Microsoft, Ozzie wrote, had to think and operate more like an Internet company and, as much as possible, like a Web startup. Consider ad-supported or subscription business models, he advised, viral distribution, and experiences that "just work." Instead of the clunkiness that Microsoft products so often displayed, focus on being "seamless." Bottom line: Change big-time, or else.

"We were clearly marching along some of those directions, but we were taking an incremental approach," says John Shewchuk, a Microsoft technical fellow who would become an Ozzie lieutenant. "Ray pulled it together in a comprehensive vision."

"It was a big and important memo," says Ballmer, who feels that the Ozzie dispatch called for even tougher adjustments than Gates did in 1995. "The Internet didn't require a change in business practices, just technology changes," Ballmer says. "The notion of moving toward more subscription-based models, more ad-based models, is a bigger change for more people."

The memo didn't get immediate results. Basically, Microsoft couldn't consider a paradigm transplant until Vista and Office shipped. Ozzie was undaunted. "I kept talking," he says. "I began incubating certain things, certain new projects off to the side." While a number of Gates' duties were passed to others (notably to chief research and strategy officer Craig Mundie, who was happy to make public appearances as Microsoft's tech ambassador), Ozzie took on some of Gates' product reviews and strategy functions while quietly building a team to implement the ideas in his memo. That team included some key personnel from Ozzie's previous enterprises. "The reason I'm here is Ray," George Moromisato says. "I just believe in his vision." Jack Ozzie, Ray's brother and Groove cofounder, also came along.

Getting the best and brightest at Microsoft to leave their sinecures and join Ozzie's team was more of a challenge, but Ballmer's active involvement helped land the bigger fish. "I'm not going to break your arm to do this job," he told VP David Treadwell. "But I'm going to twist it pretty hard." Treadwell spared himself injury by becoming a key member of Ozzie's operation, heading up a team called Windows Live Core.

Ozzie spent a lot of time crafting a different kind of work environment at Microsoft. "He was very intentional about getting stuff done quickly, focusing on the end customer," Treadwell says. Previously, a big part of any development team at Microsoft was making sure its new product worked in lockstep with everything else the company produced. This "unification" criterion was something that Gates had always hammered on. But Ozzie saw that while that approach avoided annoying conflicts, it also tended to smother innovation in the cradle. "This philosophy of independent innovation—really making progress before you pursue serious integration, is something Ray pushed very strongly," Treadwell says. Ozzie's approach was to encourage people to rush ahead and build things. Then he'd have a team of what he calls the spacklers fill in the gaps and get things ready for release.

In a sense, his teams were cultural pioneers modeling a more flexible, startup style of software development. As a signal of his new approach, Ozzie spent a lot of time on the physical workspace for his team. "I'm either at 1 inch or 30,000 feet," he says. "If there's something I care about, I'm on it." He had workers rip down the labyrinthine, catacomb-like corridors on one floor of a building on the Red West campus and called in architects to create a more open design. Now, walking into the Windows Live Core group is like leaving Microsoft and visiting a Futurama set. Office windows open onto hallways so that quick eye contact can trigger spontaneous discussions. Whiteboards are everywhere. Pool tables, mini-lounges, and snack zones draw people toward the center of the space rather than isolating them around the edges.

At first, the skunk works-like nature of Ozzie's operation engendered suspicion and resentment. "There was a perception of 'Who are these special guys off in their own little space working for this new guy?' That created some tension," Treadwell says. By breaking seldom-questioned rules of how space should be apportioned in the Redmond Borg, Ozzie was pushing against the battleship mentality. Management experts might appreciate his explanation of exactly who was putting up the resistance. "The company," he says. Who's that? "They. You know—Microsoft."

Ozzie acted less like an executive dispatching his duties per the org chart and more like a startup CEO in touch with every aspect of the process. "At first, people go, 'Whoa, what is this—are you a product manager? Are you a developer?'" Jack Ozzie says. "Then they warm up, and man, they just want to be part of the team he's leading." That's fine for the groups he spends time with, but will it scale? "None of that can happen overnight," Jack says. "It's going to have to spread from the people who work for him." Also essential, Jack adds, is whether Ozzie's teams actually deliver: "We're a very results-oriented culture here."

The Ozzie project that must deliver results is Microsoft's so-called operating system for the cloud. As more apps become Web-based, the raison d'être for Windows—running programs on desktop PCs—becomes less compelling. What better way to make up for the decreasing importance of a desktop operating system than to create a dominant OS that runs services in the cloud? This is not only a crucial effort but one in which Microsoft is playing catch-up: Amazon.com went live with its cloud services in early 2006 and now hosts data storage or applications for more than 400,000 developers, including the complete historical archives of The New York Times. Google's entire company is based on the premise that people want to move from desktop to cumulus. But Microsoft hopes to use its cloud OS (codenamed Red Dog, now called Windows Azure) to dominate the cloud the way DOS and Windows did the desktop.

Ozzie found his project lead for Red Dog in Microsoft veteran Amitabh Srivastava, a top computer scientist who had been pulled from Microsoft Research to fix the engineering process for the troubled Vista. Their first meeting, at Ballmer's urging, was set for 4:45, which implied a hard stop after an hour or so. "One of the rules in my family is that nobody misses dinner," Srivastava says. But when Ozzie came in, the two chattered like magpies, and sometime after 8 Srivastava realized that he had indeed missed the evening meal.

Srivastava agreed to head Ozzie's Cloud OS project once Vista was done. His first coup was getting Dave Cutler to come out of semiretirement to join him on the project. At age 66, Cutler is a legendary figure in computing. He wrote the groundbreaking VMS operating system for DEC and later led the team that created Windows NT. An irascible, impatient combination of John von Neumann and Sgt. Rock, his presence on the team gave it instant credibility. Srivastava and Cutler began by methodically visiting every Microsoft group working on services, from Xbox Live to Virtual Earth. In December 2006, Srivastava wrote his own vision document outlining the plan. Its title? "Owning Clouds."

Under Ozzie, Srivastava felt free to create Red Dog using methods not normally seen at Microsoft. He set up his own 1,000-machine data center right in the middle of the Redmond campus to test early versions. To power the operation, the team stole excess reserve power from three nearby buildings. No permissions were sought through Ballmer or Gates. "I take direction from only one person—Ray," Srivastava says. Another indication of the rebel nature of the project comes from its codename. "The official story is that we are just like Red Dog beer, and I'm sticking with that," Srivastava says. But Cutler is more forthcoming: "We were visiting Hotmail," he says, "and there was a really seedy strip joint in San Jose called the Pink Poodle. I said, 'Maybe we ought to name this project the Pink Poodle.' Everybody said, 'Oh, God, we could never do that.' And then somebody said, 'Red Dog,' and we all said, 'What a great name.'" Cutler also had the idea of outfitting team members with shiny red Nike sneakers.

Maybe the most subversive aspect of Microsoft's newest operating system is that it was produced with a fraction of the manpower the company usually directs to critical projects. "There are literally thousands of people on Windows, but small groups with very focused people is a better way of doing things," Cutler says. "So this project is much smaller. It's like 150."

Red Dog, available late next year, will have competition, of course, from Amazon and most certainly Google, whose own cloud OS, App Engine, will offer developers similar hosting benefits at lower cost or even for nothing. But Debra Chrapaty, the Microsoft exec in charge of the company's data centers, says that Microsoft's infrastructure is so efficient it can compete in cost even with a company she refers to by the letter G. (She refuses to speak its name out loud because "every time you say that word, it reinforces their brand," she says.)

Eric Schmidt, CEO of that G-word company, says that because Microsoft has so much market share in servers and operating systems, the Redmondites will certainly be big players in cloud computing. He sees it as an extension of Microsoft's nasty behavior in the '90s. "Microsoft's basic strategy is to gain enough share in cloud computing to force other people to use its standards," he says. (By contrast, Google has blessed an open source version of its cloud technology, which both IBM and Yahoo have adopted.) Ozzie doesn't buy the charge. "Google and Microsoft have the same basic philosophy. We're basing our cloud on Windows technologies because they're great technologies and we have a lot of higher-level services on them. If you want to write open source stuff on them, you can do that."

Srivastava and Cutler predict that Red Dog's reliability will be a competitive edge. "We don't want to say to developers, 'Hey, come and use this platform,' and then have it lose your data," Cutler says. "That would just be bad. I mean, it would be terrible. So we're being really conservative."

Ozzie, of course, loves Red Dog and prizes his red sneakers. But the project closest to his heart may be Live Mesh, one of the building- block services that run on top of the cloud OS. In a sense, it addresses a problem that then-VP Jeff Raikes posed to Ozzie during his first week at Redmond: How can Microsoft connect and synchronize people's contacts, calendars, and other information in a seamless fashion?

For Ozzie, this challenge was profound; it meant using the cloud to connect people to machines and, more important, to each other. "Getting sync right is the essence of everything," he says. "If you don't, everything else fails." And furthermore, it had to be designed in a way to scale to hundreds of millions of concurrent users. "Scalable sync is tough." Apple knows this all too well; when it turned on a similar service called MobileMe last June, it delivered more stink than sync.

Live Mesh looks impressive in demos; it can zip photos and tunes from computers to the cloud. Then it can zing the information off to anything that's connectable, smoothly fitting the stuff into its natural habitat. Whether it will work with millions of people and billions of items—and so simply that those millions of people keep using it—is another matter. (Microsoft's "it just works" record is spotty, to put it gently.) To ensure success, Ozzie has pared down the project to essentials. David Treadwell says the team jettisoned some bells and whistles. "But Ray was very firm," he adds, "about maintaining the soul of the release."

To Ozzie, software's soul does not lie in the accumulation of features. Instead, it lies in his dream of connectivity. "Live Mesh is very Ray," Mitch Kapor says. "It's the son of Groove, which is the son of Notes." Which was, of course, the son of Ozzie's beloved Plato. Thirty-three years later, Ozzie is still trying to build on what he saw in sophomore year. But it's no longer the Ray Ozzie vision. It's Microsoft's.

"Here's the deal," Ozzie says. "Somewhere in my first year, not in the first few months but before the CSA announcement, I had to make an internal decision. If I want to be here, is it to make Microsoft successful or to have a good project, a good experience, whatever? It was an issue of engagement. I asked myself, why do I do what I do? I enjoy solving complex problems that involve technology, people, organizations—the whole mix. So I made the internal decision to do what I can to make Microsoft successful, and that was it. Yes, it took me a while to understand what that meant. No, I haven't worked here for 20 years. But every day I'm up at 5 am and at work at 6 or 6:30. I don't get home until 8. I'm doing everything I can to make this company successful."

That just means getting Microsoft's 90,000 people to follow him into the clouds.

Senior writer Steven Levy (steven_levy@wired.com) wrote about the creation of Google's new Web browser in issue 16.10.

1816: Gaslight illuminates Philadelphia's Chestnut Street Theatre. Theater patrons are living in an age of wonders: lights that burn "without wick or oil."

Merchant Charles Kugler wanted to construct a gasworks to bring to Philadelphia the modern marvel that was illuminating the streets of London. He set up a demonstration of gaslight at Peale's Museum, which was run by Philadelphia painter Rembrandt Peale.

Typical lighting for the time was by candle or whale-oil lamps. Kugler felt that the cutting-edge technology of producing lighting gas from coal produced such a bad smell that, in Peale's words it "could not, with propriety, be established but at a distance from the city." What's more, coal was often expensive or scarce.

Kugler improved the method by replacing coal with pitch, which was derived from trees and therefore abundant. Pitch was also largely free of the noxious, rotten-egg smell of hydrogen sulfide.

Peale praised Kugler's innovation: "[B]y a simple apparatus, easily managed, without anything offensive in the operation, he prepares a gas at once cheaper and more brilliant, than that prepared from coal."

Kugler's technique used turpentine (also tree-derived) to dissolve the pitch, which was heated in a sealed chamber separate from the firebox beneath it. The resultant gas was passed through a chemical bath to remove tars and odor-causing chemicals. It was then collected under a weighted hood that could be adjusted to keep the clean lighting gas at sufficient pressure to feed the gaslight fixtures in the theater.

Kugler installed the furnace and gas-storage tanks in a room right next to the auditorium of the theater building. Inspired by London's famous Covent Garden Theatre, the Chestnut Street Theatre stood at the northwest corner of Sixth and Chestnut Streets.

The young nation's first purpose-built theatrical venue, it was built between 1792 and 1805 at a cost of $30,000 (about $600,000 in today's money). One of the Chestnut Street's architects was Benjamin Henry Latrobe, who was also working on the U.S. Capitol building in Washington, D.C.

Kugler faced some opposition. Some Philadelphians denounced the gasworks (.pdf) as a danger to public health and safety, maintaining that the plant would emit a stench that was both unpleasant and unhealthy. Further, the gaslight, they said, would use up oxygen and affect the lungs of those in the theater. What's more, an explosion would kill or maim people.

Amidst this display of brotherly love, the theater managers announced they were "happy to be the first to introduce this system of lighting theaters and flatter themselves that its superior safety, brilliancy and neatness will be satisfactorily expressed by the audience." And so it was.

Nonetheless, the Chestnut Street Theatre burned to the ground in 1820. It may have been arson, or ...

Source: Chestnut Street Theatre Project

We tour the history of man-made lights, from oil to arcs to neon. See how far we've come.

Left: Often cited as the most profound and significant human discovery, humans finally were able to manifest light by using fire. Providing civilizations' artificial lighting needs for thousands of years by combusting fuels, fire was replaced only when electricity was discovered.

Gas lighting was first used around the end of the 18th century. Early lamps were fueled by several different gases including methane and ethylene. Through most of the 19th century, gas made from coal was the standard. The lamp in this photo (taken around 1880-1893) may have run on natural gas, which began to replace coal gas at the end of the century.

Kerosene lamps date back to the 9th century, but the first modern kerosene lamp was constructed in 1853 in Poland. These lamps were widely used in rural America in the 1930s. Here, a 1939 migrant worker lights a lamp using a campfire flame.

The arc lamp concept was demonstrated in the early 19th century, but the technology didn't really catch on until the 1880s. Arc lamps consist of two electrodes separated by a gas such as neon, argon or xenon, which is ionized or ignited by an electric charge. The lamp shown here at General Electric's Schenectady Works used mercury.

Limelight, typically used in theaters in the 19th century, is created by directing an oxyhydrogen flame at a cylinder of calcium oxide, or lime. Though limelight has been replaced by modern electric lighting, the phrase "in the limelight" lives on.

Among Thomas Edison's most influential inventions is the incandescent light bulb in 1879. Edison, shown here around 1911, had a total of 1,093 patents in the United States alone. He also held patents in several European countries. By the time he died, he had improved the life of the light bulb from around 40 hours to 1,200 hours using a filament made from bamboo.

During World War I, Americans were asked to cut back on electricity use to conserve coal as demands related to the war escalated. The railroads compounded the problem by working double time as part of the war effort, leaving fewer cars to deliver coal to the country. Many people turned to wood in place of coal to keep warm through the winter.

Neon lights work by applying an electric charge to a sealed tube of neon gas, which causes it to glow. Neon glows reddish orange. Using other gases, such as argon or krypton, or mixing them with neon produces different colors. When neon signs were first introduced in the early 20th century, they were known as "liquid fire." This photo of the Pabst Blue Ribbon advertisement was taken in 1943.

Fluorescent lamps are filled with mercury vapor, which produces light when an electric current is passed through it. The mercury atoms are excited, causing them to emit ultraviolet light, which in turn causes a phosphorescent coating on the tube to fluoresce. Both Thomas Edison and Nikola Tesla experimented with fluorescent lighting in the 1890s. By the middle of the 20th century, fluorescent lights became more common than incandescent lights in the United States.

The word laser is an acronym for "light amplification by stimulated emission of radiation." A successor to the maser, which amplified microwave radiation rather than visible light, the first working laser was built in 1960 after Bell Labs developed the technology. This laser at the University of Texas at Austin has a peak output of more than a quadrillion watts of power.

Light-emitting diodes, or LEDs, seem to be everywhere these days, from flashlights, to signs, to electronic graffiti. But they were not always the life of the party. The first LED was created in the 1920s in Russia when Oleg Vladimirovich Losev noticed that radio diodes emitted light under a current, but his discovery sat for decades without much notice.

In 1962 Nick Holonyak Jr., an employee of General Electric created the first practical LED. The lights quickly became the standard for indicator lights in electronics, and as the technology advanced, they became useful light sources. Losev died of hunger in 1942 during the blockade of Leningrad, unaware of the modern sensation that would stem from his invention 60 years later.

Left: The cartoon image LED placards that were part of a Boston area guerilla marketing campaign for a 2007 film set off a bomb scare.

Energy efficiency is on everyone's mind today. With a recent push from GE, compact fluorescent bulbs have become increasingly popular. Built to last up to 15 times longer than regular incandescent bulbs, they use as little as a fifth of the energy of incandescents. CFLs have some drawbacks: They emit an unpleasant hue and some versions tend to flicker when they start up -- both those problems have been addressed, so the lights perform more like classic bulbs. But the CFLs contain mercury, so they require special disposal and must be kept out of the landfill.