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A Not-so-Average Day in Economics: June 29, 2007—The First iPhone Went on Sale and Changed the World

Sixteen years ago today, the first iPhone was available for sale. In Steve Jobs' famous keynote speech, he described the iPhone passionately as “…three things: a widescreen iPod with touch controls, a revolutionary mobile phone and a breakthrough internet communications device…a revolutionary and magical product that is literally five years ahead of any other mobile phone.” I think we can all agree that the iPhone has evolved in ways that Steve Jobs never thought were possible. It has evolved, quite simply, to a way of life.

“Hello” was the first iPhone ad released in 2007. Sixteen years since that 29th day in June, the iPhone has evolved from a device into a way of life.

The iPhone’s impact to the global economy is tremendous. From 11 million users in 2008 to 1 billion users in 2023, Apple commands almost 24% of the smartphone market, which is way more than any other manufacturer. With this incredible presence in the market, and, honestly, in our everyday lives, I cannot help but think…what is the secret sauce, Apple?

Well, Apple knows its market and builds a product that makes you want something you thought you would never need. They are the masters of behavioral economics, a branch of economics that explains why consumers make certain decisions when it comes to their purchases.

Firstly, Apple knows how to appeal to its consumers’ emotions. Studies have shown that we make purchases not based on rational decisions, but are instead driven by factors we don’t necessarily understand. In this case, the new iPhone is a strong channel for “self-signaling,” a notion in that has something to do with how your actions influence your beliefs about yourself. In this instance, one’s self worth is tied to the owning the newest, sleekest, and most technologically advanced iPhone. Being ahead of the curve lends to positive feelings of self worth.

It is also true that Apple makes a good product, especially because it epitomizes simplicity. In behavioral economics, consumers are attracted to products that are simple to use and those that reduce the amount of thinking required to operate it. iPhone’s sleek and minimalist design lends to an illusion of simplicity and ease of use.

Scarcity is an economic concept that resources are limited, but our wants tend to be limitless. Our human behavior makes us want more of that resource that is limited and we perceive it as more valuable. Think about the long lines outside the Apple store when a new model gets released. The craze is fueled by that perceived need of limited supply and the need to have it before it runs out! I don’t think I’ve seen long lines when the Google Pixel phone was released.

Long queues at the release of the iPhone 14

Humans are prone to making value assessments based on price, which is called “Irrational Value Assessment”. It basically asserts that the price is an indicator of quality. Ever heard of the saying: “You get what you pay for?” Making the iPhone quite expensive gives people the reassurance that they are getting a high quality product and that boosts their self esteem.

Apple knows its stuff and knows its market. So I won’t blame you if you find yourself waiting in line for the newest iPhone. I do own one after all, so no judgment here.


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