LONDON: As Joni Mitchell sang in Big Yellow Taxi:
Don’t it always seem to go, that you don’t know what you’ve got ’til it’s gone.
Apple knows it now, from the abrupt fall in its share price last week as it admitted that customers in China and elsewhere are taking their time in buying new iPhones.
It was a wonderful streak while it lasted, as it has done (with some ups and downs) since the iPhone’s launch in 2007.
It is rare for people to replace an expensive consumer product every two years because the next model is so alluring, although the existing one still works perfectly well. That is about as virtuous a circle as any company can hope to achieve.
For a while, Apple gained all the benefits of planned obsolescence without any of the disgrace.
People rushed to trade in iPhones even though they still loved them — they lined up to proclaim their excitement at being allowed to ascend to the next level. No taint attached to Apple for making ephemeral goods.
“We want the man who buys one of our cars never to have to buy another,” Henry Ford said in 1922 of his Model T, a car that came with a repair kit for customers to keep it going.
The following year, Alfred Sloan of General Motors unveiled the 1923 Chevrolet, a car with an old chassis but a stylish design that started the Detroit tradition of the annual model upgrade.
Sloan’s approach won out over Ford’s in many consumer industries — companies realised that making durable products was a recipe for strangling their sales and opted for disposability instead.
By 1969, the US consumer replaced his or her car once every five years and goods from razors to lightbulbs were deliberately made only to last for a short period.
Despite the criticism of economists such as JK Galbraith, planned obsolescence worked for the makers of many products, especially oligopolies whose buyers had few alternatives.
But it had a downside: Customers got disillusioned with the shoddiness of products that degraded rapidly. Detroit was overtaken by Japanese companies making superior vehicles.
Apple is not guilty of plotting obsolescence. Steve Jobs, its founder, admired Sony for its meticulous design and high quality.
He was devoted to, even obsessed with, making exceptional products and selling them at high prices. It was genuine — he loved beautiful things — and it had the benefit of making Apple beloved and very profitable.
The iPhone had no sales problem because technology provided the obsolescence. The latter evolved so quickly that Jobs, and his successor, Tim Cook, could pop up every year or two to announce an even better model.
Apple could even upgrade older devices with the latest software — an iPhone 5s from 2013 runs on the iOS12 operating system — without stifling demand.
It suffered no penalty for being virtuous, but it is suffering now. Many people took up Apple’s offer of cheaper battery replacement for iPhones last year, and the latest cameras and chips in iPhone Xs are not alluring enough to prompt the leap.
The iPhone’s average selling price rose by 28 per cent to US$793 between 2017 and last year. Older models are good enough.
Apple’s revenue warning last week was prompted by iPhone owners upgrading their devices once every three years, rather than two, with an even sharper change in China.
Apple tries to “design and build durable products that last as long as possible”, Lisa Jackson, head of environment policy, declared in September and its customers are behaving accordingly.
What is to be done? Apple cannot convert to planned obsolescence in the traditional sense by making iPhones flimsier: That would diminish its brand.
It has increased its trade-in efforts, with Ms Jackson promising that older iPhones will be refurbished or recycled so its environmentally conscious users need not feel guilty, but that is unlikely to revive the old cycle.
This makes Apple more like Sonos, the streaming audio speaker company, which has a similarly devoted group of fans, although it is much smaller.
Sonos speakers are well built, expensive, and last a long time — 94 per cent of the 21 million Sonos products registered since 2005 are still in use. Rather than the upgrade cycle, it relies on enthusiasts adding more speakers.
That has iron logic: If you cannot depend on simply upgrading the core product, you have to sell others as well. Sonos keeps expanding “the Sonos system” and Apple’s wearables business, including Apple Watch, now has annual sales of US$10 billion.
When Apple launches augmented reality glasses, as it seems to be planning, it will diversify further.
But the iPhone setback, along with Samsung’s profit warning this week, marks the passing of a golden age for smartphones, when the speed of innovation and obsolescence made Apple one of the world’s biggest companies.
The action is now in artificial intelligence and streamed services such as games and entertainment.
The iPhone remains an enviable franchise for Apple but, as Ms Mitchell would put it, the paradise of its first decade has been paved.
© 2019 The Financial Times Ltd.