In the 1990s, Microsoft faced a dilemma. They had created the most widely used OS, right at the brink of the Internet revolution. Millions of people were being introduced to the power of computers in their homes all thanks to Microsoft. What started off as a humble company founded by college dropouts, in the middle of New Mexico, had come face to face with the US government, charged with violating anti-trust laws.
When did a company, which started off as a David, end up being the Goliath? Is it even a fair comparison? Goliath is the villain in that story, but is Microsoft in theirs? They had worked hard to carve a place in the market for themselves, given they pretty much had to license core technology pieces from Xerox.
“Well, Steve, I think there’s more than one way of looking at it. I think it’s more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it.” -- Bill Gates to Steve Jobs
But at the end of the day, the US government thought that Microsoft had too much power and was on the track to creating a monopoly in consumer-facing software. They controlled the OS, they controlled the software.
Do you feel Microsoft was treated unfairly? If not, why not? No this isn’t an exam question.
When does the winning strategy become unethical? Is it only when the companies are big enough? If Microsoft’s business model from the beginning, was to try and bundle software and create a monopoly, why is it only once they’ve made it big, that it became a problem?
Getting in on the Underdogs
Apple, Amazon, Airbnb, Google, Facebook. You guessed it. They were all underdogs at some point. The likelihood of starting multibillion-dollar companies which revolutionize the world’s culture and society is no easy task.
But now that they have made it, although try as they might, it’s hard to treat them as underdogs. A lot of these companies will want to stick to their humble beginnings to emphasize their story and help people relate to them. Why? Because people inherently love a good underdog.
In a world where winners usually, well, … win, it’s the underdogs which garner the love of the people. Unless you were always a supporter of the Patriots (American) Football team, most people would turn their heads away in disgust if you “jumped on the bandwagon”. Even the current supporters of the dynastical team might not find much meaning in your support.
But if you choose to side with a team with a streak of losing, you might actually just find yourself with the strongest community of like-minded supporters. You won’t need to convince anyone that your motives are pure because who on earth would start siding with a loser? No, if you support the team, you probably have loyalty and ties to the culture and society around the team!
It makes sense for people to show their support, not for the winners, but the losers, especially the losers who have the potential to win.
For most people, it’s very hard to empathize with winners. Not all of us are crypto-millionaires, or TikTok famous. Most of us are still struggling to get to where we want to be. Most of us are underdogs with our own stories to tell. The idea that some poor downtrodden soul (or team) could rise up, touches our soul. It makes for a much more compelling story than finding the rich continuing to stay rich, or the 6-time super bowl champions, winning their 7th.
Businesses love to represent themselves as underdogs.
When we shift away from entertainment and take a look at business, underdogs seem to be put in a dilemma. Startups and small businesses can retain their titles, but remain small, or … they could, with the help of luck, come up with winning business strategies, launching them to the moon. They could remain the loveable and relatable underdogs, or risk the stigma and social boycotting that has become the inevitable status quo for companies like Amazon, Google, and Meta.
Is everything always about capitalism?
How do companies cement their reign? For small companies, it can be a strong mixture of luck and innovative thinking. But part of it requires having a strategy that can beat out the competitors. If we define winners in terms of wealth, then business is a constant (even zero) sum-game.
In Microsoft’s case, the strategy involved creating an OS popular enough upon which they could build their own monopoly of software applications! For bigger companies hoping to retain their power, buying up smaller, fast-growing companies can pay huge dividends.
Look at both Instagram and Youtube recently. Although some of their success could be attributed to the companies that bought them, both, initially valued above $1 billion, have come to play critical roles in the lives of the companies. Youtube now makes up >10% of Alphabet’s value. And it could be said that Instagram is providing a lifeline for a company drowning under the wrath of public outrage.
Ahh, capitalism.
Well capitalism itself isn’t necessarily the problem if it weren’t for the greed and unrelenting desire for power and money. It creates jobs, fosters innovation, and promotes a democratically driven allocation of resources.
But humans are human. Just like classical economics is a sham when we add the non-rational human to the mix, so too does the theory of capitalism fall. In theory, monopolies and consolidation of power should be a natural progression of the free market, but somehow, monopolies leave a bad taste. I mean, monopolies would be great if they could keep people happy, provide competitive solutions, and keep investing money into efficiency rather than power and profit. But even monopolies have responsibilities to their shareholders. And those shareholders are human.
Why can’t we just leave monopolies alone?
So what is wrong with having a monopoly? Why do we scorn those companies that did what they needed to do to succeed? That same company that landed the golden ticket of a winning strategy, whether that stifled competition or created a necessity for consumers, so much so that it’s unthinkable to live without.
To understand this, we need to think about why regulations, and especially anti-trust laws, exist. Their job isn’t to break up companies just for the sake of it, their goal is to protect consumer rights.
Regulations exist because there are finite resources in the world. The general population will always be vulnerable to power. Without a massive coordination effort, those with power and money will always be able to have their way with individuals, or even groups of individuals.
Imagine you have a lake where most of your town gets its freshwater. A big company, EVIL Corp, wants to come in and buy up that lake. Under free-market rules, they could buy up the lake, piece by piece. Or, going even further, just simply hire an army to forcefully take control of the lake. You could complain that it isn’t fair, but they have the power, right?
It’s a crude analogy but it makes the point of power very obviously. When power is amassed, it isn’t just a matter of ability, it’s a matter of control.
These situations present themselves in everyday markets as well. Think of how behemoths like Google are now too-big-to-fail. Amazon AWS powers companies throughout the globe. That amount of leverage and power is simply frightening.
How does it happen? Iterative aggregation. Us consumers are a bit myopic and it can become difficult to see how the individual actions of a company create top dogs from underdogs. When we do realize it, it’s probably too late.
That’s where anti-trust comes in. Tasked with ensuring we don’t always get taken advantage of by monopolies and cartels.
What happened to our small underdog company that grew up? Why did our appreciation and support for it falter, even though it was doing what we wanted to see it do: win.
Along the path to winning, it started to amass power. And with that, it no longer became a relatable story to our own. What we originally saw as a reflection of our own desires and struggles, morphed spectacularly, yet subtly, into an insatiable, morally ambiguous entity.