Apple just overtook Microsoft to become the second largest US company, China
just overtook Japan to become the world's second largest economy, both Apple and China
have authoritarian characteristics, is there a connection? Does the success of
Apple tell us anything about the economic efficiency of authoritarianism? Is the
Apple vs Microsoft debate a microcosm of the State Capitalist China vs
Laissez-Faire USA debate? I think so, and the following three points (taken from
this longer article of mine) illustrate
this:
1. The chaos of laissez-faire. Apple is famous for its closed
hardware system, the PC is famous for open standards and competition. You would
have thought we would all prefer an open system, but it can become chaotic. For
example, Apple was able to build such an amazing iPhone because it owned both
the software and hardware. This is another example of the famous Railway
Privatisation Problem in the UK which was designed to introduce competition but
ended in chaos. A closed system is often associated with higher prices, but
economies of scale can actually work to the advantage of a more monopolised
market. Apple now has economies of scale no iPhone or iPad competitor can touch,
it could undercut competitors if it wanted, but of course it makes more money by
maintaining a premium price. In fact, the biggest danger of a monopolised market is excessive prices. Apple
now makes vast profits as a result of being able to set their prices according
to what consumers are willing to pay - in a competitive market prices instead
converge on what it costs to make the product. Lenin argued that free markets
degenerate into monopolies earning excessive profits, but his collective
ownership solution failed miserably. The trendy new theory on the block is
Chinese State Capitalism which prevents companies from making excessive profits
and abusing the market either by heavy handed regulation or state ownership.
2. The evils of laissez-faire. A key element of the Apple concept is the
App Store, of protecting the consumer from bad software. One
of the problems with commercial software is that it tends to become,
to some extent, mal ware. Look at Norton Anti Virus - my personal favourite
example of a god awful product driven by commercial pressures. Norton pay lap
top manufactures to include it on on the machine. They make it as hard as they
can to uninstall. They fill it with lots of junk features you don't actually
need, but because you are not an expert, you can be tricked into thinking you do
need. They love messages that pop up so you retain brand awareness. They report
harmless things as malicious to trick you into thinking they are doing a great
job. Office Ribbon is another example of the problem of commercial pressures.
Disappointed that users were not bothering to upgrade Microsoft set up to create
something totally different. The change was not driven by virtue, but by profit.
The idea of capitalism is that it is efficient because the end user buys what
maximizes his personal contentment. The complaint against capitalism is that the
limited expertise and irrationality of consumers, combined with the selfish
motives of producers, creates anomalies which destroy the utility maximizing
process. Instead you end up with products that damage personal contentment.
3. The need for authority. Apple is famous for its top down management style. A "top down" approach is
one in which decision making is concentrated at the top of an organisation.
Steve Jobs is the classic example of the visionary genius who rules like a god
over his minions. A "flat management" approach, by contrast, places greater
emphasis on the collective intelligence of the organisation. Most technology
companies have evolved toward a more flat structure because the technical skills
of the engineers are so vital to the process. One problem with a flat management
structure is that consensual visions can lack originality. Incidentally there is
another structure, more associated with political parties, called "bottom-up"
which draws on the intelligence of the grassroots. What has all this to do with
economics and politics? If human beings have vastly different levels of skill in
a certain areas, it calls into question the efficiency of allowing individuals
to make decisions about these areas. Why have a free market in mobile handsets
if the ability of Steve Jobs to judge the relative worth of competing handsets
is infinitely higher than the average mans? Free will in this choice becomes
worthless, it just hurts people by letting them make the mistake of purchasing
Windows Mobile. Of course Apple only make one handset and people may have
different needs, so this argument is over extended. Yet you see the point that
once human beings are no longer equal anomalies open up in the democratic and
capitalist model.
These three arguments taken from the Apple-Microsoft example are insights into
the wider debate swirling around the world today between the American and the
Chinese economic models. Yet I am not suggesting authoritarian Apple should be
boycotted in favour of democratic Windows/Linux. Pragmatism, not ideology, should guide
our purchasing. I don't mean by that scientific thinking instead of artistic
feeling. Just as the sight of a beautiful picture generates positive feelings,
for many people computers are aesthetic objects that bring joy to their lives,
these aesthetic feelings are not what I mean by ideological. For example, I love
my iPhone so much I can cheer myself up just by looking at it or playing with
the cool interface. Before the iPhone I had a Nokia with a black & white display
which, unlike modern mobiles, had no timeout. The long battery life, the
functional display, and humble design were features I loved. Ideology is when we
refuse to open our mind to the choices before us and honestly compare relative
merits with detachment. Plato argued that irrationality is inhibited love, this
is why he described Socrates and Diptoma as living in a state of bliss, because
they never allowed impurities to obscure the flow of understanding and lived in
state of total love toward the good they percieved around them. Anyway, the
Apple Microsoft debate is a fascinating one because it stirs up particularly
passionate clouds of irrationality, much to delight of Apple's marketing team!