“Computers” and Other Anachronisms, or Whither Apple and China?

We’ve got months before the tedious Republican primaries grind to their obvious and inevitable conclusion. So why not discuss something more interesting?

Human language, for instance. In important ways, it’s nearly always obsolete. New words and concepts take years, if not decades, to work their way into leading languages like English, Mandarin or Spanish and acquire wide popular usage and stable meanings.

In the meantime, we use obsolete words and phrases, often for cultural and historical reasons that have little to do with the present or with clear communication. For example, we still speak of “sailing” on ocean voyages, though virtually none of our ships today has sails.

“Computers” is another one of those obsolete words. Most of us still think of tablets and mobile devices, let alone netbooks and desktop machines, as “computers.” But how many of us actually use them to “compute”?

In the beginning, Bill Gates started his vast empire with a primitive command-line operating system called MS-DOS. The operating-system bit he bought from someone else. But the product also had a BASIC-language programming module, which Bill Gates and his sidekick Paul Allen wrote themselves. They actually expected their customers to write computer programs and to use the machines to compute. And many of them did.

Today, of course, very few “computer” owners use their machines to do original calculations, let alone to write programs for that purpose. “Computers” are actually communication and information devices. If you could look inside them, you would see a lot of computing going on. But virtually all of the calculations serve the purpose of communicating: providing the user with clear and fluid text, video and audio in a rapid and efficient manner, regardless of available bandwidth and screen size.

Few users today do any computing at all. Some business users do a rudimentary form of calculation in creating spreadsheets; but that’s about it. And even they use others’ programs for that purpose.

The engineering, scientific and financial folk who actually do calculating have their own specialized programs—and often their own specialized machines. Or they use the numerous pre-configured calculation sites available on the Web, including Google, which lets you calculate pi to the power of e just by typing “(pi)**e” into its search field.

An even better example of semantic obsolescence is China. It still calls its ruling party of 80 million members “Communist.” But that party hasn’t really been Communist for nearly thirty years.

Today’s China is, besides Germany, the world’s most successful example of intelligently regulated capitalism. Its ruling party mimics the Mandarins of old Imperial China, modernized for the twenty-first century. Yet many Americans, deluded by the obsolete title, still think China follows Mao’s Little Red Book.

China’s regulated capitalism is particularly effective in its banking sector. It doesn’t let private bankers run roughshod over an otherwise efficiently functioning industrial economy, all the while spouting self-serving nonsense about financial “innovation,” free markets and Adam Smith.

When the global economy nearly collapsed, China suffered from the Crash of 2008 that our own Yankee finance psychopaths had caused. Bit it didn’t have a similar crash of its own.

When China’s few native finance psychopaths threatened to create a real-property lending bubble and ignite domestic inflation, China acted quickly and harshly. It raised capital reserve requirements and interest rates, several times. It tamped down bank lending by edict in the worst-offending regions. It fired a few hideously corrupt and insubordinate bankers as examples to others, and it even executed one or two.

The growing Chinese real-property bubble quickly deflated, and China’s astounding growth barely stumbled. China’s major economic policies—continued growth, increasing economic equality, and developing China’s relatively backward hinterlands—forged ahead. Regulated capitalism does work, at least if you have the common sense to distinguish self-serving ideological claptrap from real capitalism. Hint: capitalism requires taking real risk and personal responsibility for bad decisions.

So why is Apple the world’s most valuable computer company, and the world’s most valuable corporation, period (sometimes second to Exxon Mobil)? Part of the answer is semantics. It was first to recognize the word “computer” as an anachronism—a misnomer for what people actually do with their devices, just as “Communist” is a misnomer for what the Chinese actually do with their economy.

The reason why Apple is selling many more devices than anyone else—besides its superb product quality—is clear thinking. Apple was first to recognize that so-called “computers” actually serve other uses entirely, namely, communication and information. And it came to dominate both fields by giving people high-quality products that actually serve those two functions well.

The iPhone lets people communicate as they have done since human civilization began, by talking. It makes that job easy. At the same time, it provides broad access to information as a secondary function, with a small screen which suggests that function’s subordination (to talking and portability).

For the more important function, Apple created a whole new product category: the “tablet.” That name, too, is a misnomer. The word “tablet” implies something on which people write. But that’s only a minor and incidental use of the iPad. It’s so minor, in fact, that Apple could get away with virtualizing the keyboard and making writing and storing original text cumbersome and inconvenient. The iPad’s real function is tapping the Web to get information and entertainment.

But, just like the iPhone, the iPad also serves subordinate functions. With its camera and microphone and the aid of e-mail, texting, Skype and other VOIP devices, users can make it communicate, too. In an airport recently, we saw a very animated young man holding his iPad in front of his face and talking to his wife or lover as if she were there.

So Apple discovered the open secret of what people actually do with so-called “computers.” They don’t compute. Few even write, at least if you think of “writing” as creating something longer than a Tweet or short e-mail.

The overwhelming majority of device users don’t create content, by computing or otherwise. They consume it. So all they need is a clear screen and easy means to make it display what they want.

The same insight is likely to make Apple dominant in personal devices for business, too. Why? Because the vast majority of business users, just like their consumer counterparts, are consumers of information, not creators.

They don’t compute. They don’t create. They read and follow instructions. Or they use information provided by others to make sales or business decisions. They need rapid, efficient access to up-to-date information to do their jobs.

So, as Bloomberg.com recently reported, the iPad has taken the financial and pharmaceutical industries by storm, without any special marketing or sales effort on Apple’s part. Workers in these industries discovered the iPad in their personal lives, adapted it for work, and insisted that their enterprises support it.

You could have seen all this coming, if you were smart enough. I wasn’t. In on-line comments, I predicted a few months ago that HP would take the business tablet market because of its long experience with marketing to enterprises.

But HP’s own managers were smarter than I. They capitulated early, leaving the “tablet” field entirely to Apple and a few Android clones. They saw that Apple already had an insurmountable lead in products, market penetration, quality and “buzz.”

Google, it seems, is now fighting the last war with Android. It is trying to replicate Bill Gates’ success with an open platform running on untethered hardware.

But the battleground has shifted. Once “computers” for individuals cost several thousand dollars. Then Microsoft could succeed by riding the coat-tails of hardware manufacturers battling to squeeze the last few hundred dollars out of the retail price of “computers.” Then Apple couldn’t compete with its integrated hardware and software, much higher quality standards, and consequently higher prices.

But now the retail cost of tablets and mobile devices is less than a thousand dollars, sometimes much less. And users have wised up. They realize that spending even twenty percent less—about two hundred dollars—is no bargain if it means wasting much more time and money in learning, training, standardizing, securing, maintaining and supporting a hastily-produced, mediocre product.

For an employee who costs an enterprise a mere $100 per hour, that’s just two hours of fooling around trying to make the complicated simple. Apple’s products mostly do that out of the box, making them the economical choice.

But the real essence of Apple’s contribution may have been as simple—and as profound—as semantics. Apple was first to see that, although “computers” do a lot of internal calculating, that function is irrelevant to users, who buy them to communicate and access content that others create.

Google might have seen that light first. Its search engine created the richest and most efficient source of information and entertainment in human history. But then it failed to recognize that, for average users, simplicity, ease and quality of access were (and are!) far more important than a small difference in the price of devices that soon become obsolete anyway.

It took vision to see through misleading semantics and the internal mechanics of how “computers” work to the real benefits that they give their average users. It’s going to take similar vision to see how China is beating us at our own game of capitalism by regulating it well, just as we did in our Golden Age.

I fully expect Apple to pass Exxon Mobil again as the world’s most valuable corporation, as least before oil prices rise out of sight. Whether we can stay ahead of China with a much smaller population, obsolete semantics, an obsolete vision and a still unfettered, still psychopathic and still hideously bloated finance sector is another question entirely.

Footnote: If you want evidence of our finance sector’s ongoing predation and immunity from the normal rules of capitalism, you need look no further than the news today. In two must-read articles (1 and 2), Bloomberg.com analyzes the financial effects of the government’s much-touted foreclosure settlement with big banks.

In essence, the deal does three things. First, it settles most claims relating to improper and improperly documented home foreclosures. That settlement will allow many homeowners to stay in their homes who could not otherwise. Second, it releases the settling banks from further liability to settling governments for offenses relating to the foreclosure process, although not to other litigants or for other claims. But third—and most important—the settlement requires no adjustment in loan equity (principal balance) for millions of homes sold at prices inflated by the banks’s near-decade-long spree of psychopathic behavior.

The last point is worth emphasizing. Big banks, including those settling, created the housing bubble by manufacturing, hyping, and marketing liars’ loans, shaky mortgages, and all the mortgage-backed securities and other derivatives that triggered the Crash of 2008 and the so-called “Great Recession.” They made tons of money by grossly inflating the value of houses and related loans and mortgages. Now, at least in this settlement, they are taking no responsibility whatsoever for the principal consequence of their misdeeds: a grossly inflated housing bubble that burst, precipitating the most disastrous global economic collapse in a century.

The people who will pay for those consequences will be: (1) the homeowners who still have to pay off inflated mortgages, whether or not they need or get help to stay in their homes, (2) the investors in all the “innovative” financial instruments that turned out to be (to use a software term) vaporware, and (3) we taxpayers, who may have to front additional money to provide greater relief to homeowners threatened with foreclosure and short sales.

No wonder several financial sophisticates quoted in the Bloomberg.com stories speak of “other people’s money,” which the settlement uses to pay for the bankers’ misdeeds. If it looks like a bailout, smells like a bailout, and reads like a bailout, it’s another bailout.

I don’t know how many of Tim Geithner’s fingerprints are on this debacle, or whether it’s all the lawyers’ fault. But he had stated he’s unlikely to remain at Treasury in Obama’s second term. His departure can’t come too soon for me.

We need some people at Treasury and elsewhere who have a sense of the big picture, perspective, proportion and justice. At least we need some people who can follow the money. As it stands, we are continuing on the path of saving a few innocent victims by sacrificing the principles of accountability and personal responsibility that lie at the core of both capitalism and modern civilization.

Erratum: Earlier versions of this footnote erroneously implied that the settlement: (1) released nongovernmental claims relating to foreclosure, (2) did not provide equity relief for some homeowners foreclosed or threatened with foreclosure or short sales, and (3) required the government to pay for some equity relief. In fact, as a third Bloomberg.com report makes clear, the settlement releases only foreclosure-related claims of settling governmental entities and does provide some equity relief for homeowners, up to the $25 billion amount of the settlement, with a possible extension to $45 billion if other banks sign up. The main objection is that the settling banks bear no liability for the adverse impact of the housing bubble they caused on investors, or on millions of the homeowners who will not benefit from the settlement but must pay higher amounts for the lives of their loans or suffer future, lawful foreclosures or short sales. The author regrets the misleading implications.

Coda: Is Tim Cook a Disciple of Steve Jobs or Bill Gates?

I wrote the foregoing post while traveling. On returning home, I found two disturbing things. The Apple Airport Extreme that had been my interface to my nonprofit, long-distance-wireless ISP stopped working.

A volunteer reported numerous problems with Airports in our system. At first I, a big Apple fan, didn’t believe him. I worked for several hours reconfiguring my system to eliminate an ancient switch and mount the Airport in a cable closet, where it would be closer to the long-distance radio. It worked well for a while and then locked up again—a classic software problem. An extra generic Linksys wireless router that the volunteer lent me worked fine. I’m using it right now.

Once I got precious Web access again, I had another shock. Having been away, I first wanted to update the operating systems on our three Macs. Much to my surprise, the updates to my two-month-old MacBook Air’s “Lion” operating system totalled 1.36 Gigabytes.

What “lion“ needs a total body transplant in his first year or so of life?

A update that size means only one thing: the original product was shoved out the door before it was ready. As I watched my download meter advance, I recalled all those monstrous “Service Packs” from Microsoft that eventually made me jettison its software and never look back. Could my personal computer agonies be about to repeat themselves?

Software is a funny business. Most of the public thinks it’s high-tech. It certainly has a lot of highly trained nerds working for it. But it’s far more marketing than most techies—and virtually all the general public—readily admit.

Bill Gates made his fortune by understanding that basic point. He mostly sold digital snake oil, products not quite ready for prime time. He pushed them out the door before they were debugged and humanized, often long before. He wowed users with all the new, whizbang stuff they could do, while carefully downplaying all their crashes and errors, and all the missing, partially operative or inoperative features.

People flocked to his operating systems in droves for two reasons. First, his marketing and many of his features stayed abreast or ahead of the competition. (The most notable exception was tabbed browsing, to which Internet Explorer was five years late.) And he hid the price and flaws of his products in the computers themselves. Hardware makers took the hit for quality and cut their prices to the bone.

Steve Jobs took a totally different approach. An incurable perfectionist, he took personal pride in his company’s products. He understood how complex software and hardware are, and how their subtle and often unpredictable interactions can affect product quality. So he insisted on making both hardware and software and making them work together well. That approach, it seems, is primarily responsible for his abandoning Adobe’s “Flash” video player.

Quality, reliability and ease of use were as important to Steve Jobs as winning in the marketplace. In the long run, they were his means for winning. That’s why Apple, not Microsoft, is now second only to Exxon Mobil as the world’s most valuable corporation.

But it took a long time for quality to prevail. It took long enough for Bill Gates’s ruthless exploitation of hardware “partners” to destroy most of them or force them from the business, leaving the field to firms in Greater China. As investors and users size up Tim Cook, Apple’s post-Jobs CEO, the most salient question is whom he will follow, Jobs or Gates.

Already there are disturbing signs. There is that 1.36 Gigabyte service pack for Lion. There is my now-useless and nearly brand new Airport Extreme, which I hope the latest firmware update (which incidentally requires Lion to download) will fix, after I spent a day on it that could have been better spent.

Then is also Apple’s website, organized abysmally for everything but sales. Not only does it oversimplify products by failing to provide important technical data, leaving customers to rummage through forums and Amazon’s reviews. For software support it doesn’t even do the most rudimentary, obvious things, including: (1) organizing downloads coherently by hardware and software product and (2) providing both download instructions and the actual downloads on the same page. Steve Jobs obviously never focused his laser-like perfectionism on Apple’s online public face.

I remain a strong fan of and investor in Apple. For consumers—and increasingly for business—there is no real alternative for individual-oriented devices. Steve Jobs’ legacy is a market lead that, in most categories, is insurmountable now and for the foreseeable future.

And Apple does tend to fix things quickly when it focuses. The virtual keyboard on my wife’s iPad, which I “broke in” for her last year, made cursor control virtually impossible, thereby precluding precise writing of the kind that I do.

I and others complained vociferously on various online fora. Just a few months later, Apple came up with a neat solution: a small, virtual magnifying glass appears when you hold your finger on a point in text, allowing you to move the cursor precisely.

But as all those securities-law disclosures say, past performance is no guarantee of future success. There are cracks in Apple’s quality armor. They are becoming increasingly annoying to sophisticated users like me, who first used computers (and did light programming) 51 years ago.

Most customers probably won’t notice for a while. But those cracks may portend the type of marketing hucksterism that could make Apple rotten nearly overnight, just as it has rotted out our financial sector and corrupted our national character in less than a single generation.

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