Krugman's misguided, interesting take on Ballmer's passing

Perhaps, it’s not so good to be the King

Last week Microsoft CEO Steven Ballmer announced he will step down within the year. The news sparked excitement and agitation and even personal ridicule. Everyone, and with good reason, assumes Ballmer is being forced out. This week Paul Krugman piled it on. 

"This came very sudden and wasn't of Ballmer's choosing," said Patrick Moorhead, principal analyst at Moor Insights and Strategy. "Any time there is an extended search announced, it means that it hasn't been planned."

Back in the 1990s Microsoft was so big, and so powerful many were throwing around monopolistic allegations, and it’s former leader Bill Gates was forced to fend off antitrust charges. It was the first official dynasty of the digital age. And Bill Gates was its King. An embittered Gates left the corporation, rising star Google and fierce rival Apple Inc., have in recent years chomped away at market share. So, with the fall of Ballmer, many are proclaiming the King and the dynasty officially dead. Krugman in fact has likened Ballmer’s departure and Microsoft’s overall stagnation to complacent villagers whose gates have been stormed by disruptive though innovative barbarians.
The trouble for Microsoft came with the rise of new devices whose importance it famously failed to grasp, Krugman wrote.

 “There’s no chance,” declared Mr. Ballmer in 2007, “that the iPhone is going to get any significant market share.”

Desert tribesmen... always have more courage and social cohesion than settled, civilized folk, so every once in a while they will sweep in and conquer lands whose rulers have become corrupt and complacent. They create a new dynasty — and, over time, become corrupt and complacent themselves, ready to be overrun by a new set of barbarians.

See how he pulls out a particularly ridiculous-in-hindsight quote to validate his point?

While I do agree to some degree with Krugman and others. Innovation is more difficult at larger organization. Complacency does at times fester. Smaller organizations trying to get to the top of the food chain are at time more inspired, and they are often more agile in terms of execution. But then Krugman goes on to predict the same decline for Apple Inc., whose leadership is also currently being questioned by its board, then predicts the same fate for Google Inc., and then says the cycle of complacency will continue to play out at nausea.

Krugman's a smart guy but he doesn’t always allow reality to interfere with a good analogy. Kind of like when he said the only problem with the stimulus was that it wasn’t big enough, and he essentially repeated the same notion when Congress passed the Affordable Care Act. In doing so, ignoring the reality that a larger stimulus was no more possible than a complete EU-inspired overhaul of the health care system. Here he ignores the fact that with the exception of the digital space, the same market titans have been dominating to Fortune 500 and Fortune 1000, for that matter, for the last 40 years. Once in a while, new products and visionary leaders may shake things up but the “barbarians” as he put it who are succesfully able to storm the gates of “civilization” are few and far between.  

There are more pronounced shits in the technology space but that’s not the result of complacency or corruption, but because it is a dynamic, ever-evloving marketplace that is defined by innovation. 

Anthropology aside, look at the mobile market. There was a time when Blackberry was King. It failed to adapt and was replaced by those who did. Take Apple Inc. It didn’t simply come into existence in 1997, it was reinvented in 1997 by Steve Jobs who returned to the company and personally led its innovative renaissance. Remember those old Apple computers? If you want to catch a glimpse of one, you will have to go to a dusty vintage store in Brooklyn there a kindly old shop keeper has fashioned one into an elaborate fishbowl. Back then, folks were writing the same tired out old eulogies for Apple. 

Consider Intel in the 1980s. With an infusion of cash from I.B.M., it  came back and remains a formidable brand in technology. Or what about I.B.M. in the 90s, discount PCs nearly sent the company into bankruptcy, yet it too recovered. Dell computers likewise has peaked, lulled and endured. 

Microsoft's troubles have nothing to do with Ibn Khaldun or North African history, it’s about leadership, vision, arrogance, and the fact that a “digital dynasty” is somewhat of an oxymoron. The market is driven by innovation and must always be led by innovators not cheerleaders. But you don’t have to be a barbarian to innovate, and even if you are a member of “civilization,” you don’t have to become complacent or corrupt.

Consider this, while Microsoft spends millions in marketing Bing, Google is working with automotive manufacturers to building cars that drive themselves, weird space-aged glasses (even though you will never catch me wearing one), and they are also invading a real monopoly, the telecom market, with Google fibre. 

Consider this, Amazon launched essentially as a bookseller at a time when the publishing industry was going through a downturn from which it has never entirely recovered and just a few weeks ago bought the Washington Post.

“I would argue Microsoft does have a financial problem, and it’s been the fear of losing those massive profits from Windows and Office,” said George F. Colony, the Chief Executive of Forrester Research. “By doing everything it can to try to protect those profits, Microsoft has taken a defensive position for more than a decade. And in technology, if you play defense you’re going to lose.”

Microsoft does have a problem. It lacks technical leadership. It seems to have conceded innovation, in recent years, to its competitors. In short, it could use a Steve Jobs or a Bill Gates. It needs a leader who is willing to take risks, try and fail at new things, understands the “fierce urgency of now” and does not spend all its capital simply cheerleading old products in a market that is so clearly driven by innovation. 

That reality has not been lost on Ballmer himself. In a memo to employees he admitted, “One of the biggest mistakes I’ve made over time is not wanting to nurture innovations where I either didn’t get the business model or we didn’t have it.” 

So there you go, the one truism of the technology space: Adapt or die. It’s just that simple. But regardless of what Krugman thinks, Microsoft is a long way from being dead.