There’s been a story circulating lately that’s caught more traction than I thought it would. You’ve probably heard it. It’s the story of how Apple has more money than the U.S. government. I’ve considered it a non-story, because the government makes (and spends) more money in fifteen days than Apple has after a decade of hard work. So… I haven’t paid it much mind, but the story still persists.
And while I still believe it is, in fact, a non-story, I have realized that it contains a valuable lesson about “revenue”. You see, our nation is in a rut when it comes to this subject; it’s as if we’ve simply run out of imagination. And that’s sad, because imagination has long been one of our strongest exports. But I digress… (sorry for beginning so many sentences with connecting words by the way)
Revenue is the life blood of any society. In simple terms, “revenue” is money. In broader terms, revenue is roads, hospitals, and air conditioning. (blessed are those who have air conditioning) Even if you hate capitalism, you need revenue. The Soviet Union didn’t have enough of it, and the Berlin Wall came down. Incidentally, Germany is doing quite well these days. Revenue is how I see my family that is thousands of miles away from me. Revenue is how we got to the moon. Revenue is how you are reading this right now. There is no free lunch, free ride, or free internet. It all costs money. And money is revenue.
So how do we get it? There are various ideas of how to do that, but the proof is in the pudding. The countries with the most financial resources almost always use capitalism or have a free market mechanism of some sort. The countries where people die of thirst and have no food generally have a poor mechanism for generating revenue, but still they employ deficient techniques so long as the dictators have mansions or palaces. (with air conditioning, of course) But… this piece is not about the promotion of free markets; it’s about revenue.
So again, I ask, how do we get it? Well, if you ask our current politicians (most of them Democrats), they would tell you that we raise taxes. They equate raising taxes to creating revenue. And in a sense, they are correct. If you charge more for a product, you will get more money per product, therefore you should have more money at the end of the day. But… That’s not how life works. Usually when you make things more expensive, fewer people buy them, so at the end of the day, you can actually have LESS money in your coffers. Think about it: Is Walmart the biggest retail chain in the world, or is Neiman Marcus? Volume usually wins at the end of the day.
So what does this all have to do with Apple? Apple updated their operating system for their Mac computers earlier this month. And by “update”, I mean they created a whole new product. The new operating system is leaps and bounds more sophisticated than the previous (and popular) one. Typically, an operating system is worth every penny of $100-$200, and that’s the price that is generally charged. Apple is in a unique situation. They sell almost every piece of equipment they make, and their fans are generally quick to adopt their new software. If Apple charged $100 for Lion (their new operating system), it would sell like gangbusters. But… they didn’t. They sold it for thirty bucks. You read that right. The software that makes their insanely popular computers so popular retails for $29.99.
Do you want to know why Apple has more money on hand than the U.S. government? If Barack Obama headed Apple, and not Steve Jobs, Lion would sell for $200. Don’t believe me? Look how much Microsoft sells Windows 7 Professional for. It retails for $199.99.
And that’s what I mean when I say our politicians lack imagination. Our government wants to tax people and make things more expensive in an effort to raise their revenues, when there are other ways to make money. Drilling in our coast would be a great start. Which makes more sense? Taxing gasoline more so that we drive less (therefore we shop less and do less commerce in general, thus costing revenue), or drilling in the coast? If you drill, then the oil companies get taxed every step of the way from the equipment they use to how they distribute the oil to the profit they make on it. That’s a lot of revenue we are missing out on. Then the gas stations sell more gallons (each being taxed, thus generating revenue), and the more trips people make to the gas station, the more likely it is they are going to buy additional products from there (which all get taxed, generating revenue).
I’m telling you folks that volume wins. Ask Apple. Ask Walmart. Ask the “old” United States. Volume wins everyday, every time. So why do we limit our volume? To paraphrase @IowaHawkBlog, “Sell more tacos; don’t charge more for them”.
So even if if I originally thought of this as a non-story, there’s still a lesson to be learned. Apple knows how to generate revenue, and it’s sad that our government does not.
What (currently) unexplored ways of making revenue do you think our government is missing out on. Let me know in the comments below. Maybe we can send some suggestions to Washington.