Ben Cohen (2:31)

Well, I mean, gosh, the hardest thing for him is how do you increase value for a company that's already trading at $4 trillion?

Ryan Knudsen (2:41)

When Tim Cook took over as CEO, there was one big shadow, that of Steve Jobs. And now when John Ternus takes over, there are two big shadows.

Ben Cohen (2:49)

Two big shadows. It's hard. You know, stepping into the shoes of these two predecessors is. Gotta be tough.

Ryan Knudsen (3:01)

Welcome to the Journal. Our show about money, business and power. I'm Ryan knudsen. It's Thursday, April 23rd. Coming up on the show, Tim Cook's legacy at Apple and the new guy set to replace him

Ben Cohen (3:24)

foreign.

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Ryan Knudsen (4:35)

When Tim Cook took over as Apple CEO 15 years ago, he had some big shoes to fill. Steve Jobs had redefined tech with the imac, the ipod, and eventually the iPhone.

Ben Cohen (4:49)

These are not three separate devices. This is one device. And we are calling it iPhone. Jobs was the iconic technology CEO. He had defined the way humans interact with computing devices for 30 years, almost, maybe more.

Ryan Knudsen (5:20)

Here's Cook talking about Jobs, who died of pancreatic cancer shortly after Cook took over.

Tim Cook (5:26)

His name is still on the door

Ryan Knudsen (5:28)

and

Tim Cook (5:30)

we

Ben Cohen (5:33)

still, if you think about

Tim Cook (5:35)

the things that Steve stood for at a macro level, he stood for innovation.

Ben Cohen (5:40)

So that was quite a legacy for Tim to match. And he didn't try, he didn't try to be the innovative product visionary that Jobs was. He handed that off to others and he really focused on operations.

Ryan Knudsen (5:57)

Before becoming CEO, Cook made a name for himself at Apple by overhauling its supply chain.

Ben Cohen (6:04)

When Cook came in, the supply chain was very much a weakness for Apple. And he turned that around building, you know, probably the most impressive supply chain humanity has ever built.

Ryan Knudsen (6:14)

One of them. Cook concentrated most of Apple's manufacturing in China. Why was that a good idea?

Ben Cohen (6:22)

For Apple, what China offered was cheap labor, for one. But over time, it also offered skilled labor. Two of two things, right? There's not just an army of rural peasantry that can come into the factory and help at kind of iPhone assembly time. There's also a very large workforce in China and Taiwan and a lot of these places of expert machinists the kinds of people that we don't have in the United States anymore because we don't do those things.

Tim Cook (6:55)

You find in China the sort of the intersection of craftsman kind of skill and sophisticated robotics in sort of the computer science world. That intersection which is very, very rare to find anywhere.

Ryan Knudsen (7:15)

Cook's decision to use China as a manufacturing hub helped establish China as the center of the global electronics supply chain and contributed to China's rise as a dominant economic superpower. It also helped introduce Apple to a whole new customer base and turned China into Apple's second largest market as they

Ben Cohen (7:34)

were building their devices there. Eventually they work out a deal with China Mobile that unlocked hundreds of millions of potential subscribers in the luxury segment, in the expensive premium segment where they play. Apple is very powerful.

Ryan Knudsen (7:54)

As CEO, Cook found ways to squeeze more money out of Apple's growing customer base.

Ben Cohen (7:59)

There's a couple different things happening in terms of the services business first off, and the most lucrative that nobody really appreciates is Google search in the Safari browser. Google pays Apple over $20 billion a year to be the default search in the Safari browser. That's somewhere around a fifth of the company's profits, which is really remarkable when you think about it. Second is the App store, which games ChatGPT. All these apps you download and sometimes subscribe to. Apple takes a cut. It takes a large cut. This is a huge stream of revenue.

Ryan Knudsen (8:41)

Cook's strategy transformed Apple into a money making machine. During Cook's tenure, the company's revenue roughly quadrupled to more than $400 billion a year. And with all that cash, Cook started doing something that Jobs said he despised. He launched a massive stock buyback program.

Ben Cohen (8:59)

This company was generating so much cash you could never spend it. So what Tim Cook did is he just started buying back shares in huge amounts.

Ryan Knudsen (9:09)

The buyback program helped increase the company's stock price. Under Cook, Apple became the first company ever to hit a trillion dollar market capitalization in 2018. And Cook himself was known for another big first.

Ben Cohen (9:23)

In 2014, he wrote a landmark essay saying he was proud to be gay. That made him the first openly gay CEO of a Fortune 500 company.

Ryan Knudsen (9:33)

Here's Cook talking about what he thought his announcement would mean for the gay community.

Tim Cook (9:37)

I need to do something for them and show them that you can be gay and still go on and do some big jobs in life, that there's a path there. And so that is the reason I did it. I did not.

Ryan Knudsen (9:51)

But for as much money as Cook made for Apple, he does have his

Ben Cohen (9:54)

critics I think a lot of people around Apple are more mixed. And they would say, you know what? Tim was brilliant at scaling Steve Jobs company, taking the inventions of the Jobs era primarily at the iPhone, bringing it everywhere around the world, attaching a lot of services to it that would make more money rolling out ancillary devices. AirPods, the watch to some degree. But those people would say, he doesn't have a legacy of innovation.

Ryan Knudsen (10:26)

One area Apple has also lagged in is artificial intelligence. While other tech giants like Google and Facebook have spent billions of dollars building AI models, Apple hasn't Siri.

Ben Cohen (10:40)

You know, look at the modern chatbots they are. If they are human, then Siri's a Neanderthal.

Ryan Knudsen (10:46)

Yeah. With all due respect to Siri, she's a dumb. Dumb.

Ben Cohen (10:49)

She's pretty. Yeah. Not. Not very smart. And they're trying to update that, but they're playing from behind.

Ryan Knudsen (10:57)

Apple recently struck a deal with Google's Gemini to overhaul Siri and make it smart. Cook did make some important changes to Apple products under the hood, though.

Ben Cohen (11:10)

One innovation that is underappreciated by a lot of people outside the industry is Apple silicon. The chips in the devices are all Apple chips, and that's been true for iPhones for a long time. It wasn't true for Macs. Macs ran on intel chips until 2020 when they started ripping them out and putting in Apple chips. Apple chips are really great.

Ryan Knudsen (11:31)

Another thing that Cook will be remembered for is his diplomatic skills.

Ben Cohen (11:35)

He played diplomat. He certainly built a personal relationship with Trump over the years and has used that to protect the company and its bottom line.

Ryan Knudsen (11:46)

In 2024, Apple stock plummeted roughly 20% after President Trump announced sweeping tariffs against Chinese imports. Cook was able to get Apple a carve out after talking with President Trump and promising to increase the company's U.S. investment.

Ben Cohen (12:01)

In the case of Apple, you know, he made these threats. The company's stock got hammered because people thought the price of the iPhone was going to skyrocket. And Cook was able to escape that relatively painlessly.

Ryan Knudsen (12:15)

And now Cook is stepping away. Coming up, John Ternus and the challenges he'll be facing.

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Ben Cohen (12:50)

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Ben Cohen (12:54)

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Ryan Knudsen (13:12)

John Ternus will take over as CEO of Apple on September 1st. He's been at the company for 25 years.

Ben Cohen (13:19)

John Ternus is a 50 year old hardware engineer, mechanical engineer by training. He's been with Apple since 2001. He's an Apple lifer. Four years after he graduated, he came to Apple and steadily rose up the ranks. He's central casting for corporate CEO just to look at the guy. Tall, thin, good looking and what is

Ryan Knudsen (13:40)

he known for at Apple? What was his claim to success that got him to this job?

Ben Cohen (13:45)

Most recently he ran hardware engineering for all of Apple's products. Historically, Apple has the people who design the products who want it to have a certain look and feel and it has the hardware guys who figure out how to make the design team's dreams come true. He's the one who sort of makes the products come alive on that team.

Ryan Knudsen (14:09)

What's Ternus's reputation like as a manager?

Ben Cohen (14:12)

Super nice guy. Everybody loves him. You won't find anyone saying they dislike him.

Ryan Knudsen (14:16)

That sounds quite the opposite of Steve Jobs who definitely did not have a nice guy reputation.

Ben Cohen (14:22)

Yeah, and Apple during his day had a lot of noxious personalities. That is not Tim Cook. That is not John Ternus. Everybody who has worked for the guy, you know, he runs efficient meetings. He's in the weeds in a way that junior employees really respect. He doesn't want to talk to managers about a problem. He wants to talk to the employee who's dealing with the problem. He wants direct information and he solves pro. You know, they go into the meeting, he keeps it focused, let's not waste time. He gets to a solution. He drives him hard, but he drives them in good directions. And I think they really respect his competence. That really wins him a lot of fans internally.

Ryan Knudsen (15:06)

There is a big challenge that Cook is leaving Ternus with. What to do about AI. What's Apple's place in the AI world right now?

Ben Cohen (15:16)

I think they're still trying to figure it out is the big problem. So Apple has a few self imposed disadvantages. If they were going to try to play the AI game that everyone else is playing. One is that they care about the bottom line. Tim Cook wants to buy back shares. He wants to maximize profits for shareholders. He does not want to spend hundreds of billions of dollars building data centers and buying GPUs from Nvidia to build a frontier model to compete with Google and OpenAI and anthropic and these companies, that's not Apple's bag.

Ryan Knudsen (15:52)

The other thing that presents challenges for Apple, their commitment to privacy. Apple has a ton of personal data on its users, but company policy prohibits them from using it.

Ben Cohen (16:02)

And you talk to people inside Apple. That's actually frustrating for them because there's a lot of stuff they'd like to be able to do, but they don't have access. Right. Your stuff's encrypted. They have to jump through lots of hoops to get permission to do anything with data, to train a model, these kinds of things.

Ryan Knudsen (16:19)

How big of a challenge is that for Apple then? I mean, are they at risk of being left behind in the AI revolution?

Ben Cohen (16:27)

Sure. A lot of people argue that. A lot of people say that could happen. Apple's argument is, you know, everybody take a breath. We still have time. You know, on device, AI is coming, we have the best chips in the world, and in the meantime, none of you are going to switch to any other device. You're still going to buy iPhones. Right? So what are we really losing here?

Ryan Knudsen (16:53)

So John Turner is the hardware guy. How do you think he's going to navigate Apple through this AI race?

Ben Cohen (16:59)

Great question. That's. Nobody knows. If Apple actually totally whiffs in AI, then you could see a world in which five years from now, we actually are starting to transfer to different devices. If this technology continues to advance and Apple doesn't advance with it, maybe there is another device we start to depend on, another company that we want to move to or, you know, are we going to be using apps in the future even, you know, you have a dominant product, you just keep riding that dominant product and you assume no one is ever going to replace your dominant product until they do.

Ryan Knudsen (17:38)

It sounds like there's a lot of pressure on John Ternus.

Ben Cohen (17:41)

That's the knock on him, if there is one, which is he's not known as a big risk taker internally, he's not known for taking big swings and, you know, hitting a grand slam on some product that he can take full credit for. His reputation is he's a very solid manager. He's a good leader, he's a good hardware engineer. He knows the products, he knows how to make them better. But has he invented anything really remarkable in his time with his team that has pushed Apple into a new market that demonstrates some sort of innovative streak that has been lacking since Jobs left? He hasn't demonstrated that.

Ryan Knudsen (18:26)

When Steve Jobs handed over the reins of Apple, he gave Cook some advice. According to Cook, Jobs said that Cook shouldn't ask what he would do, just do the right thing. In a recent interview with the Wall Street Journal, our colleague Ben Cohen asked Cook what his advice would be for his successor.

Tim Cook (18:44)

I would probably say the same thing because you can get kind of in paralysis if you start trying to port yourself into somebody else's thinking.

Ben Cohen (19:00)

Jobs was a unique individual and so is Cook. You know, Jobs was a product visionary. Cook is an operations genius. And each of them played to their strengths. Each of them created immense value. And I think Tim Cook is elevating Ternus because he wants this company to continue to build great devices. He just wants Ternus to be himself and build high quality products, which is what Apple has always been about. And you know, whatever those devices are going to be in the future, that probably is its future is really great

Tim Cook (19:39)

devices if you get the values right. If you keep the North Star in clear view, you may be blown off course a little bit, but eventually you will come back to the right path. And I have always found that to be true.

Ryan Knudsen (20:12)

That's all for today. Thursday, April 23rd. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Ben Cohen. Thanks for listening. See you tomorrow.

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