[Off-Topic] Demystifying the "Evil" Microsoft
Perhaps whoever entered the tech market this decade didn’t follow the 90s story that culminated in the antitrust case against Microsoft. The “fear” of “monopolist” Microsoft was replaced by disdain and ridicule. I know, I myself use this figure from time to time — it’s almost a universal joke where Microsoft is the eternal evil and everyone else, the Canonicals, the Apples, the Googles, are the good guys.
Or almost, because now it’s Apple that is growing too big, as well as Google, which already has thousands of detractors instead of fans. Soon perhaps we’ll be seeing a new antitrust case: against Apple’s iTunes Store, for its “unfair” and “anti-competitive” practices. If that happens, it’s because people really don’t learn anything, and we’re doomed to regress instead of progress.
In terms of personal taste — guaranteed by individual freedom of expression — I dislike most Microsoft products and like most Apple products. But that doesn’t mean I don’t understand, respect, and admire Microsoft’s capacity, and Apple’s, to come out of a garage to the top of the world. It’s what a capitalist free market enables. And I equally dislike when success comes to be seen with the disdain of the envy of the incompetent, who in the end think they have a “right” to something without the same capacity. Besides, whether I consider a product “technically” better or not is irrelevant. “Better” or “worse” is a matter of taste. And the best thermometer in the market is demand. If there’s high demand, the product can be considered “good” even if “technically bad.”
No one has a “right” to anything beyond what they themselves produce. More than that, no one has a right to anything of others for free. But many think that no one can grow too much — otherwise what happens to the smaller competitors? Statist thinking like this leads to the Great Depression of 1929, leads to World Wars, leads to the Financial Crisis of 2008… I personally find it disoriented to lump the fact that a piece of software is “open” or that a company supports “free software” with social and populist movements. Technology shouldn’t be mixed with failed socialist ideologies. In another article I’ll explain why Open Source Software has everything to do with Capitalism and nothing to do with politicized social movements.
The text below is old, translated from the original article by Onkar Ghate (Pittsburgh Tribune-Review, March 17, 2002), and should convince you of what I mean. Drop the prejudices (“Microsoft = Evil”) and read with brain and reasoning because all the arguments are logical. Of course, the context is 2002 — since then Microsoft has shrunk considerably, and its qualities have changed.
[TRANSLATION] Drop the antitrust case against Microsoft
The historic antitrust case against Microsoft is now entering its final phase: determining Microsoft’s penalty. The presiding judge, U.S. District Court Judge Colleen Kollar-Kotelly, should be as lenient as legally permitted. (If possible, she should impose a nominal punishment like a one-dollar fine or, better, throw the case out entirely.)
To understand why, you must understand two points, one general and one particular. First, the antitrust laws are not objective and are unjust. Second, Microsoft is not guilty of any real crime. Let’s begin with the first point.
The “actions” that antitrust laws prohibit are vague, contradictory, and undefined. For example, antitrust laws prohibit companies from creating “restraints of trade.” But what specific actions constitute “restraint of trade”? If, as is repeatedly done in the business world, a company signs an exclusive distribution agreement with another company, is that “restraint of trade” because now other potential competitors are excluded from that area of the market? Or if a company sells a computer to individual X, is that “restraint of trade” because competing computer companies can no longer sell a computer to X, since he has need of only one? No — the courts have told businessmen — only “restraints” that are “unreasonable” are illegal. But which specific “restraints” are “unreasonable”? No definition is found in the law, so that no company can know before acting which actions are legal and which are not.
Consider another example. The antitrust laws prohibit “unfair” trade practices. But, again, what counts as an “unfair” practice? Is it any commercial practice that, for example, causes bankruptcies among some of a company’s competitors, because they couldn’t find a way to compete with the company’s low prices and/or superior-quality products? Or is it simply a practice that the ruling administration disapproves of? Again, no answer can be found in the law, so it’s impossible for a company to determine beforehand which specific actions the law prohibits.
Take a last example. Under antitrust laws, a company can be accused of “predatory pricing” if it sets prices lower than its competitors’, because the competitors might go bankrupt as a result. It can be accused of “monopoly pricing” if it sets prices that are considered too high, because that supposedly defrauds consumers of their hard-earned income. But if instead it decides to set prices at the level of its competitors’ — it can be accused of “collusion” or “conspiracy,” because now it’s no longer “competing.”
In the nightmare world that is antitrust law, any and every action can be declared illegal. No objective principles exist or can be specified in the law, and as a result a businessman has no way to determine, before acting, whether his action is legal or not. In practice, this means businessmen are at the mercy of the government. Any time the government wants to weaken a certain company, it can unleash the antitrust laws against it. In logic, a company has no possible defense against the accusation of “restraint of trade” or “unfair” trade policies or “predatory pricing,” because the accusation itself has no objective meaning. The antitrust laws, therefore, give arbitrary power to the government.
The obvious result is that when, say, a bureaucrat is unhappy with a successful company because it failed to share (that is, give) its wealth or support specific government programs — or when a government official thinks that destroying a powerful company will win the vote of disoriented citizens who believe “Big Business” is their enemy — or when resentful, envious competitors (like Netscape, Oracle, and AOL in Microsoft’s case) can convince their government representatives to weaken a superior competitor — the impact of antitrust legislation descends on that company.
It’s no accident that the most successful, most productive, most admired companies in America — Microsoft, IBM, Intel, Wal-Mart, American Airlines, Standard Oil, etc. — are the ones subjected to antitrust proceedings.
As a way of granting arbitrary power to the government, antitrust laws are unconstitutional and un-American. As a way of punishing the successful for their success, antitrust laws are a perversion of justice.
Now let us, therefore, set aside antitrust law, under which every action of a company could be deemed a crime, and ask whether in real fact Microsoft is guilty of any crime.
What are the main accusations against Microsoft?
Microsoft is accused of “unfair” competition. But competition refers to the process by which companies use their assets and personnel to build better and/or cheaper products. Thus they seek to earn, through voluntary trade, even greater profits. In a free market, there is no such thing as “unfair” competition. There are only better and worse competitors. In other words, some companies are better than others at research and development, long-term structuring, mutually beneficial business deals, product marketing, keeping good employees happy and challenged. Microsoft, for example, is excellent at all these processes — and many more. (The accusation that Microsoft isn’t innovative is particularly hypocritical given its continuous updates and improvements in its main products; even Judge Jackson had to admit this point.) The fact that Microsoft is one of the greatest competitors the business world has ever seen is, in a free nation, not a crime, but a virtue.
The only “unfair competition” that exists is, in fact, non-competition. If, say, the Mafia threatens to blow up a shopkeeper’s store unless he gives them a percentage of his sales, the Mafia isn’t engaged in competition, even if unfair. It’s engaged in coercion — precisely to prevent voluntary trade and free market from operating. When Netscape loses sales to Microsoft because Microsoft’s browser is better and/or cheaper, Netscape’s loss of sales has no resemblance to a shopkeeper’s “loss” of sales to the Mafia. One must never equate voluntary (people choose to buy Microsoft products) with coerced (if he had a choice, the shopkeeper wouldn’t “deal” with the Mafia).
Second, Microsoft is accused of “predatory pricing.” Translated into reality, this means that Microsoft is able to set prices lower than its competitors like Netscape. Some of these competitors, who cannot match Microsoft’s low prices, lose market share or go bankrupt. But it’s Microsoft’s incredible efficiency and productivity that allows it to beat its competition and still make large profits. Again, this is not criminal behavior, but virtue.
Finally, Microsoft is accused of exercising “monopoly power.” This accusation is also based on equating the voluntary with the forced.
It’s true that Microsoft holds a dominant market position in some segments of the software industry, and that some of its competitors have gone out of business. But that’s because Microsoft was really winning the competition: it was more innovative, more efficient, had better marketing, and employed better people than other software companies. Microsoft, in other words, earned its dominant position.
And it continues to earn it: it faces constant competition, even if there are no actual competitors in its market right now. For whenever another entrepreneur figures out a way to produce similar software at a cheaper price or better software at an attractive price (or some unimaginable product that makes current software obsolete), he is free to enter Microsoft’s market. And if he has a good business plan, he will be able to raise the necessary capital, even if he himself has nothing: there are thousands of venture capitalists looking for the next Bill Gates. Microsoft’s dominant position in the software industry, in other words, must be earned anew every day.
So once again, Microsoft is being attacked for its success: in reality it has no monopoly power — only brilliant management.
The only monopolies that can actually exist are those created by the government. Only a government can prevent someone from entering a market, and thus eliminate competition. The Post Office, for example, is a monopoly. There’s little doubt that Federal Express (in the US) can offer better, cheaper service and still turn a profit. But the government forcibly prevents it from entering this market. The Post Office’s dominant market position is shabby, offers bad service, but because of government coercion it faces no competition. Microsoft’s dominant market position, on the contrary, is earned: it faces constant competition, which it keeps beating. Again, don’t equate the voluntary with the forced.
Microsoft is the epitome of American business success: it produces enormous wealth through intelligence and hard work. Imagine the wealth that would exist — for every company, every employee, every shareholder, every customer — if every company in America were run by a Bill Gates. The fact that they aren’t shouldn’t lead us to destroy Bill Gates’ creation, but rather to admire and defend him even more.
Why should Microsoft’s punishment be as lenient as possible (assuming the case can’t be thrown out at this stage of the process)? Because the antitrust laws are arbitrary laws that penalize virtue for being virtue — as the specific accusations against Microsoft clearly reveal.
Dr. Onkar Ghate, PhD in philosophy, is a senior researcher at the Ayn Rand Institute in Irvine, California. The Institute promotes Objectivism, the philosophy of Ayn Rand — author of Atlas Shrugged and The Fountainhead.
Disclaimer
To clarify, it isn’t the intention to say Microsoft is innocent of everything. For that there’s the judicial system, and any company that feels illegally harmed has every right to sue, as has happened countless times. See this list of lawsuits.
And this is true for any company. One of the functions of a government is to ensure that contracts are fulfilled. Now, the discussion that interests me in the episode above in particular is the Sherman Antitrust Act which, in essence, gives the government carte blanche to litigate any company for any reason. This wasn’t the only lawsuit against Microsoft, but it was one of the most publicly publicized. Antitrust law itself is an evil, as are regulations that give privileges one can’t get in the market.
And for those interested in learning more, I recommend reading the complete Findings of Fact on the case in the American justice archive. And to understand why antitrust law is a serious problem, start by reading this article but mainly the book Capitalism: The Unknown Ideal