Cats are indeed nearsighted, with worse acuity than people, horses or dogs. Maybe 20/100 to 20/200. But they are shot-range hunters (no stamina like dogs) and have altered color response appropriate to short-range hunting. And, of course. their outstanding night vision. But, yes. They simply don’t see details well at a distance. But I suspect Ludwig recognized Arlo by his walk, which even for humans is a better recognition key at distance, and was confused by the dog head. But, you know, dogs and horses will get excited and sometime hostile to an owner who suddenly appears wearing a hat when it’s not usual. Cats seem to see through it. Or, more likely, cats just see humans as entities that are of interest because they sometimes come with a bowl of food attached.