Culture, Network Effects, oh and Apple

Where ever you get a strong network effect you get a complementary culture. The network effect draws into it’s thrall a large set of players; it attracts them, it locks them in. So a group is formed. The common cause of that group is leveraging the network effect. The common rituals of group is it’s culture. Much of the culture’s rituals emerge early and evolve in a very path dependent way. Group members, embedded inside the culture, can’t see that. It becomes difficult to tease apart what elements of the culture are necessary to maintain the network effect from those elements that are historical and act only to create those weaker, but still useful, benefits that arise from having everybody playing by similar rules.

Sometime, even often, the culture around a network falls into particular rituals that over time become dysfunctional. Which is to say they are more costly than some alternative. Switching to that alternative is amazingly difficult to orchestrate. For example consider a region that all speaks the same language. Then, just to get a concrete example, imagine that the culture of the region is very hierarchical. Then, again just to be concrete, assume that the rate of innovation is substantially higher in non-hierarchical cultures.

I got to thinking about his because Apple has decided to switch processors. The power-PC culture is very different from the x86 culture. Some of the rituals you find in each culture are cool. Some are bogus. The x86 DRM, for example, is very bogus. It looks like the Apple culture is now stuck with that.

What causes a citizen of one culture to abandon his loyalties and shift to another? It’s never the case that the citizen switching loyalty knows what the new culture has to offer him. He can only read the brochure. You have to live inside a culture for quite a while to be able to know it. For example people often move to France or Japan having tasted a sample of the culture, stay for a while and then come home again. Because of my general interest in the middleman I’m very interested in people with this kind of dual loyalities. Since a very key group of people at Apple were at Next, which was x86 based, we can assume that they have mixed loyalties.

There are standard scenarios for why a shift of loyalty happens. Some of them are pull in nature. The exotic, the taste of exciting opportunities, enthusiasm for to this or that element of the new culture. Many of them are push. The old culture is in decay, the opportunities are drying up. the cultural experience has grown stale. In extreme cases the citizen if forced – war, plague, famine, economic displacement.

What is the story for the Apple processor switch? Did the DRM issue force them? Has Intel become the land of opportunity? Are the Next guys sick of the culture shock and want to go home? Is the network effect around the PowerPC drying up? I tend to lend toward thinking the reason Apple switched is that the network effect around Intel is just too strong – that it’s the land of opportunity and Apple had to immigrate.

Apple has a super-power which other vendors lack. They control their hardware and their volumes are smaller. That means they can be first to market with the coolest shit. They can be the first to move to flat screens. They can be the first to move to wireless. They can be the first to move to firewire. They can be the first to move to GUI. It’s a standard pattern for Apple. For example they bought up all the production volume of those cute tiny disk drives and created the iPod. This super-power is why Apple can lead the industry, as an innovator.

Part of the super-power is control over their hardware. That makes it easier for them to coordinate their steps as they chase after Moore’s law and his friends. When Microsoft wants to take a step forward they have to orchestrate the high school band of PC vendors while sharing the conductor’s podium with Intel.

Part of the super-power is small installed base. They can move before the producers one back from them in the supply chain is capable of producing sufficient volume to supply the entire PC installed base. This is key to why Apple has repeatedly thru out it’s history generated really cool products and then not been able to meet the demand. It’s not Apple that couldn’t meet the demand, it’s some cool component that enabled their cool product that couldn’t meet the demand.

Maybe Apple’s move is a sign that they are relinquishing this second part of their super-power. Maybe they really want to grow out of their small market share, giving up the advantages it gives them.

On the other hand maybe Apple want’s to play the same game they have always played. Maybe there is something really cool in the component stream from Intel. Something that will let them create a really cool product out in front of the rest of the industry. I hope this is why. In which case I wonder what cool product this will let them announce for the Christmas season.

0 thoughts on “Culture, Network Effects, oh and Apple

  1. S Woodson

    Interesting concept of culture. In the 6th paragraph you write, “Are the Next guys sick of the culture shock and what to go home? ” Do you mean ‘want’?

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