Friday, May 2, 2014

The world has seen its first trillion dollar idea

We live in a  unique era in that we've probably seen the first "trillion dollar" idea. And it really boggles my mind. I'm referring (of course) to Apple's iPhone. Just to put this in perspective, a "billion" dollar idea is a rarity. A very select few (handful) of individuals get "billion" dollar ideas. The founders of Twitter, Square, Uber, and Whatsapp had billion dollar ideas. For you writers out there, J.K. Rowling had a "billion" dollar idea. So how rare of a sighting is a billion dollar idea anyway? Is it a unicorn? Pretty much.

Anyone fortunate enough to get one of these ideas should thank their lucky stars that they had the "genius" and inspiration to execute it. I say (tongue in cheek) that this is true UNLESS you're republican. In that case, you should just fall back on the hubris that comes oh-so-naturally and proclaim to the world, "I came up with this idea and executed it and you can too. You just need to stop taking government welfare and pull yourself up by your bootstraps."

And let's not even concern ourselves with million dollar ideas. Those are aired on every episode of "Shark Tank," although to be fair...a lot are shot down by the sharks (and justly so). As an aside, I think everyone should watch Shark Tank, doubly true if you're someone that thinks "I'm clever and I have an idea worth millions." Chances are, you're not as clever as you think, and you have no idea what a good idea even looks like. Here's your "I'm doomed to the middle class" card. Now settle in to being mediocre like the rest of us.

Now, just to be clear, the intent of my post is not to metaphysically defecate on too many republicans out there who live and die by the mantra: "the reason you are poor is because you're lazy!" Rather, I want to talk about what Apple has done that other companies can simply not do at this time. Yes, I'm going to talk about "the impossible" and how one company does it every single quarter. Even more astonishing is the fact that "doing the impossible" now garners "yawns" from people who don't recognize it for being mind-blowing and extraordinary at the same time.

Last week, Apple reported earnings for the first quarter of 2014. In just three months (12 weeks) they sold enough of their products to bring in $47 billion in profits. This not only blew away Wall Street expectations that believed the tech company would produce only a meager $42 billion, but reaffirmed their position as the most profitable company in the world.

If you're a Google fan boy, then here's a comparison for you: Google reported earnings of $3 billion for the same time period. They dominate the search landscape and experienced revenue growth of 19%! Everyone that has been online is reading about Google buying up other companies, continuing to innovate, and their employees get some of the best perks in the world. All of this is because Google is flush with cash. Yet they make almost 14X less than Apple does for the same time period. They are a minnow compared to a whale shark. How's that for perspective?

To say I'm in awe of Apple is an understatement. My jaw hangs open because it's inconceivable to me that someone could have an idea worth $1,000,000,000,000. Literally, fifteen "ideas" like the iPhone would entirely pay off our national debt. Making $200 billion a year on their products, it only took Apple five years to hit the $1 trillion mark. Sure, they've spent a lot too which leaves their cash hoard in the bank at a mere $200 billion that they can use to invest in whatever they want to invest.

Here's what Apple did in their earnings call last week (summarizing Tim Cook, the Apple CEO's, words): 1) A stock split of 7 shares for every 1 share in existence effective in June, 2) an increase to their dividend of 8%, and 3) a stock buyback increase from $60 billion a year to $90 billion a year. Wow! Most companies are lucky to be able to afford to buy back $1 billion of their stock. Apple's numbers are just plain ridiculousness. To misquote Weezer from Steel Magnolias, "Apple has more money than God."

It's these kinds of things that get my tongue wagging. In particular, the 7 to 1 stock split is curious. Why? I think it's to lower the stock price which is now at roughly $600 a share to around $70 a share which would make it fit very nicely into the Dow Jones, which is a very snooty Index (and the oldest) and only has 30 stocks in it. That's 30 companies that are cherry-picked for their power and influence in the American economy. Lots of people think that it's a barometer of how well our country is doing. If the Dow sinks, then the economy is sinking too (or at least that's the idea). But if Apple is invited into the Dow Jones, what stock gets the boot? Perhaps the cue was in (again) Tim Cook's words in his conference call when he (more or less) said, "I'd like to welcome Microsoft to the app store. We like it when companies take an opportunity to explore technology." In other words, the jab at Microsoft was more than obvious.

A lot of people have given CEO Tim Cook grief by accusing him of being "boring" and implicating that "boring" is the death of all tech companies. Sure, he isn't another Steve Jobs but there will never be a replacement for Steve. And when it comes to trillion dollar ideas, I think one comes along (if ever) once a century from this point forward. Seriously. Expecting a person, group, or even company with limitless money to squirt out another trillion dollar idea is just stupid. Be appreciative that you live in a time when you actually saw a trillion idea birthed into the world. It's probably as rare as seeing Haley's comet with the naked eye. Most of us will ever recall but one in our entire life. And that's just how I see it.

22 comments:

  1. Tim Cook strikes me as one of those caretaker presidents, the Chester A Arthurs or Grover Clevelands etc who didn't really screw anything up but also didn't do much of note either. At this point they're basically playing out the string on the iPhone, which means they're ripe for someone to actually come up with a trillion dollar idea and steal their crown. Or think of it as Apple is the "Big 3" automakers in the 50s and 60s, fat, complacent, and ready to be plucked.

    BTW, Shark Tank is just a rip-off of Dragon's Den on the CBC in Canada. Which itself was probably a rip-off of something in the UK or somewhere like that.

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  2. @Pat: But that's what I'm saying that runs counter to your thinking: I don't believe there is another trillion dollar idea for the rest of this century. I think it's that rare. If that proves to be true, then Tim Cook is not a Chester Arthur or Grover Cleveland. To expect another idea like the iPhone to just show up at the same company is ludicrous. It can't be done.

    I didn't know that Shark Tank was a rip-off, but I do enjoy it. Even if it is a rip-off as you say, it's still a good show because it gives "would be" entrepreneurs a reality check on how good an idea needs to be (and how well the execution for that idea needs to be).

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  3. I have to admit that there are few things I can think of that have taken the world by storm and made money hand over fist the way the Apple iPhone has. Wish I was brilliant enough to come up with something that would make me a few trillion dollars. Off to wrack my brain...

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  4. I hate money and long for a Star Trek esque future. Not communism, just no need for money. What do big companies need that much money for anyway?!

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  5. Well, they have made a lot of money and they do have an impressive crew of thinkers on hand.

    Apple did need someone to take the helm and show that they are still a force to be reckoned with even w/o Steve Jobs. I'd say they have. We'll see what the future brings.

    Sia McKye Over Coffee

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  6. @Suz: I'd love a Star Trek-esque future too. The problem is that in order to have that future, we need to come together as a species toward a common goal. I don't think this will be possible without going into space enmasse and exploring the vast unknown. Neil deGrasse Tyson pointed out that a "cosmic" perspective is what humanity really lacks.

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  7. Another trillion dollar idea will come from another company, not Apple; they're too busy resting on their laurels and making incremental improvements.

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  8. @Pat: Do you have any idea what you're saying? Or how rare a trillion dollar idea is? There has only been one trillion dollar idea that I know of. That's as rare as finding a planet in the universe that has life on it: we only have found one.

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  9. Yes, Shark Tank is the Americanized version of a British show. I don't remember what it's called. But it's a good idea for a show, and it travels well.

    I guess that's the trap of creativity. When creative thinkers make their billion, everyone wonders, "What's next?" And the creative person is pressured to top it. Usually to their detriment.

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  10. With inflation I'm sure we'll see plenty more trillion dollar ideas, barring a zombie apocalypse or something.

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  11. Is this where I should admit I bought Apple stock for my son's college fund at $58 a share simply because I liked the iPod? Never even saw the phone coming, but what a game changer. So, yeah, basically Steve Jobs is paying for my son's college education. :))

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  12. I'm not a fan of Apple, I think their business practices while very profitable aren't very ethical or user-friendly. And itunes sucks hard. It's all about creating a monopoly and paying off any anti-trust fines along the way. As consumers we're all royally screwed.

    mood
    Moody Writing

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  13. Fascinating post, Michael...

    Thanks for sharing your opinion and info with us...

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  14. I'd be happy if I had a hundred dollar idea. Have a great weekend.

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  15. It really is astounding…

    I'm with Stephen--a hundred dollar idea would work for me ;-)

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  16. Trillion dollar ideas? That really is mind-boggling and historic. Is it safe to assume that you bought Apple stock way back when it was merely $50 or so, Michael? I willing to bet that your portfolio is a thing of beauty.

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  17. It might even go beyond a trillion dollar idea eventually. I can only have the utmost respect for anyone who can envision something as amazing as the iPhone.

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  18. I think you're right. We won't see another trillion dollar idea in our lifetimes.

    Interestingly, I'm about to read Steve Jobs biography. I'm fascinated by his life and how he seemed to live in "another dimension."

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  19. @Jay: The Steve Jobs autobiography was very eye-opening. I'm surprising how much Woz contributed to Apple as opposed to Steve Jobs. Woz (in many ways) was the real genius and Steve was lucky to connect with him.

    Steve said, "No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new."

    An innovator until the very end.

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  20. Wow. That's all I can say. I'm speechless.

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  21. I had no idea Apple was still doing so well. Amazing!

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  22. What is so truly amazing about the iphone? how is it superior to other phones? why do people love it so much? is it like the emperor's new clothes where everyone says and thinks it is cool because everyone else says it is so cool? i just got one as a replacement to my android phone and don't see anything super great about it- it just seems like a nice phone.

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