Gates, A Modern Edison?
by Wendy McElroy
In October 1998, the Justice Department began its very public anti-trust case against the computer giant, Microsoft. The government aimed its gun in a most personal manner at the company's chairman and founder Bill Gates. He was accused - and subsequently found guilty - of trying to eliminate competitors through underhanded tactics. Namely, that Microsoft contractually required Internet providers with whom it dealt to distribute Internet Explorer - Microsoft's browser - rather than that of its competitor, Netscape. Microsoft's attorney John Warden argued that the company had been aggressive but within the law. Warden observed, "antitrust laws are not a code of civility."
It might be added, "nor are they necessary." The only way an unregulated market will sustain a monopoly is if the business offers a superior or cheaper product. Otherwise, it gives competitors an opening that they will soon exploit. Thus, antitrust meddling is not only superfluous, it ensures that the best product at the best price will not ultimately succeed and that competitors need not strive so diligently for excellence or innovation.
The government has ensured that we will never know if the free market would have permitted Microsoft to continue using the popularity of its operating system, Windows, to push its browser into dominance. A consumer backlash against Microsoft - as evidenced by the growth of a competing system Linux - indicates that the free market was probably correcting any 'undue' dominance enjoyed by Bill Gates. Fortunately, we are able to get a sense of what might have happened by drawing upon history.
A century ago, the techno-battle was not Windows vs. Linux but direct current (DC) vs. alternating current (AC). The giant figure trying to impose his 'product' was not Bill Gates but Thomas Edison, who championed DC. Like Gates, Edison was more of a 'developer' than an innovator. He did not originate the idea of using electricity for light, nor did he invent the first light bulb or generator, as is often claimed. "The Economist" (12/31/99) identified Edison's true genius, "he was the first person to make them commercially viable, combine them, and demonstrate the potential benefits..."
And, again like Gates, Edison had the advantage of being backed by great wealth. In Edison's case it was not a personal fortune but the backing of the J.P. Morgan, who was renowned for his 'aggressive' and 'destructive' method of competition. Namely, Morgan would buy competing firms and merge them into his own. (Microsoft has been accused of opening joint discussions with competitors, then quickly duplicating their technology - e.g. Sun Microsystems' Java. That is, Microsoft merges the essence of a competitor's product into its own.)
Edison's competitor was impoverished genius Nikola Tesla, who developed and championed AC. Believing it to be far superior to DC for common purposes, Tesla began to market his system. In this, he received the backing of George Westinghouse, a man of comparatively modest means who knew a superior 'product' when he saw one. The same could not be said of Edison, whom Tesla had tried to interest in AC.
Edison entered the market place with many advantages other than Morgan-money, not the least of which was his widespread reputation. He also had invented the first practical and commercial light bulb. In 1882, he installed the world's first large power station in New York City. Predictably, it used DC. Moreover, when confronting emerging competition from AC, Edison employed what could be called a campaign of "fear, uncertainty, and doubt." (This modern term was used by Microsoft to describe their strategy against competing operating systems.) For example, he staged the public executions of animals using AC to demonstrate its purported dangers.
Yet, today, every household and generating plant in America uses AC. Tesla achieved this monopoly for his 'product' because it was demonstrably superior. It was so superior that, in 1917, Tesla was awarded the highest honor bestowed by the American Institute of Electrical Engineers - the Edison Medal.
The public will never know what standards would have evolved in the area of Internet browsers and operating systems, as they evolved in the area of electricity distribution. The government no longer permits the collective choices of consumers - the free market - to determine such matters.