How Apple Became Japan

Tim Knight from Slope of Hope's picture

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
1108-japansayno 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.

1108-bullyThe 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.

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SmoothCoolSmoke's picture

I've said it before; there is nothing known on earth that grows forever.  I'm from Pittsburgh.  In the 1962 US Steel was the largest company on earth.... if you had suggested then that US Steel would, in 15 years, be a shell of of it's former self....... they would have dropped a net on you.

US Steel, FW Woolworth, GM, Wal-mart, etc., etc.,....................Apple.  Count on it.

Zero Govt's picture

Yep, everything in the Universe has a lifecycle. But my problem is with all the Apple-hater articles this bent world of MSM crony journalism

if you take a looky at Apples competitiors you see even MORE good reason for journalists dishing dirt. So where are the demise of GOOfy and Microshit articles? 

Microshit has been producing lemons for 20+ years, it's a wonder (monopoly?) they've got away with their crap

and GOOn has just chucked out a loss-making zombie product which now has a monopoly in Mobile. That commercial dumping is illegal, shouldn't it have both competition commissioners and the press core jumping up and down... the  silence is breathtaking

and GOOfy's Ad-Rev model is on the downer, now sucking up previous years profits to sustain a future

If anyone's in trouble it's Apples copy-cat crumbling competitiors ...where's the coverage? Why the media black-out?? ..are journalists really that asleep at the wheel??? Why the scewed focus on cool running and highly profitable Apple and not the 2nd rate copy-cat crap amongst the also-rans????

NEOSERF's picture

We will wake up one day and find the BOJ has devalued the Yen by 90% and their Quadrillion in debt is a managable $100T which will buy them another 20 years of mismanagement while they offer bonuses for families to have 5 kids or more.

Bastiat's picture

Do you get a double bonus for a kid with 2 heads?  Or would it count as 2 towards the 5?

Guldbuddha's picture

This is certainly an article written by someone with balls. Atleast one certified apple zaelot in Zero Govt seem to be pissing all over the place in a rather amusing attempt at defending his God, Church, religion, current favourite brand from all evildoing, and instead, in more or less uneducated style, continues on blaming everyone else.

I've seen Apple's rise to power as a patent bully for some time now. As they blatantly have been roaming and stealing innovations, what they cannot sue to get, they buy.

Just google 'neonode slide to unlock' for one example.

Anyway, the one-sighted, and bordering religious fanatism among the apple followers have for some time now been amusing to me. I use Apple more or less on a daily basis, aswell as a number of other products, and I am old enough to realise that companies come and go, one year they are hot, the next colder than liquid nitrogen. The day all of those applefans wake up and realize apple is not as great as they believed, will be a boon to all of those cleaver enough to study psychology and dependency treatments...

But I do believe apple is going downhill from here on out, despite all the hype surrounding Iphone 5, I just don't get the same feeling, the same enthusiasm, from the people that gives a damn about it anymore. The kids I know, the trendsetters and those that actually buys into the hype, all seem slightly ... less interested in 'their' product, instead more interested in the other available gadgets, like Samsungs Galaxy S3.

Zero Govt's picture

if I'm "pissing all over the place" do please pick up on a single point and let's run with it as fact or fiction

piss away Einstein...

Never One Roach's picture

Flip that AAPL!

Better diversify into Groupon......oooops!

Or maybe JCP:

"J.C. Penney, which is in the early stages of a multiyear turnaround, reported a 26 percent decline in third-quarter sales at stores open at least a year, a steeper drop than the 17.9 percent that Wall Street analysts were expecting."

Grand Supercycle's picture

As mentioned, APPLE parabolic weekly & monthly charts are at EXTREME levels.

Downtrend on daily chart continues.

Unfortunately longs will be badly burnt.

machineh's picture

'But, for me, the breaking point was the August 24th verdict that awarded Apple $1 billion from Samsung.'

Ditto. That shit blew me right out of my chair. Next day, I started a crash course of getting up to speed on Android.

When a company goes from innovating technology to 'innovating' legal/political strategies, it's following in the footsteps of the U.S. steel industry. (How did that work out for y'all?)

Apple's pyrrhic victory in Kalifornia patent court accomplished overnight what years of competitors' efforts could not: it redefined pudgy, fiftyish execs in jeans as profoundly uncool.

Cupertino is the new Akron: an infinite loop to nowhere. 

Meanwhile, Google's Nexus 7 likely will prove to be a global 'people's computer' -- the gadget equivalent of the Volkswagen, starting at $199 (about 60% of the Apple/Kotex minipad, without even adding Apple's costly proprietary connectors). A Nexus 7 with both wireless and 3G cellular connectivity goes on sale next Tuesday. I'll probably buy several of them for Christmas gifts.

Zero Govt's picture

nice post, ran from Apple legal advise to plugging GOOn's next hi-tek walking-dead zombie product as a 'winner' for consumers ...everyone's 'consumer champion' right cheesecake?

bet you can't wait for their GOOfy-Driver black box in your car being shoved down everyone's throat by State dictat can you?

talkin of cool executives, GOOn's are wining, dining and lobbying hard in the shadowy corridors of Big Bro State for a public-private monopolists takeover of our cars, you must think that's really coooool yeah? 


Zero Govt's picture

"How Apple Became Japan"

How Google Became North Korea


only a few weeks ago final confirmation came through on the WSJ ...the GOOn squad monopolist executives were hard at work lobbying parasites/politicians across a once free land in the shadowy corrupt corridors of the Big Brother State their new tek for the driverless car, 'GOOfy-Driver'

as if chucking un-profitable zombie products (Android) into a consumer market wasn't enough confirmation for the clueless chickens of journalism (pass the propaganda, I'll put my name on it) hasn't raised a single question mark among these dreary propaganda merchants.

Or GOOn's other walking-dead State subsidised turkey, the public-private eco-scam GOOfy-Car, Tesla

now we have GOOn following the well-worn path of using State to take away consumer choice and shove their GOOfy-Driver droid down consumers throats. Push over mate, we're gonna drive your car from now on, like it or not

this has been the dream of delusional big diseased dinosaur corporations (Zombie Corpses) like Siemens and IBM for a decade take the driver out of the car and take control. Buses and trains aren't enough. The meglomaniancs hate freedom of the individual, even driving must be controlled by a central (monopolists) core Big Bro chipset

the WSJ propaganda headlined GOOfy-Driver hi-jacking your cars as "inevitable". Yes the inevitibility of Big Govt and Big Corpse abusing peoples freedom, taking away consumers choice and shoving crap down your throat without you having a single word to say in it

Google Zombie Corpse ...the disease is confirmed, wheel the sick Statist zombie to the glue factory

Notarocketscientist's picture

This is a shit article.   Apple is heading downhill because they won a court case?

I am no fan of the brand fools who jam iphones up there arses/pussies and moan with pleasure when the vibrator function goes off... but come on dude - did you get fired from your job as toilet cleaner at the HQ?


Zero Govt's picture

probably other way around... journalists end up as toilet cleaners if they don't shovel the shit of the Statists propaganda and put their name to it

it's a funny old world, it works in mysterious ways ....not.

dark pools of soros's picture

but they have such small small penis.. not big american penis

ToNYC's picture

Who doesn't get that AAPL was a figment of Steve Jobs personality/dna and like Marshall Tito held this magic space together by force of his uncheckered will and vision? Genghis Khan's empire fell within 6 months of his death. Sic semper tyrannis.

Zero Govt's picture

when it comes to Genghis Khan behaviour patterns i think Microshit and GOOfy executives take the biscuit

Android is a market thug of a product, shitted out by the GOOn squad bleeding in blood-red ink's not a comercial product that cooly makes a profit (like Apple) and is offered to consumers. This market-subversive is stuffed free into manufacturers cornflakes packets for free

the new GOOfy-Driver droid is the same strategic below the belt (of consumers) kick, being lobbied by their monopolist executives to take over driving in our cars in a(nother) public-private scam, taking away consumers choice much for freedom and a free market eh??

Genghis would be amazed at how far tyranny by the 1% over the 99% has progressed

suck shit arsehole 

Zero Govt's picture

i'd be delighted if any 1 of the 8 junkers would detail how Apple resembles a thug/Ghengis 

...and the GOOn squad doesn't dumping a zombie product into the Mobile market

only coherent arguments need apply for this vacancy though the fact you've all junked and run suggests you haven't got an argument (ie. you're pointless)

williambanzai7's picture

I don't know how you can possibly judge what is passé in this space and what lies ahead without coming to Hong Kong and and looking at the Apple feeding frenzy.

Bubble's picture

But if they are now selling a fashion product, it's a fickle market. Also the Chinese are oft last to the party in fashion. I think they were the last to buy all of the Louis Vitton type brands that seem to be out of favour everywhere else. They love buying into these prestige brands, the minute it's perceived otherwise as it now seems to be becoming elsewhere I assume they'll drop the brand and pile herd like into the next thing...

Zero Govt's picture

'he didn't write that'

the muck-raking squad Statists did, he just 'lent' his name to it

mrmister's picture

What happened to the supposed years of products left behind by Jobs? I think we found the answer during the last keynote. Nothing! Absolutely nothing! Apple cant be run by the guys that are there.

gdogus erectus's picture

I have a buddy that works for Samsung that used to design all of Apple's next generation semiconductors and I can assure you that Samsung would not be having the success they are having now without the typical Asian company's R and D strategy: steal. Blindly. I worked in the semi industry from the early 80s and we were getting ripped off by the Japanese then. Now it's the Chinese and Koreans. Do people not know this? This is common knowledge in Silicon Valley.

Vendetta's picture

I worked in the semi industry in the 80's to ~97, I thought everyone knew the japanese were dumping memory chips at below cost to get that market share.  Who dominates memory chips now in all these gadgets ... Now its everything is being dumped into US markets at 'low cost' and crushing the US industry .... low price ... guaranteed.  What a mess

desirdavenir's picture

in that case why do US companies, including AAPL, offshore their production in Asia ?

=> they get in the long term what they deserve for being short-sighted.

trentusa's picture

 Apple is DRM junk-by-design. Android is much better and the apps don't have to be centrally approved by the home company (like Apple does for their apps). Too bad the machinery is good- linux runs great on a mac, i hear, and iphones are much more cooperative after you jailbreak them to get admin rights over your own machine

ReactionToClosedMinds's picture

just stumbled into this as going to bed ...... interesting post.

if Tim is correct, this is a mighty call.

Because John Templetom was religious, most dismiss him (at their peril). His religiousity protected him from the delusions of most of Wall Street.  What does Templeton have to do with this post on comparing Apple with Japan/Nikeii?

Templeton was very early to Japanese stocks.  But when they became overvalued he faded Japan.  Hence he missed the maniac bull in Japanese equities ... but misssed the total collapse years later as well.    Despite his walking away fom Japan early, Templeton has one of THE greatest equity investment records of any human being




NoDebt's picture

Best gadet maker in the history of the world.

But still just a gadget maker. 

Their features will be copied (building them in China assured that would happen quickly, too).  Their margins will be competed away. 

In the future... still around, still making money, but no longer relevant.

Zero Govt's picture

"Their margins will be competed away."

it's not "competition" to dump red-ink walking-dead zombies on the market like Android. It's a big outstadning case for competition commissioners of monopolist dinosaurs dumping uncommerical uncompetitive products on consumer markets and (ala Microshit) channel stuffing manufacturers to push other brands off the shelves so consumers are conned of choice

"Their features will be copied"

Yep, as they've been copied by Microshit for 20+ years and all the other also-rans, like GOOn, on iPhones and iPads

copying is not the same as leading's a whole new ball game which nobody has the balls or brilliance to do but Tek-King, Apple

certainly not the shambolic also-ran competition (cough)

taketheredpill's picture

GOOG/AAPL = 2 by Sep 2013 and I win $20!



israhole's picture

Since Obama just won, maybe Timbo can tell us again how him and his mommy were the only people in his southern town that weren't racist.  Fair warning, it's a real tear-jerker.

Zer0head's picture

Brilliant as usual Tim

I have a great deal of respect for a guy who makes a call like 20% into the cliff dive


Tim Knight from Slope of Hope's picture

My dick-o-meter is warning me of sarcasm, so I'll say two things here:


(1) The point of the essay was not a "call" on AAPL at all

(2) As for an AAPL "call", back when AAPL was at $660, I laid out my guess as to what was next, which just happened to be precisely what did happen:


So: if I'm right about the sarcasm........bite me.

falak pema's picture

on the day of the article the dip was 10%...not 20% as now.

Ouch, that was half a bite.

Japan went from Big Kong to Tiny Tim....that is an awesome slide. By any dick-o-meter measurement.

As the leading lady said about the King, " if it were one inch shorter it would be the size of my clitoris..."

I never verified that. SHe died very young way before I was born and he died before I could get my slide rule out. 

Tim Knight from Slope of Hope's picture

What is *wrong* with you guys over here? Sheesh.

ReactionToClosedMinds's picture

one has to respect 'making it public' as made clear Mr Knight.

Not that you care, but ZH has just enlightened me again to a worthy source of market input (Reggie Middleton & Testeronepit are examples) .

It took me years (maybe a decade of verifying credibility)  but after a lot of monitoring (trust, but verify) I have become a subscriber to 4 'market' services since 2007 that have paid for themselves (while a dozen others were pure trend followers ... the trend changed .. they were gone) .  Slope of Hope is on the 'Bar now.


Manthong's picture

If it wasn't for lifting Xerox's innovations, there would be no Apple.

Zero Govt's picture

if it wasn't for conning IBM there'd be no Microshit broken Windows (and still broken, fogged and falling apart 20 years later ..some people just can't stop peddling shit)

if it wasn't for Apples iPod there'd be no hundreds of copies

and iPhone copied worldwide

and iPads copied worldwide

what was your last great insight, being a blinkered consumer champion?

MeetTozter's picture

Down the hidey hole of history - Billy's Mommy was on the IBM Board of Directors.  Of course, IBM was pretty full of themselves at the time.  Sears Roebuck, man!