Gates may not shine at forecasts but reactions are usually on target

For pure chutzpah this week, I nominate the words of Mr Bill Gates, founder and chairman of software monolith Microsoft.

Addressing editors and reporters at the World Economic Forum in New York on Sunday, he gave a Microsoftian analysis of the world economy. In contrast to many economic experts who presented cautiously optimistic predictions for a general upturn in 2002, Mr Gates said he expected things to stay static.

Let's go back over a little Microsoft history before we get too worried about what will or won't happen in 2002. Microsoft, under Mr Gates's leadership, has never been particularly good at predicting trends in its own business of software development.

Any history of the company is full of moments where Mr Gates made a decision to pursue one developmental course of action only to discover that the market wanted to go in other directions.

For example, Windows only came about after Apple's Macintosh computer clearly proved that a graphical user interface (GUI) was far better than DOS, Microsoft's operating system that used a command line interface. In other words, people much preferred to interact with their computers using a mouse and clicking on images on a screen than by typing in text commands.

Later on, Mr Gates famously shrugged off the significance of the young medium of the internet. He saw it as a rarified environment that would remain the domain of researchers and universities, not an eventual mass-market phenomenon.

There are other examples - Microsoft's recent forays into WebTV, which failed to inspire the public. Then there was the company's initial belief that businesses would hardly take seriously a free operating system, Linux, which didn't come from a specific company that could be sued if things went wrong, and which depended on an anonymous army of programmers who volunteered their time to fine-tune it and solve users' problems.

In New York, Mr Gates also said he didn't think a standstill economy was all bad, especially if one considers the silly spend-without-profits business model adopted by many new economy companies.

"The sobriety will stay, the sombreness will stay. It's very healthy. . . I like this period where people are forced to play by rules driven by economic sense," Mr Gates said.

Now that made me laugh out loud. Especially since he seems to have made this statement with a straight face.

I cannot believe Mr Gates is not chewing his nails over whether the economy will climb out of its current rut, especially since Microsoft introduced a major new revamp of its operating system, Windows XP, into the current malaise. Sales, good. Product on shelf, bad.

And the comment is a bit rich coming at a time when many feel Microsoft is so huge and powerful that it shapes the economy, especially the technology economy. Indeed, the US courts found this to be true during the long antitrust trial brought against the company by the Department of Justice.

Once a firm reaches a certain size and influence, it no longer has to play entirely by the rules of economic sense. It determines those rules for other companies dependent upon its products. It has enormous - and, ruled the courts, uncompetitive - advantage over rivals. At such moments, US antitrust law dictates that companies should be legally restrained.

But of course, at the moment it doesn't look as if a new administration in Washington is going to apply very many restraints at all, a subject of great bitterness for many in the technology industry.

Which brings me to a final observation on the ironies of Mr Gates's statements. As he himself added: "We don't tend to be experts in forecasting."

Nor has he needed to be. Microsoft is an example of a very, very smart company that sometimes may not get its predictions right but almost always gets its eventual reactions right. Love it or hate it, Microsoft turns on a dime when it realises it's got a product wrong - or maybe just not quite right.

It will axe pointless developments rather than keep trying to make consumers love what they do not want to love. That astuteness, ambition and cold business sense has made the company one of the great technology success stories.

That doesn't mean it always has great products, and one can also argue that it so broadly infiltrates the tech market, in so many areas, that businesses and consumers are herded into making Microsoft purchases. Clearly this is true to an extent: I've chosen to use Microsoft products at times - not because I think they are the best choice - but because everyone else is using them and it causes me more of a headache not to use them.

In my case, Microsoft determined the rules of "economic sense", just as it did for many of its competitors and client companies, according to the courts. A bit rich, then, for Gates to sit on top of his money mountain and say he's glad other companies have a new sobriety and sombreness when it comes to conducting their businesses.

But people forget that Microsoft was also once a small and struggling company. A company doesn't become a massive success and grow to dominate in broad product areas purely because it employs a phalanx of lawyers and, at times, has unfairly threatened competitors. That's why I find some of the more clichéd criticisms of Microsoft utterly specious.

And as internal emails produced during the antitrust trial make clear, Microsoft is well aware that its tenure at the top of the tech heap could end at any time and in totally unpredictable ways.

After all, who could have guessed in the 1980s that then-tiny Microsoft would prove to be the arrow in giant IBM's Achilles' heel, causing the one-time titan to stumble and very nearly fall for good. Microsoft is well aware that the leading technology company names of the previous century are nearly all faded memories now, vanquished through mergers or corporate death.

So take Mr Gates' comments with some scepticism and in the full knowledge that, whatever happens with the economy, Microsoft will undoubtedly, and yet again, be one of the first companies to react to whatever swings and roundabouts lie ahead.