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The Independent Institute
Commentary

Winners, Losers & Microsoft Strikes a Sensitive Nerve


In the midst of the heated dispute over the antitrust case involving Microsoft, it appears that some people in the computer industry may now be stooping to any and all tactics that might be used to attempt to discredit the Independent Institute and our powerful new book, WINNERS, LOSERS, & MICROSOFT: Competition and Antitrust in High Technology, by Stan Liebowitz and Stephen Margolis. Specifically, the recent article “‘Unbiased’ Ads for Microsoft Came at a Price,” (Sept. 18) by Joel Brinkley, is an attempt to kick up dust by, as the article states, “a Microsoft adversary in the computer industry.”

Winners, Losers, & Microsoft is the second highly-regarded book on antitrust produced by The Independent Institute. The first, Antitrust and Monopoly, was published in a revised edition in 1990, coinciding about the time when Professors Liebowitz and Margolis began their work which has culminated in Winners, Losers, & Microsoft. Thus, our research and work in this area predates the Microsoft case, the “browser wars,” and even the internet industry itself.

We believe that Winners, Losers, & Microsoft will change the entire debate over Microsoft, competition, antitrust, entrepreneurship and high-technology markets. As The Wall Street Journal has stated, “Henceforth, any judges, economists, pundits or journalists who discuss Microsoft or technology lock-in . . .without first dealing with the Liebowitz-Margolis critique should have their wrists soundly slapped . . .” In addition, The Economist has described the book as “The best single thing to read on this tangle of issues,” and Wired has called it the “first systematic look . . . invaluable . . . and the best compilation that anyone has offered so far . . .”

But some people clearly do not want to see a real public debate occur, apparently preferring to attempt to discredit with a smear campaign what they cannot refute with facts. As a result, the following is worthy of attention:

1. Mr. Brinkley credits as his source, “a Microsoft adversary associated with the computer industry who refused to be identified.” In using this source, Mr. Brinkley apparently chose also to traffic and benefit from stolen goods, as the records he referenced were not only purloined from the Independent Institute, but also were fragmentary, preliminary financial records. As I informed Mr. Brinkley, our final year-end records do not agree with the numbers he had been provided by his source.

How did this “Microsoft adversary” obtain these stolen documents? What does this source who refuses to be named stand to gain by attempting to smear our work?

2. Since the time of the press conference for our Open Letter to President Clinton on Antitrust Protectionism, in early June, in Washington, D.C., there has been no “secret” about the support we receive from Microsoft. At that time, I clearly stated that the total funding we received from Microsoft was approximately 7% of our total revenues, a best-estimate based on preliminary projections; it now appears the final figure is about 8%, a statistically insignificant difference, and far less than the 20% figure Mr. Brinkley claimed in his article. Also, and contrary to Mr. Brinkley’s assertions, Microsoft is not and never has been “the largest supporter” of the Institute.

The research and publication of Winners, Losers, & Microsoft, and the Open Letter on Antitrust Protectionism, were organized entirely by The Independent Institute. The letter was written by a number of distinguished economists, the signatories were in no way approached by Microsoft, and they received no compensation for their involvement. After we pursued the publication of the Open Letter as ads in various newspapers and budgeted to pay for this work through internal funding, Microsoft expressed their happiness that such a project was being done to make the issues involved available for public debate. We advised them that we were facing costs for running the ads, and they indicated that they would be willing to continue their support for our publicity on the issues we were raising in the Open Letter. To receive such funding, I sent a letter to Microsoft outlining the costs to us for this publicity. Rather than underwriting these specific costs, Microsoft instead indicated that as in the past, they would simply renew their support for our general program including getting continued publicity for our work.

Did Microsoft contract with the Institute to run the ads? No. Did we originate, author, design and run the ads ourselves? Yes. Did Microsoft control the ads in any way? No. Did we use our general funds to pay for the ads? Yes. Did we later financially allocate part of the funds from Microsoft to cover our costs to run the ads? Yes, which then freed up funds for other Institute work. But, it was our decision to allocate the funding from Microsoft accordingly, and we could have similarly allocated the funding to pay for other expenses, with Microsoft having no say in the outcome. Are we “splitting hairs” here? Yes indeed, but only in direct response to Mr. BrinkleyÕs hair-splitting attempt to construct a conspiracy theory.

Bottom line: Do Brinkley’s charges make our book and the Open Letter any less credible or accurate? Absolutely not.

3. If an organization is attracted to our work and wishes to contribute towards the costs of disseminating the information based upon it, including the purchase of our publications, covering the costs for ads, etc., we welcome such support. Our restriction on all funding is that it is NON-contractual, meaning that the funding sources have NO say in the work, and cannot withdraw their funding should they not approve of the results. In addition, all Institute results are derived from research that adheres to the standards of excellence found in scholarly peer-review. In so doing, the Independent Institute produces many books and other projects of which our work on antitrust is far from the largest. This year, for example, we will give away more than 100 scholarships to disadvantaged K through 12 students in the Oakland and San Francisco Bay Area.

4. We believe that the issues pertaining to the disputes in the Microsoft case are fundamentally important. Central to this matter is the issue of what is correct and what is fallacious in the dispute over competition, monopoly, antitrust, entrepreneurship, etc. As a result, we welcome any careful analysis of the examinations, methodology, and findings of Winners, Losers, & Microsoft.

Furthermore, these issues pertain to one of the most serious problems in the American economic and political system, namely the pervasive existence of corporate welfare and corporate statism of which antitrust protectionism is one major aspect. As our Open Letter on Antitrust Protectionism states, the evidence is abundantly clear that antitrust is being used today by very powerful interests to reduce competition and cartelize high-technology markets, with enormous harm in store for consumers. It disturbs us that Mr. Brinkley apparently turns a blind eye to this major matter, and in effect is inattentive to corporate-welfare ambitions.

Sincerely,
David J. Theroux
Founder and President
The Independent Institute

David J. Theroux is the Founder, President and Chief Executive Officer of The Independent Institute and Publisher of The Independent Review.