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Analistas 23/02/2015

Does success in tech come at a steep price?

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Mr. Manjoo writes: “Old kingpins like Digital Equipment and Wang didn’t disappear overnight. They sank slowly, burdened by maintenance of the products that made them rich and unable to match the pace of technological change around them. The same is happening now at Hewlett-Packard, which is splitting in two. Even Microsoft - the once unbeatable, declared monopolist of personal computing software - has struggled to stay relevant in the shift from desktop to mobile devices, even as it has continued to pump out billions in profits.

“Now Google is facing a similar question about its place among tech’s standard-bearers.”

It’s a common and plausible picture: Basically, success makes you set in your ways, and unable to adapt when the environment changes.

But here’s what I wonder: Are we just making up stories to explain essentially random events?

Consider the analogy with national growth. A few months ago, Lant Pritchett and Larry Summers made a bit of a splash with a paper at VoxEU.org (read it here: bit.ly/1JnLR8R) that takes on a popular story about economic growth rates. Often, poor countries that have grown very fast in the past seem to slow down as they reach middle-income status, still far below the per capita incomes of Japan and Western nations. This has led to a lot of theorizing about a possible “middle-income trap.” But Mr. Pritchett, a Harvard economist, and Mr. Summers, a former Treasury secretary, argue that what we’re seeing is mostly just regression toward the mean: Countries that have grown fast in the past tend to be more normal in the future, because that’s the way life is. All the rest is overinterpretation.

So I wonder: Does the tendency of tech giants to lag in the next stage really represent the price of success and its attendant rigidity, or are these slowdowns simply telling us that lightning doesn’t strike repeatedly in the same place? Tech giants - giants of any kind, actually - are generally built on one big idea, and grow huge by applying that idea. Why should we expect them to be great at the next big idea?

I’d also note, as an amateur in this field, that I’m hearing good stuff about Microsoft’s latest offerings. Wasn’t the company supposed to be a dinosaur, incapable of changing because the profits from the old ways were too good?

Analysts of economic growth are familiar with the proposition that the more we study the issue, the less we think we know. I wonder if analysts of business success shouldn’t consider the possibility of a similar story in their own field.
 

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