The Microsoft Fallacy

Another fear is what I call the Microsoft fallacy: that street vendors in China are selling bootlegged copies of Microsoft Works for $5 a copy, thus Microsoft is denied a $400 sale. Of course this is absurd, since Chinese earning $100 a month are never going to pay $400 for a copy of Microsoft works. Microsoft is out nothing, because the Chinese paying $5 was never a customer anyway.

Nonetheless, it is claimed we lose $4.6 billion a year in lost software sales to China alone. USA taxpayers cough up prodigious amounts to combat this nonproblem that Microsoft faces. Moms are forced to go to work to pay taxes so the govt can afford to send govt jobholders overseas to deal with this.

We must understand that not everyone is a customer. People find factories using slave labor to make Tommy Hilfiger clothing. The factory has nothing to do with Tommy Hilfiger, has never had any contact with Tommy, has merely reverse engineered Tommy clothes. The clothing made there goes to people who would never otherwise buy Tommy Hilfiger. Tommy loses nothing, in fact gains.

Across from Hong Kong Marco Polo Hotel on Canton Road is the Official Rolex Dealer Store. Outside the store is where you buy fake Rolexes. The people outside the store would never be a customer for a real Rolex. When fake Rolexes are sold, Rolex gets free advertising.

People selling “our items” made in factories having nothing to do with us, selling to people who would never pay us anything anyway, is hardly a problem for us. Politicians devote their lives solving problems that do not exist; it is not for us to follow suit.

If you really want to stop piracy, then use business means not legal means. Legal means is “intellectual property rights.” Business means are a bit more mature in process.

Say Levi Strauss needs 100,000 pairs of bluejeans for the “legitimate” Taiwan market. They hire #1 Bluejean Factory in Taiwan to produce for Taiwan.

Presently, the legal response, #1 Bluejean Factory produces 100,000 pairs, and makes their profit, and is finished. At the same time, someone in the factory steals the specs and knocks off Levis in “Sandakan #8” selling them on the black market. #1 Bluejean Factory could care less about pirates, because they have made their money working to contract.

The business response is for Levis to hire #1 Bluejean Factory in Taiwan to produce 100,000 pairs for Taiwan for Levi’s market. Next Levi’s agrees to have #1 Bluejean Factory in Taiwan make as many more jeans as #1 Bluejean Factory in Taiwan can sell, at whatever price they want to make and sell the jeans at. And #1 Bluejean Factory in Taiwan agrees to pay Levi’s 8% (or whatever) on everything else #1 Bluejean Factory in Taiwan makes and sells. So Levi’s makes money on markets it never otherwise reached.

Now watch what else happens: since #1 Bluejean Factory in Taiwan makes money on every pair of jeans made and sold, #1 Bluejean Factory in Taiwan has an interest is shutting down unauthorized jeans coming out of Sandakan #8 factory. #1 Bluejean Factory will use local, Taiwanese methods to curb Sandakan #8 factory, at no cost to USA working moms.

The Chinese fellow selling pirated software for $5 is making money. At no cost to Microsoft. So the Chinese fellow knows how to make money selling microsoft products to people in China that Microsoft is unable to reach.

Apparently no one in Microsoft knows how to reach this market. The problem probably starts with Bill Gates, who recently said “capitalism works "only on behalf of those who can pay."

The meaning here is the only possible sceanrio is to pay $400 to Bill Gates. Never mind “capitalism” (the enemy’s terminology which I’ll let slide for now) can also means a poor person selling another poor person pirated software, benefitting both. Bill Gates became a billionaire in a system that is not free market (see the Consent Decree of 1994) and then has the temerity to announce the free market is flawed, and he will tell us how to fix it. Since the system Bill Gates profited from does not help the poor, the rest of the world must take instruction form Bill Gates. How about you just let poor people doing you no harm make money in a free market, instead of making USA taxpayers foot the bill it costs to destroy poor peoples initiative overseas?

And never mind Microsoft software, the Gates Family are ardent supporters of Washington State Inheritence tax, which destroys small businesses, in spite of the fact the Gates have a army of lawyers making sure Microsoft billions stays in the family, free of any inheritance tax.
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A legal structure is necessary to commerce, and private is best, but in USA we go too far inasmuch we infantilise people educated for business. We teach business people in USA to convert all business problems to legal problems. We teach them to run weeping to judges for redress when the law really has nothing to offer, and anyway business skill is necessary and sufficient, for rich and poor.

USA is a prodigious exporter. Of highly subsidized items. Otherwise we are very poor businesspeople when we compete worldwide. Business skill in USA is atrophying. The only way to regain it is to exercise in free markets. Job # 1 is get rid of intellectual property rights in USA, and certainly do not resort to their use. Or maybe job #1 is get rid of the get rid of of the charitable foundation trust laws, which provides the addled rich government protection from the free markets.

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