Saturday, June 04, 2011
Successful modern technology: Demand trumps supply
Successful technology in economic growth is not just about pushing out the frontier; it’s about bringing everyone along. Put another way, it’s about raising the average, not just the very top of the distribution.
This lesson has been with humanity ever since at least 14th-century China’s epic fail, although admittedly most of the time we are oblivious of it, given scholarly obsession with technology having to do with only supply-side productivity.
Almost exactly a year ago, Apple overtook Microsoft to become the world’s most valuable technology company (and the world’s second most valuable company, period). Last month, Apple overtook Google to become the world’s most valuable brand.
John Ross (30 May 2011) puts in context what is now simultaneously the world’s most valuable technology company and the world’s most valuable brand:
“Apple of course, by most industries’ standards, is a high tech firm. But Apple is not famous for fundamental technological research. It did not create the laser - as did AT&T and the Hughes Aircraft Corporation - or the transistor - as did AT&T and Texas Instruments. It was not a company that produced the world’s first microprocessor, as did Intel - a company continuing to demonstrate technological prowess in the recently announced revolutionary three dimensional Tri-Gate microprocessor.”
“Apple’s outstanding skill - shown in its series of world beating products stretching from the Macintosh, through iPod, iPhone to iPad - is to mass produce products which the user can individualize.”
Now, for some observers, that final phrase might come as a bit of a let-down. What, not whizz-bang tech that you might find only in Iron Man’s armor, or some spiffy widget that makes assembly lines run faster? No.
Moreover, the statement is not even correct. For the more technical of the IT crowd, Apple’s products are the exact opposite of customizable. Compared to Linux, say, Apple’s OS is closed; and compared to other computing boxes, Apple’s hardware can be pried open only by simultaneously breaking an explicit legal agreement. Customization of the iPhone via jailbreaking is sanctioned only by the Library of Congress, not by Apple itself.
But there lies the nugget of truth for why technology now is so much more fun and in-your-face for so many: For the average user, Apple products are customizable enough.
Consumer tastes, not the needs of raising industrial productivity, provide the leading force shaping modern technological development. Demand trumps supply.