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The Metaverse Explained Part 4: Challenges
Virtual Reality

This is the finale of our four-part series exploring the concept of the Metaverse. Authored by Loup Ventures analyst Pat Bocchicchio, Part IV discusses the challenges associated with building something as ambitious as the Metaverse and the concerns people have about spending time in a virtual world.

In the first part of the Metaverse Explained Series, we gave an overview of what the Metaverse is and painted a picture of what it could be like to experience for yourself. In Part II, we explained why you should care about the Metaverse and why it has the potential to be one of the most impactful technological developments of the next 50 years. Part III went into more detail about the economics of such an opportunity. We will conclude by addressing some of the questions that are commonly raised when discussing the Metaverse.

Key Questions

  • Repercussions of leaving reality behind
  • Technological feasibility

All Technology Is Good and Evil

Before we talk about whether or not the Metaverse would have a net positive impact on the world, we should go over some of our thoughts on the impact of technology as a whole. Back in May 2018, we published a note titled “All Technology is Good and Evil”. Here is a relevant excerpt:

Ready Player One (a fictional depiction of the Metaverse) showcased both the promise and the pitfalls of our technological future. A virtual world that enables your wildest dreams, on demand, on top of a real world that rots in decay because the virtual one is so much better. All great sci-fi achieves this balance — a healthy observation about what can go right and how right can evolve to wrong.

The core insight of science fiction is that all technologies live on a spectrum of good and evil, useful and harmful, and our perception of their place on that spectrum vacillates over time. It’s a truth that we’ve long known innately but are now being forcefully reminded of in our real world.

All technologies live on a spectrum of good and evil, useful and harmful.

This begs the question where does the Metaverse lie on this spectrum? We have our own thoughts but wanted to hear what a larger sample size of society thinks too.

Survey Results

In order to get a better understanding of the public perception of a virtual universe like the Metaverse, we asked 42 participants to answer a few questions after learning about what the Metaverse was. Here were the results:

Short Answer Results

We then asked our participants to write out short responses for two open-ended questions. Here were some of the responses the caught our attention:

Question 1: What specifically scares you about a virtual world?

  • “Eventually not knowing reality from virtual reality.”
  • “Nothing really. If It delivers on what it is defined as, I can’t see any negatives for me specifically.”
  • “That people will become incapable of living in the real world because they’ll spend too much time in the virtual one.”
  • “People leaving the physical world behind.”
  • “I believe in spending time in the real presence of our family and friends. This scares me because we are going to be spending less time physically and emotionally together.”
  • “Someone hacking my brain.”
  • “People will lose that true physical connection, people’s ability to cope with real-world issues/problems and their social skills may deteriorate, can lead to physical inactivity which can lead to poor health, could lead to people escaping from their real-world responsibilities and duties.”

Question 2: Any other comments about the Metaverse? Positive or negative.

  • “Think it’s an extremely cool idea and can provide an excellent outlet – however, I feel like it shouldn’t be a substitute to the real world. Everything is great in moderation and that would be my sentiment toward this idea.”
  • “Could be great for education and socially if used correctly and not overused.”
  • “Will people value the metaverse as a legitimate source of interaction and work? Personally, I do not value current online interactions as meaningful (ie Twitter exchange or reddit posts). I interact with people but do not value those interactions as much as if I knew the person in real life. Also, will people come to the point where metaverse has laws and consequences equivalent to the real world?”
  • “It would allow a lot of introverts to meet and make friends with the same interests.”
  • “A seemingly great opportunity, especially for those who aren’t well off.”
  • “Exciting, necessary for human life.”
  • “I’d rather die than live in a virtual world.”
  • “There has to be checks and balances in order to maintain stability and peace.”
  • “It needs to be free and open not controlled by governments or corporations.”

Survey Takeaway

Our key takeaway from the survey was a reminder of the importance of putting oneself in another person’s shoes before assuming you know how they perceive something. Even though you may perceive something as clearly logical or rational, others still might not feel the same way and may not be easily convinced otherwise. All we can do is think of ways to address their concerns.

Based on the survey, we have two key buckets of challenges that face the Metaverse going mainstream:

  1. Repercussions of leaving reality behind
  2. Technological feasibility

Full disclaimer, these are very complex issues that don’t have clear-cut solutions. We are going to focus on starting conversations rather than suggesting solutions.

Leaving Reality Behind

We’ve found the top concern most people have when learning about the Metaverse would be the consequences of spending so much time completely immersed in a virtual world.

Ready Player One showcased a virtual world that enables your wildest dreams, on demand, on top of a real world that rots in decay because the virtual one is so much better.

While we don’t expect the book/film’s depiction of 2045, with the world on the brink of collapse, to come to fruition in the same dramatized fashion, the idea of the real world getting left behind for salvation in the Metaverse isn’t too far fetched.

Many of the potential concerns regarding the Metaverse vary greatly depending on timeframes. It will be many years (similar to the rise of the World Wide Web, which celebrated its 30th birthday this year) before the network effect of the Metaverse takes hold and hundreds of millions to eventually billions of people are using the Metaverse for a vast range of reasons from the future of online college campuses to office buildings for remote workers. Our best guess is we are 10 years away from a time where a virtual world similar yet very different from our own becomes an integral part of the future of work, play, and communication.

If the time comes when a large portion of humanity is spending time working, playing and connecting in the Metaverse, it’s unclear just how much time people will spend in the virtual world vs. the real world. If you consider how many hours per day we already spend on our phones, computers, and TVs, it would be reasonable to assume time spent in the Metaverse would be comparable.

Even farther down the line, when virtual reality is indistinguishable from the real world, society will be using virtual reality to spend much of their day doing pretty much everything except eating, sleeping and using the restroom. Watch this clip from Ready Player One introducing the OASIS for context. When this happens, many of the concerns about leaving Earth behind voiced by our survey participants come into play. 52% of people we surveyed believe that a “virtual” experience is less meaningful than a “real” one. While there is a possibility we are already living in a simulation, it may take some time for society to appreciate a virtual world over the “real” one. We’ve even had someone say they would rather die than live in a virtual world, even if they couldn’t tell the difference.

It can be argued that the real world is overrated. While we tend to be idealistic about the future of humanity and despite what we see on the news every day, the world as a whole is trending in the right direction in most categories. However, there are billions of people in the world who have not been dealt a great hand in life and have many more things to worry about than debating the Metaverse, like paying rent or even putting food on the table. For the first time in history, anybody with a virtual reality headset, no matter their real-life circumstances, will be able to experience the best of what life has to offer and much more in this virtual universe unbound by the laws of physics. Physical resources are scarce, virtual resources are much less so. The future of sustainability could be a shift to digital.

One comment in our survey read: “I believe in spending time in the real presence of our family and friends. This scares me because we are going to be spending less time physically and emotionally together.” From our perspective, yes, being with loved ones in person will, for a long time, be the ultimate form of connection. However, this is often not possible given the physical distance between each other. To stay connected, we talk over the phone, have video chats, or share to social media. These are not natural forms of human connection. Virtual reality will take us closer to the ultimate goal of feeling together in the same room and give us all the ability to teleport anywhere, with anyone. Facebook recently shared its progress in building the future of connection with lifelike avatars.

The Metaverse will inevitably be the social hub of the future. It won’t stop people from seeing each other in person, rather, it could largely improve the experience of staying connected when far apart. It’s easy to get caught up in the negative side effects of a net positive outcome.

We could go on forever discussing the pros and cons of a shift to a virtual world, but we will next be discussing the health concerns of spending time in a virtual world.

Health Concerns

As the transition from physical to virtual continues, many will likely spend more and more time focusing on their virtual selves instead of their physical bodies. If our virtual avatars can look however we want and have the ability to do anything we want, why would we spend time exercising or eating healthy?

For the foreseeable future, taking care of our virtual and physical beings will not be a zero-sum game. We think there is even an outcome where our physical bodies are used more than today since we will be moving around more in VR as opposed looking at a screen and moving our fingers.

The other side of the story is mental health. Will people escape from their real-world responsibilities now more than ever? It also remains to be seen how online bullying takes form in the 3D internet where a ruthless comment section can come to life.

From our anecdotal experiences spending time in VR social spaces with strangers, we were struck by how kind many of the other players were. Will people act more like they would talking to someone face to face?

Beyond online bullying, the effects of having a safe haven in the virtual world could lead to people having issues facing their responsibilities and problems in the real world. Humans have been dodging responsibilities forever, but now they will have an easier way to do so. The hope is most of us have enough discipline to avoid this pitfall.

Overall, when the time comes where we are putting more focus on this virtual universe than the physical one, there will undoubtedly be tradeoffs, but we are bullish on the outcome being a net positive for humanity in the long term.

Technological Feasibility

When talking about the future, it’s easy to assume someone out there will somehow build it. However, what goes into breakthrough moments of technology is years of hard work and some of the smartest minds in the world coming together to solve problems that were once considered impossible to solve.

When we talk about building the Metaverse, we are,in many ways, talking about the next phase of the World Wide Web, from 2D to 3D. The network facilitating the Metaverse’s functionality will require massive development to create a universe of interconnected, persistent, open worlds. Massive online multiplayer games (MMOs) are an early example of how developers can bring together thousands of users onto a single server. For the Metaverse to fulfill its promise of becoming the universe of infinite simulation, there will need to be massive upgrades on both the hardware and software fronts that will require significant investments from big and even smaller tech companies.

World Building

In Ready Player One, a sole company, Gregarious Games, built and owned the Oasis. The Oasis, a fictional version of the Metaverse, was worth well over $1 trillion and will likely be worth more in reality.

It’s hard to say who will “own” the Metaverse if anyone. Most companies will inevitably build their own worlds, experiences, shops, etc. Will it be similar to the internet as a decentralized network full of different worlds or will there be a “ruler” of the overarching universe? Our best guess is when the Metaverse becomes as impactful as we expect it to be, governments will not allow this form of monopoly unless the creators can develop a governance structure that society is happy with.

Similar to websites on the internet, millions of developers will be building worlds, structures, experiences, etc. for the Metaverse. It will take time for developers to learn about best practices for building in the Metaverse as it will be essential to have a consistent experience across worlds. High Fidelity has been trying to build out its Metaverse with an open-source creator platform for developers to use. While a step in the right direction, High Fidelity is not anywhere near the level of quality a true Metaverse needs to be. On the bright side, this is what the first website looked like:

Thankfully, Artificial intelligence will likely play a big role in the world development of the Metaverse.

How Will We Enter This Virtual World?

Even once the virtual universe has been built, there will still need to be tremendous developments in VR hardware that enable us to feel fully immersed in the Metaverse. These developments lie in three key stages which we will be revisiting from Part 2 of this series:

We are currently in stage one with modern day VR tech that allows for a relatively immersive experience in a virtual space with just a head-mounted display and two hand controllers. VR today only influences sight, hearing and a limited form of touch. We view this as only 50% towards full immersion.

Stage two is when haptic bodysuits and omnidirectional treadmills or shoes allow for your entire body to feel and move around a virtual space the way it would in the real world. These additions might get you 80% of the way there. All of these applications, while amazingly innovative today, are still crude approximations of real-life sensory experiences.

Stage three is called Advanced VR. We are firm believers and investing in the future that technology like neurohaptics plays in the positive future of humanity. Neurotech, in the context of VR, is a technology that can use signals from the brain to entirely replicate a virtual environment without any user interface acting as an intermediary.

To quote the Loup Ventures Manifesto, “Our physical bodies are just shells with sense inputs that house our consciousness. If we can recreate sense experiences identical to the real thing, we won’t need to transport our bodies anywhere. Advanced VR will allow you to transport your consciousness, leaving your physical body in its current space, kind of like a hyper-realistic dream state…We believe neurohaptics will work in the future by sending signals directly to the brain, bypassing the physical inputs of sense (eyes, nose, hands, body, mouth, ears). Advanced neurohaptic VR will allow us to transport our consciousness anywhere we want by providing experiences in our brain identical to the real thing.”

If you are interested in learning more about the future of neurotechnology, check out Loup’s five-part series on Consumer Neurotechnology.

When It All Comes Together

When the virtual universe has been built, VR hardware enables an indistinguishable reality, and ethics debates lead to an experience that benefits all of humanity, we could have one of the greatest human developments on our hands in the Metaverse.

These are the good old days of virtual reality and the Metaverse. We will look back at 2010s and wonder what life was like without the Metaverse. You could argue about how many years it would take. You could argue about who the winners and losers might be. You can’t argue the inevitability.

On behalf of everyone at Loup Ventures, we would like to thank you for taking the time to learn about the future of experience with us. We’ll see you soon in the Metaverse.

Part I: Metaverse Overview & Tour

Part II: Why the Metaverse Matters

Part III: Metaverse Economics

Part IV: Metaverse Challenges

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

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