Apple is Defying History With Its Pricey iPhone X

The iPhone’s 10th anniversary launch was today, and Apple’s arms are just about to fall off from patting itself on the back. You can’t blame the company’s executives for self-congratulations. Apple’s marvelous smartphone has transformed our lives, and the rabid anticipation of this newest model—Edge-to-edge display! Face recognition! No home button!—is proof that we are hungry for more.

The event began with The Beatles, continued with Tim Cook tearfully evoking Steve Jobs, and 20 minutes later got around to introducing some product updates, if not new products. It took more than an hour to get to the big event—the iPhone X.

Does it look great? Sure. It’s got a lot of new features, including FaceID, a more powerful chip, and an amazing camera. Still, the price! If everybody hadn’t already read the leaks, it would have been a shock to see that the iPhone X started at four figures (minus a dollar). As it was, while applause welcomed every tiny product tweak announced in the new Steve Jobs Theatre, when the X’s $999 price flashed on screen, even the crickets shut up.

Is $1000 too much for a phone? Of course not. This is the device that is our 24/7 companion, the hub of virtually all our activities. Even when we participate in the ever-decreasing list of things we do without our phones, we are always careful to be within buzzing range of our beloved mobile devices. So if we can get a better version—and the iPhone X indeed looks better—a few hundred dollars more seems like a good investment. In this case, there’s a lot to say that having an iPhone X will make a difference—a wonderful camera, and, maybe best of all, two hours more battery life on a charge. Plus, you get to personalize animated emojis.

But Apple should be careful: It could be bucking its own history.

Let’s roll back the clock to the computer operating-system war of the 1980s. A better way of computing was emerging, based on the graphical user interface. The future would belong to the company that successfully migrated the world to the GUI. The competitors would be Apple and Microsoft. There was going to be a winner and a loser. And Apple was there first, with the Macintosh.

But even as Apple readied the Mac launch, a bitter battle brewed within the company. Steve Jobs did not want the Mac to cost more than $2000. In fact, when I spoke to him a couple of months before launch, that was the price he cited to me: $1999. But the bean-counters at Apple weren’t willing to go that low for a machine that, at first, would be expensive to produce. They set its cost at $2500—considerably more than machines that used the competitor Microsoft’s far inferior no-GUI interface.

All through the 1980s, Apple kept its prices high. There were many reasons Microsoft’s much bigger user base managed to resist moving to the GUI—but price was high among them. Much of the market waited until Microsoft introduced its first really successful effort at that interface, Windows 3.0. By that time, Bill Gates had already won the operating system war.

Then came 2007. For Steve Jobs and Apple, the iPhone was an amazing opportunity for a dominance do-over. Forget Windows’ market share lead—the mobile operating system was destined to become the system, as the desktop declined. Though the first iPhone was expensive, it was such a refreshing new product that early users flocked to it.

What happened next is interesting. With the iPod—Apple’s first successful stab at market dominance—Apple had begun with a high price but quickly dropped it. Over the next few years, the iPod underwent amazing transformations, each one introducing vast improvements and—wait for it—much lower prices. It was a classic instance of Moore’s Law, which explained how tech devices can quickly get both cheaper and dramatically better.

But the iPhone was different. It was introduced with $499 at its top price—and 10 years later, its successor costs twice as much. Apple is treating Moore’s Law as if it were a jaywalking statute. Even the second-rung phone announced today, the iPhone 8—albeit a substantial upgrade to the current top-line model—starts at $699.

On the other hand, Apple’s competitor Android has a range of prices, including many well below the original cost of the iPhone. Over the years, various Android phones have become competitive with Apple’s iOS, much in the way that Windows kind of caught up with Macintosh. But price is a big reason that the number of Android devices far outnumber those running iOS like the iPhone.

For now, Apple can count on lots of people upgrading. To some people, the extra cost can be written off as the equivalent of a few excellent restaurant meals. But many people can’t routinely afford a single one of those meals, and those people are smartphone customers, too. If the already-big global gap between iPhone and Android prices widens even further, Apple will find itself defying gravity. Developers are the canaries in the coal mine to watch. They are the lifeblood of every operating system, and if they routinely decide to develop on Android first, you’ll know Apple miscalculated.

One thing propping up Apple is the disaggregated nature of its competitor. As an open system, Android is not under the tight control of its creator, Google. (And here’s a question—now that Google is Alphabet and regularly spinning off parts of its business into separate units, why is Android still embedded in the company that does search? The world’s most popular mobile operating system doesn’t merit a unit of its own?) Still, Google has correctly identified the opportunity to seed the global marketplace with phones that do take advantage of Moore’s Law, like its low-cost Android One. Here’s an Android One device for the Indian market, made by Xiaomi for under $250. No FaceID or any of the other whizbangery of Apple’s new offerings, but a perfectly reasonable 2017 smartphone.

I’m not saying that Apple is in immediate trouble. But once again, it finds itself in the position of a high-end innovator charging much more than the good-enough competition. That didn’t work out too well the last time.

One more point: Maybe it doesn’t matter so much that Apple is milking its lead—because smartphones are on the clock. Today, Tim Cook referred to iPhone X as “the future of the smartphone.” But we’re approaching the time when what really matters is the future after the smartphone. When I interviewed Phil Schiller earlier this year on the 10th anniversary of the original iPhone launch, he opined that the iPhone might be around for 50 more years. That’s ridiculous. Consider how far technology has come in the last half-century, and then look at how that pace is accelerating. There is no way we will be carrying around those slabs of silicon and glass in our pockets in 2067.

Jony Ive, in the iPhone X design video, bragged about how the new all-display device “disappears into the experience.” But the next big thing won’t have to disappear, because it kind of won’t be there. The major tech companies are already gearing up for the successor to the smartphone, a non-obtrusive augmented reality headset that brings computing to our heads. We know Microsoft, Google, Facebook, and Apple are working furiously on this—and I would guess Amazon, too. And probably other companies I haven’t even heard of.

In the meantime, who can blame Apple for harvesting profits while we wait for the next big thing? I know I’m probably going to buy an iPhone X. I’m already considering which emoji I will be.