Every (insert time period here) there seems to be another article written by some blogger or journalist somewhere insisting that Apple lacks innovation.
Writers like to claim that Apple has “killed innovation” or ponder if Apple has lost its “innovation mojo“.
For instance, here is a quote from a “mojo” article from 2017 (emphasis and bolding mine):
Apple has entered one new product category under Cook. It released the Apple Watch. But it was late to the wearables game and Apple has yet to release figures on sales of the Watch. It has also introduced Apple Pay and thumbprint security. But many analysts don’t think these compare to previous innovations.
OK… Regarding wearables… Apple recently entered and now essentially OWNS the wearables market.
Apple Watch is a great device. I wear my Series 2 daily and it replaced my trusted Rolex GMT Master II. I do lust after the Series 3… No wonder last year Apple Watch outsold the entire watch industry… Combined.
And regarding Apple Pay and mobile payments… Apple Pay works very well. I do carry my phone with me everywhere and my wallet less so.
Looks like I’m not alone…
Just take a look at the chart below from Statista.
This chart from less than 6 months ago shows the number of retailers accepting mobile payment/digital wallets now and their expectations to accept them in the future.
Apple Pay is beating Android and even PayPal, the most widely accepted online wallet, in expected mobile payment adoption.
To me these articles that are critical of Apple’s level of “innovation” are so myopic and stupid for four reasons.
- They don’t acknowledge the incredible, innovative nature of most new “inventions”
- They don’t provide any relative context or perspective (i.e. innovative compared to what?)
- They are looking at the trees, not the forest (or moat).
- They are not interested in, or asking, the most important question: Why?
These articles remind me of the time that Steve Jobs shot back at a Gawker blogger back in May of 2010 for condemning Apple’s iPad, among other things.
They also remind me of the “piling on” mentality during the period from September 2012 to July 2014 when the press literally could not criticize Apple enough…
We’re getting into another one of those periods now.
Blah blah blah, whine whine whine.
Meanwhile, AAPL will buy back more stock soon, reduce its float, increase the dividend further, continue to crush it in its services business, release a bunch of iPhone X clones that will kick-start the real “supercycle” that some of these bloggers can’t see will happen, causing another revenue and profitability spike… All while maintaining a low P/E and a great dividend.
Sigh.
At least Warren Buffett knows it’s true.
And… What is the Meaning of “Innovation” Anyway?
First, define “innovation”.
The definition of “Innovation” below is from Webster. Webster writes that innovation is “The introduction of something new” or “A new idea, method or device”.
In the past two years, Apple has introduced at least three new products or iterations of products, that fit the above definition:
- Apple Watch with Cellular Capability
- EarPods
- Facial Recognition on iPhone
Each of them are innovative in their own important ways.
Apple Watch:
For all intents and purposes… Apple Watch is the new iPhone.
This makes perfect sense if you think about it… The Apple Watch is essentially an iPhone on your wrist.
Apple will continue to iterate, and dominate, as it has with iPhone.
Apple Watch is also the focal point of the next world to conquer in technology: health.
Apple Watch is firmly positioned in this absolutely massive opportunity. Indeed, the opportunity for Apple in healthcare is reminiscent of a Tony Montana quote.
EarPods:
EarPods are amazing. They “just work” as you would expect them to and, even though I use an iPhone 6S, I never even think about using my headphone jack.
As EarPods and Siri improve, the Apple Watch, EarPods, Siri combo will become more of a day to day experience.
Apple should be flattered… If you look at the actual competition in the wireless earbuds category, they are all absurd, direct EarPod knock-offs.
Facial Recognition:
Facial recognition on iPhone is actually incredibly important…
Even though Apple’s new Face ID technology is only famous for “Animojis”, it’s important because of the (soon to be major) new problem of social engineering and cyber crime called “Face Jacking” or “Facejacking“.
Why is this important? Because it won’t be long before your identity online can be spoofed by any kid with some free online video software and a free app. I could even see Snapchat launching it as a fun “feature”.
NPR recently did a story about it.
The potential for chaos when this technology meets human stupidity is unfathomable.
To counteract this huge, looming problem, Apple is developing Face ID to provide trusted verification and also Apple News. Apple News could, in theory, become a trusted source for verified news in a wasteland of “fake news”.
Of course, I don’t know if Apple really is working on this…
But I hope they are.
As mentioned earlier, I trust Apple more than any other tech company… And even though they don’t get everything right, I trust that eventually they will.
There are countless other iterative innovations for which Apple is under appreciated by critics.
Apple innovates in customer service, in its efforts to promote the use of renewable energy, in its recycling program, and in its generous treatment of shareholders through its dividend program.
Where else can you find a company that regularly, consistently produces more cash than the entire rest of its industry combined?
Where else can you find a company that pays a generous dividend on a low multiple while competing, aggressively, in the highest growth areas of technology today?
Nowhere.
Basically Apple innovates in a sea of less profitable companies.
Elon Musk As CEO of Apple
People have pondered whether Apple should buy Tesla and make Elon Musk CEO of Apple.
Should Elon Musk Become CEO of Apple so that the company can recapture the Steve Jobs “glory days” with the charismatic, showman innovation leader?
It’s an interesting idea, but not necessary to solve Apple’s “innovation problem”.
Elon Musk might solve a CEO charisma problem, but not an innovation one.
Go Ahead and Criticize
The one silver lining I can say that exists as a result of these critics is that they affect the sentiment around AAPL stock…
So for that I (and Warren Buffett) can thank them.
Because whenever they pile on and start whining about Apple’s “lack of innovation” the stock dips and I can either buy more or my dividend reinvestment campaign does it for me.
It’s happened again and again. And I expect it to keep happening for the foreseeable future.