“Few outsiders think new stores, no matter how well-conceived, will get Apple back on the hot-growth path . . . Maybe it’s time Steve Jobs stopped thinking quite so differently.” -May 21, 2001
Regular readers know I am not a big fan of predictions. Wall Street’s track record forecasting markets or economic activity is mediocre to poor; worse yet, we tend to marry forecasts once we make them rather than admit error.
So it was with great interest that I happened across the above quote. They come from commentary in (the pre-Bloomberg) BusinessWeek, published 20 years ago today (May 21, 2001). But it was not just BW, they were only one of many naysayers discussing the inevitable failure of Apple’s push into retail. Numerous armchair pontificators freely shared their uninformed opinions as to why this concept was destined to fail.
It is an excellent reminder of the type of errors we should avoid making: Operating outside of our own expertise; failing to fully appreciate current circumstances; and trying (with limited success) to extrapolate the present into the future.
Genuine groundbreaking or revolutionary products and services come along that do change the world. Whether it’s the iPhone or Bitcoin or Amazon Prime or whatever, we have a hard time conceptualizing true innovation. We can be challenged by novelty, and sometimes are made uncomfortable by what is different and unfamiliar. Once something is a success, we have a hard time recalling how life was before that product existed.
The Apple Store was clearly one of those game-changers: Pre-pandemic, Apple had over 500 stores in 25 countries. The stores were among the top-tier retailers, the fastest ever to reach a billion per year in sales; by 2012, they were doing more in sales per square foot than any other retailer. By 2017, the stores were generating $5,546 per square foot in sales, twice the dollar amount of Tiffany’s, their closest competitor. Apple no longer breaks out the specifics of its stores in its quarterly reports, but estimates of revenue across all stores is about $2.4 billion per month.
A big part of finance seems to involve making forecasts about what will happen in the future. Most people are really bad at this, for a variety of reasons: We have little awareness of our expertise or lack thereof; we do not truly understand the present, let alone the future; we often predict what we want to be true, rather than what is. And of course, the Dunning Kruger effect explains why we over-estimate our own skillsets about all of the above.
The sooner we learn what we know and work within our capabilities, the better off we will all be.
Predictions and Forecasts
MiB: David Dunning on Metacognition (March 21, 2020)
Wall Street Remains Clueless as Ever as to Apple’s Products (January 14, 2005)