Microsoft's $40 Billion On Hand

eMilkshake writes "CNN/Money magazine report here that Microsoft has more liquid reserves than 'Ford, ExxonMobil and Wal-Mart have combined' and 'enough to buy the entire airline industry -- twice. Or all the gold in Fort Knox, four times over. It is enough to buy 23 space shuttles or every major professional baseball, basketball, football and hockey team in America.' This is thanks to (according to WinInfo Update) the fact that 'Microsoft handles its investments with an inhouse software application called--seriously--the Catastrophe Hedging Program 2.5.' I wonder what I would do with $40 billion?"

Comments

It's about tax evasion...

[anthony_dipierro]

If Microsoft declares a dividend, the shareholders have to pay taxes. If they hold the money in reserve, they only pay taxes when they sell.

Re:It's about tax evasion...

[mikosullivan]

(IANAL) That was the first thing I thought about. The problem (for MS) is that that's theoretically illegal. You aren't allowed to hold more reserves than you need just so your shareholders can avoid taxes.

That's the theory. I'm sure the MS lawyers have a more profitable reality. Personally I've always thought it was a stupid law: it punishes companies that build themselves a solid shelter for the rainy times.

Re:It's about tax evasion...

[Anonymous Coward]

Microsoft is also getting away with not paying any accumulated earnings tax. This tax is designed to tax companies that are accumulating excess earnings and do not pay dividends.

By not paying dividends, Microsoft is able to shift the tax expense to the shareholders at the lower capital gains rate when the shareholders sell stock. Bill Gates and his crew sell a large amount of Microsoft stock each year.

I believe Ralph Nader has already been looking into this.

Go Ralph!!

Re:It's about tax evasion...

[anthony_dipierro]

Well, it's more likely they've found a loophole. The way I read it (very briefly) Microsoft likely doesn't fall under the category of "Personal Holding Company", because 50% of the corporation's stock is not held by fewer than 5 individuals. Microsoft also can argue that they're actually going to use all that cash - someday. IAAPTP, but this is not legal or tax advice.

Re:It's about tax evasion...

[guacamolefoo]

It's not even close to tax evasion. Ta evasion is illegal. Tax avoidance through compliance with the code and regulations is just being smart.

Companies are pretty much free to retain their earnings for reinvestment. There are some limitations on this general rule, but generally it is kosher (there's an old case - Dodge v. Ford Motor Co. - 204 Mich. 459, 170 N.W. 668 (1919))- in which the Dodge brothers sued Henry Ford for, among other things, retaining too much cash and not paying dividends).

There are also a number of tax cases where C corporations (whose dividends are taxable if distributed to shareholders) have been nagged by the IRS to declare dividends. The theory is that the retention of the cash has no real business purpose and it is being done solely for the avoidance of taxes. This is one way the Service can enforce what is called the "business purpose" doctrine.

Microsoft has answered claims such as you raised before, and it is a non-issue now. Especially in today's world of hyper-leveraged balance sheets collapsing, there is no way that Microsoft's war chest will be questioned by the IRS.

Re:It's about tax evasion...

[guacamolefoo]

Personal holding companies are targeted at people who seek to incorporate their personal lives (in a nutshell). Someone like Sarah Jessica Parker could conceivably create SJP Inc. and avoid paying payroll taxes to herself on what would otherwise be wages. She could also distribute shares to her friends and family (kids) in an effort to shuffle income off her return (personal holding companies pre-dated the kiddie tax, so at one point the PHC was necessary to prevent this sort of thing).

In any case, it is absolutely clear that MS is not a PHC.

Guac-foo.

Re:It's about tax evasion...

[anthony_dipierro]

You are correct. "Tax evasion" was the wrong phrase. "Screwing over the American public by legally avoiding taxes" would be better.

Re:It's about tax evasion...

[Znork]

No, it's 'tax-innovation', a right they have and are exercising. Must guard that right to 'innovate'.

Companies can retain earnings for reinvestment, and some to guard against a rainy day, but that isnt what Microsoft is doing.

It should be blindingly obvious to anyone who's even caught a whiff of a newspaper the last ten years that Microsoft does not _care_ if what they are doing is, in fact, illegal. It isnt illegal until they are convicted of it, and even then they can pay their way out of a punishment.

Re:It's about tax evasion...

[krlynch]

I guess I don't see how not paying taxes you don't owe (your "legally avoiding taxes") is "screwing over the American public". The rules were set by representatives YOU (not MSFT) elected, and if you don't like the rules, lobby to get them changed ... but don't accuse the people and corporations who actually follow the rules of being tax cheats.

Let me put this another way: Do YOU give the government more tax revenue than you are required to do by law? If not, you hardly have a right to complain about others doing exactly what you are doing....

Re:It's about tax evasion...

[jgerman]

representatives YOU (not MSFT) elected

This is a joke right. It's gotta be. You can't possibly think for a second that you have more of a voice in government than Microsoft (any large corp actually).

Re:It's about tax evasion...

[Qrlx]

Amen. Money = Free speech, which means Microsoft has about 40 billion more things to say than I do.

If you were a legislator, who would you listen to? Some guy who will vote for you once, or the guy who will send out an email to his thousands of workers saying that Uncle Bill wants you to vote for X, because that will make your stock options value go up, and backs that up with big donations of soft money so you can run ads saying Vote for Me.

The view that the representatives serve the will of the people is short-sighted and overly simplistic. Don't believe everything they teach you in grade school.

Re:It's about tax evasion...

[fmaxwell]

Tax avoidance through compliance with the code and regulations is just being smart.

And donating huge sums of money to Congressional campaigns to get these favorable loopholes is just good business? This just goes to show that something can be legal and still be unethical.

Re:It's about tax evasion...

[tshak]

"Screwing over the American public by legally avoiding taxes" would be better.

Then change the laws. Or, critique IBM, Boeing, AOL/TW, Dell, ATT, and every other major corporation that follows these standard business practices. Personally, I agree with your philospohy, and I think that there things that needed to be changed in America. This is nothing unique to MS.

Re:It's about tax evasion...

[dbrutus]

Actually, you probably do, whether you know it or not. The tax law has grown so convoluted, even the IRS can't be counted on to know the right answer to a tax question and if you ask them, their answer will have you paying more to them than if you brought it before a judge (not counting court costs of course).

DB

Re:It's about tax evasion...

[Tony]

Money can influence the outcome, but it's the people and not the corporations that cast votes. If Big Money gets its way more often than not, it's only because WE let it happen.

There is a very strong correlation between the amount of money spent on a campaign, and the results of the campaign. The more you spend, the more likely you are to win.

Plus, once in power, to whom is a legislator more likely to listen, a giant corp with $40B in the bank, or some schmuck from New Jersey with a $400 bank balance?

In our society, money == power. You are more likely to influence other people if you have money. If you have a lot of money, you have a lot more influence.

Re:It's about tax evasion...

[slashdot_commentator]

You do actually have more power over the government than Microsoft or any large corporation. You have to power to vote your representative out of office, which those companies don't. Rich people can't actually buy votes; they can only spend large amounts of money to convince voters to elect people who will work for big business over the voter's interest.
The real problem is that the majority of voters in this country are a bunch of idiots that do not make the effort to find out what is going on, and make their government run the way they wish. On one hand, negative campaign ads were a ridiculous waste of money if targeted to voters like myself.
I would never let myself be influenced by what a TV commercial said to determine who I should keep in office. But there are enough retards with voting rights that apparently will let the TV and radio tell them who they should elect. I saw the Clinton/Lewinsky witchhunt as nothing more than rich Republicans trying to subvert the democratic process because they had the money and influence.

Corporations do not buy elections, they spend money to "fool" us into voting for people that will work for the corporations.

Re:It's about tax evasion...

[jgerman]

You do actually have more power over the government than Microsoft or any large corporation. You have to power to vote your representative out of office, which those companies don't. Rich people can't actually buy votes; they can only spend large amounts of money to convince voters to elect people who will work for big business over the voter's interest.

Nonsense. To start, it doesn't matter who you vote into office, they are they subject to voting the way the money blows. As far as the rich buying votes. Of course not directly, but indirectly the more money you have to throw around the liklier it is that you'll get your way.

Re:It's about tax evasion...

[why-is-it]

Rich people can't actually buy votes; they can only spend large amounts of money to convince voters to elect people who will work for big business over the voter's interest.

Not quite.

Large corporations spend a lot of time lobbying politicians and making campaign donations. I don't think this is done for benevolent reasons. These donations are likely considered an investment, and naturally the corporations expect a return on this investment.

The end results are usually seen in the legislation. Consider the bills tabled by Hollings. Is it a coincidence that the industry that will benefit the most from his proposed legislation just happens to be the industry that has bankrolled him through the last couple of elections?

Re:It's about tax evasion...

[xtheunknown]

Call me an idealist, but you CAN change the law through voting. If you don't like the law and your local rep voted for that law, get rid of him/her. If enough people get mad, mountains can be moved. This is harder at the national level, but very possible at the local level.

Bill Gates only has one vote. Even if all the MSFT employees voted the way Bill wanted them to, they are only 10,000 versus millions of non-MSFT voters, and this would only really effect Seattle/Washington State.

Re:It's about tax evasion...

[colmore]

I love the conservatives who post to slashdot.

By suggesting that Microsoft pay taxes on their income comparable to what working families pay, we are "socialists."

Perhaps liberals, perhaps a tinge anti-corporate (or at least not rabidly pro-corporate) but certainly not socialist. i'd invest in a good dictionary and history of political thought.

Re:It's about tax evasion...

[ncc74656]

You are correct. "Tax evasion" was the wrong phrase. "Screwing over the American public by legally avoiding taxes" would be better.

That depends on whether you believe money (or other property) belongs (a) to the people, corporations, etc. who earn it or (b) to the government. Given that a dollar in the private sector generates far more economic activity than a dollar held by Uncle Sam, I would say that your position is incorrect. Tax avoidance isn't tax evasion, but it isn't "screwing the public" either.

Let me guess...you've never used TurboTax (or similar software) to minimize the taxes you pay. If you have, then explain the difference between you doing that with your income and MSFT doing something similar with its income.

Re:It's about tax evasion...

[slashdot_commentator]

Not quite.

Please now realize that nothing you wrote actually refutes what I stated.

Large corporations spend a lot of time lobbying politicians

Money that is spent to communicate to the politician how they want the legislation to read and/or be enacted. After all, they spent all that money to convince the sheep to elect the corporation's manservant, they should at least be able to tell the politician how the company wants them to vote.

and making campaign donations.

Which generally can only be used to convince the sheep to reelect the politician.

I don't think this is done for benevolent reasons. These donations are likely considered an investment, and naturally the corporations expect a return on this investment.

Duh, O King of the Obvious. But it doesn't change the fact that The Rich cannot buy votes to elect their representatives, they can only use it to convince the sheep to elect whom the Rich want to represent them. Think to your Hollings example. Why isn't the CBDTPA on the floor right now? Its because enough politicians have gotten the message from their constituents to kill the bill.

Think. If I don't like the way my representative votes, I can vote for his/her opponent. The corporation can't do that. His campaign contributions can't do that. No amount of TV commercials can do that. My point is: don't blame the rich, blame the voter. If problems in government are not corrected, its because the voters have not booted out the losers who has been working for the corporations instead of the voters. If you tell your representatives how they should vote, and you vote for a polician based on thorough review of his record, consider yourself absolved from the governmental mess that is this country.

Re:It's about tax evasion...

[why-is-it]

But it doesn't change the fact that The Rich cannot buy votes to elect their representatives, they can only use it to convince the sheep to elect whom the Rich want to represent them.

Like I said before, not quite. I think that in addition to being brutally self-interested, corporations are also pretty smart. They don't make a donation to just one candidate - they donate to *both* parties. Naturally the incumbant gets the most since that individual can be of more immediate use, but they cover their bets just in case. It is highly unlikely that either candidate you get to choose from is unsullied by corporate interests. And in the off-chance that someone who has not yet been co-opted manages to get elected, the corporate bagmen are more than happy to meet with Mr. Smith when he goes to Washington and explain their position and make a nice donation to the re-election fund.

Your argument implies there is a real choice when it comes to the ballot box. Unfortunately, I do not think that is necessarily true.

Probably the best thing to do would be to eliminate corporate donations to political parties and limit the maximum amount of annual donations one person could make. It would also be helpful to eliminate third-party partisan election campaigning, but I doubt any of these options are possible. Other alternatives might include limiting the term of the incumbant -either by legislation or strategic voting. That way, each special interest group would have to bribe^H^H^H^H^Hpersuade new politicians to support their cause more often.

If you tell your representatives how they should vote, and you vote for a polician based on thorough review of his record, consider yourself absolved from the governmental mess that is this country

Since I don't live in your country, I cannot be blamed. :-)

Re:It's about tax evasion...

[slashdot_commentator]

There's always a choice. Vote for the politician that is unbribed. Look at Ventura in Minnesota. He may not be the most desirable of candidate, but if voters took their job seriously, they'd boot out the incumbent, whether democan or republicrat.

Re:It's about tax evasion...

[anthony_dipierro]

That depends on whether you believe money (or other property) belongs (a) to the people, corporations, etc. who earn it or (b) to the government.

Not really. The government has already decided that it's going to collect taxes. The only question left is whether Bill Gates will pay more, less, or an equal percentage. And as it turns out, he pays a much lower percentage, by manipulating the sytem.

Re:It's about tax evasion...

[shyster]

Given that a dollar in the private sector generates far more economic activity than a dollar held by Uncle Sam, I would say that your position is incorrect.

Hmmm...Conservatives often spout that belief, but, for the life of me, I can't figure out how that could possibly be. In the end, both the dollar spent by the private sector and the dollar spent by the government end up back in the economy, to be recycled again thru both private and governmental spending yet again.

If you're talking savings (or, in effect, taking 10% of the dollar out of the economy--IIRC, that's the amount banks are req'd to keep on hand), then I'd have to say that the gov't "saving" the dollar is more beneficial to the economy. After all, we all know that the gov't (the US, at least) doesn't even know how to save...yet, obviously Microsoft does. Gov't savings are used to buy back T-bonds from investors, who then reinvest or spend that money. MS's savings (a portion of at least) is sitting in a bank, with only 90% available for reinvestment.

Rebuttal?

Re:It's about tax evasion...

[shyster]

The HARD indisputable facts are that the top 50% of earners in most western economies pay 90% of the taxes.

The other HARD indisputable fact is that 90% of the taxes will never be spent in ways to benefit me. They will, however, be spent in ways to benefit the upper income levels.

Re:It's about tax evasion...

[fferreres]

Tax laws have a spirit. If you cleverly avoid the need to pay taxes, you are screwing the american public. The fact that you CAN get away for free means that they are playing nice with you. But you avoinding to pay taxes is not playing nice with your country.

It is often the case that tax elusion is an investment in it's own sense. Say you have to spend $400.000 in accountants and lawers to pay 1% less of taxes. If you make $1B a year, the "investment" is worth. But if you are just a normal guy, you can't afford it.

So the Average Joe is the one that can't take advantage of the tax "avoiding" holes. So eventually, law gets more complicated, and more A.J. get screwed, and big corps just need to "invest" a little more.

Re:It's about tax evasion...

[slashdot_commentator]

What do you do when *all* the candidates are getting bribed?

Start your own political party. Try to see if you can get the judicial system to chase the down the lawbreakers. And then some people would recommend more radical action when problems cannot be redressed through the current system.

Re:It's about tax evasion...

[irony nazi]

I'm sorry, I'm browsing at 5 and don't know what this thread is about. Mod me as offtopic if appropriate. I'm writing this to clear up a few things in guacamolefoo's post and say a few things in general about software companies.

On the topic of dividends:

MS doesn't need to pay dividends. They will continue to NOT pay dividends on the stock and the stockholders will be happy. Here's why:
1. MS earns revenues, pays taxes on revenues (although MS pays little or no taxes, but that's a another tale).
2. after-tax income would go to investors in the form of dividends
3.investors pay taxes on dividends.
What I desribe here is that the investors end up with income that has had taxes paid twice on it, which is rather watered down if you ask me. What I would rather have happen, and THIS is what MS is known for is the following:
1. MS earns revenues and pays taxes on it.
2. MS buys back its own stock
3. Stock price increases substantially
4. Investors have a capital gain, which they don't have to pay any taxes on until they sell their stock, and if they are smart, they will hardly pay any capital gains tax.

On the topic of a MS having STAGGERING Cash on hand:

This is acceptable and even expected. Look at balance sheets. MS has more cash-on-hand than Walmart, Exxon, and Ford combined. Is this a surprise? No. Walmart has thousands of chain stores accross the country. Exxon has billions of dollars worth of fuel pumping, refining, and distribution equipment. Ford has billions of dollars of factories, raw materials, and vehicles. If any of these companies had excess cash-on-hand, that means they wouldn't be making money off of it by building stores, or pipelines, or Vehicles. When you look at it this way, what does MS really have? They don't have much. They have one campus in Redmond Washington and a bunch of Intellectual property, which doesn't translate well to a financial statement.

The only thing that gives MS *any* investment value is this $40B. The same holds for any software company and this is the reason that so many of the "mind-share" dot-com companies went bankrupt. If a software company doesn't have cash, then it doesn't have much of anything, and nobody wants to invest in it. You can't add *nix guru's and Aeron Chairs to your end-of-year report. *nix gurus can always get jobs elsewhere and Aeron chairs are, well, a waste of money.

About catastrophe Hedging software:

A lot of people on Slashdot have been writing that this software is to protect MS against a DOJ "disaster", a marketing flop (X-box?) or other lawsuits. This couldn't be further from the truth. Catastrophe Hedging is a very active part of finance and I can assure you that they hedging against large interest rate changes, stock-market disasters, foreign currency melt-downs, and Enrons... just like any other Risk Analysis software does. This is basic quantitative finance.

To end this rant session, I would like to state that Quantitative finance is a very interesting and geeky field. It's the 100% math and computer field that is often overlooked by the geek community. Did you know that a large number of hedge funds use Linux primarily for their analysis computers? Did you know that PDE's and Stochastic Calculus runs rampant all throughout finance?

Re:It's about tax evasion...

[Jason Earl]

That is such a fat load of crap it is amazing. Which wealthy folks does Welfare benefit, or Medicare, or public schools for that matter?

Re:It's about tax evasion...

[ncc74656]

Hmmm...Conservatives often spout that belief, but, for the life of me, I can't figure out how that could possibly be. In the end, both the dollar spent by the private sector and the dollar spent by the government end up back in the economy, to be recycled again thru both private and governmental spending yet again.

In the private sector, a dollar gets bounced around between businesses and individuals. Let's say that I buy a TiVo at Circuit City. Circuit City pays its employees out of that money. One of those employees grabs a Big Mac on his lunch break. That money gets paid to a McDonald's employee, who buys a CD at the record store, etc. The more likely path that dollar will take through the government will be to pay off an old fart on Social Security or a welfare queen (but I repeat myself here) or throw the money down some pork-barrel rathole. At best, it might get tied up in capital expenses for infrastructure or something like that.

Re:It's about tax evasion...

[colmore]

Yes, but how much of the wealth of the nation does that top 50% hold?

A few orders of magnitude closer to 100% than 90%

And, I wasn't talking about wealthy individuals. I'm talking about corporations, which pay ridiculously low taxes. Especially when they bribe congress to actually write them *by name* into tax legislation.

Microsoft has $40 Billion in liquid assets, how much will they have to pay on that? A hell of a lot less than if an individual held $40 Billion cash.

Re:It's about tax evasion...

[shyster]

Hmmm...let's see. This should be pretty easy....
Welfare benefits wealthy folks because it keeps the poor, huddled masses from amassing a revolution and forcefully taking Microsoft's/Bill Gates billions.
Medicare benefits wealthy folks because it keeps the peons alive and well enough to perform manual labor for minimum wage, thereby increasing stockholder profit.
Public schools benefit wealthy folks by giving them a (semi)educated workforce to perform menial labor for a (semi)living wage, thereby increasing stockholder profit. Also, it can be used to indoctrinate them into capitalism, thereby ensuring the wealthy folks' continued success.

Now that I've finished with your uncreative argument, here's a few facts (Warning: the preceding link is to an Excel spreadsheet).

The largest budget item is national defense. This is a greater benefit to others more wealthy than me for a few reasons. First, I have very little to defend. If China was to take over the US today, they would not seize my property or money...I have none. Bill Gates, however, would probably very quickly go from billionaire to thousandaire. (Of course, we would also both lose freedoms, but that would be an equal benefit.) Second, due to my lower income level, I cannot invest in stocks. Wealthy folks can invest in defense companies, and thereby increase their wealth (a good bit of the $300 billion will go to defense contractors).

Social Security and Medicare are paid with seperate taxes. Those taxes are only levied on salaries up to (IIRC) $65,000/yr, so wealthy folks don't pay 90% of those programs.

Health and Income Services, I'll have to admit, I'm a bit fuzzy on. I'll guess that Income Services are federal employee salaries? If that's the case, then we don't really need to discuss that. It obviously only benefits federal employees. Health, I really have no idea. Most hospitals (all?) are locally funded. Healthcare is privatized, and we all pay our HMO's for it....

The only other large item is Net Interest. That's to pay interest on the federal debt, which is mostly in the hands of the wealthy in the form of treasury bonds. The linked article even states that Microsoft used to invest exclusively in treasury bonds. And of course, each deficit dollar spent helps the wealthy even more, as they can buy even more treasury bonds.

"Education, training, employment and social services" is a paltry 3.3% of the federal budget (for 2000). Commerce and housing credits account for around 2/10 a percent. Natural resources and environment? 1.5%. Agriculture? 2%. Administration of justice? 1.5%. General gov't? Less than 1%. Transportation? Around 2.6%.

Now, you tell me where all these benefits that I'm supposed to be getting are....

Re:It's about tax evasion...

[shyster]

In the private sector, a dollar gets bounced around between businesses and individuals. Let's say that I buy a TiVo at Circuit City. Circuit City pays its employees out of that money. One of those employees grabs a Big Mac on his lunch break. That money gets paid to a McDonald's employee, who buys a CD at the record store, etc. The more likely path that dollar will take through the government will be to pay off an old fart on Social Security or a welfare queen (but I repeat myself here) or throw the money down some pork-barrel rathole. At best, it might get tied up in capital expenses for infrastructure or something like that.

And the welfare queen or old fart on SS does what with that dollar? Burns it? No, they, of course, go out and buy something (probably a Tivo as well, but that's beside the point). Now that dollar follows the same path thru the economy as your dollar did.

The pork barrel rathole, while inefficent and a general waste of taxpayer money, is simply a funnel to a private sector business. That private sector business pays its employess, who all go out and buy Tivos. Once again, that dollar follws the same path.

If anything, I would argue that private sector money is LESS efficent at motivating the economy because for each dollar that gets spent in the private sector, a portion of it will end up in someone's bank account saved for a rainy day. The bank is required to hold back 10% of that portion, effectively removing it from circulation.

The government, on the other hand, has no way to save a dollar (and wouldn't know how to, even if there was a way). Every dollar that finds it's way into the government is spent. Of course, it eventually ends back up in the private sector (to be stashed in a bank account), but it's at least 1 step behind the dollar that started in the private sector.

Re:It's about tax evasion...

[Jason Earl]

It's not every day that you meet someone as ignorant as you that is actually literate. Congratulations!

Welfare benefits wealthy folks because it keeps the poor, huddled masses from amassing a revolution and forcefully taking Microsoft's/Bill Gates billions.

Nine tenths of the world's population would give anything to live in the United States, and you are ignorant enough to think that the only thing keeping the "masses" from armed revolt is Welfare. You, my friend, need to lay of the ganga for a bit and get some fresh air. Only a small minority of people are on Welfare for any extended period of time. If this small bunch of misfits and losers ever actually organized they would find themselves facing 95% of the population that actually likes it here in the U.S.

Needless to say the gene pool would get some needed cleansing in that uprising.

Medicare benefits wealthy folks because it keeps the peons alive and well enough to perform manual labor for minimum wage, thereby increasing stockholder profit.

Never mind that it would be cheaper to simply hire foreign workers. Your explanation doesn't even begin to explain why "the establishment" would waste good money on sick peons. The reason we have Medicare is that the "people" voted for it.

Public schools benefit wealthy folks by giving them a (semi)educated workforce to perform menial labor for a (semi)living wage, thereby increasing stockholder profit. Also, it can be used to indoctrinate them into capitalism, thereby ensuring the wealthy folks' continued success.

You need to go live somewhere in the world where they don't have public education (or poor public education). In the United States it is more than possible to get an education inexpensively. I should know. I am currently putting myself through college while working full time. Put a little work into our system and you would be surprised what it gets you. Next thing you know you aren't working for minimum wage.

Guess what friend, life isn't fair. Someone will always be richer than you, happier than you, better looking than you, and smarter than you. On the flip side you could have been born in the Andean mountains, or in Afghanistan, or any number of other places that are far worse than the United States. Those folks dream of being able to take advantage of Medicare, or Welfare, and they would kill to get your "minimum wage." The world doesn't owe you anything.

What to do with $40e9?

[tsa]

I would fund a project to get us to Mars with that much money.

Re:What to do with $40e9?

[Reality Master 101]

Or feed all the hungry on this planet...

And what do you do the next day once the money's gone? Oh my god! The hungry are still there!

When you realize that the reason people are hungry is not lack of food, you will be Enlightened.

The reason people are hungry is not unequal distribution of wealth, it's because of unequal distribution of capitalism and freedom. Lack of food and money is a symptom, not a root cause.

Re:What to do with $40e9?

[Reality Master 101]

So your solution is to use the $40 billion to convert everyone to communism, thereby eliminating the very process that produced the $40 billion in the first place?

Actually, I was arguing exactly the opposite: The cure for hunger is MORE freedom and MORE capitalism.

how exactly do you propose we distribute capitalism and freedom evenly?

Unfortunately, there are only two ways:

1) Go in, overthrow the government, install a new one, and do "nation building", or
2) Subtly push and prod various governments to give more freedom to their people.

(1) is the most direct (and arguably, most successful) way to go, but it does have the downside of being kind of socially unacceptible to a lot of the world. :) Which leaves us with (2), which is where we currently find ourselves.

What we know DOESN'T work is dropping food and money on a place that can't handle it. The problem is that it tends not to find the people it's supposed to help, and just gets diverted to the corrupt government and/or corrupt "warlords".

People very often discount the effect that the lack of infrastructure has on even the best intentions. Unfortunately, intentions aren't enough. [

Re:What to do with $40e9?

[rnd()]

I'm a fan of yours, but I disagree with your comment.

If you view society as a machine as some self-proclaimed capitalists do, with each group serving as a necessary cog, then it is easy to draw the conclusion that the "poor" cog is necessary and that hunger, albeit unfortunate, is a necessary biproduct of the machine that is society.

In reality, people who suffer at the 'bottom rung' of society are a valuable resource being wasted. Bad schools, starvation, etc., are an example of wasted potential Homo Economicus would not waste this resource if he had perfect rationality and perfect information. Alas, humans are not Homo Economicus. The fact that this resource gets wasted is a failure of information and therefore effectively a failure of rationality, but not a failure of capitalism itself.

Re:What to do with $40e9?

[dbrutus]

Reread the Magic Cauldron. The marketplace of ideas is an arena where distribution and duplication costs are minimal and you never run out of any commodity. An unequal distribution of capitalism and freedom = some countries they leave people alone, some countries they rob and kill them at govt. whim. The countries in the second category are poor and hungry.

There's not a lot of communism in that idea.

DB

Re:What to do with $40e9?

[ImaLamer]

The reason people are hungry is not unequal distribution of wealth, it's because of unequal distribution of capitalism and freedom. Lack of food and money is a symptom, not a root cause.


Sure, capitalism is a cure all! Tell that to the people who live directly below me that can't feed themselves if the kids eat.

Your idea is so American-centric (i'm an American too) that it makes me laugh. Next thing you'll say is that Christianity is also an answer, the reason why people go hungry is because they are Gay, drug users, and lead other 'sinful' lifestyles.

My question is that when one company has more cash on hand than Fort Knox - doesn't that make our money worthless (or more since they don't spread it around).

You could feed the hungry, it doesn't take money at all. Only slimy, right-winged capitalists think that. It just takes food and the foundation to make/grow more food.

Capitalism in fact builds on the ideas of starving a few to get your share. Capitalists don't care about the rest - it's "me-first".

Re:What to do with $40e9?

[Tackhead]

> Sure, capitalism is a cure all! Tell that to the people who live directly below me that can't feed themselves if the kids eat.

Capitalism means finding the best your money can buy, not the most convenient or cheapest.

Maybe that means spending $10.00 on a pound and a half of fish, some green onions, a pat of butter, a splash of white wine and grinding up some toast for bread crumbs, and some rice. Chop onions, lay between two filets, pour in half an inch of wine, sprinkle with bread crumbs, bake at 300F for an hour. Steam rice while the fish bakes. You end up with four restaurant-quality ($15.00/plate) meals for $10.00, a savings of $50.00 over a midrange restaurant, and (at a minimum) cost parity with Burger King or Kentucky Fried.

> My question is that when one company has more cash on hand than Fort Knox - doesn't that make our money worthless (or more since they don't spread it around).

Inflation is too much money chasing not enough goods. If MSFT were to go out and start buying $40B worth of fish, I might not be able to eat as well. So long as it remains MSFT's money in MSFT's vaults, it's harmless. (And indeed, beneficial, as if I believe MSFT is going to use this money to make more money, I can buy MSFT stock and own a piece of their pie.

But I digress. $40B divided by 260M people in the States is $153.00 - if Bill gave everyone a check for $153.00, how much better a place would America be?

OK, let's soak the rich -- if Bill gave everyone in the lower half ( And even if it did - with MSFT's treasury looted, from whom would you pillage next year?

Re:What to do with $40e9?

[rnd()]

I would say it IS flawed, because it's based on the fictitious underlying assumptions that people are altruistic, not greedy, and can see the forest for trees.

People who believe that Capitalism is bad just because society has some less fortunate people often make the mistake of believing that there is no room for improvement in the present system. Ironically, it is the democratic nature of capitalism that enables us as a society to make changes and improve the system! Systems such as communism might do that, but they would need to rely on a massive uprising or on a 'kind artificer' to make modifications.

Notice how our evil system of capitalism has improved over the past 150 years. People have more rights, a better standard of living, more employment, better health and longevity, and better ways of communicating with one another about the system's evils (such as Slashdot). No, I am not saying that it's perfect, or that it's even close to perfect, but at least it's moving in the right direction.

What does one who opposes capitalism suggest as an alternative?

As for greed vs altruism, my point in my previous post was that Capitalism works based on self-interested behavior, not altruism. It is in the best interest of the majority to have the poorest minority healthy and employed, if for no other reason than to lighten the load on the tax money required to pay for catastrophic care when these people become sick.

I am not saying that perfect rationality or information exists. In fact, even if one were perfectly rational he/she could still make the wrong choice if given imperfect information. Let's face it, information is getting better. This discussion is an example of it. The bottom line is that neither needs to be perfect in order for a lot of improvement to occur.

Re:What to do with $40e9?

[shyster]

The reason people are hungry is not unequal distribution of wealth, it's because of unequal distribution of capitalism and freedom. Lack of food and money is a symptom, not a root cause.

Let me be the first to call "bullshit". While that is certainly a factor in some cases, unequal distribution of natural resources is much higher on the list. Sahara sand don't grow wheat, my friend. Nebraska prairies, however, certainly do...and do it very well.

Re:What to do with $40e9?

[Squeeze Truck]

1) Go in, overthrow the government, install a new one, and do "nation building", or
2) Subtly push and prod various governments to give more freedom to their people.


3) Leave poor nations the hell alone. This means not only no foreign aid, but also no IMF/World Bank indervention, as well as no securing of their markets or natural resources for exploitation/investment by US companies. The rest, as they say, will happen naturally.

Re:What to do with $40e9?

[Squeeze Truck]

Ah, the better is truly the eternal enemy of the good, isn't it.

Maybe it's because I'm getting old, but being able to point out visible flaws or inequalities in a system (ie, capitalism) is in my mind not adequate justification for junking said system -- or even radically altering it.

When I read Marx and his critique of capitalism, I thought he made several valid points. However, agreeing with his analysis of the problem and agreeing with his proposed solutions are two different things entirely.

What impels some people to ceaselessly fiddle with things until they end up breaking them? Are all politicians basically engineers at heart?

Re:What to do with $40e9?

[Reality Master 101]

unequal distribution of natural resources is much higher on the list.

Nope.

Japan: Natural resource poor, economically rich.

South America: Natural resource rich (hugely so), economically poor.

Heck, let's not even talk about the natural resources of Russia, and how they screwed it up.

Re:What to do with $40e9?

[ImaLamer]

Sure, sure.

I won't bother on most points but I don't want to "soak" the rich...

You just are missing why we have money. It's a joke, cash is used by this country to hold down others [IMF, and WTO loans...].

Our system of "free trade" means we feed the desire of the rest of the world to be like us. We loan them money, contract our workers to rebuild their country and then own them.

M$ is an example of how a comany does that. They become so huge and have so much power that they in fact can tell the government how to govern - and how to shift national resources.

Re:What to do with $40e9?

[Reality Master 101]

When I was in school, we discussed all these problems and I recall that there were plans presented, that would eliminate starvation on this planet for about 20 billion US $.

There are a lot of things you can learn in school, but how to eliminate starvation is usually not one of them.

It has helped 1.7 Million people so far and they don't starve for 20 years now! So it's not a one-day solution.

Ah, but it is. Does the organization still exist? Yes -- therefore, the problem wasn't "eliminated", it was only solved for a day, and then the organization needed more money for another day.

Think about the words "eliminate starvation". To me, that means making people self-sufficient such that they don't need handouts anymore. Unfortunately, history proves to us that the more you hand out something, the more people show up to accept the handouts. They become dependent on the handouts, because it's human nature for most people to want the "easy" solution rather than work hard to support themselves. But a stable, healthy society requires everyone to support themselves.

If $20 or $40 billion or whatever could educate the world to be able to grow their own crops and become self sufficient, the money would be donated tomorrow. But it's just not that simple. You can't discount the effect that corrupt governments have on the ability of a people to become self-sufficient.

Breaking News!!!! Extra Extra!!

[aengblom]

Breaking News!!!! Extra Extra!!

Microsoft Rich! Really Rich.

Who'd have thunk it..

Ralph Nader

[sisukapalli1]

Ralph Nader pointed out that the money is a sort of a n "illegal tax shelter" for very rich people such as Billie Boy, Paul Allen, and Steve Ballmer.

S

Re:Ralph Nader

[sql*kitten]

Ralph Nader pointed out that the money is a sort of a n "illegal tax shelter" for very rich people such as Billie Boy, Paul Allen, and Steve Ballmer.

Honestly, you Slashbots. One the one hand, Enron are bad because they used accounting tricks and pretended to have billions of dollars that they didn't. Microsoft, perhaps surprisingly, eschew fancy creative accounting, and have real cash money, which they invest in, among other things, T-bills, just like Grandma.

Let's put $40B into perspective. That's about a quarter of the shareholder value lost by Vodafone since it's peak. That's less than the value that Juniper or AOL/TW lost in a year. That's less than Marconi were forced to write off. It's a fraction of what Cisco or GE are worth. In other words, in an industry as volatile as high tech, it's only prudent to keep a lot of hard cash on hand - it's called "Catastrophe Hedging" for a reason.

If it were illegal, the Govt. would have busted them. The name Arthur Andersen was impeccable, far more so than Microsoft, but when the broke the rules, they were taken out in short order.

On /., Microsoft can do no right, so perhaps I should be unsurprised by this story. Rather than bashing them, why not download the CLR and C# source for FreeBSD and have a play with that?

Re:Ralph Nader

[Chester K]

Rather than bashing them, why not download the CLR and C# source for FreeBSD and have a play with that?

Woah! You'd think something like Microsoft releasing over a million lines of source code for one of the current crown jewels of their marketing efforts would have made at least some news mention on Slashdot.

Wait... nevermind, that'd make Microsoft look good. I forgot what site this was for a moment.

Good show, Microsoft.

Re:Ralph Nader

[alexjohns]

Microsoft's License.

What are you allowed to do with MS's shared source?: Pretty much anything except make money. You can teach it, write books about it, and experiment with it, but you can't sell any program you write with it. Fine if you're a hobbyist, but some of us have families and stomachs and houses and cars to support.

MS is trying to subsume Open Source and the GPL. The GPL allows you to sell the fruits of your labor. Maybe you aren't good enough of a programmer to ever consider selling anything you write. The rest of us, who make a living writing software, can't afford to do it for free.

Have you ever looked at the license agreements with MS's regular compilers? You can't write: Compilers, Word Processors, Spreadsheets, or anything else that competes with a product that MS writes. And you want to sign on. Go right ahead. The rest of us will be out here, in the FREE world, not locked into proprietary 'shared source' licenses that do nothing except increase MS's market share.

I guess you've given up on making money for yourself and now have turned to making more for MS. How altruistic of you. I'm sure Bill will remember you in his will.

So you're here in Open Source/GPL land, pimping MS, while I sit in corporate America, attempting to get a division of the largest financial institution in the country to use more open source software. Wonder which of us sleeps better at night?

Sheep. I'm surrounded by sheep. Blind sheep, at that.

Re:Ralph Nader

[Chester K]

What are you allowed to do with MS's shared source?: Pretty much anything except make money. You can teach it, write books about it, and experiment with it, but you can't sell any program you write with it. Fine if you're a hobbyist, but some of us have families and stomachs and houses and cars to support. MS is trying to subsume Open Source and the GPL. The GPL allows you to sell the fruits of your labor. Maybe you aren't good enough of a programmer to ever consider selling anything you write. The rest of us, who make a living writing software, can't afford to do it for free.

Go ahead and name five companies that are profitable by selling GPL'd software. Profitable enough to pay all their developers. And I don't mean by Enron Accounting Tricks, I mean honestly profitable.

I'll wait.

Re:Ralph Nader

[irony nazi]

cygnus
IBM
Red Hat (although it may be accounting tricks, they did claim profit last quater)
Tivo (I'm not sure about them, but insert a hardware vender here, Axis cameras if not Tivo)
O'reilly Publishers (some of their books fall under GPLish licenses)

I tried to cover all the bases too. Services, Services/Hardware, Services/OS, Consumer Hardware, and a book company.

Nobody is claiming that games/propriatary applications have to be GPL'd. I don't think they should be. The basics of the OS, and the tools of programming, OTOH, should be opened and free so that a maximum number of people can make them better and understand them.

Re:Ralph Nader

[jonbrewer]

"What are you allowed to do with MS's shared source?: Pretty much anything except make money. You can teach it, write books about it, and experiment with it, but you can't sell any program you write with it. Fine if you're a hobbyist, but some of us have families and stomachs and houses and cars to support."

I should mention that teaching, writing books, and experimenting are all very viable ways of making money.

I'm also in corporate America, but I don't give a shit if my software is open source or not, I just get the job done quickly, efficiently, and cheaply. Time spent evangalizing open source within a large corporation is time wasted. It's the end, not the means that the corporation cares about.

Re:Ralph Nader

[Squeeze Truck]

Profitalbe, eh. Don't know if I can name 5, but:

Sendmail
MySQL
Redhat (I know their stock tanked, but aren't they profitable?)

I know for a fact that Sendmail at least is honestly profitable.

What would I buy?

[Lxy]

Man, if I had that kind of cash sitting around I'd be tempted to buy the DOJ. Oh, wait....

my stupid pipe dream

[Vodak]

Since Microsoft wants the Government to go away and do business as usual maybe Billy BOy should have his company help pay the national debt oh. 30 billion of it off =]

Re:my stupid pipe dream

[Quazion]

Please dont give them a good idea..

Wow

[gatesh8r]

So M$ DOES get a nickel for everytime Windows crashes...

And remember, kids...

[Snafoo]

That OEM copy of 'doze 2k you filched from work for your girlfriend's laptop really *hurts* those poor, poor, Redmond urchins that have to spend sweatshop-centuries at industrial keyboards. How could you be so immoral?

Illegal to Have That Much On Hand

[loggia]

Did you know that it is illegal for a public company to have that much on hand and not pay dividends to shareholders?

Apparently there is some murkiness to get around this for Microsoft. The reason they don't want to pay dividends are the huge tax implications for those that are own massive amounts of stock (read: Bill Gates, Steve Balmer...)

Re:Illegal to Have That Much On Hand

[fobbman]

You've obviously forgotten the Golden Rule:

He who has the gold, makes the rules.

Re:Illegal to Have That Much On Hand

[chrisw15]

Actually it's not illegal, it depends on the company. Some shareholders may force the issue in particular companies but there is no law stating that dividends must be paid out. Some companies never pay out dividends (Sun, Cisco, Microsoft, etc are all examples of this). The trend in the past 20 years has been to decrease the dividends given out or to not give one out at all. Microsoft uses stock splits to basically pay out a stock dividend to their shareholders...

Re:Illegal to Have That Much On Hand

[gargle]

Some companies never pay out dividends (Sun, Cisco, Microsoft, etc are all examples of this).

All companies have to pay out dividends eventually, otherwise the price of the share would be zero (since the price of the share is basically the net present value of the the stream of expected dividends).

Microsoft uses stock splits to basically pay out a stock dividend to their shareholders...

I believe you're thinking of stock buy backs, not stock splits.

Re:Illegal to Have That Much On Hand

[bluGill]

Stock splits are NOT dividends. When a stock splits, they take away every share of stock you own, and give you 2 (or 3), each sort half as much. The net is zero. Investers don't like shares of stock going much over 100/share because it becomes difficult to deal with. Check out BRK though for a counter example of that.

Dividends are different. Companies don't like to pay them because investors don't like them anymore. They are taxed twice from some points of view. They come out of earnings, so the company pays income tax on dividends, and then the investor pays taxes on the dividend. (Unless you are investing in a tax free account like an IRA) Thus most investors prefer their companies to take the dividend money and invest it in growing the company. A company has two choices for spending profit, they can give it to the owners, or they can build the buisness.

Re:Illegal to Have That Much On Hand

[nuggz]

(since the price of the share is basically the net present value of the the stream of expected dividends).


No the stock price is the value that the investors think the stock is worth. That is the ONLY thing the stock price is.
Why do you think companies have traded at hundreds of times their sales? Or a fraction of their book value? It is because the market decided that they are worth that price.

Some people invest on expected dividends, or earnings.
Some people invest in companies that will continue to grow, and become a larger company.
Some people invest on hype.

Re:Illegal to Have That Much On Hand

[Asgard]

No, it is the NPV of the appreciation of the stock AND the stream of dividends. The appreciation of the stock is sort of like a zero-coupon bond, IE you get all the return on maturity/sale.

Re:Illegal to Have That Much On Hand

[Rombuu]

All companies have to pay out dividends eventually, otherwise the price of the share would be zero (since the price of the share is basically the net present value of the the stream of expected dividends).

The price of a stock in theory is the present value of the discounted future cash flows you receive from the stock (i.e. dividends) plus the present value of what you can sell the stock when you are done holding it. MS should never have to pay out a dividend and it shouldn't make a difference in its stock. Look at zero-coupon bonds.. they behave basically the same way.

Re:Illegal to Have That Much On Hand

[dbrutus]

Actually, they generate a billion in cash excess to operating income every month.

In other words, if they don't buy anybody, they add $12 billion in cash every year.

at the 9% of interest I remember they actually said they get, $40B ends up to $300M per month. For a billion in interest each month, they would have to more than treble their cash hoard to about $133B. With nothing else changing this will occur in 2012 (i.e. they continue to have $1B in excess cash over operations each month). I believe that at that point they become a mutual fund as they are earning as much from money management as they do from operations.

DB

Re:Illegal to Have That Much On Hand

[4of12]

Did you know that it is illegal for a public company to have that much on hand and not pay dividends to shareholders?

I read that last fall when Ralph Nader brought up the issue of just how much tax avoidance Microsoft could obtain from hoarding cash instead of declaring a dividend to shareholders, like Bill Gates, who owns something like 20% of the company.

But just how precise and unambiguous are these legal requirements?

I get the impression that there's sufficient leeway in interpretation of what constitutes normal business needs for cash that their lawyers could plausibly come out with enough reasons to keep the SEC off their backs.

Then, too, as other posters have noted, with the Enron debacle characterized by heavy debt ratios (as well as more insidious Special Purpose Entities to take things off the books), a company having the exact opposite syndrome of no debt and much cash is not so likely to be publicly reprimanded.

Re:Illegal to Have That Much On Hand

[Troed]

Don't worry about that - The Xbox will, now when it has been fully hacked to run 3rd party code like DivX players, Linux etc (check news inside) make a huge dent in Microsofts lump of cash. A LOT of people have been waiting on this and will now buy Xboxes without buying any games ... conside that Microsoft lose a lot of money on each system sold, and do the math ...

2002-05-06 19:07:56 Xbox - now fully hacked to run 3rd party code! (articles,news) (rejected)

Re:Illegal to Have That Much On Hand

[shren]

All companies have to pay out dividends eventually, otherwise the price of the share would be zero (since the price of the share is basically the net present value of the the stream of expected dividends).

Huh? Real estate deals in trading shares of things (land) that produce no dividends. (Your 100 acre lot never sends you a cheque.) Things do not have to produce dividends to have value, and anything that has value has a market.

Re:Illegal to Have That Much On Hand

[spencerogden]

Yes the current price of Berkshire Hathaway stock is definitely right around zero... ( Check BRK/A )

Stock prices are a little more complex than you suggest.

Re:Illegal to Have That Much On Hand

[Jason Earl]

No. Real Estate has income potential just like stocks do. The price of a piece of real estate should be proportional to its ability to generate income. Otherwise, it is likely to drop in value.

Or, in other words, your lot my not send you a check, but your tenants had very well better send you a check. Even a home mortgage saves you a given amount of rent each month.

Now, there are some things that are truly speculative. Art, for example, often times can be sold for far more than its intrinsic value. However, selling these sorts of items requires that you find someone else who is willing to pay the inflated price. If they don't, you get a value deflation similar to when the Beanie Baby craze died down.

Re:$40 Billion =

[srw]

> Four US stealth fighters, or 40 stealth bombers.

Oh, oh... don't give bill any ideas now...

Yeah, but...

[weave]

Don't think about the billions they have now, think about the billions they are losing because of those greedy poor grade schools who are allegedly not using properly licensed donated PCs.

Re:Yeah, but...

[CAIMLAS]

This might be funny, but think about it... it's scary, too. There's an incredible amount of tyrany involved in a system that allows a large corporation to (essentially) criminalize a small (and government run) educational body for not paying for their overpriced product.

This kind of behavior reminds me of the 'protection' fees paid to mafia members, and the like. The payers get no substantial benefit, in many cases, but the mafia gains financially. And the numbers seem to point to the mafia's dividends being nowhere near as high as MS's.

Or compare it to the extortion done by any large 'agency' throughout time - the Catholic church, most Old World governments, etc.

The US is odd that way. We seem to have multiple forms of government that compete with each other, within each other, and together. MS, the monarchy government with no real benefits, simply taxes us. The US gov't seems to work for us, but only to the extent that the MS gov't allows them to.

Oh that brings a scary thought to mind.

[spagma]

So how long will it be until we see a Microsoft sponsered sporting team? Oh boy, I cant wait to see the Colorado Avalanch taking on the Redmond Blue Screens of Death.

Sounds like a bet on Deflation

[evilned]

That Geforce 3 you bought last year for $400 is now worth $100. Its like that in all of the tech industry. If that sort of thing extends to the rest of the economy, having huge reserves of cash on hand makes a lot of sense. Because of deflation, that sort of liquid reserve effectively grows above and beyond any bank interest. Of course if they are betting wrong, and we end up with inflation, its an incredibly stupid move.

they're not completely stupid at microsoft

[gd23ka]

Don't ask me why, but somehow I've got a hunch that Castrophe Hedging 2.5 runs on FreeBSD.

Q & A

[sam_handelman]

Q: How are all these liquid assets held? Gold? Deposit accounts?

A: Mostly greenbacks, some gold and other precious metals. It's all held in a gargantuan bin, several city blocks on a side, with a giant dollar sign on the front. Bill likes to swim in it.

Q: The bin, I assume, is heavily secured.

A: Surprisingly, no. MS Security is quite porous, considering the massive resources available to it, and is often compromised by sub-literate ex-cons and bored underachieving teenagers (including, purportedly, Mr. Gates' own nephews.)

Q: Isn't he afraid it might be stolen?

A: Occasionally, as mentioned, thuggish dog-faced brutes will attempt to break into the bin. However, what Bill really worries about is that some practitioner of the dark arts might infiltrate his mansion and steal the first dime he ever earned - the magical powers of which are the only thing that keeps MS successful in spite of the low quality of their primary product.

Re:Q & A

[Fastball]

However, what Bill really worries about is that some practitioner of the dark arts might infiltrate his mansion and steal the first dime he ever earned

Don't you mean the first billion dollar bill he ever earned?

Catastrophe Hedging Program 2.5

[Schnapple]

Occasionally when I compile an online COBOL program I get a message saying "an error has occurred" or "a serious error has occured" but you know you're fucked (not really) when "a catastrophic error has occured". I always think it's hilarious when the compilers feel it neccessary to rank the errors - as if some were less in need of fixing than others.

Ergo, I wonder if Catastrophe Hedging Program 2.5 ever has a catastophic error. Better question - does this program share any code with Microsoft Money?

i thought....

[aengblom]

I thought 640KB was enough for anyone. Silly Gates.

Re:i thought....

[Kallahar]

Bill must have mean 640 kilo-billion (dollars).

Man, he sure planned ahead!

Travis

New MetaTroll?

[crisco]

You know that Troll that keeps posting all the math that shows BSD only has like 3 installations worldwide? And that other guy that posts to every other Microsoft story (posting to every one of them is too much) on how all those stock options are a grand pyramid scheme and Microsoft isn't worth so much after all?

They need to get together and come up with some good fuzzy math that shows how Microsoft will burn through that $40 billion in a week and make the DOJ irrelevant. Then we can all go home.

They will pay off their impending loss

[Odinson]

If Enron inspired the congressional employee stock option bill passes, most of that money will go to dealing with the fallout.

They currently report 4-7 billon a year profit.

When they can no longer report employee stock options as income... 17 billion dollar annual loss.

At that rate 40 billion dosn't last very long.

Re:They will pay off their impending loss

[Odinson]

Sorry If I oversimplified it a bit. I am really looking at it from a 1 to 1 basis from Microsoft tring to shift their costs around compensate for that loss and bring their profit up again. (which is important to them.) I was not meaning to imply (is this what you meant?) that they could directly report and alocate assets as profit, or even income. I saw the article a few months ago but have not been able to find it again. I think what must have been a five year cumulitive MSFT or annual DOW wide thing. According to a post Greenspan statment on options article, MSFT would go down from 7.3 to 5 billion in profits in 2001. I am really sorry for mistating this.

Greenspan's Friday anouncment on moving stock options to the business expense coulmn.

From that article... "The seemingly arcane accounting debate would have a huge impact on U.S. companies. The Fed has estimated that annual corporate earnings growth between 1995 and 2000 was 2.5 percentage points higher for big companies because they did not have to count options as expenses subtracting from their earnings. "

Also check out this news.com article. It shows that I messed up that loss estimate but there still is a big difference.

This is defiantly still pertinant, but I do owe people an apology.

Re:I was wrong...

[AntiNorm]

Catastrophe (Hedging) Program

I though this was the code name of their last OS! :)

Nope, their last OS was called Catastrophe Generating Program.

It's official

[Profane Motherfucker]

I said it before, and now this confirms it, Gates really can make More money than Jesus at a promisekeeper's convention.

It's a pity that Microsoft doesn't do a little more with their money than sell shit at top dollar. But, perhaps it's a Geffen Good, type thing. No fucking joke: start selling Linux at $99 for an install, and maybe the fucker will skyrocket.

Oh, for the days when huge corporations like Michelin did nice things. Says a French citizen, who grew up in Clermont-Ferrand (home of Michelin): "They subsidized the schools, busses, gave their workers bicycles, and helped fund the hospitals." But that was a long fucking time ago, and now it's all about fucking money. Ye, gods, though. How much fucking money does a place need? That's just irresponsible. Maybe I'm just some fucking yahoo, which is most likely the case, but it seems like one has a fucking obligation to be less of an asshole when one has the money to rule the world.

Re:It's official

[tshak]

It's a pity that Microsoft doesn't do a little more with their money than sell shit at top dollar.

Insightful? Don't you mean TROLL? First of all, this statement has no intellectual value. Second, MS is known for their relatively LOW prices in commercial software (want to compare Oracle pricing anyone?). You may not like any software that MS does, but others are able to see some of the achievments that MS has made. Sure, one can wonder with all of that money how in the world they have a mail client with a "security swiss cheeze" feature. However, if you'd take your head out of the sand you'd realize that MS SQL server is an incredible Enterprise database, that Windows 2000 is a great workstation and a decent server, and that the newer versions of DirectX are actually pretty elegant to code for (and rock-solid stable too). Finally, all the money put into .NET (the technolgy, not the marketing BS (eg Hailstorm)) has gone quite far. Any reasonable objective programmer will agree that it's a very competetive solution when compared to J2EE - less the fact that it only runs on Windows (for now). So let's put the Facts back into Science and stop being Religious about fricken Technology.

/RANT!

Re:It's official

[HiThere]

If it works, Caldera will soon be a big name (again).

Re:It's official

[maraist]

Second, MS is known for their relatively LOW prices in commercial software (want to compare Oracle pricing anyone?).

Once apon a time they had low prices. But not anymore, and your statement is becomming increasingly false. As their software actually gets close to companies like Oracle / IBM in terms of capability and robustness, their prices are reflecting it. Don't forget to take into account upgrading into the cost. A nice expensive SUN hardware work-station has been running the same version of Sybase for years at our company, and there hasn't been a compelling reason to upgrade; that's thanks to the mostly settled UNIX standard. MS APIs are ever-forward looking and thus obsoleting of previous standards (read interpolibility and network security methods).

You may not like any software that MS does, but others are able to see some of the achievments that MS has made.

I fully acknowledge that MS has contributed a lot, and provided a realistic alternative to UNIX / custom-solutions. Such innovations as MS Works, MS Access, and virus-friendly do-anything office-suites have contributed leaps and bounds to the industry. (note my synicism)

The problem is the same as if you had to choose which company to work for. Company A has low pay, marginal benifits, not particularly exciting projects, but have open and moral business practices. Company B is very radical, very growth-oriented; it has a lot of flash and excitement. It's already number one in two or three fields, and it has it's sights set on dominating other markets. The business men are ruthleess, smart, and know how to turn a buck.

Well, it would seem that most people would prefer Company B, if for nothing else than it's like a shiny toy to a child. But, risk-takers, statistically fail more often - including the probability that illicit legal affairs go on. Look at Enron, MS (by all rights, if Bush hadn't stepped in, their stock would be significantly less valuable today as they'd have been broken up like the Baby Bells), etc. Ruthlessness is a sure-sign of anything goes, which is another word for morally-indifferent. Such action works great for the here-and-now, but says nothing about one's future.

Thus the conservative employee would be best advised to choose company A, and do their best to make it competative. While in our Attention Deficit Disorder society (including stock-investors), it's entirely possible that good companies will be jettisend in favor of the Blitzkriek companies, you still have a good measure of reliability.

The same sort of comparison SHOULD go on when choosen business associates (including who's administrative products you purchase). You wouldn't purchase a database from a company that you've never heard of; least you eventually lose support. Likewise, dealing with a company who's made a publicly known habit of coersing it's customers (strong arming IBM, schools, etc via maliscious audit-threats) whenever they determine probable gain is a definate factor in the risk-analysis.

For many of us "heretical slashdotters", the risk-assesment is at the forefront of our minds. We stand to lose x,y,z as we chant our mantra over and over. That common businesses don't always take these factors into consideration is what we really fight. That they decided that the risk-cost isn't higher than other opportunity costs, is fine; so long as it is part of their calculation.

-Michael

Just think about it.

[Kenja]

Just think about how many copies of Linux that much money could buy.

Re:Just think about it.

[Salsaman]

Yeah right, that's about 40 CD's per person on the planet.

Hang on a minute...that means AOL must be even richer than Microsoft !

$40 billion?

[argStyopa]

Everyone else has been funny, so I'll bite on the question:

If I had $40 billion in CASH, an infallibility complex, and a slowly-dawning-realization that a) I'm not going to be able to take it with me and b) everyone doesn't love me as much as I think they do I'd sure use that money for something significant.

I don't mean "feeding the poor" significant. They'll forget it tomorrow. I mean like building the first moon base, or a space elevator, mine the first asteroid or some such thing. Be the person that really sparked civilian development in space, and you will be remembered forever (besides doing a good turn for humanity in the really-long-view).

My $0.02, so that leaves room for another 39,999,999,999.98 more good ideas.

Re:$40 billion?

[Greyjack]

You mean like, say, curing malaria? Or the eradication of polio? Or, say, targetting funds towards cures for tuberculosis and HIV?

Say what you will about his business practices, Bill (with, I'm sure, some conscience prodding from his wife) is doing some good stuff with his money. More than you'd ever see Ellison or McNealy do with their coin (if they had as much as he does, that is).

Hell, Ellison would do something loony like buy Costa Rica and turn it into the Federated Republic of Oracle, complete with its own airforce and navy.

Now that I mention it, that'd be sorta cool.

Re:$40 billion?

[Lumpy]

Nooo you need to build an underground missle to cover the world's cities in hot molten magma.. Unless they all buy 2 Million copies of Windows XP and Office XP by noon tommorow...

Re:$40 billion?

[zerocool^]

Yeah, or another way to look at it is:

$40 billion = 40 thousand million dollars.

Population of the U.S. = 281,421,906 source.

40,000 / 281.422 = 142

Therefore, Microsoft has enough money in reserve to make everyone in the U.S. a millionaire 142 times over.

Jesus Christ.

~Will

Re:$40 billion?

[KFury]

$40 billion = 40 thousand million dollars.

Population of the U.S. = 281,421,906 source [census.gov].

40,000 / 281.422 = 142

Therefore, Microsoft has enough money in reserve to make everyone in the U.S. a millionaire 142 times over.

Might want to watch that math. Your final line compares units in millions to units in millions. $40 billion is enough to give everyone $142, not $142 million.

Re:$40 billion?

[KFury]

If I had $40 billion in CASH, an infallibility complex, and a slowly-dawning-realization that a) I'm not going to be able to take it with me and b) everyone doesn't love me as much as I think they do I'd sure use that money for something significant.

Except we're not talking about Bill Gates, we're talking about Microsoft. You know, the company. Companies don't worry about dying and leaving money to descendants or estate taxes, and public companies choose business practices to enhance shareholder value, not cure Polio, unless curing Polio enhances shareholder value.

If you want to see some good come of this huge cash surplus, sell your Microsoft stock (or convince a friend to) and donate it to your favorite worthy cause.

Re:$40 billion?

[cosmosis]

I agree with you 100%. I have many such conversations like this one over the years about what I would do with a billion or 40 billion dollars. My answers are usually the same:

Space Migration - Reseach and Development of a cheap alternative space fleet. This would include research into stronger and lighter nanomaterials. The creation of a civilian space fleet where the cost per pound of going into orbit was reduced to less than $100/pound would be revolutionary. Once there, then massive amount of capital would be expended to mature the art of space-based material resouce extraction and manufacturing. Let the colonization of the Solar System Begin!!

Environmental Restoration - This is obviously a massive problem, but a good start would lots of money invested into alternative energy sources - solar, hydrogen, wind, bio-regeneration. I might consider buying a good chuck of the rain forests for preservation purposes.

I think those two would be great starts to spending $40 Billion. We all know of course that is not likely to happen with Microsoft at the reigns. They will use to increase their market share, buy politicians, and continue to create crappy software. Yawn.....Sad!!!!!!!!

Re:$40 billion?

[sql*kitten]

If I had $40 billion in CASH, an infallibility complex, and a slowly-dawning-realization that a) I'm not going to be able to take it with me and b) everyone doesn't love me as much as I think they do I'd sure use that money for something significant.

You are confusing Bill Gates, who owns around 16% (IIRC) of Microsoft, with the company itself. I'm sure Gates and Microsoft's management intend that the company will be around long after they are all dead. There are thousands of companies in the world that outlived their founders, you know.

Re:$40 billion?

[MarcoAtWork]

hmmmmm, methinks your math is flaky

40b$ / 281mpeople = 142 $/person

i.e. MS has enough money to give everybody in the US 142 bucks...

Re:$40 billion?

[ConceptJunkie]

Well, even if you move the decimal point 6 spaces over to where it belongs, Microsoft could buy everyone in the country a copy of XP.

Re:$40 billion?

[rnd()]

Except we're not talking about Bill Gates, we're talking about Microsoft. You know, the company. Companies don't worry about dying and leaving money to descendants or estate taxes, and public companies choose business practices to enhance shareholder value, not cure Polio, unless curing Polio enhances shareholder value.

And that's how it should be. Companies are supposed to make money, and do it ethically, however in the realm of competition the definition of ethics is sometimes a bit murky, particularly when you've got competetors who view challenging your ethics as a legitimate competetive strategy.

Investments are a way to grow money. If Bill had taken the initial startup funding that he used to create Microsoft and donated it to the poor, a lot less good would have been done than has been done by the GatesFoundation, etc.

Your comment was emotional and quite senseless. If it was an appeal to tug at the anti-MS and anti-capitalist sympathies of Slashdot, its score of 2 indicates that it failed to do so.

Re:$40 billion?

[zerocool^]

yep.

My bad.

Oops. I'll watch that.

Re:$40 billion?

[weave]

Agreed, but I gotta say, while feeding and curing poor children in third world countries is admirable, the end result will simply be that they will live long enough to reproduce and make more poor starving children.

The only real cures are to overthrow the corrupt governments that keep these country's citizen's impoverished, and/or take mean steps to cut down the birth rate (like, here, we'll feed you and your family for as long as you allow us to put this norplant thing into your woman).

Re:$40 billion?

[n-baxley]

Say what you will about his business practices, Bill (with, I'm sure, some conscience prodding from his wife) is doing some good stuff with his money.

He's married to his lawyer?!

Re:$40 billion?

[KFury]

Your comment was emotional and quite senseless.

You mean Styopa's comment (your comment's grandparent), right? Mine (the one you quoted, parent to your comment) was quite rational, and exactly on the level. No sarcasm was intended: Companies are supposed to try and make money. This in istelf doesn't make them evil.

Re:$40 billion?

[tshak]

Please mod parent up. People who are so critical of Bill should really respect the man for what he has done with his money. Saying things like "well, a few million is nothing to him anyway" is arrogant and foolish. Relative to the amount of money he's made, he's more philanthropic then any other in the US.

Re:$40 billion?

[smnolde]

He'd at least be able to afford the sharks with the freakin' laser beams attached to their heads.

Re:$40 billion?

[rnd()]

oops... sorry :)

Re:$40 billion?

[swb]

The only real cures are to overthrow the corrupt governments that keep these country's citizen's impoverished, [...]

LOL! Are you suggesting that Bill use $40 billion to fund a mercenary army to overthrow dicatorships? Now *that* would be amusing.

I'm not sure he'd get very far on that, the US military budget is $400 billion and we can't overthrow the iraqis. You could probably field a pretty good force for $40 billion, especially if he just focused on special forces kinds of activities. It'd be tough to raise and fight several wars for $40 billion.

Re:$40 billion?

[SkyLeach]

No way, he just gives his layer(s) sexual favors.

He's married to a wonderful woman, who just happens to be the mother of The Beast.

Now let's look into Bill's other supported funds...

Killing baby Indians (not American). I guess he's sick of those H1B visas? ;-)

A snapshot history of what their foundation is for, among others: "population control programs".

In nearly all their documents, the Bill and Milinda Gates foundation mentions their support for the "global community". Another writer uses those words a whole lot in his religious fiction series.

Now don't get me wrong, I don't think Bill is the antichrist. I think he's just a little imp. :-)

</IANAF>

Re:$40 billion?

[handorf]

You know, now that you mention it, I bet you could fight quite a long time on 40Bln. Just think: No command structure already in place, no hundreds of years of tradition to maintain, no obsession with maintaining high-powered weapons you can't maintain but that none-the-less require a huge amount of upkeep and security.

Look at it this way:
1 trained merc for a few weeks: 10K
1 laser guided anti-tank missile: 1K
Any tank on the battlefield today: Between 50M (very old) and 1Bln (M1A1)

Taking out said tank with said missile: Priceless.

Besides, without the political concerns of a government I bet they could be quite effective if ruthless.

Re:$40 billion?

[weave]

Chuckle, no, but now that you mention it....

Perhaps if someone phoned in a tip to BSA that Omar and /bin/laden were using pirate versions of XP, they could hunt them down. Can you imagine being a process server and getting THOSE suit papers to deliver?!

But back to the idea of overthrowing, I don't think it takes billions to bring down someone like that. Look how many of our Presidents have been assassinated for the cost of a rifle and a few bullets... For some reason, covertly hunting down a leader and assasinating them is considered uncivilized but if they die as collateral damage while bombing and killing thousands of innocent civilians, then that is OK. Then again, look who makes those "rules" -- world leaders who don't want to be assassinated....

Re:$40 billion?

[nuggz]

I believe he's made a statement to the effect that he's going to give away ALL his money.

Leave around enough for his wife & daughter (it is a girl isn't it?) to live comfortably, but not to endure the hardship of exccessive wealth.

He isn't a dumb guy, he realizes that having billions and controlling a hugely powerful corporation is a damn hard job.

You can see the toll taking care of a large responsiblity takes
Look at before and after pictures of Clinton, and pretty much any major national leader, pretty young at the beginning, then old and worn by the end.

Re:$40 billion?

[Nehemiah S.]

yes, but then your kids would suddenly find themselves with $400B+ to get rid of, and everyone would hate them for it...

Re:$40 billion?

[Paul Komarek]

Just as you suggest distinguishing between Bill the Microsoft Furror and Bill the Gates Foundation guy, one should also distinguish between US$40 billion owned by MS, and whatever assets Bill Gates the US Citizen has.

-Paul KOmarek

Re:$40 billion?

[Evro]

Most of the reason that people of Gates's wealth setup these "foundations" is so they can get massive tax breaks. Because the rich are taxed so "heavily" in the US, most extremely wealthy individuals establish a charity foundation to do good works on their behalf, while they get huge tax writeoffs. Everybody wins. One of the big problems with Bush's tax cut, which immensely favors/favored the rich (Dick cheney saves about $1 Million a year in tax now; average american saves close to $500), is that the rich have much less incentive to create these foundations, and society as a whole loses out.

Re:$40 billion?

[swb]

If you wanted to field the Taliban you could do it for $10k. But remember, we're talking about actually *winning* a war (ie, overthrow government) not just doing guerilla warfare tactics to outlast an occupying army. We want to actually defeat an existing (albeit bad) standing army and take over the government.

$40 billion would field a good light infantry, maybe with some mechanized support and some helicopters. I don't think you could win anything with just RPGs, assualt rifles and machine guns -- you will need some light armor and some choppers.

The bummer is transport to the fight -- moving 10K troops, arms, ammo and supplies to some third world country isn't cheap. Supply chain logistics is a mofo that even the private sector has problems with.

And then there's the re-usability factor -- we're going to do this in more than one country, aren't we? $40 billion is plenty to overthrow the people's republic of east treestump and the four drunks armed with AK-47s that constitute its army. It might be tough to fight in asia, africa and south america effectively, in a serial fashion on $40b.

Re:$40 billion?

[IamTheRealMike]

Say what you will about his business practices, Bill (with, I'm sure, some conscience prodding from his wife) is doing some good stuff with his money.

No no no! I absolutely refuse to think that this makes up for Gates past.

Look - if I went out today on a crime spree, if I robbed bank after bank after bank, became the richest guy in the world from ripping off other people, then hired some smart accountants to make it grow even more would you respect me? No, of course not.

If I then took that illegaly earnt money and spent it on Good Deeds(tm) would you respect me? I hope not.

Please don't lose sight of the fact that Bill Gates is really quite a sad man, he spent his life screwing others in the pursuit of wealth, and now he is richer than even his wildest dreams he's realised that it made him one of the most unpopular men in the industry, and he doesn't even want all that money anyway!

I'd have respected Gates a lot more if he hadn't deadlocked the industry into a monopoly, and actually acted ethically all this time, rather than simply accruing massive wealth then giving it away.

Re:$40 billion?

[jafac]

He's just buying some good PR, and I'd even venture to speculate, a good night's sleep - but on the other hand, I'm not sure he has a problem with insomnia or a the burden of a conscience.

Re:$40 billion?

[Tackhead]

> Hell, Ellison would do something loony like buy Costa Rica and turn it into the Federated Republic of Oracle, complete with its own airforce and navy.

Costa Rica? Fuck, that's what he's doing to California. What do you think that $95M Oraclegate scandal's all about? :-)

Re:$40 billion?

[Jason Earl]

The answer to that is simple, and some of it is even covered in the article.

Microsoft is big and rich, but they still have a very high P/E ratio. If they can't keep up their double digit growth then the boys on Wall Street are very likely to downgrade their stock price. Since the personal fortunes of most Microsoft employees (and all Microsoft executives) is deeply intertwined with the stock price that would be a catastrophe. Now that PC sales have tapered off Microsoft can no longer rely on PC growth to fuel revenue growth. Couple that with the fact that Linux has decimated their lucrative UNIX-to-Windows migration scheme and you can see why Microsoft is squeezing their customers harder than ever. After all, the only way to grow revenues without growing the market is to charge your customers more.

The whole point of the article was to point out how strange it is for Microsoft to keep such an enormous pile of wealth tied up in cash and short range investments. The primary reason that Microsoft continues to build up cash reserves (instead of offering a dividend to its investors) is that Microsoft wants to pretend that it is still in the rapid growth phase of its existence instead of the stable growth phase.

Re:$40 billion?

[ConceptJunkie]

I picked up the regular VS.NET for $99 at Best Buy. Aside from compiling substantially slower on my geezy old hardware and having a tremendous amount of useless (although sometimes interesting) baggage, it seems like a neat product.

The professional and enterprise level packages are exorbitantly priced, but they're geared towards businesses. The sheer volume of development capability that can be had for $99 is pretty amazing.

I know, I know, Microsoft is evil and gcc is free, but that doesn't change my mind.

The high price of development tools doesn't seem so bad compared to more or less _doubling_ the price of the OS between Win2k and XP.

The fact of the matter is Microsoft is in it for the money.

Catastrophe Hedging Program Beta

[DeadBugs]

I would like to see what kind of bug list and change log the Catastrophe Hedging Program has. I'm sure people would be fired for a rounding error or misplaced decimal. I could see Bill Gates face while using the program to handle his finances and get a blue screen before he could hit save.

Generating $1bn a month??

[SanLouBlues]

Haven't they been around more than just 38 months? How long have they been making this much? Seems that either the number is wrong, or they should have more than just $38bn . . .

Re:Generating $1bn a month??

[pete-classic]

[I posted this earlier, but it disappeared somewhere between the time I hit submit and the time it should have entered the /. DB.]

Matt,

Consider taking Algebra next semester. You will learn that not all functions are linear.

After that you may take Calculus one day, and learn that it is often appropriate and useful to substitute a linear equation for a non-linear one for small portions of the domain.

Good luck with that higher education.

-Peter

Re:Generating $1bn a month??

[SanLouBlues]

Quoth me: "How long have they been making this much?"

Emphasis added on the second go.

Re:Generating $1bn a month??

[pete-classic]

Yes, you said that, but you followed with "Seems that either the number is wrong, or they should have more than just $38bn . . ." which is false. The number is not wrong, and they "shouldn't" have more than $38 billion.

The question "How long have they been making this much?" does not make your false dichotomy any less false, or my statements any less true.

-Peter

Re:But is it enough to buy my freedom to choose ?

[kpansky]

Actually, I think 40 billion aught to cover the value of _my_ freedom of choice.

I mean it is 40 billion

You mean...

[Rorschach1]

They're not using MS Money for that?

Dividends are stupid

[crow]

Dividends are stupid. If Microsoft decides it has more cash than it needs and wants to provide shareholder value with the money (possibly with the federal government threatening to tax the "excess" cash reserve), then a stock buy back makes much more sense than a dividend. In theory, both provide the same value to the shareholders, but a stock buyback provides capital gains instead of income.

So even if the government decided to enforce the tax on "excess" cash reserves, there would be no need for a dividend.

Re:Dividends are stupid

[EnderWiggnz]

uhh... dividends are not stupid, at least to those of us who would like to actually have a reliable income stream from our assets.

egad... why would you invest in a compnay that has no growth prospects, like MS with such a high PE ratio anyway? you would only invest in this company if they provided a yearly dividend (aka income stream to YOU).

thats how the stock market has ALWAYS worked, and will continue to work, in the post-internet-boom.

i suggest you dont invest if you dont understand why dividends are a good idea.

Re:Dividends are stupid

[GMontag]

1. Dividends have no relation to growth.

2. If you want a constant stream then sell fractional shares of stock that do not pay dividends, as the value of the stock rises.

3. Don't confuse equity with debt, believe it or not they are quite different.

Re:Dividends are stupid

[EastCoastSurfer]

In general tech companies should not pay dividends. They should be reinvesting that money into R&D. Without R&D most tech companies will die in a few years.

Very few tech companies will ever become that "utility" stock that returns 10%-15% every year, MS included. MS will never be the Coca-Cola because MS "must" to continue to spend huge amounts of R&D dollars to keep their revenue stream moving. Coke can just continue to sell coke and make a profit. MS cannot just to continue to sell WinXP and still be around in 5 years.

Re:Dividends are stupid

[JWW]

Boy do I wish I still had some mod points.

The above post is exactly right, and very instightful.

Re:Dividends are stupid

[shyster]

[MS is] not a growth stock anymore, at best they are a "utility" stock that should produce 10-15% returns every year. If done right, they should be the new Coca-Cola - profits and dividends every year from now until eternity.

Don't you get it? In 10 years, MS will have enough cash to buy the US government. At that point, all the taxes will go to Microsoft. Talk about profits and dividends!!!!

Re:You forgot about Gizmo Duck

[Capt_Troy]

Great Show. I believe it was Fenten though.

2.5?

[mikeee]

Uh oh... we all know no Microsoft product is usable until version 3.0.

Re:2.5?

[Sabriel]

Uh oh... we all know no Microsoft product is usable until version 3.0

Yeah, but crap software is what Microsoft makes for *us*. When it's *their* money, of course they make sure to get rid of the bugs... :)

Re:Shopping Spree

[Amazing Quantum Man]

your math is off.

He could buy 160000 Congressmen.

No corporation pays taxes

[Loundry]

This needs to be repeated over and over again because many people do not understand it. Corporations do not pay taxes. Corporations collect taxes.

Here's how it works. A corproation is a legal entity designed to make money. It has a list of expenses and a list of revenues. One of those expenses is "taxes." When the government raises taxes on a corporation, the corporation has to make up for the higher costs. It does this by increasing the price of its products or services. I.e., the consumer has to bear the brunt of the higer cost of the corporation's tax. I.e., the corporation is merely a tax proxy for the government.

All wealth in the country is held by two groups: individuals and government. People talk about "Microsoft's $40 billion," but Microsoft is owned by individuals. It does not exist without the individuals who make it run.

Re:No corporation pays taxes

[anthony_dipierro]

People talk about "Microsoft's $40 billion," but Microsoft is owned by individuals. It does not exist without the individuals

But I wasn't talking about Microsoft avoiding taxes. I was talking about Bill Gates using Microsoft as a tax shelter to avoid taxes.

Re:No corporation pays taxes

[JoeWalsh]

That's only true to the extent that the corporation has pricing power. To the extent that it does not, the taxes will come out of the corporation's profits.

Re:No corporation pays taxes

[Loundry]

But I wasn't talking about Microsoft avoiding taxes. I was talking about Bill Gates using Microsoft as a tax shelter to avoid taxes.

As much as I dislike Bill Gates, I have no problem with his doing this.

Re:No corporation pays taxes

[Loundry]

government doesn't exist without the individuals who run it. eh.

Individuals do not run government. Elected officials run government.

Re:No corporation pays taxes

[HiThere]

But do remember that this "money" that your are talking about is just pieces of paper that are printed by the government. (Plus it's abstraction into accounting electrons, bookkeeping entries, etc.)

The wealth of a country is a quite complex thing, involving knowledge, resources, organization, etc. But the money .. that's simple. Money has value because the government demands that you pay taxes with it. That's it. Everyone, and every corporation, has to pay taxes to the government. So they all need to collect money to pay those taxes. And that's why money has any value at all. It's not like a CD drive, or a movie, or a loaf of bread. It's just a physical representation of a bookkeeping entry (and vice versa).

So MS holding onto $40 Billion isn't keeping anyone from having bread, or housing, or fancy clothes. It's holding onto bookkeeping entries. It's when it spends the money that it will be using up wealth. As long as it holds onto the money, it's only threatening to spend it. And this is threatening to the extent that you feel that it might use resources that you could otherwise use (e.g., the vote of a senator). And it's a promise to the extent that you feel that they might toss some of it your way (e.g., a job).

I don't know the right way to feel about this, but all of the simple ways seem to be wrong.

Re:No corporation pays taxes

[rabidcow]

This needs to be repeated over and over again because many people do not understand it.

Ok, now I'm not entirely sure here, but that might be because it's complete and total nonsense.

A corproation is a legal entity designed to make money.

That's right, the corporation is there to make money, not for the government to delegate taxes. There is a tax on making money, thus the corporation must pay taxes on the money that it makes.

When the government raises taxes on a corporation, the corporation has to make up for the higher costs.

Nonsense. When the government raises taxes on a corporation, the corporation's profit drops.

It does this by increasing the price of its products or services.

If the corporation wants its profits to remain unchanged by the increased taxes (which may not even be possible) it has to either increase revenue or decrease expenses.

One way of doing this is to raise the price of its products or services, but there's these tricky little supply and demand curves that can mess that up. You see, if you charge more for something, typically fewer people will buy it.

Since making money is the corporations business, they should be looking for the optimal price/demand level anyway. The only possible way that increasing prices could offset increased taxes without fail would be if corporate taxes had some effect on the demand of their product, which they don't.

Re:No corporation pays taxes

[Squeeze Truck]

I thought that under some 1890 law (the name escapes me at the moment), corporations are indeed legal persons -- with all the legal rights that implies.

(interesting sidenote: the Japanese word for "corporation" is houjingaisha, or "legal-person company".)

Re:No corporation pays taxes

[shyster]

Bravo. You hit it right on the head. Just to emphasize, I'll restate.

Assuming a perfect market (which is the assumption to begin with), the corps will have already priced their product at that optimal level to get the most profit. If taxes are increased, the only way to increase prices is to lower profits. That, of course, is a prettu dumb thing to do. The only way to pay the taxes, then, is to dip into the profit margin.

Re:No corporation pays taxes

[Squeeze Truck]

One way of doing this is to raise the price of its products or services, but there's these tricky little supply and demand curves that can mess that up. You see, if you charge more for something, typically fewer people will buy it.

I'm not arguing against your post, but if the government (or should I say, Congress) decides to raise taxes, it would do so across the board, or at the very least on all corporations in a specific industry.

If all corporations suddenly incurred the additional taxes, and all of them raised their prices, then the supply/demand curve should be unaffected.
That is assuming consumers truly need whatever that industry makes, and have no other means to come by it.

Re:No corporation pays taxes

[rabidcow]

That is assuming consumers truly need whatever that industry makes, and have no other means to come by it.

Yes, for inelastic industries the demand remains constant, but most industries aren't like that. Of course raising prices across the board will have less of an effect on a particular company than just that company raising prices, but usually there is still some effect.

Ralph Nader wrote about this a wile back

[warnerpr]

http://www.cptech.org/ms/rn2bg20020104dividend.htm l

Glad to see that CNN can only took a couple months to write about it!

Mr. Nader's letter on the topic was the first I read of this topic.

Re:bankrupt the world

[alen]

No stupid. The money would be lent to others. Such as mortgages, business loans etc. With interest of course. This is how wealth is created.

MS is a special interest group

[DABANSHEE]

I bet they have their own Washington polies in their pocket, including one in 'W's cabinet.

Actually that's a unfair bet because I already no that.

Re:catastrophe

[AtariDatacenter]

It gets worse. The memory isn't even parity protected.

This reminds me of the Hitchikker's Guide to the Galaxy. You know, the planet builders who put themselves into crogenic freeze until the next recession wore out? If Microsoft dies, all they have to do is become an investment company for a while, and ride the next wave of technology back in.

Uhmmm, what?

[mjh]

Quote from the article:

But there is one number that Bill Gates & Co. can point to that is heading inexorably upward: the amount of cash Microsoft has on hand. Thanks to its dominant, near-monopolistic position in what may be the best business on the planet -- system software for personal computers -- Microsoft continues to generate huge amounts of free cash flow.

"near-monopolistic"? I believe that it's been proven and upheld in appeal, that not only are they a monopoly, but they're an illegal monopoly.

Why is it that every single financial analyst and financial advisor or management group seems to be perpetually apologetic to Microsoft?

Hello! Finance world! They're guilty. I'm sorry that it hurt your portfolio. But even if it did hurt your portfolio, the only one to blame for that is yourself. You invested in them and took the risk of trusting your money to their business practices. Trying to justify their business practices in order to reclaim your stock value is morally corrupt. Accept the facts, take the loss, and move on.

Sheesh.

Re:Uhmmm, what?

[mjh]

Hi Dan! Here we go again.

1. Case isn't over.

True. But the decision about whether or not Microsoft has a monopoly is over. That's been ejudicated and appealed, with no further apeals pending. They are a convicted illegal monopoly. The only part of the case that's left is deciding the fate of the illegal monopoly... which presupposes the existance of the illegal monopoly. IOW, in order to be at this point in the trial, Microsoft must be an illegal monopoly.

2. The trial is only about Desktop Operating Systems. There are tons of other software products at MS and in the software world.

So? None of their other software changes the fact that they are an illegal monopoly.

3. Linux.

I don't understand what Linux has at all to do with the fact that Microsoft is an illegal monopoly. You could have said, "breadbox" instead of "Linux" and I'd be no more confused by the association.

Re:Uhmmm, what?

[mjh]

Of course the case can be appealed. So what? They're still an illegal monopoly. It doesn't matter if the case goes on for 1 million years. Until a judgement comes out saying that they are not an illegal monopoly, the standing judgement is applied... which is that they are an illegal monopoly.

And as far as not understanding why Linux has anything to do with Microsoft's status as an illegal monopolist, well, you can either help me understand what you were talking about or you can post out smart alec comments. The latter does nothing to convince me of your opinion.

One other question for you, personally. I went to your website. Very nice design. Clean and well organized. But I'm confused about how you can see AOL-TW as evil and not see the things that Microsoft has done and continues to do in the same light. How is it that Microsoft gets off the hook from your "evil" label?

Re:Uhmmm, what?

[mjh]

Right, the article said "near-monopoly control of ..desktop software". They do not have a monopoly in all desktop software, just OS's.

Re-read the quote. Provided here for your convenience:

Thanks to its dominant, near-monopolistic position in what may be the best business on the planet -- system software for personal computers -- Microsoft continues to generate huge amounts of free cash flow.

Now, of course it doesn't specifically say "Operating Systems" software, but it clearly does not say "desktop software". IMHO, "system software for personal computers" means OS. Maybe you disagree.

Re:Uhmmm, what?

[mjh]

I disagree. But thats okay. The case isn't over, and generally we dont execute people or even lock them up (except in cases like murder, etc) until the case is fully adjudicated. Especially in civil cases.

Except that's not true. For criminal cases, there's usually some time between the guilty finding and the sentancing. During that time, the guilty party is put in jail, pending sentancing.

As far as the existance of Linux precluding MS from being a monopoly, how so? As far as I know, Microsoft owns more than 98% of the desktop OS market. They have a complete stranglehold on that market and the existance of Linux has not made any statistically measurable dent on that market share. In the server environment, linux is doing better, but Microsoft has never had a monopoly in that environment.

IMHO, calling microsoft a "near-monopoly" in the desktop systems world, is either misinformed or apologetic.

Re:Uhmmm, what?

[mjh]

The article wasnt spefically talking about any market, just their desktop software in general. In OS's, yes they are claimed to have a monopoly. But not anything else. Hence the "near".

Re-read the original quote. Provided here for your convenience:

Thanks to its dominant, near-monopolistic position in what may be the best business on the planet -- system software for personal computers -- Microsoft continues to generate huge amounts of free cash flow.

It's talking about "system software". Maybe that's me interpreting it as OS. But it sure seems like OS to me. I would hardly classify MS Money as "system software". And maybe it's just me implying that "personal computer" means non-server. But, again, I don't think you can classify a server as a "personal" computer. So when they say "near-monopoly" in "system software for personal computer" it suggests that MS actually operates in a free market, that is not illegally dominated by one player. And it rationalizes the idea that any legal consequence for MS is over involvement of the government.

Which, of course, I disagree with.

Re:Uhmmm, what?

[mjh]

FYI, if you are looking for why I claim you are wrong, why MS is not a monopoly, and why desktop OS's are not monopolized by MS, take a visit on over to my website in about 3-4 days. I've been fighting this fight for too long here, and am colating my thoughts into a cogent article I can routinely point to.

Have you considered the possibility that you've been fighting this for so long because it's wrong? While it may sound like I'm saying your wrong, that's not what I'm saying. I'm just asking if you've considered the possibility? If what you're doing is fighting instead of discussing? In fighting, it doesn't matter what the other person does or says, just so long as they are vanquished. In discussion, though it may appear combative at times, the goal is to learn from one another.

Clearly I don't agree with much of what you're saying, and I look forward to reading and understanding the thoughts that you think will be convincing.

Makes you want to puke

[ScooterComputer]

This article makes me sick. I used to be rather anti-capitalist. Then I went on a personal crusade, reading Smith, Marx, Keynes, and, most recently, Schumpeter...I realized that much of what I THOUGHT I knew about Capitalism was incorrect. I also realized that most of what OTHERS THOUGHT about Capitalism was wrong. After my readings I came to appreciate Capitalism, but also to loathe it--primarily because one of the most basic tenets is that the consumer MUST make CONSISTENTLY INTELLIGENT purchasing decisions. And I feel that it is far too easy in today's mega-adverstising, high-incentive, low-intellect environment to expect that. In short, big companies (including the government) have found success far simpler to attain by buying off the intelligence of the consumer. And the result is companies like Microsoft.

Let's look at this company for a short second...it certainly didn't have any where NEAR $40B in the bank in 1995, just prior to Win95 being released. Win 3.1 pretty much ruled the roost; and IBM was desperately trying to released the stranglehold that MS had over them due to the (favorable) DOS licensing. Microsoft was very powerful, but at that time Office hadn't yet driven EVERY OTHER competitor out of the market, and the Internet wars hadn't even kicked up yet. But there is one indisputable fact: the trend had been well established in the American (nee World) consumer mind that Intel/Microsoft was a standard and compatibility with that system was absolutely mandatory.

So, 7 years later, Microsoft made Bill Gates the richest guy around, had TONS of cash sitting in banks, runs competitors into the dirt, and basically laughed off US Gov't legal action--several times! This has to be about as clear as it gets that Capitalism as we understand it is an incomplete model. Previously in history, mega-wealth like this was built on the backs of slaves--the railroads, for instance. But not Gates'. There were no slaves...merely consumers. One could argue that this is truly "Capitalism at its best!" for certainly it was Capitalism that provided Gates with such wealth. Only that is a short sighted thought, considering it is Capitalism that ALSO states that in such a market competitors should have been clamoring to compete! And I REFUSE to believe that DOS/Win3.1/Win32 was absolutely the best, most marketable product during that period...okay, it may have been the best, but was it "97% of the market" best? I just don't believe so--I mean look how quickly Linux has stormed the scene. Are we to assume that NO ONE else but Microsoft was so astute at making operating systems until some kid sat down at his PC? Something just DOESN'T make sense here.

So what dynamic about Capitalism are we missing? What overlooked problem could explain a seemingly complete breakdown of basic competition? Or, can it be explained with what we already know? Personally, I look at Microsoft's accounting tactics. But of course they really didn't start until AFTER a pretty good amount of money had been made. I then look at the role of the US Government in making Billy G. a gazillionaire...after all, think of all those government agencies sending YOUR tax dollars to Redmond. Of course the relationship doesn't end there--military contractors would conform their systems to the Gov'ts, and state and local gov'ts would do the same. It is nearly like a viral chain of Microsoft infection. And all the while, we were supporting government research that could have/should have been capable of creating an open source operating system.

So is it the infamous Keynesian "invisible hand" run amok that created this? Does any one have a GOOD idea as to how much money Microsoft has profited (taking into account the top-down, hierarchial spread of influence) off the US Government since 1990?

Given my newfound respect for the dynamism and aggressiveness of true Capitalism, I refuse to call Bill Gates a Capitalistic success story...to do so would be to forever sully the greatness of the fair-market system.

Re:Makes you want to puke

[phillymjs]

Previously in history, mega-wealth like this was built on the backs of slaves--the railroads, for instance. But not Gates'. There were no slaves...merely consumers.

From what I've read, the work environment that Microsoft promotes for its employees is pretty close to being a slave-- sure they pay you, but you work long hours, and anything that would keep you from the office such as marriage, children, or socializing with people who aren't co-workers is implicity frowned upon.

And you could make the argument that consumers ARE slaves in this case. When Microsoft changes file formats from version to version, creates "upgrade treadmills," and pulls other tricks to "encourage" upgrading to the latest and greatest, they might as well be hooking up a yoke and plow to people.

Just look at what they're pulling now with these volume licensing changes for their corporate customers... it's a pay-now-or-pay-much-more-later scheme designed to shore up their income until they can get .NET out the door and we're all just paying a monthly Microsoft bill the same way we pay for gas and electric and phones.

Sure, the argument could be made that one could cast off the chains and switch to Linux or something else, but for non-techie consumers and huge corporations whose clients and vendors are all locked into Microsoft products, that's not an option.

~Philly

Re:Makes you want to puke

[Jeppe Salvesen]

Most of the big thinkers envisioned direct competition in an intelligent marketplace. However, history has proven they companies prefer to create incompatibilities to avoid competition. There was a time when each company had a different dimension and set of tools for simple nuts and bolts.

However, today these items are largely standardized, to the enjoyment of the customers.

Microsoft is actively fighting direct competition. They are trying to prevent competitors from using the same nuts and bolts (Lindows, as an example), or at least punishing them when they use their nuts and bolts without asking permission.

Basically, greed got in the way of capitalism. Rather than celebrating the very ideas that makes capitalism work, there seems to be a drift towards anti-capitalistic regulations - strong IP legislation, for once.

Also, you could argue that most markets are so consolidated that entering them is a possibility only for monopolists with extreme bank accounts. Look at the franchising frenzy that has set back innovation and localized service - I studied in Grand Forks. It has several good local restaurants, but people really, really wished TGIF and Olive Garden would come to town.

Hmm. I'm done rambling now. Too bad this wasn't as cohesive as yours.

Re:Makes you want to puke

[dj28]

Every single theory of society is an "ideal". None of them will be perfectly becuase human nature is flawed. And by the way, companies are supposed to want total control of a market. They are supposed to want other businesses gone. That's the fundamental idea behind Capitalism. They are supposed to be trying their best to eliminate other competition. So you basically contradicted yourself over and over again.

Re:Makes you want to puke

[perky]

So is it the infamous Keynesian "invisible hand" run amok that created this?

That would be Adam Smith's Invisible hand.

Re:Makes you want to puke

[Fjord]

In case you (or others) didn't know, Robert Walton is the richest person now.

Re:Makes you want to puke

[shren]

But all the invisible hands do about the same thing... cover up the hole in your financial theory. Invisible hands are the dark matter of the financial universe.

Re:Makes you want to puke

[maraist]

Open Source software is insanely susceptible to hackers/bugs/etc. Moreso than even M$.

Explain then how there have been few viruses that have had success against linux/BSD servers, while IIS + winX has a new security headline weekly. You could make the argument that the proliferation of Windows machines makes them more suseptible to an attack, and therefore if Linux was 99% of the market, we'd see few Windows viruses and lots of Linux viruses.. But I'm talking about servers where Apache has a >50% share (at least at one point in time). Apache is recognized as one of the most robust services out there, and it's obviously a critical piece of the cracker puzzle. OpenSSL + OpenApache + OpenLinux (with and open firewall design) are extremely robust (though not impenetrible). Most of the security holes that I'm aware of deal with user-level applications. If you're trying to hack a bank, you can be sure that user-level applications will not be a factor. Should a bank use winXP Pro + IIS then? (Sadly I know a few that do).

I just couldn't sit by with such an unsubstantiated comment went by.

-Michael

Re:Makes you want to puke

[maraist]

Basically, greed got in the way of capitalism.

Just a small nit-pick here.. Capitalism is based on rational decisions. Those decisions are based on supposedly practical values. The most practical value is self preservation. Thus an essential element in capitalism is that one will do what is best for themself. If any decision means that throughout the course of one's life, they will be better off doing something that, but that action hurts society as a whole, they will definately choose the selfish direction. It is irrational (non-optimal decision making) to do otherwise.. It is only when hurting society will eventually hurt them in the long run (reigning anarchy where they will most likely die at a young age), that an individual must choose non-selfishly.

Greed is a hard word to quantify. You could say it's an obsessive level of consumption at the expense of others. But it's hard to differentiate this from rational action. I'd rather characterize it as a compulsory (obsessive) behavior, where optimal decision (e.g. rationalism) are not made. To promote a consumption (including mere acrument of assets) whose' diminishing marginal returns are not considered. In other words, since each additional dollar should have less value than preceeding ones, there should be a point where other elements of one's personal life are more valuably persued that that of the next dollar. Obsession is where we persue this devalued dollar in spite of other needs.

The problem is that while a human being is ill suited to make use of that last made dollar, a company isn't. In fact, the opposite is true. Each additional dollar made is a vehicle for persuite of even more productivity. It therefore has an exponential effect. Remember, so long as hurting others does not hurt yourself in the long-run (including possibly your decendents), then it is still rational to act selfishly. Thus a monopolistic company that squashes competition and locks every man-woman-and-child into a sort of tax (due to annually required upgrades), then enforces license compliance, then the raising of prices, hurts the hell out of external cultures and organizations (countries even), BUT still benefits in the end. Even if they are boycotted, affected with ledgislation, they will still have acquired more total present-day-dollars, then if they'd constrained themselves.

This is efficient and rational capitalism.

The problem is that MS should not exist as it does today according to classical capitalistic theory. The ONLY reason MS exists today as a monopoly is because of copyright law. A "tool" emposed to artifically help capitalism. MS does not produce windows more efficiently than a potential competitor. MS does not write database code that is better than competitors (nor even more cheaply). It merely has a strangle-hold thanks to it's artifically enforced licences and intellectual property. Non-disclosure-agreements, and non-terminating copyright labels stand in the way of "effecient" production of the computer software good.

Any society that has to ammend it's fundamental tenent (such as American freedom, squelched by business-bolstering copyright/patent-law) obviously demonstrates it's lack of fundamental viability.

If Capitalism can't exist without artifically constraining laws, then capitalism is a failure (if not today, then some-day). Personally, I don't think capitalism is a failure. I think that in light of modern work-paradigms, it would actually be possible to live in a capitalistic society free of copyright and patent law (of course this even means GPL would have to go). It throws away work-for-profit mentality in exchance for work-for-compensation. It would still be possible to profiteer, but you wouldn't be able to rest on your laurals.. You'd have to have a business plan where you could at least for a time, be more efficient at production of a good/service than any free-rider. If this is so strange, then look at what we say must happen with the music industry. We say that they have to wake up and accept the change. But it's no different then saying that software or medical drugs would have to give up manufacturing royalties (and thereby hurt venture capitalism).

Who then would bother spending billion dollars on medical research, or on a nuclear power-plant management operating system, if as soon as their done, a generic company will sell at bottom dollar, and thus equate a massive loss. I think the answer is very obvious. If people are afflicted with a massive disease, and we need to spend a billion dollars, then people will demand sanctuary from the government, which will therefore grant money to an organization which would then hopefully find a solution. The findings (successful or not) would be open to other organizations (since it was publicly funded). You're paying a "service" fee. A nuclear power-plant would likewise have enough value to pay a company to make custom Nuclear-power-compliant software. That the next power plant could then steal the code and use it at no additional cost is irrelevant.. The first nuclear power plant couldn't operate otherwise. Further, the second plant would have to pay service-fees to reverse engineer and recustomize the code to fit their need. The actual reduction in cost to the second plant would actually not be substantial.

If tomorrow we abolished copyright law, the first thing that would happen would be that stock prices would go rock-bottom. Share-holders would know that their IP-based profits would dissapear. Especially in the medical and computer fields where the information is most of the final result. But these companies wouldn't disssapear. First, they'd spend billions of dollars on litigation to recover their previous nest-eggs.. Many companies would go belly up in this last-ditch effort (assuming they weren't successful, which is irrelevent to this discussion). Some would simply adapt. They'd convert to a truely-free-market economy (e.g. migrating to service or minimial-cost production, or marketing (such as inferior brands who's label is all that matters; e.g. the textile industry)).

All commercial software companies would go belly up immediately, since it would no longer be illegal to simply take a single MS CD and install it on every machine in the world. The only thing MS could do would be to enforce registration (which is fine by darwinean capitalistic ideology), but this wouldn't last since hacked MS products would eventually appear which thwart registration attempts.

Strangely enough, this wouldn't hurt society as a whole because we already have sufficient advances in technology and medicine to survive. What would definately hurt would be the economy. But that would only be temporary.

It's true that we'd have a stagnent economy for a while as we learned to shift our resources from high-risk venture capital to other methods, and it's likely that we couldn't achieve the same order of magnitude financial capability as with constrained capitalism, but we have to look at the larger picture. As a society (and thereby a governing body such as congress), what are we trying to achieve? Growth? That's a selfish endeavor; not something society as a whole should be concerned about. Do we really care that we have more people next year than we do today? Do we really care that the total number of dollars in our society grows each year (even though our personal stock-piles are stagnent with respect to inflation). Do we really care that one country grows exponentially with respect to all other countries in the world? (A popular bastardization of capitalism is that you must not only compete with your peers, but measurably squash them). I say that these things should not matter. What I consider altruistic measures for a ledgislature are the accomplishment of zero non-transferring unemployment (meaning the only unemployment in a society should be that of those seeking to change their current work-status). If everyone is successfully employed and inflation is marginal, then times are good. If we move from a venture capitalistic society to a service-based society, then we obviously have a demand for employement. Further, artificial weath (as from get-rich schemes based on IP; e.g. many forms of venture capitalism) is reduced which dramatically curtails inflation. While I can't currently prove it, I am under the belief that inflation is dramatically reduced when you reduce the number of monopolies that are paracitic to the general population. While some monopolies are enevitable (telephone / cable industry, etc), the fewer monopolies you have (assuming competative markets can replace them), the less excess each citizen must pay (eaten from economic welfare), and thus the less it costs to live. A reduction in the number of forces encouraging higher costs of living should constrain inflation.

I'd be interested to hear further arguments for or against a free-market economy (again, I'd like to reinforce that we don't live in one). I know full well that no politician would cut off his own neck in suggesting curtailing IP-laws, but it doesn't hurt to contemplate such a society.

-Michael

Re:Makes you want to puke

[maraist]

Competition doesn't normally involve KEEPING others from competing

Don't know if I agree.. A capitalist is merely concerned with maximizing profit. From a purely mathematical / logical point of view, any and everything is a possible course of action.. The only constraints are the physical world, which includes artificial policing. e.g., from a business point of view, what's the most I can "get away with". Bribe, and cut-backs have long been a business practice (long before the evil yet legitimate practices of MS). Hell, just like at any city where the Maphia has influence. Capitalism is really survival of the fittest, and that often means those that are able to think outside the box will win. (note that it's not the same as acting outside the box).

So in summary, competition involves everything including murder (just think about how capitalism works when you're stuck on a mountain side with only a small ration of food and 10 starving people). Jail is just as financially bad as bankrupsy, so illicit activity followed by conviction isn't any more of a risk to investors than betting the farm on some last-ditch scheme before being squashed by your competition.

Does this justify it? Course not.. That's why we have the publicly funded SEC, Trade commission, police, etc.

-Michael

Re:Makes you want to puke

[maraist]

Sorry, but Linux is not anywhere close to being as good for the average dumb computer user as windows. People will always like it because of its simplicity, which is its weakness for those who "get" technology.

Yeah!! I can think of an argument to this. First of all, the initial comparison was between DOS. Tell me that DOS is easier to use than Linux.

Now look at modern RH Linux (and it's brethren). Installation is easier today than DOS HW/SW was; assuming you have the proper hardware (which has always been a problem). If all that "grandma" needs is a button that connects them to AOL / MSN and a subsequent button for email / word-processing / web-browsing. You can _easily_ do that with existing GUI capability (once AOL, MSN get on the Linux platform).

It should be trivial to have Linux boot-up without even a login prompt.

The ONLY thing that Linux can't completely do is provide usibility transparency to the MS platform (sadly they've even been trying; which I find pathetic). But that's the nature of competition. We don't expect that a saturn coupe and a lexus SUV are going to drive the same way, why should we "expect" that software all run the same way (while we should always expect that there is some level of intutition for each manner).

As for proof, I've already gotten several of my past girlfriends to "use" linux while at my house. They know which icons to hit, and are largely familiar with netscape. Aside from running maple, and games that are targeted to the windows platform, much of the office productivity suite are becommign viable. The complexities are all being hidden (I still refuse to use nautilus; I need to find a way of disabling it to save memory). The geek-argument is quickly eroding.

-Michael

Re:Makes you want to puke

[Malcontent]

Don't despair obviously Bill Gates has no confidence in capitalism either. If Bill Gates had confidence in capitalism or the US economy he would not be sitting on that much cash. He would have bought other companies or invested it. If he was a truly good person he would have given more then .001% to the poor and the needy. The fact is that Bill Gates sees something in the future that you and I don't that being a total and worldwide colapse of the economy. When that happens all assets that are based on paper will be worthless and whoever has cash will be sitting pretty. He wants to stay in the driving seat when the world's economic system collapses.

There is one more likely explanation. Bill Gates must realize by now that he (and MS) is a prime target for terrorist attacks. A "dirty" or an atomic weapon exploded in redmond would wipe out MS and drive their stock down to almost zero. The collapse of the MS stock will also take down every single mutual fund in the country and will in most likelyhood thrust the country into a very deep depression. If and when that day comes (presuming Bill Survives of course) he can attempt to rebuild MS from scratch in a pretty short time someplace else. MS may be a world wide operation but most important work gets done in Redmond and most important brains are there too. It's an easy target and he and bin laden both know it.

Re:Makes you want to puke

[Stu Charlton]

It's an abstraction. There are quantitative growth theories that have a lot of merit.

Re:Makes you want to puke

[Stu Charlton]

"And I REFUSE to believe that DOS/Win3.1/Win32 was absolutely the best, most marketable product during that period...okay, it may have been the best, but was it "97% of the market" best?"

A lot of this had to do with IBM & not Microsoft. IBM PC's were 'the' standard in the 1980's for businesses. Apples were quite expensive, and did a number of moves that didn't impress IT divisions (the lemmings commercial was one).

If you want an IBM PC, you used a Microsoft operating system. DR-DOS, OS/2, and DesqView were competitors that had a lot of mindshare, at least in my community. When Windows 95 came out, most found it "good enough" (I stayed with OS/2, personally).

It's a big leap to suggest that an entire market is "dumb", there's usually a rational reason behind what may appear to be irrational behavior. In this case, it was using an IBM PC. The other major reason was the influence of the monopolistic practices Microsoft used to be the "default".

Monopolies aren't necesarily anti-capitalist; many economists don't worry about monopolists because they don't last beyond a decade or two.

" I just don't believe so--I mean look how quickly Linux has stormed the scene. Are we to assume that NO ONE else but Microsoft was so astute at making operating systems until some kid sat down at his PC? Something just DOESN'T make sense here."

I think again what many people do here is assume because they don't like the market's behavior, it must be dumb. Now I will say that the growth of Windows over the past 7 years is mainly due to the monopolization of operating systems on IBM PC's through anticompetitve means. On the other hand, Microsoft Office was arguably largely a market choice. *shrug*

So, I wouldn't be worried so much about "true capitalism". Think more about "real capitalism". There are people that abuse the system, and we arguably need referees to police that. It's just unfortunate that our referees changed political affiliations just as they were about to red card Microsoft.

Re:Makes you want to puke

[msouth]

It does make me want to puke. But I think you are doing what I used to do, which is to avoid blaming the consumer, whose fault it really is. We, consumers, had the power all along to change how things were going if we wanted to, and all we, like sheep, went astray (sorry, couldn't resist).

No one forced people to buy gas-guzzling environmentally disastrous SUV's and the dominance of MS is similar (although a long way from being the same).

Granted, there were many illegal things that Microsoft did along the way. And it is possible that some of that is going to be corrected now, but it's a lot like really bad environmental damage--once you mess a system up, it takes a long time to fix.

I don't think we should blame capitalism. Capitalism is, I think, the least of a handful of evils because it still functions when people are greedy, and that's saying a lot. Things that don't work unless everyone cooperates and seeks the best interests of others are just not going to work in the world the way it is right now.

When things go wrong the correct thing to do is blame the people in power. WIth capitalism, the people with power are the consumers. If you want to change how things are, you have to change how the consumers behave.

Given that people are going to be dumb a lot of the time, or just noting the fact that anyone that does well in capitalism is going to acquire more capital and hence more power, it is also good that we have some checks and balances in place. This again, depends on the people to keep those laws strong and demand that elected officials enforce them.

Again, we are on shaky ground here with dumb voting in place of dumb consuming, but again, we have the people to blame.

In light of the current situation, I think that, rather than getting frustrated with captialism and looking for an alternative, we should see what we can do to encourage others to behave differently. Look aroung--there is a tremendous amount of work that can be done that has a reasonable chance of actually helping the situation! We really have a great opportunity to help fix things--coding, convincing, exposing FUD, evangelizing better solutions, educating people etc. It's something to be happy about, not depressed over. I have to remind myself of that every day because the world reminds us of the other side. But still, if you can just put the depression antidote in your mind--"I can do something meaningful to make this situation better"--you can then get on to puting the depressing situation's antidote into reality.

Here's what...

[Decimal]

I'll bet Microsoft plans to use the money to develop some compund of gold that is liquid at room temperature for Gate's swimming pool.

Either that, or they're going to repave One Microsoft Way real fancy-like.

Um, math, corky?

[smileyy]

Or you could do the math correctly, and realize that they could only give everyone in the US $142.

Re:Um, math, corky?

[GungaDan]

Hell, even the shrub managed better than that. Of course it wasn't shrub's money he was giving away...

Re:bankrupt the world

[letxa2000]

It'd only be a matter of time before the rest of the world was paying microsoft (in intrest alone not even counting actual products and services) and all the banks would go 'bankrupt' as MS drained them of their monies.

You are either a 1) liberal that believes in a finite amount of money. 2) Never taken econ classes. The latter is forgivable, the former isn't. :)

MS has to have their 40b deposited in banks. Those banks don't just pay interest for fun; they take that 40b and loan it to others (you, me, etc.) and we use that money to build houses, buy cars, and do other things that stimulate the economy and create more wealth. The banks take the interest we pay, take their cut, and pay interest to those that have deposited their money with the banks (MS, IBM, you and me, etc.).

It's all a nice little system called capitalism and banks allow wealth to be PRODUCED, not confiscated by a single individual or company.

Don't worry; MS really ought to pay dividends with that money, but they're not hurting you or me by doing it. In fact, they're making more money available that banks can loan us to buy cars and houses.

Good thing they're not buying those things...

[iabervon]

MicroSoft security and all the gold in Fort Knox. Good thing they can buy it four times...

MicroSoft reliability and the entire airline industry. Good thing they can afford an extra one...

All those sports teams, but not as popular as Solitaire.

On the other hand, 23 space shuttles would be cool.

Inner jobs

[Tal Cohen]

Hmmmm... I wonder if programmers/employees working on that "Internal software" use its advice for their own private investments...

if you're holding cash, that's a bad sign

[waxmop]

When any firm chooses to hold cash rather than reinvest, it's a clear signal that the firm is not optimistic about its business outlook.

That $40Bn could have been spent on developing new business (improving XP, etc), but apparently, the expected return there was worse than cash, which is particularly bad in this interest rate climate.

To use an analogy, consider this cash holding as a huge 'escape pod' for the death star, which is drawing resources away from building more planet-crushing lasers.

If MS believed in itself, it would invest in itself.

Re:if you're holding cash, that's a bad sign

[nuggz]

Stocks are "liquid" because they can be sold for cash pretty damn quickly.

Stocks are not liquid assets, and they can't always be sold quickly. Some large high trading volume companies are relatively liquid (ie Coke, MS, AOL)
Many smaller companies have infrequently traded stocks and are not liquid.

Short term cash & liquid assets are stuff like a corporate bank account, High quality short term ( 1 year, or 90 day) bonds/papers) or bank CDs. These can all be sold at close to their actual value at any time.

If you REALLY think shares are liquid assets, ask anyone who owned Enron on its way down.

Re:if you're holding cash, that's a bad sign

[Tazzy531]

If you read my other post, I did a quick calculation on the amount that they earn in interest alone. It comes out to be about 1.8 billion a year in interest alone. That is more than the revenue of a lot of smaller companies. Nobody said that they were not reinvesting the money. It's just that you can only spend so much. Can you do spend 1.8 billion + other revenue sources on R&D projects without the entire company becoming too bloated? I mean, that's the problem with the Defense department. There is a lot of money going in and nobody watching where it goes.

MS has quite a bit marked off for R&D. But they aren't going to just start an R&D project that isn't in their best interest. I mean, the XBox is a stretch from their core business, but in the end, it will go along with their plans.

Re:bankrupt the world

[nuggz]

Well 40 billion isn't _that_ much, the US gov is in debt way beyond that.

open source it. ALL of it.

[Bogatyr]

I wonder what I would do with $40 billion?"
Buy microsoft and open source the entire codebase maybe? Better samba compatibility, fix TCP/IP stack problem, not to mention the bugfix/security issue patches. Just a thought. i

Re:open source it. ALL of it.

[Bogatyr]

I know, I was just being facetious. You're right of course.

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Rebuild the WTC

[t0qer]

40billion would go a long way towards that goal. That would be the ultimate "fuck you" to Osama and his gang of thugs. Take the richest, most capitolist company out there, and have them build "The Microsoft Towers" where the WTC once stood.

Re:Rebuild the WTC

[NoMoreNicksLeft]

Complete with anti-aircraft missiles running WinCE?

Re:Rebuild the WTC

[jmorse]

Actually, I think the towers would do an adequate job of crashing on their own if M$FT built them...

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The "Survival" Stash

[Amadablam]

I first read about Microsoft hoarding cash several years ago. Back then, the figure was at $6 billion, and it was said that Microsoft was trying to keep enough cash on hand to run the company at its current level of production without any gross income for a period of one year. I'm not very business-minded, but it sounded like an ambitious insurance plan (thus the term "Catastrophe Hedging") and I didn't think much more about it. Thirty-four billion dollars later (and another billion every month), it sounds like Microsoft might be having more than simple "Catastrophe Hedging" in mind. All this talk about dividends and tax-evasion sounds suspicious, and I'm sure eventually somebody will have to answer for that pile of cash.

Not in the stock market I play. . .

[Bastian]

All companies have to pay out dividends eventually, otherwise the price of the share would be zero (since the price of the share is basically the net present value of the the stream of expected dividends).

The value of a share of stock is whatever people will pay for it, same as everything else. There are a lot of factors going into that, but I think anyone who follows the stock market would agree that the prime determinant of a share price is far more random than the one you suggest. The amount someone will pay for stocks today is related to how likely they think it will be that the stock will be worth more tomorrow. (i.e., I'm paying $15 a share because I think I will be able to sell it for at least $16 a share sometime in the future.)

It has little or nothing to do with dividends or anything else related to how much money the company has on hand, or even whether it's turning a profit. If it had much at all to do with those factors, there would be no way to explain the share prices that dot.coms were hitting during the last decade. I don't think it was exactly a big secret that most internet firms are considered fiscally fit if they succeed in having a net profit somewhere in the area of zero.

Re:Not in the stock market I play. . .

[Royster]

No one would ever pay for a stock that has no potential to ever pay a dividend. There's no reason for people to bid up the price of a stock unless there's a likelihood of some future dividend return. Over the long term, that is the economic reality of the stock market. When prices get bid up with the expectation that people will sell out to others at higher prices, eventually you run out of suckers and the price crashes. (This is called a Ponzi Scheme and it's usually illegal to set one up outside of the Stock Markets where the potential of Ponzi-like behavior is accepted as a cost of having a liquid equity market.) If this happens to the entire market at once, 1929 will look like a walk in the park -- say goodbye to your retirement savings. We've already seen the bust in Internet stocks -- there wasn't enough economic value there to justify the prices they were getting.

Re:Not in the stock market I play. . .

[scrytch]

No one would ever pay for a stock that has no potential to ever pay a dividend

They do all the time. It's called increased value. Do you think Warren Buffet got rich from dividend checks? No, he invested in "adolescent" companies (as he called them) that had good potential for maturity. He buys a dollar of stock, they take it and make a dollar of profit with it that is reinvested into the company. His stock has just doubled in book value alone -- the demand for the limited supply of this company's stock will push it up even more than that. And they didn't even send him any money. Yes, his money is on paper, but he can convert it to cold hard cash with one phone call.

Re:Not in the stock market I play. . .

[CokeBear]

Without dividends, the whole stock market is just one big Pyramid Scheme.

Re:Not in the stock market I play. . .

[Asparfame]

Interestingly enough, however, Buffet's company Berkshire Hathaway, valued today at about $75,000 per share ($19 in 1965), has never issued a dividend, and doesn't seem to have plans to do so. (I'm not positive about that statement... can't seem to find proof in the Internet. Oh well.)

Tonight's matchup...

[sacremon]

"...or every major professional baseball, basketball, football and hockey team in America."

'Tonight's matchup is between the Windows Devleopers' Rams vs. the Security Steelers. Should be an interesting game, though the Security's defense has been sorely lacking this season."

If I had $40 billion...

[PHAEDRU5]

...and I ran Microsoft, I'd build my own little DoD. $40 billion would go a long way to giving me some pretty sharp teeth.

Then I'd declare my sovreignty and dare the DoJ, etc., to do its worst.

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Re:Wait a second....

[sunking2]

Because its a little more complex than simply handing over money to the airline industry. The majority of the 'bailout' money is in loan guarantees. The airlines don't have anywhere near enough cash on hand to purchase new planes. They need to borrow from banks, just like normal people borrow for a mortgage. Given the current climet banks now see these as risky. The government has stepped in and guaranteed these loans, similar to guaranteed student loans. That money is only to be used if an airline goes belly up.

I dislike giving money to coporations as much as everyone else, but this is a much bigger issue. It's not about keeping the CEOs of Boeing fat dumb and happy, it boils down to keeping an entire economy from crashing down into a major recession.

so basicly

[Edmund Blackadder]

if you had 40 bill you wouldnt do anything selfless youd just make sure you are remembered.

ok

Re:so basicly

[smnolde]

That's a lot of trips to Amsterdam. You can get a lot for a few bucks there, if you know what I mean.

Re:so basicly

[jonbrewer]

Actually I think 40 bills would be about two week long trips to Amsterdam for me. :-)

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Re:MS Money

[letxa2000]

If they continue reinvesting and they continue making a profit, will they eventually own all the money that exists in the world leaving nothing for others?

You are either a 1) liberal that believes in a finite amount of money. 2) Never taken econ classes. The latter is forgivable, the former isn't. :)

MS has to have their 40b deposited in banks. Those banks don't just pay interest for fun; they take that 40b and loan it to others (you, me, etc.) and we use that money to build houses, buy cars, and do other things that stimulate the economy and create more wealth. The banks take the interest we pay, take their cut, and pay interest to those that have deposited their money with the banks (MS, IBM, you and me, etc.).

It's all a nice little system called capitalism and banks allow wealth to be PRODUCED, not confiscated by a single individual or company.

Don't worry; MS really ought to pay dividends with that money, but they're not hurting you or me by doing it. In fact, they're making more money available that banks can loan us to buy cars and houses.

Nope. Dividends are optional.

[RobertAG]

There is no law saying that a corporation must pay out dividends. Some corporations pay out dividends as a matter of policy, some don't. The difference is that the extra cash held onto by the corporation enables it to reinvest that cash into additional internal projects in order to increase the company's value (and therefore share price). The idea behind this is that the company feels that the cash can be put to better use by the company than by the shareholder. Besides Microsoft, Berkshire-Hathaway comes to mind. This model DOES work and value added to shareholders is reflected in increased stock price.

Of course, the shareholders don't have to accept this and can choose to take the cash now instead of later, either by holding a vote among present shareholders or by choosing to invest elsewhere.

One of the factors an investor considers is if a company pays out dividends. Ultimately, it comes down to a personal choice based upon the investor's expectations.

There have been papers written on this subject, usually asking the question: "Do dividends matter?"

Dividends are taxed as ordinary income, while capital gains are taxed as, well, the capital gains rate(usually at a lower, flat rate than ordinary income).

As for a shelter shielding Microsoft from taxes, their own financials reported a total income tax expense (2001) of $1,288,000,000 US Dollars. If they have a tax dodge in place, it AIN'T working.

Regarding that $40 Billion in cash holdings. Holdings are not taxed. How would YOU like it if you were taxed based on what your bank account held? You may be taxed in interest received, but NOT on the principle amount.

MOVE TO THE FOOD!

[Bastian]

No really. The "capitalism makes everyone do well" theory just doesn't hold water. It is true that capitalist economies have a tendency to be more efficient (note: that has NOTHING to do with equity), but the argument that capitalism feeds starving masses can't explain what happened in Russia or Nicaragua when they abandoned socialism or explain why a country with a per capita GDP as small as Cuba's can have life expectancy or infant mortality rates on par with those of the United States and other countries with highly developed capitalist economies.

Re:MOVE TO THE FOOD!

[Bastian]

All communist countries lie about their accomplishments

Nicaragua wasn't communist in the sense of Cuba or the USSR. I'm not talking about governmental systems here, I'm talking about economic systems. Even then, capitalist countries aren't completely honest, too. Admittedly, democracy seems to help keep corruption levels down, but that's a function of democracy and totalitarianism, not capitalism and communism. I will also agree that communist countries tend to be totalitarian, but using that as a justification for blanket statements is just as irrational as blindly following every statistic a government publishes.

We won't know the truth of Cuba until communism falls, just as we didn't know the truth about the Soviets until they fell.

We can't know with 100% certanity, but our concept of life behind the iron curtain in the USSR didn't prove to be all that different from the fact. About the only difference I see is that we now know that the USSR's technology level wasn't as high as the Cold War hype held it to be.

Efficient countries create surplus capital (even Marx agreed) and in capitalist ones, they end up making more and more until all are satisfied. Communist ones are inefficient and try to satisfy everybody but year after year, they make less and less. This fact is what makes the leadership eventually flinch and change from communist to capitalist societies.

I think I mentioned that in my original post. But economic efficiency is not a good measure of public health, since it includes not just things like the amount of food, but also things such as the number of TV's a people owns, and it tends to measure only efficiency, not equity. No, places like Cuba didn't have the number of fatiron computers and such that we have, but a country's ability to produce enough food for its people is not so directly related into GDP. Again, look at Nicaragua. Since it went capitalist, its GDP has increased while its ability to take care of its citizens has decreased markedly.

Re:bankrupt the world

[letxa2000]

It's a nice little system called corruption and it allows wealth to be CONCENTRATED, at least until the market collapses.

This has nothing to do with the original topic of wealth creation through capitalistic use of the banking system.

Unfortunately, just as handling cost overruns on single-source no-bid cost-plus contracts is not taught in CS 101, practical tips on perpetrating multimillion-dollar market frauds aren't going to be covered in ECON 101.

It's fraud and will be prosecuted. See previous paragraph about your reply having nothing to do with topic at hand.

Instead, you'll be taught happy little myths about friction-free perfect meetings of supply and demand, which is like discussing Earth's gravitational pull while disregarding Earth's atmosphere when trying to understand aviation.

Uhm, see previous paragraph about your reply having nothing to do with the topic at hand.

My guess is, though, that you were burned by Enron. My condolences.

... But you having been burned by Enron doesn't have anything to do with the topic at hand.

Losing $15 billion

[Animats]

CmdrTaco writes:
I wonder what I would do with $40 billion?

You VA guys had $15 billion in market cap at peak. Plus a sizable hunk of cash. And what did you do with that? You blew it.

Re:Losing $15 billion

[ainsoph]

Instead of being a troll you might want to investigate your idiot claims. Do it with google.

I tried: "credit suisse SEC VA Linux", what string can you make up?

Also, the Frontline special "Dot Con" discusses the scam VA Linux got led into.

Watch it. It was all a game.

http://www.pbs.org/wgbh/pages/frontline/shows/do tc on/

Re:Losing $15 billion

[Animats]

Actually, I do follow that sort of thing. Also, here's the correct PBS link

Re:Losing $15 billion

[ainsoph]

cool. glad you do. was just pointing it out if in case you didnt know.

I meet tons of people who were rockin due to the boom who dont have the insight to check out what went wrong, they jus think the damn tech thing was a scam.

Thanks for the downside link.

Re:You mean depreciation

[evilned]

I should have been more clear on what I meant by my geforce comment. I should have said that a brand new geforce 3 was $400 last year, and can be had new for much less now. The cost of the card used would be depreciation. As for deflation vs. devaluation because of increasing technology, thats exactly my point. The net effect is the same on either case. Of course it probably isnt as big of a benefit for microsoft as the tax breaks.

I wonder what I would do with $40 billion?

[TrevorB]

I wonder what I would do with $40 billion?

Make 2000 trips into space on a Soyuz rocket?

That could get a good chunk of the Redmond campus off the planet...

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Re:bankrupt the world

[kalidasa]

1) liberal that believes in a finite amount of money

Don't be stupid, liberals do not believe in a "finite" amount of money. They believe that wealth is created through labor, unlike conservatives, who believe that wealth is created through interest, forgetting that wealth created through interest is destroyed through inflation.

For someone who made a crack about a /. reader not having taken any economics classes, you obviously don't know your macro economics very well either.

Re:$40 Billion =

[wedg]

Four US stealth fighters, or 40 stealth bombers.


Uhm... No? The F117-A cost about $275mil each to produce. F22s are more expensive (not sure precisely). The "stealth bomber", I assume you're talking about is the B2-B Flying Wing, which is approx. $2.2 bil each (actually a bit less now, I think I heard as low as $1.2b). But niether are particularly effective by themselves, and niether make up a large chunk of our airforce.

However, if Bill wanted to threaten someone, he could contract F15s at about $175mil apiece, F14s at $200mil apiece, and other various 70s planes. If you put each F15 at about $250mil, including ground support, armament, etc, then they could buy 160 of them. I don't think we even have that many flying in our Airforce right now.

Start worrying when Bill starts to invest in hydrogen bomb parts, or buys Los Alamos labs.

Re:bankrupt the world

[letxa2000]

Don't be stupid, liberals do not believe in a "finite" amount of money

Perhaps not all, but many do. They believe that if the "rich got richer" that means the "poor got poorer." When they wack off cliche lines like that they are implicitly saying that they believe in a finite amount of wealth.

They believe that wealth is created through labor, unlike conservatives, who believe that wealth is created through interest, forgetting that wealth created through interest is destroyed through inflation.

Uhm, I know NO-ONE (Democrat nor Republican) who believes that wealth is created by interest. Interest is a by-product. Wealth is created by the banking system that takes Microsoft's money and loans it to thousands of people which allows them to further their economic goals, purchasing cars and houses that would otherwise have been unaccessible to them.

The banking system permits wealth creation, not interest. Of course, everyone has to WORK to create wealth, but banks allow the effect of that work to be multiplied.

For someone who made a crack about a /. reader not having taken any economics classes, you obviously don't know your macro economics very well either.

I'm fine on macro economics. You either misunderstood my post or are yourself a little bit lacking in study. I'll give you the benefit of the doubt and assume you read my original post too quickly.

The real problem

[dbrutus]

Anybody with any sense is going to shy away from going up against MS in any significant sense. If you have a world beating idea in the OS arena, the best you can do as a new entrant is to be bought up by the beast from Redmond. Your chief developers? They can be identified by PIs and their salaries quadrupled by MS. Publicly traded? You can't fight 40B in a hostile takeover. Privately owned? Can you afford to go up against Microsoft legal if they simply steal your ideas?

Big war chests deter competitors, like large militaries deter invasion.

This is Microsoft's version of peace through strength. I don't believe that it's a strategy that is consistent with behaving within the anti-trust laws.

Re:bankrupt the world

[Courageous]

MS has to have their 40b deposited in banks. Those banks don't just pay interest for fun; they take that 40b and loan it to others...

You're more correct than you say. They actually loan out the money many times. The very act of MS depositing $40B in the bank probably actually creates (and I do mean creates, yes) an additional $160B over the original $40B.

C//

Re:Windows forever

[HydroCarbon10]

Even if it were free, it still wouldn't be UNIX.

Did you just say, "Over the long term"?

[drew_kime]

Well, there's your problem. Since when has the stock market been played for the long term?

Re:Did you just say, "Over the long term"?

[Royster]

The fundamental economic purpose of the stock market is to provide a liquid market for equity shares. In a liquid market, there are sufficient buyers so that someone can liquidate their position to meet immediate cash needs. No individual investor is a long term investor forever.

The market also provides speculative opportunities. Buying a stock that has even a small chance of eventually holding a significant market share in a significant economic niche

But, to the extent that speculative motives outstrip the fundamental purpose of the market, the market gets subverted from its real economic function as a source of equity financing. These periods of speculation inevitably end in a bust which intereferes with the orderly role of a capital market.

If all investors are short term investors, then the market has already been subverted from its only reason for existing.

Beowulf cluster

[tapiwa]

Imagine a beowulf cluster of these

build robots to do all the work on the planet!

[HanzoSan]

Then you could feed the hungry.

Capitalism is not about equal distribution of wealth.
Freedom has nothing to do with wealth.

Its about control of resources, using capitalism, the rich control the resources even if the resources are unlimited.

You could use 40 billion to build robots, nano technology and GM foods which would make feeding the hungry an easy task.

Robots would grow GM foods, then the GM foods would be gathered up and distributed.

Distribution would cost alot of money but 40 billion is enough to do it.

but we dont have FAIR capitalism so whys it matter

[HanzoSan]

Right now our capitalism rewards big companies instead of small ones.

Many small companies are better for the economy, than a few big ones who consume all the resources and dont give back.

Small companies have to give back through competition because if they dont another small company is right there to take their place.

Big companies however are bad for capitalism. Monopolies especially.

The problem is capitalism.

[HanzoSan]

Food has a price.

Thats what happens when you have alittle too much capitalism.

Capitalism and alot of people starve, or Socialism and no one ever starves.

Food has a price, and when the US dominates capitalism with big busineses (I think the size of companies should be limited as well as the scope, mergers should be illegal as well)

little companies cant compete with mcdonalds. companies in china cant create their own microsoft like company to make an OS.

You see?

Re:The problem is capitalism.

[shyster]

ever hear of Red Flag Linux??

No. Neither has my Grandmother (I called and asked her). But she has heard of MS Windows XP.

Re:The problem is capitalism.

[Squeeze Truck]

Capitalism and alot of people starve, or Socialism and no one ever starves.

Indeed?

Ever hear of the Great Leap Forward?

(link chosen at random)

Under socialism, you either all eat together, or all starve together.

Communism = no one ever starves

[HanzoSan]

The good thing about Communism and Socialism, success is shared.

If theres a bill gates in your country, everyone lives better not just bill gates.

If we were communism, or socialism, we'd all be living better for this reason

People would still need us to buy their software from, their computers from, windows would still sell.

Instead of 60 billion being in the hands of bill gates and 40 billion in the hands of microsoft.

This money would be more evenly distributed.

Capitalism is just not going to be useful after we get to a point technology wise

Tell me what good capitalism is, when theres no jobs left? Once we have robots and nano technology, what labor can the average person do?

Prepare for collapse unless everyone wakes up tomorrow as a scientist

Re:Communism = no one ever starves

[jafac]

I don't know, as much as I hate Microsoft's business practices, I think I owe a great deal to the success of Microsoft.

The dominance of a single, cheap OS running on commodity hardware greatly uncomplicated and accelerated the rollout of technology to the masses of middle class Americans with surplus capital.

I benefitted from this. I've had a stable job for 10 years, I got health benefits, stock options, training. This was not the norm in the early 80's. If it weren't for the tech boom, I might very well otherwise be a 10 year burger-flipping veteran. Through no intelligence or skill posessing shortcoming of my own, mind you. Simply through a lack of opportunities.

Microsoft has created opportunities for tens of millions. But on the other hand, it has also destroyed opportunities for many as well. The demand for computers created and destroyed companies like Word Perfect.

How would this all have played out without Microsoft? I have no idea. Maybe we'd all be complaining about IBM right now. Maybe OS/2 would be the dominant OS. But it would cost $1000. Probably Linux would not have ever been made - and we might all be BSD freaks instead. Who knows? Impossible to speculate.

Re:Communism = no one ever starves

[Tackhead]

> "Communism = no one ever starves"

There are approximately 5 million dead of famine during Russian Civil War (1917-1922), plus 30-50 million dead (excluding WW2 casualties) in Stalin's Russia, and 30 million dead of famine in Mao's "Great Leap Forward" who might beg to differ with you.

(Actually, Stalin's count may have "only" been another 5-10 million from famine. The other 40 million were executed in purges or worked to death in labor camps. So I suppose you were right - not as many people starved, per se, under Stalin.)

I'll take my changes with Capitalism, if you don't mind.

Re:Communism = no one ever starves

[Squeeze Truck]

HanzoSan, you remind me of myself when I was 17.

Re:Communism = no one ever starves

[HanzoSan]

Im only 21 so im not much older

Re:illegal tax shelter

[Tazzy531]

I don't think not paying dividends is an illegal action. It is their choice as their business practice not to pay dividends. And this is because it is more economical and financially better for the company not to. In addition, the amount that they would have paid out could be put back into R&D and be reinvested. There is no law that requires a company to pay dividends. They are not lying to their stockholders; the stockholders are aware of their business practice.

Think about it this way. When _you_ purchase something online as oppose to going to the local store to buy it, you are not paying state sales taxes on that. (You should be filing to pay federal taxes, but most people don't) In other words, you are avoiding the sales tax. Should all online purchases be banned? Are online purchases illegal because they bypass the sales tax?

Another example. You live near the border between two states. The next state over has a lower tax on gasoline. Would it be illegal to fill your gas in the other state?

Both of these examples are equivalent to the actions of MS. We are living in a capitalistic society. In that effect, the society rewards people that go out and make intelligent choices. Business choices/decisions are included.

Re:bankrupt the world

[swb]

Perhaps not all, but many do. They believe that if the "rich got richer" that means the "poor got poorer." When they wack off cliche lines like that they are implicitly saying that they believe in a finite amount of wealth.

Wealth is finite in terms of present value -- how much am I wealth do I have at some fixed point. Obviously this has to be a finite number -- nobody is worth infinity.

The statement that the rich are getting richer and the poor are getting poorer is about the trends in wealth distribution towards fewer, wealthier people and more, poorer people. Attempting to dispute this by claiming that "liberals believe in a finite amount of wealth" is disengenious at best and just insulting at worst.

Of course, everyone has to WORK to create wealth

You're not possibly agreeing with the labor theory of value are you? This is what the previous poster was alluding to -- *labor* produces wealth. Someone who can loan you money to more efficiently utilize your labor (ie, buy a truck instead of walking to deliver your product).

Both are necessary, although there is far more emphasis and reward through finance-based wealth generation than labor-based generation, except in the motion picture and recording industries.

Re:$8 per share

[dbrutus]

The problem isn't the $40B, it's the $1B /month added to it that risks turning MSFT into a mutual fund. A dividend of $0.50 a quarter would be quite nice and they would *still* accumulate cash.

If nothing is done, approximately 7 years from now, MS will be generating an equivalent amount of cash from financial instruments and from operations. If Mac OS X and/or Linux takes off, it could be sooner. Shareholders bought MSFT, the technology stock, not MSFT the financial company.

You'd like to think so...

[TopShelf]

One big factor as to why companies don't pay dividends has to do with income tax. Wealthy stockholders who have substantial non-401K or IRA accounts don't like receiving dividends, because they have to pay income tax immediately on them, as opposed to selling an asset at a higher price later on and paying the lower capital gains tax.

Yes, it's stupid in the long run, but in the short term, it's basically a fool's market - you'd be surprised just how many companies don't pay dividends now, and don't plan no paying them in the forseeable future (read: most tech stocks).

Capitalist countries lie too

[HanzoSan]

And the truth about the USA is, it wasnt built by capitalism, it was built by slavery

COMMUNISM built the USA!!! Yet capitalism takes all the credit.

Its kinda funny how the USA is built off of Communism, yet everyone expects to be able to build a country from capitalism when its never been done.

NEVER. Every capitalist country was built from slavery, including england and australia.

Re:Capitalist countries lie too

[HanzoSan]

Whats funny is, we dont want to allow china and russia to do what we did to build their countries.

Re:Capitalist countries lie too

[Reality Master 101]

And the truth about the USA is, it wasnt built by capitalism, it was built by slavery

Uh, no. In fact, Slavery held back the American economy. Look at any economic analysis of slavery: SLAVERY IS NOT ECONOMICAL. When you factor in all the costs of slavery, it's much cheaper to pay someone a wage and let them take care of themselves.

Re:Capitalist countries lie too

[Reality Master 101]

I personally would be happy to pay reparations to former slaves.

Oh wait, they're all dead.

Oh, you mean you want to give out money to people who are totally unaffected by slavery? Sorry, that's a different matter.

Re:Capitalist countries lie too

[HanzoSan]

Slavery didnt create racial tensions, its people like the KKK who harass and kill minorities, its the nazis, its racist venture capitalists, and banks who dont give loans to minorities.

Its racism that causes racial tension, not slavery. Slavery is natural, racism is not. You see, every group of people has done slavery, its when you enslave a group of people and then taunt that group for hundreds of years afterwards, along with not giving them fair treatment (Even now) that causes racial tensions.

When US is fair for all races, and theres no more groups like the KKK and others who keep creating more tension stop provoking minorities and harrassing them, thats when tension goes down.

China has done slavery against other Chinese, its not a racial issue, its normal. Slavery is normal, europeans enslaved the people who founded the USA, they left europe and went to the new world, some of them were prisoners. The Irish had to deal with slavery, so did the italians.

You are right about sweat shops, capitalism is the cause of sweat shops, well not capitalism, but globalism.

I'm very anti globalism, not anti capitalism, i feel if capitalism is fair, its fine, but globalism allows us to have an unfair advantage, because we are so established with our capitalism and our companies, no one can compete with us because we have the best economy right now and will have the b est economy in the global economy as well, which means globalism doesnt help the world, or us,

We'll lose our jobs to sweatshop slave laborers, so NIKE can save money and overcharge us to buy their sneakers.

China is going through a phase, you have to understand America went through this phase too, we shouldnt harrass China, we should leave them alone, let China make their mistakes, and let them learn on their own.

You cannot teach China about freedom when they arent ready for it. When the USA was founded, the USA wasnt ready for freedom, maybe the founders were but the people werent! Thats why there was slavery, thats why witches were burned, and people were killed.

Right now, its the same situation, theres alot of republicans, anarchists, and absolute capitalists who want the government to be made smaller and eventually to be out of our lives.

While some of us are ready for this, the majority of the world is not, the crime rates are too high, we have terrorism to worry about, we dont have a solution for education besides public education, we dont have a solution for poverty.

Until we can solve the problems that having no government would create, we cannot downsize government with tax cuts.

Without government, everyone will have to go to private schools, so how will you set up a system so each student can go to private school? should you make it like the health insurence industry and like a persons job take money out of their check to pay for it? How are you going to make sure every child gets a fair education?

Its almost like private health care, sure successful people will do fine, but not everyone can be successful, what will the working class do?

I'm all for getting rid of government, when society is READY for it, but society isnt even CLOSE to being ready. Crime rates are still high, theres still homeless people, highschool drop outs (because the school system just isnt working), and people just arent making enough money on average, to pay for all they would have to pay for, without taxes.

So whats the solution? Usually people who live in the middle of no where, where the standard of living is lower but things are much cheaper, are the ones claiming they want no government, they usually dont have any crime because they live in the middle of no where, their schools arent as good but they are usually farmers and can live off the land so that doesnt matter, for security they have their shotgun.

But what about everyone else?

Perhaps a solution, no government for certain states and areas. No tax zones for certain areas, and so on.

This way people who want to pay taxes and who NEED government support can have it, yet people who are ready for it, can live without government in their life.

I just dont see this country surviving at the moment as a whole, if you remove government from everywhere. People in the city wouldnt know how to survive without government.

Re:Capitalist countries lie too

[shyster]

personally would be happy to pay reparations to former slaves. Oh wait, they're all dead. Oh, you mean you want to give out money to people who are totally unaffected by slavery? Sorry, that's a different matter.

Totally unaffected? How's this for an argument:
(1) Capital wealth and property allows for the easier creation of more wealth.
(2) Whites in slave times were allowed to obtain and maintain capital wealth and property. In some cases, whites received property just by asking for it. Other times, they paid a small pittance for it. Blacks were not able to accumulate wealth, nor own property, nor vote in elections to bring about a change in status.
(3) Whites who obtained wealth and/or property(whether truly wealthy, or perhaps only had a shack to their name) were able to pass that wealth to heirs. Blacks had no wealth, and could not pass any wealth to their heirs even if they had had any.
(4) Whites were able to "do better than their parents", and build upon previous wealth. Blacks were forced to start over upon each new generation.
(5) Conclusion: The field did not become remotely level until 1860. In 1860, blacks were starting completely from scratch, while whites had a couple hundred year's headstart and had claimed most, if not all, of the available and desirable land.

Only the Native Americans (who actually had wealth taken from them) got a bigger shaft than the blacks (who weren't allowed to accumulate wealth) in this country's founding.

Re:Capitalist countries lie too

[Squeeze Truck]

Not to come off as a proponent of slavery, but it is indeed economical.

For an object lesson, read up on the history of the Republic of Texas.

IIRC, Steve Austin was against slavery, but decided to make it legal in Texas since (as he put it) the choice was between slaveowning prosperity or "log cabin poverty."

Re:Capitalist countries lie too

[Squeeze Truck]

3) The new form of slavery (if there is one) are sweat-shops... If you want to do your part, inform yourself and do not buy products that are manufactured in them (Nike, etc)

*sigh* If only this particular form of slavery was new.
Sweatshop (ie, "wage") slavery has been around since the dawn of the industrial revolutiuon. I have even read arguments for American-style slavery that say that black slaves in the South were better treated than wage-slaves in the North at the time of the Civil War.

The argument is that since black slaves were owned, the slaveowner had a good deal of incentive to take good care of them, feed them well, make sure they were well-rested and strong, etc. so he could get work out of them year after year.
Wage slaves are only rented, used, and then discarded, so the Yankee slaveowners tended to work them to the point of exhaustion. Since the wage slaves are nominally "free", he had no responsibility to them whatsoever.

We have unlimited food.

[HanzoSan]

Lack of food isnt why we dont feed them. Its not that we dont have the food to feed people on earth forever,

And with GM technologies, if we wanted to, we could grow giant sized veggies and use robots to do the farming work, and ship that over to all the third world countries.

The problem is, no one wants to feed the third world countries, it would require money to build the robots and create GM foods.

Re:We have unlimited food.

[Squeeze Truck]

Are there sharks with frikkin laser beams in your plan somewhere?

Re:that much?

[Tazzy531]

The problem is.. the more money you have and the bigger your organization becomes, the less of a control you have over the entire place. It's a fact of business.

If you have 40 billion dollars, hiring 10 college graduates at 32K/year is pocket change. They try to recruit the best of the best, but when it comes down to it, you need a lot of people filling in in between.

An analogy might be this. You have $10K in your pocket. You want to buy animal crackers that cost 30/$1. Do you go through the entire the entire collection and make sure every single one does not have defects? No. You scoop a bunch out hoping that you do have more no defective ones than defects.

Having a lot of money doesn't make it easier to manage it.

Re:bankrupt the world

[overunderunderdone]

The statement that the rich are getting richer and the poor are getting poorer is about the trends in wealth distribution towards fewer, wealthier people and more, poorer people.

To be fair to the original poster. While a reasonably sophisticated person understands this there are MANY more unsophisticated people that really do believe that in order for one person to have more money someone else must have less.

Hotly contested: Money=Free Speech

[schmaltz]

Currently running in favor of corporations. The donating of corporate cash to political committees or spending on issue ads, is currently considered protected free speech by the courts. This of course requires the courts to consider corporations entities with the legal standing of people, a legal fiction granted by the Supremes in an 1886 creative reinterpretation of the 14th amendment (written to protect freed slaves) that gave corporations most rights of humans under the law and constitution.

Heh, makes me wonder what sort of citizenship laws congresscritters will pass for silicon-based intelligent entities (that will probably, initially, be owned by corporations.)

Interests

[Tazzy531]

The fact that they have 40 billion isn't the part that is impressive, but rather the amount of money they earn from interests alone.

At a rate of 4.5% (a little below average savings account rate), the will earn 1,800,000,000/year (1.8 billion/year) that is 4,931,506.85/day (4 Million/day) that is 205,479.45/hour that is $3,424.66/min. Think about that. In the time that it took me to type all this, they just made another $7K. Just for doing nothing.

When you are able to do that, you can spend as much money into anything regardless of whether it will succeed or fail. Or they can pay all there lawyers and not even see a dent in their stockpile.

A down payment

[IPFreely]

I wonder what I would do with $40 billion?

Put a down payment on the US national debt.

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[account_deleted]

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Re:More philanthropic than whom?

[Dirk Pitt]

Does it really matter to you whether the money is given paycheck to paycheck, or a lump sum after death? I think I can defend the latter pretty well.

Here's an old link I found about Gates' philanthropic tendencies: In 1999, the Bill and Melinda Gates Foundation awarded more than $2 billion in grants. That's generous amongst the rich or average or poor.

He's intimated that he will give more than 90% of his wealth away before he dies, as do many of the superrich. So they don't attach as much wages as many other 'average' earners do--which is more effective?

Most of these guys invested in the economy, providing capital through stock purchases and cash holdings that allowed new companies to thrive, houses to be built, etc. And most, yes most, of these ultra-rich give much (most?) of their dollars away after they die. I'd rather see these "10% tithers" save their money, and rev up a large fortune.

Unfortunately, I can't find good statistics on the financial donations. I suspect you won't either--private donations are usually cash-type, non-entity sponsored form. In other words, if the UW gets a $1000 donation from John Smith, they don't and can't really do an analysis on what Mr. Smith's income is. There's some data derived from write-offs on federal tax forms, and this seems to show that the top 5% of the wage-earners represent most of the increases in charitable donations from year to year (a quarter of the increase in institutional contributions was from Bill Gates in 1999).

And don't forget that 91% of the taxes are paid by just the top 5% of the taxpayers. I know that our tax duties aren't philanthropic, but dammit, people want to act like the rich do _nothing_ but capitalize on those beneath them, and it just ain't true.

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[account_deleted]

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But software companies can "print" money.

[MongooseCN]

What's the best way for a software company to boost their liquid assets? Start pressing out more cd's. Each cd of, let's say, Microsoft Small Business server costs around 1800$. The actual cd costs about 5 cents. So if MS wanted to increase their liquid assets they just print out a couple 100,000 of these cd's and tack it onto their total worth. Then their investors will stay happy knowing the company their money is in is worth a zillion dollars.

Stock buyback

[naoursla]

MS could buy back all of Mr. Gate's stock. Talk about an exit plan.

Corporations != Spending = Recession

[HanzoSan]

Microsoft and big companies like it who let 30-40 billion dollars sit in the bank, create recessions.

You know, Microsoft and others could be creating recessions on purpose to make the market hostile for the competition, did you ever think of that?

Just establish your monopolies, then sit on top, try to suck in as much money from the economy that you can, then hold it in a bank, when a recession begins to start and companies begin dropping like flies, you continue sucking more money into your bank.

Reccession happen not because companies dont pay taxes, its because companies arent spending.

Tax cuts wont make them spend, thats as pathetic as trying to give a dollar to everyone on earth to save the economy of the world.

Bush used it to get in office, thats it.

The solution to the recession isnt to do tax cut after tax cut, its to literally FORCE microsoft to spend its money, and not just Microsoft but AOL and all of these other companies which have monopolies or not enough competitition.

Economies do well during the most competitive periods, once monopolies establish themselves, its all over.

We need to outlaw monopolies, and control the size of companies, we should also make it illegal for companies to save more than a certain amount of money.

Microsoft should not be allowed to have 40 billion dollars sitting in the bank, that DOES have a HUGE impact on our economy, 40 billion dollars is biggger than the movie industry, the gaming industry, the airline industry combined.

Think about the effects this has on our economy, think about how many jobs 40 billion dollars would create, it would create hundreds of thousands if not millions of jobs!!!

Now think about all the other companies who have too much money sitting in the bank and all the jobs their money would create if they were FORCED to spend it.

Re:Corporations != Spending = Recession

[HanzoSan]

Yes but 40 billion combined with all the unused money of all companies.

It adds up.

Re:Corporations != Spending = Recession

[shyster]

Microsoft should not be allowed to have 40 billion dollars sitting in the bank, that DOES have a HUGE impact on our economy, 40 billion dollars is biggger than the movie industry, the gaming industry, the airline industry combined.

Think about the effects this has on our economy, think about how many jobs 40 billion dollars would create, it would create hundreds of thousands if not millions of jobs!!!

Pssst. MS's money isn't sitting in a bank. If you had read the next article on Microsoft's money managing, you would have seen that it's invested in "short term US Treasuries...commercial paper, municipal bonds and mortgage-backed securities...[and] others".

Even the money that is in a bank will be used by the bank to fund their own investments (why do you think they want your money so badly?). IIRC, banks are required to keep 10% or 12% of the deposited amount on hand, so that amount, is, in effect removed from the economy.

The great bulk of MS's $40 billion, however, is reinvested.

Re:Corporations != Spending = Recession

[Squeeze Truck]

Here and I thought that savings was a good thing for the economy.

I assume MS keeps its $40 million cash in a bank (if it is indeed as liquid as the article says). Keeping money in banks makes it avalable to be borrowed by other people.
People borrowing money keeps the money in circulation, and therefore (by your reasoning) would stimulate growth.

Now, if MS is keeping its cash in a mayonaise jar buried in the back yard, that would be another matter.

The argument that "capitalists" are nothing but a drain on the economy because their function is to amass wealth, and therefore make it unavailable as a medium of exchange is classic Marx (chapter XIV of Das Kapital, IIRC).

I think history proves Marx wrong on this point. Without the large sums of cash created by corporations (like MS) and deposited in banks, there would not be enough money available for large-scale industries like railroads, or steamships, or telephone networks. That is, unless you have a huge centralized state filling the role of both the corporations and the banks, but wouldn't that be an even bigger drain on the ammount of available currency?

Re:Corporations != Spending = Recession

[HanzoSan]

but not in a way that CREATES jobs, its invested in a way to make other CEOs richer

Who the hell is going to "borrow" money for a living?

Maybe someone whos rich can borrow millions of dollars but the average person cant afford to borrow any money at all.

Second the places this money is reinvested in, is not places which matter to the working class.

The working class benifits from more jobs, not from invested money.

Re:Corporations != Spending = Recession

[shyster]

but not in a way that CREATES jobs, its invested in a way to make other CEOs richer.
Who the hell is going to "borrow" money for a living?

Actually, a great many people borrow money for living. Look at credit card debt, auto loans, mortgages, etc.

Maybe someone whos rich can borrow millions of dollars but the average person cant afford to borrow any money at all.

You don't have to borrow millions. Milions borrowing a dollar will have the same effect.

Second the places this money is reinvested in, is not places which matter to the working class.

Large corporations borrowing money to expand business results in more jobs. Small business owners borrow money as well. And of course, the previously mentioned auto loans, mortgages, etc.

The working class benifits from more jobs, not from invested money.

Is this a troll? Invested money creates jobs. Jobs create extra money, which is reinvested. Whihc creates jobs...round and round we go.

Re:Corporations != Spending = Recession

[HanzoSan]

you act as if this is a perfect machine
as if people cant manipulate it to their own benifit.

Wake up.

Re:MS Money

[letxa2000]

In fact, the only thing that really seems to get "created", is debt. I'm actually not trolling, I've just never understood how it is that we create wealth as opposed to simply redistributing it.

Look at it this way. If Microsoft takes 40b and puts it underneath Bill's pillow they've effectively taken that money out of circulation. The money isn't doing anything. Your bank doesn't have any money to loan you so you can't buy that house and car.

When they put it in a bank the bank uses that money to loan to people; I think they're permitted to loan 70% of deposits, but someone correct me if I'm wrong. But let's say it's 70%. So of that 40b they're allowed to loan 28b. Assuming your house and car together cost $250k, banks can loan that money out so that 112,000 people can buy a new house and buy a new car. And they do, because that's our culture.

So... You and 111,999 people take out loans and buy a new house and a new car. For the sake of argument let's say it takes 5 people to build a house -- those 112,000 houses allow 560,000 people to be employed for the time it takes to build those houses. Likewise, some number of people are employed to build, distribute, and sell the 112,000 cars.

So... The fact that Microsoft has deposited 40b in a bank allows 112,000 to buy houses (that's your benefit), allows 560,000-600,000 to have jobs building houses and cars (that's their benefit), allows the bank to make a profit and pay their employees (that's the bank's benefit), and allows Microsoft to earn (I heard) a billion a month in interest (that's Microsoft's benefit).

Microsoft still technically has 40 billion dollars to play with. But that 40 billion has created wealth in the banking, housing, automotive, and shipping industries. And you got a house and a car!

If banks didn't have money to loan you, the majority of those 112,000 people probably wouldn't be able to buy a car and almost no-one would be able to afford a house. So the automotive workers and house builders would most likely be out of a job...

That's how the whole "wealth creation through the banking system" works.

Re:No person pays taxes

[Loundry]

A person is a legal entity designed to make money.

What gives you the power to decide what persons are "designed" for?

Your premise is flawed.

Ok, so which is it? Do "corporations" pay taxes, or do "people"? Well, the answer is both.

Incorrect. Individuals pay taxes. Corporations collect taxes on behalf of the government. The money that government gets has to come from somewhere. Whether or not one individual is trying to get more money to pay their higher taxes does not change the fact that, ultimately, money goes from individuals to government.

Since corporations are legally a "person" and can own property, they need the protection of the national defense, and they use the nation's infrastructure, etc. there is no reason they shouldn't pay taxes.

What's the point? They don't pay taxes. They collect taxes.

It could be argued that it would be fairer if we taxed both people and corporations exactly the same and instead of taxing only some transactions, we tax all transactions the same.

Since when was taxation about making things "fair"? It has much more to do with money and power than it has to do with any humanitarian goal. To think otherwise is naive.

I don't wonder...

[Arandir]

I wonder what I would do with $40 billion?

Duh! Give it to the stockholders! It's theirs, not yours.

Re:bankrupt the world

[letxa2000]

You claimed that a (what is the word? cesspool?) of liquid assets of that size feeds into wealth creation through capitalistic use of the banking system.

Not withstanding your complaints about corruption, yes, those assets do allow for wealth creation through capitalistic use of the banking system.

I won't disagree that that much money is, perhaps, a temptation or even SOURCE of abuse. Money, like anything, can be misused.

But the fact remains that the overwhelming majority of that money that's just "sitting in a cesspool" allows banks to loan money to people in the BANKS quest for more money. They can't pay MS a billion a month in interest if they just misuse the funds.

So while I appreciate your concern about corruption and totally agree that it should be dealt with, and many times is not properly dealt with, it does not invalidate the fundamental fact that large amounts of cash DO create wealth for many totally unconnected parties in the economy.

let me rephrase

[Bastian]

The model that I would suggest is not that book value and net income determine stock price and sometimes popularity determines stock price, but that book value and net income determine popularity, which determines stock price. It just seems like a far more parsimonious model. . I guess I failed to make that point clear in my previous post.

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[account_deleted]

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Re:bankrupt the world

[letxa2000]

Wealth is finite in terms of present value -- how much am I wealth do I have at some fixed point. Obviously this has to be a finite number -- nobody is worth infinity.

On that we agree. My statement is not that there is an infinite amount of CURRENT wealth, but that there is an infinite amount of potential FUTURE wealth. If I make a billion dollars today that does NOT need to mean that the rest of the world lost a billion.

The statement that the rich are getting richer and the poor are getting poorer is about the trends in wealth distribution towards fewer, wealthier people and more, poorer people. Attempting to dispute this by claiming that "liberals believe in a finite amount of wealth" is disengenious at best and just insulting at worst.

If you'll re-read one of my previous posts, I said that those that say that "the rich got richer" SO "the poor got poorer" is an indication that they believe in a finite amount of wealth. If they believe that as a RESULT of the rich getting ticher the poor got poorer then, yes, they believe in a finite amount of wealth.

I will agree that those that observe that "the rich got richer and the poor got poorer" are not necessarily saying that there is a finite amount of wealth. Actually, the people saying this are just wrong at best or insulting at worst, to use your words, since looking at government income per population segment since 1970 I have yet to find a single year where the rich got richer AND the poor got poorer. I've found years that the rich got richer faster than the poor got richer, but I have yet to find a year where the poor got poorer as the rich got richer...

But, that's beside the point. The point is that the people that use that cliche don't automatically believe in finite wealth. But those that say "the richer got richer so the poor got poorer" DO believe in finite wealth.

You're not possibly agreeing with the labor theory of value are you?

Are you suggesting that I ever said we just all sit on our butts and somehow let banks create income for us? Never said that.

*labor* produces wealth. Someone who can loan you money to more efficiently utilize your labor (ie, buy a truck instead of walking to deliver your product).

Labor produces wealth, banks multiply it. I might be able to earn $100 today. But if I deposit that in the bank the bank will be able to use it in ways that may be able to create $400 of wealth for the economy as a whole. THAT'S what I'm saying.

Both are necessary, although there is far more emphasis and reward through finance-based wealth generation than labor-based generation

I agree, both are necessary. Banks can't function if no-one works and no-one earns money. But, given the reality that people need to work to earn a living, banks actually create more wealth than a labroer. I.e., my example above where my $100 turns into $400. I generated $100 of wealth, and the bank generated $300 of wealth with that. So, yes, there is more emphasis on the financial side because it does produce more wealth than a laborer. Of course, if all the laborers stop laboring then we're toast. But that's not reality.

Re:bankrupt the world

[letxa2000]

When did you take the last econ class? Don't you realize that if they pay out dividends there will be still the same amount of money in the system, i.e., the same amount of money available for loans. If they payout dividends, the money just goes from one account to another. Nothing changes for the BANK! or the money available for loans.

Sure it does. If you have 40 billion in the bank, that's a lot of money for the bank to loan out. However, if you distribute that money to millions of stockholders it is entirely possible not all of them will deposit it in their banks.

That said, I was never saying that it's a good thing Microsoft doesn't pay dividends. With that much money I'd be pissed off if I was an investor and wasn't getting dividends. But the fact that they have 40 billion in the bank isn't harming the economy as a whole. It might even be helping it if the investors spend, rather than save, their dividends.

Not as much as I would have thought.

[Zapdos]

Just about every Major Insurance Company in the US in order to operate, has at least that amount of cash on hand.

Re:FORCE

[HanzoSan]

How much money is too much? They need enough money to run their company. A years supply of money is enough.

If they fail to make money for a whole year they should go out of business or downsize.

Companies should NOT be allowed to "save" money. The economy does not benifit from corporate saving.

CHP 2.5

[poot_rootbeer]

Catastrophe Hedging Program 2.5?

If a catastrophe is ever to strike them, they better hope that now is not the time.

Everyone knows that Microsoft applications are completely unusable prior to version 3.0...

Lack of information?

[apsmith]

I believe the fundamental problem here is not that consumers are stupid, or that the government is making bad choices, but that they simply have not had enough information to make intelligent choices between competing products. Big corporations go out of their way to hide less-than-positive facts about themselves, and spend giga-bucks on giving themselves a good image in the public mind (advertising + influence on the media) so that alternatives like the local diner, the local independent gas station, the "unknown" music band, and of course OSS software, are never considered seriously by the general public.

But this is the information age, right? Shouldn't the internet provide us mechanisms to get the information we need to make intelligent choices about such things? I don't think we are inevitably doomed to be dominated by a small number of very powerful corporations, but we have to find models (Napster and company? Ebay?) for a new way of finding more options than the familiar names we are bombarded with through the media.

Re:bankrupt the world

[letxa2000]

So the more money you owe, the wealthier you are? Paying an interest premium to borrow someone else's money to buy depreciating (most) cars does not equate to "wealth creation" for the car buyer.

Wealth creation doesn't mean the borrower is richer. The borrower obtains immediate graitifaction by obtaining a product that he either would not be able to obtain, or to obtain for 5 or 30 years. Cars depreciated, real estate usually appreciates.

In any case, the "wealth creation" happens at macroeconomic level. As I mentioned in another post in this thread you have to consider the immediate creation (or maintenance) of jobs building the cars and houses. The 40b allowed the borrower to purchase items that they would not have otherwise been able to purchase, and those purchases allowed many thousands of people to be gainfully employed.

THAT'S the wealth creation... not whether or not someone is in debt or not.

I'm actually grateful for that US$40 billion

[MtViewGuy]

I think the reason why Microsoft has US$40 billion on hand is the fact that it gives the company a huge financial cushion to weather financial downtowns and more importantly give time for Microsoft to properly develop its products.

For example, consider the Xbox gaming console. Microsoft can afford to lose money on this system because it has the cash reserves to nuture the system to success. This is where companies like Sony and Nintendo have potential major downsides--one misstep and either company will end up hurting financially BIG TIME. In fact, that's what did in Sega as a console manufacturer.

Also, Microsoft is able to afford to do serious research into computer interface design; after all, the polished feel of modern Microsoft products for the most part is due to the many thousands of hours spent in Usability Lab to develop the look and feel of the product. And you wonder why both Gnome and KDE borrows a lot of interface conventions from Windows....

While other high-tech companies have fallen flat on their faces since the spring of 2000, Microsoft continues to chug along well.

Re:You forgot about Gizmo Duck

[dimator]

You are correct, sir.

Re:bankrupt the world

[swb]

I generated $100 of wealth, and the bank generated $300 of wealth with that. So, yes, there is more emphasis on the financial side because it does produce more wealth than a laborer.

No, no, no -- the bank never generated $300 worth of wealth. The bank at best enabled someone to labor more efficiently by acting as a central access point for capital by those who have it and those who want it.

If banking was great at producing wealth the soviets should have done well at central planning.

you are confusing currency and wealth

[Malor]

Banks don't create wealth. Banks create currency.

The classic example of wealth is a man stranded on an island. He must attend to his basic needs (hunting/foraging mostly) for most of his day, but can set aside a little spare food. In this most primitive scenario, the stored food (we'll pretend for the moment that it won't rot) is his wealth.

He can consume his wealth unproductively (by taking a day off) or by saving up food and then using the time he would be hunting to, say, make a better spear. If he invests his spare time into productivity, he can hunt faster, and generate more 'wealth'. Once he has stored up enough food to, say, not hunt for a month... maybe he can build a farm and increase his productivity again. Note that currency is not involved here in any way.

In a more complex example, you have a barter system, where each citizen specializes into something. People working exclusively on one job become better at it than generalists. This allows the society to create more goods per hour worked (productivity again). People can trade their goods for other goods. In very general terms, the cobbler can work a week on shoes, and then sell those shoes for enough food to eat for two weeks. The farmer who buys the shoes can focus on farming and can, in a week, generate enough food to feed himself and, say, three other people. He can trade his food for the goods they produce. The overall standard of living rises sharply.

The next development is some sort of currency. In the Austrian school of economics (which seems much more intelligent than other sorts I've looked into), money is simply the most marketable commodity... the one thing that people, in general, will be most likely to accept. On our world, that happened to be gold and silver. This was a HUGE advancement because it allowed the storage of wealth in a way that did not decompose. If someone worked for a long time, they could store up enough money to invest into large things that made big changes in productivity. This also made the process of trade itself much faster, because people didn't have to spend time finding someone who wanted their chicken in exchange for shoes.

The next major development was 'token' money, where gold and silver were stored in a vault someplace (which is convenient, because they are heavy) and lighter, smaller coins, or pieces of paper, were issued to indicate ownership of a portion of the gold.

This is where things start to get complex. The use of tokens to represent gold allowed the issuers of tokens to play games they had never been able to do before. Someone must have thought... 'gee, I have 1000 ounces of gold in my treasury, I could probably issue 1100 tokens, because they're not going to want to withdraw all their money at once.' This was a VERY BIG DEAL, because for the first time, 'currency' (tokens) became DIFFERENT FROM wealth (the most marketable commodity).

Over time, the amount of gold held in reserve became less and less. This resulted in huge multipliers in the amount of currency circulating. If you have a 10% reserve ratio, for every ounce of gold you take in, you can issue tokens for 10 ounces of gold. Our banks presently are required to hold something like 3% reserves, which means that currency is multiplied by 33 1/3 times.

Now we're getting into an area where I understand less, and where even experts disagree, so take what I say from here as partially fact and partially opinion. The above is pretty much all solid fact, but it gets murky from here.

The rise of fractional reserve banking was a huge change in economics, but it has been a mixed blessing. It allows the economy to expand at a much faster rate in good times, but when things go bad, it appears to make contractions much worse. When bankers see that the sun is shining, they tend to lend more, thus creating more currency (and the APPEARANCE OF WEALTH), but they *do not* create wealth in so doing. In essence, they themselves are borrowing against future production. By issuing new debt, they allow things to be built that otherwise could not have been afforded. This devalues the currency to some degree, and also tends to encourage the building of things that are marginally profitable. The bigger the boom, the more demand is magnified, and the more things are built that cannot be sustained in lean times. (malinvestment)

Eventually, either due to the malinvestment or due to other outside shocks (wars, for instance), times start to get harder. The banks become worried and lend less. The lowered availability of money removes currency from the market, making it more precious. This tends to make people spend less, and increases the risk of defaults on other loans, which in turn reduces the money supply even more. Thus, just like the boom was magnified, so is the bust. Businesses that would be perfectly profitable in 'normal' times can and do fail in 'busts', which destroys yet more wealth.

Eventually things start to look rosy again, the bankers do more lending, and another boom cycle ensues. The overall heights of the booms and busts are limited, primarily by the percentages required in fractional reserve banking. The commodity underneath the tokens restrains the worst of the potential excess; it keeps the economy on relatively honest footing.

Overall, it appears that fractional reserve banking seems to have more benefits than drawbacks. It also makes the bankers one hell of a lot of money (wealth, not currency!), so they have pushed hard for the practice to continue.

However, there has been a major change, quite recently by economic standards:

What if the currency isn't backed by anything?

In 1971, Nixon took us off the gold standard. This set off a confidence crisis in the dollar, and the 1970s were a very unpleasant time. It is probably no coincidence that personal income peaked in the early 1970s, and has been on a steady slide downhill ever since.

What replaced gold? Nothing. Literally. The Federal Reserve could now create bank reserves by waving their hands. There was no limit on the amount of currency they could create; there was no fundamental check-and-balance there. The 1970s were a very un-fun time in the economy.

Starting in about 1980, Volcker restored confidence in the dollar by restoring the Fed to fiscal prudence. He did this by reducing the money supply growth rates to reasonable figures and by jacking up interest rates to the moon. Throughout the 80s, we had a pretty stable currency.

However, starting in the early 90s, the Greenspan Fed has been wildly profuse in its generation of currency. Anytime we have had a problem, it has just opened the spigots and let the money flow. Note that this is not related in ANY WAY WHATOSOEVER to actual wealth. It is just currency.

Because we were globalizing for the first time, there was an endless appetite for dollars overseas. This let Greenspan print money like mad without seeing many signs of inflation. (which is generally considered to be consumer prices going up, but this is a bad definition.) Instead of CPI gains, the inflation went into the stock market and, now, into real estate. This kind of inflation is seductive and terrible; it does enormous damage to an economy, while everyone LOVES IT and wants it to CONTINUE.

In essence, by taking us off the gold standard, Nixon has removed one of the fundamental checks on the power of the banks. As a result, the boom we had was titanic, extraordinary -- the biggest boom in the history of the world.

Likely outcome of the bust left as an exercise for the reader.

Re:you are confusing currency and wealth

[Oink.NET]

Overall, it appears that fractional reserve banking seems to have more benefits than drawbacks.

Check out The Creature from Jekyll Island: A Second Look at the Federal Reserve for some enlightening info on how fractional reserve banking really works.

Also, note that if you attempted to create your own miniature model of the Fed, you would get a $10,000 fine and a ten year imprisonment. Just because it's legal for the Fed to do it doesn't mean it's legal for you.

Re:bankrupt the world

[letxa2000]

No, no, no -- the bank never generated $300 worth of wealth. The bank at best enabled someone to labor more efficiently by acting as a central access point for capital by those who have it and those who want it.

Uhm, ok, semantics. Call it what you will. The fact is that the bank enabled the creation of more wealth than the laborer.

Re:Nope. Dividends are optional.

[why-is-it]

As for a shelter shielding Microsoft from taxes, their own financials reported a total income tax expense (2001) of $1,288,000,000 US Dollars. If they have a tax dodge in place, it AIN'T working.

Yes, but what about Gates? Right now, when he wants some coin, he sells some shares, and the proceeds of those shares are taxed at a lower marginal rate than if he had received dividends. I suspect that guys like Bill Gates and Paul Allen are avoiding a great deal of taxation in doing so.

It's not as if they can't afford to pay the tax...

Bollocks!

[why-is-it]

The reason people are hungry is not unequal distribution of wealth, it's because of unequal distribution of capitalism and freedom. Lack of food and money is a symptom, not a root cause.

It's not as if there are any poor or hungry people in the first world where capitalism and economic freedom dominate.

Oh, wait...

Re:bankrupt the world

[mpe]

When did you take the last econ class? Don't you realize that if they pay out dividends there will be still the same amount of money in the system, i.e., the same amount of money available for loans. If they payout dividends, the money just goes from one account to another. Nothing changes for the BANK!

Only if all the people involved happen to use the same bank. The money might wind up in different banks, or being spent.

Re:bankrupt the world

[shren]

I was explaining this to a bank teller and her eyes were bugging out. "You're having a 50$ gift certificate promotion to get me to deposit 5,000 dollars. When I give you 5,000 dollars, you get to make 50,000 or more in new loans, which will make you at least 5,000 a year in interest payments . . . your generosity does not impress me. Give me a real cut. That impresses me." (all numbers approximates, of course.) She *works* in a bank, you think she'd at least have casual knowledge of the principles involved.

Re:bankrupt the world

[letxa2000]

...is that the wealth creation is concentrated, i.e. only a handful of people are actually benefitting. If you are arguing that MS is making a handful of investors and financial executives rich, then we agree.

We don't agree.

The $40b cesspool is the RESULT of Microsoft getting rich. The cesspool itself isn't making the investors themselves any money, i.e., they aren't receiving dividends. That's why if I were an MS investor I'd be pissed off.

In that case, I am confused why you mentioned mortgages, which for the overwhelming majority of Americans are subsidized by tax credits and GSE's such as Fannie Mae and Freddie Mac.

I've repeated this many times in this thread. Please search on my name to find more in-depth posts. The summary is that: "The $40 bil is deposited in banks which subsequently loan money to thousands of people to do things such as buy houses and cars. Without deposits banks would not be able to do that."

So, yes, even though I don't have the $40 bil I can receive some benefits of it in that there is more money available in the banking system that I can borrow. This gives me buying power I would not otherwise have.

We've been having this argument on "wealth creation" in the US since Reagan, and I would think that after David Stockman himself called Reaganomics BS, that this trickle-down nonsense would have died out by now. It hasn't. But I will give you credit for attempting to argue that extraordinary collections of liquid assets provide benefits to others than those who hold them.

While I agree, in theory, with the "trick-down nonsense," this has absolutely nothing to do with it.

It's a simple matter of basic economics. The banks receive deposits, loan that money out to many others which, in the process, stimulates the entire economy to create more wealth. As another poster has even told me not even the liberals supposedly disagree with this. It's one of the foundations of our economy and there really isn't much debate about whether or not it is true. If everyone took their savings and hid it under their pillow, believe me, we'd be looking at an economic crisis that would make the great depression look like a picnic.

Trickle-down was more about giving large tax cuts to the wealthy based on the assumption that that will give them more money that they may invest in their business and, subsequently, hire more people and improve the economy such that everyone makes out well. What we're talking about isn't taxes and thus not trickle-down--it's the affect of the banking system in our economy.

Re:More philanthropic than whom?

[HiThere]

I'm glad to hear that he is doing some good with his money. That doesn't excuse his participating in the corruption of our government.

He has done more evil via promulgation of monopoly and it's attendant governmental corruption than any amount of philanthropy would redeem. In his defense, I must admit that he didn't participate in government corruption on a significant scale until it was forced upon him as a matter of self-defence. Since then, however, he appears to have become a major player. (This is nearly all inference, but this isn't the kind of information that one would expect to find lying around in the open. Inferences are the best one can expect.) I would welcome proof that I am wrong, but that would probably come at the expense of the kind of government that would be even worse than the current one, and thus be too expensive.

Re:bankrupt the world

[maraist]

I assume you're talking about the velocity of money (where-apon a dollar is respent many times over, so long as it never sits still). While it's true that investing money in an institutions which immediately re-issues can produce a >1.0 velocity during average to strong economic times, when the economy eventually falters (which it didn't really do during our little American recession), that multiplier contracts and can go < 1.0. At which point, the artificially inflated money suddenly dissapears.

The larger the mulitplier, the more it hurts during a real recession.

As part of the multiplier, is the idea of financial float; checks are written that are immediately deposited by the federal reserve into bank A, but funds are not immediately withdrawn from bank B. Thus extra money temporarily exists. So long as the number of transactional cash-flow remains constant, this temporarily created money sticks around. Once a recession hits, purchasing slows/stops, and checks clear...

Since recessions are cyclical, anything that artificially heightens an economic boom will effectively over-stear the economy and make the ensuing correction more powerful.

I personally believe the 90's represented an incredible growth of efficiency in our economy. Banks were allowed greater freedoms, computers reduced transactional costs, demand shifted from expensive goods to high-profit-margin-goods (like software solutions, and raw experienced human labor such as IT and effective middle-management). Since people were generally required to do more, their higher pay was justified; we simply did more work per day than we did in the 80's as a whole.

I believe this growth allowed us to avoid a catastrophic recession / depression on our economic correction. Aside from another socio-technological revolution, we can't sustain such growth as in the 90's, and thus such augmented multipliers are not ultimately to our benifit.

Disclaimer: I've taken several undergraduate economics courses, but I don't claim to be an expert, so comment-accordingly.

-Michael

Re:nice smiley

[ncc74656]

The question is, "will one ever be able to obtain an easy to use and open source tool for removing excess noses from smileys?" Stay tuned for more info.

sed "s/:-)/:)/g"

:-)

Re:bankrupt the world

[Courageous]

I assume you're talking about the velocity of money...

Monetary velocity is an enabling factor, but it has more to do with fiscal policy and reserve ratios. It has to do with what happens when you deposit money in the bank, but only have an electronic record to show for it, and then the bank turns around and makes loans into checking (and other) accounts, again only making electronic records to show for it. Real greenbacks never change hands. The banks can create a certain amount of money by fiat to a certain ratio of actual real assets held.

C//

Re:James Bond

[goatcheese]

You're almost there. While reading the article I could not help thinking about "Moonraker". Hmmm... complete with Steve B. as "Jaws" :-)

Re:bankrupt the world

[letxa2000]

I'm wondering exactly how it is that you feel the MS cesspool, to use our term for it, was collected if not for favorable tax laws allowing its collection under the theory that it was better for the economy...

I think we're discussing different things which may be why we're not agreeing on much.

Someone simply mentioned "If MS has $40b and is earning interest won't they eventually have all the money and leave everyone else poor." I attempted to explain why this could not happen.

Whether or not it is "right" for MS to have so much money is a topic for another discussion. And THAT is a discussion I don't have time for right now. :)

Re:FORCE

[Loundry]

How much money is too much? They need enough money to run their company. A years supply of money is enough.

How did you arrive at one year being "enough"? I'm guessing it was completely arbitrary.

Companies should NOT be allowed to "save" money. The economy does not benifit from corporate saving.

This is a poor reason to disallow companies from saving money. It is not the job of corporations to benefit the economy. If you argue that it *IS* the job of corporations to help the economy, then the only question that remains is "how much"?

Re:FORCE

[HanzoSan]

it IS the job of corporations to benifit the economy.

Whats the whole point of a corporation? Its a place for people to make money in an organized fashion. Its all about people making money, its all about creating jobs, its all about the economy.

What the hell is the purpose of the corporation if not to benifit the people? What better way to benifit the people than to give them jobs?

Corporations should help benifit the economy as much as they possibly can while staying in business. Corporations if they are to replace government (because alot of people seem to be anti government and pro capitalism)

Have to be responsible, this means its now corporations jobs to keep the economy in order and not taxes and government and so on.

What pisses me off about this...

[Guppy06]

... is the fact that professional athletes make an appreciable fraction of the cost of a space shuttle.

Re:Bah!

[Edmund Blackadder]

Hmm why is trying to decrease the suffering of a human being a "waste of money" and "absurd"?

Reading what you are saying makes me doubt that you may really care about other people. Well i do, you can call me a hippy you can also call me a good christian.

It is true that technology has caused a great change and sometimes improvement in peoples lives but i do not think that a big push into space exploration will do this at this point in our society.

Where would 40b be if MS didn't have control ...

[3seas]

over it?

Perhaps with all those companies they ran out
of business?

Money is an abstraction, an agreed upon media of value exchange that can be distorted.

To have a more fundamental POV there has to be value generation of which the abstract media is associated with.

So has MS really produced such real value as the abstract media ... uh errr, as the abstraction of the abstract media of money (numbers on paper) suggest?

In other words, had MS not run out of business (using proven illegal anti-trust tactics) where and how would that 40 billion be going thru the economy?

For an example consider the Trillion Dollar Bet and how it drained the south Asian Market and contributed to the so called terrorist motive/excuse.

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Re: i can't mod

[fferreres]

But i'd mod this up. Why can a guy say "eliminate them by peacefully driving them to extinction" and another guy suggesting that he could take the first step gets modded as flamebait.

I believe you can't make a country better of by killing the "would-be-born" kids. You can make them better of by teaching them, educating them.

After all, there are a lot of low-population countries which are inmensely POOR and no-one's helping them either. So how reducing a country's population makes them better off? You could only say "then less of them will suffer".

Are you guys that modded this down being serious? I really think the best Bill Gates could do is to build a network of high quality schools in the poor countries. Eliminating their population by castration is NOT a solution and it's a proposal only an ANIMAL could push.

You can take my karma, but you can't take my dignity.

Re: whoa hold on a second please

[fferreres]

And don't forget that 91% [econop.org] of the taxes are paid by just the top 5% of the taxpayers. I know that our tax duties aren't philanthropic, but dammit, people want to act like the rich do _nothing_ but capitalize on those beneath them, and it just ain't true.

Has it ever occured to you that the reason you see that pattern is because that same exact 5% of the taxpayers earn 91% (or something like that) of all country profits each year?

I know that our tax duties aren't philanthropic

Agreed!

Re:bankrupt the world

[fferreres]

How is a loan a gift? Please exmplain me this as i thought loans where just another market. Some people shop for loans and another parties sell them. You pay a competitive price (interest) which compensates the other party for delaying the use of their money.

In which way is Microsoft giving something away for free which is not already ours? Please enlighten me.

Re:bankrupt the world

[fferreres]

That mean that if they decide to use their money, they'd be destroying $200B worth of credits? Wouldn't the USA collapse in such an event and would caos reign supreme?

At least, a lot of people would find they can't pay their loans back and will be forced to sell their houses and everything if Microsoft ever decided to "suddenly" spent their hard earned money.

Re:So...

[shyster]

I don't know about other countries, but point me to an article about someone in the United States who died of starvation. It NEVER happens.

You're right. That's because while they're begging for change to get something to eat (or picking thru a dumpster, or sleeping on a bench in a park, etc.) they're arrested and thrown in jail for being a derelict with no ID and no $$.

Or, they rob a convenience store and get jailed or shot.

Or, they freeze to death before they starve to death.

Maybe a different kind of depression

[ynotds]

Likely outcome of the bust left as an exercise for the reader.

Living in a lucky country where the economic measures didn't even shorten stride as they gallop into the unknown, I have noted a few other people starting to bemoan the degree to which money is starting to get in the way of even the simplest things which are essential to our very humanity ... from seeing friends to putting one person's junk to the service of some less demanding cause.

But every day it looks more likely that we do not have to wait till after the boom for depression, but that depression has already set in, both for those whose ever harder work continues to underpin the indicators and for those struggling to find their way into the loop.

There is something primitively natural in the cycle of long growth and rapid death which flies in the face of human aspirations to fairness, the kind of overgrowth which our granting veto to the bean counters has made has made an inescapable aspiration of every human institution ... and at which those best at spreading FUD continue to have the greatest success, be they involved in hyping upgrades or the war against drugs.

So you don't have to wait for the depression to follow Wired's long boom, you just have to look around and ask people how they feel.

Re:FORCE

[HanzoSan]

without socialism i wouldnt have been able to afford an education

Re:bankrupt the world

[Courageous]

When they "use" their money, they are spending it, and when they spend it, the recipients will probably put it in the bank, right? But in any case, the US overall money supply is fucking titanic. You wouldn't believe it's size.

C//

Re:$40 Billion =

[Squeeze Truck]

The "stealth bomber", I assume you're talking about is the B2-B Flying Wing, which is approx. $2.2 bil each (actually a bit less now, I think I heard as low as $1.2b).

Wow, that is low! If the gas mileage was jus t a bit better I might consider trading up!

Re:Shopping Spree

[Squeeze Truck]

He could buy 160000 Congressmen[...]

Is there a discount if one buys in bulk?

Once saw Ellison's missile

[mattr]

I once saw a big orange missile standing on its tail, and was told Ellison kept it metaphorically aimed at his rival. Wasn't more than 3 or 4 meters long, looked cool in a Buck Rogers way but of course Microsoft could buy the real thing.

That said, The Bill's philanthropy is way too little too late and doesn't make a big dent in his net worth. A nice big number but not so much for the world's richest man. Most science fiction has such a guy funding the first moon base etc. Why does our Bill care so much about nosing into little dusty interiors when he could have his head in the clouds? Fund X Prize competitors and Nanotech startups, and try to do it without strings attached! Feh!

Hitting the wall

[Chris Johnson]

If they can't spend this money, they must be hitting limits on growth. There must not be any new ideas in Microsoftland worth investing in- at least, not to that extent. That does spell catastrophe- but hoarding money is not the way to deal with it, because Microsoft is not a bank.

communism = slavery? OK by me.

[dbrutus]

I won't argue that communism is slavery but it does seem to me that a little fairness is in order. Any professor arguing for a new variant of slavery would be drummed out of academia *if he was lucky*. The advocates of communism, unfortunately, are still with us and semi-respectable.

I would like to hear about the slave history of the ROC (Taiwan), S. Korea, etc. before I accept your blanket statement that capitalist countries have never existed without slavery. There are a whole bunch of very new capitalist countries whose slaveholding, if it is documented at all, occured long before capitalism grew up there.

communism redux

[dbrutus]

communism has always relied heavily on the useage of past economic seed corn in order to finance a temporary increase of current consumer consumption. This is very important in the period where armed opposition exists to the regime. Nicaraugua never got past that phase so you are somewhat correct that it is atypical.

Eventually the seed corn runs out, capital is used up and there is little new capital assigned to replace it. The long downhill slide of communism commences in all its customary brutality.

I would submit that the USSR success at creating a new soviet man was not, perhaps to this day still is not, understood in the mainstream West. Sure, there were some perceptive people who understood communist reality but they were largely voices in the wilderness, stifled by the paid communist hacks and their allies, the anti-anti-communists.

The commanding heights of Western society were filled with Walter Duranty types who distorted and denied the fundamental evil of communism, never giving up an opportunity to excuse and ignore the horrors that were occuring.

When a society emerges from communism, there is generally an immediate drop in living standards because the seed corn economic cycle needs to be primed and those resources are not available for present consumption. As the effects of communism fade and society is rebuilt in a sustainable fashion economic resources become more and more available to respond to present needs without robbing the next generation of any hope for even maintaining the economic level. On the contrary, it is the children who most benefit because they are placed on the economic up escalator that capitalism provides.

DB

If I were Microsoft...

[aquarian]

...the first thing I'd do is throw a little money at Congress, to pass laws that help me maintain my position, such as the DMCA. The cost would be chickenfeed, the results spectacular.

Re:bankrupt the world

[Courageous]

If money could actually be created by deposits

Dude, that's what I'm telling you. Money can be created by deposits, and routinely is. It's created through what I'll call "virtual currency," by fiat, and inserted into the accounts of borrowers.

...you could create a feedback loop

That's correct. This is what happens and why it is that a "run" on a bank is bad: they don't actually have the real capital to handle the withdrawals.

Fiscal/banking policy decides to what degree that a bank can do this and how much they have to hold in reserve. The Federal Reserve uses two primary instruments to control the money supply: interest rates, and the reserve ratio. Look up "reserve ratio" at google for more information.

C//

Re:No! They were a very close second.

[Rakarra]

Thundercats [vpga.com] was the best cartoon of the time.

But we were talking best Disney Afternoon cartoon. Thundercats was a Rankin/Bass creation using a lot of Japanese artists (had a very anime look and feel), as was the successor, Silverhawks (heheh, who remembers that?). If you want to open it up to mid-80's cartoons in general, you'd have to include more quality works like Robotech as well.

Mmmmm....Cheetara...

Rrrowl.

Re:And yet the industry cowers before the MPAA/RII

[Rakarra]

And yet the industry cowers before the MPAA/RIIA

Microsoft has lots of $$$, but the MPAA/RIAA still has much more political influence, especially with the Democratic Party, which will bend over whenever the MPAA/RIAA asks it to.

Enough money to crush the DMCA's backers and eject the politicians responsible for it.

Microsoft would never do such a thing. They love the DMCA. Expect them to use it a lot more in the future.

Re: i can't mod

[Rakarra]

But i'd mod this up. Why can a guy say "eliminate them by peacefully driving them to extinction"

Extinction? Perhaps you haven't been paying much but there are way too many people in many parts of the world, and they are in absolutely no danger of dying out, even under the original poster's proposed idea.

Re:More philanthropic than whom?

[Rakarra]

Yet you can't figure out how to get an account on /.???

Can't? Or doesn't want to? What does he have to gain by making an account? Impressing some guys on Slashdot? Yeah, that'd be really high up on my priority list too.

Re:$40 Billion =

[wedg]

Wow, that is low! If the gas mileage was jus t a bit better I might consider trading up!

Ask 'em if they'll make a hybrid?

Re:FORCE

[HanzoSan]

And if thats the case, big companies therefore are bad for the economy,

thanks for proving my point, the economy cares about jobs and people, not the top 1 percent which are owners.

Re:FORCE

[HanzoSan]

im anti government
but i live in the city
theres no alternative to government

without government you'd have complete chaos.

I like the idea of anarchy but the majority of people just cant handle it.

only rich people can borrow the money!

[HanzoSan]

So hows it helping the economy when the majority cant borrow the money. And hows borrowing money better than actually getting to keep it?

If you worked for microsoft you'd EARN the money which means its your money.

Borrowing the money is not fair because not everyone can borrow money, and its not like you can borrow 100,000 a year, and also you cant keep it, its borrowing, dont forget interest.

borrowing doesnt help the economy because most people dont borrow money, they earn it.

Re:bankrupt the world

[letxa2000]

The bank corrected the distribution of capital to allow the laborer to take advantage of his labor and his raw materials to create wealth.

What? I see you posted this at 8:33am, probably before your first cup of coffee.

First, your comment "corrected the distribution of capital," as if the previous distribution was incorrect, contaminates any reasonable chance of having a logical discussion with you. Not to get into calling people "communists" (that is so 80s) but it's hard to read your statement any other way.

The laborer didn't take advantage of his labor and his raw materials to create wealth (i.e. buy a house and a car). If he had to take advantage of only his labor and his raw materials he wouldn't be buying a car or a house, at least not for another 5 or 30 years, respectively.

Instead, the bank enabled the laborer to take advantage of someone ELSES labor and raw materials (the 40b earned and deposited by MS) to obtain what he wants and create wealth. The laborer didn't create the wealth, the depositor did via the banking system.

I'd suggest that you stop posting on the subject of economics until you've taken a good macroeconomics course.

I will assume you are young. Wisdom will (hopefully) catch up with you in time if you don't run too quickly.

Re:FORCE

[Loundry]

And if thats the case, big companies therefore are bad for the economy, thanks for proving my point,

I'm hardly convinced. I notice that you failed to answer my question about how you arrived at 1 year's operating costs being the maximum amount of money a company should be allowed to save. I also notice that your contention that a company's purpose was to "benefit the economy" was shown to be wrong, and you made no effort to argue against it.

Perhaps your argument would fare better if you had more facts and reason on your side.

the economy cares about jobs and people,

"The economy" is not a sentient being and therefore does not "care" about anything.

not the top 1 percent

Ahh, yes. The "top 1 percent," preferred punching-bag of leftists and socialists everywhere, rears its ugly head. I have two questions for you: In the United States, how much of the available income does the top 1 percent income earners make? And how much income tax does the top 1 percent income earners pay?

Re: i can't mod

[fferreres]

I can understand they sometimes have 15 children and now way to feed them so they are beign irresponsible (or ignorant).

Just that i don't find sterilizing the way to solve poverty. They will always be poor that way. So it's hypocrat. If you don't care, then do nothing. But don't suggest sterilizing their women.

How would you like it if someone suggested sterilizing America? Not funny, of course.

Re:Not if they used it , because...

[fferreres]

Then they are not creding welfare or money valued 200B. That would only happen if they left the money one coaches.

Mhh...reminds me of my country (argentina). We have destroyed 60B in bank and are saving them on coaches. Pity on us...

Re: i can't mod

[Rakarra]

Just that i don't find sterilizing the way to solve poverty. They will always be poor that way. So it's hypocrat. If you don't care, then do nothing. But don't suggest sterilizing their women.

Hey I'm not suggesting flying in there and steralizing people against their will. But a reward for people who ask to for vascectomies (I'm not so sure about tubal ligations -- those are generally pretty dangerous) is something I could go for -- yes, even in America.

Fewer children is always a good thing.

Re: i can't mod

[fferreres]

How is it a good think? Unless you are not the one unborn, you'll have a hard time proving your point.

If there was no food, no space, no resources i could undestand it. Anyway, my point was about the guy beign slaped as flaimebait for calling the guy that wanted to erradicate poverty by taking their fertility away an "ANIMAL".

It's his opinion. It's not a flame.

Re: i can't mod

[Rakarra]

How is it a good think?

Fewer children == lower population. A lower population is definitely a "good thing," and simply encouraging people to have fewer children is the best moral way of accomplishing this.

Anyway, my point was about the guy beign slaped as flaimebait for calling the guy that wanted to erradicate poverty by taking their fertility away an "ANIMAL".

It's his opinion. It's not a flame.

Crude personal attacks should always be considered "flamebait." But I wouldn't moderate down, since I prefer moderating good posts up instead...

Re: i can't mod

[fferreres]

The only real cures ... (to) take mean steps to cut down the birth rate (like, here, we'll feed you and your family for as long as you allow us to put this norplant thing into your woman).

"Stop having children if you want to eat, you poor stupid bastards" is ok, human and a honorable and thoughtfull proposition. Asking the guy to start by castrating himself is a personal attack.

My point was forced castration is not a solution, as prima nocte was not a solution for destroying scotland. You need to educate these people, while feeding them.