The First Five Years of the iPhone Obsession

Taking stock of the iPhone’s impact on business and culture on the anniversary of its debut

The First Five Years of the iPhone Obsession
IPhones sold: 217 million and counting
Photograph by Caleb Charland for Bloomberg Businessweek

On June 29, 2007, the first iPhone went on sale. The Apple device benefited from breathless advance buzz but also had its skeptics: It cost $600 and had no physical keyboard, limited e-mail options, and no copy-and-paste. In hindsight, it was clearly dumb to bet against Steve Jobs & Co. Apple has since sold more than 217 million iPhones worldwide and sparked a commercial, cultural, and—most surprising—behavioral revolution. According to a study of medical workers at the Baystate Medical Center in Springfield, Mass., 76 percent say they’ve experienced “phantom vibration,” that insistent buzz from an imagined text or phone call. Scientists speculate it’s the result of random nerves firing, biochemical noise that our brains easily tuned out until they were reconditioned by the iPhone.

“The iPhone has changed everything about how we relate to technology, for both good and bad,” says Larry Rosen, a psychologist, professor, and author of iDisorder: Understanding Our Obsession with Technology and Overcoming Its Hold on Us. According to his research, nearly 30 percent of people born after 1980 feel anxious if they can’t check Facebook every few minutes. Others repeatedly pat their pockets to make sure their smartphone is still there. Indulging those tiny, persistent urges brings us only a brief respite. “The relief is not pleasurable,” says Rosen. “That’s the sign of an obsession.”

Obsessions aren’t all bad for everyone, and this one has been profoundly good for Apple and its partners. The Cupertino (Calif.) company’s annual revenues climbed from $24 billion in 2007 to $108 billion last year; its stock price is up almost 400 percent over the same period. Samsung, Foxconn, AT&T, and other partners have all enjoyed some of the windfall. Apple has paid out more than $5 billion to app developers and created a mobile marketplace that enables a startup like Instagram to go from zero to a $1 billion valuation in 18 months. Even though the pie is growing, some have been squeezed out: In the quarter the iPhone was introduced, Nokia and Research In Motion earned a collective $2.7 billion on their handsets. Now RIM is exploring strategic options with bankers, and Nokia recently announced another round of layoffs.

The App Store’s 650,000 offerings help people massage Excel data on the go, monitor their blood sugar, and entertain their kids. More subtly, the iPhone’s tremendous commercial success has made “user-centered design” a buzz phrase in business. Before the iPhone, most tech products were designed to appeal to the engineers who made them and cost-conscious IT managers. The first iPhone arrived with a “manual” that ran only a few pages. Its Jobsian focus on beauty and simplicity has influenced countless products and services, from Jawbone’s minimalist audio gear to Dropbox’s easy file-sharing.

Until now, the cost side of the iPhone equation hasn’t received much attention. That’s starting to change. The latest iPhone-inspired cottage industry has nothing to do with old-timey photo filters but books that examine the device’s biological and societal impact. In addition to Rosen’s iDisorder, there’s Gregory Jantz’s #Hooked: The Pitfalls of Media, Technology, and Social Networking and James Steyer’s Talking Back to Facebook. While much of these authors’ concern focuses on social media, the smartphone is what lets people stay constantly connected. “The great thing about the iPhone is that we carry it with us all day long,” says Rosen. “The bad part is that we carry it with us all day long.”

That makes people lab rats in a real-time psychological experiment that’s altering behavior at lightning speed. Centuries after Gutenberg invented the printing press, literacy remained a rarity. By 2016, Cisco Systems expects there to be more mobile devices than people. Thanks to the ubiquity of smartphones, many museum-goers “skip the step of actually looking at the artwork and move straight to photographing,” says Elizabeth Broun, director of the Smithsonian American Art Museum in Washington. Storm-chasers have been emboldened by mobile weather maps and are a scourge to rural police departments, who must deal with their arrival during general evacuations, says technology historian Edward Tenner. For every feel-good story about an autistic child lighting up at the sight of a new app, there’s a story like that of actor Alec Baldwin getting kicked off an American Airlines flight for refusing to quit his Words With Friends game.

The big question: Is the iPhone a “bicycle for the mind,” as the late Steve Jobs said about the first Mac, or a crutch that does too much of our thinking for us and increasingly takes the place of real human connections? The answer may clarify as the devices get more powerful and more intrusive. Future generations of the iPhone “will gently nudge you to help you do the things you want to do,” says Bob Borchers, a venture capitalist with Opus Capital who used to run iPhone marketing for Apple. “Why couldn’t the phone know that I want to be more fit, so the next time I have 15 minutes of spare time, Siri could say, ‘Do you want me to set aside this time for you to work out?’”

Whether that vision inspires you or creeps you out, there’s one very big check on the revolution wrought by the iPhone: The capped data plan. Phone companies have been ditching all-you-can-eat plans and forcing users to pay for bandwidth as they go. Sanford C. Bernstein analyst Craig Moffett says that in the first quarter 2012, AT&T wrote bigger checks for Apple—$3 billion worth—than it did for investments on its own network. In the end, we may not be the ones to decide the costs of detox.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE