Apple Savings

Despite the year-long rise in interest rates, our major-bank savings account rate has not budged from 0.03%(!) On our average balance of $10,000 we earn a handsome (sarc) $3 per year. Meanwhile, last week Apple launched its Savings Account that pays 4.15%. (Accounts under $250,000 are managed by Goldman Sachs and are insured by the FDIC.} Your humble blogger is not so wealthy that he sneezes at the difference between $3 and $415.

Establishing the Apple Savings account took a couple of minutes on the iPhone. I opened the Wallet app, tapped the Apple Card and the three dots (...) in the upper corner and selected Daily Cash. Setting up the Savings Account required entering my Social Security Number for tax reporting and checking a withholding option.

The bank account that pays the monthly Apple Card charges is the same account that is used for savings deposits and withdrawals. I immediately transferred $1,000 into Apple Savings.

I feel myself getting richer already.

Apple Visitors Center

The $5 billion mothership: close but out of reach.

The last occasion to visit Apple's headquarters was during a shareholders' meeting ten years ago.

The office buildings on Infinite Loop were well-appointed low-rises, but not noticeably different from other Silicon Valley companies.

The $5 billion circular headquarters building has been open for five years, and, since we were in Cupertino, it was time to check out the Apple Park Visitor Center.

It took less than 15 minutes to stroll through the main sections.

The rooftop terrace provided a view of the mothership. Movie images (Men in Black, ET, Independence Day, the Day the Earth Stood Still, etc.) of flying saucers are familiar, but being in the presence of something large, tangible, and circular does stimulate an emotion akin to awe. Millions of iPhone sales went into the headquarters construction.

Having just picnicked, we didn't spend much time in the café. Nor did we linger in the exhibit room, which had a scale model of the headquarters, visitor center, and the rest of Apple Park. The exhibit was distinguished by virtual reality technology; pointing an iPad at any section of the model called up an audio-visual presentation. It's quite an advancement over the cassette players that we used to rent for museum tours.

What I found most impressive were the lavatories, which were pristine and high-tech throughout. There was minimal touching of the fixtures. Even the corridors (pictured) had a futuristic-but-sterile feel. The $80 million (per Wikipedia) for the Visitor Center had to be spent somewhere.

At the Apple Store we bought T-shirts and an iPhone 14 Pro with specifications that we couldn't find at the Apple Store near our house. After basking in the ambience of Apple Park we were indeed privileged to spend money (using Apple Pay, of course) at the Apple Visitor Center.

In the Cards

Goldman Sachs is one of the premier investment banks on Wall Street. It's been trying to leverage its prestige by entering the consumer space:

I caved to the marketing hype

Goldman’s new consumer bank, which operates under the brand Marcus, has lost $1.3 billion since launching in 2016. It spent heavily to buy startups and cloud-storage space, hire hundreds of techies, and build call centers in Utah and Texas. Loans have gone bad at a higher rate than that of rivals.

and got an Apple Card

Marcus launched without a collections team to chase down delinquent borrowers, resulting in early loan losses, people familiar with the matter said. A credit card developed with Apple Inc. was a coup, but a costly one: Thousands of engineers across Goldman were diverted to finish it in time for an August debut, delaying other projects.

Apple ads for the card carried the phrase: “Designed by Apple, not a bank”—a line that didn’t appear in a giant banner ad in Goldman’s lobby this fall.

It's easier for an upscale line to go down-market than the reverse. The risk is watering down the brand, and a failure in execution could tarnish Goldman's name. Even if the Apple Card succeeds, the cultural changes wrought from managing millions of retail accounts might prove too much for the venerable investment bank, and it wouldn't be surprising if a spin-off or even a divestiture is in the cards.

AppleCare for Watches, not People

Apple Store, Hillsdale Mall, on a Friday afternoon.

While at the gym I knocked the Apple Watch off a shelf onto a tiled floor. The crystal cracked, and the watch wouldn't turn on at all. I made a Genius Bar appointment for today.

Eric, the Genius assigned to my case, said that the repair would cost a $69 "deductible" under my AppleCare plan. I cheerfully proffered a credit card (Apple wouldn't take ApplePay, ironically).

The repaired watch will be shipped home in a week. The transaction took 15 minutes. Easy-peasy.

Note: a young college acquaintance recently likened Obamacare to "AppleCare for people". Sure, except for rising annual premiums and deductibles, disqualification from buying the policy if you either make too much or too little money (copy of your tax return, please), and not being able to go to the doctor/Apple Store of your choice, Obamacare and AppleCare are exactly the same.

My friend is a nice person, and her observation didn't deserve an argument from your humble crank. If only Obamacare were like AppleCare, we would have a lot fewer problems...

Apple Pay Can Make You Fat

(Money image)

Economist writer Tom Standage says cashless payments are causing him to put on weight (no, it's not from not having to pull out cash from his wallet). The logic is simple:

People spend more when they use credit cards and other non-cash forms of payment:

the most widely cited fact, from a study conducted by Dun & Bradstreet, is that credit cards make people spend 12-18% more, on average, than they would using cash.

Mr. Standage says that it's too easy to wave his smartphone in front of the Starbucks scanner: "I now buy a coffee every day, rather than once or twice a week."

More lattes = more pounds.

When the "pain" of paying with paper money is removed, spending goes up. But that's not a new revelation. Gambling houses knew this decades (centuries?) ago when they extend credit---just initial a marker (IOU) and $500 in chips appear in about 30 seconds (your humble blogger speaks from personal experience).

I'm so old that I used to do payroll by hand (Intuit image).

Perhaps the most significant example of weight-gain by not paying cash is the government itself. During World War II a young economist named Milton Friedman was on the Treasury team that devised payroll withholding to help pay for the war.

Milton Friedman reflected in 1995:

I played a significant role, no question about it, in introducing withholding. I think it's a great mistake for peacetime, but in 1941–43, all of us were concentrating on the war.

I have no apologies for it, but I really wish we hadn't found it necessary and I wish there were some way of abolishing withholding now.

Every self-employed individual and/or those with significant investment income already feel the pain of paying quarterly estimated taxes. Eliminating payroll withholding would sensitize a much larger population to the size of government without changing tax rates or tax brackets. Already a few voices have called for such elimination:

To build the necessary political support for otherwise unpopular spending cuts, [Speaker Paul] Ryan should quickly move to end federal income tax withholding. If American households would stop viewing their tax refund checks as happy windfalls from politicians and instead better understood how much big government is costing them every year, one would expect to see louder demands to bring runaway spending under control and to downsize the scope of federal programs and operations. The GOP honeymoon will be over in a few months. Ending federal withholding will help build support for spending cuts over the next few years and perhaps beyond.

Paying cash will cut the fat, but some ideas are too big and too bold.

Payments Revolution or Devolution

The new Costco Visa has a chip but the
Costco machines are swipe only. Maybe
Costco doesn't trust the technology?

Despite nearly a year of preparation, the transition has not gone smoothly. [bold added]

The new Costco credit card was supposed to make everybody happy.....

As soon the switch went into effect, though, Costco members reported problems with the card and vented their frustrations on social media. Cards weren’t mailed on time, there were long delays on customer service lines, and in some cases cards couldn’t be activated at all. Citi, the card’s new issuer, has spent the past couple of weeks extinguishing fires.

Comments:

1) I activated the Costco credit card by doing it the old-fashioned way and used the phone. I then used it at Costco (without a hitch). Properly established, I set up an online ID on the Citi website and linked it to the credit card. However, the first payment will be via check.

2) When starting with a new vendor, bank, or credit card company, I always pay via check for a few months.

Get your account flowing---it's not good to miss your first payment---then set up the "modern" payment method (website, mobile pay, automatic transfer, etc.) that you prefer. Checks-mailed-to-a-lockbox are a proven system that has been around for decades, and the paperless methods for most companies are bolted on top of the existing system. Yes, planning ahead a few days is so very difficult, it's such a hassle writing a check and stamping an envelope, so go ahead and take your chances....

3) It's one's right to be a demanding customer and post complaints on message boards, but have you noticed that the majority who do the complaining are themselves quite slovenly in their work product? Conscientious workers know how hard it is to make things perfectly and make allowances when complex products are introduced.

Apple: Promising and Puzzling News

I use Apple Pay all the time at
Whole Foods and McDonald's

The promising: Apple Pay has won the federal government's stamp of approval. [bold added]

Analyst Patrick Moorhead of Moor Insights and Strategy predicted that the federal government's approval will redouble Apple's momentum in the mobile payments space.

"This is really a big deal as it gives Apple access to the millions of federal employees but, more importantly, the billions [bloggers note: he meant "a lot more" but probably got carried away] of Americans who pay federal institutions," he wrote in an email.

The puzzling: Apple car project is for real, and it's a minivan.

Apple (NASDAQ:AAPL) has been hiring auto engineers, including from Tesla (NASDAQ:TSLA): The company has several hundred employees working on project "Titan," toward an Apple-brand electric car that one source says resembles a minivan, The Wall Street Journal reports.

Apple Pay is gaining wide acceptance because of its security, privacy, and convenience. Importantly, it is layered on top of the existing payments system so that the banks and credit card companies view Apple as a helpmeet and not an existential threat.

Hang on to your seatbelts. We'll see more of
these concept drawings in the weeks to come.

An Apple Car, on the other hand, would have to succeed against very powerful American, Japanese, and German competitors, some with many decades of experience. It doesn't make sense that Apple would enter an established market which contains some of the world's best companies; take the understandable concerns about offering an Apple television set and multiply those objections ten-fold.

More likely Apple is working on a demonstration minivan(?!?) outfitted with its software and products. The Apple module would be offered as an optional add-on to car companies and their customers.

We're holding our breath on this one; whatever Apple's doing with cars can't be as troubling as it first sounded, and its long record of success has earned the company the benefit of the doubt.

[Update - 2/21/15: the Economist is skeptical about an Apple car:

it will be tough to overturn the incumbents in a business where clever technology is only part of the equation.....the tech firms may be better off working with carmakers, to develop the software that will provide the brains of the self-driving car, and to improve the range and battery costs of the electric car.]

Pay It Forward

Screenshot: Apple Pay was
also a snap at Whole Foods

Unlike its counterparts in other locales, McDonald's in Redwood City has trained its employees in the use of Apple Pay. The cashier instructed me to wave the iPhone 6 over the near field communication device, then confirm the credit card charge with a thumbprint on the iPhone home button. It worked like a charm.

After lunch we noticed the cashier standing in the middle of the parking lot. She had a McDonald's lunch bag and was walking back to the restaurant at a very slow pace, much slower than barely-mobile relatives who must use walkers. (Her earlier hand tremors now had an explanation.)

When we approached, she asked me to move her car to a more accessible disabled-parking stall. I was happy to spend a minute to save her 15.

Good for her for being productive in the face of hardship, and good for McDonald's for employing her when she cannot perform every task that other employees must.

We will be stopping at the Redwood City Mickey D's more often.