BY DAN MITCHELL

Here's a thought to wrap your head around: Information technology companies don't compete in markets; they compete for markets.

The basic idea is this: Incredible pressures drive the technology world toward standards. So whichever company can become the leader in a market should eventually win just about all of it—a la Microsoft and Intel—and not just the 20% or 30%-share that might be the case in other industries. You don't get a share of a high-tech market; over time, you end up with almost all or almost nothing.

The odd dynamics of technology explain why Apple Computer fell so hard, so fast, as described in tragic detail in "Apple: The Inside Story of Intrigue, Egomania and Business Blunders," by Wall Street Journal reporter Jim Carlton. It's a tale worth understanding for anyone making decisions about which technologies will be important in the future.

Are standards inevitable? Yes. Buyers drive technology toward a single standard because it's far easier to support and service one type of computer, one type of software package, one type of network, and so on, than to manage two or 10. It's also much simpler to communicate if everyone has the same software. Software suppliers drive toward standards because of economies of scale. The first copy of a piece of software may cost tens of millions of dollars, but the second costs almost nothing.

Buyers also force the technology world toward "openness." While every supplier of technology claims to be "open"—openness being the high-tech equivalent of motherhood and apple pie—purchasers mainly insist that there be open enough competition to keep prices down.

In the face of these powerful trends, Apple fell apart because greed, ego, and pettiness kept it from recognizing them and reacting. Apple convinced itself that its elegant technology would let it compete in a market and hold onto a respectable share of the customers for personal computers. Apple also couldn't seem to wean itself from the premiums it could charge for its proprietary technology, even though it should have realized that Microsoft's more open approach would eventually win. Apple's small market share and high prices meant that it was not only not standard but also not open. So Apple has gone from pioneering the PC market to holding a 3% share—and slipping.

Mr. Carlton's big revelation is that Apple could have saved itself if only it had listened to, of all people, Bill Gates. In a letter dated June 25, 1985, Mr. Gates advised then-Apple Chairman John Sculley to license the Macintosh operating system to outsiders. Mr. Gates was five years from making Windows a success, and he saw the opportunity for Apple to greatly expand the market for PCs by making Macs more widely available. Mr. Gates would have benefited because Microsoft dominated the market for applications software on the Mac. Apple would have cannibalized its markets in the short term but would have won in the long term because its technology was so far ahead that it, not Microsoft, would have dominated the PC operating system world.

As happened throughout Apple's history, however, Mr. Sculley couldn't bring himself to do the right thing.

While that failure to create a standard was Apple's biggest mistake, there was no shortage of others-and Mr. Carlton chronicles them all. Eventually, there is too much detail. At 442 pages, this is a long book. Sometime during all the late-' 80s intrigue, it becomes difficult to keep all the players straight. Apple also gets so many projects going that it's hard to keep tabs on which brilliant-but-indecisive managers and engineers are linked to which brilliant-but-doomed projects.

The outlook from here? If you believe in standards, things can only get worse for Apple. Remember the Commodore Amiga? Come to think of it, that elegant machine is so completely gone that you probably don't.

Dan Mitchell is a writer for Red Herring Online. He can be reached at www.redherring.com.