Mac and (Perceived) Network Externalities

First let me give a brief description of what a “network externality” is from Economic Theory.  Many products benefit from having others use the same or compatible products.  For example, there is no benefit to being the only person in the world with a fax machine, the benefits of having a fax machine depend on having many people own a fax machine and having a compatible standard to send messages between them.  The more people you want to send messages to that have fax machines, the more benefit you receive from the product.  The same could be said for services such as text messaging and instant messaging.

For many years one of the biggest difficulties in owning a Mac vs. a PC was in compatibility.  For example, a majority of the software and hardware devices were not compatible, and thus you had to buy special hardware and software that you could not easily swap with friends.  While previously Mac used SCSI hard drives and RISC processors that were very different from interfaces and processors used by PC’s and thus caused many compatibility issues, the emergence of USB has a universal standard for devices on both PC and Mac as well as the adoption of Intel processors in Macs has lowered these network externalities by making hardware (and subsequently software) much more compatible between the two.

I prefer a PC for many reasons, but the biggest for me is still these network externality reasons.  I use fairly esoteric software that is not widely distributed and built for Macs, mostly for research and statistical analysis.

In a recent conversation with a college student they seemed confused by why there are compatibility issues since “everyone they knew used a Mac.”  They were somewhat astounded to discover that Mac is far less than 10% of the market, roughly 6% as of this writing.  When your peer group is hip college students, Macs may indeed be ubiquitous, but in the real world, especially businesses, PC’s still continue to dominate.  Which brings me to wonder whether this “niche” market of college students perceive high network benefits from their friends owning Macs, and thus assume the network externalities of owning a Mac are greater than a PC.  In their case it may be true for now, but not later when they graduate and enter the real world, or have to run software other than Word, Safari, and instant messenger.

Are we in for (A) a group of very disappointed college graduates in the future, or (B) a change in greater marketplace as students and other artists and hipsters demand more compatibility from their Macs.  Software already exists such as Boot Camp and Parallels for Mac to run Windows applications, but my thought is that if you buy a Mac and still have to buy Windows, something is wrong.  You are not running an alternative system, you are running an additional system.  You are paying for two operating systems, with all the difficulties and problems of both.