Today's Wearables are an Overhyped Fad, but Wait a Few Years

This story originally written by Pascal-Emmanuel Gobry at CITEworld. Sign up for our free newsletter here.

The computer in your pocket is dead. Long live the computer everywhere else. As the smartphone market starts maturing (at least in the rich world), the various players in the electronics world are looking for the next big wave of personal computing devices. And, we are relentlessly being told, that next big wave will be wearables.

The Pebble smart watch. The Samsung Galaxy Gear. Google's (NASDAQ: GOOGL  )  Android Wear platform for wearables. Apple's (NASDAQ: AAPL  )  watch, probably. And who can forget Google Glass? (Who doesn't want to forget Google Glass?)

Amidst all this hype, it's hard to know what to make of this trend. Is it all hype?

Must read: How I turned from smartwatch skeptic to true believer

Before answering this, I want to note the inevitable tech analyst's problem: The Newsweek-Internet problem. That's the name I've just made up to refer to the infamous 1995 column by Newsweek columnist Clifford Stoll completely dismissing the Internet. Choice gem: "[Y]ou can't tote that laptop to the beach. Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we'll soon buy books and newspapers straight over the Internet. Uh, sure."

The point is that whenever some big technological trend takes over the world, there's always a naysayer at the beginning. When the technological trend is triumphant, those who were on the right side of history will dig up the mean column and mock. And mock, and mock! Think of all the pieces saying the iPhone would never sell. This is actually a serious problem for the tech analyst. Because no one wants to be that guy. No one wants to be the guy who said the Internet was baloney in 1995, or said the iPhone would never sell in 2007.

But I think wearables are mostly hype. (Remember: I said mostly!)

Why? Because all of the applications of wearables are either ridiculous (Google Glass -- enough said) or niche. A smart wristwatch so you can check your email (and, uh, read the time) without having to get your smartphone out of your pocket? Is that going to be attractive to a lot of people? Sure. Is it going to be attractive to billions of people the way smartphones have been? No.

A bracelet to track your every movement to improve your health? Is that going to be attractive to a lot of people? Sure. Is it going to be attractive to billions of people the way smartphones have been? No.

The common rejoinder to this is that right now wearables are niche devices, but as more applications and more devices come online, they'll expand to the mass market -- just like every other generation of computing. Except that for every other generation of computing, there was a clear "path" from the niche to the mass market. And very often a killer app that changed the device in question from a curiosity to something obviously game-changing.

The killer app of personal computers (which nobody remembers today) was VisiCalc, the first modern spreadsheet software. For the first time, instead of painstakingly doing your accounting by hand and, if you needed to change something, not only having to white-out a box, but also having to redo all your calculations manually and change every other box that depended on that, you could just key in a new figure and watch your entire spreadsheet change as if by magic. Once VisiCalc was available, it was clear that personal computers were a spigot of human productivity that made them an unstoppable economic force.

The iPhone shipped with its killer app -- Safari. Once you could do full-web browsing on a phone, once a phone truly became an all-purpose, Internet-connected computing device, the future was obvious.

For wearables (and this might be my 1995 Newsweek moment, gulp) I see no such killer app as forthcoming.

But this isn't the end of the story.

The wearable bull case now goes that, yes, maybe going from a smartphone to a smartphone-plus-smartwatch doesn't provide the same amount of game-changing benefits as going from a dumbphone to a smartphone, but this doesn't really matter -- as electronics prices go down ever and ever on, wearables will become omnipresent simply by a natural force akin to gravity and erosion.

First of all, note the weakening of the case: we've gone from "This will be so awesome that people will be lining to snatch them up" to "This will be so cheap that people will go 'Eh, OK.'"

But second of all, this doesn't really make sense. There are plenty of things that are cheap and that nobody buys. If all that mattered to watch purchases was price, Rolex would have been out of business for 50 years, instead of being one of the world's most thriving companies. Less flippantly, if you want a computing paradigm to not only get several millions of customers, but be the next stage of computing that transforms how we experience computing -- which is the wearable bull case -- it really has to promise awesome, world-changing benefits. That's what makes these things like a force of nature. Once personal computers had reached a certain tipping point of price and useability, barring nuclear war, it was just a matter of time until there was, indeed, "a PC on every desk and in every home."

But wearables bulls might actually miss what I think is more interesting: the next wave of wearables. No, I don't think billions of people will go for smartwatches. But I do think a lot of productive and interesting applications can come from having several computers on you. But for that to be attractive, electronics have to get even smaller, and even cheaper.

Here's what I'm envisioning: What if, instead of a bracelet to track your movement, you had RFID-sized chips in your shirt collar and your shoes, self-powered by your movement, communicating with your smartphone by Bluetooth LE. What if you didn't have to choose to buy it, but it simply came in your clothes? What if, instead of dorky glasses, you could just speak into your collar like an FBI agent and hear your emails read to you in an invisible in-ear device?

For this, we have to wait for electronics to get cheap enough and miniaturized enough that people like clothes manufacturers will just build them into their cheap Chinese-made fabric. If they just come bundled into already-existing everyday items, at no or negligible extra cost, then, sure, everyone will use them. But we are still a long way from that. And the privacy and other issues are frightening. But this looks like a more plausible future where wearables change the technology world than everybody wearing an Apple watch and Google Glass.

More advice from The Motley Fool

Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2889722, ~/Articles/ArticleHandler.aspx, 10/31/2014 3:19:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement