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October 17, 2006
The story of the iPod
From Wired: The real story behind the iPod.
Exercise for those who teach principles of economics (especially micro): Come up with as many principles level lessons as you can from this. Here's one:
Apple's team knew it could solve most of the problems plagued by the Nomad. Its FireWire connector could quickly transfer songs from the computer to player -- an entire CD in a few seconds; a huge library of MP3s in minutes. And thanks to the rapidly growing cell phone industry, new batteries and displays were constantly coming to market.
Complementary goods in production Lower input cost per unit of quality--Better and cheaper cell phone batteries and displays lowered the cost and increased the quality of Apple's innovation. (UPDATE: Lower input costs would be a more direct answer, but here is what I was thinking. Smaller batteries and displays were complementary with the smaller sized hard drive and other features of the iPod. What good is the small hard drive if everything else is bulky? What good is it to be mobile if the battery doesn't last? The iPod's value came from the combination of innovations. Only when the size and power requirements on all of these complementary inputs are met does the iPod become viable. Substituting a bulkier battery greatly diminishes the value. That is the sense in which I meant them complementary. Not in the literal production process, but innovative, value-creating process.)
You could probably spend a couple weeks in class on the intellectual property rights issues if you were so inclined. You are invited to post iPod teaching suggestions in the comments.
UPDATE: I also like to use the iPod as an example of invention (small hard drive, battery, etc.), innovation (assembling the various inventions into a music player), and diffusion (network externalities with iTunes, marketing, and adoption by the masses).
Posted by William Polley at October 17, 2006 9:58 AM
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