What really went wrong at Microsoft: Thoughts and questions about Rao’s criticism of Eichenwald

It’s interesting to read the contrasting articles by Venkatesh Rao and Kurt Eichenwald.  In both articles, they offer differing views on why exactly Microsoft experienced a “lost decade.” That is, both articles tried to explain why Microsoft fell so far behind the innovation curve during this past decade to Google and Apple.

Eichenwald extensively interviews many, I believe, former Microsoft employees and articulates their views in his article.  Eichenwald suggests that Microsoft’s lack of innovation and decline as the tech world’s 800 gorilla was due to a corporate culture (emanating specifically Steve Ballmer) that did not “get” technology and the place it plays in larger culture.  Rao argues against Eichenwald’s article and suggests that it was a larger paradigm shift in the market.

These are both interesting reads.  However, I cannot help but wonder if — to use another tired cliché — they’re looking at different parts of the same elephant?

Rao argues that Eichenwald “misses the forest for the tress” when the latter focuses on an internal culture and leadership that places innovation behind older, more tested products that make money.  This “personality determinism,” Rao argues, causes Eichenwald to ignore the shift in market forces from favoring horizontal integration, which allowed Microsoft to dominate in much of the late 1980s and 1990s, to vertical integration that made room for Apple’s ascendancy in the 2000s.  OK.  I believe that.  But, what narrative explains this paradigm shift from horizontal to vertical integration?  Could it not be a deeper fracture among Microsoft, its management culture, and societies at large?

It seem that Rao points to Intel’s and Microsoft’s horizontal integration strategy along with the commoditfication of components as the factors that reduced the cost of personal computing.  He continues his argument by saying that prices fell to such a point that it made the premium pricing commanded by Apple’s design and vertical integration strategy a comfortable splurge for consumers.  As such, Rao argues that is is an “environmental determinism” that caused this shift.  That is economic factors, such as the cost of purchasing computers that he articulated, created an environment that favored a different strategy than the one that dominated Microsoft.  Again, here I believe Rao’s reading of the situation– to a point.

Here are my questions:  From where do these economic factors emerge?  What roles if any do social and cultural norms, practices, beliefs, and other messy human factors play in changing the economic environment?  The fields of “institutional economics” and so-called “new institutional economics” call to question the strictly systemic view that neoclassical economists offer.  Even by his own argument, Rao gives some space for human messiness.  For example, in his argument that the trend of horizontal integration made room for computing prices to fall so sharply that people were willing to spend a little extra on Apple’s design.  One can read that willingness to pay a premium for design and operating system as a simple act of economic calculation.  But, I believe that there is a little more than that.  One can only attribute a price to things in which it is illogical to attribute price by appealing to the social.  (“Cool” or design aesthetics often gets calculated as an interchangeable for “better quality.”)  If I’m understanding Rao as he intended, the answer is very little, perhaps incidental.  By criticizing Eichenwald’s socially focused analysis to the extent he does, Rao seems to suggest that culture is incidental to and a result of economic forces that are outside of human sociality.

It seems to me that human sociality plays a much larger role in shaping those paradigm shifts then Rao does.  During Microsoft’s dominance in the late 1990s and 2000s, a large market of information technology professionals who (among other competencies) fixed problems with Microsoft products.  Recall, poor technology design accounted for poor file system security, bad networkability with UNIX/Linux machines (as in SMB), poor memory management, and the ghastly Windows Registry, the need to have Windows servers do only one thing (Active Directory), and so forth.  This was a lucrative field for many in this burgeoning service sector– so much so that it was not uncommon to personally know an IT professional.  If we believe Eichenwald’s narrative of Microsoft’s practice of “stack ranking”, and I don’t see a reason why we wouldn’t, then this internal cultural practice may reasonably be seen as a contributor to the poor technology design.  That would explain in part why such a market of IT professionals developed.  And it would account for the frustration that many people expressed as they switched to Apple products.  In a sense I’m asking: Was the premium people were willing to pay for Apple products a premium people were willing to pay to be free of Microsoft induced frustration? If so, how much did that drive to be free of the Microsoft frustration create an opening for innovations that other companies were offering despite the “cheapness” of the Microsoft ecosystem.

As is often the subtext on this blog and in many areas of the social sciences, technology does not merely do things to people.  Rather people create practices and uses with technology that are in accordance with their needs and social world as well as with what the limits of that technology affords.  In that sense, I must disagree with Rao’s rejection of the social in favor of a purely technical explanation of Microsoft’s decline.  At the same time, I do agree with Rao in much of his criticism of Eichenwald.  While Eichenwald’s fatal flaw is that he ignores the role of technical systems of technology and economics.

Interestingly, Eichenwald walks up to seeing that technology and social practices co-create their roles in the social world.  He starts to see this in his account of the administrative practices of “stack ranking” and how/why people defected to other tech companies like Google.  Yet, in the end he fails and hold Steve Ballmer responsible.

In essence, Eichenwald sees the elephant’s “social” tail while Rao sees the “technical” trunk.