Nicholas Negroponte has a great idea.  He has built inexpensive laptops for use in third world countries.  They are durable and user-friendly.  And best of all, he wants to give them to the kids of third world countries.  He argues (convincingly) that if they use laptops that they will have incentives to learn to read (perhaps even a program for these computers teaching kids how to read could made), they will be able to teach themselves more information and that having a laptop will give them needed computer skills to compete the in the 21st century world.  I think that this is an absolutely brilliant idea with the potential help a generation rise up out of poverty.

This issue has been kind of on the fringes of my awareness for a few months now, however it gained by direct attention last night when I flipped to 60 minutes (a program I do not usually watch).  Half of the news story on Negroponte was him whining that Intel is trying to put him out of business with a similar product.  He seems to want an international body to prevent Intel from selling their products abroad.  I just am failing to understand why.

Firstly, if Intel makes their product and it is better than Negroponte’s (and sells better), even if Intel is taking it at a loss, then Intel deserves to win all the business and Negroponte’s computer doesn’t deserve to be used in third world countries.  However, Negroponte should remake his product so it can better compete with Intel’s.  This competition allows good products to become great.  This idea is widely accepted almost everywhere in business.

Some argue though that Intel’s taking a loss on their Classmate, would be unfair since they can easily absorb the costs without going out of business.  Then, they say, Intel can gain complete control over this market and charge what ever they like.  A couple of things on this…  Firstly, even if Intel did control the entire third-world computing market, they wouldn’t be able to charge what ever they like for the product.  It wouldn’t be profitable because the countries couldn’t afford to buy that many laptops.  Secondly, if this market is profitable, more business are going to want a share.  So Intel will have to compete with other businesses just as Negroponte and his computer had to compete with Intel to begin with.  Bottomline, talk of limiting businesses in such an evasive manner just is unacceptable.

But this really goes deeper than all of that.  The issue here is really about the free market.  Should the market be free or should it be constrained so the worst product is the only one allowed.  Sure, Negroponte’s product is good, but, whose is to say that Intel’s isn’t better.

Also, economic liberals seem to have picked up on the small business issue (nevermind that their taxes drive small business away everyday).  They want a world where only small business are allowed.  While certainly small business are important to any economy, so are large businesses.  You can’t just have one; they both are important.  But there is another hole in this argument as well.  What happens when a small business becomes big after consumers favor it’s products (or services).  Should the business then be not allowed?

Going back to that taking things at a loss thing: Microsoft took all Xboxs at a loss (of about $50 per console) for the first couple of years.  Did Microsoft drive the competition into the ground?  No, by taking the products at a loss, they were able to successfully push their product in to the market and make a late product successful.  Clearly, this stragety isn’t necessarily bad for the consumer.