Sharp Tech with Ben Thompson - New Laws to Regulate Big Tech, The Distinction Between Platforms and Aggregators, Apple’s API and Accessories

Episode Date: March 28, 2024

Follow-up on Apple and the DOJ, including new antitrust laws Ben would like to see, distinctions between platforms and aggregators in a regulatory context, and both sides of the Apple API argument. At the end: attempts to bridge antitrust confusion and a rant on Boeing’s CEO search.

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? I feel like chastened, Andrew. Why? What happened? Every time I just really want to go in on the Boston Celtics and make fun of them and how they fail in the clutch and they always give, you know, great opportunities to do that.

Whenever I get too vocal, the bucks then I always crap the bed and then I just have to remember, look, I can still be confident. I just need to lay low, be quiet, let the playoffs play out, and then talk. And I keep forgetting this lesson, and I forgot it this week. You know, I'm mad at you too, because I'm a Bucks believer, but I feel like you're so confident that you're screwing with the Bucks karma. And so I have to eat it as well when the Bucks embarrass themselves and lose to Spencer Dinwiddie and D'Angelo Russell on national TV.

So you should feel chastened. I'm glad. That's a good place to be starting today. I mean, I'm sorry. I'm nothing to say. I was going to defend myself, but I just got to take the L. Yeah, that's right. No tech, Ben, indefensible at the end of the day. But I'm in a great mood tonight. So you're chastened. I'm very, very happy because the Washington Wizards are staying in D.C. shot out to Ted Leonez. It's a great American tech story, America online. And Ted has always been committed to downtown. everything. I knew he loved the city. So good vibes on this end of the line. And then we have a lot of feedback on the Apple podcast. There is no way we're going to get to most of it today. But thank you to everyone who wrote in. But we're moving the conversation forward tonight. And Mark says,

Where are we moving it to, Andrew? We're moving it to practical solutions. No more focus on the problem. Let's talk about the solutions. You know, let's look. live with the good vibes with the wizards in downtown D.C. Mark says this. Ben, in your last update, you wrote, that, though, would mean actually understanding aggregation theory, which no one associated with the modern antitrust movement wants to do because the inevitable takeaway is that current antitrust law is completely unsuited to aggregators. You need new laws. So, Mark asks, what would those new laws actually look like? Traditional monopolies thrive. by controlling supply from producers, extracting monopoly profits from consumers.

Aggregator monopolies thrive by controlling demand from consumers, extracting monopoly profits from producers. For example, Apple extracting 30% from app developers. Existing laws like the Sherman Antitrust Act operate by capping the amount that monopolists can charge consumers. So should the approach to aggregators be capping the amount that monopolists can charge suppliers? You've talked a lot about these ideas, but it would be helpful to return to the fundamentals and lay out exactly what good modern antitrust regulation would look like. Mark, I just want to say, I think it would be good to you. Look, here is my, can I just get a little rant out of the way and then we'll try to be quick and efficient and move through this stuff. I don't want to put you to good mood.

I just want to make sure that that's okay. Absolutely. Hit me with the rant. I'm ready. I believe that last episode, I invited you to talk about new laws. The just the overall frustration, I'm happy to talk about this because I think it's a really fruitful and interesting discussion. I'm going to throw out some ideas here and some of these ideas I don't agree with and I think would be bad. But what they are is actual practical things that could be done. I get immensely frustrated with the antitrust debate because at the end of day, it's really just a matter of arguing the law. and guess what? I've got back in red all those Supreme Court cases that are relevant to this case.

And that's why I am very sort of adamant about like at the end of the end of the like I want to be right, right? Like what's going to actually happen here? And I do feel like, and I'm excited about this episode, because when it, when it comes to write new laws, it's kind of like a green field opportunity, right? Now, I'm sounding a little like the EU bureaucrats, which are like, we're going to lead the way of AI regulation. Live life like an EU regulator for today, you know, you're in the catbird seat, finally.

That's right. But the whole point is, as I say again and again, antitrust law is not like, it's not a constitutional issue. It's not like you have to pass, you know, like you have two thirds of the states to ratify something. What we're dealing with is just markets that are structured fundamentally different. I think the internet is different. It is different because of the scalability that is possible, where one company, can legitimately serve the entire world, right? Like that, when you're dealing with physical goods, that just wasn't possible.

And so I, you know, it's always cliche, you know, cliche, oh, this time is different. No, like, it actually is different this time, right? And so I am excited to talk about this because it is new and interesting and worth debating. And the reason why I have increasingly thinly veiled irritation with the sort of antitrustful, folks is just every time I bring up like what if we did a new law they're like no no that's too hard right and it's like that's not that's not an answer right so anyhow that's just sort of the high level high level sort of just rant to get out of the way before we get into specifics do you do you have a response or did I puncture the good mood no I'm still in a good mood I think that

it's not mutually exclusive between pursuing reform via the courts and reform via Congress. Congress is, you know, famously inefficient. But I think that both routes have been tried. That's not a response. You know what I mean? Like just saying like like Congress is hard to pass the law. That doesn't justify making bad legal arguments. But for instance, there were two laws that emerged in 2022, which we can talk about if you want to. I don't know whether you want to start there. But those bills were crafted by antitrust reformers. And the Open Markets Act, for instance, with the App Store, like the bill, I'm just reading from Congress right now, the bill establishes rules related to the operation of an app store by the owner or controller of an

app store with more than 50 million U.S. users. The bill prohibits a covered company from requiring developers to use an in-app payment system owned or controlled by the company as a condition of distribution or accessibility and requiring that pricing or conditions of sale be equal to or more favorable on its app store than another app store or three, taking punitive action against a developer for using or offering different pricing terms or conditions of sale through another in-app payment system or another app store. What do you think of that proposal? Oh, right. So I'm going to get to the proposal, but I want to start out by at the high level, the key thing, and the article always linked to

about new laws, it links to an article about sort of like talking about the framework for sort of regulation on the internet. And the key thing to understand is there's two types of entities that we're dealing with. Entity number one is a platform. A platform is a two-sided market.

Or, I mean, it's more actually kind of, it could be a three-sided market. It's a three-sided market in the context, let's say like Windows, for example, okay? So Windows, it's this middle layer, underneath Windows are the system builders who make PCs. On the top are developers and then there are users. So that's the three sides, right?

Now, you want all those to be in a virtual cycle and like serving each other. The app store is that kind of market. Now, in this case, Apple is the manufacturer. So they've integrated in that one particular channel. But it is a three-sided market. They just integrated into one of the sides. So then, but then you also have developers and users. those present distinct antitrust slash regulatory concerns.

Okay. And actually those are the entities that can be addressed in my estimation through antitrust law. My critique of this case is less about that Apple deserves or does not deserve or is a suitable candidate for antitrust than that I just don't think this case is addressing the right things, right? And this is what I got into a bit yesterday. You can generally speaking, antitrust laws. Antitrust lawsuits are about consumer harm. They don't have to be. They can be about harm to other sort of parties.

And the obvious group that is harmed in my estimation by Apple's approach are developers and competitors, particularly like accessory competitors, right? So digital wallet competitors, headphone competitors, smartwatch competitors in the future AI companion competitors, like all those sorts of things. Like how much better could a meta headset be or a meta rayban glasses if they had the sort of low level access to phones that Apple will do whenever they have their sort of thing, right? And these are very interesting and meaningful to me because they do really get to what is next. One of the, you know, this everything is a tradeoff. And I talk about things like property rights and Apple having the right to monetize their property. All those are real. and but but there's other things that matter like future innovation right the phone

congratulations to apple on winning the phone market there is a scenario where the phone becomes so important and basically a you have to have that to build something new where this is where antitrust as a whole is like fundamentally anti-property rights right that doesn't mean I'm opposed to antitrust rights because I'm not an absolutist I'm a pragmatist like you have to weigh things you have to make tradeoffs and one thing is that one thing is that's I am very concerned about is that should it be the fact that if you won in the phone, you are guaranteed to win in the future because you can limit APIs. You can do things on your side that other people can't do. Right. Well, and just to jump in, if I were making the case

on behalf of antitrust enforcement as a concept, it would be that free markets with healthy competition deliver better outcomes for society over time, and you get more innovation, more opportunity, and ultimately just more dynamic national markets. So Boeing is the textbook example of what goes wrong when there's not enough competition. But you could even look at Google. I do have a Boeing take.

I don't know if I mentioned it to you, but maybe you can bring it up at the end of the podcast. I'm still upset. We haven't revisited space after our Boeing conversation. I want to compare and contrast those industries. So yes, we'll circle back to Boeing for sure. But Google is another more recent example of how important companies can end up sort of eating themselves if there's not enough competition in a given market. Now, Google is doing fine in a lot of ways.

But it's just to underscore the point that, yes, there is a role for antitrust, even if you do believe in free markets and the value of free markets over the long term. Right. So we're on the same page, just to be super duper clear. And so the, so that's number one is sort of platforms on one side. And platforms, I think because they're so powerful and because they have such an impact on what is next, I think they are the more pressing concern. One of my consistent critiques of the FTC over the last few years has been the Apple issue is a much bigger issue than these other ones. And it's a bigger issue because of this, because it leads to the future.

If you care about the future, your number one concern, in my estimation, is not any of the aggregators. It is the fact that if we're moving to this AI future, if we have this opening for completely new devices, we are looking at a scenario where we are fundamentally constrained by what Apple decides to do or not and do for themselves because they won't open it up for others. That's a problem. And I think it's a problem for the emergence of new apps and new possibilities. Like the idea that Apple gets to dictate business models, gets to what folks can or cannot do, I think. the App Store is a triumph and there's a huge number of apps and I don't think there's nearly enough. And this is a hard thing to argue because what apps might be created that weren't, what things might have been done that weren't. But theoretically, Antitrust is opening the

possibility for new innovation in the future. So I think the platform issue is a major issue. It's why this case makes me a bit angsty because I think it's a bad case. And I think it's a bad case because it misunderstands tech history. And I think it's a bad case. And I think it's a bad. bad case because it doesn't really understand the issues with Apple. The problem is not that people don't switch from the iPhone. People don't switch to the iPhone because they like the iPhone. The issue is all the things around the iPhone that Apple limits and doesn't allow new things to happen. And almost everything in this case is backwards. Yeah. Well, and it's what's interesting and vexing about antitrust and these ongoing debates is if there's too much regulation, you end up

stifling innovation. And if there's not enough regulation and a handful of companies that can play gatekeeper for everybody, you end up stifling innovation in that scenario also. So enough prelude. What are we doing about Apple? No, not enough prelude. One more bit. Just because the difference, the other on platforms are on one side, okay? The other is the aggregators. Okay. Aggregators are the sort of pure play digital things. There's basically zero friction in the model. They accumulate customers. And that gives them power over suppliers. And Google is the perfect example. Google does not have lock-in.

This is where companies like Yelp are just full of it. Like Yelp grew large because they were the top of Google organic search results. And now they're just winding up a storm. And they're over in the EU right now saying they're asking basically for quotas. Like Google has to send a certain amount of traffic away. Why? Users can go to Yelp.com. They can install the Yelp app.

Here's another story of the early days of checkery. The big theme in the early days of streckery is that Google is screwed because people are just going to download vertical search apps. They're going to download Yelp and not go to Google anymore. And that inspired a competitive response. Actually, all the evidence we have is that competition in that space works. Google dramatically overhauled their search results in response to competition. And people are mad that Google did it better and they won. Like, I'm sorry you lost.

There's such a loser mentality in so much of this, of the antitrust stuff, and it really ruts me the wrong way. And the problem with the aggregator space isn't just that it misunderstands the market. It's not a function of controlling distribution. It's a function of discovery. It's a function of consumer preference. But it is also the case that there's no clear regulatory fix. How do you go out and change the individual behavior of customers so that you get your preferred outcome? You end up in a quasi-communist solution, like we're going to have.

quotas. We're going to have equality of outcomes. It's like Yelp has the equality of opportunity. They want equality of outcomes, right? That's what they actually want. And so, so as I go through my specific proposals here or at least the avenues for consideration, it is going to have in mind this distinction. Platforms have actual hardcore control. They control APIs. They control access. And that control can be legislated. aggregators win on consumer choice. That can't be legislated. That's the fundamental issue.

And there's just a refusal, in my estimation, of this modern antitrust movement to acknowledge that reality. And so this is how you end up with this stupid iPod story in this case. They retcon stories of how these companies became popular and how they became huge. Because if they were to tell the truth, it would undo their entire case. iPhones are popular because people like them. That's the end of the day. All the evidence we have in the market is that people switch from Android to iPhone and not the other way around. If people switch from Android to iPhone, it's not too hard to switch.

People do it. And they go in one direction because people consistently think iPhones are better. Now, we will get to the I message bit in a bit. I think I have thoughts on that as well. But I just want, like that's the, my opening statement. You have to distinguish between platforms and aggregators. And platforms, by the way, I think can be addressed in an antitrust law. You just have to understand the market and how it got there to actually approach it in the correct way.

Okay. And you said that aggregators can't be legislated. Did you mean aggregators can't be litigated? Or are we just leaving the aggregators alone entirely? Okay. So the issue with the aggregators is they have this flywheel that's really, really powerful, which people use it. So suppliers accommodate themselves to the aggregators, right? People, they make their page fit better with Google.

They go through all the Google SEO stuff. They figure out to do it. and they integrate with all Google stuff and all these sorts of things. The whole news thing with Facebook, right? The most hilarious thing ever, which entails lying about reality, which is that Facebook gets big because news products are there. No, news organizations push to get their stuff on Facebook because they want the traffic that comes from Facebook. The dependency is not Facebook on news organizations. It's news organizations on Facebook.

And to pass these laws like in Australia or Canada entail lying about the dynamics in the market, okay? Now, the implication of aggregators being this super tightly wound sort of virtuous cycle is they don't expand gracefully. I talked about this in the context of companies a long time ago, right? When you're a startup, you're sort of walking through a field and you can go in any direction you want. You have total freedom of movement. You're not going particularly fast or that particularly compelling, but you have full freedom of movement. Then you get on a bike, you have a little less freedom of movement. Then you get on a car, you have less freedom of movement, but you have more efficiency.

go faster. You go from that to a bus to a train to like a bullet train, right? A bullet train is not changing direction, but it gets where it's going exceptionally fast, right? So you want laws that acknowledge that reality. You're not going to disrupt the bullet train, but what you don't necessarily want to do is allow whoever runs the bullet train to be able to build multiple bullet train tracks like unfairly. Okay. So my two big things, with aggregators are number one acquisitions and number two contracts. I think it is an aggregator should not be allowed to acquire a company that is potentially another aggregator.

But basically where it's monetary value in the long run is going to come from a crew and large audience. The classic example is Facebook and Instagram, right? I wrote at the time on Twitter, I didn't have to checkery then. But I'm like, this is the most flagrant anti-competitive move. It's worse than Microsoft Descape. I remember where it is. Like it was, it was obviously going to be a huge problem, right?

And imagine Facebook and Instagram today, right? It's definitely a different world, okay? Now, figuring out how to phrase this is going to be tough because what you do want, you do want these large companies. Sorry. You want two things that still happen. No, it's okay. You do want number one, them to be able to acquire technology because large companies acquiring technology

means that technology is dispersed much more rapidly than it would be otherwise. So classic example, Apple buying PA semi, right? You want a large company like Apple to be able to buy this chip startup. And then that means Apple gets super awesome chips, which billions of people benefit from. That made the world better much more rapidly than PASMA, which probably went to survive on its own. But even if they had to get critical mass would have taken decades, right? Like there was massive consumer welfare that came out of that acquisition. And the other thing you want, though, is you don't want to kill aquilars.

Just because that's kind of happened. we talked about this last week with the absurdity with Microsoft and inflection. Incaping me. Inflection, yes. Like, having that out is an important incentive for people taking risks in the first place. Right. And so I'm not saying this is going to be easy. But directionally speaking, that is what I would want to sort of look into and have a sort of

distinction there. Number two is I don't think aggregators should be able to extend their power contractually. number one first and foremost, I have a big problem with most favored nation clauses. This idea that, say, you know, an Amazon or whatever can sign a deal and can dictate contractually that they always get the lowest price. And the reality is the power is such that no one can say no to that, which makes it impossible, much more difficult to set up an alternative site or go to a different retailer and offer them a lower price sort of XYZ. And so I think most favorite nation clauses in the context of a dominant company, is very problematic, and I do have an issue with this default thing. Like, I supported the DOJ in their shoot against Google and the Apple thing, in that I think

they're probably going to lose. But to me, I think that loss will actually be a productive loss in highlighting the fact that, look, the reality is that Google is so large that they can offer a price that no one can match. And that is going to further cement their position contractually, which they ought to be able to sort of win on their own. But Google's fair retort is, look, if we're barred from bidding for the Apple default position, why can Microsoft bid for it? Right. And part of the problem here is that Apple is so dominant. You're dealing with two dominant companies making a deal between themselves to cement each other's dominance.

And I would not be opposed to or figuring out a framework for just making those sort of deals illegal as a whole, right? If you're above a certain size, can you make a default deal with another company? above a certain size. Again, violation of property rights, for sure, I'm not denying that, but this is a tradeoff where you're going to end up in a inherently uncompetitive. So basically, the thing with aggregators, what I want to do is I want to put fences around them. I want to put fences around the bullet train. We acknowledge and respect their business. We're not going to interfere with it because we recognize trying to interfere with it is actually just going to make things worse for customers. That's the only outcome that's going to happen as has happened

with Google's search in Europe, right? It's just a worst product, and it's not making any actual difference, right? What we don't want to do is let them use mechanisms that are not part of the aggregator virtual cycle to extend their dominance. And I would say those two things are acquisitions and are these contractual agreements. Well, listen, I'm not

a structural engineer, but I don't know how well a fence would hold up with a bullet train coming at it. Yeah, it's a normal goal. I'm grimacing given the news this week. But yes, a fair point. One question. So what Mark was saying there makes sense to me. The idea that aggregator monopolies thrive by controlling demand and extracting monopoly profits from producers, is there any way to

statutorily limit what an aggregator monopoly can extract from producers a la Amazon? No, I don't think so. I don't see it being a problem. Like as long as there's an avenue for a competitive response. So for example, I don't. And one of the issues. issues we run into is, you know, I've brought it up before, but this idea that things as they are ought to remain forever. Right. Like, so in the context of Apple, if the future is these ambient AI sort of devices or whatever, it was, in a world where devices don't matter. Yeah, we don't know what the foreign factor will be. Right. No, if devices don't matter in the future, Apple does not have a reason to exist. I don't think Apple needs to live forever such that they need to become a company.

they aren't at all and become this amazing cloud service XYZ, right? Like, I'm fine with companies dying. Now, that's maybe an extreme example, but we over in, or like the DOJ complaining about Apple paying off paying its shareholders more than they do in R&D. Shareholders invested in Apple, that's how it works. That continues to really bother me. Like, it's, it doesn't even occur to them that share buybacks and dividends are a good thing.

Like, it's just inherently evil. It speaks so deeply to the core sort of view of the world. That's anti-profits. That is anti sort of like risk taking and paying off for that risk. It's idiot. But I don't. So I'm fine with companies paying off their shareholders. I'm fine with companies going out of business and going bankrupt.

Okay. So that is sort of the overall premise number one. So in this context, newspapers getting done in by the internet like it sucks. But the problem is they had an entire structure that was predicated on a world that doesn't exist anymore. Their structure was predicated on geography, on a geographic monopoly or oligopoly where owning assets that what you do distribution was a differentiator. Guess what? On the internet, distribution is free. That's why newspapers are screwed.

If you want to have a one sentence summary, that is why. Now, Google has come along and picked up the scraps. Facebook has come along and picked up the scraps and built new models. like the feed that we've talked about or search or whatever might be that is predicated on there being no more geographic monopoly. Google can find any article anywhere in the world and serve it to you wherever you are. And so the proper response and what we need to be careful of from a regulatory perspective is making sure there's room for new business models predicated on the new realities to emerge. I think that's happened by and large with text. Like, what can you do in text that you cannot do previously?

You can have a one-to-one paying relationship with thousands or tens of thousands or millions of readers all over the world. The whole world is your markets. That's actually an advantage. Strategory is predicated on the internet reality that you can serve anyone in the world. I have subscribers in like 100 plus countries, right? Like that's, and so the New York Times, obviously, shining example. Now, does this lead to questions of like winner take all and all sorts of things? Yes, but you're our.

arguing against structural reality there. You're not arguing against Google doing people mean, right? Like, if your substack isn't thriving, at the end of the day, that's not Google's responsibility, right? So I think that by and large, when it comes to, if Google wants to jack up, first off, Google is not charging these companies anything to take out of your example. The Apple one's unique. We'll get the Apple one in a little bit. But like, so by and large, I think the more, you know, as long as there's clear avenues to go around the out aggregator. I recognize customer acquisition is hard. Guess what? Customer acquisition is hard for the history of humanity. Like that's just the reality. Customer acquisition is hard. Right, but it's harder now because of the way the internet works.

No, it's not. It's easier. No, it's much easier. No, how would I have acquired tens of thousands of people before the internet? No, the example is Amazon. It's, you reach a much bigger audience selling on Amazon than you do if you're trying to sell a product on your own. Right.

But if you say you were trying to sell a product before Amazon, how would you sell your product? People shopped in their neighborhood. And like it was a completely different market. No, no. So you're making a, making a product. How do you get that, how do you get that product in front into those shops in your neighborhood?

You advertise. Okay. Where do you like the issue is, and this is I think a challenge here is we, we, We look at everything relatively, right? Is it hard to get customers relative to Amazon? Yes. Is it hard to get customers relative to the pre-ternet era? It's dramatically easier.

Like, like, we were, who's, we were talking to someone, uh, that had, you know, they were talking about they had like 5,000 listeners to their podcast or something like that. And it's funny because it's like, oh, well, keep growing. You could do it. if you were to go back 20 years ago, 25 years ago and say you're going to have 5,000 people listening to your talking about some sort of basketball game. It's like that is unbelievable. We're talking about a large auditorium, a huge sort of thing getting access to this. The issue is you can get way more shoppers on Amazon.

But number one, anyone can get into Amazon. There's no barrier, right? Try getting your product into Walmart 25 years ago, right? Or whatever it might be. Much more difficult. Try getting your products into every mom and pop shop and all the sort of streets are in all the little towns in America. Yeah. Honestly, what I was reacting to is you saying, well, guess what? It's been hard to acquire customers forever. But I think that downplays the reality of how powerful the aggregator effect actually is in a digital marketplace in any number of areas. I think it's one of those things where you can make a million dollars a year. But if your neighbor makes $10 million a year, then you're like, tax the rich, right?

I think there's a little bit of this going on where actually it's much easier and viable to acquire customers today than at any time in human history. That's not true. Pre-A-T-T was easier to get more. But then like going back sort of at any time. And now in the frustration is you look at it relative to XYZ and you build a business model around astronomical volume, then yeah, it's going to be tough. But I think we need to not lose sight of maybe I feel this very viscerally, and you may say I'm biased, but I think it's an important data point. Stuff like what we do, just straight up not viable before the internet, right? Like the best hope I would have is getting some local calmness position, maybe working my way up the stack, right? Like the ability to acquire customers today, and you have all these tools for free acquisition, like social media and email and all these sorts of things that all the established entities complain about because.

their problem is cost structure. Because their cost structure is predicated on geographic monopolies. And that geographic limitation goes away, the whole thing falls apart. And that's the internet. It's not any one company acting badly. Okay. So let's move to platforms then. What do you have on the platform side?

So first off, and I wrote about this at the time, I brought it up again this week. No one ever, ever mentions this. So there's two possibilities. Number one, I'm just totally wrong to remember this. And so maybe I'm missing something. Or number two, I don't know, this is why I get paid to remember stuff like this. Which is the Supreme Court case with Apple against these consumers filing a class action lawsuit complaining that they paid more for apps because Apple's App Store fee. And this is one of those cases where the Supreme Court could have really used some common sense.

Like this idea that developers are having to pass through apps, actually all of the evidence of the app stores, prices get driven to zero. Right. We see this again and again. at the beginning of the app store, just like the Vision Pro today, right? There's a small market, no app makers. So every like prices are app, like $12 or $15, right?

That's not going to last. Well, if the Vision Pro ever takes off. It's like, prices get driven down and you either have to be super highly differentiated or have to like get them in your game, get them locked in and addicted, and then you can sell sort of packs or whatever might be. But we're dealing with zero marginal cost goods.

That 30%, Apple is taking that 30% from developers. Consumers are not paying extra. The developers are completely, internalizing that cost. So in my estimation about the app store as a whole, the people who are harmed by app store policies are not consumers. The people who are harmed are developers. Now, me personally, I worry about this, not because I'm worried about developers' pocketbooks, but because I'm worried about business models and companies that are not created because of these limitations that go in. And I think this applies, yeah, and I think this applies particularly to the

API question, right? The question of like what private APIs, what companies can get access to, can they access to the NFC chip? Can they build goggles or glasses that are as well integrated as Vision Pro? Can they build headphones there as well integrated as AirPods? That is where Apple systematically extends their advantage sort of outwards. That's why they can take 30%. The 30% is like either number one. Should they be allowed to take 30%? Yes, the answer, but the answer, go back to my aggregator a bit before. What do I want to make sure always exist that there is another way? that there's an alternate avenue, right? So my proposal, and I think you could accomplish this via antitrust if you actually wrote a good case. And you had, sorry, go back to the Supreme Court precedent. The problem of the Supreme Court precedent is the question is there's a principle in antitrust law, which is only one party in the value chain can sue for these sorts of things, right? And it makes sense, right? If there's harm, if everyone, like a court doesn't want to get into having to divvy up who was the most hurt. And so the question was, who's harmed by that, by the 30 percent or who has standing to sue. Is it consumers or is developers? To me, it's very clear that

the value chain is consumers are buying from developers. The developers are entering the cost. Developers are harmed by that. The court unfortunately ruled the opposite. That consumers are buying from Apple, not from developers. And there's arguments for this, right? Apple puts itself in the middle. But at the end of the day, Apple's not a wholesaler buying apps and then reselling them. They're facilitating a transaction. And I think the degree to which they're inserting themselves between what is a connection between developers and consumers, that's actually the problem, right? The court bought into the problem as reality. And so the problem is that they gave standing to consumers to sue for app store fees, which implies developers don't have standing. Now, the majority

opinion in this case was bad. It just, it didn't make sense. And because they tried to leave this exemption open, oh, of course developers can still sue, even though that doesn't make sense. It's complete in the face of Illinois brick precedent. What I wish the Department Justice would have done is take this head on. Take on this case, say, no, actually developers have standing. And then you can build, I think, a very compelling case for developers, which at a high level is predicated on the fact that they have no alternatives. They have to reach customers, not just undifferentiated developers, but highly

differentiated developers, have to go through the app store. There's no way around. And that the remedy would be that Apple has to allow third-party installations, like side-loading whatever you might call it. And I think this is a principle that could also be legislated, which is a platform that allows third-party applications of over X amount of size, has to allow third parties to install, like, of their own volition, right? And the problem here, what happens is the app store has been good.

The App Store did help people feel safe and protected and things like that. And so the legislators don't want to make the tradeoff. They don't want to say, we're going to potentially decrease security. We're potentially going to make it risky. They don't want to do this. This is the European Commission's problem in a nutshell with the DMA. If the DMA was super clear, which said you have to allow side loading and you have to allow third-party app stores. And that was it.

There wouldn't be any of this rigmarole about is Apple going to do this? Is Apple going to do that? Right. You could just say clearly what you want. But everything that you want has tradeoffs. And so they write these super complicated laws that try to cover their rear end for all these tradeoffs. And they end up in a total mire, a total quagmire, a total mess. If you want to address this, embrace the tradeoff and say, look, if you offer a platform that allows for the installation of third party applications, those third party applications need to have the right to, you know, be able to install in their own or have third party app stores.

I think you can make this pretty clear. And then Apple's App Store can do whatever. it wants. If it wants to have an anti-steering provision, fine. If it wants to, if it wants to sort of charge 30%, fine. There's a way around. What did you think of the Open App Markets Act, though, because that required Apple to allow for steering, which allows developers to charge on their own website as opposed to. No, it didn't. It tried to legislate what happens within the App Store. It accepted the App Store as the only way to distribute apps. It said within the App Store, you have to do all these sorts of things. And to me, the Quare Alternation,

it just let anyone install an App Store, right? And now, where I do have a problem with this law and some of the other laws that came up, I think that the OEM, the provider, has a right to defaults, right? If you built the thing, you're going to make the default. What I want is therefore there to be choice, right? So I think Apple should be able to have an iPhone with the App Store installed and the App Store is the default. but should users be able to change the defaults? Yes.

A lot of these laws get into you can't even set defaults in the first place. Or in a worse scenario, you can't even ship your own competitors, right? Well, but the scenario you're describing developers are still dependent on the iTunes store. The what is it? No, they're not. No, they're not. You go to a website. You go to Spotify.com.

The consumers dictate what the developers are dependent on, though. That's why. No, this is the exact problem. the problem, the issue that I push back again is this entitlement from developers to customers. They, look, what I want is you go to Spotify.com, you click a button, an app is download to your device and it's installed. Apple can make that happen. They're going to make that happen in the EU. What Spotify wants is they want to be able to be in the app store and to be able to do what they want there.

Right. And so the pushback against this, look, side loading fixes the problem make it easy make it obvious make it you know you have to jump through hoops they don't want that because they're like yelp they want to surface high in google search results without going through the hard work of getting people to go to their website or download their app and i don't support that i disagree with that i think all the app store problems are fixed what app will make any rule they want as long as there can be an alternative app store an alternative way to install apps then they can do whatever they want that's totally fine with me okay well i don't agree with

that because I feel like the dynamics for how these platforms operate. That's not true. It's a very sort of paternalistic sort of thing. It isn't, though. It's pro-business outside of the app store owner. And the dynamics of how these platforms work are set at this point. So it's a question of how you're going to reckon with that reality to create conditions where Apple can't just charge 30% per transaction.

I mean, it's ridiculous. Like if a credit card, imagine a credit card. charging 30% per transaction. If you, then you would use something else. Like if you went there is no right now, there is zero alternative. Right now, if you could go to epic.com and you could download Fortnite and they could charge whatever they wanted there because it's their own site and it's their own app. It didn't go through Apple.

And they could also have Fortnite in the app store and Apple takes 30%. Like that is exactly what we want. Apple, there may be the case. Apps would actually do better in the app store because the experience is so much better. And by the way, I think Apple should have the right to make a better experience. They made the device. That's what you get for winning. You get to make a better experience.

Apple absolutely has the right to make a better experience and be the hub and take 3%. But taking 30% is egregious. I know. So the answer is let the developer go elsewhere. like that will show if the 30% is worth it or not. You don't trust consumers. You don't trust consumers to be able to make a choice. And so you want to go in and just arbitrarily change what Apple can do.

If the possibility is your, you can get an app in the app store and has a 30% fee, or you can get the developer site. And the developer now, they have the freedom. They don't have to completely internalize the cost. So you can get the app for $7 on the developer's website. or $10 in the app store. Guess what? What is Apple's response going to be if suddenly all those sales are going to the developer's

website? Sure. That makes sense. Reduce their fee. Why is everyone scared of competition? Why can't you redirect people to your website in the app? That's what doesn't make sense to me. No.

So there's a ton of stuff. So a lot of, let me, there's two things that are conflated here. Number one is I personally don't mind at a high level. Apple's model. I do think there's real significant pro-consumer benefits. It's basically impossible for your Normie to screw up their iPhone

to the extent it doesn't work. I do have concerns about if side loading is willy-nilly, okay? Like we've been down this world with Windows. I'm not saying iOS is Windows or anything like that. But there's, I think the bit about in one's good at this. Right, right.

And so I wish app, so in this context, this is my preference. My preference is, is that we stick with the model, but Apple changes its policies in a reasonable way. And I think the most reasonable change is let developers link to their website. Okay. So, but legislatively, what I hear the concerns are different. What we don't want to get into, and the DMA is a perfect example of this.

We don't want regulators getting into product design, right? We don't want them going in and dictating features and policies and XYZ. That's the job of Apple. If Apple refuses to do that, then what the goal of a regulator should be to increase competition, that's it. And to do it in the lightest touch possible. So to my mind, the lightest touch possible without the mess of the DMA is say, okay, look, Apple, if you're not going to be reasonable in your control, we are going to make sure there is competition. We're not going to tell you what to do. You can do what you want.

But we're going to ensure there is competition. And to me, that's the queenest, least invasive solution to the problem. Okay. Anything else on platforms or should we move to mail? No, no, no, no, that's number one. Number two is this API issue, okay? And this is actually arguably the single most important one and the most, the one I'm most conflicted about.

So we have this email actually from the AirPods guy. Why don't you read that? It's a good sort of introduction to this. Okay. So Goats, Jonathan says, I've been meaning. to write this email since Monday. By the way, Jonathan got preference because he's a long-time listener to Greatest of All Talk.

That's right. That's a easy way to the top of the light of Sharp Tech. I've been meaning to write this email since Monday, but Ben beat me to it in his latest update. In brief, I bought Sony over the ear noise-canceling wireless headphones in 2016. Reviews said they had excellent audio quality and superior noise canceling to Bose. I love them and still use them. Connecting to any device was a bit clunky, but once connected, they worked great. Following Apple's quote-unquote brave removal of the headphone jack,

I purchased Sony Wireless noise-canceling earbuds in 2019, the same year the AirPods Pro debuted. The Sony headphones sucked. I had to download two separate apps to connect the headphones to my iPhone and to control noise-canceling and other features. Half the time I switched back to wired headphones because the connection was so unreliable. What an awful experience.

A year later, I purchased AirPods Pro. The connectivity and management of noise canceling features was night and day different. Why couldn't the Sony earbuds be controlled from the Bluetooth menu like the AirPods? Did Sony build a bad product? Did their software suck? Or did Apple disadvantage them?

My wife is an avid runner. Over the past few years, she purchased a $300 garment smart watch and later a $600 Garmin smart watch. She runs every day and maybe use the Garmin watch once a week. Connectivity issues with the iPhone also limited her enjoyment of a premium product. I bought her an Apple watch this past Christmas and she now wears it every day. When I asked why, she said it stays connected to her phone much better and manages

texts and calls as a breeze. Again, is Garmin building a bad product or are they being disadvantaged by Apple? I don't know the answer to these questions, but I think they're going to be a breeze. worth asking. My MacBook connects to the various wireless printers I've had over the last 11 years far more easily than my PC work laptops have. I think this is a great example of Apple's it just works approach. Their iPhone experience has been much different. It just works as long as it's connecting to an Apple device. I tend to align with Ben on this particular DOJ case, but I think there's a stronger argument to be made for Apple leveraging iPhone success into other markets.

by advantaging its own products. So, Ben, what do you think of the dynamics there? So just a wonderful email in multiple respects. In part because it gets to some of the tensions with Apple, but he also brings up printers. So I agree the printer situation is much better than it's ever been. And part of this was Apple introducing like a universal printer sort of driver sort of thing. You don't have to do something independent and making printer manufacturers sort of work with it.

That was an aggregator really doing a good job. job, like forcing people onto a standard, at the same time, has anyone never not complained about the fritter? Right? Like, and it speaks to the real tension in this case. To me, this is the probably this, like, we could argue every side of this case by myself for hours. I'm not sure I'm not sure I'm doing that podcast would be, but it would be, it would be

an interesting sort of challenge. You just ran through your legislative solutions by yourself for about 30 minutes. So yeah, I believe in you. I'm sorry. Did you do that? I'm sorry, Andrew. I'm trying to be part of the rock. Here we are.

No, the problem was you gave me homework for this one. And so if you're ready to rock, I'd like to see it. Okay. Okay. Okay. Okay. So here's the fundamental tension. I'm the most worried about this API issue.

And AI, I think, is really bringing it to the forefront. Okay. Like, the issue is that take like a voice assistant. Any voice assistant that is an app, the more we get into this sort of real time, sort feedback and interaction, the more these limitations that come from being a third party on top of an Apple platform are going to cut. They're going to sting. You have to open the app.

You have to get there. You can't just invoke it. Even if you have a device, is that device going to stay connected consistently? Is it going to be latencies? They're going to be lag. And I think it's going to mean a real retardation in the development of this market because you don't have the sufficient access to the phone, which is the device that is. is still going to be with you all the time.

And this is going to be, I think the market is just going to suck. Because Apple will not make the APIs available for third-party devices or third-party applications to have the sufficient interaction that will make them really compelling and useful. And we're just going to be stuck with, God, I hope Apple makes Siri good. Like, is that a future we want? Do we want our dependency on truly useful AI to be gated by Apple's Siri capabilities? Or who is going to split the proceeds with Apple and partner with them. Yeah, well, Gemini, you have Gemini thoughts as well. So to me, this is like, say, I talk about that Rabbit R1 device, right?

That was at CES, right? Going to be a crappy device, I'm sure. I think actually the shipping deadline might have passed. I don't know, whatever. No, but, I mean, we've had a lot of fun talking about the different form factors that we might see. Yeah, like whoever that is is going to be dependent on Apple. The better rayband glasses are really compelling, this idea that they can see and you can talk to them. Like, it's a really compelling use case that is possible technologically today, but it

would be a gazillion times better if that low level access to your phone. So I had that always on connection and the latency would be much lower and all those sorts of things. And realistically, Facebook almost has to ship an accompanying phone with the glasses. And the phone is just can be purely bog standard, right? And by the way, Mark Zuckerberg has been explicit about that because I was sort of wondering, well, like, could this be a replacement for the phone long term and he gave an interview to Morning Brew, I believe, like a couple months ago and he was like,

yeah, this is going to operate with the phone. We don't see it as a successor piece of hardware, at least in this generation. And so, why would you try to do stuff the phone already does? Yeah. Yeah. The phone is good at so many things. And what we're trying to do is do new stuff. And the problem with Apple limiting

all this access to APIs is that it's completely retards the market. Like there's nothing nothing's going to happen. We're going to be dependent on Apple doing crap like Siri that they suck at. Okay? That's not great.

It's a huge concern. The flip side is, and this goes back to the printer bit, is that any sort of standardization sort of approach is just always going to kind of suck, right? This is like what Apple is so good at because they internalize everything. And, you know, API development is not super, like you make an API. and it's not quite right. You have to always change you. You have to X, Y, Z. When it's internal to yourself,

you have so much more flexibility and changing it and getting it to work just right. Because if you break it, who's hurt by it? You are so you can figure out how to solve it and get the issues, right? Once an API is public, you now have tens of thousands

or hundreds of thousands or millions of developers dependent on that API. And every change you make is dramatically painful and disruptive. And by the way, if you change it too much, you're probably getting a regulator yelling at you. Oh, you're just, trying to preference yourself. No, I'm trying to make it better. Like, making something public

ossifies it. And that's a big problem when you're trying to do aggressive product development, right? It is like, like you're sort of locking yourself in. So that's the, there's a really, really strong tradeoff here. I think Apple's integration is a big deal. Could they make things better for other watches and other headphones? Yes. Do they preference themselves? Absolutely. Is that preferencing also a function of it's just, hard to work with standards and public APIs and you can really push forward faster for yourself also

absolutely right and so this is a really hard one I've been thinking a lot about this I think there's something along and it's hard like the problem with this is to write legislation that could really handle this would be would have to be

so subtle in like sort of understanding the issues at a deep level now who doesn't trust Congress that's right now I do your part Well, no. Okay. So be clear, I don't trust Congress generally at all. I'm with you. The difference is I don't think the answer is to try to twist and I trust on to something that it isn't. That's my whole thing, right? Yeah. So I'm, but yeah, let me finish. So okay. Maybe there's something like if you have an API that is used to sell an accessory or a into a third party market like headphones or watches, those APIs. have to be made available to competitors

within 24 months or 12 months or whatever it might be. I think having a lag is reasonable because you need to figure it out. You might make changes. And number two, that's an incentive to keep inventing, right? Because to stay ahead. Like, you have an advantage by keeping doing it, right?

I'm fine with Apple having better AirPods in 2017. But by 2019, competitors should be able to deliver a comparable experience to the extent the experience is dependent on APIs that Apple is keeping private to themselves. Now, like I said, this one gets pretty hairy in how it would actually be written implemented. And I do worry a lot that it would actually kill invention innovation. But at the same time, I'm very, very concerned about the extent to which the iPhone platform is a tremendous barrier to any sort of innovation going forward. And particularly because of Apple's approach in this way. But that's so basically I have two things.

each. For aggregators, it's acquisitions and contracts. And for platforms, it's side-loading third-party installations and making APIs publicly available. Those would be my sort of focus areas. Yeah. Well, and Jonathan's email, we got a number of people who shared similar experiences with Apple products and the Apple ecosystem. And it creates a difficult structural question. Because what's happening there is not quite tying, but it's similar in nature where a customer is effectively locked in in some ways. And you've got a company leveraging consumer demand and market power in one market to then go dominate a completely different market. And so you wrote about that on Wednesday and said, well, the DOJ should have sued about this because it's a real

problem. But I also don't know that you could actually prosecute a case with the current laws that we have because Apple's not technically locking anybody in with the way they're maintaining their ecosystem. No, no, I disagree. Developers literally have no choice with both of the app store. There is no other way to serve their customers. But I'm saying with the smart watch,

the AirPods, like that's not lock in in the traditional sense. Right. Well, no, it is some sort of tying sort of aspect. Right now, the tying question, tying can be, what is it? Is it ipso facto, ipso facto illegal?

Per se, thank you. I kept using ipso facto. It would be per se. Tying can be per se illegal. That's very rarely the case anymore. because there are very valid sort of like justifications for tying. And but if it's not per se illegal, it can then go through like a balancing test to see like is it sort of or not. And like I think it's that would at least be a case worth prosecuting.

Now like I said, all the, the whole bit about this debate is I just want the people that want changes here to open up their minds to other avenues because they actually make much more sense. And then once we do that, like I said, I can argue both sides. Like I like this is, but this gets at, you know, this sort of next question you have on here from Jose about about sort of leadership, uh, from Apple. Well, let's get to Jose in a second. I just want to say that number one, there were two laws that were proposed and they never made it to a vote because and I wrote two articles about them. And I wrote no, that's okay, but Andrew, that's not that I'm not, I'm not adopting the loser mentality. I'm just saying that the people who. who care about antitrust reform are pursuing multiple avenues. And I agree with you that suing under our current law is imperfect, not only because the current law makes it really hard to win cases, but also because I'm not super comfortable with federal judges,

individual federal judges making incredibly complex policy decisions in what's now clearly the most important industry in the world. like they're not that different from EU regulators. And that sort of unilateral power vested in a random judge in a random district isn't the way things are supposed to work. So I actually identify with a lot of your misgivings. But even if suing is imperfect to make the suing. No, you have to lie to make the suing happen. That's why they have all this stuff about like how the iPhone became popular.

Like, well, it's a divorce. That's just rhetoric, though. A lot of what's in there is factual in terms of. what Apple is doing and the way it affects the marketplace. The intro, again, this is why I had such a problem with the intro. But my point would be that even if suing is imperfect as a solution, the status quo is also imperfect. And I'm not an antitrust lawyer, but for the last 10 years, all I've done is see five or six companies accrue more and more power and get more and more abusive about the way they wield that market power. And it doesn't necessarily affect consumers,

but it affects other businesses. And it reduces diversity and innovation long term. I mean, that would be my assumption. And so I don't have a problem with people making this a multi-front assault for reform. Don't you think it's important, though, to understand how they acquired that power? Yeah. But that doesn't preclude. enforcement and reform. Yes, it does. Because you have to, like, the problem is the story these antitrust folks tell is that they did illegal things to acquire this power. And therefore, we should apply regulation to those illegal things so they will no longer have power.

So, yeah, I don't like the word illegal. Because that, that was my issue with citing Steve Jobs in 2011 in the introduction, because again, it's sort of a rational. business impulse and you can quibble with, I mean, I didn't like the way they handled the Kindle situation either. But the problem is not when companies are competing. It's when companies have achieved supreme market dominance. Then a lot of business practices that are fine and ordinary if you're in a competitive marketplace can become problematic in terms of the way they impact the broader ecosystem. Look, I need help, Andrew. Okay. I feel like what I'm saying, not just by you, but by everyone who wants more action, is completely not being heard.

So I'm going to take responsibility. I have a communications problem. No, I'm dead serious. I feel like I'm honestly, I'm honestly kind of at my wits end. Like my contention is if you're controlling, if you control supply and you control distribution, you can abuse your control of distribution to lock people into your supply. Right. That's what the railroads did. That's what the steel industry did. All the sorts of things that gave rise to antitrust. And the solution there, and that's how you can measure it based on price changes to consumers and inventory levels and all these sorts of things that are like the foundation of antitrust, all these nuts and bolts that go to these quantitative analysis. And so antitrust laws are meant to measure and address that control. And my whole thing is, if that's, That's not how these companies are winning.

If actually anyone can get access to customers, but customers keep choosing to go there, the impetus, and I agree with the impetus, that we have a power problem. We have five companies that control so much. And just as like an American, as a believer in individual freedom and entrepreneurship and all these sorts of things. We're naturally skeptical of centralized power in this country. This is why I get so confused because your, your response. is the problem is we have power. And so my feeling is, then we need to actually craft an approach that understands how

that power accrued, because if you don't understand how the power accrued, you're not going to be successful. And so my whole argument is just grabbing at available weapons because they're there, like antitrust law, is at best not going to work. And at worst is going to make the problem worse because you're actually feeding the cycle, right? Because like your limitations on sort of supply or whatever it might be. And I just confused because if the response, I'm actually, I'm not trying to play a bit here. I'm honestly.

It's genuine confusion on your side of line. Because we talk offline and we're like, man, that got really combative. And I take responsibility for that. But I honestly don't get it. Like why is it not an ex. Why do people? And I'm just just lump you in with everyone like the Wina Khanites, right? Like we have a running joke about it.

But like, why does your side always get so mad at me for saying you don't, I mean, you're on the back on calling them stupid, but you don't understand all the market works and your approaches are not going to work. That's my whole thing. And it's interpreted as you're a big tech lover. You're a big tech defender. You just don't want good regulation. And there's too much power.

And I'm like, no, I agree there's too much power. That's precisely why you have to, number one, understand that power. And then number two, craft approaches that actually understand why these companies are popular and powerful. Only then can you actually limit the power. That makes sense. And I'm not getting mad at you as I look at you on the other end of the line here. I'll be the avatar. I feel bad for you.

You're the, like, no, but if I were the avatar, what I would say is, Ben, you just lectured us about not writing any laws, but there were laws written that drafted on the work of none other than Lena Khan at the House Antitrust Subcommittee. And they weren't passed. They weren't taken up by the majority. And so there are other avenues being pursued here. And my point is those avenues don't exist. Antitrust law is not going to fix these problems. And so you may be right. You may be right.

Why isn't the answer to work hard? Go next session. That was back in 2001, right? And by the way, I went in and I analyzed the laws and I gave my feedback and I think they should be XYZ. Like from my position, I engaged with the process and then you come back. Where was the law this session? Right?

Totally. And then maybe it didn't pass. Then next session and you work on it again and you iterate and you look at Europe, you look at the DMA, look at the mess that is there and realize actually, no, it has to be very clear. simple. You look at the fact, like, take the DMA as an example. Apple, we've known, we've known that Apple is going to just charge 27% if you make them do an alter purchase and say that's, that's the IP rights, right? The DMA, they didn't incorporate that. Yeah. No, I, I hear you,

but also as I play Avatar here, the history of antitrust law has been that this is almost always evolved at the agency level and in courts. And so I think the law exists, the body of antitrust law exists to protect competition and it is shape shifted over time. And so the fact that consumer demand is what these companies derive power from and satisfying consumers and not harming consumers, I don't know that that's going to be dispositive over the long term in terms of how a lot of this plays out as courts look at the practical realities of the marketplace and look at what some of these companies do to other businesses that are trying to exist, whether it's Amazon squeezing the profit margin out of third-party merchants on there or Apple squeezing developers or whatever it may

be. I think courts are smart enough to evolve the standards over time. So it's not a hopeless pursuit in court, even if it would be much cleaner long term to update the Sherman Antitrust Act with some provisions that account for how the internet works. Yeah, I mean, so good. Now we've gotten to a point of disagreement. I think it is hopeless because the antitrust laws are not remotely applicable to most. No, I think they are applicable to platforms because platforms entail you do have control over supply. You have control over distribution.

It's in many respects a textbook example, right? And so I'm actually complete with you when it comes to platforms. For aggregators, none of that exists. You're forced to make up stories about how these companies accrued power. And I just don't think they're even remotely, there's no, even if you want to have the most activist judge in the world completely twist these laws. It's just not going to make a remote an iota of common sense. It's going to entail lying about it. And so aggregators, to my mind, there's zero case.

there platforms. I do think there's a case. Just to be clear. And I think that, again, like, I just wish the personal tax from a lot of these people on the side would, Intel actually reading this where everything I've sent this podcast, by the way, including all my proposals, I have laid all these out. And I've laid them out for years. Yeah. Well, we shall see. Should we close with the Tim Cook question or the Boeing take? Yeah, let's do it. Let's hit it. Let's hit it. Oh, I do have a Boeing thing. Whatever. We'll do both. I'm on a roll. So, Jose says, A quote from the last episode made me think of the discussion of whether Sundar Pachai was a good wartime CEO for Alphabet. When would it be time to ask the same question of Tim Cook?

Cook's biggest strength is that he's a maximizer. And it's obvious that he has maximized everything about Apple's operational efficiency. That's great for a growing challenger, but it might not be the right style for an incumbent with increasing scrutiny. Ben, do you have thoughts on that take? I mean, it's hard to criticize Tim Cook's political capabilities, given the way he's managed China and the U.S. A legend in two games, man. Yeah, I mean, he could simultaneously be like, like last week he was in China when this case dropped. Yeah.

announcing more R&D and we're going to do XYZ and Chinese AI. Bo Jackson of the CEO game. Well, simultaneously kissing up to Trump sufficiently enough that somehow all Apple products were excluded from the Trump tariffs, right? Yeah. So look, he's already. That's on the Hall of Fame resume for sure. Suddhar Pachai, also, to be fair, somehow Facebook and Twitter get all the arrows from both sides when Google is arguably like the word. Like up until Gemini, not like just skated.

Google skated. Yeah. I think, I don't know if I made this joke on here before, but it's, you know, it's offensive that Suddarpichai goes to Congress and Congressman can't pronounce his name. Actually feature not a bug from sort of the Google's perspective, right? Oh, who's this guy over here or whatever? Ignore him. right? Yeah. Zuckerberg rolls off the tongue, much to his detriment. I do think this antitrust case is a massive black mark on Tim Cook's resume. And because

what was, I think what happened, and I've talked about this a lot, Apple is so wrapped up in their, they've sort of come to believe at a deep level, developers owe us. And we've talked about, like, I think they had to make that legal case and there was cognitive dissonance with the, actually, we know developers are important. We have to say this. legally, that's an unfrable position. And over the last couple of years since the epic case, they've spun themselves into actually no, they do owe us. And the more criticism they get, the more righteous they get about that.

And also, they won the case. And the app store is legally defensible. But they've gotten so myopic, myopic, myopic, about this. I've always said myopic, yeah. Yeah, but they've gotten so myopic about this specific issue, they lost sight of the bigger picture. And the bigger picture is that our differentiation is integration. and integration is fundamentally iffy in an antitrust context.

And because of that, they, and I've been saying this for a decade, you're going to get in trouble. And the trouble isn't that they're going to say the app store is wrong, it's that people are going to start taking a deeper look at your business as a whole. And your business as a whole is harder to defend in an antitrust context than the app store is. And that's exactly what has happened. And that is like Tim Cook, you know, I was at Apple, Apple, you know, I was at Apple, University back in the day. And everyone talks about Steve Jobs, Apple University. No, Apple University was Tim Cook.

Like he drove the program. It was his sort of views that infused it. And his big thing about what makes Apple Apple. And what makes Apple Apple Apple is integration. And Tim Cook has made what makes Apple Apple Apple has put it in the firing line because of the stupid app store. That's a massive flaw. That's a massive mistake, an astronomical mistake.

And I do think this bit about Tim Cook being an optimizer. I can't remember if I mentioned this podcast, but a friend of mine made the point that, you know, Apple runs the app store like they run their factories, right? It's just like there, I think there is a bit to that. Like developers, they treat developers like commodities because they, developers kind of are. And I'm sorry to my developer friends,

but particularly on the iPhone, that is kind of the case. Right. I mean, just like people making shows for Netflix are commoditized at this point. That's right. You can get away with that for a while. but you can't engender this much bad will

from people who are really smart and talk to a lot of people and can get the ear of folks that can make stuff happen without bad stuff happening to you. And it's just, Tim Cook's done a lot of good things, but to me, this is such a massive mistake.

And if something were to happen and Apple could no longer, even take this example, right? I think Apple being able to make the watch better than other people, maybe they don't like the AirPods better other people. From a business analyst perspective, that's a huge advantage for the company. It's a reason to be bullish about them. If they lose that, again, maybe appropriately so. But if they lose that,

that's a big mistake by their CEO. Yeah. So I do have one question about just the mechanics. So Apple is a public company. So as much as we put this on Tim Cook for refusing to budge on the app store business. I mean, Apple Services is an increasingly huge part of their business. I was looking it up over the weekend, like in Q1 of 2023, Apple Services on its own reported $203 billion in revenue, which was more revenue for that quarter than the entire company of Boeing, Nike, American Airlines, Intel, Coca-Cola, Netflix, McDonald's. Like, it's stupefying how much money they're making from that business. And so I'm just wondering whether that factors into the decision at all. Like they're basically handcuffed to their share price.

Oh, for sure. For sure. They can't move on this. The services narrative emerged in January 2016. The first quarter of the iPhone shrunk. And it was like, yeah, the iPhone's not going to grow forever. We need a new growth story. And that's absolutely 100% what happened.

This is why Gruber wrote about this, you know, like Phil Schiller proposed cutting the fees when they realize how much money they're going to make. And that was. the moment. They needed to do what was right before it became something they were addicted to. And it's absolutely the case. This is all downstream from the services narrative. The services narrative. That's our growth story. Once you have that, then you start making legal arguments just what you're doing. Once you make the legal arguments, you start believing it for your own to get rid of cognitiveness. You end up in this state. It's absolutely the case. Okay. All right.

Do you have a Boeing take on the way out here? Oh, right. Real quick, because I do got to run. Boeing fired all their, you know, senior or their chairman of the board, head of commercial division and their CEO. All right. Obviously necessary. Two big problems. Number one, like they promoted like their finance person or whatever. Like to me, focusing on finance not great. What I have the problem with, and this is the tech take, is the new chairman of the board that is going to sort of weed the search for the new CEO is Steve Malencom, the former CEO of Qualcomm. Steve Malenkov was a bad CEO. Qualcomm was the world, like they built chips. They obviously built all the wireless chips. They're still in the iPhone.

They lead the way there. They make a massive amount of money from their licensing division because they own all these patents, all the standards. And like there's been a huge patent lawsuits between Apple and Qualcomm and things like that. That's where they make most of their money. But they also have the product of Elton division where they make chips and things like that. Under Steve Malenkov, Qualcom had a large chip business. they built Snapdragon chips, their own chips. They also had a huge initiative to build arm chips for the server, which we see today

is definitely a huge sort of opportunity. He went in and killed that. He killed the division and said, we're just going to ship arm processors. Bog standard arm processors were insufficiently differentiated. It costs a lot of money. He is emblemizes everything that's wrong with Boeing. He's a bad CEO in tech. Why is he in charge of the plane?

He killed Qualcomm innovation to pursue licensing fees and increase the stock price, which was flat in the whole smartphone era. How are you flat in the whole smartphone era when you're in this business? The new CEO came in. He bought Nuvial, which is a bunch of Apple startups. So Qualcomm could get back into making chips. In the meantime, Samsung spends of Graviton, this huge project. All the cloud providers are building their own armed chips. Qualcomm was on the right track, and he didn't have the balls to stick with it and invest and pursue innovation.

He was a cost cutter and a profit maximizer that severely limited Qualcomm. It sounds like everyone was a bad CEO. And he sounds exactly like the worst part of Boeing. It disgusts me that he is in charge of finding the new CEO. Oh, well, you ruined the vibes with that final take. I was so happy thinking about the Wizards in downtown D.C. Boeing needs to hire Ted Leonces, perhaps. Who could say?

Boeing is to hire someone who actually wants to make good planes. Let's start there. I thought that was clear two months ago. So when I heard that they were shuffling executives out at the top, I was like, all right, that's finally a step in the right direction, some recognition of what's gone wrong. Now, as I said, very depressing. But always good to see you, Ben. And we will keep things rolling next week and send us email at sharptech. dot FM. Until then, I hope everyone has a great Easter. Charles has a birthday on Sunday.

It's going to be quite a scene of, but yes, I will talk to you next week. Sounds good. I'll talk to you later.