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The Critical Path #83: The Analyst Taxonomy

Horace proposes a classification of analysts and their motives and how to think about the value of commentary. We delve into how Apple executives obtain and preserve authority and talk about the disruptive impact of Nintendo. Also a hint about a new Perspective presentation before WWDC.

via 5by5 | The Critical Path #83: The Analyst Taxonomy.

  • http://twitter.com/jamesckim James C. Kim

    Surprise: APPL up after a bond offering that Goldman Sachs benefits from. What is the use of a company to Wall Street if it can’t make money from it?

    • http://twitter.com/qka qka

      AAPL

  • http://twitter.com/art_arbitrage Art Arbitrage

    Great show as always. FWIW: I’m not an expert on China but Bill Bishop is: https://sinocism.com/ He’s linked to several articles that suggested the political pressure on Apple was pretty real.

  • Bruce_Mc

    Sad to spend so much time debunking reports from the news media. It only adds to the visibility of those who write the stories. I think a pat answer is needed to avoid wasting more time on this.

    How about, “The news media understands that telling easy to understand and emotionally engaging stories is more profitable than informing people about what is going on around them. That fact is all that is necessary to make sense of what is written about Apple.”

  • Bill Esbenshade

    Great comments Horace! You mentioned in the show that you thought a bad sign might be if and when Tim Cook starts moving away from a functional structure and toward a divisional structure. It seems like Cook is avoiding this, and is actually making Apple’s structure even more functional by: (1) ousting Scott Forstall and putting both Mac OS and iOS under Craig Federighi; and (2) putting all UI’s (both for Mac and iOS) under Jony Ive’s management.

    At least at the senior VP level, Cook is eliminating product-related executive titles (and the turf wars that ensue) and giving each senior VP full control over his/her functional specialty. This should make Apple’s executive team more willing to invest in new, disruptive product categories, even if existing products are cannibalized, and should help Apple’s “disruptive engine” prosper.

    • oases

      Is collaboration _always_ good?

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

        Collaboration isn’t the goal. Great products is the goal. Collaboration is a process in itself and can happen in various ways. The point of a functional structure is to remove the means by which political power is created and wielded. The way to think about it is to ask not why Apple is organized this way but why an Army is and has been and what would an Army be if it was organized in units attached to an outcome or goal rather than to a speciality or function. [Hint: Today’s Revolutionary Guards or, in ancient Rome, the Praetorian Guard]

      • oases

        Thanks for a thoughtful meaty reply but it’s not really what I was thinking about. I was wondering if working in relative isolation is sometimes more efficient than partnering with others. I suppose it’s OK as long as it doesn’t become a dogma…which it could if one’s boss swears by it. Makes me think of the work from debate. Solutions don’t have to be either/or.

      • oases

        I meant work from home obviously. Comment editing is not working on my iPad.

  • Mark

    Between 00:22 – 00:26 you’ll hear Horace’s take on technical analysis, or as my dad’s favorite commentator the late Louis Rukeyser (PBS) used to call those who practice it, “the elves”. I wish I had time to transcribe it. It is a priceless summarization.

    • Walt French

      Sorry, Siri made a hash of that segment and I’ll just say more generally that Horace is NOT describing anything that Rukeyser’s Elves would recognize as technical analysis. I don’t endorse T.A. but it has discrete lists of measures, none of which Horace called out, and none of which are obvious in the reports from these “fundamental” analysts.

      Secondly, another opinion on the “buy side” guys (yes, almost all guys) who tell us what they’ve just done. There *IS* a money-earning advantage to a PM announcing a position that they HAVE taken, if and only if the market thinks, “PM Dediu is smart, so I should buy when he buys, and sell when he lets us know that he’s selling.” That’d drive up the share price after he says he’s holding, allowing for a more advantageous profit upon selling.

      I submit that almost no PM enjoys a widespread enough reputation that such comments make any difference. The one or two nearly-universally respected investors don’t claim to time in and out of stocks. The highly leveraged hedge fund managers are more likely to get squeezed by competitors who take the opposite approach: forcing a large holder to sell (hedge fund positions may be held similarly to margin buyers’ holdings, and forced to liquidate if the price drops), can make mincemeat of a hedge fund that is very levered.

      So why would a PM broadcast his holdings? Simple marketing: if I announce I’ve bought a bunch of Apple, people will associate MY name with the fact that Apple has gone up a bunch and think that I must have foreseen the move. (Ditto for sales.) I have yet to hear one of these announcements where the PM made a big deal about when he bought into a position much larger than the consensus (index) weight, and at what price; that leaves muppets with the ability to make the (mis-) association without the least overt dishonesty.

      Most of the talking heads you see on CNBC or its ilk are in the mutual fund business, where companies raise assets (and fees) by getting retail customers. Occasionally you’ll see those who want to burnish their reputations for ego reasons. If you’re interested in knowing what makes the company tick, versus watching the zigs and zags of investors’ sentiment, you’ll do a million times better by ignoring those whose primary story is about how much money you’ll make as an investor.