Josh: Yesterday, the most successful CEO in the history of technology announced that he's stepping down.
Josh: Tim Cook, 15 years at Apple, saw the stock go up 2,000%, introduced the Apple
Josh: iWatch, the AirPods, and also led Apple to be the first $4 trillion company,
Josh: announced that he's resigning.
Josh: On paper, he's the greatest operator CEO on earth.
Josh: So why did he resign? It's because he couldn't solve the one biggest problem that mattered to Apple.
Josh: The AI race. Apple is losing pretty badly.
Josh: They're the only trillion-dollar company in the Mac 7 that is paying a competitor,
Josh: Google, $1 billion just to license their AI model because they couldn't build their own.
Josh: Their chief AI officer quit.
Josh: Johnny Ive, the head of their design firm, left to join OpenAI.
Josh: And there's a host of other failures. But the new guy that they picked,
Josh: John Turnus, 51-year-old hardware expert, he has over 25 years' experience engineering
Josh: all of Apple's devices is the new guy to take the helm and he might be the answer
Josh: to building the next device that Apple uses to replace the iPhone.
Josh: I think that Tim Cook's replacement is simultaneously an admission of Apple's
Josh: failure to win the AI race, but also the key to them winning the next stage.
Ejaaz: Yeah, well, moment for Tim Cook's tenure because, oh my God, what a run he's had.
Ejaaz: Yes. This is a 20 times gain on Apple stock since he took control of the company
Ejaaz: 15 years ago. For reference, when Tim Cook became CEO of Apple,
Ejaaz: Apple was releasing the iPhone 4.
Ejaaz: Some of you listening may not even be old enough to remember that. It was a long time ago.
Ejaaz: We went from the iPhone 4 to the 17 Pro, which we are now at now.
Ejaaz: And over that time, Tim Cook has really just done an unbelievable job on stewarding
Ejaaz: the ship of Apple 4s into a place where it is profitable, it is sustainable, and it is larger.
Ejaaz: Now, if we compare the two 10 years, Steve Jobs took it from zero to 350 billion.
Ejaaz: Tim Cook took it from 350 billion to 3.7 trillion. One is a 14,000% gain,
Ejaaz: but the other is a thousand percent in a market that is much more difficult
Ejaaz: to kind of navigate through.
Ejaaz: And the reason is because Tim Cook is a good operator.
Ejaaz: He's great at running businesses, whereas Steve Jobs was the visionary who was
Ejaaz: great at creating products.
Ejaaz: And I think what we see with the Apple story today and their decision to move over to John Ternus.
Ejaaz: Is a swing of the pendulum back to where we were.
Ejaaz: Tim Cook created a huge services business. That's what we have Apple TV for.
Ejaaz: ICloud became really large. Business that actually generates a lot of cash came
Ejaaz: from him. A lot of the products remain mostly unchanged.
Ejaaz: I mean, if you look at this lineup of things that came from Tim Cook,
Ejaaz: we have AirTags, Apple Watch, AirPods, the Mac Studio, mostly iterations on
Ejaaz: previous products, not a whole lot of net new things.
Ejaaz: In fact the vision pro was actually steve's last great idea um so that finally
Ejaaz: came to life a long time ago but the services industry in the top right of this
Ejaaz: graphic that we're seeing is the big win for tim and it's this really exciting
Ejaaz: change in one of the world's most valuable companies, starting with this new guy, John Ternus.
Josh: Yeah. So who is this Ternus guy? Because it's not exactly a name that's been
Josh: floated around the technology headlines. He's kind of been like living in the VP exec shadows.
Josh: Well, he is the hardware expert and the guy behind the engineering of every
Josh: single Apple device that you have seen, heard or used yourself over the last
Josh: 25 years. But he was also working in hardware before that. He has over 30 years experience.
Josh: He was early on the VR trend, which is why Apple was so enthusiastic to hire him.
Josh: So he knows the depths of every single device, how it's built,
Josh: and why it was built in that particular way.
Josh: He, every device that you use has his art or his stamp on it.
Josh: But John Ternus is an impressive guy for a few other reasons as well.
Josh: There was a recent interview that I watched with him on where people would describe
Josh: him as a good replacement for Tim Cook because he's very likable,
Josh: but also kind of fierce behind the shadows.
Josh: And the reason why that's good is he inspires a lot of loyalty in the teams
Josh: that he works with, and he's the bet from the exec board to be the man that
Josh: leads Apple into the next era of devices.
Josh: And you might have seen rumors about three new Apple AI devices that they're
Josh: going to announce later this year.
Josh: We'll get more on that later. But Ternus will be the man that is engineering behind that.
Josh: And the reason why it's important and I think significant that Ternus is stepping
Josh: up right now at this particular point, it's not a coincidence,
Josh: is because Apple knows that, in my opinion, the iPhone is stretched.
Josh: We've had like a million different versions and the services businesses worked
Josh: so well for Apple right now, but they need a new model, a new approach.
Josh: And Apple's moat has always been hardware. It's not just software.
Josh: It's because everyone has one of these or an Apple Watch or a suite of different devices.
Josh: And Ternus needs to figure out or be the answer to what the AI device of the
Josh: next generation or next couple of generations is going to be.
Ejaaz: This guy rocks. I think we're going back to the hardware roots of Apple.
Ejaaz: If you have been a owner of Apple stock, you love Tim Cook. If you have been a
Ejaaz: like a lover of the Apple hardware products, you have probably,
Ejaaz: you felt there's a lot left to be desired.
Ejaaz: And I think John is going to fill that desire as it relates to the products,
Ejaaz: just through his hardware nature.
Ejaaz: I mean, he is a hardware guy through and through. He's only had two jobs in his entire career.
Ejaaz: One was building VR headsets. One was at Apple, where he has remained for the last 25 years of time.
Ejaaz: So he's really a guy that started from the bottom, worked his way to the top,
Ejaaz: and is now appointed as the hardware CEO of one of the largest companies in the world.
Josh: Can I just point something out, Josh? I just pulled up his LinkedIn yesterday.
Josh: This did not have a profile picture and everyone kind of like exposed him for
Josh: that on social media. It looks like since he's updated it.
Josh: But yeah, like he only has two job postings in his experience. So VP and engineer.
Ejaaz: That's it. Yeah. And since joining in 2001, I mean, his first product he ever
Ejaaz: launched was the Apple Cinema display. Most people probably don't even remember that.
Ejaaz: But also since then, he is responsible for a laundry list of items,
Ejaaz: including but not limited to the iPad,
Ejaaz: every AirPod generation, the redesigned MacBook Pro, the redesigned iMac Pro,
Ejaaz: all of the hardware for iPhone over the last six years.
Ejaaz: Anything that is hardware and that is physical that you've touched over the
Ejaaz: last five, six years, he has been the one that has shepherded it and led that forward.
Ejaaz: It's to be noted that there are changes that have been happening already.
Ejaaz: We have the MacBook Neo, which we never had before, which is a low cost laptop
Ejaaz: that you can go and buy for $600. We have the iPhone Fold coming later this year.
Ejaaz: That is a drastic pivot from anything that the iPhone has ever done.
Ejaaz: So we're already starting to
Ejaaz: see some of the risks that they're willing to take on the hardware front.
Ejaaz: And that's just the beginning. I assume this extends out to the AI hardware
Ejaaz: too that there are rumors of, which we'll get into, but he is the hardware guy
Ejaaz: through and through. And I'm just so excited for...
Ejaaz: This new paradigm, this new pendulum swing back from the business to the product.
Josh: I want to play devil's advocate with you for a second, Josh.
Josh: He's an amazing hardware guy, but as you probably know, the CEO position requires
Josh: so many other skills, right?
Josh: You need to be operational and you need to understand every single core part of the business.
Josh: That's why Tim Cook came in and he was the right guy at the right time,
Josh: right? He built out the services business because he saw that we had the hardware
Josh: mode. We need to tack on products on top of that.
Josh: I don't know if John Ternus has proved himself in his history or tenure at Apple
Josh: so far as to whether he can do that.
Josh: He's definitely the hardware expert, but it looks like he's going to be hiring
Josh: a really strong team around him, right?
Josh: Ternus, the CEO, and then you've got Shrooji as the chief hardware officer.
Ejaaz: Yeah. So I think this was the board that did this, who just kind of did some
Ejaaz: reshuffling of all the positions of Apple.
Ejaaz: The most noteworthy is Johnny Shrooji, which is a name most people probably
Ejaaz: haven't heard of, who has been promoted to Apple's chief hardware officer while
Ejaaz: John goes up to become the CEO.
Ejaaz: Now, Johnny, not to be confused with John, if you've ever watched the presentations
Ejaaz: of Apple events, he's the guy that's down in the lab where he's talking about
Ejaaz: chips and processors and all of that stuff.
Ejaaz: He's the guy that is responsible with John Ternus for building probably the
Ejaaz: best hardware that Apple has built in the last decade, the M series chips.
Ejaaz: Those are incredible. He is the chip guy. He is the lead architect of those
Ejaaz: chips and that's not limited to the m series ship that's a a series ships that
Ejaaz: are in your iphones that is the wireless modems that is the wireless connectivity any sort of
Ejaaz: chip responsible for your iphone getting incrementally better every year
Ejaaz: he is responsible for this and when
Ejaaz: i think about the best parts about apple over the last five years and
Ejaaz: i track down the source of where they came from a lot
Ejaaz: of that comes from john and johnny and it's it's a really exciting new dynamic
Ejaaz: where there is now this all-star cast who has built pretty incredible things
Ejaaz: at the helm and with the ability to make the decision to continue to push the
Ejaaz: envelope as it relates to hardware and at the end of the day like apple really
Ejaaz: is the sum of its products and when its products are excellent, the company does well.
Ejaaz: And I'm really hopeful that this will usher in that new paradigm of hardware in the AI era.
Ejaaz: I mean, we've already seen this with how popular Mac minis are and Mac studios
Ejaaz: are, and I'm sure they won't be scared to lean into that even more in these
Ejaaz: next generations of products and chips.
Josh: Yeah, and it's not just a fad either, right?
Josh: These like chips and hardware mode that Apple has really puts them ahead of
Josh: the competition in a very meaningful way.
Josh: So for example, like with these M1 chips, we recorded this on a previous episode,
Josh: it is the only hardware or consumer-facing hardware alone that allows you to
Josh: run frontier AI models locally on your device.
Josh: And what that unlocks is, you know, it can't be understated.
Josh: You can run AI models personally on your own data without exposing it to,
Josh: you know, anyone. It's cheaper, it's quicker, and overall quite better.
Josh: And Apple over the last couple of years has really been leaning into locally,
Josh: privately run AI models.
Josh: They're going to do something similar with Siri where they privately inference
Josh: and train off of Google's model.
Josh: And with that $1 billion deal, which we're about to get to. But the point is,
Josh: Apple's hardware is superior, and it's because of people like Ternus and Sruji
Josh: and the entire team, and the exec team recognizes that.
Josh: Another thing that I forgot to mention earlier is Turner seems to be like the
Josh: youngest board member of Apple.
Josh: Like typically it ranges between like 55 to like 65 and ahead.
Josh: He's 50 years old, 51 years old. So he's going to be the youngest.
Josh: It's some fresh young blood, but
Josh: he has a really good understanding and instinct as to what Apple wants.
Josh: He's observed and watched him cook, build up the services business.
Josh: He also observed Steve Jobs and knows of his tenure. You know,
Josh: so he's kind of like, I kind of like to think of him as like the hybrid of both of these people.
Josh: So I'm getting really bullish about it.
Ejaaz: There's some unknown lore that happens around these transitions that I'm not
Ejaaz: sure everyone's familiar with.
Ejaaz: In the case of Tim Cook, when Steve Jobs asked him to be CEO and Tim found out that Steve was sick,
Ejaaz: he actually offered to donate a portion of his liver to Steve when he found
Ejaaz: out that he had pancreatic cancer because they had the same blood type,
Ejaaz: which I found really interesting.
Ejaaz: There was this true, unrelenting commitment to, I guess, at that time, just helping a friend.
Ejaaz: Steve didn't accept it, but it's a fun story that not a lot of people know that
Ejaaz: shows the level of, I guess, gratitude and...
Ejaaz: Just i don't know teamwork that they have together what do you i wonder if john
Josh: Made sacrifices yeah did he.
Ejaaz: Make a blood sacrifice perhaps an organ like some blood maybe he's tim's blood
Ejaaz: baby we're unsure but it is it just it's just funny just to know some of the backstory in the lore
Josh: The point is i guess it like is is loyalty is pretty fierce at apple and you
Josh: know you've got each other's back and you kind of want collectively for everyone
Josh: to win in fact uh we have the uh community letter from from tim here which basically
Josh: announced that he's stepping down.
Josh: And he goes on to say, John cares so much about who we are at Apple,
Josh: what we do at Apple, who we reach at Apple.
Josh: And he has the heart and character to lead with extraordinary integrity.
Josh: And he goes on to explain why exactly John is the perfect fit over like two entire paragraphs.
Josh: So there's a lot of camaraderie around Apple, but also they're not banding together
Josh: for no reason, right? They're not making these decisions for no reason, Josh.
Josh: There's been a series of what I would personally describe as failures or maybe
Josh: unintentional successes.
Josh: And I'll explain that a little later for apple within
Josh: the ai race now it's the most important technology revolution um and they've
Josh: just watched their competitors completely drive by them um their competitors
Josh: have built up now frontier world leading models uh they tried to you know broker
Josh: a deal early on with anthropic anthropic said no so apple was kind of like shot
Josh: in the foot they lost their ai chief they lost johnny i the design guy.
Josh: Any possible team that they could have used to build a frontier AI model,
Josh: they kind of like lost them or bled them throughout the last couple of years.
Josh: And so the question remains is, what is Apple's move next?
Josh: One of the major announcements that gave us a bit of signal into this was,
Josh: I believe this was like last year, Apple announced that they're striking a $1
Josh: billion deal with Google specifically to license their Gemini model.
Josh: And the reason why they're doing this is they're going to feed that Gemini model
Josh: into their personal assistant known as Siri. By the way, for those of you who
Josh: use Apple who don't know what Siri is, it's that assistant that you just turned
Josh: off as soon as you got the Apple device because it was so, so bad.
Josh: And since then, Apple has been announcing new AI features for Siri that will
Josh: make it smarter, more intuitive, and do things for you on your own devices.
Josh: Since then, they've been delaying it. It's over like, what's it,
Josh: two and a half years now? And they delayed it again.
Josh: We're meant to hear an announcement on the new Siri later this year.
Josh: But the point is, they're plugging in competitors, they're paying competitors
Josh: for the privilege of getting access to AI, which leaves them quite vulnerable, you would think.
Josh: But now that I kind of reframed this structure, I actually think it might be
Josh: an advantage for Apple and specifically John Ternus right now because he realized,
Josh: or we, or rather I realized, you don't need to own the model layer.
Josh: You can own the distribution layer.
Josh: And the only way that you do that is knowing that every human will eventually need a device.
Josh: OpenAI is currently working on their own device, but guess who has 3 billion
Josh: active devices live right now that they can turn on AI features tomorrow?
Josh: Apple. So it sounds like a genius move think john tennis is going to focus on this.
Ejaaz: Yeah it's the unique advantage of apple they have the hardware lock-in
Ejaaz: they have all the best products in the world they have them distributed to hundreds
Ejaaz: of millions of people in the world and thanks to the work of johnny who is the
Ejaaz: chip master they're all capable of running pretty solid models locally on device
Ejaaz: and there was this huge slip up that happened at wwdc two years ago where they
Ejaaz: announced apple intelligence and it was just complete and utter failure
Ejaaz: Isn't to say that they're out of the race by any
Ejaaz: means because they own the most difficult stack of
Ejaaz: this layer of the stack being the hardware when you
Ejaaz: look at all the other frontier ai labs nobody has the capability of
Ejaaz: manufacturing great hardware at scale and you
Ejaaz: mentioned johnny ivy's working with open ai he he left
Ejaaz: apple far before that to start love from um but
Ejaaz: then they acquired his company and now he's working with them um he
Ejaaz: is going to design the thing but he's not the guy who's
Ejaaz: going to get that manufactured at scale and as we
Ejaaz: look at these charts in as it relates to progress in ai
Ejaaz: they are vertical lines they're moving so quickly but the
Ejaaz: limiting factor like we always mention is the physical
Ejaaz: manifestation of that it's moving around the atoms in the world to
Ejaaz: build the products that get into people's hands that can actually use it
Ejaaz: and it's incredibly difficult and apple is
Ejaaz: coming from the harder side of the spectrum if you view it
Ejaaz: as a spectrum on software to hardware what's more effective
Ejaaz: and what's harder to use well software has a lot more leverage but it's a lot easier
Ejaaz: to make and iterate on and that's why we see every company copying everyone
Ejaaz: else it's the hardware part that's difficult we see it with the data
Ejaaz: centers how difficult it is to roll that out and then we see it with the hardware how
Ejaaz: difficult it is to make incredible products like the iphone there's no one else
Ejaaz: who's done it like that and that is a huge advantage that john is going to certainly
Ejaaz: lean into and give them that edge when it comes to edge compute now will they
Ejaaz: be able to roll out their own proprietary versions that are good we don't know
Ejaaz: i think they're hedging that in a very smart way with google and using gemini locally on device,
Ejaaz: but if they do figure it out,
Ejaaz: If they do roll out what they promised Apple Intelligence and Siri were to be
Ejaaz: at this year's WWDC in June, then I think we have something really exciting.
Ejaaz: And you'll note that the transition period for John from Tim happens in September.
Ejaaz: So there's still a six-month window or so in which Tim Cook is going to be CEO,
Ejaaz: and there's this transition period.
Ejaaz: And only once the new iPhone release comes along in September will John take
Ejaaz: the stage for that event and become the proper CEO.
Ejaaz: So we're in the transition period. I expect to see a very strong pivot towards
Ejaaz: hardware and in a really exciting way, man. I would love to get some good new products.
Josh: Yeah, same. And if we choose to believe the main leaker of Apple News,
Josh: Mark Gurman, he posted a few months ago that Apple's ramping up to work on a trio of AI wearables,
Josh: specifically new smart glasses and AirPods with cameras on them and a pendant
Josh: that you can wear around your neck or leave kind of like ambiently around your
Josh: house and it can pick up information.
Josh: Of course, the point of these three devices is to see what you see,
Josh: hear what you hear, and also observe what you observe and feed all of this data
Josh: presumably into an AI model.
Josh: I'm guessing in this case, Gemini, a proprietary version of it,
Josh: and then recursively use that to build a smarter personal assistant called Siri
Josh: that can not only inform you of different things, but predict things that you
Josh: want and also do things for you.
Josh: Plugged into every single app that you own on your iPhone or device,
Josh: seamlessly connect to all context.
Josh: It's a really exciting vision. It is very hard to pull off that vision.
Josh: You see, OpenAI has been delaying a lot of their device releases.
Josh: I think their current puck-like device has been pushed back until early next
Josh: year because of supply chain issues. But that's Apple's advantage.
Josh: They already have dominance or monopoly on consumer hardware supply chains.
Josh: In fact, there was a story recently where apparently they've been buying up
Josh: all the memory available, DRAM, just so that they can make sure that they can
Josh: keep putting out their products on the shelf.
Josh: So for example, MacBook Neo, it sold out. They were able to release 10 million
Josh: more units for people to buy.
Josh: Whereas Microsoft had to pull products from the shelves just because Apple had
Josh: bought up all the memory.
Josh: And so it was pricing it too hard for consumers to for Microsoft to sell to their consumers.
Josh: So the point is, Apple has the scale that no other company does to build the
Josh: winning device product.
Josh: Now, the counter to this is Apple is typically waited for the product to form
Josh: itself, like they waited for the cell phone to be a thing.
Josh: And then hasn't been the case just yet. We haven't seen a new groundbreaking AI device just yet.
Josh: So they might have to be the frontier here. And Apple hasn't done that before, unless I'm wrong.
Josh: So I'm excited to see what happens.
Ejaaz: And they don't even necessarily need a dedicated hardware device for AI.
Ejaaz: The iPhone is very sufficient for now.
Ejaaz: And when you think about like, I was just thinking as you're talking about this,
Ejaaz: Claude Mythos, the new Anthropic model, that's going to be
Ejaaz: compress down to the size that can run on a mobile device in the next 12 to 18 months.
Ejaaz: And when you're able to compress models that intelligent down to a size that
Ejaaz: can run locally on your laptop or your iPhone, is that enough?
Ejaaz: Like, I think that probably is where the iPhone 20, which is their 28th year
Ejaaz: anniversary, if it's capable of running a mythos level model locally on device,
Ejaaz: how much more do you really need?
Ejaaz: And I think that's like a good question to ask as it relates to their competitors
Ejaaz: who are spending so much money on this frontier intelligence,
Ejaaz: because the average person does not need more than that.
Ejaaz: And if it can accomplish and achieve all the tasks running on your local suite
Ejaaz: of devices that you know and love, that's a huge advantage that no one else really has.
Josh: Yeah, I mean, that's the bet that Meta is taking, right? They released their
Josh: new model, what's it, two weeks ago called MuseSpark.
Josh: And it wasn't like a frontier model on like coding or reasoning versus anthropic
Josh: and open AI kind of sucked. But it was really good at data driven actions.
Josh: And guess what Meta has a lot of data. So they like built
Josh: a model specifically for their users of facebook instagram whatsapp or whatever
Josh: to build specific features that people actually care about you don't actually
Josh: need a huge model or the biggest model you just need a model that works for
Josh: your users and can unlock new use cases for you and apple's probably going to
Josh: do the same thing i think they'll probably play in both parks to be honest that's my guess yeah.
Ejaaz: Yeah, the problem is, though, is like Meta's hardware sucks.
Ejaaz: So they have no actual hardware for it. No one has hardware.
Ejaaz: And that's the hard thing about it is like hardware is really hard.
Ejaaz: And people are building the software stack, but have no place to put it.
Ejaaz: They don't have consumers that are holding their devices in their hands.
Ejaaz: They're currently holding Apple devices. We're talking to you on a MacBook.
Ejaaz: We're calling our friends on an iPhone. And Apple owns that hardware stack.
Ejaaz: And oh, my gosh, they have a really good opportunity.
Ejaaz: And they have the cash balance because Tim Cook has handed off,
Ejaaz: what, $150 billion in cash to John to go and do what he pleases with it.
Ejaaz: So it's a really exciting paradigm shift to go from the Steve Jobs innovative era,
Ejaaz: visionary era, kind of a jerk to Tim Cook being the pacifist who has generated
Ejaaz: a tremendous amount of money just by turning it into a great business.
Ejaaz: Back to John Ternus. We're unsure of the sentiment. We don't know if he's, he seems like a nice guy.
Ejaaz: But back to John, who is a product guy who is kind of hell-bent on building
Ejaaz: great hardware for this next generation of intelligence.
Ejaaz: And I think it's really exciting. Apple's in a really good position now,
Ejaaz: and it should be an interesting year to see how this transition goes.
Josh: So I believe that's it for the episode. That is the complete end-to-end breakdown
Josh: of Tim Cook's reign and the new guy, John Ternus, coming in.
Josh: I personally think this is a very good move for Apple, and I'm excited to see what they build.
Josh: Obviously, it's going to hurt. It's going to suck. There'll be a lot of speculation
Josh: as to whether John Ternus is the right guy for the job we will find out after
Josh: september i guess and i'm sure he'll be working closely with tim cook until
Josh: then but uh unless there's anything else josh any final thoughts i.
Ejaaz: Would encourage everybody to go and read the letter that tim cook wrote to the
Ejaaz: apple community it was so great it made me emotional it was really well written
Ejaaz: and it's i think it does a great job of summarizing
Ejaaz: the journey that he's had with the company and the changes and
Ejaaz: the impact that it's had on the world and it was
Ejaaz: really heartwarming so if you do anything today go read the community letter
Ejaaz: from tim it'll make you feel good about about a company like apple existing
Ejaaz: and the journey that they've been on with all of us participating in it so that
Ejaaz: is the only ask for the day other than that thank you for watching we got a
Ejaaz: lot more coming this week there's a lot of good good topics open ai has a presentation
Ejaaz: coming up there's a lot of new news that's going to be coming down the line
Ejaaz: this week. So we will be here to cover it all as always.
Josh: Yeah. So thanks everyone for listening. Whatever platform that you're on,
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Josh: We know that there's a lot of you, so welcome. And yeah, we'll see you on the
Josh: next episode, probably tomorrow, probably about OpenAI. See you soon.