Big Technology Podcast - Actually, The Metaverse Is An Enterprise Thing — With Peggy Johnson

Episode Date: November 30, 2022

Peggy Johnson is the CEO of Magic Leap. The company makes augmented reality technology and is now focused entirely on enterprise use cases after building for consumers for years. Johnson joins Big Technology Podcast to discuss the lessons Magic Leap has learned throughout its history, what its competitors (like Meta) are overlooking, and why it believes augmented reality technology is going to be most applicable to companies, governments, and non-profits (at least in the short term). Join us for a conversation that may well reframe the way you think about the Metaverse.

LinkedIn Presents Welcome to Big Technology podcast, a show for cool-headed, nuanced conversation, of the tech world and beyond. Now, I am of the belief that the metaverse has positioned, augmented reality, and virtual reality in the wrong way. We are thinking that this is all about hanging out with our friends in virtual worlds. Is that going to actually come to pass? Probably not and definitely not for the time being. The real interesting use cases for these technologies are largely in the enterprise world.

And while some companies, meta, have not yet come to grips with the fact that this is where it's going, some other prominent ones have. That's why I'm pretty stoked to bring to you this conversation today. Peggy Johnson is here with us. She's the chief executive officer of Magic Leap. And you might remember that Magic Leap used to be very much into the consumer augmented reality approach and has actually flipped and is now all in on Enterprise. So this is going to be a fun one. Peggy, welcome to the show. Great to have you here.

Thanks so much for having me. Alex, looking forward to this. Yeah, it's great to have you here. This actually originated when I tried the second version of the Magic Leap goggles out at Davos when I had done this. interview with Nick Clegg that talked all about the metaverse. And I was really surprised, I think, at how good this stuff was and how clear of a vision magic leap had for taking these augmented reality experiences and bringing them to enterprise customers and people in the public sector too. So let's start here. You know, augmented reality is nice, but we're also in the middle of this

economic contraction. Everyone is trying to figure out, you know, how do I cut costs? Where do I not spend places that I really want to spend? What is the compelling use case for them to spend some of those dollars on augmented reality? What sort of economic benefit do you provide these enterprise customers that are using your devices? Well, for sure, there needs to be an ROI for an enterprise to adopt it. And so we're focused on three areas that we believe right now in the state of the technology provide strong ROI. A lot of those are in the training area. So we have a company called PBC Linear in the Midwest, and they're a manufacturer of tooling products. And basically, they've cut their training from three weeks to three days when they're

bringing on new factory workers using the device. And, you know, the device itself has a bit of an attraction to new factory workers who, you know, we don't have people flocking to those jobs, but with the device, it gives them some of the same capabilities that, you know, knowledge workers have had with the PC on their desk. Now these workers have a PC on their eyes. It allows them to do their job efficiently. They feel more empowered. It's just a better experience for them. So there's actually some help on the recruiting side as well as the efficiencies and really the savings in the training sector that the companies have been running. Okay, so I definitely get the recruiting benefit,

but we're also in a time where people are hiring a lot less. So let's go like to the meat and bones of this right away, which is that you mentioned that this company is having people cut the training time down from three weeks to a couple days. And I imagine they're wearing the glasses and getting that hands-on interaction first where they might need classroom instruction before. But I don't want to give the answer. I'm kind of curious to hear from your perspective how exactly, you know, does this device?

Because it is a pair of glasses that you wear and it overlays digital experiences on top of the real world. So how does this work? Like how is it able to cut down training like that? Well, like a lot of training, oftentimes it starts in a classroom. You're given sort of 2D presentations. You've got a book in front of you. Your training manual. You're kind of slugging through things, much like,

kind of education we got when we're in school. Now, this immediately empowers the person trained. You can actually put them out on the factory floor on day one. Because with the use of digital twins, you can walk up to a machine that's completely foreign to them, and they can see a digital twin overlayed on the machine. They can understand, you know, how it runs, how it operates. They can understand how to repair it if the machine goes offline, which is also interesting. There's another metric that many factories measure, and that's time to resolution. And a lot of our companies have been able to shorten that time to resolution, because if a machine goes offline, rather than the worker having to go find the manual, find the right page, they can just walk up to the machine. The machine's

factory or the digital twin can appear on top of it, and they can be walked through a fix. And even if they still get stuck that you can call in an expert who may be a continent away who from any device can see what they see in front of them and walk them through. They can even annotate on the screen using, you know, a digital line or a pointer, you know, turn this screwed, pull that bolt. And it, it, it just, the, the time to empowerment, if you will, is very much shortened because they feel, you know, that they actually can go out and fix something in a much shorter time than, you know, previous. So it's a good feeling for the factory worker as well. Really, really does empower them.

Yeah. So the digital twin is basically the glasses will put a replica, a digital replica on top of the actual machine. So you can actually start to get maybe arrows and stuff onto certain buttons. And is that kind of what this is? That's exactly right. And then again, if needed, you can call in someone who we call it, see what I see. And this is actually applicable in a number of industries, including healthcare, which is the other area that we're focused on. Imagine a young cardiac surgeon in the midst of an operation has a question. And with the glasses on, you obviously still see the patient, you see the

physical room, but someone from afar can walk them through something that they may be seen for the very first time in an operation. It's actually going to empower surgeons as well as factory workers. Fascinating. So if I'm, you know, if I'm in a separate location, there's a surgeon who's in the middle of surgery. They have the magic leap glasses on. I have the magic leaf glasses on. Now, like I can sort of. You don't need the magic league glasses, by the way. I'm just like watching on a screen from their eyes. Your cell phone. Really? Yeah. Correct. So, So this sort of goes to, you know, another question I have about this. Why is it better than FaceTime? I mean, if you're like, if I'm a tech working on a machine in a factory,

why do I need augmented reality glasses in a place where, you know, maybe FaceTime could do the job in a similar way? Yeah, first of all, I would say FaceTime's absolutely fine in a whole lot of use cases. What we're talking about is highly immersive augmented reality. So, for instance, if we just go back to that, the surgeon when I was talking about, right now, surgeons who do heart catheterization, so they're, you know, winding something up through your heart ahead of a surgery, they are being guided by a 2D screen in front of them. And they're, they see a sort of a 3D depiction, but it's presented to them on a 2D screen of the heart and they're doing the catheterization. But with Magic Lee, we have a company called CentiR. They're actually

imaging the live beating heart real time in front of the surgeon's eyes. So the surgeon can see around corners. They can expand it. They can look inside of the valves of the heart using that image and the glasses and the catheterization itself is just more accurate. It can be safer for the patient. It can be done more quickly than making your mind do the work of, you know, if you have a PC in front of you, they have a screen in the operating room kind of trying to visualize what they're seeing. You're making your mind turn it into a 3D image where now the heart is literally in front of your eyes. And cognitively, it's a lot easier to understand. It's a lot easier to really to see what's happening with the heart than on a flat screen. A 3D just makes

it come to life. Yeah, I guess if I'm on the table, I'd much rather have someone with, you know, the augmented reality versus the iPad. Exactly. And by the way, on that point, you also want to see the patient. You know, there are some, you know, there are some other technologies where you, you know, you're not actually seeing your physical world. This is a type of use case. You want to see that patient in front of you. I don't think you want, you know, what's known as pass-through virtual reality where they're imaging your physical world and you're actually just seeing a video of your physical world. Like you need the precision and the accuracy that seeing the actual physical world gives you. And then by the way the digital content you place on that patient has to have

that same accuracy. So if you're, for instance, drawing an incision line, we can get to very, very high accuracy for the surgeon ahead of them actually making the incision, overlaid right on to the actual, for instance, knee of the patient during a knee operation. Right. And these are some pretty interesting use cases for augmented reality. And I preview this a little bit in the beginning. But this was not Magic Leap's original vision. This is actually very different from the more consumer-oriented use cases that Magic Leap had raised a boatload of money to go ahead and attack. So I'm kind of curious, you know, you're obviously, your company is obviously many years ahead of everybody else who's trying to figure out use cases for augmented reality. So what was the Magic Leap or what is the Magic Leap journey here in terms of saying, you know, maybe AR, you know,

is good for having big whales show up in your living room to now what it is is practical on the ground, training, and actual guiding through different work situations. Yeah, you know, and I think in some ways the journey the company took was not unlike, you know, journeys of other technologies that many companies have taken. You know, you have an exciting new technology. Really, one of the best ways to share that kind of what A.R. could do was to show that whale coming out of the floor. People go, wow, you know, that's amazing. But then you quickly have to find the actual ROI producing use cases for the technology. And I always have to go back to the story of mobile phones because when they first came out,

you know, the use case was really largely focused on business folks who were, you know, driving around in their cars. They had to call back to the office. which meant they had to find a parking spot and then a phone booth and make a call and have the change on them to make the call. Now they can make a phone call from their car. So there was a clear ROI. There was savings in time for that salesperson. And it's very much the same for augmented reality.

Right now, today, in several areas of the enterprise space, there's an ROI that exists, you know, training, any sort of 3D visualization, any sort of, remote assistance, those things can be done in a highly efficient way and produce ROI for companies. Over time, definitely we'll be able to shrink the silicon, the componentry, make it more of a glasses format. And like any technology, I can see the trajectory to getting there, but that's not today. But Peggy, this is not controversial to say that magically did start with more consumer use cases in mind. I understand that that's the evolution of technology. So going back to the previous question, take us through that shift. What did Magic Leap learn that some of these other

companies have not learned yet about these consumer use cases? Yeah. And so consumers. So when you think about it, when the product launched in mid-2018, Magic Leap One launched, it launched and it was sitting alongside mobile phones that frankly had there was more performance you could get out of a mobile phone there was a lot more content they cost a lot less and you know they there was a thriving developer community already so the device itself actually magically one still is an awesome device it works well it does what it said it was going to do it proved that you could put digital content in front of your eyes in your physical world and have your eyes believe that content was actually there. It didn't make you sick. It didn't bounce around. It was stuck in your

world. And so it did a lot of things really well. The entry point for consumer was just too early. And particularly given that our mobile phones could do so much. And while, you know, over time, it will circle back to consumer. I think that some of the things that company learned was the device itself, you know, to be on your head for any length of time, needed to weigh a lot less. You know, you needed to not make your head hot when you have it on. There's a lot of form factor things that the company learned. It needed to be, the optics needed to be very powerful.

And there's something, there's a, there's an element of, augmented reality called Field of View. It's the, it's sort of the canvas, if you will, that you could put the digital content within that's in front of your eyes. That just needed to be as big as possible. You might have put on some devices where the field of view is almost postage stamp size. And you could put digital content there. And you're kind of making your your head do the work to follow that digital content. Yeah, that reminds me of the Google Glass, which was just awful to try to use. Yeah. Yeah. I mean, a good first product to prove out the technology, but those are the things they learned along with, you know, with others. That field of

view has to be as big as possible. So the team went back, took all the input that they heard and learned from Magic League One and also watching other devices, you know, the feedback from users and built Magic League 2. From the ground up, they knew that the entry point was more likely an enterprise point and not consumer. And then they said, well, if you're going to, if you're in the enterprise, what do you need? You need something. you can wear for hours and hours, you know, not something that's got hurt your nose after 45 minutes, you know, because it's too heavy on your head or it gets hot or it's clunky. So they solved a lot of the problems that the industry was feeding back, both based on, you know,

from Magic Leap One as well as other devices in the industry, say very focused on solving that problem. Yeah, and there are some obvious enterprise use cases, the ones that you've mentioned, although I didn't think about those, but like training, of course, is interesting. And, having people overcome their fears like putting this on and you know seeing a shark in the room or being in or you know doing the fear of heights thing that's interesting um and uh it is interesting that the consumer some some have started with consumer i mean i'm curious you know so you obviously still believe that consumer is something um down the road yeah is your vision also that will just kind of be hanging out with other people in some you know big digital world together or is it more like of a gaming thing. I know it's hard to really predict, but if you believe that the consumer stuff is going to happen, there must be some sort of sense as to what it's going to look like. And I do. I do think that is the use case that many consumers would love. Can I talk to my grandma on the opposite coast and just have her in front of me? That would be great. Could I get on less

planes because it's as immersive an experience to run a 3D meeting with a device versus actually sitting across from somebody. And there's a few things to that that really need to be solved before we can reach that world. One is, in order for me, for instance, to see you right now digitally in front of my eyes, you'd need a lot of cameras on you. And it's called volumetric capture, we'd have to be able to capture what you look like in, you know, real time. So it's a lot of cameras, which means it's a lot of data. You've got to have a big pipe to get all that data back too. And then my device that's sent over there, my device in place in front of my eyes. So that's, you know, the world we're all rushing towards. It's why you see a lot of avatars right

now because that world doesn't exist yet. It does in the enterprise space right now actually be a very cool product that Cisco is doing WebEx hologram. So they've taken their video conferencing system WebEx and added an element of 3D capture, this volumetric capture. I think they use 12 cameras and they're testing that out right now with a number of their existing customers of WebEx. And it's awesome. Right. So you actually can do it today with a system from Cisco. But for a consumer, you know, who likely won't have that system, we have to work on what the depiction is going to be.

You know, maybe eventually our PCs can have four cameras on them and we can get somewhat of a view of you and maybe, you know, teamed up with some previous version that you have had. you can add in the real-time qualities of yourself, and then that is what gets sent over. But it's a problem, you know, and it's why you see avatars. And, you know, avatars in an enterprise world,

I always have a little bit of, you know, like they kind of look cartoonish, and you're trying to talk about, you know, I don't know, you're negotiating a deal. It just seems a little challenging to look at someone in an avatar form. That's just me. That's my opinion about that.

avatars. And I certainly don't think that, you know, a surgeon needs an avatar. You know, if someone wants to help that surgeon out in the previous example, they just need to see what the surgeon's seen to give them advice and walk them through something. So eventually, I believe we'll solve for that. We'll figure out how to get cameras and we will be able to have a really true volumetric capture. And as I said, it's done right now through Cisco. But for mass market, I think eventually we'll be able to figure that out. But we're not there yet. Yeah. And for meetings doing things cross country, cross continent even, this makes a lot of sense to me. But I also, I wrote this story in May for big technology, the headlines, the

metaverse sure feels like an enterprise thing. And there was this stat that I found and I spoke about this with Nick Clegg on a previous show from meta. It was really interesting to me that It's 75% of Americans live less than 30 miles away from a parent or adult child, and only 7% are more than 500 miles away. So this idea of, you know, people needing to beam in with presents to, you know, people that they are friendly with, it's, I wonder if there's actually the use case there, because in most cases, they're close enough to people that they know to just drive over. And I think if you can drive over, you would. Like, who doesn't want an in-person meeting? I think that's always going to be the best experience. So I agree with you there.

I will say, though, there is a feeling of presence. And we've been playing around with it because we just kind of wrote an app to use internally for meetings. There's a very strong feeling of presence that we're all just still learning about. And that is, when you're in a virtual meeting and you've been, and others have been invited in, even in an avatar form, you know, if they walk around and behind you, you hear their voice, walk around and behind you. That's something that feels very different than a Zoom call, right? Where you're looking at, you know, the Hollywood squares of people in front of you. And even that makes the meeting come to life more. Now, it's not

in person, but there's a draw to that. There's an attraction to that. That person has walked around me and I heard them walk around me. That presence is very palpable. The other thing we have is we've got four cameras looking at your eyes because we need to know where your eyes are gazing so we can place the digital content very accurately looking at your eyes. So what that means is I can take that where your eyes are looking, send it over to the other person who's now looking at me. And when you swing and look at me, even in an avatar form, and you're looking right at me, again, there's a connection there that's very different from a Zoom call. So it's a space we're still learning about. And we're at the early stages of that. And you hear people who

develop 3D meetings with avatars, they talk about that. There's a feeling that you get that's very different from a Zoom call or a WebEx call or a Teams call. For sure. But socially, it's just not catching on. I mean, Metas put all this. Because it's not good enough. Yeah. And meta has put all this effort into, I think it's called Horizon Worlds.

It's their big metaverse social layer. And it's interesting because there are social companies. So like, of course, how do we transpose social media onto the metaverse? It's like what, 100,000 active users and even their own engineers wouldn't be bothered to go in there. So you know a lot about where. the market is today where it's going. What do you think the companies that are investing so much in the consumer metaverse are getting wrong? Do they have a blind spot here? I don't think they have a blind spot. I do think this will be a use case. But they're just way too early, though.

I think it's early. And I, you know, we found that when we focused initially on consumer. It was early. So again, much like mobile phones, if you tried to sell mobile phones broadly, literally to everyone. I mean, I remember when I was back at Qualcomm, we were, you know, early, early days of mobile phones. And we said, someday there might be a million mobile phones in the world. Because what we were basing it on is how many phone booths were in the world. We said, this thing's going to take the place of phone booths. Like we couldn't see beyond that. That was as big as we could even think. And I, and that's a lesson that says, hey, get the, get some initial use. cases right and that then powers the next level and the next level and the next level to

go all the way to the end game right now it's going to take time it's going to take resources and you know we're talking about companies who have a lot of resources and and i you know respect their decision we're a small company right and i have to focus and i have to look at where is the market entry what is a technology capable of doing right now that's where i'm going to put all my energy. Yeah, I was like looking at your funding before and I was like, oh, Magic Leaps raised over a billion dollars. That's a lot. And then I realized, oh, Meta spending more than 10 billion this year. Holy crap. Yeah, we are highly efficient. And you have to remember, when you look back at the money that Magic Leap raised, what kind of gets lost in a lot of the headlines

is most of that money went to the technology. It went to building. augmented reality technology, which is very, very hard. It's much harder than virtual reality. And so the bulk of it went there. But unfortunately, what gets highlighted, you know, through some of the headlines was, you know, it looks like, you know, whales coming out of floors. What did that ever do? It's like, no, it was to build the technology.

And in some ways, you know, they've been, magically, it's been around since about 2010, give or take. And they were the first, they were one of the earliest in the field, and they were carrying the heavy bag of technology development, oftentimes alone for years, where compared that to the mobile phone. You had, back in the day, you had like Nokia, Samsung, LG, they were all working to make up the best mobile phone. And, you know, all of those innovations were able to be packed into the phone. it was magically alone for so long. And so, yes, this technology, which is very hard, very complex, needed a lot of investment. And that's where the bulk of it went. Yeah.

But, okay. Anyway, one of the cool things was that, I mean, I was going to say, okay, definitely like, journalists have become skeptical of the company. I'm now a believer. I think that this stuff is interesting. But we became skeptical because there was all this money and these pronouncements. And then there wasn't really any use cases. But now we're seeing some use cases, which I think is interesting. But I'll actually talk about the one that I saw, which I thought was interesting, which was this, how like a fire department might monitor a wildfire spreading, you know, through their community.

And you, like, put the glasses on and you see the topography beamed on to a table. And you see the progression that the wildfire is actually making. And you can see where you need to put resources, what percent is contained, and what. areas. And I thought it was a very interesting approach. I mean, living in California for a long time, you know, that technology felt super pressing and necessary. Yeah. And what we learned, because we brought Cal Fire and you're speaking of California, clearly they are engaged a lot of firefighting these days. What we learned is that they, how they fight fires now in real time is they build these sand tables. And so they kind of try to build the tough.

topography of, say, a valley that a fire looks like it's shooting up and then and then try to visualize, well, which way is the wind blowing. Now you know which way the wind's blowing because you have a PC there that says the wind's blowing north-northeast. It's blowing at 40 miles per hour and it's, you know, it's headed this way. But then you're making your mind do the work. Okay, I heard that. I'm looking down now at the sand table. Okay, that valley is not quite north northeast so maybe the wind will not not be a full impact up that valley like you're making your mind do a lot of the work I think what you saw in our wildfire demo was we actually showed the wind you know kind of an amorphous blob of wind coming up a canyon and at the at the true speed

and direction that we were getting from a feed a live feed and that is now you can rely on that And your mind just understands it. You're not making your mind work. Your mind can now figure out, how do I fight this? Okay, I've got a wind coming directly up a canyon. I only have one, you know, plane throwing water down there. I've got to send in the other five I have right now to this area. Like your mind can understand it so much easier in 3D form.

Yeah. It's like God mode. Yeah, looking at a series of PCs and then trying to aggregate all of that data. and then delivering the command. The other thing it does, and if you watched, we had a little film on that, talking to the younger wildfire gentleman

that were in the video, an expert wildfire, again using, see what I see who might be, you know, far away, can look at what they're looking at and give them real-time advice. So you don't always need all the experts in the room at the same time. You can have them viewing exactly,

what you're seeing again on any device and walk you through the next steps so how is this stuff selling like is this a real business i mean we've walked through some really fascinating examples the training in the factory the surgeon in the middle of your artery um or vein or what i forgot exactly what part of the body was and then uh and then you know public sector use case of of training uh or actually working to you know um attack public uh uh situations like a wildfire and then i know you're working on defense as well. So what does the business look like today? Yeah, just in defense, by the way, it's a lot of what we call command and control scenarios as well as training. So wildfire is a command and control scenario that's used for fighting fires. That same sort of

scenarios used all across the defense area from one into the other. Can you like simulate like the boots on the ground and have like somebody like look from above to see how they're making their way through enemy territory, for instance? Exactly. So you can surely have the topography of Emily, of some territory sitting on a table. All the feeds that they're getting anyway can then be depicted visually, you know, through 3D visualization in front of them. And it, you know, it helps to make stronger decisions, quicker decisions.

So you're not, you know, aggregating all that data in your own head. You can actually see it outlaid there. But, you know, you can imagine any sort of police. There's police scenarios that could do that, all sorts of ones. So that's one that's very replicable. So you talk about the business, we looked at use cases that appeared to be used. You know, we had to go to the lowest hanging fruit, which we think is 3D visualization, remote assist, any sort of training, really, from one end to another. and looked at just a few sectors of enterprise.

And largely, they're the ones who are already used to wearing something on their eyes because this is a new medium. And we didn't want to have to bring someone up to speed on that. We said, look, you're a surgeon, you're already wearing something on your eyes. Defense, you're wearing something on your eyes. Factory workers are typically wearing safety glasses. So, again, we narrowed down to the lowest hanging fruit to focus on because we have to operate efficiently as a small company.

And we have just launched Magic League 2 as of September 30th. Okay, a couple months ago, not even. Yeah. So we are just at their early stages. We sell in the same way as, say, you know, if you work at a company and they give you a PC, we go through, you know, distributors. middle, so who pack on whatever software your company needs. So there's sort of a channel out to the market. So that's how people buy it. Then you go to buy your PCs, then you go and, you know,

through that same company, you'd buy your Magic League two devices that have all of your company's mobile device management software on there, whatever apps they want to put on there for you. And that's what's sent then to the end user at a specific company. And it's still fairly early, but what are the, I don't know, you have pre-orders? Like, or do what do this? I know you can't. There's some stuff that you won't be able to share, but give us just like a broad sense. It's like business booming or is it going to be a long path to make this work?

Well, we feel good about the traction that we've had so far, but let me take you back a little in the journey. We actually started in January of this year with an early access program. And this is something that, you know, a lot of companies do. We probably should have done it for Magic Leap One. That wasn't a decision that was made. I wasn't there at the time. But it basically, you get the hardware into the hands of people who are really going to ring it out for you, you know, and really put it to use, push all the corners, give you good feedback.

We did that in January with a number of companies and then added companies all through the summer. as we, every time we rolled the software, you know, we would bring the software up to speed, bring on more companies. And so that feedback was invaluable. It taught us a lot. We had to, first of all, understand what it meant to live inside of a corporate IT infrastructure, for instance. Like these devices have a lot of sensors on them, and you need to protect all the data, the incoming, the outgoing data, you need to make sure that data is kept private and secure, so we had to have all those sorts of applications integrated to the platform ahead of our launch. So quite a bit of learning along the way.

And we're very thankful for the companies who took part in it. They were across all the sectors that we've talked about. And, you know, we've actually learned a few things. For instance, surgeons said, you know, the battery life is pretty good, but what if we're in a super long surgery? Like one of these things goes. You don't want it to go out. Eight hours. You can't have to go out.

Yeah. So is Cal Fire, are they in? So we're still working with Cal Fire on that same scenario. Okay. Yeah. And, you know, initially trying to turn that into a training device and then eventually a command and control in real, in a real situation. Okay.

So they're a customer. We're still engaged. Yeah. And we have, you know, a number of companies. who are still learning, I mean, it's early days even for companies to understand how do you create solutions in the space. And so there's a lot of educating that is still being done. And to do that, we have a professional consulting services here at the company. Because when you, actually, when you look at magically, we've been around in the space for

over 12 years now, there is a lot of unique knowledge and a knowledge base here. about, you know, software developers who know how to code in 3D, you know, using tools like Unity. Unity is a big partner of ours. And then producing something that has real value for a company. So we offer those as one of the revenue streams here at MagicLeep because we have kind of a unique set of employees who've been in, you know, some of them have been in the space for literally a decade. For sure. Okay, there's plenty I want to get to in the second half. Let's take a quick break.

Peggy Johnson is with us. She's the CEO of Magic Leap. Great conversation so far. We want to talk a little bit more about different use cases, her career, and maybe some developer stuff in the second half. So we'll be back right after this. Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and

original stories to keep you in the loop on what's trending. More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now they have a daily podcast called The Hustle Daily show where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So search for the Hustle Daily show and your favorite podcast app like the one you're using right now. And we're back here on the second half of big technology podcast with Peggy Johnson. She's the CEO of Magic we've spent a lot of time at Microsoft beforehand Qualcomm you mentioned you mentioned a little bit

in the first half comparing the metaverse technologies like VR and AR to the cell phone and we hear a lot these days about how these like new cutting edge technology are going to become the next phone heard a lot about that from crypto folks but it doesn't look like that's going to happen now so what makes you sure that this is going to follow that path versus just be one of those experimental technologies that shows promise, like not every experimental technology turns into the iPhone. So what about this, you know, gives you the confidence that it's, it is like the transformational technology versus one that might fall, you know, into the dustbin of history. Well, we believe in the transformation that this technology is delivering because we see it

and we hear it from our customers. They have said, you know, they've been able to save time. They've been able to be more efficient. They feel like they're, they're actually, this is sort of a super human, you know, tool they have in their hands now once they put the device on their eyes. And there is no way that that is not going to translate eventually to consumers. Yeah. Yeah, you make a great point. There's a use case here. Yeah.

There is a use case here. Yes. And it's real. Yeah. So I kind of looked at your bio. It's kind of interesting. You were at Microsoft's 2014 to 2020. That's like the exact overlap with Saitanadella, who came in and led a real pivot and a real culture change going from one type of business line to another.

And you just couldn't do both in terms of desktop operating system, moving to cloud, servers inside people's offices, again, moving them to cloud. What have you learned about culture change inside, inside companies and orienting companies towards different purposes? because I mean, you know, you disputed this a little bit over the course of the interview, but I still imagine that there was a bit of a shift from the Magic Leap 1.0 before you to the magic leap of your, that, you know, under you with a clear vision towards enterprise, like similar to Microsoft. Yeah, I mean, all very good points. And frankly, there was a lot of change management that had to happen with the company.

But if I just go back to, you know, what you started with. I had the honor of working for Satya for six years, you know, from shortly after he became CEO until August of 2020. And what I learned was, you know, really people and culture are everything. And I remember in my interview process with him, you know, he said, I'm going to change the company. And I remember, I remember, go back to, it was like January of 2014. And I thought, how, you know, is he going to make Outlook work better with, you know, some of the other enterprise apps in the industry? Like I was thinking very tactically about what he might do to change the company. And I said, well, how are you going to change a company? And they said, change a culture.

Like, culture is everything. And it is. Like, that is my biggest takeaway. It is absolutely. everything. So when I came to the company in August of 2020 to Magic Leave, you know, they had gone through a downsizing. They had, you know, their CEO had stepped down in May. They didn't know what the future was. They, there was, there needed to be a settling and having people understand there is a plan, there's a vision, And we want to hear from you as we start to build toward that vision. And so I would say my first period of time here at the company was all focused on the employees, understanding what their needs were, what their concerns were.

It was less about, is the market ready, you know, are we making the right device? It was like, tell me what you're thinking. Start with them and learn and just be like a constant learner and a listener. and take all of that input before then saying, okay, here's what we're going to do now. And so I spent, say, the first 30 days or so, just talking to one group after another, doing AMAs with big groups, small groups, one-on-ones.

And at the end of it, we said, okay, you know, it's clear. We need to focus, first of all, and we need to narrow our focus. And we are going to narrow it to just enterprise, and we're going to even further narrow it to just a handful of areas in the enterprise. Here's, you know, the use cases we're going to concentrate on. And by the way, there's tons of use cases, lots of things that we could concentrate on. We'll get to those.

But here's the ones we're going to concentrate on right now. So you didn't come into the job knowing that you wanted to go the enterprise route? That was something that you learned in these meetings or you had a pretty good idea and that solidified it for you? That solidified. It was a ladder. I already, you know, just watching the company from the hour. Outside, I was thinking, you know, they should just focus on enterprise.

Right, because that's the world you lived in for a world I've lived in from mobile phones. Yeah, too. And it was like, of course. That's kind of interesting where you talk about like going around and listening because, I mean, it does mirror. So I did a lot of research about Microsoft's culture change for my book. And it mirrors what Satya did inside the company, turning from from management talking at employees to listening to them. One great example was like the old Steve Balmer. you know, all hands were there was like techno music and lights.

I think he pulled his hamstring jumping around the stage once and Sanya canceled that, turned it into a hackathon with the signal being, it's not about what I'm telling you, even though he had a very clear direction. It's your ideas are going to power where this is going from here. And without that, we're not going to get anywhere. I'll have another lost decade. And it worked. It worked.

And, you know, part of what we had to do, the management team had to do was take people on that journey. Because a lot of people join the company and, you know, we're focused on consumer and they were very good at it. And they liked that area. And for me to come in and say, well, we're not doing that anymore. You know, that can be a hard message. But what we had to do is show them there's just as much gratification and seeing, you know, like the separation of conjoined twins, seeing the device, help doctors and nurses who are part of that operation up at UC Davis to successfully separate some conjoined twins. Like there's satisfaction and gratification and like, wow, we have, our technology has a real impact here. You just have to take them on

that journey, right? They had to see that and then they were all in. And that's been, you know, it took some time. It did. I'm not going to lie. It was not, you know, always an instant flip for people. And some people decided it wasn't for them at all. And, you know, they amicably left. And that's fine, too. Like, you've got to be passionate about what you do. Right.

But I can say that the team we have now is super passionate. And it's been great to see what they built, you know, during a pandemic, during an unclear vision of the future, during a change, a massive change in management. They just kept plugging away, and they built, again, just an awesome AR device, really a leader, you know, in that space. Now, speaking of Microsoft, the company is making its own way into the Metaverse. And maybe when I said it's all consumer, there is actually some enterprise that's starting to bubble up on the surface in places like Meta, for instance, with their new device, I call the Quest Pro, they've, like baked some Office 365 software into there. We're like, you can, I don't know exactly what they want you to do, Excel or Microsoft Word and the Metaverse, which to me, I mean, anyway, it doesn't sound like a very appealing proposition to me. But what is your view in terms of competition?

And when you see Meta making these moves, dabbling its way into enterprise and training, obviously they want to train with VR. They have Metaverse workrooms or Horizon workrooms. It's tough, really tough to keep track of their names. but the thing where you can have a meeting with other people in virtual reality. I mean, do you view them as like a pretty serious threat? Well, first of all, I would say I welcome the competition because, I mean, to be honest, when they made the announcement about changing their name to meta, I mean, they're serious about this and the investment they're putting into the space, that gave us tailwinds for sure.

You know, it made anybody who is in the space get a lot of attention. All of a sudden, people turned and looked and said, hey, magically, you know, first, you know, tell us what you're doing, what you've been doing. And, you know, all of a sudden we were back in the conversation, which was great for us as a small company who had been through a lot of challenges. And so definitely we welcome that. And I think it's a recent announcement with Quest Pro, you know, that only served to validate our strategy to shift to the enterprise several years back now. Right. But a lot of people, a lot of CEOs says, you know, company like Meta comes in the same business. They say it validates, but it is, it's real competition.

I wouldn't say that it's not. I mean, but I also think of, I don't think this is a, wow, one winner gets all type of, I mean, look at the. the handset space in the beginning in mobile phones. There was a bunch of folks. Some people did high-end handsets. Some people did feature phones and, you know, low-end handsets that just made phone calls. Like there's, there's room for more than one player in this space for sure because there's a hardware element to it. So much like even the PC market, you know, you've got lightweight PCs, you've got PCs that are more viewing devices and then you've got, you know, gaming PCs on the other end of the spectrum. And those are different companies. And so there's room for for all of us.

There's going to be winners and losers, but it's not, you know, winner takes all. Definitely not that. And I remember speaking with Mark Zuckerberg about virtual reality before they even did the name change. And hopefully he'll come back on again. I'll try to get him. But he was very excited about VR as like a new operating system. And he picked up his Android phone and talked about how it isn't exactly how he wants it to work. And of course, we now know Facebook has had all these issues with Apple. cutting off their revenue when it comes to being an operating system or sort of a different experience, where does magically want to be? Because you do work with developers. Is it a platform where you want to open up to all developers or is it something, you know, we've talked so

much today about focus? So where is the balance between focus and being a real platform for anything? We are really the latter. We are open. We want to be as broad as possible. We want to tap into as many developer groups as possible. And the reason is that, you know, we just do one thing. We make hardware. And we've got a platform on top of it that, you know, is developed by developer input. You know, we listen to our developers. We're very developer-friendly.

And if they say, hey, you know, we need this or that, we're going to put it into our platform. So we're hyper-focused on our platform. And just that, you know, we don't sell, we don't have a gaming business that we're trying to loop in or a cloud business or an advertising business. This is all we do. And so we really see magically as, you know, the most biz friendly because we're not pushing any other businesses. We're the most dev friendly because we integrate to all clouds, you know, physics engines, other AR platforms. we integrate to Microsoft's Mix Reality Toolkit. We integrate with Unity.

We integrate with NVIDIA's Omniverse. So it's like, come one, come all. And that has been our strategy, you know, since I joined the company. It's interesting, you talk about operating systems because in the beginning, nobody would, nobody that the company went and asked about changes to operating systems would do it. Like, you know, there needs to be certain elements introduced into an operating system in order for you to use it and to build an AR platform.

And, you know, they knocked on the doors of all the existing operating systems out there. And I think they listened, they were curious, but, you know, for a little company with no volume to ask for some changes in an operating system? Yeah, the answer was no, basically. No one said yes. So Roney, the previous CEO, said, we've got to build our own. And so in the beginning, and it was the right choice at the time, they built their own operating system

because they couldn't get anything incorporated into the existing operating systems. One of the first things that my team and I did was to move over to Android, AOSP, actually. And because we wanted to reach the most developers, we didn't want to stick with that, but we needed it in the beginning. By the time I came, those elements were largely getting incorporated into operating systems, and Android was furthest along with that. So we chose to move over, and it's really opened up our reach amongst developers. It was the absolute right move.

But again, we couldn't have, we couldn't have got to where we are today if we hadn't had our own in the beginning. That was definitely something we needed. Are you going to charge the 30 or 40% that meta does to developers to run? What's the fee? That's not our business model. We have three areas of revenue. We sell hardware. So there's margin there.

We sell professional consulting. As I said, we've got a unique base of engineers here who, some of the longest in the industry, to help companies build their own solutions. And then we have a new area of business where we can operate as a contract manufacturer for other companies in the space. And I guess I would say just the fact that companies are asking us to help them build their optics or elements of their AR is not surprising to us because it just highlights how hard augmented reality is not only to develop but to manufacture. it's not easy. And it's very, very highly technical in the optics area. So our engineers,

we've got a bunch of PhDs in the optic space, you know, had to learn how to very, very accurately place digital content in front of your eyes. And then how to manufacture it cheaply and with high yield rates, and we have amazing yield rates. Our yield rates are over 92%. What's the yield rate? A yield rate is, you know, a piece of glass comes down the line, glass substrate at the other end comes out an optical eye piece, and it's sort of how many come out the other end. So 92% come out the other end. And I mean, just going back to, I don't know if you remember Qualcomm used to build mobile phones in the early days. our yield rates, you know, on any given day were challenging to say the least.

There was always something, you know, that was, yeah, it was, I mean, sometimes, you know, it was under 50 percent, you know, we just could, you know, it was hard. Like, and that means a lot of scrap, a lot of rework. You got to figure out what the, how to make it and how to make it cheaply and efficiently. And we've got 12 years of doing this. And we know how to do this stuff. And we can do it with high yield at a fairly low cost and others are asking. So it's a real validation of the expertise that resides right here.

We run a factory. It's in the U.S. Right? It's kind of crazy. Yeah, less crazy. We recently had Ryan Peterson on from Flexport talking about how that's becoming a movement where people are like no longer relying. I don't think if he said that in particular,

but you did speak about how more companies are exploring. Yeah. Building in the U.S. Particularly for that. Like, I don't, I think it would have been really hard for the company to make those eyepieces with an overseas factory because that means, oh, something's wrong, send engineers. You might, you might want to have them in that overseas factory

wear the augmented reality glasses and then you can have, see what they said. That's funny you should say that. We did that during COVID. No way. Okay. Yeah, we have a, like an assembly partner in J-Bo who runs out of Guadalajara in Mexico. And as we were bringing up magically, too, so we make all of the high-value parts here and put the whole optical assembly together here. And then the rest of the packaging goes around it down in Guadalajara, Mexico.

And as we were bringing up those lines, we couldn't put engineers on planes. It was COVID. and we were stuck. And so we were able to use our own devices to see what they saw and, you know, to bring things up efficiently and effectively so much so that even today, we, we send fewer engineers than we ever did down to Gwad. You know, we just, there's not a, there's not that same need. Fascinating.

Well, Peggy Johnson, thank you so much for joining. What a great conversation. I really appreciate it being here. Thank you, Alex. Thanks for having me. Okay. Thank you, everybody for listening. Thank you, Nick.

Oatney for handling the audio. Thank you, LinkedIn, for having me as part of your podcast network. Thanks to all of you, the listeners for being here week after week. We have a bunch of great shows coming up. Aaron Levy from Box. The CEO of Box is going to be on relatively soon talking about in the office, out of the office. Actually, that would have been a fun topic to talk with Peggy about. We'll have to have you back on the show. All right, that will do it for us here on the big technology podcast. We will see you next time. Thanks again for listening. Thank you.