Quality to the core

Home | Op-Ed | Quality to the core

Sep 22, 2012

There’s a reason why Apple continues its success

On Aug. 20, Apple was reported the “most valuable” company ever, as measured by its market capitalization of roughly $619 billion, calculated by multiplying the number of Apple shares by the price they were trading at. Four days later, a California jury found for Apple in its patent case against Samsung, where the Silicon Valley firm has claimed that the Korean copycat conglomerate infringed numerous Apple patents in the design of Samsung’s smartphones and tablets.
The $1 billion plus damage award, the immediate spike in Apple’s market cap to above $630 billion and even the possibility that many Samsung products will have to be yanked from stores shelves and redesigned were titillating but trivial compared to the truly historic and profound lesson to be learned from these closely connected Apple stories.

Apple’s triumphs in court and in the marketplace are vindication of a visionary strategy for success that can and should be applied by all Americans that make, sell and buy things. Apple is winning because it elevates innovation and quality over quick sales at a cheap price. Apple has been willing to stand alone and defend its vision, core values and property while others go along to get along.

The dominant ideology accompanying the massive post-World War II migration of jobs, research and wealth from our shores to foreign competitors involves an article of U.S. business and government faith, that the American desire to buy lots of cheap stuff must trump all else. In the days after 9/11, President George W. Bush equated patriotism with going shopping.

Another misguided strategy is failing to protect our intellectual property, embodied in the patented and copyrighted works that Americans continue to make better and more plentifully than the rest of the world combined. We act as if our best work is not worth protecting.

Our government and business leaders regularly beat their breasts about protecting our intellectual property from foreign piracy. They also constantly rail against the “dumping” of below-cost foreign goods, often made by underpaid, slave, prison and even child labor. But enforcement of U.S. laws against piracy and dumping is miniscule relative to the number and magnitude of the offenses. For example, American media conglomerates know that their movies are reproduced by Asian pirates even before they are available here. Nevertheless, the encryption and other protections they utilize can easily be defeated by amateurs.

In a similar way, our politicians regularly promise tough measures to deal with unfair Chinese trade practices. However, virtually nothing is done, lest the flow of cheap goods be interrupted and we anger the Chinese holders of more than $1.5 trillion of our national debt.

From Apple’s earliest days, its founders Steve Jobs and Steve Wozniak took a different, often contrarian, path. They emphasized the differences in Apple’s products, rather than interoperability with their competitors. Apple established iTunes and the 99 cent per song pricing model in a world where Americans had begun to believe that the Bill of Rights and Napster had granted everyone the right to download music without payment to the artists that composed and performed it or the companies that “pressed” those digital files.

Years later, Apple saw American authors, bookstores and publishers being decimated by Amazon’s quest for a monopoly of e-books by selling them below cost and free-riding on the efforts of brick and mortar booksellers.

In response, Apple opened its iTunes Bookstore with a pricing model that allowed authors and publishers to control the price of their own works. Momentarily, Amazon’s 90 percent market share plummeted and authors, publishers and independent booksellers gained strength. But last spring, waving the flag of Americans’ right to buy below-cost books, the United States Department of Justice sued Apple and the publishers under the antitrust laws, begging the question of why Amazon couldn’t fight its own legal battles.

Apple has not stood alone against this trend. Microsoft, the previous market cap champion and still No. 3 globally, competes more on quality and innovation than on price. IBM, No. 4 on this roster, has transformed itself into a creator of ideas and solutions for industrial, environmental and social problems.

However, more than any other American company, Apple has stuck to its founders’ vision and thrived through a commitment to protecting its property and to offering something different and better. Another vindication of this strategy occurred last week when Apple unveiled iPhone 5, was deluged with 2 million pre-orders and saw its stock price spike, yet again, to above $700 per share.

Soon after an April 17, 2012, article on these pages discussed the plight of Chinese workers making Apple products and predicted that “Americans would be willing to pay a good deal more for an iPad … not only designed by but made by American workers” Apple CEO Timothy Cook, spoke of Apple’s intention to build more Apple products here.

President Eisenhower’s Secretary of Defense, Charles Wilson, once said “What’s good for GM is good for America.”

Today it seems that our fortunes are generally consistent with those of American champions like Apple and that its strategies warrant attention and emulation.



Priceless Cover

Priceless: The Case that Brought Down the Visa/ MasterCard Bank Cartel

Journal of Plague Year cover

Journal of the Plague Year: An Insider’s Chronicle of Eliot Spitzer’s Short and Tragic Reign