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Guest Post: Why The Innovation Premium Is Diminishing

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

Why The Innovation Premium Is Diminishing  

The acceleration of competition as high-tech tools and skills have dispersed throughout the global economy is an under-appreciated trend.

In the late 1980s, Apple famously reaped $1,000 in gross profit on each Macintosh computer sold: Apple was able to charge a very high premium for the innovations the Mac embodied. (Note: this was back when $1,000 was a substantial sum; that is over $2,000 in 2012 dollars.)

This ability to reap a substantial premium for innovation is fundamentally what drives the technology marketplace: since competition arises in any high-profit space, the premium for innovation degrades as competitors enter the space.

In the good old days, it took years for serious competition to arise. As the bumper sticker crowed, "Windows 95 = Mac 1985." (As I worked with both Mac 1985 and the crash-prone Windows 95, I would say Win95 was still substantially behind the Mac in stability.)

The acceleration of competition as high-tech tools and skills have dispersed throughout the global economy is an under-appreciated trend. Apple has earned billions of dollars in profits over the decades as its innovations enabled the company to charge a high premium in the marketplace. Since Apple leapfrogged the competition, this premium could be levied not just on "early adapters" of the new technology but the mass consumers who came after.

The iPod, iPhone and iPad have all followed a trajectory of constant innovation that enabled Apple to continue reaping still-hefty premiums, even years after the initial launch of the product line.

This chart depicts the dynamic. The red line is product price: it declines over time as the innovator company lowers price to maintain sales as competition arises.

The blue line represents the previous era of innovation/competition, where competitors arose slowly, and competing products reached parity of features late in the game. This enabled the innovator to continue to reap a slowly diminishing premium for years, as long as the product line was refreshed often enough to stay ahead of competitors.

The green line represents the New Era of widely dispersed global technology: competitors enter high-profit spaces quickly and reach features parity much sooner than in the previous era. Once competitors reach features parity, the innovator's premium vanishes or quickly trends toward zero.

The latest iPad models (9.7-inch screen) sell for between $500 and $700, and the iPad Mini (7.9-inch screen) sells for around $300. The Samsung Galaxy sells for about $200 (with a a 7-inch screen). Meanwhile, in China, full-function tablets sell for $50 ("Hardware is dead").

Are the $50 ($35 in bulk) tablets as good as a Galaxy or iPad? Undoubtedly they are lacking in features or qualities, but the point is that for those who cannot afford the features or qualities of a $500 tablet or $200 phone, they are "good enough."

I expect this trend of accelerating degradation of the innovation premium to continue on its current vector. The initial product cycle during which which innovators can charge a high premium will shrink, and competitors will reach features parity much faster. The profit margins of the innovating company will degrade more quickly as a result, and price will decline at a steeper rate as well.

Put another way, the price and features offered by the innovator and its competitors will converge much faster than in previous eras.

From one point of view, the recent weakness in Apple shares may reflect this trend: Apple's ability to charge a high premium is degrading faster than many expected.

This is not to say Apple's premium will vanish; as everyone knows, the Apple premium is based not on hardware features so much as the integration of intuitively easy-to-use software and hardware in a pleasing, stylish form-factor.

That said, the Android software suite is spreading fast in the open-source model; the innovative integrations of software and hardware that may emerge from this vast petri dish are unpredictable.

Looking ahead, we can speculate what this new era will mean for all technology sectors. If this trend holds, then profits within the entire space will slide as the premium slips ever-faster toward near-zero, i.e. every device and software become commoditized.

This slide in total product-cycle profits may inhibit innovation as the pay-off dwindles. This trend may also spark greater efforts to erect moats around innovations, for example, more lawsuits against global corporate competitors and louder demands for the U.S. and other advanced nations to limit the importation of knock-off products based on pirated/stolen designs and software.

Many observers are of the view that intellectual property rights are impediments, and their weakening is a good thing. But that ignores the motive for innovation: will everyone have to be a Linus Torvalds and innovate in the open-source space?

Hardware innovations often require substantial investments of capital. Will those with capital invest in innovations if the premium degrades too quickly to earn a high return? Or have we become greedy, and a lower total return on innovation is an outcome that we should welcome as both inevitable and positive?

"Faster, better, cheaper" eventually wins-- but that should not be a justification for theft. Competition should be based on innovation, not on piracy and theft. If someone doesn't like the premium being charged for someone else's innovation, then they can create their own innovation that fills the moat with a lower-cost alternative. That is the sustainable path of "faster, better, cheaper."


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Wed, 01/16/2013 - 11:17 | 3157549 0z
0z's picture

This is Voodoo Economics.

Read "Human Action" again.

Wed, 01/16/2013 - 11:42 | 3157629 Zer0head
Zer0head's picture

I am certain this means nothing


The median sale price jumped nearly 20 percent ($323,000)from a year ago in Southern California

Wed, 01/16/2013 - 13:10 | 3158010 CPL
CPL's picture

Do they come with plumbing?

Wed, 01/16/2013 - 14:07 | 3158521 trav777
trav777's picture

ignore this article.  "They" will just invent whatever we need when we want it

Wed, 01/16/2013 - 11:45 | 3157637 CH1
CH1's picture

This is Voodoo Economics.

No, it is a very common process: The commodification of a new adaptation.

At first, the thing can only be done by a few and is only done by a few: they make a lot of money. After a while, others get in on the deal.

Thus, steel production goes from an innovation to a (more or less) commodity, as do laundry methods, soft drinks, and most everything else. That's why the promoters have to sucker people into buying their brands - because Miller, Bud, Coors, etc. all make their beers in 98% the same ways.

Wed, 01/16/2013 - 15:06 | 3158909 Ident 7777 economy
Ident 7777 economy's picture

At last, a man who understands the development, engineering and production process.

Wed, 01/16/2013 - 13:00 | 3157927 TheGardener
TheGardener's picture

Oz, yes I fully agree with you.

Voodoo Economics , 7th edition...

"the iPod, iPhone and iPad have all followed a trajectory of constant innovation"

What about the 15 years in between being an obscure fetish brand for the "creative" paid for by newly wealthy parents
and the Spoiled Apple raising from the ashes like a new sun?

Bold trajectory , as bold as history writing.

First and last mover advantage, the latest share moving vogue...running full circle with underclass participation

Wed, 01/16/2013 - 11:22 | 3157562 FL_Conservative
FL_Conservative's picture

Fundamental law of financial returns provides that sustainability can be achieved with (a) high unit volumes and low gross margins or (b) low unit volumes and high gross margins.  If one finds themselves in an environment with high volumes and high gross margins, it's an anomaly that won't sustain itself (think real estate or any typical asset bubble) and you should plan accordingly.  If one finds themselves in a low margin, low volume environment....put your head between your knees and kiss your ass goodbye.

Wed, 01/16/2013 - 11:22 | 3157567 pepperspray
pepperspray's picture

Death Star: git er dun

Wed, 01/16/2013 - 11:36 | 3157579 LawsofPhysics
LawsofPhysics's picture

Simply put, innovation requires tremendous captial and resources.  If you squander that capital and resources through massive corruption, fraud, and the failure to allow real consequences for bad behavior then you are fucked eventually.

As far as I can tell, the capital and resource mis-allocation and mal-investment will continue until the supply lines finally break and WWIII starts in earnest.

Some things never change, hedge accordingly.

Wed, 01/16/2013 - 11:42 | 3157627 DCFusor
DCFusor's picture

Bullshit.  Innovation only requires ideas that are made real.  The only thing that requires tons of resources is hitting the ground running, with enough dough to hire enough lawyers to protect you from predatory lawsuits by the big companies who accuse you of stealing some idea they didn't invent either.

Even Apple " lords of innovation" haven't quite yet caught up to a post WWII comic writer - The Dick Tracy series.  Big whoop.  So they sue over things like rounded corners, or whether something bounces at the end of a scroll - yeah, that's world beating innovation.

What's actually been happening in the biz is M&A to buy customer lists - fighting over the pie rather than trying to increase its size, and lawsuits designed only to hold any sucessful competition back.

I know - because I'm one of the few self-made profitable inventors.  Our "skonk works" made millions for us, and more than that for the customers we developed innovative product for.  But we quit the biz due to legal threats.  You can't do squat without stepping on someone's idea of IP these days.  Even MS has patented the number 7, and the use of XOR to exchange variables - you can't patent math according to law, but you can if you're a big company.  IBM has a patent on entertaining your cat via use of a laser pointer.

It takes years and tens of millions to defend against/break such patents.  And that is the ONLY reason it takes major resources to "innovate", though I see very little true innovation these days.

My site from back in the heyday:

I frigging know whereof I speak.


Wed, 01/16/2013 - 11:59 | 3157685 LawsofPhysics
LawsofPhysics's picture

So "ideas are made real" without any energy or raw materials input?!?!?

You are beyond stupid.  

Wed, 01/16/2013 - 12:36 | 3157805 Lost My Shorts
Lost My Shorts's picture

Does IBM really have a patent on entertaining cats with a laser pointer?  That is too funny -- what is the patent number?

I totally agree with you -- IP is just a way that large corporations and trolls hold back innovation for their own benefit.

Wed, 01/16/2013 - 15:32 | 3159062 mkhs
mkhs's picture
Method of exercising a cat Grant - Filed Nov 2, 1993 - Issued Aug 22, 1995 - Kevin T. Amiss
Wed, 01/16/2013 - 11:47 | 3157650 CH1
CH1's picture

innovation requires tremendous captial and resources.

Bullshit. Resources are secondary, at best. 

Wed, 01/16/2013 - 11:57 | 3157678 LawsofPhysics
LawsofPhysics's picture

LMFAO!!!  Riiiiggggghhht, all these gadgets, drugs, robots and fusion reactors develop, build, and sell themselve without ANY energy or resource input at all.


Fucking halarious, must be my lying eyes then.

Wed, 01/16/2013 - 12:00 | 3157692 TruthInSunshine
TruthInSunshine's picture

Cold fusion, dude. Look it up.


/obvious sarc

Wed, 01/16/2013 - 12:11 | 3157697 LawsofPhysics
LawsofPhysics's picture

Thanks Truth.  Yeah, that shit just innovates and builds itself with no resource or energy input at all.  Remind us, how many cities are getting electricity from those reactors again?  People never bullshit on the internet or in writing, if it is written it is the truth.

< sarc off >

Wed, 01/16/2013 - 12:29 | 3157769 Flakmeister
Flakmeister's picture

On the subject of cold fusion:

The end of the E-Cat story? Andrea Rossi loses supporters for his "cold fusion" device

Mr Passerini's blog, titled "22 steps of love" has been the main focus of support for the E-Cat in Italy up to now. He says in his last post, titled "ad maiora" that "Some time ago, I wrote that, after that two years would have passed from the date of January 14 2011, I would quit in any case in the absence of official and certain announcements on the reality of the E-Cat." Passerini states that he will be waiting patiently and "will return when the news that we have been waiting for during the past two years will arrive"

The closing of Mr. Passerini's blog comes after that, in November of last year, another of Mr. Rossi's supporters, Mr. Paul Story of "eCatNews" declared that he would close his blog because, "with scant hope of Rossi delivering on his promises, I find myself wondering why I would waste any more time on him. If he is committing fraud, he should be pursued by the police. Interest in the man or the subject is now relegated to the level of curiosity, not dedication."

Earlier on, in April 2012, Mr. Sterling Allen of the blog PESN (Pure Energy Systems) had been appalled at Rossi's behavior and had stated, "I apologize to anyone that I've encouraged to try and do business with Andrea Rossi, and I retract my endorsement" even though he later continued to cover announcements about the E-Cat.

Wed, 01/16/2013 - 13:17 | 3158107 FeralSerf
FeralSerf's picture

"On the subject of cold fusion:" from NASA's viewpoint

"The theory indicates energy densities, some several million times chemical. The current experiments are in the 10's to hundreds range. However, several labs have blown up studying LENR and windows have melted, indicating when the conditions are "right" prodigious amounts of energy can be produced and released. There are some six or so groups claiming device outputs in the 100 watt range and three others claiming kilowatts. Efforts are ongoing within NASA and other organizations to validate (or not) these claims. It should be noted that these devices are essentially "Edisonian," the result of attempts at experimental "discovery" vice ab initio design from the weak interaction theories per se.

Therefore, the LENR situation and outlook is the following:
Something real is happening.
The weak interaction theories suggest what the physics might be.
There are efforts ongoing to explore the validity of the theories.
There are continuing Edisonian efforts to produce "devices" mainly for heat or in some cases transmutations.
There are efforts to "certify" such devices.
NASA LaRC has begun LENR design studies guided by the Weak Interaction Theory


There are estimates using just the performance of some of the devices under study that 1% of the nickel mined on the planet each year could produce the world's energy requirements at the order of 25% the cost of coal."

Wed, 01/16/2013 - 13:27 | 3158212 negative rates
negative rates's picture

And we complain about the Chinese bootleggin stuff, we have been the most hypocritical nation on the planet, and he seems to have no intention of changing his ways. It is written that  he shall be  thrown into the river of denile, in less than 2000 days. 

Wed, 01/16/2013 - 13:51 | 3158404 Flakmeister
Flakmeister's picture

Could you come up with substantiated claims for any of what is in the article? I couldn't...

Here is the preprint for the Widom-Larsen Weak Interaction LENR Theory

I failed to notice any citations, i.e. nobody references it, it other words, it is crap...

I did find some commentary on the theory

The Widom Larsen theory claims that the process going on in the cold fusion systems is that protons are absorbing electrons on the surface of the metal, where there is an inhomogenous electric field which can be very strong, and turning into neutrons. These neutrons then catalyze a bunch of energy releasing nuclear transformations. The mechanism is through the weak force, not the nuclear force.

It is preposterous, because there is a 1MeV mass difference between the proton and neutron, which is greater than the mass energy of the electron. It would be as reasonable to say that electron-positron pairs are produced at the surface of a metal. They aren't, and they can't be.

The strong electric fields at the surface of a metal are only so strong that they produce eV level energies for accelerating charged particles from the metal to infinity. There are no further energies available to bridge the gap to 1MeV of energy, and Widom and Larson simply make up this energy, by unphysical ansatzes for the near-surface field and made up energy balance requirements that pretend that MeV's of energy magically appear in individual particles on a metal surface.

You do seem to believe in just about anything you read that will stop you from facing reality...

PS I worked on muon catalyzed fusion experiment in my youth, in other words, a real LENR...


Wed, 01/16/2013 - 15:28 | 3159046 negative rates
negative rates's picture

That's a bit over technical for me to know, I trust the Rossi results and the positive things the machine can do to alievate the energy concerns globably. If you want to go on your own it could take up to a few decades to achieve the same results. I know from experience not to divulge to much information to the wrong people, for they will only use it achieve their desired results of control of the masses by the upper classes. Holding technology as ransom to force a reversal effect of these like minded individuals, is a worthy cause of which I am a contributor and a believer. 

Wed, 01/16/2013 - 15:55 | 3159197 FeralSerf
FeralSerf's picture

"You do seem to believe in just about anything you read. . ."

I don't believe much that I read that you've wrote.

I didn't state anywhere in my post whether or not I believed it.  I do believe that NASA said it though.

Do you believe NASA went to the Moon?  Or do you believe they lie?

Wed, 01/16/2013 - 17:00 | 3159529 Flakmeister
Flakmeister's picture

Why don;t you google Dr. Joe Zawodny, one of the NASA scientists in the famous NASA LENR video and see what he says about the current status of LENR...

So I take it that you believe in AGW since the NASA Goddard Space Center, aka Hansen and co. produces data and publishes papers showing that AGW is real?

When NASA Langely makes a public announcement that they have evidence of Lab-induced LENR I will pay attention.

Wed, 01/16/2013 - 18:58 | 3160063 FeralSerf
FeralSerf's picture

" I take it that you believe in AGW since the NASA Goddard Space Center, aka Hansen and co. produces data and publishes papers showing that AGW is real?"

Even though I didn't state that I agree or disagree with NASA, I'm not surprised that you take it that way since your existence seems to be based on jumping to conclusions and non-sequiturs.

"When NASA Langely [sic] makes a public announcement that they have evidence of Lab-induced LENR I will pay attention."

You don't read very well.  The link, was a public announcement from NASA that they have evidence ("Something real is happening."  "several labs have blown up studying LENR and windows have melted, indicating when the conditions are "right" prodigious amounts of energy can be produced and released.")

FWIW, I'm not especially comfortable with the Widon-Larsen Weak Interaction LENR Theory.  But WTFDIK?  Time will tell.

Wed, 01/16/2013 - 19:49 | 3160275 Flakmeister
Flakmeister's picture

Wow, you seem to have a very low hurdle for proof....

I would think someone of your purported background be a tad more skeptical of such claims..

Truly, WTFDYK...

BTW, when you fuck around with H2, things can and do go boom, even when you are careful and it doesn't have anything to with LENR...

Wed, 01/16/2013 - 13:31 | 3158242 negative rates
negative rates's picture

That's old news, they have a plant, in Greece of all places, and will offer the E-cat soon, if our overly too arrogant gvt will allow it, since you can't put a meter on it and taxes are his way of life.

Wed, 01/16/2013 - 13:52 | 3158419 Flakmeister
Flakmeister's picture

Charles Ponzi relied on there being people like you out there...

Wed, 01/16/2013 - 16:23 | 3159337 FeralSerf
FeralSerf's picture

 Joseph Goebbels relied on there being people like you out there.

Wed, 01/16/2013 - 17:02 | 3159540 Flakmeister
Flakmeister's picture

Nope, never been a fool or an anti-semite, you got me confused with some other Hedgehogs....

Wed, 01/16/2013 - 19:04 | 3160085 FeralSerf
FeralSerf's picture

Somehow -- I don't remember details -- I got the feeling that you don't like Palestinians much.  That would suggest you are an anti-semite.

Goebbles was, arguably, not a fool (I'm not so sure about you).  He was a master propagandist.  You might not be a master, but you are clearly a propagandist.

Wed, 01/16/2013 - 12:12 | 3157722 CH1
CH1's picture


Laugh all you like, and engage in other manipulative "arguments', but your utter obsession with resources is your own, and deviates from reality.

We all know that resources matter. Only you think they are God Almighty.

Wed, 01/16/2013 - 12:14 | 3157734 LawsofPhysics
LawsofPhysics's picture

You are the one saying that resources and capital "don't matter" or are "secondary", not me.

Good fucking luck.

Wed, 01/16/2013 - 12:25 | 3157758 CH1
CH1's picture

Thanks fucking much.

Wed, 01/16/2013 - 13:29 | 3158234 TheGardener
TheGardener's picture


What you were trying to say is : "one needs to be tremendously resourceful for innovations" or any such praise AFTER THE FACT. Capital has nothing to do with it and you probably meant LACK OF RESOURCES as a driving force of innovation.

A gave you one courteous junk , that`s what they are for.

Wed, 01/16/2013 - 11:28 | 3157581 Flakmeister
Flakmeister's picture

As I just said in one of the 787 threads.... technology, aka complexity, has diminishing marginal returns... Moreover, the product cycle becomes hyperaccelerated making investments a momo proposition, e.g. the "golden age" of profits from the touch screen revolution is basically over, what, after 4 years?

And as an added bonus from all this is that the product reliablity is almost nil... I am willling to bet you that 60 years from now, people will have fewer baby pictures of themselves than the current babyboomers do, despite 100 times the number of pictures having been taken of them....

Wed, 01/16/2013 - 11:38 | 3157617 TideFighter
TideFighter's picture

Are you counting those photos taken by government camera's and stored in Utah? Surely not.

Wed, 01/16/2013 - 11:55 | 3157672 Flakmeister
Flakmeister's picture

Don't over tighten the chin straps on the collander, you risk auto-asphyxiation....

Wed, 01/16/2013 - 14:16 | 3158590 trav777
trav777's picture

governments are highly interested in tracking people using facial recognition.

fkin casinos already do this, so do some other facilities.

are you intentionally obtuse?

Wed, 01/16/2013 - 23:52 | 3159077 Flakmeister
Flakmeister's picture

The connection between what you wrote and what buddy wrote is tenuous at best...

Moreover, given I have a passport, I guess it is too late for me...

Wed, 01/16/2013 - 21:31 | 3160633 Cosimo de Medici
Cosimo de Medici's picture

Unless I miss my guess, you are telling me to keep stacking silver---well, silver halide---and keep the Rodenstock and Schneider free from dust.

And damn, that K25 has never been beat in terms of density, dynamic range and durability.  Don't need no Paul Simon to remind me!

On a completely different subject---but which touches on another recent article and a somewhat similar theme---keep the old Hinckley deck polished.

By the way, between you and DC Fusor, I am optimistic that no amount of fools or even the State of Kansas School Board, will relegate the Scientific Method to the annals of history.  It might be getting Dark in here, but at the end of the tunnel there is still a glimmer of hope and light.

Wed, 01/16/2013 - 11:31 | 3157582 Rainman
Rainman's picture

Google's Driverless cars..they're coming...innovation will now attempt to overcome human stupidity and carelessness 

Wed, 01/16/2013 - 11:31 | 3157592 LawsofPhysics
LawsofPhysics's picture

Yes, making humans even more inept at dealing with reality and even less employable.  This should turn out well.

Wed, 01/16/2013 - 11:44 | 3157641 Dr. Engali
Dr. Engali's picture

Isn't that the truth. Thanks to TV people can't think for themselves without being told what to think. Thanks to technology people don't know how to spell or write. They can't cook to feed themselves, they're so stupid they think meat comes from the grocery store. And now we are going to create cars that drive themselves.  We will have a world like Wall-E in the future, with a bunch of whales lying around unable to do anything for themselves. I'm pretty sure we weren't meant to live that way.

Wed, 01/16/2013 - 11:56 | 3157669 Flakmeister
Flakmeister's picture

Technology will enable the nanny state that so many here fear....

What is really ironic is that when the reckoning from PO and AGW comes, the ones surviving will be at the fringes, the people that currently know how to eke out an existence off the land, whereas, the sophisticated Westerm middle classes will drop like flies...

Wed, 01/16/2013 - 14:17 | 3158594 trav777
trav777's picture


reckonings have come to various nations in the form of collapse and this isn't what has occurred.

Wed, 01/16/2013 - 15:37 | 3159081 Flakmeister
Flakmeister's picture

YMMV and we do agree that this one is different....

Wed, 01/16/2013 - 17:41 | 3159720 Totentänzerlied
Totentänzerlied's picture

Not that I disagree, but you imply that "employability" is correlated to ability to deal with reality. The size of the government payroll says otherwise.

Wed, 01/16/2013 - 12:30 | 3157757 John Law Lives
John Law Lives's picture

I understand that commercial aircraft could also be equipped to be flown without human pilots.  That probably would not be too popular with the general public to take a commercial flight without humans in the cockpit, but it could be an option.

Wed, 01/16/2013 - 13:54 | 3158437 TheGardener
TheGardener's picture

The flying public has no idea what ride they are taken for.

But once you are a pilot ,you made friends with the winds.

Don`t ever think about your human cargo or what the gods may have in store for them, you are too close to argue.

Pilotless aircraft is like heating your home with wheat,
nature has a habit of getting rid of what defies her the most.

Wed, 01/16/2013 - 14:19 | 3158602 trav777
trav777's picture

the less human intervention in flight, the fewer the accidents.

Humans are ALWAYS the most failure-prone element in any system.

Wed, 01/16/2013 - 17:44 | 3159736 Totentänzerlied
Totentänzerlied's picture

I don't think  the pilots' unions would be too happy about that... same old  story.

Wed, 01/16/2013 - 13:34 | 3158269 negative rates
negative rates's picture

Won't happen my deer, it's wasted money.

Wed, 01/16/2013 - 13:57 | 3158463 Shizzmoney
Shizzmoney's picture

PA transit already toying with the idea of driverless vehicles.

The Transit unions and the hackney trade associations, (since like here in MA, they work in unison so the MBTA doesn't run after 1am, so they can get cab fares from bar patrons after last call, 1-2am, here in MA), will NOT be happy about this.

Wed, 01/16/2013 - 11:29 | 3157583 Future Jim
Future Jim's picture

The answer is more reliance on lawsuits? Aren't lawsuits a big impediment to innovation? How about secrecy instead?

Wed, 01/16/2013 - 11:29 | 3157586 Inthemix96
Inthemix96's picture

I do believe I posted something on topic about this yesterday, but seeing as where I live is under 6" of snow I did have a canny drink before I posted it.  For anyone wondering, I am five hours in front of you East Coasters, and I like a few beers if I cant get to work. So there,

Right, the innovation problem?  This comes as to what I posted yesterday.  I know not everyone is like folk like me, and I dont and never would advocate anyone to be like me, but I own a Nokia 5000 series phone, it is all I have ever needed from a phone and it does exactly what I need it for.  On the other hand I have a brother (older than me), who loves modern tech toys, and he has owned every iphone variant since the first one.

This cuts right to the rub in my opinion, and I could be way off the mark but I own a phone which is at least 10 years old and have no desire to replace it cos it does what I need, but my brother owns the latest iphone 5, six months later after buying the 4 phone?

Why?  Even he cant answer that, he just fucking does?  Why replace for the sake of replacement after six months?  The only thing I can think of in retrospect is he thinks he looks good in front of company, as he enjoys boasting about these new found toys he has.  And believe me, his house is filled with all the latest high tech stuff.

So in conclusion to this long winded and probably useless comment, there is always people like my brother, they either buy for the sake of buying it, or they but it to make themselves look good, or show off in front of others.  Some of us though, dont give a flying fuck about fads, and on that end, it would be a strange world if we were all the same eh?

Wed, 01/16/2013 - 11:32 | 3157595 LawsofPhysics
LawsofPhysics's picture

Yes, even worse the fuckers are watering down our ale.  Good thing I brew my own.

Wed, 01/16/2013 - 11:33 | 3157599 Rainman
Rainman's picture

yes, consumer debt is fertilized by low self esteem.

Wed, 01/16/2013 - 11:43 | 3157632 Stuck on Zero
Stuck on Zero's picture

So your brother is the guy in this video?


Wed, 01/16/2013 - 12:04 | 3157701 Dr. Engali
Dr. Engali's picture

That was the funniest fucking video I've seen in a while. Thanks.

Wed, 01/16/2013 - 12:10 | 3157713 Inthemix96
Inthemix96's picture

Thats him mate, thats him to a tee, and thanks for the laugh.


Wed, 01/16/2013 - 11:31 | 3157594 orkneylad
orkneylad's picture

“Life is pretty simple: You do some stuff. Most fails. Some works. You do more of what works. If it works big, others quickly copy it. Then you do something else. The trick is the doing something else.”  LDV

Wed, 01/16/2013 - 11:53 | 3157666 TideFighter
TideFighter's picture

Not quite. You see what is working/selling, you copy it, mass-produce it in a 3rd world economy, 

dump your stolen product on the market, pause a moment to buy gold, then repeat.

[*see the neat little trick I did there, should be good for 3-4 up arrows]

Wed, 01/16/2013 - 12:00 | 3157687 orkneylad
orkneylad's picture

Aye, but isn't that the secondary market you're describing, post-innovator?

Wed, 01/16/2013 - 11:35 | 3157596 Future Jim
Future Jim's picture

Competition is making innovation unprofitable. The market has failed. Only government has the resources to fund innovation now.


Wed, 01/16/2013 - 11:32 | 3157597 disabledvet
disabledvet's picture

Not really. As we push the envelope harder I think we're discover how much more we know that needs to be APPLIED. This application process is creating a whole new batch of winners far different from what is expected. You can either eat or be eaten by it. Most of Wall Street prefers the latter ("energy price rule") and this "they are being eaten."

Wed, 01/16/2013 - 12:12 | 3157623 LawsofPhysics
LawsofPhysics's picture

They are being eaten huh?  All the wall street guys and venture capital guys I know are doing better than ever.  What fucking planet are you on?

Wed, 01/16/2013 - 11:38 | 3157601 Debugas
Debugas's picture

the returns are diminishing because the market is limited and once you reach the size of the global market no further expansion is possible.


How innovation works ? You invest in the hope to take larger market share (from your competitors) which then allows you to return your investement.

With each cycle you need larger and larger market. At some point there are simply no more buyers to be added


Wed, 01/16/2013 - 11:35 | 3157604 Kantbelieveit
Kantbelieveit's picture

The notion that only greed-heads can create useful technology products is arrant nonsense. Yes, crazed compulsives can accelerate the delivery of new technology to the marketplace, but they do so at the cost of monopolistic practices and distortions of income distribution. I would prefer a world in which the technology arrives a few years later and the money stays in the pockets of consumers.

So we all got the $600 iPhone five years sooner because Jobs was a nut job. (OOOH, it is so sleek!) BFD. We also got the acceptance of premium-priced fashion merchandise and techno-snobbery to sustain Apple's fat profits. Technological progress does not require the regular creation of billionaires. That is a societal choice.

Wed, 01/16/2013 - 11:36 | 3157606 Itch
Itch's picture

Did anyone see the patents filed for graphene with respect to the countries that have filed them? Get this, the UK, where it was invented, has filed 42...and china has filed 2200 !! China, filing patents! It copies every nut and bolt to the letter in everything from BMW's to hairdryers ,and it still has the cheek. Lets see how they like it when other countries' ignore them.

Wed, 01/16/2013 - 11:40 | 3157625 Stuck on Zero
Stuck on Zero's picture

The reason that the patent system was created in the first place was to spread innovation.  For thousands of years groups that mastered technologies would keep them secret.  Whole villages, provinces and guilds would keep their trade secrets essentially keeping a lock on their technology.  With the patent system they could have exclusive rights for a period of time but the techniques were published so that anyone could build on the innovation.  If we don't protect the patent system we will go back into the dark ages again.


Wed, 01/16/2013 - 11:47 | 3157651 Kantbelieveit
Kantbelieveit's picture

What about patenting the CURVE on the corner of the iPhone. Has anything more stupid ever been asserted? Think of the vast technology investment required to choose a suitable curve! Oh, the horror of someone stealing this precious work!

Wed, 01/16/2013 - 11:52 | 3157664 jimijon
jimijon's picture

Wrong. Secrets?! Are you serious. If there is money to be made, almost anything can be reversed engineered.

Heck... soon scanned and made via 3D printer.

Wed, 01/16/2013 - 12:14 | 3157732 Falconsixone
Falconsixone's picture

Brawndo's got what plants crave. They crave Brawndo. It's got electrolytes.

Wed, 01/16/2013 - 14:21 | 3158615 AccreditedEYE
AccreditedEYE's picture

They are working on printing human organs for God's sake... yup, anything can be scanned and printed.

Wed, 01/16/2013 - 12:56 | 3157891 faustian bargain
faustian bargain's picture

Wrong. A) patents create government-protected monopolies on ideas, which is ridiculous on its face; and B) this results in stifling competition, distorting pricing, profit & income distibution, and producing a bubble in innovation that is going to deflate (or is deflating).

Rest assured, anything the government wants (i.e. 'spreading innovation'), we end up paying for.

Wed, 01/16/2013 - 14:14 | 3158579 TheGardener
TheGardener's picture

Dark ages as in German automobiles ?

Any fool tried to make copies for a hundred years, only
recently the German car makers got globalized and lowered
quality to "global" as in "commodity".

Patent mercantilism is the nightmare that will put us
to sub-medieval serfdom.

Wed, 01/16/2013 - 11:44 | 3157636 Pairadimes
Pairadimes's picture

Don't need all this to predict the decline of innovation. As capital allocation processes are increasingly taken over by the public sector (read Fed and DC apparatchiks), the efficiency of the process will continue to degrade, and capital will be increasingly dissipated into non-productive uses like buying villas for crony capitalists, until it is all gone. Sure, the ROI for innovation in the private sector is declining as free enterprise dies, but this effect is simply being overwhelmed by the central planners.

Wed, 01/16/2013 - 11:44 | 3157640 AccreditedEYE
AccreditedEYE's picture

Innovation is sooo passe.... we have PRINTING! Who needs your "innovation"? Death to the business cycle! (and forward progress too)

Wed, 01/16/2013 - 11:46 | 3157649 jimijon
jimijon's picture

Such a very small view of technology and innovation.

We are at the cusp of a renaissance. The Internet Reformation is here and is profoundly affecting the status quo. Everything threatens the status quo. Open Source has thrived and created great wealth. However, it completely goes against the status quo. Cold Fusion and Electric Universe theories are blowing gaping holes in the status quo of physics and cosmology. Again the status quo is threatened. 

We have a world population getting... educated via a smart phone tied to the Internet. This affects all concepts of education, licensing, and monopolies, again threatening the status quo.

Hence we have a brittle structure that is trying very hard to resist change. They are losing. We feel it in our bones. We see the poisened body politic show signs of rashes and flus with OWS, shooters and truthers. Again it affects the status quo.

So what is next? Obviously a renaissance after the big mayan reset. But to have this renaissance the status quo will first need to collapse. They were used to "managing" disruptive technologies via the centralization of information and gatekeeping publishers. That is gone. 

Things are changing.

Wed, 01/16/2013 - 12:03 | 3157699 AccreditedEYE
AccreditedEYE's picture

I SO badly want to agree with what you've said... but I've been a pessimist for so long, I think I've actually forgotten how to think optimistically. I'll say this instead: I hope you're right.

Wed, 01/16/2013 - 14:19 | 3158605 TheGardener
TheGardener's picture

He most definitely is, but next Mayan reset 6000 years from now...

Wed, 01/16/2013 - 12:09 | 3157712 Dr. Engali
Dr. Engali's picture

In the back of my mind I believe what you said  as minds all over the world connect, but TPTB are so crazed I think they might destroy the whole damn thing just to hold onto power.

Wed, 01/16/2013 - 11:49 | 3157655 pragmatic hobo
pragmatic hobo's picture

the original macs (and PC as well) were indeed an innovative product not because of it's novelty but because it actually increased productivity of the user. Does ipad and iphone (or any smartphones or tablet) increase productivity of user? If there is no discernible increase in productivity then it's just a convenience device which merit no innovation premium.

Wed, 01/16/2013 - 12:23 | 3157749 adr
adr's picture

Actually, my smartphone has increased my productivity because I can send and recieve complete emails from it anywhere. I can also attach any file I have stored thanks to google drive. I can also approve and sign off on .pdf proofs from my phone. Even read and edit excel spreadsheets. Evey single website works if I need information. My phone also has a physical keyboard making all of this much easier.

Now if I bought an iPhone, then no it wouldn't have increased my productivity because almost everything I outlined would actually be harder to do.

Of course Sony did make a full function 4" pocket PC running Windows XP ten years ago. I had one of those and it was spectacular. Sony was a corporation of true innovation.

Wed, 01/16/2013 - 11:58 | 3157679 q99x2
q99x2's picture

Apple sucked and their mouse logic still sucks. Linux/BSD Unix, Final Cut Pro and independent media is what made Apple popular at the turn of the century. Marketing and market manipulation backed by money did it for Apple not innovation rather financialization. Same with the Wall St. fraudsters.

Wed, 01/16/2013 - 12:31 | 3157778 adr
adr's picture

I remember in college everyone was so pro apple. Then we got a PC lab for CAD and everyone quickly found out the PCs were better at just about everything.

The Macs never crashed line is such bullshit. They crashed all the time when you multitasked. Try running Photoshop and Illustrator on a 1996 Mac at the same time and see how often you need to reset it after you get the bomb prompt.

Macs didn't become good until they switched to the Unix core. Of course then they ceased to be Macs in the pure sense. Of course Jobs pretty much still screwed up the OS. You want to see a robust computing environment, go find an old Unix workstation. Its been a long time but I think the ones we worked on in 1998 were full 128 bit.

Wed, 01/16/2013 - 12:02 | 3157696 oddjob
oddjob's picture

We can always hope for another UFO crash to sponge more technology from.

Wed, 01/16/2013 - 12:04 | 3157702 Marco
Marco's picture

We can't exactly have every innovation generation 100s of billions of revenue ... if Apple's level of success with the previous generations of iPhone was necessary to create innovation we wouldn't have a whole lot of it.

PS. I think the only innovations Apple has generated in the last few decades are in marketing and product placement, not technology.

Wed, 01/16/2013 - 12:09 | 3157711 Falconsixone
Falconsixone's picture

They just steal your ideas. If they're good they put them in a vault for their uses.

Why would anyone do any thinking for the corporations running that end of the planet?

I'll keep mine until they're gone in order to help/advance the people not their botttom line that spells out "Greedy Bastard".

Let them all fail, they're the ones that destroyed it. 

Wed, 01/16/2013 - 12:12 | 3157721 negative rates
negative rates's picture

So the will doesn't pay anything, and the trust is never settled. Separation of the classes, and destruction at it's best!

Wed, 01/16/2013 - 12:14 | 3157728 adr
adr's picture

Innovation isn't dead, it just morphed from innovation in usefull goods to financial innovations of newer better fraud.

Seriously, why spend the time and money to actually make a real product when you can spend virtally no cash of your own to run an IPO fraud. Look at the "As Seen on TV" fraud. Retaliers have gone crazy over the scam products because they pay $2 for them and sell the garbage for $20. 99% of the crap is made by firms with executives that have names that end with ein by the way.

People do make the claim that the consumer is eating the products up, so that is why the sector is expanding. Well a lot of people paid a lot of money for water with a bit of flavoring sold as "Miracle Tonics". Didn't make it any less of a scam.

Don't get me started on the Kickstarter scam either. Look I got $250k for a rendering and I have no clue how to get it made. Ha, I don't even have to make the product and I keep the $250k.

Wall Street kills innovation. Charles, you are way off the mark with Apple. The computer wasn't $1000 because of innovatons. It was $1000 because Jobs wanted it to be that price. Wozniak wanted it to sell for $400-$500. He wanted to make the computer cheap and accesible. Jobs wanted to go long and he scammed thousands of schools into buying Macs at inflated prices.

The iMac, iPod, iPhone, and iPad are not innovative. Jobs stole every product he ever made. Marketing a logo as something desirable is not innovation, it is comsumerism at its worst.

I have a three year old GalaxyS II that is better than and has more features than the iPhone5. It might not have a higher resolution screen or a faster processor, but everything usability wise is far beyond anything Apple ever made. The phone has been dropped, kicked, and crushed. The case has some dings and scratches but the screen doesn't have a mark. I paid $1 for the phone.

Innovation will come back when and if Wall Street dies. When innovation is required to actually make money.

Wed, 01/16/2013 - 13:28 | 3158213 FeralSerf
FeralSerf's picture

There use to be a sucker born every minute.  Thanks to Bernays and Co's technology, suckers are available at an increasing rate.  It's all in the conditioning.

Wed, 01/16/2013 - 12:54 | 3157868 IamtheREALmario
IamtheREALmario's picture

People tend to confuse incremental evolution with revolution and think they both command the same premium ... not. From being in the industry, I can tell you there is almost nothing inside an iPhone that was not available in a less refined clunky version during the 80s. OK, so we made it smaller, faster, birghter and can hold more stuff ... big whoopie doo.

There is real innovation out there, but it is being suppressed by those that have a vested interest in the status quo ...

Do you want to be a genius? Troll the patent files, just like Einsten ... there are many inventions looking for someone to free them up from status quo control and to apply them.

Wed, 01/16/2013 - 13:58 | 3158472 Shizzmoney
Shizzmoney's picture

Competition should be based on innovation, not on piracy and theft.

Piracy stimulates innovation.  There's this thing called, "The VCR".  Look up how its made Hollywood billions (and they still complain).

Wed, 01/16/2013 - 14:43 | 3158751 btdt
btdt's picture

mac innovation my ass - innovation was by Xerox Parc, it took a long time to make the hike to Sunnyvale from Palo Alto



as everyone knows, the Apple premium is based not on hardware features so much as the integration of intuitively easy-to-use software and hardware in a pleasing, stylish form-factor.


... everybody knows??... the dice are loaded, eveybody knows the good guys lost"


fetish brand =apple premium

fetish band (member) = two minds


add some dog and stars Charles and you're up to 1970's mangement theory


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