Newton's Apple and Jobs' Apple: Their Dual Trajectory Is Inevitable.

Gary North

Oct. 11, 2011

We all know about the apple that Isaac Newton supposedly saw fall to the earth, thereby causing him to come up with the mathematics of gravitation -- the most important and unbreakable law governing physical objects, and still unexplained. (Why should masses attract each other at a distance in a vacuum?)

What goes up eventually falls . . . unless is disappears into outer space and becomes statistically irrelevant. Gravity overcomes the inertia of upward movement. What goes up always falls.

Apple's relentless descent to earth is inevitable. I can prove it in 15 words.

Here are the first four: regression to the mean. There is no way around this. This is the law of social gravity.

What kept this from happening earlier was the fact that Steve Jobs was a creative genius, like few other men in history. He also had this advantage: he was called back to save the company when it's share price was $5. Without both roles -- genius and savior -- Apple would barely be visible. It might have gone bankrupt.

The person who replaces him will be a corporation man. He will not be a creative genius. He will also be someone who came up from the ranks as a Steve Jobs' flunky.

Here is Apple's plight: everyone in the outfit is Steve Jobs' flunky, and everyone else knows it. Everyone bent low whenever Jobs entered the room. This position was not always in the form of a bow.

Steve Jobs was a mean-spirited, foul-mouthed, intolerant man. He told people publicly their work was "crap." He humiliated subordinates. That was his style. He was a personal SOB. He is beloved in death only because he turned out to be right in the marketplace, over and over, but only in the post-1996 period. Before that, the technology was not there to let him implement his vision.

Nobody who is that inconsiderate, that much of a personal jerk, can get the cooperation of highly skilled people unless he makes them a lot of money.

There is no one to follow him. There will never be another Steve Jobs at Apple.

Apple now faces the Bao Dai phenomenon.

You probably have never heard of Bao Dai. Wiki tells us who he was.

Bao Ðai (lit. "keeper of greatness", 22 October 1913 -- 30 July 1997) was the 13th and last ruler of the Nguyen dynasty. From 1926 to 1945, he was king (or emperor) of Annam under French 'protection'. During this period, Annam was a protectorate within French Indochina, covering the central two-thirds of the present-day Vietnam. Bao Ðai ascended the throne in 1932 at the age of 19. The Japanese ousted the French in March 1945 and then ruled through Bao Ðai. At this time, Bao Ðai renamed his country "Vietnam". He abdicated in August 1945 when Japan surrendered. He was the chief of state of the State of Vietnam (South Vietnam) from 1949 until 1955. Bao Ðai was criticized as being closely associated with France and spending much of his time outside of Vietnam. Prime Minister Ngô Ðình Diem ousted him in a referendum held in 1955. . . .

The referendum was widely regarded as fraudulent, showing an alleged ninety-eight percent in favor of a republic. Bao Dai abdicated once again and remained in exile for the remainder of his life in Paris, France.

With the emperor gone, no leader had legitimacy. Every leader faced resistance from the other pretenders. "I'm as good as you are. Better, even." This led to the inevitable escalation.

"Oh, yeah?"
"Yeah."
"Prove it."

Over the next 20 years, the leaders fought it out, with the USSR and the USA using its side as a surrogate.

The man who replaces Jobs will be neither as smart nor as ruthless as Jobs was. He will not be able to order around his peers. he will be met by these five words: Who are you to say? Jobs faced these five words in 1985. He was fired.

It took a ramrodding visionary to extract creativity out of the employees. He saw what people would buy. The flunkies merely executed his vision, and only because he was there at every step to tell them how to do this.

No one will ever command allegiance at Apple the way Jobs did, 1997-2011. Without this allegiance, Apple will become another Microsoft. It will not go bankrupt. It will still be a player. But it will lose its dominance. It will move from an order-generating organization to an order-taking organization. Its profits -- its uncertainty-based return on entrepreneurship -- will shrink. The firm will take orders from customers, because its best senior employers will not take orders from the CEO. They will depart to form their own organizations. They will imitate the founders of Intel, who left Fairchild.

"I'm as good as you are. Better, even."
"Oh, yeah?"
"Yeah."
"Prove it.

One by one, they will either prove it or not. They will leave to prove it.

Meanwhile, open source coding will eat away at Apple, just as it will eat away at Microsoft. Open source coding will let geniuses all over the world enter the market and offer better solutions.

F. A. Hayek's 1945 essay, "The Use of Knowledge in Society," shows us what will happen. The profit motive in an international, decentralized free market will call forth creative alternatives to the centralized, closed-system, proprietary architecture at Apple. Open source software will take bite after bite out of Apple. It's inevitable.

"Regression to the mean." "Who are you to say?" These nine words will bring Apple down to earth.

This time won't be different.

The great social theorist and historian, Max Weber [Mawx Vayber], described this process a century ago. he labeled it the routinization of charisma. It happens to every revolutionary organization after the death of the founder and maybe an immediate successor. Jesus was followed by Paul. Joseph Smith was followed by Brigham Young. Lenin was followed by Stalin. Few historians can name their immediate successors.

Add these four words to the nine. You get 13.

This leaves two more words. Here they are: Patents expire.

These 15 words tell us where Apple is headed. Down. Behind the curve.