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I think you're arguing two different points here, though. Yes, Nintendo fans should give up the idea of Nintendo participating in a self-destructive arms race with Sony and Microsoft. But, no, they shouldn't be ashamed of an under-powered system. Look what Wii was able to accomplish, or DS, or 3DS for that matter.

When Nintendo tries to appeal to hardcore gamers and make concessions to third-parties, as it did with GCN and WiiU, it fails.