Karl Marx and Steve Jobs
In a recent WSJ article, one of the top economists in Russia indicated he thought that the West would collapse by 2010. This is actually not a new theory; to some extent Karl Marx predicted the end of capitalism as well. A Marx educated economist claiming this in 2008 is hardly shocking, just do an internet search on “The end of Capitalism” – I get 14 million hits, and in the top ten you find authors at the Washington post listed before those who are quoting either the Iranians or Russian economists.
It’s interesting simply because it points out how important it is to understand what the strategic end state actually is. The pre-2008 theory about how Reaganomics worked runs that the capitalist west outspent the communists in the East, and in the 1980’s the Wall came down because communism couldn’t keep up – triumph the capitalists.
This reminds me very much of some business school case studies I read about the IBM PC architecture and the PC industry – horizontal, modular, competitive and making money hand over fist in those days. Apple was suffering because they were the anti-IBM PC and had ‘foolishly’ made the decision to not open up their hardware for others to innovate around. In case you’re curious, it was during the “un-Jobs” years; pre-iPOD, pre-iPhone, wandering in the desert.
Between 1999 and 2004 some interesting dynamics started to come to light. The PC model had indeed run itself to highest volume and rock-bottom margins. Dell was selling PCs over the internet/phone like a modern-day Sears Robuck, IBM sold most of their PC business to Lenovo, it wasn’t clear HP was going to pull through and survive.
Average margin per unit in the PC industry: ~5-10%.
Apple average margin per unit: ~30%
At that point I started wondering if Apple had been waiting for the unintended consequences of IBM’s decisions of the early 1980’s to play out, subsisting for a decade on the hip, the educated, and the loyal until they could step out of the wings and go mass market again. Perhaps Apple just got lucky and were able to wait for Charlie Fine’s “Double Helix” to kick in on the backswing….
Whatever the case, a decade earlier they were the MBA students’ case-study strategic chump. Look who’s laughing now.
Strategically it makes sense to listen harder or at least read more seriously what our critics say about our systems when we are at our highest points and not guffaw quite so loudly at their critique. The unintended consequences and logical outcomes of our systems and strategies are easier for our ‘competitors’ to observe – if we spent more than a nanosecond evaluating their claims before we shrug them off perhaps we’d self correct more readily and avoid the worst of the unintended consequences.
“Clockspeed : Winning Industry Control in the Age of Temporary Advantage”, Charlie Fine