The iPhone was cheap
Because it wasn’t a phone
The clip above is almost the stuff of legends. A meme. Amongst some other douchebaggery by Balmer, this one is the most famous. Mocking the iPhone as the most expensive smartphone (that doesn’t have a keyboard) is I guess how most people are going to remember him! Who was gonna use it right?
Certainly no business would! Certainly that’s what this Steve thought!
Even today, the iPhone is widely regarded as the most expensive smartphone on the market — and it is! But what most people still don’t get is that the “phone” in the smartphone is a relic of the past. Something included to make the device relatable. Like calling a mobile phone, a mobile telephone. The mobile phone wasn’t a telephone. It was a “personal” communication device. And similarly, the “smartphone” wasn’t a phone at all! In fact, the phone app is the least used app on the smartphone. Let’s call a spade a spade. The iPhone was the cheapest computer on the market. It might not be today because now the price factors in for the Apple brand but a quick look at this article tells you that the iPhone was an anomaly if you saw it as a computer in those days.
While Balmer regrets saying what he said, he’s frozen in the history of the Internet that will remember him for dismissing the most successful consumer product of all time which has sold more than a billion devices as of today and made Apple the most valuable company on the planet. To be fair to Ballmer, what he said then didn’t sound so crazy to many people. But what can we learn from this?
The iPhone succeeded not because of being cool, or having great marketing or a novel user interface. Of course all of this contributed but it succeeded because it made the computer so cheap that it was basically impossible for someone to not own one. A computer that they could carry around in their pocket.
“I will build a motor car for the great multitude. It will be so low in price that no man will be unable to own one.”
- Henry Ford
Cryptocurrency
I would similarly argue that the “currency” in cryptocurrency is a misnomer. A relic of the past. It is a contract. That’s what all money is — a social contract. When someone pays you, they are essentially making a promise to you. The promise is that “I am transferring X amount of value, that I hold, to you in an irrevocable manner”. Cryptocurrencies drastically bring down the cost of making such promises. The Internet did the same thing to information businesses. It brought down the cost of transferring information to an extent where businesses that relied on being mediators (post offices) virtually went out of business and were replaced by providers of this infrastructure (ISPs). More importantly they took the money made by the media industry (advertising) and moved it off to the Internet. Suddenly content publishers weren’t making money. People who facilitated discovering them (since the content exploded) and delivering it in a way that didn’t make your head explode (Google, Facebook and Netflix) were making all the money. Other business that, before the Internet, hadn’t looked like information businesses also succeeded. Amazon is a prime example. What is a retail store after all? A physical manifestation of a brochure. A brochure that you can experience. So why not just make it a website to deliver information on products and let you make decisions you could never make reading those brochures.
Anyone could have started a search engine, social network or online store because of the low barrier to entry but what these companies succeeded at, just like the iPhone, was to bring down the cost of doing these activities while providing the best experience.
Cryptocurrencies are going to put banks and payment processors out of business since these will become primitives that everyone will have access to just my joining the Bitcoin network. The companies that will thrive in this space are companies that make using these primitives a joy and build on top of them. Any institution that arbiters monetary contracts will go out of business and be replaced by better service providers that charge (or not charge) you for an exceptional facilitation of these services that you otherwise would have been able to accomplish but albeit more painfully. In fact this is what these incumbent businesses did to their predecessors.
Bitcoin and why the Gopher failed
Long before the Web, there was the Gopher. It even had more market share. It failed because it was too organised. It didn't take the Internet seriously — a medium for sending information. You couldn’t send information on the Gopher that you could on the Web. It was too organised to be able to trap all information in its structure. Immediately overnight the web overtook gopher because it treated Internet the way it was supposed to be — just a medium to send and receive information. And it gave you the ability to decide what that information was.
While I am driving too many analogies for my own good, I’ll stick my neck out and say that this is precisely why Bitcoin is succeeding and will succeed over all other cryptocurrencies. Anyone can make an Internet protocol and have more developer share behind it but if you don’t take the Internet seriously for what it is then you’re going to lose. Cryptocurrencies are trying to be money. Some like Ethereum are trying not to and are even more doomed to fail than others. Bitcoin takes money seriously — as a good that captures value and preserves it over space and time. It takes money seriously by doing one and only one thing well — let you define a social contract for the transfer of value that cannot be broken. You need that guarantee to use something as money — the promise that what I get is real and will not be taken away from me either through confiscation, inflation or taxation.
Bitcoin is a protocol for irreversibly settling who owns how much money by recording all the transactions globally. If it’s not on the blockchain (with the most work), it never happened! A lot of people point to the energy consumption of this novel protocol. While it’s incredibly hard to come up with the math to either prove or disprove it, I think they are missing the point. Balmer mistook a really cheap, portable computer for a phone and if you think that Bitcoin is an expensive system for global settlement of hard money that can be magically transported to anywhere in the world in 10 minutes without counterparty risk and third party custody then you my friend — are the Steve Ballmer of Bitcoin.
Bitcoin is hard money — the future currency of the Internet. And, if you want to accept it for your work then try out Saturn for invoicing your clients in the currency of the future.
