Trustbusters

Remember back when Microsoft was the huge juggernaut that was going to totally dominate the technology industry and take over the world?

I do, because I cut my teeth as a political writer and activist by defending Microsoft against the antitrust persecution whipped up against it by envious rivals. One of the arguments I made was that there is no such thing as a permanent monopoly in a free economy because every successful product or company faces the prospect of being made irrelevant by a new innovation. The only way to stay on top is to always be on the cutting edge of innovation, reliably making the right decisions again and again. A company has to continually earn its leading position. And while it’s theoretically possible for a company to keep on doing so, in practice—well, let’s look at the record.

Henry Blodget describes what has happened.

“In the late 1990s, a single technology company became so unfathomably rich and powerful—and so hellbent on dominating not just its own industry but a massive and rapidly growing new one—that the U.S. government dragged the company into court and threatened to break it up over anti-trust violations.

“The case was settled, and the company, Microsoft, agreed to play nicer. But it turned out that the world had nothing to worry about. As often happens in the technology industry, what has really destroyed Microsoft’s choke hold on the global personal computing market over the past 15 years hasn’t been a legal threat but a market shift.”

Which, of course, is a totally unprecedented development that has never, ever happened before.

I’m sorry, I’m writing, so you can’t hear the sarcasm dripping from my voice.

Even that part about “Microsoft’s choke hold on the global personal computing market” already seems antique, doesn’t it? Microsoft may still have a big share of the PC market—but it’s the PC itself that has been blown away by innovation.

“Microsoft’s ‘Windows monopoly’ hasn’t been so much destroyed as rendered irrelevant. That because, thanks to the explosion of Internet-based cloud computing and smartphones, tablets, and other mobile gadgets, the once all-powerful platform of the desktop operating system has now been reduced to little more than a device driver. As long as your gadget can connect to the Internet and run some apps, it doesn’t matter what operating system you use.

“Three charts really bring home the challenges that Microsoft and other PC-powered giants like Intel, Dell, and Hewlett-Packard face in adapting to this new Internet-driven world. First, look at global device shipments. For the two decades through 2005, the personal computer was the only game in town, selling about 200 million units a year. But then smartphones and tablets came along. And now they dwarf the PC market.”

I remember in the 1990s that there was a big debate over “thin client” vs. “thick client” systems. In a thin client system, most of the computing power is in a remote server, which the user accesses through a relatively less powerful, “thin” interface. This was dominant in the early days of computing, when processing power had to be concentrated in massive, heavy mainframe computers. My first experience with the Internet, circa 1988, was using a Wyse monitor hooked up to a Unix mainframe. This was before the Web, of course. Back when I was a kid, the Internet didn’t have pictures. All we had was text, glowing in green letters on a cathode ray tube.

In the 1990s, though, the thick client was dominant. Personal computers became powerful enough that you could do a lot on them without needing a mainframe, but the Internet was still so slow, unreliable, and expensive—remember dial-up?—that you didn’t want to rely on a connection to a server to do your work. You wanted your PC to be able to do everything all on its own. If you needed to send a file, well heck, you could just put it on a floppy disk and mail it.

Yes, we really were that primitive once.

By the late 1990s, though, the momentum was starting to flip back toward the thin client. In the 2000s, broadband and wireless Internet became available practically everywhere, usually for free, and it began to make sense to carry a smaller, less powerful device and rely on Internet-based applications. Today’s “thin clients”—smartphones and tablets—are still pretty thick compared to the PCs of 15 or 20 years ago, but the real action has moved out of the device and onto the Web.

But there the government is, reliably surfing five years behind the leading wave of innovation, setting out to punish big successful companies just as they are being undermined by the next big wave. Blodget draws the right conclusion: “only 15 years after the government went after Microsoft for antitrust violations, the idea that the company ever had a ‘monopoly’ on anything is hard to even understand.”

But he doesn’t go far enough: the idea that we needed the government and its antitrust laws is even harder to understand.

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