00:00welcome to the a 16z podcast I'm Michael
00:02Copeland and I sit here with Benedict
00:05Evans and Benedict has been putting
00:07together his year-end package sixteen
00:11mobile theses and it's your two turtle
00:16doves and a partridge in a pear tree
00:17plus 13 other things I guess it's a bit
00:20like hum this is this old Russian joke
00:23that a bunch of guys have been locked in
00:25a prison cell for so long that they know
00:26all each of each other's jokes off by
00:28heart and stone instead of sending
00:30someone telling a joke they'll just say
00:3115 and everybody lost and I kind of
00:36thought like there's a whole bunch of
00:38heshes that have been talked about and
00:40talked about and keep coming up and I've
00:42kind of written three or four things
00:43about search and a couple of things
00:45about this issue and a couple of things
00:46about that issue and I wanted to kind of
00:48pull all those together into one place
00:51as opposed to you know having a last
00:52post most recent blog format and I was
00:56also thinking so that was kind of as
00:58kind of a practical point like this just
00:59have everything that I've kind of the
01:01way all the different ways to think
01:02about all the different aspects of
01:04mobile and what the issues might be in
01:05one post right and on a 16-day 16z calm
01:11and and also on Ben Evans yeah and so
01:14what I've done is I've basically written
01:15a paragraph about each of those you know
01:17outlining what are the actual issues
01:18around this question and then link the
01:20three or four places I've been and so
01:22there's kind of a kind of a practical
01:23thing that I thought would be useful
01:24what was also sort of driving my
01:27thinking a bit is that we are kind of at
01:29a stage where we're sort of between
01:31waves in Mobile in that the smartphone
01:33walls are now overall least the first
01:36smartphone war was over an apple and
01:37Google base one in different ways and
01:38the kind of the first messaging apples
01:40are now mostly over and Facebook mostly
01:42one in sort of various ways and a few
01:45years a few other examples of that and
01:47there isn't like a big new trend coming
01:49up that like everyone's waiting for you
01:51know mobile payments or messaging or
01:54something there isn't like a new thing
01:55that's just starting to explode in that
01:57sense within mobile now there's other
01:59things like AR and VR and AI and so on
02:01but not within mobile specifically and
02:04what we have instead is like we have
02:05this platform now and then the question
02:08is well what are the different things
02:09that get built on top of that platform
02:10whether it's productivity or sir
02:12or you know or a different user
02:14interaction model sort sort of relevee
02:16Co systems and so on so there's plenty
02:18on the horizon it it sounds to me is
02:20what you're saying but there's not this
02:21kind of massive shift that we kind of
02:23always know it's not like two years ago
02:26where you were going wow look at what's
02:28up look at Instagram there's not like a
02:31big trend in that sense at the moment so
02:33what what have you been keeping your eye
02:35on then this year and I know we've
02:36talked about a lot of this but you know
02:38what really jumps out and what has
02:40meaning and will extend into the future
02:42and have impact farther than we've seen
02:45thus far um well the metaphor I used a
02:48while ago was the the sort of the tech
02:50industry is kind of like a sailor system
02:51and smartphone is a Sun and everything
02:54else orbits around it and we had this
02:57sort of mental model that mobile is this
02:58new big thing and it's another new big
03:00thing in a tech industry full of big
03:02things and like that's I think that's
03:03the wrong way to think about it is
03:04rather than the mobile is the new
03:06central ecosystem in the way that the PC
03:08was the central ecosystem for 20 or 30
03:09years and so then everything else gets
03:12built on that so you rebuild
03:13productivity and you rebuild what large
03:15screen and small screen devices look
03:17like you rebuild what the root of
03:19getting technology into the living room
03:21looks like so you know for 20 years
03:23people were thinking about games
03:24consoles or streaming boxes or something
03:26is like that would be the mass-market
03:27consumer computing product and it turns
03:29out no it's not it's a smartphone and
03:30the screen is a satellite for the
03:31smartphone and then there's cars and
03:34there's watches and there's you know
03:37search and discovery and those are all
03:40kind of things that ships it on top of
03:42this new platform of sort of our iOS
03:44Android doing one on over one and a half
03:47billion units this year and probably
03:48over three billion of those things in
03:50the world today and so you've got this
03:52big platform you're building the stuff
03:53on it you just mentioned search and
03:55discovery and one of the things that's
03:57virtually impossible or very difficult
03:59at least you know in the mobile paradigm
04:02is search and discovery so what have we
04:03seen this year and and what do you think
04:05where does that tell us about where it
04:08might be headed um well I think there's
04:10a couple of things here one of them is
04:12it becomes ever more apparent that on
04:15mobile it's the smartphone OS that's the
04:18platform or the OS that's the platform
04:19where like the desktop internet you
04:21targeted a web browser so yes you could
04:23write a Windows application that can
04:24actually internet and yes they would
04:26basically the Internet experience within
04:28the browser and on the smartphone it's
04:29on the operating system and you target
04:31you write apps and web pages and other
04:32things and the interesting thing is it
04:35is also not a neutral platform because
04:37Apple and Google changed offer and they
04:38do stuff that changes how you might
04:39acquire users and in parallel you've got
04:42this kind of search for another runtime
04:44like let's count what else could we
04:45build on that platform safer stuff so
04:47the first runtime is some web the second
04:49runtime is native apps then you have
04:50people think ok what else can we build
04:52so you have WeChat is basically built a
04:54messaging app that is a runtime Facebook
04:57we're obviously like to clone that
04:58there's other people who are trying to
04:59do something similar Baidu has done that
05:01in maps in much the same way and so
05:05there you have a development environment
05:06and also a discovery environment and a
05:08kind of user acquisition environment
05:10that's in a new place and works in
05:12different ways and it's different from
05:13the web and different from native apps
05:15and that's still completely up in the
05:18air like we left behind this model we
05:20had for 20 years of web browser mouse
05:21keyboard but we haven't settled on
05:22something new and you have Apple and
05:24Google who can change stuff and do
05:26change stuff every summer and you have
05:27Facebook kind of trying to buddy in and
05:29there's Amazon and there's WeChat all
05:31sorts of other people kind of looking at
05:33this platform in a way that we didn't
05:35have all the desktop web because it was
05:36just the web browser and yes there were
05:38browser walls but they didn't really
05:39change what you can do as a developer in
05:41the same way and do you fishy then
05:43runtime Wars as it were um well it's
05:46interesting I mean that there's sort of
05:47slightly kind of the sort of the joke
05:49that I made is that like every spring
05:51facebook says this is a future of
05:52interaction on mobile and like eight
05:54weeks later Apple and Google say look
05:55sorry kid but it's our platform and so
06:02you see a little bit of that and yeah
06:04it's like it is Apple at Google's
06:05platform now there is then there was
06:07another question and this is one of the
06:09reasons why the control of Android is
06:10interesting and why Xiaomi is
06:12interesting and so on is that it may not
06:15be Google's platform entirely and it's
06:18not there so there are some ways in
06:19which it's not Google's platform now and
06:21therefore if you can if Android kind of
06:24spins away from Google or if and would
06:26become something else then it might be
06:27other people that might be trying to
06:29make those decisions and so we had this
06:31whole wave of course of Android launches
06:33that we're all about trying to create
06:34new ways of discovering apps and there's
06:36almost all seemed to have none of they
06:39but that was like another attempt to
06:41like how do we create like a new way of
06:42finding and discovering things within
06:45within the mobile context let's talk
06:46about Apple and Google a little bit more
06:48too but maybe can you can just say okay
06:50Apple what are the strengths what are
06:52the weaknesses in the in the mobile
06:54construct and let's go down the line a
06:55little bit so where are we so there are
07:00something like seven to eight hundred
07:02million live iOS devices in use today in
07:051995 incidentally there were about 250
07:08million pcs on us just to give you a
07:10sense of kind of ecosystem scale so
07:12Microsoft Apple has got several
07:13multiples of what Windows had had when
07:15Windows Phone 95 was a new thing and
07:17that is big enough to be a sustainable
07:19ecosystem particularly because when you
07:21come to the US it's 30 or 40 percent of
07:23the install base and 70 60 70 80 % of
07:26usage and in San Francisco it's 2/3 of
07:29the install base and so you have Apple
07:31though you know the fact that Apple
07:32doesn't have many users in sub-saharan
07:34Africa doesn't really matter to the
07:35ecosystem and that's kind of different
07:37from the way the PC care system would
07:38where it's like the yuca system will see
07:39ecosystem is different market shares in
07:41different places and so Apple has got
07:42seven or eight hundred million active
07:43devices Google Android has got say one
07:48and a half billion they gave a number in
07:50the summer of what on this in the autumn
07:52of 1.4 say what about one and a half
07:54billion active Android devices um a high
07:56proportion of those affairs and tablets
07:58incidentally Apple has about 200 million
08:00active iPads out there and then there's
08:02probably another six or seven hundred
08:05million non-google Android devices in
08:07China six seventy eight hundred million
08:09depending on who you whose estimates you
08:11believe and that gets us to something
08:13over three billion and these report
08:15report Android handset manufacturers for
08:19four so forked is the kind of us is
08:21specific term but the Kindle Fire is
08:23forged that is to say it's built on
08:25Android you would not hold and pick it
08:27up and think this is an Android device
08:28well almost all the devices in China you
08:30would pick it up and think this is
08:32exactly the same as the one you bought
08:33in America until you look for Google
08:35ah and it's not fair so the Google apps
08:37and services layer isn't there right but
08:39everything else is there you mentioned
08:42so let's talk about the weaknesses for
08:45both Apple and the weaknesses so that
08:46was right the state of the units the
08:48weaknesses I think Apple has got this
08:51integrated ecosystem of
08:53we're and semiconductors and sensors and
08:55software and manufacturing that means
08:57it's able to create high-end experiences
08:58that are very difficult for anyone to
09:00match and really isn't really no one
09:01else in the market he's providing that
09:02that experience in that way and so that
09:05particularly when they came out last
09:06year with a large screen phone it turned
09:08out that that took away half of the
09:09high-end market the half of the portion
09:11of the high-end market that they didn't
09:12already have away from Sampson and sour
09:15apples position at the hired in the mid
09:16to high end is very secure they are weak
09:19in cloud services they are weak in
09:21building Internet services they have a
09:23tendency to see those as pipes that
09:25connect beautiful user interfaces rather
09:27than thinking about what is the service
09:29first and you try to see that with Apple
09:32music for example although I would say a
09:36bad example because with Apple music the
09:38cloud bit slightly quite good as a user
09:39interface it's a mess which is kind of
09:41ironic given it's Apple and so they have
09:45so far not really touched like the
09:47mid-range of the handset market and this
09:49has been an area of endless speculation
09:51for like five years but Apple do a
09:52cheaper phone they could do a $300 phone
09:55now that would be a great phone it would
09:58you would not feel like I Johnny I
10:00wouldn't feel ashamed of it I feel like
10:01that's a question of when rather than if
10:03and obviously that poses questions about
10:05what happens to second-hand sales and
10:06sales of the other iPhones in someone of
10:08course they sell the two-year-old one
10:10footer Nadal says and sold so not not
10:11touching that but they're still not
10:12touching the middle of the market at all
10:14and that puts a kind of a cap on that on
10:16the market and so they're kind of two
10:17questions for Apple one is like how big
10:19is the market for 400 $500 $600 phones
10:22because it's clearly not the whole
10:23market but we've yet to see it yet
10:25really to stop and so the speculation
10:28right now it's like well now that they
10:29came out the big screen phone last year
10:31okay is that a step change how much
10:33further can make great and then the
10:34other question is as cloud becomes
10:36important does it matter that Apple is
10:37weak there or will you just be using all
10:39Google's cloud services on your iPhone
10:40anyway and then you flip that to Google
10:43well let me ask one question the other
10:44way all the questions are exactly the
10:45opposite just one question cuz you
10:47mentioned Samsung and and the high end
10:49of the market you know what what other
10:52manufacturers other than Apple have been
10:54really good at is lowering the price of
10:56these fancy phones so like the oneplus 2
10:581 + 1 etc are we going to see pressure
11:00on Apple ever are they just so that's
11:06one way of putting it another way of
11:07putting it would be to say that the
11:11Moore's Law has taken the price of
11:12Android down to 30 or $40 and every
11:15point in between but any kind of as it
11:19might be 2/3 to 3/4 of people who are
11:22willing to spend spend five six seven
11:24hundred dollars on a phone and get the
11:26one that's beautifully made and has a
11:28beautiful finish and has the best camera
11:30in the best screen two-thirds to
11:31three-quarters of those people currently
11:33choosing to buy iPhones and that is some
11:36currently five six hundred million
11:39people on earth I've got one of these
11:41things and so that seems to be working
11:44out just fine for Apple and so there's
11:45an argument that says like it will all
11:48go to the good enough product the way it
11:50did with PCs there's another argument
11:52that says that's a bit like saying no
11:55one would ever buy a Mercedes because
11:56you can buy Ford and why actually no
12:00people are willing to spend a bit more
12:01money to get that and there are enough
12:03people who are willing to do that that
12:04you can sustain a market for that
12:05product and it turns out that for Apple
12:07that market is over half a billion
12:10people and we don't know how many more
12:12it is because it's still growing right
12:14I'll be a growing slower yeah of this
12:17growing slower that this is always this
12:19has been the question for Apple for like
12:20the last four years it's like well what
12:22is the ceiling on the market for
12:23high-end phones because it's clearly not
12:25the - bili the global handset market is
12:27two billion units a year the market for
12:29$600 phones is not 200 minute don't--but
12:31is not 2 billion units a year but we
12:34don't know what it is because it hasn't
12:35start crying yet right right interesting
12:37all right Google Google well Google is
12:39the opposite of this so Google builds
12:41incredible cloud services and builds mmm
12:46this isn't quite so good at building the
12:47user interface for them and
12:49necessarily except when they're very
12:51simple and they were exceptions do both
12:54of these and Google tends to see the
12:56devices the endpoint of the cloud
12:57whereas Apple tends to see the cloud as
12:59like the pipe for the device so like the
13:01ideal company wouldn't be like Apple and
13:03Google combined because then you have a
13:04great device and a great cloud service
13:06the challenge for Google on one hand
13:08Google is I think completely
13:09unchallenged at the moment in the kind
13:11of the fundamental business of knowing
13:12what everything is in the world and how
13:16at least as it relates to a little
13:18competition with Apple I think there's a
13:19broader question of discovery where I
13:20think Google faces a lot of challenges
13:21but that's kind of a different point we
13:23can come back to that later so they have
13:26they so they're they're kind of cool
13:27search product is I think completely
13:29unchallenged really at other kind of
13:30position is completely stable the
13:33challenge that they have on mobile
13:34specifically is that what they want in
13:37everything is reached they're not in the
13:38business of selling Android phones are
13:39in the business of reaching the purpose
13:40of Android was to get reach and they
13:42don't have the top 500 600 million
13:45people it's not said 800 million devices
13:47but people call I pad 2 and iPhone says
13:49over half a billion people and it's
13:51generally it's the best half million
13:52people that is to say it's a half
13:53billion people who are most willing to
13:55spend money who most value a user
13:56experience you may spend most of them
13:58and spend most time on the Internet
13:59which is why roughly half of all time
14:02spent online or mobile appears to be
14:03happening on iOS devices even though
14:05it's they're way more Android devices
14:07out there than iOS devices because it's
14:09skews to a certain kind of user and so
14:11how much of that is a problem for Google
14:12like if you're an Android they know they
14:14get a far more data about what you're
14:16doing what you're interested in where
14:17you're going then they do if you want
14:18iPhone and just use Google search and
14:20just use Google Maps and say you have
14:21this kind of question of well what kind
14:23of reach does google need and how much
14:24is it matter to them that Apple has
14:26apparently got a lock on this portion of
14:28the market and that you know the new
14:30Nexus it's not going to change that and
14:32you know Samsung clearly not going to do
14:33anything that's going to change that
14:34it's not clear how if anything will
14:37change that at this in this cycle you
14:38know 10 years everything will change so
14:41you know Google Apple has a cloud
14:43question but is secure in hardware
14:45Google is secured cloud and has a
14:47hardware question and then it sounds
14:49kind of limited access to some kinds of
14:50users so and then that leaves us with
14:52Microsoft Facebook Amazon and Samsung
14:56for that matter but these other players
14:57who who are clearly in the mobile venue
15:01and they need to be there but where are
15:03they yeah so Microsoft isn't in my above
15:06they sold just over five million units
15:09of Windows Phone they've written the
15:10unit down it's that that I would be I
15:13think there's even table said that
15:14product won't exist in a year so
15:18Microsoft and buy on what Satya Nadella
15:20did would say this is the end of Windows
15:23everywhere that is to say the idea that
15:24Microsoft strategy is everything will
15:26run Windows and we will never reach
15:27Windows and Office against each other
15:29and so you have office on iPad and on
15:31you have office on Android and yeah
15:32basically what Microsoft is doing now is
15:35using the lake because it kills aliens
15:37and legacy core businesses as cash cows
15:39in order to try and create new
15:41businesses for the future and so Windows
15:45will go free office will go into the
15:46cloud but then you have to kind of
15:48create a new connective tissue for the
15:50enterprise and so on as there will be
15:51like a good number two and so they have
15:53to transition away from being the PC
15:55company in the Windows company and the
15:57office company in the sense because you
16:00know they miss mobile they miss this new
16:01platform so they have to become
16:03Amazon failed with the phone the tablet
16:06is doing kind of okay again it's like
16:10everybody has their own secure business
16:12but what does somebody else's business
16:13where they're in fact though a lot
16:14weaker micros Apple has a secure
16:16high-end business for once cloud and
16:18it's weak and cloud Google's the other
16:19way around Amazon is is is kind of this
16:21is huge e-commerce giant but wants to
16:23move outwards and to kind of create new
16:25adjacent products and it tends to be
16:27much weaker in those accepting content I
16:30mean I think there's a kind of an
16:31interesting thing in here when you look
16:32at Amazon and Google and Facebook though
16:34which is that what a bizarre the Google
16:35Facebook will do is look at the funnel
16:37that is to say they look at how is it
16:39that you would know that you want to buy
16:41and I sometimes think of Google and
16:44Amazon as being a little bit like kind
16:45of funnel web spiders in that they
16:47basically wait for you to fall in it's
16:49kind of an unnecessarily the customer
16:56yeah yeah I don't know if I like to
16:57think of it that way well but the reason
16:59I say that is that you know most people
17:02buy stuff on Amazon that they previously
17:04discovered it existed somewhere else yes
17:06it's a bit of browsing but you know by
17:08and large you get around this and
17:09already knowing what you want and you
17:11get a sense you get a Google already
17:13knowing what you want like you know if
17:14you want to find a hotel in Carmel
17:16you'll go to Google but if you want to
17:18know like where could well actually
17:19that's about example because there isn't
17:20anywhere to go from San Francisco but
17:22you know if you were in you know if
17:23you're in London it's like okay where
17:25should we go on holiday this weekend
17:27okay there's 25 or 30 or 40 night
17:29beautiful medieval cities you can go to
17:31for $50 or $100 you ask Google where
17:35you're not gonna get a good answer well
17:36not from medieval cities in the Bay
17:38Area's that way well yeah
17:40the possible path for Berkeley obviously
17:42it is sort of antiquated stuck in in an
17:45equation my home so what I'm the point
17:51I'm making is Google can tell you what
17:53you want when you already know you want
17:54it it might get you like a magazine
17:56article that says here are ten things
17:58that you want but it will not you can't
17:59go to Google and say like where should I
18:01what handbag should I buy what lamp
18:03should I buy it doesn't it's not
18:05structured in that sense it doesn't do
18:07call it only does quant and I think it's
18:10fascinating of the kind of the piece
18:11that I have not written and will
18:13probably write next is sort of all the
18:15people who aren't trying to unbundle
18:16Yelp because what they're all doing all
18:18these different companies are doing is
18:20giving you not every restaurant in the
18:22city but ten restaurants and you see
18:24exactly the same thing in fashion which
18:25is not that we will not give you the
18:27entire catalogue of the global fact
18:28global apparel industry rather we will
18:31give you 75 things or 25 things or ten
18:33coats and the point of that is you don't
18:38want to give people a search box you
18:40want to give people like because that's
18:42not helpful to you right you don't know
18:45what to type in and you see the same
18:46thing with Apple music giving people
18:49thirty five million tracks in the search
18:50box it's not a great user experience
18:51giving people ten million webpages have
18:53a search box which is what Google does
18:55is a good experience for some things if
18:56you know what you want but if you don't
18:58and I think that question of if you
19:01don't know what you want is wide open if
19:03you do know what you want Google is one
19:05if you don't know what you want I think
19:06that's what opened and there also could
19:09be a sort of a risk an area of risk for
19:11Google then too if somebody really knit
19:13is I mean you could make a kind of a
19:15deterministic point which is you could
19:17propose that the state of search and
19:19discovery now is a little bit like the
19:21state of theoretical physics in like
19:231880 when you know there were just a few
19:25little bits to tidy up and then we're
19:27finished let's spin things forward a
19:34little bit what are you looking at next
19:37year or in the in the near term like
19:39what what what's interesting and what
19:40are we gonna start hearing about and
19:41talking about well as what said events
19:47someone else ability probably listed in
19:49the 60 is what was the hard part of
19:50being Prime Minister and he said events
19:53so that's part of it certainly you know
19:56the Intel Microsoft merger and you know
19:58yes yes that kind of stuff
20:01I think VR is getting be clearly
20:05becoming close to mainstream consumer
20:08product in the course of the year as
20:11cardboard and oculus and gear VR and
20:14potentially ammo from Apple and Glee
20:16microsoft's hololens and so on so VR
20:18becomes interesting there's an
20:20interesting question here about you know
20:22is this a $1,500 PC and there's quite a
20:25lot of people who've got those pcs
20:27incidentally there's tens of millions of
20:28people you've got the PC the controller
20:29oculus how important is the difference
20:32between what you get on the $1500 PC and
20:34what you get on a smartphone strapped to
20:36your head no it's a difference but how
20:37much how important is that difference on
20:40like a five-year view it seems to me
20:42that this is all going to be about
20:43smartphones because just Moore's law
20:45will drive this and the graphics and the
20:46sensors will get there but like do we
20:47have to wait until that like what are
20:49the kind of the transitional points that
20:51we get there and then also of course as
20:53a are floating around here where both
20:55Microsoft has a story and also of course
20:57we have an investment in magic leap
20:58which has a story yeah an astonishing
21:01story of a few have that if you have the
21:02demo say the sort of AR VR is
21:04interesting drones are interesting all
21:06starting at ret industrial Internet all
21:08the stuff that gets built on the
21:09smartphone ecosystem is kind of
21:11interesting then we get Apple and
21:13Google's kind of annual Jamboree in the
21:15summer and they like set they've got
21:17like a list of ten things that they
21:18could do and they'll do three and that
21:21can kind of pull the industry in
21:22different ways and so you're always
21:23slightly it's a kind of a dare sex
21:24machine er as I kind of alluded to
21:26earlier that like Apple and Google do
21:28this then it will happen if they don't
21:29do it then it just won't happen because
21:30they control the operating system so
21:33there's that question and then there's
21:36like you know as I said there's not like
21:38a it's not like two years ago when I was
21:40you know tracking Skype they're tracking
21:42what's up every day there's not like a
21:43big thing that's blowing up in quite
21:46that way yeah I was gonna ask you are
21:48there companies that are a little bit on
21:50the margin more that we should be
21:51keeping an eye on that are you gonna be
21:53there's lots of companies that are on
21:55the margin that I'm keeping my eye on
21:56and I'm not gonna tell you about them
21:57that there's not like the kind of holy
22:00crap haven't you heard about this
22:02company haven't you seen it
22:03it's not quite that of them
22:06I mean that we'll see that well but not
22:07a lot not like some being megatrend
22:09which is here it's kind of interesting
22:12as a sort of a stage of where we are in
22:13the industry well we will talk to you
22:17and often again and see if where we're
22:20headed is where you think we're headed
22:21and when you can tell us about these
22:23holy crap companies you better do it
22:28Benedict thank you thank you
![How To Succeed As A NEW & YOUNG Realtor [Deals Every Month + Luxury Listings]](/_next/image?url=https%3A%2F%2Fi.ytimg.com%2Fvi%2FrtrRghgTayc%2Fhqdefault.jpg&w=3840&q=75)
