SYMPATHY FOR THE DEVIL: Microsoft the Monopoly
by G.J. Lau
What's the old Chinese proverb: “Be careful what you wish for, it may come true.” Judging by the muted reaction from Silicon Valley to the ruling that Microsoft is a monopoly, Bill Gates's enemies may have finally realized that they have formed a circular firing squad.
What exactly does this ruling mean to a business dominated by start-up firms that hope toride the next paradigm shift to achieve wealth beyond measure? For venture capitalist Tim Draper the message from Washington was simple: “Become successful, but not too successful or we'll ruin your life.”
I have never been a fan of this particular antitrust case. Too often these days we see lawyers and lobbyists used to achieve for their clients what their clients were unable toachieve for themselves. Laws are passed that change the rules or that favor one particularinterest over another. Court cases like the Microsoft cases force parties to settle out of court, thereby guaranteeing the plaintiff at least a partial victory. And in the long run, we the people pay the price for keeping losers in the game past their time.
Bill Gates succeeded because he was right when it mattered and because he ruthlessly capitalized on his opponents’ errors in judgement. Gates understood that it's the operating system, stupid. Remember, Gates built MS-DOS while he was in college. IBM bought him out. Then IBM let MS-DOS slip through their fingers, and once he got it back, Gates was not about to make the same mistake twice.
The idea that Microsoft has never had any competition is a canard. IBM is a pretty big outfit. They had no compunction about bundling PC-DOS with IBM computers. They also built a pretty good operating system of their own, OS/2. But IBM never stood behind OS/2, and eventually it just died from neglect.
Apple made a pretty good operating system too, so good in fact that Microsoft ultimately emulated it in Windows. But Apple made the same mistake that IBM did and focussed on the hardware rather than the software. Apple's refusal to permit clones took its hardware AND its operating system out of play in the business world. That allowed IBM clones to dominate the market, and MS-DOS just rode right along with it.
Windows became a success because MS-DOS was a success. And MS-DOS was a success because large organizations like standardization and they like to save money. Buying cheap clones and picking a single operating system satisfied both needs. That’s it. Nothing magical here. Just tough but shrewd business judgement along with being at the right place at the right time.
And nobody understands better than Bill Gates how transient his success is. He knows that Microsoft is just one market shift away from losing everything. That is why he is so predatory. In his business, there are no second acts. If you miss the next paradigm shift, you are done.
And that is why Microsoft went so hard against Netscape. Bill Gates was very slow to pick up on the Internet. Does anyone remember that at one time Netscape had a virtual monopoly over the browser market? Microsoft had no presence at all for a long time. Bill Gates was on the edge of making his first really big serious mistake, because he underestimated the power of the browser.
All that changed when Netscape started concocting grandiose schemes to leverage Java and Netscape into a rival operating system. That awoke the sleeping giant. And once Microsoft decided to tackle the Internet, they went at it with everything they had, eventually retooling their entire software product line to become Internet compatible.
Yes, Microsoft used its huge financial cushion to gain a quick foothold in the browser market by making Internet Explorer free. But Netscape hurt its own cause through overconfidence and underachievement. And, like others before them they underestimated Microsoft's ability to react quickly and decisively. Netscape compounded its problems by quirky non-compliant, bloated browsers that gave Microsoft its window of opportunity. And you know what? Microsoft eventually built a better browser. That was the stake through the heart of Netscape.
Is Microsoft pretty to watch in action? No. Is it that different from other big successful operations? No. Do we need some controls over monopolies? Yes. Has Microsoft used its huge size to drive out competition? Yes. Has this hurt consumers? Maybe, maybe not. Will a break up of Microsoft hurt consumers? Absolutely.
Like I said up front, be careful what you wish for. It may come true.
Copyright © 1999 G.J. Lau All Rights Reserved
G.J. Lau toils deep in the bowels of the Washington bureaucracy. A long-time observer of American politics and mores, he now edits his own e-zine Singleminded, which can be found at : http://www.pipeline.com/~gjlau/emag/.