Michael Crichton once highlighted an unusual quirk in human thinking – something he called Gell-Mann Amnesia, after his friend Murray Gell-Mann. Chrichton said:

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.

Crichton was concerned primarily with journalism. If you see news reports covering an area you know well are frequently riddled with elementary errors and are written by someone who seems to lack even a basic understanding of the subject, you should at least suspect that news reports on other topics are likewise riddled with basic errors and were also written by journalists lacking a basic understanding of those topics as well. Yet, we rarely seem to do this. But more than journalists, I find myself concerned about what this topic says about legislators and other politicians. I find that in areas I know well, legislators are even more likely than journalists to demonstrate a lack of understanding in the areas they are so eager to exercise control. And lately, I’ve been seeing a lot of this regarding technology. 

I’ve mentioned this on the blog before, but I’m a huge gadget and technology nerd. This, in addition to economics, has made me intensely interested in following news stories about legislators’ various attempts to insert themselves into technology. The US government has recently been going after Apple as a monopoly and railed against various aspects of Apple’s business. And in almost every instance, it’s clear that the person making the claim is someone who simply doesn’t understand the tech world at all.

I could give numerous examples, but for now I want to focus on a claim made by the Department of Justice blaming “barriers to entry” for the failure of various companies in the smartphone space:

Many prominent, well-financed companies have tried and failed to successfully enter the relevant markets because of these entry barriers. Past failures include Amazon (which released its Fire mobile phone in 2014 but could not profitably sustain its business and exited the following year); Microsoft (which discontinued its mobile business in 2017); HTC (which exited the market by selling its smartphone business to Google in September 2017); and LG (which exited the smartphone market in 2021). Today, only Samsung and Google remain as meaningful competitors in the U.S. performance smartphone market. Barriers are so high that Google is a distant third to Apple and Samsung despite the fact that Google controls development of the Android operating system.

There’s a lot to unpack in the cacophony of errors. For one, the Amazon Fire phone didn’t fail because of “barriers to entry.” It failed because, to put it bluntly, it was a really bad product. It lacked key features, its hardware was subpar, and it was overpriced for what it offered. You can do a web search for reviews of the phone when it was released, and I can’t find a single example of a reviewer actually recommending it to anyone. Companies with far fewer resources than Amazon have successfully broken into the smartphone market by offering products that were good, inexpensive, or both (OnePlus comes to mind). 

Additionally, it’s simply absurd to place the failure of Microsoft, HTC, or LG on “barriers to entry,” because all of these companies had been well-established in the smartphone market long before their eventual demise and before Apple even entered the phone market. When the iPhone was first announced, Microsoft CEO Steve Balmer literally laughed at it and predicted it would fail, confidently pointing out that “Right now we’re selling millions and millions and millions of phones a year. Apple is selling zero phones a year.” Before the iPhone came along, Microsoft was deeply established as a smartphone company and had huge sales. The idea that their phone business couldn’t compete with Apple because of “barriers to entry” could only be said by someone who is completely unfamiliar with the history of mobile technology. 

Similarly, HTC and LG had previously been highly successful smartphone manufacturers as well. HTC made the first Android phones, for several years it was the largest manufacturer of Android phones, and by 2011 it was the largest smartphone manufacturer period – even bigger than Apple and the iPhone. There are numerous reasons why HTC declined, and their smartphone business failed, but “barriers to entry” isn’t on that list. The same can be said of LG – they ran a highly successful smartphone business for years, releasing phones that sold millions of units and earned solid reviews and a dedicated fanbase. There are a number of reasons for LG’s decline as well. (Tech YouTuber Marques Brownlee offers a variety of thoughts here, if you’re interested!) But to reiterate the main point – LG, HTC, and Microsoft were in the phone business long before Apple entered the scene, and all were at one time bigger and more successful in the smartphone market than Apple. To say they ultimately failed to compete with Apple because they faced “barriers to entry” fails to make contact with reality.