitors to startups.
Microsoft will continue to sell $50 OEM copies of Windows to Dell and licenses of Office but this is a business on the decline. Microsoft is Old-tech stuck in the era of desktop applications, closed development strategies, and the economics of software licensing.
The financial effects of MS being dead are already showing some effect, MSFT has moved much since the dot-com boom, but it will take 5-10 years and continued blunders from MS to see some real damage.