Cook Doctrine’s remedy: floods don’t change architectures

An Office Hours question asked by Craig D., July 31, 2026.

Q: Cook’s moat was built by being the biggest buyer in a market where consumer electronics set the bid; hyperscalers set it now. Is he handing Ternus a structurally diminished asset — and does an engineer CEO help or hurt when the binding constraint is procurement rather than design?

As Tim Cook says, this is the 100-year flood. The fact that there’s a flood doesn’t mean that you shouldn’t live in cities. It so happens that floods damage cities more than they damage rural lands, because there’s a low density of people there. The floods don’t change our architectures. We might try to prevent them in the future, we might build dams. There are countries that live with earthquakes, like Japan; there are countries that live with all kinds of other natural disasters. And this should be seen as that.

I think Apple’s not going to say: these semiconductor companies made a lot of money, let’s become a semiconductor company. They made a lot of money, and it could kill them. It’s possible that the decisions they make now, in this moment of abundance — it’s like winning the lottery. That doesn’t make you rich. A lot of people who win the lottery will actually end up broke, and worse off. It’s almost guaranteed in some cases that a windfall is damaging.

The way you think about this is: is it likely to happen again? If so, we better protect ourselves. And Apple did protect itself. It was damaged by retail, damaged by distribution back in the old days, so they built stores — and everybody said that’s a dumb idea. Then they said: we got damaged by Intel and Microsoft, so we built silicon. Then we built our own browser. All of these were reactions — the birth of Safari, the birth of silicon and Maps. All these were reactions to the fact that Apple was not in control of the things it needed to preserve and protect itself. I would even argue that Android was such a thing for Google. They needed to protect themselves against Microsoft controlling all access to end users. Microsoft together with Apple, but Microsoft was a far bigger threat than Apple was at the time. So they got into things they didn’t necessarily want to do, that were not natural. Apple is also not naturally a content creator, but they got into TV. It had to be done.

Semis are complex, but also simple. As businesses, they’re very, very tough. And they’re not great, which is why we have so few people involved. And then you get into a situation where, lo and behold, things are really tough. You treat it as something you need to make sure doesn’t happen to you. You have to have fire departments, because you have fires once in a while. I think they’re just going to work their way through this.

Having leverage is not because they’re mean and evil. Having leverage is because they are in the right part of the value network, where the customer is most important. Having that relationship with the customer determines everything, including saying: after we get scale, we’re going to make sure we get a good price from suppliers. But it isn’t like you started off saying, we’re going to build a computer company and we’ll begin by twisting the arm of everybody who makes chips. That’s not how Steve thought, and it’s not how anyone has thought since. It’s all about: I want to focus on customers, but I don’t want to be blindsided by some random natural phenomenon that’s out of my control. And for that, you have to build insurance.

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Editor’s Note: This was one of the questions asked by participants in Asymco’s July 2026 Office Hours live Q&A session, held the day after Apple’s FQ3 2026 earnings and open to Asymco One subscribers.

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