Microsoft Hatred FAQ

[Steven D'Aprano]

On Tue, 25 Oct 2005 14:22:53 +0000, Not Bill Gates wrote:

> The flaw with this is that business owners don't get to decide what 
> the market wants.  And the market wanted the Microsoft OS.  Every 
> other OS in the market had bit player status, via the economic 
> principle called increasing returns. 
> 
> You either sell what the market wants, or you go out of business.

That is not true. The market was quite happy to buy competing products
such as DR DOS. What the market was not happy to do was buy DR DOS, but
pay for *both* DR DOS and MS DOS even though they only received DR DOS.

And that, in a nutshell, is why Microsoft's actions were illegal. They
were stealing from computer buyers: if you wished to buy an IBM-compatible
PC, you had to pay for MS DOS even if you didn't want it, and having paid
for it, there was no guarantee that you would receive it.

Most users didn't know that they were paying for MS DOS -- all they knew
was that MS DOS either came bundled with the PC automatically, or that if
they requested some other operating system, they ended up paying more
rather than less -- even when that other OS was cheaper than MS DOS.

Imagine that your corner store charged $1 for a Coke, $0.90 for a Pepsi,
and $5 for burger and Coke. If you asked for a burger on its own, the
price would still be $5. If you asked them for a burger and Pepsi, the
price would go up to $5.90 -- and the Coca-Cola company would still get
their dollar for the Coke you didn't get, plus another dollar for the same
Coke when the next customer bought it.

If only one or two stores did this, then the market would correct
itself: people who wanted Pepsi, or a burger without Coke, would go
elsewhere, and save a dollar. 

But in the case of Microsoft, there was no practical "elsewhere" to go to.
All the resellers did the same thing. Virtually the only alternative,
buying an Apple Macintosh, was more or less the equivalent of driving to
the next state to buy a $10 steak when what you wanted was a $5 burger.

The situation was, pay Microsoft for MS DOS or go without a PC. Since
users were either unaware of the situation, or unable to change it, they
did the rational thing: why pay for a Coke and then pay again for a Pepsi
if you just want any old drink? A few die-hard DR DOS supporters paid
double for the product they wanted, and helped enrich Microsoft. The rest
simply took the path of least resistance: if you're going to pay for a
Coke no matter what, you might as well drink it.

The thing with markets is that they only lead to efficient outcomes when
there is sufficient competition. That's why anti-competitive behaviour is
a bad thing, and is illegal in just about every country in the world.
(Whether the laws are enforced is another story.) A few people, blinded by
ideology, deny the evidence of their own experiences by insisting that
monopolies do no harm. 

See, for instance, the contrasting situation in hardware and software.

As compilers and other tools have evolved, it has become easier to develop
software. Distributing it has also become easier: in 1985, Word came
on five or six floppies worth perhaps a dollar each, with two or three
kilograms of paper manuals. Today, you get a single CD worth maybe twenty
five cents. In the case of Windows, often all you will get is a licence
number, not even the media. The cost of distributing Windows is
essentially zero. And yet over that same twenty year period, the cost of
the operating system has more or less doubled in price.

Hardware, on the other hand, has fallen in price by perhaps 90%, while
simultaneously becoming far more capable. The PC I bought in 1986 for
$4000 probably had less computing power than the DVD drive I paid $40 for
this year. 

There is one desktop operating system vendor with monopoly power. There
are hundreds of hardware vendors competing on price and features. Only
those blinded by ideology fail to see the connection.



-- 
Steven.