This is exactly why I buy AAPL puts. The cult of Steve weighs far more heavily on their share price than their actual results.
Apple's success is clearly due to a lot of people. Nobody does that well due to the brilliance of a single man, and Steve Jobs isn't as bright as people give him credit for. The man tried to cure his own pancreatic cancer by eating carrots for Christ's sake.
Yet every time he sneezes their shares drop $10. So I buy puts knowing that one day, probably soon given the way he's looking lately, he'll announce his retirement (either voluntarily or due to illness) and their share price will plummet, at which point I'll sell my options and then go long AAPL, because really, they don't need him.
I don't own any Apple kit (though I have in the past) and I think the guy is actually quite bright. Anyone can be lucky enough to succeed once, but he has a history of multiple successes. Yes, possibly based on the hard work of others, but he's astute enough to spot this talent. Like Yin and Yang there's often a negative side to what appears outwardly positive. He's not there to be liked - he's there for himself
Matt's point is that it will run well even without Steve. But, at least according to Good to Great, such ego companies fail pretty hard once their leader leaves.
I haven't read that but perhaps I should. Either way I think selling the puts is good. But if I'm wrong that Apple can't function nearly as well without him, I shouldn't reverse positions after.
To save you a read, the gist is that the leaders of ego driven companies do not have an interest in making sure the company succeeds when they leave. In fact, it is the opposite, since a spectacular failure shows they were indeed geniuses in being able to hold it all together. Likewise for giving others the important decisions they need to learn to be leaders.
But this problem is much larger than just the business world. In my other readings and observations, I've noticed a similar trend. According to Rashid's "Taliban," the Taliban succeeded despite themselves. Their culture is so caught up in ego that they are pretty much incapacitated without a strong leader to hold it all together, consequently they are constantly splitting and fighting with each other. We also saw this in the leadership vacuum left by deposing Saddam, and is partially why it has taken so much work to get an Iraqi army going.
In general, I see this in most non western cultures, at least that I know of, so I suspect it is a common aspect of human nature: principle based leadership outperforms ego based leadership. This is reinforced by another book I read, "Why the Rest Hate the West." The enlightenment marked a very important shift in social structure: from societies based on relationships to principle based societies, such as law, strict national boundaries, a common language and currencies - the American constitution being the epitome of this approach.
However, I qualified this as being more general to western culture, since the Greeks, and then the Romans, took a similar view of law and culture. For example, see Sophocles' "Orestes" or Virgil's "Aenaed." I guess the Enlightenment more marks a truly rigorous and global application of this idea. If you want a more contemporary example, just look at what kind of culture perpetuates the ghettos vs the culture that perpetuates the more successful segments of America. At any rate, I'm pretty convinced that cultures based on principle vs personality are much more successful.
So, all that is to give credence to the idea that ego driven companies are an evolutionary dead end, and give myself a link that I can refer to for future discussions.
If your whole society is formed by a bunch of ego driven leaders who don't accept change because it threatens their power, then you're going to grow up a pretty frustrated person, anxious to do anything that will fix things - even if it is really more of the same problem.
Yes, I guess I am showing off. But, for most of the books, the only reason I've read them is because I had too, not because I'm some kind of autodidact, and not that the list is particularly impressive anyways.
You bought AAPL puts near the current price? Given their growth in the mobile market, the presence of Steve Jobs, and cash on hand, that would be more of a bet than I'm willing to take. But hey, the thesis that consumers are going to stay away from Apple Stores this Christmas is reasonable - just not certain enough for me to bet on, especially given Apple's extra-low guidance which would seem take this into consideration.
I made a bit on AAPL calls buying the day before their earnings, and selling the day after (Dec calls, sold immediately after the pop in this market).
Like I said, the puts were based solely on the nosedive the stock will take if he retires or falls ill. Seriously, every time a blog posts a rumor that he's sick it dips 10% with no signs of stopping before they suspend trading. That's happened twice in the past year.
I agree with most of what you said, which is why I'll reverse positions immediately after it happens. If it does.
It's worth noting that the writer of "I, Cringely" has pumped out more than just a few off-base Apple articles in the past. Apple merges with Intel, Apple teams up with Blockbuster, Apple to stop making hardware, Apple buys Adobe...
Everything in Silicon Valley is Ego. For all the bozo CEOs who take all the credit for _everything_, there's a gazillion unsung heroes who are smarter, faster, and are completely unsung (but hopefully they get some cash when there's an exit). That's the dynamic.
Honestly, the title seems fairly apt. The author starts the article with the sentence, and proceeds to mention a plethora of things which argue that this sentence is accurate.
If you didn't already know Steve Jobs was an ego-centric CEO with a cult-of-personality keeping him going before the article, you're pretty far behind in tech news. However, I had no clue about the reasons behind Fadell's firing, and that's the real point of the article anyway.
From the article:
> "But if Apple fails in that, Steve Jobs will just pick up the phone and choose IBM Microelectronics as the fab to build the next generation of Apple’s PowerPC processors – a contract worth billions, but ONLY if IBM drops all legal action."
I can't see Apple switching Macs back to PPC any time soon. In the last 10 years they've forced Mac developers and customers to switch to a totally different operating system AND processor architecture. Both were good moves, but it seems silly to switch back.
Apple has said they bought P.A. Semi to create custom chips for their portable devices:
They didn't switch to a different processor architecture, they switched to a system where processor architecture is insignificant, hence the universal binaries, not Intel binaries.
They could put any kind of chips in their computers and any universal application would be one recompile away from working on the new processor architecture.
That was the theory, but it's not the way things are anymore.
A whole load of stuff is being released Intel-only now. The newest PowerPC machines are now two years old, so if you're releasing something that needs a this-generation machine to run reasonably, why bother?
This proportion is only going to grow over time. And it will probably be riddled with endian bugs, alignment assumptions, and x86-only toolchains. Going back to PowerPC would be at least as traumatic as the initial switch.
Apple's success is clearly due to a lot of people. Nobody does that well due to the brilliance of a single man, and Steve Jobs isn't as bright as people give him credit for. The man tried to cure his own pancreatic cancer by eating carrots for Christ's sake.
Yet every time he sneezes their shares drop $10. So I buy puts knowing that one day, probably soon given the way he's looking lately, he'll announce his retirement (either voluntarily or due to illness) and their share price will plummet, at which point I'll sell my options and then go long AAPL, because really, they don't need him.