Microsoft Breakup?

May 1, 2000 at 12:00 AM EDT

GWEN IFILL: Technology’s future, economic growth, government regulation and cultural change: The case of “U.S. Vs. Microsoft” has it all. The Justice Department’s proposal on Friday to break up the software giant is just the latest act in a drama involving one of the nation’s best-known and most important companies, as well as its wealthiest citizen, Bill Gates. Here with perspective is Katie Hafner, a technology reporter with the “New York Times”; Jaron Lanier, a computer scientist, artist, and author; and Paul Kedrosky, a former wall street analyst who teaches information technology and commerce at the University of British Columbia.

Mr. Kedrosky, let’s put the legalities aside for a moment. Who should win, who should be broken up, who shouldn’t, and explain to us if there’s something larger at stake. Is this a bigger deal than just about the legalities?

PAUL KEDROSKY, University of British Columbia: Yeah, I think in a lot of ways it is. I think there’s… The legalities, I think, fascinate people for the same reason we kind of like LA Law and we like to see people battling back and forth, but at the same time, Microsoft is kind of at the center of a bunch of other interesting things happening. For starters, it’s one of the most successful companies in the stock market, and with so many Americans and Canadians, for that matter, people around the world generating so much wealth by investing in the market, Microsoft becomes sort of the focal point for all of that. And so, on the one hand, people desperately want to seek Microsoft succeed, because Microsoft’s success and the success of technology companies like Microsoft is money in their wallet. On the other hand, people look at it and they say, well, if they’re succeeding and it’s not fair play, well maybe I’m not such a big fan of this. People go back and forth. And they say, on the one hand, this is money in my pocket. On the other hand, we all like fair play. And so people very much are torn in two directions, trying to decide whether or not they should be in favor of it or against what’s happening. That look at their wallet and they look at what’s happening, and you’re seeing that kind of ambivalence reflected in the marketplace.

GWEN IFILL: Katie Hafner, is that so? Both sides are portraying this as a battle for the soul of capitalist society? Culturally, is it as far-reaching as all of that?

KATIE HAFNER, The New York Times: I think that’s absolutely right, Gwen, if you think about it, what is it — there are something like 60 million PC’s in households, and 85% of those run Windows. And so it’s… Microsoft is so ingrained in our culture, that it’s hard to forget what life was like without them. Now, that said, I think it’s important also to remember that Windows is actually very complicated. There’s a lot of complexity that is sort of on top of complexity here with Windows. And people get very frustrated when they’re using their computers and I think that plays into it, too. It’s sort of the devil we know attitude. We don’t want to touch a hair on Microsoft’s head on the one hand, and yet, we’re very frustrated by the computers that we use every day because they’re constantly crashing. You know, there’s always this funny analogy made to cars, and people say, “well, would we put up with this with cars, if our cars crashed twice a day, is that something that we would tolerate?” So I think there’s sort of this curiosity about what would life be like if it were different, if Microsoft were actually a different beast.

Is Microsoft an innovator?

GWEN IFILL: Jaron Lanier, both sides also seem to be battling for title of underdog. Microsoft took out these big full-page ad in newspapers today saying we’re the innovators, we’re the people that really mean best. What is your take on that?

JARON LANIER, Computer Scientist: Nobody in the technical communities think of Microsoft as being innovative. That’s not to say that they’re not admired in other ways, but for God’s sake, Microsoft is essentially a company that’s learned to corner the market on inventions that really came from others who were before them. The Windows design is essentially a copy of the Macintosh, which could be thought of a copy of earlier work at Xerox Park. And, of all of those, it’s definitely the inferior one. It sort of breaks out hearts in a way, because if only Microsoft had gotten it right, if only they had been able to put out stuff of the same quality as what they copied, I think a lot of people would be much more friendly towards them. And that’s what really gets me. I wonder if they had been able to do a better job, if perhaps we see more older people being more comfortable with computers, if we didn’t have such a sense of a digital divide. I really blame them for some of that feeling.

GWEN IFILL: But Katie Hafner just talked about the devil you know argument, the whole idea that maybe people are happy with what they have because they know it and they’re willing to make excuses and accept a monopoly if that’s what it takes in order to have what they know.

JARON LANIER: Well, look, any time you have a digital platform like this where you have a bunch of digital devices that have to connect together, you have to have a monopoly of sorts, whether it’s private or public. You can only have one type of fax machine. You can’t ask people to have five different ones so that people who own the different brands of fax machines will all be able to fax them. So you can only have one. So in the case of the Internet as a whole, there is a standard that it’s monopoly, but it’s public, and in this case the one that ended up being adopted is private. So there’s an inevitability of monopolies here. And I think everyone recognizes that. And in that sense, this is different from other antitrust cases.

GWEN IFILL: Paul Kedrosky… Go ahead, Katie.

KATIE HAFNER: I was going to say it’s very difficult to actually roll the clock back. What would have happened, for instance, if Apple and the Mack had become a great force — versus what actually happened. We can’t roll the clock back. And Jaron makes a good point about windows being based on work that came before it and is in many people’s eyes not as good. And yet, we have to live with this. We have to live with what is basically we’ve all become kind of a captive audience here, because as I said earlier, it’s so entrenched right now. You can’t sort of throw the whole thing out and start all over again.

GWEN IFILL: Paul Kedrosky, I’m sorry, is that true? Is this different than Ma Bell or the railroads or the oil industry?

PAUL KEDROSKY: Oh, sure. I mean, the difference this time around is we did it to ourselves to the extent we did anything. By our action, by saying that this particular product is the one I choose to use, and as Jaron points out, because it’s compatible with other products, it makes that decision somewhat easier. I need to use this particular word processor because everyone I work with uses that. So what if comes from Microsoft. There it is. Compatibility is what’s — you know — underneath this and driving it all. So there really is no way to step backwards. We need… You need compatibility, otherwise this whole world of technology falls apart. Things don’t talk to each other, whether it’s fax machines or computers. We’ve managed to drag this this far along where devices actually do talk, at least reasonably stable way.

So to try and turn back and find some other way of doing things I think is very, very dangerous. One of the real problems I have with a lot of the arguments that get raised in this whole situation is we have no base case. We have no way of sort of turning our focus to some alternate universe where there was no Microsoft and having a good, close look at what happened. I think you saw exactly that struggle in some of the documents that came forward from the courts on Thursday and Friday where they tried desperately hard to find out what would be… a world look like without Microsoft and without this current organization of standards —

Microsoft’s success: the reason for attack?

GWEN IFILL: Microsoft says in a more cosmic sense, there’s something more sinister at work here, and that’s that they’re being attacked because of their success.

KATIE HAFNER: But the fact, Gwen, is this wouldn’t have happened in the first place if somebody hadn’t had a reason to take notice of this. I don’t really buy that argument that it’s just all politics and it’s not really about business.

GWEN IFILL: Anybody else want to jump in on that.

JARON LANIER: Oh, yes, for God’s sakes, this is the most interesting part of the drama, that the Microsoft folks… They’re all decent people. I mean, there are a lot of very difficult personalities in the computer world, and by and large, compared to the rest of them, the Microsoft folks are affable and pleasant, and yet they live in this bubble. They live in this bubble in which they just cannot conceive themselves as others see them. They simply cannot conceive that they’re not perceived as innovative and they cannot conceive that they’re not perceived as the best thing that’s ever happened to America. And this incredible bubble mentality really makes them have a distorted view. And they do tend to get a little paranoid. They do tend to have a dialogue that suggests that anything bad that could possibly happen to them, any criticism must be the product of some strange people out there, some weird minority of competitors.

GWEN IFILL: Mr. Lanier, is it possible we’re in the bubble with them? Every poll shows that people aren’t at all bothered by the idea of Microsoft being dominant.

JARON LANIER: No, no. Listen, I personally believe, and there’s no way the prove this, but I believe that if people like their computers better, if the software was better designed, the antitrust case wouldn’t have come about. I think that this is a sort of filtration politically. There’s just enough people who get frustrated with them enough that it makes a political climate for this type of action more likely.

KATIE HAFNER: Jaron, excuse me, but this was an interesting point you brought up, this question of, you know, what is innovation. Microsoft claims that that’s what they’re doing, that they’re innovating, and they are being hindered by all of this. But it brings up the most interesting fundamental question of what is innovation.

JARON LANIER: Well, innovation is creating something that wasn’t there before that’s considered good and desirable. And I mean, within tech circles, the most frequently desired remedy actually is completely different than any of the legal remedies that would be available to the government. What people keep on saying is can we just prevent them from buying anybody else for a while.

GWEN IFILL: Paul Kedrosky, I want to brick you back into this. Bill Gates has been seen up until now as kind of the American ideal of someone who worked his way up, got rich, did it all on his own. But now this government case, no matter what the stock market seemed to show today, in which Microsoft did quite well, seems to show him vulnerable. Is that so?

PAUL KEDROSKY: Absolutely. I mean, as people are pointing out all the time, in some sense he’s a prisoner of his success. He’s vulnerable precisely because he has been so successful and because he’s become a kind of poster boy, a kind of masthead for all of our enthusiasm about technology. For many people, understandably, Bill Gates has become synonymous with wealth generated by technology, and technology companies. And Microsoft has become synonymous with those companies themselves, and it’s become almost the one has become almost a replacement adjective for another. I think because of that, for better or for worse, all of our nervousness about technology, all of this feeling like couldn’t it be better or couldn’t it work better, they become the focal point for all of that and we come right back to Microsoft, Microsoft, Microsoft, despite there being other companies in the industry who have equally dominant share, albeit in segments that aren’t nearly as well known. So Microsoft, because of this focus on Gates and because of how well his company has done, because he’s been such an astounding entrepreneur, becomes a lightning rod for all of this.

GWEN IFILL: Katie Hafner, do you agree with that?

KATIE HAFNER: That’s interesting that you say that, because I was just thinking about that, and I was thinking in the course of the last couple years in writing about this industry, it used to be a couple years ago it would always be, okay, let’s get the Microsoft angle on any aspect of technology that we covered. And now it’s much less the case. And I find that interesting that we don’t feel compelled, we I’m talking about reporters now, or at least what I cover, which is sort of the consumer part of the technology story. I don’t feel always compelled to put in the call to Microsoft to see what Microsoft is doing.

PAUL KEDROSKY: I think, though, I think that’s true, but I also think that to be some somewhat uncharitable to government, I think government is a trailing indicator here. The rest of us may have moved on, but I’m not sure that institutions have. One of the things that disappoints me about all of this is it is a very backward looking remedy, trying the change the future of Microsoft based on its past rather than thinking about in the future, what’s the appropriate form this organization might take. We’ve all moved on and said, wow look at how the Internet is change things and changing the way the future Microsoft would have to compete, but institutions like government are still very much backward looking.

GWEN IFILL: Jaron, are we looking backward or forward? You get the final word.

JARON LANIER: Well, listen. You know, if we’re applying the law, you’re always looking backwards. The law is based on precedents, and I think they did an amazingly good job at applying antitrust law as well as they could. And I think it’s important to apply the law. So even though, yes, it’s not perfect and things are moving very quickly, I’m happy that there’s at least a decent attempt to do it.

GWEN IFILL: Okay. Thanks, everybody.