(Preview) The App Store in the Shadow of AI, Offensive and Defensive Cybersecurity, Q&A on Financial Planning, AI Writing, American Sports

On today’s show Andrew and Ben begin with reflections on big Apple news that feels relatively small alongside a world of growth and dramatic questions across technology in the AI era. Then: They turn to the news that OpenAI is pausing its Internet model training, the incentive structure that makes cybersecurity challenging and how AI compounds the challenge, two digressions from Ben on misalignment and a new AI use case, and why black hat and white hat cybersecurity actors are both doing the same thing in the AI era. At the end: More thoughts on bubble benefits that may survive, an emailer considers a financial planning career but is concerned about AI, two follow-ups on AI and the writing process, and European emailer thinks Americans who love sports love everything but the actual sport.

• 0:00Speaker 00

  Hello and welcome to a free preview of Sharp Tech.

• 0:09Speaker 00

  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?

• 0:19Speaker 01

  I'm doing okay. This week, you know, Wisconsin does get fairly muggy. It doesn't really bother me. People here complain it's so hot and muggy. I'm like the 20 years in Taiwan have inoculated me. We'll see. It might be knocked out of my memory pretty quickly, though. I did adjust to the cold very well. I think if you adjust to the cold very well, you do not adjust to humidity very well.

• 0:38Speaker 00

  Okay.

• 0:38Speaker 01

  But there's that moment where, oh, it's so pleasant out. And it's so pleasant out because like the dew point drops, which means the humidity is gone, which is the first hint of winter. So it's like, oh, that's there's a little, the little twist in the air. And it's like, we had a discussion, you know, about, you know, where are we going to move the lawnmower, the, the slow wars, they take a spot.

• 1:02Speaker 00

  Start battening the hatches.

• 1:05Speaker 01

  Yes. I'm taking my daughter off to college later today. It's like, like that, I've always thought about years in like school year term.

• 1:15Speaker 00

  Okay.

• 1:15Speaker 01

  It's just, you know, like, the new season is starting, the new year of stratechery is starting, the new year of my kid's school is starting.

• 1:23Speaker 00

  And winter is coming.

• 1:25Speaker 01

  When winter is coming.

• 1:26Speaker 00

  Well, I'm ready at this point.

• 1:28Speaker 01

  Is that a Game of Thrones reference?

• 1:28Speaker 00

  Well, it is, but not intentionally so. I am 100% ready for fall, at least, not necessarily winter, but I've had enough humidity here in DC. It was pretty funny walking around Madison and talking to some of your friends out there and hearing them say, oh, it's pretty muggy and gross outside. It felt great to me as I was walking around Madison. It's fine.

• 1:52Speaker 01

  I hardly ever feel very hot or muggy here. It's great. So, but yes, it is not muggy anymore.

• 1:59Speaker 00

  Indeed. Yep. Packer season is coming. Here we go. We will begin with a topic that we have hit many a time here on the show.

• 2:08Speaker 01

  Oh, yeah. So I can lead on this, a topic we've hit many a time. I also very good news for me.

• 2:13Speaker 00

  Okay.

• 2:15Speaker 01

  I'm just glad I don't have to buy new gear.

• 2:17Speaker 00

  Why's that?

• 2:19Speaker 01

  Oh, I thought we were talking about Max Verstappen resigning with Red Bull.

• 2:21Speaker 00

  Oh, there we go.

• 2:24Speaker 01

  Look, F1 merchandise, F1 merchandise is unbelievably expensive.

• 2:29Speaker 00

  Cost you a pretty penny. That's right.

• 2:30Speaker 01

  That's right.

• 2:31Speaker 00

  You are paying for college right now.

• 2:33Speaker 01

  And by the way, Red Bull just has great stuff. So, um,

• 2:36Speaker 00

  Oh, my God.

• 2:36Speaker 01

  Big win for me in that regard. Not a big win if Max doesn't win. So I need Red Bull to get the car in order.

• 2:42Speaker 00

  Yeah.

• 2:43Speaker 01

  But, uh, but hey, you know, it's always good to save some money.

• 2:45Speaker 00

  Well, look, he, there was a good chance that he was just gonna walk away, or at least a non-zero possibility. He's not walking away. So that's a win for racing fans everywhere. And your note on the gear is really true. I'm not a Red Bull hater anymore, but when I visited Grand Prix's like four or five years ago, I was a Red Bull hater. And I remember walking through the merch tent, being infuriated by how cool the Red Bull merch was. So I'm glad that you get to hang on to that in the years to come. Good for you.

• 3:13Speaker 01

  My $70 hats are gonna still be useful. So like a $150 raincoat. Actually, that might be, might have been more expensive than that.

• 3:20Speaker 00

  Oh, my God. It's unbelievable. All right. Well, the Financial Times earlier this month wrote that Apple has acknowledged for the first time that regulatory changes forcing it to loosen control of its App Store are weighing on its more than $100 billion services business, a rare concession that antitrust action is beginning to dent one of the company's most profitable divisions. And lo and behold, Ben, in the wake of that Financial Times news and the disclosure from Apple, we have a settlement in the EU over the Digital Markets Act. Apple proposed new commissions of 15% for standard apps in the United States, while

• 4:02Speaker 00

  Germany's competition authority responded to Apple's app tracking transparency changes from several years ago and held that Apple can no longer use different language when it sends a data consent request for Apple's own offerings versus a data consent request predefined by Apple for third-party apps. As someone who has been pushing for changes to these policies for quite some time, long before it was cool, what comes to mind when you hear about these changes for Apple?

• 4:35Speaker 01

  What?

• 4:36Speaker 00

  What?

• 4:38Speaker 01

  Oh, sorry. I fell asleep because the, the topic felt so boring. We wanted to talk more about that. No, my takeaway here is actually kind of a meta takeaway.

• 4:47Speaker 00

  Okay.

• 4:48Speaker 01

  Which is not meta to the company.

• 4:49Speaker 00

  That's where I wanted to go. I don't want to get into the nitty gritty. Let's go meta on all this.

• 4:53Speaker 01

  Yeah, this, so number one, I was very early to this. I cared about this a lot. I wrote about a lot early in stratechery. I've told the story about, uh, the, who was the Felix, the financial analyst?

• 5:04Speaker 00

  Felix Salmon. That's right. Way back when.

• 5:06Speaker 01

  Yeah. Analyzing like what makes a good newsletter and, oh, you have to have your pet obsessions that no one cares about. And you listed the App Store as one of them.

• 5:14Speaker 00

  Really worked up.

• 5:16Speaker 01

  And, uh, and I think it really reached sort of a fever pitch, like during the COVID era, in part because like that's when the services revenues were really skyrocketing, in part because everyone was stuck at home. Like there are secular factors that do drive this. Apple was really cracking down on like, remember companies would have in classes and they tried to make them virtual classes and Apple's like, oh, gotta get fast 30%. They were out of control, like during that time period. But also from a big picture perspective, that's when I've talked about, that's when I kind of almost burnt out.

• 5:49Speaker 00

  Yeah.

• 5:49Speaker 01

  And I was like, do I want to keep doing this? And my realization at the time was actually, no, I still, I have no problem with all the content production that I do. I enjoy it until you get clipped and then it gets really annoying. I enjoy it. I enjoy tech. I'm worried about it. I am tired of regulation and congressional hearings. That's what's burning me out is sitting down like, nothing will depress you about your job faster than listening like five hours of congressmen and congresswomen sort of like pose like grandstanding while they're doing, you know, grilling Mark Zuckerberg or whoever it might be.

• 6:25Speaker 00

  Or poring over 400 pages of EU regulations.

• 6:29Speaker 01

  Or reading court case. The court cases are actually, I don't mind the court cases. They're more interesting because there's often interesting things in them. And you know, judges are actually usually quite smart. Like they weigh stuff out usually very, very well. Uh, that is the

• 6:43Speaker 00

  Credit to the clerks.

• 6:44Speaker 01

  Every lawyer that I've interacted with has at some point said to me, you should have been a lawyer. I'm like, um,

• 6:50Speaker 00

  You know, I've had lawyer friends remark the exact same thing, talking to me about your analysis. So I think you're happier in this career.

• 6:59Speaker 01

  Probably, but, um, I do like, you know, it's not just I like arguing. I like laying out a case and like tying stuff together and looking at things like, uh, so I appreciate a judge. I appreciate a good opinion. I appreciate a good, a good, a lawsuit, you know, and so that, anyhow, I'm off track. The whole point was we were stuck in this world that you could see coming. Like I've talked about it when I wrote aggregation theory, like two weeks later or three weeks later, I wrote an article saying, the inevitable outcome here is a bunch of regulation and court cases and it's not going to work. And I spent a lot of time on why it's going to be a problem applying it. I trust law to aggregators and all these bits and pieces. And the big takeaway here is this sort of blasé response. And I kind

• 7:44Speaker 01

  of felt compelled to write about it yesterday.

• 7:46Speaker 00

  Mm hmm.

• 7:47Speaker 01

  But I wasn't really interested in writing about it is AI. Like AI came along. Everyone cares about AI. It's a new thing. It's a growth thing. And obsessing about the App Store is emblematic of stagnation, the stagnation that had taken over in tech. And no one cared about the app. When I was running with the App Store, the reason why people were like, why do you care? Is because the App Store was growing like crazy. So everyone was making more and more money.

• 8:15Speaker 00

  Yeah.

• 8:16Speaker 01

  Yeah. There is like a political analogy here, which is this is why growth is so important. This is what the EU gets wrong by and large by undervaluing growth. When things are growing and everyone's getting richer. All the problems that inevitably exist because the world is messy, there's going to be problems, don't really matter that much and no one cares that much.

• 8:40Speaker 00

  Mm hmm.

• 8:40Speaker 01

  When you feel like things aren't growing, when the pie is not getting larger and you're just fighting about how to slice it up. Then it becomes this very overwhelming, all encompassing thing. The App Store was this world of people feeling like nothing's happening. So let's slice up the pie differently. And quite literally, this is the other one, the App Store, that is always like, it, it's bothered me in some respects. The part that's never bothered me is different than the part that bothers big companies. Like if you're Epic and Tim Sweeney, you're making a gazillion dollars on Fortnite, you're just arguing over who gets a bigger percentage of us selling virtual dances.

• 9:21Speaker 00

  Mm hmm.

• 9:21Speaker 01

  It's all ridiculous, right? Like it's purely zero marginal cost. It could not be more purely zero marginal cost than unlocking a bit of code.

• 9:31Speaker 00

  New clothes.

• 9:32Speaker 01

  That lets you, yeah, exactly. Right? Like virtual clothes. So who cares between Apple and Epic? Who's getting more? Like Epic in general, I just, I appreciate Tim Sweeney fighting the fight, like philosophically. I have a problem with the App Store and, but at the end of the day, I'm not that sympathetic to Epic, the multi-billion, a billion dollar corporation or whatever, fighting over who gets what share of virtual dances.

• 9:58Speaker 00

  Right.

• 9:58Speaker 01

  And now no one cares. I think that's the bigger point, including me. Just don't care.

• 10:02Speaker 00

  That was my sentiment as well, because you wrote about it, you went exactly the direction I wanted to go.

• 10:09Speaker 01

  Oh, did I steal your zag?

• 10:11Speaker 00

  No, no, but I just, I sat down, I was like, all right, so Ben is poring over a couple different Apple related moves here and I can't bring myself to care very much. And that's why my next question on the rundown is, isn't it amazing how incidental all of this now looks in the shadow of AI? It reminds me of the TikTok issue in the China space where Bill and I, we were podcasting until we were blue in the face over the fate of TikTok in the United States of America. And had I been writing a couple of years ago on Sharptech, I'm sure I would have written like several three or 4,000 word pieces passionately exploring that issue and why TikTok is a problem, this, that, and the other thing.

• 10:56Speaker 01

  Sharptech is one of the hottest websites in America.

• 10:58Speaker 00

  That's right, growing very fast. I of course still hate the way the Trump administration has handled the TikTok issue over the last year or two, but also alongside everything else that is changing in the world and the battle for resources and choke points and trade and whatnot. I don't want to say who cares, but it's like, I would struggle to muster the same passion for the TikTok controversy that existed the like.

• 11:23Speaker 01

  Well, the question is though, does it actually matter more than ever, right? Like take something like AI data centers. Like, are we sure China doesn't have their thumb on the scale on TikTok to be pushing a lot of content?

• 11:32Speaker 00

  Sure.

• 11:33Speaker 01

  Stopping build out some data centers?

• 11:35Speaker 00

  I mean, China would be derelict in their duty if they weren't doing that.

• 11:38Speaker 01

  Exactly. China would actually, it's funny to do this point, like you're not in like, we'll come back to the App Store in a moment, but if anything, the TikTok issue is actually the biggest issue facing tech right now. And but to your point, people like, don't care that much. I mean, App Store, AI, is that the similar thing? Actually, the interesting App Store story that was talked about a little bit earlier in the year and has kind of disappeared, is like, Apple's still having all these constraints on you like building your own apps and like with the whole vibe coding thing should be this, and people are doing it. You have like Replid or like other, other services that that should do your apps.

• 12:17Speaker 00

  What are the constraints imposed?

• 12:19Speaker 01

  Like there was a whole thing for months, Apple wasn't letting these apps update themselves because they wanted them to strip out this functionality and even be able to run other apps. And they're like, and so there's been things that it's kind of unclear. It's clear that no one wants to really talk about this in part because everyone's scared of Apple and they want Apple to enable these sorts of things. But why can't people be making their own iPhone apps and launching them and running them? And there are legitimate security concerns, I'm not denying that. Apple also has great security infrastructure on the iPhone relative to PCs. I'm not saying it's perfect, but the whole sandbox infrastructure, because it was built from day one for apps to be fully isolated for themselves. But Apple wants everything to go through the App Store because they, if they want a cut of everything, they don't want you to be able to just write a bunch of your little own apps on there.

• 13:04Speaker 01

  And by the way, shortcuts, a great AI use case, completely inscrutable for most people to actually build shortcuts, but much easier if AI does it for you or helps you, helps you through it. So there are.

• 13:18Speaker 00

  When you say shortcuts, you're talking like action button shortcuts, right?

• 13:21Speaker 01

  Well, there's the shortcut, there's a shortcuts app on your iPhone that is actually pretty powerful and lets you build different sorts of things. Yeah, I used, I made my action button, it just brings up a prompt or I just say, you know, air mattress and that just pops up, you know, basement, storage room.

• 13:38Speaker 00

  Get you what you need.

• 13:39Speaker 01

  Um, that's for Sarab.

• 13:42Speaker 00

  Exactly. Thank you for the update. Absolutely.

• 13:44Speaker 01

  But yeah, like that is, Apple is choking something of the future sort of right there. But because it's not pressing, because everyone feels like there's opportunity, because there's growth, it's not really rising to a pressing concern. I guess maybe the world affairs thing is the opposite.

• 14:04Speaker 01

  If everything feels like it's going crazy, then it's hard to get stuck on little things. But the overall concept is probably the same.

• 14:11Speaker 00

  Right. There are a lot of changes and upheaval and opportunity, at least as far as tech is concerned. I thought related to all this, your point on Germany's four-year investigation was pretty interesting because the changes to ATT in Germany are the byproduct of a four-year investigation from the competition authority.

• 14:32Speaker 01

  So this thing came up, like ATT, as I've argued for years, is hilariously anti-competitive. And anti-competitive in a very classic sense, like this is not a difficult case to make, unlike the iron heater cases. Apple imposed these rules on everyone else and applied different rules to itself and was competing in the exact same space, right? And they're putting all these scare tactics, like the prompt that came up if you to, to agree to what, to the tracking is like very scary. No one's going to ever click that if they don't know.

• 15:02Speaker 00

  I do every time, out of spite for Apple.

• 15:05Speaker 01

  I like, also I want a better experience. I want like, so.

• 15:09Speaker 00

  Targeted ads.

• 15:09Speaker 01

  But also on a principle, I click it, yes. But then Apple's is not like that. Apple's is like, oh, we want to give you a better experience. We want to do all these sorts of things. It's absurd that it's like, it's asking to do the exact same thing for all intents and purposes.

• 15:23Speaker 00

  Yep.

• 15:23Speaker 01

  And so everyone is like obsessed about limiting the big tech companies. And you know, this tech company is blatantly violating existing antitrust law as far as I understood it. And like they're changing the rules, right? We talked, a lot of Apple's stuff is not actually a violation because it's been on the tin all along, that you can't do certain things. And that's part of in US antitrust law, if you're honest all along, you're going to do what you want. Like Google's problem with the Epic case was they did change the rules. If you change the rules after the fact, that's a big problem. Apple, in this case, was changing the rules after the fact, favoring themselves. To me, super obvious. And so when I heard about the, the German regulator, Apple has to change their wording.

• 16:04Speaker 01

  It has to be the same wording for everyone that it just overall, I think it's a great regulator, I'm not completely anti-regulation. This is a, a good outcome. And I'm like, oh, I wrote about, I need to put a link here to, I already described how anti-competitive this was in an article. So I go through my, you know, no one uses a tracking search more than me, find this article, data and definitions. I read the article and the opening of the article is, the German regulator is going to look into this particular case. And I'm like, oh, it's the exact same case. I didn't even realize it was the same case. I'm like, oh, it's been four years. And so here's the deal.

• 16:40Speaker 00

  Okay.

• 16:42Speaker 01

  This is a good outcome. They were thorough and I think the right thing is happening.

• 16:47Speaker 00

  Mm hmm.

• 16:48Speaker 01

  And I understand the frustration of the regulator, of the app developer, of the analyst, that it took four years to get here. Like I completely get that.

• 16:59Speaker 00

  Because in that four-year time, like the advertising ecosystem has already been remade to some extent.

• 17:06Speaker 01

  Well, just in general, I tied this to the, the AI Act where I think a motivation for the EU's AI Act, which was passed a few years ago, and now is driving this whole watermarking discussion. And I think it's very limiting in terms, you know, the EU has like nothing going on in AI relatively speaking, like Ms. Roll's big play now is to basically be a data center operator for Chinese models. Like it's, yeah, congratulations. The impetus to pass that was like, we passed the DMA too late. Like we, we, we didn't address tech's issues until well after the fact. And I can imagine an EU fan pointing at this German case and saying, look, it's 2026. They didn't even start investigating until 2022 and that everyone's already worked around

• 17:51Speaker 01

  ATT and blah, blah, blah, blah, blah.

• 17:53Speaker 00

  Structural shifts as a result of ATT.

• 17:55Speaker 01

  Yeah. All that is totally fair and correct, and I think it's worth acknowledging that.

• 18:02Speaker 00

  Mm hmm.

• 18:03Speaker 01

  But the App Store was a good thing. Like the, Apple went too far, in my opinion, but let's not forget, they did create an entire ecosystem. They did lay the foundation for the creation of billions or trillions of dollars worth of value, trillions. Yeah. If you consider like, like the, the big, big tech companies.

• 18:25Speaker 00

  Sure, yeah.

• 18:26Speaker 01

  They made, the consumer surplus is astronomical. All these great things are part and parcel of the bad things. And if you worry about the bad things too early, it actually ends up not mattering because the good things don't happen. And you tie this back to the concept of, of the overall political economy. When things are growing, a lot of issues just aren't that big of a deal and it's a lot easier to solve problems.

• 18:57Speaker 00

  Yeah.

• 18:57Speaker 01

  And this is something I thought was just worth acknowledging. Look, this took forever. I get why the EU wanted to be early on AI. But let's not forget, this took forever in part because the App Store was and is awesome and delivered astronomical growth, astronomical consumer surplus all over the world. And I would rather be in a world where we got all this upside with a bit of Apple being a bad actor on the backside and maybe treating that too late, rather than get obsessed with the backside and Apple acting badly. And you missed out on the front end. And by the way, in which case you would never even got to the back end. So you like, you regulated nothing.

• 19:40Speaker 00

  Yeah. When I read your post on Wednesday, it was a very useful insight at the end of an otherwise boring update on Wednesday from you.

• 19:51Speaker 00

  But I do think it's a healthy acknowledgement of the tension that underlies the regulation questions. And with AI specifically, I have always said, I'm not as anti-regulation, but I think it's just changing so quickly that it's almost guaranteed we will get more wrong than right if we try to regulate it before we know exactly how any of this is used and how it will work in practice. 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 sharptech.fm. Either option will get you access to a personalized feed that has all the shows we do every week,

• 20:33Speaker 00

  plus lots more great content from Strategery and the Strategery Plus bundle. Check it out. And if you've got feedback, please email us at email at sharptech.fm.