September 2000

In response to "Love Baby Softs?" -- Rich Tehrani's July 2000 Publisher's Outlook:

In 1998 I was finishing up a Ph.D in public policy after having been a government economist for 20 years and I was on the job market. The Antitrust Division's economics shop called me in for an interview for a position I knew I would not get due to a number of factors including the fact that I was not getting a Ph.D in economics from a well-known economics department (not to mention my age). However, since I had written a dissertation on dynamic increasing returns and the semiconductor industry, they wanted to see if I had any insight into their Microsoft problem. I did not and I still do not.

The problem with establishing effective policy towards intellectual property monopolies such as Microsoft is that they owe their very existence to government. In a Darwinistic world, competitors are free to imitate as they please, but in our legalistic world, one is not free to copy Microsoft's innovations. Just read the licensing agreement where the company invokes the power of the "evil guv'mint" to tell people what they may or may not do with the product. In the jungle there are no courts to decide who owns what rights. You eat what you can capture and defend with your own strength or with the strength of your pack in accordance with their pecking order. The application of the "survival of the fittest" analogy to Microsoft is laughable at best, although I have seen it done on numerous occasions.

The simplest way to get rid of the monopoly is to take away the patents and copyrights. But, as my dissertation research showed, this is probably a major factor in making the U.S. the world leader in software (this is not to say that we have not gone too far in granting patents and copyrights, as I will discuss below). Another solution is to make Microsoft a regulated monopoly, but as you have noticed, the problem is not one of its prices being too high. It is more akin to dumping, as you point out. So then the regulatory body would likely be stuck trying to create a "price umbrella" for others to compete under in order to prevent what used to be known as "destructive competition," which is pricing below cost. However, which cost is relevant?

Having Microsoft destroy innovation in a "free market" that is not really all that free is not a good solution either. DoJ applied the only tool it had, which is not necessarily a very effective one in this case.

A very good argument has been made that Microsoft did come down on the wrong side of the antitrust laws. Calling for DoJ to ignore its obligations to enforce the laws, which is what many Microsoft monopoly proponents are doing, is not good public policy. Which other laws should DoJ not enforce? Should Bill Gates be free to break the law (even if the penalties are civil rather than criminal)?

Instead the solution lies with the reform of intellectual property rights. Why should the government grant exclusive rights to anything for decades on end? Much of the knowledge we have is a public good, often established by public education and government contracts (the military-industrial-university complex). We would have no computer industry without the government's early funding. We would have no Internet without the government. What innovators do is add another twist to make the knowledge more useful to society and they also take the knowledge to market. Certainly they should be rewarded, but government protection should end in 35 years. Once this is done (and other reforms are made to tighten up the rules on what qualifies as innovation -- I would submit that one click on a mouse does not), perhaps the antitrust acts, the Sherman Act (1890) and the Clayton Act (1913) could be revised, although they already have been to a large degree by the courts over the years.
- Henry E. Kilpatrick, Jr.

What you have written here strikes a strong chord with what I have been thinking. I too have been a loyal user of Wang WP, then Multimate, QEMM, Wordperfect, etc. I was not aware of the fate of LanTastic.

I don't know the full story on Citrix but it seems to me they are headed the same way eventually.

Re: your law on owning the desktop. Have you thought how complete Microsoft's hold is on youth who know nothing else? I have been thinking about it because I have been introducing my 14-year-old son to Linux (in order for us both to learn it). Only on trying to explain to him what it was did I realize how hard it was for him to separate Windows from the computer. To him they are essentially one thing.
I am very hopeful that there will be successful alternative operating systems to reduce Microsoft's dominance. I also believe the best chance will be in non-PC 'appliances.' I am hopeful that Linux may yet be suitable for appliances given the ever-shrinking chip set that you need to make an embedded PC sub-system. I see you think not. Is that because Linux is too bulky for embedded applications?
- Ken Metelerkamp

Rich Tehrani Responds:

Ken,
I would like to start by saying that I am a loyal and happy Citrix user and am actually surprised that Microsoft hasn't acquired them or started a competing product. If Microsoft ever launched a Citrix type product, they would harm Citrix tremendously and as such Citrix is in an extremely vulnerable position.

I see the point you make about the dominance of the Windows OS in the minds of the younger computer users. I would venture to say that most non-technical computer users, regardless of age would also have trouble separating Windows from the PC.

I mentioned in the article that Linux in its present form doesn't make a good appliance OS. There is definite market interest in making Linux mobile, in fact Gateway has partnered with Transmeta a developer of mobile Linux to make Web appliances.

Perhaps I am over-skeptical but to me Linux or any Unix variant is inherently bulky and has no business being on a portable device or appliance of any kind. What is needed is something like the Palm OS -- simple, elegant, easy to learn, and easy to use. To convert Linux into something that does what the Palm OS does, would no longer make it Linux.

From a marketing standpoint, technical people get excited about Linux, and portable or mobile Linux would likely receive lots of good press as well. So the technical community who want to end Microsoft's dominance, naturally gravitate toward anything Linux. So Linux, in a different form could be the Microsoft killer of the future. If Palm ever decided to migrate a "lite" Linux into their devices, Microsoft would be in serious trouble. If this doesn't happen, then your point about the mind share Windows has built up will make it a major player in the appliance world as well.

Remember that most users don't know or care what Linux or Windows is, they just want a computer they know how to use. If they already use Windows on the desktop, they will likely become mobile Windows users as well.

You seem to imply that because Microsoft has become dominant in almost every arena it enters is a good thing. Actually, Microsoft has set a new low standard for quality of software that competitors must beat by shortening development cycles even more.

One of the most important underlying issues related to Microsoft's Windows/DOS OS (the OS is still DOS, Windows is only a GUI) is that the memory manager has never worked. The gobbling process keeps eating available memory until the operation becomes flaky -- <CTRL><ALT><DELETE>, sometimes many times a day. This is a great incentive for hardware manufacturers because it requires frequent and totally unnecessary upgrades. Dysfunctional memory management probably accounts for 98 percent of Windows crashes. If you don't believe this, try running Windows under UNIX to discover that crashes become rare, memory requirements are drastically reduced, and performance is enhanced many times. Did I mention the enhanced security? How about the near elimination of the need for anti-virus software that is designed to cope with flaws in Windows/Outlook? UNIX has had effective memory paging for decades.

How about the shoddy products like Excel which even under Windows 2K are still not fully compatible with the rest of the Office suite? When will Microsoft remove the massive flight simulator buried in Excel, which takes more code than the product itself? Could any other company get away with such poor quality products?
- Paul Tiffany

I'd forgotten many of the products Microsoft had squeezed out of the marketplace. I'm glad you listed several of them. You described the monopolistic pattern quite well. It only reinforces the argument that the DoJ has acted correctly albeit tardily. I wouldn't count on the free market reigning in Microsoft...it hasn't yet has it? While free markets have demonstrated themselves to be more beneficial than controlled markets (e.g., communism) what an earlier generation realized in the Roosevelt and Taft era was that with monopolies, duopolies, oligopolies, etc., the concept of a free market becomes a delusion. Unless these are broken up the ultimate result is a stagnant and decaying industry.
- Michael A. Rolenz

We invite readers to send their input and advice to ggalitzine@tmcnet.com.

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