Apple's AI Play — With M.G. Siegler

25:07And so they have an advantage in that regard. And you can see a world in which they basically ship their AI, say, with, you know, iOS 18. And again, they ship it to a billion plus devices overnight. And then all of a sudden you have access to camera information. You have access to location information. You have access to videos. You have access to all different sorts of stuff that basically no one else can get to. When we talk about, you know, these companies, and I know we're going to talk a little bit about this, working on hardware. Why do they want to do that? I think because there's a wide range of data input that they would want that's not just text box based.

25:47Yeah, when Gruber was on, he talked about when Apple has a high priority project, they tend to just swarm it with talent. and it does seem we were they he basically said that they didn't do that with home pod which you and i talked about last time you were on and like now seems like a distant memory even though they've revived it in some disappointing way uh but it does seem to be like this is what they're doing now they know they have to execute here and they're swarming the talent and really directing it from places that it was somewhat like wasted before which is the self-driving car project.

26:19Yeah. And to your earlier point, like if they can get over the cultural hurdle that they're viewed as, you know, too insular, too close minded to work on some of these, you know, newfangled AI projects, if they can get over that hurdle, I think that they can make a pretty compelling sales pitch again to a lot of would be, you know, AI experts and researchers to say no one else can offer you billions of devices sort of almost overnight, right? Because so many people will update iOS to the new version when it comes out immediately. And so that's a pretty compelling pitch if you're an AI researcher who wants to do something that is unique and can be done at a scale that no one else can match.

27:00There's one more thing I want to get to. I don't want to miss on this conversation, which is that Apple is rumored to be developing its own foundational model called Ajax. Maybe it's not there yet. It seems like no one's really talking about it. And it's interesting that they're doing that in conjunction with bringing in partners Is that something that just doesn't seem ready for prime time or any thoughts about, you know, why that's not the main thrust of this? Hard to say. Again, this is all based on reporting, of course. And you're right that it hasn't been, you know, as at the forefront as some of the other reporting about their AI projects, including partnering with, you know, other other players.

27:37And you would think that maybe those two are related in some way. And so that's why it's on the back burner. But Apple, you know, occasionally does surprise, right, still. And maybe they do have more behind the scenes and they're sort of letting on or have got out there in some capacity. And so while this project has been rumored about, it could be as simple as like maybe it is farther along than we know about or that's been reported on. And maybe they are ready to go with it. Maybe it's also related to the on-device elements. And maybe that's what it launched with specifically. as you know, many of these LLM projects, you know, are now splintering off where they have, you know, the premium version, the big version, or they have the smaller on-device, right, that are meant to be on-device versions.

28:21So maybe Apple launches with the on-device version of Ajax, you know, as their sort of first foray into LLMs. And maybe they have a bigger version that they're working on, which won't come out now. You could see a bunch of different ways that could go. But again, they'll obviously be surprised with something at WWDC, but is it going to be, yeah, that big LLM. We'll see. So let's just take, before we end the segment, your gut on where Apple is behind, ahead, sort of with the pack right now. And where do you think they're going to be after WWDC? So it's an impossible question, but it is. But my general take on this, not with any, you know, just trying to read a bunch of different tea leaves, and bringing them all together to form a point of view, is essentially, I don't worry so much that Apple is very far behind.

29:13Again, we hit on this earlier. I think things are moving so fast, so rapidly, with new things shipping all the time, including LLM updates, that I'm not so sure that Apple's sort of missing the boat here. If anything, I'm not convinced that it's still not too early to launch some of this stuff, except that I think there's no way that Apple could get away with not launching something. There's obviously benefits to being in public and having people know what you're doing with regard to AI, because again, for attracting developers and attracting talent to the company again, as we just talked about.

29:49But I'm also, again, not convinced that there's, it's still not too early for all of this. And I think that that matters from a product perspective. I think we've seen a lot of fun stuff launching, from ChatGPT on forward. But again, it's all a moving target. And so Apple, as we talked about, as you well know, they like to sort of come into a market that's sort of been meandering and really firmly established it. And I'm not sure that that's the case here. I think that it's still gonna be meandering for a while, just again, by the nature of how fast things are moving. And so again, Apple needs to do something.

30:26Certainly Wall Street believes that they need to do something. If you look at Apple stock prices, Microsoft stock prices and all that. And so they're going to need to do it right now. But I'm not sure that they absolutely would do it, all things being equal. And I think that what they want to get out there is ultimately the end product. And what can they do there that's unique compared to what's in the market? There's so much more Apple that I want to talk about, including a surprising play in robotics, the stock price, which you just mentioned, and declining iPhone sales. So why don't we do that after the break?

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32:09You're used to hearing my voice on the world bringing you interviews from around the globe. And you hear me reporting environment and climate news. I'm Carolyn Buehler. And I'm Marco Werman. We're now with you hosting the world together. More global journalism with a fresh new sound. Listen to the world on your local public radio station and wherever you find your podcasts.

32:36And we're back here on Big Technology Podcast with M.G. Siegler, venture partner at GV, which is formerly Google Ventures. He also writes Spyglass, which is a great tech site. You can get it at spyglass.org. very quickly let's talk about this robotics thing while i was doing research for this interview i you you have been on this right there's been a tremendous amount of smoke shall we say when it comes to the robotics play that apple might be getting into and it sort of breaks down into two different categories one is like an actual home robot that apple has been talking about developing and two is there's like a almost like a FaceTime robot with a robotic arm that will feel like when you're speaking with somebody that it's like kind of moving along with you and it seems like Apple has a lot of this technology already developed but isn't quite sure if it's good enough or Apple-y enough or or gonna bring in enough money but it is interesting that they are so interested in pursuing robotics we also know that Amazon is interested in pursuing robotics what's going on there?

33:40So to me, this is a very obvious extension of Apple searching for the quote unquote, next big thing, right? We talked about the car project not being shut down. That was at various times over the past decade going to be their next big thing, right? It's one of the automotive business and car sales are one of the few things at volume that can sort of move and move the needle for a company like Apple, right? Because the iPhone is so massive, such a success that there's very few products that they can launch, including the recent launch of Vision Pro. No matter how well it does out of the gate, it's not going to be able to move the needle versus what they ship in terms of revenue with the iPhone.

34:22And so, again, the car project now being gone and Vision Pro being out there, they have to move on to see what is next. What else can they do that moves the needle from a revenue perspective? We're sort of running out of things. There's banking, right? And they are doing stuff with Apple Pay that I think is going pretty well. But in terms of, again, it's Apple. Their DNA is to ship products, not be financial services. Services, businesses itself is massive for Apple. And I think that that's sort of interesting. But again, they want to ship products. And so what's a new product that they could do?

34:59Robotics would be one sort of more obvious element. Obviously, it's a big, all-encompassing type of situation. It could mean a lot of things. You hit on two of them. And I do think that in some ways I had written about this for a long time because I felt like and this came from, you know, we kicked off talking about when we last spoke in the pandemic. I was thinking about that a lot during the pandemic, that it was weird that Apple didn't have a device in the home that was great for FaceTime. Right. You still had to use your phone, which was was great, obviously. And an iPad is also great. But it just felt like Apple had all of these different elements, including, you know, Apple TV.

35:36Back in the day, they had routers, right, which they've discontinued, but they had like all the pieces in place to build a really great living room device and that it should have included FaceTime. Now they've added FaceTime on the software side to Apple TV since then, and you can use it with your iPhone and it's pretty well done, but you could have just imagined just selling some sort of unit that's basically the quote unquote FacePod, right, where you basically put a device in your living room and it hooks up to your TV and it's probably an Apple TV as well. It's a home hub, it's Apple TV, and it has a small camera and others, of course, including Amazon, as you mentioned, but even Facebook slash Meta at one point was doing this, right?

36:19And they had some level of success, even though they were probably the least trusted company at the time to be able to launch something like that. I think that they were in the right place, right time for a little bit of time during the pandemic. So that's one element of what they could launch. The other stuff, like a more generalized home robot, some of the reporting, which again, I think was Mark Gurman talking about it. It almost sounds more like Rosie the Robot Jetsons type, you know, housekeeper type thing. Obviously, Amazon tried to buy iRobot, the Roomba maker, and, you know, had to move on from that after, you know, regulatory concerns there.

36:55but they're doing other stuff. They have their own robot in the world. And so you can see a world in which Apple wants to go into the space. I think that they have a lot of the pieces, again, sort of that are not brought together, at least forward facing for us right now, but they have a lot of the pieces, including some players from, you know, potentially that car project again, which could be brought in to do some sort of home device. And again, if you just think about, you know, 10 years out, what should Apple be doing? to move the needle and ship interesting products. I think it's pretty compelling to have the idea of some sort of home robot, you know, that's running an iOS-like operating system and interacts with all of your other devices, you know, beyond cleaning, doing different sorts of stuff.

37:41Yeah, I'm with you on robots. And I think robots is an area that's going to get a lot of attention, both from investors and from the big tech companies, maybe especially the big tech companies, because these large language models, they basically, you know, because you can converse with computers now and they can, they're multimodal. So they offer better, much better functionality than you could have had previously with a robot. And the big glaring hole for them is that they don't really understand the real world. So it'd be like a research frontier that they're going to, so it's sort of like both, it will help them get better by being out in the real world and they're better because they can rely on this technology.

38:18And so we see Amazon and, you know, I'm sure meta has something Apple, you know, this is going to be an area to watch. Yes. And, and that sort of speaks to, you know, the, the notion in AI itself where, you know, there's, there's some school of thought that believes that you would either, you'll never get to AGI. Obviously many people believe that, or that you won't get there until you do some sort of personified or in the real world version of a robot, like we're talking about, where it's able to not just, again, get data inputs from people inputting stuff manually on a computer, but it's out there in the real world interacting with it in order to learn different types of stuff that you can't do just from being on a computer.

38:57And we've talked so much today about how the next step for Apple or Apple getting into the next big thing is so crucial for its future prospects. But then you kind of look at the present and you're like, oh, is the house on fire? I mean, that's a little dramatic, but it doesn't seem good in terms of Apple's core businesses. So we were talking just now you know when i there's been a report where apple's uh had a 9.6 percent year on year drop in iphone sales and it's losing ground in china in a big way where there's band there's you know ostensible bands or you know wink wink don't use the iphone in certain workplaces and huawei is getting better and meanwhile like you look at the core numbers for apple and it's it's not good i I mean, their Mac and iPad are struggling to sell.

39:49The iPhone isn't growing. The revenue has been decreasing. And we talked earlier about like, maybe this is like comparisons to COVID, but we're in 2024. Like you have to start growing on your 2023 base at this point. And it just seemed rough for the company. So what do you think about the core business of Apple? It's pretty concerning, I would imagine. Yeah, I mean, so the way I think about this is tied into a lot of what we're seeing with some of the backlash on the developer side and obviously with the regulatory environment and various different bodies all around the world that are sort of hitting Apple pretty hard right now, right?

40:24Because they view them as both dominant in some capacity, but also not willing to play ball with the various different regulations that, again, various governments and entities are trying to put in place. And I think, to me, a lot of that goes back to exactly what you're sort of talking about in that and what we had talked about previously with the iPhone was such a great business and remains such a great business. One of the best businesses ever from revenue from profit, it might be the best business ever. And how do you top that? The answer increasingly has been that you can't, but instead you have to come up with other ways to sort of grow the pie, grow the business.

41:08And I think a lot of that, when I look at Apple these days, the only thing that's been growing the past several quarters now has been services reliably, I should say. As you note, the other businesses that are big are running into just the law of large numbers where it's very hard to grow beyond the extreme end of where they are in terms of shipping number of iPhones. And again, as you note, the pressure from China and these other areas where they could potentially grow a bit more, but there's other types of pressures on that. So when I see Apple pushing back against all this regulation and many of us looking at them just being like, why don't they just throw a bone to some of these folks and just make some tweaks to the app store that would maybe ding revenue a little bit, but would garner a lot of goodwill with developers and again with regulatory bodies.

42:02But again, I think they look at services and say, this is the only thing we have where it's a unique business because it sort of compounds versus their other businesses, right? Like as the user base keeps growing, they also are adding things to the services layer. And so they have all sorts of new things that they can just keep piling on to keep growing. And so eventually I would imagine services is by far their second largest business after iPhone. And so that's the way that they're growing it now. And then we talked about all the other things that they could potentially do, banking and, you know, growing that more and then robotics and different types of devices.

42:42But it's going to be the answer is going to be it's got to be a bunch of those things together. And yeah, doing that while facing all the headwinds against device sales. And it's it's a big challenge. I mean, yeah, they the the Macs, the iPads, they're launching new versions. You know, there was a report about the new M4 chips already, even though we just launched the M3 chips and, you know, trying to get the word out there. But when you look at the way that, you know, you have to run as a public company, especially a company like Apple, where the stock is so heavily owned by mutual funds and all of these, these big entities, and it's such an important stock for so much of the economy that they need to keep growing.

43:24How's Microsoft doing it? They're doing it through their AI narrative and that they're forward thinking, right, that they're a growth company. And the way that Wall Street seems to be looking at Apple right now is that they're not a growth company. They're an old school sort of becoming a dividend right company. And just like they're they need to change the narrative. And I think that's why all we're hearing about it. WWDC is AI, AI, AI, AI. They want to show that they're going to go back into growth mode. And I think that that's a lot easier said than done for all the reasons that we just talked about.

43:52That's right. We have a few minutes left. I want to hit a couple more topics if we can. So first of all, you main pin, we're not going to go, you know, sort of too deep into it, because at this point, anyone who's listening to this show has probably read the reviews, listened to our Friday show about it, March, watch Marquez Brownlee, you know, rip it a new one on YouTube. But I also want to talk to you about your view about whether the new AI era sort of warrants and you write this warrants some sort of new hardware paradigm. Do you think that the new I mean, it's been a lot of chatbots. We're seeing agents.

44:28Do we necessarily need new hardware for this AI era? Or is that just something where people are like, ah, AI, hardware, yes. Throw money at it and see what happens. I think it's obvious why various different players are trying to do that, including Humane. There's a new one that launched today called Limitless, which seems interesting,$99 pendant type device. Which I just pre-ordered because it looks compelling. It's a good price. Humane's a little expensive, as has been talked about a lot. But then, of course, there's what's rumored with OpenAI, with Sam Altman and Johnny Ive potentially teaming up to work on some sort of hardware.

45:12my view is that i'm not sure that we're anywhere near the point where we need a new piece of hardware yet i think that um again all this stuff is moving so fast all this new stuff is launching on a weekly basis where it's just there's too much too many moving pieces to know exactly what you should be building for and i think frankly that's part of what humane's problem has been They started a long time ago before ChatGPT sort of blew up. And so they built like the projector and they built the camera and they built all this other system when I'm not so sure that what they shouldn't have just built.

45:47And obviously, this is easy for me to say in hindsight, but I do think like there's something compelling to be built there. It might just be like a super simple, you know, pin that only does chat interaction and doesn't try to do all this other stuff. You bring the price down a lot. You bring the complexity down a lot. It tethers to your phone. It doesn't need its own cell service. You launch that in the success state when you have a second or third iteration. You sort of launch that stuff. You get why they launched what they launched with. They come from Apple. They wanted to build an all-in-one, all-encompassing type of device.

46:19And it's obviously a noble effort to try to do that. But I just don't think that that type of device is going to work out of the gates. I think that, again, everything is moving so fast. I think that what you would see in these early days is if anything takes off, it's going to probably be from one of the larger players. Apple being a prime example of that, right? Again, we talked about this a little bit already, but if they can get some of these AI models working on the phone and then eventually working on the AirPods or on the Apple Watch, and they can do that all on device, they have stuff already that's working on device on the Apple Watch right now with Siri.

46:54Again, Siri is not very good, but if they eventually launch a better version and different capabilities, you could see where that type of thing gets supercharged by all of this. And so, again, I think that there's probably an avenue down the road for new pieces of hardware that are, you know, using AI. But I come at this, again, from that flip side that we had hit on a little bit earlier. But it's like, why are some of these companies trying to do that? I think because they know the advantage that someone like Apple has in having billions of devices out there. When they launch their AI products, they're going to have such an advantage in having these in people's pockets at such a scale that no one else can hope to match.

47:30And then they have to hope that like they can work with Apple on some of that. Right. And maybe that's why they're they're doing it on their side. Right. Because they want something from Apple to be able to work on the device scale that they can that they can offer up. But I don't know if any of these may, you know, the rabbit device also is, you know, coming soon, I think. And that got a lot of buzz out of the gate. I have a hard time seeing any of these things taking off in a major way early on, again, just because it's so early. So maybe in a few years we see something that's a compelling use case.

48:03But right now it's going to be sort of phone and or watch and or, you know, AirPods dependent, I think. So when Marissa Meyer was on, I spoke with her about your post about how consumer is basically done and don't bother trying anything consumer. But it's interesting to hear you talk about the hardware thing, because it's almost like you say you view that there's more opportunity to do stuff in hardware than there is like in apps and software. Is that accurate or is that kind of anyway, you go ahead. They're all they're both hard, right? Consumer in general is very hard for the reasons. Yeah, as I've talked about, as many people talk about it.

48:38I mean, it's just like it ultimately boils down to time in a day. And we all are so busy. We all have the services that we use already. And so things not only have to replace those, they have to be so much better in order to replace those. And that's why, like, you know, things were sort of interesting in a weird way during COVID times because it unlocked new time throughout the day, right? Where people would try new stuff and things like Clubhouse and all of these types of services that sort of blew up because people had more different pockets of time that they weren't used to having. And so when I, again, going back to the hardware thing, we hear a lot that people are waiting for the new platform, right?

49:14The next platform and waiting for what Apple is going to launch. But the reality is that even with the Apple Watch, which is at a pretty impressive scale, and even with AirPods, like these things and with Alexa, which is at an immense scale, these things have not become platforms for, um, you know, new services built by third parties to launch on. Uh, and again, that to me boils down to just time and, um, you know, replacing other things that you're already doing in a day. So you're not an air chatter. I have, I do have air chat right now. I've been trying it out. I am, I think there's, there's something compelling about it, but I would be skeptical that it that it sort of gets to a scale, you know, over an extended period of time.

49:56Lots of things blow up and are big for, you know, a few weeks and then they sort of dwindle away for, you know, very obvious and inherent reasons. But it makes consumer both software and hardware very, very, very hard. But I think you're right. Like hardware is compelling to a lot of folks because it does potentially unlock a new time variable if you can get enough people buying it and using it. And there's the sunk cost fallacy where you buy something and so you want to use it, right? And so that's natural. Okay. And then briefly on Amazon, you mentioned the Echo device. You also wrote about how they're stopping to pay rewards to third-party developers.

50:34Basically, it seems like they're throwing up the flag on third-party apps and skills on the Echo device. Do they have a strategy there anymore? Or is that kind of like remnants of Bezos that is just going to die a slow death over time it's to me it's similar to the siri discussion we were having um i think that they're definitely going to reboot it there have been reports about that um i think you know that's a big question of if it's if it's alexa itself or if it's something new they have something called rufus which is sort of their shopping ai bot that they've that they've sort of put out there and so it'll be interesting if they try to do do something new or if they just sort of rejigger Alexa behind the scenes to work.

51:16But I think you're right. Like the third party developer ecosystem stuff as we were just talking about doesn't seem to have worked except in certain pockets gaming. There's some, you know, things that are working there. But in terms of, yeah, just like it being a device where there's going to be multi-billion dollar businesses built on top of, that's obviously not the case. And can they get there? That moment has probably passed them by. Is there something new to be built with AI? And we talked about going back to robots and what they're doing there. Like maybe there's something that they can do that's compelling sort of bringing all these different things together.

51:51But, yeah, it feels like Alexa as it stands right now, and I don't want to trigger. I may have just triggered. I always avoid it. Yeah, it's rough. Will be changed just like Siri has been. And so it's a question of, yeah, how much of it is behind the scenes versus does it require new devices and all of that. so i want to take a minute to plug spyglass because i've been enjoying reading your work there uh you had 500 ish or 500 words and i was on for a while medium i think you had your own site now you've started something new so talk a little bit about the impetus there and uh what it's been like you're i mean you're super high output i'm looking at your archive and sometimes there's like five six short posts a day it's super fun and interesting what's your thought yeah Yeah.

52:34Thanks for asking about it. I mean, it's something. So as you know, I come from a world where I was a reporter for a number of years before sort of becoming a VC over a decade ago at this point. And during the intervening time, as you mentioned, with 500-ish, you know, a site that I was running on Medium for a long time and is still up, obviously, always have just kept writing in my, you know, bag because it's something that I've just long done and enjoyed doing. But it's also just something that helps me. It helps me sort of formulate my own thoughts, helps me, you know, get obviously thoughts out into the world.

53:11But doing Spyglass now for, you know, the past few months, I've sort of built it up and talk about it as sort of three things. It's a, it's a pretty standard link blog linking to a lot of things, as you note, fairly standard sort of newsletter, you know, once a week summarizing what's both been linked to before and also, you know, linking to some new things and then a column. That is sort of more of a work in progress that I'm still sort of toiling away with behind the scenes a little bit more. But I basically want it to be those three things. None of them are new, of course. You do them. Everyone does them.

53:47But for me, it's just as much about doing it for myself as it has been about sort of doing it externally. And I sort of, you know, challenge myself to see if I could come up with a new type of site, type of publication, you know, starting from scratch, not wanting to do what I'd been doing for the past several years. And honestly, I'm loving it so far, because again, it sort of feels like it's unclogged my brain in ways that I had missed dating back to the reporter days where it's like, all this stuff is just in my head and I'm thinking about it, but it all just jumbles up in there. And it's not till I get down on the page, what I want to say about it, that I really form my own opinion about it.

54:23And that's helped a lot in conversations on the VC side, on conversations with entrepreneurs, on conversations with other investors, just with technologists in general. It's just like in dinner party conversations. It helps because it unlocks, again, my own thinking, which is very helpful. So, yeah. Yeah, and it's always a fun read. And like we spoke about the last time, I went through your archives when I was writing the Apple chapter of my book and just love the stuff there and love keeping up with your work. So the website is spyglass.org. MG, thanks so much for coming on. Thank you for having me.

54:59I hope we talk again soon. Me too. All right, everybody. Thank you so much for listening. We'll be back on Friday to break down the week's headlines. And we'll see you next time on Big Technology Podcast.