Bill Gates Secret to Success: Cheating

The NYT had a brief assessment of Bill Gates career in building up Microsoft as he prepared to leave his position with the company. The article mentions the anti-competitive practices that caused it to lose an antitrust suit in connection with its Internet browser. However, it did not discuss the earlier practices that helped give Microsoft near monopoly status in the operating system market.

In the late 80s, Microsoft signed contracts with several major computer manufacturers under which they got a discount price, but agreed to pay Microsoft for every computer they shipped, whether or not it included the Microsoft operating system. This meant that the marginal cost of including the Microsoft system was essentially zero, since the manufacturer had already paid for the system, even if she decided not to use it. The result was discourage the use of any other operating system. This could have prevented an erosion of market share that could have resulted if other software companies sought out niche markets.

Microsoft was investigated for these contracts by the Justice Department and in 1993 signed a consent decree in which it agreed to not write any more of these contracts (after Microsoft had already captured 90 percent of the operating system market).

It would have been worth mentioning this background in this piece. Gates benefited enormously from the willingness of the government to ignore violations of anti-trust law during his rein at Microsoft. If he had tried the same business practices at other times, he might be going to prison rather retirement.

--Dean Baker

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