Bill Gates recently announced he’s stepping down from the board of Microsoft, the trillion-dollar software colossus he cofounded, to “dedicate more time to philanthropic priorities including global health and development, education, and my increasing engagement in tackling climate change.” The national papers happily reported the news: “In his post-Microsoft career, Mr. Gates has become better known for his work in fighting infectious diseases and climate change. [In February], the Gates Foundation said it would commit an additional $100 million to fight the coronavirus,” the New York Times reported.
This was typical of the affectionate press treatment of Gates, who’s now considered one of the better billionaires, relative to Trump or the Koch brothers. This is mainly due to the Bill & Melinda Gates Foundation, the world’s largest private charitable entity with billions in its endowment used for fighting AIDS, accelerating economic development, and many other worthy causes.
But Bill Gates and his foundation are the perfect picture of why this model of billionaire philanthropy is so flawed. Gates’s foundation was originally cooked up as a feel-good gloss to cover up his shredded reputation during Microsoft’s antitrust trial, putting him in the long tradition of obscenely rich people using the occasional generous gift to try justifying their enormous wealth and power.
It’s worth remembering where Gates’s money came from. In 1981, Microsoft bought the rights to a version of an early operating system (“DOS”), the basic software running on a computer that makes it operable and can support applications. They modified it and sold it to IBM for its incredibly successful personal computers, leading to stupendous growth at Microsoft as IBM and the many clone PC-makers wanted the same OS in order to attract more software developers, whose applications made the PC useful.
This created “network effects,” which we economists will tell you is a major driver of monopolization. Gates and his tech CEO chums have used that monopolization to summon gigantic profits and to tighten their grip over still-growing portions of the world economy. Network effects are present when a service gains value to you as more people use it, like a phone network. Markets delivering this kind of service are especially prone to monopoly, both since early leaders in the market tend to build up an advantage in their bigger network, and since networks typically require a uniform standard in order for users to broadly connect and benefit from it.
People want to use or join networks that already have many other users, like Facebook, rather than ones with very few. The long-lasting AT&T phone monopoly is a major historical example, along with today’s regional rail shipping monopolies and Facebook’s social media empire. And Gates’s company exploded with a prime slice of the entire early IT revolution.
During his company’s manic growth period, Gates emerged as a modern Gilded Age tycoon. Even sympathetic biographers refer to Gates’s frequent “abrasive, childish rants” and “childlike temper tantrums.” Gates’s number two and CEO successor, Steve Ballmer, maintained this reputation of management by yelling like an ape at employees and sometimes throwing chairs. These are the patterns of human behavior that are encouraged by the business world’s strict hierarchy, and tech, despite its reputation for in-office yoga training and green tea vending machines, is no exception.
The ability of corporate hierarchy to create cultish conformity is well-known. But Gates took it to new cultish heights, as shown in business reporting on Gates’s rocking habit: “It has become part of the corporate culture at Microsoft among programmers trying to re-create themselves in the chairman’s image. Gates often rocks himself in a chair, elbows on knees, to contain his intensity, especially when the talk is about computers; it’s not unusual to walk into a room of Microsoft managers and find most of them rocking in sync with him during an important meeting.”
Gates’s charm also comes out in episodes in which he frequently slammed his hand into his fist while saying, “We’ve got to crush” whatever rival dared sell software in the nineties. “We’re going to put Digital Research out of business,” James Wallace and Jim Erickson’s standard history of the company recounts, “slamming his fist into the palm of his other hand. He would issue a similar vow twice more during the next year . . . promising to put MicroPro and Lotus out of business, each time emphasizing his promise by smashing his fist into his hand.”
In addition to the network effects, it was Gates’s burning desire to grind his competitors to sand, along with his desire to set the standard that software makers would conform to, that led to Microsoft selling over 90 percent of the PC operating systems of the 1990s and 2000s. That dominance made Gates the world’s richest man for decades on end.
And when new online technology came along outside of Gates’s control, above all the Internet browser sold by Mosaic (later Netscape), Gates inaugurated a period described in business and computing history as “the browser wars.” Microsoft began by withholding its software details from Netscape when the browser company requested a conventional preview of them for the next version of DOS-successor Windows. Then it approached Netscape’s management and according to later legal claims by its management, offered to divide the browser market, with an exec offering a “special relationship.” Netscape rejected this due to the gigantic advantage that Microsoft’s new browser would have, since it would likely come with the ubiquitous Windows OS updates which reached nearly every running computer in the world.
Thanks to the ensuing legal challenges, we know a fair amount of the browser war strategy. The discussions were naked plans to use monopoly power to crush an upstart. Microsoft got a license from the rights-holders to the original version of Mosaic and redeveloped it hastily into Internet Explorer, the lame browser your work PC probably still defaults to. Gates and his minions feared that Netscape would soon reach a tipping point where network effects would embrace it as a standard that would be “locked in.” Thus a top Windows executive said, “I don’t understand how IE is going to win . . . we must leverage Windows more.”
Likewise, Microsoft VP Paul Maritz is said to have stated the company’s goal in making their own browser free: to “cut off Netscape’s air supply.” By the time of the release of Windows 98, the company had gone further and forced PC-makers to include Explorer on their desktops, putting it in front of millions of users. Of course, the question of which browser is better isn’t the main issue here — the use of naked market muscle by a figure who media would have you believe is a sweet grandfatherly benefactor.
Microsoft’s hardball tactics in the browser wars, and its endless parade of these power plays from chip design to media players, now began to catch up with it, as the extremely business-friendly United States finally had to take action. In public, he said, “Who decides what’s in Windows? The customers who buy it.” But at a dinner party, the talk turned to politics, and he bragged, “Of course, I have as much power as the president has.”
Indeed, he golfed with President Bill Clinton, dined with House Speaker Newt Gingrich, and had Vice President Al Gore visit the Redmond Microsoft campus. Like all great capitalists, he enjoyed the company of powerful figures with abutting interests. But his company’s aggressive steps to take over new markets like web browsing forced the Justice Department’s hand.
The ensuing trial itself was fascinating for several reasons, not the least of which is Gates’s performance. He gave hours of videotaped testimony for the case, viewable today online. Besides being a transparently evasive and condescending ruling-class dick, Gates made a long list of claims that would soon be directly refuted in court by comparison to his own emails. The media was killing him on the nightly news, and even bland business journals like BusinessWeek reported, “He argues with prosecutors over the definition of commonly used words, including ‘we’ and ‘compete.’ Early rounds of his deposition show him offering obfuscatory answers and saying ‘I don’t recall’ so many times that even the presiding judge had to chuckle. Worse, many of the technology chief’s denials and pleas of ignorance have been directly refuted by prosecutors with snippets of E-mail Gates both sent and received.”
It was during this trying time that Gates discovered the wonders of charitable giving.
The business press has observed how “Twenty years ago, people associated the name Gates with ‘ruthless, predatory’ monopolistic conduct.” However, “after taking a public relations beating during [the Microsoft antitrust] trial’s early going in late 1998, the company started what was described at the time as a ‘charm offensive’ aimed at improving its image . . . Mr. Gates contributed $20.3 billion, or 71 percent of his total contributions to the foundation . . . during the 18 months between the start of the trial and the verdict.” A wealth manager frankly states, “his philanthropy has helped ‘rebrand’ his name.”
Indeed, philanthropy by the very richest men and women globally is one of the main arguments their defenders have — sure, Gates and other billionaires make a lot of money, but then they use it to help us. So generous! And look, he’s smarter than our racist TV president! But often it’s a fig leaf for ruling-class dominance.
Further, in this era of tax cuts for wealthy households and resulting government budget deficits, many advocates of cutting back the social safety net still point to private philanthropy and “faith-based” organizations as being able to step into their place. But this is ludicrous — private charities, even on the scale reviewed here, are nowhere near able to independently pay for a country’s social needs, from housing the mentally ill to providing vaccines.
The foundations themselves recognize this, as when Patty Stonesifer, then chief of the Gates Foundation, said, “Our giving is a drop in the bucket compared to the government’s responsibility.” This was confirmed when the foundation committed $50 million to fight the Ebola outbreak in West Africa. In contrast, the UN estimated the total cost of containing the outbreak at roughly $600 million. Such amounts are within the reach of these modern foundations, but far beyond the kind of commitment they are known to make. Of course, if the towering fortunes of today’s billionaires were socialized and put under some form of popular control, we could go much farther and have an actually robust global public health system, making testing quickly available on a nonprofit basis, and making epidemics less likely to break out in the first place.
Sometimes even conservative supporters of austerity and government cutbacks recognize this. Milton Friedman, Reagan’s economic adviser and author of Capitalism and Freedom once wrote: “It would be nice if we could rely on voluntary activities of individuals to house and care for the madmen. But I think we cannot rule out the possibility that such charitable activities will be inadequate.”
As for Gates’s original empire, the Bush administration’s Department of Justice dropped its demand to break up the company, despite a federal court formally ruling that Microsoft had a monopoly on Intel-based PC operating systems, and that it had used illegal monopolization tactics to crush software threats from Netscape, Sun, Apple, and others. So today Gates remains cartoonishly rich, and free to step down from Microsoft’s board on his own terms.
Meanwhile, the corporate media happily help to spit-shine his reputation as a generous benefactor of humanity instead of a petty, bullying scumbag.