Getting one’s head around the concept of the ‘metaverse’ for the first time requires a mental effort. The idea promises the total immersion into a virtual environment for an enhanced experience. How to make a purely virtual concept intellectually tangible?
Imagine a family living anywhere on earth. Next to their physical lives, each member has a personal identity in a virtual universe. As defined in a seminal essay (2020) by Matthew Ball, a venture capitalist, that universe – the metaverse – is persistent, synchronous, and live.
Family members can venture into the metaverse using 3-D virtual reality (VR) headsets. They can attend live concerts, visit the digital twins of real monuments, or go to a nightclub and dance (with physical motion) with friends from all over the planet. As they define their persona in the metaverse, they can buy an avatar, clothes, and other accessories, including luxury items for social recognition.
In addition, they can build or purchase a virtual home to entertain friends from new communities. They would consider financial and social factors when choosing its size and location. They can buy some furniture, and maybe a vehicle too. Fiat currencies or cryptocurrencies will be used to acquire these digital assets recorded as non-fungible tokens. The family can also create virtual objects, tokenize them, and sell them on a virtual marketplace to finance their lifestyle in both worlds.
Thanks to the interoperability across metaverse infrastructures, family members can seamlessly transfer their identity from one virtual platform to another. They can go on a holiday together on [brand name]-land to immerse themselves in new experiences.
Anyone who has tried the latest version of a VR headset or explored advanced video games will appreciate that the metaverse is only an extrapolation of existing concepts and technologies. The building blocks are well identified. The challenge is scalability.
Acquiring virtual goods will sound absurd to many. But it is just a matter of perspective. Any ‘real-world’ consumer brand has an intangible value carrying a premium not justified by physical properties. Gold has no real tangible value, yet an ounce is worth $2,000. Music, e-books and movies offer a virtual experience. Mentally, the steps toward the metaverse are fewer and smaller than they seem. The gradual but inevitable dematerialization of the world is well engaged (see ‘The Advent of Virtuality’, 2020.)
The metaverse will both expand and compete with the physical world. Industrial companies serving certain segments of the consumer product market will face challenges since a share of physical purchases will be cannibalized by virtual ones. As economic actors splash on virtual properties, their needs for physical space will decline, with consequences for the real estate and construction markets. Travel within the metaverse will substitute physical travel, with a direct impact on mobility needs. To protect their revenues and margins, many firms will need to build activities in the metaverse.
From an operational perspective, leadership teams will be compelled to broaden their PR initiatives to include, for example, virtual events sponsoring. Interactions with stakeholders, including shareholders, employees, and customers, will increasingly occur in beautiful forums situated in the metaverse.
The impact of the metaverse for the environment (freed up resources through dematerialization, compounding the ESG benefits discussed last week), health (further disruption of the mind-body connection), social matters (changes in socio-economic dynamics, new communities, the redefinition of ‘wealth’), and, ultimately, the global economy (potential sustainable output) will be vast, but difficult to anticipate.
Surprisingly, little is written about the potential metaversal impact on the economy, including by central banks. This will change rapidly. Virtuality is slowly but surely becoming real.