A twitter follower notes

Karl Smith (@ModeledBehavior) has a quixotic focus on Apple’s cash reserves. https://modeledbehavior.com/2012/03/14/iphones-and-oil/

It’s tre bizarre.

Apple does loom large in my thinking for a number of reasons.

One, Apple revenue looks to grow by something $70 Billion this year. Expectations for nominal GDP growth are around $500 Billion. So, how one calculates Apple’s value-added to the US economy has a non-trivial impact on calculations of economic growth.

Two, Apple’s cash reserves themselves account for the otherwise puzzling question of Corporate America’s growing cash hoard. Cash hoarding plays a central role in some of our stories about business cycles and so watching and thinking about how it happens is a big deal for business cycles.

Three, Apple is sort of a test case for broad theories about how the New Economy differs from the Industrial Economy in terms of rent distribution, or how the gains from productivity enhancement are distributed throughout the economy.

Four, Apple is an interesting example of deep principle-agent issues and indeed issues about how the market functions. With Apple the numbers are so big it makes subtle forces come to life. For example, you can see the way Apple treats its customers and employees as its stakeholders.

I have said for a long time that this is not profit maximization. Other folks said, no it does sound like profit maximization but it is underneath. Apple will be a big test because if it burns down this big of a cash horde seeking ever better improvements and continued survival in an ever more competitive environment then that will be a huge blow to the profit maximization theory.

If I am right that firms are essentially creatures of evolution, not of intelligent design, then it should show up here.

Fifth, Apple is also a prime example of the phenomenon of demand side productivity explosion. The notion here is that there can be lots of technological change, but unless that change actually changes affects things that people want to buy it doesn’t really count.

I remember, the early stories Jeff Hawkings walking around with a block of wood and talking about how handheld devices could change our lives. I remember the Palm Pilot and I remember the – yes, they were obvious – discussion about how to attach a radio to it. That’s what we called giving a PDA, telephone capabilities at the time.

Yet, none of that made the leap to the big time, impacted people’s lives or buying habits until Apple. The causes and consequences of that are a big deal.

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