Showing posts with label apple. Show all posts
Showing posts with label apple. Show all posts

Saturday, November 19, 2011

Key Man Risk: With Steve Jobs Gone, Apple In A Funk

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From Bloomberg,

Anyone who expects Apple Inc.’s growth to rebound after sales and earnings shortfalls last quarter is “living in denial,” according to David Nelson, chief strategist at Belpointe Asset Management LLC.

As the CHART OF THE DAY shows, shares of the maker of iPhones and iPad tablet computers have trailed the Standard & Poor’s 500 Index and a gauge of S&P 500 technology companies since the company reported fourth-quarter results a month ago.

“This is no longer a hyper-growth company,” Nelson said yesterday in a telephone interview. Apple’s products are now reaching customers who are less likely to upgrade as newer models are released, he added…

Let me first disclose that I have no interest in Apple [AAPL] since I don’t use Apple’s products nor am I a stockholder.

The reason I posted this is to show what in insurance is known as Key Man Risk—the effect of losing one important member of the team.

I have no judgment of Apple except to say that the market currently prices the company as undergoing an uncertain transition process without the presence of the Key Man—Steve Jobs. In short, Apple appears to be suffering from a Key Man Risk.

I think the same Key Man dynamics will apply to Warren Buffett’s Berkshire Hathaway [BRK/A and BRK/B] or to Bill Gates’ Microsoft [MSFT] or to any successful company whose image has been built as an alter ego of the owner-manager.

Nonetheless, I don’t think that the markets has entirely written off Apple, as all will depend on the performance of the current team (owners and managers) in serving the consumers, which should theoretically reflect on the company’s stock prices.

Wednesday, October 26, 2011

Apple Jumps Into the TV Industry

A Steve Job-less Apple won’t be inhibited from their innovative ways, they’re moving into integrating TV with their current line of products.

From Bloomberg,

Apple Inc. (AAPL) is turning to the software engineer who built iTunes to help lead its development of a television set, according to three people with knowledge of the project.

Jeff Robbin, who helped create the iPod in addition to the iTunes media store, is now guiding Apple’s internal development of the new TV effort, said the people, who declined to be identified because his role isn’t public.

Robbin’s involvement is a sign of Apple’s commitment to extending its leadership in smartphones and tablets into the living room. Before his Oct. 5 death, Apple co-founder Steve Jobs told biographer Walter Isaacson that he had “finally cracked” how to build an integrated TV with a simple user interface that would wirelessly synchronize content with Apple’s other devices.

“It will have the simplest user interface you could imagine,” Jobs told Isaacson in the biography “Steve Jobs,” released yesterday by CBS Corp. (CBS)’s Simon & Schuster.

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment. Outside of Jobs’s remarks in the book, Apple hasn’t acknowledged that it’s developing a TV set. And according to one person, it’s not guaranteed that Apple will release a television.

Until now, the company’s TV efforts have been limited to Apple TV, a small $99 gadget that plugs in to a television and gives users access to content from iTunes, Netflix Inc. (NFLX)’s streaming service and YouTube. Jobs had called it Apple’s “hobby,” rather than something designed to be a serious moneymaker.

The relentless pursuit of profits forces producers to earnestly work to satisfy the consumers, partly through innovation. If they fail, then they lose money. It’s a calculated risk for them that comes with no guarantees.

For consumers this means more choices and access to products at lower prices.

That’s the beauty of free markets.

Thursday, October 06, 2011

Celebrating Heroes of Capitalism: Apple's Steve Jobs

Apple's founder Steve Jobs passed away today at age 56.

Although I have not had the opportunity to patronize Apple's marvelous products such as the iPhone wireless handset, iPad tablet or iPod digital music player or MAC or Macintosh computers, I recognize Mr. Steve Job's immense and revolutionary contributions in bringing about transformative technology-based personalized connectivity through his magnificently consumer directed innovative ways.


As the Bloomberg aptly describes
Jobs proved that complex technologies could be designed into simple, beautiful products that people would find irresistible
For Mr. Jobs, the consumer was king. And because of this, Mr. Jobs, through Apple, has been reciprocally rewarded by the markets (see AAPL's chart here).

Mr. Jobs' personal net worth according to the same Bloomberg article was at least $6.7 billion as of September 6, mostly from his Disney (Pixar) stake [$4.4 billion] and from Apple [$2.1 billion].

The following video is a short tribute to Steve Jobs. [hat tip Russ Roberts]



Thank you Steve. RIP.

Monday, March 28, 2011

Social Inequality: The Anatomy of Plutocracy

One of the most popular misimpressions or smear campaign tactics directed against free markets or laissez faire capitalism is that such a system promotes a political order known as plutocracy-or the rule of the wealthy.

This idea either lacks the comprehensive understanding of capitalism or simply operates on the premises of deliberate equivocation (propaganda).

The Consumer Reigns In A Laissez Faire System

In the laissez faire political economic order, it is the consumer that ALWAYS reigns supreme.

Consumers ultimately determine who to reward (by profits) and who to punish (by losses). Thus, the wealthy are those entrepreneurs who manage to continually satisfy the ever dynamic desires of consumers.

As the great Ludwig von Mises wrote, (bold highlights mine)

In the capitalistic society, men become rich — directly as the producer of consumers' goods, or indirectly as the producer of raw materials and semiproduced factors of production — by serving consumers in large numbers. This means that men who become rich in the capitalistic society are serving the people. The capitalistic market economy is a democracy in which every penny constitutes a vote. The wealth of the successful businessman is the result of a consumer plebiscite. Wealth, once acquired, can be preserved only by those who keep on earning it anew by satisfying the wishes of consumers.

In addition, market dominance is neither guaranteed nor in a state of permanence because consumer desires always changes.

Importantly, the highly competitive nature of markets impels entrepreneurs to attain excellence by exploiting windows of entrepreneurial opportunities.

As Professor Israel M. Kirzner writes, (bold highlights mine, italics Prof Kirzner)

What makes possible the entrepreneurially driven process of equilibration is active market competition. It is only the possibility of unrestricted entrepreneurial entry which permits more alert entrepreneurs to deploy their superior vision of the future in order to correct the misallocations of resources reflected in the false prices which characterize disequilibrium. It is the continual threat of such entry which tends to keep incumbent entrepreneurs alert and on their toes.

A good example of such process can be seen from how Apple, the technology behemoth company, has attained its present dominance.

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Apple’s Sphere of Influence From Minyanville.com

Apple’s success wasn’t granted by fiat orders from political leaders but from its numerous attempts to satisfy consumer demands via competition derived innovative consumer friendly technology devices.

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The above is an example of one of the many failed Apple products (chart and the rest of the story from Minyanville). In other words, Apple’s recent string of successes came at the cost of her previous failed experiences or experiments.

I have recently noted on how Mattel, makers of the famous Barbie dolls, has closed shop in China for failing to adapt to local tastes and how Philippine conglomerate Jollibee has captured the largest market share in the Philippine fast food industry by toppling US based counterpart McDonald’s by ingenously configuring her products to the palate of Filipino consumers.

The point is—the political economic order of the rule of the wealthy (plutocracy) would NOT sustainably persist or would unlikely occur under a pure laissez faire system.

State And Crony Capitalism Equals Plutocracy

The apologists for statism, who see Plutocracy as the main source for inequality, hardly realize that for the wealthy to politically sustain its dominance means to adapt ANTI-COMPETITIVE measures by co-opting with the political leaders.

Writes Art Carden (bold highlights mine)

Bourgeois riches come from customer service. Aristocratic riches are expropriated. Aristocracy rests on intrinsic value whereas capitalism rests on the exchange of value for value.

Libertarian William Graham Sumner wrote, (bold highlights mine)

[M]ilitarism, expansion and imperialism will all favor plutocracy. In the first place, war and expansion will favor jobbery, both in the dependencies and at home. In the second place, they will take away the attention of the people from what the plutocrats are doing. In the third place, they will cause large expenditures of the people's money, the return for which will not go into the treasury, but into the hands of a few schemers. In the fourth place, they will call for a large public debt and taxes, and these things especially tend to make men unequal, because any social burdens bear more heavily on the weak than on the strong, and so make the weak weaker and the strong stronger. ("Conquest of the United States by Spain.")

And it has not been different here in Southeast Asia, Joe Studwell writes, (as I earlier quoted here)

Centralized governments that under-regulate competition (in the sense of failing to ensure its presence) and over-regulate market access (through restrictive licensing and non-competitive tendering) guarantee that merchant capitalists-or asset trader, to use a more pejorative term-will rise to the top by arbitraging economic inefficiencies created by politicians. The trend is reinforced in South-east Asia by the widespread presence of what could be called as ‘manipulated democracy’, either in the guise of predetermined winner democracy (Singapore, Malaysia, Suharto’s Indonesia) or else in the scenario where business interest gain so close a control of the political system that they are unaffected by the changes of government that do occur (as in Thailand and the Philippines). In both instances politicians spend huge sums to maintain a grip on power that has some semblance of legitimacy. This can only be financed by through direct political ownership of big business or more usually, contributions from nominally independent big business that is beholden to politicians. Whichever, the mechanism creates a not entirely unhappy dependence of elites between politicians and tycoons.”

If Confucius once said that ‘give the man a fish you feed him for the day, teach him to fish and you feed him the rest of his life’.

From a political standpoint, libertarians and classical liberals advocates on the method that teaches the man how to fish, so as to make him productive to the society.

Whereas for statists, who along with politicians, will naively insist on feeding the man for the day (moment), by picking on someone else's pocket, supported by a legalized coercive framework that are enabled or facilitated by a politically constructed paper money system, which from the account of the entire history of man’s attempt to produce political nirvana has always failed.

Yet such accounts for exactly the Anatomy of Plutocracy.

Any political economic order which depends on political privileges or distribution of resources—endowments, protectionism, subsidies, bailouts, behest loans, economic concessions et. al. represents NOT a laissez faire system but a political system known as STATE CAPITALISM or CORPORATISM or CRONY CAPITALISM. The important difference is that consumers in a laissez faire system represents as real power, whereas politicians signify as the most powerful agents in the state capitalist order.

In today’s setting, the cooptation of the banking cartel-military industrial complex-green industrial-government labor union-welfare state-central banking system (in the US or elsewhere) are representative of PLUTOCRACY IN ACTION!

As the great Milton Friedman said in this lecture,

A society that aims for equality before liberty will end up with neither equality nor liberty. And a society that aims first for liberty, will not end up with equality but will end up with a closer approach to equality.

Bottom line: Statism or government interventionism, which enables or sustains a political economic order of plutocracy, is what engenders social inequality. The more societies politically organize herself towards attaining social equality, the more inequality gets amplified.

Here, noble intentions and economic reality are separated.

Tuesday, June 01, 2010

The Battle For The World's Most Valuable Technology Company

The following chart from New York Times details on the rivalry of Apple and Microsoft in terms of market cap.

Apple recently grabbed the top spot as the "world’s most valuable technology company"...

Interesting comment by the New York Times:

"The rapidly rising value attached to Apple by investors also heralds an important cultural shift: Consumer tastes have overtaken the needs of business as the leading force shaping technology."

This reminds us that consumers ALWAYS play the lead role in determining how resources are allocated. And businesses only compete to satisfy consumer needs or tastes, through innovation or adaption of more efficient processes. Profits and higher market cap are consequences of the success of such pursuit. According to Ludwig von Mises,

``The economic foundation of this bourgeois system is the market economy in which the consumer is sovereign. The consumer, i.e., everybody, determines by his buying or abstention from buying what should be produced, in what quantity and of what quality. The businessmen are forced by the instrumentality of profit and loss to obey the orders of the consumers, Only those enterprises can flourish that supply in the best possible and cheapest way those commodities and services which the buyers are most anxious to acquire. Those who fail to satisfy the public suffer losses and are finally forced to go out of business."

Go to the New York Times site here to see the company milestones accompanying the chart.

However, maybe the rivalry shouldn't be limited to Apple-Microsoft. Perhaps newcomer Google should be part of it.

Google's market cap is currently at $156 billion according to yahoo finance, (chart from bigcharts.com) more than 30% off from Apple's $233.7 billion.

But again, the rewards will depend on who among these companies will satisfy the consumers most.