Deep Dive: A Primer on Mag7 (Part 4)
What drives the Mag7's revenues and bottom lines? How do they allocate capital, and are they positioned for continued outsized returns? How should we understand them in relation to the market overall?
In 2011, I had just left Facebook under the assumption that I would start Social Capital and never work for anybody ever again. Then a recruiter reached out to me about a job at Apple, which I wasn’t interested in until they said it would report to Steve Jobs.
Once I heard that, I realized that not only did I want to work for Steve, but whatever job he wanted me to do, I would have done it just for the opportunity to work with him.
For years, I had watched Apple hit home run after home run while he was at the helm, releasing products that were so anticipated by people that they would camp outside the Apple Store just to be one of the first people to buy it. Beyond creating products that were best-sellers, Apple created multiple cultural phenomena over the span of years.
Later in the hiring process, I was told that Steve would become Chairman of Apple’s board and that this job would now be reporting to Tim Cook, and that Apple was heading into a “new era”.
What was this new era?
Tim Cook embedded an operational rigor that enabled Apple to scale production to sell hundreds of millions of precisely built devices with an extremely low defect rate. This resulted in Apple almost quadrupling revenue from $100 billion to $391 billion over fourteen years, and just as impressively, increasing margins at the same time.
As a continuation of our analysis of Nvidia/Tesla (Part 1), Meta (Part 2), and Google (Part 3), this week we’re continuing the discussion on Apple. If we’ve done our job right, this work should impart an essential and durable understanding that stands up to the daily noise and chatter surrounding the company.
I’ll explain the core operating principles under Steve Jobs and Tim Cook, the multi-layered moat Apple has built, and why Apple has been unable to ship Siri 2.0 and what that means for Apple’s long-term trajectory.
The rest of the Mag7 chapters will come out later this month (two remaining: Amazon and Microsoft).
Hope you enjoy reading.
Chamath