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We're already addicted: Apple investors shrug off iPhone addiction concerns

Two of its investors have pushed Apple to help curb young people's addiction to smartphones

Reuters  |  New York 

Apple, iPhones, children using smartphones
Representative image

investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits. Hedge fund and the California State Teachers' Retirement System (CalSTRS) pension fund said on Saturday that iPhone overuse could be hurting children's developing brains, an issue that may harm the company's long-term market value. But some investors said the habit-forming nature of gadgets and social media are one reason why like Apple, parent Alphabet Inc and Inc added $630 billion to their market value in 2017. "We invest in things that are addictive," said Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management. He also owns stock in coffee retailer Starbucks Corp, casino-runner MGM Resorts and alcohol-maker Constellation Brands Inc. "Addictive things are very profitable," Gerber added. Still, the investment community is increasingly holding to higher social standards, and there is some concern that market-leading could draw attention from regulators much like alcohol, tobacco and gambling have in the past. ALSO READ: Can iPhones harm your child? 2 shareholders want Apple to address the issue Apple, Alphabet and could not immediately be reached for comment on Monday, but has said social media can be beneficial if used appropriately. Apple shares traded marginally lower on Monday. CalSTRS holds $1.9 billion in Apple stock, a sliver of the company's nearly $900 billion market value, while JANA declined to disclose the size of its smaller stake. "Before Apple speaks, I think it's too early to change the narrative" for investors, said Peter Jones, vice-president of research for Ferguson Wellman Capital Management, which has about 350,000 Apple shares. Social media companies, not hardware makers, are more deserving of any addiction-related scrutiny, some said. Jordan Waldrep, who invests in alcohol, tobacco and gambling stocks as manager of the USA Mutuals Vice Fund, said blaming Apple for their customer's addiction was analogous to blaming makers of cigarette packs instead of tobacco ALSO READ: iPhones and children are a toxic pair, say two big apple investors "The social media, the cigarettes, are the addictive product," he said. Waldrep's Vice fund does not own Apple but he said he would consider including social-media Kim Forrest, senior portfolio manager and vice president at Fort Pitt Capital Group, agreed that like Facebook, Twitter Inc and Snap Inc might be more at risk than Apple if investors and regulators push back on how much time people spend on mobile devices. "Apple is just the delivery device," said Forrest, who said Fort Pitt has limited Apple holdings. "It's only compelling with software.

Software is the dopamine releaser that keeps you coming back." Twitter declined to comment and Snap could not immediately be reached. The letter from JANA and CalSTRS recommends Apple set up a committee of child-development experts and make more new tools available to parents. The addiction issue gained notoriety when former Disney child star Selena Gomez said she cancelled a 2016 world tour to go to therapy for depression and low self-esteem, feelings she linked to a Fears about smartphone addiction have already kicked off regulatory backlash. In December, the French education minister said mobile phones would be banned in schools, and draft legislation in France would require children under 16 to seek parental approval to open a account. Even tech insiders are among the vocal critics of social media and its addictive potential. "Apple Watches, Phones, Facebook, Twitter - they've gotten so good at getting us to go for another click, another dopamine hit," said Tony Fadell, a former Apple executive, on Twitter. John Streur, chief executive of Calvert Research and Management, an Apple shareholder that focuses on social responsibility, said it is plausible that tech devices may some day be understood to hold risks we do not currently understand well. That would hurt investors if evidence later emerged that intentionally built features that create dependency and had evidence that doing so was unsafe. For the time being, John Carey, a portfolio manager at Amundi Pioneer Asset Management in Boston, said concerns over the human impacts from being glued to screens are not likely to cut into profits. The company holds Apple stock, but the funds Carey manages do not. "I doubt there will be any impact on the use of smartphones. We're already addicted to them," he said.

First Published: Tue, January 09 2018. 09:28 IST
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