(Preview) How Apple Changed the Cellular Economy, What SpaceX Wants to Do With Spectrum, Airlines and Carriers, Yann LeCun Departs Meta

Andrew and Ben analyze SpaceX's nearly $20 billion in purchases by first touching on cell carrier history and the power dynamics that iPhones upended 20 years ago. Then: Understanding the SpaceX business and Musk's approach to strategy, what Starlink is trying to do with satellite internet on airlines, a power play with cell carriers that appears to have failed earlier this year, and now, a Plan B that may involve an acquisition and a bid to partner with Apple. At the end: Why Yann LeCun leaving Meta is the right outcome for both sides, a question about big companies and innovation spawns regulation cautionary tales and a cigar anecdote, and wondering about the impact of big tech on AI's future.

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

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:19Ben Thompson?

  Not good, Andrew. I'm pretty upset, to be totally honest with you.

• 0:21Andrew Sharp?

  I'm not doing well either, just for the record. I'm feeling chastened on this end of the line. Do you want to explain why you're not feeling good and feeling upset right now?

• 0:31Ben Thompson?

  Look, you, we started out on a great page. You said I was, you were gonna take one of my recommendations for winter and I'm feeling good. I'm like, I'm glad you're listening to me, such a breakthrough.

• 0:43Andrew Sharp?

  Drop another one, yeah.

• 0:44Ben Thompson?

  It only took like two to three years, uh, you know, which is good for you relative to, you know, you had to go through the period of just completely rejecting the opposite of what I say. I tried to add on to it. We're talking about jackets here. I'm like, oh, by the way, my favorite company, Kizzix, has winter boots that are awesome. You could just slip them on and it's great. And the disdain and dismissal with which you-

• 1:09Andrew Sharp?

  Immediate not doing that.

• 1:11Ben Thompson?

  No, it wasn't just that you wouldn't do it. That's fine. The disgust with which you expressed, it hurt.

• 1:17Andrew Sharp?

  I mean, look, nothing is nearer and dearer to your heart than the Kizzix brand. And honestly, I feel a little guilty.

• 1:25Ben Thompson?

  There was a contractor here at the house this week who was like slipping his shoes on and off. I'm like, it's fine, just leave your shoes on. Like, like, it's not a big deal. And, and he's like, oh, you know, it's happened. And I'm like, well, you should get Kizzix. You're always taking your shoes on and off. And he's like, and he's like, do you work for them?

• 1:42Andrew Sharp?

  Ben is performing guerrilla marketing all over the world on behalf of Kizzix.

• 1:47Ben Thompson?

  Well, the great thing, I'm so glad that they lost the, because you know, we talked about, the one comp I ever like accepted was from them and then I got lost in the mail. I never received it, which is great, because I, I feel-

• 1:58Andrew Sharp?

  It was the universe validating your policy.

• 2:00Ben Thompson?

  That's right. I feel more empowered to endorse them to everyone. Um, so yes, actually I do have another take while we're here. So they're my favorite, the whole new generation. And D to D startups, right? Sell online, all that sort of thing. Obviously, obviously, they're my favorite. My other take is, do you remember all this D to C stuff really started with like razors?

• 2:22Andrew Sharp?

  Uh huh.

• 2:22Ben Thompson?

  And like there was the Dollar Shave Club and then like, you know, the whole thing. Oh, they're, they're all the same five ways.

• 2:29Andrew Sharp?

  Oh, yeah. It was, it was a tent part of the millennial business generation. I bought some Harry's razors for sure.

• 2:38Ben Thompson?

  Yeah. So I went to Costco when I moved back and I'm like, well, I'll try some Harry's razors because they were, you know, because of course they realized that Facebook takes all their money online. So now they're trying to sell in retailers. Terrible. Just a terrible razor. You could use it like once. You could not, it's like, so you know what? Good for CPG. Good for P and G. You know what I'm gonna do? I'm gonna go buy a Gillette razor like I used almost my entire life and I'm gonna be happy about it. So you, I feel like good for the old guard.

• 3:09Andrew Sharp?

  Honestly, it was an important epiphany for me because when I say it's like a, a central aspect of the millennial experience. Early in my twenties or maybe my mid twenties, Harry's sounded like a better razor and I felt very superior using Harry's razors. And then I looked down one day and I was like, these razors just suck. And I'm going back to Gillette and going with something I can trust and, and I'll pay extra money for it. And it's a much better way to live, but they get you with the marketing and I felt like I was using a better.

• 3:44Ben Thompson?

  It feels cool and hip. Yeah. And the terrible thing is I bought it at Costco. I have all these freaking razors to work through, but that's fine because they're only good for one shave anyway. So I, I'm plowing through them. Unfortunately, I'm Asian, so I don't have to shave that or a part Asian. So I have to shave that often. So, um, what are you gonna do?

• 4:00Andrew Sharp?

  Yeah. Well.

• 4:00Ben Thompson?

  I'm a quarter Asian. Uh, but the, the Asian genes that I got is I don't look Asian.

• 4:05Andrew Sharp?

  On the show here. Yeah.

• 4:06Ben Thompson?

  No, I don't look Asian, but I also cannot grow a beard. So, um, I, I doesn't, it takes me longer than you would think to finish off this stupid pack of razors.

• 4:15Andrew Sharp?

  Fair enough. Well, uh, one day I'll break the seal on owning my first pair of Kizzix. They won't be Kizzix boots, unfortunately, though, because it snows like three days a year in Washington DC.

• 4:27Ben Thompson?

  That is literally, it is the best articulation of the Kizzix idea because putting on boots is really annoying. Uh, and it's one of those things like you just don't go outside or don't do stuff like, oh, I gotta put my boots on. Or you put your, you'll, you put your tennis shoes on because they're easier than you fall on your rear end. So.

• 4:47Andrew Sharp?

  Snow all in your shoes. Sure. Yeah. Well, that's the thing is I just don't own any pair of boots here in DC. That's my coastal privilege.

• 4:55Ben Thompson?

  The other problem here is your feet get cold. So you wear boots for warmth. That's, that's the biggest, that's the biggest.

• 5:00Andrew Sharp?

  Well, maybe I'm built different over here in Washington DC. I can handle some cold feet. In any event, uh, enough prelude and Ben will dive in and begin with a story from Bloomberg. And they write, Echo Star agreed to sell more spectrum licenses to Elon Musk's SpaceX for $2.6 billion as it works to unwind parts of its 5G wireless network. The deal adds to a September agreement that the satellite TV and wireless company inked to sell SpaceX about $17 billion in wireless spectrum. Between that sale and another to AT&T for $23 billion, which Echo Star brokered under pressure from federal regulators,

• 5:42Andrew Sharp?

  the company has been forced to give up on becoming a fourth major US wireless carrier as originally envisioned. So there's the Echo Star story, but SpaceX is the star of the story. SpaceX has now purchased $20 billion worth of spectrum this year, or nearly $20 billion worth of spectrum.

• 6:00Ben Thompson?

  Is it that high? Yeah, I guess it is. Yeah.

• 6:01Andrew Sharp?

  And you've written about it a few times on Sir Tekkari. We haven't discussed it on the podcast. So what is driving these investments? Where is SpaceX trying to go?

• 6:12Ben Thompson?

  I mean, I think it's really interesting. I'm glad we're gonna talk about it. So the the one funny line in this story, though, I just have to call it out. The company has been forced to give up on becoming a fourth major US wireless carrier. No, Echo Star declined to make the investments necessary to be a fourth wireless carrier. And so they are appropriately being forced to give up the spectrum to people who will actually use it. So, uh, yeah, this is downstream from like some of the the AT&T mobile stuff. I can't even, I'd have to go back and refresh myself on the details. But I, this is a, spectrum is a scarce resource. Echo Star has been sitting on a bunch of it and we need that spectrum.

• 6:51Andrew Sharp?

  So out of curiosity, what would the investments have been from Echo Star in order to make that spectrum more useless or more useful?

• 6:59Ben Thompson?

  Yeah, we had actually build towers that actually use the spectrum. So they have like, I think Boost Mobile is their thing and they've built a little bit. But this is the, you know, being a carrier is not a great business. And I think that's actually an interesting place to start. You go back, you know, way back when and let's go back just to around the iPhone days. Carriers wanted to own it all. The carrier everyone dreamed to be was NTT Dokumo in Japan. Fully integrated. Of course, they had spectrum and built towers. They also designed their own phones, like all the coolest mobile phones came from Japan. And the absolute coolest mobile phones you couldn't use elsewhere because they only worked on NTT Dokumo's network. And you had like a lot of this stuff that people only realized you could do on phones.

• 7:44Ben Thompson?

  Once the iPhone came out, you could do in Japan, sort of, you know, in that time.

• 7:49Andrew Sharp?

  You could do it before the iPhone came out?

• 7:51Ben Thompson?

  Well, it wasn't iPhone, but you just lots of like multimedia and interactivity and like all these sorts of things. And it was a real classic example of the Clay Christensen concept about at the beginning, stuff has to be fully integrated because it's not good enough. So in the US, which was more, you know, when I got my first cell phone, I got like a Samsung phone that I don't remember what, I think it was on AT&T, I, uh, or maybe it was Sprint. I think it was might have been on Sprint back then.

• 8:21Andrew Sharp?

  Throwback, yeah.

• 8:22Ben Thompson?

  And like. I would have like four or five lines of text and me being me managed to accrue like a thousand dollar cellphone because I figured out to get like the WAP browser and I had like an RSS reader on there. And I actually, this was the summer I was living in Washington DC because I was interning there and I would go sit on the national on the on the lawn of the mall and like scroll through and just read the internet for like an hour.

• 8:49Andrew Sharp?

  That's pretty great. And may actually count as touching grass, just for the record.

• 8:54Ben Thompson?

  I was literally, I was laying on the grass. But I do this on like four lines of text, like, like black and white, pretty ridiculous. But, but so the experience was certainly not there. Had I been in Japan, I could have had a larger screen, better, probably like more, a better experience, sort of. They were, they were sort of doing it all. Everyone wanted to do that, you know, they wanted to own the experience. So if you got a cellphone, you only got the cellphone from the, you bought your cellphone from the carrier, it was tied to that carrier, they wanted to own the whole experience. Because who wants to, the problem is, you want to, who wants to just build cellphone towers? Like, at the end of the day, one cellphone tower is like

• 9:36Ben Thompson?

  another cellphone tower, it becomes a matter of who can build more. Your profitability is a function of how much you're willing to spend on capital investments, which is a tough game to play. So you roll around to the iPhone coming out. The company that had won that game by and large was Verizon. They, they had the best coverage. They still, I think, mostly have the best coverage. You know, obviously, there's a gazillion commercials citing all sorts of different things. But, you know, especially when it comes to like, if you want at least 4G speed, anywhere, I think Verizon is probably still the best. Again, don't quote me on this, but the, I'm such a sicko that I actually have two carriers to make sure I have as much coverage as anywhere. Look, I haven't changed at all.

• 10:21Andrew Sharp?

  Exactly. A sicko 20 years ago, still a sicko today.

• 10:23Ben Thompson?

  Yeah, well, I mean, the problem is that I've been a T-Mobile customer for a long time because T-Mobile is by far the best if you live internationally. First, they were the first one to have a good international plan, where just. Just by default, you got X amount of data in basically any country you went to. And then your texts, you got SMS and texts and all the, you know, just sort of work seamlessly. Everyone has that now, but T-Mobile is still the only one where if you're like 18 team Verizon, you have to be in the US most of the time and then you can have a good plan abroad. T-Mobile will let you live abroad, only come to the US occasionally and still maintain your plan. So for anyone living abroad, T-Mobile is still the best deal, the best plan.

• 11:02Ben Thompson?

  The problem is T-Mobile's coverage is just like kind of sucked, especially, you know, here it's fine in Madison. You get out of town, it falls apart very quickly. I still value that international aspect. My wife is back and forth between here and Taiwan. She has a line also. So I still have T-Mobile, but I got Charter. The, the, because the cable companies-

• 11:26Andrew Sharp?

  I didn't know they did cell service. Wow.

• 11:28Ben Thompson?

  Oh man, that's going to break the heart of Craig Moffett. Yeah, no, that's like, so there was a deal a while ago where, where Verizon had to give them a, so they run both Comcast and Charter have, they run on Verizon. Now they run at a slight, at a lower prioritization level. So I wouldn't tolerate that for my primary line. I want to be top priority. Like I don't want my data pushed aside for anybody else. I want it to work all the time, but in this case it works because what I want is I want coverage if I'm out in the boonies and T-Mobile doesn't work, which it probably won't. They did acquire US Cellular, which I'm excited about because US Cellular is great coverage in Wisconsin. Anyhow, way too many details that no one cares about.

• 12:10Andrew Sharp?

  No, fun little digression into Ben's fetishes as far as carriers are concerned.

• 12:16Ben Thompson?

  Oh, I mean, we talked about, like the, I am, it's a very important to me to be online and connected all the time. So I have two, I have two phone carriers.

• 12:26Andrew Sharp?

  Absolute sicko on the other line of this podcast.

• 12:29Ben Thompson?

  Well, even though I got fiber, I still have Starlink on the roof. So I have two home internet providers and I have two cellular providers. It's ridiculous.

• 12:37Andrew Sharp?

  Just in case there's an earthquake that disrupts the fiber connection that's running into your house now.

• 12:42Ben Thompson?

  I did maintain my carrier. In Taiwan as well. So I guess.

• 12:47Ben Thompson?

  But anyhow.

• 12:48Andrew Sharp?

  All right. So the economics of carriers, though, that's where we're beginning.

• 12:52Ben Thompson?

  Yeah. So Verizon's generally the best, but Verizon wanted to leverage that having the best to owning the full customer experience. It's kind of like akin to the whole thing with like GM and like CarPlay. We want to own the dashboard. We could sell services, blah, blah, blah, whatever it might be.

• 13:06Andrew Sharp?

  I mean, it's fairly intuitive that if Verizon can make the best phones, that's going to be a differentiator that makes me choose Verizon.

• 13:14Ben Thompson?

  Well, they never wanted to make the phones. They just want to control, like have control and have their services on there. And push people like you have their favorite partners and you know, it's the old integrated sort of storybook that, that you know, you, you make sense. Why you want to do that. The problem with.

• 13:30Andrew Sharp?

  Think about if iPhones were only available on Verizon, everybody would have Verizon service.

• 13:35Ben Thompson?

  Well, we're going to get there. Uh, this, the problem with, with integration is if it lets you do something that wasn't possible. You can win. If you have some way to lock in that advantage, you can maintain your win. But over time, if you don't have those two things and you can't scale to the broader thing, your advantage disappears. So I talked to the CEO of Unity this week, who started his career, or not started his career, but one of his stops was at AOL back in the day. And we were sort of talking about this in passing. AOL in the nineties was so easy. You could like, it was the way, it was the way people got online, getting online. Otherwise, it's actually funny. I realized this week that

• 14:20Ben Thompson?

  the company I got fiber from, I was actually a customer like 30 years ago because I, back when they first started. I was in the, I'm too good for AOL sort of camp.

• 14:31Andrew Sharp?

  Of course you were.

• 14:32Ben Thompson?

  Yeah. And so I wanted to get a real internet connection. So the company called Supernet, like I actually remember this week, wait. I pushed my parents to get a Supernet ISP account way back. So, um, I actually haven't told, told, told Supernet that I have.

• 14:48Andrew Sharp?

  But AOL was the idiot proof solution for the rest of us 20 and 30 years.

• 14:52Ben Thompson?

  Well, because they had so much more stuff on AOL. I remember actually being online in the nineties and like kind of being annoyed. I didn't have access to AOL because there was so much on there that wasn't available on the internet broadly. But. The internet grew up. You got lots of stuff on the internet and suddenly having to go through AOL. Oh, like AOL did, you could access the broader internet. But it just became this burden and this tax and it was cheaper and better to just get a regular connection to the internet and then. And a browser. How did you, how did you find stuff there? Oh, Google. Like Google in many respects is what broke AOL. The internet grew up and there was lots of stuff.

• 15:35Ben Thompson?

  But if you didn't know how to find it, it wasn't useful to you. Then Google made it possible for you to find everything. And suddenly the whole sort of reason, and so AOL just sort of like fell down under its own weight. Um, and this is a story that, that, that you see happen. What makes Apple unique is by integrating the, the software and the hardware. That's something no one else could do. No, like if you're, and operating systems are so powerful because apps are built for it, you're, you're, it's the key thing, you interact all the time. If people don't churn from operating systems and because Apple, you can only get the Apple operating systems on Apple hardware, which they can make a lot of money by selling, you know, at a premium price. And so they've been able to maintain their advantage.

• 16:19Ben Thompson?

  The, where this came to bear was with the iPhone. And I think, I'm sure there has to be business cases about it. I, this was one of the things I wondered about when I started Chitkery. I'm like, I need to write about this because people don't really get this. It, it's one of the all time examples of reconfiguring a value chain around you, which is, Apple had this built in customer base of people that loved, first loved the Mac and then a larger portion of people that love the iPod. And they, even there, even with the iPod, they had the iTunes component and they had the iPod component. It was hardware and software that worked together and, uh, and like I, they got a lot of people using iTunes who then got an iPod.

• 17:01Ben Thompson?

  Now, some people got iPod and thus used iTunes, but, but there was, you know, it was very much sort of, uh, worked together in that regard. And so they come out with the iPhone, the iPhone's amazing. And also everyone already has the software to manage the iPhone because they have iTunes. And it becomes, and so Apple's like, they have this thing coming out. Everyone's eagerly anticipating what it's going to be. And Apple goes to Verizon and says, we're coming out with this iPhone. You have the best network. Of course we want to be on the best network. Let's make a deal. And Verizon's like, no.

• 17:34Ben Thompson?

  Because Apple did not want to have Verizon branding on their phone. By the way, your phones used to have the carrier's brand on it. They did not want Verizon controlling the software. That's Apple's key to success is owning and controlling that. And so from Verizon's perspective, it's like, no, we're leading. We have the leverage. We have the, exactly. And so what Apple did was they signed a deal with, was then Singular. Singular took the opportunity of this deal to rebrand AT&T. Mm hmm. Cause Singular was like a, you know, when AT&T was split up and then sort of like reunited over time.

• 18:11Ben Thompson?

  And what happened that had never happened previously is people started leaving Verizon to AT&T because they wanted the iPhone. Strictly for the phone. That's right. That never happened before. There was never, even like when Motorola had the Razr. What happened was people clamored to get that on their network. They weren't leaving their networks to go get, to go get that phone. And Apple did this in market after market. It was so fascinating. In every market, they usually ended up launching with the second or third place carrier. Because the leading carrier and the ultimate example of this was Japan. SoftBank was in a distant third place.

• 18:54Ben Thompson?

  They say, fine, we'll take it. And Japan is like a massive iPhone country. And so many people, and NTT Dokumo was one of the last carriers to ever carry the iPhone. Precisely because NTT Dokumo was the AOL of phone carriers. They had the full experience and the better experience. They were superior and of course they wanted to hold on to that. And so Apple goes in and SoftBank goes from this distant third place to, I can't remember if they passed NTT Dokumo. I think they at least tied them as far as share. Just, and just obliterated NTT Dokumo. Finally around 2014, I think it was the iPhone 6. So the NTT Dokumo and China Mobile came on, I believe the same, same year, around the same time.

• 19:38Ben Thompson?

  Finally, they gave in and started supporting the iPhone. Now the iPhone is just totally dominating Japan. Everyone who's stuck with NTDO, they're like, they're like, oh, thank God, finally. And so by Apple controlling the hardware and software, they completely reconfigured the value chain in carriers.

• 19:56Andrew Sharp?

  Right, and turned every carrier into a commodity.

• 19:59Ben Thompson?

  That's right. And so everyone over time is always like, why doesn't Apple become a carrier? Like, Apple loves to integrate things. Like, they could provide a better experience. It's like, well, number one-

• 20:10Andrew Sharp?

  Let them spend the money.

• 20:11Ben Thompson?

  No, they can't provide a better experience because the experience isn't a function of Apple's skillset. The experience is a function of spending capital to build towers. And that's a bad business for Apple in particular, which is making massive margins, selling these things. And more than that, because there was already competition in the market, what actually happened was singular, like, they made a lot of money on the iPhone by selling super high-priced plans. They also spent an astronomical amount of money because iPhones were using so much data. So they had to like, even to just to stay competitive, and that happened to everyone. There was this massive build out of equipment, just because the amount of data people were using exploded.

• 20:52Andrew Sharp?

  The iPhone user base, yeah.

• 20:53Ben Thompson?

  And people forget, like, the first few years of the iPhone, it was, there would be long periods where you just couldn't use it. Because the towers were so saturated, particularly in big cities. And it's like, much better now, but it's much better now without Apple spending a dime on it.

• 21:10Andrew Sharp?

  Because everyone else but Apple spent a lot of money in order to ultimately serve Apple's interests.

• 21:16Ben Thompson?

  Then the whole world did that. And more than that, actually, one of the reasons why Apple's earnings were so predictable through about the iPhone 6S is because what would happen was Apple, as this is becoming clear, Apple's gaining leverage in every market. And every carrier that doesn't have an iPhone is bleeding customers. So they're now, they're coming to Apple, begging for the iPhone. And what Apple would say was, okay, you can have the iPhone, and you have to sign a sales guarantee of how many iPhones you're going to sell. And so people wondered, like, Apple's- Their forecast is so perfect.

• 21:51Andrew Sharp?

  iPhones are going to be sold.

• 21:52Ben Thompson?

  Because they was contractually guaranteed about how many iPhones they would sell. And so what was super funny, and I didn't even realize this till, so after the case is, I think it was the iPhone, I think it was the iPhone 6S. Suddenly, Apple kept missing earnings and both up and down. They sold more than they expected, then fewer they expected. It's like, what happened? Did they become totally incompetent? No, what happened was with the iPhone 6, they finally ran out of carriers to add.

• 22:19Andrew Sharp?

  I was gonna say.

• 22:19Ben Thompson?

  They got an Android carrier, they got a China mobile. Right, and so it was no longer they could like lock in guaranteed sales because they had total leverage in the marketplace.

• 22:29Andrew Sharp?

  All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharp tech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Sir Techery and the Sir Techery Plus bundle. Check it out, and if you've got feedback, please email us at email at sharp tech.fm.