 One Thousand Billion Dollars 

In June 1997, a pray request was sent out for a company that was within 90 days of bankruptcy.

It seems that enough people prayed.

#1,000,000,000,000.00 #OneThousandBillion AKA #OneTrillion

All Noisy on the Western Front

Today's an interesting day in the world, especially in the world of cyber.

On the heels of China's stock market turmoil came a slew of high profile computer problems resulting in United Airlines grounding their flights, overloaded Wall Street Journal servers taking down the newspaper's website, and suspended trading on the New York Stock Exchange.

From a technical perspective, each of these issues is unrelated. But, what is interesting is that I came across a cyber security company, Norse, which claims to display cyber attacks in a real time. Although I don't know what a typical day looks like, the following video gives you a good idea of the endpoints of each cyber attack.

Cyber attacks in real-time via http://map.norsecorp.com

PS – One more intriguing thing, as I wrote this blog post, is my computer crashed (kernel panicked). Yet another rare coincidence, but it helps spin a good yarn.

Replacing the Legend at Apple

Apple HQ: 1 Infinite Loop

My uncle's worked on Wall Street for half a century. There are two pieces of advice he's repeatedly told me. "Bulls make money, bears make money, pigs get slaughtered," and "You can't replace the legend."

It's the advice about replacing the legend that's interesting. When the legend leaves a great company, things change, almost always for the worse since the legend can't be replaced. Ford at Ford, Dell at Dell, Gates at Microsoft, Perot at EDS, Hewlett and Packard at HP. There's no shortage of great 20th Century companies whose best days are behind them. Companies tend to decline when the founders relinquish control.

This begs the question I've been repeatedly asked over the last three years, "How will Apple do without Steve Jobs?" Is Apple so different that they can transcend this pattern? After all, it's crystal clear that Steve Jobs was the leader who made Apple great. He founded the company and created the personal computer era for the first decade. Then the Apple board of directors pushed Steve out under direction from then CEO, John Sculley. During the decade that Steve was gone, the company came within 90 days of bankruptcy. Steve returned. Apple fans call it the Second Coming. It's crystal clear that Steve made all the difference. Not by going after marketshare. Rather, by creating great products and answering the fundamental question, "Why?" as in, "Why are we doing this?"

Steve's Greatest Invention

What was Steve's greatest invention? It wasn't the Mac, iPod, or iPhone. Steve always believed his greatest invention was Apple, the company. Steve's focus was simply on creating the best possible customer experience, from womb to tomb. Initially, Apple employees learned this by osmosis. When Steve returned to Apple, he made sure this cultural thinking was instilled into the DNA of Apple.

Steve focused on nearly every aspect of Apple. This worked well before the iPod and the iTunes Music Store. Since then, Apple's operations have become almost overwhelmingly complex.

The logistical coordination for Apple to ship their products requires a herculean effort. Tim Cook is certainly the person to manage this. He did an outstanding job as COO. Now, as CEO, he's changed some of Apple's processes to fit his style. Steve relied on small teams. Tim, on the other hand, now cross-coordinates large teams when designing and building new products. These teams have a long term focus on financial discipline.

Steve had the vision. Tim made it happen. I think Tim had the insight of seeing the operational mistakes Steve made. This weekend showed that Apple is still plagued by the same high-quality problem. They simply can't make enough of their products. But, only time will tell if Tim can succeed Steve. The success of the  Watch will be a crucial indicator.

Revolutionary Innovation: Hockey Stick, Curve Jumping Ideas

Innovation is anything that reduces the cost of a transaction. Revolutionary innovation is a curve jumping idea that looks like a hockey stick graph in a growing market. 

There are incremental improvements and then there are revolutionary improvements. The latter are improvements that aren't only twice as good, rather they're ten times better. It's a paradigm shift that disrupts markets. 

The ice trade is a perfect example of revolutionary technological improvements. In the late 1700s, only the rich had ice since it had to be harvested in the winter and then shipped like granite or marble and stored with a short shelf life. Frederic Tudor was Boston's "Ice King" who made his fortune by harvesting and shipping ice to places that would not have otherwise had it such as the Caribbean and India.

Innovation during Ice 1.0 revolved around making sharper saws to cut the ice and inventing insulation, other than hay, to keep it from melting.

With the advent of electricity, ice harvesting was no longer necessary. In Ice 2.0, warehouses could make ice anytime and send it out for local delivery. This is, in its truest sense, a curve jumping disruptive technology. If you worked in the ice business in the late 1800s you needed to pay attention when refrigeration technology came along otherwise you'd be left out in the cold. 

Looking back, it's obvious that Ice 3.0 was the invention of the personal ice maker, AKA: our home refrigerator. If warehouse refrigeration and ice delivery companies didn't start making home refrigerators in the first half of the 20th Century then they were left behind.

Apple: Think Fundamental

Many investors have been hurt by Apple stock's fall from grace as it nears its 52 week lows. There have been calls on Apple to buy back stock, split, or issue a dividend to help prop it up. But, Apple's fundamental thinking transcends form over substance and not to a fault.

It's one thing to speak these ideals yet it's another thing to stick to your guns when your stock price is tanking while investors are suing and screaming. But, whose long term interests do the shareholders have in mind? Every shareholder could chose to not be a shareholder tomorrow but Apple cannot choose to not be Apple tomorrow.

I'm an investor in Apple. But, paying dividends and buying back stock are things that Warren Buffet does since he's a finance guy. Increasing share price is not what Apple's about at a fundamental level.

"Give us your money! Pay us a dividend," demanded the investors not too long ago. So, here we are less than a year later and now these same investors are calling for more money. Let's not forget that, in a publicly traded company, none of the money invested in the stock market actually goes to the corporation. For Apple, that ended with their IPO in 1980.

Apple usually forgoes form over substance. As one of the biggest corporations in the world, they have no written mission statement. Save your corporate mission statements for non-profits where they really matter. Apple has no "department of innovation." All of these fundamentals are in their DNA. Propping up stock price is not.

Virtually every dollar of Apple's $137B in cash and investments is reflected in a dollar's value in the company's stock price. Robbing Peter to pay Paul is shortsighted. You don't make money by buying stock, it's the selling where the money is made. Apple buying back its own stock is merely a gesture symbolizing that the company feels the stock is undervalued. Yes, it decreases the supply of the stock but Apple will never have an opportunity to sell back those shares when the stock price increases.

Apple really is a different type of company. When I first started working there I initially thought that it was about design. And I don't just mean industrial design - I saw beautiful design in everything: software, user interfaces, internal hardware that no one would ever see, etc. I also realized that design wasn't just how it looked, but how it worked. However, it took me a little while to figure out Apple's DNA because I initially worked in a services division that sold into the enterprise. That was two strikes against me since Apple is a hardware company which markets to the consumer. There aren't many Apple software or services that don't directly support their hardware.

If you think Apple needs to pay its shareholders more money by increasing its dividend or by buying back more stock then ask yourself, "What Apple's motivation for not doing that?" As much as I'd like to see Apple increase its dividend or buy by its stock in order to increase its share price in the short term, I know that's not what the company is about.

Apple is about one thing: best possible user experience. And that user is the customer, not the employee or the investor. Apple's metric for this isn't click throughs, page views, or market share; rather, it's unit sales – with a nice margin which is the best of business models. If you build it right then they will come and stay.

Future Prediction
At the end of the day, Apple's investors simply feel helpless as they watch the stock price drop. What these investors really want, even more than a cash payout, is to see Apple enter and dominate a new market. I predict, if Apple gets their way, that the next market will be TV and broadcasting where viewers could unbundle their cable TV packages and, say, subscribe to individual channels via an Apple TV or iOS app. After all, this is exactly that Apple did with the iTunes store.

Wouldn't it be nice (not to mention disruptive) to pick and choose which TV channels you pay for? Imagine subscribing to your local news channel, CNBC, and Spike while forgoing the weekend morning's plethora of informercials and QVC? Seriously, why am I paying my cable company to show me get-rich-quick schemes and instant weight-loss programs?

InTrade Futures Contract to Hedge Against Steve Jobs' Departure from Apple

Yesterday, I contact InTrade and asked them if they'd consider creating a contract to hedge against Steve Jobs' departure as CEO of Apple.

Less than 24 hours later InTrade replied back to me: "Thanks for your suggestion. A market for Steve Jobs to depart as CEO of Apple has now been listed".

These futures contracts are not valid, though, if Steve Jobs dies before he steps down. Why not? InTrade goes on to explain, "We are very reluctant to list a market where people can profit from the death of an individual."
Very classy, InTrade, very classy.

The thinking, here, is that Steve Jobs would step down before he became too sick to lead Apple

Forecasting the future

I came across this forecast that Apple Could Surpass Microsoft in 2010 which I blogged about more than three years ago.

Apple may not have surpassed Microsoft in revenue, but they certainly surpassed them in market capitalization.

Down Markets are a Beach

It's not that I don't care about the down markets, but sometimes, a little change of pace can be a nice break. After working out this morning I took a couple hours and went to the beach – it was in the 80s, again, today.

After taking a refreshing dip in the ocean I just laid out, in the sun, for a nice bit.

Yes, life is always better when the NASDAQ's at 4,000, Dow's at 13,000, and AAPL's at $200. But, hey, I can't control that.

The Real Price Of Gold

Here's an interesting graph showing the price of gold since 1450, adjusted for inflation.

In 1980, gold reached a 2007 inflation adjusted price of $2,150/Troy oz.

Click to enlarge.

[digg this]