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November 10, 1999

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Apple Computer

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Subject:  Disappointed by Interventionists
Author:  DavidGardner

There has been a thread the past few days entitled "Disappointed by the Gardners," started (as best I can tell) by people who largely view the world as a titanic struggle between the good of Apple and the evil of Microsoft. The reason the thread has that title here on the Apple board is because our Motley Fool radio program focused on the Microsoft story this past weekend and after airing thoughts from both sides via call-in, we the hosts opined that Microsoft should generally be left alone.

Students of economics rightly question whether monopolies are even bad -- and if you have never seriously thought through this question yourself, I encourage you to read Hayek, von Mises, or Milton Friedman. The only way in free-market democratic capitalism that you can achieve a monopoly is if you are serving your customers perfectly -- so that no Rule-Breaking entrepreneurs see any room at all to chip away at you, or try to change the rules altogether.

"I do not see consumers in any significant number complaining."

A further and even more relevant question we can ask today is, can one even create a monopoly? The notion that Microsoft has ever been or is a monopoly is one of the great delusionary bits of conventional wisdom of our time. Microsoft is one of the most competed-against companies in the history of the world. Obvious Microsoft present-day head-to-head competitors today include Intuit, Real Networks, Oracle, Sun Microsystems, AOL, and Apple, and several of those are beating Microsoft handily -- a few of them for a long time. Even within its supposedly most monopolistic market -- operating system software -- alternatives exist via Red Hat and others distributing Linux (on the PC platform) and Apple (on the Mac platform). Microsoft isn't a monopoly. And so many technological changes are occurring as I write that any supposedly unbeatable lead in that world is, I submit, a laughably short-term view of business. And in Microsoft's case, mostly backward-looking.

What those who are really arguing for, in calling for Microsoft to be prosecuted (strung up, burned in effigy or otherwise, et cetera) is state intervention into business. The same arguments being made against Microsoft could be made against Coca Cola for underpricing its products globally (or locking Pepsi out of shelving in South America), or against Intel for "conspiring" with Microsoft (despite being one of its most dangerous competitors) to dominate and profit from the PC platform. Do we want our federal government to spend millions trying to "improve our lives" further by making it harder for these gigantic, profitable, and world-class American companies to compete domestically and internationally, to do business?

Where are the cries of "foul!" coming from? I see Microsoft's business competitors complaining, I see the state complaining, but I do not see consumers in any significant number complaining. While arguably not a single one of Microsoft's products may even be the best product within its market, the critical point that most people miss is that Microsoft made its diverse products -- word processor, spreadsheet, database, etc. -- compatible with each other, in a world in which previously the top market entrants whizbang products did not communicate effectively with each other. Microsoft's efforts to standardize software greatly accelerated business productivity, the eventual growth of the Internet, and the dominance of American technology. These things are indisputable.

"In the end, a vote for crippling Microsoft is, at root, a vote against capitalism."

In the end, a vote for crippling Microsoft is, at root, a vote against capitalism. It demonstrates a fundamentally unAmerican lack of faith in free markets, in Rule Breakers, in entrepreneurs... and even in consumers, who are essentially treated by such pundits as "idiots" for continuing of their own free will to buy products which just so happen to be deemed inferior or unacceptable by the much smarter and enlightened critics. It is a vote for using notoriously bureaucratic and ineffective governmental intervention to come and right a "wrong" that most consumers never felt. The only way a business can grow in the free market (in any industry) is if it serves its customers good products or services at acceptable prices, and if its marketing, methods, and culture are palatable; otherwise, no customers. Or at best, massive boycotts and a fractured market. That's why capitalism and the free market work. Those who rage against it -- those who are recommending message-board posts cheering on Uncle Sam -- give me the heeby-jeebies. Do we not realize that on the whole business and capitalism serve the common man, while goverment and socialism (and those who may unwittingly endorse it) ruin him?

I don't personally own shares in Microsoft or Apple, though I've certainly been closer to buying Apple in the past many months! Please understand that I don't even really like Gates, or his company; they're not to my taste; they lack style like Brezhnev lacked rhythm. On the other hand, I've written of my love of Jobs and Apple in the past (in our most recent book, especially). But while I might not want to hang out with Microsoft or Gates, I do still admire them. And as a consumer and an American, I'm darn glad they exist and that they exist on our shores. And I value them far more highly -- as, I sense, do most Americans -- than the constant intervening "help" on offer from our federal government.

Foolishly,

David