>> charlie: welcome to the program. tonight, a conversation with the c.e.o. of apple, tim cook. >> if you think about the things that 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 can control the primary technology. all of these things are still deep in our company, they're 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's probably no other company on the face of the earth that could say that. most companies begin to go larger and larger and larger porportfolios because you alway- it's so easy to add, it's hard to edit. it's hard to stay focused, and yet we know we'll only do our best work if we stay focused. so, you know, the hardest decisions we make are all the things not to work on. >> charlie: tim cook for the hour, next.

>> and by bloomberg. a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: tim cook is here, the c.e.o. of apple. joined apple in 1998 against advice of friends and better judgment. he said apple in early 1998 was very different than the apple of today. the company has been losing sales for years and commonly considered to be on the verge of extension. he's also said working at apple was never any plan that i'd outlined for myself but was, without a doubt, the best decision i'd ever made. on tuesday cook announced what he called the next chapter in apple's story at the same venue where steve jobs introduced the mcintosh personal computer three

decades ago. he reviewed the new products and launched apple pay that aimed to do something about the credit card. i am pleased to have tim cook at the table. >> thank you for inviting me. >> charlie: we have much to talk about. you call it the next chapter, why? >> the apple watch is the most personal device we've ever created. i think it takes us into a whole different area. we had an intense team working on this for three years and, so, we explored many different things and, as the product came to fruition, it became not only the timepiece that you would expect but a device that can do many different things, including really a whole new way of communicating and connecting people and also it has a health and fitness component that we

think has -- you know, it could really be profound. >> kit take your -- it can take your blood pressure and other things. >> it will start with heart and be 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 on the phone and get a full view of your health. so it's a whole new area for apple. we're all about making great product and enriching people's lives, and we see it as allowing us to do that at a whole different level. then, of course, iphone 6 and iphone 6 plus, these are the best iphones we've ever done. >> charlie: this is my iphone. look at the size of it. this is the iphone 6. >> biggest phone we've ever

done. >> charlie: thinnest. thinnest we've ever done. the screen is just to die for. it's super fast. it's lightning fast. it has a whole new range of wireless technology and, so, it's screaming fast on the wireless network. it's really unbelievable. and it feels unbelievable in your hand. hold it. it's something. it's really unbelievable. the design, johnny and his team did such an incredible job here, it's really seamless between the glass. it's like a singular form. >> charlie: yes. but back to what's next. this represents a continuation of the iphone? >> well, a leapfrog, i would say. yes, it's the iphone 6, it's not the first iphone. >> charlie: right. but it's the biggest advancement ever in iphone history. and, so, we think that the

upgrade cycle here and the number of people that will switch from other smartphones, it will be enormous. >> charlie: were you challenged by what samsung does and what it has in the development of this size personal smartphone? >> no, honestly, charlie, we could have done a larger iphone years ago. it's never been about just making a larger phone. it's been about making a better phone-in every single way. so we ship things when they're ready, and we think that both the display technology here, the battery technology, that everything else and the software, you can, on here, you can still use this phone one-handed because you can tap it twice, and the screen will come down. so the ingenuity here and the fact that we've integrated software, 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. >> sure. >> charlie: samsung and others. >> sure. >> charlie: is it philosophy of apple -- we don't have to be first, we want to be prepared to be the best? >> 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 arguably was the best and the first modern one but not the first. the iphone was not the first smartphone. blackberry and palm was shipping phones. iphone was the first modern iphone. ipads were shipping decades before and apple was the

first modern. the watch i'm wearing here will be the first watch. >> charlie: may i see that? you may see that. >> charlie: see if you can get in on this. you can't get this today. >> early next year. but you can see some of the apps i have on here. i may have some things on here. >> charlie: so what is interesting is that outside, developers can design apps for this watch? >> yes, we announced before shipping so the developers will have time to develop software for it. the first few days, i'll say there's going to be a lot of stuff available for it. >> charlie: there's a fashion aspect to this item. >> yes. >> charlie: nort mark newsom was brought in. >> mark was a great addition to

the apple team. but johnny and team recognized that, to wear something, it had to be incredibly personal. it had to reflect your taste and express what you wanted to express by yourself. it's sort of like you're closing your shoes. you're not going to wear the same thick everybody else does. so most tech companies look at this as only technology. we recognize that technology itself isn't sufficient, that it had to have a style element. it had to be something that you're proud of wearing. i mean, this is connected to your body. and, so -- >> charlie: it makes the computer personal. >> it makes it very personal. now, that doesn't take away from the function of it. the function of it is killer. i mean, there is a computer on a chip in here. you know, it's the first one we've ever done. there's 400, 500 components wrapped in one. it has everything from the gpu to cpu to memory and all the rest. >> charlie: i have to have an

iefn foiphone for it. >> yes, it requires an iphone because they have been designed to work together. so things like using the cellular system to pull down your messages. however, if you go for a run and you don't want to carry your iphone, music is also in your watch. so with a bluetooth head set, you can run and listen to music without your iphone. >> charlie: the healthcare business is a huge sector of our economy. >> yes. >> charlie: this is your entre into that in some way? >> i see this as huge, charlie. and i'm not looking at it just from the monetary piece of it. we do want to enrich people's lives so we want to make great products that enrich people's lives. neither one is sufficient by itself. we want to do both. so arguably, with healthcare, there's a wide-open field to make some really profound contributions. so our entry into this is we

announced health kit in june. health kit allows, if you want, if you wish, on your phone, you can begin to take all of the data that's in all of your health apps and aggregate those. you might elect just to use that yourself and might elect to interact with your doctor on them. so all of a sudden we've 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, and when you need help, it empowers you to take certain data to your doctor to get help from them, all the while guarding your privacy so that nobody is getting the data, if you don't want them to have the data, nobody is sharing the data if you don't want them to share the data, and no we're not keeping it. >> charlie: in introducing these products, there was the bout to the past as i suggested the arena where you had it is

what steve introduced 30 years ago, the pak macintosh. when you introduced the watch, you said one more thing, words steve used. where is steve in all this? >> well, he's in my heart, deep in apple's dna. his spirit will always be at 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? >> on the fourth floor. his name is still on the door. and we -- if you think about the things that 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're 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 you and i are sitting at, you can put every apple product on it, every single one we ship today, and yet this year our revenues will be approximately $180 billion. there's probably no other company on the face of the earth that could say that. most companies do larger and larger portfolios because you always -- it's so easy to add. it's hard to edit. it's hard to stay focused and, yet, we know we only do our best work if we stay focused. so the hardest decisions we make are all the things not to work on, frankly.

because there's lots of things we'd like to work on we have interest in, but we know we can't do everything great. >> charlie: is tv one of those? >> well, tv is one that we continue to have great interest in. i choose my words carefully there. you know, tv is one of those things that, if we're really honest, it's stuck back in the '70s. think about how much your life has changed and all the things around you that have changed, yet tv, when you go in your living room to watch the tv or wherever it might be, it almost feels like you're rewinding the clock and you've entered a time capsule and you're going backwards. the interface is terrible. >> charlie: yes. i mean, it's awful! and you watch things when they come on, unless you remember to record them. >> charlie: so why don't you fix that? >> well, you know, i don't want to get into what we're doing in the future, but we've taken

steps with apple tv, and apple tv now has over 20 million users, and, so, it has far exceeded the hobby label we've placed on it and we've added more and more content to it this year and, so, there's increasingly more things you can do on there. so this is an area we continue to look at. >> charlie: was this a question to 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 make-up? did that concern you? did you think about that?

were you committed to prove that apple had a future beyond the groundwork that steve joos had laid? >> he called me one weekend in august of '11, and he said, i'd like to talk. and i said, oh, okay. and i go, when? he goes, now. (laughter) i said, i'll be right over. and he told me, he said, i have been thinking a lot. apple's never had a professional transition at c.e.o. i'm determined that we will have one now. i want you to be the c.e.o. and, honestly, i didn't see it coming. >> charlie: you did not see it coming? >> i know you look at me in disbelief. >> charlie: yes. 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, and i guess at the end of the day, i always thought he would bounce. he always had. he had had some incredible lows in his health and had always bounced and i always believed he would. so it took me a little by surprise. i mean, he had talked to me about being c.e.o. before, so i always knew it was his long-term thinking -- >> charlie: that you would become the c.e.o. >> -- to become the c.e.o. >> charlie: but not then. not that specific moment. 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? and just sort of having a good banter with him. i said, for example, ads, do you want me just to do the ones that i think are right or do you want

to be involved in it? and he said, well, i hope you will ask my opinion on some things. (laughter) but i thought, charlie, on that day that he would be chairman for a long time, that i would be c.e.o. for a long time and that we would continue to work together. he knew when he chose me that i wasn't like him, that i'm not a carbon copy of him. so he obviously thought through that deeply about who he wanted to lead apple. so that i have always felt the responsibility of, and i've wanted desperately to continue his legacy. and the apple i deeply love. so 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 never had that objective. i've never had the objective of being like him because i knew -- the only person i can be is the person i am, right, and i'm not an actor. i would be terrible in hollywood. so that's what i've done. i've tried to be the best tim cook i can be, and i think that the reality is that apple has always had incredible contributors at very high levels. johnny's been there forever and contributed at an incredible level as has craig and jeff andd dan, and you just go around the table. we have a new c.f.o. now. we've recruited angela who runs retail. she is fantastic.

this level of people are capable of doing incredible things and, you know, it's the privilege of a lifetime to work with them. >> charlie: you have a picture in your office of martin luther king and a picture of robert f. kennedy. robert f. kennedy after his brother's assassination, someone said the difficulty for him, well, he'll have no r.f.k. as he was to his brother jack. so i might ask the question, do you have a tim as you were tim to steve? >> i think each person -- if you're a c.e.o., the most important thing, to me, is to pick people around you that aren't like you, that complement you because you want to build a puzzle. you don't want to stack

chicklets yo up and have everyoe be the same. i believe in diversity with a capital "d," and that's diversity in thought and any way you want to measure it. so the people that surrounded me are not like me. they have skills that i don't have. i may have some that they don't have. what we do i as a team collectively are able to do some incredible things, and it's because we collaborate, and i see one of my key things in life to make sure we collaborate at an incredible level because we run the company functionally. we're not like the typical can big company that has n number of divisions and p&ls. everybody is a functional expert, then we collectively, to get things done, we work together as a team because 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. so all of these people, if you were to line us up and talk to everyone, you know several of them, we're all different. and that's the power of it! is that we're not trying to put everyone through a car wash 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 don't 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: did you leading the team have any question that you could accomplish what you did, knowing those questions were out there about the future of apple? >> i think, for me -- i can't talk about what everybody else thinks -- but 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 and not be just the noise. i think if you get caught up in the noise as a c.e.o., you're going to be a terrible c.e.o., because there's so much noise out there in the world that everybody's on the sidelines saying what you should do, shouldn't do, et cetera. it's sort of like the old roosevelt quote in the arena. >> charlie: teddy roosevelt. yeah. >> charlie: credit belonged in the arena to the man who gets dirty and all those things. >> yes. well, i'm the dirty one, and 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: but that goes back

to my original question. >> yes. >> charlie: apple is becoming -- it's building on its tradition, but it's doing things different. steve said to you, don't ever ask yourself what does steve do, correct? >> he did. >> charlie: don't ask that. do what you think you need to do based on the circumstances that you face. so is apple becoming more open? i mentioned the fact that people who have great apps can do it for the watch. you're now engaged in partnerships with people like i.b.m. you've made an acquisition. tell me, where is apple doing? >> are we more open? yes. >> charlie: more engaged by partnerships? are we interested in enterprise because we can partner with i.b.m.? >> i think i.b.m., that's a great one to talk about because i think it will give you an insight into how we look at things. this is probably different than

the past is we look at these products and the ipads that aren't here and we think we can change the way people work. we've changed the consumer's life. we've changed the way students learn and teachers teach. but when you get to the working environment, the change that we've made to us isn't significant enough. so we begin to ask ourselves why? why haven't we done more? the real answer is, in the applications, there's 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 that the level of the job. so we began to ask ourselves, should we do this? or should we partner? or should we just forget it? and i didn't want to forget it because this is a way to enrich

people's lives in a big way, to change the way people work. i mean, most of our life is spent working, and certainly our apps are changing the way i work, but i'm not seeing it as much in other places. so we begin looking out and thinking about, well, who could we partner with? and jenny and i have been talking about some other things for a while. i have great respect for her, great trust in her. >> charlie: the c.e.o. of i.b.m. >> yes. she's fantastic. and we began to talk about this area. you know, this is an area where they've got things we don't have. they have deep vertical knowledge of many different verticals, right? they have a huge sales force. so i.b.m. brings significant enterprise knowledge to the table. we bring the products that enterprise want. so we have something they don't have. we also don't compete on anything. so me this is the perfect

marriage. there's no friction, there's just we have what they need, they have what we need, together we can provide something to customers that is blow-away. so i.b.m. 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 and manufacturing and so on and so forth, and they have to go to market that we don't have. so this is an area where i think everybody's going to win. we're going to win, i.b.m.'s going to win, and more importantly than both of us, the customer is going to win. >> charlie: why did you think you had to buy a head phone manufacturer? >> in beats, we saw -- >> charlie: talent. -- talent that i'm super

impressed with. jimmy and dre are off the charts, creative geniuses. they also had teams with them i really liked. jimmy has a deep knowledge of the musical industry. dre knows artists and is an artist and they started a sub springs service. these subscription services, some people think they are all alike. i went into the thing skeptically. >> charlie: to the acquisition? >> not to the acquisition, into their service. >> charlie: all right. because jimmy told me how great it was. one night i'm sitting playing with theirs versus some others, and all of a sudden it dawns on me that when i listen to theirs for a while, i feel completely different. and the reason is that they recognized that human puration is important in the subscription service. that the sequencing of songs

that you listen to affect how you feel. it's hard to describe, but you know it when you feel it. so that night, i couldn't sleep that night. so i was thinking, we need to do this. they also have -- i think they've done a fabulous job with their brand in the head phone business. it's a fast-growing business. they went into it not too long ago and, you know, have done really well. however, they needed a global footprint. we have a global footprint. they have been primarily u.s., not sol solely u.s. but primariy u.s. so i felt we could get a subscription service, we could get incredible talent that we could put our heads together and do things beyond what either of us are currently doing, and we could get a fast-growing business. you know, financially is not the only el meant of looking -- element of looking at it at all, but next year, or in our fiscal

year, which is about to start, it's acretive. when's the last time you saw a technology c.e.o. say they're doing an action that's acretive? >> charlie: yeah. i think it's wonderful to get the influx of talent, the different perspectives. it's the idea of diverse dithat i use in a big way, i think it's really going to help us, and i am 100% sold on the subscription, music subscription service. of course, we can scale it where beats would have had a more difficult time because they're a small company. >> charlie: is the new chapter in apple also defined by the fact that you're moving away from just being essentially a hardware company? >> you know, i wouldn't say that we were never just a hardware company. >> charlie: part of your revenue comes from the iphone, for example. >> but a significant part of

the iphone is the software and the services. >> charlie: right. it's just that we don't split out the price between the hardware and the software and the services. >> charlie: it's all part of your own ecosystem. >> it's part of our own ecosystem 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 -- i mean, think about what happened in the p.c. area when you had windows and a separate o.e.m. that was doing hardware and then somebody else doing apps and you had a problem, you're pulling your hair out, you called the help desk and the help desk tells you to call another help desk and that desk tells you to call somebody else and the other guy doesn't even have a help desk. so we realized early on, these kind of devices, you need to have a womb to tomb view for the customer's sake, so if somebody calls us, it's our problem,

we're not passing the buck. so 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 -- >> well, look at our ecosystem, charlie. >> charlie: yes. we've got 9 million registered developers and, so, we're not having a problem getting people developed for a platform. if you were at our conference in june, in san francisco, there's developers there from almost every country in the world, and this they're -- >> charlie: so you have access to all the innovation. >> we have incredible access to innovation, and we also view it and treat it -- it's a privilege to work with the developers we do, and, so, we treat them like it's a privilege. and 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're not fragmented like

android is, right. we've got -- we'll release ios8 next week and right now ios7, the one released a year ago, 92% of our customers are running ios7. if you look at a comparable number for android, it's extremely low. if you look at a comparable number for windows on the pc side, 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. so it's 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's no global retailer, so you were negotiating with every country in the world trying to get your product on the shelf. here, you can push a button, we review it, it quickly gets in

the app store and it's in an app store in 155 countries. i mean, it's really shocking. the jobs this thing has created is unbelievable. we're now -- between the people we employ directly and the developers -- and the developers are a big piece of this -- we're responsible for a million jobs in the united states, and a lot of that are people who have concluded to write apps. >> charlie: who is your competition? >> well, google, clearly. >> charlie: people say samsung instantly because of the products. they make smartphones like this -- not like this, but they make smartphones and have the android system. >> dpoogle suppliegoogle suppli. >> charlie: google is the top. google is the top. and they enable people in the

hardware business, like samsung, and samsung is the best of the hardware companies in the android sphere. >> charlie: google is competition. who else? >> you know -- who else... >> charlie: the big four are amazon -- in terms of most people's consideration -- amazon, apple, facebook -- >> yeah, i don't consider facebook a competitor. i consider facebook a partner. >> charlie: right. we're not in the social networking business. >> charlie: and will not be? 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. so 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? amazon, we don't work with that much. we have little relationship

there. they sell -- as you know, they've come up with a phone. >> charlie: right. you don't see it in a lot of places. they have some tablets, but they're not a product company. apple's a product company, and, so, in the long term will they become a bigger product company? i don't know. you will have to ask jeff what his plans are. but when i think of competitor, i would think of google as the -- >> charlie: so all the successes you have pointed to, when you do something that's not as much of a success -- and i'm obviously thinking of maps -- >> mm-hmm. >> charlie: -- and you look at it, what did you do wrong? >> well, we screwed up, to put it bluntly. there are many screwups in that

one, there's not just one, there's many, and we've learned and corrected and are continuing to invest in maps, because our fundamental premise that maps were really 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 have happened like it did. it shouldn't have come out. you know, sometimes when you're running fast, you slip and you fall, and i think the best thing you can do is get back up and say, i'm sorry, and you try to remedy the situation and you work like hell to make the product right. if you're not making a mistake, you're probably not doing enough. >> charlie: i i mentioned in the beginning of the interview in 1998 when you made the decision about apple and you had

reservations but, at the same time, during the interview with steve, you said something like this, i was prepared within 5 minutes to throw caution to the wind. what did he say that made you believe this company is the place for tim cook? >> 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. so i finally thought, you know, i'm going to go out and take the meeting. steve created the whole industry, i'd love to meet him. >> charlie: outside of this. i'm just thinking i'm going to meet him and, all of a sudden, he's 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 couldn't make any money in consumers so they were headed to servers and storage in the enterprise. i had always thought that following the herd was not a good thing, was a terrible thing, all right. you're 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 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 could work with him. and i look at the problems apple had and i thought, you know, i can make a contribution here, and working with him, this is a privilege of a lifetime. so all of a sudden, i thought,

i'm doing it! (laughter) i'm going for it! you have this voice in your ear that says, go west, young man! go west! i was young at the time. but you come back and you try to do the things that people do with spreadsheets and stuff and none of it makes sense. it didn't 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. >> yes. that's what i mean by gut. my intuition was telling me loudly to go, and it wasn't based on -- you know, as an engineer, you want to write down pros and cons, and 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 is wrong and it never did. michael del made the comment weeks earlier that if he were the c.e.o. of apple he would close it down and give the money back to shareholders, that it had no future. >> charlie: i remember he said that. >> he was just saying what everybody thought. >> charlie: they didn't know steve jobs. >> they didn't 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 trtraditional way, which steve never did. you know, he was always looking well beyond the norm. >> charlie: and looking with beginner's eyes. >> yes, he clearly had a gift for that, and he took that gift

and embedded it in the company. it wasn't a gift that he kept to himself. so one of -- i loved 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's never written about him. but what he left in not just me but many of us is what he taught us is he was one of the best mentors in the world. >> charlie: this is more than perfectionism. >> it's much more than that. no, it's much more than that, because that's holding the bar so high that it's very hard to hit. but, no, it's teaching, and it's teaching and making sure people are learning. and him taking such an interest, he's 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's missed -- it's a huge part of what he did that's missed, in most of the things i've read. >> charlie: misconception misses that, the teaching aspect. >> that and the human aspect of him. he was an incredible human being. i think -- you know, i've never read anything that really captured him or captured the steve i knew. >> charlie: one of the products you introduced is apple pay. ofyou have a relationship with credit cards in concreting apple pay. >> yes. >> charlie: some say why not just go around them, be disruptive. >> as it turns out, people love their credit cards. i don't know what cards you have -- >> charlie: too many. people love their credit cards because they might love they collect airline points, or

there is something about it that's sticky. so we looked at the industry and said, you know, people like that part. so we're about making the user's life and experience better. we saw all the mobile stuff that was nothing about making life better, it was about creating a business model to make somebody money. we started with the user. we said, what do they want? no one wants to carry a wallet. you don't want to remember another thing to put in your pants when you walk out the door, you don't want another thing to lose. you don't want this card with exposed numbers on it that has a huge security risk on it. 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 they do love their card, and we said we don't want any of this data. so we're not doing what other companies are doing.

we don't want to know what you're buying, where you're buying it, we don't want to collect all this stuff on charlie, i don't want to know where you're spending your nights. so we firewall all the stuff, we don't keep it, it's not on our servers, and, so, we kept what's great and fixed what was president. the retailers love it because it's a far more efficient way for people to check out. >> charlie: show us how it works. >> it's simple. if you take one of our phones, iphone 6, this phone is not wired, but if it were, all i would have to do is touch the itestiftouch or the touch i.d. d hold it within the proximity of the terminal and that's it, it's done, the transaction is finished because you've authenticated with your fingerprint which it's hard to steal a fingerprint, and you've

not pulled out a card or jostled through your wallet for something you may have lost, you haven't had to run your credit card through a machine several times for it to reject your card, none of that is done, it's as simple as boom, boom, it's done. >> charlie: technology is a very global thing, as you well know. emerging markets where a lot of people are coming to the middle class and they have buying power, china, brazil, lots of other places. how do you see that market and how does apple do well in that market? >> well, in china, if you look back at the last year, our business in greater china is about 30 billion. to my knowledge, that's larger than any american company -- certainly in technology and maybe largest of any, period. we've put a lot of energy in there for years. we've had very fast growth.

but you're exactly right. ultimately, what's 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's happening in turkey. it's happening in thailand, malaysia, many different places. indonesia is at a different place in the curve. >> charlie: does price point become an issue for people who don't have the per capita income as in the united states? >> yes, certainly income is a factor. but there are a lot of retailers that will allow for smartphones to be paid for over time. in china, there's a subsidy on smartphones if you sign a contract much like the united states. so there are ways to make it more affordable. also, this is iphone 6 and 6

plus, but we also sell iphone 5s and iphone 5c and all of these just got lower prices. >> charlie: because of the entry of the new products. >> yes, and you will find in emerging markets the mix of product sales are sometimes different in those markets versus other markets. >> charlie: you spend a lot of money on research. >> we spend a lot of money on r&d and that number ramped dramatically, that's true. some is spent for things that aren't shipping yet, like the apple watches. we've announced it so everybody can see it, but we have been spending money three years on it because we started development about three years ago and there's obviously other things that we're working on that right now isn't apparent. so we're always doing that and ju8vz working on things like this that is apparent. >> charlie: here's what's

interesting about you and about steve jobs -- john door told me about going with steve into a camerashop and steve asked to see this camera, that camera and said, boy, we could make a better camera. we get a sense you guys have ideas for products that might be part of the future which no one knows about but you're thinking about it, you're looking ahead and saying -- >> there are products we're working on that no one knows about, yes, that haven't been rumored about yet, yes. and part of some of those are going to come out and be blowaway, probably, and some of those we'll probably decide, you know, that one we're going to stop. 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 the story on the -- publicly about the ipad. the 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. >> it was not a new idea. it was shelved because of the idea to make iphone. >> charlie: ah... the team was relegated to work observe the iphone, and the iphone came out and after iphone got up and running, brought the ipad out. so there's always things we're looking at that are drawing r&d expense where there's not associated revenue. >> charlie: you may find something along the route that you wouldn't have imagined unless you started on that road. >> that's right. a lot of what leads to innovation is curiosity. it's criewriosty to begin

pulling a string and you see where it takes you. a lot of what we do isn't apparent to the public in the beginning where it's 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 and it's very cool at doing that. but then it said, well, you can buy stuff from apple with it. the entire time, we were planning to do a much broader rollout for payments with touch i.d., but we invest in a lot of things that have long tentacles, you know, for decades or so, not just for point products. point products don't thrill us. >> charlie: hacking of icloud, caused a lot of people -- >> it wasn't hacked. there's a misunderstanding about

this. if you think about what hacking icloud would mean, it means somebody would get into the cloud and could go fish around in people's accounts. that didn't happen. what happened was -- let's take you. it didn't happen to you, i hope, but let's take you as an example. somebody could say, oh, i know charlie's i.d. somehow -- >> charlie: his email, perhaps. >> maybe it's his email, and they may guess your password, or that's not as likely. they might phish it. how? i could pretend to be someone else and you could unknowingly give me your password. hap that happens on the internet too many times today. that's the number one issue by far. it's not an apple issue, it's an internet issue. millions of gmail users were

phished. my understanding is it wasn't a breech of the infrastructure, it was a phishing expedition. there are lots of bad people that do this. what we said was, instead of just saying, hey, there is a lot of bad people that do this, we need to figure out how can we try to protect our customers on this? that the our top goal. so we're working internally about how to bring more awareness to these schemes and trying to do things to -- >> charlie: public information process? >> some of it is that. some of it is like the old -- like an old public service announcement used to be. >> charlie: right. we have to do that and in addition we have to do things where it notifies the customer quickly if it does happen. that's reactive and we don't want it to happen at all. but if it does, you'd probably want to know instantly. so there are things like that

and other things that i can't describe right now where we can -- we think we can make a contribution beyond just doing -- just making sure the cloud is not hackable. >> charlie: this is different than the hacking of home depot or -- >> totally different. >> charlie: that was part one of our two-part conversation with tim cook, c.e.o. of apple. part two will be monday. we'll talk about many things including this question, what comes after the internet? thank you for joining us. see you on monday. for more about this program and earlier episodes, visit us online at pbs.org and charlierose.com. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

>> the following kqed production was produced in high definition. ♪ ♪ must have soup >> the pancake is to die for! >> it was a gut-bomb, but i liked it. >> i actually fantasize in private moments abouttthe food i had. >> i didn't like it. >> you didn't like it? >> dining here makes me feel rich.