Apple And The “Noah” Rule

Critics: Apple Has Nothing Under Construction

Following Apple’s iPhone Event last Tuesday, September 10th, the Pundits – echoed by the stock market – have been relentlessly critical of Apple’s iPhone 5C pricing strategy. Investors have driven Apple’s shares down more than 10% since last week’s event. Snippets from some of the commentary:

(Author’s note: You don’t have to read every snippet. But you might want to re-read them after I’ve made my point.)

  • (A) common theme emerges: Apple should have used the device to establish a new iPhone price band low enough to drive growth in big, price-sensitive markets like China. But it chose not to, essentially doubling down on the market’s increasingly more saturated higher end, and protecting its high margins. And, in doing so, it has — for the time being — forfeited the market’s massive not-at-all-saturated lower end to Android. ~ Source
  • “(Innovation) has slowed down,” said Laurence Balter, chief market strategist at Oracle Investment Research, when asked about innovation at Apple. ~ Source
  • (I)nvestors and consumers alike are wondering if innovation is truly stalled without the late co-founder Steve Jobs at the helm. ~ Source
  • Jobs is believed to have left Apple with a pipeline of product plans and new ideas, but the longer we get from his passing, and the longer it takes for those products to come out, the more investors may question their existence. ~ Source
  • In his (biography of Steve Jobs), Isaacson wrote that Jobs left Apple a pipeline of innovative products for several years. “We are not seeing them yet,” Isaacson said. ~ Source
  • Indeed, (what they’ve shown us is) not an innovation at all, but merely a refinement and systematic roll-out of an old idea…. ~ Source
  • Many expected chief designer Jony Ive to carry Jobs’s visionary torch, but so far, it’s not clear if he has the equivalent vision.” ~ Source
  • “The C in 5C does not mean ‘cheap’ as I had hoped. It means clueless, as in clueless about how the vast majority of new smartphone users are paying for their phones.” ~ Fred Wilson
  • “Just how far behind is Apple trying to fall? I do not get Tuesday’s release and product launches. Something is just wrong,” Doug Kass of Seabreeze Partners Management said in a note Wednesday. Customers in emerging markets are price-sensitive and want a lower-priced phone, but the iPhone 5C — or “iPhone dud,” as Kass describes it — won’t be cheap enough to drive market share gains that could lead to earnings growth.
  • “I think (Steve jobs) would have abhorred plastic, he would have thrown that out the window,” said Balter.” ~ Source
  • “Maybe we should call him ‘Timid Tim,’” Troy Wolverton writes for The San Jose Mercury News. “As Tuesday’s iPhone event showed yet again, Apple under CEO Tim Cook is anything but bold,” Wolverton writes.
  • (Cook) has demonstrated a spectacular lack of imagination as to how to spend Apple’s riches. ~ Source
  • What (the pricing policy) doesn’t represent is any clear answer about where Apple goes when that engine finally runs out of fuel. ~ Source
  • People keep believing there will be a “next big thing” at some point, but the fact is there is no next iPhone, at least in terms of the amount of value it has created in such a short time. ~ Source
  • (Apple) seems to have no idea what to do with that embarrassment of riches except to try to grow it just a bit more and that isn’t a strategy, it’s score keeping. ~ Source
  • Apple is suffering a classic case of The Innovator’s Dilemma. It invented the modern smartphone, profited wildly, and is watching the industry change beneath it. But it can’t seem to do anything about it except try to wring out as much profit from the existing business model as possible. ~ Source
  • It’s hard to be the one to kill your own golden goose and it’s much harder to know when the right time to do that is, but increasingly it feels like the time has already come for Apple. ~ Source
  • In the end, Cook chose to spare the golden goose. But the goose will eventually be cooked. Whether the CEO has a plan for that remains to be seen. ~ Source
  • These days, Apple is more like a fashion label than an electronics company….Apple is becoming more like Prada and less like Edison. ~ Source
  • Some are questioning how much more innovation is really even possible in smartphones right now. Scott McGregor, CEO of Broadcom Inc. BRCM +2.45%  said a few weeks ago in a press round table discussion that he believed innovation in smartphones had stalled. ~ Source

Pop Quiz #1

Who said:

“If you’re long-term oriented, customer interests and shareholder interests are aligned.”

See answer, below.

How Construction Works And How Construction Looks To Outsiders

(I)t’s worth noting that Apple’s strategic choice is confounding for another reason. Consider the lucky man who builds a great business and finds himself wealthy beyond imagination. He builds a grand palace overlooking the ocean. Over time, though, he realizes the cliffs are eroding beneath his palace. He could do something radical, like move his palace to higher ground or spread his real estate holdings across many different regions. Instead, he chooses to buy some new carpet and repaint. ~ Mark Rogowsky

Really, Mark? Apple’s just been sitting on its hands, not doing any additional construction? If that’s what you think, then it is no wonder that you’re confounded. Let’s take your analogy and run with it, shall we?

Construction houseIn construction, there are roughly five phases: ((There are, of course many phases, which use many names. This is just one variant.)) Foundation, Framing, Rough-In, Close-In and Finish.

Foundation: Easy to see progress. Big earth movers come in, dig out the foundation and block is laid.

Framing: Also easy for outsiders to see progress. The outline of the building quickly rises atop the foundation.

Rough-In: At this point, if you’re watching the construction, you may feel that everything has come to a screeching halt. This is when the water, electric, sewer, etc, is connected to the house. Much of the work is done underground and all of it is nearly invisible to the outside observer.

Close-In: After the Rough-In is completed, the house is “closed-in” – made watertight – and the interior infrastructure, such as air and heating ducts, electrical wiring, plumbing, etc. is added. This phase is frustrating to watch too. Although lots and lots of work is going, to the casual observers, it seems like little is happening.

Finish: Now we’re talking. Lots of action and lots to see. The floors go in, the drywall goes up, there’s spackling and painting and the cabinets and tubs, etc. are put in. Lots or motion, lots of changes, lots of progress for the casual observer to readily appreciate.

Mark Rogowsky, and the other pundits, are claiming that Apple is idly watching the metaphorical ground beneath its business being washed away while taking no more action than to “buy some new carpet and repaint.” I think this is a childish claim that blatantly ignores the known facts. Apple is doing lots and lots and lots of new “construction” to their business, however, to the casual observer, the construction appears to have come to a grinding halt because Apple is currently moving from the “Rough-In” phase of the construction to the “Close-In” phase. But just because the casual observer cannot SEE a lot of activity does not mean that Apple has not been active. On the contrary, the savvy observer can clearly see that Apple – like any good construction company – is quietly installing the infrastructure necessary to support a huge additional build-out.

Pop Quiz #2

Who said:

“We are willing to think long-term. We start with the customer and work backwards. And, very importantly, we are willing to be misunderstood for long periods of time.”

See answer, below.


So, what kind of infrastructure (mostly hidden from the public eye) has Apple been putting into place recently? Well, contrary to common belief, there’s been a LOT of activity, so let’s just list it in alphabetical order.

Appearances often are deceiving. ~ Aesop

A7 Processor:

— “Desktop class architecture”

Speed to spare, and hard to catch from behind.

While Samsung was going for brawn w/ 8 cores, Apple went for brains w/ 64-bit. ~ Adam J. Reid (@read_reid)

No one else can go 64-bit any time soon because the backward compatibility tax is too large to support. ~ Steve Cheney (@stevecheney)

It will be amazing to see what developers do to take advantage of 64 bit and create new class of applications. ~ ßen ßajarin (@BenBajarin)

Apple TV:

— Not the one that exists today, but the the one that is yet to come; the one powered by the new A7 chip, running iOS and using the new gaming controls (see “Games”).


— Bluetooth Low Energy (BLE), a technology that has been in Apple laptops since 2011 and in all phones since the iPhone 4S. Apple simply throws a switch, and 200 million users are good to go — no waiting for NFC chips.


— DoCoMo: Biggest carrier in Japan

— China Mobile: Biggest carrier in world

— ‘Nuff said.


— “Cases?”, I hear you say. “Cases aren’t innovative. Well, just chew on the following data a bit before you make a final decision on that point:

Apple’s case for the iPhone 5S: $39 For the 5C: $29 Nokia’s average selling price for feature phones: $34 ~ Benedict Evans (@BenedictEvans)


Forrester jumping on the “5S will be a big deal for business” bandwagon (I’m the driver) ~ Ben Thompson (@monkbent)

Free Software:

— iOS 7, All five iOS iWork and iLife apps, iWorks and iLife in the Cloud, (and possibly OS X Mavericks, too) all free.


Game Controller Framework

Apple’s big bet on iOS 7 gaming


— With iBeacon, Apple is going to embrace the internet of things.

Bluetooth Low Energy support in the form of iBeacons. An announcement that might well start a little revolution, not so much because Apple invented it (in fact they did not…) but because iOS support of any protocol that more of less makes sense usually ends up in a drastic uptake of its usage, and this particular protocol happens to really make sense.

— Replacing NFC

Indoor applications for iBeacons

Cash Registers


The Internet of things

iPhone 5C Product Placement:

— For all intents and purposes, Apple’s mainstream iPhone (the iPhone 5C) just dropped in price by $100.

What exactly did Apple just do? Amongst other things, halved the US price of the iPhone. ~ Benedict Evans (@BenedictEvans)

— You can’t market a one-year-old phone. Apple is already marketing the begeezus out of the iPhone 5C.

The 5C to me seems more like a play at not making the iPhone 5 feel like the “old version.” Which could work brilliantly ~ Abdel Ibrahim (@abdophoto)

— The iPhone 5C is to the MacBook as the iPhone 5S is to the MacBook Pro. The former is the company’s standard, the latter is company’s premium offering.

Does anyone really think typical consumers will see a blue iPhone 5c in store & say “oh, it’s just last year’s chipset in a new enclosure”? ~ Benedict Evans (@BenedictEvans)

iOS 7:

“The vivid realization of hardware and software together in one device.”

iTunes Radio:

Pandora’s box might have just been slammed shut.

M7 Coprocessor:

— M7 knows when you’re walking, running, or even driving. The combination of the M7 and iBeacon promises richer contextual computing.

Apple co-opting wearable tech by putting the … sensors into the phone. ~ Benedict Evans (@BenedictEvans)

Apple saw a job to be done around fitness so they did the only sensible thing: designed and built a new chip, the motion coprocessor. ~ Horace Dediu (@asymco)


Around this time a year ago, Tim Cook wrote a letter to Apple’s customers apologizing for Maps. Exactly a month later, Apple announced a major executive reshuffle. Forstall resigned. Jony Ive took charge of Human Interface in addition to Industrial Design. A new Technologies group was created, led by Bob Mansfield, who returned from retirement. Federighi and Cue took over additional responsibilities as well.

Failure is success if we learn from it. – Malcolm Forbes

Mac Pro:

Over the top power.

OS X Mavericks

— Pending…any day now…


— Mobile payments — The Holy Grail of eCommerce.

Passbook seems like a good way to extend finger scanner to 3rd parties. Controlled, no 3rd party code. ‘Unlock this pass with your finger’ ~ Benedict Evans (@BenedictEvans)

Touch ID:

— The foundation for customer convenience, personal privacy, enterprise and government security, in-person and on-line payments, and more.

The above items are the building blocks for Apple’s future. They are the equivalent of the infrastructure – ducts and the pipes and the electrical wiring – that is the very blood and guts of a new home.

Apple has not been idle – far from it. They’ve been patiently laying the groundwork for a whole new Apple, one built on a whole new foundation.

Pop Quiz #3

Who said:

“Invention requires a long-term willingness to be misunderstood. You do something that you genuinely believe in, that you have conviction about, but for a long period of time, well-meaning people may criticize that effort. When you receive criticism from well-meaning people, it pays to ask, ‘Are they right?’ And if they are, you need to adapt what they’re doing. If they’re not right, if you really have conviction that they’re not right, you need to have that long-term willingness to be misunderstood.”

See answer, below.


A building has integrity just like a man. And just as seldom. ~ Ayn Rand

What will Apple’s construction look like when it’s finished? It’s always hard to tell during the Close-In phase, and it’s even harder to tell when one is looking on from the outside, as we are. So I make no promises.

PATIENT: Doctor Doctor, will this ointment clear up my spots?
DOCTOR: I never make rash promises!

However, I – and anyone who has been truly paying attention – can tell you that Apple is slowly, methodically, painstakingly, laying the foundation for the next stage of their existence. To think or say otherwise is simply wrong-headed.

There are no shortcuts to any place worth going. ~ Publilius Syrus


No innovation at all…Tim Cook has demonstrated a spectacular lack of imagination as to how to spend Apple’s riches…Apple has no answer about where to go when the profit engine finally runs out of fuel…There is no next iPhone…Apple is watching the industry change beneath it, but can’t seem to do anything about it…One wonders how much more innovation is really even possible…

Really? Seriously? Honestly?

Are the pundits watching the same Apple that you and I are watching?

Things happen fairly slowly, you know. They do. These waves of technology, you can see them way before they happen, and you just have to choose wisely which ones you’re going to surf. If you choose unwisely, then you can waste a lot of energy, but if you choose wisely it actually unfolds fairly slowly. It takes years. ~ Steve Jobs

Based on the available evidence, which seems more likely: Apple has stopped working on innovating or the pundits have forgotten how innovation works?

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.’ — John Maynard Keynes, The General Theory of Employment, Interest and Money.

The pundits want Apple to fail in the conventional way (like Microsoft, and so many other tech companies have). Apple has a different idea in mind. They want to succeed in an unconventional way.

Apple believes in the “Noah” rule.” ((Predicting rain doesn’t count; building arks does. ~ Warren Buffett)) While the pundits are spending their time predicting rain, Apple is spending their time building an Ark.

Pop Quiz Redux

Who said:

“If you’re long-term oriented, customer interests and shareholder interests are aligned.”

“We are willing to think long-term. We start with the customer and work backwards. And, very importantly, we are willing to be misunderstood for long periods of time.”

“Invention requires a long-term willingness to be misunderstood. You do something that you genuinely believe in, that you have conviction about, but for a long period of time, well-meaning people may criticize that effort. When you receive criticism from well-meaning people, it pays to ask, ‘Are they right?’ And if they are, you need to adapt what they’re doing. If they’re not right, if you really have conviction that they’re not right, you need to have that long-term willingness to be misunderstood.”


1) Jeff Bezos
2) Jeff Bezos
3) Jeff Bezos

Surprised? The pundits love Jeff Bezos. Why don’t they love Apple? Apple is following Bezos’ advice to a “T”.

Pompous Premature Postulations And Predictions Are The Pontificating Pundits’ Purpose And Purview

A PUNDIT walks into a bar and starts drinking quite heavily. After a while he starts bothering the barman, (who happens to beTim Cook), about the air-conditioning – first he asks for the air-conditioning to be turned up because it is too hot, then he asks for it to be turned down because it is too cold. This goes on for a couple of hours. To the surprise of others, the barman is very patient, walking back and forth and being very accommodating. Finally an observer asks, ‘Why don’t you just throw him out?’

‘Oh, I don’t care,’ says Tim Cook with a grin.

‘We don’t actually have an air-conditioner…

Tim Cook is ignoring the pundits’ constant griping. We should too.

Published by

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?

31 thoughts on “Apple And The “Noah” Rule”

  1. Great analysis. The problem the pundit’s have is they believe there is really nothing Apple can do to stop the rising Android tide except maybe a cheap iPhone. But really since the Android model is “free” and “open” Google doesn’t have the incentive or control to make the investments in the future of Android that Apple can in iOS. So the “rising Android tide” might not be as long term as many think.

    1. Just like there is nothing Apple can do to save itself except release a netbook. Or license its desktop OS. Remember those pundit arguments? Since Apple doesn’t behave like all the other commodity electronics companies, they are obviously doomed. And no matter how successful they are charting their own path, they will forever be doomed.

  2. Well done. You brought a smile to my face. Truth and a good perspective presented in an entertaining way. Yes, well done.

  3. Great analysis – but will be wasted on the pundits. However, while I agree that Apple is preparing its long-term strategy – the relentless and general negative media coverage has a consumer impact – and one that Apple cannot ignore. I’m hearing too many comments about Apple’s losing its cool and as a result those in their 20s trying out Android phones. We live in a very impatient society.

    1. I don’t think many Millenials watch Bloomberg or CNBC or read the WSJ. In fact, very few people do relatively speaking. The same goes for technology publications like Venture Beat that beat up on Apple every day. But they flock to Apple stores at the mall that’s for sure.

      1. Agree. My daughter in high school told me that lots of people were excitedly showing off their iOS7 customizations yesterday at school. Just about everyone had upgraded already.

  4. @John Kirk I love the way you weave quotes; ’tis truly a work of art. I was impressed the first time I saw you do this (and joined the Insiders Club as a result). I’m far more amazed seeing that you’re simply that brilliant.

    I find it amazing that very few see how Apple analyzed what they, uniquely, are good at. Others may quickly copy the 64-bit architecture card, Apple’s business structure (like Microsoft) and such, but they don’t understand “why” Apple chose to do such things. Mimicry doesn’t save you; it only makes you think you’re safe.

    A 64-bit JIT for Dalvik will make such an Android platform have some benefits, but I believe that’s very short-sighted. Apple just “winked in” an entire 64-bit mobile ecosystem. I calculated (and AnandTech pretty much confirmed) the total compute power of the iPhone 5S at 80 gigaFLOPS, roughly comparable to a Core 2 Duo Windows desktop PC from 2007, with a then-typical graphics adapter. What happens when developers start treating the iPad as a serious computing platform, and the 2nd generation 64-bit iPad has as much compute power as a Sandy Bridge dual-core Windows laptop from 2011?

    Still, I don’t think Apple will replace Intel with the A8/A9 in their MacBook Air’s. I suspect they’ll chase Intel up-market into servers, having conquered mobile, eviscerated desktop and summarily replaced laptops. Then, in need of Intel’s process node technology, Apple will simply acquire Intel. There’s no point in doing so until Intel has delivered Apple’s enemies, and the means to defeat them, into their hands. Apple needs a fab if, as both Cook and Jobs have said, they are to own their own destiny. Why acquire now, when there are other battles to fight, and Intel can take all the risk to get the 10nm process node working?

    1. Oh yeah, and though the 5c is awful pretty,the 5s (with the 64-bit processor) is the one to get if you’ll have it for 2 years or longer. In 3 years, Apple will have moved to 64-bit only, retina-only.

        1. What’s wrong with the 5C?

          That’s the beauty of Apple’s new two-phone strategy. It used to be that you “settled” for the 1 year old model in order to save $100. Now some people actually PREFER to 5C to the 5S. Market segmentation at its best.

          1. I agree. There’s nothing WRONG with the 5c, definitely not. The 5c does not represent the future of Apple.

            Once Apple has a solid 64-bit only software ecosystem established, they will move to discontinue 32-bit app support; even if they don’t, performance when running a mixed environment will suffer (as with OS X, which uses less memory and runs much faster when 32-bit support is not called in). It may take a year or two to get to 64-bit iOS only.

            First, only 64-bit apps will be accepted into the App Store; then, 32-bit support will be removed. This will happen as quickly as 3-4 years.

    2. “John Kirk I love the way you weave quotes” – Bill Smith

      You are most kind and your comment is truly appreciated.

  5. The media is corrupt, perfidious and wants to murder Apple!! It is absolutely shameful and revolting. It reminds me of Nazi Germany.

  6. Great post. Most pundits were not around when Apple slowly and painstakingly built its previous foundations for the Mac (multiple times), iPod, and iPhone. They don’t realize that much of iPhone’s (and iPad’s) success is due to the foundations laid and knowledge gained by Apple during the iPod years; in manufacturing, strategy, ecosystem. Google, Blackberry and Microsoft copied the obvious in building OSes and ecosystems, but have missed on much of the underlying work that leads to longer-term sustainability.

    Now the pundits want to point back on how great things were back in the 2000s, and how Apple has fallen away from those things. They quickly forget that most of the pundits of that time were just as stupidly critical, and over time, proven wrong. Since today’s pundits choose to forget history, it just repeats itself.

    1. And the OS X years. Remember the shellacking Apple got over OS X when it first came out? Talk about dividends now!

      1. Precisely. Developers were furious about the lack of backwards compatibility, but they would never have invested the effort to make their Mac Apps outstanding if Apple had caved.

        My view is that Steve learned from watching IBM fail with their ‘better Windows than Windows’ strategy on OS/2. Without being forced to write native applications, developers would rather coast and offer the identical features across platforms. What that does is handicap the platform for the developer’s benefit.

        1. We see these Apple stones again in its refusal to cave to upgrade pricing in the App Store. Apple has shown via iWork and its Pro software sales tactics that it believes selling at a single low price to all is the way to go. Developers should provide free upgrades to fix problems and possibly to add minor features, but the next major version is to be sold at the same price to both those who already own and those who don’t own the previous version.

    2. MS, unfortunately, never had the stones for foundation building. I think one of the worse makes in PC history was keeping 32bit compatiblity in x64 Win7. If they had made Win 7 home x86 and Win 7 Prof x64 only, I think we would be all x64 in PCs today.

      It would certainly make dev easier when all SDKs everywhere are x64. Apple didn’t seem to make that mistake.

      1. Microsoft, at least until Windows 8, has always deluded itself about the potential for upgrades of existing systems. (Studies have shown that no more that 15% of users have ever upgraded to a new version of Windows.) This led to a worship of backwards hardware compatibility, that had two bad effects. It kept the software from advancing and produced terrible user experiences when the relatively few customer who did upgrade installed versions on systems that weren’t up to the task–Microsoft has always seriously understated Windows’ hardware requirements. With Windows 7, there was the complicating factor of netbooks, almost all of which ran on 32-bit processors.

        Apple has always been willing to set realistic hardware requirements and to refuse to extend backward compatibility to inappropriate systems. And when it has had to resort to compatibility kludges, such as Rosetta, it has made sure they were for short-term transitions, not permanent features.

        1. Well said, Steve. Microsoft seems to follow the ‘customer is always right’ theory, regardless of how those customers fail to think ahead, exaggerate complications or hold on the past too long, despite the consequences.

          I once knew an outstanding advertising company that had a designer who wouldn’t move off of Creative Suite 1, despite it being 2011 and vastly outdated already. The sheer lost productivity over the long haul wasn’t important to her. The week of theoreticaal disruption seemed the end of the world.

    3. I think it’s more that they dismissed Apple then, and since they were proven wrong, they play the ‘well, that’s all history now’ card.

      While researching my book, Anatomy of an Apple – the Lessons Steve Taught Us, I decided to focus an entire chapter on the phenomenon.

      These pundits have a clear agenda, and they react as though Apple has upended the laws of nature when they succeed with anything.

      The default was to write everything off with a ‘magical’ explanation – The Reality Distortion Field. In fact, methodically preparing a solution and carrying out your plan, while effectively correcting the disinformation spread by you detractors, isn’t magical. It’s common sense.

      The current vogue of ‘back in the 2000’s…’ being used is simply meant to shield the defeatists from being called out on their historical attacks on Apple.

      1. Agree, in the 2000s, the pundits completely missed the foundation Apple was building with iPod and iTunes Store. When MS released the Zune in late 2006, Jobs, in responding to a question about whether he was surprised, was quoted as saying something like “of course; they had to”. When Apple introduced the iPhone just a couple of months later, it seemed obvious that Jobs had been referring to the need for MS to evolve the Zune into an iPhone competitor; in other words, MS had to enter into devices to really compete. But of course the Zune never did evolve or become the foundation for anything else.

        iPod was Apple’s training ground for creating and building large quantities of smart computers in mobile devices. It spanned from touch interfaces and materials to supply chains. iTunes Store, which included music, video, podcasts, and even games for a time, was Apple’s training ground for creating and negotiating an easy-to-use, easy-to-sync ecosystem.

        Apple’s current success has been built a step at a time over the long haul of 15 years; in that sense, it’s not really magical at all.

  7. The Bezos quote thread was great. All of it was great. Perhaps your best (yet!). Bezos understands Jobs’ and Apple’s perspective. The markets (consumer & stock) reward Amazon for Bezos’ Apple-like view without even realizing it.

    Those who say Jobs would abhor the plastic (covered) iPhone 5c are forgetting the iPhone 3G/3GS, the iPod, MacBooks, iBook, iMac, etc. Aluminum and glass came later. Each material can be made to serve a purpose — later is not necessarily better.

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