David Heinemeier Hansson

April 20, 2021

What is a computer?

When Apple launched the iPhone in 2007, it was a milestone for the tech industry. They called it a phone, but the revolution was shrinking a general-purpose computer to fit in your pocket. That was the progress.

But when Apple introduced the App Store the next year, it cemented the fundamental regression that had been present with the iPhone since launch. That it was a general-purpose computer that was only allowed to run software specifically approved by Apple, unlike any other mainstream general-purpose computer in history. Including Apple's own Mac computer.

In the early days, we all failed to realize just what a monumental and fundamental regression that really was. That consumers could pay hundreds of dollars for a pocket computer, and yet not be allowed to run whatever software they so pleased, unless it had Apple's blessing. Like this wasn't a computer at all, but a gaming console or carrier-locked flip phone.

But back then, the market was growing explosively, whole new frontiers of app development were opened, and developers left whatever principled opposition they might have had at the door to be able to compete. And besides, Apple's enforcement remained comparably light touch, as long as they kept selling ever-more expensive phones in ever-more markets around the world.

That all came to an end with the so-called Pivot To Services circa 2017. Apple's new strategy for a peak iPhone world where new growth had to come from making more money off existing customers rather than finding new ones or selling the same people new iPhones every year or two.

That was when Apple started realizing and exercising the latent monopoly power available in controlling the largest and most profitable share of the US pocket computer market. And developers started waking up to the precarious situation they found themselves in, if they had a business selling any kind of digital services.

The App Store tollbooth during that time not only expanded who were due to pay, but served as a competitive cudgel to beat competitors like Spotify even when Apple were desperately late to market with me-too services like Apple Music Streaming.

Apple has since shown in market after market – be that gaming bundles, news aggregation, TV-show production, fitness training, payment gateways, you name it – that they can use their iPhone monopoly to gain an unfair advantage in any other market, and the App Store is the main vehicle to commit those antitrust offenses.

The stock market has responded with ferocious enthusiasm. We went from a bear story of peak iPhone to Apple surpassing two trillion dollars in market cap, or four times the valuation from 2017, off the prospects and profits of these monopoly rents.

Lawmakers and regulators and all the rest of us, however, are finally waking up to just what an insufferable situation that is for everyone but Apple. And quickly too. When the pivot to services was announced in 2017, there was very little antitrust interest in the App Store problem. Now it's being examined and sought countered in the US at a state and federal level with both legislation and enforcement. And so too in Europe and elsewhere.

I lived through hell for two weeks last year when Apple threatened to destroy our new email service HEY.com, unless we yielded 30% of our revenues. We took a stand and gave Apple a bloody nose then. Epic has since, by virtue of their size, been able to take the fight directly to Apple in a court of law as well. Something a small or midsized developer would be ill advised to do, given the prospects spending a decade in the courts and tens of millions in legal fees.

That legal fight is in fact exposing the underlying fallacy in Apple's key argument for its App Store monopoly tollbooth. That Apple needs to exert total control to give consumers total safety. The reality is that Apple has been hiring unqualified staff to spend mere minutes reviewing new apps, and as a consequence has let countless scams operate for years, sucking millions of dollars out of consumers, all under the guise that they were perfectly safe.

The App Store is classic monopoly tollbooth that Apple is trying to justify by operating a security theater. It's time for that show to end.

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