Apple's iPhone problem and CES preview

This week, Nilay, Paul, and Dieter prep by looking at rumors, early announcements, and predictions for the upcoming “biggest event in tech”. 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.

• 0:04Nilay Patel?

  Hello and welcome to The Vergecast, the flagship podcast of theverge.mobi, your number one source for mobile news. That's not right. Pretty soon, we're gonna, we're gonna be The Verge TV. We'll get there. I'm Neelai. Dieter is here. Hi, Dieter. Hello, hello, hi. Paul Miller is here. Hi, Paul. Hello. We're back. Merry Christmas. Merry. We took a few weeks off, but we're back. This episode is gonna be a little bit all over the place because I thought that what we were gonna do was a little bit of CES preview. CES, the Consumer Electronics Show. Starts this weekend. It's the biggest show in tech, which is a, every year, a more and more meaningless appellation. There are always bigger TVs or TVs with more pixels, which appeals to

• 0:47Nilay Patel?

  me personally. And then lately, Amazon and Google are just, are fighting it out over smart home things that connect to smart home platforms. So it's a good time. So here's what I thought. I thought we'd come in, you know, it's the days after the, the big holiday break, we were off. I talked to my friends here, Dieter and Paul, we talked about what's gonna happen in CES. I'd maybe ask them a little bit about, what'd you get for this? It'd be fun and relaxed. For the girls. Right. And then all hell broke loose.

• 1:18Nilay Patel?

  So last night, fairly late, Tim Cook published a letter to investors. Tim Cook is the CEO of Apple. It's a small company that we talk about infrequently, saying that after 60 days, Apple was reissuing its revenue guidance for the first quarter and that it would be making a little bit less money than it had planned to make, or that it had promised investors to make. It's a long letter. You can read it. It's on Apple's website. It's 1,400 words. It starts basically this way. "To Apple investors, today we are revising our guidance for Apple's fiscal 2019 first quarter, which ended on December 29th. We now expect the following: revenue of $84 billion, gross margin of 38%." Based on these estimates, our revenue will be lower than our original guidance for the quarter with other items remaining broadly in line with our guidance.

• 2:03Nilay Patel?

  So that's down like 15%, right? Is that right, Dieter?

• 2:07Speaker 01

  Something like that. Yeah, the numbers are like, I mean, people are doing the math differently. It could be anywhere from like 5 to 9 billion. And it was like, the only thing I keep thinking is, you know, Apple says it could miss 9 billion in iPhone sales. And it's like, they've got so much money, would they, they would just miss it? They just like, miss it? They'd lose it in the couch cushions?

• 2:24Nilay Patel?

  So the previous, the 60 days ago, Apple said it would produce revenue between 89 billion and 93 billion. And today, Kim Cook says it'll be 84 billion. So it depends on where you measure in that, that set of things.

• 2:36Speaker 02

  And the couch cushions are China.

• 2:39Nilay Patel?

  Yeah. And so then he, in this, it's very long, there's a lot of parts to talk about. So that's like, just one thing that happened, and we will talk about that.

• 2:47Speaker 01

  Yeah.

• 2:47Nilay Patel?

  And then-

• 2:48Speaker 01

  Oh, so much to say.

• 2:49Nilay Patel?

  I promise we will talk about this. And then today, it comes out that AT&T has just been running around filing trademarks for something called Verge TV.

• 2:58Speaker 01

  No!

• 2:58Nilay Patel?

  And you may have, you may recall from slightly earlier in this episode, when I told you that Verge is the flagship podcast of The Verge. And so that's just our name. That's our, that's our name, that they are trademarking for their forthcoming TV service. So we are opposed, our general counsel, Lauren Fisher, is all fired up. Lawyers are gonna lawyer. A good time will be hap- But come on! What are you doing?

• 3:20Speaker 02

  What's Verge TV like?

• 3:21Speaker 01

  AT&T, you don't go magenta, AT&T.

• 3:23Nilay Patel?

  Well, so AT&T has already, uh, DirecTV, which I'm gonna just go ahead and say is a strong brand name for TV platforms.

• 3:30Speaker 02

  Right.

• 3:31Nilay Patel?

  Uh, they have a new service, which is just called Watch TV, which is kind of a, an exhortation to AT&T subscribers. It's like one of those apps that you name, and it's just kind of like an instruction, you know? Like, people buy a phone, and it kind of don't know how it works, and they just push a button marked "Watch TV," and now AT&T is billing them an extra 20 bucks a month.

• 3:50Speaker 01

  It's like naming your browser "Internet."

• 3:51Nilay Patel?

  Yeah. Yeah, like, I don't, I just want "Internet," and you just like, push it. So that's Watch TV. These are just, it's not a new product yet. It's not out. It's just a, quote, "flurry of trademarks" for something called Verge TV. Look, maybe they're signing a deal with us, we just don't know it yet. Maybe they're gonna come to us and be like, "Hey, we love you guys, uh, love your net neutrality coverage, Eli. Have you thought about having a TV platform on our, on our network?"

• 4:15Speaker 02

  They're gonna be really embarrassed when they Google it and they find out what "verge" means in French.

• 4:21Speaker 01

  Yes, exactly. Actually, that's the funniest part to me is you would think that big corporations would do their due diligence to, you know, find out if somebody else was using that trademark, like, I don't know, a giant website, or, you know, the French language.

• 4:39Nilay Patel?

  The French language thing, I have to say, it's a rumor, it's out there, you can...

• 4:44Speaker 01

  Nobody knows what French is, it's not a real language anybody speaks, there's no way to verify.

• 4:48Nilay Patel?

  I'm not, I won't say it here, this is a family show for Moby fans. Anyway, so, like, all hell broke loose. So, AT&T, you know, call us, maybe? And then, you know, we can say no to you, that would be great, you could have done that before, but I'm issuing this formal invitation here on this show. You know, just let me know.

• 5:06Speaker 01

  What if AT&T is just bitter that we keep on calling them out on their refusal to name Gs accurately? Because they just started putting 5GE on the box and on phones for devices that are LTE advanced, and they're calling that 5G.

• 5:23Nilay Patel?

  5GE.

• 5:23Speaker 01

  Evolution. Yeah, and they pulled that crap with 4G and actually a little bit with 3G, although not really, it was like 2G. Anyway, maybe they're just mad, maybe this is revenge.

• 5:34Nilay Patel?

  It's revenge, or maybe they're just liars and thieves, I don't know, whatever it is.

• 5:39Nilay Patel?

  Who knows?

• 5:42Nilay Patel?

  Yeah, I mean, look, AT&T, you want to be that company that lies about how many Gs people have? You can do that, we'll be here, we'll let people know that you lied about it. You know, that company that just, like, steals a trademark, you can do that too, and then, like I said, just let me know how you want the no to be delivered to you. I can say it to you on the phone politely, you can, right, you can come on the podcast, I can tell you directly. I'm willing to do like a stop motion animation of me doing calligraphy that says no, and then mailing that to you. There's so many ways for me to broadcast audio and video on the internet using mobile applications, which is what your trademark is for, using the Verge trademark. I can, you pick one and I'll do that, and then that can be how you receive... Anyway, I'll stop, our lawyer's gonna be real mad at me.

• 6:24Speaker 01

  Back to...

• 6:24Nilay Patel?

  No, like, that's the thing, everything we're saying here, if this turns into a real lawsuit, will be like, put into evidence. So, I just want to say, for the record, on evidence in the trial that this could turn into someday, that AT&T is bad and they know it. And now that's on the record. Ladies and gentlemen of the jury.

• 6:43Nilay Patel?

  If I just start making closing statements in the podcast.

• 6:47Speaker 02

  Have you ever seen an article by Jesus Diaz for Gizmodo with the AT&T logo and it looks like a Death Star? I rest my case.

• 6:58Nilay Patel?

  So those are the two things that happened to blow up the CES previews. We always talk about AT&T. Let's get back to Apple. So Apple says it's gonna not make up as much money. They're gonna make $84 billion instead of $89 to $93 billion, which is a big miss. All the other stuff is the same. Their gross margin, their operating expenses. Really, and this is what Tim Cook's narrative is, they sold less phones in China because they think the Chinese economy is not doing very well. And then he says he's not shading it.

• 7:26Speaker 01

  Well, macroeconomic challenges in some markets were a key contributor to this trend. We believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.

• 7:48Nilay Patel?

  Yeah. So people aren't buying as many new phones in China. The buying cycle in other countries, including this one, is different. And then people are fixing the batteries on their phones and they're not upgrading as fast.

• 7:58Speaker 02

  Also, Apple doesn't make a phone for emerging markets.

• 8:02Nilay Patel?

  Yeah.

• 8:03Speaker 02

  It's not a thing. It's like Nike saying, you know, our car sales are down because people don't want to buy shoes and drive them as cars. You know, like Apple does not make a cheap phone.

• 8:15Nilay Patel?

  No, no, I looked this up today because it made no sense to me. Depending on who you ask, China is an emerging market.

• 8:21Speaker 02

  What?

• 8:21Nilay Patel?

  Okay. So, yeah, it made no sense to me either because, you know, it turns out I don't spend my days running around with the select group of economists who classify markets. If they're out there, I'm sure their parties are super fun. But they write blog posts explaining their thinking. So basically, China's GDP per capita is not maxed out. So technically, the market is still emerging, right? It's still pretty low on the curve compared to like the United States or.

• 8:47Speaker 02

  Okay.

• 8:47Nilay Patel?

  You know, a European country. So technically China counts as an emerging market. I did not make intuitive sense to me, the way that we talk about China on this show, the way that the tech industry thinks about China, like the last time we had a Vergecast, what did we talk about? Google needing to go to China because that's where the money is. All of our products are manufactured there. Chinese tech companies are huge. These are world-class cities and a gigantic nation that we're in a trade war with. But if you just look at that specific curve of GDP per capita, they haven't reached the same level as the United States. So they're technically emerging. So Cook gets to say, we struggled in emerging markets, instead of having to say, we struggled in our other biggest market, which is China.

• 9:27Speaker 02

  Yeah. I guess the way I think of it, and correct me if I'm wrong, maybe I'm just off on my numbers here, but I feel like Apple was like selling $650 phones up against $300 phones. And then Apple's like, we got this. We'll make our phones $1,000 and see what happens. And, you know, that's not going to work out, right? Or were there more variables at play here that I'm not picking up on?

• 9:49Nilay Patel?

  So there are, you know, today was the day of Twitter theories. Everyone today became a Chinese economist, which is great.

• 9:54Speaker 02

  Yeah.

• 9:55Nilay Patel?

  That's one of, one of the best things that can happen on the internet, suddenly everyone becomes an expert. So the competing theories are pretty basic. One, Tim Cook is, he's saying the truth, right? It's like the simplest one. Chinese economy is turning down. There's a trade war, which he, he mentioned the United, trade tensions between the United States and China. All those things are depressing. Sales in China, everywhere else is fine. The iPhone's still a great product. Apple makes great products. Don't worry about it. Calm down. I'm John Gruber and this has been the Talk Show. Right? And that's fine. Like, that's fine. And like, one of the things I hate the most is like when the Apple web goes into amateur Apple PR mode, but that's available to you if you want it, right? It's just like out there. So that's like theory one. And I think that is a legitimate theory. Like,

• 10:37Nilay Patel?

  Apple as a company, we deal with them all the time, tends to not straight out lie to you. Like, they don't. They shade the truth, they're arrogant, they can bluster, whatever, but they rarely will just directly lie. So you have to imagine there's some glimmer of truth in Tim Cook's statement, potentially more than a glimmer. And I think it's very telling that Dieter just read it, they mentioned the battery thing. They could have just not

• 10:59Speaker 01

  mentioned it. They didn't have to. They could have just not mentioned it. That's, that's the thing is, one of the big questions is, and this is one of, you know, I just mentioned John Gruber, one of the things he has been harping out is, why is this letter so long? Part of it is, Apple's a different company than it used to be the last time they had to do this 15 years ago. So they, you know, they're a big blue chip company now, and so they need to like, give more explanation, blah, blah, blah, blah. But like, yeah, if the more that you, the more that you talk, there's more things for us to wonder about why you said it. And they chose to not just pin it on China and like, other factors, they chose to name those other factors. And specifically naming the battery thing, in addition to like, the, you know, carrier subsidy thing and the pricing thing, leaves

• 11:44Speaker 01

  a lot of room for us to be like, well, what percentage of it is China? Is it the vast majority? Okay. But what percentage of it is this other thing? And how much should we actually be paying attention to? Are people not upgrading anymore? How much should we be paying attention to that we could just, it's, it makes more sense to get your battery replaced than it does to upgrade these days? You know?

• 12:01Nilay Patel?

  Yeah. So there's that. And then there's the fact that last quarter, they said, we're going to stop telling you how many phones we sell.

• 12:07Speaker 01

  Right.

• 12:08Nilay Patel?

  So Tim Cook went on CNBC today and said, well, if you look at, if you look at it, the problem is entirely mainland China, and the entire problem is entirely the iPhone. And it's like, well, I can't. You won't let me look at that. So I have to, I have to trust you. Which, again, you can play that card one or two times. It's like, trust us. We're Apple, we're good at this. Trust us, here are the problems. Here's this other list of problems, we're going to, we're going to address all of them. But you can't check them. You can't check their numbers. That trust evaporates, right? So coming off the heels of, we're not going to tell you our numbers anymore, you know, all these reports saying suppliers are cutting their forecasts for the XS, and then there's a big argument at that, and then now they're actually cutting their forecast.

• 12:49Nilay Patel?

  I think people are primed to not trust Apple, and then you can't go and check their work. You can't go and say, you know, it is, it's true, iPhone, the problem here is really the iPhone in China. You just have to believe what they say, because they're not even providing the investors with that stuff. So then the next theory is that the problem is in China, but the problem in China actually points to problems everywhere else, which is kind of the theory that I'm subscribing to, right? Which is, Apple's entire business model is based on you buy an iPhone, and then you're locked into everything else Apple does, and you're gonna buy, you're gonna buy more and more stuff that Apple makes, and spend more and more money on their services, and I literally got an Apple Watch for Christmas, and it's great, and it's super locked to the iPhone, and that means my next phone will probably also be an iPhone, because I bought this thing. You know, it's like, just this compounding sort

• 13:33Nilay Patel?

  of iMessage group text of products that you buy, right? And like, you can't leave, because then the whole thing turns green, and your life is a disaster. I think that's like my theory, and that's sort of like the Ben Thompson approach, which is, hey, you know what the most important thing that happens on a cellphone in China is, is WeChat? And that means people can switch phones really easily. And so if you're selling your $1,500 iPhone XS Max that looks basically the same as last year's phone, and there's a great OnePlus phone, and there's a great Huawei phone, and there's a great Meizou phone, I don't know, whatever, there's a Poco phone, like whatever.

• 14:05Speaker 01

  And they cost somewhere in the neighborhood of, you know, the equivalent of, you know, $400, $500 less than an iPhone.

• 14:12Nilay Patel?

  And their screens are getting bigger, and their cameras are doing, right? You have this like explosion of features and innovation, and all you really need is WeChat to seamlessly move from platform to platform. Well, of course, having a price premium for a phone that kind of looks like last year's phone is gonna depress your sales. Add that into like, whatever Chinese economy stuff is going on. And like, right, like, and then you can say, well, if that's happening in China, when will it happen elsewhere? Would it happen elsewhere? So, you know, Apple's out there with other numbers too, like, most activations in the United States on Christmas Day ever. So, like, they sold a lot of phones, right? But that's like, one little data point. Also, we don't know the number, right? It's like, it's right up there with Amazon being, more Kindles were dunked into a pool today than last. No one knows what that means.

• 14:57Nilay Patel?

  So, I think Apple's shading of the numbers is getting into this trouble where you can't check it. So, they're gonna quickly start cashing in the chips in that trust, because there's no way for them to build it back. There's no way to earn that trust back, because you can't check their own numbers. Unless they, you know, next quarter, everything's fine again, and they make more money, and then no one really cares. But, as long as they're in this bumpy. And then, I think the third theory is very much the, and I think this one is just wrong. The phones are too expensive and no one's buying them, right? And it's like, well...

• 15:26Speaker 01

  Well, legitimately, fewer people are buying them. That's like, the problem.

• 15:30Nilay Patel?

  Yeah.

• 15:31Speaker 01

  You don't think that's an expense thing? I mean, it's an expense thing relative to, like, with China specifically in the Ben Thompson theory. You're not gonna buy a more expensive phone for an incremental improvement. There's been a lot of chatter about, you know, all these anecdotes of, well, I chose not to upgrade my phone as a, you know, blah, blah, blah person on Twitter in America, and therefore, that explains it. Well, sure, I get that you don't wanna use those anecdotes as evidence. But I do think there is something to this idea that, the trend in China of, you know what, I don't need this phone, is a broader thing. I think that there is less hunger to get the new iPhone now, or this year, than there has been in years past. And I think that that actually was starting last year, it just got, you know, juke a

• 16:14Speaker 01

  little bit by the iPhone X, which is a new form factor and had some, some new stuff in it.

• 16:19Nilay Patel?

  Yeah.

• 16:19Speaker 01

  But I do think that there is a general slowdown in people upgrading their phones every year.

• 16:25Nilay Patel?

  I, I think that's right. I, I just think that last year, when they came out with a thousand dollar phone, and they sold a lot of them...

• 16:31Speaker 01

  Yeah.

• 16:32Nilay Patel?

  ...indicates that people will pay a lot of money for a phone. Their expectation is just, one, it'll be radically different than last time, in some way.

• 16:39Speaker 01

  Yeah.

• 16:39Nilay Patel?

  And two, it should probably last a long time, right? And Apple, at their last event, they put, and you gotta read all these things together, right? At their last event, they put Lisa Jackson, who's their VP in charge of environmental stuff, on stage, and she said, "The best thing we can do for the environment is make our products last a long time." Just said it explicitly, clearly, out loud. The best thing we can do for the environment is make your products last a long time, which means they're built to last and the software will run on them for a long time. And it's true, iOS 12 just runs on everything, runs pretty well. So they're committed to these long upgrade cycles, right? They want that to happen. They're saying they want it to happen. The question is just, this time around, is the competition actually catching up with them? Is this money moving elsewhere in the market?

• 17:24Nilay Patel?

  Or is it just disappearing because people are spending it on something else? And I don't know the answer to that question. But if it is moving elsewhere, one of the things that you can kind of just look at and say is, well, Apple doesn't have a lot of other products for you to spend that money on that are super competitive, right? Like if what you want is a bunch of home automation stuff because you're interested in smart speakers and you're a tech person, like you can't get a HomePod with a screen that runs your iCloud photos. That product would kill, like that's, everybody I know bought a HomePod because they wanted to put Google Photos on it. Apple Photos is not as good as Google Photos. They don't even have that product to sell you. If you want a little HomePod for your bathroom, you just can't buy it, right? Like, there's a bunch of stuff that they just don't have that is like, that's where

• 18:09Nilay Patel?

  all the interest is in now? And I don't have to do with that. If you want to buy a Mac laptop, well, enjoy watching YouTube for the next five years while people argue about which one you should buy. Like, that's tough. So that's why I'm in that middle zone. I think that third zone of the phone is too expensive and I didn't buy it and that means nobody bought it. Well, they still did however, you know, 80 some billion dollars in revenue. People are buying the phones. I just think the iPhone curve is plateaued and there isn't a lot else filling up the gap.

• 18:38Speaker 01

  Right. And the question is, there's never, I won't say never, but it is highly unlikely we'll ever see a product or even a product category as like wildly blow your mind, change the industry as the iPhone was, right? Actually, this was Kara Switzer's column today. It's the end of the Apple era, she called it, that, you know, we've been waiting for, will there be something else? Will it be smart home stuff? Will it be speakers? Will it be, you know, the watch, the wearables?

• 19:06Speaker 01

  Be eyeglasses, will be VR, will be AR. I don't think we're gonna have a like bam, here it is, everything's different now moment again. We're gonna have little bits and Apple hasn't had any of like, other than the Apple Watch, none of those other little bits are like, they're all hanging off the phone, even the Apple Watch hangs off the phone. What's their most successful, everybody loves it product after the iPhone and then maybe the Apple Watch? It's gotta be AirPods, right?

• 19:31Nilay Patel?

  Yeah, I answer it.

• 19:33Speaker 01

  Yeah, and like, that's fine, but that's, that's not a huge business.

• 19:38Speaker 02

  I was on a YouTube music hole the other day and I got suggested that song that's that uh uh plays in the Samsung commercial, which is some woman covering the, the Keen song, So Where Only We Know, you know? That song? She's, she's wearing AirPods in her YouTube video where she's recording the song that is used by Samsung in its commercial.

• 20:02Speaker 01

  That makes sense.

• 20:03Speaker 02

  I just thought, I just thought that was funny. But I'm, I personally am very fed up with Apple, just, you, you guys remember Rendezvous and Bonjour, right?

• 20:12Nilay Patel?

  Wow.

• 20:13Speaker 02

  Apple had this, Apple had this technology where computers could find each other and it was magic. And they would auto populate in your iChat, like people that you can contact and then you could share files with them. And then they turned that technology into Airdrop. And uh, my sister over Christmas wanted to send some photos to my dad. And he has a Mac running Mojave, she has a laptop running Mojave. And they both open up Airdrop and it just doesn't work. And then there's a button, maybe this other person's using an older computer, so click this. And then they click that and then she shows up and like, okay, now we can transfer the files, but then it doesn't work. And I just feel like Apple has gotten so, I don't know. I feel like that's like my analogy for Apple.

• 20:57Speaker 02

  Apple is so magical and it's kind of abstracted so much of the computing stuff away from us. Now we don't really know how any of it works, like iMessage is just sort of magically hijacks phone numbers and things like that. And I just, um, I'm personally kind of not in the mood for it right now.

• 21:14Speaker 01

  I was.

• 21:14Speaker 02

  I don't know if other people are there.

• 21:16Speaker 01

  And it's funny they brought up iMessage. I don't, Apple's services, like just sort of like one by one are not as good as anyone else's services, except for iMessage.

• 21:26Nilay Patel?

  Right, so like I use Apple Music because I just prefer the it's sort of default state of organizing artists and albums as opposed to playlists. So like literally, that's why I use it. And so I use it all the time. And it is just manifestly not as good of an app as Spotify. Like you open Apple Music on a plane with like pretty spotty airplane wifi and it's like, what is happening? I can't load the interface. Like it needs, like it literally chokes out showing you the interface. If you have bad wifi, like it's just bad design for a mobile music application. Apple Maps, legendarily, just maps of a different planet, as far as I can tell. And on and on and on. And then you get to iMessage, you're like, oh, this is the best one. This is actually the best messaging product that exists. Save for it can't talk to Android phones.

• 22:12Nilay Patel?

  Because there's not another, Peter, correct me if I'm wrong. There's not another fully encrypted, privacy oriented messaging app that syncs multiple devices seamlessly. Because iMessage will work on on multiple phones, an iPad, a computer, a watch, whatever. And it's like, just works.

• 22:27Speaker 01

  Yeah, getting getting your messages sync, like you can like Signal and like the super private mode and some of the other things, you can like, you know, scan the QR code on your desktop and then that'll work as long as you've got a phone connection. But that all ties to your phone. If you want to have multiple devices that sync across, that's very difficult. And that's like, that's my, that's my biggest annoyance of wanting to use a fully end to end encrypted chat app. Is there's no way to do it and have it work across multiple phones and sync your messages across.

• 22:58Nilay Patel?

  Yeah, I mean.

• 22:58Speaker 01

  If you want to be actuallyed on the internet, if you just want a million people replying to you and telling you that you're wrong, telling you that it will never happen and telling you why, telling you that you're, you don't understand the world market and that everybody in their country uses a different chat app. Just hint that it might be interesting if iMessage were available on Android, just like.

• 23:19Speaker 01

  Drop a note and you you just I you will just have endless people telling you no, no, no, blah, blah, blah. And like, I get it. I don't think it's likely Apple will do it. And I know all the reasons that they won't. But like, I don't know, I've got a draft that I'm gonna end up having to publish because I'm here I am talking about on the Vergecast.

• 23:35Nilay Patel?

  Yeah.

• 23:36Speaker 01

  Um, I know all the reasons Apple won't put iMessage on Android, but maybe, just maybe, there's a moral case for them to do it.

• 23:45Nilay Patel?

  Because it's a good product.

• 23:46Speaker 01

  Because it's a good product that will give more people access to encryption, that will actually protect iPhone users from being snooped on because they'll be able to talk to people that don't use iPhones in a fully end-to-end encrypted thing. And I know the answer is everybody should just install Signal. But I have spent the last six hours trying to get my old college buddies to switch over from a Google group to Signal so we'd actually talk to each other in our like group chat instead of using, you know, email and we never talk to each other anymore. Yeah, can't do it. Try to try to get my family to switch to a chat app instead of iMessage. Like, I could get them to maybe use it for a week and like really push them on it. But realistically, nah. So it's good for US customers. It would

• 24:28Speaker 01

  spread encryption. It would spread privacy and that would be a human good to the world. And I don't know, maybe, maybe we should ask, if if these corporations are going to be this powerful and they're going to control this much of our lives, maybe we should ask that they do something good for us instead of just make money every now and then. I don't know. That's my moral case for iMessage on Android.

• 24:47Nilay Patel?

  I'm just gonna say this and then Paul can yell at me, but in the in the night in the late 90s, early 2000s, the Department of Justice basically forced AOL and some Messenger and MSN to interoperate because they were becoming monopolies and thief terms and that was bad for consumers. Didn't happen, but I'm just saying it was a thing that happened once upon a time. My point here, by the, go ahead, Paul. I was just trying to get through that as fast as I could.

• 25:07Speaker 02

  Yeah, it was very well done. I just, so I just signed up for Wire. I got my sister to sign up for Wire. That was pretty exciting. So Wire's nice because it's like Signal, but you don't need a phone number.

• 25:18Nilay Patel?

  Yeah.

• 25:19Speaker 02

  But I really like Keybase. My problem is, I don't want to sign up for a platform that's run by somebody. I want it to be a protocol. You know what I mean?

• 25:28Nilay Patel?

  Yeah. This was the heart of the DOJ's case against AOL and Messenger. And this is true. They wanted them to have an interoperable protocol so they would compete on user experience.

• 25:38Speaker 02

  Because the DOJ were big like pigeon user.

• 25:40Nilay Patel?

  Oh, my God. They just knew, I mean, this didn't, it didn't work this way, but they knew that the market would never drive these companies to do that. The market would drive everybody to monopolize. Anyway.

• 25:52Speaker 01

  Look, I know that, I know this is a Vergecast, and we're supposed to talk about XMPP, and we're going to end up talking about Hangouts here in a minute, and I'm just going to stop it, and I want to go back to Apple's earnings.

• 26:02Nilay Patel?

  There we go. That's a good call, T.

• 26:06Speaker 01

  The, one of the stories that got passed around was Walt Mossberg yelling at somebody at CES, "I don't give an F about your stock price. He only cares about the quality of the products." And the thing that fascinates me the most about this thing, this slowdown in China, people upgrading on a different cycle, the phones costing more, is what practically will it mean for Apple's products, specifically the iPhone, in the coming year or two? And will it mean lower-cost phones? Will it mean they'll be more aggressive at different pricing strategies for people to be able to get on upgrade plans? Will it mean more innovative, they're going to push out more innovative like technology ideas more quickly than they

• 26:47Speaker 01

  might otherwise have in order to try and juice upgrades? I am fascinated by what does Apple think, because Tim Cook said a bunch of stuff like, "We've got plans. We're not going to sit back and wait for the market to beat us up. We're going to do stuff to innovate and get people to spend money on our stuff." And like, what does that innovation look like? Does it look like more services? Does it look like better hardware? Does it look like cheaper hardware? That, to me, is like the more fascinating question is, what does Apple's reaction to this global trend mean for their actual products?

• 27:18Nilay Patel?

  Yeah. I mean, so Tim Cook put out a letter today to Apple employees. It was immediately leaked to Bloomberg, and he said, "We will not let external, external forces may push us around a bit, but we manage Apple for the long term, and we will take this moment to learn and adapt." That's what you would say. Like, I completely understand, like, you employ 150,000 people. A lot of them get paid in stock. Their compensation just went down for the year, right? Like, you, you need to address them. You need to say that you're gonna do something. Learn and adapt is the least, like, sure, you should do that. You should do that every day. Like, I completely understand why you would say that thing. And they, they had a town hall meeting for Apple. So all these, these are the right management moves. I don't want to discount the fact that, of course, this is what you would say.

• 28:00Nilay Patel?

  But the disconnect between, oh, the problem's in China because of the Chinese economy, and we need to change something, is actually quite large, right? Yeah. Like, if the problem is just the Chinese economy tanked and we have a trade war because of Trump, the phones are still great, we're still doing really well, everywhere else we're setting these records. Then, learn and adapt is actually kind of like an interesting thing to say in that moment, right? It, it suggests that you, you actually need to make some other change, or there is something broader for you to learn about how to go compete in China in this moment. And again, it's kind of what you have to say. Like, don't, don't get me wrong. You have to say something. But it wasn't as much, to me, that, that note from, from Cook

• 28:42Nilay Patel?

  suggested that Apple will have to make some additional changes to go be competitive. And it's particularly strange because we have talked so much about Google in China and Facebook in China, and whether our platform company should even be there, right? Should Google even go to China? Their employees are doing petitions, saying, "Don't go to China. We don't want you to operate there." And on the other hand, you have Apple, in China, not doing so great, and Tim Cook is saying, "We have to learn and adapt, so we're doing better in this market." And we're, you know, the narrative has been, "We're a services company." So how do you make the iPhone more valuable in that market? Well, the first thing you have to do is make your services more valuable, so you can compete against these low switching costs that people can use on WeChat, which puts you right squarely into that Google-Facebook zone, right?

• 29:25Nilay Patel?

  Like, Apple already handed over iCloud to a Chinese company at behest of the Chinese government. So there's, there's like a lot, there's a lot of things there that are tough, like really, really hard. And that, Dieter, has nothing to do with like, will the products get better? Like, there's like philosophical questions to be answered about, should we even do the things that would make the products better in that market? Versus what I started talking about, which is, are they even competing where the market is interesting here? Right? Like, if you're done with your phone, and I was just saying, they should just make a TV. Like, you want to sell a lot of products in America today? Like, make, make a TV. Like, people will buy the hell out of that TV, instead of whatever it is that you're doing with, with TV producers right now. You want to be competitive with Google Photos? Like, make a photo frame. Like, these sound like little things, and they

• 30:10Nilay Patel?

  are, in many cases, little things, but they're the, they're the far spectrums of the things Apple has to contend with. Like, the philosophical problems of fixing the business in China, and the extremely boring problems of what, what LCD, what LCD screen sizes should we make next? And what software should go on then? Like, that's a huge spectrum of things to contend with. Against, yeah, well, I was saying, against, to be fair, one quarter of down earnings.

• 30:36Speaker 01

  Right. But there's also, like, should they buy Netflix, or Disney, or Sony? Should they actually launch their big, you know, TV service and all of their new TV shows that they're doing? Should they actually get that out the door, finally? You know, they, they could move into other businesses besides consumer electronics, uh, because they just, they can't figure it out there. Like, there's a, there's a bunch of stuff that they could do, and it seems clear from the way that Tim Cook is talking, that he actually intends to make some of those moves this year.

• 31:03Nilay Patel?

  Can I just?

• 31:03Speaker 01

  But it won't be steady on.

• 31:05Nilay Patel?

  Can I just tell you guys something? Can I, can I interrupt this wonderful conversation? And just let you know that our general counsel just reminded me that we own verge.tv.

• 31:13Speaker 01

  Yes.

• 31:13Nilay Patel?

  Really?

• 31:16Nilay Patel?

  It's really good. This is very exciting. Yeah, Dieter, sorry. I just needed everyone to know that at this moment in time.

• 31:21Speaker 02

  Can I just ask a dumb question about economics?

• 31:24Nilay Patel?

  Yeah.

• 31:25Speaker 02

  How big could Apple really ever be? Will we get to this point where we're just like, oh, it's disappointing, Apple was expecting everyone in the world to buy another iPhone this year, and only 75% of the people in the world bought a new iPhone this year? You know, we're, we're real bearish on Apple now.

• 31:43Nilay Patel?

  Uh huh.

• 31:43Speaker 02

  Is it all the fault of, of the nasty capitalism that we can't just be happy with $80 billion?

• 31:50Nilay Patel?

  Well, right, I mean, yes. The answer is basically yes, but also... If you're Apple and you're any company and you just have to like give everybody a raise this year, you need to make more money than last year, right? And like, that's just the way that's gonna go. So like, there's like, if they wanna go invent a self-driving car, or if they wanna go make TV shows, they need more money than they had last year. They can't just make, you know, 80% profits and give dividends to stockholders forever, right? Like, they're trapped by their size. They need a lot of money to do a bunch of the things they wanna do. Like, it's not cheap to like, produce the iPhone. It's not cheap to manufacture that many things. So, you know, I think the iPhone is expensive line, the counter has always been, well, at

• 32:33Nilay Patel?

  this scale, to do this kind of technology means it has to be expensive, right? Like, it might not be bad if they reduce demand for the iPhone at the high end, so they could make a more premium thing. I think we're just seeing them run into what that means at this scale.

• 32:48Speaker 02

  Yeah.

• 32:49Nilay Patel?

  And it's also really hard for them to meaningfully grow at this size, right? They need another planet full of people.

• 32:54Speaker 02

  That's what I'm thinking.

• 32:55Nilay Patel?

  Right? Elon, get on it, buddy.

• 32:58Speaker 02

  Hard invest in Mars colonization, so you have a larger market to sell to.

• 33:03Nilay Patel?

  I just think they need more stuff. Like, I don't, you know, it's not iMessage goes on Android and that saves Apple. It's not, they make a photo frame and it saves Apple. It literally is like, there's an Apple world that you can be in, and there's everywhere else where all kinds of neat things are happening.

• 33:19Speaker 02

  And they make your life very difficult to interop with the other world if you are in the Apple world, so therefore they need to more fully flesh out the Apple world. Is that what you're saying?

• 33:30Nilay Patel?

  Right. Like, very directly. Like, just something as dumb as Sonos. And we've probably talked about this before. Like, if you buy into the Sonos ecosystem, then whatever it is you wanna do next, there's likely a Sonos product that you can buy. Right? Whatever service you're gonna switch to next, there's likely, you know, it's a very high likelihood that it'll just work with your Sonos. Like, you bought one Sonos one, and then you got a bigger house, you wanna put it at home, there's like a Sonos solution for you. With Apple, you're kinda like, I guess I'll just buy 15 more HomePods. Like, there's literally nothing else for me to buy. You know, the endless debate between the iPad and the Mac, like, there actually isn't a middle ground between those things that like, if you grow out of one, you wanna like, touch

• 34:14Nilay Patel?

  your laptop, like, Apple just won't sell it to you. And I get that, you know, their whole philosophy is like, we say no to so many things and blah, blah, blah, but if you're gonna lock your world away, then you need to account for the people there, or you need to be better in our, like, in our operating with everybody else. And I think that the sort of like, gleeful tone, which struck me as strange today about Apple's, like, and everyone saying, "Well, the phones are too expensive, I completely understand, I didn't upgrade it," is, people aren't mesmerized by their products anymore, it's just more Apple stuff. Like, it feels the same way as before. How, how does Apple change that around? Like, the only way you can do it is a new product category, and they're not great at those. Like, I have this Apple Watch, I think it's great, it's a Series 4 with cellular, because I had this dream of leaving my phone at home, which I haven't done yet.

• 34:59Nilay Patel?

  This product is great, it is fantastic, and I have used the walkie-talkie mode with Becky almost every single day that I've had it, and it is a delight. Really? Yeah, it's so dumb. It's super funny, it's like the first thing she gravitated to. And, you know, I asked her for her review, and she's like, "This interface is confounding, like, I can barely figure out how to use it, but it's so much fun when I do." Yeah. That's like Apple's problem, like, they're four generations into this watch, they finally made one that is like, fun to use and not confusing and slow, and it's like, pretty confusing. And it's still, pretty much, just puts your text messages on their wrist. Unless you know somebody else, like, you know what I mean, like, this thing you're talking about, like, can they make another product as big as the iPhone? They made that set of promises with the watch. They're still slowly getting there, and it's still not a platform for apps in any meaningful

• 35:44Nilay Patel?

  way. The HomePod, I think, is just like, whatever it is, which is the speaker they made. But they haven't put out some new gotta-have-it product in some time, at least as far as I can tell. I'm sure people will disagree with me. Yeah. All right, let's take a really quick break, and speaking of gotta-have-it products, let's, let's talk about CES. I can't even sell it, but here's a break.

• 36:04Speaker 03

  Ladies and gentlemen, my fellow dirtbags and everybody else, welcome to This Week in Elon. I'm your host, Elizabeth Lopato, and it has been a busy 2019 already. First, we should play a little bit of catch-up at the end of 2018. You may remember that there was this whole thing where Elon Musk tweeted about taking the company private, the SEC got involved, and they made a settlement with Musk and Tesla. And as part of the settlement, which had to be implemented as of December 28th last year, two new independent board members needed to be named to the Tesla board. Well, they were, is the good news. One of them is this former Kellogg executive Kathleen Wilson Thompson, and she spent 17 years as an exec there, and she currently serves as the Executive Vice President and Global Chief Human Resources Officer of the Walgreens Boots Alliance, the holding company that owns Walgreens.

• 36:49Speaker 03

  The other person who was named was your friend of mine, the billionaire Oracle founder Larry Ellison. Now, Larry Ellison has a fairly large personality, I think it's safe to say, and there has been some talk about whether or not Ellison can serve as an effective check on Elon Musk. Ellison has called himself a very close friend of Musk and owns almost $1 billion in Tesla stock. So, here's the thing. I don't actually know how Ellison is going to behave in the context of Tesla, in part because he is a bit unpredictable. What I do know, though, is that the Larry Ellison Elon Musk buddy comedy is a thing that I would like to see in the world. So if you are listening to this and in a position to make that happen,

• 37:33Speaker 03

  I think it could be very fun, you know, on the level of Training Day or something. Like, just put the two of them in a car and see what happens. Also, the other thing that happened this year, actually on January 2nd, is that Tesla announced it was going to be dropping prices on all of its cars to help offset a reduction of the federal electric vehicle tax credit. Now, you may remember that during the Obama administration, this tax credit came into play to encourage people to buy plug-in electric or hybrid cars, and also to incentivize automakers to really invest in that technology. But it wasn't ever meant to be a permanent thing. So the way that the tax credit works is that after an automaker delivers its 200,000th eligible car, it then drops to a lower tier. And Tesla became the first company to pass

• 38:18Speaker 03

  this mark last summer, which meant that that full tax credit would drop from $7,500 to $3,750 starting January 1st. And in response, Tesla has cut its prices.

• 38:31Speaker 03

  Along with that announcement, the automaker Tesla also announced initial delivery and production numbers for the fourth quarter of 2018. And it suggests that Tesla has set new company records. So the pace of deliveries tapered off slightly at the end of 2018, according to that release. But the automaker manufactured a total of 86,555 vehicles in the fourth quarter and delivered 90,700, both of which are record numbers for Tesla. However, if we zoom out and we look at the entire year, you'll find that Tesla made 253,000 cars in 2018 and delivered about 245,000 cars, which is not quite the goal that Musk had initially set of 500,000. But it's still more than double the output of 2017.

• 39:16Speaker 03

  In that year, the carmaker made 101,000 cars and delivered 102,000. So, you know, given the general roller coaster that Tesla experienced last year, it seems like they did OK. Anyway, that's what I've got for you. That's been This Week in Elon. I'm your host, Elizabeth Lopato. Thanks for tuning in. I'll see you next week.

• 39:38Nilay Patel?

  All right, it's happening, Dieter. You're going to CES, what, tomorrow? I'm going on Saturday?

• 39:43Speaker 01

  Things kick off officially, officially. I mean, the floor, the show floor opens on Tuesday, the 8th. Media Day starts on Sunday, the 6th. That also happens on Monday, the 7th. So CES is happening now. It is beginning. Look, I'm just going to say it. Here's what we expect is going to be the themes of CES 2019. Are you ready?

• 40:02Nilay Patel?

  Yeah.

• 40:04Speaker 01

  AI, 8K plus 5G.

• 40:06Nilay Patel?

  I hate you.

• 40:07Speaker 01

  8K, 5G plus.

• 40:10Nilay Patel?

  I hate you so much.

• 40:13Speaker 01

  But I'm not kidding.

• 40:15Nilay Patel?

  But it's so true.

• 40:15Speaker 01

  Because here's what's going to happen. Here's what's going to happen. There's going to be a bunch of 8K TVs. There's going to be a bunch of 8K TVs. There's going to be a bunch of people following up on Qualcomm's Hawaii event that they had where they showed off laptops running Snapdragon processors and showed off 5G demos that didn't actually.

• 40:33Nilay Patel?

  Are you really doing this? Are you really dragging me through this? OK.

• 40:35Speaker 01

  I am. And there's going to be a bunch of people like, like blowing smoke about how 5G is here and they're. Ready for it.

• 40:42Nilay Patel?

  All right.

• 40:42Speaker 01

  And then the AI part is gonna be, Google was huge last year with, you know, hey, Google, buy me some toilet paper. Sorry for everybody who just bought toilet paper. They're gonna have a huge Google presence and I don't think Amazon's gonna sit idly by and let Google win CES in terms of like presence again. And I think they're gonna, they're gonna try and punch back a little bit. And so there's gonna be a lot of good old fashioned platform war of, you know, what's got Alexa, what's got Google, what has both, will they have both, will they have either who's ahead, who's not ahead, blah, blah, blah, blah, blah, stuff going on. And so it's gonna be 8K AI plus 5G, 5G AI plus 8K, whatever, whatever it is.

• 41:23Nilay Patel?

  It's AI, 8K plus 5G. And I just, that hurt me. I'm your friend and that hurt me.

• 41:27Speaker 01

  I'm just telling you, it's gonna be Wisconsin Valley in the desert, baby.

• 41:32Speaker 02

  Think of like Children of Men or like the opening of Half Life 2 and Eli is a lowly, downtrodden citizen of, of the techno utopia of Wisconsin. And he's being hit by security guards and he's just sad and he's, he can't do anything. And then there's huge billboards of, of all this wonderful technology and that's CES. He can't, he can't reach it. He's in a prison with barbed wire fences and oppression.

• 42:03Nilay Patel?

  So I was home, we should talk about CES, but I'm just gonna say, I was home in Wisconsin over the break.

• 42:08Speaker 01

  Yep.

• 42:08Nilay Patel?

  It was great. I was in Racine. Racine, by the way, now home to a Starbucks where the exit of the drive through connects directly to the entrance of a Taco Bell drive through.

• 42:18Speaker 01

  Can you get right back to the Starbucks so you could just live in that loop for your entire life?

• 42:22Nilay Patel?

  Through, baby. So it's still my hometown place. I mean, I love it there, but everyone has read the Foxconn coverage and everyone has an opinion. And like my parents' dads are like leaving notes on my Facebook page and everyone is very embarrassed. Just embarrassed all the way around that it's like happening. Also, no one knows what 8K plus 5G means. Speaking of 8K, we LG announced its TVs already, two 8K TVs. We expect them from Samsung. Then there's gonna be a bunch of TVs with variable frame rates, which is cool. So this is a TV show. What does CS fundamentally? It's a show with new TVs. So the rumor that Google Assistant will come to Samsung TVs. So Google Assistant and Bixby can fight on another Samsung platform, which is great.

• 43:07Nilay Patel?

  And then Alexa is coming to LG TVs, which already have Google Assistant. So it's just like, they can't do phones, right? Like every, oh, you can't do phones, but they can do TVs. So like, that's the platform that all the assistants are getting glued onto by default, which is fun. And then I think we're gonna see HDMI 2.1. I mean, the TV specs are crazy, but basically HDMI 2.1 offers much more bandwidth. So the 8K TVs can now run at 60 frames per second and the 4K TVs can run at 120. And then it allows for variable frame rate, which means primarily for game consoles, if they have to throttle down, the TV can throttle on with them. And you don't get smearing. I think that's also really important for actually streaming boxes.

• 43:50Nilay Patel?

  Because the displays can throttle up and down from 24. So the animations look clean when you bring up like the Google Assistant overlay and they can seamlessly switch back to 24 when you go back to watching TV, which is cool. But it's like stuff. Like I just bought a Sony OLED TV, knowing full well that new TVs are about to be announced at CS and I thought to myself, I will miss nothing. And it appears that I will miss nothing.

• 44:14Speaker 01

  Yeah, I mean, well, I think you're probably right. I don't know. I'm excited for some of the TV stuff.

• 44:20Speaker 02

  High frame rates and variable refresh has been a big part of the improvement in PC gaming over the past few years. So it makes sense that it would be a big improvement for, you know, a multi-stage, expensive, slow transition, but eventually it will improve home or console game.

• 44:39Nilay Patel?

  Yeah, and that's what it's for, right? They want to push the frame rates of these CS faster. So I think that's, I think all that stuff is neat. I do think like, an 88-inch 8K OLED thing will be fun to look at. And then, you know, five years from now, we'll see it. The main thing is, you know, five years ago, we were looking at 4K TVs and like, we'll never get those, they're way out there. And now we're clearly at the point where HDR 4K TVs are mainstream. You can get them for cheap. And so the TV companies are moving on to the next thing. It's a useful marker of the inflection point. Yeah. The 4K transition is just over and we're moving on to the next thing. And it's kind of amazing that the thing with the HD transition, the thing that drove it was broadcast television, right? You got football in HD. That was the reason to go by the flat panel.

• 45:24Nilay Patel?

  Yeah. We're still broadcasting in 1080. I don't see that changing anytime soon, but it's the availability of content on Netflix, on Amazon, and what have you in 4K HDR, iTunes, voodoo, that is like made that transition real for people. It's like worth it to buy a TV because you're going to at least get something from Netflix on it. And now they're moving on to the next thing.

• 45:43Speaker 02

  What's, what's going to push 8K?

• 45:45Speaker 01

  Oh, it's, it's, it's going to be B-roll of coral reefs.

• 45:51Nilay Patel?

  Yeah, it's great.

• 45:52Speaker 01

  It's all they ever show.

• 45:53Nilay Patel?

  The Planet Earth 3 or whatever has to be awesome. Like, you know, you know, they're like David, like Sir David, like, can you please just start saying stuff about monkeys now because we're going to invent the cameras?

• 46:08Nilay Patel?

  We're going to figure this out.

• 46:09Speaker 01

  Can I say something dark?

• 46:11Nilay Patel?

  Yeah.

• 46:11Speaker 02

  Yes.

• 46:12Speaker 01

  They should, like David Attenborough's getting up there in years, right? Like, he should just ramble about creatures that don't exist. They should put him in a room and just have him say random words about animals for like 20 hours a day. And then forever after, they'll just be able to remix that into future nature documentaries.

• 46:32Nilay Patel?

  So they should deep fake Sir David Attenborough.

• 46:33Speaker 02

  Okay, okay.

• 46:34Nilay Patel?

  Yeah.

• 46:34Speaker 02

  Speaking of, of this technology.

• 46:37Nilay Patel?

  In ever higher Ks.

• 46:38Speaker 02

  Okay, Amazon has Kindle. Amazon has Audible. There are a billion audiobooks. There are narrators on Audible who have said like maybe 500 hours or more of recorded audio of reading novel style sentences. Why can't an AI combine that with like speech synthesis? It used basically the inflection and tone from that, that narrator. And so I could just have my favorite narrator from Audible.

• 47:07Nilay Patel?

  Yeah.

• 47:07Speaker 02

  Read any book.

• 47:09Nilay Patel?

  So do you remember years and years ago, when the Kindle 2 came out?

• 47:13Speaker 02

  Hmm.

• 47:14Nilay Patel?

  The Authors Guild sued Amazon for copyright infringement because it had cheat text to speech built in. And I remember I interviewed that guy, it was like a, it was a long interview, ran out Engadget, it was like eight, like a billion years ago. And his exact, his argument was, we have to sue them now because the thing you just described will happen.

• 47:34Speaker 02

  It's the big bad government's fault.

• 47:36Nilay Patel?

  None of those people are the government.

• 47:37Speaker 01

  That's the government.

• 47:38Nilay Patel?

  Zero percent of those individuals are the government.

• 47:40Speaker 02

  They're using the government, they're using the long arm of the law.

• 47:45Nilay Patel?

  No, the sheriff did not go to Jeff Bezos' house. I don't know what you're talking about. They have rights and their point was, we need to assert these rights now because this is our stuff. And if you want to sell an audiobook, you have to pay us again because that's a derivative work. And if we just let the robots do it now, when the robots get good enough, no one will ever pay us for the audiobook. Which is totally fair. Just like if, say, you're a cell carrier and you want to name your forthcoming streaming service Gizmodo TV. You should probably go talk to the good people at Gizmodo. It's just an idea that I have about, you know, rights and things that you make. Paul looks so mad at me.

• 48:26Speaker 01

  I want to say one thing at like a broad level about CES, uh, just this, this, you know, it's our preview. And we're like, oh, TVs will be fine, but we won't upgrade or whatever. CES, everybody makes fun of it for having vaporware and that's true, but CES is not a tech event like an Apple announcement or a Samsung announcement. Like, stuff gets announced that you will be able to buy, but the main thing that happens there is stuff gets announced there that will become like the de facto standard in two to three years. This is what Neil's point was about 4K TVs, you know, three, four years ago, right? Um, and so like, we go there to like, experience the stuff, but we also go there to like, get a sense of what sort of direction the herd is moving in.

• 49:07Speaker 01

  And it's worth watching what direction the herd is moving in. Like, it's fun to watch the herd, especially at CES.

• 49:13Nilay Patel?

  And there's also the sort of like, you can tell when they're just, when they're just winging it.

• 49:18Speaker 01

  Yep.

• 49:18Nilay Patel?

  Like 3D TV, we're all like, you guys, you don't mean this. Your stage spectaculars have to be more spectacular to distract from the hollowness behind your eyes when you tell us 3D TV is the future. Like you can, you can feel it. And I think that stuff is like with HDR, you could feel that it was meaningful to everyone involved, right? Like the people making movies wanted it to exist. The TV makers were genuinely hopeful that people would see the difference and buy the TVs. And then we would look at them and say, oh, consumers should actually buy these, right? And that chain of people all sort of agreeing never happened with 3D. It certainly never happened with curved TVs, but you can feel it. And I, I think getting that sense of the herd is exactly like what, why it's important.

• 50:03Nilay Patel?

  All this is to say, I think we've written many, many articles over the years, either tearing down or justifying CES. And now I've just come to the conclusion that it's like a thing that happens. It's just, it's a moment in time for the tech industry to all be in the same room and gossip about Apple or 5G or the

• 50:21Speaker 01

  AI, AK plus 5G.

• 50:24Nilay Patel?

  I'm going to ask everybody what they think that means. Maybe that's my one video CES. I'm going to use the Clips app and when I walk around and just ask every executive I see what they think that means. So it's fun. We get to go, we get to see a lot of stupid things, which is always fun.

• 50:36Speaker 01

  So the thing I think we're going to see thrown against the wall of people like saying they know what they're doing and they don't are different sized screens in like weird contexts. And I'm referring specifically to like assistants and like alarm clocks and other weird screens attached to assistants. And I'm referring to dual screen devices because we know Samsung's got theirs that they're going to announce sometime this year. We know, or strongly suspect Microsoft is working on something. We know I, I personally played with some of Intel's prototypes that they are definitely moving towards doing something with a curved display. So if all that stuff is likely to get announced this year from those big companies, all the small companies that have access to the night shift for those factories that are actually making those things are going to like, oh yeah, let's just throw something out at CES right now.

• 51:20Speaker 01

  And I think we're going to see a bunch of wacky little screens and multi-screen and maybe even curved screen devices all over the place. And that's going to be a blast because like it's going to be running terrible software and we'll be able to actually like get a sense of what the problems and possibilities are for weird kinds of screens on devices. That's what I'm hoping for anyway.

• 51:42Nilay Patel?

  I bought a Home Hub, a Google Home Hub for virtually every member of every, every family unit that needs to see photos of the baby got a Home Hub from me, right?

• 51:51Speaker 01

  Yeah.

• 51:52Nilay Patel?

  So like, both the back is parents, my parents, my sister, like, and all those people already have Alexa devices. So it's like this fascinating experiment where suddenly everybody has Google and Alexa next to each other. And everyone sort of immediately started talking to the one with the screen. It is just like a wild phenomenon. Yeah, because it shows you what you're saying.

• 52:10Speaker 01

  Right.

• 52:11Nilay Patel?

  So there's like just less confusion and then because one thing you can do is ask it for photos, like that's neat, right?

• 52:17Speaker 01

  Yep.

• 52:18Nilay Patel?

  But then everyone ran into the fact that the Google Assistant ecosystem isn't quite as big as the Alexa ecosystem. So my parents, they have it connected to their Sonos, you can't ask it to play your Sonos, which is hilarious because we literally had the CEO of Sonos on the show and I demanded to know and he said by the end of the year and then it has not yet happened. And then at my sister's house, they've got like a, they've got smart home stuff everywhere and like that stuff just works better with Alexa right now. And like, I have a Sony TV at my house, runs Android TV and Google Assistant should nominally be able to control it and it's still pretty broken, like.

• 52:51Speaker 01

  Yeah.

• 52:52Nilay Patel?

  And so it's really interesting to see, people want to use the one with the screen, they prefer the photo frame aspect of it because it is a beautiful photo frame. And then it just kind of falls down in practice against Alexa and I think Google has a way to go with that stuff. It is much smarter, I will say, because it's Google, so it has a search engine that's quite good underneath it. The other thing I'll say about the Home Hub, they gave it to everyone as a photo frame. Here's this thing, it's a pretty good photo frame. The photo frame settings are completely buried in the Home app. So there's like, you open it and you're like, I want to change what photos it shows. Three menus deep listed under the words Ambient Mode, which is just where everyone would want to.

• 53:29Speaker 01

  Yeah, it's the worst, I was complaining about this. It is, I wanted to like explain to my parents how they could like add their own albums too. First I have to explain Google Photos, fine, then I have to explain how they get their Google Photos to show up on their screen. And I was just like, I finally, I found it myself, you know, after looking for it for the 10th time in my life and I was like.

• 53:49Nilay Patel?

  Just call me. Yeah. Like, that's, that's the answer. And that's terrible. I ended up just making an album called Photo Frame and saying, just add your photos to this album. Cause it's easier than figuring it out. Uh, this is why I started saying like, Apple, if they were smart, that HomePod would have been a speaker with a frame. And it said, show your iCloud photos on this. And they would just put that in people's house. It's like a trivial product for them to make. And it's the one that would have every single person with iCloud photos, which is basically every parent that I know, would have immediately bought that product instead of a Google Home. Right.

• 54:20Speaker 02

  It just feels like there's something wrong with all computers, though. Don't you think that sometimes?

• 54:25Nilay Patel?

  Paul, is that the, that's the title of your autobiography? Like, that whole sentence. Can someone please mock that up for me and send it in?

• 54:35Speaker 02

  My thing, wait, it's just like, I'm, I've got content on my phone. How do I get it onto a TV? Hope they have Chromecast. Oh, wait, I'm using an Amazon thing, so it won't even use Chromecast, even if I have, you know? They're just like, there's these endless things where there's this digital content that is somehow owned by somebody. And it clearly isn't me because getting it like across different devices. Like, I wanted to listen to music with someone the other night on, on Discord, right? It's like Discord, that's like live audio between two people. Seems like listening to music with people would be really... No, you, you both need a Spotify premium account. That's how you listen to music with people on Discord. You know, there's something like, there's something wrong with our computer abstractions.

• 55:18Speaker 02

  If, if these are the hardest things to do, it's sharing digital things is so hard.

• 55:24Nilay Patel?

  I proposed this to Dieter earlier today, and now I will propose it to you. And by extension, the audience of thousands of people that listen to it, we should have the Lock-in Awards. We should call them the Lockies.

• 55:34Speaker 02

  Hey, the Lockies.

• 55:35Nilay Patel?

  Right? And every year we give out Lockies for the dumbest Lock-in experiences that consumers can have with our technology.

• 55:42Speaker 02

  There's petty, right? That's like, like the, the beefs, right? There's the petty category. Then there's like low effort, right? You just didn't, you didn't try. Um, and then, um, something like tripping over your shoelaces kind of vibe, you know? Like, you really put, you're, you're just a fool.

• 55:58Nilay Patel?

  What, but what's the one where you're just, well, there's greedy?

• 56:00Speaker 02

  Greedy.

• 56:01Nilay Patel?

  We should just name them after the seven doors. The Lockies.

• 56:08Nilay Patel?

  There's dopey, happy, greedy, sleepy. Like it fits. It's perfect. Oh, sleepy is great. Like he just missed it.

• 56:19Nilay Patel?

  You could have, you could have done this and you just missed it. So I think, for example, uh, the lack of the fact that Apple at a system level will only use AirPlay and not Cast is like super dumb. Right? Because are they really, are they really out there saying you should buy a hundred and forty nine dollar Apple TV instead of a twenty nine dollar Chromecast? Just to make this, this very simple idea work. Like, that's ridiculous to me.

• 56:44Speaker 02

  Isn't it, the Apple TV like a hundred and sixty nine dollars? It's something ridiculous. It's like a million dollars.

• 56:50Nilay Patel?

  I just looked it up and it's a million dollars.

• 56:54Nilay Patel?

  And you can't even, you can't even play Bandersnatch on it, I hear, or Watch, or whatever you do with that Netflix thing. That's what I heard. I haven't tried it. Could be wrong. It's one forty nine for the little guy. Yeah. It's, wait, nope, I'm wrong. The 4K, the Apple's pricing, I just said they don't make enough products and then sometimes it's like, why do you make so many products? The non 4K is one forty nine and 4K is one seventy nine. And then the 4K with more storage for something. For all those games you're playing on your Apple TV is one ninety nine. Which. But yeah, I mean, it's like that. The Lockies. If you have suggestions for the Lockies. Yep. We'll come back after CS and we'll, we'll put them together. And they, and they have to be named after the seven dwarfs.

• 57:36Speaker 02

  Yeah.

• 57:36Nilay Patel?

  Paul, every week.

• 57:37Speaker 02

  Mm hmm.

• 57:39Nilay Patel?

  You do a segment.

• 57:40Speaker 02

  Yes.

• 57:41Nilay Patel?

  What's it called?

• 57:42Speaker 02

  It's called, Tell Me, Am I Beautiful?

• 57:48Nilay Patel?

  Okay. Yes, you are, Paul.

• 57:49Speaker 02

  Thank you, Peter.

• 57:52Speaker 02

  Nutrigena will 3D print custom face masks based on buyer's skin measurements. So Nutrigena has an iPhone app or accessory called Skin 360 and you can do these like macro scans of your face quality. It's kind of terrifying to actually look at it, but now they're gonna make these custom printed masks.

• 58:17Speaker 02

  Where that you can like put on your face and then like get like nutrients into your face, but like custom to your face size and theoretically, I guess your face's condition, which this just sounds like super cyberpunk, right? You you use you use like a tricorder like tool to scan the condition of your face. And then you have on demand printed a like a face fix serum mask that you just applied to your face. And now you have a better face.

• 58:46Nilay Patel?

  I think the sci fi piece would be if you printed out a new face.

• 58:49Speaker 02

  Yeah, well.

• 58:50Nilay Patel?

  They're one they're one step on the journey.

• 58:52Speaker 02

  That's that's.

• 58:53Nilay Patel?

  This is truly the CES, the five years from now at CES will be like, and you can just, here's a new face. Well, how much does this cost?

• 59:00Speaker 02

  I have no idea. What one, one real interesting, what interesting part is that they're gonna have you, you can monitor if your skin is improved. That's one problem like for me, like I picked a very specific bar of soap because I liked the way it felt after I used that soap and most soaps I didn't, right? But I don't know scientifically if it's the best soap for me. You know, so the idea of being like able to measure your skin condition before and after you do things to your skin. I think that's also interesting. I don't know. I feel like there's just a lot of exciting cyberpunk stuff here.

• 59:37Nilay Patel?

  Yeah. Didn't we do a bunch of circuit breaker stuff on like on demand skincare? I feel like Ashley, we did a whole segment on the circuit breaker show where Ashley was like, the makeup companies are coming for you because they can sell you subscriptions to your face.

• 59:47Speaker 01

  Yep, for sure. And they've got like custom scanners and all kinds of stuff. Yeah, it's coming.

• 59:52Speaker 02

  But it's it's so much better than just like here's a here's a, you know, a subscription to a pod and everybody else gets the same pod. Like the fact that this is custom is very diamond age, I would say.

• 1:00:06Nilay Patel?

  Okay, I can't wait for you to try it.

• 1:00:10Nilay Patel?

  Is there a lock-in component?

• 1:00:11Speaker 02

  Good skin. Well, I'm sure, I'm sure I'm giving NutraJit a constant updates on the very specific qualities of my skin.

• 1:00:21Nilay Patel?

  Yeah. And then you can't get the data back out.

• 1:00:23Speaker 02

  Yeah. Can I get all my skin data?

• 1:00:25Nilay Patel?

  Yeah. See, regulation is great.

• 1:00:29Nilay Patel?

  All right, we gotta wrap it up. Like I said, it was gonna be a long CES show, and then I'll help Brooke loose. But, look, Apple will be back tomorrow. They're still one of the biggest companies in the world. They're gonna make new phones, they're gonna learn and adapt, they're gonna come out with more, more websites to try to exhort you to buy an iPhone XR. It's gonna be great. I bought an iPhone XR. Yeah, they're great. I told my mother I wanna get one. I just think people want the most expensive iPhone, and that's really expensive. It's a lot. All right. Next week, we're at CES. We're gonna do a Vergecast. Dieter and I will be there. It's gonna be confusing and sleepy, as every CES Vergecast has ever been. We're also gonna try to get whoever is at CES to sit down for an interview, so look out for that. We might put some more episodes in the feed. And we'll be back from CES.

• 1:01:14Nilay Patel?

  It'll be 2019, a brand-new year, during which you can listen to this podcast, you can listen to Why'd You Push That Button? There's a new episode about question apps. Ashley bravely took anonymous questions in our industry, which is wild. Go listen to that, it's a great episode. Season 3, Why'd You Push That Button, it's so good. You can also check out Pivot with Scott Galloway, Function with Neil Dash, all part of the Vox Media Podcast Network. You can tweet at us. Please, I'm looking for Paul's autobiography. Don't You Think Something Is Wrong With All Computers? It's just something I think. Isn't that what he said, Paul? Rewind. Photoshop me that. And then, I'm looking for Locky submissions. The Locking Awards by The Verge. It's happening. And then, we're gonna, we're gonna just keep kicking ass in 2019. That's it. Rock and roll. Paul. Happy New Year!