The other day, I used — no scratch that, I *invented* the word, Searsed. A friend liked my neology so much, she suggested I make up more new words. So, for all of you lovers of lexical innovation, I offer up the new word, Ofvone. It sounds like the silent T version of often but it means a whole lot more.
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When the stock market had its hissy fit, two talking heads on CNBC were debating the merits of Apple. Apple tumbled about 5% that day. For the month, Apple shares are down about 10%. They were way too late. Apple’s merits debate happened in Omaha, NE months ago.
Omaha, Nebraska is the home of Berkshire Hathaway – one of the world’s most interesting companies. It owns things like Geico and Heinz. It buys stocks in the companies Warren Buffett likes best.
Eight years ago, Berkshire Hathaway started to buy Apple Stock. They’ve held Apple stock a long time. Buying more, selling a little here and there. But, on balance, adding to their position. At the end of last year, BH owned $174B of Apple Stock. Did I mention that Berkshire Hathaway is HUGE?
You don’t just own one hundred and seventy billion dollars’ worth of something and forget it about. It’s not a set-it-and-forget-it Ronco chicken cooker sitting in your never-opened cupboard above your pantry that you bought when you saw it in a late-night informercial and just had to have it.
At the beginning of this year, Buffett started selling Apple shares. He sold a lot more in the second quarter of this year. He’s thought about it.
He didn’t invite me to Omaha to solicit my opinion. And, I didn’t pay $19M to lunch with him to give him mine. So, I can only guess what he was thinking. And, that guess is my new word ofvone.
In Hitchhiker terms, AI is a 42. AI is driving life, the universe, and everything. CNBC anchor made the free-rider case. Apple isn’t paying to buy or build AI. Compare that to Meta where Mark Zuckerberg plans to spend upward of $40B next year on AI stuff — data centers, chips, and power.
That certainly goes in Apple’s pro column. His counterpart, Jim Cramer, says that may mean that Apple may miss out on AI. That’s in the con column.
What David and Jim are really talking about is the tech’s version of who wins: content or distribution? Now, I’m on recent record as saying content wins when its scarce. Distribution wins when content is vast.
Here, the phone is the distribution. It’s how we get things. The things we want, like search and apps are ofvone. They have to pay a toll to get off ofvone.
Let’s look at search. Our brain defaults to Google. Except on my iPhone. There, I don’t think about Google. I just type stuff. Apple just sends all that queries to Google. Apple doesn’t just do that because it thinks we’ll like results from Google more than we’ll like results from Bing or DuckDuckGo or an AI-powered search service like Yes or Perplexity. Apple defaults to Google’s search because Google pays Apple $20B or so every year. We learned that last October as a part of disclosure in an ongoing court case. The words Google and Alphabet (Google’s parent) don’t show up in Apple’s Annual report. Weird, right?
Now, let’s jump into AI. Search is vast. AI is vaster. So, it stands to reason that if search pays a bundle to be bundled on your iPhone then AI will have to pay an even bigger bundle to be the premier AI on your iPhone. Granted, AI isn’t as big as search – yet. And, no AI company can afford to pay as much as Google pays. But… Google doesn’t pay a flat $20B. They pay about one-third of search revenue. So, the Apple’s toll for AI companies could be small and grow over time.
When it comes to who wins the ofvone battle – the companies that provide the hardware or the companies that provide the software behind the scenes, the ofvoners lose.
You have to figure Warren Buffett knows all of this and this-er. So, why did a smart guy like Warren Buffett sell Apple stock when it was getting ready to exact tolls on the next generation of services?
Well, one, we learned about Google paying Apple by accident last Fall. You don’t think that’s the first time the Oracle of Omaha learned this do you? And, two, Google just lost a lawsuit that charged they used anti-competitive tactics to remain the dominant search engine. There are two phones out there. Apple’s and Google’s. Google is the default on their phone. Duh. They didn’t disclose they were paying Apple. Tonight, that doesn’t look so good. Maybe they won’t be allowed to keep paying to put their ofvone stuff on-phone.
So, is it better to the phone or the stuff that’s ofvone? The phone. Of course.