(Preview) The App Store in the Shadow of AI, Offensive and Defensive Cybersecurity, Q&A on Financial Planning, AI Writing, American Sports

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0:00Hello, and welcome to a free preview of Sharp Tech.

0:09Hello, and welcome back to another episode of Sharp Tech. I'm Andrew Sharp, and on the other line, Ben Thompson. Ben, how you doing? I'm doing okay. This week, you know, Wisconsin does get fairly muggy. It doesn't really bother me. People here complain, and it's so hot and muggy. I'm like, the 20 years in Taiwan have inoculated me. Well, see, it might be knocked out of my memory pretty quickly, though. I did adjust to the cold very well. I think if you adjust to the cold very well, you do not adjust to humidity very well. Okay. But there's that moment where, oh, it's so pleasant out, and it's so pleasant out because

0:44the dew point drops, which means the humidity is gone, which is the first hint of winter. So it's like, oh, there's a little twist in the air, and it's like we had a discussion, you know, about, you know, where are we going to move the lawnmower, where the snowmower's going to take a spot. The planning has begun. Yes. I'm taking my daughter off to college later today. It's like, I've always thought about years in, like, school year term.

1:15Okay. It's just, you know, like, the new season is starting. The new year of Stratechery is starting. The new year of my kid's school is starting. And winter is coming. When winter is coming. Well, I'm ready at this point. Is that a Game of Thrones reference? Well, it is, but not intentionally so. I am 100% ready for fall, at least, not necessarily winter, but I've had enough humidity here in D.C. It was pretty funny walking around Madison and talking to some of your friends out there and hearing them say, oh, it's pretty muggy and gross outside.

1:48It felt great to me as I was walking around Madison. It's fine. I hardly ever feel very hot or muggy here. It's great. So, but yes, it is not muggy anymore.

Red Bull F1 merchandise costs

1:59Indeed. Yep. Packer season is coming. Here we go. We will begin with a topic that we have hit many a time here on this show. Yeah. So I can lead on this, a topic we've hit many a time. I also very good news for me. Okay. I'm just glad I don't have to buy new gear. Why is that? Oh, I thought we were talking about Max Verstappen resigning with. Oh, there we go. I actually completely forgot about that. F1 merchandise is unbelievably expensive. Cost you a pretty penny. That's right. You are paying for college right now.

2:33And by the way, Red Bull just has great stuff. So big win for me in that regard. Not a big win if Max doesn't win. So I need Red Bull to get the car in order. Yeah. But, but Hey, you know, it's always good to say, well, look, he, there was a good chance that he was just going to walk away or at least a non-zero possibility. He's not walking away. So that's a win for racing fans everywhere. And your note on the gear is really true. I'm not a Red Bull hater anymore, but when I visited Grand Prix's like four or five years ago, I was a Red Bull hater. And I remember walking through the merch tent being infuriated by how cool the Red Bull

3:07merch was. So I'm glad that you get to hang on to that in the years to come. A good. My $70 hats are going to still be useful. So like $150 raincoat. Actually, that might be, it might've been more expensive than that. Oh my God. It's unbelievable. Uh, all right.

Apple regulation and tech stagnation

3:23Well, the financial times earlier this month wrote that Apple has acknowledged for the first time that regulatory changes, forcing it to loosen control of its app store are weighing on its more than a hundred billion dollar services business. A rare concession that antitrust action is beginning to dent one of the company's most profitable divisions. And lo and behold, Ben, in the wake of that financial times news and the disclosure from Apple, we have a settlement in the EU over the digital markets act. Apple proposed new commissions of 15% for standard

4:00apps in the United States. While Germany's competition authority responded to Apple's app tracking transparency changes from several years ago and held that Apple can no longer use different language when it sends a data consent request for Apple's own offerings versus a data consent request predefined by Apple for third party apps. Um, as someone who has been pushing for changes to these policies for quite some time, long before it was cool. What comes to mind when you hear

4:32about these changes for Apple? What? What? Oh, sorry. I fell asleep because the topic felt so boring. Um, I want to talk more about that. No, uh, my takeaway here is actually kind of a meta takeaway. Okay. Which is not, that's where I wanted to go. I don't want to get into the nitty gritty. Let's go meta on all of this. Yeah, this, so number one, I was very early to this. I cared about this a lot. I wrote about a lot early in trajectory. I've told the story about, uh, uh, the, who was the, uh, Felix, the financial analyst, Felix salmon. That's right. Way back when. Yeah.

5:07Analyzing like what makes a good newsletter and Oh, you have to have your pet obsessions that no one cares about. And he listed the app store as one of them. Uh, it's really worked up. Uh, and, uh, and I think it really reached sort of a fever pitch like during the COVID era in part because like that's when the services revenues were really skyrocketing in part because everyone was stuck at home. Like there are secular factors that do drive this. Apple was really cracking down on like member companies would have in classes and they tried to make them virtual classes and Apple's like, Oh, gotta get fast. 30%. They were out of control like during that time period,

5:42but also from a big picture perspective, that's when I've talked about, that's when I kind of almost burnt out and I was like, do I want to keep doing this? And my realization at the time was actually, no, I still, I have no problem with all the content production that I do. I enjoy it until you get clipped and then it gets really annoying. Um, I, I enjoy it. Uh, I enjoy tech. I worry about it. I am tired of regulation and congressional hearings. That's what's burning me out is sitting down. Like nothing will depress you about your job faster than listening, like

6:15five hours of congressmen and Congresswomen sort of like pose like grandstanding, uh, while they're doing, you know, grilling Mark Zuckerberg or whoever it might be pouring over 400 pages of EU regulations or reading court case. The court case is actually, I don't mind the court cases. They're more interesting because there's often interesting things in them. And you know, judges are actually usually quite smart. They like, they weigh stuff out usually very, very well. Uh, that is the credit to the clerks. Every lawyer that I've interacted with has at some point said to me, you should have

6:48been a lawyer. I like, um, you know, I've had lawyer friends remark the exact same thing talking to me about your analysis. So, uh, I think you're happier in this career probably, but, um, I do like, you know, it's not just, I like arguing. I like laying out a case and like tying stuff together and looking things like, uh, so I appreciate a judge. I appreciate a good opinion. I appreciate a good, a good, uh, a lawsuit, you know? And so that video I'm off track. The whole point was we were

7:19stuck in this world that you could see coming. Like I've talked about it when I wrote aggregation theory, like two weeks later or three weeks later, I wrote an article saying the inevitable outcome here is a bunch of regulation and court cases, and it's not going to work. And I spent a lot of talking about why is it going to be a problem applying antitrust law to aggregators and all these bits and pieces. And the big takeaway here is this sort of blasé response. And I kind of felt compelled to write about it yesterday, but I wasn't really interested in writing about it is AI. Like

7:51AI came along. Everyone cares about AI. It's a new thing. It's a growth thing. And obsessing about the app store is emblematic of stagnation, the stagnation that had taken over in tech. And no one cared about the app. When I was writing about the app store, the reason why people were like, why do you care is because the app store was growing like crazy. So everyone was making more and more money. Yeah. Yeah. There is like a political analogy here, which is, this is why growth is so important. This is what the EU gets wrong by and large by undervaluing growth. When things

8:28are growing and everyone's getting richer, all the problems that inevitably exist because the world is messy and there's going to be problems don't really matter that much. And no one cares that much. When you feel like things aren't growing, when the pie is not getting larger and you're just fighting about how to slice it up, then it becomes this very overwhelming, all encompassing thing. The app store was this world of people feeling like nothing's happening. So let's slice up the pie

8:59differently. And quite literally, this is the other way, the app store that is always like, it, it's bothered me in some respects. The part has never bothered me is different than the part that bothers big companies. Like if you're Epic and Tim Sweeney, you're making a gazillion dollars on Fortnite. You're just arguing over who gets a bigger percentage of us selling virtual dances. It's all ridiculous, right? Like it's purely zero marginal costs. It could not be more purely zero marginal costs than unlocking a bit of code. New clothes. That lets you. Yeah, exactly. Right.

9:34Like virtual clothes. So who cares between Apple and Epic? Who's getting more like Epic in general? I just, I appreciate Tim Sweeney fighting the fight. Like philosophically, I have a problem with the app store. And, but at the end of the day, I'm not that sympathetic to Epic, the multi-billion, a billion dollar corporation or whatever fighting over who gets what share of virtual dances. Right. And now no one cares. I think that's the bigger point, including me. Just don't care. That was my sentiment as well. Cause you wrote about it on what you went exactly the direction I wanted to go.

10:09Oh, did I steal your zag? No, no, but I just, I sat down. I was like, all right, so Ben is pouring over a couple different Apple related moves here. And I can't bring myself to care very much. And that's why my next question on the rundown is, isn't it amazing how incidental all of this now looks in the shadow of AI? It reminds me of the TikTok issue in the China space where Bill and I, we were podcasting until we were blue in the face over the fate of TikTok in the United States of America.

10:42And had I been writing a couple of years ago on sharp text, I'm sure I would have written like several three or 4,000 word pieces, passionately exploring that issue and why TikTok is a problem, this, that, and the other thing. Sharp text is one of the hottest websites in America. That's right. Growing very fast. I of course still hate the way the Trump administration has handled the TikTok issue over the last year or two, but also alongside everything else that is changing in the world and the battle for resources and choke points and trade and whatnot.

11:12I don't want to say who cares, but it's like, I would struggle to muster the same passion for the TikTok controversy that existed the like, well, the question is, does it actually matter more than ever? Right? Like take something like AI data centers. Like, are we sure China doesn't have their thumb on the scale on TikTok to be pushing a lot of content? Sure. It's a reasonable concern. I mean, China would be derelict in their duty if they weren't doing that. Exactly. China would actually, it's funny to do this point. Like you're not in like,

11:42by the way, we'll come back to the app store in a moment, but if anything, the TikTok issue is actually the biggest issue facing tech right now. And to your point, people like don't care that much. I mean, app store AI, is that the similar thing? Actually the interesting app store story that was talked about a little bit earlier in the year and it's kind of disappeared is like Apple still having all these constraints on you, like building your own apps and like with the whole vibe coding thing should be this. And people are doing it. You have like Replit or like other

12:15services that should do your apps. What are the constraints imposed? Like there was a whole thing for months. Apple wasn't letting these apps update themselves because they wanted them to strip out this functionality of even be able to run other apps. And they're like, and so there's been things that it's kind of unclear. It's clear that no one wants to really talk about this in part because everyone's scared of Apple and they want Apple to enable these sorts of things. But why can't people be making their own iPhone apps and launching them and running them? And there are legitimate security concerns. I'm not denying that. Apple also has great security

12:47infrastructure on the iPhone relative to PCs. I'm not saying it's perfect, but the whole sandbox infrastructure, because it was built from day one for apps to be fairly isolated themselves. But Apple wants everything to go through the app store because they want a cut of everything. They don't want you to be able to just write a bunch of your little own apps on there. And by the way, shortcuts, great AI use case, completely inscrutable for most people to actually build shortcuts, but much easier if AI does it for you or helps you through it.

13:17So there are... When you say shortcuts, you're talking like action button shortcuts, right? Well, there's the shortcuts app on your iPhone that is actually pretty powerful and lets you build different sorts of things. Yeah, I made my action button. It just brings up a prompt or I just say, you know, air mattress and that just pops up, you know, basement, storage room, shelf three. Get you what you need. There you go. That's for Sarab. Exactly. Thank you for the update. Absolutely. But yeah, like that is... Apple is choking something of the future sort of right there.

13:49But because it's not pressing, because everyone feels like there's opportunity, because there's growth, it's not really rising to a pressing concern. I guess maybe the world affairs thing is the opposite. If everything feels like it's going crazy, then it's hard to get stuck on little things. But the overall concept is probably the same. Right. There are a lot of changes and upheaval and opportunity, at least as far as tech is concerned. I thought related to all this, your point on Germany's four-year investigation was pretty

14:23interesting, because the changes to ATT in Germany are the byproduct of a four-year investigation from the competition authority. So this thing came up, like ATT, as I've argued for years, is hilariously anti-competitive. And anti-competitive in a very classic sense, like this is not a difficult case to make, unlike the aggregator cases. Apple imposed these rules on everyone else and applied different rules to itself. And didn't follow them. And it was competing in the exact same space, right? And they're putting all these scare tactics, like the prompt that came up to agree to the

14:57tracking, is very scary. No one's going to ever click that if they don't know. I do. Every time. Out of spite for Apple.

15:06Also, I want a better experience. Targeted ads. But also out of principle, I click it. Yes. But then Apple's is not like that. Apple's is like, oh, we want to give you a better experience. We want to do all these sorts of things. It's absurd that it's like it's asking to do the exact same thing for all intents and purposes. Yeah. And so everyone is like obsessed about limiting the big tech companies. And meanwhile, this tech company is blatantly violating existing antitrust law as far as I understood it. And like they're changing the rules.

15:36Right. We talk a lot of Apple stuff is not actually a violation because it's been on the tin all along that you can't do certain things. And that's part of in US and I trust law. If you're honest all along, you're going to do what you want. Like Google's problem with the Epic case was they did change the rules. If you change the rules after the fact, that's a big problem. Apple in this case was changing the rules after the fact, favoring themselves to me, super obvious. And so when I heard about the German regulator, Apple has to change their wording. It has to be the same wording for everyone. And it just overall, I think it's a great regulator.

16:09I'm not completely anti-regulation. This is a good outcome. And I'm like, oh, I wrote about I need to put a link here to I already described how anti-competitive this was in an article. So I go through my, you know, no one uses striking search more than me. Find this article, data and definitions. I read the article and the opening of the article is the German regular is going to look into this particular case. And I'm like, oh, it's the exact same case. I didn't even realize it was the same case. They're like, oh, it's been four years. And so here's the deal.

16:40Okay. This is a good outcome. They were thorough. And I think the right thing is happening. And I understand the frustration of the regulator, of the app developer, of the analyst that it took four years to get here. Because in that four year time, like the advertising ecosystem has already been remade to some extent. Well, just in general, I tied this to the AI Act, where I think a motivation for the EU's

17:12AI Act, which was passed a few years ago and now is driving this whole watermarking discussion. And I think it's very limiting in terms, you know, the EU has like nothing going on in AI, relatively speaking. Like Mistral's big play now is to basically be a data center operator for Chinese models. Like it's, yeah, congratulations. The impetus to pass that was like, we passed the DMA too late. Like we, we, we, we didn't address tech's issues until well after the fact. And I can imagine an EU fan pointing at this German case and saying, look, it's 2026.

17:47They didn't even start investigating until 2022. And everyone's already worked around ATT and blah, blah, blah, blah, blah, blah. There have been structural shifts as a result of ATT. Yeah. All that is totally fair and correct. And I think it's worth acknowledging that. Mm-hmm. But the app store was a good thing. Like the Apple went too far in my opinion, but let's not forget they did create an entire ecosystem. They did lay the foundation for the creation of billions or trillions of dollars worth of

18:22trillions. Yeah. If you consider like, like the, the big, big tech companies, they made the consumer surplus is astronomical. All these great things are part and parcel of the bad things. And if you worry about the bad things too early, it actually ends up not mattering because the good things don't happen. And you tie this back to the concept of, of the overall political economy. When things are growing, a lot of issues just aren't that big of a deal.

18:54And it's a lot easier to solve problems. Yeah. And this is something I thought it was just worth acknowledging. Look, this took forever. I get why the EU wanted to be early on AI, but let's not forget this took forever in part because the app store was and is awesome and delivered astronomical growth, astronomical consumer surplus all over the world. And I would rather be in a world where we got all this upside with a bit of Apple being

19:25a bad actor on the backside and maybe treating that too late rather than get obsessed with the backside and Apple acting badly. And you missed out on the front end. And by the way, in which case you would never even got to the back end. So you like, you regulated nothing. Yeah. When I read your post on Wednesday, it was a very useful insight at the end of an otherwise boring update on Wednesday from you. But I do think it's a healthy acknowledgement of the tension that underlies the regulation

19:56questions. And with AI specifically, I have always said I'm not as anti-regulation, but I think it's just changing so quickly that it's almost guaranteed we will get more wrong than right if we try to regulate it before we know exactly how any of this is used and how it will work in practice.

Subscription and preview wrap-up

20:17All right.

Subscription and preview wrap-up

20:18And that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharptech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out. And if you've got feedback, please email us at email at sharptech.fm.

20:50Thank you.