Georges van Hoegaerden is an entrepreneur, venture catalyst, serial CEO, and venture capitalist-turned-innovation economist.

As a 20-year Apple user who has infected almost everyone close to me with convincing reasons to abandon subprime computing platforms, it hurts me to have to group and introduce the reasons why I think Apple’s once-infinite loop is turning gradually finite.

Toss the pageantry of false positivity

Now, one could take this message as a negative or a positive depending on which side of the technology world you are on. Yet I am neither a fair-weather friend nor a weapons-trader in this competitive war. I am an independent thinker more worried about the only thing that matters: value to customers. I still admire Apple for its unique — if not perfect — desire and pursuit of authentic innovative value.

I’ve written this editorial as an honest appraisal of the business of innovation and to ensure innovation’s role in delivering authentic social economic value is one the public can trust. Apple is the spiritual and commercial leader in innovation, so it should expect to not only be held to the highest of standards by the public, but also be intrigued by someone who, when they had a lot less wind in their sails, was already rooting for the company.

The latest price reduction in the MacBook Pro line forced my hand to collect and share the many finite patterns I see developing at Apple. The trigger was the pageantry of false positivity applauding the recent price reduction of the MacBook Pro sold to customers. Even though the MacBook Pro 13″ Retina is truly a product worth buying (I have reviewed it personally), the underlying economics of the $200 price reduction are a bit startling.

Act different

Apple is a producer of premium technology with a unique proprietary blend of hardware and software that can demand premium pricing for its products when that innovation delivers consumers a more compelling computing experience and evolution.

But one who connects the dots and sets their own standards of excellence has to wonder.

Why does Apple deploy the equivalent of modern-day slavery in China to save cost — arguably at the expense of American manufacturing — if the consumer value and margin can withstand no less than a $200 price reduction?

Apple succeeds because it is macro-economically different from any of its competitors today. It is the most profitable technology company on our planet not because it competes on price (downside) but because it competes on value (upside). And Apple’s future is secured when it continues to drive the value over market share.

But the pattern I see developing at Apple now is a dangerous one that trades the infinite evolution of upstream innovation for the finite development of operational efficiency.

The pattern

Here are the signals that contribute to the pattern I detect:

• Since Steve’s passing Apple has not delivered any upstream innovation of significance to top-line growth, but an abundance of downstream optimizations derived from Steve’s long lasting upstream vision, perhaps to comfort a nervous Wall Street.
• Tim Cook spends too much time publicly discussing details of operational capabilities without the balanced exposure to and invention of upstream product deliverables that pay the bills. Managing Apple for a long-term strategy means aligning prime resources to vision and upstream innovation. Apple’s execution today is a mediocre extrapolation of what current managers think Steve Jobs would have done, rather than a diligent execution of leadership that knows how to take control.
• All of Apple’s operating systems are in dire need of re-invention. iOS, OSX and server software need fundamental change: upstream innovation that makes them come to life in serving the digital media hubs we as people otherwise need to manually manage. The improvements that we do see seem discombobulated and the misaligned.
• Some of Apple’s products are turning mediocre. An address book that holds six thousand contacts freezes up on every device it is synced to, and sends mail, calendar and other applications in a 40 minute tailspin when you add a single contact. Features prevalent in the distribution of internet content (RSS) disappear from one Safari release to the other, making its users flee to competitive browsers. Shell wakeup and Power Nap differ depending on what MacBook you own. iPhone5 material is sub-quality, scratching easily. Product Management has sunken into the dark catacombs of subordinates. Apple is failing exactly on the basis of the premium computing experience that made it beloved.
• Apple, despite many proclamations to want to do the right thing, is actually in blatant violation of free-market principles in the distribution of music, books, movies and other digital media, perhaps because many technologists do not understand the finite nature of greater-fool economics. Those violations — in addition to fixed pricing mechanisms and collusion — are artificially restricting supply and demand for media, and reducing the viability of creative freedom.
• Price erosion continues. Less than two days after Steve Jobs died I was offered a business discount on Apple products. Not because I wanted it or desired it: The reason for me to buy Apple has always been value, not price. For the first time since Steve Jobs’ passing Apple put previous products and next generation products in the same keynote slide, to catch the buyers who can’t afford current generation products. A slap in the face of renewable value.

There are many more signals I could list that contribute to the pattern I see. But for the sake of time I will now stop here. A complete log of the finite loop signals of Apple can now be found here. All my articles on Apple, including positive, are here.

I gain nothing by criticising Apple. I do not get paid to write this article, and I don’t advertise. I have friends at Apple who will frown on me, and I have a book to finish (on renewable economics) that will get delayed by this distraction.

The only thing I want is for Apple to grow up, to become the responsible adult it needs to be to appease new customers with incredible and renewable innovation. In fact, all of us in the technology business need to learn a hard lesson that to encircle the world, we better learn how to embrace it. The lesson Apple gets to face first.

And if that requires me to be the tough daddy to get us there, so be it.

This article was originally published at The Venture Company.

Georges is an entrepreneur, venture catalyst, serial CEO, venture capitalist turned innovation economist (by fate) and the inventor of renewable economics that will re-authenticate and re-inspire the world, the subject of his first book. Georges’ insights have been generously lauded and covered in major online publications and trade media, such as The Wallstreet Journal, The New York Times, Forbes, Business Week, Fortune, NPR, San Francisco Chronicle, Reuters PEHub, AltAssets, Pensions & Investments, Investors’ Business Daily, Portfolio and hundreds of distributions across the globe.

photo credit: boogah via photopin cc

But it’s still less than half Apple’s capitalization at $627 billion.

Google’s stock dipped a bit in later trading today, and as of 9:39 a.m. Pacific time, the search and advertising giant is worth just a little less than Microsoft. But the overall trend is very clear: Google is up over 18 percent in the past six months, while Microsoft is down just over 8 percent.

Source: Google Finance

Google vs Microsoft.

Google continues to win in web search, with an almost 70 percent search market share, with Microsoft’s Bing search engine making only modest moves to increase its share. Google’s mobile story is strong as well, with 68 percent of smartphone buyers in the U.S. choosing phones running its Android operating system.

Perhaps surprisingly, social is also doing well for Google, with increased traffic to Google+, and — perhaps more importantly — the world’s biggest social network continuing to put its stock-market palm directly on its face.

One fly in the ointment is the loss of mapping and location data from iOS, as Apple has replaced Google Maps with its own program. But Apple’s woes in that area more than compensate (even if Apple’s Maps isn’t as bad as the press has made them out to be.)

The real story here is Google versus Apple, and whether tiny profits hundreds of times per day per user will eventually prove to be more lucrative than large profits several times per year per user. Google, of course, profits by organizing information at scale, making it accessible, and matching it with advertising. Apple profits by creating lust-worthy customer experiences with tightly woven hardware, software, and services.

Both want to own the user: Google with services that are too valuable to lose, and Apple with experiences that are too excellent to switch.

The best part of this story?

We’ve all got front-row seats to the clash of the titans.

photo credit: Thomas Hawk via photopin cc

Sometimes a hack has unexpected outcomes. Today, a hacker who claims to have obtained Mitt Romney’s tax returns is demanding a ransom of $1 million in Bitcoins. The hacker probably didn’t expect to improve the market for Bitcoins, but that’s exactly what happened, as the value of Bitcoins spiked about 6 percent today, from $10.40 per Bitcoin to about $11 per Bitcoin at the end of the day.

Bitcoins are an electronic currency unregulated by any central authority. Users are self-policed and receive instant payments of Bitcoins through an encrypted process that verifies each transaction and does not allow it to be undone. Bitcoins are difficult to exchange for actual dollars, but are otherwise a very private way of exchanging cash. This makes the currency preferable for those who don’t wish to be identified.

Like any currency, the value of Bitcoins fluctuates based on the sentiment around its strength. After the news Tuesday that a hacker stole $250,000 in Bitcoins, the currency dipped into the red, and went up and down throughout the day. The movement didn’t make that much of a difference to the overall price. Today, however, a hacker sent letters to the Democratic and Republican party offices with a USB drive claiming to have stolen Mitt Romney’s tax returns. The hacker demanded $1 million in Bitcoins as a payment for silence, causing a dramatic spike in the currency’s value.

The chart above shows that as the news hit, Bitcoins spiked dramatically. This is likely because the idea of $1 million in new Bitcoins entering the system is attractive to users and potential investors.

One Twitter user, @McBill notes, “I would think theft would drive price down. Ransomers demanding them makes them seem legit, spikes demand, price [goes up].”

Ah, the things that restore faith.

Thanks @McBill; Bitcoins image via zcopley/Flickr, chart via Bitcoincharts

User numbers hit a new high, with 955 million worldwide visiting the site at least once a month. And earning are slightly above estimates, coming in at $1.18 billion in revenue and 32 percent year-over-year growth. Over half a billion are coming from mobile devices.

One of the most interesting slides in the company’s quarterly earnings release, however, is this one:

Just two years ago, the United States and Canada made up 30 percent of Facebook’s users. Fast-forward to today, and the percentage is a little bit different: under 20.

Not only has the percentage changed, but the growth rate is almost negligible: only about 35 percent user growth over 24 months for the world’s social utility. That compares to 170 percent growth in Facebook’s “rest-of-the-world” category, which includes Africa, and 165 percent growth in Asia.

Even stodgy old Europe has 63 percent growth.

On the one hand, this is expected and normal. North America has a limited population, about 350 million, of which Facebook has about a 53 percent penetration rate. That’s slightly up from about 50 percent at the end of 2011.

On the other hand … why are those missing 164 million people not on Facebook? It’s a question the company should ponder … particularly because US and European internet users are worth more to advertisers than any others. Internet users are valued at perhaps $1,200 to advertisers, with Facebook making about an annualized $5 as of the first quarter of this year, and Google collecting $20 per user per year.

But not all internet users.

Zambia’s average annual income is $1,600. In the Phillipines, a college professor might make $500 dollars a month. I don’t think Barney’s New York is banging down their doors to sell $5,000 Gucci bags. Not too many iPhones being sold in Cambodia.

The point?

As Facebook’s growth has transitioned largely to the developing world: Asia, Africa, Oceania … the average value to advertisers per user is going down. Just check another slide from the Facebook deck:

The biggest chunk of Facebook users — “rest of world,” at 268 million — accounts for the smallest slice of Facebook’s revenue, $113 million. In fact, if you do that math, you can find the average value to Facebook, per quarter, of each user:

• US/Canada: $3.20
• Europe: $1.43
• Asia: $0.55
• Rest of world: $0.44

The good news is, if this quarter is any indication, Facebook could be bringing in about $12 per US and Canadian user per year. But there’s also bad news … and that’s everywhere else.

Europe can probably be fixed with more time and attention than the US-centric Facebook has given it so far. Starting an office in London may help with that. But Asia? And the rest of the world? Those per-capita incomes aren’t coming up to U.S. standards any time real soon.

And that’s one of the reasons Facebook’s stock is getting hammered.

Image credit: Sergej Khakimullin/ShutterStock