Friday, September 23, 2011

Economy: Why Capitalism Wins - What We Could Learn From Apple and Samsung

Recently I was surprised by an article in the "Economist", at least at first look ( The magazine reported that Samsung and Apple are working together and that the Asian company is an important supplier for Apple´s iPhone.

This cooperation is very remarkable because they are fierce competitors. They are fighting over the markets for smartphones and tablet computers (iPads), even in the courts. Sales of Samsung`s Galaxy 10.1 tablet,  a rival to Apple`s iPad, were recently banned by a German court because of patent questions.

According to the Economist, Samsung produces "the flash memory that holds the phone's apps, music and operating software; the working memory, or DRAM; and the applications processor that makes the whole thing work. Together these account for 26% of the component cost of an iPhone".

This cooperation exists because both are benefitting from it, competitors or not. The reason is the profit motive, the quintessence of capitalism. Apple chooses Samsung as a provider because the Asian company is cheaper & better than the other producers. Samsung works for Apple because they gain an additional market. This allows them to produce more flash memories & processors which reduces their average costs. The cooperation is also good for the consumers because they get better & cheaper iPhones & processors.

This cooperation explains why capitalism wins. The profit motive causes more productivity & efficiency. The result are cheaper and better products. Therefore in the long run capitalism is a machine which creates wealth for everyone.

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