The Exchanges

Q Apple had just acquired Tesla from the start? What if Apple had just acquired Tesla from the start? So let's start at the beginning, like the way, way beginning. Steve Jobs actually proposed the idea that Apple could build a car in the 2000. Apple even thought about acquiring General Motors in the wake of the financial crisis. Why was a car attractive to Apple even in the early days?

A The car was attractive to Apple because of the idea that a lot of people spend a lot of their time and a lot of their days, uh, driving, right? They felt like that there was something they can contribute to that portion of people's lives. They wanted to own the on-the-go. Obviously, the iPod and the iPhone was an on-the-go device. They wanted to own the living room. They wanted to own home and work and business. And The car is a big part of, of the on-the-go experience, so that was something they took a brief look at, ah, when Steve Jobs was around, and then that project re-kicked into, into gear, ah, so to speak, 2013, 20 14 time frame. Initially, the, the first part of the car project was examining what it would take to acquire Tesla, integrate Tesla, and take Tesla to a new level under Apple ownership. And so they spent a lot of time exploring the possibility of acquiring Tesla. Apple's head of mergers and acquisitions had met with Tesla's Elon Musk and JB Straubel multiple times, and Tim Cook, Luca Maestri, the company's CFO, decided not to, you know, move forward with such an acquisition. And so that was a big moment. Instead, Apple allocated budget, resources, et cetera, to Going ahead and engineering and developing its own car. So Dan Riccio, the head of hardware engineering at that moment, uh, started hiring people from within the company, program managers, software man…

AI assessment note: “The car was attractive to Apple because of the idea that a lot of people spend”

Q This moment in 2014 is such an interesting one because it makes one speculate about what could have been. Uh, what do you think would have happened if Apple had actually acquired Tesla, which at the time was worth one 20th of what it is today?

A You know, I think if Apple ultimately acquired Tesla, it probably would have been, and this is just my opinion, a good thing for the company. I think they would have made it far more Uh, operationally efficient. They would have made it leaner. It would run, you know, an Apple-designed operating system. They would get some semblance of autonomy, and I quite frankly don't think Elon Musk would have lasted long, uh, at Apple, right, with Tesla. I think Elon Musk would have wanted control. I think Elon Musk would have wanted to run, you know, probably the whole company, obviously a very ambitious guy, and certainly I don't think that would have worked out. I think they would have clashed. I don't think his Culture, the way he handles himself, uh, you know, no judgment in either direction, you know, really meshes with how, you know, Apple as an entity operates, and so I think they would have taken, you know, a lot of the learnings that Tesla had, a lot of the underlying technology. Now, Tesla has some great tech from batteries to manufacturing, uh, to, you know, powertrains and electric car engines and such, right? That could have all been very useful for Apple, and I think they would have Taken Tesla as a basis and, and built, built on top of that. You know, what Apple does is they buy an entire company or some sort of algorithm and use that as a basis for a feature. Apple bought B…

AI assessment note: “I think if Apple ultimately acquired Tesla, it probably would have been”

Q Definitely a lot of disagreement over the design. I'm curious, what, what were some of the design changes over the years?

A So, the overall car design was pretty much the same from, from start to finish, ah, with major changes. I would say design one to the, to the final design, ah, was all in, in evolution. And I think that the, the very core of the car looked something like the Volkswagen ID Buzz, Which is their, you know, new generation concept, uh, reimagining of the 19 fifties, 19 sixties, uh, micro bus, right? Sort of that, uh, if you've seen Scooby Doo, sort of something like the bus that they, they drive around in. And the idea was to have reclining seats, uh, seats that can turn, uh, into places to put your feet up, uh, couch like living room seating, gigantic TV in the middle of the car cabin, A high tech cockpit with chairs that can swivel, uh, doors. One incarnation had sliding doors. Another had doors like in the Tesla Model X, the gullwing type doors. All sorts of crazy ideas. They had ideas about not having windows that can open. And so instead of that, they put microphones outside the car with a, you know, a high tech spatial audio system inside the car that could present The user with the feeling that they have open windows. They had a high tech air conditioning system where the air flow would flow through the sides and top and bottom of the car, sort of like what you see on some of the, the newer, I think air buses or Boeing airplanes. Speaking of, of Boeing, you had, you know, on …

AI assessment note: “One incarnation had sliding doors. Another had doors like in the Tesla Model X”

Q leadership that let the program linger while everyone else in Apple was cringing. When asked what went wrong with the effort, a senior manager involved in the vehicle's interior design replied, what went right? At what point did it turn from A Skunk Works project that could help, a very expensive Skunk Works project that could help Apple create its biggest product yet into something that was a little embarrassing.

A Well, certainly the, the first embarrassment started to, to come out around 2016, 2017, when they had to do the first major pivot of the project, which was refocusing around that autonomous driving system, paring back some engineering and operations related to the development of physical car hardware. In focusing all your attention, or some of your attention, or a greater degree of your attention on the autonomous system, hoping to nail that down, and then eventually pivoting back to building the whole car. And that was a big embarrassment. They had to, unfortunately, lay off hundreds of people at that point. Uh, you know, a bright spot of the project was when Doug Field returned to Apple. This was in the tail end of, of 18, and he, prior to that, was running the Model Three in all car hardware engineering at Tesla. Which had just got through the Model Three issues, and, you know, was on to, you know, the great success that it has seen in recent years. So Doug Field returns to Apple. Before going to Tesla, he was a Mac hardware executive. He comes back, and everyone thought, this is now the time when the Apple car is going to go full throttle towards development, and that was certainly the goal. He implemented a lot of the fail safes for the backup to the autonomy, but he ran into issue after issue related to disagreement, Indecision from top Apple executives, including Tim Coo…

AI assessment note: “the first embarrassment started to, to come out around 2016, 2017”

Q So, there are a lot of folks on the Special Projects team that are gonna move to generative AI work, to work on the Vision Pro. How important are those products to Apple's future?

A You know, I think Apple sees the Vision Pro as potentially a long-term replacement for multiple different product categories. I think they see it as something, ah, that has potential to replace the iPad as a consumption device, potential to replace the, ah, the Mac as a productivity device. And certainly something when you're shifting to augmented reality, uh, has the potential to be an iPhone replacement. Obviously, the Vision Pro would have to come down, uh, significantly in size, weight, and cost to be an iPhone replacement, but there is so much potential in sort of the head-worn, wearable space, and a lot of potential in the operating system they built there. A lot of potential, uh, in the application ecosystem that they've been building up there with ARKit for so many years, and the applications you're already seeing on Vision OS. So, I certainly think that's a critical category for them. I think generative AI is going to be at the very core of a lot of what Apple is building for both, you know, today and tomorrow. So I think you have some of the smartest engineers in the world working on the fundamental problems of autonomy at Apple on this canceled car project. And so placing those people in very important areas like generative AI, which is at the very core of what you're seeing from NVIDIA and Meta and Google and Microsoft, OpenAI, Anthropic, you name it, I think that w…

AI assessment note: “I certainly think that's a critical category for them. I think generative AI is going”

Q As you say in one of your stories, Apple saw this as the ultimate mobile device. Um, but as you reported, there were disagreements from the start. What were team leaders disagreeing about from the beginning?

A The big disagreement that, that Apple was facing from the get-go of the project was the level of autonomy to work through, right? Would it be something close to no autonomy? Would it be something like level two, like you see in a Tesla? Would it be level five autonomy, uh, like Apple ultimately landed upon as its ambition, right? And so that was a big Area of disagreement. Some people wanted to start with something like level two, or even, you know, level zero or one, and build upon that over time. And so I think that core fundamental technology is where the disagreements really began. There were also disagreements about who the car should be for. Should it be more like a traditional car? Should it be for people who love their cars? Or should it be for people who don't love their cars? And people who just want to sit in a microbus and have it act like a private jet or an airplane cabin or a living room on wheels, so to speak. And so you had differing opinions. You also had different opinions from the finance people at Apple. Do we really want to enter a market that is so incredibly competitive and so incredibly low margin? So anything you could really think of where there was room for disagreement or difference of opinion, there was Disagreement or difference of opinion.

AI assessment note: “The big disagreement that, that Apple was facing from the get-go of the project”

Q more training, and then not to mention regulations need to change, and consumer confidence needs to change, and suddenly this last decade of history shows us that it's almost a little ridiculous that they hung on to level five autonomy for this long. Why did it take so long for them to make this change? Decision when it was clear that there were a lot of struggles in the market.

A Well, it felt like they had come to some sort of solution, which is to build more of a Tesla Me Too product, which is to build something that would require less advanced autonomy, something in the level two plus three range, and they definitely were working on that. They had pivoted back to installing a steering wheel and pedals, but the problem is, is that you weren't really going to add much to the marketplace. Maybe you had a cool Apple design and user interface, but it certainly wasn't going to light the earth on fire, and I don't think they wanted to ultimately release something that was a me too product to Tesla. And so they, you know, ultimately made the decision to wind down the program. I think ultimately, to be honest with you, the biggest factor was probably, ah, the lack of profitability and the lack of strong margins that they saw coming from the car project. You know, on average, Apple's, you know, corporate gross margins are, are above 40%. You know, there are car makers like Lucid and Rivian that are losing Tens of thousands of dollars on every car unit shipped. And certainly that's probably not something Apple wanted to deal with on the bottom line. And if they were able to create a car without losing money, something that was profitable, uh, they would probably have to overcharge for the car. So, you know, in many respects it was a lose-lose, uh, for the compa…

AI assessment note: “the biggest factor was probably, ah, the lack of profitability and the lack of strong margins”

Q clear whether Tesla would actually make it, and there are a lot of big questions for some of the new market entrants. Um, So it's a very logistically complicated business making cars and competing with existing automakers, but building consumer electronics isn't exactly an easy business either. So what is the case for Apple actually being able to pull this off logistically if they actually got a model that worked?

A I mean, me personally, I think they could have gotten it right if they didn't get so far down the road on level five autonomy, building its operations around level five, building its autonomous system around level five, spending 10 years building different car designs and infrastructure and testing facilities around level five, and by the time they reached that tipping point, that, you know, teetering moment, it was kind of too late to turn back, and it was really either keep going forward Or pulling the plug on this thing, I think, personally, uh, which is a bad position to be in, so it was poor decision making and indecision that, that got us to this point. If Tim Cook had made the decision, you know, earlier on in the development process, uh, to move to a level two system, or start with a level two system and build up from there, you know, perhaps there would be an Apple car on the road today.

AI assessment note: “I think they could have gotten it right if they didn't get so far”