The hype cycle definitely has exploded around augmented/virtual reality in the last few years, but that doesn't mean no one's using the tech these days. In this week's episode of Industry Focus: Consumer Goods, host Jason Moser and Motley Fool contributor Dan Kline look at the current and future applications of virtual and augmented reality, from Pokémon GO to virtual job interviews. Learn why consumer-facing VR and AR have been so much slower than industry-facing applications; how retail could use augmented reality to its advantage; some proposed uses of AR that just won't work; some big-name and under-the-radar companies for your watch list; and more.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on June 25, 2019.
Jason Moser: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market each day. It's Tuesday, June 25th. I'm your host, Jason Moser. Joining me in the studio for today's Consumer Goods show is Dan "Casino" Kline. I say that because I listened to yesterday's Market Foolery on the way in to work this morning, and I heard you talking about casinos. I thought it was a lot of great insight you had. Couldn't resist!
Dan Kline: Coming on yesterday's show, I was coming off a pretty good day at the Horseshoe, made some money. Went to my head a little bit last night at Maryland Live. Again, I was with Matt Frankel, your regular contributor. I was feeling pretty confident. I was pretty much 10 minutes away from selling my pants. [laughs]
Moser: [laughs] I feel like there's an investing lesson in there somewhere.
Kline: If any of you come to Maryland to play a casino, one, drinks are not free. Pretty big negative. Two, when you play blackjack, it's always a shuffle machine. You're not allowed to say count, but you can't have a feeling as to what's come out before and know what's going on. It is gambling in the purest sense. You're closing your highs and throwing darts more or less. I had a late hit that made things less embarrassing. I didn't have to call my wife and be like, "Send me money to get to the airport." [laughs] But it was right about at that point. I'm teasing a little bit, I gamble very responsibly, but it was as bad a night as nights go. Hence, back at work, doing podcasts.
Moser: It's our good fortune, at least, to have you here. We were talking last week while I was away, coming up with some ideas for today. We thought it would be a fun idea to talk about something we haven't had a chance to talk a lot about on these shows. That's augmented reality. Part of this stems from the fact that, as many listeners may know, we've recently opened up an augmented reality service. I've been tapped to be the advisor on that service. It's been a lot of fun for me. I've been digging in essentially for the entire year learning about the space and all the ideas in it. We thought today would be a great opportunity to dig more into it. You have some experience with the space as well, particularly on the hardware side. Let's jump right in here. First and foremost, when it comes to augmented reality, because it's easy to get augmented reality and virtual reality confused --
Kline: There's a gray area, too.
Moser: Yeah, mixed reality. You're right, there is a little bit of a gray area. Let's talk about what augmented reality is and isn't.
Kline: The easiest example for augmented reality, the one everyone is going to understand, is Pokémon GO. There are a lot of games now that are like, "It's Harry Potter, but Pokémon GO."
Moser: Wizards Unite.
Kline: Yeah. There's a Star Wars one that never caught on. Basically, how Pokémon GO works -- I'm the last guy who still plays. I am a devoted Pokémon GO, level 36, getting there. You're walking around the real world. There's a reality overlay, where all of a sudden, I might look up, and Pikachu is jumping on your head. It'd be awesome if Pikachu was here. He is actually doing tomorrow's show.
Moser: He's scheduled.
Kline: Pikachu is an added layer of reality on top of what's actually happening. In a practical sense, that might be, a doctor is wearing glasses, and when he's cutting you, it projects a line for where he supposed to cut. That would be a very simple augmentation. Virtual reality is when you are completely in another world. I have an Oculus Go. We'll talk about that later. It does some augmented and some virtual reality. The virtual reality would be, I put on my headset, and I'm on a roller coaster. It has nothing to do with where I am. I'm in a completely different experience, but it feels real because it's immersive. The augmented experience might be if you and I had a meeting, and you're sitting at a desk, and I'm sitting at a desk, but it looks like we're in a boardroom together and we're seeing it on the headsets. Some of that's virtual; some of that's augmented. It's not a clear line. But it's basically an enhanced reality.
Moser: Yeah. That's it. I was thinking about this as we were coming up with ideas for the service when we first opened it. I know you live in Florida, I know you're a Disney guy. I remember many trips to Disney as well. But I remember vividly going to Disney World the very first time, when I was 10 or 12 years old, the haunted house, the old traditional haunted house you go through. I think it was the very last stretch where you go through and you pass in front of these mirrors. And if you look in the mirror, sitting either next to you or on top of your head or somewhere in there would be a ghost. That essentially was augmented reality even then, wasn't it?
Kline: It was. And that ride is exactly as you remember it! And it would have been exactly as you remembered it in 1965 at Disneyland! I might be getting the years Disneyland started wrong there.
Moser: The point remains, the technology's been there for a while.
Kline: Yeah. Let's talk about augmented reality as what it's going to be and what it isn't. What I mean is, do you remember two years ago, maybe three years ago, at CES, when 3D television was the thing? ESPN was spending big money in broadcasting. Weird things. It wasn't just basketball games. It's like, "We're doing NBA Roundup in 3D!" It was like, why?
Moser: It was weird. It sounded way better than it really was.
Kline: And it was very expensive. You'd buy your $3,000 3D television, and all you got was gimmick programming. Augmented reality, I think it's fair to say, is a real technology at a low level. When I say low level, I mean iPhone, Pokémon GO. That level. It's accepted, it's a thing. It's a tool to make money, it's not necessarily a moneymaker itself. What we don't know is if augmented reality is going to be a gimmick or it's going to become a part of our everyday life. We know that there's business uses. We talked about medical a few seconds ago. We know that doctors are going to be using these, and they can spend $5,000 on glasses or whatever, because they're buying million-dollar MRI machines. What we don't know is if Macy's, to bring this back to consumer goods -- six months from now, you're going to walk into the dressing room, hold up the clothes you want to try on, it's going to show you wearing it and show it to you in six different colors and you can hit the button and order from the website. That technology exists. Whether it becomes practical... Things like a virtual tailor is a form of augmented reality. It's being used in very high-end design. Do you watch any of the Flip Your House shows?
Moser: Oh, yeah. HDTV gets a lot of traction in our house.
Kline: They all show you, "This is what the room would look like." Now, when it's a completely redone artist rendering, it's a virtual reality. But if you show a picture of my room, and then show me what the flooring choice would look like next to my furniture, that's augmented reality.
Moser: Let's talk about that for a second. You made a good point there. It's the difference between the technology vs. what we do with the technology. It reminds me of 3D printing.
Kline: Oh, that was going to be the thing.
Moser: Honestly, the technology itself is helpful for a lot of companies out there. It's not as consumer facing. Honestly, more so, it helps companies protect their technology. I think augmented reality is similar in that regard. It's basically fairly commoditized technology. It's a matter of what companies do with it. Let's talk about some of the different verticals where companies are doing neat things. There are two things that come to mind when we mention AR first and foremost. People immediately think visual, and they also think consumer-facing entertainment. The reality is, it does stretch across more markets.
Kline: Yeah. That's just the gimmick. I think the one we're going to see it most practically is business productivity. We are very regular Slack users. We've talked about this. That is the method of communication at The Motley Fool internally and externally. We are also a very big Zoom meeting company. When you and I have a Zoom meeting, you're just getting me sitting at my desk in a shared workspace or sitting in my living room, wherever I happen to be. It's not necessarily a professional face if, for example, you and I are meeting with, I don't know, a big radio company that wants to hire us. [laughs] That was just being silly! No radio companies are trying to hire us!
Moser: Yeah, I'm just kidding!
Kline: But let's pretend we wanted to present a certain image. There might be a Zoom/ Slack augmented reality where we could both be sitting in the same room or in a very professional boardroom setting, or, to be goofy, in a surf lodge, skiing down a hill, whatever it is. Some of it is a little silly. But there's very practical applications for, hey, we're a business, we want to present a united front, but we're not in the same place. A lot of businesses are not in the same place. Even for internal Fools, we have multiple locations. Even, I've been in the building and a meeting starts early, and you have to jump in visually, because as somebody who doesn't work here, you don't always have easy access to getting to different floors. Some of the ability to make remote work better. Driving augmented reality. Showing you directions and accidents as an overlay in a real-time visualization rather than having to glance down and take your eyes off the road to look at GPS.
Moser: Travel. Travel, very similar, either when it comes to landmarks or directions. Think about the applications from Waze and Google Maps. The possibilities are pretty endless from that perspective in regard to communicating information.
Kline: This is just one of those things that, you're probably using it, and you don't think about it. When we talk about virtual reality or augmented reality, we tend to think the theme park experience. You mentioned Disney World. At Disney Springs -- we've talked about this on Consumer Goods before -- there's a place called The Void. You put on a headset and a backpack. It weighs like 60 pounds. And you do a virtual Star Wars.
Moser: Oh, OK! Star Wars, I'm down with.
Kline: It's the best thing I've ever done!
Moser: I thought you were telling me I was getting ready to go on a hike or something.
Kline: You look down, and you're a Storm Trooper. The actual space that this is in is maybe the size of this studio plus the control room over there, but you feel like you're on a spaceship. You walk across a floating bridge on Mustafar, the lava planet from Episode III. You feel like you're going to fall off. That technology is there. That's virtual reality. When you walk into the new Star Wars Land, your phone helps you see things that aren't there, helps you translate things. That is a mixed-use augmented reality.
You're butting up against a couple of things that keep this from being super widespread. The biggest one is battery life. I think Disney has to figure this one out. I can't go to Disney World, spend six hours in Star Wars Land using my phone as an augmented-reality device, without carrying -- I already have a battery pack on my phone. I'd have to carry two extra batteries. As we start to see the technology catch up, I think every mall, every store, is going to have enhanced experiences. Things like, have you ever tried to follow directions on an app in a mall?
Moser: No.
Kline: They don't work. It'll say step by step. In theory, we should be able to have an augmented reality that you follow along the line. It projects a line on the floor that only you can see, and you follow the yellow brick road to where you're trying to go.
Moser: That makes sense.
Kline: Those types of things are going to make this widespread. Then we'll see where the high-end, expensive things are going to be.
Moser: Let's talk about a couple of other applications that strike me. One of the things I was talking about at Fool Fest recently was the world of engineering. More and more companies like Autodesk -- Autodesk was the company I spoke of specifically at Fool Fest -- these are companies that essentially make that 3D CAD software that helps people figure out how to design what they want to design. In many cases, it is utilizing augmented reality to see how something may fit in a given space. Again, perhaps not the most consumer-facing, yet technology that is having a big impact on a lot of things around us.
Kline: Yeah. One of the things it does is it saves money. If I have to build a prototype of something -- let's say you're making a computer. The tolerances inside a computer for certain parts of it are very, very small. An iPhone, the tolerances are ridiculous in terms of fitting everything in. If I can do that in a virtual way where I'm looking at it, and I don't have to hand-make the parts or spend money to create tooling for a part that may not end up being the part, you should be able to have a big investment and take away a lot of the trial and error because it's exact. Right now, when you make something, you either have to commit to making it or you 3D print it, and that might not be as exact. This can be absolutely exact. You don't know that as a consumer, but that's absolutely happening right now.
Moser: Sure. Retail companies are bringing this to the consumers in all sorts of different fashions. You can go to Amazon and put a piece of furniture in your room, or Wayfair. I saw an announcement the other day, YouTube is going to incorporate augmented reality with makeup lines so that people can try on makeup in augmented reality to determine whether they like it or not. You see all of these different types of implications. It just is a matter of digging in there and seeing what companies are doing what with it.
Kline: Some of this is going to fail spectacularly. You talked about makeup. Have you ever been at a meeting where a company is trying to figure out its logo, and they're arguing about color?
Moser: Not a logo per se, but I used to be in the golf business. A lot of the golf business, there's a lot of publishing and stuff that went with artwork. It can drag on.
Kline: Computers and websites do not render color the way we see them. Unless you're using a MacBook with a retina screen, an iPhone with the Absolute, the makeup is not going to look like what you think it looks like, no matter how well they do projecting it on you. So, yeah, that would be great for when you and I dress up as half of KISS next year in October. We can decide if I'm the kitty cat or you're the star man or whatever it is and who looks best, because the exact shade of black and white doesn't matter. If your wife or my wife -- my wife doesn't wear any makeup, but if she was deciding what shade to paint her eyes, I don't know what you call that, makeup, to go with her dress, that might turn out not as well because the technology is not there. It depends what your tolerances are. For dimension, it's perfect. For color, not as much.
Moser: Still working on it. I want to dig in a little bit here. You own an Oculus device.
Kline: I do.
Moser: I don't. With that said, we did have one company annual meeting one year, where we got an Oculus right as they came out. This was a first-gen thing. So we all got to check it out and see what it was all about. It was clever, it was neat. To your point, it was a little bit pointless in that, "Oh, wow! I'm in this Scottish field and I can look around and see the castle and the cliff, and I'm looking over the cliff, and I'm thinking I could fall over. OK, neat. Now let me go have a beer." It was kind of short-lived. Talk a little bit about your experience with your Oculus, why you got it, and where you think this thing could be going.
Kline: I got it because I'm an idiot.
Moser: [laughs] Nah, you're just a tech guy!
Kline: I'm famous for having a lot of silly tech. I own like eight coffee makers, and I almost never make coffee. I always go out for coffee. I just bought the Keurig Drinkworks.
Moser: The soft drink thing?
Kline: No, the one that makes the alcoholic beverages.
Moser: Hey, now!
Kline: So now, you're going to come, stay at my house in Orlando, I'm not going to be there, and you're going to unknowingly -- Nick Sciple is actually doing this in a few weeks. He'll unknowingly use $40 worth of drink pods because he doesn't know that they're $3.99 a piece.
Moser: [laughs] I'm going to write that down.
Kline: But, I love technology! So, when I saw the Oculus go for $199, I went, "I will use this every day!" I previously had the Star Wars VR game. I might still have it. You have to put your phone into the headset. It's a lot of fun, but you need absolute darkness. It's hard to see if you're not in total pitch blackness, which is a very hard state to achieve. And you're wearing your phone on your head. It's super heavy and awkward.
Moser: Seems weird.
Kline: Your neck hurts after -- you don't even get to Darth Vader -- after battling the toy droid that's teaching you how to fight. Great premise. The Oculus doesn't need the phone. The phone's in your pocket. It's connected to the phone, but it's not sitting on your forehead. I got the Oculus. And the first thing I noticed is, it's pretty awkward for someone who wears glasses. So I did the logical thing anyone would do: I went out and got contacts. It's better when I'm not wearing my glasses, but it is still a relatively heavy device.
Let's talk about augmented reality. You can watch NBA games or certain boxing pay-per-views from a courtside/ringside seat. That sounds great! It's cool to look at for 90 seconds. After that, it's a mix of nauseating and, "Wait a minute, I'm wearing a big thing on my head," and no matter how well you adjust, it isn't small enough. This is early technology that has to become glasses or a scuba mask or something that works and doesn't feel like you've got a bucket on your head.
Moser: To that point, I agree with you, whether it was the Oculus or -- some of the rides at Universal Studios, frankly, are that way. You can do it once, but if you keep on doing them all day long, you will likely get sick.
Kline: I'm also a Universal Studios passholder.
Moser: We loved it, but there's a limit in what you can do there. Again, that's the first gen. You suspect in time that'll change. Google has certainly not stopped investing in their glasses.
Kline: It's a gimmick now. There's one thing -- if it wasn't such a pain to get electronics through airport security, watching Netflix movies on the Oculus, in a position where your head can rest in a headrest on a plane, it's actually comfortable and an amazing way to watch a movie on a plane. But I'm not bringing my Oculus through security and having to take it out and explain what it is, and getting flagged by TSA. It's just not a common enough device. Now, when that's a pair of glasses, or whatever, like the old Bret the Hitman Hart sunglasses that wrap around your head, then it'll become something. You can see how it's going to get there. Most of the Oculus is plastic. It's not computing power. They could engineer it down to be something better. So, I like it, but it's something I play with to do fake roller coaster rides.
Moser: From the glasses perspective, Google had Google Glass. Now that's something they're calling Google Lens. You've got Facebook doing what they're doing. You've got Microsoft with the HoloLens. Apple, some secretive product out there under the code name T288. We're not certain exactly what it is, but it is headwear. It's slow to evolve. But when you look over to the industrial side of the world, when you look at the industrial implications, there are a lot of companies in the industrials space that use smart glasses for line work, or training, whatever it may be. There are applications that these things are being used for already. Again, maybe not the most consumer-facing in the world, but the technology is definitely out there, and consumer-facing companies are using them in some capacity.
Kline: I've played with the HoloLens.
Moser: How'd you like it? That's not one I've seen.
Kline: The problem is, I got to play it doing a Minecraft demo. The actual use of the HoloLens tends to be more professional. It's medical, engineering, architecture, lots of places like that. It's an expensive device. The developer's kit is very expensive for it. I don't know how Minecraft works. I don't play that game. But, yes, it's very immersive in the same way the Oculus is, in the same way, frankly, dropping your phone into the $20 fake VR thing. But Microsoft is spending an awful lot of money and has an awful lot of people working to make this something. I think what's going to happen is the higher-end adoption -- if this becomes a common tool in hospitals, that will bring the costs down, which will then make it a tool that's maybe attainable for colleges. I don't think we have to 3D TV worry about this. This isn't something that's going to go away. I think you're going to have better gaming-led consumer devices. I've also used the PlayStation virtual reality, which is a clunky headset that does make gameplay fun for, again, 10 minutes before you have a headache. You're going to see the next generations of these get smaller and lighter and have more practical business applications, where it wouldn't be crazy for me to be wearing one for a board meeting.
Moser: Yeah, I think you're right.
Kline: Not that we have board meetings, but meetings in a boardroom.
Moser: It's technology that's been around for a while. It's just coming to light as to the different ways we can use it. Part of the fun for me has been communicating how all of these different verticals, from healthcare to engineering to retail, education, these are the types of things where you see a lot of potential, even though it's not fully realized yet. It's less about the technology and more about the companies that are doing cool stuff with the technology.
Kline: Yeah. As an investor -- not to tip off your picks, everybody subscribe to the service -- a lot of the companies on this list are companies I like anyway. I like Microsoft. They don't need this to work for Microsoft to be successful. On the other hand, this could tie LinkedIn and Skype. Think of the job interview, augmented reality. Theoretically, I could be in California interviewing at a company in New York, and you could walk me around the office. "This is where your desk would be. This is where the coffee is." All that stuff. These are companies, for the most part, I'd buy anyway. This becomes, if this takes off, just another venue for Apple to sell stuff.
Moser: Speaking of companies, resources, different types of ways we can learn more about the space -- I've certainly dug in for quite some time now. It's a difficult space to fully understand the potential because it's so young. There are a lot of those no-brainer names out there that we've talked about today that are making early waves in the space. But part of the fun for me is finding a lot of those companies that people don't know about yet, or finding out companies that are doing neat things with the technology that people hadn't thought of before. When you learn about AR, VR, things like that, what are some of your go-to resources? Any places that you look to or people you consider?
Kline: I'm a big fan of GeekWire. It's not that they specifically cover a lot of augmented reality. But there is a lot of augmented reality coming out of the Seattle area, which is their bread and butter of coverage. That's where you're going to be most likely to read about an interesting start-up that, they got $50 million in funding, they have six ex-Microsoft guys working there. What you want to look at is the people who are doing things with it, where you go, "Oh, I never thought about that, but what a perfect application." The big hits are going to come from Apple, they're going to come from Facebook. You're probably not going to get a Roku-level player in this, where some company comes out of nowhere. Where you will get that is, "I'm the company that knows underwater surveying better than anyone else. Here is the specific underwater surveying augmented reality tool. By the way, one of them sells for $800,000 because it's a niche market." I'm making that up completely, but you understand what I'm saying. It's going to be the construction use, the very, very niche uses that will then get consumer stuff. But Sony is not trying to sell a million-dollar medical device. They are trying to get one in every home.
Moser: For me, a couple of things I noticed. One thing I'll let folks know, if you follow me on Twitter -- I don't even think you need to follow me on Twitter -- I'm putting together a list on Twitter of AR-related follows. Anybody in the AR space that I find entertaining, educational, informative, I'm just adding them to the list. You can essentially see this ongoing Twitter feed of cool, real-time information that's happening in this space.
One of the people I started following early on. She's proven to be an invaluable resource. She wrote a great book on it called Augmented Human. Her name is Helen Papagiannis. She's been working in the space for close to 15 years now. I would certainly recommend for anyone looking to learn more about the space and its wide reach, check out the book, Augmented Human.
Talking about little niche companies, these were companies I found over vacation, and I thought, "Wow, these are cases I didn't necessarily think of before, or companies I didn't know about." One guy I started following on Twitter. His name is Daniel Anderson. He is the CEO and founder of a company called 3DQR, a start-up in Germany focused on AR for education, industrial training, and corporate development. That's been a fun one to learn more about.
Another one. I like painting watercolors. It's a challenge. I'm just learning how to do it.
Kline: Which you can also see if you follow Jason on Twitter.
Moser: I do that to keep myself honest! But I found this interesting app called Artivive. You can check them out at @ArtiviveApp on Twitter. It's a Vienna-based start-up. They have an AR tool for artists to create, for museums to expand, and for galleries to figure out new ways to incorporate art for the next generation into their displays. If you check out their site, they show you a really neat demo on YouTube of what their capabilities are.
Small companies, but neat things that they're doing. Again, speaking to your point about niches, these are companies that are just pursuing little niches where they may not ultimately be able to make it to become big companies, because they may be snapped up by some of these bigger companies. But that doesn't mean we can't win ultimately either way.
Kline: I think it's fair to say we didn't give enough attention to education as a use. There's a price barrier there. But pretty much every kid has some level of smartphone. I have a 15-year-old in a very mixed-income school. It's fair to say all of his friends have a cellphone. With different learning styles, to be able to say, "OK, this is an active volcano here," and as you're seeing the picture, you can access facts, or pieces of it come to life, or different things happen, we should be able to very inexpensively address different learning styles in ways that have been very challenging to do. Most schools have laptops, but they're still using them for word processing. They're not using them for changing how we educate people. My son takes a virtual algebra class that essentially we could have put out a VHS tape back in 1985. There's nothing augmented or virtual about it. It's just a tape of a person, and then you do a test.
I think you'll see leaps and bounds with this stuff. Maybe in the nonprofit area, on the education side, you'll see some people spending some money to create coursework or access to museums for kids that would never get to go to the Museum of Modern Art. I think there are a couple of museums here in D.C. A fast-food museum, maybe?
Moser: Something like that. Hit or miss. I think you're right, education is going to be a phenomenal space to follow. It's one that traditionally has been very difficult to scale. Clearly, technology is changing that. It's been fun to watch my kids going through, in seventh and eighth grade, they're going into eighth and ninth now, but to watch their school incorporate technology, basic YouTube lessons, things like that. As eyewear and new ways to experience things comes out, I have no question that augmented reality will serve as a very valuable educational tool.
Kline: I don't think we could downplay this. We talked about very simple uses for like clothing and makeup and that stuff. How many people are going to be saved from a stupid beard... Michael Jordan is going to be able to test out the Hitler mustache before he grows it! [laughs]
Moser: That's kind of like the makeup application, just a little bit different.
Kline: It is, but I'd have to grow mutton chops to learn that mutton chops are a bad idea.
Moser: Bad idea, Dan!
Kline: To be able to be in a room with my wife, or even -- this is a strange one. I wear glasses. One of the hardest things about trying on glasses is, I wear glasses. You go in and you don't know what you look like. I had to bring my wife because my previous pair of glasses -- some of you who watch this show visually may have noticed -- were too small for my head, and I look like a giant egg head! There's going to be some very fun practical uses for this stuff. I don't think that's all that far away.
Moser: Hey, man, you just look forward to the future! Dan Kline, thanks for being here!
Kline: Thanks for having me!
Moser: As always, people on the program may have interest 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, and for the love of God, people, don't grow mutton chops. Today's show was produced by Dan Boyd. For Dan Kline, I'm Jason Moser. Thanks for listening! And we'll see you next week!
