Could the “metaverse” be the next big investment theme?

Facebook boss Mark Zuckerberg has a vision. Soon, he says, he doesn’t want Facebook to be viewed as a social media company. Instead, he wants it to be described as a “metaverse” company.

What’s a metaverse? Well, it might just be the next big thing.

The future is happening right now all around us

I’m partial to a bit of classic sci-fi, so I recently put True Names by Vernor Vinge on my Kindle.

If you haven’t heard of it (I hadn’t) it was published in 1981 and was one of the first books to depict a virtual world that you could “plug into”. A vision of cyberspace well before William Gibson’s Neuromancer, in other words.

The story itself is fun (and short). It’s less po-faced than Gibson and less manic than Neal Stephenson. More than anything else it reminded me of Ready Player One.

But it wasn’t the story itself that really caught my attention. I’d picked up a 2001 edition which paid homage to Vinge’s foresight by packaging the book with a selection of non-fiction articles covering some of the issues predicted in the story.

These covered topics like privacy, cryptography, digital currency, anarcho-libertarianism versus all-powerful governments, artificial intelligence, robots coming for our jobs or creating new ones – all the stuff we’ve been talking about for decades now.

Thing is, most of these pieces were written in the mid-90s. At that time, I barely had an email address. The internet was a curiosity. I still got my music on CDs and rented my films from a video shop.

What struck me was just how prescient many of these pieces were. There were writers discussing how we’d all live in a version of the panopticon in the future as companies and governments fought to control our data. There was plenty of talk of digital currencies based on state-of-the-art cryptography (more than a decade before Satoshi Nakamoto invented bitcoin).

Then, in a very timely manner, on Twitter yesterday, someone posted a picture of an article about people getting bored of the internet. This was published in December 2000.

What’s my point? My point is that the internet was already deeply entrenched by then. To paraphrase Gibson, the future was already there – it was just unevenly distributed.

So what I’m wondering now is this: what other technologies or changes are at a similar point? What tech is already quite advanced and open to people who want to experiment or play with it, but not quite mainstream yet?

There are plenty of candidates out there. One that I think has a good chance of being the “next big thing” is augmented reality and virtual reality. Or to put it more succinctly – and to return us to the introduction of this email – the “metaverse”.

What is the metaverse and why would anyone bother with it?

Long story short, the metaverse is a 3D version of the internet. You already have a digital shadow (or several). The more time you spend online, and the less stringently you protect your data, the more detailed it’s likely to be. The metaverse really just takes that to the next level.

There are different levels to this but in the idealised metaverse, you’d stick on a virtual reality (VR) helmet and be represented in a digital world by a 3D avatar. You can go around doing all the stuff you can do in the real world but with better special effects.

Augmented reality (AR) is where the two realms cross over. You effectively have a digital overlay on the real world. There are already plenty of apps that use this –the Pokemon Go game might be the best known.

Or if you own a relatively up to date Android phone you can probably access the Google Art and Culture app. This allows you to – for example – pop a miniature art gallery out onto the table or the kitchen floor (that’s where I tried this last night), then walk around looking at the paintings.

It’s all daft fun for five minutes. But “normal” people can be entirely forgiven for asking: what’s it for?

The thing is, that’s what some of us were still asking about the internet 20 years ago. Now we almost literally can’t live without it.

I’m not saying that this is a sure thing by any means. But I think that any technology which makes communication between humans easier is likely to end up finding uses. And the pandemic has probably accelerated that.

Facebook’s comments on the metaverse came as the company launched a new app where you can meet 3D versions of your colleagues in a virtual meeting room.

I mean, yes. That sounds like no fun at all. And you might wonder what Facebook’s new virtual office app can offer that a Zoom call can’t.

But I suspect that there’s a tipping point involving a) the comfort of the hardware and b) the realism of the experience, that will eventually make people embrace VR because it will add useful depth to communication.

And more to the point, there are lots of other uses well beyond all this. Imagine if you could effectively digitise all of your computer hardware. You put on a pair of glasses, your screen appears, a keyboard appears – you take them off, it’s all tidied away.

That’s not even scratching the surface.

How would you invest in the metaverse?

How would you invest in that sector? This is me mostly just kicking about ideas out of curiosity, but I’ll be researching the area more.

Lots of big companies are experimenting; Facebook is the obvious one, of course. Bluntly, I find it hard to get excited about that, but a lot of that is purely a chippy dislike of the company and its constant boundary pushing, so please do ignore me – do your own research and see what you think.

Another interesting one is Snap, which doesn’t just do vanishing photos, but also makes AR glasses (you may or may not remember Google Glass, which people hated). It recently bought UK-based WaveOptics for over $500m.

Lex in the FT is unconvinced: “AR glasses in their current form are unlikely to take off, despite Facebook, Apple and Microsoft investing in the idea. Hostility to tech incursions into personal privacy is growing, not receding.”

It’s quite possibly correct and I wouldn’t be keen to invest in Snap (still loss-making). But privacy concerns are a red herring – consumers will swap privacy for convenience any day of the week, as we’ve all learned. The real issue is usability and given the pot of gold that all these companies believe is there, that’s a matter of when rather than if.

On the infrastructure side, I’m guessing a full-on metaverse would require even greater rollouts of physical equipment to support all this. Similar to the way that Netflix couldn’t take off until the internet pipes were big enough (that’s the highly technical level on which I think, don’t all applaud at once) to make streaming viable, it’ll probably take better broadband connections, more cloud storage, and the rest.

Anyway – we’ll discuss all this in future Money Mornings and in MoneyWeek magazine (get six free issues here if you’re not already a subscriber).

But I’m pretty confident that this is an area to keep a close eye on. VR is one of those techs that has been “around the corner” for many moons, but the underlying tech has caught up with the dream to a great extent, and with Facebook keen to harvest ever more of our data, I imagine it’ll be pushing this hard.

However – it is of course not the only exciting investment area “bubbling under” right now. I have a few other subjects I want to cover but I’d also love to hear your views – what do you think is the “next big thing” and why?

By the way, if you’re going to say “crypto” then I’d appreciate a bit more detail than just that...! Which apps or coins and why?

Ping me an email at editor@moneyweek.com and put “next big thing” in the subject line so I can filter them out. I might well publish the best ones, so please do let me know if you’d rather not be named.

Look forward to hearing your ideas.