Since 2011, Apple has been the world’s biggest company by market capitalization on almost a daily basis, dropping on occasion to second place. When it first took the title, Apple was worth a bit under $340 billion. By this past June, it had become the first company in history with a market cap of $3 trillion. The company’s rise and continued dominance has been fueled by innovation, elegant design, and a maniacal focus on getting the small details right.
Microsoft has long been the anti-Apple. No one would call Windows elegantly designed. No one who has ever used a Microsoft product would accuse the company of a maniacal focus on the smallest details. As for innovation, many of its products have been me-too copycats that became successful largely by piggybacking onto Microsoft’s worldwide laptop and desktop operating system monopoly of Windows.
But there’s a very good chance that sometime in 2024, Microsoft will overtake Apple in market capitalization — and keep that lead for the foreseeable future. And it will do so based on innovation, while Apple contents itself to milk an aging product line for bottom-line results.
The main reason for Apple’s success: Steve Jobs
It’s no secret that Apple’s startling success was built on the singular vision of Steve Jobs. The company’s most important products, from the Macintosh to the iPod, the iMac, the MacBook, the iPhone, and the iPad bore his unique imprint. It wasn’t that he envisioned new products from scratch. The Mac, for example, was released three years after the IBM PC. And Microsoft had a mobile operating system called Pocket PC and then Windows Mobile as early as 2003 — four years before the iPhone launched.
Jobs was able, though, to reimagine existing products, to recognize how people wanted to use them (even before people themselves knew it). The products he created transcended their functionality, and were beautiful to look at, touch, and use. You might pick up any of them, not necessarily to get something done as much as to revel in the pleasure of using them.
It’s rare you’ll get pleasure from merely using something Microsoft built. Windows Mobile, for example, was as dreary an operating system you’d ever find. Essentially, it was an attempt to put Windows in a person’s pocket, was unpleasant and difficult to use, and didn’t even run downloadable apps. With better software and top-grade hardware, the iPhone was everything Windows Mobile wasn’t — sleekly designed, something you couldn’t wait to get your hands on, and once you did, something you couldn’t stop using.
After the iPhone launched in 2007, it added countless billions of dollars to Apple’s bottom line, and is the main reason Apple is the world’s largest company today.
Tim Cook has been an excellent shepherd of the work Jobs initiated. He’s a classic technocrat, increasing efficiency, targeting new markets, wringing every last dollar possible out of Apple’s products. But he’s no visionary. Under his leadership, there have been no groundbreaking new products. Yes, he launched the Apple Watch and AirPods. But neither is a game-changer. Neither transformed the tech world and the world itself the ways Jobs’ products did.
Apple’s former Chief Design Officer, Jony Ive, who worked alongside Jobs on his most transformative products, explains the difference between Apple under Jobs and Apple under Cook this way: Under Jobs, the company “made products that had changed the world.” Since then, the company’s focus is instead about “making a f****** ton of money.”
Ive didn’t have that quite right, though. Products that change the world ultimately are more profitable than products designed only to make money. And that’s the problem Apple has today — no new world-changing technology in sight. (Though Apple’s Vision Pro headset, due out in ’24, could certainly shake up the AR/VR market.)
Microsoft’s soft-spoken visionary
Microsoft has followed a trajectory that’s the exact opposite of Apple’s. The company was built on grunt work rather than vision. From the beginning, founder Bill Gates cared more about making as much money as possible, as quickly as possible, than he did about groundbreaking ideas or the elegance of his products.
Jobs always had an acid tongue when it came to Gates, notably saying once: "Bill is basically unimaginative and has never invented anything…. He just shamelessly ripped off other people's ideas."
There was a great deal of truth in that. But Jobs also recognized that Gates was probably a sharper businessman than he was, offering backhanded praise like: “He really never knew much about technology, but he had an amazing instinct for what works."
Microsoft’s second CEO, Steve Ballmer, cared even less than Gates about products. He and Gates used Windows as a blunt-force object to squash competitors and grab share in other markets. But doing that only worked for so long. Ultimately under Ballmer, Microsoft stagnated and then foundered. The reason was simple: the world left it behind. Google launched a search engine and browser, and Microsoft couldn’t compete. Apple built the iPhone, and Microsoft couldn’t compete. With no groundbreaking products, it was headed for a long, inevitable decline.
That is, until Satya Nadella took over as CEO in 2014. At first, Nadella seemed to be a classic technocrat like Cook. He dispassionately examined Microsoft’s product line and killed off loser products, notably the company’s multi-billion-dollar money pit Windows Phone. He recognized the future was in the cloud and doubled down on the company’s cloud-based products, as well as making products like Microsoft Office (not Microsoft 365) cloud-based.
That turned the company around. But it isn’t enough by itself to make Microsoft the world’s largest company. That’s where the soft-spoken Nadella showed he can be as much a visionary as a technocrat. He recognized that artificial intelligence (AI) is the future and bet big on it — $13 billion in investments in OpenAI alone, and who knows how many more billions internally. Ultimately, AI will be used in every Microsoft product, those that exist today and those that will exist in the future.
One estimate says AI will generate $12 trillion by 2030. Microsoft, currently the AI leader and likely to continue its dominance, will reap the most revenue from it. Combine that with the company’s significant cloud presence, and it’s likely that some time in 2024, it will pass Apple as the world’s largest company based on market cap.
Apple won’t be able to catch up unless it comes out with a ground-breaking product, which is unlikely under Cook. Because ultimately in the tech world, it’s more about vision than it is about efficiency.