Tuesday, November 10, 2009

Waxing intellectual on Apple's future

Lately, there has been talk about Apple's upward motion and momentum and the possibility of them overtaking Microsoft in the quest to reign supreme in the tech world. There are more and more articles cropping up so I figured I'd smear my pseudo-intellectual feces across the digital landscape as well.

I can see the monetary value of the company overtaking Microsoft fairly easily, but that's only if the market share does not. These companies, just like most things in life, grow too quickly and end up getting bloated and overvalued. The rarity and scarcity of Apple products (usually due to their price points) keep the value high. They are elusive and fancy and innovative and the demand for them is particular and higher than the supply flying off the shelves. This makes them a hot ticket item as a company and therefore, worth more.

Apple is famous for 2 things as a company - their marketing and their innovation and on a smaller scale, their secrecy. Simplistic packaging designs and sleek looks make them intriguing and sexy and there's usually some killer app that makes it a "must have." The fact that it's a "can't have" for most people is awesome for them in value. Flooding the market with Apple products will devalue each product. Innovation drives sales, sales drive value. More sales equal lower value. Think of the Internet bubble. The price keeps going up because everyone wants into what seems like a good thing. The price ends up having no relationship to the value of the company. As soon as someone heads for the exit, everyone else scrambles. The average Joe (not the plumber) ends up holding Herman. Not to mention that, economically speaking, the law of diminishing return wants us to keep apples off the plates of hungry consumers. I don't know if you know that law but here's an example - you love a good Filet Mignon right? Eat it 30 days in a row. Same satisfaction on day 30 as on day 1?

Apple and I get along so well because we're both very ADD in our approach to things. We get into it, do it over and over, get to a decent point and then stop. It's a rate of return thing. The first year you took on a new hobby, your skills were improved dramatically and then more slowly as time went on. Growing in leaps and bounds spurs innovation whereas hitting the plateau is de-motivational. They end up with lots of half started stuff but because of their secrecy... it's easy for those ideas to never come through to fruition; nobody knows, nobody is disappointed but the uber geeks that watch the WWDC live (like me). Now... they grow and overtake things, they'll have the same amount of irons in the fire and complete more of them. Apple has always been a niche company. Even with its growing market share, it's still a niche. It's like a Mercedes-Benz. Your car dies, you need a vehicle you get a vehicle. You're not gonna leave a Dodge or Saturn dealership to see what Mercedes-Benz has to offer. You buy the Benz because you want a Benz. The salesman there do next to nothing. Either you want it or you don't. You have a reason or you don't. All the flashy graphics and glossy screens in the world won't make Apple buyers out of standard users (with shallow pockets). But make Apple accessible to everybody. Lower the PPU (price per unit) and shove them down everybody's throat and John Q. Consumer has no choice but to get it. Why is it cool then? Where is the elite feeling? Where's that control of the status quo? It's all gone and they're just another computer.

I don't see this flooding happening and I think that's by choice. People sell many units to make money. Apple is already doing that. The secret of their success applies to their business model across all products. They control the hardware AND the software. You don't get Sony, Dell, Gateway, etc trying to stuff more shit into a PC, slap an OS on it and make it look more appealing than its competitor's version. It's made by Apple, for Apple and there's no compatibility or interconnectivity issues and you retain the exclusivity of making your limited customer "part of the club." And customers pay a premium for that status.

MP3 players got huge and Creative Labs got in on it, as did every other schmoe out there. An iPod is an MP3 player, but nobody calls it that. It's just an iPod. Now when you talk about mobile music you just say iPod if you don't know what the person owns. It's become the Xerox/Kleenex/Rollerblade of portable music. A brand that stands for an entire industry's worth of a single product.

Steve Jobs got thrown out of Apple on his ASS and was gone for years. He started another company and made it appealing to Apple. Apple bought it and he rode that deal back into his own company from which he had been ousted and look at him today. Back on top. Motherfucker, please. This guy is not stupid. He's a marketing genius. Look at how he's marketed himself. Broke loser hoping for Bill Gates' table scraps 15 years ago is now back in power in one of the most profitable companies in the world and Gates is long done with MS. Jobs has had plenty of opportunity to use Apple's innovation to take them to the next level but why? The business of business is business. He's there to make money. He does exactly that by making cool shit on a smaller, carefully planned level. He controls the supply of everything since it's all done in house and he feeds us one little nibble at a time at a premium to the point that we forget what we're paying and we're just thankful the lord of the manor has allowed us his drippings.

So that's why I think the monetary value of Apple will increase and overtake Microsoft but the market share never can. The last 2 reasons for that is that 1) MS scored with windows 7. They took us from XP which rocked to Vista which was an unpolished turd and then made themselves the saviors of their own flop with 7 (hell, it's got MY eye). I half wonder if it wasn't a planned failure - Vista that is. They did it before with Millenium; that's no secret. They're back on top in the novelty world with wide-eyed geeks drooling over the cool factor and will stay there unless Apple steps up it's game on the computer side of the house; and 2) Apple can't live in the enterprise any more than crabs can live on a bald pussy. They don't have the foothold in that terrain. Windows dominates client services and linux/unix (true command line style) with it's low overhead has the server side processing and cloud computing angles covered. Apple never wanted the enterprise and I can't imagine they do even today (Except to maybe put iPhones in the hands of CEOs).

There's a method to Apple's madness and I think it's very carefully controlled by Steve Jobs. He's not looking for checkmate vs Windows. In the arena that he plays, he's already got it.

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