Critical Thinking

Critical thinking—that is, the ability to look at a topic or issue objectively—is one of the most important skills a human being can possess in today’s world. Critical thinking requires you to set aside your biases, and to assume that everything you’re being told about an issue is either wholly or partly wrong. You have to actively seek out contrary opinions and positions, evaluate them based on how accurate and unbiased they’re likely to be, and come to your own conclusions.

We’re going to run through an example, but I want to start with a caution.

At least for US citizens, critical thinking is hard. Here’s why:

We hate to be losers, and we hate to be wrong.

An incredibly amount of US culture is based around winning. Look at our national obsessions around sports… politics… you name it. Why, I once had a fellow harangue me for over an hour because I’d bought a Ford truck instead of a Dodge, as he had. What’s the big deal? Well, for much of US culture, there can be only one winner. Only one truth. Only one correct answer. And if he’d bought a Dodge, and I’d bought a Ford, then one of us was wrong, and it sure as hell wasn’t going to be him.

And so we don’t really incentivize critical thinking, because to think critically means that you may come to the end of an issue and realize that your initial position was wrong. Meaning, you lost. You loser!

But seriously, it’s hard.

And so let’s walk through an example. Perhaps something that doesn’t get ordinary folks like you and I as riled up, something that’s maybe easier for us to be objective about. Maybe something where you and I don’t already have strong positions. Let’s say… the 2024 Presidential elections!

Hah. No.

Let’s talk about Apple’s App Store. Not a totally non-polarizing topic, but hardly a world-shattering controversy. Specifically, let’s talk about the 15% to 30% fee that Apple charges app developers who sell their apps, or who sell in-app purchases within their apps.

Critics call this an “Apple Tax,” and it is 100% that kind of pejorative language that should trigger your critical thinking. Anytime someone describes something in deliberately negative terms, they’re trying to sway your opinion, and you should immediately suspect them of at least partly lying to you. Anytime someone uses language that gets you riled up, they’re doing it on purpose, and you should instantly be suspicious of them. E.g., literally all politicians, all the time.

So let’s begin with a few non-controversial facts.

• Apps that do not charge fees, either for the app or for in-app purchases, pay Apple nothing.
• Apps that charge a one-time fee only for the app pay a 30% fee.
• Apps that use in-app purchases for one-time purchases pay a 30% fee.
• Apps that charge an ongoing subscription pay 30% during the first year the subscription is active, and 15% thereafter.
• Apps in most regions are not permitted to advertise other means of paying app fees. There are some regions where they are permitted to do so, and recent court cases point strongly to this becoming the case in most regions. However, when an app is permitted to advertise another payment method (e.g., “you can also pay for this on our website, not in the App Store), they must pay Apple a 27% fee (or 12%). This is basically the same 30% (or 15%), less a 3% allowance for the credit card fees the develop will be paying elsewhere.

The above are facts. They are not judgement calls on whether Apple is right or wrong. We’ll come to that.

Let’s now look at some non-quantitative facts. That is, some facts to which I cannot accurately ascribe numbers, but my experience in the industry tells me that these things are true, even though I can’t measure them for you.

Specifically, I know that the App Store is a horrifically complex thing. I want you to think about this for a moment, and think about it hard. Imagine that you are the developer of an app—one that you have on your own device, right now—and you’ve found a minor bug in the app. You obviously want to fix this.

• You code up a fix for the bug. You are likely doing this in Xcode, Apple’s proprietary integrated development environment, which Apple provides you for free. This tool is likely supported by a team of developers who work for Apple, and that team is probably not tiny. A LinkedIn search suggests at least 50 people.
• You then test your fix, using the Simulator that is part of Xcode. Again, provided for free, and it’s something that has to be updated multiple times per year to reflect new Apple devices and device capabilities.
• You then upload your fix to the Apple Store.
• The Apple Store runs a fairly serious set of automated checks, looking for known malware-containing app libraries, validating various pieces of app functionality, and so on. While this is automated and can run at scale, it’s also maintained by a team of developers who are likely dedicated to it. Apple charges nothing for this service, which helps protect both users and developers.
• The Apple Store, via “Xcode Cloud,” can also run a variety of automated tests that you, the developer, write to help ensure your app is bug-free. Developers pay for this service, and aren’t required to use it.
• Once all the checks have passed, the App Store creates a variety of downloadable packages based on your app. This is actually a neat bit: they obviously build a “full” version of your app, which is what someone downloading it for the first time would receive. But they also build various “delta” versions, which represent the difference between the new upload and the older versions that are already out there. Theses “deltas” enable your existing users to update faster, and to do so using less cellular data, if they’re doing so over a cell connection. Apple does all this work for free, but once again, the ability to do this requires Apple to pay a development team.
• Apple then copies your app’s various packages to every region in the world where your app is available—which might well be all regions. Apple pays for the network bandwidth to make this happen, and they pay for the storage in various data centers across the world. These regional data centers help make accessing the App Store faster for users in that region, instead of directing someone to, say, the United States. Again, Apple does all of this for free.
• Apple then distributes your app’s update to all of your existing users—again, for free. Notably, this task is not cheap. It requires a lot of infrastructure—load balancers, web servers, storage servers, database servers, and the like. And it just works, which tells you that there are a lot of Apple employees and contractors behind the scenes to make it “just work.”
• Also notably, Apple doesn’t restrict how often you, the developer, can update your app. Daily? Fine. No restrictions. And again, if your app is free and doesn’t use in-app purchases, you pay nothing for all of this.

Trust me as someone who has worked in this field a long time, the App Store is practically magic, when looked at from a technical perspective. Big companies pay millions of dollars in infrastructure, software, and payroll to do the same thing with their own internal apps, deploying them to their own internal users. It’s one reason so many companies are moving to web-based internal apps, because those don’t require this kind of complex distribution. Technologically, it is hard, and the fact that Apple and stores like Google Play make this look so effortless is amazing.

But all right, look, someone has to pay for it all. And you might say, “Apple should do this as a service for their users, who pay a lot for their devices.” And Apple does do this as a free service if you’re not making money on your app.

But also, Apple is a business, and businesses like to make profits. Their shareholders—the people who literally own the company, mind you—weirdly insist on companies making profits. And when your owners insist that you do a thing… you know, you do it.

And so if you as a developer are making bank on your app, I would argue it is only fair that you not only pay for the work Apple does to enable your revenue, but you also help support that infrastructure for all of the free apps in the world.

In this sense, yes, it’s an “Apple tax.” And I mean that in the same way that taxes pay for roads. If you run a brick-and-mortar store, you can’t run that business out of your own pocket. You need roads. You need electrical wires. You need plumbing, at least for your employee bathroom. All of these things are paid for through taxes. In Apple’s case, they’ve simply said that people who don’t profit from those infrastructure investments—say, homeowners who live down the road from your business—don’t pay for them. Instead, the people who monetize those investments—business owners—pay for them. In the physical world, it obviously doesn’t work that way, but I’m not sure you can say that’s objectively “right.” I mean, I pay a lot of property taxes for schools that I don’t use, and it’s a quarterly source of irritation, but here we are.

So is there a more “fair” way Apple could handle the situation?

Possibly. If we’re thinking critically, there are two issues here.

1. How much Apple charges and what they charge it on.
2. Whether or not “paid” apps should subsidize the infrastructure for “free” apps.

Let’s tackle the second one first. There’s no objectively correct answer here, by the way: there’s only what you think of the situation. But take a look at your device, and do a quick inventory of the free apps you see there. How many of those would you pay for, if Apple required them to pay some fee to access the App Store? I have a couple of government-run traffic apps, for example, that would absolutely not exist if the government had to pay even a single cent. There’s an argument for revenue-generating businesses to support at least “public services,” and that argument is literally why real-world corporate income taxes exist. Again—you form your own opinion here, but consider the balances on both sides of the issue.

Now to the first issue.

Couldn’t Apple just charge a larger annual fee for their developer program, which is what provides access to tools like XCode and the App Store? Right now, I’m guessing the program’s $99/year fee (which hasn’t increased since it was introduced in the early 2000s) doesn’t actually cover all of their hard costs. So yes, they could raise this fee, instead of funding their programs from the 30% “Apple tax.” But again… how many free apps would stop existing if their annual fee rose to $500, or $1000, or whatever?

Couldn’t Apple charge a flat “app deployment fee” each time you uploaded an update? After all, that’s when most of Apple’s investments and infrastructure seem to come into play. And sure—they could. But again… how many free apps would stop existing? And more importantly, wouldn’t that be incentivizing developers to not update their apps? Or, instead of being Agile and fixing every bug as soon as they find it, would this incentivize developers to do… monthly releases, instead? Quarterly? Annually?

Again, there are balances, incentives, and dis-incentives no matter how you go about it.

Could Apple lower their fee to, say, 20%? Or some other number that more accurately reflected their actual costs, with some still-pleasant profit margin built in? Sure.

However.

If you look at the broader market in which Apple exists, they’re charging pretty much the standard. Google Play has the same rate structure, although they probably just copied Apple’s. But “stores” on Xbox, Playstation, and Switch work on the same commission basis—and for platform video games, the complex licensing and publishing arrangements often mean the platform owner gets more than 30%. For example, the deal with Nintendo is that the game publisher licenses their game to Nintendo, who then prices it and publishes it; Nintendo players don’t technically have a direct relationship with the game creator, they only have a relationship with Nintendo.

Consider other forms of media. Book authors rarely make double-digit royalty percentages. If an Apple developer is making a 70% earning on their work, a fiction author may have only made 8% or 10%. And in many cases, the book publisher is doing less work, and taking less risk, than Apple is, yet keeping a hell-ton more, because “that’s how it’s always been done.” Even on Amazon’s Kindle Direct program for independent publishers (please buy my novels), Amazon keeps 30% under their most generous plan, and as much as 60% under others. Granted, Amazon is providing a very App Store-like set of services and infrastructure to put that book into the digital hands of readers… but still, it’s 30%. So is Apple wrong for charging that much? That’s an opinion you’re welcome to hold. Are they out of line for charging that much? Factually, no, they’re not.

Would paid apps be cheaper if Apple’s cut was smaller?

I would suggest no. And here’s why: Paid music hasn’t gotten cheaper. When CDs were being phased out in favor of digital music, we were all assured the prices would go down, since there was no physical media, warehouses, shipping, and so on. Didn’t actually happen.

When digital books were getting started, we were assured they’d be cheaper, because paper, warehousing, shipping, etc. And yet a Harry Potter e-book on Amazon costs me $3 more than I can get the paperback of the same book for.

Because once businesses know what you’re willing to pay for a thing, they have no reason whatsoever to sell it to you for less than that.

If you’re already paying $5 for an app on your phone, and Apple drops their “tax” by half, the developer isn’t going to lower the price in most cases. They’re just going to pocket the difference, because that’s how businesses function in a free market economy.

(As a sidebar, there are a lot of inexpensive ebooks on Amazon; my own series usually price the first novel at just 99¢ to lure you in, even though the paperback might be $15. I don’t make money on that first novel, so that cheaper price isn’t reflective of some broader market truth, it’s just basic loss-leading. I’m hoping you’ll love it and buy the sequels. I do price my ebooks lower, meaning I make the same profit in dollars off ebooks and paperbacks for the second and subsequent books in a series, but that’s my decision, not, again, some broader market truth. Most traditional publishers don’t do that, because once they know you’ll pay $10 for the story, they’re charging that regardless of how the story is delivered to you.)

So there: a look at critical thinking. One of the unsatisfying things about critical thinking is that, if you’re doing it correctly, you’ll come to the end and realize there’s no concrete, objectively correct answers. What’s “right” and “wrong” usually come down to your personal philosophies and values, and that’s completely okay. It’s actually fine to debate philosophies and values.

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