Steve Ballmer Saved Us From an Evil Empire

Commentary about business and finance.
Aug. 27 2013 3:47 PM

Steve Ballmer Is a Hero

Microsoft stock stagnated under his watch, but he saved the world from the rise of a new evil empire.

Google vs Bing

Photo illustration by Slate. Photos by Getty.

Microsoft, even in its heyday, was the company Americans loved to hate. As a teen Mac user in the 1990s, I was of course an extra-special hater. But even regular Windows users were often haters. People felt about Microsoft the way they felt about their cable company—trapped. So the company’s relative decline over the past decade has felt exhilarating. Here come Apple and Google and Facebook and Twitter! But people just can’t stop kicking the company even when it’s down, and since Steve Ballmer announced on Friday that he’ll be retiring soon, the Web’s been full of articles detailing his strategic and tactical failures.

But there’s more to life than profit margins. It’s worth stopping to appreciate one thing: During Ballmer’s tenure, Microsoft has consistently been the opposite of an evil empire, acting as a force for good in the world and a spur for innovation even as its share price has stagnated. Microsoft achieved this because it had the financial resources, the relevant expertise, and the will to try—and fail—to mount a credible challenge to Google.

Of course, if you’re a Microsoft shareholder, this is not such good news. Your first choice would have been for Microsoft to make breakthrough products earning ever-escalating profits. In the shareholders’ dream world, people bring their Zune to the gym and check their Hotmail on Windows Phone devices while stuck in traffic. But even though the dream never came true, Microsoft has been an enormously profitable company throughout Ballmer’s regime. Its problems, such as they are, stem from the fact that the business it dominates—personal computer operating systems and office suite software—went from growing quickly to growing slowly to now actually shrinking. In strict business terms, there’s nothing wrong with running a profitable company whose core business happens to be in terminal decline. You just keep selling your product, using the proceeds to pay dividends, and slowly cut back as necessary to keep the money flowing.

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That’s managing for shareholder value. But it’s boring. Microsoft didn’t do that under Ballmer, and the world should be thankful for it.

That’s because Google has true potential to become an oppressive force. Its services are so interwoven into the contemporary digital lifestyle that it’d be hard to imagine not using them. Hard, that is, if not for Ballmer’s biggest business failure—the Microsoft online services division, which has lost $11 billion since 2005. That $11 billion has been an enormous boon to you and me and every other normal person who relies on Google rather than Bing and other Microsoft products for search and maps and webmail and calendars. As a business proposition, Bing is stuck in a weird place. It’s a solid set of services—you can get by with it fine if you have to—but there’s no actual good reason to put yourself in the situation of needing to rely on it. It’s a high-quality service, but it costs Microsoft money to maintain those high standards.

But those standards are also high enough to make Google worry. Unlike the Microsoft of 15 years ago, Google’s profits depend almost entirely on being markedly better than the alternatives. That drives them to constant improvement of their own quality. More importantly, it prevents them from deliberately reducing quality to make a quick buck. “Don’t be evil” is a nice slogan. “Don’t let techies start recommending that people switch to Bing” is a business principle for the real world.  

130827_TECH_BingVsGoogleBoo
Screengrab of Bing it On side-by-side search challenge.

We have to ask ourselves what will happen to this division of Microsoft in a Ballmerless world. The barriers to entry in the search space are daunting, and Google could easily end in a monopoly position. But unlike the AT&T of yore, there’d be no reasonable way to break it up. You can’t force people to want to use more than one search engine, and the ties between Google’s various services provide real value to customers. The only way to prevent abuse would be to rely on constant supervision from government antitrust officials. That’s better than depending on the power of a slogan, but distinctly worse than the power of a real competitive threat. Even Google’s own employees and executives are better off in a situation where they can focus on the product, rather than have decisions driven by lawyers and lobbyists.

It’s a world I’m happy to be living in, but it’s not a world that was inevitable. Not every executive would have tried to take on Google. But Ballmer did. And for that, the world owes him a debt of gratitude. Let the shareholders worry about the stock price. From the viewpoint of making the digital world the best place it can be, Ballmer is a hero.

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