What struck me as I watched a parade of Apple presenters trot out on stage to show and tell the latest incremental product improvements, was how well all of what Apple does seems to work together. It’s the ecosystem, stupid. Indeed. But there’s more to it than a cohesive ecosystem. It’s economics.
Money On Trees
As a child I heard the oft repeated phrase handed down from adults to youth. “Money doesn’t grow on trees.” It’s one of those phrases you hear often as a child but one that doesn’t make much sense until adulthood arrives. Indeed, money does not grow on trees, so I’ve developed a healthy worry about modern technology whereby robots build everything and do everything for us, circa ‘I, Robot.‘
If robots do everything for humans, and that may happen one day, what are the economics of such a dramatic turn in human history? What jobs will humans have that can pay for robots? Or, what jobs will humans have to pay for anything if robots do everything?
That is what I call an economic ecosystem that has yet to be figured out, let alone developed. Apple has such an ecosystem already and with the company’s focus on the premium end of the product spectrum and a general economic malaise sweeping the planet, who will be left to buy what Apple makes?
Old Fashioned Guy
My life as an Apple follower came about the old fashioned way. I bought a Mac. Mac360 arrived on the scene back in the early part of the century, back when Apple and the Mac were mostly synonymous, and the iPod and iTunes was Apple’s latest glory. Today Apple has so many luxurious products that target those with more money than average that I worry about the company’s future, but not quite as much as I worry about mankind.
I’ve gone from Mac to iPod. Then from Mac and iPod to iPhone. Since then, it’s been iPhone, iPad, Apple TV, Apple Watch, Apple Music, Apple Pay, and an even longer list of Apple-centric accessories; Watch bands, nylon iPad sleeves, additional power chargers and cables, AirPort, both iMac on the desktop and MacBook in the backpack.
Yet, the other day I read a headline that said Apple was now a services company. That’s crap. Apple makes money the old fashioned way. Hardware. Lots and lots of hardware. But that hardware has increasingly become integrated thanks to software and a growing cadre of services. iCloud, iTunes, App Stores, Apple Music, and more.
The economics of Apple’s ecosystem begets a number of perspectives. Apple is not just the iPhone company, despite more than 65-percent of revenue and profits coming from the iPhone. Google gets 90-percent of its revenue and profits from advertising and attempts to diversify beyond that– hardware, software, futureware– have been dismal failures. By contrast, everything Apple does makes big money. Big. As is Fortune 500 big. Only Rolex makes more money on watches than Apple and it’s not likely to remain that way much longer.
Google may sell more Chromecast units for TV, but Apple makes more money. Samsung may sell more smartphones. But Apple makes more money. HP, Dell, Lenovo or others may sell more PCs than Apple sells Macs, but guess who makes all the money.
Apple’s ecosystem ties all that together with an array of products– from media to accessories, from iCloud data to Messages and FaceTime– that has no competition. Every product is profitable, but it’s the ecosystem– that blend of hardware, software, and services– that makes the big bucks.
Damned Expensive Luxury
Here I am moving rapidly through 2016 and looking forward to another exciting array of new Apple products– iPhone 7, Watch 2, MacBook Pro, iCloud storage (I upped mine to 1TB)– and only now am I beginning to wonder and consider how I’m going to afford and pay for all those new ecosystem toys.
I’ve always considered the iPhone to be the perfect example of an affordable luxury; one that has attracted customers from all walks of life, yet collectively, Apple’s products combine to become less affordable luxuries.
If robots do everything humans can do– and there is some indication that could be the case in a few decades– what will humans do to earn the money necessary to afford future products and our robotic companions?