How do We Assess Our Beliefs About Apple?


| Analysis

Back to Apple

In the latter months of 2016, an uncomfortable feeling was emerging from the community of Apple observers. Only one new Mac was announced in 2016, the MacBook Pro with Touch Bar. By the end of 2016, it became clear that was all we’d get from Apple, and the future of the Mac was called into question.

Then, on January 31, Apple had its Q1 2017 Earnings Report. Not only were Mac sales up year-over-year (just slightly) but Mac revenue was stellar. Apple must have sold a lot of (very expensive) MacBook Pros in Q1 to make up for what looked to be sagging sales in the previous three quarters.

Kids in Apple store

Apple stores in my neighborhood were jammed all during the holidays.

Not only were Mac unit sales and revenue comforting, but the rest of the company seemed to be firing on all cylinders. I promised no equations, but I’ll sneak one in.

f{Macs, iPhones, iPads, Apple Watch, Apple TV, Services} => Revenue.

In other words, the executive focus, a function of all areas of the business produced the revenue and earnings that were reported. This is objective reality that has to be folded into the credence of the claim: “Apple is doing well as a company.”

I see many cases where authors seem to either ignore certains kinds of data, even performance data, or put the emphasis on the wrong elements of Apple’s business. Some even start with the conclusion, (Apple is doomed, Tim Cook is awful, etc), then pick and chose particular facts to support the proposition. That may be entertaining, but it isn’t analysis.

Evaluating Apple’s Black Box

I recognized that Apple’s Q1 2017 quarter was a holiday quarter, and customers tend to be expansive around that time of year. And yet. Apple’s performance was a record breaking Q1. Mac sales were up year- over-year. iPhone sales set a record. Services set a record and are on the upswing.

So when I look at Apple as a whole, and I update my thinking about what I know about Apple, I try to fold in data that’s objective and relevant (Apple customer enthusiasm => sales) and lower the credence of some other data (Apple doesn’t care about such-and-such.)

Apple is like a black box that has an input (supply chain), complex innards, and outputs (products). Most of use can’t really see inside the the black box to see the inner workings. Often, we draw conclusions about what must be going on inside to account for the output, but that’s not always reliable.

In summary, Apple is objective reality. Observing Apple is like observing the workings of the universe. We form theories. We try to do some feeble experiments on Apple by quizzing its executives at the Earnings Reports, and we formulate ideas about how Apple is functioning. How well we do that depends on how well we update our basic theories based on new information and the tools we use to assess credences of what we learn.

I’ve always tried  to do that in my own writing. Dr. Carroll’s beautiful explanation of Bayesian logic and credences has inspired me to work even harder on that kind of analysis.

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MacFrogger
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MacFrogger

CudaBoy: Re: “The Kool-Aid Meister at work again -well those that can’t get published-write for the web as they say.”

Take a chill pill Dude. It’s OK to disagree with John as you well know. But lately your insults have been borderline childish while the above one is really quite over the top. Maybe someday you will grow up and become a CudaMan…but in the meantime you owe him an apology.

CudaBoy
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CudaBoy

The Kool-Aid Meister at work again -well those that can’t get published-write for the web as they say. Fact is iOS is a tiny percentage of mkt share over Android approx 1/6 and Samsung holds about double market share to iPhones and that is while their numbers drop for a few obvious reasons. Never weep for either Cupertino or Suwan (a paltry 23 trillion dollar PROFIT in the electronics div.) as they both operate a racket that dominates 99% of mobile – the real commodity that powers Apple. Stop the rubbish about Mac …that’s bull. Where’s the new FUNCTIONAL Mac… Read more »

brett_x
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brett_x

Good points, but I think most of the disillusionment of Apple over the past 4-5 months was aimed at the lack of progress in the Mac realm. That the year over year sales were up may just mean that people gave up waiting for something spectacular and finally replaced their aging machines. There was a lot of hype, and then MacBook Pro they released was not the MacBook Pro that most people were waiting for. The touchbar is neat, and a bit innovative, but it hardly is a must-buy feature. Especially when a lot of ‘pros’ don’t even use the… Read more »

YodaMac
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YodaMac

Man, I would have sworn that image you used was the top of a Mac Pro! lol

aardman
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aardman

Thanks, an article that Apple observers should read and incorporate in their thought processes. Might I add or emphasize a few items that folks should keep in mind when they try to understand Apple’s actions: 1. Starting from the assumption that Tim Cook and the rest of Apple management are ‘stupid’ is stupid. 2. We do not know a lot of information about Apple that Apple management knows. Specifically, unlike other companies out there who sound a five-trumpet fanfare for every little thing they come up with, Apple is very secretive about what they’re working on in R&D. We also… Read more »