Wednesday, June 19, 2013

Thoughts about Paul Krugman's remarks on the information economy

(Cross-posted from my comments at Paul Krugman's blog. These were approved, and you can read them, and perhaps see some followups.)

Paul Krugman:
What do I mean by the role of rents? Consider the changing identity of the most valuable company in America. For a long time, it was GM, then Exxon, then IBM. These were companies with huge visible production activities: GM had more than 400,000 employees, which was amazing when you consider that the overall national work force was much smaller than the one we have today, Exxon had oil refineries. IBM was an information technology company, but it still had many of the attributes of an old-style manufacturing giant, with many factories and a large, well-paid work force.
But now it’s Apple, which has hardly any employees and does hardly any manufacturing. The company tries, through fairly desperate PR efforts, to claim that it is indirectly responsible for lots of US jobs, but never mind. The reality is that the company is basically built around technology, design, and a brand identity.—
I am delighted to see you considering these issues. These are very important questions, and of great interest to writers, musicians, illustrators, publishers, and so on, as well as to media device manufacturers like Apple and Amazon.

Kraw… It is a half-truth to say that "Apple has hardly any employees and does hardly any manufacturing." Their subcontractors have many employees in China. In the long run, it doesn't seem likely that the brand will survive; touch-screen computing devices are becoming commodities and other firms can also hire good designers and marketers.

Apple stands in the relation to the various content producers—publishers, recording firms, television and movie producers, and so on—as NBC used to stand to RCA. NBC was founded by RCA as a way to sell radios and transmission equipment. Apple instead licenses content. Amazon, on the other hand, is following the Sarnoff model; it is becoming a publisher. It is also following the Walton model, and pressing hard on the price of its "suppliers;" if the Amazon model of publishing becomes the standard, very few professional writers will be able to make a living at it.

One especially significant area of products: applications, especially games. By and large, apps are not portable between platforms without considerable effort. It is apps that make the platform brands like iPad, PSP, and X-Box so strong.


No economic thoughts here, but perhaps some grist for the mill.