a16z Podcast - a16z Podcast: What the Apple Watch Is -- and Isn't

Episode Date: March 11, 2015

As technology outgrows the tech industry, it moves from selling utilitarian products to selling things that fulfill other desires or pleasures. The Apple Watch is a perfect example of this market shift, says a16z's Benedict Evans. "It's another step in abstraction, and another step in the importance of delight rather than speeds and feeds." Technology meets desire in this segment of the a16z Podcast. image credit: David Adam Kess / Wikimedia Commons

Welcome to the A16Z podcast. I'm Michael Copeland, and we are here with Benedict Evans back from London, and you are well outside of the Apple reality distortion field for the watch event yesterday. So we want to talk about that and get your impression. So, Benedict, welcome. Thank you. So it's interesting. Everything Apple does is interesting in a sense. And it's interesting to list all of the different rules that they're bringing. breaking or challenging or all the things that they're doing in different ways. I think the first thing that caught everyone's attention, and of course this was a thing that there was a lot of speculation about beforehand was the price of the gold version of

the Apple Watch, which six months ago when they said there would be a gold one, people thought, aha, when the price of that comes out, people are going to leave their minds, and a lot of people did. So it's $10,000 and it goes up to, I think, $17,000 or something. Right, for all the extra fancy bits. for the extra fantasy bands. And so you've got a bunch of people talking about this as though they are unaware of the existence of the luxury goods business

where, you know, people buy $10,000 dresses that you only wear once. Right. And they buy half million dollar watches and buy lots of them and pay $20,000 for a transatlantic first class plan ticket or transcontinental plane ticket. And so there's a discussion to be had around,

you know, will people who buy $10,000 mechanical watches buy a $10,000 electronic watch? Do they buy those watches expecting that they'll last? Are they willing to replace it? I don't think you can extrapolate too much from the way existing markets work when you kind of drop a new product into it. I think what you can say about the gold watch

is, well, Switzerland, I think, sells about half a million precious metal watches a year. And Apple is sort of selling into that market, sort of not, but it's kind of selling into that market. they may sell a lot, they may not sell many. But either way, you know, it's kind of a drop in the ocean for Apple, even if they sell, even if they sell 100,000 gold watches, it's kind of well, so what.

I think what's much more interesting really for the gold watch is the effect it has overall on the position of the watch in the market. So that's what I want to ask you. Like, why do it? We don't, you know, in the Apple lineup, you can't buy a $20,000, you know, iPad if you want to do, but you can certainly buy this very expensive watch. Well, again, count the rules that you're breaking. and not breaking. So gold watches are a thing. Gold computers are not a thing. And it's a

gold watch. And gold watch is cost or expensive because there's gold in them. Why is Apple decided to do this? You could argue it's because they've lost their mind or it's a vanity project or because they can. I think what's more interesting is to compare it with the Apple retail business, which until they stopped disclosing it was about 10% of Apple revenue. So they weren't selling stuff through the retail stores particularly. Most of the stuff was being sold through other channels. But what retail did was it created this totally unique perception and this totally unique way of selling product, way of demonstrating product, and of course providing customer service. And so Apple Retail really was a self-funding marketing operation.

It was an enormous billboard on the most prestigious shopping street of every city in the developed world and nobody else had stores that big selling that kind of product in those kinds of places no luxury goods store no one who sold things as expensive with apple's products even then had those stores that big and certainly and nobody who had stores that big had them in those kinds of places and so they broke all the rules of retail and then you look at the watch and you think okay how does that change how people look at the 500 or the $1,000 watch how difficult is it for Samsung to copy that it's impossible effectively for Samsung to copy that you can argue about Apple's ability to sell a $10,000 watch.

I don't think anybody would argue about Samsung's ability to sell a $10,000 watch. I don't think anyone you would even think for a moment that Apple could do that Samsung could do that. And so I think there's a heavy brand hello effect here. And I think one, but then I think, you know, that said, you know, one can kind of put this in a box and put it to one side because there is a much broader argument, which is the watch. Yes, there is a $10,000 one. Yes, they might sell $10, $20,000, $50,000 in a year. So what, fine.

now let's talk about the actual watch right what did we learn what do we learn so we didn't learn that much that was actually new um we've got um a whole bunch of third party apps which some of which are very appealing and we got the pricing of the the mainstream models which go up to about a thousand dollars and frankly a thousand dollars for a polished stainless steel um watch where a woven metal bracelet is or a high quality leather bracelet is perfectly normal perfectly part of the course for that kind of product. In fact, it's probably better quality than what you get if you went to one of the existing manufacturers. And I think the big question as we is really hasn't changed from six months ago when they first showed it to us, which is, and I kind of broke this into two parts

or perhaps three parts. The first is it reminded me of the iPad. You looked at the iPad when it was launched and clearly, you know, if you wanted to buy a lightweight nine inch touchscreen computer this was the one to get but it wasn't actually clear if that was a good idea in the first place and by extension then I was also reminded of mobile phones that if we'd been sitting here 20 years ago you'd look at a mobile phone and say well yeah they're kind of lightweight now and they're kind of cheap and they'll probably get lighter and cheaper but am I ever actually going to want to own one regardless of how light and how cheap it gets and it wasn't you know most people 20 years ago would have said probably not actually you know back in 2019 95

most people didn't think they'd ever have a mobile phone I certainly didn't I certainly thought I'd never have a mobile phone. And how do you fit this new thing into your life? How does your life change around it? Why is it useful? And it's not useful in the way that a mobile phone is, even in the way that, so we looked at a mobile phone and you said, well, I've already got a telephone. Right. And it turned out that having a telephone when you're walking down the street in some random place was actually completely different from having one at home or having a pay phone. And it was actually really a different product than a landline. And how, so is a watch a different thing? Well, it's on your wrist and your smartphone is in your pocket and you need both. And you will continue

to need both for the time being because of things like battery life and space. You can't put a cellular radio and a battery that can power it into something that will fit on your wrist, at least not yet. But just backing up for a second, battery life they're saying is in the neighborhood of... Yeah, it depends how you use it. You know, you get the thing and all of your friends say, whoa, that's cool. Show up to me. The battery will be dead in three hours.

If you actually use it like a kind of normal use, it looks like you'll get all day out of it quite reliably. Okay. We'll see. Right. We'll see. so but the deeper and of course the reason why you need your phone is to preserve battery life because all the heavy lifting is done on your phone not on the device so the question is okay what does

it mean to have this extra screen this other screen on your wrist you could argue that this means well you'll just be swamped by even more information you could argue that it's a filter that instead of pulling your phone out of your pocket every 10 minutes and reading all of your Twitter feed and looking at all of your emails you glance at your wrist every 10 minutes and do I have an important email do I have a Twitter mention do I have a do I have something that I need to see if so I take my phone out or I read it if not carry on doing what I was doing so you could argue it kind of preserves you from information overload in some senses and then of course there's the thing you know what it reminds me of course of Google Glass

again Google Glass didn't do anything that you couldn't do with a smartphone but you know kind of tried to do it in a different way and so does the watch but without all the kind of the glass hole problems of the sort of imposing the screen between you and other people I think there's a lot of psychology and a lot of user behavior and a lot of perception around this as opposed to pure utility. And I think that's the most, you know, fundamentally the most interesting thing about this is that, you know, Apple is doing, or trying to do a step change in usability and in the emphasis of the product. That's to say when you went with the Mac, you had a step change in usability, a step change in how you thought about the product. Again, with the iPhone,

again, partially at least with the iPad, certainly as compared to a PC or Mac. And then the watch again, it's another step in abstraction, and it's another step in the importance of delight over feeds and speeds. So, but that sounds to me like you're, you are starting to sort of zero in a little bit on those use cases that you're still wondering what it's going to be used for, or at least like the types. So I think there's, there's a fine point in here around there are the specific things that you do with it but then an awful lot of people buy watches i don't happen to own a watch just as i don't own a ten thousand dollar watch but lots of people do and why do do you buy a ten thousand dollar watch instead of a hundred dollar watch and no it's not so other

people see it incidentally that's a really idiotic analysis um why are we not sitting here wearing boiler suits why have we chosen the clothes i like i actually am wearing a boiler suit Yes, but it's an ironic boiler suit. Yes. It's an ironic Berkeley boiler suit. Yes, exactly. You know, if we only bought things that had very specific utilitarian use cases, you know, we would all live in a capsule hotel,

and we would all drive the same car, and we would all wear the same clothes. We would be living in North Korea, in effect, and we don't. And I think the progression of the technology industry, one of the ways I described this as sort of technology outgrowing tech, is that it moves from selling technology products, products to selling things that create, fill other desires or kind of other pleasures. I mean, I think this company we've invested in Ringley is very interesting in this sense.

It produces a piece of costume jewelry with a notification light that tells you if your boyfriend's phone or if you've had a like on Instagram or something that you can customize. Yes, you could put your smartphone out, but it's actually quite nice to do it in this other way. Yes, I could just wear a boiler suit, but I do kind of like spending $500 on that beautiful jacket that I'm going to wear every now and then or, you know, spending $1,000 on a light instead of going to a carer and buying a $10 light. And it's not stupid to do that any more than it's stupid

to buy the $10 light. You know, you kind of, you move up Maslow's pyramid and you think about different things and you value different things. And so I think where Apple is kind of pushing with the watch is in that sense that delight, for want of a better term, is more important than the feeds and speeds. it's worth noting incidentally

so with the iPhone they don't tell you what the clock speed is on the chip I mean they do talk a lot about the chip but they don't tell you the clock speed they don't tell you the they don't give you numbers for the clock speed and the RAM and everything else so all they tell you really the only spec they tell you is the storage

right and the same thing for the iPad and then you go to the watch they don't tell you anything yet I mean they if you dig around enough you can find out what kind of Wi-Fi it's got if you really care but they don't tell you what the clock speed

that the CPU is. I think apparently it has 8 gig of storage, but you don't really supposed to care about that either. And so the technology fades more and more into the background as an enabler for other experiences that are not about how fast you run this program. Rather, it is about you lift your wrist and you tap on Uber and you press yes,

and then you drop your wrist. Rather than pulling the phone out and loading the app and doing this and doing that and pressing weight, it's about friction and pleasure and enjoyment, as opposed to operating the user interaction model, operating the user interface for a computer program. It's interesting because, you know,

what you describe, Apple has done this amazing job of creating these objects of desire in the end. Like we all wanted an iPhone. We all wanted an iPod when they came out. But they've sort of bolstered the reason why you want it with all these speeds and feeds, et cetera, like you say, and all the utility. Now they've created this object of desire

and, you know, maybe it's the first sort of instantiation of, like, this pure Apple object of desire from the get-go. Yeah, I think that's what. I mean, the progression that you see, particularly with the iPad and the iPhone, even more than the iPhone, was that it's a piece of glass that can be anything. And so it is pure, an iPad, in effect, it's pure software. Right. It's not about, you know, you can't change the ports. There's no USB socket. There's no SD card.

You're not supposed to think about that at all. It's supposed to be literally just a piece of glass. a sealed piece of glass that can be anything when it lights up and the watch I think is the same but it's just taking that that much further

it is just a piece of glass now these are the things that that piece of glass can become but it doesn't have to have a micro USB port on it or an SD card slot on the thing or even necessarily a camera although you know a camera might come

I mean who knows maybe maybe not but it is about a little magic piece of glass that can be anything and primarily what that little magic piece piece of glass is supposed to do is be pleasing and be delightful and be an enjoyable thing to own and the world is full of enjoyable delightful pleasing things to own that you don't need you know go into any you know home store lifestyle store and look at all the things that you could spend money on that you don't need but people like so I'm looking at you right now and

you have an iPhone 6 in front of you on an iPad and I see you carry around a laptop but like you said you do not wear watches. You're an inveterate non-watch wearer. Do you think you're going to start wearing a watch? Or this watch, I should say? Well, if I didn't, if I wasn't sort of professionally obligated to try it out for a while, you mean, I don't know. It is a pleasing thing in a way that the existing smart watches do not appeal to me as an object. There are, at the same time, there are a thousand dollar mechanical watches that I've sort of looked at. for the last two or three years and thought, well, I might get one,

I might not, maybe, I'm not sure, I'll think about it. Will I, would I buy one of these if I wasn't, again, you know, sort of professionally obliged to get it? I don't know, but I also don't think that's really the point because you're all, what you're also, I think, are also seeing

is this kind of expansion into areas where it's not something that everyone will have. It's just a delightful, pleasing product. Right. that many people will have. Right. Well, it launches, at least in the U.S., April 24th. End of April.

End of April. So we'll start seeing them in the wild. And Benedict, I, will start checking your wrists around the end of April, too. And we'll talk more about what you're using it for and what you're seeing in it and whether you like it. Sure. Thanks, Benedict. Thanks.