Apple Defines Wearables as Fashionable Computing

Apple pioneered the PC, the mouse-driven PC, the digital music player, the modern laptop, the smartphone, and the tablet. Steve Jobs directed the creation of each of these transformative products, collaborating with Steve Wozniak, Jon Rubinstein, Jony Ive, and others along the way. Apple is now entering Wearables without Steve Jobs at the helm – though Jony Ive’s fingerprints are all over the Apple Watch (literally. The Apple Watch is a fingerprint magnet). Along with several other Techpinions columnists and a few thousand journalists, Apple employees, and Apple guests, I attended the launch and got hands on with several Apple Watches.

A Strange Way To Launch a Product (for Apple)

Apple famously limits the number and type of products it works on. When it enters a new product category, like smartwatches or tablets, it explains what it thinks is wrong with the existing products and what role its device will fill. Apple also often curates use cases for a new product, and opens it up for apps and features later. The original iPod had fewer features than the competition; it took years before FM radio was added. The first iPhone was described as a phone, an iPod, and a web browser – the App Store did not come until a full year later. The context portion of Apple’s launch monologue typically explains why a minimalist approach makes sense. The limited functionality allows consumers to understand precisely what the problems the product is designed to solve – even consumers did not realize they had that problem before Apple pointed it out.

That is not how Apple CEO Tim Cook introduced the Apple Watch. Like Samsung or Google or Asus, Tim Cook simply said Apple is building a watch. He then went on to describe endless features – exceptionally accurate timekeeping, interactive watch faces, fitness tracking, notifications, Siri dictation, GPS directions, Apple Pay, hotel access, BMW integration, watch-to-watch communication, and more. Rather than take the less-is-more approach – with more-is-more over time — Apple jumped straight to the more-is-more stage. This part reminded me of the iPad launch. However, the iPad really was “just” a larger iPod touch – and it was fair to say that consumers understood the value proposition of iOS apps on a larger display. That isn’t the case for apps on watches.

Consumers need concrete reason to buy things, especially new things; Apple may try to rectify this closer to launch. Google has not explained to consumers why they need an Android Wear watch, and mainstream consumers are not buying them. Samsung has not explained why consumers should buy one of its Tizen watches, and they are not selling, either (Samsung stuffed the channel with the first generation Galaxy Gear, but many ended up being given away with purchase of a Samsung TV or smartphone). Note: the reason to buy an Apple Watch is crystal clear for early adopters – get the first Apple Watch! I’ll discuss that below.

In Apple’s conception, a smartwatch does not solve a limited set of problems, it is intended to be a computing platform that combines fashion and a unique user interface. While Apple is prioritizing timekeeping, watch-to-watch communication, and fitness, Apple does not really know which watch apps will appeal to consumers – the apps have not been written yet. The Apple Watch will not be available for at least a few months, and it was announced now to give developers time to write apps. (The fact that it stalls consumers from buying rival smartwatches is a really nice bonus.) This launch was as much an appeal to developers as it was a pitch to consumers.

So What is the Rationale Behind the Apple Watch?

Tim Cook didn’t explain why Apple said “yes” to the watch and “no” to all the other things Apple could have built instead. So I’ll provide three:

  1. 1. Apple SVP Design Jony Ive wanted to wear a watch that he and his staff designed. I’m completely serious. Apple is unlike any other consumer technology company in that its products do not always start as ideas from Engineering or Marketing, they often come from Design. Vendors competing with Apple tend to be organized differently, and their product focus and prioritization of attributes within those products reflect it.
  2. 2. Apple strongly believes in the power of new user interfaces to create new categories. Once the design staff decided to investigate watches as a potential product, they not only did research on horology, but on user interface design. The combination of touch, force touch (pressing down harder invokes secondary options), and using the crown for variable zooming is different from any of the existing smartwatches. Does it work? We’ll see. But Apple believes that this opens up new possibilities for small-scale app design.
  3. 3. Apple is capitulating to demand for larger phones, and that opens up the opportunity for limited computing experiences at times when pulling out a large device from your pocket or purse is unwieldy. For example, Apple Pay is built into the iPhone 6 and the Apple Watch, but it makes a lot more sense on your wrist. Fitness tracking is easier on your wrist. Looking up directions is better on a phone, but following directions on your wrist is fantastic. This is similar to the reason Apple gave for building a tablet, as there are times when a phone is too little and a laptop is overly fixed and complex.

Key Attributes of the Apple Watch

It is a fashion device first. It is expensive – there are three collections (with six watch band options), and they start at $349. The gold version could be priced in the stratosphere: it’s real gold. No other vendor has paid this much attention to the style of the case and especially the straps, which are simply design masterpieces. There are two sizes – small and large 38 mm and 42 mm, and even the larger model is smaller than most competing smartwatches. No other smartwatch even offers a smaller, more female-friendly option. On the wrist, the Apple Watch looks much smaller than it appears in photos. Apple has also put a tremendous amount of effort into making the watch faces beautiful. Some are interactive. No smartwatch competitor has anything like this.

It’s a computing device second. The user interface combines touches, swipes, “force touch” (pressing harder), a side button, and a side scroll wheel/home button. Creating text is simplified with watch-generated short responses or with dictation (I was not able to get a live demo of this, but if it works well, it will significantly enhance usability.) No one thing is central to the Apple Watch – the concept of apps is the central conceit. This is similar to the iPhone (after the App Store was launched) and the iPad. Timekeeping is not central to the Apple Watch any more than phone calls are central to the iPhone. The Apple watch offers fitness tracking, navigation, notifications, NFC for Apple Pay, and much more. Two users with Apple Watches can send each other drawings and a haptic simulation of their heartbeat.

It is a phone companion (for now) requiring an iPhone 5 or better. The Watch does have its own processor and storage, so it can be used untethered for fitness tracking, music, and some apps. However, GPS, messaging, and anything requiring cellular connectivity will not work when out of Bluetooth range from an iPhone. Battery life is clearly an issue, as the screen turns off when you don’t have your wrist raised, and you’re expected to charge it every night using a magnetic cable. The magnetic connection is elegant, and an improvement on most competitors, though it is another unique cable to pack (and lose) while traveling.

Finally, the Apple Watch indicates the company is moving away from the “i” branding that started with the iMac and became a phenomenon with the iPod. It seems that Apple views the “i” mark as old fashioned and limiting, preferring the Apple mark itself for Apple Pay and Apple Watch.

Assessing Apple Watch Potential

Short term, Apple did not provide mainstream consumers a reason to buy the Apple Watch, but it certainly provided plenty of incentive for Apple early adopters: this is a gorgeous timepiece with a new user interface and endless utility. The pool of tech early adopters has increased significantly over the years; Pebble has sold over a quarter million watches. Apple early adopters are a far (far) larger group than that, and Apple should expect to sell millions of first generation Apple Watches.

Long term, two assumptions must be made. First, that Apple’s user interface works well, and second, that app developers show the value of having computing capabilities on your wrist. Given Apple’s track record with user interfaces and its relationship with developers, both of these conditions are probable. If both are proven true, the Apple Watch will have broad appeal to the installed base of iPhone users. This is a finite pool, though it is large, and some consumers may potentially buy more than one Apple Watch. Apple may make the Apple Watch less dependent on an iPhone in a future version, opening up adoption to consumers who use Android (or Windows) phones.

The biggest driver for mainstream adoption in the second and third generations is likely to be a lower entry price point. However, higher end models – potentially extremely high end – will remain in the line for as long as consumers buy them or they lend the line cachet. Apple could also expand its styles, adding a round design and creating special editions. Apple could also expand the connectivity contained in the watch; while it is unlikely that a watch would replace smartphones for most people, it is certainly conceivable that, sometime in the future, Apple might design a watch that could.

This column was adapted from a Current Analysis report. The full report includes key competitive comparisons and recommendations for Apple, Google, Samsung, Pebble, and MetaWatch.

Thoughts On Apple

Let’s start with the bad news: The Apple Watch. This beautiful, technological marvel is, in my view, the device our future selves point back to as delineating when Apple changed forever.

Not necessarily for the good.

The company long known for delivering absolutely amazing computing devices, so perfect, so uncannily universal that often times, one device, one product line, one price point is sufficient, is no more. The new Apple Watch starts out with three distinct variations and what appears to be a near-infinite number of eye-catching bands.

This feels wrong.

Tim Cook said the Apple Watch is the company’s most “personal device yet.” Maybe so. At present, my take is thus: The Apple Watch is a pricey talisman, one certain to accelerate the top-line yet with only marginal tangible benefit to Apple’s existing customers.

Have we crossed a line?

The Strange Changes

Yes, change is necessary, often good. I realize this is Tim Cook’s Apple, not Steve Jobs’ Apple. That’s both obvious and expected. What I find so troubling is that I no longer know if this is my Apple. Having defended Apple for years against the silly, baseless charge that “Apple is a marketing company,” I woke up last week to discover that, as John Gruber flatly stated, “Apple is not a tech company.”  

I am at a loss to adequately explain why anyone would pay $349 for this device. Indeed, $349 just gets you in the door. Yes, many analysts made similar declarations about the iPhone and the iPad. Fair enough. The Apple Watch may prove transformative. Still, Apple was able to fully, succinctly proclaim exactly how we could and would all benefit from those earlier products. This is much less so with Apple Watch:

It’s the most personal product we’ve ever made, because it’s the first one designed to be worn.

Yes, but what does it do? And why should I buy one?

A device you wear is vastly different from one you keep on a desk or carry in your pocket. It’s more than a tool. It’s a very personal expression. 

Yes, but what does it do?

Apple Watch combines a series of remarkable feats of engineering into a singular, entirely new experience. One that blurs the boundaries between the physical object and the software that powers it.

I do not understand.

Apple Watch also presents time in a more meaningful, personal context by sending you notifications and alerts relevant to your life and schedule.

Such as?

Apple Watch is right there on your wrist, so it makes all the ways you’re used to communicating more convenient. 

Tell me one!

Don’t Want To Be A Richer Man

Most of the world could never afford Apple products, be they Macs or iDevices. This was, frankly, because the costs of quality, usability, integration and reliability necessitated those high prices. True, Apple margins on iPods, iPhones, iPads and some Macs are sizable. Prices can be lower, in theory. The bargain between Apple and customer, however, is we accept these large margins knowing that year after year after year Apple products will get better, without fail, until a completely new magical device takes flight. That’s money well spent.

Will this be so with Apple Watch?

I think not.

Based purely on the company’s marketing messages, the various Apple Watch(es) appear priced primarily for reasons almost fully extraneous to its technology or functionality. I find this disconcerting, to say the least.

For most users, Apple offers the very best smartphone, tablet, MP3 player and laptop available anywhere. The Apple Watch changes this equation in no way. Still, I can’t help but wonder if my relationship with Apple will change now that this “non-tech” company so proudly offers what we assume will be, per Gruber, gold bands on deluxe watches that retail for an astounding $10,000 or more. 

I don’t even go into those stores.

Time May Change Me

Throughout its history, Apple has gifted us with numerous incredible devices. Recall the iMac, the iPod (classic) or the very first iPhone. We never envisioned such a device, then quickly wondered how we ever lived without it. It was as if someone from the future left this marvel behind, perhaps accidentally, perhaps as a test. But always, magic, always liberating. 

The Apple Watch feels the opposite of this. Lock-in is not liberating. With Watch, Apple has created a mobile computing device with a small screen which requires another mobile computing device with a small screen, the iPhone, before it can function properly. 

I can’t help but think how much better it would be — for us, the users — had Apple taken all that Watch work, all those Watch resources, and made the iPhone, iPad and Mac even better, more magical. This applies to the iPhone, in particular. The fact is, I believe Apple and iPhone are on the cusp of remaking everything and I selfishly do not want Apple to blow this opportunity by getting sidetracked with a watch.

And now the good news.

Change Their Worlds

In his long interview with Charlie Rose last week, Tim Cook stated it’s important to think about long term, big picture ideas. One of these, he said, is what comes after the Internet?

I suspect Apple is not merely thinking about what comes after the Internet, but actually working toward this. What is it? My prediction: The entire Internet done right. That is, a secure, family friendly, screen-optimized web paid for by all of us — with our money not our privacy.

Google should be very concerned.

With iTunes, apps, Apple Pay, Apple TV, iCloud, continuity, inter-app communication — now available across all screen sizes and devices — we can finally have our “web” the way we’ve always wanted, the way we’ve always deserved, before we foolishly allowed it down that horrible path back in the 1990s, funded by pornography, data tracking, unceasing ads and content “aggregation” that bordered on theft.

Apple has developed the tools to make these bad bits all go away. We get what we want, reliably, securely, privately, by paying for it, not by having bits of us taken, not by having our eyes and ears assaulted with unwanted garbage.

This will change everything. It cannot come soon enough. 

Oh, and the company is not just remaking the digital web and e-commerce. Apple is helping to re-configure offline retail, making it better, faster, more personal. Consider its currently available toolkit:

  • Apple Pay (money and credit)
  • Touch ID (security)
  • iPad (cash register)
  • iBeacon and Passbook (for deals and rewards)
  • AirDrop (peer-to-peer sharing of money and benefits)

No one else has anything like this.

Perhaps I’ve been unfair to the not-yet-released Apple Watch. But, companies can’t do everything. The iPhone is literally helping us to change the world. It is re-making commerce, the web, play, learning, work. I don’t want to lose this opportunity.

I fear the Apple Watch has captured Tim Cook’s focus and consumed the best of the company’s design, hardware and software skills. If so, while Watch may be great for Apple I believe it is detrimental for the rest of us.

Apple Watch Claim Chowder

People really love to hate Apple. It should be considered a disorder at this point. ~ J. Gobert (@MrGobert)

The Apple Watch may or may not fail, but the analysis of the Watch has already failed. People just cannot wait to pronounce judgment. They. Can. Not. Wait. There’s plenty of thoughtful analysis out there, but mostly we’re hearing the same old discredited theories dredged up and reanimated like some horrible army of undead zombies.

About one-fifth of the people are against everything all the time. ~ Robert F. Kennedy

There is something within human nature that immediately has a knee-jerk negative reaction to the new. If we’re not familiar with it; if we cannot understand it, we condemn it. Instead of saying: “I know little or nothing about this, so I’ll learn more and suspend judgement until I do” we instead say: “I know nothing about this…so it must suck.”

People’s reaction to ideas: Bad ideas: “That’ll never work” Good ideas: “That could work” Great ideas: “That’ll never work”

Not only are we terrible at assessing the new, but we seem compelled to share our uninformed opinions with EVERYBODY.

He who knows little quickly tells it. ~ Italian Proverb

Some say it’s wrong to mock those who make obviously stupid statements. There’s no sport in it.

Making fun of Apple’s critics is like hunting dairy cows with a high powered rifle and scope. ~ NOT P. J. O’Rourke

Others focus on more humanitarian arguments:

Do we really need insults at all? Aren’t insults just the precinct of the desperate or powerless, or simply of people too dim-witted to make cogent and logical arguments? Isn’t the whole phenomenon of insults…a sign of the general coarsening of culture? Such concerns are shared by many people, all of them half-witted, imbecilic cretins. ~ Insults Every Man Should Know

Look. These pundits said what they said. If they don’t like it, they can try to explain it away.

The surest way to make a monkey of a man is to quote him. ~ Robert Benchley

But don’t expect me to cut them any breaks. If they didn’t want to come off looking stupid, they shouldn’t have said stupid things.

I don’t suffer fools, and I like to see fools suffer.~ Florence King

images-102Intelligent debate is welcome and there are many questions surrounding Apple’s newly announced Apple Watch. But patently dumb allegations should not be debated — they should be mocked. So here are a couple (hundred) of my most unfavorite quotes, in all their glory, arranged sorta, kinda alphabetically by topic. Let the mocking begin.

Author’s Note: Some of the quoted material contains (R rated) curse words. I decided to use verbatim quotes in order to accurately convey their original tone and meaning.

Premature Punditry

I’ve got to start with this one via the Macalope. Dominic Basulto writes “Why I’d never buy an Apple smartwatch (even if Anna Wintour loves it)“. The beauty of this article is that it was written BEFORE Apple’s September 9th Event.

From all the rumors and leaks, it now appears that Apple is going to unveil the mythical iWatch at its much-hyped product launch event on Sept. 9. While nothing has been definitely confirmed … I still wouldn’t buy it.

As the Macalope says:

It’s always best to make summary judgments on things you know nothing about. That’s just logic.

Sameer Singh suggests a different approach.

Never dismiss a new product outright. Attempt to understand why it’s needed. Draw conclusions later. ~ Sameer Singh (@sameer_singh17)

Nah, that’s never going to happen. From the Claim Chowder archives:

Apple begins selling its revolutionary iPhone this summer and it will mark the end of the string of hits for the company. ~ Todd Sullivan, Seeking Alpha, 15 May 2007

Fools never learn.

Fools rush in where angels fear to tread. ~ Alexander Pope

Against logic there is no armor like ignorance. ~ Dr. Laurence J. Peter

People will always jump to conclusions and judge things that they don’t understand. You have to ignore all of the ignorant people out there. ~ Steve Jobs

Anecdotal

Showed my mom a tablet. She instantly got it and bought one. Same with Apple TV. If I showed her this watch…nope. ~ J. Gobert (@MrGobert)

Me: Hi mom, I’m back in town. How are you? Mom: I’m watching the Apple event. Me: Finally! Mom: Again! When can I order a watch? Me: !!! ~ Rene Ritchie (@reneritchie)

You’ve got your anecdotes and I’ve got mine. The important thing to remember is that anecdotal evidences is the BEGINNING of inquiry, never the end. Isolated stories can point us toward the truth, but they are not WHOLE truth. In fact, when taken in isolation, anecdotes are more likely to mislead than to lead.

Men are apt to mistake the strength of their feeling for the strength of their argument. ~ Anonymous

It’s bad to bring in a verdict before all the evidence is in. It’s even worse to bring in a verdict before the trial has even begun.

Battery Life

Apple hasn’t solved the basic smartwatch dilemma, which is that smart watches use up far more energy than dumb watches, and that there’s nowhere to store that much energy in something the size of a watch. Indeed, Apple has made the problem worse, by combining a powerful computer with a very bright, ultra-high-resolution, full-color display. Either of those things would require a lot of energy; both together require a very thick watch and a limited battery life. ~ Felix Salmon

My first knee-jerk reaction to the Apple Event was similar to the above. Apple didn’t announce battery life and I took that as a bad sign. Then I reconsidered. The product doesn’t even exist yet. Apple literally COULD NOT have announced the final battery life figures because they don’t know what they are. So I decided to cool my jets and wait until the numbers are announced. There will be more than plenty of time to criticize the battery life figures once we know what they are. Why start now?

Imaginary obstacles are insurmountable. Real ones aren’t. ~ Barbara Sher

And while we’re waiting for those battery life numbers to appear, let’s chow down on some delicious battery life claim chowder from yesteryear. Yum!

Unless Apple has also developed some new type of power source, such as nuclear cells or magical hamsters on tiny spinning wheels for the iPad, don’t expect the claims about battery life to hold true. ~ John Breeden II, Government Computer News, 28 January 2010

We hate the very idea that our own ideas may be mistaken, so we cling dogmatically to our conjectures. ~ Karl Popper

Charging Cable

CCable

Ugh, not another charging cable! ~ Joanna Stern (@JoannaStern)

Having to charge yet another device every day will be a bridge too far for many. ~ Forrester CEO, George Colony

(T)he user will have to take off the device for 1/3 of his life as well as carry an extra cable around with him. ~ Radio Free Mobile

Oh NO! We won’t have our device available to us for a full one-third of our life!

Admittedly, we’ll be asleep during that time, and dead to the world…

But still! One third of our life! And! And! And! And we’ll have to carry an extra cable! Oh, the horror! Oh, the HUMANITY!

Hindenberg

Sheesh. I swear, if Apple made a time machine, we’d all be complaining about it having a proprietary power cable. Sigh.

People thought it was scandalous that the iPhone needed to be charged nightly. Not a deal breaker if worth it. ~ Ben Thompson (@monkbent)

Buck up, people. We may not be the Greatest Generation, but I think we can tough it out and suffer through yet another charging cable.

Make it your habit not to be critical about small things. ~ Edward Everett Hale

They that are serious in ridiculous things will be ridiculous in serious affairs. ~ Cato the Elder

Coldplay

A watch playing Coldplay is a bug, not a feature. ~ John Collison (@collision)

Okay, I’ll concede that one.

Dangerous

Wearing a radio directly on the body spooks many people who rationally or irrationally fear the health risks of close electromagnetic radiation. ~ Forrester CEO, George Colony

Oh, for the love of G….

Look, what are you trying to say here? That I’d be more fearful of having all of those “irrationally-perceived-as-dangerous” radio waves at the end of my wrist rather than in my pants pocket right next to my jumbly-wumblies?

Are you freaking kidding me?

Never miss a good chance to shut up. ~ Cowboy wisdom

Everybody

AppleWatch may have a heart rate monitor but so does every serious athlete already. ~ Eric Perlberg (@eric_perlberg)

We never seem to get this right. It’s not the eggs that make the soufflé, it’s the Chef. Saying “every one already has” a feature is like saying that “every restaurant already has” eggs, therefore, every restaurant is of equal quality. Apple is the Master Chef of ecosystems. Others are more akin to the Dirty Spoon.

food-drink-bottomless_cup-free_refill-refill-fine_diner-coffee-58430219_low

Expensive

(A)t $349 [Apple Watch] is significantly more expensive than its better looking competitors (Moto360 $249, LG G Watch R $230). ~ Radio Free Mobile

Bx6VYdoIQAArt8D.png-large

It’s expensive — and not covered by carrier subsidies. It’s $600 for the whole package of a subsidized $200 iPhone and the $400 Watch. ~ Forrester CEO, George Colony

Apple clearly believes that the Apple Watch’s advances in size, speed, function and elegance are worth the $150 price premium, but not everyone feels that way. In an informal poll at the Macworld.com Web site, 40 percent of Mac fans indicated that they would not be buying an Apple Watch, and every single one cited the price.

Oh wait! Did I say “Apple Watch”? That last paragraph was actually a 2001 quote from Macworld concerning the original iPod, not the Apple Watch. Note how the nature of the products change, but the nature of the criticism remains exactly the same.

Presuming all decisions are based on price is the easiest way to mispredict the future. ~ Ben Thompson (@monkbent)

Every time Apple brings out a product, critics cite price as its fatal flaw, even when such criticism makes little or no sense.

“iPads are too expensive which is why most of the buyers are new to iPad” Wait, what? ~ Ben Thompson (@monkbent) 7/24/14

Many of Apple’s critics have never understood the difference between price and value. As we move toward wearable computers, the disconnect is only going to grow greater.

The more personal the computer the more value we will place upon it. ~ Horace Dediu (@asymco)

The most expensive Apple Watch will cost more than the most expensive iPhone which will cost more than most PCs. ~ Horace Dediu (@asymco)

And now that Apple is going high fashion? Look out. Most of us are going to lose our grip on pricing entirely.

(There’s going to be a) nerd meltdown when we all learn what “fashion” items cost. ~ Cabel Sasser (@cabel)

When the prices of the steel and (especially) gold Apple Watches are announced, I expect the tech press to have the biggest collective shit-fit in the history of Apple-versus-the-standard-tech-industry shit-fits. ~ John Gruber

Normally, as the price of an item goes down, demand goes up. However, as Ben Thompson likes to point out, with Veblen goods (named after economist Thorstein Veblen, who popularized understanding of the effect) as the price of the product goes up, the demand rises too. This is because the “job” a Veblen good is “hired to do” is not utility alone — it’s added prestige. Veblen goods are counterintuitive and full of surprises for the unwary.

Asia is by far the biggest market for Swiss watch exports accounting for 55 percent July shipments.” ~ CNBC

What folks don’t understand about Asian luxury market in particular is people buy BECAUSE it’s expensive. ~ Ben Thompson (@monkbent)

If you don’t have a background in engineering, you shouldn’t be commenting on how to construct the space station. And if you don’t have a background in economics, you shouldn’t be commenting on pricing, either.

The Prophets of the Church of Marketshare never understood Apple’s premium business model to begin with, even though there is a premium provider for almost every good and service known to man. Woman too. And now that Apple is moving toward fashion pricing, the explosive growth in the number of tech bloggers who will think they are qualified to comment on economic theory is simply going to boggle the mind.

Tech bears the same relationship to fashion as a multiple-choice test does to an essay exam.

Fad

I have no doubts [Apple Watch] will sell. If I had money to blow I’d buy one out of curiosity. But that’s not a product. It’s a fad. ~ J. Gobert (@MrGobert)

The iPhone was a fad too.

The iPhone is a commodity. That’s really all Apple’s iStuff is — an enormous and very profitable fad. It’s the Pet Rock of the new millennium. ~ Anders Bylund, Motley Fool, 6 Mar 2012

Data Processing was a fad too.

I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won’t last out the year. ~ editor of business books, Prentice Hall publishers, 1957

Movies were a fad too.

Movies are a fad. Audiences really want to see live actors on a stage. ~ Charlie Chaplin

Be awfully careful before you summarily label — and then dismiss — something as a “fad”. It’s lazy and, even worse, misleading analysis.

Who is there who can make muddy waters clear? But if allowed to remain still, it will gradually clear itself. ~ Lao-tsu

Gimmicks

gimmick

(A)t today’s Cupertino, California, event, we — the press, the world at large — were treated to a beautifully designed smartwatch (e.g., those interchangeable straps) laden with an embarrassing slew of useless gimmicks. … Cheap tricks that consumers will tire of after a few weeks. ~ Joseph Volpe

Heres an idea Apple – rather than enter the world of gimmicks and toys, why don’t you spend a little more time sorting out your pathetically expensive line up? Or are you really aiming to become a glorified consumer gimmicks firm?

Oops! So sorry. That last quote was taken from the forums at Macrumors and refers to the introduction of the original iPod in 2001, not the Apple Watch in 2014. My bad.

Hubris is one of the great renewable resources. ~ P. J. O’Rourke

The line between gimmicks and genius is thin, as both Jan Dawson and Benedict Evans remind us:

This stuff Apple is demoing now is classic Apple. Thin line between Samsung’s gimmicks and Apple’s delighters, but fairly clear here. ~ Jan Dawson (@jandawson)

There’s an interesting line between products everyone thinks are crap and products everyone thinks are stupid. The latter change the world. ~ Benedict Evans (@BenedictEvans)

Since the line between gimmick and genius is so thin — and since the consequences of getting it wrong are so great — we should think long and hard before we summarily dismiss something as a mere gimmick. Gimmicks, like art forgeries, abound and they need to be identified and discarded. But let’s not allow our analytical brushes to paint too quickly or with too broad a stroke, lest we conceal the subtle masterpiece.

Some things have to be believed to be seen. ~ Ralph Hodgson

I Don’t Get It

I don’t get it. … Apple did not save wearables, as many thought it would. … Apple unveiled something, at best, lukewarm. At most, it’s prettier than the smartwatches that’ve come before, and that’s likely its greatest innovation. ~ Joseph Volpe, Endgadget

I don’t see it. Exquisite but no values behind it (except for design values). ~ Sean Egan (@Sean_Egn)

Here’s an idea. If you don’t understand something — REMAIN SILENT.

Better to remain silent and be thought a fool than to speak out and remove all doubt. ~ Abraham Lincoln

Good advice, seldom taken.

Worth remembering: the industry thought the iPod was stupid when it first came out. Even as recently as the iPad, people missed the point. ~ Jared Cocken (@engers)

We’ll see. It’s worth remembering that the iPod, iPhone and iPad, in turn, were greeted with initial skepticism. Apple Watch seeks to be the next in that lineage, routing the skeptics and delivering a massive payoff for Apple. ~ Steve Lohr, The New York Times

It’s okay not to get something. But it’s not at all okay for us to take that one step further and assume that because we don’t get it, it can’t be got. It’s like we’re blind, so we assume that everyone else must be blind too. It just ain’t so. If we don’t “get something”, that’s a sure sign that we should be shutting our mouths and opening our minds.

Half of being smart is knowing what you’re dumb at. ~ Solomon Short quotes

I Don’t Wear A Watch

The Apple Watch seems lovely. The problem is I don’t wear a watch, and 75% our office does not wear one either. ~ ariel seidman (@aseidman)

Most people don’t wear watches anymore. ~ J. Gobert (@MrGobert)

Jan Dawson explains this kind of thinking in a wholly unrelated article entitled: “NO-ONE I KNOW VOTED FOR NIXON” IN TECH“.

There’s a famous quote attributed to Pauline Kael, the movie critic, which is usually paraphrased as “How did Nixon win? I don’t know anyone who voted for him….”

The point was, Nixon had just won the US presidential election — in a landslide — and yet Pauline Kael lived in a world where almost no-one had voted for him.

I fear that the people who spend all day thinking and writing about technology often suffer from the same myopia about the behavior and mentality of the vast majority of everyday users of technology. We are nothing like them in many respects…. ~ Jan Dawson

When I was growing up, everybody wore a watch. Everybody. It’s only been a decade or so since some people stopped wearing watches and they did so because they were carrying mobile phones that also told time. In other words, the behavior of not wearing a watch 1) is recent; 2) is of relatively short duration; and 3) was caused by a shift in technology.

watches
Source: XKCD

To suggest that no one will buy a wearable because you don’t wear a watch and no one you know wears a watch is the height of myopia — you’re living in a self-centric world where no one voted for Nixon.

The difficulty lies not so much in developing new ideas as in escaping from old ones. ~ John Maynard Keynes

Think about it. Did you carry a phone in your pocket prior to 2007? If you did, you were in the 1%. Now half the U.S. (and growing) carries their phone with them everywhere. Why the change in behavior? Change in technology.

imgresDid you take pictures at public events using a ginormous tablet? Of course not. Who would do that? Well, turns out, lots and lots of people. (And it’s usually the ones seated just in front of you.) Why the change in behavior? Change in technology.

Stop saying you don’t wear a watch. You don’t wear a watch…yet. Tech changes. Behavior changes. Tech changes behavior. If wearing watches went out of style because of changes in technology, then wearing a watch can come back in style because of changes in technology too.

Wisdom consists of the anticipation of consequences. ~ Norman Cousins

Our inability to even contemplate — more less fathom — the possibility that tomorrow may be different from today reminds me of this joke:

One caterpillar to another, as they watch a butterfly: “You’ll never get me up in one of those things.”

I Only Need The Time

The things I miss most about wearing a watch would be fulfilled by wearing a watch and I can do that for $50. ~ The LeeBase (@TheLeeBase)

We used to only need to make phone calls too. And we could do that for $50. Then the iPhone came out in 2007. And now, we need more.

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Our vision is more obstructed by what we think we know than by our lack of knowledge. ~ Kristen Stendahl

There is nothing more reactionary than the general public. For most of us, our vision of the near future is actually our recollection of the recent past.

A leader is one who sees more than others see, who sees farther than others see, and who sees before others see. ~ Leroy Eims

Innovation

Trip Chowdhry, Global Equities: Apple Watch is ground breaking – Innovation is back at Apple after a 3 year pause. ~ The Apple Watch: What the analysts are saying by Philip Elmer-DeWitt

A three year “pause,” ay?

Here’s the thing, Trip. It takes years to make an “overnight” success. The folks at Apple haven’t been sitting around on their barcaloungers sipping champagne and eating chocolate bonbons. They didn’t wake up on Monday, September 8th, and say: “Hey, everybody. Let’s innovate!” Then — bada bing, bada boom — out popped the Apple Watch just in time for the September 9th Event.

Hey! Wait just a darn tooting minute. Aren’t you the same Trip Chowdhry who said this:

[Apple has] only have 60 days left to either come up with something or they will disappear. ~ Trip Chowdhry (March 2014)

March, April, May….

Hmm. Maybe I should change the title of this article from “Claim Chowder” to “Claim Chowdhry”.

Never put both feet in your mouth at the same time, because then you won’t have a leg to stand on.

Left-Handed

I guess left-handed folk are supposed to switch wrists. ~ Patrick Igoe (@PatrickIgoe) [9/9/14, 2:07 PM]

I guess some left-handed people have the patience of a gnat.

For you lefties: The Apple Watch crown works OK when the watch is on your right hand. But there’s a southpaw mode which flips the UI around. ~ Harry McCracken (@harrymccracken) [9/9/14, 5:17 PM]

Apple Watch can be inverted for left handers. Hurrah. ~ Matt Warman (@mattwarman) [9/9/14, 6:26 PM]

For you lefties: …there’s a southpaw mode which flips the UI around. ~ Peter Hilleren (@Peter000) [9/9/14, 6:38 PM]

Left-handers: You can just turn Apple Watch upside down (and swap straps around) and it’ll just work. ~ John Gruber (@gruber) [9/9/14, 9:49 PM]

I have more sources, if that’s not enough.

A handful of patience is worth more than a bushel of brains. ~ Dutch proverb

Seriously. Can’t people just ask a question and then wait an hour or two for the answer before they start whining? I mean, honestly. Is it really asking so much?

It is a general rule that when the grain of truth cannot be found, men will swallow great helpings of falsehood. ~ Isaac Bashevis Singer

Look And Feel

It is square and fat. 85% of wristwatches sold in the market are round and in pure looks, I think the Moto 360 and the LG G Watch R are much better. ~ Radio Free Mobile

The form factor has fixed limits — the small screen obviates advertising, electronics fatten the case, big fingers obscure the screen when touching. For many, the form will be seen as simply ugly. ~ Forrester CEO, George Colony

Apple Watch ‘too feminine and looks like it was designed by a student in their first trimester’ (Boss of Tag Heuer, Zenith and Hublot says Apple has made “some fundamental mistakes” with its smart watch) – The Telegraph

It’s not a revolution and it’s not what any of us really expected. It’s lipstick on a smartwatch. It’s an accessory and nothing more. ~ Joseph Volpe, Engadget

All this coming from critics who have never seen nor touched nor worn nor experienced the Apple Watch.

lookand

Baffled by strong opinions on the Apple watch hardware from people who’ve not held one. I have held one and am still undecided. ~ Benedict Evans (@BenedictEvans)

With smartwatches, even more than phones, even more than tablets, even more than PCs, any verdict requires actual use in the real world. ~ Harry McCracken (@harrymccracken)

Go back and re-read the above quote by Harry McCracken. Wearables simply cannot be understood until we’ve worn them. And nobody outside of Apple has worn them. Yet.

What you don’t see with your eyes, don’t witness with your mouth. ~ Jewish proverb

Ridicule is the tribute paid to the genius by the mediocrities. ~ Oscar Wilde

Name

The Apple Watch names are strange. Apple Watch, Apple Watch Sport, Apple Watch Edition. Weird that two have third names, and Edition is odd. ~ Farhad Manjoo (@fmanjoo)

I like analyzing product names too, but truth be told, if the product is lousy, the name simply doesn’t matter. And if the product is great, the name simply doesn’t matter either.

Remember how critics mocked the name “iPad”? How’d that turn out?

Talk of product names reminds me of this classic Saturday Night Live skit.

Hmm. Perhaps Apple should name their next product: “Mangled Baby Ducks.”

Niche

Beautiful, but a niche product. ~ Forrester CEO, George Colony

The $350 watch market is niche at best. ~ J. Gobert (@MrGobert)

Gee. When have I heard this lament before? Oh yeah. Whenever Apple introduces a new product category. The $350 iPod will be niche, the $600 iPhone will be niche, the $500 iPad will be niche, etcetera, etcetera, etcetera. Some Claim Chowder from the archives:

iPhone

The iPhone is a niche product. ~ Nokia CEO Olli-Pekka Kallasvuo, 17 April 2008

The iconic Apple iPhone will either not exist or occupy a very small niche satisfying the needs of committed Mac fans around five years from now. ~ Eugene Kaspersky, Kaspersky Lab, 27 April 2010

iPad

The tablet market has only succeeded as a niche market over the years and it was hoped Apple would dream up some new paradigm to change all that. From what I’ve seen and heard, this won’t be it. ~ John C. Dvorak, MarketWatch, 29 January 2010

For all the hype about an Apple tablet , it is at best a niche product. ~ Joe Wilcox, Betanews, 2 January 2010

The iPad will remain an expensive, niche device compared to all-purpose netbooks…. (N)etbooks sales will still far outstrip those of the iPad. ~ Preston Gralla, PC World, 30 March 2010

Niche, huh? Let’s see how those niche products panned out:

  1. In Q2, Apple made 68% of mobile device OEMs’ profits (65% in q1, 53% in Q2 13). Samsung – 40% (41% q1, 49% q2 13) Source: Canaccord Genuity ~ Daisuke Wakabayashi (@daiwaka) 8/5/14
  2. Quick Apple Q3 numbers for those who like that sort of thing: $37.4 billion; 7.7b profit; 35.2m iPhones; 13.3m iPads; 4.4m Macs; 2.9m iPods. ~ Macworld (@macworld)
  3. Apple’s iPhone sales alone were larger than the revenues at 474 of the companies in the S&P 500 stock index.

Most CEO’s would cut off their right arms to have “niche” products like those.

To be positive is to be mistaken at the top of one’s voice. ~ Ambrose Bierce

Pocket, Purse, Or Wrist?

Apple failed. They did not make the case to compel me to pay $350+ to reduce the pain of pulling my iPhone out of my pocket. ~ The LeeBase (@TheLeeBase)

For many, two devices on the body are unnecessary. Pulling the iPhone out of a pocket or purse is fine — most will not need another device to access payments or track health. ~ Forrester CEO, George Colony

Ya’ know, human beings are kinda funny (in an odd sort of way). I guess it’s human nature to ignore human nature. Go figure.

The fundamental principle of human action—the law that is to political economy what the law of gravitation is to physics—is that men seek to gratify their desires with the least exertion. ~ Henry George

Do want to call that kind of behavior lazy? Okay, we’re lazy. But mostly, we’re human.

I’ve always felt extremely lazy when I explain my main reason for wanting an Apple Watch. It would eliminate the need for me to reach all the way into my pocket to retrieve my iPhone when it buzzed. I stand by my brazen laziness. And I very much appreciate that the Apple Watch will analyze incoming email to create its own “quick choice” reply. Very smart. ~ Ken Segall

Benedict Evans poses some important questions regarding the tablet and the smartphone, respectively:

How much was it worth not to have to open your laptop? ~ Benedict Evans (@BenedictEvans)

I use my phone even though my tablet is in my bag or my laptop on the table. How much does a watch cannibalise in the same way? ~ Benedict Evans (@BenedictEvans)

We know that a large proportion of smartphone use is done in the home, where a laptop or tablet is within easy reach. Shouldn’t that be telling us something? Persistence matters. Convenience matters. Laziness matters. Human nature matters.

And besides, what else — or should I say who else — are we ignoring here?

For half the population, your phone is not always in your pocket. ~ Benedict Evans (@BenedictEvans)

Oh yeah. The female of the species. Remember them? The one’s who do most of the shopping for (literally) mankind? The ones who wear most of the jewelry? The ones who make up the majority of people living on this planet? The ones who often put their phones in their purses instead of in their pockets?

We should be very, very careful not to substitute our judgment for the judgment of others. Just because we don’t like something; just we’re not enthusiastic about something; does not mean that others will feel the same way. That’s just common sense. Unfortunately, there is nothing so uncommon as common sense.

Replace

I see a world where the watch will eventually replace the phone. ~ AAPL Orchard

The long-term success of the iTime (or whatever it gets called) will be similar. If it can’t replace the iPhone completely it’s a goner. ~ John Dvorak

My stance on the smartwatch as a viable mobile accessory is unambiguous; I’ve argued my case before. As a category, it needs to replace — needs to completely replace our need for a cellphone. ~ Joseph Volpe, Engadget

That’s great and all, except that it’s completely wrong.

“A smartwatch doesn’t replace my smartphone.” “A tablet doesn’t replace my personal computer.” “A motorcycle doesn’t replace my car.” ~ AAPL Tree (@AAPLTree)

A device should not try to be something it’s not. It should be true to itself. Why would we want a smart watch that replaces our smartphones? We already have smartphones that work great. What we want — or what we should want — is for smart watches to do what they do best. No one is quite sure what that is yet, but you can be darned sure that squashing a smartphone down to the size of a watch is not going to work any better than squashing a Personal Computer down to the size of a tablet worked.

Replace the phone with the watch? You’ve got it all wrong. And don’t blame Apple just because your vision is faulty.

The worst kind of arrogance is arrogance from ignorance. ~ Jim Rohn

watchface

Surveys/Polls

Forrester’s research is showing nascent interest by consumers. ~ Forrester CEO, George Colony

Yeah, about that. I’m not a big believer in surveys about products that don’t exist. You shouldn’t be either.

iPad:

We’re finding — if you look at the surveys, you can see that large amount of the customers that have purchased touchscreen devices in last two years, they intend to get a device with the QWERTY keyboard on it now. ~ Mike Lazaridis, Co-CEO, Research In Motion, Inc, 16 April 2010

iPhone:

Days before the iPhone debuted, the market research company Universal McCann came out with a blockbuster report proving that practically nobody in the United States would buy the iPhone. “The simple truth,” said Tom Smith, the author of the iPhone-damning report, is that “convergence [an all-in-one device] is a compromise driven by financial limitations, not aspiration. In the markets where multiple devices are affordable, the vast majority would prefer that to one device fits all.” Solid survey research suggested not only that the iPhone would fail, but also that it would fail particularly hard in the United States because our phones and cameras are good enough, already. ~ Derek Thompson, The Atlantic

Today there are lots and lots of people saying they have no interest in an Apple Watch or in the smart watch category altogether. They are telling the truth. They really can’t imagine owning a smart watch. However, their beliefs do not reflect the limits of the smart watch category. Their beliefs reflect the limits of their imagination.

You can’t ask people to decide on a trade-off when they have experience of one side but not the other. ~ Benedict Evans (@BenedictEvans)

Tethered

It requires an iPhone to function making it very clear that this is an accessory rather than a new product category in its own right. ~ Radio Free Mobile

Toni Sacconaghi, Bernstein: While the device is aesthetically attractive, and has a very innovative UI (“digital crown” and differentiated touch), we struggle with the fact that the majority of the Watch’s functionality is dependent on the presence of an iPhone.

This shit better have some major non-tethered functionality. ~ Jason Hirschhorn (@JasonHirschhorn)

Remember when the iPod, the iPhone, the iPad were all tethered to the Mac? No? Neither does anyone else.

Memory may be a terrible librarian, but it’s a great editor. ~ Ralph Keyes

The iPod, the iPhone, the iPad and now the Apple Watch are or were tethered to another device. They offload or offloaded tasks which they could not handle or which they were ill-suited to perform to the better suited device. Tethering is not a fatal flaw. In fact, it can be a chief advantages. Take, for example, the iPod:

One of the biggest insights we have was that we decided not to try to manage your music library on the iPod, but to manage it in iTunes. Other companies tried to do everything on the device itself and made it so complicated that it was useless. ~ Steve Jobs

Unnecessary, Unneeded, Underwhelmed

The very first new post-Steve Jobs product, Apple Watch, is stunningly pretty, is functional — and is utterly unnecessary. ~ Brian S Hall (@brianshall)

Did not expect to be so underwhelmed by implementation. It’s basically Android Wear 2.0, which isn’t saying much. ~ J. Gobert (@MrGobert)

I think Apple Watch will be a flop. ~ The Tech Guy, Episode 1118

Great just what the world needs.

I was so hoping for something more.

The reason why everyone’s disappointed is because we had our hopes up for this incredible device.

Why oh why would they do this?! It’s so wrong! It’s so stupid!

Oh wait! Those last four quotes weren’t about the Apple Watch at all. They were taken from the forums at Macrumors and were referring to the launch of the original iPod.

The more things change, the more they are the same. ~ Alphonse Karr ((The original saying & original author.))

New Apple product X is announced. Pundits & analysts say X will fail. X breaks all previous sales records. Step. Rinse. Repeat. ~ Nick Bilton (@nickbilton)

Three years from now, the same people making fun of this thing today will complain that Apple hasn’t innovated since the Watch. ~ Mitchell Cohen (@mitchchn)

CONCLUSION

Professional critics of new things sound smart, but the logical conclusion of their thinking is a poorer world. ~ Benedict Evans

Always listen to experts. They’ll tell you what can’t be done and why. Then do it. ~ Robert A. Heinlein

I have not exhausted all of my material, nor have I exhausted all of the stupidity…but I have exhausted myself. Enough. No more Claim Chowder.

It’s possible to fight intolerance, stupidity and fanaticism when they come separately. When you get all three together it’s probably wiser to get out, if only to preserve your sanity. ~ P. D. James

I want to make something perfectly clear. I am not advocating for or against the Apple Watch. That will be addressed in a future article. What I am advocating for is clear thinking.

The creators of Apple Claim Chowder used to be arrogant and obnoxious but ever since the introduction of the Apple Watch just the opposite has been true. Now they’re obnoxious and arrogant. After all, the vast majority of the Claim Chowder cited here, and in my previous 7-part series ((Apple Claim Chowder Series:

1) Introduction
2) Events
3) Killers
4) Cynicism
5) Product
6) Evolutionary Or Revolutionary
7) Business Models)) on Apple Claim Chowder, could easily have been avoided.

Conversation would be much improved by the frequent use of three words: I don’t know. ~ André Maurois

The wise man doesn’t give the right answers, he poses the right questions. ~ Claude Levi-Strauss

Never be afraid to sit awhile and think. ~ Lorraine Hansberry

Next

Next time, I’ll look at the design of the Apple Watch and try to pose some of the right questions. Come join me then.

Post Script

If you want to take the chance of having me ridicule you in one of my future articles, be sure to join me on Twitter @johnkirk. I’m looking forward to mocking your acquaintance.

Further Thoughts on the Apple Watch and Smart Watches in General

After spending more time digesting the Apple Watch announcement and talking to dozens of journalists, doing several radio shows, reading many articles, and doing two podcasts, I have some updated thoughts.

If you have read many of my posts on smartwatches, namely this one and this one, you will know it has been a category where the value proposition has not been clear. I’ve been very specific that notifications alone, or at least in their current form, are not entirely useful for your wrist. The value can not and is not in notifications alone. That is the primary value Android Wear has implemented and as myself and many others who have tried every version point out, it is unclear if there is any real value there. So what have we learned from the little bit of information we have on the Apple Watch? Does this product extend the value proposition in any meaningful way? At a high level, Apple brings several assets to the category.

User Interface

As Tim Cook said, in a recent interview with Charlie Rose:

Apple’s goal is to be the best, not necessarily the first, but the best.

This is achieved by their user experience prowess. Apple takes things, related to computing in this case, and simplifies them from the current complex state they are in. If I was to articulate why an average consumer would not like any of the smartwatches I have tried, the word complex would be front and center. For this category to take off, Apple’s user interface and user experience design chops will need to be front and center.

Philosophy

Apple has stated their screen philosophy as “the right screen for the right moment.” This is their argument for not merging iOS with OS X the way Microsoft has with Windows 8. So the interesting question with the Apple Watch becomes, what is the right moment the watch is the right screen for?

Even though I am critical of smartwatches, there are pockets of time where I have found them valuable. All of those instances when I have found value have been when my smartphone is not near me or I’m not in a place where I can use it. For example, when I am at home, I often take my smartphone out of my pocket and leave it on a table near my entry way. With the Android watches, I only get value from the watch when it is in proximity (appox. 15 ft) to my phone. So if I go outside or upstairs or into the kitchen, all my smartwatch is is a watch. Apple’s approach with Wifi will allow the watch to remain smart even when it is not in proximity to my smartphone. The same is true in the car. Personally, I’ve found wrist notifications quite useful during my long commutes. Exercising, bike riding, even walking down the street in the city between meetings, become interesting use cases where arguably a better device than our smartphone could exist to add value to our digital lives.

The right screen for the right moment philosophy is, I think, a key way to think about the role the Apple Watch will play in Apple’s ecosystem. Both for us watching Apple and for Apple itself.

The Evolution of Communication

If we think about it, mobile phones have played a role in the evolution of our communication. Arguably, nothing has had as large an impact on communication as SMS. Hands down, the longest conversations I have with people are when we are face to face. Audibly talking on the phone would come second, but in the digital world, our conversations are shorter and more compact. With SMS, short responses are the norm. Even though a conversation can be engaging or drawn out, it is simply done with shorter messages. Part of me wonders if we are on the cusp of yet another form of mass communication evolution.

Benedict Evans and I discussed this briefly on the Mobile Focused Tech.pinions Podcast, and we mentioned an upcoming iOS app called Popkey. Popkey, in a similar style to Line stickers, is enabling new ways to communicate but through a more visual nature than text. For example, a friend of mine named Ben Thompson who is the author of Stratechery, turned me onto Line. It is one of the seven messaging apps I use, but I only use it to talk to certain people and he is one of them. Our conversation will go along and then I’ll say something like “I’ll email you the details.” He will then follow up with this Line sticker.

Screen Shot 2014-09-15 at 3.44.57 PM

This sticker is his way of saying “Ok” or “sounds good” and it is always this same sticker. It has a style and a personalization unique to him. But these stickers are somewhat static. You can create your own but how many people do that? Perhaps Apple’s doodle type method on the screen will enable similar yet even more creative ways for us to interact as a part of this communication evolution.

All of that being said, there are still questions I have that will not be answered even after the Apple Watch is released. For example, what is the replacement cycle? Is there a replacement cycle? Benedict Evans had a great tweet the other day that said, “watches replace their owners.” Meaning, a great watch outlives its current owner and is handed down or re-used by someone else. Is this a product category Apple is future proofing like a watch or is it more like a typical electronics product? Is this an annual release cycle of a product or longer? If you spend $2,000 on a watch will you be angry if it is outdated in a year when the new one comes out? I have a long list of other questions to dive into for another analysis but I’ll leave it at this for now. Smartwatches are officially a category thanks to Apple and good or bad, I have a feeling there will be some bumps in the road.

Are Dogs Even Necessary In An iPhone World?

Does the iPhone hate dogs?

I know, that’s not a fair question. Still, I can’t help but wonder if the iPhone, if all smartphones, will fundamentally alter our relationship with our most trusted, faithful, ready-to-die-for-us-but-until-then-let’s-go-for-a-walk companions.

The arrival of the iPhone has, for better and for worse, diverted significant chunks of our attention away from both people and places. That much we know. But what about our dogs? Do we no longer require their fellowship? If not, what happens to them?

I do not know. The possibility of this scenario is without precedent. In such cases, I turn to fiction.

In the beloved film classic, Conquest of the Planet of the Apes, all the dogs and cats are dead. Briefly, it’s because apes from the future come back to the present (1983) and, well, a disease subsequently wipes out all our little friends. Not a problem. Humans, being a resilient lot, decide apes will make effective pet replacements. They also quickly realize apes can do all sorts of things, more, even, than dogs and cats.

Smartphones are our apes is what I’m saying.

Let’s set aside for the moment how the apes launch a rebellion and wipe out most of humanity. For now, smartphones provide immediacy, interaction, diversion from our stresses. They tell us when to exercise, remind us if we are spending too much time at work, offer comfort when we are upset. They play music, show videos, hold our entire library, manage our schedule. They learn our habits, know our routines, and make us better than we are. 

So why even have a dog?

These are the primary reasons for having a dog:

  • Dogs alert us to dangers. They can even alert us to changes in our body.
  • Dogs remind us to go out for a walk. They help us lose weight and get fit.
  • Dogs are always there, always ready to interact with us at a moment’s notice.
  • With dogs, we feel more connected, happier.
  • If you have OCD, depression, or suffer from PTSD, dogs can help.
  • Is your child safe? A dog can warn you.
  • If you feel lonely, your beloved dog offers comfort.
  • Need someone to just listen, empathize? Dogs are especially good at this.

Thing is, smartphones already do all of these. Some they do even better than dogs. And should you need to track a loved one, if they have a smartphone that’s much better than if you have a dog.

Smartphones also cost a great deal less than pets.

My oldest dog just required surgery. This set me back $5,000. That alone pays for two shiny new iPhones, an Apple Watch and at least two years of cellular service.

sparkycast

It’s not the cost, however, that prompted my speculation on the necessity of dogs. It was a trip to the vet. The old dog was in his normal jovial mood when I drove him in for surgery, despite having to go without eating for more than 12 hours. But he quickly got scared, intuiting the clinical surroundings could only mean something was amiss. He kept nudging up against me, kept seeking reassurances. I happily obliged. Every time.

Until one time when I did not. I was busy tweeting some brilliant insight, as I do, when I suddenly realized he was trying especially hard to grab my attention. A scared dog will do that. I stuck my iPhone in my pocket and left it there for the remainder of the appointment.

It is extremely difficult to put away that beckoning screen. Not just for me but for hundreds of millions of others. This is fact and offered without judgment.

Where does this lead us? Again, I do not know. I do know that smartphones will alter us because they will alter our relationships, disrupt our time, rearrange our priorities, and deconstruct traditional links with our surroundings.

I wish I could say always for the better, but that would be a lie.

The old dog’s fine. In fact, the vet says he probably has four good years remaining. What our screens will do for us by then, I can only imagine. I do know they are replacing much more than just other gadgets.

I Shall Now Make My Apple Event Predictions!

I always like to make my predictions AFTER the fact. Improves accuracy. Yet I’m still bound to get a few things wrong.

You can only predict things after they have happened. ~ Eugene Ionesco

Truth be told, I’m working on some massive articles regarding the Apple Event and they’re just not done. I simply haven’t been able to absorb the information yet and I’d rather do it right than do it now.

I’m finding it impossible to keep up with the research in my field” (said every researcher ever throughout history). ~ David Smith (@drs1969)

So I thought I’d fill this week’s column with my quick takes on last Tuesday’s Apple Event.

iPhones

Surprises? Not So Much.

Lots of leaks. Few surprises.

Sales Projections

Expected sales? AT&T said that iPhone 6 demand was “off the charts” and Apple has confirmed the iPhone 6 and iPhone 6 Plus crushed earlier preorder records. So how many are they going to sell?

My official answer to how many iPhones Apple will sell in the holiday quarter— crap tons. ~ Ben Bajarin (@BenBajarin)

Average Sales Price

Apple is selling its base mode iPhone with 16 gigabytes  of storage and its mid-tier iPhone with 64 gigabytes of storage. Further, the iPhone 6 Plus starts $100 higher than all previous iPhone models did before it.

Apple has 10% of handset sales, high-end Android another 10% and the rest of Android a further 40% (& growing). Guess which Apple targeted. ~ Benedict Evans (@BenedictEvans)

A weird thing is about to happen. The Average Sales Price of the iPhone is about to go UP! That’ll put a real dent in the “iPhone” is a commodity theory.

The iPhone Is A Commodity Claim Chowder

With all things tech, fused products and commoditization are inevitable markers of the product cycle. The iPhone 5 will be Apple’s last hurrah as competitors increasingly gain ground. ~ Kofi Bofah, Onyx Investments, 29 August 2012

As the mobile phone market increasingly offers more quality phones at a range of price points, Apple now faces a difficult choice. Does it try to remain a premium product-premium price company, or does it dive into the commoditized lower priced arena? Neither choice is very appealing. ~ Bob Chandler, Motley Fool, 2 May 2013

I’m guessing the choice to go premium wasn’t as tough as old Bob here imagined it to be.

Phones and tablets are inevitably following computers into commoditization. ~ Peter Nowak, MacLeans.ca, 28 January 2013

The iPhone as a commodity. That’s really all Apple’s iStuff is — an enormous and very profitable fad. It’s the Pet Rock of the new millennium. ~ Anders Bylund, Motley Fook, 6 Mar 2012

portfolio

Miscellaneous

Here’s a couple of miscellaneous thoughts for you all to chew upon as you wait for me to finish my research and publish my Magnum Opus on the Apple Event:

It’s still a common mistake to see smartphones (and even phones) as a luxury. In fact, their value is inversely proportionate to income. ~ Benedict Evans (@BenedictEvans) 8/15/14

More people on earth have a mobile phone than a street address. ~ Benedict Evans (@BenedictEvans)

Tablets

There’s been a lot of talk of late about tablets diminishing in importance. I don’t see it that way. To me, phones and tablets are just one big continuum — they’re all tablets. But that’s an article for another day.

PotTart

Pay

Platform building is one of the hardest things in tech. A payment platform requires simultaneous adoption by 1) Banks; 2) Retailers; and 3) Consumers. It took years and years and years for credit cards to finally gain critical mass and they were mocked all along the way.

How do you stop a charging Rhino? You take away its credit card.

And many digital payment schemes have come and gone without consumers even noticing.

Only here’s the thing. Apple makes platform building — the hardest thing in tech — look easy. Take a gander at some of the ads that appeared on the very day of the Pay announcement:

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MCard

WFARGO

Some people say Apple is late to the NFC party. But until Apple showed up, NFC was a wake, not a party.

It will take years for this to play out, but I believe Apple has already pushed digital payments past the tipping point. Pay is a done deal. Once we’re using our phones (and watches) to make payments, it will change the way retail looks and works forever.

Never underestimate the impact of the law of unexpected consequences. ~ Harvey B. Mackay

Brand

On his ‘Critical Path’ podcast, Horace Dediu expressed surprise at Apple’s move from i-everything to -everything branding. I am surprised by his surprise.

iNames, RIP. ~ John Gruber (@gruber)

The “i” Brand was misnamed from the start (not that it matters to a brand). It originally stood for “i”nternet in the iMac and now it’s simply a nonsensical way of knowing it is made by Apple. Apple is moving into an era where they need consumers to know the product or service was made by Apple. “iPay” would have been generic. Pay is anything but generic. The  branding is both a name and a logo and the  will put Apple’s brand in your face — which is right where Apple wants it to be.

Watch

Mea Culpa

I thought the Apple Watch would be more of a wrist band, less of watch. I was very concerned about battery life, so I thought the Apple wearable might have no screen. I was wrong.

Apple went the fashion route. Now, the fact Apple made all those fashion hires should have been telling me something. But I wasn’t able to put 2 + 2 together. It’s not the first time I’ve been wrong about Apple and it most certainly won’t be the last.

Why?

A lot of the post-Apple Event discussion on the Watch has been around whether Apple provided the “why”. “Why should I buy this?” “Why does this product even exist?” My favorite take on this so far is by Ben Thompson at Stretechery: “APPLE WATCH: ASKING WHY AND SAYING NO“.

I agree with most of Ben’s article but I have some serious issues with a couple of the details. I hope to write a too long article about this in the not terribly distant future.

What’s Next

Here’s a rough outline of the series of articles I’m working on:

  1. The Why Of The Watch
  2. Steve Jobs On Category Creation
  3. Category Mistakes We Makes
  4. Knee Jerk Objections
  5. Lessons Unlearned
  6. Watch Use Cases
  7. Watch User Interface
  8. First Generation Issues
  9. Fashion Issues
  10. Price Issues

All topics are subject to change.

Change is inevitable, except from vending machines. ~ Anonymous

I hope to have the articles done before Watch 2.0 comes on the market in 2016.

Hobby

Rest assured, the Watch is no hobby. Tim Cook used the “one more thing” line to announce the Watch. He called it the “Next Chapter” in Apple’s story. And it was announced by Tim Cook himself. If the Watch fails to become a category, it won’t be due to any lack of effort on Apple’s part.

OMT

Apple’s Wheelhouse

Keep the following in mind. As things get smaller, design matters more. And as design matters more, Apple’s expertise in design matters more.

I love how people say a big company can just ‘get good’ at design – they’d never say that about search or AI or big data in the same way. ~ Benedict Evans (@BenedictEvans)

Further, as things get more personal, fashion matters more. And fashion is an alien concept to most tech companies (and to most tech observers, like you and me). Apple is way, way ahead of most companies in design. And they seem to have “stolen a march” on most companies when it comes to fashion, too. Apple’s wearable products will never achieve mass adoption. However, Apple seems willing to settle for massive admiration (and massive profits) instead.

The most expensive Apple Watch will cost more than the most expensive iPhone which will cost more than most PCs. ~ Horace Dediu (@asymco)

Claim Chowder, Redux

Finally, I’ll end with some delicious claim chowder. Enjoy!

I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply ‘no.’ I already feared that would be the answer. I asked more to see how he’d qualify it. But he didn’t qualify it at all. No, there will be no more great new stuff beyond whatever’s currently in the pipeline. ~ Paul Graham, March 2012

(W)hy are people losing their faith in the money-making machine that is Apple? Maybe it’s because they’ve done it all. What is there left for Apple to do? ~ ~ Emily Knapp, Wall St Cheat Sheet, 24 May 2011

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I Was Wrong And The iPhone 5c Is Still A Failure

The best way to defeat the iPhone is to create a superior alternative to the app ecosystem. With widgets, notifications, continuity and inter-app processes in iOS 8, Apple did just that. Woe to Android, Windows Phone and anyone who hopes to see Apple falter this decade.

Unless, of course, I’m completely wrong.

Perhaps there’s some amazing technology out there waiting to leapfrog iPhone. Perhaps the new iWatch and iPhablet and all the various Kits and Plays fail to entice. Maybe Tim Cook and Angela Ahrendts succeed in transforming Apple into a luxury brand, turning the iPhone into a “Veblen good” and moving the company from high margin computing to higher margin fashion.

This seems unlikely. Nonetheless, on the cusp of the big Apple launch event, I am thinking not of new products, but of past ones, and not only of successes, but failures. When I labeled the iPhone 5c a “failure,” readers did not hesitate to emphatically declare I was wrong.

Wrong.

The iPhone 5c was a failure both in terms of sales and for how it diminished Apple’s image as an innovator. I may never have been so right as when I declared the 5c a failure. Expect it to be erased from Apple Stores before this year is out.

The 5c will not be the last Apple flop. I suspect the primary value of any iWatch, at least in the first few years, will be to show people you have an iWatch.

Carry That Weight

I understand if you vehemently disagree with my assertions. Tomorrow brings us new products but will not necessarily end any long standing debates. For example, despite the adoption of Chromebooks and the gutting of the great LA Public Schools iPad experiment, I steadfastly believe in the merits of my plan to give an iPad to every child in America. Similarly, regardless of what every other tech writer is saying, and no matter what Apple introduces tomorrow, I still think NFC is a waste of Apple’s talent and our time.

Going on public record can be daunting. Certainly, it is filled with missteps. Here are two minor predictions I have for tomorrow’s event: 

  1. Apple will offer universal content search and a single log-in across apps for its Apple TV
  2. The company will launch consumer-grade, home-optimized iBeacons

Now a big one:

The weeks-long stream of “leaks” is well orchestrated and not at all coincidental. Apple plans to reveal a great many products tomorrow but few will ‘wow’ and several are almost fully dependent upon multiple partners. CarPlay and iPhone payments may be great — but these will take time and usage and third party vendors to make successful. As the ecosystem expands, Apple has less control. This forces them to talk up the product whereas in the past, the product spoke for itself.

We will know shortly if I am right.

Some predictions take longer, however, and are not as clear-cut. My very first Techpinions column, from February 18, 2013, focused on — believe it or not — the Apple iWatch. I wrote:

Very soon, sensors throughout our homes, on our pets and possibly inside our bodies, all monitored or even controlled by our smartphone, will be the norm. Imagine now if these were ad-subsidized devices, like Android or Kindle, offering no escape from the latest marketing pitch or sponsored social media update. Is this a tolerable future?

I know. Brilliant.

But a paragraph later I followed up with:

The next design battle will almost certainly not be about “skeuomorphism” versus “flat design”. Rather, monetizing hardware, the Apple way, versus monetizing data and advertising, the Google way, will set the stage for this next great battle.

Incorrect.

Nearly 2 years later, this was a battle that never happened. The market has embraced both models, not chosen one over the other. Perhaps, as wearables and smart homes become more common place over the next many years, this will change. That’s a rather weak prediction, however.

Here’s a bold one. From March 18, 2013:

As the blogosphere pronounces ‘Apple is Doomed’ at every turn, I can’t help but thinking we have it wrong. Apple will have its ups and downs, no doubt. It’s just, the more I follow Apple, the more I study Steve Jobs, the more I suspect that, while he could not live forever, Jobs absolutely believed his creation, Apple, could. Literally. 

Am I right or wrong?

Fixing A Hole

Confession: sometimes I secretly blame you for when I am wrong. In “iOS 7 Game Changers,” I spoke glowingly of AirDrop:

I predict AirDrop will have a paradigm-shifting impact on content sharing – which means it should have a paradigm-shifting impact on social sharing sites, particularly Instagram, Facebook, YouTube and LinkedIn. 

Hundreds of millions of iPhones with simple, real time, on-the-spot sharing, all thanks to AirDrop. Big transformative things were supposed to happen. I really believed what I said. So why do almost none of you use this “paradigm-shifting” feature? (Because it’s not necessary, that’s why. I did not think it through at the time.)

Of course, some outrageous ideas may yet come true. Just over a year ago I recommended Apple:

Integrate iCloud, fingerprint technology, and an open API. Touch any connected screen and it instantly re-calibrates itself to our preferred, personalized settings, ST:TNG-like. In this way, Apple becomes the company that manages every screen in our life, everywhere, all the time.

I think this is a near certainty within the next 10 years.

Oddly enough, it’s the stuff that seems patently obvious where I get the most pushback. Following last year’s big Apple iPhone launch event, I stated:

Asking Apple to go down market is like asking Microsoft to no longer charge for software. It runs counter to their history, their strategy, their culture and skill set, their strengths, their leadership and how they recruit, reward and incentivize their staff.

…and took a great deal of flak for that.

I contend it was true then and more so now. That even the most expert Apple analysts refuse to accept this makes it no less correct. The 5c was a mildly painful reminder the company cannot go down market. That Apple is moving further up market is no surprise to me.

Getting Better All The Time

I think I have maintained a reasonably high average for prognostication. For example, fully nine months before the actual Amazon Fire Phone was released, I explicitly stated here that:

  • An Amazon smartphone would be focused on getting us to shop more — from Amazon
  • The widely reported “3D” screen technology would be a bust
  • No Amazon Phone could possibly hope to compete with other devices unless it was completely free, which I seriously doubted would happen

You’re welcome.

Unfortunately, there are those predictions that are quickly proven wrong. Just two months ago I wrote:

Given Android’s headstart in wearables, it’s hard to see Apple winning any wearable app wars. Given the limitations of its market reach, it’s similarly difficult to see Apple winning the “smart home” market without buying its way in. 

What was I possibly thinking? With Mac, iOS and HomeKit — and a premium user base — there may be no company with a bigger head start here than Apple.

Apple will reveal much tomorrow. I predict this will be a once-a-decade event, with a stunning array of new products, services and partnerships. However, despite all the talk, all the tweets, all the analysis, we will not know the full impact of the company’s efforts for years to come.

Apple Claim Chowder: Business Models

With an Apple Event fast approaching, I’m reviewing critiques of past Apple Events to see how accurate they were. Turns out, not very. Critique is needed and welcome. Repeated errors? Not so much.

Business Models

No one gets more bad advice than does Apple. Apple went from near-bankruptcy to nearly the largest company on earth, all the while being told each step of the way that they were doing it wrong. And now that Apple has done the equivalent of winning ten Super Bowls in a row, have the critics relented? Of course not. Their advice to Apple, as always, is that the only way for them to remain successful is to do the exact opposite of what made them successful.

It’s hard to say who gets criticized the most, the successful person, or the failure but it’s mighty close. ~ Joe Moore

This final section of my Claim Chowder Series focuses on business models. Apple has done all right while employing their own, unique, business model. However, no matter how much success Apple has, the critics insist that Apple is doing it all wrong.

3d joker - puppet, holding in a hand four aces

Closed

Apple has done all right while employing a vertical (closed) business model. The critics insist that Apple is doing it all wrong.

There’s something problematic in the idea that platforms with 1.5 billion users and 100 billion+ 3rd party apps installed are ‘closed’. ~ Benedict Evans (@BenedictEvans) April, 2014

…Apple’s ability to sustain an innovative edge over Android will be reduced to months – if that. The collective development opportunities made possible by the fact that Android is Open Source will see to that. ~ Brian Prentice, Gartner, 21 September 2009

Apple will have to make a strategic decision on whether to open up the platform. Ultimately a closed system just can’t go that far. ~ Patrick Lo, CEO, Netgear, 31 January 2011

It’s quite likely that Apple is going to commit the classic Apple mistake of trying to be too controlling and therefore the market gets away from them and people start to move towards Android. ~ Jimmy Wales, Co-founder, Wikipedia, 8 March 2011

Microsoft will ultimately muscle-out Apple as the leader in smartphones and tablets. Apple’s insistence on controlling every aspect of both its software and hardware puts it at a disadvantage to a more flexible Microsoft. ~ Charles Sizemore, Sizemore Capital, 29 Nov 2012

Average Sales Price

Apple has done all right when it comes to maintaining a high average sales price. The critics insist that Apple is doing it all wrong.

ASP

Phones and tablets are inevitably following computers into commoditization. Apple may still charge a premium for its products, but it will ultimately have to settle for a relatively small market share as a result, just as it has in computers. There is also a limit to that premium – with the likes of Google and Amazon setting the pace, the respective days of $700 smartphones and $500 tablets are numbered. ~ Peter Nowak, MacLeans.ca, 28 January 2013

You only find out who is swimming naked when the tide goes out. ~ Warren Buffett

The strong inference from Qualcomm’s earnings report is that smartphone prices are falling so fast that the new low end Apple iPhone is not likely to be competitive. ~ Nigam Arora, Contributor, Forbes, 25 April 2013

Margins

Apple has done all right when it comes to maintaining high margins. The critics insist that Apple is doing it all wrong.

Margins

The whole sector is priced as if the average player would sustain 25 per cent margin in eternity. It’s bordering on absurdity. This will end in tears. ~ Per Lindberg, MF Global Ltd, Feb 2009

Competition is compressing Apple’s margins. ~ Glen Bradford, Seeking Alpha, 10 July 2011

Apple is focused on defending the high end of the market, and that is becoming harder to do each year. Competitors, such as the Galaxy from Samsung, are starting to catch up. I think it is inevitable that the margin pressure increases. ~ Mark Newman, Director of Mobile Research, Informa Telecoms and Media, 26 Feb 2012

It shows (data chart from Nomura Holdings) that there is no historical precedence for Apple’s gross margins. Check this out. It shows gross margins for Nokia, RIM and Apple over the past ten years and it comes to us from Nomura because it believes the iPhone’s margins are likely 10% above the sustainable levels. ~ Sara Eisen Bloomberg, 15 Oct 2012

Margins are shrinking. ~ Howard Gold, MarketWatch, 1 February 2013

In closing, the price cuts for the iPhone 5c and the shuffling of the iPad lineup do little to address the company’s core problems of its dwindling market share, slower growth, and contracting margins. ~ Leo Sun, Motley Fool, 19 March 2014

Premium

Overheard in 2001: “Who would pay $399 for an Apple music player?!?” ~ kirkburgess (@kirkburgess)

Apple has done all right when it comes to charging a premium price for their products. The critics insist that Apple is doing it all wrong.

In Q2, Apple made 68% of mobile device OEMs’ profits (65% in q1, 53% in Q2 13). Samsung – 40% (41% q1, 49% q2 13) Source: Canaccord Genuity ~ Daisuke Wakabayashi (@daiwaka) 8/5/14

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The market is already saturated with popular [phones] that are virtually free to consumers. The perceived zero cost of a cellphone like the Motorola RAZR is a serious impediment. ~ Ashok Kumar, Capital Group, 30 July 2007

Free things cost too much. ~ Talleyrand

Bleier believes Apple will have to dramatically lower iPhone prices or risk losing market share to Android-based phones and/or RIM’s Bold, which he believes will be a big hit this holiday season. ~ Scott Bleier, CreateCapital.com, 24 Oct 2008

Pricing to gain market share simply for the sake of market share is a chump’s game. ~ Bill Shamblin

Who’s going to buy an Apple iPad? Well, not you or me, anyway – not this version, not at $600-800. ~ Bruce Beris, bruceb consulting, 4 February 2010

It’s far better to buy a wonderful product at a fair price than a fair product at a wonderful price. ~ paraphrasing Warren Buffett

Americans now are buying more Android phones than iPhones. If that trend continues, analysts say that in little more than a year, Android will have erased the iPhone’s once enormous lead in the high end of the smartphone market. ~ Miguel Helft, New York Times, 17 October 2010

iPhone owns the US market. ~ Benedict Evans (@BenedictEvans) 7/22/14

comscore_jul14_trend

From July 2012 to July 2014, iPhone share in the U.S. went from 32.4% to 42.4%.

Problematically, the Android competition is just as expensive as the iPad lineup, so Apple obviously feels free to continue gouging consumers on iPad pricing. ~ Paul Thurrott, Windows IT Pro, 3 March 2011

Everything is worth what its purchaser will pay for it. ~ Publilius Syrus

If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. ~ Milton And Rose Friedman

No one had a product that could generate that kind of excitement until HP sparked a frenzy when pulled the plug on its poor-selling TouchPad and slashed the price to $99. It’s an ugly way to go, but sacrificing profits might be the quickest way to rack up big revenues, and blunt Apple’s momentum. ~ Brian Caulfield, Forbes, 30 Aug 2011

There is hardly anything in the world that some man can’t make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey. ~ John Ruskin

Amazon’s willingness to sell hardware at a loss combined with the strength of its brand, content, cloud infrastructure, and commerce assets makes it the only credible iPad competitor in the market. ~ Sarah Rotman Epps, Forrester, 29 Aug 2011

Apple is expected to introduce an ‘iPad Mini; next week, which will compete directly with the Kindle and Nexus, but it seems unlikely that this device will sell well if it is priced at, say, $299. ~ Henry Blodget, Business Insider, 7 Sep 2012

Price – Expensive piece of kit [iPhone 5] ~ Oliver Wolf, Greenwich Consulting, 10 Oct 2012

What is a cynic? A man who knows the price of everything and the value of nothing. ~ Oscar Wilde

The iPhone, with its single annual update and super premium price, has been run down from behind by a pack of rivals with segmented product ranges, 6 month product cycles and aggressive price points. ~ Paul Sagawa, Sector & Sovereign Research, 19 Nov 2012

I think they should invest more of it in the margin, in the business. Get lower-priced products out there. Stop going after just the premium piece. Get into the real growth engine of the smartphone market, which right now is Android, its low-priced phones in China and India, same thing on the tablets. ~ Henry Blodget, CNBC, 3 January 2013

Author’s Note: Apple should get into lower-priced products? Why? Because that strategy has worked out so well for Samsung? See chart, below.

XvSamsung

As the mobile phone market increasingly offers more quality phones at a range of price points, Apple now faces a difficult choice. Does it try to remain a premium product-premium price company, or does it dive into the commoditized lower priced arena? Neither choice is very appealing. ~ Bob Chandler, Motley Fool, 2 May 2013

Author’s Note: If being a premium business provider does not appear very appealing to you, you need to get out of the business of providing business advice.

Apple’s philosophy has always been to be consumer-centric. It wants to make easy-to-use, broadly-accessible products. But on some level, it’s failing consumers when only 18% of the global smartphone population has an iPhone. ~ Jay Yarow, Business Insider, 24 May 2013

Apple’s vision is to make the best, not the most. Apple is is the cutting edge that breaks the ice and allows others to follow. There are many fast followers (and even more slow followers). There are few pioneers. If you think that Apple is failing consumers, then you haven’t looked at the computers and notebooks and MP3 players and smartphones and tablets that consumers are using. They were all inspired by Apple.

Amazon’s pricing ambition is the clearest indication of its phone playbook: undercut rivals and grab meaningful market share. It is also shows that Apple’s worst nightmare may be coming true: prices could fall not just for cheap phones in developing markets but higher-end ones too. ~ Amir Efrati and Jessica E. Lessin, jessicalessin.com, 6 September 2013

(T)he pricing of the company’s iPad line as a whole is absurdly high, with Apple’s models often costing at least $100 more than their closest rivals. ~ Troy Wolverton, Mercury News, 24 October 2013

Apple’s new iPads and iPhones will aid the company’s revenue growth going into the busy holiday season. However, Apple’s pricing of iPhone 5c will have a difficult time competing in the lower end of the smartphone market. If Apple products remain expensive the company’s penetration rates will hit a brick wall sooner or later. ~ Ishfaque Faruk, Motley Fool , 26 October 2013

skim

The iPhone 5c appears to be Apple’s red-headed stepchild. The tech giant is selling far fewer units of the 5c than it is of the (more expensive) 5s, according to recent reports. ~ Cadie Thompson, CNBC, 15 October 2013

Author’s Note: So Apple sells more of its premium product than its second-tier product and this is viewed as a bad thing. That reminds me of a joke:

Question: How did the fool try to kill the fish?

Answer: They tried to drown it.

Question: How did the critics try to kill Apple?
Answer: They tried to drown it in profits.

Apple in my view made a huge mistake by not launching a mid end smartphone. ~ Sneha Shah, Seeking Alpha, 2 January 2014

Wars are not won by fighting battles; wars are won by choosing battles. ~ George S. Patton

Note that the average Android price is heading toward $200 and the average iPhone price is heading toward $600. Apple is asking the question, do you want to pay three times as much for our phones? Thus far, 80% of the market has answered ‘no.’ ~ Jim Edwards, Business Insider, 31 May 2014

Twenty percent of the market has answered: “yes”.

For all that Android has improved, and we see the difference as a matter of taste, iPhone still outsells Android at the same price 3:1 ~ Benedict Evans (@BenedictEvans) ~ 3/30/14

As of June there were 886,580,000 iOS devices sold. 1 Billion sold will happen well before this year is out ~ Horace Dediu (@asymco)

Platform

Apple has the strongest computing platform in the world. The critics insist that it is an illusion that cannot last.

Over the last year, Google paid devs ~1/2 of Apple’s App Store ($5B vs $10B) on ~2x the devices @BenedictEvans

In other words, each Apple owner is worth 4 times as much to developers as is each Android owner.

Apple’s critics have always been wrong about the how Platforms work. They insist that cheaper hardware will always outsell more expensive hardware and that platform is a game of winner-take-all with the more ubiquitous hardware sales attracting the majority of the developers. You have to admire Apple’s critics for their consistency. Despite having no evidence to support their position and plenty of evidence to refute it, they’ve remained consistently wrong.

There are very roughly the same number of high-end Android and iOS users, yet total Android payout in last 12m was $5bn, where iOS was $10bn. ~ Benedict Evans (@BenedictEvans) 8/23/14

Apple will likely have a tough time convincing application vendors to build specialized clients for the iPhone until the volumes are there, and the volumes could be limited by the lack of third-party applications – a Catch 22. ~ Jack Gold, J. Gold Associates, 10 January 2007

Even if it is opened up to third parties, it is difficult to see how the installed base of iPhones can reach the level where it becomes a truly attractive service platform for operator and developer investment. ~ Tony Cripps, Ovum Service Manager for Mobile User Experience, 14 March 2007

Will [Android] be as elegantly executed as the iPhone? Probably not. But it won’t matter to the mobile application developer if there are eight or ten Android handsets shipped for every iPhone. Addressable market will again trump elegance. ~ Brian Prentice, Gartner, 21 September 2009

All the apps that count will be ported to every one of them (smartphone platforms). ~ Microsoft’s chief software architect, Ray Ozzie, at the Microsoft’s Professional Developers Conference, 17 November 2009

All the people (including me) who felt underwhelmed by the iPad initially might have missed its true potential. Put another way: the iPad is all about software. Forget the sleek form factor – that’s just a prerequisite. Ironically, it’s the software and services that Microsoft never ‘got’, that Apple totally does get. ~ Dan Wayne, apc mag, 12 February 2010

The iPhone vision of the mobile Internet’s future omits controversy, sex, and freedom, but includes strict limits on who can know what and who can say what. It’s a sterile Disney-fied walled garden surrounded by sharp-toothed lawyers. The people who create the apps serve at the landlord’s pleasure and fear his anger. I hate it. ~ Tim Bray, Developer Advocate, Google, Inc, 15 March 2010

(W)hile Apple’s attempt to control the ecosystem and maintain a closed platform may be good for Apple, developers want more options and customers want to fully access the overwhelming majority of web sites that use Flash. We think that customers are getting tired of being told what to think by Apple. ~ Jim Balsillie, Co-CEO, Research In Motion, 20 October 2010

Android will become the operating system (OS) of choice for developers rather than IOS within 12 months. ~ Adam Leach, Ovum, 23 Jan 2012

If Apple continues to pursue its current pricing and maximize-short-term profit strategy, it may continue to increase its profits for the next couple of years. (BlackBerry and Nokia grew earnings for a couple of years after some analysts began seeing the writing on the wall.)
But Apple will also continue to lose platform and ecosystem share in most of the world.
Apple fans can talk all they want about how Apple is “like BMW,” but in a couple of key competitive respects, it isn’t. And if the gadget platform market behaves the way other platform markets have (think Windows), Apple and its fans may come to regret this short-term thinking in the end. ~ Henry Blodget, Business Insider, 15 November 2013

Author’s Note: Hardware is the musical instrument. Software is the musical score. Platform is the stage. Ecosystem is the Orchestra that brings the instruments, the music and the players altogether on the grand stage. There is no company on the planet who out orchestrates or out ecosystems Apple.

Until such time as the critics understand that the Orchestral performance — the overall ecosystem — is worth far more than its component parts, they will never understand Apple.

Wall Street

October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February. ~ Mark Twain

Just before, during, and after the upcoming Apple Event, Apple stock is going to take a dramatic turn. And you know what that means about the future of Apple’s current products and about the future of Apple…

…absolutely nothing.

Believing that the direction of Apple stock determines the value of an Apple Event is like believing that a weathervane controls the direction of the wind. ~ John R. Kirk

The stock market is neither a gauge of current success nor a predictor of future success.

Markets reflect perception. In that sense they are always right. For the price to change, perception has to change. ~ Horace Dediu (@asymco)

In the short run, the market is a voting machine but in the long run, it is a weighing machine. ~ Benjamin Graham

We think that markets reflect and even anticipate facts. But markets reflect perception, not facts. And perception is not about reality, it’s about human foibles.

If a business does well, the stock eventually follows. ~ Warren Buffett

Claim Chowder

iPhone which doesn’t look, I mean to me… And I guess some of these stocks went down on the Apple announcement, thinking that Apple could do no wrong, but I think Apple can do wrong and I think this is it. ~ John C. Dvorak, 13 January 2007

The best revenge is massive success. ~ Frank Sinatra

Sell your Apple stock now, while the hype’s still hot. You heard it here first. ~ David S. Platt, Suckbusters!, 21 June 2007

I made a killing in the stock market. My broker lost all my money, so I killed him. ~ Jim Loy

(W)e think investors should also pay close attention to Apple. In addition to the Amazon tablet, Apple faces a growing number of risks. ~ Naked Value, 27 Sept 2011

Cook has been increasingly compared to Jobs and found wanting. ~ Rob Enderle, TechNewsWorld, 26 March 2012

I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply ‘no.’ I already feared that would be the answer. I asked more to see how he’d qualify it. But he didn’t qualify it at all. No, there will be no more great new stuff beyond whatever’s currently in the pipeline. So if Apple’s not going to make the next iPad, who is? ~ Paul Graham, March 2012

Market share analysis presumes a zero sum game but greatest wealth comes from creation of new markets. ~ Horace Dediu (@asymco)

Here are seven events, all of which could hurt Apple’s stock price in a big way:

1. Wireless service providers (WSPs) collectively decrease iPhone subsidy
2. Window 8 is a huge success
3. No surprise in iPhone 5
4. Departure of major executives
5. Lukewarm replacement sales
6. Global smartphone growth slows down
7. Chinese demand of iPhone unsustainable during the last quarter
Gutone, Seeking Alpha, 29 May 2012

Here are four reasons why I don’t think Apple’s stock will see $700 again:
1. Growth in phones is slowing as competition increases
2. Margins are shrinking
3. Apple is losing its innovative edge
4. Apple may no longer be a growth story”
Howard Gold, MarketWatch, 1 February 2013

Author’s Note: Apple’s stock adjusted price passed $700 in August, 2014.

As a value investor, I strongly believe in BlackBerry’s future because the company has several advantages, such as the security, the Q10 and the corporate world. On the contrary, Apple’s potential increase appears very limited in the short run because the company won’t release new products, which can increase the interest of the company. ~ Gillian Mauyen, Seeking Alpha, 28 April 2013

Harvard University, the world’s wealthiest university, has liquidated its stake in Apple Inc. as the iPhone maker’s shares tumbled after reaching a record high of $702.10 in September. ~ Michael McDonald, Bloomberg, 10 May 2013

Author’s Note: One doesn’t have to go to Harvard to know that it’s “Buy low, sell high.” Instead, most investors — including large institutional investors — are inclined to buy stock on the way up and sell it on the way down.

Apple has become a value trap, This is a company with no growth, and profit margins that are way too high vis a vis the competition. ~ Doug Kass, Seabreeze Partners Management, 17 Sept 2013

I will look at taking my profits on Apple stock as I do not think that the company has much upside left at the current valuation and price. ~ Sneha Shah, Seeking Alpha, 25 October 2013

They only have 60 days left to either come up with something or they will disappear,” said Trip Chowdhry, managing director at Global Equities Research. (March, 2014)

Wasn’t Apple supposed to have disappeared by now without the iWatch? ~ Brad Reed (@bwreedbgr) 8/20/14


blodgetaug2014

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. ~ Warren Buffett

Lessons Learned And Unlearned

When I find the road narrow, and can see no other way of teaching a well-established truth except by pleasing one intelligent man and displeasing ten thousand fools — I prefer to address myself to the one man. ~ Maimonides

This has been a very long article and this has been a very long series of articles. Have we learned anything from it? I fear we haven’t learned much. As this week progressed, I watched pundit after pundit make the same ridiculous errors that they’ve always made and, I guess, that they always will make. But just because they will never learn does not mean that we cannot profit from their mistakes.

Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of fools, but fools do not imitate the successes of the wise. ~ Cato the Elder

Here then are seven last lessons learned and unlearned.

Butcher

Don’t take a butcher’s advice on how to cook meat. If he knew, he’d be a chef. ~ Andy Rooney

Apple is one of the greatest Chef’s of our age. Most critics are butchers. Enough said.

Swimmingly

Never offer to teach a fish to swim. ~ Proverbs

Apple seems to be doing swimmingly without our advice. Perhaps we should stop spending our time telling them what they’re doing wrong and start learning what they’re doing right.

There are a lot of people innovating, and that’s not the main distinction of my career. The reason Apple resonates with people is that there’s a deep current of humanity in our innovation. ~ Steve Jobs

Cannot

The person who says it cannot be done should not interrupt the person who is doing it. ~ Chinese Proverb

Don’t listen to people who say it can’t be done. ~ Steve Jobs

If something is being done, we should stop saying that it cannot be done and start figuring out how they’re doing it.

Things are only impossible until they’re not. ~ Jean-Luc Picard

Prophets

“Apple is screwed” – 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014. ~ Sammy the Walrus IV (@SammyWalrusIV)

It is a test of true theories not only to account for but to predict phenomena. ~ William Whewell

To arrive at a contradiction is to confess an error in one’s thinking; to maintain a contradiction is to abdicate one’s mind and to evict oneself from the realm of reality. ~ Ayn Rand

The prophets of doom have predicted Apple’s demise year in and year out and always they have been wrong. We need to pay less attention to prophets and more attention to profits.

Unconventional

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally. ~ John Maynard Keynes

It is a paradoxical truism that success comes from unconventional strategies which are, by definition unpopular.

Differentiated

It’s not about doing what you can, it’s about doing what others can’t. ((Excerpt From: C. Michel. “Life Quotes.” C. Michel, 2012. iBooks. https://itun.es/us/AyIDI.l))

Apple’s critics always want Apple to adopt the strategies employed by their competitors. This, of course, makes no sense at all. The goal is to be different from, and more successful than, one’s competitors.

Apple has no competition who sell what their customers are buying. ~ Horace Dediu (@asymco) (3/18/14)

Apple has a monopoly on being Apple. They want to maintain that for just as long as they can.

Long Run

It may not be that the race is not always to the swift, nor the battle to the strong – but that is the way to bet. ~ Damon Runyon

Apple is in it for the long run. We too should viewing Apple from a long-term perspective.

Apple is run ‘for the investors who are going to stay, not the ones who are going to leave.’ ~ Warren Buffett

When you get up in the morning and the press is selling Apple short, go out and buy some shares. That’s what I would do. That’s what I have done. ~ Steve Jobs

If you’re in Apple for only a week… or two months, I would encourage you not to invest in Apple. We are here for the long term. ~ Tim Cook

CookLaugh

CAPTION: Tim Cook and Apple crying all the way to the bank.

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

Unprecedented iPhone Demand

As we lead up to this years “main event,” I wanted to share some initial points underscoring my read that there is unprecedented demand for Apple’s iPhone this holiday quarter and beyond.

Major Upgrade Cycle: This has been the source of many analysts’ upside, but I think it may even be larger than many realize. From data points I have from the US, China, and even parts of Europe, it appears there is an unusually large number of legacy devices (smartphones more than two years old) still in use in the world. This includes devices like the iPhone 4, and Galaxy SIII. Our own research revealed the average life cycle of an iPhone in the US is 2.8 years. That number is even higher when only multi-person families are included. Apple’s quality curse is they build such good devices they can and do remain in use for longer than the traditional 24 months.

Gaining Share with the Phablet: One of the more compelling theories for the existence of the 5.5 inch iPhone is it could steal customers away from Samsung who were previously fans of the Galaxy Note line, on the simple premise of screen size alone being the most premium smartphone on the market.

Emerging Market Growth: Perhaps one of the most interesting things Apple can do is use previous years’ models, as they typically do, but be even more aggressive at their price points and target them in emerging regions. Keeping the 5s, for example, at a 5c price would go over very well in China for the middle tier market. Keeping the 4s and pricing it even lower could do extremely well in markets like India and other parts of South East Asia.

All of this gives me the sense this could be more than just a typical growth holiday quarter for Apple but that they blow past most consensus estimates for the holiday quarter with ability to meet the demand their only limiter. While my job does not depend on making estimate predictions for shipments, I would not be surprised, assuming they can make sufficient quantities, that Apple sell mid-60’s of iPhones in the holiday quarter.

The other thing that will be interesting to watch is what happens with Samsung’s sales. Last quarter, Samsung shipped 78m smartphones and they stuffed the channel prematurely to mask some of their challenges. I think it is extremely possible, given the sense I get on both Apple and Samsung trend lines, that Apple and Samsung sales in the holiday quarter could be closer than people think.

As some recent comScore data suggests, iOS and Android are neck in neck as far as users go in the US. I have a sense Apple takes the majority share in the US by end of the year.

The Doctor-Patient Health Tracker Data Dilemma

In my column last Friday, “Why an iWatch is not Apple’s next big thing“, I pointed out I believed Apple is doing less an iWatch and more a wearable with a narrower focus around fitness and health care.

Of course it will tell time, but I suggested that, instead of trying to be all things to all people in a smartwatch, Apple would make their device the best health and fitness wearable on the market and use this to tie in to the bigger prize of becoming an important medium or data broker between the user and their doctor or health care provider. My feeling is Apple’s next big thing is tying the iPhone and an Apple Wearable to monitoring a person’s health and becoming a powerful mediator between the user and the health care system.

If you follow what is often called the mHealth and digital health revolution, you already know there is a lot of effort going into digitizing the world of health care and using mobile devices and wearables as on-person health monitors to record data that could be useful to a person’s health and fitness programs as well as their health care professionals. Unfortunately, today’s fitness trackers act as islands unto themselves and, in most cases, data is silo’ed and not shared across apps or with anyone else in the health care chain.

I believe Apple plans to fix this issue by aggregating content from fitness apps or fitness wearables that use HealthKit and, over time, play the mediator role between the user and their health care professionals. However, for this to even be a possibility. Apple has to do at least the following things:

Privacy of personal health data must be protected

The recent news hackers stole nude photos of various celebrities from their iCloud accounts underscores that Apple needs to make sure health data is truly private and can only be viewed by the user. While the hackers did not breach any of Apple’s iCloud based servers, they did use social engineering to get access to these celebrities’ passwords and security questions. While stealing nude photos is bad in and of itself, hackers gaining access to personal health data would be much worse. Instead of making dual authentication optional, Apple may need to make it mandatory and force the issue with their users to keep this from happening in the future. They are also going to have to work overtime to gain back consumer trust given what happened with these nude photos. 

Fitness tracking and health data must be accurate

Most of the fitness trackers I have used have varied in their data accuracy. Any Apple device would need to solve this problem and be as accurate as possible if they want to have any success with these products. Also, the user experience itself must be much better than what we have had with the fitness trackers on the market now.

Apple did not invent fitness trackers but, as they did with the iPod, iPhone and iPad, they have the opportunity to reinvent and make them a mainstream product. I believe Apple’s ultimate goal is to become a mediator of data between the user/customer and their doctors and health care providers and make it possible for data to be eventually sent to these professionals at the request of the user/customer. That means privacy and accuracy are critical to this product’s ultimate success.

Doctor and Healthcare Professional Training

I see two key issues or dilemmas when it comes to this data actually impacting any health care professional’s care of a patient.

The first is already overtaxed doctors are working long hours now. The idea of constant data streams coming from health trackers would be overwhelming. Long time readers know I am a heart patient as well as a diabetic and personally have to monitor a lot of things like blood pressure and blood sugar readings multiple times during the day. Thankfully, I do this via health monitors tied to my iPhone so a data stream is recorded and easily accessible to me. But my doctors want those reading too. When I go to my diabetic doctor, he downloads my blood glucose testing meter data so he can see what my blood sugar readings have been over a three month period. My primary doctor wants my blood pressure readings in the same way. What would make their lives easier is if data is collected and aggregated on my iPhone and, upon my approval, sent directly to my digital patient charts, perhaps on a weekly basis. More importantly, the data could also have alert algorithms that warn me and my doctor when these readings are out of whack and perhaps need some professional intervention. Automating this process could be a huge win for me and my doctors and help catch things early if all of this technology worked seamlessly and with privacy intact.

The second would be related to the training of professionals on how to use these self monitoring tools and data in ways that work for them and their patients. As I stated earlier, doctors are overwhelmed in their patient care practices now and while these tools could be quite important to their procedures, it will take some serious training efforts from Apple and related practitioners in the health care system to make this work.

It will be interesting to see how much Apple actually reveals of this strategy next week but I believe the signs are all there and point to a big emphasis on a wearable that has a strong focus on health and fitness. If so, the concerns I mention above need to be factored into anyone’s thoughts on the success of this product.

Side note — I am hearing this wearable from Apple might be actually modular or a module itself that can be put into different sized and colored bands that also include sensors in the bands themselves. If so, this makes sense. Giving users colorful and stylish options on the bands could be a lucrative addition to the wearable device itself and be even more interesting to a broader range of customers.

Five Thoughts on Privacy and Security

Apple’s been in the news this week because hackers apparently forced their way into various celebrities’ iCloud accounts and stole photos, which have now been released to the public. It’s still not clear exactly how the hacks were perpetrated, although that hasn’t prevented plenty of clueless reporting on the topic. In the absence of clarity about exactly what happened, I think it’s useful to focus on a few general points about privacy and security that provide some context for this sort of news.

If Apple really is at fault, it needs to remedy the situation fast

If it becomes clear, as has been reported, Apple’s systems for securing accounts are inadequate in that they either lack rate limiters or are otherwise open to brute force attacks, they need to fix this ASAP. As others have pointed out, these are basic precautions any online service ought to put in place and if Apple hasn’t had them, that’s a massive oversight. There should be (and almost certainly is) an internal review under way at Apple right now looking at all the potential vulnerabilities in Apple’s online sign-on systems and patching them as soon as possible.

The impact to Apple will be very limited

Every time a story like this blows up, I get calls from journalists asking whether this will (A) damage the company concerned, (B) make people warier of similar services in future, (C) dramatically change behavior. And every time, I tell them no to all three questions, for one simple reason: people have extremely short memories when it comes to this sort of thing. Just look at the Google Trends data for the search term “privacy”:

Google Trends privacy

What you see is interest in the topic is actually declining over time, though there are periodical spikes in interest, usually triggered by specific news stories such as the one this week. Interestingly, there’s no spike this month even though the equivalent Trends data for the word “hack” has spiked enormously as a result of the news story. In other words, overall concerns about privacy as measured by this data remain low (and are in fact falling) and although there are brief spikes in interest, they don’t last. As such, this story will likely blow over like all the others before it, and there will be little to no lasting impact on Apple.

What is certain is that, if you were looking to orchestrate a campaign to hobble Apple’s announcements this coming week, this would be about as good an attack vector as you might conceive of. It hits Apple where it’s thought to be weakest (cloud services) ahead of what’s likely to be a series of announcements about particularly sensitive data sets (health, home and financial). But my guess is by this time next week it will be forgotten – the public has a very short memory when it comes to this sort of thing.

Privacy attacks are very targeted

One reason why these attacks tend to blow over so quickly is they affect so few people. This particular attack, like most of them, was very targeted – the Guardian reports only around a dozen celebrities were affected and a total of around 400 photographs and videos leaked so far. The overall scope of the hack may have affected “over 100 individuals” and their personal data. That’s a tiny, tiny fraction of the overall populace, and what all these people have in common is they’re famous.

All of these attacks require three things to be a threat: motive, means and opportunity. And, unlike the sort of financial hacking that has affected Target and others in recent months, all three simply don’t apply to most members of the general population. There’s little motive for hackers to access my personal photos or videos, because the market for images of my kids is non-existent outside my own family. These attacks take considerable time and it’s simply not worth the means required if there’s no payoff. There’s also little opportunity because the kind of personal data necessary to perform social engineering for someone who isn’t famous is hard to come by.

As such, though celebrity photos make for big news stories, most people can easily brush them off since they’re unlikely ever to be affected by them. Financial hacking stories, on the other hand, have far more wide-reaching effects, and the likelihood that many ordinary individuals will be affected is far higher. But that doesn’t apply to this sort of very targeted and therefore, limited, hacking.

The difference between careless and deliberate privacy invasions

Another thing to bear in mind is there’s a very important difference between personal information obtained by third parties despite the best efforts of a provider, and information actively shared with third parties by a provider. I’ve written previously about how business models either create alignment between users and those paying the bills or tensions between them, and the implications that has for security. What’s most damaging with these sorts of stories is when they start to create in people’s minds a pattern of breaches, and that’s far more likely to happen when a company’s business model depends on enabling sharing of personal data than when a company is doing everything it can to protect users’ data from third parties.

What no one is accusing Apple of here is deliberately pushing the boundary on sharing personal information with third parties, and in fact Apple has spent the past week clarifying developer guidelines around HealthKit, HomeKit, Extensions and other functions in iOS 8 which have the potential for privacy invasions and violations. One of the things I was most struck with as I watched some of the individual sessions from WWDC was how carefully Apple has thought through some of the privacy implications of HealthKit. One example I’ll highlight that’s representative: apps can check whether they have write permission for HealthKit data, but not whether they have read permission, because the very fact a user has denied an app read permission to their blood sugar data might be an indication they are storing such information and therefore they’re diabetic. That kind of attention to detail is critical if Apple is to gain the trust of its users around HealthKit, HomeKit and whatever payment solution it will launch next week. The details that have emerged this week about the limits placed on what developers can do with HealthKit and HomeKit data are further illustrations of how seriously Apple is taking all of this. I don’t know if the timing is a coincidence – if the iPhone launch weren’t next week, I’d say it might have been moved up, but I suspect it’s just fortuitous timing.

Both Apple and Microsoft have taken advantage of Google’s focus on advertising to hammer it over privacy invasions. Microsoft’s Scroogled campaign was a good example of this strategy and it works because it reminds users of the inherent tension that exists between the needs of users and advertisers. Both Apple and Microsoft have been highlighting their commitment to keeping user data private, as I mentioned in my business models piece. While this week’s iCloud story may hurt Apple for a few days, it’s in a fundamentally different category from the regular stories about Facebook and Google privacy invasions, because those are about deliberately shifting the boundaries between what’s personal and what’s not. While Apple bears responsibility if poor security precautions allowed the iCloud hack to take place, it’s certainly not leaking that data deliberately to third parties.

Users are always the weak point in security

Lastly, we as the end users are always the weak point in security. That’s not to absolve tech companies of blame: in fact, it’s a key challenge they should all be working to overcome, while managing the balance between removing the barriers to good security and maintaining strong protections for users. I’ve had good discussions on Twitter about this over the last few days, and several themes have emerged:

  • The vast majority of users will always seek the path of least resistance when it comes to security – this means simple, often reused passwords and an aversion to things like two-factor authentication which might strengthen security
  • TouchID and other new forms of authentication can be very helpful in this respect, but they only go so far, as long as PIN codes and passwords are used as alternatives, and as long as they’re only used for on-device security, leaving the web as a whole, and non-enabled devices back in the current username-password model
  • Two-factor authentication which automates one of the factors – e.g. by using a fingerprint sensor or iris scanner on a device to authenticate on the web, or for mobile payments, could be a significant step forward. Two-factor authentication is being held back by its sheer awkwardness: waiting for an SMS or opening an app, manually entering a code etc. and something which makes the second factor easier to confirm could increase adoption.

There are no easy solutions in security, which is characterized by constant tradeoffs between ease of use and prevention of breaches. But better security and privacy protections are essential focus areas for all technology companies, and we can do much better than we currently are.

Apple Claim Chowder: Evolutionary Or Revolutionary

With an Apple Event fast approaching, I’m reviewing critiques of past Apple Events to see how accurate they were. Turns out, not very. Critique is needed and welcome. Repeated errors? Not so much.

Evolutionary Or Revolutionary

The iPhone and the iPad have received a lot of criticism for being evolutionary, not revolutionary. I take strong exception to this sentiment. Apple’s iPhone and iPad — which are only seven and four years old, respectively — have been about as revolutionary as tech can get.

Before And After

From 1906, to 1956, to 2006, we went from the horse to the car to the airplane. However, as the photos below demonstrate, the way we read, entertained ourselves and communicated, while waiting to ride in the horse, the car and the plane, remained largely unchanged…until the iPhone arrived in 2007.

1906

1956

2006

Subway

Convergence

Further, look at the two photos, below, showing the multiple tasks that we can now accomplish with the aid of a single device.

photo.php

Update

Inevitable

Finally, perhaps the critics think that this is no revolution at all; that this is all simply the inevitable result of the march of progress.

Hardly.

Thousand

Android.before.iPhone

Jobs.buttonphones.2007

Things do not happen. Things are made to happen. ~ John F. Kennedy

Critics think Apple’s products are evolutionary? I beg to differ. And reality begs to differ too. They’re as revolutionary as it gets.

An Attitude Of Ingratitude

If you see no reason to give thanks, the fault lies in yourself. ~ Tecumseh

There are (at least) two reasons why we don’t appreciate the significance of the iPhone/iPad revolution.

First, change seems to come very slowly when we’re looking forward but very rapidly when we’re looking backward. The iPhone was a leap. The iPad was a leap. Some acknowledge that they were revolutionary but claim that everything since has been evolutionary. I disagree.

We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. ~ Bill Gates

Sometimes, evolutionary can be revolutionary too. During the 70’s, 80’s and early 90’s, personal computing improved at breakneck speed. The changes were gradual and iterative but they came so rapidly, one after the other, that the effect was to change everything in a very short period of time. The same thing is happening in mobile, today.

Big things start small. ~ Hiten Shah (@hnshah)

Big things do indeed start small. But they don’t stay small for long.

The second reason we don’t appreciate what we have is because we’re an ungrateful lot.

Human beings have an almost infinite capacity for taking things for granted. ~ Aldous Huxley

    It’s been years — considered a long time in tech — since Apple delivered a “mind-blowing” product that made a cultural dent, some say, harking back to the iPad in 2010 and iPhone in 2007. ~ Jon Swartz, USA Today, 4 October 2012

Seriously? “It’s been years….” You mean it’s been, like TWO years before that article was written and FOUR years before today, since Apple changed everything. All over again? Geez, what a bunch of slackers they are.

The discontented child cries for toasted snow. – Arabian proverb

All this ingratitude reminds me of a joke:

    A woman was driving down the street in a sweat because she had an important meeting and couldn’t find a parking place. Looking up toward heaven, she said, “Lord, take pity on me. If you find me a parking place, I will go to church every Sunday for the rest of my life and give up sex and tequila.” Miraculously, a parking place appeared. She looked up again and said, “Never mind. I found one.”

3d clown - puppet, juggling with color balls

Claim Chowder

Here are some past quotes regarding “evolutionary” vs. “revolutionary”. They haven’t stood the test of time very well.

An ungrateful man is like a hog under a tree eating acorns, but never looking up to see where they come from. ~ Timothy Dexter

    (T)he iPhone itself may not be so great after all. ~ Randall Stross, professor of business at San Jose State University, 12 December 2009

    The iPad is not the revolutionary product so many hoped it would be. ~ Don Reisinger, eWeek.com, 28 January 2010

    Yet for some of us who sat in the audience watching Steve Jobs introduce the [iPad], the whole thing felt like a letdown. ~ Daniel Lyons, BusinessWeek, 28 January 2010

    Ultimately, the iPad is a large iPod touch: a great device to draw your inspiration from, but perhaps not the seismic shift in technology that we were expecting. ~ Claudine Beaumont, The Telegraph, 28 January 2010

    The company once notorious for its ability to upend convention and revolutionize markets may no longer have what it takes, worry some technology journalists. Call it the iPad or the iPlod, but the message seems clear: Apple may have lost its mojo. ~ Jeremy A. Kaplan, FOXNews.com, 28 January 2010

    Behold: The Apple iFlop. Neither “truly magical” nor “revolutionary,” the cluelessly named Apple iPad tablet device has dropped like a shiny wedge into the gadget game, dividing tech watchers in to opposing views — the critical and the adoring. ~ Scott Moritz, TheStreet.com, 28 January 2010

    Apple’s new iPad device is destined to disappoint (and not just because of the unfortunate name). ~ Russ Wilcox, CEO E-Ink (makers of Amazon’s Kindle), 28 January 2010

    It’s not going to revolutionize anything, it’s not going to replace netbooks… ~ Bruce Beris, bruceb consulting, 4 February 2010

    Tablets look cool, but the reality is they don’t do anything new. ~ Michael Comeau, Minyanville, 5 March 2010

smartphone-gadgets-killed

    The iPad is a not so ‘magical’ e-reader. Expect to hear a lot of: ‘I spent a cold night in line for this?’ ~ Scott Moritz , TheStreet.com, 9 March 2010

    (T)he Apple iPad is not unique, nor necessarily the best of breed in the media tablet sector it is spearheading. ~ Anders Bylund (TMF Zahrim), 11 March 2010

    And while Apple would be expected to ignite the tablet computing sector as it has done with MP3 players and the smart phone, there is something it can no longer do: sneak up and surprise the competition. There is no surprise with this device; it is just a huge iPod touch. ~ John C. Dvorak, MarketWatch, 26 March 2010

    In short, I don’t get the ‘magical and revolutionary’ vibe that Apple chief executive Steve Jobs touted at the iPad’s January unveiling. ~ Rob Pegoraro, Washington Post, 9 April 2010

    The iPad is useless. Beautiful, but useless. ~ Josh Belzman, MSNBC.com, 20 May 2010

    Right off the bat, I’m glad to see that my initial reactions to [the iPad] were accurate. Anyone who believes this thing is a game changer is a tool. ~ Paul Thurrott, Paul Thurrott’s Supersite for Windows, 6 October 2010

    I cannot see a need for the thing [iPad]. ~ John Dvorak, MarketWatch, 22 October 2010

    I can’t imagine anyone under the age of 30 wanting an iPad. … Furthermore, I do not recall ever seeing anyone under 30 actually using an iPad. ~ John C. Dvorak, PC Mag, 13 December 2010

    But I don’t see any overwhelmingly compelling capabilities that would make people sitting on the tablet fence go out and have to buy one, despite some attractive apps. I don’t see this as heads above the competition (especially the Xoom) right now. Apple didn’t really move the bar all that much. ~ J. Gold, J. Gold Associates, 2 March 2011

    The iPhone is heralded as the most revolutionary mobile phone in human history, but the cold and harsh truth is that for all the cheering and punditry, the iPhone’s impact on the world is negligible. ~ Thom Holwerda, OS News, 29 Dec 2011

Commuting

future-of-the-image

    Apple’s new iPhone 5 is a well-crafted device that’s likely to please the company’s fans and sell in the tens of millions. But if you’re looking for something truly innovative in a smartphone, look elsewhere. ~ Troy Wolverton, Mercury News, 12 Sep 2012

    Key take aways: Innovation at Apple is over… Just incremental improvements, nothing ground breaking. The best is over for Apple. ~ Trip Chowdhry, Global Equities, 23 October 2012

    And I’m really struck by this mini iPad thing. As if that’s any kind of a product innovation. You know, once you start just changing the size of your products, I really think you’re not exactly innovating. I wonder if they’re going to start coming out with the tutti-frutti iPad, where it comes out in different colors. As if that would be some sort of innovation… ~ Jeff Gundlach, CEO, Doubleline Capital, 7 Nov 2012

    However, for the company to truly move forward as a tech power, Apple should hang-up on the iPhone after one more iteration – presumably the iPhone 6. You might disagree. Granted, the phone is still selling well. However, aside from a different chip and larger screen, the change from the 4S to iPhone 5 was not that significant. ~ Richard Saintvilus, Forbes, 6 January 2013

    Google glasses may look and seem absurd now but (Brian) Sozzi says they are “a product that is going to set the stage for many other interesting products.” For the moment, at least, the same cannot be said of iPhones or iPads. ~ Jeff Macke, Yahoo! Breakout, 27 February 2013

    Enterprise tablets now exist that provide the best of both worlds between end user and IT, which puts the Apple in a precarious position of needing to add more robust enterprise features. Until that point, Moor Insights & Strategy recommends enterprises re-evaluate their iPad pilots and deployments. Enterprises should immediately evaluate the latest enterprise tablet offerings from HP, Dell and Lenovo and make their decisions on future deployments incorporating those additional options. ~ Patrick Moorhead, Moor Insights & Strategy, 15 March 2013

    Nothing new is coming from [Apple’s] pipeline. The iPhone5S and the iPad Mini aren’t new products. ~ Stephan Dube, Seeking Alpha, 28 May 2013

    Let’s face it this new iPhone is just an upgrade, a refresh, dare I say a sequel. I am sure that true tech devotees will tell me how wrong I am, that this new device is smarter, faster, revolutionary, etc. But to me and millions like me it seems a lot more evolutionary. It looks a whole lot like the last iPhone and the one before that and the one before that too. ~ Sandy Cannold, ABC News, 23 Sept 2013

    (T)hese days, Samsung sells the most smartphones, and up-and-coming manufacturers like Huawei and ZTE are nipping at Apple’s heels. The new iPhones — at least the ones being spun from the rumor mill that claim color as the big innovation — do not exactly sound like great leaps in technology. ~ Nick Bilton, New York Times, 8 September 2013

    Remember when the iPhone was truly innovative? Think hard, because you’d have to go back to 2007, and the release of the first iPhone. But since then, Apple has been tossing out retread after retread… ~ Paul Thurrott, Supersite for Windows, 13 September 2013

    The 5c may be this year’s Surface RT. ~ Rick Munarriz, The Motley Fool, 13 Sept 2013

    Apple’s innovation problem is real. … Rivals have caught up to Apple in the markets it once dominated, and the tech giant’s rumored future products appear to be more evolutionary than revolutionary. ~ Julianne Pepitone and Adrian Covert, CNNMoneyTech, 8 September 2013

    The most that Apple could think to do with the new, faster processor in the iPhone 5S was animate 3D effects that make some users feel ill and a fingerprint sensor that solved a problem that wasn’t exactly pressing. Apple’s new iOS7 mobile operating system, which felt ‘more like a Microsoft release,’ crippled many older iPhones and led to complaints of planned obsolescence. ~ Christopher Mims, Quartz, 30 December 2013

    By copying the work of others, Apple seems to admit it has fallen behind competitors. ~ Transcend Asset, 5 June 2014

Lessons Learned And Unlearned

I can think of (at least) three lessons here.

First, little people belittle greatness.

To belittle, you have to be little. ~ Khalil Gibran

Any fool can criticize, condemn and complain and most fools do. ~ Benjamin Franklin

Ridicule is the tribute paid to…genius by the mediocrities. ~ Oscar Wilde

Little men with little minds and little imaginations go through life in little ruts, smugly resisting all changes which would jar their little worlds. ~ Zig Ziglar

Second, we often do not see what is right before our eyes.

You see, but you do not observe. ~ Sir Arthur Conan Doyle

Third, acceptance comes in stages.

All truth passes through three stages: First, it is ridiculed; Second, it is violently opposed; Third, it is accepted as self-evident. ~ Arthur Schopenhauer

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

Apple Claim Chowder: Product

With an Apple Event fast approaching, I’m reviewing critiques of past Apple Events to see how accurate they were. Turns out, not very. Critique is needed and welcome. Repeated errors? Not so much.

Product

Apple’s products receive a lot of criticism and there’s certainly nothing wrong with that. Some of the criticism seems unfair to me but I usually refrain from commenting since values are both individual and subjective. However, perhaps it is worth noting that:

For all that Android has improved, and we see the difference as a matter of taste, iPhone still outsells Android at the same price 3:1 ~ Benedict Evans (@BenedictEvans) ~ 3/30/14

Some of the criticism of Apple’s products is objectively flawed. The first mistake critics routinely make is to hyper-focus on a single missing or underdeveloped feature and then declare the entire product useless or dead on arrival. The world isn’t black and white. Not every feature is essential and not every flaw is fatal.

The art of being wise is the art of knowing what to overlook. ~ William James

Never permit a dichotomy to rule your life. ~ Edward L. Bernays

If you see the world in black and white, you’re missing important grey matter. ~ Jack Fyock

The second mistake critics make is even more embarrassing. Critics often flat out get a product’s priorities wrong. They misinterpret the job the product is being hired to do and promote a particular feature or set of features as essential when, in fact, those features are less than essential and are sometimes actually an impediment to the product’s long-term success. I’ve highlighted features such as keyboards and Flash, below, but the “island of misfit features” is very crowded indeed.

Things which matter most must never be at the mercy of things which matter least. ~ Goethe

Knowledge is power only if man knows what facts not to bother with. ~ Robert Staughton Lynd

Products get bloated one lazy decision at a time. ~ @destraynor

Critics think the flaw lies in the product but quite often it is the analysis, not the product, that is critically flawed.

3d person - puppet, in a hat of the clown with bells

Specs

Sometimes highly technical people forget that the world is not comprised of highly technical people. ~ Wes Miller (@getwired)

Specs are a ceiling. You’ve got to have them in order to get great performance and without them, your potential is limited. However, specs are not a floor. The greatest specs in the world are no guarantee of a great product. Many products have a very high ceiling but a very low floor. In other words, they have great specs but their actual benefit to the user is very low. A focus on specs as the be-all-end-all of a product has led to some poor analysis, as we’ll see, below.

Never underestimate the power of a simple tool. ~ Craig Bruce

    Top iPhone Killers
    1. LG GD900
    2. Samsung Pixon12
    3. Samsung OMNIA HD
    4. Sony Ericsson Satio
    5. HTC Touch HD

    In order to be considered an a iPhone Killer, the phone must have a large touchscreen. And provide something unique that’s not found in an iPhone, whether it’s GPS, higher data rate, vibration feedback, video recording, HD video, higher resolution camera, etc.iPhoneKiller.com, 1 June 2009

Author’s Note: Notice how the criteria used to define an “iPhone Killer” is entirely based on specs and features.

    Google phone Nexus One, whose launch is one of the most-awaited ones in 2010, boasts of tech specs that make iPhone look like a wimp. ~ Nick Brown, IB Times, 30 Dec 2009

    Nothing from the iPad specs that I’ve seen really shows any great cause for celebration. ~ John Breeden II, Government Computer News, 28 January 2010

    We very carefully chose our tablet processor, the Nvidia Tegra 2, and to really compete it will take [Apple] some time. You know, [Nvidia] is well known for graphics. ~ Jonney Shih, Asustek Computer, 3 February 2011

    Technically Playbook is already on a par with iPad and the new devices will be based on its OS. ~ John Criswick, CEO, Magmic, 19 March 2012

samsungad2012

    Watch the iPhone 5 launch with a critical eye, and you’ll see a device that has a smaller less-brilliant screen than competitors. It has a slower CPU and graphics processor. It’s more fragile. ~ Rob Enderle, Digital Trends, 15 Sep 2012

    Google has beat Apple at its own Retina-display-thumping game. Meet the Nexus 7, the eye-popping 323-pixels-per-inch wonder. ~ Brooke Crothers, CNET, 27 July 2013

Mo(o)re computing power no longer makes technology feel better, so ‘design’ is how we choose. ~ johnmaeda (@johnmaeda)

Features

Engineers want power and they will sacrifice simplicity in order to get it. Giving up simplicity is really not much of a sacrifice for them since they thrive in complexity anyway.

I think a nerd is a person who uses the telephone to talk to other people about telephones. And a computer nerd therefore is somebody who uses a computer in order to use a computer. ~ Douglas Adams

Engineers like to solve problems.  If there are no problems handily available, they will create their own problems. ~ Scott Adams

Most people do not have the mind-set of an Engineer. They/we don’t want to work on their computer. They just want their computers to work.

    ’RIM didn’t expect iPhone to take off the way it did because it was so badly flawed from Day One,’ the former RIM employee said. ‘They believed that users wanted great battery life, great security, great mail handling, minimal network use, and a great keyboard experience. They never expected users didn’t care.’ ~ Former RIM Employee, according to Reuters, 16 March 2011

[A]s designers and engineers in general, we’re guilty of designing for ourselves too often. ~ Bill Moggridge

People get to buy the products they want, not the products engineers think they should want. ~ Benedict Evans (@BenedictEvans)

KEYBOARD

Keyboards are a prime example of where the iPhone and iPad critics got it wrong. Critics viewed the keyboard in isolation and concluded that keyboards were superior to typing on glass (which they are). Consumers viewed the product as a whole and concluded that it was worth giving up the keyboard in order to get all the many other advantages afforded by a large, unfettered, touch screen display. The critics’ hyper-focus on features blinded them to the overall benefits being afforded to the consumer.

    iPhone which doesn’t look, I mean to me, I’m looking at this thing and I think it’s kind of trending against, you know, what’s really going, what people are really liking on, in these phones nowadays, which are those little keypads. ~ John C. Dvorak, 13 January 2007

    As nice as the Apple iPhone is, it poses a real challenge to its users. Try typing a web key on a touchscreen on an Apple iPhone, that’s a real challenge. You cannot see what you type ~ Jim Balsillie, Co-CEO, Research in Motion, 7 November 2007

    Not everyone can type on a piece of glass. Every laptop and virtually every other phone has a tactile keyboard. I think our design gives us an advantage. ~ Mike Lazaridis, Co-CEO, Research In Motion, 4 June 2008

    We of course build plastic mock-ups that we show (to customers)…we had a slate form factor. The feedback was that for (our) customers it will not work because of the need to have (a physical) keyboard. These were 14-year-old kids, who, I thought, would be most willing to try a virtual keyboard but they said no, we want the physical keyboard. ~ Mika Majapuro, Worldwide Sr. Product Marketing Manager, Lenovo, 22 February 2010

    The pure slate form factor has failed all these years because, other than for vertical applications, people want and/or need a keyboard for regular use. ~ Jonathan Yarmis, Ovum, part of Datamonitor Group, 6 April 2010

    We’re finding — if you look at the surveys, you can see that large amount of the customers that have purchased touchscreen devices in last two years, they intend to get a device with the QWERTY keyboard on it now, right. I mean, they’ve got into a point where they’ve realize that a touchscreen alone is not enough; so that’s important. ~ Mike Lazaridis, Co-CEO, Research In Motion, Inc, 16 April 2010

    [Computers in Education are] never going to work on a device where you don’t have a keyboard-type input. Students aren’t there just to read things. They’re actually supposed to be able to write and communicate. And so it’s going to be more in the PC realm—it’s going to be a low-cost PC that lets them be highly interactive. ~ Bill Gates, Former CEO, Microsoft, 25 June 2012

    Institutions will try to preserve the problem to which they are the solution. ~ Clay Shirky

FLASH

    [Apple’s] decision not to support Flash…will have a limiting effect on the iPad’s sales potential. This is because one of the key use cases of the device, as marketed by Apple, relates to web browsing or consumption of online content. Absent Flash, iPad users will not be able to enjoy Flash-driven content, which is used in a considerable amount of websites as well as web-based games and videos. ~ Francis Sideco, Senior Principal Analyst, Consumer and Communications, iHS (now iSupply), 2 April 2010

    For those of us who live outside of Apple’s distortion field, we know that 7″ tablets will actually be a big portion of the market and we know that Adobe Flash support actually matters to customers who want a real web experience. ~ Jim Balsillie, Co-CEO, Research In Motion, 20 October 2010

    (W)hile Apple’s attempt to control the ecosystem and maintain a closed platform may be good for Apple, developers want more options and customers want to fully access the overwhelming majority of web sites that use Flash. We think that customers are getting tired of being told what to think by Apple. ~ Jim Balsillie, Co-CEO, Research In Motion, 20 October 2010

    Such a shame. Add this to the list of interesting places on the Internet you can’t see on your [iPad] device. Of course, if you had a Toshiba Tablet, you would enjoy the entire Internet. Yep, Flash sites too. ~ Toshiba ad when viewed on iPad, 22 January 2011

    Despite Apple’s claims, Flash is and will be important on the Internet for many years. ~ J. Gold, J. Gold Associates, 2 March 2011

    Since the experience of using an iPad is much more like using a computer, Apple’s (well perhaps Steve Jobs by himself) stubbornness to reject flash and not support many standard web widgets makes the experience on iPad inferior to a computer, bar portability. This is not the case for Android (and likely Windows 8). ~ Gutone, Seeking Alpha, 2 July 2012

All great truths begin as blasphemies. ~ George Bernard Shaw

SECURITY

    They are in a pickle. Their pickle is security. When the first big security flaw even happens in one of the large enterprises, you will see this turn around. Wait for the day this happens. ~ Thorsten Heins, CEO, Research In Motion, 29 Jan 2012

It is difficult to get a man to understand something when his salary depends upon his not understanding it. ~ Upton Sinclair

Toy

New products are often dismissed as being nothing more than mere “toys”. Here’s the thing — it’s not much of an insult ’cause people really, really like toys.

The supreme accomplishment is to blur the line between work and play. ~ Arnold J. Toynbee

My childhood may be over, but that doesn’t mean playtime is. ~ Ron Olson

kids

Thought exercise: Try to picture the above scene with the participants using pre-2007 phones. Pre-2010 tablets. Netbooks. A Surface Pro 3.

    The iPhone is an expensive toy for the wealthy and self-indulgent… Michael Pachter, Wedbush Morgan Securities, 14 August 2007

    Apple’s iPad 2… (is) still just a toy. ~ 
Zach Epstein, Boy Genius 2 March 2011

    (S)top with the iCoolAde, it’s a toy. ~ Shogan, TechTalk, 5 July 2011

    Apple…doesn’t want you to realize that Steve Jobs’ ‘magical’ toy is really just a Margaritaville frozen drink maker. ~ Rick Aristotle The Motley Fool, 7 July 2011

I remain very confident in the future of anything of which it is said ‘you can’t use that to do real work’ ~ Benedict Evans (@BenedictEvans)

blackberrytoys

Lessons Learned And Unlearned

In [computing] as in love, we are astonished at what is chosen by others. ~ paraphrasing André Maurois

Tech companies — even great tech companies — make two great mistakes. They build great products and they build great products that they, themselves, love.

Doesn’t sound like a mistake at all, right? Only here’s the thing. The twin questions that these companies should be asking is What and by Whom ((paraphrasing Jean Louis Gassee who is, himself, paraphrasing Horace Dediu)):

  1. What is the job the product is being hired to do; and
  2. Who is doing the hiring?

As counter-intuitive as it sounds, no one wants to buy a great product — they don’t care about specs or features. They care about whether the product does the job. And they care about whether the product does the job that THEY want done, not the job the creator of the product THINKS they want to do.

I don’t think the jobs iPads are hired to do in business are understood. ~ Horace Dediu (@asymco)

If it can’t do any useful job then it won’t get hired. Conversely, if it nails an unmet job, it will be blindingly successful. ~ Horace Dediu (@asymco)

Critics who focus on feeds and speeds rather than needs; who focus on features rather than benefits; are never going to get it right because they’re focused on the product when they should be focused on the consumer of that product.

The aim…is to know and understand the customer so well the product or service fits him and sells itself. ~ Peter Drucker

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

Apple Claim Chowder: Cynicism

With an Apple Event fast approaching, I’m reviewing critiques of past Apple Events to see how accurate they were. Turns out, not very. Critique is needed and welcome. Repeated errors? Not so much.

Cynicism

All companies suffer from the slings and arrows of outrageous criticism. However, some companies seem to suffer more than their unfair share.

If a fool has a hump, nobody notices it; if the wise man has a pimple, everybody talks about it. ~ Russian

It is unwise to hold a company in disdain if you are trying to analyze that company. Yet I routinely see Apple labeled and dismissed by the very people who are supposed to be objectively evaluating them.

Never hate your enemies. It affects your judgment. ~ Mario Puzo

Many of Apple’s critics think Apple’s success is based upon the foolishness of its customers. It’s a bizarre, but widely repeated — and widely accepted — theory.

A meaningless phrase repeated again and again begins to resemble truth. ~ Barbara Kingsolver

There’s a strong element of cognitive dissonance at work here:

  1. We don’t like Apple’s products;
  2. We’re rational;
  3. Apple’s customer’s like Apple’s products;
  4. Therefore: Apple’s customer’s must be irrational.

We often challenge the perceptions of others, but only very rarely question our own. ~ Dr. Mardy

Cognitive dissonance is a form of mental jujitsu that lets us flip our weaknesses and turn them into the weaknesses of others. If we don’t understand why someone does what they do, we don’t think of it as a lack of knowledge on our part, we think of it as a lack of knowledge on their part. Why should we question our own understanding of how things work and take the time to learn more about how others think when we can confidently assert that they don’t think at all?

Watch what people are cynical about, and one can often discover what they lack. ~ George S. Patton

Here’s the deal. Apple has well over 800 million active customers and they’re rapidly approaching the billion mark. That’s an awful lot of people voting for Apple with their hard-earned cash.

Cynicism masquerades as wisdom, but it is the farthest thing from it. ~ Stephen Colbert

Apple’s customers are not part of a cult. They’re not mindless fans or slaves to fashion. Neither are they victims of Apple’s Houdini-like marketing or Steve Jobs’ Reality Distortion Field. They’re not to be mocked or dismissed out of hand.

If we want to understand Apple, we need to understand why Apple attracts so many customers and why those customers are so very loyal to Apple. And if we don’t want to understand Apple, that’s fine too. But if we’re going to stop thinking, we need to stop talking too.

If you don’t think too good, don’t think too much. ~ Ted Williams

Joker with big bone

Claim Chowder

Cult

I just have to wonder who will want one of these things [an iPhone] (other than the religious faithful). … So please mark this post and come back in two years to see the results of my prediction… ~ Richard Sprague, Senior Marketing Director, Microsoft, January 2007

I think this will appeal to the Apple acolytes, but this is essentially just a really big iPod Touch. ~ Charles Golvin, Forreter Research, 27 January 2011

For those of us without Apple tattoos, the reaction to Apple’s new iPhone 3G S, announced on Monday, seems to look pretty unanimous. ‘That’s it?’ ~ Nick Mokey, Digital Trends, 8 June 2009

The whole Apple cult is starting to creep me out. ~ Brett Arends, Wall Street Journal, 22 December 2010

As a dog returneth to his vomit, so a fool returneth to his folly. ~ Proverbs 26:11

Fans

apple-logo-chest-fanboy

It’s the loyalists who keep promoting this device as if it is going to be anything other than another phone in a crowded market. And it’s exactly the crowded-market aspect of this that analysts seem to be ignoring. There is no likelihood that Apple can be successful in a business this competitive. ~ John C. Dvorak, MarketWatch, 28 March 2007

It’ll sell a couple million units to the many people who have wet dreams about Steve Jobs, and that will be about it. ~ Matt Maroon, MattMaroon.com , 7 May 2007

This morning, the fool’s parade gets started. Apple is taking online “pre-orders” for its iPad tablet, which is supposed to begin shipping on April 3. ~ Galen Gruman, InfoWorld, 12 March 2010

Now with Android better suited to low spec hardware and commodisation of smartphones seeing powerful handsets available at bargain prices, starting with Android could well shift from a cautionary tale to powerful gateway drug. At that point blind loyalty would be almost impossible. Even for self-confessed iSheep. ~ Gordon Brown, Forbes, 21 March 2014

When [logical] ammunition runs low, inevitably the rusty artillery of abuse is wheeled into action. ~ Wallace Stevens

Fashion

Consumers are not used to paying another couple hundred bucks more just because Apple makes a cool product. Some fans will buy it, but for the rest of us it’s a hard pill to swallow just to have the coolest thing. ~ Neil Strother, NPD Group, 22 January 2007

The iPhone is going to be nothing more than a temporary novelty that will eventually wear off. ~ Gundeep Hora, CoolTechZone Editor-in-Chief, 2 April 2007

That’s really all Apple’s iStuff is — an enormous and very profitable fad. It’s the Pet Rock of the new millennium. ~ Anders Bylund, Motley Fook, 6 Mar 2012

If you’re an image-conscious hipster/rebel/brand-monkey and you don’t use the AT&T network in the SF Bay Area, the iPhone is a great choice, especially if you need obscure apps. ~ Scott Adams, Creator of Dilbert, 17 August 2011

Apple does what it does well, and then sluffs off everything else — like getting e-mail and actually making a call on the iPhone. Succeeding with that sort of hauteur and dismissiveness is awfully dependent on charisma and sex appeal, an expensive proposition in a commodified market. ~ Michael Wolff, USA Today, 11 Nov 2012

You can’t use the iPhone 5C to make your friends feel bad about themselves, and that’s creating a problem for Apple. ~ Kim Bhasin, Huffington Post , 23 October 2013

Apple iPad Fad Is Over. ~ Robert McGarvey, Main Street, 14 August 2014

My definition of a stupid person. A stupid person is a person who treats a smart person as though they’re stupid. ~ Errol Morris

Hype

I can’t believe the hype being given to iPhone. ~ Richard Sprague, Senior Marketing Director, Microsoft, January 2007

That’s the problem with hyping a product before it comes out. It’s bound to disappoint no matter how good it is… ~ Brent Schlender, Fortune, 30 May 2007 (11 June 2007 Print Edition)

God himself could not design a device that could live up to all the hype that the iPhone has gotten… ~ Harvard computer science professor David Platt told Reuters, 25 June 2007

What an utter disappointment and abysmal failure of an Apple product. How can Steve Jobs stand up on that stage and hype this [iPad] product up and not see everything this thing is not and everything this thing is lacking? ~ Orange County Web Design Blog, 27 January 2010

For all the hype about an Apple tablet, it is at best a niche product. The world doesn’t need an Apple tablet, no matter what the hype about rumored features or regardless of what actually releases (if anything). ~ Joe Wilcox, Betanews, 2 January 2010

Don’t Believe the iPad Hype. Apple has sold out pre-orders of the forthcoming device, but it could all be a marketing tactic. ~ Mike Schuster, Minyanville.com, 29 March 2010

I don’t get it. It costs $500 for the basic model, when you could get a laptop with a lot more functionality for about the same price. The iPad hype machine has been in full effect this week, and I still think it’s just that—hype. If I turn out to be wrong, I’ll gladly eat my words, but I’m pretty sure that I’m not wrong. ~ Alex Cook, Seeking Alpha, 3 April 2010

The man who questions opinions is wise. The man who quarrels with facts is a fool. ~ Frank Garbutt

Marketing

‘Mum, the iPad is not ‘amazing.’ It’s just marketed very well, both by Apple and its culpable partners in mainstream media. ~ Paul Thurrott (in response to comment by Mum), Paul Thurrott’s Super Site for Windows, 26 April 2010

Ignorance more frequently begets confidence than does knowledge. ~ Charles Darwin

Reality Distortion Field

From my perch, the market’s very favorable reaction to Apple’s iPhone is yet another example of disbelief being suspended … on the Street of Dreams. ~ Doug Kass, The Street, 17 Jan 2007

The reality distortion field will fade. People will come back to their senses and ask what really matters to them in a mobile. The answers will be basics, like good telephony, long battery life, small size and low price. Which of these attributes apply to the iPhone? ~ Joe Wilcox, Microsoft Watch, 10 January 2007

Apparently Steve Jobs had a lifelong battle with reality, and won ~ Scott Adams

Wealthy

The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. ~ Matthew Lynn, Bloomberg, 15 January 2007

The iPhone is an expensive toy for the wealthy and self-indulgent… ~ Michael Pachter, Wedbush Morgan Securities, 14 August 2007

It seems like a high priced, unnecessary trinket to me. ~ Paul Thurrott, SuperSite for Windows, 27 January 2010

[The iPad is a] device for people who have more money than brains. ~ Alex Valentine, /dev/null, 28 January 2010

Apple is great if you’ve got a lot of money and live on an island. ~ Andy Lark, Global Head of Marketing for Large Enterprises and Public Organisations, Dell, 29 March 2011

It’s a nice-to-have product, for those of us who don’t have a budget… ~ Ashok Kumar, Analyst, Rodman & Renshaw LLC, 12 November 2010

If one does not understand a person, one tends to regard him as a fool. ~ Carl Jung

Lessons Learned And Unlearned

I’m not offended by all the dumb blonde jokes because I know I’m not dumb…and I also know I’m not blonde. ~ Dolly Parton

Apple is like Dolly Parton in the sense that they know they’re not dumb and they know something about themselves that we haven’t yet discovered. If we want to understand Apple’s success, we have to stop insulting them and their customers and start questioning our understanding of them instead. Here are some lessons to get us started.

First, never assume that what is right for you is right for others.

You have your way. I have my way. As for the right way, the correct way, and the only way, it does not exist. ~ Friedrich Nietzsche

Second, if we don’t understand someone’s motivations, assume that it is due to a lack of understanding on our part, not due to a lack of intelligence on their part. Just because we don’t understand a thing doesn’t mean that it can’t be understood.

The things we know best are those we have not learned. ~ Luc de Clapiers

Human beings are perhaps never more frightening than when they are convinced beyond doubt that they are right. ~ Laurens Van der Post

Third, never stop learning, never stop questioning. Certainty ends thinking. Doubt is the beginning of wisdom.

It is easier to be critical than correct. ~ Benjamin Disraeli. ~ Benjamin Disraeli

No man really becomes a fool until he stops asking questions. ~ Charles Steinmetz

Doubt is not a pleasant condition, but certainty is absurd. ~ Voltaire

Doubt is the origin of wisdom. ~ René Descartes

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

Apple Claim Chowder: Killers

With an Apple Event fast approaching, I’m reviewing critiques of past Apple Events to see how accurate they were. Turns out, not very. Critique is needed and welcome. Repeated errors? Not so much.

Killers

There is a long, sordid history of products being introduced as iPod, iPhone, and iPad Killers. You know the deal. Product “X” is introduced and it will be an Apple Killer because hypothetical products of the future are always superior to Apple products of today, yada, yada, yada. The problem with this theory is that repeated experience has shown that it just ain’t so.

The only thing experience teaches us is that experience teaches us nothing. ~ Andre Maurois

My rule of thumb is that a product isn’t real until it 1) has a ship date; 2) has a firm price; and 3) has been reviewed by independent third parties.

In the case of news, we should always wait for the sacrament of confirmation. ~ Voltaire

You would think that critics would want to wait until AFTER they had gotten their hands on a product, and perhaps even wait until AFTER they had received some actual sales numbers, before declaring said product a “killer” of anything. But no. Why wait when one can be so wrong, so far ahead of time?

It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts. ~ Sir Arthur Conan Doyle as Sherlock Holmes, From “A Scandal in Bohemia”

Below is a rogue’s list some past Apple “Killers”, grouped by company. I am quite confident that critics have learned nothing from the past and that they will soom be adding many more “Killers” to the list come this Fall. Critics and competitors alike should remember the words of Helmuth von Moltke the Elder (attributed) before declaring any product an Apple “Killer”:

No battle plan survives contact with the enemy.

Joker

Amazon

If everything that we have heard about the upcoming Kindle tablet is true (upgraded Android front end, 7-inch touch screen, $250 price), we think AMZN will have another big product success. ~ Naked Value, 27 Sept 2011

Last year, we wanted to build the best tablet at a certain price. And, this year, we wanted to build the best tablet at any price. Take away the price and it’s still the best tablet. It also happens to be only $499. ~ Jeff Bezos, CEO, Amazon.com, 6 Sep 2012

Feature for feature – the latest Amazon) Kindle Fire is better than the latest iPad. ~ James Altucher, Seeking Alpha, 27 January 2013

Amazon is well on its way to effectively replicate Apple’s business model. ~ Victor Anthony, Topeka Capital, 25 September 2013

Blackberry

blackberry-playbook-amateur-hour-is-over-2But when it comes right down to it, the BlackBerry Storm will be the superior mobile device and represents a true iPhone killer. ~ Andrew Hickey, ChannelWeb, 14 Nov 2008

At today’s BlackBerry developer’s event, RIM announced their iPad-beater: the PlayBook. ~ Brian Barrett, Gizmodo, 27 September 2010

Just the pent-up interest in the PlayBook is really overwhelming. ~ Jim Balsillie, Co-CEO, Research In Motion, 16 December 2010

The launch of Storm 3 gives RIMM the long-awaited answer to the iPhone and high-end Android devices. ~ Michael Li, Investing Blog, 16 January 2011

The sales of the PlayBook have been fantastic, we’ve re-ordered multiple times and it’s exceeded our expectations. ~ Ben McIntosh, Harvey Norman’s Computers, Australia, 22 Aug 2011

‘iPhone Killer’ BlackBerry 10 is here: iPhone is Dead! ~ Bob Brown, InfoWorld, 30 January 2013

Sorry Apple, the BlackBerry Z10 Is Hotter Than the iPhone. ~ Jesus Diaz, Gizmodo, 28 January 2013

BlackBerry 10 will be launching here in the US soon and I think they will increase their share to 3rd place and may even pass iOS in a couple years. ~ Matthew Miller, ZDNet, 14 February 2013

Google

Google plans ‘to market a tablet of the highest quality’ in the next six months. ~ Eric Schmidt, Chairman, Google, 19 Dec 2011

Put simply, the Nexus 7 has redefined the mini-tablet category and raised the bar enough that it doesn’t matter whether Apple releases a Retina-class iPad mini this year or not. ~ Paul Thurrott, Paul Thurrott’s Supersite for Windows, 1 August 2013

If Galaxy Gear quickly creates a buzz, it will be hard not to look at the new iPhone and wonder why Apple is late to the smartwatch party. Samsung’s timing is beautifully calculated to challenge Cupertino. ~ Douglas Ehrman, Seeking Alpha, 5 September 2013

Hewlett Packard (HP)

8 Reasons Why Apple Should Fear HP/Palm… ~ Devin Connors, Tom’s Hardware, 7 May 2010

I hope one day people will say ‘this is as cool as HP’, not ‘as cool as Apple’. ~ Leo Apotheker, Hewlett Packard, 27 January 2011

In the PC world, with fewer ways of differentiating HP’s products from our competitors, we became number one; in the tablet world we’re going to become better than number one. We call it number one plus. ~ Eric Cador, Senior Vice President of the Personal Systems Group, Hewlett-Packard, 21 May 2011

Intel

iPad has come under additional pressure from Intel Bay Trail tablets. iPad’s future may hinge on whether ARM foundries can catch up to Intel. ~ Mark Hibben, Seeking Alpha, 30 April 2014

Apple’s A7 64 bit processor was a breakthrough last year, but this year Apple will face competition from Android phones running 64 bit Intel and Qualcomm processors. ~ 
Mark Hibben, Seeking Alpha, 20 June 2014

Microsoft

Apple iPhone Doomed To Failure — Windows Mobile 7 Plans For 2009 Leaked. ~ Mitchell Ashley, NetworkWorld, 11 January 2008

We are not at all worried. We think we’ve got the one mobile platform you’ll use for the rest of your life. They are not going to catch up. ~ Scott Rockfeld, Microsoft Mobile Communications Group Product Manager, 1 April 2008

About 20 million devices will ship with Windows Mobile on it. We will outsell the iPhone. ~ Robbie Bach, Microsoft, 8 June 2008

7 Reasons Why The Windows 7 Phone Is THE iPhone Killer. ~ Jamie Riddell, CEO of Digital Tomorrow Today, 16 March 2010

100910_msft_buries_iphoneMicrosoft workers celebrated the release to manufacturing of Windows Phone 7 last week by parading through their Redmond campus with iPhone and BlackBerry hearses. ~ Microsoft Employees, Microsoft, 10 September 2010

For the first time since its introduction in 2007, Apple’s iPhone is going to take a backseat at AT&T as Ma Bell prepares a glitzy launch of three Microsoft Windows 7 phones. ~ Scott Moritz, TheStreet.com, 1 October 2010

thurrotttweet

The Lumia 900 and its successors will help Microsoft to reclaim the number 2 (replacing iOS) ranking in smartphone operating system market share in 2015. ~ Wayne Lam, IHS analyst, 19 Jan 2012

Having a secure Windows tablet that works with all the Windows applications — we’re hearing a lot of demand for that and we think that will be quite attractive. ~ Michael Dell, CEO, Dell, 9 March 2012

If Microsoft could ship today, Surface would send ripples across the tablet marketplace. ~ Joe Wilcox, Beta News, 19 June 2012

Author’s Note: The Titanic sent ripples too.

oprah

Author’s Note: Please be certain to check out the device used to send the above tweet.

Lookout Apple, Here Comes Microsoft: Surface Tablets Break Into Top-5 ~ Gary Krakow, The Street, 2 May 2013

Microsoft can better give what a lot of folks wanted in the initial iPad – a single product solution – and with a price/legacy software tradeoff that Apple doesn’t have in a similar product. ~ Rob Enderle, TG Daily, 30 September 2013

IDC reports that Windows Phone sales dropped by 9.4 percent in Q2 2014 compared to the same period last year. They’re now at just 2.5 percent.

And the Surface? $1.7 billion in losses…and counting.

Motorola

I believe that this device (Droid) is the best smartphone on the market today. ~ Sanjay Jha, Co-CEO, Motorola, 28 October 2009

iDon’t have a real keyboard.
iDon’t run simultaneous apps.
iDon’t take night shots.
iDon’t allow open development.
iDon’t customize.
iDon’t run widgets.
iDon’t have interchangeable batteries.
Everything iDon’t…Droid does.
Verizon, 18 October 2009

So I’ve got this DROID X. And I have to say, suddenly, I get it. I understand why this thing is surpassing the iPhone as we speak. ~ Paul Thorrott, Paul Thorrott’s SuperSite for Windows, 21 September 2010

iPad Killer: Truly, Really, I mean It. …Motorola’s new XOOM tablet is poised to become THE best non iPad tablet on the market when it ships later this year. ~ Jim Louderback, Huffington Post, 6 January 2011

Given what I’ve seen of Honeycomb and Motorola’s excellent tablet, Cupertino will have some serious catching up to do with their iPad 2. ~ J.P. Mangalindan, Fortune, 4 February 2011

Nokia

Nokia may hasten the end of the Apple revolution. ~ Kofi Bofah, Seeking Alpha , 30 October 2013

Palm

You know the beautiful thing: June 29, 2009, is the two- year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later. ~ Major Palm investor & co-founder of Elevation Partners, Roger McNamee, 5 Mar 2009

The Palm Pre Will Be an iPhone Killer ~ Ross Catanzariti, PC World, 2 Apr 2009

We have a really good opportunity to become No. 2 in tablets fairly quickly. Possibly No. 1. ~ Jon Rubinstein, Senior Vice President and General Manager, Palm Global Business Unit, HP, 23 June 2011

Samsung

Imagine Samsung introducing revolutionary new lines of mobile phones and tablet computers with twice the battery life of Apple devices! Imagine colors more vivid than you have ever seen in any display before and half the thickness of Apple devices! The foregoing is not just a hyperbole; Samsung is pouring billions into making this happen. ~ Nigam Arora, Contributor, Forbes, 10 Feb 2012

Miscellaneous

Dvorak: ”I’m telling you, look at this product coming out of India called the Adam.”
Curry: “A-D-A-M?”
Dvorak: “Yeah.”
Curry: “And it’s a what it’s a pad?”
Dvorak: “It’s an iPad Killer. And I hate to use that term since the iPad is probably dead anyway.
No Agenda Podcast, Adam Curry & John C. Dvorak, 25 February 2010

Our tablet will be better than the iPad. ~ Chang Ma, VP Marketing, LG, 20 August 2010

(W)ith a new, potentially more compelling tablet coming — the Cisco Cius — the iPad’s success in the corporate world could be short-lived. ~ Don Reisinger, Channel Insider, 5 August 2010

We have an extreme focus on the innovation of LePad and LePhone because these products will dominate the future market. ~ Liu Chuanzhi, Lenovo, 27 January 2011

According to data from research firm BITG, checks at 150 Verizon Wireless stores indicate that in some cases the Thunderbolt is outselling the iPhone 4. …the iPhone may have met its match. ~ Ed Oswald, technologizer.com, 1 April 2011

Sony, Lenovo, Dell to Launch ‘iPad Killers’ in 2011. ~ Paul Thurrott, WindowsIT Pro, 28 April 2011

We will prove that it’s not who makes the tablet first who counts, but who makes it better. ~ Howard Stringer, CEO, Sony, 31 Aug 2011

All in all, I am impressed with the new phone (Atrix 2). And I think Apple has reason to finally be scared of the competition. ~ Cullen Roche, Seeking Alpha, 25 October 2011

Exhibit A: Xiaomi’s MiPad. Although we could easily focus on Microsoft’s recently launched Surface Pro 3, Xiaomi’s recently unveiled MiPad is an equally serious, if not more so, threat to the iPad Mini. ~ Andrew Tonner, The Motley Fool, 26 May 2014

That which does not kill me, makes me stronger ~ Friedrich Nietzsche

Lessons Learned And Unlearned

First, don’t call anything a “Killer”. That term has overstayed its welcome. There will be product killers in the future, but we’ll only know that after the fact, not before.

Believe those who are seeking the truth. Doubt those who find it. ~ Andre Gide

Second, can we not just wait until a product exists before we compare it to an existing product? Seriously. What is our major malfunction?

Everything happens for a reason. Sometimes the reason is that you’re stupid and make bad decisions. ~ Bill Murray (@BiIIMurray)

Third, unreasonable people should not be reasoned with. They should be mocked.

You can always reason with a Troll. You can always reason with a barnyard animal, too, for all the good it does.

Never try to reason the prejudice out of a man. It was not reasoned into him, and cannot be reasoned out. ~ Sydney Smith

Reason is not automatic. Those who deny it cannot be conquered by it. Do not count on them. Leave them alone. ~ Ayn Rand

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

The 5.5 Inch iRemote For The Apple Home

You want to talk about Apple. I understand. They are the biggest tech company in the world. Their products are used by hundreds of millions. Oh, and next week there’s — OMG! — a major Apple event, not at Moscone Center in San Francisco but at Flint Center in Cupertino, the very same location where the original Mac was introduced and where the phoenix-like (i)Mac was introduced, and this can only mean…

A new Mac?

How can that be?

We are all expecting an iWatch.

And a large, new iPhone.

Two!

Some of us are even expecting an iPad XL, complete with badly needed split-screen, multitasking function. Tim Cook has repeatedly promised us new products, after all. We are 14 years beyond Y2K. Macs are borderline inconsequential in our glorious new world. Apple can’t possibly be putting the Mac at center stage, can they?

Unlikely, but kudos for cleverly diverting our attention.

Oh, glorious Apple. Stoking the rumors, week after week. Divvying out the “leaks” bit by bit. Building our excitement. Inciting our lust until…shazam!

Something totally unexpected.

Fine. Two can play at that. Here’s my totally unexpected prediction: a 5.5-inch iRemote for the home.

Price? $299, including an Apple TV.

The $299 iRemote

Ben Bajarin says there will be no 5.5-inch iPhone “phablet.” I agree. Jony Ive resisted increasing the size of the original iPhone for years. Market demand forced his hand. The market now wants an even larger iPhone. Ive will once again be forced to capitulate.

A 4.7-inch iPhone should suffice.

An iPhone that size can retain most of Ive’s iconic design, support one handed use, at least for some, and have the additional benefit of offering a larger, longer lasting battery, which is sorely needed.

A 5.5-inch iPhone is nothing more than a twisted abomination of Ive’s design. I can’t believe this will happen. Unless the rumors of a 5.5-inch iPhone point instead to an entirely new device.

The Future Of The iPod

A remote control for the Apple-optimized home does not require one handed use. It needs only be light, mobile, affordable, possibly even unapologetically plastic.

Such a device can control your HomeKit-enabled appliances. 

It replaces that wretched plastic Apple TV remote which has grown so useless even as Apple TV offers up so many more new content possibilities.

It’s the perfect size for tweeting while watching television. It encourages FaceTime calls.

Possibly, this device even supports multiple user accounts. 

That Apple will finally offer “widgets,” which are optimized for both the small iWatch screen and glanceable CarPlay screens, may possibly work better on this new device as well.

The device also does not diminish iPhone sales, where Apple gets the bulk of its money from. Think of this as the future of the iPod, if that helps. Not quite an iPad, which is more personal, this new “iPod” belongs not to a person but to a home. It collects data, controls applications and commands other devices. Yes, even an Apple Television in time.

Instead of storing and presenting your music collection, this new iPod stores, presents and manipulates the collection of data from the family’s wearables, appliances, the Internet-connected thermostats, door cams, and lights. The iPod becomes the universal remote for the Apple optimized household.

Siri will be front-and center with this new iPod, encouraging you to tell her when to turn off the air conditioner, or for how long the oven temperature should be set. Plus, with iCloud, Apple suddenly becomes a leader not just in “machine learning” but more importantly, possesses a knowledge of people inside their homes that is truly unique.

Everywhere A Screen

I accept I may be completely wrong. Where a large iPhone ends, a small iPad begins, or how iPod evolves in a world with all of these is not as clear-cut as even Apple marketing would have us believe. My strength lies not in predicting new technologies but in understanding how existing technologies will re-make the world, the economy, learning, work, power, joy. 

Yet, as computing spreads into all areas of our lives, and burrows its way into all of our things, we need new and better devices to help take full advantage of their combined potential.  

This is a unique Apple strength.

Time and again, Apple shows us how all our many technologies are supposed to work — for people, not for corporations or things or business models or the established order.

steve-jobs-pre-iphone-slide

This is why I am reasonably confident that, whether Apple reveals an entirely new device, a deconstruction of an old one, or something in between or far beyond, it will matter. If not right away, soon.  

Next week, the very moment Apple releases a larger iPhone of any size, tech bloggers will giddily point their finger and exclaim: “J’accuse! Apple copied! The iPhone phablet is copying the Samsung Note!”

This is willfully missing the point. 

Lousy artists copy. Tech bloggers squeal. Sound and fury signifying nothing.

Mobile computing is barely into the Model T phase. Apple is helping to push us forward, mostly in positive ways — even when we think their latest product is just one more device in an already crowded market. We can’t know what we need till we have it, be it an iWatch, a phablet, an all new Mac, or, yes, a universal home remote. 

We live in interesting times. They are about to get even more interesting.

Apple Claim Chowder: Events

With an Apple Event fast approaching, I’m reviewing critiques of past Apple events to see how accurate they were. Turns out, not very. Critique is needed and welcome. Repeated errors? Not so much.

Events

A book is a mirror; if an ass peers into it, you cannot expect an apostle to peer out. ~ George Christoph Lichtenberg

An Apple event is a mirror too. If an ass peers into it, you cannot expect an apostle to peer out.

Prophesy is a good line of business, but it is full of risks. ~ Mark Twain

WHAT WOULD JOBS DO?

Ever since Steve Jobs’ death, there has been an unfortunate tendency by some critics to create counterfactuals that compare the Apple of this world to an Apple still run by a living Steve Jobs. There seems to be an inverse relationship at work here. The less likely it was for a critic to understand and predict Steve Jobs’ actions while he was alive, the more likely it is for that same critic to claim they can channel Steve Jobs’ spirit from the beyond. Ironic, no?

Egotism is the anesthetic that dulls the pain of stupidity. ~ Frank Leahy

All this talk of trying to figure out what Steve Jobs would have done reminds me of a true story:

    For many years, a Franciscan priest by the name of Andrew Agnellus served as an adviser to the British Broadcasting Company (BBC) on religious affairs. One day, a BBC producer sent a memo to Father Agnellus asking how he might ascertain the official Catholic view of heaven and hell. The witty priest’s return memo said simply:

    Die. ((Excerpt From: Andre Bernard. “Bartlett’s Book of Anecdotes.”))

To those critics who truly wish to know what Steve Jobs is thinking now, I extend the same advice.

And he looked at me with those intense eyes that only he had, and he told me to never do that, to never ask what he would do. Just do what’s right. And so I’m doing that. ~ Tim Cook

Premature Predictions

For some reason, people can’t wait until they actually see and use a product before predicting it will fail. It’s like judging a wine before you’ve tasted it. Why we listen to these pre-predictions, I have no idea. But we do.

It’s generally a bad idea to have a strong opinion of a consumer product you have no experience of. ~ Benedict Evans (@BenedictEvans)

Some past premature predictions:

    Apple is slated to come out with a new phone… And it will largely fail…. Sales for the phone will skyrocket initially. However, things will calm down, and the Apple phone will take its place on the shelves with the random video cameras, cell phones, wireless routers and other would-be hits… ~ Michael Kanellos, CNET, 7 December 2006

    BaF8LuUCYAAqxrm.jpg-largeApple will launch a mobile phone in January, and it will become available during 2007. … After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish. The only question remaining is if, when the iPod phone fails, it will take the iPod with it. ~ Bill Ray, The Register, 26 December 2006

    When Apple introduces its iPhone this month, will it pass the acid test? In my opinion, no. ~ Al Ries, AdAge Blogs, 18 June 2007

    In fact, I’ll go far enough to say that, if the iPhone 5 looks like the pictures that have recently appeared, Apple may be screwed. ~ Henry Blodget, Daily Ticker, 30 July 2012

    With Apple’s next smartphone still months away, fans have been gobbling up iPhone 6 rumors faster than Pac-Man on a power pill bender. However, even the hottest rumor mill in tech can’t turn this device into a winner. ~ Avram Piltch, LAPTOP Online Editorial Director, 14 March 2014

A handful of patience is worth more than a bushel of brains. ~ Dutch proverb

All great ideas look like bad ideas to people who are losers. It’s always good to test a new idea with known losers to make sure they don’t like it. ~ Scott Adams

Speculation

If you believe everything you read, better not read. ~ Japanese Proverb

Speculation can be fun. Speculation can even be helpful. However, building elaborate arguments on unfounded speculation is like building a castle on shifting sands.

A foolish man, which built his house upon the sand. ~ The Bible, Matthew

When it comes to speculation, a couple of rules of thumb can be helpful:

It is better to debate a question without deciding it than to decide it without debating it. ~ Joseph Joubert

Exceptional claims demand exceptional evidence. ~ Christopher Hitchens

Better to trust the man who is frequently in error than the one who is never in doubt. ~ Eric Sevareid

Taking crazy things seriously is a serious waste of time. – Haruki Murakami

Wrong

We don’t know what’s about to happen but we’ll pretend that we do. Then — when we’re proven wrong — we’ll still pretend we knew it all along.

If futurism is visionary, history is revisionary. ~ Bruce Sterling. ((Excerpt From: Robert Cottrell. “The Browser Book of Quotations.” The Browser, 2012.))

Here, for example, is what we thought the iPhone would look like:

1*-hydaUpzcAtbQ4DJnVQopg

Image From “iPhone Dreams: Renders from 2006 tell us everything about what we used to think a phone could be.

No one remembers how wrong they were about the iPhone and the iPad. All they remember is the parts they got right — or the parts they re-imagined that they got right.

The human mind is a delusion generator, not a window to truth. ~ Scott Adams

Any event, once it has occurred, can be made to appear inevitable by a competent historian. ~ Lee Simonson

Even God cannot alter the past, though historians can. ~ Samuel Butler

Change

Whenever a prediction doesn’t pan out, we’ll simply claim we were absolutely right on the money, but Apple changed their mind at the last minute. What the Onion writes as parody, some Apple critics take as gospel:

    CUPERTINO, CA—Claiming that he completely forgot about the much-hyped electronic device until the last minute, a frantic Steve Jobs reportedly stayed up all night Tuesday in a desperate effort to design Apple’s new tablet computer. “Come on, Steve, just think—think, dammit—you’re running out of time,” the exhausted CEO said as he glued nine separate iPhones to the back of a plastic cafeteria tray. “Okay, yeah, this will work. This will definitely work. Just need to write ‘tablet’ on this little strip of masking tape here and I’m golden. Oh, come on, you piece of shit! Just stick already!” Middle-of-the-night sources reported that Jobs then began work on double-spacing his Keynote presentation and increasing the font size to make it appear longer.

Claiming that Apple suddenly changed its collective mind is not enough for some critics. Some will go further and claim that that a spiteful Apple changed its plans IN RESPONSE to a critic’s predictions.

When they discover the center of the universe, a lot of people will be disappointed to discover they are not it. ~ Bernard Bailey

The bottom line is, no matter what shows up on stage at an Apple Event, our predictions are never wrong.

Those who never retract their opinions love themselves more than they love the truth. ~ Joseph Joubert

Delay

Here’s another dodge favored by critics — the old “nonexistent product delayed” trick. You know how it goes. We make an outlandish prediction. Said prediction doesn’t happen. Were we wrong in our prediction? Of course not! The predicted product was simply “delayed” almost certainly due to production issues on Apple’s part. The beauty of this claim is two-fold. We weren’t wrong. Apple is incompetent.

Some recent examples of this line of argument:

blodgett081213

A fresh report from China’s Economic Daily News believes that Apple has indeed delayed the Retina iPad Mini’s launch until early 2014 because of the troubles it’s having. Apple can’t afford to wait that long. ~ Evan Niu, Motley Fool, 13 July 2013

Continued production issues may force Apple to delay ‘iWatch’ until 2015 ~ @appleinsider

When we risk no contradiction, It prompts the tongue to deal in fiction. ~ John Gay

Lessons Learned And Unlearned

People do not wish to appear foolish; to avoid the appearance of foolishness, they were willing actually to remain fools. ~ Alice Walker

Set aside your predictions and preconceptions. Go into the Event with an open mind. See what is, instead of what is missing, and go from there.

The world is full of people who have never, since childhood, met an open doorway with an open mind. ~ E. B. White

The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it. ~ T.Pratchett

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

Apple Claim Chowder: Introduction

Apple has scheduled an Event for Tuesday, September 9, 2014. Apple’s Events attract critics the way a trailer park attracts tornados. Good analysis and insightful critiques are expected and welcome, however many critics merely repeat the same discredited arguments over and over and over again. Some people simply never learn from their mistakes. Which reminds me of a joke:

    An Apple critic with two very red ears went to his doctor. The doctor asked him what had happened.

    “I was ironing a shirt and the phone rang,” he said. “But instead of picking up the phone, I accidentally picked up the iron and put it to my ear.”

    “GEEZ!” the doctor exclaimed in disbelief. “So, what happened to your other ear?”

    “Isn’t is obvious?” the critic replied. “I had to call you to schedule this appointment.”

Perhaps the above joke would be more apt if it were we, and not the critics, who had the red ears, for the critics seem to escape their repeated errors unscathed while it is we who end up getting burned year after year.

History is a very good teacher, but (it) has very few students. ~ Wael El-Manzalawy

This is the first in a series of articles that examines past claims and, having found them wanting, expounds upon lessons learned and unlearned. Future articles will group the critics’ claims into topics, but I’ll get things started by simply serving up some of the juiciest claim chowder of all time. Bon appétit.

AUTHOR’S NOTE: Almost all of the linked material comes from the excellent iPhone Death Watch and iPad Death Watch Web sites maintained by AAPL Investors.net. Highly recommended reading.

Upset 3d puppet - harlequin, keeping for a head

Apple Claim Chowder

The surest way to make a monkey of a man is to quote him. ~ Robert Benchley

Is there a toaster that also knows how to brew coffee? There is no such combined device, because it would not make anything better than an individual toaster or coffee machine. It works the same way with the iPod, the digital camera or mobile phone: it is important to have specialized devices. ~ Former Apple Vice President, iPod Division, now with Palm, Jon Rubenstein, September 27, 2005

twentyyears

We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in. ~ Palm CEO Ed Colligan, commenting on then-rumored Apple iPhone, 16 Nov 2006

    In our view, the appearance of the iPhone (or something like it) poses little risk to RIM’s business. ~ Chris Umiastowski, TD Securities, 12 December 2006

…I am not sure how [the iPhone] will stand against Sprint’s Wimax`(when it successfully launches) and its phones, which I am looking forward much more than over-hyped Apple iPhone. ~ Bhaskar Chitraju, Indews Broadcast, 18 January 2007

    The big competitors in the mobile-phone industry such as Nokia Oyj and Motorola Inc. won’t be whispering nervously into their clamshells over a new threat to their business. The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. ~ Matthew Lynn, Bloomberg, 15 January 2007

Windowscompare$500 fully subsidized with a plan! I said that is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good email machine. ~ Steve Ballmer, Microsoft CEO, 17 January 2007

    The iPhone will not substantially alter the fundamental structure and challenges of the mobile industry. ~ Charles Golvin, Forrester Research Inc, January 2007

The honeymoon is over for the iPhone. ~ Tim Moynihan, Crave, the Gadget Blog from Cnet 11 January 2007

Last year Apple’s iPhone sales alone were larger than the revenues at 474 of the companies in the S&P 500 stock index. ~ Eric Chemi of Bloomberg Businessweek

The iPhone’s willful disregard of the global handset market will come back to haunt Apple. ~ Tero Kuittinen, RealMoney.com, 18 January 2007

    I’m more convinced than ever that, after an initial frenzy of publicity and sales to early adopters, iPhone sales will be unspectacular… iPhone may well become Apple’s next Newton. ~ David Haskin, Computerworld, 26 February 2007

Apple should pull the plug on the iPhone… ~ John C. Dvorak, 28 March 2007

Nobody is completely worthless. Some can be used as bad examples. ~ John Tigges

Apple begins selling its revolutionary iPhone this summer and it will mark the end of the string of hits for the company. ~ Todd Sullivan, Seeking Alpha, 15 May 2007

How do you deal with [the iPhone}? How do they deal with us? ~ Ed Zander, Motorola CEO/Chairman 10 May 2007

We lie loudest when we lie to ourselves. ~ Eric Hoffer

What does the iPhone offer that other cell phones do not already offer, or will offer soon? The answer is not very much… ~ Laura Goldman, LSG Capital, 21 May 2007

The forthcoming (June 29) release of the Apple iPhone is going to be a bigger marketing flop than Ishtar and Waterworld combined. ~ David S. Platt, Suckbusters!, 21 June 2007

I may not agree with you, but I’ll defend to the death my right to tell you to shut up. ~ Andy Borowitz

Once the initial fever wears off, however, the bloom will really be off the rose, and sales will be disappointing (at least here in the U.S.). ~ Jim Louderback, PC Magazine. 6 June 2007

We Predict the iPhone will bomb ~ Porges, The Futurist, 7 June 2007

You may not be able to change the world, but at least you can embarrass the guilty. ~ Jessica Mitford

The iPhone is a sustaining technology relative to Nokia. In other words, Apple is leaping ahead on the sustaining curve [by building a better phone]. But the prediction of the theory would be that Apple won’t succeed with the iPhone. They’ve launched an innovation that the existing players in the industry are heavily motivated to beat: It’s not [truly] disruptive. History speaks pretty loudly on that, that the probability of success is going to be limited. ~ Clayton Christensen, Author of Innovator’s Dilemma, 28 June 2007

There’s a lot of rejoicing at Sprint, Verizon and T-Mobile [at the iPhone’s initial sales]. ~ IAG Research’s Roger Entner, 4 July 2007

Some never open their mouths without subtracting from the sum of human knowledge

Let’s face it, the Internet was designed for the PC. The Internet is not designed for the iPhone. ~ Steve Ballmer, Microsoft, 21 October 2009

    The tablet market has only succeeded as a niche market over the years and it was hoped Apple would dream up some new paradigm to change all that. From what I’ve seen and heard, this won’t be it. ~ John C. Dvorak, MarketWatch, 29 January 2010

I added it up and … like 800 people are going to buy the iPad. . . . ~ Molly Wood, CNet, 31 January 2010

ipad_1.png.CROP.promovar-mediumlarge

If Apple makes a successful tablet, they will have accomplished what no other company before them has ever managed to do, which is why I am not optimistic. If I turn out to be wrong, I’ll gladly eat my words, but I’m pretty sure that I’m not wrong. ~ Alex Cook, Frontier Outlook, 28 January 2010

    Unless Apple has also developed some new type of power source, such as nuclear cells or magical hamsters on tiny spinning wheels for the iPad, don’t expect the claims about battery life to hold true. ~ John Breeden II, Government Computer News, 28 January 2010

You might want to tell me the difference between a large phone and a tablet. ~ Eric Schmidt, Google, 10 January 2010

The true way to be deceived is to think oneself more knowing than others. ~ La Rochefoucauld

You know, I’m a big believer in touch and digital reading, but I still think that some mixture of voice, the pen and a real keyboard – in other words a netbook – will be the mainstream on that. So, it’s not like I sit there and feel the same way I did with iPhone where I say, ‘Oh my God, Microsoft didn’t aim high enough.’ It’s a nice reader, but there’s nothing on the iPad I look at and say, ‘Oh, I wish Microsoft had done it. ~ Bill Gates, Microsoft, 10 February 2010

Nothing is more damaging to a new truth than an old error. ~ Johann Wolfgang von Goethe

The Apple iPad is not going to be the company’s next runaway best seller. ~ John C. Dvorak, MarketWatch, 12 February 2010

The only time he opens his mouth is to change feet.

—David Feherty

The iPad will remain an expensive, niche device compared to all-purpose netbooks…. (N)etbooks sales will still far outstrip those of the iPad. ~ Preston Gralla, PC World, 30 March 2010

The decline of the iPhone has started. And that will become clear long before the year 2010 is gone… ~ Tomi T Ahonen, Former Nokia Executive, Inc, 9 April 2010

iphone.png.CROP.promovar-mediumlarge

(Apple) is not having an impact on Nintendo… ~ Reggie Fils-Aime, President, Nintendo of America, 7 April 2010

I admit, sales of the iPad beat my expectations. I didn’t think that this device would do that well, and I still think it’s an oversized iPod Touch. ~ Alex Cook, Seeking Alpha, 1 June 2010

Never miss a good chance to shut up. ~ Cowboy wisdom

It looks like the iPhone 4 might be their Vista, and I’m okay with that. ~ Kevin Turner, Chief Operating Officer, Microsoft, 14 July 2010

    If a user wants to walk from the kitchen to the dining room in her house, she simply walks through. It does not work like that in mobile–you have to go through the front door to get to the kitchen. iPhone has a home button which works like a go-back-to-front-door button. This is not a model that human beings are used to. People are spatial. ~ Peter Skillman, VP Meego User Experience and Services Design, Nokia, 20 September 2010

There could literally be millions of first-generation iPads gathering dust in people’s home offices already. This product is the tech industry’s biggest MacGuffin yet. ~ Paul Thurrott, Windows IT Pro, 23 October 2010

What you don’t know would make a great book. ~ Sydney Smith

I cannot see a need for the thing [iPad]. ~ John Dvorak, MarketWatch, 22 October 2010

A salad spinner would have been a better investment, [than an iPad] and I don’t even eat that much salad. ~ John Swansburg, Slate, 18 February 2011

The most costly of all follies is to believe passionately in the palpably not true. It is the chief occupation of mankind. ~ H. L. Mencken

Apple is a company that has to come up with hit after hit after hit, every 12 to 18 months, but once you do the iPhone on Verizon, what’s the next thing past this? ~ Patrick Becker Jr, Becker Capital Management, 7 March 2011

    The reliance by Apple and Android phones on the ‘app’ as the central metaphor is outdated. ~ Chris Weber, President, head of North America, Nokia, 10 August 2011

As more developers reach consumers through platform-independent technologies such as HTML5, Apple’s app store could be cut out of the loop as customers gain freedom to transfer their chosen applications from one device to another. ~ Michael Holt, CFA, Morningstar, 28 Dec 2011

What we see is that youth are pretty much fed up with iPhones. Everyone has the iPhone. ~ Niels Munksgaard, Director of Portfolio, Product Marketing & Sales , Nokia, 13 Dec 2011

Nobody goes there anymore—it’s too crowded. ~ Yogi Berra

The following are three reasons the new iPad will be dead on arrival (DOA)… ~ Michael Li, The GadgetMasters, 11 March 2012

    I don’t think anyone has done a product that I see customers wanting. ~ Steve Ballmer, Microsoft, 25 Nov 2012

Siri could signal the beginning of the end for Apple. ~ Greg Satell, Forbes, 26 March 2013

    (Android) Not secure? It’s more secure than the iPhone. ~ Eric Schmidt, Google, 8 October 2013

Apple’s iOS 7 launch is fast becoming its most troubled mobile operating system update, increasing concern that the technology giant has lost some of its magic touch since co-founder Steve Jobs passed away two years ago. ~ Scott Martin and Alistair Barr, USA Today, 17 October 2013

iPhone accounts for 41.9% of US smartphone subscriber base, up from 31.3% a year ago – Apple CFO Luca Maestri, via @macjournals

[Android phones] are a great Christmas present to an iPhone user! ~ Eric Schmidt, Google, 24 November 2013

I know there’s a lot of noise because Apple did [64-bit] on their A7. I think they are doing a marketing gimmick. There’s zero benefit a consumer gets from that. ~ Anand Chandrasekher, SVP and Chief Marketing Officer, Qualcomm, 1 October 2013
Anand Chandrasekher has been quietly reassigned — and removed from the company leadership page on its website as of 25 Oct 2013.

My prayer to God is a very short one: “Oh God, please make my enemies ridiculous.” God has granted my wish. ~ Voltaire

Lessons Learned And Unlearned

True wisdom is less presuming than folly. The wise man doubteth often, and changeth his mind; the fool is obstinate, and doubteth not; he knoweth all things but his own ignorance. ~ Akhenaton

The lesson here is to not take things on faith. Question everything. Facts should underlie every argument and logic should support that argument’s structure.

A man is getting along on the road to wisdom when he begins to realize that his opinion is just an opinion.

Beware the opinions of critics who are too sure of themselves, for it is most likely that they are also too full of themselves.

Doubt is often the beginning of wisdom. ~ M Scott Peck

Further, while it is always wise to question every opinion, it is not always wise to have an opinion on every question. Some things can only be answered in time.

Who is there who can make muddy waters clear? But if allowed to remain still, it will gradually clear itself. ~ Lao-tsu

Apple Claim Chowder Series:

Introduction
Events
Killers
Cynicism
Product
Evolutionary Or Revolutionary
Business Models

How Microsoft and Apple’s Ads Define Their Strategy

Recently, after spending a lot of time with many of Microsoft’s OEM partners and looking at their overall strategic view of the PC and tablet markets of the future, it has become clear to me there really is a huge difference between how Microsoft and their partners view the computing market compared to the way Apple designs and markets their Macs and tablets to these same users. This divide in strategy is very pronounced.

In a sense Microsoft approaches the market from the top down, while Apple goes after the market from the bottom up.

Microsoft centralizes their strategy around their belief that everyone needs tools for a wide range of productivity tasks, regardless of who they are. Microsoft and their partners, including Intel, are designing all of their products around this focus. Of course, productivity is Microsoft’s sweet spot and a strong push to create products with an eye on productivity first makes sense. This is why they keep pushing the 2 in 1 concept. Is it a tablet or is it a laptop? As far as they are concerned, it doesn’t matter to the customer. The tagline for 2 in 1’s is “It is a PC when you need it and a tablet when you want one”. They believe that, in this product, they can push the customer to cover all of their bases and hope in the process these 2 in 1’s revive the lagging PC market and get it back on track. The problem is, since the focus of these designs really emphasize the productivity aspect of the experience, 2 in 1’s turn out to be OK laptops and, in many cases, mediocre tablets.

On the other hand, Apple approaches the market from the bottom up. When Steve Jobs introduced the iPad in 2010, he put a huge emphasis on the fact it was a “consumption” device first. In fact, he downplayed any possible productivity features although he did hedge his bet by creating a version of Pages, Numbers and Keynote apps for those who “might” want them. But when Apple created ads for the iPad they were all focused on consumption. Only in the last 18 months have they even added the focus on the iPad as a serious “creation” tool. Notice the distinct difference even in terminology. For Microsoft, the term “productivity” is key to their marketing while Apple uses “creativity” instead. Microsoft shows ads of people mostly working while Apple shows ads of people doing cool things with their iPhones and iPads. Microsoft’s ads invoke work while Apple’s ads show you how to use their products to create and play.

In a good article on TUAW written by Yoni Heisler entitled “Microsoft still doesn’t get why the iPhone succeeded,” Heisler says:

As Microsoft continues its push to remain relevant in the mobile space, it still doesn’t appreciate the factors that allowed Apple to enter a market it had no previous experience in, and turn that market on its head with the iPhone. Arguably blinded by the profits brought in by its Windows monopoly and its suite of productivity software, Microsoft still doesn’t seem to fully comprehend how the iPhone was able to push established players like RIM to the brink of irrelevancy in just a few years.

As an illustration, here is Nadella’s response to a question from Joshua Topolsky regarding Microsoft’s strategy to sell more devices to consumers.

You’re defining the market as “It’s already done, Apple and Google have won, because they won the consumer side.” And I’m going to question that. I’m going to say “No, any thinking consumer should consider Microsoft because guess what, you’re not just a consumer. You’re also going to go to work, you’re also going to be productive and we can do a better job for you in there.” And that’s what I want to appeal to.

And therein lies the problem. Consumers primarily buy mobile devices that make their lives easier and more fun, work be damned. Microsoft Office wasn’t available on the iPhone until June of 2013. An iPad version wasn’t released until four months ago! And guess what, hundreds of millions of consumers bought iPhones and iPads anyhow.

Heisler captures the essence of the difference between Microsoft and Apple well. Microsoft is all about productivity while Apple wants to give people a break from work and let technology do cool things for their customers. While this may seem like semantics, it actually drives a very different mental picture to consumers about how they view their devices. As Apple has proven, this approach is highly successful and brings into real question whether Microsoft’s productivity push will help them get customers outside of the enterprise to buy their products in the future.

In fact, Apple drives a solid line between productivity and content creation vs creativity and content consumption. Tim Cook and team are adamant that, when it comes to productivity, they believe that Macs are at the center of this activity. They have created innovative laptops, especially the MacBook Air and these products continue to defy the downward market trend in PCs and every quarter Apple sells at least 4 million Macs worldwide. They then focus iPads and iPhones on the more fun activities one can use technology for and again, have sold massive amounts of these products to very satisfied customers.

Of course, there is an actual dichotomy in the ultimate use of iPads in many people’s lives. Although Apple designs their iPads as pure tablets, people and companies have found their own ways to use them for actual work and productivity. But ironically, it was never at the center of Steve Jobs’ design and its role as a productivity tool has come mostly from third party products like external keyboards and companies and individuals creating apps and tools that allow them to adapt iPads and even iPhones for work when needed.

Satya Natella’s heavy focus on productivity is an interesting one and using 2 in 1’s to bridge the gap between a laptop and tablet will be driving their strategy forward. With the goal of creating a single OS that runs on laptops, tablets and smartphones, Microsoft is at least creating an OS environment less confusing than in the past. However, Apple has shown there is success in making great laptops, tablets and smartphones each with different goals in mind. However, if Microsoft continues down this heavy productivity road I suspect they will be challenged in their quest to gain any serious ground against Apple and even Google, who at the moment have the lion’s share of the mobile market. Apple with the Mac and Google with the Chromebooks are seriously eating into the Windows market share and have changed the dynamics of the personal computing marketplace forever.

My Phablet Skepticism Thesis

I have been publicly doubting the existence of the 5.5 inch iPhone for some time. I promised many on Twitter I would share my overall thesis on the category so here it is.

Starting from the data points, we know several things. In the USA, phablet sales are quite small. Our estimates have the active installed base of all Galaxy Notes in the US at under 10m units. Phablets, or smartphones with screen sizes above 5.3″, have tended to not sell well at any price point in the US market. However, the US market is not the only one that matters.

Phablets are successful in some parts of Europe but much more so in Asia, so we will focus there. You could argue Apple needs to make a 5.5″ phone primarily to serve the Asian market and you may be right. But let’s focus on the data at hand.

Here is a chart Guardian journalist Charles Arthur made of active screen size of Android device according to Google’s data.

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As you can see, the vast majority of Android devices in use are not phablets. Now, it is entirely possible Google is not tracking or including China’s AOSP Android ecosystem in this chart. If they did, it could certainly bump the active use of phablets a bit higher but it would not be by much.

Another data point is IDC’s own projection of the phablet market which is, somewhat conveniently for my thesis, hot off the presses. This statement can be found in their latest press release.

The other widely discussed trend has been the shift towards large screen smartphones. IDC expects “phablets” (smartphones with 5.5″—7″ screens) to grow from 14.0% of the market in 2014 to 32.2% of the market in 2018. With the expected entry of Apple into this market segment, and the pent-up demand for a larger screen iPhone, Apple has the ability to drive replacement cycles in mature markets despite the slower growth seen in recent quarters.

IDC is stating 14% of smartphone shipments this year will be phablets, growing to 32% in 2018. In raw numbers, based on consensus of smartphone forecasts, that equates to approximately 165m phablets in 2014 and approximately 576m in 2018. In neither case are those small volumes. However, of the vast majority of phablets being sold in Asia, more than 80% cost less than $350. An interesting question is, where do premium phablets, like the Galaxy Note series, sell in volume in high prices points? The answer is South Korea. Good estimates of the Galaxy Note installed base in total is around 60 million. Nearly half of those can be found in South Korea. ((This estimate comes from network data I have on the region as well as some publicly stated numbers of Notes by Samsung. Notes appear to have the greatest concentration in South Korea. However, since Samsung uses shipment numbers not sell through numbers, it is entirely possible millions of Notes are sitting in a warehouse somewhere collecting dust. Perhaps if this is true it helps my thesis even more.))

What we know today is:

  1. Phablets are not the majority of form factor sales.
  2. The price points they do move at in volume are not price points Apple seemingly would want to play at with an iPhone.
  3. Where phablets do sell at high price points, and where Apple would seemingly play, are in Samsung and LG’s home country of South Korea. A market Apple has very little share in today.

When I share my skepticism, it is due to the nature of what we see regarding phablets today. However, there are always other ways to look at this data.

Firstly, perhaps the large screen phones have not sold well in the US because Apple does not offer one? Possibly yes. However, if I had to place a bet on which of the two larger screen models Apple offered would do better in the US, I would bet the 4.7″ would be the better seller.

The real question to dig into around the necessity of an Apple 5.5″ iPhone is to address a market that may be choosing Android instead of the iPhone specifically due to that sized phone. Apple will address many people’s desire for a larger phone with the 4.7″ and, in many markets, particularly the US market, it will likely bring users back to the iPhone who may have left and bought a Samsung Galaxy S series because it had a larger screen. But ultimately, Apple already dominates the US market and has an extremely loyal customer base. I don’t believe the argument for a 5.5″ has anything to do with the US.

So — back to Asia. The affluent audience who purchases iPhones in that market due so because of the status that accompanies buying an iPhone. It is entirely possible there are more iPhones in active use in Asia than in the US thanks largely to the secondary market. A 4.7″ iPhone alone will be a huge hit in Asia and break sales records at whatever price. So why offer a 5.5″ also? Is there evidence that those in Asia who can afford a $650 iPhone (not the majority) are choosing to buy an Android phablet for $350 just because Apple doesn’t offer one in that screen size? I see no evidence of this and it is the primary source of my skepticism. The decision to release two new flagship models, at the same time, and possibly causing some difficulty deciding between the two by Apple’s core customers, has to be to appeal to new customers who don’t just want a bigger iPhone (the 4.7″ will do this already) but want one specifically at the increased size of 5.5.”

Bottom line, phablets move in volume at lower ASPs than iPhones in Asia. Those who can afford iPhones in Asia will buy whatever Apple makes due to status. I’m not convinced Apple is or would lose customers in Asia if they did not make a phablet. That being said, and looking at the data I have, there are always times to forget data and go with your gut. It will be exciting to see what Apple’s gut has told them to do.

Why Apple Will Switch to ARM-Based Macs

This post originally appeared at MattRichman.net and was re-posted at Tech.pinions with Matt’s permission.

When Steve Jobs announced the transition from PowerPC to Intel processors in 2005, he revealed something that, in hindsight, seemed obvious to everyone who didn’t anticipate the switch:

There are two major challenges in this transition. The first one is making Mac OS X sing on Intel processors. Now, I have something to tell you today: Mac OS X has been leading a secret double life for the past five years.

[…]

We’ve had teams doing the “just in case” scenario. And our rules have been that our designs for OS X must be processor independent, and that every project must be built for both the PowerPC and Intel processors. And so today, for the first time, I can confirm the rumors that every release of Mac OS X has been compiled for both PowerPC and Intel. This has been going on for the last five years.

There’s not a doubt in my mind that if you substitute Intel for PowerPC and ARM for Intel, what Steve Jobs said then holds 100 percent true today, word for word. Mac OS X designs must be processor independent, every project must be built for both Intel and ARM processors, and each Mac OS X release in the last five years has been compiled for both Intel and ARM.

Somewhere on Apple’s campus, ARM-based Macs are already running OS X.

User Experience Would Improve

In his iPhone 5S review, Anand Shimpi compared the Apple-designed A7 processor with Intel’s fastest tablet chip at the time. He wrote:

For our cross-platform CPU performance tests we turn to the usual collection of Javascript and HTML5 based browser tests. Most of our comparison targets here are smartphones with two exceptions: Intel’s Bay Trail FFRD and Qualcomm’s MSM8974 Snapdragon 800 MDP/T. Both of those platforms are test tablets, leveraging higher TDP silicon in a tablet form factor. The gap between the TDP of Apple’s A7 and those two SoCs isn’t huge, but there is a gap. I only include those platforms as a reference point. As you’re about to see, the work that Apple has put into the A7 makes the iPhone 5S performance competitive with both. In many cases the A7 delivers better performance than one or both of them.

In September of 2013, the world’s preeminent independent processor expert compared Apple’s latest iPhone chip with Intel’s fastest tablet chip and concluded that the two perform similarly — even though the Intel chip draws more power, contains four cores versus the A7’s two, and is produced with a more advanced manufacturing technique. If Apple’s chip design team can create a phone processor that performs on par with Intel’s fastest tablet chip, the company’s “highest priority”, then there’s no reason to believe that the same team at Apple can’t design chips powerful enough for any Mac in the company’s lineup.

Apple has already released a line of A-series chips tailored specifically for iOS devices, and the company is most definitely working on a line of B-series chips tailored specifically for Macs. When that B-series chip — or set of B-series chips that runs in parallel — is ready, Apple will be able to switch to ARM-based Macs without sacrificing user experience. On the contrary, because the company is no doubt designing its line of B-series chips in tandem with Mac OS X, there would be iPhone-like hardware-software optimization, improving user experience.

Apple Would Make More Money Per Mac And Sell More Macs

Going from chip concept to manufactured product can be broken down into two separate and distinct steps. The first is chip design — figuring out what features the processor will have and how it will work. The second is manufacturing — turning a file that exists on a screen into a physical product you can hold in your hand.

Today, Intel designs the chips in Macs and manufactures them, profiting on both of those steps. But if Apple swapped out Intel’s chips for its own ARM-based designs, an external company would profit on only one step of the chip creation process, not both, leading to a decrease in the cost of building a Mac. By my conservative estimate, Apple would be able to drop the price of the base model 11- and 13″ MacBook Airs by $50 and still make more profit per unit on each than it currently does.

This cost savings would apply to the entire Mac lineup. Apple would be able to drop prices across the board and make more money per Mac than it does today — and with lower prices, the company would sell more of them, too.

Apple Would Be Able To Create Better Macs

When Apple announced the iPhone 5S, it explained that all of the fingerprint data associated with Touch ID “is encrypted and stored inside the secure enclave in our new A7 chip” where it’s “locked away from everything else”.

Apple wouldn’t have been able to create Touch ID if the iPhone were powered by an Intel chip instead of an Apple-designed one. There wouldn’t have been a “secure enclave” on the iPhone’s processor to store the fingerprint data, nor would there have been perfect hardware-software integration. Apple was able to implement Touch ID because it designed the A7 chip in tandem with the iPhone 5S’s software and the rest of its hardware.

I’d bet that there are features Apple envisions for the Mac that simply can’t be built while Intel designs the chips inside of them. To implement those ideas, Apple would need to switch the Mac to ARM-based processors, because only then would the company have the ability to design chips customized for specific features. If Apple moved the Mac to ARM-based chips, the company would literally be able to create better products than it can today.

This brings me to something else Steve Jobs said when he announced the transition from PowerPC to Intel. Ultimately, he explained, Apple switched for one simple reason: “We can envision some amazing products we want to build for you, and we don’t know how to build them with the future PowerPC roadmap.”

The same logic applies today. It’s not a stretch to imagine Tim Cook walking out on stage and saying, “We can envision some amazing products we want to build for you, and we don’t know how to build them with Intel’s chips.”

As I first said more than three years ago: ARM-based Macs are definitely coming.

Who Apple, Google and Microsoft Should Acquire Next

On Tuesday night, TechCrunch’s Alex Wilhelm asked on Twitter:

It was late and I fired off a quick response but I thought it was a question interesting enough to be worth thinking and writing about here in more depth. So, for today’s column, I’m going to spend some time asking which companies Apple, Google and Microsoft should consider acquiring. As a bonus, I’m also going to include Amazon, which of course has just announced a major acquisition. I’ve deliberately been mutually exclusive in my recommendations, but the fact is a number of these companies would be a reasonable fit for several of the potential acquirers, since they’re all to some extent targeting the same opportunities, albeit in different ways.

Apple

Until the Beats purchase, Apple’s acquisition strategy was so predictable, you already knew the official comment the company would put out as a result: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.” Apple has focused almost entirely on acquiring smaller technology companies and typically shuts down the products while building some of the functionality into future Apple products. But the Beats acquisition either changed all that or was a one-off anomaly. I suspect most of Apple’s acquisitions going forward will be more along the lines of its past acquisition than the Beats acquisition, but it might still make sense for Apple to buy something bigger “from time to time” as the company might put it.

Bose

This is a bit of a cheat because it’s so similar to Beats, but it’s also different in important ways. Bose is the headphone brand many people thought Apple should have bought because it’s a much better fit with Apple’s core product values: a premium, high end, high quality product that’s well respected and has a brand cachet among the same sort of people likely to buy Apple products. I think it’s possible Apple may use Beats and the technology it licenses to build premium headphones under its own brand and, as such, it may not be necessary to buy Bose to achieve this. But with Bose, it would acquire an existing known brand which would nicely complement the Beats brand.

Broadcom’s baseband business

This is also a bit of a cheat, because it’s not apparently for sale anymore, as the company is planning to wind it down. But it seemed an obvious fit at the time when it was for sale, because it’s well aligned with Apple’s strategy of steadily owning more and more of the components in its devices, and it would provide useful leverage against existing suppliers. It appears Apple is investing in this area organically already, and acquiring this business would have given that effort a big boost. For now, though, it appears as though Apple will continue to pursue this strategy internally rather than through an acquisition.

Yelp

Apple Maps has come a very long way since the early awful reviews. I use it regularly to get from point A to point B and it’s absolutely fine for navigation purposes. But where Apple Maps falls short is its point of information (PoI) database – i.e. the set of information it has about stores, restaurants, and other businesses in any given area. I regularly find Apple Maps is unable to find the nearest location for a particular franchise or company when Google Maps finds it without any problems. This is Apple Maps’ single biggest weakness today, at least in the US, and it should invest in fixing it. Apple currently buys this data from third parties like Yelp, but it has little control over the quality of that data as a mere licensee. Acquiring Yelp would allow Apple to control the data and use it as the foundation for a more aggressive effort to build an extensive, up-to-date PoI database to help power Apple Maps.

Google

Google’s acquisitions have been much less predictable than Apple’s, both in their scale and scope. It’s acquired companies as diverse as YouTube, Picasa, Dodgeball, Keyhole, Android, DoubleClick, GrandCentral, Motorola Mobility, Nest, Skybox and Zync Render. There is almost nothing all these companies have in common and some of its acquisitions have been pretty sizable. But given its current focus areas and the domains Google is likely to invest in next, it’s still possible to identify some possible opportunities.

Spotify

This was the one company I listed in my response to Alex Wilhelm’s tweet, and it’s an obvious one. To the extent Google is serious about getting into the music subscription business, it could acquire a lot of market share and a strong existing brand in the form of Spotify. Some people questioned why Apple pursued Beats instead of Spotify, but I think the reality is Apple didn’t want the baggage of millions of users across iOS, Android, Windows Phone and the web to support, and it was partly attracted by Beats’ relatively small base. Google, on the other hand, works on a massive scale, and already operates one of the other most popular music streaming services in the form of YouTube. While Google Play Music has been somewhat successful, it’s limited in terms of the countries where it’s available and is far from a leading brand. Spotify would quickly leapfrog it into a top two position in digital music.

Jawbone, Fitbit or Withings

Google has already shown that it’s willing to acquire to establish a position in one of the three key new domains in consumer technology: home automation. But in the other two (the connected car and wearables) its efforts have largely focused, so far, on extending Android. However, there are a number of companies which have established a strong position in wearables from a fitness and health tracking perspective and which Google could potentially snap up. Jawbone, Fitbit and Withings are three obvious examples (and Withings in particular is doing interesting things in the smartwatch space). Any of these companies could give Google the sort of jump start in wearables Nest has given it in the smart home market and could be a core to wrap around other acquisitions, as Nest has become a vehicle for purchases such as Dropcam.

Pinterest

As Google and Amazon increasingly square off against each other across a number of areas, Google has been investing in various retail and commerce-related initiatives. But almost all of these so far have been organic and tied to existing Google properties. Pinterest would fill an interesting gap in two different parts of Google’s business: a channel for commerce and a social network. Google+ has largely failed as a social network on a grand scale (though it’s arguably succeeded in various niches), but Pinterest has massive appeal among a segment of the population. It sits quite a long way down on ComScore’s list of top mobile apps by unique visitors (number 20, just above eBay and below Snapchat and Netflix), but comes in the top 10 by time spent among users over 24. Pinterest also has enormous potential to drive commerce activity, which could help reinforce some of Google’s other commerce-related activities.

Square

Square is, depending on who you believe, either expanding rapidly or struggling mightily. But it’s establishing itself as one of only two or three players that’s starting to build a presence in the local retail space. Amazon’s now entered that space organically with Local Register, but Google’s various efforts in mobile payments have so far failed, largely due to lack of carrier support. Acquiring Square would tackle the market from a different perspective but also potentially give Google a local footprint which could be used to re-launch Google Wallet in future.

Microsoft

Microsoft has made one big acquisition recently, in the form of Nokia’s devices business, but it’s clear Satya Nadella thinks less of that business than Steve Ballmer did (and may well have opposed the acquisition at the time). Other larger acquisitions in the past have included Danger, aQuantive, Skype and Visio. But Microsoft is in transition, both culturally and strategically, and it’s not yet clear what the new focus areas for acquisitions might be. However, there are a few areas where Microsoft could use some help.

Here

I’m not going to focus on the wisdom or otherwise of acquiring Nokia’s devices business, but where I think the board made its biggest mistake was not acquiring the Here location and mapping business from Nokia when it bought the mobile phone arm. There are only three meaningful mapping businesses in the world today, and they’re owned by Google, Apple and Nokia. Only two of these companies own major computing platforms, and the third major computing platform company is conspicuous by its absence. Having licensed maps content from Here for several years for use in Windows Phone, and since Nokia devices have used it for much longer, it was perfectly logical for Microsoft to acquire this business. But the board balked at the time and so Microsoft is left licensing one of the core elements of its platforms instead of owning it outright. It could still fix this.

Foursquare

Along similar lines, Foursquare has begun providing PoI data to Microsoft for use in Bing Maps and Cortana but, as with Apple’s relationship with Yelp, there’s a lack of control and ownership. Unfortunately, Here’s mapping data suffers from the same PoI weakness as Apple’s Maps product, especially in the US, and Foursquare would be helpful both in filling gaps and as a foundation for building a much better, more comprehensive database. Given Microsoft’s existing relationship with Foursquare both as a licensee and an investor, an acquisition would be straightforward and a good fit.

Everpix assets or Picturelife

One of the main selling points on Microsoft’s Lumia devices is the cameras, and yet neither Nokia nor Microsoft has ever provided a great way to store, manage and share these pictures. OneDrive is a storage option which should be increasingly integrated into the process of capturing and storing photos, but it suffers from the same fundamental limitations as other storage services: once you put pictures in, it’s almost impossible to find, manage and organize the pictures afterwards without heavy manual intervention. Everpix, before its demise, was one of a handful of services which promised to help with this task, and I always thought Nokia should have snapped it up. Picturelife is a similar service, though not as good, and there are others out there with similar capabilities. Such an acquisition could help set Microsoft’s photo management capabilities apart and would be a great strategic fit with the Lumia devices’ emphasis on photography.

Amazon

Amazon has obviously just announced a major acquisition in the form of Twitch, and perhaps its appetite for other big purchases might be limited at present. But as I’ve written elsewhere, there are several possible motivations for the Twitch acquisition, among them an extension into new categories within Media and a pursuit of the broader advertising opportunity. There are a number of other acquisitions which might fit into this strategy, as well as Amazon’s broader e-commerce ambitions.

Hulu

Hulu has been on the block and then off again, and at present is theoretically not for sale. But it would be a great complement to Amazon’s existing position in digital video, which is mostly focused on catalog content rather than new shows. Hulu is the only service that brings fresh content from several of the biggest US broadcasters on both an ad-funded and subscription basis, and both models are a good fit with Amazon’s new approach to media. Video advertising is an important area of expansion for Amazon and subscription content services are a business model Amazon appears to be pursuing too. It would also make Amazon a stronger competitor to Netflix, which currently dominates the US video streaming business.

Pandora

Pandora is by far the top online music service by usage in the US, second only to Facebook’s apps among all age groups in the ComScore data by usage, and in the top five by unique users, with only Facebook and Google products ahead of it. And yet it’s perennially unprofitable, because of the high content costs. With revenues and costs under a billion dollars a year, Pandora is the kind of business Amazon could swallow relatively easily, while turning it into an important part of its growing digital media offerings. And it would do for Amazon what a Spotify acquisition would do for Google: immediately vault it from an also-ran proposition to a market leader in digital music, at least in the US, which is still by far Amazon’s most important market.

Etsy or Shopify

Amazon dominates the traditional e-commerce space in the US and certain other markets, but there’s a lot more to online buying than traditional retail. Etsy and Shopify are two companies which target adjacent spaces in a way that would be a good complement to Amazon’s current business. The obvious risk here is these companies have sprung up in part as an alternative to Amazon, and their users may not be all that happy about an Amazon acquisition. But either would help Amazon to expand into new areas within e-commerce (and m-commerce).

Mac vs. PC All Over Again

The latest round of company quarterly financial results illuminate three trends in the device market:

  1. Apple continues to generate record profits largely due to growing iPhone sales (iPad sales are slowly declining, Macs are growing, iPod sales are mostly gone, and Apple’s services revenues are growing)
  2. Samsung’s profits are steadily declining (though from such a high level they remain quite high)
  3. Nobody else is making money at all ((Not consistently, or in the case of some Chinese companies who don’t break out device profitability, not verifiably))

Jan Dawson from JackDaw Research has a terrific chart illustrating the difference in margins that has made its way around Twitter (and here on Tech.pinions) a few times. To my eye, this looks like the PC market, all over again.

Screenshot 2014-08-07 09.46.57

I’m certainly not the first to point out the mobile market looks a lot like the PC market of 30 years ago; some financial analysts have been using this as part of an argument predicting Apple’s imminent collapse. Just as Apple lost the PC wars to a horizontal solution, Apple will lose the smartphone wars the same way. Apple apologists have responded the phone market is different: there are carrier subsidies, lock-in effects, or what have you.

Financial analysts aren’t dumb. The parallels are real. The phone market is turning into the PC market, only with Google taking Microsoft’s place as the OS provider. The similarities are striking. Apple redefined the market with a proprietary OS, innovative UI, and vertically integrated hardware. While it took a few years to catch up, the competition responded with a similar UI on an OS widely licensed to OEMs. In both PCs and phones, Apple targeted a narrow high end customer and lost the market share battle, while the competition aims wider and controls significantly higher market share. Apple monetizes its software by selling high margin hardware; OEM competitors fight each other to provide low margin commodities.

Screen Shot 2014-08-26 at 6.40.39 PM

There are also two interesting differences in the PC and smartphone eras: due to the way the smartphone market evolved, Google chose not to monetize the OS the way Microsoft did, instead monetizing services through advertising. The phone market is also different in size – it’s a lot larger than the PC market ever was.

The problem with analysts using these comparisons to predict Apple’s decline is they ignore the fact Apple won the PC wars. During the 1980s, Apple grew both revenues and profits. After a near death experience in the 1990s – more on this later – Apple reemerged as the most profitable PC vendor. If you count iPads along with Macs, it is now the largest PC vendor by unit sales, too. That is not to say there were no other winners in the PC market. Steve Jobs was correct when he said, “For Apple to win, Microsoft does not have to lose”. Microsoft also won the PC wars. As did Intel. At various points, IBM, Compaq, Dell, HP, and Lenovo have won battles, too (though some of them clearly lost the war).

What We Can Learn From History

The most crucial lessons from the parallels between the PC and smartphone markets are how 1) Apple should behave to successfully compete with Google, 2) the lessons Apple needs to learn from its near death experience during the PC era, and 3) the lessons today’s hardware OEMs – including Samsung – should take from PC OEMs.

1. Apple vs. Google
This one is really simple:

  1. Google does not have to lose for Apple to win. Steve Jobs’ anger towards Google was counterproductive. For that matter, Samsung does not have to lose for Apple to win. ((I think we’re seeing the application of this principle in Tim Cook’s détente with Samsung. Ironically, Jobs was able to get past his feud with Microsoft, but Samsung’s IP infringement was personal. For its part, Samsung is finally willing to compromise because it is realizing it cannot maintain its margins, and an expensive legal fight it can’t win is not worth pursuing.))

2. Lessons for Apple from the 1990’s
Apple lost its way in the 1990s when Microsoft caught up in user interface and Apple stopped innovating in both software and design. That impacted the Mac’s software ecosystem, ruined its premium value proposition, and forced Apple down market (which it tried to attack with a licensing strategy). Once Apple invested in a narrow range of high-design, premium products with regular software updates, sales and profits returned.

To win the smartphone market, Apple must continually refresh its software so its overall value proposition remains differentiated at the high end. However, software for smartphones goes well beyond the device capabilities and UI. It encompasses services and apps.

    1. Google excels in services; if Apple is to succeed long term, it will need to continually meet the “good enough” threshold on services. Given that requirement, the half-baked launch of Maps was a potentially franchise-destroying disaster. Apple has recovered from the worst of the Maps debacle, but it still has work to do on the services front. Apple next big challenge is creating a response to Google Now.
    1. Apple does not need to beat Google on services as long as Google extends most of its services to iOS. Google monetizes users, not Android. As long as Apple maintains a significant share of premium customers its advertisers want to reach, Google has to work with Apple.
    1. Apple excels in the app ecosystem, but Google is catching up. It is too early to predict whether this will keep Apple ahead, but the need to maintain an edge in the app ecosystem explains why Apple is opening up iOS 8 and giving developers more flexibility. It is also why Apple is investing in a new development language.
  1. Apple must continue to set the standard for design so consumers are willing to pay a premium for its hardware. Larger screen sizes and bezel-free designs are the only real holes in Apple’s approach; otherwise it’s doing a pretty good job.

Even if Apple pulls off this balancing act, it does not guarantee explosive growth, which is what Wall Street is looking for. However, if Apple does follow this path, it will maintain a stable, growing base of customers, apps, and assets it can use to attack new areas. The iPod and iTunes led to the iPhone which led to the iPad.

Lessons for OEMs competing with Apple and each other

There should be a market for premium Android phones, but with lots of OEMs targeting it, even vendors who can differentiate on design and hardware components will have lower margins than Apple. Margins don’t have to decline to zero, provided there is still enough value in differentiated component technologies or design. This is why Samsung’s insistence on sticking with durable, easy to manufacture, cheap plastic construction is so maddening. As the unique value of Samsung’s components has declined over time, Samsung should have been putting more emphasis on premium design and construction.

It may be possible to differentiate on software above Android, but few provide enough positive differentiation that consumers recognize and are willing to pay a premium for. Motorola, Meizu, and Xiaomi are the only ones who come close; LG is adding value by stripping out much of the excess it once had. It is worth noting carrier meddling can mess up even the best laid software plans; it requires a direct-to-consumer channel or extremely strong brand clout to build a singular software experience and get it on carrier shelves.

Below the premium tier, margins trend towards zero. Lenovo makes money in PCs in this environment by managing the supply chain and manufacturing. PC vendors were making money by preloading crapware; some smartphone vendors (and some carriers) are following suit. Another approach is to sell hardware at cost, and make money on ancillary products or services. Digital stickers work for messaging vendors, advertising supports television, and in-app purchases drive mobile game developers. Watch for variants on these approaches from hardware manufacturers. Amazon is trying to do this with its tablets, but not its phones where it tries to have its profits and sell you some cake, too. Xiaomi’s business model seems to be predicated on giving you a phone at cost, then selling you a stuffed animal.

Apple and mobile payments

In last week’s column, I talked about the current state of smartwatches. I described weak demand met by weak supply, and the resulting poor sales of the offerings in the market today. I also talked about what it might take for a new product in this category to stimulate demand. One of the potential use cases for a smartwatch or other wearable is payments, and I’ve been asked by several reporters over the last few weeks whether the iPhone 6 will have an NFC chip, potentially for payments. Today I want to explore that particular opportunity a little more.

The current state of mobile payments in mature markets in the West

It’s important to be clear what we’re talking about. Firstly, I’m not talking about m-commerce – i.e. buying things from e-commerce providers through a web browser or even an app. What I am talking about is using a mobile phone to buy real world items in a retail location. It’s also important to note the current state and uptake of mobile payments is radically different between certain emerging markets (e.g. Kenya) and different mature markets, such as the US and Europe, which behave fairly similarly, and Asian markets such as Japan, where mobile payments are more established. I’m going to focus mostly on mature markets such as Europe and the US, where mobile payments have still not taken off to any great extent.

Let’s quantify current uptake for mobile payments in  these markets. Here’s some data from a recent survey among US adults I conducted as part of my smartwatch report:

Mobile Payments Survey responses

As you can see, take-up is very limited so far, with around two thirds of US adults never having used any form of mobile payments. Even if you exclude those and focus on those who’ve tried mobile payments at least once, only about a quarter use it regularly, half use it occasionally and another quarter gave up after their first experience.

The mobile payments vicious circle

So why is this? The reasons are fairly obvious:

  • Current offerings typically depend on NFC chips in phones combined with an app or service that can make use of it. Only around half of smartphones in the US have NFC embedded (the iPhone, notably, doesn’t have NFC)
  • Google Wallet, the pioneer in this space, has become harder and harder to use on smartphones, as certain carriers have blocked it and Google has restricted use to phones running relatively new versions of Android (about 21% of Android devices globally)
  • Isis, the effort from several of the big US carriers (soon to be rebranded), has only been in trials in certain markets for much of its history, and is only now beginning to roll out more broadly.

But the biggest reason of all is there is a chicken-and-egg problem with terminals and devices, as shown in the diagram below:

The mobile payments vicious circle

As long as few people have devices capable of making payments, there will be little reason for store owners to install terminals to work with them. And as long as there are few places where mobile payments can be made, users will see little reason to either buy devices that can make them or set up an account to make use of them. Whether the underlying technology is NFC, a barcode scanner, Bluetooth LE or something else, store terminals need to be able to communicate with the smartphone to create a secure transaction. I live in one of the test markets for Isis, but even here there are relatively few locations where Isis payments are accepted, and the availability in much of the rest of the country is far lower.

Breaking the vicious circle

There are two possible ways to break this vicious circle, as shown in this diagram:

Breaking the mobile payments vicious circle

You have to break the cycle either on the terminal side or the end user side. Breaking it on the terminal side would mean subsidizing the terminals on behalf of retailers, which wouldn’t be cheap. As Tim Bajarin wrote in his great piece on the Disney MagicBand, Disney spent $1 billion just to install the MagicBand infrastructure in its theme parks. Now extrapolate that cost to all the retail locations in the United States and you have a good sense of the size of the investment needed. Any player willing to subsidize that would have to have very deep pockets indeed.

The other way to break the cycle is to create massive end user demand, something the mobile payments products in the market today haven’t been able to do. For Google Wallet, the challenge has been the split between three parties that need to come together to make it work but haven’t: Google, Android OEMs and carriers. For Isis, the problem is somewhat different: consumers don’t necessarily look to the carriers as payment providers, and Isis has been poorly marketed, leading to low awareness and demand. What would happen if Apple were to enter the market by introducing some kind of payments technology as a built-in feature of the next iPhone or a wearable device? Millions of consumers in the US would suddenly have a tightly-integrated solution built into their devices. One that carriers couldn’t block and which would no doubt receive heavy promotion from Apple and the tech press.

Were Apple to introduce such a device or devices though, it would still suffer – at least at first – from the same problem of a lack of terminals which could accept payments. Wide availability of a mass market payments solution could potentially boost sales, but it would take time. As such, this would arguably be the first time Apple would introduce a major feature which wasn’t that useful at launch. Poor initial experiences for would-be users of its payments products could sour them on the product, which would be bad for ongoing interest. Yet this is the sort of thing which would be impossible for Apple to solve ahead of a launch announcement without a massive risk of leaks. I’ve written separately about how Apple might break its usual launch pattern for wearables, but this is one factor working in the opposite direction: Apple might need to give retailers, not developers, a head start.

Technology choices – to NFC or not to NFC?

I think it’s far from guaranteed Apple will launch a payments service, even though it has many of the pieces in place to do so at this point, and it could be an interesting new angle on the wearables space. But if it does, the question remains how it might be implemented from a technology perspective. The path trodden by the two major existing US providers is NFC, a technology Apple has stubbornly resisted adopting so far. It’s an established technology and, as such, would be relatively straightforward for Apple to add to its devices. So it’s a good option in some respects.

But even as Apple has resisted embracing NFC, it has more wholeheartedly adopted other technologies which could form the basis of a payments service, notably Bluetooth LE. Where other services have used NFC for pairing, Apple has used Bluetooth LE. Where other services have used NFC for quick data exchange between devices, Apple has used Bluetooth and WiFi. With the launch of iBeacon functionality, Apple has also sparked extensive interest among retailers in installing Bluetooth LE hardware in stores to track users and push promotions. So Bluetooth LE, which is also capable of very accurate proximity sensing, could become the technological basis for a payments service, especially given the existing investment by retailers in iBeacons.

For these reasons, and despite the obvious appeal of NFC, I’m still not convinced Apple will use it in any payments service it offers. At the same time, I think it’s interesting to think about the role of Touch ID on either an iPhone or a wearable device as a form of authentication, which would dramatically reduce the friction compared with opening an app and keying in a PIN. That could potentially work with either Bluetooth LE or NFC.

Huge barriers remain

For all the potential associated with an Apple entry into the payments space, the vicious circle described in this post remains a formidable obstacle to any player in the mobile payments market, including Apple. Unless Apple is willing to make a major investment in subsidizing terminals, it risks launching a payments product which will have limited appeal at first. The one solution is to give retailers a head start by pre-announcing a product which won’t be available for several months, to provide the infrastructure ahead of time. But even that might have a limited impact before devices are in consumers’ hands. In this arena, as with smartwatches, there is potential for Apple to come in with a disruptive offering, but so much will come down to the execution.

Deeper Dive on Android vs iOS Web Usage

I gave a brief overview of my thoughts on global web usage in the Tech.pinions Insider weekly newsletter that goes out each weekend. But I wanted to dive into a few more points I think are interesting.

When it comes to the business model of so many companies in the smartphone, tablet, and PC market, usage is an essential metric. For online companies like Google, Facebook, Amazon, app vendors, and more, web usage or the extent to which one gets on and uses the Internet is even more essential. What we are seeing is the early signs of the problems connecting the next billion customers for many companies. For a long time, iOS dominated Android as a whole in terms of web usage. Interestingly, an online metrics service I track points out this specifically in their FAQ on their site.

Screen Shot 2014-08-13 at 8.45.59 AM

Android ships in larger quantities, but iOS dominates usage. Point number two is perhaps the most insightful. Not only are iPhones typically supplied with generous data plans but they are purchased by people who can afford to liberally use the web. Someone who can afford a $500 or higher phone in non-subsidesd markets can also afford a premium tier data plan. I’ve started using the term “data budget” to describe this. iPhone users have a higher data budget than the average Android user. Another point is broadband is not equal in many parts of the world. Many emerging markets have spotty and slow broadband. It makes the web challenging at times due to the lack of speed. These are part of the complexities I feel led to Android taking so long to pass iOS in terms of web usage, despite having more than double the usage base for quite a while.

While I recognize the disparity in methodologies of StatCounter and NetMarket Share,  I still find them both useful. StatCounter, measures total usage of a user and will count the same user as a page view every time that person views a website they track. That is why StatCounter has Android ahead of iOS in web usage and says it has been for some time.

Screen Shot 2014-08-10 at 1.00.03 PM

StatCounter’s data will favor the heavier of web users, thus their data will give us a broader picture of how active on the web each platform may be. But it is also skewed toward the top percentage of users who more liberally use the web. It leads us to the conclusion that the Android data collected by StatCounter is likely heavily influenced by those Android users who are more like iPhone users in terms of disposable income, data budget, quality of connectivity, etc. That point is well understood when we look at the device vendor breakdown of StatCounters data. We see Samsung users have been driving the bulk of Android’s global web browsing in their network of sites. Samsung’s premium and mid-tier devices would have similar users where usage would be impacted.

Screen Shot 2014-08-13 at 10.27.27 AM

NetMarketShare presents a different picture and for different reasons. NetMarketShare only counts each user once per day on their network of sites, so we get a bit more holistic view of platform usage which is not skewed by the power users of either platform.

Screen Shot 2014-08-10 at 12.58.55 PM

One thing to point out on this chart is it is measuring absolute share. iOS’ line is not going down because iOS is being used less, only because Android is growing as a percentage of overall web traffic on their network.

It was inevitable Android would pass iOS in terms of overall usage. What this brings up though is the striking point that usage is not equal between the two platforms per users. Meaning the average iOS consumer will still use dramatically more Internet services than your average Android user. Given the many points I’ve made before that Google’s Android already has the heaviest web users and the most profitable customers to their ecosystem as they are ever going to get, the longer term trend is problematic to their growth if it remains solely tied to usage of Internet services. The same is true of Facebook. In both cases the next billion will have a lower data budget, less reliable and likely slower connectivity and will have to prioritize that data budget accordingly. In short, this next billion will prioritize survival over entertainment. They will likely use a messaging service like WhatsApp because that is how their commerce or trade gets done. That is a worthwhile spend of data budget. Those needs will trump entertainment for the foreseeable future.

While looking at iOS vs Android web usage is helpful, it is really still only part of the story. I track a range of developer toolsets that show web usage by particular devices as well. Often many of these include app usage as well since most of these analytics services are for app developers. Here are a few select countries of interest because they are big but also because they qualify as those I consider with a stringent data budget.

Screen Shot 2014-08-13 at 10.45.33 AM

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All this does is emphasize in countries where the iPhone has a presence, even if only small, those users dominate the usage the landscape and often by a healthy margin.

Take Aways

What is becoming increasingly clear to me is at a platform level, the opportunity within iOS and Android for app developers, providers of web services or services in general, are simply different on each platform. You could make the argument the opportunity within iOS is very different than the opportunity within the Android ecosystem. Thus, each ecosystem may have an entirely different set of developers, services providers, and more.

For a more detailed view of this angle, listen to the latest podcast with myself and Andreessen Horowitz partner and analyst Benedict Evans on our latest mobile focused Tech.pinions Podcast.