Understanding Microsoft

Part 69. The Fungus

The way a fungus spreads is quite interesting. It typically starts with a small patch of infested ground or flesh, and it feeds by growing its perimeter outward. As it grows, it consumes the living things around it, leaving a "dead area" in the center. This dead spot is devoid of nutrients; therefore, nothing can grow there. The fungus spreads until it runs out of nutrients to consume or else chokes on its own wastes.

Modern corporations seem to emulate this method of growth; for example, Wal-Mart stores generally establish a single, all-inclusive retail outlet that absorbs customers from all the surrounding businesses. This is because the Wal-Mart will have shoes, hardware, electronics, clothing, a pharmacy -- an entire self-contained shopping community under one roof. Recently, Wal-Mart has expanded its stores to include fresh and frozen foods, meats, and other foodstuffs, hoping to put pressure on even grocery chains and hopefully put them out of business as well. In the most extreme cases, Wal-Mart will build two large retail centers within just one or two miles of each other, drive all neighboring stores out of business, occupy the abandoned properties, and then close the extra Wal-Mart store to cut costs. This strategy leaves a "dead zone" where no other business can prosper, and no banker will dare lend capital for retail development. The result is a small, geographically-oriented horizontal monopoly in retail distribution.

But not just the sellers of physical goods resort to this sort of market-monopolizing technique. Microsoft has used the same basic approach to the software market as Wal-Mart has used, growing like a fungus centered on PC operating systems, then expanding into word processing, spreadsheets, and graphics programs. Then moving outward in an ever-wider swath of consumption, Microsoft has attacked the market for databases and contact managers by adding more products to its Office bundle. Continuing the process of leveraging its retail distribution monopoly via preload contracts and shelf-space flooding, Microsoft has now moved outward into such areas as entertainment products, Internet software, and desktop publishing. The result has been a huge and growing "dead spot" where no banker or Venture Capitalist has been willing to plunk down the billions of dollars necessary to rejuvenate a stale market.

By leveraging its distribution choke-hold to produce a horizontal monopoly on the distribution and development of software products, Microsoft has cannibalized companies, markets, and talented innovators, leaving them with no "nutrients" in the form of capital upon which to grow their own enterprises. Like some kind of huge fungus, Microsoft is intent on not merely surviving, but also starving as many alternative life-forms as possible.

Most recent revision: November 1, 1998
Copyright © 1998, Tom Nadeau
All Rights Reserved.