Ep. 3009: Will Hardware Companies Turn Into Ad Companies? HP Launches Laptop-Targeted Ads

I'm curious on your thoughts on this, and I think this will be a fun topic to discuss, is do you think hardware companies are going to turn to ad companies? Because I saw how HP is launching an ad business with their laptop targeted ads. You know, like imagine just using your laptop and then you're starting to see more and more ads.

I think everything's going to change. I don't know, like, so I'll kick it back over to you, but like what I mentioned that's kind of related, but I'm like, okay, software will become agencies, agencies will become software and vice versa. So I'm looking at this, I'm like, you're going to try to maximize your shareholder value wherever you can.

So. I don't like the concept of hardware companies turning into ad companies unless there's a deal for us end users. I'm not saying we should get a cut of the ad revenue, but the hardware should be cheaper. When I go to places like Brazil, people always ask me to bring them like iPhones and I don't want to break the law because they're trying to avoid like tariffs and stuff and they want me to like smuggle in iPhones. Um, because a, a iPhone in Brazil costs way more than it does in the United States.

How much does it cost?

I forgot what the rate was, but like at least 20, 30% more.

Wow.

So like, keep in mind their currency exchange is worse. People make less money.

Yeah.

And then iPhone costs more.

You basically can't afford it. You can't afford it. It's a huge luxury there. Huge luxury.

Yeah. Uh, ultra rich have 'em.

Yeah.

You know, middle class to poor people, they tend not to buy 'em or they get older models.

Yeah.

Because Apple reduces prices. But I know there's a lot of people, including me, that would be willing to buy hardware if it was a lot cheaper. Like if my iPhone was free, but I got ads all the time, I would take it. I would take it.

Yeah.

And it could be on my home screen or whatever. I would, I would really take it. Now, if there was an ad before I would make a phone call, I would not take it. That's just causing me more problems.

You're just saying there has to be a win for the consumer. It can't just be, you're just trying to like maximize shareholder value.

Yeah, but I think Apple would make more money if they just made their iPhones free and they made revenue from ads, at least in specific regions like the United States where the ad revenue—

Who knows? They might. I mean, they haven't been innovating recently, so.

It's an easy way to juice more revenue without the innovation. I would slowly do a trial run.

You know, this app, this version of Apple doesn't feel like the 1990s quite yet, but it feels like it's kind of going in that direction. Not quite yet, right? I think it's still a ways out and they have a lot more infrastructure. But I just remembered the slip in the '90s where Apple just started to go straight down.

Yes.

And then the PC went straight up. So we'll see what happens. But to me, it's like, sure, they're part of the Magnificent 7. We'll come back to this. But like, when you look at the companies who are innovating right now, like Meta is pushing quite a bit in terms of how they're poaching talent, right? And then you look at Nvidia, they're innovating, right?

Even Google, they're poaching talent, paying an arm and a leg.

Yeah. And so like they're pushing, but I'm like, where's Apple pushing, right?

Microsoft's pushing.

Microsoft's pushing. You could say Amazon's pushing too.

Dude, have you— I'm pretty sure Apple has released AI features on their iPhone.

I could be wrong. They suck.

I don't use them.

Do you? You know what you can do? You can make an emoji. You can make an AI-generated emoji from it. That's all I know you can do. And then with Siri, it's still dumb as a rock.

Yes. And then with the typing, I just use Grammarly on my iPhone.

You use Grammarly on your iPhone?

Uh-huh.

Why do you need Grammarly on your iPhone?

So when I'm scheduling out tweets, like if I'm on a plane and stuff and it's really long, because I got the smaller phone, so sometimes I mistype or like push buttons. Grammarly helps catch it and fixes it. You know what's weird?

Do you use autocomplete on your phone? I don't use autocomplete or anything like that. You know how you can like slide the thing?

I hate that. I can't do that. Where you're squiggling your hand and so you're not going up.

But I think also, I also think because we're older, we just like to type it out.

I do see the young, quite a few younger people using the thing where they zigzag with their finger instead of lifting it up. Yeah. Um, they're more efficient than people like you and I. We're actually getting— we're middle-aged.

We're getting old. Yeah. Yeah. I'm still not 40 yet, but anyway.

Okay.

Back to you.

But yeah, I genuinely believe, like looking at these companies like Apple, I agree, they're not really innovating. Like the iPad really hasn't changed. A lot of their products haven't changed over the years. I don't know if I'll upgrade my iPhone in the future. Like what am I really getting at this point? They're not doing anything new. A lot of these hardware companies that have the usage should just start showcasing Ads. Like imagine Tesla, there's this big screen. Why doesn't Tesla put more screens in the robotaxi and just make it even cheaper?

Yeah.

Like usage would go through the roof.

I think the thing Apple has going for them right now is the ecosystem lock-in. And so it's still very convenient, but how much longer are they going to have that for?

Yeah, but you, I agree with that, but I think if they can start integrating into more home products, you know, like automotive and stuff like that, I do believe there will be They'll still be able to keep the lock-in. They just need to partner with other people who have the software and just integrate that software within their organization. Like instead of Apple building a search engine, they just partnered with Google, right?

Yeah.

They're partnering with ChatGPT as well. The problem is they just need to execute on some of this kind of stuff.

Yeah.

The big opportunity for Apple is to figure out how to just monetize all their users. And I believe the ad ecosystem is probably one of the best ways. I look at the same thing with Google. Their ad ecosystem makes them so much money. If they just figured out a way to get their Waymo costs even lower and they just, I know they're losing money, but break even on Waymo and make it where people are getting served ads, they would make way more money from that than anything else. They already have your email address, you're using the app, they already have all your Gmail.

I'm sure they're going to integrate ads in there because that's a little screen in the middle. Yeah. Right. Or either you can either pay to not have ads or you can just leave the ads there.

Yeah. I would pay to have ads everywhere. I don't mind ads.

Well, we're also in marketing.

No, but even then, Like some of my subscriptions, you know, like for the television streaming, I have ads and I'd rather have the ads and get the cheaper rate.

Dude, as a gamer, I used to hate ads. Gamers block all ads. I had every ad block, everything. I was like totally locked in. So, and speaking of gaming, I was watching a video of Elon playing Diablo yesterday. He's number 1 in the world in hardcore now for Diablo. What that means is—

What is that? Yeah.

So you know how like in a game, if you die, you can just respawn and go get your gear and like you can just keep going, right?

I do now.

Okay, now you know. Well, you know, any game, right? If you die, you can usually respawn.

Okay, so if you die— let's go back. So if I'm at level 5, not level 1, I don't know what levels these things go up to, and I had all these tricks and gears and, you know, trinkets, whatever you wanna call 'em, and I die, do I just go back to level 5 and I can just pick up all the stuff?

Yeah, yeah. You stay at level 5, you go, you can pick up your stuff, right? You have to go find your corpse and pick it up, right? That's how it works in Diablo.

Can someone else pick it up for you before you?

No, well, depends if you're playing PvP, which is totally different. If you're playing PvP where I can kill you, and then if I kill you, then your gear might come out and I'll steal your gear, right?

But normally people can just pick up their own stuff and they don't have to worry about getting jacked.

Yeah, exactly. So it's very safe, right? So he's number 1 in the world on hardcore. Hardcore means if you die, you lose it all, right?

Including your level?

Everything. Everything's gone. You have to start a new character.

From level 0 or 1?

Yeah. All the way down to level 1.

So what level is he?

He's maximum level, number 1 in the world. He has the best gear. But the reason I even bring this up is one, how does this guy have time for games? People are wondering that. Like what I've read is he blocks his days into like 5-minute increments, right? He's doing like the highest leverage things per 5 minutes, right? The other thing is when you look at, he always reasons from first principles, right? So I'm like, okay, I was thinking about this yesterday in the shower, right? I was like thinking about how Elon plays like Diablo. I'm like, if he was reasoning from first principles, he understands that all he needs to do is spend a ton of his money on the richest gear, because you can buy the gear, right?

Buy all the best— You know how much gear costs? Like $5?

Oh dude, I've— when I was 13 years old, I sold a helmet in a game for $3,000. A helmet.

You're 13? How much is a silly helmet?

This is not even a real helmet or a virtual helmet? Virtual helmet.

This is a waste of money.

Whatever. Somebody, some guy bought it from me.

If your mom knew that you—

She did know. She did know.

That you're buying stuff for $3,000?

No, I didn't buy it. I sold stuff. I never bought anything because I thought people were idiots for buying it, right? But if you value your time like Elon does and you're the richest man in the world, you just buy the best gear. How much is it going to cost you? Like $20 grand at most, maybe $10, something like that, right?

So you think he spent like $20 grand on gear?

I think he spent a ton of money on the gear and then you can basically like, you're unstoppable, right? And that is a very simple way of first principles. I just need the best gear and then I'm unstoppable. And that's how he's done it.

So it's kind of like a cheat code.

Yeah, basically.

So if I spent like $1 million on gear, I could beat Elon.

Yeah, well, I mean, you have to, you have to play at a high level too. So when I, when I see him playing, he's playing on a 55-inch screen and he's like, you can see his, his actions are like, he's moving very quickly, right? And he's like hitting his keyboard, a bunch of shortcuts really quickly. Now guys, you can correct me if I'm wrong here, but I think directionally I'm correct cuz I played many versions of Diablo.

So there's more than one version of this silly game?

You played Diablo 4? Yeah. I played Diablo 1 when I was like 8, 9 years old. Then there's Diablo 2 to Diablo 3 and Diablo 4.

Oh, it's like one of my favorite games. There's a lot of versions.

What's your favorite game?

Monopoly.

Oh yeah, real estate and money. I love Monopoly. Makes sense.

I even paid for it.

All right, so I wanted to take a moment to tell you about my podcast co-host Neil's agency called NP Digital, and they work with a whole host of global companies or global organizations. Also, Neil has SEO tools such as Ubersuggest and AnswerThePublic. All you have to do is go to npdigital.com to learn more, and we'll see you on the other side. Before we move on here, like talking about, I was debating yesterday with a friend and then we were talking about like, oh, you're throwing money away renting or whatever, right? And then I actually, you used to own a bunch of property, right?

It's a waste of money. You're better off renting.

Yeah. Talk about how your philosophy changed over time. Because the way we were brought up, this is a little investing lesson, our experience share here, was our moms and dads told us that you should buy, you should always buy a home. You're throwing away money renting. You're always going to make money. And then I had my reasons, but I want to hear your reasoning and then we can move on from here.

Sure. So I'll use one of my homes as an example because I know the numbers quite well. Property tax, a little bit less than $20,000 a month. So let's just round to $20,000. A month, by the way. A month. Mortgage, $39,000. It's not too leveraged. It's really actually very underleveraged. Yeah, $39,000. So let's just round up to $40,000 to keep the math simple. So you're at $60,000. Maintenance, gardening, pool, property manager, which is a contractor because no one wants to deal with it. And electricity, water, roughly $5,000 a month. I'm just rounding. I'm probably off by like no more than $3,000, $4,000 on the whole thing. So let's call it $65,000 a month.

Mm-hmm.

All right. Now the home is a $30 million home at this point. We've spent a lot on renovations. So let's call it, I have $23 million in equity, $7 million mortgage. Technically, the home's probably worth closer to $30 to $35, but let's just go with $30 and we're just going with my rough costs. So when you're looking at the math there, that's $23 million sunk costs that's put into the house that I'm not getting back because that was the equity, the cash I had to put in. Then you have still with that, you have the monthly payments of roughly $6,500. And again, I'm off by a few grand, call it $2,000, $3,000, but let's just go with easy. Numbers on the $23 million, you know, because I was talking to my wife, I can go rent a house, like a nicer house. It won't be as nicely done up, but it'll be bigger. Land will be bigger. It's worth more, but it'll be older. It's still in Beverly Hills. And let's say I can rent easily 3-year contract, $120,000, $140,000 a month. I could just negotiate that. Now you may look at that as, let's say I get it for around $130, we'll go in middle point.

Yep.

And I'm at $65, that's roughly double what I'm paying.

Yep.

But the $23 that I have now—

Opportunity cost.

That $23, I can, I wouldn't say easily, but I would say I'm probably like 80 to 90% certain that I can ink out, call it $4 or $5 million for on the worst case scenario. 5 on a good case scenario without any growth, just like buy businesses and ink out that much in profit. Plus there's opportunity to grow, but some could decline. But if you just keep it simple with just say 4 on the really low end, which would be a terrible deal for me, and I usually wouldn't spend $23 million to only make $4 million in profit.

Yep.

But even at $4 million, it's just like, okay, $130,000 a month. You know, when you start looking at that, that's less than $2 million a year. And you're just like, I'm making foreign profit.

Plus that those businesses scale too over time.

Yes.

Because the other thing too is if you look at the real estate returns, oh, well, you're going to get a return. Okay. What are you getting? Like 4 or 5% a year on real estate? Maybe, maybe, maybe a little better. But on business, what is your return that you're getting on it?

That, that I'm getting on my business?

I'm just talking about like in general for people, your return is going to be a lot better than 4 or 5% a year.

Well, not just that. If I spent that money buying the businesses, the businesses are probably worth double when I integrate them in. So if I spent $23, I'm probably inking out conservatively $35, $40 million just right there off of thin air just from the purchase. But we usually don't buy stuff unless we know we can cut costs and grow it. So I would hope the $23 million turns into at least $50 million and turns into at least something like on the low end, $5, $6 million in profit, if not more.

My point is your internal rate of return is going to be a lot higher. The other thing too is if you buy homes and things like that, then you have to actually manage it. It's like when Sam Altman's like, well, if I buy a TV, then I have to watch it. So yeah, like it's like it's It's cognitive load. Yes.

And that's why I end up believing that we shouldn't own any homes and we should just rent them all.

I believe, okay, and I think you're doing this, but like, I believe owning a home for your family is fine, but I think owning a bunch of homes just is a pain in the ass for me.

So Eric and I were having this conversation because the economy's really bad. I'm like, dude, do I sell the home and just put all that money into business? And Eric was going through some tough times with his mom. She passed away recently. And it gave him a different or a unique, a new perspective on life, I would say.

Mm-hmm.

And we were talking, he's just like, you know, he's like, you've made, I'm not the richest person, but he's like, you've done okay in business. Your life is decent. He's like, are you really going to die and remember you making, you know, taking that $23 and turning it into $50 or $60 million? Or would you rather have a really nice house? With amazing furniture. And like, when I say amazing furniture, I think our furniture bill's like $1.7 million just for furniture on our—

Which Neil didn't pick, by the way.

I didn't pick any of it. I would've picked IKEA furniture if it was up to me. Some decisions, and I'm not hating on it, you know, there's other things that I spend money on that are a waste too. But Eric's like, would you rather have your kids really happy and have things like a theater or whatever they want in a house and a big backyard where they can play and play basketball with them and have those experiences? Or would you rather just have more net worth? And the old me would've had more net worth, but I think Eric was spot on because I now will have better memories with my kids because right now we don't have a yard and they want a yard.

And you'll pay anything for those memories down the road. Correct. Yeah.

And, and, and the furniture and stuff like that. I think that's a pure waste.

Yeah.

But the only reason I did it is I'm like, if I want to sell it, it actually makes it easier to sell the house, believe it or not.

Yeah, no, I believe it.

Yeah. So then you just get a premium.

It's a product just like the cookies.

Correct.

Yeah. Anyway, that's what we'll say. A jack of all trades, guys, is better than a master of one. See you tomorrow.