I recently read “Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger”. My favorite passage is Charlie’s theoretical exercise of growing Coca-Cola (KO) into a $2 trillion company by 2034. Charlie’s best insights relate to psychology. He stresses the need for Coke to have universal appeal by removing unpleasant aftertastes, concocting a blend of sugar and caffeine for addictive qualities, and keeping the drink cold so customers can consume voraciously. He also heavily emphasizes spending large sums of money on advertising by associating Coke with happiness.
It made me think of Apple (AAPL). Today, no other company beats Apple at maximizing profit by focusing on human psychology. People buy Apple products because it make them happy. Whether the company’s products deliver real marginal productivity is irrelevant. Psychology is what matters. Continue Reading »