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Cringely's Final Predictions: Apple Becomes a Financial Service and Hedge Fund (cringely.com)
For 22 years technology writer Robert X. Cringely has been making predictions for the year to come -- but this year may be his last. So at age 66, he's promising his 2019 predictions will also "take a look out several years...because I sense the tech industry about to enter an unprecedented correction."
And last week he unveiled his first prediction -- that Apple under Tim Cook "emulates GE under Jack Welch.... Jack Welch took GE into financial services in 1981, transforming the company and increasing its market cap by 4000 percent over his 20 years. "
Tim Cook has already started in 2019 along the same path forged by GE's Jack Welch back in 1981. This strategic shift started to show just this week with Apple directly financing iPhone sales in China and announcing an Apple credit card with Goldman Sachs... Look for Apple to start financing lots of things in 2019. Remember your car dealer would rather lend you money than have you pay cash for that ride because financing is its own profit center. So iPhone prices will continue to rise, but iPhone payments will probably decline as Apple cuts out middle men and efficiently sucks-up that aspect of the phone supply chain. This is how Apple will arrest iPhone market share declines -- by assisting sales and making even more money in the process.
I expect Apple to not just make strategic investments, but participate in strategic financing as well.... What Apple is probably closest to becoming is a hedge fund -- a very big hedge fund in fact. Apple's available financial power is approximately equal to that of the world's two largest hedge funds -- Bridgewater Associates and AQM Capital Management -- combined. So when someone tells you Apple is in decline or doesn't have a clue, they are wrong. Apple will continue to compete in its established technology markets as well as new ones. But Apple has also found a $200 billion hobby that will keep it growing for the next decade no matter where the Information Technology market goes.
Cringely notes that services "are more profitable than hardware." But Cringley has always been gracious about entertaining other opinions. In 2000 he answered questions from Slashdot readers, and last week he reminded his readers again that as technology completes its next great transitions, "I'd really like to hear your thoughts, too."
As dramatic changes (including AI) kick off what may be a new 50-year-cycle, "Everything is changing and nothing -- nothing -- will ever be the same again. I hope that's a good thing."
And last week he unveiled his first prediction -- that Apple under Tim Cook "emulates GE under Jack Welch.... Jack Welch took GE into financial services in 1981, transforming the company and increasing its market cap by 4000 percent over his 20 years. "
Tim Cook has already started in 2019 along the same path forged by GE's Jack Welch back in 1981. This strategic shift started to show just this week with Apple directly financing iPhone sales in China and announcing an Apple credit card with Goldman Sachs... Look for Apple to start financing lots of things in 2019. Remember your car dealer would rather lend you money than have you pay cash for that ride because financing is its own profit center. So iPhone prices will continue to rise, but iPhone payments will probably decline as Apple cuts out middle men and efficiently sucks-up that aspect of the phone supply chain. This is how Apple will arrest iPhone market share declines -- by assisting sales and making even more money in the process.
I expect Apple to not just make strategic investments, but participate in strategic financing as well.... What Apple is probably closest to becoming is a hedge fund -- a very big hedge fund in fact. Apple's available financial power is approximately equal to that of the world's two largest hedge funds -- Bridgewater Associates and AQM Capital Management -- combined. So when someone tells you Apple is in decline or doesn't have a clue, they are wrong. Apple will continue to compete in its established technology markets as well as new ones. But Apple has also found a $200 billion hobby that will keep it growing for the next decade no matter where the Information Technology market goes.
Cringely notes that services "are more profitable than hardware." But Cringley has always been gracious about entertaining other opinions. In 2000 he answered questions from Slashdot readers, and last week he reminded his readers again that as technology completes its next great transitions, "I'd really like to hear your thoughts, too."
As dramatic changes (including AI) kick off what may be a new 50-year-cycle, "Everything is changing and nothing -- nothing -- will ever be the same again. I hope that's a good thing."
I have a really fat 50 year old business book (over 3100 pages) and the end part of it basically suggests that once any business has enough financial leverage / savings that it's best to just get into financing/lending/banking, period.
This is the link to the actual post by Cringely with the Apple prediction: https://www.cringely.com/2019/...
...they're certainly not gaining points through engineering and innovation lately, that's for sure.
Bob's predictions haven't been right all the time. But never at 50-50. More something like 75-25 or even 80-20.
The good part of Bob's predictions is how acute and sharp he's been so far.
And not just the predictions, but also any other piece he'd added to his blog (or whatever else you define it), one or a kind.
Going far beyond the pure appearance and surface, adding thought value by interconnecting news and facts from different sources and, of course, putting in a good dose of his own sharp intelligence.
I would suggest anyone how likes seeing things under a different light and yet getting most of those right, go heave a deep read to that blog.
It's worth every single information bit.
Sent as ripples into the electromagnetic field. No single photon has been harmed in the process.
“Assisting sales”, financing phones, or even dramatically lowering their profit margins is in itself not enough to arrest the decline of market share. Apple needs to offer compelling reasons for us to not buy Android, the mobile OS that everyone else is using. Switching between OSes is a giant pain in the rear, so they have some leeway there, but if Apple hardware, their OS, their services and integration with other services start to lag behind, people will switch and likely not come back. Having a walled garden is a liability if you do not take good care of it: most people (myself included) know the walls are there but we cannot see them for all the lovely trees in the garden, but Apple hasn’t been watering and trimming them very well lately, and things are starting to look a little shabby. And there are a couple of very good Android phones out there these days; time perhaps to move to greener pastures.
Google seems to better understand how to care for their ecosystem, not just the core OS but all the services around it: mapping, translation, voice recognition, and so on, all top of the bill stuff. Apple’s services are also-rans. If Apple doesn’t keep up innovation and doesn’t invest some of that vast capital into making their ecosystem the very best, sales will decline. And that means Apple will decline as a tech company. Even with billions in the bank. Same as the guy down the street running a video rental store; he made a killing back in the 80s and saved enough to comfortably retire on, but he keeps the doors to his shop open. Good for him, but I wouldn’t exactly consider him a relevant factor in local commerce.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
I have a really fat 50 year old business book (over 3100 pages) and the end part of it basically suggests that once any business has enough financial leverage / savings that it's best to just get into financing/lending/banking, period.
So, once you amass enough money that paying someone else to shove it in their mattress becomes irresponsible from a financial standpoint, you get into the mattress business.
Seems logical enough to not validate this as some kind of magical "prediction", and more like common sense and business investing 101.
This has far less to do with a company dying on the innovation vine as it does leaving money on the table by not participating in the financial sector, especially when you have the funds to back it. Doesn't matter if you're making a popular smartphone or rubber dogshit. Get a business big enough, and you will up in banking, because it's a solid revenue stream.
Doesn't matter if you're making a popular smartphone or rubber dogshit.
The best part about discussions like this is that it's near conceded that Apple is now 'a smartphone maker.' The Mac is just about dead.
Why not? Apple could start leasing their phones out, with or without data and voice plans attached. Minimum contract 18 months / 2 years.
It's probably the only way some of their poorer customers could afford the expensive new shiny things they crave.
It could be a (financially) clever move.
loan sharking. Apple will become a huge loan sharking operation that uses their phones to get into your wallet (instead of the more traditional sports book). How else is Apple going to get people to spend more and more on new phones? They're already over $1k. Right now ATT and Verizon are capturing all that revenue. I can't imagine they are going to be very happy about Apple's moves to take that revenue from them.
The same thing is happening in many industries. Corporations are buying up individual and group owned dental practices and doing a lot of advertising on TV. Under their careful and care-full management, many, many more people get the dentures they "need" for "affordable monthly payments". A word of advice: if you spend more time talking to the staff about financial arrangements than you do with the dentist, find another dentist.
Every single company that decides that "services are more profitable than productivity" eventually fails big and has to correct.
I've worked for GE, Honeywell, and a couple of other fortune 500s, and each time I got to witness the destruction from the inside that comes from the CEO and board deciding that they want to be a services company rather than a company that makes things.
I got to witness the wholesale destruction of jobs as each company outsourced those services to low-cost countries and had only a staff of "front men" in the US to pretend they were the competence behind those services.
It worked great until their customers realized they could just outsource those services themselves and not have a middleman.
What Apple looks like it is trying to do is lock its stupidly hyper-loyal fanbase into a cycle of insurmountable debt, turning them into modern-day digital sharecroppers. "Sure we've raised the price of our phones to $1200, but we'll finance it at high rates and a term longer than the lifetime of the product, and when it dies and you need a new one, we'll conveniently refinance the rest of the loan into the loan on the new phone. And oh by the way, if you don't buy a new phone with this convenient rollover financing, you'll have to pay off the note on your dead phone in full right away because we've lost our security."
Predatory lending at its best.
In the EU at least that's illegal - unbundling laws happened a few years ago and you are charged for device and plan separately. You could do minimum voice/data of 2 years I think, but you can't do the same for the device - it's a separate finance agreement.
The old banking business of GM is alive and well. It used to be known as GMAC. But you likely have heard of their new name: Ally Financial.
They offer an online only banking system that is known for having really great savings and CD rates (2.20% APR for savings, 2.75% for a 12 month CD).
The hardest thing in business, and (equivalently) one that costs a lot of money: obtaining customers.
Once you have the customer relationship you can buy or hire the expertise needed to exploit it different ways.
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Adobe has been porting Photoshop to iOS for several years in anticipation of just such a move. By the time Apple switches CPUs, a substantial percentage of the Desktop version of Photoshop (if not the entire code base) will have already been ported to run on ARM. I would not be surprised if their other project teams are doing something similar.
What moving to ARM will do, unfortunately, is create a big barrier for anyone still running Photoshop CS6 and Lightroom 6, i.e. the people who refuse to switch to a subscription model. It is unlikely that very many of those users will still be running Photoshop after that, so Adobe's overall market share will take a beating pretty quickly. I hope that the rise of alternative products will fill that gap well enough that Adobe will find themselves pressured to restore their software sales model, but I'm not holding my breath. Either way, my first ARM-based Mac will mark the end of Adobe products for me. I'm done with them.
As for Linux and Windows apps, maybe you missed it, but Windows started transitioning to ARM in 2016, with hardware shipping in late 2017, and Linux has run on ARM processors since the last part of the 20th century. Any software that has strong ties to x86 will have to be rewritten anyway, no matter what Apple does.
Check out my sci-fi/humor trilogy at PatriotsBooks.
I actually think Sony is a cautionary tale for Apple. From about 1977 through the mid-80s or so, Sony was really the Apple of consumer audio and video products. Great design and high quality. It was peak Japanese high tech. There was even a professional studio version of their products, giving their consumer products a kind of "pro" seal of approval. Sony was even into their own "better' formats, like Betamax and later, Minidisc.
If you were a balls-out stud in 1982 you had a Trinitron TV, a Walkman, and probably at least one Sony stereo component.
But somehow they didn't transition well to digital besides Playstation. They became a commodity player, albeit expensive, and really only the TVs were at the top of the heap, and even they lost TVs in the move to flat panels.
IMHO, Apple's problem is a lack of risk taking. They *should* be doing a Manhattan Project scale product development on something outside of iPhone/iPad with all their cash. The Manhattan project cost about $25 billion today's money, and the Apollo project around $200 billion. Apple literally has the resources to duplicate *both* those investments to scale.
I don't know what $100-200 billion in R&D looks like, but I bet its pretty cool.
Instead of taking those risks, Apple coasts on its iPhone, rigidly controlling the platform to prevent third parties and users from exploiting it in ways Apple doesn't control or undermine future half-step upgrades they want people to buy. They hoard cash, buy back stock and get into all the little financial gimmicks that please audit committees and institutional investors.