7 January 2020

Tech Nations


Welcome to Apple
A one-party state


The tech giants have as much money and influence as nations. So what if we reported on them like countries? What would Apple be? A liberal China…

In June 2017, about 100 employees of Apple Inc gathered at the company’s headquarters at 1 Infinite Loop, Cupertino, to hear a presentation designed to scare them witless.

Staffed by former members of the National Security Agency and the US military, Apple’s global security team played video messages from top executives warning attendees never to leak information.

“This has become a big deal for Tim,” Greg Joswiak, Apple’s vice president of marketing, said at the time. “I have faith deep in my soul that if we hire smart people they’re gonna think about this, they’re gonna understand this, and ultimately they’re gonna do the right thing, and that’s to keep their mouth shut.”

A secretive culture – bordering on paranoia – was first fostered by Steve Jobs, the founder of Apple, and then by his successor Tim Cook, who took over in 2011.

Apple employees typically sign several non-disclosure agreements (NDAs) per year, use codenames to refer to projects, and are locked out of meetings if they fail to obtain the appropriate documentation, former workers told us.

“Secrecy is everything at Apple,” one ex staffer said. “Many employees don’t like Apple Park [the company’s new headquarters] because it has very few private offices. Confidentiality on projects and the ability to step behind a closed door is vital.”

Another recent ex-employee said that security was weaponised across the company, with internal blogs boasting about the number of employees caught leaking and NDAs required even for non-sensitive or mundane projects. The employee described how they were once asked to read a negative story about the company and then identify the Apple insider suspected of leaking information.

Since becoming chief executive, Cook has doubled down on security, catching 29 leakers in 2017 alone, according to an internal memo leaked to Bloomberg in 2018 (the company does not publicly disclose such figures).

Yet Cook has also radically shifted Apple’s priorities, sometimes in directions that his predecessor would not have understood or condoned. Understanding what has changed at the company in the 3,015 days since Jobs died of pancreatic cancer is arguably more critical to understanding Apple in 2020 than identifying what has remained the same.

Since 2011, Cook, a quietly spoken 59-year-old from Alabama, has built Apple into the largest tech company in the world, with a market valuation of more than $1 trillion. More than two thirds of that value was accumulated after Jobs’ death.

Steve Jobs (left) and Steve Wozniak in 1977, launching the Apple II computer

He has achieved such stellar growth partly through the sale of iterative updates to Apple’s flagship iPhone and the launch of new products such as the Apple Watch. Even though iPhones continue to drive more than half of Apple’s revenue, sales are sputtering as the smartphone market reaches maturity. So Cook is spearheading the company’s biggest shift in more than a decade: a switch away from making devices to providing services that touch almost every part of our lives.

From Apple TV+ to Apple Music, from Apple Pay to Apple News+, Cook’s company is now the gateway through which millions of us live our lives. We watch movies, pay for groceries, read the news, go to the gym, adjust our heating and monitor our hearts through Apple services, which is now the company’s fastest growing division.

Living within this carefully curated ecosystem, soon to be bolstered by new augmented reality products, the company’s 1.4 billion active users have become less like customers and more like citizens. We no longer just live our lives on Apple’s phones, but in them.

Apple’s market valuation is roughly equal to the national net worth of Denmark, the 28th wealthiest country in the world. It has as many users as China has citizens. Its leader has a close relationship with the US president and other heads of state. In all but name, this is a superpower, wielding profound influence over our lives, our politics and our culture.

That’s why Tortoise has decided to report on Apple as if it is a country: the first instalment in a year-long project we are calling Tech Nations, which will cover all the main technology giants. Here, we’ll examine Apple’s economy, its foreign policy and its cultural affairs. We’ll dig into its leadership, its security operation and its lobbying spend. We’ll identify the executives likely to succeed Cook, and the areas where Apple is falling behind in the global tech race.

As Jobs might have put it, we’re trying to “think different” about the small computer company founded in a Los Altos garage back in 1976.


We have learned:


The People’s Republic of Cupertino

It may well be the most expensive metaphor ever built. In Cupertino, California, several sweaty miles away from Santa Cruz, is Apple Park, the headquarters of the tech company that has its logo on a billion iPhones. There is an actual park there, where employees can walk or cycle between the meticulous groves of apple trees and around a circular pool, although anyone else would be lucky to see it. It is surrounded by a great, glass, multi-storey ring of offices created by the architects Foster + Partners with help from Apple’s outgoing chief design officer, Jony Ive. The ring is a mile in circumference. It cost $5 billion.

Apple can afford such architectural extravagance. It is the company that stood against the tide and turned it; helping us all to realise that computers could be more than just beige boxes, that headphones could be white, that telephones can do everything. Its decisions have defined our digital – and daily – lives.

The Steve Jobs Theater, at the heart of Apple Park

But what is Apple Park a metaphor for? High-minded Apple enthusiasts might say that the ring represents an endless cosmic loop. Or perhaps it is a planet-scale equivalent of the circular home button on earlier models of iPhone. Visiting aliens can click it from space – and go home.

The truth, however, is that it represents what Apple has become: a secret garden with tremendously high walls. Most people who try to peer over the edge are summarily pushed back. Apple is a part of the world but also apart from it. It is Maoism for individualists.

The development of the Macintosh computer, released in 1984, is a revealing origin story for Apple. Jobs had assembled a crew of “pirates” to build a computer as he wanted it, which meant attractive design, a symbiosis between hardware and software, and, most of all, control – of the consumer, by him.

In a hundred small ways, he made the Mac immutable and inescapable. Its elegant contours were actually hard borders, held together by special screws so that bedroom hobbyists couldn’t get inside with their regular screwdrivers. Requests to license out the operating system (so that it could be used on other computers) were refused or ignored. The Mac would be an ecosystem unto itself. People would have to buy into it entirely, or not at all.

Jobs was forced out of Apple for his hubris; then reinstalled in 1997, when the company was on the verge of bankruptcy. With Jony Ive at his side, and until his death from pancreatic cancer in 2011, he introduced a series of products that were like the original Mac in spirit yet incomparably more successful: the iMac, iPod, iPhone and iPad.

Jony Ive (left) and Tim Cook inspect the iPhone XR during an event at the Steve Jobs Theater in September 2018

Against that record, it is easy to dismiss Jobs’ successor, Tim Cook, as a button-down bureaucrat. Whereas Jobs’ Apple was about an idea – Think Different – Cook’s, his critics say, is more about a number, a market valuation of $1 trillion or more. Those critics also argue that the new Apple is less innovative as a result. They point at the Apple Pencil, a stylus introduced in 2015 to supplement the iPad, and set it against one of Jobs’s typically pugnacious speeches from 2007. “Who wants a stylus?” Jobs asked then. “Nobody wants a stylus.”

Yet Cook has made some defining interventions. Other companies, such as Facebook and Google, are happy for a sort of chaos to prevail: an online world that’s sprawling, messy and mostly unregulated, where data can be plucked from the air and passed on to advertisers. Cook is trying to create a refuge: a unified world of hardware, software and services, all under Apple’s flag, where citizens can expect their data to remain their own.

Two of the company’s most significant recent releases are Apple Arcade, a subscription gaming service for iOS devices, and Apple TV+, a Netflix competitor. Executives such as Eddy Cue and Jennifer Bailey, both of whom work on the services side of the company, are now regarded to be as influential as the departing Ive once was. Much like China, Apple is shifting from being a manufacturing economy to a service-based one.

Jennifer Bailey, one of the people leading Apple into the realm of services

At the same time, Cook is doubling down on privacy and security as a differentiator from his competitors. That shift was most obvious in 2015, when the company refused to assist the FBI in unlocking the iPhone of one of the San Bernardino terrorists. It is clear, too, in the company’s latest advertisements, which are created across an in-house team and a dedicated set of people at the external agency TBWA. “These are private things. Personal things,” says one recent video promoting the iPhone and its data protections. “And they should belong to you. Simple as that.”

There is a sense of necessity, even of wisdom, about these shifts. After all, consumers have become less willing to pay out for iteratively improved phones, so new ways of making money from the phones they already have must be found. The idea is to expand the Apple ecosystem so far that consumers never need to – or never can – leave it.

But this is undeniably risky terrain for Apple and Cook. The economics of services, and particularly of content creation, are very different from those of hardware. This was demonstrated by the almost simultaneous launches of Apple TV+ and its competitor service Disney+ in late 2019. Apple spent a lot of money on its shows, hiring famous actors and filmmakers, but the critical and popular reception has been lukewarm at best. Disney, having spent no less money, was also able to call upon a wide range of old favourites and newer franchises, such as The Simpsons, Star Wars and Marvel’s cinematic universe – and is succeeding accordingly.

Apple’s traditional approach has been to make products that feel distinctively Apple and that are, at least in part, desirable because of that. But distinctiveness and desirability are harder to pin down when it comes to the shows that are being made for Apple TV+. What can Apple do that Netflix or the BBC cannot? Can it be different, or, for the first time, will it just be the same?

“I honestly don’t know how they will distinguish themselves from Netflix,” one studio executive told us. “When Apple TV was launched, it was surprisingly light on content. There was no archive, no back catalogue.”

And there are other risks facing Apple, many of which are of Cook’s own making. Its emphasis on privacy, while laudable, lays it open to the charge of hypocrisy: third-party iPhone apps have already been found spreading data in ways that contravene Apple’s declared ideals. Meanwhile, its main manufacturing base is a country – yes, China – that has become the frontline in an ongoing trade war, and a war over free speech and censorship.

In China, too, Apple is being outpaced by companies like Huawei – and this has an effect on its bottom line. Although Apple’s sales revenues are still monumental, at $260 billion in the year ending September 2019, they are lower than those achieved in the previous year.

When Apple was founded, it was a riposte to the dominant, mainframe thinking of the grand dame of American computing, IBM. But now, over 40 years later, it is a titan itself; it can no longer rely on or represent the shock of the new. Life in Cook’s empire is certainly more prosperous now, but it is also less certain. Behind that futuristic-looking ring in Cupertino is the biggest secret of all: this is a company in the grip of a mid-life crisis.

Tomorrow:

We investigate Apple’s economy, its constitution, and its foreign policy.

Credits

Reporters: Peter Hoskin and Alexi Mostrous

Editors: Basia Cummings, David Taylor, James Harding

Graphics and design: Chris Newell

Additional research: Ella Hollowood

Picture editor: Jon Jones

All pictures: Getty Images