Apparently we have arrived at the long run and we are not dead.

Do you remember the Microsoft anti-trust case?  The anti-trust division of the US Department of Justice sought the breakup of Microsoft for anti-competitive practices mostly centering around integrating Internet Explorer into the Windows operating system.  In fact, an initial ruling found Microsoft in violation of an agreement not to tie new software products into Windows and mandated a breakup, separating the operating systems business from the software applications business.  This ruling was overturned on appeal and evnetually the case was settled with an agreement that imposed no further restrictions on Microsoft’s ability to bundle software but did require Microsoft to share APIs with third-party developers for a 5 year period.

Today, all of the players in that case are mostly irrelevant.  AOL, Netscape, Redhat.  Java.  Indeed, Microsoft itself is close to irrelevance in the sense that any attempt today at exploiting its operating system market power to extend its monopoly would cause at most a short-run adjustment period before it would be ignored.

Microsoft was arguing at the time that it was constantly innovating to maintain its market position and it was impossible to predict from where the next threat to its dominance would appear.  Whether or not the first part of their claim was true, the second part certainly turned out to be so.  It is hard to see a credible case that the Microsoft anti-trust investigation, trial, and settlement played anything more than a negligible role in bringing us to this point.  Indeed the considerations there, focusing on the internals of the operating system and contracts with hardware manufacturers, are orthogonal to developments in the market since then.  The operating system is a client and today clients are perfect substitutes.  The rents go to servers and servers live on the internet unconstrained by any “platform” or “network effects”, indeed creating their own.

The lesson of this experience is that in a rapidly changing landscape, intervention can wait.  Even intervention that looks urgent at the time.  Almost certainly the unexpected will happen that will change everything.

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