Actually, The Metaverse Is An Enterprise Thing — With Peggy Johnson

Peggy Johnson is the CEO of Magic Leap. The company makes augmented reality technology and is now focused entirely on enterprise use cases after building for consumers for years. Johnson joins Big Technology Podcast to discuss the lessons Magic Leap has learned throughout its history, what its competitors (like Meta) are overlooking, and why it believes augmented reality technology is going to be most applicable to companies, governments, and non-profits (at least in the short term). Join us for a conversation that may well reframe the way you think about the Metaverse. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

  This episode is brought to you by Genesis. What does it actually take to put Agentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial, to go inside a large-scale Agentic CX transformation, including the business decisions, trade-offs, and lessons along the way. You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay?

• 0:43Alex Kantrowitz?

  Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation.

• 1:03Speaker 01

  LinkedIn Presents.

• 1:19Alex Kantrowitz?

  Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Now, I am of the belief that the metaverse has positioned augmented reality and virtual reality in the wrong way. We are thinking that this is all about hanging out with our friends in virtual worlds. Is that going to actually come to pass? Probably not, and definitely not for the time being. The real interesting use cases for these technologies are largely in the enterprise world. And while some companies, Meta, have not yet come to grips with the fact that this is where it's going, some other prominent ones have. That's why I'm pretty stoked to bring to you this conversation today. Peggy Johnson is here with us.

• 2:03Alex Kantrowitz?

  She's the chief executive officer of Magic Leap. And you might remember that Magic Leap used to be very much into the consumer augmented reality approach and has actually flipped and is now all in on enterprise. So this is going to be a fun one. Peggy, welcome to the show. Great to have you here.

• 2:19Speaker 02

  Thanks so much for having me, Alex. Looking forward to this.

• 2:22Alex Kantrowitz?

  Yeah, it's great to have you here. This actually originated when I tried the second version of the Magic Leap goggles out at Davos when I had done this interview with Nick Clegg that talked all about the metaverse. And I was really surprised, I think, at how good this stuff was and how clear of a vision Magic Leap had for taking these augmented reality experiences and bringing them to enterprise customers, people in the public sector, too. So let's start here. Augmented reality is nice, but we're also in the middle of this economic contraction. Everyone is trying to figure out, you know, how do I

• 3:04Alex Kantrowitz?

  cut costs? Where do I not spend places that I really want to spend? What is the compelling use case for them to spend some of those dollars on augmented reality? What sort of economic benefit do you provide these enterprise customers that are using your devices?

• 3:20Speaker 02

  Well, for sure, there needs to be an ROI for an enterprise to adopt it. And so we're focused on three areas that we believe, right now, in the current state of the technology, provide strong ROI. A lot of those are in the training area. So we have a company called PBC Linear in the Midwest, and they're a manufacturer of tooling products. And basically, they've cut their training from three weeks to three days when they're bringing on new factory workers using the device. And, you know, the device itself has so much, a bit of an attraction to new factory workers who, you know, we don't have people flocking to

• 4:02Speaker 02

  those jobs. But with the device, it gives them some of the same capabilities that, you know, knowledge workers have had with the PC on their desk. Now, these workers have a PC on their eyes, allows them to do their job efficiently, they feel more empowered. It's just a better experience for them. So there's actually some help on the recruiting side as well as the efficiencies and really the savings in the training sector that the companies have been running.

• 4:31Alex Kantrowitz?

  Okay, so I definitely get the recruiting benefit, but we're also in a time where people are hiring a lot less. So let's go like to the meat and bone of this right away, which is that you mentioned that this company is having people cut the training time down from three weeks to a couple of days. And I imagine they're weighing, wearing the glasses and getting that hands-on interaction first where they might need classroom instruction before. But I don't want to give the answer. I'm kind of curious to hear from your perspective, how exactly, you know, does this device, because it is a pair of glasses that you wear and it overlays digital experiences on top of the real world. So how does this, how does this work? Like, how is it able to cut down training like that?

• 5:13Speaker 02

  Well, like a lot of training, oftentimes it starts in a classroom. You're given sort of 2D presentations. You've got a book in front of you, your training manual, you're kind of slogging through things, much like kind of education we got when we're in school. Now, this immediately empowers the person trained. You can actually put them out on the factory floor on day one. They, because of, with the use of digital twins, you can walk up to a machine that's completely foreign to them and they can see a digital twin overlaid on the machine. They can understand, you know, how it runs, how it operates. They can understand how to repair it if the machine goes offline, which is also interesting. There's

• 5:57Speaker 02

  another metric that many factories measure, and that's time to resolution. And a lot of our companies have been able to shorten that time to resolution because if a machine goes offline, rather than Uh, the worker having to go find the manual, find the right page. They can just walk up to the machine. The machine's factory or the digital twin can appear on top of it and they can be walked through a fix. And even if they still get stuck, that you can call in an expert who who may be a continent away, who from any device can see what they see in front of them and walk them through. They can even annotate on the screen using, uh, you know, a digital

• 6:37Speaker 02

  line or a pointer, you know, turn this screwed, uh, pull that bolt. And, um, it it ju- the the time to empowerment, if you will, is very much shortened because they they feel, you know, that they actually can go out and fix something in a much shorter time than, you know, previous. So it's a it's a good feeling for the factory worker as well. Really, really does empower them.

• 7:01Alex Kantrowitz?

  Yep. So so the digital twin is basically the glasses will put a replica, a digital replica on top of the actual machine. So you can actually start to get maybe arrows and stuff on to certain buttons. And is that is that kind of what what this is?

• 7:16Speaker 02

  That's exactly right. And, um, the a- a- and then again, if if needed, you can call in someone who we call it see what I see. And this is actually applicable in a number of industries, uh, including healthcare, which is the other area that that we're focused on. Imagine a young cardiac surgeon, um, in the midst of an operation, has a question. And you with the glasses on, you obviously still see the patient, you see the physical room, but someone from afar can walk them through something that they may be seeing for the very first time in an operation. And it's actually going to empower surgeons as well as factory workers.

• 7:56Alex Kantrowitz?

  Fascinating. So if I'm, you know, uh, in not if I'm in a separate location, there's a surgeon who's in the middle of surgery, they have the magic leaf glasses on. I have the magic leaf glasses on. Now, like I can sort of-

• 8:07Speaker 02

  You don't need the magic leaf glasses, by the way.

• 8:09Alex Kantrowitz?

  I'm just like watching on a screen from their eyes.

• 8:12Speaker 02

  You can use a cell phone, any screen. Yeah, correct.

• 8:14Alex Kantrowitz?

  So so this sort of goes to, um, you know, another question I have about this. Why is it better than FaceTime? I mean, i- if you if you're like, if I'm a tech working on a machine in a factory, um, why why do I need augmented reality glasses in in a place where, you know, maybe FaceTime could could do the job in a similar way?

• 8:34Speaker 02

  Yeah, first of all, I would say FaceTime's absolutely fine in a whole lot of use cases. What we're talking about is highly immersive augmented reality. So for instance, if we if we just go back to that, the surgeon.

• 8:48Alex Kantrowitz?

  Yeah.

• 8:48Speaker 02

  What I was talking about. Right now surgeons who do a heart catheterization. So they're, you know, winding something up through your heart ahead of a surgery. They are being guided by a 2D screen in front of them. And they're they're they're they see a sort of a 3D depiction, but it's presented to them on a on a 2D screen of the heart and they're, you know, doing the catheterization. But with Magic Leap, we have a company called Sentiar. They're actually imaging the live beating heart real time in front of the surgeon's eyes. So the surgeon can see around corners. They can they can expand it.

• 9:28Speaker 02

  They can look inside of the the valves of the heart using that image. And the glasses and and the catheterization itself is just more accurate. It's it can be safer for the patient. It can be done more quickly than making your mind do the work of of if, you know, if you have a PC in front of you, they have a screen in the operating room, kind of trying to visualize what they're seeing. You're you're making your mind turn it into a 3D image where now this the heart is literally in front of your eyes and cognitively it's a lot easier to understand.

• 10:07Speaker 02

  It's a lot easier to really to to see what's happening with the heart than on a flat screen. A 3D just makes it come to life.

• 10:20Alex Kantrowitz?

  Yeah, I guess if I'm on the table, I'd much rather have someone with, you know, the augmented reality versus the iPad.

• 10:27Speaker 02

  Exactly. And by the way, on that point, you also want to see the patient. You know, there are some, you know, there are some other technologies where you.

• 10:38Speaker 02

  You know, you don't, you're, you're not actually seeing your physical world. This is a type of use case, you want to see that patient in front of you. I don't think you want, you know, what's known as pass through virtual reality where they're, they're imaging your physical world and you're actually just seeing a video of your physical world. Like you need the precision and the accuracy that seeing the actual physical world gives you. And then by the way, the digital content you place on that patient has to have that same accuracy. So if you're, for instance, drawing an incision line, we can get to very, very high accuracy for the surgeon ahead of them actually making the incision overlaid right on to the actual,

• 11:22Speaker 02

  for instance, knee of the patient during a knee operation.

• 11:25Alex Kantrowitz?

  Right. And then these are some pretty interesting use cases for augmented reality. And I previewed this a little bit in, in the beginning, but this was not Magic Leap's original vision. This is actually very different from the more consumer oriented use cases that Magic Leap had raised a boatload of money to go ahead and, and attack. So I'm kind of curious, you know, you're obviously, your company is obviously many years ahead of everybody else who's trying to figure out use cases for augmented reality. So what was the Magic Leap or what is the Magic Leap journey here in terms of saying, you know, maybe AR, you know, initially is good for, you know, having big whales show up in your living room to now what it is, is practical, on the ground, training and

• 12:10Alex Kantrowitz?

  actual guiding through different work situations.

• 12:14Speaker 02

  Yeah, you know, and I think in some ways, the journey the company took was not unlike, you know, journeys of other technologies that many companies have taken. You know, you have an exciting new technology. Really one of the best ways to share that, kind of what AR could do was to show that whale coming out of the floor. People go, wow, you know, that's amazing. But then you quickly have to find the actual ROI producing use cases for the technology. And I, I always have to go back to the story of mobile phones because when they first came out. You know, the the use case was really largely focused on on business folks who were,

• 12:56Speaker 02

  you know, driving around in their cars. They had to call back to the office, which meant they had to find a parking spot and then a phone booth and make a call and have the change on them to make the call. Now they can make a phone call from their car, you know. So there was a there was a clear ROI. There were savings in time for that salesperson. And it's very much the same for augmented reality. Right now, today, in several areas of the enterprise space, there's an ROI that exists, you know, training, any sort of 3D visualization, any sort of remote assistance. Those things can be done in a highly efficient

• 13:35Speaker 02

  way and and produce ROI for for companies. Over time, definitely, we'll be able to shrink the silicon, the componentry, make it more of a glasses format. And like any technology, I I, you know, I can see the trajectory to getting there. But that's not today.

• 13:55Alex Kantrowitz?

  But Peggy, this is not controversial to say that that Magic Leap did start with more consumer use cases in mind. Like, I understand that that's the evolution of technology. So but so so going back to the previous question, take us through that shift. What did Magic Leap learn that some of these other companies have not learned yet about these consumer use cases?

• 14:15Speaker 02

  Yeah. And so consumers. So when you think about it, when the product launched in mid 2018, Magic Leap One launched, it it launched and it was sitting alongside mobile phones that frankly had there was more performance you could get out of a mobile phone. There was a lot more content. They cost a lot less. And, you know, they there was a thriving developer community already. So the device itself, actually, Magic Leap One still is an awesome device. It works well. It it does what it said it was going to do. It proved that you could put digital content in front of your eyes in your physical world and have

• 14:57Speaker 02

  your eyes believe that content was actually there. It didn't make you sick. It didn't bounce around. It was stuck in your world. And so it did a lot of things really well. The entry point for consumer was just too early. And particularly given that our mobile phones could do so much. And while, you know, over time, it will circle back to consumer. I think that some of the things the company learned was the device itself, you know, to be on your head for any length of time needed to weigh a lot less. You know, you needed to not, it needed to not make your head hot when you have it on.

• 15:39Speaker 02

  There's a lot of form factor things that the company learned. It needed to be, the optics needed to be very powerful. And, and there's something, there's a, there's a element of augmented reality called feel the view. It's the, it's sort of the canvas, if you will, that you could put the digital content within that's in front of your eyes. That just needed to be as big as possible. You, you might've put on some devices where the feel the view is almost postage stamp size and you could put digital content there. And you're kind of making your, your head do the work to, to follow that digital content.

• 16:13Alex Kantrowitz?

  Yeah, that reminds me of the Google Glass, which was just awful to try to use.

• 16:18Speaker 02

  Yeah, yeah, I mean, a good first product to prove out the technology, but those are the things they learned along with, you know, with others. That field of view has to be as big as possible. So the team went back, took all the input that they heard and learned from Magic Leap One and also watching other devices, you know, the feedback from users and built Magic Leap Two. From the ground up, they, they knew that the entry point was more likely an enterprise point and not consumer. And then they said, well, if you're going to, if you're in the enterprise, what do you need? You need something you can wear for hours and hours, you know, not something that's going to hurt your nose after 45 minutes, you know, because it's too heavy on your head or, or it gets hot or it's clunky.

• 16:59Speaker 02

  So they solved a lot of the problems that the industry was feeding back, both based on, you know, from Magic Leap One as well as other devices in the industry. So very focused on solving that problem.

• 17:11Alex Kantrowitz?

  Yeah, and there are some obvious enterprise use cases, the ones that you've mentioned, although I didn't think about those, but like, um, training, of course, is interesting and having people overcome their fears, like putting this on and, you know, seeing a shark in the room or being in, or, you know, doing the fear of heights thing, that's interesting.

• 17:31Alex Kantrowitz?

  And it is interesting that the consumer, some have started with consumer. I mean, I'm curious, you know, so you obviously still believe that consumer is something down the road.

• 17:42Speaker 02

  Yeah.

• 17:42Alex Kantrowitz?

  Is your vision also that we'll just kind of be hanging out with other people in some, you know, big digital world together? Or is it more like of a gaming thing? I know it's hard to really predict, but i- if you believe that the consumer stuff is going to happen, there must be some sort of sense as to what it's going to look like.

• 18:00Speaker 02

  And I do, I do think that is the use case that many consumers would would love. Can I talk to my grandma on the opposite coast and just have her in in front of me? That would be great, you know? Could I get on less planes? Because it's as immersive an experience to run a 3D meeting with a device versus, you know, actually sitting across from somebody. And and there's a few things to that I think that really need to be solved before we can reach that world. One is, in order for me, for instance, to see you right now digitally in front of my eyes, you'd need a lot of cameras on you. And it's a volume, it's called volumetric capture.

• 18:43Speaker 02

  We we'd have to be able to capture what you look like in, you know, real time. So it's a lot of cameras, which means it's a lot of data. You got to have a big pipe to get all that data back, too. And and then my device that's sent over there, my device then places it in front of my eyes. So that's, you know, the world we're all rushing towards. It's why you see a lot of avatars right now, because that world doesn't exist yet. It does, in in the enterprise space right now, actually be a very cool product that Cisco is doing, WebEx Hologram. So they've taken their video conferencing system, WebEx, and added an element of 3D capture, this volumetric capture. I think they use 12 cameras.

• 19:28Speaker 02

  And they're they're testing that out right now with a number of their existing customers of WebEx and it's awesome, right? So, so, so you, you actually can do it today with a system from Cisco. But for a consumer, you know, who, who likely won't have that system, we have to work on what the depiction is going to be, you know? Maybe eventually our PCs can have four cameras on them and we can get somewhat of a view of you. And maybe, you know, teamed up with some

• 20:00Speaker 02

  previous version that you have had, you can add in the real time qualities of yourself. And then that is what gets sent over. But it's a problem, you know?

• 20:10Alex Kantrowitz?

  Right.

• 20:10Speaker 02

  And it's why you see avatars. And, you know, avatars in an enterprise world, I always have a little bit of, you know, like they kind of look cartoonish and you're trying to talk about, you know, I don't know, you're negotiating a deal. It just seems, it seems a little

• 20:28Speaker 02

  challenging to look at someone in an avatar form. That's just me, that's my opinion about avatars. And I certainly don't think that, you know, a surgeon needs an avatar. You know, they, if someone wants to help that surgeon out in the previous example, they just need to see what the surgeon's seen to give them advice and walk them through something. So eventually I believe we'll solve for that. We'll figure out how to get cameras and we will be able to have a really true volume that you capture. And, and as I said, it's done right now through Cisco. But for mass market, I think eventually we'll be able to figure that out. But it will, but we're not there yet.

• 21:09Alex Kantrowitz?

  Yeah. And, and for, for meetings, doing things cross country, across continent even, this makes a lot of sense to me. But I also, I wrote this story in May for Big Technology. The headlines, the Metaverse sure feels like an enterprise thing. And there was this stat that I found and I spoke about this with Nick Clegg on a previous show from Meta. It was really interesting to me that is 75% of Americans live less than 30 miles away from a parent or adult child, and only 7% are more than 500 miles away. So this idea of, you know, people needing to beam in with presence to, you know, people that they are friendly with, it's, oh, I wonder if there's actually the use case there because in most cases, they're close enough to people that they know to just drive over.

• 21:54Speaker 02

  And I think if you can drive over, you would. Like, who doesn't want an in-person meeting? I think that's always going to be the best experience. Um, so I agree with you there. I will say, though, there is, there is a feeling of presence. And we've been playing, we were playing around with it because we used, we just kind of wrote an app to use internally, uh, for meetings. There's a very strong feeling of presence that we're all just still learning about. And that is, when you're in a virtual meeting and you've, and others have been invited in, even in an avatar form, you know, if they walk around and behind you, you hear their voice walk around and behind you. That's something that feels very different than a Zoom call, right?

• 22:39Speaker 02

  Where you're looking at, you know, the Hollywood squares of, of people in front of you. And it, it, even that makes the meeting come to life more. Uh, now it's not in person, but there's, there's a draw to that. There's an attraction to that, that, that that person has walked around me and I heard them walk around me. That presence is very palpable. The other thing we, we have is, uh, we've got four cameras looking at your eyes because we need to know where your eyes are gazing so we can place the digital content very accurately, uh, looking at your eyes. So what that means is I can take that, where your eyes are looking, send it over to the other person who's now looking at me.

• 23:20Speaker 02

  And when, when you swing and look at me, uh, even in an avatar form, and you're looking right at me, again, there's a connection there. It's very different from a Zoom call. So it's a space we're still learning about.

• 23:34Alex Kantrowitz?

  Right.

• 23:35Speaker 02

  And, you know, we're at the early stages of that. And, and you hear people who, who develop 3D meetings, you know, with avatars, they talk about that. There's a feeling that you get that's very different from a, a Zoom call or a WebEx call or Teams call.

• 23:50Alex Kantrowitz?

  For sure. But socially, it's just not catching on. I mean, Metas put all this-

• 23:54Speaker 02

  Because it's not good enough.

• 23:55Alex Kantrowitz?

  Yeah. And Metas, Metas put all this, um, this effort into, I think it's called Horizon Worlds. It's their big, you know, metaverse social layer. And it's interesting because they're a social company. So they're like, of course, how do we transpose social media onto the metaverse? It's like, what, a hundred thousand active users? And even their own engineers wouldn't be bothered to go in there. So you know a lot about where the market is today, where it's going. What do you think the companies that are investing so much in the consumer metaverse are getting wrong? Do they have a blind spot here?

• 24:27Speaker 02

  I don't think they have a blind spot. I do think this will be a use case.

• 24:31Alex Kantrowitz?

  But they're just way too early, though.

• 24:33Speaker 02

  I think it's early. And, you know, we found that when we focused initially on consumer. It was early. So, again, much like mobile phones, if you tried to sell mobile phones broadly, literally to everyone, I mean, I remember when I was back at Qualcomm, we were, you know, early, early days of mobile phones and we said, someday, there might be a million mobile phones in the world because what we were basing it on is how many phone booths are in the world. We said, this thing's gonna take the place of phone booths. Like, we couldn't see beyond that. That was as big as we could even think. And that's a lesson that says,

• 25:14Speaker 02

  hey, get some initial use cases right, and that then powers the next level, and the next level, and the next level. To go all the way to the end game, right now, it's gonna take time, it's gonna take resources. And, you know, we're talking about companies who have a lot of resources and I, you know, respect their decision. We're a small company, and I have to focus, and I have to look at where is the market entry? What is a technology capable of doing right now? That's where I'm gonna put all my energy.

• 25:47Alex Kantrowitz?

  Yeah, I was like looking at your funding before and I was like, oh, Magic Leap's raised over a billion dollars. That's a lot. And then I realized, oh, Meta's spending more than 10 billion this year. Holy crap.

• 25:57Speaker 02

  Yeah, we are highly efficient, highly efficient. And you have to remember, when you look back at the money that Magic Leap raised, what's kind of gets lost in a lot of the headlines is most of that money went to the technology. It went to building augmented reality technology, which is very, very hard. It's much harder than virtual reality. And so the bulk of it went there. But unfortunately, what gets highlighted, you know, through some of the headlines was, you know, it looks like whales coming out of floors. What did that ever do? It's like, no, it was to build the technology. And in some ways, you know, they've been, Magic Leap's been around since about 2010, give or take.

• 26:43Speaker 02

  They were the first, they were one of the earliest in the field and they were carrying the heavy bag of technology development oftentimes alone for years where compare that to the mobile phone you had back in the day you had like Nokia, Samsung, LG, they were all working to make up the best mobile phone and, and you know, all of those innovations were able to be packed into the phone. It was magically alone for so long. And so, yes, this technology, which is very hard, very complex, needed a lot of investment and, and that's where the bulk of it went.

• 27:23Alex Kantrowitz?

  Yeah, but I, okay. Anyway, one of the cool things was that, I mean, I was gonna say, okay, definitely like, journalists have become skeptical of the company. I'm now a believer. I think that this stuff is interesting. But we became skeptical because there was all this money and these pronouncements and then there wasn't really any use cases. But now we're seeing some use cases, which I think is, is interesting. But, but I'll actually talk about the one that, that I saw, which I thought was interesting, which was this, how like a fire department might monitor a wildfire spreading, you know, through their community. And you like put the glasses on and you see the topography beamed on to a table and you see the progression that the wildfire is actually making. And you can

• 28:06Alex Kantrowitz?

  see where you need to put resources, what percent is contained in what areas. And I thought it was a very interesting, you know, approach. I mean, living in California for a long time, you know, does that technology felt super pressing and necessary.

• 28:20Speaker 02

  Yeah. And what we learned, because we brought CAL FIRE in, you're speaking of California, clearly they're engaged a lot of firefighting these days. What we learned is that they, how they fight fires now in real time is they build these sand tables. And so they kind of try to build the topography of, say, a valley that, that a fire looks like it's shooting up in the end. And then And then try to visualize, well, which way is the wind blowing? Now, you know which way the wind's blowing because you have a PC there that says the wind's blowing north, northeast. It's blowing at forty miles per hour and it's, you know, it's headed this way. But then you're making your mind do the work. Okay, I heard that.

• 29:05Speaker 02

  I'm looking down now at the sand table. Okay, that valley is not quite north, northeast, so maybe the wind will, you know, not be a full impact up that valley. Like, you're making your mind do a lot of the work. I think what you saw in our wildfire demo was, we actually showed the wind, you know, kind of an amorphous blob of wind coming up a canyon. And at the true speed and direction that we were getting from a feed, a live feed. And that is, now you can rely on that and your mind just understands it. You're not making your mind work. Your mind can now figure out, how do I fight this? Okay, I've got a wind coming directly up a canyon.

• 29:48Speaker 02

  I only have one, you know, plane throwing water down there. I've got to send in the other five I have right now to this area. Like, your mind can understand it so much easier in 3D form than looking at a series. Yeah, looking at a series of PCs and then trying to aggregate all of that data and then delivering the command. The other thing it does, and if you watched, we had a little film on that, talking to the younger wildfire gentlemen that were in the picture, in the video, an expert wildfire, again using See What I See, who might be, you know, far away, can look at what they're looking at and give them real-time advice.

• 30:29Alex Kantrowitz?

  Oh, fascinating.

• 30:30Speaker 02

  So you don't always need all the experts in the room. At the same time, you can have them viewing exactly what you're seeing, again, on any device, and walk you through the next steps.

• 30:42Alex Kantrowitz?

  So how is this stuff selling? Like, is this a real business? I mean, we've walked through some really fascinating examples, the training in the factory, the surgeon in the middle of your artery, or vein, or what, I forgot exactly what part of the body it was. And then, you know, public sector use case of training, or actually working to, you know, attack public situations like a wildfire. And then, I know you're working on defense as well. So what does the business look like today?

• 31:11Speaker 02

  Yeah, just in defense, by the way, it's a lot of command, what we call command and control scenarios, as well as training. So wildfire is a command and control scenario that's used for fighting fires. That same sort of scenario is used all across the defense area from one end to the other.

• 31:29Alex Kantrowitz?

  Can you simulate like the boots on the ground and have like somebody like look from above to see how they're making their way through enemy territory, for instance?

• 31:37Speaker 02

  Exactly. So you can surely have the topography of some territory sitting on a table. All the feeds that they're getting anyway can then be depicted visually through 3D visualization in front of them. And it helps to make stronger decisions, quicker decisions. So you're not aggregating all that data in your own head. You can actually see it out laid there. But you can imagine any sort of police, there's police scenarios that could do that, all sorts of ones. So that's one that's very replicable. So you talk about the business. We looked at use cases that appeared to be used, you know, we had to go to the lowest hanging fruit,

• 32:22Speaker 02

  which we think is 3D visualization, remote assist, any sort of training, really, from one end to another. And looked at just a few sectors of enterprise, and largely they're the ones who are already used to wearing something on their eyes, because this is a new medium. And we didn't want to have to bring someone up to speed on that. We said, you're a surgeon, you're already wearing something on your eyes. Defense, you're wearing something on your eyes. Factory workers are typically wearing safety glasses. So again, we narrowed down to the lowest hanging fruit to focus on because we have to operate efficiently as a small company. And we have just launched Magic Leap 2 as of September 30.

• 33:11Alex Kantrowitz?

  Okay, a couple of months ago, not even.

• 33:13Speaker 02

  Yeah. So we, we, we are just at their early stages. We sell in the same way as, say, you know, if you work at a company and they give you a PC, we go through, um, into, you know, distributors in the middle. So who pack on whatever software your company needs. So there's sort of a channel out to the market. So that, that's how people buy it then, you know, you go to buy your PCs. Then you go and, you know, through that same company, you'd buy your Magic Leap 2 devices that have all of your company's mobile device management software on there, whatever apps they want to put on there for you. And that's what's sent then to the end user at a, at a specific company.

• 33:58Alex Kantrowitz?

  And it's, it's still fairly early, but what are the, what are the, I don't know, do you have pre-orders like, or what do the, I know you can't, there's some stuff that you won't be able to share, but give us just like a broad sense. Is this, is like business booming or is it going to be a long path to make this work?

• 34:14Speaker 02

  Well, we feel good about the traction that we've had so far, but let me take you back a little in the journey. We actually started in January of this year with an early access program. And this is something that, um, you know, a lot of companies do. We, we probably should have done it for Magic Leap 1. Uh, that, that wasn't a decision that was made. I, I wasn't there at the time, but it basically, you get the hardware into the hands of people who are really going to bring it out for you, you know, and really put it to use, push all the corners, give you good feedback. We did that in January with, um, a number of companies and then added companies all through the summer as we, um, every time we rolled the software, you know, we would

• 35:00Speaker 02

  bring the software up to speed, uh, bring on more companies. And so that feedback was invaluable. It, it taught us a lot. Uh, we had to first of all, understand what it meant to live inside of a corporate IT infrastructure, for instance, like these devices have a lot of sensors on them and you need to protect all the data, the incoming, the outgoing data. You need to make sure that data is kept private and secure. So we had to have all the, uh, those sorts of applications integrated to the platform ahead of our launch. So quite a bit of learning along the way. And and we're very thankful for the companies who took part in it. They were across all the sectors that we've talked about.

• 35:42Speaker 02

  And, um, you know, we've, we, we actually learned a few things. For instance, surgeons said, you know, the battery life is, is pretty good, but what if we're in a super long surgery? What if this thing goes?

• 35:55Alex Kantrowitz?

  You don't want it to go out.

• 35:56Speaker 02

  Eight hours. You can't have it go out.

• 35:58Alex Kantrowitz?

  I need to, yeah.

• 35:59Speaker 02

  Yeah.

• 36:00Alex Kantrowitz?

  So is, is CalFire, are they in?

• 36:03Speaker 02

  So we're still working with CalFire on that same scenario.

• 36:07Alex Kantrowitz?

  Okay.

• 36:07Speaker 02

  Yeah. And, and, you know, initially trying to turn that into a training device and then eventually a command and control in real, in a real situation.

• 36:17Alex Kantrowitz?

  Okay.

• 36:18Speaker 02

  So we're still engaged.

• 36:20Alex Kantrowitz?

  Yeah.

• 36:21Speaker 02

  And we have, you know, a number of companies who are still learning. I mean, it's early days even for companies to understand, how do you find, how do you create solutions i- in the space? And so there's a lot of educating that is still being done. And to do that, we have a, uh, professional consulting services here at the company. Cause when you, actually, when you look at Magic Leap, we've been around in the space for over 12 years now. There is a lot of unique knowledge and, and a knowledge base here about, you know, software developers who know how to code in, um, 3D, you know, using tools like Unity. Unity is a big partner of ours.

• 37:03Speaker 02

  And, and, and then producing something that has real value for a company. So we offer those as, as one of the revenue streams here at Magic Leap, uh, because we have kind of a unique set of, of employees who've been in, you know, some of them have been in the space for literally a decade.

• 37:22Alex Kantrowitz?

  For sure. Okay. There's plenty I want to get to in the second half. Let's take a quick break. Peggy Johnson is with us. She's the CEO of Magic Leap. Great conversation so far. Want to talk a little bit more about, uh, different use cases, her career and, and maybe some developer stuff in the second half. So we'll be back right after this. This episode is brought to you by Avpoint. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data. And most teams have no single way to see it, secure it, and prove it's under control. That's exactly what Avpoint does. For 25 years, they've been the trusted layer beneath the world's most demanding data,

• 38:05Alex Kantrowitz?

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• 38:47Alex Kantrowitz?

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• 39:31Alex Kantrowitz?

  Learn how to stop online threats before they become real-world attacks. The link's in the show notes.

• 39:44Alex Kantrowitz?

  And we're back here on the second half of Big Technology Podcast with Peggy Johnson. She's the CEO of Magic Leap, spent a lot of time at Microsoft beforehand, Qualcomm, you mentioned. You mentioned a little bit in the first half comparing the metaverse technologies like VR and AR to the cellphone. And we hear a lot these days about how these like new cutting edge technology are going to become the next phone. Heard a lot about that from crypto folks, but it doesn't look like that's going to happen now. So what makes you sure that this is going to follow that path versus just be one of those experimental technologies that shows promise? Like, not every experimental technology turns into the iPhone. So what about this, you know, gives you the confidence that it's, it is like the transformational

• 40:27Alex Kantrowitz?

  technology versus one that might fall, you know, into the dustbin of history?

• 40:32Speaker 02

  Well, we believe in the transformation that this technology is delivering because we see it and we hear it from our customers. They have said, you know, they've been able to save time, they've been able to be more efficient. They feel like they're, they're actually, this is sort of a superhuman, you know, tool they have in their hands now once they put the device on their eyes. And there is no way that that is not going to translate eventually to consumers.

• 41:04Alex Kantrowitz?

  Yep. You make a great point. There's, there's a use case here.

• 41:07Speaker 02

  There is a use case here. Yes. And it's real.

• 41:11Alex Kantrowitz?

  Yeah. So I looked at your bio, it's kind of interesting. You were at Microsoft 2014 to 2020. That's like the exact overlap with, with Satya Nadella, who came in and led a real, real pivot and a real culture change, going from one type of business line to another. And you just couldn't do both in terms of, you know, desktop operating system, moving to cloud, servers inside people's offices, again, moving them to cloud. What have you learned about culture change inside, inside companies and orienting companies towards different purposes? Because I mean, you know, you dispute this a little bit over the course of the interview, but I still imagine that there was a bit of a shift from the Magic Leap 1.0 before you

• 41:54Alex Kantrowitz?

  to the Magic Leap of your, that, you know, under you with the clear vision towards enterprise, like similar to Microsoft.

• 42:01Speaker 02

  Yeah, I mean, that, all very good points. And frankly, there was a lot of change management that had to happen with the company. But if I just go back to, you know, what you started with, I had the honor of working for Satya for six years, you know, from shortly after he became CEO until August of 2020. And what I learned was, you know, really, people and culture are everything. And I remember in my interview process with him, I, you know, he said, I'm, I'm gonna change the company. And, and I remember, I remember, go back

• 42:45Speaker 02

  to, it was like January of 2014. And I thought, how, you know, is he gonna make Outlook work better with, you know, some of the enterprise apps in the industry? Like, I was thinking very tactically about what he might do to change the company. And I said, well, how are you gonna change your company? And he said, change your culture. Like, culture's everything. And, and it is, like, that is my biggest takeaway. It is absolutely everything. So when I came to the company in August of 2020, to Magic Leap, you know, they, they had gone through a downsizing. They had, you know, they, their CEO had stepped down

• 43:28Speaker 02

  in May. They didn't know what the future was. They, there was, there needed to be a settling and, and, and having people understand, there is a plan, there's a vision, and we want to hear from you as we start to build toward that vision. And So my, I would say my first period of time here at the company was all focused on, on the employees, understanding what their needs were, what their concerns were. Um, it was less about is the market ready? You know, are we making the right device? It was like, tell me what you're thinking. Start with them

• 44:06Speaker 02

  and learn and just be like a constant learner and a listener and, and, and, and take all of that input uh, before then saying, okay, here's what we're going to do now. And so I spent, say, the first thirty days or so just talking to one group after another, doing AMAs with big groups, small groups, one-on-ones. And at the end of it, we said, okay, you know, it's clear. We need to focus, we need to focus first of all, and we need to narrow our focus. And we are going to narrow it to just enterprise and we're going to even further narrow it to just a handful of areas in the enterprise.

• 44:45Alex Kantrowitz?

  Wow.

• 44:45Speaker 02

  Um, here's, you know, the, the use cases we're going to concentrate on. And by the way, there's tons of use cases, lots of things that we could concentrate on. We'll get to those, but here's the ones we're going to concentrate on right now.

• 44:57Alex Kantrowitz?

  So you didn't come into the job knowing that you wanted to go the enterprise route? That was something that you learned in these meetings or you had a pretty good idea and that solidified it for you?

• 45:05Speaker 02

  I, that solidified it. It's a ladder. I already, you know, just watching the company from the outside, I was thinking, you know, they should just focus on enterprise.

• 45:14Alex Kantrowitz?

  Right. Cause that's the world you lived in for.

• 45:16Speaker 02

  That's the world I lived in. From mobile phones. Yeah, I too. It was like, of course.

• 45:20Alex Kantrowitz?

  It's kind of interesting where you talk about like going around and listening, because I mean, it does mirror. So I did a lot of research about Microsoft's culture change for, for my book. Um, and it mirrors what Satya did inside the company, turning from, from management, talking at employees to listening to them. One great example was like the old Steve Ballmer. Uh, you know, all hands where there was like techno music and lights. I think he pulled his hamstring jumping around the stage once and Satya canceled that, turned it into a hackathon with the signal being, it's not about what I'm telling you, even though he had a very clear direction. It's your ideas are going to power where this is going, going from here. And without that, we're not going to get anywhere. I'll have another lost decade and it worked.

• 46:03Speaker 02

  It worked. And you know, part of what. We had to do, the management team had to do was take people on that journey. Because a lot of people joined the company and, you know, were focused on consumer. And they were, they were very good at it and, and they liked that area. And, and for me to come in and say, well, we're not doing that anymore. You know, that can be a hard message, but what we had to do is show them. There is just as much gratification and seeing, you know, like the, the separation of conjoined twins. Seeing the device help doctors and nurses who were part of that operation up at UC Davis. To se- to successfully separate some conjoined twins.

• 46:48Speaker 02

  Like there's satisfaction and gratification and like, wow, we have an, our technology has a real impact here. You just had to take them on that journey, right? They had to see that and then they were all in. And that's been, you know, it took some time. It did, I'm, I'm not going to lie. It was not, you know, always an instant flip for people. And some people decided it wasn't for them at all. And, and, you know, they amicably left and that's fine too. Like you've got to be passionate about what you do.

• 47:19Alex Kantrowitz?

  Right.

• 47:19Speaker 02

  Um, but I can say that the team we have now is super passionate. And it's been great to see what they built, you know, during a pandemic, during, during an unclear vision of the future. During the change, a massive change in management. And they just kept plugging away and they built again, just a awesome AR device, really a leader.

• 47:44Alex Kantrowitz?

  Yep.

• 47:44Speaker 02

  You know, in that space.

• 47:45Alex Kantrowitz?

  Now, speaking of Microsoft, uh, the company is making its own way into the metaverse. And maybe when I said it's all consumer, there is actually some enterprise that's starting to bubble up on the surface in places like, like Meta. For instance, with their new device, I think called the Quest Pro. They've like baked some Office 365 software into there where like you can I don't know exactly what they want you to do Excel or Microsoft Word and the Metaverse, which to me, I mean, anyway, it doesn't sound like a very appealing proposition to me. But what is your view on in terms of competition? And when you see Meta making these moves, dabbling its way into enterprise and training, obviously, they want to train with VR. They have Meta workroom,

• 48:30Alex Kantrowitz?

  Metaverse workrooms or Horizon workrooms. It's tough, really tough to keep track of their names. But the thing where you can have a meeting with other people in virtual reality, I mean, do you view them as as like a pretty serious threat?

• 48:43Speaker 02

  Well, first of all, I would say I welcome the competition because, I mean, to be honest, when they made the announcement about changing their name to Meta, I mean, they're serious about this. And the investment they're putting into the space, that gave us tailwinds for sure. You know, it made anybody who was in the space get a lot of attention. All of a sudden, people turned and looked and said, hey, magically, you know, first, you know, tell us what you're do what you've been doing. And, you know, all of a sudden, we were back in the conversation, which was great for us as a small company who had been through a

• 49:21Speaker 02

  lot of challenges. And and so definitely, we welcome that. And and I think the recent announcement with Quest Pro, you know, that only served to validate our strategy to shift to the enterprise several several years back now.

• 49:38Alex Kantrowitz?

  Right. But a lot of a lot of CEOs says, you know, a company like Meta comes in the same business, they say it validates, but it is, it's real competition.

• 49:46Speaker 02

  I I wouldn't say that it's not, I mean, but I also think of I don't think this is a wow, you know, one winner gets all type of, I mean, look at the, you know, the handset space in the beginning and mobile phones. There was a bunch of folks, you know, some people did high-end handsets, some people did feature phones and, you know, low-end handsets that just made phone calls. Like there, there's, there's room for more than one player in this space for sure, because there's a hardware element to it. So, much like even the PC market, you know, you've got lightweight PCs, you've got PCs that are more viewing devices, and then you've got, you know, gaming PCs on the other end of the spectrum. And those are different companies. And so, there's room for, for all of us. There's going

• 50:28Speaker 02

  to be winners and losers, but it's not, you know, winner takes all. Definitely not that.

• 50:32Alex Kantrowitz?

  And, and I remember speaking with, with Mark Zuckerberg about virtual reality before they even did the name change. And hopefully he'll come back on again. Try, I'll try to get him. But, uh, that he, he was very excited about VR as like a new operating system. And he picked up his Android phone and talked about how it isn't exactly how he wants it to work. And of course, we now know Facebook has had all these issues with Apple cutting off their, their revenue. When it comes to being an operating system or sort of a different experience, where, where does Magic want to be? Because is it, uh, you, you do work with developers. Is it a platform where you want to open up to all developers? Or is it something, you know, we've talked so much today about focus. So where's the balance between focus and, and being a real platform for anything?

• 51:17Speaker 02

  We are really the latter. We are open. We want to be as broad as possible. We want to tap into as many developer groups as possible. And the reason is that, you know, we, we just do one thing. We make hardware. And we've got a platform, platform on top of it that, you know, is, is developed by developer input. You know, we listen to our developers. We're very developer friendly. And, and if they say, hey, you know, we need this or that, we're going to put it into our platform. So we're hyper-focused on our platform. And just that, you know, we- We don't sell, we don't have a gaming business that we're trying to loop in,

• 51:59Speaker 02

  or a cloud business, or an advertising business. This is all we do. And so, we really see magically as, you know, the most biz friendly, because we're not pushing any other businesses where the most dev friendly, because we integrate to all clouds, you know, physics engines, other AR platforms. We've, we integrate to Microsoft's Mixed Reality Toolkit. We integrate with Unity. We integrate with Nvidia's Omniverse. So it's like, come one, come all. And that has been our strategy, you know, since I joined the company. It's interesting you talk about operating systems, because in the beginning,

• 52:42Speaker 02

  nobody would, nobody at the company went and asked about changes to operating systems would do it. Like, you know, there needs to be certain elements introduced into an operating system in order for you to use it, to build an AR platform. And, you know, they knocked on the doors of all the existing operating systems out there. And I think they listened, they were curious. But, you know, for a little company with no volume, to ask for some changes in an operating system, yeah, the answer was no, basically. No one said yes. So, Rony, the previous CEO, said, "We've got to build our own." And so in the beginning, and it was the right choice at the time,

• 53:25Speaker 02

  they built their own operating system, because they couldn't get anything incorporated into the existing operating systems. One of the first things that my team and I did was to move over to Android, AOSP, actually. And because we wanted to reach the most developers, we didn't want to stick with that, but we needed it in the beginning. By the time I came, those elements were largely getting incorporated into operating systems, and Android was furthest along with that. So we chose to move over, and it's really opened up our niche amongst developers. It was the absolute right move. But again, couldn't have, we couldn't have got to where we are today if we hadn't had our own in the beginning.

• 54:10Speaker 02

  It was definitely something we needed.

• 54:12Alex Kantrowitz?

  Are you going to charge the 30 or 40% that Meta does to developers to run? What's the fee?

• 54:19Speaker 02

  That's not our business model. We, we have three areas of revenue. Sell hardware, so there's margin there. We sell professional consulting, as I said, we've got a unique base of, of engineers here who, some of the longest in the industry to help companies build their own solutions. And then we have a, a new area of business where we can operate as a contract manufacturer for other companies in the space. And I guess I would say just the fact that companies are asking us to, uh, help them build their optics or elements of their AR is not surprising to us because it just highlights how hard augmented reality is, not only to develop, but to manufacture.

• 55:02Speaker 02

  It's not easy and, and it's very, very highly technical in the optic, optics area. So our engineers, we've got a bunch of PhDs in the optics space, you know, had to learn how to very, very accurately place digital content in front of your eyes and then how to manufacture it cheaply and with high yield rates. And we have amazing yield rates. Our yield rates are over 92%.

• 55:34Alex Kantrowitz?

  What's the yield rate?

• 55:35Speaker 02

  A yield rate is, uh, you know, a, a, a piece of, uh, glass comes down the line, glass substrate at the other end comes out an optical eyepiece. And it's, it's sort of how many come out the other end. So 92% come out the other end. And, and I mean, just going back to, yeah, I don't know if you remember Qualcomm used to build mobile phones in the early days and our yield rates, you know, on any given day were challenging to say the least. It was, there was always something, you know, that was, yeah, it was, yeah, I mean, sometimes, you know, it, it was under 50%, you know? It, we just could, yeah, it was hard, like, and, and that means a lot of scrap, a lot of rework.

• 56:18Speaker 02

  You gotta figure out what the, how to make it and, and how to make it cheaply and efficiently. And, and we've got 12 years of doing this and we know how to do this stuff and we can do it with high yield at, at a fairly low cost and others are asking. So it's a real validation of the expertise that, that resides right here. We have a fact, we run a factory. It's in the U.S.

• 56:45Speaker 02

  Right? It's kind of crazy.

• 56:46Alex Kantrowitz?

  Yeah, less less crazy. We recently had Ryan Peterson on from Flexport talking about how that's becoming a movement where people are like no longer relying. I don't think if he said that in particular, but but you did speak about how more companies are exploring.

• 57:01Speaker 02

  Yeah.

• 57:01Alex Kantrowitz?

  Building in the US. So

• 57:03Speaker 02

  Particularly for that, like, I don't, I think it would have been really hard for the company to make those eyepieces with an overseas factory because that means, oh, something's wrong, send engineers.

• 57:15Alex Kantrowitz?

  You might, you might want to have them in that overseas factory where the augmented reality glasses and then you can have, see what they say.

• 57:22Speaker 02

  Funny you should say that. We did that during COVID.

• 57:25Alex Kantrowitz?

  No way. Okay.

• 57:26Speaker 02

  Yeah, we have a, like, an assembly partner in Jabil who runs out of Guadalajara in Mexico. And as we were bringing up magically too, so we make all of the high value parts here and put the whole optical assembly together here. And then the rest of the packaging goes around it down in Guadalajara, Mexico. And as we were bringing up those lines, we couldn't put engineers on planes. It was, it was COVID and we, we were stuck. And so we were able to use our own devices to see what they saw and, you know, to bring things up efficiently and effectively, so much so that even today, we, we send fewer engineers than we ever

• 58:10Speaker 02

  did down to God. You know, we just, there's not, there's not that same need.

• 58:15Alex Kantrowitz?

  Fascinating. Well, Peggy Johnson, thank you so much for joining. What a great conversation. Really appreciate being here.

• 58:20Speaker 02

  Thank you, Alex. Thanks for having me.

• 58:22Alex Kantrowitz?

  Okay. Thank you, everybody for listening. Thank you, Nate Gwatney, for handling the audio. Thank you, LinkedIn, for having me as part of your podcast network. Thanks to all of you, the listeners, for being here week after week. We have a bunch of great shows coming up. Aaron Levy from Box, CEO of Box, is going to be on relatively soon talking about in the office, out of the office. Actually, that would have been a fun topic to talk with Peggy about. We'll have to have you back on the show. All right, that will do it for us here on the Big Technology Podcast. We will see you next time. Thanks again for listening.

• 58:56Speaker 03

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