Why Steve Jobs May Rule the World

A Modern Day Edison



It was in February that I first started writing this. Apple stock was falling. It had been as high as $250 and was around $140, on its way to around a low of $85 this year. Part of my article said that people should buy as much Apple stock as they could afford because in the next few years it will probably substantially increase in value. How much you ask? My call is somewhere in the neighborhood of $350 to $500 or more. Of course when I say this folks look at me like I belong in a lunatic asylum. Even though that the stock has now increased from $85 to $140-ish in the last eight weeks or so , I keep telling people that owning Apple under $300 may very well seem really really cheap – really really cheap in the relatively near future.

I keep thinking of these silly analogies. Like, what you are seeing with Apple now is like watching the beginning of a really big tidal wave – a hundred footer - and right now it is just a six foot swell with a really good left break .

And why, you might ask, would I think these absurd things and then publicly display my folly? Good question. Here is my answer as best I can explain it. I think that Jobs is a genius many times over. I am not sure that there is a smarter CEO out there.

Jobs invented the personal computer with his friend Steve Wozniak in their garage about 30 years ago and started Apple Computer Company. And from that, the PC as we know it today began, and also a company called Microsoft emerged.

After later being ousted from Apple, Mr. Jobs moved on and started a new computer company that he called NEXT (which Apple eventually bought from him). Not a bad move but, heck, after inventing the PC, I mean no one really expects a comparable encore. But Mr. Jobs gave them a good one.

In the mid 90’s two things happened. Apple begged Jobs to come back to run Apple and try to save it (which he did) and - apart from Apple, Jobs bought for $5,000,000 a small movie animation company from George Lucas (“Star Wars”) and turned the small company into something called “Pixar’. Remember Pixar is that company that then created among other things, Toy Story , A Bug's Life , Toy Story 2 , Monsters, Inc., Finding Nemo, Cars, and many more. To date Pixar has won twenty-two Academy Awards, four Golden Globes, and three Grammys – with most of those on Mr. Job’s watch. It was a respectable performance for a “washed up ex-CEO computer guy.

In 2004 Mr. Jobs sold Pixar to The Disney Company for $7.4 billion – mostly in Disney Stock. Not a bad return on $5,000,000. Jobs is now the largest individual stock holder of Disney stock with 7.4% followed by Roy Disney at 1.4% and Michael Eisner around 1%.

And why did Disney buy Pixar? Because a guy named Steve Jobs took movie animation into the 21st century and Disney wanted to continue its core business that Walt created.

So, ok, Jobs got lucky. He did “it” twice. He “invented the PC” business and also “invented movie animation for the 21st century”. Nothing else left to prove, right? Wrong. After getting a taste of movies and Hollywood, Mr. Jobs decided to take on “music” and something you may recall called “Napster” – the free peer-to-peer music sharing service that threatened to ruin the recording business just as the internet is said to be threatening the newspaper business.

Well, without belaboring the point, Jobs did in fact save the music business with his iPods and his iTunes. Sometime in the next month or two Apple will have downloaded its billionth song. That’s with a “B”. And one other nifty little factor about Mr. Jobs and this music download business. In 2004 Apple had about a 74% share of all paid worldwide music downloads. Guess what Apple’s share is today – almost six years later: try 75%. And this is an industry that is projected to top five billion dollars a year in the near future. That is after Sony, Microsoft, Sanyo and every other high-tech 800 lb gorillas went after Job’s newly created industry and the MP3 players used to play all that downloaded music. Everyone had the technology. Everyone had the same music to bid over. And of course all the Wall Street gurus (and I do use this term with more than a little bit of contempt to be honest) told the world that Job’s market share was not sustainable. Right.

Just how does Jobs maintain market-share like he does? Well, that is for another day but there is a simple –overly simple explanation: “design” and “presentation” is the central focus of all Job’s technology and for some reason, no competitor has yet to figure out how important this is. The other factor is that Jobs dumbs down technology better than any human being alive. It is easy to operate anything that Apple manufacturers. You would have thought that some of those 800 lb competitors would have figured that out buy now, but they haven’t.

Ok, so Jobs invented three modern industries single handedly – the personal computer, 21st century animation, and the music download business. Lucky breaks. Right place at the right time. Surely no possible encore.

Wrong. He has done it again I believe with personal software applications (apps).

Oh yea, I almost forgot, in-between all the above Jobs created this thing called an iPhone. Released in January of 2007, over 30,000,000 iPhones have been sold and the iPhone, though only holding currently around a 19% share of “smart” cell phones, now is the number one platform of mobile access to the internet . That is, more people use Job’s iPhones to get on the Internet than any other wireless device. And, according to the trades, the future of advertising and marketing and – yes – “search” is headed in only one direction: cell phones.

So, why is, Jobs most recent and possibly last “new industry” going to be the biggest and why is Jobs going to dominate it even more than the music download business?

Well what Jobs is in the process of doing is facilitating the McCreation and monetization of mass market computer applications (apps) – apps that can be applied to anything and almost everything. Jobs is in process – far down the road – in doing for computer applications what Henry Ford did for the mass production of cars – drive down the price by huge volume and, in so doing, create a massive market for his affordable and unique product. I think that Jobs goal is to make computer apps as affordable as Coca Colas. And I think he is well on his way to accomplishing that.

And if you want to monitor this tidal wave that is starting to get us wet, I can tell you what to watch for. Start looking for main-stream companies that are now beginning to have iPhone apps created for themselves. And they’ll be advertising their new iPhone apps. like there is no tomorrow. The numbers of companies doing this will grow geometrically in the coming months – look for it. I saw one this week advertised by Nationwide Insurance and one for the AAA (American Automobile Association). I also saw one in a national magazine by some big retailer today. The point is is that these applications can turn an iPhone into anything – a GPS, an alarm, a map, a horn, a calculator, a radar gun, – you name it. Currently one can choose from thousands of game downloads apps, as well as utilities, entertainment, music, productivity, lifestyle, reference, travel, sorts, navigation, news, finance, weather, book etc – all downloaded to your iPhone or iTouch in about ten seconds with one or two clicks and all costing about the same as a Vente coffee from Starbucks.

You may not own an iPhone now but you probably will in the future.

And Amazon’s Kindle (thanks Mark) is the worlds best selling book reader right? Wrong, it an iPhone app called Stanza (free from Apple or you can buy a Kendall from $300 and up) which turns an iPhone into the most popular book reader in the world.

The Wikipedia / collective resources effect

And one of the reasons that thousands upon thousands of iPhone apps are being written every month is that the whole developer world has jumped on Apple’s app. bandwagon. When an app. submitted by a developer is accepted by Apple into the iPhone (actually the iTunes) “App store” the developer is paid generally around 65% of the revenue while Apple keeps the remainder. Because the volume of app purchases is so massive developers are getting rich developing for Apple and Apple does not have to pay a dime for a Research and Development department for their applications. And are the other phone companies jumping on this bandwagon yet? They wish.

The other cell phone companies either don’t get it or they are starting to figure it out way too late. Even smart phone maker RIM (maker of the Blackberry) and Verizon have missed the “app” window because they have been so focused on making phones. And “phones” have almost nothing to do with what this is all about. Sure one of the characteristics of the iPhone is that you can make a phone call but it’s almost an afterthought. It’s the functionality that the apps. give the device – not the fact that you can make a phone call with it. The other companies don’t get it and even if they did, it’s too late to catch up. Job’s won before they even stepped up to the start line.

Three factors are worth watching though: Job's health; iPhone "jail breaking" (hackers have figured out how to modify iPhones to accept non Apple software); how Jobs deals with this "jail breaking", and lastly how Sprint's new "Pre" smart phone is accepted in the market. My guess that the "Pre" will have limited success because of Apple's new software release for the iPhone and new cheaper versions of the iPhone. And once the "Pre" fails, it will become fairly obvious that no one has much of a chance against Jobs and Apple.

My guess though is that Jobs has yet again invented a new industry and that Apple, as they did with the music download business, will own it. As Yogi Berra said , it looks like “déjà vu all over again.”

Game, set, match, and sport – Mr. Jobs and Apple.

View desktop version