Gatekeeping is Apple’s Brand Promise
Steve Sinofsky, former president of Microsoft’s Windows division and now a VC, has an excellent deep dive on the EU’s Digital Markets Act (DMA). The Act is very squarely aimed at Apple, despite the fact that Apple is not a monopoly and has a significantly smaller share of the phone market than Android. Apple’s history is well known, in contrast with Microsoft it went for a closed system in which Apple controlled entry to a much greater extent. The same was true with iPhone versus Android.
iPhone was successful but it was not as successful as Android that came shortly after because of the constraints Steve put in place to be the best, not the highest share or the greatest number of units. Android was to smartphones just as Microsoft was to personal computers. Android sought out the highest share, greatest variety of hardware at the lowest prices, and most open platform for both phone makers and developers. By making Android open source, Google even out-Microsofted Microsoft by providing what hardware makers had always wanted—complete control. A lot more manufacturers, people, and companies appreciated that approach more than Apple’s. That’s why something like 7 out of 10 smartphones in the world run Android.
Android has the kind of success Microsoft would envy, but not Apple, primarily because with that success came most all the same issues that Microsoft sees (still) with the Windows PC. The security, privacy, abuse, fragility, and other problems of the PC show up on Android at a rate like the PC compared to Macintosh and iPhone. Only this time it is not the lack of motivation bad actors have to exploit iPhone, rather it is the foresight of the Steve Jobs vision for computing. He pushed to have a new kind of computer that further encapsulated and abstracted the computer to make it safer, more reliable, more private, and secure, great battery life, more accessible, more consistent, always easier to use, and so on. These attributes did not happen by accident. They were the process of design and architecture from the very start. These attributes are the brand promise of iPhone as much as the brand promise of Android is openness, ubiquity, low price, choice.
The lesson of the first two decades of the PC and the first almost two decades of smartphones are that these ends of a spectrum are not accidental. These choices are not mutually compatible. You don’t get both. I know this is horrible to say and everyone believes that there is somehow malicious intent to lock people into a closed environment or an unintentional incompetence that permits bad software to invade an ecosystem. Neither of those would be the case. Quite simply, there’s a choice between engineering and architecting for one or the other and once you start you can’t go back. More importantly, the market values and demands both.
That is unless you’re a regulator in Brussels. Then you sit in an amazing government building and decide that it is entirely possible to just by fiat declare that the iPhone should have all the attributes of openness.
Apple’s promise to iPhone users is that it will be a gatekeeper. Gatekeeping is what allows Apple to promise greater security, privacy, usability and reliability. Gatekeeping is Apple’s brand promise. Gatekeeping is what the consumer’s are buying. The EU’s DMA is an attempt to make Apple more “open” but it can only do so at the expense of turning Apple into Android, devaluating the brand promise and ironically reducing competition.
Read the whole thing for more details and history including useful comparisons with the US antitrust trial against Microsoft.
Austin Vernon on drones and defense (from my email)
I think they still favor the defensive. On the front line they make movement, hence offense, very difficult.
In the strategic sense we’ve already seen Ukraine adjust to the propeller drone/cruise missile attacks. The first few months were terrible for them but then they organized a defense system with the mobile anti drone teams. The interception percentage for drones traveling a fair distance over Ukraine is extremely high, 98% type numbers. Most of the Russian focus in now on more “front line” targets like Odessa because the Ukrainians don’t have as much time and space to make the interception. They are downing maybe 60%-70% of those drones.
The Russians are slow to adapt, but they eventually do. There is no reason to believe they won’t get better at intercepting these slow drones. Expensive cruise missiles with high success rates can end up being a better deal when strategic drones have 98% loss rates. The slow drones are better suited for near front line attacks. It also wouldn’t surprise me if they adapted to be more expensive to add features like quiet engines, thermal signature obfuscation, and lower radar cross sections.
I also think it’s worth pointing out that the Houthis have tried unmanned surface vehicles and they’ve all been quickly destroyed. Same with their slower drones. The hardest weapons to defend against have been conventional anti ship missiles and the newer ballistic anti ship missiles. You can argue about the intercepting missiles being too expensive, but the US is moving towards using more APKWS guided rockets against these strategic drone targets. These only cost $30,000 each and we already procure tens of thousands of them each year. The adaptation game is ongoing but the short range FPV drones seem quite durable while the strategic slow speed drone impact looks less sustainable.
Here is my original post.
My podcast with Thomas Burnett
Thomas is at the Templeton Foundation, here is the link (with transcript), here is one bit:
Tyler: Well, when I was very small, my favorite books were about animals and dinosaurs. A bit later, I liked books about codes and ciphers. I loved baseball books. I loved Jerry Kramer’s Instant Replay. Chess books, of course, when I was a chess player. Maybe when I was 11, I started reading science fiction. So, Isaac Asimov, Arthur C. Clarke, a little later, Robert Heinlein. Those were many of the first things I read.
And this:
Thomas: …if I’m very well informed about something? Why shouldn’t I go marching to Capitol Hill and shout from the top of my lungs that things must be this way to have a better future?
Tyler: Well, I’m not sure how much being well informed predicts you being right. That’s an interesting question, Now, clearly, society relies on the fact that many people will go out and march for things, even when they’re not well informed. So, I don’t want to talk everyone out of that. But it still seems to me the wisest people, or people who are trying to be the wisest people, should be much more careful, and do more to listen, and set an example toward humility. While recognizing you need a lot of dogmatists fighting for a bunch of things to keep society sustainable.
Many further topics are discussed, interesting throughout.
Thomas Saving, RIP
Here is an appreciation from Texas A&M.
Saturday assorted links
Do current trends in drone technology favor offense or defense?
At first people thought that drones favored defense, since Ukraine, in its war against Russia, was defending successfully with drones. But now Ukraine is using drones to attack Russia, and Russian oil refinery assets and warships. It is less obvious that drones are defensive assets on net. Furthermore, Russia is now using more electronic jamming, and more weapons that are drone-avoiding or drone-resistant, thereby limiting the defensive value of drones.
Overall, current drones seem to increase the vulnerability of fixed assets such as tanks or troop formations, or for that matter oil refineries or Moscow or Ukraine fixed landmarks. A very large and sophisticated U.S. aircraft carrier might be able to repel the drones (albeit at high dollar cost), but a bunch of tanks in an open field will not have comparable protection.
In the abstract, “mid-valued assets become more vulnerable” could favor either offense or defense.
The more obvious trend is that it favors nations willing and able to lose lots of mid-sized assets. That is either because a) the nation doesn’t care, because it is evil, or b) because the nation can replace them quickly, for instance by building more tanks or by drafting more soldiers.
So could it be that in the long run steady state (albeit not today) drones favor the more evil nations? Factor a) is clearly a marker of evil, whereas factor b) might be modestly correlated with evil. I consider this an unconfirmed hypothesis, but it reflects my thinking at the moment.
Some triumphs of 19th century liberalism
Here is an outline of part of my lecture. I presented “free trade” (NB: it wasn’t totally free), the classical gold standard, and some modicum of free immigration (not everywhere) as three successful and mostly stable pillars of 19th century classical liberal achievement. Of course that was for limited parts of Western Europe and North America only, and with major exceptions for women, blacks, and more. Nonetheless, something in that formula worked, at least when it was actually appplied. Here is the outline:
Extreme trade protectionism after Napoleonic Wars
Later sliding scale for tariffs, maybe 50% rate of effective protection?
Complete free trade for Corn [wheat] during the 1840s, Cobden and Bright and Anti-Corn Law League
Terms of trade arguments: Robert Torrens, J.S. Mill
Protectionism does best when inelastic demand for your exports, elastic demand for your imports (two-country model)
The tariff in essence helps your buyers collude as one
That can outweigh the efficiency losses from the tariff
Removing labor from the corn sector also can boost British manufactures
What were terms of trade for GB then?
Jeffrey Williamson paper 1990 – Repeal helped the working class, hurt the landlords
Doug Irwin (EJ, 2021) – Efficiency-neutral but broadly egalitarian
American farmers were big winners
Greatest liberal triumph of the 19th century?
The other great triumph – the classical gold standard – dating from 1815-1914
Price-specie flow mechanism
Overvalued exchange rate – 1815, 1920s for Britain
Nassau Senior, Four Lectures on the Transmission of Precious Metals, 1827
Henry Thornton, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain, 1802 – prices, interest rates, exchange rates
Steve Levitt on the future of economics
It’s really, right now, I think the profession is very inward-looking. It’s rewarding people who do things that are seen as hard. It’s really blurring the lines between theory and empirics was structural in a way that it is an experiment that I personally don’t think has worked out very well. And so, I think that it’s not that, I mean, the great ideas you’re talking about like Black-Scholes are few and far between anyway. But the rewards are not there for people who have practical insights are not rewarded greatly in the profession. The rewards come to people who make innovations, theoretical innovations, right? Who come up with new techniques, who do hard stuff that other people can’t do. So, I think in that sense, economics is going to become, my prediction is that economics is going to become less and less relevant, more and more inwardly focused. And honestly, I wouldn’t be that surprised if economics ends up going the way of anthropology or sociology, which works prominent and thought to be very promising and important disciplines, but have fallen dramatically in their stature because they ended up being more arcane and more focused inwardly. So, I have a really bad feeling about the future of economics, and I don’t see an easy way to change it.”
That is from Jon Hartley’s podcast with him, transcript included.
Friday assorted links
1. Casey Handmer on how to feed the AIs.
2. What we would like to know about aging.
3. Are there good reasons to create giant sheep?
4. My colleague Michael Clemens on how deportations would harm U.S. job creation.
5. Have the liberal arts gone conservative? (New Yorker)
6. Markets in everything? (speculative, pirate revenge edition)
The El Salvador tax reform
El Salvador’s Congress approved on Tuesday a reform to remove income taxes previously imposed on money from abroad, in a move to attract more foreign investment.
Money flows from abroad in forms such as remittances and investments in companies will now be exempt from tax, lawmakers said.
Prior to the reform, incomes equal to or greater than $150,000 had to pay a rate of 30% at the time of entry into the country.
There is no extra reason to click on this link. Here are other pieces. “Good, if you can keep it,” as they say…
Milei update
The shock therapy administered by Milei and his economy czar Luis Caputo right after the Dec. 10 inauguration is showing results. In a severely recessionary context, inflation is slowing down (February prices rose 13.2% in monthly terms compared with 25.5% in December) while foreign reserves grew by more than $7 billion despite debt repayments. Deposits on local dollar-denominated bank accounts have also recovered. Last week, Argentina’s sovereign spread (a measure of country risk) dropped to the lowest in more than two years and the nation has received the enthusiastic backing of the International Monetary Fund, its single largest creditor.
The exchange rate — historically the Argentine economy’s key indicator — has recently appreciated in parallel markets and now trades at just 15%-20% over the official peso, opening the door for authorities to consider unifying the currency market. As local economists have argued, it’s time to start dismantling the byzantine currency controls that have long strangled Argentina.
The flipside of the government’s deep spending cuts, however, is a near-collapse in economic activity, with industrial production falling more than 12% year-on-year in January and construction retreating even more.
And:
At the same time, the parallel peso’s appreciation in a context of high inflation is leading to a loss of competitiveness, with Argentina fast becoming expensive when measured in dollars. The result adds to speculation that a new devaluation will soon be unavoidable, reversing gains in the fight on inflation. “Our base scenario considers a correction of the exchange framework in May,” Buenos Aires-based consultant Equilibra said in a recent report. Monday night’s measures by the country’s central bank can be seen as an attempt to tame this appreciation.
The government’s gamble is that, by the second quarter, a strong crop from Argentina’s high-powered farmlands spurs a rebound in activity that helps contain some of the social discontent produced by the measures.
Here is more from Juan Pablo Spinetto at Bloomberg. And from the FT:
Argentina’s Senate has rejected President Javier Milei’s sweeping emergency decree to deregulate the economy, in a major blow to the libertarian leader and his attempt to deliver reforms for the crisis-stricken country. Senators voted 42 to 25 to reject the decree, with four abstentions. Issued in December it modifies or eliminates more than 300 regulations affecting the housing rental market, food retailers, air travel, land ownership, and more.
So further progress on the libertarian front may be tough. Also from the piece:
“This is a worry for the market because the president is on the verge of losing . . . the only set of substantial economic reforms he has been able to introduce so far,” he said. Milei already opted to withdraw the other plank of his legislative agenda — a multipronged omnibus bill aiming to overhaul the Argentine state — from the floor of the lower house last month after lawmakers rejected several key articles.
Things could be better.
Non-binary gender economics
Economics research has largely overlooked non-binary individuals. We aim to jump-start the literature by providing data on several economically-important beliefs and preferences. Among many results, non-binary individuals report more gender-based discrimination and express different career and life aspirations, including less desire for children. Anti-non-binary sentiment is stronger than anti-LGBT sentiment, and strongest among men. Non-binary respondents report lower assertiveness than men and women, and their social preferences are similar to men’s and less prosocial than women’s, with age an important moderator. Elicited beliefs reveal inaccurate stereotypes as people often mistake the direction of group differences or exaggerate their size.
Here is the new NBER working paper by Katherine B. Coffman, Lucas C. Coffman, and Keith Marzilli Ericson. P.s. comments are closed.
Thursday assorted links
Jon Hartley podcast episode with Steve Levitt
Steve Levitt anecdote: economics has found its Bill Laimbeer. Other excellent anecdotes in the thread. And Levitt on publishing and academia, recommended. This superb podcast episode is a real coup for Jon Hartley, transcript also at the link. File under “too good to excerpt,” this is quite simply one of the best podcasts ever.
Indigenous Charter Cities
A charter city is a special zone with a charter granting significant autonomy from the host country’s regulations. Hong Kong, a succesful Chinese city operating under British law, was one early inspiration. Examples like this fueled criticisms that charter cities were “neo-colonial”. But Charter cities do not inherently require foreign legal frameworks. The fundamental purpose of a charter city is to serve as a discovery platform, a way to explore governance models allowing more people to select from the succesful.
An important case in point are the charter cities being created by indigenous Americans in Canada and the United States. In Vancouver, for example, indigenous people have asserted their rights under various treaties to control their own land.
Sen̓áḵw [an 11-tower development on 10 acres in heart of Vancouver, AT] is big, ambitious and undeniably urban—and undeniably Indigenous. It’s being built on reserve land owned by the Squamish First Nation, and it’s spearheaded by the Squamish Nation itself, in partnership with the private real estate developer Westbank. Because the project is on First Nations land, not city land, it’s under Squamish authority, free of Vancouver’s zoning rules. And the Nation has chosen to build bigger, denser and taller than any development on city property would be allowed.
Amusingly, some on the progressive left are crestfallen that the indigeneous are behaving like evil capitalist developers and not the back-to-the-land people they had imagined.
Predictably, not everyone has been happy about it. Critics have included local planners, politicians and, especially, residents of Kitsilano Point, a rarified beachfront neighbourhood bordering the reserve. And there’s been an extra edge to their critiques that’s gone beyond standard-issue NIMBYism about too-tall buildings and preserving neighbourhood character. There’s also been a persistent sense of disbelief that Indigenous people could be responsible for this futuristic version of urban living. In 2022, Gordon Price, a prominent Vancouver urban planner and a former city councillor, told Gitxsan reporter Angela Sterritt, “When you’re building 30, 40-storey high rises out of concrete, there’s a big gap between that and an Indigenous way of building.”
…. In 2022, city councillor Colleen Hardwick said of [a similar development], “How do you reconcile Indigenous ways of being with 18-storey high-rises?” (Hardwick, it goes without saying, is not Indigenous.)
…What chafes critics, even those who might consider themselves progressive, is that they expect reconciliation to instead look like a kind of reversal, rewinding the tape of history to some museum-diorama past. Coalitions of neighbours near Iy̓álmexw and Sen̓áḵw have offered their own counter-proposals for developing the sites, featuring smaller, shorter buildings and other changes. At the January hearing for Iy̓álmexw, one resident called on the First Nations to build entirely with selectively logged B.C. timber, in accord with what she claimed were their cultural values…That attitude can cast Indigenous people in the role of glorified park rangers.
There are also some interesting developments in the United States. The Catawba Indian Nation, for example, established the Catawba Digital Economic Zone (CDEZ), where I serve as an advisor. The CDEZ is based on US law but tailored for digital entrepreneurs, freelancers, FinTech, digital assets, Web3, and other exponential digital technologies. The progressive left probably isn’t happy about that either. Personally I am delighted to support initiatives that empower indigenous communities through capitalist ventures. More broadly, however, I support the introduction of new governance models to encourage competition in governance—bring on a new era of discovery and Tiebout competition!