Originally published on Slope of Hope:
Back in the late 1980s, the entire business world was obsessed with Japan. It's no wonder that this was the case: here was a country which had emerged from the ashes of World War 2 and had become the world's second-largest economy. They made high-quality cars, consumer electronics, semiconductors, plus they seemed to have a management style and work ethic that put the "good old USA" to shame.
As might be expected, a flood of books came out to instruct the business people of America how to best ape their Japanese betters. This fixation reached a fever pitch when American companies started hauling in their workers in the morning to do calisthenics, because if that's what the Japanese are doing, well by gum, that must be the secret: calisthenics. In the morning.
Japan's newfound wealth sent their stock market soaring, and these riches within the country compelled the corporations to go on a buying spree. I remember to this day the horror that Americans felt when the iconic Empire State Building was added to the Japanese portfolio. The same was true for Pebble Beach golf course. And the fact that the land around the Japanese Imperial Palace was purportedly worth more than all the real estate in California was uttered so many times as to become tiresome.
This all reached a crescendo with the publication of The Japan That Can Say No, a pro-Japanese, anti-US book that asserted, among other things:
+ Japan must use its technological superiority as a negotiating weapon, and it should
even threaten to trade secrets with the Soviet Union as a bargaining tool against the US and refuse to sell components that go into US missiles.
+ The quality of American goods is low because the level of the workers is low, while the superior education of Japanese workers is a big advantage.
+ The Japanese character is innately superior to the character of Americans.
+ Americans believe that the Caucasian race is superior since the modern era is dominated by the western world, and this prejudice will hurt them in the end.
+ Former American colonies are rife with problems, while former Japanese colonies are thriving.
+ America's dropping of the atomic bomb on Japan and not Germany in World War II arose from racism because Germans are white people and Japanese are not. (Though at the time of the German defeat in April 1945, the atomic bomb was as yet incomplete and untested until July 16, 1945, so that may have been a factor)
+ The trade surplus with the U.S. is caused by the lack of desirable products made in the U.S.
Of course, we all know what happened next. The arrow marks the point that the above book was published, and the Nikkei is now in its third decade of writhing around in an inescapable bear market. Stocks are off 80% from their peak (and this was from the 1980s, remember!) and Japan, in spite of still making plenty of manufactured goods, is a country drowning in debt. Japan's financial situation actually makes the US look responsible and prudent.
So what does this have to do with Apple? Oh, come on; do you really need to ask? Let's walk it through:
Apple had its own "World War 2" in the mid-1990s. It was hanging on to a miniscule share of the personal computer market; it was losing money at a furious pace; it made products that were, at best, mediocre; it was perceived as the maker of overpriced, overhyped, fringe products mostly used by hippie-dippie creative types. The company was privately shopping around for a buyer out of fear they might go bankrupt.
From 1997 to 2012 - - slowly at first, but then with increasing speed and surety - - Apple became perhaps the greatest corporate turnaround story of business history. The stock climbed thousands of percent; the company changed from a very minor personal computer maker to the largest consumer electronics firm in the world; and Apple itself was the single most valuable corporation on Earth. There was serious talk of Apple becoming the world's first trillion-dollar organization.
Now Apple has always been a proud company, almost to the point of arrogance, and the more successful they got, the more self-entitled they became. But, for me, the breaking point was the August 24th verdict that awarded Apple $1 billion from Samsung. The stock spiked higher the next day, and the price peaked just a few weeks later on September 21, 2012. I submit that this will be the lifetime high for Apple, at least until we've colonized Mars.
The reason the billion-dollar verdict made such an impression on me was that - - well - - it just seemed so dick. Apple was squeezing a supplier on some patent issue. You know as well as I do that whatever tangential "violation" may have taken place didn't do a damn thing to dent Apple's sales. I've been involved in patent disputes before, and 99% of them are about extortion, not actual intellectual property theft. Maybe one out of 10,000 patent cases actually involves some nefarious and ill-meaning party trying to get away with the blatant theft of someone else's hard work, but the other 9,999 are unmitigated crap.
So it simply struck me that Apple was bullying another big corporation for a billion bucks, mainly because they could. And the Silicon Valley jury was somehow sympathetic to their favorite son, and they gave them what they wanted (they actually wanted $2.5 billion, but, hey, let's all be reasonable, right?) So, with this final step, Apple completed the journey from scrappy, full-of-heart hero (1997) to corporate dickhead (right now).
The bloom is off the rose in a number of ways. First of all, the bizarre cultish habit of camping out for days in front of an Apple store before a new product is introduced is now completely passe. The "mini-pad" that just came out was received with a relative yawn. Second, nearly $170 billion in shareholder wealth has been nuked in the span of just a few weeks. And third, how do you think a plummeting stock price and increasingly gigantic pool of worthless options is going to inspire the folks in Cupertino, who over the past decade have basically expected to be made rich as a divine birthright?
As I so often do any time I write about Apple, I want to be clear that I have been a loyal consumer and fan of the company for longer than probably 99% of the people reading this post. I became a Steve Jobs disciple in 1982, bought the original Macintosh in June 1984, bought the first iPhone on its intro day, the first iPad on its intro day, and was a bright-eyed, bushy-tailed employee at Corporate HQ at the age of twenty. So I'm far from an Apple basher.
But the company has become a bully, and this has set them on a new path. It doesn't mean that they're going to be the next RIMM. Instead, I think Apple's future is more along the lines of Cisco's: a formerly-great company that was once the most valuable corporation on the planet which, after it peaked, settled into existence as a very rich, very bloated, lumbering giant that just sort of ambles through the years, issuing regular dividends to shareholders, and really not doing anything particularly worth noticing.
It's a shame, but all of this is to be expected. After all, no one expected Apple to be "Apple" for the next 300 years, did they? Innovation and momentum wax and wane from company to company; motivations change; leadership emerges in different places; simply stated, Apple has unwittingly passed the future's torch to someone else. No one - certainly not Apple - knows who it'll be, but Apple, like Japan, marked its peak with a loudly-proclaimed assertion of certitude about its own superiority and entitlement. The ancients told us that pride comes before the fall, and it is as true today as it was thousands of years ago.
As for the stock price, I suspect it'll resemble the Nikkei chart found way above, although perhaps not as dramatically. I imagine AAPL will be in the low 400s next year and will meander around relatively trendlessly for years to come. Its multi-thousand percent gain will be a part of financial history, just like similar gains enjoyed many years ago by RIMM, CSCO, and YHOO.