hardware

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Home Automation Out of The Closet

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by Jean-Louis Gassée

The Smart Home has been just around the corner for more than three decades. Now, an uneasy, not entirely frank move from one of the industry’s grandees signals a shift towards credible consumer-grade solutions. More

Apple’s Intriguing Developer Conference

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by Jean-Louis Gassée

At this year’s Worldwide Developer conference, we were told about Apple’s new music streaming service and given hints about the iPad’s future… and we were left asking questions about Apple’s relationship with Google.

Apple’s yearly Worldwide Developer Conference has a well-established, festive tradition of announcing new software tools. One way to gauge reactions to the conference is to count the number of articles that imply that Apple is simply playing catch-up: “Apple finally does X that competitor Y has been doing for Z years.” More

You Don’t Need An Apple Watch – Part 253

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by Jean-Louis Gassée

One more time, with feeling: You don’t need this [blank] Apple product. This time, pundits believe you shouldn’t buy an Apple Watch. But will the Greater We listen this time?

I’ve been professionally and sentimentally involved with tech products for more than six decades. Luckily, my affection for new technology has (mostly) been requited: The objects of my desire have rewarded me with fun and financial independence. More

Apple Watch: Five Weeks, A Dog’s View

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by Jean-Louis Gassée

[This is an updated version]

After a few supply chain hiccups, the Apple Watch is now in the wild. I’ve had mine since April 24th, enough time to educate my opinion: Is this a truly new genre or simply an elegant version of a gratuitous accessory?

Technology reviewers — and customers — come in two species: Cats and Dogs. When presented with a new brand of cat food, our feline masters tiptoe suspiciously around the offering and, having carefully sniffed their human servant’s token of devotion, finally deign to sample it.

Dogs have no such sense of decorum and hierarchy, they joyously snarf up the mystery meal. More

An Apple Watch Meta-Review Reimagined

 

by Jean-Louis Gassée

Product reviews of the Apple Watch launch are reaching new summits — and depths. A Business Insider post gave me an idea for a revealing experiment.

This isn’t an Apple Watch review — I don’t even have a Watch, yet. I’ve been told that my 42mm alumin-ium Sport model will arrive in “4 to 6 weeks”, mid to late May. Even then, I’ll hold out for my third impression. I’ve learned to distrust my first reaction: I thought the iPod was a bad idea because MP3 players had already been commoditized. The Apple Store? It will never catch on because it threatens the livelihoods of independent Apple retailers. When I came home with my first iPad five years ago, I resented the fact that my new tablet wasn’t very good at the “productivity tasks” I performed on my Mac… (I still think this, and, last year, called the iPad a tease – but I’ll leave the continuation of that saga for another day.)

As the first wave of Apple Watch reviews shows, waiting for impressions to settle down isn’t part of the Product Review genre. The psychoactive toxicity of Apple product launches that I made fun of two weeks ago is in full display as reviewers climb to the rooftops in a race for income-producing pageviews.

The Wall Street Journal’s Joanna Stern wore a helmet strong enough to support a full-size Canon DSLR while researching her review:

Joanna Stern w Tweet

No flimsy GoPro camera, we’re professionals here, this is a Wall Street Journal production. How this relates to your everywoman’s user is left to us to figure out. That said, I sincerely bow to Joanna Stern’s stamina and dedication to her mission.

Or we have the (presumably) unintended humor of a reviewer who felt “ridiculous” wearing the Milanese Loop on his left wrist:

Nilay Patel Big Band Edited 2

I’m not the only person who questions the “hot take” nature of modern Product Reviews. In his Above Avalon post, Neil Cybart says Product Reviews are Broken [emphasis mine]:

“There were 21 Apple Watch reviews published, but the 4 reviews that were more critical of the device got the most attention, leaving the 14 glowing reviews behind. Meanwhile, most of the important features of the Watch such as watch bands and durability were either not included or buried within lots of other text. Simply put: product reviews are broken.”

Our historian/philosopher Horace Dediu concurs:

Dediu Cash Register Experts

…and…

Dediu Don't Read Reviews

Ignoring Dediu’s advice, I stumbled upon a Business Insider “meta-review”, an edited summary of other reviews ominously titled The Apple Watch reviews are (quietly) brutal. The piece starts well:

“Apple Watch reviews are out today.
At first, they seem positive.
For example, New York Times tech reviewer Farhad Manjoo writes that he ‘fell’ for the gadget — ‘fell hard.’
The Verge’s Nilay Patel says it is ‘the first smartwatch that might legitimately become a mainstream product.’
Joshua Topolsky of Bloomberg Business says, ‘you’ll want one…After using it, I had no question that the Apple Watch is the most advanced piece of wearable technology you can buy today.’”

The article then attempts to demolish this happiness by citing carefully chosen damnations from the same reviews (“Topolsky says the Watch isn’t a very good watch.” “Patel says the Watch is too slow”), and concludes with a back-handed compliment [emphasis mine]:

“The most exciting thing about the Apple Watch isn’t the device itself, but the new tech vistas that may be opened by the first mainstream wearable computer.”
“For now, the dreams are hampered by the harsh realities of a new device. The Watch is not an iPhone on your wrist.

These initial reviews say more about the Product Review genre than they do about the Apple Watch. As the word genre implies, there are rules. One is that you have to provide quotable fragments that support your view — think of how movie posters and trailers quote reviews. Second, write what you want but remember you still need to eat in this town. In the case of tech reviewers, “lunch” is being among the select few invited to do the next “under embargo” product review — you don’t want to go hungry. Third, you have to be “fair and balanced”: You must provide at least a hint of negativity, no matter what, so you won’t be perceived as having “sold out”. Lastly, you have to write quickly, steamroll annoying counter-narrative trifles, and use strong words.

As an experiment, I cherry-picked quotes from the same sources as the “(quietly) brutal” Business Insider meta-review to see if I could come up with a different result. Much like the BI review, I decided what I wanted to say and then found the quotes that supported my thesis.

Here goes…

_______________________________________________________________

Burning Insider Meta-Review

The Apple Watch reviews are (giddily) enthusiastic

Apple Watch reviews are out today.
At first, they seem negative.
In his New York Times tech review Farhad Manjoo sounds disappointed:

“Third-party apps are mostly useless right now. The Uber app didn’t load for me, the Twitter app is confusing and the app for Starwood hotels mysteriously deleted itself and then hung up on loading when I reinstalled it.”

Out of the gate, The Verge’s Nilay Patel is unimpressed:

“Let’s just get this out of the way: the Apple Watch, as I reviewed it for the past week and a half, is kind of slow. There’s no getting around it, no way to talk about all of its interface ideas and obvious potential and hints of genius without noting that sometimes it stutters loading notifications.”

Another noted blogger, Joshua Topolsky of Bloomberg Business says:

“Yes, all these new functions, notifications, and tapping do make the Apple Watch very distracting. In some ways, it can be more distracting than your iPhone, and checking it can feel more offensive to people around you than pulling out your phone.”

But once you move past the obligatory “fair and balanced” negatives and get into the details of what the writers really say, it’s clear: The reviews are giddily enthusiastic.

Topolsky concludes:

“So Apple has succeeded in its first big task with its watch. It made something that lives up to the company’s reputation as an innovator and raised the bar for a whole new class of devices.”

Nilay Patel concurs:

“There’s no question that the Apple Watch is the most capable smartwatch available today. It is one of the most ambitious products I’ve ever seen; it wants to do and change so much about how we interact with technology.”

The NY Times’ Farhad Manjoo sees the Apple Watch as an extension of his body – one that makes him more sociable [emphasis mine]:

“I began appreciating the ways in which the elegant $650 computer on my wrist was more than just another screen. […] the Watch became something like a natural extension of my body — a direct link, in a way that I’ve never felt before, from the digital world to my brain. The effect was so powerful that people who’ve previously commented on my addiction to my smartphone started noticing a change in my behavior; my wife told me that I seemed to be getting lost in my phone less than in the past. She found that a blessing.”

David Pogue, one of the industry’s most thorough, experienced, and prolific tech writers, concludes his Yahoo Tech review thus:

“And this much is unassailable: The Apple Watch is light-years better than any of the feeble, clunky efforts that have come before it. The screen is nicer, the software is refined and bug-free, the body is real jewelry. First-time technologies await at every turn: magnetic bands, push-to-release straps, wrist-to-wrist drawings or Morse codes, force pressing, credit card payments from the wrist. And the symbiosis with the iPhone is graceful, out of your way, and intelligent.”

__________________________________________________________________

I think I can stop here.

If you, too, decide to ignore Horace Dediu’s advice, I found two reviews that stay away from the rooftops and make a serious attempt at providing insights into the nature of the Apple Watch, its user experience, and its future in the nascent “wearables” industry segment. (Keep in mind that while I have my own biases, the Monday Note doesn’t have advertising or other sources of revenue.)

Ben Bajarin’s Techpinions synthesis:

“Ultimately what I am convinced of is the Apple Watch represents a completely new computer interaction model. A PC is for when we have a few hours. Our smartphones is for when we have a few minutes. Our smartwatch is for when we have a few seconds. Each device, and the software and experience built for it, should help us maximize those hours, minutes, and seconds.”

John Gruber’s insightful Daring Fireball walk-through:

“Loosely, the path of all consumer electronic categories is to evolve as ever more computer-y gadgets, until a tipping point occurs and they turn into ever more gadget-y genuine computers. The sample size (in terms of product categories) is small, but Apple seemingly tries to enter markets at, or just after, that tipping point — when Moore’s Law and Apple’s ever-increasing engineering and manufacturing prowess allow them to produce a gadget-y computer that the computer-y gadgets from the established market leaders cannot compete with. That was the iPod. That was the iPhone.”

Those are nice exceptions to the Broken rule.
In the end, reviews don’t seem to matter much outside the kommentariat. In Neil Postman’s Amusing Ourselves To Death classification, most reviews aren’t Information but Entertainment. As recent Kantar World Panel research shows, consumers don’t pay them much attention:

Kantar Consumers Attention Edited

In the end, only Word of Mouth matters. After two or three months of actual availability, real humans will talk amongst themselves and decide the future of the Apple Watch, just as they did for the iPod and the iPhone. And, come to think of it, their conversation explains sagging iPad sales.

JLG@mondaynote.com

The Internet of Amazon Things

 

by Jean-Louis Gassée

With its new ordering system of one-push buttons spread around the home, Amazon wants to simplify lives, theirs more than ours as we’ll find out. In doing so, we’ll face – again – still unresolved issues for the Consumer version of the Internet of Things.

Amazon has just announced yet another tentacle into our homes and wallet, the Dash Button:

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The spirited Don’t Let Running Out Ruin Your Rhythm intro video gives a quick overview of the process: Affix a button near your stockpile of essential goods, push it when the cache runs low, go to the front door and pick up your delivery.

Unsurprisingly, wags have seized the opportunity to suggest a button that might be legal in Amazon’s home state and other enlightened places:

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(From a comment on a Gizmodo post.)

As I’m in charge of laundry operations in our house, I went to the Amazon site, typed “Dash Button”, and was greeted with a series of enticing Get it by Monday April 6th offers such as this one for my favorite brand of detergent:

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But, no… I clicked on the link and was sent to the Dash Button main page with its By Invitation Only message [emphasis mine]:

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Picture the excited crowd behind the velvet rope, waiting for the opportunity to stick Dash Buttons on their washer/driers and coffee machines.

On the surface, the Dash Button makes sense. It’s the logical, Internet-of-Things extension of Amazon’s 1-Click ordering: Hang buttons on the objects that surround you and forestall the dreaded Running Out surprise. No complicated calculations, no need to leave your house. Just press the Dash Button when you stick the last ink cartridge in your printer, or when you see you’ll run out of diapers tomorrow. Peace of mind at your fingertips.

In practice, the process requires more mindfulness and skill.

The Dash Button connects to your home Wi-Fi router, set up via a dedicated smartphone app. In most cases, the person doing the setup will remember the Wi-Fi password. If not, the task will have to wait for the resident geek’s availability. Then there’s the matter of proximity. Does the Wi-Fi network reach your washer and dryer in the basement or garage?

Once you have the hardware set up, you return to the app to specify the replenishment quantity, and to decide whether or not you want Amazon to ignore subsequent Dash Button presses before the order arrives — a prophylactic against active toddlers, no doubt.

Everything’s ready. A tap on the button brings up a confirmation message on your phone with the opportunity to cancel the order in case you’ve changed your mind.

It sounds well thought-out… But why spread buttons around the house and go through an elaborate setup when you already have everything you need on your phone? Why not have an app that presents commonly-ordered items on its main page? When you see the bottom of the diaper drawer, you take out your phone, pull up the app, and click the Pampers button. You get an instant confirmation and you’re done.

No Wi-Fi set up; no worry about accidental “elbow ordering” as you unload the dryer; no besmirching your pristine appliances with branded, phosphorescent buttons (a strongly worded injunction from my high-end home-builder spouse). You don’t even have to be at home: You can order from anywhere, just as you do now.

I’m not the only person asking this question. As I was writing this note, I saw this Steven Sinofsky tweet:

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Indeed, Sinofsky’s watch idea goes Amazon one better, and it plays to Apple’s central pitch: No need to whip out your smartphone.

Others, my son-in-law Christian Baxter included, have demonstrated how to build proof-of-concepts apps such as The Anything Button that make abundantly clear how you just need a smartphone, nothing else, for pre-programmed actions. There’s also the ingenious Pressy Button for Android phones.

Amazon is recognized as a sophisticated, long-term thinker. Is there more to the Dash Button than the added complications that we’re seeing? Possibly… but let’s remember that this is the company that came up with the “what were they thinking?” Fire smartphone. (See The Real Story Behind Jeff Bezos’ Fire Phone Debacle And What It Means For Amazon’s Future, in Fast Company magazine.)

In a recent must-read Andreessen Horowitz post, Benedict Evans provides some clues to Amazon’s occasional lack of coherence:

“Amazon is in fact organized not just in these segments, but in dozens and dozens of separate teams, each with their own internal P&L and a high degree of autonomy.”

This autonomy might be a well-calculated attempt to encourage experimentation, to provide a harbor for projects that would be impossible in a centralized command-and-control organization. A well-run, data-rich failure could calibrate the aim that leads to the next bull’s eye… or it could just be someone’s poorly thought-out vanity project. And/or an attempt to extract product placement or slotting fees for brands prominently featured on the Dash Buttons.

This led me to thinking about the nearly-forgotten Amazon Echo:

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Wi-Fi and Bluetooth enabled, the Echo provides access to an intelligent, always-listening agent called Alexa, a sort of Apple Siri or Microsoft Cortana. Alexa plays your music on demand and gives you the latest news and weather… To replenish my stash of Tide, why can’t I just ask Alexa to do the job? I’ll report back when I get my Dash Button and an Echo. (Announced last November as a “work-in-progress” the Echo is, to this day, available by invitation only. )

The Dash Button’s needless complications and the Echo’s tepid reviews (and privacy issues…would you want an “always-listening” agent in your kitchen, living room or bedroom?) are indications of the long difficult birth of the Internet of Things – in the Consumer space.

For industrial applications, the Internet of Things is already a reality. Teams of technicians install, extend, and maintain the complex array of “always-listening”, far-reaching devices that control the factory, gas refinery, or a server farm. This is what Cisco, IBM, and many others do for their customers, a continuation of their work in Enterprise applications.

Consumer instances of the Internet of Things are different. The setup and maintenance of an array of Internet objects in the home requires consumers to be their own IT support technicians. The home version of the Internet of Things assumes the ability to internalize and maintain a mental model of the network’s functions and exceptions. For non-geeks, this is an unnatural act.

Amazon’s own techies might be experiencing a failure of empathy:

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(From a now disappeared Mike Monteiro post.)

Someone, someday will make the Internet of Things work for The Rest of Us. That we still struggle with a Basket of Remotes shows how far we are from the goal.

JLG@mondaynote.com

Notes From The Road: Apple Watch, Apple Car

 

 by Jean-Louis Gassée

Taking a closer look at the size and precision of Apple’s manufacturing operations has made me rethink my skepticism about the putative Apple Car.

I’ve been in Paris for the last two weeks, mostly disconnected. I won’t wallow in specifics; suffice it to say that the struggle with cable TV, Internet, and cellular providers here is eerily similar to what we commonly endure in the Valley. There is one difference, however: A few hours ago, I watched as a cable technician spliced a fiber connection into our apartment, something I can’t get in downtown Palo Alto.

A few Web-free days watching people and eavesdropping on conversations in Left Bank cafés helped me rethink my position on the Apple Car – because of the Apple Watch.

The local level of interest in the Apple Watch is mild at best, nothing like the paroxysms in the States. Never have we seen such large-scale derangement over an Apple product announcement, not for the iPhone or for the iPad, Steve Ballmer’s and Dan Lyons’ shouts notwithstanding. Google “Apple Watch fail” and you’ll get more than 61M hits – and this is before anyone has had a chance to pay for and use the product.

The latest instance of mental poisoning comes from the NewYork Times’ tech columnist Nick Bilton. The (original) title of his anti-Watch column, “Could Wearable Computers Be as Harmful as Cigarettes?”, sounds like the work of a netwalker striking a provocative pose to attract pageviews. But Bilton is no carnival barker; he’s a real journalist with an otherwise impeccable professional record and a solid reputation for insightful writing. As you’ll see when you click on the link, the title has been changed to a less prurient “The Health Concerns in Wearable Tech”, and a long Editor’s Note and a Correction have been appended. If that weren’t enough, Margaret Sullivan, the Grey Lady’s Public Editor, has weighed in with an apology of sorts, calling some of Bilton’s assertions “pseudoscience”.

As detox, we can turn to “How Apple Makes the Watch” on Greg Koenig’s tech-porn blog Atomic Delights. Using pictures from the Apple Watch films, Koenig offers a lovingly detailed exploration of Apple’s industrial design decisions and manufacturing feats:

“Apple appears to have eschewed any revolutionary alchemy and instead, applied an innovative work hardening process to create gold that is (claimed to be) significantly harder than the typical 18kt used by other watchmakers. “

From gold alloys and steel forging, to CNC (Computerized Numerically Controlled) machining, laser clean-up, and in-process measurement exploits, Koenig’s post impresses us with the depth of the technical organization behind the product.

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After mentioning “rumors of entire German CNC mill factories being built to supply Apple exclusively” and the disappearance of manufacturing experts who later reappear in Cupertino or Shenzhen, Koenig concludes:

“While we all are massively impressed with the scale of Apple’s operations, there is constant intrigue as to exactly how they pull it all off with the level of fit, finish and precision obvious to anyone who has examined their hardware.”

(I can safely say you won’t be bored with Koenig’s blog. After reading about the Watch, you should continue down the page to his article on Mac Pro Manufacturing, followed by a 15-second video that shows how objects we can’t live without, springs, are made.)

After a couple of readings, Koenig’s thoughts on the scale and precision of Apple’s manufacturing process got me to rethink my views of the putative Apple Car. In two Monday Notes, The Fantastic Apple Car and Apple Car: Three More Thoughts, I expressed strong skepticism.

In the first place, I wrote, a long history of eating and drinking at the best restaurants on the planet doesn’t qualify you to become a successful restaurateur. More important, Jony Ive’s justly renowned prowess in coming up with exquisitely polished objects misses the point of car manufacture where the focus isn’t on the object itself, but on the machine that excretes the cars in high volume, high quality, and well-managed cost. It’s the Industrial in Industrial Design that matters.

On the weight of these two points I concluded that while the idea of an Apple Car is attractive, Apple shouldn’t confuse its love of cars and its high regard for beautiful swage lines with an ability to become a successful car maker.

Now, I wonder if I ought to Think Different.

The scale of Apple’s Supply Chain makes it clear that the company knows how to make the machine that makes the machines on a very large scale and at a high quality level. In a comparison at the beginning of his post, Koenig helps us grasp the otherwise unimaginable size of Apple’s manufacturing [emphasis mine]:

“Apple is the world’s foremost manufacturer of goods. At one time, this statement had to be caged and qualified with modifiers such as “consumer goods” or “electronic goods,” but last quarter, Apple shipped a Boeing 787’s weight worth of iPhones every 24 hours. When we add the rest of the product line to the mix, it becomes clear that Apple’s supply chain is one of the largest scale production organizations in the world.

787 of iPhones

(Initially, I read Koenig’s statement as “one 787 full of iPhones everyday”. But, no, this is the entire unladen weight of the 787 itself.)

How does this compare to cars? US sales of the 3,000 pound (1,500 kgs) Nissan Leaf averaged 2,500/month in 2014. That’s 7.5M pounds worth of cars. The iPhone’s monthly weight (240K lbs * 30 days) is…7.2M pounds. As another reference point, Tesla sold 2,500 cars in September 2014.

Such number play is just that, a feeble attempt to seize sizes. And even if we grant Apple the numbers — if we stipulate that Apple can manage a supply chain that produces a month’s weight worth of electric cars that are equivalent to the size and weight of a Nissan Leaf or, two notches up, of a Tesla — the next question is whether or not such a product will move the needle. Will it sell in multiples of Apple’s new unit of currency: $10B?

(Apple 2015 sales are expected to significantly exceed $200B.)

For this to happen, the putative Apple Car would have to sell in volumes about 10 times higher than what Nissan did last year in the US: 30K vehicles/month, at $30K each, times 12 months = $10.8B.

Of course, I’m looking at the putative Apple Car in terms of the car as we know it today, just as we all initially looked at the iPod and the iPhone using existing products as the frame of reference. Perhaps Apple has something more imaginative, more in keeping with its Think Different mantra than a mere derivation of existing designs. But whatever it intends, I no longer believe that Apple can’t design a machine to make cars.

JLG@mondaynote.com

Apple Car: Three More Thoughts

 

by Jean-Louis Gassée

[Update appended]
Beside free publicity, and huge amounts of it, the putative Apple Car raises interesting questions about car manufacturing, the future of automobiles, and the part that an interloper such as Apple could play in this century-old industry. 

The volume of comments and Twitter traffic in reaction to last week’s Monday Note, The Fantastic Apple Car, was just one small rivulet in this week’s gusher of rumors, jokes, and proclamations about Apple becoming a car manufacturer. Bloomberg takes the car as fait accompli, telling us that “Apple…is pushing its team to begin production of an electric vehicle as early as 2020”. A recent 9to5mac post provides a long list of car experts and executives hired by Apple, thus giving more than gossipy credence to the story of Apple committing huge resources to such a project.

There are many products and services I’d love to see Apple get into. For example, how could Apple not do a better job than Comcast, Verizon, and AT&T at providing wired and wireless broadband? But the Cupertino company stays out of that arena for a number of reasons: regulations, fragmentation, manpower, equipment both under and above ground.

One could argue that cars present a simpler challenge. Roads are roads and country regulations are well understood. And, yes, a car made and serviced by Apple could be an affordable quality product.

Still, I remain a skeptic. Monday Note commenter Hamranhansenhansen does a good job of summarizing my position:

“[…] if Apple were doing a car, why not just buy Tesla in the exact same way they bought Beats? Apple already made headphones for about 14 years and then bought Beats anyway. Tesla is the Beats of cars, and it is local to Apple and already has a factory and really great mindshare. If they did not want Elon Musk, he has SpaceX and could likely make a graceful exit. Apple’s car line would then be named “Tesla” same as their PC’s are named “Mac” and headphones named “Beats.” The price of Tesla right now is excellent, especially considering the battery crossover to iPhones and iPads.
It makes much more sense to me that Apple is going to become a car component manufacturer, so that BMW, Bentley, Ferrari, etc. can buy Tesla-style in-car dash systems from Apple, just as Ford bought the awful Sync from Microsoft. The itch that needs to be scratched is Jony Ive getting into his Bentley and his iPhone won’t hook up reliably and sits in a bolt-on cradle.

This week, I’ll add three vignettes, three morsels of food for thought about the hotly desired AppleCar.

For more than twenty years, two Apple execs roamed the Earth in search of technologies, suppliers, contractors, and entrepreneurs to acquihire. In their travels, they fortified themselves at many of the best restaurants on the planet, becoming friends, or so they thought, with the astute chefs, sommeliers, and maîtres d’hôtel.

Impressed by their own accumulated knowledge of the restaurant industry the two decided to parlay the money and ambition they had been soaking in at Apple and open a high-concept, high-end saloon. They spared no expense on location, decoration, wine cellar, state-of-the-art kitchen, big name chef, experienced front-of-the-house staff and, of course, a publicist.

After two miserable years of quarrels with prime donne, theft and drug use by the staff, bad reviews planted by rivals, and calamitous “surprise” food inspections, our two wannabe restaurateurs closed their dream place, millions of dollars gone to waste.

They got confused. After all the years they spent in the best restaurants in the world, they thought they knew the restaurant business. What they did know was how to be great patrons… how to talk wine with the sommelier, when to compliment the chef, how to respectfully send back a dish that isn’t just so. They were customers, not restaurateurs.

You know where I’m going with this: Some Apple execs are great car connoisseurs — one senior VP is even on the Board of Directors of Ferrari. They have the resources to own and operate, on roads and tracks, many of the choicest automobiles on the planet, but that doesn’t automatically give them the knowledge to be manufacturers.

The second vignette takes me back a few decades to Northern Italy. During my years at Apple, I took an Industrial Design team to pay a visit to Giorgetto Giugiaro, a towering figure in the automobile industry who would later be recognized as one of the Car Designers of the Century. (Both Wikipedia articles just linked to make for terrific reading – if you’re into cars.) Our goal, in visiting Giugiaro, was to find fresh inspiration, new stanzas for our design language. I had long admired not only the aesthetics of the cars Giugiaro had designed, but also their practicality and efficiency. The historic success of his work on the Volkswagen Golf re-started the company and put it on a trajectory to one day challenge Toyota.

When we walked into Giugiaro’s Italdesign offices, a surprise awaited us. When I thought of Industrial Design — Esthétique Industrielle in French — aesthetics first came to mind, industry second. But what Giugiaro showed us was the opposite: The industrial side of his practice was, for him, truly foremost. In his own words, his job wasn’t to design an award-winning shape for a car, his job was to design the process, the factory that would eventually excrete a continuous flow of vehicles.

An example from Giugiaro’s portfolio: The Renault 19. At a time when the French manufacturer saw a hole in its product line, Giugiaro raided the corporate parts bank, designed a production line, installed it, and trained the production technicians.

More than 25 years later, the conversation is still with me: One doesn’t design a car, one designs the machine, the process, the supply ecosystem that produces the vehicle. As Horace Dediu puts it, innovations are in the production system:

(Beside his Asymco blog and @asymco Twitter stream, Horace also produces Asymcar, a podcast series dedicated to the auto industry.)

I would love to be wrong about the AppleCar — I join the choristers who would love to see what Apple could do with a car — but we’ve heard a bit too much about Apple’s ability to design an interesting electric vehicle and not enough about the industrial part, about the machine that makes the machines.

Finally, there’s Carlos Ghosn. (Again, you won’t regret reading the Wikipedia article.)
How do you compete with this man?
The Brazilian born Ghosn spent his early school years in Lebanon, attended the prestigious École Polytechnique in Paris, and started his automotive career at Michelin, the very techie and idiosyncratic tire maker. After rising to CEO of Michelin North America, Ghosn was recruited by the ailing Renault, and Ghosn managed to turn two companies around by creating a global alliance with Nissan. He’s now the CEO of both companies – and a hero in Japan, featured in manga (a comic strip genre). He speaks Portuguese, Arabic, French, English and some Japanese.

As CEO of Renault-Nissan, Ghosn was instrumental in the creation of the best selling electric car on the market today, the Nissan Leaf (another interesting Wikipedia read). With 158,000 units sold, representing about $6B, the Leaf is a well-rounded implementation of an affordable “pure” electric car (as opposed to hybrids such as the Toyota Prius, or the Chevy Volt, or BMW i3 and i8 that are assisted by small accessory gasoline engines).

I don’t know which fine cars Ghosn drives for pleasure, but he certainly knows how to make the machines that create them. If Apple wants to make and sell electric cars in numbers large enough to garner revenue in multiples of 10 billion — the unit of currency for Apple in 2020 — they’ll first have to figure out how to beat Carlos Ghosn at his game.

JLG@mondaynote.com

Update
Tim Bradshaw, the author of the Financial Times article referred to above, points out his story came out before the Wall Street Journal piece and resents the “rewrite” label for his work.
I regret the error.
What led me astray is this, on FT.com, with a Saturday Feb 14 date:
“The Wall Street Journal reported on Friday that Mr Zadesky’s team was overseeing a project code-named Titan that had produced an initial design for a vehicle resembling a minivan.”
And that’s why I thought the WSJ (Fri 2/13) got there first.
It looks like the Feb 14th date was the stamp for the latest update to the article, not the 1st publication date that appears to have beaten the WSJ by “several hours” according to Arash Massoudi, one of Tim’s colleagues at the FT.”

The Fantastic Apple Car

 

by Jean-Louis Gassée

Forget the iWatch, Apple Pay, and the iPhone 7…the next big thing from Cupertino will be the Apple Car.

At first, I didn’t pay much attention to the Apple Car rumors. I saw them as the another wave of clickbait along the lines of the wiped-out Apple Television Set canards.

I even thought of writing a little parody piece:

WinCar, Microsoft Disrupts The Auto Industry.

After penetrating offices and homes, Microsoft will now hitch a ride in the third most important location (and time slice) in peoples’ lives: The Car.

As part of Satya Nadella’s Mobile First – Cloud First vision, the Azure-enabled WinCar is the ultimate personal mobility and connectivity device. Quoting Nadella’s July 10th message to the troops:
“We will think of every user as a potential ‘dual user’ – people who will use technology for their work or school and also deeply use it in their personal digital life.
[…] Microsoft will push into all corners of the globe to empower every individual as a dual user – starting with the soon to be 3 billion people with Internet-connected devices. And we will do so with a platform mindset. Developers and partners will thrive by creatively extending Microsoft experiences for every individual and business on the planet.”

Microsoft’s connections to the auto industry are old and obvious: Steve Ballmer’s father was a manager at Ford; Microsoft wrote successive generations of Sync, Ford’s dashboard infotainment system; Dr. Helmut Panke, an illustrious auto industry figure and former Chairman of BMW’s Board of Management, sits on Microsoft’s Board of Directors. Bill Gates drives a Ford Focus. Ballmer? He’s a Ford Fusion man...

No.
As I saw the growing stream of Apple Car tweets and blog posts, two minutes of research took me to what seems to be the source of the reverberating fracas, a single Wall Street Journal story titled Apple Gears Up to Challenge Tesla in Electric Cars; iPhone Maker Has 100s Working on Design of a Minivan Like Vehicle. The article tells us that the project, code named “Titan”, is being shepherded by Steve Zadesky, a former Ford engineer who “helped lead the Apple teams that created the iPod and iPhone” — two products that have many, many fathers.

Most of the echoes of the rumor emanate from that one story. The Financial Times’ Apple hiring automotive experts to work in secret research lab isn’t much more than a rewrite. The always “reliable” Business Insider tells us that Tesla and Apple are poaching each other’s engineers and throws in a quote from an unnamed Apple employee: “We’re working on something that will give Tesla a run for its money”. A Mac Observer post tells us that they have it on good authority from someone who “travels in more rarefied circles” that “a lot of people at the top in Silicon Valley consider it a given that Apple is working on a car”.

The posts and reposts are quick to find “evidence” that back up the rumors. Apple’s Sr. VP Eddy Cue, who sits on Ferrari’s Board (a fact that’s omitted from Cue’s official bio), has long been a conduit between choice automobiles and highly paid company engineers and executives. Apple recently hired Johann Jungwirth, former president and chief executive of Mercedes-Benz Research and Development North America. Recent sitings of Apple’s mysterious unmarked vans fitted with a dozen cameras proves they’re building an autonomous vehicle.

The picture wouldn’t be complete without a juicy link to complaints about American cars by “design god” Jony Ive and no less divine watch designer Marc Newson, who says that American car design is on the “shit we hate” list.

(Let’s give ourselves a moment of contemplation, here. These two august industrial artists come from Britain, whose auto industry is now either German or Indian. Bentley, Sir Jony’s choice, is owned by Volkswagen; Rolls Royce is a subsidiary of über Bavarian BMW; Jag-ü-ar and Land Rover are in the competent hands of the Tata conglomerate.)

Just as in the little Microsoft parody above, the signs are unmistakable, Apple is definitely making a car.

Let’s count the ways….

The company has the money. With $178B in the bank, it could easily afford to build a car factory. The cost of doing so, a couple billion, is certainly less than the price of a microprocessor fabrication unit where costs approach $10B. And the company is no stranger to large industrial bets. As Horace Dediu notes, Apple spent close to $4B in Machinery and Equipment in the quarter preceding the launch of the latest iPhone; for the latest quarter, spending of more than $3.2B is 60% higher than a year before. As Horace tells us, large increases in Machinery and Equipment spending presage big product launches – which is a little besides today’s topic:

355_dediu
Short of building everything from the ground up, perhaps Apple is going to buy their way in. Why not acquire Tesla and enjoy a running start? Tesla’s market cap of $26B makes it an affordable acquisition. The current Model S is, in several ways, the first Silicon Valley car, built nearby in Fremont, with a modern touch-based UI, autopilot features, and regular over-the-air software updates.

An Apple car would almost certainly be out of many drivers’ budgets, but let’s recall that Apple has a history of disrupting from the top. They took over the MP3 player market and the smartphone industry by providing a more expensive product and carefully building an ecosystem of software, content, services, and retail operations that deliver user experiences that, in turn, generate higher margins. And as car technology matures, Moore’s Law will help drive down prices.

But now let’s look at the reality.

Yes, Apple has plenty of money, but the century-old auto industry doesn’t seem like a good way to make more of it. Ford, the healthiest US car company, made $835M in net income last quarter, less than 4% of their $34B in sales. Compare that number to Apple’s record-breaking $18B profit. Tesla, Apple’s supposed rival in the fantasy blogs, pulled in a little less than $1B last quarter, and it lost about 10% of that. There isn’t an inkling of an explanation for why and how a superior product designed and built by Apple would bring superior returns.

Furthermore, there is no Moore’s Law for cars. In a Tesla Model S, the computers are a small part of the bill of materials. Batteries, which contribute the most to the price, don’t double in power or halve in cost every 18 months.

A simple chart by Benedict Evans sheds light on the opportunities before us:

355-UniqueTech

The sort of money that apple has come to expect just isn’t in cars.

An autonomous car is good PR and to some it may seem like an inevitability, but as Lee Gomes, a former tech writer for the Wall Street Journal, explains in this Slate piece: The autonomous Google car may never actually happen. This isn’t because Google engineers are incompetent, but because actual, in-the-wild autonomous driving is fraught with countless intractable exceptions. What happens in heavy rain or snow, or when the software behind the camera has trouble recognizing objects that are blown onto the road?What happens when your car approaches a a last minute detour around new construction site?

Apple’s life today is relatively simple. It sells small devices that are easily transported back to the point of sale for service if needed. No brake lines to flush, no heavy and expensive batteries and cooling systems, no overseeing the installation and maintenance of home and public chargers. And consider the trouble Tesla faces with entrenched auto dealers who oppose Tesla selling cars directly in some states. Apple doesn’t need these headaches.

There is a simpler and regrettably less grand explanation for the rumors.

Johann Jungwirth, the Mercedes Benz R&D exec that Apple hired last September, worked on infotainment systems, which makes him a natural for Apple’s work on CarPlay. The mystery vans are most likely part of the company’s Maps product.

Apple has made a commitment to better in-car systems, not in and for themselves in isolation, but as a reinforcement of the iOS ecosystem. If the large number of engineers that they’ve “poached” from Tesla seems a bit much, consider again the enormous size of iPhone (and iPad) revenue for this past quarter: $60B – compared to GM’s $40B for the same period. To Apple, anything that helps the iOS ecosystem is well worth what looks like oversized investments to outsiders.

Cars have always excited humans, they are a way to extend the reach of our bodies. As Roland Barthes once said about the Citroën DS 19 [emphasis mine]:

“I think that cars today are almost the exact equivalent of the great Gothic cathedrals; I mean the supreme creation of an era, conceived with passion by unknown artists, and consumed in image if not in usage by a whole population which appropriates them as a purely magical object.”

An Apple car feels good: design, quality, service, trust. A winner. I’ll buy two. It’ll work because it’d be really great if it did… but a small matter of implementation – actually the larger Moore’s Law intrudes.

The fantastic Apple Car is a fantasy.

JLG@mondaynote.com

How Many Laws Did Apple Break?

 

by Jean-Louis Gassée

Apple’s most recent quarterly numbers broke all sorts of records and, as we shall see, a number of laws.

Apple just released its numbers for the quarter ending last December, the first quarter of its 2015 Fiscal Year. The figures are astonishing:

iPhones:  Apple sold 74.5M, + 57% over last year’s same quarter. iPhone revenue was $51.2B, + 57%. That’s enough iPhones for 1% of the world population, 9.4 iPhones for every second of the past quarter. I hope to see some day a documentary movie on the supply chain heroics leading (parts manufacturing, assembly, transportation logistics) required to achieve such numbers. But I’m not holding my breath.

Overall company revenue grew 30% to $74.6B, with the iPhone representing a never-before 69% of total sales. This why some now call Apple the iPhone Company.

Profit (a.k.a. Net Income): $18B. This appears to be the highest quarterly profit ever achieved by a company:

Apple Largest Quarterly Profit Ever Edited

Record quarterly profits is becoming commonplace for Apple. The company has broken into the top ten list five times since Q1 FY 2012.

(The Wikipedia article on record profits and losses has Fannie Mae’s $84B in 2013 in the #1 spot, but Fannie’s categorization as a Government-Sponsored Enterprise puts it in a different race – not to mention the $77.8B and  $64.2B losses in Q4 2009 and Q4 2008 respectively.)

Cash: After generating $33B from operations, the company now holds $178B in cash and cash equivalents. To get a sense of the magnitude of this amount, $178B represents $550 for every US citizen, or $25 per human on Earth. The World Bank has more data here on income levels and other such numbers, and the Financial Times has a helpful blog entry, If Apple were a country…, that compares Apple’s “economy” to those of various nations.

If you’re hungry for more Apple numbers, I suggest you feast your eyes on Apple’s 10-Q (its quarterly SEC filing), especially the meaty MD&A (Management Discussion & Analysis) section starting on page 24. Management also discusses the quarterly numbers in its customary conference call; the transcript is here.

But not everyone thinks highly of Apple’s doings.

We have academics spewing sonorous nonsense under the color of authority, such as Juan Pablo Vazquez Sampere’s We Shouldn’t Be Dazzled by Apple’s Earnings Report, published in the Harvard Business Review. Sampere, a Business School professor, finds Apple’s display of quarterly numbers unseemly:

Announcing boatloads of money, as if that were point, makes us think Apple no longer has the vision to keep on revolutionizing.

John Gruber offers a reasoned retort to the professor, but it probably won’t sway the likes of Joe Wilcox, a Sampere defender who writes: Atop the pinnacle of success, Apple stands at the precipice of failure.

Or consider Peter Cohan, an habitual Tim Cook critic, who recently told us there are “6 Reasons Apple Is Still More Doomed Than You Think”.

Apple… always one foot in the grave. But in whose grave?

This last quarter hasn’t been kind to the Apple doomsayers. A bundle of their lazy, ill-informed or poorly reasoned — and often angry — predictions are offered here for your compassionate amusement. Or we can turn to the ever reliable Henry The iPhone Is Dead In The Water Blodget for morsels such as this one, from November 2013: Come On, Apple Fans, It’s Time To Admit That The Company Is Blowing It. One of Henry’s points was Apple prices were too high. It’s getting worse: Last quarter, the average price per iPhone rose to $687.

We now turn to law-breaking.

Law 1: Larger size makes growth increasingly difficult.
This is the Law of Large Numbers, not the proper one about probabilities, but a coarser one that predicts the eventual flattening of extraordinary growth. If your business weighs $10M, growing by 50% means bringing in another $5M. If your company weighs $150B, 50% growth the following year would require adding $75B – there might not be enough customers or supplies to support such increase. Actual numbers seem to confirm the Law: Google’s FY 2014 revenue was $66B, +19% year-on-year; Microsoft’s was $87B, +11.5%; Apple’s $183B in revenue for 2014 was a mere +7%.

And yet, last quarter, Apple revenue grew 30%, breaking the Law and any precedent. iPhone revenue, which grew 57%, exceeded $51B in one quarter — close to what Google achieved in its entire Fiscal 2014 year.

Right now, Apple is “guiding” to a next quarter growth rate that exceeds 20%. For the entire 2015 Fiscal Year, this would mean “finding” an additional $37B to $40B in sales, more than half a Google, and a little less than half a Microsoft.

Law 2: Everything becomes a commodity.
Inexorably, products are standardized and, as a result, margins suffer as competitors frantically cut prices in a race to the bottom.

Exhibit 1: The PC clone market. As mentioned, the iPhone ASP (Average Selling Price) moved up, from $637 in Q1 FY 2014 to $687 last quarter. Moving the ASP up by $50 in such a competitive market is, to say the least, counterintuitive. At the risk of belaboring the obvious, a rising ASP means customers are freely deciding to give more money to Apple.

We’re told that this is just a form of Stockholm Syndrome, the powerless customer held prisoner inside Apple’s Walled Garden. Not so, says Tim Cook in a Wall Street Journal interview:

“…fewer than 15% of older iPhone owners upgraded to the iPhone 6 and 6 Plus…the majority of switchers to iPhone came from smartphones running Google Inc.’s Android operating system.

This correlates with Apple’s 70% revenue growth in Greater China, a part of the world where, in theory, cheap clones rule.

Law 3: Market share always wins.
Why this one still has disciples is puzzling, but here we go. With the bigger market share come economies of scale and network effects. Eventually, the dominant platform becomes a gravity well that sucks application developers and other symbionts away from the minority players who are condemned to irrelevance and starvation. Thus, just as the Mac lost to Windows, iOS will lose to Android.

Well… As Horace Dediu tweets it, Apple’s loss to Windows hasn’t hurt too much:

Dediu Losing PC War

Apple has gained PC market share in all but one quarter over the past eight years — that’s 31 out of 32 quarters.

But even that impressive run isn’t as important as the sustaining number that really does matter: profit share. Despite its small unit share (around 7% worldwide, higher in the US), Apple takes home about half of all PC industry profits, thanks to its significant ASP ($1,250 vs $417 industry-wide in 2014, trending down to $379 this year). Apple’s minority unit share in the mobile sector (13% to 15%) captured 90% of mobile profits this past quarter.

Small market share hasn’t killed the Mac, and it’s not hurting the iPhone — which enjoyed a much happier start than the Mac.

Law 4: Modularity Always Wins.
This is one of Clayton Christensen’s worries about Apple’s future. In the end, modularity always defeats integration:

“The transition from proprietary architecture to open modular architecture just happens over and over again. It happened in the personal computer. Although it didn’t kill Apple’s computer business, it relegated Apple to the status of a minor player. The iPod is a proprietary integrated product, although that is becoming quite modular. You can download your music from Amazon as easily as you can from iTunes. You also see modularity organized around the Android operating system activity that is growing much faster than the iPhone. So I worry that modularity will do its work on Apple.”

This was written in May 2012. Three years later, the iPod is all but gone. The music player that once generated more revenue than the Mac and paved the way for the iPhone by giving rise to the iTunes infrastructure has become an ingredient inside its successor. With 400M units sold, Apple no longer even reports iPod sales. One could say integration won.

Christensen rightly points out that in the PC clone market, modularity allowed competitors to undercut one another by improving layer after layer, smarter graphic cards, better/faster/cheaper processing, storage, and peripheral modules. This led to the well-documented PC industry race to the bottom. But Christensen fails to note that the Mac stubbornly refused (and still refuses) to follow the Modularity Law. And, as Apple’s recent numbers show, the iPhone seems just as immune to modularity threats.

I have no trouble with the Law of Large Numbers, it only underlines Apple’s truly stupendous growth and, in the end, it always wins. No business can grow by 20%, or even 10% for ever.

But, for the other three, Market Share, Commoditization, and Modularity, how can we ignore the sea of contradicting facts? Even if we set Apple aside, there are so many “exceptions” to these rules that one wonders if these so-called Laws aren’t simply convenient wishful thinking, a kind of intellectual Muzak that fills an idea vacuum but has no substance.

As Apple continues to “break the law”, perhaps we’ll see a new body of scholarship that provides alternatives to the discredited refrains. As Rob Majteles tweeted: “Apple: where many, all?, management theories go to die?

JLG@mondaynote.com