Philadelphia Reflections

Bill Gates Gets a Medal

William Henry Gates, III

Bill Gates was once the richest man in the world. He may still have that honor, although it would be hard to say just where he stands now that he has established his charity foundation and changed jobs at Microsoft Inc. Instead of CEO, he's now Chairman and Chief Software Architect, a title so unique that its day to day meaning is obscure. If anyone cares about ranking billionaires, it would be hard to see why they do, since even one billion dollars is hard to spend in one lifetime. But it is interesting to speculate on why the Franklin Institute chose him as its scientific awardee, and why that was an insightful choice. And it is furthermore interesting to speculate on what motivated him to do what he did in life. He may not agree, but by this time he must be accustomed to having the whole world speculate on what they would do if they had his wealth, something the whole world seems to think would be a fine outcome.

The Franklin Institute is known for its interest in science, and of course, it is interested in preserving the spirit of Benjamin Franklin, who never went past the second grade but became the greatest scientist of his age. That's not the same as dropping out of Harvard because of better things to do with his time, but it has a certain kinship. Both Gates and Franklin appear to have spent a lot of time in science because they liked science, and both gave away a lot of money to charity, even though they both quite obviously liked money a lot, too. Both men retired in their 40s, but both of them sort of kept their hands in. Neither of them seems to have been able to tolerate idleness. There were appreciable differences between them as well, but enough similarities to portray them both as strikingly different from the sort of person who typically spends a lifetime as a scientist, obediently following the rules. In spite of all that, however, how does the Franklin Institute justify giving its top award to a businessman?

Since most of the people active in the Institute are residents of the Philadelphia area, it's reasonably easy to get an idea of the thought process without quoting anyone. If the Nobel Prize had been available in 1790, its present rules would have excluded Franklin. There's still no Nobel Prize assigned to eminent achievement in electricity, so the inventor of electricity might well have had some trouble getting past the nominating committees. Perhaps the 1776 founder of the American diplomatic corps might well have been able to wangle it, had he tried hard enough, and there had been enough women on the committee. So we must let that thought rest. The Franklin Institute first asks what is the most exciting field in science today, and then asks who is the most influential person in the field. Franklin would have won in 1790, and if you agree that computer science rules science today, you would have to give the prize for computer eminence to Gates. Apple and Google are coming right along, but Bill Gates was there first.

There is another line of reasoning to be considered here, one which includes the restlessness of some more conventional scientists seeing Gates honored in this way. He actively sought money for his achievements; the honor wasn't enough for him. Back in the early days of the computer, what ruled was the spirit of the gifted amateur, let's say the tradition of the wealthy English gentleman who tinkered. The early programs of personal computers were designed by the self-taught amateur who stayed up all night figuring out how to do things, and then proudly made an announcement at the local user's group. Magazines were published so amateurs could exchange discoveries; it was lots of fun. Gradually these support structures disappeared, supplanted by commercial software for a fee. Eventually, even the amateur-friendly languages were deleted, and ways were found to charge for later versions. Over the course of twenty years, amateurs by the thousands gave up the game and were replaced by millions of ordinary users.

In the early days, I was one of those enthusiastic amateurs, wrote lots of small programs for the use of myself and friends, for the good of the Order. From time to time, I wrote a piece of software that seemed more than slightly valuable, and I thought of selling it. For years I held back from such temptations, partly because of the nuisance involved, but mostly because of what I feared my friends would think of me for such crass behavior. And then, one day the light dawned on me. If people weren't willing to pay for the software, it couldn't be worth much. If it was indeed a valuable contribution to their work, they ought to help support me while I did some of the work for them. After all, money is the standard of value in our society, and a convenient means of exchange; there is nothing evil or demeaning about a free exchange between consenting adults. They want the software more than they want the money, that's all. If I charge too much they will refuse to buy; if I don't charge enough, I will starve to death. Meanwhile, the software industry with Microsoft leading the way flourished and got rich doing a lot of good for the world. It soon became clear that huge expenditures would need to be made to make the computer usable by just plain folks, but in return for that risk, hundreds of millions of school children, businesses and even barefoot citizens of developing third-world countries are now using the computer in their daily lives. Mass production brought down the costs of even the hardware, which at one time cost millions of dollars per machine. Bill Gates got rich on this revolution, but even his riches were a paltry fraction of the world benefits, whatever his original motives may have been, and no matter how much guilt he may now feel. Forget about his money. His impact on the world was stupendous.

There's a deeper level to this. We are rapidly reaching the point where nearly half of the nation works for non-profit concerns. It depends a little on which occupation is under discussion, but more than half of union members ( a group that is not shy about advancing its personal interests) now work for the government on some level. Add in the children who have not yet entered the workforce, and the retirees who have left it. If you count them, you can make a case that only a minority of Americans work for a profit right now, so their sympathies for-profits are therefore pretty weak. To them, the shift from non-profit to for-profit (like Bill Gates at Microsoft) is morally going the wrong way on a one-way street. The private economy encounters slander and epithets when they suggest privatization of public services, such as schools and postal delivery, to say nothing of policing and tax collection. These decisions in any rational environment ought to be made on which is the cheaper way to perform them since the implication that private operations are more corrupt than public ones has long since lost the argument of being obvious. Unfortunately, we are on our way to abandoning the scientific method of determining relative values, supplanting it with the judgment of fifty-nine Senators plus the Vice President, of five out of nine Supreme Court Justices. The marketplace is being denounced; what you hear is really the denunciation of the scientific method of determining truth.

We even have a glaring example amidst the ruins of the present financial mess, largely being mislabeled. Lehman Brothers were brought down by general denunciation, facilitated to some degree by the unattractive personal qualities of some of its leaders. But Lehman had discovered an important feature of globalization, which had lifted two billion Chinese and Indians from poverty. When a large international firm makes components in one country and assembles them elsewhere, it just does it. But when smaller firms make one piece and some other firm assembles pieces in another country, the components are bought and sold. There's a significant transaction cost in all this, not the least of which is borrowing the money for a short period of time to finance the inventories. On the surface of it, this sounds considerably more expensive than managing the manufacture within a single large international firm. However, Lehman figured out that borrowing money for a few days was more natural and cheaper if the money is borrowed short-term from a money-market fund; exploiting this idea, they quickly ran their business to many billions of dollars. Although the global revolution would scarcely have been possible without it, Lehman managed to keep its business secret from others long enough to give the appearance they were loaning without borrowing. A financial market in panic withdrew its investments from Lehman and brought it down. We are now left with the question, is globalized manufacture really cheaper than confining manufacture within a single country, or at most within a single international corporation? No doubt, the answer at any given time depends on a multitude of factors, but the financing of inventories is certainly one of them. No matter how it turns out, it will be a pretty close call, as all of the arguments about privatization which it strongly resembles. We cannot afford to have economic decisions of this magnitude depend on faulty reasoning, derived from ideology about the motives of private versus public reimbursement.

Originally published: Tuesday, May 04, 2010; most-recently modified: Tuesday, May 14, 2019