Apple at a Crossroads: An Interview With M.G. Siegler

Apple’s identity, the Epic Games beef, and brewing competition with Facebook

Illustration courtesy of M.G. Siegler

OneZero is partnering with Big Technology, a newsletter and podcast by Alex Kantrowitz, to bring readers exclusive access to interviews with notable figures in and around the tech industry.

This week, Kantrowitz sits down with M.G. Siegler, a partner at the investment firm GV. (Siegler is also an investor in Medium.) This interview has been edited for length and clarity.

To subscribe to the podcast and hear the interview for yourself, you can check it out on iTunes, Spotify, and Overcast.

For years, Apple had a clear identity: It was the world’s best devices maker. Today, the company is trying to balance that identity with a new emphasis on software and services.

This new approach has helped Apple surge to a $2 trillion valuation — investors now value it as a software versus hardware company — and caused considerable drama over recent weeks.

The company is currently fighting hard with Fortnite-maker Epic Games to keep the 30% cut of revenue it gets from purchases inside its App Store. Fees from customers and developers are now core to Apple’s business, so it can’t let up easy — even if it risks losing some of its brand luster.

To discuss this shift and what it means for Apple’s future, I sat down with my favorite Apple writer, GV Partner M.G. Siegler, who once covered the company for TechCrunch and continues to write about it here on Medium while still working his day job.

Alex Kantrowitz: One of the things that I wonder about with Apple is their identity. Companies operate in two different phases. One is they invent. Two is when they’ve built a big enough product portfolio, they start to milk their assets and get every dollar they can out of them. Apple is putting everything it has into making much money as it can from the iPhone. Does that eventually come back to bite them?

M.G. Siegler: I think the reality is we’re recognizing now that nothing is going to be as big as the iPhone was as a product category. That’s what’s driven Apple to become a $2 trillion company, the biggest company of all time. They basically created a market that was unlike anything we’ve seen before it, and it became the fully ubiquitous computing device.

Eventually, everyone in the world is going to have some sort of smartphone with them. We’re already a good portion of the way there, between iOS and Android devices. And so in the post-Jobs Apple, it has been a bit of a challenge to try to figure out what that next device is. In a way, it feels like they’ve done a good job, and Tim Cook has done a good job, of figuring out how to keep the ball rolling forward on top of augmenting the iPhone.

From the AirPods to the Apple Watch, these are all things that are directly tied to the iPhone or have been up to date. The next thing they’re rumored to be closing in on hardware-wise is some sort of augmented reality headset device. And that still seems like it may be tied to the iPhone.

I want to give Apple credit, though, because I feel like people were worried that it would not be able to surpass what it had done already in the Jobs world. And certainly, from a business perspective, we’re way, way past where it was when Steve Jobs, unfortunately, passed away. I think the company was at something like a $300 billion or $400 billion market cap, which is obviously still a massive company. But now that seems quaint, right?

Tim Cook has given back more money to Apple shareholders than what the company was worth when he took it over.

Which is just incredible. Microsoft is an interesting analog here because I think people, myself included, would say from an outsider perspective, it looked like during the Steve Ballmer years after Bill Gates, that basically — Microsoft was just milking the profits off of Windows. They did really well from a profit perspective and the business seemed to do well, but at the same time, if you look at the stock and the market cap, it was very flat.

There’s obviously macro stuff that’s involved with that, and obviously there’s macro stuff that’s involved with the run-up of Apple to $2 trillion. But still, I think that’s sort of indicative of the difference between the two. I think Cook has just been able to keep Apple humming along and figuring out exactly what they needed to do in order to keep the business growing and expanding from that iPhone base. Whereas Ballmer was a little bit much more, I think, aligned with just milking the profits. So I think Cook deserves a lot more credit.

But there are similarities though, right? If you look at when it comes to building for the future, Microsoft only turned the corner after Ballmer left and they started investing in cloud and mobile. And I think that Apple being so totally invested in the iPhone is missing what’s going to come next.

We’ve talked about the AR glasses. We don’t really have any sense as to whether those are going to be good. They’ve also swung and missed pretty hard at a voice assistant, where both Alexa and Google Assistant have surpassed Siri. And they’ve also swung and missed on the autonomous car. So is the company going to face this moment where they look like Microsoft did when it had the desktop operating system in a world that’s surpassed it? Or are we going to be living in Apple’s world from here on, and they have the dominant device and they’re the winner.

You’re right that they missed from a strategy perspective with voice assistants, even though they were first to market, with really a ubiquitous Siri. But then Amazon came out with Alexa and I think they just had the right strategy, whereas Apple didn’t. The strategy for these voices assistants as we’re seeing play out now is to get them as ubiquitous as possible on many devices. And that’s just not Apple’s DNA to do that, to do cheap devices that you place all over the house. So Apple looked around and thought like, well, we already have a device in everyone’s pocket. And so why do we need some cheap hockey puck thing that’s in someone’s living room or in their bedroom? Because again, they have a device with them all the time.

I just think that was a strategy mistake, and it does point to what I do worry about from Apple’s perspective. I think that they have good execution capabilities as they’ve proven time and time again. I do worry about from the high-level strategy and product perspective though, that they just keep slightly missing the bigger picture of where they should be heading. And I think it really hasn’t burned them yet because again, the iPhone is such a massive product that’s unlikely to be surpassed by anything. And so I think that they can afford to miss time and time again for at least the foreseeable future. And again, it’s not complete strikeouts, they’re wrong on certain aspects of their strategy.

Obviously the most recent stuff has all been predicated around moving to a more services-based business, which makes sense because they can leverage the billion-plus devices they already have through the iPhone and the iPad and other devices that they’ve had. Then, of course, it’s just a different model in a way, akin to what Microsoft has done right under Satya Nadella, where they basically become a different type of business that’s not so predicated around Windows, that has all these different cloud services and things.

Apple’s just doing it much more on the consumer side, and you’ve seen the numbers, it looks like those are really compelling businesses. When you’re building on top of a billion-plus device base, you would hope so. But I think that Apple took a while to come to the realization that that’s what they needed to do. And I think they can ride on that for at least the next few years.

I do think there is a question though, of what the next trends are, and we already mentioned the voice assistants, you mentioned the cars, I mean, will they end up kicking themselves because they missed that boat? I think the jury is still out on that.

When you said you don’t think they’re going in the direction they should be going in all the time, is this the type of stuff you’re talking about AR, autonomous driving, voice assistant, or is there something else that you think they should have been heading toward that they’re not?

It feels like the AR stuff is directionally correct. I feel like that that’s still a greenfield opportunity that no one’s really nailed that, there’ve been a few attempts, Microsoft, HoloLens, obviously Google Glass back in the day, but it’s super nascent market still. And obviously the best work is being done on the phone because again, it’s ubiquitous device and Apple’s done a lot of the… some of the good work on it with AR kit within iOS.

And so I think that’s a smart thing for them to go after, but I do think you have to wonder, is there something that’s a totally out of left field opportunity that they’re just not thinking, and who’s to say? Of course, we don’t know what’s going on in their secret labs necessarily, but that’s what I would worry about, that they’re going to be sideswiped by something that just totally comes out of left field that they’re not quite thinking about yet, but it’ll take years to see that.

I have just a sense of reporting on their culture for Always Day One, just seeing how they’re in such a refiner’s mindset where it’s all about refining the iPhone, versus the other companies out there among the tech giants, Facebook, Google, Amazon, Microsoft, they’re all in this mode of invention, reinvention, where Apple might have this natural resource curse with the iPhone. They tried to develop Siri as an iPhone feature, they tried to develop the HomePod in a similar way. They tried to develop the car with the same methodology as the iPhone, leading with design…

Yeah. One tangible example that you brought up just in passing there, I do think that they missed an opportunity, and obviously it’s easy to say in hindsight, but I feel like they missed an opportunity in the living room with what they have with HomePod, which is obviously set up to be like a high-end music device, which is not too surprising given their history and DNA with music. And obviously they have Apple music now, and then high-end devices and expensive hardware.

At the same time, it feels like they could have really done something compelling in the living room, especially for the world in which we’re currently living, where imagine if there was some HomePod-like device that maybe hooked up to your TV or an Apple TV, that was already hooked up to your TV that had, say like a FaceTime camera in it. And it could be a great connection portal to your family and to loved ones and even to potentially, work colleagues and things like that. And I mentioned, I said the word portal and that of course brings to mind Facebook’s work and—

Facebook is doing that.

Right. Exactly. I jumped on Facebook when they first came out with Portal because it seemed like, I mean, it was… it certainly seemed like it was bad timing when they launched it. They were in the midst of all their privacy turmoil, which they’re still in the midst of in many ways, but obviously they ended up being positioned well for a world they could not have envisioned with the Covid-19 reality that we’re all living in and work from home. But at the same time, you can imagine that Apple really should have been the company doing that. They’re a company that people trust with privacy much more so than many of their competitors.

And again, they already have a lot of the pieces in place because they have the FaceTime software that’s running on iOS devices. And so it just feels like they had an opportunity, I don’t know if it should have been the HomePod. I don’t know if it should have been Apple TV, but they just weren’t in the right place right time. And it feels like I know a lot of people right now who would love to have something like that in the living room, that’s run by Apple, that they maybe trust with their privacy again, a little bit more than some of the other companies, to connect with family while we’re all living in this world. And again, they couldn’t have predicted that world, but still that feels like a product that maybe Apple should have made.

It seems like an obvious product for them. And then you look at the Apple battle with Facebook, and it’s pretty interesting, right? Because Apple doesn’t waste any time jumping down Facebook’s throat on basically any mistake Facebook makes. Facebook really in many ways is Apple’s biggest competitor. Apple’s lock-in is messaging. People don’t want to be green bubbles. And if we use Facebook messenger and WhatsApp and Instagram, that’s going to cost Apple in the long run. Something like Portal is another good example of that. Tim Cook doesn’t take shots against anyone but Facebook. And I think there’s a reason for that beyond being angry Facebook doesn’t live his privacy ideals.

I definitely feel like it stems from that, but there’s been battles over the years. It stems back from the days when I was still on the reporting side, Facebook was trying to figure out ways to get their games because if you remember much of their business was based around Zynga and all the games on their platform when they were still primarily website-driven.

There was a real existential threat in how they were going to translate that to mobile when they didn’t control any of the mobile operating systems. And obviously there was Facebook phone and all the other stuff that they… Facebook home, I think, and all the other stuff that they tried to do that didn’t end up panning out, but they were really trying to do end-runs around Apple by using the web browser and things like that. And Apple would probably try to stop them from doing that, it seems like. That bad blood has just continued on and on and on. And now we’re in this real locking of horns between the two, because like the privacy angle is what Apple plays up the most, and Facebook has become the poster child for the unfortunate side effects of maybe if you don’t have that as much on lockdown as you should.

They’re a pretty good foil. I’ll tell one quick story — When I was sitting down with Zuckerberg to interview him for Always Day One, I was talking to him about Facebook and operating systems and how Facebook is the only tech giant without an operating system. Apple has iOS, Microsoft has Windows, Amazon has Alexa, Google has Android. And Zuckerberg just was holding up his phone and saying, it’s not how it’s supposed to work. He had an Android and just hearing the tone in his voice in terms of the way he speaks about Apple, I was like — this guy really does not like Apple at all.

You look at the App Store charts over the past decade, basically since the App Store launched and Facebook’s done a good job of getting the handful of them that are all the top apps, and obviously they acquired many of them, but they’ve done a good job dominating their charts for someone who doesn’t control the operating system. But at the end of the day, Apple does control that operating system, and Facebook is beholden to that. And so that’s always going to be attention, and it was always going to be attention. And I think now is really coming to a head with everything that’s going on.

You mentioned that Apple is now moving toward more of a service model. One of the things that I’ve been thinking about with this people buy Apple because of the way it makes them feel. They love taking out an iPhone at a meeting, they love working at a café on a MacBook. There’s just something about the status of using these products that make you feel good. Also, they work well. Then you look at services, and it’s like, does anyone feel good about paying Apple $5 a month for storage? I just wonder how you think people’s relationship will change based off of that emphasis on services.

Yeah, it’s a good question because it leads to the idea of, is Apple nickel-and-diming people after they’ve paid a thousand plus dollars for their devices, potentially. Are they now trying to get $5 for iCloud and $10 for Apple Music and all this stuff? I think the answer to that, and we’re going to see that soon it sounds like, is that they’re going to start to bundle things together and make it a little bit more seamless. So because I have a handful of different bills that come in from Apple when I rent a movie on iTunes, Apple Music, iCloud, so I think if they can make it a little bit more seamless that will alleviate some of that tension. At the end of the day, though, what you’re saying is basically right, that they need to be able to compete with the best services, not just ones that are tied very tightly to the hardware.

If they’re not the best, people are going to, in the back of their mind at least, start to not appreciate that and maybe start to wander elsewhere. Like you noted the hardware is still by far the best it seems like, and it doesn’t seem like that’s been shifting or anyone’s worried about that changing anytime soon. And so I think the bundles will be key. But they do need, and this has been talked about in the past couple of weeks at least, the idea of a linchpin for what needs to be a part of that bundle. And you’ll know this on the Amazon side obviously with Prime because they have such an awesome experience with shipping that all the other stuff that they have a part of Prime just feels like icing on the cake. Right now with Apple, if they bundled anything together, which again, it seems like they’re going to do, what is that linchpin? What is that key part of the bundle?

And John Gruber and others have written about this, of wondering what that would be. Right now it seems like it’s Apple Music, but honestly, this is not a great linchpin. I mean, it’s good, but there Spotify is and some people like Spotify a lot more than they like Apple Music. And so what else could it be? I come back to, I think eventually it has to be the iPhone, and if you start to pay for it on a monthly cadence and it becomes part of an “Apple One” package that they are rumored to be calling it, that makes some sense to me, but I think we’re a ways away from doing that. So they’re going to have some hard decisions though to make in terms of what they do from a marketing perspective, even just like for what is a key part of that Apple One bundle.

Apple’s battle with Epic

One of the things that you’ve been covering a little bit lately is the Apple against Epic fight. Epic is the maker of Fortnite. They tried to create a payment system that would subvert Apple’s payment systems, which they have to pay 30% tax on for every dollar they get. Apple then kicks them off the App Store. Right before we came on air, Apple is terminating Epic’s developer account. So M.G., what’s your read of this fight, and who do you think is going to win?

I'm hesitant to even try to predict at this point because I feel like it’s played out differently than I may have expected when it first kicked off. I think that Epic did a rather Apple-like incredible job of trolling Apple with obviously the 1984 spoof ad. And just caught them by surprise.

Ultimately, what it feels like that Epic and Apple are fighting, they’re basically fighting a PR and marketing warfare which is interesting because that has been Apple’s home turf historically. Apple gets great press, they obviously do great marketing and how was Epic going to go at them? And they just went straight at them in their seeming position of strength and to my eyes, they’ve done a really good job of it so far.

I think that they’re really challenging Apple and making people choose one side or the other. It feels like that Apple is obviously taking this very, very seriously and you can see it in their actions. Not only the fact that as you noted, they just terminated Epic’s accounts. And it’s a little bit more nuanced than that because as you’ve heard over the past few days, it seems like that the judge that this ultimately went to decided that it was okay if Apple wanted to keep Fortnite the game off of the App Store, but they weren’t able to stop people from using the Unreal Engine, which powers a lot of different types of games by many different people.

But still terminating that developer certificate is a big deal because it means that now we’re past the point of no return where Epic can’t even update Fortnite, which they just rolled out a big update for. And so iOS is sort of being sandboxed. Apple’s clearly taking this seriously and not backing down, and it seems like Epic is also taking this seriously and not backing down. I would have expected one of them to back down by this point, just given the stakes that are at play, but I think Apple views this as a threat for the reason that we were talking about earlier. This is a huge part of the services narrative is the 30% cut.

Epic tried to use their own payment method to be able to get people to pay them directly and not have to pay any cut to Apple. And obviously Apple is not going to be okay with that, because again, these payments, no matter what the cut is, is a huge, huge part of the services narrative.

If you take a step back, the question is why does Apple get to charge these exorbitant rents to people just for the very fact that they can use the operating system that Apple has built? I’m going to read something that you actually called out in a recent blog post about the way that Steve Jobs viewed this thing. He said, “Our philosophy is simple. When Apple brings a new subscriber to the app, Apple earns 30% share. When the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing.”

Apple, when they first started this, already were basically laying out the fact that Apple taking 30% of everything would be unfair. Why do you think it’s tenable for Apple to take that 30%? And then why do you think they’re deviating so much from that original strategy that Jobs laid out?

I stumbled upon that statement because Jason Kincaid, who used to work with me at TechCrunch, had shared it. We used to go back and forth. I was a pro-Apple person, he was sort of anti-Apple person. So we had these blog posts that would go back and forth about takes on their various announcements at the time. And it was almost 10 years ago that Apple rolled out in-app subscriptions, which is at the heart of what we’re talking about now. And the quote you just read from Steve Jobs was in the press release when they announced this, and it was a big enough deal that Jobs himself gave a quote about it. And that quote is important obviously in what we’re thinking about now, Apple would say that look, it’s still the same as it was back then because you can still bring your own user base to the service and we’re not taking a cut of that, like with Netflix for example.

Things have changed though, quite a bit, as it used to be that you could sign up within Netflix or sorry, within the Netflix app and then yeah, Netflix would pay that 30% cut to Apple, or if you signed up on the web, they didn’t pay that 30% cut. Philosophically, Jobs thought that that was the right thing to do. What’s changed, of course, is that Netflix decided they were going to pull out of that agreement. I don’t think you can sign up currently through their iOS app, so you have to sign up on the web. The crazy thing is Netflix can’t tell you that you can sign up on the web, they can’t say anything about that per Apple’s terms of service or otherwise, the app will be blocked and they won’t be able to have it in the App Store.

That’s where I think this really irks me and a lot of people. I don’t think that Apple, while they might be explicitly following the letter of what Jobs said back then, I don’t think they’re following the intents of what was implied by what he was saying. If you go back and read those quotes, I think he’s basically saying, look, we’re launching this new in-app purchase service because we’re trying to make the best user experience for people to be able to transact within our apps and on our devices. And we think that we can create a better experience for those users using what at the time was the iTunes Rails to be able to pay for these subscription services, and now it’s obviously all run through the App Store. And if you feel like, if you’re a service that brings in your own users a different way and you can do that, that’s great, you get to keep all of that money. And if they choose to use our Rails to do it, then we’ll take that 30% cut.

And we can talk about the 30% cut itself in a second, but I just think that Apple has deviated from that mentality and now it’s all just like, how do we make sure that we are getting that 30% cut and they are signing up are via our mechanism. So it feels like they’re not so much competing on having the best experience or product necessarily anymore. They’re competing on obfuscation and trying to make it confusing and/or just like impossible to sign up.

Now, the argument for Apple being able to charge that 30% cut is that it’s almost like you built the store and then there’s a company that wants to come and sell products in your store, what right do they have to be able to go and do that for free? So where do you land? Is a 30% cut fair or unfair?

I think that when it launched, it was fair enough. I think it came from a weird place. Like you can look back again at the reports at the time and you can basically deduce how they got to it. It more or less seemed like it was a combination of what Apple was charging for iTunes individual songs at the time. So they had the 99-cent songs via iTunes music store and they would take a 30% cut of each of those songs. And so I think Jobs just looked at it and said, yeah, let’s just keep it simple and do the same thing with apps. And they started with obviously doing that with paid apps and then there became in-app purchases and then there became subscriptions, and now it’s the standard thing.

And now, of course, Apple is pointing like, look, this is not just us, this is an industry standard. Where I beg to differ on that is I think that Apple should be leading by example here again, like, yes, it might be the standard because they set it that way and Google, and everyone else now uses that same standard. And some of the other video game councils and whatnot now are all on the same standard. But I think Apple is in a position, certainly as a $2 trillion company and as one of the biggest companies in the world, to be able to say, we want to do things a little bit differently. Look, we recognize that 10 years ago when we set out to do this, there were businesses that we could not have imagined that would be built on top of the App Store, and that’s amazing.

And Apple deserves credit for that, certainly, but I think that they should get a lot more granular in terms of how they support those types of businesses and recognize that not every type of business necessarily should be taking a 30% cut of their revenue out of, and I know that they’ve changed it slightly over the years. They have the 30% finder’s fee that again morphs into a 15% thing in year two and whatnot. But some of that was just because of back-end deals that they cut with some of the other bigger players like Amazon, and then they felt like probably some level of hypocrisy if they didn’t offer it to everyone, but there’s still a lot of hypocrisy going on behind the scenes. Everyone knows that, that they cut certain deals and there’s whispered meetings that happen behind the scenes to make sure that all sides are working together even though it’s not in the most transparent way possible that say, like a little developer, who’s doing a single app, doesn’t have the same type of white-glove experience.

And so again, I just go back to the idea that these rules were set in place a decade ago. The world is very different than it was a decade ago, and certainly, the mobile world is very different than it was a decade ago, and the app ecosystem and everything that Apple’s helped create. Again, I’m not saying that they need to give this stuff away for free and they don’t deserve any credit and fee for doing this, they absolutely do. I just think it needs to be a lot more granular and I think it needs to be rethought from the ground up for the 2020 world, not the 2010 world.

We’re also going to come down to the point where like, how is this going to impact the actual people that buy the devices? Here’s another thing I want to read. You wrote “With seemingly each passing week, Apple is eroding that relationship with developers, thanks to moves like this one. And if that continues, at some point, it has to change the other side of the equation as well. Users may not want to walk from the products they know and love, but they will if the apps they know and love just aren’t there.”

What sort of risks from severing a relationship with its own customers is Apple running when it makes moves like this?

When we were first writing about and reporting about a decade ago when they launched some of these things like the in-app purchase, people were saying the same things at the time. I mentioned Jason Kincaid. He was saying like, the risk of all of this is that developers end up balking at the payment structure and then they walk and then users follow. Obviously that hasn’t really happened over the past decade, and the question is: Why is it happening now? And I feel like there’s a number of reasons, and I feel like they’re all interrelated things from the techlash in general on down. And these companies being called in front of Congress and everything, I think is all emboldening some of the other key players in the space, players like Epic and Facebook and everyone else that we’ve talked about, even though Facebook is of course on both sides here as one of the big behemoths also.

But I think it’s just emboldening some of the other players that necessarily wouldn’t have been able to speak up or didn’t feel like they could speak up in the past and now feel like they can. And I do think that there’s a risk that this can start to snowball on Apple, and we’re already seeing it now that we don’t have feature parity for Fortnite. And I don’t think that that necessarily breaks the camel’s back, but I think that if that plus another major apps say all of a sudden you can’t use Spotify on the iPhone, I think that that would be a massive deal. If you can’t use Netflix on the iPhone, that would be a massive deal. And all of those things combined would be a really big deal, and that could actually lead to some change.

And I mean, maybe a year ago, certainly five years ago would have seemed inconceivable that that could possibly happen, but things are moving in that direction more and more. And so that’s why I feel like Apple, at some point you would hope, has to recognize that. And that’s why I do believe that they will ultimately start to move a little bit on and make some of these changes. The question is, how transparent are they going to be about that and how much are they going to work with everyone? Not just some of the bigger developers behind the scenes. And to Epic’s credit, they’ve said that they don’t want to be the ones that are getting the special deals. Obviously that’s a bit self-serving and who knows—

It has to be everyone.

Right. They’re saying it has to be everyone. And so that’s good.

I’ve been surprised that no one else has stood up and said, we’re going to do this too. All these other companies voiced support, but wouldn’t make a similar move that Epic did. I wonder what would happen if it wasn’t just Epic, but it was all the companies that voiced their discomfort with Apple’s policies, like Netflix, like Facebook, like Tinder. I mean, the list goes on.

I think there’ve been reports that they’ve been talking to these folks and they’re trying to create maybe a coalition. Obviously there’s fine lines to skirt. But I think that they would prefer that others came with them and yeah, also not just fought with words, but also fought with actions.

The question really is, is Epic the first mover here, or are they the only mover? Because if they’re the only mover here, they, at some point will, unfortunately, lose the leverage that they might have even with a game as big as Fortnite. And so I think it does have to be others coming to rally behind them in order to really make change.

Let’s do a quick lightning round here toward the end of this segment. You mentioned you were pro-Apple. Are you still pro-Apple?

I’m still largely pro-Apple. Some of their moves recently are boneheaded. I think that again, they need to revisit some of those policies. But I still use Apple devices even though as we noted in the get-go, obviously I work at a fund where our LP is one of the rivals of Apple, but I still use Apple devices more than any other type of device. And I love the products and I just wish that they would recognize and read the room better in terms of where they are right now in the ecosystem.

Does a $2 trillion valuation makes sense?

I mean, they are an insanely profitable company, the likes of which we’ve never seen before, thanks to the iPhone. I remember back in the day, reporting on the race to beat Exxon is the most valuable company, right? And it seems absurd that a technology company could be an oil company, and now it seems absurd in the other way. And so I don’t know if two trillion is warranted, I mean, I’m not a public market investor that can quantify how best to value these things off of future earnings and whatnot, but I do think they are in the best position to make the most amount of profits off of the user base that they’ve been able to gather over time. And so if Amazon’s 1.6 trillion, Microsoft’s 1.6 trillion, I think seeing Apple at two trillion right now makes sense in that capacity, but overall, it’s all relative.

Is Apple still the biggest company in the world five years from now?

If I had to guess, I would say that Amazon is.

Last question in the lightning round, who wins? Apple or Epic?

It’s obviously going to be more nuanced than that, but I think that directionally I’ll say that I think that Epic ends up getting some of what they want.

Life as a VC

You are a prolific writer and you’re also working as a partner in a VC firm. How do you balance it?

I’ve been on the VC side of things almost 10 years now, which is sort of crazy to think about, is actually longer than I was ever a reporter. And I sort of stumbled into reporting just because I was working as a web developer and I always loved writing. And so I was just writing on the side about technology, and that caught the eye of people at VentureBeat and other places. And so they asked me to come over and see if I would be willing to do this full time. At the time I thought there’s no way you could make a living just blogging about technology.

And then, of course, that took me to San Francisco and led me indirectly to where I am now. But the balance of it now, I was worried about it 10 years ago, but ultimately, I’ve recognized that the writing is important to what I do because it really clarifies my own thinking about things, and it also in a way it brings in interesting people who learn my perspective on things. And even if it’s not necessarily about their company or what they’re doing, I think that it helps clarify my line of thinking just like it does for myself. And so it’s a good balance that I’ve been able to strike. It’s taken a long time and it’s not easy to maintain, but I like where I’m at now.

It reminds me a little bit about the six pagers in Amazon where, in order to clarify their thinking on new products they want to build, they write it all down and it helps you spot gaps in the way you wouldn’t if you were just playing around with it in your brain or doing a PowerPoint. So it seems like that’s working out well for you.

I’ve always respected that about Amazon, for sure.

What’s it like investing today? What are you seeing coming through the pipeline? Is the economy in the middle of the coronavirus and the tech world somewhat similar to what you were seeing before, or is it changed in a dramatic way?

It definitely took a pause for a little bit when Covid hit, mainly because I think everyone at a VC fund, you have a lot of portfolio companies and no one knew what was going to happen. Right? And so we had to do a lot of work with the current portfolio companies to look inward and figure out how we batten down the hatches and help keep companies afloat. And in some cases, unfortunately, companies went under, obviously, there’ve been a lot of layoffs across the board for all sorts of different types of companies. But other companies have been able to use this time to figure out both what they really need to focus on more and others are using it to create new companies.

And there’s obviously a lot of different spaces that are taking unique approaches to the current world that we’re in. Obviously from Zoom on down with videoconferencing, remote work from Slack on down. And so there’s all sorts of trickle-down effects that maybe were hard to see at first, but we just went through the latest Y Combinator batch of companies. There’s nearly 200 companies that launched out of there. And a lot of them are focused on a lot of the world in which we live now for remote working, for video, for all different things that are just a different environment. So it’s very different than it was a year ago in terms of just overall feel, you obviously can’t go and meet with companies in person anymore, unfortunately. And so that makes the job a little bit harder, but there’s opportunities in it too. And so I think everyone is getting their footing back to figure out what those opportunities are at this point.

That’s a great segue for me to ask the last question I wanted to ask, which is about Slack, a company you’ve invested in. I have the perspective that Slack can be negative for some organizations, and mostly that CEOs will end up cracking down on it because they see it as something that takes away any hesitation you have in normal communication. And you end up fighting with your co-workers and saying things you wouldn’t say, and CEOs are spending a lot of their time responding to drama versus actually working on getting stuff done. Obviously there’s a positive component for workers being able to voice their opinions in ways they couldn’t before and organize, but if you think about it from a CEO perspective, sometimes it can be a bit of a mixed bag. So would you acknowledge that there are some of these issues inside Slack and how do you think it gets through them, or do you think it’s just going to be part of working from now on?

I read your Slack lash newsletter and I would say that it’s, of course not the first Slack lash, there’ve been multiple Slack lashes. It’s such a great word that slots in so nicely with that. But yeah, I mean, my viewpoint on this, and as you note, obviously I have my own biases. I was an investor in Slack when I was still a private company. I was a board observer there and we remain investors in Slack, but I don’t have any inside information about what they’re doing these days. But I would say taking a step back, it looks like that these are challenges and opportunities for new companies that are emerging like Slack. And I think that you’re seeing in the world that we were just talking about, in the Covid world, Slack has been a very, very positive tool for many companies, because how on earth are you going to operate communications-wise if you don’t have a tool like Slack.

But there are real side effects of people being connected all the time and being in channels and all of these new paradigms that Slack has helped create. And how you do that, to me, it boils down to, I think you need to have a culture that’s led from the top that instills the right sort of elements to make sure that employees are treating each other respectfully. And I don’t think that this is unique to Slack, I think that this is something that you’ve seen in the past over email, you’ve seen over IM and all the other tools, and Slack’s not going to be the last of them either, you’ll see things in the future, I’m sure, that have some of the same challenges. I do think it’s a unique time because again, we’re living in a world where we’re all remote and these are the tools that are being used more than ever.

And it’s faster perhaps than it ever has been over a tool like email, which is good and has side effects to it too, which are playing out now, sort of as you’re noting. But again, I think that the companies will figure this out. I think that this is something that, again, has to be led from the top down from a culture perspective, to make sure that people are treating each other with respect, and that communications lines remain open and that dialogue remains open. And I think that people will figure that out. This is the early days of these types of new tools. And again, I have to wonder what it was like back in the day when email rolled out within organizations and were people up in arms? Were managers up in arms because no one was talking to each other as much in the office anymore, or people were taking advantage of being able to communicate at night versus just in the office environment? So I think that all of these things have different nuances to them given that they’re different technologies, but this is the latest one.

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