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Apple succeeded because they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good. A well taught theor

• dustingetz 6y ago
  3k rings, 30k cars, 300k houses, ...?
  • namdnay 6y ago
    I definitely agree with the rings, but you don't buy many in a lifetime. Less so with the cars, the vast majority of cars sold are with relatively thin margins. And houses aren't sold by a single business, it's just the law of supply and demand. I would add Nespresso as an example: They've definitely managed to mass-market a luxury good (outrageously expensive coffee pods)
    • deleted 6y ago
      [deleted]
  • 0xEFF 6y ago
    All three are below median prices for the coastal US.
  • mikx007 6y ago
    If you are in Chicago, think 6k rings, 60k cars and 600k houses.
• snarf21 6y ago
  This, exactly. The other thing is that everyone and their brother wants to create an app store to get 30% of revenue. The thing they miss is that you have a consumer driven device that users want even without the app store. That is what Apple nailed. They were also first. They will continue to ride this wave for a long time.
  • wmab 6y ago
    Yes, the app store was genius. We'll see how the 30% shakes out in the long term, with the recent revolt from Epic etc, but creating a platform on top of your software/hardware vertical integration is a decent monopoly play that creates sustainable revenues.
    • RubberShoes 6y ago
      What's funny is how much friction and persuasion it took to get them to actually do the App Store. Steve was hellbent on WebApps and I hope the history books recognize how much influence jailbreakers had in shifting the discussion to native apps https://youtu.be/8Vq993Td6ys?t=32 https://youtu.be/8Vq993Td6ys?t=32
      • wmab 6y ago
        That's super interesting, thanks for the video! Perhaps they understood that there might be resistance to native ("small market" at the start) and so looked for something that could help the transition?
        • Someone 6y ago
          More likely, they knew the hardware couldn’t really run much more. The first iPhone had 128MB of RAM and ran at 412 MHz, underclocked from 620 MHz (https://en.wikipedia.org/wiki/IPhone_(1st_generation) https://en.wikipedia.org/wiki/IPhone_(1st_generation) ), and there was disbelief that what they showed could be built at all at the time with the advertised battery life. They likely also didn’t want to commit yet to an API for third-party apps, as they didn’t know what was reasonable there.
      • whynaut 6y ago
        I was under the impression Steve was (rather unhappily) forced into this position because of the state of native apps by launch. Can't remember where I read this or I'd gladly link it.
• fermienrico 6y ago
  Also, similar to Amazon, they treat customers really well. Customer centricity definitely played a role in Apple's rise.
  • Dirlewanger 6y ago
    A clean and simple product UX != treating the customer well. Gouging their customers for repairs and being outright hostile to anyone other than themselves managing the device is not being customer-centered.
    • auggierose 6y ago
      I once brought my old 17 inch MacBook Pro into an Apple Store because it had died. Apple Care had expired. They fixed it anyway (exchanged the motherboard in the process), at no cost. That's pretty customer centric.
      • TheOtherHobbes 6y ago
        It's also pretty untypical.
      • unkle 6y ago
        I think that varies by customer. I wouldn’t call my experience customer centric or even close. I had a 2015 MacBook Pro that had died recently and like you Apple Care had expired. This is my work laptop and was not be able to earn anymore income until it was operational again. I did all the basic troubleshooting myself resetting PRAM, etc and nothing helped. I contacted Apple support and they had me do the same tests and some additional ones without success. This all happened two weeks ago and due to Covid-19 the area I’m in has no in person support available. The only solution offered was to wait until Apple stores open or buy a new one. I tried to find third party to help with no luck. I decided to take a crack at repairing myself by buying individual parts from Amazon. I soon realized this isn’t as simple as it should be. I had to buy Apple specific tools to open the MacBook case and then realized even the SSD on a 2015 MacBook Pro is a proprietary version so I had to buy a specific over priced version to replace the drive. I felt like the last thing they wanted was for the customer to try and repair the laptop. Nothing ended up working. So, I had to buy a new one. I thought I could at least use this current MacBook Pro to get some trade in discount. Nope, they offered zero trade in since it didn’t turn on even though it was in excellent physical condition. I ended up buying a new one from Amazon and restored data from a previous timeline backup. IMO, The least a company this wealthy could have done is offer a small discount considering the times we are in. I was very disheartened with my experience.
• actuator 6y ago
  and their value is the most defensible as well. Devs might see the pitfalls of Apple's walled garden restrictions but for general public their image still holds supreme. In developing world their products are seen as sort of status symbols. Imagine loving a brand so much that you put their stickers on your car. [1] I think only Google probably had the image of superior products(Search, Maps, Mail) which rivalled/beat Apple but that has been kind of tarnished now. [1] http://damniwish.com/wp-content/uploads/2012/08/car-sticker-1-apple_thumb.jpg http://damniwish.com/wp-content/uploads/2012/08/car-sticker-...
  • wmab 6y ago
    Right, Google doesn't play in the "luxury" space, they decided that strategy early on, allowing any smartphone maker to ship the Android OS. This won them the market share for operating system - currently 75% to iOS's ~24% [1], but they are unable to capture a fraction of the value that Apple did with their luxury mass-market strategy. [1] https://www.statista.com/statistics/272698/global-market-share-held-by-mobile-operating-systems-since-2009/ https://www.statista.com/statistics/272698/global-market-sha...
    • pojzon 6y ago
      I may be wrong, but for me it looks like it was their goal to begin with. Google analotics knew they have to chance to compete with Apple in that regard so they went with other profitable options. At least from outside it looks like a sane decision.
      • actuator 6y ago
        I wouldn't be sure of this. Google at one time was a darling of the tech world. Sure, the data collection issue has been there from the start because of the business model. But their products, engineering, openness was looked upon. Add to this their principled approach to things like when they decided to pull out of China because of their values. The biggest qualm with Google was their incoherent product strategy like what happened with Gtalk, Reader etc. If anyone had the brand value to push a smartphone OS, it was Google. Once Android started going mainstream, they could have chosen a different strategy for the high end models.
• microcow 6y ago
  That's half the story. Apple makes ~10% more this year than last year, but it's more than 2x as valuable as it was a year ago today. The other half of the story is low interest rates/high asset prices. A year ago federal funds rate was ~2%; today it's ~0%.
  • ianai 6y ago
    Yes, I seriously question whether their business in the whole has doubled in that year. Ie twice the revenue and profit, etc.
    • pyrrhotech 6y ago
      No need to question that, it clearly has not: https://finance.yahoo.com/quote/AAPL/financials?p=AAPL https://finance.yahoo.com/quote/AAPL/financials?p=AAPL It's just more in favor now than it was a year ago in investor sentiment
      • ianai 6y ago
        I think it’s just a group dynamic pushing this stock up buoyed by developments like Apple silicon.
    • wmab 6y ago
      Agreed, that's correct for public market prices in general. I'm not commenting on the valuation of the business, merely the business model that "succeeded" (one definition is valuation). I would have said the same 2 years ago when they hit 1T.
      • ianai 6y ago
        Right. They’re clearly not an income stock based on their dividend. They’re a heavily weighted future value stock. (Basically a tech stock but wonder whether there’s a more general term?)
    • JaakkoP 6y ago
      That's not what's most relevant when talking about a company valuation though. A better question would be whether the expected value of all future cash flows has doubled. Evidently, a lot of people seem to think so. (Whether these people are rational is whole another question)
• ChomskyNormal4m 6y ago
  Rod Holt helped Woz build the Apple ][, and was then responsible for its design and manufacture, he was one of three VPs when Apple incorporated (Jobs and Woz were the other two) and he was in charge of the Macintosh group when it launched. An old engineer friend of his asked Holt about several topics, and I think his answers were interesting, including what was baked into early Apple that made it succeed at what it was trying to do over the years. https://louisproyect.org/2015/08/28/steve-jobs/ https://louisproyect.org/2015/08/28/steve-jobs/ (The beginning of the blog post are comments by the old friend about the Jobs movies, followed by Holt's two replies).
• ancorevard 6y ago
  Wrong. It's not a luxury product when 47% of the population choose to buy it (US).
  • oblio 6y ago
    The US is rich, at a global scale. And I'd imagine poorer people in the US don't buy new Apple devices.
    • perl4ever 6y ago
      >And I'd imagine poorer people in the US don't buy new Apple devices One thing that is pervasive in the US, is financing of expensive things (relatively speaking) through "easy" monthly payments.
• dpweb 6y ago
  The iPhone is a great product but the way it's financed is brilliant. I suspect not many people buy their new phone with a $1000 charge on their debit card and that new phones are always financed. I use a 6s, available used for $70 all in, and it gets the job done. Carriers finance the new model at a seemingly low rate ($15/mo.) then charge more on the wireless service. I can get the $15/mo phone, but only at the $60/month plan not the $35/month plan. If I don't pay, the product is worthless (no service). You can calculate the amount of housing or auto debt that is out there, but have always wondered how much 'iPhone debt' is outstanding w the wireless carriers?
  • bjo590 6y ago
    I've always paid cash on new phones. Is there a credit check associated with financing a new iPhone?
    • hajile 6y ago
      Phone costs/profits are baked into most plan pricing. If you have such a plan and are paying for your phone outright, you're paying twice for a large chunk of it.
  • lotsofpulp 6y ago
    You can get phones directly from Apple.com at 0% interest over 24 monthly payments, assuming you would have purchased AppleCare+. https://www.apple.com/shop/iphone/iphone-upgrade-program https://www.apple.com/shop/iphone/iphone-upgrade-program
• ehsankia 6y ago
  That's a bit misleading. What actually happened is Apple first created said smartphone market, and then used their advantage to create a walled garden to keep people in, and also indirectly force others to enter the garden (iMessage, FaceTime, etc). The only reason their luxury good is sustainable is exactly because people have to join it to be able to communicate with their friends, and can't leave.
  • zepto 6y ago
    A very strange comment, which is far from the experience of anyone I’ve ever heard of. I have an iPhone, but I communicate with my friends using WhatsApp, Facebook Messenger, Signal, and Skype as well as iMessage. Some of them have android phones, and some of them have iPhones. And some of the iPhone users use Facebook messenger, Signal, and WhatsApp, to communicate with me I only use FaceTime to communicate with certain in-laws, and the some of my extended family and some local friends use Amazon Echos for video.
    • ehsankia 6y ago
      I'm not saying communicating other ways is not possible, but the majority of people actually do care about "blue bubbles vs green bubbles".
      • zepto 6y ago
        I think that was true 5 years ago when SMS was still a thing. The majority of people are comfortable with Facebook and WhatsApp now.
        • zepto 6y ago
          Also - caring about the colors of bubbles is very different from ‘unable to communicate with their friends’.
• cryptica 6y ago
  Wrong. Apple succeeded because they managed to tap directly into the newly printed fiat money by borrowing vast amounts of money to avoid tax all over the world and benefiting directly from international currency inflation and doing stock buybacks.
• brandonmenc 6y ago
  > luxury good "just works and doesn't waste hours of my time" != "luxury"
• KoftaBob 6y ago
  I'd add that a huge factor behind their luxury good becoming mass market is the finance/payment plans that Apple and the cell carriers offer. I'm willing to bet the adoption of smartphones and regular upgrades wouldn't be happening at nearly this scale if all customers had to pay $600+ up front.
• agumonkey 6y ago
  it's also a peculiar time in human history.. technological convergence like that don't happen often and Apple took the first seat at the right time.
• coldtea 6y ago
  >Apple succeeded because they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good. How's that different from all kinds of clothing brands?
  • baddox 6y ago
    I think just the difference in the "mass" part of "mass-market."
    • coldtea 6y ago
      That was part of my question. Those fashion brands are also "mass". I'm not talking exclusive to rich people Armani's here, I'm talking all the mass market luxury brands. Heck, even Nike's $200+ sneakers...
      • baddox 6y ago
        Apple’s market cap is 15 times bigger than Nike’s. That’s all I meant.
        • coldtea 6y ago
          Sure, but the quote: "they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good." Is not about that. It is about the (perceived) impossibility of a mass-market luxury good. But "mass-market" is a term for broad appeal/sales (dictionary: "the market for goods that are produced in large quantities"), not for over-the-top revenues. And as for that, more people have Nike shoes than have an iPhone. But even if 1/15 as many had, it would still a mass-market good, with luxury price / appeal.
  • chillacy 6y ago
    Mass-market luxury is sort of an oxymoron. The exclusive nature is part of what supports the luxury brand. One case study: how ray ban managed to recover their "luxury" status by removing low cost, high volume items from their catalogs. https://fortune.com/2016/01/27/ray-ban-luxottica-retooled/ https://fortune.com/2016/01/27/ray-ban-luxottica-retooled/
• phatfish 6y ago
  Well the iPhone is their only mass market luxury good, and that's simply because people don't pay the whole cost at once. The get it on credit, under contract, from their mobile provider. I don't know the history of mobile phone contracts before the iPhone but i feel like that was Apples innovation (or they made the best use of it), rather than the product being so good that everyone had to spend ~$800-$1000 up front for one. Not that it isn't a good product, just without a phone contract it would have sold far less at the premium price point. In fact iPhone phone contracts seemed to spawn a trend in getting many other products on credit (and over paying for them). Also, I seem to remember Apple pushing mobile network providers hard to almost subsidise the cost of the handset around the 2012s, when they were still competing at market share with Android phones.
• scarface74 6y ago
  Apple got lucky because it entered an industry where the sellers (carriers) are more than willing to subsidize the cost of the phone or bundle it with service to make the cost of the phone seem irrelevant. Over 24 months, the difference between a $650 phone and a $250 phone is minor.
• brailsafe 6y ago
  As a consequence, I wonder if there's measurable harm being done on a mass scale, persuading so many people to give more money than they should be comfortable with to one company. I've seen kids in subsidized housing and no jobs with iPhone 11 pros. Clearly not as many can afford them as there are who own them. Being car or house broke is perhaps a parallel that is more concerning
• globular-toast 6y ago
  Surely cars are mass market luxury goods? They've been around a lot longer than iPhone.