00:00:00 ◼ ► 20 years ago, I never ever would have believed that my wife, a lawyer, I would be spending more time reading legal briefs than my wife does, who's no longer practicing, which is why she's not reading them.
00:00:14 ◼ ► I honestly am looking for my second wind here because I was kind of getting tired of the European regulation talk and I needed a little break. And I actually begged Mike Hurley last week on upgrade to like, let's not talk about this. And he's like, no, we have to. They made all these changes.
00:00:29 ◼ ► I'm like, and then it turns out that was my only chance, but I know people are tired of this and it's, it can be kind of polarizing to talk about this. And I suspect we're going to talk for a very long time about the department of justice suing Apple, which is why I want to start with a more broad topic that people will love. Getting excited about baseball season.
00:00:46 ◼ ► I've got some baseball topics, but I will say filing, wishing to talk less about the EU and the European commission regulation of Apple at last week is the definition of be careful what you wish for. Yeah. Right. I mean, you are, you are literally in, in like an Aesop's table.
00:01:07 ◼ ► Oh, well, I'm going to, I'm going to start with the signing of Blake Snell by excellent, excellent. I love by your beloved San Francisco giants.
00:01:20 ◼ ► And I cannot tell you how much personalized merchandise I'm going to buy this year. Oh my God.
00:01:25 ◼ ► They could put the monogram. They put my name on a bunch of merch. So this is the year he may only pitch for the giants for one year, but that that Snell Jersey is going to last me for decades. What's his number? Do you know yet? He is number seven. Oh, that's a pretty good number too. It's a good number. And it's my, my daughter's was born on the seventh.
00:01:44 ◼ ► So it's got little extra personal connection to me. And so I'll take it. I'll take it for the record though. No relation, no relation. No, there, there. I have been asked several hundred times if I'm related to people named Snell and only once has the answer ever been. Yes.
00:02:02 ◼ ► And that was a random person who knew my cousin, but otherwise nobody, no famous snells. If there are any, there aren't that many, there are a few, and none of them are related to me. And if they are, they're incredibly distant, like yeah, general, many generations ago.
00:02:16 ◼ ► I am unrelated to any famous grovers. There's my, my branch of the group versus small and obscure, but it is though the, it is a very popular, it is the most popular surname in Austria. I always forget the country. I don't know if it's quite as common as like Smith is in America, but it is.
00:02:36 ◼ ► If you look at a map that you just Google most popular surname by country, there's, I don't know if there's one or, but you can find a map and it just tells you the name that the last name that's most popular in every country, Austria is Gruber, but we both have, we both have Germanic names for years.
00:02:52 ◼ ► I thought that Snell was a Dutch and that they had come from the Netherlands, but finally my dad did a couple of years before my dad died, he did a bunch of genealogy and then we did the research and it turns out that there, it was a very early, like 1720, 1730, really early German immigrant named Schnell.
00:03:11 ◼ ► And then they anglicized it. So German names. Thank your ancestor because I think Snell is much more melodious than Schnell.
00:03:19 ◼ ► Yeah. Everybody was making, making Blake Snell things like Snell yeah, and stuff like that. And I'm like, guys, I've seen them all. It's not worth going down this route. There's really not, it's not worth it. Just move on, move on.
00:03:31 ◼ ► You know, there was Ian Snell was the, he was a pitcher. He got, he was for the Mariners, I think originally, and I was really excited, but he kind of flamed out, but Blake Snell won the site on the hoard. So I have a Tampa Bay Rays Blake Snell, a jersey. I have a t-shirt from when he signed with a Padres. That's the, that says Snell in a Padres logo font, but now I'm going to clean up. This is it. Every, every, my, my kids can have giants jerseys. I don't care. We're all, my mom can have one. She's not even a Giants fan. It doesn't matter.
00:03:59 ◼ ► The closest I got was you probably remember him. Kelly Gruber was, uh, which we think of more as a blue Jay. Right. Yeah. Uh, but I, I can't remember who else he played for, but not the Yankees. No, I don't think so. That's to my, and I think I would remember that, but because he played on the blue Jays, a division rival, I hear about him all the time. And it always annoyed me, especially because he was pretty good. He was a good third baseman.
00:04:23 ◼ ► And the other one played one year, his last year for the California angels, but otherwise was a lifer for the blue Jays. So yeah, never a last, never a Yankee. And Paul Gruber was, I think an offensive lineman, maybe a defensive lineman for the Tampa Bay Buccaneers in football. But there was a, there were a couple of Snells in, in the NFL, but also no relation.
00:04:44 ◼ ► The one that I guess, the other one was it's not sports related, but there was a company called the Gruber wagon works who made, it might've been the primary manufacturer of the covered wagons from like the Oregon trail type Western expansion.
00:05:00 ◼ ► Wow. That's pretty good. That's pretty good. There's still some physics and optics. People will know the, that Snell's law, which has to do with refraction again. No, but that's, that's when I get a lot in the world and Snell is actually a noun because it's something on a fishing lure.
00:05:15 ◼ ► It's like the thing that connects a fishing lure to the hook or something. It's a Snell. I don't know. I don't know. These are the names. What, you know, honestly, what I think of the most is that it's kind of unfair because I have four grandparents, each of which have their own.
00:05:29 ◼ ► Family name, but my, my dad and my paternal because of the patriarchy, we only ever talked about Snell. I'm like, there are a lot of Wilsons out there. My grandmother was named Wilson. I'm probably related to more a famous Wilson in a way that I am not to a famous Snell, but nobody asks. Right.
00:05:45 ◼ ► So, yeah, there was my mother's family had, it was a thing where they were, they're Ukrainian. And when they came over, like around the turn of the century at 1900, they all got different spellings of the last name. And the rumor was she was the pedolics.
00:06:05 ◼ ► And there was a guy for the Eagles named Joe Podolak and they, everybody in her family swore they weren't related, but it was like no way to prove it and no way to get in contact with them.
00:06:15 ◼ ► I have one, I'm going to bring this back to the Apple sphere very tangentially. One of my favorite things that randomly happened when I was talking to developers is so, you know Jesse Gross gene who does a test paper that is my new outline. Yeah, exactly. Yeah. Grazian is my wife's maiden name and they share a great grandparent. They're actually related. Had no idea.
00:06:40 ◼ ► Huh? It's kind of wild. So it's a small world, but anyway, I am not, if only I was related to Blake Snell, I would welcome with open arms. We would show him where to go in the Bay area, but alas.
00:06:51 ◼ ► All right, now we can have some real fun though. And really stick the dagger in on the dodges. And here's my question for you. Do you think you would notice if $4.5 million were wired out of your bank account $500,000 at a time over the course of a year?
00:07:09 ◼ ► A year or two. Um, what I noticed, well, I would have to have that in my bank account. Um, and, and for it to be immaterial, I would say no, because I accidentally bought two sets of plane tickets to London for the relay 10th anniversary show this summer because British Airways decided to reject my transaction.
00:07:34 ◼ ► And, and then like half an hour later, just charged me for it. And I had gone and bought tickets on another carrier and we noticed. So I'm going to say, and that was like about $2,000. So we noticed. So I think I would, I think I would notice, but you know what, if I had just signed a $750 million contract.
00:07:52 ◼ ► And I think that the number of it is if my translator was also essentially my everything life manager, right? Maybe I would notice. So we're talking here about Shohei Ohtani, who I think is fair to say is the most celebrated player in all of baseball. Right? I mean, who else who's second place? Trout or judge? I guess I would say.
00:08:14 ◼ ► Right. I would say Ohtani is number one. I mean, it pains me to say it, but he's two way player. It hasn't happened. I mean, sort of kind of happened with Babe Ruth, which is how far back it goes, but he never really did both at the same time.
00:08:28 ◼ ► He was a pitcher and then stopped pitching and became a slugging right fielder. Right. Whereas Ohtani is both an all star pitcher and a all star slugging right fielder is more DH. I mean, more DH so that they don't wear them out. But yeah. Right. Yeah.
00:08:48 ◼ ► But caught up in a genuine gambling scandal, $4.5 million. Do you understand yet how this became public in the first place?
00:08:57 ◼ ► I believe an LA Times reporter was asking questions about it, and I think it's unclear about exactly what was going on there. But there's a guy who is a, I don't know if he's a bookie. He's under federal investigation. There's a federal gambling investigation.
00:09:11 ◼ ► And it sounds like a reporter got a tip that Shohei Ohtani's translator was in deep with that guy. And so the LA Times reporter called that guy essentially. And then, and there was a statement that said, yes, Shohei Ohtani, it's very embarrassing, but Shohei Ohtani felt bad for me and he offered to pay my gambling debt.
00:09:38 ◼ ► And then about two hours later, a lawyer called the LA Times, I believe, and said, no, that's not what happened. He wasn't involved. He was robbed. And there are some, there's some legal questions about like, if you're paying a gambler, even if it's not your debt for what are probably illegal sports wagers, because sports betting is illegal in California, then Shohei Ohtani himself may have exposed himself and that the lawyers kind of jumped in at that point.
00:10:03 ◼ ► But the fact is, the person making all these statements was the guy. It was the one guy. It's bananas, right? Like they asked for a statement from Shohei Ohtani about his, the gambling debts of the translator and the translator said, Well, I talked to Shohei and here's what he said, which is what
00:10:20 ◼ ► it's, yeah, I will put a link in the show notes. ESPN has a timeline of the grades that is super useful. And there was the translator sat for a 90 minute interview with ESPN and gave this interview for 90 minutes with a spokesperson, a crisis management spokesperson in present.
00:10:41 ◼ ► And then after the interview is when a lawyer then contacted ESPN and said, don't use that interview. He was lying. It's yeah, the crisis manager did not help out there. No, it was poorly because apparently the crisis manager had only been told what the translator had told him. It's a weird story.
00:11:00 ◼ ► Things to understand is for people who don't live in California, it is strange because of how ubiquitous if you're a sports fan, how ubiquitous the ads for sports betting are. I mean, you live in California, but you still see all the sports betting ads.
00:11:15 ◼ ► On national broadcasts, we see them on local. So like if I'm on a Giants game on our local Comcast sports or NBC Sportsnet, you won't see them there. But on like a national broadcast, you'll see the national ads and they're full of, yeah. You probably see fewer than I do. Although I guess I mostly watch national telecast sports for the most part.
00:11:33 ◼ ► They're ubiquitous. And if it's not even in that it's also like it's the studio is named for it. Everything is labeled it because that's where all the money is. The DraftKings halftime report and stuff like that. Yeah. Did you see the joke that was going around? I'm going to find it. You go ahead. But there's a really great moment about somebody. Oh, I've got it here. This is a tweet from Jeff Israel or an ex or whatever they're calling them now. But I think this says it all.
00:11:59 ◼ ► Welcome back to SportsCenter presented by ESPN bet for more on the Ohtani situation. We go to our fan dual MLB insider Jeff Passan at our DraftKings studio in Los Angeles brought to you by Caesar Sports book. Jeff, how could something like this happen?
00:12:14 ◼ ► That's exactly it. But my point is California is one of only 10 States left in the United States where online sport or sports gambling remains illegal. An online general gambling in general, I believe is illegal. I don't think you can play blackjack or anything on your phone with real money. Right? Right. So that's one of the things to keep in mind is that in California where Ohtani has been playing because he was with the angels. Now he's with the Dodgers across town. Sports gambling is illegal.
00:12:41 ◼ ► And so there was this guy who's running an illegal sports book in Southern California. That's my understanding is that this guy was running a big money. Bookie operation illegally and came to the attention of the feds and the feds started investigating him and they got to look at his bank records and they saw on his bank records in coming wire transfers from Ohtani.
00:13:08 ◼ ► Then somebody I think somebody from whoever's doing that investigation. I don't know, you know, might come back to the DOJ. I don't know who's doing this federal investigation, but spoiler will be talking more about the DOJ later in the show.
00:13:22 ◼ ► But somebody leaked it to the press and therefore because that's so sensitive and probably the wrong thing to do. It might even be illegal. That's why it's sort of all these narratives about how ESPN reporters first came on to the hint of it is really obfuscated in their reporting.
00:13:39 ◼ ► Right. ESPN and the LA Times have to report have to protect their sources, but somebody tipped sports media that Ohtani had made large was a part was a large Ohtani payments were part of a federal gambling investigation, right? The sirens go off at that point.
00:13:53 ◼ ► Right. So famously, infamously, famously and infamously, Pete Rose, the all time hits king of baseball was found to have been betting not just on sports, but on baseball. And it's a lifetime ban that's on the rules that have been on the books since the 1919 White Sox scandal where they and I've read in hindsight.
00:14:18 ◼ ► There's the Black Sox, you know that they supposedly threw the World Series. I've also read that in hindsight, maybe it wasn't quite as bad as legend believes, but whatever.
00:14:28 ◼ ► Baseball had a hundred years ago, baseball had an absolutely horrendous gambling scandal where the whole country was convinced that one of the teams in the World Series threw it for gamblers.
00:14:38 ◼ ► And ever since baseball more than any other sport, all sports take gambling very seriously and until very recently, frowned upon any references to gambling whatsoever.
00:14:49 ◼ ► Like Al Michaels, my one of my favorite announcers of all time for my lifetime has always put subtle cues into his his like fourth quarter calls when the over and under goal is.
00:15:02 ◼ ► Yeah. He says there are a lot of people really happy right now. And it's widespread. Yeah. Yeah. And then like Collins worth or whoever's working with them would might say like you might say they're overjoyed.
00:15:14 ◼ ► And if you knew you knew and if you didn't know you didn't know but it was actually like he would have been reprimanded if he had said that field goal puts the over under and over can you imagine five years ago Apple releasing a sports scores app that had by default prominent betting lines turned on.
00:15:33 ◼ ► I don't think it would have been by on by default, even if it was in there five years ago, but it is train has gone down this track now for five years and it is ever since that Supreme Court ruling basically opened the door for states to legalize sports gambling.
00:15:48 ◼ ► I wonder about that. I think Apple is particularly interesting to think about because they have a Disney like brand image. I've often mentioned on this podcast and my family has taken numerous Disney Cruise Line cruises Disney's is the only cruise line that I'm aware of that has no casinos on the ship right because they just not because of any kind of law.
00:16:10 ◼ ► The whole reason cruises have casinos on ships is once you're in international waters. There's no laws regulating it so you don't have to worry about gambling regulations and guess what casinos are profitable for all for everybody except Trump.
00:16:26 ◼ ► But for most people who own casinos, they're very profitable because the odds are rigged in the house always wins. Yeah, but Disney does not have them on their ship because they consider that off brand and I don't blame them even though personally if they did I would have partaken sure.
00:16:41 ◼ ► I also it's one of those one of those ways you can hold two thoughts in your head at the same time, which again we will come back to and the ESPN brand. I mean, ESPN at least for now is entirely owned and that may change soon entirely owned by Disney and they made a deal.
00:16:56 ◼ ► There's ESPN bed is a real thing so that and I think that says something right. I think Bob Iger was like no we're going to keep it at arms arms length three four five years ago and now and part of that is that Disney's trying to find other revenue store sources.
00:17:11 ◼ ► But part of it is also the Disney culturally it's letting ESPN have betting is not the it's not as controversial. It's still controversial but not as controversial as it would have been in the US five years ago.
00:17:23 ◼ ► But to that point of would an Apple Sports app five ten years ago have included the point spreads at least by default. I don't know because one thing that's you know this too from being as old as we are but when I was growing up the newspapers always had the point spreads like so like you'd go and the sports section of the the just like the way the business section had I guess nobody prints this shit anymore.
00:17:47 ◼ ► But you know like the stock ticker for the day and the change an entire two page spread of tiny seven point type telling you every single stock on it to stock exchanges what happened changed in the previous day and the sports pages were filled with box scores little tiny type telling you everything that happened in every game in major sports and then they would have the upcoming games and they would tell you the betting lines.
00:18:10 ◼ ► It's true. I just I think culturally about the fact that although it did appear in places it was more like right before the Super Bowl. They did a really great fun documentary about the NFL today.
00:18:20 ◼ ► You are looking live exactly right that was the name of it and that was the catchphrase and Jimmy the Greek Snyder was a bookmaker basically he's an odds maker not a bookmaker he's an odds maker and they had him on the show which was groundbreaking and somewhat controversial but they said you could sure you can have an odds maker on the show he just can't talk about the odds and so they invented like a who has the advantage scenario but they couldn't talk about point spreads and they couldn't talk about it was for gamblers but don't mention the gambling.
00:18:49 ◼ ► I think that says it all right that gambling has been a part of sports forever in the US even as it's been illegal. We have a grand tradition of doing things even though they're illegal going back to before prohibition but in this case I think it says something about the cultural context that everybody knew it was there but sort of didn't want to talk about it.
00:19:08 ◼ ► And I think five years ago Apple probably would have made the same thought that Bob Iger made his decision about with ESPN at the time which is let's not but times have changed and this is the this is one of the arguments about gambling becoming so tied to sports in the US now is going to be stories like this where there's a guy involved very closely involved with a sports figure and he's in the clubhouse and he lost millions of dollars doing sports gambling.
00:19:35 ◼ ► Yeah, well the counter argument to putting the odds in an app like this or in the sports pages during for decades when sports gambling was illegal in 49 states.
00:19:47 ◼ ► Yeah, and for me growing up in Reading, Pennsylvania two time zones away before you could place a legal bed, but the argument for sports fans who don't gamble is that you still want to know who's favored right like like oh, yeah, it's the Carolina Panthers versus the Atlanta Falcons and you don't let you live in San Francisco. You're like, I don't really follow these times and you don't even favored by by by seven and you're like, oh, they're gonna kill them.
00:20:14 ◼ ► Yeah, and you're like what's wrong with the Panthers and all of a sudden you're like, oh the quarterback got hurt last week or something like that. You're like, oh, that's information and it has nothing to do with the proxy.
00:20:23 ◼ ► There is an issue there where the where it's a it's like distortion of free markets kind of stuff. This actually just happened with the Super Bowl where the 49ers were favored and I don't think there was any knowledgeable football fan and I am a 49er fan who looked at that game and said, oh, 49ers are probably they're more likely than not to win it.
00:20:39 ◼ ► I was like, it's the Chiefs that's not going to happen and it turned out that there were more excited wealthy Silicon Valley football fans betting on the 49ers and it and the line is based on where the bedding goes not based on like a right and often is a great proxy for because it's the wisdom of crowds, right?
00:21:00 ◼ ► But you also get when there's too many kind of when there's a distortion in the market you can end up with bad numbers like why are the 49ers favored by two here and it's because there was a lot of money on the 49ers so they had to do that.
00:21:13 ◼ ► Right exactly from the bookies the sportsbooks operate break even and make your money on the big on the big right. They want half the money on one team half on the other and then they're guaranteed to come out ahead because they get apple.
00:21:25 ◼ ► Yeah, they take 10% from the people who lose and so if everybody if the fans are wrong, it doesn't matter if they're like holy hell, but you know if the if like the compute pure computer model says the chief should be favored by three and a half points, but that would make way too much money go on the 49ers then the bookies would lose if the 49ers one or came with three and a half.
00:21:48 ◼ ► In fact, I read a story that said it was even there was even like a second order effect where there had been a preponderance of bets on I guess the the 49ers to win the Super Bowl at the beginning of the year.
00:22:01 ◼ ► And so they were also trying to cover the line so that they could cover that so that they can make up the difference because they're like, oh, we got a big payout of the 49ers win because we're gonna we're gonna or if the Chiefs when I forget which one it was so they shifted the line even further so that they could hedge right and basically say like,
00:22:17 ◼ ► we're going to break even either way at this point and then we take our 10% and we walk away and that's why the house always wins.
00:22:23 ◼ ► Well anyway, so it's back to Oh, Tony and I it's a bad look. It's really I mean, he really is the biggest star arguably one of the biggest at I mean inarguably one of the biggest biggest contract in sports history American sports history. Yeah.
00:22:38 ◼ ► $750 million. But I do the more I read about it. I actually kind of think it really is just the interpreter and that the interpreter the the what everybody's thinking is it Oh, Tony who is making the bets and you and because this interpreter is his best friend and it he literally is more that far more than his translator.
00:23:00 ◼ ► Yes, yes, they have run this whole life basically right and like three years ago when there was a lockout with doesn't matter two or three years ago baseball and the owners and the players union had a disagreement the season was delayed.
00:23:13 ◼ ► There was a lockout and part of the terms of lockout were that employees of the teams were not allowed to talk to the players of the teams because they were locked out.
00:23:22 ◼ ► This interpreter quit the Angels he quit his job so that he could still be friends with and hang out with and be in contact with on a daily basis Oh, Tony he quit his job during the lockout so that he could do it. They're very close, but I kind of think it really might just be him and again, it's almost like
00:23:42 ◼ ► like an absurd comedy right where like you and you hinted at this earlier where when people are asking questions to Oh, Tony about this scandal. They're going through the interpreter who is more.
00:23:55 ◼ ► But yeah, yeah, but that's and like he's sending the message of like, well, I've got a statement here from Shohei Oh, Tony and it's like, yeah, do you are you lying about this? I think Occam's razor. I read a good piece of Craig Calcutta, who has an excellent baseball newsletter called Cup of Coffee.
00:24:09 ◼ ► He wrote it and as a former lawyer like your wife he says Occam's razor suggest. Okay, first off. It's probably not Oh, Tony making the bets a bunch of people have talked to players who played with Oh, Tony and know him and said he's not interested in other sports and all these bets were on other sports.
00:24:25 ◼ ► It's like he's just not interested in any of that. He's a very one away you become Shohei Oh, Tony is being maniacally focused on baseball, but the what Calcutta says is that Occam's razor suggests that this probably was not a guy who was forging Oh, Tony's approval for wire transfers, but more that the most likely scenario is that Shohei Oh, Tony saw that his friend was in trouble and said, okay, I'm mad at you for doing this presumably, but I will bail you out because you're not.
00:24:54 ◼ ► Because you're my friend and that does intentionally if that's true, it opens him up to some he may have broken some laws there, which is I mean, nobody. I think nobody thinks that Shohei Oh, Tony is a bad guy in this situation, but he may have inadvertently done some stuff that's against the rules.
00:25:08 ◼ ► Right to help his friend. Yeah, and again, as much as 4.5 million dollars is a staggering sum of money to most of us. It's actually not to show you Oh, Tony. I mean, it's significant. It's noticeable, but you know, he can.
00:25:26 ◼ ► My thought about this honestly was that he took the story about his 750 million dollar contract as he took it massively deferred. He is not getting paid 750 million dollars over eight years or whatever he's getting paid over like 30 years and the Dodgers will be writing him checks. It's like the Bobby Bonilla contract where he's retired 20 years and he's still getting a million dollars a year from the Mets. It's a little like that.
00:25:46 ◼ ► Barry Bonds was getting paid for a decade after he left the Giants for the same reason and there are reasons to do that. You can claim you're the highest paid player, but and there's some tax reasons because by the time he gets most of the money, he won't be residing in California anymore. And so arguably he won't have to pay California taxes, but I did immediately have that thought of like, Oh, no, Shohei. You don't have a lot of money. You deferred it all. You might have to take out like a loan or something to make back that that money.
00:26:11 ◼ ► Well, the thing is, apparently by all accounts and ESPN has said multiple sources say none of the bets run baseball, which is good news. And of course, part of the argument and it comes up with Pete Rose. And I actually believe this. I personally believe it that if you're involved in a professional sport, you should not bet. You should be forbidden from betting on any games in that professional sport. You have insider knowledge.
00:26:32 ◼ ► And there's a casual idea. Well, I mean, obviously the worst thing to possibly do would be to bet against your own team. Right. And then throw the game. I mean, and that is obvious.
00:26:42 ◼ ► But we see that in like in point shaving scandals and basketball where you're degrading your team.
00:26:48 ◼ ► But I think part of the problem is Rose said on the Reds, right. But on the Reds every day.
00:26:53 ◼ ► Right. And that's the and I actually think I don't think that's a gotcha. I think that's actually interesting that he would bet on the red some days to win and then other days wouldn't bet at all, which is a sign. If you're the bookie, you're like, hey, what is Pete? No.
00:27:08 ◼ ► What does he know? And I don't want to gate thing. They're not most of these people are not bright guys and they got out of hand. It's like that. The college was a college baseball guy who was like, Oh, yeah, he literally was calling us. This is last year. Literally, I was friend and saying, our pitcher is hurt today.
00:27:24 ◼ ► So bet against us. And there were unusual bets on a game nobody cared about. And and they I mean, yeah, it's they're often they're compulsive gamblers and they make stupid decisions or they're not very bright and they make stupid decisions.
00:27:38 ◼ ► Yeah, it's scenes out of a Coen brothers movie. The I this the college baseball coach, I will look this up. I just jotted it down. I swear to God, I'll put it in the show notes. But the story is comical. His friend actually tried to place the bet in person in a Vegas casino. And it was a very large bet, like $100,000 in cash and something like that. And he's up at the counter in the sports books trying to place $100,000 bet on an obscure college football game, which are baseball game.
00:28:11 ◼ ► If if it's the Saturday, if it's the day before the Super Bowl, and you try to place $100,000 bet on the Super Bowl, you're still going to have a manager come out, I believe you don't just make the transaction like you're betting $100 on the team. But they're gonna they'll take the bet. No, no question about it. A lot of people probably bet. Like you said a lot of big money 49ers fans probably had $100,000 or more, but betting on an obscure middle middle middle team.
00:28:35 ◼ ► Middle middle of the country college baseball game. Very unusual. And like they're like manager comes out and say and they're talking to the guy and he's saying things like, you don't understand I've got inside information.
00:28:51 ◼ ► Well, they're like, this is a very unusual bet, sir. And he's like, you don't understand I've got information. And they're like, go into your stockbroker and saying, Okay, I got a tip from an insider. Let's get some trading and the stockbroker is like, Yeah, I don't know about that. I don't know if we should do that.
00:29:08 ◼ ► Sir, you're breaking the law. Anyway, this is this is not the law and order segment that I thought that this would be about. All right, let me take a break here. And before we dig into the fun part, we and I will thank our good friends at trade coffee, whose beverage I'm enjoying as I speak as we record trade coffee is here to make help you make better coffee at home.
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00:31:46 ◼ ► Alright, you know that line from the Princess Bride, let me explain. No, there is too much. Let me sum up. It's like there is too much. So we've been talking, you and I haven't exactly I don't think you, I don't think the EU thing is here the last time you were here but obviously we've had podcasts and we have websites and we've been writing and talking about the EU and the DMA for the last two months right because it was like January 24 or 25.
00:32:15 ◼ ► When Apple have announced their and it's been about a year since Mark Gurman reported that they were investing a large portion of this iOS cycle on DMA compliance. So we knew it was coming for about a year. So we knew that so we spent two months talking about that and I guess the leaks.
00:32:35 ◼ ► I mean, it's I was not surprised by the deal that the DOJ had a lawsuit, but it's been the DOJ is investigating and in a way the reports have been like it's inevitable that they're going to sue over something. I mean, so that there is a lawsuit is no surprise at all.
00:32:54 ◼ ► I find the actual lawsuit though, and I've read the whole thing and I'll give them credit for one thing and one thing only is that it is and it is a dramatic contrast to the DMA.
00:33:09 ◼ ► It is very readable. It is written in very plain straightforward language and you can at least see what they are arguing very clearly. So that's 180 degrees apart from the DMA, which is almost torturously opaque and vague.
00:33:33 ◼ ► Perhaps because they have to translate all of their laws into I don't even know how many languages a dozen or more maybe more than a dozen to cover every EU member state.
00:33:46 ◼ ► Who knows? I presume actually I what do you think they're the first language of the EU is it? Oh, I don't know if the European Commission.
00:33:57 ◼ ► I don't know. I don't even I mean Brussels. What do they see? I don't know this shows my ignorance. What do they speak in Brussels French French right? They although Belgium is a multilingual state, but the Russell's is and Brussels is kind of I mean, it's in the French area, but you know, they yeah, it is anything about the Olympics where like everything's in English French and the local language, but I don't know if there's like an official documentation rule for them.
00:34:25 ◼ ► I presume that English is high on their list, but I don't want to I don't want to absolve them of the opaqueness of it and I don't think it's purely a translation issue. I don't think it's because they that oh if you speak fluent French, then the DMA makes perfect sense.
00:34:38 ◼ ► I don't think that's the case at all. I suspect it's equally opaque in every language and it's really it really reminds me of like I have dreams like this like nightmares like where you're trying to read something and you can't understand it's you know, like along the lines of like math test anxiety dreams.
00:34:55 ◼ ► I found a little doc that says that they're always in English French and German a lot of stuff in like the official documents and can be translated into specific languages to pay based on region and wreck.
00:35:08 ◼ ► It sounds like I'm making an excuse for the terrible pros of the DMA and I shouldn't it's just terrible. So I'll give the Department of Justice credit for clarity and I think almost nothing else. I think there are and the more I think about it the more outraged I am my take away on this is and I tried my best to keep as open mind as possible and not be knee-jerk.
00:35:37 ◼ ► Oh, I'm opposed to this regulation as I could as I read it but reading it reading every single thing of it and marking it up marking my copy of the PDF up.
00:35:47 ◼ ► It just it in the more I read it and the more angry I got because I think the the less founded it is and the more.
00:35:56 ◼ ► I honestly don't I just think it could not pop it's hard to imagine it being more misguided.
00:36:04 ◼ ► And I realize you and I are in a position where again, I tried to be on the side of it as best I could because we're open to accusations that we are knee-jerk Pro Apple right and therefore a lawsuit filed against Apple people like me and you are it knee-jerk going to take Apple side and so to fight that I actually tried to have as open mind as possible and it's absolutely pointless.
00:36:30 ◼ ► It is a terrible terribly misguided lawsuit. What I would say is that you and I know about Apple's misdeeds better than anyone.
00:36:38 ◼ ► In fact, I found in some of the interviews I've done about this. I said look, I'm not a lawyer and I don't know how courts will rule and I don't know the antitrust law and I don't know the current state of how it's interpreted in different all of that stuff.
00:36:50 ◼ ► I can't tell you I do know a lot about how Apple operates and so on one level I know all of the potentially legally questionable deeds of Apple and things that I would argue are anti-competitive or are rent-seeking or anything like that and part of my disappointment with this document is that I feel like a lot of the things that I think are questionable that Apple does aren't in here.
00:37:19 ◼ ► And the things that they call out are weird and some of them are sort of fantasy and the storytelling aspect of it while it makes it really readable makes it also feel like they're kind of playing to the public and that it's the parts of it are more of a political document and a tone-setting document than they are and you can see where they as somebody knowledgeable about Apple's business practices.
00:37:45 ◼ ► We can also see where they're kind of fudging it where they don't really they can't really accuse Apple of this specifically so they kind of talk around it in order to make it seem as bad as possible when in fact it's much more complex and more shades of gray than that.
00:37:58 ◼ ► And like, so I didn't walk away from it thinking, oh, this is completely asinine and Apple is without sin. I think I walked away from it thinking you perhaps because you're limited by the fact that there are no regulations that directly cover a lot of these kind of businesses.
00:38:16 ◼ ► You're limited by the Sherman Antitrust Act, whatever it is hundred and some year old law about monopoly about regulating oil companies and railroads that you come at the king you best not miss right.
00:38:28 ◼ ► That's the line and here's like you guys missed maybe I mean, it's a long case they can add things in but like I was just struck that some of the stuff that is such a big deal in the DMA is just kind of not really here and then the stuff that they deeply care about is
00:38:44 ◼ ► one a little bit strange and two I don't I wonder what result is desired and what result could realistically come from this other than just being seen as taking on big tech and being able to crow about the fact that we're fighting for you the little guy with these big tech companies which gets us back to this is much a political statement is anything.
00:39:08 ◼ ► Very much agree. It's very political and oddly though, but it's also political from the bureaucratic side of politics, not the retail get people's vote popular side of politics, which I think is going I do think at a very high level is going to be a problem for the DOJ.
00:39:29 ◼ ► I don't think I don't think that the only people who don't like Apple or people who don't like Apple products, right? And I think the fundamental flaw in the whole thing at the very highest level is at the very highest level.
00:39:48 ◼ ► They're trying to argue that the iPhones success is entirely predicated on anti-competitive lock-in strategies and that people who want that there must be therefore implying that there are a lot of people who wish to switch from iPhone to Android and can't because of high costs imposed by Apple through anti-competitive actions when in fact the whole point the whole I firmly believe that the entire reason that iPhone is so high.
00:40:17 ◼ ► The entire reason that iPhone is successful is that people love it. It is the most popular product consumer electronics product anybody's ever made and arguably the most popular product any company has ever made in history of capitalism. I honestly believe that that's what I want away from most is what's the political calculation of you trying to save people from a product that 98% or whatever of people are satisfied with and love.
00:40:46 ◼ ► And so what are you protecting them from and the argument is oh well the iPhone could have been cheaper if they had to compete more ways like well first off the iPhone is cheaper. They sell it in a whole variety of prices and you can buy it at different levels.
00:40:58 ◼ ► But if that's the argument is that well and Apple look and this is the conundrum here Apple does itself no favors because historically I agree with you. I think people love the iPhone and they use it because they love it historically though Apple has behaved because of the where Apple came from when they were about to go out of business Apple has behaved like a company that is terrified of finding out.
00:41:21 ◼ ► If people would abandon them if it was easier and it is a bizarre to me lack of confidence in their own products and I don't know whether it's cultural or whether there's a disconnect inside the company because like I don't think that Apple should have kept deeper running or something like that and I'm I don't I think it's perfectly fine for Apple to not put iMessage on Android because it's their service and they can choose where to deploy it.
00:41:46 ◼ ► But there are moves that Apple has made that this document argues and I think on somewhat fairly Apple makes some moves that the email show they're like well, why should we help people make make it easy to switch to Android?
00:41:59 ◼ ► Why should we do that? And I would argue that they're behaving like that in error, but that is their behavior is like Wi-Fi. I said this on upgrade the other week, which is like what we think we're confident that our product is good.
00:42:12 ◼ ► But why find out if we can control it so nobody leaves then it does then what but why find out and on that I'm sympathetic to the DOJ the idea that this product should you should be able to switch but I don't think anybody except maybe at the margins would switch and I think that the document gets delusional when it suggests that everybody is just burdened into sticking with the iPhone because they're trapped.
00:42:36 ◼ ► I just don't think that's the case and then and again they are it's extremely unclear or just doesn't even mention what they actually want to happen is remedies which I guess isn't necessarily and again we're not lawyers.
00:42:48 ◼ ► Maybe that's not the point of this and that this is not this opening filing is more or less equivalent to the opening statement in a courtroom case and the closing statement where it's this is not where you delineate and present the quote from a bunch of internal emails from Apple and they never mentioned not not once mentioned who wrote any of them and include the entire context of them that stuff will of course all come out.
00:43:17 ◼ ► Eventually, and you'll be able to read all of the actual original emails and see them in context and that's not this is not the place for that. So that's fine. But just to get back to my further my my earlier point about the political nature of this as opposed to a legal nature and and that it's not I don't see this appealing to the public at large and in fact, I see that it I could see if they're arguing if the idea is that 55% of phones in America.
00:43:46 ◼ ► Phones in America are iPhones. That's a majority. I don't think it's a and again it gets to a huge problem with this. I did to me. That's not a monopoly at all or even close and I think that's the one of the strongest arguments Apple has here is that we don't even have a monopoly the whole thing should be thrown out.
00:44:04 ◼ ► Yeah, but it is a majority and I would say that entire majority are people who actually like the iPhone and chose it for the way that it works and the way that Apple runs the platform by and large and yet the parts of this that you can see that they would want is remedies are literally attacking what makes the iPhone.
00:44:32 ◼ ► It's just to get into the smartwatch thing like the better than just what pure Bluetooth offers integration between a paired Apple Watch and iPhone is not anti-competitive. It's competitive. It's a ton of work and to offer in and this is why people why you see so many people wearing Apple watches and people who like Apple watches.
00:44:55 ◼ ► I'm receptive to the idea that if Apple builds a new product or app or whatever and it's got 15 special things that it does in the OS that have been modified in order to get that app or that piece of that accessory to work better.
00:45:10 ◼ ► And Apple has developed that because they want the experience to be better. You could say this about like the secret sauce stuff around AirPods. It's the same thing or an API that has been developed for an app. I can see the argument that says as a platform owner building a product that has competition in the market at some point at some reasonable point, maybe not the moment of innovation, right?
00:45:33 ◼ ► Because that would really stifle innovation if you had to release everything as a public API, but like I can see the argument that says at a certain point you need to you can't keep it for yourself, right?
00:45:45 ◼ ► You need if Google or Samsung wants to do a smartphone that can connect to the APIs that the Apple Watch connects to you got to let it because they should be able to compete with you on your own platform and you shouldn't prefer your accessory like I can see that argument.
00:46:02 ◼ ► The problem I have with it practically is that I'm deeply dubious that it wouldn't it would create an influx of other smartwatches to the platform it that and that's like the purpose versus the reality, which is like I can see it as an argument and I think Apple's actually I mentioned this in my article about this.
00:46:20 ◼ ► I think Apple's already changed its behavior here because they knew this stuff was coming where the journaling app not a major app or anything, but when the journaling app shipped it did something interesting, which is it shipped with an API for other journaling apps.
00:46:32 ◼ ► Right Apple didn't used to do stuff like that where they're like, oh, we have a new app that does a bunch of cool stuff that's based on the system.
00:46:39 ◼ ► But if you don't want to use our app and use somebody else's app, we have an API for you and they get access that to that too. I think that's one of the things that the DOJ is arguing is sort of like you need to on your platform.
00:46:50 ◼ ► You should not be building products that are better than any potential competition because you hold all of the keys.
00:46:57 ◼ ► I just think in practical terms what that seems to me to do is create a lot of extra work for Apple that nobody will ever really take advantage of but I see the argument that if you have a if you have a Google smartwatch and an iPhone, it's easier to switch to Android.
00:47:13 ◼ ► And if you have an Apple Watch and an iPhone, it's very hard to switch to Android because you got to buy a new watch not just a new phone.
00:47:20 ◼ ► Right, but I would say you can argue that Apple should do that, but I don't think they should do it at the point of regulation. I don't think it should be illegal to have unique integration between your phone and your watch that are both made by the same company.
00:47:35 ◼ ► And at the same time, I've gotten multiple at least three emails from I haven't caught up on all of the email, but at least three readers have written to me a two with Garmin and one with a withings smartwatch. The withings ones are really cool.
00:47:54 ◼ ► I think that they are by far in a way the best looking smartwatches any company makes but anyway, and the Garmin ones of course are more rugged rock climbing type, big chunky seven day battery life type things.
00:48:10 ◼ ► But anyway, all the they're saying I have an iPhone and I have a Garmin or I have a withings and I love the integration. It's great.
00:48:19 ◼ ► This is one of the problems with a lot of things in this document is that you look at it and you're like, oh, yeah, that does sound bad and then you think about it or you happen to know something about it and you think to yourself, wait a second.
00:48:28 ◼ ► Like when I had a pebble smartwatch before there was an Apple watch. Yeah, it was hard to like keep it connected and integrated with anything more than some basic notifications and all that.
00:48:38 ◼ ► But like there is integration for third-party smartwatches now. So is what is the specific complaint here? And is it and there are several instances of this in the document where you say yourself.
00:48:49 ◼ ► Well, wait a second, but that's not like what is it? There's another one too where they make this claim about CarPlay, right?
00:48:56 ◼ ► That Apple has apparently the implication is that Apple has gone to car manufacturers and said if you don't integrate us across your entire dashboard with CarPlay 2.0, you can't have CarPlay anymore.
00:49:07 ◼ ► And I've seen several people say that's just not true. I don't know the details and I guess it'll all come out. But like there's stuff in there that you're like that doesn't sound right.
00:49:15 ◼ ► Like I don't think Apple is I think Apple is playing real serious defense and is up against it in cars.
00:49:22 ◼ ► This document is like, oh, Apple's going to dominate cars to just watch. Right. They're up against it and their own car project infamously canceled recently.
00:49:31 ◼ ► Nobody's picking up CarPlay 2.0, right? Again, the DOJ didn't release their evidence. Maybe there is something where they've made the threat that they're insinuating they made.
00:49:39 ◼ ► But I think that what Apple is saying is if two car makers, if you want to adopt CarPlay 2.0 as a system that takes all of your screens when it's invoked.
00:49:50 ◼ ► Sure. And the DOJ implies, though, in the way they word it, we can get to it. I don't know if we can go through the whole thing, but they make it seem as though that Apple's threat to car makers
00:50:00 ◼ ► is if you have to take it all and you have to let CarPlay design the instrument panel for everybody.
00:50:08 ◼ ► Or we withhold it, right? Or we withhold a feature that's materially important to you and your business, which is a feature people like, which is CarPlay.
00:50:16 ◼ ► And I don't I mean, maybe there's evidence. Here's the thing, though, John. And you know this. Apple plays hardball. They do.
00:50:21 ◼ ► Yeah, I say that all the time. And I think there do I think that there are going to be instances in this case where there's somebody at Apple who is playing hardball
00:50:38 ◼ ► So do I think it's plausible that someone whose job it is to get automakers to adopt CarPlay 2.0, right,
00:50:46 ◼ ► send an email saying, if you guys don't do this, I don't even know why we're in business with you.
00:50:51 ◼ ► Maybe we should just drop CarPlay support for your cars altogether. And it is a maybe an empty threat, but a threat.
00:51:02 ◼ ► But I would contextualize that conversation way different than the way that this document does.
00:51:09 ◼ ► Right. And everybody listening to me and you here knows Apple is Apple and Apple isn't going to effectively with CarPlay.
00:51:18 ◼ ► It's sort of the closest Apple has gotten since the pre next reunification with the clone makers of licensing,
00:51:28 ◼ ► not really an OS, but licensing their software to other device makers to put on screen.
00:51:38 ◼ ► And when Microsoft and Google to name the two most famous and popular literal monopolies who license operating systems to OEMs who make devices,
00:51:51 ◼ ► they give them lots of flexibility. And that's part of what Microsoft got in trouble for in the 90s in the DOJ case.
00:51:57 ◼ ► But right when you buy go to a Best Buy and buy a Windows PC, you're coming home with a PC that has software on it other than pure Windows.
00:52:06 ◼ ► Right. I don't I would guess that every single PC sold it like Best Buy or something like that has Norton antivirus and this and that and ads and stuff like that.
00:52:16 ◼ ► And that you've got to pay extra for a Windows, a pure Windows license to wipe the drive and have pure Windows.
00:52:29 ◼ ► You're allowed most of them ship custom skins right to sort of. Personalize their brands, right?
00:52:35 ◼ ► Samsung phones come with the Galaxy version of Android and a Galaxy Samsung specific UI.
00:52:43 ◼ ► And it's not wholly unfamiliar in a way that if you buy a Dell PC and some other brand PC, you're going to be familiar with Windows 11.
00:52:53 ◼ ► It's still the same, but it's tweaked. And if you switch from an Android phone to some other Android handset or a Samsung phone to somebody other,
00:53:01 ◼ ► you're going to be familiar with Android, but it's skinned and they can add their own stuff like Samsung pay.
00:53:09 ◼ ► Right. So Samsung in particular, who's the most successful Android handset maker, has all sorts of Samsung specific stuff on their phones.
00:53:18 ◼ ► Well, of course, Apple isn't going to it is going to take more of a if you support CarPlay, CarPlay is CarPlay.
00:53:27 ◼ ► Right. And they've said when they announced it to WWDCs ago that they are unusually for Apple,
00:53:33 ◼ ► that they're they're working with car makers to brand the version of CarPlay so that like the speedometer in a Porsche looks like a Porsche speedometer.
00:53:43 ◼ ► They're bending a little bit. But for them, you can understand, though, that Apple is has more say over how CarPlay is used than Google or Microsoft would if they were licensing something similar.
00:53:54 ◼ ► Right. Apple's going to say we want to collaborate with you on what this is going to look like when Audi supports CarPlay to they're not just here,
00:54:03 ◼ ► do whatever you want and you pick the fonts and you pick the way it looks. That's Apple being Apple.
00:54:08 ◼ ► Right. I don't think it's right. It may also be technical. Right. I think that all that stuff ends up on the iPhone in the OS is not necessarily even supplied by the car maker when it connects.
00:54:19 ◼ ► I think it might they might actually have to load that stuff on since they're projecting back out, which is kind of a hack. But I think that may be how they're doing it. I don't know.
00:54:26 ◼ ► Yeah. Yeah. It's this goes back to your comment that some of this stuff is just sort of core to Apple doing business.
00:54:31 ◼ ► And the argument is in some cases, Apple is going to say, look, this is what we do. We integrate our products.
00:54:37 ◼ ► That's what we do. And we do it to compete. And as they said in their statement, a highly competitive market.
00:54:42 ◼ ► And that's going to be their argument is where the CarPlay one kills me because it's like, like I said, their back is against the wall a little bit.
00:54:48 ◼ ► The CarPlay market that are the car market right now. Android automotive is underlying a whole lot of second new generation auto systems infotainment systems.
00:54:58 ◼ ► So they've already got their main smartphone competitor operating system, even though it will integrate with CarPlay.
00:55:04 ◼ ► But like it's from Google, it is an Android based system. So you're already dealing with their app platform and their underlying technology.
00:55:12 ◼ ► And of course, then you've got big competitors in the market with who use Android auto, which is the direct replacement for CarPlay.
00:55:19 ◼ ► So arguably it's an incredibly competitive market that Apple is actually kind of at a disadvantage with.
00:55:25 ◼ ► And it goes to the core of Apple's whole business model, which is we're just trying to integrate our stuff with, with other services and features in our app platform and all those things.
00:55:35 ◼ ► And that's an extreme example, but there is, I think that may be one of the existential questions about this entire thing is can Apple.
00:55:48 ◼ ► And one of them is some of their hardball tactics that they do, even though they're incredibly powerful now, they still do because it's how Apple does business.
00:55:55 ◼ ► Are they going to have to reign those in? They could probably afford to do that. Or are they going to be forced to change their behavior in ways that will make their future product integrations worse?
00:56:06 ◼ ► In which case it would be the legal system basically saying, I know you make good products, but they're too good. Stop doing that.
00:56:13 ◼ ► Yeah. I don't know if you follow him on Twitter, but Contra, his username is Counter Notions.
00:56:19 ◼ ► His tweet, which I think is very, as usual for him, very succinct. The DOJ's antitrust suit against Apple may read as infuriatingly ignorant, inaccurate, and ahistorical, but above all, it's an ideological frontal attack on the notion of integrated product platform design, a death march to commodification and interchangeability. The rest is much noise.
00:56:41 ◼ ► I think that's it. I mean, and I don't think that's the place of antitrust law. It's an ideological attack that says, and they mentioned the phrase middleware all the time, and they talk about cross-platform software as though it's an inherent, undeniable good.
00:56:57 ◼ ► When, when in fact, I would argue, it's like anything, it's a trade-off. Of course there are obvious benefits to cross-platform software, and the dream of write once, want, run everywhere is of course appealing to developers and sounds good. No denying it, right?
00:57:14 ◼ ► But this is one of those arguments where the people on our side will say, well, I acknowledge that there are trade-offs on both sides, and there are good things about cross-platform software, and there are things that sound good in theory, but that in history, in practice, always proved to be bad.
00:57:30 ◼ ► And I can, we can point to the evidence and go back to Java. You can go back to, I mean, you could just name the technologies that over and over again have proven flash, flash player from Adobe, all sorts of things that never ever have provided a good user experience, but sounded good on paper up front.
00:57:50 ◼ ► But then the other side, the people who are in favor of cross-platform software, almost from a point of zealotry or fundamentalism, absolutely refuse to acknowledge the downsides from a user experience perspective of cross-platform software and the history of actually being failures, right?
00:58:15 ◼ ► I mean, you don't, when's the last time you even heard of Java anymore? Honestly, I know lots of people write Java behind the scenes, like banks and stuff like that.
00:58:23 ◼ ► Yeah, even there, it's, yeah, it's just sort of, it's like a language, and it's certainly not Java as the Java runtime that was supposed to be right once, run anywhere, right?
00:58:36 ◼ ► There was a tone in the document, and I'm going to say this in a way that, I mean, maybe I'm making it a little extreme, more extreme than it seems, although I'm not sure I am, which is that the ideal state of competition in the smartphone market is undifferentiated hardware, essentially.
00:58:56 ◼ ► And the idea that, well, to make this thing the most competitive, what it should do is that all the apps should run everywhere, they should all be the same, there should be nothing unique about an iPhone that makes you want to stay there, because then you're trapped.
00:59:13 ◼ ► Because the desire to stay on one product is, you may think you want to be there, but the truth is that you're trapped, and that you can't leave, and if only you could leave, you would leave.
00:59:25 ◼ ► And, I mean, again, I think there are arguments to be made about some of Apple's behavior that is questionable, but like, the underlying assumption that only through a smartphone market where all phones are undifferentiated on software, and so that Apple, the only reason you buy an iPhone at that point is that you like the titanium frame or you like the camera,
00:59:48 ◼ ► and that the software shouldn't be any different, and the cloud storage shouldn't be any different. Not only is that a fallacy.
00:59:59 ◼ ► Yeah, it's all identical. Not only is that fallacious for the reasons that you said, which is we've heard this story before, and it never really works out right.
01:00:06 ◼ ► There's also the issue that you end up creating a new monopoly, which is in the middle layer person who now controls everything because they control, this is what it is with in China with all these everything apps, right?
01:00:18 ◼ ► The problem with the everything app is that it's your monopoly then, and it's across all the devices.
01:00:22 ◼ ► So, yeah, I just, I kept coming back to that too, that like, where do you draw the line? Because there is a fantasy here that any differentiation Apple does between its product and the competition is fundamentally wrong on a software scale,
01:00:41 ◼ ► because you're making it, the act of doing it makes it harder to switch. That's just the truth of it.
01:00:46 ◼ ► And so their dream is like everything is a web app, or is some other once run anywhere iPhone or phone app, and it's the same on Android as it is on the iPhone.
01:00:58 ◼ ► And like that is the, and this is the core of my feeling about this whole thing is like, I read this thing and I think, guys, that is the wrong argument.
01:01:07 ◼ ► Like there are arguments to be made here. These are not them. A lot of them are just like, no, what are you saying here? And that knowing that the net result would be if it came to pass, that everybody's experiences would be degraded.
01:01:21 ◼ ► And I do think there are people who firmly believe, and I think a lot of them are web developers, and we heard a lot of them when there was that moment where progressive web apps were maybe not going to run in the EU.
01:01:30 ◼ ► I think there are a lot of people who believe that the right future is a future where Apple is unable to differentiate its product, and that all apps are the same everywhere.
01:01:39 ◼ ► I think people believe that is going to be a bright, beautiful future. And I'm sorry, I don't believe it, and I think Apple has the right to differentiate their product.
01:01:47 ◼ ► Yeah, I squeezed a comment about that in a footnote recently, because I've been meaning to write about it. And again, they are, I think, fairly described. I know it has a pejorative connotation, but I would say that the web app, like the open web, whatever they are, association, the OWA, that they are fundamentalists.
01:02:08 ◼ ► And their belief is that, I mean, without question, WebKit is slower to adopt new web technologies that make web apps more like apps.
01:02:24 ◼ ► I just ran into a thing the other day where Teenage Engineering, who makes really, really cool, clever, a lot of stuff related to music, they're the ones who designed the Play Date, they're the ones who designed the Rabbit R1 little orange Play Date lookalike.
01:02:43 ◼ ► And the reason it looks like a Play Date is it's also designed by Teenage Engineering. But I'm on their mailing list for them, and they make, I don't know, they have a voice recorder that looks so cool, but it's like $2,000, and I don't need a voice recorder.
01:02:57 ◼ ► But it's like, I just want to buy it because I want to own it because it looks so beautiful. But anyway, they announced they had some kind of thing, like a software thing that could connect. I was like, "Oh, let me see, is it like a download or what is it?"
01:03:08 ◼ ► And I just checked it out, and it's a web app. But when I opened it, it said not suppo- again, it looks really cool. It's a very cool looking interface for a web app. But in Safari, it says your browser doesn't support the MIDI interface, M-I-D-I, whatever that is. I don't know. I've heard of it, but I'm not a musician.
01:03:28 ◼ ► Musical Instrument Digital Interface. So apparently, and they said, so you load this in Chrome or Brave or whatever else that supports it.
01:03:36 ◼ ► And there's dozens of little things like that where WebKit doesn't support a thing like that. You and I right now are speaking in a web app called StreamYard, and I'm looking at you through video.
01:03:52 ◼ ► The argument from the zealots on that side is that the restriction on iOS that the only allowed rendering engine is WebKit has single-handedly kept web apps from taking over the mobile world because the logic goes- which isn't- the logic isn't entirely fallacious, but I think that it, in practice, doesn't really hold up.
01:04:17 ◼ ► Is that because Apple insists on WebKit, and WebKit doesn't support X, Y, or Z, therefore nobody is making web apps, even though Android has free- you can use whatever rendering engine you want.
01:04:32 ◼ ► The System One is the one that is arguably the most featureful for things like this, Chrome's Blink engine, but like Firefox can use their own rendering engine in their Android app, and anybody else who makes a new rendering engine.
01:04:47 ◼ ► Safari, in theory, Apple could make Safari for Android and put WebKit in it if they wanted to. And that web developers- the reason web apps haven't taken over the world and relegated native iOS and Android apps to irrelevance in the beautiful future where it's right- once- run-everywhere web apps is because half the market or whatever size of the market Apple has doesn't support the stuff that they need.
01:05:12 ◼ ► And it's always like- it's like I wrote, it's like Bluetooth is going to be good next year, or next year is going to be the year of desktop Linux. It's like- it's one more feature. It used to be notifications, right? WebKit on iOS didn't support getting notifications, and then they added it, and now they don't.
01:05:29 ◼ ► But my counterargument is if web apps are so great and are only being held back on iOS because WebKit is the only allowed rendering engine, how come web apps haven't taken over on Android either, where they're allowed to run free? They don't.
01:05:42 ◼ ► People don't want web apps. They really don't. I mean, it's great that they exist, and I know some people use some, and I use some, right? There's like one or two.
01:05:50 ◼ ► But most people don't want them, and they're not great user experience, and I asked and tried to find- like show me an example of a web app that is absolutely amazing and would- on Android because it is allowed to use a non-WebKit rendering engine that would make an iPhone user jealous.
01:06:08 ◼ ► Like, oh, I wish I could use that web app on the iPhone, and it was crickets chirping. There's not a one. And again, they're going to get it in the EU. There's going to be- you're going to be allowed to make browsers that use other rendering engines.
01:06:22 ◼ ► I think if Apple does that and expands that and just says, okay, fine, Blink and the Firefox, the Gecko rendering engine, you can ship them on iOS if they comply with these things, it's not going to make a difference.
01:06:35 ◼ ► There is no future where people are going to- where web apps are going to take over mobile. It's not going to happen.
01:06:40 ◼ ► This is what I was talking about earlier, too, which is I think this is a case where there's a combination of things going on here. One of them I think is that Apple just doesn't want them on the platform, and it's one of those cases where Apple is perceived as playing defense because they're afraid.
01:06:55 ◼ ► And they may actually be afraid. I think sometimes Apple's desire for control is misread as fear. Sometimes it is. But I agree, I don't think it would matter. I don't think if Apple said, you know what, rendering engines everywhere, progressive web apps using alternate rendering engines are fine.
01:07:12 ◼ ► We built in some security and privacy things because their argument, and this is another thing that comes up in the case, is Apple does believe in security and privacy for its users. I think it also uses it as an excuse sometimes to not implement things that they don't want to implement.
01:07:26 ◼ ► And that muddies the waters for everybody. But I think they could do it. And I think you're right. I don't think the world would be transformed and all smartphone apps would go away and everybody would just use progressive web apps.
01:07:36 ◼ ► I think that's a fantasy. But I do think it would make, here's the irony of it, I think it would make the iPhone better. Right? Because my iPhone, so we're using StreamYard here. I do podcasts with people. Sometimes they're in a remote location and all they have is their phone with them.
01:07:52 ◼ ► And I would love to be able to use a web app that, because there are no iPhone apps that will do a proper audio call with a whole bunch of people with a local recording that gets uploaded to the cloud. Like, believe me, I've looked and none of them really do it. They all have some quirk or other.
01:08:07 ◼ ► I would love that. That would make the iPhone better. And if it was on Android too, that would be perfect because I also have some people who use Android. So I would like it to happen. I don't think it would kill the app market. And when you say that the people who are into the PWAs are extremists, I kind of agree with you in the sense that to boil it down in a somewhat unfair but somewhat fair manner, what a lot of them are is web developers who would really love it if you didn't need to hire mobile developers anymore.
01:08:36 ◼ ► Because all apps would just be web development and their skills would become supreme. And like, I get the motivation there. But I think the truth is in the middle, right? The truth is that I think Apple shouldn't be afraid of this other than making sure that it's secure.
01:08:50 ◼ ► And I think it would be fine. And I don't think it would blow up the entire app store and make the app store unviable. And if it did, it would be because the world had moved on and Apple wasn't up to the competition. But I think we've seen in historically, it doesn't. That's not what happens, right?
01:09:05 ◼ ► Like, there are compromises that make it more degraded experience for the user. And in the end, you end up with kind of a mixture and Apple still has places where it can differentiate because Apple's got a native app that's running a reminders list that's better than that web reminders app that you were trying to run.
01:09:21 ◼ ► Yeah, I'm with you that I think overall that if and I wouldn't be surprised if Apple is now that they're obviously working implementing it in Europe. And I do think one of the benefits of the DMA is that it is giving Apple a playground to try new things and see how they go.
01:09:42 ◼ ► And some of their fears, some of their fears about privacy and security, again, we will see some of them might be born out. But I my deep suspicion is that some of the stuff that they're going to allow in the in Europe, it's going to happen and it's going to be a big nothing.
01:09:56 ◼ ► And then there are going to be people inside Apple who are like, See, we don't worry about this. It's fine. We should roll it out everywhere.
01:10:01 ◼ ► Right. Like one thing that Apple is a smart company full of smart people who's been on a 25-ish year run of overall very good decisions and remains forward looking and is seen where things are going and and maintained success consistently.
01:10:27 ◼ ► They really haven't had a dip since the iPod came out. It's been a very good run, a quarter century of a very good run. But they are not omniscient.
01:10:36 ◼ ► It's easy to sort of get into the thinking of they're so successful and so consistently successful that they can predict how everything will go.
01:10:46 ◼ ► And I think you're right. You alluded to this earlier in the show, but I think that they're almost overly cautious about taking a brick out of the Jenga.
01:10:57 ◼ ► Here's where the whole platform is right now. Let's not screw around and take out even though it looks like if we take this piece out of the Jenga, nothing's going to topple. Why risk it? We don't have to. So why do it?
01:11:08 ◼ ► That's the complacency that can be read as fear. It can be read as being imperious and sort of saying, "No, we rule everything." But I think that is what's going on.
01:11:18 ◼ ► Because we had this about like, "Why do you treat developers so badly? Why do you do capricious rejections in the App Store?" All these things that we've criticized Apple about over time.
01:11:29 ◼ ► Because make no mistake, those of us who cover Apple have done a lot of criticism of very specific things that Apple has done over the years. I do get the sense that the answer is, "If it ain't broke, don't fix it."
01:11:40 ◼ ► That like, "Why try something new that might be better or might be the same or might not be a problem? Why risk it? Just let it ride."
01:11:48 ◼ ► The DMA and other regulators, and this lawsuit, honestly, this lawsuit will cause and has already caused change in Apple's behavior that is positive for sure.
01:12:02 ◼ ► Yeah. Well, I think this one will and maybe the anticipation of this. Allowing game streaming everywhere in the world, right? They didn't need to do that everywhere in the world. They could have just done that in the EU. They did it everywhere.
01:12:13 ◼ ► I am certain that is in anticipation of this lawsuit. 100%, right? Because they mention it. And just so happens a couple months ago, Apple was like, "Oh no, everybody can do that everywhere." Right?
01:12:24 ◼ ► Yeah. And on that point though, there's... So game streaming is now allowed. And it seems... You can kind of read in here where it seems like Apple has maybe nipped some of their arguments in the bud before they could get it out, right? Where the DOJ is slow moving. And when they thought they'd be able to complain about some of these things, Apple's already taken them off the table.
01:12:47 ◼ ► But the other thing they complain about... So game streaming clearly should be allowed. And it maybe is anti-competitive and something where regulators should step in.
01:13:00 ◼ ► But the DOJ goes further and wants to allow the... Like you just get one Xbox app and the Xbox app has 100 games that you can play all through there. And that's what Apple has disallowed and said, "You can do this. You can have a subscription where you sign in once and get access to all of your Xbox games or whatever."
01:13:28 ◼ ► I think that's the worldwide change is that they now allow that to not be an individual per game submission. If you're streaming from a remote source, then it's whatever game got on the remote source.
01:13:39 ◼ ► And that's a change that was probably precipitated by some combination of the EU and the Department of Justice anticipation.
01:13:47 ◼ ► But there are reasons for Apple to take that stance above and beyond protecting the App Store revenue, right? Like one of the things the critics always come back to... And again, they are protecting App Store revenue famously. And that's where you and I, a lot of our...
01:13:59 ◼ ► The most legit criticism of Apple right now is related to ways that they are clinging to as much or and looking to hoover up even more App Store commission revenue than they have before.
01:14:16 ◼ ► But there are reasons other than that that they do things, right? And one of them is that there is part of, to borrow Steven Sinofsky's term, the brand promise of the iPhone, is that everything has been reviewed.
01:14:30 ◼ ► And the idea that part of the reason that they would want each game to be a separate submission isn't to make the experience worse for gamers, but to make sure that games that are contrary to the guidelines of the platform aren't getting through.
01:14:44 ◼ ► I mean, I just... I don't know. I assume somebody's made a pornographic video game at some point. And to make sure that there's not, you know, and that people buy iPhones, one of the reasons they buy them is the idea that everything has been vetted.
01:14:59 ◼ ► And the critics love to find... I love to point out the exceptions. I have a running thing on Daring Fireball where I point out apps that are in the App Store that shouldn't be there. Scams or frauds or IP ripoffs or stuff like that.
01:15:13 ◼ ► And I do think, I still think, I think Apple is doing a better job of that. I always say that, you know, the phrase I like is the bunco squad.
01:15:21 ◼ ► That they should be... they should have a dedicated team of internal, effectively police, looking for scammers that they should sort by revenue, right?
01:15:30 ◼ ► Don't look for somebody who's running a scam and they've only made $15. But if you find somebody who's got some kind of scam app that is somehow tricking people into a $10 a week subscription for something that's not worth it, they should be able to...
01:15:45 ◼ ► And it's successful. And they've got tens of thousands of people who've been tricked into it. You should be able to find that by sorting for it. I think Apple could do a better job, but I think they are doing a better job.
01:15:55 ◼ ► But the critics point to any of these exceptions and say, well then the whole thing is pointless. And I think that is such a classical, logical fallacy, right?
01:16:07 ◼ ► That if you can find any exception, then the whole thing is moot, right? And if some scam apps get through, then the whole point of app review is pointless? That's ridiculous.
01:16:17 ◼ ► Yeah, the challenge is that Apple does mix their desire for control and their desire to make some money with their desire for the user experience. And this, to me, if you're coming at them and you're trying to accuse them of things, you're going to say, oh, you did that because you wanted to skim some money there, or you wanted to kick out a competitor.
01:16:36 ◼ ► And if you're Apple, you'll come in and say, no, I think they said in their reply, everything we do is for the customer. And it's like, yeah, but also it's for Apple. And the truth is somewhere in the middle. And the danger is that when you're arguing these points, you have to have that question of like, well, why is it like this?
01:16:51 ◼ ► And I think my argument for the game streaming would be the infrastructure required for game streaming is enormous. So it's probably only big players. You have to approve their app. They have to rate their app based on the content.
01:17:02 ◼ ► If you find that the content in their app in some of those games is not the content that they said, the app gets kicked out and they are given a little bit of responsibility to police their own game catalog.
01:17:13 ◼ ► And I would think with game streaming, you could make a pretty plausible argument that the reason Apple didn't want to do game streaming is that Apple would prefer that people play games that run on device and not streamed, even though very different markets.
01:17:25 ◼ ► I think that was a, I think they were under the guise of trying to protect everybody, trying to deflate a potential competitor.
01:17:35 ◼ ► But there are other examples like the Apple pay example comes up in the suit where they portray it as being this case where Apple is robbing money from the big banks, which I find hilarious.
01:17:47 ◼ ► Oh, absolutely. For the banks, we've got to protect the banks. But the truth of that story is Apple added a lot of privacy and security protections in, in setting up Apple pay.
01:17:59 ◼ ► And it was a convenience thing. It was also an establishment thing like attempts to do contactless payments in the U S had failed multiple times before Android had supported it for years before Apple pay.
01:18:10 ◼ ► And it never really took off. And then at one point there was even an initiative where people, I got sent a card with tap to pay on it and they said, Oh, this is going to be rolling out.
01:18:17 ◼ ► And then like the next year, the card didn't have tap to pay anymore. Cause it didn't work right. Like there are all these attempts.
01:18:22 ◼ ► And then Apple was looking at the partners and thinking, okay, well, do we want to do this app based and ask every banking app to update their app to support an API for this?
01:18:31 ◼ ► And the answer was, well, no, let's just have people put their credit card numbers in and we'll do it. And it worked, but you can also portray that as a sinister plot by Apple to.
01:18:39 ◼ ► Freeze out banking app innovation and skim 15 basis points off of every transaction. The truth is Apple is skimming 15 basis points off of every Apple pay transaction.
01:18:49 ◼ ► I would argue it's probably not unfair because they have greased the skids for this entire approach and that this approach works really well.
01:18:57 ◼ ► But it's again, it's that muddy water of is Apple making money from this? Yes. Are they privacy oriented and customer experience oriented? Yes.
01:19:08 ◼ ► Is there a point at which later on in the process, you should probably let other people have access to the NFC reader? Yes, probably so. Right.
01:19:17 ◼ ► And they still have hoarded access to that, that, uh, NFC reader. I get it. Right. But it's like, it's, you can tell a story about Apple being sinister and siphoning money off of the banks.
01:19:28 ◼ ► And this document does that, but we know the real story and it is true. Apple is siphoning money from the banks there. It is true, but like, it's not a scam, right?
01:19:40 ◼ ► Like it is an understandable emergence of a thing that was innovative, that changed how payments work in the United States, a company deeply resistant to payments.
01:19:53 ◼ ► There's an insinuation in the DOJ's brief that Apple wallet and Apple using Apple wallet for Apple pay is just NFC. It's just NFC and Apple's hoarding it for themselves.
01:20:07 ◼ ► But to me, that's like arguing that AirPods are just Bluetooth and it's, there's so much more. Yes, there is a Bluetooth connection between the things.
01:20:16 ◼ ► And yes, NFC is a technical implementation detail of how your phone communicates with whatever it is you're tapping. The point of sale receptor for Apple pay is going through NFC.
01:20:30 ◼ ► But Apple pay, there's so much more to it to create the overall experience, the on-device experience, the reliability, the privacy. To me, I pointed it out, but one of the most laughable, angering parts of the argument is that the DOJ argues that it's hurting privacy and security to use Apple pay versus letting the banks do it on their own.
01:20:58 ◼ ► Whereas from a privacy perspective alone, one of the, I would say it's perhaps the single best innovation in using a credit or debit card in the history of credit and debit cards is that Apple pay randomizes your number.
01:21:13 ◼ ► And so your actual card is never exposed, your card number is not exposed to the retailer and gets, and the fake one gets rotated on a regular basis so that you can't be tracked. And that is literally how retailers track you.
01:21:28 ◼ ► I linked to a story that famously, but all the big retailers do it. But you go to Target and buy baby bottles and the cream for stretch marks or something like that, and then Target flags you up pregnant and then you start getting all this mail for pregnant women because Target figured out because they track your credit card.
01:21:50 ◼ ► You don't have to have a Target card, you just come in and use your bank's credit card, but because it's the same number every time, Target keeps track of it and knows everything that you bought with that card.
01:21:58 ◼ ► Apple pay gives you a level of privacy on point of sale purchasing that no bank has ever offered, and I don't think would offer if they allowed you to do it.
01:22:10 ◼ ► Yeah, the line in the document about how Apple has stifled innovation in banking apps, I just rolled my eyes at, right? Because I've used banking apps, they're not innovative at all, in fact they're bad.
01:22:21 ◼ ► And I would say about the wallet, like, oh, everything has to be in the wallet. I mean, again, I think there are probably cases I would advocate that Apple open up as it's, I think, doing in Europe more app access to the NFC reader.
01:22:34 ◼ ► I think that would be fine, but the truth is I put passes and tickets in the wallet and like I could board a plane with the Southwest Airlines app.
01:22:43 ◼ ► I could go to a concert with the Ticketmaster app. I could enter the ballpark with the MLB app, but you know what I do? I put it all in wallet and I just use the wallet because it's more convenient for me that Apple has built it there, which is again, the whole narrative of this.
01:22:59 ◼ ► If this comes to trial, this is going to be the story is the DOJ is going to say, did you do this to inhibit competition and take complete control?
01:23:09 ◼ ► And Apple is going to say, no, we did it because of X, Y, and Z reasons. And the challenge is going to be on a per issue basis.
01:23:18 ◼ ► The question is, do you believe Apple story? And I think Apple is at fault for some of this because there are absolutely cases. And I mentioned the game streaming where I think you could argue that in the guise of trying to protect people or the user experience.
01:23:34 ◼ ► Sometimes what happens is Apple is like, also, why should we bother opening this up? And you could make those counter arguments so that a good judgment would be Apple keep innovating.
01:23:43 ◼ ► But you do actually need to let there be some competition on your platform. Like you can't, for me, the things that are not in here that really bugged me are things like a lot of the in-app purchase stuff where Apple builds a product that takes 30% of every other product in the class, except for theirs.
01:23:59 ◼ ► So they're not competing on their platform on a fair basis. And it's like books and Apple music and things like that, where there are competitors who cannot compete on the platform because Apple has decided that's not even in this is not in their DMA coverage.
01:24:12 ◼ ► That stuff a lot, right? But it's not even in here. I'm like, well, wait a second. That's like, that's to me, some of the most defensive stuff is and the most anti-competitive stuff. Yeah. Apple building stuff for themselves that they don't give to a competitor.
01:24:23 ◼ ► And a lot of that's just not in here because they're focused. I don't know whether it's because it's the Sherman antitrust act or it's the narrative they're trying to build, but like it ends up being, well, we want to make it easier to switch to Android and we just want to stop lock in.
01:24:35 ◼ ► And like, that's their big idea is stop lock in and it's, it misses so many other points where Apple is exerting their power to reduce competition. That's kind of baffling.
01:24:47 ◼ ► Yeah. I have to say that as much while this brief is written plainly and you can read it and understand what they're arguing, but then it's just very clear how I disagree with what they're arguing and the DMA is very opaque and it's hard to see.
01:24:59 ◼ ► When you drill into the DMA, at least the EU is focused on actual points that make some sense for them to be looking at largely. And as much as I disagree with large parts of it, it makes, it makes a lot more sense, which to me is just embarrassing to the DOJ.
01:25:14 ◼ ► I think there's a reason for this, and I think it comes back to the fact that our country is deeply politically dysfunctional and that if we are unable as a country seemingly to pass laws that are like the DMA that say, Hey, if you're a big enough app store, there are some rules you need to follow because competition on your app platform needs to be, you need to allow competition on your app platform.
01:25:41 ◼ ► And I think they look at the Sherman antitrust act and they're like, okay, we can get away. We haven't even really talked about this. We can get away with the kind of like multiple ludicrous steps of saying first off that market share actually is revenue share.
01:25:55 ◼ ► Second off, it's not smartphones, but it's performance smartphones. And then third, we can start hitting that magic number of a percentage that starts with a nine by saying, Oh, well, Apple and Samsung and Google have a 94% revenue share, which is like, well,
01:26:10 ◼ ► but that's, this isn't about Samsung and Google. Why are they even in here? And the reason is they are using a blunt instrument, which is the Sherman antitrust act. And I think that they know they can't make the argument that the app store ecosystem on an iPhone is a monopoly.
01:26:30 ◼ ► Right. They can't, they just can't. And the DMA doesn't care, right? The DMA has said, no, that behavior is now legally restrained. And I think the DOG looked at it and said, we can't even go there. Right. Like that's not even plausible. That would be under the antitrust act.
01:26:48 ◼ ► Yeah. That's that is a very keen observation, Jason, that I'm hopefully going to remember and steal because I think you're exactly, I think you're exactly right that they can't squeeze that into a monopoly argument, but they have to argue monopoly. Whereas the EU is largely based, like for example, the Spotify find that they already applied the 1.8 or close to, I guess, converted. It's like $2 billion fine, which I really doubt Apple's going to pay honestly, but neither here nor there.
01:27:17 ◼ ► All of those big billion dollar fine. I don't know that anybody's ever paid those fines. I know, I think Intel had one. I forget who else, but they were IBM down.
01:27:31 ◼ ► But you're right though, that it comes down to honestly, I really does. The one against Spotify comes down to a law in the EU that just says you're not allowed to use unfair pricing rules. It's just the word unfair and unfair isn't defined anywhere else in the law. Like it would be in the US where it's you say you can't do blank and then blank gets a very specific definition. They just say unfair and unfair is left up to the European commission.
01:28:00 ◼ ► And they decided, and so as ridiculous as that seems from our way rule of law works, it is the way European law has worked since like Roman times. It's like the difference between common law and I forget the other term, but that's perfectly
01:28:17 ◼ ► I think it's a very big cromulent in the EU for the EC to say this is unfair and therefore we're going to act like I have no doubt that the Department of Justice in the US would love to copy some of the stuff that's in the DMA get Apple to do it here.
01:28:31 ◼ ► And I think that on those points, they're like, we got nothing to stand on here, right? Because there needs to be actual legislation. And there has been talk about big tech legislation. It never seems to happen.
01:28:41 ◼ ► So they're like, well, I'm going to invest on Tik TOK, I guess, but like on some of this other stuff. And so yeah, the DOJ looks at it and says, well, yeah, Apple demanding that Kindle have 30% of every book sale be go to Apple, but books doesn't.
01:28:55 ◼ ► And so books offers in app purchase for a better experience. And Amazon is prevented from competing on the merits with that experience. They have to have a degraded user experience and likewise for Spotify or for Netflix or whoever.
01:29:08 ◼ ► That's you're unfairly favoring yourself. And we decided that your platform is big enough that matters in the US. They're like, that's not with there's nothing there. We can't do it. And so instead they're focusing on what seem like to a lot of us keen observers kind of tangential issues or weird issues.
01:29:25 ◼ ► Like the idea that in the end, the great scourge of Apple is that Apple makes products that make it harder to choose to leave the Apple ecosystem. And I think they make some good points in there. But like, is that the biggest issue going on is that we want switching to be easier?
01:29:45 ◼ ► I would add, but I would even argue that's ridiculous because I don't think in the history of personal computing that it's ever been easier to switch than it is to switch from iPhone to Android and Android to iPhone.
01:29:56 ◼ ► Sure. Because the competition is so great in app and iPhone is not a monopoly that every app that you would want to use is either on Android or has an equivalent on Android. And while it might be somewhat painful to copy your they mentioned at some point, it's like painful to copy your files out of iCloud or something. It's like ridiculous.
01:30:16 ◼ ► It is. And like, put them on Dropbox on your iPhone and guess what? Dropbox is also on Android. You're absolutely right. It is a huge fallacy because all the functionality is different, but like duplicated on these two platforms.
01:30:30 ◼ ► And while it is a hassle and it might cost money and that's the smartphone smartwatch argument is like you got to get a new smartwatch because your watch won't transfer over.
01:30:39 ◼ ► Like it's super easy because there's an equivalent. I would, John, I'll put it this way. I would much rather switch to an Android phone than to a Windows PC.
01:30:52 ◼ ► Because it would be fine. I've used Android. I buy an Android phone every couple of years and almost never use it other than for reference. I've been using all these weird Android based e-readers to which are very weird.
01:31:02 ◼ ► But like, so I've experienced that. It's fine, right? Like it's fine. It's different and I don't prefer it in part because I like how my iPhone works with all of my other Apple devices.
01:31:13 ◼ ► But like if I had to, I would choose to keep my Mac and go to an Android phone in a heartbeat because the fact is most of what I use my phone for, I could do on Android. It'd be fine.
01:31:23 ◼ ► Yeah. I've said that many times. So no question. And the same thing on the Mac, I would much rather use sort of tangential, but I would also in a heartbeat use a Hackintosh like a Windows laptop running Mac OS than run a MacBook running Windows.
01:31:38 ◼ ► Yes. Same story, right? So that puts the, again, I think it's a ridiculous argument, but it's the one they've got and they are using it. My generous view of this is they are using this ridiculous argument because they have to make some larger questions where it's plausible about certain kinds of Apple behavior that where Apple is exerting power that they think is unfair.
01:32:04 ◼ ► And like, I guess they'll hash it out in court, but I got some real questions about like, is it even a monopoly?
01:32:11 ◼ ► I think that's the strongest argument Apple has, honestly, because it would nip the whole thing in the bud. I think it's very tenuous. And I think that their briefing is extremely disingenuous in the way they present it.
01:32:24 ◼ ► Because they never actually talk about the actual percentage of phones in the US that are iPhones, which I believe is estimated around 55%, but they don't even, they never even mentioned them.
01:32:36 ◼ ► They talk about 70% share of revenue and 65% share of the performance smartphone market or one or the other. They toss about 60 and 70, 65 and 70%. But one of them is a revenue share number and one of them is a completely made up category of performance.
01:33:00 ◼ ► And their big number that is the scare number that makes you sit up and pay attention includes Samsung and Google's market share, which is like that to me, that's the red flag because that's like, they don't have a good number.
01:33:12 ◼ ► So they're going to, they're going to add in the competition as if it meant like, because I don't, again, not a lawyer, but like, I don't think the fact that three fierce competitors make up 96% of the market is proof that one of them is a monopolist.
01:33:27 ◼ ► Right. I'm not sure, but then you don't get as good a number if you take out Samsung and Google, and if you take it to be market share instead of revenue share, and if you take it to be the whole smartphone market instead of the performance smartphone market, or if you take it to the global market, it's even lower, but I get this as a US action, but still, like, you can see that they know that it's weak and they're trying to buttress it as much as they can.
01:33:50 ◼ ► Now, my understanding the verge did a really nice analysis piece on this the other day, the court in New Jersey, where they filed this did do a court case about like dentures and accessories, where they argued that the dominant denture accessory producer who had like a 65 or 70% revenue share was through a series of logical, like a logical chain, exerting monopolist pressure on its market.
01:34:16 ◼ ► And the verge story suggests very strongly that's why they filed it in New Jersey is because there was at least an openness to a broader definition of a monopoly.
01:34:25 ◼ ► Right. And then they the brief mentions at least twice something about certain companies who are headquartered in this district, meaning New Jersey, like Verizon, they mentioned is headquartered in the same federal district.
01:34:38 ◼ ► Before I just want to I know this is a little random, but I want to go back to the super apps thing. That's what we've been calling everything apps and the DOJ calls super apps.
01:34:49 ◼ ► And I have two huge problems with this. This the idea is that the DOJ is arguing that Apple quote blocks and quote super apps and and that this is detrimental to consumers because they could have these great super apps that take care of everything for you from chat to commerce to communication to shopping.
01:35:12 ◼ ► And then you could just switch to a different brand of phone and your super app is there and all your stuff is there. A the most famous one in the world is WeChat in China.
01:35:23 ◼ ► So it seems very strange for me for the DOJ to be saying that the U.S. market for phones should the free market for phones should more resemble the People's Republic of China.
01:35:34 ◼ ► That seems like a very strange argument. One of the reasons WeChat is so successful in China is that it's a single and having a single point is so that the PRC has one place to monitor everything.
01:35:48 ◼ ► Right. Well, that's it. They're arguing and in the markets where super apps become a thing. And then the other one that's really popular is in India.
01:35:57 ◼ ► It's called habit in my notes somewhere. But anyway, there's one in India. It's something what the hell is it called?
01:36:05 ◼ ► I'm looking it up. Do I have well, I don't know but there's one in India too, but they all become monopolies the whole point the super app thing only works when it becomes ubiquitous, right?
01:36:26 ◼ ► They're arguing that it and I see the duopoly isn't great but everything in theory you'd like to have everything be a little bit the car market is a pretty good example where there's a lot of brands to choose from.
01:36:41 ◼ ► I don't know how it worked out that way when you and I were kids before foreign imports became a big thing maybe like post World War Two. There was sort of a triopoly in the US Ford Chrysler General Motors and almost every car in America through the 70s was from one of those companies.
01:37:03 ◼ ► And then and then there were exotic German imports like BMW and Mercedes. But then the Japanese import thing became exploded in popularity in the late 70s into the 80s.
01:37:16 ◼ ► And now we have lots and lots of cars to choose from and that's good. And in theory, you'd like every market to be that way.
01:37:22 ◼ ► It would be great if there were it really would it would be great if there were more desktop operating systems to choose from it would be great if there was four or five different major smartphone platforms to generate total I think overall it would be better.
01:37:37 ◼ ► Although you can argue that the reason that there aren't is because nobody is going to write their Dropbox app for five platforms, right?
01:37:43 ◼ ► Probably not right. And to me the best situation in all of computing in the only one that's more than a duopoly is gaming consoles, right? And we've got again since the creation of Xbox in like what was that 1999.
01:37:59 ◼ ► We've effectively got a triopoly where you've got PlayStation Xbox and whatever the current platform from Nintendo is and that's about as good as it gets in computing because computing I think because of the nature of it like you said just how many platforms are you going to port something for right all cars run on gas and now they run on the same electricity and yes, there's charger incompatibilities, but we see that getting sorted out live right now as the US standardizes.
01:38:27 ◼ ► Right the market forces are absolutely working on that everybody's car all cars do ride on the same roads and they take the same gasoline and they charge with the same electricity and you just need an adapter or something like that.
01:38:41 ◼ ► So car that's why cars can thrive with many automakers and software is different and it tends to narrow right and at you don't want it to narrow to a literal Monopoly like desktop operating systems did in the 90s with Windows.
01:38:57 ◼ ► I'd say the triopoly with gaming consoles is about as good as it gets it really is. It's just the nature of it. And so the DOJ is arguing and with phones we've effectively got a duopoly in software platforms Android and iOS.
01:39:13 ◼ ► They're arguing that it would be better to trade that duopoly for a Monopoly and have some super app takeover and I guess the DOJ would say no no there'd be like seven different super apps and you could choose between and there's no vision inside the super apps.
01:39:27 ◼ ► Name one ended it's conspicuous that they don't name a single super app that that is being blocked by iOS and Apple in there. I'm sure you got the same thing Apple mailed out talking points to the press and one of the things they mentioned is we don't even block super apps we iPhone users in China have access to WeChat.
01:39:47 ◼ ► Yeah, they mentioned the Chinese and Indian apps right there like oh we they exist. They're not. Yeah, it is. It's one of those head scratchers. I will point out though that this is interesting. They're like and we allow many apps now like inside apps. Well, they do they announced that in January.
01:40:03 ◼ ► So again, one of the things that's like it's really recent and I think I know why but they did do that where they're where they made an announcement for like enhanced opportunities for streaming games mini apps mini games chat bots and plugins found within other apps where they've tried to where you can now use the in-app purchase to offer a chat bot or a subscription or something inside an app.
01:40:25 ◼ ► So they again probably prefect figuring their regulation and their lawsuits. They said well, we'll just allow this which is one of the ways that this stuff is good is that it does motivate Apple maybe to make some changes that were also we should talk about just as an aside you mentioned their smart people inside Apple Apple is not a monolith like everything that we argue like, oh, I can't believe Apple does this there's somebody inside Apple who can't believe it either and has argued against it and what ends up happening because people always say to me and I'm sure you've heard this too.
01:40:54 ◼ ► Do you write a thing saying Apple should do this hoping hoping that some BP at Apple reads John Grouper and was like, oh, you know what? I've changed my mind John's really opened my eyes to this. No, I always think when I write something there is a group there are two groups having an argument inside Apple and if I can put a log on the fire for the group that's on my side, maybe they will eventually say see I told you I was right about this and I think that's what's going on with a lot of this stuff is like there was an argument about many apps and minigames and they're like no why rock the boat.
01:41:23 ◼ ► We were doing great. Let's just not make any changes and then the law they talked to the DOJ and this is what on their list of grievances and those people inside Apple are like see I told you and they're like, all right, you got you win this one now.
01:41:34 ◼ ► That's how change sometimes happens inside big company like Apple is there's just enough to give the argument to one side over the other and then something changes at last and I feel like that stuff is going on here.
01:41:48 ◼ ► But you're right the mini the minigame thing and all that just happened so that was motivated by that but the idea of a super app.
01:41:56 ◼ ► It's like they they exist they already exist. So it's a weird. It's very weird. It's a weird one. Yeah, and with a lot of pitfalls because I think they have a fantasy and again, this is part of their argument a fantasy that if you allow everything apps there will be a great
01:42:11 ◼ ► convergence of many and they will it will be a thriving battlefield of competition except the two examples of markets where it's happened. It leads to a monopoly and then that platform has to be regulated so that the mini apps inside it can be allowed to compete.
01:42:29 ◼ ► So it like it's turtles all the way down at that point like you're just creating another monopoly if you do this right eventually there is going to be there are going to be dominant platforms, right and in China the dominant platforms.
01:42:40 ◼ ► China the dominant platform is actually a meta platform WeChat. Yeah, and in the US the super apps effectively. They're not apps. They are the platforms. It's iOS and Android. They are the super apps right and it's just not the I just don't think the market dynamics are there again.
01:42:58 ◼ ► There's nothing to keep somebody from making like Elon Musk has talked about turning X into a everything app and he wants to have payments to it and any it is not being blocked. You can do it. It's just not it's just not going to work.
01:43:10 ◼ ► Facebook has dumped a bunch of stuff in their apps too. And I mean you mentioned dominant the dominant duopoly in the US of Android and iPhone and it's true across the world. Really. It's the dominant duopoly.
01:43:24 ◼ ► And that's one of those cases where I immediately my brain says well if we want to make sure that these two giant players don't who are competitors, but also like the airlines watch each other right like Google watches Apple's App Store policies and says, oh, that's a good idea.
01:43:39 ◼ ► Let's do that on ours too. Well, the solution there is you pass some legislation that says these huge app markets are now things we need to regulate because there's too much power in the hands of those two companies, but there is none. So instead, Sherman antitrust act is the best we can do I guess.
01:43:59 ◼ ► Yeah. All right, let me take a break here and thank our second sponsor of the day. It's our good friends at Squarespace. Go to squarespace.com/talkshow and you save 10% off your first purchase of any website or domain using that code talk show.
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01:46:44 ◼ ► I don't know I this is a nightmare and could take three hours, but I just want to page through some of the highlights. I have here one the first thing I think this is really strange and it's sounds petty but I asked my wife and she said that is really weird and really sloppy.
01:47:07 ◼ ► I noticed it too in 2010 a top Apple executive emailed Apple's then CEO about an ad for the new Kindle e-reader the ad began with a woman who was using her iPhone to buy and read books on the Kindle app.
01:47:18 ◼ ► She then switches to an Android smartphone and continues to read her books using the same Kindle app the executive wrote to jobs one message that can't be missed is that it's easy to switch from iPhone to Android not fun to watch jobs was clear in his response.
01:47:38 ◼ ► They the opening paragraph just refers to jobs with a capital J and doesn't say to Apple's then CEO and co-founder of the company Steve Jobs.
01:47:49 ◼ ► It just starts jobs which I can almost see how it slipped through because everybody does know who they're referring to when you talk about Apple and a capital J jobs, you know, it's Steve Jobs.
01:48:00 ◼ ► I mean, it's like have you ever heard of Walt Disney? I mean, it's he's been dead since 1966 and he's still pretty famous.
01:48:08 ◼ ► But that is really that's not how legal documents are written and my wife said that is just it's she's never she's she said that's just like it.
01:48:18 ◼ ► She didn't even know what to say about it because it just never happens everything when it's introduced gets defined if a person is introduced.
01:48:25 ◼ ► They're introduced by a full name and then who they are and it's so clear what it is like copy and paste.
01:48:32 ◼ ► No pun intended job, you know that paragraph was originally lower in the document after jobs had been introduced.
01:48:39 ◼ ► Yep, and that somebody decided that was the punchiest anecdote to open it with and copied it and pasted it to the beginning of the document.
01:48:48 ◼ ► But it it's an indication of and as much as the language I've praised for being clear the order of the whole 88 pages is sort of all over the place.
01:48:59 ◼ ► It's almost like this podcast. It's like going back and forth from one point to another in a very sloppy way.
01:49:08 ◼ ► It was assembled by a team and then somebody took it apart and put it back together in a different form and you're right.
01:49:13 ◼ ► Steve Jobs is mentioned by name with his first name twice in the document and his title and yet in this sort of like dramatic introduction.
01:49:24 ◼ ► He was introduced in a previous version and then they moved it or removed hit the first reference when they say I talked emailed apples then CEO.
01:49:32 ◼ ► They may have taken it out right there. Right then CEO Steve Jobs would solve this problem.
01:49:36 ◼ ► But I think it's also it shows one of the quirks of this entire filing which is some of it is for public consumption.
01:49:45 ◼ ► Some of it really is to they want to set a narrative here and there are whole sections of this document that are more like scary stories spooky stories about Apple.
01:49:53 ◼ ► Then they are like let's detail exactly what the violation is here because they want to set a mood they want and again.
01:50:02 ◼ ► I get it because it is absolutely true that in some cases Apple was concerned about competition and wanted to make really tough business decisions like like tough on the competition hard-knuckled business decisions because they were worried about their competition and they think this document thinks they illuminate apples goal as a monopolist to dominate and eliminate competition in their market.
01:50:31 ◼ ► The problem is when you tell an example from 2010 Apple did not have a dominant position the smartphone market in 2010.
01:50:38 ◼ ► They were terrified that this knockoff as they viewed it from from Google was going to swamp the iPhone and leave them back in the 5% right range of market share and so to portray apples admittedly brutal and I would argue even anti iPhone user experience decision on something like Kindle.
01:51:08 ◼ ► Then we get to I think you were the first person to point this out because you're much faster writer than me, but in your first take the day of the thing dropping you pointed it out that the introduction starts more or less by taking credit for the success of the iPod.
01:51:31 ◼ ► Yeah, yeah, it was all because the DOJ sued Microsoft that the that Apple exists because the iPod wouldn't have existed would have Apple would never have been able to put the iPod with Windows compatibility.
01:51:43 ◼ ► If Microsoft hadn't been under the consent degree from the DOJ, which is a fascinating and I wrote it so fast. I'm like look if I'm missing something here somebody tell me but this does not seem remotely accurate because famously you could install anything you want on Windows.
01:51:59 ◼ ► In fact, the original iPod people don't know this the original Windows compatibility for the iPod wasn't even iTunes. They didn't have iTunes on Windows. So they launched with music match jukebox, which is a Windows app that ran on Windows just fine with I don't know the details whether they supplied music match with a plug-in or wrote a plug-in themselves or wrote code for music match to integrate but they were using Windows software that already existed in order to get iPod compatibility.
01:52:24 ◼ ► I don't think that even Microsoft at the height of its powers would break an accessory from running on PCs, especially since Microsoft had no they were not until the iPod was successful. They didn't have the Zune yet. They didn't fancy themselves a music competitor like it was not really on their radar anyway, so it seems completely ahistorical and yet also the joke I made is like I have to tip my cap for them connecting this to the greater Department of Justice connected universe.
01:52:53 ◼ ► Yeah lawsuits where they're all interrelated in some way, but it seems completely it seems a bizarre assertion by somebody who did not live through that period.
01:53:04 ◼ ► It's I will say I've forgotten I need to publish it by the time this podcast is out. I'll publish it but I had forgotten the deal with HP like I had written and I think I said on dithering that Apple never gotten iTunes bundled with PC's but they did with HP but the deal with HP was far more than just bundling iTunes. It was actually HP branded iPods. I mean, that's that's how tight the integration was right and part of the consent to consent to get.
01:53:33 ◼ ► The consent decree with Microsoft was over it and again, it's this huge confusion between.
01:53:40 ◼ ► Not just not understanding Apple's integrated philosophy the entire philosophy the company from its founding forward of doing the whole thing and that it's like looking at two sides of a coin is are they a hardware company that write software or software company that follows the adage that if you care about software, you should make your own hardware.
01:53:58 ◼ ► They're both. Yes. The answer is yes. They're both apples a hardware company and they're a software company and what they really are in the market is making integrated products where the two things work together and Microsoft wasn't anything like that. They didn't even make surface PC's at the time, you know that they made like keep the only hardware they made were like keyboard and mice.
01:54:16 ◼ ► Yeah. And the things that Microsoft MP3 players boosted their platform, right? Like they're happy to have them be three players on their platform. They had Ben Thompson even said that Ben worked at Microsoft long ago, but said that they were delighted.
01:54:31 ◼ ► Nobody was happier about Apple putting iTunes on Windows than Microsoft. They were actually happy about it because it actually alleviated the sort of pressure that got them in trouble with the DOJ in the first place like and plays into the whole as ruthless as Microsoft was that clearly by the time jobs came back to the company Microsoft was thinking we actually kind of need Apple to stay in business.
01:54:52 ◼ ► We don't want them to we've won even greedy Microsoft thought we've won enough. We can't let Apple go out of business because then we look even worse right and hence the the infamous big giant Bill Gates on the Mac world New York stage and jobs was Boston Boston.
01:55:09 ◼ ► I always say that I know it's East Coast the last year. I think thank God it's you on the show. So I don't have to do a correction say boss and they wrote an angry because that's how I guess word but and that was where he I think where he first delivered the remarks he repeated several times that we need to get over the fact that for Apple to win Microsoft has to lose.
01:55:26 ◼ ► No, we just need to build great products and that's it. We don't need Microsoft to lose for Apple to win and part of that they were they and there was nothing they could do to stop it. You can install whatever software you want on Windows. That's the whole point of windows.
01:55:41 ◼ ► I mean in the long run if it let's follow this counterfactual for a while in the long run the butterfly effect if the iPod became a big hit and Microsoft came out with a Zune would they have tried to build things into Windows that would somehow make the Zune experience superior to the iPod experience probably although I'd be hard pressed to see how they would have blocked it.
01:56:06 ◼ ► No, I it really just doesn't pass the sniff test and where Microsoft got in trouble was with like I mentioned earlier where the terms of the Windows licensing agreement allows the OEMs it's did then does today to and to customize the Windows installation and have Norton antivirus or whatever else the Amazon toolbar comes pre installed on the browser on your PC.
01:56:31 ◼ ► And what one of the things Microsoft I think rightly got dinged for back then was when they decided that the internet was a huge thing and they needed to make the famous memo Gates wrote to the whole company that we need to turn the whole company on a dime focus on the internet.
01:56:47 ◼ ► We need to the Netscape browser is a threat to our success. We need to make a browser that is more popular than that and one of the things they did was they offered a discount to OEMs who would not pre install Netscape and let IE be the default.
01:57:05 ◼ ► So you if you make PCs and I make PCs and you're going to include a deal from Netscape to include Netscape either as the default or just already pre installed on the PCs Jason sells and I'm going to take money a discount from Microsoft and not include Netscape pre installed that was deemed illegal because they had a true monopoly 95% market share.
01:57:32 ◼ ► It wouldn't have been illegal in a world where like three competing licensed OS's had 30 40 50% market share.
01:57:41 ◼ ► But what is it was a canonical example of it's not illegal to have a monopoly but certain behavior is illegal when you have a monopoly and offering a discount to exclude the pre installation of Netscape was deemed one of those things.
01:57:55 ◼ ► Good call famously but I would say the most famous thing to me and the most rightful thing that Microsoft got dinged for back then was they made licensing terms for Windows that said if you make PCs and you want to license Windows for any of them.
01:58:15 ◼ ► You need to pay for the license for Windows for all of them. So if what you wanted to do was sell some PCs with Windows installed but sell other PCs to users with Linux pre installed or BoS or OS2 or whatever OS2 OS is next might have been open step or something.
01:58:36 ◼ ► I'd never really got into the consumer market but in theory could have because it ran on x86 at the time you as the PC maker would still have to pay for the license to Windows for every one of those PCs even if it had Linux or BoS pre installed.
01:58:51 ◼ ► And so the PC makers all said well we're not going to pay for BoS and the other one too if we have to pay for Windows for all of them we're just going to make them all Windows PCs and again.
01:59:01 ◼ ► It was deemed illegal not because it's illegal on its face but illegal if you have a monopoly, and I think it was correct, but right Apple doesn't do anything like that because they have such a different, they don't license their software to anybody.
01:59:14 ◼ ► So it's really weird for them to try to shoehorn this into the framework because it's not just this opening introduction that takes credit for the iPod success and the iPod leading to the iPhone success because of that lawsuit.
01:59:28 ◼ ► But it just, the whole framework of the entire lawsuit seems framed on the foundations of the Microsoft suit which I don't think hold up for an integrated product company.
01:59:38 ◼ ► Yeah, I mean, I can see the argument. So I think the argument that you could make here is that although Apple is not a monopoly, there is a duopoly, no company that is doing anything involving digital, mobile, anything, is going to cut off the enormous iPhone market in the United States.
02:00:00 ◼ ► And so you feel like you have to be there. So the argument would be that it is effectively a monopoly in the sense that if you're going to have a cloud storage company, you have to have an app on the iPhone because 65% of people in the US have an iPhone.
02:00:16 ◼ ► Okay. And then if you buy that, then you have to say, and what Apple is doing is Apple is setting its rules such that it's impossible for there to be competition on the platform, which is not true.
02:00:31 ◼ ► It has to be with Apple. And again, I think there are some narrow cases where you could make this argument. I think that the whole anti-steering, knowing that purchases in Kindle or in Spotify or in Netflix or anything like that,
02:00:45 ◼ ► but Apple has its own respective services that, and that to me, again, not a lawyer, not a judge, but like to me, that's where I lean forward is Apple built its own thing that competes with these other things.
02:00:56 ◼ ► And it doesn't have to follow the same rules because the business model is completely different and it doesn't let them follow those rules. And therefore there's an inequity.
02:01:06 ◼ ► I could get there, but you have to take a bunch of leaps. And I think a lot of the things that are in this document, I look at and say, I can't get there. I can't do it. I'm not the judge of the case though.
02:01:16 ◼ ► So it doesn't really matter, but like it does, it is a mismatch and it is a bit of a stretch. And I think that's why the number one issue is going to be, is there, what is, if there is any context in which Apple can be seen to be exerting monopoly power,
02:01:31 ◼ ► what is the context of that? Right. Because I think they are trying to have this broad context of it. And I look at it and I think, I don't know, this is a tough argument to make and you can probably make some of it maybe, but it's going to be maybe way more limited than the Department of Justice actually hopes.
02:01:49 ◼ ► And I'm sure Apple's lawyers are like, oh man, let me at them because it's going to be a tough, like, I think that the DOJ is at a disadvantage here. They have to make, they really have to make this case, which is probably why they're trying to do the scary stories and all that
02:02:03 ◼ ► because they want public opinion on their side here by painting Apple as this dastardly villain that their entire business model is like.
02:02:12 ◼ ► You mentioned it earlier, but like just to replay this, the theme of this document is that Apple's business strategy is lock-in. Not making great integrated products that people love, but trapping hapless users.
02:02:26 ◼ ► In fact, you could argue that it is a version of the classic story that Apple users are all dupes who have been conned by marketing into joining a cult where they overpay for products that are not any better than the products made by other companies.
02:02:43 ◼ ► It is at its core, that's kind of the argument that Apple's, yeah, Apple is, it has tricked you somehow into buying their products and now they've trapped you and you can't escape, which I would argue if you look at the windows market in the nineties, it's kind of true.
02:02:59 ◼ ► If you look at the iPhone, I just don't see it. I personally, people like their iPhones. The bottom line is people love smartphones. That's why the humane AI pins argument that like, wouldn't it be great to get rid of your smartphone and just talk to a pin on your shirt.
02:03:13 ◼ ► You're solving a problem that people don't have. And this lawsuit feels a little like that, which is Apple is not without sin, but you're trying to solve a problem that does not exist.
02:03:24 ◼ ► This tells you their perspective. This is right before the whole part where they take credit from the Microsoft.
02:03:35 ◼ ► These legal briefings, they all, it's a nice little thing. They number their paragraphs. Here's paragraph one. This is paragraph one of the briefing. After that, the preamble up above that mentions jobs.
02:03:47 ◼ ► The Apple computer company, as it was then called, was founded in 1976 to make and market personal computers. From its inception, Apple had a knack for expensive high-end design and niche marketing relative to its competitors.
02:04:02 ◼ ► That tells you who wrote this brief and who's bringing the suit. It's the sort of eggheads who do not see the appeal of Apple products.
02:04:09 ◼ ► Yes, it is a historical in so many levels. They refer to the iPod and they say, "This is an example of Apple's ludicrous high-end products."
02:04:17 ◼ ► I'm surprised there's not a footnote that says less space than a Nomad, lame. Because that's the argument.
02:04:24 ◼ ► And the iPod, you remember the iPod Nano, the iPod Mini, the iPod Shuffle? The iPod was not some sort of luxury item that was unaffordable at all.
02:04:36 ◼ ► And that's why it was a hit. And they made it in lots of different versions with lots of different prices. So this narrative that they're constructing that Apple is making expensive crap that suckers people in, and has since 1976, is just, I mean, it's not, it's ahistorical. It has no basis in fact.
02:04:55 ◼ ► It's another one of those fundamentalist perspectives where the one side of it does not acknowledge the other side. I do see, I mean, anybody who's a fan of Apple products can definitely see how competing products from other companies are less expensive.
02:05:10 ◼ ► Right? I mean, it's a very easy determination to make. And you can also see how if you don't care about your phone, and everybody knows people in their greater family who do not really care, use their phone until it breaks or whatever, just go into their cell phone store and just whatever's the cheapest deal.
02:05:32 ◼ ► Right. And it doesn't matter. Everybody gets that. You can totally see, yes, that stuff is less expensive. And for many people, if price is your number one thing, yeah, I can see why you would prefer products that are made by other companies.
02:05:45 ◼ ► But the other side refuses to, because they don't see the appeal themselves, they truly assume that the appeal isn't there. And that there is no there, and therefore everybody who buys Apple products is just a sucker.
02:06:05 ◼ ► They're con job, right? That is the argument is Apple has, for decades, Apple has conned people into paying more for a product than they should because all products are the same.
02:06:15 ◼ ► Right? And that is at the core of a lot of their arguments here is like, we want people to switch, be able to switch because come on, who are we kidding? A smartphone's a smartphone. It doesn't matter.
02:06:24 ◼ ► And Apple says, that's not true and it does matter, but I don't think the people who are crafting this argument believe it. Right?
02:06:31 ◼ ► Right. And I think that bodes well for Apple and poorly for the DOJ in the lawsuit. And Apple in their talking points points out that this was brought up in Epic v. Apple, and the district court recognized that users are loyal to Apple because they prefer Apple products, not because they are "locked in."
02:06:48 ◼ ► And Apple, I think, has lots of, you know, I don't know if you've ever heard Tim say this phrase, "customer sat."
02:06:56 ◼ ► It's come up once or twice. But, you know, there's actual ways of proving it. This is not as abstract as me and you just winging it on a podcast. You can actually prove it with consumer surveys.
02:07:08 ◼ ► There's a research company that does customer satisfaction research every quarter about Apple products and the number, and I would say also telling is the CEO of Apple. Like, I think it's, you don't have to go out on a limb to say the CEO of Apple is obsessed with customer satisfaction metrics.
02:07:26 ◼ ► He is. You can't get him to stop talking about customer sat. Right? Like, this is Tim. Let me tell you about my customer sat. Every time. Every quarter on the analyst call.
02:07:36 ◼ ► Yeah, because I think that's their number one metric is do people like our products? It's not how are we locking them in. It's do people like our products? The idea that they're trapping people.
02:07:46 ◼ ► I mean, again, is lock in a strategy? Yes. We saw the email with Phil Schiller and Steve Jobs. Sure, they don't want to make it easy. But, like, to take it from there, especially when you're in a tough competition and it's 2010 and you're worried that you're going to get swamped by Android clones and it's going to be like the PC market.
02:08:05 ◼ ► I get it, but like in the long run, what has happened is that Apple has built this huge market share because people like the product. They just, which is why I find it a weird political calculation to say, ha, look at us. We're taking it on to big tech because people are trapped using a phone.
02:08:23 ◼ ► They hate the iPhone. It's just not true. It's just not true. The through line from 1976 through today through a founding of Apple with the two Steves to today is to make better personal computing devices and better in ways that some number of people will notice and appreciate and pay a premium for.
02:08:46 ◼ ► Right. And that's it. That's Apple. That is Apple in one short, easily understood sense. And their model has always been created by Apple as a product. And I would argue that, I mean, we could, it would be a fun exercise to talk about what is a fundamental of Apple over all of Apple's history?
02:09:04 ◼ ► What are their fundamental tenants and the union of hardware and software is part of it, but the larger point is they build products. They don't integrate technologies and try to make a product out of them. They have a vision. They have always had a vision for what the end result is.
02:09:19 ◼ ► And that goes back to the Apple two, which is like they are integrating that software and that hardware to make a computer. And when the clone era started to happen, right, the computer industry got populated by companies in the early days. There were a lot of companies who felt that way. Right.
02:09:35 ◼ ► But in the clone era, it ended up becoming commodity hardware manufacturers who didn't really care because their product was no longer the operating system. You get that from someone else. They were just making a PC compatible and IBM PC compatible piece of hardware.
02:09:48 ◼ ► And Apple resisted, right? Apple said, no, we're not going to do that. And it's the only one like Commodore and Atari and Osborne and like all the other companies from that era who were making bespoke products with their own thing. They all died. Texas Instruments. Yeah, they all died or became PC clone makers. Right.
02:10:09 ◼ ► And only Apple said no for whatever historic reasons in the eighties, Apple was like, no, Apple two, partly because the Apple two was so successful that they could hold out against the PC. And then they built the Mac as well and built that into something. But like Apple fundamentally was like, we're making a product that we build and that we put together and that we control and here's the end product.
02:10:32 ◼ ► And to view the, I mean, this is, you remember this from the old days, the, the knock on Apple was always that Apple didn't behave like any other company in its sector. And when you, whenever there was an analyst, they would always say Apple should license the OS. Well, what they're really saying is, can I put them in the box with Microsoft or Apple should just make windows PCs, which people absolutely said in the nineties.
02:10:56 ◼ ► And what they were saying was differentiate on design. Yeah. And what they were saying was I want to put them in the box with Dell. And they were so angry that Apple didn't fit in either box, that they were doing it differently. And that has been a fundamental in Apple since the seventies. It continues to be. And yeah, there are aspects of this document that just don't get it. Right. And again, I don't, I'm not trying to absolve Apple of bad deeds because I think that there's some stuff that they've done over the last 10, 15, 20 years that is bad and should be changed.
02:11:25 ◼ ► Right. But like the way that this document approaches, it's just like, you don't, they don't get it. They don't get why Apple is successful even let alone how to stop them.
02:11:36 ◼ ► Talking points bring up something along these lines though, just from this not getting, not misdescribing what Apple is, what their goal is. And therefore conversely, I think it's related is not understanding why people buy iPhones or stay with iPhones. Right.
02:11:56 ◼ ► They toss it out at one point that the number of iPhone users who buy another iPhone is unbelievably high and insinuate that can only be because of lock-in, not because of customer sat.
02:12:08 ◼ ► Even though that, well anyway, but they mentioned this, I've never heard of her, but it's, she was testified in the Epic case, but her name is Susan Athey and she's the department of justice's chief economist, which I didn't know they had.
02:12:24 ◼ ► And a former Microsoft employee, but she testified in the Epic case that it was switching costs that lock customers in that middleware, which is to say cross platform software can meaningfully reduce switching costs for users and developers.
02:12:41 ◼ ► And Apple's restrictions are designed to prevent users from using middleware to maintain market power, but that Judge Gonzalez completely rejected her testimony.
02:12:52 ◼ ► And the quote from the judge is Dr. Athey's testimony was, "wholly lacking in evidentiary basis and does not show substantial switching costs. It also does not determine from consumers themselves whether they are motivated by loyalty and product satisfaction or because of switching costs."
02:13:12 ◼ ► So in other words, I think what happened in the Epic case, which I don't remember this part, I don't remember this woman's name, but I think she went up there and testified that all this stuff that the DOJ is, she obviously didn't change her mind after testifying in Epic.
02:13:30 ◼ ► And then Apple presented lots of evidence that showed the customer satisfaction and actually presented evidence from actual people who actually buy iPhones that explained why they buy iPhones. And it was nothing what she described at all.
02:13:45 ◼ ► It does not show substantial switching costs to write, which is the whole argument. And this is what's great about this is, I mean, you're like Apple versus Epic, who cares?
02:13:52 ◼ ► So it's like, this is the DOJ's chief economist, which means this is the mindset inside the Department of Justice when it comes to this sort of topic is they think that customer sat and all of that is flimflam and that the truth is that Apple's users are prisoners who are trapped.
02:14:07 ◼ ► And I think it implies that at least her, and I think her viewpoint obviously informs this entire filing, entire lawsuit, they think Judge Gonzalez, they got screwed by Judge Gonzalez and that they can make the same argument again in front of another judge in New Jersey and win.
02:14:30 ◼ ► I'm trying to think what if I switched to an Android phone, what would be irrevocably lost? And the answers are I would have to get rid of my Apple watch.
02:14:42 ◼ ► Which to be clear, just let me interrupt and just say, Apple is very clear when you buy an Apple watch that it only works with Apple.
02:14:48 ◼ ► Yeah, sure. Sure. But I mean, it's a it's a it's a thing, but that's fine. I like my Apple watch, but I would have to give it up.
02:14:53 ◼ ► And is that I mean, they're not even arguing that like Apple is not allowed to make a watch that's only usable with their platform. They don't even make that argument.
02:15:01 ◼ ► They're arguing that other watches should work cross-platform so people can choose because they because I think there's a reluctance in general with these regulators to basically say we're going to dictate all your business practices.
02:15:11 ◼ ► Right. And making a product for your for your platform is not illegal at all. It's the it's in the details.
02:15:19 ◼ ► And then there's iMessage, right, which I think they mentioned here and again, the introduce introduction of support for RCS that's forthcoming, which is probably because China said they needed to do it is going to make this less.
02:15:32 ◼ ► But sure, I will miss that. Although again, this document seems to suggest that it prevents people from having secure conversations.
02:15:40 ◼ ► But I could literally use WhatsApp or signal or any number of other chat or Facebook Messenger. Plus I can use RCS currently SMS and I think that's an issue.
02:15:52 ◼ ► But then in the long run RCS and get by and I honestly like all of the other stuff Apple does like you can watch Apple TV on other devices and on the web, you can access there's iCloud web and there's iCloud on Windows like Apple doesn't
02:16:09 ◼ ► like Apple Music has an Android app. Apple is not in the business, which I think some people miss of building services that are completely inaccessible if you're off their platforms.
02:16:21 ◼ ► So like there's not a lot and that goes to the whole point of like, there's not substantial switching costs for me. My switching cost would really be that if I wanted another smartwatch, I would have to buy one and or and even then if Apple were to make the Apple Watch sync with the iPad.
02:16:42 ◼ ► Well or make it independent right or make it purely independent or sync with a Mac or whatever like something else where it's still a little dependent on the phone, but that's about it.
02:16:51 ◼ ► I'm a little surprised that so many years in that it still hasn't because if you'll recall the iPhone, I mean, I know you will recall but if listeners will recall for several years an iPhone required a PC a Mac or PC with iTunes like
02:17:07 ◼ ► you had to activate it. You had to plug it in through the cable to connect connect to your PC and connect through iTunes just to activate the iPhone.
02:17:15 ◼ ► Yeah, the activation went through iTunes on your computer and all of your contact syncing your calendar syncing.
02:17:29 ◼ ► Yeah, and sync them to the phone rather than buy them directly on the phone or at least it was common. It was if I was at home and thought to get a new app or I was reading somebody's website and they mentioned a new app for the iPhone.
02:17:42 ◼ ► I would just go buy it right there on my Mac and then the next time I connected physically connected the phone was the satellite to the.
02:17:51 ◼ ► They made it ultimately more standalone and they could do that. I mean, I've got a theory the fact that the health data is now accessible on the iPad with its sinks now, which it didn't used to means that they're actually one step closer to at least allowing the iPad to connect to it.
02:18:04 ◼ ► But you're right. Ultimately, the goal is probably to just have it be independent and that would presumably let it work with other devices to like to the larger point.
02:18:13 ◼ ► It's just not like like the lock-in effects are some of them exist and Apple benefits from them, but it is overstated by a lot in this document that the existence of lock-in this is true with all this stuff right?
02:18:28 ◼ ► The question is does the existence of B negate the existence of a does the existence of Apple skimming money from 15 basis points from every Apple pay transaction negate all of the other reasons you would make Apple pay.
02:18:42 ◼ ► And build it the way you did it is the existence of lock some lock-in negating all the customer satisfaction. And if you're the DOJ, I guess the answer is that the existence of be basically negates a I think in court Apple has a pretty strong case that a is their mode is their primary motivator.
02:19:00 ◼ ► Even if in some cases it might be easier to argue that point, but in most cases, I don't think it is the messaging thing is so technically misguided in here.
02:19:09 ◼ ► It's ridiculous. They blame Apple. They literally blame Apple for the lack of encryption between iPhone to Android text communication, which is really just it's talking about SMS, but you can using like you said, WhatsApp signal.
02:19:27 ◼ ► I think what they're really doing and this is the point is they make a broad pronouncement and then when you drill down what they're really saying is Apple could have supported RCS more rapidly than it did and they chose not to and the result was it degraded and they chose not to because they wanted it to be painful for people to know people using Android and is there an argument to be made there?
02:19:47 ◼ ► I think there is, but it is a very specific argument that has a lot of technical detail about how RCS is implemented and why it might have not actually solved a lot of these problems in terms of privacy and security, even though Apple is now sort of after the fact had a little bit of a conversion and is embracing it like there is an argument there, but the argument that they're making broadly is Apple wants you to be insecure if you're talking to Android and that's not true.
02:20:13 ◼ ► Not true at all. I mean and again and the US is unusual in terms of iMessage's market share, but and famously, very famously right now was ruled it's so, I was going to say unpopular, but it's not really unpopular, but it's such a decided non-monopoly in the EU that iMessage was actually exempted from the DMA and it's not like the EC is going easy on Apple, right?
02:20:39 ◼ ► And doing favors, lots of favors to Apple. The European Commission loves Apple and they're cutting them a break here and there. It just speaks to worldwide WhatsApp is dominant and it's actually growing in the US.
02:20:53 ◼ ► In the US iMessage, well and this undercuts one of their arguments that I think is actually kind of a novel argument that I find interesting, although I think they're right and I think it's irrelevant, which is true of a lot of these things, which is they seem to be alleging that the reason that iMessage is so popular is because iMessage emerged from the SMS app and that Apple only allows SMS messages to appear in that app that used to be called SMS and is now called messages.
02:21:22 ◼ ► And that because that's the only place you can go and then they integrated iMessage with it, everybody just stayed with messages and iMessage and that it's unfair that other communication apps couldn't also receive the SMS messages and become the default and that was Apple doing it.
02:21:43 ◼ ► Now, I think there is an argument to be made that if your Facebook Messenger or WhatsApp or whatever, that if you only want to use one messaging app, being able to get an API that says I'll be your default messaging app and I'll get all your SMS messages and your RCS when that happens from the system.
02:22:02 ◼ ► Okay, all right. The problem with it is in the rest of the world, the same was true and people don't use iMessage to the same degree there. So I don't believe that it's true.
02:22:13 ◼ ► No, and it gets even worse. That's absolutely true. In very many countries, something eventually arises to become dominant, right? It's line in Japan.
02:22:25 ◼ ► But it's even worse than that, where iAndroid has had the feature, perhaps from the get go or at least very early on, where SMS could be taken over by a third party app.
02:22:36 ◼ ► And part of that was written in so that the handset makers could do their own text app, right?
02:22:46 ◼ ► Yeah, and it does sort of tie into the pre-iPhone era of phones that you just wouldn't even occur to anybody that something other than the phone's own system would handle SMS, right?
02:23:04 ◼ ► There's a good security reason. One of the greatest security holes in all mobile is because you have to receive text messages from the carrier.
02:23:13 ◼ ► They come to you and there are, despite enormous efforts on Apple's part, I know to prevent this, one of the great security holes is still malformed text messages that break your phone.
02:23:33 ◼ ► Right, and iMessage is the same way, right? When somebody sends you an iMessage, it comes and that's been the number one source for zero-day exploits on Android.
02:23:42 ◼ ► You have to accept it. And if the way that the incoming message is processed isn't sandboxed, you know, Apple's, I forget, Blastor, right, is what they called it.
02:23:53 ◼ ► And I think they've, I don't know that they've cut them all, but it's been a while since I've noticed one of those being publicized, right? You know, I think they've successfully...
02:24:01 ◼ ► They're trying anyway. The document also suggests that messaging apps on iOS can't get push notifications and can't do, like, read receipts and stuff like that.
02:24:21 ◼ ► I use Signal all the time. I have at least one active, super active group on Signal with friends, and I use WhatsApp, and they're fine. There's a reason why they're so popular in so many countries.
02:24:31 ◼ ► Yeah, that's right. If it were a non-starter, they wouldn't be so popular elsewhere in the world, but they are, so it's not...
02:24:38 ◼ ► Because Android allows it, Signal on Android allowed you to say, "Oh, I like Signal so much, I want to take over SMS."
02:24:46 ◼ ► It turned out to be a disaster for Signal. It was more trouble than it was worth, and in 2022, they announced that they were going to...
02:24:52 ◼ ► I don't know if the current version of Signal for Android has already dropped it, but there's a blog post where in 2022, Signal explained, "We're going to drop this because this is more trouble than it's worth for us."
02:25:03 ◼ ► And Google obviously agrees too, because while SMS, I guess they can't retroactively take it out because they made the decision long ago that third parties can take over.
02:25:16 ◼ ► RCS, that's not true. To get RCS on an Android phone, it only goes through the system's chat app. There is no API for WhatsApp or Signal or anybody else to take over RCS.
02:25:29 ◼ ► Because it proved to be a bad idea, because it's part of the idea of being a phone. And yes, there's no doubt, this is one of those things where multiple things can be true.
02:25:39 ◼ ► Did Apple think, "Hey, if SMS has the default lowest common denominator communication between all phones, happens to have severe limitations on image file size, and does absolutely horrible things to the compression of video in particular?"
02:25:58 ◼ ► Does that really hurt iPhone users when they send them to other iPhone users and it goes over iMessage and it's high fidelity? Sure, it's true.
02:26:08 ◼ ► So I'm sure some people at Apple were like, "Let's not support RCS because it helps us that SMS is so low resolution."
02:26:22 ◼ ► But there's also a very reasonable argument on Apple's part that the whole idea of carrier-based messaging is not a great idea. I don't think.
02:26:35 ◼ ► And just sort of furthering the idea. I mean, the iPhone has done more than anything ever. It's almost unimaginable.
02:26:43 ◼ ► It's the whole reason people doubted Apple would ever even make a phone in the first place was the iron-clad control the carriers had over the whole experience.
02:26:52 ◼ ► Which phones were sold, what the software on the phones was, any kind of third-party app or game you could buy all went through the carriers and you'd have different games available through AT&T than through Cingular or T-Mobile or whoever else.
02:27:07 ◼ ► Nobody broke that. Nobody did more to break that. And to the benefit of Android users too than the iPhone.
02:27:14 ◼ ► Smartphones are essentially IP devices now. And SMS is a weird vestige like phone is if you're not on a Wi-Fi calling, in which case it's IP too.
02:27:24 ◼ ► It's a vestige of the old model which is this data is getting transferred through a special lane from the carrier instead of just being an internet message.
02:27:32 ◼ ► And so one of the reasons Apple resisted RCS for so many years was that they just didn't want to contribute. They didn't want to contribute to any further headroom for carrier-based features.
02:27:45 ◼ ► Other than treating your cellular connection as just a dumb internet pipe, right? Which is really the goal.
02:27:51 ◼ ► Why give carrier-based messaging decades more of legroom by supporting this new thing rather than let SMS slowly die out and become less relevant?
02:28:07 ◼ ► I'm surprised that this document doesn't paint a nefarious picture of Apple deciding to launch iMessage inside the Messages app as a way to stop all competition instead of making a separate iMessage app and leaving the SMS app.
02:28:23 ◼ ► But if you think about it again from a user experience perspective, because their iMessages IDs can be keyed to an Apple ID or to a phone number.
02:28:32 ◼ ► The whole concept was to build a really good user experience IP-based messaging system that used the same approach as text but took an MMS and took it in the same interface.
02:28:49 ◼ ► But if they happen to have an iPhone, you get a blue bubble and you get all these extra features.
02:28:54 ◼ ► It was never their intent to have it be like, "Oh, well, let's put that in a separate app so that we don't compete with SMS."
02:29:02 ◼ ► Why would they muddy their feature with SMS? The answer was not, "This way we're going to lock people in."
02:29:09 ◼ ► The answer was, "It was a better user experience to only have one app instead of two and to be able to get everybody off of SMS if they could."
02:29:17 ◼ ► But you could reverse that story now and say, "Ah, but that was all part of their plan and their scheme."
02:29:24 ◼ ► But with a lot of these stories, the answer is, "Apple did this thing in part or in whole because it was going to be a better experience."
02:29:31 ◼ ► And then, yes, they benefited from controlling it. And there's a lot that has happened.
02:29:36 ◼ ► But that's not the same as saying, "Apple invented this thing in order to lock people in and control it."
02:29:42 ◼ ► Let's see, I'm trying to scroll through my notes here and see if there's anything to cherry pick.
02:29:48 ◼ ► So here's a slide dig they work in where they paint a picture that I would – and I don't think this is an exaggeration. Tell me if you agree.
02:29:56 ◼ ► I think that the DOJ filing argues that most of Apple's – we have user security and privacy as an utmost priority.
02:30:06 ◼ ► I think the DOJ is arguing that's a complete sham, or maybe not complete, but that it's more hype than truth and that it's just cover for anti-competitive behavior.
02:30:18 ◼ ► And not the other way around where it's mostly actually true and only slightly cover for anti-competitive behavior, which is the way I would argue.
02:30:27 ◼ ► Apple – here's from the paragraph 16 – "Apple selectively compromises privacy and security interests when doing so is in Apple's own financial interests, such as degrading the security of text messages."
02:30:39 ◼ ► Right? Which, again, is blaming Apple for the fact that SMS and RCS are not encrypted, which is nonsense.
02:30:47 ◼ ► "Offering governments and certain companies the chance to access more private and secure versions of app stores," which is a very curious description for enterprise software distribution.
02:30:59 ◼ ► So what we should do – so the solution here is that Apple should allow my parents to do enterprise software installation.
02:31:08 ◼ ► I mean, it's not like Procter & Gamble has a secret app store. It's enterprise. It is complicated and ITE and no fun at all and not at all an app store.
02:31:23 ◼ ► Or – and this is the praise I was getting to – "accepting billions of dollars each year," which is a verb typically that goes with bribes, "accepting billions of dollars each year for choosing Google as its default search engine when more private options are available."
02:31:42 ◼ ► So that is something I've pointed out. You've pointed it out, too, over the years. It is a big hole in Apple's privacy argument, their deal with Google, right?
02:31:54 ◼ ► Right. The counterargument would be that it's the best search product. And so they're choosing not only – but this is the muddiness, right?
02:32:02 ◼ ► That they're choosing it because it's the best search product, even though it's less private, because Apple's priority is not just privacy. It is also user experience.
02:32:09 ◼ ► And it has the advantage of paying them a lot of money, right? And that muddies the waters. I like – honestly, I think their examples here are poor, but I love – my favorite sentence in the entire thing, I think it is – I think that there is truth in it and I think it's well-written, is "Apple deploys privacy and security justifications as an elastic shield that can stretch or contract to serve Apple's financial and business interests."
02:32:32 ◼ ► And this is where I would say I think Apple gets itself into trouble because – I would even argue most of the time, Apple is most concerned about security, privacy, and user experience.
02:32:46 ◼ ► But every so often, they do something that I read as being pretty much nakedly a power grab or a money grab, and they justify it by saying, "Well, it's really about security."
02:33:03 ◼ ► And sometimes I'm like, "I don't buy it." Right? Like, I don't think it's really about security. I think that's your justification.
02:33:09 ◼ ► And I think the problem with doing that is it allows people to make this argument, which is you say you're worried about user experience and privacy and security, but you're not really.
02:33:19 ◼ ► And I think most of the times they are. But there are those moments where – and the Google example is not a bad one in the sense of saying, "Are they making a judgment?" Yes.
02:33:30 ◼ ► Is it counter to one of their stated goals? Yes. Is it the unstated goal here in the document of a user experience? I would say yes. But is it muddied by the fact that they get billions of dollars back from Google for doing it? Yes, it is.
02:33:44 ◼ ► There's no doubt about that. And there are other cases that are similar where Apple will say, "Oh, no, we don't let – like we mentioned the browser engine stuff.
02:33:52 ◼ ► Like we don't let other browser engines on the platform because of security issues." Are there security issues? Yes. Is that the reason that they've never allowed them on?
02:34:01 ◼ ► I mean, maybe, but I think you could argue that it also has a business benefit to them. And once it's muddy, then the DOJ can point to it and say it's all a sham. And Apple has to defend every single choice they make.
02:34:16 ◼ ► Right. And part of it, too, comes to the idea of the integrated device, right? And the fact – it does go back to the whole first year of the iPhone where there were no third-party apps.
02:34:27 ◼ ► Right. And that this is what the device does. And I keep meaning to write a column about it, but it's like I can talk through some of it here. But there's a way that you can sort of paint the Apple should be obliterated by these antitrust things and just that these all should hit hard and vastly change.
02:34:45 ◼ ► And vastly change the way the company works. But there's a step-by-step process of how the iPhone evolved where it's really hard to put your finger on where they crossed the line. Was it illegal for them to ship the iPhone in 2007 without third-party apps at all?
02:34:59 ◼ ► I don't see how anybody could argue that, right? That if you want to make a phone that doesn't have any third-party native apps from third parties, I don't see how you could possibly argue that's illegal.
02:35:11 ◼ ► But then if you want third-party apps, would you say it's better or worse for everybody, the developers who want to make the apps, the users who'd like to install the apps in games? Was it better or worse that they opened it up in 2008 with the App Store as the sole distribution, taking a 30% cut of paid apps, saying you can't use private API, you have to stick to the public SDK, you have to agree to the developer license agreement. Was that better or worse?
02:35:39 ◼ ► I would say everybody would agree it was better. And largely led to the iPhone becoming the success that it is, right? A world where the iPhone never had third-party apps, it seems the iPhone would have been relegated to iPod levels of popularity, not world-changing levels of popularity.
02:36:00 ◼ ► But where then, as you go down the line from that starting point, did it cross the line and become illegal? And I think it's very hard to do. I mean, because a lot of these arguments in the DOJ from critics outside in groups like the Epic, whatever their app, what fairness, whatever, the open web, they really, some of them explicitly say it, they really do.
02:36:28 ◼ ► And lots and lots of people bring up the, but what about the Mac? If the Mac is allowed to install software from any source and the app doesn't mandate that the App Store is the only thing, how can Apple possibly argue that the iPhone shouldn't work the same way?
02:36:42 ◼ ► That the basic argument is that the iPhone should be ethically and legally obligated to work like a Mac in terms of software distribution. And I just completely disagree. I personally would enjoy it. I mean, that's one of the ironies of the whole DMA thing. I'm against the DMA largely, but I'm actually jealous in some ways because I think for nerds, people in our audience, it's going to be kind of cool to have third-party app stores.
02:37:08 ◼ ► And I trust myself to choose in the same way that I'd install lots of software on my Mac directly from the web. I trust myself because I consider myself at least somewhat of an expert to do this.
02:37:20 ◼ ► I think there's going to be lots of cool stuff available to iPhone users in the EU that's exclusive to the EU because of this, but I also think Apple has a point that it might or might not, we'll see, end up being worse for the average user in the aggregate in terms of what happens and what gets through and how their phone operates and what effect it has on battery life, etc. and so forth.
02:37:44 ◼ ► But the idea that the iPhone is legally obligated to work like a PC is, to me, has no foundation.
02:37:52 ◼ ► Well, legally obligated is the question there. And I think if, let me try this thought exercise, which is let's say that iPhone market share in the US is Windows market share in the 90, it's 95%.
02:38:05 ◼ ► So essentially if you've got a phone, it has the app store on it, and then the argument is, okay, they're a monopoly and they take money out of the market and they dictate terms.
02:38:15 ◼ ► And if there's a piece of software that they don't want in the store, they say no, and there's no alternative.
02:38:26 ◼ ► And I think in an extreme case like that, you would probably say you can't, like, we can't do this. We can't have one company to determine what software exists on all of the country's smartphones.
02:38:46 ◼ ► The DMA is saying, we have law that says that there needs to be competition when there are large gatekeepers.
02:38:53 ◼ ► And the challenge in the US is we don't have that law. And so they're trying to say they're a monopoly. Are they or not? They're going to give it a go.
02:38:59 ◼ ► I do think that sideloading, like, I think what made the app store successful is because it made buying software easy.
02:39:07 ◼ ► And for me, the argument that the app store being exclusive helped the iPhone be what it is mostly that everybody who made software for the iPhone had to be in the app store.
02:39:17 ◼ ► And therefore all the appealing apps were in the app store and therefore it was very easy to have an array of appealing apps on your device without having to mess around with downloads.
02:39:25 ◼ ► Which, cause Apple always talks like they invented shareware. They didn't. They just made it real easy for regular people to buy shareware, essentially.
02:39:32 ◼ ► Apple likes to talk about how nobody bought software on the internet before the iPhone in the app store. It's not true. It's ridiculous.
02:39:42 ◼ ► But I will say, if I don't think that if you could have sideloaded on day one of the app store, I'm not convinced that we wouldn't have still seen the app store be incredibly successful and be the defining part of the platform.
02:39:58 ◼ ► And because it's so easy and it's such a great consumer experience. And to this day, I would say, I would like there to be sideloading on the iPhone.
02:40:07 ◼ ► Like you said, I don't believe most people would do it. And I don't think most people would turn it on just as on Android, most people don't do it.
02:40:15 ◼ ► I would like it there because it means that Apple can't determine whether a piece of software can run on their platform or not.
02:40:24 ◼ ► And in part, it's because while Apple talks about security and privacy and stuff like that, and certainly there would be scam apps just like there are on the app store.
02:40:32 ◼ ► My gut feeling, and I'm not a judge, my gut feeling is that the reason they don't allow it is because they is not because of security.
02:40:41 ◼ ► It's because of control. It's because they don't want they don't want somebody doing something on their platform.
02:40:45 ◼ ► They don't want Epic putting Fortnite on their platform outside and making money that they don't get cut in for.
02:40:51 ◼ ► And that they could do whatever they want. And Apple doesn't have a say, even though it's running on their platform.
02:40:57 ◼ ► Like I get that why Apple wants control and a financial stake in the products that are on the platform.
02:41:03 ◼ ► I would probably argue that they don't need it and that it would be okay and they'd be just fine.
02:41:08 ◼ ► But there's no legal basis for it in the US as far as I can see. So in Europe, it's like that.
02:41:13 ◼ ► But in the US it's not. And that's why this document is disappointing to me in a lot of ways, because I think there are places where Apple should probably change its behavior.
02:41:20 ◼ ► But if it's not in a law that's plausibly going to can plausibly be applied, you just have to leave it.
02:41:30 ◼ ► So here's another thought exercise for you. I brought this up on dithering a week or two ago.
02:41:36 ◼ ► But let's say they passed a law that said if you run an app store and you charge a commission fee.
02:41:45 ◼ ► All of 100 percent of those fees that you, the platform owner, own go directly to the Treasury Department as tax and you keep none of it.
02:41:55 ◼ ► So the Apple couldn't profit a penny from any commissions charged through the app store.
02:42:00 ◼ ► Would Apple keep the app store as the sole distribution for the iPhone if left to its own devices?
02:42:09 ◼ ► I say yes, they would. I think they would because of the control and the control over the experience.
02:42:15 ◼ ► I think you're right. Do they like the money and does the money motivate a lot of their decisions and specific ones like the anti-steering stuff?
02:42:21 ◼ ► I think the anti-steering stuff would probably go out the door. Yes. When it's steering you to the Web to do stuff.
02:42:27 ◼ ► Yes. I think the anti-steering stuff is all about protecting their mandatory cut of on-device transactions for digital goods.
02:42:35 ◼ ► I think, though, that they would probably still seek to keep the app store as the sole distribution of software because of the control and because of the benefits of it.
02:42:51 ◼ ► But furthering that, if they had no money to make from the app store, if it was all just immediately 100 percent of that commission goes right to the Treasury Department as tax that the federal government keeps.
02:43:03 ◼ ► Would they allow sideloading if they allowed it side? I think they would try not to. But if they did, what would they want the sideloaded apps to be?
02:43:12 ◼ ► Well, clearly they would want them to be native UI kit, Swift UI apps written for the iPhone that use the frameworks, that use the idiomatic design of good native iOS apps that integrate with iOS specific features like the wallet, like iCloud.
02:43:32 ◼ ► Like all the things that are specific to the iPhone. And it ties into the argument from the PWA fundamentalists who think that a future world where everything is a web app is being held back by Apple's limitations on WebKit.
02:43:51 ◼ ► And that they won't let WebKit have features like the MIDI interface and whatever it is that's being used here by StreamYard so that you and I can have a live chat and video conversation through this.
02:44:03 ◼ ► Even if it wasn't for the money from the app store, if it was all off the table, Apple would clearly rather have people writing native apps.
02:44:13 ◼ ► And there is a lock in story, too, right? It's not just that the experience is better, but that exclusive features for the iPhone are differentiating features for the iPhone and differentiating features sold at a premium is Apple's business.
02:44:26 ◼ ► So of course they have a motivation to keep web rendering engines from usurping the role of the native platform and being able to do everything. It would be far better. Apple's perspective, app store revenue aside, native side loaded iOS apps are far better for, in Apple's mind, for the user and for the platform and for Apple than cross platform web apps that don't take advantage of any
02:44:57 ◼ ► Right. So this is I think this is where Apple gets in trouble because I think and when Apple is accused of being paternalistic, this is it, which is.
02:45:07 ◼ ► We're defensive or afraid. I agree with you. I think it's true that your theoretical Apple is saying I want native apps on my platform because they're better than web apps.
02:45:19 ◼ ► I guess what I would say is I agree and I believe that, and that's why I wouldn't be worried about web apps because I think the user experience is so degraded that people are going to reject them in large part.
02:45:30 ◼ ► And if they are, if it turns out that it's not true, then you were worried about the wrong thing because the problem was the difficulty in building native apps or that your native apps aren't good enough.
02:45:40 ◼ ► But like you could compete on that point if you believe it, but to say, no, we think it would be bad and therefore we're not going to compete is where I think Apple gets in trouble where they are.
02:45:56 ◼ ► And it's at its worst if Apple does something mediocre and they're trying to protect it because it's mediocre.
02:46:02 ◼ ► Like, I mean, books is kind of like that, but when it's good and they go to the same playbook, it's kind of infuriating.
02:46:10 ◼ ► And I would also say based on your hypothetical, the first thing I would say is that's why there is the the platform access fee in the, in, in Europe.
02:46:22 ◼ ► Is that would be the Apple's first claim would be like, okay, all money is going to go to the treasury, but we're going to now have a licensing fee for using our APIs on our development tools.
02:46:32 ◼ ► And I personally think that governments in general are really reluctant to force companies to not charge for core access to their product, right?
02:46:45 ◼ ► Like there's clearly value in building developer tools and building APIs for third-party developers.
02:46:54 ◼ ► So it would be a, like, that would be their first move would be like, okay, you can take our revenue there, but now all developers are going to pay us because of all these other things that we're doing.
02:47:03 ◼ ► And if that didn't work, they'd be like, okay, well now based on the size of your business, we're going to charge you for X code.
02:47:09 ◼ ► And they would find a way to do that because I think they do believe fundamentally they offer a value, but I agree a hundred percent with you that it's not.
02:47:16 ◼ ► With Apple, it's not always about the money. And I think if you think that you're missing the point, it's not always about the money.
02:47:22 ◼ ► It's not always about lock-in. Sometimes it is legitimately about privacy and security and the user experience.
02:47:28 ◼ ► And sometimes it's just about control because Apple is at its, if Apple were a person, it would be a control freak.
02:47:41 ◼ ► Even if they care about stuff that you should care about, it still can be difficult to deal with them.
02:47:47 ◼ ► And it's hard for them to let go of stuff that they need to let go of. And I think Apple is like that.
02:47:55 ◼ ► And to ascribe it to avarice or even just fear of competition, I think doesn't do it justice.
02:48:02 ◼ ► Actors are famous for their comments about how joyful and lighthearted and easygoing it was working on the sets of Stanley Kubrick.
02:48:09 ◼ ► Mm-hmm. I've always, I mean, ever since I started covering Apple, I've always likened Apple to somebody who is a brilliant artist, maybe a world famous brilliant artist.
02:48:19 ◼ ► And if you look through history at the friends and family of those brilliant creative minds, oh, that's rough, right?
02:48:27 ◼ ► Like there's very rarely one of those brilliant creative minds that are like, they're pretty well adjusted, easy to be around, easygoing, not a problem.
02:48:33 ◼ ► Like, no, it's actually kind of hard to be around them. Apple is like that as an entity, Apple is like that.
02:48:39 ◼ ► But you just have to like, again, are they doing it because they're villainous and greedy?
02:48:44 ◼ ► Like sometimes I would say yes, but there are so many other reasons at play, including, as you said at the outset here, control.
02:48:59 ◼ ► And I would argue they probably shouldn't, they should get over it, but that's what they think.
02:49:04 ◼ ► And so if something bad happens on the iPhone that is completely out of their control because it's a sideloaded app in the EU and it does a thing that it's not supposed to do,
02:49:13 ◼ ► like they still find themselves responsible for that. They feel they'll be blamed, which they probably will be, and that they need to, like, it's just the nature of it.
02:49:22 ◼ ► And unless they're told not to, unless it's wrestled away from them by a regulator of some sort, they will continue to think that.
02:49:31 ◼ ► I forget the details of how it came up and how it was relevant, but that famous Mac roundtable discussion when Apple had a handful of us,
02:49:43 ◼ ► me and Panzareno and Ina Fried and, forget who else was there, oh, Pachkowski and Lancel and all.
02:49:56 ◼ ► I think it, of all the people who should have been there, I don't understand why you weren't.
02:50:01 ◼ ► But it was largely about the Mac Pro trashcan and we're serious about Pro computers and we're even going to tell you a year and a half advance that we're working on an iMac Pro, blah, blah, blah.
02:50:22 ◼ ► I forget what the relevant thing was, but Federighi was talking about that they, and it was kind of insightful into the insular nation nature of Apple itself,
02:50:35 ◼ ► that it came up that they, I forget why it came up, but Federighi said that they looked at it then and did some battery testing on the difference between Chrome and Safari on Macs
02:50:48 ◼ ► and were flabbergasted at how detrimental doing the same browsing on Chrome versus doing it on Safari was.
02:50:56 ◼ ► And I honestly believe Federighi's, it just, the way he said it, I don't think there was anything insincere about it,
02:51:07 ◼ ► But, and I don't know, I really don't, I don't know what, and I don't think that all of the Blink engineers at Google,
02:51:15 ◼ ► it's not that they don't care about battery life and that they're careless or reckless about it,
02:51:25 ◼ ► Apple, at Apple, because they actually sell the devices, and especially the iPhone, battery life is so precious.
02:51:31 ◼ ► It always has been, and for the foreseeable future still will be, right? Battery anxiety is a real thing.
02:51:38 ◼ ► That the efficiency of WebKit versus Blink is a real deal. That's a real reason for them to insist on WebKit.
02:51:52 ◼ ► and you could do a comparative side-by-side battery test and Chrome would be equal to or even better than WebKit?
02:52:03 ◼ ► But that's the sort of thing Apple thinks about, and they do. They really do think about such things,
02:52:09 ◼ ► and that's part of the control, that this is a thing. Web browsing engines are incredibly computationally expensive.
02:52:17 ◼ ► They really are. It is, and the nature of web development is such that it continues to, if anything,
02:52:30 ◼ ► JavaScript, by nature, is single-threaded, so everything goes onto a performance core when you're running complicated JavaScript,
02:52:45 ◼ ► Oh, it's justification, sure. But on the Mac, bank users just know, don't run Chrome if you care about your battery.
02:52:50 ◼ ► Well, our audiences do. I don't think typical people do. If it's still true that Chrome is like 20 or 25 percent less efficient than WebKit,
02:52:58 ◼ ► which wouldn't surprise me, I think there's millions and millions of Mac users who are using Chrome who don't realize that their battery life is suffering.
02:53:06 ◼ ► Yeah, I guess, I mean, in the end, if it mattered that much to Apple, they could compete and they could market it and say,
02:53:12 ◼ ► "Don't use Safari on iPhone because it's so much better," and all of that. But you're right. You're right.
02:53:17 ◼ ► I mean, this is the thing, though, is, but why if we don't have to? If we can just say that it's a rule that you can't run it,
02:53:24 ◼ ► then we don't have to deal with any of those issues. We don't have to market Safari. We don't have to warn people.
02:53:29 ◼ ► We don't have to get blamed for bad battery life when, in fact, they're actually running a web app that's bad.
02:53:34 ◼ ► And you can see the mindset, right, which is like, why would we open ourselves up to so much trouble when we can just say no?
02:53:41 ◼ ► And I get it. I totally get it. Where it becomes a problem is when they just, their default is just say no,
02:53:48 ◼ ► and the reason is that they don't, like, right, like that they're suppressing competition and that at some point,
02:53:54 ◼ ► a government steps in and says, "I know that it seems like it's more trouble than it's worth, but you got to do it.
02:53:59 ◼ ► You just have to bite the bullet and actually compete on this one instead of just shutting them out."
02:54:05 ◼ ► Yeah, two things that hurt Apple here in above and beyond whatever avarice they might have for the App Store commission fee.
02:54:12 ◼ ► Also, side note, drives me crazy whenever, well, it irritates me when other people describe the App Store commissions as quote-unquote "tax."
02:54:43 ◼ ► They are not tagged. To have the Department of Justice describe them as taxes is infuriating and tells you the sort of people who wrote or leading this at the Department of Justice.
02:54:54 ◼ ► I think the other thing to consider is Apple doing something on Mac OS that allows Safari to be more efficient and Google can't do it?
02:55:02 ◼ ► Or is Google just not efficient? And if it's Google not being efficient, I think that's okay, right?
02:55:09 ◼ ► And I think we would know probably because there'd probably already be a controversy about it.
02:55:14 ◼ ► Because the principle here is that Apple shouldn't make Safari better by withholding technology that other browsers could use to make their browsers better.
02:55:24 ◼ ► The way to compete is to say, "You guys didn't do as good a job as us, and that's why people should use our browser and not yours."
02:55:31 ◼ ► And to Apple's credit, and I know that this is controversial and some people out there, maybe not people who listen to my show, but a lot of people out there are going to roll their eyes at this.
02:55:47 ◼ ► And I obviously, while still looking out for Apple as number one, that's where anybody who's calling it malicious compliance is going off the rails.
02:56:04 ◼ ► But given that Apple is still looking out for its own interest, I really do think almost everything, and the parts that maybe weren't, are the things they've already changed in the two months based on feedback from actual people.
02:56:17 ◼ ► Like the, "Hey, once you switch to the new rules, you can't switch back." And they're like, "Oh, okay, maybe people do want to switch back if they suddenly realize that it doesn't work out for them financially."
02:56:31 ◼ ► But at a very technical level, with the DMA, and I don't think the DMA gets into the technical computer science specifics of it, but it does say they have to allow third-party browser engines.
02:56:42 ◼ ► And one of the technical things that makes JavaScript engine faster is called just-in-time compilation.
02:56:50 ◼ ► And JIT, J-I-T. And without, I mean, I could explain it a little bit with my 30-year-old computer science degree.
02:56:59 ◼ ► But basically though, it's inherently dangerous to have a just-in-time compiler because of reasons, right?
02:57:08 ◼ ► And they're allowing the third-party engines to do it in a way that no other app would be allowed to do the sort of things.
02:57:24 ◼ ► And if like an attacker could somehow get into the memory of the JavaScript engine while it's doing the computation and inject instructions into the code,
02:57:47 ◼ ► They're doing, as far as I can tell, everything they can to allow the third-party engines that might come to fruition in the EU to run as fast as possible.
02:57:56 ◼ ► Which I don't, you know, if they hadn't allowed it, then it would have been one of the things that came up at the workshop last week.
02:58:06 ◼ ► I have changed, I mean, I never called it malicious compliance, but now I've been referring to it as an incremental compliance.
02:58:14 ◼ ► They make a guess about what's going to satisfy, but they don't try to, they try not to overshoot.
02:58:47 ◼ ► Thinking that they're gonna, that's the best way to deal with a regulator who is going to judge what they ship rather than agree to a term sheet in advance.
02:59:08 ◼ ► And they launched their plan on January 24th or 25th with what they thought was the tightest possible thing that they thought maybe, hopefully, sort of might fly.
02:59:35 ◼ ► And they clearly now, when they announced that it was coming, they've obviously been working on it because they said it's coming later this spring.
02:59:48 ◼ ► And what's going to happen, and this is why they strategized it this way, is some stuff that they did the minimum for, they're going to be allowed to do, right?
03:00:00 ◼ ► And they're going to be like, whew, because we were going to give you more there and now we're not.
03:00:04 ◼ ► And then over here, like, and I still think there's stuff in there that very clearly is not in the spirit of the law.
03:00:09 ◼ ► Like they, the, not to get on the DMA here, but just as a quick aside and a very long podcast, I think there, if the law is supposed to prevent people from being gatekeepers,
03:00:21 ◼ ► the idea that in order to sideload, you have to be in the store for two years and have a hit app, I like using your participation inside the gate as a proxy for being trustworthy, I don't think is going to fly.
03:00:36 ◼ ► I get what Apple's doing there, but I think that's the wrong proxy because you're saying basically you need to set up an app store business and become wildly successful for us to trust you.
03:00:45 ◼ ► Or from this point forward, wait two years while you're distributing through one of the marketplaces that's going to pop up.
03:00:56 ◼ ► And therefore, if it's not within Apple's own app store, it would have to be two years from now, even if.
03:01:14 ◼ ► And I think when they said in that, in that video meeting where Steve Trout and Smith clipped that part out, where, where the kid who's doing the store.
03:01:40 ◼ ► It's like they get feedback from, I think the phrase is developers and other stakeholders will be other stakeholders is the E E C itself, but they will ratchet as they go.
03:01:58 ◼ ► I wonder how much of that will end up being the approach in the U S too, which is because they can negotiate and they could settle or they could take it to court.
03:02:07 ◼ ► And I do wonder, look, they just filed the case and three of the five main bullet points in the case, Apple has already done in advance, essentially already addressed them.
03:02:17 ◼ ► So I do wonder sometimes if the end result of this case is going to be a settlement that Apple agrees to do a few things that may not even have very big consequences for anyone that allows the DOJ to declare victory, Apple to declare victory.
03:02:46 ◼ ► I think it's almost ironic where I'm not, I think it's far less clear what the DOJ wants than what the EU wants.
03:02:53 ◼ ► And even though the DMA is so opaquely written, you can kind of read between the lines, what they really want.
03:03:07 ◼ ► Like I think they just want to be seen as being, being tough on big tech because they believe that being tough on big tech is politically advantageous, that it makes them look good.
03:03:17 ◼ ► And that's why I'm a little cynical and say, if you could give them a win that is not necessarily even a win for consumers in any way conceivable and is doesn't even hurt Apple that much because Apple's already headed in that direction in so many dimensions that maybe they take the win because that might be all they really want is just to be seen as victorious and taking on big tech.
03:03:39 ◼ ► And they put out the pre Merrick Garland goes up there and says, Oh, look at what we did to change Apple's ways.
03:03:45 ◼ ► Things are better now. And are they really better? Maybe not, but like they can declare victory. Sorry to be cynical, but some part of me thinks that's all they really want is to look like they got a win against the bad guys of big tech.
03:03:56 ◼ ► Well, and that's exactly how I think it's going to play out in the EU with the DMA. I do.
03:04:03 ◼ ► I mean, there's the big question is the core technology fee, which I'm like 60% thinking is going to be fine, but only 60% to get back to betting odds.
03:04:16 ◼ ► But I think the I think they're you know, maybe they'll make them tweak it somehow. And like you said, Apple's definitely they've explicitly said they're looking at the viral hit app problem for it.
03:04:28 ◼ ► And I think that it could probably work around that by saying maybe like individual developers would be locked in with nonprofits and government institutions, which they've already exempted from the million download limit.
03:04:40 ◼ ► When somehow carve out a definition of a individual non incorporated developer and say that and who's not charging anything for the app.
03:04:51 ◼ ► Yeah, that a free app increment individual right does not incur any core technology fee, but free apps from corporations would because and I know that again, it's sort of a fundamentalist thing where the people who want it to be like a PC where if Spotify wants to have a side loaded app.
03:05:09 ◼ ► That does its own in app commerce as it sees fit without paying a nickel to Apple that they should be mandated by law to be allowed to do so.
03:05:21 ◼ ► I mean, I see where that's coming from. I just disagree with it. But I also don't think the European Commission is I think at a fundamental level, they are still a capitalist government.
03:05:34 ◼ ► And I think the people who think the EC is going to nuke that see the EC as much more socialist in nature.
03:05:43 ◼ ► There's certainly more socialist than the US government, but fundamentally, they're still trying to create a business friendly environment in the EU.
03:05:51 ◼ ► And for them to say the core technology fee is off the table and that it's completely illegal would be effectively saying that platform makers once they achieve a certain level of success, even if it's far below a monopoly level are not allowed to monetize their own intellectual property would be a radical change.
03:06:11 ◼ ► The way I've always described it is regulators are really reluctant to reach inside the fundamental business model of a company. They want to change their behavior and the core technology fee is clever and there are other ways you could do it. Like I said, you charge for Xcode if you wanted to or you could have for API's but regardless, it is
03:06:43 ◼ ► It's telling if you look at the stuff that hasn't really been attacked in Apple's response to the DMA, you see some interesting areas where probably they don't want to go like the notarization. I think that if you're an extremist you say Apple having any rules at all about my app and keeping me out of the store or being able to kick me out or blacklist me in after the fact is contrary to my freedom.
03:07:11 ◼ ► And the EC has been very clear that as a platform owner, Apple absolutely gets to have some level of oversight and control over security. And they're not going to ding you for doing an app they don't like. But if you don't pass muster, and this may come up actually, it might be very interesting to see if somebody says,
03:07:33 ◼ ► Well, actually, we want to use a private API, because we want to compete with Apple and Apple's notarization process rejects them. At that point, somebody might actually go to the EC and say, I should be able to use any API that Apple offers and we'll see what they say. But for now, it's telling right that they're like, no, I mean, Apple is not this is not a free for all Apple gets to exert a certain level of control and make some business rules and the European Commission is going to be fine with that.
03:07:59 ◼ ► Well, as Stephen Sinofsky pointed out in his exemplary book length analysis of it, it really does the DMA goes even further than that. And you can really again, it's opaque, and you can kind of read it both ways. But I agree with Sinofsky, where the DMA goes even further and actually mandates Apple to keep the platform as secure and private as it currently is, that it's that they really are trying to force Apple to come up with a compliance plan and Google.
03:08:24 ◼ ► But that has it both ways that both opens the Apple the iPhone up to other software distribution, including obviously now sideloading, while maintaining the level of security and privacy that it had while it was exclusive on the App Store, that Apple would actually be in violation of the DMA for exposing users to things that are that corrupt the platform security.
03:08:47 ◼ ► So we'll see, I to wrap it up, I jotted down two notes a couple minutes ago from you. But I think one of them, the two things, institutional, cultural aspects of Apple. And they do have companies are formed in the personality of their founders. And they both come from jobs, but one more than the other.
03:09:07 ◼ ► And I think that these two things work against Apple now that it's gotten big enough to get scrutiny, whether it's a monopoly or not. One is it's insatiable desire for control over everything in a default mindset, as you pointed out with a couple examples on this show, that if there's a question, should we do A or should we do B?
03:09:37 ◼ ► Now that it's so successful and it is, it's absolutely true that smartphones are an essential part of modern life. And so therefore it's inevitable. And this is what's frustrating from the outside, where it makes it look like how could Apple not see any of this coming?
03:09:52 ◼ ► That of course it's going to get regulatory scrutiny, whatever the result and penalties of that is, but the centrality of it to modern life in around the world, right? Anywhere where there is internet service is indisputable.
03:10:10 ◼ ► And then the other aspect of Apple's culture that I think is hurting them is that they don't like to explain themselves.
03:10:20 ◼ ► I always go back to the, what's his name, the Daniel Day Lewis character in There Will Be Blood, but I don't like to explain myself. And that is Apple.
03:10:29 ◼ ► And the control part from Jobs is absolute, I mean, if anything, that's a maybe only lesson. Jobs loved control. The explained part is where I think they actually missed Jobs.
03:10:41 ◼ ► And in general, even while Jobs was there, they didn't like to explain themselves, but when some crack in the dam would occur and it's like, we need to do something. Nobody was better at explaining Apple's perspective than Steve Jobs.
03:10:59 ◼ ► He was a great controller of the narrative. And I think that maybe in the corporate culture or just because he was so talented at it, that has gotten lost because you're right. There is this thing that comes from Steve, which is like the black box.
03:11:11 ◼ ► And nobody wants to know how we do it. They just want to be amazed by us doing it. And you see that throughout all of their products is why they don't pre-announce things. It's like all those reasons, but they also don't explain their behavior.
03:11:21 ◼ ► And you're right. Jobs had a particular talent. It wasn't just, we don't want to explain ourselves. It was, we want to control the narrative and tell the story we want to tell about what we're doing.
03:11:30 ◼ ► And when forced, I mean, he lost it a little bit with Antennagate where he was like, you can have a case if you want, right? He was obviously kind of mad and he was dragged back from vacation.
03:11:39 ◼ ► But generally he was really good at recasting the narrative in Apple's favor and explaining why Apple did what it did. And it does feel a little bit like that's been lost and that Apple of today doesn't have, it doesn't do that so much.
03:11:55 ◼ ► And the one time recently where they did it was that memo that was seemingly, I mean, it felt to me like Phil wrote it.
03:12:04 ◼ ► Which one? The Spotify one? It was the, yeah, Spotify pays nothing. That one. It was about the thoughts on the EU.
03:12:13 ◼ ► And it didn't have the, it didn't set the narrative in the way that I would say you want, if you want to control the narrative. I think it came off as kind of spiteful.
03:12:21 ◼ ► And if Spotify pays nothing, whereas in this, in their response to this case, they're like, Hey, Spotify pays nothing. It's great. It's just like, you're right. I think that their silence and their opacity at this point in this climate hurts them.
03:12:39 ◼ ► And that even back in the day, there was also like a narrative setting aspect of it and they have kind of lost that.
03:12:47 ◼ ► Yeah. And again, the thoughts on flash in particular, I thought was exceptional, but thoughts on music was really good too, which was about DRM.
03:12:55 ◼ ► And it's, but the flash one in particular really explained a complex situation, boiled it down, still apt to this day when it comes to this whole DOJ thing, singing the praises of cross-platform middleware.
03:13:11 ◼ ► But they missed that and there's nobody, I don't know. I mean, I think it's indisputable that Schiller's hand, cause he's definitely still running the app store.
03:13:19 ◼ ► And I think the misreading or the miswriting on that was that, and I've said, I guess on dithering, maybe here, but my read on it is that what Apple wanted to say was Spotify pays nothing and that's fine.
03:13:35 ◼ ► 88% of all developers pay us nothing or whatever the percentage is, it's fine that Spotify pays nothing, but they shouldn't expect more.
03:13:43 ◼ ► But what everybody, almost everybody read from that was Spotify pays us nothing, but they should.
03:13:53 ◼ ► That's part of the corporate culture that comes from Steve too. I mean, I can, I've said, I've told the story before, but like Macworld and IDG and Pat McGovern who founded IDG and Macworld
03:14:03 ◼ ► and all the CEOs we had, like we, they often heard from Steve about the fact that they dared to build a whole business called Macworld when Steve invented the Mac.
03:14:13 ◼ ► And I mean, Steve's attitude was very much like you guys just stole money from me because you built a whole business and I didn't get cut in for any of it.
03:14:21 ◼ ► And so it's very hard not to read Spotify pays nothing as being a little bit of being irate that Spotify built a whole business on Apple's platform, which I would argue, but like, let's just say it and then didn't cut in Apple.
03:14:38 ◼ ► But they, they definitely, what it does come across as more than anything else is, is that Spotify was ungrateful, right?
03:14:43 ◼ ► Spotify should have been grateful to Apple for what it gave them and that's indisputable.
03:14:52 ◼ ► And to some, they should have kept to themselves because they clearly, they can't help that they believe it.
03:14:56 ◼ ► And I know that they do believe it, but you know, people believe all sorts of things that you shouldn't tell the world.
03:15:02 ◼ ► I mean, to be honest, I mean, I think everybody believes, has some beliefs that we don't make public and you know, one of them for Apple.
03:15:09 ◼ ► That back and forth with Tim Sweeney, where they said that he needed to give them assurances that they would follow the rules.
03:15:16 ◼ ► And then when they wrote back to him and canceled his account, they said, we saw you criticizing us publicly.
03:15:22 ◼ ► And I know a lot of people have read that in different ways, but it is absolutely the case that Apple thinks that business partners don't run down Apple in public.
03:15:35 ◼ ► And I understand why they felt that way historically, but in this climate, what it reads like is that an incredibly powerful company is suppressing criticism of it.
03:15:45 ◼ ► And you can't do business with this incredibly powerful company unless you essentially bend the knee.
03:15:51 ◼ ► And I know they don't necessarily think of it that way, but you got to see how people see you.
03:15:57 ◼ ► Right, right. Exactly. It's the perception. The perception matters more than the actual reality of it.
03:16:03 ◼ ► That is, and that is, you're going to let it roll off your back too. I mean, that's the other part is like Tim, look, you're in business with Tim Sweeney.
03:16:08 ◼ ► Tim Sweeney's going to continue to criticize you. He's going to continue to criticize you.
03:16:12 ◼ ► So let him back in the store, watch him like a hawk, roll your eyes when he criticizes you, because he is one of your critics, but he's also one of your partners.
03:16:20 ◼ ► And you just got to let it go. And I guess they, I mean, they did ultimately somebody talked to them from the EC, presumably, and they did let it go.
03:16:29 ◼ ► But like, that's the case too, where you see the corporate culture bubble up, where it, look, Apple's corporate culture brought them to this point of being a huge successful company.
03:16:37 ◼ ► It really did. You can't disintermediate it from the rest of the company, but they're so huge and powerful now that the things that kept them alive and allowed them to survive, some of those traits now work against them in public.
03:16:51 ◼ ► Yep, exactly. And those are two of them. My theory on that is, I think Schiller wrote that. I think Schiller wrote the, obviously wrote the email to Sweeney.
03:17:01 ◼ ► And my guess is that when Schiller said what, more or less opened the door and said, what assurances can you make that you're going to stick to the rules this time when you infamously shattered the rules deliberately the last time as a publicity stunt?
03:17:18 ◼ ► My guess is that Tim Cook hadn't signed off on that. Schiller opened the door and then Sweeney wrote back and then it went to the Monday morning executive meeting and it went around the table.
03:17:33 ◼ ► And I think it's Cook who is the most adamantly anti-epic, fuck those guys, really mad about that and was like, no way, they don't get back in the store.
03:17:50 ◼ ► Nothing has changed from that. It doesn't matter what they say. And I think it sort of maybe painted Schiller into a corner because he'd already opened the door and then they were like, well, we already opened the door.
03:18:03 ◼ ► How about we just say his two sentence answer was insufficient and Mark Perry write a letter and tell him that their new license is gone.
03:18:13 ◼ ► And he was like, well, and his argument was, look, the last time when you guys broke the rules, you said a bunch of shit about our rules about the app store and then you broke the rules.
03:18:23 ◼ ► And now you're saying shit about the app store again. So obviously you're on the cusp of breaking the rules again. So your license is gone.
03:18:29 ◼ ► Yeah. But like you said, it played in public incredibly differently. And most importantly, to the two lead EC commissioners, Thierry and Vestager, who both tweeted.
03:18:39 ◼ ► So I don't even know that there had to be, but I think just their tweets made Apple like them tweeting about it on a Thursday made Apple say on Friday, fine, Epic, you can have your thing build your store.
03:18:50 ◼ ► I don't even think it had to be back channel. Yeah, I suspect it was. And again, like, and the truth is, yeah, I mean, I've you've dealt with Apple, I've dealt with Apple.
03:19:00 ◼ ► Them doing that is I entirely believable. And I, some of it is probably they don't understand how it's being seen, but some of it is absolutely.
03:19:12 ◼ ► I think Apple fundamentally, and this comes from the corporate culture and it comes ultimately from Steve believes business partners don't criticize Apple in public.
03:19:21 ◼ ► Right. Running to the press never works. It never works. Don't do it. And it is when you are as powerful as they are now, it comes across as like a code of silence.
03:19:34 ◼ ► Don't cross us. And that's a problem. Right? Like, and they, and again, you just got to see it, right? Be as mad as you need.
03:19:41 ◼ ► That was what I kept thinking is this is so unnecessary. Be as mad at him as you can be in private in public. You smile, you say, all right, let's give this another go.
03:19:52 ◼ ► You have given us entire assurances that this is going to be fine. So we're going to be benevolent and let you back in this very particular area.
03:20:00 ◼ ► And we're going to watch you like a Hawk and then that's it. Right. But they couldn't do it. They couldn't do it. And like, yeah.
03:20:06 ◼ ► And the limits of their spitefulness on that regard, I think within reason, and I think are reasonable or like does Spotify get its fair share of App Store promotions?
03:20:17 ◼ ► Probably not. I think if somebody were to watch the App Store editorial stories and log them on a daily day basis, has Spotify gotten an amount of promotion from the editorial team in the App Store commensurate with its popularity?
03:20:35 ◼ ► I'm going to guess no. Yes. It's because there was a mandate to do it because they were afraid somebody was watching. Right. Right. But I, you know, I'm guessing no, but that do they, has Apple ever threatened to revoke Spotify's developer license?
03:20:48 ◼ ► No. And Spotify talks as much shit about Apple as anybody. You know, it's true. It's true. Yeah. Don't cite the tweets. Don't promise them what you can't deliver. Like that was just a, that was just a screw up.
03:20:58 ◼ ► I think one of the most fascinating things in the long run with Apple is what I said before, which is Apple success is predicated, modern success is predicated in part on jobs, building a new corporate culture when he returned to Apple and trying to get it to stick by building Apple university.
03:21:15 ◼ ► And the whole idea is he didn't, he knew whether he was coping with his own mortality at that point or not, he knew that the biggest risk to Apple in the long run was bringing in the sales guys and completely blowing their corporate culture.
03:21:28 ◼ ► And so that's why Apple university existed. They hired that guy to come in and build that whole thing to keep the corporate culture alive. And I do believe that by doing that, he was laying the groundwork for decades of success with Apple.
03:21:43 ◼ ► But I think nobody really thought about the fact, like what are these behaviors do to us? Do they backfire on it's like the monopoly thing. It's like things that are perfectly legal when you're the upstart and you've got 10% of the market are really illegal when you've got 90% of the market.
03:21:58 ◼ ► And I think that goes for the corporate culture too, that, that the it's what brought them here, but now that they're here, they kind of can't do it the same way anymore.
03:22:06 ◼ ► And I know they want to, but they kind of can't because they don't see it about themselves maybe, or they don't understand it, but like they are the 600 pound gorilla now.
03:22:14 ◼ ► And I know that you want to keep doing what brought you here, but there is a point at which somebody is going to scrutinize you whether you like it or not and tell you, you can't behave that way anymore.
03:22:24 ◼ ► Right. I mean, a company is run by people of your and my generation or older, right? I mean, and it's two apples vast benefit that, that the company tends to hold on to talent for as long as it can.
03:22:42 ◼ ► And that, that so many people are Apple lifers or someone like Federighi who was at Apple and then left for a while and came back.
03:22:54 ◼ ► I know, but, and he wasn't at Apple continuously. He came back after Bertrand Serlet resigned, but, or retired, did not resign.
03:23:01 ◼ ► But you know, it's exemplified in Cook and this is why I think Cook has been so successful and what he took away.
03:23:09 ◼ ► How could somebody who's not a product person or a designer at all take over from a purely product person with an exquisite taste in design like Steve Jobs is his obsession with customer satisfaction.
03:23:23 ◼ ► That Cook, despite not being a product person, but also being the first person to tell anybody he's not a product person, fundamentally understands that Apple's, to go back to it,
03:23:33 ◼ ► Apple's entire reason for being is to make products that make people happy and direct differentiate themselves.
03:23:40 ◼ ► He's a product person in the sense that he cares that the product is good and that customers like it.
03:23:51 ◼ ► Even if he's not the one down in the details like Steve was, he gets it that their product is their product.
03:23:58 ◼ ► And customer satisfaction is his way of measuring it and he's spoken about it most effusively about the watch.
03:24:13 ◼ ► I think the watch's focus on metrics is the biggest product influence Tim Cook has personally on Apple's devices.
03:24:22 ◼ ► I'm not quite sure that an Apple watch under Steve Jobs would have been so focused on like closing rings.
03:24:28 ◼ ► Cook, you know better than anybody because you transcribe his goddamn statements every three months.
03:24:33 ◼ ► But Cook loves and speaks about wanting to be able to measure things in an objective way and not fool yourself.
03:24:58 ◼ ► Yeah, I mean, it's clarifying. I've said before, there's the business we're in now where we talk and write for a living.
03:25:04 ◼ ► I find that one of the great things about it is I get to talk to other smart people about these issues and talk them through.
03:25:12 ◼ ► And that helps my writing and my writing helps the talking and it all kind of like circles around.
03:25:17 ◼ ► So like I woke up on what was that Thursday morning and got a push notification while I was still in bed.
03:25:31 ◼ ► And then like literally I was visiting my mom literally stumbled out into the dining area and so my mom like I got it right.
03:25:39 ◼ ► But like I feel a lot better having had conversations with people, including this one, because everybody's got a little bit of a different nuance and aspect to it.
03:25:52 ◼ ► I greatly enjoyed dithering. I really do. I mean, it's it's I love the money to from the subscribers.
03:26:00 ◼ ► And I'm so happy so many people enjoy it and stay subscribe. But I like doing it and I like the pace and 40 some weeks a year to 15 minute episodes a week feels perfect.
03:26:12 ◼ ► But there are times like the last two months in particular where it really feels like trying to squeeze 50 pounds of potatoes into a five pound sack.
03:26:22 ◼ ► I mean, it has been especially Thursday, which was the day this came out and us trying me trying to fit my day one thoughts on this into 15 minutes or my share of 15 minutes.
03:26:33 ◼ ► We would have just done 15 minutes about baseball. So, you know, let me thank our sponsors.
03:26:39 ◼ ► In addition to Jason for his time, we had Squarespace. You go to Squarespace dot com slash talk show. No, the just Squarespace dot com slash talk show and drink trade coffee drink trade dot com slash the talk show.
03:26:53 ◼ ► Jason is home base, of course, is six colors, which can be spelled however you feel most comfortable.
03:27:03 ◼ ► It just redirects to the American spelling dot com and of course, numerous podcasts over relay FM upgrade and upgrade one talk show.
03:27:19 ◼ ► But I get to talk to Julie Alexander about what's going on in streaming, which is bananas.
03:27:26 ◼ ► I don't know if you saw, but Apple is squeezing their competitors with the incredibly popular TV plus.
03:27:33 ◼ ► Yes, which weekly I'm reminded by Matt Bellamy of Puck is incredibly low rated, like nobody.
03:27:40 ◼ ► Apple spends a lot of money on Apple TV plus and nobody's watching it, which is kind of amazing.