Hacker Newsnew | comments | show | ask | jobs | submitlogin

I get a bit of an ugly feeling about the way competition is working at the moment. On the surface it's all roses - glitzy features coming faster than we can count them, hardware obsoleted with far better options every 6 months, prices falling like crazy ...

But you look under the surface. Apple and Microsoft championing user's "privacy" - why? Because they want to attack the revenue base of Google. Don't compete with your competitor. Poison their environment until it is too toxic for them to survive and they leave.

Google releasing ultra cheap phones - why? Apple hugely dependent on enormous margins. Don't compete with them directly. Poison their environment by changing how people think about hardware. Make it a zero margin game and Apple goes away as simply a side effect.

I feel differently about these things on different days. On good days it seems like we're in a golden age of competition. On bad days it seems like we're witnessing a silent armageddon where all sides have abandoned our interests and have voted for mutual-annihilation. "If I can't win, I'm going to make sure you lose too" they are saying. I hope my good days are the ones that turn out to be correct.

Supreme excellence consists in breaking the enemy's resistance without fighting.

I think you make good points re: their strategies--but those strategies have some risks for those pursuing them, and the consumer tends to benefit either way.

If google can hurt apple's margins, the consumer wins. Meanwhile, if they can't, they just end up giving away a bunch of phones. And to my knowledge, no company has been able to maintain the kinds of gross margins Apple has without becoming a monopoly. The apple brand is a kind of monopoly, and patents add monopolistic properties to innovation. But no brand lasts forever, and the big players all have patents they can use against each other, somewhat damping their appeal with MAD

Meanwhile, on the privacy front, I suspect we'll see more push back on this in coming years. Better privacy laws are probably good for the consumer, but could be catastrophic to many companies that currently place huge theoretical value on their big data. If strong restrictions come into place on how you can and can't use that data, suddenly it's not quite as valuable as first thought.

So I'm generally optimistic that this is still the kind of competition that helps consumers.


I don't think that pricing aggressively to get people to pick your product over your competitor's is "poisoning the environment". It's Capitalism 101. Uprooting an entrenched market leader isn't done by being as-good-as, it'd done by offering something so compelling over the market leader (in this case, price) that people are willing to give you a shot. Apple managed to survive the computer price wars with its ridiculous margins intact, by positioning themselves as a luxury brand with an image that justifies the price premium. Why would the smartphone/tablet market be any different? We know from decades of technology sales that hardware trends towards being easier and less expensive to produce, and thus, more affordable. Economies of scale naturally dictate that Apple is going to have to lower prices to compete; if their prices remain the same, their margins go up because the component hardware becomes less expensive to produce.

Google is gunning for people who are price-sensitive because they can afford to have next-to-zero margins on their hardware. I don't think it's to poison the perception of mobile hardware pricing as much as it is an attempt to be as competitive as possible.

The iPad Mini costs about $195 to build, according to analysis I've read. Apple could had made the choice to position it at $299, still made a ~30% profit margin (rather than 40%, which is about Apple's margin on everything), gotten under the psychological $300 barrier, and been much more price-competitive with the Nexus 7 ("It's a premium brand! You pay a little extra, but it's worth it!") - the fact that they chose not to isn't because they had to make a choice between a profit margin and being competitive. It's because they make a 40% margin on everything they sell, and the iPad Mini wasn't going to be any different. They may pay for that choice in loss of marketshare, but that's economics, not a poisoned perception.

OTOH, attacking Google on "privacy" is poisonous, IMO, because it's hypocritical; both Apple and Microsoft have long histories of doing things that are questionable on that front. Attacking your competitor and attempting to ruin their image or public perception as a tactic to dissuade people from buying their products, rather than competing with them on features or price is absolutely ugly, and should be called out and discouraged. Apple seems to be really hot on this strategy lately (privacy with Google, "cheap knockoff" with Samsung, "patent thieves" with basically everyone else), and it's discouraging, because consumers benefit much more when companies put their money and effort into building products that outclass their competitors rather than simply trying to discredit them out of business.


So your saying that basically were in something like the cold war. And that our only hope is the realization of MAD?


Applications are open for YC Summer 2015

Guidelines | FAQ | Support | Lists | Bookmarklet | DMCA | Y Combinator | Apply | Contact