The EconomistJuly 27th 2019 Leaders 112 The shock of intervention would probably take the dollar
lower—for a while, at least. But interventions have a better
chance of working in the longer term if the currency is way out of
whack. That is not obviously the case. Currencies roughly reflect
economies’ relative strengths. America’s has proved the most re-
liably resilient. Yields on Treasuries are still the highest in the
rich world. Global investors look to America’s capital markets as
the place to find the digital firms of the future, rather than to Eu-
rope, whose bourses are heavy with banks and carmakers.
Without a surge in gdpgrowth outside America, it would
probably take a hefty intervention to keep the dollar down. Stan-
dard Chartered, a bank, puts the required commitment at
$200bn-400bn. Printing dollars to sell would complicate mone-
tary policy, but that is a trivial objection. The Federal Reserve is
set to cut interest rates in any event (which might itself weaken
the dollar a bit). A bigger headache is which currencies to buy. It
is hard to put a lot of money to work quickly in non-dollar assets.
The most liquid markets are in euros and yen, where the safest
bonds have negative yields. Of those, the one large market with
positive yields is Italy. If America bought Italy’s bonds, it would
help cut its borrowing costs—an odd kind of punishment.
An advantage that America has over China, its strategic rival,
is its open capital markets. A one-sided intervention to weaken
the dollar would undermine that. Foreign investors would think
twice about betting on dollar assets if Washington reserved the
right to bet against them when it sees fit. Though Mr Trump is an
unlikely history student, it may be wise for America to recall
Britain’s dilemma in 1967. It had dawned on Britain that having
one of the world’s main currencies was at best a mixed blessing.
Allowing the pound to weaken would be a salve to an economy
that had trailed the rest of Europe, but it would also hurt the
many foreign allies who kept their reserves in sterling. When de-
valuation came, there were feelings of relief but also of regret.
These days sterling is a shadow of its former self.
The best remedy for the dollar’s strength is stronger eco-
nomic growth outside America. Fiscal stimulus across the euro
zone would help, of course. But one policy is in the gift of the
White House. An end to the trade wars would lift the fog over the
world economy. Sue for trade peace, Mr Trump—and watch the
yuan and the euro rally against the dollar. 7I
t must feelgood to be back on top—and this time, almost
liked. Twenty years ago Microsoft was considered an evil em-
pire, scheming for domination and embroiled in a bruising anti-
trust battle with America’s Justice Department. Five years ago,
having dozed through the rise of social media and smartphones,
it was derided as a doddery has-been. Now, after several stellar
quarters—this month it reported revenue of $33.7bn, up by 12%
year on year—Microsoft is once again the world’s most valuable
listed company, worth over $1trn. How did Satya Nadella, the
boss since 2014, pull off this comeback? And with American
trustbusters starting on a new review (see Business section) of
“search, social media, and some retail services online”—ie, Goo-
gle, Facebook and Amazon—what can the other
tech giants learn from Microsoft’s experience?
First, be prepared to look beyond the golden
goose. Microsoft missed social networks and
smartphones because of its obsession with
Windows, the operating system that was its
main moneyspinner. One of Mr Nadella’s most
important acts after taking the helm was to de-
prioritise Windows. More important, he also bet
big on the “cloud”—just as firms started getting comfortable
with renting computing power. In the past quarter revenues at
Azure, Microsoft’s cloud division, grew by 68% year on year, and
it now has nearly half the market share of Amazon Web Services,
the industry leader.
Second, rapaciousness may not pay. Mr Nadella has changed
Microsoft’s culture as well as its technological focus. The cult of
Windows ordained that customers and partners be squeezed and
rivals dispatched, often by questionable means, which led to the
antitrust showdown. Mr Nadella’s predecessor called Linux and
other open-source software a “cancer”. But today that rival oper-
ating system is more widely used on Azure than Windows. Andmany companies see Microsoft as a much less threatening tech-
nology partner than Amazon, which is always looking for new
industries to enter and disrupt.
Third, work with regulators rather than try to outwit or over-
whelm them. From the start Microsoft designed Azure in such a
way that it could accommodate local data-protection laws. Its
president and chief legal officer, Brad Smith, has been the source
of many policy proposals, such as a “Digital Geneva Convention”
to protect people from cyber-attacks by nation-states. He is also
behind Microsoft’s comparatively cautious use of artificial intel-
ligence, and calls for oversight of facial recognition. The firm has
been relatively untouched by the current backlash against tech
firms, and is less vulnerable to new regulation.
True, missing the boat on social media
means thorny matters such as content modera-
tion pose greater difficulties for Facebook and
Google. Still, others would do well to follow Mi-
crosoft’s lead. Apple has championed its cus-
tomers’ privacy, but its treatment of competi-
tors’ services in its app store may soon land it in
antitrust trouble. Facebook and Google have
started to recognise that with great power comes great responsi-
bility, but each has yet to find its equivalent of Azure, a new busi-
ness model beyond its original golden goose. Amazon, in its am-
bition and culture, most resembles the old Microsoft.
Even a reformed monopolist demands scrutiny. It should not
be forgotten that Microsoft got where it is today in part through
rapacity. Critics argue that in its battle with Slack, a corporate-
messaging service which competes with a Microsoft product, it
is up to some of its old tricks. A growing number of women at the
firm are complaining about sexual harassment and discrimina-
tion. The new Microsoft is far from perfect. But it has learned
some lessons that other tech giants should heed. 7Rebooted
What the software company’s surprising comeback can teach other tech giantsMicrosoftMarket capitalisation
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