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Summary: Liebowitz and Margolis Winners, Losers & Microsoft
Review: As prior favorable reviewers have noted, the authors previously neatly deflated the critical example of an alleged danger that inferior technologies get locked in. The prolix, anonymous critic reviewer misstates the case. The point is that the claimed clear superiority of Dvorak's keyboard arrangement over the prevailing QWERTY arrangement did not exist. This belief in Dvorak spawned a vast number of models (many of which are cited in the book) in which the wrong choice persisted. Frustrated at the persistence of concerns for which the empirical basis had vanished, the authors went on to examine other alleged examples and to appraise the theory. The other examples also were invalid. That theory only establishes the special conditions that might produce lockin. The book nicely brings all this together in a lucid presentation. As the title neatly suggests, they go on to the point that belief in the theories they have long questioned are being used against a major company. The authors thus raise questions about the wisdom of applying such poorly tested theories to public policy. Beyond their argument is the movement in economic regulation to insist on strong evidence to support action. This is indeed an interesting book that those concerned with sensible government policy will find well worth reading.
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Summary: Brilliant debunking of current antitrust law
Review: Forget Microsoft. This book will make you doubt everything you've ever been taught about lock-in, bundling, and the ease with which market dominance can be abused.But don't forget about Microsoft entirely--the book makes clear that the conventional wisdom about how the company achieved dominance could lead to "remedies" that would have a terrible effect on the software market as a whole--inevitably dooming winners to constant hamstringing or worse in order to enforce an artificial measure of competition. The movie puts the lie to much that has been said about Microsoft by its critics, competitors, and even its advocates. Certainly no one connected to Microsoft has made such a devastating rebuttal of the charges against it. This book is a must-read for those interested in the outcome of that case.
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Summary: Dvorak isn't a myth.
Review: It's true that no completely scientific studies have been done on Dvorak vs Qwerty, but it hardly takes a study to see that Dvorak is better. Qwerty was created before touch typing was ever dreamed of. It's no better than an alphabetic arraingement. Anyone who touch types knows that some words are harder to type than others because you have to reach for awkward keys or one finger has to do too much work. Dvorak simply makes the common keys easier to get to and all but eliminates the need for one finger to type two letters in succesion. Just think of a word that's easy for you to type in Qwerty (e.g., flask), and consider that the majority of words you type in Dvorak feel like that. Do you believe these agenda driven jokers or your own fingers? This isn't rocket science. I don't need a study to tell me that a layout designed for touch typing will be better than one that was designed to keep primitive machines from jamming, and I don't trust the authors of a book who will set aside common sense and ignore the obvious in their quest to prove their pet theory. Also, I think Microsoft is a great company and we're all better off because it exists, but to deny that their OS monopoly gives them a huge advantage in the marketplace for other software products is a special kind of idiocy which can only be obtained through decades of academic isolation.
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Summary: Dvorak isn't a myth.
Review: It's true that no completely scientific studies have been done on Dvorak vs Qwerty, but it hardly takes a study to see that Dvorak is better. Qwerty was created before touch typing was ever dreamed of. It's no better than an alphabetic arraingement. Anyone who touch types knows that some words are harder to type than others because you have to reach for awkward keys or one finger has to do too much work. Dvorak simply makes the common keys easier to get to and all but eliminates the need for one finger to type two letters in succesion. Just think of a word that's easy for you to type in Qwerty (e.g., flask), and consider that the majority of words you type in Dvorak feel like that. Do you believe these agenda driven jokers or your own fingers? This isn't rocket science. I don't need a study to tell me that a layout designed for touch typing will be better than one that was designed to keep primitive machines from jamming, and I don't trust the authors of a book who will set aside common sense and ignore the obvious in their quest to prove their pet theory. Also, I think Microsoft is a great company and we're all better off because it exists, but to deny that their OS monopoly gives them a huge advantage in the marketplace for other software products is a special kind of idiocy which can only be obtained through decades of academic isolation.
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Summary: Reviews From Around the Country
Review: Leibowitz and Margolis tackle one of the central problems in modern antitrust economics: Can inferior products prevail in competition? If so, can the producer of such products achieve a monopoly? Standard neoclassical economics denies that either outcome is possible. Economic evolution tends to favor efficient equilibria, while inefficient local equilibria tend to become extinct. Two fashionable economic theories have been advanced, however, which claim that inferior products can not only prevail in competition but also achieve monopolistic status. Path dependence claims that inefficient local equilibria can persist over time. Initial conditions, which may be determined by chance or other non-economic forces (such as political interests), direct the system down a particular path. Subsequent deviations from that path may be precluded as too costly, even if there are more desirable or efficient alternatives available. Where the cost of reversing the initially chosen starting point or conditions is especially high, an inefficient equilibrium may result that resists correction by market forces. Network externalities is the other key element of the inferior product lock-in story. Some products become more valuable as the number of persons using them increases. Each person who adopts the product thus confers positive externalities on other users. Personal computers (PCs) are a commonly cited example of this phenomenon. The value of Microsoft's Windows operating system, for example, depends in part on how many people use it and thus create markets for compatible hardware and software. The more people who use Windows, the larger the market for ancillary products becomes, thus encouraging the development of more ancillary products of higher quality and lower price. The claim made on behalf of the combined effects of path dependence and network externalities is that one cannot depend on markets to get it right. Arbitrary initial starting conditions favor an inferior product. That product generates network externalities. As the number of users of the product rises, the size of those externalities increases, which gives the inferior product a huge competitive advantage. Eventually the network product achieves a "lock in" effect. At that point, path dependence kicks in. It becomes too expensive to switch to a new product even though that product is superior. Hence, the inferior product prevails. In WINNERS, Stan Leibowitz and Stephen Margolis popularize their well-known (among economists) work debunking these fashionable theories. An important theoretical contribution, albeit one which is likely to be of interest only to economists and economically-minded lawyers, is the distinction they draw between "second-degree" and "third-degree" path dependence, which is driven by the availability of a feasible alternative to the suboptimal equilibrium. Only if such an alternative is available, does the phenomenon in question demonstrate true path dependence. Only if such an alternative nevertheless remains not taken, can the phenomenon in question even potentially be deemed inefficient in either the Pareto superior or Kaldor-Hicks sense. Of greater interest to general readers will be WINNERS' debunking of several urban legends about path dependence and lock-in. Several now famous lock-in stories are reviewed, most notably the QWERTY keyboard and the VHS videotape format. Leibowitz and Margolis thoroughly debunk both stories. As for the supposed superiority of the Dvorak keyboard over the prevailing QWERTY model, for example, they show that the studies on which the claim of Dvorak's superiority was based were flawed. Drawing on evidence from ergonomic studies, computer simulations, and training experiments, they find that the Dvorak keyboard offers no significant advantage over the QWERTY model. Hence, the QWERTY fable (as they call it) does not even demonstrate second-degree path dependence, let alone the real thing. Of primary interest to the general reader, however, will be Leibowitz and Margolis' extension of their argument to the antitrust case against Microsoft. The success of Microsoft's Windows operating system over alternatives such as Mac or OS/2 is frequently attributed to a network externalities/lock in story. Assume for a moment that the lock in story is true. It is not clear what the antitrust implications ought to be. Antitrust historically was justified by concerns that monopolies are harmful: they result in lower output and higher prices than competitive markets. It is not at all clear that this is true of software markets. Even if it were true, the positive externalities that result from the network effect might well outweigh those costs. Hence, a monopoly created by network effects arguably ought to be deemed a natural monopoly and, as such, tolerated by the antitrust laws. (The use of a natural monopoly in one market as leverage to monopolize a second one, as Microsoft is alleged to have done, of course, cannot be so justified.) If Leibowitz and Margolis had limited their arguments to these points, the book would not have been controversial. (It also wouldn't have sold as well or gotten the attention it so richly deserves.) Instead, however, they try to debunk the claim that Microsoft's products are inferior ones that prevail only because of their network effects and path dependence. Here, I think they are on weaker ground than in either the QWERTY or VHS examples. Their primary empirical evidence on the quality of Microsoft products is software reviews in leading computer magazines with respect to a comparative handful of product markets. This is one plausible measure of quality, but surely it is not the only one. (I have often wondered whether the volume of advertising in those magazines effects their editorial content, for one thing.) Hence, it seems to me, that they overstate the case when they assert their data prove that Microsoft prevails in market competition because it makes high quality products that it sells at low prices. Having said that, however, this is an incredibly important and remarkably accessible introduction to the key economic principles that underlie the software markets.
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Summary: It's about time this work is made available for everyone.
Review: Liebowitz and Margolis have done research on intellectual property issues for over two decades. Their work on new technologies began over a decade and a half ago. Their piece on the Fable of the Keys, was the lead article in the Journal of Law and Economics in 1990. Unfortunately, their other work on path dependency has languished in less well-known journals. It is a wonderful asset finally to have all their work on technological lock-ins put together in this one volume, and accessibly written for anyone who is interested in the topic. I've been a long-time Microsoft user/hater, but I find most of the arguments put forward by the authors to be very compelling: When MS products receive top ratings, those products tend to dominate the market and prices fall. I'm not sure I agree with most software reviewers that MS IE is better than Netscape, but perhaps that's a personal preference. But as I said, this book is a superb and accessible summary of the authors' work on path dependency and is a telling condemnation of BOTH sides in the antitrust suit agains Microsoft.
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Summary: First-rate Empirical Research Combined with Excellent Theory
Review: No economist (or team of economists) has produced during the 1990s research that is as compelling, as exciting, as important, and as well-grounded in both theory and data as that of Stan Liebowitz and Stephen Margolis. These guys' work is truly and deeply impressive. And their writing is a joy to read. They tackle some of the most challenging issues at play in modern economics -- and they succeed brilliantly! Because of the research these two scholars produced earlier in this decade, it is inexcusable for anyone to trot out the success of the QWERTY keyboard or that of the VHS tape as examples of "inefficient lock-in." Because of the research they have done, and report clearly, in this new book, it is now inexcusable for anyone to claim that Microsoft's market success is due exclusively -- or even principally -- to "path-dependency" or "inefficient lock-in." Liebowitz and Margolis show beyond any reasonable doubt that in those markets where Microsoft achieves and maintains a large market share, it does so by offering consumers deals that consumers fine attractive. Period. WINNERS, LOSERS, AND MICROSOFT is economics at its finest and most relevant.
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Summary: Authors do not know the computer industry
Review: The authors are PH.D. economists, but obviously do not know how the computer industry works. I've been in the industry over 40 years and had to deal with the IBM and Microsoft monopolies. Much of the text deals with dead issues like Beta vs. VCR and QWERTY vs. Dvorak keyboards. If you are interested in these topics, the material is complete. The rest of the book is a defense of Microsoft and tells us that Microsoft is a success because of the quality of their software. They do not mention the hundreds of bug fixes and security patches Microsoft sends out regularly. Most people in the computer business will laugh at some of the statements in this book.
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Summary: Great Book
Review: There are a lot of myths about why products succeed or fail. Many claim that customers get "locked into" products simply because they arrive on the scene first even when much better products are available. Some claim that Microsoft has taken over different markets despite inferior software simply because of the monopoly that it has in operating systems. Liebowitz and Margolis provide straightforward, convincing, and imaginative evidence that these claims are false. It is amazing how many stories like the superiority of the DVORAK keyboard hang around for years with no supporting evidence. They make for great stories, but as these authors point out they are false. If you want to learn about how markets work, read this book. Finally, the previous commentor's remarks about these authors being bought off is offensive and false. Liebowitz and Margolis wrote about these issues a decade before Microsoft became involved in its current legal problems. Anyone who reads this book will realize that Microsoft would have been a lot better off if they had hired them rather than the lame effort they got from the MIT business school dean.
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Summary: Deflates the case against Microsoft
Review: This a great book for those whose only exposure to the economics of the case has come from DOJ lawyers' press conferences. The "Fable of the Keys" article/chapter is excellent for its demolishing of the DVORAK v. QWERTY keyboard myth. Also good is the right on the money explanation of the Betamax v. VHS standard battle. When thinking about the claimed lock-in effect for Microsoft Explorer one should ask: even if ME is "inferior" to Navigator, does it really matter? For as M&L illustrate, peceived dominant players in software markets have been completely overthrown in a short period of time (ie. 1-3 years using their example of Lotus and Wordperfect). Therefore, to buy the government's argument that Microsoft will lead to permanent ineffiencies, and this is based on the assumption that ME is inferior to Navigator, one must believe that people are either extremely stupid or that no one will ever, and I mean ever, be able to challenge Microsoft, but this idea flies in the face of all empirical evidence as well as common sense. Lastly, M&L take some shots at academic economists near the end of the book. They write that the quest for tenure, acclaim, money etc., has lead many economists to distort economics by applying purely theoretical (read as: having no connection to the real world) to the real world. This is dead on. As a graduate student in economics I can attest to the fact that economics in theory and practice are too very different things. Unfortunately, many economists are not that scrupulous and take advantage of the popular belief that "experts" know something, and would rather make a quick buck testifying for the government than admit to the fact that economics in the classroom and textbook has nothing to do with reality.
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