Bill Gates, the wealthiest American, rode into Washington recently. Appearing before the Senate Judiciary Committee, Gates expressed barely concealed contempt for the hopelessly unwired senators who had summoned him and the out-of-touch political establishment that presumed to regulate the knowledge revolution he and his fellow "nerds" have unleashed.
Gates' performance recalled a similar journey to Washington nearly a century ago. In 1902, President Theodore Roosevelt slapped an antitrust suit on J.P. Morgan, then the most powerful man in the nation. Morgan dominated banking, finance, steel and railroads. He assembled U.S. Steel, the world's first billion-dollar corporation and, like Gates, he did not kowtow to public officials. In fact, U.S. politicians had long deferred to Morgan; during the Depression of 1893, President Grover Cleveland traveled to Wall Street, silk top hat in hand, to beg Morgan to calm troubled financial markets.
When Roosevelt summoned him to Washington, Morgan answered with haughty disdain. The mogul told the president: "Have your man (meaning the attorney general of the United States) talk it over with my man (meaning his attorney), and they can work all this nonsense out." Morgan's conceit that he somehow equaled or even outranked the president of the United States so incensed Roosevelt that he wanted to physically boot the financier out of the White House. The Senate Judiciary Committee might have felt the same way two weeks ago.
Are Gates and his fellow cyber-billionaires latter-day robber barons, intent on building out of the creative combination of ones and zeros the same sort of economic empire that John D. Rockefeller and Andrew Carnegie constructed from oil and steel? Can the industrial America of U.S. Steel and Standard Oil teach us anything about the digital era of Microsoft and Sun Microsystems?
In many ways, Gates does parallel the great turn-of-the-century robber barons. First, Gates shares with his forebears an absolute disdain for government regulation. With his usual bemused Cheshire cat grin, Gates warned the Senate committee that government should not meddle in the computer business. Echoing Morgan's outrage at Roosevelt's "presumption," Gates and his backers asserted that bureaucrats and lawyers, lacking the technical sophistication and entrepreneurial zeal of the West Coast hacker aristocracy, should not even attempt to regulate the creative ferment of Seattle and Silicon Valley. A bunch of elderly senators and Beltway insiders, many of whom could not distinguish an Internet browser from a pair of trousers, rein in the nation's most dynamic and profitable industry?
Second, ruthless competitors though they were, U.S. captains of industry have always been energetic innovators, developing not only new products and technologies, but novel and more efficient business practices as well. Much as Gates exploits Microsoft's mastery of the operating-systems market to scare off competitors and dominate the lucrative applications business, Rockefeller leveraged his control of oil refining to extract concessions from transporters; branch out into distribution and retail, and corner the market on supplies of raw materials.
By forming those monster corporations, the 19th-century robber barons pioneered new management techniques, introducing innovations in accounting, purchasing and marketing. Similarly, Gates has changed the meaning of the term "desktop," placing computers in nearly every office and revolutionizing the ways Americans do business. His company perfected new approaches to product licensing, employee compensation and the workplace environment.
Without the industrial giants of the late 19th century, modern business administration and U.S. industrial supremacy would not have emerged. Without Microsoft, U.S. software engineers would not enjoy the standard platform that helped establish the United States as world leader in computer technology.
Third, both generations of robber barons not only accumulated vast fortunes, they gave them away. Accepting the challenge laid down by Ted Turner's billion-dollar pledge to the United Nations, Gates and other high-tech moguls have initiated a new wave of conspicuous philanthropy on the model of Carnegie, Rockefeller and Andrew Mellon. These great philanthropists built universities and libraries, concert halls and hospitals--and gave away far greater shares of their income than the current generation has disbursed so far.
Generous though they were, these were not mere charitable donations; turn-of-the-century captains of industry saw private philanthropy as an alternative to social policy. They believed the rich formed an elect group, suited by nature not only to generate wealth but to distribute it fairly and wisely. They viewed government programs as the unskilled wasting resources on the unfit--bureaucrats ministering to the idle and undeserving. Carnegie and his friends pursued philanthropy as an alternative to government meddling they so distrusted.
This faith in private charity persists. There remains a serious danger that Americans will see extravagant gifts--like Gates' promise to put computers in every library--as a substitute for public investment. Forty billion dollars is an awful lot of money and Gates could do an awful lot of good with his fortune. Still, the United States spends 10 times that amount every year on education. Already, Turner's donation to the U.N. has diminished public support for the payment of the nation's outstanding obligations to the world body. Will ostentatious displays of high-tech generosity further erode the nation's willingness to support public schools, libraries and hospitals?
What lessons can Americans draw from the parallels between Gates and the robber barons of a century ago, between the Justice Department's continuing suit against Microsoft and Roosevelt's attack on Morgan? Roosevelt understood it was neither possible nor desirable to return to a preindustrial world of small firms and unfettered competition. Big business, Roosevelt recognized, was here to stay and he welcomed its arrival, along with the efficiency and innovation the modern industrial behemoths could provide.
Then, as now, the public reaped benefits from the establishment of uniform national standards and from the domination of key industries by a few well-oiled, well-managed corporations. Roosevelt also believed that government should not impose standards or pick winners in the marketplace, whether it be deciding which railroad gauge or which Internet browser should prevail.
Still, Roosevelt understood that the people retained an overriding interest in the outcome of these shakeouts, that it was hazardous to allow unsupervised private interests, particularly a single corporation, to make those decisions alone. Roosevelt believed government should not break up a U.S. Steel, but should instead make it "behave well"--induce them to respect the broader public interest.
The Clinton Justice Department could profitably apply Roosevelt's approach. TR hardly relished his reputation as a trust-buster. He saw the antitrust laws as a blunt instrument, a bludgeon he wielded so businesses would behave responsibly and acknowledge the supremacy of the public's representatives in Washington. Seldom did he pursue an antitrust case to its conclusion, instead using the threat of prosecution to force the great monopolies into gentlemen's agreements with his administration.
Under such a plan, Microsoft would remain intact but would desist from some of its more obnoxious business practices. Gates would remain America's most powerful industrialist but, like Morgan, would have to accept that here the people rule.