Bloomberg Audio Studios, podcasts, radio news. When Apple released the iPhone sixteen last year, the company put out a series of TV ads promising shiny new AI tools. One of those ads featured Bellow Ramsey, the star of HBO's The Last of Us, trying to remember someone's name at a party.
Sirih, what's the name of the guy I had a meeting with a couple of months ago at Cafe Grenell.
Siri scans their calendar and answers, you.
Met Zach Wingate at Cafe.
Grenelle, And when Zach approaches Bella, they nail his name.
Hey, Sach eh wow, I think that you don't remember me? Yeah. Push.
It was a promise of what was to come with Apple and its AI ambitions, but Mark German, who edits Bloomberg's consumer tech coverage and has been covering Apple for years, says it hasn't quite gone. According to Plant.
They advertised I was going to do that in order to sell the new phones, but that feature never came out. A complete disconnect between Apple engineering and Apple marketing.
How rare is that for Apple to do something like that, to promise something, to advertise it, and then not actually deliver.
It, this is AI, this is Siri. This is at the very core of this major technological revolution. So to the scale that this happened with the importance of these features, nothing like that has happened in modern Apple history, and I consider modern Apple history to be the last twenty or so years.
Apple ended up taking the Seri add down, but that disconnect led customers to file class action lawsuits alleging false advertising. In March. Apple declined to comment on the lawsuits. The company also declined to comment on Mark's story or on
behalf of the executives mentioned. Mark spoke with several employees and people close to the company, some of whom requested anonymity to discuss sensitive matters, and he says, based on his reporting, those missing features on the iPhone sixteen point to a much bigger issue for Apple that when it comes to the AI race, the company known for delivering on revolutionary tech, is way behind. This is the big
take from Bloomberg News. I'm Sarah Holder today on the show inside Apple's efforts to catch up on AI, the challenges the company faces to keep its status as a tech pioneer, and the pitfalls of getting in the game too late. Mark, I want to start by getting a sense of your reporting process here. What made you want to dig into Apple's artificial intelligence efforts?
You know, AI has always been an important topic, but until chet GPT launch at the end of twenty twenty two, it really didn't come into the mainstream. It really wasn't the center of the technology world. And it's so interesting because over the years, Apple has dominated so many categories that it wasn't first two the MP three player with the iPod, the smartphone with the iPhone, the table with the iPad, earbuds with the AirPods, smart watches with the
Apple Watch. What was different this time around is not only was Apple late to AI or generative AI, this modern technology that we know from Chat, GPT and Gemini, Anthropic, you name it, but they also weren't the best. There was no Apple iPhone or Apple iPad moment for AI where they took something that people didn't really understand and made it mainstream into some beautiful, fully functional product. Right. That just didn't happen, And so for me that was fascinating.
That was a c change for Apple. And then over time you start hearing from people working at Apple, people in the industry that there's a problem there.
What products does Apple have that do use AI today? Like when you go on your phone, is AI there?
Touch ID face ID the way you unlock your phone with biometrics, that is a form of artificial intelligence. The ability for the phone to say you have a meeting and for five minutes, there's forty minutes of traffic, you should probably leave right about now in order to get there on time. That's artificial intelligence. They've been really good at heavily integrated AI. Where they missed was this new
topic of generative AI. And so there's a big disconnect between the AI that Apple has long offered and the AI that both Wall Street and consumers are clamoring for. And Apple knew that. That's why they spun together Apple Intelligence. They called it AI for the rest of us, just like they called the original Mac the computer for the rest of us. Expectations for sky high the presentation looked
pretty good. In reality, it fell extraordinarily flat. I used the first beta version of Apple Intelligence back at the end of July early August of last year, and I wrote a column about this, saying, this is kind of unbelievable. They've hyped it and hyped it and hyped it. It has basically nothing. People are going to start using this thing and be like, that's it, right, and people were shocked at the time.
This is where you get a couple of texts from your friends and then they give you basically an AI summary of what was said.
That is one of the futures. So you have the summaries and it can summarize, you know, a slew of text messages. It was able to summarize news headlines right, but they had to pull the news headline's feature because the BBC complained. They sent a headline out about Luigi Maggioni and the headline actually spit out after going through the Apple system that he had shot himself and so that was a sign the system was quite broken. So
they pulled that months ago and that's still not back. Actually, there's the gen moji's feature where you can create your own emoji of that one. That is a cool feature. There's writing tools which allows you to summarize text synthesized text into bullet points, but the Generative AI to create something that actually uses OpenAI chat GPT, which is also
integrated into iOS eighteen. So there's a slew of these little features throughout, but many of them have also been delayed, many of them don't work as intended, many of them don't work as it's been marketed. And what we have today is really a far cry from the vision Apple presented, and it's an even farther cry from what you're seeing from competitors.
Well, benefit of the doubt for a second, being a little late to the game isn't exactly new for Apple. They've historically sat back while their competitors developed riskier new products. They've entered the ring when the bumps and the kinks are kind of smoothed out. Is Apple lagging behind now as a strategy to work more on the tech, or is it really struggling to keep up?
Well, I think it's all of those things. Right. One, they're struggling to keep up. They have fewer AI engineers than other companies like Amazon at this point. The other issue is that they don't have the vision for exactly how they can be different and how they can implement these things. But also AI is something that the company
is not necessarily built to produce. AI is messy. There's a frequent problem called hallucinations, right hallucinations could be you ask chat GPT or claud or Perplexity a question and it's so confident that it knows the answer the AI and it'll give you an answer, but it's complete nonsense based on nothing, and it's completely wrong. And so Apple as a company with two point three to five billion devices out there, they want to avoid those types of issues.
So there is a bit of approach to go slow. There are the technical challenges that they've had trouble overcoming, but then there's also the true reality that this stuff takes a lot of time in the oven in order to be a great place for consumers, and they put it in the oven quite late.
Well, let's talk about when they put it in the oven, because part of that beginning of the baking process of AI, if you will, started with poaching John Andrea from Google back in twenty eighteen. They wanted him to kind of kickstart the AI program at Apple. How was he supposed to change the game.
So that was a big coup for Apple. That was one of the most dramatic at caires at the time. JG as he's known, was probably the second most important person at Google. He ran all Google Search and all of Google AI and don't forget back in twenty eighteen. Google is really at the forefront of AI, putting it into Gmail Translate photos. They were really a pioneer and JG was supposed to come in and take everything AI related, serelated, put it under his own umbrella. Before you had Siri
and different AI teams scattered throughout the corporation. Apple executives at the time felt like the scattered nature of the AI work made it more difficult for them to get things working properly. They brought it under one roof. He did a lot of analysis of what features people were using and not using in Syria and proposed killing a lot of those features. He brought in his own people from Google and elsewhere, some of the top scholars and
AI researchers in the world. But then everything sort of fell flat since he came to Apple. There wasn't a lot of change that we've seen in Siri or Apple's machine learning. Artificial intelligence were a lot of the AI work in the years before Apple Intelligence went to development of a self driving car. They spent billions billions on that.
They never launched the car. That AI didn't go entirely to waste because they were able to use some of that technology towards the generative models that they're putting on the iPhone, iPad and Mac at this point.
But not a lot happened until November twenty twenty two, when open ai released chat gpt to the public. According to people familiar with the events who spoke with Mark, that set off a flurry of activity at the company and.
Craig Federigi, who runs software engineering for Apple. He and JG and other people at Apple. They started meeting with open Ai, met with Anthropic, met with other smaller AI players, and determined they need to figure out these AI models and they need to make the twenty twenty four release of iOS very much an AI driven release with AI features throughout. The edict get is many AI features into the operating system as possible.
So three years and several delayed AI products later, the question is when will Apple catch up? Can it? That's after the break mark. Your reporting shows that internally Apple is really worried that falling behind on AI could be a critical error. But why couldn't Apple just be content to be a good hardware and software company without being a leader in AI.
That's a good question. So, really, there's this predicament inside Apple right now, how much of this stuff should we be building versus how much of this stuff should we be licensing? And already you have OpenAI chat GPT integration into siriy in writing tools for those generative use cases like writing an essay and whatnot. They're going to add Google Gemini as an alternative to CHET GPT inside of
Siri and writing tools as well. They're also working to redo the search engine in their browser Safari to integrate AI engines. That's still to come. So you have this question internal versus external partnerships, Like you said, why do we need to be an AI expert? Why can't we just license? That's what Samsung does, right, Samsung uses Google Gemini to power there ALAI.
Right, and all these other companies are putting so many resources and energy into developing this AI.
They're ahead correct Sitting here today, AI is the most core fundamental technology that you can get. It's equivalent to the processors that go into their devices. Throughout Apple's history, it has been core technologies that have enabled their new types of products. The iPhone only was created because they owned a core technology known as multi touch we take it for granted today, but that touchscreen interface to the original iPhone on the iPad is enabled by very intense,
expensive to develop multi touch technology. All the macs, the one you're using now, the iPad, those products, AirPods were enabled by these very advanced processors. But Apple needs to think about the next wave of technology. They already killed the self driving car, but let's just put that in there.
So the next wave of hardware in the technology industry, autonomous cars, advanced augmented reality glasses, glasses that can scan your surrounding environment, robots, whether that's humanoids, whether that's roaming robots, whether that's tabletop robots. The only way to enable those products is by owning the core technology of AI, and we've already seen Apple's AI was not up to snuff enough to produce the autonomous car. But they're going to be doomed on the next phase of hardware if they
don't get the AI working. And you cannot rely on third parties for technology as cores artificial intelligence. So that's why they need to keep digging in and building their own AI to enable the next way of a hardwork, because don't forget the end of the day they're a hardware company.
Are these things that customers are actually, like, really really asking for?
I mean it's hard to say. I think there is demand for augmented reality glasses. I think the meta ray bands have been somewhat popular, and so I think glasses are going to become a real category. I think there is going to be a time when pointing your watch at something or pointing your earbuds at something to get more data based on AI is going to be commonplace. I think there is going to be a market for
different robotics devices, and certainly the ship has sailed. Autonomy and self driven cars is a real thing, so I think yes. Now, is it ever going to be as popular as the iPhone has been over the last twenty years? Probably not, but it is certainly the future.
What does Apple actually need to change about its culture, its processes, it's core business model in order to actually compete in the AI space? And is it doing it?
Apple needs to get a lot faster. They need to get a little messier. They need to make boulder bets. They need to be less afraid to launch things. They need to go back to that ethos of move fast and break things. There's going to be a new entrant that potentially could knock Apple off the top of the technology mountain right in in order for Apple to avoid that, they're going to have to beat out those new entrants
time and time again. And AI is the big thing right now, and they have so far very much failed to do so. Because of their large user base, because of their design, because of their marketing, and the love that people have for Apple products. I mean, we're all using them right. They have a very big chance of turning things around, but they're only going to have so many chances and only so much time to break through
these new, faster, cheaper competitors. Well, thank you so much, Mark, thanks for having me.
This is the Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by Julia Press. It was edited by Aaron Edwards, Tracy Samuelson, and Jeremy Keene. Additional reporting by Drake Bennett. It was fact checked by our editorial team and mixed and sound designed by Julian Weller. Our senior producer is Naomi Shavin. Our senior editor is Elizabeth Ponso. Our deputy executive producer is Julia Weaver. Our executive producer
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