Editor's note: This is one half of a two-part story on Apple's new super campus. For the flipside of the argument, see: Apple's UFO-Shaped Campus: It's a 'Stunning Representation' of Success and Sustainability.
(NASDAQ:AAPL) has seen a lot of volatility in its stock price over the past year, and despite growing pressure from its competition, the company remains seemingly confident. In fact, one way we may measure its corporate confidence is by looking at its planned Apple Campus II in Cupertino, CA. The plans reveal a futuristic, aesthetically pleasing ring that will nest in a small wilderness in Silicon Valley. (Apple will be helping to create and maintain that wilderness.) The headquarters will be environmentally friendly, using fuel cells and solar power to run the majority of operations. It seems like a big, bold, forward-thinking move for the world’s most valuable company, but, based on historical precedents; it may also portend the peak and subsequent fall of Apple.
In his book Moods and Markets
, Minyanville contributor Peter Atwater lays out the signs that often forecast the peak and fall of a corporation, including abdication of risk management, organizational complexity, novice and naïve entrants, and finally, architecture. The first three factors we shall leave for another discussion, but the precedent from big corporations and their big building projects suggests trouble for Apple.
Building a new campus or headquarters obviously implies confidence, and perhaps, overconfidence. Atwater gives the Citigroup Center as an example; planning for this building began in the early 1970s when markets were peaking. He writes, “Today, the skyline of Dallas is filled with built-at-the-top 'memorials' to banks-gone-bust such as Interfirst, MCorp, Texas Commerce, and Allied Bank. All were built at the top.” Of course, these are all banks; perhaps there is more propensity for this kind of build-at-the-top behavior in bank corporations. According to Paul Goldberger, architectural critic for the New York Times
, this is not the case. He writes:
When companies plan wildly ambitious, over-the-top headquarters, it is sometimes a sign of imperial hubris. AT&T (NYSE:T) was broken up not too long after it moved into Johnson and Burgee’s famously grandiose “Chippendale skyscraper” on Madison Avenue. General Foods did not last too long after taking occupancy of the glass-and-metal palace Kevin Roche designed for it in Westchester County, and Union Carbide fell apart after it moved into another Roche building in Danbury, Connecticut. The New York Times Company's (NYSE:NYT) stock price plummeted after it moved into its Renzo Piano building on Eighth Avenue, and they now lease the home they built for themselves.
The problem is not architecture or the building project itself but it may be a symptom of Apple losing track of reality, the true state of affairs for consumer tech, and its role in that growing, volatile market. As Peter Atwater said to my colleague Justin Rohrlich in a 2011 article
on the new campus, "The more outlandish the design, the nearer the peak -- just like homes... My guess is that Apple's ridiculously modern building will be yet another obvious sign of the top in hindsight."
In that article, Rohrlich wrote about the "Skyscraper Index," created 13 years ago by Andrew Lawrence of Barclays Bank in Hong Kong to trace the relationship between conspicuous construction and economic crisis. Lawrence noted, "In the three to five years after the construction of a record-breaking new skyscraper began, per annum stock market returns are around 10 percentage points lower than in other years." Will the correlation ring true for Apple's new Campus II? It does not scrape the sky, but definitely seems to represent, in its oddity, a corporate statement just as bold.
Perhaps Apple’s focus should not be on making such a radical new headquarters for itself. As Jeff Littell of JGL Capital said to me, “If they were focusing on new products and developing excellent client relationships, the things that have gotten them to be the company they are today, they would not be going in this direction.”
Then again, the Apple Campus II project is a legacy of Steve Jobs, and he certainly knew what he was doing when it came to the iPod, iPhone, iPad, and the complete reinvention of the company. Time will tell whether the UFO-shaped Campus is a good or bad portent for the company, but through the lens of historic precedents in the relationships between big companies and big architecture, this project suggests a peak and the coming fall.
See also: Is Apple In Its Sammy Hager Era?
No positions in stocks mentioned.