Subject: Re: Is the party over?
From: Tom Hull <thull@kscable.com>
Date: Fri, 15 Jun 2001 02:33:43 -0500

Seth Gordon wrote:
> 
> A few points to ponder:
> 
> (1) I've recently started reading Burton Malkiel's _A Random Walk Down
>     Wall Street_.  One chapter discusses the history of stock-market
>     bubbles.  I was especially intrigued by the "tronics boom" in
>     1959-1961, when IPOs were hot, and electronics-related IPOs were
>     particularly hot -- every stock with "tron" or "onic" in its name
>     seemed a sure-fire hit.  In 1962, everything came crashing down
>     again.
> 
>     A lot of people made stupid investments in both the electronics
>     bubble.  However, electronic equipment obviously plays a larger role
>     in the economy now than it did in 1962.  By the same token, you should
>     not confuse the short-term fortunes of publically traded companies
>     that specialize in Linux with the long-term viability of Linux as an
>     operating system.

The new thing about open source is that the long term viability of Linux
as an operating system is totally independent of the viability of the
companies that specialize in it. The companies are disposable. If the
top ten Linux companies today were all to fold next week, I'd start a
new one myself (and I wouldn't be alone).

> (2) When Microsoft first announced that it was developing Windows NT,
>     a lot of people in the software industry treated it as the death
>     knell for Unix -- because *of course*, once Microsoft, the
>     800-pound gorrilla of the desktop, went up against the squabbling
>     horde of Unix vendors, Microsoft would win.  And I suspect that if
>     you took a time machine back to, say, 1993, and told some
>     prominent Linux hacker that Microsoft would eventually recognize
>     Linux as one of its main competitive threats, the Linux hacker
>     would think you were on crack.  So compared with back then, the
>     situation looks pretty good.

Looks pretty good even without the perspective. I like Linux on the
desktop. Nobody's made much of a business out of that, but lots of
people are running it just fine. The huge advantage that Windows has
on the desktop has little if anything to do with technology or ease
of use or killer apps or anything like that: Microsoft has the retail
channels and support structure locked up. People who don't care much
one way or another buy Windows because that's all they can find, and
learn to live with it.

> (3) Microsoft has some very smart people running it, and when charged
>     with finding a business strategy to counter Linux, they've come up
>     with a smart plan.  They also have a marketing team that is very
>     good projecting an aura of invincibility, and they weathered the
>     dot-com bubble while preserving a large war chest.  However, that
>     does not make Microsoft invincible.

The more I learn about .NET (which isn't a lot), the more it seems to
me to be a response to the antitrust case. If/when Microsoft loses their
appeals, .NET would give the non-OS split of the company something very
OS-like to leverage, in the same sense that they leverage their desktop
OS monopoly. And if they win, of course, they not only implement their
cherished vig, they get to thumb their noses at the whole affair.

It isn't clear that this relates to Linux in any real way. I don't doubt
that Microsoft fears Linux -- they're paranoid, they fear everything. But
as long as Microsoft continues to make money doing what they're doing,
it's too risky for them to change horses. They'll suffer some attrition,
and try to move on to greener pastures.

> (4) In order to satisfy its investors (and, more importantly, the
>     employees who are motivated by their stock options), Microsoft
>     *must* maintain a high growth rate.  If open-source competitors
>     are successful enough that Microsoft sales *don't grow as fast as
>     expected*, it's practically a victory.

Back around 1995, John Dvorak wrote a book that predicted Microsoft's
demise for just this reason. (But then, he also predicted that OS/2
would be the victor.) We saw a bit of this in 1999-2000, including a
bunch of defections, but the dot-com collapse allowed Microsoft to
reset their growth expectations. After all, they still had all that
cash.

In the movie "Trading Places", Eddie Murphy argued that the way to
punish rich people is to make them poor. Too bad the DOJ didn't figure
that much out.

-- 
/*
 *  Tom Hull * thull at kscable.com * http://www.ocston.org/~thull/
 */