But Apple does not pursue profits either!

In my essay on Google’s absence of profit (or income or business) motives questions were raised on the stated absence of hunger for profits from Apple and what difference there might be from Google’s philosophy.

Indeed, Jony Ive stated:

“Our goal isn’t to make money. Our goal absolutely at Apple is not to make money. It may sound a little flippant, but it’s the truth.”1.

He was probably repeating what Jobs had previously stated:

“I remember very clearly Steve announcing that our goal is not just to make money but to make great products”2

However, note that both quotes are qualified. In the case of Jobs, he said “not just to make money”. Jobs clearly stated that great products lead to money. That great products are causal to money and therefore that if you make great products you make money. One leads to the other.

Ive also continued in this reasoning:

“Our goal, and what gets us excited, is to try to make great products. We trust that if we are successful people will like them. And if we are operationally competent we will make revenue. But we are very clear about our goal.”

I would paraphrase the Apple logic as “Great products are the means by which we sustain our business. By focusing on the product, the customer is satisfied and through that satisfaction we create the free cash flows which can be used to fund more products.”

There is a difference between Apple’s “indifference to money” and the “indifference to business models” that Google exhibits.

Google steps even further away from cash flows. Its goals are to build great things guided by their vision and patterns in the data they collect. The value is in the data itself rather than in any transaction.

As long as the source of money is unfettered, its provenance is uninteresting. A business model is a profit algorithm. It could be linked to the data but it need not be. Markets are messy and imperfect. Data provides much clearer views into value. You could conclude that value itself cannot be trusted to the judgement of the public. Value is to be determined through the recognition of patterns on data privately collected.

So when I say that Google has disdain for market mechanisms I mean that they believe they can do better. Apple still values the user as the ultimate adjudicator of its actions. Google looks past the user and interprets their intentions.

Google sees markets as ultimately obsolete.

  1. at the British Embassy’s Creative Summing in July 2012 []
  2. Walter Isaacson’s Steve Jobs []

The Critical Path #106: Can Bitcoin Be Money?

This the the first of hopefully a series of talks on Bitcoin. The hope is to assess it as a disruption but first we need to understand the differences between a store of wealth, a currency and money. Then we need to understand what jobs each of these is hired to do and whether Bitcoin is better or worse than the incumbents and whether it has “headroom” to get better in those cases where it’s not good enough.

via 5by5 | The Critical Path #106: Can Bitcoin Be Money?.

A way to measure one’s life

In the post Seeing What’s Next, I showed how the rate of change of adoption of technology varies with time and asked what might be experienced by present and future generations.

It turns out that knowing how what innovations become universal and the speed at which these technologies are replaced can give us an idea of what individuals might experience in their lifetimes.

Here’s how to think about it:

Screen Shot 2013-11-19 at 11-19-8.04.42 PM

Continue reading “A way to measure one’s life”

Sponsor: Lootback

Your client deadline is in the morning and you really need some web design resources to finish out the project. A dollar here and a dollar there, often stock items add up quickly.

Just because you’re using stock doesn’t mean you have to jack up your prices. There is a better way to stay competitive.

Lootback, the newest addition to your design toolbelt, pays you to make your purchase from the big stock retailers like Envato, iStock, Shutterstock, DepositPhotos, and ThinkStock.

With Lootback you can search all the marketplaces in one spot. Once you find that perfect item, create an account with Lootback, then head over to the other marketplace and buy it. Lootback will track your purchase and get paid a commission for generating the sale. Then they split that commission with you and credit your account to lower your overall costs.

It’s a pretty unique idea that I’ve never seen before. Lootback will save you time and money, so be sure to give it a try.

Sponsorship by The Syndicate

How many years does Apple have?

The graph below shows the Revenue and Operating Income for a select group of companies. The large numbers represent the share price to earnings (trailing twelve months) ratio (P/E or PE ratio).

Screen Shot 2013-11-06 at 11-6-2.56.25 PM

Of course the P/E ratio hides a lot of subtlety. It mostly fails to account for the fact that earnings are largely a matter of opinion. A company can defer income (as Apple and Microsoft do), it can invest earnings (as Amazon does) and can otherwise avoid declaring it since it’s taxable. Continue reading “How many years does Apple have?”

The diffusion of iPhones as a learning process

All theoretical and empirical diffusion studies agree that an innovation diffuses along a S-shaped trajectory. Indeed, the S-shaped pattern of diffusion appears to be a basic anthropologic phenomenon.

This observation dates as far back as 1895 when the French sociologist Gabriel Tarde first described the process of social change by an imitative “group-think” mechanism and a S-shaped pattern.1 In 1983 Everett Rogers, developed a more complete four stage model of the innovation decision process consisting of: (1) knowledge, (2) persuasion, (3) decision and implementation, and (4) confirmation.

Consequently, Rogers divided the population of potential adopters according to their adoption date and categorized them in terms of their standard deviation from the mean adoption date. He presented extensive empirical evidence to suggest a symmetric bell shaped curve for the distribution of adopters over time. This curve matches in shape the first derivative of the logistic growth and substitution curve as shown below. Screen Shot 2013-11-06 at 11-6-1.51.57 PM

In the graph above I applied the Rogers adopter characterization to the data we have on the adoption of smartphones in the US. The latest data covering September is included.

Continue reading “The diffusion of iPhones as a learning process”

  1. Tarde was probably influenced by mathematician Pierre François Verhulst who first published the logistic function in 1845 []

Do ads work? The ad budgets of various companies

Microsoft spent $2.6 billion for Advertising in the fiscal year ended June. Apple spent $1.1 billion in its fiscal year ended October.

Other companies will report their full year ad spending later but their previous years’ spending is shown below.

Screen Shot 2013-11-04 at 11-4-4.55.03 PM

I added a second graph showing the percent of sales that each ad budget represents. Note that Coca Cola retains the crown as the most prolific advertiser when it comes to budgeting.1

Continue reading “Do ads work? The ad budgets of various companies”

  1. Think of it as 7 percent of every Coke purchase going to pay for the ad that presumably got you to buy it. []