You didn’t think I’d stop at headphones, did you?

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Bill Simmons, writing at Grantland:

Super Bowl XLIX was like the last episode of The Sopranos (and I’m not the only one who thought so). I will always remember watching it, I will always be dumbfounded by the ending and I needed 48 hours to figure out what I thought happened. What was Bill Belichick doing? What was Seattle doing? What was EVERYONE doing? This isn’t a retro diary, it’s a retro retro diary. It’s time to relive, regurgitate, recelebrate and re-heart-attack the final 12 minutes of Super Bowl XLIX.

Bill Simmons at his absolute best. The insanity of the final minute made it easy to forget just how crazy and how exciting the entire fourth quarter was.

John Gruber is, as only he can, relishing the claim chowder – his collected bits of analyst wisdom sure, again and again, that Apple is doomed.

Apple, of course, is not doomed. In fact, the company is the very opposite of doomed, having just posted the best quarter of any company, ever.¹ The analysts Gruber mocks were not just wrong (and, as everyone knows, they are only a small part of a much larger sample), they were hilariously wrong, and cost their clients millions of dollars.

And yet, the perception that Apple is somehow hanging on by the skin of their teeth persists. I was speaking to someone about Apple’s particularly excellent China results this afternoon, and was struck at how their questions were so focused on threats to Apple – “How will Apple respond to Xiaomi” for example. This is in stark contrast to the way most think about a company like Google, where their dominance in whatever field they choose to enter is assumed, just as Microsoft’s was a decade ago. Apple, though, is always a step away from catastrophe.

It’s difficult to overstate just how absurd this is, but here’s my best attempt: last quarter Apple’s revenue was downright decimated by the strengthening U.S. dollar; currency fluctuations reduced Apple’s revenue by 5% – a cool $3.73 billion dollars. That, though, is more than Google made in profit last quarter ($2.83 billion). ² Apple lost more money to currency fluctuations than Google makes in a quarter. And yet it’s Google that is feared, and Apple that is feared for.

I’ve previously, in one of the first ever posts on Stratechery, tried to figure out why it is that people keep getting Apple so wrong; I chalked it up to an over-reliance on modeling and magical manager syndrome. And, while I think that is still true, it’s hard to escape the conclusion that much of the reporting and analysis about Apple specifically and tech broadly is governed by bad assumption on top of bad assumption on top of bad assumption:

Bad Assumption 1: Markets are monolithic

If you look at a market monolithically, simple math dictates that the average will be most heavily influenced by the majority. And, income distributions being what they are, the majority of customers in any market will have less money, and likely be inclined to prioritize price. Ergo, monolithic market analysis necessarily concludes that customers prioritize price.

Markets, though, are not monolithic. They are wildly disparate, able to be endlessly segmented not just by income, but by a whole host of demographic and psychographic factors. In every market there is a segment of people who have the means to buy nice things, and there is a segment that values a superior experience. These segments quite often overlap, to Apple’s benefit.

Bad Assumption 2: Consumers only care about speeds, feeds, and price

The old hoary chestnut that “Apple only wins because its advertising tricks people into paying too much” was raised in my Twitter feed last night, and while the holders of such an opinion are implicitly saying others are stupid, my take runs in the opposite direction: it’s not that people are irrational, it’s that human rationality is about more than what can be reduced to a number. Delight is a real thing, as is annoyance; not feeling stupid is worth so much more than theoretical capability. Knowing there is someone you can ask for help is just as important as never needing help in the first place.

Apple spends an inordinate amount of time and resources on exactly these aspects of their products. Everything is considered, from the purchase to the unboxing to the way a webpage scrolls. Things are locked down and sandboxed, to the consternation of many geeks, but to the relief of someone who has long been conditioned to never install anything for fear of bad actors. Stores – with free support – are just a few miles away (at least in the US), a comfort blanket that you ideally never need. All of this is valuable, even though much of it is priceless, only glimpsed in an average selling price nearly triple the industry average.

Bad Assumption 3: Apple’s talk about “making the best products” is for show

Apple executives have again and again stated some variation of the line Tim Cook delivered during his prepared remarks on yesterday’s earnings call:

Apple’s mission is to make the greatest products on earth and enrich the lives of others

Surely it can’t be so simple! Surely to believe such tripe is the ultimate in fangirl-hood. And, in fact, I hesitate to write about stuff like this, for fear of the fanboy angle. This blog prides itself on calling things as I see them, not as I wish they were. At a more fundamental level, I’m much more concerned with the underlying strategies and trends that govern companies, and the incentives that ultimately decide how effective those strategies are.

It’s incentives, though, that make Cook’s line so believable. If you believe, as I do, that there is a segment of the market that is not strictly governed by the lowest price, and if you further believe that customers value products that deliver more value than what can be reduced to a number, then you believe there is an opportunity to create best-in-breed experiences for a handsome price. In this view, view Apple’s focus on “making the best products” is perfectly aligned with their market opportunity.

To put it another way, is Apple concerned with making the best product, or with making the most money? The answer is yes.

And so they have.

The post Bad Assumptions appeared first on stratechery by Ben Thompson.

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Dr. Drang, in an excellent piece on l’affaire Functional High Ground:

I think a lot of us have lost our spirit, and that’s a problem for Apple. Apple may not think so — its financial statements would argue that it’s in great shape — but it’s being buoyed by an excellent run of hardware releases and a certain amount of inertia. Eventually, though, it runs the risk of becoming another Microsoft, with users who do more complaining than praising. When a company’s best users lose their spirit, it loses their leverage.

Every company’s downfall is different. Microsoft didn’t have a major update to 2001’s Windows XP until 2006’s Windows Vista, which was rejected by its customers. The “fix”, Windows 7, didn’t ship until 2009. I can’t help but wonder whether Apple’s recent focus on annual significant-but-not-hubristic (read: Longhorn) updates to Mac OS X is an attempt to do the opposite of what Microsoft did to lose its edge with Windows. The annual schedule keeps OS X from stagnating, and keeps Apple from biting off way more than it can chew, leading to a years-long death march that never actually ships. (See also: Copland and Pink from Apple’s own history.)

But in avoiding the problems of stagnation and hubris, it feels like Apple has run into a different problem: nothing ever feels settled and stable. If the pattern Apple has established the last two years holds, by the time the loose screws get tightened in iOS 8 and OS X 10.10, we’ll be getting developer betas of iOS 9 and OS X 10.11 at WWDC. And as Guy English has keenly remarked numerous times, the annual schedule means that by now — that is, January — a lot of engineering talent in Cupertino is being directed to next year’s OS releases, leaving less talent on the task of tightening the remaining loose screws in last year’s.

Apple’s decade-ago development schedule for OS X now seems downright leisurely.¹ 10.0 was a glorified public alpha — more of a proof of concept than a usable OS. 10.1 followed just a few months later in September 2001. 10.2 shipped in August 2002, 10.3 in October 2003, and 10.4 (Tiger) slowed things down by not shipping until April 2005. That schedule was close to annual, but in those years, Apple was just picking low-hanging fruit. Mac OS X was incomplete, inconsistent, and slow when it debuted. Those first few years were about making it more complete, consistent, and fast. It’s fair to say, in hindsight, that 10.4 Tiger was the first good release of Mac OS X, the first one that truly delivered on the promise of a union between Mac OS and NeXTStep.

And then 10.5 (Leopard) didn’t ship until October 2007, after having been promised for June of that year. That was the time Apple issued a decidedly Jobsian “Hotnews” post acknowledging that Leopard — which even if it had shipped on time would have appeared more than two years after 10.4 — would be delayed an additional four months because Apple had pulled engineering resources to work on the original iPhone release.

It was then another two years before we got 10.6 (Snow Leopard), which Apple proudly marketed as having no new features. That’s not true, of course — Snow Leopard had plenty of new features, including significant new technologies like Grand Central Dispatch, Apple’s solution to parallel computing. But it really was true that Snow Leopard didn’t introduce many new user-facing features. It was exactly what Apple billed it as: a shoring up of the OS’s technical foundations. It was then another two years before the release of 10.7 (Lion) in June 2011.

So from April 2005 through June 2011, Apple released only three major updates to Mac OS X, one of which had “no new features”. Again: an almost leisurely pace by recent standards. But this led to criticism that Apple only cared about iOS. Predictions that Apple would soon enough abandon the Mac were common.

It’s a hard balance to strike. When Mac OS X releases were roughly biannual, we complained that Apple was neglecting it. Now that the releases are annual, we’re complaining that they’re going too fast.

Guy English, earlier this week, regarding Marco Arment’s argument that “We don’t need major OS releases every year”:

Sure, it’s a pain in the ass for us at times. But “we don’t” is starting to echo through the people for whom iOS devices were a revelation. These devices made people believe in the magic of technology again. Now? I hear a lot about planned obsolescence and buggy software.

“No! I know these people and I swear that’s not at all their intent!”

That really only goes so far.

The worst thing is that it’s seldom anything big, onerous or serious. It’s just weird little things that don’t work that add up to create the impression that “computers” are incomprehensible.

I don’t regret upgrading from iOS 7 to 8, or from Mac OS X 10.9 to 10.10. I definitely don’t want to switch to Android or Windows. But I’d like to think that a year from now, I’ll be running new versions of iOS and OS X that don’t do much more than what today’s versions do — instead, that they just do those same things more reliably and consistently.

My hope is that the reliability issues we are seeing in iOS and Mac OS X in recent releases are largely the inevitable result of Apple going through numerous transitions simultaneously. Extensions, XPC, iCloud Drive, Continuity — these things require coordination between all three of Apple’s platforms (mobile, desktop, cloud). That what we’ve been seeing the last few years is this decade’s equivalent of the first few years of Mac OS X — rapid development and flux that precedes an era of relative stability and a slower pace of change. Let iPhone, iPad, and Mac settle in — and let the rapid change and flux flow through Apple Watch, CarPlay, a new Apple TV, and whatever else comes next.