Apple (NASDAQ:AAPL) is the most talked about company in financial news today. No matter what side of the argument you are on, every move made by Tim Cook is placed under a microscope. Every piece of information, no matter how small it is will be examined in an attempt to answer the question everyone wants to know. What's next?
If we instead look back through the history of Apple we see a trend, not clear to the lay-man. The trend has occurred before, not in a way that is evident. Right now the sentiment is negative; mainly because most have only taken into account events of the past year.
When we witness a phenomenon occur we tend to categorize it in an attempt to understand what is happening. When we do not have empirical data for such events we theorize on how and why something is occurring. When we see a shift in a culture we try to explain what is happening and why as we see it happen. In 1871, Sir Edward Burnett Tylor wrote a book entitled "Primitive Culture". In this book Sir Tylor lays out the basis for Culture-Epoch Theory.
Apple is exhibiting behavior that coincides with this theory. It is said that no one can truly tell if a culture has complete a full cycle, Apple has exhibited the first two phases. Allow me to explain.
The first phase is Chaos. This phase can be the start of the culture or it can signal the start of a change in culture. In this phase we see that the old way of doing things are not good enough or are no longer valid. People start to question the basic fundamentals of the establishment. Old patterns, beliefs and values disappear. The establishment falls apart and change is needed. In creation myth, the end of Chaos occurs when a deity has brought order to Chaos.
There is not necessarily a definitive point in which the cycle switches from Chaos to Adjustment. However, if a deity or leader emerges it may be considered the turning point. The Adjustment phase is the phase of innovation, the phase of thinkers. Once the old ways have been removed, new and fresh ideas come to fruition. The intellectuals of the culture put an end to the Chaos by building a framework on which the new culture bases its Folkways and Mores.
Balance, the final phase is achieved when everyone in the culture accepts the new framework. A Balance is achieved when people understand what the culture is about and how it will operate. Even though a culture has achieved Balance, new ideas still occur but not to the magnitude it did in the Adjustment phase. There is no set time frame in which this or any other phase is realized. Balance may end or it may continue indefinitely with new ideas occurring in a less dramatic manner than in Adjustment. There is also the possibility that the ideas may once again be broken down and the cycle starts over again.
In the early to mid 1990's Apple lost its luster. The popularity of PC-based computers overran the market. The idea of how Apple operated in the market place changed immensely. The culture questioned Apple in general and Chaos emerged. Apple did what it could to continue as a company. Apple was on the verge of Bankruptcy. Apple's Chaos phase ended in 1997 when Steve Jobs took over.
Apples' Adjustment phase occurs when we see the creation of the Apple Store in 1997, the iMac in 1998, and the iPod in 2001. Apple continued its innovation with iTunes, the iPhone and iPad. Apple was in the middle of a full blown renaissance. Items that were nothing more than a toy from a 1960's TV series are now reality. The conceptual framework for the new culture takes shape as a result of these events.
As I mentioned before we cannot truly know if and when the phases occur except in hindsight. At this point in time, we may be shifting to Balance. The question everyone wants to know is if the innovation is over. At this point in time no one can tell, we can only speculate. If innovation is not over then Adjustment will continue. However, at some point we do have to arrive at Balance.
Once in Balance we will not see the innovation that we saw in Adjustment. However, this does not mean that new ideas will simply go away. New ideas may be fewer and farther between. Not because Apple does not have the ability to innovate, but because the rest of society has caught up to the notion of this innovation by accepting the conceptual framework as the new norm.
In the short term people believe there is a definitive beginning and definitive ending. Culture-Epoch Theory suggests it is a constant series of cycles that continue to improve upon each other. The difficulty is gauging when and where we are in the cycle. Or will the cycle reset? This does not mean it is the end. It means that the rest of the culture has caught up to the innovation and the new framework in which the culture operates is no longer a concept but reality.
When a company pays out a dividend it means that they have stabilized and rapid ascent may be over. A plateau has not occurred; instead the culture no longer considers the innovation as innovation as the constructed framework supports it as the norm. This is where Apple seems to be at this moment. On One side of the argument, Apple still has plenty of tricks up its sleeve. On the other side, Apple can no longer innovate as it once had.
We seem to be at a paradigm where the actuality is that we meet in the middle and both arguments are correct and false. Apple may be on its way to Balance, where everyone has caught up to the technology that Apple has innovated but no matter what they come up with in the future, no matter how innovative it is; the consumer's imagination, through speculation has caught up with and possibly surpassed the reality. So whatever Apple builds it won't amount to what has happened, not because it is not innovative but because the framework that Apple created has altered our thoughts on what is possible.
Disclosure: I am long IBM, KO, MPC, WMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.