In The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society (2020) and our research since mid-2015, we traced the modern evolution of business enterprises, from a world dominated by big, traditional, asset-heavy, command-and-control “value chain” companies like GE and GM, through several phases, the first being dominated by early-Internet “platform” firms like Amazon and Google, the second being the social and mobile era which catapulted Apple forward, and created social networks such as Facebook. Today, these phases are often described as Web1 and Web2. The first two phases have been well described as the phases where platform companies grew, the emergence of the platform economy or the platform revolution.[1] In 2020, we contended that we are entering a third phase, the world of metaverse and Web3 technologies, a future where a new type of firm, namely “interaction field” companies will flourish.[2]

Web1 and Web2 had a profound impact on how companies create value and how they achieve competitive advantage. Until then, strategy evolved around deciding where to compete and how to compete in a market. Good strategy was about choosing a market and establishing barriers to entry such as building strong brands or establishing customer switching costs. Competition was essentially a way of competing in a World of Walls. Web1 and Web2 changed this world for companies and brands. Today, competition takes place in a World of Webs where everything connects: things, people, machines and companies and more — a world of hyperconnectivity. Industry or category boundaries have blurred, and barriers of entry have become as porous. We believe that the metaverse will accelerate this world of connectivity, and Web3 technologies will put the World of Web in overdrive and create the convergence of all sorts of worlds: the virtual world, the real world, or the mirror world, which is essentially the real world in digital form.

Interaction field companies will reach their prime in these worlds. A defining difference between “interaction field” and “value chain” and “platform” companies is that interaction field firms view consumers or users not as targets, audiences to capture, or a source of transactions to be aggregated but they see consumers as a system and part of a complex network of relationships, from close-in family and friends to society at large. In this network or system, every consumer has his or her own set of goals that ladder up to values and beliefs. Consumers perform a set of activities to achieve these goals and priorities in the context of their daily lives. Value creation is about solving the challenges and problems of consumers as they seek to optimize the range of actions and activities they must perform to achieve their goals.[3] Interaction fields then optimize this entire system, ranging from consumers’ daily goals to broader and more important challenges of society.

A second difference is that interaction field companies open up their most important customer relationships to a wide range of stakeholders and third parties who provide new value in the field. This contrasts with value chain and platform companies who are hoarding and aggregating massive data pools in their internal systems such as their CRM or secured customer data platforms. For example, take a platform such as Uber, or an ecosystem such as Airbnb. Essentially these firms hoard transactions and data from riders and drivers, or from travelers and hosts, and they optimize their businesses to extract maximum value for themselves.

Interaction field companies instead create a nucleus of interactions with customers or consumers with maximum value, and then build an open architecture around it that attracts partners and third parties to create shared value for everyone. Marshall van Alstyne and Geoff Parker call this the inverted firm, where a firm seeks to externalize value creation to others by designing interactions and rules of governance accordingly.[4]

John Deere for example built a network of farmers who ride on Deeres, who share data from the health of a plant in the field to overall farm productivity. Instead of hoarding the data on its secure cloud servers, John Deere enriches the data and makes it available to fertilizer or crop suppliers, and a broad range of others that create value – solving major challenges that farmers and consumers face from making farms profitable, reducing water depletion, and ensuring healthy and sufficient food supply around the world. Interaction field companies maximize interactions in an entire field of value creation. Platform companies instead like to own the transactions, and own the customer.

A third no less important attribute of interaction field firms is that they motivate interactions far beyond their existing industries, such as agriculture or automotive. They encourage value creation through partnerships, platforms and ecosystems across different industries, sectors or categories. Ant Group’s nucleus is Alipay for example, but it operates a number of platforms and ecosystems that have emerged and sit on the top of payments including lending, wealth management and even health insurance and many others. In a way, it makes the traditional concept of categories and industries irrelevant, since value creation is achieved across new market spaces that are defined around consumer or even societal challenges.[5] This means automotive companies solve for mobility, not just selling a better car.

In short, interaction field companies change the nature of value creation for consumers, beyond mere fulfillment of needs and emphasizing relevant attributes through branding, or hurling new products and services in the name of innovation at consumers. In the interaction field, consumers innovate for themselves, they solve problems, collaborate with companies and create competitive advantage for them. They assume an active role in value creation. They change the way companies are configured beyond just the optimizing of their functions or their own activities along the value chain, and they change the way they create value beyond existing industry or traditional category boundaries.

Now, let’s peer into the metaverse after donning an “interaction field” lens. The firms vying to build and equip consumers to enter the metaverse are primarily platform companies or ecosystems like Meta Platforms, Microsoft, Apple, and all the other tech giants that supply the essential tools such as Nvidia. Much like German immigrant Levi Strauss sold workman’s clothing, today known as Levi’s jeans, to hopeful farmers during the California Gold Rush in the 1870s, purer-play virtual reality firms like the online game platforms Roblox or Minecraft or the Ethereum-based environments such as Decentraland of The Sandbox aren’t any better. Their primary channel of value creation is through aggregating transactions, building large audiences of players that become gullible consumers or users susceptible to monetization via in-app purchases or by issuing and selling tokens. They too merely optimize their own worlds, rather than enabling meaningful interactions, sharing them, and creating value for everyone.

Decentralization

As for the most fundamental societal challenge Web3 enthusiasts are seeking to solve, the pathetic reality is that the lion’s share of the value on which the tech giants’ staggering market capitalizations are currently based on comes from their proprietary ownership of the data generated by their own customers. As I noted in Newsweek, “The dominant digital platform model that Big Tech uses represents a fundamental mismatch between the value they derive from the day-to-day gusher of data generated by their billions of customers, and the value to those customers—that means all of us—of the products and services they profess to provide for free.”[6]

The World Economic Forum observes that the decentralization of platforms is destined to broaden the value base of beneficiaries of data generators, who will in time graduate into full-fledged data owners:

Web3…harnesses blockchain [technology] to “decentralize” management, thereby reducing the control of big corporations, such as Google or Meta, and making it more democratic. It is defined by open-source software, is trustless – doesn’t require the support of a trusted intermediary – and is permissionless (it has no governing body).[7]

That an overwhelming share of the value generated by cryptocurrencies and NFTs – the first most visible manifestation of Web3 – has so far accrued to assorted celebrities, crypto snake oil salesmen, and sports stars is not promising. As the cryptocurrency boom seems likely to end in a big bust, what are we to make of Web3’s aspirations to become the vehicle for more fairly distributing the inherent value of data through the magic of decentralized blockchain technology?

For starters, in a Web3 world, your activities and the data they generate would no longer be hosted on proprietary servers owned by Google or Amazon, which use them to harvest the value from it (i.e., sell advertising that targets you) but on networks of computers using blockchain. Web3 transactions will be conducted not in fiat currency (which benefits intermediaries such as banks who extract fees) but through your crypto-wallet and websites hosted through decentralized applications, or “dapps.”

Sangeet Paul Choudary, one of the leading scholars of the merits and demerits of the platform economy, considers the advent of Web3 as promising an alternative model, or “organizing mechanism,” to now-dominant platform firms like Google, Meta, and Amazon. In his view, these platforms’ primary shortcomings are their propensity for mass standardization as opposed to customization:

The largest businesses today – Facebook, Google, Amazon, Apple, Airbnb and others – aggregate a market around their platform…and standardize the core interaction supported by the platform. The purchase experience for a book is not too different from the purchase experience for an item of clothing on a horizontal online marketplace. This standardization helps achieve scale…however, standardizing the core interaction…involves a trade-off: the loss of end-user context.[8]

Loss of end-user context means failure to solve the problems and challenges that consumers as a system have.

Interaction field firms have a different architecture from platform companies. An illustrative example is the difference between Google and Tesla. Google’s business model is based on selling ads at nearly infinite scale to users of its search engine. You are the product. Period. End of story.

Tesla’s network of charging stations

Tesla’s open architecture drives ecosystem innovation. The firm’s success is not at its core derived from its ability to build a better, faster, or cheaper electric car although the automotive industry and major competitors appear to believe so. In the interaction field model, the primary source of value and innovation is on the demand side, not the supply side. Tesla’s interlocking ecosystems include its Supercharger charging network, which in Europe is accessible to all EV drivers. In May 2022, Tesla announced plans to open its Supercharger network in the U.S. to all EV drivers as well. As Elon Musk commented, “We’re trying as best as possible to do the right thing for the advancement of electrification, even if that diminishes our competitive advantage.” This open architecture benefits not just the global community of EV drivers but helps to accelerate the digital transformation and sustainability of the entire auto industry and other industries as well. Those drivers, in turn, collectively contribute data to a different system called Autopilot, as the data generated from every mile driven pushes Tesla closer to its ultimate goal of truly autonomous mobility. That data also connects the community of EV drivers to the California electric grid network, which lets owners of solar rooves share electricity with other owners of solar rooves, to power not just their Teslas but their houses. The data is the fuel of value creation — the open architecture its chassis.

Let’s look at LEGO from a similar perspective. The resident geniuses at LEGO HQ in Billund, Denmark are not the only drivers of the innovation that creates successive generations of LEGO sets. The company more heavily relies on an innovation ecosystem, a globally distributed network of partners and collaborators. One example is called LEGO IDEAS, which includes AFOLS (Adult Fans of LEGO), a community of fans, parents and kids like you and me that collectively co-creates innovation. After you put an idea up on LEGO’s website, if that idea gets 10,000 votes through social media, LEGO produces it and compensates the inventor. LEGO externalizes innovation and new idea generation beyond the company, in the spirit of the inverted firm in the platform economy.[9]

Van Gogh’s Starry Night, built with LEGO

Earlier this year, Kirkbi, the parent company of the LEGO Group, announced its entry into the metaverse in partnership with Fortnite-maker Epic Games. Their joint goal is to build a “kid-friendly metaverse.” Whether the kid-friendly metaverse that ensues will also be a Web3 enterprise, let alone an interaction field firm, is still very much TBD. That said, LEGO’s open architecture is a precursor to a potential convergence of the metaverse and Web3 in a virtual Legoland.

Glimpses and glimmerings of the vast store of value that transcends the feverish and adolescent speculative yearnings of the Bored Ape Yacht Club can be seen in the late 2020 launch by the Crop Sciences division of Bayer and enterprise blockchain provider BlockApps of the TraceHarvest Network. Its stated aim is to “set new standards in sustainability and drive digital transformation and food system resiliency that will shape the future of the agriculture industry.”[10]

These partners and collaborators comprise an ecosystem replete with powerful interaction field characteristics. The network is not just “the first blockchain solution of its kind to track and trace the full lifecycle of agricultural products starting at the seed source.” It is a shared open platform from which “farmers, manufacturers, distributors and processors can selectively share and review data within a single, secure platform, making activities available to the entire chain, and allowing all parties to identify and address product tracking and integrity issues faster than previous manual processes allowed…Member farmers, manufacturers, distributors and processors use the same TraceHarvest network to track where their products are going, providing them with full visibility and traceability into the source of their crops.”

Conclusions

Looking at the metaverse and Web3 merely from a technology perspective is not helpful. As Alex Cahana, partner at Ark Invest already said: “Technology does nothing. It is what people [emphasis added] do with technology that matters.”[11]

Looking at these metaverse and Web3 developments from a consumer, strategy and business perspective, as articulated in the interaction field model, reveals their enormous potential in creating value. By value, we mean solving new challenges, difficult and intractable problems of consumers and society, and creating new competitive advantages for collaborators. This leads to creating real and shared value for everyone.

In our world, value is not created through network effects alone, value is created through solving problems and challenges of consumers and society in the interaction field. What real, new and intractable problems does the metaverse or Web3 really solve?

It is difficult to foresee the many different paths of evolutions the metaverse and Web3 may take. We have three thoughts:

• A first critical path is the consumer and a deep understanding of the challenges and problems of consumers as a system – as an individual identity as part of society. The question not to ask is: what products or services do these new technologies create for consumers? Instead, the question to ask is: how do these technologies help to improve people’s lives? Do they solve something? Do they enable them? Do they give people time back?

Companies must understand the challenges and problems of people and society really, really well. Today, this is not the case. Most use cases don’t solve anything useful yet.[12] Technology is cumbersome and slow.

One of the great steps in this direction is related to the technologies that enable the building of digital identities using the Self-Sovereign Identity or SSI approach. What this really means is that consumers become data owners, giving them full control in their digital or crypto wallets. Even if you record your Peloton bike session with the Peloton digital app, it isn’t Peloton who owns the data, but you. This changes fundamentally how to think of consumers – as passive recipients or audiences of advertising, or as targets for a company’s products, or prospects to be converted. We are looking at technologies that enable consumers to become active participants in creating value, consumers who understand where and how to own their data, and how to share their data, whether it is a digital asset or piece of art via NFTs or the data that the rich metaverse or Web3 contexts enable to be collected on behalf of consumers.

This will be a significant departure from today. When consumers are truly involved in value creation, when they know how they can build the value, and can take their data anywhere they want to, and can co-create products and services, then it is very likely that startups, established companies or brands can build valuable use cases that have a major impact on consumer behavior. This will be a significant change from today’s value creation through aggregation of data, realizing network effects and monetizing the value creation as Facebook or Google practice, and most other platform businesses practice today.

• A second path we are looking into concerns the evolution regarding tokenization which will create an exponential increase in interaction velocity across an interaction field. This will clear the way for sharing of valuable data across a broader set of participants or partners with zero distance to consumers, a sort of value-creating network. Because the tokens are secured on distributed ledger technologies, or the blockchain using smart contracts, the distinction between internal versus external interactions becomes irrelevant. It will be a trusted system of value exchange. In the case of John Deere and agriculture, it is feasible that farmers create significant value for themselves via digital tokens, which they can convert into substantial cash, as a very large chain of partners and participants benefit in the process as food travels from the farm to the table of consumers.

• Finally, the third path that we are studying intensively concerns technologies that enable the formation of entirely new companies or organizations built on code and encrypted on the blockchain that create value in an interaction field. As value is created in the nucleus in the interactions between a company or brand and its consumers, and as these interactions are tokenized, this will enable new collaborations between existing platforms and traditional pipeline businesses but also new organizational forms such as “decentralized autonomous organizations” or DAOs. Brands can develop communities and reward customers for their engagement and involvement by issuing tokens. Would John Deere, for example, issue tokens or voting rights in exchange for farm productivity or profitability data from farmers? This would reward farmers for the value creation in agriculture and the food supply chain as described in “The Interaction Field” book in Chapter 2. Entire new organizations or communities can emerge that create and share value with other participants in the interaction field. These organizations could be organized around fundraising for major social missions or sharing projects, such as eradicating cancer or accelerating K-12 education or other major consumer and social issues. These types of DAOs could be structured as open protocols which enable everyone to participate that can create value.

In the third part of this series of three essays, we will describe several actual case studies in healthcare and education.

[1] “Platform Revolution: How Networked Markets Are Transforming the Economy―and How to Make Them Work for You,” Marshall W. Van Alstyne, Geoffrey G. Parker, and Sangeet Paul Choudary, March 28, 2016.

[2] The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society; Erich Joachimsthaler, Public Affairs, 2020

[3] I have first articulated this notion in my second book: “Hidden in Plain Sight: How to Find and Execute Your Company’s Next Big Growth Strategy,” Erich Joachimsthaler, 2007.

[4] Marshall W. Van Alstyne and Geoffrey G. Parker (2021), “Digital Transformation Changes How Companies Create Value,” Harvard Business Review, December 17.

[5] I like the concept of growth domains or market spaces where companies solve similar consumer challenges and problems (see Joachimsthaler 2007). This idea was pioneered by Rita McGrath who speaks of competitive arenas where groups of market players apply similar strategies. “The End of Competitive Advantage,” Rita McGrath, Harvard Business Review, August 7, 2013.

[6] “Big Tech Must Respect What Consumers Want in the Post-Pandemic Era” Erich Joachimsthaler, Newsweek, 6/24/21

[7] “The Evolution of the Internet to Web3,” Rebecca King, Engagement Lead,” World Economic Forum, Feb 1, 2022

[8] Sangeet Paul Choudary, “The Building Blocks Thesis,” Vol. 1, Apr 26, 2022

[9] “Digital Transformation Changes How Companies Create Value,” Marshall W. Van Alstyne and Geoffrey G. Parker, Harvard Business Review, Dec. 17, 2021.

[10] “BlockApps Launches Agribusiness Blockchain Network ‘TraceHarvest’ Following Success with Bayer” Press Release, Nov. 18, 2020

[11] The Future of Blockchain and Healthcare with Dr. Alex Cahana, ARK Invest, YouTube

[12] “Jorge Stolfi: ‘Technologically, bitcoin and blockchain technology is garbage’,” Jordi Perez Colome, El Pais, July 7, 2022.

The post The Metaverse Meets the Interaction Field Meets Web3 appeared first on Vivaldi.

My thesis is a simple one. If you want to assess whether these new technologies are important to you, where there are opportunities for your company to create a competitive advantage, connect with consumers, build a sustainable new business or achieve new growth, you need to analyze and understand how these technologies will change how consumers live, play and work in the future. Fortunately, we can already see glimpses of these changes on consumers today.

Download the article series

This first article aims to establish whether the metaverse or Web 3+ is a thing, and whether we really should bother at all. I’ll offer a brief recursion in the recent past. I think this is helpful in the sense of what Albert Einstein once said: “If you want to know the future, look at the past.”

The second article will introduce a framework and model that we at Vivaldi find helpful. It is a way to understand these technologies, how they help achieve business goals, and how they affect consumer behavior and society. This framework is the interaction field model. A model or framework is a way of choosing what information is important and which information is not. The model I propose helps to sort out what really matters, what you should attend to and look out for, and what is merely noise, hubris, hucksterism, hype, speculation, gambling, unsavory works or even criminality, so often reported by the press.

The third article will describe actual applications and case studies of how the metaverse or the Web3+ technologies impact companies and industries and how value is created for consumers and society. That is, how it impacts the rest of us, beyond those that make it a business such as the speculators, futurists, boosters, thrill seekers, experts, fortune tellers and others. But before we get there, allow me to first briefly describe how we got here. This will set the stage and answer a simple question: Is the metaverse or Web3+ a thing or not?

The answer is: yes. This chart from CBInsights, which shows the frequency with which the word “metaverse” was mentioned on earning calls, shows when it became at least a very exciting movement; a lofty vision with enormous energy and enthusiasm —even if it is still not quite real.

Earnings Call Mentions of “metaverse”

October 21, 2021 is when this hypothetical, notional, alternative lofty vision and digital domain, called the metaverse became a thing. That day is the Metaverse’s equivalent of the Mayflower touching shore near Plymouth Rock. That’s when then-Facebook CEO Mark Zuckerberg rebranded the firm “Meta,” to signify the seriousness with which the company was taking “the next generation of the Internet.” At the stroke of a press release, Zuckerberg pulled the metaverse from the further reaches of futurist fantasy into the here and now. In the coming years, he predicted, “People will transition from seeing us primarily as a social media company to seeing us as a metaverse company.”[2] To which, those of us more deeply engaged with all things IRL (tech-speak for “In the Real World”) could be forgiven for scratching our heads.

No sooner had brands and businesses cottoned on to the idea that the metaverse might just be the next big thing, when Microsoft jumped into the fray, in a big way. Analysts applauded its bold $70 billion bet on gaming juggernaut Activision Blizzard as a major metaverse play, in light of the golden opportunity it presented to marry software — games like World of Warcraft and Call of Duty – to hardware. Microsoft’s HoloLens VR/AR technology up until then had been mainly a B-to-B tool. Driving the point home, Microsoft CEO Satya Nadella used the term “metaverse” five times on the analyst’s call, extolling it as primarily a 3D gaming experience. 

The metaverse is…about creating games…To me, being great at game building gives us the permission to build this next platform, which is essentially the next internet: the embodied presence. Today, I play a game, but I’m not in the game. Now, we can start dreaming [that] through these metaverses: I can literally be in the game, just like I can be in a conference room with you in a meeting. That metaphor and the technology . . . will manifest itself in different contexts.”[3] 

Zuckerberg, for his part, dealt out a dueling definition:

You can think of the metaverse as an embodied internet, where instead of just viewing content — you are in it. You feel present with other people as if you were in other places, having different experiences that you couldn’t necessarily do on a 2D app or webpage, like dancing…or different types of fitness.[4] 

In a “Meta Founder’s Letter,” he delved deeper into the details:  

The defining quality of the metaverse will be a feeling of presence. It will feel like you are right there with another person or in another place. Feeling truly present with another person is the ultimate dream of social technology…In this future, you will be able to teleport instantly as a hologram to be at the office without a commute, be at a concert with friends, or be in your parents’ living room to catch up. This will open up more opportunity no matter where you live. You’ll be able to spend more time on what matters to you, cut down time in traffic, and reduce your carbon footprint.[5] 

Travis Scott on Fortnite

As if on cue, these blue-sky pipe dreams were reified by a succession of major Metaverse moments. An anonymous bidder laid out $450,000 in cryptocurrency for a plot of virtual land adjacent to rapper Snoop Dogg’s virtual estate, both “located” in an upscale district of a self-styled metaverse called Sandbox. A Travis Scott concert held in the gaming metaverse of Fortnite pulled in 27.7 million attendees, vastly outdrawing any conceivable real-world counterpart. JPM Morgan Chase, most unabashedly bullish of the big banks, approvingly noted: “In Decentraland, a user-owned Ethereum-based virtual world, 21,000 real estate transactions totaled $110 million in 12 months. Virtual real estate is a growing market. The average price of a parcel of land doubled in a six-month window in 2021. It jumped from $6,000 in June to $12,000 by December across the four main Web 3.0 metaverses.”[6] The concept gained real credibility on Wall Street with the $40 billion blockbuster IPO of Roblox, a firm famed in Fortune for creating “an immersive virtual world of gamers with a following that has spread far beyond young STEM nerds.”[7] What made Roblox stock so hot was that a holy host of consumer brands, including Disney, Nike, the NFL, and Chipotle, had lately staked out first-mover claims on its virtual frontier. The buzz only intensified after the digital pop-up store Gucci Garden sold a limited-edition virtual version of its exclusive Queen Bee Dionysus handbag for a higher price than in IRL: $4000 over $3600.[8] Also on Roblox NIKELAND offered a virtual version of Nike HQ, with the added attraction of visitors using accelerometers on their phones to “translate activity in the physical world into longer jumps or faster speeds” in the metaverse.[9]  

As the buzz and hype amplified to deafening levels, a chorus of skeptics pushed back. Leading the contrarian pack, Elon Musk dismissed the concept as “all hype and no substance,” if for no other reason than the current crop of AR/VR headsets were clunky, costly, and dorky. “You can put a TV on your nose but I’m not sure that puts you `in the metaverse’” Musk scoffed. “I don’t see somebody wearing a frigging screen on their face all day and refusing to leave…I don’t believe we’re on the verge of slipping into the metaverse. It has the ring of a buzzword.”[10] 

Pushing back on the pushback, not so surprisingly, was the sector best positioned to benefit from the vision becoming reality: consumer electronics companies. Forever on a quest for the next big thing to replace maturing legacy technologies in the hearts and minds of consumers, in early 2022 over 2,000 tech companies descended on the IRL fantasy land of Las Vegas for the first in-person CES (Consumer Electronics Show) in two long pandemic years. 

Samsung’s NFT TV

Observing from the sidelines, Axios tech journalist Ina Fried dryly noted: “Many CES observers suggested a drinking game in which keynote watchers took a shot every time the metaverse was mentioned. But that would have been a recipe for alcohol poisoning.”[11] Boosters prowling the booths, however, could point to, touch, feel and in some use-cases wear tangible products tailored to meet the moment. From Panasonic subsidiary Shiftall: a body tracking suit designed to extend VR experiences beyond the head and torso. From startup Pebble Feel: a body-worn accessory that lets its wearer “feel” virtual heat and cold; from yet another startup: a “haptic jacket” that permit wearers to “feel” virtual sensations. From Sony: PlayStation VR2, complete with “new sensory features” like eye-tracking, enabling users to swivel their vision from right to left. From Microsoft: a partnership with Qualcomm to develop lightweight AR glasses. From Hyundai: grand plans to build “digital twin” factories, yet another key facet of the evolving metaverse, touted as potentially re-inventing manufacturing. From Samsung: a TV to display your growing collection of Non-Fungible Tokens (NFTs) for the bros on the block. 

The Dawn of Web3 

Samsung’s NFT TV was one of the only tangible hardware nods there to a potentially competing paradigm, Web3, whose proponents argue with a quasi-religious fervor that the “3D immersive experience” is not the main act but a side-show compared to the radically transformative economics of shared value among and between digital denizens. Web3+ seeks to unshackle the digital economy from sovereign authorities like central banks and private enterprises that thrive within the current global financial ecosystem. In Web3+ future world, late-stage capitalism withers away, to be replaced by decentralized, self-governing, anonymized forms of finance, of which the current crop of cryptocurrencies are merely the first crude iterations.  

The term Web3 was first coined in a 2014 online treatise by Ethereum blockchain cryptocurrency co-founder Gavin Wood, who contended that this new and improved digital domain’s defining attribute, “pervasive privacy,” was only attainable through the adoption of “identity-based” pseudonyms. A core tenet of Web3 is that key to tapping into the magic of financial disintermediation and decentralization is unpierceable anonymity. [12] As a purely practical matter, however, IRL protocols aiming to protect privacy by promoting anonymity have succeeded thus far mainly to put widely speculative and in some cases, quasi-criminal forms of finance at the heart of a putatively noble experiment. An unrelenting focus on safeguarding anonymity at all costs has, to its critics, served mainly to amplify abuses, including but not limited to hacking, groping, snooping, and stealing, which have turned Web2 into a moral and social cesspool over the past two decades. 

In the eyes of those critics, the most damning dark side of Web3 is that its most conspicuous beneficiaries are younger, scruffier versions of the original Silicon Valley male mafia. In Vice, early Web3 adopter Tim O’Reilly conveyed his dismay that “blockchain has turned out to be the most rapid recentralization of a decentralized technology I’ve seen in my lifetime.”  

Accounting for its vested interest in advising large enterprises on how to dispense the staggering tech investments needed to make the big leap into the digital unknown, Accenture insists the two trends – Metaverse and web3 – are converging.  “Either Metaverse or Web3 alone would be enough to draw hype and attention,” Accenture maintains. “But the fact that they are unfurling simultaneously is what demands enterprise leaders take notice.”[13] The firm draws a useful distinction between the two trends:

“These evolutions are taking place on two fronts: metaverse [is] the re-platforming of digital experiences…Web3 is reinventing how data moves through that system.” 

Prophets of the Metaverse 

Venture capitalist Matthew Ball, the most fluent prophet-protagonist of what he calls a “quasi-successor state to the mobile internet,” defines its realization as predicated on a specific set of prerequisites. His top three: scaling, to exponentially increase the number of potential participants to “infinite”; persistence, enabled by pervasive 5G networks to “improve immersion and create new experiences”; and interoperability, to enable economic value, experiences, and identities to be portable among multiple metaverses.  

Counterpoint to the prophesizing and proselytizing came again from Axios’s Ina Fried, who did a quick reality check on the metamorphosis’ minimum timeline from the sidelines of the 2022 Mobile World Congress in Barcelona: 

The full vision of a shared, 3D digital dimension…is probably still a decade away — but it won’t arrive out of nowhere in one piece. Instead, it will show up in bits and chunks, clunky and disjointed, before coalescing into something both functional and useful. Unless, of course, all this turns out to be another false start for a VR industry that has been promising us one metaverse or another for three decades now.[14]

By Way of Background 

In his 1992 fantasy novel Snow Crash, science fiction author Neal Stephenson (three decades on, fittingly, a futurist at pioneering virtual reality firm Magic Leap) concocted a compelling mash-up of utopia and dystopia, ushering the term “metaverse” into the vocabulary of tech-geekery and elevating it to canonical status among self-styled Silicon Valley visionaries. In the book’s fictional IRL, Los Angeles is no longer part of the United States because the federal government has ceded much of its power and territory to private enterprises in the wake of a global economic and social collapse. Across what is left of the nation, mercenary armies compete for defense contracts while elites hunker down in guarded gated housing developments known as burbclaves.  

The 1992 fantasy novel that used the term “metaverse”

The City of Angels, where the story is set, is threatened by waves of hungry Eurasian refugees approaching a Gold Coast densely settled by billionaires who live the high life on obscenely huge yachts.[15] In this bifurcated collision of “real” and “virtual” worlds, the ironically named Hiro Protagonist is a loser-slacker-computer hacker who lives in a shabby shipping container and delivers pizza IRL. Upon entering the metaverse, however, he transforms into a hero on a mission: tracking down the source of a nasty computer virus inflicting brain damage on users IRL. Thirty years later, Stephenson modestly admitted to “just making shit up.”[16] Still, Snowcrash’s metaverse uncannily prefigures today’s Roblox and Decentraland, among other proto-metaverses. It’s an urban fantasy amusement park, where virtual visitors spend vast amounts of cryptocurrency on speculative real estate and trivial pursuits and patronize boutiques along a Main Street thousands of miles long. Avid participants develop unhealthy addictions to the virtual world, and escape to the metaverse to disconnect from dystopian reality.  

To today’s thinkers pondering the pros and cons of this virtual vision ever becoming reality, it’s hard to deny its potential to turn in on itself, as a digital extension of all-powerful of surveillance states, ruled by big government, big business, or worst-case scenario, both. Whether it’s Big Brother or Big Boss, The Wall Street Journal cites Electronic Frontier Foundation general counsel Kurt Opsahl on the disturbing prospect of your supervisor being equipped with the ability to track and record with uncanny accuracy the attitudinal implications of your subtlest eyeroll or shrug being monitored in a virtual meeting. “If coupled with data about body temperature or heart rate from a smart watch, the information could be used to try to infer a worker’s emotional state.” [17]    

Small solace on that front may be gained from some sobering research conducted by the Center for Countering Digital Hate (CCHD), a nonprofit that analyzes and seeks to disrupt online hate and misinformation. After staffers spent 12 hours recording activity on VRChat, the proprietary virtual world platform accessible via Meta’s Oculus headset, “the group logged an average of one infringement every seven minutes, including instances of sexual content, racism, abuse, hate, homophobia and misogyny, often with minors present.”[18] Nina Jane Patel, vice president of metaverse research for Kabuni, an immersive technology company based in the U.K., was, by her own account which promptly went viral, happily immersed in Meta’s Horizon Venues when her female avatar was “virtually groped and harassed” by a group of three avatars with male voices. “Before I knew it,” Patel maintained, “they were groping my avatar…[and] touching [its] upper and middle portion of my avatar…while a fourth male avatar was taking selfie photos of what was happening.”  

In response to her sordid user experience, Meta rapidly rolled out a “default personal boundary” requiring avatars to stay nearly 4 feet apart from each other. That said and done, how is that enforceable in perpetuity? Given Meta’s checkered track record pitting profit up against the costs associated with safeguarding users’ privacy and dignity on Facebook, Meta’s baby step, however well intentioned, was anything but reassuring.  

Fast Forward

If the metaverse and Web3+ is a world we dream of, and is indeed still years off, the lure of it has been unstoppable despite some enormous headwinds and dire turmoil in recent weeks and months.

All major crypto currencies have declined over the months with Bitcoin losing over 70%, and Ethereum losing as much in just four months, while a number of firms, including Celsius, the biggest lending platform, stopped trading due to insolvency risk. Terra UST and stablecoin LUNA wiped out over $40 billion of investors’ wealth in just 24 hours.

Some enthusiasts will quickly point out that crypto has survived major crashes before. It dropped 99.9% in 2011, and it dropped from $1,100 to $200 in 2013, in just a month. And then again, it dropped from $20,000 to $4,000 in 2017. Every time it dropped, it kept coming back stronger. Alex Dovbnya asked “Black Swan” author Nassim Nicholas Taleb whether the crash is just another crypto winter or a full-blown ice age. [19]

Others will say that we need to look beyond crypto, and even beyond the core technology of Web3+, namely the blockchain. This is a fair point. There are two ways to think about this one. First is to confide in experts, those that study the metaverse and the future more profoundly than everyone else. From this perspective, the metaverse will be a thing. McKinsey estimates it to be a $5 trillion economy. Goldman Sachs believes the metaverse will be a $8 trillion opportunity and Citi even estimates it to be worth $13 billion by 2030. These are staggering numbers. In order to get a sense of how big these numbers are, remember that today’s fashion industry is a $1.5 trillion global industry, and retail is about $6.6 trillion in the US. Even while these industries are so much smaller than the metaverse, they’re pervasive and important in our lives, which will make the metaverse a real thing for consumers and society.[20]

The second perspective is a personal one. I came to this country in 1995 and was told there was a company that had started to sell books online and we’d all read books and publish online. I smiled in disbelief wondering whether I missed something in translation. Some said that we’d buy cars and houses online, and even work there. They talked about an internet where you could find everything thanks to a search engine such as Google. A sort of goldrush took place, but by 2000, all this came to an end with the stock markets crashing, and dotcom companies rebranded as “dotbomb” companies.

But while many companies disappeared, the internet did not, and technologies associated with the internet evolved. The ecommerce pioneered by Amazon got better and better. Of dozens of search engines, Google emerged as the most useful one. This reminds me of Web3 today. Try to buy land on Decentraland for example, and it is a cumbersome experience. Currently Web3 is slow, reminiscent of AOL dial-up. And for what use?

Therefore, while I believe the metaverse or Web3+ is not a thing yet, it will be a thing that will change the way we live our lives, the way we work, and play.  This translates into enormous opportunities for companies and brands — but only those that solve real problems and major challenges. This is something I explained in my last book (The Interaction Field, PublicAffairs 2020).

Look at the companies that have thrived over the years — Amazon solved a real problem and made shopping for anything much more efficient via ecommerce. Google helped you find things on the internet via the technology of search engines. Uber and Lyft helped us get around town in a relatively cheap, convenient way that beats waiting for a taxi, especially in NYC when it rains.

The problem with the metaverse and Web3+ seems to be that we’ve forgotten this simple principle of solving something for consumers and society. Buying a Bored Ape or selling an NFT collectible or dressing up your avatar with your favorite fashion label is something we’re doing not because we should but because we can. Currently we’re trying too hard to be amazing, rather than being amazingly useful, as Jaer Baer, a branding strategist, has said before.

In the next article, I’ll introduce a framework and model to really see the big opportunities that these emerging technologies associated with the metaverse or Web3+ present for companies and brands.

 To be continued in Part 2. 

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[1]  “Why is Snoop Dogg talking about Web 6.0”

[2] Other tech luminaries have followed Zuckerberg’s lead. By December, Jack Dorsey co-founder of Twitter and Square announced rebranding it to Block in an effort to position the payments company on new technologies that underlie the metaverse, such as blockchain.

[3] “Microsoft Chief Hails $75 billion Deal for Activision as Grand Step Into the Metaverse,” Financial Times, February 2, 2022 

[4] “Facebook’s CEO on Why the Social Network is Becoming ‘a Metaverse Company” Casey Newton, The Verge, Jul 22, 2021  

[5] Meta Founder’s Letter, October 28, 2021, Mark Zuckerberg, https://about.fb.com/news/2021/10/founders-letter/October 28, 2021 

[6] “Opportunities in the metaverse: How businesses can explore the metaverse and navigate the hype vs. reality” JP Morgan Onyx by JP Morgan February 15, 2022 

[7] “Why Wall Street thinks the metaverse will be worth trillions,” Bernard Warner, Fortune, January 27, 2022  

[8] Ibid. 

[9] “Meet Me in the Metaverse,” Technology Vision 2020, Accenture  

[10] Elon Musk Interview, Babylon Bee, December 22, 2021 

[11] “CES 2022 brought pieces of the metaverse into view,” Ina Fried, Axios, January 7, 2022  

[12] “Bored Apes, BuzzFeed and the Battle for the Future of the Internet,” Maxwell Strachan, Vice, February 14, 2022 

[13] “Meet Me In the Universe,” Technology Vision 2022 Accenture 2022 

[14] “CES 2022 brought pieces of the metaverse into view,” Ina Fried, Axios, January 7, 2022 

[15] Wikipedia description of Snow Crash 

[16] “The Sci-Fi Guru Who Predicted Google Earth Explains Silicon Valley’s Latest Obsession”; Joanna Robinson, Vanity Fair, June 23, 2017 

[17] “Why the Metaverse Will Change the Way You Work,” Sarah E. Needleman, The Wall Street Journal, Feb. 7, 2022 

[18] “Metaverse virtual worlds lack adequate safety precautions, critics say,” Maura Barrett and Douglas Forte, NBCNews.com, Feb. 9, 2022 

[19] Alex Dovbnya (2022), “Crypto Winter? “Black Swan” Author Predics Full-Blown Ice Age,” UToday, June 2022

[20] See McKinsey; CBInsights 2022: Metaverse of Madness and Fahri Karakas (The Goldrush has started in the metaverse….)

[21] Thank you to Alberto Velasco and Luis Geradin for valuable comments on earlier drafts of this article  

The post Making the Metaverse Work for the Rest of Us: Part I appeared first on Vivaldi.

Q: Who is the metaverse working for currently?

A: The metaverse right now works for scammers, criminals, bandits – people who are a bit unsavory, and perhaps for speculators or traders who have a lot of money to speculate or celebrities who buy a Bored Ape as a status symbol.

These new technologies have created a Wild West. The evolving question is — how does this create value to the consumer or society at large? How can a company or a brand then do good business? People who are not trying to speculate or scam somebody.

Q: Right now a lot of consumer brands are experimenting with the metaverse — what are the options for services or B2B companies? Is there a way they can engage at the present? 

A: One simple way that companies currently participate is to say if we do it here [in the real world], we should also be over there [in the metaverse]. Sort of like the old version of Second Life.

JP Morgan, for example, has Chase branch offices, and they recreated a branch office in the metaverse using the platform Decentraland. Or Gucci says if you like Gucci loafers in the real world and want to express yourself in the metaverse, maybe your avatar will have the same Gucci loafer, and you’ll pay a lot of money for it. Or there are advertising companies that say, hey, in the real world we do advertising on 5^th Avenue because a lot of consumers walk by, so we’ll create a giant billboard in the metaverse.

That’s where a lot of conversation is right now, which is not really constructive. People have started to build some things, but not a lot of activity is taking place — yet.

B2B companies will benefit from what’s called the industrial metaverse, which has recently been extensively discussed at the World Economic Forum at Davos.

Q: What do you think the inflection point will have to be, or what will have to happen technologically, to get us from where we are now, with marketing and entertainment leading the charge, to a future where businesses are better utilizing this new world?

A: There are a number of things that have to happen. The metaverse and Web 3.0 — it’s extremely slow. If you remember dial-up internet and AOL, where the screen would slowly fill up, that’s actually what’s happening with Web 3.0.

Another very important thing is the regulatory and legal framework. There are big problems right now – if you buy an NFT that is tied to a digital asset, the legal framework is not clear if you bought the copyright of something or merely the fair use. Legally with fair use, you can use it, but you don’t own it. The original owner still owns it. There’s no law right now.

In order to make the metaverse work for the rest of us, the speed and regulatory framework have to evolve fairly rapidly.

Q: There’s an idea that the decentralization that comes with Web 3.0 will give individuals more control over their personal data — what is the benefit of that for large companies or business services?

A: In Web 3, I have my identity on the blockchain, it’s encrypted and everything I put there stays there. I could have a digital wallet, an SSI [self-sovereign identity], and if I own that data, it’s spread across many computers: decentralized. It’s valuable because my data can be shared and aggregated and everybody can learn from the data. It isn’t just owned by one company.

I could create an NFT out of my data and every time I share it or provide access, I earn a token. I could connect my exercise routines, my eating habits, sleeping behavior, and then could use that data and buy health insurance. If I’m healthy, I could use it to get a reduction in insurance.

Right now, the value is exploited by companies that capture data, like Facebook and Google, via annoying advertising. In the future, decentralization will democratize things. I can create a value out of my data and trade or gift it. It creates value to companies because they can create better products and services based on the data. As I wrote in my book, it’s about winners share all, not winners take all. In the future the consumer becomes a lot more powerful.

Q: In Web 2, we’ve been in an era of deep “personalization” or something that’s been sold to us as “personalization,” and maybe what’s being advocated for in the future is a level of aggregation that allows for better overall products, even if they seem less “personalized”?

A: Personalization right now isn’t really personalization. Today it is about a limited context such as past purchases. It’s almost lost its original intent. Web 3 promises that it becomes real personalization — because I’m in charge of serving myself. Companies will only attract customers and business if they can truly understand the context and daily life of consumers. As I’ve said many times before, if content is king, context is King Kong.

Q: Do you see health tech or health care as being the industry that could benefit the most or most quickly from these new developments?

A: Health care is a big one because it’s extremely fragmented. One doctor in a hospital doesn’t know what another doctor in the same hospital on a different floor is doing. Never mind a doctor across the country. There’s an incredible fragmentation. With the aggregation of data, people start benefiting from each other.

Q: You’ve made the prediction that the cryptocurrency boom may end in a bust — do you foresee cryptocurrency reaching a level of stabilization, or serving as a testing ground for the blockchain, or something else?

A: Crypto is a financial instrument and that means it attracts criminals, scammers and speculators – in a good way and a bad way. Those practices will have to clear themselves out with the regulatory and legal frameworks. I think what will be left is an infrastructure that is far more efficient and effective than what we have now, which is a few banks controlling the banking system. In the metaverse, it’s permissionless; there are no intermediaries which charge you a fee for transfers. Money will be able to travel from me to you without any friction. That really creates consumer benefit. I’m bullish on crypto, and bearish on crypto as a speculative tool.

Q: Is there some inherent value to being the “first” in these new spaces? 

A: The standard recommendation by consultants and ad agencies is that you need to be participating and experimenting, and I think that’s a bit of a self-serving recommendation. Ad agencies tell you that so they can help you do that. I don’t necessarily think that’s the right recommendation.

At Vivaldi, we think differently. You have to figure out how to create real and meaningful value to consumers and create a competitive advantage for your company and brand. It’s better to start with: “Who is my customer? What is my product or service? How do we create value?” and then make decisions from that vantage point. Thinking about your business and framing it from your business perspective is a more thoughtful and practical approach to participating, rather than buying a lot of real estate on Decentraland just to have a presence there or hoping consumers will eventually come. Being first isn’t really the value, it’s being first in providing a meaningful benefit for consumers, that should be the value.

GLOSSARY:

The metaverse: A 3D immersive environment that exists both physically and virtually, built on Web 3.0 technologies.

Web 3.0: The third generation of the internet, which utilizes blockchain technology, operating in a decentralized way and a host of other technologies.

Blockchain: A list of securely linked records distributed digitally over a peer-to-peer network and publicly displayed as a ledger of timestamped transactions.

NFT: A non-fungible token, i.e. a unique digital element that exists as part of the Ethereum blockchain.

Cryptocurrency: A digital or virtual form of currency secured by cryptography, distributed in a decentralized method.

The post Making a Better Metaverse appeared first on Vivaldi.