Did "unethical" behavior help keep Bill Gates rich?

This is another loaded question which I had fired at me tonight.

My interlocuter claimed that Microsoft has made some software packaging deals which preferentially helped some companies and ended up hurting others in the process. The preferential nature of the deal allowed the preferred companies to develop drivers for the software -- leaving the non-preferred companies out in the cold.

My response was to get my interlocuter to confirm that Linux was a superior product than Windows. He conceded the point but followed up with the non sequitur that Linux is open source and too technical -- making it a non-competitor with Windows as far as market forces are concerned.

I retorted that the fact that Linux is better is half of the "free market solution" -- and that the other half would come when an intelligent-enough entrepreneur was able to effectively market Linux either directly, or indirectly. In this way, the market would correct the so-called social injustice of Microsoft playing favors with certain companies -- "leveling the playing field" once again.

The basic market truth is that what is often thought of as "unearned" profits (from either "price-gouging" or "collusion") will be diluted by the entry of other producers in the field who are willing to charge lower prices (or produce with less perceived "collusion") than competing companies do.

My solution -- as I had outlined it -- wasn't satisfactory to him. He mentioned that Apple uses Linux for MacOSX, and that that hasn't substantially solved the "problem." My question is this:

Have I missed (or misunderstood) anything -- or is he just being a pig-headed "anti-corporationist" who hates Bill Gates and everything that he touches?

Ed

p.s. He quipped that the only reason Bill Gates has a charity foundation is because he's getting laid by a wife who demanded it; which is something thought to be true of Ted Turner, as well -- that these men act altruistically because women want to live in an altruistic world (i.e., that they do it for sex). Rush Limbaugh calls that American phenomenon "chick-ification."

Post 1

Sunday, February 7, 2010 - 9:27am

Ed,

Is the question about whether Gates violated antitrust law, and if he did, whether that was unethical?

Jordan

Post 2

Sunday, February 7, 2010 - 10:06am

Jordan,

You said, in one line, what took me 12 to say.

Yes, those 2 questions are the key questions to which I'm seeking an answer.

Ed

Post 3

Sunday, February 7, 2010 - 11:08am

Hi Ed,

Microsoft has had loads of antitrust allegations lobbed at it. I'm guessing the one at issue here is the one about MS tying IE to MS Windows while making MS Windows incompatible with other browsers. The EU said this violated their antitrust law. The US case settled.

There were plenty of alleged unethical shenanigans that took place during these cases, notably that MS execs were alleged to have lied and evaded. Those shenanigans aside, Objectivists reject antitrust law wholesale. So far as I can tell, they think all is ethical when doing battle on the economic field, save violating others' rights. MS violated no one else's rights. So Objectivists will reject that MS did anything unethical.

(In my view, people can be unethical without violating other's rights, and there are several possible unethical non-rights-violating (NRV) behaviors on the economic battlefield: competitors can be NRVly shitty to themselves and anothers. This is not a tangent I'd want to explore here. For what it's worth, I did at one point offer an alternative defense for antitrust under an Objectivism framework. But it was ignored.)

Jordan

Post 4

Sunday, February 7, 2010 - 5:57pm

This Objectivist believes that people can behave in unethical ways that don't violate anyone's individual rights. Eg., engaging in self-sacrifice, evasion, gratuitous meanness, dishonesty (that doesn't involve fraud or theft), etc.

Post 5

Sunday, February 7, 2010 - 6:33pm

Steve,

I agree with you. Would you offer some actual examples of such behavior in the marketplace?

Jordan
(Edited by Jordan on 2/07, 6:35pm)

Post 6

Sunday, February 7, 2010 - 8:24pm

I don't think the described situation can be considered unethical, although it is particularly underhanded. The free market eventually punishes such behavior.

jt

Post 7

Monday, February 8, 2010 - 12:01am

Jordan,

Jay calls the Microsoft behavior "underhanded" - that would be an example of getting a market share based on something other than a quality/price value. The difference between what market share is achieved at a given quality/price ratio via driving hard deals with their distributors is a measure of a minor unethical behavior - but not a violation of rights. Long term it would always be better to compete head-on with quality/price. If Microsoft used their power in a distribution channel to have their product sell at a lower mark-up, that would be hard-ball, but ethical.

People aren't confused when they look at the person next door. We have no problem seeing evasion, slight dishonesty, presenting a false image, laziness, etc. It really isn't any different with a company. Are the company's efforts to succeed based on virtues?

Another example of unethical behavior is marketing to stupidity, or sales that rely on hard sell to make up for quality/price deficits. Or more investment in marketing to create unrealistic expectations. Short-term motivation (quarterly MBOs for example or caving in to union demands) that damage the long term achievement.

Each market is in constant flux - there is no perfect market because technology changes, costs to producers change, distribution channels have changes, and these all happen before everyone can learn all they need to know to make the best choice based upon their values. And companies are always experimenting with different marketing approaches and different price points.

And there are differing values and priorities among the buyers and these change as the culture shifts.

And Jay is right that the free market is always moving towards perfection, but we can have long periods where business cycles generated by government influence move things down-hill. Inflation will degrade product/service quality and increase unethical behaviors.
-----------

An important point is that achieving Laissez-Faire Capitalism won't make for perfectly ethical behavior or utopia. Some values and benefits come from our individual character, our culture, and our psychology.
(Edited by Steve Wolfer on 2/08, 12:06am)

Post 8

Monday, February 8, 2010 - 4:43am

Excellent post, Steve.

Ed

Post 9

Monday, February 8, 2010 - 7:57am

Steve,

I'll second Ed's endorsement of your post #7. Microsoft has done all manner of unethical things (see Wendy Rohm's The Microsoft Files) and produced a number of lousy products, but the government picked an area to attack Microsoft where it was virtuous. Microsoft provided a valuable product, Internet Explorer for free. Microsoft and other tech companies with platform dominance have done the world an invaluable service, they have provided market-based standardization. This standardization is not always optimal. The answer to Microsoft is Google, Apple and Firefox not antitrust.

Jim

Post 10

Monday, February 8, 2010 - 8:26am

Thank you guys for the kind words.

- I like Microsoft. Visual Studio and the .Net languages are awesome programming tools. Starting with Visual Basic 3.0 I made an excellent living doing software for PCs instead of main frames.

Post 11

Monday, February 8, 2010 - 9:06am

As a Hewlett-Packard Systems Engineer for a number of years, I was trained in Operating Systems theory. I also did sophisticated software / application development on them. Mainframes, minicomputers, etc. The OS's not only had to multitask, assign priorities, assess security, but entire businesses, all the endeavors of giant corporations, much more complex than today's PC environments, depended on them both in batch and t/p mode. Yet these computers were dependable. They basically didn't crash or freeze or grind to a halt under time-sharing or transaction pressure (although this last is not entirely an OS issue).

With the advent of poorly designed PC Operating Systems - led in large part by the PC-DOS kluge Mr. Gates bought and messed up further, which came to be called "Windows" - you now see these problems - and many others - regularly.

Also, Windows was developed in an insecure and almost criminally irresponsible manner. No operating system not designed by idiots needs to be vulnerable to viruses and malware or being taken over by outsiders who use them as bots or 'slave' computers.

You simply don't allow outside software, whether buried in webpages or jpegs or email or from any other source to run or gain administrator level security without permission.

Not every computer problem is in the software (people can breach security, leave files unprotected, use stupid passoards). But a lot of it is. When I was in computers, I looked at and sometimes had to fix a lot of code. Poor design. Stupidly, ineptly written software written in a hurry, failing to account for eventualities.

I'm old school. I believe each new generation of software, including OS's, ought to run -much- better and with fewer glitches than the preceding.

*Especially* operating systems like Windows. They are the air traffic controllers, the executive programs which run/allow/prioritize everything else that flies and lands.

(Edited by Philip Coates on 2/08, 9:11am)

Post 12

Monday, February 8, 2010 - 9:10am

I admire Microsoft and Bill Gates a great deal for their decision to put their operating system out there as an open system (hardware & software) and invite third parties to make applications for them. Virtually every PC is a unique combination of hardware/software. It is a still evolving system, there have been tons of problems, many because of deliberate attacks, some because of lazy developers not reading the specs, some bugs. But MS continues to deal with it, upgrades continue on the path of a better and better and more useful product as times goes by. My productivity has grown with the evolution of the personal computer over the years. I can't imagine a workday without Excel, Word, Access, or simulation and graphics tools. Hats off to Bill Gates. I wouldn't take an Apple if you paid me to take it off your hands. Apples are expensive broken PC's with training wheels. Lame.

Post 13

Monday, February 8, 2010 - 9:17am

Phil,

Exactly. I still remember the bad old days of having to work on Windows 98. I had at least 1 system crash and 2 program crashes a day. I got in the habit of saving every 10-15 minutes to make sure my work was secure...

Jim

Post 14

Monday, February 8, 2010 - 10:36am

Phil,

I spent a decade programming in the IBM 360/370 environment - mostly in assembler language - mostly applications, but a fair amount of systems work as well.

Those systems and applications were child's play in simplicity compared to what is done now on a laptop. The multi-tasking handled by the computer currently sitting in my lap blows away anything ever contemplated for IBM's biggest system 370. They were excellent for large volumes of transactions. They had nothing to do with the consumer market which is an entirely different thing.

When Gates and Intel went open system, they did, in one stroke, more for technology than all of Linux nerds or Steve Jobs ever did - put together. Other people designed software or hardware that was better - so what? That is only part of the job. They didn't follow through and satisfy the people that count - the ones with the money that want to buy.

Open architecture hardware and software was a stunning decision that implements market freedom and resulted in the evolution of an open mechanism for achieving standardization in a rapidly changing technical arena - that is a big deal.

I remember the frustration of Windows 3.1 - so what? I'm delighted with Windows 7. It is beyond me how people can work up such a ferocious hatred for a company, believe in a free market system, and not recognize that there MUST be some element of satisfying the needs of the people who put down the money... otherwise Microsoft would not hold the market share it does.

I'm sorry, but there is more than a little of the elitist whining coming from those whose pet system was a loser in the market place. (And I've noticed that most of the people that vent their anger at Microsoft are typing the words into a Windows system - that's weird!)

Post 15

Monday, February 8, 2010 - 11:04am

Certain systems simply become fixed due to inertia. No one in his right mind would choose the qwerty keyboard today from its alternatives if we were starting from scratch. But tha'ts what evereyone is used to. The Chinese would never choose their unwieldy ideograms over an alphabet if it weren't for a billion people following the habit of millennia. Nor would anyone in his right mind choose Windows over Macintosh as the standard if we were starting from scratch. The "superiority" of Windows has to do with market position and inertia, not with technical virtue. Odd that some people want to defend inertia as if it were innovation.

Post 16

Monday, February 8, 2010 - 11:12am

Steve,

I agree with you that open architecture was one of the huge advances in personal computing and I really like Microsoft Excel, but Microsoft's product development is very hit and miss. I remember never being able to use Microsoft Word 4.0 on my dorm computer and Microsoft Word 5.0 in the college computer lab because you could get unrecoverable disk errors that would eat your documents. Until Windows NT/2000 the operating system was a piece of junk. It's serviceable now, but how many years did it take them? I hope Google, Apple and open source eat Microsoft's lunch. I've gone back and forth between Macs and Windows-based computers. I had Macs in the '90s but I use Windows computers now because they're cheaper, do what I want well enough and I find it easier to use the same platform at work and at home.

Jim

Post 17

Monday, February 8, 2010 - 1:42pm

The average MAC costs twice as much as the average PC.

http://www.maximumpc.com/article/news/pcs_average_half_cost_macs

Obviously the price has a lot to do with its continuing popularity.

Post 18

Monday, February 8, 2010 - 3:32pm

What I've read in many articles is that the basic components in Mac computers are generally at the higher end on quality - one reason why Mac's are more costly. Another point is that Apple is tough on developers for Mac when it comes to quality control. I've heard they exercise more control over what developers can and can't do code-wise and feature wise. One example, Apples old Appleworks, performing all the same functions as Microsoft's old MSworks, while it had the same look and feel, not only worked faster, but used less than half as much code as the Microsoft product. It gave Apple an edge on early laptops, where memory and disk space were more at a premium.

When all is said and done though, Apple has clearly established themselves as the 'luxury computer' in the marketplace, and has benefitted from that image.

Now that there is Windows 7, arguably as close a copy to Apple OS as Microsoft has ever done, the real differences are few. Even so, I still wouldn't hesitate to pay twice the price of any Windows machine to own Mac. Life is too short to settle.

jt

Post 19

Monday, February 8, 2010 - 6:16pm