Dave Danforth19.TIF

You work for a hot growth company. What does it take to stay on top? It’s a rough life, made simpler when you realize the truth: the only way to go is down. You aren’t going to stay on top forever.

Yet the bennies for being top dog are undeniable, mostly as ego food. Your stock has no problem selling, your stuff still sells like hot cakes and when the president needs a target to prod to bring more jobs “back home,” he points to you.

The truth is, it’s a long ways down, and a lot of what you fall through is just thin air. Apple has reigned as the largest U.S. company by valuation (just short of $1 trillion). Ever since Steve Jobs ran it (he died in 2011), the company’s emphasis has been not just on new stuff, and getting you hooked on something you never knew you needed. Sometimes it was just eye candy — in just the right hue. Each new Apple machine or phone was pretty, right down to the color combo.

So when Apple stock flirted with bouts of free-fall recently, it spooked plenty of people. Even if you owned no Apple, if you owned any stocks or funds at all, you owned plenty of Apple. Even Warren Buffett’s Berkshire Hathaway, a sort of anti-Apple, owned plenty of it. Buffett, long a doubter of tech stocks, had loaded up. That, and he liked its color combos.

Nothing you noticed on the ground accounted for the swoon in Apple’s stock price (it flirted with a 30 percent drop). It was entirely in the math. Growth, for a tech company in particular, is the holy grail, pushing the price up markedly. When Apple CEO Tim Cook noted a marked weakness in demand for Apple phones in China, that did it. It’s hard for you and I to fathom the numbers: He warned of an $84 billion drop in revenues next quarter. Economists have been warning about weakness in China’s economy, where one-fifth of Apple’s revenues originate.

Business schools preach that the value of the stock represents the sum of the present value of its future gains. Whatever. Something was tanking at Apple, and soft landings come at a steep price in Silicon Valley, where Apple’s futuristic satellite-shaped headquarters sit.

Yet a wisp of wind — not even a gust — can knock a high-flier off its perch, often with little advance hint. Top restaurants often begin a downward spiral through word of mouth, where the restaurant is the last to hear the whispers because it’s not set up to listen.

In high tech, any threat to the rate of growth can shoot a high-flier out of the sky. The winning streak is going to pause sometime. Steve Jobs, already tossed out of Apple by its board in 1985 for being himself (prickly and difficult to abide, though the actual decision came down to a product pricing squabble), returned in 1997 with his usual crazed fixation for detail. He paid first attention to the “product,” figuring “corporate culture” would follow. Jobs was widely credited with birthing the iPhone, where his prickly marriage to detail showed. At one point, he pitched a fit in search of Chinese manufacturers who could make a special brand of shatter-proof glass he demanded.

Cook, Apple’s next CEO, carried on the tradition, but where would he go? Apple’s reputation attracted designers and engineers, and the company was able to continue to churn out new iPhone models. The average Apple user keeps his phone between two and three years. A slight change in that state can carry huge implications for Apple, and it did.

Apple walked a fine line all along. It needed a support system that evoked fierce customer loyalty, but loyalty keeps users glued to their phones and can keep them from switching.

Apple then tried what B-schools called “product extension,” up-charging for small improvements in existing phones. Then prices shot up, provoking lots of experimentation with mixed results. The wisdom of a $1,000 iPhone would be questioned.

The largest tyranny with a hot product is “market saturation.” Apple’s growth — and that of competitors — was supercharged by young (very young) new users becoming introduced to its products. But that trend slows naturally when the market gets saturated. Even the huge iPhone market was reaching the point where everyone who could afford a model all over the world had one in markets with advanced cell service. From there, it was a question of ‘product extensions’ and pricing. It would could only go so far.

Few mathematicians or soothsayers can offer more than educated guesses about what happens to Apple, or the three or four companies who have muscled it out of the top valuation spot. Some betting is centered on content; some on the coming 5G market. Very few talk about a shiny new product. Few remember the revolution that gripped Mac sales when Apple insisted on one rollout with five gorgeous colors.

Apple has many levers left to pull. Most of high tech is rushing to stay ahead of artificial intelligence, with some jumping into driverless cars and others into TV content. Few know from where the next certifiable breakthrough will come. But we’ve long since stopped betting against it.

Columnist