Understanding Microsoft

Part 25. New Japan, Inc.

Back in the economic doldrums of the 1970's and early 1980's, many Americans began voicing a curious "solution" to the problems that American business seemed to be having: "We need to become more like the Japanese!" What they meant was that Japan seemed to be booming, and obviously their business model was superior. Obviously their way of management was doing better than the American way, and thus a wise thing to do would be to learn from their example and begin to run American businesses the way the Japanese ran theirs.

Business leaders also thought this was a good idea, and books such as *Japan, Inc.* tried to bridge the cultural gap and help Americans understand what such changes would mean. For example, the Japanese model is not built around many competing entities having a free-for-all the way the American system is designed to work; instead, the concept of the *keiretsu* is used. Keiretsu are roughly equivalent to a business conglomerate, usually centered around a bank and a major manufacturing company. Assembling the keiretsu is a way to perform a vertical integration that includes not just physical products, but also capital, marketing, and raw materials. The keiretsu are often accompanied by family ties.

The effect on the Japanese public of such collectivism is to limit consumer choice in the name of "efficiency" so that the keiretsu are able to compete globally with the extra capital. By sacrificing consumer choice, domestic prices are kept artificially high to finance global economic warfare. This occurs not only in consumer entertainment but even in foodstuffs. The Japanese model thus made for very strong positive trade imbalance because the Japanese citizen was subsidizing the keiretsu expansionism at the expense of lost freedom of choice and higher prices. It seemed to be a reasonable tradeoff for a while.

However, all artificial means of floating a controlled market on top of a free market eventually fail. When Japanese real-estate prices crashed, the foundation of many keiretsu began to crumble, and there was no longer the extra capital needed to continue the external expansion. Without expansion capability, the model fails. Japan has been in an economic funk ever since. Is there a warning message to America's booming high-tech economy?

Indeed there is. Microsoft has seen fit to build alliances with companies like MCI, VISA, TCI, and various other major corporations in areas outside of software, areas like communication, finance, and entertainment. This is nothing less than an information cartel or an Americanized version of the Japanese keiretsu, with Microsoft's global expansionist hunger as the driving force. By building and leveraging monopolies on consumer credit, cable television, PC operating systems, and telecommunications, these companies seek to eliminate consumer choice and finance their global agenda of growth and control. Microsoft is the new Japan, Inc., and it is only a matter of time before its expansionism runs into a brick wall as well, taking down the companies it has knitted into its web of control.

Most recent revision: January 21, 1998
Copyright © 1998, Tom Nadeau
All Rights Reserved.