Google and Motorola

I was happy this week to read about Google’s acquisition of Motorola’s mobile phone business. As a long time Apple fanboy who is now trying to move away from their products, I still desire their high quality. Since Google is the driving force behind the only serious competitor to iOS, by owning a handset manufacturer they will be in a better position to make hardware specially tailored to Android.

This doesn’t mean I’ll end up with a Google phone. I think HTC makes some nice gear as well, but my guess is that there will now be more choice.

I’ve come under some criticism for my #noapple decision. I’ve spent nearly ten years working in free software and that tends to cause people to develop a prejudice that I’m somehow anti-business or a communist. When I complain that Apple is making too much money, that their margins are undeserved, I’m told that this is just the way capitalism works.

Wrong.

Capitalism depends on the proper functioning of markets. Properly functioning markets demand easy entry and exit. When there is excess profit in a market, competitors move in, produce more goods which drive down the price until profit disappears. If profit should ever go negative, companies will leave the market, reducing the number of goods and causing prices to rise.

Unfortunately, there are a great many industries that don’t have easy entry and exit. Take aircraft manufacture. There is a reason that there are only two main producers of commercial aircraft in the world – it takes a tremendous amount of money just to get started, and once invested, it is hard to leave. The deregulated banking industry in the US has created a small number of “super” banks that are “too big to fail” which causes its own entry/exit issues (if you want to get your bile up, check out Dan Ariely’s article on compensation of bank officers versus market cap).

As much as we’d love to think of the computer software industry as being a free market, software patents and proprietary hardware block easy entry and exit. Take the iPad. Apple designs a nifty little device that generates a tons of consumer demand. This creates excess profit, which causes Samsung to create a competing product in the Galaxy tablet. In a normally functioning market, this should both inspire innovation and lower prices. Thus the end users benefit.

However, in a world of software patents, Apple blocks the sale of the Samsung product in the courts. Consumers get no options, prices don’t change, and you either get to spend too much money on the Apple product or go without. This is in the best interest of Apple preserving its margins, but monopolies are the antithesis liberal market economies.

The Google/Motorola deal was north of US$12B, so I think it is safe to say that the mobile handset market is pretty hard to enter and exit. In a world of giant companies, only a Google can take on an Apple at this level. I don’t expect either of them to act in my own best interest, but Google has shown time and time again a willingness to err on the side of openness, whereas Apple is now working hard to consolidate and close its entire production stack (iOS, A4/A6 ARM processors, and the possible move to Sharp for displays, etc.).

I run The OpenNMS Group as a for-profit company. We focus on open source software not out of any zealotry, but because it makes the most sense for our clients. I’m all for making money, but I want to compete fairly in the marketplace. Luckily, the internet and commodity hardware make it possible for us to compete with products from much bigger companies. I don’t ever want to see that go away. I think Google’s move will better position itself against Apple (from both a product and patent perspective) and that will benefit everyone.

2 Responses to “Google and Motorola”

  1. gvainfo Says:

    Funny enough I had to buy a new power supply for my macbook (the kids took one to death). I felt being ripped off in the first place (99 CHF!!) but then I thought..”ok, for one thing I _could_ actually simply go into a shop and pick up a power supply for the macbook..given the principle to change power supplies and connectors for every model that other suppliers follow, that’s unusual on the supply side..and on the availability side, too..”I could see no HP nor DELL nor ACER nor .. whatever supplies around. In the end, the 99chf were probably not sooo overpriced, taking into account that I had it straight away, w/o wait, w/o mail ordering – that’s a value that apple creates, even without courts and thelike. If I switch supplier, I want that service level. It’ll be hard to get..and I’m happy about the google move to the device market. Other concerns come up, but it makes sense. And google faces a real challenge now – integrating a “hard” product into their otherwise “soft” portfolio.

  2. esh Says:

    I read an article that there are 250,000 US patents for smartphones alone.

    Though now I do some searching, this came largely from a Google blog post (http://googleblog.blogspot.com/2011/08/when-patents-attack-android.html) blasting Microsoft, with wording “might involve as many as,” sourcing from an FT article (http://www.ft.com/intl/cms/s/0/b0da8540-5aea-11e0-a290-00144feab49a.html) with the wording, “There are potentially more than..”

    As dubious as that all sounds, it is incredible to think that even a fraction of that many patents for smartphones alone exist and. in the spirit of the patent system, that many discoveries were made surrounding smartphones that require patent protection. /sarcasm

    I want to hope that something as mundane as a gva’s power connector becomes ubiquitous, as you might imagine with something like USB. Unfortunately even USB or even HDMI connectors can’t be left alone; both have regular size, mini and micro flavors. So I guess even at a basic level, we can’t leave even standards well enough alone to create a broadly adopted product made for a reasonable price. Too much money-lust and short view out there getting in the way of real progress.