(Preview) Should Apple Buy Perplexity?, What Apple Could Learn from IBM, Vision Pro and Its Vaporware
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Hello, and welcome to a free preview of Sharp Tech. But you go back to Apple and this question, and it's, okay, what exactly are they, what do they need to do, right? The reality is the iPhone has a lot of lock-in, remains a compelling platform. Like, all the AI developers are mostly using Macs. Like, are you actually the ultimate, people talk about build picks and shovels in the Gold Rush,

The biggest pick and shovel maker, the most profitable one is Apple remains Apple. It seems like it's going to be Apple for a very long time to come. Even when it comes to things like if there's goggles or visions, they're well placed, at least in theory, to to succeed in that area. So what's actually wrong with what they're doing?

And not just maybe nothing, right? Like that's the whole thing. And I think what people missed about Gruber's article is he wasn't

Yes, part of it was critiquing their failures in AI. What he was actually talking about was their dishonesty with end users. I mean, that would be the problem with what they did. Right. And dishonesty with themselves last year. Right. That's what his finger was on. It was remarkable to see some motivated readers say,

Miss the point like like like that. That was his whole thing. And as he put in the article, it would have been kind of mock worthy if Apple comes out and all they have is like basic image image generation and ask chat GPT a question. It's like really Apple in 2024. This is what you have. But you know what? Yeah.

It would have been fine because you still need a phone. It would have been, yes, you could sit there and make fun of them. You're so far behind open AI. You're so far behind Google or wherever you want to point to. And actually from a business perspective, it wouldn't really matter because, and the whole thing that I put after that was it,

you know, they could be the aggregator for all these other models. Now I did assume and grant them that they were going to actually do better on delivering the personalized intelligence bits, but you know what? Even if they don't, it's still pretty compelling. Now that, that,

may diminish over time. Again, I think the strong assumption should be that Google is going to nail a lot of this in a way that Apple isn't sort of in the long run. So then how does Apple need to, you know, in the very long run? So assuming they're- No, in the long run, but in the short term and the medium term, we've been saying for the last three years, no,

Maybe Apple sitting on the sidelines and letting everybody else spend themselves into oblivion to try to be at the leading edge of this stuff. Maybe that's strategically the right decision. And then ultimately, it's all going to come back to the iPhone. And so absent the ambitious announcements that then never materialized with actual products.

Apple would be fine. Yeah, I think that's an important addition to this conversation. Right. We would probably be sitting here. Essentially what Gruber was writing about. Yeah. I think both John and I would be sitting here on dithering, saying, like, just poo-pooing everyone's concern about Apple if they had shipped relatively basic updates and say, look, where are you going to run these models?

Where are you going to access these apps? You're going to access them on an iPhone. I mean, every time Zuckerberg comes out and talks about AR glasses or this, that or the other, he's always careful to say we don't think phones are just going to go away. I mean, even the people who I mean, I'm sure they sort of wish they would as long as they could keep all their revenues along the way.

But he's not lying to people. And he frankly is more credible because he says, look, we don't, we're not going to displace the phone overnight with some of this new hardware. And all of that is obvious. And so it's really a credibility issue more than a software issue. Exactly. That, that is the key thing that, that, that is the problem that is revealed by all this AI stuff is they started lying to themselves. And that's the, that's what John was putting his finger on for sure.

So where should they go now? Well, look at a company like Microsoft. Microsoft is backpedaling furiously from the idea they need to own and control their own model. They have decided for lots of reasons, in part because the OpenAI partnership ended up being sustainable. I think the core reason is because ChatGPT is too popular. It wasn't tenable initially.

The way that relationship was structured is chat GPT does all the research and Microsoft harvest sort of the end and end use game, like the end users. And, and,

ChatGPT is in a position where I think the long-term route to profitability is owning the end-user relationship. It was just a fundamental structural conflict between the two companies that I actually don't – I think it has less to do with the whole Altman situation. It was just once ChatGPT was this breakout hit, the relationship was doomed just because you can't like be serving two masters in some respects.

And Microsoft's like, well, okay, this isn't sustainable in the long run. And also, by the way, we're looking around and there's like 47 GPT-4 level models out there. Models are a commodity. Guess what? Models being a commodity?

Fantastic. Our entire business is predicated on computing be a commodity. We treated processors as a commodity. We treated PCs as a commodity. We get to treat models as a commodity. Fantastic. Let's get in a situation where we, what do we do? We leverage our distribution, our relationship with enterprise customers, and we'll make, they don't need to worry about the model. We'll take care of the model. And by the way, we'll switch the models in and out. We'll figure out how to make it totally,

you know, a black box to, to the end user, they will trust us and we will figure out a solution that, that, that maximizes our profitability. And we're not going to spend on Stargate and this crazy AGI dreams. We'll take what we want. And then we'll, again, is that going to work out in the long run? Might it be the case that AGI completely transforms work and undoes everything? It might be, but if you think about it,

If AGI completely eliminates normal worker PC use and productivity, Microsoft's screwed anyway. They're screwed anyway. So there's a bit where there's an – this applies to Apple too. It does, yeah. If we get to a world beyond the iPhone, Apple's probably screwed. So why not –

Why not assume that's not going to happen? Apple's only chance in that universe would be we're going to invent the next piece of hardware that people are going to use. And at this point, it's purely theoretical, like what that hardware will look like. But they're not going to lose out in that reality.

If they don't have software, that's good enough. Exactly. There's a software issue. This is, I've talked about this for as long as the right trajectory, there's this sense of, because people do treat tech. And by the way, I'm not complaining about this because it's very good for business. People treat tech as like a sports competition and they're cheering for their team and they want to see who can do it.

do sort of X, Y, Z. But from, from you zoom out from a market perspective, like there's no reason companies need to live forever. Like from, if I'm a shareholder, my money is in Apple because I think the device market is valuable going forward. So it's there. If I think that market is no longer viable, I don't want Apple who's good at making devices and integrated devices.

operating system hardware devices to throw that money at something they're bad at. I would like to make the capital allocation for myself, withdraw that money from Apple and put it into another company that's better at what I think the future is. But people don't think that way. Like, oh, Apple has to live forever. Apple doesn't have to live forever. I think doubling down on we actually think devices are going to be important. The phone's not going anywhere. We're going to be the best in that. It's perfectly fine. That's what Microsoft is doing. And I think it makes...

Total sense. So in that perspective, Apple, it's not that they're actually close. They've done a good thing by not spending billions and billions of dollars building their old model or acquiring an Anthropic, which I predicted they would do, I think, when ChatGPT came out. That hasn't happened yet. It's only increased drastically in value. Probably if someone acquires them, it's going to be an Amazon. But I think they would certainly like to make a go of it on their own.

We'll see what, but, but, you know, I think Apple's okay. And in this perspective, a perplexity is not a terrible sort of option because again, perplexity also predicated on models sort of becoming a commodity and owning that user interface layer, uh,

Should Apple do that? I mean, maybe. I guess what perplexity does, if that was Siri and you were getting that experience, it's not the worst idea of the companies in Ukraine. I mean, I think the price is going to be pretty steep. But at this point, Apple's pretty desperate. I think the chances of M&A happening are pretty high. And the question is, does that M&A go towards we have to actually become better at making models?

Or we have to be better at the interface layer and we don't need to own a model. We can bet on it being a commodity. If it is the latter option,

at least in theory, certainly makes a lot of sense. And so that makes sense because Apple just doesn't have a great feel for how users want to interact with this technology. And from a developer standpoint, they just lack the chops to build those sort of tools internally. Is that right? Yeah. I mean, yeah, clearly they have, they're struggling. I mean, the problem is,

a lot of the core problems here are really about product. Someone posted a screenshot of, I don't know if it was a beta or something about, you know, Apple intelligence promoting an email to pro like a scam email or a spam email that is trying to get your information to like elevated that as being important.

That's a product problem. And what I mean is Google is very good at identifying spam by and large, better than Apple is. And some aspect of that is certainly machine learning and AI in a more sort of traditional sense. But the point, the problem there isn't like it's very easy to blame generative AI for Apple just being bad at product.

And there's – and this is – this applies to Google as well, by the way. I mean I'm – there's a point that I'll get to later. But there's a difference between the core technology and the actual implementation of that technology. And Apple traditionally product is supposed to be their strength, and that is a big problem here. Is perplexity a great product?

I would say my big problem with talking about perplexity is I basically don't use perplexity. I found the insertion of search capabilities into regular chat models kind of took away the main motivation I had to use it.

I certainly in theory, get it. If Apple owns it, they have like, they can take care of the customer acquisition problem to a certain extent. But the alternative is Apple being Apple decides actually our problem is we need to control the core technology, blah, blah, blah, blah, blah. And we have to build our own model. And in that case, that is more of an anthropic acquisition or a mistraw acquisition. And, and,

that is, so that's the core. If they do M&A, that's the core question. Do they decide, no, we're in the right place strategically. We just suck at product or actually, no, we need to, we need better model making capability. The models are going to swallow everything. If we're not in this game, we want to deliver an integrated experience. And just as the old integrated experience was from the processor up to the operating system, the new integrated experience is from the model up to

up to sort of the user interface. And this is a question facing AI broadly, right? Is open AI, is chat GPT just going to swallow every chat GPT wrapper? It's just going to become internal to the model and that's the user interface to rule them all. I think Apple should not do that. I don't have faith in them pulling it off. And like I said, the, you know,

That's spending a lot of money that I would think as a shareholder, I'm happy to let other people spend because I don't think I would be good at it. And I still have a very dominant position otherwise. That's the thing. That's the whole privilege of being the dominant hardware product in America. And you just would be sacrificing that massive advantage to try to keep up in a race that may or may not lead anywhere for Apple. That seems crazy to me on its face.

But you could argue this is the future, right? And so you actually need to get in the game fully. Again, I don't think Apple does, but I understand the argument that they do, particularly if you're really an AI sort of believer and think it's going to – there is going to be like this AGI moment and it's going to sort of consume everything. So I would fall on the something like a perplexity makes sense argument.

I'm sure Perplexity and their investors would welcome that very much and not get into the – weave the hardcore investing model stuff to everyone else. But I can get the argument in the other direction. But for sure, I would imagine – I've heard mumblings. There's a –

Apple knows they screwed up. From what I gather, there is a sense of panic and we have to do something here. So we'll see. Well, a little urgency is healthy. All right. More will be revealed in the weeks to come. To keep it moving, you mentioned integration earlier. Jonathan says, gentlemen...

Perhaps I am mistaken, but I believe some of Ben's previous takes regarding Siri and Apple intelligence mentioned that Apple had significant self-imposed handicaps when it came to machine learning and AI due to their pre-existing privacy commitments.

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