Monday Morning: Brittle

The Emperor’s Palace was the most splendid in the world, all made of priceless porcelain, but so brittle and delicate that you had to take great care how you touched it. …

— excerpt, The Nightingale from The Yellow Fair Book by Andrew Lang

Last week I’d observed that Apple’s stock value had fallen by ~7% after its financial report was released. The conventional wisdom is that the devaluation was driven by Apple’s first under-performing quarter of iPhone sales, indicating weaker demand for iPhones going forward. Commenter Ian remarked that Apple’s business model is “brittle.” This perspective ignores the meltdown across the entire stock global market caused by China’s currency devaluation, disproportionately impacting China’s consumption habits. It also ignores great untapped or under-served markets across other continents yet to be developed.

But more importantly, this “wisdom” misses a much bigger story, which chip and PC manufacturers have also reflected in their sales. The video above, now already two years old, explains very neatly that we have fully turned a corner on devices: our smartphones are and have been replacing our desktops.

Granted, most folks don’t go through the hassle of purchasing HDMI+USB connectors to attach larger displays along with keyboards. They continue to work on their phones as much as possible, passing content to and from cloud storage when they need to work from a keyboard attached to a PC. But as desktops and their attached monitors age, they are replaced in a way that supports smartphones as our main computing devices — flatscreen monitors, USB keyboards and mice, more powerful small-footprint external storage.

And ever increasing software-as-a-service (SaaS) combined with cloud storage.

Apple’s business model isn’t and hasn’t been just iPhones. Not since the debut of the iPod in October 2001 has Apple’s business model been solely focused on devices and the operating system required to drive them. Heck, not since the debut of iTunes in January 2001 has that been true.

Is there a finite limit to iPhones’ market? Yeah. Same for competing Android-driven devices. But is Apple’s business just iPhones? Not if iTunes — a SaaS application — is an indicator. As of 2014, there were ~66 million iPhones in the U.S., compared to ~800 million iTunes users. And Apple’s current SaaS offerings have exploded over time; the Apple store offers millions of apps created by more than nine million registered developers.

At least nine million registered developers. That number alone should tell you something about the real business model.

iPhones are a delivery mechanism, as are Android-based phones. The video embedded above shows just how powerful Android mobile devices can be, and the shift long underway is not based on Apple’s platform alone. If any business model is brittle right now, it’s desktop computing and any software businesses that rely solely on desktops. How does that change your worldview about the economy and cybersecurity? Did anyone even notice how little news was generated about the FBI accessing the San Bernardino shooter’s PCs? Was that simply because of the locked Apple iOS account, or was it in part because the case mirrored society’s shift to computing and communications on mobile devices?

File under ‘Stupid Michigan Legislators‘: Life sentences for automotive hackers?
Hey. Maybe you jackasses in Michigan’s state senate ought to deal with the permanent poisoning of nearly 8000 children in Flint before doing something really stupid like making one specific kind of hacking a felony worthy of a life sentence. And maybe you ought to do a little more homework on hacking — it’s incredibly stupid to charge a criminal with a life sentence for a crime as simple as entry permitted by wide-open unlocked doors. Are we going to allocate state money to chase hackers who may not even be in this country? Are we going to pony up funds for social media monitoring to catch hackers talking about breaching wide-open cars? Will this law deter citizen white hats who identify automakers’ vulnerabilities? File this mess, too, under ‘Idiotic Wastes of Taxpayers’ Money Along with Bathroom Legislation by Bigots‘. This kind of stuff makes me wonder why any smart people still live in this state.

File this, too, under ‘Stupid Michigan Legislators‘: Lansing Board of Water and Light hit by ransomware
Guess where the first ransomware attack on a U.S. utility happened? Do I need to spell it out how ridiculous it looks for the electric and water utility for the state’s capitol city to be attacked by ransomware while the state’s legislature is worrying about who’s using the right bathroom? Maybe you jackasses in Lansing ought to look at funding assessment and security improvements for ALL the state’s utilities, including both water safety and electricity continuity.

Venezuela changes clocks to reduce electricity consumption
Drought-stricken Venezuela already reduced its work week a month ago to reduce electricity demand. Now the country has bumped its clocks forward by 30 minutes to make more use of cooler early hour during daylight. The country has also instituted rolling blackouts to cutback on electricity. Cue the right-wing pundits claiming socialism has failed — except that socialism has absolutely nothing to do with a lack of rainfall to fill reservoirs.

Coca Cola suing for water as India’s drought deepens
This is a strong piece, worth a read: Whose Water Is It Anyway?

After a long battle, the UN declared in 2010 that clean water was a fundamental right of all citizens. Easier said than done. The essential, alarming question has become, ‘Who does the groundwater belong to?’ Coca Cola is still fighting a case in Kerala where the farmers rebelled against them for using groundwater for their bottling plants. The paddy fields for miles around dried up as water for Coke or the company’s branded bottled water was extracted and transported to richer urban consumers.

Who did that groundwater belong to? Who do our rivers belong to? To the rich and powerful who can afford the resources to draw water in huge quantities for their industries. Or pollute the rivers with effluent from their industries. Or transport water over huge distances at huge expense to turn it into profit in urban areas.

Justus Rosenberg: One of Hannah Arendt’s rescuers
Ed Walker brought this piece to my attention, a profile of 95-year-old Justus Rosenberg featured in this weekend’s New York Times. I love the last two grafs especially; Miriam Davenport characterized Rosenberg as “a nice, intelligent youngster with no family, no money, no influence, no hope, no fascinating past,” yet he was among those who “…were a symbol of sorts, to me, in those days […] Everyone was moving Heaven and earth to save famous men, anti-fascist intellectuals, etc.” Rosenberg was a superhero without a cape.

That’s our week started. See you tomorrow morning!

See you tomorrow morning!

17 replies
  1. Lexington says:

    I suspect the death of the PC has been much exaggerated. Sales are declining in part because it is a mature, commodified technology that offers few reasons to upgrade. Smartphones are undergoing the same evolution, though from the vendor perspective with smartphones users are at least forced to replace them when the battery sealed inside the device fails.

    I don’t think Apple’s growth prospects are nearly as rosy as you think. Global smartphone sales are stagnant and Apple’s market share is declining. Unless there is suddenly a huge explosion in wealth in places like south Asia and Africa Apple’s current business model of marketing a boutique product with a price to match will seriously limit their growth in emerging markets.

    Also, iTunes may have 800 million accounts, but that’s not the same as 800 million users. I have an account but no longer use iTunes because I decided I don’t want to be locked into the Apple ecosystem. Time will tell whether I’m an outlier or trend setter.

  2. Rayne says:

    Lexington (1:20) — Where are desktops still a must to use in enterprise? The emergence of ransomware and other malware makes the case that every point of entry into a network is a risk, and PCs are entry points. We’re going to see a move back to terminal-like nodes to reduce injection points due to USB and other ports on PCs. Granted, a lot of malware comes in from email, but if email is walled off from enterprise operation networks, risk to production drops substantially. The biggest desktop businesses were worried about this transition a decade ago because this shift would cut into their licensing sales (I was paid to do competitive intelligence in this area). Now they can sell seats or connections to the cloud at lower cost to serve without the cost of desktop service.

    The model we see playing out is the same as it was a decade ago, just on different devices. It was once Windows vs Apple on the desktop, now it’s Android vs Apple on mobile devices. As long as Apple continues aiming for higher end market, the percentage of device market share will remand about the same as it was a decade ago. BUT the SaaS model behind it will be very, very different given Android’s open source license.

    Where the friction between Apple vs Android will be greatest is in those markets leapfrogging past PCs, where cellphone adoption has been strong, but smartphones are still few in number. Intuitive design combined with localized apps will encourage uptake.

    As for me: I’ve disclosed before I own $AAPL — but I am not an Apple user. Had an iTunes account, don’t use it. But everyone closest to me is just the opposite (no $AAPL, uses iTunes, and half use iOS devices). I like the ratio. I hedge my bets owning $GOOG and $GOOGL, because nearly everybody I know either uses their product or promotes inadvertantly. I do not and have not owned $MSFT. I won’t buy another Win device.

  3. earlofhuntingdon says:

    Michigan legislatures, who knew they were so smart? Everyone did know they’ve been in bed with Big Auto since Al Sloane worked for the DuPonts. The car guys should start worrying about their product quality rather than asking the legislature to come up with such ridiculous, purposeless sentencing. But why not act like big banksters. Let them eat carburetors.

  4. Rayne says:

    earlofhuntingdon (3:29) — I don’t think the state’s legislature is in bed with the automotive industry any longer, or the legislature would do more and better things about developing the communities in which Tier 1-3 suppliers exist. I think this is a bullshit stunt to make it look like the legislature is doing something besides monitoring bathrooms. This GOP-led state government are either hopping into bed with each other (see the Courser-Gamrat sex scandal), or studiously ignoring the Flint water crisis if it takes any more than stop-gap measuers, or doing some other equally lame crap designed to discriminate against somebody.

    What’s it say when the Ford Foundation switches focus to inequality while the Michigan state legislature spins its wheels on discriminatory legislation and other ineffectual policymaking?

    • earlofhuntingdon says:

      I guess if the legislature looks at anything substantive, it will see and document what it does not want seen or documented. I would think, though, that the legislature still has good relations with big auto; it’s just that big auto needs things besides better infrastructure in a unionized northern American state.

  5. by the lakeshore says:

    let’s file this under ‘tone deaf’ ‘unbelievable’ ‘geebus’

    Flint Residents Outraged After Discovering The City Is In Talks With Private Water Companies

    Once again, decisions are being made about Flint’s tainted water system with no public announcement or conversation.

    The city has quietly started seeking bids from private water companies. City residents say they only discovered the move when a researcher at the consumer watchdog group Food & Water Watch unearthed a request for proposal (RFP) in a Global Water Intelligence report.

    • earlofhuntingdon says:

      Like living in Bolivia, which I guess is precisely the point. We are all third worlders now, barring the MOU.

    • earlofhuntingdon says:

      We’re not third worlders yet, but the comparable treatment is beginning. I would file the “privatize our water mess” (in secret, for one dollar or with substantial subsidies) under the neoliberal banner that proclaims that no public governmental entity be allowed to do something that any private business might do, regardless of how much more costly it is to taxpayers. In fact, if the taxpayers can be made to pay more for what have traditionally been regarded as public services, then yipee-kay-yea.

    • harpie says:

      The next paragraph states:
      [quote] The RFP is for an analysis of the city’s water system, […] The analysis would give recommendations for how the system needs to be upgraded to bring it into line with best practices and address the Environmental Protection Agency’s order to take corrective measures. This particular contract wouldn’t make Flint’s public water system private on its own. […] In a statement emailed to ThinkProgress, [Mayor Karen Weaver’s] office said, “In the midst of all that’s going on surrounding the Flint Water Crisis and investigation into the matter, Mayor Weaver wants residents to know despite what some people are saying, the City is not looking to privatize operations at the water plant.” [end quote]

      • harpie says:

        The whole mess in Flint was created by people who were empowered to make critical decisions about things they had no knowledge about, and who may have had incentives to not know about.
        At the risk of being shunned as a “neo-liberal”, I would just like to say I wonder who/which entity people think has the expertise and experience to evaluate the Flint water system and make recommendations for remedies to satisfy the EPA order.
        The EPA defines a “public water system” as an entity that provides “water for human consumption through pipes or other constructed conveyances to at least 15 service connections or serves an average of at least 25 people for at least 60 days a year.”
        For water quality, both municipal and private entities which run public water systems are regulated by the EPA and the State primacy agencies [MDEQ].
        In many states, water and sewer RATES are controlled by Utilities Boards, but ONLY for private companies [not municipal utilities]. If a private water company in these states needs to raise rates, they must apply to the Utilities Board and prove their case. [In Michigan, it seems, electricity and gas rates are regulated, but not water and sewer.]
        Municipal utilities have no such controlling authority for rates/increases. In many cities/towns all over the country, water/sewer revenues are used for all kinds of other things [ie: general fund] instead of being reinvested into system maintenance and improvement.
        That is how Mayor Walling could raise the City of Flint’s water/sewer rates twice in 2011 by double digits:
        [quote] Flint Mayor Dayne Walling said the upcoming increase is also necessary to avoid potential cuts to the city’s general fund — which pays for services like public safety and other departments.[…]

  6. John Casper says:


    think, “But as desktops and their attached monitors age, they are replaced in a way that supports smartphones as our main computing devices — flatscreen monitors, USB keyboards and mice, more powerful small-footprint external storage,” is a brilliant bullseye.

    Many thanks.

    Am I on target that it’s the operating system that matters and that Big Data’s putting the majority of their resources into improving smart phone operating systems, (not OS’ for desktops)?

    I’m in no hurry, but I want to upgrade my old Mac Mini. Per my poor memory of a great line from masaccio, I’m seeing far too much of Apple’s “beach ball of love.”

    I’m not a gamer. Want to run MS Excel (maybe Word; (and definitely MSProject if I can)), along with Hotmail on the best OS (and hopefully the ability to run multiple browsers for redundancy) I can find. I use Twitter a lot and want to get on Instragram.

    Any ideas, strategies appreciated.

    If it’s a gamble on a superior OS, I’m willing to explore, “Granted, most folks don’t go through the hassle of purchasing HDMI+USB connectors to attach larger displays along with keyboards.”

    • jerryy says:

      As the magic 8-ball sez ‘reply hazy, ask again later’ … :^)
      Intel just threw in the towel on the mobile market. It is being reported they are stopping development of all the Atom series chips (mobile phone and tablets). So things will be odd as the remaining manufacturers move in to make adjustments. The mobile stuff is far from being settled.
      But, the worldwide market is still wide open (which should help Rayne relax some about the price of Apple’s shares).
      If you do like Apple’s operating systems as you mention, they are a pretty safe place to stay for now. (I am not going to do more than mention the names Linux and Microsoft as that can sometimes lead to harsh words between folks, which … well it is springtime, so cheers!)
      This site can let you know the current prices vendors ask for gear:
      Click on the tab across the top row for Deals and Price Guides, etc. Keep in mind Apple’s World Wide Developers conference is set to start June 13, and usually there are equipment upgrades along with the occasional new release at those events.

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