Apple’s Grand Designs — CEO Daily, Friday 22nd December

December 22, 2017, 12:51 PM UTC

Good morning.

We tend to think technology is the source of lasting value in today’s world. But there are other companies—Google rockets to mind, or even Microsoft—that are stronger technology companies than Apple. And Apple is certainly not distinguished by manufacturing prowess—it outsources that. Nor does it dominate distribution networks—Amazon is king in that space.

No, what makes Apple Apple is something else: Design—the ability to create products and services that continually delight customers and help them bring order and coherence to the chaos of the digital world. And it is arguably that ability to design that has become the most important source of lasting competitive advantage in today’s hyper-connected, hyper-competitive economy.

In recognition of that, the January issue of Fortune shines a spotlight on 25 companies that excel at design. Apple is certainly one of them, and our story—Has Apple Lost its Design Mojo?explores how long that design edge can last. Others on our list range from shoemaker Nike to medical equipment maker Philips to banker Capital One to soft drink maker Pepsi. You can find the full list here.

For those eager to delve deeper into design thinking, Fortune and its sister publications, TIME and Wallpaper*, will be hosting a gathering of the world’s best design minds, called Brainstorm Design, in Singapore on March 6-8. You can learn more about the event here. Attendance is by invitation only, but as always, CEO Daily readers will be given special consideration. If you are interested in attending, shoot me an email.

More news below. CEO Daily will be dark next week, as we enjoy time with our families, but back in full force on January 2. Have a great holiday!

Other news below.

Alan Murray

Top News

In The Beginning Was a Misjudged Word…

John Schnatter, the founder of Papa John’s, said he’ll step down as CEO. The move comes less than two months after Schnatter complained about the impact of the NFL anthem protests on his business. The complaint was, to all appearances, entirely grounded in fact. But airing it without any reference to the broader concerns exposed Schnatter to outrage from both sides of the cultural divide, something that would be fatal for today’s CEO even if the stock price weren’t already 30% down for the year. Fortune

Away in a Merger Discussion

Boeing and Brazilian regional jet maker Embraer said they were in talks about a “potential combination,” a move that mirrors Airbus’s cozying up to Bombardier. Embraer needs the deal more than Boeing, inasmuch as the prospect of its big Canadian rival getting access to Airbus’s sales and marketing clout has very negative implications for it. For Boeing, the logic is less clear, not least since getting into bed with a company part-owned by a corruption-prone state creates numerous governance risks. President Carlos Temer has promised not to cede control of the "crown jewel" of Brazilian industry. Fortune

Slaughter of the Bitcoin Innocents

The dollar price of Bitcoin (note: we still can’t bring ourselves to talk about its ‘value’) fell by over 25% in less than 24 hours as a long-overdue correction arrived. We’d like to rationalize the moves, but that would assume a degree of rationality that we can’t quite establish today—beyond the natural instinct of winners to take their chips off the table in order to enjoy some peace of mind over the next 10 days. All at the expense of the last to jump on the bandwagon, obviously. Even so, the dip quickly found buyers: at the time of writing, it’s back at $13,388, up nearly 7% from its intra-day low. Most other digital currencies suffered similar fates. Fortune

Nunc Dimittis, Says Schmidt

Eric Schmidt is to step down as executive chairman of Google parent Alphabet. Schmidt tweeted only that he “can’t wait to dive into the latest in science, technology and philanthropy” and said he would continue “working with Larry (Page) and Sergey (Brin)” at Alphabet. According to the company, Schmidt will continue to advise some of Alphabet’s businesses such as its smart cities venture Sidewalk Labs. Fortune

Around the Water Cooler

How Silently, How Silently, The Wondrous Gift Is Given

Treasury Secretary Steven Mnuchin is to blame/credit with saving the carried interest tax loophole so beloved of hedge fund managers and private equity partners—the same loophole that candidate Donald Trump had pledged repeatedly to close if elected. According to various reports, Trump’s chief economic advisor Gary Cohn claimed to have pressured the Treasury repeatedly to kill the loophole, which allows a large part of remuneration to be taxed as capital gains (i.e., at a rate of 23.8%) instead of income (where statutory rates are nearly 14 percentage points higher). Bloomberg

Joy to the World! (Now Available as Backing Track on Facebook)

Hot on the heels of Google, Facebook signed a deal with Vivendi’s Universal Media Group that allows users to add copyrighted background music to their posts. Similar ones with Sony and/or Time Warner may follow. Bloomberg said the deal would cost the social media company hundreds of millions of dollars. The cost of sourcing original content is rising inexorably for the social media giants, but there is little if any sign of it squeezing margins—yet. Fortune

Joyful, Half a Nation, Rise!

Separatist parties kept their slim overall majority in Catalonia’s regional elections, in a stinging rebuke to Spanish Prime Minister Mariano Rajoy and his heavy-handed tactics to restore constitutional order. The result, on an 83% turnout, establishes beyond any doubt the legitimacy of the separatist movement, and puts the spotlight firmly on Madrid and the EU. The Spanish constitution’s lack of a fit-for-purpose mechanism to allow a legitimate separation is now a real problem, as is the EU’s blanket backing for Madrid. Fortune

It’s a Less-Than-Wonderful Battery Life

Apple was forced to defend itself against complaints (and now a class action lawsuit) over its practice of deliberately slowing down the performance of older phones. The company had released a feature that shut down iPhones without warning to protect their processors from damage by power surges. The lithium-ion batteries used in mobile phones struggle to deliver power consistently as they age. Customers claim it’s a scam to coerce them into upgrading their phones faster than they would otherwise. Fortune

[Summaries by Geoffrey Smith;]


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