Lots of people have speculated as to why this is, and there are several good reasons, but we don’t need a Wall Street analyst to tell us the obvious. Apple is losing its sheen, because rational investors are scared that the iPhone and iPad product cycles have run dry. People don’t need to get the next one anymore. This leaves prospective shareholders and fanboys in one of two camps: (1) the “Apple is in trouble, as sales will decline” camp and (2) the “Apple can innovate itself out of any problem” camp.
But the people in the second camp are wrong. Apple cannot innovate itself out of any problem. And, guess what? Even if Steve Jobs were alive, Apple would still be facing the same damn problems.
Because Steve Jobs was lucky.
Now, let me clarify that I am talking strictly about Steve Jobs from a business perspective here, not with regard to his personal life. Let me also point out that, as an entrepreneur, I believe that luck is the greatest factor in anyone’s success, so Steve Jobs isn’t alone.
But look at the timeline, folks: Steve Jobs’ tenure at Apple was perfectly timed to capture the biggest technological sea changes of the last 30 years. And, more specifically, he was fortunate to avoid a twelve-year period (1985 – 1996) in which Apple could not, even with God as its CEO, correct its core problems.
Let me begin with the 1980s and 1990s, a time period in which my Apple-loyal family reluctantly switched to Windows. Those who worship Steve Jobs will argue that after his firing, a train of unimaginative corporate dunces — John Sculley, Michael Spindler, and Gil Amelio — tried and failed to fill the void. They had none of his creativity and vision, and so Apple almost died. This is revisionist thinking, and it is dangerous thinking as we enter 2013.
These men weren’t as smart or visionary as Steve Jobs. But they also lived in a world in which Apple depended upon desktop software — much of it created by third parties — that nobody would build for their operating system. It’s basically the problem that Microsoft is facing right now with its own mobile and tablet efforts. Nobody will develop for it. Only in the 1990s, software development was a much bigger and costlier undertaking, so the barriers were far thicker.
And Apple spent those 12 years doing a lot of good things to try to overcompensate for a blatantly unresolvable problem. They created forward-thinking products like the Newton. They aggressively honed in on core constituencies like Education and Graphic Design. Do any of today’s 14-year old kids who live on their iPads remember a piece of software called Hypercard? No, of course they don’t. But it was basically the Web before the Web existed. Does anyone remember FirstClass and BBSs, which predated AOL and the Web?
I can look back at the “Steve Jobs exile” era and point to plenty of compelling innovations that brought my Apple experience to life. But in 1995, I joined many users in switching to Windows, because I wasn’t going to live without computer games and productivity software. Again, God could have run Apple Computer in the early 1990s, and there is nothing he could have done to keep me — and millions of others — from switching. I wanted “Duke Nukem,” “Warcraft II,” and a version of Excel that didn’t suck.
Steve Jobs re-entered Apple in 1996 at precisely the moment when the impenetrable barriers that dogged Sculley, Spindler, and Amelio were coming down. The Internet had provided computing with its greatest killer app, and it was neutral to any particular operating system. Now Apple could continue to make great hardware — and its hardware had always been better than the hideous crap that IBM, Compaq, and Packard Bell were making — that people might use.
Jobs wisely continued catering to his perpetual constituency: graphic designers. And another fortuitously timed event — the expansion of hard drive capacities — allowed “graphic designers” to broaden into “creators,” as high-quality music and video could now be stored on home computers. This was not really feasible pre-1996 when the multi-GB hard drive did not exist.
In short, people like me returned to Apple in the early 2000s, because of two highly fortuitous sea changes that neither Steve Jobs — nor any one individual — precipitated. The first was the arrival of the Internet, which broke Microsoft’s platform monopoly. The second was the expansion of hard drive capacities, such that Apple’s existing strength in “creativity” could expand from graphics, a fairly niche constituency, to music and video, which appealed to many more people. Steve had always favored creativity over Microsoft’s productivity, and perhaps Mac was ahead of its time in 1984… but for fuck sake, he mistimed it by two decades!
Was the second Steve Jobs era of Apple executed masterfully? Yes. Did Steve Jobs’ beautiful vision, taste, and marketing catalyze our journey back from Windows to Mac? Yes. Did Steve Jobs hire outstanding talent in order to re-gain an edge over Microsoft? Yes. Did Steve Jobs advance innumerable concepts, such as seamless hardware/software integration and uber-simple functionality? Yes. Was he the most important man of the century to date? Yes, I believe he was.
But that does not change the fact that everything he accomplished was — at its core — a beautifully and fortunately timed sequence of events that were built upon technological breakthroughs that he did not create.
And that is why AAPL shareholders like me need to be scared right now.
Everything that Steve Jobs brought to the company is still there — beautiful design, simplicity, retail stores, hardware/software fusion, and the list goes on. But it’s not the “magic” of Steve Jobs that is missing today. It’s the absence of any technological sea changes. And if he were alive today, he would be struggling with this very issue.
Hard drives are now infinitely big. Microchips are almost infinitely small. And everybody is connected. We are entering a world of iteration and optimization, but the breakthroughs are behind us. We are lucky that Steve Jobs returned to Apple just in time and brought his masterful execution, cohesiveness, and marketing to layer upon these breakthroughs. But he didn’t create them. We saw it with the Internet, hard drives, and then we saw it with phones.
Like all great entrepreneurs, he was in the right place at the right time. And he took advantage of it better than anyone.
And as an Apple fanboy, it kills me to cast an imperfect light on our most inspiring of heroes. But I’m also an Apple shareholder who owes it to himself to look deeper at the company, its past, and its future. The company trades at a relatively attractive P/E multiple. And people will probably buy the rumored television set simply because of the logo on it. So I’m not going to bail just yet.
But make no mistake about why share prices have lost momentum. The panic is real. There are real problems with Apple. They are problems that Steve Jobs would not be able to solve today. Just as he would not have been able to navigate the 1985 – 1996 period.
Steve Jobs was lucky to be gone during those bitter 12 years. And Tim Cook is unlucky to have inherited this company at precisely the wrong time.
[Image courtesy Vectorportal]