Michael Crichton once highlighted an unusual quirk in human thinking – something he called Gell-Mann Amnesia, after his friend Murray Gell-Mann. Chrichton said:
Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.
Crichton was concerned primarily with journalism. If you see news reports covering an area you know well are frequently riddled with elementary errors and are written by someone who seems to lack even a basic understanding of the subject, you should at least suspect that news reports on other topics are likewise riddled with basic errors and were also written by journalists lacking a basic understanding of those topics as well. Yet, we rarely seem to do this. But more than journalists, I find myself concerned about what this topic says about legislators and other politicians. I find that in areas I know well, legislators are even more likely than journalists to demonstrate a lack of understanding in the areas they are so eager to exercise control. And lately, I’ve been seeing a lot of this regarding technology.
I’ve mentioned this on the blog before, but I’m a huge gadget and technology nerd. This, in addition to economics, has made me intensely interested in following news stories about legislators’ various attempts to insert themselves into technology. The US government has recently been going after Apple as a monopoly and railed against various aspects of Apple’s business. And in almost every instance, it’s clear that the person making the claim is someone who simply doesn’t understand the tech world at all.
I could give numerous examples, but for now I want to focus on a claim made by the Department of Justice blaming “barriers to entry” for the failure of various companies in the smartphone space:
There’s a lot to unpack in the cacophony of errors. For one, the Amazon Fire phone didn’t fail because of “barriers to entry.” It failed because, to put it bluntly, it was a really bad product. It lacked key features, its hardware was subpar, and it was overpriced for what it offered. You can do a web search for reviews of the phone when it was released, and I can’t find a single example of a reviewer actually recommending it to anyone. Companies with far fewer resources than Amazon have successfully broken into the smartphone market by offering products that were good, inexpensive, or both (OnePlus comes to mind).
Additionally, it’s simply absurd to place the failure of Microsoft, HTC, or LG on “barriers to entry,” because all of these companies had been well-established in the smartphone market long before their eventual demise and before Apple even entered the phone market. When the iPhone was first announced, Microsoft CEO Steve Balmer literally laughed at it and predicted it would fail, confidently pointing out that “Right now we’re selling millions and millions and millions of phones a year. Apple is selling zero phones a year.” Before the iPhone came along, Microsoft was deeply established as a smartphone company and had huge sales. The idea that their phone business couldn’t compete with Apple because of “barriers to entry” could only be said by someone who is completely unfamiliar with the history of mobile technology.
Similarly, HTC and LG had previously been highly successful smartphone manufacturers as well. HTC made the first Android phones, for several years it was the largest manufacturer of Android phones, and by 2011 it was the largest smartphone manufacturer period – even bigger than Apple and the iPhone. There are numerous reasons why HTC declined, and their smartphone business failed, but “barriers to entry” isn’t on that list. The same can be said of LG – they ran a highly successful smartphone business for years, releasing phones that sold millions of units and earned solid reviews and a dedicated fanbase. There are a number of reasons for LG’s decline as well. (Tech YouTuber Marques Brownlee offers a variety of thoughts here, if you’re interested!) But to reiterate the main point – LG, HTC, and Microsoft were in the phone business long before Apple entered the scene, and all were at one time bigger and more successful in the smartphone market than Apple. To say they ultimately failed to compete with Apple because they faced “barriers to entry” fails to make contact with reality.
READER COMMENTS
steve
May 8 2024 at 5:15pm
Wife was also a doctor so we both enjoy the mistakes people make about medical care, however, we have also read a number of articles that were very well done. You are much more likely to get good writing from someone who is a real dedicated and experienced science/medical writer. I see the same thing in health care economics. Many economists like to make general comments on health care and they are sometimes good and sometimes they make me think they have no idea what happens in a hospital or with patients. People who specialize in health care tend to do much better. I may or may not agree with them, but I might be wrong and it’s not just them being ignorant.
Steve
David Henderson
May 8 2024 at 5:33pm
Great post.
I often apply this idea but I had forgotten that there’s a name for it: Gell-Mann Amnesia.
Dylan
May 8 2024 at 6:47pm
This happens to be an area I know reasonably well, so I agree that the media gets a lot wrong when telling the story, and the government is worse. Yet, I’m not sure this piece really captures the gist of things either? I can’t read that Bloomberg piece on HTC, but I’m almost certain that it will say that HTC sold more units in 2011 than Apple, but in the metric that counts, profit, I’m just as certain that they were much, much smaller than Apple (and Samsung).
I also hate that quote from Balmer, because it is not reflective of what was going on inside Microsoft, where there was something close to panic from day 1 on the iPhone. Say what you will about Microsoft, but paranoia is baked into their DNA. Yet, you’re not going to go out and say that you’re panicking when you have phones to sell and developers to appease.
But the biggest thing is, how are we defining barriers to entry? For every new idea, you want something where there are zero barriers to entry when you start, and a thousand mile high and 10 meters thick rock wall guarded by fire breathing dragons right after you enter. It doesn’t really matter that there were competitors in the market before, what matters is that after Apple redefined the market, they had no chance of getting back in. Which is why Microsoft, with an arguably better product , billions of dollars, and Nokia…couldn’t take more than a sliver of the market after iOS and Android had built their walled gardens. Does that mean government should get involved? I’m skeptical to outright hostile to the idea. But, that doesn’t mean there are not “barriers to entry” that can stop even someone that was in the market first, from being able to compete.
john hare
May 8 2024 at 8:00pm
To me, barriers to entry prevent new companies from entering the market. It is definitely not applicable to companies that fail out.
Vivian Darkbloom
May 9 2024 at 3:50am
I agree with the observations about “journalists” and “legislators and other politicians”. However, and I’m not trying to be impolite, where do bloggers fit into this? Are they “journalists” or akin to “journalists”? In any event, why should they be exempted from this critique, particularly when they stray outside their very narrow and specific area of expertise?
MarkW
May 9 2024 at 11:39am
Excellent article. And you could have included some other manufacturers who were highly successful in the smart phone market before iPhone and Android — namely Nokia, Blackberry, and Palm. And then there’s Huawei, which was thwarted not by competition, but by the US government.
BS
May 10 2024 at 12:05pm
One of the largest “barriers to entry” is trying to enter a competitive market without offering a big hook: disruptive novel features, or more of the same but at much lower prices.
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