Tuesday, February 1, 2011
The Trojan Horse In Your Pocket
Steve Jobs, CEO, meet Odysseus, Greek. Both had the same idea but in different times. Odysseus, you see, had the idea to build a wooden horse. The horse, a symbol of the city of Troy, was left outside of the city’s impenetrable gates. The same gates which had kept the Greeks at bay for ten years. The people of Troy – Trojans – seeing it and thinking it a gift of conciliation from the Greeks, couldn’t resist bringing it inside the gates as a trophy.
The rest, as they say, is history. The Greeks had craftily built the horse large enough to contain 30 soldiers, who emerged at night and opened the gates, allowing the army – which had appeared to the Trojans to have sailed away earlier – to enter the city. The Greeks took over the city and to this day a “Trojan Horse” evokes a sense of something benign, even treasure-like, containing something powerful, even nefarious, with powers allowing it to subsume or dominate its host.
Mr. Jobs & Company have created what is quickly becoming the Trojan Horse of our generation. The iPhone that sits in your pocket will, within the next three years, become so all-powerful, so enveloping, so important, that Apple will become the largest, most powerful company in the world. It will dominate multiple markets, be pervasive throughout your entire life and Apple logos will be as common as colored lights during Christmas. It will be everywhere and everything.
And everyone will love it.
Apple's stock, skyrocketing for the past two years, will take off like its afterburners had been lit with nitroglycerin. Once Wall Street realizes that the company has moved into a never-ending, ever-growing, durable flow of gargantuan revenue from now until doomsday, today’s $300+/share price will seem like a bargain.
Here’s why. There has been a technology hovering in the background of all mobile devices for years that has never been fully prosecuted called “near field communication” (NFC). It allows a device – phone, computer, key fob, whatever – to communicate with another device when held close to it… usually within a range of a few inches. NFC hasn’t really gone anywhere because manufacturers couldn’t agree on standards, nor was there one device ubiquitous enough to make a difference in the marketplace. Until now.
Rumors from highly reliable sources indicate that Apple will be building NFC chips into its next iteration of the iPhone. “So what?” you might ask. Here’s what: more than 150 million people around the world have iTunes accounts, which is essentially an account with Apple that’s tied into a valid credit card allowing you to purchase music, apps, video rentals, etc. But with an iTunes account tied to an NFC chip embedded in a phone that you carry with you everywhere, all the time, even when you don’t have your wallet with you, this is, no kidding, world-altering. You'll be able to buy much more than what's in the iTunes store. In fact, there's little that you won't be able to buy using your iTunes account and, of course, the iPhone.
Apple has more than $60B in the bank. Let’s presume for a moment that they take this NFC technology seriously. So they develop a payment gizmo that attaches to a cash register and, in typical Apple fashion, it also automatically handles all of the software issues to connect to the register, the merchant’s bank account, whatever. Now Apple takes a few hundred million dollars to seed the market and distributes these payment terminals, free, to every major retail chain operation and individual store with sales greater than $1M (stores with smaller volumes pay a nominal fee for the device).
(Let’s also remember that Apple already has a built-in nationwide network of strategically placed geeks that can help implement these terminals in every major mall or shopping center in the U.S. I mean, did you think those Genius Bar types were never going to get out from behind that counter?)
Now you have with you, in your pocket, all the time, a universal payment mechanism that requires no cash, no credit card, no additional device and no thinking. Instead of using your Starbucks card or a Visa to pay for your coffee you simply wave your phone in front of a plain black panel with an Apple logo on the counter. The Apple logo lights up and simultaneously the screen on your phone shows a message, “You are about to charge $2 to your iTunes account for coffee at Starbucks. Tap ‘OK’ to approve.” You tap, complete the transaction and the next person does the same. How much faster do you think the lines would move?
So in a couple of years this goes on millions, maybe billions, of times each day. You see Apple “iPay” terminals everywhere. There are iPhones everywhere. Lines accelerate at every fast food counter, coffee shop, parking garage and toll booth along with a complete, geo-located record of where, when and how much was charged; instantly available, of course, on your iPhone app. Speed – and I mean speed that puts a credit card to shame – becomes the norm. Credit cards and cash are out. Now anyone that carries a phone (and that's everyone) wants an iPhone with an NFC chip in it connected to an iTunes account. But mostly they want iPay and iPay is inside iPhones, like soldiers in a wooden horse.
And in the House of Jobs the cash register rings all day long. Taking a tiny percentage of the credit card transaction fee for billions of transactions every day, all over the world. Suddenly, the hardware is simply a means to an end. You are now a bona fide member of the Bank of Apple, all housed within the shiny iPhone in your pocket.
But the Trojan Horse we know as the i-Device holds much more in store. How about Apple building a complete, user-friendly remote control app for the iPhone (or iPad) that works best with Apple-branded TVs and peripherals? Or Apple buys Skype, with its base of 500+ million worldwide users, combines it with FaceTime and creates their own phone network over the Internet.
Then more magic begins. Apple purchases spectrum at auction from TV broadcasters who no longer need it because they're on cable and satellite systems instead and, voila, an instant Internet protocol-based phone network with free calls everywhere. You just pay for a data plan like your home broadband connection because, hey, it’s just bits traveling through the airwaves. Whether it’s an email, a payment or a phone call it all looks the same to a router, right?
But what doesn’t look the same is your phone. You look at it now and it somehow has changed shape. It’s no longer the elegant, glass-and-metal clad Museum of Modern Art-worthy sculpted electronic gizmo. Instead you see the shape of a large wooden horse.
And you smile.