June 7, 2023

Virtual Reality Calls

Should you wear an Apple Virtual Reality headset during earnings calls? 

Wait, what? Earnings calls?

I’ll explain.

Photo 67535015 / Vr Headset © Ljupco | Dreamstime.com

I remember wondering if Apple would survive.  You too?  The maker of personal computers had by the 1990s lost the market to Microsoft.  Some schools used taxpayer dollars to buy Apple stuff and keep it afloat (smile).

Then, Apple under Steve Jobs revolutionized consumer behavior starting with the iPod, extending into iPhones, then to iPads.  Apple ships 200 million iPhones annually now, and the company generates $400 billion of revenue a year, $100 billion of earnings.

Crazy. Right?

Steve Jobs died. Tim Cook, anointed successor, faced a tall task.  What next?

Turns out, the Apple Watch.  Cook’s first post-Jobs product was a wristwatch. People thought it was crazy.  Apple was about phones. And music.

Well, phooey.

Apple owns 60% of the smartwatch global market, sells tens of millions of them annually and generates billions of dollars of revenue from them.

Score one for Tim Cook.

Now, comes Tim Cook Reprised, the VR Headset.  (Yeah, AirPods, but Apple didn’t invent the wireless earbud.)

The company introduced the pricey gadget – which some likened to an Apple Watch to strap on your head – this week, at the same time the Investor Relations profession gathered for its annual confab

IR people run earnings calls for public companies.  We come to the Apple-and-earnings-calls confluence.

By the way, I’ve not missed but maybe three NIRI annual conferences since 1995 when I became a member.

But I’ve got my plate full this year, including our first-ever educational session in partnership with Interactive Brokers today.  If you want to understand how the market works and what the money is doing, come join!  Noon ET.

Back to Tim Cook, Apple, earnings calls, and VR headsets.

Earnings calls haven’t changed in 20 years. Maybe more.  We’re way overdue.

Apple revolutionized music, phones, and smart watches.  Now it’s trying to get people to see the unseen, in a new way.  I wouldn’t bet against Apple, given the track record.  But it’s really hard to follow one hit with another, Steve-Jobs-style.

The pressure is on Tim Cook.

Now, I’m not a gamer. I’m not looking to interact with other people in the metaverse.  I like interacting with other people in the real world.

Earnings calls are the real world that people abandoned. I mean, they need re-invention. 

Earnings calls were invented – they’re not a regulatory requirement, they’re a tradition, a ritual of being a public company, a pseudoscientific pursuit – to meet growing demand from investors to connect with companies.

That era is gone. Used to be, 80% of volume was stock-picking. Now it’s less than 10%.  Machines permeate the stock market. They drive the majority of volume and most prices.

Every new dollar coming to the stock market, on net, goes to Passive investors – quants indexes, ETFs.  Stock-pickers have lost $1 trillion on average every year for 15 years, to Passives (and bonds and alternatives like private equity).

Yet the earnings call is still this weird anachronism stuck in time, like somehow it’s just as important as it was in 1995 (Warren Buffett has never held one).

So, why DO we hold them? 

Ostensibly, to boost shareholder-value.  Do they?  Show me the data, the evidence.  I’m in the data business!  For over 18 years, ModernIR has measured the data behind price and volume.

And I can tell you without reservation that earnings calls don’t drive shareholder value. They cost immense real and soft dollars in the form of consumed executive time. They promote arbitrage and hedge-fund bets. And they often destroy shareholder-value.

We need a VR headset for earnings calls.  A new way to see them. We either make them valuable again or get rid of them.

And ModernIR is working on it.  I’ve said companies should focus on characteristics, not story. ModernIR has preached a gospel of messaging to machines (ask and we’ll explain) at earnings. In fact, you have three audiences – machines, internal constituents, long-onlys.

But just two of these really matter now. 

I’m not knocking our traditions. I’m saying let’s learn something from Apple. Steve Jobs and now Tim Cook rethought the way humans interact, track data and consume information and entertainment.

And Apple won big.

We need that in the IR profession. IR is not storytelling. That was yesterday. IR is about understanding the money and the markets and helping the c-suite and Board deliver shareholder value with better data. 

So either stop holding earnings calls and stop wasting time. Or reinvent them.  If you’re interested in either option, we can help!  Reach out to me. I’ll explain.

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