0:00:00Hey john mg. Seaguller. How you doing?
0:00:04Good. It's been a long time. I know months. I feel like I
0:00:09strongly suspect, but I would never be as industrious as to
0:00:14actually check. But I'll bet this is the longest stretch
0:00:17you've been without being on on the show. I think so. I think
0:00:20that's right. But you know, I live in London now, so that's
0:00:23part of the reason. Yeah, that is. It makes it a little bit
0:00:25harder to communicate. Yeah, it's funny because it's going
0:00:28back to back. It's uh last episode was Ben Thompson who's in Taipei and now it's you
0:00:35in London. So I feel like I've gone around the world.
0:00:38You have a very international audience hopefully.
0:00:43Yeah I don't know that it could I honestly think it I um maybe somebody in New Zealand
0:00:49or something could be further away but that's it's about as far away as as people can get.
0:00:55Well this is much better you know normally I have to talk to the west coast and that's
0:00:58eight hours. And so that keeps me up, you know, 1 a.m., 2 a.m. for those types of calls.
0:01:03Yeah, I'll bet that that's actually pretty weird because I do feel like being a lifelong
0:01:08East Coast U.S. person, I feel like Greenwich Mean Time isn't that far away. But for someone
0:01:18from the West Coast, it truly is. It's an entire eight hours.
0:01:22Yeah. We'll see how I'm going to watch the Super Bowl. I think it starts at like
0:01:271230 or so maybe 1130 p.m. and then it's gonna go obviously till like 2 30 a.m.
0:01:34obviously they have a lot of different bars and stuff set up over here to show
0:01:38it but it will be weird because it's in it's in Arizona right so is that West
0:01:42or is that it's either Western Mountain time but yeah Arizona is definitely West
0:01:47Coast time okay I think definitely but isn't Arizona one of the no or is it New
0:01:53Mexico. That's like one of the like a holdout on. Yeah, one of those does not do it. And
0:01:58then Vegas does it weirdly like they sometimes are on one time zone, sometimes on another
0:02:03or something like that. Yeah, well, they legislate it in Vegas that there's no clocks anywhere.
0:02:09Like a lot of you have to like hide your watch when you get to the airport there. They'll
0:02:12confiscate it. That's right.
0:02:17So the big news this week, I feel like we have to talk about it. I can't skip it, is
0:02:23is the quarterly results from Apple.
0:02:26- Yes, how do you miss that?
0:02:29- And it's like, I know I'm not a finance blogger.
0:02:33I try not to overemphasize it, but I feel like in this case,
0:02:37it's so outlandishly exceptional that you can't help
0:02:42but talk about it and write about it
0:02:44and make links to it and stuff like that.
0:02:47- Yeah, it's insane.
0:02:47I remember, I guess it was a couple years ago probably
0:02:51when I was obviously still with,
0:02:53maybe it was three years ago then
0:02:54when I was still with TechCrunch,
0:02:55and I was obviously doing a lot of the coverage
0:02:59of the Apple earnings, and each subsequent year
0:03:03they would go up and up and up,
0:03:04and one of the years it was like insane.
0:03:07It was like they made $13 billion in profit
0:03:09in the holiday quarter,
0:03:10so it was either two or three years ago,
0:03:12and it seemed like a time like wow,
0:03:15I mean that's amazing.
0:03:16It's sort of in that time when the margins
0:03:20were still very, very high, and then everyone was thinking
0:03:24that they were gonna start coming down
0:03:25because of different products that were coming out
0:03:27in the future, iPad and whatnot,
0:03:29and so it seemed like the 13 billion
0:03:31might be a high watermark, and now, you know,
0:03:34that's just been totally obliterated by this quarter.
0:03:37- The thing that comes to mind for me,
0:03:39I keep thinking about it.
0:03:40I don't know why, 'cause it's not like
0:03:43it's a particularly even number of years,
0:03:46but four years ago was the debut,
0:03:49oh, I guess it was five years ago. No, so it is kind of, it's a half decade. So five years ago,
0:03:532010 was when the original iPad came out. And I remember there were two things about that
0:04:00keynote that stand out to me, and it's not the iPad in particular, but it was, that was when
0:04:06they introduced the A4 system chip. And I remember Steve Jobs being very, very proud of it.
0:04:12And in hindsight, it wasn't that great of a chip, but I feel like the reason that he was bragging
0:04:18about it. In hindsight was that he knew the pipeline of the A5, the A6, like what they
0:04:24were planning to do year after year and how they were going to take control of their own silicon
0:04:28in the years to come. And the other thing I remember, do you remember this? I think that was
0:04:33the event. I'm like 98% sure that it was the event where he mentioned that Apple was now a $50 billion
0:04:39a year company. Yeah, I think you're right. I do remember, I remember being at whatever event that
0:04:45that was when he sort of highlighted that
0:04:47for the first time, I do remember that.
0:04:49- Right, and he said almost the same thing
0:04:51that I said here, is we don't wanna talk,
0:04:53we have all sorts of products to talk about,
0:04:55but I just wanna take a moment and just mark this,
0:04:58that we're now, Apple is now a $50 billion a year company.
0:05:01And sort of saying, that's the big boys' club
0:05:06in Silicon Valley, $50 billion a year in revenue.
0:05:10And they did 74 billion in revenue in a quarter.
0:05:15(laughing)
0:05:16- It's insane.
0:05:17- Five years later, right?
0:05:19Like, and it really was worth marking.
0:05:20It really was remarkable, like five years ago
0:05:23that Apple was doing 50 billion a year in revenue.
0:05:26Like, that's a huge number.
0:05:27It's a ton of money.
0:05:29It's way more than Apple did, you know, for decades,
0:05:33or ever, really, until then, ever.
0:05:35And all of a sudden, that's, you know,
0:05:38two thirds of one quarter.
0:05:40I mean, what are they going to hit this year?
0:05:41So everyone's obviously talking about,
0:05:43in terms of earnings, in terms of profit,
0:05:45they're actually, you know, they set the record.
0:05:47They eclipsed all those oil companies,
0:05:49including the Russian state oil company, you know,
0:05:51in terms of the amount of profit they're making.
0:05:53But they're also very much on track,
0:05:56this being, you know, technically the fiscal quarter one.
0:05:59They're very much on track to break
0:06:01the all-time yearly record for that,
0:06:03which is also held by all the oil companies.
0:06:05There's an outlier, the Fannie Mae outlier thing,
0:06:08which is on the Wikipedia page,
0:06:09but that's with the government bailout and everything.
0:06:12It's sort of not a fair comparison.
0:06:15So they're probably gonna set that record.
0:06:17And in terms of, yeah, revenue, yearly revenues,
0:06:19what's it gonna be this year?
0:06:20200 billion, something like that?
0:06:22Obviously this is the big quarter,
0:06:24but then next quarter should be pretty big,
0:06:26then it goes down a little bit,
0:06:27and then it will spike up again,
0:06:28sort of with back to school sales and everything like that.
0:06:31I assume 200 billion, something like that?
0:06:34- That seems within reach, definitely,
0:06:38'cause what, 40, 40, 40, you know, gets you pretty close.
0:06:42- Yeah, that's so crazy.
0:06:44And you know, remember, I guess it was a couple years ago,
0:06:49I was also covering this, you know,
0:06:51talking about Apple's market cap,
0:06:53which you can also make an argument, you know,
0:06:55isn't really, it's sort of symbolic
0:06:58more than it's really meaningful
0:06:59what market cap actually means,
0:07:01and you know, people always argue about that.
0:07:03It was a big deal when Apple, of course, passed Microsoft,
0:07:05which was, I don't even know now, four years ago,
0:07:08or maybe longer than that.
0:07:10And then Apple was chasing Exxon for a long time.
0:07:12And at one point, I remember they were something like $200
0:07:14billion behind in market cap.
0:07:16And it just seemed like impossible
0:07:17that they would ever get there.
0:07:18And now there's something-- they're over $200 billion
0:07:21ahead of Exxon now.
0:07:22They might be $300 billion ahead.
0:07:25And obviously, Exxon's depressed because of the oil situation
0:07:28going on, their stock is.
0:07:30But it's incredible.
0:07:32I think someone has been tweeting today and showcasing this,
0:07:37that I think Apple's market cap is now just about
0:07:41the exact same as Google and Microsoft's combined.
0:07:44- That's insane.
0:07:45Somebody tweeted, I saw yesterday,
0:07:48this we're recording on Friday, January 30th.
0:07:50So yesterday, I think at the close of market,
0:07:52that Apple closed with, when the market's closed,
0:07:59had exactly double the market cap of Google.
0:08:02- Yeah, that's right. - So I guess that would
0:08:03make sense 'cause Google's ahead of Microsoft now.
0:08:05- And they're almost neck and neck.
0:08:06They're like very close to one another.
0:08:08So yeah, that's right.
0:08:10- I mean, it's almost uncanny how close
0:08:12to exactly double it was, which is,
0:08:15- Yeah. - I mean, again, it's,
0:08:17you know, in years past and probably years future,
0:08:25when Apple's stock is down,
0:08:28for reasons good or reasons nonsensical.
0:08:31Like you said, it's not proof of anything.
0:08:34It's not like market cap is an infallible measure,
0:08:38but it's at least a measure
0:08:41of what people think of the company.
0:08:43- Yeah, and I mean, right now,
0:08:44the craziest thing of all this is
0:08:46you could make a very good argument
0:08:47that Apple is undervalued on the stock market.
0:08:50They're trading at multiples that are way below
0:08:53what some of their peers are trading at,
0:08:54given the numbers they just released. I mean, it's not so insane anymore to think that they could be the first trillion dollar company if they're able to sort of, I mean, we could talk about what it would take. It would take continuing to grow iPhone and I think we all agree now, you know, they can continue to do that. They don't have a massive market share still. So there's room for growth.
0:09:20and then China, I think is the big sort of factor in that.
0:09:25And if they can keep doing that and if the stock market overall keeps sort of going
0:09:30up and there's no, you know, assurances of that, of course, it's possible.
0:09:35It's crazy, but it's possible.
0:09:37So the, I don't know if elephant in the room is the right analogy, but it's,
0:09:46it's clearly largely almost two thirds three course three quarters driven by iPhone like iPhone
0:09:53has become an enormous chunk of Apple's business the Mac is historically at an all-time high but
0:10:01still that's you know that's an established market and it's you know four million five million units
0:10:07a quarter iPad is down which is weird it's not collapsing you know I saw somebody call it gloomy
0:10:14It's not gloomy. I mean, they sold 21 million iPads last quarter. It's just weird, though,
0:10:19compared to iPhone because it's down 20 percent year over year. But iPhone is up enormously.
0:10:27It's almost unbelievable how much it's up because I think it was 51 million iPhones they sold a year
0:10:34ago in the holiday quarter and 74 million iPhones this year.
0:10:39Yeah, yeah, I think it's if I read the numbers right someone broke it down. Maybe it's from her
0:10:44I think they're at 69% the iPhone is 69% of Apple's business now
0:10:50not sure if that's revenue or profit, but you know it's about it's it's roughly probably both and
0:10:55It's probably higher actually for profit, but that's crazy
0:10:59But you're right if you were just if you were to take of course the iPhone business away from Apple
0:11:07They would still be near the top if not at the top of the biggest sort of business in
0:11:14terms of revenue and then all of those other businesses, both the Mac, the iPad and even
0:11:20in, you know, increasingly iTunes and the app store now are becoming the if you broke
0:11:25those out, they would each like probably be Fortune 500 companies in their own right when
0:11:30you think about it, which is crazy, right?
0:11:32Because the store, you know, the iTunes store, whatever you want to call it, iTunes plus
0:11:36App Store is some some number of billion a quarter now right yeah it's it just
0:11:43keeps going up and remember they used to say specifically about the App Store
0:11:48that you know it's it's basically they didn't use the word sort of loss leader
0:11:52but they just said they run it sort of break even right and then they you know
0:11:57it's it the whole thought was that it was just out there to sell sell devices
0:12:00which of course you could still make the argument that's that's probably the
0:12:03biggest part of it, but they're starting to make a lot of real meaningful money from that store.
0:12:07Yeah, and I think it's always been the case, and this is from years ago when it was the numbers
0:12:13were much smaller, where a lot of what they made was from the float where they collect the money,
0:12:19and it doesn't, you know, they can do stuff with the money, you know, just, you know,
0:12:24they hold it for a little bit, and while they're holding it, they can, you know,
0:12:28do financial guy things with money.
0:12:33Yeah, and make a little bit of money while you hold it.
0:12:36Like, as that money passes through their fingers,
0:12:38it's good for them because they don't immediately pass it on
0:12:43to who they're paying out.
0:12:45- Right, they get a little bit of what makes Amazon Amazon,
0:12:48sort of that aspect of the business.
0:12:50- Right, and anybody who's a developer knows
0:12:52you don't get paid by Apple until the end of the quarter
0:12:54or the end of the month.
0:12:56They hold the money.
0:12:57like you get paid every day as people buy your app,
0:13:00you wait and then two weeks after the month is over,
0:13:04you get your check from them.
0:13:05In the meantime, they're holding that money
0:13:07and making money on it.
0:13:09And now that it's enormous sums of money,
0:13:12it's even more so.
0:13:13- Yeah.
0:13:14What do you think about the notion of,
0:13:19correct me if I'm wrong, but they,
0:13:21when the Apple Watch is released,
0:13:22so they announced, of course,
0:13:23it's gonna be shipping in April,
0:13:25when it's released, they're not breaking that out
0:13:28as a separate entity, right?
0:13:30That's gonna be roped in under something else,
0:13:33I'm not sure what, other services or something,
0:13:36but they're not gonna break that out in terms of sales,
0:13:38at least to begin with, correct?
0:13:39Is that what they said?
0:13:40- That's what they've said.
0:13:41- Yeah.
0:13:42- And everybody's gonna try to backwards engineer it,
0:13:44clearly, from the, you know, whatever,
0:13:47wherever it is that they report it under.
0:13:49- Right, I think that's, it's sort of interesting
0:13:52to think about it because, so,
0:13:54I know you and I know I and many others have long railed against Amazon for sort of not
0:14:00being transparent with their numbers, whereas Apple is.
0:14:03We still have no idea how many Kindles have ever been sold.
0:14:06I think with this most recent quarter, which Amazon had, there was some hint that you could
0:14:11finally back into it in a way, but they still have never come out and directly said what
0:14:16the number is.
0:14:19They also announced that this quarter, the coming quarter, that they will finally be
0:14:23breaking out AWS, their cloud services infrastructure, they'll be breaking out that revenue as a separate
0:14:30business and so they'll be reporting on that.
0:14:33And I think that that's smart the way that they've done it.
0:14:36Well it has been annoying for anyone who's trying to get some idea of what Amazon is
0:14:41actually selling, if anything.
0:14:43Obviously they're selling candles, but fire phones and those types of things.
0:14:48But I would imagine that Apple is first putting the Apple Watch under sort of this same type
0:14:53of thing that Apple TV is under.
0:14:56Though they do announce the Apple TV numbers.
0:14:58They just announced whatever it was, five million sold recently and I think it's 25
0:15:03million total or something like that.
0:15:07But I would imagine that they'll keep sort of Apple Watch under wraps until there's something
0:15:11more substantial to talk about if there ever is, sort of like what Amazon has done with
0:15:16AWS where they wrote that into something else.
0:15:18And now that it's substantial,
0:15:19they're gonna break it out and actually talk about it.
0:15:22- Yeah, I don't know, you know,
0:15:24for the reputation that Apple has, you know,
0:15:26well-deserved, I guess, as being secretive and relatively,
0:15:31they don't like to explain themselves, you know,
0:15:33they, here's our products and that's it.
0:15:35And they don't like to talk about what they do.
0:15:37- Right.
0:15:38- They're very forthcoming and have been in the whole,
0:15:42you know, modern era of Apple,
0:15:44very forthcoming in their financial reporting.
0:15:48- Yeah, and so, you know, now that I think about it,
0:15:51I can't imagine that we're going to get
0:15:53an Apple Watch launch without a weekend,
0:15:57end of weekend sort of report as to how many units
0:16:00were shipped, or sorry, were actually sold.
0:16:03Unless it's, I don't know, I can't imagine
0:16:07that they don't do that, right?
0:16:09- I guess, it just seems weird, you know.
0:16:12I understand it's almost not surprising
0:16:14because they're secretive and I feel especially
0:16:18the mix of, you know, for, you know, they don't,
0:16:21and they don't, one thing they don't reveal
0:16:23and have never revealed is the mix of iPhones.
0:16:26So they don't say how many iPhone 6s were sold,
0:16:29how many 6+, how many 5Cs, how many 5Ss.
0:16:33They've never revealed that.
0:16:34You can kind of get it a little bit
0:16:38'cause they do reveal their average selling price.
0:16:40and so you can kind of create a formula
0:16:43that estimates it based on the prices that they have.
0:16:46But the watch, everybody expects that the watch
0:16:49is gonna have an incredibly wide variance in price,
0:16:53going from the sport model at 350
0:16:56to however much the gold one's gonna cost.
0:16:59But most people, including me,
0:17:00think it's gonna cost at least a couple thousand dollars.
0:17:03So the mix on that is going to be way more,
0:17:08way bigger divide than any other product in Apple's business.
0:17:14Yeah, and I wonder if that sort of plays into the notion of why they wouldn't break out the
0:17:18Apple Watch 2, because it will be, because of the widespread of prices, it would be sort of
0:17:25maybe easier, maybe not, but to know, "Boy, they must be selling a lot of the gold version,
0:17:30because look at these numbers," or, "Boy, they must be selling basically no gold versions,
0:17:34because here's sort of..." Right, because if the average selling price is
0:17:38$450 or something like that.
0:17:40- That's right.
0:17:41- Yeah, I don't know.
0:17:42I'm not quite sure.
0:17:43And who knows, maybe once the business settles down,
0:17:46they will report it,
0:17:47and it's just that they don't know what to expect.
0:17:49I, you know, it's like new territory, so I don't know.
0:17:53- So one other notion about the watch
0:17:57that sort of has been interesting to think about
0:18:00in recent weeks sort of leading up.
0:18:02So, well, two things.
0:18:03First, do you think,
0:18:05are they gonna do some sort of other event before April
0:18:08to more sort of put it out there
0:18:13in front of the world one more time
0:18:15with a proper unveiling with all functionality
0:18:19that it's gonna ship with working?
0:18:23- My assumption all along has been yes,
0:18:25but now that it's getting close
0:18:29and I'm starting to make plans for the next couple of months
0:18:34and there's a couple conferences
0:18:37that I might go to and I'm thinking like, hey,
0:18:39which of these things should I maybe not do
0:18:42because I should keep my schedule open?
0:18:44I'm starting to wonder.
0:18:47I've always thought that yes, they are going to,
0:18:50'cause I think that they have to show
0:18:52more of the functionality.
0:18:53I think they have to reveal more of what the watch does
0:18:57with the first-party software.
0:18:59In other words, right out of the box,
0:19:01the stuff that's in there.
0:19:02And how better to do it than at an event.
0:19:06But I kind of also feel like they can't do it
0:19:08if they don't have anything else to show.
0:19:10- I think you're right.
0:19:13And I think I could, so I know now
0:19:16that they are definitely working with some other people,
0:19:20some third parties who you would imagine
0:19:21that they would be working with already
0:19:23to sort of get things ready to go for launch.
0:19:25And so that definitely points to, you know,
0:19:29a potential other events and unveiling
0:19:32where they have a few of the major players up on stage sort of showing off what the third party can
0:19:39do with this thing. Right. And I feel like there's like three levels. There's A, the first party
0:19:45software, what the watch does right out of the box. There's the SDK that they've already revealed,
0:19:51which is somewhat limited. It's the whole thing where you have to have an iPhone app,
0:19:56and it's iPhone apps more or less projecting notifications to the watch.
0:20:01And they even say, I mean, this and this is totally like new open Apple, you know,
0:20:09Tim Cook, you know, era, where they even said when they revealed this initial third party SDK,
0:20:16that a full SDK with native apps will be coming later in 2015.
0:20:20Ted Kinsley Right.
0:20:21John Green So it's not native apps that the software doesn't run on a watch the software
0:20:25with the current SDK runs on the phone and just sort of projects a UI on the watch.
0:20:31You can just send a notification.
0:20:32Jared Ranerelle Right. They're almost like
0:20:33widgets, I guess, in a way. It's like a small – it's going to be packed into the iPhone app.
0:20:38So…
0:20:38Darrell Bock Yeah. I feel like it's almost
0:20:41new territory. The closest thing, though, would be something like – to call it something like a widget,
0:20:46like a widget that you project. But then I feel like there's got to be a little – not got to
0:20:51be, but almost certainly going to be a little bit more sort of blessed partner third parties
0:20:58who are working with Apple and will have things that aren't in that public SDK,
0:21:06but are a little bit more like if you are inside, if you've been embraced by Apple, if they've asked
0:21:12you to send a guy or a team to spend three weeks in Cupertino, that you're going to have a little
0:21:18bit more tighter integration with the watch, just to demonstrate it.
0:21:21**Matt Stauffer** Right. And I haven't looked at the SDK,
0:21:23nor if I did, what I really have a great understanding of it, but like something like
0:21:28having access to the music that you can store on the watch. Like, is that available to third parties?
0:21:32Or is it only available to Apple? Okay.
0:21:34**Ezra Klein** It's not yet. Right now, it's only available
0:21:36to Apple, the audio playback. Marco Arment has been looking into that for the obvious reason that he
0:21:41has a podcast app that would be perfectly suited to actually storing some audio on the watch itself.
0:21:47So it's not there yet
0:21:49So you could see though that would be an obvious one for like Apple to work with a trusted third party to sort of get
0:21:54You know give them access to it. Maybe it's Spotify or or well Spotify is sort of a weird one
0:21:59I don't know how that would work, but something like that, you know
0:22:02We're running app if it's something fitness app that can access those
0:22:05Yeah, and and you know
0:22:07there were
0:22:09like clearly before the initial
0:22:11event they had already been talking to some people like
0:22:16Starwoods hotels where they said like hey, you're going to be able to check into any Starwoods hotel and
0:22:22Use your watch as your key and then you get into your room just by putting your wrist up to the door
0:22:29Which is awesome in my opinion as somebody who very frequently loses his hotel keys
0:22:35Yeah, I always D magnetize mine. Like when I put it I always keep them in my pocket and I have either
0:22:40like a
0:22:43Or I give them to my girlfriend and she puts it in her purse and she has an iPad in there and the iPad has
0:22:48The magnetic class and it always de magnetizes the stupid key. So yes, and they they give me a hard time
0:22:54I've done that too, but I've done it and I don't keep it in the same pocket as my phone
0:22:57I keep it in a different pocket and it still it doesn't work. I don't know
0:23:01I think the technology in those things is it's pretty bad
0:23:04But I don't know and when I check into like hotels where I've you know been a frequent customer
0:23:09They're like how many keys do you want three keys?
0:23:11(laughing)
0:23:14- That's right.
0:23:15- They've got me in the file that I need extra keys.
0:23:18So the watch, the idea that you'll be able to do it,
0:23:20but that's clearly something that if they're gonna announce
0:23:22it at the event, they would have partners lined up
0:23:24in advance.
0:23:25- And do you think that also it gives them a sort of
0:23:29a natural way to do a little bit deeper dive into Apple Pay,
0:23:33where it's at right now, sort of the six month check in
0:23:37or something, and then also to show it on the Apple Watch
0:23:39actually working.
0:23:41Obviously, that seems like it's already been
0:23:42a pretty big success for them and will continue to be so.
0:23:46And so that's another obvious thing that they would do
0:23:48at such an event, I would imagine.
0:23:50- Yeah, I think, and it's,
0:23:52Apple Pay is sort of an interesting thing for Apple,
0:23:56to me, in terms of how much emphasis they're putting on it.
0:23:59And it's sort of like, to me, it's sort of like
0:24:01what we were talking about just a couple minutes ago
0:24:03with the App Store and iTunes Store,
0:24:05where they're not making a ton of money on it.
0:24:08they're only making a very fraction of a 1%
0:24:12on each transaction.
0:24:13It's a small amount per transaction.
0:24:16But it's just about getting entrenched and having,
0:24:20once you get used to it,
0:24:22you don't wanna not have an iPhone anymore
0:24:24because then you don't have Apple Pay
0:24:26and it just is another way to sort of
0:24:29sink their teeth into people's daily lives.
0:24:32- Yeah, it's-- - You know,
0:24:33the money isn't anything to sneeze at.
0:24:36It's not bad. - No.
0:24:37It's a great moat is what it starts out as.
0:24:40And then over time, much like you said,
0:24:43like with the App Store,
0:24:44if they can get to a interesting sort of transaction volume,
0:24:47which they're already well on their way to doing,
0:24:49they're gonna be making a lot of money off of that.
0:24:51And they can also, of course,
0:24:53renegotiate the fees with the banking partners
0:24:57to get a little bit more money off of it.
0:24:58I think they have a lot of sort of wiggle room there
0:25:01to be able to make that into a really,
0:25:04really interesting business
0:25:06if they can get it to a scale.
0:25:07- Yeah, and I just firsthand,
0:25:11a month ago I got a Moto, the latest model Moto X
0:25:17just to sort of do the, every year or two,
0:25:21what's it like to live with the latest and greatest Android?
0:25:24And one of the, to me, weirdest things is,
0:25:28and I've been trying to, when I'm using it,
0:25:31the days I'm using it, I try, leave the iPhone at home,
0:25:34just take the Moto X.
0:25:35The single weirdest thing to me out of,
0:25:39well, there's two things that are really weird.
0:25:41One is not having iMessage is really awful
0:25:44because there's so many people now who I,
0:25:46'cause I don't get text messages anymore.
0:25:48They're all iMessage.
0:25:49So my phone is the one going off,
0:25:52my phones and iPad are going off at home
0:25:55with the blue messages,
0:25:57while my Moto X, which has a different SIM card,
0:26:00isn't getting these messages.
0:26:02And the second one is Apple Pay.
0:26:04Every time I go to Whole Foods with that Moto X in my pocket,
0:26:07I take it out of my pocket and then realize,
0:26:09oh, I actually have to go back and use my credit card.
0:26:12It's actually become a habit where I take the phone out
0:26:15before I even remember that, oh, I'm walking around
0:26:17with the Moto X, I can't use it.
0:26:19- So that's interesting for me to hear
0:26:21because being over here right now where I am in London,
0:26:24it's not actually live yet.
0:26:25I think it might be testing in a few places,
0:26:27but I haven't gone around and I haven't used it here.
0:26:30I haven't seen it really anywhere.
0:26:31It might be starting to roll out at a few drugstores,
0:26:34or they may have that sort of hack thing,
0:26:36where it will work with another NFC reader,
0:26:39but it's not officially supported yet.
0:26:41And so the only times that I've gotten to use it
0:26:43had been when I'm back in San Francisco for work.
0:26:46And so I've only gotten to use it
0:26:48probably three times or something.
0:26:49And it's definitely, it's all it was cracked up to be,
0:26:53in my mind, it's just sort of a magical experience,
0:26:57which almost seems like it's a little bit crazy
0:27:00when you use it for the first time,
0:27:01'cause it's like, are you sure I don't need
0:27:05to do anything else?
0:27:06And sort of the cashier still asks you,
0:27:08"Yeah, I think you're good."
0:27:10It's still that early stage period of the thing.
0:27:15So you use it regularly, and it's good to hear
0:27:17that it's sort of already in your daily flow.
0:27:21Where do you go besides Whole Foods that sort of uses it?
0:27:24There's like, I know there's Walgreens
0:27:25and some of their bigger stores,
0:27:26Do any smaller things use it that you regular?
0:27:30The smallest are the cabs, the taxis in Philly that have...
0:27:35Oh, interesting.
0:27:36That have... And that's a perfect example of the sort of unofficial support for it,
0:27:41where they have these... It doesn't have an Apple Pay logo. It just has a,
0:27:45you know, "Stick your phone at the terminal" logo.
0:27:48Right, right.
0:27:48And it works there. And that was a total surprise to me. 'Cause I know I'd read those stories that
0:27:56that said, you know, just about any place
0:27:58that says you can pay by your phone, Apple Pay will work.
0:28:01And it's, just in particular, it's so much more convenient.
0:28:07'Cause a lot of times when I'm in a cab,
0:28:08I've got my phone out because I'm bored
0:28:10while I'm riding in the cab and I'm, you know, on the phone.
0:28:13And digging your wallet out while you're in the backseat
0:28:16of a cab is such a pain, you know,
0:28:18it's like you're sitting there like a contortionist
0:28:21trying to get your stuff out and you don't want.
0:28:23And if you can just stick your phone at the thing,
0:28:26it's super great.
0:28:28And then it just gives you like a thing,
0:28:29like what percent tip do you wanna give?
0:28:31Do you wanna give 18%?
0:28:32Yes, boom, done.
0:28:34And then you're out of the cab.
0:28:36- And maybe it gives cabs a fighting chance
0:28:39against things like Uber and Lyft and whatnot.
0:28:41'Cause I have the problem where I have multiple times,
0:28:44sadly enough, I take Uber so much
0:28:46that I will get out of a cab without realizing I have to pay.
0:28:49(laughing)
0:28:50And it's very awkward and it seems like
0:28:52I'm sort of crazy or I don't know what, but yeah.
0:28:56- Trying to scam them.
0:28:57- Yeah.
0:28:58(laughing)
0:28:59Yeah.
0:29:00- No, that's, you know what,
0:29:01that's the same sort of convenience though.
0:29:03Like Uber is to taxis what Apple Pay is to credit cards.
0:29:08I mean, it's, you get used to that increased level
0:29:13of convenience and you forget, you know,
0:29:15it's hard to go back.
0:29:17- Definitely.
0:29:19- It's like trying to go back to, you know,
0:29:21an outhouse after you've had indoor plumbing.
0:29:23- That's a good analogy, I like that.
0:29:27- Or so I would imagine.
0:29:29- Right, right, back in the 1800s when I remember.
0:29:32- Right, let me take a break and thank our first sponsor.
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0:30:44To me, it's like when they, with the iPhone 4,
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0:32:21Fracture. What I like about their site is that they compare, they show you the sizes and the
0:32:27comparison is always a Campbell's soup container. It's like a sort of a random but interesting way
0:32:34to compare. Yeah, and because it's like a universal, everybody knows how big a can of soup is.
0:32:40Yeah, I like that. Yeah. If you use a hand, I mean, some people's hands are way bigger than others.
0:32:45Yeah, it's true. So, Apple's financial results. Two of the points that really stick out to me.
0:32:55One is China, and it's clearly a huge source of growth. And one of the things that I've been
0:33:02thinking about with that. And eight years into the iPhone era, in the early years, it's stuck,
0:33:11it stood out a lot more, but it still is an issue is the carriers, the carrier support,
0:33:17and the growth of the iPhone in the early years, I think was clearly largely constrained by the
0:33:24number of carriers, you know, and especially around the world. I mean, it wasn't until
0:33:31was it 2010 or 2011 when Verizon first got the iPhone?
0:33:34Ted
0:33:57But around the world, it was a huge issue.
0:34:01Like, growth in Japan was clearly constrained
0:34:04because they were only on the third biggest carrier
0:34:08in Japan for a long time.
0:34:10And China was a similar issue, where they weren't
0:34:15on the biggest national carrier in China
0:34:18until fairly recently.
0:34:20- Yeah, I think it's almost been just about a year, right?
0:34:23I think it's almost, it's coming up in a year
0:34:24that China Mobile has been with them, yeah.
0:34:27And as much as everybody, you know, and I, you know, I think the bigger screen sizes,
0:34:33especially in Asia, I mean, Tim Cook even called it out that it definitely varies by geography,
0:34:38how much, you know, the mix between six and six plugs, it varies around the globe. I don't think
0:34:44it's any secret that in Asia, and China and Korea, and, you know, that in those countries,
0:34:51that the 6 Plus is more popular than it is in other countries.
0:34:57So the big screen size is definitely part of it.
0:34:59But I think just the fact that it's available is almost overlooked.
0:35:04Yeah.
0:35:05What I find fascinating about that, at the highest level, is Apple…
0:35:14There was definitely some questions when they were moving into the Chinese market.
0:35:16Would they be able to compete?
0:35:18Would they be able to succeed?
0:35:19it's a high-end product, the difference in buying power versus the United States and
0:35:26all that kind of stuff and subsidies and all that.
0:35:31But now that it's clear that Apple's business is doing very well in China and growing very
0:35:36quickly, all of the other tech companies that they're stacked up against in the United States
0:35:44they're compared to of course. Google and Facebook and you know even Twitter and
0:35:51some of these other things that are just hot properties right now. Most of them
0:35:55have no business in China right? And Apple has a giant massive business that
0:36:02a lot of their competition or what is viewed or often you know mentioned in
0:36:07the same breath as them as their competition just doesn't really have
0:36:12that opportunity at all. Yeah, I completely agree. And this is another case where to me,
0:36:18Apple has been, if you're paying attention, very forthcoming about it for years now, I would say,
0:36:25at least during the entire Tim Cook era, like since Steve Jobs stepped down as CEO and Tim Cook
0:36:34took the reins, I feel like quarter after quarter after quarter, Tim Cook has always made mention
0:36:40of China, even before China became, it was almost like, you know, he kept and continues to keep
0:36:47mentioning their growth in China. And it's, you know, again, it goes against the idea that Apple
0:36:54is super secretive. They've been very forthcoming about it. And now it's, I feel like they're at
0:36:59the point where it's, everybody's talking about it because it's gotten to be an enormous part of
0:37:04their business. Yeah. And I wonder if part of that is just honestly because, you know,
0:37:09when he was still in charge of operations, he would go over there.
0:37:13That's where all the operations were, the majority of the operations were happening.
0:37:19While China was always interesting to people because of course there's a billion and
0:37:23a half people there, it's the most populous country and everyone knew that it was sort
0:37:28of coming online and becoming more prosperous and becoming more affluent.
0:37:34Maybe his time on the ground there, he just knew no matter what, we have to figure this
0:37:38this out and we need to do what it takes to sort of crack this market because eventually
0:37:43we will saturate the United States market and the European market, you know, not as
0:37:48big already and so where are we going to find that growth and they are positioned better
0:37:54than anyone right now to be able to exploit that.
0:37:58Yeah, the – this is right from Apple's press release on their results.
0:38:05sales accounted for 65% of the quarters revenue. So exact almost exactly two thirds of the revenue
0:38:11is outside the US now. And that's a big time, right? It used to be under it used to be under 50%
0:38:17and then it was hovering around 50% and now it's two thirds or whatnot. Correct? Yeah,
0:38:23definitely is way up and a big change. Years ago, many years, let's say back before, especially
0:38:30before the iPhone existed, like in the first half of the last decade, the mobile market around the
0:38:37world was very unevenly distributed, where BlackBerry had a huge share of the US and was
0:38:45almost nonexistent elsewhere. And eventually, before BlackBerry sort of imploded, they did
0:38:51get popular around the world. But I'm saying, you know, 10 years ago, BlackBerry was almost like a
0:38:57US-centric phenomenon. And like Symbian was a European and Asian phenomenon and had no,
0:39:05almost no footprint in the US. It was huge in Europe and in Asia and almost non-existent in
0:39:11the US. There weren't any major carriers that had Symbian phones and none of the US, you know,
0:39:17the companies that sold phones and the US carriers made Symbian phones. You know, it was weird.
0:39:24And I always thought that Apple was a little, not quite as totally US-centric as BlackBerry
0:39:31was then, but it was similar though, where the US was much, much stronger for Apple selling
0:39:37computers than the rest of the world. Yeah, well, it's sort of, it's not directly comparable,
0:39:45I guess, because obviously BlackBerry was big with business users, big in Washington,
0:39:49big on Wall Street, but it's the market was still the more affluent market, right? And
0:39:54so they both sort of tracked to that market for a long time.
0:39:58Yeah.
0:39:59And I wonder too as time goes on, I mean, you know, Apple is always going to be a US
0:40:07company.
0:40:08I mean, it's, you know, I would say in a grand scheme, I think famously that they're
0:40:13rather, you know, in terms of like, you know, they have some remote employees, but in general,
0:40:19if you work for Apple, you're working in Cupertino, if you're working on product
0:40:22development, you know, hardware or software, they don't really have, you know, the yes,
0:40:26They've just started a Seattle office.
0:40:28They've had like a, I think the iWorks team
0:40:31has been in Pittsburgh for a long time.
0:40:33So there's some people who, and there's individuals
0:40:35who can get an exception and work remotely,
0:40:37but for the most part, people work there.
0:40:38It's always gonna be a US company.
0:40:40The culture is very California-centric.
0:40:43I think that stamping, designed by Apple in California
0:40:49and all their devices, is actually very honest.
0:40:52That's who the company is.
0:40:54But I do wonder as time goes on,
0:40:56how much, and you know, we're spoiled.
0:41:00Well, you're in London now, so I don't know.
0:41:02But I mean, I've always felt like I'm spoiled
0:41:05because everything comes out in the US on day one.
0:41:08And I think it always will.
0:41:09But I wonder how much, you know,
0:41:11at what point will like China be on like
0:41:14the day one list for iPhone?
0:41:15Because you know, it was clearly close enough
0:41:18that it made a big difference in the quarter, you know?
0:41:20- Yep, I agree.
0:41:22I mean, yeah, I think they talked about that even in the release or something, because
0:41:26it was two weeks later or something like that that the iPhone came out in China.
0:41:29So it wasn't day one, but it was sort of the second wave, I think.
0:41:34And I actually think about that a lot when I was moving over here.
0:41:36I'm like, "Oh, God, I'm going to have to wait a long time to get the new products when
0:41:42they come out."
0:41:43But London's now sort of day one.
0:41:45They had the new iPads came out, the same thing.
0:41:48You know what this reminds me of, though?
0:41:49I think this tracks with sort of what Hollywood's going through as well, right?
0:41:55So for a long time, movies were released first in the US and then they would go abroad over
0:42:01a long period of time, sometimes months.
0:42:04Now increasingly, they're tracking much closer to the US release date.
0:42:08In some cases, they get released abroad before they get released in the US and sort of to
0:42:13the point I think you're getting at which is in Hollywood increasingly of importance
0:42:19is the Asian markets for making the actual money like the box office in the US is now
0:42:26often a minority piece of the pie compared to what they make overseas.
0:42:31And so you're starting to see movies like Transformers and things that are more catering
0:42:36towards Asian audiences and I do wonder like when that happens with Apple, when the tip
0:42:43happens fully that either the Asian markets or a combination of Asia and some other areas
0:42:52around there end up being bigger than the US.
0:42:55Do they change the company in any way to make it more focused on that region?
0:43:01Do they do specific devices?
0:43:03I think we talked about this way back when that in order to sell an iPhone in China,
0:43:08they would have to do a special version of it or whatnot.
0:43:12then the notion was always that they would never do that.
0:43:14They would always just have sort of,
0:43:16while they could, while they change up the technology inside
0:43:18for the different carriers or whatever,
0:43:20they would always, they would never stray
0:43:22from having sort of a streamlined product line
0:43:24that's offered around the world.
0:43:26But does that change at all if China becomes
0:43:30like 75% of the business, like in the future, say?
0:43:33I don't know.
0:43:34- I don't know either, but it's, you know,
0:43:36the fact that it's within two weeks is remarkable.
0:43:39And, you know, again, I think it's a combination
0:43:41of multiple factors.
0:43:43I think it's the fact that they're now on
0:43:46the major carrier in China,
0:43:48which makes a huge difference
0:43:50in terms of how many people can get it.
0:43:51I think the fact that China's economy is growing
0:43:55and that there's an ever-increasing number
0:43:58of Chinese citizens who have the kind of income
0:44:02that they could buy an iPhone.
0:44:04I mean, clearly a majority of people in China can't.
0:44:06- Right. - No argument there.
0:44:09there's a, you know, take any percentage of how many billion people there are in China and if,
0:44:16you know, 10% or something like that is a huge number of people.
0:44:19Brian Kardell Yeah, it's half the U.S. already.
0:44:21That's great.
0:44:22Darrell Bock Right. It's just enormous.
0:44:24I think that they reported that they've, you know, they call it the brick countries, Brazil,
0:44:29Russia, India, China, which is weird because they're all very different, but it's more or less
0:44:36four countries with a ton of people and, you know, wide income disparity, I guess.
0:44:43Brian Kardell Yeah.
0:44:44But that they're doing well in all four of those countries.
0:44:46Brian Kardell Yeah, I would, I haven't looked into it,
0:44:48but I would imagine that so India is probably the farthest behind. That seems to be the case with,
0:44:53you know, basically everything because they're, well, they also have a billion people there,
0:44:57and I think they would, I think they're on pace to eventually eclipse China in terms of population.
0:45:03but while they do have a billion people right now, well over a billion people right now,
0:45:09the society is quite different there. And, you know, it's still, the iPhone is still viewed as
0:45:16way out of reach for most people. Whereas in China, you know, there's a, there's,
0:45:21as you mentioned, there's a growing segment of the population that can and is buying the iPhone
0:45:25right now. Yeah. And I think, I think in broad strokes, that's exactly right, that India,
0:45:31it might be growing faster population-wise, but that the economy is nowhere near as strong as
0:45:37China's in terms of a growing, you know, Western-style middle class.
0:45:41Pete: And that's what Xiaomi, right, is going after, right?
0:45:44Ted, is like their big focus because they know that they have an opening there that Apple probably
0:45:50can't go after at least any time in the next couple of years or something.
0:45:54Trenton Larkin Right. I totally agree. And I think that they
0:45:57have a great opportunity, but I feel like all of the and you still see it, you still see it where
0:46:03it's, you know, when Xiaomi comes out with something and it's what does it mean for Apple? How can
0:46:07Apple compete? It's, to me, they're a huge problem for Samsung and for all the other hand, Android
0:46:14handset makers. And not that they're irrelevant to Apple, but it's, it's all in that segment
0:46:22underneath what Apple is targeting.
0:46:24- That's right.
0:46:25I mean, just look at what has happened to Samsung.
0:46:28They've been, while they're still making a lot of money,
0:46:31their growth has been just totally eaten into
0:46:35and likely by Xiaomi and Apple, of course, at the top end,
0:46:40but they're being squeezed, not unlike Microsoft,
0:46:43is squeezed in the US from sorta, you know,
0:46:46the Chrome OS on the low end
0:46:47and MacBook's still sales rising.
0:46:50It's the same thing, just happened,
0:46:52in a very condensed time to Samsung. It's sort of incredible how fast it happened to Samsung, but
0:46:56they're in this precarious situation right now because of that.
0:47:00Pete: Yeah, actually, I think Samsung revenue and profits are actually down, not just stagnant.
0:47:05Brian
0:47:18So, another thing about the Chinese market that you hear come up time and time again
0:47:22is actually that the watch industry is pretty massive there.
0:47:26As the population grows in affluence, they're sort of looking to these different traditional
0:47:31areas of affluence like wine and watches, of course, is one.
0:47:36And so, what does that mean for Apple Watch there?
0:47:39And I don't know, but it could mean major things if the product is successful.
0:47:47becomes if maybe from day one it's a bigger seller in China than it is in the US.
0:47:51Yeah, I think so. I don't know if I've mentioned this on the show before. I saw a documentary a
0:47:57couple months ago. It was great. It's on iTunes called Red Obsession. Have you seen this?
0:48:03No.
0:48:03It's about the wine industry. Great documentary. Just note the name Red Obsession, but the gist
0:48:10of it is about how the Asian market has completely disrupted the sale and price of wine. Like,
0:48:21they'll go in, there's Chinese buyers of wholesale wine who will go into like,
0:48:27you know, high end French, what do you call a wine maker? Not a distillery. What's the word?
0:48:37- Winery?
0:48:38- Yeah, winery.
0:48:39And just buy, they would just come in and just say,
0:48:43"We'll buy all of it, we'll just take it all."
0:48:45And they're like, "What?"
0:48:46And they're like, "We'll just take all of, this is great,
0:48:49your wine this year, this Bordeaux is fantastic,
0:48:54just give it, just send all of it to China."
0:48:57That's it, all of it.
0:48:58And then there's people who are used to buying the wine
0:49:01from this place in America and elsewhere in Europe,
0:49:05And they're like, "What do you mean you don't have any?"
0:49:07And they're like, "We sold it all to China."
0:49:09That's it, it's gone.
0:49:10- I have a first-hand account of that.
0:49:12I was being situated in Europe now.
0:49:15It's pretty easy to obviously get around
0:49:17and go places like Paris.
0:49:19I think we were in Switzerland over the summer
0:49:21and we're in a small little vineyard place
0:49:24in the middle of nowhere.
0:49:26And we are there with the only other people in the room
0:49:29is a Chinese family sort of tasting the wine.
0:49:32and you look around and we were thinking about buying a bottle or whatever, they had so few
0:49:39bottles that were actually earmarked that could be sold to people who walk in. So much
0:49:48was earmarked to go to China and they even print Chinese labels and this is in the middle
0:49:51of Switzerland and it's like this little winery we were in, they are experiencing just what
0:50:00you're talking about where they just know that their market now is basically China is
0:50:05a huge part of it. I don't know what the percentage was, but say it's 75% and then
0:50:09the rest of the world is like 25%. So they store some for the rest of the world, but
0:50:13then the most of it is just going to be sent to China.
0:50:16Right. And extrapolate from that what happens if China, if their economy keeps growing and
0:50:23a bigger and bigger percentage of their citizens grow into what we would consider like middle
0:50:29or upper class incomes. And the potential for growth there is just phenomenal.
0:50:34And so what does, so do you, I mean like the Apple Watch really could be the first product
0:50:40that's a massive hit in China, bigger than it is in the US. And like that's weird to think about,
0:50:46right? That there would be, it's always been that the US has sort of been the leader ahead of the
0:50:53game, I guess, in terms of Apple and technology, and then the rest of the world sort of catches on
0:50:58by stages and that doesn't also just mean in terms of the US being more affluent and
0:51:02having more buying power or whatever.
0:51:06Sometimes it's just everything from Apple releases the products here first, traditionally
0:51:13they have, to it being sort of the benefits of scale and so everyone you know has an iPhone
0:51:20and so you can use things like AirDrop and things like that and so it becomes, and iMessage
0:51:26so it becomes a more compelling option. But it hasn't been that another country has really
0:51:32taken off first. And I don't think that it's a crazy notion that Apple Watch could be one of
0:51:38those things. Yeah, I don't think so either. And I think that the gold models, the edition level
0:51:46plays right into that. And that's right. You know, it's totally like a feel thing, not a
0:51:56think thing. It doesn't make logical sense, right? Logically, it makes no sense for anybody to buy
0:52:01the gold version of the watch if the aluminum one does the exact same function at $350. But that's
0:52:08jewelry. Jewelry is entirely a, you know, how it makes you feel type thing, not like a logical
0:52:14thing. Nobody needs any kind of jewelry. And, you know, it's a long, you know, it's a long standing,
0:52:20you know, it's, you know, it goes back to the beginnings of human civilization. It's, you know,
0:52:26there's no, you can't argue with it. But I feel like in America, it's, you know, let's just say,
0:52:33when they, when they do come out with the watch, and they announce the final pricing,
0:52:36and let's say that the addition ones are $4,000. There's, I'm telling you, I still think even after
0:52:43all these months of people saying, "Hey, I think these gold ones might cost thousands of dollars.
0:52:46I think these gold ones might cost thousands of dollars." When they announce it, I'm telling you,
0:52:50America, people are going to shit their pants. They're going to be like, "I cannot friggin'
0:52:55believe this. They're out of—Johnny Ive has lost his frickin' mind. Why in the world is anybody
0:53:01going to do this?" And in the meantime, people in China and Asia, other places in Asia, are going to
0:53:07start lining up to buy them. I totally agree with you. I mean, it's because there needs to be a
0:53:15a mindset change which only can happen sort of over time I think. Everyone, including
0:53:20me even when I think about it, I'm viewing this as a technology product. What technology
0:53:24product would I buy these days that costs say $4,000 or $5,000? I mean it used to be
0:53:29televisions cost that much, now they don't anymore, they've come down in price a lot.
0:53:34It used to be computers cost that much, now they don't anymore, they're about half that
0:53:37price for a high-end one. And so what else is there out there in the technology world
0:53:42that would cost that amount of money. I mean, I'm trying to think of something now and
0:53:47I can't really come up with anything, right? So, all of a sudden this small little gadget
0:53:52becomes the most expensive piece of technology that you can buy on the market and why on
0:53:57earth would anyone do that when you can also get basically the same thing for $350 for
0:54:02the sport edition or whatnot. Yeah, it's exactly what you said. The mentality has to
0:54:08shift around it that this is actually jewelry and that's, I mean, you know, that's why Apple's doing
0:54:13what they're doing and that's why they're hiring the people that they're hiring, obviously.
0:54:17And there's some serious cultural differences too where, and I'm not an expert on it, I mean,
0:54:23Ben Thompson is, he lives over there, but I mean, I know enough about Asia though to know that
0:54:27they're culturally, their view of money is very different than us in the West. In the West,
0:54:35not that we're ashamed of it, but it's money is considered like a private matter. You don't flaunt,
0:54:40if you're wealthy, it's considered uncouth to flaunt it. And in Asia, that's not the case at all.
0:54:46So like I remember specifically like when the watch was first announced, I was listening to
0:54:50Accidental Tech Podcast and Marco Arment had just said something, something I think in reference to
0:54:56the gold one that like if he was at WWDC next year after the watch was out, he would be embarrassed
0:55:01to be out like, you know, having cocktails at five or six in the afternoon after WWDC and have a gold
0:55:08watch if everybody could know it was four thousand dollars. And I know exactly what he's talking
0:55:13about. I know, you know, I sort of feel the same way. Whereas in Asia that wouldn't, nobody would
0:55:18ever, that nobody would ever say that. Nobody would ever say I'm embarrassed to have what
0:55:22everybody knows is a four thousand dollar watch on my wrist. Right. Yeah, no, that's a, that's a
0:55:26great point. I mean, and I think that's true. You see that even before the watch, like when,
0:55:31When you buy one of the new iPhones for the first time,
0:55:35day one, you get it.
0:55:36And you know that plenty of people all know that this is,
0:55:41especially, say, with the 6 Plus,
0:55:43because it's such a different size.
0:55:44And so everyone's looking at that like, wow,
0:55:46that guy just dropped whatever, $700 to get that phone.
0:55:50And I'm still stuck here with the 3GS model.
0:55:54And one day, I hope to get that.
0:55:55But there's already that sort of thing
0:55:59where you're looking at this.
0:56:00It's like, yeah, everyone's gonna know that I just spent $700
0:56:03and it's, even though it's an awesome device
0:56:05and I wanna use it out there,
0:56:06it's like, should I really take this out of my pocket here
0:56:08and sort of flaunt it in front of everyone?
0:56:11- Yeah.
0:56:12Let's take a break.
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0:59:14Here's another thing about the iPhone. I want to talk to you about this,
0:59:21because I know you've written about it. The iPhone 5C, I think, is the most misunderstood iPhone
0:59:31that Apple's ever made. Do you think the iPhone 5C… What do you think the point of the iPhone 5C
0:59:39So my thoughts have changed.
0:59:43I don't know, obviously.
0:59:45I mean, I haven't talked to anyone
0:59:46sort of with first-hand knowledge of this,
0:59:52of like what the point was.
0:59:54And I don't know,
0:59:55I don't have a good enough sense of that to know for sure.
0:59:58But my thought process has changed over time.
1:00:00At first, everyone was talking about it, of course,
1:00:04is the quote-unquote cheap iPhone,
1:00:06which ended up being incorrect.
1:00:08And then it became sort of the first product that was launched under the unified Johnny
1:00:17Ive design and software and hardware design at Apple.
1:00:22So it was iOS 7 and we got the new flat design, the colorful sort of fluorescent look and
1:00:29those phones seem to go nicely with that.
1:00:32I still think, even I still have a blue model of the iPhone 5C that I still think is, I
1:00:42know I'm sort of in the minority here, but I thought it was a beautiful device when paired
1:00:45with iOS 7 at the time.
1:00:47I don't even know if I've upgraded it to iOS 8.
1:00:49It's sitting in a drawer somewhere obviously with iPhone 6 out now.
1:00:53But I thought it was a beautiful device and sort of the way it played with the wallpapers
1:00:58that they had for iOS 7, and it just seemed like it was a device that Johnny Ive wanted
1:01:03to create to showcase the new software that he was creating for the first time.
1:01:08Whereas the iPhone 5s was also a great design, great industrial design, but different.
1:01:17It was sort of the extension of what they had already done before doing this new software.
1:01:22And so that was my thought process for a while.
1:01:26You know Apple just didn't sort of continue the line right and so now we have the six and the six plus and we have
1:01:32No, we have three colors three sort of ten each of those but no no more colorful range anymore and
1:01:39Now we're sort of going towards as we head towards Apple watch where that's obviously going to be the most
1:01:45customizable Apple device that Apple's ever done
1:01:48You know, maybe that's enough to sort of placate the people who want
1:01:54different type of design and and I don't know what are your what are your thoughts on it?
1:01:58I I feel like I feel like I gave myself credit for not really buying into the whole like
1:02:05It leaked
1:02:07Months in advance that they were doing a plastic phone and that's just inevitable
1:02:11when you're making things in this quantity that it the news leaks from the Asian supply chain and
1:02:17Every you know, not everybody but the the conventional wisdom was Oh apples going after cheap the cheap market
1:02:23They're gonna sell this thing cheap, cheap, cheap, cheap.
1:02:27And then it wasn't cheap.
1:02:28It was unlocked.
1:02:29It was started at like 550 bucks,
1:02:31which is not by anybody's,
1:02:35it's certainly cheaper than the 5S was, but it wasn't cheap.
1:02:39And I never bought into that.
1:02:40It never made sense to me that Apple would suddenly lurch
1:02:43after the low end of the market and just go for market share.
1:02:47So I gave my, patted myself on the back
1:02:49for getting the 5C just because I didn't,
1:02:53never bought into it being cheap.
1:02:55But I think I missed the boat though.
1:02:56I think just by thinking, well, it's not going to be cheap,
1:03:01isn't enough.
1:03:02And I almost feel like in hindsight, when it came out,
1:03:05it wasn't even, not that they didn't wanna sell it
1:03:08in the first year, but it almost wasn't even meant
1:03:12for that year.
1:03:13I think it was meant for the long haul
1:03:17and like where it is now, like at the, you know,
1:03:20the free with contract level of iPhone,
1:03:25that it had the new aspect ratio for the screen.
1:03:30It wasn't three and a half inches,
1:03:32it was four inches and 16 by nine.
1:03:34And the, I do think, I agree with you,
1:03:39I think they're proud of the industrial design of it.
1:03:41I think Apple really likes that look.
1:03:44And I think, again, I think you're right,
1:03:46I think it's very astute that it does seem
1:03:49to be much more in harmony with the aesthetics
1:03:52of iOS 7 and 8 than the aluminum phones,
1:03:56the 5S and the 6s.
1:04:00And I know a lot of people, not tons,
1:04:04but I know enough who have the 5C
1:04:08because they just like the way it looks.
1:04:11- Right, even though it was slower,
1:04:12even though it wasn't as fast.
1:04:14- Yeah, that the iPhone has sort of gotten
1:04:17the point where you know whatever the difference in performance is doesn't matter. They're not
1:04:22waiting for anything anyway. It doesn't take any longer. You're mostly waiting for stuff to download
1:04:26right. Instagram doesn't run slower on the 5C. It's you're just waiting for the pictures to come
1:04:31down the pipe. Yeah, they just like the way it looks and I almost feel it was all about like
1:04:37establishing an aesthetic that fits at the lower end of the product lineup so that they don't have
1:04:45the free with contract phone being a premium device.
1:04:50- Yeah, that's a really interesting thought.
1:04:52I totally understand what you're saying there.
1:04:55Because it's weird when you buy something brand new,
1:04:59like say the 6 now, and then you know in two years
1:05:03this is going to be viewed as sort of the quote unquote,
1:05:06whether it's fair or not, the cheap version, right?
1:05:08It's going to, not only will it,
1:05:11we all know things degrade in value over time
1:05:13as they're sort of used and everything,
1:05:15But it's weird, the notion that as soon as you buy it,
1:05:19you know that in two years this will be on, you know,
1:05:22sort of Verizon ad spreads saying like, free,
1:05:27and this is the cheap version now.
1:05:30And so if Apple can get around that by creating a product
1:05:34that's sort of separate from the high end to begin with,
1:05:38from the high end meaning their actual most expensive things,
1:05:41even though as we just talked about,
1:05:42it's not that much cheaper,
1:05:44that creates a different sort of psychological dynamic to it.
1:05:47I also think, and I, so I had written a post a long time ago, maybe a year ago I guess,
1:05:53talking about like how odd it is that every advertisement I see around, I think it was
1:05:59around still San Francisco and sort of, I think it was in Seattle actually when I saw
1:06:03one that sort of made me think about this, that every ad I was seeing was for the iPhone
1:06:095C and not the 5S.
1:06:10There were a few ads for the 5S, but almost all of them, certainly around the Bay Area,
1:06:14were for the 5C.
1:06:16And at first I interpreted that as it must not be selling well
1:06:18and Apple feels like they need to pump up the advertising
1:06:21to sort of boost it up.
1:06:22And that may have been the case.
1:06:23I don't really know.
1:06:24But I did get a lot of pushback for it.
1:06:25And I think some of it was astute pushback, thinking,
1:06:29like, actually, this is sort of the perfect device.
1:06:31Along the lines of what we were just talking about,
1:06:32this is sort of the perfect device for Apple
1:06:34to showcase in their advertisements,
1:06:36because it's colorful.
1:06:37It sort of goes perfectly with iOS 7.
1:06:39It's sort of part of this--
1:06:42the playful ads that Apple likes to do.
1:06:45And so it ended up being, in a way,
1:06:47like the poster child for a long time
1:06:49for all those ads around different cities,
1:06:52and certainly in the US.
1:06:53I don't know about the rest of the world.
1:06:55And what if it was like, you know,
1:06:57just sort of a product that they thought
1:07:00was really beautiful and they knew
1:07:01that it could sort of get people in the stores
1:07:03by having these colorful ads,
1:07:05and then, you know, then either they buy this device
1:07:08and that's great for them,
1:07:08or they, you know, they decide to buy
1:07:11the more expensive device.
1:07:12- Yeah, I remember that post
1:07:13and it's actually why I brought it up with you.
1:07:15I don't know how.
1:07:16I'll look it up and I'll put it in the show notes,
1:07:17but I do remember that post.
1:07:18And I remember disagreeing with it
1:07:20because it was right around the time
1:07:22when it first started dawning on me
1:07:23that I had underestimated the 5C.
1:07:27And like I said, I think that this year
1:07:30is the year where the 5C
1:07:32is exactly where Apple wants it to be.
1:07:34I feel like it's,
1:07:36I feel like the hardest part of Apple's business
1:07:38is now that they've hit these insane quantities
1:07:42for iPhones, it's really, really hard.
1:07:46And their pipeline is so long.
1:07:48Like, how do you ship 74 million iPhones?
1:07:52And who knows what percentage of them were the iPhone 6?
1:07:54But I think it's a majority of them last quarter.
1:07:57How do you make that many in the first quarter
1:07:59that it's available?
1:08:01Well, part of how they do it is that it's planned out
1:08:05years in advance.
1:08:07I mean, like, I think it's about a two-year pipeline
1:08:10for their iPhones, like more or less
1:08:14that the iPhone 6 and 6 Plus were about two years
1:08:17in the making, and it's dangerous for them.
1:08:20And I feel like that's partly why they're,
1:08:22I think in hindsight, they were probably a year late
1:08:24to the big phone market.
1:08:27I think that if they could go back
1:08:29and do everything over again,
1:08:30I think that they would probably put the iPhone 6 and 6 Plus
1:08:34one year ahead on the schedule,
1:08:36'cause it was, but it takes too long for them
1:08:38to get everything set up so they can make these quantities.
1:08:41They can't act fast and just say,
1:08:44"Okay, we'll make a five and a half inch phone,
1:08:47"but we're only gonna be able to make a million of 'em
1:08:49"because it's new and we're not ready for it."
1:08:51Well, they can't do that.
1:08:52They can't have a phone that they can only make a million of
1:08:54in the first quarter.
1:08:55- Yep, I agree.
1:08:57- But I feel like the 5C was something
1:08:59where they were thinking ahead over a year,
1:09:03and they wanted to have a phone that sat at this sort of,
1:09:08well, in fact, they've gone to four levels, right? They've got the six plus, which is $100 more for
1:09:13the same specs compared to the six. So they've got the six plus where you pay $100 premium for
1:09:18the bigger screen with the extra pixels. Then there's the six, which sits where the iPhone
1:09:27always had, the new iPhones always have same price levels. Then one cut down, $100 down is the five S,
1:09:35which is still a premium device, right? The 5S is – and we could do a whole show about it,
1:09:41but in my opinion, it's still my favorite iPhone that they've ever made.
1:09:44And now the 5C at that free with contract level is so much more natural than if they were selling – if
1:09:52they had stuck to the original plan and hadn't made this one device that is so unusual with
1:09:59the plastic body and it never was at the high end. Effectively, though, the 5C is where,
1:10:05if they had stuck to the plan and done the same thing they've done every other year,
1:10:09that would still be the original iPhone 5 without the S.
1:10:12Benji M
1:10:12Right.
1:10:13And instead, which is like visually indistinguishable from the 5S, except it doesn't have touch
1:10:20ID, but at a glance it looks the same.
1:10:24Whereas now, at a glance, it's instantly recognizable as a different phone.
1:10:29Yes, that's a good point.
1:10:30I've thought, I think I've written about that as sort of that notion as well, that
1:10:35there was the problem with the S lines where they look the same.
1:10:40And so it's like, well, yes, they're faster inside.
1:10:44Like, what is it that's sort of differentiating on the outside?
1:10:48There was nothing for a while, and now the 5C gives you
1:10:51a very differentiated factor.
1:10:53But what do you think, then, sort
1:10:55of the obvious lead-in to that is,
1:10:58what do you think they end up doing the next iteration?
1:11:02So we're coming up on the fall of 2015.
1:11:07the assumption I would assume is that they do an iPhone 6S
1:11:12and then do they have an iPhone 6C
1:11:17and what do they do with them?
1:11:19Do they have a Plus S and how do they keep the line going?
1:11:24- Yeah, and how big would it be, right?
1:11:25How big would it be?
1:11:26Would it be 4.7 inches or would it be 5.5?
1:11:30Would it be both?
1:11:31I don't think it would be both.
1:11:32I think that they, it's an excellent question.
1:11:35I'm really kind of at a loss to guess
1:11:38what they're gonna do this year.
1:11:39Like I kind of guess they're gonna do at the high end,
1:11:436S and a 6S+, which would be this,
1:11:45look a lot like the, you know,
1:11:47just the typical S, you know, TikTok revisions.
1:11:52- Right.
1:11:53- But then what did they do at that pricing level below
1:11:55where the 5S is now?
1:11:57And I really wonder.
1:11:59- Do they keep the 6 and 6+ and, you know--
1:12:03- I don't think so.
1:12:03- We're getting pretty convoluted then at that point.
1:12:05to what the what the offerings are. Yeah, I don't think so. I kind of feel and I kind of feel like
1:12:11the way that they're and it's somewhat arbitrary because I don't think that the actual cost is
1:12:17that much different for the different sizes but I kind of feel like they'll if I had to guess
1:12:25maybe like they'll call it a 6c and it would be a four inch screen but with the specs of the iPhone 6.
1:12:33So that's interesting because one thing that has always been humorous to me for the past couple years now
1:12:38Remember when the iPhone first came out and everyone was clamoring like we need an iPhone Nano
1:12:43And you know and this is when the iPhone was a 3.5 inch screen the original iPhone and people were saying
1:12:50It's too big like we you know
1:12:52We're coming from a world of flip phones like the in the razor and things the Motorola razor
1:12:56We need a smaller device like I don't want anything bigger and now it's like no one talks about that anymore
1:13:02more and when you do hold even a 5 and 5s next to the 6 plus, it's sort of comical
1:13:09how small it seems and I don't even know when the last time I held a 4 was, let alone
1:13:14you know some of the even the older ones, but do you think that they go to a world where
1:13:21we have now the 6 inch screen, is it a 5, 5 and a half inch screen and then is it a
1:13:29in screen or do they do some other variation on that?
1:13:33But is the three SKUs, it seems to me like three SKUs is pretty good because you can
1:13:37offer different things at each for what people want.
1:13:40Some people might want a smaller phone.
1:13:43The problem of course is with developers, it's a pain in the ass to have to support
1:13:48all of these different screen sizes still.
1:13:50And so Apple traditionally, as you know, has been pretty good about retiring older sort
1:13:56of technology and making it so that you don't have to support that. Rather, you know, they
1:14:00push forward. But what do you think that they would do there?
1:14:04I don't know. It's interesting to me. Whether they say 4.7—like, one way they could go
1:14:11would be to say 4.7 is the new small iPhone size. And now the $99 mid-tier—$99 with
1:14:19contract mid-tier phone is also 4.7 inches. They could do that. And then that, to me,
1:14:25be a strong signal that the four inch size, you know, I'm sure that they would still have something
1:14:31at the, you know, free with contract level that still has a four inch screen at the end of, you
1:14:36know, next year. But that it's on the way out. But on the other hand, I could see them going though,
1:14:43where they still say you can still get a four inch phone, you know, we've got the, you know, small,
1:14:48medium and large screen sizes, and four inch is our mid-tier size. And it would have the same,
1:14:57the A8 from the iPhone 6, the camera from the iPhone 6, but in a four inch form factor. But
1:15:08would that form factor be plastic, like the 5C, or would it be metal, like the 5S? I don't know.
1:15:13Yeah, and I guess the other thing to bring up is that I think now, are we at the point
1:15:19now where everything has the Lightning connector?
1:15:21We are, right?
1:15:22Yeah, we are with iPhones.
1:15:24But we're not at the place where everything has Touch ID, and I assume that Apple wants
1:15:29to get there for Apple Pay especially, and then just overall to simplify and make it
1:15:34easier for developers who are trying to support Touch ID and there's the fallback, of course,
1:15:39of just using passwords, but I would assume that they want to get everyone on Touch ID,
1:15:43even the low-end ones? Do you think you agree with that? Well, I don't know, because that's the—so
1:15:48the weird thing, it's like I said, like, I think like this year, right now until the end of the
1:15:53year, the 5C is exactly what Apple wanted. They've got this, you know, a nice phone,
1:15:59everybody likes it, it's easily advertised, it's colorful. But because they didn't rev it last year,
1:16:06my assumption is, at the end of this year, the 5C as we know it goes away. That just, you know,
1:16:12falls off the bottom of the product list and it's gone and it's replaced by what? If they just keep
1:16:20moving things down the line, it would be replaced by the 5S, which does have touch ID but doesn't do
1:16:26retail Apple Pay. Like, it only does Apple Pay like in apps, which it doesn't seem to have taken off
1:16:33yet. Right. Because it doesn't have NFC. Right. And it also, if they do that, it goes against my
1:16:40thinking that they want the bottom of the line phone to not have that premium metal industrial
1:16:47design like so I don't know like do they come out with a new plastic model that debuts at that free
1:16:54tier I I well it seems like an awful lot of new SKUs right yes yes um because I also feel like part
1:17:03of it just part of the reason that they can make all these new iPhones is that they're only making
1:17:09one or two new phones a year and the other ones are these things you know
1:17:12like the 5s that they already know how to make and it just you know just keep
1:17:17making them like you did last year you know the other thing that throws a wrench
1:17:20into it is what they did this year and and this is another discussion you know
1:17:25to the iPad mini where they didn't update the internals at all but they
1:17:30gave it touch ID and like why why even bother to do that you know when they're
1:17:35when that was the only sort of upgrade that they did and now there's the whole
1:17:38debate, you know, is the iPhone 6 Plus eating into iPad mini sales specifically, and what
1:17:44do they do with the future of that line, and is there a future of that line?
1:17:48Yeah, it's a good question.
1:17:50So maybe, I don't know, like could they come out with like the equivalent of a 5C,
1:17:55but just add Touch ID?
1:17:57Yep, potentially.
1:17:59That would be something that I might guess would be something that they do, because I
1:18:03do agree that they want to keep, obviously they want to have differentiating factors
1:18:07for the premium.
1:18:08But I do think that their strategy is pretty strong
1:18:12right now around Apple Pay.
1:18:14And I would imagine that they want--
1:18:16like we talked about earlier-- they
1:18:17want that to be a moat, a new moat, that sort of creates
1:18:21a reason why you're in the Apple ecosystem,
1:18:23regardless of which device you have.
1:18:25And so my guess would be yes.
1:18:27They have something like an iPhone 6C that
1:18:31has Touch ID and NFC.
1:18:33They add both of those to it.
1:18:35- Yeah, but maybe like old, a seriously older A series chip,
1:18:39like an A6 or something like that.
1:18:41- Right, and that's how they differentiate.
1:18:43It's not nearly as fast as sort of the high end,
1:18:45and it's maybe plastic, so plastic not as fast,
1:18:48the camera's not quite as nice,
1:18:50but it does still have Apple Pay and Touch ID.
1:18:54- Yeah, at the very least, I can't imagine that they'll ever,
1:18:58at any price point, I can't imagine that they'll ever
1:19:00come out with any new iPhones that don't do NFC
1:19:03and Apple Pay.
1:19:05- Yeah, I agree.
1:19:06- But it's a question, a big question is,
1:19:08if they keep the 5S around though
1:19:11and move it down the product tier,
1:19:15that's another year then though that they have a phone
1:19:18that doesn't have Apple Pay and NFC.
1:19:21- Yeah, and yeah, I mean that's an interesting dilemma
1:19:25for them to have, though they've always dealt
1:19:29with that fine in the past, sort of keeping those products
1:19:31around longer than anyone else thinks that they should
1:19:33and obviously they have the data to back that up
1:19:36that they should do that.
1:19:37- Yeah, totally.
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1:24:14- No, I mean, I'm still, so I was back in San Francisco
1:24:20when, a couple weeks ago, for a while.
1:24:24And I've been sort of going back and forth
1:24:28about Apple Watch, so unlike you,
1:24:29I wasn't at the event, the unveiling,
1:24:32and so I didn't get a chance to sort of see it
1:24:34and sort of get a better sense of what it was.
1:24:36I watched the keynote, sort of it's great
1:24:39that they stream it live, and so I could watch it here,
1:24:41despite their technical hiccups,
1:24:42which I'm sure you heard about.
1:24:43You know, they-- - Yeah, that was bad.
1:24:46- Yeah, it was really bad.
1:24:48But they fixed it a little bit for the later one.
1:24:51So I wasn't sure really what to make of Apple Watch,
1:24:55and I'm still sort of trying to get there,
1:24:57but I had a number of interesting discussions
1:25:00with people more in the know while I was back,
1:25:03and sort of thinking through things
1:25:07of where this is gonna go.
1:25:08And I'm starting to get a lot more bullish on Apple Watch
1:25:11than I was to begin with.
1:25:13Not to say that I was bearish on it,
1:25:14but I was sort of wondering a lot of what we talked about.
1:25:18Sort of how many people are going to pay a premium
1:25:21for a gold one, how many people are going to buy
1:25:23the edition one, how many people are going to buy
1:25:27the cheaper sport one, and what does it mean.
1:25:29And then when they released the SDK,
1:25:31and just like we were talking about earlier,
1:25:33it sort of seemed like there were more widget-like apps
1:25:36rather than true apps and it seemed like Apple was already telepathing into the future where
1:25:42they're going to make them more robust apps.
1:25:44So they're almost saying like, "Yeah, we're going to put this out there, but V2
1:25:47of this is when things get really interesting."
1:25:50And so it's sort of the old problem that Apple has had amongst many people who believe
1:25:56like, "Don't buy the first version of something.
1:25:58They always make it better the second version."
1:26:02I am definitely getting more bullish on it now
1:26:05after having sort of had a few chats
1:26:08and learned a lot more about what it's actually doing.
1:26:12Where's your mind at with it?
1:26:13- I've never been either bullish or bearish.
1:26:17Even having been at the event and even having,
1:26:20I didn't get to use it
1:26:21because they were all running the demo software,
1:26:23but I did get to at least try one on.
1:26:25I've always been ambivalent, like tell me more.
1:26:30Like I need to know more about this
1:26:32before I can even decide either way.
1:26:34To me, the big, and I still feel that way.
1:26:37That's why ultimately I still feel like
1:26:40they're probably gonna have another event
1:26:42before it comes out.
1:26:43And if the other rumors are right
1:26:45and they're gonna do like a bigger iPad,
1:26:48that would make sense to do it all in one event.
1:26:50And so there's a new thing, which is a bigger,
1:26:53pro-sized 11-inch or 12-inch iPad.
1:26:56So here's a new thing.
1:26:58And here is more on this thing we announced in September, the Apple Watch, which is now imminent.
1:27:04And he'd let us show you more. That to me feels like they don't even need to do anymore. That's
1:27:10a perfect Apple event, a new iPad at a new size. You know, and if the thing about the stylus is
1:27:17right, there's all sorts of demos they can do there, you know, bring up somebody, some third
1:27:21party with, you know, show some kind of Wacom style professional artwork being drawn on the
1:27:26thing and then, you know, show me more about the Apple Watch. The thing that gets me and
1:27:32is the confidence that Apple seems to have about the Watch. It's not what they've told us and what
1:27:38you can read at apple.com/watch. It's the confidence that Tim Cook has and everybody else
1:27:45who's spoken about it publicly. They're so confident about it that to me it's it seems like
1:27:52like it would be reckless to bet against it because they're just not they're not
1:27:56the type of people who breathlessly promote everything and anything that
1:28:01they do I agree with you definitely I think that that is something that makes
1:28:07it so you can't obviously you can't write it off well you could never write
1:28:10it off being from Apple these days but their confidence is is pretty
1:28:15fascinating the the way that they're positioning it they're obviously still
1:28:19doing this world tour of going around and talking to all the various people in the fashion
1:28:23industry, hiring the various people in the fashion industry to bring them in to make
1:28:28sure that they're ready to go for this.
1:28:32It all adds to the feeling I'm getting.
1:28:34But I also just am starting to get a better sense of what I think that they think they
1:28:43can do with it.
1:28:44do think that the early days will be maybe a little bit underwhelming at first because
1:28:51they're only going to work with a handful of people as they always do behind the scenes
1:28:57to get third party apps sort of ready to go for when this thing launches and there are
1:29:02going to be obvious things and it will be largely predicated around push notifications
1:29:05I would assume. But I am starting to believe more that there's different types of things
1:29:11that third-party developers will be able to accomplish.
1:29:14And maybe it takes to the second SDK, the more robust thing, for it to really get there.
1:29:19But I'm reminded back to when the iPhone first came out and we had developers making the
1:29:26web apps because they didn't have access to actually making native apps at the time, only
1:29:29Apple did.
1:29:30So it's not exactly what's going on here, but we are getting a little bit of what feels
1:29:34like a muted SDK for third-party developers right now.
1:29:39I think it's somewhat analogous.
1:29:41I think it's a little bit better than the web apps of 2007,
1:29:45but it's close.
1:29:47It's not a bad analogy.
1:29:50- I agree.
1:29:50And so now I'm trying to think through,
1:29:53when Apple did release the second sort of SDK for the iPhone
1:29:58that allowed for native app development,
1:30:01it was insanely exciting to everyone,
1:30:03but no one really knew what would happen.
1:30:05We knew games would come
1:30:06and there would be sort of silly little apps to begin with,
1:30:09which there were, there were many.
1:30:11And then it wasn't clear if there would ever be
1:30:13like big businesses, right, or real businesses
1:30:15built on top of that.
1:30:16And look at it now, I mean, how many billion dollar
1:30:19businesses have been built on top of the iPhone alone?
1:30:22You know, and Android and stuff,
1:30:24but the iPhone is what kicked it off.
1:30:25It's like Instagram and all these other things
1:30:27that were iOS only at the time.
1:30:31And is there a way, this is what I'm trying to think through,
1:30:33is there a way for the watch to do something similar?
1:30:37And your instinct is that sounds ridiculous, right?
1:30:40Like that there's this watch, this small little device that just seems like more of
1:30:46a novelty, or is it going to actually be something that big businesses can be built on?
1:30:51And I think that there's two camps.
1:30:53There's people who believe that eventually we will get to that place and there can be
1:30:57sort of new interactive paradigms with sort of the taptic feedback stuff and there will
1:31:02be new types of messaging apps that we haven't thought of yet.
1:31:05But then there's the other group that I think is more along the lines of, look, the
1:31:09Apple Watch, here's what it is.
1:31:11It's just another moat for the iPhone.
1:31:14It's a way, you can't use it right now without the iPhone.
1:31:17It's a paired device with that, and so it makes the iPhone more attractive to iPhone
1:31:22owners and it gives people maybe another reason to buy an iPhone rather than choosing an Android
1:31:28device or some other similar device.
1:31:31Yeah, I don't know.
1:31:34I feel like both of those scenarios are possible.
1:31:37I do feel like ultimately it's, you know,
1:31:40just the march of technology is that eventually
1:31:42it will be independent.
1:31:43Like it won't need, you know,
1:31:45it'll have its own internet access without an iPhone.
1:31:48Just to me exactly the way that the iPhone
1:31:52used to need a Mac or PC running iTunes to sync.
1:31:57I mean, it's still, it seems crazy.
1:31:58Like there was only way to get contacts on your iPhone
1:32:00was to sync it with your computer using a cable.
1:32:04And I kind of feel like the watch needing a phone
1:32:07Within Bluetooth range to get internet is the same thing like, you know, three four or five years from now
1:32:14We're gonna laugh at the fact that you couldn't get text messages on your phone unless you were within
1:32:19You know 20 feet of your or on your watch unless you were within 20 feet of your phone
1:32:23But in the meantime, I do feel like that's the way that you bootstrap it is that it's again
1:32:30Like you said like a moat around the iPhone
1:32:32I think that's how it debuts and then all of a sudden you realize it's you know, two three four years from now
1:32:37It's its own thing. That's right. I agree with that
1:32:40And I think I think they're going about it the right way with everything that they've sort of shown so far
1:32:46You know having used a lot of these other sort of wearable devices. They're all they all range from either very bad to sort of just
1:32:53Mediocre there's no great one right now
1:32:54And I think a lot of it is that a lot of a lot of these companies have just basically taken
1:33:00the phone paradigm that the smartphone the touchscreen paradigm and strapped it on the wrist and
1:33:05Apple with this crown sort of interaction they're trying to actually think about what they should do
1:33:11I mean you're putting your hate when you're touching the screen all the time
1:33:15You're completely covering the screen like why would you do that?
1:33:18You know so like the crown where you can zoom in and out that that's like sort of
1:33:22Is an obvious thing in hindsight that I think is is going to be sort of a?
1:33:27a killer feature that everyone ends up copying, of course,
1:33:30but it's things like that that make me more excited
1:33:33about the prospects for it, though I agree
1:33:37with sort of everything we're saying,
1:33:38which is that the first iteration,
1:33:40it will take a while to prove these things out.
1:33:43- Yeah, I think that the crown in particular
1:33:46is one of the reasons, like why did they announce it
1:33:49when they announced it?
1:33:50Well, part of it is, like I wrote this week,
1:33:53part of it, I think, is that they wanted to announce it before it went into production,
1:34:00because once it went into production, it was inevitably going to leak. And in fact, it did
1:34:04leak. There was, like, one day before they announced it, there actually were, like,
1:34:09blueprints that leaked that were, in hindsight, were pretty much spot on, or exactly spot on.
1:34:15They didn't get a lot of publicity because they weren't real pictures, but if it had happened even
1:34:20a week earlier somebody you know could have done like a 3D rendering and and and spoiled it i think
1:34:27they really wanted to be the ones to unveil it and they're glad they did um six months is about the
1:34:34outer limit i think for when apple could do it i think and you know i think it's also possible that
1:34:41in in like an ideal world if everything had gone according to plan maybe it wouldn't be shipping in
1:34:45April, maybe it would have been shipping like in February. And it's just, you know, enough bugs
1:34:53still remain, enough kinks still remain in the software that they need the extra two months
1:34:58before they feel comfortable shipping. But well, I also I definitely heard that they did want to
1:35:03do this in the fall. And it just Oh, originally, yes, definitely. Yeah. Like, and in hindsight,
1:35:09with some of Tim Cook's remarks, like it all things D or whatever. That's right. You know,
1:35:14I think the year before that they, you know, they have a, they have products to release all
1:35:17throughout 2014. Yeah, I think, like two years ago, they were thinking like a holiday release
1:35:23for 2014. So I think it's, I think that's definitely the case. I've heard the same thing,
1:35:26too, like internally that it's, you know, yeah. Not that they're shocked. I don't think it's
1:35:32like a disaster. I just think it's, yeah, it just took it just was not the best case scenario.
1:35:38Yeah, there's soft it's and it's, I think it's largely software rather than
1:35:42Yes, the hardware that's going on. It's a software. It's hard to nail this this new sort of paradigm that they're trying to do
1:35:48Yeah, I think that the hardware that they and who knows I mean because you know
1:35:53It's not like they were letting us crack open the demo units back in september
1:35:57But i'm pretty sure that the hardware they showed us at the event in september
1:36:01Is exactly the hardware they intend to show. I think i'm pretty sure that it is. Yeah
1:36:05Yeah, and that they're like internally like johnny ives team is already working on the next
1:36:12revision of the hardware like that's they've you know, the hardware is done and defined and you know, it's that screen and
1:36:19That chip and that metal and you know everything down to the bands that that stuff is all done. It's yeah
1:36:25I think it's all software that's still
1:36:27being worked on and of course the
1:36:30component of that is the battery life and what do you think about sort of I'm sure you saw the the Mark Gurman report about the
1:36:37The breakdown of the battery life issue and so it's you know, I think it was 2.5 hours of full active usage
1:36:43Which is a little bit?
1:36:46You know misleading because are you gonna be sitting there on your watch for two two and a half straight hours using it straight through?
1:36:52No, but what do you think is that like in the ballpark you thought it would get to?
1:36:57Yeah, I think that the basic gist is that they need to make it so that if you're an act if you use your Apple
1:37:04watch thoroughly that you can still get through a day, no problem.
1:37:08I've seen some stuff.
1:37:11You know the demo units they showed us on all the screenshots they show us don't show a battery meter all the time.
1:37:18And the simulator in Xcode does.
1:37:24So there's some question as to whether you know where they've you know what are the actual production ones are going to do?
1:37:30Yeah.
1:37:31how are you going to check the battery? Like it seems as though what they've shown us so far is
1:37:35that you're not supposed to even, I'm sure there's some way to do it, like go into settings and
1:37:39there's, you know, if you really want to check your battery there'll be a way. I feel like what
1:37:44they want to do is just get it so that it, you know, if you charge it every night you'll be fine
1:37:50and you don't have to worry about it. And if you forget to charge it one night you're probably
1:37:54gonna, it's probably gonna die the next day. And you know, one thing, so as we know with the phones
1:38:00now and iPad and everything else.
1:38:02The biggest power draw is the screen of all these things.
1:38:06I think that it seems like they're doing smart things that the other smart watch makers haven't
1:38:12done by the way, which is when you get notifications coming in, rather than illuminate the screen
1:38:19right away, they're using their haptic thing, the haptic engine to be able to alert you
1:38:24to that.
1:38:25The screen is going to be on probably less than you think it is because we all see these
1:38:29smartwatches out there right now that light up when whenever you get something
1:38:32and that's not gonna be the case with this yeah I mentioned last week with
1:38:36when Ben Thompson was on the show that from what I've heard from a couple
1:38:39people again not firsthand not anybody who has a watch but all secondhand from
1:38:43people who've talked to people who are testing a watch is that an enormous
1:38:47amount of effort has gone into making it so that when you do want to look at the
1:38:51screen it comes right on like the detection of your wrist and you know the
1:38:55the motion detection of what angle the watch is at. Hey, I'll bet this, you know, the person
1:39:01wants to look at me right now. And then when you move it away, it goes off. That they've,
1:39:05you know, an enormous amount of work over the last three years has gone into just turning the screen
1:39:11on and off when it wants to be on and off. And I feel like the Gurman stuff is interesting. It's,
1:39:17you know, I have no reason to doubt that those are the actual numbers. I just feel, though,
1:39:21that it's like it almost doesn't it isn't really helpful to thinking about how you're going to use
1:39:26the watch it's it's just sort of their enumerating that's right i'm 100 in agreement with that it's
1:39:35sort of it's thinking it's it's yes it's it's sort of the spec sheet it's what it will be like if you
1:39:41were just in a in a vacuum if you just said like give me the numbers of what it's going to do when
1:39:45it's like this and this but i think the key is that the way that it's been engineered the apple
1:39:50watch will change the way that people at least right now think that they're going to use it
1:39:56it's not going to be all the time coming on and it's not going to be you have a hard time you know
1:40:01turning the screen off or you have to hit a button to turn the screen on and off and all that kind of
1:40:05stuff and so yeah i think it will end up lasting a lot longer than people are sort of thinking about
1:40:09just reading that that that stat line yeah the polar opposite to me would be the um the now
1:40:17defunct iPod nano or whatever it was called the one that was square and then yeah there was the
1:40:24I think it was yeah the watch fans yeah the tick tock kick card yep starter which is like it right
1:40:29I bought I did too which I think at the time was like the broke the record for like a kickstarter
1:40:34project it did and it really was well done it was as well done as a turn your iPod nano into a watch
1:40:43could be done, I think. But I got it, I popped my iPod into it, and five minutes later took it off
1:40:52and never used it again because the idea of a watch that you had to hit a button to read
1:40:57drove me nuts. Because there was no motion detection because the iPod wasn't meant for that.
1:41:02So to see the time or do anything with it, you had to use your other hand and hit the button.
1:41:07and as a watch it was you know and I you know I could see why some people's liked
1:41:14it but for me as somebody who wears a watch and just wants to glance at the
1:41:18time it was maddening and I feel like the Apple watch is the opposite of that
1:41:22and that sort of also leads to one last thing I know we were going for a while
1:41:26but I don't know when we'll talk again so I want to there's so with that you
1:41:30know you also had if you wanted to listen to music which is what you do of
1:41:32course mainly with an iPod you had to have you know your your white earbuds
1:41:37plugged into your wrist and then they would be going up to your ears right and
1:41:41it's like yeah if you're trying to run you could you know rip the earbuds out
1:41:45of your ears if you were for some reason you know moving your arms too far or
1:41:49something that leads to a question which I have no idea but I and I don't know if
1:41:55they're gonna do this anytime soon or if this waits till sort of the fall or the
1:41:58next version or something but like they have to be doing something with Bluetooth
1:42:02earbuds right I mean there's no way that they can they're they're already saying
1:42:06that you'll be able to store music and some podcasts and they'll have limited storage
1:42:10to be able to do that and they want you to be running with it and you can have sort of
1:42:15be able to listen to your music. And they're saying, I think they said in the press material
1:42:18or whatever, you can use your Bluetooth running. People have special running Bluetooth headsets
1:42:24that they already use and they're decent or whatever, but that's not going to be good
1:42:27enough for Apple. They're going to want to do their own, right? And when are they going
1:42:29to do that?
1:42:30- Yeah, it's a perfect has to happen eventually idea.
1:42:35And again, I think having used the iPod Nano
1:42:41with the TikTok watch strap, I had the exact same thing.
1:42:43I thought, well, when I sent it for the Kickstarter,
1:42:46I thought, I'm probably not gonna like this as a watch
1:42:48because I'm not gonna like a watch
1:42:50that I have to hit a button to see,
1:42:51but I might like it as something to use my iPod
1:42:54when I go running.
1:42:55And in fact, I hated it because of exactly what you said,
1:42:58that having the cable go to my wrist
1:43:01and my arm is moving while you run, it was maddening.
1:43:06It just felt like I was, I don't know.
1:43:11It felt like the sort of thing that you,
1:43:13like when you're on probation and they put like a, right.
1:43:18But I can't help but feel the same thing
1:43:23with the Apple Watch.
1:43:24I mean, the watch clearly doesn't even have a headphone jack
1:43:27So it's going to, and it does do Bluetooth audio.
1:43:32So if the watch does Bluetooth audio
1:43:34and the future is to not have a cable
1:43:37between your headphones and your device period,
1:43:40Apple has to do Bluetooth.
1:43:42My question though is if Apple goes
1:43:44and does Bluetooth headphones of their own,
1:43:47are they going to be included with devices?
1:43:50Or-- - Yeah, interesting.
1:43:52- And/or if they're not, will they do them themselves
1:43:56will it be like a beats thing? Well, so remember how they used to have, I think they still
1:44:01probably sell them. They had those more high-end version of any ear earbuds because I bought
1:44:06them at one point. They were like $100 or something.
1:44:08Yeah, I remember that.
1:44:09Or $20 for the other ones. And they were pretty good. They were okay. They had like three
1:44:12different sort of sizes that you got the earbud gel things that you could sort of stick in
1:44:18your ears depending on how big your ears are. And they were okay. They were definitely better
1:44:22than the old version of the earbuds that came with all the iPods and everything. I don't
1:44:28think they're better than the new version of the earbuds, at least I don't use those
1:44:33higher end versions. I'm not even sure if they sell them. I think that they still do.
1:44:37But I would imagine that's how they do it at first at least, that they sell them as
1:44:40like, because it'll probably be expensive to make, more expensive than the current iteration.
1:44:44So maybe they sell them for those $100 and then eventually they sort of move towards
1:44:50because that is something I always think about, you know, like what else can they do to improve
1:44:54the iPhones right now? And the biggest pain point now is honestly untangling the damn
1:44:59earbuds when they're in my pocket. I know that they're like, you know, everyone, I
1:45:03complain about this from time to time on Twitter and everyone comes at me with like, "You
1:45:07should get these ties," or, you know, "This thing," and they have all these like third
1:45:10party products to like make it better. But like really, I just want, I don't want to
1:45:14carry around more stuff. I just want to have my earbuds and I want to have the phone in
1:45:18in my pocket and I want the earbuds not to somehow defy the laws of physics and get so
1:45:24tangled up that it seems like you have to cut them almost to in order to untangle them.
1:45:29And so it's another thing that really strikes me in the winter too because it's so much
1:45:34more of a pain in the ass when you're wearing a coat and yeah and you've got these these
1:45:40things dangling right and it's like when do you there's no good way to do it like if you
1:45:46you know, wanna listen to podcasts.
1:45:47Like, you know, I walk almost everywhere in the city
1:45:49and I run errands and that's when I listen to podcasts
1:45:52and it's great, but when it's winter
1:45:53and I have to wear a coat, it's like, what do I do?
1:45:55Do I put it in my pocket and start listening to podcasts
1:45:58and put the coat over the headphones?
1:46:00And then it like, it pulls.
1:46:02But if you put the coat on first
1:46:04and string it over the coat,
1:46:06it, there's just no good way with the cable.
1:46:08Like, as opposed to when you're not wearing a coat,
1:46:10you can just put your phone in the pocket
1:46:12and it's not too much of a hindrance
1:46:13to have the headphone cable going
1:46:14your jeans pocket to your ears, put a winter coat on and it there's no good way. It's hard to do.
1:46:20Have you have you tried one of the bluetooth ones before? So it's like funny, you know,
1:46:24going back into the late 90s or whatever when they first came out, obviously they sort of got this
1:46:28douchey, you know, sort of aura around them. But I use the I use the jawbone era, I think it's
1:46:37called the era quite often now. The problem is that it's only obviously one year so it's not
1:46:42great for music, you can do it for music, but for podcasts and stuff it's pretty good.
1:46:48The only other downside is with one ear, you have to turn it up quite high sometimes, like
1:46:53if you're in a louder environment to be able to hear.
1:46:56And I never use it for calling or anything, but I honestly don't make that many calls,
1:47:00so I don't use the speaker part.
1:47:02But I use it a lot just to listen to things.
1:47:05It's a little bit wonky, the Jawbone software isn't great, and so it can take a little
1:47:09a while to pair and sometimes it drops and it's great not great audio quality I would
1:47:13say but it's good for podcast definitely yeah I would probably enjoy that if I had
1:47:18one but I've never tried it yeah I you know I haven't tried any of the others but the
1:47:22job on one is pretty solid I kind of wonder what the form factor would be for like an
1:47:26Apple Bluetooth headset like you know would would would they be connected somehow and
1:47:32if so what would it be like a thing that goes around the back of your head hmm yeah that's
1:47:38an interesting point there. I've seen both. I've seen ones that are like that, where they have a
1:47:41thing that goes around the back of your head. I think I've also seen one where they still have
1:47:45something dangling, but it's not connected.
1:47:47Right, because somewhere there's got to be a battery.
1:47:49So it can't just be the earpieces. Ideally, it would just be two earpieces that you put in
1:47:56independently.
1:47:57Right, but then you'd need two batteries, and one of the reasons why I think the jawbone one is
1:48:04bigger than it even needs to be is just because of the battery, obviously. And the battery's not
1:48:08great by the way either that thing lasts for it says four hours of talk time i think it's it's
1:48:12usually like two and a half hours max it will last yeah i feel like that's it's gotta happen but i
1:48:18don't have i have no idea how it's gonna happen i feel like bluetooth has you know the headphone
1:48:22cables have got to go the way to the dodo and the other thing too that's got to be a motivation for
1:48:27apple is just staring at my iphone 6 right now i can't help but look at it and think that the
1:48:32headphone jack has now a gating factor on making it thinner.
1:48:36Yes, that's the biggest part.
1:48:38You know, the lightning adapter is so much thinner than the headphone jack.
1:48:45And whatever the thickest port is on your device is going to be the next one Apple gets rid of,
1:48:53and right now it's the headphone jack.
1:48:54Well, and obviously they're starting, I think, pretty soon. I think they have a few already,
1:48:59But they there was some story that they're gonna start shipping the lightning ones, right?
1:49:03So you'll be able to do audio through the lightning port and so I'd imagine that's how they do it
1:49:07Maybe even starting next year or something that they they just sort of get rid of the headphone jack and and my god
1:49:14I can't wait for people to complain about that
1:49:15That will be you know
1:49:16That's gonna be the next getting rid of the optical drive and you know
1:49:19Killing the mouse and all these types of things like when they kill that audio that headphone jack. It's gonna be
1:49:26It's gonna be a shit store and people are gonna say it's because they own beats and beats. Well, that's right. That's right
1:49:32Yeah, it's all we'll have an antitrust
1:49:34investigation, you know like
1:49:36It's all it's all a scheme to get you to buy beats headphones
1:49:39But I would assume that that's what they're gonna do
1:49:44It seems like only natural because you can actually drop it. You can draw power from that too
1:49:49Which is pretty interesting, right? So you could have a pair of headphones that are connected still but
1:49:55you know, like the noise canceling ones,
1:49:57where right now you need like AAA batteries,
1:50:00but like the Bose ones that cancel out the noise,
1:50:03but they need AAA batteries to put in them.
1:50:05And if you could just draw the power from the phone,
1:50:07that's interesting, but that doesn't alleviate the,
1:50:10that actually probably exacerbates the cord issue still.
1:50:13- Yeah, probably.
1:50:14Yeah, well, it would have to.
1:50:16Yeah, and then the other thing,
1:50:19I was thinking like, 'cause noise canceling,
1:50:21whenever I think of noise canceling,
1:50:23I used to have a pair of Bose noise canceling,
1:50:26and I do, I kind of miss them whenever I'm on a plane,
1:50:28because they really do work, and I always think of them
1:50:31as something you wear on a plane.
1:50:33- But they're just so bulky to carry around.
1:50:35- Exactly, it's such a huge,
1:50:37they're so big compared to earbuds.
1:50:39And if they drew power, that's the other thing too,
1:50:44is that you don't wanna get off the plane
1:50:45and have your phone be dead
1:50:46because you were powering your headphones.
1:50:49And if you've, there's only one lightning adapter,
1:50:51So even if you're on a plane depending on your airline if you have a you're lucky enough to be on a plane where you
1:50:56Can have a power port?
1:50:58Are you gonna charge it while you're while you're using it for lightning to do the headphones?
1:51:03Yeah, I feel like Bluetooth is the way to go
1:51:06Yeah, the only way that that would their trade-off would be good
1:51:09There is if is if by drawing power from the phone you could significantly reduce the bulk of the noise cancelling
1:51:16So they didn't need the battery obviously
1:51:18But I don't know. I don't know what's involved in sort of the noise canceling technology
1:51:22But I cannot help but think that the headphone jack is going the way of the dodo
1:51:26I mean, I really I honestly don't know how much thinner they could make the device and still have it
1:51:30I mean a little bit just looking at it, but it's really and then could they could they do stereo speakers then?
1:51:36do you think on the
1:51:38You know at the bottom where they only have the one sort of side is is the speaker could they do both would they do?
1:51:43both
1:51:46I feel like I've never gotten a definitive answer on it, but when I've brought it up with people at
1:51:51Apple, they've always said that it's a gimmick because it's too close. It doesn't make it,
1:51:55it actually doesn't make a difference. Yeah, that's right. I've heard the same thing. It's sort of,
1:51:59it wouldn't matter. You're exactly right. I think it might matter a little bit if, and I've seen
1:52:04some phones, you know, like with Android, you can find a phone that does anything, you know, there's
1:52:08some obscure Sony one that has like speaker on the top and the bottom. So that when you hold the phone
1:52:14in horizontal mode like you would when you're watching a video, there's a little bit more
1:52:20separation and I could see it would make a difference. But for the most part, you know,
1:52:23if you have stereo speakers on the bottom, just on one side of the phone, it's pointless.
1:52:28And in fact, when you're watching video sideways, it's counterproductive.
1:52:32Right.
1:52:33Because, you know, what's the point of having left and right when they're both on the right,
1:52:36because that's how you're holding the phone. Like it's, you know, so that's what I've heard,
1:52:41Is that it's just a stupid marketing checkpoint that they're not going to go for
1:52:44That was one of the rumored features though of the ipad pro right that it might have stereo like because it would have
1:52:51Speakers on both sides who knows if that's that's gonna end up being legitimate at all
1:52:55But I think that was at one point like I thought I still think though
1:52:58It would only make sense if they were at the top and bottom not left and right because yeah
1:53:02That's how you watch video and video is when you want it like who cares if your alert sounds come in stereo
1:53:07that's right or
1:53:10what they could do if they do actually do some sort of keyboard device with the iPad Pro.
1:53:17Maybe they could do it just like they do with MacBooks now where they have the speaker sort
1:53:20of built under the keyboard. Yeah, something like that I could see. I don't know, but I
1:53:23don't think putting them on the actual sides of the device makes any sense. Yeah. All right,
1:53:30I think that about does it. Good talking to you. We shouldn't make it so long this next time.