Was Nintendo right to opt out of the graphics arms race?

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Gamecube was a great piece of hardware tech wise, but the software and look wasn't where it needed to be, and it failed to capture the zeitgeist in the way that even the N64 did with the likes of Mario 64, Goldeneye 007, Ocarina of Time, etc.

Graphically it surpassed the PS2, but nobody really cared as it was seen as the uncool "kiddy" console.