The Books: The New Gilded Age: The New Yorker Looks at the Culture of Affluence, edited by David Remnick; ‘Hard Core’, by Ken Auletta

Next up on the essays shelf:

The New Gilded Age: The New Yorker Looks at the Culture of Affluence, edited by David Remnick

A 40+ page essay by Ken Auletta about Bill Gates, Microsoft, and the anti-trust action against Microsoft in the 1990s. Microsoft had always been loved and hated in equal measure, and this was not the first time that the company had been accused of being a monopoly, but events had certainly escalated and the eyes of the world watched as Microsoft was dragged into the court of public opinion, and the actual court, to defend its practices. The Department of Justice headed up the investigation, although the Federal Trade Commission had also been on Microsoft’s tail for the greater part of a decade.

In college, the best class I took (outside of acting classes) was on the Industrial Revolution, and there was a giant “unit” on the passing of antitrust laws, in reaction to the giant monopolies created by the Barons of the Industry. Ron Chernow covers the Rockefeller trial in detail in his wonderful biography of John D. Rockefeller. It was a fascinating time in American history: where competition bucked up the underlying desire for fair-ness. And what happens when a company so dominates, and its practices are so rapacious, that it begins to squelch the important aspect of competition? And diversity of choice for the consumer?

It’s been a while since I read this huge piece on the Microsoft trial, and so many of the details are lost, although we all know how it turned out. I switched to Mac in 2006, after years of being a PC person, and I’ve never looked back. At my various jobs, I usually have to work on a PC and I find Microsoft quite annoying and unnecessarily so now. The “update” to Microsoft Word was so opaque, so ridiculous, that I actually had to ask someone where the “Save” button was. That is NOT a good update, Microsoft. I’ve been a User for years. You’re supposed to make it simpler, more intuitive. But I’m not particularly up to date on the workings of Microsoft now. And it’s not really relevant anyway.

Auletta’s piece is a massive accomplishment of research. He spent time with Gates, he spent time on the Microsoft “campus”, he described the culture, went to the meetings. He lays out the history of Microsoft, and its issues with its competitors from the get-go.

The issue in United States vs. Microsoft was the “bundling” practices of Microsoft, making everything a package deal: The browser was bundled with the operating software. This, essentially, cut out competitors in the browser market. Microsoft, in this way, killed Netscape, and I’m sure many others. It was easier for companies to order the bundled software/browser, than shop around, and purchase a Browser elsewhere – that, anyway, didn’t run quickly enough on the Windows software. I am sure there were many other elements in the case against Microsoft, but the bundling was the biggest. Microsoft, of course, was like, “This is bullshit.” (I told you I wasn’t an expert.) Microsoft argued that what they had developed went together: the browser and the software. It was, essentially, one product. How dare they be punished for their own innovation?

I seem to recall that the antitrust suit filed against Standard Oil had to do with their handling of the railroads (which they also owned). It was the “rebate” issue that was the real clincher. One could, of course, argue that Standard Oil was just doing what Standard Oil did best, find the best/easiest/most efficient way to get their product to where it needed to go. Of course they would buy up the railroads and offer rebates. It makes perfect sense. My college professor was so fantastic, breaking down all of the issues with these corporations, their drive, their ferocity, their success, and the corrective placed on them by the government. Every class was a cliffhanger. If you cannot imagine a group of college kids groaning in disappointment and agony when a teacher says, “Class is over – we’ll find out what happened at the trial next week” – then I am here to tell you: It happened – week after week after week!

United States vs. Microsoft went to trial in 1998. Auletta’s essay details that process, and to some degree is a Courtoom Diary, as well as a profile piece on Gates, on Microsoft’s culture and history. It’s fascinating!

Microsoft, of course, was deemed a “monopoly”.

The New Gilded Age, a collection of financial writing from The New Yorker, is essential reading. It’s recent past, but it already feels like ancient history. The articles were written in real-time, with writers trying to come to grasp the implications of the Internet, and the boom the economy was then experiencing. There is no retrospect here. It’s an amazing compilation.

Here’s an excerpt, describing the head counsel for the Justice Department, David Boies, and his plan of attack. This is just one tiny section of Auletta’s huge essay.

The New Gilded Age: The New Yorker Looks at the Culture of Affluence, edited by David Remnick; ‘Hard Core’, by Ken Auletta

Boies, who has thin brown hair and protruding ears, gives an impression of studied casualness. In court, he always wears a navy suit with pants that drape over black sneakers; a blue-and-white pin-striped button-down shirt; a square-bottomed dark-blue knit tie, which dangles above his beltless waist; and a black Timex strapped over his left cuff, so he can easily read the time. The suits, shirts, and ties are purchased in batches from Lands’ End. During the trial, Boies stayed in a modest apartment that the Justice Department rented for him. Despite his casual demeanor, his intensity is such that he routinely walks past associates without noticing them. He has become a celebrity in Washington restaurants, where he picks up thick lamb chops in his hands and chews the bones clean. Sometimes he takes a quick nap in a booth at the Capitol Grill. Playing tennis or Ping-Pong with any of his children – he has six, and has been married three times – he plays to win, as he does at craps or card tables in Las Vegas, which he visits several times each year. “When he plays craps,” Mary Boies, herself an attorney, says of her husband, “he remembers every roll, every sequence.”

Just before ten o’clock on October 19, 1998, the first day of the Microsoft trial, Boies entered the block-long, eight-story E. Barrett Prettyman United States Courthouse, rode the elevator to the second floor, then walked past a line of reporters parked against a mauve marble wall who were vying for the forty daily press seats, past an even longer line of spectators on the opposite wall, and entered Courtoom No. 2, where Judge John J. Sirica had tried the Watergate defendants. The room has no windows, and there is no street noise.

Then the door to the Judge’s private corridor opened and Deputy Marshall R. Kirkland Bowden, who has worked in this court since 1962, called out “All rise!” Judge Thomas Penfield Jackson entered and ascended his platform. Although Jackson, who is now sixty-two, was the first judge appointed by President Reagan to this district court and therefore might be assumed to oppose intrusive government, Microsoft executives have learned to be wary of him. He was the judge who ordered Microsoft to separate Internet Explorer from Windows, and since then he had made a number of preliminary decisions that angered the company, such as allowing unwanted excerpts from Gates’s twenty-hour-long videotaped pretrial deposition to be played in court. Before the trial began, Jackson had announced that it was his intention to speed it along by limiting to twelve the number of witnesses each side could call and by stipulating that all testimony be submitted in written form, so that all cross-examination could occur without delay.

After a flurry of procedural maneuvers and a brief opening by a representative of the states involved, Boies rose and stepped to the microphone on the podium in front of the judge, ready to make the government’s opening argument. Mary Boies looked on from the spectator section. Joel Klein, the bald top of his head bobbing, shifted in the aisle seat of the bench beside the counsel table. The Microsoft counsel, Bill Neukorn, sitting at the head of the Microsoft table, stared straight ahead, his pen and pad poised. Judge Jackson, who has white hair and gold-framed half-glasses, nodded with a welcoming smile to each table of attorneys.

For nearly three years, glancing occasionally at a few noted he had written on a manila folder, Boies described, first in sum mary form and then in chronological order, how, in his view, Microsoft had violated the antitrust laws – in particular, by “restraint of trade or commerce” – and so became a predatory monopoly. Coercion, he claimed, was standard operating procedure at Bill Gates’s Microsoft. Boies then gave a signal and played the first of many excerpts from Gates’s videotaped deposition – an excerpt that gave a portrait of Gates at odds with the decisive, fearless straight shooter of common lore. Shown slouched in a leather chair, and compulsively sipping from a can of Diet Coke, Gates appeared on several court screens:

BOIES: Are you aware of any instances in which representatives of Microsoft have met with competitors in an attempt to allocate markets?

GATES: I am not aware of any such thing, and I know it’s very much against the way we operate ….

BOIES: Now, have you ever read the complaint in this case?

GATES: No ….

BOIES: Do you know whether in the complaint there are allegations concerning a 1995 meeting between Netscape and Microsoft representatives relating to alleged market-division discussions?

GATES: I haven’t read the complaint, so I don’t know for sure. But I think somebody said that that is in there.

More than a few spectators laughed at Gates’s professed ignorance. Boies now paced in front of the bench, a pointer in his hand, and asked an aide to roll the second video. Gates again filled the screen, and, in response to a question from Boies about his understanding of Netscape’s strategy back in mid-1995, Gates said at the time “I had no sense of what Netscape was doing.”

Using his pointer, Boies displayed on the screens various Gates documents, including a May 26, 1995, memo titled “The Internet Tidal Wave,” which showed that Gates quite clearly saw the importance of Netscape. In it he wrote to his managers, “A new competitor ‘born’ on the Internet is Netscape. Their browser is dominant, with 70 percent usage share, allowing them to determine which network extensions will catch on.” With control over how software worked on-line, Gates noted, Netscape could cheapen Windows and “commoditize the underlying operating system,” by which he meant that people using any number of programs, for browsers, for word processing, for spreadsheets, for printers – for all sorts of applications – might begin to move away from Windows.

With a nod from Boies, an E-mail written by Gates five days later and sent to his senior executives appeared on the screens. It said, “I think there is a very powerful deal of some kind we can do with Netscape” – a deal that would reduce competition. “We could even pay them money as part of the deal, buying some piece of them or something.” Then, just a few weeks before the meeting with Netscape – the meeting that Gates said he was not involved in – he wrote, “I would really like to see something like this happen!!”

A division of markets was proposed at the June 21st meeting, Boies argued, producing E-mails from both Netscape and Microsoft. “What you have here is, in and of itself, an attempt at monopolization,” he went on, a “restraint of trade” effort prohibited by law. Why would Netscape feel compelled to cooperate? Because, Boies claimed, Microsoft’s leverage stemmed from Windows, which controlled ninety percent of the P.C. operating-system market (a somewhat inflated number, since it excluded the Macintosh and all other machines not running on Intel-type chips). Any computer manufacturer, or any maker of printers or software-application programs, from spreadsheets to browsers, needed to know Microsoft’s Application Program Interfaces, or A.P.I.s, in order to be able to connect to Windows, Boies said. He charged that Microsoft was predatory because it threatened to crush Netscape if it did not comply. There would be testimony, Boies promised, that one of Gates’s “top lieutenants” threatened to “choke Netscape’s air supply.”

For three crucial months, Boies said, Microsoft had withheld A.P.I.s that Netscape required to be compatible with Windows 95, the latest version of Microsoft’s operating system. Unlike Netscape, which tried to sell its browser, Microsoft adopted what Boies called “a predatory pricing campaign” and gave its browser away, bundling it with Windows. “Our business model works even if all Internet software is free,” Gates told a reporter in an article that Boies cited. Microsoft imposed contracts on computer manufacturers, Boies said – on A.O.L. and on software companies like Intuit – restricting their ability to do business with Netscape.