Apple: The goose that lays the golden eggs

Join Horace Dediu, Daniel Eran Dilger (and me) in New York City Thursday (8/16).

I have a limited supply of half-off tickets to The Goose that lays the golden eggs, a day-long seminar for long-term Apple investors in Manhattan tomorrow. With apologies to my current subscribers (for whom I have undying love), I’m offering them to first-time 12-month subscribers. Tickets (not sold at the door) cost $750. A year of Apple 3.0 costs $100. You do the math.

Dediu’s agenda:

• How to read the company’s performance given its published results. We will review how to build a model of the company’s financials and how it can be used to forecast the next quarter. We can go line-by-line through the income statement.
• How to think about the markets Apple considers important. This is the best way to forecast the company’s performance beyond its current portfolio. This requires calibrating your sense of timing of innovations. What is too early, what is too small, what is something where Apple can’t exercise control? Innovation theory is essential to this understanding. If you know where Apple could go next and where it won’t it helps you build patience into your planning.
• How to understand Apple’s culture and its resources and processes. This gets into the critical management question that leadership at Apple is concerned with. I’ve had a few conversations with and have some great insight from former managers. Curiously, this is Apple’s greatest competitive advantage and its sustainability is the key “moat” question. Most people don’t even realize that this is the most important question for investors.
• How to understand the market’s reaction to Apple. If you understand the three points above it becomes necessary to juxtapose how others see the company. There is a compelling case of asymmetry of information even though “everyone” is watching the same data. I use the fable of “The Goose that Lays the Golden Eggs” to best describe how most people react when they observe Apple. Apple is something which cannot possibly exist and therefore it is fragile and must be treated as a transient system. It leads to deep discounting in the market. This cognitive illusion has an opposite: monopolies are over-valued because they are seen as invulnerable and permanent even though they are brittle. I use antifragility as another metaphor. Many anecdotes from Steve Jobs also indicate that he understood this asymmetry and instilled it in the company. Investors need to understand this dynamic in order to profit from it.

Interested? Write me at [email protected]. First come, first served.

My take: Nobody applies the theory of innovative disruption to Apple and its competitors with more clarity—or graphical flair—than Horace Dediu. For a preview, see his write-up of his Apple summit in Los Angeles two months ago: On knowing the value of everything and the price of nothing.

Click to enlarge.