Nassim Taleb, author of The Black Swan, isn't a fan of Apple
In his most recent book, Antifragile, Taleb makes numerous
references to the Apple products he owns and draws on the wisdom
of the late Steve Jobs to help support some of his arguments. But
despite his high opinion of Jobs, Taleb isn't a fan of Apple.
"I am a fan of Steve Jobs, not Apple," Taleb told
In The Black Swan, Taleb focused on the concept of Black Swans
-- rare, significant and unpredictable events. In Antifragile,
Taleb attempts to provide an answer to the Black Swan problem:
How does one deal with a world susceptible to Black Swans?
One of Taleb's central themes in Antifragile is the concept of
"optionality." Optionality, just like an options contract, means
having the right to collect on the upside while avoiding the
obligation of the downside. (When a trader buys an options
contract, they have the right but not the obligation to exercise
Apple's corporate strategy limits optionality, as the company
maintains tight control over its devices. On the other hand, both
) and Google (NASDAQ:
) have embraced it: The former allowed Microsoft to dominate the
PC business in the 90s; the later might allow Google to surpass
Apple in the mobile handset market.
Microsoft allowed third party hardware manufacturers to build
its PCs, while going out of its way to court developers to write
applications for the Windows operating system.
There were negative consequences to be sure; the Windows
operating system is much more susceptible to computer viruses and
hardware failure. But the ultimate outcome was undeniable:
Microsoft has had, since the mid 90s, a practical monopoly on the
The same might be true for Google in the mobile world.
Google has been even more aggressive than Microsoft in its
push. Rather than charge hundreds of dollars for a license,
Google gives Android away completely for free. It even allows
companies like Amazon (NASDAQ:
) to reverse engineer its operating system for their own
This has led to Google taking a commanding share of the global
smartphone market -- 75%.
Still, in the U.S., where consumers are more able to afford
Apple's expensive iPhones, Android is in the minority. But there
are signs this may be changing.
Apple shares have slumped since last September, and continue
to trade lower following the release of the company's fourth
quarter earnings. Apple sold 48 million iPhones in the last
quarter -- a significant amount, but less than many analysts had
There are also rumblings that Apple has been surpassed in the
high end phone market. Samsung's Galaxy S3, with its larger
screen, is believed by many to be a better phone than the iPhone
5. At the same time, the LG-produced Nexus 4 offers similar
hardware to Apple's iPhone but costs less than half -- making it
more attractive to budget conscious consumers.
By giving away its operating system, Google is using the
optionality of the broader market. Different hardware
manufacturers will tinker with different style handsets which
will appeal to different consumers.
Perhaps consumers want larger phones. Or, perhaps they want
cheaper phones. Perhaps they prefer phones with keyboards or
longer battery lives. To Google, it doesn't matter. Google
benefits no matter which Android phone wins out -- or even
better, if many different ones do.
Apple, on the other hand, must accurately predict the type of
phone consumers want. And there are growing signs that management
may be losing touch.
On the earnings call Wednesday, CEO Tim Cook was asked what he
thought about the larger screen on Samsung's phone.
"We've put a lot of thinking into screen size and we think
we've picked the right one," Cook said.
The problem here is that Cook must be certain. If he's wrong,
and consumers strongly prefer a different screen size, Apple's
iPhone empire could be toast.
Google doesn't have this problem. Instead, Google shifts the
downside of this question to Samsung, Sony (NYSE:
), Motorola, LG, and HTC (among others) while it retains the
If Samsung makes a fantastic phone, it supports Google's
Android operating system, and Google benefits. But if Samsung is
surpassed in quality by say Sony, it doesn't matter to Google, as
it still benefits.
Of course, Apple could alter its strategy and make a variety
of different iPhones, and in the end, it might be forced to. But
that could be costly, eating away at Apple's margins and
stressing its supply chain.
Shares of Apple traded near $443 on Friday, down about
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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