This is Tim: Cook talks to Charlie Rose about Apple Watch, Samsung, and the future

Apple CEO Tim Cook doesn’t speak publicly often outside of events and the company’s quarterly earnings calls, so it was a special treat to watch his interview with Charlie Rose this weekend. We’ve put together edited highlights from his first hour chatting with the ABC talk show host about Apple’s new products, the Apple TV, Steve Jobs, and the future of the company.

On the iPhone 6 Plus

We could have done a larger iPhone years ago. It’s never been about just making a larger phone, it’s about making a better phone in every single way. And so we ship things when they’re ready… This phone—now is the time for it.

The philosophy [of Apple] has always been to be the best, not the first. If you look back in time at Apple, the iPod. The iPod was not the first MP3 player. It was arguably the best, and arguably it was the first modern one. But not the first. The iPhone was not the first smartphone. BlackBerry was shipping phones, Palm was shipping phones. iPhone was the first modern smartphone. And then if you look at iPad—tablets were shipping a decade before. And yet, iPad arguably was the first modern tablet, and the first one that met any level of commercial success.

On the Apple Watch

To wear something, it had to be incredibly personal. It had to reflect your taste and express what you wanted to express about yourself. It’s sort of like your clothes and your shoes: You’re not going to wear the same thing everybody else does.

We recognize that technology itself isn’t sufficient, that it had to have a style element. It had to be something that you’re proud of wearing. I mean, this is connected to your body… It makes [the computer] very personal.

It requires an iPhone, yes, because they’ve been designed to work together… however, if you go for a run, and you don’t want to carry your iPhone, music is also in your watch. And so with a Bluetooth headset, you can run and listen to your music without your iPhone.

On Apple’s health initiatives

With health care, there is a wide-open field to make some really profound contributions… So this is yet another way to begin to build a comprehensive view of your life, which should empower you to take care of yourself over time, and when you need help, it empowers you to take certain data to your doctor to get help from them. All while guarding your privacy, so that nobody’s getting the data if you don’t want them to have the data. Nobody’s sharing the data if you don’t want them to share the data. And, no, we’re not keeping it.

On Apple Pay

As it turns out, people love their credit cards. I don’t know what credit cards you have, but many people love their credit cards, because they might love that you collect airline points, or there’s something about it that’s sticky.

We looked at the industry and we said, y’know, people like that part. And so we’re about making the user’s life better. Making the experience better. We saw all the mobile payment stuff that had been done as none of it was making anybody’s life better. It was more about creating a business model for someone else to make money.

We started with the user, and we said, “What do they really want?” Well, nobody wants to carry a wallet. You don’t want another thing that you have to remember to put in your pants when you walk out the door. You don’t want another thing to lose. You don’t really want this card with exposed numbers on it that has a huge security risk on it.

We fixed the security issue. Our system is much more secure than the traditional credit card system is. We kept the thing the people liked, which is they do love their card. And we said “We don’t want any of this data.” So we’re not doing what other companies are doing. We don’t want to know what you’re buying. We don’t want to know where you’re buying it. We don’t want to collect all this stuff on [you], Charlie. I don’t want to know where you’re spending your nights.

And so we firewall all the stuff, we don’t keep it, it’s not on our servers. And so we kept what’s great, and fixed what wasn’t.

On Steve Jobs and innovation

He’s in my heart, and he’s deep in Apple’s DNA. His spirit will always be at the foundation of the company… His office is still left as it was… his name is still on the door.

When he called me one weekend, in August of [20]11, and he said “I’d like to talk,” and I said “Oh, okay,” and I go “When?” and he goes “Now.” [laughs] And I say “I’ll be right over!”

And he told me, he said “I’ve been thinking a lot; Apple’s never had a professional transition in CEO, I’m determined that we will have one now; I want you to be the CEO.” And honestly, I didn’t see it coming.

I know you look at me with disbelief, but you can say I was in denial or whatever, but I thought—I felt—that Steve was getting better; he was still at home, but I felt that he was getting better, I was seeing him regularly. And I guess at the end of the day, I always thought he would bounce. He always had. He had had some incredible lows in his health and had always bounced, and I always believed he would.

And so it took me a little by surprise for that. I mean, he had talked to me about being CEO before, and so I always knew it was his long-term thinking… to become the CEO. But not that specific moment.

And so he and I had a discussion back and forth about—because I was testing him on this—I said “Y’know, what kind of things do you want to do as chairman versus me?” Just sort of having a good banter with him. And I go, well, “For example, ads—do you want me to just do the ones that I think are right, or do you want to be involved in it?”

And he said, “Well, I hope you’ll ask my opinion on some things!” [laughs] But he… I thought, Charlie, on that day, that he would be chairman for a long time. That I’d be CEO for a long time. And that we would continue to work together.

He knew when he chose me that I wasn’t like him. That I’m not a carbon copy of him. He obviously thought through that deeply, about who he wanted to lead Apple. And so that I have always felt the responsibility of. And I’ve wanted desperately to continue his legacy. The Apple I deeply love.

And so, from the onset, I wanted to pour every ounce that I had in myself into the company. But in terms of being everything he was, I never had that objective. I’ve never had the objective of being like him. Because I knew, the only person I can be is the person I am, right? I’m not an actor. I’d be terrible in Hollywood.

And so that’s what I’ve done. I’ve tried to be the best Tim Cook I can be.

On building a good team

I think each person… if you’re a CEO, the most important thing, to me, is to pick people around you that aren’t like you. That complement you, because you want to build a puzzle. You don’t want to stack chicklets up and have everyone be the same.

And so I believe in diversity with a capital D. And that’s diversity in thought, and diversity in any way you want to measure it.

The people that surround me are not like me. They have skills that I don’t have; I may have some that they don’t have. What we do as a team, collectively, we’re able to do some incredible things. And it’s because we collaborate. And I see one of my key things in life is to make sure that we collaborate at an incredible level.

Because we run the company functionally, we’re not like the typical big company that has n-number of divisions, and n-number of P and Ls [income statements]. Everybody is a functional expert, and then we collectively, to get things done, we work together as a team. Because the work really happens horizontally in our company, not vertically. Products are horizontal: It takes hardware plus software plus services to make a killer product.

We’re all different. And that’s the power of it. We’re not trying to put everyone through a car wash so they look alike, talk alike, think alike at the end of the day. We argue and debate. If you were to come into our executive team meetings on Mondays, you’d hear a lot of discussion and debate about something. We don’t always agree on everything. But we have great respect for one another, and we trust one another, and we complement one another. That makes it all work…

I think that the reality is that Apple has always had incredible contributors at very high levels. Jony [Ive, SVP Design]’s been there forever and contributing at an incredible level, as has Craig [Federighi, SVP Software Engineering] and Jeff [Williams, SVP Operations] and Dan [Riccio, SVP Hardware Engineering]. And you just go around the table. We have a new CFO now [Luca Maestri].

This group of people—and we’ve recruited Angela [Ahrendts, SVP Retail and Online Stores]. You know, Angela now runs retail, Angela Ahrendts, and she is fantastic! This level of people are capable of doing incredible things, and it’s a privilege of a lifetime to work with them.

On outside criticism

One great skill I have is blocking noise. I typically read and listen to things that are deep and challenging and intellectual in nature, not just the noise. I think that if you get caught up in the noise as a CEO, you’re going to be a terrible CEO, because there’s so much noise out there in the world. Everybody’s on the sidelines saying what you should do, shouldn’t do, etc. It’s sorta like the old Teddy Roosevelt quote in the arena [“ It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena…”]

Well, I’m the dirty one. And you have to block the noise. The question, I think, is did I have doubts, and the answer is no, and did the executive team have doubts—I think you can see in our products that we were all betting on each other in a big way.

On the IBM collaboration

Are we more open, yes. I think IBM… that’s a great one to talk about for one because I think it’ll give you an insight into how we look at things, and this is probably different than the past.

We look at these products and the iPads that aren’t here, and we think we can change the way people work. We’ve changed the consumer’s life. We’ve changed the way students learn and teachers teach. But when you get to the working environment, the change that we’ve made, to us, isn’t significant enough. We begin to ask ourselves, “Why? Why haven’t we done more?”

The real answer is in the applications. There’s not enough apps that have been written for verticals; for very deep verticals, like what the airline pilot does, what the bank teller does, down at the level of the job. And so we begin to ask ourselves, “Should we do this, or should we partner, or should we just forget it?”

I didn’t want to forget it, because this is a way to enrich people’s lives in a big way, to change the way people work, I mean most of our life is spent working! And certainly our apps are changing the way I work, but I’m not seeing it as much in other places.

[IBM has] things that we don’t have. They have deep vertical knowledge of many different verticals, right? They have a huge sales force. IBM brings significant enterprise knowledge to the table. We bring the products that enterprise wants, and so we have something they don’t have. And we also don’t compete on anything.

To me, this is the perfect marriage. There’s no friction, there’s just “We have what they need, they have what we need; together, we can provide something to customers that is blow-away.” And so IBM is in the process, with our help, of designing many different apps for many different verticals, from banking to all the different financial services, to pharmaceutical, to aerospace and manufacturing, and so on and so forth. And they have the go-to market that we don’t have.

This is an area where I think that everybody’s going to win. We’re going to win, IBM’s going to win, and more importantly than both of us—the customer’s going to win.

On the Beats acquisition

In Beats, what we saw was several things. We saw talent that I was super impressed with; Jimmy and Dre are off the charts creative geniuses. They also had teams underneath them that I really liked.

Jimmy has a deep knowledge of the musical industry; Dre knows artists. Dre is an artist. And they had started a subscription service. And the subscription service, well, some people think that they’re all alike. Let me tell you, I went into the thing skeptically, like I should… not into the acquisition, into their service, because Jimmy had told me how great it was.

One night, I’m sitting playing with theirs versus some others, and all of a sudden it dawns on me that when I listen to theirs for awhile, I feel completely different. And the reason is that they recognized that human curation was important in the subscription service; that the sequencing of songs that you listen to affect how you feel. It’s hard to describe, but you know it when you feel it. And so that night—I couldn’t sleep that night. I was thinking, “We’ve… We need to do this.”

… I felt that we could get a subscription service, we could get incredible talent, and that I think we could all put our heads together and do some things that are beyond what either of us are currently doing, and we could get a fast-growing business.

On competition

Google, clearly… Google supplies [the Android operating system], too. I think, I would say, Google would be the top. And then they enable many people in the hardware business, like Samsung, and Samsung is the best of the hardware companies in the Android sphere.

You know, who else. I don’t consider Facebook a competitor, I consider Facebook a partner. We’re not in the social networking business.

[Charlie: And will not be?]

We have no plans to be in the social networking area. We partner with both Facebook and Twitter, and we have integrated both of them into the operating system. We’ve worked closely with both of them so that our customers can get access in a different and unique way to their services. And we like both companies.

Amazon, we don’t work with that much. We have little relationship there. They sell, as you know, they’ve come out with a phone. You don’t see it in a lot of places. They have some tablets, but they’re not a product company. Apple’s a product company. And so in the long term, will they become a bigger product company? I don’t know, you’d have to ask Jeff [Bezos, CEO] what his plans are.

But when I think of competitor, I would think of Google.

On the development ecosystem

I wouldn’t say that we were ever “just a hardware company.” A significant amount of the iPhone is the software and the services. It’s just that we don’t split out the price between the hardware and the software and the services. It’s part of our own ecosystem, and we do that because it all works together. It just works when you do it that way.

When you split the two, you wind up with… well, think about what happened in the PC area. When you had Windows and a separate OEM that was doing hardware, and then somebody else that was doing apps—and you have a problem, you’re pulling your hair out, you call the help desk, and the help desk tells you to call another help desk, and that help desk tells you to call somebody else, then the other guy doesn’t even have a help desk.

So we recognized early on that these kind of devices, you really need to have a “womb to tomb” view of them for the customer’s sake. And so if somebody calls us, it’s our problem. We’re not passing the buck. I think you get a much better customer experience.

We’ve got 9 million registered developers. We’re not having a problem getting people to develop for a platform. If you were at our conference in June in San Francisco [WWDC], there’s developers there from almost every country in the world, and they’re writing for iOS.

We have incredible access to innovation, and we also view it and treat it—it’s a privilege to work with [the] developers we do. We treat them like it’s a privilege. And from their point of view, they get to design something from a company that has over 90 percent of their customers on one version of the operating system.

So we’re not fragmented like Android is, right. We’ve got, we’ll release iOS 8 next week. Right now, iOS 7, the one we just released a year ago, 92 percent of our customers are running iOS 7. If you looked at a comparable number for Android, it’s very low.

Think about how it used to be if you were a developer. You had to go and negotiate with every retailer—and there’s no global retailers—and so you were negotiating in every country in the world trying to get your product on the shelf. Here, you can push a button, we review it, and it quickly gets in the App Store. And it’s in the App Store in 155 countries. I mean, it’s really shocking. The jobs that this thing has created is unbelievable. We’re now between the people that we employ directly and the developers—and the developers are a big piece of this—we’re responsible for a million jobs in the United States.

On growing markets and pricing

If you look back at the last year, our business in greater China is about 30 billion. And to my knowledge, that’s larger than any American company; certainly in technology, maybe the largest of any, period. We’ve put a lot of energy in there for years, we’ve had very fast growth.

But… ultimately what’s causing that is, you have a significant number of people moving into the middle class. Large numbers, unprecedented large numbers. This is also happening in Brazil, it’s happening in Turkey, it’s happening in Thailand, it’s happening in Malaysia—it’s happening in many different places. Indonesia’s beginning, it’s at a different place in that curve.

Certainly, income is a gating factor. But there’s a lot of retailers that will allow smartphones to be paid for over time. In China, there’s a subsidy on smartphones if you sign a contract, much like the United States. And so there are ways to make it more affordable.

Also, this is iPhone 6 and 6 Plus, but we also sell iPhone 5s and iPhone 5c, and all of these just got lower prices on Tuesday… You will find that in emerging markets the mix of product sales are sometimes different in those markets versus other markets.

On successes and failures

[Regarding Maps…]

Oh, we screwed up, to put it bluntly. There were many screw-ups in that one, it was just not one, there’s many. We’ve learned and corrected and are continuing to invest in Maps because our fundamental premise—that maps were really key to Apple—is the same as when we made that call many years ago.

But we did screw up on the release. It should not have happened like it did, it shouldn’t have come out, and, y’know, sometimes when you’re running fast, you slip and you fall, and I think the best thing you can do is get back up and say “I’m sorry,” and you try to remedy the situation, and you work like hell to make the product right.

If you’re probably never making a mistake, you’re probably not doing enough.

On the “iCloud Hacks”

[iCloud] wasn’t hacked. There’s a misunderstanding about this. If you think about what hacking iCloud would mean, it means somebody could get into the cloud and go fish around in people’s accounts. That didn’t happen. What happened was that—let’s take you. It didn’t happen to you, I hope. But let’s take you as an example.

Somebody could say, “Oh, I know Charlie’s ID from somehow, maybe it’s his email,” and they may guess your password, or that’s not as likely, they might phish it. How do you phish it? I could pretend to be somebody else, and you could unknowingly give me your password.

That happens on the Internet too many times today. That’s the number one issue by far. And it’s not just an Apple issue, this is an internet issue. You just saw that this happened to, I think, millions of Gmail users. They were phished. My understanding is it wasn’t a breach there either, of the infrastructure, it was a phishing expedition.

There are lots of bad people that do this. And what we said was, instead of just saying, “Hey, there’s a lot of bad people that do this,” we need to figure out how can we try and protect our customers on this. That’s our top goal, and so we’re working internally about how to bring more awareness to these schemes.

In addition, we have to do things where it notifies the customer quickly if it does happen, that’s reactive. And we don’t want it to happen at all, but if it does, you’d probably want to know instantly. And so there are things like that and some other things that I can’t describe right now where we can, we think we can make a contribution beyond just making sure the cloud’s not hacked.

On joining Apple

It was an interesting meeting. I had gotten a call several times from the search people that he had employed, and I kept saying no, I was at Compaq, I was happy, or thought I was, and they were persistent.

And so I finally thought, y’know, I’m going to go out and take the meeting. Steve created the whole industry that I’m in, I’d love to meet him.

And so I’m honestly going into the meeting, I’m just thinking “I’m gonna meet him,” and all of a sudden, he’s talking about his strategy and his vision, and what he was doing was going 100 percent into consumer when everybody else in the industry had decided you couldn’t make any money in consumer so they were headed to servers and storage in the enterprise.

And I thought, I’d always thought that following the herd was not a good thing, was a terrible thing to do. You’re either gonna lose big, or lose, but those are the two options. He was doing something totally different. And he told me a little about the design—enough to get me really interested—and he was describing what, later, would be called the iMac, and the way that he talked, and the way the chemistry was in the room, it was just he and I. And I could tell: I can work with him.

And I looked at the problems Apple’d had and I thought, y’know, I can make a contribution here. And working with him—this is a privilege of a lifetime!

And so all of a sudden, I thought, “I’m doing it! I’m going for it!” And you sort of, you have this voice in your ear that says “Go west, young man, go west.” I was young at the time. But y’know, you come back and you try to do the things that people do with spreadsheets and stuff and none of it makes sense. It didn’t make sense. And yet, my gut said, “Go for it.” And I listened to my gut. There was literally no one around me that was advising me to do it.

My intuition was telling me loudly to go, and it wasn’t based on—y’know, as an engineer, you want to write down pros and cons, and the financial part you want to look at, and you want it to say, “Go,” you want it to sort of validate the decision that your gut’s come [to], and it never did.

Because Michael Dell had made a comment weeks earlier that if he were the CEO—and he is and was a very respected CEO—that if he were the CEO of Apple he would close it down and give the money back to the shareholders. That it had no future. He was just saying what everybody thought. They didn’t know Steve.

And so in that meeting, I concluded “All of those guys are wrong.” They don’t know him, and they don’t know his vision, and they see things in the traditional way, which Steve never did. He was always looking well beyond the norm. He had a gift for that, he clearly had a gift for that.

And he took that gift and embedded it in the company. It wasn’t a gift that he kept to himself. One of the—one of the many things I loved about him, he was a dear friend, but he was also a great mentor. He was a great teacher. This is something that’s never written about him, but what he left in not just me, but in many of us, is what he taught us. He was one of the best mentors in the world.

It’s much more than [perfectionism]. No, it’s much more than that because that’s just—that’s holding the bar so high that it’s very hard to hit. But no. It’s teaching. And it’s teaching and making sure people are learning. And him taking such an interest, he’s going out of his way to do this. I saw him do that over many years, with not just me but many people, and I think it’s missed. It’s a huge part of what he did that’s missed in most of the things that I’ve read.

That, and the human aspect of him. He was an incredible human being, and I think, y’know, I’ve never read anything that really captured him, or captured the Steve I knew.

On future products

It’s so easy to add. It’s hard to edit. It’s hard to stay focused. And yet we know, we’ll only do our best work if we stay focused. And so the hardest decisions we make are all the things not to work on, frankly. Because there’s lots of things we’d like to work on, that we have interest in, but we know that we can’t do everything great…

We spend a lot of money in R&D, and that number has ramped dramatically. That’s true. Some of that is spent for things that aren’t shipping yet—like the Apple Watch is an example of that. Y’know, we’re… I’ve announced it now, so that everybody can see it, but we’ve been spending money for three years on it because we started development about three years ago.

Apple

And there’s obviously other things that we’re working on that right now isn’t apparent. We’re always doing that, and we’re also working on things like this [gestures to the Apple Watch] that is apparent.

[Charlie: Here’s what’s interesting about both you and Steve Jobs…]

We’re both secretive. [laughs]

There are products that we’re working on that no one knows about, yes; that haven’t been rumored about yet, yes. Part of some of those are going to come out and be blow-away probably, and some of those we’ll probably decide “Y’know, that one, we’re going to stop.”

We kick around a lot of things internally and we might start something and get down the road a little bit and have a different idea. Steve told a story publicly about the iPad. iPad was started way in advance of when it came out, many years before. It was put on the shelf. [Tablets were] not a new idea. It was shelved because of the idea to make iPhone.

The team was reallocated to work on iPhone, and then the iPhone came out, and after iPhone got up and running, we brought the iPad out. There are always things that we’re looking at that are drawing R&D expense where there’s not associated revenue.

A lot of what leads to innovation is curiosity. It’s curiosity to begin pulling a string, and you see where it takes you. And a lot of what we do isn’t apparent to the public in the beginning where it’s going to lead.

Like Touch ID, as an example. We did Touch ID a year ago. People thought—a lot of people thought Touch ID was just a way to get into your phone. And it’s very cool at doing that. But then we also said, “Well, you can buy stuff from Apple with it.” Obviously we, the entire time, were planning to do a much broader roll-out for mobile payments with Touch ID, but we invest in a lot of things that have long tentacles for decades or so. Not just for point products. Point products don’t thrill us.

On the future of television

Well, TV is one that we continue to have great interest in. So, I choose my words carefully there. But TV is one of those things that, if we’re really honest, it’s stuck back in the 70s. Think about how much your life has changed, and all the things around you that have changed, and yet TV, when you go in your living room to watch the TV or wherever it might be, it almost feels like you’re rewinding the clock, and you’ve entered a time capsule, and you’re going backwards. The interface is terrible! I mean, it’s awful! And you watch things when they come on, unless you remember to record them.

[So why don’t you fix that?]

Well, yeah, y’know, I don’t want to get into what we’re doing in the future, but we’ve taken stabs with Apple TV. And Apple TV now has over 20 million users and so it has far exceeded the “hobby” label that we’ve placed on it, and we’ve added more and more content to it this year. There’s increasingly more things that you can do on there.

But this is an area that we continue to look at.