Mar 182001

The defacto standard is an in fact public standard that the market mechanism has selected, while such a standard is called the dejure standard that becomes widespread because of formal approval by a public standards organization.

1. Interdependence of selection

The classic examples of defacto standards are VHS of VTR, Windows OS of PC etc. I will explore in reference to them what conditions are necessary for a certain standard to be the defacto standard.

A defacto standard is autopoiesis that spreads because it has spread. Agents’ selection must be interdependent to give effect to this positive feedback.

In the case of VTR, users have to buy the videocassette recorder that can play back the majority videotapes in a video rental store. In the case of PC as well, users have to buy the majority OS, so as to exchange data with the others.

If it is not certain which standard wins a majority, you will hesitate to judge because of the interdependence, where your selection depends on the others’ selection and their selection depends on the selection by their others including you. But once it gets certain, all rush to the majority so as not to be losers and the majority standard as the defacto standard quickly locks in the users.

In the absence of this interdependent relation, you cannot expect the external economy that a defacto standard brings about. You do not have to buy at the online mall again, where you once bought or your friends bought. During the swelling process of the bubble economy that attained the peak in March 2000, many dotcom companies invested too much to establish the defacto standards, believing in the law of increasing returns in the New Economy. The result was miserable.

What standard can be a defacto standard in the relation of interdependent selection, then?

2. Two common sense requisites

Common sense tells you that superior or pioneer standards are advantageous. But these are actually not so important conditions.

Betamax, the VTR that Sony proposed in 1969, had 1 hour long recording time, while VHS, the VTR that JVC proposed 7 years later, had 2 hour long. Moreover, VHS was 5kg lighter than Betamax. But as the image quality of Betamax was higher than that of VHS, it was a well-matched game in respect of performance.

A blank Betamax casette next to a blank VHS cassette for size comparison. A betamax cassette is smaller than a VHS cassette.

In the case of PC, Microsoft was not the pioneer in the development of OS either. The first OS for PC in the world was CP/M developed by Digital Research in 1973 and it was after 8 years that Microsoft provided MS-DOS1.0 for IBM. The first PC with GUI in the world was Lisa, the antecedent of Macintosh. Windows1.0 that Microsoft developed 2 years later was not only delayed but also inferior to Macintosh.

3. Two actual requistes

If VHS and Windows OS were neither pioneer nor excellent, how could them get the defacto standards? Two factors were important:

  1. JVC succeeded in persuading the strongest rival of Sony, Matsushita, which had the greatest own retail network in Japan. It reminds us that Microsoft succeeded in providing Windows OS for IBM, the largest computer company and the rival of Apple. Recently IBM has endeavored to promote Linux. As IBM is no longer the giants of the industry, it is quite uncertain whether Linux can be the next defacto standard.

  2. While Sony wanted to hold onto all rights to it, JVC opened and lent their trial model to the other companies, without making it a secret. It enabled other companies to participate in improving VHS, for example, Sharp added front loading system, Mitsubishi Electric fast forward function and so on. It reminds us that Microsoft outsourced hardware, while Apple persisted in its own making, and Linux opened its source code.

To sum up, you must first persuade the possessor of sufficient capital and second throw away secretiveness, spreading the network of outsourcing so as to make a standard lock in the market.

Sufficient economic capital of issuer is necessary for a currency to circulate and sufficient cultural capital of users is necessary for a language to circulate. Although a defacto standard does not depend on the public power by definition, it usually depends on the economic and cultural (brand) capital of the private power instead. Once they get to circulate, circulation causes further circulation and the private power like IBM that used to support the defacto standard, cannot stop this circulation.

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