Motley Fool Hidden Gems Investing - David Pogue on Apple’s Suprising Past and AI Future

Starting point is 00:00:00 This thing seems to have gone under the mass media's radar, but Apple has turned into a medical instruments company in an astonishing way. I mean, the watch can alert you about this huge number of life-threatening diseases. that was veteran tech journalist david pogue author of apple the first 50 years i'm motley foal producer matt career pogue recently talked with motley foal analyst jason moser about those 50 years about apple's history steve jobs the imac tim cook and yes about what the next chapter for Apple might look like. Enjoy. David, thanks so much for being with us today. I'm excited to talk with you about your new book, Apple, the first 50 years, and even talk beyond that to

Starting point is 00:01:00 get your insights on the company, where it's been and where you think it may be going. So my first question for you, I was looking at your website at davidpogue.com. For those of you interested, go check it out. But one thing that really impressed me, it's the breadth of your library. I mean, the topics that you cover from Apple to opera and even digital photography, it was just it reminds me of my father. You seem like you're a renaissance man, a lot of different interests. So what was it that inspired you to write Apple the first 50 years? I mean, it's a natural topic because I've been covering Apple for 40 years, 40 of the 50 years I wrote for Macworld magazine. I was a columnist there for 13 years, and then I became the tech columnist for The New York Times.

Starting point is 00:01:46 did that for 13 years covering apple and now i'm at cbs sunday morning also covering apple and technology so um the whole thing was my wife's idea actually she she woke me up in the middle of one night literally woke me up she goes dave dave wake up i have the best idea for a book i'm like what she's like apple's first 50 years and i literally shut her down i'm like dude you missed it. That's come and gone. And then in the morning I looked it up and she was right. It was like two years away. Perfect time to research and write a book. So, but you know how when you have an idea in the middle of the night, when you're half asleep, you're not really sure if it's a good idea. So I called my editor at Simon & Schuster and laid this idea on her. She's like,

Starting point is 00:02:32 oh yeah, do that. Well, most of the best stuff in my life has happened because of my wife too. so I can certainly understand. Where some see heroes and others see egos, Bloomberg sees the era of billionaire athletes. A fad to some, the future of money to others.

Starting point is 00:02:53 We see crypto's trillion dollar swings, the end of jobs or the end of human struggle. We see the endless funds fueling the AI hype while others follow the noise. We follow the money. Learn more at Bloomberg.com.

Starting point is 00:03:11 Okay, this is a bit of a wide-reaching question, but after all is said and done, right, you've written this book. What's one thing that really stood out to you that you feel like people really need to know, either about the company or about leadership? What's the one thing you took away that you're like, man, people really need to know this? I guess it's, you know, Apple's marketing is, you know, top notch and they, you know, their whole story is we make the finest, we make the most beautiful, we really go the extra mile. And I always just thought, well, every company says that. Everybody says they strive for excellence. But man, when you peel back the curtain, Apple really does. I mean, the stories of the extra miles they go, they're just like, I think my favorite one is, well, here, I'll give you two quick examples. When they're developing the Apple Watch, they've got these sensors on the back that can measure a very limited amount of stuff, like your blood flow and the motion of your arm. But how do they translate that into things like your stages of sleep, which is up in your brain, or your heart rate, atrial fibrillation and disease, and then hypertension, which is blood pressure? So to figure out how to correlate those data with your VO2, your blood oxygen saturation, they became the world's largest consumer of VO2 backpacks.

Starting point is 00:04:37 So they bought all these oxygen measuring equipment backpacks with a face mask and they set up fake apartments and they got people to live, work, shop, dine, play in these fake apartments wearing this equipment to measure their actual blood oxygen saturation so that they could train the AI how to correlate with what. So just like beyond. And the other really great story is about Face ID, you know, unlocking the phone with your face. They wanted to make sure that it would work on every kind of face everywhere in the world. So they set up Makeup Mondays in the cafeteria at Apple where they would have prototypes and ask people to try to unlock the thing wearing special makeup, wearing wigs, wearing weird glasses. They would take the thing to Harley Davidson rallies on the premise that they would find a lot of creative facial hair there. And they did. They would take it to twins conferences to see if twins could fool. They hired a Hollywood makeup special effects company to make these incredibly realistic 3D latex faces, masks with like actual eyes and whisker stubble and, you know, the whole thing to make sure that you couldn't fool it with a mask. And there's like this great story of the guy in the mailroom opening this box and there's like these decapitated heads looking back at him. But it's just, I mean, they go to ridiculous lengths. Well, I think it shows in all of what they bring to the market. So it does. It sounds like a company that does its homework.

Starting point is 00:06:18 You noted in the book that when Steve Jobs was with the company, he cut Apple's product line from 15 to just four. Right. That quadrant strategy, I think it was. But from like inefficiency standpoint, how do you feel like that reductionist approach impacted the company's financial position during the turnaround? Because that's a big move. That's a big bet. It is. I mean, he shut down more than that. Yeah, they had 50 Macs. They had printers. They had the Newton, you know, the handheld computer. They had an advanced technology group. He shut all of it down. They had a low end series of computers called Performas that were terrible. So he and his hardware guy, John Rubenstein, just said, we're shutting it all down. We're going from 70 products to four. And, you know, to answer your question, Jobs' argument was, and by the way, greatest turnaround in corporate history by a guy who'd never been to business school, did a semester of college. How did he know? How did he know? I don't get it. But the cuts were not popular. You know, Jobs' return was not universally beloved. He'd run two companies in his life, Apple the first time around, and then Next, the company he started after that, both failures. So like what confidence should they have that he was going to lead this company out of the doldrums? It was bad in the 90s. Apple had all these fiefdoms, all these duplication. They had 22 different ad campaigns running. Jobs shut them all down and said, we're going to have one ad. And it was the here's to the crazy ones ad. That was it.

Starting point is 00:07:58 My favorite story is there was one point where two Apple lawyers showed up in trademark court to sue each other. It was so dysfunctional. The company. Anyway, so Jobs' argument was by focusing on just four products, two laptops, two desktops, we can take our very top engineers and have them work on every aspect of these four. I mean, from a financial perspective, there's this unsung hero, the CFO, this guy, Fred Anderson, who's very shy. He doesn't like the limelight. He doesn't really like to be hailed. But Apple was six weeks from bankruptcy when he was hired. Like it was on the edge. They had this run rate of like $50 million a week and they had $400 million worth of loans to Japanese banks. And so Anderson did all this ingenious, instantaneous stuff like Apple was paying its vendors, its part suppliers on net 30 days. So they pay these part suppliers within 30 days when the industry standard is 60 days. Like Apple is being nicer than it needed to be. So he's like, okay, we're changing that. We're going to stop paying dividends. We're going to fly to Japan and talk to those bankers and explain our plan for recovery and get them to extend our

Starting point is 00:09:20 loans. Just a bunch of smart, common sense thing. And that gave Jobs some breathing room for the financial stuff. And then for Jobs, it was radically cutting down the company's expenses by eliminating all these ridiculous overextended product lines and focusing on the four. And the first new one they came up with for that quadrant was the iMac, which, again, I just don't know how Jobs does it. Like the iMac was so weird, right? It has no straight edges. It's transparent blue plastic, no floppy drive.

Starting point is 00:10:00 First personal computer in history without a floppy. Like what? What are you doing? If your company is on the ropes, why do you bet everything on something that's so weird and radical and yet became the best selling computer in the history of the world? You know, so Jobs, love him or hate him, man, he could see the future in a freakish way. Yeah, very, very true. And what do you think is the biggest misconception about Steve Jobs? I have a good answer to that.

Starting point is 00:10:27 So I interviewed this guy, Andy Hertzfeld, who was one of the original Macintosh engineers. And he said, you know, Jobs would burst into tears or he would burst into uproarious laughter. He could rip you to shreds or he could put you on a pedestal. He was so many different things. And what Hertzfeld says is any adjective you can use to describe a person, you could have applied to him at different times. And so the misconception is everybody who thinks they know him. You know, everybody who says, oh, yeah, Jobs was an asshole. And yeah, he sometimes was.

Starting point is 00:11:07 And oh, yeah, Jobs was a godlike genius. And yeah, he sometimes was. But the totality is that he was all of these things. And you could flick from one to the other like super fast. Let's transition right here. You know, we move from Steve Jobs and we're going into the Tim Cook era. And you noted in the book that Steve Jobs told Tim Cook, and I quote, there has never been a professional transition at the CEO level in Apple. The last guy is always fired.

Starting point is 00:11:35 And then somebody new comes in. I want there to be a professional CEO transition, end quote. Now, how do you feel like this plan succession impacted the company's stability going forward? Because I remember vividly when Tim Cook over and all of us, we were like, oh, man, is this going to work? I mean, this is a big transition, but it seems like it was executed flawlessly. This is the mind blower, right? Like every critic, including me, like every headline was like, Tim Cook is not the guy. He is not a product guy.

Starting point is 00:12:10 He's not a showman. He is not colorful or passionate like Jobs. I mean, visibly passionate anyway, like Jobs. I mean, he could not be more different. Jobs was volatile and loud and dominated the room. Tim Cook is calm and shy, steely, but very reserved. The man does not raise his voice. He just doesn't.

Starting point is 00:12:34 No. I've never heard it. I know. And he was a logistics guy. He was the world's greatest logistics guy, you know, supply chain and prices and spreadsheets. But, I mean, he never would have thought of the iPod or whatever. And so I remember The Onion had a really mean headline like, Cupertino man panics, has no ideas. Article about Tim. But once again, as you say, this was the first time that Apple had chosen a CEO not in a panic.

Starting point is 00:13:09 They'd had five of them at that point. And yet somehow Jobs knew. How did he know? He picks him, Cook. How did he know that Cook was exactly the person for the next chapter? I mean, Cook has tripled and quadrupled the revenue, the profits, and the headcount of Apple. It's unbelievable. And all this from a guy they said is not a product guy. I mean, it was a professional transition. And was Jobs lucky or did he really just somehow know that this polar opposite man was the right CEO? It's crazy. But when you talk about the differences between jobs and cook, and I think you're absolutely right there. And so what's interesting to me, I think there's this big debate on Wall Street with investors. When it comes to innovation, I think that's probably one of the biggest criticisms from certain people today in regard to Apple is that they just aren't innovating, right? And I think you got to sort of take that with a grain of salt because, I mean, clearly they do innovate. It's one of the most innovative companies out there in my mind. But it's also predominantly a phone company still today. But what do you say to people who say that Apple has lost its ability to innovate?

Starting point is 00:14:25 Well, I think what they're saying is that they don't follow the Steve Jobs every three year pattern of releasing new world busting new platforms. I mean, iMac, iPod, iPad, iPhone, like every three years until Jobs died. Right. And that does not go on anymore. It's not that they haven't tried. You know, there's the Vision Pro, which I mean, that is really innovative. Five thousand patents on that thing. I mean, 12 cameras. And I mean, the technology is absolutely breathtaking. I mean, way too heavy and clunky and expensive. 3,500 bucks. So clearly it failed, but they did innovate. And then there was the car. There's a chapter in this book about the Titan project. They were trying to design an electric, self-driving, beautiful living room on wheels. This Titan car with chairs that faced each other and no steering wheel and the whole thing. I mean, they invented so much in battery technology, screen technology. The sound system was said to be like nothing you've ever heard. But it is true that they're not doing the cadence of every three years, another brilliant hardware

Starting point is 00:15:41 product. But there's an argument to be made that nobody does that anymore, that jobs came along at an incredible time in history with miniaturization and cheap memory and Chinese manufacturing that made possible these amazing new categories. But Cook has innovated plenty in other ways, right? He took the company into software and services. You said Apple's a primarily phone company. It's 50% a phone company. And the other 50% is these services. And then there's the Mac at 8%. So that was all Cook. And from a profit standpoint, it's like hand over fist, right? Because there's no parts involved in offering services. But they're very popular. Apple Music has more subscribers than Spotify. Where some see heroes and others see egos,

Starting point is 00:16:35 Bloomberg sees the era of billionaire athletes. A fad to some, the future of money to others. We see crypto's trillion dollar swings, the end of jobs or the end of human struggle. We see the endless funds fueling the AI hype. While others follow the noise, we follow the money. Learn more at Bloomberg.com. I like that you mentioned in the book, the chain of pain, this idea that Apple identifies broken consumer experiences, you know, like paying for things or organizing photos, then they swoop in and they change it. What current industry today do you think Apple is most likely to disrupt next using that chain of pain playbook? I mean, this kind of steps right into the AI topic, because what Apple demonstrated in 2024, which is this new AI driven Siri that has private guardrailed access to your messages in your email and your files.

Starting point is 00:17:42 I mean, they had a woman come on stage and said, this is what it'll do. Siri, what time do I need to pick up my mom? That's all she said. And behind the scenes, in a tenth of a second, it went through her email, learned that her mom was going to come and visit for Thanksgiving, went through her messages, found out her mom's flight number, went to FlightAware, looked up the flight to find out if there was a delay, looked at Google Maps to see how the traffic was, and then just said, you need to leave at 120. That is truly disruptive. I mean, AI is lousy in some ways. It still hallucinates. It still gets stuff wrong. But if Apple could do this, make Siri into our absolutely flawless, rock solid AI god of our own digital domains, data domains, that would be very disruptive. That's another chain of pain. I'm glad you brought up AI because I'd like to wrap up today talking a little bit about, you know, the topic that's dominating the headlines today, just AI, right? It's everyday AI, AI, AI. Now, one of the things we've noticed, you know, compared to the rest of big tech, you look at Apple's investments in AI, it's just comparatively very, very low. Like it's almost nothing. Is this a case you think of them wanting to be best, not first? You know, Tim Cook says that a lot, right? We're not looking to be first. We just want to be the best. And that's worked out pretty well for them so far, by the way. But or do you think this is a sign that maybe they're not quite sure what to do? I mean, they definitely have a direction and they definitely know what they want to do. And by the way, I don't think they've got enough credit for the AI stuff, the generative AI stuff they put in so far.

Starting point is 00:19:24 They looked at the awful parts of AI and they very cleverly avoided it. So for example, their AI for your writing, it can rewrite what you've written, make it more formal or more casual. It can make it more concise. It can summarize, but it will not write for you because they don't want kids cheating with AI on their homework, which 50% of them now do. They don't like the idea of deepfakes, using AI to generate pictures and videos of real people doing things and saying things that they never said. So they have this image playground app. It's generative art, but it's limited to cartoons, sort of three-dimensional cartoons. It doesn't try to make fake photos. And I admire that in addition to the whole privacy thing. They refuse to pass on your AI requests or the answers to anything that can be captured, studied, or reused to train new large language models. But to your point, there's been a lot of news about the trouble Apple's had in AI. Like that demo of what time do I pick up my mom? That was almost two years ago. That's not here yet. They're saying soon, but they've now struck a deal with Google to use its Gemini AI to

Starting point is 00:20:46 power all this stuff. And they've had turnover in the executive ranks. A lot of their guys have been poached. As you say, they've invested a lot less in all those NVIDIA graphics cards. But having just written a book about Apple's first 50 years, I can tell you there was no time in Apple's history when there weren't people saying the company's lost its way. The company doesn't know what it's doing. The company's making a mistake. Like Phil Schiller, who was their head of marketing for a long time, said, if we're not getting flack for screwing up, then we're not innovating and being radical enough. Okay, last question. I'm going to let you go. We talked a little bit about AI and you talked about Siri and some of the other opportunities,

Starting point is 00:21:28 but based on what you know today, what do you think Apple's biggest opportunity in AI actually is? I think it's that idea of going beyond just chat GPT style chat bot generative stuff and nipping and tucking its way into every corner of the iPhone, the Mac, the iPod. In other words, it's not going to be a monolithic thing. They're just going to make every little feature better and smarter. The other part of it is this thing seems to have gone under the mass media's radar, but Apple has turned into a medical instruments company in an astonishing way. I mean, the watch can alert you about this huge number of life-threatening diseases, giving you early warning of atrial fibrillation, which is the single most common heart rhythm ailment and gives 35% of those people strokes.

Starting point is 00:22:27 And by the way, you can't test for atrial fibrillation in a doctor's office because it's intermittent, right? You have to be wearing something all the time for it to pick up. So hypertension, high blood pressure, and now they're predicting it'll diagnose a million people this year alone. Sleep apnea can become very dangerous, picks up on that. It looks at your gait as you walk over time, looks for early detection of Parkinson's, and they're just getting started. They've spent a lot of investment on continuous glucose monitoring. And what's crazy is this is all on your wrist. Like, what does it know about your stages of sleep?

Starting point is 00:23:03 that's up here in your brain. What does it know about the heart in your chest? It's on your wrist. It's mind blowing stuff. And now they're starting to look at the AirPods as a medical instrument too. They've just added heart rate monitoring in your ear. And I mean, there's no telling where they could go with this stuff. I know that they have a lot of other really advanced medical projects going on with the watch and the AirPods. And AI plays a huge role in all that. His new book, Apple, The First 50 Years, is out now and you can get it wherever you get your books. Make sure to check out davidpogue.com. Fascinating website. David Pogue, thank you so much again for your time today. This was a real pleasure.

Starting point is 00:23:42 Thank you, Jason. I really appreciate it. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only.

Starting point is 00:24:05 To see our full advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Mac Greer. Thanks for listening, and we will see you tomorrow.

Motley Fool Hidden Gems Investing - David Pogue on Apple’s Suprising Past and AI Future

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