The roots of all evil: Apple, Google, Intel, and Microsoft

George C. Scott as Gen. George S. PattonAmericans love a winner, and will not tolerate a loser.

- General George S. Patton (as portrayed by George C. Scott)

Throughout the information technology industry, there has been a certain pathology that somehow precludes any segment of it from evolving in any pattern other than consolidation, centralization, and the investment of authority and leadership in a dominant power. With every new market segment that's ever come into fruition -- "PC clones," laptops, smartphones, applications, operating systems -- the initial players can be scattered across the field like seeds strewn randomly in a flower bed. Once they coalesce, the pattern tends to look the same: a few dominant players, but usually just one, with the rest searching for new ways for their marketing or legal teams to plea for fairness and relief.

The argument against any government regulation of technology markets is that, left to their own devices, businesses will seek their own level of competition, manufacturers will develop their own unique strengths, and customers will decide for themselves which one provides the best product or service. Yet historically that has always been half-true: Left to its own devices, a technology market will always wind up with a dominant player, whether it's by accidental circumstance, fair competition, or fiendish design.

Markets make dominant players in order to have a center of activity -- almost every strategy among vendors leverages the dominant player's position either toward mutual goals or opposite goals. You'd think it would be nice if governments seeking to regulate the activity of dominant players could find them wholly guilty of the circumstances that led to their unfair success, and present to public scrutiny the evil motives and terrible plans that led to their rise to power. And yet it's never happened that way:

  • Intel. As documents emerging from antitrust proceedings against it in Europe, Asia, and from AMD in the US indicate, Intel probably did make deals with its customers for exclusivity or near-exclusivity. Yet those documents also very clearly indicate that it was Intel's customers themselves who specified those terms, like a would-be victim who gives the bank robber the gun to hold to his head, asking him to make him open the vault so he too can get a share of the loot. Customers such as Dell and HP were willing to buy CPUs in quantity, and appear to have been auctioning their virtues to the highest bidder. Intel's customers constructed its platform of dominance during the 1990s and early 2000s; they paved the way for it to become an exclusive supplier, to tip the scales against AMD. They fostered Intel's desire to win and they used it to their advantage. Any government seeking to assess Intel's liability for creating an unfair market must take into account the conduct of its customers for their mutual role in its creation.
  • Apple. There is absolutely no question about the fact that Apple won the digital music market, and is leveraging that stake to gain a big share of the smartphone market, through its brilliant marketing strategy and fabulous designs. But Apple knowingly, intentionally, and probably without malice rushed into a void left by its competitors. Apple did not create the MP3 player, but it was capable of building a digital music empire that continues to undermine the existing business model for media, mostly because it accurately assessed the short-sightedness of competitors in not reconstructing that business model for themselves. With Macintosh, every tenth-of-a-point of market share gained for Apple has been a hard-fought, bloody slog. But with iPod, Apple walked into a market that no one else was willing to build, and was immediately welcomed as the dominant player. Instantly Steve Jobs became the icon of the revolution, whereas with about 20 minutes more foresight, it could just as easily have been Michael Dell.
  • Google. In the history of cakewalks, however, Apple's will not be the most astounding. The Internet has really never had a viable, long-term business model. Almost every company whose revenue is dependent upon the Internet, rather than just invested in it as a side venture, perceives what it's doing now as a stopgap or an interim business, in lieu of what it can or should be doing once the "Second Bubble" bursts or the recession ends or someone else comes up with a better idea...or when Google invents it. Google has been everyone's savior. It's the lovable giant, the big daddy, the central source from which all fairness springs forth. It has cleaned up everybody's mess. When no one was successful at building "portals," Google created a big one for everyone. When no one could sell ads for themselves because it meant having to differentiate and strategize and all those...thinking things that require brainpower, Google stepped in and sold ads for everyone. When publishers couldn't find a way to build libraries, Google said, we'll make a digital Alexandria just for you (whether you're dead or alive). If only publishers and manufacturers and vendors and advertisers and governments could just let go and let Google, it would be just so happy to take care of everything for us while we have our nappy-time.
  • Microsoft. The road to power for Microsoft has always been paved by the blunders, errors, and completely foolish ideas of its adversaries. Everyone knows now that Microsoft came into being through the short-sightedness of IBM. And along the way to software market dominance, it made severe errors in judgment and committed illegal acts. But the facts that Windows is the dominant operating system, that x86 is the dominant CPU architecture (because it runs Windows), that Office is the dominant applications suite, and that Exchange and SQL Server are becoming the sources for digital communications and digital storage, respectively, are due to the most obvious reasons of all: This is what Microsoft's customers want, and no one else ever stays in a position of competitiveness long enough to offer a reasonable, affordable, working alternative. WordPerfect and 1-2-3 and, as time goes on, Oracle didn't lose their dominance entirely because Microsoft drove them into the ground; it's because they had their own shovels and, for whatever reason, dug their own graves. Microsoft leads, in markets where it does lead, because it lets its competitors fail on their own account. And in markets where it doesn't lead, it almost doesn't matter all that much.

The reason there are dominant players in IT markets is because we made them -- we the customers, we the OEMs, we the software developers, we the Internet users, we the readers. And the reason we made them is because we wanted to make them, and circumstances favored these candidates at the time and not others. If not for maybe a missed appointment here or a botched marketing campaign there, Motorola, Dell, Yahoo, and Digital Research could have been the subjects of this column.

We talk about "net neutrality," as if our goals for any one technology market have always been to level the playing field, favor no one, and let the best design concept succeed through the merits of pure and fair competition. But who are we kidding? In what other competitive field do we not seek a dominant player -- a majority party, a "most-watched network," a "nation's team," a "best seller," a "blockbuster," a "guaranteed hit?" We expect Darwin to select the survivor, but then we always rig the ballot box. In the absence of a dominant player, we will appoint one.

I was in the room for the unveiling of the world's first clamshell portable computer, the Data General One. It was a thing of beauty, or so it seemed, being able to boot up DOS from any place with an electric outlet. Too bad, an analyst told me at the time, because once IBM sees this it'll do it too, and Data General will be a remnant of history and IBM will own the market. Why? "Come on, seriously?" the analyst returned at me, like I just fell off a turnip truck. "Tell me you see the pizza-box computer market being owned by Data General!"

Nearly three decades later, the need persists for a dominant player, if only to generate Web site traffic. In market segments where a dominant player doesn't develop itself organically, publishers and bloggers often strive to invent it artificially. In data storage, for example -- a segment which editors have historically found dull, and have even used to banish writers they don't like, like stationing them in Siberia -- from time to time, the talk among editors will inevitably turn to, "What dirt can we get on EMC?" If only EMC could be framed as some kind of Microsoft or Apple or Intel, with an evil moustache and a pocket protector and electrical tape holding up its glasses, we could centralize our focus, get commenters to start bashing someone...and we'd really get traffic.

To some extent, a great deal of so-called "technology news" -- or at least the chunk of it that people actually read -- isn't even really about technology (tell me you read our series on high-k-plus-metal-gate fabrication). It's about the dominant player, or when dominant players collide as was the case with Google Voice on Apple's iPhone, or when dominant players flounder in unfamiliar territories. Just the word "Zune" excites exponentially more readers than will ever own a Zune or touch a Zune. In the IT news business, there has been one word for fair markets: boring. So even when companies make fair deals with purely benign, mutually advantageous goals -- for instance, between Microsoft and Novell, or Microsoft and Yahoo, or Google and Verizon -- even in the absence of any evidence of unfairness or collusion or anti-trust activity, people will inevitably invent it.

The biggest irony there is in this entire scheme is that every government investigation involving a dominant player using its dominance to obtain more dominance, has been conducted in the name of protecting something called "competition." In the real world -- in the world that has existed for millennia, since the distant ancestors of Steve Jobs and Eric Schmidt swung from trees -- since when has competition not been about winning? And how can anyone win without, at some point, whether by accident or its own design or someone else's design or perhaps, just perhaps, by necessity...becoming dominant?

Imagine there's no dominant player. I wonder if you can.

The viewpoints expressed here are those of Scott M. Fulton, III, who is solely responsible for his content.

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