Bill Gates and Microsoft have committed the crime of understanding the Information Age better than anyone else. Now the Reno Justice Department has joined forces with Gates’s competitors to teach him a lesson, ignoring what his brilliant career could teach them.
On May 18, the Department of Justice filed an anti-trust suit against Microsoft Corporation, charging it with anti-trust violations in promoting its Internet Explorer over rival Internet browser Netscape. Simultaneously, attorneys general from 20 states filed companion suits on almost identical grounds.
The case could take a decade to decide. The anti-trust suit against IBM, filed on the last day of the Johnson administration in 1969, was not dismissed until the first weeks of the Reagan administration in 1981. But one thing is already clear — the government has again become a player in the Information Age.
For almost five years, the private economy has been so strong, so self-sustaining, that even politicians have a hard time claiming credit for it. Microsoft is the flagship of this armada, charting America’s course into the Information Age. The vista we now see unfolding before us — capitalism made “frictionless” by the nearly free flow of information — is a vision perceived by Bill Gates while at Harvard more than twenty years ago.
But of course such a transformation always upsets the status quo. In this case, a largely West Coast based revolution has diminished the East Coast, New-York-to-Washington “policymaker” axis. A measure of this came in April when New York Times editorial-page columnist Thomas Friedman visited the center of the computer industry. “I don’t think I like Silicon Valley,” reported Friedman. “There is a disturbing complacency here toward Washington, government and even the nation. There is no geography in Silicon Valley, or geopolitics. There are only stock options and electrons. When I asked an all-too-typical tech-exec here when was the last time he talked about Iraq or Russia or foreign wars, he answered: Not more than once a year. We don’t even care about Washington. Money is extracted from Silicon Valley and then wasted by Washington…. If I don’t care enough about the wealth-destroyers in my own country, why would I care about the wealth-destroyers in another country?”
Unfortunately, the answer to that executive’s question is,
“Because they may soon be appropriating your wealth.” The Microsoft
anti-trust suit puts politics back at center stage. After years of
sitting on the sidelines, politicians now have renewed importance.
Bob Dole, who once criticized the Justice Department’s pursuit of
Microsoft on the floor of the Senate, is now representing Netscape,
Microsoft’s alleged victim. Robert Bork, supposedly the most
libertarian Supreme Court nominee in recent history, is also on
Netscape’s payroll. The archconservative Orrin Hatch, whose Utah
constituent Novell is one of Microsoft’s bitterest enemies, has led
the attack in the Senate.
“[W]e may be seeing a welcome new consensus emerging that government has a role to play and that it should not be ridiculed on reflex for every intervention,” celebrated the New York Times. Before long almost everyone of political import will have chosen up sides — except Bill Clinton, Al Gore, and Michael Kinsley.
What is harder to fathom is the fear and loathing Microsoft has generated in the business community. Rival computer companies have long hated Microsoft. Silicon Valley sees the Redmond, Washington giant as poaching on its territory. But the hostility is not limited to Gates’s rivals. In a widely reprinted article, Fortune recently warned the nation’s top executives: “Microsoft: Is Your Company Its Next Meal?” Bob Ingle, president of new media at Knight-Ridder, Michael Eisner, CEO of Disney, and David Coulter, CEO of BankAmerica were all reported to be terrified of Gates. “Everybody in the communications business is paranoid of Microsoft, including me,” said Rupert Murdoch. (Some people, of course, also worry about Rupert Murdoch.)
“In the past two years, Microsoft has launched aggressive, Internet-based businesses that threatened the status quo in automobile retailing, newspapers, and travel,” reports Fortune’s David Kirkpatrick. Microsoft has launched “carpoint.com,” a Web site that allows consumers to make point-by-point comparisons among new cars of all makes and then solicit bids from nearby new car dealers. Carpoint.com is threatening General Motors’ “gmbuypower.com,” where customers can only buy GM cars. “With all deference to Mr. Gates,” said Ann Noel Pattyn, GM’s “top Nethead,” “I don’t think it is advantageous for one entity to get exclusive ownership of the World Wide Web.”
There is even a half-baked theory floating around that Microsoft is trapped in some kind of Marxist dialectic of self-destructive growth. “Microsoft has no choice but to expand,” says U.S. News & World Report. “It is driven by the rules of Wall Street, and those rules require that the company’s profits continue to grow by at least 20 percent a year…There is only one way Microsoft can continue to meet that target — by moving well beyond the desktop PC and into new business.” “Gates can’t afford to let Microsoft stop growing, even if a few customers’ flower beds get trampled,” echoes Fortune. “Its phenomenally talented staff is compensated largely by means of stock options. If Microsoft’s historic growth of 25%-plus per year slows and the stock’s steep climb halts, many of those people may no longer find it worthwhile to devote most of their waking hours to the company…This isn’t megalomania; it’s just business.”
How did Microsoft become the most feared American corporation since Standard Oil? How did Bill Gates, the child prodigy from Seattle, become the object of a nationwide manhunt? The issues here are much greater than some alleged anti-trust violations. The story that follows is a history of a cultural transformation — as seen in the birth and growth of one corporate entity.
ON A COLD DECEMBER MORNING in 1974, 22-year-old Paul Allen, a programmer for Honeywell Corporation, was walking through Harvard Square when he spotted a copy of the January issue of Popular Electronics. “World’s First Minicomputer Kit to Rival Commercial Models — Altair 8800,” proclaimed the cover. Allen grabbed a copy and ran to see his high school friend Bill Gates, a 19-year-old sophomore at Harvard.
At the time, Allen was writing code for 24-ton, $100,000 mainframes called “minicomputers.” Gates had been programming since he was 13. While still at Seattle’s Lakeside School, the pair had founded a small company, “Traff-o-Data,” which analyzed traffic counts for the City of Seattle. Now they knew their moment had arrived. As Gates wrote in The Road Ahead, “We glimpsed what lay beyond the Intel 8080 chip [Altair’s major component], and then acted on it. We asked, ‘What if computing were nearly free?’ We believed there would be computers everywhere because of cheap computing power and great new software that would take advantage of it.” The following spring, both Gates and Allen quit Cambridge and headed for Albuquerque to meet Ed Roberts, the designer of the Altair, who owned a small company called Model Instrumentation and Telemetry Systems (MITS).
Roberts was operating out of a run-down shopping center, sandwiched between a bar and a massage parlor. The Altair (named after a planet in Star Trek) was only a mock-up and Roberts had little manufacturing capability. He had severely underestimated the demand and was desperately trying to keep pace. The size of a breadbox, the Altair had no monitor or keyboard. Its user interface was a set of sixteen red-light switches on the front panel. Inputting information meant switching the lights over many times in succession without a mistake. Gates and Allen took up residence in a nearby motel. They agreed to supply Roberts with a BASIC language that would give the Altair some simple abilities to handle logical and mathematical problems. MITS would own the language, under the condition that it would exercise “due diligence” in promoting it.
The Altair sold thousands of kits but soon had imitators. Gates and Allen — who had incorporated as “Micro-soft” — started to shop their language to other competitors. Sales of the Altair petered out and Roberts sold the company. The new owners soon claimed exclusive rights to Micro-soft’s BASIC. Gates, who had once considered going to law school, had written much of the contract himself. Microsoft (now without the hyphen) went to court and won back the rights to its BASIC on the grounds that MITS had not exercised due diligence in promoting it. Roberts took his earnings and went home to Tennessee, where he fulfilled his lifelong ambition of becoming a country doctor. Gates and Allen, who had assembled a staff of high school friends, moved back to Seattle.
By the time Microsoft left Albuquerque, the world of personal computers was already exploding. Working out of a garage in Cupertino, California, Steve Jobs and Steve Wozniak had invented the Apple, a desktop computer released in 1977 for $1,300. Jobs and Wozniak, who were hardware specialists, needed someone to write the underlying language. Microsoft got the job. Soon Gates and Allen were writing code for Commodore, Radio Shack, NCR, Texas Instruments, and other brands of personal computer rushing onto the market.
These machine languages are simple sets of instructions that translate a computer’s ability to manipulate 1’s and 0’s into some rudimentary functions such as mathematical calculations and logic. More complicated is the “operating system,” which determines how the different parts of the computer interact. An OS sets up files, organizes the computer’s memory, manages the interaction between the monitor and keyboard, and creates a platform for higher applications.