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

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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.

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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…]

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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.

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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!

Tim Cook

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.

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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.

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