Tim explained his reasoning by professing that everything that's meaningful in computing is based on people. With that reasoning VR replaces reality; AR improves it.
Sigh, that sounds about right. The place is full of whip-smart people with convoluted strategies, almost all of which Tim Cook would do best to ignore! Apple's greatest successes have happened when they have gone simple. All the strategy in the world won't help you, if customers just want to buy an Oculus so they can zone out in GTA "Virtual Detroit" every evening.