The Iphone 5s, Proof That Apple Has Given Up on Innovation
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The Iphone 5s, Proof That Apple Has Given Up on InnovationLet us just, arguendo, accept his point about Apple no longer being innovative. Let us also gloss over the obvious typo about Apple handing out the $100 billion cash pile as well, it’s no where near that amount being returned to investors. So, what is it that we actually want a non-innovative but highly profitable company to be doing with the rivers of cash that it is generating?
Why, we want it to be handing that money back to shareholders. Who can then reinvest it or spend it as they please. And we are entirely happy with the money flowing out of that no longer innovative company because we know, as economists or those interested in economics, that almost all innovation in the economy comes from new firms entering the market.
For that is the truth of it: Apple’s run of innovation under Jobs is the oddity in the economy. Almost always innovation, new products, new ways of doing things, new methods of organisation, that variety of things that leads to economic growth and the creation of jobs, comes from the creation of new firms and the extinction by their replacement of the old firms. So, if a company is making good profits but has no new great ideas we’d actually prefer them to be paying out dividends. Buying back stock: getting that money into the hands of investors who might then invest in new start ups.
We can go further too: if those executives at Apple knew which were the new start ups were that were worth investing in, knew which new technologies or market areas were ripe for development, then they wouldn’t be out of ideas about what to invest in, would they? So we know, because we’ve already defined as such, that the Apple execs don’t know where to spend the money (recall, we are accepting Chakrabortty’s position for the sake of exploring it). Thus we’re absolutely delighted with the idea of it leaving their control and ending up in the hands of someone who might have a clue.
It is this that is so interesting about the argument being made. The...