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Month: July 2016

The hidden competitive advantage of Virtual Reality products

The hidden competitive advantage of Virtual Reality products

A secret gem and endless source of information about investment and management can be found by reading Warren Buffett’s annual shareholder’s letters. And what better way to spend a Sunday afternoon but to read through these old publications?

So in one particular case, Warren (yeah, first name basis!) explains a very simple, yet extremely important aspect of an emerging technology which people completely disregard: the competitive advantage.

So what does this mean?

People tend to overvalue every company and product that is visible when a new industry emerges and they tend to infer that a new technology automatically means investment opportunity in all directions. But it’s not quite like that, as Warren explains. Just because a new technology will change the way we live, which means huge long term growth, that doesn’t mean investing in ‘anything’ related to it is a good idea.

Let’s take some examples:

At the beginning of 20th century, there was no doubt that the automobile would change forever our life and that the automotive industry will grow into the distant future. And it did! However, this is a list of roughly 1000+ car manufacturing companies that existed in the United States alone! Out of these, only 3 survived! It turns out the same is true for the airplane manufacturers, and we all the know the fate of the .com bubble.

So now we have a new technology which I am convinced it will change us forever – Virtual Reality (and all its flavours of VR, AR, Mixted Reality, etc). All of the sudden we have a similar scenario: an industry that will grow as a whole, and many many companies and products are trying to get a pice of it.

As an investor, you shouldn’t throw your money at everything that moves and has VR in it, because most of these companies will disappear soon. Of course this doesn’t mean that the current companies and products are not profitable – they are, and they will be, but not long term! As a long term investor, you should not bet big just because they’re part of a hot industry.

So in a hot industry, with a relatively small entry barrier, how do you know which companies will persist in the long run and which will flop? The answer lies in the management. In an industry that’s like stardust – hot, forming planets, and not knowing how many and where they will be, it’s important to have leaders that can converge long-term vision with short term adaptability.

Today you are selling software and headsets, tomorrow those headsets will be obsolete, so the value will be in the software alone. In a few years, some other device will appear that projects straight onto your retina – so your value returns to a software/hardware combination.

In conclusion, although it’s impossible to map out what will happen with an emerging technology and how to invest in it, you could follow the above advice and look very closely at the founding team and their vision. It’s what will make the difference between small, insignificant products, and large successful ones!

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360° Video vs 3D Video vs Virtual Reality

360° Video vs 3D Video vs Virtual Reality

Many people use 360° video, 3D Video and Virtual Reality interchangeably. This is wrong and leads to a lot of confusion. So here is a quick overview of what each is, and where I believe the technology is heading.

360° Video

360° video is video that’s filmed in 360 degrees, but with no depth of field. This is the most common type of “VR” videos at the moment. Facebook just launched support for these videos on their timeline, so anyone with the right camera can film and upload a 360 degree video. So what is it? It’s really a video that captures a dome-like panoramic view. When you watch the video, you can move around the camera so you can see in different directions (note: not different angles). So if you use 360 video to shoot a skydiver, you can see what they saw, except you have the option that every time you watch the video to look in a different direction.

Here is a great example of such video. Notice how you can turn around the camera, but you cannot move it. In other words, you can’t move the camera so that you get a another angle of the shooting. You can watch these type of videos on youtube and on the Facebook timeline. You can use your mouse to move the camera around. Alternatively, you can watch these on your cellphone combined with a 3D Headset. When you do this, you will be able to move your head around to control the camera direction. This will give you a great deal of emersion, but it is still not 3D!

Some examples of cameras that can shoot 360 videos are found here and here.

3D Video

Now, the real deal is 3D video. 3D video gives you depth of field. To consume 3D video, you will need a 3D headset and a good cellphone. The experience is similar to what you’re used to at the 3D movie theatres, only much better. This technology is fairly new and rather expensive.

Here is an example of a 3D video .

You can notice a major difference between the videos: the 360 video is full 360 degrees, but no depth of field; whereas the 3D video has depth of field, but the viewpoint is limited.

As technology gets cheaper, all the 360 videos will become 360 3D videos! I hope that makes sense 🙂

Virtual Reality

Virtual reality is just a specific case of 3D video, where the entire scene is NOT filmed, but computer generated. In reality (no pun intended), we are using the same technique: stereoscopic rendered images. In a 3D Video, this is filmed using special cameras such as this:

Source: http://cdn.techpp.com/wp-content/uploads/2011/12/jvc-3d-camcorder.jpg

But in Virtual Reality, all the content is computer generated using special programs such as Unity or Unreal Engine.

The future of Virtual Reality

I think the near future will bring us many different cameras and ways of doing this, until everything will merge into pocket size 360-3D cameras. Also the devices we use right now to consume this, will be so small they will fit on a contact lens.

I hope this article will shed some light onto this amazing new technology!

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