Sharp Tech with Ben Thompson - Mailbag: A Navy SEAL on the Vision Pro, Reading 10-Qs, Apple Follow Up, Netflix and Books, Unsolicited Parenting Advice

Episode Date: February 1, 2024

A new mailbag featuring a comparison between the Vision Pro and night vision goggles, Ben’s process for digesting quarterly earnings news, and some final thoughts on Apple’s approach to the App Store.

Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing? Doing okay, Andrew. How are you? I'm doing well and you know what? We're not going to get into any prelude at the top because we have to do better than we did earlier in the week. This is another attempt at the mailbag and I promise the listeners we're going to answer more

than one question on this episode. So let's kick it off. It's Vision Pro Week. Next week may also be Vision Pro Week, as more of these devices actually landed people's hands. But we're going to start with James. He says, Ben and Andrew, I love the show, and I'm a regular listener. Keep up the good work. I'm writing because I'd like to hear your thoughts on the physiological challenges

when it comes to large-scale adoption of the Vision Pro. As a former Navy SEAL, I spent a lot of time wearing night vision goggles that weighed 652 grams with a battery. that's about one and a half pounds, and at the start of a mission, it always felt light and comfortable. However, an hour into a mission, you were very aware of the weight, and four hours in, you couldn't wait to get them off. This was the case with or without a helmet. In fact, it was worse without a helmet because I couldn't add a counterweight. I bring this up because the Vision Pro is advertised as being 22.9 ounces, or 650 grams, so about the same weight as those goggles. Although the form factor and headstraps are different than our goggles,

I'll argue the Vision Pro will still have the same challenges because in the end, it's still a one and a half pound object sticking out from your face. Soldiers could suck it up because there was no other option, but regular folks have plenty of options. I feel like everyone who has tested the Vision Pro to date has done so with limited time, and it's easy to get excited because everything feels light when you only wear it for 15 to 30 minutes. I believe the Vision Pro is a great piece of technology, but I wonder, is it going to be useful outside of short entertainment viewing because of all the comfort issues I just mentioned?

So if the Vision Pro is too uncomfortable to capture the productivity market, then is the $3,500 entertainment device market large enough to Apple to stay with it. I do believe Apple's mixed reality roadmap and product is the best we've seen to date, but I also feel the technology is still not where it needs to be if you want a large market of folks wearing devices on their faces for long durations of time. What do you guys think? So, Ben, I'm confident we are officially the only news outlet to include a Navy SEALs perspective in our Vision Pro coverage, important milestone for Sharp Tech. What do you think of the concerns there, though?

Well, great email. I mean, I think the perspective is helpful. And it certainly sounds correct to me. I just think there's a couple of, there's just a couple of assumptions, I think, that are embedded in here that I would sort of push back on. So number one, regular folks have plenty of options. Plenty of what options. There's the quest, which is lighter, including a battery, and it's counterweighted. And I would expect that it's going to be significantly more comfortable.

It's also significantly less capable. Like, I mean, again, I've only used a vision pro for 1530. minutes, so we'll have a better report next week. But it's a, it's two completely different approaches. And beyond that, there's professional VR headsets and things on those lines. But there, there isn't options, number one. Number two, I completely grant this premise. I think it's reflected in all the reviews. The Vissippro's too heavy. And it's, it's front-weighted to, I expect it's going to be uncomfortable to wear for a long time. What I would say is that the, you know, to take a pertinent example,

the original iPhone was too slow. It had 2G networking. Like today when your phone falls down to like 3G, it's intolerable. When it goes down to edge, it's like it's broken. It's really pathetic how intolerable it is. Yeah.

So I mean, I think the point here is one that comes up regularly, which is don't over index on V1. You have to start somewhere. And I think it is to Apple's credit, to be totally honest. And this comes up in, you know,

I haven't posted yet, I have an interview with Joanna Stern, who was one of the blessed reviewers of the Vision Pro. And there's a bit here where I think Apple deserves a lot of credit

for shipping a headset that is obviously too heavy. And that is definitely early. Because number one, people are going to complain. Number two, they're not going to sell a lot of them. I don't think they want...

It's a really easy target. Yep. It's a really easy target because it's going to get made fun of, you know, it's $3,500, all these sorts of things. But they have decided that this is sort of the minimum viable level of capability. I mean, well, except for eyesight, in everyone's opinion. But this is the minimum sort of level of capability.

And they're shipping it. And the way you get better, the way you get smaller, the way you improve, the way you start seeding an ecosystem is by shipping. And they could have waited until it could be smaller. but they decided this was tolerable for a V1, and I applaud them for it. So I think all the, so I'm not disagreeing with James.

I expect once I get the Vision Pro, and I'm going to definitely try, I have a trip coming up, I'm going to work in it, you know, and I expect that my neck's going to get sore, and it's going to be uncomfortable, and that's fine.

It's better than my neck not being sore because it doesn't exist. Yeah, no, I actually sort of agree with the sentiment there. I mean, I will have more specific observations once I'm able to demo it, which will hopefully happen this weekend or early next week. I'm going to be waking up Friday morning to try to schedule something. I'm not sure how competitive it's going to be to try to get one of those slots. But I think for me, what I find interesting about the Vision Pro is I am constitutionally opposed to a lot of what this product represents.

I mean, first of all, the eyesight feature. everything I've seen is just so creepy and it seems like that's inevitably going to be abandoned in future editions of this product, which is for the best. Neway Patel in his review had a whole section on Tim Cook talking about how he doesn't like VR, he wants AR because of like the sense of not being connected to people sort of around you, which, you know, this feels very, I mean, I don't want to read too much into it and I'm going to proceed to read a lot into it. This feels like a top down directive to include.

this feature that no one actually wants that adds weight because you have to have you know it adds cost and is probably going to get killed but it's like well the Apple Watch had this remember do you I don't know if you're you probably don't remember this because you were just enormy listening to your recorded headphones

the original Apple Watch one of the core features and this also felt like a Tim Cook thing to be honest was you could send a digital heartbeat where you could send a message to someone that was your actual heartbeat at that moment. What's going on? That's what they're going to actually get it.

That lasted, I think, one version. And eyesight feels like that. Again, having not used it, only observed it. But every reviewer is like, this is ridiculous. I have no idea why this is here. I don't want to use it. I don't want to observe it. Sorry, Tim Cook.

It's a nice thought. Yeah, I mean, I think in general, there's other sort of more abstract objections that I have. Like we've already hit a point where everyone's figuratively in their own little silo of content. And so the idea of making that literal in the future fills me with dread a little bit. And, you know, the price point is utterly ridiculous. I saw Joanna Stern, her video of her cooking with the Vision Pro, I came away from it thinking, that's not something I will ever want to do for as long as I live. but maybe that becomes a utility in the future that more people adopt.

Well, you have to think about it. Would you cook with glasses on or, like, say, like, safety goggles sort of thing, right? Right. Yeah, you look silly, but it's not that uncomfortable and there's just massive utility. I think that's the, and this is the give me the key thing with this. And this applies to the AI stuff. And this is why it's so exciting in technology right now because the whole thing is, and I, we keep saying this, but maybe it can't be. said enough. Don't over index

on where we're at right now. With all these things, you need to think about what could this be in five or six years or ten years. And again, I would just point to the iPhone, right? When the iPhone shipped, like BlackBerry

thought it was a complete fake. They're like, that is not possible given today's hardware. As documented in an excellent Blackberry movie. Yes. And that's true. That's based on a true story. And And it was at the edge of possible. And again, kudos to Apple for shipping on the edge of possible again. Now, is it going to, I'm not, I am not saying it's going to be an iPhone level success.

The iPhone, phones already existed. It was a clear need and they made a better phone. That's a much better market opportunity than this, which is trying to create something new. It's not, so I'm not making that sort of pronouncement. What I am saying is it's reasonable to assume that. that the hardware is going to get a lot better. Yeah. No, and we can be clear-eyed about the challenges that Apple faces in succeeding in this area

because everyone else has failed for 40 years. And like along the lines of what James is writing in about, not only do I think this product is going the opposite direction from society in terms of like what people want from their relationship to technology, but I would guess that a potential downfall here could just be related to, evolutionary biology where humans just don't want to have sex with other humans who are walking around looking like duffices in giant headsets. And so the meta glasses, who knows? Look, no judgment here, no kickshaming on Sharp Tech in 2024. But I just, I think like the

meta augmented reality glasses might be closer to what the future actually ends up looking like 10 and 20 years down the line. But having said all that, I agree with you because everything I just said could have been said about every VR experiment in history. And I admire Apple's audacity here. Yeah. I mean, you got a ship. If you want to seed an ecosystem, if you want to sort of start getting the scalability on

component costs, if you want you like, you just got a ship. Like that's the way it works. Every three weeks, there's some crazy rumor about what Google's developing. And none of that ever sees the light of day. I like Apple just going for it here. So we shall see more coming next week. Kevin says, Ben, you've mentioned in the past that one of your superpowers is reading really fast.

I'm curious about your approach to incorporating quarterly earnings into your analysis. When do you actually read through 10 Q's versus stick to the summary in shareholder letters and the content of the earnings calls? How much does third-party analysis factor into your process? can you peel back the curtain on what you do with earnings reports? So we got a version of this question like a year and a half ago, but our audience is now much bigger than it was then. So I'm curious, do you have any tips for Kevin here? I maintain, with the help of our friend Dumbin, a basically a set of, I have an Excel sheet for every single company that has all the relevant numbers from their earnings report.

And with a lot of those, I have, you know, if I've ever made any sort of chart or graph about a company, that is maintained and it's updated with all new earnings. So the numbers is obviously always important. And you always want to sanity check any take you have by going and checking with the numbers and making sure like there's something there. Right. There was like with Google's earnings yesterday, everyone's like freaked out about search revenue. And that's like an easy take.

Oh, their search revenue is slowing down. Maybe that's because of generative AI, right? And oh, wow. Actually, their search revenue has been terrible over the last year. Is that what it is? And then you go in and like, so that's like, you. see the headlines before you've done anything. You're like, wow, I know what I want to write about today.

And then I go in, I look at the numbers and it's like, well, actually they had a really bad, you know, court, you know, year like a year ago. But that was not a quarter in which chat GPT would have had an impact. There's other explanations that they brought up that are reasonable. You know, there's some currency aspects. There was the COVID hangover. There was like all, you know, all these sort of various pieces. is and actually search revenue growth has been accelerating for most of the year.

The reason why the market might be worked up is because that rate of acceleration slowed last quarter, but what does that mean hard to say? And Google doesn't tell you anything during his calls. So in that case, that's why it's really important to, if you have a thesis, start with the numbers. Like what exactly is going on? And I have those numbers in. And I actually have one of the reasons I keep my own Excel.

files instead of using someone else's is I have lots of stuff formatted in those to make charts in the way sort of I want to you know relatively quickly and like they're you know so I won't get into details but that's number one always okay the numbers are the core number two I do always read the earnings called transcripts I read the investor letters and and that is usually what I'm the most focused on the issue with 10 Q's and 10 Ks is they don't change very much I've read mostly all of them of the companies that I've written about at some point.

And I'm not necessarily doing a diff on them. That said, search is your best friend, right? So like, you know, with Microsoft, I knew there had to be something in there about the Open AI scenario.

And it took a while, but in the risk factors, they had added a new line that said, some of our partnerships, we don't have any control that might impact our ability to deliver products, right? You may have heard. That's right.

So it took a while to find that one. But the every quarter, I'm not rereading a 10Q every quarter. Like that's that's not, you know, given the level and frequency of my posting, that's not viable. But I've read them at some point and I use search a lot. So that's my process. I'm most focused on management commentary. And I think I've been clear about that. Like I like keynotes.

I like earnings calls. I like investor letters. And, and yeah. So, but this is part of, to be totally honest, this goes into the I'm not making stock recommendations. I'm not putting a price on the stock and saying buy or sell sort of XYZ. And if I did do that, I would, one, right much less because two, I would be doing what. I would charge more. And three, I would be, you know, every single quarter, I would be rooting that 10 Q from

top to bottom to make sure I didn't miss anything. Okay, that makes sense. One follow up question. If you were transported to the SEC and were in charge of regulating the reporting process, is there anything specific you would change in the way this is done every quarter? Yeah, I would enforce the law, which is that you're supposed to report profit and loss numbers for subsidiaries that report to the CEO. Like, I think Google, Google's should be reporting YouTube's profit and loss numbers. They're not. They're like they, it was very, one of the reasons, I were one of

the rumored reasons for why the alphabet structure came about is that Google wanted to obfuscate their stuff. And, and because Google reported to Larry Page and other bets reported Larry Page. And other bets reported page and so they could get away with just reporting a Google number. Once Sundar Bichai was the CEO of Google and then became the CEO of Alphabet, YouTube now reported to the CEO and that's like those numbers should be broken out in their earnings. And so like a couple quarters after like, okay, we're breaking it out. Here's YouTube revenue. That's not P&L. That's just revenue. Like you can't, you actually need the cost associated with it. And they don't do that. And I think they're supposed to. And, There's a reason companies don't want to, right?

Like, probably the most famous example of this was when Amazon reported AWS numbers. And they had to do that because it was becoming a material part of their business. It was a separate division. They reported the CEO. Like, as I understand it, there were, like, regulatory reasons why they had to finally sort of break that out. And on one hand, it was beneficial to Amazon because everyone was like, holy cow, this is a massive business. I wrote an article at the time called the AWS IPO. Like this is like an IPO level event.

It's a huge deal. And their stock took off like crazy. So they benefited from breaking that out. On the other hand, that was probably the event that really kicked both Microsoft and Google into gear as far as competing with AWS. Because it's not some little thing on the side. This is a massive business that we should be investing in. I think for Google in particular, which has had the hardest time to break out. of search, this finally got them to meaningfully invest in alternative business over the course

of many years because AWS showed it's very viable. And I think there's real. Yeah. Yeah. And I think there's folks that, you know, some late stage startups that don't want to go public, for example. I don't think they want to report. I think they think their business is better than other people think.

They don't want to inspire competition. And, you know, and I think that's the same thing with these big companies and some of their their subsidiaries. Now, I'm utterly and completely biased on this point because I rely on this information. So I want more information out there. Right. So take it, take it or take this point. Take it or leave it.

But yes. Well, no, but I particularly in some of the conversations we've had about the future of the entertainment landscape and YouTube's role in shaping what that landscape looks like over the next 10 years or so, along the way with some of those conversations. I've been stunned at how little we know about what YouTube is actually doing on a quarterly annual basis and the lack of reporting and just the general inscrutability associated with that business. Yeah, they're doing like $15 billion of revenue a quarter. Like this is a massive social force. And yet we know almost nothing about it.

So there you go. Well, thank you for the question, Kevin. and I didn't know that about Amazon and the reporting and sort of the butterfly effect there. I don't know that for sure either, but if you look at the timing, like it seems reasonable. It makes sense. Yeah. All right. Well, on that note, we're going to shift back to the app store for some brief follow-ups to the discussions on Tuesday's show.

I just want to say for the record, for me personally, that was hands down the funniest show we've ever done because of what went on behind the scenes. with that conversation where I sign on last episode and we're talking through the rundown and you ask whether we're going to talk about Apple and the DMA. And I'm like, nope, I decided it's going to be an app store free zone today. And you're like, well, we should probably mention it. And so I say, okay, let's touch on it real quick. And then we just launch into this opus on iPad history and property rights and the competing impulses and EU cautionary tales and everything else. So I'll laugh about that for months and possibly years to come. And I thank you for your contributions to that. Be careful what you're promising or laughing about until we get

through the next 10, 15 minutes or so. Yeah. Well, for the record, had I known we were going to spend the final 45 minutes of the episode on that topic, I would have been a bit better at setting up what exactly the DMA is, what Apple's doing to comply with it. But again, no regrets. In retrospect, the conversation was perfect. We'll start with Paul here. He says, Ben completely ignores customer acquisition costs in his discussion of the impact of the 30% app store tax. Ben spent a ton of time talking about how the reason ATT impacted Facebook and small businesses so much was because they could hone in on KAC versus customer value and spend until they stopped making money. They did not look at marginal cost versus customer value. Variable costs inform investment decisions.

The impact of the 30% tax impacts their ability to monetize, reach scale, and accept certain customer acquisition that would otherwise work if the tax were lower. If there were a level playing field for the app store, the tax would be lower because it would be competed down. Look at Webb, the ultimate app store, it has a tax of zero. Addressing Apple's monopoly power is not nationalization. It's addressing an abusive monopoly, just like ATT, standard oil, et cetera. The market is freer on net if the government addresses the monopoly, less free for Apple, the largest company on earth, and more free for literally every single other participant in the economy. So, Ben, do you want to address Paul there, or should I read this other email from

Nick I'm here. No, of course I want to address Paul. So this is why we end up with 45-minute discussions because you have people like Paul coming in and ignoring everything else that I've written and talked about the matter. Of course I know what impacts customer acquisition costs. Like, as you noted, Paul, I've written about it. My point in that article is that what is better?

Is it to increase or to decrease, I should say, the net revenue of an already acquired customer or to charge an upfront cost for installing an app. I would argue that if you have to choose one, you have to choose the other. And this is the point broadly about every issue that we bring up. You have to operate in the world as it is. I don't, I would prefer, greatly prefer, that the app store had no tax, that it just had payment processing fees, that it was like the web. There's a lot of things I would like in life.

I would like a pony. At the end of the day, you have to deal with the reality of. of where you're at, number one. Number two, yes, Apple operates like a monopoly. Now, is it a monopoly according to the definition of XYZ? That's a legal argument. That is a separate point. I'm the one that coined the phrase,

Apple has a monopoly on iOS. And I was roundly mocked for that, but that is sort of the point, right? Like, yes, they do. And they can charge whatever price they want because it's their property. and the whole point of antitrust is it is a violation of property rights. My whole point of bringing that up is to highlight the fact that Apple's actions are pushing us to making very black and white definitions and distinctions about what we're talking about.

I'm not defending it. I'm not saying it's good or bad. What I'm saying is I have been sitting here for the last 10 years. I've been writing about the app source since day one of Stratory. Like, I think it's really important. I care about it a lot. I've written about things that customer acquisition costs and lifetime value. I've written about ATT.

I've written about all these sorts of things that Paul comes out with categorical statements and says that I completely ignore. And that's how we get 45 minute discussions. The issue, though, is all along, and I'm just sort of being sort of honest with myself, I've been proposing solutions like, for example. So my proposed solution all along has been, I'm fine with Apple controlling the game market because I think it's, I think they've created a huge portion of the game market. I think it's consistent with consoles and other areas that are competitive in the space. And I think there's a large scope for abuse like in the game market. You have like all these loot box things.

It's basically wateries. It can be addictive. Kids are playing it a lot. I and honestly, I, you know, the gamers, you get mad at me. but I'm the evidence of the app store is that we're not missing out on massive innovation in games because of sort of XYZ. Again, maybe I'm just being a hater because I'm not a gamer, but whatever. I'm much more concerned about productivity apps because I think those are the bicycle for the buying sort of aspects. You can create new things.

You can do new things on these devices. And then number three is the sort of like reader app sort of idea where they're procuring or acquiring or providing content that Apple has nothing to do with and it's just absurd that Apple is doing it. And so my proposal for the latter two is that a company should be able to link out to the web or even better the way it used to work on Android, you can load a web view in your page. So it's in your app. And it's basically the web. You can transact there and Apple doesn't touch that.

And I would have been fine with drawing a line between games and everything else. Games have to be an app purchase. Other things, you can have a link to the web or you can use an app purchase if you want. I think that would, that's what I want. That's how I want the system to work. That what I want is only going to happen if Apple decides to do it, right? And so I've been sort of like, this is the way it should be, Apple, can you go this direction? And what's happened with the epic case and Apple's arguments in court they made, what's happened with their response to Japan, to the Netherlands, to South Korea, what's happened with their response to the DMA is Apple has made crystal clear that no, we are not going to do that, Ben.

So you are being a, it's cutting corners for me to hold onto what I wish it were. And I need to deal with the reality that Apple has decided to set as the sort of the holder here. And what they have stake their ground, their, their stake in the ground is this is our property. We're going to monetize it how we want. I am simply acknowledging that fact, which is why at the end of last episode, I said, if you want to change. it, you need to do it legislatively and face this head on. You need to say, we are going to declare that a computing platform of XYZ cannot be monetized just because you wanted to. It has to be monetized on a Fran type basis or whatever it might be. We're going to set the rate. And that,

to be clear, is absolutely a violation of Apple's property rights. Just like all antitrust legislation is. Me defining the terms is not me advocating or being. an absolutist about it. I'll fast forward to the next email that says I delivered a tirade on property rights. I delivered the facts of the matter. That's what it is. And now, and I think there's a real, the reason I do this is number one, to be honest with myself and number two, to be honest with my listeners and readers.

But number three, the reason why all these regulations are failing is they're not being honest about the situation. They're trying to like, like, make these fancy things. And it's about payments. It's about XYZ. And that's why Apple gets loopholes. This is like when I criticize Congress for talking about Facebook selling data. All that does is give them an out to sit there in a congressional hearing and say,

we don't sell data. And then what do you say? Do they monetize data? Absolutely. But you have to actually understand what's happening if you're going to actually have an effective critique and actually talk about what should or should not be done. And my whole point here is I and everyone have been insufficiently honest about what's going on here. And Apple, to their credit, I guess, has driven us to forcing specificity.

That's right. They're forcing specificity. And the specificity is they're putting it forward that this is a property rights fight. And me articulating that is not going on a tirade. It's not denying that the cost impacts customer acquisition. It's just being honest about the reality of what's going on. Yeah. No.

Now, that was a tirade for the record. Well, it's healthy to be specific about the. competing principles at play. And it's something we do a really good job of on this podcast. So all jokes aside, I think it's been good to cover all the dimensions of this issue. And the other aspect of this issue that I wanted to hit on was this email from Nigham, who he does say in Ben's tirade about property rights, he never once mentioned the rights of the consumer. It's a good question, except for that line. Yeah, he said, he never once mentioned the rights of the consumer. I paid $800 for my iPhone.

I should be able to install any damn app I want on it. The law may be on Apple's side, but while Ben insists on a culture of free speech beyond the law, we also have a culture of private property rights beyond the law. Saying that I chose to purchase an iPhone because I want my freedom and rights to be artificially limited is total BS. I chose to purchase an iPhone because it is the best gadget ever invented,

not because I want App Store reviewers and Apple Services executives to make my life decisions for me. Now, so that was raised by a couple different listeners and readers. A few other folks cited the right to repair as a governing principle here. Do you have any thoughts? No, I mean, beyond the tirade part. No, so I, again, I agree.

I think that I'm buying a phone and I want to do with it what I want. But Apple, that's what's on the tin. Like that's what you're buying. From my perspective, I'm buying the iPhone despite the limitations. Apple would argue, look, that's a reason people like the iPhone. They like the limitations because we keep them safe, XYZ. We birth the market. And reasonable people can disagree about which way that falls.

But this is the bit about we have to deal with reality as it is. Apple has never been dishonest, which Google arguably has, which is why they lost to Epic, as we talked about a few weeks ago, because they are changing the rules. They are advertising as being one thing and doing another. Apple has never promised the ability to install any app you want on their iPhone. You know that as a customer going in. And there are people, and I know them, that they buy Android phones because they are philosophically opposed to the app store.

And even if they don't use many apps or sideload apps or whatever it be, just on principle, they don't want to support a platform that has. these sort of limitations with it. I respect that point of view. I am too weak to take that point of view. Every time I switch to Android, I'm like, oh, this is that these things I can do. And then like a month later, I'm like, I want to

go back to an iPhone now. A lot of people live like this. Yeah. I miss my blue bubbles. I unfortunately, buy and large, I'm mostly on WhatsApp now, so that that's easier to manage. But I've, you know, the whole thing, there is that controversy about a company like running like Mac minis in the cloud,

like four and I mentioned stuff. Like I was doing that on my own, like running a server on my Mac that was always turned on that would like forward messages and sort of XYZ. I've explored all these various routes, but neither here nor there. The point is, is that this is my, this is my whole point. Again, maybe I'm over indexed on this and people don't care or they're just bad because they're mad at Apple. But from my, I just feel I need to be more honest with myself. Like I want a platform that is more open. I want a platform.

There's not these restrictions. But Apple is just being crystal clear that they're not going to give that to me. And I need to accept that reality and move on from there. And yes, I think about the phone as being mine, but that's not what Apple is selling me. And if I, you know, I would say to Nickham here, you're, you have a mistaken understanding of what you're buying. Like, that's, unfortunately, that's what it is. Now, the whole culture of property rights and it's my device, I do with what I watch, completely agree. I don't like Apple's App Store policies.

I don't like them. Okay. At the end of the day, strategy is not my listing of what I like and don't like of the world. It's my analysis of the world as it is and how we progress from there. That's what I'm trying to articulate and deliver. 100%. And honestly, the only thing that if we go back to Tuesday's episode, I do think we've had a really healthy discussion on all of this. The addendum that I would add is I really don't think the fight over 30% is irrelevant or that it's just a case of big companies fighting over how to split a

bunch of zero margin revenue. Like to me, I don't want to get too abstract with everything, but alongside Apple's IP claims and the property rights discussion, the reason 30% is ridiculous is because a fundamental principle of a healthy market is that the market functions best when an entrepreneur who's creating value is entitled to a return that's proportional to the value that's being created. And so Apple may have created the app store and they continue to maintain it, but Apple has realized proportional returns on all those investments. And Apple is not creating 30% worth of value for every app in the app store, let alone doing that on a recurring basis with every transaction.

Yeah, it's ridiculous. They're like, oh, we, we helped people discover your app. No, that's what Facebook did. Right. Right. Or that's what my ad money did to get better placement in the app store. I not only don't like Apple's pause at the app store. I think they're clearly taking way too much.

It's not a competitive rate at all. It would not be sustainable in an open market, not in the slightest. And, you know, now I actually think it might be competitive in games, by the way. That's one of the reasons why I'm more okay with games. I think that a lot of games, there's a monetization aspect. You're in the moment. You're trying to solve this puzzle. You just need X, my board credits or whatever might be.

And to have that one quick super fast go through, like there is sort of a conversion issue, right? Like this is measured with any sort of e-commerce site. Like every little. Every tiny bit of friction leads to huge drop off and conversion. If you have to go to the website, if you create an account, log in, you have time to think, what am I doing? Why am I about to spend $10 on gems? Right? Whereas like the seamless is the app store.

Long look in the mirror. No, that's probably like not a great value add from like a societal perspective. But I think there is lots of cases where it's a pretty significant one. But, you know, but no, there's no way. like for lots of things, this is, this is sustainable. And it's also, the innovation's been crappy. It took till 2016 or 2017 to get subscription support. There's still no support for paid upgrades.

Like we are seeing, it's a classic example. Anyone who has to deal with the finance at the app store, it's a big, you know, on one hand, they take care of all the multi-currency stuff and all the countries. That is a real value at. On other stuff as far as reporting and keeping track of stuff and the, and the capabilities, drastically inferior to what, say, a stripe offers, right? And you have to balance two systems. It'd be so much easier to just have one.

Like there's so many things that are wrong and the reason why this rate is not reasonable and in a competitive environment, it would be lower. What we have to press to, though, is we have to get away from, I don't like this, it's wrong, XYZ, and get down to nuts and bolts of how, if you want to change it, how do you change it? And what does that, what does that entail? What it entails is making a declaration, legislatively or otherwise, that yes, you created this, but no, you don't get to monetize it however you please. It's too important. And because of that, we are going to, despite the fact you created it, we are going to restrict your rights to control what you created and we're going to, from the top, mandate what you can collect, what you can rate. And again, I'm in favor of that. Apple has pushed us to this spot where we have. I would not, I don't like the idea of a government body coming in and dictating how Apple does this.

But Apple's forced us to this position. Yeah, well, Apple's a public company too. They're not going to sacrifice any of this services revenue. And long-term strategy, it's an open question as to whether that's the right decision, because I'm sure it's going to invite all kinds of extra scrutiny into other business practices of theirs that they probably don't want to be talking about in public. But I think short term, they've made their position clear. and the next steps are going to be government regulators, hopefully doing a better job than the EU has done with everything

it's tried to regulate over the last 10 years or so. Yeah, but I just don't want to create the impression. Yeah, just to add to your point, too. I mean, there's all sorts of costs like developer angst, developer costs. Like the whole thing of Apple building all this stuff for the EU and having no idea if it's going to be okay or not, that's what developers deal with all the time. Yeah, is this the time?

Bypassing the Vision Pro. Yeah, but there's, so. look, at the end of the day, I have to take the arrows with these emails. I'm going to do my best to tell you what I think is going on, not what I wish it were or were not. I'll try to add both, but I'm trying to distinguish between the two. Yeah. Well, and I don't want to create the impression that app developers are emotional or somehow immature about all this or not seeing the full picture. They're business owners fighting for their rights to do business in a fair and rational marketplace.

and eventually it will get there. Apple is not going to be able to keep this 30% charade going forever. The other note I'd like to clarify about Tuesday's episode, do you know why I was confused about the, I was confused between the Mona Lisa and Girl with Pearl Eres? No, I don't. I hope it's a good one, though. I hope it's a good excuse.

So continuing the behind the music theme here, I had prepped for the show on Monday morning, and then I recorded, greatest of all talk for two hours late Monday afternoon. So I'm getting ready for Sharp Tech, and I thought, let me just grab a news article about Lumiere in case we need some details to anchor listeners just as far as what this technology actually does, what's in this video that they can't see. And so the article that I grabbed 15 minutes before we came on to record was from cnet.com,

an outlet that wasn't particularly reliable, even 10 years. ago and until 48 hours ago, I didn't know that CNET was still publishing today, but they were the ones who described Mona Lisa and its inclusion in the Google Lumiere video. But I say Mona Lisa and the disappointment in your voice, as I, the horror as I confuse the Mona Lisa with Vermeer and the girl with pearl earrings, in a split second as we're recording on video, I have to make a call. Like, do I just play this off like I'm some uncultured rube, or do I compound the embarrassment by admitting that I was doing last second show prep on CNET.com? And in that moment, I went with uncultured rube. And then with this episode, you decided to double down and do both. Both look like

a Rube and also, and also say that, look, I wasn't really prepared. I'm throwing a, I think, I like CET. I think, I think CET is made the, they have good TV reviews. I mean, they're, They have a consistent system at least. They cover stuff that other sites don't, don't cover. I'm going to take CNET side here. Own it, Andrew. There you go. No shots at CNET.

That particular article had an error in it. It's fine, though. We all make mistakes. I clearly compounded the mistake. I just want to make it clear for the record. I understand the difference between Vermeer and the Mona Lisa. You never sounded more like a tech bro than when you had no idea. You should have stuck with that.

There you go. All right. Well, to keep things moving here, beyond a follow-up to Tuesday, Nicholas says, Andrew and Ben, I thought Ben's interview with Greg Peters was great, and I was interested in the response on why Netflix is in gaming. As mentioned, gaming is super expensive, has long lead times. The games that people play forever are freemium games that really monetize on in-app purchases, which seems to be at odds with a subscription model. So why doesn't Netflix challenge Amazon, for serial type written content like Kindle Unlimited.

It's a lot cheaper to produce compared to a game or a TV show, and writers aren't thrilled with Amazon's monopsony of the market. Written fiction could benefit greatly from Netflix's ability to surface and expose content to much bigger audiences. So what do you think, Ben? It's a really interesting idea. I mean, I think he gets at what I think, I mean, the Netflix gaming thing is still a little hard for me to wrap my head around.

what I do think gaming provides in a much more tangible way than fiction is you generally read a book once. A game you will play endlessly for ages and ages until you finally go discuss it with yourself and sort of move on. And that is better for retention. And it's sort of, you know, and it brings to bear, you know, what I think Netflix is identified is there is this increasing convergence between gaming and TV and some of the most successful franchises on TV are increasingly sort of. of gaming based? And is there sort of a asset creation benefit you can get where you're creating the game and you're creating the show all at the same time? I mean, all this feels a little far-fetched to me, to be totally honest, to make a AAA

games really expensive. And is that going to actually translate to, I don't know, are you to compromise the game because you're trying to make the TV show at the same time or whatever it might be? So I'm not sold on the Netflix gaming bit. the idea that Nicholas does have is interesting here is this idea of you know creating a platform for basically idea generation and for you know that's what I'm thinking I mean I'm old fashioned so I wouldn't guess that you could have like IP as gaming that you then transform into Netflix traditional streaming IP but that does make sense to me but this is like a tried and trude method that's worked for 100 years where you own the IP rights right well and I think the idea is you can have a much larger market, it can be much more scale, people producing stuff. I would guess that, you know, taking on Amazon in this space is probably a pretty tall order.

I mean, I think Amazon's effect and, you know, there is a bit of an app store effect where the Kind of, like, there's just the entire universe of self-published books that are, that are e-books only that it's not really seen because it doesn't go through traditional publishing houses. It's not really measured, but it's all on Amazon. And, you know, I would imagine Netflix can go in and buy those rights, you know, if there's something that they find sort of, sort of compelling,

does Amazon reserve them for themselves? Not that I know of. Like if Netflix to do this, like, they're like, oh, come on our platform, but we get the rights.

Like, it's not clear that they could actually get traction here. And I think there is also a brand aspect here where Netflix, you know, one of the things that Peter's brought up is like, look, we're professional content. YouTube's great.

It's definitely a competitor. But, you know, he brought the COBR Kai example, which that is a great example. example, a show that by all accounts, lots of people like was very well done, but failed on YouTube and then went to Netflix and succeeded. Why? Because people don't go to YouTube thinking about getting sort of professional content, you know, about some of their like karate kid, right? Whereas Netflix, it's a much more of a natural fit. And maybe that applies in this case where Netflix, like I think implicit in Nicholas's point is getting a user generated content engine going to generate IP. Again, I think it's a compelling idea. I'm not sold on gaming, but if I had to try to articulate what Netflix is thinking, I think it touches on some of those points.

Yeah. And also, just from a brand perspective, Netflix is about decimating society's relationship to the written word and getting us addicted to all kinds of nonsense on there. It really turned into an art form. They keep us engaged. But I look at gaming. I mean, if it's a churn mitigation investment, I as a Netflix consumer would pay an extra couple of dollars per month to have unlimited books available in some way or another.

Well, that's not churn mitigation. That's revenue increasing. I think they're thinking about it like, look, we're going to have a full service of stuff. And from the game acquisition point, it's not just that you'll start, look, if you're looking for a game, they already have access to these for free.

And then I think, at least in theory, there's an idea of we can offer a better gaming experience because we're not badgering you for in-app purchases, right? We can do something unique. So I think there's the thesis is plausible. We'll see in the long run to what extent it ends up being worth it. Yeah. Well, it would pair well for me. I'm not a Kindle unlimited subscriber, but I would be open to it with Netflix.

The brand thing, though, is definitely why they wouldn't go that direction. In any event, a question that's explicitly about churn mitigation, Saeed says, in a recent discussion about the churn rates of the various streaming companies, you mentioned Netflix had a churn rate of 2% per month with the other streamers having a much higher rate. How does Stratory stack up against these? What can you tell him, Ben? Take us under the hood. Well, the one thing that I learned about churnerickery is you have to distinguish between the cohort that's like one month or,

a lot of people will sign up for one month and then immediately disable a auto renew. And maybe they just want access to one article or they want to try it out or sort of X, Y, Z. But because of that, you're just going to have this significantly increased turn rate if you took the thing as a whole because of this cohort. If you take the cohort of people that renew at least once, then my turn rate is very low. I would think probably better than Netflix. So I don't follow it super closely, to be honest. I, you know, despite the fact I will talk about numbers and churn and lifetime value and all these sorts of things. I don't practice what I preach by and large because I think that at the end of the day,

I know the driver of my business, which is writing good updates every day. And I think good updates stem from me writing what is true to myself and what I think and not trying to write for an audience or trying to drive numbers and sort of XYZ. And this article will be very popular with people, so I have to cover it. Or in this case, I could come on here. out at the app store and just rage against Apple and people would love it, right? Everyone loves it. Everyone hates it. Like that's the whole thing. Everyone dislikes it. But that's not what I think it's important to write. What I do is like I've had other situations like ATT, for example.

I was adamant that Facebook was in the right here and Apple was in the wrong. And at the time, a lot of people were really, really upset with me. Called me a Facebook shill and said, oh, you had Mark Zuckerberg on for an interview. You're just, you're all, like all these sort of aspersions. And now fast forward two or three years. I was like, yeah, ATT kind of felt like a money grab sort of XYZ. Yeah. And I think that's a take that holds up very, very well. But I got to that take not by looking at my numbers, which by the way, I absolutely,

like, I mostly feel the churn when I get a flood of emails saying like, I'm not going to pay for a Facebook show. And I'm just unsuscribing, right? And like if one person emails, there's probably 10 other people that feel the same way or whatever might be. And so just because I'm. I'm a, you know, I would say we have dominant in you. So I'm not a one person shop anymore. But as far as writing, I am, and I've made the choice that I know what drives my business, and I'm going to optimize for that.

And that entails not watching churn like a hawk every day. I did previously, I think I understand the drivers. And I'm, I'm, I'm good with that otherwise. But it was, it was very good. I was very happy with, with the churn numbers. What's a, once I separate out that cohort? Before that, I'm like, oh, my word, this looks really bad. And then once I realized that there was a lot of people that did this.

And by the way, my best, what I was doing all this cohort analysis, my best cohort was actually people that signed up immediately unsubscribed. And then like a week or two later would sign up for an annual plan. Where they gave it to try it. They're like, okay, this is actually pretty great. I'll take the discount. I'll sign up for a year. And then they stick around for years and years.

So there you go. Tell your friends, Sertecre, no better bargain these days with all the extra content you're getting. Yeah, I mean, I had the exact same experience with churn rate where I followed it super closely through the first couple months of greatest of all talk. And I, we had a very low churn rate also, but I would still sort of obsess over little spikes here and there. And I found that it was taking the fun out of the entire experience. And if I'm in that mode, ultimately I just wasn't making as good of a product for a couple months there. And so I was able to take a step back. But I also think zooming out here to circle back to the streaming conversation, if my churn rate with my basketball podcast that I launched on a subscription basis in 2020 was 8% per month, I would still be practicing law. And I just would have backed right out of the entire business. So that's the key takeaway here.

Netflix, the 2% churn rate is great. The takeaway here is that Paramount Plus or Peacock or whatever, these are not one-person businesses. These are large businesses that are, you know, that they need people that are focused on this and it should influence their decision-making. There is not, I was, you know, jokingly asking Greg Peters about, you know, advice for my business.

Some of which is interesting. Like, I love the fact he made the point that, that one of the things they've learned is your library is a promise about what you're going to continue to produce. And people are paying for that assumption you're going to keep producing. It's much more of a forward-looking sort of purchase, not a backwards-looking one is the way people often think about it. And that was great. That's how I think about it. That is analogous.

Things like looking at your turn rate or looking at like sort of password crackdowns, XYZ, very different. Well, we're in very different positions, to say the least. Yes, good point. All right, to keep it moving. Doug says the subject line to this is mispronouncement. And he writes, the word that is abbreviated by verse is versus. No, my word, Andrew. The word that is abbreviated by VS period. Thank you. The word that is abbreviated by VS period is versus. It should not be pronounced or shortened to verse, as Andrew and a growing number of people under 40 say. So point taken, Doug, I too loathe young people and I think that linguistic standards are important. However, I will note, if you're writing a pedantic email to somebody about a colloquial phrase they use on a podcast, the subject line mispronouncement. Mispronouncement is not itself a word. So I think that you are actually the one who has some soul search.

the new here. I am just colloquial, but it's not necessarily as egregious as your error. So I thought you were going to drop the well in the law. We say verse. But no, it sounds like, I think it's V. I think it's, yeah, I think it's L's all around on this one. Yeah. To keep it moving, we have one TikTok question to close things out. But at some point in the next week or two, while we're talking TikTok, I also want to have a discussion about phones in schools and phones with kids. So if any parents have thoughts on the way their kids interact with cell phones or what cell phones are doing to kids everywhere, or if you just loathe young people everywhere, please send us thoughts to email at sharptech. FM. Sometime of the next couple of weeks, I want to tackle that one. So I would love to hear

perspectives from the audience. And Harry says, Andrew and Ben, I flew home to the UK from Israel for the Christmas break with my wife and our one-year-old son. Following Ben's sage advice, we booked a night flight and upgraded to bulkhead seats with extra legroom. Everything was set to go smoothly, but then our son fell ill on the day of the flight. He proceeded to scream his head off for the entire five-hour flight. We tried everything to stop the screaming, but nothing worked. We both felt terrible seeing our son in such discomfort and felt bad for disturbing our fellow

passengers. We started to feel particularly self-conscious the second time a flight attendant asked us if there was anything they could do to help. But the icing on the cake was when a passenger from a few rows behind suggested that we put something on the screen. Like we weren't born yesterday, my wife replied respectfully that we had already been trying screens, but that the little guy is sick and nothing is calming him down. She retorted that we clearly don't know what we're doing as parents. This was the straw that broke the camel's back. My wife let it rip on this woman like I've never seen. It was great to see her stand up for herself and for me, just like that. I'm surprised that anyone could actually ever do that to parents who obviously want the child to stop screaming more than

anyone else on the flight. But unfortunately, we must deal with reality. So to either of you have any TikTok advice for how to handle unsolicited parenting advice? Ben, what do you have? Well, first time, I want to applaud Harry because he was not able to allow, his son was not able to allow his fellow pastures to sleep on this flight. And so what's the alternative if you can't sleep? Well, you could watch sort of in-flight entertainment. You could catch a movie, a TV show, with some music. Or you could go to, you know, a live-action drama. And it sounds like he gave that to everyone sort of around them.

A show for everybody. That's right. So, I mean, really above and beyond. So kudos, kudos to Harry and his family here. I'm sorry, Harry, this sounds horrible. It sounds terrible. I once had a flight where I had some sort of sinus infection. And it's one of the worst experience in my life.

For four hours, I was like incapacitated. Like I went back to the back and like the flight attendant, fortunately let me like lay on the floor in the back galley because I was so clearly in agony. Like my like just like the pressure change had gone up into into my sinuses. horrible. It was awful. It was like it was just intense pain that in the moment the plane descended went away. I was fine.

And like, yeah, it was. So, I mean, I don't know if that was going to happen to their son, but it's like, I can imagine being ill and then it being worse.

Like it sucks. It sort of is what it is. And yeah, there's not much, there's not much you can do it. I'm sorry that happened. Of course the other person is just a terrible person. And there's,

you know, there's an aspect where, certainly now that I've had kids, I have tremendous patience and mercy for anyone that is struggling with the child on a flight, you know? And I've been there. And at the end of the day, like, we're going to get old and children are the future and all the other cliches that are actually true. And God bless Harry and God bless all the other parents out there for having kids and doing their best to bring them up. Like they're doing the work that more and more people don't want to. And I think that, you know, good, good for them. And if you're on a flight with someone that has a crying baby, I promise you, they are much more miserable than you are by a massive amount. It's like, as long as they're doing their due diligence and clearly making an effort, then you really got just get them space. Yeah, the answer is say like, look, I'm glad I'm not them. This sucks, but I'm glad I'm not them. And bring your plugs. Right. That's your responsibility as sort of a

passenger to do, do, do the best you can. Now, as far as, far as dealing with someone telling you to parent, I mean, the answer is pretty obvious. They are a miserable person that has to live with themselves at the end of the day and you have to tell yourself that, move on. And then write an email to email at sharp tech up.com. I was going to say, that's exactly how to handle it. You can take it out on us. You can swear. You could, you could come up with the most cutting remarks, you, whatever you want.

And we will not read it on air and you will feel better for having gotten it out. But, yeah, sounds like she deserves it. Harry's wife. I'm glad that she let it rip on this woman. And I would say big picture, you don't want to engage with miserable people who are lecturing you on how to be a parent unless they take it that extra 15, 20 percent of obnoxious, insufferable advice, in which case, absolutely feel free to let it rip. I mean, you really probably still should. And I mean, we have a mutual friend that was talking about an experience he just had where, you know, is waiting in line for a long time. Taro was acting up,

ran off, went to get him, came back to order and then got yelled at for cutting in line. And I think his, his sort of take was, I understand how those viral videos happen of, of people just like freaking out in public. And he's like, you know, because he's like, that's what he wanted to do. And the reality is, is, uh, this is, yeah, like stuff doesn't happen. It's not worth it. It'll make you more miserable if you, if you go back and forth with the person in that moment. And especially if you're stuck on a flight, it's usually not worth it.

But at that point with Harriet is poor wife. But I'm cognizant. We're telling Harriet is Harry and his poor wife that they just have to seethe and sort of live with it. And, you know, it's a miserable person. They have to live with themselves. You had to live with them for a few minutes. And be grateful that's the extent of your interaction. I appreciate, though, that there's sort of an unwritten rule that you don't hand out unsolicited parenting advice.

if you're a fellow parent, particularly among people in my age bracket, everybody just sort of lets each other live without too much judgment. Yeah, the problem is there are, there are situations where kids are just out of control. Like maybe you're on a playground or you're in an activity. And one kid is just like being a bully or hitting other kids and the parent is not doing anything about it. And, you know, not to get like all off my porch, but it is sort of a shame, you know, sort of like the degradation of society or whatever it might be. you know, there's a real, there's a real sense of entitlement generally, right? Like I deserve my quiet on the airplane, which you do.

It sucks to have a crying baby on there. But, you know, again, they're- We're all in it together. We're all in it together to one extent. And are you doing everything that you can to alleviate it, right? Like, for example, if Harry was here saying, like, I am absolutely against letting kids have screen time. And boy, I was really tempted on the plane that one time when my kid was yelling, but I'm not going to let him have an iPad until he's 15.

Then it's like, no, Harry, don't fly then, right? Like, now, I'm not going to be a don't fly with kids. And, like, the reality is the nature of our world is sometimes you need to, you need to travel, you need to do things. I don't know, you know, he's flying home to the UK. How long has he not seen his parents? Like, how long have his parents not seen their grandchild? Like, there's, it's totally legitimate to be flying with a kid.

That said, your duty for flying with a kid is pull out all the same. stops to keep the kid occupied, right? Let them watch an iPad, XYZ. And, you know, and so, but he did do that, right? The kid was sick. It is what it is. And unfortunately, my advice is unsatisfactory, which is you should probably just sit and seethe and don't take it on your kid. Don't take it on your wife. Right. Think bad thoughts and emails to email. We'd love to hear from you. Don't make the situation worse in the short term. One final note that I just wanted to share with you. So, and is this TikTok related. I heard Gruber talking about the Vision Pro as an entertainment device on dithering and how he preferred it to his brand new big screen TV.

And it reminded me of an experience I had this past weekend where you helped me shop for TVs like a year ago. So I now own an 83 inch O-L-E-D TV. I've had it for about a year. It's incredible. And so when I got it, I was so excited to show it to my wife and show her how crisp the picture was. And she's like, it's a TV. Like, great. This is, it looks like the TV we have upstairs, which is like 20 years old. The TV upstairs is terrible. I've been there.

It's crappy. I was, I walked up like, how are you living this way? Exactly. And so I'm like, listen, this is a quantum leap over every other TV we've ever owned. It's incredible. And she's like, yeah, definitely, like, try to humor me. Fast forward to this past weekend. I bring my 10-month-old son down to my basement with the 83-inch TV.

And he's seen the TV upstairs and he mostly just ignores it. There's always sports on in the background or whatever. But watching the HD broadcast of Chiefs Ravens for like 20 minutes. Whatever it was. I don't know whether it was actually 4K. No, the Fox one was in 4K, not that one. Exactly. You're right.

But you know what? HD on the 83. inch O-L-E-D-TV was enough to blow Charles's mind. He's at a point right now. He's 10 months old as of today. And he doesn't sit still for anybody. This was the only time in like three months he's been willing to just sit in one place and chill with me on the couch. So he appreciates the TV, even if my wife doesn't.

This is why you ought to have the discussion about screens with kids because now you're terrified. You're like, oh, my word. The power that this has. He's like, did I, you, you want to know, Ben, did I already screw up by exposing Charles to my 83H TV? Is he sort of doomed forever? And unfortunately, the answer might be yes. It might be too late. Yeah, it's so good.

He's never going to go back to a regular TV again. Just wait until he sees a Vision Pro. On that note, Ben, we are coming back next week. Continue to email us. Email at sharp tech.fm. It's great to hear from everyone, even the angry emailers. And until then, have a great weekend. And I will talk to you soon.

Talk to you later.