To Beat the Law of Large Numbers, Apple Must Expand Its Product Line

[TrollToddington]

Money is only one part of wealth. But also, for all intents and purposes, resources are infinite. A particular resource may become exhausted, but some other resource or source will take its place. Also, humankind's labor is a resource that (hopefully) will be available forever. For example: If I craft my gold bar into a statue that others appreciate, I have added value (or wealth) to the system.

Wrong assumption. Were the resources infinite would that mean there would be an infinite number of people living on the Earth. You can only have a limited number of gold bars from which you can craft statues. You're right that if a particular resource gets exhausted another one may take its place. However, we deal with limited number of resources. So, basically, they can't get replaced forever.

The only "inexhaustible" resource is the solar energy but even it will deplete in some gazillion years. We won't be alive when that happen but, hopefully, the mankind will have settled down on another resource-rich planet by then.

 

[gnomeisland]

No, in fact, it has gained features.

I see your point but, yes, ML (as it stands) is missing features from Snow Leopard (which I currently run). So the question really becomes, "are the new features that replace old features going to make my life better?" The answer for me was "no" with Lion. We'll see about ML.

But please don't assume that all "features" come only as a gain. At this point messing with an operating system is about making changes (which sometimes negatively affect productivity) and not just adding new features.

 

[dysamoria]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A405 Safari/7534.48.3)

Yeah because it's somehow reasonable to expect to be able to double profits every year, indefinitely

 

[Snits]

One word ...

Cars

 

[Dmunjal]

Okay if you discover more gold, then the value of all the gold in your model drops, as there's more of it overall so it's worth less.
Making you more wealthy and the other 9 people slightly less wealthy.

The top 1% of Americans own 40% of the country's wealth,
how did that end up happening in your "more money for everyone" world

In all your replies you are missing the concept of work which generates wealth. When Apple works to create value to combine all the parts of an iPad to build it, it is creating wealth for them. When you work to gain cash to buy the iPad you are also adding wealth into the system. It is NOT a zero sum game.

 

[Dmunjal]

using your theory we could just print more money to solve all the world's problems.

Isn't that what we've been trying to do these past few years?

 

[leon44]

Isn't that what we've been trying to do these past few years?

Yeah and it's been working so well

 

[Dmunjal]

Yeah and it's been working so well

Sure, as long as you don't need to drive or eat.

 

[Ryth]

Not this large numbers crap again.

It doesn't apply to Apple because of their product line that gets refreshed every year unlike most other products that this theory was based on.

Plus Horace already did a whole post/blog on this...Apple is not like other companies that this theory applies to.

They are a disruptive force.

 

[cire]

Wrong assumption.....

...but, hopefully, the mankind will have settled down on another resource-rich planet by then.

You countered your own point. The solar system has all the resources mankind will need for the foreseeable future. Only the relative abundance of those resources on Earth makes extraterrestrial gathering infeasible. But with extreme shortages that will change. Hence, the "for all intents and purposes" part of my reply. Now, a shortage of a single essential resource could stymie our progress, but I doubt it.

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Yeah and it's been working so well

Therefore, Lesson 1 is wealth creation is not a win-lose proposition. Lesson 2: Currency is not wealth.

Learn these two rules and you'll be on the way to rejecting Socialism in all its myriad forms.

 

[jlgolson]

Not this large numbers crap again.

It doesn't apply to Apple because of their product line that gets refreshed every year unlike most other products that this theory was based on.

Plus Horace already did a whole post/blog on this...Apple is not like other companies that this theory applies to.

They are a disruptive force.

The law absolutely does apply to Apple, the question is WHEN.

Over the past few years, Apple has been doubling its annual revenue every two years.

For that to continue, in 2013 Apple would have $200 billion in revenue.

2015: $400 billion.

2017: $800 billion.

Will Apple have $200b in revenue by 2013? It appears so. But it is highly, highly unlikely that Apple will have $800 billion in revenue in 2017, disruptive force or not.

Unless they expand their product lines. Which they will.

 

[georgB]

I'd like to get back to the original point of this thread, the article about the Law of Large Numbers and Apple's alleged problem because of it. I've run it over and over in my mind, but I can't see what the problem is (nor have I seen a post in this thread which has explained it - admittedly, I might have missed it).

Why does Apple have to grow at all? I'm not suggesting that it shouldn't, or won't, but why does it have to? Apple's net quarterly profit was $13.06 billion this last reported quarter; that would make them over $50 billion a year. What if they never grew an inch, and just kept profiting that amount, or even only half of it, forever? Where's the problem? They would still be designing, manufacturing, and selling their products, and paying the help, and still socking away tens of billions of dollars every year. Of course, there would be a real problem if profits began to shrink and shrink, and finally shrank to nothing, but that has nothing to do with the point of the article in question.

Or is it possibly Wall Street wisdom (or myth) that if a company isn't growing all the time, perhaps even defined "by more than X%" (the article seems to suggest 20%), that it's somehow losing, and on the way out? What am I missing? I really don't understand, and would be grateful for an explanation.

 

[thundersteele]

I don't think you need the golden theorem to explain the point, the writer got a little overzealous

I don't even think the law of large numbers is applicable here. While economy is very weird at times, I don't think it's a purely random environment.

 

[blinddance]

Nonsense

This is complete nonsense. Anyone who's taken at least one course in statistics knows that the law of large numbers is conserned with mean-values of randomized trials. Two qualities which the share-value has got nothing to do with.

It's true that a company will have more difficulty selling products once a high percentage of the population already owns the product - which probably is a very real concern at Apple, it should be - but this is completely unrelated to the law of large numbers.

 

[leon44]

Therefore, Lesson 1 is wealth creation is not a win-lose proposition. Lesson 2: Currency is not wealth.

Learn these two rules and you'll be on the way to rejecting Socialism in all its myriad forms.

I just think wealth should be spread more evenly, and I'm not sure how you do that but surely that's not something you can disagree with.

All I know is that everyone can't be rich at the same time.

 

[vrDrew]

I like (and am a subscriber to) the New York Times. But this article annoyed me for a variety of reasons.

Lets just get this straight, the mathematical/statistical concept referred to as the "Law of Large Numbers" has very little - if anything - to do with the market performance of Apple. But they threw it out there (originally in the headline) as a sop to wannabe intellectuals rationalizing their 401(k) asset allocation strategies. Eventually Apple's performance will "revert to the mean"? Sure. But eventually the dying sun will expand to a massive size, engulfing our long-dead planet within its fiery corona, destroying whatever is left of the corporate behemoth that was AAPL. Plus ça change, plus c'est la même chose

Just because we all know that, ultimately, we're going to die doesn't discourage us from getting up every morning to go to work or school.

The *best* way to look at Apple's prospects over the next ~5-10 years is to keep in mind an interesting observation from a commenter at Horace Dedieu's Asymco blog: Apple has created an ecosystem with iOS whereby each customer spends on average about $1 per day to Apple for iOS-related products and services. And this number is similar for Mac customers.

Does is it not seem possible, given Apple's incredible consistency in delivering superior customer experiences, that they might be able, over the near term, increase that "Apple daily spending" to $2, $3, or even $5? And that, again, given the rapid growth of affluent and middle-class consumers in developing economies (India, China, Brazil) - that Apple could double again the number of people it counts as "Apple Customers"?

 

[jonnysods]

Or they could just keep doing really well. They don't need to chase percentage increases, just continual profits.

 

[cg0def]

There is a rather large hole in the logic that the NY Times uses. Yes the law of large numbers is absolutely real, however it does not say anything about certain individual companies being able to consistently perform above the mean and also noone knows what the actual market size of an evolving market is.

The first point goes something like this, if there are enough companies that perform under the mean Apple has very little to worry about in terms of breaking any laws. Why do you think that Tim Cook has said many times that they welcome competition? Also you need to keep in mind that for the law to work, it only matters how many competitors there are and not really their size.

The 2nd point is a bit harder to explain but basically, Apple (and any other company) has 2 choices once they take over more than half of the market, start lowering prices, or expand the market. Well they are technically doing both because you have no guarantee that you can expand a given market. Hence, the iPhone 3GS is still in the product line and the iPad is becoming a full blown eBook reader with content not available anywhere else.

So yes, NY Times touches upon some very relevant points but if this is the best they can do it makes me really sad about the future of journalism because there was a day when NY Times was synonymous with quality.

 

[SiPat]

Apple has a set line of products and is moving towards defining and refining that further (if rumours of 15" & 17" Airbooks are in fact, fact). If the laptop line goes Airbook and the current crop of laptops EOL, we're talking replacement, not new, products. That is the Apple way, and any growth will come from desire and demand of replacement products not new lines or products.

At the end of the day, most people tend to upgrade their computers at least every five years, and every year someone is replacing something or the other with a more powerful and sleeker model.

IF Apple does introduce what everyone has dubbed "iTV", then this will be a new product category for Apple -- not the industry as a whole -- as happened with iPad where apple created a whole new market -- iPad competes with iPad, not Android or eBook Readers.

Apple can control the timing of new product lines to benefit Apple so that it doesn't become overwhelmed by demand. In the case of "iTV", how many millions of people** are going to dump their Sony/LG/Samsung 80" models (or wait) for Apple's best-in-category product, which may be limited to 32", 37" and 42" models? The development and inclusion of Retina displays in mobile devices will eventually extend to iMacs and Apple Cinema Displays. If iPad3 gets Retina display, resolution is likely to be 2048x1536, not far from the current 27" iMac/ACD at 2560x1440 -- I can't see Apple leaving desktop Macs with inferior display resolution.

Apple has a fall back position, that's why it always under quotes future performance, and Cook & Co will control that growth as much as it can be done internally within Apple and without the influences of outside agencies, especially the likes of so-called analyst (I know it's getting a bit boring, but I still very much prefer anal-ists).
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** Personally, I'd love a 30-inch display connected to my Mac Pro but I would replace the Mac Pro without hesitation with a 32 or 37-inch iMac with ultra-ultra hi-res display with built-in TV and TiVo-like functionality, even though I haven't owned a TV these last 16 years.

 

[xoggyux]

The only reason Apple is the most wealthiest technology company in the world is because their prices are extortionately high. Almost to the point of being a rip off. But we love Apple products, they're like Alessi, so we keep buying them.

thats not accurate. just think about how much it cost the closest competitor to the ipod touch (lets say the zune touch just for sake of argument) it costs about the same (go check it out in amazon or something, I just did). Its the same history for phones, the iphone unblocked costs about the same as the last generation samsung galaxy phone unblocked, etc.
What apple has "overpriced" in a matter of speaking are computers, but the truth is, pc don't have direct competitors in this area. Most PC do not carry the same mixture of battery life, portability, power, materials quality, and attention to detail as apple's computer do.

 

[xoggyux]

Well we have more stuff than they did so I can see why it looks like that way, but relatively we aren't any wealthier overall.

Also, I actually would rather be a hunter-gatherer, according to research their diet was better, they worked far less than us (hunted for about 2 hours a day), they weren't as stressed, their problems were real and tangible.
They had dogs and spent more time with their family and friends outdoors than anyone can admit to in 2012, they were small communities that could live of nature and not have to farm anything. They were happier people!

and they lived to 30years of age that is if they survived the 50% child mortality .
hunter gatherers weren't hanging out in paradise relaxing.
Also the "gatherer" part is a lot misleading, remember modern fruits and vegetables didn't exist back then, they have been evolving at an accelerated pace due to selection by farmers.

Imagine filling your stomach with maize that looked just like the one our 50thousand years ago ancestors would have. And this is the same to virtually all vegetables and fruits we cultivate.

Hunter gatherers really weren't at risk from starvation, they were healthier and stronger on average than us and didn't find it difficult to hunt (if you look at how much time they put in every day). Also they didn't just eat meat and they kept moving around so they never used up all the food.
They still had comedy, love, happiness, music etc. and it gave them as much satisfaction as we get today.

Oh I get it, you are describing 70's hippies and not 50,000bc humans...

 

[Gata]

Apple's growth is continuing, but my question is whether or not Tim Cook will be able to sustain that beyond what he and Steve Jobs laid out for the company. Apple owes its immense success to SJ, though I really hope it'll be able to continue as it has been without him.

 

[bdkennedy1]

I completely disagree. All Apple has to do is keep doing what it's doing. Expanding is going to turn them into Sony and Steve Jobs had said the company doesn't need to be the biggest, just the best.

Why the greed? Why do they have to have more products to get even bigger? Walmart did this until they were no longer in control and now they are caving in one themselves because they are too big to turn things around.

 

[Chupa Chupa]

Inflation has nothing to do with GDP.

Huh? Do you even know what GDP is? Of course there is a relationship between inflation and GDP because inflation is the measurement of the general increase in the cost of goods and services. Real GDP always take inflation into account.

 

[charlituna]

They didn't do what they wanted, they did what they had to under the guidance of a guy with a vision and a plan,

Despite what various books want us to think we really were not and still are not privy to the internal workings of Apple. You want to put out an argument that some folks at Apple have wanted to do various things that Steve simply said no to because he didn't like them. But you have nothing to back that up. Further, Steve (and now Tim) are Apple in regards to the issue of doing as non Apple companies, analysts, bloggers etc think Apple should do.

Steve killed the iPad so he could put a phone in first since most people were using phones,

Or rather Steve delayed the iPad because he felt (and apparently was correct) that people would accept a phone easier than a tablet. Perhaps he was wrong and the iPad should have come first. THen he could have talked about how people love their iPads but it's not really all that portable, well now with the iPhone it is.

and he d killed the Newton before.

Because it sucked and wasn't really selling

He certainly did not go with the attitude why do anything more

You might want to actually read what I wrote. Perhaps then you wouldn't read into it what you want to see and actually read what I wrote. Because I said that they don't add things simply because other people did or say they should. I never said that they don't improve their products.

now that the leader with the vision and plan and the experience is gone

Replaced by people he choose, trained etc. People that would agree with his vision and his plans and could be trusted to see it through when he was gone.

Unlike what is apparently your attitude which is now that Steve is dead Apple is and should totally change their way of doing things because the old ways and thoughts died with the man. I think you will find that you are wrong. Apple is not suddenly going to change everything about themselves to cast off Steve Jobs. They will keep doing what they have planned all along. yes that might seem to change over a period of time but since they don't broadcast their plans we will never know whether or not those changes were part of the plan that Steve created or not.