Blackberry’s Demise Reminds Us Of The Dangers Of Export Controls

It was a switch “most of us made years ago.” The newspaper quoted is USA Today. The newspaper was referencing the U.S. Senate’s July 3, 2016 announcement of its intent to switch from BlackBerry smartphones to iPhone and Android versions.

That the federal government was so late to changes in the marketplace requires serious thought now, and as a bipartisan collection of House and Senate members strives to limit Nvidia and AMD from selling advanced chips in China. What happened to Blackberry calls for Washington to adopt a humbler stance.

That’s because buyers are more than buyers. In truth, buyers are our eyes and ears in the marketplace, not to mention that they teach us the value of our products and services based on how they use them.

Looking back at Blackberry’s demise, it’s no reach to say that the federal government as a size customer factored in its eventual decline. At risk of stating the obvious, governments are long on money but short on market feel. No doubt it was challenging (if not impossible) for Blackberry to turn down government business, but it’s possible government as buyer warped Blackberry’s understanding of the marketplace in such a way that Steve Jobs and Apple were able to lead customers to all new needs they didn’t know they had.

Which brings us back to Nvidia and AMD. Senators with last names like Warren, Ricketts, Cotton, Coons, and Graham are using national security as an excuse to try and limit their sales in China. Except that the limits aren’t even good for national security.

Easily forgotten by the senators is that when producers in countries are trading with each other, war becomes frightfully expensive. It recalls the old Otto T. Mallery line “If soldiers are not to cross international boundaries, goods must do so.” If China and the U.S. are to avoid impoverishing military conflict, the best way to do so is to keep trading lanes wide open.

As for the Chinese Communist Party (CCP), it would prefer fewer inflows of advanced U.S. products into China so that there’s a greater incentive among top Chinese companies to build chips that rival those of Nvidia and AMD. Are the U.S. Senators aware they’re doing the CCP’s work for it?

Which then brings us to the implications of export controls themselves. It’s not just that top U.S. chipmakers will lose crucial market share while they’ll gain much more substantial competition from Chinese corporations, it’s that “export controls” are but a high-end way of saying that the U.S. political class will choose Nvidia’s and AMD’s customer bases. Which is a dangerous development. See above.

Even if we look past Blackberry’s gradual then sudden decline at least partially rooted in a customer base not sufficiently in touch with marketplace, we can’t look past the importance of customers themselves. They’re market information personified, they represent crucial knowledge about the products sold to them, and then their long-term success is instrumental in lifting the corporations selling to them.

That both Nvidia and AMD want a Chinese presence is evidence of the market’s importance to their long-term growth. For politicians to then deprive them of the myriad benefits of the Chinese marketplace isn’t just bad for U.S. national security, it robs some of the U.S.’s most important and valuable companies of the market information and customer prosperity necessary for them to thrive over the long term.