If Microsoft Ran The Economy

One of the major criticisms I’ve heard over the administration’s plan to regulate the financial industry is that it might “stifle innovation”. This puzzled me, as it seems excessive “innovation” is what got us into this recession in the first place. But if innovation in the financial industry is, in fact, a good thing – it seems logical that said industry should be run not by bankers, and not by government bureaucrats, but rather by an organization that has expertise in managing innovation. Following this logic one can’t help but wonder what the economy would be like if it were a Microsoft product….


There are no sub-prime loans in the Microsoft economy. Nothing sub-prime would ever be shipped. True, many customers would end up with version 1.0 loans that would occasionally run into problems – payments might mysteriously fail to get recorded or interest rates change without logical reason. But don’t worry – everyone could get their loan upgraded for a nominal cost when a new version comes out – refinancing would go smoothly for 99.5% of customers, only a small number would crash into spontaneous foreclosure.

Microsoft loans will come with legal agreements as long and incomprehensible as any we see today. And just like today, nobody would read them. Unlike today, it would never matter.

Derivatives and Credit Default Swaps

Microsoft has extensive experience creating incredibly complex products that almost nobody understands (COM, WCF, etc.), which makes it the ideal organization to take over the development and marketing of financial derivatives. However, unlike today’s financial products, Microsoft derivatives would undergo extensive testing both internally and through a massive pre-release beta and preview program to customers ranging from individuals to the largest banks.

With thousands of amateurs and experts able to download and examine every derivative and credit default swap before release, most potential problems will be discovered long before they are actually deployed. Sure, they will ship with some bugs, but the odds of bugs significant enough to crash the economy will be very small. Any such serious bugs discovered after release will be quickly patched using the Microsoft automatic update service for financial instruments, that will be included with every copy.

Executive Bonuses

Microsoft licenses products generally by machine or user. Microsoft doesn’t care if you are using Word to write a 3rd grade paper or a billion dollar contract, so it won’t care if a Microsoft fund has a thousand dollars or a trillion. From loans to hedge funds, once you’ve bought the product, there are no further charges (other than support or upgrade fees). Fees for financial products will be based on number of customers, but not the size of the product. Fees and costs will drop – and large bonuses and salaries will vanish. Of course Microsoft product managers will be paid a decent salary, and will have some company stock options that might become worth something someday. But the days of huge executive bonuses at institutions that are losing money will be over.

The overall economy

Our existing economy is a complex and bloated system with a long history of solid growth and productivity punctuated by booms and crashes. Microsoft Windows is also a complex and bloated system with a long history of solid growth and productivity punctuated by booms and crashes.

However, unlike the real economy, when the Windows run economy stutters, most of the time it can be fixed in short order with a quick reboot. Those rare crashes that occur are typically also solved by a reboot, and only occasionally need a complete reformat and restore.

Imagine an economy that can be rebooted in hours instead of years. One with extensive documentation and transparency as provided by MSFN (Microsoft Financial Network).

The mind boggles at the possibilities. The Bernie Madoff’s of the world would have no chance in an economy where dozens of vendors sell SAV (Securities anti-virus) software. Hundreds of thousands of developers will build financial products for the new economic system (run your own bank, publish your own credit card). And there would be no secrets – anything you ever wanted to know about the economy or any financial product or institution would be instantly available to view – on Google of course…

7 Responses to “If Microsoft Ran The Economy”

  1. Krishna Says:

    Funny, but isn’t this a bit like shooting dead fish in a barrel? Microsoft jokes are a bit like high-school jokes: cool when you hear them for the first time, but stale for adults.

  2. Dan Says:

    To Krishna:

    That could be true – but only if it were actually Microsoft that I was poking fun at 🙂

  3. Fake51 Says:

    “expertise in managing innovation”, “version 1.0 loans that would occasionally run into problems”, “upgraded for a nominal cost”, “the odds of bugs significant enough to crash the economy will be very small”, “Any such serious bugs discovered after release will be quickly patched” …

    It would be fun if it wasn’t so sad

  4. Stacy Says:

    Actually, Microsoft does care if you’re writing a 3rd grade paper. They cared a little bit to create a student license of Office that costs a fraction of what the commercial user pays.

  5. JD Says:

    I ran across this post by accident. Your take was interesting, but just a bit further down the rabbit hole, if you like…

    It is far too simple-minded when people try to pin the cause on so-called ‘excessive innovation’; not only is this a diagnosis with no context (i.e. how much ‘innovation’ ought to occur? and how is this to be determined? and what, exactly, is ‘innovation’?), but it completely ignores the lion’s share of the problem space. If one must boil it down to its simplest description, it might be more accurate to say that the problem was innovation disconnected from the natural consequence of failure (notice that we can use ‘innovation’ in the general sense here); or put more simply, riskless risk. This reality was implicit, but proved to be true nonetheless.

    Now, the concept of ‘hands-off’ is well understood, second nature even, when people are talking about ecosystems, mechanical governors, etc., but this knowledge seems to go right out the window when we begin to consider human systems. If we analyze the situation with this in mind, we may begin to see that such a condition (i.e. this perverted situation of riskless risk) is the natural and expected consequence of setting up an absolute and coercive monopoly over the very lifeblood of an economy, money. As such, we should expect to observe booms and busts for so long as we decide it best to put our fingers into the machinery of the economy; it is immaterial whether those end up being the fingers of republicans/democrats/others – the only unknowns here are frequency and amplitude. The cause is that human regulators simply do not posess the capability of pulling the levers in such a way as to acheive equilibrium; even if they did, or if we could build machines powerful enough to work out the models; even then, we still lack the instrumentation necessary for feeding the algorithm; we are talking about trillions of decisions made by billions of people, which must be collected, analyzed, and understood on a daily basis, and this does not even begin to touch on preferences which are based on future unknowns. So it is a fundamental problem, first of measurement, and then of calculation. It is therefore, in my opinion, completely naive for us as a society, to assume that we can ‘regulate’ the economy with any net-positive effect.

    So, I leave you with three words: unregulated private currency. If you are so inclined, you may find it an interesting exercise to analyze the full effects of this concept. Possibly you already have, but your post here does not lead me to believe so, so I suppose I’m safe in making the suggestion.


  6. Edward G. Nilges Says:

    Hi Dan!

    Humor aside, perhaps there was, in addition to excessive innovation, innovation not properly implemented.

    Most of the innovation involved software, right?

    And a “derivative” is by definition a financial deal, contract, product, or loan whose value is based on ANOTHER financial deal, contract, product or loan, right?

    OK, what does this become in software?

    It becomes some sort of software file, program or object which is linked to another software file, program or object.

    The complexity is that the linkage can go further…and while a programmer would see the problem here, many people don’t.

    Derivative A is linked to and dependent on B.
    B is linked to and dependent on C.
    C is linked to and dependent on … (drum roll) … A.

    The computer hangs when the clerk tries to calculate a final price or otherwise cash out and unwind A. She presses Cancel, and the derivative remains for someone else to unwind.

    Talk about toxic waste, right?

    I first encountered this program in the old Cobol days. I was working with another guy at a reinsurance firm near O’Hare, where as you know, reinsurance is what insurance companies buy to protect themselves from the unfortunate event of having to pay a claim. As many people know who pay on medical insurance policies for years only to get screwed when they have a claim (as seen in Mike Moore’s film Sicko), insurance companies really, really hate to pay claims.

    The user had contracted our firm to figure out why a program “took so long” and always got a “SOC7” from OS/360, where to this day one cannot forget that SOC7 meant the program had exhausted its time slice.

    [Memories are made of this.]

    We discovered that the Cobol code was calling itself recursively and the original programmers had not realized that this was possible. It prohibited a policy from reinsuring itself, but the programmers hadn’t anticipated indirect recursion.

    I created a (limited) stack using Cobol’s OCCURS clause and warned the user of the problem.

    How much of today’s financial crisis is a fulfillment of Dijkstra’s grim warning that if we did not master software it would master us, Dan?

  7. Edward G. Nilges Says:

    I don’t agree, Dan, with JD’s “unregulated private currency”. It’s a good way to return an economy to the Dark Ages real fast, since it’s in the self-interest of the issuers of currency to make it scarce, and for their competitors to counterfeit successful private currencies.

    It’s a fantasy that society could be self-regulating machine if men were free to pursue their self interest. Gee, we tried that, and in pursuing their self-interest men naturally do each other dirt (force and fraud) and form coalitions with stronger men rather than trying to be warlords, or corporate executives, on their own.

    N-person game theory has multiple winners but only by virtue of some players accepting a partial win in doing the bidding of more successful players.

    Therefore, society needs a super-ego in the form of a common understanding of fairness and decency. Omigosh that’s a liberal government.

    But one reason I left the programming business, Dan, after working with you on the cult classic “Build Your Own .Net Language and Compiler” was because working as a programmer, at whatever level, one finds that if one ever speaks or writes on the Internet to the left of corporate free market ideology, one takes a hit at performance review time, since programmers just aren’t all that important enough to be allowed to have left-wing opinions.

    Instead they are allowed to float to the right of corporate free-market liberalism in the dark seas of libertarian fantasy, and moan and groan that we need unregulated private currencies and Ron Paul, and everything would be just great.

    Thank god I am both a good teacher and a heckofa telemarketer (I like bothering people on the phone as you may know) as well as an ace programmer and excellent if digressive computer author, since the price of success as a programmer seems to be political emasculation.

    I will understand if you do not allow this to appear at your blog, since I digress again. You are always welcome to visit me at http://www.spinoza1111.wordpress.com.

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