Technology and business forecasting is hard. I get that. That is one reason I try to avoid it except, of course, for fun or to get attention. But the one thing that continues to perplex me is why pundits keep coming back to one specific well: that Apple is doomed.
The latest is surrounding the iPhone X as somehow a portend of the inevitable demise of Apple. In Fortune, Mohanbir Sawhney, a professor at the Kellogg School of Management, writes:
This means nothing short of redefinition of the personal electronics that matter most to us. As AI-driven phones like Google’s Pixel 2 and virtual agents like Amazon Echo proliferate, smart devices that understand and interact with us and offer a virtual and/or augmented reality will become a larger part of our environment. Today’s smartphones will likely recede into the background.
As we have seen, when the vector of differentiation shifts, market leaders tend to fall by the wayside. In the brave new world of AI, Google and Amazon have the clear edge over Apple. Consider Google’s Pixel 2 phone: Driven by AI-based technology, it offers unprecedented photo-enhancement features and deeper hardware-software integration, such as real-time language translation when used with Google’s special headphones.
Similarly, the Amazon Echo enables natural conversations through the Alexa virtual agent. Next-generation devices will use AI and deep learning to recognize our voices, faces, and emotions. We will move from touch to touchless interactions and we will move from software apps to AI-powered skills. Just like the App Store, Amazon has created an Alexa skills store for third parties to offer skills that enable the Echo to do everything from set your kitchen temperature to play Jeopardy with you. “There’s a skill for that” will apply to more and more consumer needs.
The shifting vector of differentiation to AI and agents does not bode well for Apple.
The story is that, unlike Google and Amazon, Apple have fallen behind in AI and that is the thing that matters for future innovation. Ben Thompson chimes in doubting that phones are going to recede into the distance and that it isn’t clear how all this matters for Apple’s durable advantages.
What I want to talk about here is the entire premise of the argument that Apple is behind in AI. One issue is that it is hard to define what being behind and being ahead in AI is. AI is not a single dimensional thing but has a number of narrow areas where some companies do better than others. Google are ahead in translation and serving up search results. Amazon is doing very well in speech recognition. While Facebook is ahead in ad targeting (recent policy discussions aside — remember the Russians spent only $50,000 to get a reach of 146 million Americans meaning that something interesting is going on under Facebook’s hood). On other dimensions, the advantages rest with a whole host of start-ups which are never on anyone’s radar when talking about AI ‘leadership.’
Despite all of this, Apple, even though it doesn’t advertise technology as necessarily AI or not, is clearly leading in many areas. Fingerprint recognition is second to none. Face recognition and processing is, by all accounts, off the charts. My watch knows magically which app it should have open when I lift it to look at it. And it is hard to list Google as having any advantage at all in photography. There is AI going on there and in terms of consumer products it is well ahead of anyone else.
What Apple have not done is advertised AI supremacy or told the world they are AI-first (that is, they are pushing AI above all else). By contrast, with its Alexa, Amazon has marketed itself as AI and, to be sure, Echo devices seem closer to the AI we have imagined from popular culture. In reality, it is just good design and AI-drive speech recognition tacked on to what is a very ordinary looking app platform (the so-called skills). You can look at that and say what a great magical product it is, but it is hardly an indicator of some AI supremacy.
In summary, even if we can define what being behind in AI is, Apple is far from behind and is likely ahead. Moreover, regardless of that it is far from clear that AI is a source of competitive advantage — that being great in AI is what will sustain business innovation in the future. Apple are the most valuable company in the world for one reason and one reason only — their strategy is to focus on the consumer experience. No one was lining up for a Pixel 2. No one was lining up for the latest Echo (or getting up early to order it). But for the iPhone X, there were lines and 3am bleary eyes. And they weren’t from AI enthusiasts but consumers.