Saturday, July 12, 2014

Hand in Glove

Trivia: Latex surgical gloves are generally used today to protect the patient from germs on the hands of the surgeon and his team. Surprisingly, this was not why surgical gloves were first used, however. Dr. William Stewart Halsted of Johns Hopkinsintroduced surgical gloves for the initially exclusive use by his favorite surgical nurse, Caroline Hampton (who eventually became Mrs. Halsted). In the late nineteenth century, the idea of keeping the field around the patient sterile was relatively new, and doing so involved spraying an antiseptic mist containing mercury. Unfortunately, Caroline’s skin had an allergic reaction to the mercury; so, rather than do without his favorite nurse, Halsted gave her rubber gloves to wear during procedures. Nobody else wore gloves, just her. Eventually, of course, it was realized that latex gloves on the hands of the entire team might actually benefit the patient, too, and the rest is history.

Not Too Big to Fail?

It is an article of faith among those on the left that if one person, company or country is successful while another fails, then it must be because the one stole the success of the other. This is rarely the way the world works. Take for example, the fact that in 1914, London, the capital of Great Britainand its far flung British Empire, was the financial capital of the world. If you were in the business of making and controlling large amounts of money in stocks and other investments, London was the place. By 1918, however, New York City in the United Stateswas the financial capital of the world. Did New yorkachieve this by taking something away from London? Not quite. What happened between those two years was World War I, which financially ruined Germany and to a degree France as well. To pay for its own share of the war, Britain spent and borrowed money and brought itself near bankruptcy, too. Londonhad to borrow from someone, so they borrowed from New York. It wasn’t so much that London had something taken from it as that it exhausted itself. New Yorkstepped in to take up the slack, not only loaning to Londonbut to anyone else who wanted to borrow money and could no longer borrow it from London.

 

Failure is never so much what others take from us as it is the result of our failing ourselves. Recently, the AMC cable channel started airing a series called “Halt and Catch Fire” about the heady days of PC clone computers in the 1980s. This is a remarkable and instructive (and therefore forgotten) story about how the action of the free market confounds the common (leftist) wisdom about how economics works.


Shortly after IBM announced its pending introduction of the OS2 operating system for its PC computer in the mid-1980s, I met a man who worked for “Big Blue” and he told me that IBM was going to continue to dominate the PC market because it is big (a kind of precursor of “too big to fail”) and people would buy OS2 just because it was IBM that produced it.

 
To grasp the fallacy in his thinking, you need to understand the history of IBM’s PC project. Of course, IBM is one of the oldest computer companies in the world, and made its reputation building enormous computers. In the 1960s, the company introduced “mini-computers,” which were so-called because they were smaller than the house-sized behemoths IBM had been making, but these minis were still more than twice the size of the refrigerator in your mom’s kitchen.

 
Well, after Apple introduced desk top computers with user-friendly software, Big Blue assigned some executives to a team project intended to develop IBM’s own desktop to compete with Apple. The trouble was that IBM’s people did not know what they were doing and did not really know that they did not know, and if they had known, they would not have believed that it made any difference. They represented IBM and they were they five-hundred-pound gorilla in the computing business.

 
So the first thing IBM did was create it own original microprocessor. They got it patented. The next thing they did was to build a desktop computer around this processor, using off-the-shelf parts—parts they did not patent. Anyone else could buy those parts and build a computer with them, but IBM didn’t think they would, because they would be competing with Big Blue, and Big Blue was the five-hundred-pound gorilla, right?

 
Next the IBM boys went to Redmond, Washington, and met with Bill Gates, then-president of a little software company called Microsoft. Gates (now the semi-retired chairman of Microsoft) and his business associate, Steve Balmer (who recently stepped down as president of Microsoft), quickly realized that the IBM guys did not have a clue. They thought that Gates could magically give them CPM, the best operating system at the time, but not one that Microsoft owned. Gates sent IBM to the owner of CPM, but when IBM called at his home, he wasn’t there, and his wife, who was vice-president of his little company, was so freaked out by the IBM men in their crisp blue suits and waiving sheaves of non-disclosure agreements in her face, that she sent them away. Not knowing what to do next, the IBM men went back to Gates. This time, Gates decided to stop being so ethical and take some money from these suits. He bought QDOS—the Quick and Dirty Operating System—from a long-haired hacker and re-sold it to IBM. Now, Gates knew that QDOS was basically a rip-off of CPM, but any lawyer could have told him that the law in the early 1980s was very unclear as to whether or not someone could patent a software program. Dubbed a “virtual machine,” a program fell into a gray area because it was not an actual machine. (Do not try this today; the law has since decided that computer programs are patentable.) This legal situation, which helped Gates sell a computer operating system to IBM, would later come back to haunt Big Blue.

 
IBM took the Microsoft DOS (MS-DOS after Gates replaced the Q with an MS) and called it OS. It operated the first IBM PC. It was an adequate little desktop computer for its day. For one thing, it was cheaper than the Apple desktop, and you could buy one anywhere and even get it repaired through your dealer.

 
(A side note: Michael Dell was a college dropout who sold bootleg IBM PCs out of the trunk of his car. The legality of this was interesting because the dealers who sold Dell those PCs for him to resell were breaking a legally-binding contract they had signed with IBM; but Dell was not technically breaking the law because he had signed no such agreement. Michael Dell eventually went into the business of selling his own PC clones, but that gets us ahead of our story.)

Gates again remembered his ethics and—realizing that someone could use Microsoft DOS to operate a PC clone—offered to sell the exclusive rights for the operating system to IBM. But IBM did not see why they needed to do that. The software only worked in a PC, and IBM made the only PCs. They were Big Blue after all. They were the five-hundred-pound gorilla, right?

 
It might have worked out differently. When companies like the fictional one in the TV series “Halt and Catch Fire” began the expensive and elaborate process of reverse-engineering the microprocessor at the heart of the PC, it was only a legal theory that judges would declare that this was legal. What the would-be clone maker had to do was get someone who had never worked for IBM and had never seen the blueprints for its microprocessor to read a report carefully extracted from a report on how the IBM PC microprocessor works. This extracted report would not tell how to make the microprocessor; it only told what it does and what a clone would need to do. The reverse-engineer had to invent something that would mimic everything the IBM microprocessor was capable of doing. Almost from scratch. It would cost the company that wanted to do it millions of dollars just for the reverse engineering project, but the prospect was not as daunting as it might have been. If you reverse-engineered the microprocessor, you did not have any other patents to worry about. IBM did not own any other components of the hardware, and, since IBM had turned down Gates offer to buy the exclusive rights to the operating system, the clone manufacturer could just pay Microsoft for the right to use MS-DOS.

 
Was all of this legal, though? IBM would have to sue somebody to find out. The problem, of course, was that candidates to sue were everywhere. There were both foreign and domestic clone makers within a short time. And when IBM finally sued some of them, the courts made the landmark decision that reverse-engineering was legal because the person who actually built the new microprocessor did not directly copy the IBM processor but merely made a device that could do the same thing.

 
At that point, the argument that people would buy IBM’s new proprietary OS2, just because IBM made it, fell flat. IBM failed to realize that they were closing the barn door after the cows had already escaped. Microsoft DOS was a good enough operating system as far as consumers were concerned, and the price of a PC clone was right. (It was cheap.) The desktop computer became ubiquitous, and the revolution was underway.

 
The head of the PC project at IBM tendered his resignation, by the way, but his boss refused to accept it. The lesson taken at Big Blue seemed to be that this was a learning experience for everyone. Quite a lesson: Size only matters until it doesn’t.

 
It was not that the PC clone makers took anything away from IBM so much as that IBM shot itself in the foot by not taking proprietary control over more than just one component of its invention. IBM failed to gain a monopoly over the PC because of its own weaknesses, not because of the strengths of its competitors who resembled a swarm of mosquitoes more than an opponent anywhere near IBM’s own size. And the assumption that IBM would beat Apple because Apple was a smaller company just showed a failure on IBM’s part to see the bigger, more complex picture. It was also an error on the part of both IBM and Apple to think that the real battle was over the hardware. In the war between IBM and Apple—which my IBM acquaintance assumed that IBM would naturally win because of the five-hundred-pound gorilla thing—it turned out that the winner was Microsoft, not either of the hardware champions. Licensing MS-DOS and subsequent software products to PC clones is what made Gates the billionaire that he is today.

 
Gay Fascism?

 
There are more and more cases popping up all over the country of gay people suing business owners for not photographing or catering their weddings or parties. In at least one case a t-shirt customizer was required to make t-shirts for a gay pride parade or else get out of the business.

 
Past millennia of gay people would have given their right arms just to be tolerated. They wanted to live without other people’s values imposed on them. To now impose the obligation to participate in gay celebrations on non-gays is reverse fascism, forcing people, who would rather not, to participate in same sex celebrations. It is one thing to expect a baker to sell you a cake regardless of your sexual orientation, but it is quite another for you to force him to cater your gay wedding or make signs for your gay pride parade. If you call the police on him, he isn’t guilty of harassing you; you are guilty of harassing him.