Apple’s New Headset: Buy or Bust?

Why is Apple talking about announcing a $3,000 mixed reality headset when it’s clear the $2.7 trillion colossus hasn’t pulled together all of the pieces?

That’s the question The Wall Street Journal poses today in an interesting piece about what would be the launch of Apple’s first new product category since the debut of the Apple Watch way back in 2015.

People who have tried the device say that it’s worlds apart from existing products such as Meta’s Quest Pro, citing its superior performance and immersive capabilities. Also, Apple has designed the device so that users can see what’s around them, which could possibly reduce the nausea that many people feel when they use devices like these. (The company is doing this via outward facing cameras.) And finally, it’s an Apple product, which will undoubtedly mean something to the company’s many diehard  fans.

The rumor is that Apple will announce its new headset at its Worldwide Developers Conference this June.

Still, insiders grumble that the device doesn’t have a killer app, and it will require a battery pack, a bulky addition that probably would have caused Steve Jobs to burst an aneurysm.

And, did we mention that it costs $3,000, three times more than Meta’s most expensive headset?

While the price of Apple’s headset would be a good thing if it had the potential to sell tens of millions of units, few think there is massive, pent-up demand for yet another metaverse or virtual reality product. Indeed, both Walt Disney and Microsoft recently shuttered their respective divisions.

“Apple is absolutely standing on top of the many bodies that are trying to climb up that mountain,” Rony Abovitz, the founder and former CEO of Magic Leap, a much-hyped augmented-reality startup that has fallen on hard times, told the Journal.

What puzzles us is this: Tim Cook is a numbers guy. He doesn’t take a lot of wild bets. Either he is so desperate to show that Apple can innovate without Steve Jobs and Jony Ive, or there is something there. 

As corny as it sounds, we can’t wait to hear him say those magic words, “And one more thing.”

AI Time Bomb

Yesterday, we included a story in the newsletter about a Google researcher who leaked a critique of Google’s AI efforts, complaining that Google was losing ground to open source AI projects.

That story hit home today with the publication of a piece in The New York Times entitled, “The Next Fear on A.I.: Hollywood’s Killer Robots Become the Military’s Tools.”

The military is of course deathly afraid that AI-powered weapons could dramatically accelerate the pace of war, making decisions much faster than humans could control. The ability of artificial intelligence models to pump out disinformation coupled with their susceptibility to hallucinations and misinformation only adds to these fears. 

Up until now, we have been hoping that depriving China of advanced chipsets might delay the use of artificial intelligence by our adversaries. Also, Google’s Bard and OpenAI’s ChatGPT have controls in place that limit public access to dangerous information such as homw to build an atom bomb.

But as the Google researcher points out, Google and Open AI are no longer the only game it town.

“Open-source models,” this person writes, “are faster, more customizable, more private, and pound-for-pound more capable. They are doing things with $100 and 13B params that we struggle with at $10M and 540B. And they are doing so in weeks, not months.”

They don’t need those advanced chipsets, in other words. 

This may sound alarmist, but it’s not only possible but probable that rogue nations like North Korea are exploring how they can embed open source AI into their nuclear weapons systems.

And as the Times points out, “So far there are no treaties or international agreements that deal with such autonomous weapons.”

So enjoy your weekend, everyone. We’ll sort this out … right?!

Pity City for CEOs

Andi Owen, CEO of MillerKnoll, which makes high-end furniture under the brands Herman Miller, Knoll, and Design Within Reach, was trying to explain over Zoom why her employees should  focus on landing a big deal rather than mourning the fact that their bonuses had been taken away.

I had an old boss who said to me one time, you can visit Pity City, but you can’t live there, so people, leave Pity City. Let’s get it done.

Get the damn 26 million. Spend your time and your effort thinking about the 26 million we need, and not thinking about what are you gonna do if you don’t get a bonus. All right.

Let’s get it done. Thank you. Have a great day.

Owen, whose bonus last year was $4 million, later apologized, but the clip quickly went viral. 

In an article in today’s Wall Street Journal, authors Vanessa Fuhrmans and Joseph Pisani portray Owen’s video message as yet another example of the challenges CEOs face in today’s hybrid marketplace.

Although a strong case can be made that Owen is uniquely tone deaf, many chief executives find the pressure of Zoom to be hard to bear, according to Peter Rahbar, a New York-based lawyer who specializes in employment matters.

“You’re always on, there’s no time off, and you have to assume that you could be recorded,” he told the Journal.  

In order to combat potentially damaging leaks, last month, Zoom introduced a new feature that allows an account owner or administrator to watermark a video with a viewer’s email address. Employees at said they noticed email watermarks on their corporate Zoom calls, but a spokesperson for the company denied that it did this in order to stop viral videos.

(’s CEO had his moment in the sun in 2021, when he callously fired 900 employees on a video call.)

Regardless of whether you are broadcasting a message to employees over Zoom or talking to them one on one, there is probably never a good time to tell someone who works for you that it is unfair of them to take care of their children while they are supposed to be working, as James Clarke, CEO of Clearlink, a Utah marketing firm, did this week. 

As Bill McGowan, founder and CEO of Clarity Media Group, a communications coach, explained to the Journal, “These are real human beings you need to connect with.”

Still, that seems to be a very hard – and expensive – lesson for many CEOs to learn.

Crypto: Not Dead, Just Resting?

The title of The New York TimesHard Fork podcast paints a grim picture of the crypto industry: “Everyone Pivots to AI, and Bad News for Crypto.”

The subhed is even worse: “Is crypto dead? Or only mostly dead.”

It’s not all bad news. While the price of Bitcoin has fallen 43% over the past year, it has risen almost 35% since January 1st.

Still, it was shocking to read last night that FTX believes it might be missing almost $9 billion in assets.

Now comes word that Tether might have skeletons in its closet, as well. 

Tether is an important linchpin in the crypto economy. It’s eponymous stablecoin is the most widely traded cryptocurrency and provides an important means of liquidity for holders of digital assets. Moreover, its sister company runs Bitfinex, one of the world’s largest crypto exchanges

According to a Wall Street Journal review of emails and documents involving the company, however, both Tether and Bitfinex went to great lengths to mask their identities in order to stay connected to traditional banks and financial institutions. 

In addition to opening banking accounts under different pseudonyms, the companies urged customers to keep the details of these arrangements to themselves. “Divulging this information could damage not just yourself and Bitfinex, but the entire digital token ecosystem,” a client page on the Bitfinex website read. 

Certainly, the Journal’s analysis of Tether’s documents will only spur on legislators who are looking to treat cryptocurrencies as securities. 

And that would be bad news for the crypto world, indeed.

Is Your EV a Security Risk?

The Wall Street Journal reports today that Tesla stock is more popular than ever among individual investors, leading the stock to rise by over 60% so far this year. 

And, demand for EVs shows little sign of slacking off. According to JD Power, last year, EVs accounted for 5.8% of all new cars sold, an 81% increase over 2021, and the rollout of mainstream vehicles such as the Ford 150 Lightning should only cause EV penetration to increase. 

Given the popularity of electric vehicles, it is perhaps time to take their security more seriously. On Wednesday, The Wall Street Journal posted an interview with correspondent Bart Ziegler, who wrote an article two weeks ago about whether electric vehicles can be hacked. 

The short answer is, they can.

While internal combustion engine (aka ICE) vehicles may have 150 electronic control units, Syed Ali, a partner and cybersecurity expert at consulting firm Bain & Co., told Ziegler that an average EV could have as many as 3000 chips. Put another way, that’s 20X more opportunities for a hacker to infect an EV with malware than an ICE vehicle.

Hackers could also spread malicious software through public charging stations or home chargers. The latter are particularly vulnerable, as “ many home chargers are linked to the owner’s Wi-Fi network and a smartphone app, or to a cellular network, offering more potential attack vectors,” Ziegler writes.

Experts think that it might take a major cyberattack on the EV infrastructure before the industry and lawmakers take serious steps to help prevent them.

Stuart Madnick, a professor and cybersecurity expert at the Massachusetts Institute of Technology’s Sloan School of Management, is one of them. “Sometimes we need a wake-up call,” he told the Journal.

Totally Fried

FTX founder Sam Bankman-Fried has been talking the ears off of journalists, but up until now, he has avoided speaking to Congressional investigators. 

That has changed. 

Today, Bankman-Fried tweeted that he would appear before the House Committee on Financial Services this coming Tuesday.

SBF will presumably be under oath, so it’s probably a good thing that he has hired a high-profile lawyer to represent him. (This same advocate recently represented Ghislaine Maxwell, Jeffrey Epstein’s partner in pedophilia.) 

Still, Bankman-Fried will have a lot of splainin’ to do. 

The former crypto wunderkind will inevitably be asked whether he transferred customer deposits to Alameda Research, a hedge fund that he controlled. FTX’s new CEO, John J. Ray, III, a man who has been hired to clean up the mess at FTX, has stated that SBF used “special software to conceal the misuse of customer funds,” which Bankman-Fried has denied

It would also not be unreasonable to think that SBF will face questioning about the $1 billion that he borrowed from Alameda as well as the $2.3 billion that an Alameda affiliate loaned Paper Bird, another company that he controlled. 

And he will surely face questioning about the money he put to work with both the Democratic and Republican parties as well as news organizations such as the crypto news publication The Block, which, according to a report in today’s Axios, received some $43 million in loans from  Alameda. Was this all part of a cynical and manipulative game that the former billionaire was playing as he intimated to a Vox reporter in a series of late night DMs? 

For what it’s worth, if the House Committee is open to suggestions, I would like to know more about the Signal conversations that SBF had with Binance CEO Changpeng (CZ) Zhao in the days leading up to FTX’s bankruptcy and what they reveal about the state of the cryptocurrency market. In a fascinating article in today’s Times, reporters  David Yaffe-Bellany and Emily Flitter write about one such conversation in which CZ accuses Bankman-Fried of trying to tank Tether, a USD stablecoin, with a $250,000 trade. SBF retorts that there is no way such a small trade could ever undermine Tether, but the fact that Zhao was so concerned about Tether’s stability does not speak well for stablecoins or the crypto industry in general. 

So we will be watching on Tuesday and looking to see in particular if committee members will be able to poke any holes in SBF’s defense, namely that he was a terrible CEO and lost sight of FTX’s risk exposure. 

One thing is certain: whatever SBF’s lawyer is getting paid, it’s not enough. 

Game On!

Yesterday, the Federal Trade Commission announced that it would seek to block Microsoft’s $69 billion acquisition of Activision, the video game behemoth behind Call of Duty, a franchise that has generated almost $30 billion in revenue from game sales and microtransactions since 2003.

It’s a curious development for two very different reasons. First, according to a story in today’s Wall Street Journal, Microsoft has been engaged in a charm offensive with every regulator that will sit down with it, an effort led by its vice chairman and president, Brad Smith, who joined the company back in 1993. To allay regulators’ concerns, Microsoft has made many promises, the most important of which is that Call of Duty will be available on other platforms, such as Sony PlayStation. 

Perhaps a more important reason that the FTC’s move came as a surprise is that courts have been skeptical of challenges to so-called vertical mergers, or mergers in which two businesses don’t compete directly. Although the landmark Paramount case famously barred vertical integration in the movie business, in which studios tried to control production, distribution, and exhibition of feature films, the justice system has looked the other way when it comes to other vertical mergers. One famous albeit dated example is the AT&T / TIme Warner merger, which was ultimately allowed. 

Given how many concessions Microsoft has made to help this deal go through, Daniel Francis, an assistant professor of law at New York University and a former F.T.C. official, thinks the FTC has overplayed its hand. “Courts have been surprisingly solicitous about the kind of things that Microsoft has offered here,” he told the New York Times.

The Times also notes that the FTC’s leader, Lina Khan, has been very aggressive in pursuing novel novel or little-used arguments to challenge deals.

Still, any parent of a thirteen-year-old StrictlyVC intern who plays NBA 2K can tell you that Xbox and PlayStation don’t always play well together, especially when it comes to fast-twitch games like Call of Duty. 

No matter how much Microsoft protests that Call of Duty will not tilt the scales in its favor, we can definitely see why regulators and Sony are so concerned

Follow the Money

The situation at FTX is awful, with the distinct possibility that hundreds of thousands of customers have lost billions of dollars of precious capital, but Samuel Bankman-Fired’s one saving grace was that he didn’t seem to be in it for the money. 

A mop-haired techie who favored dressing in T-shirts and shorts, SBF came across in articles as a somewhat frazzled graduate student trying to reinvent the world for the better.

That has changed. 

First, Bankman-Fried confessed to a Vox reporter on Thursday that his advocacy for better crypto regulation in Washington was “just PR.”

Then, lawyers for FTX alleged that Bankman-Fried was working with the government of the Bahamas to transfer FTX assets into accounts outside the control of management, even after the company filed for bankruptcy in Delaware last week. 

And now today, the Wall Street Journal reports about an FTX financing round last year raises new questions about FTX’s governance. 

In October, 2021, FTX raised $420.69 million (yes, the choice of digits was deliberate) from investors, and as part of this transaction, Bankman-Fried cashed out $300 million of his FTX stock, a fact that has not been previously reported.

According to The Journal, Bankman-Fried told investors at the time it was a partial reimbursement of the $2.1 billion he spent to buy out Binance’s stake in FTX a few months earlier.

The Journal article points out that it is usually a bad sign when a founder sells stock in a secondary offering. 

However, this new information also raises some troubling questions.

Given it’s not clear where Bankman-Fried got the rest of the money – some $1.3 billion – one wonders what role FTX’s capital played in all of this. Did Bankman-Fried use $1.3 billion in FTX capital to purchase the Binance shares? Could this be the $1.2 billion related party receivable listed on FTX’s balance sheet as of December 31st? And, if so much FTX capital was involved, why didn’t FTX purchase these shares instead of Bankman? Surely, it would have been in the company’s strategic interest to do so given its business momentum and $25+ billion valuation. 

New FTX CEO John J. Ray may have cleaned up Enron, but he will certainly have his work cut out for him in trying to figure out what Bankman-Fried did with all of this money.

The Tragedy of Elizabeth Holmes

Former Theranos founder and CEO Elizabeth Holmes was sentenced today to more than 11 years in prison, two years more than a probation officer had recommended but nine years less than the maximum amount specified in federal guidelines.

Holmes’s lawyers had asked for a sentence of home confinement and community service and no more than 18 months in prison, while prosecutors were seeking a 15-year prison sentence to send a message to potential wrongdoers.

Holmes does not have to report to prison for five months, and her lawyers will almost certainly appeal the sentence, but if her lawyers are unsuccessful, her 135 month prison term will be a tough road to hoe. Holmes and her partner have a young son, and she is currently pregnant. 

In a statement to the court, Holmes said, “I stand before you taking responsibility for Theranos.” Still, Holmes did not explicitly acknowledge the fraud that she had perpetrated nor the lives of Theranos patients that she put at risk. 

Before sentencing Holmes, Judge Edward Davila talked about letters he had received from venture capitalists in support of Holmes. Although these VCs reminded Davila that failure in Silicon Valley was not uncommon, “[T]hey didn’t endorse failure by fraud,” Judge Davila said. “Those letter writers did not condone misrepresentation and manipulation.”

Davila explained that he didn’t give Holmes the maximum sentence because he didn’t believe her main objective was to enrich herself.  

“The tragedy in this case is that Ms. Holmes is brilliant,” he concluded.