But, as I said, even if Apple hasn't reformed its bad old ways, it has grown a whole lot wiser. And, in one of the most brilliant strategic moves in its history, the company opened the door more than a year ago to outside developers to create their own proprietary application programs for the iPhone (and iPod Touch) to be sold through the Apple Store. Here, too, serendipity has been Apple's friend: economic downturns are always times for a burst of entrepreneurial energy as the unemployed and underemployed use the downtime to start new enterprises and then give them a running start. But this crash has been unique in high tech history not only for its depth and duration, but also because, for the first, time, the venture capital industry (largely because of government regulation) is paralyzed and little investment money is available.
This entrepreneurial energy needs to go somewhere … and where much of it has headed is toward the design of iPhone apps. The sheer number of these apps that have been created in just 18 months is absolutely mind-boggling: more than 100,000 different programs, from guitar tuners to restaurant ratings to burp generators, and everything else you can imagine. It is one of the greatest outpourings of small, independent entrepreneurship in American business history, and all supported by the Apple Store. There have been more than 1 billion iPhone app downloads.
Some of these apps are superb, most are crap. But that doesn't matter. What does matter is that the sheer mass of all of these creations creates a gargantuan barrier to any competing smartphone initiative that wants to take it on. Apple, without surrendering much control, has nevertheless found an alternative way to harness the intellectual capital of thousands of its smartest and most ambitious supporters. So now, to compete with the iPhone you pretty much have to match the best of the iPhone App catalog – and even with a well-developed user community, that won't be easy to do. Android might be able to catch up – and I emphasize "might" – by building its own developer community. But it hasn't happened yet.
The only other ways to catch Apple right now is to either price bomb the iPhone with a super cheap, super powerful smart phone – easier said than done, especially since you're giving away all of your profits – or come out with your own, revolutionary, new design. But nobody's been able to end run Apple yet; revolutionary new design being what that company does better than anybody.
But if any could stun the phone world it would be Google. It, too, is full of smart, arrogant people, the company has lots of dough, and because phones are outside its core business, it can in theory take a big risk without worrying about legacy issues. For example, as many industry insiders have suggested, Google could stun the tech world – and hit Apple at its weakest point – by coming out with a "Webphone," a device that uses the Internet, a la Skype, as its transmission medium and thus escaping forever the tyranny of the phone companies. There's a lot of problems with that strategy, of course, but it would certainly shock the world and put Apple on the defensive.
Unfortunately, the early reports suggest that what Google will introduce next week, the Nexus One, will be a largely conventional smartphone. That's a pity because I suspect Google will never get this chance again.