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The Microsoft Myth: We Shouldn’t Assume More Antitrust Will Give Us More Tech Innovation
Sen. Elizabeth Warren argues that if Washington breaks up Big Tech — and more aggressively reviews acquisitions going forward — the result will be more competition and thus more innovation than would occur otherwise. Just look at history. As the Democratic presidential candidate explains in a blog post:
The government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge. The story demonstrates why promoting competition is so important: it allows new, groundbreaking companies to grow and thrive — which pushes everyone in the marketplace to offer better products and services.
It’s a superficially compelling argument at times like this: Demographic challenges mean the American economy will need to become more innovative if it’s to grow anywhere near as fast in the future as it did in the past. From this perspective, Big Tech is now a big problem.
But this isn’t obviously the lesson that history teaches. It’s not at all clear the Microsoft, if not distracted by its antitrust fight with the feds over the now infamous 1990s “Browser War” with Netscape, would have mercilessly squashed Google and Facebook. Nor is it clear that the American software industry owes its existence to the government’s distracting 13-year pursuit of IBM born out of the last official act of LBJ’s Justice Department in January 1969.
Certainly, both claims are bandied about bulletproof explanations, such as in the Axios story “For tech, antitrust is a fatal distraction.” Let’s focus on the case of Microsoft. Was the software giant distracted by its conflict with Washington such that it let Google become a search superpower and missed the industry move to mobile. Perhaps. But maybe simpler and more common explanation is the correct one: A big, bureaucratic, slow-moving incumbent failed to adjust to a secular business shift.
Here’s what Steve Ballmer, Microsoft CEO from 2000 to 2014, said when he departed the company: “If there’s one thing I regret, there was a period in the early 2000s when we were so focused on what we had to do around Windows that we weren’t able to redeploy talent to the new device form factor called the phone.” And Vic Gundotra, a former head of Google’s mobile division, left Microsoft after it became clear “the company could not accept the reality that Windows was no longer the center of the universe,” according to “In The Plex: How Google Thinks, Works, and Shapes Our Lives,” a 2011 biography of the company by tech journalist Steven Levy.
More on this from Stratechery tech analyst Ben Thompson: “In short, to cite Microsoft as a reason for antitrust action against Google in particular is to get history completely wrong: Google would have emerged with or without antitrust action against Microsoft; if anything the real question is whether or not Google’s emergence shows that the Microsoft lawsuit was a waste of time and money.”
It’s also worth noting this analysis on Twitter by Andreessen Horowitz’s Benedict Evans on how regulators and other policymakers miss out on how markets and technology evolve when doing antitrust analysis:
Published in Economics, TechnologyWhen a market is being created, people compete at doing the same thing better. Windows versus Mac. Office v Lotus. MySpace versus Facebook. Eventually, someone wins, and no-one else can get in. The market opportunity has closed. … Monopoly! … But then the winner is overtaken by something completely different that makes it irrelevant. PCs overtook mainframes. HTML/LAMP overtook Win32. IOS & Android overtook Windows. Google overtook Microsoft. … Tech anti-trust too often wants to insert a competitor to the winning monopolist, when it’s too late. Meanwhile, the monopolist is made irrelevant by something that that comes from totally outside the entire conversation and owes nothing to any anti-trust interventions. … None of this is to say regulation is a bad idea. It’s often very necessary. But historically that has not been where generational changes came from in tech.
Not sure I needed more evidence to bolster the argument that Warren is an idiot.
JimP,
The problem with anti-trust isn’t with the basic idea. Rather it is with the very common ideological application of it. If you just decide that the big guy is the bad guy without any real evidence then you are bound to screw things up. It may be of interest that Robert Bork had exactly this even-handed point of view in mind. Bork may have been Borked not by left-wingers but by moderate Republicans who were afraid of his non-ideological anti-trust stance.
Jobs tied himself to a “closed box architecture”. Microsoft went for “open systems architecture” from the start. It wasn’t Mr. Gates’ unfair business practices that caused Microsoft to run away with the PC market but rather Mr. Jobs’ obsession with his closed box graphic machine. With the Apple II & III line, Jobs could have bit off a major piece of Microsoft’s market but Jobs chose ideological purity and an inferior fundamental view. Incredibly, Gates recognizing that Jobs was right about some of his graphics ideas put Jobs back in business when Jobs had destroyed Apple by his own bad choices. Far from an abusive competitor Gates was a very good steward of the entire industry. His system allowed third-party hardware & software companies to thrive. Jobs tried to control everything and lost out.
If Gates had not been held back by unnecessary anti-trust perhaps we wouldn’t need to consider breaking up the internet/smartphone gang now. Gates whole mentality was much more fundamental and would have provided a real alternative to Google, Facebook, and the I-phone. By tying Microsoft’s hands all we’ve done is put everybody in the hands of people who have contempt for real work and don’t mind addicting the entire country to useless activities for profit.
I apologize in advance for using a Paul Joseph Watson video. However, sometimes his over the top approach is necessary to get the point across.
Regards,
Jim
This is a fantastic synopsis of these events.
Jim,
I think a lot more homework needs to be done on your part around MSFT, which, despite the inept actions of the government around anti-trust, was literally dumping their OS code by bundling it, essentially for free, way back the 1980s, as a way to gain market penetration.
A lot of literature was written around this, back in the day, and how superior operating systems like OS2/Warp died on the vine, in part because of Gates, also in part because of IBM’s size and consistent ability to shoot itself in the foot.
Gates is a marketer, not some kind of abused technical hero. And I don’t need a phone to waste time, as if every PC user is doggedly sweating over his or her hard work. The internet and games ensure that plenty of time is wasted on your PC/laptop, too. Even if the smart phone had never been invented.
The problem with anti trust is it’s all remote government that faces different incentives. There’s always a problem. Almost every business is a monopoly for a while and with modern techs falling marginal costs, it’s a problem, but we don’t know how to deal with it as government isn’t a solution although law may be. While nobody can see the future, the government concentrates on a remote past. Remote now days isn’t that far behind them, but still enough to make them wrong almost all the time.
Bork (to oversimplify) wrote the Antitrust Paradox to make the point that a generic policy approach hostile to bigness was usually going to be antithetical to a policy based on consumer welfare. Protecting inefficient little guys was not necessarily in the public interest. Breaking up big just because it’s big is not an economically coherent policy.
Scalia opined about how a true monopoly (without government help) is almost impossible given all the incentives to innovate around it. It does seem apparent that Microsoft set out to strangle makers of browsers, competing OS etc. to make one platform über alles but could never have done that even without antitrust intervention. The Windows phone, for example, never threatened to rule the market.
The Bell breakup was different. Phone manufacture and all of the services and technologies that could be delivered over phone lines were inhibited because the telecom industry was a single giant regulated utility with strong disincentives to innovate. Ironically, that is the situation that Warren seeks to recreate–regulated internet companies that bend the knee to government and serve political, regulatory and ideological interests instead of the market.
Some have theorized monopolies cannot exist without some form of government help, either inadvertantly through laws, or directly, typically through “partnering”.
As for antitrust actions against the big tech firms, I have to fall back on one of my basic tenets: if the left is for it, I’m against it. And because Warren is for it, I’m against any government action against these companies.
Aside: I switched from Google to DuckDuckGo based on a recommendation from a fellow Ricochetti, and I use it 99% of the time. I still use Google when I do maps and satellite, or DDG doesn’t come up with what I’m looking for.
The Apple II came with full documentation, including circuit diagrams and code (written by Wozniak). That led to a thriving industry of add-ons such as graphics cards, modems and even CPU boards.
Ironically, when Apple started being more secretive, IBM (the ultimate proprietary company) came out with the PC and published its interface which triggered an even bigger add-on industry.
Bill Gates was very anti-open software. One of the first times I came across his name was his “Open Letter” about copying his basic
https://en.wikipedia.org/wiki/Open_Letter_to_Hobbyists
Chris,
No, Open Systems Architecture was the Microsoft plan from the beginning. Selling your OS at a reasonable price to clone makers was the object. The clone makers were making the finished product so the OS was just one more cost of production to them. Did Western Digital or Seagate dump their hard drives when they sold them to pc clone makers at low cost? Their drives were faster, cheaper, and more reliable than the Apple in-house drives. How many people needed to have their arms broken to make Apple look good?
There is a video by Joanna Stern WSJ’s tech writer. She shows herself in love with her iPad. She walks with it, eats with it, and takes it to bed with her. Then she stops in mid adoration of the iPad and says, “I love my iPad but when I need to get my work done I need my laptop.” She was expressing the simple reality that serious work requires a device geared to do serious work. Yeah, I can make do with my tablet (Andriod as the iPad is twice the price) but to do serious work one should be on at least a laptop and probably sitting at a desk. Randomly surfing the web and games are a choice. Spending $1,000+ on a phone (plus very expensive monthly service) and not buying a laptop says you’re not interested in doing any serious work or looking up & downloading serious but lengthy articles. Yeah, you can do it on your phone (now a 6″ screen) but really you are more likely to just tweet and text.
The medium is the message.
Regards,
Jim
What’s so galling about this claim is that they aren’t arguing that the outcome of the antitrust suit against Microsoft is what allowed Google and Facebook to ascend. They (more or less) admit that the settlement that was reached between Microsoft and the US government was virtually inconsequential. Instead, the argument is that the distraction of having to defend itself from the US government’s antitrust suit is what allowed Google and Facebook to ascend. They’re admitting that the process is the punishment, and they’re making the claim that legal harassment of corporate “giants” via antitrust law is what’s conducive to business innovation, regardless of the actual outcome of any particular antitrust suit.
Why isn’t Elizabeth Warren calling for a breakup of Apple? There isn’t a single mention of the word “Apple” in her diatribe against Google, Facebook, and Amazon. If anybody employs “monopolistic” business tactics, it’s Apple. They’re the ones whose devices and services are all part of a closed ecosystem.
Chris,
No, Open Systems Architecture was the Microsoft plan from the beginning. Selling your OS at a reasonable price to clone makers was the object. The clone makers were making the finished product and were responsible for all customer support, so the OS was just one more cost of production to them. Did Western Digital or Seagate dump their hard drives when they sold them to pc clone makers at low cost? Their drives were faster, cheaper, and more reliable than the Apple in-house drives. How many people needed to have their arms broken to make Apple look good?
There is a video by Joanna Stern WSJ’s tech writer. She shows herself in love with her iPad. She walks with it, eats with it, and takes it to bed with her. Then she stops in mid adoration of the iPad and says, “I love my iPad but when I need to get my work done I need my laptop.” She was expressing the simple reality that serious work requires a device geared to do serious work. Yeah, I can make do with my tablet (Andriod as the iPad is twice the price) but to do serious work one should be on at least a laptop and probably sitting at a desk. Randomly surfing the web and games are a choice. Spending $1,000+ on a phone (plus very expensive monthly service) and not buying a laptop says you’re not interested in doing any serious work or looking up & downloading serious but lengthy articles. Yeah, you can do it on your phone (now a 6″ screen) but really you are more likely to just tweet and text.
The medium is the message.
Regards,
Jim
Willow,
You don’t get the meaning of Open Systems Architecture. It means the Operating System is not proprietary. Any manufacturer can buy it from Microsoft and make a clone. Apple was a closed box, you could only buy the Operating System from Apple already installed in the Apple hardware. No clone market. Everything cost more and was often less powerful and even less reliable.
This makes all the difference.
Regards,
Jim
Mis,
Exactly so. Sort of the same reason that Hillary & Bill Clinton were never accused of foreign collusion even though they were patently guilty of such and while in office.
It didn’t fit the narrative.
Regards,
Jim
There were clones for a while. And I’d argue about the “less reliable” part, back in the olden times.
Apple doesn’t have a monopoly on anything, except a few Apple products and services. They used to control everything from monitor to mouse to printer; now options abound. You just can’t get a non-Apple made Mac or non-Apple iPhone, a situation that hurts exactly nobody.
JamesL,
Oh my, can I sell you this fabulous bridge in Brooklyn? I’ve got an exclusive listing on it. Just kidding!
James, the Andriod clone phone market place is intensely competitive. For $350 you can get hardware that outperforms what Apple will give you for $700. The Apple iPhone OS used to be better than Android. However, my most recent experiences tell me that Apple users are being dragged around by the nose. The OS is more and more quirky. You’ll be on the phone to the Apple Store a lot. The newest Android is very clear and easy to use. That’s just my impression but I’ve been around selling & tutoring people in tech for a long time. There’s intuitive and then there’s just quirky. Quirky comes from making differences without any other purpose but to claim something new. Then you can sell people the new $1,200 phone before they’ve mastered basic features of the old phone. I guess the new $1,200 job just feels better in your hand.
Regards,
Jim
You can however build your own Hackintosh computer from off-the-shelf parts. You simply cannot (legally) sell such a computer for a profit.
It’s also technically possible to build one’s own iPhone from off-the-shelf parts, but it’s pretty hard to do if you’re not in Shenzhen.
Plus, for many models of Android phones, it’s still possible to replace Google’s version of the AndroidOS with a fully open-source version that doesn’t have any of Google’s bloatware/spyware.
On the other hand, considering how few people actually go through the trouble, it’s hard to say if this will always be an option. You need a critical mass of users willing to actually do it if you want developers/hackers to think it’s worth their time to figure out how to do it.
This is the exact and complete opposite of my experience, but YMMV.
Well, that’s not me. The new feature in my current phone was facial-recognition to unlock and enter passwords. Increased processor speed and a better cameras were gravy. I’m sure there are Android kits that perform as well, and the trade-off between the lower price and the wild-west app landscape is an acceptable bargain for the users. I’ve no idea if Android / Windows offers the same integration as the Mac / laptop / phone / watch / tablet Apple ecosystem, and couldn’t care less if it does or doesn’t – if people are happy with their platform, then great! Enjoy.
@jameslileks, @jamesgawron:
I think that the only one hurt, arguably, is (was) Apple itself. However, it seems to have worked quite well in the phone/device space where it almost killed them in the PC space back in the 90s. Back then, they got fat on high margins and a fanatically loyal fanbase and were able to ignore their shrinking market share until it was almost too late.
In some ways we have seen the same pattern with market share in the phone space but it doesn’t seem to have led them down the same drain. I suspect it is maybe because controlling the whole experience is a better fit for the more consumer, lifetstyle-oriented, self-contained nature of devices. We were already used to thinking about cell phones as disposable things you replaced every few years. It also mattered that the Mac experience on computers was increasingly garbage as the 90s wore on. It really was abysmal even (especially) for it’s hometown crowd of digital artists. It was (and still mostly is) a non-starter in 3D and using Photoshop on a Mac in the late 90s was painful. Even so, it is amusing to see people still retain that impression that if you are an artist/designer, you must use a Mac. Hasn’t been true for a long time.
I don’t think they will face the same fate in phones even though their proprietary walled-garden will always keep its market share down.
Interesting – the first was true for me, inasmuch as the machines were boring and the OS stale, until x came along. ButI never had trouble with Photoshop.
I haven’t decided whether breaking up Google and the like is over all positive or negative. But one plus of breaking them up is ideological competition. These companies impose their left wing biases on us and society. The competition may not foster innovation any more, but it would be better for conservatives to have if they had a choice.
So you’re mixing hard drives with the OS discussion now?
Look, I get it – but you’re creating your own straw man, above, to agree with you. We’re talking anti-trust here, and MSFT’s actions in the late 80s/early 90s was at least in the general vicinity of monopolistic practices. Dumping your OS into millions of PCs is a great way to make sure everybody’s using Windows.
If your complaint is around useless activities, you don’t need a phone to waste your time. It’s quite likely that people were wasting their time doing other things when they didn’t have a phone. Of course you get work done on your PC/laptop. But people were wasting their time on there, too, and continue to do so.
One might argue that typing here on Ricochet is exactly that.
Chris,
Gates wasn’t dumping his operating system. He was selling licenses to his non-proprietary operating system as was the plan from the beginning with Open Systems Architecture. Computers come in three pieces, not two. Hardware, Operating System, and Software. Expertise in one in no way guarantees expertise in the other two. The Open Systems approach accepted this reality. This conflict had already been played out between Sun Microsystems and Dec in the workstation market. Dec was proprietary and Sun was Open systems. Dec started with a big lead but soon lost out. Aside from the fact that Microsoft wasn’t dumping there is an anti-trust interpretation that simply refers to your % of the market and not unfair business practices. This is really why Microsoft was tagged. Gates’ % of the market was just too big. That is what is in question when I referred to Bork. Bork felt that a crude blind attack on a company simply because they had x % of the market wasn’t good public policy. My point is that Gates was a very good steward of the market. Most of the criticism was because people didn’t understand what was going on. The original Mac was brilliant but pushing the available hardware too far. Supporting a fully graphic OS and a peer to peer network with the hardware available was not practical. Jobs brought out the LISA at $10,000 a copy but it was too expensive. Gates held back and allowed his creation of the clone market place to rapidly bring the hardware up to power. With an alphanumeric display and a fast 16bit computer, 1MG of RAM with a local hard drive, client-server networking, Gates took over corporate computing. He waited for a cheap 32bit computer and the price of 6M of RAM to go down. Then he could easily compete with Windows 3.1 against the MAC. Soon he brought out Office. None of this was an unfair business practice. All of it was intelligent and well planned.
Chris,
Yes, of course, even Ricochet which develops good writing, reasoning, and social skills can be seen as just a pass time. However, compared to becoming expert at putting other people down in 140 characters of ungrammatical misspelled English, Ricochet is angelic.
The medium isn’t always the message but that is what I’m trying to get at here. The 6″ screen of the phone suggests on the fly short messages and quick peeks at news headlines. Those things can be important but they aren’t that important. Actually, aside from the anti-trust argument, the other reason Gates never did well with phones and social media is that Gates was just too serious. You really do need to concentrate on what will be addictive to a 14-year-old to be successful in that market. I don’t think Gates was capable of being that shallow.
Regards,
Jim
‘ The Microsoft Myth: Why we shouldn’t assume more Anit-trust will give us more Tech Inovation”is something of a false argument. Microsoft did use it’s market power to suppress competition many years ago, but now is another time, new technologies have arisen and there are far more ominous challenges afoot from the concentration of Big Tech power.
Is innovation being suppressed.? You betcha. In a big way, a very big way, because Big Tech is not just using predatory business practices, they along, with much of Corporate America, are suppressing competition and thus innovation in a myriad of ways that tilt the playing field heavily in their favor.
Our government has granted Corporate America huge amounts of cheap capital via QE while denying capital to their potential competitors through our new banking laws that restrict capital to small start up competitors. Silicon Valley start-ups other than those with social media apps are starving for capital. But that is just the beginning. There are all kinds of government environmental, licensing, and labor restrictions meant to purposely overwhelm small start-ups with expenses only the Big Boys can afford. And that doesn’t address the development restrictions that limit options for available affordable space, housing restrictions that limit the availability of affordable labor, and lack of infrastructure that limits access. This massive tilting of the playing field when you get down to it a huge transfer of wealth to the Corporate Behemoths and away from the middle and working classes.
But there are also other ominous issues and concerns here.
• Big Tech has accumulated a huge concentration of power that they have not only used to gain dominant market share, but they have used that concentration of power to increasingly stifle free speech. Just this week Facebook banned Zerohedge, one of the most informative business and information sites out there for Gawd knows who knows what. Not a week goes by where some substantial, informative web site is banned for crossing the Tech Giants.
• Big Tech has also developed their “data mining” and AI systems to psychologically profile every American and to strongly influence our consumption and political choices. In cahoots with the more fascist Progressives here in American and Europe, gaining total mind control of the population is their ultimate goal.
• In a precursor to what could happen here, Google, Apple and Microsoft have all kowtowed to China, helping suppress the rights of the Chinese people in the process and have helped develop their digital Brave New World of a Social Credit Score which is ready to use 250 million already installed cameras to monitor every move one of their citizens make. Even after much criticism and a near revolt among employees, Google is still working on the DragonFly search engine to fully develop this Social Credit score system.
Big Tech needs to be broken up. Now. This is no longer about Anti-Trust issues, our future, our Republican Democracy, and our Freedoms are at stake now.
Yes. That was what made the difference. System 7 was incapable of Pre-emptive multi-tasking so that you needed tons of RAM to open more than one RAM-hungry program at a time. I remember having to quit Photoshop in order to launch Illustrator if I was working on a big file. Windows NT at that time was far superior in memory management.
OSX finally freed Macs from that byzantine train wreck of an OS.