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What if you had bought Apple stock instead of that iPod? (kyleconroy.com)
161 points by Derferman 2524 days ago | hide | past | web | 85 comments | favorite

Or Jobs health situation could have been worse, the company could have died, the iPod could have ended up blowing up in peoples pockets.

What if's are always interesting in retrospect. I invested in apple last year at around the same time, made a small chunk of cash after a month, got out and never looked back. Had I left it there I'd be driving a bmw, assuming history would have unfolded exactly as it did.

Thats the reason I tend to avoid tech stocks. Its not possible to say if a product will work. Yahoo was doing so well till Google came along. I wouldn't invest in Google though (for the same reason) even though its a great company and I love the innovations they have brought in. I tend to stick to boring stocks like soaps, car batteries, paints etc. Its worked well (with buy-and-hold) so far.

Adjust for inflation (2.8% mean for 1997 to now [1]) and the $330k value of a PowerBook goes down to $230k in 1997 dollars.

[1] http://www.wolframalpha.com/input/?i=US+inflation+from+1997+...

Yeah, but you wouldn't have those dollars in 1997, you would have them now, after the stock has appreciated. Inflation is rolled in to the stock price in this comparison.

Just as an idea: what if YC companies all offered stock to HN users as a complete, or portion of their next investment round. So if 15 users put in $5000 each, that's $75000 - enough for another 6 months runway at least, and they could probably set the valuation higher than they would with a VC. Also, these could well be value-added investors because of the skills, feedback and experience presented.

Yes! Why we haven't done this yet?

Because most Hacker News users aren't accredited investors (in the US, $1 million net worth, or $200,000+ annual income for 2 years running.) I imagine it'd somehow be possible, but it's legally messy.

On the other hand, I imagine it'd be possible to put together a well-sanctioned group of accredited angel investors that would be able to do like a "YC round two financing" if need be. It'd be pretty interesting.

For argument's sake, giving 15-25 hackers my business plan for their perusal is a risk in itself. There'd have to be some thought put into how much is revealed, and under what circumstances.

You could get around accredited investor rule by having the founder form a contract with each investor. "Whatever profit and earnings I make from startup A, you have xx% up until the year 20xx." In this way, there is no interference in the startup's balance sheet, although there should be some indication of a cash injection by the founder due to their relationship with the hackers.

Offering stock to members of the public is an "initial public offering", which in itself costs millions of dollars just in regulatory costs. Yes, we're still members of the public, except for the millionaires among us.

No, it's bootstrapping from friends and acquaintances who are known within this online community, both in readership and interaction.

It really does make sense for hackers to support each other in this way.

No, it isn't. As others have mentioned, most HN readers and YC founders are not (yet) wealthy enough to be accredited investors. If you were to try to treat it simply, you would wind up in serious legal trouble, and possibly in prison. Selling shares to any non-accredited investor, who is not a founder, requires dealing with a lot of legal issues, and potentially opening yourself up to significant liability.

The side effect of this law intended to protect people is that the average person can no longer participate in the highest growth sectors of the market. The rich get richer, and the poor don't have as much choice in their investments (and once a company has gone public, its astronomical growth is probably over; it's very rare for a company to be as successful as GOOG or AAPL, and even those, if you'd owned stock pre-IPO, you'd be incredibly wealthy today).

I would love to be able to invest in some of the YC companies, other than my own, but I don't have that ability yet. But, the first few rounds of YC companies have produced some accredited investors already, so the circle of available investors who "get YC" is getting wider.

You could get a personal loan from friends and family, and then roll the money into the business, but you can't sell shares without dealing with the extra paperwork and liability.

Being an accredited investor to invest less than $10,000 in a small web startup sounds ridiculous to me, especially if one has good knowledge of the startup's business environment and a rapport with the founders. If it's the law, so be it, but there'd have to be a legal workaround for hackers to connect with another hacker's startup financially.

This must be Deja Vu, I remember having a conversation with you about Barack Obama after his election win in a thread where I lost over 60 points.

-- I wonder how bpick is able to invest legally in this case, because I don't think he fits with the accredited status but is still looking for investments.

Yes, it is ridiculous that you and I can't invest in our friend's companies without significant enough hassle that no small company would be interested in such investment (I wouldn't take money from non-accredited investors, even if we really needed money). I'm sure I'd do better investing in Dropbox and Weebly and Wufoo than I would investing in the stock market in general.

I don't recall a conversation about Barack Obama, but I talk a lot, and I don't remember everything I say, so it could have happened. Anyway, I think it'd be a great reform of our investment law, if normal people could buy stock in small companies, without all the hoops and craziness required. This is particularly true now that IPOs are so much less common; it takes years before normal folks have the right to invest in a new company. SOX has eaten up even more of the extremely rapid growth curve of new companies, from the perspective of regular people.

On the other hand, if you opted for the Nomad back in 2001, you definitely made the right choice vs. buying stock in Creative Labs.

Ha - I replaced my 32MB Diamond Rio with the whopping 64MB Creative Nomad as soon as it came out. I remember trying to solve the knapsack problem manually, just to squeeze as many total seconds of music onto the thing as possible. On reflection, I was probably a slightly strange 13-year-old.

The thing you learn in stock trading is that you never rue missed/mistaken investments. Otherwise you will spend all the time doing this :)

I guess the point of this comparison is showing what's smarter: investing or buying junk.

Buying junk, clearly. I'm guaranteed to get considerable value out of a computer, whereas $2000 of Apple shares could well have been worthless.

Try squeezing considerable value out of your iPod. It's much more likely that it will squeeze value out of you. You are still better off with 0 dollars in worthless stock.

I think that's disingenuous; and is the same point pg makes when he explains that wealth != money.

Take me for example; my nano has barely left my side for the last 2 and a bit years - I work best with music around :) it's worth a lot.

And the beer I drink also improves my coding skills, and the coffee and the nicotine.

Stop trying to pass your costly and possibly damaging addiction as something that improves your life and brings you value.

I guess I'm asking to get heavily down-voted but I'm not all that into music. I know some coders that can't work without radio but radio is a torture for me when I try to concentrate. I even read about one guy that thinks that he codes best when he has TV on (spidweb guy, you have to give it to him that he makes amazing stuff all by himself, but I personally think he would have no problem concentrating with pack of buffaloes running over his body). I tried once coding with TV on and I lasted a minute before It drove me nuts. I can bear songs if they are in language I don't understand.

I know that some people have better or worse resistance for distractions but I can't believe that some people concentrate better with distractions than without them.

You are generalizing from one example -- because this is how you are, this is how everyone else must be. This is fallacious, for obvious reasons.

> I know that some people have better or worse resistance for distractions but I can't believe that some people concentrate better with distractions than without them.

Why can't you believe that? I personally find myself completely incapable of concentrating in silence. You think the music, or tv, or whatever is a distraction, yet for me it's sorely needed to drown out my own diverging thoughts. I need the constant distraction, or I will very soon find myself thinking about or designing something completely different from what I was supposed to be doing.

What kind of environment you need to be able to work is, however, is not really that important. Much more important is learning not to generalize from yourself. I am utterly dumbfounded that this is not taught in schools at an early age -- I find understanding that you are not me to be one of the crucial life lessons needed to turn people into decent human beings.

Please read at least the 10 first paragraphs of http://lesswrong.com/lw/dr/generalizing_from_one_example/ , it won't take that long, and for a lot of people I know reading it has been a real life-changing experience.

I agree that generalization from one instance is wrong. But you can't assume that every case is different because if you did that then science could not exists. If you would assume that each subsequent item would fall different way there would be no point in searching any universal law of falling.

You construct theory about something with the data you have, and try to gather more data and see how it fits. Especially you look for the data that doesn't fit.

As I live my life I gather data and construct theories. I shared with you with one of my theories that seems to check up so far.

Namely: Music helps you the same way that glass of whiskey helps some doctor, cop or worker of printing press to deal with dull and stressful job.

In my opinion it creates an illusion that it's beneficial for you, same way as you feel better after drinking coffee or alcohol.

You get accustomed to music, listening to it makes your brain addicted to such stimuli and when you abstain from it you have trouble concentrating. That's why you have such trouble concentrating without music.Music gives you value. It only satisfies your addiction. You can argue same way that nicotine gives you value.

The inherent problem is as follows:

I have observational evidence of people who like the strictest of silence to work. They are unable to concentrate with even the slightest amount of noise in their environment - they are, applying your theory, addicted to silence.

The other problem is that addiction is a difficult study; you can't sync your theory with nicotine or alcohol because those sorts of addictions are metabolic - in that there is an actual physical/chemical addiction.

And, finally, if you are right and music can be addictive - what's the problem? It's entirely non-harmful, no side affects and helps you concentrate. It sounds like the ultimate drug :)

You've constructed a very strange theory :)

> I agree that generalization from one instance is wrong. But you can't assume that every case is different because if you did that then science could not exists. If you would assume that each subsequent item would fall different way there would be no point in searching any universal law of falling.

Yes. But plural of anecdote is not data. How you use music is simply not good enough to base such a huge "theory" on.

> Namely: Music helps you the same way that glass of whiskey helps some doctor, cop or worker of printing press to deal with dull and stressful job. In my opinion it creates an illusion that it's beneficial for you, same way as you feel better after drinking coffee or alcohol.

This would assume that I need the constant distraction because my job is particularly dull or stressful, and I need the pleasure derived from music to be able to bear it. But how does it compute into your theory that 1) I don't need it to be music, or in any way pleasurable. Anything that contains more parseable data than the A/C hum is good enough -- when I still worked in an office, the constant background "chatter" was good enough to keep me sane. 2) This does not apply to me just at work, but on anything and everything I do. To take a very extreme example, I am not able to derive pleasure from sex without something keeping me distracted enough to stay in my mind.

> You get accustomed to music, listening to it makes your brain addicted to such stimuli and when you abstain from it you have trouble concentrating. That's why you have such trouble concentrating without music.Music gives you value. It only satisfies your addiction. You can argue same way that nicotine gives you value.

This assumes that what I want is music -- but this is not just true. I'm fine with anything I need to spend some thought on parsing. A lot of the distractions I commonly use to keep myself grounded are in fact in no way pleasurable.

Now you have been provided with more data, please update your theory. :)

I can't believe that some people concentrate better with distractions than without them.

Personally, I last 2 or 3 times longer when doing anything mental if I have music playing. Easily. I'm also happier.

Trying to pass your beliefs off as our experiences is doomed to failure. There's always an exception, often millions of them, if you look around a different corner than you live on.

Substitute music with drink and imagine that your job is a doctor.

I'm just trying to point out that there is a possibility (a bit far fetch I agree) that listening to the music while you work is kind of mind numbing mild drug that maybe helps you to suffer through the drudgery of workday but it might be harmful to your ability to concentrate and the value of your work.

Oh man, I thought you had a valid argument - though one I disagreed with - till the last two comments.

Basically your argument has become along the lines of: you don't like music and therefore anyone that does has a "problem".

I personally can't comprehend people who work in silence! But I'm not judging people who do; just as music works for me, silence works for others. You've assumed silence can't be a distraction which, from my perspective, is wrong.

> Stop trying to pass your costly and possibly damaging addiction as something that improves your life and brings you value.

All in all you lost me at that... how rude.

Drinks != music. Alcohol is known to slow reaction time and cognitive skills.

Instead of substituting music with drinks how about wonder if doctors also listen to music while they work. When I was pre-med (prior to becoming compsci) I went and observed a few surgeries. The surgeons were some of the most focused, professional people I've ever met and they had music playing in the OR. Go figure.

First off tasty beer, and coffee both improve my coding skills, and my quality of life. As for music, you may not like it, but for those of us who do... does it ever make life great.

As a total aside, I can't imagine exercising without music, it'd be like some form of torture.

I had a similar argument with my business partner the other day. When it comes down to it, you can only really comment on the work flow you enjoy.

He requires total radio silence to be productive, doesn't like IM, music, anything. Where as I love having conversations going while I am coding, gives me something to think about in the front of my mind, while particularly tricky problems get my idle thread. And often when I am not focusing on why I can't solve something, it will come to me.

Just my 0.02.

This is almost depressing. As a freshman in college, I bought a PowerBook. If only I had bought the equivalent value of Apple stock, I could have afforded my entire college education.

Yeah, but it's always easy to do this kind of number crunching assuming you know exactly when you will sell the stock.

Of course, that's never the case in real life. Imagine the time you would spend worrying about your investment and analyzing when it will go out or go down or when to exit, etc. If you convert that into money say $20/hr, is it still worth it to invest as suppose to buy the PowerBook?

Better yet compare it to the efficiency you have gained by having a PowerBook, or if you are a hacker, how much more you'd have learned by having a computer then. How would you even go about quantifying that?

Thought experiment: Imagine a stock market with active participation by time travelers. Would surprises and risk be eliminated?

would the observer [participator?] effect make a time traveler's stock market even more vulnerable to manipulation?

But I imagine at the time you would have still needed a computer?

This line of thinking is dangerous. Investing in the stock market is always a _risk_. I doubt you find yourself thinking "Oh if only I had bought 2,500 lottery tickets instead of that Powerbook, I'd might of afforded my entire college education." Of course not, because we've been taught that thinking like that is ludicrous.

Now before I get blasted for that comparison, obviously the lottery which is meant to be random is not exactly equivalent to an open market where information flows can mitigate some of the risk and provide indicators of good potential investments. But, investments are always a risk regardless especially as you are just getting out of school, have loans, and don't have much money you can afford to loose in bad investments.

Having graduated from grad school two years ago myself I've been doing the following: 1) In general I've been paying off my loans as quickly as possible as their interest rates are higher than the rates of returns I would see from putting money into the market. 2) Because the market was in a special place after grad school, I've temporarily violated my #1 rule and put about half of my spare money into retirement funds tied to the market as it was fairly obvious that the market would probably rebound strongly (which it did, yay!). 3) As the market's rebound levels off I'm redirecting more and more money back to my loans. 4) If you're going the route of retirement funds, invest in Roth IRAs before you're making too much to not be able to invest in them.

Once you have reduced your debts then take your money and go play in the market, but only with money you're willing to loose.

BTW - I realize that my current investment strategy is pretty conservative, as I'm attempting to experiment with living nearly debt free. I would love to hear alternative theories if there are any.

One trading "strategy" that I use is that I buy the stock of companies whose products I find myself buying or using a lot. AAPL, AMZN, etc.

Using a service often does not always translate into that service generating spectacular, analyst beating results.

Looking at businesses that you are familiar with is a good starting point, but is -no substitute- for analyzing the numbers generated by the business. It's better for scuttlebutting, that is, visiting the stores and seeing how customer levels fluctuate. Are there more people visiting the Apple Store this year than last? That kind of thing.

A good case in point - I visited a hamburger chain, tasted the food and hated it. I thought the food was mediocre and the prices were too high. But, I decided to keep the stock anyway. Why? They had a new 32 year old investor who fought his way onto the board of directors, fired members of the old management team, made himself CEO, and cut expenditures to the bone. The result? They company steered clear of bankruptcy, became debt free, generated a 10% free cash flow yield, and has so far generated me an 80% return.

The thing is - had I just visited the restaurant, I probably wouldn't have noticed this. Red dots being removed from styrofoam cups (cost cutting), a picture of the new CEO in the restaurant (change in management), and sliced rather than cherry tomatoes in the salad (cost cutting) may have been indication of some change; but not enough to tell me about the big behind the scenes changes without the company's financials.

Actually, it's paying attention to the choices you make (for example, continuing to buy Macs over PCs) in domains that you are knowledgeable.

I actually know a great deal about trading, having done it professionally for a while. I only occasionally trade stocks now; I prefer angel investing...

By trading do you mean investment (as in long term buy-and-hold, 5-10years)?

The strategy is sound (and have a similar approach) but it makes sense only for a buy-and-hold approach. For the short term the quality of the company product doesn't really matter too much.

Of course. Short-term trading is way too hard.

I'm still optimistic about my conservative, iPad-based portfolio.

You may want to unlaod those iPads sometime soon. As soon as Apple announces the next generation they are going to go down significantly in value.

I think he means a portfolio of investments in companies involved in the manufacturing and production of iPads, i.e. http://en.wikipedia.org/wiki/Ipad#Manufacture

It sounds like it would be a good idea, but you'd actually have to take a look at each of the companies, and figure out exactly how much each contract with Apple is going to bring in relative to their current revenue streams.

I think that he may also just be joking that an 'iPad-based portfolio' is not exactly 'conservative.' (I mean it's a brand-new product, it's still risky no matter how hot it looks to be in the market)

I hoping that was a reference to this classic Zoidbergism: http://www.youtube.com/watch?v=e3QRTToTLzI

Nicely done! If you were inspired by this thread -- http://news.ycombinator.com/item?id=1291809 -- a shout-out would be nice. Glad to see the detailed implementation, either by inspiration or independent-invention, in any case.

But: only back to 1997?

What if I hadn't bought that Powerbook Duo 230 in late 1992? (~$2200 from Whole Earth Access in Berkeley, if I remember correctly.)

Thanks, that comment actually was the inspiration behind my post. I am adding a shout-out right now.

If too many had done that then perhaps the stock wouldn't be so valuable today. :-)

No, it would have been more valuable: the more people buy, the higher the price is.

True. But ironic.

I seriously doubt tens of thousands of geeks buying AAPL stock instead of their products would have changed the valuation.

This is very cool to see. However, you shouldn't have accounted for the splits like you did (I think you had it right the first time you did it). Prices you find in databases/charts for stock prices are already split adjusted.

For example, Apple PowerBook G3 250 (Original/Kanga/3500): Price stated at $5700 released on 11/10/97. On 11/10/97 AAPL closed at $18.37/share. If you spent all $5700 you would have 310.3 shares (assume you can buy partial shares). On/around 6/5/2000 the stock split so you would now have 620ish shares. On/Around 3/28/05 stock split and you would have 1240ish shares. Multiple this by the stock price ~$270/share and you have ~$330,000. As someone already pointed out, you should not take into account inflation because the $330k is the amount you have have in the bank TODAY if you had bought the stock back on 11/10/97.

If you look at the stock chart you will see the price reports on 11/10/97 for AAPL is $4.59/share, this accounts for the split (It was actually $18.37 on that day, but divide by 4 because of the splits and you get $4.59). You can see http://finance.yahoo.com/q/hp?s=AAPL&a=10&b=1&c=... for details about this (You will notice a "close" column and "adjusted close" column. The "adjusted close" is what you will see on all the charts, but "close" was the actual close that day. This is done to avoid massive jumps on the charts that would make them less useful.

Hope that helps, and once again, this was a really cool thing to see, it really puts some things in perspective.

How much did Microsoft lose by divesting itself of Apple stock prematurely?

Microsoft invested $150 million into Apple on August 5, 1997 (convertible preferred nonvoting stock which ultimately converted into 18.2 million shares of common stock). Bill himself appeared on satellite link at Macworld (1997!). 18.2 million shares today is $4.9 billion (split-adjusted).

I can't find when exactly Microsoft sold their shares, but it was sometime during 2003. Wolfram Alpha calculated the mean price of AAPL in 2003 was 9.26 (max 12.41 min 6.56), which is split-adjusted. The real price then would be 18.52 (mean). One split would have happened, so 36.4 million shares were owned by MSFT at the time of sale, so they sold for a mean of $674 million.

Someone check my math? It's 5am. It's difficult because a lot of the sources I used don't denote whether a price is split-adjusted or not, and Microsoft converted portions of stock at different times. It's a mess.

Great analysis. I will note that however much money MS lost or made on the deal, the value of maintaining a customer platform (for Office) and keeping a competitor alive (at a time when the antitrust thing loomed) was probably priceless.

Maybe at the time Microsoft saw Apple as a dying company that would never recover from their early to mid-90s blunders, so throwing it a bone would have seemed like a no brainer at the time.

Absolutely. And now Microsoft MacBU makes a killing from developing Mac software (some estimates put it at $350 million [http://www.appleinsider.com/articles/08/06/24/microsoft_expa... ]). (Thanks, by the way!)

Don't forget that it included an IP sharing agreement, which was no doubt worth more than $600 mil given what Apple had to share.

I may be misunderstanding, but it looks like you're giving them both the post-split number of shares and pre-split price, which would double the value of the investment? Great number sleuthing, though, thanks!

Oh, on reread - perhaps the stock split in 2003 would have been the second time?

I wish they had the original Mac 128k I bought in the fall of 1984. I painted all summer to be able to buy that.

What if you had bought Apple call options instead of AAPL stock?

If you bought AAPL April $200 Call on Feb. 1 (at $10.20), you would made around 370% return. But obviously trading options is more risky, because you have to get both the direction and timing right.

Would be really neat if there were a few of the earlier models too, for comparison

The cost of an Apple IIe in inflation-adjusted terms vs the same amount of stock back in the day... vs the price of an original working Apple IIe on ebay now?

See, if you and me and all of us would have buying Apple's shares instead of its products, Apple's shares would have never being making this tremendous performance.

I think it is a paradox every shareholder face from time to time.

Can you also include transaction costs to give a truer picture. This will be more relevant for the smaller gains. Also remember these are pre tax.

what about sales tax?

Considering all of those, you might as well also include capital gains tax.

I only wish this chart reflected reality. I'm looking at my Fidelity statement for the AAPL stock I bought in 1999 and 2000. In actual dollars, my original investment is now worth 11x what it was back then. Your chart shows stock bought nine years ago is worth 35 times the original investment. Maybe I should ask Fidelity if they've made a mistake...

The table takes splits into account incorrectly, so some of the numbers (pre 2000) split show up 4x too high and pre 2005 split show up 2x too high.

Reminds me of a 'Rich dad - Poor dad' seminar I attended on my trip to Philippines.

In my case, I would have saved just a few hundred dollars, I got free AppleCare with my MacBook in 2008 and Apple has already replaced too many things, from my battery to fan to what not.

If I hadn't bought that iPod zillion years ago, I would not read the question today^^ All kudos go to iPad buyers, all money to Apple designers.

Can you add annualized return for each entry?

Wait I would have made 10% on my money just by putting it in Apple shares and not the bank for the last week or two?

Yeah. The catch is you could have also lost 10%. or 20%. or more.

Doesn't seem a bad risk going on these figures though. I had no idea solid companies had decent share return rates.

But look at what could go wrong. Steve Jobs' health for one--one skinny guy with a history of cancer and a used liver gets another life threatening illness and your investment is worth bananas. (As in, you would have been better off buying banana futures.)

October $210 puts are $4 a share. A bit pricy, but that would protect you from the catastrophic downside.

What current tech company (other than Apple) has this kind of potential?

Palm had this potential a few years back. Netflix is one, you could have bout one of their shares instead of the monthly subscription and would have had 10 times that now. IMAX is another, so will be Facebook when and if they go public.

super cool.

Thanks. I'm glad you like it. I am thinking about possibly updating the code base so that the prices are generated in real-time, based off Apple's current stock price.

Time to sell AAPL? =)

don't know if you are serious in this question, but I would be interested in people's honest opinion.

Is apple over valued(or i guess i should say over priced) at its current market value. would you expect apple's value to go down relative to the market over the next year or so?

It's a tough question. The problem is that AAPL makes a lot of their money off hype/fad products (and don't flame me on this, they make some nice products, but the AAPL marketing machine is genius and could sell the Brooklyn Bridge right now). Not that this is a bad thing, but fads can change on a dime. Remember how cool the RAZR used to be?

Rightly or wrongly AAPL is seen as a personal extension of SJs will. What happens when he leaves?

AAPL has also just had a HUGE run up. I'm not saying it's going to drop anytime soon, but you don't want to be the last one on the train.

AAPL makes premium products at premium prices. Has the overall market (jobs, financials, housing) really recovered enough that people in general are okay with spending again? Some statistics say no, but recent earnings say possibly.

All these are questions you need to answer for yourself. I would be a little gun shy today (either buying or shorting) because I think there are easier/less risky investments to be in right now.

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