Amazon’s recent disputes with publishers (Hachette and Disney) shows a degree of market power that is closer to monopsony than to monopoly but this power is nevertheless real. It may not not be something that requires intervention, regulation or even scrutiny but market power is evident in both how companies operate and in how they are valued.

If you look at the following graph, it’s easy to spot those with “monopoly” power. The graph shows a short history of revenues/operating income and P/E ratios. Modest or no growth in earnings coupled with extraordinary high P/E ratios indicate that the market understands the business is not threatened by competition.

Screen Shot 2014-08-14 at 8-14-1.40.47 PM

In contrast, “beleaguered” companies include those with great sales growth but no perceived long term prospects. This perception is evidenced by a low P/E ratio. It indicates how long the company can maintain its present level of profitability. I’ve highlighted Apple’s continuing, and indeed perpetual, beleaguered state. Excluding its existing capital base, Apple rarely gets votes for a life span longer than 10 years. One can see the same status in many Asian companies. Samsung is even more beleaguered than Apple by this measure.

The underlying implication is axiomatic as far as investments are concerned.: Being under threat all the time is undesirable.

But is this true?

One of the issues with monopoly/monopsony is that it leads to business practices and strategic priorities that are tainted by hubris. In contrast, the stress of competition leads to “paranoia” and to a sense of urgency which is blessed by innovative insight.

This is a corollary of Grove’s “only the paranoid survive” or Jobs’ rant on why Microsoft was unable to come up with breakthroughs. Grove and Jobs looked at dominance of a market (as either buyer or seller) and saw a curse. Their understanding of the human condition went beyond what the arithmetic of markets would suggest. Running a business and managing people who are asked to create things leads to this insight. Peering at spreadsheets doesn’t.

The observation to be made is that those who invest in companies haven’t caught on.

  • rationalchrist

    What about utility companies? They have very low PE.

    • charly

      That is not historically been true.

    • handleym

      (a) “Utility companies” by itself is not a well-defined category. In the 90s, at least as far as mutual funds were concerned, telcos were “utility companies”. Do you mean JUST water, gas, electricity? Do you include landlines? Cell phones? Cable TV? ISPs? Longhaul data (like Global Crossing)? Parcel delivery?
      In a sane society (ie NOT the US) the payment system would be decoupled from the casino side of banking and would be considered a utility.

      (b) As far as water, gas, electricity are concerned, the explanation is obvious, at least in the US. These are regulated and so as far as investors are concerned they’re treated like bonds. They’re expected to generate a steady stream of profits with little volatility and little upside, and so they’re priced to match the prevailing interest rate for (slightly but not very) risky asset.

      • charly

        (a) You are right that banking and payment service should be decoupled but i don’t know a country i which that is true

        (b) Electricity companies have to deal with Solar power. It kills their profits

  • charly

    Samsung is Korean and that means the Korean discount.
    Apple major profit centers in the last 10 years where ipod’s and iphones. The expectation was that mp3 players were a temporary mass market gadget that would be integrated into mobile phones when flash became cheap enough. This is what happened see for example the Nokia 130. The mp3 player market is nearly death

    and the ipods that are still sold (the Touch) aren’t bought to play mp3’s but as a cheap alternative to an Iphone.
    Iphone has the problem of market share and price pressure. I have so my doubt if they have enough market share to stay viable outside their core markets but an Android emulator is always an option. But the big problem for Apple is price. Not so much from Android but from the Iphone (X-1) In the past the phones improved so fast that they were definitely worse but i think that era will end with the 6 as improvements from then on will only be small.

    ps. ipads have already peaked, says it all

    • stefnagel

      Price is Apple’s glory. It has staked its ground: Apple will generate enough profit to continue its leadership in tech. Or die trying. It will not go gently into that good night called Dell Hell.

      • charly

        My personal opinion of Apple is that it will end up like Blackberry but even if you see the future of Apple bright than there is a problem for the stock as it is unlikely that they can double the number of phones sold (at least without a lower priced model and even then) or up their profit margin but the quality difference between their most expensive phone and their cheapest phone is shrinking so more of their customers will decide for their cheaper model. For Apple the company this isn’t that bad. It just means less but still very health profits but for Apple the stock it is bad because less profit is bad for stocks.

        ps. You could look at what happened with computers. Apple’s asp for their computers was much higher in the 80’s than it is now, even with inflation. But the number of personal computers sold skyrocketed in that time, the same is unlikely to be true for smartphones with the sale of 1 smartphone per 4 persons per 2 years worldwide.

      • stefnagel

        Says you.

      • handleym

        “but the quality difference between their most expensive phone and their cheapest phone is shrinking so more of their customers will decide for their cheaper model.”

        That’s the nice thing about having customers who are wealthy. If I can afford it, why WOULDN’T I pay an extra $100 to have a nicer phone, even if the “quality difference” between that and the cheaper phone is small? The whole point of having money is so I can buy nicer things, isn’t it?

        We’ve had this dynamic play out in cars for a hundred years, and in clothes for two thousand+ years.

        Blackberry failed not because of pricing issues, but because they no longer offered the nicest device. The time to worry is when Apple stops producing what are clearly desirable devices, not when curve projections match a certain shape.

      • charly

        Most iphone buyers are not wealth and even wealth people need to watch their spending so your argument that it is just $100 doesn’t work.

        ps. Cars are a real expression of wealth. A $500 phone isn’t

      • melci

        iPhone buyers are certainly more wealthy than Android buyers.

        Neilsen reports that 40% of iOS users have incomes above $100K versus only 25% of Android users, while double the percentage of Android users have incomes below $25K.

        CIRP reports that twice as many iPhone users have incomes above $150K as Samsung users and 45% of Samsung owners have incomes below $50K versus only 32% of iPhone owners.

        When users turn over a $600-$1,000 phone every 1 or 2 years, it most certainly is a real expression of wealth compared to a new car every half decade or longer.

      • charly

        So 60% of IOS users have income less than $100k. Is that 60% wealthy?

        The normal bought(read leased) new BMW/Mercedes/Audi driver “owns” his car for less than 5 years and it is more than $300 in depreciation a year. I think that that is true for any new car

      • melci

        It’s certainly far more wealthy than Android users.

      • Mark Jones

        Fifteen years ago, 3Q99, Apple sold 805k Macs for $1.29m in revenue, or ASP of $1430. Last quarter, Apple 4.4m Macs for $5.54m in revenue, or ASP of $1255. It’s not a huge difference, even with inflation.

        Apple’s Mac ASP relative to Windows PC ASP is likely higher today than it was in the 80s and 90s, as Mac prices have declined more slowly than Windows PC prices.

        As the industry definition of smartphones expands to include any phone with AOSP costing as low as $50 unsubsidized, there will be 3 or more smartphones per 4 persons per 2 years worldwide.

      • charly

        It is more than a 10% drop. Plus 15 years of inflation. It is not a huge but it is absolutely big. But i was more talking about the 80’s when you couldn’t buy a new mac below $2k

        It is not an expansion of definition as a $50 smartphone in 2016 can do more than a iphone 3. The smartphone market hasn’t grown much in the market for people who didn’t own a phone but in the market for people who owned a plain or feature phone so i sadly don’t see those numbers soon.

      • obarthelemy

        I’m not sure ASPs are comparable. PCs around me are usually bought with no screen (screens’ useful life is much longer than PCs’, mine is 7 yo to a 2-yo PC ?), sometimes even a separate OS or no OS at all (ditto).

    • vincent_rice

      Wow. You should be in politics.

    • Space Gorilla

      Couple things you are missing completely.

      One, Apple almost certainly already has a sustainable user base in absolute numbers, and that base is still growing. Apple’s share of the whole market doesn’t matter. You just can’t seem to grok this. You also seem unable to understand that even in emerging markets there is a segment that can afford Apple’s products. China, for example, the absolute number of people that can afford (and are buying) an iPhone is very, very large. Apple’s sales in China will soon be larger than their sales in the US. And yet you’ve gone on record many times saying Apple could never get significant sales outside the US, EU, and Japan.

      Two, if iPads have peaked, that is 70 million iPads sold annually. This makes the iPad as a standalone business the top PC seller in the world by a significant margin. In fact, iPad sales could shrink by quite a bit in 2015 and still take the top PC seller spot.

      • DesDizzy

        SG, I think trying to educate Charly is a waste of time. He obviously has no conception of business or economics.

        I would however quibble with the inclusion of Samsung in this “paranoid” group, as the recent tanking of Samsung shares and the discount that this has caused is due to the falling sales in it’s key smartphone division as it is caught in a pincer movement between Lonovo/Xiaomi at the low end and Apple at the high end.

      • Space Gorilla

        I agree, I gave up on charly a long time ago. But now and again I find it fascinating to post a reply, explaining some simple truth or reality, and watch the response. It’s the Cognitive Dissonance Show.

      • charly

        Samsung problem in the high end is more LG, HTC and Sony. Samsung had an unnatural high market share in the high end Android phones. Other problem is that a $300 Samsung phone is good enough and not much different from an S5

      • DesDizzy

        Charly. I will try to make this very simple. Have you ever seen Samsung mention or allude to LG, HTC or Sony in their smartphone adverts? The answer is no. Samsung & their advertising agencies do not see these companies as their competition in the high end smartphone market. Neither does any other informed market observer.

        However, I will agree with the point that I believe you wished to make, that a Samsung $300 plastic/qualcomm midrange phone is not much different from a Samsung $600 plastic/qualcomm high end phone.

        Samsung have managed to obliterate LG, HTC, Sony in the high-end smartphone market by outspending them 100/1, that strategy seems to be failing to diminishing returns.

      • obarthelemy

        I think it’s a bit more complicated than that. Sam’s ads target Apple, because Apple is perceived as the highest end option. That does not mean than Sam’s *real* competion isn’t Sony/HTC/LG/…, nor that Sam is unaware of that. If anything, I’d bet more design-conscious HTC and Sony (metal and glass ! changes everything !!) are more appealing to the “I want a luxurious gizmo” crowd.

        I’m struggling to come up with a good example… Car brands… If I’m Peugeot, I’ll pretend my high-end model is positioned vs BMW, though it’s really competing with Renault’s, because if I’m battling BMW, then of course I’m crushing Renault :-p(Replace Peugeot and Renault with whatever midrange car companies are in your country.)

        Plus if I had Sam’s ad budget and brand recognition, the last thing I’d want to do is use it to raise awareness of HTC/LG/Sony nor create the perception they’re competitors. Those will have to pay for their own ads.

        Sam’s early success was in good part due to competitors’ missteps, not solely to advertising. Sony’s screens and cameras are only now catching up (which is a mighty paradox); HTC had a strange lapse of reason between the HD2 and the M7 (and are still doing strange things with their cameras, though they got design and sound down pat), I’m not even sure what LG did wrong… probably no real flagship, and Nexus clones since they were doing those too… Oh, no SD.

        Meanwhile Samsung managed to tick all the checkboxes from the S1 onward (though they dropped the FM radio on the S5, maybe even S4), while adding some exclusive bonuses (AMOLED especially), for manageable minuses (software bloat and featuritis). Their competitors are only now getting their act together… And so are lower-tier suppliers (Huawei, Lenovo…).

      • DesDizzy

        Hi OB. One of the problems with this sort of debate is that there are so many “armchair” managers. Predominantly, they have never worked in large organisations or if they have, this has been limited to a particular niche. The consequence of this is that they interpose their own logic into a economic/commercial scenario, with limited knowledge of how large organisations work.

        This is a good example. Samsung, in it’s marketing targets Apple. Samsung internal e-mails (Court documents), have revealed that they target Apple and that senior management see the threat/target as Apple

        Despite this evidence, the “armchair” managers, prefer their own scenario, because it conforms to their logic/view. Despite the fact that these sorts of decisions are not whimsical, within large organisations, but are built upon research, involve scores of senior managers and $bns of dollars. In the case of Samsung literally, one of the biggest advertising/marketing budgets in the corporate world.

        But don’t let evidence alter your view, to mangle a quote from JMK.

      • obarthelemy

        Let’s do a little logic: who do you think is taking sales from Samsung right now ?
        Don’t let logic alter your trolling though, it’s so silly it’s funny.

      • DesDizzy

        Sorry, which bit of my post did you find inaccurate or “trolling”?

        Re your question, I think Samsung answered that best:

      • Mark Jones

        What made it “unnatural”? Are there rules of nature that govern market share?

      • charly

        LG, HTC, Sony & Samsung high end phones are all really similar so you don’t expect one to have a majority of that market. That is the unnatural part of it.

        There is nothing natural about markets

      • Mark Jones

        The unnatural part is easily explained – Samsung outspends LG, HTC, and Sony on marketing (including spiffs) by an insanely large margin. Thus, one wouldn’t call it unnatural.

      • Sam

        I expect one to have a majority when they will pay kickbacks to the carriers and spiffs (bribes/commission) to the salesforce.

        That’s why Samsung is killing HTC, LG, Sony.

        Sucks to buy a non Samsung smartphone when the maker/OEM might go bankrupt before your warranty expires.

      • charly

        They all pay spiffs & kickbacks and it is not like with HTC, LG, & Sony gone that there wont be any competition left. Those places would be quickly filled up with new companies so Samsung doesn’t even want them to go bankrupt (except possible Sony)

        Sony & LG bankrupt? Both are to big to fail

      • charly

        The user base is slowly growing & the expected asp of iphones is likely to drop. For the company that does not matter to much but for the stock it matters a lot

        ipads are a big business but not growing. Bad for the stock, not the business.

      • Space Gorilla

        Ah, I see you have officially changed tactics. Now everything is bad for Apple’s *stock*. Well, at least you’ve recognized the enormity of Apple’s success in one way, that might be progress.

      • melci

        Apple is growing the number of iOS devices at a rate of quarter of a billion per year and growing.

        The iPad is in a pre-new model lull (everyone is waiting for TouchID to be added)

        Your argument is baseless.

      • charly

        TouchID on a home table is useless so i doubt many people are waiting for it. Apple is also selling fewer tablets this year than last so i doubt a new model will save the day

      • melci

        Typing in pin codes is a pain and the promise of using TouchID for online payments mean TouchID is desired no matter where a device is used.

        Apple’s new iPhones are mini-tablets which means Apple’s tablet numbers will be surging enormously come launch. Phablets are easily understood to be one of the major reasons why larger tablet sales have stalled worldwide.

        No comment on Apple’s quarter of a billion new iOS devices sold each year and growing charly?

      • charly

        Why would you need to type in a pin for a tablet that never leaves the house? Except maybe for buying stuff but than TouchID is to insecure

        Apple’s new iphones will still be smaller than its Android competition so are you now also calling them tablets?

        Slowly growing even when they sell a 4S 8GB for €250

      • melci

        You still harping on your hilarious statement that TouchID is more insecure than pin codes? We have thoroughly demonstrated the glaring fallacy of that before charly. There really is no talking logic where you are concerned is there?

        Quarter of a billion annual growth on nearing a billion devices. You call that small? comedy.

        iOS is growing at an enormous pace and remains by far the most lucrative ecosystem in the world.

      • Space Gorilla

        A lot of iPads are being used in education and enterprise, TouchID will be very useful in that setting.

      • charly

        A max of 10 people can use TouchID at a time IIRC. There is also the issue of fingerprint information and companies

      • Space Gorilla

        You’ll have to explain what you mean by a “max of 10 people can use TouchID at a time”. That’s odd, there seem to be millions of people using it ‘at a time’ right now.

        Yes charly, we’ve been over your objections to fingerprints. A very easy solution is a fingerprint in combination with one other verification (if you’re really that concerned about security), making it impossible to hijack a device with only the fingerprint.

      • charly

        IOS supports at a max 10 fingers IIRC. A finger per person and you are left with a max of 10 people who can use 1 tablet/phone/etc. That is not a lot a lot of people in a business environment let alone a school.

      • Space Gorilla

        Just so I understand this, fingerprints aren’t good enough security for you, but you’re fine with physically sharing a single device among dozens of people (hello security risk!), in fact you’re arguing that not being able to share the device with enough people is a drawback. Is that right?

      • charly

        Company tablet so Huh?

      • Space Gorilla

        Well, you seem to be saying it’s a great idea for more than 10 people to share the same device at the same time. It must be a great idea because it’s a very bad thing that the iPad isn’t able to do this.

        So how does that work exactly? Sally gets the iPad from 9 am to 10 am, then Joe uses it from 10 am to 10:30 am, then Bill takes the iPad until noon, then Mary gets it after lunch until 2 pm, then Fred takes it until 5 pm. But wait, that’s not enough people. So, the company iPad gets used by a different person about every 40 minutes or so throughout the day?

        That seems a bit strange, the mobile devices I’ve seen used in education and business settings are typically assigned to one person and then used by that one person. Perhaps later if that person leaves the company and the device is still useful it gets reset and is assigned to a different person.

        But hey, maybe your idea of 15 or 20 people all trying to work on a single device throughout the day will turn out to be a real breakthrough in productivity. Yikes.

      • charly

        Most ipads i see are in retail (an obvious selection effect) where they are used as interactive brochures. A small problem if you have less then 10 sales staff (you still need to add the fingerprint) but it gets difficult when you have 11

      • Space Gorilla

        If it is used as an interactive brochure or as a way for customers to give the retailer money, where’s the security risk? There’s nothing on the device to steal, unless you want to learn more about the retailer, or give the retailer money.

        There’s an easy solution to your edge case though, revert to a PIN that all the sales people know. Or don’t secure the device, since there’s nothing on it worth stealing. But I’d set up a PIN at least, why not, it’s easy.

        In a corporate setting where security begins to matter a lot, devices are not shared in the way you imagine, and TouchID coupled with one or more other forms of verification will work very nicely. Same for education, all the pilot projects I’ve seen, and I know kids in school with iPads, they get an iPad at the start of the year and they use that one iPad all year.

        Sorry charly, you’ll have to do better to come up with a ‘bad for Apple’ scenario here.

      • Christopher

        What’s an ‘an obvious selection effect’?

      • charly

        That i don’t see the tablets used in a office, education, farming or factory setting because the number of those settings i “experience” is so small unlike retail. For example this week i was in more retail places (4) than the combined total for office, education, farming or factory this year


        What company is this shared tablet for? The corner lemonade stand? Coming apart at the stitches I tell you!


        Hold on a second. This is HONESTLY, the first comment in a long time, on any site, where I have actually, literally, laughed OUT LOUD. Key word LOUD. Honestly, Charly you have zero insight into anything you’ve typed and I can’t believe that anyone here has even bothered to reply in a meaningful fashion.

        I can’t fathom for a second anyone being so self-delusional that I have to surmise that you’re just having a troll. Now, I’ve seen lot of trolls over the past few decades online, so let me tell you that you’re not getting high marks in their endeavor. The sheer lunacy and clear evidence at lack of education, either real or as part of your facade, just steamrolls what should be a more subtle approach. But still you get a few folks to nip the line.

        10 people using one device… Oh boy, that’s a serious treat. The best I’m likely to read all day.

      • Space Gorilla

        Heh, charly is an entertaining distraction from time to time. He (or she) writes some seriously batshit crazy stuff about Apple. It’s fun to see just how crazy it can get.

      • Multiple people in the house? It’s in a hotel? You take it to bars/coffee shops?

        TouchID is fundamentally more secure than a PIN. Again, you show a very weak understanding of technology and how it works and is used.

      • charly

        A PIN is a secret and a fingerprint isn’t so a PIN is fundamentally more secure, at least without infinite tries.

      • juanm105

        A pin is a short term secret at best
        A fingerprint may be public but not usable but to its owner for accessing an iPhone 5s

      • charly

        Faking fingerprints isn’t exactly hard. In fact i would calling faking the fingerprint scanner of a 5s relatively easy compared to stealing a PIN though both are not exactly difficult

      • Space Gorilla

        Hold on there sparky, fiscal 2014 iPad sales could very well be dead even with fiscal 2013 iPad sales. You’ve been reading too many clickbait headlines, iPad sales are not off as much as you think. The worst case scenario right now looks like maybe a two to three percent annual decline. But it could also be no decline at all. Depends how many iPads sell in the back to school quarter this year.

      • charly

        2% decline (or growth) is in this business over the hill.

      • Space Gorilla

        Now you’re just making stuff up to fit your ‘Everything is Bad for Apple Narrative’. You are entertaining, I’ll give you that.

        The fact that you’re ignoring of course is even if iPad sales levelled off from here on out, that’s 70 million per year, which makes the iPad the top selling PC worldwide, beating Lenovo by a significant margin. Lenovo sold 55 million PCs in their most recent year and called that “outstanding”.

        There’s no reality where 70 million-ish iPads sold annually is a bad thing for Apple. It’s an impressive number (even if it declines a bit), no matter how you try to spin it.

      • KirkBurgess

        Touch ID on the iPad is the only reason I need to buy a new one this year, its horribly painful going back to the iPad after using an iPhone, especially after iOS 8 enables TouchID to be used with third party apps.

      • holyc2a

        I am waiting for the touchID on the mini. it is the only thing holding me back and I think for many many consumers. Apple is either milking the market before it adds that feature or it is trying to manage supply. In either case once that happens I will upgrade and I think many others will as well.

      • Christopher

        What’s a ‘home table’?

      • charly

        A tablet that never leaves the house

      • peto1

        Yeah, you obviously think of Apple as just a hardware company. In the fullness of time I’m guessing Apple will evolve and various services will contribute much more to its bottom line. For arguments sake – if you can imagine it as a goal Apple might actually aspire to – let’s say services will contribute 50% of total profits in the not too distant future. That would have a massive stabilizing effect on the stock and the share price would trend ever higher as that objective is realized …

      • charly

        I think of Apple as a software company. That is their strength. Hardware is secundairy

      • peto1

        Indubiously, you’re correct. However, just to be clear: Whether Apple harvests its profits primarily from the sale of its hardware is irresplendent – it’s “fun with numbers”. Apple is an ecosystem anyway you cut it and that’s where their value is. That’s what we’re paying for. It makes sense to lead with the hardware though because it’s the necessary cause – It delivers the experience …

      • juanm105

        irresplendent? new word?

      • Apple is a systems company. They do the intersection of software and hardware. If you think of them as only a software of a hardware company you will have no hope in understanding them as a company and will miss on every single projection.

    • Mark Jones

      There’s no problem of market share. At almost 1 billion (and growing) users, Apple likely already has a large enough user base to build an even richer global ecosystem. So you’ll never see an Android emulator on an iPhone.

      There’s no problem of price pressure. Analysts and chumps have been saying since the iPhone 4 that “improvements from then on will only be small,” so sales should decrease given Apple’s refusal to lower the price. I see you’ve joined them. Problem is every new flagship iPhone (4S, 5, 5S) has sold more units in its first year than the previous flagship iPhone, so when exactly will this price pressure kick in? Only those with small minds and puny visions think “improvements from then on will only be small.” There are way way more jobs to be done by pocketable/wearable computers. We’ve only scratched the surface.

      • charly

        Great selling flagships is more an indication that people buy iphones purely for their luxury brand image than their quality as a smartphone. That is bad in the long run.

      • Mark Jones

        Not necessarily as the flagship iPhone has always had the most capability, and thus could do additional jobs well that the previous flagship couldn’t. Most people are paying the $100 extra mostly for that capability, not for image.

    • Sam

      “Iphone has the problem of market share and price pressure. I have so my doubt if they have enough market share to stay viable outside their core markets…”

      Sounds like what everybody says about the Mac market which pulls about 50% of the PC market’s profits.

      HP, Dell, Lenovo, Acer, Asus, etc… Would love to sell computers with similar margins and profits, even if it meant less market share.

      In the last fiscal YEAR, Lenovo didn’t even make $900 million profit on PCs

      If Apple only sold 5 million iPads, they’d make 2X+ more profit than HP selling 15 million PCs. Why do think HP considered selling their PC business?

      HP Printer and Ink sales make more profit than selling 15 million HP Windows PCs. Bundling and Branding and distribution is why HP kept its PC Business.

    • “Iphone has the problem of market share and price pressure. I have so my doubt if they have enough market share to stay viable outside their core markets but an Android emulator is always an option.”

      And this one statement is why you don’t understand the business of technology.

    • StevenDrost

      There is some truth to the market share comment, this could end up being a regional game. For instance, they could be wildly successful in England and Japan, but not China and India. Of course the thing to keep in mind is the countries that are not doing well are the countries with low income, bad networks and virtually no credit. Why by an expensive 4G devise when you only have 3G networks? Those people are not choosing not to buy apps from Apple, they simply can’t buy apps because they don’t have credit.

      • charly

        Wealth is only a small factor in the success of the iphone. Carrier subsidies is the big deciding factor in iphone success. Usage profile of 3G and 4G isn’t that different so i think it is a fallacy to believe that 4G is anything more than a check mark.

        ps. You don’t need credit to buy apps from itunes. Every supermarket here sells itunes “gift” cards.

      • StevenDrost

        How about the supermarkets in India?

      • charly

        Sorry, never been to India but Apple isn’t exactly big there so i think you should go to a specialist shop. Also €250 is a lot of money in India for a 4S 8GB

      • StevenDrost

        Fascinating. But, what does that have to do with my comment on the availability of the network and the ability to make mobile purchases? Kinda like buying a car if you don’t live in range of a gas station and there are no roads.

      • charly

        The difference between 3G or 4G is only important for Video. Video is not a reason why people buy a smartphone

      • StevenDrost

        You know what I love about your posts. You start off with a semi-objective statement with some rational point and then you follow it up with complete nonsense.

      • charly

        Video is a “nice-to-have” feature. Besides video works on 3G too, especially with a supplement of wifi

  • stefnagel

    Whoa. Tons here to unpack. Milestone post. Just a comment on your “running a business” statement: Nothing kills a company quicker than perceived completion of its mission. From that moment the fruit rots.

    Mission ain’t in the spreadsheets. And boards, not just investors, often treat mission statements as blah.

    Mission is everything. Why is the prime cause. Apple knows.

  • Jeff G

    I want a Like button.

  • r.d

    So Horace are you predicting that
    GOOG can double in 3.8 years have
    market cap of 387B*2 = 774 B
    which MSFT never achieved in its run up.

    • 程肯

      “774 B, which MSFT never achieved in its run up.”

      Are you sure? Have you looked at adjusting MSFT’s max cap to today’s dollars? It might be closer than you think.

      • markrogo

        Microsoft was worth $619B in 1999. Using the CPI, that would be $885B in today’s dollars.

  • Christian Peel

    I think the discussion about competition and lack thereof can help us understand why Apple doesn’t improve the App store much: there’s just not much competition and no real need to do so at present.

    • handleym

      Is it lack of competition (something I’d not deny) or is it simply that no-one knows how to do this well?

      I’m unaware of a convincing claim/explanation (as opposed to mere partisanship) that ANYONE else’s App stores (MS, Amazon, Google, Samsung, Xiaomi, etc) are really much better in terms of any metrics one can think of — value to developers, delight of use, ease of discovery, sensible utilization of (per-user or aggregated) historical patterns and data, etc etc.

      Which is not to say that Apple couldn’t do better. In particular, if they were willing to share the data (both the “storefront” data and the historical/browsing pattern data) with anyone who wanted to set up a rival storefront, there’d presumably be a lot more competition in the area and we’d get to the point of “that’s OBVIOUSLY the right way to handle an app store” a whole lot faster. But, to be fair, I also don’t see Amazon, MS, Google, etc rushing to help 3rd parties build a better version of their app stores.

  • eagle

    Excellent post, many insights. Except…. Microsoft in the 90’s was as paranoid as it gets. It moved so fast on the Internet and innovatively (IE3 is one of the most innovative products ever built), once it engaged, precisely because it felt threatened and acted like an upstart, all the while the government deemed it a monopoly and such upstart tactics were deemed illegal. Similarly, Apple was dying but was one of the most hubristic companies in the world — it was like some faded starlet who still saw itself at the center, treated everyone including its customers with an extreme amount of arrogance, and basically put itself out of business, only to be saved by Microsoft.

    • stefnagel

      Microsoft: Dominance is a curse, as noted in the post. When you have a 95% hold on a market, almost everything you do next is going to be anticompetitive and wrong. There is no up, only down. IE might have been genius. Who cared? The issue was its deployment.

      Apple: By ’95, Apple was pretty lost; its confidence shot, along with its hubris. Which indeed it had in the 80s. But Jobs saved Apple, not Gates. And Microsoft, not Apple, is dying of Gate’s hubris.

  • GlennC777

    In this case I think the temptation to draw easy conclusions has been too strong. Monopolists often succeed at their game until they have so angered everybody, most importantly their poorly-served customers, that whole cultural movements are born to knock them off their pegs; and that is in efficiently-governed democracies. When they exist in less efficient and more corrupt systems, they tend to prevail indefinitely and drag entire economies down around them. No amount of hubris seems to make any difference.

    Conversely, among the vibrant scuffle between non-monopolists, neither paranoia nor arrogance seems particularly predictive. It seems as though markets can be truly chaotic: very similar initial conditions can result in wildly varying outcomes, as distantly-related factors interact in unpredictable ways. Only in hindsight does the progression from one state to another seem orderly and predictable.

  • amazeballs

    Amazed that Apple makes no money on iTunes and software despite the substantial revenues.

    • Selling other’s people’s stuff has always been a low operating profit business.

      • ionionionish

        So why do investors value Amazon so highly?