Selling products as loss leaders is not some absurd esoteric strategy, and it was quite normal for consoles to be subsidized with that exact goal. They needed systems affordable enough to get into homes, otherwise there's no user base. No user base means no opportunity for game sales. No game sales, and it ends up as the Dreamcast.

So it starts to sound like their big mistake was ever allowing Linux and general computing to begin with? Sony were the only ones doing that even while the competition was an actual x86 machine running some form of Windows. Users still had to buy a PC to use office.

Companies (and governments) saw an opportunity for cheap computers that outperformed traditional servers and took advantage of it. Now no one gets Linux.