16 Minutes on the News #8: Apple Camera, Services; Wearables – Where are We

0:00:04 Hi everyone, welcome to the A6NZ podcast. I’m Sonal, and I’m here with this week’s segment
0:00:11 of 16 Minutes, our new show where we cover recent headlines the A6NZ way, why they’re in the news,
0:00:17 why they matter from our vantage point in tech. This week we cover two topics, the trend of wearables,
0:00:21 given recent news well beyond just the Apple Watch, and we also quickly cover
0:00:25 recent Apple event announcements and what they mean for mobile, TV, and so on.
0:00:29 But first, if you’re liking this new show, I wanted to let you know that you can subscribe
0:00:34 to 16 Minutes separately wherever you like to get your podcasts. So you can have all eight
0:00:38 episodes so far, conveniently right there to listen to in the app of your choice.
0:00:43 Also, a heads up that in a couple of weeks, we will no longer publish 16 Minutes here,
0:00:48 along with the regular A6NZ podcast. So be sure to go and subscribe now if you want this as a
0:00:53 separate weekly show. Thank you for listening. Okay, so the first segment of 16 Minutes is on
0:00:58 the news coming out of Apple’s event this week. Let me invite our A6NZ expert, Benedict Evans,
0:01:01 to talk to us about what your quick take on all this is.
0:01:06 Well, Apple has a big event this time of year, every year for over a decade,
0:01:13 on what new iPhone is plus some other things. And so we have new iPhones and we have also some
0:01:16 information about some of the services that they’re launching, kind of into the realm of
0:01:20 diminishing returns as we look at new iPhones. It’s kind of more interesting to think about
0:01:25 where they’re going with some of their services. We’ve had smartphones now or multi-touch smartphones
0:01:28 as we understand them now for something over a decade. And there’s lots of great phones on
0:01:32 the market now and they keep getting better, but it becomes kind of increasingly boring.
0:01:36 The new one is pretty much the same as the old one. All the obvious easy innovation has kind of
0:01:42 happened and there’s still a few things that get done. But mostly we’re kind of where PCs were 10,
0:01:46 15 years ago. The big place where you really can still see innovation is camera. And so Apple
0:01:51 spent most of the time talking about cameras. And so we’re still seeing kind of dramatic
0:01:55 improvements sort of every year or two. And Apple and Google have been leapfrogging each other
0:01:59 every year with the portrait mode and night mode and so on. I think the interesting thing looking
0:02:03 at that, and there’s this sort of telling phrase that Apple used was camera system,
0:02:08 is that this is really computational photography. So you have multiple sensors, you have the GPU,
0:02:12 a lot of software, a lot of machine learning going on. And so it’s not that there’s an image
0:02:15 sensor that’s capturing an image, it’s that the computer is looking at a bunch of input and
0:02:19 generating an image for you. So you get the kind of people sort of looking at these announcements
0:02:22 saying, “Ha ha ha, they’ve got lots of sensors. It’s like Gillette.” Which is kind of a dumb
0:02:26 reaction because actually what you’re seeing here is instead of having one big sensor and a big
0:02:31 piece of glass, which is what you get on an actual camera, you’re getting something similar or in
0:02:36 some cases better result by using many small sensors with also things like the gyroscope and the
0:02:40 image sensor and so on to work out what a good image would be. I think the other side of the
0:02:44 story and the thing that’s more interesting to talk about is all the services that Apple is building
0:02:49 around the iPhone. And so you see that both with little bits of hardware, like HomePods,
0:02:56 AirPods, Watch and so on, and with the credit card, the subscription game service, the TV service,
0:02:59 some of them hardware, some of them software, some of them are free, some of them paid,
0:03:05 like iMessage is free. But what they all do is drive kind of retention and repurchase of iPhones,
0:03:09 some of them drive high margin money, some of them drive low margin money, some of them are free.
0:03:14 But what they’re all fundamentally doing is a seven, eight, nine hundred dollar phone purchase
0:03:18 every year, two years, three years. And so you have all these sort of supporting effects.
0:03:21 So it’s kind of sitting and looking at the event. There are kind of two things where we got
0:03:25 really kind of new information. One of them was subscription game service, which is, I think,
0:03:29 five dollars a month. This is Apple Arcade? Yeah, this is the Apple Arcade where they’ve
0:03:33 rounded up something like a hundred games from independent developers. And then the other
0:03:38 thing is the, what is it called, the TV product? Apple TV Plus. I loved your tweet about how you
0:03:43 said what is the Apple take on this? Like there’s a clear Apple take for card, there’s a clear Apple
0:03:48 take on the watch, but like what is the clear Apple take on TV? Yeah, exactly. There’s something
0:03:55 interesting if you look at like the arcade or Apple news or the credit card, where you have,
0:03:59 there’s kind of a sensibility here, that you have kind of a trusted experience. So
0:04:03 you get Apple Arcade, now you know the games don’t have weird advertising and you can trust them
0:04:07 with your children. You get the Apple card, it doesn’t have weird fees, it doesn’t have weird
0:04:11 overages and it kind of tries to help you build kind of more healthy attitude to your money.
0:04:15 So there’s a kind of a building narrative here about what it is to be an Apple customer
0:04:20 and what the Apple brand promises, which is less about like, is the hardware reliable and more,
0:04:26 is it safe? Is it a trusted internet experience? And so that’s kind of interesting as Apple shifting
0:04:32 how they see the brand promise of using Apple products. The TV thing is interesting for the
0:04:35 opposite direction because there really isn’t any of that. They just went to LA, they gave a
0:04:38 bunch of LA people some money, LA people made them TV shows and now they’re going to put TV shows on
0:04:44 the iPad. Like, okay, they’re giving it to you for free for a year with every new iPhone purchase.
0:04:48 So it’s like, it’s retention and some marketing value there. But it’s kind of like saying,
0:04:54 well, you get free pizza for a year with an iPhone. There’s nothing Apple about that. There’s no
0:04:58 software experience, there’s no engineering. There’s not anything that they’re actually
0:05:02 doing to making it different where even for the credit card, like they’re doing different stuff
0:05:07 to what other credit card companies do. And I was writing in a blog post about this.
0:05:12 I kind of looked this up that it’s been reported that Apple’s initial budget for content for Apple
0:05:20 TV Plus is $6 billion. The operating cash flow in 2006 was $5 billion, more or less.
0:05:25 They announced the original Apple TV hardware device in 2006. And so Apple is like orders of
0:05:28 magnitude bigger than they were when they first started trying to do television. But at the same
0:05:33 time, like they haven’t iTunes this, they haven’t Napsed it. And I think it’s kind of interesting
0:05:39 to look at this as like the failure of the tech industry to get into television. Because, you
0:05:44 know, the tech industry has been talking about changing TV for 20 years. They haven’t like
0:05:49 come in and change the TV experience, which is what a lot of people were hoping for.
0:05:53 And so it’s kind of interesting to look at kind of the evolution of the maturity of the product.
0:05:57 They’re spending what would have been like the entire cash flow of the business
0:06:01 to do what’s now basically kind of an incremental marketing retention business around the side
0:06:06 of the iPhone. So if we come back to the watch, then it’s kind of interesting because it’s like
0:06:12 the opposite of TV because it’s doing really hardcore, difficult, mechanical technology,
0:06:17 software, machine learning, engineering, very few other companies that could make a product
0:06:22 like the watch. They are shipping this new screen technology that allows the screen to be almost
0:06:27 always on. I mean, it goes dark a little bit, or it turns from a white background to a dark
0:06:32 background. The watch is like the exemplar of the integration of hardware, software,
0:06:36 semiconductor design and everything else that Apple does better than anyone else.
0:06:38 And it’s very hard for a more modular company to do.
0:06:41 Okay, Benedict. So bottom line it for me. How should we think about this week’s
0:06:45 recent announcement in the larger context of what’s going on with Apple and all the
0:06:46 trends you just mentioned?
0:06:51 Well, phones have happened. Phones are boring. Apple and other people keep making great phones.
0:06:55 But what next? That’s actually not what’s important anymore.
0:07:00 And it’s interesting to see Apple iterating around that product and building kind of accessories
0:07:05 and optimization and execution around the iPhone. The things you do around that is aware of
0:07:10 supporting that business. Meanwhile, of course, we kind of sit and think, well, what is the next
0:07:14 product that is going to come into this world? And everyone from Google to Facebook to Apple
0:07:16 have other projects that are going on.
0:07:19 Okay, great. Thank you for joining this segment of 60 Minutes, Benedict.
0:07:19 Thank you.
0:07:24 Okay, so the next segment this week is on the news that fitness tracker company Fitbit won a
0:07:28 contract with the government of Singapore as part of the Live Healthy initiative.
0:07:32 It’s also interesting because Apple was reportedly, according to the CNBC article
0:07:36 by Chrissy Farr, one of those vying for this contract. And not only do they have the global
0:07:40 lead on the smartwatch market, but they actually announced this week that the latest addition
0:07:45 has improved health monitoring. And you can also access emergency calling there without
0:07:48 a phone in hand, which arguably makes it a life-saving device.
0:07:52 But the bigger picture here is really about the overall trend of wearables in healthcare.
0:07:55 What’s hype? What’s real? Where are we?
0:08:00 To help us put all this in context, let me invite our expert, A6NZ Biogeneral Partner,
0:08:01 Vijay Pandey. Welcome, Vijay.
0:08:02 Hi, great to be here.
0:08:06 So let’s talk about this news. Let me quickly summarize some of the more salient details.
0:08:09 The head of Singapore’s Health Promotion Board is partnering with tech and health companies,
0:08:14 which is why the residents there can now register for Fitbits. It’s the same plan that they actually
0:08:18 have for employers. You get the device, which you can wear on your wrist or even on a clip,
0:08:23 like inside your bra strap for free. But you have to commit to a service that also offers
0:08:27 coaching and other stuff. And it tracks everything from calories burned and heart rate to sleep
0:08:32 stages. To me, this is interesting because Singapore has a population of 5.6 million,
0:08:37 and they think this could reach at least 1 million of those people. So that’s the specifics.
0:08:42 There’s a lot of interesting aspects of this. So first off, Singapore is just a great place to
0:08:46 try out new technology, the nature of the healthcare system, being this integrated system,
0:08:50 and it being a sovereign state, but not huge, means that they can really push innovation
0:08:53 the way other people’s can’t. I agree. And by the way, Singapore has a long history of
0:08:58 experimentation in general. Yes. And so they’re a very natural sort of leading indicator for where
0:09:01 other people may go. And so, you know, if you looked at the way they are thinking about this,
0:09:06 they really want Singaporeans to adopt a healthy living and to affect behavior change.
0:09:11 And, you know, one of our essential theses that we think about is that tech is a great way to
0:09:15 change behavior. And so now the question is, what’s the right thing? And it’s common to like think
0:09:20 about things like 10,000 steps. There’s really not a lot of basis in 10,000 being a magic number.
0:09:24 It comes from marketing literature more than clinical literature. And it’s nice because
0:09:30 it’s simple and it’s easy to compete with. But it really is a very little medical basis for that
0:09:35 number or that metric to be the thing to look at. Well, quite frankly, there’s been a lot of hype
0:09:38 about wearables. People have been talking about, oh my God, people are going to do this, you’re
0:09:41 going to do that, you’re going to get data from this and that. And the reality is there’s no good
0:09:46 way of surfacing the data from wearables. It’s honestly really early adopters where the concept
0:09:51 of the quantified self comes in. It’s about taking empirical tracking and data gathering tools to
0:09:55 better reason about what works and doesn’t work in our bodies to help us solve problems.
0:09:59 That trend has been around for years, but hasn’t really gone mainstream or gotten widespread adoption.
0:10:04 I think the real advantage that we’re starting to see is that these new devices are moving way
0:10:08 beyond step counting into much more clinically relevant and measurable. That is part of the
0:10:12 difference between quantified self and earlier attempts than what we have now. We actually have
0:10:17 the ability now to measure a lot of different things and to imagine that on millions of people
0:10:24 with longitudinal data, like every hour, every minute, that’s a data set that really is unheard of.
0:10:28 And just to really concretely make real what longitudinal means, because that term gets
0:10:33 thrown about a lot, what that really means is that you’re essentially setting a person’s baseline
0:10:37 for themselves at an individual level, because right now those things are normed on things that
0:10:43 are not baseline, to say me, Sonal, Choxi, or you, Vijay Pondett. So if I have repeated measures
0:10:48 over a long period of time, I can compare 10 years from now what it should be relative to my own
0:10:52 personal baseline. Without any information, all you can do is compare it to the population
0:10:58 and population averages. But people are so variable that having this type of data on the individual
0:11:01 is really invaluable to really understanding how the individual is doing. Are they getting better?
0:11:06 Are they getting worse? And especially, are there some more severe changes that can be detected?
0:11:11 So then let’s go back to why wearables, why now? What are the factors or key industry shifts that
0:11:15 make you think it may be more ready now versus before? Yeah, I think there’s going to be a lot
0:11:19 of different ways to get at that. So gamification is a very natural one. I think it may be a good
0:11:25 example outside of wearables or something like the Peloton. Yeah, so you could like get a bike
0:11:29 anywhere. But the reason why the Peloton is so powerful is that it enables behavior change.
0:11:32 A is the feeling of like, you’re being this class and you’ve got this coach,
0:11:37 sort of trainer sort of on you. But also you’re seeing everyone else’s statistics.
0:11:41 And a little bit of competition often drives people. And you know, there’s other different
0:11:45 ways you can imagine also various insurance companies could have discounts. If you’re
0:11:48 going to save like, you know, a couple hundred dollars on insurance, maybe then actually that’ll
0:11:52 change your perspective. A second wind would be compliance. What do you mean by that?
0:11:55 From a medical point of view, we’re talking about adherence to a doctor’s wish,
0:12:00 whether this would be compliance to taking a drug or some behavior. If you talk to doctors,
0:12:03 actually, a lot of them will say, Hey, you know, it’s nice to think about fancy
0:12:09 new cures, but I wish people would just do what I ask. I wish that people would just
0:12:13 take the medicine they ask or just do what they ask in terms of eating better and exercising.
0:12:17 And anything about like one of the greatest challenges that are facing this country and
0:12:22 the world is something like type two diabetes. I think about preventing that kind of the way
0:12:27 we thought about sanitation 100 years ago. So no one should die from not having sewers.
0:12:31 No one should die from type two diabetes. And so what does this new sanitation look like?
0:12:35 What does this new infrastructure look like? Apple set up the watch to be a platform.
0:12:39 And so we are starting to see companies come in and create health apps on that platform.
0:12:44 So a great example is one of our portfolio companies, Cardiogram, that actually has an app
0:12:49 that not only can detect atrial fibrillation, but the ability to measure the nature of your heart
0:12:54 actually opens the door to not just heart related things, but any sort of co-morbidities.
0:12:58 Their previous study demonstrated that the Apple watch can actually predict type two diabetes,
0:13:03 hypertension, and sleep apnea. And actually medically this makes sense because there is a
0:13:08 connection to all these things. And so once we start being able to go beyond steps, now we’re
0:13:12 getting actually into a really interesting area. But it’s really kind of amazing that this device
0:13:18 that’s sitting on your wrist was sort of a platform and the app ecosystem takes those components
0:13:22 and figures out interesting things to do. They were wise enough to put enough sensors on it
0:13:26 to see, okay, people, let’s see what you can do. So you mentioned sensors. So let’s talk about
0:13:30 these significance of that here. Well, you know, I think the key significance is that this is all
0:13:34 about measurement, right? This is about getting this data that we could not get any other way.
0:13:38 So I’m going to still have you convince me harder though, because data is also the hurdle
0:13:43 over which people never seem to get past the early adopter wearables hype to the reality of mass
0:13:49 adoption. What do you think it’s going to take to really take it from data, not just for hobbyists,
0:13:54 to the next step of data for diagnostics, and then even a step further to potentially
0:13:57 therapeutics being designed in this world? This is where actually machine learning will play a
0:14:02 very natural role. So either you can connect to the medical records, as you probably could in
0:14:07 Singapore, then you’d have millions and millions of labeled data points where you have sort of
0:14:13 inputs from sensors and the connection to what this means medically. But also there’s a lot of
0:14:18 interesting things that you can do with semi supervised, where you have a bunch of unlabeled
0:14:22 data, but a few data points with labels. You spike in a few healthcare records for some people,
0:14:27 and basically you can understand the landscape by having all these data points, and especially
0:14:30 a lot of the rare cases. That’s actually really fascinating, because I think that is one of the
0:14:34 biggest differences in terms of answering and thinking about the question of what’s different
0:14:38 now versus before with the first waves of hype around wearables. Is that machine learning has
0:14:43 come of age in order to deal with all the data finally? Yeah, absolutely. I think the next level
0:14:49 from compliance would be towards prevention. So this is kind of wearable, identify issues before
0:14:53 you would start to have symptoms. Now, the pros of this is that if you have a serious issue
0:14:58 and the ability to detect that early is huge. And actually, there are many, many people that are
0:15:02 either pre-diabetic or have type two diabetes that don’t realize it. And so getting that type
0:15:06 of information is key. Now, the concern that everyone’s going to have is that will there be
0:15:10 false positives? I was about to say it’s like type two errors, because you’re essentially
0:15:15 creating a false, you have it when you don’t. Now, of course, I would much rather have that
0:15:20 than not find out. Well, it all depends on what is the result of that false positive. If the result
0:15:25 of that positive is behavior change, if the result is that next time you have a conversation with
0:15:29 the doctor, you bring these things up, that’s not necessarily bad. I think as long as the
0:15:33 false positive leads to something that does not put a burden on the healthcare system,
0:15:37 then even those are not necessarily a bad thing. So then I have a question about who pays for all
0:15:40 this. So how does this work? So in the case of the government of Singapore, they’re asking for a
0:15:44 commitment from users to do a subscription, which is part of Fitbit’s move into subscription and
0:15:48 services and their way of monetizing beyond just the device itself, which is probably smart for
0:15:53 them from a software strategy point of view. But how does this work in terms of our insurers
0:15:58 supposed to pay, our healthcare employers supposed to pay, our individuals supposed to pay, is the
0:16:03 government supposed to pay? Yeah. So one of the nightmares of the healthcare systems, and I think
0:16:08 especially in the US, is just who is paying for this and the sometimes misalignment between the
0:16:13 payers and the patients. And so you can imagine a couple different things. One could be realigning
0:16:18 payer and patient where the patient wants to pay for this. If it’s like $100 or $200, then the price
0:16:23 will undoubtedly go down over time. And actually, it’s interesting because the Singapore news comes
0:16:28 right in front of news that their Apple Watch Series 3 is now $199. I get that the low cost makes
0:16:32 it more ubiquitous and more widely available, but I really don’t still see how it really pushes
0:16:37 wearables forward to the reality where it could be. There’s one aspect of this, which may be seen
0:16:41 as chicken and egg, which is that so much of the current healthcare system is shaped more for
0:16:45 treatment than for diagnosis and prevention. For that to change, there has to be a couple
0:16:50 different forces. We’re already seeing the financial forces there in terms of fee for value and staff
0:16:54 service. But now what I think wearables can do is that they can be a key part of the tipping point
0:16:59 to have something tangible to point to such that we have the data we need and that we’re not burdening
0:17:03 the healthcare system with sending people in to get tons of physicals or tons of measurements.
0:17:09 Dixon has talked about this thesis of strong versus weak technologies, that every technology comes
0:17:14 in two forms, a strong form and a weak form. And they often come together. And generally, we as
0:17:18 innovators prefer the strong form because it’s the most direct. But the reality of tech adoption is
0:17:23 there needs to be a weak form. Or what I would argue in some cases is a hybrid phase. And what
0:17:27 you’re really saying with that, which I love, is that the healthcare system is so complex,
0:17:31 we can’t actually solve this big complex puzzle from the top. We might be able to use this as a
0:17:37 wedge in to drive it forward. A remarkably low cost was that could connect one technology to
0:17:43 the other. I think as the whole system in the US moves from fee for service to fee for value,
0:17:48 then actually the payers or combined payer providers or at risk providers will see the
0:17:52 financial benefits of having this. Because for many, many cases catching things early,
0:17:58 like catching pre-diabetes over diabetes or diabetes over the situations where people are
0:18:01 starting to have real issues with insulin and where it gets really quite serious. Catching
0:18:07 that early actually could have a huge impact on the patient’s health as well as on trying to make
0:18:11 sure that you’re not having really expensive treatments down the road. Okay. So last question,
0:18:15 how does this fit into the future of the integrated picture for wearables?
0:18:20 It’s probably not that far from now where your day will seem very similar, but what you’re learning
0:18:25 is going to be radically different. So you wake up, you go to the bathroom, your toilet will
0:18:30 have, who knows, DNA reader on it such that you can learn about all the different things that are
0:18:34 in your urine. From a medical geeking out point of view, this is super exciting because this is
0:18:40 something that maybe you measure once a year and to measure that once a day is intriguing.
0:18:44 And then you go on to all the other sensors that are around you. Maybe in your body, maybe you’ve
0:18:49 just got on the shower, it’s looking for different moles and you go through your day. It seems that
0:18:54 you actually had a pretty sedentary day today. And this is your third sedentary day in a row.
0:19:00 And you were at Baskin Robbins. When all these things are connected, it’s all the small things
0:19:05 that are really the secret here because for many things, there’s not magic. There’s just,
0:19:11 how do you motivate people? And that is so hard in general. And hopefully it will be much, much
0:19:15 easier to attack. So bottom line it for me, Vijay. What’s the big takeaway on the news from Fitbit
0:19:19 and Apple and the context of wearables and where we’re going with healthcare?
0:19:23 I think the takeaway is that the Singapore government is seeing the value of this and
0:19:26 that I think they are very much going to be leading into care to others. And actually,
0:19:31 there are already insurance companies that are subsidizing or paying for Apple watches as well.
0:19:35 And so we’re going to see more and more of this because the cost really isn’t that high.
0:19:38 And so this will be something that I think will become just a part of our lives.
0:19:39 Thank you for joining 16 Minutes.
0:19:40 Yeah, thank you.
0:19:44 All right, everyone. Thank you for listening to this week’s episode of 16 Minutes. As a reminder,
0:19:50 none of this is investment advice or intended for investors. Please be sure to see a6nz.com/
0:19:54 disclosures for important information. Also, the show notes often include links to the
0:20:00 article cited or other relevant background. You can find those at a6nz.com/16Minutes. Thank you.