0:00:00- We don't have anything to talk about.
0:00:01- We don't, nothing to talk about.
0:00:02I am on here slowly for self-promotion
0:00:04'cause I wanna tell people that Exponent started again.
0:00:07(laughing)
0:00:09- What's the URL, Exponent.fm?
0:00:11- Yeah, but I, you know, we do a hiatus
0:00:13and I'm like, why not just leave it in your podcast?
0:00:15But no, people like to lead it,
0:00:16so now I have to tell people.
0:00:18(laughing)
0:00:21- Oh my God, where do we start?
0:00:23We can't screw around, I don't think, can we?
0:00:25- There's always room for screwing around.
0:00:28It's been eight months because the last time,
0:00:30you can tell on Skype because it says the last time
0:00:32you called someone on Skype and it was eight months ago.
0:00:35- Wow, that is a long time.
0:00:37That's unusually long, especially for someone
0:00:40who tends to have the same people over and over again.
0:00:43- I've lost my title to Moltz pretty significantly
0:00:46at this point.
0:00:47- Well, Moltz had the back-to-backer.
0:00:49- It's tough to come back with that.
0:00:51- It was the multiest.
0:00:52I talked about that on the show, right?
0:00:55- I don't remember.
0:00:58It was like, I was like, I haven't had Moltan forever.
0:01:00I'll have Moltan.
0:01:01And then the next week it was like an emergency,
0:01:02like needed to do a show.
0:01:05And like one, two, three, four people after another
0:01:08couldn't do it when I could do it.
0:01:09And then I had to go to, had to hit the Moltz button,
0:01:12even though he had just been on.
0:01:14Made for a good show.
0:01:16Good old Moltz.
0:01:17Who you liking in the NFL?
0:01:21- I don't know.
0:01:22I don't, I'm probably the chief, I guess,
0:01:24just because I think Andy Reid is a great coach
0:01:27I'd love to see him sort of win. But it's hard to follow the NFL in general because
0:01:33the time zone issue and then also the general feelings of guilt. But also the Packers were
0:01:40bad this year, so that makes it a lot easier to not pay attention.
0:01:44What the hell happened there? Now, they fired their coach halfway through the season, which
0:01:47is unusual in the NFL and particularly unusual for a well-run organization. And the Packers,
0:01:54success shows that they've widely considered a well-run organization. If the Jets fired
0:02:00a coach halfway through the year, who the hell would be surprised?
0:02:03Yeah, I think in part that was being a well-run organization. If you know he's not coming
0:02:08back, why leave him dangling out on a vine? It was pretty apparent to everyone that it
0:02:13was time for that era to end. I think some of us probably felt that era should have ended
0:02:16several years ago. If management has come that decision, then why not let him go, get
0:02:22a head start on the coaching search and don't leave him dangling out of line. Actually,
0:02:26if anything, give him an opportunity to look for a new job as well. I don't see any problem
0:02:31with the fire in the middle of the season. If you're going to move on, move on.
0:02:35Especially if you know your season's over in the NFL. Who the hell would have thought
0:02:39two years ago, I think it was two years ago, it seems like yesterday, two years ago when
0:02:45my beloved Dallas Cowboys were playing your Packers in a playoff game. And the Cowboys
0:02:52lost through coaching mismanagement. There's no other way to describe it. I mean, managing
0:02:58the clock is the most important game time thing that a coach can do, I think. A combination
0:03:04of coach and quarterback, but the coach, it's on the coach.
0:03:07Speaking of Andy Reid. Right, exactly. Clearly, a coaching error. I'm not going to say that
0:03:14Cowboys would have won, but I think it was extraordinarily likely that just by managing
0:03:19the clock properly, they would have won. Everybody expected, I mean, who the hell didn't expect
0:03:25Carrot to be fired immediately? I really thought that, you know, his goose was cooked. And
0:03:30here we are two years later and Jason Garrett's still coaching the Dallas Cowboys and Mike
0:03:35Murphy's out.
0:03:36- I know Mike Murphy is the president of the Packers. So I was, you know, Packers famously
0:03:41don't have an owner. Well, they do have an owner. I am one of the owners, along with
0:03:46half the state of Wisconsin. So there's a team present that makes these decisions, which
0:03:51is good and bad. I mean, the good thing is obviously there's lots of downsides that come
0:03:54to an owner. The Packers will never move. If the team were ever not in Green Bay, it
0:04:01would have to be disbanded and the proceeds would go to the local American Legion or something
0:04:04like that. So that's all very cool. But kind of the problem is that you don't have an
0:04:11owner sort of banging on the door saying why are we don't we have when the all-time great
0:04:15quarterbacks why are we not winning more Super Bowls and I think that's been a bit to the
0:04:18Packers detriment over the last few years so it Mark Murphy has been in that role so
0:04:23he's the one that's hiring the new coach they hired a guy named Matt LeFoure who was previously
0:04:28the offensive corner of the Tennessee Titans which doesn't seem like much they out of but
0:04:32they had a lot of injuries and I think they're there there's a stat like they're expected
0:04:37yardage on past plays was super high. They just didn't have very good players. And then
0:04:41he was previously the offensive coordinator with Sean McVay in LA and Kyle Shanahan before
0:04:47that. So he's got a really, really great background. I'm pretty excited about the
0:04:51hire. I really wanted them to go with a young guy, but everyone wants to do the young guy
0:04:55thing after how successful McVay's been. And I think of the options there, I think
0:05:01I really like the pick personally. So I'm pretty excited about it.
0:05:04All right, that's enough football talk
0:05:06We don't wanna
0:05:08Yeah, especially these footballs definitely moved into like a solid number three for me
0:05:12Yeah, I am all-in on basketball as you know and the Bucks are amazing and absolutely have a title shot this year
0:05:18and then last year's bruise run was awesome, which I think we ever talked about but
0:05:23Great great run. They added they added
0:05:27The names now escaping me the the Dodgers catcher. Oh, yeah, I'm all them
0:05:32Which is a great signing. So yeah, I think things are Milwaukee sports are looking pretty solid. Yeah, Milwaukee Bucks
0:05:39That's a good example of power of coaching really. I mean, it's oh man talent wise is fundamentally not that not a different team
0:05:46but with a completely different strategy and
0:05:49a tremendous
0:05:51unbelievably different result
0:05:53It's been such a tremendously delightful season in part
0:05:57You know the first and foremost because the team is good and it's fun to cheer for a good team and particularly last year
0:06:02It was so miserable because you you wanted to cheer for the team to win
0:06:05But every win felt like that would make the coach stay longer with that. You clearly needed a change
0:06:10That's a very miserable place to be as a sports fan
0:06:12But the other great thing about this year then is they're super successful and also just tremendous heaps of I told you so
0:06:19which is which is a you know of definitely a
0:06:23Probably evil pleasure but an enjoyable and I know that the sports stuff often, you know
0:06:28There's a lot of you out there who are rolling your eyes because you're not into sports
0:06:31But I do think that for the talk show's audience of, you know, let's face it, nerds, I do think
0:06:36that there's a fascinating trend in your and my lifetime in pro sports, which is the rise of
0:06:42analytics. And sort of the downfall of old school, go with your gut sports man, you know, man, you
0:06:52know, picking players, you know, there used to be like, you know, people actually pick baseball
0:06:57players based on how they look. Swing looks good. Let's sign them. That's how they'd sign
0:07:01kids out of high school. Everything is so driven by data and analytics in sports now,
0:07:08if you want to be successful, because it works. The Bucks are just proof of that.
0:07:14You introduced me to NBA Twitter. NBA Twitter is truly Twitter at its best. All the problems
0:07:20that Twitter has is, if you're a sports fanatic, getting involved in the Twitter circle of
0:07:26your favorite sport or team, it is truly a great way to feed an obsession. And Buck's
0:07:32Twitter was 100% convinced that with a coaching change and a shift in strategy, the Bucks
0:07:38would be a terrific team. And it's exactly what happened.
0:07:43It's delightful. Here's a really interesting point, though. This definitely, if you want
0:07:49to do a real tie-in to this discussion and the rise of nerds and whatnot, back to the
0:07:54stuff we talk about. I think that a mistake a lot of, you know, it's weird because if
0:08:00you're in the world where you're like, you're just the blind leading the blind, it's like
0:08:03we've always done it this way. Obviously having a data driven approach is much better. And
0:08:09so there's been a big sort of return to having that sort of approach to having been very
0:08:15good at using data. But now the problem with sort of using data in your decision making
0:08:19is everyone generally speaking has access to the same data. Now there's folks that have,
0:08:23different and more advanced analytics departments
0:08:25and it's a real sort of arms race to get better at that.
0:08:28But they're sort of diminishing returns.
0:08:30And I think there's an analogy here to the business world
0:08:32where once people figured out you should focus
0:08:35on operational efficiency and using data better
0:08:37along those lines, this is part of the whole revolution
0:08:41in part driven by competition with Japan
0:08:42and supply chain efficiency and all those sorts of things,
0:08:45that there was a huge amount of returns to it
0:08:48but there's not necessarily
0:08:49sustainable differentiation there.
0:08:51And one thing that I think a lot of analytics people get wrong, and I get, you know, lumped
0:08:58in as an analytics person on Twitter, even though, like, I'm not, I am certainly analytics
0:09:05adjacent to use the exact low term, but I'm not, you know, I don't have my own like massive
0:09:09spreadsheets of players or anything on those lines.
0:09:11But you know, if you look at tech, for example, the analytics movement is in many senses the
0:09:17the speeds and feeds movement, which is the, you know, let's look at how fast something
0:09:21is, let's look at the processor speed, the amount of memory, et cetera, et cetera.
0:09:25It's very sort of number driven.
0:09:27And I think the great thing about sports, and I think more and more folks are maybe
0:09:32sort of becoming vaguely aware of this, is that there's still lots of pieces that go
0:09:36into building a winning team, particularly in basketball, I think more than any other
0:09:39sport, that are very, very hard to measure, that are very, very hard to sort of put on
0:09:43a spreadsheet.
0:09:45And there are advantages in understanding and pursuing those sorts of things.
0:09:51To use an Apple strategy, just to use the obvious analogy.
0:09:55And that, I think, is particularly interesting.
0:09:57And so moving towards-- I don't think analytics is the end all, be all, by any means.
0:10:02And it's very interesting and exciting as a sports fan to see that part of the game
0:10:08become more and more important.
0:10:10Yeah.
0:10:11- To name one example, I think the Dodgers have a reputation
0:10:15of being incredibly analytics-driven
0:10:17in terms of who's in the lineup.
0:10:18And I think they lost the postseason this year by doing it.
0:10:23That they had guys, they had a bunch of outfielders,
0:10:26like way more than three outfielders who were ready to play.
0:10:28And they would pick who was playing based on
0:10:31who was pitching and based on analytics models and stuff,
0:10:34rather than just do what was smart and say like,
0:10:37hey, how about the guy who had three hits last night?
0:10:39Let him play again.
0:10:41Well, I mean, that's, I mean, that, in baseball, that's particularly a huge sort of debate.
0:10:46And, you know, I'm mixed on that because the Brewers certainly took that approach to the
0:10:51extreme. But then again, we, you know, we basically had no pitching staff and we made
0:10:55it to the NLTS. So, so it, you know, but yeah, we didn't make it all the way. But it's great
0:11:00though. I mean, this is why sports is, is, sports is so fun. I think, you know, just
0:11:04to, I know there's lots of people that don't care about sports, but it's fun because there's
0:11:08so many angles into conversations about it and there's all in there and all the conversations
0:11:14reach a resolution right like we can debate left and right like Bucks fans like complain
0:11:18that the Bucks aren't getting any attention even though they're statistically speaking
0:11:22they're by far the best team in the league like it's not even close and as far as like
0:11:26net rating and offense efficiency, defense efficiency all those sorts of like numbers
0:11:29things but you know what it doesn't matter if they get respect because at the end of
0:11:33the day there's going to be a playoffs there's going to be a Eastern Conference Finals championship
0:11:37there's gonna be an NBA championship,
0:11:38and we're gonna know if they were good or not.
0:11:40And that's very sort of satisfying in a way that,
0:11:43well, lots of areas are not.
0:11:45- Yeah, that's so true.
0:11:47That we know who won the Super Bowl last year.
0:11:50You can argue about who should've, but we know who did.
0:11:54All right, we got a big agenda.
0:11:58We really can't screw around too much.
0:12:00I don't know, did you see my note?
0:12:03I don't know what order you wanna talk about these things on.
0:12:04could go most timely would be probably talking about Apple's quarterly earnings warning
0:12:14that sort of shook the market.
0:12:17I think that makes sense because I do want to talk about the App Store stuff, but I think
0:12:20that that's actually an interesting thing to talk about as sort of part two because
0:12:24it's very much in the context of what Apple does now sort of going forward.
0:12:28Yeah, because the App Store stuff is more evergreen and I feel like it's less—I
0:12:33I feel like the timely stuff always works better first.
0:12:35- Yep.
0:12:37- So let's talk about it.
0:12:39Boy, the market had a fit.
0:12:41- Well, justifiably so.
0:12:45I think the thing to appreciate is there's two things,
0:12:49there's multiple things that are going on here.
0:12:51I mean, Apple was flying out.
0:12:53It was only last summer that they passed a trillion dollars
0:12:54and I think they got up to like 1.2 trillion
0:12:57or something like that.
0:12:58And there were two big red flags on the last earnings call.
0:13:03The first thing is that their projection, their forecast, was already pretty low.
0:13:09I mean, it was lower than the consensus, so that was sort of red flag number one.
0:13:14And then red flag number two was they said, "Oh, we're not going to report unit sales
0:13:17anymore," which is like, well, if you don't report unit sales, if unit sales were going
0:13:22up, would you say that?
0:13:24Well, maybe not.
0:13:25I think also the reaction was maybe a little bit out of whack.
0:13:29People were like, "Oh, iPhone growth is saturated," blah, blah.
0:13:32unit sales have been flat for like two or three years now. So like the, the, the, if
0:13:38you actually understood what's going on, it wasn't that iPhone stopped growing. The kind
0:13:42of obvious conclusion was that the iPhone sales were going to start to decline. And
0:13:46so that was the, there was already lots of sort of bad news in the air and the stock
0:13:51was already sort of plummeting. I mean, the most of the stocks loss has happened even
0:13:55before this, but then this has two parts, which is part one is the revenue is actually
0:14:00way worse than we said. And two, we didn't know. The fact that you're way better off
0:14:07giving a bad forecast that is accurate than having to restate your revenue. That's way
0:14:13worse than … That's the worst possible thing you can do as far as your reporting
0:14:16goes.
0:14:17Mad Fientist Yeah, but then a couple other companies had
0:14:20to too. Samsung, I think LG, a few others, a week later issued similar warnings based
0:14:27on similar explanations, you know, slow economy in China, etc., etc.
0:14:35Yeah, I mean, it's a little—it's interesting to say, and I think if I were to rewrite my
0:14:42article that I wrote this past week, even after a few days, because some of this news
0:14:48came out, and also things like car sales are down in China, there's definitely a lot
0:14:55news out of China that the economy is slowing. We knew that even the government reported figures
0:14:59were down and those are all generally thought to be fake anyway. And so if they're down a little
0:15:03bit it's probably way worse. And also just on the ground I've heard a lot of scuttlebutt that
0:15:08the trade war is definitely hurting China much more at this point than it is the US. It's hitting
0:15:16pretty hard. And so there's definitely the... There's no denying that the economy is a big
0:15:23That said, Apple is also down much more,
0:15:27the reports that we have on our smartphone share,
0:15:30they're down much more than the market.
0:15:33So there is, it's not just in line with everyone else.
0:15:36They're worse, I think, in some respects.
0:15:39But at the same time, it's definitely a China thing.
0:15:41I mean, it was amazing when that news came out
0:15:44and you had so many people coming out with,
0:15:47this is Apple's problem.
0:15:48And if you back up, actually,
0:15:50I started Chit Chakra in 2013,
0:15:53which was very fortuitous for me
0:15:54because that was the iPhone 5 cycle.
0:15:56And that was when there was a ton of panic.
0:15:59Apple's, for the first time, Apple wasn't growing
0:16:01like plus 50%, they only grew like 15%.
0:16:04And the stock was way down
0:16:06and people were like, "Samsung's ascendant."
0:16:08And it was a great opportunity for me to say,
0:16:09"No, this is ridiculous.
0:16:10"Actually, Samsung is the one that is more
0:16:13"sort of in a tough spot."
0:16:15But you notice all those same people
0:16:17that wrote all those articles in 2013
0:16:19were back this year writing all the same articles in 2019.
0:16:22and barely mentioning China. - Except instead of Samsung,
0:16:26yeah, well, the articles I saw where instead of Samsung's
0:16:29gonna eat their lunch, it was the cheap Chinese phones
0:16:33are gonna eat Apple's lunch, you know?
0:16:37And not just in China, where it is different.
0:16:39- Well, not just, and it's, again,
0:16:43it's kind of frustrating, but I can understand why,
0:16:47I think we've talked about that.
0:16:49I think Apple's management does not listen enough
0:16:52to sort of criticism, in part because so much of the criticism of Apple is just kind of
0:16:57unhinged. And even in this case, the problem for Apple in China is less cheap Chinese phones.
0:17:04It's things like the Huawei Mate, which by the way, costs $800 or the large one costs
0:17:10like $1,000. The issue is not people buying cheap phones instead of buying iPhones. It's
0:17:17people buying other very expensive phones.
0:17:22Yeah. Well, one of the things I didn't really think about with the trade war, but it's
0:17:27very obvious in hindsight with the US, is the—basically, I don't know how else to
0:17:33describe it—the patriotism issue, where the Trump administration is poking a stick
0:17:42at China and people in China are naturally, it's driving a bit more of a, hey, let's buy Chinese
0:17:49phones, you know, let's, you know, and Apple is obviously unique in that very almost unique in
0:17:56that regard, because what other American company sells large amounts of consumer products in China,
0:18:02maybe luxury brands, but a lot of the luxury brands are not US companies, right? Are people
0:18:06buying Fords over there? I doubt it. Yeah, it is a super hard question to answer,
0:18:13like how much that mattered. But I also think it's, I agree with you, it's silly to not think
0:18:18that it didn't matter. And I've been sort of in the daily update, not in weekly articles,
0:18:22so the only subscribers who know this, but I've been banging the drum that Apple is,
0:18:27from the moment the trade war began, that Apple, this is bad for Apple, this is bad for Apple,
0:18:32this is bad for Apple. And it's because they're exposed on both sides. They're exposed on the
0:18:35on the production side and they're exposed
0:18:37on the consumption side.
0:18:38And given how large the market is,
0:18:41relatively speaking for Apple,
0:18:42and this is the other thing with Samsung, right?
0:18:43Samsung's kind of not in the Chinese market anymore.
0:18:46Like their number seven or eight or something like that,
0:18:49like their share is so small now.
0:18:52Like if you wanna talk about being obliterated
0:18:53by Chinese brands, I mean,
0:18:55Samsung was obliterated by Chinese brands.
0:18:57The fact that Apple still has 12% share
0:19:00is a testament to the fact
0:19:01that they are still differentiated.
0:19:04- I don't have the link handy,
0:19:05but I just remember reading a couple days ago,
0:19:08reading about Samsung's projected warning for this quarter,
0:19:13the upcoming quarter they're about to report.
0:19:17It actually have those numbers in my head
0:19:20that at one point Samsung had 18% market share in China
0:19:24and last time that was measured it was 0.9%,
0:19:30like under 1%.
0:19:31That is, that's staggering.
0:19:34- Yeah, so Samsung's like profit warning was--
0:19:37Right, their profit warning was mostly
0:19:39about their component sales, right?
0:19:41Which matters as far as the smartphone market being down,
0:19:44but it was a related warning to Apple,
0:19:47but it was like a different type of warning in that
0:19:50it's not that their smartphone sales are getting slaughtered,
0:19:52it's that if less smartphones are being sold in general,
0:19:55they're gonna make a lot less money.
0:19:57- Yeah, and I think that the hit a point
0:20:00that you mentioned a minute or two ago,
0:20:04I think that Apple's exposure in China
0:20:08is obviously the single biggest threat facing the company.
0:20:11I think it's, I don't think there's any doubt about it.
0:20:16I don't think they could lose any,
0:20:20Johnny Ive or Tim Cook or,
0:20:24Phil Schiller could leave.
0:20:27It's not going to,
0:20:28nothing is as big a risk as China.
0:20:33kind of calamity, calamitous escalation of this trade war because like you said,
0:20:37Apple's exposed on both sides. They mostly, I mean, most importantly on the production side,
0:20:42like Apple can't make its phone, it can't make the phones for sure anywhere else in the world.
0:20:48And so something that would make it more difficult to make to produce their products in China could
0:20:54be devastating to Apple in the short run. Yeah, I completely agree. And honestly,
0:20:58If you want to get into criticism of Apple's executives, and there does deserve to be criticism
0:21:04for a miss of this magnitude, even if the market changed dramatically.
0:21:08And I think they, we can get into what I wrote a little bit.
0:21:12I think they've generally underestimated their risk in China for reasons we can get into.
0:21:17But just in general, I think Apple, they're a little too cheery on these earnings calls.
0:21:23I think it's been a little bit of a problem for a while, frankly.
0:21:27The fact that China is a huge risk factor, I think they should be upfront about that.
0:21:32It so obviously is.
0:21:34And instead, Tim Cook has spent the last several years, which have included quite a few quarters
0:21:40with very bad results in China, saying, "Oh, we believe in the Chinese market.
0:21:43The Chinese market is super important to us," blah, blah, blah.
0:21:46There hasn't been enough, in my estimation, sort of honesty about the fact that, look,
0:21:52we're very optimistic about the Chinese market.
0:21:54It's a huge opportunity, but there's a lot of risks there.
0:21:57And we've, as you know, our results have been very up and down.
0:22:00And I feel like a little honesty about the China situation over not just this quarter,
0:22:06but the last few years, would have bought them, would have been very beneficial this
0:22:10quarter and would have come as much less a sort of surprise.
0:22:14I mean, you remember back with the 6S cycle, like the Chinese market got clobbered.
0:22:20They were not selling anything there.
0:22:22And instead of sort of being straightforward about why that was, they're just like, "Oh,
0:22:26it's a great market.
0:22:27confidence is going to come back. And they spent the whole cycle saying, "We have a
0:22:29lot of people that are upgraded yet. We feel very confident." And then they had to do
0:22:33a $2 billion inventory write down. It's like, "Well, maybe you should have been a
0:22:36little clearer about what was going on all along instead of suddenly changing your tune."
0:22:40Which I was very critical of it at the time and couldn't help but think about it now.
0:22:44I just feel like there's a little bit too much excessive optimism at times with Cook
0:22:48in particular on some of these earnings calls.
0:22:52I think the fear is, my fear is that it's not,
0:22:57you know, that the reason behind that isn't dishonesty.
0:23:01It is not rah-rah-ing China knowing that it's wrong.
0:23:06It's that he honestly doesn't understand
0:23:09their problems in China, you know,
0:23:11that he really is wrong, right?
0:23:16That's more worrisome to me than if he's being
0:23:19overly optimistic on earnings calls
0:23:22with knowing in the back of his head
0:23:24that he's BSing a little.
0:23:26To me, it's more worrisome if he's actually wrong.
0:23:28And I think that's actually more likely
0:23:30'cause I think Tim Cook is fundamentally
0:23:32a very honest person, almost remarkably so
0:23:36for somebody who's the CEO of a large company.
0:23:39I mean, and that's certainly not something
0:23:41anybody ever said to Steve Jobs.
0:23:42- Yeah, I completely-- - Steve Jobs wasn't--
0:23:46- Yeah.
0:23:48He wasn't a liar per se, but he was a bullshit extraordinaire.
0:23:51And Tim Cook is not.
0:23:52It is just the antithesis of his personality.
0:23:58I completely agree.
0:23:59To me, and this is sort of my third--
0:24:01I put like there's three errors Apple made.
0:24:03And one, like I said, I think they've always
0:24:05been more vulnerable in China with S models.
0:24:08And I think that they probably overestimated the XR model
0:24:12again.
0:24:12But the third error was exactly this.
0:24:15I would much rather have a liar than someone
0:24:18that's not fully in touch with reality.
0:24:20I think that that's exactly right.
0:24:22- Or as is the case here in the US,
0:24:26we've got someone in charge who's both.
0:24:30- You've got both, all of the above?
0:24:32- Yeah, all of the above.
0:24:34But yeah, me too, me too.
0:24:35I would rather have somebody at the wheel
0:24:37who at least, you know, if they're lost
0:24:41but telling you they're not lost,
0:24:42I'd at least have them know that,
0:24:44at least themselves that they're lost.
0:24:46You know what I mean?
0:24:47- Yeah, no, but the six-- - Rather than honestly believe
0:24:48they're on the right way.
0:24:50- No, this is exactly it.
0:24:51This is really the thing that concerns me the most
0:24:53about this entire episode.
0:24:55And again, just because it's a bit of a pattern.
0:24:58I remember I wrote about this in the 6S cycle.
0:25:00Every single earnings call,
0:25:02the results were not what anyone expected,
0:25:05and every earnings cycle, Tim Cook would cite,
0:25:07and I literally, I went through and I tracked all of them,
0:25:09and I quoted all of them in a daily update,
0:25:11where every cycle, Tim Cook was like,
0:25:12we have a lot of upgrades coming along.
0:25:14we feel very confident. Only 30% of the base is upgraded. Because every call he'd be asked,
0:25:20do you think that the 6, the large phone, pulled forward people, that made them upgrade
0:25:25faster than they would have otherwise? And that's why the 6s is going to be hurt. And
0:25:28every time he's like, no, no, no, no, no. And then at the end of the year, he's like,
0:25:32you know, what we think happened was all the upgrades got pulled forward. And so that is
0:25:35why the 6s was down. It's like, well, why did, you know, that's been clear to everyone
0:25:39for a while. You've been denying it over and over again. Why didn't you just admit that
0:25:44was the case all along. And I think that he actually thought that there was a new reality
0:25:49and that the sixth growth would continue going forward. And actually there wasn't necessarily
0:25:53a new reality. And so that just reflecting on that and it makes me concerned that there's
0:26:01a tendency in Apple's management to always see sort of the sunny side of the egg as it
0:26:05were. And that's, it's good to be optimistic. It's good to pump up the troops, but it's
0:26:11It's really important to have a sort of clear-eyed view about exactly what the state of your
0:26:16business is.
0:26:18And if you don't, that's a really good way to get yourself in trouble.
0:26:22Yeah.
0:26:23Now, in my family, we have a long-standing tradition where we call them "being right
0:26:29points," and they're just like invisible coins that you pantomime giving to somebody
0:26:32if there was any kind of argument over, you know, it could be anything, small or large,
0:26:36but it's something that says—
0:26:37No, you and your wife, this is the most unsurprising news ever, but continue.
0:26:40- Jonas is, we invented him in,
0:26:43we didn't have him before Jonas.
0:26:44It was something we invented with Jonas,
0:26:46but we call him being right points.
0:26:47And the way you admit somebody was right
0:26:49and you were wrong is you award them a being right point.
0:26:52And I'm awarding you a being right point
0:26:56for your overall thesis on S model iPhones
0:27:01and the Chinese market.
0:27:04Which, why don't I let you paraphrase
0:27:10or explain it for those who aren't familiar with it.
0:27:12Because I think it's really, really interesting.
0:27:16And I think it's-- I can't prove that it's what's happening
0:27:20this year, but it's certainly-- their bad years in China
0:27:23certainly line up with S-years for the iPhone.
0:27:27Yeah, so it is a subtle point.
0:27:29Because it's not to say that the-- so a podcast is actually
0:27:33a good way to explain it.
0:27:35My thesis is that Apple's differentiation in China is different and fundamentally weaker
0:27:43than it is elsewhere in the world.
0:27:46And that is due, I focus primarily on WeChat, but it's not just WeChat, it's sort of the
0:27:49broad array of services in China.
0:27:52And keeping in mind that Android in China is a very different experience than Android
0:27:57here, because here Android is, it's Google Android, whereas Android in China, it's all
0:28:01homegrown Android.
0:28:03It's based on the open source project.
0:28:04It's not in front of Google at all.
0:28:06It's heavily tuned to sort of the local market.
0:28:08And the long and short of it is that the sort of step down in the user experience, if you
0:28:15believe there is a step down between iOS and Android, is much fainter in China, in part
0:28:20because the most important things to your life are going with you.
0:28:24And again, WeChat is not just chat.
0:28:26It's not just messaging.
0:28:28It's payments, like all aspects of life.
0:28:31There's always stories in China about how old people go out and they can't buy anything
0:28:35because they're not used to buying with their phone and they feel very put out because no
0:28:38one will accept cash anymore.
0:28:40The degree to which the WeChat wallet and Alibaba wallet are dominant is hard to overstate.
0:28:45There's many apps.
0:28:46There's the fact you pay your bills using WeChat.
0:28:49You contact government agencies with WeChat.
0:28:51WeChat is LinkedIn.
0:28:52All your business contacts are there.
0:28:54The degree in which it is interwoven in all aspects of life are hard to overstate.
0:29:01What that means is, one, you switch to Android, obviously it also has WeChat.
0:29:04Not just that, things like WeChat and other Chinese services are arguably better because
0:29:09they're not locked down the way that Apple locks down iOS, where yes, there's the affordances
0:29:15to share between the apps along those lines, but you can't get the deep level of integration
0:29:20that you can if you're sort of architecting the OS from scratch for the local market in
0:29:26the way that those local phones are.
0:29:28The reason you buy an iPhone in China is not necessarily because your day-to-day experience
0:29:33of using the device is better.
0:29:35In some respects, it's arguably worse.
0:29:38But you buy it because China is a very sort of ... You want to show off that you have
0:29:46the new iPhone.
0:29:47The way that wealth is sort of flaunted in China, it's pretty crazy if you haven't been
0:29:52there.
0:29:53It's very jarring.
0:29:54Especially, I grew up in the Midwest,
0:29:55and the idea of showing off your fancy handbag
0:29:59or being very visible about your wealth
0:30:02is so foreign to me, so strange to me.
0:30:06And it's just so, it's very, very different.
0:30:09And so you have an iPhone,
0:30:11and iPhone has always been the top of the line.
0:30:14It's very clearly the best thing, the best model.
0:30:16The fact that it's expensive is a good thing,
0:30:19not a bad thing.
0:30:21This is something that people miss
0:30:22when the 5C were out.
0:30:23The 5C is like, "Oh, one month salary in China."
0:30:27People who are earning that much in China are not buying iPhones, right?
0:30:32You can't look at a billion person market and look at averages.
0:30:36You have to look at the different segments in the market.
0:30:38And there's a very large segment that absolutely has the income to buy an iPhone and would.
0:30:43And the flip side of that, though, is that if an iPhone isn't new, then what's sort of
0:30:50the allure?
0:30:51out and I buy a XS, yes, there are some degree of iPhone fans and people that generally prefer
0:30:58iOS that want the newest model, but I think that that segment is much smaller than people
0:31:05that care very about the visibility of the phone that they're carrying.
0:31:09And so if you're someone that buys every year, well, better off to buy, like I said, the
0:31:13new Huawei Mate or the Mate 10, because that's clearly the new phone.
0:31:17It's the new hotness, and you can show off that you have it.
0:31:19And if you want to stick with iOS, well, just stick with the iPhone X.
0:31:24No one knows it's not the iPhone XS.
0:31:27You might as well have the newest phone.
0:31:29And this, again, I'm not saying this is a "the" factor, but what it results in is a market
0:31:37where Apple's moat, in my estimation, is far shallower than it is almost anywhere else
0:31:42in the world.
0:31:43And what that means is when other things come along.
0:31:46So I think they would be weak regardless because I predicted that the S models are going to
0:31:50always be weak in China.
0:31:51But you add on economic troubles, you add on a slowing economy, you add on the nationalistic
0:31:57sentiment because of the trade war, you add on the Huawei CFO being arrested and people
0:32:01maybe wanted to react against that.
0:32:03And Apple doesn't really have anything propping it up the way it might in a different market.
0:32:09And so I wouldn't say I appreciate the right point.
0:32:12I don't think that is the only factor,
0:32:14but I think it's a factor that is a factor,
0:32:17and it's a factor that interacts with all the other factors
0:32:21to make those other factors even worse,
0:32:23if that makes sense.
0:32:24- Well, and I think it might be a factor
0:32:26that Apple's senior management either is in denial about
0:32:30or doesn't grasp as fully as they should, perhaps.
0:32:34- And I do tend to think that's the case,
0:32:36and that ties into sort of the excessive optimism case.
0:32:39Like the, there's, I mean, I wrote this in, you know,
0:32:44a year and a half ago in the middle of sort of the S cycle
0:32:48or the seven cycle and really looking at the China numbers,
0:32:51'cause what was so striking was Apple was flat,
0:32:55but if you, and I did this in that article,
0:32:57the, you know, Apple's China problem.
0:32:59If you took out China, the entire business was up
0:33:02like 10% or 10, 15%.
0:33:04Like the iPhone was doing great
0:33:06and the iPhone was doing great everywhere
0:33:09except for China.
0:33:09Once you put in China, then the overall numbers were flat.
0:33:13But once you took out China, it was up.
0:33:15And there was clearly the China market
0:33:17was behaving differently.
0:33:19And it was behaving differently, again,
0:33:21in a sort of predictable way.
0:33:23And so the prediction that I made at the time
0:33:24was that actually, I said Apple has a China problem,
0:33:28but the implication of that China problem
0:33:30is that the next iPhone is going to return Apple
0:33:33to growth in China, because it's going to be a new form factor.
0:33:36And that's exactly what happened.
0:33:38The iPhone X was a great success in China.
0:33:39Apple started growing in China again.
0:33:41And then you had Apple's management on their own call
0:33:44saying, oh yeah, everything's great.
0:33:45See, he told you, China's great.
0:33:46But there was a part two to that prediction,
0:33:49which was the next S model,
0:33:51they're gonna be in big trouble.
0:33:52And that's, again, exactly what happened.
0:33:54Now, I can't, again, it's all tied into the economic factors
0:33:58and I'm not denying those factors at all,
0:33:59but I think that it is a factor,
0:34:02and I agree with you that I don't think
0:34:03it's one that Apple's management
0:34:04has taken completely seriously.
0:34:07- Yeah, and you know, predicting these things is hard.
0:34:12I've spoken to people at Apple.
0:34:14And I remember we had a conversation when the 5C came out.
0:34:19And one of the things that made the 5C very different
0:34:23than any previous phone until the XR really
0:34:26is the variety of colors.
0:34:29You know, that there were five colors to choose from.
0:34:31And one of my questions was, you know,
0:34:33how do you, you know, what do you do?
0:34:35just make them all in the same quantities
0:34:37and adjust after you see which ones are popular?
0:34:41I mean, how do you gauge something like that?
0:34:44And they're like, you know, as usual,
0:34:47they didn't explain exactly what number.
0:34:50I was trying to get them to say,
0:34:51"Yeah, we made a lot of the blue one."
0:34:53- Right. - But they, of course,
0:34:54revealed nothing of the sort,
0:34:55but did say that they're always surprised every year,
0:34:59and with the iPhone in particular,
0:35:01because it is the most popular,
0:35:04and therefore it reaches the most people.
0:35:07They're surprised every year with differences
0:35:11that they never anticipated.
0:35:12There's two colors of the iPhone 4S
0:35:18and they open up a new carrier in country X.
0:35:21Doesn't even matter what country it is.
0:35:23And in that country, everybody buys the white one
0:35:26and they had no idea.
0:35:27They had no idea that black wouldn't be popular there.
0:35:30And they said, "We adjust on the fly."
0:35:32That's what we do.
0:35:34But so it's really, even Apple,
0:35:37they don't think that they can foresee everything.
0:35:40But boy, their estimates for years have been close.
0:35:45- Well, so one of the issue points, though,
0:35:47'cause this is something that I tracked for a while,
0:35:49is Apple's estimates used to be eerily accurate, right?
0:35:52Even if you, even when they were sort of sandbagging,
0:35:55they were sandbagging very predictably.
0:35:57- Yes, very predictably, right.
0:35:59- But here's what's interesting.
0:36:00they were way off on the iPhone 6, right, on the downside.
0:36:04Like they missed the upside.
0:36:06Then they were way off on the 6S,
0:36:08where they over predicted.
0:36:10They were a little better on the 7 and the 10,
0:36:13but actually they were under on the 10 too.
0:36:15And I think what's interesting is they,
0:36:18so basically since the iPhone 6,
0:36:20their estimates have been significantly less accurate.
0:36:23And I think that's actually not surprising,
0:36:27'cause there's another thing that's going on here,
0:36:29which is for the first 10 years of the iPhone
0:36:32or eight, nine years of the iPhone,
0:36:33Apple was still rolling out availability, right?
0:36:37They were adding countries, they were adding carriers.
0:36:40And when Apple would add a carrier,
0:36:41particularly once they were very powerful,
0:36:43after sort of the first four or five years,
0:36:45they would add carriers and they would,
0:36:47the carriers had to agree to guaranteed sales.
0:36:50So they had to say, we will absolutely sell
0:36:52this many iPhones in the next year
0:36:55or something along those lines.
0:36:56and if we don't make it, we're gonna pay for them anyway.
0:36:59And I think what might have been going on here
0:37:02was Apple's estimates were so accurate
0:37:05because a lot of their growth was driven
0:37:07by the expansion of these deals,
0:37:09which had numbers written into them.
0:37:11So they kinda knew exactly how much was going on.
0:37:13And whereas, the other thing with the iPhone 6
0:37:17that made it so huge was that was the first iPhone to launch
0:37:19with China Mobile on board,
0:37:20'cause China Mobile came on during the 5S cycle.
0:37:24and that was the first one to launch China Mobile.
0:37:26And since then, they haven't really,
0:37:29that was the last kind of the great white whale
0:37:31for Apple as far as carrier availability.
0:37:34Since then, they've added them here and there,
0:37:36but that aspect of iPhone growth is kind of over.
0:37:40And now the prediction is actually real predictions,
0:37:42like how many people are gonna buy them,
0:37:44as opposed to how many carriers
0:37:45are we gonna force to buy them contractually.
0:37:46And I think it's not a surprise that ever since then,
0:37:49their predictions, their forecasts have been
0:37:52significantly less accurate than they were before then.
0:37:55- I linked to it this week.
0:37:58Matt Richmond had a blog post years ago.
0:38:01It was while it was still going on.
0:38:02But the way he, I think this was obvious
0:38:04if you looked at the charts.
0:38:05You know, you can look at the,
0:38:06see the slope of iPhone sales growth in the early years,
0:38:09and you could see what an unbelievable slope it was.
0:38:13But when you word it the way he did,
0:38:14it's truly extraordinary that the iPhone 3G
0:38:18sold more than the original iPhone.
0:38:20the 3GS sold more than the 3G and the original iPhone combined. The iPhone 4 sold more than
0:38:27the previous three. Or I guess we're going by calendar years. But that iPhone 4 year,
0:38:32they sold more iPhone than the previous three years combined. And then the iPhone 4S, they
0:38:35sold more than the previous four years combined. Every year wasn't just bigger than the previous
0:38:40year. It was bigger than all previous years combined. That type of growth, it's hard to
0:38:48imagine how that could happen in any other market than phones because the way that that
0:38:51can happen is the way that you roll out to additional markets around the world, new carriers.
0:39:00It's truly remarkable. And even within the US, it's not even just countries. Other
0:39:05countries I think have always made it a little bit easier. There was less lock-in to carriers,
0:39:09but opening, going from AT&T exclusive to adding Verizon in 2011 was like adding another
0:39:17United States. You just can't keep that up. I mean, and I know that there are two versions
0:39:25of the "law of large numbers" and the people who only know about the—I forget what the
0:39:30first one is. The one is more mathematically rigorous. But the sort of business-y one is
0:39:39sort of basically explaining why Ponzi schemes can't work, right? Because you run out of
0:39:43people. You can't keep a Ponzi scheme going because eventually you run out of people.
0:39:47It only works by bringing new people into the scheme
0:39:50and eventually you run out of new people to bring in.
0:39:52I'm not saying that the iPhone is a Ponzi scheme,
0:39:55it's the opposite.
0:39:57It was a totally legitimate product,
0:39:59but the growth was driven by bringing in new markets.
0:40:02And new markets had new people who'd never been able
0:40:04to buy a new iPhone before.
0:40:06And eventually you run out of new markets.
0:40:08- Yep, and there's kind of like,
0:40:09there's three ways to grow a business, right?
0:40:11Like you can serve a market, you can grow,
0:40:14which is, you know, there's an empty pie pan
0:40:16and you want to fill the pie pan.
0:40:17You can grow the market, which is you get a bigger pie,
0:40:20or you can still share from other people
0:40:22sort of in that market, which means you take a bigger slice.
0:40:25And Apple, for what you're talking about,
0:40:29they were all in the sort of filling the market stage
0:40:32to start, where people that already had phones,
0:40:34now they're getting smartphones.
0:40:35And then they grew the market,
0:40:37which is a lot of people that never had phones
0:40:38now had a smartphone.
0:40:39But now that all those are sort of tapped out,
0:40:42and to the extent that you can grow the market,
0:40:44It's definitely in markets where the iPhone is way too expensive.
0:40:47And one, I think, under-discussed market
0:40:51is India, where Apple is just a total mess.
0:40:53I mean, they've actually completely flat-lined in sales
0:40:56there, too.
0:40:59So they're basically stuck with stealing share, which, again,
0:41:03I think is not the worst place to be.
0:41:05It's still the case that, again, outside of China,
0:41:09that more people go from Android to iOS
0:41:12than the other direction.
0:41:13So they're in strong shape in the long run, but it's a much harder and slower path to
0:41:20growth than the other ones.
0:41:22I think one of the great ironies of Apple's situation in China, and I think it's permanent,
0:41:26I think it's exactly what you've been describing, what your beam rate point was awarded for,
0:41:32is that it goes back to what you said a half an hour ago, though, that Apple has long been
0:41:38misunderstood by financial pundits and tech pundits for basically the same reason, which
0:41:43is that I think most financial and tech pundits want to treat Apple as just another company
0:41:50that makes X, Y, and Z. They're just another laptop maker. They're just another phone
0:41:55handset maker and that they're competing on an equal basis. The advice to the company
0:42:03over the years has been so fundamentally wrong based on that misunderstanding. And I think
0:42:10it leads to people who do understand Apple rolling their eyes, including Apple management.
0:42:16But I think the irony here is that—I think the truth is around the world, Apple's strength
0:42:22is this fundamental integration between hardware and software and the overall experience that
0:42:28it can provide and that you can't separate it. You can't just review a MacBook next
0:42:32to a ThinkPad without reviewing macOS versus Windows or whatever else you can run on a
0:42:37ThinkPad.
0:42:41I think fundamentally in China, Apple is a lot more like the Apple that's been wrongly
0:42:48assumed by the pundits over the years.
0:42:49They really are just another handset maker or a lot closer to being just another handset
0:42:54maker, just another company that sells laptops.
0:42:58and that they're buying it, people are buying it for the superficial reasons that these
0:43:03pundits have said that everybody who buys Apple products has been buying Apple products
0:43:06for over the years.
0:43:07Yeah, I think that's right, in broad strokes. It's not totally the case that they're
0:43:13completely commoditized. If you are used to using an iPhone, you're used to using an
0:43:17iPhone. It's worth keeping in mind that Apple's install base in China still grew,
0:43:22which suggests that it's more people have the iPhone X aren't necessarily upgrading,
0:43:27example, whereas I think they might have if it was a new form factor. So it's not like
0:43:31they're completely commoditized, but they are to a much greater extent, I think, than
0:43:38anywhere else, if that makes sense.
0:43:40Right. None of these are extremes. I mean, to some extent, Apple is commoditized in the
0:43:48United States, and to some extent, they are not in China. But it certainly is a bigger
0:43:53factor there.
0:43:54- You could actually go by market.
0:43:55I think they're probably the least commoditized
0:43:57in the United States, in part because iMessage
0:43:59is the biggest in the United States,
0:44:00and that's a huge differentiator.
0:44:03You know, Europe, for example,
0:44:04and this is where it's important to discuss
0:44:06the fact that WeChat is more than chat,
0:44:08and that the importance of Chinese services being different
0:44:12are much broader than I think people appreciate.
0:44:15Like in Europe, for example,
0:44:17iMessage is much less of a lock-in,
0:44:19but the general sort of, the way you use an Android phone,
0:44:22the way you use an iPhone are different
0:44:25in sort of predictable ways.
0:44:27Like there's less, it's not like you're advantaged
0:44:30by using an Android phone in Europe relative to an iPhone.
0:44:33Like you are in China given the fact
0:44:35that it's so heavily customized to the local market.
0:44:37Like that dynamic really only exists in China.
0:44:40- All right, let me take a break here
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0:46:13All of this is really great. You can even get VPN protection with encrypt.me. It's really
0:46:20great. The single router model, it just doesn't work. It really doesn't. I think it's gotten
0:46:25worse with just the proliferation of Wi-Fi networks. It just makes it harder to set it
0:46:31up. I've been using Eero for years. And when we moved a couple years ago, there's just
0:46:36no way our new house, there is absolutely no way. I don't think anybody makes a single
0:46:40router that would go, because it's a townhouse. It's got four floors. I don't see how we could
0:46:45possibly get good Wi-Fi all the way from the basement to the top floor. With Eero, we do.
0:46:51It's really easy. And it's so easy to set up. It's plug them in. You just plug them
0:46:57into the wall and that's it. And then they talk to each other. They see each other. You
0:47:01manage it all from one app. And when you want to do something like, let's say you get their
0:47:05default their default package. It's a base unit. That's the thing you plug into like
0:47:11your cable modem and two of their beacons. Their beacons are the little smaller ones.
0:47:15They're like little wall just like little wall lights and they even have a little light
0:47:21if you want to and you can turn that light on and off in the app or have it come on at
0:47:25certain times a day. Let's say you get that. You get the base unit, two beacons and it's
0:47:32It's not quite enough. Maybe you want one more. We just buy one more and you just plug
0:47:36it in and it couldn't be easier to add it. It's not. You have to start over anything
0:47:40like that. Really, really terrific. I've been using them for years and it's really the wifi
0:47:47in my house is so much better than it was before. So here's where you go to find out
0:47:52more. Go to ero.com. Check out with the code, the talk show. And if you buy a base unit
0:48:03and two beacons and one year of Euro plus, you'll save a hundred bucks. That's a tremendous
0:48:10savings, a hundred dollars just forgetting their base, a kit with the base station, two
0:48:16beacons in one year of Euro Plus. 100 bucks off at Euro.com. And remember that code, the
0:48:24talk show.
0:48:28Before we get off of China, I wanted to just talk briefly about this situation with the
0:48:32Huawei CFO, who was arrested, detained in Canada. And she's still detained there. I
0:48:40think she's out on bail or something. But the US is trying to extradite her to the United
0:48:45States. I don't want to get into too much in the details of it, but what they're accusing
0:48:52her of is more or less laundering money to Iran. I forget where else, but Iran obviously
0:48:59has international sanctions against it, and the charges from the United States are pretty
0:49:06serious.
0:49:07Yeah, so I mean the limitation is Huawei's not supposed to be selling this advanced stuff
0:49:14to Iran.
0:49:15And the reason why the U.S. has leverage over that is because it involves a lot of U.S.
0:49:20components.
0:49:21So those components are not supposed to be sold on into Iran because of the sanctions.
0:49:25And the accusation is that they set up basically a shell company to do that and then she told
0:49:32the banks that no, we're not associated with that shell company any longer or something
0:49:37along those lines, and then they still were.
0:49:39So I think the accusation is wire fraud,
0:49:41where basically lying to the banks
0:49:43and forcing the banks to break sanctions unwittingly.
0:49:48And so obviously there could be more charges,
0:49:52but that's sort of the nut of it.
0:49:54And so yeah, sorry, that was the sort of 30 second
0:49:57overview of the case.
0:49:59- But it's, you know, and it's unseemly.
0:50:05I mean, even if the charges are accurate,
0:50:06It's politically difficult because Huawei is tied,
0:50:11like everything in China, tied to the state to some degree.
0:50:17- Yeah, well not only that,
0:50:18but she's the daughter of the founder.
0:50:20- Right.
0:50:21And so my thought on that was,
0:50:26boy, I sure wouldn't wanna be the next senior executive
0:50:29from Apple to go to China.
0:50:30And I don't think that that's likely
0:50:35they would trump up charges against somebody from Apple or some other major American corporation
0:50:41and detain them similarly. But also, if they did it, I wouldn't be shocked, right? It's not
0:50:48out of character for a regime like China's. Yeah, it's very complicated, because I would say that
0:50:56without speaking about this case specifically, I would say the likelihood that Huawei is engaged in
0:51:04sanction avoiding behavior in a way that is problematic is pretty close to 100%. I think
0:51:14what makes this particularly challenging on all sides is I think everyone's kind of known
0:51:20it's 100% for a long time and no one's done anything about it. And obviously, this isn't
0:51:26the first time this has happened either in the last few years. ZTE got the basically
0:51:31the US companies were forbidden to export to ZTE,
0:51:36the number two Chinese telecom manufacturer.
0:51:39And there's basically a death sentence.
0:51:42Like Chinese, US technology is still at the core of,
0:51:46it's not just phones, it's the,
0:51:48Hawaii and ZTE are all in the sort of the base stations,
0:51:50like the things that sit on the cell phone towers,
0:51:53and actually do all that.
0:51:56And there's lots of ZTE and Huawei,
0:51:59The connection to the Chinese military is strongly suspected publicly.
0:52:04There is lots of sort of redacted classified questions about this where I think the understanding
0:52:11is the US has a lot of evidence that that's the case.
0:52:15And that's why, for example, Huawei base stations and whatnot are not allowed in the US.
0:52:19You have to buy from Nokia or from Ericsson.
0:52:23And that's actually spreading.
0:52:24I think Japan recently moved against Huawei.
0:52:27I think there's a discussion at least in the UK about that happening.
0:52:34But then you tie in the fact that you weren't enforcing this or you're letting them get
0:52:39away with it for a long time.
0:52:40And then there's also the trade discussion going on and it's a senior executive.
0:52:44And it's a situation where you can choose almost any frame to look at it and decide
0:52:51that what the US is doing is right or wrong and you could be correct.
0:52:55In a broad global scope, is it a good thing?
0:52:58In the context of bilateral relations is a good thing.
0:53:01As far as the rule of law, is it a good thing?
0:53:04And you have a different answer in perhaps every case.
0:53:07But the fact that it's a...
0:53:12Once you get to the level of nation states, it's not really like a contractual engagement
0:53:17that's going to be educated in a court of law.
0:53:19You're dealing with nation state politics and they're the ones that make the laws with
0:53:22guns behind them.
0:53:24Which means that the calculus is very, very different as to what is going on and whether
0:53:29it's the right thing to do.
0:53:31Yeah, it's less of a judicial issue than an executive issue, really.
0:53:35Right.
0:53:36And it's politics.
0:53:39It's international relations at the absolute highest level.
0:53:42And the reality of—I think you're about Apple—I mean, the reality is that Apple
0:53:49is when you're the size of Apple and you're synonymous with the US as Apple is and when
0:53:56you're exposed to multiple countries the way Apple is, yeah, the risk is extremely high.
0:54:01I think for now, what I've heard from people on the ground in general is it's a lot more
0:54:07dodgy right now to be a Canadian, in part because Canada is the one that arrested her
0:54:13And also Canada kind of like can't like, China may be bad at the US, but the US has a lot
0:54:20of leverage and power over China.
0:54:24Whereas you know, it's I think they're kind of taking it out on Canadians.
0:54:27Like there's been a few Canadian executives arrested or Canadian nationals for very dubious
0:54:31reasons.
0:54:32But yeah, it's a mess.
0:54:34It is absolutely a mess.
0:54:35But it's a mess.
0:54:36It's like if they're actually, you know, if they are quite clearly violating the law,
0:54:42well, maybe it isn't a, you know, like I said, there's no sort of right answer here.
0:54:46Yeah. Here's another one. Here's a new topic. I thought this was an interesting,
0:54:55Steven Sinofsky, former Microsoft executive now, sort of a pundit at large, had a couple of threads
0:55:03in recent weeks on Apple, but he closed one with a post PPPs. And I thought this tweet was pretty
0:55:11interesting. Just this tweet in and of itself. Let me read it. "The idea that Apple is
0:55:16on some countdown clock to a 'next big thing' is completely the opposite of what to worry
0:55:21about. That is the mistake analysts are making. Just as with Adobe, nothing is bigger than
0:55:26Photoshop or Microsoft with Office. Yet. But so what? Focus on execution." There is sort
0:55:37of an obsession, especially with Apple, with what's the next big thing. It's so obvious.
0:55:45There will be a next thing eventually. The watch is certainly a new thing, but nothing's
0:55:50ever going to be the iPhone again. It's almost impossible. It may not be possible for any
0:55:55company to come up with something as great of a consumer product, as profitable as the
0:56:00iPhone again, let alone the odds that it would be the same company.
0:56:08And I've seen it—there's a lot of Tim Cook haters out there. There always have been.
0:56:12I mean, there were Steve Jobs haters, too, but there's a certain contingent of people
0:56:16who really, really don't like Tim Cook. And boy, did I hear from them in the last week
0:56:21or two. I mean, people who really, really are—and it ultimately is his decision, but
0:56:29the basic idea—and they love to trot out that Steve Jobs quote about Steve Ballmer
0:56:34and that they turned it over—who do you turn it over to? You turn it over to the numbers
0:56:38guy and then what do you get? You run the company by the numbers. And you know, Tim
0:56:42Cook was obviously—he wasn't a product person, never claimed to be. But they blame
0:56:48Tim Cook for the rising price of Apple products. And it's undeniable that the prices have
0:56:58gone up a lot recently. But this idea that Tim Cook is obviously a failure because if
0:57:09the right person had gotten the job after Jobs had died, Apple would have come out with the next
0:57:15big thing or two by now. And I think that's completely wrong. I really do. And I think
0:57:21that an obsession with that would be a disaster for Apple's leadership and would lead them to
0:57:25to change that thousand no's for every yes mentality,
0:57:30which I think is, maybe the numbers are exaggerated,
0:57:35but I think it's mostly true.
0:57:37- I completely agree.
0:57:40I think it's not just a matter of,
0:57:43you can look at this, I think,
0:57:45from a very sort of analytical lens
0:57:49that can come to no other conclusion
0:57:52and the fact that the iPhone will never be matched.
0:57:55And I wrote this article back in 2016,
0:57:58it's called Everything as a Service.
0:58:00And one of the points is that the most valuable sort
0:58:05of manifestation of a particular technology
0:58:11is at the very end of its sort of viability.
0:58:15And what I mean is the best possible carriage
0:58:19was the last carriage that was made
0:58:21before cars came along.
0:58:22And like the most valuable car was one that came along,
0:58:25will be the most valuable gas car,
0:58:27or the best performing gas car is gonna be the last one
0:58:29before sort of electric takes over.
0:58:31Like that's just sort of the way,
0:58:32you know if you think about it,
0:58:33that's quite obviously the case.
0:58:35And-- - I think it's from Horace,
0:58:36I think it's from Horace Dedue,
0:58:37but one of my favorite examples of that
0:58:39was that when jet aircraft carriers came out,
0:58:42the propeller planes at the time were way better,
0:58:45way more comfortable, they flew faster,
0:58:47they were, you know, but they were doomed.
0:58:51for many reasons, like the jets overtook them.
0:58:53But it took years after the introduction of the jet engine
0:58:57for them to overtake the propeller planes in the market.
0:59:00- Yeah, that's exactly right.
0:59:02And so, if you think, so that's just the overall
0:59:07sort of concept.
0:59:08You think about the iPhone specifically,
0:59:10and what makes the iPhone so insanely valuable
0:59:14is that first, it's a physical object.
0:59:17And you think about how the challenge
0:59:20with digital goods, how do you monetize digital goods?
0:59:23Because a digital good is by definition,
0:59:26sort of there's no scarcity, it can be duplicated endlessly,
0:59:29and which means that the sort of inherent value
0:59:32of a digital item is zero.
0:59:33And you see this in things like the music industry,
0:59:35for example, right?
0:59:36The longer they try to hold onto selling songs,
0:59:38the more they were doomed.
0:59:39Now, music companies, they don't sell songs anymore.
0:59:44They sell convenience, right?
0:59:45The point of Apple Music and Spotify
0:59:47is you can conveniently get access
0:59:49to any song that you want to.
0:59:50And the music is kind of a byproduct of,
0:59:53when the actual selling proposition is convenience.
0:59:55And that's a business model that makes sense
0:59:57with digital goods.
0:59:59The thing with the phone though, it's a physical good,
1:00:01which means there is scarcity, which means you can,
1:00:04like there is inherent economic value to a physical good
1:00:07in a way that there isn't with a digital good.
1:00:10But it is a physical good that is differentiated
1:00:14by software, by that sort of ineffable component
1:00:17that is endlessly duplicable, endlessly sort of iterable.
1:00:21You can constantly be improving it, making it better.
1:00:23You can build any sort of differentiation.
1:00:25So the iPhone has all the benefits
1:00:28of being a hardware product as far as monetization goes,
1:00:31and has all the benefits of software
1:00:34as far as differentiation goes.
1:00:35It's really the absolute perfect marriage of these two models,
1:00:40such that you can drive high differentiation
1:00:42through software, and you can reap and capture
1:00:44differentiation by charging money for a physical device. And a physical device that, by the way,
1:00:49wears out, breaks, needs replacements, so on and so forth. It is the absolute perfect possible
1:00:56sort of business that you could ever be in because it has all the benefits of digital and all the
1:01:00benefits of being a hardware good. And I don't think we'll ever be in that state again. The
1:01:05future of physical goods differentiated by software is they are going to rent them, right? You think
1:01:10about self-driving cars, it just makes intuitive sense in the long run that Uber and self-driving
1:01:17cars are a natural marriage, right? Or an Uber type service where you call it up on your phone
1:01:22and it drives around, it picks you up and you go. The reasons why we would buy a car were because
1:01:30we didn't have the sort of technology to make an always available car that made sense. And you
1:01:36You think going forward, this is going to make sense for so many things that because
1:01:40we have a device with us all the time that we can access the internet and access anything
1:01:45we want to, this rental model of very high cost physical goods is going to, I think,
1:01:52be more and more predominant, which means really, what's next?
1:01:57I mean, yes, I guess maybe AR glasses or something, but if you think about it, there's always
1:02:02the phone is it's so it's perfect in so many ways it's big enough that you can
1:02:08information do things on it it's small enough you can carry it with you it is
1:02:11it is really the perfect product in a way that it's very hard to imagine you
1:02:16can imagine lots of other good businesses but the perfection of the
1:02:20business model combined with the form factor and the perfection of the product
1:02:24itself it like it seems if you think about it it's obvious there will never
1:02:28be anything to match it yeah and the way that it's it's actually eaten the
1:02:32a bunch of sub-markets.
1:02:36Cameras, for one thing, right?
1:02:37Consumer cameras still exist,
1:02:39but they've been decimated by phones.
1:02:41I mean, when you go on vacation,
1:02:44go anywhere touristy these days,
1:02:45when you actually pay attention
1:02:47and look for people using cameras as cameras,
1:02:50not phones as cameras, it's hard.
1:02:52It's hard to go to Disney World
1:02:54and find people using a real camera.
1:02:55Or if you do, it's very, very obvious
1:02:58because it's actually like an SLR-sized camera
1:03:01with a big black lens.
1:03:03It's somebody who's buying, truly expert,
1:03:06or at least a consumer, what's the word,
1:03:09prosumer level camera.
1:03:11But for the point and shoots, it's gone,
1:03:14eaten by cell phones.
1:03:15Voice recorders, right?
1:03:19I don't know that that was a huge market,
1:03:21selling little personal tape recorders,
1:03:24but who buys them anymore?
1:03:25Everybody just uses the voice recorder on their phone.
1:03:30Like last year when there were like five or six of us
1:03:32who got invited to Apple to talk about the Mac Pro,
1:03:36and we were allowed to record it.
1:03:40We weren't supposed to publish the recording,
1:03:44but we could record it for our own notes.
1:03:46All of us, every single person used their iPhone
1:03:49as their recorder.
1:03:50It's, you know, that's just not something
1:03:53people buy anymore.
1:03:55There's so many things like that.
1:03:57- Yeah. - And they're all
1:03:58in the phone.
1:03:59Alarm clocks. Who buys an alarm clock anymore?
1:04:04We should talk about the Google Home Help, by the way. That reminded me because we're
1:04:09going to get back to it a little bit. I wrote about this idea of there being—I think some
1:04:16people really misunderstood about the iPhone way back when. This is back when I started.
1:04:20People were talking about the iPhone disruption and et cetera, et cetera, whatever. The iPhone
1:04:26is a unique product in that it's not really a, it's not a disruptive product. It's a product
1:04:31that has come in on top that is more expensive, that does more than what is in the market.
1:04:35That's the opposite of what a sort of disruptive product is supposed to be. And the, yes, it's
1:04:41disruptive, the laptop's the wrong one, I get that. But relative to other cell phones,
1:04:44it was what I turned being obsolete of or in that it made so many things that were cheaper,
1:04:52obsolete. It made your camera obsolete. It made a calculator obsolete. It made all sorts
1:04:57of things that you would otherwise buy individually, and it just sort of subsued them into one
1:05:03device, or maybe obviate is maybe a better term. And the PC did that back in the day.
1:05:10Like there's always pictures of like this desk with all these tools on it, and then
1:05:14there's only a PC, and the phone did the exact same thing. And it's a sort of, it's
1:05:18It's a different dynamic where it sort of comes in over the top, but it's very hard.
1:05:26Continue to do that over time.
1:05:28Yeah. Somebody has a similar picture. I remember it went super viral on Twitter where they
1:05:32had literally had the cover, either the cover of a Radio Shack catalog or just, I think
1:05:37it might've been an advertisement, but like a mid 1980s Radio Shack ad and it had like
1:05:4420 different products and every single one of them is on your cell phone now. It was
1:05:48like they had video cameras, they had still cameras, calculators, all these things and
1:05:54every single thing. It was like uncanny. It was almost like you can't believe that this
1:05:57wasn't ginned up and it's fake, but it was actually like a real Radio Shack ad and everything
1:06:02that they were advertising was all on your cell phone now.
1:06:04Yep. Basically, the form factor rules, anything that was sort of portable and carable was
1:06:10going to end up on the phone and that's what's happened and that's why it's such a great
1:06:14your product, but then it follows then,
1:06:16like what's gonna actually replace that?
1:06:19'Cause you have to replace not just a phone,
1:06:21you have to replace all that functionality
1:06:23with something else, right?
1:06:24Yeah, sure, maybe you can go out for a run
1:06:26with just your Apple Watch and your AirPods,
1:06:28but then you still need a camera sometimes.
1:06:30Then you still need a screen to watch video.
1:06:33Like that's why I think the phone is,
1:06:35and this is why, I thought my article this week
1:06:37was actually relatively optimistic.
1:06:39I think this is a bit of an overreaction
1:06:41because yes, Apple, people might be holding
1:06:45on their phones longer, yes, China is an issue,
1:06:48but the fact of the matter is phones aren't going anywhere
1:06:50and within the phone market, everywhere except for China,
1:06:54Apple is not going anywhere either.
1:06:55And frankly, in China, their install base still grew,
1:06:58so it's not like they were necessarily
1:06:59like bleeding customers either.
1:07:01I mean, the company, I think there's been
1:07:03a bit of a reaction.
1:07:04Like I think they're, yes, the days of growth are over,
1:07:08but that's, I think, been clear for a while
1:07:10for people that are paying attention.
1:07:12But that doesn't mean, it doesn't follow from that,
1:07:15that the decline has now arrived.
1:07:18- Yeah, and the other thing that plays into your point
1:07:22from a few minutes ago about the difference
1:07:25between a physical good and a digital good
1:07:26is there's a resale market for physical goods, right?
1:07:30And you mentioned music.
1:07:31I still think back, there was a time in college,
1:07:34you know, I went to college in the mid-90s,
1:07:36there was a time in college when I got to thinking
1:07:38about my net worth, just as an abstract idea.
1:07:43And often, as a typical college student,
1:07:46I might have under $100 in my bank account,
1:07:49maybe if I was lucky.
1:07:50I mean, I always say, I knew the one,
1:07:52that there was a particular ATM that aid
1:07:56I could get without a fee,
1:07:57'cause it was on my ATM network.
1:07:59- That's right, yeah, you told that story,
1:08:01yeah, I remember now.
1:08:02- And it gave out, it was a machine that gave out 10s,
1:08:05and most of the machines only gave out 20s.
1:08:07And so like when I was under $20,
1:08:10if I had somewhere between 10 and $20,
1:08:12I could still get a $10 bill out of that
1:08:14and then figure out how to get my parents
1:08:17to give me some more money.
1:08:19I figured out the only things I had of any value,
1:08:22I had a Macintosh, which I couldn't part with,
1:08:25or I wouldn't want to part with, and CDs.
1:08:29I had like, I didn't have a massive CD collection,
1:08:33And I had a little hi-fi system to play CDs
1:08:37that was maybe worth, I don't know, 150 bucks.
1:08:40But I had, I would, let me think about this,
1:08:43if I had 200 CD, yeah, I had thousands of dollars
1:08:46worth of CDs, I don't know if I had 200 CDs.
1:08:49That sounds about right.
1:08:51Not a big collection, but it took up a couple of rows
1:08:54on one of those CD holders that was four or five feet high.
1:08:57And you could sell them.
1:09:01There was a very vibrant market in used CDs,
1:09:04you know, college campus, typical, you know.
1:09:07There was one on Penn's campus right next to Drexel's
1:09:09and you could go there and get a fair amount
1:09:11of your money for a CD, you know.
1:09:14You could get, you know, a CD that maybe you bought
1:09:16for $16, you could sell it for, I don't know, like eight,
1:09:21and then you could buy the used CDs there
1:09:22for like 10 or 11 or something like that.
1:09:25Like the idea that I had my significant portion
1:09:28of my liquid wealth in music makes no sense today.
1:09:33Like how in the world would a college student
1:09:36sell their music?
1:09:38It doesn't make any, it's almost laughable
1:09:42how different the world has gotten in those 25 years.
1:09:46- Half our listeners don't even know what a CD is.
1:09:48(laughing)
1:09:50- And it's fascinating to me that the one way
1:09:52you still can buy and sell music is with vinyl.
1:09:57vinyl right that there's because vinyl is sufficiently differentiated from digital music that it sounds different works different and
1:10:04Looks different has a different tactile sense to it has left it as the I mean who the hell would have predicted that in the 90s
1:10:11That vinyl would would be the last
1:10:13Last physical medium for music but it is and there still are music stores that sell but they all sell vinyl to my knowledge
1:10:21Yeah, I mean, I don't know for those of you who are young. It's just crazy. It's crazy how common
1:10:27record stores were in the 80s and 90s. Like my typical my hometown shopping mall was not
1:10:34even that particularly large. I think it had three record stores. They were record stores
1:10:39that were they were more record stores than drugstore.
1:10:41I remember then what was the what was the like Columbia house or whatever you would
1:10:45get like the six CDs for for. Oh yeah. Remember to cancel every month. They would also send
1:10:51you some crappy CD they didn't want like $25. It was a whole racket.
1:10:57- Yeah, Columbia House had the thing
1:10:59where their advertisement would literally have
1:11:01like a outline of a penny,
1:11:03and they wanted you to scotch tape a penny,
1:11:06fill out your name and your address,
1:11:08and name the six albums you want,
1:11:11send them one penny, and they'll send you six albums,
1:11:13but then you were on the hook for like,
1:11:16like the album of the month.
1:11:17- Yep.
1:11:18- You didn't even get to pick what they sent you.
1:11:21- No, you could decline it,
1:11:23but to decline it was like a big pain in the ass.
1:11:25So the way the business model worked is
1:11:27people would forget to decline it
1:11:29and then they'd get just these terrible CDs in the mail
1:11:32that they paid like $22 for or something like that.
1:11:35- Yeah.
1:11:36- It was very devious.
1:11:39- But anyway, in today's world,
1:11:40the iPhone absolutely plays into that.
1:11:42And the way that Apple's,
1:11:44how is their user base for the iPhone growing
1:11:49when their sales are down year over year?
1:11:51And it's because people,
1:11:53there's this second hand market for iPhones
1:11:56that is significant.
1:11:57Whether it's actually selling them and buying a used one
1:12:00or getting a refurbished phone,
1:12:01or I think it's probably super, super common in families
1:12:05handing down older phones from parents to kids
1:12:08and keeping them in use for years to come.
1:12:12So in terms of Apple's services narrative,
1:12:16which I definitely want to talk to you about significantly,
1:12:19you know, on the upside for Apple,
1:12:22You know, the iPhone user base is still growing
1:12:26in a way that handset sales aren't.
1:12:28- That's exactly right.
1:12:30But you should do an ad,
1:12:30and then we can gripe about services.
1:12:33- All right, I will do an ad.
1:12:35This is gonna be a great ad.
1:12:36(upbeat music)
1:12:39He sponsored the show before, do you hear this?
1:12:40You can't hear it, Ben,
1:12:41but the people out in the real world,
1:12:43when they listen to the show,
1:12:44they're gonna hear music right now,
1:12:46which is amazing,
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1:12:49But music is a crucial part of almost every visual project.
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1:12:57Your next film, commercial, or app, right?
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1:13:28often guest on the show, Adam Lisagor, and Sandwich Video.
1:13:32He's worked with them on a lot of projects.
1:13:34If you recall the occasionally used theme song
1:13:37for the talk show, Picking Boogers with John,
1:13:39that's an Alex Weinstein song.
1:13:41So what makes his music different?
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1:14:02to make a brand new song, soundtrack, something like that,
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1:15:00for more information. Seriously, great, great work. I love Alex Weinstein and his work.
1:15:06My thanks to Alex for sponsoring the show. What's next on our list?
1:15:11- Well, I think the services one is the obvious segue
1:15:14because your point, the payoff for Apple is,
1:15:18as long as Apple is only making money from selling devices,
1:15:21the fact that people are buying secondhand devices
1:15:24or using hand-me-down devices is a bad thing, right?
1:15:27Because they are using those devices
1:15:29instead of buying something new.
1:15:32And they're basically competing with themselves.
1:15:35And so the great lure of a quote-unquote
1:15:40services narrative is that actually that's good news.
1:15:45People buying second-hand phones is a good thing for Apple.
1:15:47People using hand-me-down phones is a good thing for Apple.
1:15:49People holding onto their phones,
1:15:51yeah, it'd be great if they bought a new one,
1:15:52but as long as they're still using an iPhone
1:15:54and not buying something else,
1:15:56then it's all to the benefit of Apple.
1:15:58And I think that's a very sort of
1:16:02legitimate argument to make.
1:16:03- Yeah, before we move on to services, actually,
1:16:07that reminds me that I wanted to mention a theory of mine,
1:16:10And again, I think if it's true,
1:16:12if there's any truth to it, I think it's a tweak.
1:16:16It's not like this explains everything.
1:16:18It is one factor among many.
1:16:20But I wrote back in November that if there's any truth
1:16:24to this, hey, iPhone XR is selling less than expected
1:16:27and maybe not doing as well as iPhone 8 did
1:16:30versus iPhone X a year ago.
1:16:33And I wrote that I suspected it might,
1:16:36at least to a few percentage points,
1:16:39be that people are resistant to the fundamental change
1:16:44in the interaction model of the iPhone
1:16:47that the X introduced.
1:16:49No home button, no touch ID,
1:16:51which is actually one and the same.
1:16:53Even the no headphone jack, I think,
1:16:57which didn't start with the iPhone X.
1:16:59But I don't know.
1:17:01And boy, oh boy, after this Apple news came out,
1:17:04I heard from an awful lot of people
1:17:06who swear up and down that they're not getting rid
1:17:08their iPhone 6s or their iPhone 7.
1:17:11I guess the 6s was very common,
1:17:13but until Apple brings back Touch ID and the home button.
1:17:16There are certain cases where Face ID is not as good.
1:17:23I've noticed more and more, like in the morning,
1:17:26I don't know what I look like when I wake up,
1:17:28but it must be awful because most of the time
1:17:30my phone doesn't recognize me.
1:17:33- Well, you have to hold it away from your face.
1:17:35That's the issue that I found,
1:17:36'cause in the morning I don't have my glasses on,
1:17:37and so I want to put it around my face.
1:17:39But now I'm in the habit of hold it out like 10 digits.
1:17:42- Yeah, but I often, when I still read on the phone,
1:17:46when I go to bed and I have my glasses off,
1:17:48my contacts out, and I have to hold it close to my face,
1:17:50and I don't seem to have nearly as much problem
1:17:53right before I go to bed without my glasses on
1:17:55holding the phone closer to my face.
1:17:58I don't know.
1:17:59But I mean, and somebody, people often bring up
1:18:02like when you have the phone mounted
1:18:04on the dashboard of your car,
1:18:06You can't unlock it with Face ID because it's not pointed right at you.
1:18:11If you're driving, you probably shouldn't be unlocking it, period.
1:18:13But I know that there's cases where you might be completely stopped or somewhere it
1:18:17might actually—even if you are actually being a responsible person driving a car using
1:18:23a phone.
1:18:26But I think it's mostly psychological, though.
1:18:29I think it's largely the fact that most people aren't early adopter types and they
1:18:35don't like fundamental changes like this or they're resistant to them before they
1:18:39try them. And I think that moving all of the new phones for this year to the new model
1:18:46I think has hurt them to some degree and maybe more than they predicted. And boy, I just
1:18:51heard so much in the last two weeks of people who are, you know, or last week mostly, I
1:18:57guess. It seems like two weeks ago, but it's been a long week. But so many people who think
1:19:02that's part of the problem that Apple's made a huge blunder by getting rid of Touch ID and
1:19:07the home button.
1:19:08It's at least a reason to hold on to your phone longer and you combine it with the higher
1:19:13prices and all the things that are going on.
1:19:15And you know, this can be very interesting to see.
1:19:17I'm glad you brought that up.
1:19:19I agree that that point is very interesting and I think there might be something there.
1:19:24And there's two other points.
1:19:25One is Apple's, you know, doesn't release unit sales anymore, but they do still release
1:19:30by geography and it's gonna be very very interesting to see because if you read carefully what
1:19:35Cook wrote all the problem is iPhone and most of the iPhone problem is China but that means
1:19:41there is a bit of an iPhone problem somewhere other than China so it's be very interesting
1:19:46to see where that is I think the battery placement thing is also very interesting you know did
1:19:52that like if the US ends up being lower than other places that I think that would suggest
1:19:57there might be something there. I'm looking forward to that in the earnings to see what
1:20:02that says.
1:20:03Dave Asprey Yeah, that was an interesting thing that Cook
1:20:05called out both in his open letter to the public and reiterated in TV interviews with
1:20:12CNBC afterwards that the iPhone discount battery replacement program, which turned what I think
1:20:17was usually like a $79 battery replacement into a $29 battery replacement.
1:20:22- Something like that.
1:20:23- It played a factor in the slower sales.
1:20:27- Right, and people are trying to make the argument
1:20:31that they lost revenue on batteries.
1:20:33No, I think it's pretty clear that some people
1:20:35replaced their battery instead of getting a new phone.
1:20:37I think that's, and they almost,
1:20:40I wouldn't be surprised if there was some aspect
1:20:41that people didn't even know they could replace
1:20:43their battery until it became such a huge sort of news cycle.
1:20:47- Well, and I think that it clearly,
1:20:49when it became a news cycle, it broke through
1:20:51more people that that is the explanation for the slowness that they were actually seeing.
1:21:00That's actually common sense to me that people would never—they wouldn't guess—a normal
1:21:04person would not ever guess that the reason their three-year-old iPhone feels so much
1:21:10slower than it used to is because it needs a new battery.
1:21:15It makes sense when you really understand how they work and what was going on and that
1:21:20The CPU has to be throttled and it needs the full speed of the CPU with a healthy battery
1:21:25to run the user interface the way it's supposed to be run.
1:21:30But the way most products that people know that are battery run work, that's not how
1:21:37a battery that needs to be replaced works.
1:21:40Right.
1:21:41That's how it manifests itself.
1:21:42Right.
1:21:43It just feels broken.
1:21:44And I think that people's experience with computers, which is largely based on using
1:21:50Windows PCs, there is—what do they call it?
1:21:53Link rot.
1:21:54You keep using Windows for a couple of years and the computer gets slower just because
1:21:58that's how Windows works.
1:22:02I think that they sort of chalked it up to that's how old—that's what happens.
1:22:05Your phone gets old and it gets slow and then you have to get a new one.
1:22:08And I think whatever number of people that that news broke through to that, "Hey, you
1:22:13actually you might be able to check this in iOS and if it says you could get a battery
1:22:18replacement, bring it to Apple and for 29 bucks they'll replace it.
1:22:22You know, I'm reminded of, remember when SSDs were first coming out and if you put
1:22:26an SSD in your computer, it felt like a completely new computer. It's like, "I don't need
1:22:31to get a new computer at all. This is amazing." It's almost like a similar sort of dynamic.
1:22:36No, I had that exact thing back in the early days of the talk show, probably like 10 years
1:22:42years ago, I had a PowerBook. The idea of replacing hard drives in an Apple notebook
1:22:50is—
1:22:51Well, not just that, but I did the—with the MacBook, they had a—one of the companies
1:22:55had a kit where you could take out the CD drive and you could put in a second hard drive.
1:23:01So I actually would have dual hard drives in—so I think I had the—I had a spinning
1:23:06drive to be very large, and then I had a boot drive with the SSD because these were super
1:23:12So you would buy like a 64 gigabyte boot drive,
1:23:15install OS 10 on that,
1:23:17and then you would also have the large drive.
1:23:19And yeah, you did it all yourself.
1:23:20Like you would unscrew the back of your computer,
1:23:22you would literally take out the CD drive,
1:23:24put in this kit, reconnect it all up.
1:23:26It's amazing.
1:23:28It's wild to think about it.
1:23:30- I think it was like a three or four year old power book
1:23:32and I upgraded, I took, I think I replied,
1:23:34I don't think I did that.
1:23:34I remember that though,
1:23:35that you could take out the CD drive and replace it.
1:23:38I think I just replaced the hard drive with an SSD
1:23:41and it was uncanny how it felt like a brand new
1:23:46four year, year over year improvement PowerBook.
1:23:52Although it probably cost half as much
1:23:54'cause SSDs were so expensive at the time.
1:23:56- But you were probably getting a better deal
1:23:58with your old computer with an SSD
1:24:00than buying a new computer with a spinning drive.
1:24:02- Yeah, it made sense to me.
1:24:03It made sense to me and it turned out
1:24:06even better than I expected.
1:24:08So the other point to bring up with this is I'm very,
1:24:12I'm obviously not looking forward to a recession,
1:24:15but it's gonna be very interesting to see
1:24:17what happens to Apple's business
1:24:19the next time there is a recession in the West
1:24:21or in the United States.
1:24:23Because the last time there was a recession,
1:24:25the iPhone was such an nascent business
1:24:28that it was still selling to people
1:24:30at the very sort of high end of the adoption curve.
1:24:32So they weren't really impacted by the Great Recession
1:24:36in a way that now when you're at market saturation,
1:24:40the macroeconomic factors impact your business much more.
1:24:44And so as far as, I might still be wrong,
1:24:47I'm actually gonna give you back my being right point,
1:24:49in that if their sales in the US
1:24:52end up being impacted dramatically to a similar degree
1:24:55that they appear to be being in China,
1:24:58then maybe it really was just sort of
1:25:00the macroeconomic factors as opposed to my conjunction,
1:25:03my thought, which is it's a combination of them.
1:25:08- Conjecture.
1:25:09- Conjecture, thank you, yes.
1:25:10- All right, let's talk about Apple's services narrative.
1:25:15- I have a bit of mea culpa.
1:25:19I have to give back a being right chip.
1:25:22I've written this in the Daily Update,
1:25:26I've already recorded this week for Exponent,
1:25:29so I'm kind of repeating myself.
1:25:31But when Apple first came out with the services narrative,
1:25:33The timing's very interesting because it was the first quarter of the 6S, which was really,
1:25:39again, that's the quarter where China plummeted.
1:25:42And they tried to say, "Oh, everything's great and everything's good."
1:25:45And then actually they ended up having to take like a $2 billion inventory right down
1:25:48the layer that year.
1:25:49Everything was not good.
1:25:50Everything was not great.
1:25:51But I don't think it's necessarily an accident that that's when the services narrative came
1:25:56out.
1:25:57They did a supplementary document saying, "Oh, this is actually how much money we make."
1:26:00and that document was kind of funny because they took credit for all app sales, including
1:26:04the developer share. That was the point of it to say, "Well, yes, we only report this
1:26:08much, but the actual number to think about is this much," which was the developer share.
1:26:14But that was when the narrative started. And at the time, I wrote that, "Oh, wait, this
1:26:17is ridiculous. Apple's not a services company." And that was right. Their services business
1:26:25was a result of their hardware business.
1:26:28Like they were still a hardware company
1:26:30that were developing hardware products,
1:26:32software-differentiated hardware products,
1:26:34and the services business was sort of like
1:26:35frosting on that cake.
1:26:37And so that's my opinion for a while.
1:26:40A couple years later, I had to come back and say,
1:26:43I was a little unfair in their characterization.
1:26:46Apple is still not a services company
1:26:49in that they make decisions as,
1:26:51their strategic decisions are made as a hardware company.
1:26:54But from a financial perspective,
1:26:56it is fair to make this argument
1:26:58because the money is real, it's meaningful, it's growing.
1:27:01It's important to understand that Apple
1:27:03does monetize consumers over time.
1:27:05It is the case that people on secondhand iPhones
1:27:07are valuable to the company in a way that's not captured
1:27:10if you only think about a hardware thing.
1:27:11And so I had to sort of adjust there.
1:27:14And I think I need to adjust again in that
1:27:17not only is that the case that services revenue
1:27:20is a real thing for Apple that should be considered
1:27:23when analyzing them financially,
1:27:25but I think you could make the case
1:27:26that Apple's starting to make strategic decisions
1:27:29like a services company,
1:27:31which means they actually are starting
1:27:32to really be a services company.
1:27:34So there was a lot packed in there,
1:27:35but you gave me so much credit before,
1:27:37I needed to put my cards on the table
1:27:39and say I wasn't completely right there.
1:27:42Or if anything, our Apple's changed over time.
1:27:45- Yeah, well, we can tie that in
1:27:49and mix the pot here and talk about Apple's TV strategy
1:27:53because I think there's no better case of that
1:27:56than the news out of CES this week
1:27:58that Apple is working with,
1:28:01I would say the four major TV set makers,
1:28:05Samsung, LG, Sony, and Vizio
1:28:08to get Apple stuff built into their TVs.
1:28:12And particularly interesting is Samsung,
1:28:15who I think Samsung is getting iTunes movies and TV shows.
1:28:20And presumably, I could not believe
1:28:24that it wouldn't automatically include,
1:28:26but obviously couldn't be announced,
1:28:28Apple's upcoming subscription streaming service.
1:28:32However, they're going to charge for that.
1:28:36So Samsung TVs are gonna have that built in.
1:28:40So you just buy a new Samsung TV, turn it on,
1:28:43and as quote unquote input zero,
1:28:46what does the TV show you before you switch
1:28:49to like an HDMI thing and have like a box
1:28:52put something on TV?
1:28:53Nowadays they're all computers
1:28:56and they show you some sort of interface.
1:28:57Well iTunes is going to be part of that now
1:29:00from Samsung of all companies.
1:29:03But they're also supporting AirPlay 2 built in.
1:29:07So your Samsung TV will be able to be an AirPlay 2 target.
1:29:12And then the other three, Sony, LG, and Vizio
1:29:15are getting AirPlay 2 and HomeKit support.
1:29:19So Samsung is different in that they're the only ones
1:29:22with iTunes, at least so far.
1:29:24And the other ones are different because they have
1:29:28HomeKit support in addition to AirPlay 2.
1:29:31And that to me is fascinating and it certainly seems
1:29:35like the move of a services company, not a product company.
1:29:38- Absolutely, 'cause they may continue
1:29:41to sell the Apple TV, but this is like,
1:29:43they are no longer using services
1:29:47to differentiate the Apple TV.
1:29:48Like you buy it because you wanna buy
1:29:50another Apple product, you don't buy it
1:29:51because it has anything particularly unique to it.
1:29:53At least for your Samsung.
1:29:54And the fact that it's only Samsung,
1:29:57I don't know this for a fact,
1:29:58I've kind of heard scuttlebutt that Samsung processors
1:30:02in their TVs are significantly more powerful
1:30:05than everyone else, so it might just be
1:30:06a technical limitation where Apple couldn't get
1:30:09or software to work acceptably on the other TVs?
1:30:12I don't know that this is the case.
1:30:13This is just sort of what I've heard.
1:30:16But I highly doubt it's like a,
1:30:17I think if they're gonna be on Samsung,
1:30:21they'd just as soon be everywhere.
1:30:22I don't think it's necessarily like something
1:30:23that's particularly unique in that case.
1:30:26But yeah, why buy an Apple TV?
1:30:28If you have one of these things, why buy an Apple TV?
1:30:30And yes, you can say, well, I like the experience better
1:30:32and et cetera, et cetera,
1:30:33but the Apple TV is very much having to compete
1:30:37on its own merits.
1:30:38And frankly, those merits are not particularly strong,
1:30:43particularly especially when you consider the price.
1:30:45I mean, it's so much more expensive than the alternatives.
1:30:49It's kinda crazy.
1:30:52- Yeah, and they didn't do the iPhone type thing, I guess,
1:30:57or did they, can you still buy an older Apple TV,
1:31:00a non-4K Apple TV?
1:31:02Maybe you can, but whatever, if you can,
1:31:05it's not as much cheaper as it should be.
1:31:07It's not like, oh, the expensive one is Apple TV 4K,
1:31:10but you can get the other one for 50 bucks.
1:31:12It's like you still have to pay like $130 to get one.
1:31:16And it's ridiculous compared to all the other things
1:31:18you stick into HDMI.
1:31:20I'm not saying it's unjustified.
1:31:21I'm a big Apple TV fan.
1:31:23Almost everything I personally watch on TV,
1:31:25I watch through Apple TV.
1:31:26And there are things I would like to see improved about it.
1:31:31And I'm, you know, lately.
1:31:33I've never heard anybody defend the remote.
1:31:36I have never, it doesn't even seem like there's--
1:31:39- It's awful.
1:31:39It's not like it's, oh, they could do better.
1:31:43It is awful.
1:31:45Everything about it, it's just bad.
1:31:46The number of times, it bothers my mind
1:31:49they could ship this, just for accidental input alone.
1:31:53Like it's, oh, you would be in the middle of something
1:31:56or whatever, and then someone gets set down on the couch
1:32:00or whatever, and someone's butt hits it,
1:32:02and then suddenly it stops the movie, or fast forward,
1:32:05It's unbelievable how bad it is.
1:32:07- Yeah, the accidental input is, anyway,
1:32:11we don't wanna spend too much time on the remote.
1:32:13- No, but yeah, the non-4K is $150.
1:32:16The 4K is 180.
1:32:19- Well, there you go.
1:32:19I mean, that's even more expensive than I thought.
1:32:21Whereas a Fire TV is, I don't know, 20 bucks, 30 bucks,
1:32:25I don't know, and Roku's is similarly cheap,
1:32:29and they're trying to make money, but they put ads up,
1:32:33and it's a very different experience.
1:32:35And part of what I like about Apple TV
1:32:37is knowing that I'm nothing I do through my Apple TV
1:32:40and iTunes is getting sold.
1:32:42I'm not seeing any extra ads.
1:32:44No, my image isn't being captured by the TV
1:32:47and used for marketing purposes.
1:32:49But that's where the industry's gone.
1:32:53And Neil Patel had an interesting interview
1:32:57with the CEO or CTO of Vizio at CES this week
1:33:02asking about it. They call it post-purchase monetization. The TV business is so low margin
1:33:10and so cut rate and costs are going—they really are going remarkably down. You can
1:33:16get a bigger, better TV for less money every year. It's truly a remarkable market.
1:33:25He basically admitted, "Yeah, part of our business model is based on the assumption
1:33:29that we can make money on TVs after we've sold them.
1:33:33And that's, you know,
1:33:34and not by people subscribing to things,
1:33:36it's by reselling the information
1:33:38they glean from what's on the screen.
1:33:40And it's weird to see Apple getting involved with that
1:33:44in some ways.
1:33:45- Yeah, I would strongly suspect that
1:33:48the iTunes content will not be trackable.
1:33:52I mean, I would be pretty shocked
1:33:55if Apple did anything along those lines.
1:33:57But yeah, we'll see.
1:34:00- But on the other hand, I got the feeling,
1:34:02I don't even know how that works.
1:34:03Like I still have, by this point, ancient,
1:34:06I guess it's like 12 years old, geez, plasma.
1:34:10You know, totally non-smart TV.
1:34:12My TV is just a dumb terminal, you know.
1:34:15But it's old enough and now small enough
1:34:21by today's standards that I'm definitely
1:34:22in the market for a new TV.
1:34:24But it really offends me deeply
1:34:27what are they called, ACR?
1:34:28Whatever they do when they, but it's--
1:34:30- Yeah, automatic content recognition.
1:34:31- I said basically, yeah.
1:34:32- And Visio's the worst, by the way.
1:34:34Like they are, as far as this stuff goes,
1:34:37they've been busted for all kinds of shady stuff.
1:34:40- Well, and Eli even had a tweet recently,
1:34:42I guess parents had a Visio TV,
1:34:43and he looked like at their,
1:34:44I don't know if they're Euro or what,
1:34:45but you know, whatever it is to track
1:34:48which devices on the network he had a screenshot in,
1:34:50it was like, their most active device in the house
1:34:53by a factor of like 20 was their new Vizio TV,
1:34:57which was contacting Vizio servers
1:34:59like thousands of times a day.
1:35:01And they'd never like signed up for anything with it.
1:35:04All they did was put the TV on their wifi
1:35:06and the thing just started phoning home
1:35:07like a ridiculous amount of times.
1:35:09But I think if you plug an Apple TV into like that TV,
1:35:14it's going to do, you know, your Apple TV box is going to,
1:35:18you know, it's more or less what the TV sees they see.
1:35:22If it's on the screen, they can see it.
1:35:25- Interesting, I don't know.
1:35:26I don't know how that works.
1:35:29- Yeah, I don't know either,
1:35:30but it is a little bit surprising.
1:35:32And you know, it's just TV is a totally different market.
1:35:35And you know, poor Gene Munster, you know,
1:35:37was looking for an Apple branded television set
1:35:40for years and years and years.
1:35:42And you know, he was obsessive, which was funny,
1:35:46but he wasn't fundamentally wrong,
1:35:48which is that that sort of seemed to be the Apple way
1:35:51to do something, right?
1:35:52That the Apple way to do it is to make the hardware,
1:35:55make it the best, integrate it with the software,
1:35:59and sell it at a premium.
1:36:00You know, and that the way to, you know,
1:36:02so that the Apple, the seemingly natural way
1:36:06for Apple to enter the TV world would be
1:36:08to make an Apple branded TV set with everything built,
1:36:10you know, the Apple TV computer part built in.
1:36:14They've obviously never done that.
1:36:20And even before these announcements at CES this week, I think most of us had thought,
1:36:25you know, well, that ship has sailed, and they're never going to do that. But now it
1:36:28certainly looks at least less likely than ever that they will.
1:36:31Yeah, it's interesting, especially in light of this tracking stuff, you would think that
1:36:37there would be there would be more of an opportunity that you would think but I mean,
1:36:42Apple can even make a computer monitor. So I guess asking for a TV was was would definitely
1:36:46have been a bridge too far.
1:36:49Well, they never said they couldn't make a TV monitor or computer monitor.
1:36:52They just chose not to.
1:36:54Um, and then, you know, well, the other one is the, um,
1:37:00the Apple music beyond Alexa. I mean the, the, I mean that,
1:37:04to me, that's a clear shift in strategy. I mean the, and frankly,
1:37:10to my mind suggests that home pod sales are way worse than they expected. Um,
1:37:14and that, that, you know,
1:37:16That was a real differentiator for Spotify,
1:37:18is that if you have a Spotify subscription,
1:37:20it will work on the smart speaker that you already have,
1:37:22and Apple Music didn't.
1:37:23Strategy is about making trade-offs,
1:37:27and they were, at first, trading off Apple Music
1:37:31to favor HomePod, and now it's the exact opposite.
1:37:34- But you brought up a thing in a recent piece
1:37:38that's in the show notes.
1:37:40It was mostly about Apple and antitrust,
1:37:43which is a whole segment of the show I wanna get to,
1:37:44So don't go into the antitrust stuff yet.
1:37:50But the last third of it was basically sort of raising a flag about Apple's services
1:37:56that in some ways one of the reasons that Apple has been such a consistently great company
1:38:01is that their interests have always been aligned with their customers and that Apple makes
1:38:07nice products and customers want to buy them and they do and Apple gets the money from
1:38:14from them and they charge very healthy margins
1:38:17and the people get a product they're happy with
1:38:20and Apple gets the money and the circle continues.
1:38:25Services is, the impetus of a services-driven company
1:38:32is very different and it leads to things like,
1:38:36you know, ad tracking and privacy invasive stuff.
1:38:40And I'm not saying Apple's gonna go down that route.
1:38:42I really, I hope not.
1:38:43But the motivation is suddenly there
1:38:46when it wasn't before, right?
1:38:48It was sort of like it was easy for Tim Cook
1:38:51to rail against privacy when Apple didn't have
1:38:53any reason financially to not hold people's privacy.
1:38:58- Yeah, it's hard to say because I think there's an aspect
1:39:04of it depends how you monetize the service, right?
1:39:07If you're ad driven, by definition you're going to have,
1:39:11You need to collect data, your business depends on it.
1:39:15And I've long ago noted that Apple, talking about privacy,
1:39:20I labeled it as strategy credit,
1:39:24which is the opposite of a strategy tax.
1:39:26A strategy tax is where you sort of hurt one business
1:39:29to prop up another business.
1:39:30Apple Music being a classic example, right?
1:39:33Apple Music not being on the Echo previously
1:39:37was a strategy tax that was paid to support the HomePod.
1:39:40And inherent in any business is, particularly if you have
1:39:44a hardware business and a service business,
1:39:46there's inherent tension there.
1:39:48And they're gonna be sort of working across concerns.
1:39:52A strategy credit on the other hand is where,
1:39:54because of your business model, you get something for free.
1:39:56Like as long as Apple was making all their money
1:39:58by selling devices, they could criticize Google for privacy.
1:40:03And it's not that their criticism was wrong,
1:40:06and it's not that they weren't right that their devices
1:40:10were better for privacy than Google's,
1:40:12but it didn't hurt them either, right?
1:40:14There was no injury to their business,
1:40:17there was no trade-off being made.
1:40:18And again, that's not to say it doesn't matter
1:40:20or it's not important, but it's worth noting
1:40:23when you're looking at it strategically.
1:40:25I think it gets a little trickier when you get into,
1:40:28so Apple's not gonna be an ad business,
1:40:30so they have ads in the app store,
1:40:31but by and large, they're not necessarily being
1:40:34an ad business, in part because they won't
1:40:36cross these lines, which is fine, which is great.
1:40:40I think there's definitely a place in the market for that.
1:40:44The challenge is when he gets to things like iterative services, like to what extent does
1:40:49having a large corpus of data matter in developing some of these different machine learning based
1:40:54things, for example.
1:40:57There's disputes about it.
1:40:58Do you need a lot?
1:40:59Do you only need some?
1:41:02You can come down at different sides, but now it's getting a little bit closer to being
1:41:06a tax as opposed to being a credit, where you might actually be hurting your business
1:41:11in order to maintain this sort of stance on things. And that's a more—again, it's
1:41:16not saying one way is right or wrong, but it's a more challenging sort of managerial
1:41:22decision than it was a few years ago.
1:41:26Yeah, I think so. You know, one question I've had, and I still think it's unclear, is
1:41:32the hell is Apple? I mean, Apple is undeniably working on streaming original content, as they say,
1:41:38TV shows and movies. They've announced it. They had to. This is something they can't keep secret
1:41:48because they make these deals and they get published. So that's coming. But nobody knows yet
1:41:54how the hell they're going to charge for it or are they going to charge for it. And I know there was
1:41:58was one, I forget who published it, but there was one piece at some point last year where
1:42:02somebody said that it would just be free, but it would just be like, but you could only
1:42:07watch it on Apple devices. That if you have an iPhone, an iPad, a Mac, or Apple TV, you
1:42:13could watch Apple's original content, and if you didn't, tough noogies. This deal at
1:42:20CES makes me think that's hard to believe. Because it's obviously going to be on the
1:42:26Samsung TVs now. I mean, and I guess they could make it so that you have to have an
1:42:32iPhone or something to get started, you know, like to get signed in, you know, and so that's
1:42:37only, you know, some way they could somehow more or less make it so that just because
1:42:41you have the Samsung TV, you can't watch Apple's original content without owning some other
1:42:46Apple product. But it seems unlikely to me. I've always thought that they, you know, to
1:42:52the three main ways they could do it. They could just give it away free, which I think is unlikely.
1:42:59They could just make it part of Apple Music and either change the name or keep it called
1:43:06Apple Music even though you're getting TV shows on it. That's sort of what they're doing now,
1:43:10because the carpool karaoke thing, I think you only get if you have Apple Music.
1:43:14Or they could just start a separate service and you'd have to get Apple Music and Apple TV the
1:43:21the service, you'd have to pay two subscriptions a month,
1:43:25or maybe, you know, obviously the natural thing to do
1:43:27would be if they're both $10 a month,
1:43:29for 15 you can get both.
1:43:30It seems a lot more likely to me that they're gonna do
1:43:34something like that at this point.
1:43:35I think this idea that they'd give it away free
1:43:37is not nutty, but it certainly isn't the strategy.
1:43:42It's a strategy of a device company,
1:43:44not a services company.
1:43:45- That's exactly right, and I agree with you,
1:43:47that it seems pretty clear that it's gonna be
1:43:50a broadly available sort of content, which, you know,
1:43:54I mean, I wrote an article a few years ago
1:43:57that they say they should buy Netflix,
1:43:59and this is when Netflix was worth like $40 billion
1:44:02or something, so it was a much different proposition.
1:44:04But yeah, I'm not sure, like, basically effectively
1:44:09competing with Netflix doesn't seem like
1:44:11a particularly fruitful strategy, but we'll see.
1:44:16We'll see what happens.
1:44:17It's gonna be very interesting to watch.
1:44:18I mean, yeah, I'm, I'm skeptical about the video stuff.
1:44:22I mean, with the caveat, I've been very skeptical all along.
1:44:25So, you know, there's probably a degree of confirmation bias here, but especially
1:44:30now to your point that it's very hard to see how it connects to their core
1:44:34business, it's yeah, it's going to be very interesting to see what it looks like,
1:44:39what the business model is, how they rolled out, uh, because it kind of feels
1:44:44like, well, let's do this thing that everyone else is doing and making some
1:44:46money at.
1:44:47Yeah.
1:44:48And there's only so many, I don't know what,
1:44:52I think the phrase would be subscription fatigue.
1:44:55There's only so many things a month
1:44:56that you're gonna get people to sign up for.
1:44:58And Netflix, to their credit,
1:45:05I think they have a pretty clear strategy on that,
1:45:07which is that if you're gonna get one,
1:45:10it's gonna be Netflix.
1:45:11I mean, I think if you looked at all the people
1:45:13who pay for some kind of original content subscription,
1:45:16If you took all the people who only pay for one,
1:45:21I'll bet the overwhelming majority is Netflix.
1:45:24- We'll see though.
1:45:25I think the one thing that I've always believed
1:45:29very strongly is that the shift,
1:45:32I think what's happening with entertainment, with video,
1:45:35it's a, like there's a reorganization of the value chain,
1:45:39but I don't think that, it's not gonna get cheaper, right?
1:45:43Like I think that people were paying, you know,
1:45:45between $100 and $200 for their entertainment needs 10 years ago, and they're going to
1:45:50be paying that equivalent amount 10 years from now, adjusted for inflation or whatever,
1:45:55and the money's going to be going to different people.
1:45:59I hear the point about subscription fatigue, but if you maybe stop paying for cable or
1:46:05you get a skinny package and then you spend that money elsewhere, I just don't see a
1:46:09world where suddenly people were paying $200 a month for their entertainment previously
1:46:15and now they're only paying $50 a month. I think that's very unlikely.
1:46:19Yeah, and another sign of this from a few years ago is Apple Music for Android. It was
1:46:27easy to justify because it's not free. Everybody has to pay $10 a month for Apple Music. Whatever
1:46:35the small percentage of Android users who do subscribe to Apple Music, it's all icing
1:46:43on the cake because they are at least paying $10 a month for Apple Music.
1:46:47Yeah, I think they had to do that too. Especially when Apple Music started, they were doing
1:46:53like an exclusive strategy where there'd be stuff that's only on Apple Music. But
1:46:57I think that'd be a hard strategy. They've kind of abandoned that for now, but I think
1:47:00that'd be a hard strategy to do if you only had 15% of the market or in the US, 45% of
1:47:06the market or wherever it is. Yeah, I was taken by surprise by this Apple
1:47:10stuff with the TV set makers. And now that it's settled in after a couple of days, I'm
1:47:14less surprised. I still don't have a coherent, total explanation of it. So I haven't written
1:47:20much about it.
1:47:23You know, I think it's where growth is. Like, I think they need growth and the iPhone is
1:47:29what it is. It's not going anywhere. Again, I think to bet on it, you know, on Apple losing
1:47:33share or losing their position in the market is mistaken. But I think as far as revenue
1:47:39growth, it is probably mostly tapped out.
1:47:42And so I think that's probably underlying most of this,
1:47:46is making more money from services is by far the,
1:47:50it's kinda like we need to make more money everywhere
1:47:56because the iPhone's not gonna happen.
1:47:58'Cause the wearables division is doing great,
1:48:01but that's not gonna be the size of market of an iPhone.
1:48:05- No, well, and the thing that popped into my head
1:48:08only days later, but it should've popped in right away,
1:48:10is the comparison to putting iTunes on Windows.
1:48:15Now that was not about iTunes, the music store,
1:48:20it was fundamentally about the iPod, which was a device.
1:48:23Most of the money Apple made from that decision
1:48:27to put iTunes on Windows was made from selling iPods,
1:48:30not from selling music and TV shows, I think.
1:48:35It certainly was at first, but it was about growth,
1:48:40even if it was at the expense of the whatever,
1:48:46let's keep it all in the Apple family advantage
1:48:50there was to keeping the iPod Mac exclusive.
1:48:54And I think there was sort of a similar,
1:48:56whoa, Apple's doing it for Windows?
1:48:59Clearly the explanation was all about growth,
1:49:05and it worked, it made iPod sales skyrocketed
1:49:08because there were all sorts of people
1:49:09who had no interest in switching from Windows to the Mac
1:49:12who definitely wanted an iPod.
1:49:15- Yeah, it's probably one of the,
1:49:17I think there was a lot of dispute within Apple with this.
1:49:21Isn't it right that Steve Jobs was opposed to it originally?
1:49:24- I forget which book that comes from, unfortunately,
1:49:28so I wish I could give credit,
1:49:29but it might have been Steven Levy's book on the iPod,
1:49:33but there was this story somewhere,
1:49:35but it was like Phil Schiller and I forget who else
1:49:39were on the side of, look, we should do this.
1:49:41We should put this on Windows
1:49:42'cause we could sell a ton of iPods
1:49:45and we can get new customers, you know?
1:49:47And Jobs was reluctant.
1:49:50- No, that is the all-time greatest
1:49:55I think Apple strategic decision.
1:49:56People talk about like making a phone
1:50:00that obsoleted the iPod, that's easy business, right?
1:50:04It's a more expensive device,
1:50:05you're making more money, right?
1:50:06That's not disrupting yourself.
1:50:08The real one was going to Windows.
1:50:10And what's so interesting, a lot of decisions are like this.
1:50:14In retrospect, it's so painfully obvious
1:50:16that was the right thing to do.
1:50:17But it really entailed sort of giving up
1:50:20on the heart of the company, right?
1:50:22I mean, Apple was the Mac.
1:50:24Apple and the Mac were synonymous.
1:50:25That's what they were.
1:50:27And you had to basically say, we have the first time we have something that could actually
1:50:34switch people from Windows to the Mac because we have this device.
1:50:37We can actually grow the Mac.
1:50:39And it's like, nope, you know what?
1:50:41Mac you're going to have to do it on your own.
1:50:43Because there's something bigger here that we need to reach towards something larger.
1:50:47And that was the decision that weighed the groundwork for the iPhone.
1:50:50Because people forget the iPhone was a computer dependent device when it launched.
1:50:56And you had, so one, it had to work with Windows to reach the market it did.
1:51:00But two, you already had people acclimated to Apple, used to using iTunes.
1:51:05Like, they had all the pieces in place for the iPhone to happen, and the decision that
1:51:10mattered most of all for that was putting iTunes on Windows.
1:51:14Yeah, and I think the reason they deserve credit as a great decision is that it wasn't
1:51:20about a bad strategy versus a good strategy,
1:51:23which in hindsight is easy to say,
1:51:26well, yeah, they made the right decision.
1:51:27It was a good strategy versus a bad strategy.
1:51:30It was a strategy that was good for certain reasons
1:51:32on the one side that was diametrically opposed
1:51:35to the opposing strategy that was good for other reasons.
1:51:38It was good for the Mac that the iPod and iTunes
1:51:41were exclusive to the Mac.
1:51:42It was great for the Mac,
1:51:43and being great for the Mac was good for Apple,
1:51:46but it was just better for Apple overall
1:51:50to put it on Windows.
1:51:52Yeah, I mean, Apple famously, when they launched the iPhone,
1:51:57they changed the name of the company from Apple Computer
1:52:00to Apple Incorporated, which I think is--
1:52:04honestly, when you think about the iPhone,
1:52:06it's still a personal computer.
1:52:07It's actually way more personal than any computer
1:52:09we've ever had.
1:52:10But there's a degree of symbolism there.
1:52:13But the moment that change actually happened
1:52:16was when it went to Windows.
1:52:17That's when Apple sort of ceased being a computer company
1:52:22and became something larger than that.
1:52:25And the name change was a trailing indicator in that regard.
1:52:30- Yeah. (laughs)
1:52:31All right, let me take a break
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1:55:17of the talk show.
1:55:18All right, we were talking about services,
1:55:20but I think that parlays into the last big ticket thing,
1:55:25at least I think it's the last big ticket thing on my list,
1:55:27which is Apple, the App Store, and antitrust.
1:55:31Why don't you give the background on this,
1:55:35'cause I think you're way more informed than I am.
1:55:38Well, the context to write about it is the Supreme Court case that involves Apple, which
1:55:44is kind of a sidebar to, I think, the bigger issue.
1:55:49So the Supreme Court case is, can consumers sue Apple for antitrust with regards to the
1:55:56App Store?
1:55:57And the argument that Apple makes is, there's a doctrine in US antitrust law called the
1:56:04the Illinois brick doctrine coming from a Supreme Court decision called Illinois Brick
1:56:08Company versus Illinois in 1977, that the only parties that can sue for antitrust violations
1:56:15are the ones that are directly injured.
1:56:17So in that particular case, concrete brick makers were conspiring to raise prices, and
1:56:25they would pass that price on to masonry contractors.
1:56:28Masonry contractors were hired by general contractors, and general contractors were
1:56:32hired by the state of Illinois to build schools or whatever it might be. And so the Supreme
1:56:36Court ruled that Illinois could not sue, only the masonry contractors could sue because
1:56:40they are the ones that were directly injured. And part of this was sort of just administrative
1:56:44reason like how do you decide where the damage is distributed? You know, you don't want to
1:56:48have double jeopardy where you get multiple things. It was actually a relatively closely
1:56:54decided case. I think there's a fair bit of controversy about it. But it's sort of been
1:56:57the law of the land for, you know, 40 some years, and Congress has had plenty of opportunity
1:57:02to change the law and they have declined to.
1:57:04So it's kind of like set.
1:57:06And so the question now is who is actually
1:57:08harmed by the App Store?
1:57:11And neither party is asking the Supreme Court
1:57:14to repeal Illinois Brick.
1:57:15It's just a question of who is harmed.
1:57:18So Apple is saying that developers are harmed.
1:57:20They enter a contract with us.
1:57:21We take money from them.
1:57:23And we're just a facilitator.
1:57:25We're providing a service for them to sell to consumers.
1:57:28The actual relationship is between developers
1:57:31and consumers, which means consumers can't sue us,
1:57:34they can only sue the developers.
1:57:36And the--
1:57:38And it's important to note that the lawsuit was brought
1:57:40by users.
1:57:40It's people who--
1:57:41That's right.
1:57:41--somebody who owns iPhones who's-- they're suing Apple,
1:57:44saying that we want to be able to get apps from other stores.
1:57:47Well, no, no, they're just saying that we shouldn't
1:57:50have to pay that 30% premium.
1:57:51We're being overcharged.
1:57:52And so the reason-- so they haven't even
1:57:56talked about the antitrust issue yet.
1:57:58The only issue is can the lawsuit even go forward?
1:58:01So it's still like a preliminary sort of matter.
1:58:05Do the people suing have standing is the legal term.
1:58:08Are they the ones that can sue for this?
1:58:11And they're saying, no, we pay Apple.
1:58:14And so we are the ones that are harmed
1:58:16'cause we're paying Apple a 30% premium
1:58:18that makes things more expensive
1:58:19than they would be otherwise.
1:58:21- Yeah, so I think this is fascinating.
1:58:24And I like to, I hold it up.
1:58:28And this is one of the reasons
1:58:29I really enjoy your writing and love having you on the show. As I often say, the only
1:58:35way to be right all the time is to actually be correct most of the time and be looking
1:58:40for where you're wrong. Figure out why you're wrong and change your mind. Changing your
1:58:45mind, a lot of people don't change their mind on anything. There's a lot of people
1:58:48who if you say, "What was the last thing, big thing that you changed your mind on?"
1:58:52They might have a hard time coming up with it. You've changed my mind on whether Apple
1:58:56has an antitrust problem with the App Store. We could talk about that in detail.
1:59:02I don't know if irony is the right word, but I think the fact that it's coming ahead with
1:59:08this lawsuit is kind of ironic in a way because I think the lawsuit is totally wrongheaded.
1:59:14I think if Apple tomorrow said, "Okay, no more 30%. We'll charge 2.5% because that's the credit
1:59:21card transaction fee. So if you buy a $1 app, it will take two cents. That's not going
1:59:31to lower the cost of apps by 30%. There might be an argument for how you can say that users
1:59:41are harmed by the app store's exclusivity, but it's not pricing. You hang out on Slack
1:59:51with me with a bunch of independent developers. I mean, India developers, especially Mac developers,
1:59:55you know, the idea that the price of apps has been driven up by the iOS App Store is ludicrous,
2:00:04because they're all free and 99 cents if you have to pay anything, right? Like when it until recently,
2:00:09when when apps were paid, they you know, the price was quickly driven down to 99 cents, which is
2:00:15unsustainably low. It's a different type of monopoly if it's a monopoly. Whereas the brick
2:00:22case is classic antitrust where the prices were going up. They conspired to raise the price of the
2:00:28bricks at the manufacturer's level. Then, like you said, the Masons had to pay more,
2:00:35which then the general contractors had to pay for more. And then the state of Illinois had to
2:00:39pay more to build the school because the bricks were—it was all about raising prices.
2:00:43You know, protecting against high prices—you and I have had this conversation online and
2:00:53offline. You know, if anything, US antitrust law is almost fundamentally based now, at
2:01:00least, on the entire point of it is about protecting customers from higher prices. And
2:01:06there definitely are not higher prices in the app store. The app store prices are ridiculously
2:01:11low.
2:01:12Yeah, I agree. And I think to me that's sort of the quenching factor where I think that
2:01:17Apple should, will and should win this case. There is definitely skepticism from the judges
2:01:24in the oral hearings, but it seems to my eye that it's pretty clear that that's the case.
2:01:30But at the same time, if you back up and think about it, Apple's point that developers
2:01:37have the relationship or developers sell to users and Apple is just sort of like a payment
2:01:41processor or facilitates it. Why don't developers, why aren't they able to get their users sort
2:01:47of account information? Why can't they give them refunds easily? There's actually very
2:01:53little about this relationship that suggests it's any sort of a direct relationship between
2:01:58developers and users. And Apple certainly sits in the middle in every sense except for
2:02:04maybe the way the finances move. Yes, Apple doesn't stock apps in their store. They're
2:02:12not a wholesaler, but that's the nature of digital goods is there is no stocking to be
2:02:17had, right? I mean, so it's a challenging case because it'd be, again, if this were
2:02:23physical goods, it'd be very straightforward. Either Apple buys the goods from developers
2:02:27and sort of holds inventory and then sells them on or they don't. And they facilitate
2:02:32transaction where the developer delivers it straight to the end user.
2:02:35But given that it's a digital good, there is no inventory to hold.
2:02:40So it's not really clear who's in the middle.
2:02:42And again, I agree with you about the way this will probably play out and probably should
2:02:49play out.
2:02:50But I think Apple is...
2:02:54They are very happy to stick themselves in the middle of the developer-end user relationship
2:03:00in every single factor that actually matters but for this particular legal case. Like,
2:03:05"Oh no, we're just standing to the side facilitating a transaction," which that
2:03:09doesn't reflect the way that those relationships actually play out at all.
2:03:14Yeah, it really is—it seems like Sophie Street argued that their relationship is not
2:03:22with the customer. I mean, like you said, I mean, I think people—I don't even know—I
2:03:26know from talking to developers that typical users are shocked almost when they find out.
2:03:31If they do want a refund for reasons X, Y, or Z and they contact the developer, the developer
2:03:37literally has no mechanism to give somebody a refund. People find this surprising because
2:03:42it seems like they should, but they don't. What do you do? It's frustrating when you're
2:03:49a developer who's trying to give good customer support to users and you want to say, "Hey,
2:03:54If for whatever reason you're not happy,
2:03:57I would give you a refund, but they can't.
2:03:59They don't have much more relationship with the customer
2:04:02or any knowledge of who they are than,
2:04:04like when you walk into a Target, a brick and mortar store,
2:04:07and I buy a Sony TV, and I give Target the money,
2:04:10and I walk out the door with the TV,
2:04:12do I have a relationship with Sony or with Target?
2:04:14Clearly it was with Target.
2:04:16I mean, Sony's gonna get the money,
2:04:17or already got the money from when Target stocked the TV
2:04:21and paid the wholesale cost.
2:04:24but my relationship isn't with Sony.
2:04:26That's what the App Store relationship is more like
2:04:30than anything.
2:04:31- Yeah, and not only that, but Apple forces you into,
2:04:35you have to offer your goods in a way
2:04:37that you don't necessarily know who the end user is.
2:04:40There's a curtain there that you can't break through.
2:04:44And even if you want to have an account system,
2:04:47that account system has to be after the purchase.
2:04:50You can't force someone to create an account
2:04:52and then do a purchase.
2:04:54You have to allow them to do the purchase
2:04:56and never create an account such that
2:04:57they're always anonymous to you.
2:04:59I mean, pseudonymous, I guess, is the right word
2:05:01'cause you can track who they are,
2:05:03but you can't know who they are.
2:05:05And in what respect then does the developer
2:05:08have a relationship with the end user?
2:05:09I mean, the reality is that the,
2:05:12according to the very narrow sort of reading,
2:05:16I think, of Illinois Brick,
2:05:17Apple's probably in the right here.
2:05:19But I think it's more a testament that Illinois Brick
2:05:21is woefully insufficient for dealing with digital goods.
2:05:24Because we're dealing with a sort of relationship
2:05:28that's like, Illinois Brick envisioned
2:05:30a very sort of linear value chain
2:05:32where money went from A to B to C to D to E.
2:05:35When the reality of a digital relationship,
2:05:37it's not just money, it's also the consumer relationship.
2:05:40It's data, it's all this sort of stuff
2:05:42where it's much more of a 3D or quantum sort of connection
2:05:47that to try to distill it to a series of boxes and arrows is woefully insufficient.
2:05:57But that is all to say that Apple doesn't have a—I had too many double negatives there—but
2:06:06Apple has an antitrust problem perhaps with the App Store. And I think the term that applies
2:06:11is rent-seeking? Yeah, well, rent-seeking is a—it's not
2:06:15It's not necessarily an antitrust term per se.
2:06:17It's just the idea that a company or entity is collecting money based not on the provision
2:06:25of a service, but because the parties have no choice.
2:06:35You think about it in terms of rent.
2:06:36If you own a piece of property and someone wants to do something on that property, you
2:06:40can extract money not by doing the activity that is generating money, but because you
2:06:44own the property on which it's happening, right?
2:06:47And that's legitimate in the case of real estate because you need the real estate.
2:06:52It's a little less legitimate, I think, particularly in terms of digital content.
2:06:57And there's a discussion we had about buying apps and to what extent does Apple provide
2:07:02the APIs and the platform and all those sorts of things that they're justified in taking
2:07:07that.
2:07:08I think that argument gets drastically shakier when it comes to digital content.
2:07:13If you want to buy, to take the classic example, and this was the last app where you could
2:07:18buy digital goods in the App Store was the Kindle app in 2011.
2:07:22And Apple said, "If you want to sell a book, Amazon, if you want to sell a Kindle book,
2:07:29you have to pay us 30%.
2:07:30You have to use our purchasing system."
2:07:32Because it used to be, when the App Store first launched, the Kindle app, you could
2:07:37go to a web view.
2:07:39Again, you weren't using Amazon's payment system with like in-app purchase APIs.
2:07:43You would click on a button, you would go to a web view, and you could click a button
2:07:48to buy it.
2:07:49And this is how it works on Android, by the way.
2:07:50If you use Kindle on an Android phone, there's a tab on the bottom which is store.
2:07:55That page is not like an app page.
2:07:57It's not like using APIs or whatever.
2:07:59It is actually a web page.
2:08:01I think it actually, I do think that they did shoot you over to Safari.
2:08:06I don't think it was a web view in the app.
2:08:08I think that was part of the--
2:08:10That might be the case back in 2011.
2:08:12Yeah, were there even web views back in 2011?
2:08:14I'm not even sure if there were.
2:08:16There always was a web view, but it was limited at the time.
2:08:20If I was a developer, I'd probably remember.
2:08:22But there was a time a few years later
2:08:25where Apple significantly improved the web view
2:08:28and made it sort of like a mini version of Safari
2:08:31that had access to the same cookies and et cetera.
2:08:34But instead, they shot you off a Safari.
2:08:35And in some ways, that might have been better,
2:08:37just because if you were already logged into amazon.com on Safari, you were already logged
2:08:42in when they shot you over. And they knew it. There was like a callback so that when
2:08:46you did buy the book, you could from Safari hit a button that would jump you back to the
2:08:51Kindle app to the book that was already downloading, you know, because they sent a push notification
2:08:57to the Kindle app on your phone, you know, so
2:08:59it's the one half dozen the other. The long and short of it is, is that until 2011, you
2:09:05you could buy Kindle books easily.
2:09:07- In an obvious way, all on the phone,
2:09:10with maybe at the most arguably one extra step
2:09:14compared to if the purchase had literally been in the app.
2:09:18- That's right, and whereas now today,
2:09:20you can download the Kindle app,
2:09:22and there is no web view, there is no link,
2:09:25you can't even say that if you wanna buy books,
2:09:28go to Kindle.com.
2:09:29Like you would have to know magically
2:09:31that I'm going to go open the browser,
2:09:34Go to Amazon.com, buy a book, then switch back to the app and do it.
2:09:38For Amazon, that works because everyone knows Amazon, everyone knows Kindle.
2:09:41For Netflix, it works.
2:09:42Everyone knows who they are.
2:09:44If you're a small business, a content business, it doesn't work very well.
2:09:49The problem I have is I don't see in any respect the case in which an e-book is the smartphone
2:09:56market.
2:09:58This has nothing to do with the smartphone market.
2:10:02It is a book.
2:10:03It is a digital content.
2:10:05The phone is simply a device on which you view something.
2:10:10And I find it extremely problematic and objectionable and not just from a moral reason, but from
2:10:17an innovation reason that Apple is going to take 30% because they can.
2:10:25It is rent-seeking.
2:10:26They are taking 30%, not through anything that they do, but simply because they can.
2:10:31They made the rules.
2:10:32There's only one App Store.
2:10:33You have to follow this rule if you want to be in the App Store.
2:10:36Because phones are—we just talked about how incredible the phone is as a market.
2:10:41It is something everyone needs, right?
2:10:43They are leveraging the fact that they control one of the two platforms for the device that
2:10:47everyone needs to basically take 30% on stuff they have nothing to do with.
2:10:52I find it problematic morally, and I think it's problematic legally.
2:10:56Yeah.
2:10:57So, the news on that front is that Netflix—for those of you who haven't been paying attention—Netflix
2:11:02has changed their iOS app to no longer do in-app signups.
2:11:06So if you're new to Netflix,
2:11:08or if you've stopped your Netflix and are coming back,
2:11:10if you start in an Apple app, iOS, iPad,
2:11:15or I guess Apple TV,
2:11:17I don't know if they've updated the Apple TV,
2:11:19but you can't create a new Netflix account.
2:11:21You used to be able to until like a week or two ago.
2:11:24You could just sign in and use an in-app purchase,
2:11:28and they charge the same price,
2:11:30I think, whatever, 10 bucks a month,
2:11:32except that for people who signed up in the apps, 30% of that went to Apple every month,
2:11:39and 70% went to Netflix. Whereas if you signed up in your web browser with a credit card,
2:11:45the user would still pay $10 a month, and all of the money would go to Netflix, minus
2:11:50Visa or Amex is 2% to 3%. So Netflix has made the obvious strategic change to go all in
2:11:59on that, but it is I'm with you. I don't care if Apple takes things that the third, you
2:12:06know, and now they're for subscriptions, Apple, I don't know, a year or two ago announced
2:12:11that once a subscription is a year old, that 70 30 split changes to 85 15. So somebody
2:12:18who, you know, signs up for HBO now in the app, you know, 70 30 split for a year and
2:12:27and after that it's 8515. If Apple thinks those numbers are good, that's fine. I think
2:12:31it's their prerogative. The part that I find objectionable, and to borrow your description,
2:12:36both morally and perhaps legally, but certainly morally, is the refusal to allow the app to
2:12:43tell you what's going on. One of the rules of complying with Apple's App Store guidelines
2:12:50is that if you're not going to do in-app purchases and you have to sign up outside to get them,
2:12:56One of the rules is you can't tell the user the rules.
2:13:00That you have to go to amazon.com to buy the Kindle book,
2:13:04or you have to go to the Comixology website
2:13:07to buy the comic book, or you have to go to Netflix.com
2:13:11to sign up for Netflix.
2:13:14And when you really look at it,
2:13:17you look at the new Netflix, like I signed out,
2:13:19or signed in on an older iPad that I didn't use anymore.
2:13:24It is, it's ridiculous that they don't tell you.
2:13:28And so I really tried to put myself in the mindset
2:13:30of like, let's say, somebody who,
2:13:33it's hard to imagine not having Netflix,
2:13:35but somebody who's like,
2:13:37"All right, I've heard enough about this Netflix.
2:13:38"I wanna watch this Bird Box thing everybody's talking about
2:13:41"or sign up," and you go to your iPad.
2:13:43It really looks like a bug almost that you can't,
2:13:47that the only option is sign in, right?
2:13:50If you've just downloaded this app for the first time,
2:13:52Everybody you've heard about Netflix,
2:13:54and most things you do on your iPad,
2:13:58you do everything on the iPad.
2:14:00And with Netflix now you don't.
2:14:02But they have a button up in the corner, help,
2:14:05which lets you make a phone call to Netflix.
2:14:07And I called it, which I'm glad I did.
2:14:10And if you ask them on the phone,
2:14:13they will tell you, oh, you need to go to your web browser
2:14:17and go to Netflix.com and you can sign up there.
2:14:22- Which, the challenge then is even that,
2:14:25like it's ridiculous, but that, can a startup
2:14:28or can a new small company have like a call center?
2:14:31- No.
2:14:32- And not only that, but the insistence
2:14:36that you have to use the in-app purchase,
2:14:38again, even if the percentages were much lower,
2:14:40the level of burden and complexity that puts on a new app,
2:14:44because now you have to support Apple
2:14:46and you also have to support something for the web,
2:14:49and you have to support something different,
2:14:49Like you can't just have like one payment system.
2:14:52Like you're forced into supporting multiple ones
2:14:55as if the world were only iOS, but that's not the case.
2:15:00- Yeah, I really think that Apple should be able to,
2:15:04whatever they decide the split should be,
2:15:0570/30, 85/15, whatever they decide it should be,
2:15:09it should be able to compete on its own,
2:15:11and that developers should choose,
2:15:12well, it's so convenient and so easy for the user
2:15:15to sign up right there in the app
2:15:18and just put their thumb on the touch ID button
2:15:21or use face ID and confirm, and now they're subscribed.
2:15:25It's so much, I'm gonna get so many more signups
2:15:27because of this, I'll agree to this 8515 or 7030, whatever.
2:15:31That's their choice, right?
2:15:34And if those numbers are too high, if 7030 is too much,
2:15:38then it would naturally come down and they would adjust it.
2:15:41There is no market effect at work
2:15:43if they can unilaterally disallow developers
2:15:47from even choosing it while explaining to users
2:15:50how to go about it.
2:15:51- Yeah, and they would still be very successful.
2:15:54I mean, take like in-app, take games for example.
2:15:57Like, you don't, if you're a game developer
2:15:59and you're getting someone to buy a bunch of virtual coins
2:16:01or whatever it might be, you probably don't wanna
2:16:04kick them out to a web browser because you're breaking
2:16:07the spell, you're getting out of it and you're like,
2:16:09do I really wanna spend this money?
2:16:11- Yeah, exactly. - You want the convenience
2:16:13and the speed of that transaction.
2:16:15It's a huge benefit and Apple, you know,
2:16:17I'm not saying that Apple has to open up their in-app purchases to other payment processors.
2:16:22They innovated that.
2:16:23They built that.
2:16:24By all means, you should be able to compete on those grounds.
2:16:28I have no objection to that.
2:16:29And frankly, there's a huge benefit to being tied in with Apple.
2:16:34The number one thing that drives churn for Chitakri, for example, is credit cards expiring.
2:16:40And people, they expire and they don't notice for a while, or maybe they're going to sign
2:16:44up, whatever it might be.
2:16:45Well guess what, guess which credit card is the first credit card to get changed if your
2:16:49card expires or if your card gets stolen.
2:16:52You go and you change your iTunes card right away because you're more likely to realize
2:16:56it's expired fast, right?
2:16:58That's a huge benefit for a developer to have someone else basically policing the "remember
2:17:04to update your credit card" problem.
2:17:05That's by far one of the biggest drivers of churn for anyone that relies on credit cards.
2:17:10So like there's real benefits to going with Apple and where I think they could absolutely
2:17:14charge a premium and rightly so. This idea though that Apple deserves 30% of a Kindle
2:17:21book, which by the way would never happen in books because you're paying like there
2:17:25are, I've, I heard a lot from people running ebook stores or ebook things that were not
2:17:31Amazon that this is devastating for them because they're paying out 80% of, of, of, of a book
2:17:38price. Like they, it's literally impossible for them to use in app purchases because they'd
2:17:43be eating 10% on every purchase.
2:17:45And what did Apple have to do with the publishing
2:17:48of that book?
2:17:49What did they have to do with anything?
2:17:51All they did was make a device with a screen that
2:17:53is integral to daily life.
2:17:56And to think that entitles them to book revenue,
2:18:00or to music revenue, or to whatever revenue might be,
2:18:03I think is preposterous.
2:18:06And it's hostile to users.
2:18:07I really do think so.
2:18:08Because it leaves-- when the developer like Netflix
2:18:12chooses not to participate or all of Amazon's properties that have consumable content or
2:18:18subscription content, it is confusing. It is really, really confusing. That is the antithesis
2:18:25of the Apple experience, to leave users in a confused state. It really does not look
2:18:30like—and the fact that you can't link or have a button that jumps you over to Safari
2:18:35to do it, I really do think that should be allowed, and I don't even think there should
2:18:40should be a question about it.
2:18:41But the fact that, all right, even if you say
2:18:43you can't have a link, but you can't even tell them,
2:18:46like you can't even say go to Netflix.com
2:18:48and not have it be, not even have it be at link,
2:18:51but that's just, again, that's absurd,
2:18:53but it's even more absurd to say that you can't
2:18:55even tell them that that's what you have to do.
2:18:57- Yeah, and I just think there's no defense for Apple here.
2:18:59I mean, believe me, I've heard all the objections
2:19:02from the Apple supporters that like, well,
2:19:06it would be better for the user if everything
2:19:08was in that purchase.
2:19:09It's like, well, we're not in that world, one.
2:19:12And two, again, it's to understate, I think,
2:19:17the importance of a phone, right?
2:19:20The phones are, we live, look at how the world
2:19:25is transformed by this device.
2:19:27That's the reason why Apple makes so much money
2:19:29on the devices, because they're so integral and important.
2:19:32And by definition, if they're so integral and important,
2:19:35they are essential to the economy,
2:19:37they're essential to innovation,
2:19:39are essential to new things coming forward. And it's a
2:19:42society, I think it's problematic that that one
2:19:47company can basically, again, rent seek on an entire new world
2:19:53of digital content. And let me be clear, I'm super biased on
2:19:55this, because I am in the digital content business, right?
2:19:58And, you know, I, I don't have an app. And if I had an app, I
2:20:04would be forced to, you know, deal with this conundrum. So I'm
2:20:07certainly biased, but I'm also a huge believer in the potential of there being all kinds
2:20:12of new businesses, all kinds of new opportunities to do things online, to do things that weren't
2:20:16possible previously.
2:20:19I don't see in any respect in which these sort of rules and limitations are making that
2:20:25future more likely to happen.
2:20:26They're making it less likely to happen.
2:20:28Dave Asprey Yeah, and it gets back to the services narrative,
2:20:31where Apple's drive to increase the revenue it makes from the App Store is in some ways
2:20:35at odds with the user experience.
2:20:37I mean, and one of the ways it would be better if everything was an in-app purchase is the
2:20:42fact that Apple has, in my opinion, a very good interface for seeing, "Hey, what subscriptions
2:20:48am I paying for through iTunes?"
2:20:50And then you can see them and you can unsubscribe from them right there, and there's nothing
2:20:55the company can do about it.
2:20:56That's the way it is.
2:20:58So from a user experience perspective, it would be great if more subscriptions went
2:21:01like that because they're in one central place where you can see them all, get a better
2:21:06sense of like what you're spending per month overall on these subscription stuff. And you
2:21:11can unsubscribe easily. I mean, I always bring it up because to me, it's it's like the best,
2:21:15the most amazing counter example. Like if you want to unsubscribe from the New York
2:21:19Times, you have to call them on the phone.
2:21:21Jared Ranere: That's ridiculous. It's so interesting. And the other thing is that it
2:21:24irritates me so much about is that when they won't tell you the price, they're like, it's
2:21:29$1 for eight weeks. It's like, well, how much is it after it? Yeah,
2:21:32- Yeah, it's ridiculous, right.
2:21:35Apple's rules make it, yeah,
2:21:37Apple A makes it easy to unsubscribe
2:21:39and they also make it impossible to obfuscate
2:21:42what you'll be paying on what basis.
2:21:45It's all great, but in the user's interest,
2:21:49it would therefore be in Apple,
2:21:51it would therefore, it would be better for the users
2:21:54than if Apple priced its cut for these in-app subscriptions
2:21:59such that companies like Netflix and Amazon and booksellers could agree to them.
2:22:04Well, that's also why that's a vector Apple can compete on, right? If people asking for digital
2:22:12subscriptions are being scammy about it, then the solution is a market-based solution where
2:22:17consumers decide not to subscribe to them. Or they are forced to offer an in-app purchase
2:22:24solution that a consumer can say, "Look, I'm not going to subscribe to you unless you offer
2:22:29in-app purchases because I trust Apple to handle this better than you." That's the mechanism for
2:22:36Apple to compete on by we're better and more trustworthy and consumers trust us. It's not to
2:22:42decree by fiat that this is the way it's going to be and we're going to justify it. It's not that
2:22:49what you're saying is not true, but that's a reason to compete or a way to compete.
2:22:54It's not a justification for basically taking 30 percent because we can, which is the reality now.
2:23:02right? Yeah, there's no market pressure really on Apple to adjust or lower its price. I mean,
2:23:09they have in some sense with the thing I mentioned before where year-plus-old subscriptions are 85.15
2:23:19instead of 70.30, but for the most part, the rate has stayed unchanged since the app store opened
2:23:26up. And that's a little ridiculous because the difference in convenience between paying
2:23:31in app in 2008 versus now and 10 years later, it's not as big a difference, right? It was
2:23:40a lot more convenient back then compared to paying manually than it is now.
2:23:46- Well, and again-- - You know, in a web view
2:23:49or whatever. - Yeah, well, but not just that,
2:23:51but there will always be advantages to it.
2:23:54But it's also the, yes, people will say
2:23:57the market pressure is Netflix taking it out, right?
2:24:00But the problem is that the only companies
2:24:03that can do that, that can exert that pressure,
2:24:05are other very large and powerful companies
2:24:08that are very well known.
2:24:09And by the way, Netflix had a favorable rate
2:24:11for a lot longer than Apple doing that.
2:24:13Like, that was more Apple giving the Netflix rate
2:24:15everyone else, 'cause Netflix previously threatened
2:24:18to leave the store, right?
2:24:19But here's the problem, that's not market pressure,
2:24:22that's big company fighting.
2:24:24If you're a little guy, you don't get to exert
2:24:27that sort of pressure on Apple.
2:24:28Apple doesn't give, doesn't care if you're not
2:24:31in the app store. - Yeah, you don't get it,
2:24:32you don't get a meeting with that EQ.
2:24:33- Right, and Apple, this is why it bothers me,
2:24:37just, I think it's bad for society,
2:24:38because it's the little guys that are getting hurt here.
2:24:42It's the gal that doesn't even create an app,
2:24:45It doesn't even create a service because it's too much,
2:24:50or it's too much of a hassle.
2:24:53Again, this idea that the other thing
2:24:56that people don't consider is because you have to use
2:24:59Apple's in-app purchases, that means you have to build
2:25:02at least two payment systems for a new app or service,
2:25:05'cause you need one for Android and the web.
2:25:08You can use the same one for Android and the web,
2:25:09'cause Google allows it, but you still have to have
2:25:11a different one for Apple, and now you have two different
2:25:14revenue streams, you have to figure out how to mix them together, your bookkeeping is
2:25:17way more complicated.
2:25:18It is increasing the entry for innovation and for creating something new and that's
2:25:26a bad thing and Apple will go on and on about all these new jobs they created and the new
2:25:29things they created in the App Store and that's all true, I'm not denying any of that.
2:25:33But now we're no longer in the world where the iPhone's coming along, we're in the world
2:25:37where the iPhone exists, where smartphones exist and they are inescapable.
2:25:41You can't build a business and not be on a phone.
2:25:44like it is the most important computing platform there's ever been. And for digital platforms,
2:25:49it's the only platform that matters. And that makes it even more important that there not be
2:25:55anti-competitive policies like this, given its importance to society broadly.
2:26:01Yeah. And it's, you know, like if you buy, I mean, people don't buy apps anymore. I mean,
2:26:08I know it's all going subscription, but you buy an app and Apple gets their cut one time,
2:26:15and then if you keep using the app, you keep using the app or not.
2:26:19One of the things that makes Netflix is pulling out of this remarkable is that Netflix is
2:26:23the top grossing app in the store.
2:26:28Obviously enough people were signing up, did their signups through the app store that it's
2:26:33the top grossing app in the store.
2:26:35I guess it's not surprising if you think that Apple is making 15% off of all these Netflix
2:26:40subscribers. And Netflix, of course, is super popular, that there'd be enough of them that
2:26:44would make Netflix the top grossing app in the store. But it's really hard to argue that Apple
2:26:48deserves 15% of those those numbers for forever, forever in perpetuity for years to come. And
2:26:55obviously, it will be years to come because Netflix isn't going anywhere. And, you know,
2:26:59part of the whole Netflix point is it's just new new subscribers, they haven't like canceled the
2:27:04subscriptions of everybody who signed up in iOS. So Netflix may well remain the top grossing
2:27:10app in the store for years to come, even though they no longer allow people to sign up. That's
2:27:14kind of crazy. The fact that Netflix, a year from now, might still be, and I wouldn't bet
2:27:21against it, might still be the top grossing app in the App Store. I don't think people
2:27:26cancel their Netflix very frequently. I think there's enough, so I think it'll keep going.
2:27:32just shows how it's ridiculous to argue that Apple quote deserves that money when Netflix can stop
2:27:37taking it and just on the basis of years old signups still be paying all that money.
2:27:43Yep. And you know, it's concerning because this isn't going to change because we just went through
2:27:51the entire thing where hardware revenue is in a hard place, which means the services narrative
2:27:56is super important. And you saw that in Cook's letter. He really emphasized the services aspect.
2:28:01and emphasize the fact the install base is growing.
2:28:04And as I noted a little bit ago, the install base growing,
2:28:08the reason that matters is because it means
2:28:09more services revenue, which means Apple's
2:28:12not going to back down here.
2:28:13And that is understandable strategically.
2:28:17It worries me tremendously as an observer of the company.
2:28:21Like, if this is how you're going to make money is by,
2:28:26again, it's rent-seeking, by taking money from activities
2:28:30that you had nothing to do with just because you can.
2:28:34That is a, I worry that can have a corrosive effect.
2:28:39- Well, and the flip side of it,
2:28:42and I wanted to make this point before we stopped,
2:28:44and I'm glad I thought of it,
2:28:45but the flip side of it is on the other side,
2:28:47I'm in agreement with you that, for example,
2:28:49in-app purchasing in a game to buy boxes of coins
2:28:53or whatever the hell you buy, I do think that Apple,
2:28:56I think it makes sense that even if it were only an option,
2:28:59that the game developers would still use Apple's system and still pay Apple's 30 percent because
2:29:04of the, you know, like you said, if you leave and go to Safari, all of a sudden it's a moment
2:29:08to think, "Wait, do I really want to spend 10 bucks on this, or why don't I just stay in Safari
2:29:13and see what the hell's going on during Fireball?" But that means that Apple is in a position where
2:29:20they benefit tremendously from this whole in-app purchasing of games and consumables
2:29:29You know like you what do you call it pay to win right yep?
2:29:33That you have to pay to win the game or to keep going you know whether you you know
2:29:38It I don't think that's a good I
2:29:40Think it's very morally questionable
2:29:45Business model and apples in a position of benefiting
2:29:49Quite a bit on this on particularly in the area where they're directing
2:29:56Analysts to look like look at our services. Look at our services
2:29:58that's the one that they're telling everybody to look at and they services to some degree benefits from the
2:30:04unhealthy
2:30:07World of pay to win games, you know, so on the one hand they're taking money from like Netflix
2:30:13That they you know arguably don't deserve and then where they do deserve it. It's it's not a very
2:30:20It's questionably
2:30:22immoral
2:30:24- Yeah, well, and then I think the other piece is stuff
2:30:28like, I quote, I call it storage being five gigabytes,
2:30:30right, that's a terrible user experience.
2:30:33And you see Google leveraging that against them, right?
2:30:36They run ads for Google Photos that has the pop-up
2:30:38of you're out of storage, right?
2:30:40And, but, you know, getting that every month
2:30:44is apparently hard to give up.
2:30:47- Yeah, yeah, I know, it's funny,
2:30:50'cause I never saw that dialogue, 'cause I'm an idiot,
2:30:52and I buy the biggest iPhone every time,
2:30:53and so I've got plenty of space on all my iPhones.
2:30:56But once they started showing it,
2:30:57and it is definitely an iOS dialogue,
2:31:02it makes me realize that it surely is a common experience
2:31:05for a lot of people.
2:31:08- Yeah, absolutely.
2:31:10And all this stuff is making it hard for people to,
2:31:15I think this is a policy that kills innovation.
2:31:19I think to the extent that big companies go outside,
2:31:23to your point, it makes the user experience ridiculous and confusing. It hurts the performance
2:31:30as far as the storage thing goes, that you don't have everything backed up, you don't
2:31:33have everything restored. I mean, remember Apple was all about backup, they needed a
2:31:36time machine. Like, wouldn't it be a shame if your computer crashed and you lost all
2:31:39your photos, right? Well, wouldn't it be a shame if you lost your phone and you lost
2:31:42your photos because you didn't pay for enough storage or whatever it might be? I mean, what
2:31:50What happened to the user?
2:31:51What happened to this, "You go with Apple and everything's taken care of."
2:31:55Well, you go with Apple and everything's taken care of if you pay a lot extra or some
2:32:01amount extra per month.
2:32:02And, oh, by the way, there's things that aren't going to happen you're not going
2:32:05to get because we made entry too difficult.
2:32:09Yeah.
2:32:10And I wonder, too, how much that even plays into backfiring even on iPhone sales.
2:32:16How many people are reluctant, people who, let's say, are on the free tier so they
2:32:20don't have their whole photo library backed up and they know that they've got tons of
2:32:25photos and videos that they care about on the phone that aren't backed up anywhere.
2:32:29I know you can go buy a new iPhone and go to the Genius Bar and if you explain it to
2:32:33them, you know, "I don't have iCloud backups because they don't fit," that they'll
2:32:40do the backup on a Mac right there at the bar for you and help you.
2:32:44I don't know if people know that that's even possible.
2:32:47Like how many people just vaguely in the back of their mind
2:32:49are like, I don't wanna get a new phone
2:32:50'cause I don't feel like, I don't know,
2:32:51I'm worried that I might lose my photos.
2:32:53- Yeah.
2:32:56- I mean, it has to be some number of people.
2:32:58And then therefore it's affecting the upgrade cycle.
2:33:01I mean, I honestly don't think that that's,
2:33:03I don't think I'm jumping through contortions
2:33:04to imagine that there are people like that.
2:33:06As somebody who cares about digital data
2:33:10and knows how important backups are,
2:33:11It terrifies me how many people's iPhones aren't backed up.
2:33:14- Yeah, and just to be clear,
2:33:16people are gonna bring this up,
2:33:17photo stream does not count against your data,
2:33:20but you're limited on the number of photos
2:33:22that are in the photo stream.
2:33:23If you want all your photos backed up,
2:33:26that is gonna count against your data.
2:33:28- Yeah, yeah.
2:33:30And it's otherwise tricky,
2:33:32or people don't know how to move everything
2:33:34that you've got on your old phone to your new phone.
2:33:37And the fact that people lose phones,
2:33:39people destroy phones. There's all sorts of, you know, go on and on and on about the
2:33:46importance of backups. But it's tragic that more iPhone users don't have their phones
2:33:51backed up in iCloud, which is the easiest and old and in my opinion, for the typical
2:33:55user by far the most reliable way to back up your phone because it's not up to you
2:33:59to make sure your iTunes is working and your computer's in good working order. It's,
2:34:03you know, it's all on Apple's part. You don't have to do anything on a regular basis.
2:34:08And I don't know to the extent to which, I mean, there's lots of talk about Silicon
2:34:13Valley companies in general and being large and should there be antitrust and should companies
2:34:16be broken up, etc., etc.
2:34:18And to my mind, the clearest single bit of anti-competitive behavior in the Valley is
2:34:25Apple and it's not close.
2:34:27Can you imagine back in the day if Microsoft had insisted on taking 30% of every app on
2:34:33Windows?
2:34:34I mean, this is far more egregious than anything that Microsoft tried to pull off.
2:34:37And people will point to other examples, like what about Google?
2:34:40Well Google, you can kick out to a webpage.
2:34:43What about Steam?
2:34:44Steam takes 30%.
2:34:45Well you can install games outside of Steam.
2:34:48There are competitors to Steam.
2:34:50That's the equivalent of having multiple app stores, right?
2:34:54There's really nothing like this in tech that is just so egregious.
2:35:01When you back up and think about it and you realize that the digital goods market is different
2:35:05than the smartphone market. This is quite blatantly leveraging their position in the
2:35:10smartphone market into taking money out of the digital goods market. And it's, I don't
2:35:16know, it bothers me. And I think it hurts innovation just as much as Facebook and Google
2:35:22being large and dominant, taking all the advertising money hurts innovation. Like it's not good
2:35:26for anyone. The general consumer tech right now is so stagnant in my mind, in large part
2:35:32because of how dominant these companies are and these sorts of policies.
2:35:36Yeah. That's a good closing thought. I appreciate it. This is a great episode.
2:35:43We mentioned it at the outset, but anybody who forgot because it was quite a bit ago,
2:35:50your podcast, Exponent. Yes. Stretchickery, my writing in One Article is free a week,
2:35:57and then there's 4Pay and then Exponent. My podcast is back. It was gone. I just needed
2:36:03a little bit of a break, but it is back, so you can check that out as well.
2:36:07And that's at Exponent.fm. You've been on a roll on Stratechery. I mean, you've been good
2:36:14ever since it started, but I feel like the last couple of months have been really good. A couple
2:36:19of really good pieces, including your take on the Apple, which we've kind of rehashed here, but
2:36:24the Apple earnings thing.
2:36:25And your year in review is a good one too.
2:36:28- Well thank you, I appreciate it.
2:36:29- Was that a free one?
2:36:30That's the one thing, sometimes I get confused
2:36:31is what was a paid, what I got as a paid daily update
2:36:34and what was a column.
2:36:36But the year in review was a column, right?
2:36:38- Yeah, yeah, yeah, it was free.
2:36:40Yeah, everything's a trade off, right?
2:36:41And that's one of the trade offs that comes from
2:36:44having some stuff be free and some stuff not,
2:36:46is people almost become hesitant to promote it
2:36:48'cause they're worried about promoting the wrong thing.
2:36:50But that's the reality of business,
2:36:52you gotta make trade offs.
2:36:54But yes, that is free.
2:36:55If you go on the page, you have the Apple piece,
2:36:58and then the one before it is the Year in Review,
2:36:59which is all the,
2:37:02pretty good overview of everything I wrote in the last year.
2:37:04What was the most popular,
2:37:05which ones I thought were particularly meaningful.
2:37:07And then I believe the article before that is,
2:37:10or a couple ones before that is the Apple antitrust one.
2:37:15- We didn't even get into the damn MacBook keyboards.
2:37:19- Oh, I was doing one of your commercial breaks.
2:37:23Dieter Bodge from The Verge posted one of his coworkers at CES with a portable Bluetooth
2:37:30keyboard sitting on top of her MacBook because her spacebar stopped working.
2:37:35I feel this.
2:37:37I travel and I am constantly low-key nervous about my computer suddenly not working.
2:37:42It's ridiculous that that would even cross my mind of being something.
2:37:47Frankly, it makes me want to buy...
2:37:50If my computer ever suddenly stopped working, I would probably go buy a Windows computer.
2:37:55I'm dead serious.
2:37:56I don't care how much I'm used to Mac OS, and I know you were complaining about it during
2:38:01Firewall this week, so I don't want to open that can of worms about Windows, but literally
2:38:04having your keyboard suddenly stop working is ridiculous.
2:38:08It's just absurd.
2:38:11Wouldn't you be more likely to get a Chromebook?
2:38:13No.
2:38:14Actually, I haven't used Chromebooks in a while.
2:38:16I love Chromebooks.
2:38:17I think they're a great experience.
2:38:18Pixelbook. I wrote a lot of it on Pixel. The big problem I had was the lack of clipboard
2:38:26history. It just wasn't possible. That might be possible on Chromebooks now. I'm not
2:38:31sure. But literally, that was the number one reason why I couldn't keep using the Chromebooks.
2:38:37But I do like Chromebooks.
2:38:39That's one of the top reasons I can't. Whenever I try using an iPad for an extended
2:38:44period of time. The lack of a clipboard history is such a deal breaker. For those of you who
2:38:49don't know, if you want to take away a tip, do a tips and tricks segment, find yourself
2:38:53a clipboard history app for the Mac and try it. There's so many. Keyboard Maestro has
2:38:59one. I've got like three apps running at all times that offer it as a feature. I have to
2:39:02choose which one. Launch Bar has one. I'll bet Alfred has one.
2:39:07Dave: Payspot.
2:39:08Dave: Payspot is actually the one I use because it's dedicated to clipboard manager. The basic
2:39:12idea is everything you can set it to say, "Remember my last 100 copies." The last
2:39:18100 things you've copied are all remembered. Then there's a system-wide keyboard shortcut
2:39:22that you can invoke to show you a list of them and search them. Once you get used to
2:39:31it, it feels like going to the 1800s to go back to once you copy something, the previous
2:39:37thing you had copied is gone. It is a game changer. For me and you who write things and
2:39:43we put a lot of links in, like going to Safari and going copy, copy, copy for three URLs
2:39:48and then going back to the writing environment and paste, paste, paste to get the three things,
2:39:53the idea that you'd have to go back and forth between the two apps is crazy. I know there's
2:39:57some utilities, the iPad that kind of let you, but it's not as automatic. The thing
2:40:02about the Mac one is that it's just automatic. Every time you hit Command C, it's in your
2:40:06clipboard history.
2:40:07Yeah, that's exactly right. I think I remember looking at Chrome OS. I think it might be
2:40:12possible now, but it's not just using keyboard shortcuts super fast, everything's super
2:40:17automatic. Yeah, no, that's exactly right. No, I would get a—my wife got a, for various
2:40:24reasons, got a Surface laptop. It's nice. The hardware's beautiful.
2:40:33Is that the one? Is it the one that's all metal? It's not the one with the fake leather,
2:40:36- No, it does have the fake leather, which I thought--
2:40:38- Oh, it does have the fake leather.
2:40:39- Which actually in use is not nearly as objectionable
2:40:43as I thought it was.
2:40:44And she has the blue one, so it's like this blue metallic,
2:40:48like when it's closed, it is gorgeous.
2:40:51Like it's a really good looking machine.
2:40:53I was really impressed by it.
2:40:55Obviously it's still Windows, whatnot,
2:40:56but the keyboard works great.
2:40:58The trackpad is matte quality.
2:41:00Like that was always a big objection I had
2:41:01to all Windows laptops,
2:41:02the trackpad seemed to always be terrible.
2:41:05It's a nice machine.
2:41:07- Well, bizarre, for whatever bizarre reason,
2:41:09of all the things that Microsoft has always been good at,
2:41:12is they've always been good at input devices.
2:41:15They got into the business selling mice and keyboards
2:41:17long ago, and it seemed so crazy at the time.
2:41:19Like, why the hell is Microsoft making mice and keyboards?
2:41:21Their mice were always excellent, excellent.
2:41:23I used a Microsoft mouse for a while.
2:41:25And their keyboards, the keyboards have--
2:41:27- We were when they did the Surface--
2:41:28- Never to my liking, but they were very good.
2:41:30- Even when they did the Surface from day one,
2:41:32the trackpad was always good,
2:41:33'cause that always drove me up the wall
2:41:35with Windows laptops, is the trackpad was always bad,
2:41:37and then Microsoft, even V1, the trackpad was great.
2:41:40So apparently, I don't know if people
2:41:43were just cheaping out or what.
2:41:44The Microsoft computers are expensive.
2:41:47They are not making any bones about it.
2:41:49They are very much Apple prices,
2:41:53and I think probably with the trackpad,
2:41:55it was a matter of you get what you pay for,
2:41:56and it has a really good trackpad.
2:41:59And by the way, having touch is really nice.
2:42:02I think the mistake people make about touch is no one's using touch all the time, but
2:42:09it's like every now and then, it's just easier to touch something than to click on
2:42:14it.
2:42:15It's not like an all or nothing sort of thing.
2:42:17My wife's very happy with it.
2:42:19Mad Fientist My Windows observation, my son got a gaming PC, for those of you who didn't
2:42:25pay attention, and helped him set it up over Christmas.
2:42:29I haven't seen Windows in like 15 years.
2:42:33I mean, I've seen it, but I've never actually tried to do anything,
2:42:35just connect a computer to Wi-Fi or something like I did.
2:42:39And it's horrendous.
2:42:41To my opinion, worse than ever, because it's
2:42:43like whatever Windows 10 does is actually just a veneer over Windows 7,
2:42:47and Windows 7 is just a veneer.
2:42:48And if you poke around and keep hitting advanced settings enough,
2:42:51you eventually get all the stuff from Windows XP.
2:42:54It's all still there.
2:42:56Yep.
2:42:57This has always been Windows blessing and curse, right?
2:42:59Like the--
2:43:00- Right.
2:43:01- It will still run everything that has ever been written
2:43:03because of that, but you, like,
2:43:05there's a definite trade-off involved.
2:43:07And yeah, the, no, it--
2:43:09- So my observation was that I would rather retire
2:43:11from using computers than using Windows.
2:43:14- The other thing that I really dislike about Windows
2:43:16is they're much better about switching languages
2:43:17than they used to be, but you have to log out
2:43:19and log back in, whereas with a Mac,
2:43:21you can just switch, when you, in a Mac,
2:43:24if you switch the language, the finder will always be
2:43:26the language that it booted up into, but if you quit an app and restart the app, it will
2:43:29be in the new language. And so my wife, her computer's in Chinese, and so I was trying
2:43:34to do settings and you're right. The settings, the settings area is a bit of a disaster as
2:43:40is and then once you start digging deeper, it gets worse. So you ha I have to have it
2:43:43in English to get it set up. Like I'm not going to figure it out. And then they have
2:43:46to log out and log back in. Oh, it's a bit, it's a big pain. And the start menu, my God,
2:43:52it's like an entire operating system in the start menu.
2:43:55- Well, that's kind of what it is.
2:43:56That's where Windows 8 ended up.
2:43:58- It is the craziest thing I've ever seen.
2:44:01And my son has a, we got him a 4K display.
2:44:04So in theory, it's quote unquote retina.
2:44:08But there's certain apps and windows
2:44:10are like effectively retina,
2:44:12like using four pixels to render one dot,
2:44:16so everything looks fine.
2:44:17Other things though are like one to one.
2:44:19So it's just like the tiniest text
2:44:21you could ever friggin' imagine.
2:44:23Like literally using one pixel on the display
2:44:26as a stroke of the letter.
2:44:30- Yeah, it's too bad.
2:44:31I mean, if you go back, I mean, I say this
2:44:33as someone that worked there during the Windows 8 era,
2:44:34so to whatever small responsibility I have, I apologize.
2:44:39But Windows 7 was actually a really solid operating system.
2:44:43Like, if there were little things in its appearance
2:44:46that drove me up the wall, like this weird highlighting
2:44:48in the menu bar and stuff like that,
2:44:50but like it generally worked and it worked well
2:44:52and it was predictable and sort of understandable.
2:44:55And I think Windows, like the whole Metro UI,
2:45:00which took pictures really, really well,
2:45:02but I think from a usability standpoint was not great.
2:45:06It would be kind of nice if they could kind of rewind that.
2:45:08And if they had, 'cause right now, yeah,
2:45:10that whole Start menu is basically trying
2:45:12to cram that in there.
2:45:13And the reason why the settings are such a mess
2:45:15is because that's like that new UI
2:45:17and it didn't get translated everywhere.
2:45:19and if Windows could just be Windows 7
2:45:22but evolved since then,
2:45:24but that the same general aesthetic and design,
2:45:27which again, I'm not saying it's a wonderful design
2:45:29or aesthetic and I'm not saying you should like it,
2:45:31but it was predictable in a way that Windows 10
2:45:35is much better than it used to be,
2:45:38but I think they're in definitely a worse place
2:45:41because of it.
2:45:42- I don't know how unique I am.
2:45:43I mean, obviously my career is a privileged position
2:45:47where I can only use, I only have to use whatever devices I want to use, but man, if anybody
2:45:53else out there has not used Windows in like 10, 15 years, you really should sit down and
2:45:58try it.
2:45:59It is.
2:46:00I worked at Microsoft, so I had a few years of using Windows.
2:46:03And honestly, once you were like, mostly Windows 7, and then, and once you're used, like if
2:46:08you're used to it, it's, it really was fine.
2:46:11Like the biggest problem I had with Windows, and this surprises people, was third-party
2:46:15apps was actually the sort of like, you know, uh, the back apps and the functionality provided
2:46:23and the, the general overall design and quality of them was weeks higher than that sort of
2:46:28third party windows app. Again, for like an individual, like when that surprised me, like,
2:46:33Oh, windows has a big app advantage, right? Well, that advantage is like line of business
2:46:37apps and like all of these like customized things for a particular business that are
2:46:41not there because of the great user interface. They're there because they do a very sort
2:46:44of specific function. That was always the max sort of big advantage. The actual day-to-day
2:46:52experience of using Windows once you were used to it, Windows 7, was honestly not that
2:46:57bad. It was a lot better than I expected. But I agree that then Windows 8 came along
2:47:03and it got a lot more complicated.
2:47:07That's a good postscript to the show. Anyway, people can read you on Twitter. Your regular
2:47:13Twitter account is @BenThompson. And then anybody who actually is interested in your
2:47:17nightly musings and gloating lately on the Milwaukee Bucks can find your sports stuff
2:47:24nicely separated in the NoTechBen Twitter account.
2:47:28Twitter account.
2:47:29Ben
2:47:35come to me when I go off on sports on Twitter and they're like can't you set
2:47:38up can't you set up a no tech or a sports sports account like Thompson did
2:47:43and I don't want to do that but anyway all right hey have a great day sounds
2:47:50good I'll talk to you later I appreciate your time thank you Ben oh yep bye bye