Unbundling Bill Gates and why it's so hard

Jeremy Warner on meeting Bill Gates and the mistake he's made in not backing off earlier

IT'S A CURIOUS experience meeting Bill Gates, the world's richest and most successful businessman. I've met many powerful and successful industrialists, but nothing compares to the feeling of awe you get when given this opportunity. The anticipation is of being ushered into the presence of some demi-god. It's nerve wracking and you worry the experience will strike you dumb.

And then it happens and he is none of the things you thought; he's easy going, laid-back, charming, accessible, possibly even sensitive. Certainly he seems genuinely hurt by the persistent attacks on his company that now litter the internet and the pages of the world's press. Meeting this faintly shy, awkward man for the first time three months ago at the World Economic Forum annual meeting in Davos, Switzerland, I found it hard to credit him with being the evil monopolist he's now often depicted as.

The idle chit chat dispensed with - hello, how are you, where do you come from, oh, The Independent, good paper, and so on - he takes the rostrum before a small gathering of editors and financial journalists. Mr Gates has long been the most fascinating business story of recent times. Now, with the US Justice Department threatening to issue an all-embracing anti-trust suit against him, the story is about to go nuclear.

I'd heard he was inarticulate and unconvincing; he's not. He's persuasive and compelling as he takes on the case against him. But as with all those who preach a message, he deals only in generalisations. They are good ones, all the same. He talks about the huge benefits his operating system and applications software have brought to business throughout the world. People don't have to buy our products or upgrades, he says, nor do we use our position to restrict trade or stifle competition.

The usual characteristics of monopoly - restricted output, rising prices and insurmountable barriers to entry - simply are not there in our case, he insists. In fact prices are falling by an order of magnitude, production is rising and new companies and competitors are continually entering the market place.

Mr Gates plainly still has some friends. Later that day I heard a Nobel prize-winning economics professor take the defence of Microsoft a stage further. He argued that since the Windows monopoly was created by the market, and since it wasn't immediately apparent it was doing any harm, it was bad policy to attack it. The US Justice Department, he claimed, simply wasn't equipped to judge a new techno-monopoly, nor did it have the laws with which to do so. As for the "bundling" of Microsoft's Internet browser and other applications with its PC operating system, he thought that a non issue. The bundling of products together for sale is common throughout commerce and should be dealt with on a case by case basis.

He also took the view that Microsoft had a fundamental right to profit from the monopoly of its operating system, a monopoly achieved simply because Microsoft was a cleverer organisation commercially than Apple and others with rival products. Apple's refusal to sell its operating system to other hardware manufacturers was itself a kind of abuse, he said, and Apple only has itself to blame for what happened. In the end we should trust to the market, for if the consumer didn't like Microsoft and its products, it would ostracise the company and find a way round them.

I have to admit, I came away from Davos feeling all warm inside about Microsoft. I was seduced, I really was. Joel Klein and the US Justice Department were most definitely barking up the wrong tree. They were the type that believed all business was theft, and if they could build up enough of a head of steam against a successful business enterprise, they would attack and destroy it. IBM spent 19 years defending what proved to be an ultimately groundless anti-trust suite from the US Justice Department. The process was so distracting for management that it virtually destroyed the company.

Is this really what the US wants to do to Microsoft? Of course Sun Microsystems, Novell and Netscape would like to see Microsoft brought low and broken up, but what competitor wouldn't want to do that to its rivals. If government is stupid enough to do the job for them, so much the better.

Well, that was my frame of mind at the time but as I descended from the rarefied Alpine air, the doubts began to surface again. Was that not the ice-cold, calculating look of the consummate predator I had caught in Mr Gates's eyes amid the bon amis and smiles? How is it possible to grow from nothing in little more than 20 years to the third largest company by market value in the world without monopoly of a big and fast growing market?

Furthermore I've begun to believe the black propaganda about Windows, that though its price is falling and each upgrade makes it better, it nonetheless may not be a very good operating system. But because everyone else has it, and the overwhelming bulk of other software is designed to operate on it, we have no option but to buy it. Worse, we have no option but to buy each new upgraded version of it. If Windows 98 is not launched because of action by the Justice Department, it will be a blow not just to Microsoft, but to Intel and the legion of hardware producers which rely on each successive upgrade to boost sales of new PCs. It is easy to see how the operating system becomes a conspiracy against the public.

Then there is the opportunity Microsoft has to use this gateway to promote and sell its applications software at the expense of others. This is what lies at the heart of the Justice Department case against Microsoft. A dominant but inadequate operating system is one thing, but to use that to disadvantage rivals in the applications market is another altogether. This may be a new and vibrant industry, but actually what seems to be happening is not so very different from what happens with all monopolies. One monopoly is used to build another, to cross subsidise into other markets and to freeze out those who would compete in them.

The US has a long history and tradition of trust-busting. Each onslaught has prompted the same siren voices, the same dire warnings over the consequences of attacking and breaking up successful companies. In each case, the US economy has survived and prospered. It is one of the great paradoxes of the free market system that it produces these wonderful breakthroughs, these extraordinary companies and entrepreneurs, but to protect that power of invention and enterprise it needs constantly to cleanse itself of them. The market cannot be relied on to self correct. There must always be a referee.

As for Mr Gates, I believe he has made a serious strategic error in not backing off at an earlier stage. It may now be too late to reverse the tide of hostility building against him.

News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
Sport
sport
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
PROMOTED VIDEO
Life and Style
techCould new invention save millions in healthcare bills?
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
News
Jermain Defoe got loads of custard
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst - Banking - London - £550 - £650

£550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...

Data Centre Engineer - Linux, Redhat, Solaris, SAN, Puppet

£55000 per annum: Harrington Starr: A financial software vendor at the forefro...

.NET Developer

£600 per day: Harrington Starr: .NET Developer C#, WPF,BLL, MSMQ, SQL, GIT, SQ...

Data Centre Engineer - Linux / Redhat / Solaris / Puppet / SAN

£65000 per annum: Harrington Starr: A financial software vendor at the forefro...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape