April Fools: Microsoft, Department of Justice and the State Attorneys General

April 4th, 2000 - Chuck Flink

How very appropriate that Judge Posner had to declare failure in the Microsoft-DoJ negotiations on Saturday, April 1st, April Fools Day! This truly has been a dance of fools, in spite of the combined IQs of all involved and the millions in taxpayer and consumer funds being expended. In fact, I'd argue that the foolishness of the whole affair is magnified by the intellectual firepower all sides have brought to the table! Has there ever been a case where more intelligence was focused on fixing something that wasn't broken? List all the potential payouts in all the various categories and it makes the entire affair foolish beyond belief.

Let me list the extraordinary foolishness of it all:

• The #1 objective is supposedly to accelerate the rate of innovation! Can anyone of these geniuses tell me with a straight face that that information revolution is coming too slowly for him/her to digest?
• The #2 objective is supposedly to allow more entrepreneurial activity, to allow more start-ups to have a chance at the market! Every statistic indicates that, if anything, we're in danger of a market collapse because too many pure paper garage-shop corporations have sprung up with little or no profits or serious expectations of profits, yet have grown paper fortunes on totally unsubstantiated promises. There simply will be no overall payout or value in further overheating the market with start-ups.
• The #3 objective is supposedly to redress the 'harm' done to the competitors that Microsoft has 'stifled' by their anti-competitive practices. Let's see, Netscape sold out to AOL for $4 Billion after being in existence less than 10 years. Pretty stifling! Especially when you consider the company was founded on ripping off a government funded product that should have accrued value to the taxpayer, not the entrepreneurs! And I'm sure that the fact that AOL is far bigger than MSN is a result of the kindness of Bill Gates, since Microsoft's 'monopoly advantage' would have guaranteed the opposite results if it wasn't for charity on the part of 'Big Bill'. Give me a break! Sun, Oracle, AOL, and dozens of other 'competitors' are in remarkably good positions in spite of numerous mistakes they themselves have made. Is this a crisis for America?
• The #4 objective is suppose to be lower prices! Ask any CIO where the money goes. The answer will inevitably be support first, hardware or communications second or third, and well down the list you will eventually find software license fees. And when you look further at that, the lions share will be in specialized software, not the commodity products like Windows 98. Some may argue that the complexity and unreliability of Windows is what gives rise to the high support costs. Then I suppose the evolution of the computer industry against mainframes and UNIX minicomputers was totally driven by the market hype of Microsoft and in no way involved reduced costs through mass production, mass education of users through home computers, and the relative simplicity of a windowing interface? Simply review history!

And throughout this, no estimation is given to the value of the relative standardization that has resulted from the Microsoft dominance.

I very seriously doubt the 'browser' and the World Wide Web would be the house-hold words they are today without the huge mass- market opportunity made possible by the relative standardization and low-cost of Microsoft's computer-vendor independent Windows.

The right answer may well have been to have required AT&T turn over UNIX to the National Bureau of Standards during the divestiture negotiations 20 years ago. If UNIX had been a national standard, we could have had the stability, reliability, compatibility, and low-cost objectives everyone claims we need. Rather, we chose to allow innovation then and saw a dozen years lost to in-fighting, confusion and posturing. Microsoft grew out of that fiasco, won dominance, and has given the industry 8 years of phenomenal growth.

In fact, I think this is a story if jealousy, power, greed and paranoia:

• jealousy on the part of competitors that felt they deserved a bigger share of the inflated high-tech market growth;
• power on the part of politicians that find squeezing corporations make them look and feel powerful, and justify their salaries while taxing the consumers twice: once thru the tax system and again through the fines imposed (that are passed on in terms of higher prices, e.g. the tobacco settlements!);
• greed and paranoia on the part of Microsoft that: a) could have taken even more wind out of their competitors sails by taking less money out of their customers pockets, and b) could have slacked-off and not been so very successful in responding to every competitive challenge. Imagine how profitable Sun or Oracle would have been if Microsoft had been two orders of magnitude cheaper, instead of just one. Imagine if Microsoft had set back and not responded with Windows Terminals to the Java and Internet terminals these two companies had promised. Microsoft's greed allowed Sun and Oracle a profit margin in their traditional markets and Microsoft's paranoia caused it to face each of these challengers head-on, forcing them to compete in court rather than in the market. What's that old saying? "Discretion is the better part of valor!"

Frankly, the whole fiasco should be thrown out of court on the grounds that all the issues are moot. It is obvious that the technology is moving far too fast for any legal remedy to be effective, unless it was with immediate Microsoft concurrence. By not agreeing this weekend, the case is presumably going to be in appeals courts for years, if not decades. Meanwhile, Microsoft will be even more motivated to feel paranoid and to fight like the dickens against any competitors.

The Netscape sale to AOL shows very clearly that the marketplace is not stagnant and in need of trust-busting. Even more importantly, the rapid evolution of technology assures us that the browser and the operating system are well on their way to ceasing to exist as entities distinct from the 'Internet Appliance'. They are artifacts of the past as much as hand cranks and manual transmissions on cars: only of interest to historians and hobbyists! How can these lawyers continue to focus on the integration of these two concepts as the most significant crime, when both are going to be history before the trial is over?

With so many more interesting and valuable things to do, it's immensely foolish for all parties to continue this trial. I'm reminded of all the lawyer and politician jokes we've all shared over the years. As citizens and consumers, let's make very sure that we don't make clowns of ourselves by losing sight of what's important to our bottom line!

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