Apple

Early Days — The Homebrew Computer Club

• Steve Wozniak built the Apple I as a hobbyist project — never intended to sell it
  • Wozniak’s design insight: use dynamic RAM instead of static (10× cheaper)
  • He gave away the schematics for free — Jobs saw the business
• Jobs’ first move: negotiate 30-day payment terms with suppliers to fund production with customer pre-orders
  • Effectively built Apple with zero capital — a precursor to Amazon’s supply-chain genius
• The Apple II (1977) was the first mass-market personal computer
  • 6 million units sold over its lifetime
  • The killer app: VisiCalc spreadsheet software — proved computers had business utility

The Macintosh & the Reality Distortion Field

• The Mac project began as a skunkworks inside Apple
  • Jef Raskin’s vision: a computer for the “person in the street”
  • Jobs took over and made it great — and nearly killed it with scope creep
• The 1984 Super Bowl ad directed by Ridley Scott
  • Cost $900K to produce, $1.6M to air — the board almost didn’t run it
  • Defined Apple’s brand identity for 40 years: liberation vs. conformity
• Jobs was fired in 1985 — a decade of drift followed

The NeXT Years & the Return

• NeXT Computer (1988): incredible engineering, commercial failure
  • Too expensive ($6,500), too niche — but the software was extraordinary
  • Tim Berners-Lee invented the World Wide Web on a NeXT workstation
• Apple acquired NeXT for $427M in 1997 — really just to get Jobs back
• Within a year, Jobs cancelled 70% of Apple’s product lines
  • Cut from 350 products to 10 — “deciding what not to do is as important as deciding what to do”

The iMac, iPod, iTunes — The Comeback Arc

• iMac (1998): Jony Ive’s translucent “Bondi Blue” design shocked the industry
  • $1,299 — deliberately premium; reinvented the category
• iPod (2001) + iTunes (2001) = a system, not just a product
  • Music labels gave Apple DRM control because they were terrified of Napster
  • Jobs extracted 70¢ per song — a deal the labels would later deeply regret
• The iTunes Store created the template for every App Store that followed

The iPhone — The Greatest Product Launch in History

• January 9, 2007: “an iPod, a phone, and an internet communicator”
  • The audience thought he was announcing three products
  • The capacitive multitouch screen was the key breakthrough — enabled by a deal with BallistiX / Fingerworks
• Steve Jobs’ carrier negotiation with AT&T
  • Got revenue share, unlimited control of the device, no AT&T branding — unprecedented
  • Cingular (AT&T Wireless) said yes because they were losing to Verizon and needed a halo product
• The App Store (2008): the real business model
  • Originally Jobs didn’t want third-party apps — feared they’d destabilize the device
  • Phil Schiller and Scott Forstall convinced him; 500 apps on day one
  • By 2023: $1.1 trillion in developer billings since launch

Services — The $100B Business Hidden Inside Apple

• Tim Cook inherited a hardware company; is retiring a services empire
  • Services revenue (2023): $85B, growing at 16% YoY
  • Gross margin on services: ~70% vs. ~36% on products
• The App Store antitrust war
  • Epic Games vs. Apple revealed the 30% cut generates ~$20B/yr in pure profit
  • EU’s DMA forced alternative app stores in Europe — a crack in the moat
• Apple’s Google deal: ~$18–20B/year to be the default search engine on Safari
  • Possibly Apple’s highest-margin “product” — zero cost of goods

Why Apple Wins: The Integration Flywheel

• Hardware → Software → Services → Hardware
  • Each layer makes the others more valuable and harder to leave
  • The “switching cost” is now: phone + watch + AirPods + iCloud + Apple Pay + Photos
• The silicon bet: Apple Silicon (M1, M2, M3)
  • Moving from Intel to own chips: $1B+ investment, 3-year transition
  • M1 outperformed Intel on performance-per-watt by 3–4×
  • Now Apple has control of the entire compute stack — unprecedented for a consumer company