Want to break up Google and Facebook? Be careful what you wish for

As the 2020 presidential election kicks into high gear, one thing is clear: The love affair between Silicon Valley and Washington, D.C., is over.

The calls to take a big stick to Big Tech have never been louder. Elizabeth Warren, for example, is proposing to delete Whole Foods and Zappos from Amazon’s shopping cart, force Facebook to unfriend WhatsApp and Instagram, and make Google kick DoubleClick, Nest, and Waze to the curb.

While Warren has gone further down this road than other Democratic hopefuls, nearly all have expressed a desire for more stringent regulation of the high-tech industry.

It’s hard to blame them. Competitors claim they’re being unfairly squeezed by these monopolies. Choices available to consumers continue to shrink. Privacy concerns, always a sore point, have never seemed more dire. Activists, torches and pitchforks at the ready, cry out for Uncle Sam to do something about it.

But to someone like me, who’s been writing about technology since Mark Zuckerberg was in nappies, these cries are also quite familiar. We heard many of the same things 20-odd years ago. Only back then, the boogeyman was Microsoft.

Microsoft über alles

It’s easy to forget just how much Microsoft dominated software in the late 1990s. More dominant than Google in search. More dominant than Facebook in social networking or Amazon in e-commerce. In 1999, 95% of all personal computing devices ran a Microsoft operating system.

For many years, Microsoft and its sometimes-reluctant partner in crime, Intel, were the PC industry (sorry, Apple). The company’s power was virtually unchecked. And it acted like it.

“It was clear that Microsoft was using its monopoly control of the personal computer industry to limit the pace of innovation,” says John Markoff, a technology journalist who covered the Microsoft antitrust saga for the New York Times. “You either fit into their Windows ecosystem or they would attempt to destroy you.”

As an executive editor at PCWorld magazine in the late 1990s, I had a front row seat to much of this circus. Virtually every meeting with a software vendor involved some discussion of how arrogant and/or rapacious Microsoft was. People talked about the company the way gangsters in Hollywood movies talk about the Mafia.

I remember meeting with two Intel engineers, who arrived at PCWorld’s San Francisco office without any press relations personnel in tow (completely unheard of for a company as locked down as Intel). They had no product to hawk; their entire purpose was to demonstrate just how poorly engineered Windows was, and how hard Intel’s silicon had to work to compensate for some truly egregious coding.

When I brought up these many instances in a meeting with two Microsoft marketing executives, one of them replied, “It’s true, we have a perception problem.” No, I interrupted him, you have a reality problem. It got uglier after that. The editor in chief at the time had to intervene before it came to blows.

The meeting I recall most vividly was with Netscape at its Mountain View office in mid-1996. I was there with a few colleagues to get a demo of Netscape Navigator 3.0. The product manager talked openly about Netscape’s intention to create a world where operating systems and hardware no longer mattered; apps would simply run inside the browser on any machine.

I left that meeting thinking these guys were either dangerously arrogant or hopelessly naive to believe that Microsoft would let them do that. Redmond would take their lunch money, write “losers’ on their foreheads in Sharpie, and leave them hanging by the BVDs from their lockers. Or, to use a phrase that became notorious in the antitrust lawsuit that soon followed, it would “crush them.”

And that is pretty much what happened. A little more than two years later, Netscape was acquired by AOL, which was probably more embarrassing than simply being crushed.

But it wasn’t just Microsoft’s our-way-or-the-highway business practices that irked. It was the software itself. Nearly every day there were audible groans in the PCWorld newsroom when a PC blue-screened in the middle of editing an article, losing that work forever. The Office applications were bug-infested memory hogs. And don’t even get me started about Outlook.

Then there was Microsoft’s galling PR defense of its tactics: that attempting to rein in the company would be punishing “the innovators.” Besides maybe the Xbox (which shipped 13 days after the DOJ and Microsoft reached a settlement) and Excel, I can’t remember the Microsoft of that era inventing or innovating on anything. Its notoriety as a “fast follower” was well earned. From DOS through Windows and beyond, Microsoft’s MO was to create hasty imitations of other companies’ technology, then keep iterating until they gradually shoved the original products off the shelves.

Breaking up is hard to do

It was Microsoft’s successful effort to neuter Netscape that drove the U.S. Department of Justice to bring an antitrust suit against the company in 1998. (For a brilliant and exhaustive history of Silicon Valley’s campaign to persuade the DOJ to rein in Microsoft, read John Heilemann’s story in the November 2000 issue of Wired.) And it was Microsoft’s arrogance and mendacity in that trial that spurred Judge Thomas Penfield Jackson to order it be split in two—one company to handle Windows, the other one to sell Office and all the other products.

Having no sympathy for the company whatsoever, I was on Team Breakup. Because Microsoft controlled the operating system, it was able to throttle all of its competitors. And because there was no competition, it had no motivation to make its products better. I thought splitting the company was the only way it might become truly innovative.

Ultimately, Microsoft was not broken up. In late 2001 it reached a settlement with the Bush DOJ that kept it intact, along with some fairly tepid oversight. But that agreement, and the many years of legal battles leading up to it, altered the company’s behavior, says Brad Silverberg, who was a VP and then senior VP at Microsoft from 1990 to 1999 and is now a venture capitalist.

“There’s no doubt the consent decree changed the company,” says Silverberg. “I heard that many product team meetings had as many lawyers as product people in them—that’s going to change the culture for sure. It certainly made the company more cautious.”

Gary Reback, who as an attorney working for Netscape co-authored a 222-page white paper laying out the case for antitrust action against Microsoft, agrees. By April 2002, Internet Explorer owned 97% of the browser market. Microsoft could have used its monopoly power to steer Web surfers away from Google or Amazon and toward its own sites.

“Microsoft could have killed Google in its crib,” he says. “The same is true for Amazon and Facebook. But it didn’t, because it was concerned about antitrust enforcement.”

Longtime tech watchers remember what happened after that. Following a reputation-shredding appearance in a taped deposition, Bill Gates stepped down as CEO of the company in 2000, handing the reins to Steve Ballmer. In November 2004, Mozilla released the Firefox browser, based on the Netscape source code. In January 2007, Steve Jobs announced the iPhone, and Google released its Android mobile OS 10 months later. Google Chrome appeared in September 2008. All of these products not only avoided being crushed by Microsoft—they thrived.

Unable to gain a foothold in mobile and blindsided by the rise of social media, Microsoft’s consumer products floundered. Today 35.8% of all computing devices run Windows, per Statcounter, just slightly more than Android. Windows still runs on nearly 80% of all PCs, but nobody cares about PCs anymore.

20/20 hindsight

Looking back, I’m not sure that breaking up Microsoft in 2000 would have made much of a difference. I think the company’s inability to keep pace with technological change had as much to do with its diminished (but still incredibly powerful) position in the tech world as anything the DOJ tried to do. Now Redmond is an enterprise cloud company with few consumer-facing products, and Bill Gates is an esteemed philanthropist. Once again, F. Scott Fitzgerald’s chestnut has been proven wrong—there are plenty of second acts in American lives.

I’m also not convinced the same methods can be applied to the current roster of techno-bullies. People choose to use Amazon, Facebook, and Google because they’re really good at what they do. I never thought the same was true for Windows. Are they abusing their near-monopoly positions? No doubt. Should the government try to curb such abuses? Maybe.

As with IBM in the 1970s and AT&T in the ’80s, Reback argues that serious antitrust enforcement is what revealed Microsoft’s anticompetitive behavior to the world.

“In Silicon Valley, we frequently talk about how the trial is the remedy,” he says. “Once people can see how bad a company’s monopolist behavior is, the case tends to solve itself.”

Silverberg argues that it would be foolhardy to impose regulatory solutions on an industry that moves as quickly as technology does.

“What’s popular today may be yesterday’s news in a few years,” he adds. “Technology often renders leaders in one era to be also-rans in the next.”

But waiting for market forces to settle things is no guarantee it will actually happen. And as another presidential election looms, and Facebook announces plans to become the world’s banker, there’s a real sense of urgency to solve this problem now.

The most intriguing part of all this may be how quickly our views of high-tech giants have flipped, says Markoff. “In 2016, Silicon Valley went from being able to do no wrong to being able to do no right,” he argues. “What strikes me is how long it took Washington to realize that the Valley’s central mythology—that these so-called revolutionary technologies would be a force for good for all of society — was simply effective public relations.”