450: Apple's iPhone Pricing, Hyperscalers, Google, Capital-Light Businesses, Rory Sutherland, Norway, Spotify AI, and Hitchcock

“the opposite of a good idea can also be a good idea”

Some ideas sound insightful because they are true. But not all true ideas sound insightful.

A true idea that is commonly accepted can sound trite and obvious: we call those clichés. The job of a good writer, then, is to present some truth in a way that doesn’t trip our cliché triggers.

—Cedric Chin

🛀💭👧🏻🧒🏼👦🏻 If you think about it, nobody really knows how others raise their kids.

More specifically, I’m thinking of the scientific ideal of trying to get reliable and unbiased data on a large and varied sample to better understand the underlying reality.

You can kind of know how you were raised by your parents, but that’s an incomplete and distorted picture since it’s hard to remember things before a certain age and all those memories are filtered through the lens of a child’s perspective, which can be very different from how you’d perceive the same events as an adult observer (ie. a child’s mental model of an adult’s thought process and motivations is missing a lot of things).

Memories also get modified over time, as any specialist on eyewitness testimony knows (there’s a great 2020 mini-series on Netflix called ‘The Innocence Files’). Over decades, they become like a photocopy of a photocopy of a photocopy. We forget things that happened and swear we remember things that never happened, or happened differently.

Apart from that, what direct experience do we have?

If you look at parents interacting with their kids in public spaces, there’s a strong observer effect. When people know they can be watched, they don’t behave the same way. And context is missing — someone who seems terrible may be having a bad moment and someone who seems great may be a psychopathic abuser behind closed doors.

Yeah, I don’t know either ¯\_(ツ)_/¯

You can probably get a decent idea of how someone is as a parent if you know the person well and spend a lot of time with their family, but it’s still just a partial view of a biased sample (ie. the people you know well are likely not a representative cross-section of the population, across cultures, generations, socio-economic levels, etc).

A lot of what we think we know about parenting comes from the culture, but Hollywood definitely isn’t a reliable source, and people who write books and articles about parenting don’t really have a more representative view of it than anyone else.

In fact, working in the field may give them an even more biased sample (ie. psychologists don’t see a random cross-section of the population and have to rely largely on what people will tell them, which is never a complete picture).

It’s not like anyone has been a fly on the wall and secretly observed a random sample of hundreds of families in private settings. (wait, is the NSA an accidental expert on human behavior? 🤔)

Bottom line: Nobody really knows how others raise their kids ¯\_(ツ)_/¯

🙋‍♂️ Friend-of-the-show Chris Powers (⭐️) asked for question ideas for his podcast. I kind of like what popped in my mind, so I’ll turn around and ask you:

If you could relive your career all over again but could only focus on 20% of what you did to try to get 80% of the result, what would you focus on?

💚 🥃🐇 The price of a couple of coffees or one alcoholic drink isn't a bad trade for supporting this newsletter and getting exclusive members-only editions!

The entertainment has to be worth something on its own, but for those who care most about the bottom line, there’s optionality:

If you make just one good investment decision per year because of something you learn here (or avoid one bad decision — don’t forget preventing negatives!), it'll pay for multiple years of subscriptions (or multiple lifetimes).

As Bezos would say of Prime, you’d be downright irresponsible not to be a member, it takes 12 seconds (3 secs on the mobile with Apple/Google Pay):

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🏦 💰 Liberty Capital 💳 💴

📲 Adjusted for inflation, the iPhone 15 is the most affordable iPhone since the original iPhone in 2007

Everyone loves to complain about Apple’s prices — there are many memes about it.

However, if you look at the numbers and adjust for inflation, it turns out that the base model has been fairly stable for over a decade, and the new iPhone 15 is the most affordable since the original iPhone in 2007 — if you could ever compare these two side-by-side, you’d see that they may have the same name but are very different animals with very different capabilities (the original didn’t have downloadable apps, couldn’t record video, had no biometrics for security, had a very slow processor, low-resolution 3.5-inch screen, etc).

Smartphone tech has been incredibly deflationary and you now get a lot more per dollar.

The Pro models have actually become cheaper in constant dollars since they came out.

Part of what is causing this narrative about higher prices is probably that the USD has been strong vs many other currencies lately, so iPhone prices in many countries went up to reflect the FX. Source.

🕵️‍♂️☁️👮🏻‍♂️ The White House could force cloud companies to disclose AI customers

Hmm..

The White House is considering requiring cloud computing firms to report some information about their customers to the U.S. government... disclose when a customer purchases computing resources beyond a certain threshold. [...]

the rules are intended to create a system that would allow the U.S. government to identify potential AI threats ahead of time, particularly those coming from entities in foreign countries.

This is the kind of measure that OpenAI and RAND have been lobbying for…

Google paid Apple an estimated $120bn since 2010 to be the default search on iOS’ 📲💰💰💰💰💰💰💰💰💰

These numbers are just bonkers:

Google has paid Apple an estimated $120B since 2010 to be the default search engine on Safari/iOS, with $19.3B estimated this year alone (Source: GS)

Because big numbers can easily be meaningless, it’s fun to compare them to other things to get an idea of scale:

In 2022, Google's payment was equal to a third of its net income and increased Apple's by 25%

Last year, Google's payment was roughly 60% more than Microsoft's total ad revenue

Last year, Google's payment covered three quarters of Apple's R&D budget

Note: The numbers may not be entirely accurate since Google and Apple haven’t exactly been bragging publicly about them. But even if they are off by a few billions, it’s still a crapload of money for what basically amounts to some Apple engineer changing a line of code.

I’d be really curious to see what would happen if this deal ended — for whatever reason, regulatory or Google deciding to try its luck. It would be a fascinating natural experiment into the power of default settings and how strong people’s preference for Google is.

Via friend-of-the-show Matt Ball (🪓👨‍🚒)

🧡 Everybody Loves Ray Capital-Light Businesses

Friend-of-the-show and Extra-Deluxe supporter Byrne Hobart (💚💚💚💚💚 🥃) writes:

Software can still be a wonderful business with favorable economics, but capital will always flow into places where it can get a high return, and out of places where returns are low. There are traits of software companies that make them great, like high margins, the ability to pivot early, and the possibility of scale benefits like network effects and lock-in. But these traits must, over time, be offset by the competition to either start similar companies or to acquire customers for them. 

Absent excellent management, government protection, or extraordinary good luck, the industry's economic balance sheet, as opposed to its accounting balance sheet, must end up looking like that of a capital-intensive industry like airlines.

Understanding an industry in the early days means assessing whether or not it can grow, what impact it will have, and what its particular capital cycle looks like. But in the long run, understanding an industry is about understanding why it's different today in order to understand why it will end up looking similar to every other industry given enough time.

This is such an important point.

It’s easy to understand how good capitalism is at competing away high returns over time when looking backward (steel mills, whatever), but it’s much harder to notice when it’s happening in real-time.

Fairly recently, businesses like newspapers 📰 and media 📺 had very favorable characteristics. Asset-light, sticky revenues, high margins, high operating leverage, etc. But that didn’t make their moat bulletproof and most of them didn’t see the competition that came from the internet.

🗣️🗣️🎙️ Interview: Rory Sutherland talks to Rick Rubin 🧙‍♂️

This was a really fun one.

I quite like how Rory thinks about things from a different angle than most people. His example about making a train faster vs making it more pleasant so that you don’t mind spending more time on it was very good.

Check it out:

• 🎧 Rory Sutherland on Tetragrammaton with Rick Rubin

His saying “the opposite of a good idea can also be a good idea” is one that has stayed with me since I first heard it a few years ago.

🇳🇴 Norway’s Sovereign Wealth Fund passes $1.4 trillion dollars 🛢️🛢️🛢️🛢️🛢️→💰💰💰💰💰

"Norway, with just ~0.07% of the world’s population, owns a staggering 1.5% of the global stock market" 🤯

If you’re curious how they did this, the short answer is: Oil.

Via Chartr

♾️🔁 Interview: Dror Poleg on the future of work, non-linear scaling, power laws, global competition, and AI aftereffects

I quite enjoyed this convo between Jim (💚 🥃 🎩) and Dror!

The best way to improve the quality of our answers is to improve our questions, and I think a lot of good questions about the future of our society were posed in this podcast:

• 🎧 Dror Poleg — The Future of Work

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🧪🔬 Liberty Labs 🧬 🔭

Stick figure battles Mathematics 🧮🤺

This is just fun and clever!

It goes quite deep, and if like me you rapidly get lost in the details of what is happening, there’s an explanation video that has text overlaid to explain wtf is going on.

Crazy AI-designed, 3D-printed, Titanium Rocket Engine part! 🦾🤖 🚀

What an incredible part! And the machinery used to make it is just as fascinating. It’s really fun to see it in operation step-by-step.

Thanks to AI-assisted design and 3D-printing using metal (titanium, in this case), it’s possible to create parts that would otherwise be impossible and that have significant performance and weight improvements over traditional techniques.

You can expect that this will trickle down to all kinds of things over time. Someday you’ll see some of these weirdly organic-looking parts in everyday machines (ie. cars, HVACs, etc).

🤖🎙️🎧 Spotify demos AI-translation of podcasts

This Spotify-developed tool leverages… OpenAI’s newly released voice generation technology to match the original speaker’s style, making for a more authentic listening experience that sounds more personal and natural than traditional dubbing.

A few big podcasts will have some episodes available with AI translations as part of this pilot: Dax Shepard, Monica Padman, Lex Fridman, Bill Simmons, and Steven Bartlett.

But rather than read about it, the best way to get an idea of how this sounds is to listen to the sample on this page.

🇵🇱 Poland goes nuclear ⚛️

Westinghouse and Bechtel have inked a formal agreement to partner on the construction of Poland’s first nuclear power plant at Lubiatowo-Kopalino. [...]

“The Polish Nuclear Power Programme lays out plans to build up to six reactors across two or three locations that would generate around 6 to 9 gigawatts of energy… That's enough to power almost 8 million homes.”

Coal currently powers 69% of Poland’s grid 🏭🏭🏭🏭🏭🪨

They are the most polluting grid in Europe, though whenever the sun doesn’t shine and the wind doesn’t blow, Germany is also getting up there… 😬 (and they have a much larger grid)

Poland has a little over 30GW of coal capacity installed, so if they got 9 GW of nuclear that would make a big dent.

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🎨 🎭 Liberty Studio 👩‍🎨 🎥

🔪🩸🚿Hitchcock helped put an end to the ‘Continuously Showing Movie’ 🍿✋

Stories have a beginning, a middle, and an end.

But in the early days of Hollywood, that’s not quite how most films were experienced:

Throughout the classical Hollywood era, moviegoers dropped in on a film screening whenever they felt like it, heedless of the progress of the narrative. In the usual formulation, a couple go to the movies, enter midway into the feature film, sit through to the end of the movie, watch the newsreel, cartoon, and comedy short at the top of the program, and then sit through the feature film until they recognize the scene they walked in on. At this point, one moviegoer whispers to their partner, "This is where we came in," and they exit the theater.

This changed slowly during the 1940s and 1950s as films got more complex, but the real turning point was in 1960 with Psycho:

On June 16, 1960, after a saturation campaign giving fair warning, the DeMille and Baronet theaters in New York premiered Psycho with the see-it-from-the-beginning edict in place [...]

Uniformed Pinkerton guards were on hand to enforce the policy.

Source.