Tech History is Being Made Not Repeated

Ben Bajarin / April 15th, 2014

I’m not going to try to convince you that, in the case of the tech industry, history does not repeat itself. In some cases, it does and it will. Rather, I’m going to tell you why any claim, or any conclusion, being made today that we are waiting for history to repeat itself is premature.

I speak with VCs, C-level executives, pundits, and any opinionated type about things related to the theory and philosophy of the technology industry. My most valued discussions come from those who have been in this industry since the beginning. Their observations are time and time again better than most and often more accurate. The theory of the cyclicality of the industry is often brought up in many contexts but most often I hear it brought up about Apple. I hear things like “the smaller ecosystem always loses.” Or, “closed always loses in the end.” Or, “vertically integrated companies always get phased out.” I know my industry history well enough to understand their logic, but I continually think these claims are premature.

Claiming history is ready to be repeated, rather than still being made, discounts the point that most of this industry’s history has been focused on commercial markets not consumer ones. Most of this history has been focused on developed “affluent markets” not developing markets. We can make some sound observations about the industry’s history up to this point as we have talked about millions of consumers but can we make the same observations once we start talking about billions of consumers? I’m not so sure.

Uncharted Territory

I say history is being made rather than being repeated because I believe we are in uncharted territory. Those who like to make points about tech history repeating itself are primarily using the history of the mainframe, mini computer, and desktop/notebook PC form factor to make it. Points get made about these segments around open vs. closed, integrated vs. modular and so on. But using “PC” industry history as our sole basis has flaws. We are in the midst of one of the largest global rollouts of consumers getting their first smartphone, in many cases the first type of computer they have ever used. Billions and billions of people have leapfrogged the PC and jumped straight to a computer in their pocket. They have no concept of what it was like to grow up with a PC or even in a PC saturated region. They didn’t have PCs in their school to learn computer literacy, they haven’t had to deal with the Microsoft Windows monopoly, they never dealt with corporate IT bureaucracies. In the very near future, the number of people in the market who had nearly zero contribution to tech industry history will dwarf the number that did. So how can we, with any degree of intellectual honesty, claim so boldly we know how this will play out?

I feel a proverb I’ve heard time and time again from those who have been around from the beginning is appropriate.

The market is the ultimate arbiter.

We can debate theory and philosophies related to how much of a predictor industry history is of the future all we want but ultimately the market will decide. My hypothesis is that, unlike the PC era we know so much about, we have no idea how these next several billion consumers will dictate the winners and losers. For example, I like to use the analogy that Facebook and WhatsApp are serving as the emerging market equivalent of America Online — connecting these consumers to the internet and to others digitally for the first time. Yet in the PC era, consumers outgrew the walled garden approach of AOL. Do we know for sure these emerging market consumers will outgrow the walled garden? Or maybe walled gardens win in the end? We have no idea. These consumers are coming online with very different social, national, and economic backgrounds. We are observing usages of mobile devices in places like China, India, and other markets we have never seen before. If we see things that are new how can we apply industry history to it?

What will be a smartphone in the future? Will native apps or web apps win the future? What’s an app in the future? All of these and more are subjects where industry history is used to attempt to shed light. I have no problem with that. It is useful and in some cases I imagine history may repeat itself. The problem is we don’t know which part it will be.

If we were having this discussion 20 years from now I feel the “history will repeat itself” mantra would be more applicable. We simply don’t have enough industry past under our belt to claim what we do have is the part that will repeat. We are still in the middle of this journey from analog to digital. We are still bringing the masses online for the first time. They will still play a role in writing the history we are observing today. In all likelihood, the history which may “repeat” is still yet to happen.

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio
  • stefnagel

    Apple will soon claim one billion credit card carrying, willing users. Now that’s new.

    • Brian M. Monroe

      Yes they will. Plus the fact that as we know not every person who has a credit card is of equal value. Apple is doing a great job culling out the users that will be good for the ecosystem and the ones that will not.

      • klahanas

        Indeed, must keep out the riff raff…
        /s

        • stefnagel

          I’m making two points:
          * Unlike Microsoft users, Apple users pulled a buck out to buy the device; enterprise is now secondary. And nobody listens to IT anymore.
          * Unlike Google users, Apple users pulled out a buck to buy the device; no buck, no commitment, no engagement, no loyalty.

          • klahanas

            I was replying to Brian Monroe, but since you bring it up, you’re right.
            I happen to like “no loyalty”. Make them have to fight for my dollar every day. Lock me in, it counts against you.

          • jfutral

            I’m not a big believer in the “lock-in” narrative people keep repeating. In reality, these days, there really is almost no such thing. Even in main frame days, lock-in wasn’t automatic. What has changed is the cost of leaving an ecosystem. And, frankly, these days the cost is pretty darn negligible with many apps free, and more still in the under $5 range. And with carriers willing to pick up ETFs, the cost is even less for smartphones. Even with PCs many of the more expensive applications often come with both Windows and Mac versions.

            The only thing CCs in iTunes/Apple ID accomplish is convenience. Loyalty has never been as easy to lose and at the same time so costly to the company.

            Joe

          • klahanas

            I don’t hold any ill will on App lock in. It’s a different OS, I agree that is inevitable. Media, on the other hand is an entirely different story. It should play on anything. Apple is not alone at this, but Apple pioneered it.
            As we get into in dash systems, wearable’s, and home automation, Apple would automatically be out of the question if it’s not interoperable with other vendors (which is what I suspect will be the case).

          • jfutral

            You give Apple too much credit for media DRM. I didn’t even know one could DRM VHS tape, yet there I was trying to make a digital copy of a “Titanic” VHS we just purchased, to take on a vacation with us and, wait… what the heck are those lines??? Yeah, the entertainment industry knows no bounds to keep you from enjoying your media. Remember when all of a sudden the Compact Disc logo started disappearing from Sony music CDs? Never mind the money the music industry skimmed from the sale of BLANK tapes and CDs.

            Joe

          • klahanas

            Yes, but a VHS, CD, DVD, or Blu-Ray play ubiquitously. Things could still be DRM’ed and be cross platform. The Google Play Store movies and shows work on everything, for instance. iTunes movies work on iOS and Windows. Why not Linux or Android?

          • jfutral

            Sort of. They still have to support RIAA and MIAA guidelines. In that case “cross platform” means cross media and so far the industry is still fighting to keep you from making copies at least in formats other than your original purchase. They would rather you don’t copy at all.

            As for what media capabilities are allowable depending on what store, that is all the entertainment’s doings. They are trying to keep a leash on Apple by imposing more restrictive allowances than on Apple’s competitors afraid Apple might pull another music industry coup on everyone else. What they miss is that before Apple people were downloading FOR FREE from Napster.

            So again, the entertainment industry trumps all. They are the ones who say what movies from Apple or Google can play on what platforms.

            Joe

          • klahanas

            Okay, I can see that. Let’s reserve the interoperability issues on up and coming techs for when they launch.

  • capnbob67

    Good assessment of the fact that we really don’t know what is going to happen in these vastly different, expanded markets with different players, dynamics and mechanisms. It clearly calls BS on those experts you cite at the beginning who largely have nothing but trite aphorisms of past victories.

    Horace Dediu got it right several years ago when he demonstrated that we are living in times of asymmetric competition where players with defensible (almost monopoly) revenue and profit streams are competing against each other in much broader markets than ever… Apple’s almost unassailable hardware profits vs. MS windows/server/office monopoly profits vs. Google’s entrenched advertising profits create a fundamentally different competitive scenario in vast trillion dollar markets rather than the relatively much smaller niches of the PC revolution. Facebook, Yahoo and MS/Bing are attacking Google’s profit base, Google, Samsung, MS/Nokia are attacking Apple’s and Apple, Google, Linux etc. are attacking MS’ base. Telecoms is one market where they all come together but there is much less likely to be a zero-sum game given the scale, complexity and deep segmentation of that/those market(s), let alone the rules that determine the profitability of the key players.

    Even looking at the PC wars, who won? MS Certainly, but also Apple since off <10% of the volume, it makes about 50% of the profits from all hardware makers. Unit market share doesn't seem to be helping HP, Dell or Lenovo make serious money from PCs.

    It's not unlike the world of macro-economics where all the simple models of 80's supply-side economics are all dead in the water as the globalized economy has invalidated the assumptions and levers that made the old models tick. In the late noughtie's we could throw a trillion dollars in to the US economy without sending inflation through the roof while still driving growth, profits and (some) jobs. New world, new rules, new models – it's the same in the tech world for many of the reasons you mentioned and more.

    • stefnagel

      “MS Certainly, but also Apple” When I worked in publishing, there were two approaches: Make one dollar each off of a million books. Or make a million dollars off one, really great, book. Inch thin profits off a mile wide sales or the reverse.

    • Space Gorilla

      That’s a key point, who really won the PC wars? I’d say there’s a strong argument to be made that Apple won. Or perhaps that Apple simply played a different game and most analysts were keeping the wrong score the whole time.

      • benbajarin

        Or to my point, what if the PC wars are not over?

        • Space Gorilla

          That’s an excellent point. I still think Apple is playing its own game on a field across town while most analysts are attending some other game and keeping score, operating under the illusion that Apple is somehow on the field at the game the analysts are watching.

          • klahanas

            You could be on to something there…

      • Will

        Apple almost went bankrupt fighting the PC wars…

  • Hawk_Eyes

    To be able to predict and extrapolate if tech history is to repeat itself, will have to forecast how the world economy shall have behaved ten, twenty years from now. How the geopolitical landscape between each countries integrate or disintegrate. What is the average purchasing power of a certain segment of society, country is, increase of role/IT Security threats from hackers, disruption theory continuum, and the brand-media perception.

    World economy- if the world suffers another major recession one like happened in 2009, expect alot of tech industry to get hurt- and shift focus to cheaper phones which will lead to lower sales and profit just to survive. However those that have had alot of cash reserves and hoarding it will be able to wear it with grace as they can still manage to differentiate and create a higher value stream which will ultimately to higher pricing schemes.

    Geopolitical Landscape- Back in the glory days of IBM it was very successful because it operated in the cold-war era likeway of managing its business. It was slow, it was a laggard but it was effective because back the businesses where protected by certain “division” cell block if you will between markets that it was alot harder to enter a market that was already entrenched by another company-because back then, 1) Financing was way lot harder 2) There were fewer VCs back then. This however changed dramatically when globalization succeeded the cold war system of doing things and democratize finance, information and most of all technology.

    Purchasing power of segment of society. As more and more people climb up from poverty and rise to middle class- expect alot of demand/sales for gadgets above the mid to top-tier class. With this increase of purchasing power- Credit card institutions, line providers, banks and other lending institution will be enticing all the people they could pitch to, so long as these people satisfy their criterion-thus drive the sales of this tech gadgets.

    Increase IT Security Threat. Although I am not an Apple enthusiasts, I certainly believe that its iOS build and being a close platform makes it more a secure platform rather an Android is-which is fragmented. Only time will tell when a conficker like virus app/phone trojan invade every smartphone connected to internet and create global chaos of the millions of google play account holders where user’s highly sensitive information is compromised.- I predict this will happen when analytics tell us that a critical mass of paying customers are utilizing android pay schemes to transact, purchase anything online.

    Disruption theory continuum- It happened before and it will happen again. It is a cycle of endless disruption brough about by 1: necessity 2: capitalism 3: breakthroughs in R&D that makes it viable for production and consumption. This happened to recording plaques, to tapes to cds, to mp3s, then to iPod. From beta-max, to VHS to VCD to DVD to HDDVD then finally to Blu-Ray. Necessity made it an urgency to produce lighter and more portable storage media. Capitalism played it role into ensuring that future generations of cash flow are ventured and maximized upon and 3. R&D that are practicable to realize them into profits.

    Finally, brand-media perception. This is the tricky part. it pays for the company to have a positve rating as regard brand to media perception. A strong brand but with strong backlash from the media will certainly have its dire effects. As the saying goes. “If you throw alot of mud on a person, eventually some of it will do stick.” Imagine a person who considers buying a high end cellphone. He reads thru blogs, thru articles. But what if the articles he reads gave scathing reviews of the said product would he still be buying the said phone after reading the naysayers. Perhaps. But that is if the brand of such product have had the privelege of attaining brand loyalty in the person going to do the purchase. If however there is no brand in him, then he’ll not be buying the phone no matter what given that it was reinforced by bad press/media.

    To sum up, the reasons I posit above have a crucial influence whether history will repeat itself or get it made. Only time will tell… 🙂

    • Space Gorilla

      “World economy- if the world suffers another major recession one like happened in 2009, expect alot of tech industry to get hurt”

      Interesting point. Apple launched the iPhone in that recession, which the NBER pegs as starting in late 2007 in the US. Apple would seem to be much more recession proof than most tech companies. Not stock-wise of course, we were able to buy a crapload of Apple stock at $100 because of the recession. But products-wise I think Apple experiences less pain in a downturn.

  • jfutral

    I am sure this is not the case with the people you interact with at your level, but in the blogosphere, it would help if some actually knew history or would try not to rewrite history. For instance, there seems to be this belief that Apple ever had the lead in PCs. Apple only hit double digits once or twice and that was with the Apple II, not the Mac.

    And while the Mac never had the lead the iPhone has, the iPhone was never the majority (greater than 50%) smartphone, IIRC, except possibly in a few instances or specific markets. I remember Blackberry’s share actually growing around the first year the iPhone came out, rising tides and all that.

    And for the market _share_ declines the iPad may be seeing, they are still seeing strong sales, which was not always the case in the Mac OS dark days.

    It seems more like people are remembering fictional narratives rather than actual history.

    Joe

    • benbajarin

      As I mentioned above, to Space Gorilla, to my point of the article, what if the PC wars aren’t over?

      • jfutral

        Ha! Uh… wait… crap… aw… now my head is hurting.

        Joe

      • Space Gorilla

        And what if Apple already won?

        • benbajarin

          The definition of winning clearly changes in the stage we are in that I do know.

          • Space Gorilla

            I would say Apple has created what is very likely a self-sustaining ecosystem (although nothing is forever) of engaged users willing to pay money for value delivered. Who else in tech has a paid ecosystem of engaged/satisfied users? That feels like winning to me.

            Of course for Apple to win at their game, things like Windows and Android are required. Apple can’t serve the whole market, the existence of Windows or Android allows Apple the luxury of culling a minority of total users. It makes it possible for Apple to play a different game.

          • jfutral

            I do find it interesting that somehow the definition for Apple losing seems to be an implied assumption (or sometimes even explicit assumption) the Mac has dried up. Yet Apple still sells Macs and profitably, and even growing.

            I had a friend tell me once about the narratives we tell ourselves about ourselves at work—who thinks what about us, who is on our side or has our backs, and who doesn’t. Doesn’t really have to have anything to do with reality, just how we parse out our relationships. I guess it is the same thing here.

            Joe

  • Walt French

    Ben, this is by far the best analysis I’ve seen you make. Bravo!

    Now that you’ve established why we can’t act as if we’re on a merry-go-round, the question is HOW IT’s not repeating.

    I think many people are thinking of Apple using the home run metaphor but really ought to be thinking of how Bill Walsh invented the Walsh West Coast of fence to turn a team that couldn’t even run very well into a ball-control championship winner.

    That’s more like the Apple that Jobs built.

    • benbajarin

      Thanks Walt. I really appreciate it. What’s your email? I’ll email you something non-public I wrote I think you may like. Email me at benbajarin @ Mac.com

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