Wednesday, April 28, 2004

There's Nothing Wrong with MicroSoft - it's Monopolies that Are Bad

Unfortunately, a lot of people think that Linux is all about being anti-Microsoft. And that Microsoft is the evil empire that must be subverted at all costs. These perceptions are true both inside and outside of the Linux camp. But there is nothing inherently evil about Microsoft. Most large companies today are formidable competitors and should be looked upon warily by competitors. You don't get big without having done something right. AND once you are big, you have the resources to do things that smaller companies can't. Fortunately, smaller companies have the advantage of having less invested in the status quo and are therefore more likely to break paradigms and truly innovate.

All in all, it works out to a pretty fair fight. The big and rich against the hungry and nimble. Consumers win as producers vie for market share by delivering ever better feature / price combinations. We call it Free Enterprise, and at least for the last few hundred years, it has proven itself to be the producer of a pretty darn good standard of living. Generally only out performed by economies based on possession of large supplies of scarce natural resources.

But what is wrong in the world of computing today, is the presence of an organization that is anti-thetical to the idea of free enterprise. An organization that threatens economic freedom, not because of the management style or an 'ends-justifies-the-means' competitive spirit. But because by its very existence, it displaces free enterprise. This organization is not Microsoft; it is a monopoly.

If you've had MacroEconomics 101, then you understand the issues. A monopoly is not BAD because it is run by malicious or vicious people. A monopoly is bad because it destroys competitive balance in the market place. It undermines the forces that allow a free market to produce high customer value, high economic returns to shareholds and deliver an economy-wide high standard of living. A monopoly is to be feared, again not because of the specific people that run it or are employed by it, but because a monopoly wields power in the market place destroys free enterprise. It is most likely that any company in a monopoly position would behave in an anti-competitive fashion. Not because they are anti-capitalistic, but because they CAN. It is the out of balance market power that comes from being a monopoly that allows them to do things that a non-monopoly can't do.

A good example is the change in Microsoft's enterprise licensing. What do you think would have happened to Norton AntiVirus if they decided to require users to pay for upgrading thier product every, whether they actually installed the upgrade or not? The net result being about a 2x increase in what they have been paying for virus protection. I suspect a very large portion of their customers would have opted for MacAffee. Now, personally, I prefer Norton. But not at 2x the price. I'd make the switch in a minute. That's the power of competitive balance in the market place. It's a restraining influence on products that forces them to keep the customer's best interest in mind.

A good historical example is from the early 80's when PC's were still young. Processor speeds were starting to climb, and IBM began to be concerned about approaching the performance of there low end mini computers with these new desktop contraptions. Their solution? To limit the processor speed they offered on the pc line. Had then been a monopoly, this strategy would have worked just fine. But, the presence of competitors in the market place made this a short lived strategy. You could turn around and buy a faster pc for about the same price from a number of other suppliers. So here we see competitive balance correcting a market policy that was clearly against the customers' best interest.

Do you see the distinction? There is nothing wrong with Microsoft. It is not the company, but it's position in the market place that is the problem. Monopolies on the other hand, are generally intolerable. I say generally, because in some domains, a monopoly has been determined to make sense. In these cases, the monopoly is regulated to insure that they don't abuse their dominant position in the market place. What does this abuse look like? It takes many forms, but the outcome is always the monopoly gains at the expense of its customers. This is contrary to the general outcome in a free market place where consumers benefit and innovative, efficient companies prosper.

Linux is not about being anti-Microsoft. Linux is about restoring choice, freedom and competitive balance. It is about trying to restrain the harmful activities of an unregulated monopoly.

Steven Beebe
Colorado Springs, CO
email: steveATxapwareDOTcom