1. The Economics of QWERTY Jan Damsgaard Dept. of Informatics Copenhagen Business School http://www.cbs.dk/staff/damsgaard/ This presentation is based on Paul A. David (1985) Clio and the economics of QWERTY The American Economic Review (75:2), pp. 332-337.

2. EBUSSJan Damsgaard 20042 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. 332-337.

3. EBUSSJan Damsgaard 20043 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 (1909-24) u Apple Computers equipped with switch from QWERTY to DVORAK

4. EBUSSJan Damsgaard 20044 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

5. EBUSSJan Damsgaard 20045 Complex technical system u Actors –Manufacturers –Buyers –Operators –Trainers of operators u All part of an emergent complex technical system of production

6. EBUSSJan Damsgaard 20046 The lock-in of QWERTY u QWERTY become locked-in due to –Technical interrelatedness –Scale economies –Quasi irreversibility

7. EBUSSJan Damsgaard 20047 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

8. EBUSSJan Damsgaard 20048 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

9. EBUSSJan Damsgaard 20049 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

10. EBUSSJan Damsgaard 200410 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

11. EBUSSJan Damsgaard 200411 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 http://www.nandotimes.com/technology/story/476814p-3810077c.html