<![CDATA[Perezonomics - Home]]>Sun, 25 Jun 2017 14:14:51 -0500Weebly<![CDATA[Former Apple Product Design Engineer Discusses Manufacturing at Scale]]>Sun, 25 Jun 2017 12:40:30 GMThttp://perezonomics.com/home/former-apple-product-design-engineer-discusses-manufacturing-at-scaleAnd Why Tesla's Model 3 Will Be a Disaster
If you’re either a manufacturing or Apple wonk you should check out Leander Kahney’s interview with former Apple product design engineer, Anna Katrina Shedletsky.  The latest podcast of Apple Chat spends time with the now co-founder of Instrumental discussing all manner of hardcore manufacturing science. Her views were formed from spending a lot of time in China getting the iPod and Apple Watch manufacturing lines validated. Anna could easily be a professional podcaster. She's a great communicator without getting too dry.
Regarding Factory Automation
I particularly appreciated some of her comments towards the end where, like me, she hopes that the public doesn’t grow to fear factory automation. One of the reasons that I like to write about manufacturing robots in my blog is because it is such an overwhelming positive trend for both business and society in general.
 
Large Fortune 500 companies that can afford to invest in factory automation are, by far, the minority of job providers. As these large companies automate they will focus on an ever more narrow product band. That leaves more opportunity for the smaller non-automated companies to scoop up the lower volume product lines. Meaning that they have to hire more people.
 
Are people at large companies going to lose their jobs? Yes. Are smaller companies going to have to hire more people? Yes. This is why it is so important for governments to remove barriers to starting new companies or lowering the tax and regulatory burdens on medium-sized companies. We need them to pick up the slack.
 
The net result is that everyone pays less for those products which have been automated.
 
I also enjoyed her clarification regarding the controlled environment that engineers crave. Having spent my entire career in manufacturing I can attest that this controlled environment is always at odds with the freewheeling wild west that actually occurs out on the plant floor. Watching these two groups is like observing a married couple where one is a slob and the other an OCD neat freak.
 
Why Tesla Is a Risky Bet
Anna also spoke some about the science of building quality products at scale.  This is not an Apple-specific process and is one that I’ve observed at the various companies I’ve worked at. It involves “soft tooling” or fine tuning your one “golden line”. Once the process engineers sign off that your master line can produce X number of units per hour without quality problems, the manufacturing group is off to the races with the ramp up. This is how world class manufacturers do business. You take the time to get things right before you fire up countless lines that start churning out junk.
 
Even I, with my low expectations of Tesla, was surprised recently to see the headlines that Tesla (TSLA) had decided to skip the step of fine tuning their Model 3 production master line. Why? Because they are 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.
 
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 terrorist attacks happened anyway. It is hard to quantify all the issues that you did prevent by doing the master line and Tesla should have spent more time in validation, not less. 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.
 
This is part of the reason why I wrote The Tesla Bubble. The stock has been going up and up all year because investment firms and pension funds are trying to ride the momentum. But anyone who takes a closer look at this company can see it’s riddled with problems. Some of which haven’t fully emerged yet.
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<![CDATA[Who Is Most Favored Now?]]>Sat, 24 Jun 2017 13:55:23 GMThttp://perezonomics.com/home/who-is-most-favored-nowIf Apple Was All About Profit the iMac Pro and Mac Pro Wouldn’t Both Exist
The creative class of Mac users no longer has any reason to throw stones at Apple. In the span of only a few weeks they’ve ascended from lonely orphans to most-favored status. 
​For a few years now, the creative power users who purchase Macs have watched Apple lavish the iPhone and iPad side of the business with plenty of time and attention. Meanwhile, their Macs sat largely unchanged and macOS received incremental improvements…which made it more iOS-like. It looked like the iPhone and iPad were the golden wunderkinds who could do no wrong.
 
But everything changed in April of this year when Apple revealed at their journalist round table that they were working on a totally redesigned Mac Pro. Then in June they took the cover of the hottest desktop computer ever, the iMac Pro.
 
All at a time when the market for desktop computers is shrinking. You could even make a credible argument that the future of the laptop is in doubt. And yet, Apple is forging ahead with some incredible sounding hardware for this small market.
 
But it’s likely that the price on both the iMac Pro and new Mac Pro will shrink what was already a small market and make it even smaller.  Further, these devices will segment this small pie into those who want future upgradability and those who don’t.  This means each model will have less buyers than they would have had otherwise if the other model didn’t exist. The net result is smaller profit for Apple.
 
If Apple was only about the bottom line, both of these models wouldn’t exist simultaneously. They’ve doubled their development costs and cut the units that will carry their fixed costs in half. But in this case, I think Apple is OK with that. It’s hard to put a value on customer goodwill and positive press but Apple seems to be reaping both in spades.
 
So which market is really getting special treatment from Apple? Sure iOS gets a lot of investment but the financial models all point in that direction. Apple has to do this. The desktop monsters that Apple is about to deliver seem to be getting lots of investment in the absence of a concrete financial reward. Apple doesn't have to do that.
 
Like a parent reassuring his adopted child with the words “I had to have them, but I chose you”. The same dynamic is at work here. 
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<![CDATA[Where Is Siri's True Home?]]>Thu, 22 Jun 2017 02:13:34 GMThttp://perezonomics.com/home/where-is-siris-true-homeHomePod vs Apple Watch
Since Apple’s WWDC (AAPL) unveiling of their upcoming HomePod, many tech pundits have been reading a lot into the fact that Apple put all their focus on the HomePod’s sound quality and not so much its Siri utility. But there may be more to the story than just Apple deciding that “Siri isn’t much improved so let’s hide that fact.”
Many of Apple’s customers already have access to Siri on multiple devices today. Optimally when you say, “Hey Siri,” the device that is the most convenient for you will be the one to respond. But is that going to be the HomePod? I would guess that, for those who have one, it would be the Apple Watch.
 
If and when Siri becomes the supercharged intelligent assistant that everyone wants, I would guess that the Apple Watch is going to be where Apple would want to spotlight it. The Apple Watch is going to have access to much more data than the HomePod. It has all your credit cards, can verify that you are you, knows your health stats, etc. Further, it can go wherever you go and isn’t limited to a specific place.
 
But the problem with the Apple Watch is two-fold. First, the Apple Watch has a tiny battery so it isn’t exactly always listening. You have to engage the screen first to relay your Siri command. And second, it has issues distinguishing your voice if there is background noise. But I think that once Apple sorts out the battery life and microphone issues, Apple will advertise the Apple Watch as the best place for Siri. Not the HomePod or the iPhone.
 
I’m not so sure that even if Siri was new and improved that Apple would want to showcase the HomePod’s Siri capabilities because that isn’t the best user-experience for Siri. Just like Apple didn’t dwell on Siri for the Mac at WWDC even though it exists there. Siri is available on the Mac if you happen to need it, but that’s not why you would buy a Mac. Same with the HomePod. Siri is there because you’ll need it to request your music, but you wouldn’t buy a HomePod just to access Siri. You would use Siri to access your HomePod to access your music or because you don’t have any other device handy.
 
Now the Apple Watch is the device I’d specifically recommend people buy to get access to Siri. The Apple Watch is Siri. I use Siri all the time to send text messages, write notes, set reminders etc. Siri is a major selling point for the Apple Watch and by far the place I use Siri the most. I’m not buying the argument that the reason iOS users are buying Amazon’s Echo is because Siri is too dumb. For one thing, the Echo struggles all the time with simple queries and is far from perfect. I would also point out that Google Assistant has superior intelligence to the Amazon Echo, but Android users are purchasing the Echo as well.
 
Google has spent a great deal of time and treasure in the area of intelligent assistance only to see Amazon swoop in and steal their thunder with the Echo. Why? Was it because Amazon can guess what you want better than Google? Doubtful. I’ll readily concede that Google probably has the best personal intelligence in the world when it comes to knowing what you might want next. No, the Echo jumped to the lead because in this case, hardware trumped software. Amazon’s Alexa doesn’t have to worry about battery life, so it can always be listening; and a countertop device has more capacity for multiple microphones than a mobile device so it can better pick up your requests.
 
I’m not so sure that Apple’s lack of spotlight on Siri with the HomePod means that they’re not making progress in that area. The deeper issue at stake is that Apple really didn’t wanted to make an Echo-like competitor because they felt a countertop Siri device was redundant.
 
The iPhone is the preeminent communications device. The Mac is the preeminent computing device. The iPad is the preeminent entertainment device. The HomePod will be the preeminent music device. But the preeminent Siri device is the Apple Watch and always will be.
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<![CDATA[An Apple HomePod This Year, Apple Camera Next Year?]]>Sun, 18 Jun 2017 11:47:27 GMThttp://perezonomics.com/home/an-apple-homepod-this-year-apple-camera-next-yearOne Can Dream
​Recently while speaking about Apple’s (AAPL) upcoming HomePod, Phil Schiller made the comment that Apple had so much in-house speaker talent that it was exciting to turn them loose on a new project. And this makes sense considering that these audio specialists must have spent countless hours trying to get tiny speakers in iPhones, iPads, and MacBooks to sound good. They know a thing or two about generating big sound out of relatively small speakers
​Early reports regarding the sound quality of the HomePods are that they do indeed sound great. I’m not too surprised. The HomePod is still relatively small as far as tabletop speakers go but it’s huge compared to iPad speakers.
 
This whole thing with the HomePod is reminiscent of something I had written earlier, an Apple DSLR camera. Last year Apple’s Graham Townsend told CBS News that they had 800 people who worked exclusively on the iPhone’s camera.
 
I doubt that there is a financial case to be made for Apple to get into a shrinking market like DSLR camera’s. But I discovered that I enjoy photography because of my iPhone and working with photos on my iPad is a lot of fun. So I wonder what Apple could accomplish if they were to apply their optics knowledge to a device more than 7mm thick? 
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<![CDATA[The Tesla Bubble]]>Sat, 17 Jun 2017 17:27:45 GMThttp://perezonomics.com/home/the-tesla-bubble
​Perhaps no company on the stock exchange exemplifies a bubble stock more than Tesla.  To the unemotional eye you can see a poorly managed company which makes mediocre products. And like a teenager about to get swindled by a smooth talking used car salesman, investors buy the story that this clunker could be highly valuable one day.
Even if Tesla made high quality products, there is one thing that they don’t have which all of their main competitors do, a subsidizing business. Audi, BMW, and Mercedes Benz all have an advantage over Tesla. They are raking money hand over fist on gasoline cars and can afford to work on electric cars…no matter how long it takes.
 
You can see the same principle at work in all industries. This is not a peculiarity of the automotive world. Looking at the PC market, for example, One of the things that hurt us at Gateway was the fact that we didn’t have a robust server or printer business to subsidize our PC sales. I’ve seen firsthand how not having these cash cows can put a company at a real disadvantage. HP and Dell could afford to sell computers at break even or less whereas Gateway couldn’t. HP and Dell are still around, Gateway is not.
 
Most of the stories written about Tesla are by clueless writers who don’t know how to properly evaluate a business or analysts with a hidden agenda. There is an ever refreshed stream of puff pieces written about Tesla that try to frame them in the best possible light.
 
If you don’t believe me, go do a search on Amazon or iBooks for all the books written about Tesla Motors. There aren’t many but they are 100% uncritical propaganda with the exception of one. That one would be my new book, The Tesla Bubble.
 
If the coverage of Tesla had been more balanced I would have never written this book. But the coverage was so wrong and so pervasive that I felt someone had to write the other side of the story.

Available on iBooks now ---> The Tesla Bubble
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<![CDATA[Should Apple Offer the Apple Watch to Android Users?]]>Sat, 17 Jun 2017 14:28:22 GMThttp://perezonomics.com/home/should-apple-offer-the-apple-watch-to-android-users
You always hear people say that Apple should make everything cross-platform. These people make that request because it’s good for them. They want the freedom to move back and forth between platforms without having to give up any of their accessories. And Apple would rake in the cash from all those Android users who would start buying Apple Watches and AirPods. Everyone’s happy, right?
Not necessarily. First, one major question needs to be answered. Are Apple’s products iPhone accessories or are they a stand-alone business? Because I’ve gone through this drill countless times, I can imagine what Apple is doing, or has done, behind the scenes.
 
A big part of my job is evaluating whether or not it makes sense for my company to move into a new market. These types of analysis are approached in a similar manner to a medical drug trial. In a drug trial, you compare the experimental drug to a control group taking a placebo. This way you can measure the change from doing nothing at all and remove the placebo effect as a variable.
 
In the case of a financial analysis, the control means a financial scenario where you don’t expand into the new proposed market. When Apple’s executive management considers whether they would push to make the Apple Watch Android compatible they would commission their financial analysts to present to them two scenarios side-by-side with no other variables in the mix. On the left you would have their current strategic plan for the next five years and on the right you would have the added revenue and opportunity cost of expanding the Apple Watch to Android.
 
I suspect that the financial analysis for making the Apple Watch Android compatible is going to be similar to making a low-cost iPhone. They both would both bring in additional revenue but at what cost to the premium iPhone market?
 
Apple is painstakingly creating what I refer to as their “Hardware Kingdom". The Apple Watch, AirPods, and soon the HomePod all work together to create an iPhone experience that you can’t get on Android. And judging by the amount of Android switchers that Tim Cook loves to bring up, it appears to be working.
 
So Apple probably has a five year plan that includes millions of new high-margin iPhone sales to future Android switchers. If the Apple Watch product manager comes before Tim Cook with his idea to expand into Android, his analysis will have to include the impact of less Android switchers coming to the iPhone over the next few years. His proposal will need to show that Apple can gain more net profit by exchanging relatively few high-margin iPhone sales for exponentially more Apple Watch sales to Android phone users.
 
I think that is going to be a tough case to make. I’ve long suspected that the Apple Watch isn’t a very high-margin product. So to de-couple the business case for the Apple Watch from the iPhone poses an immediate problem. Where do they bring in more revenue? Services? Will sales of the Apple Watch lure millions of more Android users to sign up for Apple Music? I doubt it.
 
But what if the Apple Watch could one day become the centerpiece of mobile communications? Could it serve as a sort of Trojan horse into the Android arena? No one makes a better wearable than Apple. If a bunch of Android users were to start wearing the Apple Watch for the health tracking benefits could they be lured into the Apple ecosystem by a fully independent cellular Apple Watch?
 
In the short term, if the Apple Watch is an iPhone accessory, it probably won’t ever make financial sense to work with Android. The Apple Watch exists to propel the iPhone to higher sales and steal Android customers. Allowing the Apple Watch to work with Android would short-circuit Apple’s growing hardware kingdom value proposition for the iPhone. But the Apple Watch as an accessory isn’t necessarily Apple’s long term plan for the Apple Watch. So who knows what may happen?
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<![CDATA[iPhone Notifications While Driving Aren’t the Problem]]>Fri, 16 Jun 2017 02:17:01 GMThttp://perezonomics.com/home/iphone-notifications-while-driving-arent-the-problem
​Apple (AAPL) announced last week that they were going to introduce a new iOS interface for the iPhone while you drive. A completely black screen with automatic replies to your friends that you are driving and can’t respond until later. This is a step in the right direction.
As a runner, my biggest fear for myself and my family while we’re out pounding the pavement, is that someone texting while they drive is going to swerve off the road and mow us down. I see people all the time driving with one hand on the wheel and the other on their phone. I can’t help but wonder what they’re doing that is so important? Checking their Facebook feed?

But the problem isn’t notifications. The problem is that people aren’t driving with their hands on the steering wheel and they’re responding to text messages. Apple’s response to this is that if they can’t see their notifications, they won’t be tempted to type a response. I suppose this is probably the best way to handle the situation if you know you have no self-control.  

For the record though, I don’t see reading occasional notifications as a problem. It’s no more dangerous than looking at billboards by the side of the road or turning your radio station dial. I see part of the problem is that people don’t take the time to mount their iPhone somewhere where they can see the screen without using their hands. This is why I’m peeved at auto manufacturers for not working with their customers by providing decent built-in mounts for their phones. 

People hear their notification sound and they can’t resist pulling their phone out of their pocket, purse, or cup holder to see what it was. By the time you are holding your phone in your hand you’ve already lost the battle. If you are holding your phone in your hand, you are much more likely to type a response.

If people would mount their phones on their dash so that they could see that the last notification was about JCP’s July 4th white sale that’s no big deal. Or even if that text is from a friend, if you have both hands on the steering wheel you’re much less likely to respond. 

I glad that Apple took a realistic approach with their new driving mode. You can setup various individuals as still coming through. If you want to see notifications from your spouse or boss than you still can. Even if you aren’t going to respond to a text from one of your VIPs right away, it’s nice to be able to think about your response. 

Apple’s new driving mode is step in the right direction but it may begin a new debate on freedom versus safety. Driving mode is a voluntary decision made by the user. I suspect it won’t be long before lawmakers start to push for compulsory driving modes that can’t be switched off.

Are iPhone Mounts Immoral?
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<![CDATA[What Separates the iPad from the Mac?]]>Fri, 16 Jun 2017 02:03:31 GMThttp://perezonomics.com/home/what-separates-the-ipad-from-the-mac
​After Apple’s WWDC unveiling of a slew of iOS 11 enhancements for the iPad I read more than a few snarky comments by journalists.  The jokes were along the lines of that what iPad enthusiasts really wanted all along was a Mac. If that is what anyone took away from the iOS 11 unveiling then those people misunderstand why people prefer the iPad.
​But what makes the iPad an iPad? I’ve never quite been on board with the school of thought that says that simplicity and focus is the reason. I can understand why someone would say that. Because it certainly is true that the simplicity of iOS forced you to focus. But to me that was always more of a consequence than a feature. I put up with the simplicity so that I could enjoy what I really wanted. 

1.    The iPad is Intimate
You interact with a laptop at arm’s length whereas an iPad gets brought into your circle of personal space. It's a question of intimacy. You might not think it’s a big deal but it is. Being at arm’s length is the difference between shaking the hand of a business acquaintance or hugging your spouse.
You can get cozy with an iPad in a way that you never can with a laptop. That has an effect on your brain that is almost below the conscious level. This closeness starts to engender a biased preference for a device that you associate with your favorite easy chair and a hot cup of coffee. 

2.    The Touch Interface
I love the touch interface of iOS. Ever since I first delighted in slide to unlock on the iPhone I’ve found a satisfaction in the various swipes and touches. 

But Touch is better on an intimate device than one at arm’s length so I’ve never desired Touch on my Mac. In fact, whenever I’m using my iPad with a keyboard and I have to touch the screen it reminds me why touch is so bad on a laptop and I wish my iPad had a mouse. 

I prefer editing photos on my iPad simply because it’s more enjoyable. If I’m writing on my Mac and remember that I need to edit a few photos I will literally slam my MacBook shut and reach for my iPad. Sitting in my easy chair and grabbing the corners to crop a photo with my finger feels more like fun, sitting at my desk on a Mac using a mouse it feels more like work. The whimsy interaction with the touch interface makes work more enjoyable and also feels more natural. 

For millennia artists have interacted directly with their canvas. If your painting needed a little more something in the dark sky you would painstakingly apply your brush directly to the canvas, adjusting pressure and speed as you go. The touch interface of the iPad seems more natural to me when I’m interacting with a photo. There’s no middleman, just you interacting directly with your art.

3.    The Apps
Even if you could remove the keyboard from a MacBook Pro and Apple added a touch interface you would have a hard time getting me to switch back. Mainly because of the iOS App Store. 

I love the fact that when I get a new iOS device I can conveniently load all of my apps from one single place. One of the things I hate about the Mac more than anything is how difficult getting my software back on it will be after starting over from scratch. To remedy that I stopped purchasing software that wasn’t on the Mac App Store. But unlike the iOS App Store, that means you might miss out on some of the good stuff. 

Even taking into account Mac software that isn’t in the Mac App Store, there are a lot of iOS equivalents that have no equivalent available for the Mac. For instance, I love how I can control my TV when I’m sitting with my iPad using the VIZIO SmartCast app or Apple TV app. If I’m sitting in chair with my MacBook that is not possible. And the list of iOS apps not available on the Mac goes on and on.

Conclusion
I didn’t see anything out of the WWDC that made the iPad less of an iPad. Anyone who thinks that the iPad became more like the Mac misunderstands why we like the iPad. Removing the keyboard allows the flexibility to use it as an intimate device when you want. And the combination of the touch interface and iOS apps makes work on the iPad feel more enjoyable. Kind of like grinding up vegetables and putting them into the mashed potatoes so that your kids will eat them. 

The iPad retained the big three items I enjoy about it and added some new tricks that were long overdue. I came away from the WWDC more than pleased with Apple's iOS enhancements for the iPad.
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<![CDATA[Google Moving To Blunt Apple's Processor Advantage]]>Thu, 15 Jun 2017 03:21:10 GMThttp://perezonomics.com/home/google-moving-to-blunt-apples-processor-advantage
​Variety is reporting that Google has poached one of Apple’s (AAPL) key chip designers.
 
Google has hired a veteran chip architect away from Apple and is now looking to build its own chips for future versions of its flagship Pixel phone, Variety has learned from sources familiar with the hire. Manu Gulati, who had been spearheading Apple’s own chip developments for close to eight years, joined Google in the last few weeks. He publicly announced the job change on his Linkedin profileTuesday morning, stating that he now works as Google’s Lead SoC Architect. -Janko Roettgers

I had written recently about how Apple’s chip advantage could grow into a real danger to Android. It appears that Google agrees with me.
 
For all of Google’s vaunted server power, there will always be a desire to do as much on the device as possible. Response times will quicker, downtime will be lower, and security is tighter.
 
Apple has outpaced everyone when it comes to designing powerful chips that sip power. Anyone can build a powerful chip. Building one that allows you to have great battery life is the trick. That’s like trying to design a V8 sports car that gets 50mpg.
 
And now Apple is rumored to be focusing on a new artificial intelligence chip that would do on-device services. I don’t blame Google for trying to go after Apple’s in-house chip talent. They need to get more aggressive to keep from falling too far behind. It’s about time.

Apple's iPhone Processor Advantage Is More Important Than You Think

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<![CDATA[Watch OS4: Runners Rejoice!]]>Thu, 08 Jun 2017 02:51:21 GMThttp://perezonomics.com/home/watch-os4-runners-rejoiceAirPods Are Now My Favorite Wireless Headphones
I’ve installed watchOS 4 on my Series 2 Apple Watch, and I couldn’t be happier. I can finally easily adjust the volume quickly and easily for my AirPods when I’m out running. 

Just last week I was complaining about how adjusting my music volume on the Apple Watch took too much time. You had to do the following:
  1. Raise your wrist
  2. Hit the dock button
  3. Scroll the dial until you got to “Now Playing”
  4. Tap the screen to select “Now Playing”
  5. Adjust the volume with the crown

Now all you have to do is:
  1. Raise your wrist
  2. Adjust the volume with the crown

What has changed is that the workout app now has a “Now Playing” screen to the right. So after you start your workout, swipe to the right to show your music. But the best part is that this music screen stays the default screen until you actively swipe to the left back to the workout info screen. So every time you raise your wrist, you’re on the “Now Playing” screen and can instantly turn the volume dial.

I can now finally say that the AirPods are the best set of earphones I’ve ever used. Formerly the Beats Powerbeats 3s were my favorite. I still think the Powerbeats 3s paired with a custom foam tip (I use Comply) sound a little better than AirPods, and the Powerbeats amazing battery blows the AirPods away. So why do I like the AirPods better? More than any set of headphones I’ve ever used, I get the weird feeling that what I’m hearing is not from headphones. Especially when compared to big over-the-head headphones. Since the AirPods are so small and light, you almost forget that they’re in your ears, giving the illusion that you’re hearing the ambient sound in the room.

The only fly in the ointment was that it was hard to adjust the volume when I was out running. Any other time it wasn’t so bad. I could just use my phone or iPod. But when I’m out running, it’s difficult to get to those devices if they’re in an armband or workout belt. The Apple Watch’s new OS now solves that problem.

The text in Workout also got thicker everywhere, making it a little easier to read in the sunlight. My only gripe thus far seems to be that you’ve lost the option to delete a workout when you’re done. You know how every once in a while you’d get in your car after a run and your Apple Watch thinks you just ran another ten miles at 40mph? Well, you now have to use your phone to delete these. I hope they bring back delete to the Workout because I’ll never end up going to my phone later to do that.

The other nice thing for runners has more to do with iOS 11. You can now select what you want the double-tap on the AirPods to do for the left and right earphone separately. Your options are:
  1. Siri
  2. Play/Pause
  3. Next Track
  4. Previous Track
  5. Off

I set up my AirPods so that the left one triggers Siri and the right one triggers Next Track. This is probably a bigger deal for people who don’t own an Apple Watch though. Since now raising your wrist to do any of these functions is almost just as easy. 
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<![CDATA[Don't Lump All iPhone Features in the Hapless Bucket]]>Sun, 04 Jun 2017 13:06:37 GMThttp://perezonomics.com/home/dont-lump-all-iphone-features-in-the-hapless-bucketThe Power Users vs the Confused
I couldn’t disagree more with including 3D Touch in this New York Times Apple (AAPL) gripe article by Vindu Goel:

A similar lack of enthusiasm among users and developers has limited adoption of the iPhone’s 3-D Touch feature, where a long, hard press on an app sometimes offers additional options such as viewing an email without opening it. And sales of the Apple Watch have been hampered by the steep learning curve it requires of users, who must master pushing, turning and tapping various parts of the watch and a related iPhone app.
3D Touch to the iPhone is like Applescripts on the mac. It’s a shortcut that will appeal to the minority of power users who are willing to master a new language. Most people aren’t going to to take the time to memorize these shortcuts but that doesn’t mean they aren’t delightful to the people who do. I have no idea what the percentage of Mac users who use Applescripts is but I’ll bet it’s in the single digits.

Knowing these shortcuts is part of what makes a platform sticky. I can guarantee that people who use 3D Touch would never consider Android just like people who use Applescripts would never consider using Windows or even iOS.

Further, Vindu conflates the fact that people are unaware of 3D Touch with some difficult user interface issues with iMessage. They shouldn’t be lumped together like that. Complex menu mapping is a valid problem on Apple’s part. Especially if that is the only way to trigger a feature, unlike 3D Touch. 3D Touch is merely a shortcut to something that you could do the normal way. Not knowing the 3D Touch commands doesn’t preclude normal people from using a feature.  But not knowing how to navigate complex menus to install iMessage Apps will cut you off from ever using them. 
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<![CDATA[The iPhone’s Growing Hardware Kingdom]]>Sat, 03 Jun 2017 13:42:42 GMThttp://perezonomics.com/home/the-iphones-growing-hardware-kingdomApple's Hardware Advantage
Android users who switch to Apple’s iPhone quickly find one huge advantage to living in the iOS ecosystem. It’s one thing that iPhone users don’t generally talk about because they assume that everyone has the same options. But they don’t. I’m talking about an entire universe of hardware accessories that exists for iPhone users that is unmatched by any other phone, or perhaps any other product, in the world. 
Cases, camera lenses, etc. The world of made-for-iPhone accessories is so large that you can’t even begin to name all the neat stuff that you can buy for an iPhone, and only an iPhone. But only in the last couple of years has the realm of made-for-iPhone accessories gone up to a whole other level. Apple started pouring their hardware design know-how into electronic accessories that would have been in a science fiction movie only five years ago.

Whether this is by chance or a carefully thought out plan, I’m not sure. But the iPhone is growing into a hardware kingdom that puts Android far behind. First came the Apple Watch which is now the undisputed smart watch champion. Then came the AirPods which have tamed the Bluetooth headphones into the best wireless experience you can get, period. Now there’s talk about watch bands that monitor your blood sugar levels, and Tim Cook can’t stop talking about how Augmented Reality is going to change the world around us.

Apple and everyone else pours tons of energy into iPhone accessories because the iPhone is the single best-selling smartphone in the world. Android is split amongst hundreds of models and with the Chinese market gaining steam, it’s only getting more splintered.

Does anyone else find humor in the fact that one of the most successful hardware accessories for Android smartphone users is Amazon’s Echo? Or that the Samsung smart watches don’t even run Android any more? Talk about the fragmentation problem from hell.

While I was at Gateway, I learned that we got into the server market because we were losing business to Hewlett-Packard and Dell. Our corporate customers liked that fact that they could buy entire systems meant to work together from one company. We also had a hard time winning any new business from HP or Dell customers because we didn’t offer the same breadth. So we were forced to dive into servers to offset their competitive advantage.

Consumers aren’t too different from corporate buyers in that they sometimes prefer to buy from one trusted company and value components designed to work together. Building a comprehensive hardware solution has consequences. It will both retain existing users and pull in new customers drawn to the cohesiveness of it all. I’ve seen it work quite well.

For a few years, the smartphone was absorbing the functions of everything around it. Camcorders, MP3 Players, and GPS devices all got assimilated. But now the almighty smartphone seems to be ceding some territory back to other devices. The smartphone is morphing into more of a hub with an array of hardware accessories to choose from.

Yet, all the tech press seems to want to write about is how Google has a machine learning advantage that Apple can’t match. Never mind that no one is asking for a stupid automated assistant that gets twenty percent of your queries wrong. I would argue that Apple’s burgeoning hardware accessory solutions are a much more consequential item.

If I’m sitting in Apple’s shoes and I see that Google has an advantage in helping people find a cup of coffee or in finding an old photo of your dog, I wouldn’t be too concerned. They can catch up on those trivial items later. Minor software features don’t cause people to switch platforms but hardware solutions to real problems do.

For now, Apple is outflanking Android with surprise attacks from behind. Apple is doing what they do best and utilizing their hardware prowess to do to Google what HP and Dell did to Gateway. They’re creating a fully featured hardware solution designed to work together. 
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<![CDATA[Dear Movie Studios, Netflix Is Right]]>Fri, 02 Jun 2017 02:08:31 GMThttp://perezonomics.com/home/dear-movie-studios-netflix-is-rightWhy Not Maximize Profit?
Lauren Goode of Recode writes about Netflix CEO Reed Hasting’s prediction that movies will eventually be available in theaters and streaming simultaneously:
 
Netflix’s chief executive officer has made no secret of the fact that he’d like movies to come to Netflix almost as soon as they’re released in theaters. Today at Recode’s Code Conference, he offered a rather optimistic view of how people will still have their in-theater experience and stream it, too: by likening the theater experience to going out to dinner, as opposed to cooking at home.
I know that movies are not physical products, but I don’t see why movies are exempt from universal business law. More specifically, smaller convenience sizes are always more profitable for the seller.

Many companies offer their bread-and-butter products in small convenience packages for travel, like shampoo or drinks, if there is a demand. They’ll do this because even though the sell price is much lower, the profit margin is much higher. Most people are willing to overlook the higher cost per ounce if they only need a small size. They are paying for convenience. Businesses don’t have to decide between offering larger bulk sizes and smaller convenience sizes. They offer both to maximize profit.

To my manufacturing mindset, I don’t see why movie studios can’t follow the same plan. They could sell their movies in “bulk” through the movie theatres and sell their convenience sized portions via streaming to individual homes. It seems like the best of both worlds.

The only reason a company wouldn’t offer smaller high-profit convenience sizes is because there isn’t a demand for it. Movie studios don’t have that issue. Movie goers are clamoring for streaming as soon as possible. They could either price movies so that streaming brings in more revenue per viewer than movie theaters or they price it low enough to bring in more total viewers.

The only losers would be smaller movie theaters that couldn’t absorb the resulting downtick in ticket revenue. But hey, times are changing.  This shouldn’t impact the movie studios if they handle their streaming pricing correctly. 
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<![CDATA[Is the iPad More Profitable Than the MacBook Pro?]]>Thu, 01 Jun 2017 02:03:44 GMThttp://perezonomics.com/home/is-the-ipad-more-profitable-than-the-macbook-proIt's Hard to Say
I find this question quite intriguing. Since Apple’s MacBook Pro has roughly double the average selling price (ASP) of an iPad, most people would assume that Apple must make a higher gross margin on the MacBook Pro. But that’s not necessarily the case.
I would argue that it’s more likely that Apple makes more money on the iPad even at half the ASP. I would expect that iPad gross margins are fairly close to or perhaps higher than an iPhone. At a high level, you can see that Apple’s gross margins rise when iOS devices are a greater percent of total sales and they fall when they are down. But my suspicions go deeper than that.

I used to analyze laptop profitability for the Gateway Corporation in their heyday, so I know a thing or two about what it costs to manufacture laptops. Because of that, I can see a myriad of advantages that Apple has with manufacturing an iPad instead of a MacBook Pro.

Material Advantages
The iPad outsells the Mac by a factor of 2:1, so components that are specific to MacBook Pros are going to be more expensive just because of that. Not only that, the MacBook Pro has way, way more unique components than an iPad. The hinges, trackpad, keyboard, GPU, etc. are all items that the iPad doesn’t need to worry about.

Labor and OH Advantages
A rule of thumb in manufacturing is that labor and overhead rise and fall with the number of unique components that an item has. That means a bunch of parts that need to be ordered, delivered, stored in a warehouse, and finally assembled. A MacBook Pro is going to be exponentially more expensive for Apple to produce from a labor and overhead perspective.

Also, depreciation is captured in the overhead line of an income statement. Remember when I mentioned that the iPad outsells the Mac by 2:1? That also means that all capital costs are spread over half the volume. That means a smaller gross margin.

Selling Costs
All warranty costs end up below gross margin in selling costs. Warranty costs for laptops are amongst the highest of any kind of device. By their nature, laptops are prone to suffering from damage because they aren’t always sitting on a desk. People walk around the office with them; they precariously balance them on a sofa arm; they trip on the power cord. A lot of this damage shouldn’t be covered by the manufacturer, but when a customer plays dumb what are you going to do? They have no idea why their hard drive isn’t working or why their power jack came loose.

Then there are ports. The more ports there are, the higher the eventual warranty costs. No matter what you do, people find a way to jam things in there that shouldn’t be there or they throw their laptop in a bag with some accessory hooked into the port and break something. And the customer always claims that it just broke in the middle of the night while sitting unmolested on his desk.

At Gateway, one of our largest warranty costs was broken power jacks or internal damage due to the power cord yanking the device off of a table. The iPad, due to its all-day battery is rarely ever used while plugged in. So no one is going to yank on the power cord. This means less damage to internal components. This used to be a non-issue for the MacBook Pro due to MagSafe, but Apple has backtracked here by dropping MagSafe. I assume either they are prepared to the pay the price or maybe the new components are more resistant to damage.

When it comes to ports, the iPad has a huge advantage over the MacBook Pro. There is only one port and it’s hardly ever used for anything. The iPad also seems much more resistant to damage upon a drop. Plus, it’s harder to drop since it doesn’t have that awkward balance of holding a laptop by the corner with the screen open.

I could go on and on about why the iPad probably has lower warranty claims than a MacBook Pro but suffice it to say that it all adds up to a more profitable income statement for the iPad than the MacBook Pro.

Conclusion
It’s not controversial to say that it costs Apple a great deal more to manufacture and service the MacBook Pro than it does the iPad. The question is whether the MacBook Pro’s higher ASP makes up for the difference. That is difficult to say, but I doubt it does. I think that Apple is reaping more profit from every iPad sold than the MacBook Pro.

Apple has made it a point recently to spell out their commitment to the MacBook Pro. I don’t doubt that they fully intend to satisfy demand for it in the foreseeable future. How long people will be clamoring for $2,000+ devices is another question.

But if Apple commits a great amount of its resources to developing the MacBook Pro, I doubt it is because of the financial case to be made.  It’s more of a romantic commitment to a device that used to define Apple.

Microsoft has made a big splash with what journalists define as “going after the MacBook Pro.” My first thought has always been “Why?”  That’s a small market destined to shrink. I’m sure there are financial analysts at Apple who tell Tim Cook that if Microsoft wants it, let them have it.

I’m amazed that anyone would question why Tim Cook or Apple seem to never give up on the iPad in the face of falling sales for the past three years. It’s because the profit margins are probably huge. When you combine double the unit sales volume with perhaps double the profit margin you can be forgiven for wanting the future to tip one way over the other.  And the customer isn’t getting screwed. If you can get by with an $800 device over one that costs $1,800 what’s to complain about? 
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<![CDATA[Music on the Apple Watch]]>Tue, 30 May 2017 19:54:26 GMThttp://perezonomics.com/home/music-on-the-apple-watchMusic Acquisition and Control Needs to Improve
I hate to say it but this article is right on the mark. Check out this article in Mashable by Pete Pachal. Apple  has poured so much effort into the health and exercise aspect of the watch that other functions seem to have been left behind. Notably, music playback.
 
In using the Apple Watch day to day, I'm also annoyed that audio playback controls — what I would consider a fundamental feature of the watch — are buried. If you're listening to, say, a podcast, in order to pause playback you first need to move your wrist, press the home button, swipe to the Now Playing "glance" (the term Apple uses for app screens), tap to activate the glance, then tap again to actually press pause. That's five steps for something that should be two at the most. – Pete Pachal, Mashable
Getting music on and off the Apple Watch Series 2 is still excruciatingly slow. And controlling the music and podcasts from your watch still seems much more difficult than using an iPod. I’m not sure how Apple can do it, but I want to quickly and easily play and pause my music and adjust my volume from my watch. Especially now that I’m using my AirPods which have no volume control.

 If that means adding more physical buttons then so be it. 

Dear Apple, Turn the Apple Watch Into the iPod of My Dreams
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<![CDATA[Forget Apple? The Next Big Thing from Tesla?]]>Mon, 29 May 2017 18:14:07 GMThttp://perezonomics.com/home/forget-apple-the-next-big-thing-from-teslaMoving Bits vs Pounds
​In an interview with Bloomberg, Apple (AAPL) Co-founder Steve Wozniak suggested that perhaps Tesla would be the originator of the next big thing in tech as opposed to a large tech company like Apple.
 
This is laughable. With all due respect to Woz, Tesla specializes in moving people and things. Apple, Google, Facebook etc are truly tech pioneering companies that specialize in moving data and connecting people in new ways. Big difference.
Expecting the next big thing from Tesla is like expecting horse breeders to design flying cars. It’s not going to happen because they are both steeped in the past.
 
For all intents and purposes, Tesla is still in the business of refining the horse drawn wagon or locomotive. Both the Model T and the Model S still accomplish the same goal of moving you from your house to work. “Model S” is such a fitting name.

If the next big thing doesn't come from Apple, it'll be a company that specializes in moving bits, not pounds.

Related: Is Apple a Part of the Future or the Past?
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<![CDATA[Apple Watches and Electric Cars]]>Mon, 29 May 2017 16:20:28 GMThttp://perezonomics.com/home/apple-watches-and-electric-carsThe Mechanical Parallel
Apple’s marvel of miniature electronics, the Apple Watch, has become an indispensable part of my day and points the way to a future when smartphones offload various functions to satellite devices. But to watch purists, this vision of the future is a cold one. In a piece for Business Insider, Dennis Green writes about how Swiss watch maker H. Moser & Cie has crafted a mechanical watch that mimics Apple’s watch.

More than anything I’ve heard, listening to mechanical watch fans talk about smart watches describes how driving enthusiasts feel about electric cars.
Inside, there's no gadgets or gizmos, just a HMC 324 fully mechanical movement. It's visible from the rear, where instead of a heart rate monitor there is a beautiful window into the movement (known in watch enthusiast circles as a "city").

Moser built this watch as a response to the "cold electronics of connected watches" and says it "presents the soul of mechanical watchmaking." – Dennis Green, Business Insider


There seems to be an odd parallel between watches and automobiles. Both have mechanical origins and a die-hard fan base that clings to the moving harmony of intricately assembled machinery. Granted, cars have become rolling platforms of electronics these days, but you can’t deny the long love affair that enthusiasts have had with the gasoline engine. 
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<![CDATA[No Hillary, You Didn’t Beat Donald Trump]]>Sat, 27 May 2017 19:03:18 GMThttp://perezonomics.com/home/no-hillary-you-didnt-beat-donald-trumpWhy Hillary Can't Claim Popular Vote Victory
​In an interview with the New Yorker, Hillary Clinton makes the statement that she beat both Bernie Sanders and Donald Trump.  She’s referring to the fact that she beat both candidates in the popular vote.

That’s like a losing football team saying that they actually won because they gained more offensive yards. Or a losing basketball team saying that they should have won because they grabbed more rebounds. If those were the metrics that determined who won, everyone would have played the game differently.
Likewise, if the popular vote is what determined who actually would win the presidency, the Republicans would have played their pieces on the board differently. The big fly in Hillary’s ointment is the state of California. Just this one state alone could have changed the way the popular vote turned out. Since Republicans knew they had little chance to win in California they didn’t waste their advertising dollars trying to win those electoral votes. And as a consequence, Donald Trump’s popular vote total was a lot lower than it would have been otherwise.

I’m not trying to say that Donald Trump would have won the popular vote. My point is that we don’t know who would have won that contest because everything would have changed. ​Had popular vote been the measure, Republicans would have shifted their war machinery to the large population blue states that they let go uncontested. They would have swarmed the suburbs with field offices and volunteers and saturated the airwaves with ads.
 
So for Democrats to say that Hillary would have won the presidency because she had a popular vote lead is pure propaganda. It’s possible that Donald Trump would have won by an even larger margin.
 
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<![CDATA[Yes, Google Tracks Your Credit Card Use]]>Sat, 27 May 2017 14:37:10 GMThttp://perezonomics.com/home/yes-google-tracks-your-credit-card-useGoogle Is Raiding Retailers
I predicted that Google would start tracking purchases via credit card numbers a year ago. I’ll bet some of you thought I was crazy. Reporting for Engadget, Chris Ip wrote a story about how Google is indeed tracking credit card purchases.

First, Google followed you to the store using location data, much like Foursquare. Then its launched its Express shopping service. Now, it will track billions of credit and debit card transactions in an even bigger effort to prove its online ads push users into brick-and-mortar shops.
I predicted this would happen last year because this is the kind of analysis that retailers do with their own databases. I did it when I was working for the Cabela’s Corporation. I tracked customer behavior via their credit card numbers to try and quantify trends. I was more interested in quantifying the financial impact of a large investment than peeking into people’s habits.
 
It’s interesting that Google is treating all Android users as their customers in the same way as a retailer would. Sure BestBuy, Amazon, or your local grocery store do it.  They’re already recording all transactions in order to forward your sales tax to the government or send you your merchandise. Retailers have been collecting customer data for decades because they don’t have an option not to.

But Google isn’t the one selling you anything. And yet, they take the same liberty as if they were the first party retailer selling you the merchandise. This is kind of like the owner of the mall that leases space to Dillard's sifting through all of Dillard's sales info. Furthermore, this is valuable data to the retailer. They don’t want anyone else seeing it let alone profiting from it. And yet, Google walks in and takes their data like mafia goons.

There’s a whole new class of privacy victims that no one is talking about. Retailers. Cabela’s regarded their customer sales data from their catalog sales as the crown jewels of the company. We could use this data to decide where to place our bricks-n-mortar stores with a high level of success. This gave Cabela’s an advantage over Bass Pro which didn’t have a robust catalog arm. The last thing Cabela’s would want is for Google to study their customer’s credit card sales and use this data to help any of their competitors. But that is exactly what Google aims to do.

Nothing that Android users do is technically off limits to Google. The same is true in regards to iOS users and Apple. But Google makes their money via connecting customer habits to advertising and Apple doesn’t. So Apple has the option of leaving customer data alone. Google can’t. 
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<![CDATA[Automotive Evolution Is Not Revolution]]>Thu, 25 May 2017 01:46:10 GMThttp://perezonomics.com/home/automotive-evolution-is-not-revolutionWhat Would Really Change Transportation?
Blah, blah, blah. I’m so tired of the narrative that these evolutionary changes in transportation are some kind of earth-shattering revolution. Peter Valdes-Dapena, writing for CNNTech goes through his list of how everything with driving is changing:
 
Everything about cars is changing right now. That means how we power them, how drive them and even how we own them. –CNNTech, May 24, 2017
If those three things are changing cars, then the tech world misunderstands the purpose of cars. It’s really not that hard to understand. Cars physically take you to where you want to go. Just like they have for over a hundred years.
 
Who cares how they’re powered, who drives them, or whether we own them or not? Those are all incremental changes to the same old concept.
 
Maybe this would make more sense if I placed the idea into another realm a little less controversial. You need your lawn mowed once a week. Whether your lawnmower is gas powered or electric doesn’t make a huge difference, right? They both accomplish the same task and the makers of electric lawnmowers don’t purport to be changing the world. Even if you decide to hire a lawn service instead of using your own lawnmower, it’s not that big of a deal. The objective is cutting your grass, not fixating on what powers your mower or who pushes it.
 
From a personal standpoint, I’m super excited about self-driving cars. But from a business analysis standpoint, not so much. Automated driving doesn’t impact the master logistics equation as much as many would like you to think. Either they don’t realize it or they are trying to sell you something.
 
So, what would be an example of something truly revolutionary that will change how business functions? 3D printing. Transporting a hundred widgets from San Francisco, California to Dallas, Texas hasn’t changed all that much from the year 1950. Even if we had automated electric trucks in the future, it’s still going to be a similar model. But if you sent the designs for those widgets via the internet and the consumer could print his own widgets, that changes everything.
 
3D printing truly alters the master logistics equation. You’ve slashed two variables in the formula simultaneously, distance and weight. It’s the closest thing we have to Star Trek’s transporter this side of the movie screen.
 
Driverless drones would be another game changer. This radically changes the distance variable via bypassing public roads.
 
I am hopeful about the future of transportation. It’s unfortunate that very few people are writing about the changes that matter.
 
 
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<![CDATA[On Tech Companies, Love, and Physical Objects]]>Sun, 21 May 2017 18:45:06 GMThttp://perezonomics.com/home/on-tech-companies-love-and-physical-objectsHardware vs Software
I liked this article by Vlad Sadov...

Physical things anchor our gadget lust in the real world and ultimately soak up whatever goodwill the software on those gadgets engenders. Yes, people have their favorite apps, but the appreciation for an app’s quality rarely translates into love for its maker. With hardware, on the other hand, a great user experience is almost always converted into brand loyalty. That’s part of Apple’s grand success, it’s the catalyst for growing fan appreciation for Microsoft and Amazon, and it was the thing that made Google I/O feel a bit boring. –Vlad Sadov, The Verge

If you’re going to buy somebody a gift for an occasion like their birthday or Christmas, you never think about software. The software may make the gadget more appealing but it’s still the physical gadget that gets all the glory.

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<![CDATA[Maybe the Next iPhone Won’t Be a Galaxy S8 Train Wreck After All]]>Sun, 21 May 2017 15:08:10 GMThttp://perezonomics.com/home/maybe-the-next-iphone-wont-be-a-galaxy-s8-train-wreck-after-allDid Samsung Forget About Tablets?
This is encouraging. 9to5Mac is reporting rumors that the upcoming iPhone 8 is shorter than the Plus model but slightly wider than the non-Plus 4.7” iPhone. This would be the best case scenario.

I’ve been concerned that Apple would give the new flagship iPhone a taller and narrower aspect ratio. As I’ve written before, narrow screens make viewing the internet terrible when holding your device in portrait mode. 
There’s an intangible quality to tall narrow aspect ratios that people just don’t like. That’s part of the reason why Android tablets abandoned their tall narrow aspect ratios and eventually emulated the iPad’s fatter ratio. Since the iPad is not intended for your pocket it has the luxury of using a pleasing 4:3 screen aspect ratio.

Since phones need to fit into your pocket they’ll probably never get to a 4:3 aspect ratio. That’s OK. But backtracking from where we are now with a 16:9 ratio to an even taller and narrower screen would be a big mistake.

Even if Apple does end up going with a narrower aspect ratio, all is not lost. It's only a temporary setback until screens become foldable. At that point, all of a sudden everyone will rediscover the wonders of width.

My iPhone 7 Plus is too tall, not too wide. I'd still prefer that the width of the 7 Plus not be reduced at all. That is really the best part of the 7 Plus. 

Related:
Phandroid.com - The Galaxy S8's Worst Feature Is It's Screen

The Web Is Better on Wider iPhones
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<![CDATA[Where Is the Amazon Echo’s Advantage Over the iPhone or Apple Watch?]]>Sat, 20 May 2017 13:34:20 GMThttp://perezonomics.com/home/where-is-the-amazon-echos-advantage-over-the-iphone-or-apple-watchHardware vs Software
​Rumor has it that Apple is about to launch an Amazon Echo–like competitor at WWDC next month. Something that I never thought they’d do. I figured that Apple’s most likely course of action was to improve Siri. Unlike Amazon, Apple already has Siri distribution points all through our lives. In our phones, tablets, watches, Apple TVs and MacBooks. And yet the Echo seems to be running away with the household assistance market. Why?
This is a case of hardware features and design being more important than software. It’s popular for some in tech circles to say that software is more important than hardware. I disagree with that in general. I think it’s equally important but certainly not more important. Although, I’ll acknowledge that there are special cases where software can be more important than hardware. Apple and iOS would be one. But for every example of software outweighing hardware in importance, you could find an opposite example of hardware trumping software. Amazon’s Echo would be a prime example of this.
 
Amazon has some advantages over Siri due to its wide-open security platform and ever growing list of skills. But Siri has many advantages over Alexa with its deep integration into my personal info and ubiquitous presence no matter where I am. On the software front, it’s a draw.  The Echo hasn’t beaten back Siri due to superior software. It’s all about the hardware.
 
Microphones
The Echo comes with seven microphones that allow it to hear you from across a crowded room or over music. The importance of this can’t be overstated. I find Siri to be best on my Apple Watch or Apple TV remote because I can move the microphone up to my mouth. However, if there are other people talking around me or music playing in the background, Siri’s failure rate goes way up.
 
Speakers
It also has a relatively strong speaker compared to most portable devices. You can ask it to play music and it’s OK. You’re never going to do that on a phone or tablet.  I use Siri the most on my Apple Watch and Apple TV. And guess what? Siri has absolutely no vocal feedback on either of those two devices. The Apple Watch has a small speaker but it’s not used for some reason. My first thought was because Apple didn’t think we’d want vocal feedback while out in public. But the Apple TV doesn’t do it either in the privacy of your own living room. Why not?
 
Stationary Design
Then there’s the fact that it is designed to be in one spot. It’s literally tethered to the wall via the power cord. This means that no one can move it or take it out of the house. This allows occupants in the house to get conditioned to using it because they’ll know that 100% of the time the device is always listening.  Your spouse can’t take it to the garage or accidentally leave it in their pocket and go to the store with it. Siri is pretty good on the Apple TV remote if you don’t mind hitting a button, but with eight people living in my house, do I know where that little thing is at all times? Not a chance.
 
Single vs Multi-Purpose
The Amazon Echo has a hardware advantage over the iPhone much like a high-end DSLR camera or a 60" television. You can take pictures or watch movies on your iPhone, but there are single-purpose devices which can offer a better experience. No amount of software can change that.
 
Smartphones have been conquering single-purpose devices for a few years now. Point-and-shoot cameras, MP3 players, and PDAs have all fallen by the wayside. But it was hardware advances in the smartphone that made that possible.
 
The Amazon Echo is the rise of a new single-purpose device. The question now is whether it is more like the television in that it has a big enough hardware advantage over the smartphone that it can’t be conquered or like the camcorder, destined to one day be assimilated by our magical pocket devices. 
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<![CDATA[The Problems with Samsung’s Galaxy S8]]>Thu, 18 May 2017 03:10:59 GMThttp://perezonomics.com/home/the-problems-with-samsungs-galaxy-s8Besides a 50% Sales Decline
Chris Chavez over at Phandroid makes the case that the curved screen on Samsung’s Galaxy S8 is actually the phone’s worst feature. The fact that Samsung made another dumb decision that favors a marketing gimmick at the expense of the user experience does not surprise me.

Picture this: a smartphone manufacturer makes a new smartphone with the best display on the market. The only caveat is that there’s excessive distortion and light bleed along the side edges. Would this phone be given rave reviews? Not a freakin’ chance, but that’s exactly what you see with the Galaxy S8. –Chris Chavez, Phandroid
Perhaps this is part of the reason why the Galaxy S8 sales are way down from where the previous Galaxy phones used to be. Not that you’d know this from the tech coverage which completely omits any context to the Galaxy S8’s sales figures. Appleinsider puts the recently released first month sales figures for the S8 into proper historical perspective. 

report by Cho Mu-Hyun for ZDNet noted the 5 million unit announcement, without any comparison to previous year sales. Each year since reaching Peak Galaxy in 2014, Samsung has floated the idea that its new model has outpaced sales, shipments (or sometimes "preorders") of the previous edition, but in reality Galaxy S sales--and subsequently Samsung Mobile profits--have actually never recovered since the Galaxy S4. – Dan Eran Dilger, Appleinsider
 
Is it just me or is it odd that Apple’s recent 1% downturn in iPhone sales from last year garnered headlines all over the world? One single quarter. And yet Samsung has a 50% decline from three years ago but you’d never know it?
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<![CDATA[RIP iPhone, Long Live the Apple Watch]]>Sun, 14 May 2017 13:06:55 GMThttp://perezonomics.com/home/rip-iphone-long-live-the-apple-watchThe iPhone's Partial Successor?
Alex Kipman, the inventor of the HoloLens, is absolutely correct. Smartphones will eventually be replaced by augmented reality wearables. Even I can see it coming.

We’re not going to come out with another device that someone’s done,”  says marketing chief Mehdi. Anyway, smartphones are yesterday’s news, says HoloLens inventor and in-house futurist Alex Kipman. “The phone is already dead,” he says. “People just haven’t realized.” Kipman is convinced some kind of mixed-reality device like the HoloLens will replace the phone—a theory echoed over at Apple. –Alex Kipman, HoloLens Inventor
This is why I think the Apple Watch is arguably the most important product at Apple. Until smartphones came along the big craze in the phone world was making cell phones ever smaller.  We probably would’ve eventually got to Dick-Tracy-style watch phones. Communication devices at their essence merely relay information and should be as small as possible. The smaller they are the more likely we are to never be without them. Because the larger they are, the more likely we are to leave them behind.

But a funny thing happened on the way to the forum. The Internet and Facebook caused a massive U-turn in phone design. The masses were torn between having a small phone that would fit into their pockets and larger screens to see the internet. Eventually, larger screens won a close but hard-fought battle. Who can deny the importance of seeing what your 2nd grade classmate had for dinner last night on Facebook?

Out of necessity, two opposing functions were married together into one device. Communications, which should be on a small device so that we can take it everywhere. And information display, which should be on as large a device as possible so that we can enjoy it. There’s a host of reasons why you wouldn’t put everything on the goggles so a wrist wearable will be vitally important.

Which brings us to augmented reality. The dreamers of today see a future where we can have our cake and eat it too. The Dick Tracy watch is already in view. All the Apple Watch needs to make that a reality is cellular connectivity. And screens? What would be better than augmented reality glasses that display your data like an automobile heads-up display. It would be like having a 70” inch screen for your iPhone. Sounds tantalizingly appealing to me.

Asking our smartphones to both be as small as possible while simultaneously trying to show us a much information as possible will eventually get solved by forking this functionality into two. That doesn’t mean that the smartphones of today will go away completely. In the interim, they’ll morph into foldable phones with larger screens.  But they’ll become like the feature phones of today. Something that primarily the budget-minded and developing nations would use.

This is why wrist worn wearables are so important. After the information delivery function gets moved away from the smartphone the race to make it smaller will resume. Apple has a lead on everyone when it comes to how much functionality they can cram into a tiny high quality device. I don’t think this is by accident.

Tim Cook has already been quite vocal about how he sees augmented reality as being a pivotal future technology. The extent of Apple’s efforts on the watch may be an outgrowth of that belief. From the start, the watch was never treated as simply a “hobby”. If and when communications is decoupled from the screen, Apple will be ready and waiting with the Apple Watch and everyone else will have to play catch up.

If this ends up being true and Apple ends up being in the right place at the right time with both augmented reality and smart watches it will have been a huge victory that was planned many years in advance. This takes vision.

One day we will finally get what we always wanted. Phones so small that they can strap to our wrist and screens so big that we can enjoy as much information as we can handle. And all of it completely hands free. 
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