So the great Steve Jobs has stepped down from his post as chief executive of Apple. Among the Silicon Valley faithful there is much weeping and wailing for this strange but undeniably brilliant individual who has become the messiah of the digital age.
It’s sad to see somebody so young – Jobs is just 55 – struck down by cancer. But his resignation has at least given him one cause for satisfaction. Judging by the loss of value of Apple’s shares on the back of news, he was the world’s most valuable CEO.
But his genius may not be lost to Apple because he has offered to “serve as chairman if the board sees fit”. Somehow I cannot see anyone voting against that motion.
What’s really incredible is the progress of Apple’s share price since Jobs took over. Ten years ago, you could have bought Apple shares for just $9 each. Today, you would have to pay $390. This is a phenomenal return over ten years – more than 4,230% – which begs the question: should we be looking for a new moody computer-geek with a penchant for turtle neck sweaters, or was the Apple success story about a little more than this?
What made Apple’s 4,230% gain possible
My mind is taken back to the final of the BBC’s Apprentice. This competition was won by Tom, a self-styled inventor. Among the pushy, hard-nosed types, his good manners set him apart. He had plenty of ideas, not all of them good ones.
His ‘emergency biscuit’, designed to provide comfort when all had gone wrong, seemed like a good excuse for binge eaters, but failed to impress anybody else. And yet when Sir Alan made his final decision, pointing his stubby finger to fire rival Helen and confirm Tom as the victor, it was because he was “a product man at heart”.
The product that Tom pitched at Sir Alan and his colleagues in the final was an ergonomic chair that automatically sensed the shape of your back and provided support where necessary. But this was not the one that seemed to impress Sir Alan. What fired the entrepreneur’s imagination was Tom’s curved nail file, which he had successfully sold to various retailers.
Tom’s ability to actually sell certainly impressed Sir Alan, but it was that line about being “a product man” that stayed with me. Sir Alan made his name through a product – the low-priced Amstrad television. He clearly likes something that he can look at, touch and show to the buyers. He understands just how much it costs to make and how much profit he can garner.
The alternative to a product business is a service business. Helen, the other finalist on The Apprentice, came up with the idea of a concierge service for busy people. This was not particularly original and unlikely to be of interest to anyone other than the super-rich. But those were not the reasons that Sir Alan rejected it. At heart, he knew we would be prepared to pay for something solid that we could hold in our hands, but that we would not be so keen to pay for somebody else’s time.
Last week, a friend told me that he had paid £120 to have his golf swing checked. The expert told him that he needed to put slightly more weight on his right foot – and that was all. My friend was not impressed by this. “A waste of £120”, was his opinion.
What he paid for, of course, was the expertise of the golf instructor. Whether it is a visit to the dentist or a quote from a garden designer, both of which can seem very expensive, it is the expertise we pay for. But we are in the business of making an investment profit, and my experience on this score points me in one direction.
Why, like Sir Alan, I’m a product man at heart
A good service can make a good business but, like Sir Alan Sugar, I too am a product man at heart.
If the product is a good one then it will sell, almost regardless of the people behind it. If the product is a dud then it won’t sell, however smart the management.
No doubt the success of Apple had a huge amount to do with Steve Jobs – after all he is Apple’s creative genius. But the overriding reason for this success has been that Apple has come up with great products: products such as the iPod, which created a market for music downloads that previously did not exist; products that are well designed and appeal to consumers all over the world.
Thanks to these ingenious products – and to the visionary in white running shoes who brought them into being – Apple has become one of the biggest success stories in corporate history. Its success provides an example of the sort of rewards that can be made by bold and far-sighted investors. And it’s these kinds of companies that I aim to find at an early stage for readers in my Red Hot Penny Shares newsletter.
A chilling warning about the UK economy
You’ll know by now that I’m a glass-full kind of a guy. I look on the bright side of things. And I’ll invest on that basis – in companies I believe can deliver extraordinary growth.
But I’ve got to say, this two-minute video-clip that’s doing the rounds sent shivers down my spine. It talks of a period when the UK economy was on its knees… and draws eerie parallels with what’s happening right now. Imagine that: a return to the despondency and hard times of the 1970s. It doesn’t bear thinking about.
I remember those times well… and it wasn’t pretty at all. So I’m desperate to know what these guys know (or think they know) about what lies ahead. If they’ve got even one idea of how I can protect myself if we are headed down that road, I want to know about it.
You need to see this short trailer now. (And make sure you register to get the full report as soon as it’s released.)
• This article is taken from Tom Bulford’s free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
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