Gates loses $12bn, just like that

I remember listening avidly, as a child, to a speech by Tony Benn (or Viscount Stansgate as he had been in a previous life, or Anthony Wedgwood Benn, as I believe he still was at the time). "Why does the BBC keep broadcasting those stock-market reports?" Benn asked. "Do little old ladies gather round their radios and faint or cheer when they hear 'Tin closed steady'?"

It struck a chord with me then: I had vaguely presumed that the stock market, with all its news of copper falling or tin rising, was one of those mysteries of the grown-up world that would be explained in adulthood.

But it was not to be, I'm afraid. If I hear today that the Nasdaq plunged dramatically, I'm still pretty baffled. I understand a little more if it is translated into human terms: that Bill Gates, a co-founder of Microsoft, lost $12bn several days ago when his company's stock prices crashed by 15 per cent. But the mystery deepens when I go on to see that he still has $72bn left and that the stock-market price of Microsoft has almost doubled in the past two years.

For me, it all becomes very confusing indeed when I then learn that Tim Koogle of Yahoo! (an internet venture) earned $1.7bn last year - $100m less than AOL's Steve Case, whose 1999 earnings (if that is the word) topped $1.8bn.

So what is it all about? Nasdaq - how many people know it stands for National Association of Securities Dealers Automated Quotation System? - indexes around 5,000 dot-com-type companies in New York, keeping tabs on their financial peaks and troughs. The sad dip in Gates's fortunes, for example, came in the wake of a 207-page ruling by Judge Thomas Jackson. He ruled that Microsoft had acted predatorily and illegally towards competitors under the Sherman Antitrust Act of 1890. (This piece of legislation, as I've mentioned before, would surely put Rupert Murdoch out of business were anything like it to be law in the UK: how about it, US-lovers Blair and Brown?)

The case against Microsoft was brought by the US government and 19 states, plus the District of Columbia. Judge Jackson will hear recommendations on 25 April, and Microsoft will learn of its punishments on 24 May. Speculation is rife that Jackson will order the partial break-up of Microsoft - and the effective forfeiture of the programme that is now used most widely by people across the world to surf the web, Internet Explorer. Had Microsoft accepted settlement proposals that were put forward by government mediators a few weeks ago, it could have escaped a lot more lightly.

So what do we make of the humbling of mighty Microsoft? It was founded 25 years ago by the precocious 19-year-old Gates and his friend Paul Allen: they rumbled early on that real money in the computer revolution lay not so much in the computers themselves (the hardware) but in the programmes that make the computers do what you want them to do (the software). They created the first mass "operating system", MS-Dos, and have hardly looked back since, with Microsoft products being sold somewhere in the world with about the same frequency (every one and a half seconds) as a baby is born. (Allen later became ill and left the fray with only a few billion dollars.)

Gates is an unprepossessing fellow with a hint of autism in his psychopathology: when talking to people, he will perpetually and rhythmically rock his body, sometimes to an angle of 45 degrees. His wealth is derived not so much because he is a brilliant whizz-kid at writing computer programmes; he is certainly very clever at that, but bright young computer nerds are fairly thick on the ground. Gates's unique success is because he marries this ability with the business acumen and ruthlessness of a Murdoch. Together, the two qualities became what seemed an unbeatable combination, especially in a country such as the US, where the number of households with personal computers has jumped from 22 per cent to 53 per cent in the past decade.

Until now, that is. Gates and Microsoft were singularly merciless in the way they crushed competitors. Judge Jackson found that they had even paid computer manufacturers such as Compaq not to take the software of competitors. Excellent programmes by others, such as WordPerfect and Netscape, were effectively purloined by Microsoft under the new guises of "Word" and "Internet Explorer" - and its great steamroller flattened anything or anybody else in its way, as Judge Jackson painstakingly spelled out.

This is the tragedy of Gates and Microsoft, if anybody or anything associated with them can be seen as tragic: that, fearing their monumental worldwide conquest was not enough, they were so greedy for more that they were willing to break the law in their ruthless trampling of smaller competitors. Judge Jackson wants the case to go to the Supreme Court soon, while Gates is desperately hoping for a Bush victory in November. Others predict that the litigation, which has already cost Microsoft a billion, will go on for decades.

In the meantime, I remain loyal to WordPerfect and Netscape, though the latter has now been acquired by AOL for $9.8bn, creating another giant monopoly. And when I hear that the Nasdaq had another bad day, I am slightly more clear than before.

But I still wonder where the money lost - such as Gates's $12bn - actually goes. Into other stocks and shares, I presume? No, apparently. "Will any stocks gain from Microsoft's pain?" the New York Times helpfully asked last weekend. "Probably not," it answered - leaving me quite as baffled by the grown-up world as I was when I heard Tony Benn all those years ago.

Andrew Stephen was appointed US Editor of the New Statesman in 2001, having been its Washington correspondent and weekly columnist since 1998. He is a regular contributor to BBC news programs and to The Sunday Times Magazine. He has also written for a variety of US newspapers including The New York Times Op-Ed pages. He came to the US in 1989 to be Washington Bureau Chief of The Observer and in 1992 was made Foreign Correspondent of the Year by the American Overseas Press Club for his coverage.

This article first appeared in the 17 April 2000 issue of the New Statesman, The New Statesman Essay - The rise of the ergonarchy