CNBC:
Warren Buffett is still a big believer in Apple.
The Oracle of Omaha was asked if he bought more shares in the technology giant after the end of the June quarter. “We bought just a little [more],” he said Thursday on CNBC in an interview with Becky Quick. Buffett explained that he loves Apple as an investment due to the power of its brand and ecosystem, not its short-term financial results.
“I do not focus on the sales in the next quarter or the next year,” he said. “I focus on the … hundreds, hundreds, hundreds millions of people who practically live their lives by it [iPhone].” He also called the iPhone “enormously underpriced,” saying that it’s worth far more than the $1,000 Apple charges.
“I have a plane that costs me a lot, a million dollars a year or something of the sort. If I used the iPhone — I use an iPad a lot — if I used the iPhone like all my friends do, I would rather give up the plane,” he said.
Shut up, Warren. I can barely afford an iPhone as it is.
“I can barely afford an iPhone as it is.”
Amen.
Not only this, the amount of use that $1,000 phone gets—hours on a basis—means it’s quite cheap amongst items one owns. It’s certainly less than the daily coffee many folks buy at Starbucks…
The luxury car, in fact, is much, much worse. Unless you live your life on the road (and, if you do, typically you don’t use a luxury car), your car spends the vast majority of its life depreciating in a parking garage.
In any case, I think Apple knows pricing and segmentation better than anyone, and they’re not going to change their calculus based on what Buffett—or Shawn—says. The big point here is that Buffett understands the tremendous value phones have over people today (as does Apple).
Be civil.
Sigh. What you, “Ghandi” and Buffett all miss is that hundreds of millions of people own and use iPhones BECAUSE they’re relatively affordable. If the iPhone was a $2000 or $5000 item very few people would have them and the value he sees would not exist. IT does exist because they’re priced well, allowing some people to buy one outright and others to pay reasonable installments.
Of course, that ALSO misses the point. Buffett could say that same thing about, say, the Samsung phones. Even more people use those and they’re priced similarly.
Eat your Wheaties.
Sure. Hundreds of millions more would also use it if it were even cheaper. For example, Apple’s getting killed in India due to the premium pricing of the iPhone. (Turns out, they don’t want tiny iPhone SEs. Who knew? :))
I think the value still exists irrespective of where on the demand curve the product is priced, and for the heavy users is probably more than how much your average phone costs. Ideally, Apple wants to price it just right for the subset of the market they want to buy in.
Again, I don’t think they’re going to listen to us anyway. 🙂
“Anyone holding a gun to your head forcing you to buy the most expensive
model of the iPhone? You do realize they sell a model for $350 right?”
Check your privilege, please. The only way I can afford an Iphone SE is by buying one used.
As Rick Gregory says elsewhere in this thread, the only reason Apple is able to sell hundreds of millions of iphones every year and make all those billions of dollars in profit is because they sell phones that cost far less than $1000 as well as phones that cost $1000 or more.
The fact that the iphone’s value by far exceeds its cost is not an argument for raising its price, and Buffet is an idiot for saying so.
The value exists (in Buffett terms) because of the massive user base which brought network effects that in turn have brought a vibrant app ecosystem, etc. The value to Apple has been that they have priced it high enough to make boatloads of money while also keeping it reasonably affordable to most people thus allowing the mass adoption in the first place.
An iPhone would not have the same value if, say, only 10m people could afford one – the network effect would not be the same, we’d have a less interested App Store and accessories like the AirPods and Watch likely would not exist because they wouldn’t make sense when selling into a comparatively small user base. Conversely, the iPhone’s value isn’t enhanced all that much if 1.5b people used iPhones vs 1b (for example). Yes, 500 million more users would be massive for Apple, but the network effects are not really different.
The value to the individual? Here’s where this quote doesn’t make that much sense. If Apple suddenly decided that all new iPhones would be priced at $5000 and up, I’d buy a good Android phone for a few hundred dollars and get substantially the same value. The value he seems to be talking about is basically the value of having a powerful smartphone in your pocket. I strongly prefer than to be an Apple iPhone, but it’s not like a good Android phone doesn’t bring me substantially the same benefits.
“Anyone holding a gun to your head forcing you to buy the most expensive model of the iPhone?”
LOL Anyone tell you that you lack a sense of humour?
“Do you also go bitch at Porsche for selling expensive cars? Complain about prices at high end restaurants? Luxury watches being too expensive?”
Yes.
“quit whining about the price and get a better job”.
LOL Thanks for the advice.
Hence my line at the end about “preaching to the choir”
Perhaps you should write better jokes
Buffet didn’t say Apple should raise the price, though. He was simply praising the value proposition for customers the iPhone represents.
Anyone holding a gun to your head forcing you to buy the most expensive model of the iPhone? You do realize they sell a model for $350 right? One that is still supported and will be supported when iOS 12 comes out next month? One that can be had for even cheaper if you go with a post paid plan? Or you can buy a newer model as a used one off a reputable seller because unlike Android, it will get software and security updates?
Do you also go bitch at Porsche for selling expensive cars? Complain about prices at high end restaurants? Luxury watches being too expensive? Did you even read the Buffet quote you posted? What other manufacturer sells consumer goods that provide so much value in daily usage as a mass-produced scale that still feels ultra luxury and ultra premium to hold and use? Name one besides Apple – you wont find another with the same combination of luxury and utility. That is what Buffet is getting at, not the $1000 price tag for the top model.
I know I am preaching the the choir here but these comments about $1000 phones are tiresome. Unless you are some poor soul in the third world or war torn country with poor prospects of upward mobility, quit whining about the price and get a better job, or patiently wait for the price to come down and then buy it.
It’s all a matter of perspective. But I think his point is not that they should charge more for it, but that its value greatly outstrips its cost to the user over time. And thus the idiot pundits who are outraged by its price are just stupid.
Sure, but two quick responses:
1. This is where market segmentation comes in (as has been mentioned before). No one is suggesting all iPhones be priced to their nominal value.
2. The $ value is snapshotting the iPhone *today*. The original iPhone was probably worth much less to the average owner (or potential owner).
Exactly this. I don’t know why people are getting worked up about it.
“Oh, hey, I predicted people would think I was an idiot.”
Well done, Nostradamus.
More like calling him out on a meme that was tired and lame a year ago before the iPhone X was even released. “OMG! Apple is teh expensive” meme is something usually posted on Business Insider articles. Expect better on an Apple focused site like this.
But thanks for your brilliant insight and contribution, Einstein
I wanted an iPhone for years before we felt we were in a position to get any. We waited and saved up a bit by using lesser tech.
I now have one; it’s a three-year-old iPhone 6. My smarter half has an 8. Both are great. So’s the $10/month MNVO carrier we use.
Besides, if anything is underpriced, it’s the broadband connection the phone is connected to, rather than the device itself.