Apple's Greed Is Finally Backfiring

0:00 Apple was the most valuable company in the world from 2021 to 2023. But in 2024, they fell to second place with Microsoft claiming the title for half the year. And now in 2025, Apple has fallen to third place behind Nvidia and Microsoft. In just 4 months, Apple's value shrank by 28%, amounting to a $1.1 trillion loss. Overpriced iPhones have led to stagnant sales. Lack of innovation has allowed competitors to catch up and their anti-competitive business practices has earned them several lawsuits. So, how did this happen? Well, Apple's greed resulted in profit taking priority over products. It was a slow transition that began in 2011 when Steve Jobs stepped down as Apple's

0:47 CEO and gave the job to Tim Cook. He famously told Cook to quote not ask what would Steve do, just do what's right. The problem is what's considered right depends on who you ask. To Jobs, great products were the secret to Apple's success. He proved this in the late 90s when the company faced bankruptcy. At the time, prominent figures like Gilamelio and Michael Dell shared how they would save Apple. Examples included breaking up the company, selling off their hardware division, or even shutting down Apple entirely and returning money to shareholders. The most interesting piece of advice came from Oracle CEO Larry Ellison. He was a close friend of Jobs and advised him to move away from hardware and focus on

1:32 software instead since those were the companies making the most money. Microsoft, for example, enjoyed a profit margin of about 80% while Apple's hovered around 35. But Jobs created his own plan to save Apple from bankruptcy, one centered entirely on hardware. He cut Apple's portfolio of about 20 different computer models to just four, with the first being a consumer desktop called iMac. It went on to become Apple's bestselling computer at the time, helping fuel long-term profitability and restore shareholder confidence. Had Jobs followed the advice of those around him, we may have never seen products like the iMac, iPod, or even iPhone, since Apple would have likely abandoned hardware and become a software

2:17 and services company instead. When it came to Apple's stock price, Jobs didn't really worry about it. During a Q&A session in 1997, he said, "What we need to do is keep our eye on the prize. That's turning out great products and communicating with our customers. Then the stock price will take care of itself." To his credit, that's exactly what happened. When returning to Apple in 1997, the stock price was 10. In 2011, 14 years later, he left Apple with the stock price of $11.50, growing the company by 11,400%. Great hardware is exactly what fueled this unprecedented growth with Apple releasing the iMac, iBook, iPod, iPod mini, MacBook, iPhone, and iPad. That's

3:03 a major new product release about every other year. Now, that doesn't mean Jobs didn't care about Apple's valuation. He famously sent a companywide email in 2006 when their market cap surpassed Dell, saying, quote, "Team, it turned out that Michael Dell wasn't perfect at predicting the future. Based on today's stock market close, Apple's worth more than Dell. Stocks go up and down, and things may be different tomorrow, but I thought it was worth a moment of reflection today." Then in 2010, when Apple surpassed Microsoft, he sent out a similar email. But that wasn't because Jobs thought market cap was the best indicator of success. It was just proof that his hardware focused business strategy, which many others advised against, had not only worked, but outperformed the competition. In fact,

3:49 Apple was doing so well that by the end of 2010, they were sitting on almost $27 billion in cash and didn't know what to do with it. So Jobs reached out to Warren Buffett seeking his opinion. Buffett shared three ways Apple could spend their extra cash through acquisitions, dividends, and stock buybacks. An acquisition would mean buying another company. Dividends are an optional small payment companies can give to shareholders, typically once every 3 months, as a reward for buying and holding their stock. This typically benefits companies by attracting more investors. And a stock buyback is exactly what it sounds like. When a company buys its own stock back from investors, this lowers the number of shares on the market, which typically increases their stock price. Jobs had

4:35 already purchased the Siri app for about 200 million earlier that year, and there weren't any other companies he was interested in acquiring. As for dividends and stock buybacks, these were two things Jobs refused to do. In fact, the only time Apple had ever paid dividends was from 1987 to 1995 during Job's absence. When asked why he never paid a dividend or allowed Apple to buy back its own stock, Jobs said, "Our goal is to increase enterprise value. Which would you rather have us be, a company with our stock price and 40 billion in the bank or a company with our stock price and no cash in the bank?" That meant jobs priority was strengthening Apple rather than directly rewarding shareholders. But near the end of 2011, Tim Cook took over as CEO, and he had a

5:22 different plan for the company's cash. Before becoming CEO, Cook had been Apple's chief operating officer, ensuring the goals set by Jobs became a practical reality. Cook was known for his logistics skills that allowed companies to cut costs and maximize revenue. If Jobs was considered a product genius, Cook could be considered a financial genius. The two complemented each other well. In just 13 years, they took Apple from near bankruptcy to generating billions in profit each year. But when Jobs left Apple and gave Cook complete control, the company's focus began shifting from industrial engineering to financial engineering. In 2012, less than 7 months after becoming CEO, Cook implemented Apple's first dividend in stock buyback program.

6:08 Initially planning to spend 45 billion from 2012 to 2015, but they ended up almost doubling that amount. spending 80 billion instead. And Apple's stock price responded, moving from $17 in 2012 to $27 in 2015. This caught the attention of people like Warren Buffett, who is happy to see Cook following his financial advice, something Jobs refused to do 6 years earlier. Buffett was so confident in Apple that he invested a billion dollars in the company in 2016. This came as a surprise to Cook and many others since Buffett was historically against investing in tech companies, saying Birkshshire Hathway prefers quote simple businesses. If there's lots of technology, we won't understand it. So

6:53 Buffett investing in Apple under Cook and not under jobs carried a couple implications. That the company's shift toward financial engineering was something Buffett understood and therefore felt comfortable putting his money into. and that prioritizing stock price could mean putting product development on the back burner. It's no secret that Cook isn't a product person. He allegedly visits Apple's design studio about once a month, while Jobs was there almost every day. A former employee said, "When Jobs was alive, there was a lot of effort toward Steve's coming to the studio today, so we have to have a lot for him to see. When he died, that went away." Changes like these were also felt by Chief Design Officer Jonathan Iive, who previously was considered the most powerful person

7:40 within Apple after Jobs. But under Cook's leadership, that was no longer true. Some of his decisions were met with resistance, especially if they drove up costs. For example, when they were developing the Apple Watch, IV felt it was primarily a fashion accessory similar to traditional watches. So, he wanted its upcoming introduction to be as extravagant as a high-end fashion show. The event would be held at the Flint Center in Certino, which is a fairly small auditorium without much space for a hands-on area. So, I've wanted Apple to build one by relocating 24 trees that line the plaza and constructing a temporary building in their place. This elaborate plan would cost Apple $25 million. This shocked the finance team who

8:26 considered it an unnecessary expense. While the marketing team preferred a more traditional product introduction, showcasing what the watch could do rather than how it looked. But I've felt reviews from magazines like Vogue would be more important than opinions of tech journalists. Cook was reluctant to spend the 25 million, but eventually interrupted the discussion between Iive and the marketing team by saying, "We should just do it." While Iive did end up getting his way, it came at too high a cost. For the first time ever, his ideas were being challenged by finance and marketing executives. And worst of all, Cook appeared to be on their side. It was during this period when I've began to distance himself from Apple by working from home, showing up late to meetings, and delegating tasks to other

9:12 designers. During his absence, Cook began reshaping the company. He replaced board member Mickey Drexler, a marketer who built GAP and J Crew, with James Bell, a finance chief from Boeing. I've complained about the change to a colleague, saying he's another one of those accountants. While the design team complained about quote turning the crank for one similar product after another. This became clear from 2014 to 2017 when iPhone 6, 6S, 7, and 8 all looked nearly identical. And while the iPhone 10 was a dramatic upgrade, Apple used it as an opportunity to raise prices to unprecedented levels. In the early years of iPhone, its price never really went up. The first model to

9:57 be sold unlocked at full retail price was iPhone 4 and it cost $650. The following year, iPhone 4S was also $650. And the same for the 5 and the 5S and the 6 and the 6S and the 7. For 7 years, the flagship iPhone stayed $650. That meant with inflation, it actually became about 9% cheaper. And this was the case with many of Apple's products. The iPod either stayed the same price with each update or became cheaper. The original model in 2001 was $400. When the final model was released in 2009, it was $250. That's a drop in price of 46%. And the changes made during that time

10:42 were dramatic, going from a plastic design to all metal, becoming 47% thinner and 24% lighter, getting a larger display with almost four times as many pixels and 160 GB of storage compared to the original 5 GB. Paying less for these big improvements is probably unimaginable for Apple users today since we've been conditioned to expect endless price increases. With iPhone, it started in 2017 when the 8 and 8 Plus were priced at $7 and $800, an increase from the $650 and $770 a year earlier. But the price of iPhone 10 is what really shocked people. At $1,000, it was not only the most expensive mass market in the world, but it was the biggest price hike of any

11:28 Apple product ever. Going from the $770 7 Plus to the $1,000 iPhone 10 was a 30% increase. And this was just the start. The following year, Apple raised the price of their most expensive iPhone by 10% with the $1,100 XS Max. Then in 2023, the 15 Pro Max set another price record at $1,200. And just this year, Apple's supposed budget model iPhone became 40% more expensive, going from $430 with the SE to 600 with the 16e. These unprecedented price hikes worked as Apple intended, increasing iPhone's average selling price from $657 in 2016

12:14 to $974 in 2024. But while prices went up, innovation went down. Consider how little Apple's products have changed over the last 6 years. Today's iPhones look almost identical to 2019. Same with the iPad Pro, Apple Watch, Apple TV, AirPods Max, and HomePod. Not to mention the Magic Keyboard, Magic Mouse, and Magic Trackpad are using the same design from 10 years ago. Compare this to the 6 years prior to 2019 when virtually every single Apple product had changed dramatically. Plus, they introduced several new products like the Apple Watch, AirPods, and HomePod. But they haven't done much of that recently with the Vision Pro being Apple's only brand new product since 2019. And even that is

12:59 considered by many to be a failure. Apple expected to sell 1 million units in 2024, but only reached about 500,000. So, what's causing this stagnation in Apple's hardware? Well, consider this internal email from 2020 where Apple's vice president of iPhone marketing wrote, quote, "I think going forward, we need to set a stake in the ground for what features we think are good enough for the consumer." I would argue we're already doing more than what would have been good enough. Anything new and especially expensive needs to be rigorously challenged before it's allowed to go into the consumer phone. Essentially, Apple's saying they should innovate just enough to keep customers buying, but not so much that it affects profit margins. This is corporate greed,

13:45 and it's been influencing many of Apple's decisions. Not only the price increases and declining innovation, but also more subtle things like how they handle new product releases. In 2017, iPhone 8 and 10 were the first models with wireless charging. Apple was working on their own charging mat called Air Power, but the accessory wasn't ready in time to be released alongside the new phones. Nonetheless, Apple chose to reveal it anyway as a sneak peek. That way, customers would wait to buy Apple's wireless charger instead of getting one from a different company. Their marketing executive, Phil Schiller, was very careful in describing Air Power, saying, quote, "Our team wants to create something I think all of us want to use." instead of saying our team has created something. Schiller

14:31 also said we're going to give you a sneak peek of this idea instead of saying this product. He also mentioned air power wasn't possible to make with current charging standards, implying that Apple has yet to invent the technology necessary to make the product happen, but he reassured the audience saying quote, "Our team knows how to do this." It turned out they didn't know. Apple planned to release Air Power in early 2018, which would be about 6 months after the sneak peak, but that didn't happen. Early 2018 became mid 2018, then late 2018 with no updates from Apple. Then after the iPhone 10S event in September 2018, almost all mentions of Air Power were removed from Apple's website. At the same time, Air

15:16 Power was mentioned in the new iPhone XS and 10R packaging, giving customers mixed signals about the future of the product, but still Apple remained silent. On March 25th, 2019, iOS 12.2 was released, mentioning support for Air Power. The following day, the AirPods wireless charging case was released featuring Air Power on its packaging. At this point, it had been a year and a half since the sneak peak and a year since the initial release deadline with no official word from Apple about what was going on. Finally, on March 29th, 2019, it happened. Apple's head of hardware engineering said, "After much effort, we've concluded Air Power will not achieve our high standards, and we've canled the project."

16:02 This was the first time in Apple's history that a publiclyannounced product was cancelled. And the entire fiasco could have been avoided if they'd waited to reveal Air Power until it was actually ready. Something historically Apple was known for doing. In fact, Steve Jobs was nervous about introducing the original iPhone 5 months before it went on sale. He was forced to do it since iPhone's public FCC filings would take several months and Jobs wanted to reveal the product rather than the FCC. Typically, Apple products were released fairly soon after their introductions. The original iMac took 3 months to go on sale. The original iPod took just 2 weeks, and the original iPad took 2 and 1/2 months. But today, Apple announcing something many months in advance has almost become routine. The Apple Watch

16:48 took over 7 months to be released. Apple TV Plus took 8 months. Apple Card took 5 months. The 2019 Mac Pro took 6 months. Vision Pro took 8 months. And Apple Intelligence was announced over a year ago with many of its biggest features like an improved Siri still not available. Typically, the reason why companies like announcing products early is to reassure shareholders, generate excitement, and prevent customers from choosing a competing product that may already be available. But this strategy can backfire, which Apple experienced not only with Air Power, but also Apple intelligence. Despite pioneering ondevice voice assistance with Siri in 2011, Apple quickly fumbled their lead in the AI space. Google, Microsoft, and Amazon all created assistants that

17:34 surpassed Siri in just a few years. By 2017, a study found that across 5,000 different questions, Siri answered correctly 62% of the time, compared to the 90% accuracy of Google Assistant and Amazon Alexa. Apple publicly admitted Siri needed to be improved. Eddie Q, their senior vice president of services, said, quote, "I don't think anyone does an A+ on conversation. It's a challenging problem and there's a lot of work to be done in that area. It will get a lot better and it needs to get a lot better." The problem was Siri never got much better. And the reason had to do with its foundational technology. Siri was built on rule-based systems that had to be manually programmed with specific voice commands and responses. While impressive for 2011, it was

18:21 completely different from the transformer-based systems that powers modern generative AI. That means Apple's head start with Siri likely did more harm than good since they continued to rely on outdated technology that held back their AI advancement. By 2022, Apple fell even further behind when chat GPT was released. It was essentially everything Siri was supposed to be for the last decade. It used large language models and generative AI to understand the context of a user's question and provide an accurate response. Now, to be fair, chat bots like these aren't perfect, and Apple has demonstrated that in their own published research papers, which essentially proves that LLMs can't genuinely reason, and that their intelligence claims are highly overstated. But those things also apply

19:08 to Siri, which Apple's used on their products for 14 years. It's also odd how Apple's been discounting services like chat GPT. When explaining how Apple would approach generative AI, Federigi said, quote, "You won't have to chat with the thing." He also said, "This isn't about building a chatbot." Which came as a surprise since Siri is literally the original chatbot. All customers want is to ask Siri a question and receive the right answer. The reality is chat bots were far better at that in 2022 and have only improved over the last 3 years. All while Apple struggled to even understand the point of services like chat GPT. John Gian AndA Andrea who led the Siri team knew Apple needed to build their own generative models which required huge

19:55 quantities of AI chips. By 2023, Meta or Facebook had about 150,000 of these chips. Microsoft had about 500,000 and Google had over a million, but Apple only had about 50,000 and they were over 5 years old. So, in 2023, Geian Andrea submitted a request to purchase 50,000 additional GPU chips, doubling their capacity. To Cook's credit, he approved the request, but Apple's finance team stopped the order from going through, telling the Siri team they should quote, "Make existing chips more efficient." This added yet another obstacle to Apple's AI development instead of owning and controlling their own computing infrastructure. They now had to rent and

20:41 rely on cloud computing resources from Google, their competitor. This made it almost impossible to optimize their AI hardware and software since they had to work with the configurations of Google's cloud infrastructure. That meant Apple was in the same position as smaller tech startups who couldn't afford their own AI resources despite having over 150 billion in cash. Now, it's true that doubling their AI chip capacity would have been expensive, costing an estimated $10 billion, but Apple spent over 77 billion on stock buybacks the same year. This made two things clear. That Apple's finance team was calling the shots and that they were detrimental to product development. By 2024, 2 years after ChatGpt, Apple still hadn't

21:26 revealed any new AI features. Shareholders became worried that they were already too late to the AI race, causing Apple's stock price to drop 16% in just 3 months. All while competing tech company stocks soared by double digits. Cook knew Apple had to reveal their AI technology called Apple Intelligence by the summer to restore shareholder confidence, but the reality was they didn't have much to show. Similar to Air Power, they had an idea of what they wanted to do with AI, but nothing that actually worked. So they put together a demonstration that according to former Siri team members was almost entirely fabricated. Now Apple has since denied this, but the proof is in the delays. Initially, Apple said some AI features, including an

22:12 improved Siri, would be released in October 2024. And that was true for a few features like writing tools, photo cleanup, and notification summaries. But the improved Siri was delayed until early 2025. and the notification summary feature had to be removed entirely due to spreading fake news. One example was from a BBC news article. Its original title was quote CEO shooting suspect Luigi Manion in angry outburst outside court as he fights extradition to New York. But Apple Intelligence summarized it as Luigi Manion shoots himself. A former editor of the Guardian said Apple intelligence was quote clearly not ready. The problem was Apple's stock price depended on convincing the public

22:57 that it was ready. Apple Intelligence was even advertised as exclusively available on new products, including iPhone 16, 16 Pro, 16e, MacBook Air, iPad Air, MacBook Pro, and Mac Studio. When early 2025 came, the improved Siri was delayed yet again. This time, Apple simply said it would be released, quote, in the coming year, which most likely means 2026. But according to multiple reports, Apple employees have said they don't expect a new truly conversational Siri until 2027 at the earliest, which would be almost 3 years after the features original release date and 5 years after the original chat GPT. This prompted a lawsuit from the US District Court in San Jose, claiming that the

23:42 company's promotion of now delayed Apple intelligence features constituted false advertising. Apple has dug themselves in a hole. Over the last decade, they've prioritized cost cutting over innovation. And now they've fallen behind. To catch up, Apple should have aggressively invested in generative AI, waiting to reveal the technology until it was finished, even if that meant taking hits to their stock price. Instead, they decided to reveal a feature that essentially didn't exist, to satisfy shareholders and prop up their stock price. Maybe this is the type of situation Steve Jobs feared when he turned down Buffett's advice. Today, Apple functions more like a finance company than a hardware company. In 2024, they led the world in stock

24:28 buybacks, spending $110 billion. But they were far less competitive with research and development, spending 30 billion compared to Amazon's 85 billion, Google's 45 billion, and Meta's 39 billion. all of whom happen to have better AI technology than Apple. And while customers may be frustrated, it's clear shareholders are enjoying Cook's leadership style. He's increased Apple's market cap from 350 billion to over 3 trillion. One analyst even said Tim Cook actually meets with and listens to investors and shareholders. Steve Jobs did not. But when you're prioritizing shareholders, is it really possible to prioritize products? Judging by the current state of Apple, it would appear

25:14 difficult. I think this is exemplified best by recent comments Cook made in a company meeting about AI. He said, quote, "We've rarely been first. There was a PC before the Mac. There was a smartphone before iPhone. There were many tablets before iPad. There was an MP3 player before iPod. But Apple invented the modern versions of those product categories. This is how I feel about AI." The problem is Cook had it backward. Apple was the first to do AI with Siri and the modern version was what happened in 2022 with Chat GPT, Google Gemini, Microsoft Copilot, Anthropic Claude and all the rest. If this had happened with smartphones, then Apple would have made the Blackberry and RIM would have made the iPhone. Historically, Apple was the first to

26:00 modernize several industries, but that's when Apple prioritized products. The Apple that exists today prioritizes profit and the greed that caused their complacency could be the very thing to cause their downfall. This is Greg with Apple Explained. Thanks for watching till the end and I'll see you in the next video.