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Innovation or Outsourcing?

I do praise Apple for its history of kicking Microsoft in the gut. It’s one of the few companies that has managed to do this (albeit never directly) and get away with it, the results being better technology for end users and ultimately that is all that is important. Yet this latest trend of taking design shortcuts by essentially outsourcing interconnectivity to external peripherals is, interesting. Immediately other forms of outsourcing come to mind.

Outsourcing is largely done to offload risks, cost and externalities onto a third party. This is a core global business logic with disastrous effects on the planet and on people. Outsourcing makes it possible for Apple to claim ethical business practices while Foxconn workers commit suicide and the horrors of coltan mining in Congo happen, elsewhere.


image from wikipedia

Apple is not really innovating here, they are merely outsourcing the physical hassles of digital to analogue conversion (DAC). The audio jack hasn’t changed in a century because sound is created by way of physical vibrations in speakers and its design is good enough. Apple would have innovated had they delivered a new approach to transmitting the digital information in an audio file, by inventing a connector reduced in size with equal or better analogue audio fidelity characteristics, or by inventing new ways of using digital audio information to make speakers vibrate just the right way to create higher quality sound. Instead they just externalised/outsourced the problem.

This is outsourcing with a thin veneer of innovation marketing as cover. I write this on a 2015 Macbook with only one USB-C port. I need another device (at my cost of course) to connect anything to it. Apple and Microsoft. Trump and Hillary.

Yet More Differential Accumulation (by Breadth) in the Tech Sector

From an article on Forbes about Amazon.

The reported Dell-EMC deal, one that neither company has confirmed, epitomizes the sort of financial engineering that has inflamed older tech companies of late. Companies like EMC,IBM, and Hewlett-Packard garner headlines more for their M&A activity (or litigation) than for their new products and services.

This kind of financial engineering is not new in large industry, it is only relatively new in the information technology technology sector because the sector itself a relatively new one. Bichler and Nitzan would call this differential accumulation by breath. The purpose of mergers and acquisitions is hardly ever driven by the supposed efficiencies of economies of scale that is usually the official reason for such operations. Like the Oracle’s acquisition of Sun, both these companies have so many duplicate product lines that the only benefit from such operations is for the owners. For customers, usually the experience is a bad one, as working product lines are dropped, and prices never decrease thanks to the supposed economies of scale efficiencies. Apart from perhaps Google and Facebook, usually an IPO or an acquisition signals the end of the innovation that grew the start-up in the first place.

Also, it is mainly in the information technology sector that M&A events are heralded as portents of great new products and never before seen innovation. Other industries don’t bother to maintain this fiction, as stock price is determined by expected future earnings, and by the relative power of a corporation to manage demand and competitors in its sector.

It’s also not surprising that software-centric tech companies have huge market capitalisations, despite owning few tangible capital assets and having pitiful (or nil) revenue (Amazon). Again, this is due to the market’s perception of future earning potential, which has little, if any, relationship to a corporation’s fixed assets, revenue or past earnings. The primacy of finance-capital, certainly not a recent development.

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