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TheStreet Open House

Microsoft's Similarities to Apple Will Be Its Salvation

NEW YORK (TheStreet) -- Investors are well aware of the concept of wealth creation. There are several ways that can be done. The first is wealth extraction from others. Another is the creation of new wealth by developing things of value.

The focus here is on Microsoft (MSFT), the creation of new wealth and what I think it's doing right.

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Microsoft, like Apple (AAPL), focuses on the idea of wealth creation for its customers by virtue of paid services. Customers build their own companies and they use Microsoft's software and services to succeed financially. In other words, a non-free investment results in potential wealth creation.

This is what Apple is so good at, so this parallel, legacy vision of Microsoft means that customers are willing to engage in expenditures with the belief that they can leverage the cost into a real return on equity.

However, Apple's ads do a better job of pointing that out than Microsoft's. Apple emphasizes personal creativity that produces goods of value: Mac and iOS apps, writing, art, music,and so on. In contrast, Microsoft's ads emphasize dreary work with business software and half-baked tools like the Surface Pro tablet.

Of note is that Apple has paid over $20 billion to all its developers to date. Doing business with Apple's best-of-breed hardware and development tools has paid off. That's some serious financial incentive.

Another important point here is that in order to convince people they can build wealth safely, privacy and security are paramount. Apple and Microsoft also share that value.

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For example, if a 19th century farmer worked very hard to sell his crops, then deposited his earnings in a local bank and then the bank were robbed every week, the infrastructure would fail him in his wealth creation no matter how good his tractor.

The Limits of Wealth Extraction

When customers have confidence in the tools and infrastructure, they spend their money with cautious optimism, even cheer, because the future looks good to them. They love their tools and they love creating valuable things with them.

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