iDay – welcome to the age of insanely great products

iphone.jpgHere’s an early review of the iPhone. I’m not actually a fan of the iPod though it’s amazing how large its market share is in a market in which it doesn’t have many strong natural monopoly advantages – just ‘first mover’ advantages. It doesn’t record radio so I buy other machines (which are less easy to use).

I’m in no hurry to buy an iPhone either. Still I read the review with relish. And it’s remarkable to think what an amazing guy this Steve Jobs is. A bit like John Maynard Keynes really, who managed world influencing things three times in his life. Keynes has the Economic Consequences of the Peace (1919), The General Theory (1936) and the management of the English war economy through to his influence over post war reconstruction from 1943 till his death in 1946.

Jobs has the Apple II, the Mac, the iPod and perhaps the iPhone which if the review is correct is on a par with these achievements.

But to look at the iPhone as a laundry list of features and bugs is to miss the point (though if you did, the former would commandingly outweigh the latter). The iPhone isn’t just the gadget du jour, it’s a fresh new platform, an exceptionally powerful mobile computer that’s still in its infancy. There’s a full version of Apple’s desktop operating system in there. The Palm and the Treo, et al., were merely harbingers of the era of true walk-around mobile computing that Jobs has just inaugurated. Hail to the chief.

Apple and its partners are just beginning to figure out how to develop for this thing. Look at the iPods of five years ago. That monochrome interface! That clunky moving touchwheel! They look like something a caveman whittled out of a piece of flint using another piece of flint. Now imagine something that’s going to make the iPhone look like that. You’ll have one in a few years, and it’ll be cheaper, too. If you’re not ready to think different, then think ahead.

And (though I know the analogy I’ve made above is a little ridiculous) allow me one other indulgence. One of the themes of these achievements of Jobs relates to a little obsession of mine that Troppodillians may be familiar with. I think we routinely underestimate the value of (qualitative) feedback between economic agents. Well three of Job’s great leaps forward (and most obviously his second and greatest leap – the Mac and his realisation of the power of the graphical user interface) excel not in the way in which they directly do what something else before has not done – but in terms of the way in which they relate to the user. He is an innovator of systems and of interfaces between agents – more particularly between us people and our machines.

Further, I guess many producers of goods and services like the idea of ‘insanely great products’. I guess the folks at Mercedes and BMW think that way. Maybe they always did. But Jobs’ great good fortune (and ours) was that he was born at a time not only of sharply rising affluence, and so preparedness to pay for insanely great products, but also at a time when making something insanely great need not cost more than making it OK (did someone mention Microsoft?).

Of course Macs do cost more than PCs and iPhones cost more than your average phone right now. That’s partly because our friend Steve is taking his cut – because he can. But at least in the case of the Mac this strategy of charging a hefty premium for good design was a mistake – a mistake that Jobs may well not have persevered with had he remained at Apple (but who knows).

My point is that Steve’s genius and the grand talent of his hirelings will be amortised in no time and so in a few years sold back to us for the near zero marginal cost it takes the company to roll out another copy.

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24 Responses to iDay – welcome to the age of insanely great products

  1. Jacques Chester says:

    But at least in the case of the Mac this strategy of charging a hefty premium for good design was a mistake – a mistake that Jobs may well not have persevered with had he remained at Apple (but who knows).

    I don’t think you’re right, for two reasons. The first is that the premium on a Mac these days isn’t that hefty. And secondly because it boosts Apple’s profit margins over their making-tiny-profits-on-vast-volumes competitors like HP and Dell.

    In fact every company that decided to ditch proprietary platforms for Wintel has suffered for it, especially at the fat-margin highend. HP gave up PA-RISC and HPUX, Compaq killed Tru64 and the Alpha when they bought DEC, SGI has been struggling for years after stopping forward movement on MIPS and Irix. The 90s push towards Wintel architectures is mostly to blame, though Intel achieved a first by killing 3 high performance processor families with no more than a press release.

    The only companies who still do complete systems design are IBM (AIX, zSeries, POWER, AS/400) and Sun (SunFire, SPARC, Solaris) . Who coincidentally make a good thing on their stuff. Apple is in a similar boat with OS X, though over the years they’ve steadily dropped proprietary hardware.

    Since Steve Jobs came back to Apple, the stock has risen from $7 in early 2001 to $120 today. That’s including a stock split. I don’t know about you, but I think Apple know how to turn a buck better than either of us.

  2. Jacques – I said ‘WAS a mistake’. I’m not saying it IS a mistake now. Mac is a profitable niche player in computers. The mistake was not trying to displace DOS as the standard. The prize was the cash that Microsoft makes today. Apple could have continued to build a handy hardware business as the best, least bug prone supplier of hardware to Apple OS. It might have even offered slightly better software exclusive to its own hardware. But at least in hindsight, shouldn’t it have gone after Microsoft’s market? There was only ever going to be one winner there.

  3. Amanda says:

    Is being able to record FM radio really such a selling point for people? What on earth is on FM radio that’s such a drawcard? I have my own lame “golden hits and memories” and I have an MP3 player to listened to them.

    Since my current, and for the forseeable future, phone is a four year old pre-paid that rarely has credit on it and I use almost exclusively as an alarm clock I won’t be camping out for the iPhone. But it does look cool. Go Stevie!

  4. Jacques Chester says:

    Nick;

    We’ve had this argument before I think. Apple did try opening up Mac OS to clones in the 90s, it nearly killed them. As for Microsoft, they make massive revenues but their total profits are not that higher because their costs are much higher. They spend a lot of money on deep sinks like Xbox, Zune and others while the production of Windows costs an absolute motza.

  5. Apple tried opening up Mac OS way too late and far too restrictively. But if you understand my argument and think it’s wrong, you’re probably right – you know more than me about the subject! Are there any people who know as much as Jacques on this who agree with me?

  6. Jacques Chester says:

    Robert Merkel might be worth asking.

  7. David Rubie says:

    Nicholas Gruen wrote:
    Jobs has the Apple II, the Mac, the iPod and perhaps the iPhone which if the review is correct is on a par with these achievements.

    Apple II: Succeeded then Failed. Was once the best supported and most open PC (despite Jobs abhorring the things that made it successful like the internal expansion ports and an easy to understand programming interface). Did not die as a bad product, died because Apple lost focus to concentrate on the..

    Lisa: Failed. utterly. Apple lost focus to concentrate on the…

    Macintosh: Failed. Was once the great breakthrough of affordable GUI computers and had most of the Lisa features without most of the pricetag, but (surprise!) wasn’t expandable enough or particularly easy to program for as a third party. Arrogance that they would win left the market wide open for Microsoft, who took all the good ideas and made them easy to access from a programming point of view , at the same time expanding the market for PC’s by making them a commodity, which the Apple II should have become 5 years earlier.

    Then: 15 wilderness years and dozens of worthless eye candy products like the Newton. Jobs builds another failure in the meantime (NeXT).

    Then: ipod. Finally a success. Finally a platform where being closed and lacking expandability was a virtue (nobody wants to program a music player, just play music).

    Jobs always wins the battles and loses the wars. iPhone will fail as a platform for the same reason the Mac 512k and Plus were relative failures, nobody knows how to program for it and Apple won’t release the specs or a decent development library. The most successful macintoshes will ironically be the ones that are capable of running Windows.

  8. Amanda,

    I use a creative MP3 player which records from streaming audio. Very handy for time shifting audio that isn’t directly downloadable as an MP3.

    David, Thanks for your comments. It will be interesting to watch how things turn out.

  9. jimmythespiv says:

    iPod aside, there are two sorts of people in the world – Apple users, and everyone else. Apple users do tend to be quasi-religious advocates for Apple.

  10. David Rubie says:

    Nicholas Gruen wrote:
    It will be interesting to watch how things turn out.
    I fear for the worst. Where iTunes was hostage to music companies insistance on digital rights management, they are amateurs compared to phone companies.

    I suspect a big part of withholding the development access on the iPhone will be telephone companies horrified at the prospect of an open development platform running on their fragile and expensive networks. Who knows what kind of funky applications you could dream up with open access to a phone network and programmable handsets (low cost mobile phone conferencing? positioning devices based on cell locations? massive multi-user mixed real world and virtual world games?). Their pricing models can’t accommodate new, resource heavy services they would have trouble charging for. The paucity of phones available with mp3 ringtones gives us some idea of just how reluctant these companies are to accommodate users.

    Jobs loves to play in this kind of space (closed, restricted spaces where the user experience can be micro-managed) but genuinely new platforms tend to fail without some third party introducing a product we never new we needed. Like the spreadsheet. I don’t think the iPhone by itself qualifies, and Apple (the only organisation who have full development access) have a patchy history of providing ground breaking applications.

  11. Jacques Chester says:

    David;

    I think that the turn around point for Apple was the original iMac, which was actually the biggest-selling PC of all time up to that point.

    I’d also disagree that iPhone will fail due to being ‘closed’. In actual fact it runs a variant of OS X with a different interface layer. Apple will probably release development tools for it once they sort out the tools and interface doctrine. You have to remember that the iPhones interface is quite new compared to the well-established Apple Human Interface Guidelines which Mac apps follow.

  12. Jacques Chester says:

    Where iTunes was hostage to music companies insistance on digital rights management, they are amateurs compared to phone companies.

    I suspect a big part of withholding the development access on the iPhone will be telephone companies horrified at the prospect of an open development platform running on their fragile and expensive networks.

    I disagree. The iTunes store example shows that Apple is prepared to stare down anyone when they get the upper hand. Apple continues to set the prices for the music downloads despite intense lobbying by music companies. The iPhone has sold half a million units in 2 days and will probably keep on selling big to people with disposable income – ie just the sort of people you want to boost your profit margins. In 18 months Apple will be dictating terms to the phone companies, who like the music giants will find out that they don’t have that much say after all.

  13. David Rubie says:

    Jacques Chester wrote:
    In 18 months Apple will be dictating terms to the phone companies, who like the music giants will find out that they dont have that much say after all.
    I hope you’re right Jacques, but their record with music companies is fairly patchy as well, even with the most popular music playing gadget franchise. Sure they champ at the bit at the imposed 99c pricing, but EMI was the only company so far to drop DRM and the others are still waiting to find out what will happen (hardly in the position of being strong-armed by Apple so far). When a second major music company drops DRM, I’ll start believing.

    As for the iMac – yes they sold a lot, no they made no dent in the overall market share of the Windows operating system. Still a failure, albeit a pretty one that gave Apple enough marketing capital to launch the iPod.

  14. Tony Healy says:

    Nicholas is correct that Apple stuffed up with their premium pricing strategy. That’s why they lost market share to Windows. Around the late 80s and early 90s, Macintoshes were about twice the price of equivalent Windows machines.

    They also lacked the diverse range of software on Windows, as a direct result of Apple’s arrogant approach to third party developers (ISVs). Apple was not alone in this. IBM also failed to understand quickly enough the importance of third party developers, leaving OS/2 marooned.

    Jacques’ point about workstation vendors failing when they tried to go downmarket confuses cause and effect. The expensive workstation makers like SGI and Sun had no choice when Intel machines started to provide the same power at a tenth of the price. So it wasn’t that reducing their prices crippled the workstation vendors; it was that their business models were built on high margins.

    Regarding the iPhone, the failure to provide an SDK strikes me as more of the Apple arrogance, although Apple might intend to strike private deals with selected software developers, particularly for games. It will then provide SDKs to those developers. At the moment, Apple says developers can use ajax, but that’s useless for serious applications, especially valuable ones.

    On the subject of working with phone companies, existing mobile devices, such as Pocket PCs, have had the capability to run third party applications for five or six years. The great problem has always been the phone companies, who insist on rigid and expensive certification procedures. I don’t see that changing just because Apple has a new phone. Other phone makers have much better market share, but must still conform with phone company requirements. Even Microsoft has to conform.

    Apple’s marketing spiel has always really been about signalling. You dont want to get sucked into it too much.

  15. Jacques Chester says:

    David;

    I hope I’m right too. I’d really like to see apps like the upcoming OmniFocus available on an iPhone. That’d be a killer combo.

    Tony;

    I don’t think I did confuse cause and effect. The problem for a high end vendor moving downmarket is that the margins there can’t support the highend R&D efforts which dominated DEC, SGI etc etc. It turns out there is still a market for that kind of product and those companies who stuck with it – IBM and Sun mainly – have done OK from it; though IBM does have the advantage of lock-on on the zSeries (nee OS/3×0) front.

    The consensus among people who care is that Apple will release an SDK for the iPhone as it would grow the pool of Mac OS X developers. But that might be wishful thinking. I hope not!

  16. Beju says:

    The iPhone is Apples first “real” attempt at cracking into the mobile market. For an initial move into the market, Apple has done a very good job.

    That being said, the iPhone’s features are not revolutionary. There are a number of other phones out there which does exactly the same, and in some cases, more than what the iPhone is capable of.

    iPods are in the same boat as the iPhone in that what you pay for compared with other products is not justified and the features of an iPod are replicated in other MP3 players.

    Why is the iPhone thus far a success? I argue that is is because Apple is cool now. Its a fashion statement to own an iPod or an iPhone. Apple is in a great position now in that they can almost put out total crap and have it sell. Apple TV may be proof of that.

  17. Jacques Chester says:

    Beju;

    You’ve essentially said that consumers only care about “features”. Consumers tend to like Apple because they make things mere mortals can drive with nice design, fit and finish. Sure you can buy a Rio or Sandisk, but they look like arse and have interfaces designed by retarded chimps. And don’t even get me started on mobile phone interfaces.

  18. Amanda says:

    In-line recording? Well, OK. But I just want to listen to music (and some regular podcasts). Which is why when I recently lost my Nano ;-( I bought a refurbished 20gb 4g (?) IPod from the Apple store online for $149 — old skool, non-colour screen, a bit heavier and less embiggened battery than the new ones but, hey, 20gb for $149.

  19. Tony Healy says:

    Jacques, you used the example of the workstation makers as a counter to Nicholas’ point about Apple, and it’s not relevant. Apple did in fact do as you suggest, maintaining their high prices through the early 90s. As a result of that, and other mistakes, they not only failed to compete against Windows and Intel; they dramatically lost market share.

    Apple did not need such high prices. About half of it was pure markup. They were gouging the dumb “I’m special” part of the market. In their new incarnation, their margins are more closely aligned with the market.

    Regarding the workstation market, there wasn’t much the traditional vendors could do because Intel machines were so much cheaper. The markets for those machines collapsed, although they didn’t disappear completely.

    Regarding Apple’s plans for the iPhone, I don’t think they will release an SDK. Involving the great unwashed is too messy for Apple, especially with the complications of dealing with phone companies. Apple will work with a few selected big developers to produce games and applications.

  20. JM says:

    Nicholas said: “The mistake was not trying to displace DOS as the standard. The prize was the cash that Microsoft makes today. Apple could have continued to build a handy hardware business as the best, least bug prone supplier of hardware to Apple OS. It might have even offered slightly better software exclusive to its own hardware. But at least in hindsight, shouldnt it have gone after Microsofts market?”

    No. Look at the profits:
    Apple – 8 billion/year
    Microsoft – 11 billion/year

    Apple make nearly as much on much smaller sales.

    Again. (Comparing hardware companies this time)
    Apple – 8 billion/year
    Dell – ? (nothing the last couple of years)

    Again. Compare what Apple made when they *did* open their software and try to
    grab the general market from MS:
    1997 – 1 billion loss
    Now – see above

    The money speaks. The trope about “if only they’d released MacOS on commodity
    hardware” is flat out wrong.

    To explain why an indirect quote from Steve Jobs (I have this from one of his
    senior managers who was a drinking buddy of mine when I worked overseas a couple
    of years ago, so this is a paraphrase)

    “Could BMW make a $15k car for the price range market? Of course, but they
    don’t. Could we make low price PC’s and compete with Dell? Of course,
    but we don’t. We don’t want to.”

  21. Tony Healy says:

    Those profit figures are not correct. But in any case they’re not relevant to the topic, which is the activities of Apple during the early and mid 90s. Apple in the mid 90s was losing money and sacking people, while Microsoft surged ahead.

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  23. Mark says:

    I disagree that the Apple II “succeeded then failed”. I think it’s like saying that Windows 3.1 “succeeded and failed”; in fact, both products were replaced. Unfortunately for Apple, the Apple /// failed, and Windows 98 and NT succeeded. If product failures are important indicators of future success then I think it bears pointing out that most MS products, with the exceptions of Windows and Office, are also failures: Last I heard the PS2 (2!) was still outselling the XBox 360.

    I also disagree that Microsoft “took all the good ideas and made them easy to access from a programming point of view” — this is simply incorrect. The Windows APIs have always been much nastier than those for the Mac, from their bizzare and discredited use of Hungarian notation in their code to the well known “DLL Hell” issues of 3.x and 95 (somewhat persisting today). In fact Apple was a bit unique at it’s introduction both for using a compiled high-level language (Pascal) when most serious applications at the time were written in assembly language, and for releasing very accessible programmer documentation (“Inside Macintosh”) which I’ve always considered to be the epitome of documentation for any product, ever.

    While Apple (and Jobs I) can certainly be held to account for past errors, it is hard to argue that Jobs II is making the same mistakes. He has conceded that he and Apple made errors in in the early days, and under his recent direction, the Mac has gained substantial market share – some reports suggest that Apple now has a remarkable 10% penetration of US homes, and the rest of the world generally follows the US lead in this regard.

    So I think the jury should still be out on whether or not the Mac is a success or a failure, and there are no indications that OSX is any less important to Apple than it has ever been; the focus of the recent WWDC on Mac and OSX to the exclusion of iPod and iPhone being a case in point. And so extrapolating the “failure” of the Mac and it’s philosophy to the success or failure of the iPhone – created by a person who has learned his lessons the hard way – seems quite a stretch.

    The complete lack of an SDK for the iPod has not hampered it’s adoption.

  24. David Rubie says:

    Mark wrote:
    I disagree that the Apple II succeeded then failed. I think its like saying that Windows 3.1 succeeded and failed; in fact, both products were replaced.
    Apple II replaced by the IBM-PC and Windows 3.1 replaced by Windows For Workgroups / 3.11. Microsoft held their share and increased usage, Apple lost an entire user base of business users and never really got it back.

    I also disagree that Microsoft took all the good ideas and made them easy to access from a programming point of view this is simply incorrect. The Windows APIs have always been much nastier than those for the Mac
    “Inside Macintosh” – a set of books most people had on their shelves and never managed to do anything useful with. It wasn’t widely available until a year after the Mac was released! And Pascal was always somewhat of a toy for general purpose programming on microprocessors. I think a lot of people forget just what a paradigm shift it was to write event driven windowing programs compared to text based ones – Apple did document all the calls and the hardware, but it didn’t help much due to the complexity. I’d disagree Windows was nastier to program for, the Mac still had issues about which way around on the call stack arguments for the system subroutines should appear, or whether the mac you were programming for was properly “32 bit clean” which made the hungarian notation stuff look like childs play. Microsoft hid all that stuff for you.

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