Krugman on Microsoft and Apple

There’s much to quibble about in this Krugman post, but I’ll keep it short:

The Microsoft story is familiar. Back in the 80s, Microsoft and Apple both had operating systems to sell; Apple’s was clearly better. But Apple misunderstood the nature of the market: it said, “We have a better system, so we’re going to make it available only on our own beautiful machines, and charge premium prices.” Meanwhile Microsoft licensed its system to lots of people making cheap machines — and established a commanding position through network externalities. People used Windows because other people used Windows — there was more software available, corporate tech departments were prepared to provide support, etc.

Two things.

First, when we talk about the ’80s and ’90s and Apple, we’re talking about the Mac. And though the Mac suffered mightily in the late ’90s, dropping so low that it almost brought the entire company down, today, the Mac makes Apple the world’s most profitable PC maker. Even if you don’t count the iPad as a “PC”, no one makes more money selling personal computers than Apple. In the long run, Apple’s strategy paid off.

Second, Krugman is right about the fundamental difference between Windows’s success and iOS’s. The beauty of the Windows hegemony is that it wasn’t the best, and didn’t have to be the best. Once their OS monopoly was established, they just had to show up. Apple’s success today is predicated on iOS being the best. They have to stay at the top of the game, both design- and quality-wise, to maintain their success. That’s riskier.

★ Saturday, 24 August 2013