Today I’d like to share a few thoughts on the world’s largest company.
I’m not going to look at a chart or attempt a valuation. I’m not even going to consider any of their products in any great detail.
I’m just going to describe my experience in the Apple Store yesterday – and suggest what it might signify.
I love Apple but I’ve never bought its shares – but now I might
Apple has made a lot of money from me.
I bought my first iMac in, I think, 1999. I got an iBook a couple of years later. In a drawer at home, I’ve got a first edition iPhone (it’s probably worth a bit now). I’ve been a good customer.
But, then again, every product I’ve bought from Apple has, without exception, been excellent. They’ve benefited from my custom; I’ve benefited from their products. Isn’t the free market a wonderful thing?
But I’ve never once owned a share in the company. More fool me. I must have spent at least £1,000 a year with them over the last 16 years. Plenty of people spend a great deal more.
Yet I’ve never made the simple leap and thought: “Ooh I like their products, I should buy their stock”.
I guess I’ve always thought the shares were either a bit over-valued, or the company’s market leadership would fade and it would be overtaken. And I thought Apple had lost its vision a bit after Steve Jobs died.
Back in the 1980s, Sony was the grooviest electronic company. Now Sony stuff feels a bit second string. I figured the same would happen to Apple. And it will one day, I suppose.
But something happened yesterday to make me want to buy Apple stock, even at today’s heady heights.
Would you queue for an hour just to look at a watch?
I went into the Apple Store on Regent Street to have one of their geniuses look at my phone. It was even more mobbed than usual. The new Apple watches were on display.
They looked quite nice. I’m not entirely sure what they do or why I should own one – I’ll find out soon enough, I guess.
Others were keener than me. People had booked appointments and travelled a long way, just to try a watch on. If you didn’t have an appointment, you could queue up to try to get one.
The queues were an hour long. I’ll say that again: people were queueing up for an hour – voluntarily – to try on something that they couldn’t even buy.
And apparently, the very friendly assistant explained to me, the queues were even longer at the weekend – and longer still at the Covent Garden branch.
I’d just had lunch with a friend. He’s strolled over to the store with me. He’d just bought an Apple laptop the previous Friday. He’d queued for 20 minutes, to cough up £1,000 for a laptop.
How much business can one company do?
Apple has won hearts and minds – now it’s looking for something else
Apple is now the largest company in the world by market capitalisation. It is trading on 13 times earnings and has a market cap of three quarters of a trillion dollars. Just for perspective, if you had spent a million dollars a day since the year 0, you would still have not spent a trillion dollars.
Yet despite being such a vast company, Apple has somehow managed to remain chic. I guess I’ve been fooled by the branding, but I still think I’m being alternative when I buy an Apple product.
Which brings me to an excellent talk I watched on YouTube the other day by tech analyst Scott Galloway – The Four Horsemen: Amazon/Apple/Facebook and Google – Who Wins/Loses.
Galloway describes the journey that Apple has been on. First, it appealed to our heads – and won over our minds. Then it moved down the body and appealed to our emotions – and won our hearts. Now it’s moving down the body to the groin.
That might sound weird. But here’s what Galloway is on about.
We use luxury goods to ensnare a mate, he suggests. That’s why we want to drive cool cars and wear trendy clothes. It’s our way of saying: “Look at me, look what I’m capable of – mate with me”. Jewellery and watches are part of that. It’s the human equivalent of a peacock’s tail.
I love watches, by the way. I’ve got a collection of them – not as many as I’d like, but I’ve got a few. I love staring at pictures of watches in magazines, and drifting through airport watch shops or Selfridges. Omega, Cartier, Rolex, Patek Philippe, Jaeger-LeCoultre – love them all. (That said, I’d never book an appointment or queue for an hour just to try one on!)
However, those luxury brands are about to be brutally disrupted. There are Apple watches that look a bit like Swatches for £250. There are 18 carat gold ones for £13,000. There’s an iWatch for every budget (almost).
They looked pretty cool.
And I guess they’ll bring out another version in a couple of years’ time – and people will buy those too.
It’s not just high-end watch brands that are going to take a hit. The Seikos, Casios and Swatches of this world are for the chop as well. As for all those companies that make fitness wristbands and running aids and pedometers – unless they start making apps double quick, the game’s over. Short them if you can.
Apple is coming. It’s remodelling itself as a luxury brand. First, the head, then the heart, now the cojones.
That same friend of mine who bought a new laptop last week is starting a new business. He keeps saying: “I need a mailing list. I need an audience. I can’t start from scratch. And I need a mailing list to flog stuff to.”
My experience in the Apple Store is that Apple already has a pretty captivated mailing list. Now it’s got a new product to sell to them.
John, my editor, always likes me to make sure these Money Mornings give clear opinion and investment advice. So if you didn’t already get it, the advice of this missive is: long Apple, short luxury watch brands. I might even get around to buying some stock this time around.
Now – anyone got the time?
• Dominic Frisby is the author of Life After The State and Bitcoin: the Future of Money.
Category: Investing in Technology