Sharp Tech with Ben Thompson - A Few Questions Before Apple Embraces Virtual Reality, Meta Tries to Crash Headset Week, Nvidia and the Omniverse

Episode Date: June 4, 2023

Big picture questions before Apple debuts its new headset at WWDC this week, the latest twist in Meta’s ongoing foray into hardware, and two follow-up emails about Nvidia’s future. Plus: Zuck sympathy, cable bills, and why there’s no ultra premium Stratechery stock picking tier.

Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing? Doing okay, doing okay. Not sure what time it is, not sure where I am, but ready to podcast, as always. Yeah, you know, bright-eyed and bushy-tailed. You look great on the stream here. I don't know how you're...

I think that's the low-quality camera, to be clear, right? There you go. Well, you know, we'll take it. Welcome back to the USA and Ben, welcome. to Headset Week. All eyes on Cupertino for the next couple of days here. Meta is in Menlo Park. I think you got your cities wrong.

Oh, boy, there you go. Yes, we are going to talk about meta and the Quest 3 later in the episode. But Apple is set to unveil a new VR headset at its worldwide developers conference on Monday. Later in the week, we're going to recap the event in detail. Ben, you're going to be on campus for it. But for the first episode here, I figure we could just provide a little table setter for everybody and then hit some Nvidia follow-up at the end.

Does that rundown work for you? Sounds good. Let's do it. Okay, so I'll lay out a few general details for people. These come courtesy of Mark German at Bloomberg. He writes, Apple's first headset will be an ultra-premium device made of glass, carbon fiber, and aluminum. It looks like a high-tech pair of ski goggles,

features a new magnetic charger for power, has a curved front with an external screen to show a wearer's facial expressions and eyes and several external cameras to enable video pass-through, depth sensing, and hand control. The main use cases will be communication, video consumption, wellness, gaming, and productivity. One person who worked on the device called it part status symbol and part future of the computer.

Apple initially hoped it could sell about 3 million units per year out of the gate, but it's paired back those estimates to about 1 million, then to 900,000 units. By comparison, the company sells more than 200 million iPhones a year. An unbelievable statistic. So, Ben, question number one for you. as I look around my office, I've got a pair of Google glasses over here, several Quest headsets, the Microsoft HoloLens, all of them, sadly, collecting dust, all of them reminders that lots of people over the past 40 years have tried and failed to make VR products useful and popular. Why, given that history, do you think Apple wanted to enter this space? Well, I mean, if we're just lying on this episode, I mean, you should give me a heads up to start. You know me. I've always been a big VR guy. I'm psyched for this week.

No, the reason why Apple is entering the space is because they want to deliver on the use cases of communication, video consumption, wellness, gaming, and productivity. It seems pretty obvious. I mean, that list cracks me up because it's like literally just a grab bag of like, what sort of stuff can you do with a computer or with a phone? and let's put that on the list, which I think speaks to both the risk and the opportunity in some respect. I mean, the risk is, who knows? Who knows what this is going to be used for? I mean, I would say the Quest 3 to date, you saw that we'll get to bed in a little bit,

but this unveiling was also part of like their big video of like all the applications you can get, most of which are all sort of games. And this is sort of a, this is actually a general springtime. thing. This is usually when like the game video game developers release their sorts of things. So that was the context. So of course it was more games. But gaming has been sort of the, you know, one potential use case. I've been intrigued by the possibility of meetings because I do think the sense of presence is sort of a real thing. But the answer is no one knows for sure,

including Apple. And so that does raise the question of why build this. And the answer is because that's how progress happens, right? If you said you had to wait to see everything a computer can be used for when we've ever gotten a computer. If you have to see everything a smartphone can be used for, like you go back to the 2007 introduction of the iPhone. Steve Jobs says we're introducing three new products today, a widescreen, touchscreen iPod, everyone goes crazy, right? A revolutionary mobile phone, everyone goes crazy. An internet communicator, barely anyone claps, right? And the reality is that internet communicator basically encapsulated everything 99% of what we use in iPhone for. And even like the iPod part is now like streaming, which is basically an internet communicator,

that's basically the entire product. And no one then, Apple didn't know what it was and people watching didn't even know to clap appropriately, even though that was like the actual use case. And I do have a little bit of a critique, not critique, but annoyance. with people like you who are just like, what's the point? What's the point? What's the point of anything, right?

Like, like, there is an impetus to sort of push forward. There's an Apple commentator named John Syracusa that makes a point that I enjoy when, you know, I think with the most recent version of the IMA or no, it was an older version of an IMAC came out. It was much thinner than the previous one. And people are like, why are you making a desktop computer thinner? It's going on your desktop.

Who cares? And his point was, look, if you don't sort of keep pushing forward, you're never going to develop the capabilities and the abilities to actually make a meaningful breakthrough, whether it's with this product or with another one. There is value in progress sort of on its own when it comes to this sort of technological sort of stuff. So big picture, you can see a future where some sort of headset is tremendously valuable, right? Like you mentioned I'm on the road. I can imagine a future where I could have an expansive workspace, which I find to be very beneficial and useful. And I could get my work done. Maybe I don't even need to carry a computer or whatever it might be.

I mean, like, you probably do for typing or all those sorts of things. But like, I'm happy to start podcasting in headsets moving forward. If Apple wants to donate a couple trials. You're making that. You're making that up. I'll give it a couple weeks at least. Let's see where it leads. You know what I mean?

No, I hear you in terms of pushing boundaries, and I'm interested in what they bring to the table, in part because Apple's track record is so strong across all their hardware. And that's where I look at this, and it does seem like a risk, given the history of some of the hardware we've seen over the last 10 years that's come and gone without really making a dent. And Apple, the reason people are so excited about this is because Apple's batting average is like unbelievably high.

And so to see them swing for this particular fence is pretty interesting because, again, just nobody's been able to crack the code thus far. Yeah, I think that's an excellent observation. And there is an aspect to this where I do admire Apple shipping this. And you put like the numbers in there. This is not going to sell well. It's going to be like fodder for, you know, criticism. and all Apple finally shipped a flop, XYZ.

Like, there's a bit where the easiest thing is just sort of sit on your laurels. You're not going to get criticized for it. You're going to keep making lots of money. You could say, oh, let's let someone else figure out the market and will come in, but they think it's ready to go. And so they're going to ship it. And I think that's great. I think that's sort of admirable.

And it is sort of big picture of the role Apple plays in the tech ecosystem. Like at the end of the day, one of the things that's just. sort of odd about meta pushing in this space is we've talked about this. They're a horizontal services company. Like getting into hardware is just sort of a weird fit for them. And it's like, why would like, why would you do this when Apple could do it much better? Well, that would not be beneficial if Apple was not actually doing it better. And maybe one of the greatest benefits of meta being out there is Apple does feel like it needs to get a move on. It does need to sort of start shipping. And the reality,

is there's so much you learn and discover once it's actually out in the market. And this, by the way, includes what you actually use it for. I mean, you go back to the Apple Watch, the most recent big Apple announcement, and they listed a number of things that could be used for. And a lot of it was about communication and they had a whole app store and all this sorts of thing. And one of the items was sort of health and fitness, but it was one of a list of them. Yeah. It turned out and it took them a little bit to figure this out. that was it, health and fitness. People get out Apple Watch, they get notifications and they use it to like track their steps and their exercise.

It's the only time I've ever considered buying an Apple Watch is when I got super into running a couple years ago and wanted to track my distance and track the time. I wound up not actually going that direction because I didn't want like an extra touch point where I was going to be connected to digital life and have to get notifications all day. but the health aspects of it were the only time I looked at that and said, oh, that might have enough utility to justify the cost. Yeah, by the way, you know, for all my critique of you of, you know, being a liar about all your tech products in your house, that's why I don't wear an Apple Watch personally. Like I am like, I don't need, I really don't need notifications on my wrist.

And yes, you can turn them off and stuff, but it's actually there's not nearly enough fine grain control on what goes there and what doesn't. So I'm definitely with you on that one. But it was just interesting to go back and you see this list of things that it's going to be used for. That's boilerplate. That's the way it should be interpreted as. We will only know what this was used for a few years down the road when we sort of look back and say, oh, yeah, that's sort of the use case.

And from my perspective, I like the fact Apple, by all accounts, is coming in super high end. Now, just to go back to another bit of history from Apple announcements, the other big product is the iPad, which, they leaked a story that I was going to cost $9.99. And so Steve Jobs is up there and he's going through it. And it's this incredible demo and all these sorts of things. And then he comes out, starts at $4.99. And everyone's jaw drops because everyone had it in their head who's going to be $1,000. And so this $4.99 price, which was actually quite high, everyone perceived it as being

incredibly cheap. And so the question here is, you know, the rumor is $3,000. Is that going to actually come in much lower? But even if it doesn't, I do like Apple going more high end here. I think you're more likely to find a compelling use case. I mean, from my perspective, you know, when do I want to go to events? I want to go to event when there's a product like this. I can actually try it out, right?

And so I've tried out the Quest. I've tried out the Quest Pro. My biggest frustration with both of them, particularly the Quest Pro, which was really disappointing given the price point, is the resolution. It's just too low resolution to be useful for, work in particular. Like if you want to do that use case like putting the screen, I mean, it's use, you could use it, but I, I personally don't, don't like it.

And so if Apple is actually coming in and be super high resolution is going to be super powerful and it's going to be super expensive and have this weird sort of battery situation, which it sounds like it's going to have, I actually like that because you want to be deficient on vectors that the progress of technology will naturally take care of, which are sort of power, efficiency, and cost. Those will come down. The use case is going to be the use case, and I'd rather nail that first.

So I'm cheering for $3,000, not that I think it would be sell a lot, but just because I think that it opens up the aperture to discover use cases. Exactly. It's better than the alternative where you water down the product to try to appeal to a bigger audience

that may never materialize anyway if the product isn't very compelling on its own, which certainly has been met as experience in this space. And I've read somewhere that Apple's not even expecting to really make money from this particular iteration of the headset because of the cost of materials that are going into it and the limited audience that they're expecting to buy it. I think they will, I think on a unit basis they will make money. Like they always charged include them like Apple is not a company to sell sort of products at cost or below cost. So I would bet. Good to know.

Again, who knows? But my assumption is that they will make money on a per unit basis. But when you sort of spread out all the costs, including all the R&D and all that sort of stuff, no, this will take, you know, it will take years to sort of pay off. But that's my guess. I don't know for sure. But I have a hard time seeing Apple selling actual physical hardware. Just out of the goodness of their heart. They're just trying to push technology forward for all of us.

This is a common use case. Like consoles are famously sold at a loss, particularly at the beginning of their life cycle. except for Nintendo. Nintendo always wants to sell out of profit. But like Sony and Microsoft will subsidize the consoles, particularly at the beginning, because why? They're selling a console for five years.

So they want to have sufficient capability that it will be useful for five years. So they will overspec something, knowing that as they make more and more of them, the cost curve will come down, as they're sell, like when they start out, they're selling top of the line sort of hardware. Within a few years,

they're selling two-year-old hardware, three-year-old hardware, and then it's very cheap, and then they'll be making money then. But most importantly, they're making money on the game side because they make money not just from their own games, but also licensing for the other games that are on there. It's like a razor and blades sort of strategy. So that is common in tech. And, you know, I think meta is also selling at a loss and has been selling their devices at a loss. But again, that makes sense for them because, number one, obviously they want to sort of build up the market on their platform.

but also they're a social network. They want more people sort of using it. Apple's not a social company. Everything they've attempted to do socially has sort of failed beyond sort of IMessage and FaceTime, which are right on top of SMS because they have a phone. And I think that's going to be a useful thing here. But even there, like your typical Apple device, it's a one-person device, right? And Apple's core competency is productivity.

Like they've traditionally been very bad at games too. The fact they're dominant in games on mobile is sort of an accident of being the device people have with them everywhere, not because Apple is particularly sort of great at fostering a sort of gaming platform. Sure. So my, so that goes into their pricing and the way sort of their pricing work. So my bet personally is I think it would be in line with Apple to sell a device that costs them of $500 to make,

whatever, price it for $3,000, productivity being the key sort of Apple, you know, sort of use case. again like this sort of like uh which is a really fuzzy use case but we'll allow them to get away with it for now well no productivity basically is is work that you do by yourself and uh in the other one you mentioned the facetime thing again the presence thing is real it is compelling

but it's fundamentally limited by how many people actually have a headset right so productivity it's a single player game but it's not like a game right now gaming and i think though though hope for the ecosystem developers who make mobile games to also make VR games. But I mean, we'll see. We'll see how that goes. So in terms of their business, though, are they essentially playing with house money here or is this actually important to their strategic future? Well, I mean, it's important to their strategic future to the extent that this is sort

of a future of computing. Apple is a computing platform. But that's, that's certainly fun. The future. Well, no, I mean, they're selling 200 million iPhone. right? That makes them plenty of money. But you're sort of always moving in tech, either forward or backwards. So if you're not moving forward, you're moving backwards. And so, you know, I think it is good for Apple. It's good for the company. It's what Apple does is sort of figure out these new

devices, new interfaces, and push forward. And so I think that that's beneficial. I do think the big open question about this device, outside of VR generally, is that an obvious, you know, obviously, way to interact with this is voice and series terrible. So I think that is one of the, you know, one of the big question marks here. But as far as actually making the hardware and delivering on productivity functionality, that's what Apple's very good at. Yeah. Yeah. I'm just trying to get a sense for like the stakes for the company as they roll this out. I mean, because you look at their existing businesses and they are the most successful company on earth. Yeah. Well, I mean, all their existing businesses are relatively flat and they have been for a long.

long time. And I'm wondering, like, do they need this new win here? No, not. I mean, services is always sort of increasing sort of vector, like the app store and the Google search deal and all those sorts of things. And, you know, people who get iPhones keep iPhones. They don't switch away. So they might hold on to an iPhone longer or buy a secondhand iPhone, but they're still

in the ecosystem buying goods, subscribing to things, all those sorts of things. Apple's core business is totally fine. and I personally have made this point for a very long time. I don't think the phone's going anywhere. It's like the natural endpoint of a certain course of development where it's small enough to carry around, but it's large enough to be useful. And like by definition, if you go in either direction, it's going to be something less, right? The watch is a great product. It's been very successful for Apple.

It's not going to supplant the iPhone. It's too small. But that doesn't mean it's a bad product. The iPhone is just like the perfect product of all time. And so, you know, I think the watch is kind of useful as a predecessor to this to this VR headset in that, look, it's totally fine to build a nice business. AirPods, great business. iPhone business? No.

But it's like it's supported by the iPhone and goes along with it. And that's, that's fine. So eight years in, we should consider the Apple Watch a success despite the fact that it hasn't like expanded a whole new market for high end for like wearable tech, which is sort of what was thrown around. It has. Well, I mean, it's not an iPhone product. Like, if you want to measure it compared to an iPhone, it's not an iPhone, but it was ridiculous to ever expect it to be an iPhone. The reality is, is Apple has expanded their business. So I mentioned the services bit. Apple has also expanded their business by selling more things to iPhone users, right? Sometimes that's selling a computer. Like people buy an iPhone and then they buy a Mac. Sometimes it's buying AirPods. They buy an iPhone and then they buy a watch. Right. There's not very much. many people that just use an Apple watch and don't start with the iPhone. The iPhone is not just the core of Apple's business, not just a cash cow, not just the foundation, and that this sort of natural endpoint I talked about, it's also sort of a platform to launch other hardware products on top of. And, you know, I think the watch by any metric has been hugely successful. I'm pretty sure it's

the highest selling watch in the world, including whatever brand you want to include. And, you know, you just walk around. It's quite visible. You know, it reflects sort of the numbers that you see. And that, and, and it's, like, helpful that, like, you don't need to be an iPhone level product to be a success just like AirPods. Yeah. Well, that's what I'm curious about is, like, how they view it in terms of just like the measuring stick and what they're aiming for because I think it is a good analog to what they're trying to achieve with VR here. It's, it's like, is this going to be something. that everyone has, or is it going to be sort of a specialized market that Apple does better than anyone else in the near term? Well, I mean, I think they'll have high optionality, right? It might just end up being a specialized market, to your point. It might be the future of computing, right? If VR takes over computing, it's not going to replace the phone in my estimation.

It would be more of a replacement for a laptop. Now, there is an input question where having a keyboard and a mouse is still very useful for a lot of productivity applications. But is it going to be a situation where you do just sort of sit down and this sort of big debt, like you're at an at work sort of thing? I mean, this has been my sort of assumption is the headset is actually more of a work device. It's sort of a sit down experience.

You put it on. You're not going to want to walk around with this on, even though it is mixed reality. There's cameras so you can see around. Now, there's also AR, which is this sort of like you're just, it's ambient sort of with you. But number one, I think that's still quite far away. And number two, I'm still not convinced that is going to be superior or better than the iPhone sort of just that's sort of with you. But we'll see. I mean, that that's, you know, this space, AR, VR, VR, mixed reality, XYZ. From my perspective, it's all VR basically, even though both meta's headset and this is

supposed to be mixed reality. But that's just where there's cameras. And so you can see around you, which is important. It's better than just being blind, but you're still putting on a bulky headset. It's something you're mostly going to do at home. You're not going to be doing it sort of walking down the sidewalk. There's a clear line between something you mostly do at home and something you're going to do walking down the sidewalk,

and I think this is on the home side of the line. Yeah. What I'm most curious about as you head to Apple on Monday, the external screen to show a wearer's facial expression and eyes. I'm really not sure. what we're getting into. We'll lead a creepiness rating on the way out from you. Yeah, that feels like one of those,

let's talk about it after they announce it to make sure it actually exists and what it actually looks like. Yeah, we shall see. Are there any other announcements that you're looking for from Apple? Or is it all headset all the time this week? I mean, I'm pretty excited about the like 15 inch MacBook air. That seems like an obvious product that should have been existed for a very long time. So that's rumored.

I mean, I don't know, I like computers. So new computer announcements are always interesting. But, you know, we're, we're all this entire podcast is going to be obsolete in like 48 hours. So we might as well wait until see, see what actually comes out. Well, I can I just say also if you meet anyone high up at Apple over the next few days, please pass along my compliments on the 1999 wired ear pods that have been holding me down for years now. The best product they make. One more question from Ben.

He says, suppose that in a few years, there will be much excess GPU capacity. If a tech company had, say, an Apple watch on your wrist and real-time biometric data on you, then could their streaming service rewrite music or maybe even video in real-time to suit your mood and tastes with generative AI, like a live in-person human storyteller or musician?

Who benefits in that world? Apple, because they make the biggest selling biometric device, maybe Google too would Netflix Disney Spotify etc be out of luck because they can't convince anybody to get a Netflix watch I think I read about this in a Yuval Harari books I'm not claiming this as an original idea and then I read that mainly because it's important for all of us to be in moonshot mode over the next couple of days let's all just dream on the possibilities and no I'm gonna crap all over it okay let's cross this bridge when we come to it I'm not going to speculate. I'm not interested in speculating on who's going to be like winners and losers in a hypothetical science fiction scenario. 35 years from now. I mean, like, I mean, I don't know. I mean, I think reality is I do question the extent just how far are we actually interested in going when it comes to like customization. You know, like, like this is a very sort of dystopian future where we're all just sort of in our, you know, with our AirPods and our

headset, seeing content perfectly tuned to us and there's zero shared experiences. Even among families, everybody watches their own thing and their own headset. Which is, I mean, it's already the case to an extent. And I don't think anyone is particularly pleased about it, right? There's, so there's two points. Number one, I reject the whole premise of speculating on strategic advantage or disadvantage in a hypothetical, number one. Number two, there is a philosophical sort of concern and objection to where this future is going.

So to the extent we talk about it and more interesting talking about it about let's think about what we're actually sort of going towards here. Now, certainly there's been lots of technological things that, you know, old people like me have sat around on their porches and said that's terrible. And they've taken the marketing away because it's sort of compelling. So we'll see what will happen. But, you know, I think this is a little bit, a little bit too speculative for me. Yes. Well, it cracks me up because I can see why tech people might. find it exciting and then people in entertainment and culture would just be repulsed by this idea.

Like you've got on one side, like Martin Scorsese lecturing people about storytelling is supposed to be difficult and how everybody is just having content spoon fed to them these days. And then you've got a sicko like Ben emailing in to say, one day we're going to have AI access, like the pleasure center in your brain. and it's going to write the movie for you in real time and end it however you want to end it. I mean, the unfortunate reality is that Ben is probably I know.

It's definitely closer to where we are and certainly where we're going. Just to sort of refine my point. I think it's interesting to talk about this scenario and where we're going. I think it's pointless to speculate on who has a strategic advantage in that world. Like that's like a different,

that's a different bridge to cross at a different moment. in time. Very fair. Well, could be meta that has the advantage one day. Uh, less you think that headset week is going to be only about Apple. I'll read from Mark Zuckerberg. It's right. It started last week. This past Thursday on Instagram, he wrote, introducing meta quest three, the first mainstream headset with high res color mixed reality, 40% thinner and more comfortable, better displays and resolution. Next-Gen Qualcomm chip set with twice the graphics performance, our most powerful headset yet.

Coming this fall, starting at $499, Quest 3 will be the best way to experience mixed and virtual reality in a standalone device. It'll be compatible with Quest 2's entire library with more titles coming, more details at our Connect conference on September 27th. So just teasing people four months in advance of MetaConnect, do you have thoughts here, Ben? Yeah, I mean, this is super lame on multiple levels. So number one, you know, the Quest Pro seemed like a bit of a mistake at the time. Definitely seems like a mistake now. Like my critique that I just mentioned is I was disappointed at how low resolution it is. Well, great.

Here comes a headset with higher resolution, which they did. didn't say what the resolution was, by the way, which is kind of annoying. And it's going to be cheaper. But it's going to be three months from now. The year sort of, like, it's just like, number one, I don't know what their strategy is with their products. You know, the, in this case, Meta's goal is supposed to be to be a social media company. They theoretically should be trying to reach more people rather than fewer. So it makes sense for them, contra Apple, to be focused more on sort of low end, lower,

Accessibility, yeah. Et cetera, right? Yeah. And that present sense is perfectly fine with the resolution that's sort of in the Quest 2. Of course, Quest 3 would be better. Now, would I want to do work in the Quest 2? No, I tried it and it was too low resolution for me.

And so that from my personal productivity perspective, I'm more interested in the Apple thing. But if it were to come to like having the whole team have a headset, I could rather get four quests instead of like one Apple device, right? So it makes sense for them to be sort of lower market in the extent that this product exists. But number two, there's the big question of, like, to my mind, meta's focus as a horizontal services company, again, we've already discussed this a couple episodes ago, should be all hands on deck to make the best possible Apple headset Facebook app. This whole bit about Apple and meta being natural partners and refusing to admit to that. and accept it, like Apple and Google previously,

like Waymo and Uber, which took them seven years to finally realize, yeah, we should actually be partners. One of us is good at building the tech. One of us has the customer base. Like this is a natural, natural meeting. You know, ideally Apple will be demoing this WUC with the Facebook app and saying,

wow, look at this sort of experience. But both companies are sort of, you know, not willing to do that. And it's not clear, you know, the danger here is, you know, the tail starts weighing the dog. Like, like, is meta's goal in this metaverse world, do they want to be the Apple of that world making money selling devices or they want to be the sort of social network in the world that, you know, that is where people congregate and make money sort of that way? And you can't really serve two masters, right?

Like, there's a few times in history where a company could be the end all, be all. The really the main one was Windows in the 90s. And this was sort of, Windows was in this position where they were sort of both a monopoly and also were in the broad ecosystem and like made money vertically by licensing their sort of operating system. And that was just a function of there was one device that came to dominate the world, the PC. They were sort of the operating system on that. But you could see as soon as we got different devices, that sort of fell apart. And a big mistake Windows made was Windows was actually more sort of a vertical business model. They made money when you bought the device.

Now, they weren't selling the device. They were selling a license for that device. But they got so hung up in like, for example, our applications need to come out on Windows first. And then they can be on other devices. But the reality is, is Microsoft is appropriately, and they now operate a horizontal services company. They're just on sort of the enterprise sort of side. And so their applications need to be on, they've always been on Macs, they need to be on iPhones. They need to be on Android.

They need to be on iPads and tablets and whatever else there might be. And we can't let Windows control our destiny, even though Windows did control their destiny for so long, but they got away with it because there was only Windows. There was no sort of alternative. And I just don't, it's been 10 years. I don't understand what meta is trying to have. accomplish here. Like are you, they say they still want to be a horizontal services company, but what are they doing then? What's the end game for this hardware? Oh, we want to push the market forward. I think a big thing is we want to make sure Apple doesn't dominate. And the reality

is, is like you have to make tradeoffs at some point. Obviously, Apple is a very difficult company to have a dependency on, as we've seen over the last couple of years. But there is an aspect where, yes, someone needs to fight that fight, but it's not clear it should be you. And this sort of response of, well, next week when people write their comparison articles, they'll include the Quest 3 instead of the Quest 2, which, although we're not including all the information about it, it just seems kind of desperate. Well, it was a real whimper. Yeah.

It was unreasonably weak or inexplicably weak considering Facebook's power elsewhere and how well the company is doing in so many other areas. Yeah. If you feel confident in your product, just let Apple have their moment in the sun and then come out with your product and say, look, it's XYZ. It does this better. It does just as good here. And oh, by the way, it's a quarter of the price or half the price or whatever it ends up being. Can I make a confession to you? Sure.

Do you want me to turn off the recording here? No, no. Look, I'll confess live on the podcast. I'm becoming a bit of a Zuck defender these days. Like, he posted that photo. on Memorial Day of him with the weighted vest, which people thought was a bulletproof vest or some sort of flack jacket.

And he immediately got roasted by all of Twitter for like the ensuing 48 hours. But one person on Twitter pointed out that Zuck, as he's become more addicted to all the combat sports and everything else, he's essentially just a middle-aged guy who has adopted like a nerdy hobby and is getting way too into it.

posted a photo of his daughters working out with him too. And I found it all pretty endearing relative to some of the other CEO behavior we've gotten over the last couple of years. And, you know, as a born-again Zuck guy in the wake of that experience, I just want him to get out of this whole VR experiment. Like at some point, are they going to be able to pull the plug and walk back a lot of their commitment? in this space. Because the announcement last week, we're going to be rolling out a product that's probably not going to be as good as Apple, still going to be $500 without a clear utility if you're not a gamer.

This just feels like a losing proposition. And there was the Wall Street Journal reporting earlier this year about how most of these headsets are just unused these days. And like the metaverse is populated sparsely, I guess, would be a difficult. way to put it. Yeah, exactly. Just like empty tumbleweeds. And so I just wonder like why are they beating their heads against the wall or if it's duck in particular, this is a combat sport where he's just beating his head against a wall trying to make VR work. It's a, it's a good question. I mean, I do think he does believe in VR, right? But I think the disconnect from my perspective is just because, you believe in VR doesn't mean you're the right person to bring it to market, even if you have a cash cow that throws up billions of dollars and allows you to fund it. Right. Like, like there's not necessarily the full connection there. And maybe it would be better if this VR entity was like, why is it better being a part of Facebook? What if it was spun out, right? Like, Mark, go go go build a view. You can keep your hands in it. Yeah. He does clearly believe in it, which I also find endearing. Yeah, no, there is, like, there is a bit where if like the meta VR stuff ends up, like, being a big deal, like, this will go down is like where the all times, what, you know, sort of just middle finger to the world.

It's already, I would say it's a valiant defeat that he's enduring right now. I can't imagine that it's just going to whip all the way around and meta is going to conquer everybody at the end of all this. But maybe I'll be wrong. I just want to add one extra point. I actually really liked your observation of Zuckerberg as just sort of another middle-aged guy who, by all accounts, is like one of the most, you know, sort of decent and like family-oriented guys in tech. Like you hear a lot of stories about executives in tech that are not particularly flattering. And like, Zuck's like, yeah, he just hangs out like he, you know, hangs, like he, you know, hangs, like running ultra-maritons and stuff. Yeah.

And there's a bit where I, like I was on dither. John and I were talking on dithering about like what is like the corporate sort of or what's the branding of meta. What's the consistency there? Meta's just like the normy middle age guy, right? That's kind of what it is. They're super competent. They like they get stuff done. They still ship, right?

Unlike sort of a Google that Google is like that, you know, the hit it big in his 30s and just like co-been like coasting like sort of years. Like, no, meta is a very diligent company. You feel this in your interactions with them. Like they're always on top of the ball doing different sort of stuff. And yeah, they have this sort of hardcore. Like that is the face, the sort of meta brand identity around all their sorts of stuff. And you could like internally you can tell kind of drives them nuts because they want to be hip and cool and all that sort of thing. And they're just not.

But the answer is, and you talk about this in terms of like marketing or, you know, like advertising. Oh, you've got to reach the kids, reach the kids. the problem is the kids don't have any spending money, right? Where you actually make the money in the boring old suburban households and buy a bunch of stuff, that's kind of like Facebook, right? And I think there actually is a consistency between founder and company that is super competent, makes a bunch of money, and is just very not cool. And that's just the reality they have to live with.

And that's okay. And, you know, we go back to like the Microsoft Xbox conversation and whether Microsoft should just pull the plug on Xbox at this point and focus. on what they're great at and what they dominate at. If Microsoft should be considering pulling the plug on Xbox, I mean, Xbox is still like a relatively successful product that's well regarded. This is like turning meta into a punchline every six to nine months every time they announce something new.

And so I just wonder how long that cycle is going to be allowed to play out before there's some sort of pivot. Well, I mean, the reality is, you know, let's take it with Gander at Meta's stock price. You know, people were reminded that this is still phenomenally successful company that not only is like has a durable sort of advantage as far as advertising, but actually may be extending their lead thanks to sort of working through a lot of this, you know, ATT stuff and at least to more quickly to a better extent their competitors, which by the way was predictable. And, you know, hey, I guess we'll let them have their little side project. They're so good at everything else. Yeah, Mr. Flackjacket. Well, I'll be rooting for Zuck moving forward, even if I'm not on board, the quest train with him.

To keep it moving, I'm going to clear out for you to answer some follow-ups we got on NVIDIA. We'll start with Bill. He says, I began wondering about whether NVIDIA can leverage a cutting-edge scale advantage into the local inference market. much like Apple's version of a lower cost phone was just to keep selling the old model and TSM can generate margins by continuing to produce using older processes, can Nvidia's high-end data center GPUs be repurposed, perhaps first to the enterprise server market and later to the desktop or even mobile. Or are there factors other than cost, parentheses size, power consumption, etc., that make these chips unsuitable for local inference. What do you think, then?

Yeah, there are plenty of factors. Like, number one, first off, these are like $15,000. Number two, their power consumption is astronomical. Their cooling needs are super huge. And the reality is they're not particularly useful sort of in the long run because all the stuff that goes into housing them, powering them, cooling them is better spent on a more efficient chip. So I'm not sure we're at this stage yet where it's,

even worth keeping the old chips around in data centers because that data center space like if you have like a amount of like physical space in a data center and you have a given power budget and you have a given cooling budget you would rather use that to power a higher performance chip because the amount of performance you're getting for what you're spending is going to be greater right and so um this idea that there might be more GPUs out there that's very speculative just in terms of the data center. That entails a lot of build out of data centers and it's worth

it to make huge investments in data centers and cooling and power and all those sorts of things to keep these old things. The cost of a chip is a small part of the overall cost of ownership. So I actually, in some respects, I kind of threw that out there because it's interesting to think about, but even in that context, I

think I was somewhat overstating it. But there's absolutely no way this can shrink down to anything less than a data center. You can't really run these things local. You can get an Nvidia chip. You can get like a 4090s, their highest end sort of consumer level chip. And even that is massive. It's huge.

You need a big desktop PC to put it in. You need all these sort of cooling sorts of things to go into it. And, you know, that's with, you know, that doesn't have nearly enough memory to run sort of most models as it is, right? And then now they do have laptop chips and like you can imagine go down to mobile. But by and large, Nvidia is focused on high performance. focus on high performance does not usually translate into high efficiency, which is what you need for local inference, particularly when it comes to mobile sort of stuff.

This was Intel's problem with going mobile. Intel didn't, like, there's been a lot of talk, including by me, oh, Intel's mistake in turning down the iPhone sort of contract. I added an interview with Tony Fidel a little bit ago, and he's like, look, the one thing I want to get here is correct you is Intel had no chance at powering the iPhone. the fundamental way in which they approach chip design, including their then X-scale arm unit,

is they were focused first and foremost on performance. And you make trade-offs when you're designing and fabricating a chip, but what's actually most important? Their trade-offs were always towards performance. In the case of the iPhone, though, the first iPhone chip was actually under-clock from what it was. It was an armed chip from Samsung. They actually under-clock because the most important thing for the phone

was battery-wise. was efficiency, and only then could they make it as fast as they could sort of afford to keep the phone on all day. And so that led to a bunch of different decisions down the line because efficiency was number one, and only then did you care about performance. So the reality is, invidia is more like Intel in this regard. They're focused on performance. And rightly so, that's what they're good at, where local inference is probably going to happen. This is where it's going to be very interesting to see what Apple in particular does with their chips.

This is something that Qualcomm is focused on, you know, it's sort of armed generally as well, is can you make something efficient that can run inference on these models and also the development of models? Like how can you actually run a model locally with a limited amount of memory? And then I think the answer is going to be the sort of hybrid thing, where there's going to be stuff that's local and stuff that's kicked up to the cloud. And, you know, the reality is-

And you expect those will be two different core competencies. You don't think that one company is going to be able to straddle the fence and dominate in both areas. Yeah, I think that's probably going to be the case. Yeah. I have a very hard time seeing Nvidia going, you know, being a, you know, I don't think we're going to get an Nvidia mobile phone chip someday soon. That's going to be like running inference.

Right. And they're certainly not repurposing old GPUs to make it work. No, no. That's impossible. Interesting. Okay. Another follow up. Ward says one thing I'd love to understand better is the nature of the

Nvidia Omniverse and what sort of. of asset that is and might become? Is it possible that the Omniverse could be used by Nvidia to open up the markets for AI beyond the big, powerful buyers who are surely going to throw massive resources into taking some or all of the Nvidia margin? Do you have thoughts? So the Omniverse is more like it sounds more of sort of a metaverse concept.

It's sort of like building a worldwide database for metaverse sort of experiences. So you could have like, say you're in your industrial sort of user and you want to do a layout of like a factory and you want to use say a particular robot industrial robot well ideally you don't have to make that industrial robot from scratch that asset there's actually a perfect representation that's already available to you and it's available in invidia's omniverse right so you connect to that and whoever made that put it up into there and then you can access that and it's sort of a way to build a common layer for building these sort of experiences now right

Now it's mostly focused on industrial sort of applications, but you could see it. Invita has talked about sort of more consumer use cases. It's almost like an app store for VR is maybe more of a way to think about it. But it's not necessarily like a store per se. It's really about sort of a common sort of asset base because one of the challenges, and this is going to be an issue with sort of VR generally, I mentioned before, Apple's going to sort of look to the developers to develop the game environment. Developing games for VR is really hard because you have so much more, there's so much more stuff to sort of

generate. AI is super interesting for VR because to the extent AI can generate sort of your environment and you don't have to actually draw those by hand, like drawing textures and things along those lines, that is going to be very sort of

interesting and compelling. So there is a natural connection between AI and VR, but Omniverse is more on this sort of industrial online 3D. Like, like, Nvidia, everything Nvidia does comes from 3D, 3D, graphics, right? That's where they started. And there's like, wow, Invita does 50 gazillion

things. What they do is they design one core and then they like build a gazillion variations on that core, both in chips and where it's applied. And then they also do even more software on top of that. So when you talk about like self-driving car stuff or you talk about this, this online omniverse thing, or you talk about AI, all this is manifestation of them building this vector processing unit, this graphical processing unit, and then sort of using it in lots and lots of different places and building up an entire ecosystem on top of that. Like that's like, like, InVedia in some respects is actually a very simple company. It's, but they've built this entire sort of infrastructure on top of like a common core that

they just sort of build once and then sort of like apply in a bunch of different places. It's been interesting to see the narrative around Nvidia evolve because to your point, I am not sure that they're doing anything that differently, but it's like a couple years ago, it was like, Nvidia is critical to this boom in gaming and Ethereum and everything else. And now, Nvidia is critical to AI and everything that people want to do there. And it's like the technology around them is what's changing and the emphasis that people are putting on different sectors that might explode going forward. But Nvidia itself is just great at enabling all of this.

Right. It's this accelerated computing idea, which is doing a job across multiple relatively simple cores. And so AI is like that. Gaming is like that. Ethereum and sort of like mining in general. Like again, these are all very paralyzable processes. This gets to the open question about Nvidia is Jensen Huang would argue accelerated computing is so much more efficient. It goes back to this data center issue on like your space in a data center and your power usage,

that it will actually start to take over jobs that regular CPUs do. That remains a big open question. Like, is that actually going to happen? I'm skeptical. I think it's going to be more of a layer on top. I do think we will see more data center build out to take advantage of the opportunities as opposed to substitute for what's there. But we'll see.

That's sort of an open question going forward. Yes. And if nothing else, the Advidia roller coaster over the last couple of years is Oh, it's hilarious. Like, it's crazy. The stock is, is the more than the most crazy thing. I mean, if you stayed in it, you've done well. You've consistently done well.

But it, like every, it goes through these cycles where it just is crazy high, that it plummets. And then like, this has been like the shortest one yet. Again, it was like six months ago. It was down. But this happened before. Like, a very similar thing. They had a glut. They over.

I know. You wrote. And Vida in the valley. And now they're out the mountain top. No, but this is like the third or fourth valley they've been in. Right? Like, this is like through the course of the company. I mean, Jetson Huang is a classic sell ice to an Eskimo sort of person, right?

And like, genuinely so. Like he's super optimistic. He absolutely has a vision for the future. But that doesn't always necessarily align with the current realities of how many units are going to be sold in the next sort of six to nine months. And so that's what you end up with these cycles where when it's going well, that people want to believe. And then they like, they, they overbuild.

that they have this big inventory problem and then there's this drawdown and X, Y, Z, and the market's not ready. And so this is very much part for the course. First of all, I come away from every interview you do with Jensen Wong liking him. I know, it's hard to,

like, so he's kind of like adopted trajectory as like, when he does a developer conference, he likes to come on and like talk to me about it, which is, I mean, I don't want to turn it down. It's obviously,

you know, very compelling. And he's a great interviewer, to your point. It's also a little sort of like scary because it's like, you like you like it's hard to push back on somebody downer like dumping water on this

and the other end it's like you know we know jensen we need some skepticism about how it's going to actually manifest in the next sort of five years even if you're right maybe a decade out the reality is I think he's probably earned the deference because even if invidia does frequently get the short term

projections wrong which when they're by making chip orders can get them in big trouble and they get inventory hangovers and stuff like that the reality is, is that his sort of long-term view has turned out pretty well. And even if you go back and say what they said 10 years ago, it wasn't exactly right, but it was sort of like broadly things are going in this direction. And we're going to sort of like build stuff there. And then they get there.

And it's like, yeah, we do this all along. It's like, well, you didn't specifically say this, but you were marching the right direction and no one else is here with you. So, okay, guess I guess I've got to give you credit. Yes. Well, and I don't want to be a Debbie Downer, but I had not even thought of the word Omniverse until Ward's email. And I think it was a year or two ago, Omniverse was like a central theme of one of the

interviews you did. No, it's a perfect example. It's like, yeah, that's what they, that's what he wanted to talk about. And then like, no, no, AIA all the time. And he sold me. He sold me for the record in the moment. And now here we are a year and a half later. It's like, all right, well, maybe that'll make a dent one day.

Who knows? Odds and ends as we close things out here. Just a programming note. Again, Ben's going to be at the Apple event. If anyone is following the event Monday and has questions for us, you can send them to email at sharp tech.fm. We'll try to go through them on the recap podcast, part two of headset week as we continue the celebration here. And maybe we'll get some Zuck follow up too. Who knows?

Three questions, though, at the end. First, Tony says, the first syllable of ballet sports is pronounced like balance, not like the last syllable of baseball. here's a video of official ballet sports promo so you can hear it for yourself. Ben, this is, I think, your most legendary mispronunciation. No, here's the reality. I know you don't need to tell me, Tony. I am aware of how it is supposed to be pronounced. I am physically incapable of pronouncing it that way.

I'm from Wisconsin. Sue me. I pronounce all my A's wrong in almost every single word. It is a very distinct local dialect and you're just going to have to deal with it. So there you go. Okay. Yes. You pronounce it like Bali.

for anyone. And I say bank and tank and bag and a bunch of, like all my A's are all screwed up. I'm, I used to teach English at the school that was super strict and like, you know, basically the idea was if these kids are going to be forced to take English classes, going to make sure they actually learn English.

And so like the, they were super strict on like pronunciation and how you had to say stuff. And I got my, not in trouble per se, but it drove the boss bonkers at my inability to say this particular A sound correctly. And look, that was when my my livelihood is on the line. I guess it technically is here as well, but I mean, I'm sorry.

No, no, no, no. Take the acknowledgement. I know I'm saying it wrong and just accept it. So sorry. Listen, mispronunciations are one of our core competencies. Most of the most of the disconsation. This is a, this is a, you're insulting my culture sort of issues. Apologize, Tony. That's right, Tony. I'm sorry. Patrick from Chicago says, I couldn't believe my ears hearing Ben fired up about cable bill saving since I was listening while in the middle of calculating how much I'd save if I got rid of cable.

I pay for pretty much every streaming service and cable TV with a DVR. And with my property taxes shooting up suddenly, I need to make some tough choices. Parentheses, don't worry. I couldn't live without this tech re bundle. My cable and internet bill has ballooned to $260. $70 a month. Back in June 2020, it was $162 a month. Obviously, I still need internet to function. So if I stick with Xfinity, it looks like 800 megabytes per second internet is going to cost $150 a month. I'm more likely to switch to AT&T fiber, which will run $80 a month. So cutting cable

will save me approximately $170 a month or $2,040 a year. So yes, the savings of $2,000,000,000, a year isn't that far off base. I will lament the loss of watching the White Sox and HGTV, parentheses, pro pro bros for life, but that's about it. More than anything, I can't believe I pay $2,000 a year for the White Sox, House Hunters, and Law & Order reruns. And the moral of the story there is that we should never underestimate cable company's ability to rip people off. and I'm sure there are lots of listeners out there who could save a similar amount of money per year if they got rid of cable. Okay, so a few things. Number one, maybe, okay, I pay for cable in Wisconsin.

Maybe it's just cheaper there. This $270 is mind-blowing. Number two, definitely switch to fiber. Fiber is better than cable. It's one of my great regrets. It's so much better. I got you to switch. My place in Wisconsin does not have fiber.

it is very annoying. Upload speed matters. That's sort of the moral of the story. Not only that, canceling your Xfinity cable is one of the most satisfying calls you will have in your entire life. So I encourage you to go that direction if you haven't already, Patrick. Yes. Number three, he says he's going to save $170 a month. But he said, I pay for pretty much every streaming service and cable TV.

So where is the cost for the streaming service in this? calculation. The cable TV is 270. So he's saving 170 by going with fiber. Where's the cost for the streaming services? Like that, I'm just a little, I'm a little confused. I don't know. This, this, basically this whole discussion has gone off the rails completely. I will grant to Patrick. I don't know how it costs $270. But the, I think it's very viable. And I'm not surprised actually, because I will read Disney earnings every time. And until. last quarter, they were still making more on cable than they were every month because rate increases were outpacing subscriber losses. We know subscriber losses have been huge. So these rate increases must have been fairly out of control. So I will grant the point that it probably is more savings than I had in the back of my head, number one. Number two, like once you actually calculate the internet costs and if you sign up for every streaming services, you're going to be close to like $200 a month. It's in the same ballpark.

There's no question. Now, the problem for the cable companies is to his point, and this is where I do agree with Patrick, there's no reason to get cable other than sports. Like that is a huge problem. And this gets to our overall critique, which is they destroyed the value of the cable bundle themselves. They did it to themselves. They took all their shows off and put it on streaming services and, like, trusted sports to carry the day.

And the reality is that they killed the golden goose. And, you know, to the, you know, emailers point sort of last time. Yes, one of the biggest winners of this are people who don't watch sports for sure. And the biggest losers are people who do watch sports because if you want sports, you're going to pay for it. And you're going to pay more because it's only you paying. It's not sort of everyone's sort of paying for it.

So I maybe I have to go like calculate the numbers myself. I think regardless, you are going to save money. Most of that money is going to be because of sports. So I think we can all agree that we're all in the same ballpark. if you were not being the specific numbers. And you know why I read this email from Patrick? It was because of the parenthetical where he said pro bros for life. And I just really cracked me up.

I hope that we can hear from more property brothers enthusiasts out there who want to stand arm in arm with Ben as proud HGTV heads. Yeah, well, I mean, my other cable TV show is top chef, which Padma is leaving after 20 years. Oh, man. Condolences. Might need to cut the cord. I'm just going to be totally honest with you.

Is this worse than the Bucks loss for you? No, I've, I did. That's like the one, like me and my daughter have watched every single Top Chef episode like ever. So it's very meaningful in that regard. But no, I'll be okay. I'll survive. All right.

Final question. Anthony says, you guys have talked a lot about the Stratory business model recently. Frankly, I've always felt Stratory is, ludicrously underpriced, and I've always felt a little guilty paying only $120 a year for such great content, particularly after the rollout of the bundle. So my question is, Ben's mentioned a few times that if he commented directly on stock valuations, he'd charge a heck of a lot more for the newsletter. Would Ben ever think about providing an ultra-premium tier of certacary that publishes, say, once a month with more explicit investment ideas? What do you think? No, that's mostly a joke.

which I've probably overused because I'm overexposed thanks to the bundle. So, no, the reality is if you're doing that, number one, you need to do the work to actually go through and justify it, right? It's one thing to say this is, it's like Jensen Huang, right? To say the broad general direction of where you're going is one thing to actually properly sort of forecast the number of GPUs you're going to order from TSM for nine months down the road is a completely different thing, right? Now, he has to do both because he's a CEO. If I were doing that, though, number one, I would not be getting out stock tips. I would open up my own investment fund and I would take, I would do it myself, right? Just to be like super clear.

That was not an option when I started. It's a shame because I would have made a lot of money, I feel like, over the last decade. But I was, you know, I was just starting out with no audience, no whatever. So this worked for me. But yeah, no, if I was giving out, if I was giving out stock tips, I would be running a fund. Like that I would, that's exactly how I would do it. and it would not be compatible with what I do today just from I don't have enough bandwidth. And just to sort of do all that sort of stuff, I do think strategy is probably, you know, too low.

But I've been interested in expanding the market generally. I'm interested in sort of having reached, sort of having an impact. There's things that motivate me beyond sort of maximizing my revenue. Again, if I want to maximize my revenue, I should probably open a fund in like, and go in that regard. And, you know, never say never, but I enjoy doing what I'm doing now. I live. My wife is comfortable.

I definitely make enough to sort of like have a great life. And I, you know, depends what you optimize for. What do you sort of put at the top of the stack? And quality of life and the ability to spend time with my family and to go to cigar night and to do those sorts of things are super important to me. Touching grass. And to not have like in the back of my mind knowing I have, you know, hundreds of millions or billions of dollars on particular stock bets is not is not the sort of stress that I want right now. And if you want to say that's me chickening out and not sort of talking my book, that's fair.

On the other hand, by virtue of being in public of trying to maximize my audience, I'm putting a different sort of thing on the line. It's sort of like an ongoing reputation. And so there's pluses and minuses to both. I actually don't mind that critique. I respect it. I understand it. I think it's undervalues what my actual business is and what I am risking and not risking. But yeah, we'll see.

I mean, the reality is it's strictly, you know, they're probably, probably overdue to probably raise prices at some point. I raise prices once, you know, every time back to the U.S.,

I'm like, yes, there is a lot of inflation. So I don't know. We'll see what happens. But I enjoy reaching a lot of people and I'm glad you feel you've gotten a lot of value. And I don't look at it is, oh, look at all that extra money I could have gotten. It's just not the way I think and that's fine.

Yes. Well, we get some variation of that question every few weeks. And I appreciate that Anthony feels like he's getting a good value from Sothecary. And he said that he tries to pay it forward by buying gift subscriptions for friends and family. That's what all of our listeners should be doing here. And you talk about bandwidth. Man, oh, man, great performance from you after a 12-hour flight. What's the time from the other side of the world?

It's actually much, this is, it's much faster coming here because you come here, the, like, the route are super funny because they're always different. What they do is they fly into the jet stream, then they fly with the jet stream and then, you know, dip down to sort of come in. Zoom. No, so it's like a two hour difference. So like coming here will be like 10 and a half hours going to the West Coast. Going back is like 12 and a half hours or 13 hours. It's a pretty drastic difference. So it's actually in some respects, it's, I don't like the coming here flight because it almost feels too short.

It's like I just fell asleep. Why you're waking it up? So, but no, it's all good. I would say get some sleep, but I have no idea what your sleep. No, I'm going to be working on Monday's update. That is the plan for the next few hours. There you go. Well, live your best life.

And Ben, we are going to come back later this week. wait to find out how creepy the external eyes are on the headset. I mean, maybe Mark Zuckerberg is going to have the last laugh, literally. He could. He could. My guy, Zuck. All right, on that note, we'll come back later in the week. Email at sharp tech.fm. If listeners have questions, and we'll keep it rolling. Talk to you later.