9/26/23- Job's iPhone🤫, Security Analysis7️⃣, Edelweiss on Luxury 💍👜

Steve Jobs - You already have a phone, why do we have to make one?😐

Welcome back. In a busy world we can be distracted with the trivial many things or we can focus on The Vital Few.

Something that I am thinking about

Steve Jobs was not perfect, but hey, who is perfect? Jobs is also exceptional at a few things and an undisputed master of a couple areas. Watching a master working on their passion is captivating for me.

I was rewatching a Walt Mossberg interview of Steve Jobs at the All Things Digital conference from 2004. iPod had debuted a year or 2 before and was starting to gain some traction. iPhone would not be released for 3 more years, 6/2007.

Apple's iconic 2007 iPhone team. (Left to right: Phil Schiller, Tony Fadell, Jony Ive, Steve Jobs, Scott Forstall and Eddie Cue)

🚨Secret- The project within Apple Inc. for developing the iPhone began with a request in 2004 from CEO Steve Jobs to the company's hardware engineer Tony Fadell, software engineer Scott Forstall and design engineer Sir Jonathan Ive to work on the highly confidential "Project Purple". 🤫- Secret🚨

The majority of the 2004 interview is spent on music, iPod and the music industry, but people are smart and curious.

Walt - What about other devices, beyond the iPod? 9min mark Jobs - Wait and see.😐

Walt - If memory capacity keeps improving, what about photos on a phone? 18 min mark Jobs - The present phone screens are too tiny for photos. 😐

Audience - I love your products, can you make a phone from Apple? 40 min mark Jobs - You already have a phone, why do we have to make one?😐

Audience - I’ve notice on Apple iTunes that you've migrated the movie trailers site into the iTunes experience and there's music videos creeping into iTunes so without putting words in your mouth what's that all about and how does that interplay with the rumors? 45 min mark

Jobs takes the bate…🪝 What follows is a 5 minute nonstop, brilliant, staccato answer. Buckle up, the master gets passionate.

Jobs - Well people like music videos number one and number two we just put out a press release that Apple has the most popular movie trailer download site in the world on the internet or a streaming site actually in the world. So we encode all the movie trailers from all the studios put them up on the internet and pay money for you to download them and or to stream them. More people go to our site than any other site and we have the highest quality ones. We've distributed 200 million copies of QuickTime in the last two years which is really fun because that's what we encode them in. We've since built that into iTunes because iTunes has QuickTime in it as well and you can just do this one download of iTunes and watch your music videos, watch your movie trailers as well as your music. We thought it was just really convenient. There's no giant plan under the covers there but who knows how things evolve. 😏

The interesting thing about movies is that movies are in a very different place than music was when we introduced the iTunes music store. There was only two ways to listen to music, right. One was the radio station, you didn't get to listen to what you wanted to. The other was you go out and buy the CD. Let's look at how many ways are there to watch movies:

• I can go to the theater and pay my 10 bucks

• I can buy my DVD for 20 bucks

• I can get Netflix to rent my DVD to me for a buck or two and deliver it to my doorstep

• I can go to Blockbuster and rent my DVD

• I can watch my DVD on pay-per-view

• I can wait a little longer and watch it on cable

• I can wait a little longer and watch it on free TV

• I can maybe watch it on the airplane

..there's a lot of ways to watch movies! Some for as cheap as a buck or two. And I don't want to watch my favorite movie a thousand times in my life, I want to watch it five times in my life. BUT, I do want to listen to my favorite song A Thousand Times in my life! So they're really different animals and the movie industry is far more mature in its distribution strategies than the music industry was. They're really in very different places.

The other thing is that people are much more attuned to visual quality than audio quality. This is the most amazing thing that happened in the music industry to me. We had the the cassette and well the LP to cassette and then the CD which raised the quality supposedly. The next format after the CD should have been a higher quality format, right. Just like we've got television going to high def but it wasn't sa cd and DVD audio have totally failed. What was the successor to the CD format? MP3 a lower quality format but one that provided a convenience of being able to transmit music over the Internet that no other format had. So that convenience went out and people settle for a lower quality format. The first time I've ever seen that in my life happen!

But that's not going to be the case with with video. With video people have ratcheted up to the DVD format and no one is going to go back to VHS quality just because they can download it faster over the Internet. It ain't going to happen. So to download a DVD quality movie takes hours over most people's Broadband connections and we're going to high def in 2007. Let's say that's going to add another 10x of bandwidth. And I don't see bandwidth improving the home by 10x to even stay equal to where we are now. It's going to get even slower as we go to high def. So to download a high def movie is going to take you half a day. IF the bandwidth increases it's going to take you half a day. Is that instant gratification? Like a song that's going to take you just a minute to download. No.

Therefore the threats to Hollywood of which you know we're a small member at Pixar are very different than the threats to the music industry. Actually the biggest threat to Hollywood isn't the internet. The biggest threat to Hollywood is DVD burners, right. What's happened in music there's a double threat. One was the internet for the distribution of stolen property but the other was that every PC turned into a little replication Factory with the CD burner. And that's what's starting to happen with standard def DVDs now. The DVD burners are going to hit 40% in the next year so. We'll see what happens with standard def DVD. Hollywood's Big Challenge is what do they do about high def to make sure it doesn't happen and that's that is probably the crucial challenge for Hollywood in the next decade much more so than the internet. Likewise the internet might not be as big of an opportunity. Part of the other problem with the internet and downloading movies other than it taking half a day is they go to the wrong place. Most people don't want to watch movies on their PC and they could stream them to their television but there's issues with all of that stuff.

Steve’s answer shows us the depth to which he is thinking about the hardware, software, and network options. He is also thinking about the consumer habits and that informs the consumer product design. His thoughts are not jumbled up like water in rough seas. His thoughts are clear, reasoned and organized like train cars pulling into the station, one after the next. 💥

Look at the iPhone that you hold in your hands (and/or the Android phone) and know that Steve as a master, as an artist thought about and created much of it in his mind. Almost all of the product, feature, UX decisions were filtered through him and his mind.

CEO’s like Steve Jobs do not come along often. Who are the CEO’s like Jobs in 2023? Are you invested with them?

Here is a link to the full interview video from above.

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Investing, Companies, Market Past/Future

(I invest in Companies, not in stocks.)

Interesting companies that hosted earnings results or information sessions since my last edition that I reviewed-

• Technology- ORCL conference, CRWD conference,

• Housing & Banking - LEN, KBH

• Others- AZO, FDX

Weekly TSA Passenger volumes below for the last 5 years. I suspect that because the US consumer is running out of savings, we are going to see passenger volume dip. Keeping an eye on it. 👁️

Parcel Volume market share below, I still find this visual fascinating. Long AMZN!

Public homebuilders continue to build and sell. ASPs and margins might be a bit lower, but this is not their first rodeo 🤠.

AI image progress below. 🤯

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Podcasts

🎧Goldman Sachs Exchanges: Great Investors, Peter Brown, CEO of Renaissance Technologies, talks about his career and building the hedge fund company.

I wrote about quant firm Renaissance and its founder Jim Simons in my post on 8/1/23, link here. The podcast from Goldman is interesting, enlightening and amusing.

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Books and Articles since my last edition

(Books are like loading software on your brain. If I get bored of a book I quit and move on.)

• Security Analysis, Seventh Edition by Seth Klarman, Graham, Dodd This was a reread for me, but I read it first long ago. I think of it like a textbook and because Seth Klarman devoted his time to this 7th edition, I accepted his invitation. The book is over 1000 pages and if that frightens you, permit me to make a suggestion. Read the fantastic 🤩12 new chapters from- Jim Grant, Roger Lowenstein, Howard Marks, Dominique Mielle, Todd Combs, Steve Romick, Ben Stein/Zach Sternberg, Nancy Zimmerman, Seth Klarman, Bill Duhamel/Ashish Pant/Jason Moment, David Abrams, and Seth Alexander. 🙏

• Fugitive Telemetry (The Murderbot Diaries #6) by Martha Wells Science Fiction. Always fun to get inside the head of a half human, half robot and listen to him think.

• The Sisters Brothers by Patrick deWitt Fiction. This is harder to describe than usual as there is a lot of interesting things going on in this story. Set in the late 1800s in the west. It is widely read, google it if you are interested. I enjoyed it.

Here is a link to many of the books I have read and my 1-5 star rating- Goodreads Books Read

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Wild Card🃏

The writing from

Edelweiss Capital

in this edition below is truly exceptional, straightforward and ORIGINAL. 14 Rules of the luxury business. We have all crossed paths with some of the rules before, but never have I seen them collected in 1 post that you can read in 10 minutes. Here is an appetizer:

Rule 1: Do Not Rely on Positioning: Luxury Stands Alone

In standard business strategy, positioning is key. Brands are taught to identify a unique selling proposition (USP) that sets them apart from competitors. However, in luxury, this rule is turned on its head. Luxury brands don't compare or position themselves against others; they stand as unique entities unto themselves. The concept of "positioning" is irrelevant because each luxury brand embodies its own universe, complete with its own set of rules, aesthetics, and values. The idea is not to be better than the competition but to be incomparable.

My only editorial comment with luxury brands and marketing in general is don't be subconsciously sold🧙‍♂️. Instead be conscious about the fact that your human brain is being influenced…. manipulated even. 😬

“The idea is not to be better than the competition but to be incomparable.” 🫳🎤 Enjoy!

The Luxury business: Part II

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Disclaimer: All of my posts are for informational purposes only. I might own some of the companies discussed in these posts. This is NOT a recommendation to buy or sell securities discussed. Please do your own work before investing your money.