In his great little one-man show, Feisty Old Jew, my old friend Charlie Varon makes copious use of the word “vigorish” or “vig” — a Yiddish word so outlandishly pungent that half the audience regularly assumes he made it up. (He actually polls the house, impromptu, each night.)
Me, I knew it was a real word. I knew that it refers to the percentage of a bet a bookie takes for himself — or, more broadly, any commission on a transaction. I knew this because “vig” had cropped up in a prominent way in the annals of the ’90s Internet boom. When I first heard it then, I couldn’t quite shake the suspicion that the man who had used it, Nathan Myhrvold of Microsoft, must have made it up, so I looked it up.
At Microsoft in the ’90s, Myhrvold was known for writing voluminous in-house memos dedicated to crystal-balling the tech future. In a much-circulated 1993 memo titled “Roadkill on the Information Highway” (RTF file) he introduced the term “vigorish” to readers. But he really put it to work in a 1994 followup — a memo that tried to make up for the previous one’s inexplicable failure to account for, or even mention, the Internet, which was not the form Myhrvold or most everyone else at Microsoft had expected the “information highway” to take.
One of the reasons the Internet took Microsoft and so much of the tech industry by surprise was that its government-and-university roots and its open-computing culture made it seem like a singularly inhospitable place to do business. Microsoft was halfway through building its own Microsoft Network as a competitor to Compuserve, Prodigy, and AOL when the Web browser known first as Mosaic and then as Netscape started getting popular in 1994. Sure, the Internet was opening up to commerce thanks to recent regulatory changes; but why would you want to set up shop there?
As Ken Auletta wrote in a May 12, 1997 profile of Myhrvold for the New Yorker:
It also infuriated Myhrvold and Microsoft that the Internet was free. They saw it as a flower-child culture that disdained profits and copyrights — and Microsoft… “Nobody gets a vig on content on the Internet today,” [Myhrvold] wrote. “The question is whether this will remain true.”
We all know what happened after that: Microsoft gathered its forces and smote Netscape, preserving at least another decade of massive profits and sparking a federal antitrust suit. Meanwhile, the Internet became a pretty good place for at least some people to make a lot of money.
I revisit this tale of yore partly because the word “vigorish” is just such a treasure (as is Charlie’s show — go see it if you get the chance!), and partly for two more substantive reasons: It puts today’s news of Microsoft layoffs in perspective, and it reminds us of how heavily today’s Web business depends on “vigs.”
Sic transit gloria Microsoft
Today Microsoft announced roughly 18,000 layoffs. That’s a lot of jobs to vanish, even if more than half of them are from the company’s recent acquisition of Nokia’s phone business.
Microsoft isn’t going away; heck, IBM is still around and making plenty of money. But Microsoft isn’t exactly leading the industry the way it did when Myhrvold was writing those memos (these days, he’s busy buying up patents and publishing $600 cookbooks). It has been displaced as thoroughly as it displaced its mainframe and mini-computer predecessors.
Myhrvold’s dream of Microsoft interposing itself as the Internet’s middleman, taking a vig from every transaction, never came true, thank goodness. Microsoft already took another kind of vig from us in the form of Windows and Office licenses and upgrades, but those are less and less central to our work lives, and almost irrelevant to our casual/personal digital lives.
It was hard to imagine such an outcome in the late ’90s. It is similarly hard today to imagine a relatively near-term scenario in which any of Google, Facebook, or Apple have faded into near-irrelevance in shaping the future. Rest assured: it will happen.
Today, you can’t click without tripping on a vig
The Web remains relatively vig-free today: if you set up shop there, you need to pay for hosting, but there aren’t a lot of people squeezing a percentage from you. (There are credit-card transaction fees, but they exist offline as well.)
But as we move into the world of mobile and apps, in which private vendors maintain tighter holds on app and content distribution, we’re suddenly back in the land of the vigorish. Apple’s app store takes a big fat cut, as do most other app stores. Ditto for content marketplaces like the iTunes store and the Kindle store. Apple makes sure to get a cut of in-app purchases, too. As Mike Cane wrote in a 2011 post, the day Apple’s app store started insisting on its cut of in-app purchases was “the day Apple became Nathan Myhrvold.”
These are obvious vigs — but there are other kinds. Facebook and Twitter both take a slice of us, too, not from our transactions but from our social lives and our attention. Think of this as an emotional vigorish.
The “disintermediation” so many predicted back when Myhrvold dreamed of vigs was real enough. But today we are facing a new infestation of middlemen, in previously not-intermediated realms like finding a parking space or booking a restaurant reservation.
If you don’t like that — I don’t — it can be a frustrating moment in digital time. But hold tight: This sort of market advantage is usually fleeting.
It’s not that some competitor will come along and beat the app store at its own game. Instead, our needs and habits will change, and just as we find that we can get along OK without Microsoft Office, we will wake up one day and realize that we haven’t spent anything at an app store in ages.