Bill Gates' Legacy: Constructive Monopolism

Bill_gates_time_magazine_cover_apri Quickly: Gates's monopolistic business practices created a significant benefit for technology users -- a set of standards that greatly streamlined communications and work.

I've grown up with and lived with Bill Gates as the most influential technology leader of the era. Even though he has been slowly backing out of Microsoft for the last five years, his actual July 1, 2008 departure from the company is a milestone worth reflecting on.

What is his single most important legacy? The ability, through monopolistic business practices, to make Microsoft's products global, de facto standards for business and consumers. This created a standard ecosystem of documents, spreadsheets, printer drivers, programs, browsers, and operating systems which enabled people to communicate in a single "language" -- greatly easing the inherent limitations of computer systems.

Unlike oil, pharmaceutical, or steel, monopolies are a necessary ingredient in the technology business. It's only when de facto standards like Windows or de jure standards like HTML become dominant that usefulness soars. Why? Because the more people that use a technology increases its utility exponentially, not arithmetically.

Bill had the vision to see this future and he possessed the competitive drive to force his technologies into monopoly positions in the marketplace. He has not been an innovator in technology -- in polite circles we would call him derivative, in less genteel terms we would call him a plagiarist. Gates has been a business innovator, not a technology innovator.

Yes, many got damaged along the way. Windows marginalized Apple. The Office bundle pithed Lotus, Borland, and WordPerfect. And just when it appeared that Microsoft would lose in the Internet era, the operating system (Bill's favorite monopoly tool) was again deployed to propagate Internet Explorer throughout the world, destroying Netscape.

This wasn't all just bullying. Bill's products were not elegant or particularly innovative -- but they were just high quality enough to attract the critical mass of users to get the monopoly rolling. And once the monopoly expanded, the software developers would arrive, lured by Microsoft's developer! developer! developer!-friendly embrace, assured that their work would have the widest possible audience.

No, it wasn't just about altruism. Gates recognized that while this standard ecosystem would be a boon to users, it would also generate unparalleled profitability for Microsoft. And these gravity-defying margins inevitably attracted regulators -- who wrong-headedly applied the old rules of monopoly to a new world.

As I look back, I think that Gates' "constructive monopolism" most closely parallels Thomas Edison's. They both created pretty good technologies and then worked, using many means, to get them accepted by more users than their competitors. Tesla and Jobs are two sides of the same coin.

Why hasn't Microsoft caught Google? Why has Steve Jobs clawed his way out of his grave to be adored once again? It's because Gates over the last five years has moved on to philanthropy -- and taken his formidable legacy with him.

What are your views on Gates? Do you think that Microsoft can thrive again without him? I'd love to get your analysis...

Comments

re: Bill Gates' Legacy: Constructive Monopolism

Interesting term - I hope that Gates can bring some constructive monopolism to philanthropy and make it easier for the average person to do good. (Assuming that the BMGF doesn't attempt to "own" altruism...)

re: Bill Gates' Legacy: Constructive Monopolism

Hi George, I'm curious who you see taking up that "business innovator" title (possibly without the monopolistic baggage). It seems like Mark Benioff and Jeff Bezos - with SaaS and cloud computing business innovations respectively - may be the closest.

re: Bill Gates' Legacy: Constructive Monopolism

Hi George,This interesting read was worth the wait. In my blog I have tried to analyze some potential issues with Microsoft from my perspective.Regards,Varun

re: Bill Gates' Legacy: Constructive Monopolism

Monopolies are never good and not good for anyone except for the monopolist. I do neither see the standards nor do I see the benefits. There are enough Open Source standards to counter your claim that a monopoly is necessary to achieve them. Bill Gates never had any visions. He was about to dump Windows V2 for OS2 when a single person created a 386 version of Windows. His comment that no one would ever need more than 640kB in a PC is well known. ot event he growth of the business is his. Steve Balmer is the real bully behind it all and his laughter about Apple's iPhone on YouTube tells you why MS is on the way down.Microsoft has held back IT development for along time and will continue to do so. Even the idea of DOS, Windows and mouse driven user interfaces were copied from others. Bill Gates books lacked a total sense of vision. Look how innovative Apple and Google are in difference. And it is real innovation. I switched to a Mac a year ago and it is the best thing I did for myself in the last twenty years. Our business switched to Open Office and we do not miss anything.Vista is a bummer and so is for example Sharepoint. I am not watching Microsoft and I dont care where they go. To me they are irrelevant and I will not waste my time wondering about Bill or Microsoft.

re: Bill Gates' Legacy: Constructive Monopolism

Jesus guys. I'm willing to bet you hate The Beatles too? Look, he was at the right place at the right time. If it wasn't him, you'd be harping down some other poor entrepreneurial billionaire's neck. Yeah I have Windows (XP), yeah it crashes for the most mundane of reasons, but I don't want to kick the guy in nuts over it.Don't give me this kill Bill crap either. I have more respect for any pioneer in the Tech industry than anyone else in any other industry. Look at the banking industry for example. They're out to make money...evil, dirty, grubby money. I know Microsoft is too, trust me I know. But banks do this by charging you money for using their service. At least we don't have to pay Microsoft everytime we're inflicted with the Blue-screen of Death, we just wait for a service pack, and it's free.My point is, there's many more people to dislike who've done way worse things to you, I'm sure. They're just not in the spotlight for you to see them. What about all those hackers who steal credit card numbers? What about those spammers, and those hooligans who secretly install spyware on your PC? Those are the people I hate. Not the guy who created a standard for computer operating systems who happened to be at the right place at the right time. Give 'em a break, geeze.

re: Bill Gates' Legacy: Constructive Monopolism

I have a very simple way of looking at it. Most folks (IT) have an axe to grind with Mr Gates, especially around the Open Source concepts, but hey the guy was/is in it for the money. So are Oracle, IBM, Sun, HP, ... and its not like their software is cheap either. Look at the price lists to get an idea.Regarding 'derivate innovation' I think innovation really applies to maing something (invention/discover) usable. Google wasn't the first search engine. If you are old enough you would remember AltaVista, WebCrawler, ... iPhone wasn't the first phone to have touch capability, believe it or not Windows Mobile actually had thar earlier, albiet Apple made it a lot more USABLE :-). Isn't Linux an inspired version from Unix as wellWhile I am not a betting man, I do think Microsoft will survive (at least for a while) even after Mr Gates. it would be difficult to wind up when >90% of the computers boot up to your logo.I do think (and hope) Mr Gates will make a significant difference to the foundation. If he can pursue it with even 1/8 the passion he had/has for Microsoft good will happen for humanity. I loved his remarks in an interview once, when asked on how did he manage the business/philanthrophy, he replied in effect stating that he got into work in the morning thinking of every possible way to make money and left in the evening thinking of every possible to give it back. I wish I had that problem :-)

re: Bill Gates' Legacy: Constructive Monopolism

Oliver:I think the question is: "Who are the emerging constructive monopolists?" I'd say that Jobs is doing a pretty good job with the iPod. And Sergei/Larry/Eric are building a pretty amazing constructive monopoly with their ad/search ecosystem.George

re: Bill Gates' Legacy: Constructive Monopolism

While comparing Bill Gates with any of his peers or leaders since, we need to be cognisant of the impact he had on them (for the right or wrong reasons). For instance, Google carved an identity for itself based on "Do no Evil"Total concur with the gist of the article. Bill Gates has been larger than life in our industry. He made an impact on a whole generation of technologists.

re: Bill Gates' Legacy: Constructive Monopolism

Microsoft will definitely survive, but survive is a relative term. Agree with your assessment of what Mr. Gates has brought to the table. It has been focused and a critical component to the introduction and acceptance of computers as part of everyday life. But consumers don't really care who invented the light bulb. They just like electricity. He missed a once in a lifetime opportunity to incorporate delightful design into his master plan to monopolize desktop products. Will history remember Bill Gates. Definitely yes. But for what? Will history remember Steve Jobs? Yes. Imagine what Mr. Gates could have accomplished if he had Mr. Job's design discipline; Windows Leopard. That's world dominance beyond Google. I don't envy Mr. Ballmer's task. He's a railroad baron thrust into the jet age.

re: Bill Gates' Legacy: Constructive Monopolism

Microsoft will survive, but what is indeed interesting that the notion of fast follower/ then dominate may not work with cloud computing, SaaS, and online advertising.With their earlier successes, their was a logical stream, PC O/S, but one innovation that MS excelled at was the Office suite. We were all using Wordperfect, lotus 123, and MS Office as an integrated offerring was a winner.If MS could pull off an MS Office again in the internet space, that might be the next winner in software.

re: Bill Gates' Legacy: Constructive Monopolism

Hi George,I work for Larry at Racepoint Group. Love your blog. Also liked your Q & A with him for your radio show. I'm sure you've had some debates with him on if CEO's should blog - but I think if they are to blog, they should do it in a way similar to how you have embarked on yours.As for Gates - In his departure doesn't he leave Google with the keys to "constructive Monopolism"? It seems that the only innovation being spawned in the technology industry these days involves advertising monetization models – and Google owns that category.Can’t Gates be blamed for leaving the company in this situation?By the way I caught the Forrester study “How to Connect to Bloggers,” which came out last week. It noted that most adults blog to share thoughts/feelings with friends and families (65%). Why do you blog? – Besides for the good of the company -

re: Bill Gates' Legacy: Constructive Monopolism

His radio show that is...

re: Bill Gates' Legacy: Constructive Monopolism

Plagarism? What is wrong with you?

re: Bill Gates' Legacy: Constructive Monopolism

It has been so bad, I can not imagine a level playing field in the industry and how more far advanced it would be by now with 10 years of healthy competition - imagine if there were only one car manufacturer in the world what we would be driving now. I cannot say how happy I am that Microsoft are no longer winning in the right areas.

re: Bill Gates' Legacy: Constructive Monopolism

In my perspective, the greatest lesson that Gates has taught the business world (including Jobs!) is the power of network externalities and two-sided markets. Bravo!Ofcourse, on a more sombre note, he's also taught us all that products have to go beyond mere function (usable) to find a special place in people's hearts!MSFT will remain for a long time to come but it is, most certainly, on its way to becoming the GE of the tech world.

re: Bill Gates' Legacy: Constructive Monopolism

I don't see anything wrong with most of Microsoft's business practices. Bill Gates did not inherit Microsoft; he started it from scratch. In the beginning, Microsoft's OS was open-source and the MAC-OS was proprietary. Gates' shrewd business sense propelled his meager purchase of DOS for a few thousand dollars into a software empire. Word processing, spreadsheet, and internet browsing software are all part of the computer. I don't see anything wrong with Microsoft using their dominance in the OS market to spread other products. If you go to a McDonald's, you'll see chicken sandwiches and garden salads promoted along side their hamburgers. Coca-Cola's classic Coke soft drink is sold in the same places as other soft drinks they own. If I don't want to use McDonald's or Coca-Cola, no one is stopping me from going to Burger King or Pepsi. Likewise, anyone who doesn't like Microsoft's software can freely use software from another vendor. There is only so much you can chop a product down into pieces and still have it make sense. If you say that the OS is separate from the web browser, even if they are part of the same product (the computer), one could argue that the lettuce is separate from the patty in a McDonald's hamburger. If McDonald's uses its own patty with its own lettuce, is McDonald's using their "monopoly" of one product to sell another? The patty can be further broken down into which farm the cow came from, and further into which state the farm is located. Microsoft is selling a complete product. Saying Microsoft can't use Windows to sell IE is like saying McDonald's can use their hamburgers to sell their choice of patty. If we don't like Microsoft's products, we are free to use someone else's.On a related topic: One thing I find absurd is all this Gates-Bashing. I think many people dislike Gates because he is successful. The young Gates took the risk of buying DOS in the first place. Like any business risk, it could have failed. Rather than complaining about Gates' success, we should try to work harder to become more successful ourselves. If someone did better than me on the SAT, I could complain all I want, but that won't change my score. If I want a better score, I need to stop playing sports, stop playing video games, start doing my homework, and start studying harder. Unlike those complainers, I respect Gates for his success.

re: Bill Gates' Legacy: Constructive Monopolism

There was no "monopoly", any number of competitors early on could have taken the spot (even Atari), I think the key word, is "Constructive Commodity", Gates made the computer personal, by granting software for it, namely Office. It wasn't always elegant nor overtly functional (still isn't), but it was there, and by being there it became a standard, creating an Empire instead of a Balkanized State (Mainframe) or a Cult (Apple). You don't need the OS, so much as you need the Apps, the Office Suite made Microsoft, not the OS. Business tools gone commodity.Why hasn't Microsoft caught Google?Because Microsoft is a software company, and Google, is a religion posing as an advertising company. Microsoft shouldn't even be in that race.