The Talk Show

51: Amazon First Citywide Change Bank


00:00:00   I feel like you've been on the show many times but it's like a long stretch now [TS]

00:00:03   remember not the sort of with the with the new gig and still was getting [TS]

00:00:08   getting and giving the schedule in order but I feel pretty good about it now but [TS]

00:00:13   unfortunately I have to do sort of last minute things like a of an opening today [TS]

00:00:17   so we can do it it's it's settled then I mean it's weird you work now we're [TS]

00:00:21   officially work for Google Ventures right yeah there was a holy shit [TS]

00:00:27   announcement yes in a way I guess but it's not that weird where were you know [TS]

00:00:36   pretty well sequestered away from from Google itself but I can go over there [TS]

00:00:40   whenever I want to hang out which is sort of interesting but yeah i mean you [TS]

00:00:47   know day today my job is pretty much the same as it has been for the past two [TS]

00:00:51   years which is just sort of being around San Francisco and meeting up with her [TS]

00:00:55   trainers here right in trying to scope out good ideas and CNN you know I need [TS]

00:01:01   to go but still has that word Google and it it does which is both beneficial and [TS]

00:01:10   you know it's it's it's detrimental but it's it can be a little bit of a [TS]

00:01:17   discussion sometimes when you're talking with specially early-stage entrepreneurs [TS]

00:01:20   who are worried that if they take you know if they take money from Google [TS]

00:01:24   Ventures at me you know stop them from doing a day to deal with Facebook or [TS]

00:01:29   something like that right that that's not the case of course you know we we [TS]

00:01:34   invested a lot of things that are actually competitive with what Google [TS]

00:01:36   itself is doing and you know that's our our mandate is really to go up there and [TS]

00:01:41   find the best stuff regardless of what it is [TS]

00:01:44   yeah that's a very googly mindset in a good way [TS]

00:01:48   yeah yeah definitely so it's been good the sort of try everything and see what [TS]

00:01:55   sticks mind yep [TS]

00:01:57   so you had a piece and and you know and again just like with your previous game [TS]

00:02:05   you're still writing at TechCrunch still still raining Paris lemon but you had a [TS]

00:02:09   great piece this week Jeff Bezos and Amazon yeah so right [TS]

00:02:16   writing is also sort of an interesting thing for me now because again I just [TS]

00:02:20   have to sort of do it when I have free time in my day which is hard to do it's [TS]

00:02:25   a lot harder than I could have imagined it was going from being a full-time [TS]

00:02:29   writer to sort of a part-time writer it's it's it wasn't as easy of a [TS]

00:02:35   transition cause I used to be I was just one of those people who I never really [TS]

00:02:38   got writer's block and i could just write about whatever sort of any topic [TS]

00:02:42   just go on and on and on about it and it was really just sort of trying to rein [TS]

00:02:46   in thoughts and make it a coherent piece but now when you're doing the day-to-day [TS]

00:02:51   stuff of of going from meeting to meeting its right to think about you [TS]

00:02:55   know the the future of these different on startups and then you try to go back [TS]

00:02:59   in certain to write and think about big picture of things it's it's not as easy [TS]

00:03:04   as it is a imagined it would be which is which is definitely something I've [TS]

00:03:08   struggled with but when they're so when there's news like this happens to this [TS]

00:03:12   you know this was a surprise to everyone Jeff Bezos buying the washington post it [TS]

00:03:18   hits whatever time it was in a midday a few days couple days ago and it's [TS]

00:03:25   something like that where I start to feel like you know my old self again [TS]

00:03:28   because they just like so many thoughts about that and that's so interesting and [TS]

00:03:31   fascinating and and so instead of kind of opening up you know WordPress or [TS]

00:03:36   whatever and said I immediately now go to Twitter to start reading about it and [TS]

00:03:40   then sort of the the back and forth their sort of gets me ideas as to what [TS]

00:03:44   what I should write about and so for this particular topic it wasn't so much [TS]

00:03:48   about Jeff Bezos barring washington post because i dont really know the backstory [TS]

00:03:53   of that I don't know I don't actually know why he did that I think it's it's [TS]

00:03:56   fascinating that it could be a disaster could be great I don't really know but I [TS]

00:04:01   i realize that like so many people you know we can to starkly making the the [TS]

00:04:05   references to Amazon's overall business model of course an abandoned by [TS]

00:04:10   washington Post exhausted but the same idea where Jeff Bezos is a great honor [TS]

00:04:14   because he doesn't care about profits and I even made that joke too and it's [TS]

00:04:17   like but people like really get into that and so I thought that there would [TS]

00:04:21   be a good in business to start writing about sort of my change in mentality [TS]

00:04:25   about Amazon I guess over the past year [TS]

00:04:28   yeah I'm right behind you really on that I think used in your piece I really [TS]

00:04:34   liked it and it kind of clicked for me because it it's like I said I was behind [TS]

00:04:39   you on this where I was sort of having the same thoughts but hadn't put them [TS]

00:04:44   together and I thought your piece put it together in the same connected the same [TS]

00:04:49   thoughts in my head that that it didn't float around yeah thank you I think I [TS]

00:04:56   think we've all been under no I don't want to speak for everyone but for me in [TS]

00:05:00   particular obviously a lot of us read a lot about a fuller have in the past and [TS]

00:05:04   there's a way of thinking about Apple that is that is different than a lot of [TS]

00:05:08   companies of course is as you know better than anyone but there's also a [TS]

00:05:14   feeling there can be an issue with that because Apple in many ways is very [TS]

00:05:19   straightforward when it comes to business right they they make they make [TS]

00:05:23   products that they want to sell for money at a profit and that earns them a [TS]

00:05:28   lot of money and that's great of course it's more nuanced and that they've lot [TS]

00:05:31   of other businesses have iTunes and its etcetera etcetera but you know just [TS]

00:05:35   looking at a high level picture it's pretty straightforward what Apple does [TS]

00:05:38   and I think Amazon is not straightforward at all and that's why a [TS]

00:05:43   lot of us were very confused as to like how is this company you know not only [TS]

00:05:47   continuing to do well but to thrive certainly in the in the stock market and [TS]

00:05:50   we can argue you know whether that's a meaningful metrics are not but you know [TS]

00:05:55   it's it's a bit confusing when you look at it first [TS]

00:05:57   yeah and I think I I've said this many times over the years that in a lot of [TS]

00:06:01   ways especially as a business Apple is so simple even though they're they're [TS]

00:06:07   literally the biggest company in the world or second exon [TS]

00:06:11   never but you know certainly you know massive corporate entity by any measure [TS]

00:06:17   but they're actually fundamentally simple as a business like you said they [TS]

00:06:20   make products that people buy and do it for a profit you know set a price that [TS]

00:06:27   people are willing to pay that significantly higher than the cost it [TS]

00:06:30   takes to make the product and it it stands out they stand out in technology [TS]

00:06:36   because there aren't a lot of other companies making computer type devices [TS]

00:06:43   that that keep its so simple and that do it so successfully but in other [TS]

00:06:48   businesses it you know it's as old as the way business is always have worked [TS]

00:06:54   right especially with the luxury brands like you know that's that's the good [TS]

00:06:58   analogy of you know like a luxury car maker luxury watchmaker they're selling [TS]

00:07:03   their selling things more expensively than you can get another version of a [TS]

00:07:10   similar product but they're doing it with quality and so people are willing [TS]

00:07:14   to pay for quality right you know or like you know and and the luxury thing [TS]

00:07:19   can be a little distracting because a lot of time to start thinking about you [TS]

00:07:23   know like retail they're often compared to Tiffany and company because of the [TS]

00:07:28   profit as revenue per square foot and that's a little bit off-putting because [TS]

00:07:33   Tiffany sell stuff that very few people by I mean Apple you know it's this weird [TS]

00:07:39   intersection between [TS]

00:07:41   affordable luxury it's like mass-market luxury [TS]

00:07:44   maybe good maybe I don't think maybe a good comparison be like Nike where you [TS]

00:07:50   know Nike sneakers cost more than average sneakers but they're not on you [TS]

00:07:57   know almost anybody you know very very many people can and do by Nike sneakers [TS]

00:08:02   yeah that's that's good thought I actually I would be interested to know [TS]

00:08:06   what the margins are on on Nike shoes I have no idea I assume you're right [TS]

00:08:11   though that they're making a pretty healthy margin selling the shoes market [TS]

00:08:15   from say [TS]

00:08:17   you know like New Balance or something and yeah that's that's a good way to [TS]

00:08:22   think about it you know and then there's you know there's certainly you know they [TS]

00:08:26   probably much like Apple you know marketshare wiser not a majority most [TS]

00:08:32   seekers are denied him in most people probably despite discount sneakers just [TS]

00:08:36   by counting all six billion people on the planet but what shoes are on there [TS]

00:08:41   right but it is it's a simple business and Amazon and and and the other parts [TS]

00:08:47   of Apple's business stuff like iTunes and stuff like that which is not quite [TS]

00:08:51   as simple as make a product sell it for a profit is not a significant part of [TS]

00:08:57   Apple's business yea though it is interesting that it was a few quarters [TS]

00:09:02   ago it happen right that iTunes pass iTunes revenue I think past Mac revenues [TS]

00:09:09   at right is that it is now possible I think overall stuff including absolutely [TS]

00:09:14   everything right something like that yeah but I still think it's up in the [TS]

00:09:19   air and they don't break it down i mean it's you know they're fairly open in [TS]

00:09:22   their financials compared to most other companies but they still don't break a [TS]

00:09:25   lot of stuff down but I think like horse did you as has made the case that he [TS]

00:09:29   thinks that iTunes even though the revenues varied gotten very high it's [TS]

00:09:33   still effectively a breakeven business right which I think yeah and and so we [TS]

00:09:39   can talk about you know obviously horace had a happy sort of countering which I [TS]

00:09:44   found interesting and i felt like you get mad at me last night on and on [TS]

00:09:48   Twitter when I sort of said you know well I don't really understand what he's [TS]

00:09:52   going after but you know I'm going to debate it with you on this podcast and [TS]

00:09:55   so he's certain responded he thought that he thought that using quotes like [TS]

00:10:00   anti Apple was was suggesting that I was sort of making fun of his his stance [TS]

00:10:06   which wasn't really his stance which was my stance and there's some confusion [TS]

00:10:09   there but I usually do think that Amazon in many ways the anti Apple and he he [TS]

00:10:14   does not at all it seems like he thinks it's not that that cut and dry that [TS]

00:10:18   there's I think you know not to go too deep into what his thinking is on this [TS]

00:10:25   cuz he should speak to their himself but [TS]

00:10:27   from reading his post my sense is that he feels like it won't be as easy for [TS]

00:10:32   Amazon to flip the switch and turn to a profitable company which was sort of one [TS]

00:10:39   of my main points [TS]

00:10:40   yeah I think it just it it it's not a disagreement fundamentally I think it's [TS]

00:10:46   in disagreement over what aspects of the company you want to say opposite each [TS]

00:10:50   other yeah that's that's right you know and if you just look at the desire to [TS]

00:10:54   turn a profit [TS]

00:10:58   agro hopefully a growing profit each quarter they are opposite as Apple's [TS]

00:11:03   goal clearly is to turn a profit [TS]

00:11:07   a large profit each quarter and in the long run you know have that profit [TS]

00:11:11   continued it stretch whereas amazon has never really endeavored to do that right [TS]

00:11:17   but you know I think we're we're overthinking this in some ways I believe [TS]

00:11:23   Apple again straightforward business Amazon seemingly not so straightforward [TS]

00:11:29   but it's also like if you if you go back and read the Jeff Bezos shareholder [TS]

00:11:34   letters from the beginning sort of in the late nineties right when they when [TS]

00:11:36   they went public [TS]

00:11:38   there's a lot of interesting stuff in there because you know he basically lays [TS]

00:11:43   out his vision for the company in in the most high level terms in that like you [TS]

00:11:50   know they're they're going to sell things you know it low as lower prices [TS]

00:11:55   they can to you know to benefit the customers and they realize that this [TS]

00:11:58   will sort of hurts their their margins in her and hurt their potential profit [TS]

00:12:02   but from time to time you know when he said this they will have to sort of [TS]

00:12:08   again to flip the switch but but more or less that that the check and i think is [TS]

00:12:14   what he would say they're gonna check in to make sure that they can actually [TS]

00:12:17   still make a profit when they need to and the problem now is that we haven't [TS]

00:12:23   seen that all time right [TS]

00:12:24   like this last quarter Amazon actually lost money they you know they posted a [TS]

00:12:30   loss for the quarter and previously it's been very small profits if any certainly [TS]

00:12:36   compared to Apple I mean we're talking about [TS]

00:12:38   a single-digit millions tens of millions while Apple's making you know [TS]

00:12:42   double-digit billions in some quarters in profit and so Amazon actually lost [TS]

00:12:47   money last quarter and so so we're trying to figure out how are they ever [TS]

00:12:55   going to be able to make a profit but again you know many not not even that [TS]

00:12:59   long ago several years ago they were making some you know pretty good profits [TS]

00:13:03   off of much less revenue that they're at now the revenue of course keeps growing [TS]

00:13:06   over time and you know to go back to her spine he thinks that it's going to be [TS]

00:13:11   hard to flip the switch and they do i do agree with the overall sense that it [TS]

00:13:15   that it could be hard just because you don't know what's coming down the road [TS]

00:13:19   there could be there could be a competitor that that comes around in the [TS]

00:13:23   buzz phrase but disrupts app Amazon and they won't they want to see that coming [TS]

00:13:28   and they're they're so focused on building out that they're they're not [TS]

00:13:33   focused on the right things but I do think that that severely downplays some [TS]

00:13:40   of the innovation that that Amazon could do I think a good example of that is is [TS]

00:13:44   like what they've done with Amazon Prime so like they now have a lot of people [TS]

00:13:48   paying a recurring fee a yearly fee for products and like when you just think [TS]

00:13:53   about it think about their business if people are paying for something that [TS]

00:13:57   razor thin margin you know of course that doesn't seem like the best business [TS]

00:14:01   to be in from a profit perspective but they have all these people paying Amazon [TS]

00:14:05   Prime which is sort of interesting because that has you know that while not [TS]

00:14:10   infinite margins you can assume that that has very good margins I don't know [TS]

00:14:15   though because I i mean i'm i'm a prime subscriber I guess you call a [TS]

00:14:20   subscription yeah but I can't help but think that over the course of a year I [TS]

00:14:25   make my crime pays 800 bucks I don't think it's eighty 80 in nato that sounds [TS]

00:14:36   about right but I think that we get more than [TS]

00:14:39   $100 worth of shipping out of it well and so this is another thing when when [TS]

00:14:45   you're at the scale that Amazon is at you know shipping costs are relative so [TS]

00:14:51   Amazon is building infrastructure out to build these warehouses all over and now [TS]

00:14:54   now that they had their shit nude the new taxes in place for Internet taxing [TS]

00:14:58   they can actually build warehouses in somewhere like California where they [TS]

00:15:01   couldn't before right because you couldn't have a a physical you couldn't [TS]

00:15:05   have any physical space in California [TS]

00:15:07   otherwise they would have made you collect sales tax there and so now that [TS]

00:15:10   that they you know they've come to an agreement that they are going to collect [TS]

00:15:13   sales tax over the internet now amazonas starting to build warehouses all over [TS]

00:15:16   the place they did they didn't have before and so when they when they do [TS]

00:15:20   things like build a brand new warehouse right outside of San Francisco they can [TS]

00:15:25   you know the cost of delivering to San Francisco of course goes way down and so [TS]

00:15:30   this is sort of the game [TS]

00:15:31   Amazon explain I do think that you're right that that there are a lot of [TS]

00:15:35   people and certainly your power you know a power user of Amazon Prime and I am [TS]

00:15:39   too and there are a lot of people who are probably the margins aren't as good [TS]

00:15:44   for Amazon Amazon Prime but I do I would imagine that there's a lot of people who [TS]

00:15:47   buy you know a couple things here and there making you know quite a bit of a [TS]

00:15:51   substantial came from that I'll do stupid things I'll do things can I know [TS]

00:15:57   its Amazon and so I know I don't feel bad for them I don't feel like i'm [TS]

00:16:00   taking advantage of them but it was like a mom-and-pop business I would never do [TS]

00:16:04   like it if it was just like a small business that happened to offer the same [TS]

00:16:09   shipping offers that Amazon does I wouldn't do it like last week or two ago [TS]

00:16:17   I bought a little tiny screwdriver just I just needed a real blast size [TS]

00:16:26   screwdriver and I so I bought one on Amazon for like three dollars and had it [TS]

00:16:33   sent to me on Prime shipping for free I mean I mean like it's like super low [TS]

00:16:39   cost I mean yeah I would never do that if it was like a small business would [TS]

00:16:44   wait and [TS]

00:16:46   and waited till I needed you know three or four things back together and nets [TS]

00:16:52   and then i dont ridiculous right it sounds like ridiculous that Amazon would [TS]

00:16:55   would in any way allow you to order a $3 thing and let you get you do not pay [TS]

00:17:00   shipping for it but at the same time at the same time because of the scale [TS]

00:17:05   Amazon operates at they probably have you know say a thousand trucks going [TS]

00:17:09   going around to your area you know any any given week or something and they [TS]

00:17:16   just happen to have extra space on it so because you're using the Prime thing [TS]

00:17:19   you're not doing overnight which of course you have to pay extra for you [TS]

00:17:23   know they'll be able to find room on one of those trucks that's just on [TS]

00:17:26   unutilized rate right I would probably be be surprised at how maybe how [TS]

00:17:34   efficient they're shipping is and how little it does set them back to me for [TS]

00:17:39   free and remember that they you know with the purchase of Kievan they've been [TS]

00:17:43   doing some other things they'd there this is all a lot of these processes is [TS]

00:17:46   completely automated now where they just have robots going around their [TS]

00:17:49   warehouses and and picking up your mini screwdriver and and putting it in a [TS]

00:17:53   truck and that's it and there's no you know there's there's very little human [TS]

00:17:56   costs and you know their their business is pretty interesting at the scale and [TS]

00:18:02   you know and I have to admit I've always thought that point of prime I mean it [TS]

00:18:06   may be there for some people it actually is very profitable because they pay the [TS]

00:18:10   80 bucks and they don't use up 80 bucks worth of prime services right in a year [TS]

00:18:17   and so that's just free money for him but I've always thought it was a way to [TS]

00:18:21   sort of encouraged loyalty that there's like you know once you pay for prime you [TS]

00:18:26   feel like 10 me to look at Amazon first because I know I can get Prime shipping [TS]

00:18:31   yep and I i do think that that's right I would imagine you know I just bought a [TS]

00:18:35   Samsung Panasonic supplied no idea what the actual margins are on that but I do [TS]

00:18:40   think you're you're probably right in that they view it [TS]

00:18:43   well maybe not a loss leader and I do think like office certain people they're [TS]

00:18:48   probably making a pretty good profit off of that but they do view it as a way to [TS]

00:18:52   just keep people coming back and keep people buying more using him as far as [TS]

00:18:57   I've always said that was the point [TS]

00:18:58   of like the way that like Sam's Club or forget some of the other big-box [TS]

00:19:04   retailers were you have to be a quote unquote member ready to be a member [TS]

00:19:08   eases pay 25 bucks a year or something like that but I've always thought it was [TS]

00:19:13   you know sure the membership fees are are nice but I don't think that Sam's [TS]

00:19:18   Club runs on membership fees I've always just thought that there's like a [TS]

00:19:22   psychology to it where once you remember and you have paid you feel like one [TS]

00:19:26   telephone gonna buy toilet paper I'm gonna go to Sam's Club because i've you [TS]

00:19:29   know I'm a member [TS]

00:19:30   yeah right and thats so that you know that that plays into the idea that that [TS]

00:19:36   Amazon's business at least at first I think Amazon again is super complicated [TS]

00:19:41   because they're doing so many things I mean we've even talked about like AWS [TS]

00:19:44   and and and sort of their digital services which are which are really [TS]

00:19:48   fascinating but from the beginning of Amazon Chris asserted selling books but [TS]

00:19:52   even when they're just trying to sell sort of everything online you know of [TS]

00:19:56   course everyone recognizes that what they're trying to go after his basically [TS]

00:19:59   Walmart where wal-mart has an insane amount of revenue and relatively low [TS]

00:20:05   profit compared to that but that doesn't matter because the revenue is so high [TS]

00:20:09   that the profit is also high even though the margins are so bad that so Amazon by [TS]

00:20:13   doing things like Amazon Prime and keeping people coming back in just [TS]

00:20:17   keepin on using the revenue profits will go up the thing that of course we're [TS]

00:20:23   talking about now is the fact that the profits are going up because they're [TS]

00:20:26   spending so much of this money on other things are let's take a timeout couple [TS]

00:20:31   sponsors shows get one out of the way and then we'll keep going on and I want [TS]

00:20:35   to thank our first sponsored Squarespace longtime friends of the show [TS]

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00:21:24   they've even won awards for their customer support something called a gold [TS]

00:21:30   Stevie Award they just got what is it what is a caustic cost starts at just [TS]

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00:21:55   show eight and you'll save 10% back to Amazon and profit so my summary and this [TS]

00:22:12   was I hadn't had this thought until I read your piece but my summary is there [TS]

00:22:16   Dave Bezos has said Amazon up from investor perspective that that profits [TS]

00:22:23   are sort of like a will of the west and that's always investors believe in [TS]

00:22:28   Amazon or Amazon investors certainly do and the revenue growth is certainly [TS]

00:22:35   there right it's it's you know maybe one quarter over another there been dips but [TS]

00:22:39   a pretty steady pace since the company was founded in 1994 revenues have grown [TS]

00:22:45   at a remarkable rate Lake you know it used to behave Amazon might someday be a [TS]

00:22:52   major retailer on the scale of like wal-mart and target and no physical [TS]

00:22:58   world retailers like that and you know in the nineties some people thought that [TS]

00:23:02   was not some people truly thought hey come on to buy stuff on [TS]

00:23:06   but normal gonna buy stuff online it that's totally turned out to be true and [TS]

00:23:12   so that's sort of investor faith from a long time ago has panned out the revenue [TS]

00:23:17   growth is there but I think Bezos I think they want to put words in your [TS]

00:23:22   mouth but I think this is the point you're sort of making his basis is sort [TS]

00:23:25   of set up the expectation that profits never have to come now they only have [TS]

00:23:31   two potentially come in the foreseeable future right and I do so this is why I [TS]

00:23:40   think basis is sort of what do you think he's business genius certainly but I [TS]

00:23:46   think he's sort of underappreciated and I think that's what we're seeing with [TS]

00:23:49   the washington post up like what would you do this and maybe he doesn't have a [TS]

00:23:53   plan for us to put again I don't know but you know when people are sort of [TS]

00:23:56   saying like like crazy guy who just doesn't care about profits by as well I [TS]

00:24:02   think that I mean when you look at his history right he worked on Wall Street [TS]

00:24:06   he understands how this works maybe better than most other CEOs do because [TS]

00:24:11   they don't have that experience wherever he didn't start he didn't start until he [TS]

00:24:13   was thirty hedge fund announced twenty right to hedge funds so he totally [TS]

00:24:18   understands are you can assume that he totally understands wall street and so I [TS]

00:24:22   think what we've been seeing the past two years which is really interesting [TS]

00:24:25   when compared to Apple AAPL has just done profits so much so so good of [TS]

00:24:32   business they the profits you know that what the one the couple quarters of it [TS]

00:24:36   thirteen billion dollars and the only thing to that's comparable to that or [TS]

00:24:40   the oil companies right i mean this is that's amazing and it's not even though [TS]

00:24:43   companies often don't do that well it's like there's there's three best quarters [TS]

00:24:47   stack up against Apple's best quarters now and so does profits are huge and [TS]

00:24:54   while they were showing those giant profits and the profit growth more [TS]

00:24:58   importantly and the revenue growth while she was loving Apple pushed the stock up [TS]

00:25:02   to 700 past seven hundred dollars a share right now that the growth is [TS]

00:25:08   slowing even if the profits are still pretty good you know I forget what it [TS]

00:25:11   was last quarter eight billion or something like that I mean it's still [TS]

00:25:13   insane for almost any company [TS]

00:25:15   the growth is no longer there and [TS]

00:25:19   the problem and and sort of one of the points and I made it in my post which i [TS]

00:25:23   think people just don't really think about it so obviously people don't think [TS]

00:25:28   about it [TS]

00:25:29   Apple's problem with wall street is that they're looking for future potential and [TS]

00:25:33   the fact that the iPhone was such an incredibly good business and still is [TS]

00:25:38   for Apple that it's gonna be almost impossible I think for them to find a [TS]

00:25:42   business that's similar to that maybe I'm wrong I hope I am I hope that you [TS]

00:25:46   know they come out with with some kind of crazy new device that no one is [TS]

00:25:50   thinking about but I think even with like you know the rumored television [TS]

00:25:54   stuff and in the watch I think that they'll be hard-pressed to get the sort [TS]

00:25:59   of profits that they do offer the iPhone because of the way the unique market [TS]

00:26:04   that iPhones in the smartphone market especially the subsidized and [TS]

00:26:08   unsubsidized markets where they're getting paid so much money up front for [TS]

00:26:12   these devices and so that's going to naturally if you can't get another [TS]

00:26:18   iPhone like product the the growth is naturally going to come down and so you [TS]

00:26:23   know when people talk about has Apple you can maybe make an argument that they [TS]

00:26:27   have in terms of revenue and profit growth just because the iPhone was such [TS]

00:26:32   a good business [TS]

00:26:33   Amazon is the opposite right where those is playing this way and and and just go [TS]

00:26:39   back to Apple for a second so so Tim Cook you know that the operator he [TS]

00:26:43   understands how to make the the machine as well oiled as possible and as soon as [TS]

00:26:47   he took over 44 steve Jobs was found that both on an interim basis and then [TS]

00:26:51   in a permanent basis [TS]

00:26:52   you know people don't give him credit but the stock went crazy you know after [TS]

00:26:57   after Jobs passed away and and cook is is the CEO and the man in charge that's [TS]

00:27:01   what it do the run up to $700 Sharon Apple sort of hit its peak and then you [TS]

00:27:06   know everyone talks now like oh my god he's lost so much value but he created a [TS]

00:27:09   lot of that was under him that that value was created and so pesos though is [TS]

00:27:16   playing at the the the opposite way we're rather than focus on [TS]

00:27:20   the profit you know of course you want revenue growth especially in the [TS]

00:27:25   business Amazon is in but rather than than focus on the profit in showing [TS]

00:27:29   investors what you know showing him your hand basically he's focused on trying to [TS]

00:27:35   trying to ground that revenue that that profit into the into the ground and make [TS]

00:27:39   it almost you know break even [TS]

00:27:42   yeah I totally agree and I and it's you know Matt Iglesias who rides on [TS]

00:27:48   economics its slate has has commented on Amazon several times as well as his [TS]

00:27:52   phrasing that he called them that effectively that they run like a [TS]

00:27:57   charitable charitable foundation for the benefit of consumers rate at which which [TS]

00:28:03   is funny I mean that's a really funny way to think about it and and I used to [TS]

00:28:06   totally agree with that but you also remember that Amazon Amazons business [TS]

00:28:11   and in anything was eugene way he used to work at at Amazon pointed this out in [TS]

00:28:16   a really good way a few months ago remember that Amazon because of the [TS]

00:28:21   business there and they have cash constantly flowing in and yet they don't [TS]

00:28:26   have to actually pay for things necessarily right away so they have the [TS]

00:28:30   day of the sort of interesting buffer that other companies do not have and [TS]

00:28:35   that's why when you talk about free cash flow in like how Amazon could possibly [TS]

00:28:38   keep operating in and bring in money when they're losing money it's because [TS]

00:28:42   their business is is unlike sort of any other where they actually do constantly [TS]

00:28:48   have a flow of cash coming in and if that dried up they would be yeah yeah [TS]

00:28:53   there would be there would be a problem but that's not a drying up certainly [TS]

00:28:56   things like you like Amazon Prime are probably hoping that were people just [TS]

00:28:59   keep buying stuff and so they have this cash that they can use for things where [TS]

00:29:02   they don't need to focus solely on making a profit there's the classic [TS]

00:29:09   eighties Saturday Night Live a commercial for the first union change [TS]

00:29:17   bank I do remember this is Kevin Nealon [TS]

00:29:21   in the gist of it was it a bank where all they do is make change [TS]

00:29:25   and they're like hey you can come in with a dollar bill and if you want [TS]

00:29:29   twenty nichols will give you 20 nichols' you want ten dimes you can get ten times [TS]

00:29:34   you want half nichols have times we can make that happen and it was funny and [TS]

00:29:39   then you know the punch line was people say how do you turn a profit [TS]

00:29:46   how do you make money right right and that it's funny and that i think is sort [TS]

00:29:54   of been the the knee jerk and it has been mined the knock against Amazon you [TS]

00:29:59   know that you know if you're breaking even there is no profit but it did you [TS]

00:30:04   could actually turn a profit as a change bank if you can hold the money before [TS]

00:30:09   giving them their change right now and that's why you know I think Amazon [TS]

00:30:13   wasn't that the PCR citing from the guy who worked at the date they hold some of [TS]

00:30:17   that money for up to 90 days right that they only have to pay like the book [TS]

00:30:21   distributors I give you buy a book they pay at the end of the quarter and the [TS]

00:30:25   time they've helped them money and they can earn interest on it do it do you [TS]

00:30:28   know do you actually can make money as a change bank if you have money for 90 [TS]

00:30:33   days right it's it's an interesting way to think about it is like maybe maybe [TS]

00:30:37   more simplified way that like you know someone just on a day-to-day can think [TS]

00:30:41   about it like imagine that your you pay a you have to pay a down payment on your [TS]

00:30:48   on your renter you have to pay basically a holding fee or whatever to to get an [TS]

00:30:54   apartment right and see you give that to your landlord in your landlord then has [TS]

00:30:58   that money he could put it in a in his checking account and he's earning [TS]

00:31:02   interest on that money so it's like your money is being used to make him more [TS]

00:31:07   money because eventually he's going to give that money to back that you [TS]

00:31:10   treasure apartment or whatever but he is earning money off of the money that [TS]

00:31:15   you've given in so there's so there's the interest component of it which I do [TS]

00:31:19   actually don't know how much Amazon doesn't that I assume that there that [TS]

00:31:23   they have you know somebody invested in making interest off of that but yes and [TS]

00:31:26   then there's also the free cash flow component where they're just they can [TS]

00:31:29   hold onto this money and use it for whatever they want to use it for until [TS]

00:31:33   they have to to to pay it ninety days later but at that point they already [TS]

00:31:37   have [TS]

00:31:38   their money that has come in for the same purpose so it's [TS]

00:31:46   I know that this is this is this is fairly complex in this took me a little [TS]

00:31:49   while to understand how exactly this could possibly work is it almost seems [TS]

00:31:53   like it's such an interesting idea that it seems like a scam right where it's [TS]

00:31:57   like they don't actually they're they're not selling something and getting money [TS]

00:32:03   and then distributing it the rather there's they're selling something [TS]

00:32:06   they're getting the money and then they're distributing what they already [TS]

00:32:11   took the last money for right it's like it's a pretty complex idea but this is [TS]

00:32:17   this is sort of the genius of basis that he realized that you could do this and [TS]

00:32:21   certainly that's not at all of Amazon's business they have many different you [TS]

00:32:24   know AWS and stuff where they were they can't do this kind of stuff but in in [TS]

00:32:28   the retail side of things there are there are some interesting ways that [TS]

00:32:33   they can that they can make money out of seemingly having no profit right yeah [TS]

00:32:40   it's totally interesting I isn't the story with AWS that day wasn't like [TS]

00:32:46   they've really I mean who knows how many you know you have to take their public [TS]

00:32:49   statements with a grain of salt I guess because maybe there won't be a little [TS]

00:32:53   cagey about what they say publicly but publicly they've said more or less that [TS]

00:32:57   they've built up a lot of infrastructure so that they could handle their peak [TS]

00:33:03   traffic which affect you know for Amazon right retailer is like holidays you know [TS]

00:33:07   like giving night and the day after Thanksgiving and stuff like that so they [TS]

00:33:11   want to be able to handle that they don't want the site to crash [TS]

00:33:14   on Monday the day after Thanksgiving when everybody's trying to order and so [TS]

00:33:19   they've filled out an infrastructure to handle that level of traffic smoothly [TS]

00:33:23   but then you know three hundred and fifty five days a year they don't need [TS]

00:33:28   it right it's sitting there unused and said it will why don't we sell it to [TS]

00:33:33   people other people take advantages yeah I think you're right in that that was [TS]

00:33:38   the initial impetus behind how they do it I don't actually know that their full [TS]

00:33:41   story but I think that that I believe that that's right but but now I imagine [TS]

00:33:46   that they realize that this is actually pretty big business and so we should [TS]

00:33:49   just have these sort of we should just run this is as a separate business aside [TS]

00:33:53   from having having the same excess inventory of storage for win her sick of [TS]

00:34:00   a city for women it's not a holiday season and I think that they do not [TS]

00:34:04   recognize how big of a business this this actually is anything about yeah you [TS]

00:34:08   know you always talk to me with startups I mean the number of them that are built [TS]

00:34:13   on top of Amazon's cloud infrastructure is amazing I mean I don't know what the [TS]

00:34:18   you know the actual percentages but I it's it's way over 50% for me at least [TS]

00:34:24   in startups in San Francisco that it that are built on top of Amazon in some [TS]

00:34:27   way at least and that that's pretty incredible when you think about that and [TS]

00:34:33   when you if if they can keep doing that you know there there's already there's [TS]

00:34:37   big businesses that are built on top of Amazon I don't know if Instagram is [TS]

00:34:40   still using Amazon for for their picture hosting they were and I don't know if [TS]

00:34:46   they've moved over to Facebook's infrastructure sense but it's no [TS]

00:34:49   guarantee that they have and they may still be using Amazon to host all their [TS]

00:34:53   images member when when they first announced iCloud and people sort of [TS]

00:34:58   poked around and and it ended up it was like a retard hodge podge on the back [TS]

00:35:04   end where it had built some of it and it was in Apple datacenters but they were [TS]

00:35:07   also using Windows cloud I know they're using Microsoft for some of it yeah I [TS]

00:35:18   think I think they may have been [TS]

00:35:20   I think Apple is using them in there you know nobody's more security but that's [TS]

00:35:29   pretty tellin ya and it's in that that brings up something that's that's sort [TS]

00:35:33   of some people have have sort of said in response to 20 this Apple and Amazon [TS]

00:35:38   argument it's like so obviously we had the the dead center is down all hits [TS]

00:35:42   high right it was supposedly hacked or whatever but they also they've had it [TS]

00:35:46   was down again yesterday briefly and of course had a lot of issues with with [TS]

00:35:51   various things I message and in all kinds of services iCloud just being down [TS]

00:35:55   so why doesn't Apple take a page from Amazon's book and just spend a sliver of [TS]

00:36:02   their hundred and fifty billion dollars or whatever it is in cash and just go [TS]

00:36:06   crazy on on building out the the infrastructure and so I think the [TS]

00:36:10   argument there is that like you have to assume that they're doing they're doing [TS]

00:36:14   that right I mean I don't know what are your thoughts on that Lake people get so [TS]

00:36:18   frustrated about this and assume that that Apple is like so obsessive about [TS]

00:36:23   holding onto their cash that they don't want to spend it even when there's a [TS]

00:36:26   very obvious thing that they should spend it on I have to assume that [TS]

00:36:29   they're not doing that that we don't know the whole picture like maybe they [TS]

00:36:33   just don't maybe they can't build it fast enough maybe they're spending as [TS]

00:36:35   many billions as they can to do it but they just can't do it at quite a pace [TS]

00:36:39   that they want and need to you yeah that's a good question but with data [TS]

00:36:46   centers they can't keep them secret because they're a man I don't think that [TS]

00:36:51   they can I mean I guess it would depend where you build it but you know like the [TS]

00:36:53   big one in north carolina I mean it's not a secret I mean everybody knows [TS]

00:36:57   where it is and because they're so big like to build a data center that is [TS]

00:37:02   significant to Apple's needs that you know just what just happened to have [TS]

00:37:09   some sort of significant impact on the services they provide is a huge [TS]

00:37:14   undertaking and therefore it requires you know deals you know the whole reason [TS]

00:37:19   I went to North Carolina's the deals from the government [TS]

00:37:22   right tax breaks tax breaks and whatever zoning permits I guess and stuff like [TS]

00:37:28   that that it's not secret because all that stuff you know when you're [TS]

00:37:33   negotiating with the government is all you know has to be out in the open right [TS]

00:37:37   so you know to my knowledge there's not a lot of brick-and-mortar building out [TS]

00:37:44   of of data centers on that Apple's undergoing so I what else could a [TS]

00:37:51   senator Mian well so you know i mean certainly they have to be spending money [TS]

00:37:55   on infrastructure for components right i mean you know there's always talk that [TS]

00:38:01   they've debt while they work with third parties overseas and they built a lot of [TS]

00:38:05   factories for them in sort of built built the infrastructure needed to do a [TS]

00:38:10   lot of what they're doing which is customized and so they're certainly [TS]

00:38:13   spending money on that but it is crazy if they're not spending as much as they [TS]

00:38:19   possibly can on the on the database the data warehouses because everyone knows [TS]

00:38:26   that this is such a problem for them and we see it on it on an almost daily basis [TS]

00:38:29   now and so you know what are they holding onto that money for a net that [TS]

00:38:33   that sort of goes back to again the argument between Amazon and Apple and [TS]

00:38:38   answer the wall street component of it of course Apple started going under fire [TS]

00:38:42   when they when they passed a hundred billion dollars in cash that was [TS]

00:38:47   overseas as we know but you know there there were activist shareholders who are [TS]

00:38:51   rising up and saying you need to distribute this money and they are of [TS]

00:38:54   course now but Amazon doesn't have that problem again because they just aren't [TS]

00:38:59   you know posting these these giants amount of profit and holding on all this [TS]

00:39:03   case I think they do have plenty of several billions I don't know what the [TS]

00:39:06   number is that they actually hold in cash but it's nowhere near what Apple is [TS]

00:39:09   holding and so why exactly is Apple holding onto this you know they say it's [TS]

00:39:13   for for future considerations are you know for defensive purposes but they're [TS]

00:39:18   really not doing anything for it so was it you know you start to wonder at least [TS]

00:39:22   I'm starting to wonder was it a miscalculation to actually build up this [TS]

00:39:26   amount of cash [TS]

00:39:27   started asking these hordes of money yes I also feel like they you know I'm not I [TS]

00:39:34   i dont know I don't work for the SEC so I might be off base here but the money [TS]

00:39:38   that they have quote unquote in the bank [TS]

00:39:41   the profits from past 10 years that they're sitting on if they'd spent a [TS]

00:39:46   huge chunk of it in the next like two quarters to build out like another [TS]

00:39:51   massive data center [TS]

00:39:53   you know Texas you know alaska [TS]

00:39:57   doesn't matter where they'd still have to account for that in those quarters [TS]

00:40:01   right so that's not just because they have the money in the bank doesn't mean [TS]

00:40:05   that they don't it wouldn't have an impact on their quarterly earnings [TS]

00:40:09   right-o it would and it would just look bad [TS]

00:40:13   investor wise if if their profit for like two orders from now [TS]

00:40:21   was way lower than it would have been if they hadn't made this massive up-front [TS]

00:40:25   capital expenditure they can explain it in people who are paying attention could [TS]

00:40:31   listen to them and say look this is you know we were doing this for this reason [TS]

00:40:34   and it you know it's in our best interest going forward but we all know [TS]

00:40:39   that people don't really listen to the actually explanations they just CEO [TS]

00:40:43   Apple made you know turned lower than they were expected to you know there [TS]

00:40:47   must be going under and again that just goes back to my thought on why basis is [TS]

00:40:53   a genius with this you know I won't call it manipulation but it's it's the way [TS]

00:40:58   that he's he's playing it right where he doesn't have to worry about spending a [TS]

00:41:03   billion dollars one quarter on a datacenter because that bill like the [TS]

00:41:08   investors aren't used to seeing that billion anyway and they think they'll [TS]

00:41:11   see that billion down the road somewhere as a result they think you'll see two XE [TS]

00:41:15   billion down the road as a result of him sending this billion right now right [TS]

00:41:19   maybe oversimplifying but I see it's the way he's set them up from an investor [TS]

00:41:25   perspective that really does contrast with Apple rebels and never really ever [TS]

00:41:30   even in the old days when they were relatively a small company [TS]

00:41:34   has never been held in high regard by Wall Street right now the stock I think [TS]

00:41:41   has long been was old days long undervalued because they were [TS]

00:41:47   misunderstood company and the company was never really set up to make [TS]

00:41:52   investors happier you know it was always about the product it was always the [TS]

00:41:57   company has always been set up to make great products great experiences and and [TS]

00:42:02   everything else is secondary whereas I think pesos is experience it's like [TS]

00:42:07   what's coming with what's becoming clear to me is that he set the company up in a [TS]

00:42:12   way that it's always been set up to make investors happy or satisfied you know [TS]

00:42:18   that it's not a coincidence not like the way matt Yglesias put it it's almost [TS]

00:42:25   like investors are delusional you know to support its crazy that they support [TS]

00:42:31   Amazon's lack of profitability quarter after quarter whereas I think the truth [TS]

00:42:35   is that that was by design [TS]

00:42:40   yeah and again I go back to the earlier point where you know basis is obviously [TS]

00:42:46   aware of this because he's put it in the shareholder letters it's like we at some [TS]

00:42:50   point we realize we recognize that we need to turn a profit [TS]

00:42:54   eventually and we're gonna do that down the road you know we may have to check [TS]

00:42:57   in from time to time to make sure that we can do that and maybe that means just [TS]

00:43:01   not spending billions of dollars on infrastructure costs in a one-quarter [TS]

00:43:04   something like that then all of a sudden a show like you know like a five hundred [TS]

00:43:08   million dollar two billion dollar profit of a sudden and then then the very next [TS]

00:43:12   quarter they go right back to building out again and so maybe they do do that [TS]

00:43:14   sometime in the next couple of years or something like that I don't know if [TS]

00:43:19   they're not showing any signs that they're going to do that but yeah I [TS]

00:43:23   think I think you're right that that basis is just playing this sort of thing [TS]

00:43:28   this perfectly that everything is in the future and everything is going to going [TS]

00:43:35   to be going to be rosy at some point but what really is the point is to go back [TS]

00:43:39   to the to the to the idea of what Apple is doing with their money what is the [TS]

00:43:42   point of caring all these profits if you know when you get beyond a certain point [TS]

00:43:46   I mean Apple couldn't buy enough companies nor were they want to because [TS]

00:43:50   it would be a disaster if they spent a hundred billion dollars buying companies [TS]

00:43:52   they're not gonna do that there there are you know probably investing in [TS]

00:43:57   infrastructure as much as they feel comfortable with so they clearly have [TS]

00:44:01   more money than they need for that and so what is the point at the end of the [TS]

00:44:05   day of having all these massive profits beyond it kinda having a major headache [TS]

00:44:09   I mean it's good if if the economy turns that's what that's one argument right [TS]

00:44:13   like you know if the if the economy goes bad again Apple doesn't necessarily have [TS]

00:44:18   to change anything they're doing because they have so much money and they could [TS]

00:44:22   sort of dip into that but Amazon seem to whether you know the last downturn [TS]

00:44:28   perfectly fine I don't know you know what their numbers exactly word then but [TS]

00:44:32   certainly you know they are not going well and I think that's that's the other [TS]

00:44:38   that's another thing that to me through at least threw me off that Amazon is [TS]

00:44:42   that my first impression of Amazon was was formed in the go-go dot com nineties [TS]

00:44:48   right and I i mean I was an early Amazon user but I memorable an Amazon with just [TS]

00:44:53   a bookstore and they were you know had crazy customer service and it and it was [TS]

00:44:58   free shipping for everybody and crazy low prices on the books and they had [TS]

00:45:03   just amazing customer service like if you wanted to send a book back you just [TS]

00:45:07   pay for the shipping to send it back just like a lot of form on the website [TS]

00:45:11   and they'd be like your print this out and UPS guy I'll pick the book up [TS]

00:45:15   tomorrow you know or whatever it is you bought one day started selling more [TS]

00:45:18   stuff right and but the bottom line is that they ran did that run up in the mid [TS]

00:45:25   to end of the nineties they were they were running a real they were losing [TS]

00:45:30   money quarter after quarter after quarter right in a typical dot com [TS]

00:45:35   mindset lots and lots of dot coms had that same I did lose money to build [TS]

00:45:40   market sharon's blah blah blah something well blah blah blah something to happen [TS]

00:45:44   for Amazon [TS]

00:45:46   they did kind of turn it around and so yeah they don't make big profits and a [TS]

00:45:52   quarter and sometimes they lose a little sometimes they they make a little but [TS]

00:45:56   it's not at all that it's not at all like it was in the nineties when they [TS]

00:46:03   were burning money they're not be right money right and even you know I brought [TS]

00:46:09   this up briefly in the peaceful lake it's funny that they you know Amazon [TS]

00:46:12   invested in things like pets.com which of course you know is one of the great [TS]

00:46:15   dot com flame outs and even more recently they invest in LivingSocial [TS]

00:46:20   which is they've had to write down their investment and so they're still sticking [TS]

00:46:25   some risks and you know making sort of crazy bets but in the nineties pets [TS]

00:46:28   upcoming was total disaster while they were losing money and they still don't [TS]

00:46:32   go under now we have LivingSocial thing is a total disaster but they're able to [TS]

00:46:38   easily withstand something like that it doesn't even really make it did you know [TS]

00:46:42   they did lose whatever that was a few quarters good that they wrote it down [TS]

00:46:45   you know they posted some some losses but you know investors still don't mind [TS]

00:46:50   it's like they they trust Amazon because the amazon has lived through kind of [TS]

00:46:55   some seemingly impossible things to live through like you were saying in the in [TS]

00:46:59   the sort of the dot-com bubble and you said like basis has been upfront about [TS]

00:47:04   it forever [TS]

00:47:05   you know he has been you know I Amazon investors are getting exactly what they [TS]

00:47:10   were promised yeah you know but maybe someday there gonna need to turn a [TS]

00:47:14   profit I mean you have to assume that they will it it becomes like it just [TS]

00:47:19   becomes a very weird thing and I would have thought I think I like two years [TS]

00:47:22   ago I think at some point they will have to show profit right like winter I don't [TS]

00:47:29   get it this is madness when are they ever going to actually show a profit [TS]

00:47:33   again are meaningful profit again and you know investors just the stock has [TS]

00:47:38   passed $300 whatever and and they show no signs of slowing down so I don't know [TS]

00:47:43   actually win win that is that they have to do that and basil seems like he's a [TS]

00:47:47   step ahead and that he does know when they'll have to do that [TS]

00:47:50   and I don't know when that is and maybe it's her but I think that it will be [TS]

00:47:55   sometime relatively soon I have to believe that I think so let me take a [TS]

00:48:00   break here and thank our second sponsor second sponsor back from last week is 10 [TS]

00:48:05   tiang and what's tempting is an OBS mobile service no contracts no overage [TS]

00:48:15   penalties they have a bunch of great plans you pick the one that fits the [TS]

00:48:20   right size for you to go over they just move you up to the next year and you pay [TS]

00:48:25   that for the month you were under if you don't use as much voice or data or [TS]

00:48:30   whatever you've signed up for they'll move you down to that here so that you [TS]

00:48:35   save money they have an online calculator go to the website at [TS]

00:48:41   talk-show . 10.com that way don't know you came here from the show even online [TS]

00:48:49   calculator and it's amazing you do you pump in what you're paying now for [TS]

00:48:55   Verizon or AT&T or whatever it is [TS]

00:48:57   sign up do tell them how much data you use how much Voice use and they'll tell [TS]

00:49:03   you how much you'll save per month and if you're using something like AT&T or [TS]

00:49:07   Verizon I I think it's almost guaranteed you gonna say it's kind of amazing when [TS]

00:49:13   you sit there is a catch the catches they don't have the iPhone right now [TS]

00:49:17   that's obviously going to effect a significant number of people listen to [TS]

00:49:21   the show but there's also a lot of people like John Siracusa out there who [TS]

00:49:26   don't have an iPhone don't want to spend the money on $120 a month iPhone plan [TS]

00:49:31   and if that's you I would seriously suggest looking at 10 there an MVNO that [TS]

00:49:36   build on the Sprint network so it's got great coverage all over the country [TS]

00:49:40   whole bunch of great features great support from the same parent company [TS]

00:49:44   that does however the great great domain registrar and like I said last week [TS]

00:49:52   domain registration is notoriously as scummy business however has a great [TS]

00:49:56   reputation no scams no tricks [TS]

00:49:59   mobile services exact same way mobile service is notorious for all sorts of [TS]

00:50:03   hidden charges and overage fees and wow I signed up for $100 a month plan in my [TS]

00:50:08   bill is a hundred and fifty how'd that happen is the complete opposite totally [TS]

00:50:14   have your back [TS]

00:50:15   great support unbelievable prices so again check them out at talk-show dot [TS]

00:50:20   dot com you'll be surprised at how much money you can see and you can see also [TS]

00:50:28   you can sign up to be notified when they when they do support the iPhone which [TS]

00:50:32   they're working on so boris did you in His peace following up on on Amazon I [TS]

00:50:41   think he focused a lot on the idea of flipping the switch which would be sort [TS]

00:50:46   of switching from breaking into suddenly making big profits I think if there's [TS]

00:50:51   anything I liked his piece of that he made a lot of great pieces Island it up [TS]

00:50:54   but I think maybe flipping the switch is the wrong notion I think it's maybe a [TS]

00:50:59   little bit more like turning this pick it up a little bit you know and yes [TS]

00:51:04   order or the opposite turning the spigot down on the expenditures that they have [TS]

00:51:09   right right it's it's not flipping a switch and suddenly piles of profit [TS]

00:51:15   start piling in [TS]

00:51:16   I think it's turning dials little downturn this little downturn this [TS]

00:51:20   little up you know maybe raised prices just a little maybe decrease [TS]

00:51:27   expenditures on you know capital in ventures expenditures a little bit and [TS]

00:51:32   all of a sudden you know the little better profits turn into a little bit [TS]

00:51:37   more profits suddenly turned into more profits turned into more profits quarter [TS]

00:51:40   after quarter and it's you know or you know like water boiling on the stove you [TS]

00:51:48   know it doesn't just go from cold to hot but eventually it is very hot [TS]

00:51:51   yeah I think I guess there was one of my main problems with horses post was just [TS]

00:51:59   that it seems like to me that he was trying to squeeze Amazon into a easy to [TS]

00:52:06   understand [TS]

00:52:07   and Apple business model right where at some point Amazon will have to flip a [TS]

00:52:14   switch meaning turn up the cost I assume of the goods they sell it to make it [TS]

00:52:22   better margins and then to to make better profits what I think he's [TS]

00:52:26   discounting is the fact that they can instead just not spend as much money on [TS]

00:52:30   dated warehouses or things of that nature and the fact that Amazon is in [TS]

00:52:36   there in an increasing number of businesses remember we talked about AWS [TS]

00:52:40   there now getting into this sort of the web threat FreshDirect stuff right where [TS]

00:52:47   they're doing sort of grocery deliveries and I don't know I don't know what the [TS]

00:52:50   margins are on that they're probably not very great but still that's a that's [TS]

00:52:53   another new business that they're getting into and we haven't even talked [TS]

00:52:55   about things like where they could potentially you know they could get into [TS]

00:53:00   the advertising business more certainly they have a lot of interesting user data [TS]

00:53:04   and they have all those credit cards on file they could get more into the in-app [TS]

00:53:08   purchase stuff certainly they already have their own app store they're just [TS]

00:53:12   doing a lot of stuff that i think is is is totally discounted in the notion that [TS]

00:53:17   Amazon is still just the one company that sort of you go to buy anything [TS]

00:53:21   online there's so many different things now so I don't think that it's just a [TS]

00:53:24   matter of flipping a switch I think you're right it's turning [TS]

00:53:27   just tweaking nozzles for all of these different businesses that they have that [TS]

00:53:30   that is the way that if they do eventually decide that they want to show [TS]

00:53:34   profits again at least for a little bit that's how they're going to do it [TS]

00:53:39   yeah I totally agree with that [TS]

00:53:42   backtrack a little bit and like you said you were talking about like the almost [TS]

00:53:48   the perfect storm that the iPhone was for Apple may be one of the reasons [TS]

00:53:55   they've amassed so much cash is that they deserve [TS]

00:53:59   it's almost a surprise to them that the iPhone turned into such a success [TS]

00:54:05   yeah and that three years later that all of that technology software and hardware [TS]

00:54:11   that the iPhone was gave them the perfect opportunity to do the iPad and [TS]

00:54:18   start suddenly after all these years taking massive chunk of the PC industry [TS]

00:54:27   has faced as the years have gone by that this is what has happened is that the [TS]

00:54:32   iPad and tablets in general have have overrun just completely almost overrun [TS]

00:54:39   the sub thousand dollar portable computer market [TS]

00:54:44   yes i think thats I think that you're the first point is definitely right [TS]

00:54:49   where I would imagine that they were surprised at how good the business could [TS]

00:54:54   be because you know they were they were entering a new space jobs you know [TS]

00:54:59   famously said what was what percentage did he want to get like five percent or [TS]

00:55:04   whatever it was [TS]

00:55:05   of the of the smartphone million and one percent of the phone market one percent [TS]

00:55:09   of the overall vote phone market or so and by the way while Nokia and some [TS]

00:55:14   other ones had hit great businesses at that point they were nowhere near the [TS]

00:55:17   business that the iPhone is from you know that the carrier at least in the [TS]

00:55:22   you s carrier market where where these things are subsidizing the money gets [TS]

00:55:26   paid up front to Apple and so it's almost like they were it really was the [TS]

00:55:31   perfect storm because right as [TS]

00:55:33   Tim Cook was taking over Tim Cook had its streamlined the art of making you [TS]

00:55:39   know beautiful products that people want for a relatively inexpensive you know [TS]

00:55:46   manufacturing write the thing is we we talked about you know I am making [TS]

00:55:51   premium products and so most of the time when you make a premium product you know [TS]

00:55:55   the the problem at a very high level I know this isn't the way that it always [TS]

00:55:59   is but the thing is it it it costs more because it costs more to make great but [TS]

00:56:04   Apple cats so streamlined it getting at getting good at making things like the [TS]

00:56:08   iPhone where it's like they could make this this this thing is so much higher [TS]

00:56:12   quality than everything else they could almost make it the same cost of their [TS]

00:56:15   rivals making these these decidedly less quality phones and so that along with [TS]

00:56:21   the fact that the smartphone market you know Apple timed it perfectly that it [TS]

00:56:25   took off and with the with the sort of the carrier subsidy model already in [TS]

00:56:29   place and I think the carrier sort of underestimated sort of how big something [TS]

00:56:35   like the iPhone and Android phones would would become it really was the perfect [TS]

00:56:40   storm in making this like the absolute perfect product that I don't think that [TS]

00:56:44   anyone can really match again at least anytime soon in terms of just how much [TS]

00:56:50   profit making off of that and think about what Apple's margins used to be [TS]

00:56:55   and then remembered like a few quarters ago when they got up to it was like 42 [TS]

00:56:59   percent or something like that [TS]

00:57:01   loser like software margins for a hardware company which is crazy [TS]

00:57:05   significantly higher than Microsoft's in Google's which is crazy because of [TS]

00:57:10   Microsoft and Google are primarily overwhelmingly software companies right [TS]

00:57:15   right yeah I'm so I you know I think you're right there with me where I am [TS]

00:57:20   really have no almost zero down i mean you know nothing certain but I have [TS]

00:57:25   zeroed out that innovation is far from over a couples should be good for the [TS]

00:57:30   decades to come in terms of coming up with new products [TS]

00:57:34   in new categories I don't know that they'll ever come up with a new product [TS]

00:57:39   in a new category that of the massive profitability as as the iPhone and iPad [TS]

00:57:45   because you know I just think about the size of the market it almost everybody [TS]

00:57:52   on the planet is gonna have a mobile phone and certainly you know there's a [TS]

00:57:57   huge huge chunk of of the world that can't even dream of buying a $700 phone [TS]

00:58:06   but it doesn't matter to Apple in all for just talking about profitability and [TS]

00:58:11   revenue you know I'm not saying those people no matter but their money doesn't [TS]

00:58:15   matter because if they don't have the money it's irrelevant but in terms of [TS]

00:58:19   the people who could in theory by a $700 so it's it's almost everybody who has [TS]

00:58:29   money is going to at least consider yourself it's a massive market it's a [TS]

00:58:35   very expensive product I think in the grand scheme of things you know $700 [TS]

00:58:40   foner 67 $800 tablet these are expensive things in the grand scheme of things I [TS]

00:58:46   mean compare and contrast with the iPod which really didn't take off until it [TS]

00:58:51   hit like the 199 markers so I mean even then it's expensive for a music player [TS]

00:58:57   and at the end the flip side of what you're saying which is exactly right is [TS]

00:59:03   that the iPhone didn't take off in a meaningful way either until it got down [TS]

00:59:07   $299 because it was subsidized and there's no other there's just no other [TS]

00:59:13   business that's like that right there's not gonna be some some weird entity [TS]

00:59:17   that's not Apple that's going to pay Apple to lower the price of their [TS]

00:59:21   products and in terms of Apple not maybe not knowing quite what they were getting [TS]

00:59:25   into at the outset I think the thing that they knew that they had was they [TS]

00:59:30   had an amazing device right i mean as everybody knows you know the one product [TS]

00:59:35   that Apple introduced that wasn't banned on day one [TS]

00:59:38   as you know for whatever I mean there were some people who thought they were [TS]

00:59:41   going to be a failure but nobody denied that the thing wasn't incredibly cool [TS]

00:59:47   right [TS]

00:59:48   they knew that they had a great product is amazing holy shit you have a computer [TS]

00:59:53   in your hand and it's all touching it was so smooth and everybody knew that [TS]

00:59:57   was great so they were focused on that he knew it they had a great then but [TS]

01:00:01   just think about the way that with the original iPhone in 2007 they actually [TS]

01:00:05   tried to circumvent the traditional carrier subsidy thing where you you [TS]

01:00:11   bought your to buy your iPhone on june 28 thru whatever it was [TS]

01:00:18   2007 you paid they are paid 599 [TS]

01:00:23   $4.99 we bought unsubsidized iPhone and what we've gotten turned forget our [TS]

01:00:34   monthly fee from AT&T was a little bit lower as we didn't have any kind of [TS]

01:00:38   contracting we still had contract with AT&T but we weren't buying subsidized [TS]

01:00:44   devices and I can't help but think it was because they wanted they somehow but [TS]

01:00:48   they don't want to get into that because then it would it would tie them to the [TS]

01:00:55   carriers too much yup that's exactly right and then they that what I think it [TS]

01:01:01   was the real genius was the fact that they stayed exclusive to AT&T for so [TS]

01:01:06   long and they forced the other carriers to sort of been to there will be no [TS]

01:01:11   Verizon [TS]

01:01:12   especially because otherwise it just they would have had to make so many [TS]

01:01:17   sacrifices we would have Verizon and on the back of the phone we would have had [TS]

01:01:20   like little stickers who had all these apps installed like we see any Android [TS]

01:01:24   because you know you remember that Google tried to do the same thing with [TS]

01:01:28   the I think it was the Nexus One the original one where they tried to sell it [TS]

01:01:32   online at full price without can you could pick your carrier and it just did [TS]

01:01:39   not work same ideas didn't work for the same reason because no one's gonna pay [TS]

01:01:42   that much for a phone [TS]

01:01:43   the problem was exacerbated by the fact that unlike Apple Google doesn't have [TS]

01:01:48   retail stores so like Apple's you know secrets [TS]

01:01:51   access really could you could also say why they could they could pressure the [TS]

01:01:54   carriers as much as they have those stores which moved the iPhone so they [TS]

01:01:58   don't need it really AT&T and Verizon they do that at a certain scale of [TS]

01:02:02   course because you know more people you know by them based on what carrier they [TS]

01:02:07   want but they have their backup plan which is just that will try to push them [TS]

01:02:10   in the stores and you hear that even now they're trying to ramp up the amount [TS]

01:02:14   that are sold through the stores versus through the other day other carrier [TS]

01:02:17   partners yeah I and it it just I think the African how many iPhones sold in the [TS]

01:02:25   first year but is only like a million or something like that yeah yeah if even [TS]

01:02:30   that of something small small I mean it's you know they saw like five million [TS]

01:02:34   in the opening weekend when they come out with a new one like this there was a [TS]

01:02:39   whole year like so late in the grand scheme of things that first iPhone was [TS]

01:02:43   not a hit product in in the mass market it was among people like us probably [TS]

01:02:48   listeners of the show probably you know huge number of people who listen to the [TS]

01:02:51   show probably bottomed original iPhone right but it wasn't a mass market it [TS]

01:02:56   because it was $699 $599 phone even though when you buy a subsidized for [TS]

01:03:03   $1.99 or $99 you are paying the price you pay more right to actually do pay [TS]

01:03:11   more right but it it the psychology the truth is the psychology works yep it [TS]

01:03:16   does people it feels like only buying a hundred $999 iPhone because you're [TS]

01:03:23   already prepared for that [TS]

01:03:24   monthly bill that has the subsidy charged built-in baked into it that's [TS]

01:03:31   exactly right and so you know it's over now with all this talk of this this [TS]

01:03:34   cheaper iPhone which I don't know anything firsthand about but I do [TS]

01:03:37   secondhand I do think I do think that we're finally in the in the in the point [TS]

01:03:42   at the point where this is legitimate and there will be some sort of you know [TS]

01:03:46   cheaper version of the iPhone because of everything we just talked about but also [TS]

01:03:52   the fact that Apple wants to expand the market they need to have a bigger bigger [TS]

01:03:56   share of the Chinese and Indian and [TS]

01:03:59   and some other different countries where they don't have the subsidy model and so [TS]

01:04:03   that's the only way to do it and you know we'll see what the what the price [TS]

01:04:07   point ends up being of that thing with his what are the things floating around [TS]

01:04:09   now that would be like $300 or something like that unsubsidized [TS]

01:04:14   might be too much money I don't know and I don't cheap might be the wrong way to [TS]

01:04:19   look at it but i i think i think pricing wise what it's going to turn out being [TS]

01:04:23   is the thing that we've all been talking about since the fall of 2007 when the [TS]

01:04:28   first iPod Touch coming came out which is if the iPod Touch only costs three [TS]

01:04:34   hundred and fifty dollars or $300 or whatever [TS]

01:04:37   how much would it cost for them to put a cell chip in there i mean of course it [TS]

01:04:42   would make it thicker let's just assume that putting an extra extra antenna and [TS]

01:04:46   chips etcetera and to make it do [TS]

01:04:49   LTE invoice and you know but it can't be that big you know i mean that has always [TS]

01:04:55   been better than the iPhone but why could they make an iPod touch if its 350 [TS]

01:05:00   bucks why can't they make a cell phone costs and I think that's what this you [TS]

01:05:04   know lower-cost iPhone is an iPod touch that can make phone calls yet so I [TS]

01:05:09   wonder what they'll do that in the you s market where you know the the carrier [TS]

01:05:13   syst dominate certainly they got the carriers to agree to do the ala carte [TS]

01:05:19   iPad stuff originally right like where you could just you can pay one month and [TS]

01:05:24   not pay the next month and was really easy to flip on and off right there was [TS]

01:05:26   no contract I don't know how that will go over with this with this new device [TS]

01:05:32   like will will just not be available in the USA Thompson saying it has to be [TS]

01:05:36   right but there's no way that they would do it and only launched overseas know [TS]

01:05:39   let's come back to that I have some thoughts on that but let me just do the [TS]

01:05:43   final sponsor and we'll come back to them we would be a great way to finish [TS]

01:05:47   the show gonna tell you about batched geo da TCH Ji Hyo they've sponsored to [TS]

01:05:54   show before [TS]

01:05:55   maybe the sponsor during fireball sometimes I confusing but I know they've [TS]

01:06:00   come back and they're great it's amazing it's fast easy way to visualize location [TS]

01:06:05   data so one thing you can do if you have like a bunch of addresses in like an [TS]

01:06:10   Excel spreadsheet just copy and paste them in too bad geo website and hit a [TS]

01:06:14   button and boom you have a map with all of those addresses on and i i tried it [TS]

01:06:19   it sounds to get that to me sounds like way too good to be true I figured that [TS]

01:06:23   after they'd spend some time putting the data in a certain way or whatever no you [TS]

01:06:27   just put addresses in hit a button and you get a map with the addresses of all [TS]

01:06:33   sorts of other things you can do to they have an easy way that you can make a [TS]

01:06:36   locator app for your website like if you have a website with locations in a [TS]

01:06:42   restaurant or something like that they have an easy way to do that thing where [TS]

01:06:46   you can find a location near you just go to their website they have fun and very [TS]

01:06:52   simple video that explains the whole product way better than I could do here [TS]

01:06:56   if you have any kind of location data wanna make maps of any kind [TS]

01:07:01   go to bad geo dot com and check out the video and it will explain the whole [TS]

01:07:05   thing it really is amazing it's a fascinating fascinating that can't [TS]

01:07:09   believe how easy it is to make to make maps with this thing so here's my [TS]

01:07:14   thought on low-cost iPhone my thought is why now [TS]

01:07:17   like they have had a low cut they did the the coverage of it has to me for [TS]

01:07:23   years been misguided because they've had a lower cost iPhone four years and years [TS]

01:07:29   ever since they started the strategy of selling the previous year's phone for [TS]

01:07:35   another year at a lower price and then they run to three levels where they had [TS]

01:07:39   22 year old phone which is now free with a contract and then a year old phone for [TS]

01:07:44   99 bucks and it gets lost in the tech press because the tech press doesn't [TS]

01:07:49   care about anything other than new products right it's new it's not new [TS]

01:07:52   that's so it doesn't count and somehow that spread to the business version to [TS]

01:07:59   you know like the business journalists also somehow discount the fact [TS]

01:08:04   that Apple has a pretty darn good free with contract phone right now the the [TS]

01:08:10   iPhone 4 but again the key is with contract at how much are they selling it [TS]

01:08:16   for I don't know how much are they selling it for on subspace you know I [TS]

01:08:20   honestly don't know because they don't they don't sell them any less I think [TS]

01:08:23   though I think it's still so so basically they're taking you know a $200 [TS]

01:08:28   thing down to $99 and get a free right so I think what I think not sure about [TS]

01:08:33   this but I think that they're selling it for about 450 or whatever you know it's [TS]

01:08:36   basically full price of the iPhone 5 minus $200 for that thing so I think it [TS]

01:08:42   still four hundred and fifty and I do think that that's still a non-starter in [TS]

01:08:47   some of the other countries around the world and so I don't know what the price [TS]

01:08:53   point they need to get to is I don't know if it's if it's $300 that's that's [TS]

01:08:58   what they're aiming for it maybe two hundred dollars in subsidized that they [TS]

01:09:02   need to get to to actually make it a viable thing and I don't know what kind [TS]

01:09:05   of what kind of corners they'd have to cut to do that but like you're talking [TS]

01:09:08   about how much is the cheapest iPod Touch right now it's got it's like it's [TS]

01:09:13   a 250 is it is it in between [TS]

01:09:17   let's take a look 229 229 that's and that's the 16 gig one that doesn't even [TS]

01:09:25   have a camera doesn't have a rear-facing camera yes so ok so they'd like [TS]

01:09:31   basically shaved 2001 with the camera are $2.99 ok so and does it have more [TS]

01:09:39   surgeries at the same 32 and 64 akka so conceivably they could do a 16 gig sort [TS]

01:09:48   of iPod touch with cellular radio right for I don't know I don't know how much [TS]

01:09:53   it would cost 250 yeah maybe I don't know it seems like 299 is definitely [TS]

01:10:00   reachable for sure [TS]

01:10:03   I would I can't help but think that the plastic back that all reports about this [TS]

01:10:08   device you know claim and which makes sense of its a point to make it cheaper [TS]

01:10:13   you know has got to be cheaper than a little or no I don't know if the [TS]

01:10:16   aluminum is that significant factor in the $300 costs but right now no I mean [TS]

01:10:22   couple sense here a couple sense there and you know you might have a $250 and [TS]

01:10:29   so i think thats good guess I think that's like it probably will be 299 try [TS]

01:10:35   that at least at first maybe they have to lower to 250 can still do that within [TS]

01:10:38   their their margins have a $250 1 to get you in the door but everybody's gonna [TS]

01:10:45   buy the 299 1 because there's some more stories right yeah but by a mean and you [TS]

01:10:54   know I don't know I don't remember what the margin on the iPod touches but it's [TS]

01:10:57   clearly not what the iPhone is and that's that's gonna be a huge problem [TS]

01:11:02   for wall street again you know where the margin later talked about a few quarters [TS]

01:11:07   ago was that forty-something percent and now all of a sudden it's gonna go below [TS]

01:11:10   you know maybe goes below 30 percent because maybe if they if they do this in [TS]

01:11:16   a successful way at any kind of meaningful volume this is just going to [TS]

01:11:19   drive down the margin and that's what that's unfortunately one of the things [TS]

01:11:23   that Wall Street will focus on and you know say like well you know the the time [TS]

01:11:29   of of riding high for Apple is is over now they're now they're going into [TS]

01:11:34   margin volume business yeah I have some serious questions about how they're [TS]

01:11:40   going to bring this one to market to because I don't know I I'm sure they'll [TS]

01:11:44   say I'm almost like you I can't believe they wouldn't sell in the USA but in the [TS]

01:11:48   USA I don't know how they sell it [TS]

01:11:51   unsubsidized I think right so I think they would I think I think this is all [TS]

01:11:56   coming together there's a lot of pieces out there right and we're in we're [TS]

01:12:00   starting to see them starting to make sense why is Apple pushing for Apple [TS]

01:12:06   stores to sell more iPhones within the store why do they can hear certainly you [TS]

01:12:11   know they're in more control the experience you could argue and it's just [TS]

01:12:15   a better overall experience for the customer and you know they like having [TS]

01:12:19   that relationship and not having to worry about using the carrier certainly [TS]

01:12:22   that's all true but if it's also that they're they're only going to sell this [TS]

01:12:25   through the Apple stores and they want to get people in the mindset that if you [TS]

01:12:30   want to buy an iPhone you go to an Apple store you don't go to Verizon anymore [TS]

01:12:34   AT&T because and now by the way we have this lower-cost new iPhone that comes in [TS]

01:12:41   a variety of colors and it's only available exclusively at the Apple Store [TS]

01:12:46   so come on and get it and so maybe there maybe they're trying to lead into that a [TS]

01:12:50   little bit with this maybe that's interesting I hadn't thought of that but [TS]

01:12:54   that's definitely makes some sense with the again this I guess we know because [TS]

01:13:00   people who work at Apple stores have even said so that it's come down from [TS]

01:13:05   Cupertino that you know that that's the retail Apple stores are supposed to be [TS]

01:13:10   trying to sell more phones right then they had been [TS]

01:13:14   here's the other factors I've been thinking and I gotta write this up for [TS]

01:13:17   daring fireball but long story short why this year to switch to a new phone at [TS]

01:13:25   the low price point as opposed to previous years you know when they've [TS]

01:13:29   sold these years old [TS]

01:13:30   phoned and and there's a couple of technical reasons why they might wanna [TS]

01:13:34   do that now which are to me the two big ones I see are the screen to get [TS]

01:13:41   everybody on 605 every 15 mins [TS]

01:13:44   yeah four-inch screen 16 29 aspect ratio and to get everybody on do lightning [TS]

01:13:52   adapter yes that's a big thing that no one really talks about but that's still [TS]

01:13:58   a problem for them right that there's so many devices out there that are not on [TS]

01:14:01   this lightning adapter and it would be if they followed the old-time this is [TS]

01:14:06   just a theory of mine is that they're going to announce this they're gonna [TS]

01:14:12   stop selling [TS]

01:14:14   while obviously the for the old strategy would have been that the four would go [TS]

01:14:19   out the door for a sore ass would be a free so I think that they're gonna get [TS]

01:14:25   rid of the four and the 40 S and it makes sense because it doesn't have the [TS]

01:14:30   foreign screens right that eases developer pain a bit and kind of pushes [TS]

01:14:36   everything forward especially if I don't know who your thoughts on this but if [TS]

01:14:40   you know if they do want to do a different size again slightly larger [TS]

01:14:45   than four-inch screen they have to get rid of the three and a half inch screen [TS]

01:14:50   when they do that right I would think so I don't know I mean only way I could see [TS]

01:14:54   it [TS]

01:14:55   well yeah i just i just think that they want to get rid of that I think it's [TS]

01:15:00   more about the aspect ratio than the size is in theory and the rumors are [TS]

01:15:04   that this low cost you know if that leaks or truth that cases are true it's [TS]

01:15:09   the same size as the iPhone right 55 in theory I could still see them coming out [TS]

01:15:16   with Ace physically smaller phone that maybe would have a three and a half inch [TS]

01:15:22   screen but it would be sixty-nine [TS]

01:15:24   it would be an interesting year yeah you know and then shrink the chin and [TS]

01:15:29   forehead or something like that you know make it so that the device is almost [TS]

01:15:33   just the size of the screen I can see them doing that a lot maybe three and a [TS]

01:15:39   half is too small if it keeps the aspect ratio of 3.7 or something that's [TS]

01:15:45   interesting about that you know I just expected but I wouldn't be shocked you [TS]

01:15:50   know and I think if they come out with a bigger one to address the people who [TS]

01:15:53   really do want a bigger screen again the aspect ratio I think problem certainly [TS]

01:15:58   stay the same 16 I really do think they want to get everybody on that and I [TS]

01:16:02   think getting rid of the thirty port adapter just makes sense I just feel [TS]

01:16:06   like at this point it looks just looks antiquated and so the idea of them [TS]

01:16:10   selling iphone4s for another year just seems outdated yeah I think that that's [TS]

01:16:17   that's all pretty pretty good good reasoning for why they would do it right [TS]

01:16:22   now I also wonder how much because the flying I have my old for us right here [TS]

01:16:27   in front of me because I'm using it for testing I was seven [TS]

01:16:32   it's a premium product right it's got this steel band around the side its [TS]

01:16:39   class front guard class back and it just feels premium and I you know I can't [TS]

01:16:45   help but think I don't know how big a cost of the device the premium materials [TS]

01:16:50   are but you know however much that the chips have gotten cheaper you know [TS]

01:16:57   obviously when the four s came out it was a cutting-edge mobile processor [TS]

01:17:01   cutting-edge mobile GPU and now it's you know two-year-old technology it's [TS]

01:17:06   certainly a lot cheaper but the glass-and-steel still cost the same [TS]

01:17:10   whereas if you really want to get a lower unsubsidized price I feel like [TS]

01:17:16   switching to a new material makes a lot more sense and how much do you think I [TS]

01:17:22   know it's sort of silly but it it you know it it may be silly to discount how [TS]

01:17:26   much sort of customization we we see that you know what the new Moto X right [TS]

01:17:30   where they're they're highly customized just from our perspective right and so [TS]

01:17:35   that's the rumor course with this this low-cost iPhone that they would have [TS]

01:17:38   maybe some different colors and certainly that's been the case of the [TS]

01:17:42   iPods for a long time the iPod nanos at least and so how much do you think that [TS]

01:17:48   that plays into it you think that that's important for them I guess I think it's [TS]

01:17:52   does it is starting to get old I mean I'm just gonna buy a black one but I [TS]

01:17:57   feel like it's starting to get old that you can only get in there and I'm just [TS]

01:18:01   I'm staring here right now ever since we're talking about it a few minutes ago [TS]

01:18:04   at the iPod Touch page and to me it looks more happily to have a array of [TS]

01:18:09   colors of a device and certainly with the new I was seven color palette that [TS]

01:18:16   it sort of is sort of the way they're going so here's a question I wonder I [TS]

01:18:20   mean I just presume [TS]

01:18:22   and it seems like the rumors are way more about the lower-cost iPhone quote [TS]

01:18:26   unquote iPhone 5 see than the presumed iPhone 5 s new phone but if they come [TS]

01:18:36   out with the lower cost one and it comes in five colors can they still do the [TS]

01:18:42   high end one just in black and white [TS]

01:18:44   I mean presumably they want people to buy them in a preferred with they bought [TS]

01:18:48   the more expensive but I think I know can't think about what they did with the [TS]

01:18:54   regular iPod and then the iPod nanos rights of the nanos run colors the [TS]

01:18:59   iPod's remained in black and white right there are you 21 or whatever but yeah so [TS]

01:19:07   I don't know I have no idea but I would I would guess that maybe they do that [TS]

01:19:10   and then in the selling point on the higher end is you know like like you're [TS]

01:19:15   saying this is this is the premium product the city's top of the line the [TS]

01:19:18   best we can do for everything it has a faster processor more RAM which they [TS]

01:19:23   won't talk about and it may be it has you know that the fingerprint reader has [TS]

01:19:28   it been rumored and that's like that sort of the marquee differentiator of [TS]

01:19:34   like what's new about this device and have a better camera for saturday right [TS]

01:19:38   and so maybe they do just rely on that if you want this go with this if you're [TS]

01:19:44   interested in sort of personalization and fun and colors and maybe they think [TS]

01:19:48   that's more the teen market or you know some of their market that they're going [TS]

01:19:53   after maybe they think that they can differentiate those enough for it where [TS]

01:19:57   it makes sense to do that I wonder too I would love to know I don't know how who [TS]

01:20:01   who could do such a survey but I would love to know what percentage of iPhone [TS]

01:20:07   users use a case with their device yeah that would be interesting to know i you [TS]

01:20:12   know i mean I'm certainly i mean the the the the heart of the bubbles for this [TS]

01:20:18   where in you know in San Francisco it's sort of considered I i've had discussion [TS]

01:20:23   of many people search considered a full body is the case right and and in you [TS]

01:20:27   even remember the event all those years ago and attended Gatorade [TS]

01:20:32   you ask them jerry is anyone using the bumper and they all you know jobs and [TS]

01:20:36   and cooking everyone pulled out their right hands they put out their populist [TS]

01:20:41   iPhones and so I feel like it's sort of a faux pas in like in the tax year to [TS]

01:20:46   use a case I certainly don't use a case except when I'm using the Mophie to to [TS]

01:20:50   recharge it but I would bet that it's much much higher percentage use a case [TS]

01:20:56   in the day today you know regular regular world out there [TS]

01:21:00   yeah we've had the family we're down at Disney World last week and I was doing [TS]

01:21:08   two things I was caught a whole bunch of pictures of people using tablets as [TS]

01:21:14   cameras nice to say to have went to most of them overwhelmingly none surprise [TS]

01:21:18   where iPad but I saw a few obviously 16 2910 which meant that they were you know [TS]

01:21:25   Android tablets of some sort but I was also I just was looking I Drive had this [TS]

01:21:31   on my mind thinking about this plastic iPhone I was looking at people's iPhones [TS]

01:21:34   and disney world which i think is a pretty good cross-section of the whole [TS]

01:21:40   country [TS]

01:21:41   Disney World in July boy i i would guess I seventy-five eighty percent of the [TS]

01:21:46   people had him in the case really really sad that can and do you think that that [TS]

01:21:56   goes back to the idea of personalization or protecting it could be both of course [TS]

01:22:01   I think it's both because the cases that I was seeing where especially you know [TS]

01:22:06   don't think it's surprise especially the cases that women had we're very colorful [TS]

01:22:13   patterned you know [TS]

01:22:16   just everything anyway you know any almost any sort of just go and look at [TS]

01:22:22   the wall of of of cases like at the Apple store and i stood you know you see [TS]

01:22:27   all of them in real life [TS]

01:22:28   somebody's brain every one of those I wonder though with the plastic if it's a [TS]

01:22:32   plastic iPhone will people see the need to buy a case for ya yeah potentially [TS]

01:22:38   not though I don't know why would I think this is one of the things will be [TS]

01:22:43   surprised about where people do anyway yeah because it's it's not like we [TS]

01:22:46   haven't had plastic I funds before we had 23 dry 3ds and I seem to recall that [TS]

01:22:51   in the real world most people put him in cases yeah they just like when I first [TS]

01:22:56   got an iPhone ridiculously I used to I insisted on getting one of those over [TS]

01:23:04   screens on the planting protector thing it's like any like I can't imagine doing [TS]

01:23:09   that right now but it was just in my head that I need to do that each time [TS]

01:23:13   like I was protecting it and so I just did that until until they start to talk [TS]

01:23:17   about whatever the allele phobic we are exactly [TS]

01:23:22   coding yeah yeah you know and I'm over the years I've always had good luck with [TS]

01:23:28   my phones not carry him in a case I've never had one shattered and neither of [TS]

01:23:32   which everyone thinks is so strange this one I guess is nine months old one tiny [TS]

01:23:38   scratch on the glass and it's only visible against like a white background [TS]

01:23:43   and only when I heard it at a certain angle it's a tiny little hairline [TS]

01:23:49   scratch a mean it's almost I would I would venture to say it the screen at [TS]

01:23:55   least is would be qualified as near mint and that's no I'm not particularly [TS]

01:24:00   careful with it but i dont I think a big part of it is the personalization I do [TS]

01:24:05   think I think people are cautious cuz I think people see that their iPhone is [TS]

01:24:09   you know a valuable thing that you carry around in your pocket [TS]

01:24:13   so it's certainly part of it but I think the customization and personalization is [TS]

01:24:17   a huge part of it yeah I mean and and the fact that Apple carries so many [TS]

01:24:22   cases in their stores like you were saying says that they recognize that too [TS]

01:24:28   totaling so it's wrapped up I will say this though just one more thing on the [TS]

01:24:33   future and what's coming up you know next year or two from Apple just tossing [TS]

01:24:38   it out there like I know that the watch the iWatch is certainly one that a lot [TS]

01:24:41   of people are you know seemed almost expect in a business week and others [TS]

01:24:46   have literally reported that there are people working on it right I just don't [TS]

01:24:51   see like finding it back in with your thing about this you know another iPhone [TS]

01:24:54   size hit I just don't see how anything that you wear on your rest no matter [TS]

01:24:59   what it does [TS]

01:25:00   could possibly grow into an iPhone sized business cuz I don't see how it could [TS]

01:25:04   possibly cost more than 200 bucks like no I don't think anybody is going to buy [TS]

01:25:09   if it costs as much as an iPhone which is six seven eight hundred dollars some [TS]

01:25:14   people would buy it but nowhere near as many people would buy it is who bought [TS]

01:25:18   an iPhone so it wouldn't be couldn't even at the same prices the iPhone [TS]

01:25:21   wouldn't make nearly the amount of money the outcome does it matter how cold it [TS]

01:25:26   and if it's a hundred and fifty bucks then there's no waiting to there's no [TS]

01:25:30   way for you know even if everybody who bought an iPhone but one which would be [TS]

01:25:35   huge [TS]

01:25:36   it wouldn't make it nearly as much money as it doesn't cost us want to watch can [TS]

01:25:40   can be the iPhone financial I totally agree and this this has been sort of an [TS]

01:25:45   interesting discussion just amongst watch people right because it's like [TS]

01:25:48   watches are considered for many people a premium product you know you can buy [TS]

01:25:53   watch that's that's tens of thousands of dollars and many people buy watches that [TS]

01:25:58   are least several hundred dollars if not a thousand dollars but that's a premium [TS]

01:26:03   product and could Apple potentially tap that market I don't know I think that [TS]

01:26:08   this watch I think it's it's almost like an away a misnomer to call the watch [TS]

01:26:11   right it's it's going to be something that that lives on your wrist and is [TS]

01:26:16   doing all different kinds of things beyond telling time it will make it may [TS]

01:26:20   look like a watch but it's really going to be a screen that's on your wrist a [TS]

01:26:24   screen and a monitor for different health things or whatever [TS]

01:26:26   that that resides on your wrist the computer on your wrist it's fun to watch [TS]

01:26:30   and so I think I think that they'll have problems trying to go after you know [TS]

01:26:35   that the nice watches of the world [TS]

01:26:38   certainly because the design will have to be different than than what those are [TS]

01:26:42   of course and so I do think you're right I think that they'll probably do you [TS]

01:26:47   know $200 $300 price point at most for something like that and the lead singer [TS]

01:26:55   heard on that you never know for sure but I it's a ways out still like we're [TS]

01:26:59   doing next year not this year [TS]

01:27:01   yeah I think there's a to go into rumor rumor central here but the let the [TS]

01:27:08   latest things like I've heard that some sort of television product not the not [TS]

01:27:15   some not necessarily a television screen but something and could be coming as [TS]

01:27:20   soon as as soon as this November and I think there's there's some surprises [TS]

01:27:26   there about about what it could actually be and I don't know this for sure yet [TS]

01:27:29   but there's been whispers about and I have something to write anything about [TS]

01:27:33   it but it's just there's with Chris out there that that the interaction with it [TS]

01:27:38   could be like the interesting thing people talk about voice but I think that [TS]

01:27:41   that's that might be out the window and there might be something some new way to [TS]

01:27:44   interact with whatever this thing is just think price and that's a way that [TS]

01:27:48   both in a way both of those mythical products are are like the iPhone maybe [TS]

01:27:53   and to your point about though watch not really being a watch and not really [TS]

01:27:58   competing with Seiko and Rolex or something like that [TS]

01:28:03   it wouldn't be any more of a watch than the iPhone is just a phone radio exactly [TS]

01:28:08   really about putting a tiny laptop in your pocket pocket it was a computer not [TS]

01:28:14   a phone just happen to also make phone calls I think the right to be the same [TS]

01:28:18   way and that's that's that's the mistake one of the main mistakes people make [TS]

01:28:21   about happened i think is that like they think like oh they're gonna go after [TS]

01:28:24   going to go after the phone category they're gonna go after the television [TS]

01:28:27   category they're gonna go after the watch category both the way that they [TS]

01:28:30   think about it is they're not going after any specific like category being [TS]

01:28:35   pigeonholed into going after something because if they do that that's going to [TS]

01:28:39   be a failure of a product it's just something they're trying to like certain [TS]

01:28:42   extend what people already know and make it slightly better the only way that [TS]

01:28:45   Apple succeeds at all these things that make it so much better that people have [TS]

01:28:48   to buy this this new thing that isn't that isn't just to watch it's not just [TS]

01:28:52   the phone and it's not just a television yeah and I think your point on the TV [TS]

01:28:56   and the interaction model that's really the key to the iPhone's success was dead [TS]

01:29:01   everybody's idea prior to the iPhone 4 how to make a more computer II [TS]

01:29:06   smartphone was bad more and more buttons and lots of buttons and keyboards and [TS]

01:29:12   wheels and it's the interaction model that was really the breakthrough with [TS]

01:29:16   the iPhone where it's no we're gonna get rid of all the buttons except for one [TS]

01:29:19   and you just touch stuff on screen and we're gonna do it on software and I feel [TS]

01:29:24   like there's I don't know what it is you know I'm terrible at pled conceiving [TS]

01:29:29   ideas like that but I do think that's maybe where the future of Apple TV is i [TS]

01:29:33   think is right now if there's one thing that's the most disappointing that Apple [TS]

01:29:35   TV is that it still is just the interaction model is infrared remote [TS]

01:29:41   with up down left right yes right and you know they're trying to date just [TS]

01:29:45   started doing you to thinking right with the so you can use your phone for it but [TS]

01:29:50   I still think that there's there's gonna be a different way whether it's whether [TS]

01:29:54   it's touch your movement or something there's going to be a way that they that [TS]

01:29:57   they break ya break the mold of the way that you interact [TS]

01:29:57   they break ya break the mold of the way that you interact [TS]

01:30:00   right I think that the breakthrough has to be more me maybe it's still a remote [TS]

01:30:03   of some sort I don't know how I get a bad idea of magic but it's got to be [TS]

01:30:07   more than just switching from infrared the Bluetooth it's gotta be you know [TS]

01:30:11   there's got to be some kind of potential great leap forward in the interaction [TS]

01:30:15   yep that's another one to know where I just don't see how it could make as much [TS]

01:30:19   money as the iPhone yeah I mean so Apple TV as it is currently made up is it does [TS]

01:30:27   what it says is doing very well right and it's it's because it's $99 and you [TS]

01:30:32   know the most compelling thing about this new chrome casting is it a $35 like [TS]

01:30:35   these are things that are sort of no-brainers to buy because they're so [TS]

01:30:38   cheap the television you know everyone's focusing on an actual television i mean [TS]

01:30:44   that would sell for a it would have to sell for at least a couple thousand [TS]

01:30:47   dollars and that's you know if if they do that the TV market is just so [TS]

01:30:54   different than what the phone market is going to subsidize it and I guess in [TS]

01:31:00   theory you could maybe they can work out a deal in Comcast's sub to subsidize its [TS]

01:31:04   interesting interesting but they're not really in the business I don't know it [TS]

01:31:08   would be shocking to me if that's what it turned out to be but you know I guess [TS]

01:31:13   it's possible but it's the only way that if it is in fact a thousand $2,000 TV [TS]

01:31:18   said that's the only way it would work at scale would be to somehow figure out [TS]

01:31:23   a way to sell it subsidized because normal people aren't going to replace [TS]

01:31:26   their TV just cuz Apple came out with a TV right and if they do by the one first [TS]

01:31:32   appt this first Apple theoretical television it would be you know what's [TS]

01:31:36   gonna be five years until they buy another one they're not gonna upgrade [TS]

01:31:39   every year and they're they're not gonna get every two years [TS]

01:31:41   one of the other ways that the phone market with such a perfect opportunity [TS]

01:31:44   is that people even before Apple got in we're already sort of in the habit of [TS]

01:31:49   getting a new one every two to three years [TS]

01:31:51   yea and yea and getting a new TV is a hassle would be a hassle you know you [TS]

01:31:55   mounted or or its just a heavy clunky think 22 to move in and out of your [TS]

01:32:00   living room and the set you know the same selling points don't work like [TS]

01:32:04   people upgrade to the new iPhone because it has a better camera often [TS]

01:32:07   you know there is no such thing in itself television you can upgrade you [TS]

01:32:12   can upgrade your cell phone on a whim real yeah he can't do that with UTV know [TS]

01:32:18   and so yeah I don't know I would be surprised if if there's some sort of [TS]

01:32:27   actual screen television anytime soon I would look for something more akin to [TS]

01:32:34   what we already have with a different thoughts around it and you know the app [TS]

01:32:38   that model is just there for the taking and they're going to destroy that right [TS]

01:32:42   but I just don't see it as being an iPhone sized business and I feel like [TS]

01:32:45   that they might run into problems with the Investor Relations I mean could you [TS]

01:32:51   can you think of anything in the world that would be an iPhone sized business I [TS]

01:32:55   keep making the joke that they would have to get into the oil business to do [TS]

01:32:58   something like that or or cars I don't know I mean I know and I'm sorry the [TS]

01:33:03   first just as a blue sky idea that what if Apple but Tesla I don't see it [TS]

01:33:08   happening but it just in theory if they did and turnout will stores into car [TS]

01:33:15   dealers potentially that seems like a big business because of cars cost twenty [TS]

01:33:21   thirty forty thousand dollars and you know you don't need a huge market share [TS]

01:33:25   to have that turn into a lot of money but that's the only thing I can think of [TS]

01:33:29   the people by that is very expensive year that I think you're right that's [TS]

01:33:35   that's one of the few things that they could do that would they would have a [TS]

01:33:39   meaningful impact on revenues and profits something of that just that size [TS]

01:33:44   so I don't know I mean and I think that the potential is there for Apple to have [TS]

01:33:48   a really healthy and he's already doing well in terms of numbers I think it go [TS]

01:33:54   even higher [TS]

01:33:54   I think that they could monetize it further with an app store for it I think [TS]

01:33:58   it could turn into a great little business but it just wouldn't be the [TS]

01:34:03   iPhone yet the only other the only other thing that they could do I think you're [TS]

01:34:08   a cars and then there's the unknown right there could be some new market [TS]

01:34:14   that no one thing about right now like like the very first computer that PCs [TS]

01:34:17   right [TS]

01:34:18   they would have to conceive of some entirely new market which would be [TS]

01:34:23   impossible for us to think about right now what whatever their whatever they [TS]

01:34:27   they may or may not be dreaming up but you know that that's that may be a once [TS]

01:34:31   in a lifetime thing for a company in Apple's already done it you can argue [TS]

01:34:35   they could have done it a few times right so the likelihood that they do it [TS]

01:34:38   again as is diminishing each time right [TS]

01:34:41   jet packs or something like that right [TS]

01:34:44   probe rosy the voters the jetsons robot rose is a rose roses are over [TS]

01:34:49   yeah yeah yeah something like that that's the only way thanks great show [TS]

01:34:54   oMG really appreciate the time I thought this was a great show [TS]

01:34:59   yeah good stuff thankyou very much and everybody can find out more of your [TS]

01:35:04   website Paris lemon dot com follow you on twitter everybody should follow onto [TS]

01:35:10   her up when I talk about sports but you do a lot to ya [TS]

01:35:15   Yankees [TS]