Microsoft, FDR And Escaping The Prison Of The Past

America still gropes for a generally accepted conceptual past template to explain the present and future. The most hegemonic meme is ‘The greatest crisis since the Great Depression’. The slogan is everywhere. It taps into a hazy Jungian collective memory and aligns American expectations for Obama. The meme’s 7 words are shorthand for 100 days, public works — the dimly recalled 3-4 pages from high school American history textbooks.

Redmond and the American Future

We’ve all seen how America’s soupy consciousness sucks it in from blog and cable micro channel niches, silos, stratifications and spam. The dominant meme itself then becomes a news story as contrarians fight for web hits and fleeting relevancy.

In 1933, as today, a new president stepped into the White House, vowing change and decisive action at a time when a banking crisis posed a grave threat to the nation’s economy.

The economic morass that confronted Franklin D. Roosevelt 76 years ago was undeniably deeper and more ominous than the trouble President Obama is facing. Yet, according to economists and historians, there are also some telling similarities and cautionary lessons to be drawn from the experience of the Roosevelt years in the 1930s.

And so on. One does wonder what FDR would have encountered had Hoover’s Commerce Department and then the newly created FCC not nationalized radio spectrum and protected government and incumbents with licenses and regulatory control. A small reason there to be thankful Obama is not following the Hoover-FDR thing too closely.

Beyond FDR

But we digress. We offer an alternative meme to FDR. One that resonates with today and looks foward with honesty.

Consider Microsoft and its latest earnings report. Microsoft’s setbacks were long anticipated by technology watchers (in fact most reported in December the layoffs would be 15,000, not the actual 5,000). Much like the American economy in 2008-2009, Microsoft is reaping the bitter harvest of its once seemingly permanent business model/license to print money. Redmond’s prognosis is a better template and cautionary tale than FDR when thinking about the post-Warlord economy.

The Microsoft Economy Is Not Sustainable

First, a short recap why Microsoft, like the American economy, suffers from structural flaws. Most know Redmond’s billions accrue from its strangehold on the desktop environment: (a) the operating system; and (b) office applications. Think of Microsoft operating systems as the American economic model – pervasive, loathed by some, and the epitome of the Davos set.

Unfortunately for them, Vista, Redmond’s latest operating system, is a fiasco. Now the recurring butt of Leno monologue jokes, it is the IT industry’s Edsel. It may go down as one of the biggest corporate blunders in American history.

Fine. That’s one product. More damning, however, the world environment changed. Customers and enterprises are migrating to web-based applications instead of the old Office Suite. It doesn’t matter so much which operating system is around. A surprising rise in the new ‘netbook’ segment of ultra portable notebooks in 2008-2009 caught Microsoft flat footed. The hot-selling smaller devices can not run the Vista bloatware — XP remained in demand. To Redmond’s alarm manufacturers for once had the upper hand — they could always turn to the free Linux alternative. Microsoft’s comical tilting at Google wind mills via the aborted Yahoo acquisition speaks for itself.

A slight confession here — the Stiftung is not ambivalent about Microsoft. We’ve dealt with Microsoft’s Chief Operating Officer, Vice Presidents, Directors and alarmingly smug managers over decades. In both a representative capacity and other ways. With the possible exception of one defense contractor, the Stiftung never met a more duplicitous, dishonest, mendacious, anger-filled and sociopathic corporate culture. But like a broken clock (or should that be Zune?) even Microsoft can be right.

Redmond warns investors and the market that the future will not rebound to 2007 or before. Based on current economic trends and its own business model (described in strictly revenue terms for the Street) the future will unfold on a significantly lower economic plateau. Is Microsoft finished? Doomed? Hardly, but it will have to fight harder and make do with less.

This is where the Obama Administration makes a strategic error. The ‘Stimulus Bill’ is a misnomer. Obama should ‘state clearly’ (his favorite phrase – it makes a great drinking game, try it) he is proposing a stabilization bill. This is in keeping with his ‘create or preserve’ jobs meme. It’s also more accurate regarding his plans for the States. A ‘stabilization bill’ also protects him from retroactive recriminations down the road for preserving what never cratered.

As we wrote recently, Obama should come clean with the American people that there is no going back to the economy and lifestyle fueled by the tech and real estate bubbles. This means resetting expectations to circa 1994 at best. Many of those jobs related to the bubbles are gone for good. Obama is wise enough to cloak this message in fairer, more palatable terms than say the Peanut Farmer’s malaise thing. It needs saying.

Regardless Dear Reader, don’t you think we need to move beyond the imperialism of the FDR meme?

Comments

  1. Comment says

    Interesting to see Jeff Immelt on TV wonder out loud if out current model of desindustialization into service was a good idea. He noted the decline in patents – the endless debt.

    But he did not mention the non redundent factories Jack Welch closed down [ in favor of media ]just so his stock price would bump

  2. Dr Leo Strauss says

    If Ballmer says something, does that make it ipso facto untrue? No word if he ran across the stage yelling ‘Windows’ at Hoyer . . .

    http://news.cnet.com/8301-13578_3-10158959-38.html?part=rss&subj=news&tag=2547-1_3-0-5

    Microsoft Chief Executive Steve Ballmer sketched a dire portrait of the world economy on Friday, likening it to market conditions in 1837, 1873, and 1929, each of which involved bank failures, high unemployment, and a depression.

    “This is a once-in-a-lifetime economic crisis,” Ballmer told a retreat of House Democrats in Williamsburg, Va. “There is a lot of history around that, and frankly if you stop and think about it, 1837, ’73, ’29, 2008, it’s almost exactly a whole lifetime between each of the major economic difficulties that we face.”
    Ballmer said that economic growth in the last 25 years was fueled by innovation, globalization, and debt–and that the current levels of debt were unsustainable. “In 1929, for example, just before the stock market crash, the private debt-to-GDP ratio was 160 percent,” he said. “Last year, private sector debt as a percentage of the GDP: 300 percent, far more leverage.”

    His warning of a protracted downturn that could become a depression comes amid a stock market that is down by more than 40 percent from its October 2007 peak, and housing prices in many metro areas that have been falling consistently since July 2006–a feat not equalled since the Great Depression.
    “In my view, what we now have will be a fundamental economic reset,” he said. “The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate.”

  3. anon says

    re Movies – Just turned on TV and TCM was playing Annie Hall – the scene was the one where Wolfowitz (played by Woody dating Annie) visits the Bush family house at Kennnebunkport – and he goes upstairs and runs into the pyschotic George W. Bush (played by Christopher Walkin)in the upstairs of G.H.W. and Barbara Bush’s house in Chippiwa Falls. Later Dubya (Walkin) takes Wolfy (Woody) for a crazy car ride in the rain.

  4. DrLeoStrauss says

    re Cleese,Popbitch ran this earlier in January:

     >> Fawlty tanners <<

    John Cleese doesn’t like wife

    Mark writes:

    “Last week my wife had the pleasure of meeting John Cleese who had popped into her workplace (a solarium in Sydney) to top up his tan. Being a bit of a fan, I asked her when he came out if she could get his autograph. Obliging, he wrote:

    ‘Dear Mark. You have a very beautiful wife, much more so than the one I am currently divorcing.

    John Cleese’.”

  5. anon says

    There should be a Madoff award for trickery – We just read on HuffPo that Cleese from Monty Python’s wife was lying about her age by 22 years. That’s aburdly bold. We thought people can sometimes get away with a 10 year shave if they are on TV and not that famous, but 22 is just crazy.

  6. anon says

    The gist of Wolfe’s criticism was that Black is in prison and so therefore is not respectable enought to comment in polite company about Serious people. But there was a defensiveness to Wolfe’s tone, as if he knew this rebuke of his lacked legitimacy (not just because prison writting has a long pedigree) because Black may be right and he wish he’d go away.

    Wolfe, in the recent past, has written that most business is BS and online ventures are mostly garbage – including his own. So on a certain level, Wolfe must feel somewhat criminal himself – deep in his subconcious – and he must resent that Black does not feel criminal, despite conviction and incarceration. Plus – Black is a terrific writer, whereas Wolfe is banal and only trendy in the most ephemeral sense.

    It’s quite funny – But Black did win that round. Wolfe wrote an uninteresting book about an interesting person and someone in jail pointed that out.

    Black would be a good asset hunter – He should be offered 1 percent of all Madoff money he can track down – including people who (so far) go lucky cashing out early before the scam went bust. Apparently, Bernie’s father in law was not on the up and up, so this whole thing must bo back 40 years.

  7. DrLeoStrauss says

    Conrad is quite right about Wolff’s literary bulemia. We’ve said it before and say it again now – free Conrad and give him a billion upfront to track down the initial $350 billion TARP proceeds and a finders’ fee of 1.5% for the first $50 billion he tracks down and reports on, 1% on the next $50 billion, and so on. Along with a requirement of a twice weekly blog column with a to be determined minimum invective and personality deconstruction.

    That would be stimulating *and* highly entertaining.

  8. anon says

    Incubators? Reminds us of someone telling Dachis (we think that was the one) he didn’t want to do a VC appps deal with him, but and tDachis insisted that he was the one who was gonna fire the VC, rather than the other way around. So he called back to say he was gonna fire the VC and that the VC’s earlier attempt to fire him was to inoperative and better not show up in any Alley or Valley newsheet.

  9. says

    Regarding pardons, the Warlord demonstrated everything you need to know about his character with that decision; E.M. Forster said he hoped that he would betray his country rather than his friends, but Bush managed to betray the republic and have others do so, and then betray them as well. Pardoning Addington or whoever would have been a sordid act, but at least one that revealed some humanity; the Mafia always understood this, as did the aristocracy.

    Regarding Microsoft, I can’t imagine anything more ridiculous that it trying to buy Yahoo. If MS has strengths, they are all about enterprise products – Douglas Copeland’s dig way back in 1995 that without the Cult of Bill they’d be a great big office supply company has much truth to it. Their main product is called “Office”, after all.

    But they insist on trying to be exciting, customer-focused, media-sexy; I wonder what unmet need their corporate culture is trying to fulfil, or what it’s trying to repress. Perhaps, in fact, they are unconsciously aware that they have never done anything genuinely innovative; but then, as Stewart Brand said, there should be a publication called Conservative Architecture. Excellent engineering and product design of well-tried technology is as valid a strategy as innovation – you ask their neighbours at Boeing – and you can’t honestly say that MS has ever delivered that, or at least not since Windows 3.1 or even MS-DOS.

    But being an Operational Excellence or Product Leadership company hardly fits with the culture; can you imagine starting SAP or Ericsson or Siemens or Intel in the US of the last 20 years? (No wonder all those companies worked out on their competitors in the States…) Those who did either had a very strong pre-existing culture (IBM, Intel), strong influence from outside (Amazon is surprisingly German), or else a real determination to stand at an angle to it, like Google and Apple. Their insistence on being weird may be neurotic in its intensity, but of course, nothing is more real than neurosis.

  10. Dr Leo Strauss says

    Frum’s hilarious. But then he believes it all, as having in his mind successfully molted from Neocon Tool into principled small ‘p’ Paleocon rationalist. He has another year of hard labor but by then most of the cable producers and the chattering class will accept it and demur any reminders of ‘that stale old Neocon thing.’

    Progressives’ agitation of a last minute Scooter pardon to us also seemed a misread. We agree. We thought Black would not get lucky because he is too ‘pointy headed’ with class aspirations for the regime even if part of the economic social set. Alas, Conrad did not have time (or the shamelessness) to discover Jesus and profess commitment of his business acumen for faith based initiatives. Or ties to Poppy.

  11. says

    Microsoft buying Yahoo is all backwards. Yahoo should buy Microsoft. Yahoo is in the right market, with a new leader who will Disrupt things. Yahoo could take advantage of the cash flow, distribution and engineers at Microsoft to develop new products – whereas Microsoft has no real use for Yahoo! Read more at http://www.ThePhoenixPrinciple.com

  12. Dr Leo Strauss says

    Lynn’s situation is puzzling. They had to know it would contradict his ethic rules. It’s manifestly absurd to link him as personally indispensible ala Geitner.

    MSFT to be fair performed some services to the economy in the early days. Recall Gates begged Jobs to license the Mac OS in 1984 (or was it 85?) in a memo that essentially asked Apple to execute his later business plan. MSFT promoted CD-ROMs and other standards. By forcing hardware to become commodities, computers did become more affordable, etc.

    But on the whole its impact is in our opinion mostly negative. Particularly during the boom years. I can’t tell you how many meetings with venture capitalists in SV and incubators (remember that cool label?) around the country we sat through were a bunch of kids threw together a PPT presentation for a business plan that ended with “liquidity event – sale to Microsoft”. And alot of them became millionaires.

    For sanity’s sake we liked hanging out with Sun at the time (John Gage and others), Oracle VPs and Doerr/Kleiner people as they raged against the Machine. It’s so weird to think back — getting calls from cable and NAB people frantically asking ‘What is Microsoft doing about X’. And McNealy blowing off buying Apple for a song.

    It gives us such pleasure that the only Microsoft product used in the Bunker is an Xbox (which so far has escaped the Rings of Death shoddy manufacturing curse). That’s not only because of HALO but also in this niche MSFT played nimble upstart to Sony’s PS empire.

    http://seanmalstrom.wordpress.com/2009/01/21/kaz-has-gone-insane/

    Gates retirement and ‘conversion’ by Melinda to humanitarian goals can’t obscure the distortive harm he inflicted at Microsoft that continues by dull inertia today.

  13. anon says

    Do you think anyone was really surprised that Bush failed to pardon Scooter despite Cheney’s request? Conrad Black is not surprising – Yes, he helped spew propaganda for the Iraq war, but his case his been problematic since Posner mocked it from the appeal bench.

  14. anon says

    Eric Cantor is actuall quite medicore, but he’s being pushed as GOP up and comer. Obama is truly blessed with a poor opposition on the Hill – They will be totally ineffective for the next few months – Obama will get what he wants. Plus, his gracious behavior will win the PR.

  15. anon says

    Niall Ferguson should do one of those speculative history articles imagining a world where Microsoft never succeeded – kind of like how he imagines a Europe that did not exp WW1.

    Think of all the patents and developments that did not manifest because MSFT put the Kibosh on them. Many technologies were aborted before the reached full development just because MSFT was out there ready to pounce,

    Even small things MSFT did were annoying – like buying the Bettman archive and burying it’s contents in a mine shaft and converting the images to Corbis.

    On of Anon’s late relattives donated his archive (100,000 items of NYC history) to his old pal Otto Betteman precisely because Betteman was committed to maintaining an open accessable archive in NY City.

    Now Gates ownes it all.

  16. anon says

    re Gates and pentagon lobbying ethic rules – Maybe Gates is right and only people with conflict of interests have the necessary qualifications and clearances (this process needs big reform ) to staff the pentagon – Maybe Lehman was too big to fail – Maybe torture is necessary. Rome wasn’t built in a day.

  17. anon says

    Did you catch Zbig take Scarborough to skool when Joe regurgitated some neocon talking points about Isreal giving Arafat everything he wanted? It’s hard to know if Joe was as credulous as he was pretending to be.

  18. anon says

    McCain must be having a complicated psychological reaction now – The mixture of awe and resentment at the size of the crowd at inauguration. Poor Cindy.

    Obama should assign McCain the role of GOP good cop and let the simpletons like Mike Pence and Dan Burton play the chief foil roles. Obama should invite Burton over for dinner and give him a pumpkin and a BB gun as a gift.

  19. Dr Leo Strauss says

    Agree completely – McCain-Palin an absurdity.

    A reset to 1994 would be indeed good fortune. We picked 1994 for many reasons including as you note pre-Netscape.

    The Negroponte laptops are terrific and congratulations for the good outcomes. We’re all in favor of them. As well as all the other netbook manufacturers that reject the MSFT tax and use a version of Linux for those looking for just mobile web surfing and email.

    Zbig in many ways was and is a better politician than the Peanut Farmer. Having a telegenic daughter as daily den mother on a 3 hour cable show also has its benefits.

  20. anon says

    No matter what you think about Obama – a McCain Presidency (put Palin in charge of energy and Putin)
    seems laughably absurd now.

    circa 1994 is not so bad – It was the beginning of exuberance – pre Netscape IPO.

    re Netbooks and Linux – Doc, we gather you still disagree with us on this – But we have been fans of N Negroponte for helping usher this margin killing category with his cheap laptop for foreigners.

    It really upset Microsoft.

    We gave several of these laptops (XO-1) as gifts last year and the quality of learning that resulted was very impressive and the laptops have been pretty easy to upgrade – Not to mention the fact that we know that one free laptop was donated to the truly needy for each one we bought.

    re FDR imperialism meme – we shall see. 1994 was still robust – If we go back to 1974, then we’ll re-assess.

    There’s a lot of business opportunity out there –

    re Malaise – we read Zbig use that word in an article in 1975 – From context, it is clear that is where Jimmy got the idea – Zbig has dodged blame for that one.

    The UK and Ireland are reeling – They all blame Dubya.

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