I Am John Galt (19 page)

Angelo Mozilo wasn't the only James Taggart at work in the era of corruption that led to the Great Recession. And as long as the world accepts the collectivist lies that disguise parasitism behind a curtain of high-minded social ideals, he won't be the last Taggart—and the Great Recession won't be the last crisis our economy has to face.

Chapter 5

The Persecuted Titan

Bill Gates as Henry Rearden, the businessman who created revolutionary technologies and was criminalized for his success

And yet—he thought—through all the generations of political extortion, it was not the looting bureaucrats who had taken the blame, but the chained industrialists, not the men who peddled legal favors, but the men who were forced to buy them; and through all those generations of crusades against corruption, the remedy had always been, not the liberating of the victims, but the granting of wider powers for extortion to the extortionists. The only guilt of the victims, he thought, had been that they accepted it as guilt.

—Atlas Shrugged

The news hit him like a punch to the solar plexus on that blustery fall day in Redmond, Washington. Despite his unwavering fight against the forces bent on destroying him, Bill Gates was slipping ever deeper into his own personal hell. “U.S. Judge Declares Microsoft Is a Market-Stifling Monopoly,” blared the newspaper headline on November 6, 1999.
1
In a bluntly worded 207-page “Findings of Fact,” Judge Thomas Penfield Jackson, a career public jurist and demonstrated technophobe—he didn't even use e-mail—concluded that Microsoft had used its “prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products.” He added, “The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest.”
2

For Gates, the finding was outrageous. The company he had dropped out of college to build from a ragtag crew of computer geeks into a world force in software development had always competed aggressively but fairly. Of course he had pursued his own self-interest—and vigorously advanced opportunities to create new products and exchange fair value with his customers. That's what a free-market system is all about. “Who grew this market?” he asked himself. “We did. Who survived companies like IBM, ten times our size, taking us on?”
3
In the process, like an early metallurgist at the dawn of human civilization, he created a brand-new substance called software that would power our society into the next level of permanent technological orbit.

On the day Gates was born in 1955, fewer than 500 electronic computers had ever existed in the entire world, their total retail value amounted to less than $200 million, and the term
software
had not yet been coined.
4
By 1999, nearly half of all American households owned a computer,
5
with annual global shipments exceeding 100 million units.
6
Microsoft software ran on nearly all of them. Bill Gates had come close to realizing his youthful dream of a computer on every desk with Microsoft on every computer. But that success, while seemingly destined in retrospect, was in the beginning hardly guaranteed among the primordial soup of competitors in a chaotic personal computing field all vying for prominence—or mere survival.

Along the way Gates had lived the American dream. His own personal effort had made him the wealthiest person on earth with a net worth in excess of $80 billion
7
—the vast majority of it still at work invested in Microsoft stock, but an amount larger than the annual gross domestic product of the Philippines or Singapore.
8
His company was an American success story that ensured the United States' place as a leader in global technology for years to come.

And while it wasn't his primary intent, Bill Gates himself was far from the main beneficiary of his industrial endeavor. By creating a de facto standard in computer operating systems, he unlocked widespread cross-compatibility of applications and files, which boosted global workforce productivity throughout the 1980s and 1990s to historically astronomic levels. The same work output that had previously required a bank of financial analysts poring over hand calculations or a pool of typists hammering away at carbon-copied memos could be accomplished by a single office worker in a fraction of the time, and then disseminated instantly to a worldwide audience using a compatible DOS or Windows-based PC.

A single $21 share from Microsoft's 1986 initial public offering (IPO) would be worth more than $10,000 just 12 years later. A $1,000 investment on the secondary market even after Microsoft's 40 percent first-week IPO pop would have grown to $483,000 by the end of the 1990s. Thousands of employees and investors alike made lifetime fortunes by taking a risk on Bill Gates and his competitive drive. For that matter, thousands of competitors, far from being shut out by Microsoft, in fact made fortunes for themselves, and improved the lives of
their
customers, only because Microsoft had created a stable and widespread computing standard in which their products could operate. And in an age when the American economy is faulted for being dependent on paper shuffling and burger flipping, Gates built his wealth by actually manufacturing something.

So what was Bill's reward for his industry, foresight, and entrepreneurialism? Just like Henry Rearden, the brilliant inventor and industrial titan in Ayn Rand's
Atlas Shrugged
, he was persecuted for his success. He was branded a criminal for not playing soft enough, for not allowing weaker companies a spot on the field, for capitalizing on his opponents' mistakes to score points for his own business—in other words, for succeeding against all odds in a competitive marketplace. Now the market buzzed about possible penalties, including a forced breakup of the firm, confiscation and public dissemination of its intellectual property, or other conditions—like seating government appointees on Microsoft's board—amounting to socialist nationalization of his business.

It's as if Judge Jackson were channeling a passage from
Atlas Shrugged
in support of the “Equalization of Opportunity Bill” reading that “it was society's duty to see that no competitor ever rose beyond the range of anyone who wanted to compete with him.” In other words, the best athletes should be hobbled so that the worst can keep up. Gates should play nice, sacrificing himself, his employees, and his shareholders, and leave some room for others.

In turn,
Atlas Shrugged
's Rearden, like Gates, having dealt only with the clean reality of technology and production all of his life, “had acquired the conviction that one had to concern oneself with the rational, not the insane—that one had to seek that which was right because the right answer always won—that the senseless, the wrong, the monstrously unjust could not work, could not succeed, could do nothing but defeat itself.” Gates liked to say, “The business side always seemed simple to me, you know, make great software, figure out a way to get it out there and get people to buy it.”
9
But just as Henry Rearden found out in
Atlas Shrugged
, businesspeople who compete on their own merits—naively ignoring the parasites seeking to drain them—do so at their own peril. There is no record to suggest that Gates ever read
Atlas Shrugged
, or ever heard of Rearden. Too bad. It might have helped in the travails to come.

Storming the Gates

In 1988 after a full two years operating as a major public corporation, Microsoft employed just five attorneys on staff (by 2003 Microsoft's legal staff had mushroomed to 300).
10
When his senior executives urged him to boost the company image in mainstream media with a public relations campaign, Gates rejected the idea as distracting the company's focus away from technology. “In the early days of the company I was very proud that we had no lobbyists ever, no PACs [political action committees],” Gates noted. “I had to spend more time in capitals of other countries than our capital. And, what a testament that was to America. You could build a company with great success without involvement in political activities of any kind.”
11

Rearden felt the same way—right up until the government destroyed his business. “He knew that it was necessary to have a man to protect him from the legislature; all industrialists had to employ such men. . . . An inexplicable kind of distaste, part fastidiousness, part boredom, stopped him whenever he tried to consider it.”

Now, facing incessant attacks from the very government that was founded to protect his freedom and the products of his individual effort, Gates couldn't comprehend why anyone could begrudge him for selling so much software. What could possibly be wrong with that? And what was he supposed to do instead? Should he
fail
to deliver what the customers demanded? Should he
stop
innovating,
stop
improving his products? In 1999 alone, he had spent $5.3 billion on research and development—more than the entire annual corporate profit of General Motors, Wal-Mart, or Boeing.
12
Why was it his fault that smaller companies couldn't afford to invest as much to benefit their own customers?

As far back as the late 1980s, certain industry players were already plotting against Gates. Instead of focusing their efforts on improving their businesses and doing the hard work needed to take on Microsoft openly, these so-called competitors chose to whine—and conspire—from the shadows. First, complaints against Microsoft were made to the Federal Trade Commission (FTC) along with a road map to help guide the agency to other disaffected companies whose spiteful grumblings might uncover more damaging evidence in support of their spurious claims. The Novell Corporation and its chairman, Ray Noorda, led the opposition, employing two Washington law firms and a well-connected Washington public relations firm in an effort to influence the FTC's evaluation of Microsoft.
13
Despite these poisonous tactics, the FTC found insufficient evidence of any wrongdoing and ceded the investigation over to the U.S. Department of Justice (DOJ).

Then, even more boldly, big names like Oracle, IBM, and Sun Microsystems together spent millions on government lobbying in part to convince the DOJ to take action against Microsoft.
14
Urged on by this angry horde of collectivist interests armed with their quivers of money and political influence, the attacks would persist. As one reporter put it, the government “didn't know what Bill Gates did—but they were sure he must have done something wrong.”
15

Yet his customers clearly didn't share the sentiment. In a poll, 77 percent of Americans believed Microsoft made quality products
16
—and for those who felt otherwise, well, just don't buy them. Microsoft continued to improve its products, cut costs, and offer competitive upgrade options to newer versions—and the marketplace agreed with his approach, rewarding Microsoft with ever greater success.

“The FTC investigation was a lightning rod to bring computer people forward and say that it would be helpful if Microsoft was hobbled in some way,” Gates told
Newsweek
in June 1991.
17
In 1994, Microsoft agreed to settle a Department of Justice case by making it easier for personal computer manufacturers to use Microsoft's rivals' software. It signed a consent decree that forbade it from using its operating system dominance that reputedly “choked off competition.”
18

Still, Microsoft's competitors did not let up, claiming that the software titan had achieved and then abused its monopoly status by
forcing others to do business with it
. Who could seriously think that Microsoft really had the power to force someone to buy its goods, as though at the point of some kind of figurative gun—and then argue that the police apparatus of the government ought to force Microsoft to desist at the point of an actual gun? Who, indeed? These were Gates's supposed peers in the computer industry.