AI transcript
0:00:00 Support for Prop G comes from BetterHelp Online Therapy.
0:00:03 We waste a lot of time worrying about what we haven’t done,
0:00:05 and this may sound a little corny,
0:00:07 but taking a second to appreciate your wins is important.
0:00:09 Personally, this year I am spending more time with my boys.
0:00:12 Good for me. If you’d like to celebrate your own wins
0:00:15 and make some adjustments for the rest of the year,
0:00:17 BetterHelp Online Therapy is a great place to start.
0:00:19 It’s entirely online, which makes it more convenient
0:00:22 and more affordable than traditional therapy.
0:00:24 Take a moment, visit BetterHelp.com/ProphecyToday
0:00:27 to get 10% off your first month.
0:00:29 That’s BetterHelp, H-E-L-P, .com/Prophecy.
0:00:33 Support for the show comes from Atlassian.
0:00:37 Atlassian software like Jira, Confluence, and Loom
0:00:39 help help with the collaboration needed for teams
0:00:41 to accomplish what would otherwise be impossible alone.
0:00:44 Because individually, we’re great,
0:00:45 but together, we’re so much better.
0:00:47 That’s why millions of teams around the world,
0:00:49 including 75% of the Fortune 500,
0:00:51 trust Atlassian software for everything
0:00:52 from space exploration and green energy
0:00:55 to delivering pizzas and podcasts.
0:00:56 Whether you’re a team of two, 200, or 2 million,
0:00:59 Atlassian software is built to help keep you connected
0:01:02 and moving together as one.
0:01:03 Learn how to unleash the potential
0:01:04 of your team at Atlassian.com.
0:01:06 That’s A-T-L-A-S-S-I-A-N.com.
0:01:11 Atlassian.
0:01:11 I’m Scott Galloway, and this is No Mercy, No Malice.
0:01:22 Innovation is overrated.
0:01:24 The best strategy, second mouse.
0:01:29 And nobody does second mouse better than Apple.
0:01:32 Secondmouse.ai, as read by George Hahn.
0:01:36 As stupid as Apple’s Vision Pro is,
0:01:42 Apple intelligence is that intelligent.
0:01:46 Innovation is overrated.
0:01:49 Specifically, disruptive innovation,
0:01:52 the kind that marks a before and after in our lives,
0:01:57 is terrible for shareholder value.
0:02:00 Some innovators that changed our lives?
0:02:03 Seattle computer products.
0:02:05 Xerox Park, Grid, Palm, Netscape,
0:02:09 Friendster, Blackberry, Alta Vista, Nokia.
0:02:13 Combined market capitalization, $21 billion.
0:02:18 And that’s only because Blackberry and Nokia
0:02:21 somehow still exist.
0:02:24 Xerox donated Park to a non-profit in 2023,
0:02:28 valuing it at $132 million.
0:02:30 Just four of the companies that capitalized
0:02:35 on the innovations of the departed,
0:02:37 Microsoft, Apple, Google, and Meta,
0:02:41 register a market capitalization of seven plus trillion dollars.
0:02:46 The second mouse often gets the cheese.
0:02:51 Tesla didn’t invent the consumer electric car.
0:02:54 GM.
0:02:56 Visa didn’t invent the credit card.
0:02:58 Diners Club.
0:03:00 McDonald’s didn’t invent fast food hamburgers.
0:03:03 White Castle.
0:03:05 And Coca-Cola didn’t invent soda.
0:03:08 Dr. Pepper.
0:03:10 One firm enjoys a market cap larger than all five combined.
0:03:15 Apple is a second mouse the size of a blue whale.
0:03:21 AI has seen a brand equity implosion in 2024,
0:03:26 similar to that suffered by the Supreme Court,
0:03:29 Twitter, and elite colleges.
0:03:32 The promise of the AI brand is that it will either
0:03:36 save us or kill us all.
0:03:38 It has done neither.
0:03:40 Any time saved by AI has mostly been chewed up
0:03:44 listening to breathless media reports on management
0:03:48 or lack thereof drama at Microsoft AI.
0:03:52 Some people call it open AI.
0:03:55 The brand is the offspring of capitalism
0:03:57 and the Bravo Channel.
0:04:00 Staggering increases in shareholder value
0:04:02 mixed with IP theft, hallucinations,
0:04:05 and constant catastrophizing.
0:04:07 It’s as if Rupert Murdoch got married
0:04:09 for a sixth time to Skynet.
0:04:13 I’m especially proud of the previous sentence.
0:04:16 Apple’s move to shit can the AI brand
0:04:18 and opt for Apple intelligence
0:04:21 is the best brand move of 2024.
0:04:25 The worst?
0:04:26 A, a toss up between a Chardonnay fueled decision
0:04:30 to hang the stars and stripes upside down
0:04:32 or the zombie apocalypse of useful idiots on US campuses.
0:04:37 Apple intelligence is more than a great brand move.
0:04:43 It encapsulates the company’s strategy.
0:04:47 Take something invented elsewhere,
0:04:49 make it more user friendly, easier to use and more reliable,
0:04:53 mix in world-class industrial design and print billions.
0:04:58 Artificial intelligence is for tech bros and data scientists.
0:05:04 Apple intelligence is AI for the rest of us.
0:05:09 Shrewd.
0:05:12 The tech press has spent the past 18 months
0:05:15 telling us Apple is behind on AI.
0:05:19 While in the next breath,
0:05:20 reporting on the AI gaffes produced by its rivals.
0:05:24 And that’s the point.
0:05:26 Apple is always behind.
0:05:29 Apple is a distinctly inventive company.
0:05:32 Its $30 billion R&D budget generates
0:05:35 2,000 plus patents per year.
0:05:38 But it’s mainly improving versus inventing.
0:05:42 Ways to more precisely cut white cardboard boxes
0:05:45 to deliver its new devices,
0:05:47 new glues to bond layers of glass and plastic together
0:05:50 in its phones.
0:05:52 For the big stuff, like the mouse, digital music
0:05:55 and multi-touch screens,
0:05:57 it lets someone else traverse the Sierra Nevadas first.
0:06:00 What has Apple really been behind on?
0:06:05 The economist estimates that AI will generate $20 billion
0:06:09 in revenue for AI leaders,
0:06:12 Alphabet, Amazon and Microsoft in 2024.
0:06:16 A whopping 2% of their combined revenue.
0:06:20 Apple makes close to $20 billion just from AirPods.
0:06:26 Think about that.
0:06:28 All that hype and increased shareholder value
0:06:31 rivaling the GDP of Germany
0:06:33 and the AI industry is so far the same size as AirPods.
0:06:39 The media tells us Apple isn’t an attractive employer
0:06:42 for cutting edge AI researchers because of its secrecy.
0:06:47 But the company is content to let artificial intelligence
0:06:50 scientists work elsewhere and publish their work
0:06:53 and exchange ideas freely.
0:06:55 When Apple does try to be cutting edge,
0:07:00 it confirms the merits of its slower approach.
0:07:04 When it launched Siri in 2011,
0:07:06 using technology it acquired,
0:07:09 Samuel L. Jackson introduced the digital assistant
0:07:13 science fiction had been promising us.
0:07:15 Even today, Siri doesn’t work as well as promised in 2011.
0:07:21 I just asked her the same question Jackson asked in 2011.
0:07:25 – Find me a store that sells organic mushrooms
0:07:27 for my risotto.
0:07:28 – This organic market looks pretty close to you.
0:07:31 – And she gave me a list of UPS stores.
0:07:34 Siri is Apple’s most glaring failure,
0:07:39 even more so than the Vision Pro.
0:07:41 The headset is a sideshow.
0:07:44 An insurance policy Tim Cook purchased
0:07:46 in case that mendacious fuck, one guess,
0:07:49 was right about headsets.
0:07:52 Apple spent couch change just in case Zuck knew hardware.
0:07:57 He didn’t.
0:07:58 Siri, however, is supposed to be at the heart
0:08:00 of Apple’s most important products.
0:08:04 Apple has the brand equity and capital
0:08:06 to absorb mistakes like these,
0:08:08 but the missteps show that being first
0:08:11 is not the winning strategy.
0:08:13 Alexa and Google Assistant are better than Siri,
0:08:18 but they aren’t better enough.
0:08:21 They also came out too early,
0:08:22 got bogged down in the Sierras,
0:08:25 and were forced to eat each other.
0:08:26 Too much?
0:08:29 If Apple Intelligence delivers on the promise made this week,
0:08:33 this version of Siri will be the product
0:08:36 Apple should have waited to launch.
0:08:38 Apple has learned to under promise,
0:08:41 in contrast to the rest of the AI committee,
0:08:44 who tell us in hushed tones
0:08:47 how concerned they are about AI.
0:08:50 That’s an obnoxious humble brag.
0:08:52 The anti-Apple crowd growled that Android
0:08:55 already has many of Apple’s new features.
0:08:59 It does, sort of.
0:09:01 If you have the right phone
0:09:03 and can navigate a complex ecosystem,
0:09:06 it has artificial intelligence.
0:09:11 Apple Intelligence’s integration of chat GPT
0:09:14 also elegantly eliminates an existential threat.
0:09:19 Few firms have the consumer resonance
0:09:21 and cheap capital to launch a handheld phone.
0:09:25 It’s been reported that OpenAI
0:09:27 is planning to develop an AI phone
0:09:29 with former Apple designer Johnny Ive.
0:09:32 But why would you wanna chat GPT phone
0:09:35 when you can have chat GPT on an iPhone?
0:09:39 On the day of Apple’s worldwide developer conference,
0:09:43 when Apple Intelligence was introduced,
0:09:46 the stock declined 2%.
0:09:49 However, as with an intelligent joke,
0:09:52 it took a beat to absorb the real insight.
0:09:57 From a shareholder standpoint,
0:09:59 Apple Intelligence has positioned the company
0:10:02 to again create the second
0:10:04 most profitable licensing deal in history.
0:10:07 Much of Apple’s shareholder value
0:10:10 hasn’t come despite competition from Microsoft or Google,
0:10:14 but because of it.
0:10:16 Specifically, Apple’s ability as gatekeeper
0:10:20 to the Earth’s billion most affluent inhabitants
0:10:23 to pit the two against each other.
0:10:26 Alphabet pays Apple $20 billion each year
0:10:31 to make Google the default search
0:10:34 and gain VIP access to the Premier Club on the planet.
0:10:38 It’s likely $19.8 billion of that hits the bottom line.
0:10:44 At a PE of 32, the Alphabet deal is responsible
0:10:49 for 20% of Apple’s market cap.
0:10:52 Incorporating OpenAI’s chat GPT
0:10:56 positions the business to put ballgags
0:10:59 on both Microsoft OpenAI and Alphabet
0:11:03 and molest them as they’ll be forced to pay billions
0:11:07 for direct access to Apple’s users.
0:11:10 At launch, Apple is reportedly letting chat GPT in
0:11:15 for no fee, but don’t expect that to last.
0:11:19 As Apple is likely erecting a toll booth
0:11:21 and it will surely take its usual cut
0:11:25 from premium chat bot subscriptions bought via iPhone.
0:11:29 The market figured this out
0:11:31 and over the next two trading days,
0:11:34 Apple added $300 billion in market cap.
0:11:38 Apple intelligence, by any other name,
0:11:41 is this decade’s Apple monopoly tax.
0:11:44 Generative AI has been the anodyne buzzword in tech
0:11:50 since chat GPT launched,
0:11:52 but there’s something more powerful.
0:11:55 Contextual AI.
0:11:57 I don’t need AI to know everything
0:12:00 about Icelandic history or sinus medication.
0:12:03 I need it to know about me.
0:12:06 The most impressive AI feature on my iPhone is memories.
0:12:12 I don’t know how or when it was added, but it’s powerful.
0:12:16 Out of nowhere, I get notifications.
0:12:18 You have a new memory.
0:12:20 And there is a cropped image of my boys
0:12:22 on their first day of school,
0:12:24 the younger one clinging to his mother
0:12:26 that flows into another image
0:12:27 of the older one not comforting him.
0:12:29 All set to music that morphs my older son’s disposition
0:12:34 into endearing from indifferent, but I digress.
0:12:39 I use AI for brainstorming and research,
0:12:42 thus far that hasn’t affected my life nearly as much
0:12:45 as the ability to more easily search my photos.
0:12:48 A feature Apple intelligence will enhance.
0:12:52 A well-timed memory renders me a chocolate mess
0:12:57 in a good way.
0:12:58 No number of parameters in GPT-5 will generate that.
0:13:03 Integration into the Apple ecosystem
0:13:07 was the theme of the Apple intelligence announcement,
0:13:10 giving the AI the context of our email and messages,
0:13:14 calendar, browser history,
0:13:16 the whole storehouse of information already on our device.
0:13:21 Post-launch, Apple intelligence will start to reach out
0:13:25 to third-party apps and services beyond our devices.
0:13:29 That’s where the real cheese lies.
0:13:32 Scott, how’s your shoulder pain?
0:13:34 Do you want me to make an appointment
0:13:35 with your physical therapist?
0:13:37 Design matters and Apple’s AI features will reflect that,
0:13:43 but Apple’s greater advantage at this stage
0:13:46 of its evolution isn’t design or technology
0:13:50 or distribution, though all are best in class.
0:13:54 Its advantage is that for the wealthiest
0:13:57 billion people on earth, an iPhone is the first device
0:14:02 they see in the morning and the last before they go to sleep
0:14:06 and it’s never more than a few feet
0:14:08 from them throughout the day.
0:14:10 Everything I do is on my phone.
0:14:13 The LLM that gets my discretionary spending
0:14:16 will be the LLM that gets me.
0:14:19 And that means it has to live on my iPhone.
0:14:23 Another advantage of the second mouse strategy
0:14:27 is that when you fail, it’s a whole lot cheaper.
0:14:31 The exit wounds are clean and heal quickly.
0:14:34 Meta has burned $46 billion to stuff the same drawer
0:14:40 that has your Nike Fuel Band
0:14:43 with Zuckerberg’s VR hallucination.
0:14:45 Apple’s cheaper call option on the metaverse
0:14:49 can be quietly killed in a few years
0:14:51 with no lasting damage.
0:14:54 In innovation-driven industries,
0:14:56 how you fail is almost as important as how you succeed.
0:15:00 I predicted the Vision Pro would be a failure
0:15:04 when it launched, but I didn’t sell Apple stock.
0:15:07 Next year will probably be the year
0:15:12 that real winners and losers start to emerge in AI.
0:15:15 We’re still in the Netscape stage
0:15:18 when the technology itself is the innovation.
0:15:22 Because our government spent the last 40 years
0:15:24 asleep at the switch on antitrust,
0:15:27 the usual big tech giants will fight for AI supremacy
0:15:31 and Apple is holding a strong hand.
0:15:35 Not just because of its second mouse strategy,
0:15:38 but also thanks to its vertical integration.
0:15:41 There is a lot of money to be made
0:15:43 adopting an asset light model.
0:15:45 C, Airbnb, Sheehan, NVIDIA, more on that in another post.
0:15:50 But Apple’s contrary approach has its advantages.
0:15:55 Apple intelligence requires massive computational power
0:15:59 to run LLMs on the device.
0:16:02 But that’s key to its contextual awareness,
0:16:04 speed, and reliability.
0:16:07 When these features roll out later this year,
0:16:10 they will only work to their fullest
0:16:11 on the latest Apple devices,
0:16:14 giving a billion or so users of older editions
0:16:17 a reason to upgrade.
0:16:19 Then they’ll work on every future iPhone and iPad and Mac.
0:16:23 This sharpens an edge over Alphabet,
0:16:27 which can’t ensure every Android phone
0:16:29 has the necessary hardware to run Gemini Nano,
0:16:32 the Android LLM equivalent to Apple Intelligence,
0:16:35 or even access to the updated OS.
0:16:38 Android’s Achilles heel has long been this fragmentation.
0:16:43 What you see running on pixels in the keynote
0:16:46 takes years to filter down to the phones
0:16:49 most Android users actually own.
0:16:51 I spend a great deal of my wealth on homes in nice places.
0:16:58 The goal is to live where my sons
0:17:00 and the people they collect will come visit me.
0:17:03 I think a lot about death.
0:17:06 It gives me power or courage
0:17:10 to live a bit louder and less fearfully.
0:17:13 And when the ass cancer comes,
0:17:16 I plan to be in a beautiful place,
0:17:18 surrounded by people who will miss me terribly,
0:17:21 a shit ton of heroin and Tom Petty,
0:17:24 who will be joined by his best friends from the 80s.
0:17:27 In addition, I plan to live my life over again,
0:17:32 courtesy of Apple Memories.
0:17:34 And that’s the real promise of technology,
0:17:38 not to explore new worlds in a dildo
0:17:40 or reduce customer service costs,
0:17:44 but to save people time
0:17:45 so they can spend more moments with loved ones
0:17:49 and feel closer to them.
0:17:51 Tech’s promise isn’t artificial intelligence,
0:17:56 but native intimacy.
0:17:59 Life is so rich.
0:18:05 (upbeat music)
0:18:07 (upbeat music)
0:18:10 (gentle music)
0:18:12 [BLANK_AUDIO]
0:00:03 We waste a lot of time worrying about what we haven’t done,
0:00:05 and this may sound a little corny,
0:00:07 but taking a second to appreciate your wins is important.
0:00:09 Personally, this year I am spending more time with my boys.
0:00:12 Good for me. If you’d like to celebrate your own wins
0:00:15 and make some adjustments for the rest of the year,
0:00:17 BetterHelp Online Therapy is a great place to start.
0:00:19 It’s entirely online, which makes it more convenient
0:00:22 and more affordable than traditional therapy.
0:00:24 Take a moment, visit BetterHelp.com/ProphecyToday
0:00:27 to get 10% off your first month.
0:00:29 That’s BetterHelp, H-E-L-P, .com/Prophecy.
0:00:33 Support for the show comes from Atlassian.
0:00:37 Atlassian software like Jira, Confluence, and Loom
0:00:39 help help with the collaboration needed for teams
0:00:41 to accomplish what would otherwise be impossible alone.
0:00:44 Because individually, we’re great,
0:00:45 but together, we’re so much better.
0:00:47 That’s why millions of teams around the world,
0:00:49 including 75% of the Fortune 500,
0:00:51 trust Atlassian software for everything
0:00:52 from space exploration and green energy
0:00:55 to delivering pizzas and podcasts.
0:00:56 Whether you’re a team of two, 200, or 2 million,
0:00:59 Atlassian software is built to help keep you connected
0:01:02 and moving together as one.
0:01:03 Learn how to unleash the potential
0:01:04 of your team at Atlassian.com.
0:01:06 That’s A-T-L-A-S-S-I-A-N.com.
0:01:11 Atlassian.
0:01:11 I’m Scott Galloway, and this is No Mercy, No Malice.
0:01:22 Innovation is overrated.
0:01:24 The best strategy, second mouse.
0:01:29 And nobody does second mouse better than Apple.
0:01:32 Secondmouse.ai, as read by George Hahn.
0:01:36 As stupid as Apple’s Vision Pro is,
0:01:42 Apple intelligence is that intelligent.
0:01:46 Innovation is overrated.
0:01:49 Specifically, disruptive innovation,
0:01:52 the kind that marks a before and after in our lives,
0:01:57 is terrible for shareholder value.
0:02:00 Some innovators that changed our lives?
0:02:03 Seattle computer products.
0:02:05 Xerox Park, Grid, Palm, Netscape,
0:02:09 Friendster, Blackberry, Alta Vista, Nokia.
0:02:13 Combined market capitalization, $21 billion.
0:02:18 And that’s only because Blackberry and Nokia
0:02:21 somehow still exist.
0:02:24 Xerox donated Park to a non-profit in 2023,
0:02:28 valuing it at $132 million.
0:02:30 Just four of the companies that capitalized
0:02:35 on the innovations of the departed,
0:02:37 Microsoft, Apple, Google, and Meta,
0:02:41 register a market capitalization of seven plus trillion dollars.
0:02:46 The second mouse often gets the cheese.
0:02:51 Tesla didn’t invent the consumer electric car.
0:02:54 GM.
0:02:56 Visa didn’t invent the credit card.
0:02:58 Diners Club.
0:03:00 McDonald’s didn’t invent fast food hamburgers.
0:03:03 White Castle.
0:03:05 And Coca-Cola didn’t invent soda.
0:03:08 Dr. Pepper.
0:03:10 One firm enjoys a market cap larger than all five combined.
0:03:15 Apple is a second mouse the size of a blue whale.
0:03:21 AI has seen a brand equity implosion in 2024,
0:03:26 similar to that suffered by the Supreme Court,
0:03:29 Twitter, and elite colleges.
0:03:32 The promise of the AI brand is that it will either
0:03:36 save us or kill us all.
0:03:38 It has done neither.
0:03:40 Any time saved by AI has mostly been chewed up
0:03:44 listening to breathless media reports on management
0:03:48 or lack thereof drama at Microsoft AI.
0:03:52 Some people call it open AI.
0:03:55 The brand is the offspring of capitalism
0:03:57 and the Bravo Channel.
0:04:00 Staggering increases in shareholder value
0:04:02 mixed with IP theft, hallucinations,
0:04:05 and constant catastrophizing.
0:04:07 It’s as if Rupert Murdoch got married
0:04:09 for a sixth time to Skynet.
0:04:13 I’m especially proud of the previous sentence.
0:04:16 Apple’s move to shit can the AI brand
0:04:18 and opt for Apple intelligence
0:04:21 is the best brand move of 2024.
0:04:25 The worst?
0:04:26 A, a toss up between a Chardonnay fueled decision
0:04:30 to hang the stars and stripes upside down
0:04:32 or the zombie apocalypse of useful idiots on US campuses.
0:04:37 Apple intelligence is more than a great brand move.
0:04:43 It encapsulates the company’s strategy.
0:04:47 Take something invented elsewhere,
0:04:49 make it more user friendly, easier to use and more reliable,
0:04:53 mix in world-class industrial design and print billions.
0:04:58 Artificial intelligence is for tech bros and data scientists.
0:05:04 Apple intelligence is AI for the rest of us.
0:05:09 Shrewd.
0:05:12 The tech press has spent the past 18 months
0:05:15 telling us Apple is behind on AI.
0:05:19 While in the next breath,
0:05:20 reporting on the AI gaffes produced by its rivals.
0:05:24 And that’s the point.
0:05:26 Apple is always behind.
0:05:29 Apple is a distinctly inventive company.
0:05:32 Its $30 billion R&D budget generates
0:05:35 2,000 plus patents per year.
0:05:38 But it’s mainly improving versus inventing.
0:05:42 Ways to more precisely cut white cardboard boxes
0:05:45 to deliver its new devices,
0:05:47 new glues to bond layers of glass and plastic together
0:05:50 in its phones.
0:05:52 For the big stuff, like the mouse, digital music
0:05:55 and multi-touch screens,
0:05:57 it lets someone else traverse the Sierra Nevadas first.
0:06:00 What has Apple really been behind on?
0:06:05 The economist estimates that AI will generate $20 billion
0:06:09 in revenue for AI leaders,
0:06:12 Alphabet, Amazon and Microsoft in 2024.
0:06:16 A whopping 2% of their combined revenue.
0:06:20 Apple makes close to $20 billion just from AirPods.
0:06:26 Think about that.
0:06:28 All that hype and increased shareholder value
0:06:31 rivaling the GDP of Germany
0:06:33 and the AI industry is so far the same size as AirPods.
0:06:39 The media tells us Apple isn’t an attractive employer
0:06:42 for cutting edge AI researchers because of its secrecy.
0:06:47 But the company is content to let artificial intelligence
0:06:50 scientists work elsewhere and publish their work
0:06:53 and exchange ideas freely.
0:06:55 When Apple does try to be cutting edge,
0:07:00 it confirms the merits of its slower approach.
0:07:04 When it launched Siri in 2011,
0:07:06 using technology it acquired,
0:07:09 Samuel L. Jackson introduced the digital assistant
0:07:13 science fiction had been promising us.
0:07:15 Even today, Siri doesn’t work as well as promised in 2011.
0:07:21 I just asked her the same question Jackson asked in 2011.
0:07:25 – Find me a store that sells organic mushrooms
0:07:27 for my risotto.
0:07:28 – This organic market looks pretty close to you.
0:07:31 – And she gave me a list of UPS stores.
0:07:34 Siri is Apple’s most glaring failure,
0:07:39 even more so than the Vision Pro.
0:07:41 The headset is a sideshow.
0:07:44 An insurance policy Tim Cook purchased
0:07:46 in case that mendacious fuck, one guess,
0:07:49 was right about headsets.
0:07:52 Apple spent couch change just in case Zuck knew hardware.
0:07:57 He didn’t.
0:07:58 Siri, however, is supposed to be at the heart
0:08:00 of Apple’s most important products.
0:08:04 Apple has the brand equity and capital
0:08:06 to absorb mistakes like these,
0:08:08 but the missteps show that being first
0:08:11 is not the winning strategy.
0:08:13 Alexa and Google Assistant are better than Siri,
0:08:18 but they aren’t better enough.
0:08:21 They also came out too early,
0:08:22 got bogged down in the Sierras,
0:08:25 and were forced to eat each other.
0:08:26 Too much?
0:08:29 If Apple Intelligence delivers on the promise made this week,
0:08:33 this version of Siri will be the product
0:08:36 Apple should have waited to launch.
0:08:38 Apple has learned to under promise,
0:08:41 in contrast to the rest of the AI committee,
0:08:44 who tell us in hushed tones
0:08:47 how concerned they are about AI.
0:08:50 That’s an obnoxious humble brag.
0:08:52 The anti-Apple crowd growled that Android
0:08:55 already has many of Apple’s new features.
0:08:59 It does, sort of.
0:09:01 If you have the right phone
0:09:03 and can navigate a complex ecosystem,
0:09:06 it has artificial intelligence.
0:09:11 Apple Intelligence’s integration of chat GPT
0:09:14 also elegantly eliminates an existential threat.
0:09:19 Few firms have the consumer resonance
0:09:21 and cheap capital to launch a handheld phone.
0:09:25 It’s been reported that OpenAI
0:09:27 is planning to develop an AI phone
0:09:29 with former Apple designer Johnny Ive.
0:09:32 But why would you wanna chat GPT phone
0:09:35 when you can have chat GPT on an iPhone?
0:09:39 On the day of Apple’s worldwide developer conference,
0:09:43 when Apple Intelligence was introduced,
0:09:46 the stock declined 2%.
0:09:49 However, as with an intelligent joke,
0:09:52 it took a beat to absorb the real insight.
0:09:57 From a shareholder standpoint,
0:09:59 Apple Intelligence has positioned the company
0:10:02 to again create the second
0:10:04 most profitable licensing deal in history.
0:10:07 Much of Apple’s shareholder value
0:10:10 hasn’t come despite competition from Microsoft or Google,
0:10:14 but because of it.
0:10:16 Specifically, Apple’s ability as gatekeeper
0:10:20 to the Earth’s billion most affluent inhabitants
0:10:23 to pit the two against each other.
0:10:26 Alphabet pays Apple $20 billion each year
0:10:31 to make Google the default search
0:10:34 and gain VIP access to the Premier Club on the planet.
0:10:38 It’s likely $19.8 billion of that hits the bottom line.
0:10:44 At a PE of 32, the Alphabet deal is responsible
0:10:49 for 20% of Apple’s market cap.
0:10:52 Incorporating OpenAI’s chat GPT
0:10:56 positions the business to put ballgags
0:10:59 on both Microsoft OpenAI and Alphabet
0:11:03 and molest them as they’ll be forced to pay billions
0:11:07 for direct access to Apple’s users.
0:11:10 At launch, Apple is reportedly letting chat GPT in
0:11:15 for no fee, but don’t expect that to last.
0:11:19 As Apple is likely erecting a toll booth
0:11:21 and it will surely take its usual cut
0:11:25 from premium chat bot subscriptions bought via iPhone.
0:11:29 The market figured this out
0:11:31 and over the next two trading days,
0:11:34 Apple added $300 billion in market cap.
0:11:38 Apple intelligence, by any other name,
0:11:41 is this decade’s Apple monopoly tax.
0:11:44 Generative AI has been the anodyne buzzword in tech
0:11:50 since chat GPT launched,
0:11:52 but there’s something more powerful.
0:11:55 Contextual AI.
0:11:57 I don’t need AI to know everything
0:12:00 about Icelandic history or sinus medication.
0:12:03 I need it to know about me.
0:12:06 The most impressive AI feature on my iPhone is memories.
0:12:12 I don’t know how or when it was added, but it’s powerful.
0:12:16 Out of nowhere, I get notifications.
0:12:18 You have a new memory.
0:12:20 And there is a cropped image of my boys
0:12:22 on their first day of school,
0:12:24 the younger one clinging to his mother
0:12:26 that flows into another image
0:12:27 of the older one not comforting him.
0:12:29 All set to music that morphs my older son’s disposition
0:12:34 into endearing from indifferent, but I digress.
0:12:39 I use AI for brainstorming and research,
0:12:42 thus far that hasn’t affected my life nearly as much
0:12:45 as the ability to more easily search my photos.
0:12:48 A feature Apple intelligence will enhance.
0:12:52 A well-timed memory renders me a chocolate mess
0:12:57 in a good way.
0:12:58 No number of parameters in GPT-5 will generate that.
0:13:03 Integration into the Apple ecosystem
0:13:07 was the theme of the Apple intelligence announcement,
0:13:10 giving the AI the context of our email and messages,
0:13:14 calendar, browser history,
0:13:16 the whole storehouse of information already on our device.
0:13:21 Post-launch, Apple intelligence will start to reach out
0:13:25 to third-party apps and services beyond our devices.
0:13:29 That’s where the real cheese lies.
0:13:32 Scott, how’s your shoulder pain?
0:13:34 Do you want me to make an appointment
0:13:35 with your physical therapist?
0:13:37 Design matters and Apple’s AI features will reflect that,
0:13:43 but Apple’s greater advantage at this stage
0:13:46 of its evolution isn’t design or technology
0:13:50 or distribution, though all are best in class.
0:13:54 Its advantage is that for the wealthiest
0:13:57 billion people on earth, an iPhone is the first device
0:14:02 they see in the morning and the last before they go to sleep
0:14:06 and it’s never more than a few feet
0:14:08 from them throughout the day.
0:14:10 Everything I do is on my phone.
0:14:13 The LLM that gets my discretionary spending
0:14:16 will be the LLM that gets me.
0:14:19 And that means it has to live on my iPhone.
0:14:23 Another advantage of the second mouse strategy
0:14:27 is that when you fail, it’s a whole lot cheaper.
0:14:31 The exit wounds are clean and heal quickly.
0:14:34 Meta has burned $46 billion to stuff the same drawer
0:14:40 that has your Nike Fuel Band
0:14:43 with Zuckerberg’s VR hallucination.
0:14:45 Apple’s cheaper call option on the metaverse
0:14:49 can be quietly killed in a few years
0:14:51 with no lasting damage.
0:14:54 In innovation-driven industries,
0:14:56 how you fail is almost as important as how you succeed.
0:15:00 I predicted the Vision Pro would be a failure
0:15:04 when it launched, but I didn’t sell Apple stock.
0:15:07 Next year will probably be the year
0:15:12 that real winners and losers start to emerge in AI.
0:15:15 We’re still in the Netscape stage
0:15:18 when the technology itself is the innovation.
0:15:22 Because our government spent the last 40 years
0:15:24 asleep at the switch on antitrust,
0:15:27 the usual big tech giants will fight for AI supremacy
0:15:31 and Apple is holding a strong hand.
0:15:35 Not just because of its second mouse strategy,
0:15:38 but also thanks to its vertical integration.
0:15:41 There is a lot of money to be made
0:15:43 adopting an asset light model.
0:15:45 C, Airbnb, Sheehan, NVIDIA, more on that in another post.
0:15:50 But Apple’s contrary approach has its advantages.
0:15:55 Apple intelligence requires massive computational power
0:15:59 to run LLMs on the device.
0:16:02 But that’s key to its contextual awareness,
0:16:04 speed, and reliability.
0:16:07 When these features roll out later this year,
0:16:10 they will only work to their fullest
0:16:11 on the latest Apple devices,
0:16:14 giving a billion or so users of older editions
0:16:17 a reason to upgrade.
0:16:19 Then they’ll work on every future iPhone and iPad and Mac.
0:16:23 This sharpens an edge over Alphabet,
0:16:27 which can’t ensure every Android phone
0:16:29 has the necessary hardware to run Gemini Nano,
0:16:32 the Android LLM equivalent to Apple Intelligence,
0:16:35 or even access to the updated OS.
0:16:38 Android’s Achilles heel has long been this fragmentation.
0:16:43 What you see running on pixels in the keynote
0:16:46 takes years to filter down to the phones
0:16:49 most Android users actually own.
0:16:51 I spend a great deal of my wealth on homes in nice places.
0:16:58 The goal is to live where my sons
0:17:00 and the people they collect will come visit me.
0:17:03 I think a lot about death.
0:17:06 It gives me power or courage
0:17:10 to live a bit louder and less fearfully.
0:17:13 And when the ass cancer comes,
0:17:16 I plan to be in a beautiful place,
0:17:18 surrounded by people who will miss me terribly,
0:17:21 a shit ton of heroin and Tom Petty,
0:17:24 who will be joined by his best friends from the 80s.
0:17:27 In addition, I plan to live my life over again,
0:17:32 courtesy of Apple Memories.
0:17:34 And that’s the real promise of technology,
0:17:38 not to explore new worlds in a dildo
0:17:40 or reduce customer service costs,
0:17:44 but to save people time
0:17:45 so they can spend more moments with loved ones
0:17:49 and feel closer to them.
0:17:51 Tech’s promise isn’t artificial intelligence,
0:17:56 but native intimacy.
0:17:59 Life is so rich.
0:18:05 (upbeat music)
0:18:07 (upbeat music)
0:18:10 (gentle music)
0:18:12 [BLANK_AUDIO]
As read by George Hahn.
Second Mouse.AI
Learn more about your ad choices. Visit podcastchoices.com/adchoices