Monday, January 09, 2006

Microsoft Bashing - CATO Unbound Style

Another consequence of digital brittleness and lock-in is that more niches turn out to be natural monopolies than in previous technological eras, with Microsoft once again being a celebrated example. I call these niches "Antigoras," in contrast with the classical idea of the Agora. An Antigora is a privately owned digital meeting arena made rich by unpaid or marginally paid labor provided by people who crowd its periphery.

Microsoft is an almost ideal example, because users are dependent on its products in order to function in cooperation with each other. Businesses often require Windows and Word, for instance, because other businesses use them (the network effect) and each customer's own history is self-accessible only through Microsoft's formats. At the same time, users spend a huge amount of time on such things as virus abatement and glitch recovery. The connectivity offered by Microsoft is valuable enough to offset the hassle.

All of you users of Microsoft’s ubiquitous Word – let’s try an experiment.  Click File – Save As.  In the dialogue that says “Save As File Type” click the little down arrow to the right and take a look at how much interoperability Microsoft has built into its word processor.  Look at how easy they have made it to user competing software.

Microsoft is all but daring you to use something else.  You can interoperate with other people that can read text files (txt), rich text files (rtf), xml files and html files.  And who can’t read an html file?  Back in the days when people actually used Word Perfect you could share those files too.

The problem is not that Microsoft is a natural monopoly but Microsoft has created a product that people like to use with all of the features that they need.  The economics of scale help tremendously in this regard – they have dedicated teams that code the menu system and the help system and similar sub-components.  This allows the developers of the word processor to focus exclusively with what is important in a word processor.

There are free products that do what Word does – Sun Office being the most well known, it just doesn’t do it as well as Word does for most people.   The market has not given Microsoft a free-ride because of some inherent flaw in the computer software marketplace, the free market has consistently rewarded Microsoft for developing innovative software that meets the needs and wants of its customers.

Until a company steps up and develops software that is BETTER than Word, it will continue to be the de facto standard word processor.

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