What would Apple do?

As a vestige of a previous life, I still somewhat track the personal computer industry, with a particular interest in the fortunes of Apple, a company I have long admired for its innovative and elegant products.  And it has always been particularly amusing to read the dire warnings and earnest advice of industry analysts and other “experts” pontificating about Apple’s latest imagined misstep.

Most recently, as the world economy headed into a nosedive, the fear and loathing focused on price… specifically, Apple’s continued refusal to dip its toes into the low end of the market at a time consumers are rightly counting their pennies.  For the first time in years, Macintosh market share was on the decline in terms of units shipped.  Low cost netbooks were the hot new thing, yet Apple was snubbing its nose at the market.  Meanwhile, Microsoft was more than happy to pick up on the “Macs cost too much” meme with an advertising campaign that featured Windows PCs’ low cost versus Apple’s pricey cool factor.

Yet this week, amidst all the usual economic gloom and doom, and even as Microsoft was announcing its first revenue decline, well, ever, Apple bucked the trend by reporting a 15% profit increase, and its best non-holiday quarterly revenue and earnings on record.

So much for conventional wisdom.

There are a number of factors that have contributed to Apple’s relative success during these tough economic times, but I think there are two that stand out from the rest.  The most obvious is that Apple’s counterintuitive strategy of focusing on the high end of the market during an economic crisis turned out to be pretty damn smart.  The high end is where people with money tend to hang out, and these are exactly the people suffering the least during the Great Recession.  Apple’s devotion to quality, design, and yes, coolness over price, is also responsible for enabling the company to maintain gross margins the rest of the industry drools at.

The other major factor in Apple’s success, and somewhat related to the first, is that, at least since Steve Jobs retook the helm, Apple has displayed an uncanny knack for giving consumers what they want.  Not what they think they want… and certainly not merely what they think they need. No, once they see it, touch it, feel it… Apple gives consumers what they really, really want.

Sure, one could buy a generic, plasticy, yet perfectly functional Vista laptop for hundreds of dollars less than the lowest priced MacBook… but one gets the feeling that even those characters in the latest Microsoft ads would have chosen the Mac if price was no object.

But… um… this is a political blog.  So what am I doing delving into the Mac vs PC wars?  Well, it all comes back to conventional wisdom.

Under Steve Jobs’ leadership, Apple is a company that has consistently defied conventional wisdom, and profited handsomely from it.  While the rest of the industry has responded to the recession by focusing on affordability, sacrificing margin for market share, Apple understood that most of those already willing to pay a premium for its products would continue to be able to afford to do so.  Apple also refuses to lower its standards in pursuit of lower prices, a steadfast resistance to commoditization that consistently earns it by far the highest consumer satisfaction ratings in the industry.

Now compare that to the budget compromise Democrats are hammering out during the final days of the legislative session.

Despite a gaping $9 billion revenue shortfall, a proposal to partially fill the gap with a high-earners income tax was largely scoffed at by the conventionally wise, as a politically futile and/or anti-stimulative tax increase during a recession.  Instead, the Legislature has settled on a cuts-only budget that includes a sweeping rollback of spending on education, health care, public safety, parks and other popular and essential services and investments.

Not exactly the Apple way.

No doubt Democrats expect that, as unpopular as the cuts might be, they’ll at least get credit for being fiscally responsible, but I think it’s just as likely that their race to the bottom will actually make it more difficult to generate public support for refunding these services in the future.  By joining the likes of Alabama and Mississippi as one of the Windows netbooks of state government—small, cramped, slow, clunky and cheap—Washington is setting consumer expectations awfully damn low.

Over time, some voters will grow accustomed to reduced services and expectations, and decide that a governmental netbook is good enough.  (Today, we call these people “Republicans.”)  Others will still long for the governmental equivalent of an iPhone or a MacBook Air, but will no longer trust the state to deliver these sort of “premium” services, at any price.  Alas, a brand once tarnished is hard to rebuild.

What Democrats in Washington state consistently miss is what Microsoft’s ad campaign intentionally obscures:  that there is a difference between price and value. Apple has thrived by delivering value that cannot be measured simply in terms of gigabytes and megahertz… a lesson Democratic leaders would be wise to learn, however unconventional.  If we diminish public education, voters will be less willing to pay for it, as they rightly perceive government to be incapable of delivering value for their tax dollars, and the same holds true for nearly every other government service, commodities all.

Any Democrat who thinks our party will ultimately benefit from holding the line on taxes has another thing coming; what voters will really remember is the crappy service and real hardships these cuts will inevitably produce.  As such, this budget will make it more difficult to enact a progressive agenda, not just in the short term, but in the long term as well.  For who in their right mind would ever be willing to pay the so-called “Apple tax” on a brand better known for cheap, PC clones?

Comments

  1. 1

    Boo Boo Bear spews:

    When costs on necessities go up, the fiscally responsible thing to do is to get more money. To get more money, the state must go to the people who have it.

    You can’t tax someone who has no job. Current budget cuts demand that the jobless be thrown under the bus, but the bus may not be running — so who gives a flying farthing?

  2. 2

    Marvin Stamn spews:

    Goldy-
    proposal to partially fill the gap with a high-earners income tax

    Not exactly the Apple way.

     
    Remember the apple way.
     
    Target the rich people, make products THEY want. Rich people do not want higher taxes.
     
    So if the democrats can learn anything from goldy pointing out how a successful company like Apple runs their business, maybe it’s doing what the people paying the bills wants.

  3. 3

    Bill Gates spews:

    Um, Apple is going to continue to tank when it’s idol, Mr. Jobs dies. Apple is overpriced Linux plain and simple. Put Ubuntu on an intel machine and voila, you’ve got a mac.

    Only throwbacks who talk about ‘cool factors’ buy apples, and for those in the know, you are referred to as a sucker. Much like you are in the political spectrum as well.

  4. 4

    Roger Rabbit spews:

    It sure is frustrating to vote for candidates labeled as “Democrats” on the ballot and discover after they get into office that you actually got Republicans. That happened back in ’64, too, when people thought they elected a Democrat but got a Texas Goldwater.

  5. 5

    czechsaaz@hotmail.com spews:

    Off-topic, why I hate Apple…

    The iEverything.

    Apple’s current business model is to convince you about every three quarters that your perfectly functional device is obsolete. “You’ve go a Nano that you love. Silly consumer, the new Nano has more memory, still too little to hold your entire CD library, but enough to have more music than your battery life will allow you to play, but more memory. Oh, and it has rounded edges and comes in Roayl Blue. That little grey thing you’ve got is SOOO 2008. Chuck it.”

    Toss in a shockingly short planned obselecnce of the non-changeable battery on the iEverything and the Air and the refusal to open source iTunes to other player manufacturers and you have a company that is as manipulative of their consumers as any prior imagined.

    Apple. Think Different.

  6. 6

    Roger Rabbit spews:

    OK, the governor wrote and the legislature passed an all-spending-reductions, no-new-taxes budget that looks like the GOP caucus wrote it. And what do you think our resident trolls will do? Give the Democratic governor and Democratic legislature credit for passing a Republican budget? Hell no! The divorced-from-reality propagandists of the right will post comments that, if believed, would give you the impression the Democrats raised taxes and increased spending!

    I may be a partisan hack and liberal propagandist, but my propaganda is based on facts and truth. What you get from the wingnut trolls is helium, which does funny things to your capacity for logical functioning if you breathe too much of it.

  7. 7

    Roger Rabbit spews:

    King County Agrees To Pay Stefan $225,000; Now What?

    The Seattle Times reported today that King County has settled Stefan’s public records lawsuit for $225,000.

    Now that Stefan, the self-appointed champion of small government, has lifted more money from the pockets of beleaguered King County taxpayers than a full-time minimum-wage worker earns in 12 years, will he keep it all for himself or share it with the generous donors to his “legal action fund” who made this lawsuit possible?

    How about it, Stefan, are you gonna share the loot with your financial backers?

  8. 8

    Roger Rabbit spews:

    I just want to put this settlement in perspective.

    $225,000 is more than what some King County taxpayers’ homes are worth.

    $225,000 is more than the average Washington family’s net worth.

    $225,000 is more than a U.S. Senator or Supreme Court Justice is paid.

    $225,000 is, for most people, a tremendous amount of money. Every cent of it will come out of King County taxpayers’ pockets.

    And if Stefan accepts this money, he will never again have any credibility as a champion of beleaguered King County taxpayers. (Not that he ever did, anyway.)

  9. 9

    Roger Rabbit spews:

    The next time you see Stefan rail against taxes or government spending, remind him of the $225,000 that he lifted from King County taxpayers’ pockets and put into his own pocket. I sure will.

  10. 10

    Marvin Stamn spews:

    8. Roger Rabbit spews:
    I just want to put this settlement in perspective.

     
    If king county didn’t violate the law they wouldn’t owe a settlement.
     
    Someone that wasn’t a partisan hack and liberal propagandist would be upset at the democrat officials that caused the county to pay a settlement instead of the whistleblower.

  11. 11

    Roger Rabbit spews:

    @10 “If king county didn’t violate the law they wouldn’t owe a settlement.”

    Any lawyer or insurance company knows that’s bullshit. Defendants settle questionable claims all the time because litigating them would cost even more. It’s legalized extortion.

    As for you, Stamn, if you don’t publicly condemn this financial rape of King County taxpayers, your rants against taxpayers will never again deserve an ounce of credibility.

  12. 12

    Roger Rabbit spews:

    Let’s review:

    1. King County provided Sharansky with the use of a room in a county building and the assistance of a county employee for two weeks, at taxpayer expense.

    2. King County gave Sharansky access to over 600,000 county records.

    3. Because county officials, who were extremely busy with the recounts of the closest gubernatorial election in American history, inadvertently failed to give Sharansky a few pages of data from said election, King County taxpayers have to pay Sharansky $225,000.

    4. For years, Sharanksy has positioned himself as a champion of beleaguered taxpayers and a tireless foe of wasteful government spending. By his act of lifting $225,000 from the pockets of innocent King County taxpayers who had nothing to do with his grievance against county officials, Sharansky establishes himself as the biggest hypocrite in the history of this county (and maybe state, hell, maybe the whole fucking universe).

  13. 13

    Marvin Stamn spews:

    11. Roger Rabbit spews:
    Defendants settle questionable claims all the time because litigating them would cost even more. It’s legalized extortion.

    Are you telling me the king county political structure does not stand on principle? If no crime/offense was committed, why not just prove it. Oops, the the problem isn’t it, there was an intentional problem.
      

    As for you, Stamn, if you don’t publicly condemn this financial rape of King County taxpayers, your rants against taxpayers will never again deserve an ounce of credibility.

    Nice one old man, as if you would give me an ounce of credibility no matter what I said.
     
    Maybe this can be a learning lesson for you… You feel outraged about your government paying out money it shouldn’t. That’s how the protesters at the tea parties feel. You have more in common with them then you want to admit.

  14. 14

    Boo Boo Bear spews:

    re 2: Bill Gates Sr. wants higher taxes. Who are you to speak for all rich people? How else will the state subsidize the $2,000 a year medical care for WalMart workers that they currently spring for.

    It’s not just poor people on the gravy train — by any means.

    But, if Milton Friedman or Ayn Rand never mentioned it, it can’t be relevant to the 21st century — at least in the Stamnerian cast iron mindset.

  15. 16

    Boo Boo Bear spews:

    re 2 and 13: Marvin is apparently an oracle as he ‘knows’ not only what rich people want but also how Teabaggers and RR have similar feelings.

    As my teenage daughter might say, “Ewwwwwwww! You’re disgusting!!”

  16. 18

    Steve spews:

    @11 “As for you, Stamn, if you don’t publicly condemn this financial rape of King County taxpayers, your rants against taxpayers will never again deserve an ounce of credibility.”

    As a person who fucks goats, Marvin never did deserve an ounce of credibility.

  17. 19

    Seattle Jew, a true liberal spews:

    Goldy ..

    You true religion is showing!

    Your words of faith move me to be kind to you .. just as I am to those poorest of the Madoff victims whose welfare depended on charities who invested in him. Or perhaps they remind me more of the words of the Resolute Reaganites?

    Apple as a model? Hmmm… maybe if we think the US can survive like Switzerland as a niche protected by a proprietary operating system and consumers insanely devoted to our brand.

    As for coolness, the only folks who see Apple as cool are those who ware tie die and drove the bug because it was a great car.

    Of course, maybe Apple is a model for our future .. all way gotta do is convince consumers to buy Merican cars cuz they are cooler than Toyotas!

  18. 20

    Crusader spews:

    @14 Boo Boo Bear – sure all the uber wealthy types have no problem paying higher taxes – they can afford it! Problem is Obama defining “rich” down to 250K, because practically that’s where the real chunk of the new revenue is.

  19. 21

    Politically Incorrect spews:

    Why not just get the Feds to print up a bunch of cash and give $1,000,000,000, in cash, to each person in America.

    That should solve things, rights?

  20. 22

    Politically Incorrect spews:

    roger said:

    “King County Agrees To Pay Stefan $225,000; Now What?”

    Stefan gets to spend his money as he chooses, that’s what! I’m just sad it’s not ME gettin’ the $225,000!!

  21. 24

    I Luv My Macbook spews:

    You get what you pay for. I’m not one of those high end people. I saved my pennies until I could afford a Macbook. Heck my home computer was over ten years old. I also compared what I would have to ‘add on’ to a Dell to come up to the level of ‘what’s in the box’ for the Mac. It was competitive. It works. It works. it works.

    I also don’t do hardware and electronics stuff (competent but NO interest), which is why I don’t do windows.

    You get what you pay for. For me it’s an investment. That’s how I view taxes and government spending.

  22. 25

    I Luv My Macbook spews:

    Oh — and those people with enough money to hoard? Isn’t hoarding anti-American in a time of crisis?

  23. 26

    Jesse spews:

    Sure, one could buy a generic, plasticy, yet perfectly functional Vista laptop for hundreds of dollars less than the lowest priced MacBook… but one gets the feeling that even those characters in the latest Microsoft ads would have chosen the Mac if price was no object.

    Um… so what? If money were no object, I might be driving a Tesla, a Lamborghini, or some other ridiculously expensive supercar. But price does matter, so I drive a Corolla.

    It would be foolish for every car company to emulate Lamborghini. There just aren’t enough people who are willing or able to spend that kind of money on a car, and almost none who really need the things that such a car offers — although they wouldn’t mind taking it if it were free.

    Likewise, it’d be foolish for other computer companies to emulate Apple. Few people need everything that’s in a MacBook Pro, especially when you can get a fully loaded Windows laptop that has 95% of the same stuff (not just a watered-down netbook) for half the price.

    Apple is successful because they sell a luxury product to a luxury market. It’s not just “delivering value”, but who they deliver that value to: people who don’t care about the cost.

    So although you’ve gotten Apple’s story mixed up, this is still a decent analogy for the state budget. That’s because unlike computer buyers, voters don’t necessarily have to pay for their choices — I can vote for a tax increase on someone else, giving me the benefit while he picks up the cost. So as long as we can pay for the value we get by taxing a rich minority, we can act like Apple customers.

  24. 28

    Marvin Stamn spews:

    17. Steve spews:
    @14 Pay no mind to Marvin. He fucks goats.

      
    Thanks. I asked you to stick to goat sex and it appears you took my advice.