Even With Unprecedented Earnings, Apple Cannot Purchase Our Trust

Will record profits affect Apple? Forget that, Jake, Cupertinotown is here

Apple’s most recent fiscal quarter has concluded, and the business (yet again) posted record revenues, raking in a billion dollars and closing its most recent fiscal year with a profit just shy of $100 billion.

Give that some time to sink in. The majority of us will never even get close to a billion dollars in our lifetimes, making $100 billion completely incomprehensible. It exceeds the gross domestic output of several countries and not just a handful. More than half of the world’s countries. The majority of them Again, this is the profit, not the revenue, which was a rising $316 billion, placing it among the top 40 countries.

On one hand, this is positive for Apple. There was a period within living memory when the corporation was on the verge of bankruptcy; it has since rocketed to become the most valuable in the world, according to some estimations. This is a credit to the business savvy of its management, but also the quality of its products.

Which makes it all the more surprising to observe some of the company’s recent actions that feel, for lack of a better word, cheap: the almost pathological urge to grab a cut of every App Store transaction, the recent influx of advertising, and price increases on its services. All of these strategies could have been appropriate for a struggling company, but when applied to a corporation that earns more money than the majority of nations, they come out as indecent.

Even though there are numerous explanations for Apple’s evolutionary path, I can distill it down to three basic components.

Not yet dead

Apple was on the edge of bankruptcy when I was a teenager and an Apple enthusiast in the 1990s — yep, dinosaurs still ruled the planet and I’m waving my fist at a cloud right now to urge it to get off my yard. The CEO’s office had a revolving door, and the corporation frequently placed its hopes in technology that was just marginally superior to vaporware. Those of us who believed that our goods were substantially superior to the great majority of PC clones on the market found this to be incredibly upsetting.

Apple did not, as expected, go out of business. Instead, it acquired NeXT, bringing Steve Jobs back to Apple, and went on to release a string of successful products, including the iMac, iPod, and iPhone.

However, this near-death event left an indelible impression on the organization. Similar to Scarlett O’Hara’s declaration that she will never go hungry again in the presence of God, Apple appears to suffer from the anxiety that all these riches could one day abruptly vanish, leaving the corporation once again on the verge of disintegration. The sinking of the Titanic took less than three hours. To avoid mixing my cinematic metaphors:

The introduction of the iMac saved Apple from near extinction. And sometimes the corporation does everything it can to ensure that such days never return.

I believe this is the primary reason why the company rested on a massive cash hoard for so long: it needed a buffer in case its business was ripped out from under it. The corporation has only lately begun its endeavor to attain a “cash-neutral” position, which has proven to be extraordinarily tough, as it turns out that it’s really difficult to get rid of all the money it has.

The world revolves

The return of Apple co-founder Steve Jobs had a significant role in the company’s abyss-averting turnaround. Jobs brought with him a particular worldview, partially derived from his attitude, which served Apple well in those days: Apple collecting its piece. According to my colleague Jason Snell’s account in the most recent episode of the Upgrade podcast, Jobs appeared to be deeply convinced that accessory manufacturers, software developers, and media businesses owed Apple a portion of their revenues.

This resulted in the Made for iPod (and later iPhone) accessory licensing programs and the iTunes Music Store’s 30 percent cut, which was subsequently adopted by the App Store.

The concept of a commission on transactions is not new, nor is it particularly unpleasant in principle: retail establishments have always had markups on the things they sell; it’s how they cover expenses and make a profit. Regularly, agents and others charge a commission for their services.

As an example, becoming a registered Mac developer used to cost at least $500 per year and, in some circumstances, considerably more. However, the popularity of the iPhone app marketplace prompted Apple to reduce the cost to $99 per year, where it has stayed. (Yes, Apple receives a portion of an app’s revenue as compensation, but this does not change the reality that the barrier to entry is lower than it ever was.)

Apple has remained adamant over the years about taking 30 percent of every transaction on the App Store, regardless of its involvement, and, to make matters worse, has made it less customer-friendly for developers wishing to take alternative routes by cracking down on any attempt to exploit loopholes. Because of this, antitrust officials from throughout the world have placed the corporation in their sights.

All of this may have suited Apple well in the past when it had to account for every penny, but that is no longer the case. Instead, the forceful techniques come across as unsettling and, at times, money-grubbing. To increase its revenue, does the corporation need to alienate its developer base, who are also its customers? Where does it end?

Growth at any price

Not everything is Apple’s direct fault. After all, we are in a capitalist society where shareholder profit maximization takes precedence above all else. (Though experienced scholars of Adam Smith’s original treatises on the subject will point out that this perspective disregards his point that it should go hand-in-hand with social improvement.)

Wall Street requires growth quarter after quarter and year after year, which feels absurd when your coffers are overflowing and you cannot spend money fast enough. It’s as if you piled your holiday table with more food than anyone could consume and then demanded that next year’s spread be even more extravagant. It is a system that is, to put it bluntly, broken and possibly even a bit deranged.

And this comes at a cost. One of the expenses associated with the growth-at-all-costs mentality is client trust. Tim Cook cites the customer satisfaction ratings for Apple’s products as if they were the company’s guiding light, but this is a lagging indicator: in many cases, you don’t know when you’ve exhausted your customers’ trust until it’s too late. Twitter is currently facing a real-time erosion of user confidence. Or Meta, the poster child for mistrust in the IT business, losing fifty percent of its stock value. The plain truth is that no organization can grow indefinitely.

The parallels are not exact, but there is a lesson to be learned. Changing an entire system is not an easy or quick task, but who is better positioned to make these inroads than the most valuable company in the world, which has the financial resources to weather the resulting storm? It merely needs to decide to do so.

And it has pointed in that direction. Apple, along with 200 other large corporations, signed a statement a few years ago declaring that there is more to business than profits, including protecting the environment, providing for employees, combating economic inequality, and providing value to customers. Apple has made significant strides in some of these areas, but it is up to the most valuable company in the world to make the most progress. Change, as the saying goes, begins at home, and Cupertino should examine what it is sacrificing for a few extra dollars.

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