IEX 185: Metaverse - Coming, But When?

A salad bowl of extended reality, gaming, economics, and culture.

First a note: There are 2 reasons why the IEX has been irregular. First I’m still submerged in planning our innovation lab. Second, from the start of this year I’ve been on a drive to improve my health and fitness, which has meant incorporating a daily morning gym routine and a dietary overhaul. The gym has added an hour to my day and also severely impeded my physical ability to stay awake to write, beyond 10 PM. Bear with me, this too shall pass. The good news is I’m at least 7 kilos lighter and my cholesterol numbers have improved.

Here’s this week’s IEX. (For meta or for verse!)

Image by Tumisu from Pixabay

"In sooth, I know not what the metaverse is

It wearies me, you say it wearies you?

But what 'tis made of, where of it is born, I am yet to learn

And such a want wit the metaverse makes of me,

I have much ado to know myself'

These lines might have been uttered by Antonio, in the opening lines of the Merchant of Venice, had the story been set in the vortex of the metaverse frenzy created by the Zuckerberg announcement to change his company name to Meta. It is, in fact, just short of 30 years from Neal Stephenson publishing 'Snow Crash' in June 1992 (where the first mention of the metaverse is traced to), to Mark Zuckerberg's proclamation. Which is an eternity in technology terms. For reference, the cost of storing a gig of data has gone from about $100,000 to $0.0125 between 1990 and 2021. You might think with that kind of exponential change under way the metaverse would be a household phenomenon by now. Yet, we're still talking about it as though we're on the verge of seeing it come to life. 

I'll put my cards on the table right at the start. I believe that the metaverse is at the peak of inflated expectations on the well known Gartner Hype Curve.  Usually this is followed by the trough of disillusionment as the various aggressive estimates don't pan out in the short term. And then it starts to slowly pick up in a more realistic and gradual manner.

This humorous take on the metaverse hype cycle sums it up well

First, let's clarify a couple of key concepts.

1. Why is the metaverse different from Virtual Reality?

Fundamentally because in virtual reality, typically the objects you interact with are not reacting to you except in pre-programmed ways. For example you could press a button to open a car door in virtual reality, and find yourself inside the car at the press of another button. In the metaverse, you and the car are objects with properties that can interact in a vast number of non-deterministic ways based on a set of laws. For example, as in games, you can embed the laws of physics to govern what happens when you collide with a car. Actually the closest example of the metaverse is probably multiplayer immersive games. The objectives of 'players' in a metaverse are different, and arguably more complex than in a game where a set of clear win/lose objectives might be established.

Which is why Roblox might make a good claim to have an early version of the metaverse up and running

2. How is the metaverse different from second life?

Arguably, if you could experience second life via a virtual reality headset, you'd be quite close to the metaverse experience. Of course, the peak excitement about the second life was over 12 years ago, and there were many aspects of technology that limited the experience. Bandwidth, processing, AI, and the evolution of digital currency have all change the experience you might have today.

3. Is there a connection between blockchain and the metaverse?

Depends. There seem to be a lot of people happy to bundle blockchain and NFTs into the metaverse. Much like Web 3.0 - it's a shape shifting concept that appropriates all new technologies. It's likely that many versions of the metaverse will come with their own (crypto) currencies, but equally, you could transact with existing financial systems (credit cards etc.) within the metaverse. Read Mathew Ball's take on metaverse payments (TL/DR)

So what do Gartner themselves say about the metaverse?

Gartner is cautiously optimistic about the metaverse. On the one hand they project that by 2026, 25% of people will spend an hour a day in the metaverse for work, shopping, education, social media, or content. It doesn't clarify whether this is ALL people or in specific countries. However, they also do make NFT and digital currencies a part of the metaverse. (Others are more skeptical)

If you start to read about the metaverse realise quickly, that a lot of the research paths lead to the writings of Mathew Ball, of Epyllion, a Venture firm as well as running his eponymous metaverse research firm. Ball has written a comprehensive primer for the metaverse, and his opening argument reads thus: for significant and disruptive technologies, such as electricity, production line, the internet, or the smart phone, there is no one specific point when everything changes. As systems and businesses are redesigned around the new tech, that's when value accrues. Hence, Ball argues that the full version of the metaverse may be decades away, though Fortnite or Roblox may have kickstarted the journey. Like Gartner, Ball also calls out a number of contributing aspects of the metaverse. However these are generic categories - for example payment services, not necessarily NFT or digital currencies.

Assuming that one way or another we are on the bumpy road to metaverse realisation, what can we expect in the near future - i.e. the next 2-3 years? Here are 6 predictions:

1. Buzzword overload. Until we get to the point of disillusionment (and if), expect a gazillion articles about the metaverse. Also, to exploit herd mentality, we can also anticipate every product and service looking to appropriate the metaverse for their own means. Remember ICOs?

2. Assets and bubbles - much like crypto currencies, there is already an apparent gold rush in acquiring property in the metaverse. You can set up your office in Decentraland. According to Scott Galloway, 'unreal estate' - or virtual property is an area of investment that will attract people simply because real estate is too expensive already and crypto currencies offer little by way of returns over the market. The fact that there are already venture backed metaverse real estate companies such as Everyrealm should tell you something.

3. Brands and marketers will continue to drive up interest by making creative forays into the metaverse. You remember the early brands in Second Life? Hello Kitty is already in the metaverse. As far as experiences go, you could have attended this year's Sundance Festival in the metaverse too.

4. Gaming as a growth area. Technically, games are closest to metaverse experiences, and we can expect this to be a route in for many organisations. Gaming companies will rebrand themselves as metaverse builders, and get bought by big tech firms. Microsoft's acquisition of Activision Blizzard for $68.7bn is an early high-water mark of this. Refer the comment on Nadella mentioning 'corporate metaverse' in the image earlier!

5. Augmented reality will make a comeback in the shadow of the metaverse. AR Glasses will be back - thanks to companies such as Nreal and Spatial; and XR will be used for more inventive purposes such as treating addiction. Even big tech such as Google, Meta, and Snap are building AR and VR strategies and products.

6. The actual metaverse, much like its Web 3.0 cousin will keep growing in niche areas, and almost behind the scenes. It will form cults, communities, and self sustaining societies and cultures. I alluded to this earlier in my take on crypto currencies and Web 3.0.

Meanwhile, get set to figure out what to wear in the metaverse, and keep an eye on companies looking to provide the tools and the virtual estate - such as XRSpace, and Decentraland. These may be the real winners.

Other Reading

Enterprise: Lyra, Spring Health and other startups are disrupting employee assistance. The pandemic and rising anxiety are key drivers. Excellent quote from Desmond Tutu at the end. (Bloomberg Businessweek)

Strategy: Managing in extreme uncertainty. The volatility across the world challenges traditional operating models. Overcoming challenges such as optimism bias, information instability and others, requires a new toolkit, and becoming an agile organisation with a nerve centre and a radar that creates early warning. (McKinsey)

NFTs: Inside the world of NFT heists. Are 70% of people in the NFT world really scamsters? Would you pay $300k for an NFT image of a bored ape? (Sifted)

Crypto: A perspective on WorldCoin - an Andreessen Horrowitz / Khosla Ventures backed effort to create a universal currency. A human centric coin that can be distributed to every person on earth, like a universal basic income. (Exponential View)

Gaming: from ambisonics, to advocacy and motherhood, and from 3D modelling to found phone mysteries. The kaleidoscopic world of game development as seen through the Game Developers Conference. (New Yorker)

Have a great week!