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BlackBerry: When the Tech World Met Wall Street

The new film charts the conflict between making a good product and
pleasing investors.

A decade ago, the BlackBerry phone was a ubiquitous appendage in any
power center, from corporate boardrooms to the halls of Congress. Barack
Obama famously used a BlackBerry throughout his presidency
<[link removed]>,
even long after the phone's mass popularity had waned. The
"Crackberry," as it was dubbed, became the status symbol of the era,
projecting a new image of a workaholic and information-obsessed elite
always emailing, texting, and "connecting," at all hours, day and night.

Then, as soon as it revolutionized the cellphone market, the BlackBerry
was eradicated from the commercial landscape by Apple's iPhone. The
company went from a nearly 50 percent market share at its peak in 2008,
to near zero (save Obama) only a few years later.

The new film BlackBerry <[link removed]> charts
the rise and fall of the once-dominant tech company, and how it lost out
to Apple. It's one of several brand-centric films that have come out
this year, a genre that Hollywood seems particularly enthralled with at
the moment. Many of them appear to be acting as thinly veiled
promotional campaigns. There's Ben Affleck's new movie Air
<[link removed]> about Nike's successful
signing of Michael Jordan and producing his wildly popular sneakers,
which recently sold to Amazon Prime; Apple TV produced the Tetris
<[link removed]> movie released earlier this
year; and Jerry Seinfeld is making a film about ... Pop-Tarts
<[link removed]>.

The BlackBerry movie, for the most part, avoids the pitfalls of the
genre, which all too often presents either hagiographic or sociopathic
portraits
<[link removed]> of
the genius founder triumphing over the market, especially when it comes
to the tech industry. The procession of biopics about Steve Jobs
<[link removed]> after his death and **The Social
Network**'s <[link removed]> portrayal of Mark
Zuckerberg are prime examples of the former; The Dropout
<[link removed]> (about Elizabeth Holmes) or
WeCrashed <[link removed]> (about Adam Neumann)
TV shows, examples of the latter.

Instead, BlackBerry presents a uniquely incisive look at the political
economy of the 2000s, and how it shaped the arms race among tech firms
to develop the smartphone. That period not only killed off BlackBerry
but also two consumer electronics giants of the 20th century, Nokia and
Motorola, and led to the rise of one of today's most powerful
corporations, Apple.

The film tells the story of BlackBerry's co-CEOs Jim Balsillie (Glenn
Howerton) and Mike Lazaridis (Jay Baruchel), who embody the dissonance
between Wall Street financialization and the early ethos of Silicon
Valley. As it turns out, this culture clash also makes for a great
comedic duo.

**** Today, tech firms have become synonymous with Wall Street, often
concerned more with their stock valuations than new products. That trend
is aptly embodied by Apple, which hasn't developed any truly novel
device since Tim Cook took over in 2011. But in the early years of the
tech revolution, many pioneering engineers in the Valley were wary of
finance's short-term returns model, which they saw as anathema to
innovation.

The film's plot captures how the fusing of these conflicting business
interests was resolved inside BlackBerry and eventually honed by Apple.

Directed by the Canadian actor and filmmaker Matthew Johnson, the film
loosely adapts a 2015 book about the decline of BlackBerry called

**Losing the Signal**. The authors Jacquie McNish and Sean Silcoff have
lauded the film for its general accuracy, though of course embellished
and simplified for dramatic effect.

After getting fired from his investment banking job for advising clients
to commit tax fraud, Balsillie joins Research in Motion (BlackBerry's
parent company), which at the time was a fledgling startup with piles of
debt working out of a tiny office space in Waterloo, Ontario. Founders
Lazaridis and Douglas Fregin (Johnson, the director) epitomize the 1990s
tech-utopian spirit: idealistic, disheveled-looking engineers and

**Star Wars** nerds. Balsillie, always in a suit, is high-tempered and
returns-driven, a man of Wall Street.

Lazaridis brings Balsillie on board to sort out the company's
finances, but immediately comes into conflict with his management style.
Balsillie is set on squashing the company's startup culture and
turning it into a high-efficiency corporate enterprise to court
investors. He is only concerned with getting a product to market and
goosing stock prices, while the founders are meticulous and obsessive
about creating a high-value product that will revolutionize
communications.

The financial stakes only heighten when BlackBerry faces the threat of a
hostile takeover, which requires the company to focus obsessively on
keeping its stock price valuation high enough to stave off a sale to
outside investors.

Another flashpoint in this tension plays out over whether to move
BlackBerry's manufacturing to China. Balsillie insists outsourcing to
China will lower costs and allow the company to boost sales, but
Lazaridis, the head of product development, refuses because he believes
it will worsen the cellphone's quality. Throughout the film, Lazaridis
neurotically fixates on a high-pitched humming noise emanating from all
kinds of electronics manufactured in China, which he bemoans as
representing the "emptiness" of modern consumerism.

As the BlackBerry begins to dominate the cellphone market, Balsillie's
business strategy wins out and refashions the company to Wall Street's
liking. Lazaridis eventually turns into a company man and a convert to
Balsillie's obsession with returns, leaving his business partner
Fregin as the only holdout defending the original startup spirit. In the
corporate world, it's a tale as old as time, though a potent one.

[link removed]

**** The subtext of the film captures how competition between firms is
mediated by contracts and other agreements, shaped by government
policies rather than the nature of the market.

Trade is one arena where this takes place. The iPhone certainly
conquered the smartphone market because of its unique product features
and design. But over the past decade, Apple also undeniably gained an
advantage by setting up shop in China and mastering global supply chains
as they'd been organized by decades of U.S. trade policies. BlackBerry
took a hit by abstaining, while other smartphone makers didn't refine
their supply lines as effectively.

In the film, the main battleground between BlackBerry and Apple is their
business partnerships with the telecommunications monopolies, which
control access to the market. Apple notoriously deferred entering the
smartphone market for years because the company didn't want to deal
with the slow and sclerotic carriers, which Steve Jobs called the "four
orifices."

BlackBerry and Apple first had to convince the telecom giants that it
was worth making the investments to upgrade their infrastructure in
order to carry smartphones without the servers crashing from data
overloads. The film accurately conveys that the large carriers, like
AT&T and Verizon, really were the primary business clients that the
smartphone makers competed over. Consumers came second.

The telecom carriers also put their thumbs on the scale during the
smartphone arms race, both collecting rebates from the cellphone makers
and also periodically discounting certain products to increase their
sales. Even if the phone makers took losses in the short term, sales
needed to continually increase for the carriers to justify making
investments and ensure more smartphone users could access the network
without it crashing.

The carriers were important middlemen in determining the playing field
for competition between BlackBerry and the iPhone. Though the iPhone
very well might have won out anyway, the rebates and discounts collected
by the carriers distorted markets and caused inefficiencies for all tech
players involved.

The BlackBerry movie perhaps unwittingly conveys a key dictum of the
neo-Brandeisian school of anti-monopoly thought: that market competition
isn't just a natural phenomenon, but structured by laws and other
policies.

Also, it's funny.

~ LUKE GOLDSTEIN, WRITING FELLOW

Follow Luke Goldstein on Twitter <[link removed]>

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