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Episode 138 October 9, 2018 | 31:57min

Kill ‘Em All: What’s Coming for Giant Platforms

We talk about geopolitics, divine intervention, and market disruption.

Show Notes

Never Going Away: It’s hard to guess how the reigning platforms of today be destroyed. Might it be government regulation? Another Great Depression? New competitors? This week, Paul Ford and Rich Ziade discuss the future of tech by looking to the past. We talk about where companies like Microsoft and Xerox went wrong — and what they did right — while trying to predict what will unseat the current champs.

Rich Ziade The year is 1989 . . . and the album lands pretty much like an atomic bomb on rock and roll.

Paul Ford Which album is that.

RZ Kill Em All.

PF Oh! [Snickers] By Metallica.

RZ By Metallica [rock and roll music fades in, plays alone for nine seconds, ramps down].

PF Here’s my big question for you: seems like Google, Facebook, Amazon, Twitter, all these—these are [music fades out]—we—we live in the shadow of these giants.

RZ They are big shadows aren’t they?

PF Yeah. And—and it’s—here’s the question: are they brontosauruses that could die? You know are they—are we the mammals runnin’ around?

RZ Kill them all.

PF Or [chuckles] are these the giant beasts that are—they are never gonna go away.

RZ [Sighs] Never say never.

PF Well I mean it’s also there’s a—there’s a kind of radical transformation, right? Like IBM used to . . . run the world at a certain degree and now it’s—

RZ Cuz they sold hardware.

PF But it’s an enormous company now. Still very successful in a weird way—

RZ They don’t sell hardware anymore.

PF No, not as successful as they used to be. Well, no they still sell hardware.

RZ [Crosstalk] Mostly sell—don’t sell hardware.

PF They don’t sell consumer hardware. They only—it’s mainframes.

RZ Yeah. But even that . . . is not their main business if I’m not mistaken.

PF Alright lemme—lemme just ask it straight up: Rich Ziade, how do we kill Google?

[1:19]

RZ By kill there’s a couple of approaches [mm hmm]. One is . . . shatter it . . . through regulation and government.

PF Ok so that’s one thing which is we’re gonna break this company up into component pieces . . . which is gonna be weird cuz it’s like 95 percent of it is advertising. So they’re really gonna be splitting up something that’s kind of got a monolithic revenue model.

RZ Yeah well there’s one way is to break up into pieces.

PF It’s tricky, right? Cuz it’s the search business.

RZ Yeah. I mean the other way is to heavily temper it’s—what it can do and where it could go so that other competitors can seep in. So [right] for example, the only Android operating system which . . . the Google button is pretty much right there in the middle—

PF Yeah you get right into Google services.

RZ You’re—you’re in Google, right? And they may say—and the government may say, “Ok, that’s anticompetitive. You’re not giving consumers choice and therefore you’re taking oxygen out of the competitive sphere.

PF Not unlike when the government sued Microsoft.

RZ Correct! Very similar.

PF You can’t—you can’t just put your browser everywhere cuz you’re cutting off oxygen for places like Netscape [that’s right]. Other people need to be able to live in there.

RZ That’s right. When you installed Windows, the Internet Explorer icon was on the desktop and people didn’t know that there was another browser [mm hmm] and you had to go and download Firefox or whatever and then the government swooped in and said, “You can’t do that. Put ‘em all on the desktop.” And I remember it was weird [it’s weird]—it’s like you had like it was a Firefox link but it wasn’t installed and you had to [laughing] go get it.

PF Product is really hard and then the government gets involved, right?

RZ Yes. Really messy! Really, really messy.

PF You don’t want surley product managers going, “Alright, just put it there anyway.”

RZ Yeah, exactly. It was not good but the—the—the spirit of it which, by the way, interestingly: Microsoft lost that battle—

PF Yeah.

[3:00]

RZ So I—the only way I can answer these kinds of questions is to run through history and see how like behemoths died.

PF Sure. We’ve also—they broke up the Bell System.

RZ Correct.

PF So you had one—which to me the Bell System feels more like Facebook than Google but uh eh there’s a little of that. Anyway, regardless, giant globe-spanning behemoths—

RZ I mean let’s go back to—to Google kicking into gear, right? Microsoft lost it’s shit. There’s like a [oh man] famous meeting when I forget who quit Microsoft to go to Google and [Steve Ballmer] Steve Ballmer threw chairs at him and whatever.

PF [With Rich] Threw chairs. Yeah. Through a chair. I think it was.

RZ Threw a chair. Not—not like a dining set?

PF No [laughs].

RZ Just the chair? One chair?

PF They probably actually had a supply of chairs—

RZ For Ballmer?

PF For him to throw.

RZ So—

PF Also the offices were big. I’m sure it was very like he’s like 20, 30 feet away. You think about that in New York City—

RZ You gotta give the guy space, also.

PF Yeah.

RZ Ballmer is not gonna have a little spot.

[3:48]

PF Ah there’s no cubicle [there’s not] like with Mike Bloomberg [Rich laughing]. It’s gonna be like [laughing] you’re gonna—[he needs room]. You’re gonna give him roughly a football field sized office [Rich laughs] just so you don’t—just so your eardrums don’t explode.

RZ So you could say—even though Microsoft’s still huge today, it lost the shine, right? Google showed up and everyone was talking about Google. I mean search became the world. The web [right] became the world. Google Docs freaked them out [yup]. All this stuff kicked in and all of a sudden Microsoft wasn’t the darling anymore, it was Google [mm hmm]. I mean Google was technology. Apple became hardware. Mobile took over. And Microsoft was kinda—it had its phone. It tried to catch up. It put billions into Bing. Which is still around [yeah] but it’s two percent of market share.

PF I mean let’s actually come back to them cuz how they die is really interesting cuz they used to own the market. They used to own how computers worked for the most part. You put Windows 95 [yeah! Absolutely]. They had a cultural power akin to Google. So—but wait. We could regulate Google and we could say, “You can only do these things.” We could split up Google. Or, also you just—like what could disrupt it? I think anything that would take away from their advertising business is very dangerous to them. Like [yes] Facebook was very dangerous to Google [yes]. It just turns out that the world was big enough for both of them.

RZ Correct.

PF But at one point [correct] they were like, “We need our own social network cuz we’re gonna lose all that advertising revenue to Facebook.”

RZ Correct. I mean you can’t go head on, right? I mean that—that we know.

PF No one will fund a . . . no one [search engine] will fund a company that is gonna go head on with Google [no], except as a kind of quixotic experiment.

RZ Or Facebook frankly [right]. So let’s go—let’s go—let’s read some more obituaries.

PF Ok. So—

RZ That’s always helpful.

PF Ok.

RZ Kodak.

PF Oof! Digital photography killed Kodak. That’s my thesis. I mean I’m sure there’s some contrarians—

[5:33]

RZ [Crosstalk] Technical advancement. Technology showed up and just eliminated the need.

PF Couldn’t keep up. You know—

RZ I mean the core business, right? So, what happened? Kodak I think is still around, kind of.

PF You know there’s just hindsight is 20/20 thing where you look—you’re like, “How could you not have seen the tidal wave coming?” And you’re like, “I was—you know everybody was in the beach shack havin’ a good time.”

RZ And—yeah. Exactly. Exactly.

PF They’re like, “I have a country club membership.”

RZ That’s how it goes usually [yeah]. So is there some advancement that just renders the idea of search—

PF Well the thing people talk about a lot is—

RZ—archaic.

PF—anything decentralized, right? So if suddenly there was—the thing that Go—the thing that’s tricky with Google is it’s very good at search as a process. Like it’s thought a lot about it. It owns the category. To the point that we say, “I’m going to Google that.” And when you put words in, it does an enormous number of things to those words as sets of tokens to turn them into meaningful search results.

RZ It’s not just searching web pages.

PF That’s right [anymore], there is—

RZ There’s a lot happening.

PF You’re basically using a search focused operating system [mm hmm] when you type words in, you don’t see the computer in front of you cuz there’s tens of thousands of computers but you are burning like, you know, you’re turning a lot of light switches on and off.

[6:43]

RZ So how do you kill it? Forget regulation. That’s too easy.

PF This is what—So you could create a superior search product that was decentralized so that all the different—everybody sort of like—like the early web. I mean I’m like, “Bah bah blah blah blah!” I mean it is hard.

RZ It’s hard.

PF And we’re 20 years in. So I don’t even—it’s hard to even see a path [yeah]. You know?

RZ How could you not . . . take pictures and develop film? Who the hell’s gonna stop that company that has a monopoly on film processing and taking—and cameras?

PF Ok so here’s really good contextual information which—you know you can see Google’s tried to do this. Like with Google Glass [yeah]. They’re gonna look at the world around you and their gonna give you contextual search results [mm hmm]. Ok. So far they haven’t been able to unlock that.

RZ World around you—the—how do I eliminate the typing—like—

PF That’s right. Can I just—

RZ It’s elimination, right? How do I eliminate taking film, going to some film development place—

PF What we’re saying here is how do I get rid of the need to search in order to find information?

RZ How?

PF Wooo! Well, I mean, this is—this is—now we’re in that sort of metazone.

RZ Don’t go implants and shit on me.

PF No, but this is the thing right? Like 20 years from now they’ll be like, “God you can listen to these idiots on this podcast, they couldn’t see that Squirtle Blue was coming [Rich laughs],” and you know, it’s like, “It was right there in front of them! Squirtle Blue [right] was an amazing [right] product [right].”

RZ Yeah.

PF And so all the obvious answers—first of all: it’s almost definitely right in front of us, right? [Mm hmm] Like it’s—it’s a sweater that’s really smart [laughs] or something [right]. Something ridiculous. So what could—what do we use search for now today? Let’s get really abstract. Like what—I use to just—I know—I know where to go. I look for information. I look for, you know, a dentist.

[8:30]

RZ A restaurant.

PF Mm hmm. You know what could actually do this? So let’s—here’s a dystopian scenario that could make it really hard for Google. You have Fitbits and devices on your Apple Watch that help you know when to walk, right? [Mm hmm] And how many steps you take. And so like what if there came a path where it just became more attractive to kind of let the computer tell you things beforehand. Like Netflix is a good example here. Netflix isn’t really a huge curiosity rewarder.

RZ No.

PF And—and it’s actually kind of unsearchable except for like you go find shows that you’ve heard about [yeah] but you—the experience of going into Netflix and being like “cool documentary” you exhaust them very, very quickly.

RZ Yeah. Yeah, yeah, yeah. They try to create the appearance of like just tons and tons of wonderful things but you really—the list is pretty short.

PF It’s very short and so—

RZ Like that skit you know when you open the closet and all the boxes come down on your head?

PF That’s right.

RZ But they’re all empty boxes [laughs].

PF That is the Netflix user interface. And then they’re sort of like, “Oh you know we’ve—” So Netflix has gotten to a point where they basically anticipate what you wanna consume [yes], put it on that screen, they even customize what the covers of the little virtual video cases that they show there.

RZ Right.

PF And you just sort of relax and let Netflix have you.

RZ Yeah.

[9:47]

PF So there’s no search. Not really. Not like we think of Google. Like you don’t think like, “You know I’m really interested in World War II.”

RZ I mean that’s a disrupter. Let’s—I mean we’re on Netflix right now. Jump into Netflix for a second. I mean HBO and cable and—and premium cable dominated the world [that’s right], right? And you had Netflix that started as a business that sent DVDs around [yeah], they looked around and said, “Oh my god, people are startin’ to stream things on their computers.”

PF Yeah, “We thought we were Blockbuster by mail but what we need to be is upscale YouTube.”

RZ “We need to be streaming content.” At first. [Yeah] They didn’t wanna be YouTube at first. They were like, “I’ll go to Universal.”

PF No, but that’s what I mean: they’re sitting there watching people watch garbage.

RZ Watch garbage.

PF Like it’s, you know, a pigeon makes a cooing noise and that’s got a hundred million views. You’re Netflix, you’re like, “That’s actually our competition.”

RZ Yeah, “We can put in Fletch 2 [yeah laughs]. If they’re willing to watch a pigeon for like an hour—”

PF Imagine those early meetings, you’d go over and you’re like, “I’d like to talk [why not?] I’d like to talk to the president of Universal Studios.” And they’re like, “How about you talk to his nephew?”

RZ [Laughs boisterously] What’s that movie with that dead guy at the beach?

PF Oh. Weekend at Bernie’s.

RZ Yeah and I think there’s a two.

PF Oh there’s a two.

RZ Which the decomposition of a—of a dead body it’s not [it’s long laughs] factored in here.

PF No, I know.

RZ So credit to Netflix cuz they were really like, “Ok, we’re gonna get either eaten by the thing or we’re gonna become the thing.” And they became the thing. They decided [yeah] to be a streaming service and then after that they lost their shit and just said, “They won’t give us the good stuff!” [Well I think—] “We’ll make the stuff!”

[11:14]

PF They couldn’t control their destiny. They were on the hook and so they said, “Let’s take billions of dollars and make original content because that will hang out for years and years—”

RZ Mm hmm.

PF “And uh we’ll be able to—and it’ll—we’ll be able to go global on it.” Like they decided they would control their own destiny. But I think it’s really worth noting like here you have an experience that is roughly ad free, subscription based, very passive in terms of user experience, and they kind of feed you things along channels cuz they just—it’s not like the web where there are, you know, or Wikipedia where there’s millions of pages [yeah]. There are thousands of Netflix things [yeah] of—of sort of entities. There’s hundreds of—

RZ It just goes on and on.

PF Categories that matter.

RZ It doesn’t seem to st—I never hit like scroll to the top. Like you get to the bottom of the thing.

PF No, you just keep going.

RZ It just keeps going.

PF But there’s actually very little anybody wants to watch.

RZ You know the—that greens they put around the salad buffet you don’t eat?

PF Yeah! You know Pizza Hut was the world’s largest acquirer of kale because they used to use that in the Pizza Hut salad like the buffet.

RZ Nobody would eat the kale.

PF It was architectural.

RZ Right! Right.

PF Have you ever eaten kale? I mean it’s like you can use it to hold up the rest of your body.

[12:21]

RZ [Laughs] I’ve come around on kale.

PF Me too. Me too. [So—] My children are made of kale.

RZ But look, man. Credit to Netflix. They—

PF Well not just credit to Netflix, could Netflix ever kind of get so big—could that model get so big that it really threatens Google? Like Google I have to imagine that Google’s bread and butter—like true bread and butter if you think about it is like, “I wanna buy a house,” and the real estate firms will pay a hundred dollars a click . . .

RZ Right.

PF To get somebody to come to Century 21.

RZ It’s huge!

PF Or Remax or whatever.

RZ I mean there are people paying multiple dollars per click [that’s right] on Google. That’s Google’s wealth right there.

PF That’s right. So, you know, I mean if there was—if you could create situations—and we’re just talking about like what could destroy search business? If you could create the Netflix of Zillow [laughs], you know, I don’t even know how to explain it but like [yeah] but where I’m like I wanna watch—I wanna buy a house [yeah] and instead of searching for your zip code, you flip to the house app on your Apple TV and it just walks you through houses [yeah] one after the other and instead of search criteria—

RZ You’re not searching.

PF You start to count more and more on algorithms to kind of know where you’re at and—

RZ So you’re not searching. You’re eliminating search is what you’re—

PF That’s what you’re doing [right] and Google’s trying to do it in various different ways like they use Geo a lot and there’s Things Near You but—but they’re never—Google’s bad at creating experiences that aren’t purely about software and data.

RZ True.

[13:49]

PF And so if the appetite is for passive, lean-back experiences and—

RZ Which is real.

PF Yeah now that doesn’t destroy search. People still have to, you know, write things, do things, talk about things, find out about things but—but if like these major categories where they start to get lots of money—if people were sort of like, “No, you know, actually, there’s—there’s a tremendous desire for these lean-back style experiences.”

RZ I forgot where I had heard this but like Google lost it when they saw the Alexa sort of momentum kick in . . . they kinda lost their shit . . . because their biggest fear is, “Ok I don’t have to go the search box.”

PF Oh yeah!

RZ And I’m gonna be able to do it through some other way like talking or whatever [right] and you go to Amazon which, by the way, is willing to dump hardware on our heads every three months.

PF That’s the next one. We need to kill Amazon next.

RZ Yeah! That’s an interesting one, right? And—and they put this Alexa out where you can say, “Alexa, what’s the nearest Chinese food place?” [Yeah] Google freaked. And they—they said, “Oh my god. What is this?” Why is it in everyone’s houses and why aren’t people going to their computers and searching in the search box and all of a sudden they hit us with Google Home and their own moves around this stuff, right?

PF You know what’s tricky with this is these consumer categories are really attractive to people. People like Alexa and I think they like Google Home too, right?

RZ Yeah.

PF They like being able to talk to Siri and I like the voice interface—

RZ It’s pretty amazing.

PF—on my—my Pixel. But building those things at scale is not a startup level problem. It actually [no] does require sort of huge industrial giants to pull it off [that’s right] cuz the amount of machines you need like the deep learning is—is [yeha] fantastic and so it’s tricky because where, you know, we’re talking about this—they’re doing things that only at their scale can be done.

RZ So is this con Edison? Like is there no way out and now you just pay a fee? And it’s done.

[15:33]

PF Well, you know, and then so is it Microsoft? Is it IBM where you have this red hot moment where you’re able to just own a market and then things wind back.

RZ But your wealth is so big and your—like Microsoft, people don’t talk about them as much—

PF It still owns operating systems as far as most of the is—

RZ It’s still a beast. It still makes—

PF Most—most computers still run Windows, the only thing that really—where Microsoft got utterly destroyed is phones, right? So billions of devices show up with Apple operating systems on them, they still own desktop, and they still own just sort of the wider ecosystem of like business services and [yeah]—IBM still makes, you know, every now and then they’ll—they’ll do something where they’re like, “Hey, we uh archived a human genome from a cat or we’re simulating a mouse brain.” And you’re just like, “That’s cool. It’s good to hear from IBM.” Most of their money is—is like setting up big servers and maintaining them and writing software [right] for—I mean it’s just like—they’re just a—like a management [that’s their bread and butter] consulting firm [yeah]. And so like there is a afterlife but it’s probably—

RZ The dominance. The question is dominance, right? [Right] Like people say, “I got the latest Windows.” Nobody says it. The latest anything is gone. It’s all [no] driven by your browser and the cloud and all that.

PF There’s also the fact that Google made its—its bones kind of on the open web. Right? Like and there were lots of webpages and chaos and it brought order. But they—the openweb has been suffocated. People don’t contribute to it. There’s a lot of user generated content on Facebook, [no] there’s stuff on Twitter.

RZ There’s stuff getting pumped into Instagram and Twitter and that’s how content is being created.

PF I mean Google at some level I think for most [chuckles] people if you think about it on a day to day basis Google is an efficient interface to Wikipedia.

RZ Right.

[17:16]

PF And then that’s probably 60 percent of my general interest searching—

RZ Well you’re a smart guy who likes to learn about the world.

PF No, no, if it’s real estate or what movie is near me [yeah]. It’s very good at that. Like movies near me, Google’s really good [yeah]. [Music fades in] Like that kind of Geo stuff [yeah] where you used to have to call a service [music plays alone for six seconds, ramps down]. Hey, Rich!

RZ Yes, Paul [music fades out].

PF Postlight is a company that—

RZ Doesn’t wanna kill you.

PF That’s right. We’ll sit down with you and think about all the things that are coming competitively to eat up your world . . . and destroy your job and we’ll look at all those risks and then we’ll help you avoid them strategically. Like an adult.

RZ Yes we will.

PF And we’ll do that by helping you build things and make things. We’re not management consultants of the classic mould, we don’t sit there and write you a 7000 page PowerPoint so that you can feel good about yourself and no change happens. We will bring change to you.

RZ And make you feel good about yourself!

PF That’s true! You’ll feel really good. And you will have a digital product and platform that you didn’t have before at the end of your relationship with us.

RZ Great design and engineering!

PF Yeah we really—we wanna—we’re looking for some new clients. It’s time. There’s—

RZ We also love to talk to people so if—

PF Oh yeah that’s the thing.

RZ—you just wanna bounce an idea, hit us up at [email protected]

PF I think people sometimes worry like, “Do I need to get in there and like, you know, with my budget in hand and—” You know, we’re—we’re not anxious.

[18:35]

RZ No. We’ve had many conversations we didn’t make sense or it wasn’t the time yet but—

PF A lot of times we tell people, we’re just like, “We’re not gonna be the right fit.” We’re happy to have that conversation.

RZ Yes.

PF So let’s uh get in touch [music fades in] [email protected] We are here for you [music plays alone for five seconds].

RZ Alright, let’s play a game.

PF Ok.

RZ I throw a big technology company name [music fades out], you kill it in one sentence.

PF Ok!

RZ Ebay.

PF Cryptocurrency actually works out. Distributed sales and trust actually works out and people just enter into a peer to peer seller market.

RZ No posting.

PF No posting.

RZ Ok.

PF Twitter.

RZ When you tweet, the tweet goes out only to the first ten people that are closest to you . . . ok?

PF Oh because of regulation.

RZ Yeah.

PF Ok.

RZ Uh you’re just talking to your friends.

PF Ok.

[19:30]

RZ And it has to graduate little by little into let’s call it a broadcast status. You can’t blast to the world anymore, you have to talk to your circles and those circles can then talk to their circles and if it continues to propagate out, congratulations.

PF I mean I feel that Twitter has the ingredients of its own self destruction in like 50 different ways. Like Twitter is one where, you know, when they write the history of it, they’re gonna go, “It was pretty clear that this was going to happen.” [Rich laughs] Like there were a lot of warnings.

RZ Yeah.

PF Yeah.

RZ Dropbox.

PF Dropbox a couple different ways but at some level it’s too visible like it just gets built into the operating system.

RZ Great answer because I think that’s—iCloud is that plan, right?

PF Well frankly that’s what Dropbox was disrupting. It was disrupting all these complicated storage services. It—it—it acted like a spare hard drive. It acted like a folder.

RZ Right.

PF Right?

RZ And—it was really beautifully executed and people bought into it—

PF It’s—it’s just sort of built into the OS and you never even bother and you have a 200 megabyte local hard drive and a, you know, [yeah] 200 terabyte cloud hard drive. The other thing that could kill it is that the files and folders are increasingly out of fashion with mobile and so that, you know, what you end up with is like sort of databases of things that happened when you were using an app.

RZ Right.

[20:55]

PF And that’s not—that’s a different storage profile. It’s pretty technical but like that’s a different way of seeing the world and—

RZ Yeah, the metaphor is dying, right?

PF Yeah so Dropbox is deeply organized around the metaphor files and folders.

RZ Correct. True.

PF And if that—if that drifts away because suddenly, you know, we’re in this world of social interactions and feeds and we’re no longer making Word Docs [yeah], you know, or they’re all up in Google Cloud then it’s a less and less relevant product.

RZ Right.

PF Let’s go for big. I got—well let’s both do this one: Facebook.

RZ Ooh. Facebook’s promise is better executed elsewhere: friends and family.

PF Yeah.

RZ Essentially everything else is violation of the terms of service [yeah]. It’s friends and family. As a band, go to Bandcamp or wherever else [right]. You can’t do it here. It is friends and family. And if you happen to have a lot of acquaintances, good for you. And it is kept at that and I think there would be enormous appeal around that, especially . . . I think everybody’s exhausted at this point.

PF This is one—I—I talk about this a lot but it’s just sort of like . . . one of the few cases where I think the internet of things and sort of little tiny things is relevant in that . . . it’s almost like there’s a hardware based disruption that could happen here where—

RZ Explain.

PF Well, let’s say I get a little sheet of USB keys. Like that I snap off and I give one to you and you plug it into your computer and suddenly you’re on PaulNet. And you give—you have RichNet. And we sort of like just kind of all have our little secure VPNish like share file—what—what Facebook—

RZ You’re protecting the relationship.

PF It’s not just that. Facebook makes piracy impossible. And piracy is the key to digital friendships.

[22:40]

RZ Explain.

PF Sharing files, you and me, like not that we would ever do this now ever but like coming up you would find something interesting and you’d share it out. And what I would love to do if I was—if I was 22, I’m gonna give my closest friends access to my Spotify account. If I really want them to hear something, I’m gonna say, “Just login as me and listen.” And then Spotify’s like, “Nah! That’s too much,” you know like there was a lot of file trading among friends . . . and now we have—

RZ Yeah, it was a weird thing, right? I mean—

PF No but that’s the thing it’s like I can’t give you my cool digital stuff on Facebook. I can tell you—I can send you a picture and I can show you how and I can click some buttons and I can write some words and I can promote myself or have an event but that’s actually—what friendships are is like, “Check out this cool song.” [Yeah] “Lemme see that picture of you today. How you lookin’?”:

RZ Yeah and I think you got a real business even around that.

PF Yeah. Facebook I think sees itself as a governance mechanism—

RZ Well now it—it backed into that [yeah]. That’s done. It’s a done deal at this point.

PF I think it has a fantasy that it is the future of government. That’s actually not what—people didn’t want another government [snickers].

RZ No.

PF They [exactly]—there was very little demand for that from our digital world.

RZ Last one: Apple.

PF Oh I have a very specific thesis on Apple. I’m curious to know what you think. As you see with Android, the operating system gets more and more commotized every year and the devices get smaller and smaller—

RZ Or bigger and bigger, depending on what you’re into.

[24:07]

PF Yeah, exactly! It could be TVs, could be watches, right? There is a point at which it’s almost disposable where the—where the hardware gets cheap and the software is essentially free—it was been for a long time, right? So [yeah] Apple by focusing on brand, quality of product, Jony Ive coming out and saying, “Aluminium.” You know over and over again [Rich snickers], reading off the periodic table of the elements has been able to keep this enormous elevated sense of quality around their products—

RZ The physical thing.

PF That’s right. And you buy into an ecosystem there and you’re like, you know, you buy a watch and you buy a phone and, you know, there’s—they’re very good at getting you to spend thousands of dollars on Apple products. I’ve done it.

RZ It’s—I mean it’s the 800 dollar Hermes scarf.

PF Honestly it’s the Target scarf but it feels good.

RZ Yes.

PF And it works well and it’s large and it’s commoditized and you get your email and—and everything’s pretty good, right? But I think that there’s just enormous downward pressure on the, you know, at a certain point—and you saw this with Android, like my Pixel 2 is as good as my iPhone and that didn’t used to be the case [yeah]. And it just is like you can’t—

RZ The camera is I mean worth noting [yeah]. I mean I think Apple has something like 800 people working on the camera [that’s right] and the Pixel 2 camera outshines the Apple camera [I dunno—] I saw the side by sides—

PF But now there’s like a new—

RZ It’s still better.

PF I love my—

RZ They’ve—they’ve really killed it with the camera.

PF Look it’s been wonderful for taking pictures of my kids. I’m—I’m sure Google literally knows everything bad about me and will sell it to health insurance but I don’t care [Rich laughs]. Um [chuckles] my son got a hair—

RZ My old rationale with that shit is I’m not that interesting.

[25:44]

PF I’m not. My son got a haircut and it looks great and the picture’s beautiful and so like those little—we’re talking the little—about very little differences.

RZ You’re saying that hardware that they sell for 12 hundred bucks it’s just gonna be everywhere and not that interesting and not that differentiating, that’s how they die?

PF So Apple gets in trouble because if it can’t differentiate its brands and it can’t insist that the overall cost of ownership is worth it.

RZ I mean where are we? We went from one to three to four to five, six, seven, eight, nine, ten and now we’re at ten plus or ten SE or whatever it is?

PF And let’s also now—let’s be clear: we got a competitive moat here that carefully maintains could give them 50 years of runway.

RZ For sure. But you know look, man, after seven, which was four years ago.

PF iPhone7 sure.

RZ Jobs would’ve stopped if—you know may he rest in peace. If he was around, he’d be like, “We’re dying.”

PF Yeah, yeah, yeah! [Chuckles]

RZ He would’ve been like, “What? Seven?!”

PF “You’re gonna give me another number?”

RZ “You’re gonna give me a num [yeah]—that’s it? [Yeah] We’re not doing that. I’m not going out there. I’m not doing it. If this is all you came up with [that’s right], Jony Ive would be dead.”

PF “No, give me something without a screen.”

RZ “Give me something without—something, right?” He would press that. But what you have is, you know, a true operator heading up. It’s just the culture left with him [oh yeah], right? And so—

PF This is a giant spreadsheet—Apple now.

RZ It’s a giant spreadsheet. So there is something in that lab, dude, that like touches your back [laughs].

[27:05]

PF Yeah this is the thing [Rich laughing There is something]—can—what we’re gonna find—and it’s entirely possible that the history of Apple—

RZ You’re wearing it around your neck.

PF Think about 50 years from now when they write that history and they’re gonna say, “Apple had it. They had it in the lab but, you know, this little tiny upstart company in Topeka, Kansas—”

RZ Snuck in there.

PF Yeah, cuz it turns out that what people wanted to do was whistle at their computers [Rich laughs] and Apple—Apple had whistle, you know, whistle kit. You know it’s—this is the world we’re in now cuz it’s like—

RZ That’s how it always happens, right?

PF It sounds so silly, right? And it’s just like, oh you know, “What people just wanted was one Bluetooth earphone that you talk to and talk back to you.”

RZ Yeah.

PF You know and it—

RZ Disposability is important too. Like Apple’s ability to treat that piece of hardware as all of a sudden ugly and outdated [yeah] and you need to get—

PF You spent 800 dollars on this a year ago.

RZ Cough drops.

PF Yeah.

RZ They make cough drops that when they’re in your mouth whisper to you, are amazing, and they dissolve and die and you have to buy more cough drops. Let’s condense disposability into like a box of 12.

PF No, that’s right I mean your computer is going to be disposable and cost a dollar, right? So what does that mean? For [stammers]—that is the overall trend. Now Moore’s law is kind of ending, we’re not gonna get like infinitely tiny, infinitely fast computers [no] because of physics, right?

[28:24]

RZ Power and—

PF But—but they’re getting cheaper, we’re getting smarter about batteries. There’s a lot of—there’s a lot to go. So this is the thing: it’s fun to make the predictions about the specific aspects but just history shows that Apple will die. It won’t die, it’ll just implode. It’ll—it’ll just kind of become a—

RZ Well it’ll be a thing.

PF It’ll be—yeah—

RZ Another thing.

PF Like IBM or—

RZ And do other stuff.

PF Microsoft’s in this process.

RZ IBM did very well. Xerox did not. Xerox isn’t a beautiful turnaround story or like pivot story—

PF Well this is—you get to a certain scale, you can’t turn Apple around.

RZ You get to a certain scale.

PF Apple can’t be—[I think that’s right]. Apple can be like broken up, it can change its—you can’t change its direction [yeah], you can reorganize it.

RZ They’re also incredibly stubborn about acquisitions [yeah]. They don’t acquire anything.

PF Well that would change, right? That would be the person after Tim Cook. They would get the CEO who’s like coming from the company they acquire or, you know, it’ll be—

RZ Look the cable companies . . . started to see the content was seeping out, right? [Yeah] And they freaked. Because they’re like, “Shit, you don’t need the cable box.” Right? The cord cutters—but even before that they kinda picked it up. And Comcast, one of the biggest cable providers in the country are like, “Ok, so if the content’s leaking out, we need to go get the content.”

PF That’s right.

[29:38]

RZ So they bought NBC Universal [yup]. Right? Because they wanted to have that tie in so that there’s still some control of some sort on access to that content. For Apple, they’re just now, they’re hiring a lot of writers [yeah], they’re just now—they have TV shows that are gonna start to come out [right] apparently. But—

PF Didn’t they do that one? They did like some—

RZ They did one. It was awful. It was app pitches.

PF Oh app pitches. Ah that’s a nightmare [yes, yes, yes]. Ah that’s the worst thing. Look: they all die. These entities don’t survive forever and they definitely become shadows of their former selves. Nothing remains on top forever.

RZ Which is what makes life interesting.

PF Oh my god! No, I mean, in our lifetime we will see a radically—Apple will not—Apple will outlive you and me. Most likely. It’s so big.

RZ Oh for sure.

PF It would take an unbelievable tectonic shift for it to just kind of disappear.

RZ Yes. They don’t die, they kind of age. You know it’s like, “I’m different now. I’m 40.” [Snickers]

PF Yeah, that’s right.

RZ I think it’s more like that [laughing].

PF “Still swingin’! Still out here!”

RZ I think that’s what happens. It just becomes the less sex—Microsoft—Microsoft is like 52 and it still does a lot of pull ups.

PF Yeah that’s right. Oh it’s in great shape.

RZ It’s in great shape! It’s in great shape. It’s doing great. Right.

[30:50]

PF It has 36 legs [laughing] which is weird. Um—

RZ We tried to kill ‘em, Paul. I don’t know if we were able to do it.

PF Well this is what’s hard, right? We are in a world in which they have the power and so it’s very hard to conceive of how they will be destroyed.

RZ It’s—it’s a surprise attack—

PF And I think that—

RZ—which is what makes it interesting.

PF I mean the great hovering thing would be a true either—So I think there’s two major external factors that would kind of black swan the whole thing up, right? [Music fades one] One would be: a very different government approach around regulation where there was just like a FDR level of, you know, we have to break these up, they are destroying our society. And then the other thing I think would be a true like a depression. Right? Like if there was a real economic change [yeah] and people just weren’t about to ever buy Apple products or—

RZ Yeah, that’s just intervention, right?

PF Yeah, there’s no money for advertising for Google and so they find themselves in the same boat that like publishers find themselves in today.

RZ Right. So, on that note, Paul.

PF Alright, let’s get outta here! [Music ramps up, plays alone for six seconds, fades out to end]