Copy Apple and Focus on What’s Important

In order to do a good job of those things we decide to do, we must eliminate all the unimportant opportunities.

This was the marketing philosophy of Apple, Inc. [NASDAQ:APPL] in 1997.

It’s because of this philosophy that Apple is still here today.

In 1985, Apple made their worst mistake. They fired their co-founder Steve Jobs. In a speech given at Stanford University, Jobs said:

I was out — and very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

It wasn’t until July 1997 that Jobs came back to Apple.  But what he came back to was a business that was starving.  Apple only had five weeks’ worth of cash left. Jobs went to work immediately. He began to streamline Apple’s product range.

Apple had wasted millions of dollars on non-core products, including printers, servers and digital personal assistants. Jobs tossed aside 70% of products made by Apple and focused on the 30% that was generating cash.

This idea to streamline the business didn’t just save Apple. It was also the basis for some of Apple’s most famous products.

Why do you think the iPod was such a success?

Apple discovered that 20% of the features on an MP3 player were used 80% of the time. So they decided to only focus on the 20% of features that most people used, improving on them to outmatch their competitors.

By removing rarely-used features, Apple was actually making the MP3 player more consumer-friendly. As you no doubt know, they soon came to dominate the market like never before.

The same principle applies to the iPhone. Commentators initially wrote the iPhone off. It didn’t have many of the features the BlackBerry had.

But the iPhone’s simplicity was exactly the reason behind its success. The iPhone focused on the 20% of features that everybody used more than 80% of the time. Apple made these features fun and simple to use, presenting them in a product that was both thinner and lighter than their rivals.

Less really is more. Even when it comes to investing.

80/20 investing

You don’t need a university degree or fancy trading software to be a successful investor. In fact, you don’t even need to be that smart. Warren Buffett regularly tells people that an IQ of about 120 is more than enough.

All you need to do is focus on what’s important.

OK, so what’s important?

Earnings, assets and cash flow.

All you need to focus on is the state of a business and its future prospects. That means you shouldn’t concern yourself with where global growth is heading, or what interest rates might do in the future. To be a successful investor, all you need to do is understand the business and its intrinsic value.

Regards,

Härje Ronngard,

Junior Analyst, Markets & Money

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Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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