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The Future of Apple: A panel session at Fortune Brainstorm Tech

My thanks to Adam Lashinsky of Fortune for inviting me to Fortune Brainstorm Tech in Aspen this week. I was asked to participate in a panel session with Gene Munster of Piper Jaffray to discuss “The Future of Apple”. The session was moderated by Adam.

Here is a full video of our conversation: FORA.tv – Future of Apple.

  • George Bluth Sr.

    Horace, I look forward to the growing popularity of your brand. You’re the Apple of analysts.

  • George Bluth Sr.

    Horace, I look forward to the growing popularity of your brand. You’re the Apple of analysts.

  • Canucker

    Who didn’t get the memo about pink shirts? :)

    • George Bluth Sr.

      He’s thinking different.

  • oases

    This question of killing the iPhone with something radically new is fascinating but aren’t they caged in by the dependence on cell towers? How can they escape those walls purely from an engineering viewpoint? Maybe with satellites? Ultra-long range Wi-fi? Or maybe the carriers will keep being pushed down the road to being dumb pipes…but that still seems a long way off – cell towers are toll booths, golden geese.

    • Ted_T

      Satellites won’t work — there is noticeable delay for voice communication via satellite — it would be untenable. I don’t see how a new “phone” input method such as voice/AI is limited by the use of cell towers. Indeed I don’t see anything wrong with cell tower tech, just with the execution; business model and structure of the incumbent providers.

      • oases

        I didn’t mean there was anything wrong with cell tower tech. I meant ‘How can Apple bypass carriers so they aren’t coming between Apple and its customers?

    • Davel

      I believe Horace gave one method of the disruption – voice. With a working voice interface you don’t need a big screen. Of course you do for video and web surfing. Some people ingest information more naturally visually than for audio, etc, but that is one avenue they can use.

  • nuttmedia

    Fascinating exchange. Thanks for sharing. Intrigued by your answer contrasting Nokia’s approach of optimization with that of Apple’s which is more on focus and execution. Would be great fodder for a future post or TCP segment.

    In case you missed it, there was an interesting article on Nokia’s missteps in the WSJ on Wed:

    http://online.wsj.com/article/SB10001424052702304388004577531002591315494.html

    Reinforced my belief that Apple’s story, more popularly described as one of visionary greatness, is more accurately told as one of focus and execution. Building on your reply to the question on payments, my immediate thought went to Cook’s articulation of requisites for Apple’s entrance into a given space at ATD and the Jobs axiom on focus being about saying “no” to right things. They are not a bank, nor are they a payment clearing house. But what they can impact is the friction involved in payments and the customer experience so you are spot on. It’s when they lose focus on simply creating good products vs optimizing monetization that I will begin to worry.

    Speaking of threats, also loved your thought on Apple’s primary one being centered on entropy and politics. The foils of the human condition are always the first and most lethal threats to success. I would submit that Jobs’s value as a forward thinker was equaled only by his role as “benevolent dictator”; one who had unilateral final word on all things. He may not always have been correct, but his presence erased the ambiguity that corporate politics and power struggles tend to bring. From that clarity of thought and direction (and Tim Cook’s operational excellence) sprung an uncanny ability for the organization at large to execute better than the competition.

    Curious — given your comments that the conference attendees were of a different background than your usual crowd, were there any interesting insights that you garnered from your interactions with this more diverse population that affected your thinking on Apple?

    • http://www.asymco.com Horace Dediu

      The audience was skewed more toward investment professionals rather than technology professionals. That led to more discussion about the limits to growth and the question of “exceptionalism.” Overall however there isn’t a big difference between what audiences want to discuss about Apple.

    • Davel

      I agree. This was a fascinating event. I was surprised at how forceful Gene was regarding Apple’s television product.

      What struck me most was the approach. The difference in how Horace looks at the problem is starkly different from Gene’s approach. I realize Gene has to be more quantifiable and short term, but that was very interesting. I was struck by Horace’s thoughts on mobile transactions and the unpredictability of disruptive technology.

  • http://twitter.com/dmarcoot Dave Marcoot

    I watched about half of this. Thank you for it. I have to say when you both spoke of voice as being the possible disruptive force, you are missing the forrest for the trees. It is not voice, but AI that powers Siri. Voice recognition is licensed from Dragon. Siri is AI.

    That you missed this I do forgive. That Munster did is unforgivable to his credibility given his job function and money involved. I repeat, voice is worthless without AI. Voice is not the next disputation, that has passed in a blink of an eye. AI is the next and is probably what Jobs saw. Invite me to your next meeting.

    • http://www.asymco.com Horace Dediu

      AI (or machine learning which is the new politically acceptable term) is behind much of Siri but it’s also partly applied in the touch UI of iOS and Android. The algorithms for detecting user intention through touch are fuzzy. Rather than being lost, the importance is now taken for granted.

      • Davel

        “The algorithms for detecting user intention through touch are fuzzy..”

        Really?! I didn’t know that.

        Thank you.

    • actualbanker

      “Do you really think..” “That is absurd.” “Do you think” “Do you think”
      Is this attitude necessary?

    • Davel

      I believe you did not understand the words and meanings that we’re expressed. Gene said that voice recognition was quite good and that the understanding was not good enough.

      I agree with @actualbanker, the attitude you bring is not necessary and gets in the way of any valid criticism you may have.

  • Ted

    I dont see how an increase in market cap needs an inflow of capital. If nobody sell the stock at current levels, or say below 1000USD, market cap increases. Theoretically only one 1000USD transaction is needed.

    • graphex

      It doesn’t.

    • surf121

      About 20% of outstanding shares are held by mutual funds. Many mutual funds who are bullish on AAPL (e.g. Fidelity Contrafund… 9.3% of its portfolio) have diversification guidelines that preclude them from holding above a certain amount (could be absolute % if fund and/or relative to benchmark weight, which is ~5% of S&P). These funds literally have to sell on the way up – if AAPL were to jump 50% overnight many would have to unload substantially.

      AAPL was rebalanced in Apr/May of 2011 because it got too big (above 20%). If AAPL rises more than markets, it will happen again in the 750-850 range. QQQ, funds indexing against NAS100 will need to sell.

      So an inflow of capital is needed to the extent that it offsets the forced exit of capital as AAPL rises. This is why things like the dividend and small buy back are supportive of capital flows supporting an expanding market cap. Some funds and institutions require a dividend (of any size, often) to hold a stock at all – witness why Citi was adamant with the Fed in its capital plan about having a 1 penny dividend as opposed to 0 dividend. Many investors would have had to sell, meaning an equal number of buyers to maintain the market cap.

      • Davel

        Nice description.

  • Tim Yoon

    Munster is sure about an “apple TV”. This makes sense given that Apple covers all of the most common
    video screen sizes (phone, tablet, and computer) except TV sized. This naturally suggests that Apple should introduce a TV screen size as their next major product category. Their job right
    now is to figure out how to make TV much better appliance than it is currently.
    That means not just that it can show videos like all current TV’s.
    Remember, iPhones are used as phone only as the #4 most common task.
    So, the Apple -TV will incorporate new functions. Perhaps as an alarm,
    weather, calendar function that is much better that can be done on smaller
    video screens. I believe that they will be better able to redefine this category than any other company.

    • KirkBurgess

      It was interesting to hear the 2 different takes on content – GM guessed we are a decade a way from seeing a la carte video options, whereas Horace suggested the ‘appification’ of Tv content may bring unknown changes (I’m guessing rather quickly).

      Some producers/artists are already seeking outside the box solutions online and with alternative distributors, I can only assume an explosion would occur once a product platform arises that offers secure & easy payment for on demand content (iOS is pretty much 99% there – it just lacks a non-clunky large screen viewing device – iOS device AirPlay via AppleTV via your existing HDTv is nice, but it’s not perfect)

  • Tim Yoon

    Horace, I disagree with you about Apple “killing off iPhone”. While iPhones may become less of a growth engine and profit center, Apple will need to keep a phone sized device in their portfolio much as they have done with the Mac. Apple will keep iMac, Macbooks, iPad, and iPhones to cover the full spectrum of sizes as each size is uniquely better at certain jobs. What they are missing is the TV size device.

    • http://www.asymco.com Horace Dediu

      What makes you think they are keeping the Mac?

      • http://twitter.com/Yelmurc Brian W. Crumley

        They will keep the mac until you are able to program for iOS on a iOS device.

      • actualbanker

        Which you can do now. It’s in its infancy, but there are apps in the AppStore developed entirely on iOS. A glimmer of things to come.
        Gruber often opines about the desire for a larger iPad, not just a smaller one.

      • Bernhard Grabowski

        In a cannibalization scenario they need it to feed the iOS line ?

        But joke aside – they’ll have to keep the Mac until all of the major computing tasks and OS versions have migrated to iOS devices. This migration I believe will require and result in more change than just keyboard -> touchscreen.

        At home I can see a stationary or semi-stationary becoming what an amplifier is to a guitar. Eventually we’ll end up with small hidden, wirelessly connected cubes providing serious computing power on demand while we interface with our iOS devices and while our iOS devices interface with much bigger screens.

        But if I would have to bet on only one future, it would be iOS.

      • http://www.isophist.com/ Emilio Orione

        Like Jobs said, there will be cars (iOS) and trucks (os x). For some tasks precision input will always be needed (cad design for instance, also in need of big screens).
        So the Macs will be there until there will be problems they only can solve.I believe that after some time OS X will have a iOS mode in which it will play iOS software, for instance there could be iOS only kind of apps needed on the mac.Users will want to buy software that runs on all their devices, if possible, that will be a plus against android.In this case, macs will need a touch screen, but than a big screen will be not mobile, it will have mouse and keyboard and so could become an iOS only not mobile computer, perhaps to smooth transition with a OS X emulating mode, even if it could still be named Mac (a mac could be a non mobile iOS device).
        So at the end, may be in ten years for now, iOS could be the only apple o.s., but it will be a lot more complex than today.

      • Davel

        Like Horace says, there is no requirement to keep the Mac. If you look at the history the pc was to be the center of the digital hub. Now it is the iPhone which is a mobile computer. With the cloud and mobile a pc is limiting. What function does the pc serve? If you have data only on a pc that may or may not be connected you are limited in access to your information. With the information synced to the cloud there is less ( or perhaps no ) reason for a pc.

        Yes. In the current state the pc can do things the other platforms cannot. How long will that last? I have had an iPad for 2 years now. I resist turning on my pc.

        Technology has changed. Years ago I listened to Ken Thompson and Dennis Ritchie speak on different occasions on a project they were working on called plan 9. Essentially it was a distributed unix system where the CPU may be in chicago, the storage in Florida and the program in Boston. The limiting factor was the network. Their vision had a unix workstation as the dumb terminal.

        Their vision is here today with some twists. For example the dumb terminal is a mobile phone ( running unix ) but all the elements are in the cloud but the unifying interface is not the OS but a browser.

      • http://www.isophist.com/ Emilio Orione

        There are two things that for now advantage PC (Mac) in specific application: precision input and processing power.
        While processing power could be achieved in the cloud theoretically, current network speed limits pratical implementation for now, precision input will require further software development and no one knows if it could be really replaced by touch.
        Touch now is backed up by fuzzy logic, old artificial intelligence, to guess user’s intentions.
        A precision input app, for instance autocad and all the cad software could be replaced by touch only if touch AI becomes so smart to let people work easily and quickly and the processing power of mobile devices, limited by battery not by technology, will be fast enough to allow real time 3d rendering.
        The working position is also a issue here, since you have to design 8/10 hours a day and you have to use an ergonomic position that does not stress hands and arms.

        So trucks (PC or MAC) will be in use for some time, maybe for a long time, but will be limited to specific tasks that need precision input and processing power.
        In the future AI will be so smart and cloud so quick that this tasks could handled by touch or voice only interfaces, but I want bet on it, at least in the near future.

    • Ted_T

      I think you are misunderstanding what “killing” means. The iPhone killed the iPod, yet the iPod is still being made and sold. Nobody is suggesting that Apple will pull the plug on a successful product line — simply they won’t hesitate to release a new product that cannibalizes the old one, nor will they cripple the new product to help keep the old cash cow going.

      Thus, you can say that the iPad has killed the PC (and Mac with it), but that doesn’t mean Apple will suddenly stop selling Macs. Nor will they stop selling iPhones, or iPods for that matter.

      • gbonzo

        “simply they won’t hesitate to release a new product that cannibalizes the old one, nor will they cripple the new product to help keep the old cash cow going”

        That is exactly what they are doing. They are hesitating to bring a larger screened iPhone to market in fear of breaking some software compatibility with the old one. They should have done that last year. Now they are going to cripple the new one by just increasing the length of the screen (for the sake of that software compatibility) instead of both dimensions.

        Samsung, please, disrupt these guys to the ground.

      • Ted_T

        Your argument doesn’t make sense in two different ways: one, you are assuming that in smartphones bigger is better. Many of us disagree. Sorry but I have no desire whatsoever to have 5″ screened “phone” like Samsung’s Galaxy Note. I bet most people don’t.

        Secondly, even if your bigger is better premise were true, what is Apple afraid of cannibalizing by producing that more desirable, bigger iPhone? They’d simply sell more phones, since bigger is better, right? Developers would simply fall in line and fix their software for the super popular new giant iPhone.

      • gbonzo

        They are afraid of breaking their apps compatibility due to the inflexible iOS resolution handling. Bigger is better, but if their crappy software makes things difficult for developers, what to do?

      • http://www.asymco.com Horace Dediu

        The hesitation you cite (if there is one) is because they consider the platform to be more important than the hardware. Are you suggesting that hardware is the basis of competition and software platforms can be disrupted by hardware from Samsung? In other words, that hardware is what is not good enough and software is more than good enough?

      • gbonzo

        People are clearly waiting for a new iPhone. Obviously more than they were at the same time last year, as shown by moderating growth. Question: Why is that?

        The answer: the current iPhone hardware design is aging rapidly. Competition has larger screens and faster data speeds and people value both of those. Yes, iPhone 4S hardware is no longer good enough.

      • http://www.asymco.com Horace Dediu

        Your contention was that Samsung would disrupt Apple. How would it do so without a software and services strategy? Making a phone with a bigger screen is a sustaining improvement and as we all know sustaining improvements universally favor incumbents. This is because whatever improvement is offered, the incumbent can adopt it if and when it’s already proven to work and can do so at lower cost. I would consider Samsung a disruptive threat if it had a business model that was completely asymmetric to Apple’s. The only companies that are in a position to have such strategies are those that eschew hardware profits, and even then it’s a very hard and lengthy process where timing is critical.

      • gbonzo

        “the incumbent can adopt it”

        If incumbent has inflexible software solution, it is possible that they hesitate about adopting a larger screen and therefore lose momentum. The more flexible software solution is quicker to adopt optimal hardware solutions and that ecosystem gains a dominant position in the market. It would not be the first time.

      • http://www.asymco.com Horace Dediu

        Technical constraints are no match for economic incentives.