The Talk Show

51: Amazon First Citywide Change Bank

 

  I feel like you've been on the show many times but it's like a long stretch now [TS]

  remember not the sort of with the with the new gig and still was getting [TS]

  getting and giving the schedule in order but I feel pretty good about it now but [TS]

  unfortunately I have to do sort of last minute things like a of an opening today [TS]

  so we can do it it's it's settled then I mean it's weird you work now we're [TS]

  officially work for Google Ventures right yeah there was a holy shit [TS]

  announcement yes in a way I guess but it's not that weird where were you know [TS]

  pretty well sequestered away from from Google itself but I can go over there [TS]

  whenever I want to hang out which is sort of interesting but yeah i mean you [TS]

  know day today my job is pretty much the same as it has been for the past two [TS]

  years which is just sort of being around San Francisco and meeting up with her [TS]

  trainers here right in trying to scope out good ideas and CNN you know I need [TS]

  to go but still has that word Google and it it does which is both beneficial and [TS]

  you know it's it's it's detrimental but it's it can be a little bit of a [TS]

  discussion sometimes when you're talking with specially early-stage entrepreneurs [TS]

  who are worried that if they take you know if they take money from Google [TS]

  Ventures at me you know stop them from doing a day to deal with Facebook or [TS]

  something like that right that that's not the case of course you know we we [TS]

  invested a lot of things that are actually competitive with what Google [TS]

  itself is doing and you know that's our our mandate is really to go up there and [TS]

  find the best stuff regardless of what it is [TS]

  yeah that's a very googly mindset in a good way [TS]

  yeah yeah definitely so it's been good the sort of try everything and see what [TS]

  sticks mind yep [TS]

  so you had a piece and and you know and again just like with your previous game [TS]

  you're still writing at TechCrunch still still raining Paris lemon but you had a [TS]

  great piece this week Jeff Bezos and Amazon yeah so right [TS]

  writing is also sort of an interesting thing for me now because again I just [TS]

  have to sort of do it when I have free time in my day which is hard to do it's [TS]

  a lot harder than I could have imagined it was going from being a full-time [TS]

  writer to sort of a part-time writer it's it's it wasn't as easy of a [TS]

  transition cause I used to be I was just one of those people who I never really [TS]

  got writer's block and i could just write about whatever sort of any topic [TS]

  just go on and on and on about it and it was really just sort of trying to rein [TS]

  in thoughts and make it a coherent piece but now when you're doing the day-to-day [TS]

  stuff of of going from meeting to meeting its right to think about you [TS]

  know the the future of these different on startups and then you try to go back [TS]

  in certain to write and think about big picture of things it's it's not as easy [TS]

  as it is a imagined it would be which is which is definitely something I've [TS]

  struggled with but when they're so when there's news like this happens to this [TS]

  you know this was a surprise to everyone Jeff Bezos buying the washington post it [TS]

  hits whatever time it was in a midday a few days couple days ago and it's [TS]

  something like that where I start to feel like you know my old self again [TS]

  because they just like so many thoughts about that and that's so interesting and [TS]

  fascinating and and so instead of kind of opening up you know WordPress or [TS]

  whatever and said I immediately now go to Twitter to start reading about it and [TS]

  then sort of the the back and forth their sort of gets me ideas as to what [TS]

  what I should write about and so for this particular topic it wasn't so much [TS]

  about Jeff Bezos barring washington post because i dont really know the backstory [TS]

  of that I don't know I don't actually know why he did that I think it's it's [TS]

  fascinating that it could be a disaster could be great I don't really know but I [TS]

  i realize that like so many people you know we can to starkly making the the [TS]

  references to Amazon's overall business model of course an abandoned by [TS]

  washington Post exhausted but the same idea where Jeff Bezos is a great honor [TS]

  because he doesn't care about profits and I even made that joke too and it's [TS]

  like but people like really get into that and so I thought that there would [TS]

  be a good in business to start writing about sort of my change in mentality [TS]

  about Amazon I guess over the past year [TS]

  yeah I'm right behind you really on that I think used in your piece I really [TS]

  liked it and it kind of clicked for me because it it's like I said I was behind [TS]

  you on this where I was sort of having the same thoughts but hadn't put them [TS]

  together and I thought your piece put it together in the same connected the same [TS]

  thoughts in my head that that it didn't float around yeah thank you I think I [TS]

  think we've all been under no I don't want to speak for everyone but for me in [TS]

  particular obviously a lot of us read a lot about a fuller have in the past and [TS]

  there's a way of thinking about Apple that is that is different than a lot of [TS]

  companies of course is as you know better than anyone but there's also a [TS]

  feeling there can be an issue with that because Apple in many ways is very [TS]

  straightforward when it comes to business right they they make they make [TS]

  products that they want to sell for money at a profit and that earns them a [TS]

  lot of money and that's great of course it's more nuanced and that they've lot [TS]

  of other businesses have iTunes and its etcetera etcetera but you know just [TS]

  looking at a high level picture it's pretty straightforward what Apple does [TS]

  and I think Amazon is not straightforward at all and that's why a [TS]

  lot of us were very confused as to like how is this company you know not only [TS]

  continuing to do well but to thrive certainly in the in the stock market and [TS]

  we can argue you know whether that's a meaningful metrics are not but you know [TS]

  it's it's a bit confusing when you look at it first [TS]

  yeah and I think I I've said this many times over the years that in a lot of [TS]

  ways especially as a business Apple is so simple even though they're they're [TS]

  literally the biggest company in the world or second exon [TS]

  never but you know certainly you know massive corporate entity by any measure [TS]

  but they're actually fundamentally simple as a business like you said they [TS]

  make products that people buy and do it for a profit you know set a price that [TS]

  people are willing to pay that significantly higher than the cost it [TS]

  takes to make the product and it it stands out they stand out in technology [TS]

  because there aren't a lot of other companies making computer type devices [TS]

  that that keep its so simple and that do it so successfully but in other [TS]

  businesses it you know it's as old as the way business is always have worked [TS]

  right especially with the luxury brands like you know that's that's the good [TS]

  analogy of you know like a luxury car maker luxury watchmaker they're selling [TS]

  their selling things more expensively than you can get another version of a [TS]

  similar product but they're doing it with quality and so people are willing [TS]

  to pay for quality right you know or like you know and and the luxury thing [TS]

  can be a little distracting because a lot of time to start thinking about you [TS]

  know like retail they're often compared to Tiffany and company because of the [TS]

  profit as revenue per square foot and that's a little bit off-putting because [TS]

  Tiffany sell stuff that very few people by I mean Apple you know it's this weird [TS]

  intersection between [TS]

  affordable luxury it's like mass-market luxury [TS]

  maybe good maybe I don't think maybe a good comparison be like Nike where you [TS]

  know Nike sneakers cost more than average sneakers but they're not on you [TS]

  know almost anybody you know very very many people can and do by Nike sneakers [TS]

  yeah that's that's good thought I actually I would be interested to know [TS]

  what the margins are on on Nike shoes I have no idea I assume you're right [TS]

  though that they're making a pretty healthy margin selling the shoes market [TS]

  from say [TS]

  you know like New Balance or something and yeah that's that's a good way to [TS]

  think about it you know and then there's you know there's certainly you know they [TS]

  probably much like Apple you know marketshare wiser not a majority most [TS]

  seekers are denied him in most people probably despite discount sneakers just [TS]

  by counting all six billion people on the planet but what shoes are on there [TS]

  right but it is it's a simple business and Amazon and and and the other parts [TS]

  of Apple's business stuff like iTunes and stuff like that which is not quite [TS]

  as simple as make a product sell it for a profit is not a significant part of [TS]

  Apple's business yea though it is interesting that it was a few quarters [TS]

  ago it happen right that iTunes pass iTunes revenue I think past Mac revenues [TS]

  at right is that it is now possible I think overall stuff including absolutely [TS]

  everything right something like that yeah but I still think it's up in the [TS]

  air and they don't break it down i mean it's you know they're fairly open in [TS]

  their financials compared to most other companies but they still don't break a [TS]

  lot of stuff down but I think like horse did you as has made the case that he [TS]

  thinks that iTunes even though the revenues varied gotten very high it's [TS]

  still effectively a breakeven business right which I think yeah and and so we [TS]

  can talk about you know obviously horace had a happy sort of countering which I [TS]

  found interesting and i felt like you get mad at me last night on and on [TS]

  Twitter when I sort of said you know well I don't really understand what he's [TS]

  going after but you know I'm going to debate it with you on this podcast and [TS]

  so he's certain responded he thought that he thought that using quotes like [TS]

  anti Apple was was suggesting that I was sort of making fun of his his stance [TS]

  which wasn't really his stance which was my stance and there's some confusion [TS]

  there but I usually do think that Amazon in many ways the anti Apple and he he [TS]

  does not at all it seems like he thinks it's not that that cut and dry that [TS]

  there's I think you know not to go too deep into what his thinking is on this [TS]

  cuz he should speak to their himself but [TS]

  from reading his post my sense is that he feels like it won't be as easy for [TS]

  Amazon to flip the switch and turn to a profitable company which was sort of one [TS]

  of my main points [TS]

  yeah I think it just it it it's not a disagreement fundamentally I think it's [TS]

  in disagreement over what aspects of the company you want to say opposite each [TS]

  other yeah that's that's right you know and if you just look at the desire to [TS]

  turn a profit [TS]

  agro hopefully a growing profit each quarter they are opposite as Apple's [TS]

  goal clearly is to turn a profit [TS]

  a large profit each quarter and in the long run you know have that profit [TS]

  continued it stretch whereas amazon has never really endeavored to do that right [TS]

  but you know I think we're we're overthinking this in some ways I believe [TS]

  Apple again straightforward business Amazon seemingly not so straightforward [TS]

  but it's also like if you if you go back and read the Jeff Bezos shareholder [TS]

  letters from the beginning sort of in the late nineties right when they when [TS]

  they went public [TS]

  there's a lot of interesting stuff in there because you know he basically lays [TS]

  out his vision for the company in in the most high level terms in that like you [TS]

  know they're they're going to sell things you know it low as lower prices [TS]

  they can to you know to benefit the customers and they realize that this [TS]

  will sort of hurts their their margins in her and hurt their potential profit [TS]

  but from time to time you know when he said this they will have to sort of [TS]

  again to flip the switch but but more or less that that the check and i think is [TS]

  what he would say they're gonna check in to make sure that they can actually [TS]

  still make a profit when they need to and the problem now is that we haven't [TS]

  seen that all time right [TS]

  like this last quarter Amazon actually lost money they you know they posted a [TS]

  loss for the quarter and previously it's been very small profits if any certainly [TS]

  compared to Apple I mean we're talking about [TS]

  a single-digit millions tens of millions while Apple's making you know [TS]

  double-digit billions in some quarters in profit and so Amazon actually lost [TS]

  money last quarter and so so we're trying to figure out how are they ever [TS]

  going to be able to make a profit but again you know many not not even that [TS]

  long ago several years ago they were making some you know pretty good profits [TS]

  off of much less revenue that they're at now the revenue of course keeps growing [TS]

  over time and you know to go back to her spine he thinks that it's going to be [TS]

  hard to flip the switch and they do i do agree with the overall sense that it [TS]

  that it could be hard just because you don't know what's coming down the road [TS]

  there could be there could be a competitor that that comes around in the [TS]

  buzz phrase but disrupts app Amazon and they won't they want to see that coming [TS]

  and they're they're so focused on building out that they're they're not [TS]

  focused on the right things but I do think that that severely downplays some [TS]

  of the innovation that that Amazon could do I think a good example of that is is [TS]

  like what they've done with Amazon Prime so like they now have a lot of people [TS]

  paying a recurring fee a yearly fee for products and like when you just think [TS]

  about it think about their business if people are paying for something that [TS]

  razor thin margin you know of course that doesn't seem like the best business [TS]

  to be in from a profit perspective but they have all these people paying Amazon [TS]

  Prime which is sort of interesting because that has you know that while not [TS]

  infinite margins you can assume that that has very good margins I don't know [TS]

  though because I i mean i'm i'm a prime subscriber I guess you call a [TS]

  subscription yeah but I can't help but think that over the course of a year I [TS]

  make my crime pays 800 bucks I don't think it's eighty 80 in nato that sounds [TS]

  about right but I think that we get more than [TS]

  $100 worth of shipping out of it well and so this is another thing when when [TS]

  you're at the scale that Amazon is at you know shipping costs are relative so [TS]

  Amazon is building infrastructure out to build these warehouses all over and now [TS]

  now that they had their shit nude the new taxes in place for Internet taxing [TS]

  they can actually build warehouses in somewhere like California where they [TS]

  couldn't before right because you couldn't have a a physical you couldn't [TS]

  have any physical space in California [TS]

  otherwise they would have made you collect sales tax there and so now that [TS]

  that they you know they've come to an agreement that they are going to collect [TS]

  sales tax over the internet now amazonas starting to build warehouses all over [TS]

  the place they did they didn't have before and so when they when they do [TS]

  things like build a brand new warehouse right outside of San Francisco they can [TS]

  you know the cost of delivering to San Francisco of course goes way down and so [TS]

  this is sort of the game [TS]

  Amazon explain I do think that you're right that that there are a lot of [TS]

  people and certainly your power you know a power user of Amazon Prime and I am [TS]

  too and there are a lot of people who are probably the margins aren't as good [TS]

  for Amazon Amazon Prime but I do I would imagine that there's a lot of people who [TS]

  buy you know a couple things here and there making you know quite a bit of a [TS]

  substantial came from that I'll do stupid things I'll do things can I know [TS]

  its Amazon and so I know I don't feel bad for them I don't feel like i'm [TS]

  taking advantage of them but it was like a mom-and-pop business I would never do [TS]

  like it if it was just like a small business that happened to offer the same [TS]

  shipping offers that Amazon does I wouldn't do it like last week or two ago [TS]

  I bought a little tiny screwdriver just I just needed a real blast size [TS]

  screwdriver and I so I bought one on Amazon for like three dollars and had it [TS]

  sent to me on Prime shipping for free I mean I mean like it's like super low [TS]

  cost I mean yeah I would never do that if it was like a small business would [TS]

  wait and [TS]

  and waited till I needed you know three or four things back together and nets [TS]

  and then i dont ridiculous right it sounds like ridiculous that Amazon would [TS]

  would in any way allow you to order a $3 thing and let you get you do not pay [TS]

  shipping for it but at the same time at the same time because of the scale [TS]

  Amazon operates at they probably have you know say a thousand trucks going [TS]

  going around to your area you know any any given week or something and they [TS]

  just happen to have extra space on it so because you're using the Prime thing [TS]

  you're not doing overnight which of course you have to pay extra for you [TS]

  know they'll be able to find room on one of those trucks that's just on [TS]

  unutilized rate right I would probably be be surprised at how maybe how [TS]

  efficient they're shipping is and how little it does set them back to me for [TS]

  free and remember that they you know with the purchase of Kievan they've been [TS]

  doing some other things they'd there this is all a lot of these processes is [TS]

  completely automated now where they just have robots going around their [TS]

  warehouses and and picking up your mini screwdriver and and putting it in a [TS]

  truck and that's it and there's no you know there's there's very little human [TS]

  costs and you know their their business is pretty interesting at the scale and [TS]

  you know and I have to admit I've always thought that point of prime I mean it [TS]

  may be there for some people it actually is very profitable because they pay the [TS]

  80 bucks and they don't use up 80 bucks worth of prime services right in a year [TS]

  and so that's just free money for him but I've always thought it was a way to [TS]

  sort of encouraged loyalty that there's like you know once you pay for prime you [TS]

  feel like 10 me to look at Amazon first because I know I can get Prime shipping [TS]

  yep and I i do think that that's right I would imagine you know I just bought a [TS]

  Samsung Panasonic supplied no idea what the actual margins are on that but I do [TS]

  think you're you're probably right in that they view it [TS]

  well maybe not a loss leader and I do think like office certain people they're [TS]

  probably making a pretty good profit off of that but they do view it as a way to [TS]

  just keep people coming back and keep people buying more using him as far as [TS]

  I've always said that was the point [TS]

  of like the way that like Sam's Club or forget some of the other big-box [TS]

  retailers were you have to be a quote unquote member ready to be a member [TS]

  eases pay 25 bucks a year or something like that but I've always thought it was [TS]

  you know sure the membership fees are are nice but I don't think that Sam's [TS]

  Club runs on membership fees I've always just thought that there's like a [TS]

  psychology to it where once you remember and you have paid you feel like one [TS]

  telephone gonna buy toilet paper I'm gonna go to Sam's Club because i've you [TS]

  know I'm a member [TS]

  yeah right and thats so that you know that that plays into the idea that that [TS]

  Amazon's business at least at first I think Amazon again is super complicated [TS]

  because they're doing so many things I mean we've even talked about like AWS [TS]

  and and and sort of their digital services which are which are really [TS]

  fascinating but from the beginning of Amazon Chris asserted selling books but [TS]

  even when they're just trying to sell sort of everything online you know of [TS]

  course everyone recognizes that what they're trying to go after his basically [TS]

  Walmart where wal-mart has an insane amount of revenue and relatively low [TS]

  profit compared to that but that doesn't matter because the revenue is so high [TS]

  that the profit is also high even though the margins are so bad that so Amazon by [TS]

  doing things like Amazon Prime and keeping people coming back in just [TS]

  keepin on using the revenue profits will go up the thing that of course we're [TS]

  talking about now is the fact that the profits are going up because they're [TS]

  spending so much of this money on other things are let's take a timeout couple [TS]

  sponsors shows get one out of the way and then we'll keep going on and I want [TS]

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  show eight and you'll save 10% back to Amazon and profit so my summary and this [TS]

  was I hadn't had this thought until I read your piece but my summary is there [TS]

  Dave Bezos has said Amazon up from investor perspective that that profits [TS]

  are sort of like a will of the west and that's always investors believe in [TS]

  Amazon or Amazon investors certainly do and the revenue growth is certainly [TS]

  there right it's it's you know maybe one quarter over another there been dips but [TS]

  a pretty steady pace since the company was founded in 1994 revenues have grown [TS]

  at a remarkable rate Lake you know it used to behave Amazon might someday be a [TS]

  major retailer on the scale of like wal-mart and target and no physical [TS]

  world retailers like that and you know in the nineties some people thought that [TS]

  was not some people truly thought hey come on to buy stuff on [TS]

  but normal gonna buy stuff online it that's totally turned out to be true and [TS]

  so that's sort of investor faith from a long time ago has panned out the revenue [TS]

  growth is there but I think Bezos I think they want to put words in your [TS]

  mouth but I think this is the point you're sort of making his basis is sort [TS]

  of set up the expectation that profits never have to come now they only have [TS]

  two potentially come in the foreseeable future right and I do so this is why I [TS]

  think basis is sort of what do you think he's business genius certainly but I [TS]

  think he's sort of underappreciated and I think that's what we're seeing with [TS]

  the washington post up like what would you do this and maybe he doesn't have a [TS]

  plan for us to put again I don't know but you know when people are sort of [TS]

  saying like like crazy guy who just doesn't care about profits by as well I [TS]

  think that I mean when you look at his history right he worked on Wall Street [TS]

  he understands how this works maybe better than most other CEOs do because [TS]

  they don't have that experience wherever he didn't start he didn't start until he [TS]

  was thirty hedge fund announced twenty right to hedge funds so he totally [TS]

  understands are you can assume that he totally understands wall street and so I [TS]

  think what we've been seeing the past two years which is really interesting [TS]

  when compared to Apple AAPL has just done profits so much so so good of [TS]

  business they the profits you know that what the one the couple quarters of it [TS]

  thirteen billion dollars and the only thing to that's comparable to that or [TS]

  the oil companies right i mean this is that's amazing and it's not even though [TS]

  companies often don't do that well it's like there's there's three best quarters [TS]

  stack up against Apple's best quarters now and so does profits are huge and [TS]

  while they were showing those giant profits and the profit growth more [TS]

  importantly and the revenue growth while she was loving Apple pushed the stock up [TS]

  to 700 past seven hundred dollars a share right now that the growth is [TS]

  slowing even if the profits are still pretty good you know I forget what it [TS]

  was last quarter eight billion or something like that I mean it's still [TS]

  insane for almost any company [TS]

  the growth is no longer there and [TS]

  the problem and and sort of one of the points and I made it in my post which i [TS]

  think people just don't really think about it so obviously people don't think [TS]

  about it [TS]

  Apple's problem with wall street is that they're looking for future potential and [TS]

  the fact that the iPhone was such an incredibly good business and still is [TS]

  for Apple that it's gonna be almost impossible I think for them to find a [TS]

  business that's similar to that maybe I'm wrong I hope I am I hope that you [TS]

  know they come out with with some kind of crazy new device that no one is [TS]

  thinking about but I think even with like you know the rumored television [TS]

  stuff and in the watch I think that they'll be hard-pressed to get the sort [TS]

  of profits that they do offer the iPhone because of the way the unique market [TS]

  that iPhones in the smartphone market especially the subsidized and [TS]

  unsubsidized markets where they're getting paid so much money up front for [TS]

  these devices and so that's going to naturally if you can't get another [TS]

  iPhone like product the the growth is naturally going to come down and so you [TS]

  know when people talk about has Apple you can maybe make an argument that they [TS]

  have in terms of revenue and profit growth just because the iPhone was such [TS]

  a good business [TS]

  Amazon is the opposite right where those is playing this way and and and just go [TS]

  back to Apple for a second so so Tim Cook you know that the operator he [TS]

  understands how to make the the machine as well oiled as possible and as soon as [TS]

  he took over 44 steve Jobs was found that both on an interim basis and then [TS]

  in a permanent basis [TS]

  you know people don't give him credit but the stock went crazy you know after [TS]

  after Jobs passed away and and cook is is the CEO and the man in charge that's [TS]

  what it do the run up to $700 Sharon Apple sort of hit its peak and then you [TS]

  know everyone talks now like oh my god he's lost so much value but he created a [TS]

  lot of that was under him that that value was created and so pesos though is [TS]

  playing at the the the opposite way we're rather than focus on [TS]

  the profit you know of course you want revenue growth especially in the [TS]

  business Amazon is in but rather than than focus on the profit in showing [TS]

  investors what you know showing him your hand basically he's focused on trying to [TS]

  trying to ground that revenue that that profit into the into the ground and make [TS]

  it almost you know break even [TS]

  yeah I totally agree and I and it's you know Matt Iglesias who rides on [TS]

  economics its slate has has commented on Amazon several times as well as his [TS]

  phrasing that he called them that effectively that they run like a [TS]

  charitable charitable foundation for the benefit of consumers rate at which which [TS]

  is funny I mean that's a really funny way to think about it and and I used to [TS]

  totally agree with that but you also remember that Amazon Amazons business [TS]

  and in anything was eugene way he used to work at at Amazon pointed this out in [TS]

  a really good way a few months ago remember that Amazon because of the [TS]

  business there and they have cash constantly flowing in and yet they don't [TS]

  have to actually pay for things necessarily right away so they have the [TS]

  day of the sort of interesting buffer that other companies do not have and [TS]

  that's why when you talk about free cash flow in like how Amazon could possibly [TS]

  keep operating in and bring in money when they're losing money it's because [TS]

  their business is is unlike sort of any other where they actually do constantly [TS]

  have a flow of cash coming in and if that dried up they would be yeah yeah [TS]

  there would be there would be a problem but that's not a drying up certainly [TS]

  things like you like Amazon Prime are probably hoping that were people just [TS]

  keep buying stuff and so they have this cash that they can use for things where [TS]

  they don't need to focus solely on making a profit there's the classic [TS]

  eighties Saturday Night Live a commercial for the first union change [TS]

  bank I do remember this is Kevin Nealon [TS]

  in the gist of it was it a bank where all they do is make change [TS]

  and they're like hey you can come in with a dollar bill and if you want [TS]

  twenty nichols will give you 20 nichols' you want ten dimes you can get ten times [TS]

  you want half nichols have times we can make that happen and it was funny and [TS]

  then you know the punch line was people say how do you turn a profit [TS]

  how do you make money right right and that it's funny and that i think is sort [TS]

  of been the the knee jerk and it has been mined the knock against Amazon you [TS]

  know that you know if you're breaking even there is no profit but it did you [TS]

  could actually turn a profit as a change bank if you can hold the money before [TS]

  giving them their change right now and that's why you know I think Amazon [TS]

  wasn't that the PCR citing from the guy who worked at the date they hold some of [TS]

  that money for up to 90 days right that they only have to pay like the book [TS]

  distributors I give you buy a book they pay at the end of the quarter and the [TS]

  time they've helped them money and they can earn interest on it do it do you [TS]

  know do you actually can make money as a change bank if you have money for 90 [TS]

  days right it's it's an interesting way to think about it is like maybe maybe [TS]

  more simplified way that like you know someone just on a day-to-day can think [TS]

  about it like imagine that your you pay a you have to pay a down payment on your [TS]

  on your renter you have to pay basically a holding fee or whatever to to get an [TS]

  apartment right and see you give that to your landlord in your landlord then has [TS]

  that money he could put it in a in his checking account and he's earning [TS]

  interest on that money so it's like your money is being used to make him more [TS]

  money because eventually he's going to give that money to back that you [TS]

  treasure apartment or whatever but he is earning money off of the money that [TS]

  you've given in so there's so there's the interest component of it which I do [TS]

  actually don't know how much Amazon doesn't that I assume that there that [TS]

  they have you know somebody invested in making interest off of that but yes and [TS]

  then there's also the free cash flow component where they're just they can [TS]

  hold onto this money and use it for whatever they want to use it for until [TS]

  they have to to to pay it ninety days later but at that point they already [TS]

  have [TS]

  their money that has come in for the same purpose so it's [TS]

  I know that this is this is this is fairly complex in this took me a little [TS]

  while to understand how exactly this could possibly work is it almost seems [TS]

  like it's such an interesting idea that it seems like a scam right where it's [TS]

  like they don't actually they're they're not selling something and getting money [TS]

  and then distributing it the rather there's they're selling something [TS]

  they're getting the money and then they're distributing what they already [TS]

  took the last money for right it's like it's a pretty complex idea but this is [TS]

  this is sort of the genius of basis that he realized that you could do this and [TS]

  certainly that's not at all of Amazon's business they have many different you [TS]

  know AWS and stuff where they were they can't do this kind of stuff but in in [TS]

  the retail side of things there are there are some interesting ways that [TS]

  they can that they can make money out of seemingly having no profit right yeah [TS]

  it's totally interesting I isn't the story with AWS that day wasn't like [TS]

  they've really I mean who knows how many you know you have to take their public [TS]

  statements with a grain of salt I guess because maybe there won't be a little [TS]

  cagey about what they say publicly but publicly they've said more or less that [TS]

  they've built up a lot of infrastructure so that they could handle their peak [TS]

  traffic which affect you know for Amazon right retailer is like holidays you know [TS]

  like giving night and the day after Thanksgiving and stuff like that so they [TS]

  want to be able to handle that they don't want the site to crash [TS]

  on Monday the day after Thanksgiving when everybody's trying to order and so [TS]

  they've filled out an infrastructure to handle that level of traffic smoothly [TS]

  but then you know three hundred and fifty five days a year they don't need [TS]

  it right it's sitting there unused and said it will why don't we sell it to [TS]

  people other people take advantages yeah I think you're right in that that was [TS]

  the initial impetus behind how they do it I don't actually know that their full [TS]

  story but I think that that I believe that that's right but but now I imagine [TS]

  that they realize that this is actually pretty big business and so we should [TS]

  just have these sort of we should just run this is as a separate business aside [TS]

  from having having the same excess inventory of storage for win her sick of [TS]

  a city for women it's not a holiday season and I think that they do not [TS]

  recognize how big of a business this this actually is anything about yeah you [TS]

  know you always talk to me with startups I mean the number of them that are built [TS]

  on top of Amazon's cloud infrastructure is amazing I mean I don't know what the [TS]

  you know the actual percentages but I it's it's way over 50% for me at least [TS]

  in startups in San Francisco that it that are built on top of Amazon in some [TS]

  way at least and that that's pretty incredible when you think about that and [TS]

  when you if if they can keep doing that you know there there's already there's [TS]

  big businesses that are built on top of Amazon I don't know if Instagram is [TS]

  still using Amazon for for their picture hosting they were and I don't know if [TS]

  they've moved over to Facebook's infrastructure sense but it's no [TS]

  guarantee that they have and they may still be using Amazon to host all their [TS]

  images member when when they first announced iCloud and people sort of [TS]

  poked around and and it ended up it was like a retard hodge podge on the back [TS]

  end where it had built some of it and it was in Apple datacenters but they were [TS]

  also using Windows cloud I know they're using Microsoft for some of it yeah I [TS]

  think I think they may have been [TS]

  I think Apple is using them in there you know nobody's more security but that's [TS]

  pretty tellin ya and it's in that that brings up something that's that's sort [TS]

  of some people have have sort of said in response to 20 this Apple and Amazon [TS]

  argument it's like so obviously we had the the dead center is down all hits [TS]

  high right it was supposedly hacked or whatever but they also they've had it [TS]

  was down again yesterday briefly and of course had a lot of issues with with [TS]

  various things I message and in all kinds of services iCloud just being down [TS]

  so why doesn't Apple take a page from Amazon's book and just spend a sliver of [TS]

  their hundred and fifty billion dollars or whatever it is in cash and just go [TS]

  crazy on on building out the the infrastructure and so I think the [TS]

  argument there is that like you have to assume that they're doing they're doing [TS]

  that right I mean I don't know what are your thoughts on that Lake people get so [TS]

  frustrated about this and assume that that Apple is like so obsessive about [TS]

  holding onto their cash that they don't want to spend it even when there's a [TS]

  very obvious thing that they should spend it on I have to assume that [TS]

  they're not doing that that we don't know the whole picture like maybe they [TS]

  just don't maybe they can't build it fast enough maybe they're spending as [TS]

  many billions as they can to do it but they just can't do it at quite a pace [TS]

  that they want and need to you yeah that's a good question but with data [TS]

  centers they can't keep them secret because they're a man I don't think that [TS]

  they can I mean I guess it would depend where you build it but you know like the [TS]

  big one in north carolina I mean it's not a secret I mean everybody knows [TS]

  where it is and because they're so big like to build a data center that is [TS]

  significant to Apple's needs that you know just what just happened to have [TS]

  some sort of significant impact on the services they provide is a huge [TS]

  undertaking and therefore it requires you know deals you know the whole reason [TS]

  I went to North Carolina's the deals from the government [TS]

  right tax breaks tax breaks and whatever zoning permits I guess and stuff like [TS]

  that that it's not secret because all that stuff you know when you're [TS]

  negotiating with the government is all you know has to be out in the open right [TS]

  so you know to my knowledge there's not a lot of brick-and-mortar building out [TS]

  of of data centers on that Apple's undergoing so I what else could a [TS]

  senator Mian well so you know i mean certainly they have to be spending money [TS]

  on infrastructure for components right i mean you know there's always talk that [TS]

  they've debt while they work with third parties overseas and they built a lot of [TS]

  factories for them in sort of built built the infrastructure needed to do a [TS]

  lot of what they're doing which is customized and so they're certainly [TS]

  spending money on that but it is crazy if they're not spending as much as they [TS]

  possibly can on the on the database the data warehouses because everyone knows [TS]

  that this is such a problem for them and we see it on it on an almost daily basis [TS]

  now and so you know what are they holding onto that money for a net that [TS]

  that sort of goes back to again the argument between Amazon and Apple and [TS]

  answer the wall street component of it of course Apple started going under fire [TS]

  when they when they passed a hundred billion dollars in cash that was [TS]

  overseas as we know but you know there there were activist shareholders who are [TS]

  rising up and saying you need to distribute this money and they are of [TS]

  course now but Amazon doesn't have that problem again because they just aren't [TS]

  you know posting these these giants amount of profit and holding on all this [TS]

  case I think they do have plenty of several billions I don't know what the [TS]

  number is that they actually hold in cash but it's nowhere near what Apple is [TS]

  holding and so why exactly is Apple holding onto this you know they say it's [TS]

  for for future considerations are you know for defensive purposes but they're [TS]

  really not doing anything for it so was it you know you start to wonder at least [TS]

  I'm starting to wonder was it a miscalculation to actually build up this [TS]

  amount of cash [TS]

  started asking these hordes of money yes I also feel like they you know I'm not I [TS]

  i dont know I don't work for the SEC so I might be off base here but the money [TS]

  that they have quote unquote in the bank [TS]

  the profits from past 10 years that they're sitting on if they'd spent a [TS]

  huge chunk of it in the next like two quarters to build out like another [TS]

  massive data center [TS]

  you know Texas you know alaska [TS]

  doesn't matter where they'd still have to account for that in those quarters [TS]

  right so that's not just because they have the money in the bank doesn't mean [TS]

  that they don't it wouldn't have an impact on their quarterly earnings [TS]

  right-o it would and it would just look bad [TS]

  investor wise if if their profit for like two orders from now [TS]

  was way lower than it would have been if they hadn't made this massive up-front [TS]

  capital expenditure they can explain it in people who are paying attention could [TS]

  listen to them and say look this is you know we were doing this for this reason [TS]

  and it you know it's in our best interest going forward but we all know [TS]

  that people don't really listen to the actually explanations they just CEO [TS]

  Apple made you know turned lower than they were expected to you know there [TS]

  must be going under and again that just goes back to my thought on why basis is [TS]

  a genius with this you know I won't call it manipulation but it's it's the way [TS]

  that he's he's playing it right where he doesn't have to worry about spending a [TS]

  billion dollars one quarter on a datacenter because that bill like the [TS]

  investors aren't used to seeing that billion anyway and they think they'll [TS]

  see that billion down the road somewhere as a result they think you'll see two XE [TS]

  billion down the road as a result of him sending this billion right now right [TS]

  maybe oversimplifying but I see it's the way he's set them up from an investor [TS]

  perspective that really does contrast with Apple rebels and never really ever [TS]

  even in the old days when they were relatively a small company [TS]

  has never been held in high regard by Wall Street right now the stock I think [TS]

  has long been was old days long undervalued because they were [TS]

  misunderstood company and the company was never really set up to make [TS]

  investors happier you know it was always about the product it was always the [TS]

  company has always been set up to make great products great experiences and and [TS]

  everything else is secondary whereas I think pesos is experience it's like [TS]

  what's coming with what's becoming clear to me is that he set the company up in a [TS]

  way that it's always been set up to make investors happy or satisfied you know [TS]

  that it's not a coincidence not like the way matt Yglesias put it it's almost [TS]

  like investors are delusional you know to support its crazy that they support [TS]

  Amazon's lack of profitability quarter after quarter whereas I think the truth [TS]

  is that that was by design [TS]

  yeah and again I go back to the earlier point where you know basis is obviously [TS]

  aware of this because he's put it in the shareholder letters it's like we at some [TS]

  point we realize we recognize that we need to turn a profit [TS]

  eventually and we're gonna do that down the road you know we may have to check [TS]

  in from time to time to make sure that we can do that and maybe that means just [TS]

  not spending billions of dollars on infrastructure costs in a one-quarter [TS]

  something like that then all of a sudden a show like you know like a five hundred [TS]

  million dollar two billion dollar profit of a sudden and then then the very next [TS]

  quarter they go right back to building out again and so maybe they do do that [TS]

  sometime in the next couple of years or something like that I don't know if [TS]

  they're not showing any signs that they're going to do that but yeah I [TS]

  think I think you're right that that basis is just playing this sort of thing [TS]

  this perfectly that everything is in the future and everything is going to going [TS]

  to be going to be rosy at some point but what really is the point is to go back [TS]

  to the to the to the idea of what Apple is doing with their money what is the [TS]

  point of caring all these profits if you know when you get beyond a certain point [TS]

  I mean Apple couldn't buy enough companies nor were they want to because [TS]

  it would be a disaster if they spent a hundred billion dollars buying companies [TS]

  they're not gonna do that there there are you know probably investing in [TS]

  infrastructure as much as they feel comfortable with so they clearly have [TS]

  more money than they need for that and so what is the point at the end of the [TS]

  day of having all these massive profits beyond it kinda having a major headache [TS]

  I mean it's good if if the economy turns that's what that's one argument right [TS]

  like you know if the if the economy goes bad again Apple doesn't necessarily have [TS]

  to change anything they're doing because they have so much money and they could [TS]

  sort of dip into that but Amazon seem to whether you know the last downturn [TS]

  perfectly fine I don't know you know what their numbers exactly word then but [TS]

  certainly you know they are not going well and I think that's that's the other [TS]

  that's another thing that to me through at least threw me off that Amazon is [TS]

  that my first impression of Amazon was was formed in the go-go dot com nineties [TS]

  right and I i mean I was an early Amazon user but I memorable an Amazon with just [TS]

  a bookstore and they were you know had crazy customer service and it and it was [TS]

  free shipping for everybody and crazy low prices on the books and they had [TS]

  just amazing customer service like if you wanted to send a book back you just [TS]

  pay for the shipping to send it back just like a lot of form on the website [TS]

  and they'd be like your print this out and UPS guy I'll pick the book up [TS]

  tomorrow you know or whatever it is you bought one day started selling more [TS]

  stuff right and but the bottom line is that they ran did that run up in the mid [TS]

  to end of the nineties they were they were running a real they were losing [TS]

  money quarter after quarter after quarter right in a typical dot com [TS]

  mindset lots and lots of dot coms had that same I did lose money to build [TS]

  market sharon's blah blah blah something well blah blah blah something to happen [TS]

  for Amazon [TS]

  they did kind of turn it around and so yeah they don't make big profits and a [TS]

  quarter and sometimes they lose a little sometimes they they make a little but [TS]

  it's not at all that it's not at all like it was in the nineties when they [TS]

  were burning money they're not be right money right and even you know I brought [TS]

  this up briefly in the peaceful lake it's funny that they you know Amazon [TS]

  invested in things like pets.com which of course you know is one of the great [TS]

  dot com flame outs and even more recently they invest in LivingSocial [TS]

  which is they've had to write down their investment and so they're still sticking [TS]

  some risks and you know making sort of crazy bets but in the nineties pets [TS]

  upcoming was total disaster while they were losing money and they still don't [TS]

  go under now we have LivingSocial thing is a total disaster but they're able to [TS]

  easily withstand something like that it doesn't even really make it did you know [TS]

  they did lose whatever that was a few quarters good that they wrote it down [TS]

  you know they posted some some losses but you know investors still don't mind [TS]

  it's like they they trust Amazon because the amazon has lived through kind of [TS]

  some seemingly impossible things to live through like you were saying in the in [TS]

  the sort of the dot-com bubble and you said like basis has been upfront about [TS]

  it forever [TS]

  you know he has been you know I Amazon investors are getting exactly what they [TS]

  were promised yeah you know but maybe someday there gonna need to turn a [TS]

  profit I mean you have to assume that they will it it becomes like it just [TS]

  becomes a very weird thing and I would have thought I think I like two years [TS]

  ago I think at some point they will have to show profit right like winter I don't [TS]

  get it this is madness when are they ever going to actually show a profit [TS]

  again are meaningful profit again and you know investors just the stock has [TS]

  passed $300 whatever and and they show no signs of slowing down so I don't know [TS]

  actually win win that is that they have to do that and basil seems like he's a [TS]

  step ahead and that he does know when they'll have to do that [TS]

  and I don't know when that is and maybe it's her but I think that it will be [TS]

  sometime relatively soon I have to believe that I think so let me take a [TS]

  break here and thank our second sponsor second sponsor back from last week is 10 [TS]

  tiang and what's tempting is an OBS mobile service no contracts no overage [TS]

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  whatever you've signed up for they'll move you down to that here so that you [TS]

  save money they have an online calculator go to the website at [TS]

  talk-show . 10.com that way don't know you came here from the show even online [TS]

  calculator and it's amazing you do you pump in what you're paying now for [TS]

  Verizon or AT&T or whatever it is [TS]

  sign up do tell them how much data you use how much Voice use and they'll tell [TS]

  you how much you'll save per month and if you're using something like AT&T or [TS]

  Verizon I I think it's almost guaranteed you gonna say it's kind of amazing when [TS]

  you sit there is a catch the catches they don't have the iPhone right now [TS]

  that's obviously going to effect a significant number of people listen to [TS]

  the show but there's also a lot of people like John Siracusa out there who [TS]

  don't have an iPhone don't want to spend the money on $120 a month iPhone plan [TS]

  and if that's you I would seriously suggest looking at 10 there an MVNO that [TS]

  build on the Sprint network so it's got great coverage all over the country [TS]

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  that does however the great great domain registrar and like I said last week [TS]

  domain registration is notoriously as scummy business however has a great [TS]

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  mobile services exact same way mobile service is notorious for all sorts of [TS]

  hidden charges and overage fees and wow I signed up for $100 a month plan in my [TS]

  bill is a hundred and fifty how'd that happen is the complete opposite totally [TS]

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  great support unbelievable prices so again check them out at talk-show dot [TS]

  dot com you'll be surprised at how much money you can see and you can see also [TS]

  you can sign up to be notified when they when they do support the iPhone which [TS]

  they're working on so boris did you in His peace following up on on Amazon I [TS]

  think he focused a lot on the idea of flipping the switch which would be sort [TS]

  of switching from breaking into suddenly making big profits I think if there's [TS]

  anything I liked his piece of that he made a lot of great pieces Island it up [TS]

  but I think maybe flipping the switch is the wrong notion I think it's maybe a [TS]

  little bit more like turning this pick it up a little bit you know and yes [TS]

  order or the opposite turning the spigot down on the expenditures that they have [TS]

  right right it's it's not flipping a switch and suddenly piles of profit [TS]

  start piling in [TS]

  I think it's turning dials little downturn this little downturn this [TS]

  little up you know maybe raised prices just a little maybe decrease [TS]

  expenditures on you know capital in ventures expenditures a little bit and [TS]

  all of a sudden you know the little better profits turn into a little bit [TS]

  more profits suddenly turned into more profits turned into more profits quarter [TS]

  after quarter and it's you know or you know like water boiling on the stove you [TS]

  know it doesn't just go from cold to hot but eventually it is very hot [TS]

  yeah I think I guess there was one of my main problems with horses post was just [TS]

  that it seems like to me that he was trying to squeeze Amazon into a easy to [TS]

  understand [TS]

  and Apple business model right where at some point Amazon will have to flip a [TS]

  switch meaning turn up the cost I assume of the goods they sell it to make it [TS]

  better margins and then to to make better profits what I think he's [TS]

  discounting is the fact that they can instead just not spend as much money on [TS]

  dated warehouses or things of that nature and the fact that Amazon is in [TS]

  there in an increasing number of businesses remember we talked about AWS [TS]

  there now getting into this sort of the web threat FreshDirect stuff right where [TS]

  they're doing sort of grocery deliveries and I don't know I don't know what the [TS]

  margins are on that they're probably not very great but still that's a that's [TS]

  another new business that they're getting into and we haven't even talked [TS]

  about things like where they could potentially you know they could get into [TS]

  the advertising business more certainly they have a lot of interesting user data [TS]

  and they have all those credit cards on file they could get more into the in-app [TS]

  purchase stuff certainly they already have their own app store they're just [TS]

  doing a lot of stuff that i think is is is totally discounted in the notion that [TS]

  Amazon is still just the one company that sort of you go to buy anything [TS]

  online there's so many different things now so I don't think that it's just a [TS]

  matter of flipping a switch I think you're right it's turning [TS]

  just tweaking nozzles for all of these different businesses that they have that [TS]

  that is the way that if they do eventually decide that they want to show [TS]

  profits again at least for a little bit that's how they're going to do it [TS]

  yeah I totally agree with that [TS]

  backtrack a little bit and like you said you were talking about like the almost [TS]

  the perfect storm that the iPhone was for Apple may be one of the reasons [TS]

  they've amassed so much cash is that they deserve [TS]

  it's almost a surprise to them that the iPhone turned into such a success [TS]

  yeah and that three years later that all of that technology software and hardware [TS]

  that the iPhone was gave them the perfect opportunity to do the iPad and [TS]

  start suddenly after all these years taking massive chunk of the PC industry [TS]

  has faced as the years have gone by that this is what has happened is that the [TS]

  iPad and tablets in general have have overrun just completely almost overrun [TS]

  the sub thousand dollar portable computer market [TS]

  yes i think thats I think that you're the first point is definitely right [TS]

  where I would imagine that they were surprised at how good the business could [TS]

  be because you know they were they were entering a new space jobs you know [TS]

  famously said what was what percentage did he want to get like five percent or [TS]

  whatever it was [TS]

  of the of the smartphone million and one percent of the phone market one percent [TS]

  of the overall vote phone market or so and by the way while Nokia and some [TS]

  other ones had hit great businesses at that point they were nowhere near the [TS]

  business that the iPhone is from you know that the carrier at least in the [TS]

  you s carrier market where where these things are subsidizing the money gets [TS]

  paid up front to Apple and so it's almost like they were it really was the [TS]

  perfect storm because right as [TS]

  Tim Cook was taking over Tim Cook had its streamlined the art of making you [TS]

  know beautiful products that people want for a relatively inexpensive you know [TS]

  manufacturing write the thing is we we talked about you know I am making [TS]

  premium products and so most of the time when you make a premium product you know [TS]

  the the problem at a very high level I know this isn't the way that it always [TS]

  is but the thing is it it it costs more because it costs more to make great but [TS]

  Apple cats so streamlined it getting at getting good at making things like the [TS]

  iPhone where it's like they could make this this this thing is so much higher [TS]

  quality than everything else they could almost make it the same cost of their [TS]

  rivals making these these decidedly less quality phones and so that along with [TS]

  the fact that the smartphone market you know Apple timed it perfectly that it [TS]

  took off and with the with the sort of the carrier subsidy model already in [TS]

  place and I think the carrier sort of underestimated sort of how big something [TS]

  like the iPhone and Android phones would would become it really was the perfect [TS]

  storm in making this like the absolute perfect product that I don't think that [TS]

  anyone can really match again at least anytime soon in terms of just how much [TS]

  profit making off of that and think about what Apple's margins used to be [TS]

  and then remembered like a few quarters ago when they got up to it was like 42 [TS]

  percent or something like that [TS]

  loser like software margins for a hardware company which is crazy [TS]

  significantly higher than Microsoft's in Google's which is crazy because of [TS]

  Microsoft and Google are primarily overwhelmingly software companies right [TS]

  right yeah I'm so I you know I think you're right there with me where I am [TS]

  really have no almost zero down i mean you know nothing certain but I have [TS]

  zeroed out that innovation is far from over a couples should be good for the [TS]

  decades to come in terms of coming up with new products [TS]

  in new categories I don't know that they'll ever come up with a new product [TS]

  in a new category that of the massive profitability as as the iPhone and iPad [TS]

  because you know I just think about the size of the market it almost everybody [TS]

  on the planet is gonna have a mobile phone and certainly you know there's a [TS]

  huge huge chunk of of the world that can't even dream of buying a $700 phone [TS]

  but it doesn't matter to Apple in all for just talking about profitability and [TS]

  revenue you know I'm not saying those people no matter but their money doesn't [TS]

  matter because if they don't have the money it's irrelevant but in terms of [TS]

  the people who could in theory by a $700 so it's it's almost everybody who has [TS]

  money is going to at least consider yourself it's a massive market it's a [TS]

  very expensive product I think in the grand scheme of things you know $700 [TS]

  foner 67 $800 tablet these are expensive things in the grand scheme of things I [TS]

  mean compare and contrast with the iPod which really didn't take off until it [TS]

  hit like the 199 markers so I mean even then it's expensive for a music player [TS]

  and at the end the flip side of what you're saying which is exactly right is [TS]

  that the iPhone didn't take off in a meaningful way either until it got down [TS]

  $299 because it was subsidized and there's no other there's just no other [TS]

  business that's like that right there's not gonna be some some weird entity [TS]

  that's not Apple that's going to pay Apple to lower the price of their [TS]

  products and in terms of Apple not maybe not knowing quite what they were getting [TS]

  into at the outset I think the thing that they knew that they had was they [TS]

  had an amazing device right i mean as everybody knows you know the one product [TS]

  that Apple introduced that wasn't banned on day one [TS]

  as you know for whatever I mean there were some people who thought they were [TS]

  going to be a failure but nobody denied that the thing wasn't incredibly cool [TS]

  right [TS]

  they knew that they had a great product is amazing holy shit you have a computer [TS]

  in your hand and it's all touching it was so smooth and everybody knew that [TS]

  was great so they were focused on that he knew it they had a great then but [TS]

  just think about the way that with the original iPhone in 2007 they actually [TS]

  tried to circumvent the traditional carrier subsidy thing where you you [TS]

  bought your to buy your iPhone on june 28 thru whatever it was [TS]

  2007 you paid they are paid 599 [TS]

  $4.99 we bought unsubsidized iPhone and what we've gotten turned forget our [TS]

  monthly fee from AT&T was a little bit lower as we didn't have any kind of [TS]

  contracting we still had contract with AT&T but we weren't buying subsidized [TS]

  devices and I can't help but think it was because they wanted they somehow but [TS]

  they don't want to get into that because then it would it would tie them to the [TS]

  carriers too much yup that's exactly right and then they that what I think it [TS]

  was the real genius was the fact that they stayed exclusive to AT&T for so [TS]

  long and they forced the other carriers to sort of been to there will be no [TS]

  Verizon [TS]

  especially because otherwise it just they would have had to make so many [TS]

  sacrifices we would have Verizon and on the back of the phone we would have had [TS]

  like little stickers who had all these apps installed like we see any Android [TS]

  because you know you remember that Google tried to do the same thing with [TS]

  the I think it was the Nexus One the original one where they tried to sell it [TS]

  online at full price without can you could pick your carrier and it just did [TS]

  not work same ideas didn't work for the same reason because no one's gonna pay [TS]

  that much for a phone [TS]

  the problem was exacerbated by the fact that unlike Apple Google doesn't have [TS]

  retail stores so like Apple's you know secrets [TS]

  access really could you could also say why they could they could pressure the [TS]

  carriers as much as they have those stores which moved the iPhone so they [TS]

  don't need it really AT&T and Verizon they do that at a certain scale of [TS]

  course because you know more people you know by them based on what carrier they [TS]

  want but they have their backup plan which is just that will try to push them [TS]

  in the stores and you hear that even now they're trying to ramp up the amount [TS]

  that are sold through the stores versus through the other day other carrier [TS]

  partners yeah I and it it just I think the African how many iPhones sold in the [TS]

  first year but is only like a million or something like that yeah yeah if even [TS]

  that of something small small I mean it's you know they saw like five million [TS]

  in the opening weekend when they come out with a new one like this there was a [TS]

  whole year like so late in the grand scheme of things that first iPhone was [TS]

  not a hit product in in the mass market it was among people like us probably [TS]

  listeners of the show probably you know huge number of people who listen to the [TS]

  show probably bottomed original iPhone right but it wasn't a mass market it [TS]

  because it was $699 $599 phone even though when you buy a subsidized for [TS]

  $1.99 or $99 you are paying the price you pay more right to actually do pay [TS]

  more right but it it the psychology the truth is the psychology works yep it [TS]

  does people it feels like only buying a hundred $999 iPhone because you're [TS]

  already prepared for that [TS]

  monthly bill that has the subsidy charged built-in baked into it that's [TS]

  exactly right and so you know it's over now with all this talk of this this [TS]

  cheaper iPhone which I don't know anything firsthand about but I do [TS]

  secondhand I do think I do think that we're finally in the in the in the point [TS]

  at the point where this is legitimate and there will be some sort of you know [TS]

  cheaper version of the iPhone because of everything we just talked about but also [TS]

  the fact that Apple wants to expand the market they need to have a bigger bigger [TS]

  share of the Chinese and Indian and [TS]

  and some other different countries where they don't have the subsidy model and so [TS]

  that's the only way to do it and you know we'll see what the what the price [TS]

  point ends up being of that thing with his what are the things floating around [TS]

  now that would be like $300 or something like that unsubsidized [TS]

  might be too much money I don't know and I don't cheap might be the wrong way to [TS]

  look at it but i i think i think pricing wise what it's going to turn out being [TS]

  is the thing that we've all been talking about since the fall of 2007 when the [TS]

  first iPod Touch coming came out which is if the iPod Touch only costs three [TS]

  hundred and fifty dollars or $300 or whatever [TS]

  how much would it cost for them to put a cell chip in there i mean of course it [TS]

  would make it thicker let's just assume that putting an extra extra antenna and [TS]

  chips etcetera and to make it do [TS]

  LTE invoice and you know but it can't be that big you know i mean that has always [TS]

  been better than the iPhone but why could they make an iPod touch if its 350 [TS]

  bucks why can't they make a cell phone costs and I think that's what this you [TS]

  know lower-cost iPhone is an iPod touch that can make phone calls yet so I [TS]

  wonder what they'll do that in the you s market where you know the the carrier [TS]

  syst dominate certainly they got the carriers to agree to do the ala carte [TS]

  iPad stuff originally right like where you could just you can pay one month and [TS]

  not pay the next month and was really easy to flip on and off right there was [TS]

  no contract I don't know how that will go over with this with this new device [TS]

  like will will just not be available in the USA Thompson saying it has to be [TS]

  right but there's no way that they would do it and only launched overseas know [TS]

  let's come back to that I have some thoughts on that but let me just do the [TS]

  final sponsor and we'll come back to them we would be a great way to finish [TS]

  the show gonna tell you about batched geo da TCH Ji Hyo they've sponsored to [TS]

  show before [TS]

  maybe the sponsor during fireball sometimes I confusing but I know they've [TS]

  come back and they're great it's amazing it's fast easy way to visualize location [TS]

  data so one thing you can do if you have like a bunch of addresses in like an [TS]

  Excel spreadsheet just copy and paste them in too bad geo website and hit a [TS]

  button and boom you have a map with all of those addresses on and i i tried it [TS]

  it sounds to get that to me sounds like way too good to be true I figured that [TS]

  after they'd spend some time putting the data in a certain way or whatever no you [TS]

  just put addresses in hit a button and you get a map with the addresses of all [TS]

  sorts of other things you can do to they have an easy way that you can make a [TS]

  locator app for your website like if you have a website with locations in a [TS]

  restaurant or something like that they have an easy way to do that thing where [TS]

  you can find a location near you just go to their website they have fun and very [TS]

  simple video that explains the whole product way better than I could do here [TS]

  if you have any kind of location data wanna make maps of any kind [TS]

  go to bad geo dot com and check out the video and it will explain the whole [TS]

  thing it really is amazing it's a fascinating fascinating that can't [TS]

  believe how easy it is to make to make maps with this thing so here's my [TS]

  thought on low-cost iPhone my thought is why now [TS]

  like they have had a low cut they did the the coverage of it has to me for [TS]

  years been misguided because they've had a lower cost iPhone four years and years [TS]

  ever since they started the strategy of selling the previous year's phone for [TS]

  another year at a lower price and then they run to three levels where they had [TS]

  22 year old phone which is now free with a contract and then a year old phone for [TS]

  99 bucks and it gets lost in the tech press because the tech press doesn't [TS]

  care about anything other than new products right it's new it's not new [TS]

  that's so it doesn't count and somehow that spread to the business version to [TS]

  you know like the business journalists also somehow discount the fact [TS]

  that Apple has a pretty darn good free with contract phone right now the the [TS]

  iPhone 4 but again the key is with contract at how much are they selling it [TS]

  for I don't know how much are they selling it for on subspace you know I [TS]

  honestly don't know because they don't they don't sell them any less I think [TS]

  though I think it's still so so basically they're taking you know a $200 [TS]

  thing down to $99 and get a free right so I think what I think not sure about [TS]

  this but I think that they're selling it for about 450 or whatever you know it's [TS]

  basically full price of the iPhone 5 minus $200 for that thing so I think it [TS]

  still four hundred and fifty and I do think that that's still a non-starter in [TS]

  some of the other countries around the world and so I don't know what the price [TS]

  point they need to get to is I don't know if it's if it's $300 that's that's [TS]

  what they're aiming for it maybe two hundred dollars in subsidized that they [TS]

  need to get to to actually make it a viable thing and I don't know what kind [TS]

  of what kind of corners they'd have to cut to do that but like you're talking [TS]

  about how much is the cheapest iPod Touch right now it's got it's like it's [TS]

  a 250 is it is it in between [TS]

  let's take a look 229 229 that's and that's the 16 gig one that doesn't even [TS]

  have a camera doesn't have a rear-facing camera yes so ok so they'd like [TS]

  basically shaved 2001 with the camera are $2.99 ok so and does it have more [TS]

  surgeries at the same 32 and 64 akka so conceivably they could do a 16 gig sort [TS]

  of iPod touch with cellular radio right for I don't know I don't know how much [TS]

  it would cost 250 yeah maybe I don't know it seems like 299 is definitely [TS]

  reachable for sure [TS]

  I would I can't help but think that the plastic back that all reports about this [TS]

  device you know claim and which makes sense of its a point to make it cheaper [TS]

  you know has got to be cheaper than a little or no I don't know if the [TS]

  aluminum is that significant factor in the $300 costs but right now no I mean [TS]

  couple sense here a couple sense there and you know you might have a $250 and [TS]

  so i think thats good guess I think that's like it probably will be 299 try [TS]

  that at least at first maybe they have to lower to 250 can still do that within [TS]

  their their margins have a $250 1 to get you in the door but everybody's gonna [TS]

  buy the 299 1 because there's some more stories right yeah but by a mean and you [TS]

  know I don't know I don't remember what the margin on the iPod touches but it's [TS]

  clearly not what the iPhone is and that's that's gonna be a huge problem [TS]

  for wall street again you know where the margin later talked about a few quarters [TS]

  ago was that forty-something percent and now all of a sudden it's gonna go below [TS]

  you know maybe goes below 30 percent because maybe if they if they do this in [TS]

  a successful way at any kind of meaningful volume this is just going to [TS]

  drive down the margin and that's what that's unfortunately one of the things [TS]

  that Wall Street will focus on and you know say like well you know the the time [TS]

  of of riding high for Apple is is over now they're now they're going into [TS]

  margin volume business yeah I have some serious questions about how they're [TS]

  going to bring this one to market to because I don't know I I'm sure they'll [TS]

  say I'm almost like you I can't believe they wouldn't sell in the USA but in the [TS]

  USA I don't know how they sell it [TS]

  unsubsidized I think right so I think they would I think I think this is all [TS]

  coming together there's a lot of pieces out there right and we're in we're [TS]

  starting to see them starting to make sense why is Apple pushing for Apple [TS]

  stores to sell more iPhones within the store why do they can hear certainly you [TS]

  know they're in more control the experience you could argue and it's just [TS]

  a better overall experience for the customer and you know they like having [TS]

  that relationship and not having to worry about using the carrier certainly [TS]

  that's all true but if it's also that they're they're only going to sell this [TS]

  through the Apple stores and they want to get people in the mindset that if you [TS]

  want to buy an iPhone you go to an Apple store you don't go to Verizon anymore [TS]

  AT&T because and now by the way we have this lower-cost new iPhone that comes in [TS]

  a variety of colors and it's only available exclusively at the Apple Store [TS]

  so come on and get it and so maybe there maybe they're trying to lead into that a [TS]

  little bit with this maybe that's interesting I hadn't thought of that but [TS]

  that's definitely makes some sense with the again this I guess we know because [TS]

  people who work at Apple stores have even said so that it's come down from [TS]

  Cupertino that you know that that's the retail Apple stores are supposed to be [TS]

  trying to sell more phones right then they had been [TS]

  here's the other factors I've been thinking and I gotta write this up for [TS]

  daring fireball but long story short why this year to switch to a new phone at [TS]

  the low price point as opposed to previous years you know when they've [TS]

  sold these years old [TS]

  phoned and and there's a couple of technical reasons why they might wanna [TS]

  do that now which are to me the two big ones I see are the screen to get [TS]

  everybody on 605 every 15 mins [TS]

  yeah four-inch screen 16 29 aspect ratio and to get everybody on do lightning [TS]

  adapter yes that's a big thing that no one really talks about but that's still [TS]

  a problem for them right that there's so many devices out there that are not on [TS]

  this lightning adapter and it would be if they followed the old-time this is [TS]

  just a theory of mine is that they're going to announce this they're gonna [TS]

  stop selling [TS]

  while obviously the for the old strategy would have been that the four would go [TS]

  out the door for a sore ass would be a free so I think that they're gonna get [TS]

  rid of the four and the 40 S and it makes sense because it doesn't have the [TS]

  foreign screens right that eases developer pain a bit and kind of pushes [TS]

  everything forward especially if I don't know who your thoughts on this but if [TS]

  you know if they do want to do a different size again slightly larger [TS]

  than four-inch screen they have to get rid of the three and a half inch screen [TS]

  when they do that right I would think so I don't know I mean only way I could see [TS]

  it [TS]

  well yeah i just i just think that they want to get rid of that I think it's [TS]

  more about the aspect ratio than the size is in theory and the rumors are [TS]

  that this low cost you know if that leaks or truth that cases are true it's [TS]

  the same size as the iPhone right 55 in theory I could still see them coming out [TS]

  with Ace physically smaller phone that maybe would have a three and a half inch [TS]

  screen but it would be sixty-nine [TS]

  it would be an interesting year yeah you know and then shrink the chin and [TS]

  forehead or something like that you know make it so that the device is almost [TS]

  just the size of the screen I can see them doing that a lot maybe three and a [TS]

  half is too small if it keeps the aspect ratio of 3.7 or something that's [TS]

  interesting about that you know I just expected but I wouldn't be shocked you [TS]

  know and I think if they come out with a bigger one to address the people who [TS]

  really do want a bigger screen again the aspect ratio I think problem certainly [TS]

  stay the same 16 I really do think they want to get everybody on that and I [TS]

  think getting rid of the thirty port adapter just makes sense I just feel [TS]

  like at this point it looks just looks antiquated and so the idea of them [TS]

  selling iphone4s for another year just seems outdated yeah I think that that's [TS]

  that's all pretty pretty good good reasoning for why they would do it right [TS]

  now I also wonder how much because the flying I have my old for us right here [TS]

  in front of me because I'm using it for testing I was seven [TS]

  it's a premium product right it's got this steel band around the side its [TS]

  class front guard class back and it just feels premium and I you know I can't [TS]

  help but think I don't know how big a cost of the device the premium materials [TS]

  are but you know however much that the chips have gotten cheaper you know [TS]

  obviously when the four s came out it was a cutting-edge mobile processor [TS]

  cutting-edge mobile GPU and now it's you know two-year-old technology it's [TS]

  certainly a lot cheaper but the glass-and-steel still cost the same [TS]

  whereas if you really want to get a lower unsubsidized price I feel like [TS]

  switching to a new material makes a lot more sense and how much do you think I [TS]

  know it's sort of silly but it it you know it it may be silly to discount how [TS]

  much sort of customization we we see that you know what the new Moto X right [TS]

  where they're they're highly customized just from our perspective right and so [TS]

  that's the rumor course with this this low-cost iPhone that they would have [TS]

  maybe some different colors and certainly that's been the case of the [TS]

  iPods for a long time the iPod nanos at least and so how much do you think that [TS]

  that plays into it you think that that's important for them I guess I think it's [TS]

  does it is starting to get old I mean I'm just gonna buy a black one but I [TS]

  feel like it's starting to get old that you can only get in there and I'm just [TS]

  I'm staring here right now ever since we're talking about it a few minutes ago [TS]

  at the iPod Touch page and to me it looks more happily to have a array of [TS]

  colors of a device and certainly with the new I was seven color palette that [TS]

  it sort of is sort of the way they're going so here's a question I wonder I [TS]

  mean I just presume [TS]

  and it seems like the rumors are way more about the lower-cost iPhone quote [TS]

  unquote iPhone 5 see than the presumed iPhone 5 s new phone but if they come [TS]

  out with the lower cost one and it comes in five colors can they still do the [TS]

  high end one just in black and white [TS]

  I mean presumably they want people to buy them in a preferred with they bought [TS]

  the more expensive but I think I know can't think about what they did with the [TS]

  regular iPod and then the iPod nanos rights of the nanos run colors the [TS]

  iPod's remained in black and white right there are you 21 or whatever but yeah so [TS]

  I don't know I have no idea but I would I would guess that maybe they do that [TS]

  and then in the selling point on the higher end is you know like like you're [TS]

  saying this is this is the premium product the city's top of the line the [TS]

  best we can do for everything it has a faster processor more RAM which they [TS]

  won't talk about and it may be it has you know that the fingerprint reader has [TS]

  it been rumored and that's like that sort of the marquee differentiator of [TS]

  like what's new about this device and have a better camera for saturday right [TS]

  and so maybe they do just rely on that if you want this go with this if you're [TS]

  interested in sort of personalization and fun and colors and maybe they think [TS]

  that's more the teen market or you know some of their market that they're going [TS]

  after maybe they think that they can differentiate those enough for it where [TS]

  it makes sense to do that I wonder too I would love to know I don't know how who [TS]

  who could do such a survey but I would love to know what percentage of iPhone [TS]

  users use a case with their device yeah that would be interesting to know i you [TS]

  know i mean I'm certainly i mean the the the the heart of the bubbles for this [TS]

  where in you know in San Francisco it's sort of considered I i've had discussion [TS]

  of many people search considered a full body is the case right and and in you [TS]

  even remember the event all those years ago and attended Gatorade [TS]

  you ask them jerry is anyone using the bumper and they all you know jobs and [TS]

  and cooking everyone pulled out their right hands they put out their populist [TS]

  iPhones and so I feel like it's sort of a faux pas in like in the tax year to [TS]

  use a case I certainly don't use a case except when I'm using the Mophie to to [TS]

  recharge it but I would bet that it's much much higher percentage use a case [TS]

  in the day today you know regular regular world out there [TS]

  yeah we've had the family we're down at Disney World last week and I was doing [TS]

  two things I was caught a whole bunch of pictures of people using tablets as [TS]

  cameras nice to say to have went to most of them overwhelmingly none surprise [TS]

  where iPad but I saw a few obviously 16 2910 which meant that they were you know [TS]

  Android tablets of some sort but I was also I just was looking I Drive had this [TS]

  on my mind thinking about this plastic iPhone I was looking at people's iPhones [TS]

  and disney world which i think is a pretty good cross-section of the whole [TS]

  country [TS]

  Disney World in July boy i i would guess I seventy-five eighty percent of the [TS]

  people had him in the case really really sad that can and do you think that that [TS]

  goes back to the idea of personalization or protecting it could be both of course [TS]

  I think it's both because the cases that I was seeing where especially you know [TS]

  don't think it's surprise especially the cases that women had we're very colorful [TS]

  patterned you know [TS]

  just everything anyway you know any almost any sort of just go and look at [TS]

  the wall of of of cases like at the Apple store and i stood you know you see [TS]

  all of them in real life [TS]

  somebody's brain every one of those I wonder though with the plastic if it's a [TS]

  plastic iPhone will people see the need to buy a case for ya yeah potentially [TS]

  not though I don't know why would I think this is one of the things will be [TS]

  surprised about where people do anyway yeah because it's it's not like we [TS]

  haven't had plastic I funds before we had 23 dry 3ds and I seem to recall that [TS]

  in the real world most people put him in cases yeah they just like when I first [TS]

  got an iPhone ridiculously I used to I insisted on getting one of those over [TS]

  screens on the planting protector thing it's like any like I can't imagine doing [TS]

  that right now but it was just in my head that I need to do that each time [TS]

  like I was protecting it and so I just did that until until they start to talk [TS]

  about whatever the allele phobic we are exactly [TS]

  coding yeah yeah you know and I'm over the years I've always had good luck with [TS]

  my phones not carry him in a case I've never had one shattered and neither of [TS]

  which everyone thinks is so strange this one I guess is nine months old one tiny [TS]

  scratch on the glass and it's only visible against like a white background [TS]

  and only when I heard it at a certain angle it's a tiny little hairline [TS]

  scratch a mean it's almost I would I would venture to say it the screen at [TS]

  least is would be qualified as near mint and that's no I'm not particularly [TS]

  careful with it but i dont I think a big part of it is the personalization I do [TS]

  think I think people are cautious cuz I think people see that their iPhone is [TS]

  you know a valuable thing that you carry around in your pocket [TS]

  so it's certainly part of it but I think the customization and personalization is [TS]

  a huge part of it yeah I mean and and the fact that Apple carries so many [TS]

  cases in their stores like you were saying says that they recognize that too [TS]

  totaling so it's wrapped up I will say this though just one more thing on the [TS]

  future and what's coming up you know next year or two from Apple just tossing [TS]

  it out there like I know that the watch the iWatch is certainly one that a lot [TS]

  of people are you know seemed almost expect in a business week and others [TS]

  have literally reported that there are people working on it right I just don't [TS]

  see like finding it back in with your thing about this you know another iPhone [TS]

  size hit I just don't see how anything that you wear on your rest no matter [TS]

  what it does [TS]

  could possibly grow into an iPhone sized business cuz I don't see how it could [TS]

  possibly cost more than 200 bucks like no I don't think anybody is going to buy [TS]

  if it costs as much as an iPhone which is six seven eight hundred dollars some [TS]

  people would buy it but nowhere near as many people would buy it is who bought [TS]

  an iPhone so it wouldn't be couldn't even at the same prices the iPhone [TS]

  wouldn't make nearly the amount of money the outcome does it matter how cold it [TS]

  and if it's a hundred and fifty bucks then there's no waiting to there's no [TS]

  way for you know even if everybody who bought an iPhone but one which would be [TS]

  huge [TS]

  it wouldn't make it nearly as much money as it doesn't cost us want to watch can [TS]

  can be the iPhone financial I totally agree and this this has been sort of an [TS]

  interesting discussion just amongst watch people right because it's like [TS]

  watches are considered for many people a premium product you know you can buy [TS]

  watch that's that's tens of thousands of dollars and many people buy watches that [TS]

  are least several hundred dollars if not a thousand dollars but that's a premium [TS]

  product and could Apple potentially tap that market I don't know I think that [TS]

  this watch I think it's it's almost like an away a misnomer to call the watch [TS]

  right it's it's going to be something that that lives on your wrist and is [TS]

  doing all different kinds of things beyond telling time it will make it may [TS]

  look like a watch but it's really going to be a screen that's on your wrist a [TS]

  screen and a monitor for different health things or whatever [TS]

  that that resides on your wrist the computer on your wrist it's fun to watch [TS]

  and so I think I think that they'll have problems trying to go after you know [TS]

  that the nice watches of the world [TS]

  certainly because the design will have to be different than than what those are [TS]

  of course and so I do think you're right I think that they'll probably do you [TS]

  know $200 $300 price point at most for something like that and the lead singer [TS]

  heard on that you never know for sure but I it's a ways out still like we're [TS]

  doing next year not this year [TS]

  yeah I think there's a to go into rumor rumor central here but the let the [TS]

  latest things like I've heard that some sort of television product not the not [TS]

  some not necessarily a television screen but something and could be coming as [TS]

  soon as as soon as this November and I think there's there's some surprises [TS]

  there about about what it could actually be and I don't know this for sure yet [TS]

  but there's been whispers about and I have something to write anything about [TS]

  it but it's just there's with Chris out there that that the interaction with it [TS]

  could be like the interesting thing people talk about voice but I think that [TS]

  that's that might be out the window and there might be something some new way to [TS]

  interact with whatever this thing is just think price and that's a way that [TS]

  both in a way both of those mythical products are are like the iPhone maybe [TS]

  and to your point about though watch not really being a watch and not really [TS]

  competing with Seiko and Rolex or something like that [TS]

  it wouldn't be any more of a watch than the iPhone is just a phone radio exactly [TS]

  really about putting a tiny laptop in your pocket pocket it was a computer not [TS]

  a phone just happen to also make phone calls I think the right to be the same [TS]

  way and that's that's that's the mistake one of the main mistakes people make [TS]

  about happened i think is that like they think like oh they're gonna go after [TS]

  going to go after the phone category they're gonna go after the television [TS]

  category they're gonna go after the watch category both the way that they [TS]

  think about it is they're not going after any specific like category being [TS]

  pigeonholed into going after something because if they do that that's going to [TS]

  be a failure of a product it's just something they're trying to like certain [TS]

  extend what people already know and make it slightly better the only way that [TS]

  Apple succeeds at all these things that make it so much better that people have [TS]

  to buy this this new thing that isn't that isn't just to watch it's not just [TS]

  the phone and it's not just a television yeah and I think your point on the TV [TS]

  and the interaction model that's really the key to the iPhone's success was dead [TS]

  everybody's idea prior to the iPhone 4 how to make a more computer II [TS]

  smartphone was bad more and more buttons and lots of buttons and keyboards and [TS]

  wheels and it's the interaction model that was really the breakthrough with [TS]

  the iPhone where it's no we're gonna get rid of all the buttons except for one [TS]

  and you just touch stuff on screen and we're gonna do it on software and I feel [TS]

  like there's I don't know what it is you know I'm terrible at pled conceiving [TS]

  ideas like that but I do think that's maybe where the future of Apple TV is i [TS]

  think is right now if there's one thing that's the most disappointing that Apple [TS]

  TV is that it still is just the interaction model is infrared remote [TS]

  with up down left right yes right and you know they're trying to date just [TS]

  started doing you to thinking right with the so you can use your phone for it but [TS]

  I still think that there's there's gonna be a different way whether it's whether [TS]

  it's touch your movement or something there's going to be a way that they that [TS]

  they break ya break the mold of the way that you interact [TS]

  they break ya break the mold of the way that you interact [TS]

  right I think that the breakthrough has to be more me maybe it's still a remote [TS]

  of some sort I don't know how I get a bad idea of magic but it's got to be [TS]

  more than just switching from infrared the Bluetooth it's gotta be you know [TS]

  there's got to be some kind of potential great leap forward in the interaction [TS]

  yep that's another one to know where I just don't see how it could make as much [TS]

  money as the iPhone yeah I mean so Apple TV as it is currently made up is it does [TS]

  what it says is doing very well right and it's it's because it's $99 and you [TS]

  know the most compelling thing about this new chrome casting is it a $35 like [TS]

  these are things that are sort of no-brainers to buy because they're so [TS]

  cheap the television you know everyone's focusing on an actual television i mean [TS]

  that would sell for a it would have to sell for at least a couple thousand [TS]

  dollars and that's you know if if they do that the TV market is just so [TS]

  different than what the phone market is going to subsidize it and I guess in [TS]

  theory you could maybe they can work out a deal in Comcast's sub to subsidize its [TS]

  interesting interesting but they're not really in the business I don't know it [TS]

  would be shocking to me if that's what it turned out to be but you know I guess [TS]

  it's possible but it's the only way that if it is in fact a thousand $2,000 TV [TS]

  said that's the only way it would work at scale would be to somehow figure out [TS]

  a way to sell it subsidized because normal people aren't going to replace [TS]

  their TV just cuz Apple came out with a TV right and if they do by the one first [TS]

  appt this first Apple theoretical television it would be you know what's [TS]

  gonna be five years until they buy another one they're not gonna upgrade [TS]

  every year and they're they're not gonna get every two years [TS]

  one of the other ways that the phone market with such a perfect opportunity [TS]

  is that people even before Apple got in we're already sort of in the habit of [TS]

  getting a new one every two to three years [TS]

  yea and yea and getting a new TV is a hassle would be a hassle you know you [TS]

  mounted or or its just a heavy clunky think 22 to move in and out of your [TS]

  living room and the set you know the same selling points don't work like [TS]

  people upgrade to the new iPhone because it has a better camera often [TS]

  you know there is no such thing in itself television you can upgrade you [TS]

  can upgrade your cell phone on a whim real yeah he can't do that with UTV know [TS]

  and so yeah I don't know I would be surprised if if there's some sort of [TS]

  actual screen television anytime soon I would look for something more akin to [TS]

  what we already have with a different thoughts around it and you know the app [TS]

  that model is just there for the taking and they're going to destroy that right [TS]

  but I just don't see it as being an iPhone sized business and I feel like [TS]

  that they might run into problems with the Investor Relations I mean could you [TS]

  can you think of anything in the world that would be an iPhone sized business I [TS]

  keep making the joke that they would have to get into the oil business to do [TS]

  something like that or or cars I don't know I mean I know and I'm sorry the [TS]

  first just as a blue sky idea that what if Apple but Tesla I don't see it [TS]

  happening but it just in theory if they did and turnout will stores into car [TS]

  dealers potentially that seems like a big business because of cars cost twenty [TS]

  thirty forty thousand dollars and you know you don't need a huge market share [TS]

  to have that turn into a lot of money but that's the only thing I can think of [TS]

  the people by that is very expensive year that I think you're right that's [TS]

  that's one of the few things that they could do that would they would have a [TS]

  meaningful impact on revenues and profits something of that just that size [TS]

  so I don't know I mean and I think that the potential is there for Apple to have [TS]

  a really healthy and he's already doing well in terms of numbers I think it go [TS]

  even higher [TS]

  I think that they could monetize it further with an app store for it I think [TS]

  it could turn into a great little business but it just wouldn't be the [TS]

  iPhone yet the only other the only other thing that they could do I think you're [TS]

  a cars and then there's the unknown right there could be some new market [TS]

  that no one thing about right now like like the very first computer that PCs [TS]

  right [TS]

  they would have to conceive of some entirely new market which would be [TS]

  impossible for us to think about right now what whatever their whatever they [TS]

  they may or may not be dreaming up but you know that that's that may be a once [TS]

  in a lifetime thing for a company in Apple's already done it you can argue [TS]

  they could have done it a few times right so the likelihood that they do it [TS]

  again as is diminishing each time right [TS]

  jet packs or something like that right [TS]

  probe rosy the voters the jetsons robot rose is a rose roses are over [TS]

  yeah yeah yeah something like that that's the only way thanks great show [TS]

  oMG really appreciate the time I thought this was a great show [TS]

  yeah good stuff thankyou very much and everybody can find out more of your [TS]

  website Paris lemon dot com follow you on twitter everybody should follow onto [TS]

  her up when I talk about sports but you do a lot to ya [TS]

  Yankees [TS]