On August 2, 2018, Apple made history by becoming the first publicly traded U.S.

company to be valued
at $1 trillion, as measured by market capitalization.1 In August of 2020, the company broke records
again by becoming the first U.S. company to reach a $2 trillion market cap.2

Apple (AAPL) hovered just below that level as of early October 2020.

Since 2010, Apple has been one of the most valuable companies in the world.3 It stayed at or near the
top for many years after that.4 The reason Apple is so highly valued is simple on the surface: the
company makes popular products with generous margins. However, a curious reader who digs a little
deeper will find mistakes, overthrown CEOs, and much more. In this article, we’ll look at the story
behind Apple’s success.

KEY TAKEAWAYS
• Steve Jobs and Steve Wozniak co-founded Apple in 1977, introducing first the
Apple I and then the Apple II.
• Apple went public in 1980, but Jobs eventually left—only to triumphantly return
several years later.
• Apple's success lies in a strategic vision that transcended simple desktop
computing to include mobile devices and wearables.
• Both performance and design are key drivers of the Apple brand and its ongoing
success.
From Apple I to Steve Jobs 2.0
Understanding why Apple became so successful requires looking back at its origins and history. From the
first Apple computer (the Apple I, which was just a motherboard without a monitor or keyboard) to the
latest iWatch, here is a brief overview of the chronology of Apple's innovative products.

Apple, founded by Steve Jobs and Steve Wozniak, started out in the business of kit computers with the
Apple I.5 This initial production run is popular as a collectible now. However, it will mainly be
remembered for helping the company get enough capital to build the Apple II in 1977—the same year
Apple officially incorporated.6 Wozniak primarily built both these computers, and Jobs handled the
marketing side.7

The Apple II drove the company’s revenue until the mid-1980s, despite the hardware remaining largely
the same. Apple attempted updates like the Apple III and the Apple Lisa, but these failed to catch on
commercially. Although the Apple II was still selling, Apple as a company was in trouble when the 1980s
began.

The 1984 release of the Macintosh was a leap forward for Apple. However, in the intervening years
between the Apple II and the Macintosh, IBM had caught up. Disappointing revenues from the
Macintosh and internal struggles for control led to Apple's board dismissing Jobs in favor of John Sculley
(some sources say Jobs decided to leave).8

In any case, Jobs worked on NeXT Inc. after leaving Apple. Under Sculley, Apple started growing its
product lines.
Sculley served as Apple’s CEO until 1993.9 During those years, Apple enjoyed strong growth. It created
new products, including laser printers, Macintosh Portable, PowerBooks, the Newton, and much more.
Apple products continued to sell at a premium, so the margins were generous for Apple and led to
strong financial results. During the same period, however, cheaper computers running Windows were
serving a far larger middle market, while Windows also benefited from powerful Intel processors. By
comparison, Apple seemed to be stalling.

Two CEOs, Michael Spindler and Gil Amelio, failed to turn the tide against the relentless spread of
systems running Microsoft operating systems.10 Microsoft's new operating system, Windows, was
becoming the industry standard, and the Apple Macintosh was showing signs of age. Amelio eventually
set about addressing some of these issues by buying NeXT Inc.—the company run by none other than
Apple founder Steve Jobs.

The Second Chance CEO

From the Macintosh onward, Apple has either been a reflection of or a reaction to Steve Jobs. In the
Macintosh, Apple was trying to create a machine that made computing simple and enjoyable. In
particular, Jobs was out to create a user experience that would convince everyone to buy a Mac.

Jobs believed a truly revolutionary product couldn't depend on customers’ needs and wants. He thought
customers could not understand the value of a product until they were actually using it. Unfortunately,
Jobs was ahead of his time in 1985—precisely 12 years ahead of his time.

When Jobs overthrew Amelio and took Apple's reins once more in 1997, the hardware had caught up to
his vision for all things digital. He launched the iMac with a strong marketing campaign featuring the
"Think Different" slogan. Although Jobs is often given credit for spending the money and time on
marketing, excellent marketing and branding have always been key to Apple's growth. The real
difference between the iMac and all the products preceding it was the beauty and design.

It was not a tower and monitor setup like every other PC on the market. The iMac almost looked like a
racer’s helmet photographed at speed, a colorful blur sweeping back from the screen. In 1998, the iMac
was the most aesthetically pleasing machine on the market. It was the computer no one knew they
wanted until they saw it. It was elegant and, thanks to the OS upgrade, it was user-friendly.

The iEcosystem
The iMac was just the start as Apple released a string of hit products that reflected the new focus on
elegance and user experience. These included the iBook, the iPod, the iPhone, the MacBook Air, and the
iPad. The iPod became the category killer in MP3 players, and the iPhone essentially launched and then
dominated the smartphone market. The iPad then somehow convinced millions of people that they
needed yet another screen to consume content.

All these devices were perceived as being better in quality—and certainly in design—than competing
products. Jobs was relentless on design and indoctrinated the entire culture of Apple into the art of
design.

The other point he brought Apple back to in his second tenure is the ease of use. After a few minutes of
using the wheel on an iPod or tapping icons on an iPad, these new forms of control became part of the
simplicity that makes Apple appealing. Now every product update from Apple is anticipated by the
media and the general public, in addition to the fans that the company had from the start.
More importantly, all of these products moved Apple into a new business model of creating a tight
ecosystem of hardware, software, and content. Apple didn't create iTunes to be a simple program for
users to transfer MP3s onto iPods, as was the case with many other manufacturers' offerings. Instead,
the company attacked the concept of an album by breaking them into songs that would be sold
individually at a fraction of the whole album's price.

The same process took place with software. Many popular computer functions could be done on Apple's
mobile devices using stripped-down apps—available, of course, on Apple's App Store.

Being the first big mover into many of these markets, Apple built the stadium and set the rules for the
game. When you pay for books, movies, apps, or music on an Apple device, Apple gets a cut. Of course,
this business doesn't generate as much revenue as selling an iPhone or an iPad, where the markup is
much more generous.

That said, it is the content you buy through Apple that locks many people into buying Apple again when
their i-devices get old. So the content part of the ecosystem pays off for Apple in the short-term and the
long-term. Once you migrate to Apple because of the design or the simplicity, it is the integration with
your content that keeps you there.

The Post-Jobs Era

Steve Jobs died in 2011 of pancreatic cancer.11 Serving as CEO until shortly before his death, Steve Jobs
turned the reins of the company over to Tim Cook.12 The post-Jobs era at Apple has nonetheless been a
success by most measures. Apple continued to be the dominant tech company in both market share and
stock price.

Some analysts feel that without Jobs as the creative force, Apple has become solely iterative in its tech
releases rather than transformative. The major release of the post-Jobs era has been the Apple Watch.
The firm also created Apple TV devices and launched the Apple TV+ streaming video-on-demand service
to go with it.

In the absence of a groundbreaking new product, Apple is heavily reliant on the iPhone's production
cycle to power its financial success. Critics say that without Steve Jobs at the helm, Apple has lost its
innovative edge in recent years and is riding on its brand to drive sales.

The company still produced some of the best products with the most integrated ecosystem. However,
the gap between Apple and competitors like Samsung and Google was no longer as pronounced as it
once was. Indeed, companies like Samsung were increasingly poised to take the lead when it comes to
product innovation in some categories.

Apple in the 20s

Apple's market capitalization reached new highs in 2020, as the company enjoyed some successes and
set new goals for the future. The company's revenue from wearable technology, such as the Apple
Watch, set new records.13 Apple's revenue from services also rose to record highs during the 2020 crisis,
as contactless payment options like Apple Pay became more popular.

Apple also announced two major changes to the Mac in 2020.14 First, Apple is transitioning the Mac
away from Intel processors to its own custom-designed chips. Apple's new processors are based on the
ones used in iPhones and iPads, making them more energy-efficient. The new chips have the potential
to give Apple's laptops longer battery life and more processing power than PCs.

Secondly, Apple is changing the macOS so that developers can make iOS and iPadOS apps run on the
Mac without modifications. That will dramatically expand the number of apps available on the Mac and
make it more competitive with PCs.

The Bottom Line

There is a fairly good chance that you are reading this article either on an Apple device or with one near
you. Maybe you are doing it on a MacBook Air while listening to an iPod touch and occasionally glancing
at the newest Apple Watch for alerts from your iPhone. The reason behind that—and behind Apple’s
success—is that its devices are beautiful to look at and a pleasure to use. That's why the company has
such a powerful brand and lofty stock valuation.

The marketing helps, and the media and fan frenzy never hurt. However, it is the quality of the products
that drive Apple's success. Add to this the iEcosystem that makes it much easier to stay with Apple than
try something new, and you have a company with what Warren Buffett called an economic moat. It
should not be surprising that Buffett invested heavily in Apple.