Paul Krugman is (finally) wrong about something: Apple Macintosh

Nobel-winning economist and New York Times opinionator Paul Krugman tries to put into context Steve Ballmer's exit announcement, the history of the Wintel industry and the rise of smart phones. What's hindering Krugman's analysis is that he's a typical Windows PC end-user.
Written by David Morgenstern, Contributor

In a Monday opinion piece in the New York Times, economist Paul Krugman started off saying he wasn't much of a "tech geek nor a management guru" when it came to Steve Ballmer's future departure from the top spot at Microsoft. But he apparently decided that he does have a deep understanding of IT tech markets and history.

Yet he is mistaken on a number of important points about the Apple and PC markets and their histories and intersections.

Krugman notes that in 2000, Microsoft's share price hit its peak and the company "seemed utterly dominant." Of course, he's even wrong there: there's no "seemed" about it, Microsoft was totally dominant.

The odd thing was that nobody seemed to like Microsoft’s products. By all accounts, Apple computers were better than PCs using Windows as their operating system. Yet the vast majority of desktop and laptop computers ran Windows. Why?

The answer, basically, is that everyone used Windows because everyone used Windows. If you had a Windows PC and wanted help, you could ask the guy in the next cubicle, or the tech people downstairs, and have a very good chance of getting the answer you needed. Software was designed to run on PCs; peripheral devices were designed to work with PCs.

This part Krugman has right. When a company has more than 95 percent of a market, its independent software developers, peripheral makers, and all the tiers of customers, from professionals to consumers, circle around the platform as the earth goes around the sun. But then he reveals his biases.

The story of how that state of affairs arose is tangled, but I don’t think it’s too unfair to say that Apple mistakenly believed that ordinary buyers would value its superior quality as much as its own people did. So it charged premium prices, and by the time it realized how many people were choosing cheaper machines that weren’t insanely great but did the job, Microsoft’s dominance was locked in.

Now, any such discussion brings out the Apple faithful, who insist that anything Windows can do Apple can do better and that only idiots buy PCs. They may be right. But it doesn’t matter, because there are many such idiots, myself included. And Windows still dominates the personal computer market.

Here Krugman makes two fundamental errors: He says that it was Mac faithful who said that PC users were the idiots; and that it was Apple's fault that the Mac platform declined in the 1990s. These are commonly held common wisdom among PC users but are mostly wrong.

Mac users have always known that the Macintosh is the superior platform, from its hardware to its highly-integrated operating system. And they've never been shy of telling this to their Windows-using colleagues, friends and family. Yes, it's annoying.

However, it was PC users, and then Windows users, who thought (and said) that Mac users were the crazy ones: for paying more than a commodity PC, for straying from the dominant Wintel platform, and going with a computing platform that had a smaller peripheral and software base. Recall that it was Steve Jobs himself who used this internalized emotion as the theme for Apple's famous adverb-killing Think Different ad campaign.

Check Out: Recalling a summer when Steve Jobs saved Apple and the Mac

Worse in my eyes is that Krugman blames Apple alone for the decline of its customer base in the 1990s. In the late 1980s, the Macintosh was still a mainstream business computer and the platform was supported by enterprise groupware vendors and other important applications. With its unique graphical interface and strong support for graphics, the Mac was very popular in the higher education, science and technology, and publishing segments. And others. While a reporter at MacWEEK in the early 1990s, I interviewed a number of customers in the government: at NASA and in various military intelligence departments.

The Mac was purchased in volume purchases by a number of enterprise customers in select markets. For example, I recall reporting on Apple's significant presence at database conferences.

However at that very time, the Mac platform came under tremendous pressure from a many-years-long sales and marketing campaign by Microsoft and Intel. These companies came to large educational sites and enterprises waving gifts of technology deals and IT perks, but only for sites that went for Wintel. The sales presentations specifically targeted Apple, saying the company and the Mac platform were doomed. Technology directors were given passes to a special insider IT conferences so that could be in the know for product roadmaps and strategies.

The result was government and business policies forbade Macintosh purchases. No matter that a department or site might have a large investment in Macs, that Macs were actually better for the task at hand, and that the end-users preferred doing their computing on the Mac, the site couldn't continue to use Macs or buy replacements.

In school districts, PC-using parents wanted their children to use the same machines in school, despite calls from teachers that the stand-alone Macs already in the classroom were more robust and required much less support, had familiar educational software and did the job.

No matter. Apple was a failing company, one misstep, one failed product and one quarter away from ruin.

Krugman has the PC viewpoint of the computer market: All computers are alike and the cheaper the better. There's no point in buying a more-expensive brand. Apple customers like their fancy industrial design and the eye candy. PC users know better.

Check Out: Apple delineates its ecosystem: The Mac's new advantage vs. Windows

That common wisdom was proved wrong. The Mac returned with its move to the Intel platform, better quality and a support organization. It helped that many Windows users began to see that Apple wasn't going to die in the next quarter. In addition, missteps by Microsoft in the development of new versions of Windows and the terrible lack of quality from even reputable PC vendors opened customers to the Mac opportunity.

Oh, and then there were the product halos from Apple's successes with iOS.

At this summer's Apple Worldwide Developer's Conference (WWDC), the company said that the Mac's installed base was some 72 million, up 100 percent in the past 5 years. This growth is from switchers from Windows.

So, it appears that a growing number of "ordinary buyers would value its [the Mac's] superior quality as much as its own people did." That's no mistake, Mr. K.

Editorial standards