What's bad for Apple is good for
America By Spengler
I
hate Apple, for what it is as well as what it
represents, and have watched with
Schadenfreude the 25% decline in its stock
price since the mid-September peak. Sony also rose
like a skyrocket, and then lost almost all of its
market capitalization. I wish the
same outcome on the
brainchild of "billionaire hippy" Steve Jobs. Tech
stocks are not my field of study, and I don't
presume to make a prediction. But I can hope.
Exhibit 1: Apple Computer (moved 12
years forward) vs Sony stock price Source:
Yahoo Finance
Sony's demise saddens
me. Once it was a great company that led through
technological innovation. Apple, by contrast,
adapted existing technology - most famously the
graphic user interface and mouse pioneered by
Xerox - into something cool. Steve Jobs marketed
ersatz individuality to the conformist masses. In
the face of his success, I feel like the fellow in
the back in Monty Python's Life of Brian
who hears a Roman centurion instruct the crowd,
"You are all individuals!," and protests, "I'm
not!"
Putatively intuitive devices
infuriate me. No machine can anticipate what I
might do, and I don't want software that presumes
to do so. Not a single Apple product remains in my
possession after I discarded an aging iPod in
favor of a cheaper and more robust Sandisk MP3
player. On occasion I have had to use Apple
computers, but with reluctance and distaste.
That's just my personal preference, and I mean no
disrespect to people whose cognitive handicaps
cause them to prefer Apple. They are also God's
creatures.
What I despise utterly is
Apple's supposed patent on creativity, the
bourgeois-bohemian ethos promulgated by the
brilliant, odious Steve Jobs. His untimely death
last year was a sad event, and I do not want to
besmirch his memory; it's just, as Will Rogers
said, I didn't like the way he made his living.
No-one was better than Jobs at guessing
what consumers did not yet know they wanted. When
the first tablets appeared I was astonished. One
either carried a smartphone in a pocket, or a
small computer in a briefcase. If one has to carry
a briefcase, why carry something without a proper
keyboard? Doesn't everyone need an econometrics
package to calculate the principal components of
returns to a portfolio of assets just downloaded
to a spreadsheet? That is not to mention a word
processor and a keyboard amenable to typing 80
words a minute.
What Jobs understood, and
I did not, is that the vast majority of computer
users employ the device as a toy. They surf the
net, leer at pornography, download music, and play
games. They do not write. They text. Their ideal
instrument combined a maximum of screen resolution
with a minimum of writing capacity and
computation. Jobs gave them a funnel to pour mass
culture into their brains in the guise of a
stunted computer.
This would not be so bad
if Apple did not stake a special claim to
creativity. My animus against the firm began with
Apple's iconic "1984" television ad for the
Macintosh shown during the Super Bowl. Director
Ridley Scott depicted a scene out of George
Orwell's eponymous dystopia. An endless line of
grey-clad, androgynous drones shuffles through a
drab industrial structure into a giant hall where
the projected image of Big Brother proclaims the
triumph of a totalitarian state. A young woman in
bright athletic gear breaks into the room and
hurls a hammer at the screen, destroying it and
liberating the drones. "1984 won't be like 1984,"
the clip concludes.
Apple persuaded people
to buy the means to disseminate mass culture on
the premise that it was promoting individuality.
It was the slickest and most insidious piece of
salesmanship in modern times.
That gave
Apple the largest market capitalization of any
stock in the world earlier this year. But it
brings up a paradox. As long as Apple could
represent its products as the favorite of hip,
creative people, relegating the market-leading PC
format to dull cubicle-dwellers, the illusion of
individuality held. Now Apple has grown to the
point that the Life of Brian paradox
applies. If everyone uses Apple, and everyone is a
hip individualist, then no-one is.
That
was the upshot of Apple's iPhone pitch: "If you
don't have an iPhone, you don't have an iPhone",
meaning that you won't have as many apps available
for the alternatives. That was IBM's line in the
old days before the Windows program ran on the
Apple operating system. The apps gap is closing,
and Apple's competitors offer a more robust
product at a better price.
Apple's
arrogance, meanwhile, manifests itself in
important details, for example, the lack of a
removable iPhone battery. I go through two and
sometimes three batteries a day, especially when I
use my Samsung phone as a hotspot for my laptop.
Even if Apple's product were superior, which it
isn't, that problem alone would keep me with the
competition.
The tablet helps dumb the
culture down. Easier access to streaming movies
and video games makes people stupider. Tablets can
be used to read books, to be sure, but a tablet
user is less likely to read a book and more likely
to be distracted by other things. Writing in
Forbes Online on August 14, Jeremy Greenfield
observed that tablets are slowing the growth of
e-books:
"Tablets will adversely affect the
e-book business in that the tablet is a
multifunction device and will therefore draw the
reader into non-book activities and therefore
cause them to consume books slower and therefore
buy fewer books versus a single function
e-reading device," Kelly Gallagher, vice
president of publishing services at Bowker
Market Research, told me in May when it started
to become clear just how tablet sales were
affecting e-books.
Rather than read
books, tablet users are more likely to waste time
with that great enforcer of conformity, social
media. Last May, I observed that Facebook's
business plan contained an inherent flaw (see What
if Facebook really is worth $100 Billion, Asia
Times Online, May 22, 2012). It was supposed to
supplant Google push-ads by using social media
posts to identify personal idiosyncrasies, such
that advertisers could reach the consumers most
likely to buy their products.
Sometimes
this is helpful; one can reach all the alumni of
one's university, for example, and similar
subgroups. For the most part, though, Facebook
does exactly the opposite: it allows its users to
exalt the insignificant (the Denny's breakfast
menu, or the dress rack at Marshall's) into an
item of conversation. It generates a great deal of
positive feedback from mass consumer culture and
little else.
Exhibit 2: Apple
Option-Implied Stock Volatiity vs. S&P 500
Implied Volatility (VIX Index). Source:
Bloomberg
What irks me the most about
Apple, though, is the way in which its stock
performance - now somewhat tarnished - encourages
false conclusions about the state of American
entrepreneurship. Doesn't Apple's success as a
global brand demonstrate that animal spirits are
still roaring in the American economy? The trouble
is that venture capital committed to high-tech
manufacturing has fallen next to nothing in the
United States, as I a reported recently in this
space (see Post-US
world born in Phnom Penh, Asia Times Online,
November 27, 2012). After Facebook's IPO fell on
its face last spring, Apple's stock-price surge
offered the last hard evidence of American
entrepreneurial genius. Or did it?
In
fact, Apple trades like a stable consumer business
rather than an aggressive tech company. A simple
way to put a number on this change is to examine
the implied volatility of options on Apple stock
vs options on the overall stock index. The price
of an option (the right but not the obligation to
buy or sell a stock at a specified price) reflects
the likelihood of big moves.
Start-up tech
companies have a huge variation of possible
outcomes, and options are costly; stable
businesses trade in a tighter range and options
are cheap. As we observe in Figure 2, Apple's
implied volatility in the early 2000s was a
multiple of the index volatility. Now they trade
on top of each other.
Apple's business
strategy these days seems driven by its legal
department more than its designers, let alone its
tech people. I do not know whether the recent
losses in its stock price demarcate a Sony-style
turning point, but it makes sense. Once you are a
global monopoly, you can't also be edgy and hip.
Samsung and other competitors are eating away at
Apple's franchise and might topple it.
The
American economy has do to more than market video
games and streaming movies. Apple may yet become a
byword for a stock bubble borne by illusions. The
sooner it pops, the sooner we can address the
urgent tasks at hand.
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