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

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.

Was Steve Jobs a “Tweaker”?

The real genius of Steve Jobs was about his tweaking, that’s according to the perceptive author Malcolm Gladwell in his latest article at the New Yorker,

The visionary starts with a clean sheet of paper, and re-imagines the world. The tweaker inherits things as they are, and has to push and pull them toward some more nearly perfect solution. That is not a lesser task.

Read the rest here

Steve Jobs to President Obama: Only a One Term Presidency

Steve Jobs reportedly told President Obama that the latter would only hold on the US presidency for only one term

The Huffington Post writes,

In one of the most hotly-anticipated biographies of the year, "Steve Jobs," author Walter Isaacson reveals that the Apple CEO offered to design political ads for President Obama's 2012 campaign despite being highly critical of the administration's policies and that Jobs refused potentially life-saving surgery on his pancreatic cancer because he felt it was too invasive. Nine months later, he got the operation but it was too late.

Those are just some of the tidbits about Jobs' life revealed in the upcoming biography, a copy of which was obtained by The Huffington Post…

Jobs, who was known for his prickly, stubborn personality, almost missed meeting President Obama in the fall of 2010 because he insisted that the president personally ask him for a meeting. Though his wife told him that Obama "was really psyched to meet with you," Jobs insisted on the personal invitation, and the standoff lasted for five days. When he finally relented and they met at the Westin San Francisco Airport, Jobs was characteristically blunt. He seemed to have transformed from a liberal into a conservative.

"You're headed for a one-term presidency," he told Obama at the start of their meeting, insisting that the administration needed to be more business-friendly. As an example, Jobs described the ease with which companies can build factories in China compared to the United States, where "regulations and unnecessary costs" make it difficult for them.

Quote of the Day: Charity of the Markets

it is impossible to assess Mr. Jobs’s philanthropic legacy without discussing how Apple’s technology has changed the way nonprofits operate.

Devices like the iPhone and iPad have helped many organizations communicate more efficiently. They have allowed groups to improve the way they respond to disasters, communicate with supporters, and carry out their day-to-day work.

From Peter Panepento of the Philanthropy.com (hat tip Jeff Tucker).

Mr. Jobs’s philanthropic legacy can be seen from the largely 'unseen' factors, i.e. the consumer surpluses, wealth creation and in making people's lives significantly better.

Video: Steve Jobs on Education, Life and Death

Steve Jobs shares his life's lessons in this stirring commencement address at the Stanford University in 2005 (hat tip Bob Wenzel)



Transcript here

Some noteworthy passages (bold emphasis mine)

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting...

Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life...

I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle...

No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

Quote of the Day: Legacy

It's one thing to miss someone, to feel a void when they're gone. It's another to do something with their legacy, to honor them through your actions.

That’s from marketing guru Seth Godin’s eulogy for Steve Jobs. Read the rest here

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.