Everything is amazing and nobody is happy.
When comedian Louis C.K. famously expressed that notion on Conan, he was making a commentary on the public’s instantly acquired sense of entitlement when confronted with new technology.
His observations are also applicable to the assumptions underlying nearly all the stuff you read about consumer electronics by bloggers, journalists and financial analysts.
The gnashing of teeth and ripping of hair over with everything Apple these days is a perfect example.
Take Apple’s earnings call this week. Investors are dropping Apple stock like yesterday’s garbage because (in part) Apple reported quarterly revenue of about $54 billion (roughly the annual GDP of Bulgaria) and profits of around $13 billion (comparable to the annual GDP of Iceland) and also because Mac sales are down (although not as far down as the rest of the PC market).
Despite the fact that Apple is making the lion’s share of profits in the “post-PC” world — the future world of computing, rather than the PC past — investors are concerned about Apple’s future.
Sure, they have absolutely no idea what that future might entail — Apple still has the ability to develop new products in secret — but Wall Street is still disappointed in it. Countless stories said flatly that investors are concerned that products of completely unknowable levels of “innovation” aren’t innovative enough.
But wait! There’s hope! Maybe the rumored iPhone Math phone will be radically different and save Apple from its boring, iterative iPhone! Oh, but what if the non-existent Google X phone is even more innovative? What then?
Gimme a break.
Am I saying that investors should be bullish about Apple in this information vacuum? No, not really. Outlook should be based on educated guesses. For example:
Will Apple come out with a desirable TV set and grab a big chunk of the expected massive “living room” revolution? Probably.
Will Apple come out with a wristwatch that extends the awesomeness of the iPhone and creates a lucrative new additional side business? Possibly.
Will Apple continue to take the “post PC revolution” to the desktop to replace Macs for the masses? Definitely.
Most importantly for investors: Will Apple continue to attract the deepest pockets to the most profitable segment of the market while 100 Chinese mobile phone handset and tablet makers gain most of the market share but almost none of the profits? Almost certainly.
These common-sense expectations are way more valuable for predicting the future of Apple’s business performance than a vaporware rumor that suggests something totally new.
So why are investors fixated on “innovation”?
The reason is that they’re listening to pundits.
The Three Kinds of Pundits
There are three kinds of tech pundit and each can lead you astray in a different way.
Each of these pundit types specializes in one of the three components in technology: 1) the industry; 2) the products; and 3) the users.
Here they are:
1. Access journalists
An access journalist is someone who allows himself to be “used” by sources in exchange for access. Essentially, the journalist and source “befriend” each other for mutual benefit. The source gets to influence the press in his favor and the journalist gets to feel important by hanging out with industry big shots.
You see access journalists everywhere. In the mainstream TV news, nearly all the talking head political analysts and commentators, as well as hosts of those shows, are access journalists.
Access journalism is great for getting firsthand information and also giving an audience a vicarious front-row seat to something exciting.
The problem is that reporters are ultimately reporting on their “friends.” The audience (in the case of technology access journalism, the users) become a distant afterthought.
What matters is the movers and shakers and Silicon Valley executives and entrepreneurs. The sources’ concerns, perspectives and world view dominate the contextual universe of the access journalists’ content.
In political reporting, access journalists talk about politics rather than policy.
The problem is that politics — who’s up, who’s down, who’s winning, who’s losing — matters to sources, but policy — who gets what, what the rules are — matters to the audience, or should.
In technology reporting, a similar emphasis takes place. Technology access journalists dramatically overemphasize the horse race aspects of companies — who’s in the lead, who’s falling behind. They also overemphasize mergers and acquisitions, personnel changes, lawsuits, stock prices and other such stuff. And they also tend to be persuaded by the personalities of the people they know.
It’s all very interesting, but not especially relevant to user questions about which products they should buy or how to understand the cultural changes wrought by technology.
2. Product analysts
A product analyst is someone who writes product reviews, or who writes mostly about their personal experience with using a product or service.
Product analysts live in the world of technology, and de-emphasize the personalities, companies, market performance or cultural implications of a product. They instead focus on speeds and feeds, look-and-feel, features, performance and actual attributes of things we buy and use.
Product analysts often forget that product evolution is not unidirectional and not a natural force (like biological evolution). They seem to also forget that product direction is determined by the decisions of individuals, by market forces and by user and buyer preferences and behaviors.
These types of technology journalists are also impatient with change, and view newness, novelty or “innovation” as the highest good. They’re always bored with existing products, and tend to over-value surprising new technology.
One of the mistakes product analysts make is to assume that if they like a product it will succeed in the market. This is an error, because hardcore product analysts are by definition not typical or average users and therefore represent a minority of users, rather than the majority.
3. User and market analysts
User and market analysts focus on human nature. They look at what real users do both individually and collectively, and emphasize both small and large changes in how technology products change what people do and how they live.
They praise or denounce things not based on how new they are, but on their potential to improve or change how we do things, how we live our lives.
User and market analysts underemphasize product novelty or technical sophistication, industry personalities, company horse races, lawsuits and all the rest, and instead focus on technology as an extension of the human body and human mind, as tools for human progress.
Whey user and market analysts make predictions, they focus on user types, how many of them there are and what their response might be, rather than reflexively asserting that a newer or “better” technology equals product or company success.
When And Why to Listen to Each Type of Pundit
I used to be a combination of pundit types 1 and 2, but in the last decade have mostly been type 3 — in part because it works.
I believe that focusing on the user and the market has enabled me to make better predictions, and to provide more relevant insights to readers.
Having said that, I personally follow and am informed by many good access journalists and product analysts. These pundit types can provide us all with invaluable insights and I’m glad they do what they do.
Ultimately, however, I’m biased toward the third type — the user-focused pundit.
Analyzing Apple, pundits will walk away with a different take depending on which type they are.
Apple decided to drop the YouTube app as one of the default apps. How does that affect the user experience of iPhone users?
A product analyst might dismiss this change in policy as irrelevant. After all, the app is free and anyone can easily download it.
But a user analyst will ask: Yes, but will they? It doesn’t matter if they can but don’t. What matters is what people actually do.
The answer is that so far about half of all iPhone users have downloaded the YouTube app, and half have not. To a user analyst type pundit, that means the YouTube experience is totally absent from half the people who use iPhones.
Thinking about bigger things, is it really true that two years ago Apple could do no wrong, and today it’s a failing basket case? Was the historically unprecedented run-up in Apple’s stock price warranted? Was the huge decrease this week warranted?
The access journalists would tell you that nothing changes until the next announcement — you’ll see a picture of me on my blog holding the iPhone 5S (which my sources tell me is going to be awesome) and talking to by old buddy Phil Schiller.
The product analysts might say yes in both cases because Apple used to “innovate,” but stopped innovating. They might say that they used to be thrilled with the iPhone, but have gotten bored recently and have been more impressed with the Android phones.
But the user analysts would say “no,” because Apple has a proven track record of consistently coming out with products that appeal to specific segments (the sweet spot) of the market. They focus not on a checklist of components, but on an overall user experience that solves annoyances and frustrations that users have with the previous iteration. Because Apple’s ability to do that hasn’t changed, as far as we know, big movements in Apple’s stock price are unwarranted.
None of these kinds of pundits are better or worse than the others. We should all listen to the best of each kind. But we should also know which kind we’re listening to, and balance their judgement against both their perspective and the situation we’re looking at.
And most important of all is to maintain some Big Picture perspective.
After all: Everything in technology really is amazing. So be happy.
(Picture of concept iPhone dreamed up by Ady Pratioto.)