It's Apple's Vision Pro, The Rest of Us Just Live Here
With the Vision Pro, Apple is showcasing a product that is magic. But behind the glitter is a dangerous empire that is placing all of America at risk.
Welcome to BIG, a newsletter on the politics of monopoly power. If you’d like to sign up to receive issues over email, you can do so here.
Today I’m writing about the two major events this year for Apple. The first is the release of the remarkable Apple Vision Pro, and the second is a likely antitrust suit against the computing giant. How augmented and virtual reality, aka ‘spatial computing,’ reshuffles our society will in many ways be up to antitrust enforcers.
If we don’t handle Apple properly, not only will we deploy what should be a wonderful technology in soul-crushing ways, but we may even bring closer a war with China. On the other hand, nothing is inevitable, and this new platform could actually reverse a lot of the bad dynamics we see in our culture. So yes, the stakes are high.
To understand the full extent of Apple’s power, I’m going to discuss my brief experience with the Vision Pro, sketch out Apple’s history, and then walk through the new device’s supply chain, to where the sophisticated M2 chip that powers this headset is made.
Plus, at the bottom of this issue I have an email from an energy investor on the case for consolidation in the oil patch. Before I get to that, I have a request. I’m thinking of launching a podcast with a very cool partner, but neither of us have any experience producing one. If you are a podcast producer and are interested in working with me, send your resume my way. We’re in the early stages of this new project.
And now…
The Apple Vision Pro headset looks like a genuine technological inflection point. It’s hard to overstate the hype about the device. ‘Absolutely Bonkers.’ ‘I normally don’t call tech things sort of magical or surreal like this but...’ ‘The most mind-blowing piece of tech I’ve ever tried.’ ‘Wearing the Vision Pro for hours on end will call into question what it means to compute, but also, what it means to live in the real world.’ And on and on…
I want one. I probably won’t buy one for awhile, for reasons I’ll get into, but it’s clear that Meta, and then Apple, have legitimized a whole new layer of computing with fantastic world-changing possibilities. And if there’s a killer application, then augmented and virtual reality, aka ‘spatial computing,’ will likely become ubiquitous. The most hopeful commentary came from YouTuber Cleo Abram, who pointed out that the technology, if developed properly, could allow us to reconnect with one another and end the epidemic of loneliness that is so pervasive in our fragmented atomistic and monopoly-dominated society.
If targeted advertising and polarized consolidated media and social networks cause us to become alienated from one another, then rich spatial computing could do the opposite. The emphasis, of course, is on the word ‘could.’
There’s another and much darker possibility.
If we don’t activate antitrust law, and other forms of anti-monopoly policy to embed social controls in this platform, then spatial computing will cause harms we cannot imagine. We have visions of what that could look like, such as the dystopian surveillance of Minority Report or novels like Brave New World, but we need only look at how smartphones wrecked our attention spans by putting a de facto endless slot machine and digital leash in four billion pockets to see how to roll out a technology in the wrong way.
But first, before getting to concerns, let’s celebrate the Apple Vision Pro, and the Meta Quest, which are actually attempts to innovate from firms that have been extractive for far too long. The Apple Vision Pro is not the first product in this space, Tim Cook’s firm is following others, most notably Meta, which bought Palmer Luckey’s VR technology innovator Oculus in 2014 for $2 billion, and then dumped tens of billions into research. These investments depressed Meta stock for a few years. But Zuckerberg soldiered on, and one reason is because of anti-monopoly policy. Meta was blocked from acquisitions, and couldn’t expand into payments. So Zuckerberg chose to build, in some ways because he had to create a new market instead of buying an existing one. Then, Apple saw Meta’s entrance in spatial computing as a spur to invest, creating a device that is quite different than the Quest, but which has drawn lessons from its predecessors.
Spatial computing, in other words, is a competitive space developed because the government forced our large corporations to invest. It’s not a highly competitive space, of course. Spatial computing is a duopoly, like the iPhone and Android, and acquiring and exploiting market power is a core part of how the existing players are thinking about their strategy. Already, Meta has successfully rolled up app developers, with the goal of monopolizing its market segment, beating the Federal Trade Commission in court. But spacial computing is not like Google search, which is 95% of the market. Indeed, to highlight that there’s competition, Meta CEO Mark Zuckerberg did a little trash talk, going on Instagram with a video panning the Apple Vision Pro in favor of his own virtual reality headset. “I don’t just think that Quest is the better value,” he said. “I think Quest is the better product, period.” It was actually really great to see this dynamic, both competition and mind-blowing innovation in a new technology paradigm.
What’s fascinating is that at the same time Apple brings this product to market, the government is gearing up for a major antitrust case against the device maker. This might not make sense at first blush. It brings to mind a comment by Citibank CEO Walter Wriston in the 1970s on the ‘nonsense’ suit to dismember IBM, where Wriston argued it was like saying, 'Let's break up the Yankees—because they are so successful.’”
But actually, now is the perfect time to address the dangerous concentration of power that is Apple and that the Vision Pro represents. In the 1970s, the government did take on IBM, as well as AT&T, which were the two most technologically sophisticated corporations in America, and the result was an explosion of innovation in Silicon Valley for the next three decades. Something similar would happen as the government goes after the big guys today.
And that brings me to the question, what’s the market power problem with the Apple Vision Pro?
Well let me start with the possibilities of the technology. A few days ago, a contact from across the country was Facetiming with me on the Vision Pro, which felt a bit like being in the same room. It was a mind-melting experience, and it’s pretty clear that in a few years we’ll be able to just feel like we’re physically together. That’s very cool, and could help us stay connected to friends and family in a way we can’t do now.
But these possibilities work both ways. My contact then tried to turn on a movie, to show me a scene that would illustrate the capacity of the Vision Pro. Only, he couldn’t, because that’s not allowed by Apple, unless I paid $3.99 to rent a movie he already owned. So we didn’t watch the movie scene, because Apple didn’t let us. Now, that’s not necessarily a bad decision on Apple’s part, I believe in copyright. But think of all the other rules Apple or Meta could impose on behavior if it so chose in this environment, and the levels of surveillance, censorship, and advertising that is now possible. That’s a level of control that is almost beyond our capacity to imagine. Also, given the business and design applications of spatial computing, think about what that implies for Apple’s ability to control commerce.
Is Apple going to engage in dangerous rule-setting for our use of the Apple Vision Pro? We don’t know. Apple probably doesn’t know. But what we know about Apple is problem one. And that is…
(1) Apple Is a Control Freak
When the iPhone launched in 2007, it was magical and life-changing. Over the course of the next ten years, it unleashed new forms of commerce and culture, from the sharing economy to ‘swipe right’ in dating. I’m no expert on kids, but this device shortened all of our attention spans, so I can’t imagine it did good things to the younger generations. But it certainly shaped them.
The social earthquake wasn’t obvious at first, and neither was the importance of the device. For that reason, when Apple exerted ironclad control over the iPhone ecosystem and the iPhone app store, it wasn’t a big deal. In fact, Apple’s market power helped break new cool devices into a stagnated mobile phone world, dominated as it was by AT&T and Verizon. People loved Steve Jobs and his visionary ideas of the right way to use technologies, such that Occupy Wall Street gatherings in 2011 actually held memorials to Jobs when he died. Jobs, however, was a maniac about control, and he embedded that instinct in the company he built. And as the smartphone became THE gateway to commerce, Apple’s control freak nature extended, almost accidentally, over much of the economy.
All sorts of app developers who made products for the iPhone faced the wrath of Apple over the next fifteen years. And as addiction and other social disorders came to light, Apple’s control freak nature caused obvious harm. By 2020, Apple was dictating to government leaders all over the world how the smartphone maker would allow their health departments to manage contact tracing during a pandemic. That’s too much power. Far too much.
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Here’s a headline from a few years back that makes the point in a different way. In 2019, Apple got rid of apps that are directly about promoting the health of children because these apps competed with the Apple Screentime feature. Indeed, Apple CEO Tim Cook had to trudge to the Antitrust Subcommittee in Congress, where Rep. Lucy McBath grilled him over the firm’s choice to block these products.
Such behavior is leading to policy action. For instance, late last year, a messaging service called Beeper found a way to allow Android phones to use Apple’s iMessage service, which Apple subsequently blocked. This move prompted Congressional outrage, and probably moved up the Antitrust Division’s timeline for a case. Republican Commissioner of the Federal Communications Commission Brendan Carr criticized Apple, and noted that the decision may have been a violation of his commission’s rules on accessibility.
The Beeper situation was egregious not because it was so problematic in and of itself, but because it pointed to the longstanding behavior that Apple engaged in to prioritize its own interests at the expense of its users.
From the Apple Watch to the iPhone, the strategy of Apple is to exclude rivals from its ecosystem, in part for security and safety reasons, but also because it enables the firm to exploit its market power. Given this strategy, the Apple Vision Pro is likely to be deployed like the iPhone, and not the much more open personal computer market of the 1980s. Apple and Meta will wall off the augmented and virtual reality world - that is their strategy. I mean, if Apple doesn’t let a small firm interoperate with its iMessage product, then how likely is it to allow a rival device maker to interoperate with its Vision Pro ecosystem?
Much as Google controls Android phones and Apple controls the iPhone, Meta will control low cost open high-surveillance forms of spatial computing, while Apple will lock down the luxury high productivity spatial computing market. But the problems go far beyond excluding rivals. As with smartphones, there are other reasons to be concerned about these kinds of devices, with researchers already flagging that they could cause “visual aftereffects, lapses in judgments of distance, induce simulator sickness, and interfere with social connection.” The inability to tinker, modify, or have a variety of options increases this risk dramatically. If Apple makes a mistake, then everyone who uses an Apple Vision Pro suffers… (Incidentally, if I were a member of Congress, I’d do a document request to both Meta and Apple on any internal documents on possible health harms of these devices…)
Anyway, that’s the theory, the market structure isn’t set, so this is the best moment to ensure an open and competitive dynamic, versus a monopolistic one. Of course, I don’t think Apple wants to cause harm, or is necessarily operating out of a desire to thwart all competition. Many Apple executives genuinely believe their absolute control is a net social benefit. But whether good faith or not, Tim Cook’s stance is, it’s Apple’s world, we just live here.
(2) Apple Limits Innovation Outside of Apple
A new computing platform like augmented reality should be a dream for innovators, bringing the ability to digitally edit the real world in 3D. Yet, the new Apple Vision Pro launched with just 600 apps, and did not include apps from Netflix, Spotify, or YouTube. Why? Well, because no one trusts Apple, not even the big guys, to allow them to build inside Apple’s ecosystem. I’ve mentioned the apps, but Apple does this in lots of other areas, like payments, the use of the iPhone as a wallet, and even in the design of its platform.
There’s a physical element to the monopolization as well, which is especially important since the Apple Vision Pro is about interacting with the real world. Take repairing or building on top of physical Apple devices. A key part of innovation is the ability to tinker. The original Apple II computer, for instance, was built on top of parts sold in an open market, where hobbyists would exchange ideas, software, and hardware in the hopes of doing something cool. But Apple today is downright hostile to letting anyone else tinker with its technology in ways of which it disapproves. The most obvious example is its stance on allowing anyone but Apple repair its products.
Just six months after supporting customers' right to repair their devices in California, Apple is currently lobbying against a right-to-repair bill in Oregon, marking the first time the company has outlined its stance on right to repair during a public hearing, 404 Media reports.
John Perry, Apple’s principal secure repair architect, told the legislature: “It is our belief that the bill’s current language around parts pairing will undermine the security, safety, and privacy of Oregonians by forcing device manufacturers to allow the use of parts of unknown origin in consumer devices.”
The difference between Oregon's and California’s bills is parts pairing, a practice whereby repair parts are tied to a specific device and must be unlocked by Apple or an Apple-authorized repair shop before they can be used. That means not only can you not use aftermarket replacement parts for your device, but you also can’t just take the screen or battery out of one iPhone and put it on another and have it work without the intervention of an authorized repair facility.
While technically Apple would be allowing customers to repair their devices, parts pairing means it still has control over that process. The California bill allows for parts pairing, the Oregon one does not.
Apple throwing its weight around to block right to repair laws is consistent with the firm’s aggressive political work to defang all rules designed to allow tinkering or interoperability with Apple products. Again, the stance seems to be, it’s Apple’s world, we just live here.
The last problem with Apple scares me the most, and while unrelated to the device experience, it is linked to Apple’s absolute control freak nature.
(3) Apple Caused Our Semiconductor Crisis
From a consumer standpoint, it’s easy to love Apple. Yeah there are some problems here and there with how the smartphone maker operates, but hey, that’s just the way things are. But the biggest risk of how Apple operates too often goes unmentioned, which is Apple’s role in placing our semiconductor manufacturing capacity in Taiwan, an island that could be invaded by China at any point. Such an invasion, because of this chip dependence, could literally shatter our society in a way that would be far more catastrophic than the 2008 financial crisis. In other words, that nifty Apple Vision Pro is powered by an M2 chip manufactured in a semiconductor fab with thousands of Chinese military missiles pointed at it.
And Apple isn’t just a side player that happens to buy chips where everyone else buys them. Apple is the biggest semiconductor buyer in the world, with a direct role in pushing to have the United States offshore its production of these critical products. Tim Cook, who took over for Steve Jobs, is not a designer, but a logistics and operations expert. And he is as control oriented in supply chains as Jobs was in the consumer experience.
Last week, several researchers, including semiconductor expert Todd Achilles, released an important report on exactly this problem. The report was broadly about how the U.S. chips industry fell apart, but Apple’s role as a key organizer of our unstable supply chains is clear. “Apple dominates both ends of the semiconductor value chain,” they wrote. It “maintains tight control over product distribution, and chases away category competitors.” The researchers cited this article from The Information, which describes how Apple and high-end chip monopoly producer Taiwan Semiconductor have a deal to box out rivals from advanced semiconductor production. Apple is by far TSMC’s largest customer, and is driving where chip fabs are placed, not the Taiwanese giant.
The more you look at the details, the more dangerous the Apple-TSMC relationship looks. Apple didn’t just get better pricing, but “bought TSMC’s entire 3nm production capacity for 2023,” giving it a year’s head start over rivals, and forcing rival chip buyers to work around Apple’s “preferential place in line” and the availability of TSMC’s fabs. This deal is “without compare in U.S. industry,” like having one manufacturer buy the nation’s “entire supply of aluminum for a year.”
In high end logic chips, Apple guarantees its own competitive advantage over American rivals by ensuring that Taiwan monopolizes semiconductor production. But in other areas of chipmaking, the firm’s Walmart-like scale and penchant to squeeze out costs relentlessly also fosters bottlenecks. But this instability is, paradoxically, good for Apple. “A brittle supply chain and chip scarcity increase Apple’s market power,” Achilles noted, “by putting smaller, second-tier competitors under greater business continuity risk.”
It gets worse. “The consequence is a key national security vulnerability for the U.S., since TSMC has pledged to retain its key fabs in the hot zone of Taiwan. Without Apple’s help, it is unlikely it would be able to do so.” Apple continues to act badly, even as the U.S. taxpayer is shelling out $60 billion through the CHIPS Act to try and bring some semiconductor fabrication back to the United States.
In other words, the Apple Vision Pro, with its breathless feature set, is built in a way designed to foster a hot war with China. In the 1970s, IBM and AT&T, for all their faults, never fought aggressively to offshore key technologies to our enemies and place America itself at risk. Apple does so as a business strategy.
So yes, Apple really is the bad guy.
Should We Be Living in Apple’s World?
From the American Revolution to the Civil War, America basically shifted from medieval technology to railroads, telegraphs, steel, oil, the machine gun, mechanized farm machinery and submarines. And we did it without big business, which didn’t really appear in meaningful ways until fifteen years after the great conflict over slavery.
Scientific and engineering development isn’t a function of corporate size and power, but the collective knowledge of our society and how we organize it. The internet is a massive scale network, the biggest in human history, and no one owns it. By contrast, Apple, Meta, Microsoft, Google, and Amazon have control over immense swaths of our knowledge base, but there is no reason for that except a political choice to allow a regulatory scheme that concentrates power.
To that end, the Apple Vision Pro is indeed a vision for what a society could look like. It’s brilliant and beautiful, but locked down. Meta has a different vision, one built on video gaming and surveillance. These devices look amazing, and spatial computing may end up being as important as the smartphone. But do we need to limit ourselves to the instincts and political control of a few people in California? Do we need to let them choose where we place factories for semiconductors, some of the most important and difficult to produce technologies in existence?
We answered those questions in 2007, before the new anti-monopoly movement was born. And we got it terribly wrong, turning what should have been a glorious future of supercomputers in our pocket into a world of digital leashes. But this time, we don’t have to let that happen again. This time, we know better. This time, we’re paying attention. The Antitrust Division, the FCC, Congress, and states could actually prevent Apple from excluding rivals from its ecosystem under the pretext of safety or security, and force openness in products that Apple has kept closed. I could see Apple forced to allow rival app stores, make its systems far more transparent to developers, license its operating systems to new firms that want to compete, split its semiconductor purchases across different non-Taiwanese firms, or even spin off lines of business.
The Apple Vision Pro is extremely cool. Let’s make it clear that how this technology gets deployed is up to more than the engineers and executives at Apple.
Thanks for reading! Your tips make this newsletter what it is, so please send me tips on weird monopolies, stories I’ve missed, or other thoughts. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation, and democracy. And consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.
cheers,
Matt Stoller
P.S. I’m going to start trying to share emails from readers, because you all have so many interesting things to say. I used to publish these letters a lot, but stopped for no particular reason. Anyway, I got this great comment from an investor about the last BIG issue on consolidation in the oil patch, and figured I’d share it.
Long-time reader first time caller. Really enjoy your newsletter, and I read it with the context of oil and gas in mind (as I work for an investment manager in the space). We’re actually pretty vocal in the consolidation theme in the sector, having pushed for it for a number of years. You bring up some interesting and valid points in your writeup, and I figured I’d share my perspective as you ruminate on this further.
You’re very correct in your history of high finance dominating the industry vs. the mom and pop style wildcatters from times prior, but I generally find this to be a positive. On a market share basis, the E&P and Oilfield Service industries rank among the most fragmented across the United States. With demonstrable cost benefits of increased scale, this fragmentation leads to inflated average costs per barrel, raising the price at which companies would be incentivized to grow production. Said another way, because E&Ps are price-takers, the competition generally works against the consumer. While large well-capitalized operators are able to ride economic cycles and are price agnostic, smaller E&Ps rely on higher pricing and face outsized risk in periods of low pricing. This is dangerous given the inelastic need for both transportation fuels and electricity. (note: in no world do I think the industry would be better if it closer resembled the PC or smartphone industries, but there’s an immense amount of consolidation before that could even be a concern)
As you pointed out, companies committed to be less price-responsive after the blowup in 2020. This is generally positive as well, as it should lead to a less volatile energy economy. The stop-and-start mentality of small operators chasing price is why we get the booms and busts that are famously associated with the industry (which comes with a much more uncertain employment outlook for oilfield workers). But also as you pointed out, we’re at record levels of production in the US. This is largely due to efficiency gains led by the large operators. Growth fueled by optimizing previously mismanaged assets is a much healthier form of growth than the get-rich-quick-because-oil-is-$150 playbook.
Another large component of these commitments is the public perception of the industry. Nobody wants to hear that an oil company is increasing production, even if it’s truly at the benefit of the general populace. However, environmentalists should be encouraged by the consolidation in the space, because it allows for measurable emission reductions. Per Bloomberg, “86% of [58 recent oil and gas] deals by volume were initiated by companies with stricter climate goals.” The doctors and attorneys that used to personally invest in oil wells had no interest in paying for emissions reduction initiatives, which, granted, is legitimately difficult to do if you are sub-scale. Therefore, putting assets in the hands of high-visibility public companies does more for the environment than leaving them in the hands of indifferent operators, or worse, divesting them into the hands of those who simply don’t care.
For the final piece, while scale does give increased leverage against service companies, most operators choose to work with multiple service companies at any given point in time to alleviate any concentration risk. Additionally, while the service companies represent the men in the field doing the actual work, an outsized share of the geologic research, well design optimization, and production innovation is done at the E&P level. Therefore, incentive to improve will always exist at these companies, as it will at service companies, who constantly strive to provide better and more efficient services to their customers and can in tandem demand higher payment. Only major objection here is your definition of the $2B in synergies as “cuts to supplier payments.” While a sliver of that number is likely improved pricing power, Exxon and Pioneer both outline what they believe the synergies are in the merger deck, and the lion’s share is efficiency-driven production improvements.
I’m pretty skeptical of the synergies argument, since if there were real efficiencies in geology or geophysics the big guys would be chasing that instead of merging. But I suspect the climate change point is correct, as the big E&P players are willing to invest in, say, methane control while a random person who owns a few producing wells would likely not.
Gak! I had to pause my reading. Every single tech advance in the past century from automobiles to TV to Jet Planes to antidepressants has ALWAYS been touted as "bringing us closer together." I need a break. Appreciate your work Matt!
Matt, don't get captured by the hype. A very small number of people will buy and walk around with goggles on their face.. It's technically appealing but like the meta verse, it's anti-human and will suffer the consequences thereof.