Steve and Bill's Midlife Crises

In the spirit of giving (and the new administration) it’s time to consider the government laying off America Online and Microsoft.

AOL’s price for acquiring Time Warner is apparently the end of its monopolies on cable access and Instant Messenger ^SM. That’s only going to be true in law. In fact, there are tons of ways for regulated companies to frustrate such agreements (look to the Baby Bells for inspiration).

Microsoft figures the U.S. Court of Appeals will let it off anyway, but the company has already paid a ferocious price. Like IBM before it, Microsoft has been forced to layer itself in lawyers and other bureaucrats to fight the power.

A bureaucrat does for and to a corporate body the same thing fat does for and to a human body. It insulates, sure, but also renders you slower and more vulnerable. Fat can lead to heart attacks and strokes, to cancer and an early grave. But this holds true for corporations, too.

Of course, a certain bureaucratization is going to happen in any company that wants to institutionalize itself. When you hire thousands of people and build a corporate campus, you’re going to have people whose careers are tied to everything from the internal matters to the condition of bathrooms to the shape of the organization chart.

The great companies such as General Electric work hard to stay in corporate trim. They enter many different businesses. They make the training of executives a key part of their corporate mission, even if that means losing stars to companies like Home Depot.

Very few firms make this transition. It’s the hardest thing to do in the Fortune 500. The easy thing to do, once you dominate the market you were born in, is try to maintain that monopoly. It’s the corporate equivalent of sitting at home with popcorn and beer watching College Bowl Games.

For Christmas the new administration will give AOL and Microsoft that choice. It’s not going to “pick winners.” It’s going to let Steve Case and Bill Gates freely decide whether they want to sit on the couch and get fat or seek new markets and stay lean.

And what would be the corporate StairMaster for Case and Gates?

For Case, it might be the corporate market. AOL dominates the consumer Internet, but it does little for businesses.

Gates has fewer options because Microsoft has tried repeatedly and unsuccessfully to get into services and hardware.

Changing habits and launching a new exercise program is never easy — for people or corporations. But the alternative, I think, is far worse than another round with the government.

So the best thing Gates and Case can do, I think, is to join their brethren here in the dot-com world and haul out the pink slips. Let layoffs reign among the lawyers and PR people. Let unemployment come to the Microsoft and AOL bureaucrats. Shed the fat, and find new markets to compete in.

Maybe we can’t stay young forever, guys, but with a little imagination our companies can.