Apple Is Now an Antifragile Company

Originally published at: Apple Is Now an Antifragile Company - TidBITS

With the return of Steve Jobs, Apple became a titan of the tech industry, but the COVID crisis has proven that Tim Cook’s Apple is truly “antifragile,” in that it grows stronger under adversity.

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How did Tim Cook show his leadership qualities last year? What decisions did he take?

What is the difference to other companies? How is Apple more or less robust than Google, Facebook or Microsoft?

The article is rather vague.

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I don’t think you can limit it to decisions he took last year. As the article points out, a lot of the reasons for Apple’s resiliency was that from decisions it took earlier on.

The ones mentioned are:

  1. Locked in chip supplies at an increased rate
  2. Moved to its own CPUs
  3. Stockpiled cash
  4. Stayed strong in China
  5. Diversified portfolio
  6. Digital and physical distribution networks (that might be more Jobs than Cook)

Taleb, not a fan of experts, says of them in The Black Swan: “The problem with experts is that they do not know what they do not know.”

I wonder if he applies that analysis to himself?

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There’s been a pretty consistent tenor to the articles in the media criticizing Big Tech. They seem to view the economy as a zero-sum game, where profits in Big Tech come at the expense of “the little guy” somewhere. That is patently not based on economics, but it’s certainly a ‘populist theory’ that gets a lot of clicks. (One can argue that Amazon takes away sales from ‘brick and mortar’, but that argument doesn’t make sense for Apple, Facebook, Google, Netflix or Microsoft.)

And on Taiwan, I was surprised to see a “Made in Malaysia” label on my new M1 Mini.

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All excellent points. There wasn’t much Cook could do on the spot other than close stores and offices and try to weather things out. The aspects of Apple that made it antifragile had been established years and decades in advance, starting with Jobs and built upon by Cook.

@deemery That’s a more complex topic for another time. They’ve all cut into smaller businesses in one way or the other. The question is whether it was through vastly superior competency or underhandedness.

I’d like to add to this very insightful continuum:

Expanding hardware lines and services, like iMac, Watch and Fitness+, iPod, iTunes and Music, acquiring Beats and building Air Pods and Pro, iPhone, iPad, Home Pod, Arcade, Apple TV and TV+, iCloud, iTunes/Music, and most recently podcast subscriptions. He’s even responsible for stuff like emojis. And he built Apple’s physical and digital stores. And he’s expanded Apple across the globe.

In addition to stockpiling cash, he developed Apple Pay and credit card. But what I think is critically important is that after the death of Steve Jobs, he picked up the ball, ran with it. He didn’t just restore Apple to financial health, he built it into the world’s first one trillion, and the first two trillion $ company, and continues to set standards of excellence across the globe.

Instead of focusing on privacy and security, he could have focused on building out advertising revenue and selling user information to third parties. But he did not, and it is unparalleled among Apple’s rivals.

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I think you are correct in the zero sum game, but I doubt if the stockholders and management of companies like Research In Motion (BlackBerry), Gateway, Motorola, Nokia, along with the mobile music and phone units of Sony, LG, etc., etc., would agree about the little guy.

What I find very interesting is that when the Fortnight controversy hit the press, it initially seemed to me that they were the brave little David risking its life against the evil Goliath, Apple. A quick search turned up information that Fortnight is part of Epic Games, one of the largest, most profitable gaming companies in the world. And Epic/Fortnight is owned by Tencent, one of the largest global companies in the world.

Here’s an example of one of their many development initiatives:

I’m afraid I really don’t know what the point of this piece was. We in Apple fan land knew and know they are doing well. Nobody around these parts seriously doubts the world’s largest company has done well and knows how to look out for itself. I don’t think anybody is worried Tim might have to go bag groceries any time soon. Or was this supposed to be an “I told you so”? I’m really not sure.

Apple can do this because it spends billions well in advance to secure the parts it needs—precisely what the auto industry didn’t do.

Well how is that a big accomplishment when they’re stockpiling $200B? They’d be idiots not to spend what is to them peanuts in order to ensure their supply.

Not saying it wasn’t a good move, but congratulating them for it is as if you were to congratulate an adult for going to the bathroom rather than wetting their pants.

Apple can take its designs directly to foundries like TSMC and buy up manufacturing capacity in advance.

The transition to AS was undoubtedly a good move. But this article fails to investigate the other side of that plan. Apple designs its own chip, but it has right now just one company capable of building it. It has exactly one M1/A14 foundry. If TSMC has a problem at that plant (next time perhaps a bit more serious than today’s issue), Apple could be in trouble. Considering China and its increasingly brazen bully stance towards Taiwan (along with the rest of the world), this risk involves substantially more than just bad weather or contaminated gases. It would be nice to hear how Tim plans on getting TSMC to build AS in a free democratic country not threatened by one of the world’s most atrocious dictatorships. And what’s the due date on that plan?

A brick-and-mortar retailer like Dollar General would be devastated by store closures, but for Apple, it was only an annoyance that could be mitigated by the Apple online store.

So in essence, are we to be surprised that a global corporate behemoth that attempts to insert itself in all of everybody’s lives and at all times of the day (Amazon is probably an even greater example here) has managed to ride out the pandemic well while a low-end grocery chain that markets to addicts and poor people faces trouble? Of course Apple did well, but again, is there any subtlety to this point here? “For whoever has will be given more, and they will have an abundance.”, Mathew 25:29. So congratulations, Tim Cook, I guess, for having turned much into more, in a biblical sense.

Re: black swan, personally, I find Taleb a conceited ass. His books meander on forever, full of repetition and redundancy, incredibly annoying to read all the way to the end. He’s marketed the hell out of himself and I certainly give him that, but when all is said and done I find him rather potemkin TBH.

Simon, you’re being entirely too dismissive. None of the things that the article mentions are actually that obvious and, more importantly, in most of the cases there’s active pressure in the other direction. For example:

Well, yes, but the smart decision is to hold onto the cash in the first place. Wall Street has been a drum beat for a decade critiquing Apple for holding onto that much cash, and Apple has steadily ignored them. Are there a lot of other companies holding onto giant stacks of cash?

Your criticism seems to boil down to “Yes, we know Apple is successful, you don’t have to tell us how they’re successful” which is odd.

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The goal was to point out to those who don’t pay a lot of attention to Apple’s corporate moves (like stockpiling cash, maintaining both physical and virtual distribution systems, and focusing efforts on different geographic areas) that Apple’s doing really well for reasons that go beyond just the products we all see. And as we know from Apple’s past, quality products aren’t enough on their own.

As far as the reliance on TSMC, it’s already building a factory for that in Arizona.

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Stockpiling was a truly visionary move. The powers that be among the auto companies across the globe are neither dumb, unaccomplished, incompetent in their respective fields; nor are they, on average, likely to be incontinent. In addition to cars, computer and mobile devices, home appliances, medical device and drug manufacturers, robotics, television, broadband and broadcast providers, game hardware, cash register and banking equipment,and a host of other manufacturers, are suffering because of chip shortages. Their top level supply side guys are likely to have backgrounds similar to Tim’s, but they don’t seem to have the vision.

Things are so bad that Intel is walking around with their hands out for billions of cash to subsidize building a plant to build chips in Europe:

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Except that plant isn’t geared towards Apple’s latest and greatest. It’s being built for a 5-nm process. By the time the plant goes into production (2024), Apple’s 5-nm A14 and M1 will be 4 year old CPUs. Apple’s current Mac and iPhone CPUs by 2024 are expected to be on a 2-nm process for which a brand new plant is just now being built in, guess where, Taiwan of course. That’s not to say they won’t be manufacturing chips for Watch or AppleTV or older hardware in AZ, but that plant does not look to be what will be making Apple’s high-volume orders for current-gen hardware.

But Apple is far from TSMC’s only customer and not everybody needs 2mm chips. If this factory can take a lot of the load off of the other factories in Taiwan, that will also have a huge impact.

And although it’s taking a long time to get this factory up and running, we don’t know how long it may take to upgrade its equipment to a smaller process in the future. I think it’s safe to assume that it will be faster than starting from nothing.

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That’s beside the point. It wasn’t about capacity, it’s about Apple receiving its latest and greatest from a plant that’s not threatened by China. And of course ideally from more than just one foundry (company). Similar to how they otherwise also strive to have several suppliers whenever they can.

TSMC has plans to build six factories in Arizona over the next few years:

They do plan to begin mass production in AZ in 2024. In the meantime, they will continue to build chips for Apple in Asia. This past December, Apple locked in production for the next generation iPhone. And here’s what’s coming in 2022:

“Keep in mind that 3nm chips will not just be for mass producing the A16 Bionic expected to fuel the iPhone 14 series. The advanced manufacturing process may also be used to make chips for Apple’s iPad and Mac lineup, so a large product base means TSMC will have to start trial production much earlier to achieve a healthy yield in the coming months. In related news, TSMC has reportedly started mass production of N5P chips, or the improved 5nm technology for the iPhone 13 line.“

What’s so unusual about Black Swans? :blush:

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I know the article was focused on Apple, but it’s fascinating to me to see which other companies (particularly in the trillion-dollar-value range) managed for mostly different reasons to have huge revenue increases.

Amazon was severely constrained early in the pandemic, handled infection exposure of its workers’ terribly, did not improve its reputation — and grew and had a huge market cap increase, too! They ultimately did start delivering well again, and proved both we rely on them too much but that nobody else was well suited, either (because they dominate many markets).

I was also thinking “robust” in terms of diversification of product lines. Apple has been very aggressive in expanding its hardware and software offerings ever since Steve Jobs returned to the company. They’ve even moved successfully into financial services. By rolling their own chips, they are, and will be, greatly rejuvenating existing product lines. And there could even be an M2 chip in 2022. Air Tags and New Mag Safe pack are their latest new product introductions. And though they are still badly kept secrets, it looks like Apple is planning moves into transportation, VR/AR in the near future.

Looks like Google is becoming increasingly antifragile as well. Like Apple, they’ve designed their own chip for their upcoming Pixel phones. They’ve been designing their own chips for their servers for a while:

Zombies don’t use Androids at all?