APRIL 1, 2004
Timing is Everything
Look at Anti-Trust Law as a Digital Design and -- Guess What -- Microsoft Wins
By Robert X. Cringely
SourceLast week, Microsoft was slapped by the European Union with sanctions and a $600+ million fine for anti-trust violations. Readers have been asking me what this really means. But Microsoft's troubles extend beyond Europe. There are signs of strain in last year's DoJ v. Microsoft anti-trust settlement. And while Redmond has settled many private and class action anti-trust lawsuits, several more are continuing. This would seem like not a good time to be Bill Gates. On the contrary, this is a VERY good time to be Bill Gates, because Microsoft is winning every case. Not only are they winning, in fact they've already won. Sure, the verdicts aren't all in, and in some cases, the jury hasn't even been chosen, and there is even the very real prospect that some verdicts will appear to go against Microsoft, but that doesn't matter: Microsoft has already won, by which I mean that Microsoft literally can't lose. It's just that until now they are the only ones to have figured this out.
There was a time, years ago, when I actually worked for a living. I did a little software, did a little hardware, and while I wasn't the best at any of it, I got by primarily on, of all things, my skills in geometry. Something of an idiot savant, I was so bad at math and so good at geometry that, of course, I reduced everything I could to a geometry problem. And it turns out that geometry, at least as I practiced it back when I did practice it, was particularly useful for understanding the timing of digital circuits and the biorhythms of software. I believe that in today's world circuit libraries and object-oriented code such timing is something of a lost art, but the results back then were that my efforts, crude as they were, often got to the finish line first just because in computers, as in comedy, timing is everything.
What this has to do with Microsoft's legal situation is simple. Forget about looking at Microsoft's legal problems as, well, legal problems, and start looking at them as a digital design problem. Business itself is just a big computer program with the computer being our economy or maybe our entire culture. There are inputs, outputs, variables, coefficients, values, and constraints. Most of these are analog, but if we forget for a moment the business of business and think only of the business of law, suddenly the design becomes all-digital. That's simply because laws are made up of yes's and no's which are effectively zeroes and ones -- a binary system. Even the fuzzy logic of legal opinions can be reduced to digital values since someone inevitably wins while someone else loses, no matter how many words are involved in explaining the outcome.
Timing comes into this because doing work (even legal work) takes time, and the time required for some work is more flexible than for others. Think of it in hardware terms as discrete devices that can only work so fast, plunked into designs where something can't start until something before it ends.
Good design is like figuring out the timing of traffic lights such that driving a steady 38 miles per hour gets you green lights all the way through town. Bad design is like having to punch the accelerator or slam on the brakes over and over again to achieve that same average 38 miles per hour. REALLY bad design is not being able to go fast or slow enough to average 38 so you miss a few lights and finish later even though your car may actually be the fastest of all. Sometimes you go nowhere at all.
Now let's apply these admittedly poorly defined principles to anti-trust law and to Microsoft in particular. I have no idea whether anyone at Microsoft has done this same exercise, but I'd bet they have. Nor does it matter whether they've done the exercise or even thought of it, because the result will still be the same.
In anti-trust law the actors are individuals, companies, and regulators. The clock rate of the overall system was defined no later than the 1930s when the most recent anti-trust laws were passed. The primary data bus is provided by the U.S. Mail. And here's the most important part of all: coefficients were set too long ago to be effective in the case of Microsoft or any Microsoft-like entity. Finally, there is almost no way to optimize the system, which is filled with extraneous wait states and timing loops that slow it to a crawl because lawyers are paid by the hour. Justice may be blind, but she is also slow.
None of this should matter if we believe to be true the idea inherent in law that the courts can always redress infractions even in cases where victims are dead. Sure the system is slow, little Eolas tells itself, but all the while Microsoft is being assessed interest on that $520 million punitive damage award, so if it isn't paid for years, that hurts Microsoft more than Eolas. At least that's the idea which is, of course, nonsense.
In practice, it doesn't work that way, and not just in America. Take this example of the European Union fining Microsoft. It looks tough, but Microsoft gets to appeal, remember, and this particular part of the EU bureaucracy has been reversed on appeal two out of the last three times. So whatever the fine, Microsoft has two-to-one odds of not having to pay it, or at least of having it substantially reduced. And while the fine looks like a lot of money, to Microsoft it isn't. That $600 million is the amount by which Microsoft increases its cash hoard in TWO WEEKS. Even if the EU had hit Microsoft with its maximum allowable fine of 10 percent of gross global turnover or about $3 billion, it wouldn't have mattered. Paying a $3 billion fine to keep moving a $10 billion annual European cash machine that yields $7 billion in annual profits is a no-brainer. Would you pay $3 billion knowing that doing so would bring in a net profit of $4 billion PER YEAR, especially given the likelihood that the final judgement would be reduced or eliminated entirely? OF COURSE you'd pay the $3 billion, anyone in that position would. And nobody in that position, having paid the $3 billion (or $600 million) would put much effort into real compliance, since THAT's the thing that threatens profits, not paying artificially-capped fines.
So Microsoft will pay the European fine, which will have no impact on their behavior. They will appeal the decision, which will freeze any real enforcement action and effectively authorize continuation for another two to five years of otherwise proscribed behavior while the appeal moves forward. And if its European appeal fails, Microsoft will still be $8-20 billion ahead of where it might be had they actually attempted some version of compliance, which they won't. By that time, too, enough will have changed that Microsoft will have good grounds for arguing that it’s a different world and just maybe all parties should start again from scratch.
Much the same thing is happening in the U.S., too. Microsoft is laboring under a consent decree ostensibly being monitored by Harry Saal and his team up in Redmond, but I'm hearing enough grumblings through friends of friends to believe that Microsoft isn't paying a lick of attention to complying with that agreement. Why should they? Compliance just slows the company down without providing Microsoft any advantage. While it may look like the company agreed to comply, what is really happening is the company agreed to be bound by certain requirements, not necessarily to comply with them. At the end of the day, they can always opt for what's behind door number three, which is the DoJ's punishment for noncompliance. But Microsoft knows that any such punishment won't be enough to reverse the gains of noncompliance, and that there is a good chance there will be no punishment at all.
Viewed as a digital system, Microsoft gains more from noncompliance than from compliance. Microsoft risks less through noncompliance than it would through compliance. Dynamic action gives Microsoft effective control of the master clock because wait states can always be added by hiring more lawyers. And if all else fails, Microsoft can always pull up stakes and move to some other country, the very threat of which would stimulate a frenzy of political ass-kissing that could ultimately result in Bill Gates being named king of somewhere or other, possibly even of the U.S.
Justice is blind, slow, and unequal. What makes this possible is a legal system designed for the late 18th century and operated by a government that effectively believes that while antitrust matters to individuals and companies its effect on nations cancels out. Only it doesn't if the companies involved are as big and powerful as Microsoft or Intel or Wal-Mart -- companies of near-infinite resources and near-total fixation on executing a global strategy.
There are only two ways for a society to address such taking advantage of a legal system. One way is to drag that legal system into the 21st century, which isn't going to happen in America. The other way is to dramatically simplify the legal system along the lines of nomadic justice where there are no prisons nor even capability for collecting damages, so all correction comes down to death or maiming. That isn't going to happen, either, so Microsoft wins.