Apple

Brad DeLong inquires about why he was wrong about Apple.

A decade ago it was very clear what was going to happen. Over time, more and more interesting applications would show up first on Windows and only later (or not at all) on MacOS, as Windows’s superior market share attracted more software development brainpower. Eventually Microsoft’s deep pockets would create a clear quality-and-usefulness edge between Windows and MacOS. And everyone left would–with a sigh–drop the Mac and get Windows machines.

My first bemused thought was “How has France survived?” But actually this is a question that does deserve more careful consideration. It’s a fascinating question. It does deserve a more sober analysis than it usually gets.

One answer is that Apple and Microsoft reached a treaty that exchanged all of Apple’s patent portfolio for access to key part’s of Microsoft’s network; i.e. Microsoft promised to do five releases of the Office Suite. It should be noted that agreement did not include access to Microsoft’s exchange server and calendaring network around castle outlook.

One answer is that the Apple ecology is structurally different and smaller. Both of these make it possible for Apple to evolve in ways that are harder for Microsoft. That in turn makes it easier for Apple to get early mover advantages on the for front of the four: Moore and his friends.

IPod is a nice example of that. The world’s total production of disk drives of the kind needed to make the IPod was appropriately sized for an Apple product; it wasn’t large enough for a Microsoft product. Microsoft needs to work in the footprint of the median commodity PC.

A third answer is that Apple had figured out that the desktop was dead in 1990, or so I’m told. The Internet is the third and fourth player at the game of Moore and his friends. It is beginning to look like the fourth player, the universe of network effects created by group forming on the communication substrate, is more potent than all the other three combined.

These third (exponential growth in communications) and fourth player have created a flurry of ways around Microsoft’s key bottleneck – i.e. disruptive innovation opportunities. Apple and others have begun taking advantage of these.

Since IBM commoditized the PC market Apple has run out in front of the commoditizers. That has scale only if the fecundity of new opportunities out runs the potency of the lock-in created by the network effects around those that play in the standardized commoditized markets. Moore and his friends have seen to that. This interplay between the new opportunities and the older web of complements is at the heart of the competitive struggles around Microsoft.

Job one at Apple is to stay in front of the commoditizers by creating value from the new opportunities. Job one at Microsoft is the keep the complements commoditized while drawing into the hub those proven innovations that might threaten that hub.

As Mitch Kapor said a very very long time ago about the irresistible advantages of the Macintosh v.s. the immovable object of the PC ecology – it’s very interesting.

It’s a fascinating puzzle and it deserves a lot more careful analysis than it gets.

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