Don't Be Evil
Monday, March 2, 2009 at 02:09PM The phrase “Don’t Be Evil” is Google Inc.’s corporate motto. The slogan was reportedly created by Paul Buchheit and Amit Patel (the creators of Gmail) who stated that the catch phrase is a “bit of a jab at a lot of the other companies, especially our competitors, who at the time, in our opinion, were kind of exploiting the users to some extent.” Google has become a fierce competitor of Microsoft in the search engine market and web based email market. The new products that Google brings to the market place is convincing evidence that despite Microsoft’s size and strength, there is always room for new companies to competitively offer consumers new products which are cheaper, better, and more enjoyable to use. The only requirement for competitive success is to allow companies like Google and Microsoft the freedom to sell their own products on their own terms. It is hard to deny that Google has been a ‘good’ company by creating programs that are better than their competitors. However, Google has recently violated its motto by intervening as a third party in support of a European Union antitrust complaint against Microsoft. In supporting the European Union’s attempt to disallow Microsoft from selling its own products on its own terms (i.e. to bundle Internet Explorer with the Windows operating system), Google is engaging in anti-competitive behavior. Google is attempting to get an unfair advantage, not by creating better products, but through government pull and coercion.
Antitrust laws in America and Europe were created based on the socialist premise that unregulated markets might inevitably lead to private monopolies. It has been argued that these private monopolies could then charge arbitrarily high prices as smaller companies would not be able to effectively compete against them. In fact, no large company is immune to market forces under a system of true capitalism. When a company charges arbitrarily high prices, opportunities are created for competitors to enter the field and offer cheaper and in some cases better alternatives. Similarly, a consumer is always free to reject a product or choose an alternative product based on price, preference, and/or utility. It is extremely difficult, if not impossible for one company to maintain long term dominance without lowering prices and continuing to innovate in the face of competition from new innovators.
The computer industry is a perfect example of how the free market reacts to dominance by one company in a particular field. In the year 2000, the US Justice Department labeled Microsoft an ‘abusive monopoly’ and filed suit against the company, seeking to break it up into smaller units among other restrictions. Although a settlement was eventually reached in that case, the government’s decision to bring suit was based on arbitrary laws and false premises. The lawsuit against Microsoft was coercive and counter productive. In time, Microsoft’s dominance was decreased significantly by Apple’s Imac brand of computers, advances in mobile computing, and the advent of web based computing driven primarily by Google. Apple’s Ipods continue to outsell Microsoft Zunes by large margins, Apple computers (and it’s associated Mac OSX) have gained over 8% of the laptop and desktop market and google continues to out-compete Microsoft in search engine revenue. In addition, Google’s gmail is used more frequently than Microsoft’s own Hotmail. These are just some examples of developments that have put Microsoft on defense and have caused them to lower prices and offer better and cheaper services in response.
One of Microsoft’s strengths includes its wide base of Windows users. Microsoft has every right to dictate terms of use of the Windows program to prospective customers. This includes bundling the Internet Explorer web browser within Windows. If the consumer doesn’t like the terms of use, he/she is free to buy an Apple computer or even use another browser within Windows such as Google Chrome or Firefox. While Microsoft is free to make Internet Explorer the exclusive browser for Windows, this decision would likely cause other operating systems that offer multiple web browsers to increase in popularity and sales. The point is that when a company restricts the use of its product, opportunities are created for competitors to market new products without those restrictions.
The only real monopoly is a coercive monopoly in which companies are forbidden by the government from conducting business on their own terms. Every coercive monopoly that has existed was created by government intervention either through subsidies, grants, special privileges, franchises or legislative action. When government controlled coercive monopolies occur, real distortions are indeed created in the market which require subsequent regulations by the government and an expansion of government power. A government's action in barring other companies from entering a certain field permits the monopoly with 'special privileges' to charge high prices and offer inferior products without fear of being outsold by competitors. This results in less efficiency and more expensive goods and services for consumers. Some government created monopolies exist today in energy companies, taxi cab regulation, and liquor stores to name just a few.
Ayn Rand once wrote that “Free competition enforced by law is a gross contradiction in terms.” The European Union’s antitrust complaint against Microsoft violates Microsoft's right to offer its own product (Windows) on its own terms to customers. Google’s explicit support in aiding the European Union’s antitrust case against Microsoft is anti-capitalist, anti-liberty, and immoral. The one way for Google to redeem itself is to follow it’s OWN motto.
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Reader Comments (5)
Google may tout themselves as a "good" corporation, but they are still beholden to their shareholders - so can you really blame them for trying to even the playing field? The American & EU courts have already established that Microsoft holds a monopoly in the OS market & illegally leverages this position. The truth is that Microsoft was using its monopoly in one market (the OS market) to gain dominance in another (the web browsing market). PC Makers & OEMs were prevented from installing alternative (superior) browsers, after Microsoft intimidated them with outrageous license fees to only bundle IE. Linux & MacOS are alternatives to Windows, but they are not always realistic choices when your job requires you to learn & use Windows. Since Microsoft is a convicted monopolist, competitors such as Google certainly have the right to expect enforcement of all appropriate laws. For this reason, I don't think you can fault Google. Hell, Microsoft itself recently interfered with hearings on the proposed Google/Yahoo deal, and lobbied against Google's acquisition of DoubleClick, claiming it was anti-competitive and would hurt innovation. What goes around comes around.
You may argue that Microsoft is NOT a monopoly (and there is some merit to that argument) - but this does not seem to be your position at all. Instead, your basic premise is that all companies should be allowed to sell products "on their own terms", and essentially that IT DOESN'T MATTER that Microsoft is a monopoly. This is an important distinction.
You state that "A consumer is always free to reject a product or choose an alternative product based on price, preference, and/or utility". Your blind faith in market capitalism is telling. I would argue that it is not always true that a consumer has choice. Consumers may have more leeway on luxury items, but sometimes the consumer DOES NOT have choice for essentials, such as heat, electricity, medicine, etc. You wrongly assume there is always a viable alternative. Monopolies can undermine the free market, and capitalism works better with competition. You might argue that Microsoft is not a true monopoly & should be entitled to bundle it's own web browser, but I don't think you can successfully argue that ALL monopolies should be allowed to thrive without intervention.
To respond to some of your questions - yes, I can blame Google for acting immoral. In the extreme case, one could argue that Google would profit by hiring a hitman to assassinate Bill Gates or other important Microsoft executives. That does not make their actions moral despite the potential advantage to Google's shareholders.
Your second statement - The US Justice Department has not "established" that Microsoft is a monopoly. It claimed that Microsoft was engaging in monopolistic behavior and demanded they take arbitrary steps to decrease that behavior. There was eventually a settlement after the Appellate Court reversed the lower court's ruling 'convicting' Microsoft of being a monopoly. At least that was back in 2000. The EU is now attempting something similar and is hearing arguments on the subject. One main point implicit in the article and made explicit here, is that the laws in this area are arbitrary and in essence inappropriate and it is therefore immoral for Google to push for their 'enforcement'. I recommend reading the chapter on 'monopolies' and 'antitrust' laws in Ayn Rand's Capitalism the Unknown Ideal. With regard to the 'appropriateness' of the antitrust laws, Ayn Rand has stated the following -
"Under the Antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly or for a successful “intent to monopolize”; if he charges prices lower than those of his competitors, he can be prosecuted for “unfair competition” or “restraint of trade”; and if he charges the same prices as his competitors, he can be prosecuted for “collusion” or “conspiracy.” There is only one difference in the legal treatment accorded to a criminal or to a businessman: the criminal’s rights are protected much more securely and objectively than the businessman’s." -Ayn Rand.
On to your next point - I'm not trying to make a distinction whether it is OK that Microsoft is a monopoly. I am saying that the very concept of monopoly is invalid in a free market and only applies when the government intervenes in the economy. See below quote from Ayn Rand -
"A “coercive monopoly” is a business concern that can set its prices and production policies independent of the market, with immunity from competition, from the law of supply and demand. An economy dominated by such monopolies would be rigid and stagnant. The necessary precondition of a coercive monopoly is closed entry—the barring of all competing producers from a given field. This can be accomplished only by an act of government intervention, in the form of special regulations, subsidies, or franchises. Without government assistance, it is impossible for a would-be monopolist to set and maintain his prices and production policies independent of the rest of the economy. For if he attempted to set his prices and production at a level that would yield profits to new entrants significantly above those available in other fields, competitors would be sure to invade his industry."
Admitting that Microsoft has achieved a dominant role in the OS market and/or browser market is not the same thing as saying other competitors are physically 'barred' from entering the field. Google, or Apple, or Linux can have their own browsers, operating systems or a combination of both to offer customers as against Windows and Internet explorer. Punishing Microsoft for having consumers choose Windows and Internet explorer on the terms offered is punishing Microsoft's success. It's punishing the good for being the good. It doesn't matter that Microsoft was able to exert 'leverage' to convince pc makers to sell Windows on terms favorable to Microsoft. Should starbucks be forced to carry Dunkin Donuts in its stores instead of, or in addition to its own brand snacks/cakes?
I agree that Microsoft may be no less guilty than Google in trying to gain an advantage by government coercion. I chose Google for this article because of their stated commitment to their motto and their recent behaivor, which stands in total contradiction to that motto.
On to your last point. It's ironic that you would bring up the fields of 'essentials' where you state consumers don't have a choice - i.e. electricity, medicine, heat, etc. Have you ever wondered why it is they don't have a choice? Those industries you mentioned are the most heavily regulated industries in existence and it's very difficult for new companies to enter the field because of government coerced barriers to entry. There are so many ways in which the government has ruined these fields that it is too much to go into here. If there are monopolies in those fields, it's because the government made it that way, not the other way around.
Some succinct points:
* I am very glad that you are not the CEO of any company I own shares in. The goal of a company is of course to generate profits, & make the best business decisions for its shareholders. It's purpose is NOT to blindly follow Ayn Randian political ideologies in the name of some imagined morality. Equating the hiring of a hitman to a company requesting enforcement of court decisions is not exactly in the same category, and you well know that.
* It is not Google's job to play the role of the courts & determine which laws are "arbitrary" or "inappropriate and therefore immoral" as you write. Don't hate the player - hate the game!
* Your statement that Microsoft is not a convicted monopolist is false. The appeals court did not overturn the findings of fact. Merely the scope of liability. The court held that 1) Microsoft poses a monopoly. 2) Microsoft leveraged their monopoly in violation of the law. 3) The guilty verdict is sound. 4) Breaking up Microsoft is not an overly harsh penalty & could be re-imposed.
* Microsoft was not found guilty for having success & for having users "choose" Windows & IE. They were punished for using their position to strong-arm OEMs & use their OS market position to break into the Web Browser market - in addition to bundling, they intentionally introduced incompatibilities with established web standards, forcing other web browsers to compensate. I'm not 100% convinced Microsoft should have been convicted as a monopoly, but they clearly were convicted for more than just "their success".
* I did not bring up essentials (heat, electricity, medicine) as examples of monopolies. I brought them up to demonstrate that consumers do not always have the option of refraining from a purchase. You stated "A consumer is always free to reject a product". If regulation was not in place here, what would stop the producer of your life-saving medicine from predatory price-gouging? What would stop your utility company from doubling or tripling your rates if your only alternative was to sit in the dark? (Not an option if you have children). You may say that this provides an opportunity for other companies to sweep in and offer lower prices - but the truth is that without infrastructure in place, this is not feasible.
* Your view is that the concept of monopoly is invalid, which is a direct contradiction of our current antitrust laws. You are entitled to your viewpoint here, but don't blame Google for agreeing with our court system.
"I brought them up to demonstrate that consumers do not always have the option of refraining from a purchase. You stated "A consumer is always free to reject a product". If regulation was not in place here, what would stop the producer of your life-saving medicine from predatory price-gouging? What would stop your utility company from doubling or tripling your rates if your only alternative was to sit in the dark?" -Dan S.
Products and services do not exist without human thought, effort and labor. To have a right to a product or a service is to have a right to another human being's time, energy and effort. This definition of rights is a contradiction and it destroys the concept and purpose of individual rights and makes slaves out of everyone. The life-saving medicine you refer to would not exist at all if someone had not invented and produced it. The fact that it may now exist does not mean that those who are sick have a right to it anymore than they did before it existed. The producer of the medicine has a right to his product and with that right he can charge whatever he would like - even if it means no one can afford the medicine he created. The reality is that the producer will likely charge a price that enables him the greatest profit and this price point will likely be affordable to many people so as to maximize his profits.
The possibility of having a Monopoly (dominance in a particular market) in the absence of government intervention and the threat of physical force is the moral right of the producer. While it is true that initially people may pay more during the introduction of a revolutionary product or service, it is also true that without the company, the product or service may never have existed. In a free market it is impossible to be immune from market forces. The opportunity for alternatives always exists. A dominant company today may be a failed company tomorrow if it does not compete in the market place in both better products and lower prices. It is when the government gets involved with the market, controlling prices and supply that problems arise - namely shortages, ultimately higher prices and an overall lack of innovation.
Yes, I agree with Josh W. Some more clarifications -
- A main point to the article is that the antitrust laws are arbitrary and immoral. They are immoral because they violate the property rights of the owner and arbitrary in their application. Google does not have a choice as to whether the government will one day arbitrarily declare gmail a monopoly simply because it comes bundled with Google Docs and Google Reader. However, Google does have a choice not to aid the infliction of injustice on another company competing freely in the market place. And yes, the concept of a private monopoly is invalid and our anti trust laws do contradict this fact. It is not I who am guilty of contradiction. It is the government and the antitrust laws which are contradictory and immoral. I don't debate that the laws exist, I am declaring them immoral and arbitrary as it is impossible for a company to 'really' know when they are in violation. A company only knows they are in trouble when the Justice Department feels like playing monopoly.
-As to the specific facts of the Microsoft case back in 2000, Judge Jackson's decision was indeed overturned. The findings of fact were a minor issue and were never seriously in dispute. Microsoft never 'denied' that they were packaging IE with Windows or that they used certain leveraging tactics with original equipment manufacturers etc. It was the significance of the facts, and the 'scope of liability' that formed the crux of the case. The scope of liability is another way of saying 'the extent to which Microsoft could be termed a monopoly." This scope was an arbitrary one as the law itself is arbitrary and even the government eventually realized this and did not end up breaking up Microsoft into 3 companies. The absurd motivation of the government was realized by many economists.
-A full-page ad run in The Washington Post and The New York Times on June 2, 1999 by The Independent Institute delivered "An Open Letter to President Clinton From 240 Economists On Antitrust Protectionism." It said, in part, "Consumers did not ask for these antitrust actions - rival business firms did. Consumers of high technology have enjoyed falling prices, expanding outputs, and a breathtaking array of new products and innovations...Increasingly, however, some firms have sought to handicap their rivals by turning to government for protection. Many of these cases are based on speculation about some vaguely specified consumer harm in some unspecified future, and many of the proposed interventions will weaken successful U.S. firms and impede their competitiveness abroad."
-Microsoft was truly prosecuted and dragged through the mud for their success. There is no reason Apple shouldn't also be dragged to court for enabling safari to be downloaded for free with OSX except for the fact that consumers don't use safari nearly as much as Internet explorer and other browsers.. yet.
On to your next point -
"If regulation was not in place here, what would stop the producer of your life-saving medicine from predatory price-gouging?"
The answer is that competition from other providers of life saving medicines or the threat of competition would stop predatory price gouging. The regulation keeps other competitors out of the field and is most often the cause of higher prices and shortages. Josh W has stated clearly that there is no right to products and services that exist but for someone inventing them. If I think up the cure for cancer tomorrow, does the government have the right to hook me up to a mind reading device, steal the knowledge of the cure from me or force me to divulge my knowledge or give it away for free?" Why should people have to pay anything for it after all? Aren't all prices "predatory" when it comes to curing cancer?