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The economics of the mac? A paradox of competition

I switched to the mac and it’s great I’d like a bit more real estate on my laptop but Malecki assures me that soon I’ll get used to jumping between windows.

Anyway, my impression is that now the mac dominates the pc, but a few years ago it wasn’t so clear. The mac had some nice features but often ran slowly, and thinkpads could do a lot. At the time, the way I understood this was that only one company made macs but several made pc’s, thus there was a lot of competition, stimulating innovation in the pc market.

But what’s the story now? The macbook air is awesome and a real advance on what came before, while the thinkpads and all the rest have stagnated. So what’s my new theory? There’s lots of competition on pc’s, but what they’re all competing on is price. Meanwhile, only one company makes the mac and so they have the freedom to make something good.

But I’m just blathering here. I’m sure someone can offer some thick description to reveal the real story.

42 Comments

  1. Jon Baron says:

    I don’t think it is true that “all they are competing on is price”. You can get pretty powerful laptops and desktops. True, they compete on price too. The last two “desktops” I got were Lenovo “workstations” that are really powerful and cost about $1200 each(with various “discounts”). To be sure, these had “no frills” (e.g., DVD writers). Also, for a while I have wanted a laptop with a screen that was bright enough to see in the car on a sunny day. Lenovo also had the answer to that too, a T510 with the option of a bright screen. It cost more, of course, but a lot less than the HP model made for military use (which had a bright screen and also survives falling out of a helicopter, a feature I didn’t need).

    As for usability, I put Linux on everything and get excellent control of real estate on the screen, making most windows full screen and eliminating all toolbars. To switch between applications, I use Metacity’s multiple workspaces (happily still possible despite Gnome 3).

  2. Rodney Sparapani says:

    Hi Andrew:

    Macworld just had an article on the same topic.

    http://www.macworld.com/article/161775/2011/08/why_cant_windows_pcs_catch_up_to_the_macbook_air_.html

    Although, I am a Mac (and Unix) fanatic, I don’t necessarily subscribe to everything that Macworld said. However, I am quite happy that Apple makes the best products and I don’t really care why no one can compete with them :o)

    Rodney

  3. Brent Buckner says:

    See also the Samsung Series 9 laptop – on a pure hardware basis at least playing in the same league as the MacBook Air.

  4. Martin Theus says:

    Andrew,

    that is certainly one “model” to look at it. I think the biggest difference between Apple and their competitors is that only Apple is taking a holistic view on what a computing device can (or should) do for us. Let’s for instance look at the Lenovo machines. They “only” deliver one piece of hardware that is “forced” to run some OS supplied by the friends in Redmond. If it is a desktop, they don’t even know what kind of expansion hardware people will put it. In the end, some retail chain will bundle it with some other stuff like printers or monitors and sell it to people who don’t know better – how can you expect a great experience?
    Regrading innovation, it is obvious that none of the people / companies from the above mentioned delivery chain can make a significant shift to move forward as they will then be out of sync with the rest. Not so for Apple. Just think of such a simple thing like the Smart Cover on the iPad. It is a accessory that is integrated with the design of the hardware and the software.

    How hard it is to really keep up with innovation can be seen from the example of HP’s WebOS, its journey seem to come to an end now after a promising start …

    • Jonathan says:

      For whom, exactly? It’s exactly the holistic view that keeps me from really considering a Mac in anything more than a passing sense. I like making all those decisions myself and custmizaing what I want. It’s the (to me) irritating tendency of Apple to give me the final completed product that leaves me unsatisfied. I have used them, but I agree with John below and following. I will conced that the Jobsian gear is more stylish, but i contend that’s because it’s much easier to be stylish holistically. To take the most obvious example: if you can’t replace a battery, you can make a computer sleeker. That doesn’t strike me as an innovation.

      • Martin Theus says:

        That is an old argument against Apple’s approach – and a perceptual error for most users. It is certainly right that on a classical Intel-PC, running Linux, you have plenty of degrees of freedom how you customize your environment – but most users will never ever use this “freedom”, and contrary will get into trouble by making the wrong choice.
        But you are right, if you like to spend a considerable amount of time “tuning” your computer rather then using it, Macs are probably the wrong choice.

  5. JL says:

    I recently switched to Mac, and I’m rather disappointed. It’s really very similar to PC/Windows, the only real advantage is that it rarely crashes. OS X is often clumsier to use than Windows, especially when switching between windows, and file management is more difficult to do than in Windows.

  6. John says:

    JL, that’s a common complaint of someone who just switched. All of those flaws with the Mac are almost all due to using your old thinking with the new interface. Hang out with more experienced Mac using folks and voice your concerns and you can find out more about how to rethink things.

  7. John says:

    Andrew, it is an interesting paradox but it’s not news. Apple leads and the rest follow. It’s been like that for some time but it was mostly in OS software. Now it’s primarily in integration between hardware and software which has given no path for the followers. They can’t do it because they don’t control both.

    I thought it interesting someone brought up that there are competitors for Air hardware (though none of them have equivalent chassis engineering). Intel really wants competitors for the Air and have been pushing the ultra book but there’s a lot of push back because the parts are too expensive and it would have to cost about $1000 minimum. Basically Apple’s competitors are complaining to Intel that if they can’t beat Apple on price there’s no point in playing because they can’t match them on user experience, reputation, etc…. something. It’s a pretty absurd situation but does lend some support to the idea that all of the others are only competing on price, and perhaps distribution and market positioning.

  8. Wesley says:

    There’s a couple of points to make in this discussion.

    1) Apple had, until recently, an essential monopoly on the factory setup to make aluminum unibodies. It’s only recently that other companies have managed to even match that feature. Without the unibody, it’s hard to compete on styling — plastic just doesn’t look as good.

    2) With the new Intel Ultra-thin Laptop effort (http://www.intel.com/consumer/products/processors/ultra-thin.htm), we should start seeing some real competition within the next year. Of course, by then Apple will have moved Retina from the realm of the iPhone into iPads and MacBook Airs, but that’s what you can do when you have $70 billion to play with, and use it to fund factory rebuilds to make exclusive parts. See: http://www.businessinsider.com/apple-supply-chain-2011-7. It’s an excellent read that helps explain exactly why Apple products seem so futuristic.

  9. Wayne says:

    To appropriate a somewhat-apropos line from a movie, “Innovation: you keep using that word, but I do not think it means what you think it means.”

    You’re right that things have changed in Apple 2.0 (Steve Jobs back in command). One of them is that somewhere in the iPod era, Apple got to the point where it had enough cash to start using the supply chain in innovative ways. The other is that Apple has consistently executed on what it had been inconsistently (and arrogantly) supposedly been doing all along: the Big Vision.

    Addressing the second point first: for a long time, Apple fell into a slump where it had lost its overarching vision and where it arrogantly felt that if it had some of the cleverest ideas in the business, people should flock to them and pay a premium to do so. Steve came back at the point where it was do or die for Apple, and developed an overarching vision that looks a lot like where we’ll probably be in another 3 or 4 years (post-PC era, cloud, etc). And then they trimmed and cut and simplified, and rejected, and assembled a team that focused on innovating in terms of elegance and functionality to reach that vision.

    So they envision how a product would be used by a person, then designed to that usage, being as elegant as possible in the process. This drive was so strong that they were the first (and still are the only) company that stood up to phone carriers and said, “We design, you sell, don’t touch the phone.” This process has played out most obviously in the iOS products, but it’s affected their more traditional computers as well. And if they could not pull off the usage, they’d sit on it (for example, the iPad was designed first, but had to wait until after the iPhone. And Apple passed on the latest-and-greatest cellphone technology, LTE, because the chips use too much power — something that their competitors, competing on specs, did not do.)

    In terms of supply chain, Apple has been using its volume and cash to lock up supplies of new designs and components. Competitors simply can not, in many cases, get the same components in adequate supply. (Though what competitor would have chosen to make machined aluminum laptop cases when plastic is cheaper and has more bling possibilities?)

    Contrast this with non-Mac PC’s. You hear about price and specs. Price is price, and there’s not much to say on that front. (Especially since Apple’s vision and supply chain management means it can often win now on price.) The biggest blunder, though, is confusing specs with functionality or usage. Yes, when you’re running an enormously complex BUGS simulation, sheer CPU power and RAM is a dominant consideration. But most of the time, there are tradeoffs to be made if you have a functionality you envision, and most manufacturers paint themselves into corners by pursuing specs instead.

    “Innovation” on specs or bling is not really innovation. At most, it is a small piece of innovation. And there’s not much room in margins to have much price “innovation” (though Apple may actually be doing just that). So, on the PC side, “innovation” has tended to be used in the sense that Microsoft uses it: as a synonym for “change”.

    How relentlessly did some critics pan the iPad because its CPU was “underpowered”, it didn’t have “enough” RAM, and it didn’t have a stylus or enough hardware ports? Did it affect usability? No, and it allowed the whole package to work together: battery life, size, weight, viewability, responsiveness, convenience.

    This all makes sense, and ties in to your thesis. Microsoft has a monopoly that is best served by lots and lots of forced installations, which tends towards the commoditization of machines. It’s greatest non-OS product is Office, which was innovative only in the sense that by bundling the suite together they crushed all of the non-suite competitors. (Pricing innovation.) Manufacturers can only distinguish themselves on price, specs, or surface-deep bling. There’s no way to get a vision, make appropriate tradeoffs, and execute on it, in a sort of destruction of the commons kind of scenario.

    P.S. You’ll also receive Linux comments, which are often spec-oriented arguments in another guise: I can customize every pixel of my screen. Yes, yes you can, but the amount of effort you will expend and the expertise you will have to accumulate is more than most users want to do. If customizing your computer is an enjoyable hobby, PCs and Linux let you do it — and force you to do it. (I’ve been a bonafide Unix geek since before “@” symbols were invented for email, so I don’t speak as someone incapable of taming Linux or any other tool. If the Mac went away, or took a terribly wrong turn, I’d adopt Linux myself, but that doesn’t mean that its usual strength — it’s not Microsoft, and it lets/makes you customize everything — is appealing to most people.)

  10. David Marcus says:

    Dominates in what way?

    I’ve been using Eudora for email for what seems like forever. Eudora is no longer supported. A company (www.infinitydatasystems.com) tried to write a Eudora replacement (“Mailforge”), but doesn’t seem to know what they are doing, so their app is so buggy it is unusable. The problem is the newest version of the Mac OS doesn’t include Rosetta. The Eudora users on Mac who are now being forced to stick with an old version of the OS or switch to a new email app are not happy. On the other hand, Eudora runs just fine on my Windows 7 64 bit laptop.

    I’m no expert on Macs, although I have used Unix a good deal over the years. Traditionally, Windows has had the best software development tools of the three operating systems, so has had the most apps.

    • eb says:

      Sounds like a Eudora problem, not a mac problem. Both Mac and PC OSs are rapidly changing, if a software company gets behind, the OS cannot and should not hold off in it’s improvements. Mac dropped support of older/Rosetta software for 10.7 because they were ready to optimize the kernel and speed up the machine.

  11. This topic has been done to death but your analysis is pretty superficial. The idea that Apple is the only company being really innovative is absurd. They have spend a ton of time on industrial design and their user interface, but technology wise they’re not leading. The development of the new ‘Ultrabooks’ will continue to challenge the Macbook Air. As mentioned earlier the the Samsung Series 9 is as good or better looking than the Air. Moreover, Apple does not “dominate” the PC in any meaningful way. Despite making great strides it has less than 11% market share in the US. Worldwide it is estimated to be less than 8%.

    I have great admiration for Apple products, but the smugness of Apple owners will keep me from ever owning one.

    • Wayne says:

      Having the highest specs does not result in the best experience. Sometimes you have to make tradeoffs for the product itself. That’s why Apple is on such a roll right now: their competitors feel they have to check all of the boxes in a product spec comparison, so they get something that’s disjoint and ultimately not the best experience for those who use devices rather than maintain them. Nokia-like the chip-heads run the company.

      To be honest, the true fanatics that I know of are PC users who view Mac users as hopelessly clueless regarding technical things. (And themselves as technical masters, of course.) I don’t think I know a smug Mac owner.

      • I think the problem is between people who understand computers and those who don’t (and yes the majority of PC owners are clueless too). For me the technical aspect is the innovation. I couldn’t care less if some trendy person thinks my Thinkpad doesn’t look nice. I couldn’t care less if my laptop doesn’t fit in a manila envelope. It works.

        The smugness comes from many Apple owners who constantly remind you that they never get viruses or they never crash. Besides both being nonsense, this is about user knowledge. I know what I’m doing and do not suffer breakdowns and I haven’t had a virus in a decade. So it’s fine and dandy (and probably brilliant) that Apple wants to cater to the less knowledgeable and and fashionable, but I prefer and open system. The aesthetic aspect of computing is simply irrelevant to me. I refuse to encourage the system that Job’s has created, not matter how sleek a design Jonathan Ive comes up with. If I can’t tinker with it, I don’t want it.

        • Andrew says:

          Robert:

          I don’t care about the manila envelope but it has made a big difference for me to switch from heavy thinkpad–even heavier because I had to carry the battery charger along with me everywhere–and a light macbook whose battery lasts long enough that I don’t need to shlep it around with me. Also the macbook starts right up, none of those annoying delays. I do miss the screen real estate, though.

        • Wayne says:

          Robert: And I, having been a computer geek since before email gained the “@” sign, am perfectly happy to run R and a host of technical programs on my Mac, which also happens to include innovative technical tools ranging from LLVM, Virtualbox, and DTrace, to Scrivener, Papers and EagleFiler. All in an attractive machine that has a long battery life and a UI that doesn’t look like it was designed by programmers or people trying to be cool. In fact, there is an interesting historical link between computer geeks and Macs, going back to before Macs ran on UNIX.

          I’ve never understood the “aesthetics don’t matter” attitude. It matters when you buy a house, a car, furniture, even when you buy a shirt or watch at Target. Suddenly, when it comes to computers (hardware and UI), I hear people proclaim that aesthetics don’t matter. While you may think that Apple is catering to “the less knowledgeable and fashionable” rather than the technical, perhaps its that they’re not catering to the computer hobbiests and tinkerers like yourself.

          • Or perhaps some people appreciate the muted simplicity of other machines as opposed to the uniform Apple design. I actually prefer the square matte black design of the ThinkPad. This is of course why it’s called a preference.

            I’m not saying computer geeks never use Apple, but realistically that demographic disappeared when Wozniak left his formal role there. Jobs has transformed the company into something very different than the origins of the company.

            You don’t understand that attitude because you misunderstand it. Some people don’t take their laptops to coffee shops. For some people a computer isn’t an accessory. For some people it is a tool. In the same way I don’t stress over the aesthetics of hammers, I don’t stress over computers. Sure it plays a role, but if that’s your first criterion, then in my opinion you’re doing it wrong. On the UI side, I simply don’t feel that OSX provides the superior experience that Apple fanatics so brazenly tell everyone it does.

            I’ve already acknowledged that Apple deliberately avoids the tinkering market. It’s in doing this that Apple gains its smugness.

      • Sebastian says:

        “I don’t think I know a smug Mac owner.”
        While I’m not deeply invested in the debate – I think Mac is most likely the best option for anyone who can afford it and who doesn’t want to/can’t run linux – that’s a striking statement. The smugness and preachiness of many MacHeads is among the most frequently cited reasons I here for people _not_ to consider a Mac. Try to think of a time when any Mac user ever agreed that anything was better on another operating system…

  12. JL says:

    John, I don’t think so. I’ve had Mac now for a couple of months, and I think I know most things worth knowing about how to use it. It’s not really even about the fact that some things are better in Windows. The problem is that for the most part there is no difference between Mac and PC/Windows. I expected there to be a qualitative difference between the two systems, but there really isn’t one. It’s not really worth the higher price tag, although I do appreciate the greater stability (the flipside of which is of course less customizability).

  13. Ram says:

    Andrew,
    I am surprised you don’t mention price difference.
    To me a Mac is no more comparable to PCs than a Mercedes is to Toyotas/Hondas/Chevys. A PC costs half of what an equivalent Mac does.

    • Andrew says:

      Ram:

      My point is that even if you’re willing to spend $3000 on a laptop, there’s a limit to what you can get.

    • Martin Theus says:

      Hmm, again a good old argument that is not so true. To make a Chevy as good a car as a Mercedes, you usually spend even more than for the Mercedes and mostly won’t succeed. All the competitors that wanted to copy the MB Air did not succeed in meeting the price point of Apple.
      Sure, if you are happy with less, you well be able to pay less …

  14. Keal Gross says:

    I must say I am quite happy here with my Lenvo Thinkpad X301 running Debian Squeeze… :) it too is quite lightweight (1.4kg), small, has a nice non-reflective screen, a built-in dvd burner and a solid state disc.

  15. Raymond says:

    The other nice this about Apple is the lack of choices (not being sarcastic). With PCs, you spend hours shopping around. With Apple laptops, pick Macbook, Pro or Air; then screen size, and you’re done.

    However, Apple is quite expensive and technology advances rapidly. I recently bought a super cheap PC laptops for $400 with the intent of buying another super cheap computer next year that would probably outperform the $2000 laptops of today.

  16. Kaiser says:

    I have been a Mac user for many many years, except when my school or employer makes me use a PC. The battle between PC and Macs has a long history, and worthy of a business school case study. There are lots of interesting angles to it – here are some to ponder:

    Mac is and has always been a closed system – except for a brief experiment, Apple has always produced both the hardware and the OS; that has pros and cons; it almost never crashes, there are few conflicts but then it doesn’t have the ecosystem that the Wintel franchise enjoys.

    Mac is also less prone to security risks and malware. Could be due to being a closed system. Also, it could be that the “return” on writing viruses and malware for Macs is low given that it has only < 5% market share for years. It's unclear as Mac becomes more popular whether this will change.

    Mac has never been a "good deal". Part of it again is the open/closed system, and market share. Macs have always been quite a bit more expensive with lower specs. Because it occupies a niche, for a long time it catered to specialists like education sector, designers, etc.

    Then, there is the monopoly issue. With a tiny market share, many software developers were unwilling to make software for Macs. Since Microsoft owns the most successful productivity software (Office), plus the OS, it was hard for Apple to survive. This situation seems to have reversed itself in the smartphone space.

    JL mentioned "clumsier to use than Windows". Well, part of it is the marketing desire to be different. So if the Mac has "Trash", Windows has to call it "Recycle Bin". And if Windows has the close-window button on the right side, Mac has it on the left side. (although Macs pre-date Windows…) This inconvenience is easy to adapt.

    The other clumsiness is due to Steve Jobs, who is the embodiment of Apple. He has some truly wonderful ideas but then he also has quirks. e.g. he thinks the 2 or 3 button mouse is a monstrosity. So on Macs, you have a 0 or 1 button mouse, which I find really annoying. (although if you plug in a 2 or 3 button mouse, it would work as expected!)

    Finally, welcome to the Mac family and don't look back!

    • The reason that Apple is less susceptible to security risks and malware is primarily due to a smaller market share. The popularity of the iPhone has demonstrated that with increased usage comes increased attention to security issues.

  17. greg says:

    As a new Mac user, you will love this: http://mizage.com/divvy/
    It’s going to solve some of your window jumping problems…

  18. Seth Spain says:

    Well, the big question is — what’s your new Emacs setup like? Personally, I’ve been using a macbook for about a year now, and in general I find the Emacs + ESS setup to be much more straightforward than on Windows systems. I shifted while working on my dissertation, and found working with R to be generally more pleasant on OS X than on Windows.

  19. DK says:

    the only real advantage is that it rarely crashes

    And Windows does that frequently? What century are you living in? Me, I never saw Windows XP crashing. Just never. As in not a single time. 9 years uptime at work (save only for obligatory reboots and occasional power failure) and 7 years daily use at home. Not a single OS reinstall either. That is all under a typical heavy load from fairly complex scientific calculations.

    Linux is fine and I use it a lot at work too but installation issues and dependencies mess are a common nightmare. Mac I won’t touch because I’ve never seen a single advantage that it offers over the price, performance and flexibility I have with Windows.

    • LS says:

      I am somewhat surprised by the “dependency nightmare”, have you used a popular version of linux lately, in my experience, the package managers/installers are excellent at taking care of the dependencies and except for saying ok at some point to a prompt, there is no more trouble than that. I generally found the rpm packages very easy to install.

      • DK says:

        On Linux I happen to deal with very specialized professional programs. Great many programs written by many people with sometimes little or no coordination. Issues of incompatibility are common. Until recently installers were uncommon. Precompiled executables are still not always provided. I agree, for office type use there are hardly ever any issues these days and all the installers and package managers do excellent work. But that’s not what I *ever* see Linux being used for.

  20. Kaiser says:

    DK: How about application “not responding”? That happens quite frequently on Windows XP and you have to force kill those apps.

    • DK says:

      As a rule, not an OS issue. There is a very good correlation between quality of the code and how frequently this happens. E.g., this hardly ever happens to IE (which I don’t like) and comparatively often to Firefox (which I like) and all the time to Acrobat browser plugin and never to Acrobat itself. Overall, I have to kill a process a lot more frequently in Linux than in XP.

  21. JL says:

    DK, I’ve had XP crash, or at least “not respond” more times than I can count. It really depends on what you do with it. I have Windows at work, and it is very stable because I only use a handful of programs. At home, I tend to download and install all sorts of software and tinker with the system, with the result that Windows becomes very unstable and progressively slower over time. I’ve had to periodically reinstall Windows to sort out the problems. With Mac, I have no similar problems.

    • DK says:

      With Mac, I have no similar problems

      Of course you don’t. Because on Mac you don’t “download and install all sorts of software and tinker with the system” – Apple makes it difficult to do so. I tinker with Windows at home a lot too – except that I know what I am doing and as a result I’ve never seen this “becomes very unstable and progressively slower over time” symptom. On the other hand, I am regularly exposed to the moaning about another OSX upgrade breaking some of the functionality of the existing programs or causing some incompatibilities.

  22. Millsy says:

    Isn’t this a simple problem? Different people have different preferences, therefore both Macs and PCs exist. From this variety, we also have price differentials (for differences in disposable income and needs) and many choices. HOORAY!

    Why must each side put down people that use the other? Do people really not buy products because they think the other people that own them are smug (research paper anyone–this could have interesting marketing implications???).

    I love black jelly beans. If I were a total snob, would that keep you from eating black jelly beans, or is more likely that it doesn’t fit your tastes? Of course, the Mac/PC argument is always a fascinating topic, given that there are very few products out there that bring on such emotional connection and strange ‘giving a crap’ about what other people use (sports teams are the only one I can think of).

    I prefer the interface of PCs likely because I’m most familiar with it (and the Office software tools and bars on Macs seem terribly inefficient) and–given my large data sets, use of R and lack of computer programming knowledge–prefer customizability of the hardware (i.e. RAM and clock speed). The laptop I got cost me $800, but in Mac form would have been in the range of $2700-$3000. If my laptop lasts me only 3 years (and a Mac lasts 10), I can upgrade every 3 years nearly 4 times before I match the price of the Mac–and that last computer will be more powerful since it is bought 10 years from now. As a poor grad student, that’s a big selling point. As someone where this isn’t an issue, then one would probably go with a Mac for that reputation if they don’t mind the switching costs of learning the new interface (Andrew, I believe this would be you).

    But I have an iPhone because the interface is loads better than any Droids I have tried, and its failure rate is about 1/6th that of a Droid. The fixed costs for learning either were the same at the time since it was my first smartphone. But “iPhone Me” never calls “Dell Me” an idiot.

  23. Taki says:

    The PC vs Mac debate is too subjective. People defend what they use.
    As an IT analyst I had many opportunities to use Macs but resisted to learn just another interface as PCs are standard in business and have wider application.

    Mac’s are considered prestige items with on average lower value for money and PC’s as more customizable productivity tools with all inherited compatibility issues.
    For various reasons the world market share was & will be in near future 5% Macs vs 90% PCs & the rest. In a few richer countries this is changing but considering deepening of the divide of reach vs poor the ratio is going to get worse for Macs. One Co alone cannot possibly serve a huge market with overvalued products, and growing too big makes it less flexible (as is a fact lately).

    The technology cycle is changing much faster (2-3 years), so overspending is not a good or long term investment (laptops are now ~$300 – 1000, you can have the higher range in a year for half price).

    And now the real storm is coming with the Cloud computing (IBM, Google, Amazon, Cisc o,.. .) with Androids and Chromiums attacking from all sides. Have fun.

  24. […] lots of competition between PC makers but they’re all competing on price. Only one company makes the iMac but it has the freedom to make something really […]