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Tim Cook on shaping the future of Apple

Steve Jobs will always be synonymous with Apple. But shareholders have made more money under his successor, Tim Cook, than with the visionary Apple co-founder. When business historians look back and consider the difference between Steve Jobs’ first and second stint as Apple CEO, one important factor in the success of the second was his COO - Tim Cook. The man who took care of the basics and allowed Steve to be a visionary.

This profile from GQ has Tim Cook discussing the future of Apple in his own words. First of all, a note on his morning ritual - getting up at 5am and reading every email that has come through to his publicly available email address - sounds like a terrible way to set yourself up for the day. Straight into the problems and complaints of others. But it does keep him close to customer feedback on Apple products.

This article was written before the release of Apple’s new headset. But even still it offers plenty of insight into where Cook sees Apple’s future - from services, to new devices and maybe even self-driving cars (emphasis on maybe). In an era where loud, celebrity CEOs dominate Silicon Valley, Tim Cook is a counterpoint. And maybe a role model for his cage-match fighting peers.

Explained: Why news publishers across the world are suing Google – their biggest source of readers

Facebook and Google are butting heads with traditional news publishers. This story isn’t new in Australia, we were really the focal point after our previous government introduced the News Media Bargaining Code and for one day, no news publishers appeared on Facebook. But this story has expanded beyond Australia.

This year, Google changed its search results for Canadians. No longer can Canadians find local publishers on Google products after the Canadian government introduced a similar law to Australia. And it is not just new government regulations. Google has faced lawsuits from publishers in the United States, the United Kingdom, the European Union, Germany, France and Belgium.

These lawsuits are interesting. Some may argue that news publishers are biting the hand that feeds them. Google is the biggest source of traffic for all of these publishers and every publisher now has a team that specialise in the dark art of SEO (search engine optimisation).

In a recent lawsuit, Gannett, one of America’s largest publishers, explained why publishers are suing.

Further, Gannett allege that since 2009 more than 20% of all newspapers in the United States have closed and the circulation of the remaining daily and weekly newspapers have decreased by more than 40%.

Google, on the other hand, argue that they send at least 24 billion search queries to news publishers websites each month and that publishers receive 90% of the ad revenue generated through their websites. They argue they are a partner, not a predator.

Either way, this story isn’t going anywhere. News publishers continue to decline as Google and Facebook take more of the advertising market. We should expect to see more and more clashes, especially as new artificial intelligence chatbots deliver information directly to users which in turn take away valuable clicks to news publishers websites.

Rowan Street Capital: H1 2023 investor letter

Now here’s a result you’d be happy to share with your clients - Rowan Street Capital returned 78.5% for investors in the first half of 2023. Put another way, they almost doubled their clients money in six months. A huge result.

But, and there is so often a ‘but’ with these great results, you need to zoom out. Go back to their 2022 year end letter and the fund declined 61% last year. Or, put another way, Rowan Street lost more than half of their investors money in a year.

For investors that have been riding the wave of the past 18 months, you can guess the stocks Rowan Street have invested in: the once high-flying tech stocks. The four companies that have headlined their great result for H1 2023 - Spotify +103%, Meta +138%, Trade Desk +72% and Shopify +86% - were also some of the biggest losers in 2022.

This is a great read for those interested in fast-growing tech stocks. Because as Rowan Street make clear, the changes in the share prices for these companies had very little to do with business performance. Instead, these swings from one extreme to the other have been driven by the valuation multiple investors were willing to pay. It has been driven by psychology rather than business fundamentals.

In hindsight it is easy to look back and see how investor psychology was driving these big swings in share prices. In the moment, it’s a lot harder to keep our heads and remain long-term investors. Hopefully the more market cycles we live through and the more investor letters like this we read, we’ll be better prepared for next time. Because that is one thing we can be certain of, there will be a next time.

Michael Mauboussin: ROIC and the investment process

Michael Mauboussin is one of the most respected investing minds of his generation, and in this client note he writes about one of the most important investing concepts - Return on Invested Capital (ROIC).

ROIC measures how much profit a company makes divided by how much money the company had to spend to make that profit. In that way, it gives business owners and investors a view on what additional profit they can expect from each additional dollar spent in the business. Businesses and investors can then measure this return on invested capital against the weighted average cost of capital (WACC) to determine if an investment is worth it. (To explain that with an example, if a business can earn a 15% ROIC and to borrow money from the bank it costs 5% interest, then it is a worthwhile investment. If your return is 5% but it costs 15% to borrow the money to make the investment, then it is not worth it).

That is the theory. And as with so many things in finance, simple theories in textbooks become a little more complex in reality. Mauboussin and the team at Morgan Stanley have looked at public companies in the United States between 1990 and 2022 and examined the link between a company’s ROIC and the total return for shareholders.

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