The open-source software community is simply too turbulent to focus its tests and maintain its criteria over an extended duration, and that is a prerequisite to evolving highly original things. There is only one iPhone, but there are hundreds of Linux releases. A closed-software team is a human construction that can tie down enough variables so that software becomes just a little more like a hardware chip—and note that chips, the most encapsulated objects made by humans, get better and better following an exponential pattern of improvement known as Moore’s law.
So let's just look at those statements for a start, shall we?
There is only one iPhone, but there are hundreds of Linux releases.
There's only one iPhone because the business of negotiating with the oligopolistic wireless companies is something that requires huge resources and deep, feral cunning possessed only by unpleasantly aggressive business executives. It has nothing to do with being closed. There are hundreds of GNU/Linux distributions because there are even more different kinds of individuals, who want to do things their way, not Steve's way. But the main, highly-focussed development takes place in the one kernel, with two desktop environments - the rest is just presentation, and has nothing to do with dissipation of effort, as implied by the above juxtaposition.
chips, the most encapsulated objects made by humans, get better and better following an exponential pattern of improvement known as Moore’s law
Chips do not get better because they are closed, they get better because the basic manufacturing processes get better, and those could just as easily be applied to open source chips - the design is irrelevant.
The iPhone is just one of three exhibits that are meant to demonstrate the clear superiority of the closed-source approach. Another is Adobe Flash - no, seriously: what most sensible people would regard as a virus is cited as one of "the more sophisticated examples of code". And what does Flash do for us? Correct: it destroys the very fabric of the Web by turning everything into opaque, URL-less streams of pixels.
The other example is "the page-rank algorithms in the top search engines", which presumably means Google, since it now has nearly two-thirds of the search market, and the page-rank algorithms of Microsoft's search engine are hardly being praised to the sky.
But what do we notice about Google? That it is built almost entirely on the foundation of open source; that its business model - its innovative business model - would not work without open source; that it simply would not exist without open source. And yes, Yahoo also uses huge amounts of open source. No, Microsoft doesn't, but maybe it's not exactly disinterested in its choice of software infrastructure.
Moreover, practically every single, innovative, Web 2.0-y start-up depends on open source. Open source - the LAMP stack, principally - is innovating by virtue of its economics, which make all these new applications possible.
And even if you argue that this is not "real" innovation - whatever that means - could I direct your attention to a certain technology known colloquially as the Internet? The basic TCP/IP protocols? All open. The Web's HTTP and HTML? All open. BIND? Open source. Sendmail? Open source. Apache? Open source. Firefox, initiated in part because Microsoft had not done anything innovative with Internet Explorer 6 for half a decade? Open source.
But there again, for some people maybe the Internet isn't innovative enough compared to Adobe's Flash technology.
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