Matthew Ball on the metaverse future: What could go right; what could go wrong

Matthew Ball on how the metaverse will reshape the future of everything – Video transcript

Joe Kornik: Welcome to the VISION by Protiviti interview where we look at how current megatrends will impact global business over the next decade and beyond. Today, we’re talking about the metaverse future.

I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, and I’m joined by Matthew Ball, managing partner of Epyllion which operates an early-stage venture fund as well as an advisory arm. He is a leading global authority on the metaverse and you may have seen him interviewed on CNN, CNBC, VICE, the BBC, or in the New York Times, Washington Post, Wall Street Journal, The Economist, and many more. He’s the author of the important and very influential book, The Metaverse And How It Will Revolutionize Everything.

Matthew, thank you so much for joining me today.

Matthew Ball: I’m excited to chat.

Kornik: Matthew, let’s start with the title of your book, The Metaverse And How It Will Revolutionize Everything. You don’t see this as just a Web 3 but rather sort of a watershed moment with almost immeasurable impact.

Ball: That’s quite right. I understand the degree to which the title can seem bombastic. Certainly, it is backed by a number of different third-party perspectives. Jensen Huang, the founder and CEO of Nvidia, estimates that roughly 50% of world GDP will eventually sit within the metaverse. Various estimates from Citi bank, Morgan Stanley, KPMG run from between $2.5 trillion to $16-trillion-plus dollars by the end of this decade as it relates to the world economy, in contrast to about $102 trillion as of 2022-2023.

Behind this is a fundamental distinction between how we often envision the metaverse—a giant video game, a virtual reality headset—and how the technologists who were pioneering it understand it. That is to understand it as a successor state to today’s internet, not fully replacing the internet as we know it today but much like the cloud and mobile computing era, it builds upon that foundation, TCP/IP forged in the late 70s-early 80s to produce new experiences, that leads to new devices, that leads to new software, that leads to new applications.

When we’re talking about the metaverse, to build it, we are therefore talking about fundamentally overhauling, re-architecting, transforming one of the world’s most important consequential technologies, one that itself has transformed almost every individual market, country, political culture, climate, and the individual—and that’s the internet.

Kornik: Right. For those trying to wrap our heads around its impact, you mentioned some of those forecasts and some of those various estimates. Some of them value the global metaverse economy could be as much as $15 trillion by the end of the decade, by 2030. Is that realistic?

Ball: The fun thing about these forecasts is that they’re really a question of allocation. You realize that we often talk about the digital economy, digital businesses, the internet economy, but no one really says this is the precise value. Why? Because it’s a question of allocation. The UN generally embraces an estimate and says 20% of world GDP is digital but, of course, allocation is the name of the game there. How much of AT&T’s revenues are digital? We know what percentage comes from mobile smartphone subscriptions but, of course, part of that is for voice communications.

When you purchase something from Amazon.com, is that a digital purchase? Is that an internet purchase? The internet is certainly the channel for the purchase but if you purchased my book, it’s a physical book that was manufactured physically. It’s distributed and fulfilled physically. It’s consumed physically. You might say, well, 90% of that is physical revenue, but what happens when it’s an e-book? Certainly, the allocation should change but what is it? What happens when you discover it through social media as opposed to an outdoor billboard?

What really matters about this is not whether or not the metaverse is $2.5 trillion or $10 trillion. It’s recognizing that almost all of the world economy runs on the internet. We may say 20% is digital but the remaining 80%—agriculture, energy, transportation—that certainly runs on the internet. That is certainly digitally powered and to the extent you’re an investor, digital is the growth engine, the opportunity for displacement-replacement. We’re looking at the metaverse as a game of allocation but more important is the transformation of value, both on the increase and the substitution replacement side.

Kornik: Interesting. How far away are we right now from the metaverse being mainstream?

Ball: I want to start by disabusing one of the challenges with the metaverse narrative today. This is an idea that has had a name for about 30 years. It has been varyingly described for close to a century. What’s new, of course, is that we’re talking about it all the time, most obviously because Meta changed its name from Facebook. When most people were building the metaverse a few years ago, they talked about it as a multi-decade transformation. That is my frame of reference. There’s a second cohort that talked about five to 10 years. In fact, Mark Zuckerberg and John Carmack, the CTO of Oculus, talked about it as a five-to-10-year transformation.

But there was another cohort, including Sachi and Adello or Bill Gates, many in the Web 3 community who talked about it as imminent, if not here now. The challenge of that last perspective is, it raised expectations, even though such as Mark Zuckerberg started to lose that battle where people started to say, “If the metaverse is here, why isn’t my life more different? Where are the revenues? What’s the product I can buy and how is it different?” I think of this as a transformation, but what’s most important here, and certainly relates to investors and entrepreneurs, is to recognize that the question of “when is a technology mainstream?” is a bit elusive. It’s actually not that practical a question. Certainly, the timeline matters, but all technologies about when is what available for whom, when, how, and why.

The mobile era began in some regard in 1973 with the first cellular call. In 1991, we had the first 2G network. That was the first digital wireless network. The first smartphone came in 1992. That was IBM, by the way. We had the Apple Newton in ’94, BlackBerrys in the late 90s, the first direct-to-consumer media services in the early 2000s in Japan, but we would really say that for the average person the smartphone and mobile cloud era felt present until 2007, 2008. We have the coincident launches of the iPhone, then Android, then the iPhone App Store.

But even if you say it began in 2007, 2008, the average American did not have a smartphone until 2014. The average human didn’t have a smartphone until 2020, and so for them, it would be wrong to say that the mobile era had arrived prior to, truthfully, 36 months ago. For you and I, Joe, I imagine the answer to the question when was mobile here was probably 1998, 1999, and so that’s how we think about it. There’s a technology question. There’s a demographic question. There’s an application question, and there’s a sector question.

Kornik: Right, and I think some of those, maybe those early predictions around timing and how long before the metaverse became mainstream, might have led to some of the skepticism right now that we’re seeing around the metaverse, some of the stops and starts, particularly among business leaders, I think, you have a challenge. They’re probably not engaged with the metaverse very much at all. How would you suggest they started to begin to map out a strategy around the metaverse?

Ball: I think that’s quite right. The immediacy to which the metaverse emerged as a buzzword, plus the learnings of internet and mobile disruption, led many to start asking themselves the question, “What is our metaverse strategy?”—if not demand outright that they establish one, that they start testing one. The challenges here are the intent is right, but often I found the business leaders didn’t have a good sense of what it was they were trying to establish. What were they trying to solve? What were they trying to answer? What was the problem that, what I would define as real-time 3D simulation technology, could answer? If the question is you want to start a think-tank, that’s a legitimate objective. If you wanted to make a signal to the market, to your peers, to shareholders, to perspective employees about the seriousness through which you are taking this transformation, about your willingness to experiment, that’s all valid. But the broader question is, if you go back to the question, the metaverse is not a when, it’s a when is what here, why, how, and to what end? Business leaders need to start from, what’s the problem we’re trying to solve for?

Often, it’s as simple as establishing a digital twin that aids industrial design and then potentially supplements live operation. That doesn’t require you to imagine a future state that’s that different. It doesn’t imagine or require you to deploy VR headsets. It just requires a focused exemplar and business case.

Kornik: You talked about Web 2.0 and mobile earlier. We saw some legacy companies, well-established brands disrupted to the point of extinction because of it, and we say we saw new companies emerge in that space. Do you expect a similar sort of fate for companies in Web 3 in the metaverse? Do you expect new players to emerge and old, more established brands to maybe go by the wayside?

Ball: Certainly. If you imagine that the metaverse is as transformative as I imagine it to be and the forecasts of third-party agencies are to be realized, then you almost have to imagine that there’s going to be widespread disruption in displacement because the technological platforms and software and services that we use today will change. I imagine this change in five buckets that we’ve seen throughout history. The first of those companies which will perish, they’ll be so significantly disrupted that their business model and going concern evaporate. Blockbuster is a famous example of that. You can think of web crawler as another, and the search engine space replaced by PageRank and Google.

The second or companies which actually do endure but they languish because they’re so far surpassed by another company in that space. Skype and ICQ exist but, of course, the leading instant messaging services of this era are tens if not hundreds of times larger than those services were even at their peak, and that’s partly because they reimagined fundamental premises. Skype was designed to speak to traditional telephony systems. WhatsApp does that, but Snapchat does not. Slack has no interest. In fact, it’s organized around enterprise APIs. Of course, Instagram reimagines it as a picture-centric medium.

The third category or companies which do port over and indeed grow because the TAM (technology acceptance model) in the digital economy has grown, Disney is not of the digital era but it’s larger and reaches more customers because of it. Apple was reinvented in mobile and is larger because of it. Facebook was threatened by mobile and, of course, predated it, but it reached 2 billion daily active users last quarter because of the lack of constraints that mobile offers in contrast to PC.

The last two categories, however, are my favorite. The first are those companies which are displaced in their core business but grow because of growth in what used to be their side arms. Microsoft is the classic example. Microsoft has never had a smaller share of computing operating systems than it does in 2023. At one point, market share was as high as 96%, including mobile. Today, it’s less than 10% in the Western world and 5% global. Yet Microsoft reached new highs because of its horizontal services which no longer reached just 100 million Windows users, but potentially billions of mobile users across multiple different operating systems. IBM is more valuable than ever, even though it has been decades since it held the dominant position in computing devices for the average person.

The last category are the new entrants who take advantage of this new platform and the new generational shift to displace some of the aforementioned companies. Right now, we see that most classically is Google in the PC era, Facebook, and, to a lesser extent, TikTok in the social and mobile and cloud era. Right now, we’re making hypotheses as to what the new metaverse services and platforms will be.

Kornik: Matthew, if I could ask you a best-case scenario and a worst-case scenario for the metaverse future, I guess what I’m asking is what could go right and what could go wrong?

Ball: When we talk about what could go wrong, there are really two different questions. One is to talk about the impediments to actually constructing the metaverse. The internet was commercialized after it was established and indeed, it was established around the premise of exchange. That is what the internet is. The term comes from internetworking. Really, we had a fleet of standards and protocols which supported myriad different use cases. The idea that AT&T, Telefonica, IBM, Verizon, Comcast, China Mobile can all exchange an email with the same structure, none of them actually managing the global system for email, is remarkable. Of course, many of these companies try to have their own de facto networking standard.

One of the things that can go wrong is not that the metaverse doesn’t happen, but the various for-profit initiatives and endeavors mean that where it is established, it’s limited and therefore, while we talk about the internet and the software layer on top of it, it’s perhaps possible that there’s very little commonality for the metaverse. This pollyannish ideal of an interconnected 3D simulation is not possible, just the limited exchange of information with highly siloed and comprehensive but for-profit kind of islands within it. You’ll see that from the 70s through the 90s, there was an expectation that’s what the internet would be, we’re very fortunate the internet was not, but that doesn’t mean that history will repeat.

The second thing that could go wrong is to understand that there are many downsides with the internet as it exists today and the metaverse will challenge many of them. Most of us are dissatisfied with the role of algorithms, the contribution of the larger social platforms to our state of mind or well-being or happiness. I would certainly say that data rights and data security aren’t what they need to be. More broadly, we still contend with harassment toxicity, mis- and disinformation, and radicalization on the internet. Going to a live shared, more global, 3D-immersive experience will not make those problems easier. It will make them harder, and it will also deprecate some of the best practices that we’ve established over the last decade.

In addition, some of the virtual reality and extended reality devices and technologies that we envision will produce very severe challenges. Right now, many of us contend with the fact that Siri listens to everything that we say, but Siri doesn’t see inside your home. It doesn’t see your tax returns. It doesn’t see your children running through the home. Trying to figure out how we progress, how we regulate, how we figure out what the requirements should and shouldn’t be, that’s going to be a real challenge, and I do think that there’s a way in which we can fear that outcome.

But if you ask me what can go right, look, the internet has been not perfect—far from it—but I would certainly argue it has done far more good than ill. It has certainly given voice to billions who lacked one before. It has made the global economy more competitive and fostered greater openness. But we discussed earlier that many companies may be displaced by the metaverse. That means their business models, their philosophies, and their leaders will as well. It’s very hard to affect change midcycle because of the entrenched leadership, but to the extent in which we’re dissatisfied with the metaverse as it exists today, I actually think that the swap to a next platform, plus the learnings we have as consumers, developers, users, governments, affords us a rare opportunity to reset the internet as we know it today to be a better one in the future.

Kornik: So interesting. Matthew, last one for me. Envision, if you could, 2035. Let’s go out more than a decade. Can you give me an example of something that perhaps I haven’t thought of that will just blow my mind?

Ball: Well, I can’t speak to what you haven’t thought of, but I can tell you that the category that I am most hopeful about is education. Education is a really important category for a few different reasons. Firstly, its value is self-evident but it’s worth highlighting that not only is it a substantial portion of the U.S. economy. You’ll note that it is actually the single sector of the U.S. economy which has seen the greatest cost increase since the internet was formalized in the early 1980s. Costs are up about 1,400% to 1,500%. In contrast, healthcare, which many consider to be an albatross on the economies, up half as much. It’s still crippling 600% or 700%, but education is twice as bad. That’s because, for all of the benefits of the internet, it hasn’t meant that we can actually teach cheaper than ever before. We don’t teach faster than ever before, and we don’t teach more effectively a larger number of students than ever before. If we want to solve for cost creep, we also need to find a way to change that dynamic. I’m further hopeful that we can finally start to address some of the longstanding hopes for what the internet might bring, which is not just better cost. It’s greater quality and broader reach.

Today, your access to education is primarily limited to the wealth of the school board, the geographic availability of that school board, and the teachers which happen to live there, and that we’re talking about a primarily American concern. Certainly, if you will live abroad in developing markets, really none of those three things are even questions, and we know that just on-demand video on YouTube or digital multiple choice does not really close that gap.

When I think about the metaverse, the idea of virtual classrooms with nearly infinite zero-to-no-cost marginal goods and experiences that have a sense of presence—you can see your teachers’ eyes; you can look to your right and see your peer; you can dissect a feral cat or a dog or an elephant while also going Magic School Bus and traveling in circulatory system. Test physics on the moon and Mars. Go into a volcano as it erupts into the atmosphere, and then be dispersed as particles to understand its impact on the climate. We’re talking about some things that we don’t want to do. Dissections, certainly of some animals we don’t want to dissect, ethics around that, but more importantly, just the availability of these resources. I think idea of making more personal, lower cost, immersive experiences that untether us to resources and geography, that’s what matters to me the most, certainly.

Kornik: Yes, fascinating. Matthew, you’ve given us a lot of think about here today. Thank you so much for the conversation. I really appreciate the time.

Ball: My pleasure. This is a lot of fun.

Kornik: Thank you for watching the VISION by Protiviti interview. For Matthew Ball, I’m Joe Kornik. We’ll see you next time.