One of the nuggets from my gleaning exhibits of US DOJ v M$ is a rant by Nathan Myhrvold of M$ about how great M$ was and how misunderstood. He begins with this warped view of reality:
“The computer industry as we know it today is full of examples of positive feedback. The value of a computer to its user depends on the quality and variety of the application software available for it. The incentive to create such software for a particular computer depends on the number of users, since they are the potential customers for the application developer. This creates a similar situation to the video store – the best software is attracted to the most popular platform, making it more popular still. This is not the only source of positive feedback however. If I want to exchange data with you, or get advice from you, then it helps a lot if we are using the same computer am the same software. When a user upgrades to a new version there is a large benefit if existing data files can be used directly, thus favoring whatever software the user had in the past. A user who-invests time learning the interface and commands of a piece of software will be loathe to re learn for a new package unless absolutely necessary.
A more familiar way to say this is compatibility – the laws of positive feedback govern any system where compatibility with other users is either directly or indirectly a key factor in the utility of a product or service. This value is usually instantiated and made tangible by a separate product whose availability or quality depends on the installed base, such as the rental tapes in the case of VHS or software in the case of computers.
The positive feedback effect has been responsible for the phenomenal strength of leading software products in both applications and operating systems. Digital Research, Novell, Apple and Microsoft are among those who have been beneficiaries of this effect at various times and in various market segments for systems software. Micropro international (developer of WordStar), VisiCorp and Software Arts (marketer and developer of VisiCalc), Lotus Development, WordPerfect, AutoDesk (developer of AutoCad), Ashton-Tate (developer of dBase) and Microsoft are examples of companies who have been high market share leaders of specific applications categories at one point or another. The historical situation is that the market share leader in systems software takes about 90% or so of the market, the runner up takes about 90% of what is left and so on. This maps reasonably well to the current world wide market share figures – MS Dos based computers have about 91%, Apple Macintosh computers which run the Macintosh OS have about 8% and the largest variant of UNIX has less than 1% [GET PUBLISHED FIGURES]. Applications software usually gets a somewhat smaller benefit from positive feedback than systems software because the effects which drive the feedback are less central to how someone uses the application. As a result the typical figures are something like 60% to 70% share for the leader, 60% to 70% of the remainder for the runner up and so forth.”
No, Nathan, the world does not owe you and M$ a living. You do not have first place in anything due to the luck of the draw. IBM set you up to monopolize the world of PCs in business back in the days of DOS and you rode into town on the back of Moore’s Law and its corollaries. If it costs you almost nothing to produce a licence and a copy of your software and hundreds of millions are sold, you are not getting positive feedback but jet propulsion. Any positive feedback that came your way came after you achieved a monopoly on PCs, hardly a situation of “first to market”. The world needs IT and the PC is a great way to provide that. Each PC needs software and M$ bullied the world into putting your software on most of them. In the process, you did not make the best software and no one chose the best software, you made the market accept little choice in contravention to the laws as I understand them. You hid your product from the market by bundling it with the PCs rather than competing on price/performance on retail shelves as you should have done.
“It was enacted in the era of “trusts” and of “combinations” of businesses and of capital organized and directed to control of the market by suppression of competition in the marketing of goods and services, the monopolistic tendency of which had become a matter of public concern. The goal was to prevent restraints of free competition in business and commercial transactions which tended to restrict production, raise prices, or otherwise control the market to the detriment of purchasers or consumers of goods and services,”
see Sherman Anti-trust Act
At first M$ required OEMs to pay M$ for every PC produced rather than for copies of the software, pressuring OEMs to ship only M$’s software. Then, as the monopoly grew stronger, M$ required OEMs to ship only M$’s software, conditioning the retailers to buy only PCs with M$’s software.
“Microsoft erected artificial barriers to the entry and growth of competing operating system vendors through its contractual relations with original equipment manufacturers of IBM-compatible PCs (OEMs). These practices included the following:
(i) contract terms that required OEMs to pay Microsoft based on the number of computers shipped whether or not those computers had a Microsoft operating system preloaded (the “per-processor” contract);
(ii) unnecessarily long terms for the contracts with OEMs for the use of Microsoft’s operating system software products; and
(iii) large minimum purchase obligations for OEMs (“minimum commitments”).
Microsoft’s contractual relations with OEMs had created strong economic incentives for OEMs to deal exclusively with Microsoft. OEMs with a per-processor contract were obligated to pay Microsoft a royalty fee for every computer they sold with a
specified type of microprocessor (e.g., the Intel 486). The royalty had to be paid even if the OEM elected to load an operating system on the machine from a different vendor. As a consequence, OEMs
who did elect to load competing operating system software products had to pay a double royalty – one to the supplier of the software actually used and a second royalty to Microsoft.”
see Declaration of Kenneth J. Arrow
That’s not positive feedback but anti-competitive behaviour. Look at any particular kind of software in IT and you will find that while some may be more popular than others, no one has the kind of monopoly that M$ had on the desktop PC. Wildly popular software like Photoshoptm or QuickBookstm or Oracletm database are not monopolies. The vast majority of PCs or servers do not run those softwares. Their market share might be 10-20% and buyers have lots of choices. That’s the way IT should be, not 95% or so where M$ ended about 1998-2004. Positive feedback and lock-in are tiny forces compared to stacking M$-only PCs on retail shelves.
Fortunately competing technology has found its way onto retail shelves simply because the world demands small cheap computers and Wintel cannot supply them. If positive feedback was all that mattered we would have nothing but small cheap computers on shelves by Christmas. That will not be the case because there is no monopolist excluding large expensive computers from retail shelves. The same thing happened with servers years ago but now one has no problem finding servers with any OS or no OS because there never was a monopoly on servers. M$ managed to get its software on a lot of servers by FUD, compatibility issues and aids to managing that other OS on the desktop but those forces were weak compared to monopoly on retail shelves.