How Many Laws Did Apple Break?

MondayNote ^ | February 8, 2015 | by Jean-Louis Gassée

[dr_lew]

Law 1: Larger size makes growth increasingly difficult.

Isn't this the Law of Diminishing Returns ?

[Swordmaker]

Isn't this the Law of Diminishing Returns ?

No, that's a different law. This is the law of large numbers. The law of large numbers says that to double the size of a business that is doing $100 you in $1 widgets only have to sell 100 more, but to double the size of a $10,000 business selling $1 widgets, you have to sell 10,000 widgets, a much harder proposition. The larger the first number of your large company, the harder it is to increase the size of the company. Apple broke that this last quarter.

The Law of diminishing returns applies to adding a single factor that in the microcosm may increase returns but as you increase that factor may not continue the pattern. For example, growing crops requires water. . . adding more water may give more crops or better crops. . . but too much water will give diminishing returns until you kill the crop. Another example is Oxygen. . . O₂ is necessary for life. . . and if you increase it, vitality will increase. However, increase it too much, vitality will decrease until you reach a point where too much O₂ is poisonous. Diminishing returns can be applied to inflation as well. . . if you subscribe to the pump priming of the Federal Reserve. A little inflationary oil in the economy is necessary to provide the currency to absorb the increased production of new goods and services. . . but too much can eventually kill value of the monetary supply. Diminishing returns.

[Swordmaker]

Moths to a flame type of thing.

I kinda figured with the title of the article and thread, this would be like waving a red cape in front of a bull. . . LOL!

[Swordmaker]

BTW, what is it about the letter "e" that makes companies lower-case or subscript it:

I think it has to do with the mathematical concept of e more than anything. It's Napier's or Euler's Constant. . . it's an irrational number almost equal to 2.7182818284590452353602874713527. . . and so on, and on, and on. . . like Pi only for logarithms. (1 +1/n)ⁿ approaches e as n gets larger. It's a very geeky number, just the thing geeks would tend to put in their logos. Especially in Ne, as a pun on that formula, and a gas that glows when excited.

[cynwoody]

I knew one of the FUD Packers had to be Gruber.

Are you referring to the Rodent of ObamaCare?

If so, that would be Jon Gruber, not John Gruber, who, it seems, is just a harmless computer hacker.

[PA Engineer]

If so, that would be Jon Gruber, not John Gruber, who, it seems, is just a harmless computer hacker.

I would change my name.

[cynwoody]

BTW, what is it about the letter "e" that makes companies lower-case or subscript it:

It's a reference to a subatomic particle which began to get really interesting in about 1906, when Lee De Forest invented the triode, a gadget for switching streams of submicroscopic e's, with the aim of transmitting information over long distances. It's been an upward trajectory ever since.

[dr_lew]

No, that's a different law. This is the law of large numbers. The law of large numbers says that to double the size of a business that is doing $100 you in $1 widgets only have to sell 100 more, but to double the size of a $10,000 business selling $1 widgets, you have to sell 10,000 widgets, a much harder proposition.

This seems to me ill posed.

It seems to me the proper question is the marginal return on investment. The law of diminishing returns says that it costs more to sell ONE more widget per day, say, if your selling 10,000 per day, than if your selling 100 per day.

[dr_lew]

Here's the Investopedia definition of The Law Of Large Numbers, pretty much along the lines of what you said. It's a different context than diminishing returns, but I think it rests on the same foundation. That is, there is always a limit to growth.

[Swordmaker]

It seems to me the proper question is the marginal return on investment. The law of diminishing returns says that it costs more to sell ONE more widget per day, say, if your selling 10,000 per day, than if your selling 100 per day.

No, you've got it backwards. Cost of sales per widget on 1 widget when you are selling 10,000 is probably a lot less than if you are selling only 100. That is economy of scale. Overhead for operations can remain the same. . . as the number of widgets increases, thereby the cost for overhead per widget goes down.

[dayglored]

> Especially in Ne, as a pun on that formula, and a gas that glows when excited.

Ah, yes... I once knew a Hawaiian girl named Nene, who glowed when excited. She was a gas. :)

[Swordmaker]

It seems to me the proper question is the marginal return on investment. The law of diminishing returns says that it costs more to sell ONE more widget per day, say, if your selling 10,000 per day, than if your selling 100 per day.

The cost to DOUBLE sales is far more expensive when you are selling 10,000 widgets, than if you are selling 100 widgets, not to just sell one more widget. There is where you are making your error. trust me.

[dayglored]

> ...the triode, a gadget for switching streams of submicroscopic e's, with the aim of transmitting information over long distances. It's been an upward trajectory ever since.

Ah, but it was not until the invention of the pentode ("e" being the fifth letter of the alphabet) that the transmission trajectory really took off. Numerous valve vendors repackaged their pentodes as tetrodes (a smoke-screen, especially if you took the screen above its rated voltage). The pinnacle of this technology was reached with the 807, which forced the anode to move to the top of the envelope (whence the term "pushing the envelope"). The "e" particles were never higher than in that fine component's plate cap.

All kidding aside, many years ago I had an RCA audio theater amplifier that used four 807's in AB push-pull-parallel. It was awesome.

[dr_lew]

Hmmm. The Wikipedia article on Diminishing Returns uses the example of adding workers to a factory, consistent with your statement. But what about building more factories? According to the “workers per factory” concept, there should be no problem with filling the earth and the entire solar system and galaxy with factories, but adding factories to the earth is like adding workers to the factory, is it not? There is always a saturation point.

[Swordmaker]

Let me put it this way. . . seeing as how your Freepname has a DR. to begin it, I will assume you are in the medical field. Let's further assume you have 1000 patients. The cost to bring a new patient in the door is $200 in advertising, outreach, patient spiffs, etc. That gets you 1001 patients. Cost, $200. To double your patient load,

However, to double your patient load to 2000 patients, you will have to increase your advertising, patient outreach, really up your game. . . and it may actually cost you a lot more to get to 4000 patients in advertising costs. However, your office expenses don't necessarily go up to service those patients. However, your per patient cost to bring them in the door went up to $250 because of the increase in all the effort you put in to double your patient load. Cost to get that extra 1000 patients was $250,000 . . .

One patient = $200 and little effort.

1000 patients = $250,000 and a lot of effort.

Do you see?

Now suppose you only had ONE patient. It still costs $200 to bring a new patient in the door. But you DOUBLED your patient load for $200. . . and you can perhaps do it in one day.

If you had 1000 patients, it would cost you $250,000 to DOUBLE your patient load. . . and it may take you a year or two.

That's the law of Large Numbers.

[Swordmaker]

Hmmm. The Wikipedia article on Diminishing Returns uses the example of adding workers to a factory, consistent with your statement. But what about building more factories? According to the “workers per factory” concept, there should be no problem with filling the earth and the entire solar system and galaxy with factories, but adding factories to the earth is like adding workers to the factory, is it not? There is always a saturation point.

Then you have to look at the ability of being able to supply the factories with raw materials. . . law of diminishing returns. At some point you will run into it.

[dr_lew]

Let me put it this way. . . seeing as how your Freepname has a DR. to begin it, I will assume you are in the medical field.

BAAANNNNNKKKKK! I am Doctor of Philosophy! In Physics! As I explained some years ago on this forum, this was an appellation assigned to me by a coworker, circa 1980, which was meant as a sort of a dig, but I liked it.

One patient = $200 and little effort.

1000 patients = $250,000 and a lot of effort.

Do you see?

Yeah, I see! $200/patient vs. $250/patient ... the Law of diminishing returns as expressed in patients per dollar !

[Swordmaker]

Yeah, I see! $200/patient vs. $250/patient ... the Law of diminishing returns as expressed in patients per dollar !

Only because you have to put more effort to DOUBLE. Each patient will be easier to get when the office gets larger because word of mouth grows. . . but the law of diminishing returns hits when the doctor's time gets too saturated to do a good job with each patient and they stop coming so billable visits go down. . . and patients flee to other offices. Diminishing returns.

The basic point is that it is easier and cheaper for the small office to double its business than it is for a large one to double its business. However a large business gets to take advantage of economies of scale in sales of widgets. . . but not necessarily on advertising. But advertising to bring in patients is NOT what a doctors' office is selling and is not what their sales are based on. THAT is billable services. Getting patients, customers, is a cost of doing business to sell services. Overhead. Patients are not the product.

[Swordmaker]

Yeah, I see! $200/patient vs. $250/patient ... the Law of diminishing returns as expressed in patients per dollar !

That is actually true. . . the low hanging fruit is cheaper to get, then it get's more expensive to get more. The first patients might only cost you $1 per patient (the cost of handing out business cards) and the last few might cost you $1000 per patient (Expensive banquets for specific procedures in which you dine 10 and get 1 patient signed on). However, the law of large numbers still applies in that getting from one patient to two is a hell of a lot easier than getting from 1,000 to 2,000. , but BOTH movements in numbers are a doubling of patient loads.

[cynwoody]

But the triode advanced the state of the art at the time.

E.g., around the time De Forest invented the triode, Reginald Fessenden was inventing AM radio. "AM" stands for "amplitude modulation", wherein you vary the strength of a radio signal to conform to a wave form from an audio source.

Fessenden's solution to the modulation problem was admirably brute-force: Generate a radio signal using a really fast (and heavy) alternating current generator and modulate the generator's output with a water-cooled carbon microphone!

In 1904, he got his alternator from General Electric. It was a 50kw model, designed by Ernst Alexanderson, operating up to 100khz. It was more powerful and a lot quieter than the spark-gap contraptions he'd tried earlier (with limited success, however). And, on Christmas Eve, 1906, it sufficed to produce the world's first AM radio broadcast.

De Forest's invention paved the way both for better ways to generate RF and better ways to modulate it.