Motley Fool Hidden Gems Investing - “A Great First Effort from Apple”

Episode Date: May 11, 2024

Sure, the Apple Vision Pro has some flaws, but it’s incredible to be in a recording studio with Alicia Keys. Mary Long and Jason Moser checked out the new headset and discuss: - The training and educational use cases for spatial computing.  - How Apple and Meta products stack up against each other. - Meta’s virtual reality strategy.  - The strong value proposition for VR training in healthcare. Companies discussed: AAPL, META, GOOG, GOOGL, MSFT, PCOR, ADSK, AXON, ISGR, GMED Host: Mary Long Guest: Jason Moser Producer: Ricky Mulvey Engineer: Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

I started Ornod in 2013, and we make bike apparel. The best part of Shopify for me is our ability to run the business as essentially non-technical people. We're able to admin everything on the back end, front end, and sell things online easily. If Shopify were a bike accessory, I think it would actually be the bicycle. It's the thing that you do the thing on. We run the business on Shopify. Start your free trial on Shopify.com. There is an opportunity there. I mean, clearly it's just, it's trying to figure out whether it's a bit more of a niche opportunity or a mass market opportunity, but with Apple,

you know, this is their first step. I'm Mary Long and that's Jason Moser. In addition to analyzing stocks for you on Motley Fool Money, JMO is the lead advisor on our augmented reality and beyond investing service. Not too long ago, we each checked out the new Apple Vision Pro headset to see if it's worth that $3,500 price tag. On today's show, Jamo and I walk through that experience and look at the virtual reality applications that are already having an impact. Jason, I wanted to grab you to talk a little bit about virtual reality and augmented reality and the state of that, because this seemed to be a really big news story in February when Apple launched the Vision Pro and things kind of

seem to have quieted down a bit. I recently made a field trip to Apple and got to demo the device and walked out of that kind of fireworks show that they put you through for about 30 minutes thinking, whoa, this is really, really cool. To be fair, I had not yet tried a VR headset. So I wanted some other perspective because you dabble in this space a bit more. You also recently took a field trip to check out the Vision Pro. What did you think? Yeah, yeah, I just did. It went to the Apple store and it's very easy. I mean, for anyone who wants to do it, I mean, you just go to the Apple website, you sign in, you make a reservation. They seem to be very open to it. You reserve your time slot and you go in there and they give you a demo of what this Vision Pro

is all about. So it was very easy to do. I must admit, I went in with some, I think some preformed opinions based on my experience having used Meta's Oculus slash Quest device, right? I think actually I think my daughter has an Oculus that she got a couple of years ago for a birthday present. But I had used those Oculus headsets several times all along the way. So I had a little bit of a sense of what I was getting into going into the demo. But, you know, I absolutely wanted to give it a fair shake. And I must say, I mean, when I think about the pros of the Vision Pro, I mean, of course, this is just really impressive technology. I mean, Apple rarely, if ever, does anything half-heartedly, right?

And I think this is another example of a lot of hard work and a lot of imagination and a lot of technological prowess going into hopefully what is just their first iteration of this device. And the technology itself is just really impressive. It's very immersive. There are instances where you really do feel like people are right there in your face and like right next to you. And I thought it was generally pretty user friendly and navigating around. And I'm a guy that, I mean, I have an iPhone, but I work on a Windows. So I'm kind of all over the place when it comes to the operating systems that I use. But I felt like it was pretty user-friendly in navigating around to get what we wanted to get done. Now, with that said, I mean, there are some cons. And I think the primary con to me, and this is not Apple specific.

This is something that I think pertains to all of these headset devices. It is very cumbersome. I mean, it is heavy. You feel it on your face. I absolutely did not want to wear it for too long. I mean, when 30 minutes were up for that demo, I really was ready to take it off. And I did notice when I took it off that my eyes kind of burned a little bit. So, I mean, there are things,

those things I think will get better in time. And I think the other hurdle that they need to clear, and again, this is not Apple specific, but there is just no obvious killer app. I did not walk out thinking I needed this device at all. It's a neat want, but I just felt like there was no reason for me to buy this device.

I have no need for it. And that to me is gonna be one of the bigger hurdles to clear as well. I'm not a gamer. I feel like that's kind of the use case that's been touted for from like a consumer perspective in the past sitting there and and being in this demo to me really opened up like the possibilities for the entertainment space and i mean that again not as a gamer like with this for those listening the what's part of what's

so amazing about the tech is that you can truly move your head anywhere like up down right left behind you, below you. And in certain instances, you're still seeing a screen there, or you're seeing a fully immersive, natural background, and it can feel really like you're there. There was a moment in my demo where I forget what the app was, and I was effectively taken inside a recording studio. And Alicia Keys is so close to me. It's like she's right there next to It's amazing. And moments like that, again, it's a really sharp visual, but there's not too much movement. That to me was like, this is a really cool possibility for movies. Yes, for gaming, but that's kind of already been thrown out there. for photos and videos and just sharing like personal memories, there's a lot of cool personal and entertainment use cases there. Did you, what, what apps did you try out when, when they walk

you through? Cause I feel like they, they have a few that they like to show to everybody, but maybe others get different experiences. Yeah. I'd imagine the demo process is probably fairly standardized so that everybody in the Apple store can, can kind of give the same consistent experience. But, you know, you go through sort of the, the, the obvious ones, right? Photos and videos, video streaming, their opportunity to show off 3D capabilities. They even had me go into the browser, the Safari browser and scroll and navigate around a little bit in the Safari browser. So you can see how you might actually be able to do that. But I think you keyed in on something that to me, and again, it's not just the Vision Pro, it's these devices in general.

I think we're at the stage where these devices, for the most part, they're just consumption devices. And not that there's anything wrong with that. But I think that when you're looking to find, you know, sort of a reason for mass adoption, we need to go beyond, we need to figure out what, how do we get beyond just that consumption use case, right? And so you think about something like the phone, for example, and I mean, obviously the iteration of the phone well beyond or well before just like the iPhone, right? The smartphone, the cell phone. I mean, I grew up in the era of phones on our walls where you had to dial with the rotary thing. And now we're sitting here talking to people in video form as if it's magic. But I think ultimately what they need to do is figure out with these devices how to make them more productivity tools. And they are productivity tools in certain cases, whether it be something like training or something like engineering. There are certain use cases where these are phenomenal productivity tools, but we need them to become productivity tools for the masses in order for this to become that new computing paradigm. And so that I think is very unclear. But like you said earlier, it's just such early days. I think this is a great first effort from Apple, and I suspect we're going to see them iterate off of this soon. There was a moment in my demo where you're able to use a keyboard. So like you're typing with your fingers. And as you type, the letters are appearing like on the screen through your goggles, glasses. And a journalist, Nick Belton from Vanity Fair, who like profiled Tim Cook around the launch of this, he described that as writing using a pen with your toes.

Like that type of action was pretty awkward. And from a productivity standpoint, I thought, I don't need to type in the, use like an air keyboard to type something on a screen in front of me. Yeah. That I don't really see getting mass adoption. But one of the apps that I got to check out in this experience was I think called Jigs. And you basically get to see 3D models of anything from like a rocket engine to a human heart. And you can use your hands to reach out and pull this model closer to you to take apart different pieces of it. I'm not using that in my day-to-day work, working in audio, but it was really cool to get to see and understand that kind of a use case because that type of thing I can't see on a productivity standpoint. Okay. They're reaching out that kind of like innately knowing how to grab this virtual rendering and then pull it apart and examine it. There are really cool implications for that on a commercial level? No question. And I think that really goes to one of the more compelling use

cases for devices like these today. It boils down to things like training and education. And I think that's where we see some of the most impact coming from these devices right now. That doesn't mean that that's all that we'll use them for, but it's really neat to see companies like Apple, companies like Meta exploring those capabilities. Because I mean, if you just game this out and you think about it to the nth degree here, and we're not talking about just professionals, I mean, take it down to the educational level. And I'm not talking about like med school, take it down to like third grade, right? Take it down to like second grade. All of a sudden, if you can immerse someone in a given situation, and I mean, I'll use the civil war as an example, but just because

the civil war is such a profound event in, in humanity. And we read about it, we learn about it, but man, if, if you can, all of us, if you can, if you can actually put people, if you can take the beyond their imagination, right. And show them the reality of what things were like on the ground there. I mean, it, that is just, that's a memorable experience. And, and that really is what education is all about, right. It's creating memorable experiences, things that we remember and that help shape our lives and our worldview. So I think there's a lot of exciting possibilities here. And it's easy to sort of hammer on the things that are wrong or where they're missing.

But if you take it from the glass half full perspective and you see the potential and the possibilities, it takes a little bit longer term thinking. That's what we specialize in here at The Fool. It's exciting, I think. So you have tried Meta's products in this realm, right? Yeah, yeah. I've tried the Oculus. I remember we had actually an annual meeting for the company one year, probably.

It must have been 10 years ago at this point, where we had an Oculus demo there at the meeting. And recently, yes, my daughter a couple of years ago got an Oculus headset as just a birthday present. So I've had the opportunity to fiddle around with Meta's offerings there as well. Yeah. And from a product and a tech standpoint, how do they stack up against each other? I think they're very comparable. Now, I think the biggest difference I found, I mean, there are little differences in how

you navigate and whatnot, but I think the biggest difference I saw is just in regard to the meta products that I've used are basically full-on virtual reality. You are immersing yourself into a fully digital created world, whereas, and I thought this is pretty interesting with the Vision Pro. You had a number of different ways you could kind of go about it. I would call it a bit more of a mixed reality device. I mean, you had sort of the augmented reality sort of stage. You also had the opportunity to fully immerse yourself into another world by just turning that little crown at the top. And so it did seem to me that with a Vision Pro, it was a bit more multifunctional in that regard.

It incorporates more augmented and virtual reality into ultimately what we would call a mixed reality device. And it should be noted, I guess, for those that haven't experienced either with the Apple Vision Pro, while you can see, while the screen or whatever you're seeing around you is totally there, you can also make out the people that might be next to you, which you can't really do in the other device, in the meta device, right? Yeah, exactly. And I thought that comes with its pluses and minuses.

I thought that was okay. It's nice to know that you're still at least in touch with the world outside. But then by the same token, I guess it depends on what you're doing. It could also be kind of distracting. Totally. It could also take a little bit away from the experience. And so, I mean, I don't think ultimately it was a bad thing. It's just different.

And I think that, yeah, it's a good point to note there. Maybe a little bit of a difference there in the two devices in that experience. So from a price standpoint, like the MetaQuest comes in at around, you can get one for $300. Again, we mentioned earlier the Apple Vision Pro clocks in at $3,500. Based on that alone, it seems to me like each company is targeting a different kind of consumer and user. Does that different targeting translate into strategy at all? Do you think that Apple has a uniquely different VR, mixed reality, augmented reality, whatever reality strategy then does meta here? Or are they kind of in parallel? I don't know that I would put them in parallel

right now. I think meta is very explicitly pursuing that metaverse opportunity, right? I mean, this chance for humans to actually live in this alternate universe more or less. And it seems like with Apple right now, I mean, this was really their first product launch in this space and it took them a little while longer. And that's kind of their MO, right? They sort of sit back, they see how the market develops? Is there an opportunity developing? And if so, well, how do we pursue that? And then let's go ahead and pursue that. And so it feels like maybe that's sort of the approach they took here is they saw these investments, the companies like Meta, even Google, right? We think about Alphabet with Google Glass, companies making these investments

in the space, trying to figure out if there was that opportunity. And there is an opportunity there. I mean, clearly, it's trying to figure out whether it's a bit more of a niche opportunity or a mass market opportunity. But with Apple, you know, this is their first step. And I think with the price point, the price point is extremely prohibitive. I mean, you're talking about a device where most people are going to have to take out a loan to buy this thing. I mean, they're not just going to pay $4,000. I mean, it is a $4,000 device, if not more, when you add together, I mean, getting, you know, the memory that you need along with probably need the service plan, because if this thing breaks, man, you've got no recourse, you know? So, I mean,

it's a $4,000 device. And there are not many people out there that are just going to go shell out $4,000 in cash to buy this thing and take it home without any real clear value proposition. So maybe they're employing that Tesla style model in really innovating at the high end to then let that sort of trickle down to additional opportunities in order to bring the cost of these devices down. And that's how technology typically works anyways, right? We see that sort of race to the bottom. Apple has always been able to maintain a little bit of pricing because of the functionality, because of the aesthetics, because of the brand. And so I think that probably has something to do with it, is they're just thinking, let's develop the high

end, see what the opportunity is, and then we can sort of iterate from there to expand that market opportunity. So we've talked a lot about the consumer side of this kind of technology. We've also dabbled in like the commercial, the productivity opportunities there as well. And we focus primarily in this conversation on Apple and meta. But Microsoft is one company that talks about an aspect of this technology we haven't really touched on. They call it the industrial metaverse. And that's the idea of, okay, connecting the physical world with the digital one, kind of in this mixed reality way, but really using it to drive efficiencies in systems rather than giving us a new way to watch a cool movie or a new way to interact virtually. Can you maybe give us an eye into what Microsoft's vision for this industrial metaverse is and where they are in that process? Yeah. I mean, it's not just Microsoft too. That's the neat thing. I mean,

Microsoft is certainly playing a role in it. They've worked on developing their own headset ambitions there with the HoloLens. And they've hit some roadblocks with the HoloLens, right? I mean, it's, again, trying to kind of get down to the core use cases. But I think industrial AR, to me, when we talk about AR, augmented reality and virtual reality, and sort of the immediate question then goes to, well, how does this impact consumers, right? We're talking about the mass consumer.

But there's a point in between there. And I feel like that's industrial AR, right? I mean, this is something where this technology is helping different markets and different sectors do things a little bit better, a little bit more efficiently, right? Whether it's determining location or pulling data from that location or visualizing that data. But I mean, there are a number of ways that AR, augmented reality, is being used in things like construction and engineering already. You talk about safety training, real-time project information, collaboration planning, modifications. And so, you know, I think about companies like Procore, companies like Autodesk that are really utilizing things like this. Building information modeling is one where Autodesk is clearly one of the stronger players in that market. But yeah, I mean, to me, I mean, the industrial AR in the industrial mixed reality sort of use cases, they don't get the headlines, but they really are the crux of the market today. So another VR company that you follow quite closely, and you mentioned trainings just now, and the use of augmented reality in trainings in an industrial sense. But another VR company that you follow quite closely, and that you and Ricky Mulvey talked about on the show earlier this week, is Axon Enterprises. And they're a company that develops, manufactures, sells conducted energy weapons, so tasers. They also sell software services to support these devices. What's the immersive reality play there? Yeah, well, in a word, it's training. And we mentioned that earlier. And you can even see this in their shareholder letter. If you want, you Google Axon Investor Relations, go to their investor relations website, you can see their shareholder letter for the most recent quarterly report that just came out. And they have a whole section in there on their VR investments. Ultimately, this is training, right? And training plays a critical role for them in achieving what they call their moonshot goal. And they're looking ultimately to cut gun-related deaths between police and the public by half or in half by 2033.

And that really is kind of the idea behind Axon, right, is there's not necessarily the need for guns when there are other alternatives like tasers, right? I mean, this is a company that's focused on public safety. And so they develop these taser weapons along with all of the software services that go to support the data that these police forces and whatnot pull in from whatever civil instances they run into. But I think if you can imagine a world where if you're trying to learn how to use one of these taser weapons, it's not very efficient to just fire off these taser weapons one after another, wasting these cartridges. I mean, there's a lot of money that's being spent there by doing that. And so they utilize virtual reality as a training tool, right? They've developed this hardware and this software in-house for their customers, the police forces and whatnot. They can use this hardware and software to actually go into that virtual world and train on how to use these devices and how to deal with certain situations that, let's face it, these are not everyday scenarios, right? These are situations that folks run into, hopefully very rarely, but they're certainly not normal. And it's difficult to replicate in that real life.

But with virtual reality, you can program that thing to do whatever you want it to do. And you can fire off as many taser weapons in that virtual reality environment as you want. You're not going to be wasting a ton of money in cartridges and whatnot. And so really, it boils down to training. And they seem to be very excited about it. followed this company for a while, and certainly the conversation in regard to virtual reality and how it applies to the business and in training, it's only grown. So it's neat to see.

I think you only have to kind of dip your toe into the bathtub of this world to see the cool implications and ripple effects that it can have across a number of sectors. We've touched on a lot of those. Before we wrap up, is there any company or space or use case for AR, augmented reality technology that's particularly interesting to you that we haven't touched on already? Yeah, I think healthcare stands out as just one of the other markets where it's really having an impact. And much like Axon, I think in healthcare, a lot of it boils down to training. One company that we followed for a long time here in our universe is Intuitive Surgical. Intuitive Surgical is using more and more of these tools to train on their machines. They have this new augmented

reality system. They have this new system for iris, which is, I believe, a bronchio-related device. But they have gained FDA approval for this iris system and augmented reality training on that iris system. Look at another company like Globus Medical, which is focused on the musculoskeletal market and disorders there. Utilizing augmented reality and, to an extent, virtual reality, I think in the healthcare space is that value proposition is really proving out. And that is more and more becoming the norm, not only for how physicians practice today, but for how physicians are training, right? How they're being educated today in going forward. So healthcare is another space that I think is really exciting.

as always people on the program may have interests in the stocks they talk about and the motley fool may have formal recommendations for or against so don't buy or sell stocks based solely on what you hear i'm mary long thanks for listening we'll see you tomorrow Thank you.