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What Would It Take to Win? -- BEHRMAN CONCLUDES
A good wrap-up topic. I beg to respond:
At The Political Level:
Anti-trust law was created by popular and progressive legislators in the
Southern, Border, and Western states. It was given decisive effect, first,
in a few states, like Texas. It was later implemented at the federal level
by Theodore Roosevelt who, however, had to bypass his own Party bosses and
a corrupt Department of Justice in order to get any action. Woodrow Wilson
gave the law maximum effect and Franklin Roosevelt pretty much its last
major push. Today's all-Whig judiciary is hostile to the original concept
of anti-trust and sees it strictly in terms of protecting some capital from
other capital, not in the states' original framework of promoting the
national return on and to land, labor, and technology generally.
Our two anglophiliac Republicanoid parties today are equally corrupt and
passionately indifferent to everything but campaign finance. Our President
is a much more disciplined politician than the run of his ilk but not a
self-confident aristocrat in the mold of a Roosevelt or a Wilson. So, we
are back to where anti-trust needs to be given at least a nudge back in the
states where it started, and where some techno-constituencies exist.
Clearly, that would not be the Great State of Washington, D.C., a decrepit
capital full of literary drones and traitors-for-hire.
At The Economic Level:
The tie-in sale harms OEM assemblers of computer hardware as re-sellers of
pre-installed software. US domestic ones, mostly in Texas, must buy a
poorly documented DOS/Windows as well as fulfill VMS/Windows quotas and
install all such junk, the good and the bad alike, exactly as Microsoft
dictates in complex, non-public agreements. They must buy whatever
Microsoft bundles in as well as pay extra for hardware-specific support
which requires custom code Microsoft writes or secret code Microsoft uses
to manipulate benchmarks and control features.
This is a tax US domestic hardware firms must pay on any value they seek to
add in the course of hardware/software assembly. It is a tax the OEMs
cannot avoid by substituting software "drivers", "stacks", "utilities",
"managers", or even "apps" that have not also gained access to the
"desktop" Microsoft boasts of owning through rent-sharing agreements all
potential competitors of Microsoft must have with Microsoft.
This is aggravated by the fact that while Microsoft "books" the same sort
of revenue from overseas, it probably does not collect it as efficiently
over there. This accounting mystery leaves US domestic assembly plants and
OEM firms competing against foreign firms with not just lower labor costs
but also with a lower mix of direct and indirect taxes, maybe even lower
campaign contributions and bribes in, say, Singapore. Singapore,
incidentally, is an authoritarian place hateful to the Wall Street Journal
where even vandals with wealthy parents are caned and responsible
government officials are paid more than middling entrepreneurs. All the
same, this hellish Singapore is certainly hospitable to market enterprise,
technological innovation, and a form of republican democracy with a rather
low lawyer-count that its own citizens do not seem to despise.
Finally, Microsoft's practices make it impossible for any OEM to sell a
computer with non-bloated code and with maximum "net" disk space for
"optimized" or "well integrated" Corel Office, Netscape Communicator,
Norton Utility, or Adobe Publishing suites users consider "best of breed".
The return to an OEM from integration and optimization of competitive
software suites would certainly be much higher, both in "corporate" markets
sensitive to "cost-of-ownership" and in "christmas season" markets
sensitive to advertised prices. Returns from software integration OEMs
might perform far outweigh the the paltry returns they can realize from
razor-thin markups on increasingly imported hardware components.
In short, Microsoft's oppression and conspiracies have a measurable
negative impact not just on a well-defined OEM industry in states like
Texas but on the US trade balance, including the constant tasking of US
diplomats and armed forces to collect bloated MS royalties to the exclusion
of other proclaimed US human rights, environmental protection, trade
balance, financial stabilization, nuclear terror, and blah, blah, blah,
Washington-type, bullshit goals.
When originally implemented in the several, partly sovereign states,
anti-trust law was seen as a way to reconcile both Free Trade and
Industrial Protection short of Civil War. The core concept was and still is
Zollverein or reservation of the right to levy and collect uniform ad
valorem wealth taxes or severance taxes on ground rents to the states, in
the main, or, as uniform tariffs, to the Navy, Coast Guard, and Customs
Service, or, as excises, to the BATF, but, in all cases, not to Barons of
this or that here or abroad. This truly federal and national system of
rights was simpler and more efficient than today's Republicanoid,
globaloney, NIFTY, Last Track system of taxation. It was also voluntary in
that all but a small class of very rich people submitted to it. Those rich
people then, as now, remain undecided as to whether they would rather be
American or British. They were the sort of folk Theodore Roosevelt grew up
with but sought to distinguish himself from patriotically and militarily.
Now, they are the Capitalist International or, as one ex-Spook put it, The
Worst People In The World. Of course, in the Great State of Washington,
D.C, they are the only people who really count.
At The Technical Level:
While the software industry, like music publishing, exhibits huge overhead
costs and low marginal costs for distribution media other than live
performance, these are swamped on the margin by other costs of
distribution, technical support costs which are shifted all over the place,
and "hidden costs of ownership" like gratuitous bugs and crashes or
features, as Microsoft calls them. The digital media or hardware, namely
storage, transmission, and switching media, are all subject to "doubling
rates", like Moore's Law. These lead to huge "increasing returns" to the
scope, scale, and cycle of hardware deployment. But, two things remain
remarkable constant: The white collar productivity of the US, and the
"price points" for customary grades of packaged system.
So, the OEMs and the software industry or, increasingly, Microsoft and the
firms which pay tribute to it or seek to share in rents with it, compete
for their shares of revenue from the number of systems sold in each grade
of packaged system. The fact that a "gray" market persists, conspicuously
in Houston, Texas, and certain other facts pertaining to that strategic
market, suggest both (1) that there is monopoly rent, and (2) that it
consists in large measure of MS royalties earned abroad but, while
"booked", not actually collected yet. That all, in turn, suggests (1) the
DoJ has a case based on an aggrieved OEM industry and (2) the DoJ can
settle it on terms seemingly favorable to the Administration. Those terms
probably include relief the OEMs will get and lengths the US will go to in
order to collect MS royalties overseas.
The problem here is that, while the Ayn Rand/Timothy McVeigh crowd would
love for Bill GATES to become their patron and poster boy, a very intimate
relationship is likely to develop between Microsoft and this Administration
on "issues" stemming from DOS/Windows royalty accrued abroad. Meanwhile,
there remains the technical problem of how MS comes to effectuate a tie-in
sale. Partly, that is by contractual agreements the DoJ will be able to
compel disclosure of, analyze, and make new work for more private or
ex-government lawyers re-writing. This is burdensome, but some way can
doubtless be found to shift the costs of it on to small business people
like the least white of domestic clone vendors or, of course, consumers and
what used to be called voters.
Partly, it is technical: That leaves the nerds and other software vendors
in a tizzy. These are existing or new entries into the software business,
the computer equivalent of garage bands or of respected, old, and poor jazz
or just ethnic ensembles like Corel, Novell, Lotus and so on, looking for
arts grants or government work like the USO and other defense contracts.
Now, will that stifle technical innovation? To the extent that software
development is artistic, maybe so, but compared to what? French television?
Hong Kong cinema? It will not stifle increasing returns because those are
all in hardware. It will lead to a "studio system" of software development
and, indeed, it has. One problem with showing a stifling of technical
innovation, as opposed to suffocation of artistic creativity and
originality, is that there may be no such innovation in software. If there
were such innovation, why has US white collar productivity not soared?
So, the technical harm from a rent-shared, monopolistic software industry
with only such artistic creativity or originality as an
aesthetical/political elite dictates is, simply low morale, low integrity,
and low quality. It is the sort of tawdry shabbiness evident in late-stage
communism, boring literature, and huge airplanes or ocean liners that crash
or sink and, of course, power plants that blow up or financially capsize,
with no explanation or even clean up, what is called Mafiya or, in the US,
To-Big-To-Fail Capitalism. This is a picture not of insufficient technical
innovation but of failing craft and, of course, of de-industrialization.
Low-bandwidth Farmers, Merchants, and Mechanics a century ago would have had a
three-tier political, economic, technical perspective on the present problem. Of
course, it would have involved steam engines rather than binary logic,
thermodynamic rather than information theory. Above all, they would have been
uncool but sophisticated enough to see the problem as a matter of avoiding
international war and continuing to heal the scars of a civil war. Of course,
they would have been ridiculed by rich people and their sycophants, people who
would rather be British Peers than American citizens.
I think when more Americans identify more with the Farmers, Merchants and
Mechanics of a century ago, less with characters in the soft porn of Ayn Rand or
Barbara Cartland, then we can see some real progress on re-application of the
Common Carriage and Anti-Trust doctrines of a century ago. Until then, what we
will do is watch snippets of Ralph Nader and Ira Magaziner on TV humbugging
about how lawyers and management consultants can fix everything. Of course,
Nader is about half-right. Magaziner is completely wrong.
Thank you for indulging me this final rant. Best wishes to you all as well as to
my friend Ralph Nader and all the Yalies of the World.
Have a nice conference and PLAYON JRBehrman sends.....
charles mueller wrote:
> I've read the full collection of posts to this list, thanks to its
> Archive. The impressive part is the technical knowledge and skills
> displayed in them. And the meticulous relating of the "unfair" practices
> Microsoft has reportedly engaged in over the years. But does it all add up
> to a violation of the U.S. antitrust laws--as interpreted by the court that
> will have the last word here, the U.S.D.C. Circuit Court of Appeals in
> At bottom, the antitrust case against Microsoft seems to be that it
> has engaged in "tying," i.e., selling its Windows OS only to those who also
> agree to buy its browser, IE, and some other applications. Is that illegal
> under the U.S. antitrust laws? The short answer is, alas, No.
> To understand the Supreme Court's interpretation of our antimonopoly
> laws, you have to be able to grasp the following situation: A murder
> occurs. The judge says, okay, what "effect" did it have? Was the victim
> Albert Einstein, so that his death is going to adversely affect world
> science? Murder, as such, is not illegal here. There must be, as a
> consequence of that regrettable act, some discernible, harmful "effect" on
> society as a whole. Otherwise, the murder is harmless and therefore lawful.
> Bill Gates' lawyers have explained to him that, before he can be
> convicted of anything under the U.S. antitrust laws, his enemies have to
> prove that (a) he's inflated prices and (b) he's suppressed innovation.
> Charles Mueller, Editor
> ANTITRUST LAW & ECONOMICS REVIEW