Gene is a principal in Progressive Performance Software. He can be
contacted via the web at
http://www.stgtech.com/ and via e-mail at
[email protected].
The most oft-cited examples of "superior" technology losing out in
the marketplace are Betamax, Macintosh, and the Dvorak keyboard. The
economic explanation for this triumvirate is the theory of path
dependence, the keystone of "increasing return economics." The theory
is that in the high-tech world, as opposed to other manufacturing
industries, a company's profit margin often increases with each
additional customer. Increasing return economics claims that because
of a putative size advantage, the early market leader will be able to
crush late arrivals by slashing prices, running aggressive ad
campaigns, throwing its weight around with suppliers and partners, and
so on. This leads to path dependence, because although the late
arrivals may have better products, they won't stand a chance in the
market. The veracity of path dependence theory has great relevance to
us as programmers, as it is likely to affect our choices regarding the
APIs, programming languages, and operating systems that we work
with.
Much as in the AI debate, where it is useful to differentiate
between the claims of "weak" AI and "strong" AI, the notion of path
dependence can be divided into a weak and a strong case. The weak
case says little more than that the future is, to some extent,
dependent on the past. The strong case goes much further, and
contends that we often get stuck using inferior products, as the first
product to market can win out against significantly superior
competitive products. Strong path dependence means that it is only
through coincidence that the market winner is the best technology. If
strong path dependence is a common phenomenon, then certain
conclusions are suggested: it is generally futile to compete against
standard holders in the market, and it is useful to have the
government intervene in the standard-setting process.
A few examples illustrate how commonplace the idea is that Dvorak,
Betamax, and Macintosh were superior products that the market
capriciously rejected. (A search of
Alta Vista will turn
up about as many examples as any reader would care to see.)
Some of the leading proponents of strong path dependence feel that
a new branch of economics is necessary to explain this phenomena.
However, like most new branches of economics, this branch does not
stem from a failure of classical models to fit new phenomena, but from
a failure to understand how to apply the classical models correctly.
The empirical evidence necessitating a new branch seems to be shaky,
at best.
No one doubts that there are markets that have a natural tendency
to move toward a state where a single producer, or type of product,
dominates. The VCR market is an excellent example -- people want to
exchange tapes, studios want to release movies in one format, and
video stores have no desire to stock two of everything so that they
can offer VHS and Betamax. However, the issue is not if this occurs,
but whether it leads to poor choices for standards, and whether a
group of industry experts, operating with a government mandate, could
make better choices.
Economists call the effect a sale has on parties other than the
buyer and seller an "externality." Pollution is a classic example: it
may be the people down the river who pay the price for the waste a
factory produces, rather than the manufacturer or the customer. An
example of a "standards externality" would be the effect that the next
sale of Windows NT has on all of the previous purchasers. Even though
they did not participate in the sale, they gain a benefit from having
one more customer in their "camp." Developers are more likely to
write for their chosen platform, there is a broader base of users from
which to hire employees, and so on. Classical economic theory tells
us that the "... expected effect of a 'standards externality' is on
the amount of the standard-using activity, not on choice of standard
or the mix of standards." [8] In other
words, there will be a higher percentage of consumers using the
leading product if there is a widespread benefit to having a standard
-- and this is just what consumers want! However, the existence of
bias toward a standard should not, per classical theory, affect which
product is the leader.
Examining the three popular cases put forward by the proponents of
strong path dependence will show how this theory works out in
practice.
Sony, the developer of the Betamax format, and Matsushita, one of
the VHS developers, chose to give different weight to the importance
of ease of transportability (which meant small tape size) and
recording time (which increases with tape size). Sony thought that
consumers would want a paperback-sized cassette, even though this
limited recording time to one hour. Matsushita, on the other hand,
opted for a larger tape and a two-hour recording time. Later, when
Betamax raised its recording time to two hours (by slowing down the
recording speed), VHS raised its to four. Otherwise, the two
technologies were nearly identical.
Liebowitz and Margolis point out that:
The superiority of the Dvorak keyboard to the standard QWERTY
layout is usually taken for granted. Yet this myth is built around a
single study, which was performed by the U.S. Navy during World War
II. The study, it turns out, was conducted by none other than
keyboard inventor August Dvorak himself, who was the Navy's top expert
in the analysis of time and motion studies during World War II. The
study used inadequate controls, and allows no real comparison between
the two training groups. [9] Later studies
have failed to support Dvorak's results.
The apocryphal story on the QWERTY keyboard is that it was
deliberately designed to slow down typists, to prevent key jams.
However, the keyboard design actually had to win many typing-speed
contests to eventually triumph in the market. "The QWERTY keyboard,
it turns out, is about as good a design as the Dvorak keyboard, and
was better than most competing designs that existed in the late 1800s
when there were many keyboard designs maneuvering for a place in the
market." [8] If this were not the case, and
Dvorak's claims of large efficiency increases with a few days training
were true, then a single corporation with a large typing pool could
internalize the costs of switching technologies, and lead the market
away from the "QWERTY trap" all by itself.
Notice that the new "ergonomic" keyboards, from Microsoft and
others, also belie the notion that we are locked-in to a particular
keyboard choice. Even though they use the same key order as the
traditional QWERTY keyboard, the ergonomic models use a very different
shape for the keyboard as a whole. Yet, despite the re-training
necessary to use them, they are apparently viable in the marketplace.
And mice are, in fact, a replacement for keyboards on many input
tasks, and have become ubiquitous despite their radically different
operation.
Calling the Macintosh superior to "Wintel" computers ignores many
dimensions of what users want from their machines: expandability, a
good price/performance ratio, a wide choice of peripherals, a wealth
of software, and so on.
Whether or not a technology is superior often depends on who is
answering the question. Macintosh always had its strong adherents
among the visually oriented professionals in graphic design, and in
education, where ease of learning was paramount. However, it never
won the hearts or minds of the general business community, which
continually opted for the superior price/performance and "power-user"
features of DOS over the ease of learning of the Macintosh.
Nor did it win over the techies, who preferred the ease of
programming of DOS (e.g., the Macintosh did not even support a
scripting language for many years after its release) and the ability
to get directly to the machine with assembly language, allowing for
high-performance graphics games and so on. Apple failed to realize
that a large portion of the early PC adopters were tinkerers, who
wanted to be able to get inside their machine, trying to hook a piece
of lab equipment to the bus, for example. The early Mac was simply
not to be tinkered with. The case was not even designed to be opened
by the consumer. The first developer of a hard drive for the Mac did
so with no assistance from Apple, and despite the fact that Apple
engineers said it was impossible. This was a crucial mistake, for it
is the tinkerers who develop the peripherals and applications that a
platform needs to succeed. Tom Steinert-Threlkeld sums up Apple's
failure: "Open up your architecture to all comers and win -- or keep
it closed, like the Macintosh, and lose." [12]
If strong path dependence is so uncommon that the proponents of the
theory can't find any good examples, then there are several important
conclusions we can draw.
If your "superior" product is failing, perhaps it's not actually
superior in some important dimension. Analyzing why Apple lost out to
Microsoft in the battle for the desktop, Virginia I. Postrel, editor
of Reason Magazine, points out that Apple was "...too hung up
on the beauty of their product to understand that consumers actually
cared about many other things: price, plenty of software, and
compatibility with other systems. Quality is not one-dimensional."
[11]
"... a single-standard equilibrium, if it is achieved, is more
readily displaced by an alternative if preferences differ. This
suggests that product strategies leading to strong allegiances of some
group of customers are likely to be effective in the face of an
incumbent standard." [8] Linux is following
this path with great success, appealing to the tinkerer market that
GUIs tend to ignore. Ellen Ullman did an excellent piece in
Salon Magazine on the
satisfaction she derived from deleting NT and installing Linux on one
of her machines. [13]
Many developers might prefer working on a platform other than Microsoft's,
but stick with Windows for fear of being crushed by the "Microsoft juggernaut."
Similarly, many IS managers have sought safety in being extremely conservative
with their technological choices. Ten years ago, this conservatism
found expression in the idea that you couldn't get fired for going
with IBM. Today, Microsoft is substituted for IBM. (Doesn't that say
something?) The idea of path dependence is implicit in this attitude
-- no one can replace Very Big, Inc., as its lead is too large. The
absence of any evidence for strong path dependence should give these developers
and managers pause. Those who bet on OS/2, which was developed and backed
by both of the "can't-get-fired-for-going-with" companies, learned
this lesson the hard way.
Full disclosure: I am not a big Microsoft fan. I have worked on
UNIX systems for a decade, and hope to continue to do so for the
foreseeable future. Nor am I a big fan of most current GUIs -- I
discussed their limitations in an article for
Software Development several
years ago. [1]
However, we should give credit where due. Liebowitz and Margolis
remark that, "Since high technology changes so frequently, a firm that
achieved monopoly with one technology will not be able to hold on to
its lead unless it is extremely resourceful." [8]
Far from stifling innovation, as Arthur contends will happen,
Microsoft has had to innovate constantly to maintain its position.
Just three years ago, "Microsoft Bob" was, according to Redmond, the
"easy-going software that everyone will use." But it
turned out that it was actually Web browsers that everyone would use,
and Microsoft quickly adopted this interface as its own. Giving the browser and
the OS the same interface is a major innovation, a step that no
other OS has undertaken. Or consider Rich Text Format (RTF),
Microsoft's erstwhile standard for portable, formatted text. Although
Microsoft was blind-sided by the success of the Web, it quickly
adopted HTML as its new standard, and RTF has been left by the
wayside. Microsoft may have wanted to stifle innovation in these
cases; it was simply unable to do so. And whatever happened to
that network software Microsoft sold in the late 1980s? Can anyone
even remember the name of it?
[1]
Callahan, Gene.
"Excessive Realism in GUI Design:
Helpful or Harmful?"
Software Development, November 1994.
[2]
Diamond, Jared.
"The Curse of QWERTY."
Discover Magazine, April 1997.
(The hyperlink here is to the archive search engine.
Enter "QWERTY"
in the search field, and this article will be returned.)
[3]
Huang, Wayne.
"Psychology and OS Platform Preferences."
Vroom Studios, May 5, 1998.
[4]
Kedrosky, Paul.
"The More You Sell, the More You Sell."
Wired Magazine, October 1995.
[5]
Keefe, Daniel J.
"What Ever Happened to Apple Computer?."
Babson Free Press, February 17, 1998.
[6]
Kelly, Kevin and Reiss, Spencer.
"One Huge Computer."
Wired Magazine, August 1998.
[7]
Liebowitz, Stan and Margolis, Stephen E.
"The Fable of the Keys."
Journal of Law and Economics, April 1990.
[8]
Liebowitz, Stan and Margolis, Stephen E.
"Should Technology Choice
be a Concern of Antitrust Policy?"
Harvard Journal of Law and Technology, Summer 1996.
[9]
Liebowitz, Stan and Margolis, Stephen E.
"Typing Errors?"
Reason Magazine, June, 1996.
[10]
Liebowitz, Stan and Margolis, Stephen E.
"Path Dependence and Economic Evolution."
Jobs & Capital Volume VI, Number 4 / Fall 1997.
[11]
Postrel, Virginia I.
"Creative Insecurity."
Reason Magazine, January, 1998.
[12]
Steinert-Threlkeld, Tom.
"Linux: The back door is open."
Inter@ctive Week Online, September 11, 1998.
[13]
Ullman, Ellen.
"The dumbing-down of programming."
Salon Magazine, May 12, 1998.
These op/eds do not necessarily reflect the opinions of the author's
employer or of Dr. Dobb's Journal. If you have comments, questions,
or would like to contribute your own opinions, please contact us at
[email protected].
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November 01, 1998
URL:http://drdobbs.com/just-what-is-superior-technology/184410813
The Evidence
Betamax vs. VHS
Not only did the market not get stuck on the Beta path, it was able to
make the switch to the slightly better VHS path. Notice that this is
anything but path dependence. Even though Beta got there first [by
two years!], VHS was able to overtake Beta very quickly. This, of
course, is the exact opposite of the predictions of path dependence,
which implies that the first product to reach the market is likely to
win the race even if it is inferior to later rivals. For most
consumers, VHS offered a better set of performance features. The
market outcome, in which VHS prevailed, is exactly what they wanted.
[8]
QWERTY vs. Dvorak
Macintosh vs. Wintel
What Does This Mean to Software Professionals?
Listen to what the market is telling you.
To compete against a market leader, specialize.
There may not be safety in numbers.
You can't rest on your monopolistic laurels.
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