A blog which periodically revisits evergreen investment principles!

Is New Really Better?

Is New Really Better?

The fundamental impulse that sets and keeps the capitalist engine in motion comes from the consumer’s goods, the new methods of production or transportation, the new markets, the new forms of industrial organization, that capitalist enterprise creates.

– Joseph Schumpeter

I love Apple products. But that’s not what this post is about. It’s about a very interesting concept which we all fall prey to at some point in time. We (humans) always crave new experiences. In fact as Schumpeter says in the quote above, making new things is a sign of growth. What he doesn’t mention there & is perhaps hidden between the lines is that it only works when we’ve mastered the other things we’re previously good at. New for him meant incremental.

We don’t generally think of New as incremental (only good investors do that). We treat anything New as different. An experience that is beyond what we have had before. It becomes fascinating in that case to study a situation where something old was taken & modified to make it New. We crave for an analogy to copy+paste our experience on to something new, to make us feel like we have somehow crossed a multidisciplinary chasm. The question, like in the Ship of Theseus, remains whether that object is really New or not?

Of course, I’m talking about the iPhone SE. It retains all the external features of the ‘older’ iPhone 5S but at the same time has a totally modified internal hardware which makes it almost at par with the flagship & ’newer’ iPhone 6s. Now why would someone do such a thing?

Despite having learnt in behavioural sciences that New (different) things attract people’s attention, why would a company, which is proud of its ability to launch great products, decide to tinker with such a fundamental rule? We will find out the answer to this question soon enough when the June Quarter ends and they officially reveal the shipment volumes of this product. But I don’t believe that this is a mis-guided move at all. I think this is a calculated move to bring back the real charm of Apple products, extremely functional, user friendly, moderately expensive & the buy-me-right-now quality.

Apple is turning into a luxury brand with fascinating products at the top end. Whereas there is this huge middle market which craves for the same technology & has very limited ways to enjoy the latest features due to prices of these devices. Now with the discontinuation of carrier financing in the US, people will have to find their own financing options to buy at retail price.

By its move to launch the iPhone SE, Apple is reinventing its image into the Old Apple. There is a chance that this subtlety might be lost on the customers & the investors, but I like the fact that Apple is willing to take that chance.

The reason I wrote this post is not to rant about something I’m already biased about. It was to highlight the subtle shift in our minds (or at least in my mind) about how New (different) ideas drag us out of our comfort zone & at the same time alienate us from our previous portfolio positions. Since we already own something, we have the case half figured out. If it’s an investment, we secretly wish that it has to go no where but Up. So now that we have reassured ourselves of that expected reality, we go on to hunt for New ideas that will fit our ever so meticulously designed checklists. While we are at it, we might forget to look upon our existing ideas in greater detail & continue to test their validity. If we own a position then we have to literally become the best analyst out there for that particular position. Since we run diversified portfolios, we have to amplify that feeling across all our holdings.

What we can learn from Apple is that they are using that ability to test if the market can still recognise the Apple they really were & they’re willing to take that chance by releasing a product so radically old that it is almost New in every way. They’re are willing to re-visit what makes Apple, Apple in the same way as every investor must re-visit their portfolio stocks to see if they still represent the image of reality that they’d pictured. Otherwise, just like a volume drop of one of the most profitable consumer electronics product ever made, our portfolio might suffer an unbearable shock which can take decades to repair.

Further reading: Novelty – A History of New by Michael North (an odd book that takes a look at how & why New things fascinate us).


Learning Business from Moby Dick


Great Conversations


  1. As always a good read. Thanks for the new book title. 🙂

    • Thanks Mihir.
      It’s an interesting book. I hadn’t read much about the behavioural impact of New things, so I found the book quite fascinating.

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