Normally I work with a bunch of grouchy graybeards, most perhaps somewhat younger than myself, but most of whom have been in the bitwhacking business for over a decade (or two). Recently, events at World Wide Widgets became such that I had a chance to work for a month with a whole new group of people, most of them just a year or three out of high school. While none of them seemed to be very computer literate, most of them knew about Microsoft, that its founder is the richest person in the US, and that there is an anti trust lawsuit going on between Microsoft and the US Justice Department. And they all feel that Microsoft is getting beat up by the US Govmnt.
I found it interesting to discuss this subject with these people. Keep in mind, I am a child of the 60's, a San Francisco child at that. I did my university thing not four blocks from the corner of Haight and Ashbury streets in the then presumed City of Love. People of college age in my era would certainly not have been rooting for some huge corporation (although they would not have been rooting for the Govmnt much then either.)
I am writing this epistle at the end of November, as the Microsoft vs Govmnt trial is still going on. By the time you read this, it may have been all decided, and Microsoft may well Own the Govmnt. I have a view of this that perhaps is somewhat colored by my employment at World Wide Widgets for 30 years. Specifically, WWW would likely never have continued to exist, except for another anti trust case in 1945 against the then dominant Widget manufacturer, All American Widgets, which AAW lost. The result of this was AAW being split up into a smaller AAW, and another company, Canadian Widgets, which took almost half of the company with it. They were also forced to license their patents to other companies, including WWW, and to sell certain of their facilities to these other companies, including WWW. This allowed the other much much smaller widget manufacturers to attempt to compete in the open marketplace. AAW is still the dominant company in the industry, followed by CW, but the rest of the industry does feel that it has a fighting chance on a level playing field.
Instead of arguing about the real Microsoft, let is talk about a world that could have occurred if an anti trust case that was fought in 1911 against Standard Oil, had been lost. The govmnt won in that case, Standard Oil was broken up into several smaller companies, and there has been real and serious competition in that field ever since. But what if Standard Oil had won? What could have happened if something like a Mega Oil Company had been allowed to continue to exist as essentially the only oil company around? (There would probably be an Apple Oil company with a very small percentage of the market, but it would not have much effect on the market itself.).
Let us presume that Mega Oil's gasoline products were as good, and as cheap, as anybody else's in the industry. For whatever the case, good marketing, better customer service, more products, whatever. Once you get to a certain market share, companies who buy these products start to become afraid that if they do not deal with this company, that they might be on the outside looking in if, for instance there were an oil shortage. So all of a sudden it becomes a company mandate that all oil products bought by that company be Mega Oil's products. In some cases, companies even attempt to make its employees buy Mega Oil's products in their personal lives, for instance if they use a car to commute to the office. And Mega Oil's market share grows larger.
At some point in time, however, Mega Oil essentially owns the market. The oil industry growth reaches a saturation point, and Mega Oil's growth can only reflect the oil industry market itself, since it is essentially the market. But smart executives at Mega Oil realize that the company can expand, by expanding vertically. Expand into other areas that the oil industry serves.
So maybe they decide that the auto industry might be a good next step. They have the funds, so they set up an auto manufacturing company, the International Explorer (IE) company. And it starts to build autos. They have essentially no market share in the auto industry, and their products do not yet have all the bells and whistles that the established companies have (these things take time to develop), but they release a product (Version 1.0) and hope for the best. It doesn't sell well, but they learn from their experience, and release enhanced products over time (Version 2.0, 3.2), but these products are not selling well either, because there is already a dominant player in the market, New Sun Auto (NS), and IE isn't it.
Well, what can we do? Since Mega Oil, owner of the IE auto company, has lots of resources, one way to gain market share is to cut the prices, and cut them so low that everybody else will be driven out of business, except Mega Oil, which has all this income from the oil business. However, for whatever the reason, perhaps better adherence to standards, a more mature product, people still buy the NS product line, even though they have to pay far more for it. IE, even with its Version 3.2 model, still only has 30% of the market.
But it does have 100% of the oil. And all of a sudden, this oil gets reformulated. After that, the new models of the NS autos do not run well on this new oil. IE runs just fine, in fact, runs better than ever. But the NS autos develop mechanical problems, have poor performance, the engines fall apart, and it is just a bad experience for the owners of NS autos generally. Of course, the NS people finally figure out what went wrong with their product when it used the new oil, and they fix this problem in the next model year, but by then, the oil is reformulated all over again, but miraculously the IE autos still run fine, while the NS autos break down all over the place.
Mega Oil of course denies that it changed the internals of its oil, and insists that even if they did, that there is a so called "Chinese Wall" between the Mega Oil company, and the IE auto company, such that one company has no way of knowing what the other one is doing. Full arm's length distance, as they say on Wall Street. NS Auto simply doesn't know how to put an auto together, they say.
Eventually, NS Auto becomes a shadow of itself, and IE becomes the dominant player in this industry too. The scene repeats with other associated industries. Cars need documentation. Perfect Sams is the company that produces most of the manuals that shadetree mechanics use to fix their cars. Mega Oil starts up a competing company, freezes the information that Perfect Sam needs for the IE cars, then about 80% of the auto market share, and Perfect Sam goes out of business. Actually moves to Canada, but the effect is the same.
Mega Oil decides to get into the financial business, starts up a company named Money Inc. It buys the dominant company in this industry, Quiet Industries, (essentially from the petty cash fund) and all of a sudden owns that industry too.
Anyway, you get the picture. None of these things happened. Mega Oil was never allowed to come into existence, because the Trust Busters nailed Standard Oil before it could get very far into this. The auto industry somehow escaped being totally dominated, either by Ford in the beginning of the century, or GM in the middle of it. Quicken was prevented from being bought by Microsoft by a threat of govmnt action a few years ago. Word Perfect shot themselves in the foot, and probably would have pulled the trigger even if there were no Microsoft competition.
But it is clear, that Microsoft did put Netscape almost out of business, by giving away the very product that Netscape developed and relied on for income. It is clear that Microsoft does change the internals of its operating systems such as to break competing applications, and has been doing this since DOS 3 - it was well known even back then, that "Dos isn't done till Lotus won't run".
And that, Virginia, is why the Govmnt is suing Microsoft for anti trust violations. They may have the best products in the world, they may even be competing on a somewhat level playing field, and their customers may love them to death. But the history of our business system says that no one company can have a completely dominant position in an industry, without govmnt regulation (like the electric and telephone utility companies.)
After this article was written, it was announced that Exxon and Mobil Oil, the two main chunks remaining from the original Standard Oil breakup, were merging back together again.....
After this article