This exact argument also applied to smartphones, yet we've seen what can happen if you put a computer in people's pockets and let people figure things out.
I'm not suggesting the watch will displace the phone (the way the phone can displace laptops for many users) but I believe there's huge scope for augmenting it.
> "Yes, they are selling bunches of them, but I fail to see this as a long term product unless they pull a rabbit out of a hat."
Selling bunches of them is enough to indicate that something will happen in this space (i.e. people are already spending their money on it). Whether this iteration or the next will be the one that nails it remains to be seen. For example, the upcoming changes to allow native watch apps (as opposed to only having the UI there) should allow developers a bit more freedom.