Love it or hate it, most investors will readily agree that Microsoft (NASDAQ:MSFT) epitomizes capitalism. In Microsoft, some see capitalism at its best: a software entrepreneur that over the course of 30 years has become one of the world's most valuable companies -- No. 3 by market capitalization after ExxonMobil (NYSE:XOM) and GE (NYSE:GE) -- by creating a common language for computer users around the globe. And some see capitalism at its worst: a ruthless monopolist that bundles products, destroys competitors, and stifles competitive innovation.
But in at least one respect, Microsoft has made a corporate political shift with a new initiative announced in February that's more Iron Curtain than Adam Smith. As reported on CNET Thursday, Microsoft has traveled to one of the world's last Communist regimes to institute a rather ham-fisted policy: "Rat out your dealer, receive a prize." (OK. That may not be the exact slogan the company's using, but you get the idea.)
Chinese owners of pirated copies of Microsoft Windows are being offered a deal. If they fill out an online form describing to Microsoft where, how, and from whom they got the contraband program, Microsoft will email them a coupon for 50% off the purchase price of a legal version of the operating system.
It's an interesting ploy, to be sure. But the cynic in me wonders whether this exercise in private police-statism will work any better than it did when the Soviets pioneered it. Then as now, people were tempted to tattle on others in hopes of winning favors. But many putative informants just gamed the system, reaping rewards by accusing innocents. By the same token, Microsoft could well find that it's collecting as many false leads and piracy allegations against nonentities and innocents as genuine leads to real criminals.
Another flaw in the program is that Microsoft is placing an awfully small carrot in this rabbit trap. Half off a piece of software that retails for $200 to $300 is still pretty pricey, especially when you consider that your average pirate charges just $5 for his Windows version. Imagine you're given a choice. You can pay an extra hundred bucks for something you already own (albeit illegally), ratting out your dealer, and maybe angering that dealer's backers -- and remember that software piracy is a real cash cow for organized crime -- or you can just keep quiet. What would you do?
Now throw in the fact that you'd be admitting to a crime to collect the reward -- in a country not noted for its leniency, no less -- and you'll see why I have my doubts about the effectiveness of Microsoft's latest plan for world software domination.
Now read about a Microsoft anti-piracy initiative that, although it's angered some computer users in the West, stands a decent chance of success in the East:
Fool contributor Rich Smith owns no shares in any company mentioned in this article.
