The Economics of QWERTY Jan Damsgaard Dept. of Informatics Copenhagen Business School This presentation is based on Paul A. David (1985) Clio and the economics of QWERTY The American Economic Review (75:2), pp

EBUSSJan Damsgaard Outline u The Controversy of QWERTY u The Story of QWERTY u The Lock-in of QWERTY u Lessons learned This presentation is based on Paul A. David (1985) Clio and the economics of QWERTY The American Economic Review (75:2), pp

EBUSSJan Damsgaard The controversy of QWERTY u Why QWERTYUIOP and not something else? u For example DVORAK with world records for speed typing? u U.S. Navy showed that DVORAK is faster u Seven other improvements rejected ( ) u Apple Computers equipped with switch from QWERTY to DVORAK

EBUSSJan Damsgaard The Story of QWERTY u 1867 patent for “TYPE WRITER” with QWERTY lay-out u Sales people could type the brand name using the top row only u Reduce the frequency of type bar clashes u Technical problems therefore strategic alliance with Remington (arms maker) u Entire stock of QWERTY 5,000 at the beginning of 1880’s and the annual production was 1200 in 1881

EBUSSJan Damsgaard Complex technical system u Actors –Manufacturers –Buyers –Operators –Trainers of operators u All part of an emergent complex technical system of production

EBUSSJan Damsgaard The lock-in of QWERTY u QWERTY become locked-in due to –Technical interrelatedness –Scale economies –Quasi irreversibility

EBUSSJan Damsgaard Technical interrelatedness u Systems compatibility between hardware and software –Physical lay-out of the keyboard –Memory of the lay-out by the typists u The buying of a QWERTY keyboard was a positive externality u Increases the likelihood that subsequent users will learn QWERTY

EBUSSJan Damsgaard System Scale Economies u Decreasing costs conditions –de facto standardization of just one lay-out u Polya Urn Scheme –Traditional economics t Decreasing returns, cost leader or differentiation –Network economics (W. Brian Arthur) t Increasing returns

EBUSSJan Damsgaard Quasi irreversibility u Sunk cost investments in QWERTY u The cost of hardware was coming down as the cost of software conversion was coming up u Competitors found it beneficial to make hardware compatible with the installed based of QWERTY typists rather than the other way around

EBUSSJan Damsgaard Lessons Learned u Technical interrelatedness, scale economics, and quasi irreversibility caused a lock-in to the wrong standard u Other examples –Britain's undersized railway wagons –The penalties of taking the lead u Lock-in to the wrong standards is common in the network economy

EBUSSJan Damsgaard Further evidence? u AOL INSTANT MESSENGER WILL NOT WORK WITH RIVALS u America Online has said that making its popular instant messaging u application compatible with rivals' products is too expensive. The u company will instead focus on establishing contracts with other vendors u allowing AOL to operate instant messaging systems for them. AOL and u other providers of instant messaging, including Microsoft and Yahoo, u have said for several years that they support interoperability, which u would allow their systems to work similar to phone lines, across u various providers. AOL conducted a test of interoperability last u summer. Although the test was successful, AOL said implementing the u system and addressing security would incur significant expense. Some u observers criticized AOL for apparently turning its back on u compatibility, saying AOL is choosing instead to guard its large base u of users. u Associated Press, 24 July 2002 u