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An open letter to Om

Wednesday, October 14, 2009 by Dave Winer.

In a thread about netbooks on his blog, Om asks what he's missing in his analysis of the relationship between the computer industry and users re netbooks. I spent some time thinking of an analogy, and came up with one about the industry we all love to hate -- the airline industry.  

So here's the story... 

Once upon a time there was an MIT professor who said: "I have an idea, let's design an airline that can get you to a great resort for $100! Then every schoolkid can afford to have a great vacation in Mexico, Italy or Thailand!!" 

No matter how hard he tried the professor couldn't come up with a solution. The moguls of the airline industry sighed in relief. Their margins were safe.  

Not so fast! A Taiwanese airline named Susa discovered a way to do it for $600, which was still a lot cheaper than the airlines could get you to Italy or Spain for. Huge numbers of people signed up and the airline bustled with new business. People came home from their holidays and told everyone that they had a great trip. And with the new economies of scale Susa was able to get the price down to $350. Not the $100 that the MIT professor promised, but still cheap enough that lots more people could have a vacation, and while some people still went on the more expensive and luxurious airlines, more and more people were flying Susa. 

In fact this happened in the airline industry, and it forced a lot of the big airlines to either merge or go out of business. Maybe analysts in the airline industry say that any day the users will tire of the cheap flights, but they'd be just as wrong as the analysts in tech who predict the demise of netbooks.