Apple's Tim Cook: Martyr or visionary?

Steve Jobs' suited successor, Tim Cook, may not excite the same quasi-religious fervour, but those who lament that Apple's heyday is behind it may yet be proved wrong.

by Rhymer Rigby
Last Updated: 07 Aug 2015

When Steve Jobs died on 5 October 2011, Paul Talbot, a tattoo artist based near Birmingham, had the company's striped 1980s Apple logo inked onto his foot along with the letters 'RIP'; his wife had a similar tattoo done on her ankle. Talbot says that he did this because 'I'm a huge Apple fanboy'.

Three years on and Talbot is still keeping the faith. 'As far as I'm concerned Apple remains the standard by which every other product is measured,' he explains. While expressing the hope that this will continue to be the case as the company leaves its iconic founder further and further behind, he adds: 'It's too early to tell.'

Others are more bearish. In late July, Pedro de Noronha, managing partner at the hedge fund Noster Capital, said that, while he loved Apple, he was not convinced about the company's long-term prospects. 'It might become obsolete in two to three years,' he told CNBC.

If this were any other company, Noronha's comments would have stayed on the financial pages. But this was Apple, so his words spread like wildfire. Everyone loves an Apple story, and everyone has an opinion on Apple. People who have no interest in business whatsoever have strong opinions on Apple. What other company could your tattoo artist discuss like a tech analyst?

Apple has been compared to a cult and a religion. People will queue overnight in freezing weather for the new iPhone 6; some even bring tents and sleeping bags. Others build online shrines to the company's discontinued products and write 'fan fiction' about its dead founder There could easily have been a chapter about Apple in Charles MacKay's 1841 book, Extraordinary Popular Delusions and the Madness of Crowds.

And yet, with a market cap of well over $600bn, it is one of the world's largest companies. This is what really makes Apple unique: you get other cult brands (for example, Harley-Davidson, Sriracha and Hello Kitty) but what you do not get is cult brands that are bigger than ExxonMobil.

Everyone agrees that Apple is a phenomenon, but the question being asked is whether it can continue to be so.

Given that you can find any opinion you want on Apple, perhaps we should start with the facts. Apple is the biggest company in the world, at least measured by market capitalisation. (If you take sales and/or profit into account, however, then there are several larger companies in China.) Three years ago, after a long, well-publicised illness, its quixotic, difficult and undeniably brilliant founder died of pancreatic cancer. He was succeeded by Tim Cook, a long-time Apple insider who has had a mixed run since he took the helm, although his fortunes are currently waxing.

Some other facts are that the company has a cash pile of around $160bn (much of it squirrelled away in offshore tax havens), which is more than the cash reserves of countries such as Malaysia, Turkey and the UK. Last quarter it reported profits of $7.75bn, up 12% on the previous year.

But, even so, people have concerns. They worry that the company is so big and its markets so fully penetrated that it cannot continue to grow as fast as it has been. They worry that it won't be able to keep its margins up. They worry about its product pipeline. But, if we're honest, what they worry about most of all is that Tim Cook is not Steve Jobs.

Apple has been without Jobs before. In 1985, only a year after the first Mac was launched, he was fired from the company he had co-founded nine years earlier. The business did well enough into the late 1980s, but by the early 1990s it had lost its way. Jobs returned in 1996 and Apple was bailed out a year later by its rival Microsoft, in a deal Jobs negotiated. Jobs then put his people into key positions and Apple went on to enjoy one of the greatest comebacks in corporate history, the fruits of which have included the iPod, the iPhone and the iPad.

The effect of all this has been to indelibly burn the connection into many minds that Apple + Jobs = Good, while Apple - Jobs = Bad. But it also explains why Apple hasn't been able to move on from Jobs' death, three years after the event. When Jobs left in 1985, the company didn't run into real problems for six or seven years. Therefore, the thinking goes, you may be able to coast on your Jobs legacy for a long, long time.

Cook was not well known outside the company before he took over, although he was well respected in a 'behind the scenes' way within it. He was an operations guy. A manager, not an obnoxious visionary genius who believed vegans didn't need deodorant. Not Steve.

However, it is worth remembering that Cook may not be carrying on the Jobs legacy single-handed. There is also Sir Jony Ive, Apple's British-born chief designer. For many followers of the cult of Apple, it is Ive who has picked up the torch left by Jobs. Cook runs the church, but Ive is the new messiah.

Apple's financial performance under Cook has been a play of three acts. Jobs' death was expected and 'priced in', so it is barely noticeable on a graph. For nearly all of year one AJ, the shares climbed steadily. But then, just before the anniversary of Jobs' death, the price reversed direction and declined equally steadily for 10 months, down to 45% off its high. Pundits who had begun to give Cook the benefit of the doubt started muttering about him being toast.

In April 2013, the tech analyst Rob Enderle wrote: 'It was hard to listen to the second-quarter financial report ... and not imagine Steve Jobs spinning like a top in his grave.' For many, the narrative was clear: Cook had burned his way though the Jobs legacy, and Apple was well on its way to becoming the next Nokia or Sony.

They were wrong. In July last year, the shares reversed direction again and, at the time of writing, the company was trading at over $100 a share. So not being Steve might not be such a bad thing after all - and, as Ben Rogoff of Polar Capital points out, plenty of companies survive the death of their founders: 'When Henry Ford died people said it was the end of the company. But the shares increased tenfold in value.'

There are some interesting parallels here. Ford was innovative, iconoclastic, creative and crazy. Along with his well-documented anti-Semitic views, he built a city in the Brazilian rainforest called Fordlania. He straddled the genius-loon divide just as Jobs did. Yet (and very hearteningly for Apple shareholders) pretty much every great Ford except the Model T came out after his death.

The last year has put Cook back in the markets' good books and history has been rewritten again. Cook's managerial suitiness is the Yin to Ive's Yang. And, for what it's worth, Cook's recent accidental outing on CNBC hasn't hurt either - it makes him more human, more sympathetic. Besides, there are some real upsides to having a suit in charge. Under Jobs, Apple was often seen as a listed company that ran itself like a private fiefdom; under Cook, corporate governance has improved immensely.

Eight per cent of the Global Technology fund that Rogoff manages is made up of Apple shares and he says he's happy with this, and that while growth investors may struggle with the stock, value investors won't. 'There's going to be a slower growth rate - 5% to 6% - and, in the short term, buybacks and dividends will keep investors happy.' It is perfectly possible, he believes, for Apple to run itself as a premium, high-margin brand like Audi. The time to worry is when the residuals on your iPhone tend to the industry norm - that is, when a three-year-old iPhone is worth as little as a three-year-old Samsung Galaxy.

So, nothing to worry about, right? Wrong. Wrong, because this is Apple and with Apple we expect more than sound financials. We - from analysts to fans, from customers to investors - want fireworks. We want the manic prancing around a stage in a black polo neck and jeans. We want stunning arrogance about new products, followed by products that actually justify that arrogance. We want the old Jobs magic - and recently that has been in short supply.

Since late 2011 we've seen several new iPhone models and some of them have been excellent products. But the changes have been evolutionary, not revolutionary and there is a feeling that, increasingly, companies such as Samsung are defining the category. Last year's iPhone 5s, in particular, prompted a lot of online snark. One memorable parody ad had an Apple representative saying: 'We call it the iPhone 5s. The "S" stands for "same".' Earlier this year, Laurence Balter, chief market strategist at Oracle Investment Research, spoke for many when told the New York Times: 'All we hear from Cook is there are some great products coming down the pike.'

But here too, Cook may be about to enjoy another great reversal. On 9 September, the brand-new Apple Watch was announced, alongside the iPhone 6 range with Apple Pay, a contactless system that might just be mobile payment's long-awaited breakthrough moment. Apple has also acknowledged past frustration and promised great things, and Ive has reminded those with short memories that many of the same things were being said before the launch of the original iPhone.

There are other straws in the wind too: health and medical innovations, upgrades to Apple TV and the possibility that Siri could become a big player in search. People may be sceptical about some of these - notably the Apple Watch - but it's worth remembering that between 1993 and 2009 only eight tablet-type devices were launched and all of them sank with barely a ripple. When Apple's iPad was announced, wags joked that it would be the ninth, memorable only for sounding like a feminine hygiene product. Instead, it created a new product category, rewrote the notebook handbook and is now the middle-class stocking-filler of choice.

Apple has also been hinting heavily about great things to come. At Re/code's CodeCon in May, the company's Eddy Cue said: 'We've got the best product pipeline that I've seen in my 25 years at Apple.' It's a lot to live up to but Apple is not given to announcing vaporware, probably because its fanboys do this for it. Moreover, the company has a strong track record of delivering not only what we want, but also what we had no idea we wanted.

This is a reason we should all want Apple to do well. Because even if you aren't a fan or an Apple h8er, you can't deny that the company is the kind of high-end, high-innovation, high-margin business that we need more of in the west. It is one of the very few companies in its sector that understands it is not about the technology, it's about the impact. Its products have created whole new markets and changed the way we live and work. Even if you do not use any of its products you are affected by them. As Virginia Postrel explains in her book The Substance of Style, Apple is one of the key reasons why making things look good is a 21st-century growth industry.

Apple is, according to Interbrand's 2013 survey, the world's most valuable brand, worth just under $100bn, which is about the same as Microsoft (number two) and Coke (number three) combined. But there are signs its halo might be slipping - the rival BrandZ survey of the world's 100 most-valuable brands puts Apple second (down 20% to $148bn) behind Google at $159bn, in its latest 2014 figures.

There's no denying that the brand is unique, but unlike the products, which are real and tangible, the brand can be anything you want it to be. In fact, after a while, immersed in the world of Apple, hearing the thoughts of fanboys and h8ers, consumer psychologists and marketing gurus, you could start to wonder if this might literally be true. Perhaps the real genius of Apple's brand is that it's like something out of a Greek myth. The brand is a sort of mirror onto which we project our own hopes and fears - and this is why you can find almost any opinion you want on Apple.

However, while the company's product pipeline and financials appear in good shape, the Apple brand may actually be in trouble. One of Jobs' greatest achievements was keeping that brand artificially young. With his company, he did what every toned, wheatgrass-juice-chugging Californian dreams of: he more or less arrested the ageing process. But with Jobs gone, the fountain of eternal youth has run dry and Apple is having to grow up fast.

It may well have had to do so anyway. The company has always traded on being an upstart and did so long into its comeback. But when you're bigger than Walmart it's just not credible to pretend you're not part of the establishment.

Chris West, of the brand strategy consultants Verbal Identity, says: 'Apple has deep roots in being a challenger brand, but now it looks like it's trying to be a challenger brand. It seems hollow.' He adds that perhaps the worst recent example of this was the company's 2012 'Designed in California' tagline. Virtually everyone who saw it mentally appended the coda '... and made in China.'

Mark Borkowski, the public relations expert, adds that the games Apple used to play with its public and the media no longer work as well as they once did: 'You'd see Apple products win awards at huge events and the company would send no one to collect them,' he explains. 'It was famously a brand of no engagement.' In some ways, it still is. MT's requests for an interview for this piece went unanswered; Apple engages on its own terms or not at all. But while you might reasonably expect this kind of behaviour from an upstart run by a genius that makes products for an elite few, coming from the largest company in the Fortune 500, it just seems a bit peculiar, especially in the age of social media. There's a fine line between hauteur and plain rudeness.

Apple's chronological woes don't stop there. The company is now middle aged and its appeal may well be too. West says that the kind of emotional equity that today's fortysomethings have in Apple is not shared by the generation below them: 'People under 30 just don't have that belief now.' Indeed, the idea of Apple as a youth brand may well be a concept that exists largely in the minds of today's 45 year-olds.

But you can always find a dissenting voice. Philip Graves, a consumer psychologist, says: 'For now I don't see Apple as having peaked. If it releases a new product it will be received with interest and enthusiasm, and consumers will have enormous faith in it working as it should.' However, he adds: 'Arguably, Apple's survival depends very much on it understanding and perpetuating the values that Jobs embodied.'

So we're back to the Jobs legacy. When it comes to the brand, that legacy is still a work in progress. Since he shuffled off to the Infinite Loop in the sky, there has been a slow drip drip of stories about his crazy behaviour, as more people have spoken out. The wellspring of these was Walter Isaacson's authorised biography, published just weeks after his death, which revealed nuggets such as Jobs being so smelly that his co-workers at his first employer, Atari, called him 'a goddamn hippie with BO' and forced him to work night shifts.

Three years down the line, these nutty revelations show little sign of abating. One is that the Apple university compared the company's approach to that of Picasso, and it was striking that the coverage contained plenty of references to Jobs and none to Cook. You have to feel for a man who often seems to get less press than his dead predecessor.

But it also makes you realise that, in death, Jobs is just as big as he was in life and, if anything, getting bigger. Moreover, it doesn't matter that most of the revelations are negative. Steve had BO because he was a genius, Steve was a fruitarian because he was genius, Steve was an asshole because he was a genius. Each new revelation just feeds the legend.

All this talk of revelation sounds religious and it's hardly a novel view that Jobs did not create a company, but a cult. But what is surprising, perhaps, is how much literal truth there is in this. In the late noughties, the brand expert Martin Lindstrom conducted a three-year study in which he used a fMRI scanner to look at the brains of the most ardent customers of 'superbrands'. What he discovered was that their scans were indistinguishable from those of devout Christians. Apple was held up as a prominent superbrand.

In a similar vein, Dr Kirsten Bell, a social anthropologist at the University of British Columbia, wrote of the iPad mini-launch: 'A stranger observing one of the (product) launches could probably be forgiven for thinking he had stumbled into a religious revival meeting.' She went on to describe the sacred symbols that littered the building and said that the company leaders address the audience in order 'to reawaken and renew their faith in the core message and tenets of the brand/religion'.

So, rather than digging through the ruins of Nokia or Sony for signs of what lies ahead for Apple, perhaps we should ask ourselves what happens when a cult leader dies. And the answer here is that the cult either falls apart or becomes a religion. There are plenty of cults that have become religions in living memory, but the two most successful are Scientology and Mormonism, so maybe it is these we should be looking at. In which case, as the tattooed Talbot says, it really is too early to tell.

TIMELINE

1976: Apple founded by Steve Jobs, Steve Wozniak and Ronald Wayne in Cupertino, California. Apple I microcomputer goes on sale for $666.66

1980: Apple goes public at $22 a share. Jobs worth $165m

1984: Macintosh personal computer launches, priced at $2,500

1985: Jobs pushed out of Apple in coup led by the CEO he hired from Pepsi, John Sculley

1992: Jonathan Ive joins Apple as a designer

1997: Jobs returns to Apple as interim CEO. Ive made head of industrial design

1998: First iMac appears, designed by Ive. Jobs made permanent CEO

2004: Jobs reveals he has pancreatic cancer. iPod sales hit 10 million

2007: iPhone launches. Sells one million units in 74 days

2009: Jobs takes first health-related leave of absence. Has liver transplant

2010: The iPad launches. Sells three million units in 80 days

2011: 5 October: Jobs dies. Tim Cook takes over as CEO

2013: Shares plummet to $56

2014: 9 September: the long-awaited iPhone 6 launches, featuring Apple Pay, and is joined by the $349 Apple Watch.

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