Why the New iPhone Risks Becoming New Coke

You've probably been thinking to yourself, "Gee, I wish I couldn't charge my phone while also listening to music." Or perhaps, "Gosh, if only my headphones were more expensive, easier to lose and required frequent charging." If so, you're in luck. Apple's newest iPhone, unveiled on Wednesday, lacks the familiar 3.5-millimeter headphone jack. You can listen to music through the same lightning jack that you charge the phone with, or you can shell out for wireless headphones. The internets have been … unpleased with this news. To be fair, there are design reasons for doing this. As David Pogue writes, the old-fashioned jack is an ancient piece of technology. It's been around for more than 50 years. "As a result," says Pogue, "it's bulky — and in a phone, bulk = death." Getting rid of this ancient titan will make for a thinner phone or leave room for a bigger battery. Taking a hole out of the phone also makes it easier to waterproof. And getting rid of the jack removes a possible point of failure, since friction isn't good for parts. For people who place a high value on a thin phone, this is probably a good move; they'll switch to wireless earbuds or use the lightning jack. But there are those of us who have never dropped our phones in the sink. We replace our iPhones when the battery dies, an event that tends to occur long before the headphone jack breaks. There are people in the world who take their phones on long trips, requiring them to charge them while making work calls, and they won't want to fumble around for splitters or adapters. Some of us do not care whether our phone is merely fashionably slender or outright anorexic. For these groups, Apple's move represents a trivial gain for a large loss: the vital commodity that economists call option value. Option value is basically what it sounds like. The option to do something is worth having, even if you never actually do it. That's because it increases the range of possibility, and some of those possibilities may be better than your current alternatives. My favorite example of option value is the famous economist who told me that he had tried to argue his wife into always ordering an extra entree, one they hadn't tried before, when they got Chinese takeout. Sure, that extra entree cost them money. And sure, they might not like it. But that entree had option value embedded in it: They might discover that they like the new entree even better than the things they usually ordered, and thereby move the whole family up to a higher valued use of their Chinese food dollars. (His wife, as I recall, never embraced this philosophy. But in my household, when we get Chinese takeout, we often order an extra entree in memory of this brilliant discovery.) Option value can make a big difference to businesses. Consider the debacletacular replacement of original Coca-Cola (possibly known to you youngsters as "Coke Classic") with New Coke. Coke was losing market share to diet colas, and to Pepsi, which was sweeter, which people seemed to prefer in taste tests. So Coke developed a modern formula that did well in focus groups. Oh, sure, there were a few holdouts who liked the old stuff better, but the overwhelming majority liked the new flavor. In 1985, the company retired its stalwart and replaced it with a fresh new face. Customers went ballistic. The company was inundated with complaints. Within a matter of months, the old formula was back on the shelves as Coca-Cola Classic. And then a funny thing happened: The old formula not only did better than New Coke, it started beating Pepsi. Losing the option value of having the familiar beverage available reminded people of why they had liked it -- and they started using that option more often. Apple may end up facing a similar dilemma. Even if the number of people who are attached to their headphone jacks is small, there's a risk that those folks are really, really attached -- much more passionate about it than people who would kinda like to have a thinner phone. And losing that option may remind others what they liked about having a headphone jack available, even if they weren't using it that much. If those people can't get a headphone jack from Apple, they may decide to look for a phone that can provide it. Unfortunately for Apple, it takes a lot longer to design and produce a new phone model than it does to change a bottling plant back to a tried-and-true recipe. If this goes wrong, Apple's customers won't be the only people who wish they had better options. -- Megan McArdle is a columnist for Bloomberg View

Why the New iPhone Risks Becoming New Coke

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