Sure, the Mac OS was light years ahead of Windows 1.0, and it took Microsoft until Windows 3.1 or even Windows 95 to get to near feature parity. Did that translate into the immense marketshare and “big profits” for Apple Mr. Lee’s theory would predict? Funny enough, no it didn’t.
In fact, it took Apple nearly 7 years to sell its first 5 million Macs. On the other hand, Microsoft sold 10 million copies of Windows 3.0, “a usable, less expensive alternative to the Macintosh platform,” in less than 2 years!
Blafkin seems to regard this as evidence that the Mac (and its successor machines) weren’t profitable for Apple, but it proves nothing of the sort. Apple did, in fact, make a ton of money on Macs in the late 1980s and early 1990s, with prices of high-end models pushing ten grand and fat margins.
Apple has long been stuck in the role of creating markets, while others come in later to dominate them. They spend millions in R&D innovating. They spend millions market testing each product. They take on all the risk that consumers might not even WANT a GUI-based operating system. In the end, their competitors take advantage of all their hard work and gobble up marketshare.
Apple tried using trade secrets and even copyrights to protect their innovations to no avail. In 1998, Apple sued Microsoft and HP to protect the “look and feel” of the Mac OS with copyright, but they failed in the courts. Many believe that if they had patented some of those concepts, Microsoft would not be the dominant player in computing today.
Blafkin seems to regard this as an argument for software patents, but it seems to me to cut in the opposite direction. The point is that Apple kept innovating despite their inability to prevent Microsoft and others from imitating their products. That was a boon to consumers, who got more innovative products at ever-lower prices. Indeed, as Luis pointed out in comments to the previous post, if anything Apple seems to innovate more when they have a competitor breathing down their necks.
Blafkin seems to believe that the Apple’s competitors are the primary beneficiaries of this competition, but that’s not true. Some of Apple’s imitators certainly made a healthy profit, but their profits are dwarfed by the benefits to consumers, who saw prices drop much faster than they would have if Apple had been given a monopoly.
Indeed, this phenomenon, which economists call consumer surplus, is one of the strongest arguments for capitalism. In a free market, the goal is never to maximize the revenues of innovators. Rather, the goal is simply to ensure that innovators reap a sufficient share of the profits from their innovative activities that they will continue to innovate, with the rest flowing to consumers. The fact that other firms quickly come along, imitate an innovative company, and drive down prices is one of the great strengths of free markets.
So while it might be true that software patents are good for Apple and the software companies Blafkin represents, I don’t think Blafkin has made a convincing case that software patents are good for consumers–who ought, in my opinion, to be the focus of public policy analysis. I’m sure Steve Jobs finds it frustrating when other companies “take advantage of all their hard work and gobble up marketshare,” but the millions of consumers who get better products at lower prices feel differently.