June 2002

The true test of the greatness of an enterprise is not, as some would claim, how well it handles adversity. Empires have risen and fallen for thousands of years, but one consistent pattern has been that nations, businesses, and churches have typically failed to capitalize on the so-called "good times." It is not when people feel challenged or threatened that they fail to respond. Rather, it is when they become fat and complacent that the decay sets in.

Every evidence of decadence in the modern world -- from priestly pedophiles to software megalomaniacs to political monkeyshine -- is the result of an attitude of smug, self-assured complacency. Decades of relative peace and a period of ever-increasing wealth have produced a generation of leaders who want to rig the game, to ensure that the outcome is fixed and that success is pre-determined. Stock-market and accounting swindlers are obvious adherents to this mindset of writing the rules so that the appearance of success is maintained at all costs. Technology companies -- at least the large, capital-driven ones -- are not immune to this trend, and in fact are among its primary examples.

During the relatively wealthy period of the past decade, IBM had a golden opportunity to re-establish itself as a technology powerhouse. There were two paths that it could take: either follow the general trend of submitting to the decadent, ubiquitous Microsoft environment (thus ensuring short-term success), or take the high road and press its advantage of technological superiority (while risking short-term profits in favor of long-term strategic advantage). There were two very different cultures involved with these two choices.

The outcome of the first option was clear: IBM would gain the approval of Wall Street and the mediocre, populist technology press. By capitulating to Microsoft, they would be accepted into the "boys club" and avoid the reputation as an old-school maverick. The outcome of the second choice would be less certain, but more noble: IBM would push excellence into the mainstream, risking everything by swimming against the tide, so to speak, and agitating for a cultural reversal away from mediocrity and toward greatness. By refusing to capitulate to the forces of mindless, tasteless products, IBM would eschew the pop-culture technology press and establish its own standards and priorities.

If IBM had taken the high road and continued establishing OS/2 as the superior choice for desktop and portable computing, then its short-term earnings in the mid-1990's would have been sacrificed for long-term advantage. Wall Street may have frowned on such a policy, but where is Wall Street today? IBM's earnings are at risk anyway, so the decision to conform instead of to lead was a bad decision. Just look at the Reuters article at for more details.

Meanwhile, Microsoft has been no wiser in recognizing the best way to leverage its financial success. A monopolist needs to accumulate friends, not vassals. Recent federal decisions to settle on SEC accounting charges and antitrust penalties are evidence of government abdication, not respect or friendship. Microsoft's Wall Street mentality of immediate gain over long-term strategy means that an ever-increasing percentage of its user base feels alienated, manipulated, and cheated. Raising the price while bloating the product makes for short-term largesse and long-term bitterness. Sooner or later even a P.T. Barnum will run out of suckers.

The current technology and market malaise is the result of too many people running the same game at the same time. Quality, innovation, customer service, and idealism may seem like old-fashioned hooey to the moneychangers and the trendsetters in the financial world, but they produce something that no amount of money can buy: loyalty. It's too bad that nobody on Wall Street figured out that something *priceless* does not have to be *worthless*. As a result, none of them figured out that sooner or later, everyone's chickens would come home to roost at the same time.

Most recent revision: May 28, 2002
Copyright © 2002, Tom Nadeau
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