Gates: Robber Baron of the 1990s?

A hundred years ago, their innovations reshaped America, converting it from a small rural nation to a transcontinental industrial giant. Each one of them became rich and powerful, destroying their competitors and anyone else who got in the way of their vision. Antitrust laws were written to stop them. And at the end of their lives, these men known as the "Robber Barons" performed unequal philanthropy. They were loved and reviled in their time and in the century since. And there has been no one else like them -- until Bill Gates came along.

The Robber Barons of the last century are perhaps the most complex set of individuals in U.S. history. Rising out of the ashes of the Civil War, the group — notably John D. Rockefeller, Andrew Carnegie, Jay Gould, Cornelius Vanderbilt and J.P Morgan -- was the driving force behind the Industrial Revolution during last quarter of the 19th Century. They built the railroads, made the steel, refined the oil and financed the companies that made America great. And along the way they became richer than anyone in the nation's history; Rockefeller's wealth translated to 1999 dollars would make him the richest man in the world even today.

But words like "ruthless" and "brutal" don't even begin to capture the way the Robber Barons of the last century ran their businesses, scholars say. Nothing would stand between them and their goals of dominating their industries. Theirs was a world of clandestine deals to centralize power.

Workers were forced to toil around the clock, and strikes were ended by armed private guards. When the Progressives wrote the antitrust laws in 1890, they simply looked at Rockefeller's Standard Oil company to know exactly what to ban.

Agents of progress
But for all the atrocities of the past century's Robber Barons, it is impossible to overlook the good they did. Each one, by making their industry efficient, drove prices down and carried America into the 20th century. And each one spent at least part of his fortune on philanthropic initiatives that have been unrivaled even to this day.

In the 1962 forward to his 1934 history "The Robber Barons" -- the definitive history of the era -- Matthew Josephson summed them up: "Theirs is the story of a well-nigh irresistible drive toward monopoly, which the plain citizens, Congresses, and Presidents opposed -- seemingly in vain. The captains or barons of industry were, nevertheless, agents of progress -— in the words of their contemporary Karl Marx; under their command our mainly agrarian-mercantile society was swiftly transformed into a mass-production economy.

"I have tried to give a candid description of their most ruthless actions, their conspiracies and their plunderings, for they accepted no ethics of business conduct; but I have also spoken of their constructive virtues, and sought to picture them as human beings living in their time," Josephson wrote.

When Standard oil was split into 32 companies, it seemed like the days of the Robber Baron were over forever. In the decades since, there have been ridiculously rich men and women, and other monopolistic companies have been split up.

But no individual has conjured comparisons with the simultaneous heroes and antiheroes of the Gilded Age until a Harvard dropout founded a software company and dominated the revolution of his time. (Microsoft, of which Gates is CEO, is a partner in MSNBC.)

It's clear that many of the biggest atrocities of the last century's Robber Barons -- their labor practices, for example -- are unthinkable in the modern world. Any insinuation that Microsoft Corp. (Nasdaq: MSFT) can be compared to them in that way would be completely absurd, experts say.

But the initial findings of a federal judge this month paint a picture of Gates' business practices that is similar to the monopolists of a century earlier. Coupled with his youth, his vast wealth, his generous philanthropy and the perception of his persona and his empire, it is hard to ignore arguments that paint a portrait of Gates as Robber Baron for the information age.

The information revolution
The final quarter of the 20th century has brought an economic revolution that is comparable only to the industrial revolution. No one doubts that the personal computer, and later the Internet, have changed the lives of most Americans and has reshaped our national fiber in a way that the inventions of the corporation and the factory did before.

And for better or for worse, one company has been in the center of the information revolution.

Earlier this month, Judge Thomas Penfield Jackson declared Microsoft to have a monopoly over the PC operating system. While it was only in a preliminary ruling, the decision is the culmination of nearly a decade of federal investigations into Microsoft's business practices. And while it may be months or even years before the trial is brought to its conclusion, the mountains of internal e-mails and documents presented as evidence have shown light on much of how Microsoft is run.

The comparisons between Microsoft and Gates and Standard Oil and Rockefeller -- as well as Carnegie Steel and Carnegie -- are inescapable, experts say.

"There is a sense that they're kind of bookends -- mirror images of each other," said Ron Chernow, author of "Titan: The Life of John D. Rockefeller, Sr." "You start with the fact that if you go back to the early 20th century, oil was very much to the industrial age what software is to the information age."

At its peak, Standard Oil controlled 90 percent of the oil in America; Microsoft Windows runs on 90 percent of PCs. And "the political backdrop to this antirust case is very similar," Chernow said.

Comparisons abound
Some experts say the evidence in the Microsoft case reads like it's cribbed from Rockefeller's and Carnegie's playbooks. Microsoft's exclusive deals with computer makers are a mirror of Carnegie's deals with the railroads to only allow his steel to be transported on their rails. And Microsoft's fear of what Netscape Navigator and Sun's Java may have done to its Windows dominance echo Carnegie's fear that if he didn't control ore production, he would lose his power over steel.

Standard Oil counsel Samuel C. T. Dodd's justification for his company's monopoly -- that "cooperation and association among the refiners, resulting eventually in the Standard Oil Trust (which) enabled the refiners so cooperating to reduce the price of petroleum products, and thus benefit the public to a very marked degree" —- sounds very much like the Microsoft spin uttered nearly daily by Microsoft chief counsel William Neukom during his company's antitrust trial.

Symbols of an age
But the strong-arm business practices, desire for domination and constant paranoia are only the beginning of the similarities, historians note. The success of each of the companies -— as vast as they became -— is inextricably linked to the individual. While there have been other monopolies in the years between, none of them were driven by the cult of personality with which Bill Gates and the Robber Barons drove their companies.

The men have become "symbols of an age," said H.W. Brands, history professor at Texas A&M and author of "Masters of Enterprise : Giants of American Business from John Jacob Astor and J.P. Morgan to Bill Gates and Oprah Winfrey."

"When people think of the oil industry, they think of Rockefeller, much like when people think of the software industry, they think of Bill Gates," said Brands.

Each of them seized on a dramatic change taking place, and quickly recognized that by taking a central position in the newly developing economy, they could control it.

Instead of drilling for oil, Rockefeller bought the refineries; rather than build the bridges and the rails, Carnegie sold the steel; and in a deal with then-monolithic IBM, Bill Gates realized the true power was not in making computers, but in controlling the operating system.

As their power grew, each of them began to view their companies -— and themselves -— as vitally important to a new world order, experts say.

"In the life of every conquering soul there is a 'turning point,' a moment when a deep understanding of the self coincides with an equally deep sense of one's immediate mission in the tangible world," Josephson wrote in his landmark history. "For Rockefeller, brooding, secretive, uneasily scenting his fortune, this moment came but a few years after his entrance into the oil trade, and at the age of thirty."

The driving desire: Not just money
With that understanding, what began for all of them as a desire for wealth, quickly transformed into something bigger.

"People automatically assume that if you end up with more money than anyone in the world, money must have been a motivating factor," said Chernow. "Later in his life, nothing embarrassed [Rockefeller] more than when people recollected these stories that he would say 'I want to be rich some day,' or 'I want to make $100,000.' "

Carnegie, too, saw his company as far more than simply a money maker. "Man must have an idol -- the amassing of wealth is one of the worst species of idolatry -- no idol more debasing than the worship of money," he wrote in 1868.

And from all accounts, Gates also seems driven by motives other than increasing his already unfathomable wealth.

"Their belief in their vision, coupled by their belief in themselves, is finally what's driving them," said Chernow.

"They believe they see farther than most people."

It is that vision of the self as greater than humanity -— as the driving force behind the nation -— that allowed the Robber Barons to justify their most brutal practices.

"In the business arena, the standard rules of morality don't apply," said Brands. "What we're really looking for is efficiency. It doesn't do anyone any good to be nice to the weak. In a certain sense, competition is inefficient."

So for the Robber Barons of the last century, everything was forgiven by the efficiency they produced.

For all the criticism of his deals and labor practices -- which culminated in the bloody Homestead Strike in 1892 -- Carnegie could always point to the fact that increased productivity in his plants drove the price of steel rails down from $160 a ton in 1875 to $17 a ton in 1898. There is no doubt that the price decrease benefited all Americans.

And Rockefeller also saw every dark dealing as part of a bigger good: making oil cheap so every American could afford the kerosene that lit their houses before electricity.

"These people were delivered better products at lower price, and consumers weren't complaining," said Brand.

If Bill Gates approaches his dealings with the same sort of moral flexibility as the Robber Barons, it is clear that it is because he also views Microsoft as serving a larger purpose -- driving the country into the information age, experts say.

In a public letter written after the judge's ruling against his company, Gates proclaimed that: "In addition to Microsoft's long-standing commitment to innovation and competition we are guided by the most basic American values: serving customers, quality, integrity, partnering and giving to our communities. We will continue to strive to live up to these values, while we focus our efforts on building great software for consumers."

Baffled by backlashes
Throughout the 79 days of trial, Microsoft's entire defense seemed as if it could be boiled down to a single notion: That the company has been good for America and for consumers.

"Both Rockefeller and Gates are men who see themselves as public benefactors," said Chernow.

"They feel that they're very patriotic. They're slightly baffled that there's this public backlash. They're fairly puzzled by the discrepancy between their view of the world and the view coming out of Washington -- which they see as an inversion of the truth."

Brands said that both Gates and Rockefeller "deeply resent intrusion by the government."

"They feel they're much smarter than the government," Brands said. "It's not simply a matter of 'I'm right and you're wrong.' It's a matter of affront. I think neither Rockefeller nor Gates would have been as resentful had a competitor taken away their business."

When the government began investigating, each of them reacted with pure hubris. In twenty hours of videotaped testimony for the antitrust trial, Gates was shown as belligerent and obtuse, quibbling over the meanings of common words with government lawyers. But his way of responding to the government inquiry was nothing new.

Josephson describes Rockefeller's answers to government questions about a refiners' pool of 1872:
" 'Was there a Southern Improvement Company?'
'I have heard of such a company.'
'Were you not in it?'
'I was not.'

"His hearers were amazed at the apparent perjury he made point-blank with even voice and an inscrutable movement of the eyes. But no! He had been only a director of the South Improvement Company, and not of the 'Southern Improvement Company,' as the prosecutor had named it by mistake."

But Chernow pointed out that Rockefeller's anger at the government may be more justified than Gates', since the rules were quite literally changed on him in the middle of the game. Congress penned the antitrust laws primarily to break up Standard Oil. His business practices weren't against any law when he enacted them -- only later were they made illegal.

"Rockefeller is more easily forgiven for this, because Gates should have known better," he said.

It is easy to argue that the qualities these men share are necessary to build the hugely successful businesses they built.

One needs only look at Microsoft rival Apple Computers to see what a charismatic and visionary leader can do for a company that a conventional business executive can't. After Apple founder Steve Jobs was forced out -- primarily because of his notion of business as revolution serving a higher purpose -- the company floundered under the so-called professional managers who ran it in Jobs' stead. When the man who coined the term "Insanely Great" returned, so did the company's success.

But while the leader as cult-of-personality may be the key to turning a business into an empire, it is also risky, said Chernow.

"This type of person can become very dangerous because there's such a fanatical belief in yourself and your company," he said. "One has to assess how much good that company does and how much damage."

Making a difference with charity
But it is precisely that personality type -- the intense view of the self that borders on megalomania -- that also may be at the heart of the great philanthropy performed by the Robber Barons, and by Gates as well.

Paul Schervish, a sociology professor at Boston College who is an expert in philanthropy, said there are two factors that drive people to give away money.

"One is what I call individuality and the other is principality," said Schervish. "By individuality I mean the ability to conceive of oneself as having great expectations to make a difference in the world and having the sense of confidence to do so."

Principality "is the side that has to do with world building," he said.

Each of these men is what Schervish calls a "hyper-agent" in the process.

"Most of us are agents -- we are in search of and we hope to be finders of a way to be expressive of our place in the world," he said. "Hyper-agents are founders of the world."

In other words it is the same things that drove Gates, Carnegie and Rockefeller to build empires -- the idea that they could make a business that would reshape the world -— that drives them to make huge donations to charities and foundations. Their charity, in effect, becomes a continuation of their notion that they are changing the world — only now they reshape the world by giving their money wisely, rather than by running a crucial industry.

Before he died, Carnegie gave away nearly all of his wealth. He founded Carnegie Hall and the Carnegie Institution for the Advancement of Teaching. According to Paul Johnson's "A History of the American People," "In 1919 the Carnegie Endowment for International Peace published 'A Manual of the Public Benefactions of Andrew Carnegie,' which showed that $350,695,653.40 had then been spent on a huge variety of projects. They included the construction of 2,311 free public library buildings and the purchase of 7,689 church organs, a curious gift from a lifelong free-thinker."

Rockefeller, who had more, gave more -- a total of $550 million, according to Daniel Yergin's "The Prize: The Epic Quest for Oil, Money and Power." He founded Rockefeller University, financed the University of Chicago and Spelman College. His Rockefeller foundation gave away hundreds of millions of dollars, especially to medical research -- and is credited with finding a treatment for meningitis, a vaccine for Yellow Fever, and a cure for 500,000 cases of hookworm in the South.

Like them, Gates has given freely -- and in the mold of Carnegie has promised to give away 90 percent of his wealth before he dies. He has given $17 billion to the Bill and Melinda Gates Foundation, making it the largest nonprofit organization in the nation. The foundation, managed by Gates' father, gave away $1.5 billion in 1999 for things like vaccinations of third-world children and other "global health, learning and community programs," said foundation spokesperson Rose Berg.

It's almost as if giving away the money is a religious experience for Gates and the Robber Barons, Schervish said.

"It's in some ways the spiritual secret of money," he said. "They conceive of themselves as being effective -- and dramatically effective -- in the physical world. All of these people believe that wealth is an idol. Wealth as an idol is an immoral task, but wealth as an instrument is a moral task."

It also ensures their characters a positive cast in history, said Brand.

"They want to be remembered more than as someone who just made a lot of money," he said.

But for all the similarities, Schervish warns that "Robber Baron" may not be a fair term to pin on Gates.

"Both [words] are negative," he said. "One is aristocratic and the other is criminal. We generally have a much more ambiguous notion of the wealthy today. They have always been our sinners and our saints, but I think today we look at them more as icons."