Iowa caucus app issues, Panos Panay takes over both Microsoft’s hardware and software, and Google reveals Q4 earnings

Stories discussed this week; Election tech was supposed to clean up the Iowa caucus … Iowa's caucus fracas shows we're still too ignorant about how … America is bad at voting (it isn’t just Iowa) US attorney general says tech and telecom industries should invest in Huawei competitors Donald Trump ‘apoplectic’ in call with Boris Johnson over Huawei US pushing tech and telecom industries to build 5G alternative to Huawei Microsoft’s Windows future is now tied to hardware Microsoft's Surface chief now leads Windows and hardware ... YouTube is a $15 billion-a-year business, Google reveals for … Creators finally know how much money YouTube makes, and ... Google now has a 'multibillion-dollar' hardware business Google opens its latest Google Glass AR headset for direct purchase The Super Bowl is streaming in 4K HDR for the first time ... Roku and Fox strike a last-minute deal to keep Super Bowl ... Apple might be releasing a new Apple TV soon Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Nilay Patel?

  This week on the Vergecast, we talk about the app issues in the Iowa caucus. We talk about whether or not the United States government should buy Nokia. That's a real thing. We get into Panos Penne taking over both Windows hardware and software. A little bit about Google earnings and then I'm just be honest with you. It gets wild when we talk about the Apple TV. That's coming up in the Vergecast now.

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• 0:43Speaker 02

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• 1:16Nilay Patel?

  Hello and welcome to Vergecast, the flagship podcast of the 5G revolution. Race. If, if we were good at sponsors, someone would buy that. Hmm. But we're not, so no one, and I would, I would reject it anyway because of integrity. That's right. I'm your friend, Neil I. Paul Miller, you're in New York. Hello. How's it going? It's good to be here. You're, you live here now. Some, some upset.

• 1:41Nilay Patel?

  Literally packed a bag and just moved to New York again. That's apparently that's all it takes. Dieter Bohn is here. I'm not in New York, though. That's true. Look, all it takes apparently is just a bag and a dream. It's so easy. Yeah, that's, it's all it takes. I'll, I'll tell my wife.

• 1:57Nilay Patel?

  That's the real problem. Anyway, it's a, it's a busy week. There's actually a lot going on this week. Paul, you just said to us that you think that you can explain Iowa, which is a broad generalization.

• 2:07Speaker 03

  Yes.

• 2:08Nilay Patel?

  I don't know if that's entirely possible, but there was a caucus, a democratic primary event. It went sideways. The way I would put this is it went from, oh no, don't let it be the app. To, oh boy, it's the app. To, to actually.

• 2:28Speaker 03

  Pure chaos. To, I don't know if it's the app anymore.

• 2:31Nilay Patel?

  Yeah.

• 2:31Speaker 03

  So.

• 2:31Nilay Patel?

  All right, go ahead.

• 2:32Speaker 03

  Problem, problem negative one, right? Set the scene. Tried to do a poll, failed at doing the poll. So we had no poll going into the primary, right? But that's, that's unrelated. Problem, problem zero. I would say this definitely starts, starts the issues. They picked a company named Shadow Incorporated to make an app that the.

• 2:54Nilay Patel?

  This is the Iowa Democratic Party.

• 2:56Speaker 03

  Correct. Yes.

• 2:57Nilay Patel?

  Yes.

• 2:57Speaker 03

  And apparently some other state Democrat parties had also were working, like Nevada announced that they were working with Shadow Incorporated. But now they're, they have cut ties. So, so not just Iowa was doing this, but they picked this company to make an app. And so you, you know, you go to the poll site, you caucus with people, whatever that, if that's a verb or noun, who knows? And, and then the, the local temporary leader type people would report the results of the caucusing to the central Democratic Party of Iowa through this app. So problem one with the app, it was hard to download the app because it wasn't on the app stores.

• 3:39Nilay Patel?

  Yes.

• 3:39Speaker 03

  And like I, you know, I've worked with my parents. Every time I try to help them on their phone, they don't even remember their Apple ID password. Right?

• 3:47Nilay Patel?

  Yeah.

• 3:47Speaker 03

  So it's hard to get an app downloaded from a real app store. But here they had to use like test fair. So you'd have to download an app for beta testing applications. Then you'd have to download the app, the actual Iowa result app.

• 4:02Nilay Patel?

  And in some cases, like on Android, often when you use even those test things, there's like a scary warning thing that pops up saying, are you sure you want to do this? Unsafe, you know, sources, blah, blah, blah, blah.

• 4:12Speaker 03

  And apparently, a lot of people had trouble getting the app. Then, problem two, a lot of people had trouble logging into the app because there's the PIN code, a precinct number, and then a 2FA code or something like that. And they're all the same number of digits. So that was an issue as well. So even if all that worked out, the app was misformatting data when it would upload it. So but apparently, Shadow Incorporated says they fixed it, whatever. I don't, it's really hard to tell. Obviously, there's a lot of chaos around this. But they were having trouble actually uploading the correct data. But after that, that's when I don't know what's going on anymore. Because the fallback is you just call in and say, here's the problem. And then you just report the results.

• 4:56Nilay Patel?

  Yeah.

• 4:57Speaker 03

  So that's where now you can just venture into all sorts of conspiracy theories. Because the fact that the app didn't work is one thing, but the fact that we still don't know the results in Iowa now?

• 5:09Nilay Patel?

  Yeah.

• 5:10Speaker 03

  When theoretically, people could just call them in and tell them and they could be tallied.

• 5:14Nilay Patel?

  There are two things. One, one piece of information broke today. NBC News reported that the phone number to call in was Google-able. So it wound up on 4chan. And the 4chan boards decided to clog the line.

• 5:29Speaker 03

  Okay.

• 5:29Nilay Patel?

  So that was just created, it just created a delay. Then there were probably some even, I mean, 4chan is already a malevolent force, but then there's like the actual malevolent disinformation forces also got hold of the number. So that's all bad. I think the bigger story here is you described the app. The app is like, that's like the Verge Zone. Dieter, you wrote a column this week that I think just laid it out. Like, we know how computers work. It's like, we had the same conversation about like Sonos and the speakers and the, right, and the software not supporting. It's like, are we still, are we just gonna just routinely be surprised that computers are computers? Like, that you, because you see, you see exactly what happened here. You hire this company, Shadow.

• 6:12Nilay Patel?

  And they say, we've got this app. The app is supposed to make it easier to do a pretty basic thing.

• 6:19Speaker 03

  Yeah.

• 6:20Nilay Patel?

  Type in the first set of numbers, then they realign themselves.

• 6:25Speaker 03

  Right, because there's some calculation that happens.

• 6:27Nilay Patel?

  Right, so you type in the first set of numbers, who everybody in your little local caucus is gonna support. And then you type in, like, after some candidates are deemed not viable, you type in the second set of numbers, that was realignment, and then you type in, like, the delegate, like, does that. This is what computers are for.

• 6:45Speaker 03

  To be clear, as far as I understand, everybody's reported that the apps did the math perfectly.

• 6:51Nilay Patel?

  Yeah, sure, right, because they're

• 6:52Speaker 03

  The thing that's hard is distributed systems.

• 6:55Nilay Patel?

  Right, so like, you see exactly what happened here, like, okay, we're gonna do some math. Computers, great at math. So now, we're gonna make a bunch of promises based on the idea that people will have access to the app, and will do the math perfectly. Yeah, how fast we'll be able to distribute the answers, how secure they'll be, blah, blah, blah. And they staff down their phone banks, and they didn't build a backup system in case their ridiculous plan to distribute an app to 1,600 volunteers in TestFlight went sideways. Which, if you know anything, if you're like, I'm gonna distribute my app via TestFlight, the first thing you should think is, this will go sideways.

• 7:35Speaker 03

  To be clear, it's not necessarily TestFlight, there's also TestFerry.

• 7:39Nilay Patel?

  It was TestFerry on Android and TestFlight on iOS, yeah.

• 7:42Speaker 04

  How many hundreds of millions of dollars were spent in Iowa for this, this thing, this primary? Many, many tens of millions, right?

• 7:49Nilay Patel?

  From the campaigns and the advertising.

• 7:51Speaker 04

  From the campaigns.

• 7:52Nilay Patel?

  And Mike Bloomberg just dropped $22 million in Iowa today, just for fun. No, I don't know if that's true, that's just the sort of thing he does.

• 7:57Speaker 04

  How much would it have cost, do you think, to just buy, you know, 400 iPhone 6s?

• 8:05Speaker 04

  And just preload the app on it and hand them out.

• 8:07Nilay Patel?

  Hmm.

• 8:08Speaker 04

  Just drive them to every precinct and be like, this is your reporting phone.

• 8:11Nilay Patel?

  Yeah, we put it in like kiosk mode and just use this phone. Yeah, I mean, maybe. The thing that I see, and again, you know, this is like inherent in your column. If someone just described this to anyone.

• 8:22Speaker 04

  Yeah.

• 8:22Nilay Patel?

  There's like five places you're like, that will never work. It will just never work the way you want it to.

• 8:28Speaker 04

  The, the problem is when you hear us say test flight, it was installed by a test flight or test ferry. Uh, you, the Vergecast listener, like, oh, that seems bad. Um, but I, it seems pretty clear that a bunch of people are like, you know what? They're the technology people. I'm sure they've got a handle on it. And that they're the technology people. I'm sure they got a handle on it. That phrase or that thought had to have occurred at least a half a dozen times before the night of the primary, before the night of the caucus, right? There's the, the number of warning flags, uh, where somebody should have been like, eh, I don't know much about technology, but that seems bad, which is just massive.

• 9:07Nilay Patel?

  Yeah.

• 9:07Speaker 04

  So my, my whole point is there's, you know, there's a responsibility for regulation. Do we want to live in a world where you have to for, you know, if you want to make an app for election, it has to be approved by the central government, maybe, maybe not, I don't know. But I definitely want to live in a world where there's a basic fundamental level of tech literacy, where if someone says, hey, man, we're going to run the first election of the 2020, you know, presidential campaign and, uh, we, we hired this company and we paid him 60 grand to make an app and they're going to distribute by a test ferry.

• 9:37Nilay Patel?

  And no one can see it first.

• 9:38Speaker 04

  Yeah, no one can see it first and security through obscurity and, you know, all of these things that as a person that is conversant with technology, you listening to this show, probably know, like, wait a minute, this should stop, that more people need to be able to say, hang on. That's all.

• 9:54Nilay Patel?

  I mean, this is to me, the, we keep training people to not know how their phones work. In particular, their phones. Right? Like neither Apple nor Google really wants you to know how your phone works. They want you to do everything through their app store and they want to sell you that they've checked the apps and the cost of app developers being mad and whatever is all worth it because they're, they're doing it for you. And all you gotta do is like search for the thing you want in the store and download the app and everything will be fine. And you don't really need to know how anything in the background is working. Particularly with phones, I think this is the case. It is increasingly the case with laptops.

• 10:36Nilay Patel?

  I think you had another column, Dieter, this week where you're like, it was the same one where you're like, Microsoft calls laptops the intelligent edge.

• 10:42Speaker 03

  Yes, that's so annoying.

• 10:45Nilay Patel?

  That's, eh, that's not right. There was an insane bug with Windows this week.

• 10:51Speaker 03

  Yes.

• 10:51Nilay Patel?

  This week, where Bing went down and local search in Windows 10 just displayed a plain gray box.

• 10:59Speaker 03

  Yep, yeah.

• 11:00Nilay Patel?

  That's a, come on.

• 11:02Speaker 03

  Just to heighten everyone's fear and panic in this situation. So motherboard got a, got a hold of the APK, of the actual app, and is distributing it as some sort of, you know, like, we need to look what's going on here. And so had some experts look at it, and that one of these quotes is just amazing. The code looks like someone Googled things like how to add authentication to React native app, and followed the instructions. Now, that might sound scary to somebody, like, in my professional job, like, my job is, is I dig, dig with a shovel. I don't have to Google it every time I dig with a shovel.

• 11:42Speaker 03

  But, but, most of technology is built by people who Googled it and followed the instructions. This is most of our technology. This is not a weird anomaly. Like, maybe that, that shows that this person is a bit of a beginner. But I don't know, I just, that really struck me because it was such a true statement.

• 12:02Nilay Patel?

  Yeah, I don't think you should hire a beginner to write your election app. I mean, this is like, it's not even a voting app. Like, it's, what's truly bizarre about this is, this is the best case scenario for let's drop technology onto an election. Right? In every one of these, like, little locations, there's someone in charge, there's a paper backup record. And all they need to do is transmit the results from here to there.

• 12:25Speaker 03

  And to be clear, this is an election run by a private organization that is not the government.

• 12:32Nilay Patel?

  Right, so Iowa Democratic Party is having its caucus, and this is its system.

• 12:36Speaker 03

  Right, this is not a vote for the president in the sense of a real election. This is a vote by an organization trying to determine who they will put forward for an election.

• 12:46Nilay Patel?

  Yeah, I mean, the the state governments manage the primary process in their states. So the Iowa Democratic Party is allowed to do this.

• 12:53Speaker 04

  Right.

• 12:54Nilay Patel?

  But like, yes, there's some government and it's still an election.

• 12:57Speaker 04

  Is it?

• 12:58Nilay Patel?

  Yes.

• 12:58Speaker 04

  I mean, I know it's an election, but.

• 13:00Nilay Patel?

  Yes, it is.

• 13:01Speaker 04

  It's different than an election, too, right?

• 13:03Nilay Patel?

  Well, no, it's I mean, it's small groups of people in high school gyms in Iowa moving around in circles. But yes, it's an election. Um, I mean, there's.

• 13:11Speaker 04

  It's an election, but also it involves Red Rover.

• 13:13Nilay Patel?

  It's a middle school dance that determines the president. I don't know how to make this clear for you. Right, but you're right. It's the Iowa Democratic Party is the one who's in charge, right? And they're making some decisions under some system that the Iowa state government has like put into place. Right? All of this is to say, they shouldn't have hired a beginner, even for this like best case scenario of all we really need you to do is write down how many people are in the groups the first time. Say that these groups aren't going to make it. Let them join new groups and then write down how many groups are, how many people are in the groups a second time? Then open this app, type in all the numbers and walk away. Like, it's not voting in that way. It's it's reporting.

• 13:55Nilay Patel?

  Then you you say, OK, we can't even accomplish this in the backup, which is just call us on the phone. We can't even manage that. We probably should never let anyone vote with their phone is like the next step of this. And I think that's the one where it's just deeply connected to. The dream is that it's election day and everyone picks up their phone and like checks a box for, checks a box for whoever they want to vote for. And they put their phone back down and then we all have results instantly. And it's just abundantly clear we are not ready for that in any way, shape or form.

• 14:27Speaker 04

  The thing that was rolling around in my head was results instantly. We have been trained to expect election results and to expect information instantly. You Google something, the information's there, you can get it. So the amount of consternation of not knowing what the results were is part of the problem. It would have been OK if they just say, yep, we're going to hold the election and we won't know the information for a couple of days. We have a technical problem, but like, it's not OK. But on the other hand, the level of freak out. Especially from cable news that were like completely outraged. It was pretty clear that part of their outrage was the fact that they didn't have anything to talk about and they were mad. They're like personally angry about that.

• 15:06Nilay Patel?

  Yeah.

• 15:06Speaker 04

  We have learned two bad lessons from technology that are like multiplying upon each other. One, that the technologists got it, apps are like easy to make and like we don't want to have to look behind the curtain to see how they work. And two, we should be able to get any piece of information the second we think we might want it. And if we, if it's not available to us, we need someone to yell at for that. Like those two things together added up to like this complete fiasco.

• 15:37Nilay Patel?

  Yeah. Watching cable news that night was very entertaining. They were just like.

• 15:41Speaker 04

  They're so mad. And so they were so irresponsible. They, it jumped immediately to all sorts of, not quite conspiracy theories, but like saying, well, people might say that there was a problem with the something, something. And it's just putting the idea in people's heads that maybe it was hacked when clearly everyone was saying it wasn't. As a news organization, not the right move.

• 16:03Nilay Patel?

  Yeah.

• 16:03Speaker 04

  For an election.

• 16:04Nilay Patel?

  I mean, it definitely, it definitely wasn't hacked because it didn't work.

• 16:10Nilay Patel?

  What was there to hack here, really? Okay. Well, that's Iowa. Maybe one day we'll find out who won the caucus in Iowa. There's another policy story that I want to talk about. It, it is just so close to my heart.

• 16:21Speaker 04

  Yeah.

• 16:21Nilay Patel?

  Because it's so, it's so dumb.

• 16:24Speaker 04

  Yeah.

• 16:25Nilay Patel?

  But you might've heard there's a, there's a race.

• 16:27Speaker 04

  Mm hmm.

• 16:28Nilay Patel?

  To G's.

• 16:29Speaker 04

  Yes. The fifth G.

• 16:31Nilay Patel?

  The fifth G is before us. We gotta get there fast. So Huawei is a company from China. The UK government just voted to allow Huawei to sell infrastructure to telecom vendors there.

• 16:45Speaker 04

  Up to 35%.

• 16:47Nilay Patel?

  Yeah. There's a report in the Financial Times that Trump called Boris Johnson and yelled at him about this, which is incredible. Uh, cause it was a vote. So he, even if Boris Johnson wanted it to be different, I'm not sure that he could do that. So Huawei's there. There's a notion that the Chinese government so thoroughly backs Huawei that no one can compete. So today, Bill Barr, the Attorney General of the United States, gave a speech and he suggested that the United States government just buy Nokia, or a controlling stake in Nokia, or Ericsson, or both.

• 17:16Speaker 03

  I haven't seen this controlling stake. I thought it was just invest in them.

• 17:20Nilay Patel?

  Uh, no, it says controlling stake. Uh, and either we would, the government would do it directly, or they would provide incentives for private equity groups. I'm not even done yet. It's, it's just gonna keep escalating with the dumbness. Or they would incentivize private equity groups to buy controlling stakes in Nokia, or Ericsson. And then, there's this competing plan from the Trump White House, which is you're gonna get all the vendors together, and they're gonna agree on like, an open standard situation, so that you could mix and match software and hardware more easily. And Bill Barr was like, no, that's dumb. It's unproven. It'll never work. We just need to own it. So there's like, literally an open, closed debate inside the government. And one answer is, what if America just buys Nokia? Which I love so much.

• 18:05Speaker 03

  Which sounds to me, you know what's wrong with Huawei? Is they're too influenced by their government.

• 18:10Nilay Patel?

  Yeah. And so our solution, from the Republicans, is what if the cops buy Nokia? Because Bill Barr is the head of law enforcement. Like, what if the cops just own Nokia?

• 18:24Speaker 04

  I mean, we have been asking the government to intervene and lay more fiber, you know?

• 18:28Speaker 03

  That's right. Isn't that what you want?

• 18:29Nilay Patel?

  And the end of the day, what did I really want? I wanted the cops to buy Nokia. What I think is that the best part about this is like, a large American company has, in our recent history, purchased Nokia. It didn't go well when Microsoft bought Nokia.

• 18:44Speaker 03

  They, they didn't buy the infrastructure part, right?

• 18:47Nilay Patel?

  Uh, they did buy the handset business. Steven Elop, our boy. So here, you send Elop back in.

• 18:52Speaker 03

  Yeah.

• 18:53Nilay Patel?

  What's he doing? Get him in there. Steven, go back to Finland.

• 18:58Speaker 03

  So, I've, I've always had a trouble with the Huawei story. It's like, is this industry special interests who want to be commissioned to build the infrastructure in the US, doing so good at lobbying? And this story, you know, doesn't clarify that at all.

• 19:14Nilay Patel?

  I mean, it's everything that I've ever wanted from a tech policy story. Like literally, the cops swan by Nokia. Like, what do you want me to say? I can't get enough of it. Uh, but a little more serious, like, there is this fear that small carriers and it says who want to compete. They're going to see 5G as a moment to enter. They're obviously going to want to reduce costs and Huawei will just sell them the cheapest stuff because it is heavily subsidized by the Chinese government. The Chinese government will insist on a backdoor. Now I have a backdoor to the US networks. Game, set, match, right? Like, that's the fear. That's the nightmare scenario.

• 19:43Speaker 03

  The thing that we know for sure is that Huawei's stuff is available and typically cheaper and often seems to be the best.

• 19:51Nilay Patel?

  I mean, I think there's a big conversation on what it means to be the best in this context, but yes, it is definitely available and cheaper.

• 19:56Speaker 03

  Right.

• 19:57Speaker 04

  And I do think that there are people that authentically have that fear, genuinely feel it, aren't just like, you know, pretending like they're afraid of security stuff because really they're just trying to make sure that they can, in a business sense, like, stick it to Huawei.

• 20:10Nilay Patel?

  So I think what is interesting here is that obviously Huawei makes 4G LTE equipment. And we have not heard this quite so loudly when it comes to the existing network build out. It's because we're about to build a next generation of networks. We'll move more things onto it, presumably, all the nonsense 5G stuff that we hear. That Huawei will become a dominant provider of this networking gear, drive the other companies out of business. And then we live in a world of Chinese infrastructure, which is funded for slash has a backdoor for the Chinese government. Okay. All that said, I don't know that the answer is, uh, we should buy Nokia. Like, it's, it's the jump from there to there that is like particularly bizarre to me.

• 20:54Nilay Patel?

  Because we've already said to our companies, American companies, we don't want you to buy this equipment. We already have plans. Uh, Jeffrey Starks was on the Verchass last year. Uh, we talked about rip and replace plans. So the vendors have already bought Huawei equipment. They will rip it out. They will replace all their stuff. The government will subsidize that investment. Uh, I don't know if you've noticed this, Verizon's been very quiet about it. They have a 5G network. They don't talk about it a lot. Verizon's like, we have 5G everywhere. It's in your brain Verizon. 18K's like, our 5G is better. T-Mobile's like, our 5G, while not yet available, will kill you and kill Verizon because ours are the best. The networks in this country are already offering 5G.

• 21:36Speaker 03

  And what equipment are they using?

• 21:39Nilay Patel?

  Right. They're not using Huawei equipment. They're using Nokia, Ericsson, Siemens. Like, they have found vendors.

• 21:46Speaker 03

  Hmm.

• 21:46Nilay Patel?

  So it's, it's just, this is such weird timing to say Huawei's about to win when all of the marketing that any consumer hears is 5G is here. We're winning the race.

• 21:57Speaker 03

  Right.

• 21:57Nilay Patel?

  The FCC today announced a plan to auction off 280 megahertz of spectrum in the C-band. Like Verizon immediately put out a press release. It's like, yes, this will help us win the race to 5G. Like, we're doing stuff.

• 22:09Speaker 03

  Hmm.

• 22:09Nilay Patel?

  It is not clear why at this time, we need to make sure that Nokia wins.

• 22:14Speaker 03

  I like the angle. Wall Street Journal has a quote from Huawei's US security lead, Andy Purdy. This is kind of a PR win for the, basically, the US government to say, everybody sucks except for Huawei. We have to subsidize to be as good as Huawei. So his quote is, "If the US wants 5G hardware and software developed by a US or European company, the government should encourage companies to begin negotiations with Huawei to license our 5G technology."

• 22:42Nilay Patel?

  That's great. That's great. Qualcomm exists. I don't know if you have heard about Qualcomm. They're a small company based in the US that owns most of the patents to 5G technology. Like, it is, Cisco exists. What's Cisco doing?

• 22:55Speaker 03

  Cisco is my, my bet for the competent lobbyist in this situation.

• 23:02Nilay Patel?

  Cisco has bought every other networking vendor that has ever started in America. If you would like to be rich, here's what you do. You start a company that makes like five-port ethernet switches, and you just wait for Cisco to show up. Because they're like, we can't have that. We need to own all the five-port ethernet switches in America.

• 23:18Speaker 03

  It's not, you're not lying.

• 23:20Nilay Patel?

  It's 100% true. And so it's just bizarre, like the idea that like law enforcement officials, not the FCC, not anybody else are like, we need to, the, the American government needs to somehow get private equity to buy a controlling stake in Nokia or do it directly is, it's like everything that I've ever dreamed of.

• 23:41Speaker 03

  I'm sorry that I, I sound like Alex Jones, but it, it's just like the law enforcement agency works with these companies to put backdoors in our infrastructure.

• 23:51Nilay Patel?

  Yeah. Yeah. There's like AT&T and Verizon buildings here that have no windows, like that loom ominously over New York. And it's like, yeah, that's where the FBI goes.

• 23:59Speaker 03

  So it's like, we can't accept this Huawei equipment that doesn't have backdoors.

• 24:04Nilay Patel?

  Well, no, I mean.

• 24:05Speaker 03

  That doesn't have our backdoors.

• 24:06Nilay Patel?

  So that's like, it would, just to be clear, because they would require AT&T and Verizon to put in American law enforcement backdoors, right? Like AT&T would still operate its building where the NSA can go and like, look at the network traffic, which is not ideal, but it would still happen.

• 24:24Speaker 03

  Right.

• 24:25Nilay Patel?

  The problem is presumably the Chinese spy agencies would have their own.

• 24:28Speaker 03

  Possibly also have access.

• 24:30Nilay Patel?

  And you don't want that. It's never that the cops aren't gonna get it. The cops will always get the backdoor.

• 24:36Speaker 03

  Cops always get the backdoor.

• 24:37Nilay Patel?

  Bill Barr, also, he, um, uh, he put out a, uh, this is totally unrelated, but he has a draft proposal, uh, with Lindsey Graham's name on it, that he, if you want section 230 protection for your platform, you have to offer an encryption backdoor.

• 24:51Speaker 03

  Earn it.

• 24:52Nilay Patel?

  Yeah. It's called the Earn It Act. It is the most upside, first of all, it's like, do you know what you really want? You want to break iMessage. Do you know what? Apple doesn't run any publishing platform with user-generated content. Like, Tim Cook is like, great, we will not earn it at this time. Like, we don't need.

• 25:07Speaker 03

  No more podcast reviews.

• 25:09Nilay Patel?

  Yeah, sorry, we're, we're gonna go ahead and shut down Ping, are you, whatever. And Google is like, well, our messaging strategy hasn't really worked out, so we're just gonna go ahead and not, right? The only company that this matters to is Facebook. And the Facebook's right now is not encrypted. They've announced a plan to be encrypted, but they could just, uh, not do that.

• 25:27Speaker 03

  Right.

• 25:28Nilay Patel?

  The end. Or they could just give them back, like, Bill Barr, he wants to be, he has like a telecom background, so he thinks he's in it, you know? Uh, but it's just like, the more he does stuff, his ideas are like the Earn It Act and then. What if I buy Nokia?

• 25:43Speaker 04

  Hmm.

• 25:43Nilay Patel?

  Which, to be fair, as somebody who also thinks they know about telecom policy, I often think about what would happen if I buy Nokia. I'm very sympathetic to that idea. I just...

• 25:52Speaker 04

  Is there any definitive evidence that Huawei has built five, uh, backdoors into its 5G infrastructure?

• 25:57Nilay Patel?

  Oh, if you ever spend any time with the Huawei people, will they ever tell you that there is no definitive evidence that such a thing exists?

• 26:05Speaker 04

  Yeah.

• 26:05Nilay Patel?

  Uh, they are happy at any time to just to, I mean, I'm surprised wasn't one Huawei PR person hasn't shown up now.

• 26:12Speaker 04

  No, he expects a Spanish Inquisition.

• 26:14Nilay Patel?

  I mean, their whole thing is, look, we've been selling networking equipment for years and years and years to governments around the world who are suspicious of China. They've all checked it. It's all checked. Everything's fine. Will we ever know if like the Swiss government found a Huawei backdoor? And like, we will never know. So I think that's like, that's a problem inside of this entire, entire story. I will say that I tweeted the Wall Street Journal article about the United States buying Nokia, and a number of Finnish people have been like, "Just try it."

• 26:44Nilay Patel?

  Thank you. Like, I've never been happier about the angry Finns in my mentions. All right, let's take a break. I really hope the government buys Nokia.

• 26:59Speaker 05

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 27:28Speaker 06

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bullspend, and marketers are calling it out in. Dashboard Confessions.

• 27:37Speaker 07

  My boss asked for results, so I opened my dashboard for the only positive sounding metric I had: impressions.

• 27:44Speaker 06

  Cut the bullspend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 27:59Nilay Patel?

  So some actual news in consumer tech land. Tom Warren tweeted it, this Microsoft news this way. He just said, "It's Microsoft reorg day." Which implies it happens on the frequency of like a Patch Tuesday, you know, like.

• 28:11Speaker 04

  Oh, for sure.

• 28:12Speaker 03

  At least annually, right?

• 28:14Nilay Patel?

  I mean, stuff happened, but.

• 28:15Speaker 04

  Oh, they've got the sign. It's been X days since the last reorg.

• 28:18Nilay Patel?

  Yeah. So our, our, our boy, Panos Panay, now in charge of the Windows in addition to hardware. Do you want to, you want to walk us through it?

• 28:27Speaker 04

  He's in charge of Windows Client.

• 28:28Speaker 03

  Yes, I hate this term.

• 28:30Nilay Patel?

  Which, which.

• 28:31Speaker 04

  What's an intelligent edge? Do you want to try and explain the difference between Azure, Windows and Windows Client?

• 28:38Speaker 03

  Windows Client is software that you run on your computer.

• 28:43Speaker 04

  It's Windows.

• 28:44Speaker 03

  Windows is, is brand, is, Microsoft has decided that Windows is a good brand and so therefore everything that they do in some way is Windows.

• 28:56Nilay Patel?

  No. Azure is their brand.

• 28:59Speaker 04

  But Windows is still around because Windows like technically, there was a minute where they're like Xbox runs Windows and kinda.

• 29:07Nilay Patel?

  Yeah.

• 29:08Speaker 04

  And then Hololens runs Windows. Well, sorta. And there's like all these different versions of the shell that is, you know, also the client and it gets very complicated very quickly. The point is the thing that you think of as Windows has now been moved under the auspices of Panos Panay who until now is doing all the hardware stuff. He's making all the surfaces. And the, you know, the PR was like the, the whole thing that you expect everybody to say, which is we're going to tightly tie hardware and software together and it'll make the whole thing better. Which is like, true. It also to me shows that where is Dell going to go?

• 29:50Speaker 04

  Like how, what kind of advantages could Microsoft give Surface devices under this unified thing? Maybe you could think of something. It might be something small, might be something big, who knows? But no matter what, whether they are completely neutral and give no advantages to Surface hardware because of the hardware software integration, give a nice little advantage or something huge. Where's Dell gonna go? Where's HP gonna go? What are they gonna do?

• 30:12Nilay Patel?

  So I've got an idea.

• 30:13Speaker 04

  Is it Linux?

• 30:13Nilay Patel?

  They should buy Nokia.

• 30:16Nilay Patel?

  Why not? So this is, there's only a few comparisons here, right? And I've said this a lot, I've talked to Panos about this a lot, uh, over the years. Microsoft is the only tech company that has ever had a successful hardware business at the same time it licenses the operating system to its competitors. There is not another one.

• 30:36Speaker 04

  Yeah.

• 30:36Nilay Patel?

  The closest is Google and Android, and they do not have a successful hardware business.

• 30:41Speaker 04

  Fair.

• 30:42Nilay Patel?

  Yep. Right, like, the Pixel is always sort of just like, around the edges, doesn't sell very well. Samsung is the winner, and then everyone else gets to sort of play, right?

• 30:51Speaker 03

  What about Palm licensing Palm OS?

• 30:54Nilay Patel?

  A fighter. Dieter still has PTSD.

• 30:56Speaker 04

  I mean, it gave us the Sony Clee, yeah. That was nice. I had, I had a Handera phone.

• 31:02Nilay Patel?

  Let me go ahead with the Clee. The word I was using was "successful." Does this company still exist? Do those products still exist? Did any of those executives look happy at the time?

• 31:13Speaker 04

  No.

• 31:14Nilay Patel?

  Right, it, I mean, that is like, that is the singular example of, here's what seems like a good idea.

• 31:22Speaker 04

  Uh huh.

• 31:22Nilay Patel?

  But it is actually a disaster that ruins the company. Right, we're gonna make the hardware, we're gonna, they spun it out, it was called Palm Source.

• 31:30Speaker 04

  There was a whole thing.

• 31:31Nilay Patel?

  Right.

• 31:31Speaker 04

  Access Palm.

• 31:32Nilay Patel?

  They spun it back in.

• 31:34Speaker 04

  Yep.

• 31:34Nilay Patel?

  Leo Apofiker showed up and ruined everything.

• 31:37Speaker 04

  That was much later, but yes.

• 31:39Nilay Patel?

  Right, so the only other comparison is Google.

• 31:42Speaker 04

  Uh huh.

• 31:42Nilay Patel?

  And for the longest time, the way they handled it was basically the same. Right, so Google will tell you that the Pixel team and the Android team don't get to talk.

• 31:54Speaker 04

  Right.

• 31:55Nilay Patel?

  Do you truly believe this? But they will tell you this. And they're like generally sincere bunch, but they're like, the Pixel team licenses Android just like Samsung does.

• 32:04Speaker 04

  Yeah, they will also tell you that, uh, the reason that the Nexus existed before the Pixel was, uh, we want to create like a Halo flagship device that tells the rest of the industry where to go, which is another thing that Microsoft has said many times with the Surface. And in both cases, for a while, this was definitely true. The main real reason this thing existed was to... Convinced the rest of the industry that it was possible to make something that wasn't a piece of crap.

• 32:28Nilay Patel?

  Yes.

• 32:29Speaker 04

  They could, they could make a nice thing, it turns out, and it would sell.

• 32:32Nilay Patel?

  Yeah, so the flip side was, for the longest time, Panos, on our show, would say, "We, we love our ecosystem, we, you know, the world needs Windows laptops, our job was to push the hardware forward, I don't have special access to Windows." He said it to us a thousand times. And it is true that when they started Surface, you know, the story he has told is he would like go to the store, he would go to Best Buy, and there would be no Windows laptop over $700, and Apple was just destroying them on the high end. So they, they wanted to make a laptop that competed at the high end, the premium stuff. None of the vendors wanted to do it because they didn't see the opportunity, they didn't want to like sink the costs. Microsoft has all the money, they spent all the, they spent all the money, they built the fancy hardware, and they let that propagate through the ecosystem. Right? So like hinge design, custom thermals, all that stuff, like Microsoft actually shares

• 33:17Nilay Patel?

  pretty freely, freely with its ecosystem. Great, so Microsoft eats the upfront hardware development costs, they don't get special access to Windows, but they don't need to do a blutware, blah, blah, blah. Turns out Surface is actually successful. Right? It's not just this like pie in the sky, pixel nexus thing, it's a very successful business line for Microsoft, they make great products. And now they're gonna remove the barrier between the operating system team and the hardware team. And that, that, I think there's more there than, you know, it's like, how much do you believe that barrier exists? Like, they say it? Is it important to say so that partners believe you? Or is it like, it was never really there, and we're just gonna drop the fiction?

• 33:54Speaker 04

  I lean towards the latter.

• 33:56Nilay Patel?

  Yeah.

• 33:56Speaker 04

  But the, the fact that the Neo is coming, right? The, the Windows 10x folding thing.

• 34:02Nilay Patel?

  Yeah.

• 34:03Speaker 04

  If there was, if that fiction was actually instantiated in some sort of org chart, you know, Joe Belfiore is over there, and like, he's gotta set up a meeting to figure out the thing with the software to do the other thing, blah, blah, blah, blah, that adds some time and friction, at least organizationally, to making sure that Windows 10x actually works on a dual-screen device. Or, you know, another thing, like Hololens or whatever, right? The Windows team is over there thinking about Windows, the Windows client, and then like all, you know, Dell and HP, and what are they gonna do next, and how are they gonna make Bing happy, and, you know, da-da-da-da-da-da-da. And the hardware team is over here thinking about hardware, and then it turns out that, "Oh wait, we need the software to do a thing to make our hardware work." They need to like have a meeting.

• 34:43Nilay Patel?

  Mm-hmm.

• 34:44Speaker 04

  And now the meeting can just be in Panos's head. They'll have a team, of course.

• 34:50Nilay Patel?

  But they'll be able to turn the wheel faster on the new stuff they want to try. And they'll be able to get stuff done, especially for this very, very important launch of the Duo. I think a little bit more quickly.

• 35:03Speaker 03

  Do you think this has any impact on Microsoft, like thinking that the way to monetize Windows Client is Office 365 and, I don't know, Skype credits and OneDrive?

• 35:15Nilay Patel?

  Yeah, no, that's, I mean, Windows is basically free. I mean, you know, you could, it's not hard to get a copy of Windows. They want to make all the money off of all those subscriptions, for sure.

• 35:27Speaker 03

  Well, I just, I feel like as someone, let's say I in the future, I'm going to buy a Dell laptop. I'd feel better about that purchase, that Windows is something that Microsoft works on passionately to make it work great on surface and also works well enough with its now competitors in the laptop space to make sure that all the drivers work and stuff like that. Versus a Microsoft is like, hey, we made this free to play operating system with a bunch of upsell opportunities and we also, you know, we also put it on our hardware and we offer it for free to all the, you know, I just feel like I would like Microsoft to be passionate about Windows and I haven't gotten that vibe in the past few years.

• 36:07Nilay Patel?

  I think that's fair. I mean, I just saw Nadella and he, we put it up, he was like, "Look, there's a lot of Android and iOS phones in the world. We're going to address them. We're going to make an Android phone of our own. There's a lot of Windows devices and there's a lot of Macs. Like, we're out there, we're doing it." And then he was like pivoted to like Windows for IoT. Like, that's how he's thinking. All of these things are endpoint for Microsoft Software and Services and it'd be great if all those endpoints talked to Azure, which is where they make the money.

• 36:36Speaker 04

  Quote, "Sometimes I say," quote, "Hey, look, should I call Windows Azure Edge?" Unquote, unquote.

• 36:44Nilay Patel?

  So I was in a room with a bunch of very fancy journalists when he said that. And like, you know, it's like Ben Smith from BuzzFeed, Andrew Usurking from The Times, and I'm the nerd who was like, "What?"

• 36:59Nilay Patel?

  So just to bring this all the way back around, I think the answer to Panos now runs hardware. He runs Windows Client, which is Windows. And Dell is, Microsoft clearly sees its future in delivering this kind of big service experience. Yeah. It is better for that business if the Dells of the world are successful. Right. If there are more endpoints. And I think you see that from Nadella. Like, it's just, to him, it's a series of endpoints that he can put Microsoft services on. Other people's services are on that rely on Azure. That's his version of the business. I think it's very compelling. He's pulled it off, right? Yeah, they're making tons of money. They're making tons of money. Developers seem very happy with them.

• 37:43Nilay Patel?

  No one thinks of them as evil anymore. Like, they're a much happier, healthier company since Nadella has taken over, right? There's no, there's no confusion about what they are, what they're doing. There's no hand wringing about the future of Windows as a business, right? Like, they're just making their move. They're just, it's going over there. So if you're Dell, or you're Lenovo, or whatever, I think the answer is, oh, we still have an operating system to make hardware against, and we can come in just under the Surface line, which is mostly what they do, right? They crib a lot of design, it's true. But then they do, on the high end, they do different things. Like, there's no Surface Gaming PC, right? That's where all the action is, right now in the PC market. That's where the growth is. It's Gaming PCs, high-performance PCs. So they can win in those spaces.

• 38:28Nilay Patel?

  And then, I don't think Microsoft really wants to sell, like, fleets of $500 laptops to UPS drivers. And that's like, just a huge market for all these companies to still be in. And I, as long as Windows is still relatively good, or its capabilities keep going forward, I think it's good for those companies. And I think, again, I think Panos is a good executive. I think he understands that challenge. Again, we've talked about it with him so many times. If he's pushing Windows forward because he wants to make cool hardware for Surface, I don't think he's gonna like, do the bad thing and hold it back from everybody else. I think that is the enormous temptation for him. So we're gonna have to like, check. But you, like, if he wants to make folding Windows devices, in two years, everyone will have access to that capability in Windows, I think that's pretty good.

• 39:11Speaker 04

  And actually, just to wrap it up, that is a contrast to what Google is doing. They are holding back their very good pixel camera software algorithms from everybody else.

• 39:23Nilay Patel?

  Yeah.

• 39:24Speaker 04

  They could, you know, but that's special for the pixel. And Android, everybody else gets Android with bad cameras.

• 39:29Nilay Patel?

  Yeah, I don't know. Like, I think there's a difference between like the OS level capability and like the software that enables your hardware, if that makes any sense.

• 39:38Speaker 04

  Yeah.

• 39:39Nilay Patel?

  It's like, the pixel camera is the reason you should buy the pixel.

• 39:41Speaker 04

  Right, exactly. But there's not that much software that enables the hardware on Surface quite yet. Not really. There's like basic like battery controller, turn the camera on stuff. But the real question will be when Windows 10X comes out, will there be cool Windows stuff that is only available on the Surface Duo?

• 39:58Nilay Patel?

  Yeah.

• 39:59Speaker 04

  Or is it the Neo?

• 40:00Nilay Patel?

  The Duo is the Android phone.

• 40:01Speaker 04

  Which one is which?

• 40:02Nilay Patel?

  The Duo is the Android phone.

• 40:03Speaker 04

  God damn it. I said it wrong, this is our Vergecast, don't at me.

• 40:05Nilay Patel?

  We'll see. I mean, it's, you know, Panos is making the Surface Duo too. That's his, that's his baby. So he's in charge of Windows and he's making an Android phone. Historically, those, those have not been the same groups of people, but I guess we're gonna find out. All right, we're gonna take a break. We come back, speaking of Google, Google had earnings this week, we gotta talk about it, and there are rumors of a new Apple TV. We'll be right back.

• 40:27Speaker 05

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 40:59Speaker 06

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bullspend, and marketers are calling it out in Dashboard Confessions.

• 41:09Speaker 07

  My boss asked for results, so I opened my dashboard for the only positive sounding metric I had: impressions.

• 41:17Speaker 06

  Cut the bullspend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 41:31Nilay Patel?

  All right, Paul Miller.

• 41:32Speaker 03

  Mm-hmm.

• 41:33Nilay Patel?

  Live. I will say that we have not held the nation together with consistency. That was a disaster.

• 41:39Speaker 03

  That's on me.

• 41:39Nilay Patel?

  The president said bullshit in the White House today, on camera. It's a real thing, and that's your fault.

• 41:45Nilay Patel?

  But let's, let's keep it going.

• 41:47Speaker 03

  I'm not gonna change the name if that's what you want. The segment that I do every week is called Revenge of the Glass Hole.

• 41:54Nilay Patel?

  Oh, my God.

• 41:55Speaker 04

  Oh, God.

• 41:55Speaker 03

  Google Glass is back. So I had completely forgotten about this, but remember after Google got rid of Google Glass, then they were like, "Well, actually, we've made another Google Glass." So there's Google Glass Enterprise Edition 2, and it's just, it's a few tweaks. It is pretty much like the original Google Glass. It's got USB-C. And apparently, it's been, it's been hot with some enterprises, and now they're just gonna sell it directly. So you don't have to be part of, like, you had to be sort of part of some special organization somehow to get your hands on Google Glass Enterprise Edition 2. And now you could just be a pleb and give Google $1,000 for one of the greatest flops

• 42:39Speaker 03

  in human history, and I just love it. I just love this, this little guy keeps on going.

• 42:45Nilay Patel?

  Poor Google Glass.

• 42:48Nilay Patel?

  I mean, I will never forget wearing Google Glass, the Indy 500, and just a thousand drunk people been like, "Can you see through clothes of that thing?" And it was just like, "No." But that's what, that's what everyone wants from, if you're gonna mount a camera to your face, that's the level of value that you need to receive from it to look this dumb.

• 43:07Speaker 03

  Yeah.

• 43:08Nilay Patel?

  Well, I'm gonna buy one.

• 43:09Speaker 03

  Good.

• 43:10Speaker 04

  No, you're not. Yeah, you are.

• 43:11Nilay Patel?

  Yeah, it's like I didn't, I didn't buy a Pixel 3, so I...

• 43:14Speaker 04

  Oh, yeah.

• 43:15Nilay Patel?

  I skipped a generation of Pixels, so I'm gonna...

• 43:18Speaker 04

  Pixel 4A rumor is starting to ramp up, though. Just FYI, we got a code name now? It's coming.

• 43:23Nilay Patel?

  Headphone jack, I'm told.

• 43:25Speaker 04

  Hmm.

• 43:25Nilay Patel?

  That's not a joke? Huh? That's not a goof? I mean, it's the rumor. I don't know. Wait 20 minutes, the whole thing a week, we'll find out. All right, speaking of Google, earnings.

• 43:35Speaker 04

  Yeah, so earnings, blah, blah, blah, Google made money, blah, blah, blah, nobody cares, except, Google finally started telling us how much it's very sufficient to make, including and especially YouTube. It gave us three years of financial data. Last year, it made 15 billion dollars, which is a lot. It's a significant portion of Google's overall revenue, something in the neighborhood of 10%, I think. And Google also said that they pay out the majority of that money for content acquisition. So some of that goes to creators. So at least 7.501 billion dollars is going to that. I think they said it was like 8.5 or something. Anyway, yeah.

• 44:18Speaker 04

  And all of the new information that Google has provided has served as an excellent way for everybody to reify their opinions about Google. Yelp, very mad at Google, and they're saying, well, the only reason they released those numbers is because their overall revenue was down, and so they were trying to, you know, hide the fact that they are doing scary things with the search page and blah, blah, blah, they're evil. YouTube creators, who rightfully are concerned about not getting paid enough, and the adpocalypse and whatnot, are very mad because, look, they're making all this money that we should get more than we're currently getting. And just like on and on and on. The big question is, why did Google release these numbers?

• 44:58Speaker 04

  And I think it's twofold. One, they're probably trying to like hold off having the SEC yell at them because until now, when YouTube wouldn't, or they wouldn't release YouTube numbers, people are like, why not? And they'd be like, well, you know, Larry Page is too busy, and so he doesn't even know. It's like, well, that's... That was dumb.

• 45:18Speaker 04

  But now Sundar's in charge of everything and so he knows.

• 45:20Nilay Patel?

  Yeah, I mean, I think that's the real reason. I like, I think you can make a strong case that Larry Page just didn't, didn't go to work.

• 45:27Speaker 04

  Sure.

• 45:28Nilay Patel?

  Like.

• 45:28Speaker 04

  But like, somebody knew.

• 45:30Nilay Patel?

  Right, so the, the, the rule is if this, any material numbers reported to the CEO are whatever. That's.

• 45:36Speaker 04

  Okay.

• 45:37Nilay Patel?

  So like, you can make a strong case that Larry Page like, was at one of his 16 flying car companies.

• 45:44Speaker 04

  Right.

• 45:45Nilay Patel?

  Cause he, he has like a number of flying car companies.

• 45:47Speaker 04

  Yeah, more than any, any one person needs. I will grant that like, you might need one. Everyone needs one.

• 45:56Speaker 04

  Once you hit three, you're getting a little excessive.

• 45:58Nilay Patel?

  Uh, so like, he's distracted. He's like, is Google doing well? Everyone's like, yep, it's great. And he, he's not drilling into the, but Sundar definitely knows because he was the CEO of Google.

• 46:07Speaker 03

  So you're saying that, I was not at all aware of this, that company, the numbers that companies release are based on the numbers that have been reported to the CEO?

• 46:17Nilay Patel?

  That's, it's at least part of the rule. I mean, there's like, the SEC has a number of, just think about like, the SEC's interests here. Right? It's if you're investing as a, a person in the public markets, there's a certain amount of material information that you need to make decisions. So the SEC like mandates material information to investors.

• 46:37Speaker 04

  Huh.

• 46:37Nilay Patel?

  So like, there's, there's a lot of rules at play about what is material. So like, for example, uh, you would think the number of iPhones sold would be material. Like, Tim Cook definitely knows that number.

• 46:48Speaker 03

  Like, if, if I knew if it was going up or down, I might buy or sell Apple stock.

• 46:51Nilay Patel?

  But Apple decided and they presume the SEC, SEC now for several quarters has not caused a problem. Like, we're going to tell, tell you iPhone revenue, not iPhone sales numbers. So like, there's, there's some play in there, but like, as long as you're reporting enough to, to inform investors that the market is transparent, you're fine. So here, I think the answer was Alphabet is a big holding company. There's a Google number. A lot of investors would like to know the YouTube number, but like, it's not even important for our CEO. It's not even important such that our CEO needs to know the number, so we don't have to tell you.

• 47:23Speaker 03

  I feel like YouTube is the most important thing that Google does.

• 47:26Nilay Patel?

  I don't think you're wrong. And I think this is, to backtrack to the other reason of why you do this now. The notion that Google search will be the engine of profitability for this company, uh, is like, it's under attack from all sides.

• 47:41Nilay Patel?

  Right, it's on, it's like, first of all, have enough people gotten phones in their lives? Right, so like, we can't monetize all those additional data points. It's like, users have flattened out. Then it's like, on mobile, have we junked this up enough? The answer is abundantly yes.

• 47:58Speaker 04

  Has Paul switched over to DuckDuckGo?

• 48:00Nilay Patel?

  And then on desktop, we made this change and everyone screamed and we did a whole Vergecast and they had to change it back. Like, is the ad load of a search page, it's like, it's flattening out, it still makes a ton of money.

• 48:10Speaker 04

  A ton of money. And the, but all the Googles moves to make more money off of basic search ads, this is where they make the vast majority of their money, are being watched way more closely now than they ever have been by, you know, antitrust regulators.

• 48:22Nilay Patel?

  Yeah.

• 48:23Speaker 04

  Both in the US and in Europe especially. And so, they can't grow much more because they've got everybody. They can't necessarily squeeze more out of what they already have without people going, hey, what the hell, Google? So they need other lines of business to start picking up the slack.

• 48:39Nilay Patel?

  Yeah.

• 48:40Speaker 04

  And so that's why YouTube matters.

• 48:41Nilay Patel?

  It's, it is the same story right now with Facebook and Instagram. I think Bloomberg reported that Instagram makes 20 million, or 20 billion dollars for, for Facebook. And it's, one, that's more, I think that's part of the reason that we, we have a bigger number. And second, it's, you just see that happening inside of these services, like the core Facebook growth, user growth, money has leveled off, Instagram is picking up the slack, I think Google is saying, look, YouTube is a big business and we haven't gotten all the way. Sundar said something really strange in the earnings call, he's like, we're adding shopping buttons to YouTube, if you search for like, Puma sneakers, you can buy the shoes right there. But like, I haven't seen it. A bunch of people have like, that's not there yet. So maybe he just like leaked a feature. But they're doing more to like, commercialize YouTube in that very direct way.

• 49:25Nilay Patel?

  And then, you know, it was like the 15th anniversary of Maps today.

• 49:30Speaker 04

  Yeah.

• 49:31Nilay Patel?

  And Lauren, Lauren Getit Wired, our friend had a great interview with Sundar and he was just like, we're reorganizing our face and doing more AI stuff and like, also there's going to be more ads in it. Like, they're, they're starting to monetize all their surfaces. Which is, you know, like, fun. But it's like, the ad moment for all of Google services are here in a very serious way.

• 49:48Speaker 04

  Yeah, the other things that sort of came out around here, they called their hardware business a quote, "multi-billion dollar business," but who knows how many multi that is. All of, everything in sort of Google's other category, which also includes like, subscription services, like YouTube Music Premium and whatever, I guess was 17 billion, all of which tells me that Google doesn't make that much money on hardware. And it's probably not coming from Pixel, it's probably coming from, you know, Chromecast and Nest and whatever else. Maybe some of it's Pixel, but it's a relatively small business. And then lastly, I don't know if this is on the earnings call, but Hiroshi Lachimer tweeted that, "A lifetime, Google has paid out $80 billion to Android developers," which is almost exactly half of what Apple has paid out to iPhone developers.

• 50:33Speaker 04

  The big caveat there is Apple's number includes payouts in China, and Google's doesn't. So, I think regardless, the point is, there is still more money going out to developers on the iPhone than is going out to developers on Android. Even if it's, even if it's like, close in China, I still think that that's true. Which is wild, because, again, I keep saying it until people remember, it's 85% of all phones on the planet is Android. And yet, they still aren't pulling in as much money for developers as the iPhone is.

• 51:09Speaker 03

  Is that a culture of people buy, like, 85% of phones are Android, but how much money is spent buying phones, Android phones? Because like, if, you know, someone's buying a $200 Android phone versus an $800 iPhone.

• 51:25Speaker 04

  Oh, yeah, yeah, yeah. And how much are they spending on apps? And there's more free apps than Android. All of these storylines have been around for almost a decade. But what's interesting is, Google's number basically confirms it.

• 51:37Nilay Patel?

  Yeah. What I hear, here's my hot take. It is almost certainly not true, but I'm gonna say it, and we can react to it.

• 51:43Speaker 04

  Okay.

• 51:44Speaker 03

  Uh, wrong.

• 51:45Nilay Patel?

  Mobile operating systems have not been good for software developers.

• 51:48Speaker 04

  Ooh, okay.

• 51:50Nilay Patel?

  Name a software company, a pure-play software company, that exists because of a mobile operating system.

• 51:56Speaker 04

  Fantastical.

• 51:58Nilay Patel?

  That's like, two people.

• 51:59Speaker 04

  Yeah.

• 52:01Nilay Patel?

  Like, name a company on the scale of an Adobe.

• 52:03Speaker 04

  Zynga.

• 52:05Nilay Patel?

  Okay.

• 52:05Speaker 04

  Well, they had Farmville on desktop, though, right?

• 52:08Speaker 03

  Yeah, that's definitely the game, the game ones.

• 52:10Nilay Patel?

  Okay.

• 52:10Speaker 03

  For sure, like pop, pop cap or whatever. All the different podcast apps. Those are all like little businesses.

• 52:17Nilay Patel?

  One and two people shops.

• 52:19Speaker 03

  She's saying Adobe sized?

• 52:20Nilay Patel?

  Uh, yeah, I'm saying like Microsoft was an apps vendor.

• 52:24Speaker 03

  Uh huh.

• 52:25Nilay Patel?

  And it had a big business selling applications for computers.

• 52:29Speaker 04

  Okay, I got one for you.

• 52:30Nilay Patel?

  Yeah.

• 52:30Speaker 04

  This is, this is a controversial one. Slack.

• 52:34Speaker 03

  Hmm.

• 52:35Nilay Patel?

  Okay.

• 52:35Speaker 03

  That's pretty good.

• 52:36Nilay Patel?

  That's what you got?

• 52:37Speaker 04

  Yeah.

• 52:38Nilay Patel?

  All right. Microsoft's about to destroy Slack. We'll see if that's true in another year.

• 52:43Speaker 04

  Uh, okay.

• 52:44Nilay Patel?

  That's fine.

• 52:46Speaker 04

  But I mean, your, your larger point, uh, to me, it's, it's not so much the mobile OS is all, it's partly that. It's also the original sin of the app store of like, well, let's just price this stuff at 99 cents. Right?

• 52:57Nilay Patel?

  Yeah.

• 52:57Speaker 04

  That is what.

• 52:58Nilay Patel?

  Let's call them apps and make them feel like toys and price them real cheap. And this will be the business.

• 53:03Speaker 03

  What about, uh, like Square and Venmo? Those are pretty big businesses.

• 53:07Nilay Patel?

  But they don't sell software, right? They take a cut of transactions for buying other things.

• 53:12Speaker 03

  That's, isn't that being a software business?

• 53:15Nilay Patel?

  Sure. I just meant like when you, when you bought Photoshop in 2003, Adobe wasn't looking over your shoulder every time you, you like, paid your buddy for a movie to take two, two cents out of it. Like you just bought the software and moved on with your life.

• 53:27Speaker 03

  Hmm.

• 53:28Nilay Patel?

  Like, like Square is like a credit card processing company. It just happens to have a software interface.

• 53:32Speaker 03

  Well, Minecraft. Does that count?

• 53:35Nilay Patel?

  Minecraft was on desktop, it was on consoles.

• 53:38Speaker 03

  Right.

• 53:38Nilay Patel?

  It's hard. Like, I'm sure someone's gonna tweet at me and I'm sure there's a thousand examples. But I come back, Dieter, you, you said, you had your piece about, uh, software pricing in the app store.

• 53:49Speaker 04

  Yep.

• 53:49Nilay Patel?

  That's where, that's where this idea came from. Um, our friend Ben Thompson has written about this over and over again. Like, the idea that these are platforms that, that you can build a big business on, that isn't actually just a software shell for another more lucrative business, is, it hasn't been there yet. And I think this Google number is just another example of that. Like 85% of the phones in the world run Android. And no one has built a huge business in supplying, supplying Android software, like client applications, that isn't connected to some other business somewhere else.

• 54:19Speaker 03

  Or games.

• 54:20Nilay Patel?

  But even a game is like, free to play games are not sort of like, you don't grow up as a young child being like, I will charge you to stop waiting.

• 54:31Nilay Patel?

  Like, that's not, you know what I mean? Like, it's fine that that's a business model that emerged, but it's not. I don't know. Anyway, that's a little bit of an aggression. Do you want to talk about television?

• 54:39Speaker 04

  What do you want to say about television?

• 54:40Nilay Patel?

  Well, there's going to be a new Apple TV, we're told.

• 54:42Speaker 04

  Well, it's about time. The last one came out in September 2017.

• 54:45Nilay Patel?

  Yeah, but who cares?

• 54:46Speaker 04

  Yeah, I guess like it's still the same. All we really want is a better remote control, right?

• 54:51Nilay Patel?

  It's all anybody wants is a better remote control.

• 54:53Speaker 04

  Well, you, in particular, Neil, I want is support for more codecs, which isn't necessarily a hardware problem. It's a will Apple play ball problem. We should probably talk about what it was like trying to watch 4K HDR on the Super Bowl. How'd that go for you?

• 55:07Nilay Patel?

  So Amazon's a big company, right?

• 55:09Speaker 04

  Yeah.

• 55:10Nilay Patel?

  They're really good at delivering things the next day.

• 55:13Speaker 04

  Yeah.

• 55:14Nilay Patel?

  And so on Friday, I think Fox and Roku announced that they couldn't, they weren't going to renew their deal.

• 55:21Speaker 04

  Yeah.

• 55:21Nilay Patel?

  And so it wouldn't stream to Roku players. And on Saturday, they announced it was going to be fine. And so in the meantime, I tried to order an Amazon Fire stick. So I can watch the game in 4K. And Amazon, I think they like sold out or they just couldn't deliver it to me in time. So when Saturday came, I ordered two different Roku's from two different sellers, because I didn't trust anybody. And one got there and the other one is still not at my house. So it's fine. I mean, the Fox app worked fine. It streamed HDR 10. It was, it looked good. It took like 36 gigs of data, which is crazy for four hours of video. I'm not too crazy. It's right there with everything else, but like most 4K stuff you watch is like a movie, right? In like two hours, like four hours of sustained 4K streaming is a lot. 500 megabytes of upstream data. What was that Roku saying?

• 56:06Speaker 04

  That is so wild.

• 56:07Nilay Patel?

  They continued to watch the Super Bowl. What, what on earth were they saying? Like, what data was that thing generating? Half a gigabyte of data upstream.

• 56:17Speaker 04

  Your phone most likely has 128 or 256 gigs of storage.

• 56:22Speaker 03

  It's like a significant hit under storage.

• 56:25Nilay Patel?

  Yeah, it was half a gig of data, right?

• 56:27Speaker 03

  Yeah.

• 56:28Nilay Patel?

  So, anyway, we can ask, but it's a lot of ad pings is what I'm told. But even then, it's like.

• 56:35Speaker 03

  It's a lot of ad pings.

• 56:36Nilay Patel?

  Don't you just need to tell them the delta? They stopped watching the Super Bowls. Useful information. They continue to watch the Super Bowl. No buttons have been pressed. This should not take much.

• 56:45Speaker 03

  What the ad pings would be that Roku can tell that this ad is being shown. Roku is not putting its own ads in.

• 56:53Nilay Patel?

  So, this was the heart of the dispute with Fox. So, and I think this is like, goes back to this whole conversation with app stores. Roku makes no money selling hardware. Like Anthony Wood has been on the Veritas. He's told us, we do not make enough money selling hardware to support engineering efforts.

• 57:08Speaker 03

  We must spy.

• 57:10Nilay Patel?

  Basically, all of their money is in their ad ecosystem, in content placements in their channel. If you want to publish an app that is monetized on the Roku store, you have to go through the Roku Partner payments platform, blah, blah, blah. And they get a cut. And so you can imagine that Fox is like, their deal is up. The Super Bowl is coming. They know people want to watch the Super Bowl on Roku. And they're like, we would like a different cut, please. We would like to take more money. And Roku said, no. And they couldn't agree. And they pulled the app. And Roku sent the email saying, sorry, Fox customers, you can't watch the Super Bowl on Roku because Fox is a bully. And Fox said, no, we just want more money for the thing that we make. And then they, something happened and they figured it out. That is like a carriage dispute. That is what Turner does with Comcast or whatever, like.

• 57:54Nilay Patel?

  Except that usually it's different. Right? Usually a cable company pays to run the channel. Here, the channel pays to be on Roku, which is a little bit backwards. But it's the same, the heart of the debate.

• 58:08Speaker 03

  Which is why if you have Nvidia Shield and you just run Android apps.

• 58:13Nilay Patel?

  Android apps come through the Play Store.

• 58:15Speaker 04

  It's just fine. But speaking of Nvidia, their new game streaming service doesn't have games from a bunch of publishers, even though in theory, the idea is you just get your Steam library in the cloud. Uh, because they need a separate license, which means that we not only have carriage disputes for cable, we also have it for set-top boxes, and now we're gonna have it for cloud gaming.

• 58:35Nilay Patel?

  So let me, but so carriage disputes on cable is like a really interesting thing. So if you run a cable, this is like a true story. In the old days.

• 58:44Speaker 04

  Yeah.

• 58:44Nilay Patel?

  Right? You would have like the cable menu, you'd have the channel lineup. Where a channel got placed in the lineup is like a competitive concern.

• 58:51Speaker 04

  Oh, sure. You wanna be channel 18 to channel 400.

• 58:54Nilay Patel?

  Right. And so, like, a big cable system buys a big network.

• 59:02Speaker 04

  Yeah.

• 59:02Nilay Patel?

  For example, Comcast might buy NBC. Comcast is an investor in Box Media, by the way, apparently. Uh, seriously, disclosure. Uh, and they might have ended up buying like the golf channel or the tennis channel. And suddenly those channels spike in the guide.

• 59:15Speaker 04

  Yeah.

• 59:16Nilay Patel?

  And competing sports channels sue Comcast. This is a thing that happens all the time. Uh, there's an entire system at the FCC of like managing these disputes. Like an alternative court arbitration management anti-discrimination system.

• 59:30Speaker 04

  Yeah.

• 59:30Nilay Patel?

  Just for like where the cable channels go, how the cable companies handle the cha- like their, their providers. It's like a whole thing, like a whole legal apparatus.

• 59:39Speaker 04

  And if that legal apparatus fails and they can't come to a resolution, uh, Ajit Pai opens up his drawer where he's got his D and D dice. And he just rolls a few of them, and then that becomes your channel.

• 59:49Nilay Patel?

  Uh, it's just, it's like an interesting thing because like that was developed over years and years and years of like argument and conflict and whatever. None of that exists for the Roku's of the world, or the Apples of the world, or these app stores. And so there is like, uh, a little bit of a drumbeat of like, hey, this is kind of a solved problem. Right? Like managing these disputes, like we understand what these disputes are. We understand how to evaluate who wins and who loses. We understand how to, how to split the difference in terms of money. There's an entire, like, what if we just build a system like that for this stuff? And it's, I think we're just at that, this place now where these problems are so dumb that it seems silly that there isn't a system by which they can be managed.

• 1:00:32Nilay Patel?

  It's just fun, it's like, these are just TV problems now. You can't get the Fox Sports app on your Roku before the Super Bowl because they can't come to terms on, on payment. Or, uh, the Roku store. Promotes certain things above other things, even though they own their own channel. Like, Apple's gonna promote its content. Amazon, if you buy a Fire TV, like, I don't know if you heard about this, but Amazon makes TV shows, you guys. Uh, they're called Amazon, or like, they're woo. I don't know if you know about that. Like, that's all the Fire TVs like screaming at you. So like, there's just a world in which there's, there's a lot of competition there now. I think it's pretty good. But there's a world in which, as it kinda coalesces, you see a bunch of the cable TV problems are just gonna come along for the ride.

• 1:01:10Speaker 03

  I want to believe in gamers. They will put up with some quantity of bullshit, but they're not quite as bullshit tolerant, in the sense that they can, they, they, they know better how to move, move platforms. And I think the outcry of like, a lot of the exclusive stuff, like, cause PC gaming has had like, a lot of exclusives before now. Everything's been on Steam, um, and then like, a little bit has been on Uplay, uh, a little bit's been on Battle Net. But now, there's, now with Epic, uh, games having its launcher and, and its whole store, and trying to create some sort of bifurcated PC gaming market. I feel like

• 1:01:50Speaker 03

  the gamers are so mad at that, that I actually think that maybe it won't become a hellscape. But, who knows?

• 1:01:58Nilay Patel?

  Well, the, the Epic store is a really good one, right? Like, um, they announced an alternative App Store, they have this other deal, like, the, the cuts that game stores take have just like, dropped. Right? Like, Apple takes 30% from energy developer, but in the games world, like, Epic takes less, Steam takes less. Like, those numbers are dropping just because there's a little bit of competition for developers. That's like a, yes, competition lowers prices. By the way, uh, just to, it was the tennis channel that was mad at Comcast. They sued each other for years and years and years. It finally ended in 2015. I'm just saying, this is like a classic, if you're interested, this is like a classic case of Comcast bought something, and they put their channels in the, like, the free tiers, and to get the tennis channel, they had to pay extra. And then it's like

• 1:02:42Nilay Patel?

  a whole, whole FCC thing. I know a lot about the FCC, you guys. Do you want somebody to go next for two minutes?

• 1:02:48Speaker 03

  Oh my god. Yes. Well, how was your Super Bowl quality?

• 1:02:52Nilay Patel?

  It was great. It looked great. So, you know, an interesting problem for a live, high-res video, is that when you're watching a movie, it can just buffer. They know what's coming. They know what happens at the end of Ford versus Ferrari. I won't tell you, but... Ford wins. It's just a fact, but like they've got the whole file, right? So they can, they can buffer. You can't really buffer the Super Bowl without interesting delay. And they eventually just, that, that stream just got farther and farther behind.

• 1:03:22Speaker 03

  Wow.

• 1:03:23Nilay Patel?

  And like, so like live streaming, I think is still, if what people want is live 4K sports, like the bandwidth requirements are just going to get higher and higher. Or you're going to just deal with a delay. Fox said it was up to a minute in some cases, which is wild for the Super Bowl. If you're like a, like a betting type person and you're a minute behind, like, whoo, it's not great for you. Uh, I'm not a betting type person. Uh, I, I, I use that money to buy limousines in Las Vegas. It's a real, real fact.

• 1:03:49Speaker 03

  I know Twitch has a setting. It's basically you can have high quality, high latency or, or lower quality, low latency, or you can be like a super high end popular streamer. And I think you get high quality.

• 1:04:02Nilay Patel?

  You get everything. Uh, it's just like, it's just a fact. Like they have to encode everything on the fly and, and get it out. And like that.

• 1:04:09Speaker 03

  Well, I also wonder if that has something to do with how high your bitrate was.

• 1:04:13Nilay Patel?

  The bitrate came out about 20 and like Netflix recommends 25. So it was, it was in the right zone. But yeah, I mean, it, it worked. I'm like proud of them that it worked.

• 1:04:22Speaker 03

  Hmm.

• 1:04:23Nilay Patel?

  It looked really cool. Like it's going to be hard to go back to watching 720p broadcast sports. We never really talked about the, the Apple TV. Here's what I think they need to do with the app. They need to change the remote. They need to not worry about Apple TV, uh, or Apple Arcade games running in the 812 or 813. And they need to make it like a $50 stick.

• 1:04:41Speaker 03

  Yeah, they definitely need to make a stick. That's the real problem is like, cause it, what, what's 180 or something? Like, that's too much.

• 1:04:48Nilay Patel?

  Yeah, it's way too much. Entirely too expensive and they have no self-confidence about the interface, which is like a weird zone for Apple to be in.

• 1:04:56Speaker 03

  Hmm.

• 1:04:57Nilay Patel?

  Right? They've got the app tile interface and they've got the just what is happening here? Apple TV app interface. And they haven't yet decided which is the interface of the whole thing.

• 1:05:07Speaker 04

  But that's not a hardware problem. That's just a change of software setting problem. They just don't have the confidence to do it yet.

• 1:05:13Nilay Patel?

  Yeah, I mean, they need to make a much cheaper thing with a better interface and better remote. Which, so basically what I'm saying is they need to throw out the Apple TV and make something way simpler.

• 1:05:22Speaker 04

  And it is wild that they haven't made a stick. And I know that people, Apple doesn't make cheap things, blah, blah, blah, blah, but like, the sticks are fine, y'all. Like, you can get 4K HDR out of a stick. It's fine.

• 1:05:33Nilay Patel?

  Well, so here's the confusing thing to me is we know that making the shows is not their business. They are not expecting to make back the budget of The Morning Show and For All Mankind and C and honestly, The Servant. Like, those are very expensive shows. They're not expecting to make that back based on $4.99 a month and/or giving it away for a year if you just like breathe it in iPhone, right? They're expecting that you're gonna open the app to watch those shows. In the app, you will see that you can watch some HBO shows, and then you will push the button to subscribe to HBO inside the app, and Apple will take 30% of that, right? That's like their, it's the same business model Amazon has with Firestick. So it's another cable box, right?

• 1:06:18Nilay Patel?

  It's just, it's the dream of the à la carte cable box. You open this thing, you can subscribe to the channels you want, you can quit them when you want, whatever. Okay, that all makes sense, but it's on everyone else's hardware, right? Like, the idea that you're gonna buy a Roku and then you're gonna subscribe to all your channels inside of this one app over here instead of just doing it directly, I think is, they haven't quite squared that circle. And they haven't made their own hardware so compelling that you'll buy it and then definitely use it that way. So I think that's the problem. Like, yep, they've got the app in all these places, and maybe you'll watch The Morning Show on your Roku or your Firestick or your Android TV, but you're not gonna say, you know what, now that I've watched The Morning Show in this app, this is where I should also subscribe to HBO. And I think that's like confused.

• 1:07:00Speaker 04

  Unless you like really like finish the thought of, oh, I want to have all of this stuff on my iPhone and iPad without having to think about it, and having to install yet another app or whatever, that is what finishes. Is the thought, but are people thinking on their Roku? I should make sure to use the Apple app to subscribe to HBO so that my iPhone I can use Apple TV to watch HBO. Like, that's a lot of steps in the chain for people to have to.

• 1:07:26Nilay Patel?

  And they are also, I don't know if they've done this yet, but they are building an iCloud SSO for TV. So if you download the HBO Go app, you can then sign into it using your Apple TV credentials. So like now you're just like all over the place. Now you're just like, I, what I wish to have is a billing relationship with Apple Inc. Like, I don't, I think about nerdy TV things all the time. I've never thought to myself, I need to consolidate my billing relationships. I suspect most Americans have done that. Look, I want them to make a TV. Just make me a TV.

• 1:07:56Speaker 04

  How does that solve any of these problems?

• 1:07:58Nilay Patel?

  Then you'll have a TV.

• 1:07:59Speaker 04

  It's like a $2,000 television.

• 1:08:03Nilay Patel?

  Yeah, it'd be great. It would be much, it would be a lot cleaner than whatever they're doing now, which is just all over the place. I just don't think they know what they want to do with this product yet. I think it's still a hobby and they, they just had, like Jennifer Aniston is on the payroll now.

• 1:08:16Speaker 04

  Right.

• 1:08:16Nilay Patel?

  Which like in terms of like your hobby, like you've like advanced level hobbyist. Like, I love model trains. Also, I'm paying Oprah a lot of money.

• 1:08:26Speaker 04

  To say choo choo.

• 1:08:29Nilay Patel?

  All right. This one's off the rails. I love you all. I really hope Microsoft buys Nokia again. I just wanted to say it one more time. Double E love. Rock and roll.

• 1:08:36Speaker 04

  Halt. Promo code.

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