>> from our studios in new york city, this is "charlie rose." [applause] charlie: tim cook is here. he is this ceo of apple. he succeeded steve jobs in august, 2011. he joined apple against his better judgment. he has said apple in early 1998 was very different than the apple of today. the company had been losing sales for years and was considered to be on the verge of extinction. he has also said working at apple was never in any plans i will outline for myself, but it was the best decision i ever made. on tuesday, cook announced the

next chapter in apple's story at the same venue where steve jobs introduced the macintosh personal computer 30 years ago. he unveiled the iphone 6, the iphone 6 plus, and the apple watch. he launched apple pay, a mobile payment system. it aims to do something about the credit card. i am pleased to have tim cook at this table for the first time. welcome. tim: great to be here. thank you for inviting me. charlie: we have much to talk about. you call it the next chapter. why? tim: the apple watch is the most personal device we have ever created. i think it takes us into a whole different area.

tim: we had an intense team working on this for three years. and so we explored many different things. as the product came to fruition, it became not only the timepiece you would expect but a device that can do many different things, including a whole new way of communicating and connecting people. and it also has a health and fitness component that we think has, could really be profound. charlie: take your blood pressure and lots of other things. tim: it will start with heart. and it will be a sort of a personal trainer for you. you can set goals and it will reward you for achieving certain things. you can choose to interact with your doctor. you can choose to combine it with other apps and get a full view of your health. ole new areas a wh for apple. and we think, we're all about making great products, enriching people's lives. we see it as allowing us to do that at a whole different level. then, of course, iphone 6 -- are the best iphones we have ever done.

i think you will agree. you have them in front of you. charlie: this is my iphone. this is the iphone 6. tim: the thinnest we have ever done. the screen is just to die for. it's superfast. it is lightning fast. it has a whole new range of wireless technology. so it is screaming fast on the wireless networks. it is really unbelievable, and it feels unbelievable in your hand. hold it. it is really unbelievable. the design -- johnny and his team did such an incredible job here. it is really seamless between the glass. it is like a singular form. charlie: back to what is next. this represents a continuation of the iphone. tim: a leapfrog, i would say, but yes, it is the iphone 6.

it is not the first iphone. but it is the best advancement ever an iphone history. so we think the upgrade cycle here and the number of people that will switch from other smartphones will be enormous. charlie: were you challenged by what samsung does and what it has in the development of this size personal smartphone? tim: no honestly, charlie, we , could've done a larger iphone years ago. it has never been about just making a larger phone. it is about -- been about making a better phone in every single way. so we ship things when they are ready. we think the display technology here and the battery technology, and everything else, and the software you can -- on here, you , can use this phone one-handed because you can tap it twice.

and the screen will come down. and so the ingenuity here and the fact that we have integrated software and hardware services which i think only apple can do. this phone now is the time for it. charlie: there are other watches on the market, samsung and others. is the philosophy of apple, we don't have to be first, we want to be prepared to be the best? tim: the philosophy has always been to be the best, not the first. if you look back in time at apple, the ipod -- the ipod was not the first mp3 player. it was arguably the best, and arguably it was the first modern one, but not the first. the iphone was not the first smart phone. blackberry was shipping phones. palm was the first modern smartphone. iphone was the first modern smartphone.

tablets -- look at tablets were shipping a decade before, yet ipad arguably was the first modern tablet, and the first one that met any level of commercial success. the watch, which i am wearing here, will be the first watch -- charlie: may i see that? tim: you may see that. charlie: see if you can get in on this. you cannot get this today. tim: early next year. you can see some of the apps i have on here. charlie: what is interesting is that outside entrepreneurs can design apps for this watch. tim: yes, we have opened it to developers. one reason we wanted to announce it before shipping it so that developers will have time to develop software for it. we think that, based on the first few days, i would say there is going to be a lot of stuff available for it. charlie: there is a fashion item aspect to this. tim: there is. charlie: johnny brought in his friend, mark newsom. tim: he did.

and mark is unbelievable, another great addition to the apple team. johnny and team recognized that to wear something, it had to be incredibly personal. it had to reflect your taste and express what you want to express about yourself. it is sort of like your clothes and your shoes. you are not going to wear the same thing everybody else does. most tech companies, i think, look at this as only technology. we recognize that technology itself is not sufficient. it had to have a style element. it had to be something that you are proud of wearing. i mean, this is connected to your body. charlie: it makes the computer personal. tim: it makes it very personal. and that does not take away from the function of it. the function of it is killer. there is a computer on a chip in here. it is the first we have ever done. there is 400 or 500 components,

everything from a gpu to a cpu and all the rest. charlie: but you have to have an iphone. tim: they are designed to work together. things like messages, using the cellular system to pull down your messages. if you go for a run and do not want to carry your iphone, music is also in your watch. with a bluetooth headset, you can run and listen to your music without your iphone. charlie: the health-care business is a huge sector of our economy. tim: yes. charlie: this is your entry into that, in some way? tim: i see this as huge. i am not looking at it just from the monetary piece of it. we do want to enrich people's lives. we want to make great products that enrich people's lives. neither one is sufficient by itself. we want to do both. and so arguably, with health

care, there is a wide open field to make some really profound contributions. and so our entry into this is, we announced healthkit in june. allows, if you want, if you wish on your phone -- you , can begin to take all the data in all of your health apps and aggregate those. you might elect just use that yourself. you might elect to interact with your doctor on them. now all of a sudden we have also got a device that gathers certain fitness data about you. so this is yet another way to begin to build a comprehensive view of your life, which should empower you to take care of yourself over time. when you need help, it empowers you to take certain data to your doctor to get help from them, all while guarding your privacy. nobody is getting the data if you do not want to share the

data, and we are not keeping it. charlie: in introducing these products -- there was the bow to the past, the arena where steve introduced, 30 years ago, the macintosh. when you introduced the watch, you famously said, one more thing, words that steve had used. where is steve and all of this? tim: he is in my heart. he is deep in apple's dna. his spirit will always be the foundation of the company. i literally think about him every day. his office is still left as it was -- charlie: on the fourth floor. tim: on the fourth floor. his name is still on the door. and we still -- if you think about the things steve stood for at a macro level, he stood for innovation. he stood for the simple, not the complex. he knew that apple should only enter areas where we could

control the primary technology. all of these things are still deep in our company. they are still things that we very much believe. the strive for perfection, for being the best, for only doing the best products, for staying focused -- the fact that, despite this table being so small that you and i are sitting at, you could put every apple product on it, every single one that we shipped today, and yet this year our revenues will be approximately $180 billion. there is probably no other company on the face of the earth that could say that. most companies do larger and larger portfolios, because you are always -- it is so easy to add. it is hard to edit. it is hard to stay focused. and yet we know we will 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 is lots of things we would like to work on, that we have interesting, but we know we cannot do everything great. charlie: is tv one of them? tim: well tv is one we continue , to have great interest in, so i choose my words carefully there. you know, tv is one of those things that, if we are really honest, it is stuck back in the 1970's. think about how much your life has changed, and all the things around you that has changed, and yet tv, when you go in your living room to watch the tv, or wherever it might be, it almost feels like you are rewinding the clock and have entered a time capsule, and you are going backwards. the interface is terrible. i mean, it is awful. you watch things when they come on unless you remember to record them.

charlie: why don't you fix that? tim: well, you know i don't want to get into what we are doing in the future. we have taken stabs with apple tv, and apple tv now has over 20 million users. it has far exceeded the hobby label that we placed on it. and we have added more and more content to it this year. so there is increasingly more things you can do on there. this is an area we continue to look at. charlie: was this a question for you among some investors, consumers, people who write about technology -- there was the question. steve was a visionary. can tim continue the apple tradition of creating? new products every four years or less? can he reach into the future?

does he have that kind of makeup? did that concern you? did you think about that? were you committed to prove that apple had a future beyond the groundwork steve jobs had laid? tim: he called me one weekend in august 2011, and he said, i would like to talk. and i said, ok. and i go, when? and he goes, now. i said i will be right over. ,he told me, he says i have been thinking a lot, apple has never had a transition of ceo. i am determined that we will have one now. i want you to be the ceo. honestly i did not see it , coming. tim: you did not see it coming?

you did not see it coming? tim: i know you looked at me with disbelief, but you can say i was in denial or whatever, but i thought -- i felt steve was getting better. he was still at home, but i felt he was getting better. i was seeing him regularly. i guess at the end of the day i always thought he would rebound. he always had. he had incredible lows in his health and had always bounced, and i always believed he would. and so it took me a little by surprise. he had talked to me about being ceo before, so i always knew it was his long-term thinking -- charlie: that you would become ceo? but not then? tim: but not that specific moment. so he and i had a discussion back and forth about -- because i was testing him on this. i said, you know, what kind of things do you want to do as chairman, versus me do? it was just sort of having a good banter with him.

i go, for example, ads, do you want me to just do the ones i think are right, or do you want to be involved in it? he said, well i hope you will , ask my opinion on some things. [laughter] i thought, charlie, on that day, that he would be chairman for a long time. that i would be ceo for a long time. and that we would continue to work together. and he knew, when he chose me, that i was not like him. that i am not a carbon copy of him. and so he obviously thought through that deeply, about who he wanted to lead apple. and so that, i have always felt the responsibility of. and i wanted desperately to continue his legacy.

and the apple i deeply love. from the onset, i wanted to pour every ounce that i had in myself into the company. but in terms of being everything he was, i have never had that objective. i have never had the objective of being like him. because i knew -- the only person i can be is the person i am, right? i am not an actor. i would be terrible in hollywood. so that is what i have done. i have tried to be the best tim cook i can be. i think that the reality is that apple has always had incredible contributors at very high levels.

johnnie has been there forever, and contributing at an incredible level, as has craig, jeff, dan. you go around the table. we have a new cfo now. this group of people -- and we have recruited angela. angela now runs retail. she is fantastic. this level of people are capable of doing incredible things. and it is a privilege of a lifetime to work with them. charlie: you have a picture in your office of martin luther king. a picture of robert f kennedy. robert f kennedy, after his brother's assassination, someone said -- the difficulty for him, he will have no rfk, as he was to his brother jack. so i might ask the question, do you have a tim, as you were tim to steve? tim: i think each person -- if you are a ceo, the most important thing to me is to pick people around you that are not like you, that complement you,

because you want to build a puzzle. you don't want to stack chiclets up and have everyone be the same. i believe in diversity with a capital d, diversity in thought , diversity in any way that you want to measure it. the people that surround me are not like me. they have skills i do not have. i might have some they do not have. what we do as a team collectively -- we are able to do some incredible things. and it is because we collaborate. i see one of my key things in life is to make sure we collaborate at an incredible level, because we run the company functionally. we are not like the typical big company that has n-number of divisions. everybody is a functional expert. then we collectively, to get things done, work together as a team. the work really happens

horizontally in our company, not vertically. products are horizontal. it takes hardware plus software plus services to make a killer product. all of these people, if you were to line us up and talk to everyone -- you know several of them -- we are all different. and that is the power of it, is that we are not trying to put everyone through a carwash so they look alike, talk alike, think alike at the end of the day. we argue and debate. if you were to come in our executive team meetings on mondays, you would hear a lot of discussion and debate about something. we do not always agree on everything. but we have great respect for one another and we trust one another, and we complement one another. and that makes it all work. charlie: the team, you leading the team, did the team have any questions you could accomplish what you did, knowing those questions were out there about the future of apple? tim: i think for me -- i cannot

talk about what everybody else thinks. for me, one great skill i have is blocking noise. so i typically read and listen to things that are deep and challenging and intellectual in nature, not just the noise. i think you could get caught up in the noise as a ceo. you are going to be a terrible ceo. there is so much noise in the world. everybody is on the sidelines, saying what you should do, should not do. it is sort of like the old roosevelt quote in the arena. charlie: credit belongs to the man in the arena who gets dirty. tim: i am the dirty one. you have to block the noise. so the question, i think, is, did i have doubts? the answer is no.

and did the executive team have doubts? i think you can see in our products that we were all betting on each other in a big way. ♪

charlie: tell me, where is apple going? tim: are we more open? yes.

charlie: are we engaged by partnerships? are we interested in enterprise, because we can partner with ibm? tim: that is a great one to talk about. i think it will give you an insight to how we look at things. this is probably different than the past. we look at these products, and the ipads that are not here, and we think that we can change the way people work. we have changed the consumer's life. we have changed the way students learn and teachers teach. when you get to the working environment, the change that we made, to us, is not significant enough. so we began to ask ourselves why. why haven't we done more? the real answer is, in the applications, there is not enough apps that have been written for verticals -- for very deep verticals, like what the airline pilot does, what the bank teller does, down at the level of the job.

and so, we began to ask ourselves, should we do this, or should we partner, or should we just forget it? and i did not want to forget it, because this is a way to enrich people's lives in a big way, to change the way people work. most of our life is spent working. certainly, our apps are changing the way i work. but i am not seeing as much in other places. so we began looking out and thinking about who we could partner with. jenny and i had been talking about other things for a while. i had great respect for her, great trust in her. charlie: as the ceo of ibm. tim: as the ceo of ibm, she is fantastic. we began to talk about this area. this is an area where they have things that we don't have. they have deep vertical knowledge of many different verticals, right? they have a huge sales force. and so ibm brings significant

enterprise knowledge to the table. we bring the products that enterprise wants. so we have something they don't have. we also don't compete on anything. to me, this is the perfect marriage. there is no -- there is no friction. there is just, we have what they need. they have what we need. together, we can provide something to customers. ibm is in the process, with our help, of designing many different apps for many different verticals, from banking to all the different financial services, to pharmaceutical, to aerospace, manufacturing, and so forth. and they have the go to market we don't have. this is an area where i think everybody is going to win. we are going to win. ibm is going to win. and more important than both of

us the customer is going to win. , charlie: why did you think you had to buy a headphone manufacturer? tim: in beats we saw several things. charlie: talent. tim: talent that i am super impressed with. jimmy and dre are off the charts creative geniuses. they also had teams underneath i really liked. jimmy has deep knowledge of the musical industry. dre knows artists. dre is an artist. they had started a subscription service. this subscription service -- some people think they are all alike. let me tell you, i went into the thing skeptically. charlie: the acquisition? tim: not into the acquisition of their service, but jimmy had told me how great it was. one night, i am playing with theirs versus others, and it dawns on me that when i listen to theirs for a while, i feel completely different.

and the reason is that they recognize that human curation was important in the subscription service, that the sequencing of songs that you listen to affect how you feel. it is hard to describe, but you know it when you feel it. and so that night, i could not sleep that night. i was thinking, we need to do this. they also have -- i think they have done a fabulous job with their brand. and in the headphone business, it is a fast-growing business. they went into it not long ago, and have done really well. however, they needed a global footprint. we have a global footprint. they have been primarily u.s. not solely u.s., but primarily u.s. i felt we could get a subscription service. we could get incredible talent. i think we can all put our heads together and do things beyond what either of us are currently

doing. and we can get a fast-growing business. financially is not the only element of looking at it at all, but next year, in our fiscal year, which is about to start, it is accretive. when is the last time you heard of a technology ceo saying they are doing an acquisition that was accretive? it just does not happen. so i think it is wonderful to get the influx of talent. the different perspectives -- it is this idea of diversity i use in a big way. i think it is really going to help us. i am 100% sold on the subscription, the music subscription service. and of course, we can scale it. beats would have had a more difficult time, because they are a small company. charlie: is the new chapter of apple moving away from just

being essentially a hardware company? tim: i would say we were never just a hardware company. charlie: a significant part of your revenue comes from the iphone, for example. tim: a significant part of the iphone is the software and services. charlie: right. tim: it is just that we do not split out the price between the hardware and software. charlie: it is all part of your ecosystem. tim: 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 -- think about what happened in the pc area, when you had windows and a separate oem doing hardware, and somebody else doing apps. you have a problem. you are pulling your hair out. you call the help desk, and they the help desk tells you to call another helpdesk, and they tell

another helpdesk and the guy who does not even have a helpdesk. we realized early on that these kind of devices, you really need to have a womb to tomb view of them for the customer. if somebody calls us, it is our problem. we are not passing the buck. i think you get a much better customer experience. charlie: but do you miss opportunity to take advantage of a whole group of people? because -- tim: look at our ecosystem. we have 9 million registered developers. we are not having a problem getting people to develop for the platform. if you were at our conference in june in san francisco, there is developers there from almost every country in the world. and they are writing for ios. access to all the innovation. tim: we have incredible access to innovation.

and we also view it and treat it -- it is a privilege to work with developers. we treat them like it is a privilege. from their point of view, they get to design something from a company that has over 90% of their customers on one version of the operating system. so we are not fragmented like android is, right? we will release ios 8 next week. seven -- the ios one that we released a year ago, and 92% of our customers are running ios 7. if you look at a comparable number for android or windows, very low. so you can really write software to the latest, or write your app to the latest software, versus spending your time on all these versions and iterations and so forth. it is great from their point of view, and they get to sell their product worldwide. think about how it used to be, if you were a developer. you had to go negotiate with every retailer, and there is no

global retailers. 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. it is in the app store in 155 countries. i mean it is really shocking. the jobs this thing has created is unbelievable. we are now, between the people we employ directly and the developers -- and the developers are a big piece of this -- over a million jobs in the united states. and a lot of that are people that have concluded to write apps. charlie: who is your competition? tim: well google, clearly. , charlie: some people say samsung instantly, because of the product. they make smart phones like this. not like this, but they make smartphones. they have the android operating system, the largest in the world. tim: google supplies that. i think i would say --

charlie: google is your competition. tim: google would be the top. and they enable many people in the hardware business, like samsung. samsung is the best of the hardware companies in the android sphere. charlie: google is competition. who else? tim: you know -- who else? charlie: the big four are amazon, in terms of most people's consideration -- amazon, apple, facebook. tim: yeah i don't consider , facebook a competitor. i consider facebook a partner. we are not in the social networking business. charlie: and will not be. tim: 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 work 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. charlie: amazon? tim: amazon we don't work with that much. we have little relationship there. they sell -- as you know, they have come up with a phone. you do not see it in a lot of places. they have some tablets. but they are not a product company. apple is a product company. and so in the long term, will they become a bigger product company? i do not know. you would have to ask jeff what his plans are. when i think of competitor, i would think of google. charlie: all the successes you have pointed to -- when you do something that is not as much of a success, and i am obviously

thinking of maps, and you look at it, what did you do wrong? tim: we screwed up, to put it bluntly. there were many screw ups in that one, not just one. there is many. and we have learned and corrected, and we are continuing to invest in maps. our fundamental premise that maps are 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 of happened like it did. it should not have come out. sometimes, when you are running fast, you slip and you fall. i think the best thing you can do is get back up and say, i am sorry. and you try to remedy the situation. and you work like hell to make the product right. if you are never making a mistake, you are probably not doing enough. ♪ we live in a pick and choose world.

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charlie: i mentioned when you made a decision in 1998 about apple, you had some reservations. but at the same time, during your interview with steve, you said something like this. i was prepared within five minutes to throw caution to the wind.

what did he say that made you believe this company is the place for tim cook? tim: 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, you know, i am going to go out and take the meeting. steve created the whole industry i am in. i would love to meet him. charlie: there is no downside to this. tim: i am just thinking i am going to meet him. and all of a sudden, he is talking about his strategy and his vision. and what he was doing was going 100% into consumer when everybody else in the industry had decided you could not make any money on consumer, so they were headed to servers and storage and enterprise.

i had always thought that following the herd was not a good thing. it was a terrible thing to do, right? you are either going to lose big or lose, but those are the two options. he was doing something totally different. and he told me a little bit 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 had, and i thought, you know, i can make a contribution here. and working with him -- this is the privilege of a lifetime. all of a sudden, i thought, i am doing it. i am going for it. you have this voice in your ear that says, "go west, young man. go west."

i was young at the time. you come back and you try to do the things people do with spreadsheets, and none of it makes sense. it did not 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. charlie: but in your speech at auburn, your commencement speech, you spoke to intuition. tim: yes, and that is what i mean by gut. my intuition was telling me loudly to go, and it was not based on -- you know, as an engineer, you want to write down pros and cons. 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 has come, and it never did. michael dell had made a comment

weeks earlier that if he were the ceo -- -- 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 shareholders, that it had no future. he was just saying what everybody thought. charlie: they did not know steve jobs. tim: they did not know steve. 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 don't -- they see things in the traditional way, which steve never did. he was always looking well beyond the view -- charlie: and looking at things with beginner's eyes. tim: he clearly had a gift for that. and he took that gift and embedded it in the company. it was not a gift that he kept to himself. one of the -- i loved the

many things about him. he was a dear friend. but he was also a great mentor. he was a great teacher. this is something that is never written about him. but what he left in not just me but many of us is what he taught us. he was one of the best mentors in the world. charlie: this is more than perfectionism. that,t is much more than no it is much more than that. because that is just -- that is holding the bar so high that it is very hard to hit. but no it is teaching, and it is , teaching and making sure people are learning. and him taking such an interest he is going out of his way to do , this. and i saw him do that over many years with not just me, but many people. and i think it is missed. it is a huge, huge part of what he did that is missed.

in most of the things that i have read. charlie: the misconception misses the teaching aspect. tim: that, and the human aspect of him. he was an incredible human being. i think i have never read anything that really captured him, or captured the steve i knew. charlie: one of the products you introduced is apple pay. do you have a relationship with credit cards in creating apple pay? some say, why didn't you just go around them, be disruptive? tim: it turns out that people love their credit cards. i don't know what credit cards you have. charlie: too many. tim: people might love that you collect airline points, or there is something about it that is sticky. charlie: go ahead. tim: we looked at the industry and said, people like that part. we are about making the user's

life better, making the experience better. mobile payment stuff that had been done and it wasn't making anybody's life any better. we saw was about making a business model to make money. we started with the user. what do they want? nobody wants to carry a wallet. you do not want another thing you have to remember to put in your pants when you walk out the door. you do not want another thing to lose. you do not want this card with exposed numbers that has a huge security risk on it. and so we fixed the security issue. our system is much more secure than the traditional credit card system is. we kept the thing that people liked, which is that they do love their card. we said, we don't want any of this data. we are not doing what other companies are doing. we don't want to know what you are buying or where you are buying it. we don't want to collect all the stuff on charlie. i don't want to know where you are spending your night.

we firewall all your stuff. we do not keep it. it is not on our servers. we kept what is great and fixed what was not. the retailers love it, because it is a far more efficient way for people to check out. charlie: how does it work? tim: it is very simple. if you take one of our phones, this is the iphone 6, literally all you have to do -- this phone is not wired, but if it were, all i would have to do is touch the touch i.d., and hold it in proximity of the terminal. and that is it. it is done. the transaction is finished. because you have authenticated with your fingerprint -- it is hard to steal a fingerprint -- and you have not pulled out a card. you have not jostled through your wallet for something you may have lost. you have not had to run your credit card through a machine several times for it to reject your card. none of that is done.

it is as simple as boom, boom, it is done. charlie: technology is a very global thing, as you know as well as anyone. emerging markets are where a lot of people are coming to the middle class, and they have buying power. tim: absolutely. tim: china, brazil, lots of other places. how do you see that market, and how does apple do well in that market? tim: in china, if you look back at the last year, our business in greater china is about $30 billion. to my knowledge, that is larger than any american company, certainly in technology, and may be the largest of any period. we put a lot of energy in there for years. we have had very fast growth. but ultimately what is 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 is happening in turkey. it is happening in thailand, in malaysia, many different places. indonesia is beginning, a different place in that curve. this price point become an issue for those people who did not have the same per capita income? charlie: sometimes. tim: sometimes. lot of retailers that will allow smartphones to be paid for overtime. in china, there is a subsidy on smart phones if you sign a contract. so there are ways to make it more affordable. also, this is iphone 6. we also sell iphone 5s and 5c and all of these just got lower

, prices on tuesday. charlie: because of the interest in new products. tim: because of the entry of new products. so you will find in emerging markets, the mix of product sales are sometimes different. charlie: you spent a lot of money on research. tim: we spend a lot of money on r&d. that number has ramped dramatically. that is true. some has been for things that are not shipping yet. the apple watch is an example of that. we have announced it. everybody can see it. what have been spending money for three years on it, because we started developing it three years ago. there are other things we are working on right now that is not apparent. we are always doing that. and we are also working on things like this, that is apparent. charlie: this is interesting about you and about steve jobs. tim: we're both secretive. [laughter]

exactly. charlie: exactly. it is also this. john doerr told me the story about going with steve into a camera shop. steve asked to see this camera and that camera and said, we could make a better camera. you get a sense you guys have ideas for products that might be part of the future which no one knows about. but you are thinking about it. you are looking ahead. tim: there are products we are working on that no one knows about, yes, that have not 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 will probably decide, you know, that one, we are going to stop. and so 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. i mean, 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. charlie: it was not a new idea. tim: it not a new idea. was not a new idea. it was shelved because of the idea to make iphone. the team was reallocated to work on iphone. the iphone came out, and after iphone got running, brought the ipad out. so there are always things that we are looking at that are drawing r&d expense where there is not associated revenue. charlie: may be an ancillary thing. you may find something along the route, and would not have gotten there unless you started on that road. tim: that's right. a lot of what leads to innovation is curiosity. it is curiosity to begin pulling a string, and you see where it takes you. and a lot of what we do is not apparent to the public in the beginning, where it is going to lead.

like touch i.d. as an example. we did touch i.d. a year ago. a lot of people just thought touch i.d. was a way to get into your phone. it is very cool at doing that. then we also said, you can buy stuff from apple with it. obviously, the entire time, we were planning to do a much broader rollout for mobile payments with touch i.d. but we invest in a lot of things that have long tentacles. and, you know, for decades or so, not just for point products. point products don't thrill us. charlie: the hacking of icloud. it caused a lot of people -- tim: it was not hacked. there is a misunderstanding about this. if you think about what hacking icloud would mean, it means

somebody could get into the phish in go around and people's accounts. that did not happen. what happened was that -- it did not happen to you, i hope. but let's take you as an example. somebody could say, i know charlie's i.d. somehow. charlie: i know his e-mail, perhaps. tim: maybe it is his e-mail. and they may guess your password, or that is not likely. they could phish it. i could pretend to be someone else, and you could unknowingly tell me your password. that happens on the internet too many times today. that is the number one issue by far. it is not just an apple issue. it is an internet issue. you just saw this happens to millions of gmail users. they were phished. my understanding is that it was not a breach there either of their infrastructure. it was a phishing expedition. there are lots of bad people that do this.

, instead of was just saying that there are a lot who do this, to d we need to figure out, how can we try to protect our customers on this? that is our top goal. so we are working internally about how to bring more awareness to these schemes, and trying to do things -- charlie: is that a public information process? tim: some of it is that. some of it is like an old public service announcement used to be. we have to do that. in addition, we have to do things where it notifies the customer quickly if it does happen. that is reactive. we do not want it to happen at all, but if it does, you probably want to know instantly. and so there are things like that, and some other things i cannot describe right now, where we can -- we think we can make a

contribution beyond just doing, just making sure the cloud is not hacked. charlie: this is different from the hacking of home depot or of people? tim: it is totally different. ♪

rishaad: it is wednesday. it is the ninth of september. i rishaad salamat and this is "trending business." here is a look at what we are watching. soaring stocks, asian equities on entering. the nikkei 225 back above water. after wiping out gains tuesday. hong kong under pressure. tell moore between washington and beijing, and the economies hurt by falling visiting numbers. you can bank on it. the new china bank expecting to

sell by the end of the year. the president saying it is going to be a truly international development institutions. follow me on twitter. #trending business. we are talking about the asian pacific being on terror. shery ahn: after weeks of losses, led by the nikkei, which at one point surged over 5%, it is now gaining the most since march 2011. up 4.9%. and losee nikkei fall all of this year's gains yesterday. i just regain footing today. -- they just regained footing today. the fact that the japanese yen is weakening is helping. assets -- a aske