>> HANNES HOFMANN: Welcome, and thank you for joining us for our next panel. My name is Hannes Hofmann, re. I'm delighted to welcome you to our next panel, a conversation with an American inventor, Jack McCauley. Instead of introducing him myself, we've prepared a little video for you to demonstrate some of his innovations and accomplishments over his distinguished career. After the video, we'll immediately jump into our interview together. Enjoy the video. >> HANNES HOFMANN: Jack, I hope the video did you and your innovations justice. It's great to have you join us from UC Berkley. I see the background image of your office on university campus. Really happy to have you with us. Very clearly right now, we're going through an age of rapid technological change and disruption, whether it's environmental technology, automotive technology, health technology, education technology, the way how we cooperate and work with each other. Lots of disruption happening around us that opens interesting investment opportunities. Now, one of the things that stands out about you from early days, people have said you're a modern age Edison. And already as a kid, you've been experimenting a lot with technology. In fact, you've got a junior Tinker engineer from 9 years old. So at an early age, you had an interest in innovation. Tell us a little bit what triggered that interest, and then do you think right now is your time? How does it feel, like, living as a technologically interested person in such an age of change? How does it feel for you? >> JACK McCAULEY: Well, thank you, Hannes. I appreciate it. And thank you, J.P. Morgan, for inviting me to speak here today. It's an honor to be here. The introduction of modern day Edison, I don't know about that. I will tell you how rapid the change has occurred. Particularly in communication. We will talk later about cyber security, which is one of the areas I've been working in. But just the rapid changes that we've seen in the last couple of years, especially with search engines and AI. So, I'm primarily working in two areas, cyber security as I mentioned, and also electric vehicle technology. These are my areas of focus trpg right now. I see major changes occurringtransportation right now. I see major changes occurring right before our eyes with transportation. Just the other day, I was looking at Tesla's sales figures. 595,000 vehicles in 2020. Volvo, which is a large -- mid-sized company, sold 640,000 in 2020. So Tesla is. -- is catching up. There is a market for environmentally conscious vehicles, hybrids and so forth like that, that's growing. And I'm very aware of what's happening in that area and I do teach at UC Berkley. This is a facility both by Paul Jacobs and myself. We teach students how to use their hands and build things. So it's actual physical hands-on, not so much on the theory side of things. [Inaudible] is famous for hardcore theory, but this is more hands-on maker space. I would say that, you know, for a person like myself getting my hands on things and physically testing is very pedagogical. And that's how I learn. So I thought that maybe by building this space, that we could get to reach out to the underprivileged people, bring them in, and teach them. So different people learn in different ways. I'm probably on the spectrum of people that have -- you mentioned about my childhood. That's true. I've been doing this since I was a little kid. And I just always had an interest in this job. There were no computers around when I was a kid. They were around, but they were mainframes and so forth. I sort of watched that whole thing unfold in front of me. I would say that the main thing -- the main contributor to my success was my relationship with people. Being able to have a network of advisors and mentors, people to reach out to and talk to about things, to ask questions to, it's been very helpful to me in my career. These relationships, some of them go back 40 years, I'm still in contact that I worked with that long ago. And this is how I got gigs. They would call me when they needed someone. I'm a tech guy, I can do all the technical part of it, for sure. And just because I'm connected to people, that's how I got these opportunities. It had a lot to do with me, but a lot to do with the help I got from other folks. And the great education I got at University of California. So those are -- modern day Edison -- I'm an inventor. I do work on stuff all the time. I work on cars. I've got a full staff of engineers and so forth at our private research facility. I work out of there. It's like a hobby shop, I would say, pretty close to that. But it's serious stuff we're working on. I'm focused on -- like I said, cyber security, electric vehicles and so forth. I could talk some more about the innovation that we're doing there. >> HANNES HOFMANN: Yeah. Listen, I mean, what's fascinating is you say you're an inventor, and you're have hands-on, but you also have a great network, which obviously in northern California, where you are, is really important and is very much an ecosystem that is available for new technologies. But what's fascinating is much more than just an inventor of different things, you're also someone who has a lot of commercial success with the things that you invent. So, one of the big success stories that is in your bio is you co-founding Oculus, right? A company that you started in 2012, and three years later, you sold it to Facebook for a few billion dollars in what was then considered quite a landmark deal for virtual reality. Maybe you can share with us a little bit what got you to that opportunity and whether your background in gaming, where you had designed before that important aspect of Guitar Hero, which was the number one selling -- the first game in a single edition of the game sold a billion dollars worth of revenue. Whether your experience in gaming led you to the VR space or what else led to the call that made you start this company Oculus that was so successful at the time and still is as part of Facebook today. >> JACK McCAULEY: Well, here's how things went down in a nutshell. I worked at Activision. I knew the staff and working on patents of intellectual property. I also sold a bunch of my patents. I got to know some of the folks there. The chief legal officer. And along comes Oculus. I didn't know about Oculus. He reached out to me and told me, hey, you've got to talk to these guys. Again, this is what I'm going back to with these connections that I have. They're working on gaming stuff. I said, okay, I'll talk to them. The first guy I met, the CEO of Oculus. I was just blown away by how talented and smart the guy was. Probably the most talented software energy, but also more of a biz guy. He's had three successful exits. He was just amazing. The gaming part of it, I wasn't sure about. Games have turned into a social experience. This very simple graphic. It has 150 million users. That's how many active users there are, and part of it is this experience during COVID for people to get to play against one another. This is what video games are becoming. They're becoming social. You play in teams online, or you play with other players. You have your buddies there. Twitch and [indiscernible] video, you can actually see the other players playing. So we never saw that coming. We didn't have Internet connected games, and saying goodbye to DVD and plug it in. But that's what's happened. I would say this -- if you're an investor looking at investing in gaming, I would look at [indiscernible] the social component of it. You know, heavily. Now, Facebook bought Oculus, we all did well by it. Most of my earnings from that have gone into [indiscernible] -- given away millions and millions and millions of dollars to education and other things. That's what it's done for me. It has turned out that this gaming thing -- it's what I would be looking at. Could not have invested in those. At my research facility, there's a start-up upstairs. I'm not really involved, but I'm a big investor. And they're working on social gaming. So that's what I would be putting my saddle on. That's my take on the gaming side of it. I hope that answered the question. >> HANNES HOFMANN: Yeah, it's fascinating, and obviously many of our parliaments at Morgan Tech Exchange come from Asia. Social gaming particularly in China and in Asia is a very dominant phenomenon where significant amount of money actually is also being paid by gamers who play with each other and compete with each other or cooperate with each other in some of these games. Now, one other aspect I wanted to ask you, though, is the virtual reality aspect of Oculus and what you've built. What's interesting to me, I remember a few years ago, we discussed virtual reality at an earlier version of Morgan Tech Exchange, and the experts there had extremely positive outlooks on the potential of the technology. So I brought up a slide for the audience. At the time, 2016, the numbers they were giving to us saw an increase of revenue projected from $120 billion. And the argument was very much that as technology improves, 5G networks are becoming a reality. Latency will go down. The immersive experience will become better. And many people thought that social gaming that you just talked about would actually increasingly be dependent on virtual reality and the opportunities that came with it. I also remember Steven Spielberg made a movie called "Ready Player One" about effectively people competing in a virtual world using virtual reality devices. It was actually a big success in the box office. Made about $600 million in the global box office. But the reality now in hindsight where we look today, the reality is that the reality numbers have overwhelmed these projections enormously. I've just put the real numbers in here for our audience. We're looking at as of 2020, revenues of less than $10 billion compared to the 120 billion forecast for the time. History have lots of technologies that have failed or technologies that worked as a technology but didn't make investors money. Think of airlines. What is your take on virtual technology? Does it need more time? Will it ever get to this 120 billion industry, or do you think people were too exuberant and too positive on it? >> JACK McCAULEY: Well, the exuberance for it -- I mean, it's really cool. If you put it on, you transport into another world, it's magical. But, you know, it's hard to develop content for it. A game is very, very expensive to develop. Grand Theft Auto cost half a billion dollars. Half of that -- roughly half of that was just in marketing, and so forth. GTA5, half a million dollars. It's very, very expensive. In order to produce content, you have to have a lot of hardware out there. The Sony Play Station 3 has 50 million units out there. That's a lot. I don't think that there's enough platform capability to sustain a large Triple-A title in the marketplace. So, long and short of it, there wasn't enough hardware for content. And the other thing, as I'd mentioned, it's kind of -- gaming has evolved into a social thing. And it is a little bit isolating. You wear the thing on your head. It's just different play. And we haven't actually figured out how to write a game for it exactly without making people sick. You really can't move around in it very well. It gives you vestibular issues and motion sickness. Haven't figured that out. And I don't think that Facebook is a gaming company. I know they bought the business, and the quest 2 is an awesome piece of hardware, but it's not their thing. They sell ads. They sell them to millions of users. 1.5 billion users. And that's their specialty. It's not video games. Would somebody like Sony have been able to pull this off? Well, probably not, because at the time when the Sony headset came out, the platform was too underpowered to run it. To your point, though, with 5G coming out, here's my prediction with 5G. Wi-Fi will go away. You won't have Wi-Fi in your house. Everything will be on a 5G high speed cellular tower network. Cable -- you won't have cable going into your house because there will be towers positioned at different points in your neighborhood that will provide all the bandwidth you need. So, to your point, that's going to be cloud rendering in gaming and less platform. You'll be able to play high end video games without having a high end -- you have a cloud-based GPU, a cloud-based processor doing the work for you. That's my prediction. That's exactly the point about 5G. I think that this thing we're seeing now with other people who are investing heavily in 5G, there's a reason for that. And there's a reason to be worried about competition. So I think that that's what's happening right now. We do at my facility -- the IOP stuff with the cellular networks and we're looking at that right now. So, that's where I'm thinking it's going. If you have 5G available everywhere, you could wear your virtual headset any time you want and watch movies in 3-D and do whatever you want. It's just not there. It's all on Wi-Fi right now. So that's my take on it. Maybe we'll have a better view of what will happen. You're exactly right. Exuberance was -- I knew that that would never happen when I was there. >> HANNES HOFMANN: Well, listen. What's interesting is, you just gave us an example of a technology that was exciting, and is exciting in many ways, like you described. But it doesn't seem like it has found its broad scaleable use, right? Because like you said, it's hard to produce content. It's hard to figure out how to get into social gaming. If I think about another area where there seems to be a new technology that has a lot of use, let me move into the automotive sector, right? So, automotive technology is something that a lot of people are very interested in today, because of course, mobility is something that all developed societies and developing societies have fully embraced. Car ownership, individual transportation, mass transportation. What is fascinating as an investor, obviously, a lot of the -- especially electric vehicle stocks have done investments over the last 12 months alone. Companies like Tesla or Chinese main competitor BYD, almost tripled. Another Chinese company that is active in the electronic recourse space. Increased by 50% in the last nine months after its IPO. So we've got a lot of positive investment stories in the automotive space. I know that you also have a big interest in automotive. I wanted to slow the audience again another angle, another slide here, which is something that I actually think is cool. And I wanted to see your comments on it. So you've got a lab. And you said you work a lot with your hands, right? Where you took a car -- I'm a little bit curious why you decided for this specific car, which is a beautiful car, but not a car that is known to a lot of people. And maybe you can share with us a little bit what you're working on in automotive and where you see opportunities. >> JACK McCAULEY: Well, this vehicle is a platform, and this is a T70 only on the surface. We bought the body from the original manufacturer in England. It comes from 1969, that's when the body was produced. The rest of the car, though, is innovative and technical. For instance, we wanted to build a car without mirrors. You'll see mirrors on it, but they're really not mirrors. Those are cameras inside the mirrors. And a display. So the car does not have standard mirrors like reflective mirrors. It has camera modules. It also has a wireless steering wheel. The connection between the vehicle and the wheels is wireless. So I wanted to do some new and innovative things there. You asked me for the genesis to genesis. There's a sci-fi movie, George Lucas's first sci-fi movie, and I love that movie. I'm a sci-fi crazy guy. That's why I decided to build this car. I wanted to build an identical copy of it. And if you look at one of the slides there, you can see it on the background, on the top left, the first vehicle. And then I change my strategy a little bit and ended up with this. We build everything there except the body. We built the steering wheel, the suspension, the brakes, everything that you'd see there. Everything else, the -- myself included. I did a lot on it. So this is what I was trying to do, to do some innovative stuff with gasoline-powered vehicles. But we are working on electric powered vehicles now. But that's our focus. We're trying to make an electric vehicle even more efficient. And for investors, looking at companies to invest in, solid state batteries, which are different than the batteries that go into -- the battery that's in a standard electric vehicle is very similar to, you know, a battery you'd find in a cell. Very similar to that. But there are companies doing work in solid state batteries, another hot thing to invest in. I personally feel that's one of the areas I would reach out and be interested in investing in. They're lighter weight, higher energy density. So a large part of the weight of the Tesla is the battery. What if you could reduce the battery mass by 50%. It would really make the vehicle weigh less. So that's one of the areas we're looking at. We're looking at battery management. How to manage the energy inside the batteries and how to manage the energy that the vehicle has. So the vehicle, just by moving, it has energy. You put on the brake. What do you do with the energy? A Tesla dissipates the energy in the brakes. A lot of it just gets burned up on brakes. So we built one without brakes. It has no mechanical brakes in it. Pure electric brake. This was the focus of what I was teaching at Berkley in the fall of last year. Trying to do something innovative. We've accomplished that. So that's kind of what we're hoping. You asked about the car. I thought it was cool-looking. I wanted to build a sci-fi type car. It's got four computers on it. It's got cameras and all kinds of stuff. A lot of programming, engineering. A lot of things like that we did internally. The display. A lot of the stuff on the car was done that way. I would go to work, I would get burned out on a game or something I was working on, and then go build a car. This one here took me four years from the time I started, four years, and the other ones -- they're about three or four years to do. That's kind of what I would do is just take a break. >> HANNES HOFMANN: That's an incredible story. Can you actually drive this car on the street? Is it -- it is? >> JACK McCAULEY: Yeah. >> HANNES HOFMANN: Your children must love the idea of going for a ride with daddy in such a beautiful... >> JACK McCAULEY: Well, my kids are all grown, but they love riding it. It's fully environmentally compliant. It has all the emissions equipment on it than a car you would buy from Toyota, let's say. It's fully compliant. So I wanted to build a car that was green also. This is a gas car. I realize it's a carbon thing. But I wanted to build a vehicle that was emissions compliant. Yes, it's a streetcar. I drive it around the neighborhood and drive it to work and do all kinds of stuff with it, and it's brutally fast. It's scary fast. It weighs about -- about 2,000 pounds. That's all it weighs. And it's got huge amounts of power. So it's very quick. And scary to drive. But I put enough safety stuff in it -- I'm not so worried about getting hurt in it, but I am careful with it. >> HANNES HOFMANN: It's a beautiful car, for sure. And listen, as an investor, listening to it, the interesting thing here to me is the idea that in this day and able, where everyone says cars are becoming so complex and so hard to build, and you need massive companies in order to drive innovation in the automotive sector, I mean, an inventor like you, obviously with a very active brain, you're able to build your own street-going car, where all you take is a part of the existing car and replace all the parts, is actually a really interesting thought. Because it shows again how innovation can come in many different places, where many people were not expected. And again, automotive is definitely a key area of interest for many of our clients. And I think we all look forward to seeing the impact of your inventions in the commercial space in the future. One other question I wanted to ask you, another topic that a lot of people are concerned about today is cyber security, for good reason. J.P. Morgan, it's not a secret we spend about a billion dollars a year on cyber security. Just recently, there were a few big cyber security problems in the headlines. One of them colonial pipeline in the U.S. shut down. They reduced the payment of 4.5 million just to get the pipeline going again. There were news reports that hackers had hacked into public health data for the Republic of Ireland, wanted a $20 million payment from the government of Ireland. Cyber security is a big topic. And you talked about Wi-Fi and 5G and more connectivity. What are your thoughts on cyber security? What trends do you see there? What do you do there? And it's very clear, we all have to be a lot more vigilant in the future. What are the cutting technologies that you see? >> JACK McCAULEY: Well, just to give you an idea. You see these doorbells you're welcome buy them, put them on your house, and someone comes up to it and it triggers and sends an image to your phone. It's very, very easy to grab those images with a Linox computer and an access point. I can grab images from someone's house -- this is the experiment I ran. I didn't have to write any software to do that. It's commercially available software. So, it's a serious problem. Let's say you're a celebrity and people are snooping around your house. You've got cameras. First of all, don't put cameras in your house. That's my advice to people. I don't put them inside. They're very easy to grab the entire image from them. Also, the access points you have in your house, like your Wi-Fi, are not secure. I don't care what anyone says. For about $8 on Amazon, you can buy a device that will get your Wi-Fi password. So, it's not really built into the infrastructure. It's all about performance. It's about going as fast as you can and watching streaming movies, entertainment. That's what it's about. In the future, like the colonial pipeline example, it is coming -- becoming more and more important and more and more prevalent. The 5G system is not built with a tremendous amount of security. It's built for speed. It's like a race car. It's built to go as fast as you can. So it is a huge problem. I worry about my bank accounts. I mean, all of your assets don't have physical assets. You wanted to attack a country, wipe out their financial system. That's my take on it. And we are working in this area specifically right now. >> HANNES HOFMANN: Definitely a fascinating area. And like you said, an area that needs a lot more focus, and again, I love the analogy that you just draw to networks. Clearly, your love of cars shows through. Listen, we're almost out of time, but I wanted to ask you a final question. Morgan Tech Exchange, this conference, originated in China. And we spend a lot of time making Chinese technology companies and potential investments in Asia for technology accessible to clients around the world and explaining the differences between U.S. technology companies and Chinese technology companies. You've been active in China early on. You are someone who's had a lot of inventions in the technology space. Can you share your perspective on where you see similarities and differences between Chinese technology companies and U.S. technology companies and what you foresee as the trajectory of development? Will there always be a rivalry? Will there be partnership? Will there be complimentary technologies? How do you see that developing? >> Well, the claim that I hear about Chinese companies is the theft of intellectual property, that's one claim. Lack of innovation. Look at TikTok, look how quickly that grew. In We Chat, they have 1.2 billion users, just slightly less than Facebook, and it's completely indigenous. Those are built within China. So I think about if I were a company that has a social media presence, I would look at how to get into that market. I think it would be very difficult to get into the Asian market, not with Facebook necessarily, Facebook and China, some company like that. I would -- I mean, isle not going to criticize Europe. What do they produce there in the last 20 years? There's no Facebook. There's no Google. China has done all these things. They have their own Alibaba and so forth. They have their own things. But they really haven't produced that. I'm wondering why that is. It's just the thought they ponder. They're sort of capable of doing it. They're smart people and all that. I think that the government and China has gone to great lengths to make it easier for people to do entrepreneurial things. The available capital in the United States is not available in Europe to do a start-up company. It's just not. There has to be a good environment for that. So that's my thought there. I wouldn't take China lightly at all. I would be very careful, you know, to consider them if not a competitor, I think it's a crucial mistake. That's just my take on it. >> HANNES HOFMANN: Yeah, and I remember when we prepared for this conversation, you told me that you actually spent time in China, significant amounts of time in China in the last 20 years. So, you definitely speak out of not only of someone who understands technology, but also someone who spent a significant amount of time in China and understands the Chinese angle. One of the reasons for this conference this year, one of the themes of this conference this year is 100 years of J.P. Morgan in China. So I think we share your perspective and we see equal opportunity, growth, and innovation in China, and obviously we're very happy to be one of the first tier American companies who are active, very strongly active in both regions. Listen, I wanted to thank you very much for your time. It's been an incredible tour deforce. You led us through automotive, cyber security, we talked about development of networking technology in the future. You give us an insight into the work you do hands-on under the beautiful cars you drive. I cannot thank you enough. I think it's been very interesting to see what a modern day Edison can do in terms of innovation, and also turning innovation into commercial success. And ultimately, I think that's what many of us are looking for, like you said, finding the right people to partner with in order to innovate in this age of disruption and create economic success from that. So, thank you very much for your time. It was absolutely fascinating. And we look forward to working with you and talking with you a lot in the future. Thank you, Jack. >> JACK McCAULEY: Thank you, J.P. Morgan.
>> HANNES HOFMANN: Welcome, and thank you for joining us for our next panel. My name is Hannes Hofmann, re. I'm delighted to welcome you to our next panel, a conversation with an American inventor, Jack McCauley. Instead of introducing him myself, we've prepared a little video for you to demonstrate some of his innovations and accomplishments over his distinguished career. After the video, we'll immediately jump into our interview together. Enjoy the video. >> HANNES HOFMANN: Jack, I hope the video did you and your innovations justice. It's great to have you join us from UC Berkley. I see the background image of your office on university campus. Really happy to have you with us. Very clearly right now, we're going through an age of rapid technological change and disruption, whether it's environmental technology, automotive technology, health technology, education technology, the way how we cooperate and work with each other. Lots of disruption happening around us that opens interesting investment opportunities. Now, one of the things that stands out about you from early days, people have said you're a modern age Edison. And already as a kid, you've been experimenting a lot with technology. In fact, you've got a junior Tinker engineer from 9 years old. So at an early age, you had an interest in innovation. Tell us a little bit what triggered that interest, and then do you think right now is your time? How does it feel, like, living as a technologically interested person in such an age of change? How does it feel for you? >> JACK McCAULEY: Well, thank you, Hannes. I appreciate it. And thank you, J.P. Morgan, for inviting me to speak here today. It's an honor to be here. The introduction of modern day Edison, I don't know about that. I will tell you how rapid the change has occurred. Particularly in communication. We will talk later about cyber security, which is one of the areas I've been working in. But just the rapid changes that we've seen in the last couple of years, especially with search engines and AI. So, I'm primarily working in two areas, cyber security as I mentioned, and also electric vehicle technology. These are my areas of focus trpg right now. I see major changes occurringtransportation right now. I see major changes occurring right before our eyes with transportation. Just the other day, I was looking at Tesla's sales figures. 595,000 vehicles in 2020. Volvo, which is a large -- mid-sized company, sold 640,000 in 2020. So Tesla is. -- is catching up. There is a market for environmentally conscious vehicles, hybrids and so forth like that, that's growing. And I'm very aware of what's happening in that area and I do teach at UC Berkley. This is a facility both by Paul Jacobs and myself. We teach students how to use their hands and build things. So it's actual physical hands-on, not so much on the theory side of things. [Inaudible] is famous for hardcore theory, but this is more hands-on maker space. I would say that, you know, for a person like myself getting my hands on things and physically testing is very pedagogical. And that's how I learn. So I thought that maybe by building this space, that we could get to reach out to the underprivileged people, bring them in, and teach them. So different people learn in different ways. I'm probably on the spectrum of people that have -- you mentioned about my childhood. That's true. I've been doing this since I was a little kid. And I just always had an interest in this job. There were no computers around when I was a kid. They were around, but they were mainframes and so forth. I sort of watched that whole thing unfold in front of me. I would say that the main thing -- the main contributor to my success was my relationship with people. Being able to have a network of advisors and mentors, people to reach out to and talk to about things, to ask questions to, it's been very helpful to me in my career. These relationships, some of them go back 40 years, I'm still in contact that I worked with that long ago. And this is how I got gigs. They would call me when they needed someone. I'm a tech guy, I can do all the technical part of it, for sure. And just because I'm connected to people, that's how I got these opportunities. It had a lot to do with me, but a lot to do with the help I got from other folks. And the great education I got at University of California. So those are -- modern day Edison -- I'm an inventor. I do work on stuff all the time. I work on cars. I've got a full staff of engineers and so forth at our private research facility. I work out of there. It's like a hobby shop, I would say, pretty close to that. But it's serious stuff we're working on. I'm focused on -- like I said, cyber security, electric vehicles and so forth. I could talk some more about the innovation that we're doing there. >> HANNES HOFMANN: Yeah. Listen, I mean, what's fascinating is you say you're an inventor, and you're have hands-on, but you also have a great network, which obviously in northern California, where you are, is really important and is very much an ecosystem that is available for new technologies. But what's fascinating is much more than just an inventor of different things, you're also someone who has a lot of commercial success with the things that you invent. So, one of the big success stories that is in your bio is you co-founding Oculus, right? A company that you started in 2012, and three years later, you sold it to Facebook for a few billion dollars in what was then considered quite a landmark deal for virtual reality. Maybe you can share with us a little bit what got you to that opportunity and whether your background in gaming, where you had designed before that important aspect of Guitar Hero, which was the number one selling -- the first game in a single edition of the game sold a billion dollars worth of revenue. Whether your experience in gaming led you to the VR space or what else led to the call that made you start this company Oculus that was so successful at the time and still is as part of Facebook today. >> JACK McCAULEY: Well, here's how things went down in a nutshell. I worked at Activision. I knew the staff and working on patents of intellectual property. I also sold a bunch of my patents. I got to know some of the folks there. The chief legal officer. And along comes Oculus. I didn't know about Oculus. He reached out to me and told me, hey, you've got to talk to these guys. Again, this is what I'm going back to with these connections that I have. They're working on gaming stuff. I said, okay, I'll talk to them. The first guy I met, the CEO of Oculus. I was just blown away by how talented and smart the guy was. Probably the most talented software energy, but also more of a biz guy. He's had three successful exits. He was just amazing. The gaming part of it, I wasn't sure about. Games have turned into a social experience. This very simple graphic. It has 150 million users. That's how many active users there are, and part of it is this experience during COVID for people to get to play against one another. This is what video games are becoming. They're becoming social. You play in teams online, or you play with other players. You have your buddies there. Twitch and [indiscernible] video, you can actually see the other players playing. So we never saw that coming. We didn't have Internet connected games, and saying goodbye to DVD and plug it in. But that's what's happened. I would say this -- if you're an investor looking at investing in gaming, I would look at [indiscernible] the social component of it. You know, heavily. Now, Facebook bought Oculus, we all did well by it. Most of my earnings from that have gone into [indiscernible] -- given away millions and millions and millions of dollars to education and other things. That's what it's done for me. It has turned out that this gaming thing -- it's what I would be looking at. Could not have invested in those. At my research facility, there's a start-up upstairs. I'm not really involved, but I'm a big investor. And they're working on social gaming. So that's what I would be putting my saddle on. That's my take on the gaming side of it. I hope that answered the question. >> HANNES HOFMANN: Yeah, it's fascinating, and obviously many of our parliaments at Morgan Tech Exchange come from Asia. Social gaming particularly in China and in Asia is a very dominant phenomenon where significant amount of money actually is also being paid by gamers who play with each other and compete with each other or cooperate with each other in some of these games. Now, one other aspect I wanted to ask you, though, is the virtual reality aspect of Oculus and what you've built. What's interesting to me, I remember a few years ago, we discussed virtual reality at an earlier version of Morgan Tech Exchange, and the experts there had extremely positive outlooks on the potential of the technology. So I brought up a slide for the audience. At the time, 2016, the numbers they were giving to us saw an increase of revenue projected from $120 billion. And the argument was very much that as technology improves, 5G networks are becoming a reality. Latency will go down. The immersive experience will become better. And many people thought that social gaming that you just talked about would actually increasingly be dependent on virtual reality and the opportunities that came with it. I also remember Steven Spielberg made a movie called "Ready Player One" about effectively people competing in a virtual world using virtual reality devices. It was actually a big success in the box office. Made about $600 million in the global box office. But the reality now in hindsight where we look today, the reality is that the reality numbers have overwhelmed these projections enormously. I've just put the real numbers in here for our audience. We're looking at as of 2020, revenues of less than $10 billion compared to the 120 billion forecast for the time. History have lots of technologies that have failed or technologies that worked as a technology but didn't make investors money. Think of airlines. What is your take on virtual technology? Does it need more time? Will it ever get to this 120 billion industry, or do you think people were too exuberant and too positive on it? >> JACK McCAULEY: Well, the exuberance for it -- I mean, it's really cool. If you put it on, you transport into another world, it's magical. But, you know, it's hard to develop content for it. A game is very, very expensive to develop. Grand Theft Auto cost half a billion dollars. Half of that -- roughly half of that was just in marketing, and so forth. GTA5, half a million dollars. It's very, very expensive. In order to produce content, you have to have a lot of hardware out there. The Sony Play Station 3 has 50 million units out there. That's a lot. I don't think that there's enough platform capability to sustain a large Triple-A title in the marketplace. So, long and short of it, there wasn't enough hardware for content. And the other thing, as I'd mentioned, it's kind of -- gaming has evolved into a social thing. And it is a little bit isolating. You wear the thing on your head. It's just different play. And we haven't actually figured out how to write a game for it exactly without making people sick. You really can't move around in it very well. It gives you vestibular issues and motion sickness. Haven't figured that out. And I don't think that Facebook is a gaming company. I know they bought the business, and the quest 2 is an awesome piece of hardware, but it's not their thing. They sell ads. They sell them to millions of users. 1.5 billion users. And that's their specialty. It's not video games. Would somebody like Sony have been able to pull this off? Well, probably not, because at the time when the Sony headset came out, the platform was too underpowered to run it. To your point, though, with 5G coming out, here's my prediction with 5G. Wi-Fi will go away. You won't have Wi-Fi in your house. Everything will be on a 5G high speed cellular tower network. Cable -- you won't have cable going into your house because there will be towers positioned at different points in your neighborhood that will provide all the bandwidth you need. So, to your point, that's going to be cloud rendering in gaming and less platform. You'll be able to play high end video games without having a high end -- you have a cloud-based GPU, a cloud-based processor doing the work for you. That's my prediction. That's exactly the point about 5G. I think that this thing we're seeing now with other people who are investing heavily in 5G, there's a reason for that. And there's a reason to be worried about competition. So I think that that's what's happening right now. We do at my facility -- the IOP stuff with the cellular networks and we're looking at that right now. So, that's where I'm thinking it's going. If you have 5G available everywhere, you could wear your virtual headset any time you want and watch movies in 3-D and do whatever you want. It's just not there. It's all on Wi-Fi right now. So that's my take on it. Maybe we'll have a better view of what will happen. You're exactly right. Exuberance was -- I knew that that would never happen when I was there. >> HANNES HOFMANN: Well, listen. What's interesting is, you just gave us an example of a technology that was exciting, and is exciting in many ways, like you described. But it doesn't seem like it has found its broad scaleable use, right? Because like you said, it's hard to produce content. It's hard to figure out how to get into social gaming. If I think about another area where there seems to be a new technology that has a lot of use, let me move into the automotive sector, right? So, automotive technology is something that a lot of people are very interested in today, because of course, mobility is something that all developed societies and developing societies have fully embraced. Car ownership, individual transportation, mass transportation. What is fascinating as an investor, obviously, a lot of the -- especially electric vehicle stocks have done investments over the last 12 months alone. Companies like Tesla or Chinese main competitor BYD, almost tripled. Another Chinese company that is active in the electronic recourse space. Increased by 50% in the last nine months after its IPO. So we've got a lot of positive investment stories in the automotive space. I know that you also have a big interest in automotive. I wanted to slow the audience again another angle, another slide here, which is something that I actually think is cool. And I wanted to see your comments on it. So you've got a lab. And you said you work a lot with your hands, right? Where you took a car -- I'm a little bit curious why you decided for this specific car, which is a beautiful car, but not a car that is known to a lot of people. And maybe you can share with us a little bit what you're working on in automotive and where you see opportunities. >> JACK McCAULEY: Well, this vehicle is a platform, and this is a T70 only on the surface. We bought the body from the original manufacturer in England. It comes from 1969, that's when the body was produced. The rest of the car, though, is innovative and technical. For instance, we wanted to build a car without mirrors. You'll see mirrors on it, but they're really not mirrors. Those are cameras inside the mirrors. And a display. So the car does not have standard mirrors like reflective mirrors. It has camera modules. It also has a wireless steering wheel. The connection between the vehicle and the wheels is wireless. So I wanted to do some new and innovative things there. You asked me for the genesis to genesis. There's a sci-fi movie, George Lucas's first sci-fi movie, and I love that movie. I'm a sci-fi crazy guy. That's why I decided to build this car. I wanted to build an identical copy of it. And if you look at one of the slides there, you can see it on the background, on the top left, the first vehicle. And then I change my strategy a little bit and ended up with this. We build everything there except the body. We built the steering wheel, the suspension, the brakes, everything that you'd see there. Everything else, the -- myself included. I did a lot on it. So this is what I was trying to do, to do some innovative stuff with gasoline-powered vehicles. But we are working on electric powered vehicles now. But that's our focus. We're trying to make an electric vehicle even more efficient. And for investors, looking at companies to invest in, solid state batteries, which are different than the batteries that go into -- the battery that's in a standard electric vehicle is very similar to, you know, a battery you'd find in a cell. Very similar to that. But there are companies doing work in solid state batteries, another hot thing to invest in. I personally feel that's one of the areas I would reach out and be interested in investing in. They're lighter weight, higher energy density. So a large part of the weight of the Tesla is the battery. What if you could reduce the battery mass by 50%. It would really make the vehicle weigh less. So that's one of the areas we're looking at. We're looking at battery management. How to manage the energy inside the batteries and how to manage the energy that the vehicle has. So the vehicle, just by moving, it has energy. You put on the brake. What do you do with the energy? A Tesla dissipates the energy in the brakes. A lot of it just gets burned up on brakes. So we built one without brakes. It has no mechanical brakes in it. Pure electric brake. This was the focus of what I was teaching at Berkley in the fall of last year. Trying to do something innovative. We've accomplished that. So that's kind of what we're hoping. You asked about the car. I thought it was cool-looking. I wanted to build a sci-fi type car. It's got four computers on it. It's got cameras and all kinds of stuff. A lot of programming, engineering. A lot of things like that we did internally. The display. A lot of the stuff on the car was done that way. I would go to work, I would get burned out on a game or something I was working on, and then go build a car. This one here took me four years from the time I started, four years, and the other ones -- they're about three or four years to do. That's kind of what I would do is just take a break. >> HANNES HOFMANN: That's an incredible story. Can you actually drive this car on the street? Is it -- it is? >> JACK McCAULEY: Yeah. >> HANNES HOFMANN: Your children must love the idea of going for a ride with daddy in such a beautiful... >> JACK McCAULEY: Well, my kids are all grown, but they love riding it. It's fully environmentally compliant. It has all the emissions equipment on it than a car you would buy from Toyota, let's say. It's fully compliant. So I wanted to build a car that was green also. This is a gas car. I realize it's a carbon thing. But I wanted to build a vehicle that was emissions compliant. Yes, it's a streetcar. I drive it around the neighborhood and drive it to work and do all kinds of stuff with it, and it's brutally fast. It's scary fast. It weighs about -- about 2,000 pounds. That's all it weighs. And it's got huge amounts of power. So it's very quick. And scary to drive. But I put enough safety stuff in it -- I'm not so worried about getting hurt in it, but I am careful with it. >> HANNES HOFMANN: It's a beautiful car, for sure. And listen, as an investor, listening to it, the interesting thing here to me is the idea that in this day and able, where everyone says cars are becoming so complex and so hard to build, and you need massive companies in order to drive innovation in the automotive sector, I mean, an inventor like you, obviously with a very active brain, you're able to build your own street-going car, where all you take is a part of the existing car and replace all the parts, is actually a really interesting thought. Because it shows again how innovation can come in many different places, where many people were not expected. And again, automotive is definitely a key area of interest for many of our clients. And I think we all look forward to seeing the impact of your inventions in the commercial space in the future. One other question I wanted to ask you, another topic that a lot of people are concerned about today is cyber security, for good reason. J.P. Morgan, it's not a secret we spend about a billion dollars a year on cyber security. Just recently, there were a few big cyber security problems in the headlines. One of them colonial pipeline in the U.S. shut down. They reduced the payment of 4.5 million just to get the pipeline going again. There were news reports that hackers had hacked into public health data for the Republic of Ireland, wanted a $20 million payment from the government of Ireland. Cyber security is a big topic. And you talked about Wi-Fi and 5G and more connectivity. What are your thoughts on cyber security? What trends do you see there? What do you do there? And it's very clear, we all have to be a lot more vigilant in the future. What are the cutting technologies that you see? >> JACK McCAULEY: Well, just to give you an idea. You see these doorbells you're welcome buy them, put them on your house, and someone comes up to it and it triggers and sends an image to your phone. It's very, very easy to grab those images with a Linox computer and an access point. I can grab images from someone's house -- this is the experiment I ran. I didn't have to write any software to do that. It's commercially available software. So, it's a serious problem. Let's say you're a celebrity and people are snooping around your house. You've got cameras. First of all, don't put cameras in your house. That's my advice to people. I don't put them inside. They're very easy to grab the entire image from them. Also, the access points you have in your house, like your Wi-Fi, are not secure. I don't care what anyone says. For about $8 on Amazon, you can buy a device that will get your Wi-Fi password. So, it's not really built into the infrastructure. It's all about performance. It's about going as fast as you can and watching streaming movies, entertainment. That's what it's about. In the future, like the colonial pipeline example, it is coming -- becoming more and more important and more and more prevalent. The 5G system is not built with a tremendous amount of security. It's built for speed. It's like a race car. It's built to go as fast as you can. So it is a huge problem. I worry about my bank accounts. I mean, all of your assets don't have physical assets. You wanted to attack a country, wipe out their financial system. That's my take on it. And we are working in this area specifically right now. >> HANNES HOFMANN: Definitely a fascinating area. And like you said, an area that needs a lot more focus, and again, I love the analogy that you just draw to networks. Clearly, your love of cars shows through. Listen, we're almost out of time, but I wanted to ask you a final question. Morgan Tech Exchange, this conference, originated in China. And we spend a lot of time making Chinese technology companies and potential investments in Asia for technology accessible to clients around the world and explaining the differences between U.S. technology companies and Chinese technology companies. You've been active in China early on. You are someone who's had a lot of inventions in the technology space. Can you share your perspective on where you see similarities and differences between Chinese technology companies and U.S. technology companies and what you foresee as the trajectory of development? Will there always be a rivalry? Will there be partnership? Will there be complimentary technologies? How do you see that developing? >> Well, the claim that I hear about Chinese companies is the theft of intellectual property, that's one claim. Lack of innovation. Look at TikTok, look how quickly that grew. In We Chat, they have 1.2 billion users, just slightly less than Facebook, and it's completely indigenous. Those are built within China. So I think about if I were a company that has a social media presence, I would look at how to get into that market. I think it would be very difficult to get into the Asian market, not with Facebook necessarily, Facebook and China, some company like that. I would -- I mean, isle not going to criticize Europe. What do they produce there in the last 20 years? There's no Facebook. There's no Google. China has done all these things. They have their own Alibaba and so forth. They have their own things. But they really haven't produced that. I'm wondering why that is. It's just the thought they ponder. They're sort of capable of doing it. They're smart people and all that. I think that the government and China has gone to great lengths to make it easier for people to do entrepreneurial things. The available capital in the United States is not available in Europe to do a start-up company. It's just not. There has to be a good environment for that. So that's my thought there. I wouldn't take China lightly at all. I would be very careful, you know, to consider them if not a competitor, I think it's a crucial mistake. That's just my take on it. >> HANNES HOFMANN: Yeah, and I remember when we prepared for this conversation, you told me that you actually spent time in China, significant amounts of time in China in the last 20 years. So, you definitely speak out of not only of someone who understands technology, but also someone who spent a significant amount of time in China and understands the Chinese angle. One of the reasons for this conference this year, one of the themes of this conference this year is 100 years of J.P. Morgan in China. So I think we share your perspective and we see equal opportunity, growth, and innovation in China, and obviously we're very happy to be one of the first tier American companies who are active, very strongly active in both regions. Listen, I wanted to thank you very much for your time. It's been an incredible tour deforce. You led us through automotive, cyber security, we talked about development of networking technology in the future. You give us an insight into the work you do hands-on under the beautiful cars you drive. I cannot thank you enough. I think it's been very interesting to see what a modern day Edison can do in terms of innovation, and also turning innovation into commercial success. And ultimately, I think that's what many of us are looking for, like you said, finding the right people to partner with in order to innovate in this age of disruption and create economic success from that. So, thank you very much for your time. It was absolutely fascinating. And we look forward to working with you and talking with you a lot in the future. Thank you, Jack. >> JACK McCAULEY: Thank you, J.P. Morgan.
Some very exciting developments in consumer electronics, automotives and cybersecurity are now emerging.
As the applications for virtual and augmented reality continue to expand, the core foundations of how we engage with the world are being reconfigured.
Speaker:
Jack McCauley, Co-founder of Oculus VR
Moderator:
Hannes Hofmann, Head of International Multifamily Office and Intermediary business, J.P. Morgan International Private Bank
