When being bad is good business

Microsoft has been just plain bad in the world of business for a long time. They break rules, abuse monopolies and starve or absorb entire industries right and left. They’ve got strangleholds in dozens of tech markets and leverage them all to acquire even more. They get caught all over the world − you relatively often read of Microsoft in court or paying fines − but they continue to do business exactly the same way.

Why is that?

The answer is relatively obvious, but Timing is Everything by Robert Cringely strings together some numbers to back it up: because it pays. Crime really pays for Microsoft; there hasn’t been a punishment handed out that makes obeying the law more cost-effective.

Take the recent fine levied by the EU against Microsoft in a ruling that determined that Microsoft had abused its monopoly position in Europe:

“…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.”

And that’s only assuming Microsoft ever pays the fine. As with all their other court decisions, it will, of course, be appealed. It will, of course, linger in court for a long, long time. The punishment is just so small compared to the astronomical profits they rake in for breaking the law. The US anti-trust decision of a few years ago is still in appeal, despite the laughable sentence exacted on Microsoft by a corporation-friendly justice department. They aren’t complying with the restrictions laid out in that decision, either.

“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.” That’s an important difference lost on most fans of Microsoft. Just because they accept their sentence doesn’t mean they aren’t going to do it again (or aren’t in the middle of doing it). In a person, that would be pathological. In limited liability capitalism, that’s the best way to run a large firm and reward your investors.

Morals? Ethics? Can’t you see we’re running a business? Make your own business and compete. Let the market decide. Don’t you believe in a free market? Sink or swim. If you can’t stand the heat, get out of the kitchen, baby. It’s not cheating if you don’t get caught. If you do get caught, use your “Get out of jail free” card and keep on playing!

In the EU case:

“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.”

And no one can stop them because what else can you do? You fine them according to the law. The law does not account for simply this kind of egregious “taking advantage of a legal system”. If the US got really harsh on them (bear with me while I spin a small fairy tale), Microsoft could threaten to “pull up stakes and move …, the very threat of which would stimulate a frenzy of political ass-kissing”.

Yeah, they’re that big; how’d you like to be the politician that made Microsoft contribute less to the economy? Yeah, I thought so. Have a happy retirement, Senator.