Apple's problem is it doesn’t know how to grow its business. Not with respect to the huge chunk of money sitting in its various bank accounts ($137 billion). In that sense Apple is the story of American capitalism gone wrong.
The company has become an accumulation machine and reflects the problems of the American economy – hugely innovative and successful but paralyzed in the face of the 21st century’s investment needs.
Last week’s report from Bain and Co shows that the sheer level of capital accumulation is now a fundamental of the global economy. Though there is growth in underlying GDP around the world, the growth of financial assets is much faster.
But the irony in this is that the majority of assets still reside in the US and Europe. They are not finding their way to investment projects in emerging markets and are tending instead to inflate asset prices.
There are two clear lessons just from that report – American and European companies are under-serving real economic growth, and we will pay for that neglect in the long term. And investment horizons need to be longer term anyway – there is so much cash to burn that the time is ideal for long imaginative projects..
Companies like Apple, Google, Philips need to be evolving new paradigms in new economies not just trying to sell them on high margin devices or new ad mechanisms. Apple in fact needs to being painting a picture of itself as the post-device company, as Google might well do with Project Glass.
But this is Samsung’s CEO on Jan 2, 2013 having climbed to the top of the tree in smartphones.
“Forget about the past and start anew,” Lee exhorted employees in his New Year’s address on Jan. 2. “We must search out new businesses that Samsung’s survival depends on.”
What would a post-iPhone Apple look like? If you are an investor you have a right to know.
Anything that needs a liberating interface could be an Apple product or service. And the real economic needs of the growing world do not fit into the palm of your hand.
It needs to engage in whatever this crazy, chaotic, fast changing world wants of it because for as long as Americans sit back and congratulate themselves on their innovativeness, China will mop up the loyalties and markets of emerging market after emerging market. Apple has a role to play in imagining how these economies will benefit from its ingenuity. And time is tight.
News that China’s trade in goods now exceeds that of the United States is no surprise but it comes with some reassuring qualifiers. Add in services and the USA is still top. The US economy is still twice the size of the Chinese and per capita income is five times that of China’s.
The problem though is that nobody outside of the USA is looking for caveats when they observe the relative decline of American power. It feels like a result.
Yet, the USA still has the best and richest tech companies – yes, look at Apple and Google, just ahead of Samsung and likely to be overwhelmed by the new generation of Chinese tech companies that enter new markets with a development agenda as well as a product to sell.
The problem for America is not knowing how to use these great companies and their gifts, brains, and resource in strategic ways for the US economy. The problem for Apple is strangling itself with its device-focus and its inability to graft a development role onto its bank account.
Of course it is their market-given right not to spend its money but I am 100% sure that the US economy cannot prosper if its best companies hoard cash on this scale and I am as sure that competitor regions are happy to see them idle that cash away.
The cash hoards in fact are beyond imagination – can you conceive of how to spend $137 billion? Here is the crux of it, I think. Apple, like America, cannot conceive of its responsibilities in the wider world.
America and its companies lack a capitalist-driven agenda to participate in the great economic battles taking place in Africa and India and maybe that’s because they can skim decent margins on devices in China. According to The Guardian: