ill Gates said we
“overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”
To prove that, here’s a picture of what Microsoft’s nemesis, Apple, had on their homepage nearly twenty years ago, on 5 April 2001.
Who remembers iTools and iCards? Me neither but more pressingly, the company’s share price had fallen nearly 70% in twelve months. You could buy an Apple share for $1.47 at the time, which looks a bargain price today but didn’t seem such a great deal at the time.
The company’s two-year future looked bleak, and no one predicted what would happen over the next ten years. Not even Apple.
Back then, they made almost all their money from selling computers. In their annual report, Steve Jobs projected we’d enter
“a new era in which the personal computer will function for both professionals and consumers as the digital hub for advanced new digital devices such as digital music players, personal digital assistants, digital still and movie cameras, CD and DVD players, and other electronic devices”.
His forecast came true, just not in the way he expected. Apple ripped up its business model to make a phone which did away with personal computers, music players, and cameras. Today, they make only 10% of their money from computers, and over 60% from phones.
Apple’s lessons for investors are important.
- Building an investment plan around how you think the future will unfold is tough because even companies which shape the future don’t know how they’ll do it, beforehand.
Winston Churchill put it this way: “It is a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time.”
- Secondly, embrace uncertainty because risk and return are linked. Buying Apple shares at $1.47 was painful, but it got worse because two years later they were $0.95. You don’t get great returns if you’re not willing to take on pain. And the more return you’re after, the more pain you’ll be subject to.