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

Hello, and welcome to a free preview of Sharp Tech. Hello, and welcome back to another episode of Sharp Tech. I'm Andrew Sharp, and on the other line, Ben Thompson. Ben, how are you doing?

I'm doing okay.

Mm.

This week, Wisconsin does get fairly muggy. It doesn't really bother me. People here complain, “It's so hot and muggy.” I'm like, “The 20 years in Taiwan have inoculated me.” We'll see if 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 when it's so pleasant out—and it's so pleasant out because the dew point drops—

Mm-hmm.

…which means the humidity is gone, which is the first hint of winter. So there's the little twist in the air, and we had a discussion about where we're going to move the lawnmower. The snowblower is going to take a spot.

Oh, boy.

The planning has begun.

Start battening down the hatches.

Yes. I'm taking my daughter off to college later today. I've always thought about years in terms of the school year.

Okay.

The new season is starting, the new year of Stratechery is starting, the new year of my kid's school is starting, and—

And winter is coming.

When winter is coming.

Well, I'm ready at this point.

Is that a Game of Thrones reference?

It is, but not intentionally so. I'm 100% ready for fall at least, not necessarily winter, but I've had enough humidity here in DC. 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.” It felt great to me as I was walking around Madison. It's fine.

Yeah.

1. Max Verstappen Stays At Red Bull

Indeed. Yep. Packers season is coming. Here we go. We will begin with a topic that we have hit many a time here on this show.

Yeah. Oh, yeah. So I can lead on this, a topic we've hit many a time. It's also very good news for me.

Okay.

I'm just glad I don't have to buy new gear.

Why's that?

Oh, I thought we were talking about Max Verstappen re-signing with Red Bull.

Oh, there we go.

So, yeah.

I actually completely forgot about that.

F1 merchandise is unbelievably expensive.

It costs you a pretty penny, that's right.

That's right.

You are paying for college right now.

And I can stick with what I have. By the way, Red Bull just has great stuff.

Oh, my God.

A 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 hey, it's always good to save some money.

Well, look, there was a good chance that he was just going to walk away, or at least a nonzero 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 a Grand Prix 4 or 5 years ago, I was a Red Bull hater, and I remember walking through the merch tent being infuriated by how cool the Red Bull merch was. So I'm glad that you get to hang on to that in the years to come.

Yeah.

Good for you, good for Max.

My $70 hats are still going to be useful, as is a $150 raincoat. Actually, that might have been more expensive than that. So I'm good to go.

Oh, my God.

It's unbelievable.

2. Apple Loosens App Store Control

All right. Well, 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 $100 billion 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 Apple's disclosure, we have a settlement in the EU over the Digital Markets Act. Apple proposed new commissions of 15% for standard apps 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. 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 about these changes for Apple?

What?

What?

Oh, sorry, I fell asleep because the topic felt so boring. But I wanted to talk more about that. No, my takeaway here is actually kind of a meta takeaway.

Okay.

Which is not Meta, the company—

That's where I wanted to go. I don't want to get into the nitty-gritty. Let's go meta on all this.

Meta—

Yeah.

So, number 1, I was very early to this. I cared about this a lot. I wrote about it a lot early in Stratechery. I've told this story about Felix, the financial analyst—

Felix Salmon.

Yeah, analyzing 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.

This guy.

Yeah.

It's really worked out.

Yeah. And I think it really reached a sort of fever pitch during the COVID era, in part because that's when the services revenues were really skyrocketing, in part because everyone was stuck at home. There are secular factors that do drive this. Apple was really cracking down on—remember companies would have in-person classes, and they tried to make them virtual classes, and Apple was like, “Oh, gotta give us 30%?”

Mm-hmm.

They were out of control during that time period. But also from a big-picture perspective, that's when I kind of almost burned out.

Yeah.

And I was like, “Do I want to keep doing this?” And my realization at the time was actually, no, I still have no problem with all the content production that I do. I enjoy it until I get clipped, and then it gets really annoying. I enjoy it. I enjoy tech. I worry about it. I am tired of regulation and congressional hearings. That's what's burning me out.

Mm-hmm.

Nothing will depress you about your job faster than listening to 5 hours of congressmen and congresswomen grandstand while they're grilling Mark Zuckerberg or whoever it might be.

Or poring over 400 pages of EU regulations.

Or reading court cases. Actually, I don't mind the court cases. They're more interesting because there are often interesting things in them.

Mm-hmm.

And judges are actually usually quite smart, and they weigh stuff out usually very, very well.

Credit to the clerks.

Every lawyer that I've interacted with has at some point said to me, “You should've been a lawyer.”

You know, I've had lawyer friends remark the exact same thing when talking to me about your analysis. So I think you're happier in this career.

Probably, but I do like—it's not just that I like arguing. I like laying out a case and tying stuff together—

Mm-hmm.

…and linking things. And so I appreciate a judge. I appreciate a good opinion. I appreciate a good lawsuit. Anyhow, I'm off track. The whole point was we were stuck in this world that you could see coming.

Mm-hmm.

I've talked about it. When I wrote “Aggregation Theory,” 2 or 3 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 time talking about why it's 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—

Mm-hmm.

3. AI Overshadows The App Store

But I wasn't really interested in writing about it. It's AI. AI 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—

It was all upside.

…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. There is a political analogy here, which is this is why growth is so important.

Mm.

This is what the EU gets wrong, by and large, by undervaluing growth. When things are growing and everyone’s getting richer, all the problems that inevitably exist—because the world is messy and there are going to be problems—don’t really matter that much, and no one cares that much.

Mm-hmm.

When you feel like things aren’t growing, when the pie’s not getting larger and you’re just fighting about—

And it’s all fixed.

…how to slice it up—

Yeah.

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 differently. And quite literally, this is the other thing with the App Store that has always bothered me in some respects. The part that’s never bothered me is different from the part that bothers big companies.

Okay.

If you’re Epic and Tim Sweeney and you’re making a gazillion dollars on Fortnite, you’re just arguing over who gets a bigger percentage of us selling virtual dances.

Mm-hmm.

It’s all ridiculous, right? It’s purely zero marginal cost. It could not be more purely zero marginal cost than unlocking a bit of code—

New clothes.

Yeah, exactly, right? Like virtual clothes. So who cares between Apple and Epic who’s getting more? Epic, in general, I appreciate Tim Sweeney fighting the fight. Philosophically, I have a problem with the App Store, but at the end of the day, I’m not that sympathetic to Epic, the multibillion-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. I just don’t care.

That was my sentiment as well, because you went exactly the direction I wanted to go with this conversation. 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 Ben and I were podcasting until we were blue in the face over the fate of TikTok in the United States of America. Had I been writing a couple of years ago on Sharp Tech, I’m sure I would have written several 3,000- 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.

Yes.

Growing very fast.

Of course, I still hate the way the Trump administration has handled the TikTok issue over the last year or two, but alongside everything else that is changing in the world—the battle for resources and choke points and trade and whatnot—I don’t want to say “Who cares?” but I would struggle to muster the same passion for the TikTok controversy that existed three or four years ago.

Well, the question is, though, does it actually matter more than ever? Take something like AI data centers.

Mm-hmm.

Are we sure China doesn’t have its thumb on the scale on TikTok to be pushing a lot of content to stop them building out certain data centers?

Sure.

It’s a reasonable concern. China would be derelict in its duty if it weren’t doing that.

Exactly. By 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.

Mm-hmm.

But to your point, people don’t care that much. I mean, App Store, AI—is that a similar thing? The actually interesting App Store story that was talked about a little earlier in the year, and has kind of disappeared, is Apple still having all these constraints on you building your own apps.

Mm-hmm.

And people are doing it. You have Replit or other services where you make your apps.

What are the constraints imposed?

There was a whole thing for months: Apple wasn’t letting these apps update themselves because it wanted them to strip out this functionality and even be able to run other apps. And so there are things that are 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 make their own iPhone apps, launch them, and run them?

Right.

And there are legitimate security concerns. I’m not denying that. Apple also has great security infrastructure on the iPhone relative to PCs. I’m not saying it’s perfect, but the whole sandbox infrastructure was built from day 1 so that apps are fully isolated from each other. But Apple wants everything to go through the App Store because they want a cut of everything.

Mm.

They don’t want you to be able to just write a bunch of your own little apps on there. And, by the way, Shortcuts are a 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.

When you say Shortcuts, you’re talking about Action Button shortcuts, right?

Well, there’s the Shortcuts app on your iPhone that’s actually pretty powerful and lets you build different sorts of things. Yeah, I used it. I made my Action Button. It just brings up a prompt, or I just say, “Air mattress.”

Mm-hmm.

And that just pops up: basement, storage room, shelf 3.

It gets you what you need. There you go.

That’s for Sarab [?], our Florida inventory app reference.

Exactly.

Thank you for the update. Absolutely.

But yeah, Apple is choking off something of the future right there. But 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.

Mm-hmm.

I guess maybe the world’s fairest 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 4-year investigation was pretty interesting, because the changes to ATT in Germany are the byproduct of a 4-year investigation from the competition authority.

Right. So this thing came up. ATT, as I’ve argued for years, is hilariously anti-competitive, and anti-competitive in a very classic sense. This is not a difficult case to make, unlike the aggregator cases.

Mm-hmm.

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?

Right.

And they’re putting in all these scare tactics. The prompt that comes up if you don’t agree to let them track you is very scary.

Mm-hmm.

No one’s ever going to click that if they don’t know it.

I do every time out of spite for Apple.

I also want a better experience.

Targeted ads. Sure.

But also, on 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 asking to do the exact same thing, for all intents and purposes.

Yep.

And so everyone is obsessed with limiting the big tech companies. Meanwhile, this tech company is blatantly violating existing antitrust law, as far as I understand it.

Mm-hmm.

And they’re changing the rules, right? 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 U.S. antitrust law, if you’re honest all along, you’re going to do what you want.

Right.

Google’s problem with the Epic case was that they did change the rules. If you change the rules after the fact, that’s a big problem.

Mm-hmm.

Apple, in this case, was changing the rules after the fact, favoring itself. To me, it was super obvious. And so when I heard about the German regulator requiring Apple to change its wording—to use the same wording for everyone—I just think it’s a great result. I’m not completely anti-regulation.

Yeah.

This is a good outcome, and I'm like, “Oh, I wrote about this. I need to put a link here. I already described how anticompetitive this was in an article.”

Mm-hmm.

No one uses site search more than me. I find this article, “Data and Definitions.” I read the article, and the opening of the article is, “The German regulator is going to look into this particular case.” And I'm like, “Oh, it's the exact same case.”

Yeah.

I didn't even realize it was the same case. I'm like, “Oh, it's been 4 years.” And so here's the deal.

Okay.

This is a good outcome. They were thorough, and I think the right thing is happening.

Mm-hmm.

And I understand the frustration of the regulator, the app developer, and the analyst that it took 4 years to get here. I completely get that.

Because in that 4-year time, the advertising ecosystem has already been remade to some extent.

I tied this to the AI Act, where I think a motivation for the EU's AI Act—which was passed a few years ago and now is driving this whole watermarking discussion—is that the EU has relatively little going on in AI. It's also very limiting in terms of what it does. Mistral's big play now is to basically be a data center operator for Chinese models.

Great.

Yeah, congratulations. The impetus to pass that was, “We passed the DMA too late.”

Mm-hmm.

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. They didn't even start investigating until 2022, and everyone's already worked around ATT and blah, blah, blah.”

There've 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. Apple went too far, in my opinion, but let's not forget that they did create an entire ecosystem. They did lay the foundation for the creation of trillions of dollars' worth of value, if you consider the big, big tech companies.

Meta. Sure. Yeah.

The consumer surplus is astronomical. All these great things are part and parcel of the bad things.

Mm-hmm.

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 the overall political economy. When things are growing, a lot of issues just aren't that big of a deal, and it's a lot easier to solve problems.

Yeah.

And this is something I thought was just worth acknowledging. Look, this took forever.

Mm-hmm.

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.

Mm-hmm.

And it delivered astronomical growth and astronomical consumer surplus all over the world. I would rather be in a world where we got all this upside with a bit of Apple being a bad actor on the back end and maybe treating that too late, rather than get obsessed with the back end and Apple acting badly—

Throttling the growth engine. Yeah.

—and miss out on the front end. And, by the way, in that case, you never even got to the back end, so 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 from you on Wednesday. But I do think it's a healthy acknowledgment of the tension that underlies the regulation questions. With AI specifically, I have always said I'm not as anti-regulation, but I think it's 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. All right, and 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@sharptech.fm.