Once Upon a Time in America

Laissez-Faire versus Activist Government

It is a moment of singular hypocrisy for an American to say that he loves open competitive markets while criticizing the EU for this corrective & balancing measure against Microsoft, for this company has been a singular anti-competitive force in the history of American business.

The EU upholds its ruling (see the document dated 2007-09-17) against Microsoft: this reflects more than just a government's assertion of fairness upon technology markets; it manifests core differences of culture between the United States and the nations of the European Union and marks an eastward shift of power as the EU gathers into its early maturity.

Americans, take note. Mark the date.

Having lived during childhood in England, I am more aware than the proverbial Ugly American of the similarities and differences between ourselves and our European friends -- both English- and non English-speaking.

Let me say also as a once-Republican MBA investor who cherishes the pro-business atmosphere in the US, and also as a biased Microsoft-watcher, that the EU ruling makes common sense for Europe and shows an admirable willingness among EU government officials to cope with complexity and actively correct the markets when clear imbalances have been obtained. This is more important to try to do in the technology sphere than in most other markets, as I will touch upon below.

Microsoft is an organism which has grown out of, and so embodies, the American competitive spirit, the freedom companies enjoy here to function above governmental control, and the American meritocratic work ethic. And Microsoft is an organism which perfectly illustrates these qualities when they are taken too far. (A book on this subject would deserve its place, just for posterity.)

In rational and self-searching company, it goes without saying that the abuses of market influence on Microsoft's record are extensive & well understood, although denial runs thick during Capitalist Tool cocktail hour. I assert that the litany of Microsoft's abuses is so complete that it could expose that corporation to racketeering charges (RICO) in a willing domestic political environment. From notorious & continuing application programming interface (API) manipulation (creating a favorable playing-field for its own applications), to Netscape ("air supply"), to illegal contractual control of PC OEMs, to unethical public relations and lobbying methods and payola, Microsoft is a gemstone example of "the American way" -- that business is a war-game and that the ends justify the means, as long as you don't get caught. Being in software, it has been all the more expedient for a group so motivated to hide within the complexity of code the nefarious activities of a very well-organized gaggle of common purse-snatchers. This -- the paradoxical rise of a most-respected-corporation with criminal attributes -- could only come about in an environment where government is tasked to leave business alone, to habitually look the other way.

Knowing where we differ, it is no surprise to me that the EU has the will to end Microsoft's market abuses (to the extent possible) and to re-level the playing field. It is also no surprise to me that the EU has the intelligence, the patience and the long-term perspective in government to coordinate & impose acceptable behavior upon an American technology corporation where the American system itself has failed to do so.

It's different in America, where the personnel in government turn over frequently, where the high pay and the honorable career is in what we call -- with a meaningful fillip -- "the private sector". In America, government bureaucrats are not looked upon with the same respect as so-called "professionals" (doctors, lawyers, bankers); they are viewed in the American social sub-conscious as approximately one notch above "blue-collar" (laborers, factory-workers, waiters, garbage-collectors). (Notwithstanding this stereotype, I have worked with some American bureaucrats in some places where their backgrounds and attitudes are more complete, more professional than the "professionals".)

As the stereotype goes, EU bureaucrats tend to be among the highest academic achievers, competitive, cultured & diplomatic individuals who identify closely with their meaningful roles in the life of a government which has a higher purpose, greater social import and more influence on the lives of people. EU bureaucrats have higher status than their American counterparts. (And European government costs more, too.)

Along with the Microsoft-is-not-European factor, this explains the EU officials' willingness to understand in depth the Microsoft business practices, which requires a bit of patience for non-engineers to take on board the technical information necessary to distinguish, say, the role of a server in a system architecture, to understand what is a protocol, what is a standard; to understand by what process did Microsoft achieve its 95% market share of the desktop, what is a network-effect, how is that achieved, what's a document format versus an application? These are difficult questions -- unless you are motivated to deal with them.

American bureaucrats by and large have not shown the patience nor demonstrated any ability to cope with technological material or with market dynamics, or relevant matter on the history of computing. In fact, American legislators and bureaucrats believe it is not their job to understand these complex things and it is not their job to tell corporations what to do. Don't argue: this was demonstrated to perfection in the resolution to the DoJ case by a conservative, laissez-faire judge who was put in place with the assistance of the President of the United States under the influence of the friendly cultivation of the Chairman of the Microsoft Corporation. Not only has Microsoft purchased influence but its extensive "food-chain" of dependent software developers creates a significant population in the United States that will not tolerate truth-telling or realism on the subject of Microsoft. For largely social reasons, the US environment does not tolerate criticism of Microsoft.

Here, it is not quite so simple to say there is corruption. The common people quite literally buy into this status quo. Through our retirement accounts, Americans are almost all investors -- punters. We are therefore keen that government stay away from the businesses that propel our portfolio.

There was a period from 1995 to 2000 when Microsoft was the bellwether of the NASDAQ over-the-counter stock market. The indexed performance of MSFT was definitional, tick for tick, with the "NAZ". MrSoFTy was our buddy. During that period we became trained to associate Microsoft with THE FUTURE, with OUR OPTIMISM. Microsoft came to define our aspirations as affluent, invincible & innovative Americans.

This is partly why Microsoft's defensive arguments against oppositional forces -- such as Free Software, for one; the Internet, for another -- have developed a patriotic, even McCarthyite, tone. This was engineered with some cunning as a confident response to our emotional connection to Microsoft's example of pugnacious American-style success. The language: the 'GPL is un-American,' 'open source is a cancer', 'they do not respect our "intellectual property"'. The wording reflects Microsoft's self-awareness, its sensitivity to the special place it had carved in American life, history & corporate culture (one more monopoly after the pattern of Standard Oil and IBM); and its self-riteousness reflects the confidence of immunity from control by the government and the laws of the land.

These are carefully-chosen messages which amplify a feeling of paranoia, as though there is an invasion under weigh by forces against Microsoft -- against your personal interests -- against life, liberty and the pursuit of happiness. Ironically, Microsoft was the one guilty of assault against open & free competition, so effectively had new investment dried up, scurried away, in competitive ideas that might have developed in Microsoft's core spaces. Microsoft had succeeded in equating its brand with our feelings of American-ness while having undermined those principles. Strictly speaking, that is a clever achievement. It is beyond ironic; it is a dark, Dreiserian American Tragedy.

There is a great deal of material in the record of the numerous lawsuits against Microsoft (including the current Comes v Microsoft proceeding in Iowa) indicating that senior Microsoft officials see themselves as superior men to the bureaucrats around whom they construct elaborate mechanisms to defy authority -- to give the appearance of accommodation while proceeding according to plan.

Now, the Europeans have made a farce of Microsoft's dim view of bureaucracy. 

They have smoked out Microsoft's modus operandi and organized a template for new boundaries against technological abuses of market influence (not only applicable to Microsoft).

We Americans are very distrustful of what we call "Activist Government". We thought we liked "Small Government" -- though you'll be hard-pressed to find a single American who can define what that means (Ronald Reagan, the great proponent of "Small Government", presided over greater spending and more rule-writing than any President in history). We glory in open competition and regard government as an interfering force in the mysterious balancing influence of the markets' Invisible Hand. We believe in Jesus Christ, leprechauns, Santa Clause and fairies just as emphatically.

This is nothing if not ironic. Microsoft, and many Americans, will argue by rote that government should stay out of this; that government is incapable of making smart, correct decisions for the market-place. The gargantuan failure of the Soviet Union's command & control economy still hovers like a spectre for us. Governments only screw things up, we say.

We disdain Europe's involved government as if it is against everything we know. But an activist government -- capable of enforcing an even playing field for unfettered, open competition -- now that's desirable. (The astute reader will observe the obvious parallel here with the Net-Neutrality cause, in which case aggressive governmental "observation" and even regulation is probably necessary to return & preserve an open Internet environment. Yet the knee-jerk American "conservative" anti-regulatory belief-system will be prodded awake to defend greedy corporate maneuvering in both cases.)

A Harvard Business School professor said something ridiculous in The New York Times today. Surely David Yoffie said something useful at some point in his phone conversation with a Times journalist, either Kevin O'Brien or Steve Lohr, but this statement strains for relevance...

"If you end up handicapping a major player in new markets, you may not enhance competition but hinder it, and help create new monopolies. The obvious example is Google in Internet search and Apple in digital music."

This is as indicative of the American laissez-faire philosophy toward government and business as it is revealing of Microsoft boosterism from a professor who would lose his job if he said anything truthful in the matter -- so deeply is Harvard University morally gutted through obeiscence to Microsoft for research grants and other funding.

As a general statement the first half is true; applied to the EU ruling today, it is at best a non-sequitur.

The EU action is not a handicapping but an evening-out; Google's dominance of search is not a factor of anything related to Microsoft (and Microsoft is so inept at search that neither Google nor the government can be blamed for Google's overwhelming success); equally, Apple's success with the iPod/iTunes juggernaut is not a product of some exogenous force holding Microsoft back. (If Zune is the litmus test, it's fair to say Microsoft has trouble competing in any case where it lacks the advantages of a rigged platform.)

To characterize the EU action as a "handicapping" is typical Microsoftian psychological transference; it is to ignore the way Microsoft itself has tactically handicapped its competitors in illegal and unethical ways throughout its rise to prominence. Harvard Business School -- a symbol of American business culture showing its own symptoms of American hypocrisy here -- needs to do better.

We Americans need to do better. The EU is right. With Microsoft, our faith in laisse-faire got out of hand. If we lack the frame, the mettle, to restrain our uncouth business leadership, then the Europeans will not be shy to do it for us.

The message to take here is quite simple: Europe is serious about standards, they are serious about fair trade, and they are serious about business. And they have zero tolerance for Colonial monkey-business.

The ruling is water-tight, and by the glum deer-in-the-headlights expression on Brad Smith's face (registering a negative-$600 million bonus) during the Court of First Instance's reading (see the listing at 9.30 am), it is devastating to the Microsoft Legal Department's ambition to continue to play bureaucrats for fools.

End of Era...Amen.

Comments

[W^L+]

As a former MBA student (I finished my Master's Degree in IT instead of Business Administration), I find it amazing just how much our DOJ ignores the clear message of historical antitrust and genuflects at the altar of corporate greed.

In 1999, DOJ knew (and proved) that MSFT's illegal behavior endangered both competitors and consumers. Eight years later, DOJ seems to have suffered head trauma. The same behavior continues unabated, yet DOJ protests when the EU CFI does what DOJ should have done.

What is different? Campaign contributions and a different administration. I'm sure that the next DOJ will have lots of fun checking for connections between those contributions and the decisions made the past few years. It will be interesting to see whether any are found and if they are, who goes to prison for it.

[Gary Edwards]

Wheew! Nice writing Sam. How long have you carried that load on your back? You must be feeling very good right about now.

Can i add something to the the European motivational list? Whether they know it or not, they may have saved the open Internet, and saved it for generations to come.

This is a one - two punch the EU has delivered; coming off the mat, rocking the bad guys hard against the ropes, and then putting them down for the count.

Of course i'm talking about the ISO refusal of MS-OOXML, followed by this devastatingly brilliant legal ass whooping, with the DG Competition circling for the kill.

When we talk about open markets and fair competition, few associate that with our beloved Internet. But it is the web that is at stake here.

Having lived together through the file format wars, you know what i mean. But perhaps others don't?

We are both on intimate terms with MS-OOXML and it's application, platform, vendor specific bindings to MSOffice.

We are similarly on intimate terms with ODF and it's application specific bindings to OpenOffice.

One thing we know that much of the world is unaware of is that one of the things Microsoft has achieved with MS-OOXML is that it goes far beyond MSOffice. And does so in ways that starkly demonstrate how ODF is by contrast limited to the OpenOffice and the desktop office suite space.

MS-OOXML goes far beyond ODF in that it is bound to the MS Stack of desktop, server, device and web platforms. MSOffice is actually only a small part of the MS-OOXML story. Although no one should not diminish the importance of existing MSOffice workgroups as the the starting point of a vast migration of existing business processes and line of business integrated apps to the new center of a monopolist dream galaxy, the Exchange/SharePoint developer hub.

Where ODF targets the 1995 desktop office suite space, Microsoft is going for the whole enchilada with MS-OOXML; targeting the great convergence of desktop, server, device and web systems. MS Stack specific systems.

So here it is, the only possible conclusion our observations and years of work can arrive at: ODF is not the target.

Let me say that again. ODF is not the target of MS-OOXML.

I think it's all a side show; a slight of hand meant to send the world into an emotional tumble, off in the wrong direction. Off into the past.

The perception that ODF is the target is meant to buy Microsoft precious anti trust time. Time to run out the anti trust clock in the USA. Time to run out and run around the legal armies of Europe.

So if ODF is not the target, what is?

HTML!

HTML is the target of MS-OOXML, and the Web the prize.

How could we have not noticed that there is no HTML in the MS Stack, only MS-OOXML with proprietary Smart Tags - .NET - XAML accelerant?

Easy, we want so bad to find that universal file format meeting the qualifications of open, unencumbered, universally interoperable, totally application-platform-vendor independent, with an acceptable citizen driven governance that we overlooked the problem of rapacious deal making big vendors who knee jerk commercialize the terms of interoperability, and deal it away in a heartbeat today for profitability tomorrow.

One could also argue that, hey, there is no ODF in the emerging MS Stack either. But so what? The Internet does not run on ODF. It runs on HTML!

Some time ago, when saving ODF in Massachusetts was the order of the day, we came up with our list of three challenges any Universal File Format must overcome to succeed - succeed through real world implementations.

The three challenges are:

.. Compatibility with existing file formats and documents, including Microsoft binary and xml documents.

..Interoperability with existing applications, including Microsoft applications.

.. Convergence of desktop, server, device and web systems. This is the great convergence, a Universal Interoperability that has always been the promise of the Internet, and remains the core of SOA, SaaS and Web 2.0 initiatives.

Interestingly, MS-OOXML meets all three criteria, but is noticeably limited to the MS STack of applications and services. It's actually a barrier to the great convergence we seek. But wow do they nail the the first two criteria! As one would expect since they own the secret binary document blueprints and over 500 million MSOffice application implementations of binaries and bound business processes.

ODF on the other hand was intentionally NOT designed to meet ANY of these criteria. These criteria are considered, "Outside the Charter and out of scope" by Sun and much of the OASIS ODF TC.

ODF ambitions are limited to the realm of desktop office suite file formats, even as many W3C grand convergence technologies are reused by ODF.

And then there is HTML. Or should i say HTML+, because the W3C has been busy? Very busy.

So busy that HTML+ can in fact meet all three criteria, matching MS-OOXML toe to toe. And none too soon i might add. It's only in the past few months, while most of the world was caught up in the ODF-OOXML-ISO world wind, that the W3C quietly made their move to save the Internet.

Noble as the W3C's efforts might be, i for one do not believe the Internet can be defended from the rape, pillage and burn Redmond has planned with MS-OOXML and the MS Stack. Lucky for us we have stalwart governments willing to take up the anti trust cudgel and level those who would seize that which belongs to all of us.

The EU has made their stand for free trade, open markets, open standards, universal interoperability, and a free and open Internet. And what a glorious legal gem of a stand it is! Beautifully done, with a precision of legal excellence that transcends corporate corruption and national merchantilist yearnings.

We needed a miracle, something, anything to temper the voracious Redmond appetite, and we got it. One, two, and a third punch waiting in the wings. Now it's time for the marketplace to speak with real world solutions that can solve the problem of transitioning existing documents, applications, and processes to the Internet. And we must do this soon.

In February, MS-OOXML will face some strong headwinds at ISO during the Ballot Resolution Meetings. Maybe they fail. Maybe they pull it out. Whatever the outcome, it is a guaranteed certainty that the MS-OOXML implemented across the MS Stack will not be interoperable with whatever ISO - Ecma comes up with.

It's also a certainty that ODF 1.2, as it is currently written, will not pass ISO. The May 2006 ISO Directorate refusing to grant ODF an exception to the interoperability requirements of international trade agreements has yet to be dealt with! (May, 2006? Yes, that's right ODF 1.1 has not come up for ISO consideration). The OASIS ODF TC is in fact unaware of the minefield awaiting ODF 1.2.

Meaning, the world faces the distinct possibility that come April of 2008, neither file format will qualify as an international standard.

Anyway. We'll deal with that. The EU has done their part. Now it's in the hands of those who believe in a universal file format, universal interoperability, and, a free and open Internet.

Nice bit of writing Sam :)

~ge~

[Sam Hiser]

Thank you Walt & Gary for your comments.

The FT today (Tobias Buck in Brussels, who's coverage is excellent) has another piece that addresses my points from a different angle.

Stephen Kinsella, a Brussels-based partner at Sidley Austin who represents a pro-Microsoft software association called Act, says the US regulator’s attitude is very different today: “In the US we are seeing very little enforcement when it comes to dominance abuses. You very much see an attitude that says: ‘If you have got yourself into that position, good luck to you.’”

[Michael Hickins]

Hey Sam,
I find it incredibly ironic that the implication of the DoJ's statement is that customers are somehow unharmed by Microsoft's monopoly on the desktop. Things couldn't be further from the case. Microsoft abuses its dominant position every day, to the detriment of its customers.

[Wesley Parish]

For reasons beyond my comprehension, a song started playing in the recesses of what I am pleased to call my mind, after reading this piece; it's by a band called Smokie, and is a take-off of one of Cliff Richard's hits:

Twenty-four years just waiting for a chance,

To tell her how I feel,

And maybe get a second glance,

But I'll never get used to not living next door to Alice...

Alice, who the fsck is Alice

It's that last line that isn't in the Cliff Richards hit; it takes the schmaltz out of it quite.

I wonder if that is the reason why the European Union managed to hold Microsoft to their avowed declaration of "interoperability" - they don't know, or care, who the fsck is Alice.