On Apple and Revolutions: How to Solve a $178 billion problem
Following the most profitable quarter in its history, Apple is a $700 billion company sitting on a $178 billion pile of cash. These staggering numbers have led some analysts to worry, yet again, about how Apple can keep growing and others complain that Apple has lost sight of its world-revolutionising ambitions (here, hereand here). That’s madness. Apple won’t be running out of revolutionary projects for another couple of centuries. There is the core business, health tech, cars—and if that’s not enough, there is space, Apple’s final frontier.
Valued at over $700 billion dollars in February 2015, Apple is already America’s most valuable company. For years, people have worried about the future growth prospects of a company that is selling millions of devices every week. However, seen in the right context, Apple is barely scratching the surface. Almost 2 billion people now own a handset. Apple sold 75 million units in 1Q2015, accounting for a quarter of new smartphone market and one-tenth of the phone market. As Apple’s CEO pointed out already back in 2012, 3 out of 4 smartphone buyers are buying something else and 9 out of 10 phone-buyers are buying something else. There is plenty of wiggle room for Apple in the phone market alone, with growth in China already beating everyone’s expectations and India still awaiting a serious business development effort.
Admittedly, all this growth is extensive rather than intensive — to borrow the conceptual distinction from Peter Thiel’s book Zero to One. Apple is merelyextending its existing products to new markets, not doing the intensive work of going from zero to one and building something completely new and revolutionary. And if you are a company without new and revolutionary ideas, then the proper thing to do with your $178 billion cash pile is to give it back to the shareholders, right? Not so fast. Apple is incubating several revolutions. There is a pilot (HealthKit), a project (self-driving electric cars) and a potential (space).
HealthKit and Cars
Health is the obvious domain for Apple to get into next: all seven billion of us want it and our devices are evolving into the centre piece of the healthcare puzzle. Health tracking wearables, apps, remote monitoring and virtual care all tied into a single platform — Apple is already piloting its HealthKit service that acts as a repository for patient-generated health information like blood pressure, weight and heart rate in a dozen of top hospitals in the US. One day soon we will all be monitoring our health real time and relying on a combination of smart algorithms and our doctors to watch for early signs of trouble. We will keep adding to the menu of tests we can perform with the help of our devices (Apple Watch turning into Apple Lab?), and soon enough we will be administering treatments locally, too. With global expenditures on health currently standing at around $6.5 trillion, there are plenty of new devices, sensors and services for Apple to beautifully create here.
Then there is a billion of gasoline-guzzling cars polluting the air and offending design sensibilities of Apple’s chief designer. Replacing all of them with something electric, self-driving and beautiful is no small feat. Elon Musk is certainly hell-bent on making a dent with Tesla. But at the moment it is but a tiny electric shock to the gigantic body of our monstrous internal combustion fleet: Tesla has shipped around 60,000 Model S and Roadster cars in total since 2008. By 2025, we are talking of Tesla’s manufacturing ramp up to hundreds of thousands of cars a year. We need hundreds of millions. Elon Musk could certainly use a shoulder of a Titan from Mount Cupertino. Enter Project Titan, Apple’s rumoured foray into electric cars that might very well be self-driving. Replacing the installed base of over a billion will take decades, more than enough work for several Teslas and Apples.
When Steve Jobs introduced the first iMac in his 1998 Apple Back on Track keynote, “i” stood for “internet”. This was just three years after we all got the memo in the format of Netscape’s eye-opening IPO: several technologies — the PC, software, internet, hyper-linking and Netscape browser — have converged to create a world-changing platform. “i” was magical.
In 2015, the magical letter is “s” and it stands for “space”. Again, several technologies — cheaper launch costs, cubesats and nanosats, cloud computing and big data — are converging to create the next world-changing platform. As venture capitalist and SpaceX and Planet Labs investor Steve Jurvetson recently put it,”space is the new internet.”
The recent $1 billion capital injection from Google and Fidelity valued the flagship s-company, rocket-maker and future satellite internet provider SpaceX, at $10 billion. So what does that have to do with Apple? What s-businesses could Apple create to revolutionise the final frontier? There is space internet from thousands of satellites in low Earth orbit. This app already has two high-profile lead developers — SpaceX-Google tie up on the one hand, and Branson’s Virgin Galactic-Greg Wyler’s tie up on the other hand — but Apple is no stranger to stiff competition. Real-time Earth observation is another application that will evolve into a decent data-driven business, with half a dozen of young entrepreneurial companies like Planet Labs and Skybox hard at work to develop their offers.
And then there is the ultimate killer app for space with the largest terrestrial market of all — space-based solar power. As a civilization, we are currently using more than 17 terawatt years of power per year, accounting for almost $7 trillion of global spending. We could supply all of it from solar power satellites in geostationary orbit — and use the same infrastructure to provide an order of magnitude higher internet bandwidth as well, a nice kicker to the boys playing with small satellites in low Earth orbit. [Let’s be clear, this ain’t easy. We are talking about putting massive infrastructure into geostationary orbit, ideally built with materials sourced from lower (=cheaper) gravity wells like asteroids and the Moon. But hey, if you have a $178 billion cash problem, you can afford to think outside this planet.]
Apple has been flirting with solar power on Earth for the last couple of years. Most recently, In February, Apple’s CEO Tim Cook announced that Apple is partnering with First Solar to build an $850 million solar farm in Monterey County, Calif. The solar farm will produce enough power for Apple’s new campus, along with the company’s data center, offices, and 52 retail stores in California. That’s a charming small step. Now there is the rest of humanity to think about — and take solar to the next level, 35,000 km above the ground.
Apple could revolutionise terrestrial energy, strike universal internet access and bandwidth off our civilizational worry list and, by stimulating resource extraction from asteroids and the Moon, enable humanity’s expansion into space. There is something Apple-esque about solving three civilizational problems with a single space-based infrastructure drawing on pre-existing technologies. It’s not unlike packing a phone, a camera and a computer inside a single elegant device while obsessing over its mass. Apple’s space power and comms stations — sBeams? — could be as sublime as the iPhone 6 Plus, just a few orders of magnitude bigger.
In a recent profile of Sir Jonathan Ive in The New Yorker, the forty-seven-year-old senior vice-president of design at Apple reflected after watching “Moon Machines,” an old Discovery Channel series about the Apollo program:
There was the realization we needed to develop a spacesuit, but it was hard to even know what the goals should be,” he said. And then he linked the studio’s work to ’s: like the Apollo program, the creation of Apple products required “invention after invention after invention that you would never be conscious of, but that was necessary to do something that was new.
Ah, the opportunity! It’s right there, in front of Ive’s eyes: Apple could be not just like Apollo, Apple could be running the 21st century Apollo. And when it comes to industrial design, Ive’s specialty, space is certainly the final frontier in dire need of Jony Ive’s design sensibility. Have you seen the interior of the Soyuz capsule or the International Space Station? These manufactured environments are a definitive testament to carelessness about human-machine interfaces, a crime against beauty and function.
$178 Billion to Make a Dent in the Universe
Steve [Jobs] did a lot of things for us for many years, but one of the things he ingrained in us [is] that putting limits on your thinking [is] never good.
So say, we take the no-limits-on-our-thinking seriously. Here is how the $178 billion inconvenience could be put to good use over the next 10 years:
$25B — Health // Get 300 million people on HealthKit.
$70B — Cars // Make 1 million electric cars.
$80B — Space // Offer 100 million people the 21st century bundle: space solar power + infinite internet bandwidth.
$2B — Write sOS.
$1B — Save for office party.
Catalyze a health revolution — check. Help Musk out with the electrification of the world’s 1+ billion car fleet — check. Solve the world’s energy and bandwidth problem — check. Write the operating system for humanity’s expansion into space — check. Then, take a well-deserved five-minute break and keep going. $178 billion cash problem — solved.
The details of the cash allocation are less important than my main point: it’s mad to suggest that Apple can’t keep growing or that it should return cash to the shareholders. As Apple is headed toward becoming a trillion-dollar company, continued stock appreciation will be more than adequate for Apple’s shareholders. From an evolutionary perspective, concentrating capital in the hands of people capable of making a dent in the universe is a massive advantage. We have a whole solar system full of elements that need to be rearranged in ways that add beauty, function and life. And with an explicit commitment to not putting limits on their thinking, Apple is in no danger of running out of projects for the next couple of centuries.