This Week in Tech 596
Leo Laporte: It's time for TWiT, This Week in Tech! Great panel for you! Phillip Elmer Dewitt is here, he's the king of Apple, journalism, and we're going to talk about the tenth anniversary of the iPhone. It's tomorrow, might even re visit that amazing announcement. Also from Fox and Friends, Clayton Morris is here. We're going to talk about the Russian hacking, and a whole lot more. We got a great show ahead for you.
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Leo: This is TWiT, This Week in Tech, episode 596, recorded Sunday, January 8, 2017.
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It's time for TWiT: This Week in Tech: the show where we talk about the latest tech news. I am thrilled, as always, with our panel. It's so much fun to get our friends together to talk about tech news. Old friends, Clayton Morris from Fox and Friends, and a tech journalist for years. Great to see you, Clayton. It's been a long time. You had a baby since last I saw you.
Clayton Morris: Yeah. I had a baby, I had a food baby.
Leo: Wait a minute. What is that coming out of your ear.
Clayton: Instead of wearing the giant cans, when you're dong TWiT and it's three hours long, it squeezes your forehead together, so I put on the Airpods.
Leo: You're not using it for the mic.
Clayton: No. Just to hear.
Leo: Nice. Also with us, the Dean of Mac journalism, Philip Elmer DeWitt. He's also wearing them. And he's dressed for the occasion, because he is in the snowy North. New England.
Philip Elmer-DeWitt: This is what we wear in Western Mass, so people don't know we don't use Airpods.
Leo: Elmer Fudd hat! Paul Allen was wearing his Elmer Fudd hat. He was caught on camera during the game wearing an Elmer Fudd hat and sitting behind a Lenovo ink pad. I don't know how the NFL feels. But I'm guessing the NFL doesn't mind if the owners don't use surface pro.
Philip: How is that an Elmer Fudd hat?
Leo: This is not. I can't find...
Philip: It's the ear flaps, right?
Clayton: All of the announcers, whether it was Fox or CBS, they call them iPads. Last year, during the Super bowl, or it was during one of the championship games, the surface broke down on the sidelines. That was the first time the announcers got it right.
Leo: Microsoft was hoping it was the iPads. Here's a picture from last night of Paul Allen. He's still got his think pad, and I don't know what he was so concerned about. I put my Elmer Fudd hat on too.
Philip: They won't mistake you for a dear with that on.
Leo: I have to apologize. We had to have Kara Swisher on the phone, from Recode. She's been writing some interesting stuff, about the transition, about the tech executives going to meet Donald Trump in Trump tower and so forth. Some very acerbic stuff. We couldn't get her on because of the flooding in Northern California. Cable Internet is out. She's on the phone with Comcast, hoping she can get on the show. That is the biggest joke of the day, as we know that's an hour, two hours, three hours. Could be forever! We'll reschedule and get Kara on. Before the show we talked to her via phone, and you'll see why we won't have her on the show. But I thought we'd drop this phone call in, because I did thank her for what she's been writing lately in Recode. This is what she had to say.
Leo: Your writing has been so awesome, Kara, as of late. Freed of the chains of corporate... which is ironic, because you work for AOL.
Kara Swisher: I never worked for AOL.
Leo: Who owns Recode now? Fox. Fox is not AOL. They're letting you do whatever you want.
Kara: So did everybody else. No one ever told me what to do.
Leo: I think you're inspired.
Kara: No one has ever told me what to do. I think it's an important time, and tech seems so ridiculously silent about what is happening, and it's irritating after all these years to listen to them yammer on about their independence and innovation and how they disrupt everything and sit here quietly while things near and dear to their core values are being attacked. Not saying anything and trying to be practical. On some level you get the sense they happen to like the power and they like the money. They happen to like their status and don't want to speak up for core values, what Silicon Valley represents. That's all. They like everything else. Employees feel this way. I was at a big company last week, and a pretty high ranking executive under one of the executives went to the Trump meeting that took place at Trump executive leaders. Literally thanked me. We are very upset they are not sticking up for what we think is important. This is someone from the top.
Leo: Do you think they struggle with this because at the same time they feel some fiduciary responsibility as a CEO of a publicly held company?
Kara: Sure. They can say that. They're not going to escape scrutiny. If this guy decides he wants to tweet about one of them, what happened to this executive? He didn't feel that way about encryption. He stood up for what he strongly thinks. He seems to have a voice. They certainly stand up for the gay issue in Indiana. They stand up for a lot of things. In this case, I don't know why they can't make normal statements. It doesn't need to be opposed. They don't have to say "I hate you." They can engage like Tim said to his staff. By the way Tim Cook is the only executive who went to that meeting who made a statement to his staff about it in any way that could become public, which is astonishing because as you know, Leo, these people never stop wanting to talk or say things, and suddenly they are rendered silent before and after the meeting. I found that fascinating. As you know, they never stop talking about their values. He has fiduciary duties, that doesn't mean he can't say we think immigration is important, we think fair immigration is important, we think diversity is important, we think a lot of things are important. He's said things that disturb us. Sorry, I'll get off my soap box.
Leo: Kara thank you, and we'll get you on. She's now traveling. She's going to Germany and DC, so I don't know if we're going to get her back. We'll get her on again as soon as possible. Kara is always welcome as a member of the panel. I don't know if she has an Elmer Fudd hat, but if she does, yours is authentic, Philip.
Philip: It's an aviator hat. I got it for Christmas.
Leo: I have one of those too.
Clayton: Every time we're on we end up doing some kind of costume parade. Last time I was on we were nude at some point. Weren't we naked?
Leo: That made it to the best of. We played it last week with you in the chewy mask. That was when the viral video was all the rage. Those things have the shelf life of fish. Anyway what were we talking about? Oh. CES. This is the day CES ends in Las Vegas, and you asked the most important question, Clayton. Philip, you asked the most important question. How many of us went to CES? Zip. Zilch! Nothing. Is that because we're the lucky ones, or is that because we're the left behind ones?
Clayton: I think the lucky ones. You mentioned fear of missing out. I get that for like five minutes, and when I see that everyone has to pack up right after New Year and you're trying to get your life back in order and they have to go to Las Vegas, and spend a week there and walk non-stop, it feels like you know less of what's going on when you're there than by the time you get back to your hotel room or when you're able to read about everything and then you go investigate. When you're there it's a mad house.
Philip: I started reading the feeds from it, and I got the same horrible feeling that I-- I would leave after a day of that angry. My favorite report from CES this year was Aaron Gloria Ryan writing for the Daily Beast dropped acid for the first time to go to her first CES. It was a great report, because it's written under the influence.
Leo: She was still tripping when she wrote?
Philip: It kicks in as she's walking in, the carpet freaks her out, and the robots freaked her out. It's quite a story.
Clayton: All the booth people dressed up in different costumes inviting you over.
Leo: That's crazy! I wish I'd had the guts to do this.
Clayton: I don't know that you need to drop acid. It's so sensory overload anyway.
Leo: This is her first time there and she... Was she micro dosing? Or was she doing the full thing?
Philip: From her hallucinations, the full thing.
Leo: Even these straight pictures that she took of the event look psychedelic.
Clayton: The polaroid cube of this tree house.
Leo: Crazy. And the colors...
Philip: She references Hunter Thompson who famously...
Leo: Wow. Not that we're advocating illegal drug use, above my head a mono rail flew by like a dragon. Every breath felt like a laugh. In my peripheral vision a woman blatantly held out her cell phone to take a photo of me. She was only a few feet away. I turned to tell her to mind her own business, I'm no celebrity, just an amateur idiot drug doer getting some air. She wasn't a real woman, she was an ad for polaroid. I laughed with relief. It's kind of Hunter S Thomson-esque.
Philip: Next year we should go.
Leo: Let's all take acid and go to CES baby! Philip, you sound like you...
Clayton: The screens too, and how they freaked her out. The LG Samsung booth, the Sony booth. That was one of the bigger stories out of CES this year was all the screen technology, haptic feedback and the larger television sets and weird there. That's what people were racing to go see were the haptic feedback television sets and things. She was on acid looking at those things. I can't imagine.
Leo: She also had the gall nerve? guts? to publish her reporter's notes.
Clayton: The carpet freaks me out!
Leo: I wouldn't recommend that, because CES is a trip all by itself. To me, let's talk a little bit about it because we sitting from a distance probably have a better 30,000 foot view of CES than people who are there on the floor. Exhausted, sick, tired. Way too much giant shrimp and chocolate fountains. We avoided the side shows as well. Those always creep me out a little bit. Those are Pepcom and show stoppers that CES unveiled that seemed to be de reger for journalists, mostly because they get free food and booze, and always get over covered. It's right there. You don't have to go anywhere. There's always a happy fork. Something like that fork...
Philip: That tells you you've eaten too much?
Leo: That you see on every channel. Everybody because it was the first thing in the door at showstopper and so everybody got a story. Then they went home.
Clayton: Honestly because your producers are begging you for what you're going to be covering this week, those early events take place early, you get there on a Sunday, you have a press event on Sunday evening, it doesn't officially kick off until Tuesday. Right? So the stuff that is unfolding on a Monday, like showstoppers or Epcom you're able to see all these in one room and one sort of ballroom. They're right there and it's easy for you to walk around with your producers and get ideas and gather ideas for your shows. You're right. Those are the things that end up getting the most coverage.
Leo: That's why those companies pay ten, 15, 20 thousand dollars to be in those ballrooms, because they know. If you want to get on fox. You've done that, right? How many years have you covered CES for Fox?
Clayton: Six or seven? You would be walking around there doing live streaming and we'd bump into each other.
Leo: For several years we had a giant booth, which was crazy. I have to tell you, I have fear of missing out this year, because of the last three or four CES, this seemed to be the most interesting. There was some new stuff. Echo everywhere. Echo in everything.
Clayton: We had a live report this morning out of the Detroit auto show. Go back to back, that kicks off tomorrow officially, but there's a lot of Amazon Echo built into the car technology, so you're having that built into a ton.. even Amazon was surprised at the number of Echo integrations at CES this year. They thought there might be 30 or 40. There were three times that amount of things? Not all of them good. Not all of them have deep integration. They don't have Internet access, it's not as robust an experience as people would want.
Leo: This is Fast Company. Mark Sullivan writing. A list of some of the things. Lenovo smart assistant speaker, LG appliances, these are all Amazon voice services. Amazon Echo built in. Belkin's Wimo dimmer switch. Whirlpool, Mattel's baby monitor. Coway air mega smart air. Purifier. You tell the purifier to turn on and ask what the air quality is in the room. The Linux Vellop, which is a router you talk to. Nightingale. Sleepaid system. The afford, In Volkswagons integrating into their car services. Inriques, which is a car analytics company says it'll have Echo in its car platform. Wawe putting Echo in its Smartphone, even though it's an Android phone. Dish, Jam audio, Playfi. Ihome. Monster sound stage home speaker. If it's a big monster beefy speaker with Amazon, that's going to sound crazy, the UB tech robotics links, the LG Hub robot, Samsung power bot VR 7000. On and on. Do you think Amazon charges for this? It seems to me Jeff Bezos would be brilliant to give this away.
Philip: I think it's a free API. It raises the question of has Amazon ever got the mover advantage? They certainly stolen the lead over Apple who marketed one of these home assistants. They're also ahead of Google. I thought Ben Thompson had an interesting take on it. He said although Google Home works better as far as he's concerned, and because it has direct access to all that Google knows about the Internet, ultimately it should overtake Amazon. He thinks the advantage that Amazon has is the business model.
Leo: He says it's a platform.
Philip: If you think of it that way...
Leo: In the same way that Windows was...
Philip: Or Google is for the Internet. His point about Amazon, why he thinks Amazon will win is because Google makes money by selling more ads, Apple if they market one of these things makes money by keeping people within the ecosphere, but Amazon has another business model, which is they sell stuff through this. You can order your teepee, or your orange juice.
Clayton: I'm fascinated by this. I think there's a couple different layers to this. One is, I think Amazon is the main place we go to shop. It's right there on the front page. Everyone knows about it. I'm so surprised whenever I do a story one morning on the show with Fox and Friends, before George Michael passed away. Christmas song is Last Christmas by Wam. I know it's cheesy, but I said I want to try something with our audience. How many Alexas across the country I can wake up.
Leo: When you do this here, don't use the A word. This is my new year's resolution. I'm not going to use the A word, the S word, the G word, or the C word on the shows. Please use Echo instead.
Clayton: There's been some reports over the past week when little girls were ordering girl scout cookies at their house, because so many news stations didn't know that the device was actually called the Echo, so they kept putting in the A word.
Leo: It's a huge problem!
Clayton: Right. So all these things were showing up in people's houses. My point is, anyway, that I did this test, and our viewers played along. You wouldn't believe how popular this device is. I don't know that Google... where do you go to buy it?
Leo: I think it's sweet that before George Michael passed away, you sent him a massive royalty check, curtesy of Amazon's Echo.
Clayton: I was saddened by this, I couldn't believe it. But where do you go to buy this device?
Leo: You go to Google's store.
Philip: You can get it at Target as well. If you go online and ask where you can order it, there are six different places. I bought them for my kids for Christmas.
Leo: Why did you buy the home but not the Echo?
Philip: It felt like it had more upward movement. It could get smarter than the Echo. I just trust Google to be more advanced in AI, to run the network stuff better. That they have a better sense of what is on the Internet. I have been disappointed. If you ask it who Leo Laporte is, they'll read the first sentence out of Wikipedia, and then you want to say read the rest of the entry, and it can't do that. I don't know how to do that yet.
Leo: Both Echo and Google do that. Which is weird. But Google has the big knowledge graph, that they've cultivated over the years. Amazon's advantage is the open API, 6000 tasks already. 7000. All of these installations, the thing is its also got a business model in a way that Google doesn't, really. Right?
Philip: that's the thing. You can sell through it and get revenue from the sales, whereas Google is continuing to do the thing, let's make the Internet bigger and we'll somehow get a piece of the advertising.
Leo: That's Google's way of doing it.
Clayton: What about advertising? We've had all these weird ads for the Pixel during the Holidays, which didn't make much sense. They should a bunch of people singing with a rectangular shaped phone image, but nothing about Google Home. To me, the Echo is a huge gift. So many kids, my little girl is 4, my son is 6. All of their friends, the only thing they wanted this year was the Echo dot.
Clayton: When we would go to these Christmas parties the kids would come back and say Janice has this and Emma has that, and I want the Echo Dot.
Leo: I gave my Mom two dots. She's 84. I gave her two for Christmas and her birthday, because they're cheap. This is another thing Amazon finally got. The Echo was very expensive, maybe they were artificially constraining it so they could ramp up at a reasonable speed. In any event, the Echo is inexpensive enough that people might buy them. What Amazon wants, what you want, is an Echo in every room. You want to have your whole house listening to you.
Philip: You have to have the mother ship in order for the dots to work, is that how it goes?
Clayton: No. They just use Internet, but it doesn't have a speaker.
Leo: They slice the top off an Echo. This is the point of the dot. Everybody thinks that computing has powered speakers, so you just plug them into the Dot. The Dot has as good a speaker system as you want.
Clayton: Or kids with a Bluetooth or even one of these bad boys, the what is this one called?
Leo: The Dash.
Clayton: The Tap.
Leo: Dash tap dot. That's an Amazon Echo with a battery in it.
Clayton: You can take it out back for your barbecues. You just have to press the button.
Leo: Who wants to tap anything?
Clayton: Some of the ones at CES had to tap it twice to activate the Echo features at CES. A lot of the Amazon integration at CES is not as seamless by a long shot as it is on the actualy Echo device. You have to double tap certain buttons that was on the floor of CES. Who wants to do that? You don't want to do it once. Because you hit this one time, I don't want to use it. That's how lazy we are.
Leo: I feel like Amazon, Bezos is both a genius with long-term thinking and the luckiest man in the world. I don't think Amazon web service is for instance, I think that was an afterthought. We got these services lying around, let's try this. It turned out to be a massive business for Amazon. The Firephone. He thought that was going to be the next big thing. You can scan anything and they'll order it. Flopolla. But then, I feel like he stumbled on the Echo. I don't think they understood the value of talking to your house, because that's what you're doing and having it do something for you.
Philip: Was that an in house job, or did they buy that?
Leo: That was in house. It was project 42? The story of the Echo is interesting. AS I remember, Bezos first saw it and didn't want it. Said that's stupid. Somebody has written up the story. Let me see if I can find that. That's an interesting...
Clayton: Philip, you bring up a great point too. Where was Apple? The first mover advantage with Home Kit. That's why before... right before the Holiday you saw Apple doing some Press events quietly in different cities, or maybe just in one or two cities about Home Kit. Wanting to remind everyone about Home Kit integration and all the bells and whistles that Home Kit could provide. But I have to say with this explosion of Echo powered Items at CES, I think you're right. I don't know if it's first move or advantage. I don't know what it is right now, but I think Apple is behind the 8 ball on this.
Leo: Not just Apple. Microsoft, Cortana, they're working as hard as they can, but Siri is a sad story.
Philip: Siri was there first. In theory, it should be as good as anything Google can do. It should be better than Amazon. Amazon to its credit discovered that what really mattered was that the machine understood what you said, heard what you said, and could parse it. Because it's plugged into the wall and has seven microphones or whatever it is, it's very good at that. For apple to get over the problem with Siri now which is it usually doesn't understand you, and usually you want to throw it out the window, they're going to have to make a stand alone thing that plugs into the wall, that has the microphone capability. Apple should have the advantage. They build the whole stack. They got designers, they should know how to do this, but because they move so slowly, they get overtaken. I don't think we can write them off yet. The investment in Siri will pay off eventually, but it could be so late... who can say?
Clayton: Do you guys think it's still so nascent? To your point, Apple likes to sit back on these things, except for the Apple watch. To my mind, it's still a nascent, I have friends who come over and ask about it, but they still don't own. They still haven't made the plunge to go out and buy this device. Apple has that power. They have the stores, they have all of that infrastructure. Plus, the Echo really only works well in the United States.
Leo: That's a good point. It's not a global device. There is an opportunity for Apple. Amazon doesn't say how many Echos they've sold, even if it's millions, it's not Apple scale numbers. I just want to side note, and then we'll go back. This is Josh Brewstein from April of 2016, and it was on Bloomberg, the real story of how Amazon built the Echo. Lab 126, which was created to make the Fire Phone. Bezos saved the Fire phone as a side project. I was mistaken. I don't think Bezos didn't like the Echo, I think he did like it, but what he also liked was a different name. He also wanted to call it the Amazon Flash, and it was going to be called the Flash up to a few weeks before it shipped. Employees convinced him to change the name to Echo. The original boxes, which had already been printed had to be destroyed. That's a little...
Philip: Look at these graphics!
Leo: This is in April. It was a different Bloomberg then. They were trying something else. This looks like...
Philip: He's wearing diapers!
Leo: Yeah. And it looks like he's smoking. Which I don't... he's a smoking baby. It's a very strange. It's a great story. It's really good reporting. They don't talk about this stuff. They try not to talk about this stuff. They point out the people who created the Echo aren't in Amazon any more.
Philip: That's how he was able to report it, probably.
Leo: When he wrote this, by the way, Echo had 500 skills. He says, it has more than 500 skills. That was April.
Philip: Have you explored these 7,000 skills?
Clayton: The key ones work well. Play music, around the holidays, we'd use it ad nauseum. We'd say, "Echo, play Christmas music." My wife was using it constantly for countdown timers in the kitchen. "Set the timer for ten minutes." What is the forecast for tomorrow, can we go skiing? There were those three key areas it was crushing. I would do Google home, I found every time I was playing a play list, it would play one song and stop. That was a deal breaker. But those 7,000 I haven't explored.
Philip: I loaded up a bunch of joke skills. The Yo mama jokes, and guy walks into a bar. They're all bad. I saw Google plays one song problem. you have to step up and get a full paid version of Spotify, and then if you say "Play all of Amy Winehouse" it's got it.
Leo: The other thing they did that was brilliant was Amazon unlimited music. I wonder how this is going. It's only $4 a month if you only use it with one Echo. The Market for that is students, young people, people living in studio apartments, Carston Bondie, my Producer. If you only want Music in one area, you hook up your Dot to a good set of speakers, that's your stereo. For four bucks a month you get Spotify sized playlist. That's a killer app itself. This is one... Go ahead.
Philip: Who would have guessed that the killer app was really the kitchen timer.
Leo: I think that was the Camel's nose under the tent. They got to give you one thing you'll use all the time regularly. But that was... now the Echo was not just in the kitchen. It's everywhere in my house.
Clayton: How does that work? I only have one in the kitchen. Do you find... I find it so responsive. Let's say you got one near where the kids are sleeping, and you want to know what the forecast is, does it trip and work in the other room and wake up other people?
Leo: We had an Echo in the gym, which was right off the kitchen. I hear them both respond and set timers and go off, but about a month ago, Amazon did the obvious. It knows which one is closer because of the area mic, and it seamlessly picks the right one. Amazon didn't have the problem, everybody had one, and as soon as it became a widespread problem because people bought second Echos, they had to solve it, and they did. I think Jeff is quite brilliant in this. I would not count him out either. Of course you can't count Apple or Microsoft or Apple or Google out. This is a great battlefield. I think CES showed it. Let's take a break, come back, talk more about CES, some of the things people saw. We didn't see, but we have eyes and ears. I sent a priest down, Father Robert Ballecer. I did some exorcisms and had a lot of fun. We'll talk to you about that in a second. Our show to you today brought to you by those great people at Squarespace, they host my website, Leolaporte.com, they should host your next website with new year come new resolutions, new ideas, new goals, whether you're starting a business, you're launching a creative project. Squarespace provides a platform to make your ideas known to the world. Man, what a beautiful site you'll have with Squarespace. They do the hosting and the content management system. Designed to give you not only a beautiful site, but a site that works great. Never goes down, because they have the best hosting in the business, has E commerce built in. It's the only web hosting company that gives you e commerce that matches the aesthetic of your site, and the site matches your personal aesthetic. Every Squarespace site looks different, you start with one of their great templates, their templates have great design, because they use really good designers, but also the engineering behind the template is state of the art. Mobile responsive, that means you don't have to have a separate mobile site, it looks great on every sized screen. Every template has commerce built into it. Lots of features too for your growing business. The commerce there will get you started right away, you'll be able to accept payments right away, even if you don't have a merchant account yet. They have all sorts of integrations and things like inventory control and shipping. You can get a free custom domain name when you purchase a plan at Squarespace. 24/7 support of course. Even if you're not ready to make your next website, they have Squarespace domains where you can buy a domain name and get a landing page that looks great. It's not filled with spam or junk. It looks great, and until you're ready to get going, and I really like that. Squarespace.com try it now, it's free. Click that free trial button. But, if you do me a favor, if you decide I love this and I want to buy it, it's very affordable, use the offer code TWiT, you'll get ten percent off your first purchase. Squarespace.com, it's the place to make your next website. I put in my ears so I match you guys. Clayton Morris is here from Fox and Friends, he's... we look like some strange cult. Also, there's another problem. I can't hear you. We're in the cult.
Philip: I couldn't hear Clayton either. Did he turn his mic off?
Clayton: Can you hear me now?
Leo: Yeah. We turned you down because of the ad. Also here, Philip Elmer-DeWitt. By the way, I neglected to plugped30.com. His fabulous blog and new site. How is it going? Is it going well?
Philip: It's going well. This week I put up my first podcast.
Leo: I'm so proud of you. You joined the club. Everybody here has their own show now.
Philip: Mine was newsy. Jean Munster, everybody's favorite analyst joined the other side. He started a venture capitalist fund.
Leo: He's the guy who said Apple is going to do a TV for five years.
Philip: I got the first broadcast interview with Jean Munster in his new gig. Got him to tell me the story of how he got set off on Apple's new television rumor. It turned out he was told by TV manufacturer who had been working with Apple, probably LG, because Apple had cut a big deal with LG. They told him Apple was building this television set. He ran with it. He started writing about it in 2009. Predicting every time he wrote about it, it's coming in two years, and he got all the way to 2016. Who was it? It was Carl Icon. Wrote a memo to Tim cook saying how great it would be when the Apple television came out this year with two models that sell ten million in the first year. Apple felt obliged to tell the Wall Street Journal that they had killed the project a year earlier.
Leo: There was a project at some point.
Philip: To his credit, there was something going on, but he just got it wrong, and he kept pressing it. He's one of those guys who would be on the Apple earning's call. Every time he would ask about the television and it became an Industry joke, and it didn't help his reputation, and I don't think it helped him with Pipe or Jaffrey. He's off on his own. They're going to be investing in AR, VR, AI, and robotics. That's their gig.
Leo: I'm glad you're doing a podcast. Clayton, let's plug yours. While we're plugging away.
Clayton: Sure. I launched the podcast, back in May the last time I was on. I launched it on TWiT. It's called the investing in real estate podcast. It exploded. We passed 2.5 million downloads. You wouldn't believe how many TWiT listeners listen to our show and worked with our team and have become real estate investors or who got off the couch and took action. It's been amazing. I'd ask, where'd you hear about us? TWiT. Heard you on TWiT.
Leo: Good, good.
Philip: How often do you post a podcast, Clayton?
Clayton: Three times a week. On a Monday I do a ten minute monologue episode about strategies and tactics for real estate investing. Wednesday, my wife Natalie and I host a show together where we talk about how to save on your taxes, how to structure your investing for your family, because she and I work closely with the spreadsheets, and making sure we're saving on taxes and how to set up your LLCs properly. That's the show on Wednesday, and on Thursday I have an expert--someone who owns five hundred properties, whose, we can talk about multi-family investing. The whole show is dedicated to buy and hold real estate. That's what the show is about. So it's been...
Philip: How did you get into real estate? Why did you choose that?
Clayton: Years ago I started rehab and houses, and when I lived in Florida.
Leo: You've done this for ages.
Clayton: I went through a long time. You realize the rockiness of the stock market, the ups and downs, the one consistent thing is always buying real estate, buying it right, and holding it for the purpose of high return cash flow. To me, there's no greater investment. More millionaires have been made in this country from real estate investing. All of the tax laws are written to benefit real estate investors in this country, almost every member of Congress is a real estate investor. So when you look at it that way, if you own a business, a lot of your listeners are real estate owners, what a way to offset your personal income by owning real estate. The depreciation you can claim is amazing. When you dive into it, you will never go back. I'm telling you.
Leo: You sold me. Where do I sign up?
Philip: Were you riding it when the bubble burst in real estate?
Clayton: It's funny. If you talk to any high level real estate investor during that time who owned hundreds of properties, they didn't see one dip in their rental income. What they did see was a drop in value. They're going to hold it for the rest of their lives, so if they lost 20, 15 thousand in value, it didn't matter because they weren't selling it. The people who got hurt during the bubble were people with five year mortgages, the movie the big short focused on the people who were buying it for appreciation. Then they would try to flip it. In California.. those were the people who got burnt, who were over leveraged. But the people who were holding real estate for the purposes of cash flow with a tenant, those people did fine. That's what I focus on. I've been through the foreclosure stuff in 2008, and I'll never go back to that again.
Leo: Interest rates are starting to trend up. If they go up, does that effect it? Do you like my new hat?
Clayton: Interest rates, it's interesting. You look at what's going on, and it goes up a little bit, but that effects the broader home buying market if you're going to go out for your own personal residence. Yes, if you're going to buy houses with a bank for the purposes of rental real estate, yes it's going to effect it a little bit. But for the most part we're still at historic lows for interest rates. I don't see a bit shift. Mostly in the primary personal home buying market you will. Even though these interest rates went up a little bit, there's still historic lows. Think about the 80's. They were 18, 19, 20 percent interest rates. The real story is that millennials aren't buying real estate. They're waiting until they have children and they buy a four or five bedroom house. They're not buying starter homes, three bedroom, one bathroom. Two beds, one bath. People need to rent those, so those are the ones that I buy. Builders aren't building them. So it's one of the greatest times in our history right now for rental real estate.
Leo: You know what I can tell it's a bad time to invest in consumer electronics. Very bad time to do that.
Clayton: What is that? A bubble hat?
Leo: I don't know what this is. Am I wearing it wrong? I think this was my football helmet. They called me the rambling TWiT from just down the road a bit. Yeah. So. CES. If this were flesh colored, I would look bald.
Clayton: Speaking of wearables, you have a wearable on. I thought that was the other big story of CES.
Leo: Isn't this a flop? Isn't this a dead category?
Clayton: I think that's interesting. That's where Google is dropping the ball on Android wear. You saw some opportunities in the wearables market, and Google dropping the ball with Android wear. I don't know what Google is doing.
Leo: They announced Android wear too, right? They announced Decassio announced the first Android wear two watch. But I don't know what's different, and Motorola said we're not going to make a new 360. FitBit, even though FitBit has bought Pebble and is the number one wearable, its profit margin is pathetic. I don't think it's a good market. This is the kind of thing that people say Apple is selling millions of these. Everybody is thinking this is a huge product. That's Apple. They can brute force anything. Whether it has lasting power is another question entirely. Don't you think, Philip, they've brute forced this a little bit?
Philip: I'm not sure I'd use that verb. It's true that people who have bought into the Apple ecosystem are much more likely to buy one of these than ordinary citizens. I think they're going to do fine. They're making good money. They continue to put resources in. I don't know... I'm still on my first one, I didn't upgrade to the second one. I probably won't upgrade to the third. Until they put a communication chip in it. It's fine the way it is. I think these earbuds. Those are the wearables that are going to take off.
Leo: Now Siri has gotten... I'll make the point while Philip is fixing. Yes, Apple has an opportunity, but Apple's history of late has been to fumble these opportunities, one right after the other. This could be huge. In fact, I was very excited when I saw the air pods. This could make a great hearing aid. It's got microphones on it, there's so many things you can do with this. It's so close to the ear, it can measure blood oxygen. As far as it is in the ear, it's close enough to the tenpanic membrane that it could actually monitor that kind of thing. There's a lot of things this thing can do that a watch can't do. But they've got to get the dopey double tap, they've got to get the voice interface right.
Philip: They've only put, my suspicion is they made it as simple as possible. The first go round, and they've limited the functionality. I hate that word, to you turn it on and there's two taps. The thing that it is most obviously missing is a volume button. It's worse than the Wired ear phones in terms of the volume and the skip forward and all those great things. Not only do you have to use your watch or your phone to do that, but I think it's just a software change. They can add those features. I think.
Clayton: I'm sure they probably could, and I'm sure they learned a lot from that iPod shuffle, the one that had no buttons. They probably took a lot of data away from what people were using it. IF you're trying to remember these gestures when you're out jogging, you're out doing these things, and if you don't use them often, it's like keyboard shortcuts. Unless you have a cheatsheet written down, is it up, down, I swipe left, double tap left, swipe up, tickle my earbud, touch my nose, that's how I can skip a song. What if I want to go ahead 30 seconds? For instance, Marco Armon who built Overcast, there's a bunch of features in his integration with the earbuds, where you can do certain taps that will take you forward a bit, or back, and I can never remember which way is which. So they might have some good data from the iPod shuffle experience that shows people weren't using all these bells and whistles. Let's give them the basics and we'll refine it over time to see if people really want that up and down, but I could certainly see that being the case. There was a parrot headset a few years ago, the larger, canned headset from Parrot where you would swipe your finger up, and I love that with a swipe of your finger up, you could turn the volume up, but I Could never remember where to hit it properly, so you would blast your ears out, turn off Bluetooth. It needs to be done right, otherwise you'll never use it again. Otherwise you try it once and it doesn't work for you.
Leo: Talk about the Bell. You quoted Chuck Von Roseblock in your blog, Philip. He says, 17 years at Apple. He and I got into a back and forth over Apple when I was critical of Apple over the Guilemilo era. He was an Apple employee listening, but now Chuck has changed his tune as well. He says Apple's problem right now is they're chopping the edge off the bell curve. Apple is focusing on the fat belly of its product line, but as a result it's hurting the smaller but influential groups. People who buy Mac Pros for instance. Apple is relying on data too much. They're making business decisions that don't cater to a large enough group of people. Do you agree, Philip?
Philip: It's the opposite. They're so focused on the middle of the bell curve and chopping off the people on the edges. In this last, without updating the Mac Pro, with this latest Macbook pro, they angered an important part of the bell curve, and they paid for it with a lot of angry pro users. I thought the telling quote from it was if you look at the bottom line, if you look at the numbers, everything is fine. It's what everybody feared about Tim Cook is he's a guy who knows spreadsheets, he knows how to build a supply chain. He's not a product guy. He's likely to make that kind of mistake. Let the Pro users go, because there's not that many of them and they don't make that much money from them. But Chuck's point is that this is an incredibly influential group. You don't want them angry. It's worth spending money to keep them happy and in the fold. It's what we worry about. Maybe they do need... it seems like they need a product guy with enough influence within the organization that they get this stuff right.
Leo: According to Recode, Apple was absent from CES. This is Zina Fried writing. In a worse way than usual. Although Apple didn't have a booth there, they almost always dominated the conversation. They had iPhones come out in the same time frame. They often competed and won the news cycle during CES.
Clayton: I remember Alex Lindsay and I standing outside the hall at CES talking about the impending iPad or whatever it was to be called. That was all anyone was talking about was the iPad. No one cared about what was happening. We saw some crappy tablets show up.
Leo: They were horrible.
Clayton: Steve Ballmer showed that HP thing that never saw the light of day. Especially in the home kit area, it was crickets.
Leo: It's crickets in general. amazon aside, this has been a struggling section, this voice automation section.
Clayton: Philip, I think you're right about the voices though. The echo chamber, the people talking about Apple the most, the tech reporters who host podcasts where that's happening. I don't know how influential it is. Those are the people who buy Mac pros. those are the developers who have podcasts who talk about the lack of a Mac Pro update, and therefore it drives the conversation to the average person. If I were to ask my Mom if she, she wouldn't know what a Mac Pro is, she doesn't care. She has an iPhone and an iPad. Ask her about a Mac Pro and she wouldn't care less.
Leo: Interesting. Certainly that's what Apple is betting, but for the die-hard Apple fans, it's a little depressing to see them become an iPhone company.
Philip: Looking down the road, everybody is assuming the self-driving car is the next thing that will be as big as the Smartphone. Apple already found itself behind the curve enough they had to lay off the people actually building a car and refocus the car effort on where they thought they could add value and distinguish themselves.
Leo: to be fair, Google has done the same thing and they've been working on autonomous vehicles longer than anybody. This year they decided to change the name to Waymo and to focus on selling the tech to actual car manufacturers. That's probably wise. Tesla aside, that's a tough business to get into.
Philip: You have Nissan announcing at the Detroit auto show overnight. Nissan with their Tele operating car, the autonomous, being able to drive that car remotely.
Leo: That's interesting. That's really interesting.
Philip: Maybe it's better left to the car manufacturers who know what they're doing.
Leo: It's a high risk, high reward business.
Philip: My sense is that it is a platform game eventually and that it's going to matter less who builds the physical car than what platform it runs.
Leo: This is interesting. Nissan wants to have professional drivers in call centers driving you. That doesn't make sense.
Clayton: Why not? We've got our entire military sitting in Nebraska or in Oklahoma flying drones over Afghanistan.
Philip: That doesn't scale up real well. There are millions and millions of cars. Probably hundreds of drones.
Clayton: The idea is the technology in these Nissans would talk to other Nissans. This is the first roll out of these cars that would be talking to each other as they're driving. It's a new standard. The idea is the standard would be built into all cars. We wouldn't have 30 styles of speaking to each other, we would have one universal standard to avoid accidents and to be able to have a remote fleet that would take human error completely out of the equation.
Philip: Everybody wants to be that standard, and I think that is the battle going forward, because you can't have multiple standards on the highway. It makes it much more complicated. I would be surprised if the standard adopted in the US is Nissan's.
Clayton: Right. You see that with Tesla though. You got the Tesla plug, so you know where you can park in your own garage. I go to the mall, there's certain Tesla spots you can plug into. Or there's the other one. Only Teslas are putting in those things and they have to get approval and it's a mess.
Leo: I would be willing to bet... go ahead.
Philip: You're driving a Tesla, right?
Leo: I got the impression Clayton is too. Are you driving a Tesla?
Leo: Wasn't sure if he should tell the world. It's a secret. So I love my Tesla and I haven't found any—but I don't drive it long distances. I haven't had any charging issues because I fill it up every night (laughing). I start my day with a full charge.
Clayton Morris: I was talking about the standard.
Leo: But your Tesla has an adaptor, doesn't it? Mine does. I have the adaptors to try to charge from anything. The real problem with that is it's slow. You want to go to a super charger because it's fast.
Clayton: Exactly, exactly. And so—well, I drove a Nissan Leaf before. But when you flipped open the lid you saw multiple, like there was multiple charging options.
Leo: Multiple holes? Wow.
Clayton: Different holes. You would open it up and there was the one you would normally charge and there was like a bigger one and you know, it was weird. And then of course you pull up to the different stations and you've got the ChargePoint Stations, you've got the Tesla Station, you've got that different infrastructure. And now Tesla's even rolling back by December 31st of 2016, so just a week ago they are no longer—if you're grandfathered in to purchasing the Tesla you can access and plug in to those super charge stations. But Elon was fielding these complaints from all these people who would just park and plug in and top off even if they didn't need to just because they were there. They would pull up and they get that 10 miles or so of charging to top off when someone could pull up and actually need to plug in. So now they're going to charge you for that instead of giving it away for free which was an incentive with Tesla before.
Leo: I think it was Calacanis who stimulated that. Jason was pissed off because there were people sitting at super chargers all day. And he tweeted Elon and said, "You've got to solve this." Elon said, "I'm getting on it." And like 3 days later announced that they were going to solve this by charging you for every minute that you sat at a super charger not charging. So that shows you how a well-run company does listen to customer even on Twitter and can respond very quickly.
Philip Elmer-DeWitt: Yea, he could look at the data and say, "You know what? You're right."
Leo: He did. I think actually, self-driving cars may be a McGuff and I think we're way off with those. There are so many other issues, regulatory issues, acceptance issues from drivers. Admittedly there is a lot of pressure going the other way from insurance companies and the fact that traffic fatalities are going up for the first time in years because people are playing Words With Friends while they're driving down the road.
Clayton: Pokémon Go.
Leo: Actually Pokémon Go is probably the worst. But I think augmented reality might actually be what Apple's really working on. We certainly have heard a couple of hints from Tim Cook about that.
Clayton: Yea, he's been pretty open about it.
Leo: Yea, and that would be, to me, another kind of technology that could change everything.
Philip: Where do you see it? On glasses or on the windshields of cars?
Leo: I would see it on glasses. I would see because you want it everywhere. And I think the idea of augmented—I think that the value of is, is first of all and this is what Microsoft's investigating, a different UI. Microsoft's doing Windows Holographic and they're very close to shipping that in just a few months. And of course they already have a product, the HoloLens which is in its infancy but it actually exists and is being sold. I think Apple would be looking at that but I think more importantly, Apple—it seems to me that Apple has decided the computer is not where it wants to be. It wants to be in consumer electronics. I think Apple sees it as a product that's important to you in 5 years as an iPhone. That you wouldn't go out of the house without wearing your augmented specs because it would tell you all sorts of stuff about the world around you, the people you're meeting. And that would become a huge flow of information that's unique to you. And I think that's going to be huge. So my bet, if I were going to bet, is that that's what Apple's thinking, that's what Apple's working on. It's the next closest thing to creating a category like the iPhone.
Clayton: I think in health care too. I had lunch with a buddy of mine the other day who is intimately involved in some big, different healthcare initiatives and companies. And one of the thing—I mean he's right there in the operating room on a regular basis, running all these tests and they're working on operations and surgeries. And I think augmented reality, I think that's where Google Glass really could have shined, is having a surgeon working in a particular capacity and having somebody else guiding them in a way. But having that overlay over optically, to be able to do things three dimensionally even, in ways that a microscope can't, getting that three dimensional view of a spinal column for instance or those sorts of things. So there's all sorts of applications I think in Enterprise and healthcare and that's where everyone wants to be because there's so much money in healthcare. Also we saw that at CES too, didn't we? I mean we saw these VR add-ons to baseball bats and things at CES this year where from, I can imagine from the Philadelphia Phillies who need all the hitting help they can get, overlaying in batting practice VR applications with the baseball bat and actually getting and being able to swing at different pitches without even having to have a pitcher there throwing the ball at them. But they can work on their speed and their able to time it with the VR headset. And the latency, that was one of the big things that we saw at CES as well, getting rid of the latency with VR so that you're not throwing up. Who wants to put on VR headsets and throw up because of latency? So having that latency removed from that experience, whether it's VR, whether it's augmented reality but I think you're seeing maybe more of practical applications in the Enterprise space than you are even in the consumer space right now beyond gaming. I don't know.
Leo: To me, Apple's not looking for a vertical niche. They're looking for something they can sell a hundred million, two hundred million, five hundred million, a billion units of. And that is going to be something very general. I don't think you need to worry so much about latency with AR because you're looking at the real world and you're superimposing thought or whatever on it. So you don't get that nausea effect. You're seeing what you would see otherwise. The only thing, the one thing I see is a lot of people wouldn't want to wear glasses. And yet, everybody wears sunglasses, right? I mean, that's hip, that's with it, that's cool. I don't know. What do you think, Philip? You've been watching Apple longer than anybody.
Philip: Yea, I would take a slightly different tack. I think one of the problems with the Watch is that it came out when the market was moving the other way. People were wearing less watches and depending on their phones. So you were sort of asking the ship that was already headed in one direction, to turn and fall back in love with the thing on the wrist. The reason I'm so bullish, one reason I'm so bullish on the Air Pods, ear pod, earbuds, is we're actually becoming more dependent on things in our ears. We listen to books. We listen to podcasts. We spend more times with things in our ears and it feels like they're riding a curve that's going in the right direction if you pardon the mixed metaphor. And considering all the things you can maybe eventually do with this thing, it's an important piece of real estate and there they seem to have the first mover advantage. There have certainly been a lot of other wireless things that you put in your ear but you know the big step forward that they made was, I think they're the first that you don't have a wire connecting the two ears.
Leo: No, there are others. There are others, yea.
Philip: I think Samsung may have one but—
Leo: It's very typical of Apple where there was a scattered market of very similar devices and Apple just went and coalesced it into something much better.
Clayton: The Bragi headset, the Bragi—
Leo: Bragi, what was it, a big Kickstarter? No, a lot of people hate those.
Philip: You know what their price tag is?
Clayton: Yea, they're expensive. The Bragis are like $299 or $399.
Philip: Right. This was unusual. Apple actually came under the market and $159 actually looks relatively cheap compared to the competition, which is for me another sign that Apple's going to be aggressive here. Anyway, I forgot what I was going to say.
Leo: Samsung I think, somebody makes something very similar with a charging case. You put the two pieces in there. I don't think that that's so unusual. For some reason I think that Apple's going to struggle with these. I don't feel like these are going to be a big market for Apple. I might be wrong. I like mine a lot, by the way. Obviously you guys do too.
Philip: Yea, although the reason I wear this hat is I think I'm the only person in Franklin County, Massachusetts that has these things and I'm not—
Leo: No, embrace it. Embrace it.
Philip: I'm not sure they're socially acceptable yet.
Leo: No one's going to say, "What that in your ear?" It looks like a Bluetooth. You know, they'll figure it out. He's got a new Bluetooth headset.
Philip: I never could wear the Bluetooth headset. I felt obnoxious.
Leo: It is obnoxious.
Philip: It's like—
Clayton: Yea, my wife thinks I look ridiculous.
Leo: I think we will get, and next year we'll be talking about this and we'll go, "Oh, yea. Everybody is used to that now." No big deal.
Clayton: How many of us will have lost 5 pairs by then?
Leo: (Laughing) That's the other problem, isn't it? These are going to be the most expensive toy just because you keep losing them.
Clayton: How many people will be washing them?
Philip: What happens if you drop one in the snow? I figure that's no problem. I'll just call myself and it will ring. Well it turns out that doesn't work. You can't call yourself.
Leo: But Rene Ritchie as you know did do that. He was demonstrating. He turned them up really loud and listened to hear his earbuds.
Clayton: When you take it out of your ear—
Leo: It stops playing. He figured out a way to get it to play. I don't remember what it was.
Clayton: Well, there's also an app that lets you find them.
Leo: Ah, there you go.
Clayton: It's like Find My Ear Pods. Find my AirPods is an app in the App Store. Did Apple take it down yet? I don't know. There's Apple—
Leo: Apple took it down (laughing).
Clayton: They did take it down already?
Leo: So I have a very, very expensive pair of real hearing aids. I mean much more expensive than this. And maybe because they're so expensive, I haven't lost them but they're the same size, same problem, same box. But I haven't lost them. So I think, you know, these are precious enough. You can make sure you don't lose them. They don't fall out.
Philip: Well, when you wear your aviator hat in the cold, they do fall out. I dropped them twice now in the snow and I had to go out with a sifter and a shovel.
Clayton: A metal detector?
Philip: And sift through the snow until I found my missing AirPod. So it is actually a real problem.
Leo: They should make them in other colors. So what you're doing is, you've got to get the flap nice and tight on the ear. Then they won't fall out. Oh, I double tapped and Siri came up. It said—
Philip: I'm not sure they're socially acceptable yet. That's my point.
Leo: It says, "I found something on the web called, about call fall out pip boy, Siri fell out (laughing). So—
Clayton: I am surprised so many people know about these because I've walked around with them whether at the gym or on a plane—
Leo: Really? They recognized them?
Clayton: Are those the new Apple? And so there's like no advertising for them.
Leo: No, they're marketing geniuses though. That's kind of what I meant when I said they can brute force a product.
Philip: Well they really blew this Christmas and I think it should be said that they promised them for the end of October. They didn't deliver them in October. They didn't deliver them in December. They delivered them in small enough quantities just before Christmas that you had to order them that day, you know, the first day to maybe get them by Christmas. I was, the timing was so weird that part of me thought, "Well, wait a minute. Wait a minute. Did they do this on purpose because they knew they had made their December numbers with iPhone sales and they didn't need the revenue from the AirPod and they were going to push it into the 2nd quarter where they really needed the sales?" But I'm told by someone who's talked to people at Apple that no, they really did screw up and they couldn't get them. There was some problem with the sync and this was a real failure to deliver on their part.
Leo: Well look at what happened. Tim Cook lost a considerable amount of his bonus this year because, for 2016, because of Apple missing its sales targets. This is the first time since 2009 Apple's missed its sales and profit goals.
Philip: I made a graph to see how big a haircut they got and showed what their compensation was, would have been and what it actually ended up being.
Leo: Nice choice of graphic on that blog post.
Philip: Thank you. I couldn't find a picture of Tim Cook getting a haircut but if you go down to the bottom there. Now click on 2015 and 2016 to see how big a difference it made. Can you click on 2016 on the top right there?
Leo: Yea, I can do it. Why don't I do it because I have the giant Surface Pro and I can go—so not that much. It's 15%. 15%.
Philip: So it wasn't much of a haircut.
Leo: Hey, it's millions of dollars. Why is Tim so underpaid compared to these other people?
Philip: Because he got a huge bonus that's spread out over 10 years.
Leo: This is fun. How did you set this up? I like it. Push the buttons.
Philip: Oh, it's a little app called—
Leo: It's interactive. Back and forth, back and forth.
Philip: There you go. Cool.
Leo: Back and forth. Love this, by the way. It's not news anymore but this is the Surface Studio and I just love it.
Philip: What kind of stand do you have it on?
Leo: No, no, this is it. This is—the computer has its own—
Clayton: And the one you got there, that's the—
Leo: The Shepard Smith model.
Clayton: That's the $14,000-dollar one, right?
Leo: (Laughing) No, it's—if felt like it, I got to admit. It was I think $2,100. Something like that.
Clayton: And that's the screen inside the Tesla too which is cool. You can take it out, pop it out.
Leo: Same size, just pop it right in. It's amazing. It's amazing. No, I love it and the pen. See, look, I can do stuff like this, watch. Double click the pen and now I draw circles. I can point up. I can point down. I can point around. Take that, John Madden.
Clayton: Yea, I was going to say, how soon until we see these on NFL Broadcasts?
Leo: We put a lot of work to getting a Telestrator working on TV. It's nontrivial. And so this is kind of like wow, that was easy. That's the best way to do it. Hey, let's take a break. I want to ask you about your friend Campbell Brown and if Facebook approached you before they approached her. But that's coming up. Oh, Clayton's looking down. I think I got it. I think I know.
Clayton: No, I just have a cuticle that needs trimming.
Leo: Ok (laughing). Wow. I love him. Clayton Morris, ladies and gentlemen, from Fox & Friends. From PED 3.0, Philip Elmer-DeWitt. So you get—when you wear a hat like this, do you drop the Philip? I'll be vewy, vewy quiet. Ah, Elmer. Welcome. Our show today brought to you—I should take this off. The sponsors will just hate it. I should take this off.
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Leo: Let me tell you. Those Elmer Fudd hats, they don't come cheap. They do not come cheap. Philip Elmer-Dewitt—
Philip: $150 bucks.
Leo: What? For the one you're wearing?
Philip: Yea, $150 bucks.
Leo: Oh, but that's real leather.
Philip: North Hampton. Yea, that's real leather and—
Leo: Oh, you got a North Hampton.
Leo: Oh. This one was about $4 bucks (laughing).
Clayton: All I have over here is a Tribble.
Leo: Oh, that's nice. You can wear that.
Philip: Oh, that's cool.
Leo: Does that multiply? Because that would be cool.
Leo: That looks like my hairpiece that I was wearing (laughing).
Clayton: It's a little fuzzy.
Leo: Does it make a sound?
Clayton: It does but I think the battery's dead really. William Shatner gave it to me.
Leo: William Shatner gave you that Tribble?
Clayton: Well we used it for a segment. I was interviewing the 50th—ah, here we go. It's purring. This tribble is having a little bit of a seizure I think. But—
Leo: Did tribbles make sounds? I don't think they did, did they?
Clayton: Yea, they would make a cooing.
Leo: Yea, yea.
Philip: There you go. There you go.
Leo: Wait a minute. William Shatner gave you that Tribble?
Clayton: Well we were using it for a segment. I interviewed him for the 50th, the 50th anniversary of Star Trek in New York City and talked. Yea, we had a great time. He's just funny and he's very, very nice. And he's so down to earth and you know, you can just roll with stuff. Yea, we had a good time. We talked about his upcoming book and you know, we talked a lot about Leonard Nimoy and that troubled relationship. I thought he was really open about that to me. He said "As men, it's hard. Sometimes you've got guy friends. You've go through a phase where you're close and you fall out of favor. You kind of screw things up. You kind of get back together." And he's like, "But he was always that friend." It was interesting. Good guy.
Leo: Wow. That's a great scoop. So Campbell Brown. Do you know Campbell Brown? You must know Campbell Brown. Small fraternity.
Clayton: Yea, in the TV world. Not terribly closely but I've met her and have a lot of friends close to her, yea. So she's going to be heading up this Facebook operation. The New York Times broke this story about leading this sort of news partnership team. Although I don't know how really involved she will be. It seems like she'll be more of a public face but trying to maybe—obviously, obviously the big pushback and all the meeting that took place with Zuckerberg and a lot of friends who were in those meeting with him right after. There was a feeling that conservative news was not giving a place in Facebook's Newsfeed. That there was people on their editorial staff maybe removing stories and all of that. So I think this is a push in that direction. Apparently she's not going to be in charge of any content or have any editorial control at all. But she's going to work with connecting publishers to partners. You know, look, a lot of these publishers for crying out loud, the majority of their traffic comes from Facebook overwhelmingly. Not even, nothing is even close to the traffic that Facebook provides for them in the Newsfeed. And so their business is basically run on Facebook. And if some small tweak to the algorithm happens, it effects their bottom line.
Leo: Facebook really is a publisher as much as they have said, denied that, they really are. I think it's interesting. They didn't hire Campbell Brown in the same way Yahoo hired Katie Couric. She's not going to be doing news.
Leo: She's just kind of an evangelist I guess for the news product.
Philip: Can I ask a question about it? The time—what you described, the issue that the publishers are having where they basically hand it over to Facebook, access to their subscribers, they real important thing for a publisher is to have a direct content with the subscriber and have their email address and you can market it to them. Facebook has interred itself in there and they've actually lost a lot of power, the publishers have. But the issue of the conservatives feeling like they weren't getting enough, their voice wasn't expressed in Facebook feels ironic.
Leo: (Laughing) I know. I guess that's true.
Philip: They have been tipped by the red bubble and the blue bubble not listening to each other to the point where Mark Zuckerberg first laughed it off as ridiculous that it might have happened and to come around to well, you know, we may have been, we may have some responsibility for the way the election turned out. You know where in those 3 events where Campbell Brown Is going to fit in?
Clayton: It's hard to say. I mean it seems like—I mean I know what you're getting at. I don't know because if she's not going to be in charge of content at all, she's not going to be in charge of editorial at all and there has been this move recently obviously to remove fake news from the feed that all these fake news stories were getting voted up to the top of the Newsfeed. So in an effort I guess to be the public face of that, she'll be the public damage control I guess. When in 6 months we have another Facebook story, who are you going to see in all the network newscasts answering this question for Facebook? Campbell Brown will be out in front of this saying, "No. In fact it was the algorithm and some human curation of these stories," in an effort to keep these things out of the media.
Leo: It's really a PR job.
Clayton: Right, that's what it seems like. And sort of helping bridge that gap. Putting a conservative, she is a conservative. By putting a conservative voice in Facebook to bridge that gap, I think Zuckerberg takes this seriously. I think there was a lot of pushback from the conservative media when this all was unfolding back in the fall. But to your point, I mean look what happened, right? An overwhelming response and a lot of people believe that Donald Trump won the election because of Facebook in large part, not only from his ads and the way that they were able to gather these smaller donations and drive the narrative on Facebook, showing up in these small towns and being able to get the message out about it, Facebook was one of the reasons that pushed him over the edge significantly. So it's an interesting—
Leo: And I don't think it was fake news at all. I think—
Clayton: He is a publisher. He is probably the largest media provider in the world.
Leo: He's a publisher. Exactly. I don't think it was fake news at all. It really—
Clayton: It's an entirely new and strange frontier. We're already seeing in these past few weeks all these changes to their video algorithm. And you've been noticing the way that videos have been showing up differently now in the Newsfeed, the way that you can interact with videos in the Newsfeed is different. I also think it's incumbent upon these publishers though to not whine in their own soup because they have the opportunity to be doing and providing great content and then gathering up their own audience on their own. Being able to gather email addresses and market directly to those on their website by providing value. And now Facebook is enabling them to gather that information with a new feature called Leads that they just rolled out not too long ago. So in the Facebook News, the Facebook Ads Manager being able to use that feature called Leads so you can gather leads directly. That was an answer to this exact issue from publishers, being able to gather email addresses and market to people. So Facebook's listening to publishers' complaints.
Philip: They've kicked me off.
Philip: Well, I used to promote individual stories. You can spend $9-bucks and a story that might get a few dozen views—
Leo: Yea, they always ask me, "Would you like to promote that? You can just promote that. Just give us some money."
Philip: I was doing it and spending hundreds of bucks a month doing it. And then suddenly, boom I got a little—with no explanation, got a thing saying that had been turned off. I violated some TOS.
Leo: (Laughing) that's very confusing, Facebook. You're just buying ads.
Philip: Right and then they tell you if you want to find out what's gone wrong, contact us.
Leo: Oh, yea, good luck.
Philip: And that doesn't work, right? I think what happened is—
Leo: Talk about a confused company. I mean that's crazy because they're always telling me I should be doing that.
Philip: Right, I think someone complained and I suspect it was CNN because I was taking CNN video and excerpting 30 seconds and posting it. And I guess that's a violation. And I'm not sure there's any way out of it. I think I'm permanently banned from spending money on their ad business.
Leo: I'm going to tell you something.
Philip: That's ok.
Leo: That's a good thing.
Philip: Because I was looking at how many subscribers I got through that and it was zero (laughing). It didn't work.
Leo: I think there's smart money spent on Facebook and there's dumb money that's spent on Facebook. And what I was saying, and I think you couldn't hear me, Clayton, so you put on the regular headphones. Can you hear me now? Now I can't hear you so (laughing). There you go. Now you're working. So what I was saying while you were—and I apologize for interrupting but I'll say it now, is I have come to the conclusion that fake news had nothing to do with it one way or the other. I know that was a big issue, blah, blah, blah. And fake news is just a generally problem on the internet. There's a lot of, you know, conspiracy theories and nonsense on the internet that's not particularly a problem, worse on Facebook than anywhere else. But I do think what Trump did very well was use Facebook ads very well and Facebook targeting very well. Brilliantly so much so that I have come to the opinion that the kind of thing you were doing, Philip, is the dumb money people spend on Facebook. And I'm sure they're glad to accept that until you, whatever, break some rule. But the smart money that's spent on Facebook is very savvy. And that Jared Kushner and the San Antonio operation they had down there with Cambridge Analytica, they used it in a way, such a canny way that it really establishes a whole new precedent for how Facebook can be used for advertising.
Clayton: And I apologize. I think I was saying something similar to that and maybe I had an audio issue here but what I think the fake news thing is, who cares. The real story was Donald Trump's leveraging of Facebook ads. That was the real story.
Leo: Exactly. Exactly.
Clayton: Maybe my audio dropped out.
Leo: No, no. But maybe I'm agreeing with you anyway. That's good. Good.
Clayton: Yea, but showing up to these events and being able to target, micro-target these areas and get that message out. I think the fake news thing is, that was a small portion of this and those who wanted to believe those stories were already voting a certain way anyway.
Clayton: But being able to leverage those ads, micro-targeting, there is no better. I mean I do a lot with this. There is no better art ad platform. And being able to, like I said, giving the power of the publishers this idea of leads and being able to generate now in the Ads Manager leads and all of these things. To be able to retarget. So if someone watches 25% of the video that you publish, being able to run an ad to those people as a warm audience. Being able to run those ads to people who watch 50% of one of your ads, your videos. 75% of one of your videos. So imagine rolling a campaign ad out and someone watches 75% of that video and it's 5 minutes long. Well that tells you a lot about the type of person who sat through most of that video. Now maybe run a separate ad to that person and then I can dive a little bit more deeply. So there's power in local business. But I think for publishers too, who just stop whining about it and actually realize how to leverage this platform. I mean ultimately Facebook doesn't want you, they don't want you putting up click-baity things that drive you off of the platform and have a bad experience because it reflects poorly on them. They want you to spend as much time as possible inside of Facebook. So I think Zuckerberg is taking this seriously. He doesn't want any news publisher complaining about the way in which their content is being perceived. If he has these meetings with them and he's taking it seriously. So I think this Campbell Brown thing is Zuckerberg realizing the power that he wields at this point. I'm not saying it's right or wrong I'm just saying I think he realizes he's the biggest publisher in the world.
Leo: Of course the other story is how much Facebook and Google are going to eat the ad dollar going forward. You know I wonder why any advertiser savvy enough to use Google and Facebook and to really target their advertising and to shape their advertising for different sectors and different niches would want to use mass media advertising at all or even podcast advertising. These guys are going to swallow the earth with their advertising platform. I worry.
Philip: How do you see that working out? Explain that.
Leo: Well I think it requires—the good news is, don't tell anybody I said this, but advertisers and agencies aren't the swiftest people in the world and they're also not the early adopters so they may be a little slow to adopt this. But I think what you're seeing is if someone savvy enough like Jared Kushner and Trump were to really work Facebook can get—and he spent a fraction of what Clinton spent and was able to be much more effective than broadcast media ads by being very smart with this Facebook ads. I think Google gives you some of the same kind of targeting and probably works just as well. Both Google and Facebook by the way, ad sales taken off and I think it's just a matter of time before you start to see them go up as other media, broadcast media particularly goes down. There will still be—good news, Pepsi doesn't have any way to target its advertising so they're still going to buy Super Bowl ads. But I think increasingly as advertisers and agencies get smart, they're going to really demand this kind of very fine slicing of the audience.
Clayton: You're right, you're right. Absolutely. I think the riches are in the niches.
Leo: Oh, I like it.
Clayton: Right, that's why you're seeing the powers of these podcasts. When I launched mine I wanted to be very specific. It wasn't broad. Very specific. And then that audience, even if it's smaller, is very specific. And then you know the advertisers that are willing to come on for that very specific niche. And that's the power of Facebook advertising. Look, if you're a small business for crying out loud listening right now and you've got like a small ice cream shop or you're a chiropractor in a town, I mean why are you not on Facebook leveraging that? In that one zip code or those two zip codes, being able to run video ads, small inexpensive, 30, 40 2-minute video ads just talking. Not even ads necessarily, but running videos and then boosting posts and then running ads later about your chiropractic practice and just talking about, you know shoveling right now all the heavy snow and here's how you can damage your back.
Leo: Yea, there you go. Exactly.
Clayton: And then in that town being able to retarget to those people in that specific town who watch those videos, offer them an incentive for a free consultation to come in. You can't do that on television.
Leo: It's amazing. The one—
Philip: I do have an issue, Leo, with something you said. I do think fake news was a factor. I mean I could list 20 factors that tipped what was really a very close election.
Leo: Yea, oh yea. It's very complex.
Philip: And I think probably the fact that he could tweet and then everybody in the media would then write about it, was probably a bigger factor than whatever targeting they did on Facebook. I think Fox News played a huge role in this election. Not Clayton—oops. I've been turned off.
Leo: Yea, I'm sorry, Philip, you can't be on the show anymore. Thank you for joining us. Good-bye. There we go. We got it (laughing). No, obviously I'm kidding. I kid. I'm a kidder. You know, I agree but look, there was a masterful media strategy all around. And no one can deny that Trump's use of Twitter is absolutely masterful and in effect, with the help of fake news and a lot of other things, I think mainstream media was sidelined in this election. And you know, it worked. It worked. Somebody said, "Yea, but they didn't get the popular vote." You know? It doesn't matter. He got the votes. He got the votes. All he needed was enough votes to get elected. He got the votes. And I don't think it even mattered. They were all out here. I do think even the Russian hacking probably wasn't as big a factor as the use of Facebook to be honest with you.
Philip: I think the FBI may have been the biggest factor.
Leo: Call me certainly didn't hurt. It didn't hurt. Yep, yep. Here's the most interesting—I don't want to get into this conversation. We go to this conversation too much. It's long over. I do speak politics though. I find this really intriguing to talk about the conspiracy theory, but TechCrunch pointed this out. Facebook rejiggering of its stock plan which was ostensibly to allow Zuckerberg and his wife Pricilla Chan to donate a lot to charity has the side effect, and TechCrunch, John Constine doing a great job on Tech Crunch, examined the SEC documents, turns out Zuck can continue to serve, run Facebook while serving in government. And the most interesting story I've heard and the one that probably is highly speculative is that Mark Zuckerberg's ultimate ambition is to become President of the United States.
Clayton: Yea, I heard that story this week. I don't know. From his comments during his speech it seemed—I don't know. You read his comments and it seemed like a pretty big stretch. But I don't know.
Leo: Well he'd be smart to be cagey at this point.
Clayton: Right. You know can we see a Mark Zuckerberg run in 202? I don't know. Again we live in an age of television. We live in an age of speeches and energy and we're not as Michael Douglas' character in The American President talked about that if there were cameras around when FDR was there, would this country elect someone in a wheel chair? And the problem is Mark Zuckerberg is not a dynamic speaker. You know, he's not great on the stage to excite people.
Leo: True. But he's working on that. Betcha anything he's going out—his plan this year in 2017 is to talk to people in 50 states. That is totally the kind of thing a president, a candidate for president would say four years before the run. The fact that he embraced religion is exactly the kind of thing you need to do if you're going to run for president in this country.
Clayton: And you appoint a conservative voice to be your public face of your news party.
Leo: All right, conspiracy theory (laughing).
Clayton: First of all, he doesn't need to travel anywhere. He could literally stay in his house and never leave. He's got Facebook. He can get his message out there without doing anything, you know?
Leo: Precisely. Precisely. All right. Let's take a—I know, you know? There's no merit in it at all but I just love the idea. Would you vote for him?
Philip: I like Alec Baldwin for 2020.
Leo: No, I wouldn't vote for Alec Baldwin. He's a hothead. Would you vote for Zuckerberg? He's got tech cred.
Leo: (Laughing). I think, I don't know. If he can't be emperor of the world, maybe it's a stepping stone. Think of the presidency as a stepping stone.
Clayton: Look at these guys like Mark Zuckerberg, he is already president. I mean he is already wields that power. Why would he want to stoop to the level of the office of the American President?
Leo: Not to mention the pay cut, right?
Clayton: Right, the pay cut but it's so—people think that it's—
Leo: No, I know why he would want to do it though. I do think that Mark—whatever you think about him, cares about a lot of things. And I think Mark wants to change the world. I really think Mark wants to change the world.
Clayton: But my point is, look at somebody like Elon. Look at somebody like Mark Zuckerberg can wield more power and change more things, I mean to Steve Jobs' point, by being outside of the government and being able to effect change on a global scale in ways that being the American Presidency is constitutionally limited, it's a really limited office.
Leo: No, in fact Obama said it really is the power to persuade more than anything else.
Clayton: Right. Historians and constitutional scholars talk about this. The office of the presidency is the power to persuade and that's really it.
Leo: Let's take a break and we will come back with more Philip Elmer-DeWitt from PED3.0.com. Actually I shouldn't say 3.0 because that would add dot. So it's PED30.com.
Philip: And I bought a bunch of other domains. I bought Apple30.co, Apple30.net. I tried to buy Apple30.com but it was owned by someone in Iran who was willing to sell it to me but there was no way to send money to Iran so it's sitting there unused.
Leo: See? These sanctions hurt even the little people (laughing). Also from Fox and Friends our good friend Clayton Morris, tech guru, tech writer, podcaster and journalist. Actually I do want to talk about a big anniversary tomorrow. It's a massive anniversary. We'll talk about that in a second.
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Leo: We're going to take a break. Come back with more Philip Elmer-DeWitt, Clayton Morris, but first this was a big week for us. It was a little quiet around the studio because the whole gang went down to CES for CES coverage. Take a look at what you might have missed.
Narrator: Previously on TWiT.
Father Robert Ballecer, S.J.: I've waited all my life to meet this man in person. To me, this is a human being. That's it. Of all the people I've ever met, Dickie is one of them.
Narrator: TWiT Live Specials.
Fr. Robert: It's loud. There's a lot of energy and I'm on top of an RV with a jacuzzi and a helicopter. I'm Father Robert Ballecer, The Digital Jesuit and here's the best of CES.
Narrator: Security Now.
Steve Gibson: The first story is the internet of tattling things. A man was found dead. The suspect in his home had an Amazon Echo. Amazon received a warrant requesting any information that the Echo might have picked up and that Amazon had on their servers.
Narrator: TWiT. Say hello to the NSA. They're listening.
Leo: It's very easy to pair to your phone. Boss' AirPods. Boss is my name. I tell Siri to call me Boss so that's why they call me Boss. Sometimes when you're around a therapist you worry that everything you say is somehow horribly revealing.
Georgia Dow: We're not on all the time.
Leo: So you're not thinking, "Oh clearly he has authority issues because he made his phone call him boss." You're not saying that?
Georgia: (Laughing) No.
Leo: No. I know you're saying that. That's ok.
Leo: Great week up ahead. Megan Morrone, what will you be covering on TNT this week?
Megan Morrone: Thanks, Leo. Here is a look at just a few of the stories we'll be watching in the week ahead. CES has come and gone. But the product announcements have not. HTC sent out invites to an event this week prominently featuring the letter U which has some rumor mongers saying the company will release its flagship HTC Ocean Note as the HTC U Ultra. Also on January 12th, Nintendo will finally unveil the Switch, a hybrid console for your living room or for you to bring with you to a cocktail party if you attend cocktail parties where you don't feel like a total weirdo playing the Legend of Zelda: Breath of the Wild on your portable Nintendo. We will learn about the game including pricing, games and availability at a Nintendo press conference this week. In search news this week, on January 10, Google will start punishing sites that try to annoy us with popups. According to the official Google Webmaster Central blog, pages that use intrusive interstitials may not rank as highly in search. And finally this week is the North American Auto Show in Detroit where we expect to see VW's new autonomous electric concept car and Google's Waymo's self-driving Chrysler Pacifica minivan. Jason Howell and I will cover all of this and a whole lot more all week on Tech News Today, each and every weekday at 4:00 PM Pacific. That's a look at the week ahead. Back to you, Leo.
Leo: Thank you, Megan. Now we continue with This Week in Tech. Clayton Morris, Philip Elmer-DeWitt. How about this story? Tomorrow, January 9th, ten years ago, Steve Jobs announces a widescreen iPod, an internet communicator and a phone, all three in one. You must have, you both must have been at the event, right?
Philip: I wasn't. I was in New York. Were you there, Clayton?
Clayton: No, wasn't.
Clayton: I know. So sad.
Leo: It is one of the great moments in tech history. And we all knew that he was going to announce an iPhone. We didn't know the name. And he still kind of fooled us. I've got to find that video. Let's see if I can find the video because it's—
Philip: I changed jobs after he did it. I left Time Magazine and went to San Francisco to cover Apple.
Leo: Did you? You saw something big happening.
Philip: Well, finally, yea. It had been a long time. I used to be the tech editor and there would be guys in San Francisco pitching Apple stories at the end of the Gil Amelio era and I just didn't see it. I didn't see Apple coming together, but.
Leo: Yea, that was a bad time. Oh here you go. Here's Steve Jobs.
Steve Jobs: In 2001 we introduced the first iPod.
Leo: Actually maybe I'll jump ahead a little bit.
Steve: And it didn't just—
Leo: I was sitting right about there.
Steve: It didn't just change the way we all listen to music.
Leo: Next to Scott Morn.
Steve: It changed the entire music industry.
Leo: Merlin Mann, Alex Lindsay. We were all sitting there.
Steve: Today we're introducing three revolutionary products of this class.
Leo: I get chills still, don't you?
Steve: The first one is a wide screen iPod with touch controls (applause).
Leo: You know you're in the press so you're trying not to applaud but it's hard not to get excited.
Philip: Did you know where he was going with this?
Leo: Well, we suspected an iPhone. I did not know where he was going with this.
Clayton: Yea, because you're thinking to yourself, "Ok, wait a second.":
Leo: What? You're going, "What?"
Clayton: What's happening here? This misdirection is perfect.
Leo: This guy's a brilliant showman. Brilliant!
Steve: Is a revolutionary mobile phone.
Leo: That's the thing that we were waiting for. He's got three things. You never knew with Steve.
Steve: And the 3rd is a breakthrough internet commutations device.
Philip: We're like, "Ok, ok, great, great."
Leo: Three things.
Clayton: Tell me about number 2. Tell me about number 2.
Steve: Three things. A widescreen iPod with touch controls, a revolutionary mobile phone and a breakthrough internet communications device. An iPod, a phone, and an internet communicator. An iPod, a phone—
Leo: Now we're getting it.
Steve: Are you getting it?
Steve: These are not 3 separate devices. This is one device. And we are calling it iPhone.
Leo: No one even knew what they were going to call it.
Steve: Today, today Apple is going to reinvent the phone. And here it is.
Leo: And of course a little joke there. That's an iPod with a dial on it.
Leo: It also—that takes some guts.
Steve: Actually here it is but we're going to leave it there for now.
Leo: Oh, it's in his pocket.
Steve: So before we get into it—
Leo: That is amazing stagecraft and—
Clayton: Did you see the leaked Verge stuff, is what the images and video on the Verge, the click wheel iPhone prototype that they built and would have looked like.
Leo: But that's where you see Steve Jobs saying, "No. We're not doing that." I have to say, he's missed. He really is missed. And even as exciting as that moment was and we were all just champing at the bit to hear about this new phone, even then we had no idea how important this product was going to be.
Philip: Right. And the three things he named, one of them, actually it's not a really good phone. But the internet communicator part of it turned out to be the breakthrough. That's what really took off.
Leo: He picked the wrong thing to pick in the name obviously (laughing). Who cares about the phone nowadays? But at the time, it was replacing cell phones, right?
Clayton: And it was one of those things which improving the phone component of the iPhone took years to nail down.
Leo: And you've got to read the amazing stories by the engineers we now know who were sitting in that audience taking a shot every time the demo, one item of the demo worked, their part of the demo worked, they go, "Oh, thank God." Because apparently first of all that thing in his pocket? There were only two of them. They didn't work very well and they had the 2nd one in case the 1st one just died. And Jobs had to follow a very narrow path in the demo. One mistake, the thing would crash.
Clayton: He had to follow that golden path. The whole thing was done. The whole demo was done.
Leo: But again, a testament to this man's incredible ability. I mean all of this, he knows all of this. This could go very wrong and yet man, he had such mastery of the room. I mean, pretty amazing. It's fascinating to learn later how difficult. This is the click wheel prototype that came from Sonny Dickson who was a well-known Apple leaker. I think this is kind of funny. And he also says there is a patent for 2006 that shows us. Some Apple employee obviously had this video, leaked it.
Clayton: Right and be able to scroll through the scroll wheel and scroll through new messages and phone and—
Leo: It's interesting. The Acorn logo there. I don't know, Acorn was the inspiration for ARM, remember, that was the Acorn computer that ARM was created for in conjunction with Apple. Apple was one of the owners of ARM. Really interesting. I'm glad they didn't do this, aren't you?
Clayton: Yea. I'm sad I didn't get to see that live, to be able to watch that. I did get to see the iPad launch.
Leo: Yea, that was the last one I saw (laughing). You know, help a brother out here, Clayton. I'm sitting in the auditorium, you guys, CNN, everybody's got cameras. They're going like this. I'm a little podcaster. I've got a laptop. I thought, "I'll just turn it around. I've got a camera in the thing. I'll just stream it."
Leo: By the way, this is all speculation. Nobody ever said anything then. Has never said anything since and in my opinion, I shouldn't bring this up because as soon as Apple opens its Spaceship campus and had its first event in that Spaceship campus, I am going to be on my knees begging for an invitation to that event.
Clayton: Or you'll be flying over with a new drone that you built.
Leo: Well, and also very grateful that I saw Steve Jobs at his peak, at his finest. And I think that iPhone is clearly, that announcement is clearly amazing. 10 years ago tomorrow.
Philip: I missed a beat there, Leo. They kicked you—they don't invite you?
Leo: Oh, you don't know the story? Everybody that watches TWiT knows. So that was the last time I got invited to an Apple event was that iPad event. And I always had the iPods. First of all, I'm in the official Apple video sitting here with my chin on my laptop streaming it. So, busted. And I do think Steve gave me the stink eye at one point. I'm not absolutely certain but I think he looked at me and went and then looked and went on. I was like right there. And then I never got invited again. So that's my thesis and I'm sure we all know that there is a blacklist for sure and many people have been on that blacklist. But even Gizmodo gets to go to Apple events again. There the ones who were blocked for years.
Philip: Yea, you should try. Write a note to Steve Dowling.
Leo: I'll get in. I just have to ask. I don't think I'm really on the blacklist. I think I just, you know, I just have to ask.
Philip: You fell off the list.
Leo: I fell off the list. There's a big difference.
Clayton: Yea, it's not like you stole an iPhone and published stories about it.
Leo: And that's what Gizmodo did and they're invited. Christina Warren is on their list. Apple did have a good holiday season. 44% of all device activations according to, you know, people who monitor this thing, not Apple.
Philip: Although that was down from 49% the year before. So it wasn't quite the—Samsung is gaining on Apple every year and in the graph you're showing there, the year before Samsung was at 19% and Apple was at 49%.
Leo: Ok. Is it just from Flurry? Flurry monitors this kind of thing and I think because their analytics are actually culled from apps, they're pretty accurate.
Philip: They're actually called—if you sign up for Flurry, they get to look at every receipt that gets emailed to you.
Leo: That's what it is. It's like Slice. That's right. There's another company that does the apps. Is it Adobe? Somebody else does apps. Right, Flurry is monitoring your shipments.
Clayton: I'd like to see how much of those holiday sales in general from Apple were Apple Watch. I saw a lot of people at the local Apple store gathered around using their Christmas money afterwards buying Apple Watches. I would be curious to see how much. I wish we knew those numbers but we don't get to see those numbers.
Leo: Tim said it was the best 3 days ever for Apple Watch. Huge growth. And I think they dropped the price $100 bucks on the Series 1 and I think it might have helped. At $259 that's—at that point maybe that's something people would consider if they've been waiting to get one. He said, "The AirPods are a runaway success. We're making them as fast as we can." That we know (laughing).
Philip: I know. I tweeted this, "Apple tells CNBC nothing new."
Leo: Yea, we know you're making them as fast as you can. The question is, how fast can you make them? In fact we have heard rumors from the supply chain that Apple's actually going to cut iPhone production by as much as 10%.
Voice from Video: This is CNET from CES 2017 and here are the stories.
Leo: I don't even see where this news is coming from. I don't even see the video that's playing. Thank you, CNET. Knock it off.
Philip: That 10% cut was another story. The iPod just got played completely wrong. Last year the same people, the Nikkei Asian Review reported that Apple was going to cut production by 30%. And that turned out to be right and it presaged a terrible second quarter. In the beginning of that year cost Tim Cook 15% of his bonus. But this year it fell 10% which is a lot less than 30%.
Leo: That's a good point, yea.
Philip: So it was actually, it was a good news for Apple but it got played as bad news because that's what people click on.
Leo: Well and there's also—
Clayton: That's how it sells.
Leo: Yea, there's way to interpret it also. Maybe they made enough. You know, I mean—
Philip: And also every after—the December quarter is the big quarter. They always reduce their orders after the December quarter. It's such a weird story.
Leo: They crank them out so fast that there's not been a supply problem. So maybe that's it, you know?
Clayton: And people forget that what Tim Cook prides himself on, he has this weird sort of idiosyncrasy, so steeped in spreadsheets and what stores have what items left on shelves. And he's obsessed with the idea that not having an excess of supply in a back room somewhere that doesn't need to be there. Is there a possible where he can get to that zero mark?
Leo: Right. Just in time. Exactly.
Clayton: Just in time. Zero. And they get into that nice little gray area between having too much and not enough and will people be happier? Will we hear griping about it? You've seen it every time. One of these new products is rolling out. Apple TV starts to dry up on store shelves so he you know, under Steve Jobs' reign, Tim Cook was very much in control of making sure that as those things were drying up, the new products were starting to proliferate.
Leo: Huge app sales too, right? For the App Store recorded—how much was the App Store sales? Was it $44-billion? No, that can't be right. $28-billion. $28-billion dollars. Is that right? Yea, in the App Store, Apple collected a third of that which is $8.5-billion dollars in 2016. That's a growth of 40% year over year.
Clayton: All Mario Run.
Leo: (Laughing) Yea, probably. Probably.
Clayton: Because if you download it on 5 devices you have to pay 5 times.
Leo: Oh, the record day was January 1st of this year.
Philip: Funny day.
Leo: Yea. Well, I want to hear your theory. But $240-million dollars in purchases. That's the largest single day sales in App Store history. A quarter of a billion dollars. What's the story? Why are people buying New Year's Day?
Clayton: Everything's closed on New Year's Day.
Leo: (Laughing) Oh, that's all you can do.
Leo: You've got to play that Pokémon Go. I guess a lot of people got iPhones for Christmas.
Philip: Right, right.
Leo: It's a Sunday. It's a week later.
Philip: You'd think it'd be the day after Christmas that all the apps would get bought. It's a bit of a mystery. And we don't—they didn't report what had happened in all the days around January 1st. That happened to be the peak.
Leo: Right, right. I'm very excited about another announcement at CES. We've been waiting for Samsung to confirm the Chromebook Pro. We've seen leaks of it and the Chromebook Plus. What is interesting is that it's not merely a Samsung product. Apparently made in partnership directly with Google which would answer the question, what's going to replace Google's Chromebook Pixel? It might be this. Much less expensive than the Chromebook Pixel but still expensive for a Chromebook starting at $450-dollars. I immediately ordered the Plus which is the ARM version. That will be available first at Best Buy and supposedly in about a month I will get it.
Philip: They sold so many of these into schools, they're really eating Apple's lunch there.
Leo: And not just Apple. Microsoft. They're completely replacing Windows machines. What's interesting is this is, this is—I think this is going to be a killer product. You know it folds over, becomes a tablet, has a pen, as Samsung's famous for their pens. But because this will support, and you can see it right here, the Play Store, this means this will be both and Android Tablet and a Chromebook. And I think that—
Clayton: The question that comes out is software.
Leo: Yea. That's very interesting.
Clayton: And what we'll see from Apple in 10.3 for the iPad. Big move. I mean we need to see some big updates for iPad I think and whether or not we'll see that in the spring. Maybe Apple shifts to the spring time table for talking about iPad and relegates the fall to iPhone. I think it comes down to software as it does with this Chromebook. Where are those really killer apps that make you want to stay on an iPad or a Chromebook with a pencil, these Enterprise level apps, these pro level apps that I'd love to see on the iPad Pro. That's my main computer now. I'm sitting here talking on an iMac. But I run my whole company on this little guy.
Leo: That's Apple's hope I believe is that they really want the iPad to eventually take over for the MacBook and the Macintosh and become its primary computer.
Philip: And it's the reason why Pro users, Pro Mac users—
Leo: Are freaked.
Philip: Think that Tim Cook doesn't understand. Doesn't know what the Pro users need.
Leo: This Surface Studio is exactly what Pro users were hoping Apple would do something as innovative as this. And incidentally, sales on this are tiny. 30,000 apparently according to some sources. Nothing like Apple Mac sales and yet even at CES this week, all these interesting, innovative, unique PC form factors, fast, much faster laptops, much more interesting, better battery life, no Touch Bar. Nobody in the world is making a Touch Bar but Apple and I think for good reason. That thing is a—do you like your Touch Bar, Philip? Do you have one?
Philip: I don't have one.
Leo: Don't get one.
Philip: I'm still using my MacBook Air.
Leo: Don't get one.
Philip: I like my ports.
Leo: I like my ports. I also like my touch and I guess that's one of the reasons I think iOS is ultimately going to eclipse MacBook.
Clayton: Yea, the Touch Bar—
Leo: The Touch Bar's terrible.
Clayton: I use it once in a while. I more use it for Touch ID than anything.
Leo: Yea, the fingerprint's great. I love the fingerprint. But by the way, I don't know if you've experienced this yet, but I am now making more typos because I accidentally hit the Touch Bar all the time and Siri pops up or my search Spotlight pops up and I'm trying to do something here and get out of my way. And this has become an anti-productivity tool. I'm not happy with it.
Philip: Do you use it when you're writing? Do the right words show up in advance so you do not have to type them?
Leo: They show up, but, Philip, you're a touch typist. You don't look at the keyboard.
Clayton: And to glace up and do the auto correct or to pick those, it's like an extra level, an extra step. I do like—there are certain apps, 3rd party apps that are taking advantage of it. I love Airmail. I use Airmail on my iPad. I use Airmail on my iPhone. That's my go to mail application now mostly. And they updated it for Touch Bar support and there are some cool bells and whistles inside of that app. So when you're living in an app for a while and you can then customize and experience Touch Bar inside of that app, that's when I think it becomes compelling. Like if for instance you're living inside of Photoshop and you're going to be doing certain things inside of Photoshop for a long time, that's when I think it becomes compelling. To me, I forget about it because I'm jumping between apps so often and it takes on a new skin every time I'm jumping between apps and I'm just—right, it's unpredictable and I don't remember where things are and now there's a whole new layout every time. It comes back to what I was talking about before. Memory, keyboard shortcuts or gestures on ear buds, you know, you've got to get used to these things. I'm just not used to them.
Philip: I would love to see some sales numbers to know if they are selling more of the MacBook Pros without the strip than they sell with the strip.
Leo: Well, unfortunately if you want the high-end MacBook, the MacBook Pro, you've got to get the Touch Bar. I tell people get the one, if you can live with the one without it it's absolutely better but if you want the faster processor. Battery life still an issue. It's unpredictable. That's the worst, right? If it were short I could live with it. But it's not. It's long and short. It's all over the place.
Philip: Are you reacting to the Consumer Reports report?
Leo: No, I have one. I'm been using it—I bought it right away. I would be so much happier with a modern MacBook Pro with the old design and frankly, the same thing with the Mac Pro. I'd be much happier with a cheese grater on the old design, it would be much more useful. I could upgrade it. I could put more drives in it. Apple, I think Apple, in terms of Macintosh, I don't think that Apple's doing a very good job.
Philip: No invitation for you, Leo.
Leo: You see? You see? I blew it every time. Let me talk about my mattress than we'll wrap this thing up here.
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Clayton: Love it.
Leo: You have a Casper?
Clayton: Oh yea. We have a Casper and I just bought my mom and dad a Casper for Christmas. They've been wanting a new king size bed. They've been living in a queen bed forever. And so got a little picture of a mattress. My mom said, "What's this?"
Leo: Aw, that's so cute.
Clayton: I said, "Pick the one you want." She said, "I want a Casper." So I got her a king size. And they do the frame as well. So we did the frame, the mattress, they have a foundation. So just order it and it should be there this week, yea.
Leo: Oh, that's nice. Unsolicited testimonial.
Clayton: Unsolicited. Love it, love it.
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Leo: Let's see. Wrap it up. I don't think you would ever do this on Fox and Friends. Those guys across the street, CNN, wanted to show what hacking looked like so they picked a screen shot from Fallout 4 (laughing). That's embarrassing. It only took a minute or two for Reddit to figure out that's not hacking. That's a mini game inside Fallout 4.
Clayton: Oh, you know, I feel bad.
Leo: I'm sure you're sympathetic because this is hard.
Clayton: I'm sympathetic because here's what it is, right. Often times, and think about the producers, the poor producers are 23 years old, 22 years old. You know, right? They're there at like one in the morning. They're not making any money. They do like a Google image search or something for hacking and they end up pulling up an image from Fallout 4 and that's what they use on the show. And look, yes, there should be extra layers and hoops and hurdles to jump through on this but I'm sympathetic. I'm sympathetic. The amount of mistakes I make on a 4 hour show, these kinds of things are bound to happen.
Leo: I know and I'm just teasing them. But I have to say, part of the problem is you're trying to illustrate abstract concepts in a visual medium and it is the hardest thing in the world. I mean, how do you illustrate, how do you do a visual of hacking? Well, you've got characters on a screen. What else are you going to do, right?
Clayton: They all try to come up with these creative ways to show things in television because you're right, it's a visual medium. You're getting your kids ready for school, you're making pancakes and you're looking up on the TV and you're trying to illustrate something. I remember years ago, a TV anchor had—and this was actually kind of brilliant, but had one of those forklift style bucket raising devices you would stand in to go up and fix a telephone pole.
Leo: Oh, that was funny. I saw that.
Clayton: To illustrate the amount of snowfall. This is how high the snowfall has been this year. It actually was really smart. Here's an idea. And you can—they held a measuring tape down. So, look, you've got to come up with—
Leo: Whatever it takes.
Clayton: Yea, whatever it takes (laughing).
Leo: Whatever it takes. Samsung actually is interesting. These are just the little seeds and the stems that fall to the bottom of the show. Samsung forecasts a record 4th quarter profit, the best in 3 years even despite the Note 7 debacle. It did very well. We are going to find out in a week or two what happened with the Note 7 by the way. They're going to release the results of its investigation. I'd be very interested to see what that is.
Clayton: Probably fueled by the sale of washing machines, you know.
Leo: Yea, yea, it's a big company. I mean mobile isn't the only thing they're up to.
Clayton: Well, I'd love to know what's going on with the Gear, with the S3 still floating around. You know, what are they going to do with Android Wear and the Gear Watches.
Leo: I want to see a Note 8. Maybe they don't call it the Note but they've got to release it. The Note7 was a great phone. A little hiccup (laughing). But it was a really nice phone. I would like to be using it today. I really would. Russia requires Apple and Google to remove LinkedIn from app stores. Now, ostensibly this is because there is a Russian law requiring that networking service store data on Russian citizens in Russia which doesn't seem unreasonable. It also seems like it makes it easier for them to spy on their citizens. In any event—
Clayton: It's like in China.
Clayton: You know with their databases in China that they have state control over so we know exactly what you're up to, how many children you have, what websites you run, who you visit.
Leo: LinkedIn is now owned by Microsoft and they said they were disappointed. We didn't talk about the Russian hacking story because, I hate to say it, but the joint agency report, the JAR Report on Russian hacking was such a mishmash of useless information that I don't think we can say anything with intelligence. This is Kevin Poulsen's really great article. We're going to get Kevin on very soon to talk about it. Kevin is a hacker so he knows what he's talking about. He's writing for The Daily Beast on How the U.S. Hobbled Its Hacking Case Against Russia and Enabled Truthers. The truth is, according to Kevin, there is useful information about Russian hacking that might confirm the intelligence agency's report, but none of that made it into the joint report, the JAR and in fact the stuff in the JAR was worse than useless. It was actually dangerous. They offered, for instance, according to Kevin, in the report hundreds of IP addresses that were—let me find that part of the piece here. That were tied to dangerous Russian hacking groups. The problem is that off the, what was it, 800—there it is. The 876 addresses that the offered, 40% were Tor exit nodes that anybody can use. They aren't tied to anybody and they're aren't particular located in Russia, and worse, a number of them were Yahoo email servers. And we know what happened there because of Vermont Utility, got these 876 internet IP addresses, did what the Department of Homeland Security said it should do which was to scan all of its computers for access to any of these internet addresses. Oh my God, they found a laptop that had access to one of these addresses. It got in the news that the Vermont Utility had been hacked by the Russians. The laptop had access to Yahoo email.
Clayton: Right. There was no sign that it had been hacked.
Leo: No sign that it had been hacked.
Leo: I think they did themselves—I can only think that the intelligence agencies offered this really pathetic—there's two ways you can go with this. I'm going to go with the way that they didn't want to review operational security and methods but they never should have released a report that was so clearly made up. The other way you can go is this is propaganda from the intelligence agencies and that this is bull****. I'm sorry.
Clayton: I think your first take on this is probably more the case.
Leo: I hope so.
Clayton: Because we saw on Friday, President-Elect Trump and President Obama both having 2 hour meetings with the senior intelligence officials on Friday. And leaving those meetings, President-Elect Trump was—I think his comments about it and in meetings subsequent, taking it quite seriously.
Leo: Good. Because he's poo-pooed this all along. So clearly he was presented with evidence that satisfied him.
Clayton: So what he was not able to say publicly, which was all of the stuff that didn't make it in to this report, the classified stuff. We have former CIA operatives on our show who said as much as, "Well and that's what was handed to President Obama as well." So this public stuff, you're right, is this mishmash—
Leo: They should not have released it.
Clayton: And if anything, paints a picture of the ability of 3rd party hackers that had nothing to do with the government in that capacity. It seems like that emboldened them more or it made the case for them more than it did for the Russian government itself.
Leo: They pointed to an old, publicly available PHP malware. We're actually going to on Security Now on Tuesday, Steve Gibson found it so fascinating that he wants to delve into this PHP malware. But even the malware that this Joint Agency Report came up with was out of date. There's much more malware available, widely available. Anybody who wants to buy it you can just Google it and you can download it and use it against your friends. So I'm actually very disappointed because I think this is just more, very confusing and bad information. I recommend people check out Kevin Poulson's article. If anybody knows this stuff, it's Kevin and I think he makes a good case, a much better case than the JAR report made.
Clayton: Yea, it was embarrassing.
Leo: You know, I don't get it. So we'll kind of defer a discussion of that Russian hacking until we know something better or more useful to say. Let's see. I think—anything else you guys wanted to talk about? I think we covered, I think we covered the highlights. There certainly are a lot more.
Clayton: Yea, those are the big stories out of CES.
Leo: I know, I know, you want to watch the Golden Globes. Go ahead. Go ahead. It's ok.
Clayton: No, no, no, no, I have football on right in my office here, see the Packers crush the Giants.
Leo: Oh, good.
Clayton: That's all I cared about.
Leo: Oh, you're a Packers fan.
Clayton: No, no, no, I'm an Eagles fan.
Leo: That's what I thought.
Clayton: But anytime the Giants lose, exactly.
Leo: By the way, you can have Chip Kelly back now.
Clayton: Yea, thanks (laughing).
Leo: We're done with him.
Clayton: No thanks. But you guys had the same exact experience that we did.
Leo: (Laughing) Oh my God. Ok, we won't talk football. Philip, anything else you want to mention? You're doing such a great job on PED30.com of covering the—if people want to keep up on Apple news and I've been doing that lately for MacBreak Weekly, I always go to PED30 to see what the big stories are and your stuff is great. So keep up the good work. I will be listening to the new show and see what Gene Munster has to say about new Enterprise.
Philip: My volume seems to be off. Can you hear me, Leo?
Leo: Yea, I hear you.
Leo: I was just saying nice things. You know what? Stop. Nobody should use these crappy AirPods anymore on the show (laughing).
Philip: Well, my microphone was screwing up.
Leo: Oh, ok.
Philip: The only thing I was going to add, you had a link to a lot of rumors about the next iPhone, the iPhone X.
Leo: Do you really want to say anything? What can we say?
Philip: I ignore most of it because I don't really care about the OLEDs and so forth but I think the wireless charging, if it works and if it could be a real deal breaker. The company that's been talking the most about it, whose name I forget, they've got patents for contact charging, 3-5 feet away and 18 feet away and we'll have to see what part of that surfaces in the next iPhone, if they're going to actually do it. But the idea that you could walk into a room and your iPhone starts charging immediately is quite appealing and I think could change the game.
Leo: It would if they could make something like that. I'm a little skeptical that such a thing could work, but.
Philip: Well the technologies there.
Clayton: And it will also power my pacemaker at the same time.
Leo: Yea, you really don't want to create a room that no one can enter if they have any medical devices because that would be a problem.
Philip: But we'll have to see.
Leo: Why is my hip buzzing (laughing).
Clayton: To not have to—to live in a cord free environment would be fantastic. Think about the future of the iPad in that environment if that's your main computing device, if your iPhone is your main—you would never have to worry about the stinking cords again and plug into anything. Looking for them, forgetting them on a vacation. Well, I guess you would want them on vacation.
Leo: We've had, we in the Android world have had wireless charging on many devices for a long time. All the Samsung devices for instance, although—
Philip: But you have to have contact.
Leo: Yea, but that's not a big deal. I put it on a stand and it charges.
Clayton: But keeping it in your pocket and never worrying about its charge.
Leo: That can't work. You think that's actually going to happen? You can't get enough energy through the air to charge it.
Clayton: Didn't Tesla do it 15 years ago?
Philip: I talked to a guy who's in the business. He's working on this very thing. It is a technology that they're working on. There's some people who claim that the physics is right and that it's impossible but there's a company making them. And Apple is—
Leo: But making them in such a way that you can buy it?
Philip: Not yet, no. What they said is they're waiting for FCC approval. They've got approval for the contact. But because it's going to go through the air, the FCC has to rule on whether it's safe for 3 to 5 feet or 18 feet.
Clayton: Yea, Tesla in whatever, over a hundred years ago with his large Tesla Tower using wireless transfer of energy.
Philip: Yes, yes.
Clayton: He was run out of town because the power companies were like, "Nope, not gonna happen. We want to be able to control this." Tesla's Tower. In 1904, to draw millions of volts of electricity through the air and then feed it out to cities wirelessly.
Leo: I mean I know uBeam was the company that was pushing this and they've been kind of debunked, right?
Philip: I think Energous is the one I'm following.
Leo: I will—Energous. Ok. Ok. We'll watch with interest.
Leo: Anything, anything you want to say to watch out for, Clayton Morris, in the weeks and days to come?
Clayton: To watch out for.
Leo: Anything you're excited about? Watch for your podcast.
Clayton: Oh, sure, yea.
Clayton: Yea, if you go to—or morrisinvest.com. We've got the podcast. But by the way, I just launched—you and I were talking before the show about our YouTube channel. Tried to really do a big push in October. Launched the YouTube channel as well so—
Leo: What's that?
Clayton: Just my last name Morris Invest on YouTube where we go into very niche-y pieces about how to invest in real estate and walk you through all of those different things, whether it's--
Leo: Oh, there he is. There's—I know that guy. Clayton Morris.
Philip: How often do you do these?
Clayton: We do these—constantly I'm doing these. We publish these 3 times a week also.
Leo: But you only work on Fox and Friends on the weekends, right? So you just got 5 days a week you're not doing anything.
Clayton: Well, no, now I'm doing 5 days a week, so I'm doing Saturday, Sunday, Monday, Tuesday, Wednesday.
Leo: Good. I'm glad to hear that. That's great. Congratulations.
Clayton: And so it's non-stop work.
Leo: I think you should take Megan Kelly's old show.
Clayton: Too late. That's already been snatched up.
Clayton: They're not leaving that 9 o'clock hour away.
Leo: Damn, they just whoosh. Hey, it's great to have you both on. Always a pleasure. We do—and by the way, speaking of YouTube, you can watch us live on YouTube now. YouTube.com/twit. We also have our TWiT Bits there and links to all of our shows channels so any of the shows you want to watch you can watch on YouTube as well as on TWiT.tv or you know, subscribe and get every show automatically pushed to your device and you won't miss an episode. I like it when you watch live though because then you can be in the chatroom. That's about 3:00 PM Pacific, 6:00 PM Eastern 2300 UTC every Sunday afternoon. And thank God football's almost over. Don't have to fight the NFL for your attention going forward. Thanks for joining me, everybody.
Clayton: What about the Golden Globes?
Leo: And we, yea. Now it's drunks on the Golden Globes. Kara Swisher, I'm sorry we couldn't get her on. I gather she didn't get her internet back. Comcast didn't act that quickly. What a surprise. But, we will reschedule her and have her on a show coming up in the weeks to come. Thanks for being here. We'll see you next time! Another TWiT is in the can. Bye-bye.