Don't Doubt Me
Forgive me for taking somewhat of a victory lap, but when I saw this recent article about how phone prices topping $1,000 have become normal, I couldn’t help but think “I told you so.” And it reminded me about a couple of other theories I have addressed that have since fallen out of favor.
Myth #1 - Phone Prices Would Collapse Due to the Power of Software Platforms
Some of my readers may remember me debunking a popular theory that smartphone prices needed to come down. The prevailing school of thought was that software platforms were making hardware irrelevant. Needless to say, no one brings this theory up any more. As I correctly predicted back then, these software platforms would make phones more valuable than ever since people would be able to justify their expensive phones more easily the more they used them.
Myth #2 - Bricks-and-Mortar Retail Was Going to Get Steamrolled by Amazon
There was also quite a bit of hysteria written in tech blogs about how the world was moving to online shopping and bricks-and-mortar retailers were dying off. I had to dust off my sword and go out and slay another dragon of a misconception. News in the last few days shows that Best Buy, Walmart, Target and Costco are doing better than ever. And I predicted they would do so before anyone knew that would be the case. Amazon hasn’t put a dent in their sales at all. It’s true that a lot of smaller retailers have bit the dust, however, that’s not a new phenomenon. Retail stores have historically had an 80% death rate in the first five years of existence, and retail churn has always been high. Remember when everyone thought the big box stores were a menace to society?
Myth #3 - Apple Will Accept Reduced Profitability on the iPhone X
I have no idea where this idea came from, but there were actually some tech journalists who believed that Apple was going to willingly sell the iPhone X at a reduced profit margin. They rightly perceived that Apple’s cost to build the X was going to be much higher. However, they thought that the iPhone 8 model was so old that Apple was going to have to take a hit in margins in 2018 to usher in something new. Of course, I had to write a post on why that made no sense. I made the case that the iPhone X was probably a HIGHER margin product, and I’ve been proven right since.
Myth #4 - Self-Driving Trucks Will Decimate Truck Driver Jobs
This one may be a little on the premature side to declare victory over. However, this study just came out which supports my thesis that, no, self-driving trucks will not be causing driver layoffs for a decade or two. The first problem with the theory that truck drivers will get laid off en masse is the cost equation. Companies may be able to reduce their driver jobs but the cost of capital equipment more than offsets that reduction. So there’s no financial incentive to replace truck drivers. Second, these long-haul cross country jobs are ones that nobody wants. You can’t layoff drivers when they beat you to the punch and quit or won’t even apply in the first place. In 15 years when self-driving trucks are finally put into service it’ll be on these long-haul routes first. And turnover is so high on those routes, there will be no resulting shock wave in the driver market.
Part of the reason I started this blog is because when I would see prevailing ideas that were just wrong, I wished someone would stand up and say, “Sorry folks, but that makes no sense”. There’s not enough critical thought going on. Case in point, many in tech actually believe that Tesla will be around in five years.
When a skilled craftsman walks through a house, he can tell you when he sees shoddy workmanship and can make a good guess on how long it’ll last. In a similar manner, financial analysts who make their living by assessing cost-benefit ratios on various product ideas or business units are doomed to forever reducing everything to percentages of profitability or estimated remaining life. I feel like the kid from the movie The Sixth Sensewho was cursed to seeing dead people. Only I see zombie products or companies that I know will one day disappear.
Some of my readers may remember me debunking a popular theory that smartphone prices needed to come down. The prevailing school of thought was that software platforms were making hardware irrelevant. Needless to say, no one brings this theory up any more. As I correctly predicted back then, these software platforms would make phones more valuable than ever since people would be able to justify their expensive phones more easily the more they used them.
Myth #2 - Bricks-and-Mortar Retail Was Going to Get Steamrolled by Amazon
There was also quite a bit of hysteria written in tech blogs about how the world was moving to online shopping and bricks-and-mortar retailers were dying off. I had to dust off my sword and go out and slay another dragon of a misconception. News in the last few days shows that Best Buy, Walmart, Target and Costco are doing better than ever. And I predicted they would do so before anyone knew that would be the case. Amazon hasn’t put a dent in their sales at all. It’s true that a lot of smaller retailers have bit the dust, however, that’s not a new phenomenon. Retail stores have historically had an 80% death rate in the first five years of existence, and retail churn has always been high. Remember when everyone thought the big box stores were a menace to society?
Myth #3 - Apple Will Accept Reduced Profitability on the iPhone X
I have no idea where this idea came from, but there were actually some tech journalists who believed that Apple was going to willingly sell the iPhone X at a reduced profit margin. They rightly perceived that Apple’s cost to build the X was going to be much higher. However, they thought that the iPhone 8 model was so old that Apple was going to have to take a hit in margins in 2018 to usher in something new. Of course, I had to write a post on why that made no sense. I made the case that the iPhone X was probably a HIGHER margin product, and I’ve been proven right since.
Myth #4 - Self-Driving Trucks Will Decimate Truck Driver Jobs
This one may be a little on the premature side to declare victory over. However, this study just came out which supports my thesis that, no, self-driving trucks will not be causing driver layoffs for a decade or two. The first problem with the theory that truck drivers will get laid off en masse is the cost equation. Companies may be able to reduce their driver jobs but the cost of capital equipment more than offsets that reduction. So there’s no financial incentive to replace truck drivers. Second, these long-haul cross country jobs are ones that nobody wants. You can’t layoff drivers when they beat you to the punch and quit or won’t even apply in the first place. In 15 years when self-driving trucks are finally put into service it’ll be on these long-haul routes first. And turnover is so high on those routes, there will be no resulting shock wave in the driver market.
Part of the reason I started this blog is because when I would see prevailing ideas that were just wrong, I wished someone would stand up and say, “Sorry folks, but that makes no sense”. There’s not enough critical thought going on. Case in point, many in tech actually believe that Tesla will be around in five years.
When a skilled craftsman walks through a house, he can tell you when he sees shoddy workmanship and can make a good guess on how long it’ll last. In a similar manner, financial analysts who make their living by assessing cost-benefit ratios on various product ideas or business units are doomed to forever reducing everything to percentages of profitability or estimated remaining life. I feel like the kid from the movie The Sixth Sensewho was cursed to seeing dead people. Only I see zombie products or companies that I know will one day disappear.
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