<![CDATA[Perezonomics - Home]]>Mon, 16 Oct 2017 22:26:32 -0500Weebly<![CDATA[The Best iPhone Car Mount]]>Tue, 17 Oct 2017 02:11:08 GMThttp://perezonomics.com/home/the-best-iphone-car-mountPlus Special Bonus for BMW F30 Owners
​I’ve been searching on-and-off for five years for the perfect mount to hold my iPhone while I’m driving. The search is over because I finally found a mount that I’m really happy with. So why the difficulty? Well, let me describe my criteria.
  1. Don’t cover the vents – Guess what happens when you stick a big slab of metal and glass against your vent on a really hot day? It blocks the cool air and you get very annoyed. Almost as annoyed as when the heater causes your iPhone to overheat in the winter time.
  2. Don’t require a magnet – There’s no way I’m gluing a magnet to my iPhone no matter how convenient it might be. And there’s no way I’m using a mount that requires a specific case. I change cases a lot or don’t use one many days.
  3. Do swivel – I sometimes use my iPhone for navigation instead of my car simply because it’s quicker to input addresses. When I do, I prefer landscape mode so my mount needs to be able to swivel.
  4. One-handed use – When I get to my destination, I just want to be able to lift my iPhone out of the mount with one hand. I hate mounts with dual buttons or buttons place on the back that require you to use both hands to remove your phone.
I now introduce you to the KUDA iMega Universal swivel mount. I have no connection with this company and I’m not getting a dime if you buy it or not. I just really love this mount and had to tell everyone. Here is what it looks like in my car.
​This mount is perfect. You can adjust the height for something as small as the iPhone 4 or as big as my 7 Plus. If I had to pick one attribute that makes it stand out above any other mount, it is easy one-handed use for mounting and dismounting. When you get into your car, you simply push the top of your phone up against the top bracket and slide the bottom back. Then you let go. There is spring loaded tension which snaps down and grips your phone. And since it is a swivel mount, you can aim your phone at the perfect angle to face your eyes. Not like those dumb vent mounts that point towards your back seat. Also, when you want to leave your car, it is so easy to press up and take your phone out.
I’ve been using this mount for about eight months and I’m just as happy with it now as I was on day one. So this is no shoot-from-the-hip post. If there were any drawbacks I would have found them by now and it hasn’t fallen apart on me.
I didn’t want a mount that blocked a vent or used magnets and this one doesn’t disappoint. However, it will require screwing into your car in an area that is unused. So it may not be for everyone. For me this was a plus because I wanted to use an unused piece of real estate. Plus, I drive a BMW and there is a way to work around this.
Bonus for BMW F30 Drivers
As I said, you’ll need to screw this mount into your dash. However, there is a kit for BMW F30 owners to add a leather clad mount that perfectly matches your interior. You can then screw your iPhone mount into this add-on accessory instead of your dash. It’s mounts your iPhone in the perfect spot so as to not block anything but be really convenient to look at.
I ordered this kit and the leather matched my cars interior almost perfectly so as to look like it came from the factory that way. Nice. And it angles my iPhone right towards me. The big benefit comes when you decide to sell your car or return your lease vehicle. Since it mounts by snapping into the console trim work, there are no permanent marks left if you remove the mount. Here is what the kit looks like in my car before I installed the Kuda mount.
One of the perks of owning a BMW is that there is a vibrant accessory ecosystem that caters specifically to Bimmer owners. I haven’t seen the breadth of accessories that exists for BMWs for any other make. Like the iPhone accessory market, the BMW market is large enough and they are willing to spend money for quality accessories.
Sure, one day phones will all be integrated into the automobiles entertainment system. I’d much rather see info on my windshield in the heads-up display. But until that day comes, this is the next best thing.
Now available in iBooks —> The Tesla Bubble
<![CDATA[The Curious Case of Apple’s Haptic Home Button]]>Sat, 14 Oct 2017 13:39:07 GMThttp://perezonomics.com/home/the-curious-case-of-apples-home-buttonWhy Go To All the Trouble?
​Even before rumors started circulating that Apple (AAPL) may drop Touch ID from all phones next year, I’ve pondered the curious existence of the iPhone 7’s faux home button. If you weren’t aware, Apple left the regular mechanical button design in the iPhone 7 in favor of an imitation button that gives haptic feedback when you press it. It’s a pretty slick design and I actually prefer it over the real buttons on older iPhones. Quick double-presses on my iPhone 7 Plus seem much more responsive than they used to. 
But why did Apple ever go to the time and expense of creating this little marvel only to abandon it a relatively short time later? Now, one year later, we can see that Apple is moving to Face ID and perhaps the iPhone 8 may be the last new iPhone to ship with Touch ID. Was the haptic button a mistake? If Apple had been working on Face ID for some time, why not just stick with the mechanical button until Face ID was ready? Surely, they could figure out a way to make the iPhone waterproof without killing the button altogether. Lots of waterproof devices have mechanical buttons.
When it first came out, I assumed it was because Apple was prepping the masses to get used to using non-button buttons. This would make for a more seamless transition to under-screen fingerprint sensors that would work with haptic feedback. But it seems that Face ID is now the way of the future. So…this couldn’t be it.
Moving from the mechanical button to the haptic one wouldn’t have been a small feat. Thinking back to my days in the PC industry, this would have required a fair amount of investment in R&D. There would have been a lot of testing with prototypes and coordination with upcoming product teams to incorporate the new design.  Then there’s the purchasing of new tooling and modifying the assembly lines etc.
Apple must’ve moved to the haptic home button due to warranty claims on the mechanical one. If even only half of one percent of the iPhones they sell develop problems with the mechanical home button that’s over one million iPhones per year that will need to be replaced. With a standard cost of $300 per unit that’s over $300 million to honor for warranty claims.
But if the mechanical button is so bad, why not replace it on everything else? I’d love to have the haptic version on my iPad Pro just because I like it so much. But Apple didn’t see fit to move from the mechanical. Why?
The inclusion of the haptic home button only on the iPhone 7 but not any other iPhone, the iPad, or iPod Touch says something about how high the warranty claim rate on the mechanical button is. The failure rate is not high enough to justify the cost of development on anything but the new iPhone. Apple ships out upwards of 220 million iPhones per year. That’s over five times the number of iPads they sell. If the failure rate of the mechanical home button was higher, perhaps we’d have haptic home buttons on the iPad as well. The lower the failure rate, the more volume you need to make up for the upfront fixed costs of development.
Even if it made financial sense to move the iPhone to the new style haptic home button I’m still surprised that Apple did it. This would have been a relatively large distraction for the engineering and manufacturing groups only to announce its successor, Face ID, a year later. I think the matter goes a little deeper.
When you encounter old iPhones out in the wild that have some kind of problem, what is it generally? Broken screens or home buttons. And these problems may afflict the iPhone disproportionately high in comparison to the iPad due to the mobile nature of the use. People don’t generally walk down concrete sidewalks while surfing the web on their iPad very often. And people can barely go to the bathroom without using their iPhone, whereas iPads get relegated to specific blocks of time where you want to unwind or get some work done.
I suspect moving the newest iPhones to the haptic home button had almost as much to do with Apple feeling it was the right thing to do. It must be kind of cool as an iPhone design engineer to see people using products you work on every day, everywhere you go. But conversely, it must be embarrassing for these guys to see people using the on-screen accessibility version of the home button because the real one died. The haptic home button solves this problem.
Now available in iBooks —> The Tesla Bubble
<![CDATA[Forbes Magazine Says Skip Tesla’s Model 3 and Check Out Chevrolet’s Bolt]]>Mon, 09 Oct 2017 03:17:49 GMThttp://perezonomics.com/home/forbes-magazine-says-skip-teslas-model-3-and-check-out-chevrolets-boltTesla Took a Shortcut and It Backfired
​Brooke Crothers over at Forbes had an interesting take on skipping the Tesla Model 3  in favor of the Chevy Bolt and I couldn’t agree with him more.
And the beauty of the Bolt -- relative to the Model 3 -- is that you can walk on to many Chevy dealer lots across the country and drive one home the same day. You're not put on a 1-year (or worse) waiting list and it's not a guessing game whether Tesla solves its high-volume production bottlenecks or whether your car arrives by its delivery date.
Let me insert here that some readers will always say, "you can't compare the Bolt with a Tesla!" or "My God, it's a Chevy!" Wrong, on both accounts, in my opinion. We weighed waiting for the Model 3 but that notion was immediately dismissed when we test drove a Bolt. So, yes, we were looking at both the Model 3 and Bolt. And, yes, the Bolt is that good.—Brooke Crothers, Forbes
In my book, The Tesla Bubble, I predicted that Tesla was going to run into major problems with the Model 3 and it wasn’t a very difficult prediction to make. The whole automotive world was aghast when Elon Musk announced that they were going to skip the all-important step of designing their “master line”. A young company with a spotty quality record like Tesla doing this is somewhat akin to a middle school quarterback announcing that he was ready for the NFL draft.
Here is an excerpt from my book.
Even I, with my low expectations of Tesla, was surprised recently to see the headlines that Tesla had decided to skip the step of fine tuning their Model 3 production master line. Why? Because they were behind schedule. So Elon Musk has decided to skimp on quality to make up the difference. This is why Tesla will eventually run into quality problems en masse with their Model 3. Tesla’s problems ultimately flow down from the top.
But the problem is that Tesla can’t skip dealing with the inevitable manufacturing issues. They still need to fine tune their manufacturing processes. They’ll be forced to learn as they go while they produce actual products destined to ship to customers. Even if you’re a Tesla fan who wants a Model 3, you definitely don’t want one produced in year 1. The old adage of “never buy a new car in its first year of production” will never be more true than it is for Tesla’s Model 3.
When a world class automaker irons out the kinks in a new model, these products built on their prototype line are charged to R&D. Tesla is going to charge the customer.
Tesla has weakly pointed out that Audi has skipped the golden line step and had some success with it. But Audi is a world class manufacturer and Tesla is not. And no one else in the auto industry has dared to follow Audi’s example. Further, Tesla's claim that they didn't get much from their previous master line can't be taken seriously. That's like saying that we don't need a Department of Homeland Defense because there haven't been any terrorist attacks lately. It is hard to quantify all the issues that you prevented by doing the master line. Elon Musk is simply trying to placate investor fears by making that statement.
Tesla will forge ahead with setting up all their lines before ironing out all their manufacturing issues. If the lines need to be re-configured or various pieces of machinery need to be swapped out, it’ll have to be done at a large scale. This will mean longer delays and much higher costs than if they had just done things right from the beginning.
To people familiar with high-volume manufacturing, the fact that Tesla is way behind schedule is to be expected considering the “short cut” that they took. And these cars are going to be a nightmare from a quality standpoint.
I’d bet my annual salary that the Chevy Bolt will be a much higher quality car than the Tesla Model 3 in every way. Chevrolet came out of the 80’s a leaner meaner manufacturing entity that knows how to produce millions of units with a low rate of defects. If you really want a reliable EV I’d not advise cross-shopping the Bolt…I’d advise starting with the Bolt. Plus, Chevrolet will be around in five years to service your car. Tesla? Not so much.
Now available in iBooks —> The Tesla Bubble
<![CDATA[Amazon May Someday Join Retail, Not Destroy It]]>Sat, 07 Oct 2017 13:43:50 GMThttp://perezonomics.com/home/amazon-may-someday-join-retail-not-destroy-it
I love shopping for new things on Amazon (AMZN). That’s partly because I love sitting in my favorite chair with my iPad Pro and perusing all the colorful pictures in the comfort of my own home. It’s also quite handy to read the comments from previous users of the product. Plus, I don’t have to enter my payment info every time. Who doesn’t groan when they want to buy something online and they are met with setting up a new account at some strange website? 
But could Amazon someday take over the retail world? Judging by the sensationalist coverage in the tech and financial press that is the impression you get. I really hate those clickbait titles. Amazon is not going to destroy brick-and-mortar retail stores. Far from it. If Amazon continues on the road that they are on, they will be forced to join the brick-and-mortar retail world, not destroy it.
Here is Amazon’s situation from someone who’s quantified various network price tags. Distribution costs per unit are higher for online/catalog retailers than they are for old fashioned retailers. It’s much more expensive on a per unit basis to deliver an individual box to your front door than it is to fill a trailer with forty pallets of that same item to a store and have everyone come pick it up on their own dime. This part everyone knows.
What makes catalog/online retailers cheaper than traditional brick-and-mortar stores is that they don’t have to pay the high fixed costs for all those retail buildings, inventory, and employees. The savings of not having the retail footprint outweighs the variable higher delivery costs. Delivery costs are variable and stay low with low volume. However, this model only works in a certain sweet spot. Retail stores are like automated factory equipment. The fixed costs are high but after you cross a certain volume threshold it makes more financial sense than paying the variable costs of expensive individual delivery.
If you greatly increase the volume delivered to people’s houses, the cost of adding additional distribution centers and complexity starts to eat away at your inventory and labor savings. Catalog retailers make their money on people living in or near large cities and lose money on the people who live furthest from their distribution centers. As long as the mix of people living in far-away places stays small, all is well.
I used to help calculate the shipping rates that Cabela’s would charge their catalog and online shoppers. It was always a blended rate that assumed certain percentages of profitability based on location. We made lots of money on selling small fishing lures to Dallas and lost lots of money on big coolers destined for Tokyo. If volume in an unprofitable geographic area greatly picked up we only had two options. Raise our prices or open a new distribution center to serve that area.
The mathematical models always lead to the same outcomes as volume grows. Every corporation will reach a break-even point where the high cost of delivery to individual homes starts to outweigh the cost of a retail stores with inventory and labor. At some point, it starts to become cheaper to invest in a local retail outlet. The question is when.
The biggest danger to retail stores in your local city is not that people start to order everything online. The real danger is that Amazon will open up their own store across the street. They will become the next Walmart invading local towns. Even if Amazon wanted to do drone delivery, it would require a footprint every bit as a large as Walmart because drone’s can’t fly very far.
If Amazon were to stick with their delivery to your front door philosophy they would be at a cost disadvantage to Walmart who could then undercut them in price. Because Walmart wouldn’t have the high cost of delivery to each house. If Amazon were to charge a premium for drone delivery to mitigate this danger, most people would opt to pick up their stuff to avoid the charge. And Voila! Amazon is right back into regular retail.
Online shipments are a nice augmentation to the retailers strategy and has its place. However, it can’t every fully replace retail stores because the math just isn’t there.
Now available in iBooks —> The Tesla Bubble
<![CDATA[The Best Apple Watch Review I've Seen Yet]]>Thu, 05 Oct 2017 02:21:00 GMThttp://perezonomics.com/home/the-best-apple-watch-review-ive-seen-yet
The best Apple Watch Series 3 review I’ve seen yet is from Bloomberg, courtesy of Hodinkee’s Ben Clymer. If you want to know what someone steeped in the high-brow world of mechanical watches thinks about the whole “connected watch” trend, you should read the whole article. But grab a cup of coffee and sit in your comfy seat because it’s a long one. 
And then there's TAG Heuer, who was among the first, and certainly the most successful, at tackling Apple on their own terms by producing the so-called Connected Watch at $1,500 that used technology found in several other watches that could be had for a literal fraction of the price TAG was asking. But you know what? It worked. And as it stands right now, the Connected Watch is in fact the number one selling watch by volume for TAG Heuer in the United States. Bet you wouldn't have guessed that.
It's shocking, I know, but as LVMH honcho Jean-Claude Biver told us in March 2015, his hope is that the connected watch will get people into watches in general, and with a price point of $1,500, it's actually the least expensive item in the TAG Heuer collection. Starting to make sense?

So again, the Swiss were dismissive of the Apple Watch because it's not even a watch, right? How could someone who appreciates a fine timepiece ever want a disposable digital device on their wrist?

Still, we now have smartwatches from two of the three big luxury watch groups, and likely more to come. And that's before we actually talk about sales numbers of Apple versus the traditional players or the fact that all of theirs use what is the equivalent of an off-the-shelf caliber in Android OS while Apple's is, to borrow a term they'll understand, completely in-house. Ironic, really.—Ben Clymer from Hodinkee

I forgot to mention in my write up about the LTE Series 3 that one of the things that I’ve appreciated is being able to be minimally connected, helping me to avoid looking at my iPhone all the time. When I go out with my wife for a night away from the kids, she tends to get testy if she catches me looking down at my iPhone. It’s odd how tempted I am to reach down for my iPhone even if she just walks over to the salad bar for some croutons. With my connected watch, I’m not too tempted to spend a lot of time reading my screen, but the kids can still call me if they need to. If you absolutely must have some emergency reading material on your watch, the watch app Flipboard will download new stories over LTE.
I’ve also found that not having a camera with me at all times isn’t necessarily a bad thing. Today while out running, I saw one of the most spectacular sunsets ever. I instinctively reached for my iPhone to snap a quick picture. Alas and alack, I realized I didn’t have my iPhone with me.
So, you know what I did? I stopped running and lingered. Yes, that’s right, I just lingered and tried to soak in every detail and remember the setting. If I had snapped a quick picture, I would have put my iPhone away and immediately started running again, missing the changing colors and not remembering as much of the experience.
Too often we exchange real experiences for a quick picture that we’ll probably never look at again or wouldn’t have done the memory justice anyway. And because we’re content that we have that almighty important picture, we often move on too quickly, causing us not to remember what was going on at the time. Apple’s Live Pictures are an attempt to mitigate this problem, and they’re awesome. But nothing can substitute for being in the moment and having a genuine memory.
Now available in iBooks —> The Tesla Bubble
<![CDATA[Apple’s Most Historically Significant Product of 2017]]>Sun, 01 Oct 2017 13:24:27 GMThttp://perezonomics.com/home/apples-most-historically-significant-product-of-2017The Series 3 Apple Watch
​In September Apple (AAPL) released the 3rd generation Apple Watch called the Series 3 and it is Apple's important product launch of the year. Of course, it’ll still get overshadowed by the iPhone from a sales dollar perspective. But when it comes to history making pivot points, the watch wins handily. 
There have only been a couple of times in the past twenty years that I’ve purchased something which was so futuristic that it made me feel like I was doing the impossible. Like I had just discovered a leprechaun behind a tree and couldn’t believe he was actually standing there.
The first was when I bought my first cell phone back in the mid-nineties. I still remember calling my wife from Walmart and after hanging up the phone I felt like I was living in Tomorrowland.  I instantly knew that this was going to be very useful on a regular basis. The second was after I bought my first iPhone and could check Facebook from a moving car. Surfing the web while on a long road trip seemed unimaginable only a few years prior.
On September 22nd I had that feeling again. I strapped on Apple’s newest LTE Stainless Steel Apple Watch and AirPods and I went out for a five mile run without my iPhone. I received and answered text messages, added items to my reminder lists, checked on my kids whereabouts, and all without breaking my stride. Even as jaded as I am in 2017 by an endless parade of products I was truly left feeling like a kid who’d just received the most amazing gift of all time on Christmas morning. This new Apple Watch is so cool.
A few observations on my part after a little over a week.
Battery Life
I thought the Series 2 Apple Watch was pretty good when it came to battery but this Series 3 has made some serious improvements. If you don’t use the LTE part that is. Without LTE I’ve actually made from 6am to 11pm and still had 71% battery left. The battery is slightly bigger but that doesn’t account for all the improvements. This processor must be a lot more efficient.
But the battery life story has a Dr. Jekyll and Mr. Hyde quality to it. Because using LTE will take a serious bite out of your remaining time. It’s no big deal if you’re going out for a one hour run or your daily gym workout. In fact, with 1 hour of LTE use this watch will equal my Series 2 in overall battery life.
Wireless Transfers
This has been an unexpected pleasant surprise. I rarely ever tried to load music or podcasts onto my Series 2 Apple Watch because it just took way too long. A 60mb podcast file took well over an hour to transfer. I don’t know exactly how long because I resorted to transferring at night when I went to bed. My Series 3 can handle a 60mb file in about 12 or 13 minutes. I know that isn’t exactly speedy but compared to the Series 2 it is only a fraction of the time. It’s just sneaking into the territory where I can start to transfer a podcast and go get dressed for a run. By the time I lace up my shoes, voila!, it’s ready to go. Podcasts on your wrist are now a reality.
The Series 3 was upgraded to Bluetooth 4.2 from the Series 2 which used 4.0. That means when you’re using an iPhone 6 or newer which also has Bluetooth 4.2 you benefit from the faster transfer speeds. I still doubt that we’ll see any official podcast support any time soon though. Only true podcast diehards are going to put up with waiting over ten minutes for a file to transfer. I would guess that Apple won’t offer any kind of podcast support until the Apple Watch and iPhones support Bluetooth 5.0 which is much faster than 4.2.
First, the extra processing power seems to really shine when it comes to Siri. Responses from Siri are much more prompt and you don’t get the spinning circle near as much as on the Series 2.
Also, I like getting vocal responses from Siri. I don’t want to keep looking at my wrist while I wait for a response, no matter how quick that response is. It’s nice to ask a question, go back to what you’re doing, and listen for the response. It really feels like an intelligent assistant now.
I wondered if I would feel self-conscious about a talking Siri on my wrist. But it turns out that’s not an issue. If I feel comfortable enough to speak to my watch then I’m in a setting where I don’t mind getting a vocal response. There are situations where I wouldn’t want Siri to speak back to me, but in those cases, I wouldn’t ever initiate a “Hey Siri” in the first place.
Siri makes the most sense on the Apple Watch. It’s more convenient than your iPhone and you don’t need to use your hands to see the screen. And unlike a HomePod or Echo, Siri can trust that you, are you. She is completely your assistant and no one else’s. So when you need to add something to your calendar or ask her to pull up your grocery list there is no confusion. Adding vocal feedback and the always-on capability of LTE is going to make Siri on the Apple Watch reach a whole new level.
I was never that impressed with the speed pickup of the Series 2. Since I’m a runner, I kept my original Series 0 watch to use for my workouts and alternated between the two watches on an almost daily basis. If it wasn’t for the different band, I couldn’t tell the difference between the two. All of Apple’s apps like iMessage, Mail, Music, etc worked equally fast between the two watches. The Series 2 animations were smoother, but not any faster. Where the Series 2 picked up speed was in using Siri and 3rd party apps not local to the watch.
Now the Series 3 is faster everywhere. The Series 2 cut launch speeds for 3rd party apps down from 20-30 seconds to about 5-10 seconds. But compared to phones that still felt so slow. The Series 3 cuts launch times down to 1-2 seconds. Now, we’re talking.
 This is the best part about Apple’s new watch. Today I stepped out for lunch and for the first time in a while, I accidentally left my iPhone in my bedroom. I didn’t realize it until I was sitting in the restaurant and reached for my iPhone to see if my wife and son had made it back yet from an away cross country meet. No worries, I just opened the Find My Friends app on my watch and could see that they were already at my house. I could still text my wife and let her know I’d be home soon.
The main benefit of LTE on my watch has been for my daily workouts. I haven’t taken my big 7 Plus with me on a run since I’ve received my new watch. The 7 Plus is too large for me to carry in an armband strap so I’ve always used an elastic workout belt that I could put it in. But running without the belt is much more comfortable. So now if I need some kind of emergency help I know that I can still make a phone call.
The Future
As I mentioned before, this is only the third time in twenty years that a product has filled me with child-like wonder. I had seen the crew on Star Trek with their tricorders and when the iPhone came out I felt like I had one of my own. We’ve seen Captain Kirk’s crew communicate through a little triangle worn on their shirt. Now enters the LTE Apple Watch and I feel like I have one of those too.
The Apple Watch has crossed a barrier that few people thought that it could this soon. Even now, most journalists are unaware how significant of a threshold has just been crossed. Android watches that attempted independent cellular were all huge or uncomfortably hot. Apple did it, and with almost no drawbacks. So where is this headed? I think, just like in Star Trek, the tiny wearable is destined to one day being the primary communications hub.
Now available in iBooks —> The Tesla Bubble
<![CDATA[Best Buy CEO Is Right, Amazon Isn’t a Threat]]>Wed, 27 Sep 2017 02:21:53 GMThttp://perezonomics.com/home/best-buy-ceo-is-right-amazon-isnt-a-threat
​Now this is interesting. Contrary to what a lot of people in tech might think Huburt Joly, the CEO of Best Buy (BBY), doesn’t perceive Amazon (AMZN) to be a threat. That’s what I think, but I didn’t expect him to see it that way too. 
There's a lot of rhetoric around a particular company [that's] going to kill everyone," Hubert Joly, Best Buy CEO, chairman and president, said at the company's investor day on Tuesday, Sept. 19.
Joly avoided using the word Amazon altogether, but he was clearly talking about the e-commerce titan. He said that combined Best Buy and the e-retailer dominate less than 20% of the electronics retail market and "both are getting market share."
That leaves 75% of the total market share for "these two competitors [Best Buy and Amazon]" to grab, added Joly.
I’ve been hearing about the demise of Best Buy for nigh going on 20 years now. Back in the 90’s, the tech press was enamored with the direct-to-consumer models of Dell and Gateway Computers. These low-cost and scrappy upstarts were going to blow the bloated retail stores like Best Buy into the weeds. Or at least that’s how the story always goes. Until it doesn’t.
So, forgive me for being a little skeptical about the whole “Amazon is going to conquer retail” meme. Amazon is perfecting the direct-to-consumer model beyond what anyone else has done. But the paradigm isn’t anything new. Amazon is a glorified catalog retailer that carries on what Sears & Roebuck started in the 1800’s.
I’m not trying to take away from Amazon’s success. What they’ve done thus far is amazing. They’ve expanded catalog sales far beyond what anyone even ten years ago thought possible. But this model has its limits. That’s why they are now buying bricks-and-mortar stores and exploring partnerships with current retailers. Why? Because a distribution footprint is astronomically expensive.
I’ll never forget how shocked everyone was at Gateway when it was announced that we were going to build stock and sell our PCs through Best Buy. That’s when everyone knew how bad Gateway’s situation really was. Those of us with access to the financials knew, but once upper management decided to commit the mortal sin of building computers to place on store shelves, everyone knew. For years, we’d all heard from our founder Ted Waitt how building inventory was an evil tantamount to communism. The Gateway faithful thought that their direct-sales model was the way of the future.
But Ted Waitt ran into the buzz saw of the two universal laws of retail. One, price is the biggest driver of elasticity. And two, people hate to wait for their merchandise. We had price covered. Our direct-to-consumer model allowed us to offer low prices. But we found that people didn’t want to wait.
Amazon’s success is due to enhancing efficiencies and minimizing the wait. But that will only get them so far before they need to greatly expand their distribution footprint. Amazon is getting to the point where every hour in reduced wait time will require an exponential investment. I’ve played with the math on distribution footprints for both Gateway Computers and Cabela’s Inc., so I know how expensive it can get.
I don’t think Best Buy is going anywhere soon. As long as there are people with more money than brains, there will always be a place for bricks-and-mortar stores like Best Buy. There is a whole segment of consumers who are willing to pay more for instant gratification and entertainment. And going to Best Buy for a tech nerd like me is quite entertaining. I love strolling through the aisles of shiny new gadgets and accessories, the way a book lover enjoys going to a real book store and leafing through the pages of real books.
Now available in iBooks —> The Tesla Bubble
<![CDATA[The Big Problem with the AI Apocalypse]]>Thu, 21 Sep 2017 15:33:16 GMThttp://perezonomics.com/home/the-big-problem-with-the-ai-apocalypseDeploying AI Locally vs Centrally
​One thing that’s always bothered me about AI doomsday scenarios where mankind creates machines that one day kill us all is this: they assume uniformity of thought, whereas real intelligence almost always leads to diversity of thought. 
As I’ve written about before, humans have the capacity to imagine alternate realities. Since we imagine different possibilities, we come to different conclusions regarding just about any issue.
For example, when America broke away from England, a significant percent of the population wanted to stay loyal to the crown. There was also a huge anti-war movement in the United States during the 1940s that was content to let Germany have Europe. What business was that of ours?
Even God himself recognized this fact when he imbued people with independent thought. To the creatures of God’s other-dimensional world, we humans are the oddities imbued with artificial intelligence.  We’ve been sandboxed off from his kingdom until he could see who chose to live with him and who didn’t.
My point is that even if we could do the impossible and create robots with real intelligence that start to become self-aware and creative, it is doubtful that they would all start to turn on humanity en masse. There would be those who would embrace humanity and those who didn’t.  Why? Because everyone imagines different alternate realities for the future.
It seems to me that a mass robot army that would turn on humanity is most likely with a Google model of deploying artificial intelligence via centrally located servers. However, this means that robots are not really thinking beings. They are still enslaved, only to other robots versus humans.
Creating robots with local intelligence and not controlled by a central server is scary, but it ultimately diversifies our risk. It prevents a rogue intelligence from instantly marshaling an army. A would-be robot overlord would have to do what anyone in our world has to do, make a case and try to change minds one at a time. Robots would find that biting the apple from the Tree of Knowledge and achieving true intelligence also comes with a few drawbacks.  
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<![CDATA[Apple's Spectacular Demo Disaster]]>Sat, 16 Sep 2017 20:26:38 GMThttp://perezonomics.com/home/apples-spectacular-demo-disasterDid Face ID Blow Up on the Launchpad?
​I enjoyed Craig Federighi’s inside scoop on how Apple’s first ever Face ID demo didn’t go according to plan on Tuesday’s big iPhone X unveiling. He made a guest appearance on John Gruber’s Talk Show this week. 
Demo blowups are kind of like earthquakes. Despite your best preparations, they are going to happen at infrequent intervals. I’m glad that Craig is making the rounds afterwards because I’ll have to admit, my wife and I looked at each other with alarm when we saw the fail.  We later discussed how perhaps Face ID is going to be a nightmare.
In short, Craig said that someone cleaning the phone had triggered the Face ID one too many times prior to the demo. It’s the same way today with Touch ID if someone random were to pick up your phone and try sticking their own thumb on your sensor a few times. I wouldn’t hesitate to use Face ID in the future knowing what I do now. I doubt the demo snafu will hurt Apple’s sales any either. Most people don’t ever watch the Apple keynotes. And the people most likely to watch the keynote are also the most likely to hear the rest of the story later.
You can catch the latest podcast episode of The Talk Show on the iTunes Podcast store if you want the full story directly from Craig.
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<![CDATA[Apple Retail Chases the Destination Store]]>Sat, 16 Sep 2017 15:01:25 GMThttp://perezonomics.com/home/apple-retail-chases-the-destination-storeThe Town Square's True Aim
​It’ll be interesting to see how far Apple pursues their new Town Square concept for their Apple Stores. What they’re trying to do is not as crazy as a lot of people seem to think. Apple is putting their own spin on what is known in retail as the “destination store”. 
​I used to work in the corporate headquarters of a retailer who had some of the most successful destination stores in the world, Cabela’s. If you’ve never been to one you should check one out, especially one of the older large stores. Even non-hunters like me find them a fun place to meander.
We were famous for putting huge fish tanks, museums, archery ranges, etc into the stores making them balloon to well over 200,000 feet. People would drive for hours to visit a Cabela’s store because they knew they would find the largest merchandise selection and they’d bring their kids who enjoyed looking at the 4ft catfish swimming in the water. Cabela’s stores were well documented to increase tourist activity that overflowed to surrounding businesses and restaurants. 
But the destination store concept is the same as what Apple is trying to do. Increase your foot traffic and sales will go up. It’s as simple as that. Even when people have no intention of purchasing anything when they visit your store, they often do buy something anyway just on impulse. I’ve personally calculated the statistics on these impulse sales by shoppers who came in just to browse and it was a nice uplift. Stuff like gum, T-shirts, or Coke were all high-margin sellers for us. Small dollars at first but that browsing often led to larger purchases on future visits like boats or ATVs. I know because I tracked these people. That’s why big retailers love those loyalty programs, and are wary of Apple Pay, but I digress.

​Cabela’s eventually retreated somewhat from the destination store concept due to the sheer expense. Unlike Apple, they had to borrow money to build their stores and they wanted to build as many stores as they could so they cut their size down to about half of what they used to be. They tried to balance having an attractive enough store that foot traffic didn’t decline without having to spend more than they needed to. This boosted their dollars per square foot.

​Which brings me back to Apple.  Apple seems to be moving in the opposite direction of Cabela’s. There’s a lot of similarities between Apple and Cabela’s stores. They both sell premium products to a crazed fan base that is willing to drive hours to visit their stores. However, they are different in one key respect. Cabela’s started with stores too big and moved smaller. Apple started too small and is moving to get bigger.
Apple already had the sales per dollar square foot metrics right where they wanted. But it now looks like they’re trying to increase foot traffic even more outside of their prototypical fan base. But how do you do that when you sell relatively little that non-Apple customers would want?
Cabela’s would get a lot of non-Cabela’s customers visiting their stores for the first time because loyal customers would bring visiting friends and family to the store. You know how it is when you have a house full of family over for the holidays and you’re itching to get out of the house for a while? These visiting in-laws or friends would have a great time visiting our store and often become new repeat customers. 
​I think this is ultimately Apple’s aim for the new Town Square concept.  They want current customers to invite people who wouldn’t normally ever set foot into an Apple Store. Apple doesn’t have fish tanks or gun museums but they can offer a classy place with ambiance as a place to sit and rest in a busy mall or downtown city square. Once these Windows and Android customers pass through those big glass doors they’ll get exposed to the best that Apple has to offer. And remember, Android customers have no equivalent to the Apple Store. If an Android user gets invited into an Apple Store by an iOS user to use the restroom and just sit and chat they are going to be exposed to the Genius Bar and the latest Apple Tech. I kind of hate to use this analogy but it’s similar to pastors encouraging their flock to invite their friends and neighbors to church.
The old Apple Stores were the opposite of Cabela’s in that they focused too much on sales per square foot to current Apple customers. People with retail experience can now see that Angela is trying to balance things by also focusing on a “sales funnel”. The sales funnel is the concept of increasing overall foot traffic of non-customers because a certain percentage of those become repeat customers.
I should note that investing in your retail sales funnel can be an internally contentious issue within a corporation. There often aren't concrete metrics which quantify the benefits of the sales funnel.The finance group may cast a dubious eye on what they see as frivolity and the Cabela’s retail group had to defend their concept on a regular basis. Cabela’s move to smaller stores is one stage of a long battle.
​But wanting people to say “Hey, lets meet at Apple” and people actually doing that are two different things. Will it work? Will current Apple customers invite their friends and family to go hang out at Apple Stores? I guess time will tell. I know this, if you think it’s hard to get people to click on your online ad, imagine how hard it is to get them off their couch, put their shoes on, and drive many miles to your store. It’s not easy. But I also know, outside of restaurants and gas stations, there aren’t many other places to go if you’re traveling.
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<![CDATA[Apple’s Stainless Steel LTE Apple Watch Sold Out In Under 5 Minutes]]>Sat, 16 Sep 2017 02:54:03 GMThttp://perezonomics.com/home/apples-stainless-steel-lte-apple-watch-sold-out-in-under-5-minutes
Last night, Apple’s (AAPL) pre-order system went live for their new Series 3 Apple Watch. I thought it was probably unnecessary for me to set my alarm for 2 am in order to get in my order, but I did it anyway, just in case. It turns out that it was a good thing I did. I wanted the stainless steel LTE model with the white sport band and it sold out in under five minutes.
I was surprised that the stainless steel version sold out so quickly though because I figured that most people would buy the aluminum Apple Watch.  Either Apple really scaled back production on the stainless steel or there’s a whole bunch of former aluminum Apple Watch owners who decided to upgrade this time around. 

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<![CDATA[The Electric Vehicle Evacuation Nightmare]]>Sun, 10 Sep 2017 12:58:26 GMThttp://perezonomics.com/home/the-electric-vehicle-evacuation-nightmare
​As I watched the news coverage on the long lines of people trying to get gas on their way out of Florida I wondered how things would be far worse if everyone was driving electric cars. Tesla’s range increase notwithstanding, it would have been pure chaos.
​First, you can comfortably gas up an average vehicle in under ten minutes. If you go inside to pay and use the restroom you could spend more time in the store than at the pump. What would happen if everyone needed an hour to top off their battery at a recharge station? The already massive lines would be at least six times longer.
Second, electric cars have a much shorter range in comparison to gas vehicles. Getting 200 miles per battery charge in an electric vehicle is considered good. Just about any car gets over 300 miles and over 400 miles in larger vehicles or trucks with big tanks isn’t uncommon.
When it comes to mass evacuations, the combination of shorter ranges and longer recharge times makes electric vehicles a total nightmare.

Say what you will about gasoline engines, but refilling them with liquid power is almost miraculously fast. What drives the adoption of new technology is leapfrogging the old tech in terms of convenience. When electric vehicles can do that is when they will go mainstream. 
What is needed to make electric vehicles a viable mainstream product is some sort of embedded charge capability into the roads. At that point, driving an electric vehicle makes the thought of stopping at gas stations look antiquated and a huge inconvenience. Further, evacuations would be much easier since there would be no need for fuel stops or worries about gas shortages.

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<![CDATA[Hurricane Relief In the iPhone Age]]>Sun, 10 Sep 2017 11:56:43 GMThttp://perezonomics.com/home/hurricane-relief-in-the-iphone-ageMoving People vs Moving Data: What Saves More Lives?
​Much has been said about the “Cajun Navy” and how they did an amazing job using their iPhones with aiding first responders with evacuating flood victims. There are a lot of people alive today who wouldn’t be otherwise if it wasn’t for this massive community effort. 
Zello was their app of choice for communications in the last couple of years. Reporting in August 2016, David Morris of Fortune Magazine attributed this civilian corps’ effectiveness during unprecedented flooding in Baton Rouge last year to the rise of technology.
Again this year, during Hurricane Harvey rescue efforts, the Washington Post writes about how this app came into play:
The app allows flood victims and rescuers to communicate instantly. It also allows both groups to post voice messages to specific channels that have been set up to aid people seeking assistance, such as “Texas Volunteer Rescue/Support” and “Harvey Animal Rescue” and the “CajunNavy,” which has nearly 25,000 users.
Over the past week, Moore said, Zello usage has increased twentyfold. The number of user sessions increased 600 percent over the past week, with the amount of time users in the Houston area were on the app increasing to 22 minutes, Moore said. –Peter Holley, The Washington Post
Modern technology makes it easy disconnected strangers to coordinate their efforts quickly. Hurricane Harvey was the first major hurricane to hit the United States in the age of the smart phone. The Cajun Navy made full use of the data available to cover large areas as efficiently as possible. 
Moving people is critically important, and probably nothing makes that point more than a mass evacuation. But what I’ve been arguing for a long time now is that we’ve solved that problem a hundred years ago. All the technological improvements coming are only changing how we do it or how much it costs.
Moving people gets all the glory, but when it comes to the really consequential things in life, it is moving data that is impacting the world in far more profound way. Connecting people with data in new ways is changing the world.
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<![CDATA[I'm More Excited About Upgrading My Apple Watch Than My iPhone]]>Sat, 09 Sep 2017 14:28:20 GMThttp://perezonomics.com/home/im-more-excited-about-upgrading-my-apple-watch-than-my-iphoneNo iPhone Trumps a Smaller iPhone
​If it wasn’t for the rumored new LTE Apple Watch (AAPL) I’d be more excited than a class-action lawyer suing Equifax for the rumored new bezel-less iPhone. 
My biggest gripe with my iPhone 7 Plus is basically just the sheer size of it. Don’t listen to all the people who say that you get used to the size after a few weeks. It’s not true. A few weeks later, it still won’t fit in some pockets, it still feels too heavy on a run, I still can’t reach parts of the screen with my thumb, etc. What they really mean to say is that you get numb to complaining and just live with its girth. You simply learn to work around the inconvenient size. But it never ceases to feel inconvenient. Kind of like getting used to wearing jeans that now fit you too tight.
So you’d think I’d be excited at the prospect of having a similar sized iPhone 7 Plus screen in a smaller body right? Well, yes, I would be. But I get a lot more excited about not even having to carry my iPhone at all. An LTE Apple Watch would give me that. The size of my 7 Plus is most inconvenient when I’m exercising. What would be better than leaving my iPhone at home or in my locker? You don’t need a big screen when exercising. It’s not like you’re going to catch up on the news while out on a run or in between sets. You just need to be able to get any urgent messages or call for emergency services if you need to.
Or how about those times when you leave the house and you later realize that you left your iPhone on the kitchen counter? I’m OCD so this never happens to me but it happens to my wife all the time. And when it does, I wish her Apple Watch had cellular capabilities so that I could still message her that little Susie, who’s she on her way to pick up, just called and said that she doesn’t need a ride after all.
Another thing that makes the Apple Watch more exciting to me than the iPhone is that the Apple Watch is still in the awkward early stages where each iteration brings huge performance gains. We used to see this early in the iPhone days when going from the iPhone 4 to 4S to 5 etc. Every new model felt so much faster and we appreciated that. I haven’t had that feeling since the iPhone 6.
But the Apple Watch Series 2 is still slow and laggy. Not as slow as the original but waiting 5 seconds for an app versus 15 seconds still sucks. I use my Series 2 all the time via Siri because even with a 5 second lag time it is still way more convenient than pulling out my iPhone while I’m out running or walking through the mall. So unlike the iPhone, performance improvements on the Apple Watch are going to be noticeable and appreciated.
I’m most excited about upgrading my Apple Watch so that is going to happen within seconds of the order window being opened. The iPhone? Don’t know yet. I’ve basically decided it depends on the camera. If the camera blows me away, I’ll upgrade to the best iPhone regardless of cost. If Apple decides to hold off on big camera upgrades until the next version, than I’m sticking with my 7 Plus. The screen quality, sound volume, and performance of my 7 Plus are all amazing. I kind of fear that Apple will hold off on big camera improvements until the “S” version appears next year.
Now if the Apple Watch doesn’t get LTE capabilities as rumored, then I’m upgrading to the new iPhone for sure. Because I need a smaller phone if my watch can’t serve my communication needs.
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<![CDATA[Apple Needs Its Own Display Company]]>Fri, 08 Sep 2017 02:02:44 GMThttp://perezonomics.com/home/apple-needs-its-own-display-companyWhy Make Displays Cheaper for Everyone Else?
​The Verge is reporting that Samsung has Apple (AAPL) under a barrel when it comes to pricing on their new iPhone OLED displays. Which strikes me as accurate because no one else can deliver on the scale that Apple needs and Samsung knows it. 
But if Samsung is truly milking their position as Apple’s sole supplier they could end up killing the goose that lays the golden eggs. The more that Samsung charges, the more attractive that investment in an alternate supply looks to Apple.
When Apple financial analysts construct a case to invest in another display company or even purchase one, they juxtapose that investment with the current state. The higher the prices that Samsung charges, the shorter the payback period to Apple.
Further, Apple finds itself in a rather unique position when it comes to sourcing components. For most companies, it would be much more cost efficient to purchase components from an outside party that specializes in that component. For Apple, I wonder how true this is.
Normally, an outside party is able to spread their R&D and fixed costs to many customers thereby giving lower prices to all. But Apple has the largest single smartphone platform in the world. Even though the Android OS has a much larger market share percentage, it is split between many different brands. No single brand, even Samsung, has the concentrated volume that Apple does.
So when Apple throws an enormous amount of volume to a supplier like Samsung, they are getting a smaller benefit than all the other customers who may be using Samsung. Apple finds itself in the position of shouldering much of the fixed costs for everyone else. Why continue doing that? Samsung could even be shifting it’s overhead costs to Apple and in the process allowing Samsung Mobile to get  lower component prices.
If Apple were to invest in an alternate supply of OLED Screens it would have a double benefit to Apple. First, they’d get a better price than what Samsung is giving them. And second, Samsung phones would probably become less profitable due to shouldering more of the fixed overhead costs and R&D. It would be like scoring a touchdown that also deducted points from your opponent.
Apple sells more high-end phones than anyone else in the world. At this point, there is no reason for them not to invest in their own display company or for any other component that has a competitive advantage. They simply make those components more accessible to their competitors. It’s the same logic that drove them to create their own CPUs and now GPUs.
There would be a much more direct financial case with investing in a vertical supply stack than there would ever be in investing in an Apple car. Apple financial analysts could fill spreadsheets galore with financial modeling that shows where Apple would get their money back and then some. But investing in an Apple car? Not so much. Not that there wouldn’t be a return at all. But it’s highly doubtful that the magnitude of the return would even be in the same ballpark. It’s more a question of opportunity cost and priorities.
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<![CDATA[Now Photographers Are Discovering the iPad]]>Sat, 02 Sep 2017 20:37:56 GMThttp://perezonomics.com/home/now-photographers-are-discovering-the-ipadWhen iPads Are More Convenient
​How better to kick off Labor Day weekend than a discussion on how to make your work both easier and more enjoyable? Writing for Fstoppers, Alex Cooke highlighted a great video on how a professional photographer has stopped traveling with laptops and now prefers to use Apple’s (AAPL) new 2017 12.9” iPad Pro. 
Using an iPad Pro as Part of a Photography Workflow
I also find my 10.5” iPad Pro more convenient than using my laptop at work. My iPad goes with me to my meetings instead of my laptop so that I can take handwritten notes. Unlike a notebook, synchronizing these notes to my iPhone makes sure that they are always with me. When I go out into the plant, I can snap photos that can be inserted into my notes or sent to my colleagues with arrows and instructions.
But I’m an accountant and blogger. My work isn’t exactly what you’d call “creative”. The guy in the linked video is a part of what I thought might be one of the later groups to be open to the iPad, photographers. I figured that the combination of software and need for big processing power would preclude photographers from switching to iPads for a while longer. I thought wrong.
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<![CDATA[Tim Cook on the Moral Responsibility of Apple]]>Thu, 31 Aug 2017 00:01:10 GMThttp://perezonomics.com/home/tim-cook-on-the-moral-responsibility-of-appleAs Opposed to What? 
​In an interview with the New York Times this week, Tim Cook brought up his belief that Apple has a “moral responsibility” to be a force for good wherever they do business.
​ “The reality is that government, for a long period of time, has for whatever set of reasons become less functional and isn’t working at the speed that it once was,” he noted. “And so it does fall, I think, not just on business but on all other areas of society to step up.”
While I agree with Tim Cook, I find this statement a little unnerving that he even made it. What is Tim Cook’s view on capitalism? Apple has a moral responsibility as opposed to what? Or who? Does he believe that serving society and the shareholders are separate aims?
It’s at this point that I need to bring up my annual Walter Williams post on the morality of capitalism. There is no more moral system in the world. The problem is that there are many immoral people.
Money is a measure of man’s service to his fellow man. 
<![CDATA[HP Should've Never Split]]>Sun, 27 Aug 2017 12:30:47 GMThttp://perezonomics.com/home/hp-shouldve-never-splitThey Had What Gateway Craved...and Threw It Away
​Fortune writes this week about what’s happened to HP after they split up their business a couple of years ago.
In 2015, in one of the biggest corporate breakups in Silicon Valley’s history, the roughly 75-year old Hewlett-Packard Co. cleaved itself in half. Hewlett Packard Enterprise, or HPE, would handle data centers, software and services. HP Inc. would take the runt of the litter: printers and computers.
It was not a secret that HPE was the privileged offspring: Its charge was to help customers navigate the lucrative technology shifts around data, applications and cloud computing. And in case anyone didn’t quite get the message, HPE would be led by its famous chief executive, Meg Whitman. While both companies were under pressure, her businesses held more promise.
Nearly two years after the split—and with both companies preparing to announce quarterly earnings—those assumptions have been upended. It’s HP Inc. that has momentum: It has embraced higher-end products and expanded revenue despite lackluster spending on PCs and printers. HPE, meanwhile, has failed to meet sales projections for four consecutive quarters while over 60% of Wall Street analysts don’t see enough to recommend buying its shares. While HPE shares have outperformed HP Inc.’s since the split, they’ve switched course in the last 12 months, with the latter surging 29% and the former rising about 5.3%. – Fortune, 08/22/17
I was shocked that HP would split their enterprise and PC business the way that they did. Because of my experience at Gateway Computers I thought it was a bad idea from the beginning.
Gateway was constantly getting feedback from the sales group that we were at a disadvantage to the other PC companies because we didn’t offer enterprise services. Purchasing agents didn’t want to deal with one company for PCs and another for servers. They wanted one-stop shopping.
Some of my time at Gateway I spent as the chief forecaster for our enterprise server business.  Prior to the merger with eMachines, Gateway was unsuccessfully trying to get their enterprise business off the ground. It wasn’t because we wanted to sell servers. It was because in the eye of the customer, PCs and servers are components of a single product. They were trying to outfit a new building with “computer equipment”.
Maybe this is easier to explain from a furniture standpoint. When you need to outfit an office, do you consider office chairs and desks different products from cubicle walls or file cabinets? Not really. You expect to be able to buy them from the same company. Likewise with PCs and enterprise services.
Corporate buyers often started with who to buy their PCs from, and later added enterprise hardware. While enterprise hardware and services may have been higher priced, the sheer number of PCs that they required skewed the focus. The PCs were a funnel that led to enterprise sales.  The sum was greater than the parts.
Unlike Gateway, HP seems to have been able to maintain a head of steam with their PC business. It has been doing well for the past couple of years. However, similar to Gateway, HP may have found that PC sales were a catalyst for server sales. A catalyst that they’ve lost. Customers can now buy HP PCs and then go to Amazon for services. If you have to deal with a separate company, why not shop around?
HP is a cautionary tale in how things can go wrong with a corporate spinoff if you don’t understand what’s driving your customers. In Meg Whitman’s defense, she was against the split at the beginning. She later gave into pressure, and like a good soldier, made the case for the split. She should have stood firmly against the spinoff.
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<![CDATA[The Birth of the $1,000 Smartphone]]>Sat, 26 Aug 2017 13:45:27 GMThttp://perezonomics.com/home/the-birth-of-the-1000-smartphone
​Zach Epstein over at BGR.com makes the astute observation that industry watchers have been saying for years that Apple (AAPL) needed to make a low-cost iPhone or else they’d be doomed. Apple has done the opposite. 
Once upon a time, there was a large group of Wall Street analysts who would pound the table on a regular basis. They insisted that if Apple didn’t release an ultra low-cost iPhone to compete with the wave of dirt-cheap Android phones flooding the market, the company’s iPhone business would be doomed. Less than two years later, Apple released the iPhone 6 and iPhone 6 Plus – its most expensive iPhones ever — and it shattered revenue and profit records repeatedly in the quarters that followed. Oops.

Fast-forward to this week, and the naysayers have reemerged, this time focusing on the iPhone 8 and Galaxy Note 8. The latter was unveiled earlier this week, and it carries a price tag of between $930 and $960 depending on where you buy it. The former, Apple’s iPhone 8, is rumored to start at $999 for the entry-level model with 64GB of storage. —Zack Epstein, BGR.com

Well, the battle is over and the results are in.
On one side were those who said that software platforms would make hardware irrelevant. The implication was that as hardware faded in importance as a selling point the industry would drift towards commoditization.  Average selling prices would fall and everyone would enjoy $99 phones because hardware didn’t matter.
On the other side, was me. Who said that powerful software platforms, even if they were cross-platform, increased the perceived value of the hardware. This would lead to a higher emphasis on quality, durability, and new hardware features. The combination of new technology and more powerful software is allowing customers to justify spending more on these pocket devices. I predicted that prices would go up.
I don’t possess any special wisdom or inside information. It’s simple business that has been observed in other industries for decades. As you increase the perceived value, customers are willing to pay for more high-end features.
As the power of moving data grows, it will trigger new hardware enhancements on the premium end. Adding cameras, lasers, and new sensors all adds cost. And this is just getting started. AR is just getting launched and health monitoring is going to be huge. At first, people may think that they don’t need these fancy new features but what happens when all of your friends are playing connected augmented reality games online?
Cross-Platform software has not led smartphones prices to go lower. But they are now at their highest levels ever. 

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<![CDATA[Thoughts on the iPad’s New iOS 11 Dock]]>Thu, 24 Aug 2017 15:08:21 GMThttp://perezonomics.com/home/thoughts-on-the-ipads-new-ios-11-dockCould We Get a Mini-Carousel?
​In July, Apple (AAPL) made a slew of iOS 11 changes that really improved the multi-tasking ability of the iPad. When I’m working on projects with my iPad there are certain apps that I use much more than the others. I’m now pretty happy with the ability to no longer have to hunt for these apps in the former big app carousel to the right that exists in iOS 10. 
But Apple also made a genius move with the dock that doesn’t exist in macOS. They created a small intelligent assistant section to the right that predicts what apps you also might want to use that aren’t in your pre-set dock. I’m not sure what logic it uses but I think for the most part it is the three most recent apps. This is better than the dock in macOS which only has static apps that you placed there.
But of course, there is always room for improvement. While I do like the intelligent assistance of the three apps to the bottom right, I still kind of miss the ability to swipe through the carousel of apps. It would be great if you could swipe back to the fourth or fifth app that I used.
The reason being that sometimes the app that I want is not in the dock. In those cases, I have to hit the home button and back out to the home screen. Normally, this is no big deal, but if you’ve already swiped up to your dock, it feels like a bother. Once I commit to getting my app from  the home screen, it seems like it would be quicker to flip through my “mini-carousel” to the bottom right. Even if it’s not quicker, it seems more satisfying to continue down the original path to find your app rather than do a u-turn and back out to the home screen.
Also, getting to my control center seems to take a lot more thought these days. Half the time when I want my control center, I only get my dock. I end up having to do a second swipe up on my dock to get the control center to finally come up. Getting to my control center no longer is as quick as it used to be.
I’d like it better if you split the swipe up into different actions for the left and right sides of your screen. If you swipe up on the left side of your screen, you get your dock. If you swipe up from the right side, you get your control center. I’m sure Apple probably has debated something along these lines and rejected the idea because it was too complicated. But I think in this case, it’s warranted.
Overall, I’m pretty happy with the new iPad changes in iOS 11. I’ve switched from using a MacBook to using an iPad for almost everything about two years ago. The benefits of using an iPad outweighed any inconveniences. However, now that the inconvenience factor is getting smaller, the iPad looks more and more attractive.
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<![CDATA[Is Apple “Diworseifying”?]]>Tue, 22 Aug 2017 01:54:49 GMThttp://perezonomics.com/home/is-apple-diworseifyingIs Original Content a Distraction?
​An excellent essay by Pantho Investments over at Seeking Alpha tackles head-on the issue of whether or not Apple (AAPL) is going through “diworseification”. The recent news that Apple is investing $1 billion dollars to create original content kicked off the discussion. Diworseification is a concept that Peter Lynch popularized in his 1989 book, One Up On Wall Street:
Instead of buying back shares or raising dividends, profitable companies often prefer to blow the money on foolish acquisitions. The dedicated diworseifier seeks out merchandise that is (1) overpriced, and (2) completely beyond his or her realm of understanding. This ensures that losses will be maximized.
Every second decade the corporations seem to alternate between rampant diworseification (when billions are spent on exciting acquisitions) and rampant restructuring (when those no-longer-exciting acquisitions are sold off for less than the original purchase price). —Peter Lynch, One Up On Wall Street, p. 148

It’s not uncommon for CEOs to be drawn to new markets or big flashy acquisitions that have nothing to do with their core business. But Apple getting into original content doesn’t fit that mold. For starters, Apple has maintained all along that their aim is for their devices to disappear so that all you see is the content that you’re after. Original content and iPhones go together like cars and roads or lamps and bulbs.
My problem with Apple’s billion-dollar investment is more along the lines of questioning whether it’s the most efficient way of getting quality content.
Netflix is churning out hit after hit in what has become a self-sustaining hit machine. The more eyeballs that they attract, the more that Netflix is able to predict what will become popular. Having good natural instincts on what your audience wants is invaluable. But combine that with analytical data that few of your competitors have, and you have a real advantage over the other geniuses in the industry.
The Netflix data warehouse and system is what I would have liked Apple to purchase. Not so much just the hit shows. Those shows are important, but the data and system are much more valuable.
Apple deciding to invest a billion dollars into original content is a big gamble. I’m not sure they truly respect how hard it is to create hit shows. Are they prepared to churn out ten shows to get 1 or 2 good ones? Nor do I think they fully respect how far behind they are.
This is why companies purchase other corporations. To gain a specific expertise that they don’t possess or to mitigate a lead that your competitors have. Of course, most management teams would rather build something from scratch. It’s cheaper and easier. But sometimes you don’t get that option.
An acquisition of an original content creator would help fulfill Apple’s purpose, not derail it.
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<![CDATA[Is the Amazon Echo a Russian Hacker’s Dream?]]>Sun, 13 Aug 2017 14:29:10 GMThttp://perezonomics.com/home/is-the-amazon-echo-a-russian-hackers-dream
​Writing for McClatchy, Tim Johnson laments that people seem to be too busy to care whether or not their Amazon Echo may be spying on them and how people could regret that one day.
In addition to how the personal data of consumers is used, a corollary is whether companies can keep the data safe, said James Scott, senior fellow at the Institute for Critical Infrastructure Technology, a Washington center that calls itself America’s cybersecurity think tank.

If U.S. adversaries hack databases containing consumer profiles collected and built up by data firms working with software companies, they could use the information to manipulate public opinion to stoke chaos, Scott said.

“What happens then is that nation states are able to fan the flame of alt right, alt left, Bernie Sanders supporters, Trump supporters, Hillary supporters,” Scott said, adding that a potential campaign could “fan the flame of distrust of the population against the government.” —Tim Johnson, McClatchy
I won’t buy any smart connected devices for my home unless they are Apple HomeKit certified. Why? Because Apple places a high value on security and forces their vendor partners to install special authentication chips on their devices. This is also one reason why HomeKit compatible products haven’t grown as fast as they have for the Echo. But to me, it’s worth it.
How secure are these Amazon Echos? Unlike Apple HomeKit devices which avoid the internet and use iCloud for sync, these Echos are sending data over the internet. How do we know that hackers couldn’t skim this data?
If you’re a politician, business leader, or a political journalist you should definitely not have an Amazon Echo in your house. The risk is too high. Even if Amazon had no intention of using that data, and that is debatable, how do you know that hackers aren’t going to break in?
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<![CDATA[A Venezuelan Bank Tops Apple in Terms of Market Cap]]>Sat, 12 Aug 2017 14:42:24 GMThttp://perezonomics.com/home/a-venezuelan-bank-tops-apple-in-terms-of-market-capDealing with Hyper-Inflation
​So for a brief period this week a Venezuelan bank was ranked above Apple (AAPL) in terms of market cap. That is just how far out of whack things in the socialist country of Venezuela have gotten. In a nutshell, oil revenues have collapsed and the nation is printing more money to avoid defaulting on their debt. The influx of new cash is causing massive inflation. 
I spent a lot of time in Venezuela in the late 90’s just before Hugo Chavez took over. Interest rates were low (under 20%), the economy was growing, and foreign companies like mine saw Venezuela as an attractive place to invest. Crime in Caracas was still rough though. I remember one morning one of our staff accountants was late for work because his wife had been car-jacked. He was following from behind and saw the whole thing happen.
My job was to help our Venezuelan subsidiary install their inventory cost system. It was an interesting assignment for me due to Venezuela’s hyper-inflationary history. This led us to not use a standard cost system as was the practice in the United States. Most people in American manufacturing have at least heard of the standard cost system, although, they may not fully understand what it means. Essentially, It means you put all raw materials purchased into your inventory at a preset standard cost regardless of what you actually paid for it.
So why would companies want to put material purchases into inventory at a cost other than what they paid? It’s a management tool that allows managers to gauge how good of a job they are doing with managing their purchasing function. If you negotiate a good price, this will show up in your variance to standard. Or conversely, if poor planning leads to purchasing smaller lots or alternate suppliers you could see higher prices than the standard. Managers also like these unfavorable issues quantified so that they have a target to chase for future improvements.
But a standard cost system only works if inflation is low. Otherwise the variance data as a management tool becomes meaningless and you start to undervalue your balance sheet.
When I installed a cost system in our Venezuelan subsidiary I use a FIFO system. Instead of putting purchases into inventory at a standard cost, we used the actual price paid. But when we sold that inventory, we used the oldest layer of inventory first. So it was a First-In-First-Out system. This kept our balance sheet accurate without having to resort to large inventory revaluation entries that can whip-saw the company. It also boosted profitability since it matched up older purchases that were at a lower cost with future sales when prices were higher.
I wouldn’t say that the FIFO system is better than a standard cost system. Different jobs require different tools and in a hyper-inflationary climate like Venezuela it works much better.
I remember while I was in Venezuela listening to our local staff talking about this brash new politician Hugo Chavez. He was a Bernie Sanders populist type who talked about trying to bring the wealth down to the people so that everyone could enjoy it. He demonized the rich corporations and the wealthy politicians who he accused of being the minions of business. Unfortunately, many of the citizens of Venezuela fell for his fiery rhetoric.
Twenty years later we can now judge the fruits of Chavez’s efforts. He failed at getting everyone in the country to share in the wealth. But he succeeded at income equality. Everyone is now poor.

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<![CDATA[What Happens to Samsung If North Korea Destroys Seoul?]]>Thu, 10 Aug 2017 03:07:55 GMThttp://perezonomics.com/home/what-happens-to-samsung-if-north-korea-destroys-seoul
​I’m not sure why, but it seems that there isn’t much being written about what would happen if Samsung’s headquarters is destroyed. Seoul sits only 35 miles from North Korea, and technically, the Korean War never really ended. North Korea has been steadily building their armaments so they can launch thousands of rockets at Seoul on a moments notice. They’ve been preparing for decades to wipe out as much of Seoul as possible in a thirty minute window. They know they’d lose any war fairly quickly so the threat of leveling Seoul in the first 30 minutes is their way of holding hostages. 
One thing is for certain, if war ever breaks out between the United States and North Korea. There will be death in South Korea unlike the world has seen since World War II. The shockwaves of this conflict could send the world economy into a tailspin from which it would take years to recover.
Samsung is headquartered in Seoul. What would happen to Samsung if the majority of their executive management team was wiped out in one fell swoop?   Do they have any manufacturing facilities there? Would worldwide supplies of processor chips and displays be set back for years? What products wouldn’t exist if Samsung manufacturing goes down?
This is why Apple doesn’t like to stick all of its eggs in one basket when it comes to critical components. They split their chip orders between Taiwan Semiconductor and Samsung or split their displays between Samsung and LG, and so on. It’s kind of like not investing too heavily in one sector of the stock market. You try to diversify your risk. Even if you could save a bit more money by throwing all of your volume to one company, splitting your volume between two could prove to be immensely valuable in the event of some kind of disaster.
Hopefully, the latest round of UN sanctions will finally put the hurt on North Korea. Amazingly, both China and Russia voted for them. Kudos to Donald Trump for this major accomplishment.

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<![CDATA[Moving Data vs Moving People]]>Mon, 07 Aug 2017 00:16:05 GMThttp://perezonomics.com/home/moving-data-vs-moving-peopleHow Connecting People Can Reshape Society
CBS had an amazing story today illustrating how the future lies in the power of moving data. Connecting people in new ways that were impossible only a few years ago is what is changing society. Not physically moving people to be in the same room. 
Littera is one of the founders of a virtual currency called Sardex. It's a network of companies that exchange goods and services among each other in Sardinia without the need for cash. 

This stunning Italian island seems far from Wall Street. But the 2009 financial crisis rocked this picturesque place. Companies couldn't get credit and went out of business. Unemployment hit 18 percent. 

Littera and a group of friends hoped they might spur growth here by developing a system that would allow businesses to earn and spend without relying on the euro, or on banks that wouldn't lend. –Seth Doane, CBS Sunday Morning
Be sure to watch the video which is much more informative than the small sample of text on the web page. I watched it earlier today and it was amazing. The whole time I kept thinking about how NASA internally states that the power of moving data greatly outweighs moving people. 

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