How tech’s Evil Empire learned to play nice
Microsoft evolved its business after its antitrust case in early 2000s
Google, Facebook, Amazon and Apple are targets of government investigations and public outrage, facing accusations that they abuse their power in various ways, from exploiting personal information to stifling rivals.
Conspicuously absent from most of that criticism? Microsoft, a tech company worth more than them all.
The software giant, valued at more than $1 trillion by investors, is no stranger to government scrutiny and public criticism. It endured years of antitrust investigations, and faced a long public trial that almost split up the company. In the end, Microsoft paid billions in fines and settlements, and absorbed humbling lessons.
But its “Evil Empire” moniker, once a label favoured by the company’s critics, has fallen by the wayside.
Today, Microsoft has positioned itself as the tech sector’s leading advocate on public policy matters like protecting consumer privacy and establishing ethical guidelines for artificial intelligence. Though it has sued to limit government access to users’ data, Microsoft is seen in capitals around the world as the most government-friendly of the tech companies.
“It’s in a league of its own,” said Casper Klynge, a foreign-service officer who is Denmark’s ambassador to the technology industry, based in Silicon Valley. “There is self-interest, of course. But Microsoft actively engages with governments on important issues far more than we see from the other big tech companies.”
Market shifts and the evolution of Microsoft’s business over the years help explain the transformation. It is less a consumer company than its peers. For example, Microsoft’s Bing search engine and LinkedIn professional network sell ads, but the company as a whole is not dependent on online advertising and the harvesting of personal data, unlike Facebook and Google. And while big, Microsoft no longer looms as the threatening bully it was in the personal computer era. The company is a healthy No. 2 in markets like cloud computing (behind Amazon) and video games (behind Sony) rather than a dominant No. 1.
“Microsoft can afford to be more self-righteous on some of those social issues because of its business model,” said David B. Yoffie, a professor at the Harvard Business School.
But Microsoft has also undergone a corporate personality change over the years, becoming more outward looking and seeking the views of policymakers, critics and competitors. That shift has been guided by Brad Smith, Microsoft’s president, diplomat-in-residence and emissary to the outside world. His work has been endorsed and his role enlarged under Satya Nadella, who became chief executive in 2014 and led a resurgence in the company’s fortunes.
In a new book, Smith makes the case for a new relationship between the tech sector and government — closer co-operation and challenges for each side. “When your technology changes the world,” he writes, “you bear a responsibility to help address the world that you have helped create.” And governments, he writes, “need to move faster and start to catch up with the pace of technology.”
In an interview, Smith talked about the lessons he had learned from Microsoft’s past battles and what he saw as the future of tech policy-making — arguing for closer co-operation between the tech sector and the government.
Smith, 60, was at Microsoft during the company’s antitrust conflict in the 1990s, but he did not direct the legal strategy.
Microsoft lost the suit filed by the Justice Department and 20 states, narrowly avoided being broken up and then settled the case with the Bush administration in 2001. Smith, who became general counsel in 2002, then served as Microsoft’s global peacemaker, settling the follow-on cases with companies and governments.
From that experience, Smith had some advice for the young platform companies today — Google, Facebook and Amazon. Major antitrust confrontations, he noted, last a long time. The landmark cases in technology — AT&T, IBM and Microsoft — all went on for decades.
“And once you’re in the crosshairs, it is hard to get out,” Smith said.
The natural tendency for the young tech powers is to fight. “They didn’t get to where they are by compromising,” Smith said. “They got to where they are because they stuck to their guns. And so they tend to think they’re right and the government is wrong.”
Microsoft co-founder Bill Gates, who wrote the foreword in Smith’s book, recalled that for years he was proud of how little time he spent talking to people in government. “As I learned the hard way in the antitrust suit,” he wrote, “that was not a wise position to take.”