Volitional Science

According to the concepts in this series of columns, I think you would have to answer "Yes".

There is a problem with Microsoft but it's not because of this "Monopoly power" stuff.

Galambos points out that you don't really have anything to fear from monopolists because in the absence of coercion you can always say "no". Statist-monopolies are a bit more problematic but then so is anything statist.

There is no law that says you must use Windows and Office.

Except maybe the law of convenience. This law, if it were to exist, would say that, for example, Microsoft has made it very convenient to use their products and it's not worth the effort to change to another vendor.

As you'll see, the problem with Microsoft has nothing to do with so-called monopoly power.

The issue with Microsoft is that they take other people's good ideas, clone them, and then run the original innovator out of business.

That's essentially what the US Government is complaining that Microsoft did with web browsers. It figures, doesn't it, that the US Government would focus on the one product where competition existed and where Microsoft didn't run the competitor (Netscape) out of business?

Microsoft didn't invent web browsing (but then neither did AOL or even Netscape). Microsoft bundled a web browser with Windows, sure, but they also added lots of APIs to make it easier to make internet applications in Windows. And they did in fact integrate the browser interface with Windows but the morons made the mistake of selling Internet Explorer in a separate box! If it looks like a bundled product and smells like a bundled product, it probably is a bundled product! Never mind that installing IE also installs new APIs and other low-level stuff. That's too complicated for lawyers and judges. Microsoft packaged IE like a separate product, so it's hard to argue that it isn't a separate product that was bundled, not integrated. After signing an agreement with the US Government not to bundle products, they went ahead and did it anyway. Morons. (IE was integrated in the OSR (OEM Service Release) versions of Windows, but these were never released as separate boxed products, so if you went to the store, it still looked like Internet Explorer was a separate product until Windows 98 shipped.)

Most Microsoft clone products start out inferior to the original. For instance, "My Briefcase" was a piece of crap compared to Traveling Software's Laplink software. I can't tell if the free "My Briefcase" software bundled with Windows killed off Laplink or if the availability of higher-bandwidth network connectivity did it and you just didn't need Laplink anymore. Probably the latter.

Microsoft's MediaPlayer has inferior functionality in terms of user interface (although after years of trying MS finally developed some decent codecs for audio and video). AVI files were inferior clones of Quicktime files. And so on. (Microsoft is set to release a new MediaPlayer [number 7!] that implements all the stuff you could get from WinAmp, MusicMatch and RealPlayer. It's a 100% clone product.)

Microsoft rips ideas off and does a poor job of implementing someone else's ideas but still kills off the superior product because they lower the price (frequently down to free) such that the law of convenience kicks in and most people will just use the inferior product because it's there.

It's tempting therefore to label Microsoft plundering scum and to try to think about "punishing" them.

The first problem is that Microsoft does this regardless of whether they have so-called monopoly power or not. It's enough that they can afford to give away lots of stuff for free and that hurts innovators who don't get compensated for developing new products. (Unless their company gets bought by Microsoft, of course.)

The second problem is that in the face of competition or even lots of bad press, Microsoft does eventually make decent versions of their clone products. Then those clone products are really convenient, because they are free and good. I like Internet Explorer. I downloaded Netscape 6 PR1 for Windows the other day and that sucker is slow. But at least it finally renders my web pages correctly.

The third problem is that nearly all companies steal ideas without compensating the original innovators.

(Some companies, like 3M, have good internal mechanisms for identifying, encouraging, and rewarding innovative employees. Most companies don't have any mechanisms for recognizing where all the good ideas come from.)

Did Dell invent PCs? Did Cisco invent routing? Did the Coca-Cola Company invent sweetened colored water?

I don't think so. These companies excel because they do a better job at improving and delivering these products to customers. Dell has made PCs easier for most corporations (and many individuals) to own. They have worked hard to get the price down. They have awesome internal organization. Cisco makes better and faster routers. Coca-Cola sells a lifestyle of colored water better than anyone else.

There is innovation in making products better, cheaper, and more convenient. And it is innovative to integrate products together. That takes work and planning. (My Ph.D. dissertation had to do with integrated programming environments so I have some experience here.)

Do I think the current statist-government should be hassling Microsoft?

No. For one thing, the lawyers at DOJ are just doing this for publicity. Do you honestly think those lawyers at the Department of Justice give a rat's ass about computer product development? They want to be heroes, that's all. They want the public spotlight. They want to be the guys that overpowered Microsoft.

When I read in the judge's ruling that Microsoft did "violence" to the market, I had to pause.

Violence? Like beating people up?

But I do think that Microsoft has consistently hurt innovators by stealing their ideas. I think 99% of all the corporations in the world do this.

I don't think statist intervention is the solution.

So what is?

I'll have to organize my thoughts on that and get them to you in the next column.

[I think I've accidentally created an example of one of the things Galambos feared - namely, incomplete disclosure of a new idea. One question I get a lot is "how can incomplete disclosure of a cool new idea be dangerous?" Well, here we have an example. The preceding column reads like an indictment of Microsoft, and if you have a tendency toward statist solutions to free market problems, you would be inclined to use my arguments to promote an agenda of regulation. Which would be missing the entire point. Just to repeat: I am specifically not in favor of statist-government regulation of Microsoft, no matter how many ideas they have ripped off. For one thing, there isn't anyone in the government even remotely qualified to regulate Microsoft. And secondly, I want to find a zero-coercive solution to this problem. But even if there is no zero-coercive solution, who do you think is qualified to regulate Microsoft? The only possible candidates are former Microsoft employees (you laugh, but this happens all the time - new statist government agencies are created and then staffed with lackeys from the industry they are meant to regulate) or competitors in a similar business area - and how fair would that be?]

[I've mentioned that I'm an investor in Microsoft. You probably are too if you own a mutual fund. The reason I invest in Microsoft is that Microsoft is a really great downstream company. Galambos divides the world of companies into two main hunks: The upstream companies that create genuine innovation and the downstream companies that simply manufacture, market, and/or distribute products. It's hard to invest in upstream companies because by the time they are stable enough to be a reasonable investment there isn't too much innovation going on. You can, of course, speculate, and pour your money into startup companies and possibly win big. For instance, my wife would prevent me from investing in Amazon.com even though that company is highly innovative. There just isn't a big enough track record for us to park our retirement money in Amazon.com. I speculated in Patriot Scientific and made a nice 1200% return. My $500.00 turned into $6,000.00. I decided I'd had enough speculating so I rolled it over into Microsoft.]