Why You Should Fear Microsoft

There’s been an ongoing discussion on the Beowulf list for Linux clusters about SGI and Windows clusters (which I’ve not had a chance to read), but as part of it the inimitable Robert G. Brown (or one of his AI bots that he must use to keep up his prolific and ever useful posting rate) wrote a lengthy and very interesting piece about why he is, and others should, be afraid of Microsoft’s dominance. It is written in response to a posting from a Microsoft employee, which in itself is an interesting turn up.

He makes lots of references to “hydraulic monopolies”, so it is worth reading up on hydraulic empires for some background to the historical context.

One point he makes is about their impact on pension funds:

Finally, there is Microsoft and pension plans and the general stock market. This is perhaps the scariest part of Microsoft’s supermonopoly status, one that a gentleman named Bill Parrish seems to have devoted himself to uncovering and laying bare to an obviously uncaring world. Microsoft stock is a rather huge component of stock owned by both pension plans and individual “S&P Index” investors (and individuals) all over the world. If Microsoft stock were to collapse, or even to slip steadily down in nominal value, the economic consequences would be catastrophic. It would make the collapse of Enron look tame by comparison, because Microsoft is considerably larger at baseline than Enron ever was. This creates a HUGE disincentive for individuals and companies to challenge Microsoft’s hydraulic legacy — Microsoft has essentially tied the future well being and wealth of an entire generation of corporate employees and index fund investors to their own continued success.

Here he is using an essay by the afforementioned Bill Parish which was done as an editorial for Barrons (from the WSJ people) in 2003 and available online, where Mr Parish writes:

For anyone owning a S&P 500 index fund, Microsoft automatically was almost 4% of their investment. Microsoft’s stock has since declined 58.5%, from $58.38 a share on Dec. 31, 1999,(adjusted for a subsequent split) to $24.21 on March 31. That’s a loss of more than $363 billion, an amount exceeding the gross national product of all but a few nations. The loss also happens to be almost five times the total market value of Enron at its peak.

For reference, MSFT are currently trading at US$30.74 and a market capitalisation of US$302.19 billion. That’s about twice the GDP of Ireland and half the GDP of Australia.

Rob has kindly granted permission for its reproduction here, but he retains copyright.

From: Robert G. Brown
Date: Tue Jan 23 09:28:33 PST 2007
Subject: [Beowulf] An OT patented rgb editorial rant, skip if you like…

On Thu, 18 Jan 2007, Ryan Waite wrote:

> I know some of you aren’t, um, tolerant of Microsoft for various reasons
> but I thought I’d clear up a couple errors in some of the posts. If you
> hate Microsoft at least you now have an email address for when you’re
> feeling grumpy.

I don’t feel grumpy (I’ve had my coffee:-) about Microsoft, nor do I
hate it.

If anything, I fear it. And so should you, even as you work for it.

Never in the history of the world has a single company achieved the
level of single-market dominance that Microsoft now has. Even AT&T at
its peak didn’t dominate the WORLD market, and it was a government
regulated monopoly (indeed, it could not have come into existence
without the active help of the government, which more or less
deliberately decided to give it exclusivity in the market in exchange
for accepting government regulation and price control). J.D.
Rockefeller was a piker, Vanderbilt a wimp in comparison. Only Ford,
perhaps, enjoyed a similar period of global dominance but then, no,
probably not, as global markets didn’t really exist until after he had

Microsoft, on the other hand, is for all practical purposes completely
unregulated, it faces no serious competition, it routinely engages in
business practices that make it very difficult for serious competition
to ever arise, and it extends all over the world, not just in the United
States. It has long since surpassed critical mass. It has demonstrated
conclusively that it is invulnerable to antitrust suits — it can
cheerfully spend more money defending against them than it stands to
lose, and can stand to lose a billion dollars, and still come out
unimaginably ahead. After all, its opponents also have to match it
dollar for dollar and politically breaking it up is not an option even
if it is the “obvious” thing to do.

Microsoft has exploited its position to achieve the unthinkable — it
has become a globe-spanning “hydraulic empire” (water monopoly), the
strongest kind of monopoly there is and one where it has virtually NO
competition and where by virtue of its position it can ensure that NO
competition has any sort of realistic chance to emerge.

This is more than an analogy — its practices fit this historical model
better, in many ways, than e.g the Chinese empires that were one of
Wittfogel’s original examples. By controlling the basic operating
system (the “water”) it has asserted a level of control over the mass
software market for PCs that vastly exceeds any reasonable definition of
a “trust”. Basically, it does whatever it likes in this market, in such
a way that it literally cannot be opposed. Time and again, when a new
software market has developed in the past, when an entrepreneur has come
up with a good idea and at risk of personal fortune and time created a
new software product, Microsoft has simply written their own version of
the product, shifted the access of their competitor to the “water” of
the operating system to create problems that they (Microsoft) are able
to avoid, and behold! The emperor’s troops remain healthy and strong
while those of the upstart warlords are thin and emaciated without the
water to grow rice! They have then proceeded to take as much of the
market as they liked. Where is Borland today? Lotus? Corel?
Netscape? Even Apple exists to some extent because Microsoft “needs” a
visible “competitor” lest our government be forced to actually
acknowledge the obvious truth. OS2 was the last viable candidate for a
competitor, and if it had won IT would doubtless have become the
hydraulic empire and we’d all be railing against IBM.

I could go on (and have gone on in this and other forums in the past:-).
Adam Smith’s invisible hand relies on the POSSIBILITY of nucleation and
growth of real competition, but the wonderful (from Microsoft’s point of
view) thing about hydraulic empires is that they historically never fall
from within, and even when conquered from without their replacement
starts to “look like” the conquered bureaucracy — the temptation to
exert abolute control by controlling access to water is just too strong.
Only forces from outside — foreign barbarian invaders — tend to be
able to bring about real change.

So when netscape emerges as a viable competitor in one small part of the
Empire — sorry, no water for you. Your product will not work, our
competing product cannot be removed and does. Java? A clear threat, as
it enables the development of software that does not rely on our supply
of water — suborn it and insert our own insidious code base to ensure
that future programs written to use it require water from our carefully
controlled and expensive wells. Make sure that our customers know that
glacial ice melt water provided by penguins, however clear and cold and
free of access, is of limited supply and contains giardia, cholera,
amoebic dysentary and possibly traces of mercury and radioactive
compounds because penguins have unclean habits and never wipe their feet
and should NEVER be used to make java. We (Microsoft) cannot lose,
because somewhere between 90% and 95% of all desktops already run our
flavor of water (and the exceptions are pretty much confined to graphics
arts workstations or geek machines, both ignorable markets that we still
dominate anyway) and will hence inherit our flavor of Java. Business
developers who choose to fight the trend will simply dry up and blow
away, and if we have to pay Sun a half-billion dollars in “damages” who
cares? The real “damage” is already done to our advantage and the
markets at stake are tens of billions per year.

Or my favorite — when assessing and certifying competence on computers
in the state of North Carolina, students are tested on the use of an
integrated office suite. Which one(s)? Well, let’s see. Schools have
the choice of Microsoft Office, Microsoft Works (even for — and this is
not a joke — DOS 2 or 3) or Apple Works (or again not a joke, Claris).

Hmmm. Apple has been driven to the edge of extinction several times and
has only been teased back from the brink by the invention of the ipod
and OSX (the latter allowing it to tap into the fast pool of OS software
and solving to some extent Apple’s problems finding people outside of
Apple willing to develop for the platform). And Apple has a certain
appeal in elementary schools in the state, especially with the deals
Apple is willing to cut to remain in the market. Still, what does this
mean, practically speaking, given the cold hard reality of that 95%+ of
all BUSINESS desktops being Microsoft mentioned above? That the great
state of North Carolina metaphorically tests “driving” — not of any old
vehicle — but of a Ford, because if and when you graduate and go on to
work in business, you’re gonna be driving a Ford.

Oh, you can use a late model Ford, a used Ford, or even one of those
antique Fords that still use handbrakes and are started with a little
handle up front, but a Ford it must be. And if not a Ford, we’ll
tolerate an “artistic” American Motors, because after all it is modelled
upon the Ford and besides some of us still own stock in it or like the
garish colors of its sporty models. Don’t even think about coming in to
pass your driving test in one of those “open source” autos, that somehow
auto-magically assemble themselves — God knows if the gearshift even
works, and then don’t run on the approved flavor of Water.

Thank you North Carolina (and many, many other states). Talk about
>>institutionalizing< < a monopoly by >>government mandate< < by training our children to accept it as the natural state of affairs from their earliest years... This globe-spanning supermonopoly is a serious and ongoing threat to our personal freedom. This is for a variety of reasons. For one, the "water" that is being controlled is the fundamental means of processing information, and we live in a society where information and its processing is so tightly integrated with economic, governmental, military, and research activities that the possibilities of abuse in this arena are positively nightmarish (and are explored in various movies and books that make this point). For another, the monopoly (like all superpowerful orgainizations, criminal or otherwise) becomes a form of "shadow government" -- collecting what resembles a tax far more than a fee for service as an unavoidable cost of doing business, since there is really no viable alternative to using water from their tightly controlled and very expensive wells. The supermonopoly can also directly impact political choice simply because of its vast resources. Money has a huge effect on the success of modern media-based political campaigns, and by directing even tiny bits of its vast resources -- through completely legal means -- a supermonopoly can have a disproportionate effect on political campaigns and political decision making. We've seen how pervasive this sort of thing can be in the case of e.g. the tobacco industry and its powerful and well-funded lobby, that kept it more or less invulnerable to any sort of rational regulation at the cost of HUNDREDS of millions of LIVES worldwide over the DECADES from when the scientific evidence of addiction, mobidity and mortality was completely overwhelming and beyond any reasonable doubt. If we can't even act to preserve our lives against the power and money of the tobacco lobby, who could expect us to act to preserve something as ephemeral as our informational freedom in the hands of a supermonopoly that doesn't need a "consortium" of companies to create a lobby -- it IS the consortium? Almost by definition, much of the influence exercised in this way is "invisible" -- it can be uncovered only by means of nearly impossible detective work, and then usually only surfaces during a scandal of some sort where the usual protections of cronyism, "unremarkable" memberships on the board of directors of seemingly disconnected companies, and untraceable non-cash quid-pro-quo deals break down. Some of it IS uncovered, but it turns out (unsurprisingly) that short of a smoking gun or the crossing of an invisible line somewhere, nobody cares. So Tom Delay goes down, perhaps there are connections there back to Microsoft, perhaps not, but they are quickly explained or hushed and everybody goes back to their business having seen "nothing". Why is that? Well, for one thing in addition to holding a water monopoly sort of control over competitors that makes it "impossible" for a serious competitor for any given significant software product it takes an interest in to emerge WITHIN the confines of its uniquely pervasive desktop operating system, it gets to rely on a variety of aspects of human nature to help it maintain a position where people don't CARE if it maintains its monopoly, or even actively support it. They are content, as it were, to accept the risk to their personal freedoms and to pay the Microsoft tax as long as their own personal computing environment remains familiar. Just as was the case for decades with AT&T. It is a sad fact that roughly 90% of all humans hate to have to learn new things (a thing that I constantly struggle with as a teacher and parent). Seriously. Sure, there are exceptions -- all people don't mind learning some new things, some people would love to be able to learn all new things, but all people do NOT want to learn all new things and a significant class doesn't want to have to learn at all. As a species, though we live in a perpetual state of what Alvin Toffler once called "Future Shock" and we just aren't evolved for it. We especially hate to have to learn new things (and maybe fail at it!) in order to keep our jobs, in order to be able to do work we've already figured out how to do "the old way". Learning is "expensive". It costs time and money. There is also something mysterious about how it is an >>unpleasant< < aspect of mental activity for most people -- we are somehow evolved, one is almost forced to conclude, to >>avoid< < the particular mental actions and states associated with structured learning. As a systems person I've seen this a million times over. Once a secretary or office person has by virtue of necessity associated with the means of making their living overcome all of the pain and invested all of the time and "mastered" enough of e.g. Microsoft Office to be able to do their job with it, they will NOT willingly change. Change means threat, it means more work for them, it means an uncomfortable period of uncertainty -- they will only willingly change if they are de-facto threatened with dismissal if they fail to change and if they are supported through the change, at which point they will become just as adamently opposed to change away from the new product. [This isn't just a factor that works in favor of Microsoft products -- for many years the physics department used (the old toy) Macintoshes administratively because our then chair was enamored of them. When a new chair took over and decided to change away from this system to Windows based PCs (this was an easy ten years ago and Linux wasn't even a vaguely possible alternative at that point, and Sun workstations which were were 2-3x more expensive) there was much pain and resistance and suffering before the move was accomplished.] Humans in this state become conservative and defensive about the provider of the flavor of water they think that they need to survive, unmolested by the need to change. They are in a curious way addicted, trapped in their current way of doing business by many natural and artificial/perceived barriers to change. EVEN if many flavors of water were out there, they'd prefer a world with only the one they are "used to" because they have a hard time coping with change, with choice, with the "threat" associated with the possibility that they might be required to learn a new tool that is finally beyond their abilities to master or that lacks some feature that they have grown accustomed to in their old toolset. Remember, computers in particular are the leading edge, the very shockwave itself, of Future Shock. Moore's Law more or less guarantees it. Five years is enough to see a complete revolution, change that might have taken a lifetime to see two hundred and fifty years ago compressed into two hundred and fifty weeks. Voice recognition is coming, so are universal convertible tablets, plus changes as yet unknown, all of them scary, unsettling, expensive. Not even industry pundits can predict what the world of computing will be like five years from now with any real accuracy, and in ten years we will probably be carrying around fully voice-driven wireless universal interfaces to "the network" which at long last will indeed be "the computer" -- and the media delivery channel, and the phone system, and roughly 90% of our active memory and de facto usable intelligence. Or something even more bizarre. So sure, those humans are actually perfectly happy to worship the Emperor and bless Him at meals, as it is by the Emperor's good graces that food arrives on the table -- his water let's their crops of rice grow and if fools start digging their own wells or diverting the rivers of free water there will be war and chaos and "interesting times". It is better to remain a peasant with rice on the table than to be brave and perhaps watch one's children starve or to die at the hands of the barbarians. Finally, there is Microsoft and pension plans and the general stock market. This is perhaps the scariest part of Microsoft's supermonopoly status, one that a gentleman named Bill Parrish seems to have devoted himself to uncovering and laying bare to an obviously uncaring world. Microsoft stock is a rather huge component of stock owned by both pension plans and individual "S&P Index" investors (and individuals) all over the world. If Microsoft stock were to collapse, or even to slip steadily down in nominal value, the economic consequences would be catastrophic. It would make the collapse of Enron look tame by comparison, because Microsoft is considerably larger at baseline than Enron ever was. This creates a HUGE disincentive for individuals and companies to challenge Microsoft's hydraulic legacy -- Microsoft has essentially tied the future well being and wealth of an entire generation of corporate employees and index fund investors to their own continued success. Who can doubt the political impact of this astounding fact (and feat)? What president, what attorney general, would dare to tackle this supergiant when by doing so he or she would damage the retirement prospects of tens of millions of (voting) people? Even traditional opponents of supermonopolies quail before the damage this would do to the ordinary workers that are their constituents. Note that Microsoft is nearly unique in their status here -- in most other industries a gradual slippage gives the market time to adjust and reinvest in other emerging and more profitable businesses in the same sector, including those that are (in a healthy market economy) the ones that are putting the hurt on the failing business. However there ARE no other businesses poised to "become Microsoft", and there is little sign that anybody really wants a mixed marketplace with many choices (an argument that was used for years to justify the perpetuation of AT&T, BTW, although after it was broken up it turned out that the consumer just LOVED the explosion of competitive alternatives for their phone service dollar and still are benefitting from them today). Apple is still a joke as far as threats go, and could be quashed more or less at will if it were in Microsoft's real interest to do so -- they NEED at least one "visible" competitor to trumpet in their period antitrust suits to help them advance the argument that they don't need to be broken up like AT&T was, they're just strugging to keep their head above water folks, really, competition could emerge >>any day
now< <. So sure, Linux makes steady inroads in the server market and somehow managed to create a multibillion dollar cluster market all by itself, other unices are holding their own or slipping a bit, but the big market, the one that matters, are the hundreds of millions of desktop computers, not the millions of servers that serve them (that are STILL overwhelmingly Microsoft servers), and they all use Microsoft water to grow Microsoft rice that has to be eaten with Microsoft chopsticks from a Microsoft bowl (where other chopsticks tend to drop valuable grains of rice, other bowls spill rice on the table) by an overwhelming margin. Even if (or rather when, in my opinion) Linux emerges as a viable threat on the desktop, it will do so in a way that is disasterous for those pension funds, because it will do so by DEFLATING the incredibly INFLATED software market back to something approximating true value. This isn't "just" a matter of Linux being basically free so that software companies in this market are really service providers and not software providers, eliminating the high margins of pure profit associated with having dozens of products developed and maintained by any ten or even hundred employees that are then resold onto a hundred million or more desktops. Microsoft's P/E for years has been one of a strong growth company and is in no way balanced as a generator of steady revenues as an income stock. If (or rather, WHEN) its growth shows signs of actually peaking, not just bobbling along with the market or tapering off but actually deflating some with no obvious new markets to exploit and no more headroom for growth, The P/E bubble will burst and Microsoft could lose 1/3 to 2/3 of its value in a matter of a year, with NO company emerging as a suitable reinvestment platform to replace the money with matching stratospheric growth in the sector. A hundred billion dollars will simply vanish from our economy like the paper it is, dragging with it hundreds of billions more as the complex of debt structures, pension investments, exchanges of services, and so on comes crashing down. Sure, we would survive this, just as we survived the S&L collapse that caused a few hundred billion paper dollars to disappear, we survived the dotcom collapse brought about by a lot of ongoing business practices that inflate apparent value and preserve the illusion of endless growth, we survived Enron, we survived Tyco, we survived MCI/Worldcom. However, what politician wants to be seen as the one that triggers such a collapse, even the collapse of a rotten, termite-ridden house when that house shelters millions of voters? What businessman (or congressman) is immune to the charm of continuing to buy into Microsoft's empire when Microsoft's market position makes it so easy and besides, it would be bad for their own pension plans and their own personal investment portfolios to do otherwise? In my opinion, the world is still coming to grips with emerging global supermonopolies, with intellectual property seen now as a "natural resource" to be created by individual minds, often with high risks, and then taken over by corporate supergiants as their bread and butter resource. Strong historical, political and economic forces conspire to protect many of these supermonopolies because they often provide services or goods that are "necessary" to the functioning of the global economy. Also, they necessarily have as an essential part of their superorganismal nature an urge to grow, to dominate markets, to quash competition, to make more money for their shareholders and preserve the power and intersts of their corporate leadership and employees. They are indeed little shadow governments, and have interests that are not, actually, the interests of the general public at heart. They are opposed, ultimately, not by the forces of communism or totalitarianism (either of which tend to simply "become" the hydraulic empire anew under new management) but by the forces of a free society with the right to regulate business practice and level playing fields for the common good. The laws of our free society, however, change slowly, very slowly compared to the rate at which supermonopolies have emerged, and at no time have the lawmakers been free from the immense influence wielded by those supermonopolies via the mechanisms outlined above. As a consequence we must suffer each "surprising" collapse, each "unethical" business practice that is revealed for the pyramid scheme or shell game that it is when the peak of the pyramid is finally reached and there is no longer any way to pay off the expectations of all of those who invested in it. So no, I don't hate Microsoft, any more than I hate Ford or hate Exxon or hate Verizon or hate Enron. I fear Microsoft for the threat it implies to my own personal political freedom, for the influence it has had on the last couple of presidential and all ongoing congressional elections (won, we must recall, by the thinnest of margins and usually by the candidate with the deepest pockets), for the disaster I see looming when it can no longer count on growing at a rate that justifies its shareholders expectations as a "growth stock" and is left in a state of eternal war to defend a slowly eroding income stream against the tiny nibbling penguins that ultimately will only go away if Microsoft manages to stake out some sort of unassailable intellectual property turf, and for the significant problems I see associated with any company's IP becoming a de facto standard for information storage and processing, especially for the government. So I forsee "interesting times" ahead on all fronts. As a Microsoft employee, you can hardly state in print that you share any of these concerns. You more or less have to defend the point of view that it is simply great and wonderful that a single company controls such an overwhelming share of the world's information technology industry (and wealth -- more than a rather impressive list of COUNTRIES) because it is YOUR company and YOU benefit directly from its success. You have to be overjoyed to see that yet another possible high growth market will be usurped and co-opted on behalf of your Emperor because it pays for the rice that feeds your children and maintains a state of peace in the Empire. These are good times, for you. The barbarian penguins are far away and weak -- it is easy in this time of plenty to feel the warm joy of a life well lived and well ordered, where all of humanity worships the Emperor and eats his the rice that the water that he controls makes possible, even when it is the peasants themselves that actually grow the rice and pump the water up from his wells with the strength of their backs. It is even possible to learn from these upstart penguins, to observe how they fight battles and use the profitable weapons they have discovered back upon them, a strategy that has worked well so many times before. It is not necessary, nor even desireable, to wipe them out, any more than it would be a good thing to eliminate the loyal opposition, Apple. The forms of democracy and "free-market" competition must be observed. All that is needed is to ensure that no seed may be planted, no twisted sapling take root, that might one day grow into a vast kudzu-like mass that could challenge the Emperor, and so the Emperor's ministers remain vigilant, guarding against these weeds that can grow without the Emperor's water by crowding them out, buying them out, or planting right next to them and lavishing such care as to ensure that they grow strong while the challenger at best lives a blighted existence thereafter. Perfection is not needed -- good enough is plenty when you rule the entire world. As a human being, though, you too must fear the Emperor. If he fails, you will be among the first to starve. His weaknesses are your weaknesses, and in our society there are always the Gods of Democracy and Free Trade that stand even over the Emperor and can, with the stroke of a pen, cast him down. There are always the warring demons of the stock exchange, ever fickle, that can lose confidence in the strength of the Emperor and overnight make you a pauper. There is the chance that among the penguins will emerge a veritable Ghengis Khan who will overrun the Empire with a might horde. To defend against these threats the Emperor ever seeks to extend his Dominion over even these Gods and Demons, to arrange matters so that no longer are his ministers and loyal subjects threatened in this way but instead are protected, aye, are become one with the Gods themselves. To have to eat the Emperor's rice by law, to see it served in all of the schools, surely that is enough to ensure the immortality of the Emperor and all who support him. But never forget -- the barbarian penguins have one weapon, one tool, that the Emperor can never embrace for it would unmake him, and cause his mighty empire to unravel and turn to dust even as he sought to grasp it. A tool stronger than the worst Khan of a penguin of sweaty nightmares, a weapon greater than any other ever discovered. Everybody on this list knows well what it is, and why that tool makes it impossible, ultimately, to wipe out these pesky penguins UNLESS the Emperor becomes a Dark God and can do so by fiat, unless the Empire is indeed protected by force of law. Do you? rgb

One thought on “Why You Should Fear Microsoft

  1. True, but the question is:

    How do you get the sheep like masses to listen to the facts when they see them as exaggerated conspiracy theory’s, of the ufo and big foot sort?

    How do you get them to realise it is just not a theory, when most of those in authority color the facts or are given colored facts?

    How do you change the water supply?

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