How to Succeed in Business

Filip Palda

Keeping the money you make is rough business these days. If you decide to get rich, do it wearing a hockey helmet. Bill Gates is learning this lesson the hard way. Gates is chairman of Microsoft, and perhaps the world's richest man. US politicians, with the help of Micro-soft's business rivals, are now trying to make their careers by taking his money away. They may succeed because the US public is not crying for Gates. Bill is in the wrong profession. He should have taken up hockey.

When hockey players make big bucks, the public applauds. Ask Sergei Fedorov. He was recently the object of a bidding war that has left him perhaps $36 million richer than before. Hockey fans applaud such windfalls, all the while getting their skins peeled at the ticket booth. That's to be expected. We see the Fedorovs play like virtuosos, being hit, and putting out efforts we could only imagine ourselves making if our children's lives were at risk. We know little of how entrepreneurs make their money. Our lack of understanding makes entrepreneurs targets for politicians.

The word with which politicians are beating Gates over the head is "monopoly." Microsoft's rival, Sun Microsystems, argued before a Senate judiciary committee that Gates has a monopoly because almost everyone uses his software on their personal computers. Senator Edward Kennedy pressed the attack by telling Gates "You are in the bull's eye."

If Kennedy had been less interested in bull, and more interested in getting at the truth, he would have reflected on his own career. He has been a Senator for more than 30 years. Does that mean he has a monopoly on representing his district? He would probably laugh at the stupidity of the question. It takes time and money to win a seat. In the competitive US political market, you have to work all the time to keep your place in Congress—hold endless meetings with constituents, give public service speeches, and grub in the details of laws that come before your committee. Just because you are the only one does not mean you have a monopoly. To keep your rivals in their place you have to bend to the wishes of the people. Think of Roosevelt and Hitler. Each man governed between 1933 and 1945. Hitler held on to power by force. Roosevelt held on to power by appealing to his people. Which one had the monopoly? If your answer is Hitler, then you have understood something US Senators have overlooked. Monopoly exists by force. Examples of monopoly are local telephone and cable companies. They have a monopoly because government will send armed men and women to arrest anyone who tries to set up a rival service.

Bill Gates is now in the same hot seat in which Buck Duke sat 100 years ago. In his early 20s Duke was an unknown, with a small pot of family money to back him. He used the money to improve cigarette blends and gamble on risky high-volume production techniques. He was a millionaire by his late '20s, but instead of stashing money in the bank he ploughed it into advertising and research. With these techniques he caught his competitors napping, and by the turn of the nineteenth century he had bought out most of them. On the pretext of breaking up a price-fixing monopoly, the US Justice Department forced Duke to disband his tobacco trust. Duke's defense against the Congress' accusation that he manipulated the market was that "We happen to have more of the brands that please the people and consequently we sell more tobacco."

Microsoft made its name using the same techniques as Duke's tobacco company. It plowed tens of billions of dollars into research. Its 1995 Windows advertising campaign cost more than $1 billion. It took risks no one else was willing to take. In the early 1990s, before Windows became dominant, Gates broke boldly his partnership with IBM and sunk billions in a competition with IBM to provide the next generation of operating systems. Consumers voted for Microsoft.

The real monopolists in the debate before Congress are Microsoft's rivals. They cannot provide a better product so they are calling on government muscle to guarantee them a part of the market. In other words, they want government to limit how consumers can vote.

I can understand why politicians are listening to companies that whine because they are not good enough to attract customers. US leaders preside over a government whose expertise lies in wasting money and exercising force. It is natural that the administrators of this boondoggle should place their sympathies with inefficient businesses. Perhaps if Gates wore a hockey helmet and threw a few body checks, he might get the public sympathy needed to dispel the vultures from government and business descending to pick his flesh, and make life expensive for consumers.

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Last Modified: Wednesday, October 20, 1999.