The Why Vs. The What - GOOGL Vs. AAPL

I was looking over some of my longer-term investments the other day (particularly AAPL and GOOGL) and was trying to pin point why I decided, some time ago now, to go long on Google and short on Apple. What it came down to was more of a feeling (I know, I know, what’s wrong with me?). But it was based around this idea that companies, especially now, and particularly in tech, need to win people over more than just sell great products.

The sentiment of the masses towards tech companies have proven to be oh-so-important in their success. We trust these companies with our most valuable data. They track our every move, our searches, our phone calls, our driving habits, our lifestyles, and even our moods (thanks to social media). And what we are giving them is valuable. Incredibly valuable. So it makes sense that if we are going to give this nearly priceless information away, as well as our sense of privacy, we expect to “feel good” about them.

Sure, all legit companies have some level of privacy settings, agreements not to sell your data, etc. And yet, sentiment towards companies continues to be a driving force in regards to their successes and failures.

Then I found this TedX Talk.

It was from 2009, and ironically uses Apple as a prime example of a company who is getting it right. The TL;DR? Companies motivate people to support them not by their products alone, but by their message. The typical company tells you what they are selling, they tell you how they made this amazing product, and then may or may not explain why they made it. Usually they are satisfied with saying why you need to purchase it instead.

Simon Sinek argues that companies (like Apple in 2009) sell in reverse. They tell you who they are. They tell you why they are passionate about the things they are passionate about. And after you listen and you believe in them, after you buy their mission statement, they tell you how they made their product, and then finally what it is. Per his argument, by the time you get to the what it is phase, it shouldn’t even matter what they are selling. You believe in them already, and you want to know what can buy from them.

This makes a lot of sense to me, as I said, specifically now, and specifically in tech. It elucidates my own thoughts about how certain companies would perform much more eloquently than I could. And so, this “feeling” I had now feels less ludicrous (it also feels pretty good that I was right).

But as obvious as this seems, not everyone seems to see things in this manner. For example, this article, from April of 2015 argues that Apple was poised to be a winner in the future, while Google was poised to be a loser.

Why?

Well there were plenty of good reasons at the time. Chiefly among them, Galloway argues that Apple boasts a great price point for a luxury item, its products are globally recognizable, they have expanding margins, etc. Google, on the other hand, has Amazon as a competitor for a lot of its business, is not winning the cell phone race monetarily, and has several major failures under its belt (he points out Google+ and Google Glass).

In terms of cell phone profitability, during that general time period, there were a number of articles, like this one from 2013 with all kinds of marvelous graphs that show how Apple is capitalizing despite a shrinking market share, and this one explaining how Apple is able to remain ahead of Google's Android despite a much smaller research and development budget. There are far more examples, just do a Google search (pun intended).

But what happened?

Since April 10th 2015, the day after Galloway’s article was published, GOOGL rose 47.56%, while AAPL fell 10.35%.

Again, why?

Simon Sinek was probably right about Apple in 2009, before the death of Jobs among other things, But major changes have taken place, both in terms of the role of technology in our lives as well the founding principles of the companies in question.

While Apple was once the lead innovator of new things tech-wise, they seem to have changed course somewhere along the way. Sure, millions of people around the world still eagerly await the release of the new iPhone iteration, but what else are they doing? They have approximately 150 billion dollars overseas, sitting in securities, and a lot of debt at home. Sure, it works for their balance sheet, but what is it doing for the public who is ever-demanding more? How does it prove that the brilliant “Why” they once had, the desire to innovate, to change the world, to integrate technology into our lives in a way that we couldn’t imagine living without it, still exists?

But if you turn to Google, all you see is future tech. From robots to self-driving cars, to internet for the world through atmospheric balloons. Will all of these extraneous projects be fruitful? Of course not. Are some of them huge flops? Absolutely. But their message is loud and clear. They believe in a future that is amazing, where things we can’t even fathom become commonplace, and they are putting their money where their mouth is.

It is this vision of the future that I fell in love with, that I imagined others would fall in love with, and propel Google's success forward. And it is the very opposite for Apple, the death of the why, the repetitive cycles of iPhone releases that have minimal upgrades and no foreseeable change, that I imagined others would notice. The love affair with Apple is dying, but Google's is still taking off.

Now I’m not at all arguing that Apple is dying as a company. As Galloway mentions at the end of his article, either of these companies could lose for ten straight years and still be immensely important. I'm also not arguing that any company with good ideas will be wildly successful and vice versa. Traditional markers do still matter, a company's actual ability to succeed and grow is still important.

But I do feel as though something is changing, a new Zeitgeist is upon us, where numbers and profitability aren’t everything. Where the role of ideas and mission statements is growing, and perhaps some day will reign supreme.

The Why is suddenly fighting back against the What. And I, for one, as a proud owner of the failed Google Glass experiment, find it fascinating.

I’d love to hear your thoughts, as always.

Until next time,
This is The Uncontortionist.