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Down memory lane with Apple on the 10th anniversary of Steve Jobs’s death

‘What Apple has taught me over the past couple of years is that it’s not always the best product that wins. It’s the product that makes things easier’: Irnest Kaplan of Kaplan Equity Analysts.

 

SIMON BROWN: I’m chatting now with [technology equity analyst] Irnest Kaplan. On Monday morning I was sitting in the studio, remembering Steve Jobs. The 10th anniversary of his passing is Tuesday, October 5. Irnest, I appreciate your time today.

As I was pondering Steve Jobs, you tweeted two things; the one was his presentation – that launch for the iPhone in January of 2007.

This video is on YouTube, of course, and it is an astounding presentation. He was an astounding individual. You also make the point, and I quote you, that ‘the iPhone is arguably the most successful product in history’. I think you’re spot on. There’s a compelling argument to say that it is.

IRNEST KAPLAN: Simon, thanks for chatting and hi to all the listeners. I said to you earlier, just before we started recording, I wish I was analysing Apple aggressively when Steve Jobs was still alive, because I wasn’t. I only started looking at him very closely a couple of years back.

He really had a great way of presenting his ideas. He always made it sound so simple, but you knew there were thousands of hours behind the scenes happening to allow him to get up on stage and present those things. Yes, what a visionary, what a great product. I still use it, use my iPhone every day – fantastic. It never crashes and works well.

SIMON BROWN: It never crashes, works well. Prior to that, I remember trying my hand at smartphones and those horrible little keyboards, which are too small for my sort of oversized hands; he fundamentally just created a new way of looking at it. And of course out of that then also came the iPad, which in some ways is just like a large phone. But it’s the simplicity of something that is so deeply complex and powerful.

IRNEST KAPLAN: It is. Look, I also went through my fair share of the Nokia Communicator, Blackberry, all those phones. I enjoyed them all and I was actually quite late to get the iPhone. I just didn’t like the concept of touching the screen. I thought, that’s quite strange. But after you’ve used it, it works for you well. Like he said, the problem with the keyboard is the different applications have to all use the exact same keyboard, whereas on the touch screen you can change the application or change the keyboard to suit the application, which I think is obvious now. He obviously just had the vision. So they did it and they deserve all the success that they’ve reached from there.

SIMON BROWN: It has been a success. I remember when Steve Jobs had left Apple a couple of months prior, Tim Cook took over. He had been the sort of supply-chain maestro because part of the process is, if you’re selling 70, 80, 90 million iPhones in a quarter, there’s a lot of logistics behind it.

There was a lot of concern around Tim Cook. He’s brought out the [Apple] Watch. He’s got the M1 chip service, which  is now [worth] $20-plus billion. The share price is up 10X. We lost Steve Jobs and a visionary and a great leader and product developer, but Tim Cook stepped into those shoes.

IRNEST KAPLAN: Look, he’s done such a great job with Apple that, when you look at Berkshire Hathaway, Warren Buffett getting into Apple about five years ago and having four times his money in four or five years, who would have thought a company of that size would have gone up four times over four years or something? It’s just phenomenal. So they’ve really executed very well on just about everything.

In fact, this call I’m speaking to you now on is through my ear pods. Those came in as well. Maybe that’s not the most revolutionary product but, gee whiz, it works so well. It’s always clear. Yes, you’ll get the purists saying you get better earphones – but it just works. It pairs up nicely and there are no issues.

I think what Apple has taught me over the past couple of years is that it’s not always the best product that wins. It’s the product that makes things easier, and the easiest product to use. It makes people smile.

Those are the products that people just carry on using; not necessarily the one with the biggest horsepower or the most pixels or whatever the spec is.

I think what Apple does incredibly well is they package their products beautifully. They focus on their user interface. That’s like they’ll live and die by their user interface. I think many companies can learn from that.

SIMON BROWN: I like that. It’s not always the best. It’s also not something which…is always first to market. I mean, the iPod wasn’t the first. There were others around Microsoft, Entrade, or the Zoom, which didn’t work. There were smartphones. The tablet was a decade before the iPad. It’s not necessarily [being] first. It’s just making it an experience. That’s what works. To your point, you don’t have to be the best. You don’t have to be the first, you’ve just got to make a user experience par excellence.

IRNEST KAPLAN: Exactly. My entry to an Apple product was through the iPad in 2011. That was around the year that I think Steve Jobs died. In fact, he had died already. No, no, he hadn’t. I bought it in September. Anyway, I went to the shop, I looked at the iPad. It was the version two, and I looked at the competing Android tablet. I can’t remember which brand it was. There was no comparison whatsoever. The iPad was smooth and slick to your finger. The other one was like jagged. You couldn’t compare the two devices. So I bought the iPad and I’ve subsequently bought a few iPads and then the iPhone. I don’t have the computer yet. I’m still with Microsoft.

SIMON BROWN: Well, I know they’ll get you that in time. We’ll leave it there.

Irnest Kaplan, I really appreciate your time down memory lane. Thanks very much.

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Phenomenal execution.

When you compare Apple to a long list of other investment choices, what stands out:

Hardly any large acquisitions. Biggest was $3b the rest is hundreds of small niche tech companies. Large acquisitions tend to be disasters, ask Microsoft about Nokia, Skype, LinkedIn probably $50billion down the drain. Apple has a longterm return on capital of I think over 30% That is the hurdle that they set for major initiatives. And they achieve it.

Hardly any once-off results entries. They just don’t have “oops” moments and write-downs.

Frightening supply chain management. Take a look at their cashflow from operations per share.

They can already and will soon achieve the unthinkable for a large (largest) company: They will have negative reported equity because they will have (through buybacks and canceling those shares) paid back all the capital shareholders ever advanced, plus all the profits ever retained and they will then have net surplus cash and pay a dividend. Basically they would have ticked off everything that the purpose of a company really is.

My biggest mistake was selling half my holding when ai thought the overall market was a bit crazy. When you go back 12y to the financial meltdown, Apple’s dividend now is more than their share price then. Up 40 times!

Irony : when Jobs passed he had more wealth in Disney shares than Apple shares

RIP Steve Jobs. The world has not improved since you are gone.
What an understatement.

End of comments.

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