Chapter 23: Oceans of FUD

When Gene Amdahl coined the word "FUD" (for fear, uncertainty and doubt) in the mid-1970s, his ire was aimed at Frank Cary, chairman of the Board at IBM, who was waging a no-holds-barred attack on Amdahl, Itel, Control Data, and the other small companies that were selling machines that competed with the IBM 360/168. According to Robert Sobel:1

The campaign began in a conventional fashion. IBM salesmen and executives visited clients who were thought to be considering plug-compatible machines, to warn them of problems that might arise should Amdahl or National Semicomputer leave the business. There was talk of reduced maintenance on IBM peripheral equipment hooked onto other mainframes, of software changes to eliminate or reduce compatibility, and of alterations in hardware that could make the Amdahls less compatible than advertised.

Sound familiar?

By the end of 1997, Eric Raymond had delivered "The Cathedral and the Bazaar" at least twice: at Linux Kongress in May and at the Perl Conference in November. It appeared on First Monday online in 1998, on paper in Matrix News in three installments (June, July and August 1998), and in book form in 1999. It does not seem to have been read in Redmond, WA.2

In the May 1999 issue of Microsoft Internet Developer, Douglas Boling wrote:

While free distribution is a great marketing tool (think about all those samples you get in the mail), what does it say about the product itself? Frankly, it says that the product (or the effort that went into making the product) has no value. Is that what you software engineers out there want?
... If ... you gave away all software, how would you pay the creators of that software?

Boling goes on, but I'll spare my readers. I was also going to cite Microsoft's "Linux myths," but that page is no longer accessible at http://www.microsoft.com/ntserver/nts/news/msnw/LinuxMyths /asp

It was there I read that there were "hundreds of UNIX vendors with no 'standard' flavor of UNIX" [take that, POSIX!]. And that "Windows NT 4.0 Outperforms Linux on Common Customer Workloads" [inability of the Linux stack to handle multiple network cards on SMP machines adequately was the vital "Customer Workload," incidentally].

But in August 1999 Red Hat had its IPO and, by Christmas, it had acquired Cygnus and VA Linux Systems had had its IPO. Free software was becoming big business.

But then, so was nearly everything else. Pets.com, boo.com, and a variety of other fantasies blew hundreds of millions of dollars.

In 1999 we were nearly at the peak of what was (retrospectively) known as the Dot-Com bubble: the dot-bomb. But a look at history is needed.

NASDAQ was begun in 1951. By 1990 it was a good-sized marketplace with a large number of new and recently-formed corporations holding their IPOs (Initial Public Offerings). Many of these were hi-tech; many were in areas previously untested -- selling products over the Internet, setting up and using Web sites, indulging in e-commerce rather than selling products in shops. Some of the new companies were actually involved in Information Technology, rather than using it. But they all seemed to show great promise, and folks didn't want to miss the boat.

After the stock market crash of 1987 (in which the Dow-Jones average dropped 22.6% and lost about $500 billion on October 19), the markets around the world continued their bullish ways. In the early 1990s, the personal computer was becoming a household object and the advent of the Web made access yet more user-friendly. 1994 saw the business world "discover" the Internet as a commercial opportunity, and yet more companies were formed. Amazon began in 1994; eBay in 1995. On December 5, 1996, Alan Greenspan warned of "irrational exuberance" as evidenced by the rapidly rising stock prices.

In 1997, NASDAQ announced a new listing standard: it would base new listings on market capitalization alone, basically telling the world that accounting regulations hindered many new firms, preventing them from listing. There was a surge of registrations. In fact, "nearly 50% of the new listings between Aug 1997 and June 2000 entered under the market capitalization standard." 3

Greenspan's warning didn't count. From 1996 to 2000, NASDAQ went from 600 to 5000. And then it crashed. Within six weeks, NASDAQ dropped from 5000 to 2000, then to 800 (in 2002). MicroStrategy, a soaring business-software provider, fell from $3500 per share to $4, the victim of an accounting scam. On December 14, 2000, it was at $15.19. The emperor had no clothes. On March 10, 2000, the NASDAQ fell from its peak of 5132.52. Over five years later, at the end of 2005, it had climbed back to 2200. Even Microsoft dropped from over $60/share to $20/share in 2000-2001, losing two-thirds of its (paper) value. It closed 2005 at under 50% of its peak.

Looking at Klein and Mohanram again, "367 non-financial firms [were] listed under the Type 3 criteria between ... August 1997 and the end of the hi-tech IPO boom in June 2000. Without this alternative, none of these 367 firms would have entered the NNM [NASDAQ National Market] on their entry date." Moreover, "over a four-year event-time window, Type 3 firms earn significantly less than other NNM new listings..."

Klein and Mohanram illustrate that the inflation of the bubble (and its bursting) were not merely "irrational exhuberance," but specifically an "irrational exhuberance" concerning barely-understood yet extensively hyped hi-tech ventures. No idea was too bizarre to invest in.

These last few paragraphs are a background. The rise and ebb of FUD has consistently followed the rise and fall of the stock market or the rise and fall of (perceived) commercial threats. Thirty years ago, the rise of "other" mainframes worried IBM. The collapse of its stock price worried Microsoft. So did the fact that new offerings were not really in the offing.

One of the useful forms of past FUD had been "preannouncement" -- press concerning wonders of the future. Following what appeared in The Register, we can find:

But then, on July 22, 2005, Microsoft issued a press release:

Media Alert: Microsoft Unveils Official Name for "Longhorn" and Sets Date for First Beta Targeted at Developers and Professionals.

The date of release was August 3, 2005.

What's the function of this?

Let's suppose that you're the CIO or CTO reporting to the CEO of a Fortune 1000 company. Microsoft targets its marketing pitch at that CEO. Your company is going to invest lots of cash, dollars, yen, pounds, euros. Do you take a chance on the unknown (Mandriva, SuSE, Red Hat) or stay with the familiar (known to your CEO) and wait? Remember: No one ever got fired for buying {IBM, XEROX}.

Preannouncement is one tactic; planting "news" is another; questioning bonae fides is a third.

As an illustration, here are some data from 2003:

License fees, private equity investments. Shoring up confidence in a company; raising questions for potential customers; stalling for time when an OS is delayed; paying the lawyers (Boies, Schiller received a $31 million fee).

Nearly a year earlier, in 2002, the Alexis de Tocqueville Institution issued a white paper by Kenneth Brown using, according to Richard Forno, "'terrorism' and 'national security' [in ] shameful attempts to use fear, uncertainty and doubt to push Microsoft's monopolistic agenda." 4

In May 2004, the Institution and Brown resurfaced. This time, Brown put out a "study" which claimed that Linus Torvalds wasn't the father of Linux at all. Here's a part of the press release:

In one of the few extensive and critical studies on the source of open source code, Kenneth Brown, president of AdTI, traces the free software movement over three decades -- from its romantic but questionable beginnings, through its evolution to a commercial effort that draws on unpaid contributions from thousands of programmers.
Among other points, the study directly challenges Linus Torvalds' claim to be the inventor of Linux.
Brown's account is based on extensive interviews with more than two dozen leading technologists in the United States, Europe, and Australia, including Richard Stallman, Dennis Ritchie, and Andrew Tanenbaum.
"The report," according to Gregory Fossedal, a Tocqueville senior fellow, "raises important questions that all developers and users of open source code must face.
"One cannot group all open source programmers together. Many are rigorous and respectful of intellectual property. Others, though, speak of intellectual property rights -- at least when it comes to the property of others -- with open contempt."

Linus responded, saying it was true -- he had been found out, "The true fathers of Linux are Santa Claus and the Tooth Fairy."5

Andy Tanenbaum was less easygoing: "Brown is not the sharpest knife in the drawer," he posted.

While listed as a 124-page E-Book, Mr. Brown's opus is "not yet available," over 18 months after the press release.

In general, FUD has quite limited utility. In the 1970s it could be somewhat effective. The growth of the Internet has reduced that: reality moves around at the speed of light. And while Don Basilio was right about rumors (in Rossini's "Barber of Seville"), technology has caught up with him.


1IBM: Colossus in Transition (Times Books, 1981), chapter 15

2There will be further discussion in a future chapter on "literature."

3 I am indebted to the extensive analysis of April Klein and Partha Mohanram, "They Came, they Conquered, they Collapsed" (March 2005). http://www.lerner.udel.edu/finance/Seminar_Papers/listingrequirements_7.pdf

4"Alexis de Tocqueville Serves Up a Red Herring," Security Focus June 19, 2002. The paper, "Opening the Open Source Debate," is available at http://www.adti.net/ip/opensource.pdf.

5Linus Discloses "Real" Fathers of Linux," LinuxWorld May 17, 2004.