The Apple Watch: Towards a New Era in Human-Computer Interaction

I was born in 1988, and by the time it became important for me to manage my own schedule (when I was about 11), I had a cell phone to tell me the time. Watches have always seemed like a matter of personal preference rather than one of incontrovertible utility. After all, why would I want some clunky wrist thing? Now I’m changing my mind.

What sold me was the unstated implication at the end of the Apple Watch’s product video. Jony Ive, the senior vice president of design at Apple, observes that “We’re now at a compelling beginning: actually designing technology to be worn, to be truly personal.”

This is a very big deal. The Apple Watch is the first device that lives on a user’s body and has the potential to deliver technological interactions without separating the wearer from their environment. Accordingly, it represents a bright line: technology is no longer something you necessarily stop interacting with the world to use. It’s just something that exists.

This post will not conduct the analysis you might expect. I will not discuss the addressable market for Apple Watches, sales estimates, or share prices. I’m more focused on what a wearable device with the potential for commercial success means for human-computer interaction than with any particular device. Accordingly, let’s consider the only question that matters.

What Is Actually Being Sold?

This thing is not just a watch. But it’s not the physical product that I am excited about. I am excited because hardware companies are recognizing that I want to use technologybetween screens rather than on them.

Consider a way that you might actually use the Apple Watch. The intuitive thing to focus on is querying a service or retrieving email, but that is a use case that occurs only because it’s the way we use technology now. What if it augmented our experience in another way, by giving us a new window to other people?

One of the features I have not heard enough buzz about are the Snapchat-style sketches that we will be able to share at the flick of a wrist. These sketches — like notes passed in class or cave paintings — are the essence of communication. I can share drawings (which will wind up looking fundamentally like cave paintings) with others, and we can communicate using those sketches, just like we did thousands of years ago. We have developed immeasurably complex technology which will allow us to interact with our surroundings as intuitively as we did in the Stone Age.

Much of the technology that we use in our daily lives is something that we consider separate from non-technological artifacts. As I write this on my iPhone in the subway, I am consciously using technology. I’ve made a choice to engage with my surroundings only in order not to bump into anyone in the spirit of getting work done.

But that can and will change. Apple Watches are designed to exist with us, not to be awkwardly fondled. They are a piece of technology that lives with us in reality rather than transferring us into a virtual one. A charred twig used to make a cave painting didn’t feel like technology to a caveman, and in the same way the descendant of an Apple Watch might not necessarily feel like technology to my grandchildren. After all, do you consider an analog watch to be technology?

This is one significant evolution in a trend that my colleague Jason Voss, CFA, and I classify as the rise of human technology. It’s a big trend with a lot of implications, but its ultimate implication is that tech products will come to feel more like our limbic systems than something that we consciously interact with.

This phone’s features fulfill that trend in several key ways:

  • It’s a tech product that’s differentiating itself with fashion. If you look at the watch’s product page, you may notice something interesting: the different lines of the product stress fashion features, not technical ones. Have you ever seen a laptop marketed as a fashion accessory? I haven’t even heard how fast the processor of the Apple Watch is or how much RAM it has.
  • Human health is one of its killer apps. The Apple Watch will gather the same data that a Fitbit or FuelBand does, but it will also offer other functionality. This means that one of the key ways we’ll use these devices will be to improve our well-being. In a very real sense, health will be one of its killer apps.
  • Finally, human security is assured. If you heard about Apple Pay, you might naturally wonder how they intend to keep your data secure. After all, somebody might pick up and use your watch without you present and just spend your money. Ingeniously, this watch will use contact with your skin to verify your identity. Imagine a world where such an iterated version of a system like this replaces passwords as a means of verifying your identity. In that world, technology looks a lot more human.

If Not This One, Then the Next

Whether the Apple Watch or a competing product ultimately delivers a more human interaction with technology, it seems clear that an important trend is being born: technology that doesn’t separate you from your environment.

Wearables have existed for a while (notably the Pebble Smartwatch and the large collection offered by Samsung), but the debut of the Apple Watch suggests that wearable devices will gain a large audience among both consumers and software developers inside of the next two years.

I might be being too enthusiastic, but I’m biased here. As I said, I’m excited to buy a watch. Watch geeks are excited too, so I feel like my excitement is substantiated. But what do you think? Let me know in the comments section below.

This was conducted for the CFA Institute and originally posted on the Enterprising Investor

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What Marketing Looks Like When Your Brand is Really Boring...And You're At A Party

I went to this great party today, and the best music was played by the NY State Nurses Association and the NY State Comptroller. 

Yeah, I just totally wrote that sentence. What's going on? It's the West Indian parade today, and a lot of brands that people don't typically care very much about--think health insurers, associations, and unions--are doing whatever they can to demonstrate their relationship with this community. 
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Getting Excited about Stellar

I heard about Stellar recently, and I think it might become kind of a thing. The platform is similar to bitcoin, but it seems like it's designed to particularly serve a lot of the core functions that people are getting excited about, particularly:
  • Transacting between two arbitrary currencies (dollars, yen, euro, bitcoin) seamlessly. Stellar accepts currency from gateways and transmutes it into whatever currency might be desired. 
  • Kicking untrusted gateways off the network. Gateways are essentially lending each other money, so there's a built in "creditworthiness" mechanism that can handle a financial system where trustworthiness is impermanent. 
  • Governance. Stellar seems to have put the foundation that governs its deployment and use together ahead of mass adoption. This could be seen as a bad thing (or just a way to cash in), but I think it leads to a better formed product. Bitcoin got popularity first, and is now building respectability. I feel like taking the opposite approach and designing specific rebuttals in the protocol to commonly leveled criticisms of bitcoin is a great way to get adoption from the conservative, image-conscious financial community. 
I don't really have the ability to evaluate the technical merit of this platform, but I can definitely evaluate the way it might play among traditionally conservative financial firms. Many of these are aware that financial infrastructure can be improved, but for whatever reason are wary of bitcoin. 

This seems like someone built a custom version of bitcoin for the powerful institutions that exhibit that conservatism, and I feel like it might work. Not a prediction, but this is an exciting idea. 
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Adventures in Brooklyn's B-Side Parks

One of the things that you realize when you spend time in parts of Brooklyn that are not synonymous with cultural movements is that if you try, you can really avoid the crowds out here. 

It's also really nice. I had a lot of fun today exploring McGolrick Park in Greenpoint, which is one of the nicer outdoor spaces I can think of. It wouldn't be that remarkable if it was crowded with people...what's remarkable about it is that it's beautiful and empty. 
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Piketty's Problem

Every time i've talked about Thomas Piketty with someone, the first question I've gotten was "have you seen any takedowns of him?" 

Here's one from the FT, and if true it's a big deal: 

Prof Piketty, 43, provides detailed sourcing for his estimates of wealth inequality in Europe and the US over the past 200 years. In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source.

For example, once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns.

Read the whole thing. It's short. 
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Have You Made a Profit on your Life?

I wrote something inspired by the excellent old article "why I never hire brilliant men". Take a look below. 

Personal finance can at times seem less scintillating than the world of high finance that is sometimes covered on these pages, but in many ways it’s much more important.

There is simply no way to make money through investing without already having money, and I’ve got bad news: There’s no better way to accumulate money than earning it, saving it, and not spending it.

Why is that so important? Well, investment media occasionally does a poor job reminding its readers that, as far as their wealth is concerned, the most recent high-profile earnings announcement is a passing distraction compared to their savings pattern.

This post’s title offers a simple way to think about it. Imagine that your personal life is a business. Are you profitable? If you’re neglecting your loan balances and buying expensive things on credit, consider how you would react if one of the companies in your portfolio was doing the same thing. What about a company that managed to go a whole lifetime without ever generating a meaningful amount of cash?

Read the whole thing here
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Why Are You Not Indexing?

I spoke with friend and Inside Investing contributor Lars Kroijer about a core premise he's developed: most investors should index. It's a good read, and it's worth remembering as you look through this that he still believes it's possible to beat the market...just that it's not likely for the bulk of investors. 

As with all the stuff I do for work, I'll add this humble plea: if you like this sort of thing, you should subscribe to Inside Investing

Conventional wisdom says that if you want to make money in the stock market, you need to exercise fanatical discipline and develop unique competence as an investment analyst.

Lars Kroijer thinks that’s all kind of a waste of time for most people. Can his mom really do that? Since she can’t, does it mean that she can’t ever make money investing?

The big question to him is reasonably straightforward. Do you really think that you are good enough to beat the market? If not, you can invest simply in low-cost alternatives. It’s easier, cheaper, and for many investors, likely to produce better results.

A lightly edited transcript of our interview follows. It’s long, but worth reading. We start by talking about his career (he used to run a hedge fund) and move to talk about how he came to the idea that most investors don’t have an edge.

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What is Good Research?

I had an immensely enjoyable discussion with Tom Brakke about the nature of good research. If you like this sort of stuff, you should subscribe to Inside Investing.

We were privileged to have Tom Brakke, CFA, stop by our offices in New York City a few weeks ago. After a multi-hour meeting where many of us talked about all sorts of things, I managed to wrangle Tom into a quick interview.

Before posting the interview, I’ll say that if you don’t already follow Tom on Twitter or on his excellent blog, The Research Puzzle, then you are probably missing out. He is a regular font of provocative thoughts, and that can be one of the most useful things in the world. He has also written a number of excellent posts for Inside Investing, including a thoughtful look at how you should consider cash and a post about the most important question to ask about a projected rate of return.

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Are you Sure Your Money is Worth Anything?

I had a great discussion with Paul Brodsky and my colleague Jason Voss. If you like this sort of stuff you should subscribe to Inside Investing

In the spirit of last week’s feature, which asked a few of our contributors to speak about things that they believe to be true but know they could never prove, we present this week’s podcast interview with Paul Brodsky. Though we spoke with the benefit of data and research, the ultimate subject of our conversation was difficult to draw solid conclusions about: the probability of a shift in the way that humans store and exchange value.

For many years, Brodsky has been a partner at QB Asset Management, a firm that recently folded into Kopernik Global Investors, which was founded by Dave Iben, CFA. We began our conversation with Brodsky by talking about Plato’s Allegory of the Cave, which he uses to introduce his thinking about monetary policy. What follows in part 1 is a wide-ranging discussion that treats the mechanics of the global system of interchange and our financial infrastructure. 

We begin part two with a question from Jason Voss that is likely at the top of many investor’s minds: what is the catalyst that spurs the radical shift we are discussing?

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An Hour with Mike Mayo

I was lucky to get to speak to Mike Mayo for work. Here's the interview (in two parts). If you like this sort of stuff, you should subscribe to Inside Investing

Part 1

“I realized that when I couldn’t understand something that a company was saying, it wasn’t my fault.”

Mike Mayo, CFA, is an outspoken analyst and a notable expert on the banking system, but the above statement is perhaps one of the most important things to come out of our hour-long conversation. In a nutshell, Mayo is saying that companies are responsible for providing good disclosure that is intelligible.

This is an important lesson: often, poorly written or difficult to understand disclosure leads investors to believe that the underlying dynamics of the business or investment are impossible to understand. In conversation with Robert Stammers, CFA and me, Mike speaks about how investors should go about analyzing financial institutions, gives his views on the present state of the industry, and talks about the surprising tack that he adopted to gain access to company management. We also treat some of the topics he raises in his excellent book, such as the accountability of the banks, their governance structures, and the role that they have played in economic history.

Part 2
This is part two of an hour long conversation with Mike Mayo, CFA, a banking analyst at CLSA and author of Exile on Wall Street, which details his long and very interesting career.

We start this portion of the conversation by talking about the peculiar nature of growth in financial companies. Mike explains that one of the most important things to remember when analyzing a bank is that their product is money. To grow at an above-average clip they can simply sell more money or—as it is typically described—make more loans.

When asked to categorize the various banks that he analyzes, he makes a distinction between two types of banking companies: banks that are well-run and banks that aren’t. To hear how he analyzes that, please listen to the podcast below! Part one can be found here.

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