An Open Letter about the Politicization of the PC Industry

by Dan Fylstra


Last year, Netscape and several other PC industry companies appealed to our government to help them in their fight against Microsoft, whom they felt was using its market power with Windows to gain an unfair advantage in the browser wars. Our federal and state governments have responded, and the results are everywhere in the daily news. I'd like to comment, not about Netscape or Microsoft, but about the politicization of our industry, what it means for our future, and what fundamental choices we can make going forward.

Somehow, things are not working out quite the way we expected: As I'm writing this, we're waiting to find out whether the Justice Department and/or a dozen state attorneys general will file lawsuits to stop the shipment of Windows 98 -- a decision which will impact the fortunes of not just Microsoft, but literally thousands of smaller companies, hundreds of thousands of us who make our living in the computer industry, and tens of millions of consumers. And there are strong hints that the government will soon launch an antitrust action against Intel. (Intel? What did they do? Among other things, they paid out money to PC makers who put the "Intel Inside" logo on their machines.) Now, in countless trade press articles, columns and editorials, people are asking: Should the government be involved? Will they do the right thing-whatever that is? And how will it impact us? Have we opened Pandora's box?


My answer is yes-we've opened Pandora's box, and it will prove impossible to close it. Our industry is being politicized. Henceforth, it won't be enough to design and build great products, and sell them at attractive prices. We'll also have to compete in the political sphere. And that will take time and money, which will be siphoned off from product development and marketing. We'll have to worry about whether we have enough influence in Washington, and in our state capitols. Have we hired the right lobbyists-donated to the right PACs-hobnobbed with the right politicians?

Will we get our share of any government largess, and can we sneak in our special exemption from the latest tax or regulation? There will be a new pecking order, defined by the amount of political influence enjoyed by various companies, trade associations and other groups. And who is likely to come out on top of this new pecking order: The startups with the hottest new technology, or the established companies who've had the time to develop their political connections? Let's be blunt: It's pretty obvious that in today's White House and Congress, influence can be bought, and the price tag isn't all that high by our industry's standards. If a night in the Lincoln bedroom goes for $50,000 and a seat on a Commerce Department trade mission is just $100,000, the established leaders in the PC industry ought to be able to afford plenty of influence. As for the small and medium-sized companies, well-if you can't afford to pay, you can't afford to play.


And who can afford the most influence? Which company is responding to the pressure brought upon it by drastically stepping up its lobbying efforts and political contributions? Microsoft, of course. Bill Gates is no dummy, and he's said it quite explicitly: He used to think that all he had to do was design and build great products. Now he realizes that that attitude was "naive." The folks who hate Microsoft, the 800-pound gorilla in a relatively free market, should be worrying about the future Microsoft, the gorilla with so much political influence- so many senators and congressmen in its back pocket-that it's practically untouchable. No, this won't happen next month or next quarter-but what about four years from now, given our politics today?

We've worried about the market power of a few companies like Microsoft, but we haven't anticipated how the true coercive power of government might be used for or against us. After all, you don't have to buy Windows 98, and many people won't. But you do have to pay your taxes, or go to jail-to finance things like the federal Market Promotion Program, which pays for McDonald's hamburger ads overseas today, and-who knows? -- might pay for Microsoft's browser ads overseas tomorrow.


Most of us cling to the notion, or at least the hope, that the Justice Department or the state attorneys general will somehow act intelligently in the public interest, and things will turn out OK. We've never examined public choice theory, which predicts that in the public sector as in the private sector, key players will pursue their own self-interest, not the broad public interest. We need to recognize the state attorneys general for what they are: Political entrepreneurs who are simply riding the anti-Microsoft wave for all it's worth, seeking to advance their own careers. The results for consumers or for our industry are beside the point, as long as we are not that politically influential. Indeed, public choice theory predicts that a political system like ours will transfer wealth from the politically unorganized to the politically influential. The ideal outcome, from the politicians' viewpoint, is that we all become supplicants, on an ongoing basis, fighting among ourselves for the favors that only they can hand out.

Pandora's box is open. The impact of politics on our livelihoods is growing every day, and we don't know what to do about it. Most of us would rather avoid thinking about or spending time on politics-we'd rather be creating new technology, and satisfying more customer wants and needs. Many of us, if asked, would echo the classic cry laissez faire-leave us alone! But the politicians won't leave us alone. Because of our relative lack of sophistication and lack of involvement in politics, we are on the defensive. We're likely to end up on the short end of any compromise-whether it's about strong encryption, Internet access and freedom of speech, electronic commerce and sales tax, you name it.

Dan Fylstra has been involved in the PC industry since its inception. He was founding Associate Editor of BYTE Magazine in 1975, and founder of VisiCorp, the marketer of VisiCalc, in 1979. He is currently president of PC software vendor Frontline Systems, Inc . Comments are welcome-Please send them to