The Concept of Vertical Integration in Technology

When it comes to technology, building a new lens that only works with a specific camera is considered vertical integration. Similarly, creating headphones that only function with a particular cable also falls under this category. However, when it comes to building a smartwatch that exclusively works with a smartphone, the situation becomes more complex and potentially illegal.

This concept of vertical integration has become increasingly prevalent in the tech industry, where companies create products that are deeply integrated with each other, making it difficult for users to switch between different brands or devices. In the case of Apple's ecosystem, this is particularly true. The iPhone is a prime example of how vertical integration can lead to a monopoly in the market.

The US Department of Justice has recently taken notice of Apple's dominance in the smartphone market, specifically with the iPhone. According to recent reports, the Department of Justice is suing Apple for allegedly being an illegal monopoly in the United States. This move comes after years of complaints from consumers and rival companies who claim that Apple's ecosystem makes it difficult for users to switch between different brands or devices.

To understand the extent of Apple's vertical integration, let's look at some examples. The Apple Watch is a prime example of how this concept plays out in practice. The iPhone and Apple Watch are designed to work seamlessly together, with features such as notification management, fitness tracking, and camera functionality. This level of integration is not seen with other smartwatches on the market.

However, there's more to the story than just the benefits of vertical integration. There's also a real reason behind Apple's ecosystem that goes beyond mere marketing or customer satisfaction. The truth is that if you try to use any other smartwatch with an iPhone, you simply don't get nearly as many useful features from being super well integrated.

For instance, trying to use a Garmin smartwatch with an iPhone results in a lack of features such as viewfinder for the camera, fitness tracking through Apple Fitness, quick replies, image previews for text messages, and notification management. It's all or nothing when it comes to choosing a compatible smartwatch. This is not just true for the Apple Watch but also applies to other products within the ecosystem, including headphones and trackers.

The blue bubbles and green bubbles phenomenon is another example of how Apple's vertical integration affects consumers. When iPhones message other iPhones, they use high-resolution media, typing indicators, and feature-rich messaging features that are blue bubbles. However, when iPhones message Android phones, it falls back to standard SMS features, which are slow, low-res, and unencrypted green bubbles.

Apple has refused to make iMessage work on Android devices, despite the fact that this technology was initially designed for Android platforms. The Department of Justice even references a video of Tim Cook onstage at a conference where he talks about the limitations of messaging between iPhone and Android users. This stance from Apple only adds fuel to the fire, as it highlights the company's reluctance to adapt its products to accommodate different ecosystems.

The Department of Justice's lawsuit against Apple is not just about monopoly practices but also about the impact that vertical integration has on consumers. With any public-facing decision, there are often two sides: the answer given to the public and the real reason behind it. In this case, the Department of Justice is likely scrutinizing Apple's practices to ensure that they do not unfairly restrict consumer choice or stifle competition.

In conclusion, Apple's vertical integration has become a major point of contention in the tech industry. While some argue that it benefits customers by providing seamless and high-quality experiences, others claim that it creates a monopoly that stifles innovation and limits consumer choice. The Department of Justice is taking a closer look at these practices to ensure that they comply with anti-trust laws and do not unfairly disadvantage consumers or rival companies.

"WEBVTTKind: captionsLanguage: en- So if I build a new lensand my lens only works with my camera,then that's vertical integration.Or if I build new headphonesand my headphones only work with my cable,that's vertical integration.Now, if I build a new smartwatchand my smartwatch onlyworks with my smartphone,be careful that might be illegal.That's a bit of an oversimplification,but let's talk about it.(upbeat music)So this is a developing storyand will continue to develop for years,but I feel like it allcomes down to somethingthat I've at least noticed in talkingto all these big companies,all these very public,multi-billion dollar companies,they always have two reasonsfor any public-facingstatement that they make.There's the reason for the public,and then there's the real reason.So there's just some news this past weekof the US Department ofJustice suing Apple sayingthat they are an illegalmonopoly in the United States,the iPhone specifically.Now, whenever there's legal proceedings,obviously things get very complicated,and I won't even pretendto be diving into thisat a super deep level.But this is also interesting to mebecause of all the stuff with the thingsthat we talk about every daywhich is just smartphones and gadgets.And of course this is apretty US specific thing,like obviously they'rebeing sued by the US,but also their dominance,Apple, the iPhone is themost popular in the US.So I think these are somenumbers we should keep in mind.In the US the iPhone isat like 60% market share,and it's even way higher upnear 90% with young people,like it is ridiculously dominant.But worldwide, the iPhone isat about a 25% market share.So the iPhone is specificallytrending towards a monopolyin the United States.(upbeat music)So here's where it getsreally interesting.I would like to live inthis analogy for this video,which is, you've heardabout people describingApple's ecosystem as awalled garden before,this could not be more true, right?There's this really, reallynice, beautiful luscious gardenand in the middle ofthat garden is the iPhoneand it has these really tall,thick walls all the way around it.So in an ideal world,right, you are just pickingbetween different optionsfor a product based on itsmerits, based on its features.So you just look at thewhole lineup and you go,yeah, I like this one the best.And that's how you makeyour choice, right?Sick.But with this one, the claim isApple is making itreally, really difficult,once you've chosen theirsto ever switch to anything else.So with this analogy,again, it's really the wallsof the garden that we have the issue with.So I'll give you, I'll do two examples.So take the Apple Watch, right?This is one of the examplesin the Department of Justice's 88 page PDFthat they've submitted.The iPhone and the Apple Watchwork perfectly well togetherand only together.It's a feature, it's by design.That's how they are.So two parts of that are sketchy.One is the Apple Watch worksreally well with the iPhonein a way that no other smartwatch can.And two, the Apple Watch does not workwith any other smartphone.So look, I don't think it's a surprisethat when Apple built awatch, they gave it all kindsof integrations with the iPhone.So you can see themworking perfectly together.You can see and dismissyour notifications,you can reply to messages,track your fitness.You can even use it as a shutterfor your iPhone's camera.All these features that they just plugright into the iPhone, they work great.And I think that's even whatApple would tell people.They would agree like,this is how we made itso that they work amazingly well together.This is vertical integration.It's awesome.But there's also the real reason.Because the truth is now if you tryto use any othersmartwatch with the iPhone,you just don't get nearly asmany of those useful featuresfrom being super well integrated.If you try to use like aGarmin smartwatch for example,you don't get theviewfinder for the camera,you don't get the fitnesstracking through Apple Fitness,you don't get quick replies,you don't get even imagepreviews for your text messages.You don't even get to choosewhich apps show you notifications.It's just all or nothing.So if you choose an iPhone,then next, when you're lookingfor a smartwatch to buy, there's kindof only really one goodfull fledged option,which is the Apple Watch.This is also true, by theway, to various degreeswith AirPods and AirTagsand various other thingsin Apple's ecosystembecause they all are greatwhen you have an iPhoneand work super well withit, but work horriblyor not at all when you don't.So that is part of the,that's the walls around the ecosystemthat make it really hard to leave.Because if you now wannaswitch from the iPhoneto the Android phone, you'renot just switching phones,You have to now get anew phone and a new watchand new headphones and a newtracker and all this stuffbecause they all workedso well with the iPhoneand so horribly with anything else.So that is a real barrierto people leaving thisecosystem once they get into it.So another example isthe whole blue bubblesand green bubbles thing that they do.I've already made an entirevideo about this dynamic.If you haven't already seen it,I'll leave a link with a like button belowif you wanna watch it.But basically today, wheniPhones message other iPhones,they have tons of featuresand typing indicatorsand high res media, andthose are blue bubbles.And when they message Androidphones, it falls back to SMS,which is slow, low res, unencrypted trashthat is green bubbles.And Apple just refuses tomake iMessage work on Android.The Department of Justiceactually literally referencesa video of Tim Cook onstage at a conferencewhere he says this.- it's tough not to make it personal,but I can't send my mom certain videosor she can't send me certain videos.And so we leave-- Buy your mom an iPhone.(everyone laughing)- All right.- And this is so poeticjust because, you know,obviously he's got this smile of like,you guys all know it's true,but also it goes back towhat I said at the beginning,which is with any of thesepublic-facing decisions,there's the answer thatthey give the public.And then there's the real reason.You know, originally iMessagewas built back in the dayswhere text messages werebasically paid per text.Like every SMS costmoney, hence the green.So iMessage would work overthe internet and be unlimitedand it would offer way more featuresand they'd build onto it over time.Adding encryption and reactionsand typing indicators, all this stuff.And Apple people and Apple themselveswould probably all agree like this is,it's just a thing that Apple builtthat's way better than SMS.Like it's not their fault, SMS sucks,they just made a better thing.So yeah, of course, yeah,they're gonna build theirown version of a thingand it's not illegal to notalso develop it for Android.They just made their ownthing for the iPhone.But also Tim Cook's quote,\"just buy your mom an iPhone\"is the other equally valid point.It's the real reason.There are plenty of internal emailsthat have surfaced over timewith Apple executives openly talking abouthow giving iMessage toAndroid would make it easierfor people to switch toAndroid from the iPhone.iMessage is clearly one ofthe walls of the ecosystemand it's probably one ofthe biggest thickest walls.Like ask any young person in the US todaywhy they use an iPhone.And I think a lot of themwould probably tell yousomething to do with iMessage.So is this stuff thatthey're doing illegal,I guess is the question,or maybe even another way to phrase it is,is Apple making other products worseor are they making theirown products really goodand then not letting other thingsoutside the ecosystem haveaccess to those things?It's kind of both, honestly.But the thing is,they're not the only onesdoing a lot of this stuff.They are just the ones that happen to bein this pseudo-monopolyposition right now.Like the Pixel Watch for exampledoes not work at all with the iPhone.It just works perfectlywith Android phones.But is anybody that mad about that?You know, RCS is announced to be comingto the iPhone at some point in 2024,but I can almost guaranteeit'll probably still be green bubbles.It will probably be theabsolute bare minimumof supporting RCSand they will probably stillbe delineating very clearlybetween iPhone to iPhone, iMessageand iPhone to Android something else.And there's even more to this lawsuit,like Apple Pay is another one.How no other services can usethe NFC chip on the iPhone.Super apps is another one.Like if you wanna look at all this stuff,I will link the best stuffI can find down below.So my take is Apple istechnically yet guiltyof all these things.They're doing all stuff,but in the walled garden analogy,it's like they have built upa really, really nice garden.And Apple would say like,look, our garden, it's so greenand luscious and beautiful.They've built the most beautiful gardenwith the most people in it,but they've also builtup the biggest wallsaround that garden.And so Apple would love to say, look,everyone's chosen our gardenand they're all staying in our garden.That's how great it is.But even if you saw another greener,softer, better garden somewhereelse, the walls to escapingto getting to that are just way too high.So it's less that each individualthing that they're doingwith the products workingwell together is illegal.And it's more that they feellike they have to do somethingabout this one company havingso much power and controlin smartphones, which is here,it's essentially a commodity.It's just like a thing that everybody has.So I wanna leave you with this.You remember at the beginningwhen I talked about howApple's ridiculously dominantin the US and these crazynumbers, like 90% of young people.The crazy thing is they'resuper, super popular here,but as I mentioned, they arenot a monopoly anywhere else.And why?Why is that true?How are they so popular hereand they're doing all thesame stuff in other places,but they're not amonopoly in other places?And so I think of China for example.China is another huge smartphone marketwhere WeChat is kindof like this super app.It's a huge thing.Like it's messaging, it's payments,it's also calling a taxiand also paying your billsand ordering food, groceries,like WeChat is everything.So just as long as your phone has WeChat,then the rest is kind ofdoesn't really matter,it's up to you.And so in China there'sthis incredibly vibrant,innovative landscape of allthese smartphone manufacturerscompeting like crazy,like Huawei, Xiaomi, Oppoand iPhone is in there too.But they're all just competing ruthlesslywith hardware featuresand with other stuff totry to get your attentionto maybe pick their phone'cause it's just what you're into.They all have WeChat.So in a market like that,people will buy your phone based onif it's actually better or not.Meaning there's lots of gardensand very few walls around those gardens.That's what a good competitivelandscape looks like.Now, what would be maybe illegalor a wrong thing to do is ifWeChat or the makers of WeChat,if Tencent made a phoneand then they gave theirphone special accessto certain parts of WeChatthat suddenly no other phonecould get, then monopoly.So this lawsuit and all thislegal versus illegal stuff,it's mainly just a wayto try to poke some holesand get closer to thatlevel of lower wallsand more competition thatmakes everybody better.Then we're actually competingon innovation again.But it's something that will be evolvingfor a long time over time.So it'll be interesting to keep an eye on.And speaking of thingsthat might be illegal,shout out to Dbrand forsponsoring this video.So you might have heard about,unless you've been living under a rock,you've heard about their grip case by now.So I've got their latestHydrodip cases hereand I gotta say the namematches it perfectly.You know, these days a lot of phone casesare just kind of boring plastic shells,but with Dbrand they're kindof playing with some stuffand these are some crazy colorwaysand these trippy hydrodipped patterns.Plus with the Gold Rush one,if you catch it under the right light,you'll notice a littlelow key metallic effectunder this matte finish, which is sick.Now in addition to the impact protectionthat you expect frompremium case, perfect.Grip cases also havewhat I would consider attention to detail.So that's two things.First of all, these buttons,they're just really cliquey,they're nice, they're probably betterthan the actual phones buttons.But also, in general,like we've all eventually dropped a phone,whether it's like out of a caror on your face whilewatching a YouTube video.It happens.Ideally, this case prevents it'cause it's in the name,it's the Grip Case.This texture is pretty nice at that.So it's hopefully gonna preventthat sort of drop stuff.But in the case you do dropit then, yeah, should be fine.It's good.So yeah, if you wanna,if you're a case person,I would say at least getyourself a nice Grip Case.I'll leave a link below.But that's it.Thanks for watching this videoand lemme know what youthink about these featuresand the iPhone andeverything going on with it.And I'll catch you guys in the next video.Peace.(upbeat music)\n"