Apple Car? Not Likely.

You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.

~Charlie Munger, Vice Chairman, Berkshire Hathaway

Some journalists speculate that Apple is building a car because they recently hired some automotive engineers away from Tesla.

My prediction: Apple is not building a car. Apple might build a device that plays a major role in the automotive marketplace. But a fully assembled automobile is too far outside the company’s circle of competence, as Charlie Munger might say. Apple succeeds because the company maintains disciplined focus within its circle of competence.

AppleTV as an Example

Case in point: AppleTV. Pundits predicted an AppleTV with a large LCD display, in a form factor that might be built by Samsung or Sony. But instead, Apple created a black set-top box about the size of a hockey puck. Apple focused on those parts of the television ecosystem that are most closely tied to their circle of competence:

• User experience
• Internet connectivity
• Content delivery

Apple entered the television marketplace while remaining within its circle of competence. Even better: Content delivery is a cash flow engine that generates revenue for as long as Apple can push bits down the wire.

iPhone Example

When Apple entered the mobile phone market, they focused within their circle of competence.

• User experience for computing devices, using a subset of Mac OS X.
• Internet connectivity via WiFi.
• Content delivery (iTunes).

In the area where Apple lacked experience, mobile network management, they partnered with an industry veteran (initially AT&T). By focusing within its circle of competence, Apple was able to negotiate aggressive terms with AT&T, terms which included no carrier branding on the physical device. Later, Verizon, T-Mobile, Sprint, and all of the other major players begged for the same deal as AT&T.

And, as with AppleTV, content delivery is an engine that prints money for as long as Apple can push bits over the radio waves.

Apple’s Automotive Entry

Apple will not build a fully assembled automobile. They’re more likely to create an auto-related device that leverages their existing circle of competence. Something that shows off their skills with user experience, Internet connectivity, and content delivery.

Apple’s automotive content delivery offering will be interesting. The company currently offers maps and directions. What’s next… maintenance data? Entertainment? How about a “find my car” serivce for those of us who forget where we park at the shopping mall.

Apple’s automotive device will fit well within the company’s circle of competence. And Apple fans will line up around the block to buy it.