Thursday, October 4, 2007 - The Progress & Freedom Foundation Blog

Karlgaard on "The Cheap Revolution"

Rich Karlgaard, publisher of Forbes, had an excellent editorial in yesterday's Wall Street Journal commenting on the silly lawsuit that a New York woman has filed against Apple for supposedly violating price discrimination laws when the price of the iPhone dropped by $200 bucks. Apparently, this woman believes she is the victim of some sort of grave cosmic injustice because she shelled out $600 clams to be an early adopter, only to see the lesser mortals among us get their iPhones for $400 just a few months later.

Karlgaard points out that this is just the way a world governed by Moore's Law works:

What's going on here? Did Mr. Jobs gouge early technology adopters just for a couple extra (billion) bucks? I don't think so. After a long streak of successes, Mr. Jobs and Apple -- whose stock is up more than 20-fold since 2002 -- have collided with two forces stronger than they are: One is the cheap revolution; the other is the global economy. Together they forced Apple to drop the price of the iPhone and offend its geeky customer base.

To illustrate the power of "the cheap revolution" in action within our new digital economy, Karlgaard provides this wonderful example:

I am thumbing this column on Research In Motion's BlackBerry 8600. It's a 2006 model, almost ancient now. My BlackBerry is powered by an Intel 312 megahertz microprocessor, for which RIM pays Intel about $20 per chip in volume. Keep that price and performance in mind. Fifteen years ago, at the dawn of the Web age, Intel's hot seller was the Pentium family of microprocessors. In 1992, the Pentiums ran at about 312 megahertz, just like the Intel chip in my 2006 BlackBerry. The difference being that the 1992 Intel chip cost about $400, in volume. That's the cheap revolution at work -- the flipside of Moore's Law.

That's amazing stuff. You gotta love the power of techno-capitalism!

Finally, regarding that absurd NY lawsuit alleging price discrimination on Apple's part for giving the world great products at a rapidly falling price, Karlgaard rightly concludes that, "Apple need not apologize for cutting prices. It had to. And as for that nutty lawsuit in New York, the court should delete it post haste."

posted by Adam Thierer @ 8:37 AM | Innovation