John Gruber is, as only he can, relishing the claim chowder – his collected bits of analyst wisdom sure, again and again, that Apple is doomed.

Apple, of course, is not doomed. In fact, the company is the very opposite of doomed, having just posted the best quarter of any company, ever. The analysts Gruber mocks were not just wrong (and, as everyone knows, they are only a small part of a much larger sample), they were hilariously wrong, and cost their clients millions of dollars.

And yet, the perception that Apple is somehow hanging on by the skin of their teeth persists. I was speaking to someone about Apple’s particularly excellent China results this afternoon, and was struck at how their questions were so focused on threats to Apple – “How will Apple respond to Xiaomi” for example. This is in stark contrast to the way most think about a company like Google, where their dominance in whatever field they choose to enter is assumed, just as Microsoft’s was a decade ago. Apple, though, is always a step away from catastrophe.

It’s difficult to overstate just how absurd this is, but here’s my best attempt: last quarter Apple’s revenue was downright decimated by the strengthening U.S. dollar; currency fluctuations reduced Apple’s revenue by 5% – a cool $3.73 billion dollars. That, though, is more than Google made in profit last quarter ($2.83 billion). Apple lost more money to currency fluctuations than Google makes in a quarter. And yet it’s Google that is feared, and Apple that is feared for.

I’ve previously, in one of the first ever posts on Stratechery, tried to figure out why it is that people keep getting Apple so wrong; I chalked it up to an over-reliance on modeling and magical manager syndrome. And, while I think that is still true, it’s hard to escape the conclusion that much of the reporting and analysis about Apple specifically and tech broadly is governed by bad assumption on top of bad assumption on top of bad assumption:

Bad Assumption 1: Markets are monolithic

If you look at a market monolithically, simple math dictates that the average will be most heavily influenced by the majority. And, income distributions being what they are, the majority of customers in any market will have less money, and likely be inclined to prioritize price. Ergo, monolithic market analysis necessarily concludes that customers prioritize price.

Markets, though, are not monolithic. They are wildly disparate, able to be endlessly segmented not just by income, but by a whole host of demographic and psychographic factors. In every market there is a segment of people who have the means to buy nice things, and there is a segment that values a superior experience. These segments quite often overlap, to Apple’s benefit.

Bad Assumption 2: Consumers only care about speeds, feeds, and price

The old hoary chestnut that “Apple only wins because its advertising tricks people into paying too much” was raised in my Twitter feed last night, and while the holders of such an opinion are implicitly saying others are stupid, my take runs in the opposite direction: it’s not that people are irrational, it’s that human rationality is about more than what can be reduced to a number. Delight is a real thing, as is annoyance; not feeling stupid is worth so much more than theoretical capability. Knowing there is someone you can ask for help is just as important as never needing help in the first place.

Apple spends an inordinate amount of time and resources on exactly these aspects of their products. Everything is considered, from the purchase to the unboxing to the way a webpage scrolls. Things are locked down and sandboxed, to the consternation of many geeks, but to the relief of someone who has long been conditioned to never install anything for fear of bad actors. Stores – with free support – are just a few miles away (at least in the US), a comfort blanket that you ideally never need. All of this is valuable, even though much of it is priceless, only glimpsed in an average selling price nearly triple the industry average.

Bad Assumption 3: Apple’s talk about “making the best products” is for show

Apple executives have again and again stated some variation of the line Tim Cook delivered during his prepared remarks on yesterday’s earnings call:

Apple’s mission is to make the greatest products on earth and enrich the lives of others

Surely it can’t be so simple! Surely to believe such tripe is the ultimate in fangirl-hood. And, in fact, I hesitate to write about stuff like this, for fear of the fanboy angle. This blog prides itself on calling things as I see them, not as I wish they were. At a more fundamental level, I’m much more concerned with the underlying strategies and trends that govern companies, and the incentives that ultimately decide how effective those strategies are.

It’s incentives, though, that make Cook’s line so believable. If you believe, as I do, that there is a segment of the market that is not strictly governed by the lowest price, and if you further believe that customers value products that deliver more value than what can be reduced to a number, then you believe there is an opportunity to create best-in-breed experiences for a handsome price. In this view, Apple’s focus on “making the best products” is perfectly aligned with their market opportunity.

To put it another way, is Apple concerned with making the best product, or with making the most money? The answer is yes.

And so they have.

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