The State of iPhone (Premium)

This has inadvertently turned into a big week of iPhone news and commentary. But I think this is an important topic, so what the heck.

Apple’s recent warning about lower-than-expected iPhone sales was met by histrionics on both sides of the fence. Apple haters---and yes, they exist---rejoiced in the firm’s declining fortunes, while conveniently ignoring the fact that Apple is a huge, huge business and will be for the foreseeable future. Apple’s biggest fans, meanwhile, circled the proverbial wagons, first denying that all of the evidence we had seen about an iPhone shortfall was true and then falling back on nonsense defenses related to Apple’s services business (which is much, much smaller than iPhone) or its cash balance, which says more about the past than the future.

As is so often the case, there is a more measured reality to be found. And as is always the case, that truth can only be found by looking at what’s happening rationally rather than emotionally.

Contrary to what many think---on both sides---I have no particular stake in this controversy. And my take on Apple remains unchanged, mostly because Apple itself has remained unchanged over many years. This is a company that makes great hardware products, decent apps, and terrible to middling services. It is not an innovator but in one major way, which I do respect: After moving slowly to embrace particular technologies, it usually gets it right when it finally does jump in; this results in safe, predictable experiences that its users value and appreciate. The way it markets itself and its products is almost always reprehensible, and Apple executives exude a faux humility and hubris that I find troubling. Its products are generally too expensive, but those who use them for several years can usually justify---or at least rationalize---the cost. There are a lot of them, folks. Maybe they're on to something.

That’s most of it. But with regards to the iPhone specifically, Apple had been on a nearly decade-long tear before reality set in. This reminds me very obviously of Microsoft and Windows, which enjoyed a similar dominant decade that ran from roughly 1992, with the release of Windows 3.1, until 2001-2003, the dates that coincide with its antitrust losses in the United States and the European Union, respectively.

The Windows comparison is apt: Dominant businesses don’t just drop off the face of the earth. And while Microsoft---and Windows---suffered through a subsequent uncertain and wobbly decade, giving competitors like Apple and Google a chance to first catch up and then race ahead, especially in mobile, Windows is still a thing. Here we are, 15 years after the EU verdict, and PC makers still sell 260 million units a year. The Windows PC user base is still 1.5 billion strong.

It’s not possible to state that Apple’s iPhone business will be alive and thriving in 15 years, of course: I’ve already explained my theories about how each subsequent pe...