The decision caused Ballmer and Microsoft to miss the massive shift customers were making from PCs and laptops to smartphones and tablets. He didn't quite miss the shift to cloud computing, but resistance from the reseller base on which Microsoft's revenue depended slowed the move toward clouds as well.
Microsoft could have missed one or two of those shifts without drastic consequences. Missing or falling behind on all three put it in grave danger of becoming irrelevant.
It wasn't all Ballmer's fault. Gates didn't Get It either.
The difference between the two is that, when he was CEO, Gates knew when he didn't understand something that was, nevertheless, important.
In 1996, for example, after years of pooh-poohing the Internet as a pointless productivity suck, Gates realized that he might be right in disliking the Internet as a conduit for business, but his customers were going there anyway.
After a weeklong retreat to read up on the Internet and think about its implications, in Apri, 1996, Gates made the hard call to endorse a technology he didn't really understand as user.
He changed Microsoft from a company that was allergic to the Internet to one that built it into almost every product in its catalog.
It saved the company. At least, it put off the inevitable point at which any tech company starts losing a race it has always led because it has become too borne down by the weight of its expectations to move quickly and too focused on preserving its existing revenue streams to see the future clearly enough to know how soon they will end.
Ballmer faced the same kind of choice, though on a much smaller scale. He chose the safe and obvious course that, for tech companies, is always the most likely to be fatal.
By deciding to preserve what he could of Microsoft's past success at the expense of its future, Ballmer showed that he either didn't recognize gaps in his own understanding or was willing to assume they didn't matter.
He also showed that he didn't have the independence of mind to make a risky decision that went against the opinions of the industry icon in whose shadow he lived his whole adult life.
I admit, I put the blame wrong. I blamed Ballmer for blowing the call on tablets and phones. I meant to use them not as damning examples of incompetence; Ballmer's anything but incompetent, at least as a a manager.
I meant them as examples of the limits on his vision and perceptiveness, both of which are critical for leaders in an industry in which the future is always approaching so fast that picking the wrong position means you won't just be left behind, you'll be run over first.
Obviously Ballmer knows what position like to choose – facing the same way as Bill Gates, but standing a few paces behind.