Apple – Digital Life Insurance

Apple plants its flag in The Metaverse.

• Apple has announced its play for The Metaverse but by going at least 3 years early, it has been forced to make some hideous compromises in order to deliver the kind of experience that everyone has come to expect.
• The Apple Vision Pro is being touted as an augmented reality (AR) device, but the reality is that it is a VR unit where a huge amount of effort has gone into replicating the real world and, to be fair to Apple, it has done an excellent job given what it has today.
• Those who have tried it support Apple’s claim that it is like looking through the device when you put it on and with 12 cameras, 5 sensors and 6 microphones the recreation of reality is pretty convincing.
• Strangest of all is the eyesight feature which displays the user’s eyes on an external screen which allows interaction with other people not in The Metaverse while using the device.
• The recreation of the real world is the default position with virtual elements being layered on top which creates a pretty good illusion of reality, but this illusion falls apart when one thinks for 5 minutes about some of the use cases Apple has in its advertisement.
• For example, a lady is packing her suitcase and answers an incoming Facetime call, and we are expected to believe that anyone in their right mind would be packing a suitcase with a VR unit plastered onto their face.
• The use case here is that she would not be wearing the device while packing her suitcase and would either have to put it on or just take the call on her iPhone.
• Another example is where parents interact with their children on special occasions and during everyday life while wearing the unit.
• Facial interactions are extremely important for the development of children, and I can see the psychiatrists shivering at the prospect of what this could mean for the development of children.
• This brings us to hideous compromise number one which is the layering of the real world on top of the virtual instead of the other way around.
• True AR is where the world is viewed through a regular pair of glasses but then the virtual world is superimposed on top through the transparent lens.
• This is a far better method of delivering AR but it is so technically challenging that no one has yet been able to get to grips with it.
• Doing this way around makes it possible for all-day use as well as negating some of the weird and creepy use cases that Apple has gone with in its marketing material.
• In order to deliver the kind of user experience worthy of its brand, Apple has been forced to take this route even if it has no long-term future.
• I have long believed that if The Metaverse is going to take off in volume, it will predominantly be in AR meaning that Apple is going down a dead end with this device.
• However, I suspect that the long-term roadmap will be able to re-use all of the sensors and the software that Apple has developed to virtualise the real world when it comes time to flip the script and do AR properly.
• The device is powered with an M2 chip as well as a specialised R1 chip which handles all of the input from the sensors, leaving the M2 free to do everything else.
• Apple has put so much effort into the user experience that a lot of compute horsepower is needed which brings us to hideous compromise number 2: the device is tethered to a power supply.
• This takes the form of mains power or an external battery pack just small enough to fit into a back pocket that supplies 2 hours of usage.
• Apple has made this compromise so that the device will not be heavy and bulky and still have a great user experience but it is much better than full tethering where the compute runs on an external computer.
• I think that Apple gets 2 things out of this launch namely an insurance policy and a load of IP that it can use in the future.
  • First, Insurance: At $3,500 per device, volumes are going to be very low but crucially, Apple has staked out a position in The Metaverse from which it can build over time.
  • This means that it can bring the price down as the technology improves as well as introduce new form factors from this base position when or if the market emerges.
  • The Metaverse is something that Apple has to address because if it replaces the smartphone over the next 20 years and Apple has no position, then it will suffer the same fate as many smartphone makers before it.
  • Even if it is a total failure and billions of dollars go down the drain it is a worthwhile insurance policy to ensure the longevity of the iOS ecosystem.
  • Apple Vision Pro is the first iteration of that insurance policy.
  • Second, IP: Apple has filed over 5,000 patents during the development of this device which probably translates into around 1,500 patent families or separate innovations.
  • If Apple has been merely tinkering with no intention to release a commercial device, it would not have been forced into making the design and technology choices that have resulted in the filing of so many patents.
  • Furthermore, its unique take on how to deliver The Metaverse has taken development in directions where no one has gone before.
  • This means that a lot of this IP could be quite novel, meaning that if everyone follows, they will have difficulty getting over the IP wall that Apple has constructed.
  • This puts Apple in a good position as I suspect much of this IP will be re-usable when the time comes to flip the script and do AR properly and make life hard for competitors and imitators.
• The net result is that even though Apple is not taking the right long-term path with the Vision Pro, it provides a placeholder for The Metaverse and an insurance policy just in case The Metaverse is the next big computing platform.
• Its device is extremely expensive, but it does everything so much better than anything else that has gone before that it will give developers the confidence that this is a platform worth paying attention to over the next 10 years.
• This will have no financial impact on Apple for many years as both its revenues and its costs will be a rounding error in the accounts, but it provides the security of a position just in case.
• Hence, holding Apple shares remains about iPhone which continues to fare very well in difficult circumstances but not well enough to make me want to own the stock.
• Hence, I continue to look elsewhere.