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     Dec 11, 2012

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.

Spengler is channeled by David P Goldman. His book How Civilizations Die (and why Islam is Dying, Too) was published by Regnery Press in September 2011. A volume of his essays on culture, religion and economics, It's Not the End of the World - It's Just the End of You, also appeared last fall, from Van Praag Press.

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