More thoughts on the iPhone and its markets

Tyler Cowen at Marginal Revolution did a post this morning which casually mentioned that among the things he could do is type on this iPhone (He claims he cannot drive stick and some other things which I found curious).

One of the responses, from a Sociologist from Arizona named Kieran Healy made the following comment - "Based on that first comment, I will be interested to see how many MR readers will find the iPhone awakens their inner Galbraithian, Marxian or Veblenian economist, discount the judgment of hundreds of thousands of consumers, and insist that advertisers have duped all those buyers into overpaying for a product that allegedly has perfectly good market substitutes; that the masses just have the wrong set of preferences when it comes to assessing phones because necessary feature x is missing; or that people only want this new product because it will impress their friends. Perhaps EP approaches will offer a way to save face, because I'm pretty sure having shiny objects on one's person was adaptive in the EEA." (By the way his post on the iPhone is pretty good and also pretty funny - his comment on the Sprint counter campaign was spot on.)

I responded that most of the "experts" on the iPhone had been proven wrong. Many suggested that the iPhone, for whatever non-feature, would fail. It obviously did not. But in another post on Marginal Revolution someone said the initial success is based on a prime sub-group inclined to accept it. That got me to thinking who that sub-group actually would be. There are two possible that come to mind immediately. The first would be the Apple diehards. In the Amelio and Spindler era they were called Macintosh Evangelistas. I was an original Evangelista. Just as there are diehard Windows supporters there are also diehards for Apple - indeed there are even a small group who try constantly to berate Apple supporters. The second most likely group would be the techno-junkies who want to stay at the bleeding edge of technology. Both groups would create an initial uptick of people who would buy the product - pretty much without thinking much about the preliminary reviews. Galbraith claimed in The Affluent Society that business somehow manipulated demand but like most of what he wrote it was about 180º off. I think the most accurate quote on Galbraith's economics came from George Stigler who said (on a picture for Milton Friedman) "All great economists are tall. There are two exceptions: John Kenneth Galbraith and Milton Friedman." (Galbraith stood almost 7 feet.)

But I would argue that there is also something else going on. If you look at the development of the market for iPods - the initial buyers were probably from the two groups mentioned above. All of a sudden, however, people began to see new ways to use the device. That happened with the original Macintosh (with WSYWIG word processing and with Desktop publishing). In the iPod cycle people began to think about linking blogs and broadcasting so we created Pod (and Vod) casts. My suspicion is that as the market for iPhones begins to elaborate that those kinds of new uses will also emerge. The linkage of full fledged browsing with maps and a personal contact list and calendar creates a pretty wild set of possibilities.

The most interesting thing to watch in the coming months is whether the kinds of new uses that have evolved with the iPod and the original Mac will also develop with the iPhone. For now, the cool factor is still there. I get asked at least once a day to show it off. But as happened with the iPod, if the thing begins to develop we may see some very interesting developments.