Paul Krugman: The Decline of E-Empires

Steve Ballmer’s surprise announcement that he will be resigning as Microsoft’s C.E.O. has set off a huge flood of commentary. Being neither a tech geek nor a management guru, I can’t add much on those fronts. I do, however, think I know a bit about economics, and I also read a lot of history. So the Ballmer announcement has me thinking about network externalities and Ibn Khaldun. And thinking about these things, I’d argue, can help ensure that we draw the right lessons from this particular corporate upheaval.

First, about network externalities: Consider the state of the computer industry circa 2000, when Microsoft’s share price hit its peak and the company seemed utterly dominant. Remember the T-shirts depicting Bill Gates as a Borg (part of the hive mind from “Star Trek”), with the legend, “Resistance is futile. Prepare to be assimilated”? Remember when Microsoft was at the center of concerns about antitrust enforcement?