The Pragmatic Libertarian

The Microsoft Conundrum

by Evan Maloney evan@brain-terminal.com

Conflict often arises in the software industry when the subject of Microsoft comes up. The argument usually divides people into two camps: one camp believes Microsoft uses other companies as extensions of their own research and development, stealing ideas when useful and squashing ideas when necessary; the other camp avoids denying this, and instead contends that chaos would result if there weren't a force like Microsoft uniting the industry technologically by eliminating alternatives.

If the group discussing Microsoft consists only of Libertarians, the conversation is usually much more sedate. Libertarians put their faith in free, unfettered markets, not government intervention, and are therefore unlikely to be the ones you'll find supporting the government's effort to reign in Microsoft.

This is where it gets tricky being a Libertarian in the software industry. Again and again, I've seen great products and technologies fall by the wayside as Microsoft wields its power over the industry with all the grace and restraint of an elephant stampede. Microsoft's use of power frequently results in fewer choices being available in the marketplace. Do we Libertarians, the most ardent defenders of market choice, really want to become mouthpieces supporting the reduction of that choice?

That Microsoft is a monopolist is no longer up for debate; this was found to be fact by a trial court and was later upheld by an appeals court that otherwise issued many rulings in Microsoft's favor. Okay, so Microsoft is a monopolist. So what? Does it matter? If so, should anything be done about it? To a Libertarian, the stock answers are "No, it doesn't matter" and "Even if it did, nothing should be done about it, because governments shouldn't interfere in the markets". The rationale behind these answers stems from the core Libertarian philosophy of limited government.

Libertarians believe that we should be eternally skeptical of government intervention, because governments aren't very good at sticking to just one kind of intervention. Whenever people permit government intervention in one aspect of life, they will eventually discover that it has seeped uninvited into many others. That's because power is a gravitational force; any entity with a sufficient amount of it finds that amassing more of it is almost automatic. And power, once acquired, rarely goes unused.

History proves that--short of revolution--governments always grow in power, and they never relinquish any significant amount of it willingly. Recognition of this fact is what drives Libertarians to seek limits on government power. We don't want to invite government intervention, because the result will be an accelerated accumulation of--and therefore use of--government power. And use of power, if unchecked for a sufficient period of time, invariably turns into abuse of power.

So, it seems that a "good Libertarian" should demand the repeal of anti-trust laws and an end to the case against Microsoft, since it would slow the government's continued accumulation of power. I respectfully disagree, and I do not intend to give up my Libertarian credentials.

You see, governments are not the only entities to which these dynamics of power apply. Businesses, too, can acquire so much power that they're able to wield it with destructive results, as is the case with Microsoft.

Microsoft's defenders feebly counter that the company's use of power is justified by virtue of their various "innovations", almost all of which were in fact created elsewhere:

MS-DOS was Microsoft's first product that led it down the road to monopoly. Microsoft bought MS-DOS from another company, and was lucky enough to license it to IBM for use in their new PC product. IBM could have easily developed their own operating system but decided against it because, ironically, they feared the anti-trust implications of doing so. As the PC clone market exploded, most manufacturers followed IBM's lead and shipped MS-DOS, so as the PC gained popularity, MS-DOS became entrenched.

While MS-DOS was giving Microsoft its first taste of monopoly, Bill Gates paid a visit to Apple Computer, where he was given a tour by Steve Jobs. At Apple, Gates saw something pretty revolutionary: a computer with a pointing device called a mouse that let people operate the computer by interacting with graphics--icons, windows and menus--that were drawn on the screen. Gates recognized it was quite a leap forward from the text-based MS-DOS, and when he returned to Microsoft, the company initiated the project that eventually became Windows.

Once completed, Microsoft was able to ensure that Windows would achieve ubiquity by tying it to the already ubiquitous MS-DOS. The company changed its licensing agreements, forcing computer manufacturers to take Windows if they wanted to continue shipping their computers with MS-DOS already installed. Computer makers abided, because selling a computer with no operating system installed would have put them at a severe disadvantage: consumers didn't want to install operating systems themselves if they didn't have to.

This is how Microsoft used their MS-DOS monopoly to create their Windows monopoly. Microsoft then set its sights on another market where they would eventually gain their next monopoly. The weapon was a product called Microsoft Office, a set of productivity tools that included a word processor, spreadsheet and database.

Microsoft was very creative in using their ownership of Windows to kill off Office's competition. The developers building Office were supplied with inside information about Windows--information the company did not make available to other software vendors--which enabled Office to operate more efficiently with Windows than competing products could. If the developers of Office needed to rework part of Windows to make building Office easier, the change would get made; competitors obviously had no such influence. All of this guaranteed that updates of Office would be the first to market whenever new versions of Windows were released. Competitors, meanwhile, were continually scrambling to play catch-up.

Eventually, Microsoft stopped publishing information about the structure of Office document files, leaving competitors unable to make their products compatible with those files. There were soon millions of documents stored in Office files that couldn't be accessed by non-Microsoft programs. Because these documents were often shared between companies, buying Office became a price of doing business, like having phones or a fax machine. And each new release of Office brought different file formats, thereby forcing everyone to upgrade or else be left behind, unable to read the newer documents.

By 1995, however, Microsoft sensed that it might have something to fear. The Internet was starting to become a part of daily life, and its newfound prominence brought with it two technologies poised to loosen Microsoft's chokehold on the industry: the Navigator web browser from Netscape, and the Java platform from Sun Microsystems.

Navigator allowed people to view information and interact with programs on the World Wide Web, the portion of the Internet that catapulted the global network into the public consciousness. The web was an open frontier completely uncontrolled by Microsoft; any operating system could be used to access the web, not just Windows. If the web browser became the predominant mechanism for accessing information, Microsoft's Windows monopoly could crumble, because people didn't need to run Windows to get on the web.

Sun's Java promised to allow for the creation of programs that could run without modification on several operating systems: Windows, Macintosh and UNIX, among others. One of the barriers to entry against Windows was the fact that so many programs--many tens of thousands of them--ran on Windows and only on Windows. This base of programs gave Windows a huge advantage over less prevalent operating systems: Microsoft believed that people would continue to use Windows as long as it was the operating system that ran the most programs. But if enough software was written for Java, consumers wouldn't be locked into Windows anymore, because Java programs would run just as well on a Macintosh or a UNIX machine.

When Netscape announced that, by the middle of 1996, Navigator would include support for Java, Microsoft saw a double threat. Not only did Navigator provide access to the web, which Microsoft didn't control, but it would soon become the Trojan horse that delivered Java to millions of Windows machines.

So Microsoft set out to crush Netscape. Fittingly, on the 1995 anniversary of Japan's attack on Pearl Harbor, Microsoft announced that its next big move would be to transform itself into an Internet company. Central to this announcement was the introduction of Internet Explorer, its web browser. While Microsoft maintains that it created Internet Explorer to give consumers more choice, internal Microsoft e-mails exposed during the anti-trust trial show that the product was instead part of larger plan to "cut off Netscape's air supply".

Microsoft made good on its threat by embedding a copy of Internet Explorer in every copy of Windows, in effect tying one product to another as the company had done previously with MS-DOS and Windows. With Internet Explorer firmly in place on the computer desktop, Microsoft sought to dislodge Navigator by pressuring computer manufacturers to stop installing the popular program. First, Microsoft raised the price of Windows, but only for those manufacturers that chose to install Navigator for their customers. After this succeeded only partially, Microsoft threatened to stop licensing Windows to the remaining manufacturers that insisted on providing Navigator to their customers. This, in classic Microsoft double-speak, increased consumer choice.

Once again, though, Microsoft's tactics eventually ensured victory. Internet Explorer now enjoys somewhere around 80% of the browser market, similar to the share Navigator held in 1995. Meanwhile, the company that made the web browser popular has since faded into irrelevance. Threat averted; score another one for the monopoly.

Microsoft's next grand plan is their ".NET" initiative, which will result in a massive database of personal information. Your credit card numbers, address, phone number--and eventually information like investment holdings and medical records--will all be stored by Microsoft to facilitate online transactions. Of course, you'll have to voluntarily provide Microsoft with that information, but if they are able to gain control over a large enough share of online transactions, you'll have no choice but to use their technology if you care to participate. The benefit for Microsoft is a piece of the action; they will take for themselves a little slice of each transaction.

And this is where as a Libertarian, I begin to get very scared. If Microsoft pulls this off, they will manage to become a quasi-government. Think about it: their database of information will probably be more accurate and up-to-date than any government database. They will know what you purchased, when, and how much you paid. They will know how much money you have, what stocks you own, and what medications you take. And they will tax every transaction.

Even if we give Microsoft the benefit of the doubt and ascribe to them nothing but the best of intentions, their record on matters of security is abysmal. Every major computer virus in recent memory has spread thanks to security flaws in Microsoft products. Due to a lack of competition, the exposure of these flaws hasn't hurt Microsoft, and the company continues to do nothing to improve security other than issue patches after the damage has been done. Yet, despite Microsoft's inept handling of security, they ask us without even the slightest hint of embarrassment to entrust our most personal and private information to them. And then they even ask us to pay for the privilege!

While Microsoft's previous actions might not raise the ire of some Libertarians, the company's plans for the future should be very frightening to any self-respecting Libertarian. All my information held by one authority? All my transactions taxed and logged by Bill Gates? Microsoft may yet realize Orwell's vision of Big Brother.

It may soon become obvious to the rest of the world what many of us in the software industry have known for years: Microsoft has far too much power. And it may soon become obvious to my fellow Libertarians what I have come to learn recently: we should not let our support of free markets become a willingness to support such a blatant bastardization of them. It is quite clear that the markets in which Microsoft has focused its efforts do not stay free for long. The company wins not through creative innovation but by using its power to destroy the innovation of others.

When competition is used to create, it can be a force for human advancement unlike any other; when competition is used to destroy, though, choice is reduced and advancement slows. Right now, Microsoft has enough power to dictate the choices that are available to us in the marketplace. Ultimately, we Libertarians favor choice above all else, which is why we should be appalled by Microsoft's past actions and future plans.

Excessive power is dangerous regardless of who holds it. I support the government's case against Microsoft not because I am a lapsed Libertarian, but because I am resigned to the fact that the government may be the only entity capable of checking Microsoft's power. And I hope never to find myself supporting another government intervention again.