Monopolies Without End
As the marathon antitrust case against Microsoft heads toward its climax, the federal government’s proposal to dismember the software colossus into two companies summons up images of the trustbusters’ triumph of a century ago: the 1911 breakup of John D. Rockefeller’s Standard Oil.
In both cases, prosecutors tangled with the country’s most formidable monopoly, which was bolstered by the immense resources and prestige of the planet’s richest man. Neither Rockefeller nor Bill Gates admitted the legitimacy of the government inquiry or showed any signs of contrition in the face of sustained legal assault. Both men adopted a defiant, unrepentant stance that gratified partisans even as it ratified the darkest suspicions of detractors. And, to complete the often eerie parallel, both men proved to be notoriously evasive and impenetrable witnesses, susceptible to sudden bouts of amnesia under oath.
According to a recent Wall Street Journal poll, Gates’ uncompromising stand has rallied public support in his favor. For all the reams of testimony about Microsoft’s monopolistic behavior, 60% of Americans still endorse Gates as a “positive role model,” and an equivalent portion back his company in the case. Whatever its merits in the court of public opinion, however, Microsoft’s self-righteously assertive strategy has backfired in the court of law. Exasperated by the firm’s intransigence, the Justice Department and 17 state attorneys general have now graduated in their thinking from advocating lenient “conduct” remedies to more draconian “structural” remedies--legalese for a breakup.
It may seem paradoxical that moguls who show faultless judgment in business should so sorely miscalculate in politics. This contradiction isn’t uncommon, as Rockefeller’s career attests. Populist critics perceived him as the malignant agent of big business, stamping out small proprietors to concentrate power in his huge enterprise. But he retained his self-image of superior morality through myriad court cases, legislative hearings and exposes in the muckraking press, not to mention 20 state antitrust actions that preceded or coincided with the main federal case filed in 1906.
Rockefeller launched Standard Oil in Cleveland in 1870, 11 years after “Col.” Edwin L. Drake struck oil in nearby western Pennsylvania. While hundreds of independent drillers pumped oil at a furious rate, leading to a chronic surplus and skidding prices, Rockefeller opted for the steady profits of refining. By the late 1870s, this wunderkind of American business, still in his 30s, had imposed his mastery on nearly 90% of the world’s refineries. He straddled a critical intersection of the industry, much as Gates does today with the Windows operating system. Rockefeller parlayed his refining monopoly into control of the pipelines and railroad tank cars that carried oil, making it futile for independent oilmen to try to bypass the Standard Oil monopoly.
Far from feeling villainous, Rockefeller viewed himself as the savior of an anarchic industry buffeted by boom-and-bust cycles. He was the prophet of a new order that he dubbed “cooperation” but that the trustbusters, to his dismay, labeled monopoly. That Rockefeller was a pious Baptist, with (as he believed) a God-given talent for making money, only strengthened his sense of personal virtue. His opponents, in contrast, struck him as benighted men--barefaced schemers, malcontents and blackmailers--wedded to antiquated notions of “competition.” By no coincidence, Rockefeller approached his philanthropy with the same fervor as business, just as Gates would a century later. Even their charitable priorities--medicine and education--tally.
Having enlisted the Lord on his side, Rockefeller brooked no resistance to his absolute rule of the industry. If he learned through his elaborate intelligence network that independent oil had appeared in a small town, he would issue immediate orders to suppress the interlopers. A hard-driving executive, he imbued his troops with an irrepressible fighting spirit, a relentless desire to win at all costs.
Like Gates, Rockefeller was a superb businessman, filled with the moral certitude and fatal blindness of the authentic visionary. Contrary to our hackneyed view of Gilded Age monopolists, he slashed prices of oil products and improved quality to deter rivals. The bulk of his career unfolded before the 1890 Sherman Antitrust Act, and he managed, with matchless energy, to figure out every conceivable anti-competitive device. Antitrust reformers simply had to study his machinations to draw up a legal agenda.
As the climate shifted toward regulation, Rockefeller found it hard to relinquish the unbridled freedom he’d enjoyed. This dilemma is a recurrent one in economic history. New technologies spawn raucous, freewheeling industries, with young entrepreneurs improvising the rules of the game. When they suddenly reach a scale that attracts the attention of regulators, they chafe at unwonted restraints on their freedom and find it hard to curb their more muscular practices.
Unlike Gates, the reclusive Rockefeller made a fetish of secrecy, never courting, much less enjoying, public adulation. His ideal was complete obscurity. Only in 1906, when the major antitrust case was filed, did Standard Oil deign to hire its first public-relations man. In retirement, Rockefeller became the implausible darling of newsreel cameramen, handing out dimes on cue. Yet, he succeeded in business for the same reason he stumbled in politics: He relied on his intuitions and trusted them implicitly, remaining heedless of public opinion.
Some salient differences in personality distinguish Rockefeller and Gates. Where Rockefeller was laconic, his emotions buttoned up, Gates seems a far more volatile figure. Indeed, it can be hard to square the smiling, boyish guru of the digital age with the often tempestuous boss revealed by the antitrust case. Nonetheless, one senses a fundamental affinity between the two men: a messianic belief that they were meant to dominate their respective industries. As chief theoretician and practitioner of the computer age, Gates has exhibited an incurable optimism, embodied in the company’s current slogan: “The best is yet to come.” He’s never more relaxed or convincing than when evoking the brilliant prospects for software.
It’s telling that Gates’ career originated in his all-consuming adolescent passion for computers. Had he been merely a money-hungry careerist, he would never had dropped out of Harvard to work for a software company that didn’t even pay him a salary. Whether by calculation or chance, he gravitated, like Rockefeller, to the point in the industry where he could exert maximum leverage. By providing an operating system that became the industry standard and prevented dangerous fragmentation, Gates unified the computer world and accelerated its growth.
Very much in the Rockefeller mold, Gates has been detested by rivals and revered by employees. A famously demanding boss, Gates is wont to respond to new ideas with, “That’s the stupidest thing I ever heard of.” Yet, his hypercritical manner has inspired many subordinates to outdo themselves to please the boss, whom they regard as the resident genius. So powerful is the Gates mystique at Microsoft’s Redmond, Wash., campus that many employees apparently find it hard to conceive of defeat in the courtroom. The Gates charisma hasn’t entirely dimmed among young techies, either: Despite the poisonous cloud cast over the company by the suit, Microsoft continues to receive 1,000 job applications daily.
Quite unlike Rockefeller, Gates has long been adored as the boy wonder of American business and credited with restoring U.S. technological supremacy. He manufactures products that are at once potent business tools and magic toys for adults, and he basks in the glow of their popularity. The historic tension between the “masses” and the “classes” that made Rockefeller a boogeyman has largely vanished, yielding to a new glorification of the rich. Workers who might once have recoiled at Gates’ wealth now frequently own Microsoft shares, directly or through mutual funds, and root for this rich man to prevail. As a result, the Microsoft case has been shot through with unusual public ambivalence, whereas the Standard Oil case enjoyed more pervasive support.
Right up until the breakup of the company, Gates, like Rockefeller before him, will adamantly insist that he has done nothing wrong; that splitting up Microsoft will only crimp innovation; and that his company will prevail on appeal. Genuinely baffled, he will regard his tormentors as vengeful rivals or ambitious prosecutors. There will be no sudden conversion to the government’s case, no second thoughts about past behavior. This shouldn’t surprise us, for it was Gates’ unwavering refusal to compromise that created Microsoft in the first place. His lifelong strength in business has now ended up as his tragic flaw in the legal realm. Visionaries simply aren’t cut out for the smooth arts of compromise. *
