Winners, Losers, and Microsoft: Competition and Antitrust in High Technology
Once one dismisses
The rest of all possible worlds
One finds that this is
The best of all possible worlds
So lyricist John La Touche paraphrased Dr. Pangloss in Leonard Bernstein’s 1956 adaptation of Candide. What was true in Voltaire’s day was true in Eisenhower’s and in ours: Optimism can be taken too far.
The basic argument of Winners, Losers and Microsoft, a controversial study from Oakland, Calif.-based economic policy think tank The Independent Institute, is that we should all be happy that Microsoft dominates the market for PC operating systems, word processing, Web browsers and other software. Indeed, economists Stan Liebowitz and Stephen Margolis reveal, Microsoft products are so superior, and so useful when networked together, that we have collectively decided to give the company a virtual monopoly.
I have been unkind to Microsoft in these pages, but anyone who spends 10 hours a day using Microsoft products will understand my resentment. I would prefer an iMac to my PC, but everyone in my office uses a PC. I would prefer to run the Linux operating system on my desktop, but the office network depends on Windows.
In short, I-and a great many others-have been locked into Microsoft technology not by choosing the best product but by network effects.
Lawyers at the Department of Justice see the same pattern; lock-in is one of the harms cited in their antitrust case against Microsoft. Liebowitz and Margolis, however, assert that in a free market, lock-in is impossible. The pattern they see is one of benign “serial monopoly” in which the firm with the best product dominates for a time, but is eventually and inevitably displaced by one with a better product.
For their key evidence against lock-in, Liebowitz and Margolis attempt to debunk examples frequently cited by technology journalists. The VHS and Beta video formats are, they argue, of comparable quality-VHS won out in the late 1970s because consumers preferred the longer recording times of the larger cassettes. While they’re at it, they also argue that the original Macintosh OS was no better than DOS, that FORTRAN persists because it is economical and that the metric system offers no worthwhile advantages over the English system of measures.
Maybe Liebowitz and Margolis are right and maybe, as they complain, we journalists are simply “quick to file the bad-news stories of how the world is not only unfair, but also illogical.”But that still doesn’t get Microsoft off the hook, since the question in the antitrust case is whether the company bullied other firms in an illegal attempt to quell competition. And it doesn’t explain why so many of us still feel locked in. If this is the best of all possible worlds, my name is Bill Gates.
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