TCS Daily


The Beginning of the Decline and Fall?

By Jerry Pournelle - June 19, 2000 12:00 AM

Roman history tells us the story of how Tarquin the Proud became king in Rome. His father wanted to send his son -- who had been sent to another town -- a message on how to become a tyrant. Because the message might be intercepted, Tarquinius Superbus took the messenger into the garden, and used his cane to strike off the heads of the tallest poppies. The slave took the message to the son who understood, and began to eliminate all the prominent men of the city. As he went after his most important rivals, lesser but still prominent people helped him, because that would make them more important. Soon he became tyrant.

Judge Thomas Penfield Jackson's decision last week in DOJ vs. Microsoft has much the same effect. Whatever other outcomes it has, it should serve as a clear warning to anyone who rises above the herd. The effect of that accomplishment will be a massive and permanent transfer of resources and intellectual talent from engineering and development to legal services and protection. Those who think the nation will be better off with more money devoted to lawyers should cheer Jackson's act to restore lawyers to their natural ascendancy. Consumers have no reason to cheer.

Still, the cheering continues. It comes from Microsoft's competitors, of course. And those who just don't like Microsoft. And programmers who don't like the Microsoft corporate culture. And purists who don't care for the blend of compromises Microsoft puts into its products. Then there are "consumer advocates" like James Love of Ralph Nader's Consumer Project on Technology. Love says: "Monopolies tend to have big market share as their goal and therefore beat off their competition. But the market then doesn't grow like it should." The mind boggles: Neither Love nor Nader have ever been close to predicting the growth of the computer and information-services market, let alone the Long Boom that was largely sparked by the computer revolution -- so why should we believe them now?

The effects to be feltIn 1985, IBM had a vision of the future: a few thousand large companies using big IBM mainframes, and a few million people getting used to computing through personal computers, which were sold by the IBM "Entry Systems" division. Apple had another: a few million loyal users who could be sold equipment and software at high profit margins. Then there was Bill Gates, who spoke of "a computer on every desk, and in every home, and in every classroom." Yeah, Bill. Sure. A hundred million people are going to learn to use these complicated things. They are going to be in stores and libraries, and be so embedded into the economy that we'll all be terrified of the world disaster when they stop working on Dec. 31, 1999. And pigs will fly.

Only it happened that way, and now "consumer advocates" are telling us the market did not grow as it should, as if they had any clue as to what that growth ought to be or have been.

The immediate effect of the Microsoft decision was about $100 billion in lost investment: that is about how much capital vanished from pension funds, from investment funds, from the economy. The effect on the Long Boom was immediate, and much of that money will not come back no matter what the final outcome of the case may be. When a marathon runner stumbles, he may recover, but he probably won't set new records for the race.

So what are the specific implications -- both in the near future and down the road?

First, as noted, we will see a long-term tendency to put more resources into the legal and "public relations" divisions than into engineering and research; this will affect not only Microsoft, but its rivals as well. Note that by public relations, I do not mean sales and marketing, I mean politics. Goodwill advertising. Parties for congressional and White House staffs. Political contributions. Whatever the merits of the government's case in the Microsoft suit, I have yet to meet anyone who believes that any of this would have happened had Gates spent $100 million on political influence including nights in the Lincoln Bedroom. Imagine Janet Reno insisting on prosecution if the president told Justice to lay off. Imagine the president ignoring $100 million.

Second, consumers will pay higher prices for software. This is inevitable because public relations and legal services are expensive .

Third, venture capitalists will be more cautious. The wild days are over. This isn't quite a direct result of the Microsoft decision, but certainly the market slowdown that was a direct consequence had its influence. With less loose money, what is left over is invested more carefully. Perhaps this is a good thing. On the other hand, Yahoo!, Earthlink and many other success stories might not be possible in today's climate.

An impossible definition

Those are obvious outcomes. Others are a bit more subtle, and prediction requires more analysis.

First, note that the remedies ordered have nothing to do with the issues tried. Microsoft was found guilty of monopolistic practices because it gave away its Web browser. Its rival, Netscape, which also gave away its Web browser and had had a practical monopoly for a couple of years before Microsoft got into the act, is now part of the AOL/Time Warner complex that seems to think it fair to make life difficult for outsiders like MSN and all us other non-AOL users. There is little that Microsoft did that AOL/Time Warner does not want to do or has not tried, the difference being success and visibility. I would guess that AOL/Time Warner had best walk softly: That's a tall poppy indeed, and even more noticeable once the Demon Gates is brought low.

Second, Jackson has acted as if he knows what he is doing, when clearly he does not. He forbids Microsoft operating system to include "middleware." His definition of "middleware" will make for a field day for lawyers while producing maximum uncertainty within the software industry. What is this "middleware" that must not be incorporated into Windows?

Is a Web browser "middleware"? It seems unlikely that an operating system without a Web browser can survive in the real world. Jackson requires that the OS and the Web Browser come from two different companies that have no special relation with each other. The result of that is certainly going to be higher cost to the consumer, but worse is to come.

I'll illustrate with examples. Before Microsoft included networking in its operating system, if you wanted to have machines work together you needed to go to third parties. There were several, but the most popular client/server network was from Novell. The result was that you would try to run Microsoft Word on a system networked by Novell and you would have a problem.

So: Microsoft incorporated networking, which was certainly "middleware" at the time, into Windows, and then integrated Word, Excel, Access, Front Page, Outlook and Photo Draw into a suite that sold for less than many of its components, and which worked together with a more or less common interface. Now we are to have two companies. One is supposed to bust its buns to develop new operating systems features that it must then give away to competitors. The other is supposed to develop new applications to run with an OS from a separate company. All this may work just fine, but is there anyone mad enough to think prices will be lower as a result?

While we are discussing middleware, does Solitaire belong in the operating system? Sound drivers? Sound Recorder? Media Player? FreeCell? Pinball? Mine Sweeper? Notepad? WordPad? Every one of those is given free when someone else could sell it, and every bit of that is middleware under the definition Jackson thinks he understands.

The definition of middleware is going to consume a lot of resources that might otherwise go into innovations and technology. The result will be a slowing of growth. And while a change in administrations in Washington may attempt to ameliorate this, the damage will been done: legal bureaucracies seldom get smaller, and seldom consume fewer resources next year than last.

Rewriting history

Finally, let's look way farther out.

The U.S. population is aging. Older people produce less, and as they retire may produce nothing at all, but their consumption does not fall as fast as the loss of production. Who will support the baby boomers in their retirement?

Only a few answers are possible. This nation already has an enormous transfer of resources from the productive young to the unproductive consuming elderly. That trend will grow as boomers age. Since the population is aging, fewer workers must produce enough to keep the boomers in the style to which they are accustomed: Older people vote. If productivity grows fast enough, this isn't a problem. We can produce what we are good at (read Ricardo on comparative advantage) and use our surplus to buy the goods we can't make. But if productivity stumbles, we'll have to do something else.

Increasing productivity is already in trouble because of the terrible system of education we have. This throws even more of the burden of increased productivity onto computers, robots and automation, while the Jackson decision forces us to invest more in lawyers and public relations. How, then, can we make enough goods to support the retired boomers?

One possibility is to delay the age of retirement. This may or may not sit well with the boomers and their descendents. Another is to import productive workers. That, too, has its negative as well as positive aspects. Either way, these are drastic decisions that require discussion. The Microsoft case will make those decisions more pressing.

Judge Jackson uses a computer but doesn't know whether it's a PC or a Mac. With that background he has undertaken to apply 19th-century law to 21st-century economic issues. The result was to cut off the head of the tallest poppy, and if his remedies are to be applied fairly, many more poppies will be cut.

He is likely to be reversed on appeal, but the effects of this decision will be with us for a long time, no matter what the Court of Appeals and the Supreme Court finally do. Tarquinius Superbus changed the course of history. So, I think, has Thomas Penfield Jackson.

Jerry Pournelle has written about computers and civilization for 20 years. He is a contributing editor for IntellectualCapital.com.
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