Evolutionary Economics - The iPhone, the long tail and

the winner-takes-all economy

Classic economic theory had homo economics at its centre: a completely rational being that
maximizes utility and wealth. When buying, say a smartphone then people should buy
according to these economic principles. However, this model totally fails to predict actual
human buying behaviour. The most desired smartphone model is not the most economic
one, but the most expensive one: the iPhone. How can this phenomenon be explained?
The long tail theory (Chris Anderson) is an extension of the classical model. It predicts that
quasi perfect markets that are possible because of the web would cater to many different
needs. In the case of smartphones, this means there should be smartphones for every type
of person (e.g. outdoor people, geeks, fashionistas, etc.) and this is true. As far as budgets
go, you can buy smartphones from $50 to $1000+, yet among the thousands of smartphone
models there is one model that exceeds all others and one company that gets the lions’
share, while the majority of smartphone makers don’t make any profit at all.

Many people simply claim they pay a superior price for a superior innovative product.
However, that is not true. There are cheaper models than the iPhone that beat the iPhone on
specs like camera, speed, battery life or whatever features people desire most. The iPhone
hasn’t been innovative since Steve Jobs died, either. It mostly copies over features from
successful Android makers that catch the eye of the market. NFC, triple cameras, night sight
are all features Android phones had long before the whatever current iPhone model when it
was launched. And still, iPhones are selling like hot cakes.

How can we make sense of such behaviour? Evolutionary psychology would answer that
“utility” can only be obtained when an item increases survival chances or an individual’s
reproductive potential. The economist who came closest to this thinking was Thorstein
Veblen with his idea of “conspicuous consumption”. According to this theory, people buy
iPhones not because they need them, but because they want to show off their status and
how much money they have got to spend.

There is, however, considerable variation in spending behaviour. Extroverts tend to spend
much more than introverts and it seems likely that they have a higher need to display their
status. Another factor that classic economy theory neglects is conformism. Some people
tend to be more conformist than others. Some people start to show off their status and the
rest plays “keeping up with the Jones, er… influencers”.

In my theory of evolution of personality types, the most conformist type would be “farmer” (SJ
in Myers-Briggs). As farmer types make up the majority of the population (around 50%), this
would explain the winner-takes-all economy we can see around us everywhere. Instead of
the long-tail, people tend to buy the same products, watch the same TV shows, consume the
same goods.
The long tail does work much better for hunter-gatherer personality types (N types in Myers-
Briggs), who tend to care less about social conventions and have their own passions. Adam
Smith and Chris Anderson are, after all, INTPs, i.e. hunter-gatherer types. Personally, I was
an early adopter of Amazon when they were still only selling books I got my first book
about Evolutionary Psychology from the US via Amazon.com for which I was much more
willing to spend my money on than I would have been willing to spend it on an iPhone.