Posts Tagged ‘steve jobs’

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The economist Robert Gordon opened a can of worms a year or so ago when he suggested that technology is having a limited impact upon the economy; that the computer revolution is not increasing wealth like the industrial revolution or the move towards mass production did in the early 20th century. In short the good days are behind us. But is that really right?

Other see it in terms of low hanging fruit. They say we have picked the fruit that can create economic growth the easy way. The growth period supported by carbon fuels may be approaching its end – or maybe the end will be delayed if the hype about shale gas is to be believed – and this era of growth is coming to an end. But is that really right?

Capital Economics pointed out that it took 60 years before the steam engine invented by James Watt in 1769 materially boosted productivity. If history teaches us one thing, it is that there is a time lag between innovation and growth.

Sometimes we even get economic depressions in-between, as happened between the innovation we call mass production and the post World War 2 economic boom.

So to say that the computer has not created growth and neither will it, does seem to be a bit hasty.

The thing about technology that economists often forget is Moore’s Law. Computers are getting more powerful all the time and, as this happens, their potential to influence growth rises. Sometimes technology can steadily increase in power, but we barely notice it until it passes a kind of breakthrough point. When that happens we start to notice it more and more.

Apple is a good example. Steve Jobs had a dream of combining design with technology. But this was only really viable once technology had passed a certain level; a level it may have passed in the early years of the 21st century. And then the company went from flirting with bankruptcy to the biggest in the world within just a few years.

Certain burgeoning technologies may suit the UK rather well.

Take biotech. The industry is on the verge of some seriously major breakthroughs. And in this industry, the UK is the world leader.

Or take 3D printing. Critics make the same mistakes economists often make when they forget about Moore’s Law. This is a burgeoning technology, which is set to become steadily more powerful and relevant. The 3D printer costing £699 and for sale in Maplin may help users to replace missing chess pieces or new cases for their phones, but future 3D printers will do an awful lot more. NASA is funding one project to make a printer than can create a pizza from powders. It may be only a matter of time before one can say to a printer: “Tea, Earl Grey, hot.”

But 3D printing may transform industry in a way that is just as radical as when mass production took off, but this time it may work in reverse. Manufacturing may return to local craftsmen; even to the High Street as it becomes possible to have bespoke clothes, furniture, even cars made without necessarily paying more money.
Debt matters, but it matters less if your income is growing. It matters even less if the percentage interest on debt is less than the percentage growth in income.

Many critics say we face a debt crisis, that the economy is about to implode. But they forget about technology. And their error may be dangerous. If we try to cut debt at a time of innovation, the result may be falling demand at a time of rising productivity.

The debt hawks may mean well, but their belief that we must suffer pain before we can see recovery may be both wrong and dangerous. If we try to cut debt, with a resulting fall in demand at a time of rising productivity, the result may be an economic depression of great severity. The arch bears may be right in prophesying doom, but they may be right for entirely the wrong reasons.

© Investment & Business News 2013

Commodities. It’s difficult to make money in the commodities business. Barriers to entry are low, and prices often fall so much that profit margins are very low indeed.

The snag for the likes of Apple is that the smart phone business is looking increasingly like a commodities game.

Apple had first mover advantage, just like biro once had it with pens, and Hoover with vacuum cleaners, but will it be enough?

Investors are having their doubts, and despite the company posting a 61 per cent increase in profits on the year before in its most recent quarter, shares have been falling.

They are 33 per cent or so off peak price. Apple’s market cap is $445 billion, why that is only $40 billion or so more than Exxon Mobil. If Apple ain’t careful, it will lose its mantel as the world’s biggest company. In fact it did, for a few days in January.

But then you consider Apple’s cash pile, and that the forward earnings ratio of market cap to expected annual profits, or p/e ratio, of just 10.78. Strip out the company’s cash from the equation and the p/e ratio is not much more than seven. That’s a pretty tiny multiple for what has been one of the fastest growing companies in the world over the last ten years.

Investors are fretting over Apple’s profit margins, which have been falling, and are scared that the company cannot carry on growing when the smart phone business is looking like a commodity business.

But whatever you do, don’t write the company off yet.

Steve Jobs may no longer be with us, but Apple’s design man – the fellow said by some to be as important to Apple’s success as Jobs – Jonathan Ive is very much part of the company still.

Last year, while in London and collecting his knighthood, he said that the product he is working on now feels like Apple’s most important product to date.

So what is it?

Most are expecting Apple to release its iTV player.

But now the rumour mill has churned out talk that the company is planning a smart watch. The breakthrough technology for this to work must be a screen that can curve. Well we know Apple has been working on precisely this technology.

So what will this smart watch do? Your guess is as good as anybody’s – except Tim Cook Apple’s CEO and Jonathan Ive that is.

But it sounds intriguing, doesn’t it?

Apple has no God given right, no irreversible reason why it should out innovate its rivals. The company one day will fall victim to reversion to the mean, and will be just another player. That day may be close. Or it may not be.

It is possible Apple is about to do for smart phones what the wrist watch did for those old fashioned pocket watches. And that will be something to watch.

©2012 Investment and Business News.

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They say Steve Jobs used to fire staff in the elevator. So this was the nightmare scenario for you if you worked at Apple. You step into the lift and just as the doors close, a hand reaches in, the door slides back open and there stands the familiar figure of Steve Jobs. At this point you have limited options. You can pray that Jonathan Ive steps in too, and then you will probably be ignored. You can try to hide in the shadows and hope Jobs doesn’t spot you.  Or you can tough it out, look the potential death of your career in the face, and smile. Regardless, what often happened was a series of quick fire questions, about you, your role in Apple and what you thought about this, that and the other. When the lift journey came to an end, you may well have found you were out of a job.

Today, Apple’s CEO is Tim Cook, and the axe has been wielded, although on this occasion no elevator seems to have been involved.

Out goes a Brit. John Browett is a former CEO of Dixons, and a high flyer at Tesco. He was charged with leading Apple’s retail strategy.

Out goes Scott Forstall, the man who headed iOS software.

Browett was the first appointee of Tim Cook. Forstall had been with the company since 1997. He joined Apple along with Steve Jobs himself, and before that was with the special one at NeXT.  In other words, Forstall was a Jobs man through and through, working with the Apple founder during his wilderness years post and pre Apple. He was considered by some to be the Apple CEO in waiting.

It is not hard to see why Forstall has gone – actually he is leaving in a few months’ time, if you want to be precise. The Apple maps on the latest iPhones were a disaster (darling).

Up goes Jonathan Ive. He is now responsible for the look and feel of software. He already held a similar role for hardware.

Ive has now taken on the kind of role once held by Jobs himself.

If Apple is all about design, design and design, then Jony, Jony, Jony is the man.

But how long can it last?

Regression to the mean is a term all mathematicians know about. These days economists understand it too. In the long run it is not possible to continuously do better than your rivals, unless you have some innate advantage.

Microsoft was in danger of suffering regression to the mean when DOS was coming to an end. It avoided a downfall by playing to its size, and experimenting; trying lots of different ideas, Windows being one of them. It seems to have forgotten that lesson, although the new Surface product does seem pretty exciting.

Companies such as GlaxoSmithKline may enjoy long term success by building upon their huge distribution network and financial clout, to market products developed by third parties.

In a funny way, even Facebook has an asset that may provide long term value; after all its network of users provides an inherent asset that is not going to disappear in a hurry

Apple just has to go on being brilliant.

And Jonathan Ive may just be brilliant enough to ensure the success continues. And, by the way, the company’s valuation is surprisingly modest compared to profits, bearing in mind its recent growth trajectory.

But nothing lasts forever, sooner or later regression to the mean occurs. Are the recent departures at the top a sign of this, or merely indicative of a company ensuring it stays at the top?

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

They used to talk about the bells of Shoreditch. You might recall the words ‘When I get rich, say the bells of Shoreditch’. Better than the oranges and lemons offered by the Bells of St Clements.

These days the area is more known for its roundabout,  or silicon roundabout as it is called. For this has come to symbolise an attempt to create a rival to California’s Silicon Valley in the east end of London. The UK government has come together with Tech City Investment Organisation to try to realise this dream.

On Sunday, a Vice President of Facebook – Joanna Shields – who also happens to be Managing Director of Facebook Europe, Middle East and Africa, was chosen to be the new head of the Tech City organisation.

She will start in January.

As a dotcom star, her credentials are impressive. Ms Shields has been a President at AOL, responsible for social and communications businesses, and previously served as chief executive of Bebo. She has also been Google’s Managing Director for Europe, Russia, the Middle East & Africa.

On the news of her appointment she said: “Throughout my career I have had the privilege of working with great entrepreneurs and innovators to create thriving new businesses and industries. The seeds have been sown in East London for a dynamic and successful cluster: we have the infrastructure, the technology and the talent, now we need to accelerate the growth. I am looking forward to leading the Tech City Investment Organisation in the next phase of its development. With the right boost now, there is no reason why we can’t make London the number one location for tech in the world.”

Bold words indeed! If her stated objective can be realised, then for once we would have to cast aside cynicism, and say “well done”.

But right now there are critics. For one thing, Facebook has not been paying much tax in the UK. It’s been in the media this week. Last year the company apparently only paid around £2oo,000 tax from sales of £20.4 million. It’s an embarrassing one for Ms Shields to explain away. She admits she has received some pretty stroppy emails on the subject, but suggests that now it’s different. Since the government is actively promoting the area, its tech occupants will be happy to have their tax domicile in the UK. It’s a kind of quid pro quo. “We do this,” says the government, “you reciprocate.”

But there are other criticisms. James Dyson, for example, says that all the government is doing is forcing up rents in the region, making it all but impossible for other companies to operate. Those are companies which produce real things, things you can see and touch; things like… I don’t  know… vacuum cleaners perhaps.

And that brings us to another criticism.

What does Facebook produce? Some say nothing, literally nothing, it produces ether. It trades in a kind of Ponzi scheme, in which its one real asset is popularity, and it’s popular because… well because it’s popular.

For that matter, these same critics might say the same of AOL, Google and Bebo. So goes their critique: how can a woman who has excelled in selling ether do something real, like create a hub to power the UK economy?

Then there is the anti-London argument. ‘Why London?’ they ask?

And finally, the anti-immigration brigade can always be called in to support the ‘no to silicon roundabout campaign’.  For the Cameron government plans to allow certain rules making it easier for budding tech entrepreneurs in silicon roundabout to migrate to the UK.

Some of the criticism may be fair. Most is off the mark.

On the topic of immigrants, hubs like London’s tech city need them.  For that matter, so does Silicon Valley, which to a certain extent was built by immigrants . Not literally built, but the ideas and the social network, and Silicon Valley’s culture was built by them. But the US is tightening up on rules regarding immigrants – really tightening up.  From Uncle Sam’s point of view it’s a highly dangerous move. After all the US is a country of immigrants. It is they who made it so dynamic. It is no good bringing up the drawbridge and expecting the US to continue to enjoy economic dominance. So the mistake in the US is the UK’s opportunity, though no doubt the ‘Daily Mail’ will try to stop it.

As for the argument that Tech City is based on vapour ware companies, well that is surely wrong. You would hardly expect ‘Investment and Business News’, which exists solely because of vapour ware, to agree with that.

The thing is that the UK does produce excellent designers in tech. Remember Jonathan Ive? He’s the man behind the iMac, iPod, iPhone and iPad. Even Steve Jobs recognised how crucial he was to Apple. He still is crucial, of course. Then there is ARM, the chip company that designs the chips that sit in so many mobile devices, including Apple’s products. ARM grew out of 1980s computer company Acorn.

The UK’s problem is that it has failed to convert design brilliance into creating British companies that shake the world. For Tech city to be a true success, it needs to create some of the can-do spirit that encapsulates Silicon Valley; the real dynamism that sees investors willing to consider most ideas, and a culture immersed in the idea of innovation.

Silicon Valley was not deliberately created. It created itself. But that is no reason to think that trying to create something similar in London, one of the most important cities in the world, isn’t a dream worth pursuing, or indeed is an unrealistic dream.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here