Skip to main content

Apple Was Steve Jobs

I recently read with a chuckle that Apple was making a $1B investment in a Chinese company that is a version of Uber in China.  For a while now I’ve been saying that it is odd that a technology company, that is dependent upon constantly being cool and hip and relevant, is the most highly valued company on earth.  By definition, what is hip and cool must always change, and what was once hip and cool is absolutely guaranteed to not be that forever.  That is the nature of “hip and cool.”

Whenever I make this point and apply to Apple and its lofty valuation, which to me defies logic, the pushback I often hear involves pointing at Apple’s enormous (and still mostly untaxed) cash horde, which would seem to make them very strong and valuable.  However, I’ve seen many companies with huge cash hordes and have bought the stock of one or two when the market cap actually was lower than the cash position, only to learn the very painful lesson that the cash doesn’t really belong to the shareholders but instead to the management team who may have very divergent aims.  I have learned the hard way that company management would rather tear all their hair out than return cash to investors, in that the returning of cash both reduces the scale of their enterprise and thus their likely compensation, and may seem to the outside world as an admission of the limitations of their business model.  History has shown that management teams in this position will ultimately seek to deploy their company’s cash in ways that would expand their kingdom, often in areas that are at best tangential to their company’s core competency.  Unsurprisingly, this mostly ends in massive losses.

Finally, it is hard for many to grasp this, but very often a company’s greatness is tied to a specific individual, whose energy, passion, and vision is the essence of his company.  When that leader exits, it is very difficult for a company to continue as successfully.  Sometimes, as is the case with Wal-Mart and Sam Walton, the run can be longer, and sometimes as was the case with Steve Ross and Time Warner, the run is shorter, but almost always the company does not remain the same and is most often much worse off.  Steve Jobs was Apple, and his passing heralded the certain beginning of the decline of Apple.  Apple was always special because it was cool and it was visionary, and its products were simple and elegant.  The company was that because Steve Jobs was cool and visionary, and had a vision for simplicity and elegance (just look at his attire).  Tim Cook is not any of those things.

Apple valuation has declined a bunch recently.  With its cash horde it may take some time, and its stock price may bump up and down for a while, but its future is not looking rosy, and its destiny may ultimately follow that of Blackberry or Palm.

Popular posts from this blog

Greed & Laziness

In this most contentious and fascinating of election cycles, when nearly each conversation leads to politics, and when polarization runs so high, I ask myself - what is the essence of the debate between left and right?  What does it really mean to be a Conservative or a Liberal?

Why Rates Must Remain Low

There is an old bond trader joke that I first heard in the 1980’s when I traded mortgage-backed securities at Drexel Burnham Lambert.  It went like this:  “Upon dying, Albert Einstein finds himself in what he is told is heaven.  He encounters another individual there and asks him what his IQ is.  When he is told that it is 175 he is overjoyed, knowing that he’s found an intellectual peer with whom he can share much.  Upon meeting another, he discovers that person’s IQ is 140 and is pleased to have met another highly intelligent person with whom he can enjoy chess and other pursuits.  He is feeling pretty good about heaven, when he comes across a person who tells him that his IQ is a mere 90, and he is flummoxed.  What, he wonders, is this guy doing in my heaven and what can I even say to this person?  Then it comes to him.  ‘Where,’ he asks, ‘do you think interest rates are heading?’”

CMBS In Flux

The CMBS market has been in a period of upheaval, with dramatic spread widening on bonds and a resulting much more expensive cost of capital for real estate borrowers who depend upon this channel for their debt financing.Market participants today wonder whether we’ve entered a period like the summer of 2011, when spreads on bonds last widened this dramatically and then snapped back within a year to provide tremendous returns for those who were courageous enough to purchase bonds at the time when there was panic selling.Or, people wonder, is this recent downturn a prelude to a structural or systemic problem, like what was experienced in 2007, when spreads widened and sucked investors in, only to punish those early responders with a much more dramatic price collapse in the next 24 months.