Some notes on conservative rhetoric and the Microsoft trial, among other things, plus a batch of URL's. As a periodic reminder, you can cancel your subscription to RRE by sending a message that looks like this: To: requests@lists.gseis.ucla.edu Subject: anything unsubscribe rre If you send such a message and get an error by return mail, or if you have another question about the list, the URL of the RRE web page can be found in the -=-=-=-=-=-=-= banner at the top of most RRE messages. The Microsoft trial has been first-class entertainment, but now we turn to the more serious business of remedies. Although the legal and media focus is on Microsoft and its employees, the more important issue is the precedent that this trial sets for business in a world of pervasive information technology and the systemic market failures to which information technology contributes. It is useful to divide the issues under three headings: (1) definitions, (2) rules, and (3) punishment. In my opinion, the most important thing that the Microsoft trial can accomplish is simply a clear definition of what constitutes a monopoly in a high technology world. You would think that this is clear, but in fact some of the traditional tests for monopoly don't work well anywhere near the software industry. That's because those tests derive from the very idealizations of neoclassical economics that the software industry confounds. This situation has opened a vacuum for the most remarkable sophistry, such as the libertarians' often-heard claim that monopolies can arise only through government intervention. This idea remains puzzling until you press them on it, whereupon it transpires that that's simply how they have defined the term. What's needed, therefore, is a restoration of common sense to the definitions of basic words. Simply compelling Microsoft to admit the simple fact that it is a monopoly would be a great accomplishment, not least because the company would then be open to civil suits by the firms that its business practices have unfairly harmed. The precedent would then permit the legal system to do its job without the danger that government antitrust action will be further dampened by shifts in political fashion. Having established what a monopoly is in high technology, the next question concerns the rules by which monopolists must live. It is an extremely well-established principle of antitrust law that monopolists must live by different rules than other firms, and that a competitive action by one firm can be anticompetitive if taken by a monopolist. The question at hand, then, is not this basic principle but rather its application to the particular case of high technology industry. The crucial starting-point here is the market dynamics of compatibility standards. Control of de facto standards is a license to print money, firms that control such standards frequently become monopolies, and companies that acquire monopolies based on the control of standards should be enjoined from abusing them. This may sound like a stiff claim, but observe that it takes for granted a more fundamental point, that high technology monopolies are likely to arise in great numbers. It is not about preventing monopolies from existing, then, but only about preventing them from abusing their position. The mechanisms for the abuse of proprietary de facto standards have yet to be taxonomized fully, but the most important form of abuse is the practice of leveraging one's monopoly in one area into a monopoly in other areas. This is why so many observers have been calling for Microsoft -- and, by extension, other firms that control standards -- to publish its API's on an open, early, and equitable basis. It should be emphasized just how limited and reasonable a request this is: it applies only to those cases where a firm that controls standard competes with other firms in one or more markets for the provision of complementary goods, for example applications programs for an operating system, and it does not prevent a firm from end- running the equally well-established anti-bundling rules by endlessly adding functionality to an existing standard. Another potential measure to prevent leveraging of standards is open publication of pricing and contract terms with OEM's and other firms that incorporate the standard into their products. The list of forms of abuse goes on, and those who fight these battles every day can provide a more detailed list of abuses and their remedies than I can. Finally there is the matter of punishment. Microsoft's behavior has been so extraordinarily and systematically abusive that it has become common to call for extreme measures such as breaking the company into several parts. Although it would be great to see the look that such an action would produce on a certain billionaire's face, I don't see that it would serve any purpose. Two very different break-up plans are being circulated. One would create several companies that each have the rights to sell precisely the same range of products that the current Microsoft sells; the idea would be to create a competitive market in the sale of these products. This is a truly awful idea. It would lead to an instantaneous price war, with the winner being whichever company has the best access to capital. If more than one company survives long enough to differentiate its products from the others, then the standards will fragment, leading to even more rampant incompatibility than Microsoft already deliberately induces as a device to compel its customers to upgrade their software. And faced with the potential for fragmenting standards, buyers will go with whichever company they expect will have the largest network of other buyers, meaning almost certainly whichever company Bill Gates works for. The result of this mess will be precisely like the situation we have today, only a lot worse, not least because the resulting monopoly will be effectively immune from further corrective action. A second proposal for breaking up Microsoft would divide it along product lines, perhaps placing the operating system in one company and the applications in another. This is another terrible idea. It will not stop the operating system company from leveraging its monopoly by incorporating a steady stream of features, including the features in the applications. The government and the courts will never stop being called upon to referee the proper dividing line between the operating system and everything else. This proper dividing line does not exist; "operating system" is not a category of nature like "liver" or "head". Once again the result would be much like the situation we have today, only worse. Even though it would be fun to say "Baby Bills" over and over, the idea makes no sense. Another proposed remedy is to compel Microsoft to publish the source code for its programs. This too would certainly produce entertaining facial expressions, but what exactly would be its point? One point would be to make visible any anticompetitive behavior that is hidden in the functionality of the code. Many of the accusations against the company do take this form, and someone should certainly perform a proper taxonomy and legal analysis of code-based market abuses to determine whether forced publication of source code would actually be a plausible means of preventing them, and whether other remedies against those particular abuses would be likely to work just as well. Any such precedent should be defined carefully, and it would take some work to decide what precisely Microsoft has done to deserve this particular sanction. Much as we might all sympathize with open source software, it is not at all clear that the market for software can function at all if a firm cannot retain the full benefit of privileged knowledge of the programming techniques it has developed. I would speculate that a leading principle here is that forced publication of source code is a counterbalance to especially marked network effects. Having established a critical mass of customers, a software firm can then count on obtaining many more customers because the imperative need for compatibility would make the use of any competitor's software prohibitively expensive in comparison. The counterargument here is that the market works perfectly well when competing firms are each trying to establish a network, assuming that customers are thoroughly informed and each vendor has a similar capacity to subsidize early adopters. The test for compelling a firm to publish its software, then, may rest not simply on the existence of network effects but the use of monopoly rents to establish them. This is clearly the case with at least some of Microsoft's products. At the end of the day, the quite horrid behavior of Microsoft in its dealings with other firms has been a mixed blessing. On the one hand it draws attention to a set of fundamental issues that are otherwise hard to explain in sound-bite form. On the other hand it may lead us to overlook these important issues in favor of a superficial morality play about this one company. So we have to remind ourselves that it's not about personalities. Rather, it's about the political economy of a world that is rapidly becoming dependent on software. Even at its most capitalistically extreme, the production of software resembles the workings of political process or the scientific community or both as much as, or even more than, than it resembles Adam Smith's market. Our old intuitions do not work properly, and in many cases they give us answers that are competely the opposite of the easily observable truth. One thing that is clear is that we have to get this stuff right as soon as possible. Standards dynamics are path-dependent: once they head off in a given direction, neither governments nor markets can easily set them straight. Getting the Microsoft case right, then, is not just a matter of bringing a particular set of rogues to justice, but more fundamentally a matter of determining whether the future of information technology will be increasingly distored by the perverse incentives that rewarded that roguish behavior in the first place. Now it's time for another episode of "What If Normal Americans Were Allowed to Talk Like Conservatives?". You may want to skip this. Conservatives want everything in society to be organized by the market, and they want to free the market from all moral constraints. The sorry results of this conservative war on morality are nowhere more evident than in the Microsoft antitrust trial. The Reagan-era policy of watering down the moral standards of the marketplace gave the go-ahead for an orgy of white-collar crime and sent a signal that anything goes. This dumbing-down of values has produced a pernicious moral decay that is now visible to those who will look. Because everyone assumes that activist appellate judges will impose their own radical views in the end, the real value of the Microsoft trial has been the glimpse that it has provided into a bizarre culture of lying and cheating on the part of the monopolist elites. And yet conservatives' cynical use of perjury and obstruction of justice for crass political gain in their most recent coup attempt has so discredited these serious charges that nobody has even murmured about applying them to the much more compelling case of the elites. These sophisticates live in a parallel reality, completely oblivious to the civilized norms of behavior that ordinary Americans take for granted. Do they believe their lies? The question doesn't even make sense. Modern conservatism has learned its language from the wizards of public relations, and in the language of public relations the concept of truth cannot even be expressed; all that exists are "perceptions" and "messages". What "we" say is truth and what "they" say is lies and spin, simply because that is how the words are used. This is the thoroughgoing relativism, the demolition of reason and meaning, into which the conservatives have sealed themselves, and into which they are trying to seal us. The assault on morality, indeed on the very possibility of conceiving moral values, is not a side-effect of conservatism. It is conservatism, and its arrogant dogmas pour all day from the bottomless sewer of the conservative-dominated media. This concludes another nauseating episode of "What If Normal Americans Were Allowed to Talk Like Conservatives?". Aren't you sick of people who talk this way? I am. Alan Wexelblat observed that one valuable book was missing from my bibliography about industrial, graphic, and information design: Louis Rosenfeld and Peter Morville, Information Architecture for the World Wide Web, O'Reilly, 1998. Also omitted and recommended by others are: Kevin Mullett and Darrell Sano, Designing Visual Interfaces: Communication Oriented Techniques, Prentice Hall, 1995; and Darrell Sano, Designing Large-Scale Web Sites: A Visual Design Methodology, New York: Wiley, 1996. Some URL's the dancing hamsters http://www.hamsterdance.com/ an especially interesting design firm http://www.ideo.com/ analysis of the cable companies and Internet architecture http://www.edventure.com/release1/cable.html article about new online privacy protection technologies http://www.wired.com/news/news/technology/story/18678.html Motorola Piano Platform for spontaneous wireless neworking http://www.motorola.com/piano/ article on Microsoft and Linux http://www.cnn.com/TECH/computing/9903/24/mslinux.html/ (really) remedies in the Microsoft antitrust case http://raven.stern.nyu.edu/networks/ms/remedies.html it's that time of year http://www.thinkyourmail.com/ Political Change for the Information Society http://www.poliseurope.org/ privacy problems in MS Office http://www.macintouch.com/o98securitysamp.html http://www.macintouch.com/newsrecent.shtml http://www.macintouch.com/o98security.html http://www.macintouch.com/msprivresponse.html http://www.macintouch.com/msie-mystery.html http://www.microsoft.com/presspass/features/1999/03-08custletter.htm http://www.microsoft.com/presspass/features/1999/03-08custletter2.htm Internet-Based 'Collaboratories' Help Scientists Work Together http://www.chronicle.com/free/v45/i27/27a02201.htm http://www.chronicle.com/free/v45/i27/collaboratory.htm Statewatch (European civil liberties organization) http://www.poptel.org.uk/statewatch/ intelligence resources from the Federation of American Scientists http://www.fas.org/irp/ Yorkshire CND campaign to close the NSA station at Menwith Hill http://www.gn.apc.org/cndyorks/mhs/index.htm Freedom for Links http://www.freedomforlinks.de/ http://www.computerworld.com/home/news.nsf/CWFlash/9903103monit Virtual Institute of Information http://www.vii.org/ Honeyguide Web Log http://www.chaparraltree.com/honeyguide/ interview with George Lakoff http://www.edge.org/3rd_culture/lakoff/lakoff_p1.html The Internet2 Project http://www.internet2.edu/ The New Age of the Book http://www.nybooks.com/nyrev/WWWfeatdisplay.cgi?19990318005F Smart Communities report from Canada http://smartcommunities.ic.gc.ca/smart/sc/english/index2.htm Museums and the Web http://www.archimuse.com/conferences/mw.html American Antitrust Institute http://www.antitrustinstitute.org/ articles on Amazon.com's valuation pro: http://www.businessweek.com/datedtoc/1998/981214.htm con: http://www.msnbc.com/news/250150.asp ACLU Defend Your Data campaign http://www.aclu.org/privacy/ Microsoft and the GUID Tattoo http://www.junkbusters.com/microsoft.html International Trepanation Advocacy Group http://www.trepan.com/ end