Seeking Alpha

Always Day One: The Mantra For Mega Cap Tech (Book Review)

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Includes: AAPL, AMZN, FB, GOOG, GOOGL, MSFT
by: Ted Stamas
Ted Stamas
Long only, value, growth at reasonable price
Summary

Features the five horsemen of the digital age.

Amazon is the leader of the pack.

Apple needs a makeover.

Damon Runyon is famous for saying:

"The race may not be to the swift, nor the battle to the strong, but that is how you bet".

And that's the way technology investors have been wagering the past decade, on the swift and strong; companies such as Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT). Although household names, retail investors may not have an understanding why these companies have propelled the overall market since 2009, and why they may continue to do so for the foreseeable future. Market participants just stay long because the stocks keep going up. A no-brainer. Always Day One: How The Tech Titans Plan To Stay On Top Forever is a new book by Alex Kantrowitz and answers all these questions and more. It's about what it takes to remain number one. Part prediction, part computing history, part human resources, and a whole lot of organizational behavior, Kantrowitz sets the record straight about the digital oligopoly with its tentacles in every aspect of our day-to-day lives.

The book's title Always Day One is the current version of a technology motto of yesteryear: only the paranoid survive. It's the mantra of the digerati, fashioned from Amazon's quest to make each and every working moment like the inaugural day of a startup. Don't look back, somebody may be gaining on you. As Kantrowitz states:

"In the 1920s, the average life expectancy of a Fortune 500 company was sixty-seven years. By 2015, it was fifteen".

You have to stay hungry. Amazon started the trend years ago with founder Jeff Bezos. He entrenched "Day One" thinking into Amazon's corporate culture. Almost like a cult of personality, only it's the cult of an idea. "Day One" is the name of an Amazon building, it's the title of the company blog, and it's the recurring message in the annual letter to shareholders. Amazon is like the Pied Piper of the mega cap technology elites; it blazed a trail and was so successful, the others followed suit. As a result, instead of experiencing the corporate life cycle of a previous era, these companies have become more powerful as they've aged. Whatever it takes to remain numero uno.

So, what is Amazon's secret sauce? For one, open communications in a horizontally structured workforce unlike hierarchical silos in the more traditional organizations. Out of the five companies covered in the book, it's only Apple that's vertically organized. Secondly, Amazon, Facebook, Alphabet, and Microsoft are all engineering-centric. Again, Apple remains the outlier with more of a sales-oriented structure. In development and production, Apple begins with a model or rendering created by their design team, then the supporting cast amalgamates the accoutrements, including the operating system. Apple tends to work in secrecy. The other four companies don't. They begin with an idea and work backwards. Every person in these companies has a say with their respective internal communications systems that flow from the bottom of the pecking order to CEO. Legacy products and systems can be given short shrift if they don't move the company forward in the rough and tumble world of technology. Microsoft made that mistake by milking Windows under the Steve Ballmer era. His replacement Satya Nadella turned things around.

It's only Apple that Kantrowitz believes may have the toughest time remaining on top. According to the author,

"Apple is having its Windows moment. It must leave iPhone orthodoxy behind and reinvent itself again to compete in the age of voice computing".

He makes a valid point with the iPhone thirteen years old. Other Apple products didn't take off or have been put on the back burner. For instance, Apple TV and the HomePod have inferior market share compared to the competition, and Apple Car has yet to come to market. CEO Tim Cook has a background in operations and is not a visionary. He's done a great job of leading the company since the passing of Steve Jobs, but Kantrowitz infers that Apple needs a major overhaul. This structural renovation can happen with or without Cook. The railroads went out of business because they thought they were in the railroad industry, not the transportation business. Apple is a communications company.

One trait the leaders of these organizations have in common is that they're great listeners. Especially Mark Zuckerberg of Facebook. That surprised me because his public persona appears to be more dictatorial. Facebook is vulnerable because they don't have their own operating system. Plus, the nature of social media firms is that it's a zero sum game. You're either on Facebook, or you're surfing the competition such as Snapchat (SNAP) or Twitter (TWTR). Myspace, Foursquare, Tumblr, and Friendster found out the hard way. Zuckerberg took a page from the Amazon playbook with their own company slogan of "One Percent Done" instead of "Day One". The CEO stays one step ahead of his adversaries with continuous feedback from not only the C-Suite, but the rank and file, too. He also likes dissenters to play Devil's Advocate. There's no "Corporate Yes Men" at Facebook as they used to say in the old days. Employee input has saved Facebook's bacon a number of times. Most notably, when they transformed from a desktop to a mobile corporation a decade ago. It was touch and go then, much the same way when they blatantly stole the "Stories" concept from Snapchat five years later. It kept the patrons coming back for more.

If you've been on the Internet since the launch of Amazon, you're probably familiar with the fates of search engines such as Northern Lights, AltaVista, Lycos and Ask Jeeves. You don't find Google in the dead dotcom group. Google rolled with the punches and seemingly stayed on top under the direction of Larry Page and Sergey Brin. However, current CEO Sundar Pichai was instrumental in jettisoning the company from search, to a juggernaut in AI. Pichai came to esteem within the company with his work with the Chrome browser and Chrome operating system. Google became a formidable opponent to Microsoft that previously had a stranglehold on desktop applications. Under Pichai's direction, core productivity programs run through the browser. He also transitioned the company from a desktop, to a mobile computing organization. The current battlefield is in voice assistance with their product Google Home. Pichai runs the organization like an open source software project. It's a collaborative effort in company communication. As a result, Google Home is the biggest threat to Amazon's Alexa, not Apple's HomePod with the Siri voice recognition software.

Always Day One is a fascinating book. Because you're so familiar with the companies and products in the narrative, it reads a lot like Walter Isaacson's Steve Jobs. If popular music is the soundtrack of your life, then technical innovation is the film that accompanies it. Reading this is like watching a movie of your communications history for the past 15 years. But instead of being just about Apple's iterations as in Steve Jobs, you get the gamut of many of the major players in our digital lives. I believe technology investors will benefit tremendously by reading this. Although there are regulatory threats for all five of the companies covered in the text, they've all been winners from their adaptability. Kantrowitz has no kind words for former Microsoft CEO Steve Ballmer, but praises Satya Nadella. Microsoft is the Lazarus company of the group coming back from the dead under Nadella's leadership. He's not so sure about Apple. Lots of changes could be in store for the Cupertino, California mainstay if Kantrowitz had his way. From the book, it sounds as if Apple co-founder Steve Wozniak would like some changes to the organizational structure, too.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long the market with S&P 500 index funds.