In October 2021, Mark Zuckerberg stood in front of the world and
announced that he was renaming Facebook.
Meta, the future of the company, and indeed the future of human
interaction itself, would be something called the metaverse.
Our hope is that within the next decade, the metaverse will reach
a billion people. He said that it would host
hundreds of billions of dollars of digital commerce.
People would work there, socialize there, attend concerts
there, and presumably never wonder why they were doing all
of these things while wearing a television strap to their face.
Teleporting around the metaverse, Zuckerberg explained,
would be like clicking a link on the Internet.
Which is, of course, how everyone already teleports
around the Internet by clicking links on it.
The timing of this announcement was entirely coincidental.
It had absolutely nothing to do with the fact that Facebook was
experiencing one of its worst ever press cycles, that a
whistle blower had just testified before the US Senate a
few weeks earlier about how the company put profits over safety,
or that regulators on both sides of the Atlantic were circling.
The decision to rename a 3 billion user company after a
concept from a science fiction novel in which the main
character delivers pizza for the mafia was purely strategic.
Facebook was not the most original idea to begin with.
Social networks like Friendster and Myspace existed long before
Facebook launched, and Zuckerberg famously lost a
lawsuit to the Winklevoss twins for stealing their idea, which
they hadn't really come up with either.
What Zuckerberg did really well was execution.
He launched Facebook through elite universities, making it a
status symbol, before slowly opening it to the rest of the
world. After that, Zuckerberg grew
through acquisition, buying Instagram in 2012 for a billion
dollars and WhatsApp in 2014 for $19 billion.
Instagram now has almost as many users as Facebook itself, making
that billion dollar deal possibly one of the best in
American business history. The problem is that Zuckerberg
Berg's best ideas have usually been other people's ideas.
Instagram was someone elses company.
What's up with someone elses company?
And more recently, Threads is, well, it's Twitter.
So here we had a man who has built one of the most successful
companies in the world, primarily by copying things that
already existed, announcing that he finally had a big idea and
that he was going to lead humanity into a bold new virtual
frontier. He was so confident that he
renamed the entire company after this big idea.
This was a man who once went surfing in Hawaii, wearing so
much sunscreen on his face that he looked like a mime.
He later explained that he he had spotted a paparazzi
photographer and thought that the sunscreen would act as a
disguise. It didn't.
It instead became one of the most viral photographs on the
Internet. This is the man who decided that
he knew so much about how humans interact that the future of
human socialization would be designed by him.
To sell this vision, Zuckerberg produced a 75 minute
presentation video that really has to be seen to be believed.
The first thing you notice about the presentation is what isn't
in it. This is a 75 minute video about
virtual reality in which almost nobody is shown wearing AVR
headset. Not once do you see Zuckerberg
himself put a headset on. And the reason for this is
obvious. A person wearing AVR headset
looks ridiculous and unnatural, and so the creative team
apparently decided to just not show it.
Instead, Zuckerberg walks around his home in carefully staged
morning light with a bicycle in the background to remind you
that despite his dystopian vision of the future, this man
still goes outside. And then he sort of seamlessly
transitions into the metaverse. In reality, this transition
would involve strapping a large plastic device onto your face
and bumping into your furniture. But this is not the version of
events presented. What we are shown instead is a
fully animated Pixar quality cartoon of what the metaverse
might look like. It was not a demo or footage
from an actual existing product. It was instead a cartoon in
which Zuckerberg's avatar, which looked like something from a
Nintendo Wii game, hangs out on a space station playing cards
with the friends that we're supposed to believe he has.
This was the future, a low resolution space station where
people play cards, which is something you can also do at
home without spending any money at all.
Now a noticeable issue in Zuckerberg's presentation was
that the avatars did not have any legs.
They were floating torsos, which is weird.
The people of the metaverse just hovered from the waist up.
This became such a problem for Meta that a year later, in
October 2022, Zuckerberg held a special event to proudly
announce that avatars would now have legs.
The Internet reacted as you would expect to a multi billion
dollar company celebrating the invention of virtual legs.
It later emerged that even this demonstration had been faked.
The legs in the video were generated using a motion capture
suit, not actual VR technology. So to be clear, they had spent
roughly $10 billion at that point.
They couldn't render legs and they faked a video showing that
humans have legs. There were other strange moments
too. In one scene, a woman in Kyoto
sees on Instagram that her friend is at a concert in Los
Angeles. She presses a button and
instantly appears next to her friend as a photo realistic
hologram. If you think about the
technology required for this, you're thinking about it a bit
more carefully than the people who made this video.
It's not a demonstration of existing technology, or even
plausible near future technology.
It's a cartoon about wishes. The woman is not at a concert
and she's not with her friend. She's at an off brand, low
resolution version of the Matrix.
There was another scene in which two people played virtual ping
pong. A scene in which someone
teleports street art into a space station, at which point
the art begins to disappear unless you pay for it, which
really captures the spirit of public art.
But we have to remember that the man presenting this vision, when
asked if he liked coffee on the Theo Von podcast laughed like a
madman and then went on a rambling explanation about how
he knows what coffee is but doesn't drink it as he prefers
to get up in the morning and fight people, going on to claim
that he raw dogs reality. You drink coffee, man or no?
Nah. Really.
Yeah. I mean, you've, you've had it.
I have sometimes on vacation I'll drink it recreationally.
It's like every once in a while. Just like a yeah, it's like a
like a celebration. Yeah.
No, really. Yeah, no.
So you when you get up in the morning, that's not your thing.
Like, is there something you do? No.
No, no, yeah. I mean, I wake up and I, I fight
people. Yeah.
Oh really? So you'd like to keep everything
the equilibrium. Yeah, my sister gives me such a
hard time about that. She's like, you're just sitting
there raw dogging reality. Wow.
I'm not sure Mark Zuckerberg has any real link to reality
whatsoever. According to Jack Dorsey, the
founder of Twitter, Zuckerberg once invited him for dinner and
presented him with cold goat meat that he said he had shot
with a laser gun and then finished off with a hunting
knife. Dorsey told Rolling Stone.
I just ate my salad. It's worth keeping in mind the
kind of interactions the man designing the future of human
interactions has with other people.
I'm not sure what he's raw dogging, but it's not reality,
and hopefully it wasn't that gold.
Despite all of this, a lot of serious people took the
metaverse very seriously. In November 2021, The Economist
argued that it was a logical extension of computing text,
then images, then video, then 3 dimensions.
They pointed out that mockery was an unreliable guide to the
future, and that smartphones had once been mocked as cross data
symbols. It turns out that this time
around, mockery was the correct approach.
The hype in late 2021 was really something Wall Street threw
itself into the project with the enthusiasm of a man who's just
been handed a laser gun and a gold.
Bernstein reported that the word metaverse appeared 449 times in
third quarter earnings calls that year, up from 100 the prior
quarter. McKinsey published a report
declaring that the metaverse could generate up to $5 trillion
in value by 20-30 and that it was too big for companies to
ignore. Citi predicted 5 billion
metaverse users, meaning more than half of the world's
population. Jeffrey said that the metaverse
had the potential to disrupt almost everything in human life,
which is the kind of thing an investment bank analyst says
when they want to be on the right side of whatever is
happening without thinking too carefully about what it actually
means. Big corporations piled in two
Disney appointed a head of metaverse strategy. 3/4 of CEO's
surveyed in 2022 said that they were hiring dedicated metaverse
talent. McKinsey helpfully predicted
that 15% of corporate revenue would be derived from the
metaverse by 2027. That is next year, so we'll have
to wait and see how that goes. As silly as some of this
corporate involvement might have seemed, most of these firms
won't have spent much money on this stuff.
You could just give the social media intern a big title and set
them loose on analyzing the metaverse.
And if it all comes to nothing, you've wasted a year or two of a
single salary. The CEO of a company called
Improbable wrote an article for The Economist comparing the
metaverse to an 11,000 year old temple in southern Turkey.
He argued that throughout human history we've been influenced by
worlds that we imagine beyond this one, and that the metaverse
was the next stage in human culture.
He suggested virtual clothes could be better for the
environment than real ones and that the metaverse may allow the
developing world to participate in new forms of economic
opportunity, pointing to gamers in the Philippines who were
wasting their lives trying to make money in a crypto based
game that looked a lot like a Ponzi scheme at the time.
It's always reassuring when Aceo, who would directly benefit
from a trend, explains that the trend is inevitable and will
somehow save humanity. Then there was the virtual real
estate. In early 2022, someone paid
$450,000 to become Snoop Dogg's neighbor in the sandbox and
metaverse platform. Despite all of the rumours, it
wasn't me. To be clear, this person did not
become Snoop Dogg's actual neighbor with a fence and
awkward conversations about who's bins are who's.
They became his virtual neighbor in some sort of video game.
That plot of virtual land is now reportedly worth around $100.
I'm guessing that Snoop has moved on in something called
Decentral Land. A group called Metaverse Group
purchased a 116 parcel virtual estate on November 2021 for
approximately $2.4 million. That estate is now worth around
$9000, representing a decline of 99.6%.
A Coin Gecko study found that average metaverse land prices
were down 95% in The Sandbox and even more in Decentraland.
In the real world, when property prices decline that much, it's
usually due to a natural disaster.
In the metaverse, nothing happened, people just stopped
showing up, which is probably be better than a natural disaster,
but also somehow worse. Near the peak, Gucci managed to
sell a virtual handbag on roadblocks for over $4000, which
was more than the physical bag would have cost in an actual
shop. That transaction stands as the
purest distillation of 2021 as a financial era, a virtual handbag
that cost more than the real 1 and cannot be used to hold
anything. So what was it actually like?
Zuckerberg's presentation showed a Pixar quality cartoon, but the
actual product, Horizon Worlds, looked a lot worse, like a low
quality video game from the early 2000's.
The graphics were basic, the world's were empty, and the
avatars, as discussed, did not have legs.
On the positive side, though, Zuckerberg's metaverse avatar
showed more facial expressions than the man in itself.
Reports of what it was like to use Horizon Worlds were not very
encouraging. In February 2022, a
psychotherapist reported being verbally and sexually harassed
within 60 seconds of joining. All of the toxicity from social
media platforms followed users into virtual reality, except now
it was happening to a floating torso rather than to a profile
picture. That's progress for you.
It wasn't just outside users who struggled with the product.
Meta's own employees hated it too.
According to internal memos reported by The Verge, the
company was pushing staff to spend more time in the
metaverse, but VR meetings were described as exhausting and
borderline unusable. The VP of Horizon World sent an
internal memo that was leaked acknowledging the problems, he
wrote. For many of us, we don't spend
that much time in Horizon and our dog fooding dashboard shows
this pretty clearly. Why is that?
He asked. Why don't we love the product
we've built? He went on to ask if we don't
love it, how can we expect our users to love it?
Now I don't know what he means by Dog fooding dashboard and I
refuse to look that up. It probably involves that
unfortunate goat from earlier on, but this is still a
devastating question. Why don't even the engineers
like the product that they've designed?
You might think that the next step would be improving the
product. Instead, the VP followed up by
telling staff to make it their mission to fall in love with
Horizon Worlds. Which is the kind of thing you
say when the product is far beyond saving and you're hoping
that enthusiasm can substitute for quality.
John Carmack, the legendary engineer behind the games Doom
and Quake, had been working at Meta since the Oculus
acquisition. He left in 2022, describing
Meta's VR efforts as inefficient and bloated.
Reports suggested that employees couldn't even agree on what the
metaverse was supposed to be. Was it YouTube, a casual World
of Warcraft, a platform, a social space, or a game?
Nobody was quite sure. This is worrying when you've
renamed the entire company after an undefined concept.
The user numbers tell the real story.
While Zuckerberg had predicted a billion people, Horizon World
peaked at a few 100,000 monthly active users.
By some estimates, daily active users eventually fell to around
900 people. That's roughly the population of
a small village. For context, Second Life, a
virtual world that launched 23 years ago, still attracts around
200,000 people per day. They even manage legs on day
one. Decentraland once reported just
38 active users. Later, they disputed this
figure, saying that the real number was closer to 8000, which
is a lot more than 38. But it is still fewer people
than would pass through a moderately busy supermarket on a
weekday. So let's look at the financial
history. Meta reports the metaverse
business under a division called Reality Labs.
And the reported losses at Reality Labs have increased
every single year. In 2019, they lost $4.5 billion.
In 2026 point 6 billion. In 2021, the year Zuckerberg
renamed the company 10.2 billion 2020 two, 13.7 billion in 2020
three 16.1 billion in 2020 four 17.7 billion.
Last year they lost 19.2 billion.
That is a total of approximately $88 billion in operating losses
over 7 years. To put that number in context,
it's more than NASA's entire annual budget several times
over. It's roughly what it cost to
build the International Space Station, which unlike the
metaverse, is a real place that people occasionally visit.
You could fund the entire Apollo program in inflation adjusted
dollars for less than Meta spent on a virtual world with 900
users and no legs. Meta stock fell 64% in 2022 as
investors started panicking about the metaverse spending.
But then in 2023 and 2024, the stock recovered dramatically and
the recovery had nothing to do with the metaverse.
Metas core advertising business continued to be enormously
profitable, generating over $200 billion in total revenue in
2025. The family of apps Facebook,
Instagram, WhatsApp and Messenger is simply a machine
that prints money. The problem was never that Meta
couldn't make money as a broader business.
The problem was that it decided to set $88 billion of the money
that they were making on fire in a virtual world that fewer
people visited than a village post office.
Late last year, Bloomberg reported that Meta was planning
to cut the metaverse budget by 30%.
Meta stock went up on the news, adding about $60 billion in
market value in a single day. When your stock price rises
because you announced that you're going to stop doing
something, it's a clear signal that investors would have
preferred you hadn't started doing it.
This January, Meta laid off more than 1000 Reality Labs employees
and shuttered several VR game studios.
Zuckerberg told investors on the most recent earnings call that
he expects Reality Labs losses in 2026 to be similar to last
year, but that this will likely be the peak.
So after spending 88 billion, the peak of the losses is almost
behind them, which is probably good.
Last month, Meta delivered what many described as a near death
blow to the metaverse. On March 17th, the company
announced that starting this summer, users would no longer be
able to access Horizon Worlds through VR headsets.
The metaverse, the thing the company was named after, was
being downgraded to a phone app. Then, two days later, Mehta
reversed a decision. The chief technology officer
confirmed that the VR app would stay available after all,
presumably because all 900 of the daily users had complained.
Meta's vice president Samantha Ryan framed the situation as
Meta doubling down on the VR developer ecosystem while
shifting the focus of worlds to be almost exclusively mobile.
When a company describes shrinking something as doubling
down, it's usually not a sign that things are going well.
I imagine Zuckerberg probably said that he was doubling down
on the gold when he drew his hunting knife, Ryan wrote in a
blog post. Sometimes we knock it out at the
park, other times we get things wrong.
This is a diplomatic way of saying we spent 88 billion and
almost nobody used it, so we're doing something else now.
The something else is, of course, artificial intelligence.
Mehta has pivoted aggressively towards AI, and the shift is
visible in everything the company does.
At the September 2025 Connect conference, the same annual
event where Zuckerberg had announced the Meta rebrand in
2021, he used the word metaverse just twice.
While he mentioned AI 23 times. The company's focus is now on AI
powered smart glasses, a product that exists in reality and
appears to be selling. It turns out that making a
product that people want to buy can be quite important when
running a tech company. Meadow was not alone in this.
The metaverse had attracted an extraordinary collection of
fellow travellers who managed to exit before anyone could ask too
many questions. Disney eliminated its entire
division in 2023. Walmart built metaverse
experiences on Roblox and then quietly ended them.
Microsoft shut down its mixed reality feature in Teams.
The chief metaverse officers have all vanished from corporate
org charts, presumably to pursue other opportunities and things
that don't exist. Apple characteristically waited
until everyone else had already embarrassed themselves before
entering the market. In 2024, they released the
Vision Pro headset, a piece of hardware that cost $3500.
A huge number of buyers ended up returning it within the 14 day
returns window. Apple had made the best possible
version of a product that almost nobody wanted.
Now I wanted to return briefly to the consultants and analysts.
McKinsey told us in 2022 that the metaverse was too big for
companies to ignore. They predicted that 15% of
corporate revenue would come from the metaverse by 2027, so
that should be happening anytime soon.
City predicted 5 billion metaverse users, and Jeffrey
said that it would disrupt almost everything in human life.
Sometimes the thing that everyone is laughing at deserves
to be laughed at. The broader question is why so
many intelligent people got this so wrong.
Part of the answer is that the metaverse hype coincided with an
unusual moment in financial history.
Late 2021 was the peak of near 0 interest rates and free capital.
NFTS were selling for millions, crypto was booming, and in that
environment, the idea that people would pay to live inside
a video game didn't seem obviously more insane than
anything else that was going on at the time.
It was only when interest rates rose that people started asking
whether any of this made sense. The answer, as it turned out,
was no. Now, while all of this was
happening, Meadow was also running an entirely different
business, one that people actually used.
And that business is now the subject of what analysts are
calling social media's tobacco moment.
Last week, a jury in Los Angeles found that metas platforms,
Instagram in particular and Googles YouTube have been
designed to be addictive to children and that these
companies had failed to warn users of the dangers.
The jury awarded $6 million in damages, with Meda liable for
70%. Separately, a jury in New Mexico
found Meda liable for failing to protect children from explicit
content and ordered the company to pay $375,000,000 in civil
penalties. Meta's stock lost 280 billion in
market capitalization in March 2026 alone, which is more than
three times the total amount Meta lost on the metaverse over
seven years. Let's be serious here.
Mark Zuckerberg created Facebook not for social connection, but
as a form of revenge against humanity.
He created it because he was rejected by a girl in 2004 and
decided that the only logical response was to dismantle the
concept of human privacy forever.
Instagram isn't a social network or a photo sharing website.
It's a forensic archive of your aunt's descent into Q Anon and
every haircut you've ever had that made you look like a
medieval peasant. What Mark Zuckerberg calls
social media is better described as being a digital Victorian
workhouse where the inmates are forced to mind their own self
esteem for likes. The details that came out of the
trial are worth dwelling on. Zuckerberg testified that he had
personally overruled A proposed ban on Instagram beauty filters,
filters that make users look more attractive, despite
warnings from 18 separate experts that they were
contributing to body dysmorphia in teenage girls.
The reason he gave was free expression.
Internal emails included one from a researcher who wrote that
Instagram is a drug. We're basically pushers and
noted that Instagram chief Adam Masari freaked out when this was
raised. Internal documents showed that
boosting time spent on the platform, including amongst
teenage users, was an explicit goal.
Zuckerberg told the court that Mehta no longer set such
targets, but the jury was then shown the documents in which he
had said exactly those targets. One of the FT journalists
present when Zuckerberg testified observed that he's not
a sympathetic character. The man who decided that the
future of human interaction should be a virtual world
designed by him was now in a courtroom explaining why he had
overruled medical advice about the harm his products were doing
to children. The irony here is so perfectly
constructed it almost seems planned.
Meta spent $88 billion trying and failing to get people
addicted to virtual reality. The products people are actually
addicted to, the ones that generate $200 billion a year,
may now potentially be destroying the company through
litigation. They built an experience machine
that nobody got in, and the machine that they left running
in the corner was the 1 causing all of the damage.
Tobacco's problem was that it's product was too popular, too
addictive, and too harmful. The metaverse's problem was that
it wasn't popular at all. Meta in 2026 had managed to have
both problems at the same time. One division spent $88 billion
building something nobody wanted.
The other built something that almost everyone used and was now
being sued for how well it works.
This is, in its own way, an extraordinary business
achievement. Free cash flow at Mehta is
expected to shrink by 83% this year, even as revenues grow.
The company is laying off hundreds of workers to fund its
AI ambitions. The company will likely be
called Meta for the foreseeable future.
Permanently branded after a product that lasted about four
years, this company has now changed its name twice.
From a website built in a Harvard dorm room to rate the
attractiveness of students to one of the most powerful media
companies in history, to the name of a virtual world that
couldn't render legs, each name has represented a version of
what Mark Zuckerberg believed the future would look like.
Each time, he's been very confident.
Two out of three times, he's been right.
The question nobody can answer is whether $88 billion was a
reasonable price to pay to find out that people didn't want to
live in a cartoon space station. They were speculating with the
kind of confidence usually reserved for people spending
other people's money, and the result was a failure that was
only a surprise to those who were being paid to believe
believe in it. Thanks for tuning into this
week's podcast. The podcast is entirely
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If you'd like to support it, you can sign up using the link in
the video description. Have a great week and talk to
you again soon. Bye.