1 00:00:00,160 --> 00:00:04,600 In October 2021, Mark Zuckerberg stood in front of the world and 2 00:00:04,600 --> 00:00:07,440 announced that he was renaming Facebook. 3 00:00:07,440 --> 00:00:11,720 Meta, the future of the company, and indeed the future of human 4 00:00:11,720 --> 00:00:15,600 interaction itself, would be something called the metaverse. 5 00:00:15,840 --> 00:00:19,760 Our hope is that within the next decade, the metaverse will reach 6 00:00:19,840 --> 00:00:22,560 a billion people. He said that it would host 7 00:00:22,560 --> 00:00:25,520 hundreds of billions of dollars of digital commerce. 8 00:00:25,840 --> 00:00:29,640 People would work there, socialize there, attend concerts 9 00:00:29,640 --> 00:00:33,560 there, and presumably never wonder why they were doing all 10 00:00:33,560 --> 00:00:37,360 of these things while wearing a television strap to their face. 11 00:00:37,800 --> 00:00:41,280 Teleporting around the metaverse, Zuckerberg explained, 12 00:00:41,440 --> 00:00:44,480 would be like clicking a link on the Internet. 13 00:00:44,640 --> 00:00:48,080 Which is, of course, how everyone already teleports 14 00:00:48,080 --> 00:00:50,960 around the Internet by clicking links on it. 15 00:00:51,720 --> 00:00:55,840 The timing of this announcement was entirely coincidental. 16 00:00:56,080 --> 00:00:59,320 It had absolutely nothing to do with the fact that Facebook was 17 00:00:59,320 --> 00:01:02,960 experiencing one of its worst ever press cycles, that a 18 00:01:02,960 --> 00:01:06,640 whistle blower had just testified before the US Senate a 19 00:01:06,640 --> 00:01:10,960 few weeks earlier about how the company put profits over safety, 20 00:01:11,160 --> 00:01:15,080 or that regulators on both sides of the Atlantic were circling. 21 00:01:15,360 --> 00:01:19,760 The decision to rename a 3 billion user company after a 22 00:01:19,760 --> 00:01:22,880 concept from a science fiction novel in which the main 23 00:01:22,880 --> 00:01:27,440 character delivers pizza for the mafia was purely strategic. 24 00:01:27,840 --> 00:01:31,680 Facebook was not the most original idea to begin with. 25 00:01:31,880 --> 00:01:36,160 Social networks like Friendster and Myspace existed long before 26 00:01:36,160 --> 00:01:39,680 Facebook launched, and Zuckerberg famously lost a 27 00:01:39,680 --> 00:01:44,000 lawsuit to the Winklevoss twins for stealing their idea, which 28 00:01:44,000 --> 00:01:46,040 they hadn't really come up with either. 29 00:01:46,480 --> 00:01:50,080 What Zuckerberg did really well was execution. 30 00:01:50,320 --> 00:01:54,320 He launched Facebook through elite universities, making it a 31 00:01:54,320 --> 00:01:57,760 status symbol, before slowly opening it to the rest of the 32 00:01:57,760 --> 00:02:00,760 world. After that, Zuckerberg grew 33 00:02:00,760 --> 00:02:04,800 through acquisition, buying Instagram in 2012 for a billion 34 00:02:04,800 --> 00:02:09,520 dollars and WhatsApp in 2014 for $19 billion. 35 00:02:09,759 --> 00:02:14,840 Instagram now has almost as many users as Facebook itself, making 36 00:02:14,840 --> 00:02:18,280 that billion dollar deal possibly one of the best in 37 00:02:18,280 --> 00:02:21,760 American business history. The problem is that Zuckerberg 38 00:02:21,840 --> 00:02:26,040 Berg's best ideas have usually been other people's ideas. 39 00:02:26,320 --> 00:02:28,680 Instagram was someone elses company. 40 00:02:28,800 --> 00:02:30,960 What's up with someone elses company? 41 00:02:31,200 --> 00:02:34,840 And more recently, Threads is, well, it's Twitter. 42 00:02:35,400 --> 00:02:38,800 So here we had a man who has built one of the most successful 43 00:02:38,800 --> 00:02:42,000 companies in the world, primarily by copying things that 44 00:02:42,000 --> 00:02:46,760 already existed, announcing that he finally had a big idea and 45 00:02:46,760 --> 00:02:50,400 that he was going to lead humanity into a bold new virtual 46 00:02:50,400 --> 00:02:53,160 frontier. He was so confident that he 47 00:02:53,160 --> 00:02:56,320 renamed the entire company after this big idea. 48 00:02:56,640 --> 00:03:00,480 This was a man who once went surfing in Hawaii, wearing so 49 00:03:00,480 --> 00:03:03,880 much sunscreen on his face that he looked like a mime. 50 00:03:04,120 --> 00:03:06,960 He later explained that he he had spotted a paparazzi 51 00:03:06,960 --> 00:03:10,520 photographer and thought that the sunscreen would act as a 52 00:03:10,520 --> 00:03:12,720 disguise. It didn't. 53 00:03:12,880 --> 00:03:16,200 It instead became one of the most viral photographs on the 54 00:03:16,200 --> 00:03:19,760 Internet. This is the man who decided that 55 00:03:19,760 --> 00:03:23,760 he knew so much about how humans interact that the future of 56 00:03:23,760 --> 00:03:27,000 human socialization would be designed by him. 57 00:03:27,600 --> 00:03:31,400 To sell this vision, Zuckerberg produced a 75 minute 58 00:03:31,400 --> 00:03:35,400 presentation video that really has to be seen to be believed. 59 00:03:35,640 --> 00:03:39,440 The first thing you notice about the presentation is what isn't 60 00:03:39,440 --> 00:03:42,760 in it. This is a 75 minute video about 61 00:03:42,760 --> 00:03:47,000 virtual reality in which almost nobody is shown wearing AVR 62 00:03:47,000 --> 00:03:49,720 headset. Not once do you see Zuckerberg 63 00:03:49,720 --> 00:03:53,240 himself put a headset on. And the reason for this is 64 00:03:53,240 --> 00:03:56,280 obvious. A person wearing AVR headset 65 00:03:56,320 --> 00:04:00,120 looks ridiculous and unnatural, and so the creative team 66 00:04:00,120 --> 00:04:03,320 apparently decided to just not show it. 67 00:04:03,600 --> 00:04:07,720 Instead, Zuckerberg walks around his home in carefully staged 68 00:04:07,720 --> 00:04:11,400 morning light with a bicycle in the background to remind you 69 00:04:11,640 --> 00:04:15,320 that despite his dystopian vision of the future, this man 70 00:04:15,320 --> 00:04:19,720 still goes outside. And then he sort of seamlessly 71 00:04:19,720 --> 00:04:24,000 transitions into the metaverse. In reality, this transition 72 00:04:24,000 --> 00:04:27,800 would involve strapping a large plastic device onto your face 73 00:04:27,800 --> 00:04:31,840 and bumping into your furniture. But this is not the version of 74 00:04:31,840 --> 00:04:35,680 events presented. What we are shown instead is a 75 00:04:35,680 --> 00:04:39,960 fully animated Pixar quality cartoon of what the metaverse 76 00:04:40,000 --> 00:04:43,360 might look like. It was not a demo or footage 77 00:04:43,360 --> 00:04:47,720 from an actual existing product. It was instead a cartoon in 78 00:04:47,720 --> 00:04:51,040 which Zuckerberg's avatar, which looked like something from a 79 00:04:51,040 --> 00:04:55,840 Nintendo Wii game, hangs out on a space station playing cards 80 00:04:56,000 --> 00:04:58,880 with the friends that we're supposed to believe he has. 81 00:04:59,280 --> 00:05:03,880 This was the future, a low resolution space station where 82 00:05:03,880 --> 00:05:07,440 people play cards, which is something you can also do at 83 00:05:07,440 --> 00:05:10,080 home without spending any money at all. 84 00:05:10,520 --> 00:05:14,720 Now a noticeable issue in Zuckerberg's presentation was 85 00:05:14,720 --> 00:05:17,440 that the avatars did not have any legs. 86 00:05:17,800 --> 00:05:20,720 They were floating torsos, which is weird. 87 00:05:21,040 --> 00:05:24,600 The people of the metaverse just hovered from the waist up. 88 00:05:24,920 --> 00:05:28,720 This became such a problem for Meta that a year later, in 89 00:05:28,720 --> 00:05:33,520 October 2022, Zuckerberg held a special event to proudly 90 00:05:33,520 --> 00:05:36,320 announce that avatars would now have legs. 91 00:05:36,760 --> 00:05:40,320 The Internet reacted as you would expect to a multi billion 92 00:05:40,320 --> 00:05:44,520 dollar company celebrating the invention of virtual legs. 93 00:05:45,160 --> 00:05:49,160 It later emerged that even this demonstration had been faked. 94 00:05:49,440 --> 00:05:53,120 The legs in the video were generated using a motion capture 95 00:05:53,120 --> 00:05:58,440 suit, not actual VR technology. So to be clear, they had spent 96 00:05:58,440 --> 00:06:00,800 roughly $10 billion at that point. 97 00:06:01,000 --> 00:06:05,000 They couldn't render legs and they faked a video showing that 98 00:06:05,160 --> 00:06:08,680 humans have legs. There were other strange moments 99 00:06:08,680 --> 00:06:11,760 too. In one scene, a woman in Kyoto 100 00:06:11,920 --> 00:06:15,240 sees on Instagram that her friend is at a concert in Los 101 00:06:15,240 --> 00:06:17,920 Angeles. She presses a button and 102 00:06:17,920 --> 00:06:21,640 instantly appears next to her friend as a photo realistic 103 00:06:21,640 --> 00:06:23,720 hologram. If you think about the 104 00:06:23,720 --> 00:06:27,640 technology required for this, you're thinking about it a bit 105 00:06:27,640 --> 00:06:30,320 more carefully than the people who made this video. 106 00:06:30,640 --> 00:06:34,760 It's not a demonstration of existing technology, or even 107 00:06:34,760 --> 00:06:37,000 plausible near future technology. 108 00:06:37,400 --> 00:06:41,720 It's a cartoon about wishes. The woman is not at a concert 109 00:06:41,720 --> 00:06:44,920 and she's not with her friend. She's at an off brand, low 110 00:06:44,920 --> 00:06:47,120 resolution version of the Matrix. 111 00:06:47,680 --> 00:06:51,600 There was another scene in which two people played virtual ping 112 00:06:51,600 --> 00:06:53,280 pong. A scene in which someone 113 00:06:53,280 --> 00:06:57,000 teleports street art into a space station, at which point 114 00:06:57,000 --> 00:07:00,320 the art begins to disappear unless you pay for it, which 115 00:07:00,320 --> 00:07:03,120 really captures the spirit of public art. 116 00:07:03,680 --> 00:07:07,360 But we have to remember that the man presenting this vision, when 117 00:07:07,360 --> 00:07:11,720 asked if he liked coffee on the Theo Von podcast laughed like a 118 00:07:11,720 --> 00:07:15,320 madman and then went on a rambling explanation about how 119 00:07:15,320 --> 00:07:18,920 he knows what coffee is but doesn't drink it as he prefers 120 00:07:18,920 --> 00:07:22,600 to get up in the morning and fight people, going on to claim 121 00:07:22,720 --> 00:07:26,360 that he raw dogs reality. You drink coffee, man or no? 122 00:07:27,400 --> 00:07:30,760 Nah. Really. 123 00:07:31,200 --> 00:07:33,680 Yeah. I mean, you've, you've had it. 124 00:07:34,000 --> 00:07:38,920 I have sometimes on vacation I'll drink it recreationally. 125 00:07:38,920 --> 00:07:42,760 It's like every once in a while. Just like a yeah, it's like a 126 00:07:43,080 --> 00:07:44,400 like a celebration. Yeah. 127 00:07:44,440 --> 00:07:46,640 No, really. Yeah, no. 128 00:07:46,840 --> 00:07:48,480 So you when you get up in the morning, that's not your thing. 129 00:07:48,480 --> 00:07:49,600 Like, is there something you do? No. 130 00:07:49,600 --> 00:07:51,680 No, no, yeah. I mean, I wake up and I, I fight 131 00:07:51,680 --> 00:07:52,480 people. Yeah. 132 00:07:55,280 --> 00:07:56,960 Oh really? So you'd like to keep everything 133 00:07:57,080 --> 00:07:59,560 the equilibrium. Yeah, my sister gives me such a 134 00:07:59,560 --> 00:08:01,040 hard time about that. She's like, you're just sitting 135 00:08:01,040 --> 00:08:02,800 there raw dogging reality. Wow. 136 00:08:05,040 --> 00:08:08,760 I'm not sure Mark Zuckerberg has any real link to reality 137 00:08:08,760 --> 00:08:12,080 whatsoever. According to Jack Dorsey, the 138 00:08:12,080 --> 00:08:16,280 founder of Twitter, Zuckerberg once invited him for dinner and 139 00:08:16,280 --> 00:08:19,840 presented him with cold goat meat that he said he had shot 140 00:08:19,840 --> 00:08:23,040 with a laser gun and then finished off with a hunting 141 00:08:23,040 --> 00:08:25,520 knife. Dorsey told Rolling Stone. 142 00:08:25,800 --> 00:08:29,120 I just ate my salad. It's worth keeping in mind the 143 00:08:29,120 --> 00:08:33,320 kind of interactions the man designing the future of human 144 00:08:33,320 --> 00:08:35,960 interactions has with other people. 145 00:08:36,240 --> 00:08:40,440 I'm not sure what he's raw dogging, but it's not reality, 146 00:08:40,679 --> 00:08:43,000 and hopefully it wasn't that gold. 147 00:08:44,000 --> 00:08:47,400 Despite all of this, a lot of serious people took the 148 00:08:47,400 --> 00:08:52,440 metaverse very seriously. In November 2021, The Economist 149 00:08:52,440 --> 00:08:56,760 argued that it was a logical extension of computing text, 150 00:08:56,800 --> 00:09:00,240 then images, then video, then 3 dimensions. 151 00:09:00,560 --> 00:09:04,760 They pointed out that mockery was an unreliable guide to the 152 00:09:04,760 --> 00:09:09,040 future, and that smartphones had once been mocked as cross data 153 00:09:09,040 --> 00:09:11,840 symbols. It turns out that this time 154 00:09:11,840 --> 00:09:15,040 around, mockery was the correct approach. 155 00:09:15,600 --> 00:09:20,480 The hype in late 2021 was really something Wall Street threw 156 00:09:20,480 --> 00:09:24,160 itself into the project with the enthusiasm of a man who's just 157 00:09:24,160 --> 00:09:26,320 been handed a laser gun and a gold. 158 00:09:26,680 --> 00:09:32,520 Bernstein reported that the word metaverse appeared 449 times in 159 00:09:32,520 --> 00:09:37,000 third quarter earnings calls that year, up from 100 the prior 160 00:09:37,000 --> 00:09:39,880 quarter. McKinsey published a report 161 00:09:39,880 --> 00:09:44,480 declaring that the metaverse could generate up to $5 trillion 162 00:09:44,480 --> 00:09:48,600 in value by 20-30 and that it was too big for companies to 163 00:09:48,640 --> 00:09:51,920 ignore. Citi predicted 5 billion 164 00:09:51,920 --> 00:09:55,200 metaverse users, meaning more than half of the world's 165 00:09:55,200 --> 00:09:58,720 population. Jeffrey said that the metaverse 166 00:09:58,720 --> 00:10:02,760 had the potential to disrupt almost everything in human life, 167 00:10:02,960 --> 00:10:05,920 which is the kind of thing an investment bank analyst says 168 00:10:06,120 --> 00:10:08,600 when they want to be on the right side of whatever is 169 00:10:08,600 --> 00:10:12,560 happening without thinking too carefully about what it actually 170 00:10:12,560 --> 00:10:16,280 means. Big corporations piled in two 171 00:10:16,600 --> 00:10:21,840 Disney appointed a head of metaverse strategy. 3/4 of CEO's 172 00:10:21,840 --> 00:10:26,920 surveyed in 2022 said that they were hiring dedicated metaverse 173 00:10:26,920 --> 00:10:29,920 talent. McKinsey helpfully predicted 174 00:10:30,080 --> 00:10:34,280 that 15% of corporate revenue would be derived from the 175 00:10:34,280 --> 00:10:38,720 metaverse by 2027. That is next year, so we'll have 176 00:10:38,720 --> 00:10:42,560 to wait and see how that goes. As silly as some of this 177 00:10:42,560 --> 00:10:46,080 corporate involvement might have seemed, most of these firms 178 00:10:46,080 --> 00:10:48,480 won't have spent much money on this stuff. 179 00:10:48,720 --> 00:10:52,960 You could just give the social media intern a big title and set 180 00:10:52,960 --> 00:10:55,160 them loose on analyzing the metaverse. 181 00:10:55,320 --> 00:10:58,920 And if it all comes to nothing, you've wasted a year or two of a 182 00:10:58,920 --> 00:11:02,640 single salary. The CEO of a company called 183 00:11:02,640 --> 00:11:06,720 Improbable wrote an article for The Economist comparing the 184 00:11:06,720 --> 00:11:11,280 metaverse to an 11,000 year old temple in southern Turkey. 185 00:11:11,800 --> 00:11:15,840 He argued that throughout human history we've been influenced by 186 00:11:15,840 --> 00:11:20,120 worlds that we imagine beyond this one, and that the metaverse 187 00:11:20,120 --> 00:11:22,680 was the next stage in human culture. 188 00:11:22,960 --> 00:11:26,080 He suggested virtual clothes could be better for the 189 00:11:26,080 --> 00:11:30,080 environment than real ones and that the metaverse may allow the 190 00:11:30,080 --> 00:11:33,920 developing world to participate in new forms of economic 191 00:11:33,920 --> 00:11:37,920 opportunity, pointing to gamers in the Philippines who were 192 00:11:37,920 --> 00:11:41,280 wasting their lives trying to make money in a crypto based 193 00:11:41,280 --> 00:11:44,720 game that looked a lot like a Ponzi scheme at the time. 194 00:11:45,320 --> 00:11:49,720 It's always reassuring when Aceo, who would directly benefit 195 00:11:49,720 --> 00:11:53,920 from a trend, explains that the trend is inevitable and will 196 00:11:53,920 --> 00:11:58,000 somehow save humanity. Then there was the virtual real 197 00:11:58,000 --> 00:12:01,520 estate. In early 2022, someone paid 198 00:12:01,520 --> 00:12:07,200 $450,000 to become Snoop Dogg's neighbor in the sandbox and 199 00:12:07,200 --> 00:12:10,800 metaverse platform. Despite all of the rumours, it 200 00:12:10,800 --> 00:12:14,320 wasn't me. To be clear, this person did not 201 00:12:14,320 --> 00:12:17,840 become Snoop Dogg's actual neighbor with a fence and 202 00:12:17,880 --> 00:12:20,920 awkward conversations about who's bins are who's. 203 00:12:21,240 --> 00:12:25,120 They became his virtual neighbor in some sort of video game. 204 00:12:25,480 --> 00:12:30,800 That plot of virtual land is now reportedly worth around $100. 205 00:12:31,040 --> 00:12:35,160 I'm guessing that Snoop has moved on in something called 206 00:12:35,160 --> 00:12:38,600 Decentral Land. A group called Metaverse Group 207 00:12:38,800 --> 00:12:44,840 purchased a 116 parcel virtual estate on November 2021 for 208 00:12:44,840 --> 00:12:50,200 approximately $2.4 million. That estate is now worth around 209 00:12:50,200 --> 00:12:55,640 $9000, representing a decline of 99.6%. 210 00:12:56,040 --> 00:13:00,400 A Coin Gecko study found that average metaverse land prices 211 00:13:00,400 --> 00:13:06,040 were down 95% in The Sandbox and even more in Decentraland. 212 00:13:06,400 --> 00:13:10,160 In the real world, when property prices decline that much, it's 213 00:13:10,160 --> 00:13:12,640 usually due to a natural disaster. 214 00:13:12,920 --> 00:13:16,320 In the metaverse, nothing happened, people just stopped 215 00:13:16,320 --> 00:13:20,400 showing up, which is probably be better than a natural disaster, 216 00:13:20,720 --> 00:13:25,760 but also somehow worse. Near the peak, Gucci managed to 217 00:13:25,760 --> 00:13:31,520 sell a virtual handbag on roadblocks for over $4000, which 218 00:13:31,520 --> 00:13:35,320 was more than the physical bag would have cost in an actual 219 00:13:35,320 --> 00:13:38,200 shop. That transaction stands as the 220 00:13:38,200 --> 00:13:44,480 purest distillation of 2021 as a financial era, a virtual handbag 221 00:13:44,640 --> 00:13:48,160 that cost more than the real 1 and cannot be used to hold 222 00:13:48,360 --> 00:13:51,760 anything. So what was it actually like? 223 00:13:52,160 --> 00:13:56,520 Zuckerberg's presentation showed a Pixar quality cartoon, but the 224 00:13:56,520 --> 00:14:01,520 actual product, Horizon Worlds, looked a lot worse, like a low 225 00:14:01,520 --> 00:14:04,520 quality video game from the early 2000's. 226 00:14:04,760 --> 00:14:08,440 The graphics were basic, the world's were empty, and the 227 00:14:08,440 --> 00:14:11,440 avatars, as discussed, did not have legs. 228 00:14:11,760 --> 00:14:15,520 On the positive side, though, Zuckerberg's metaverse avatar 229 00:14:15,680 --> 00:14:18,880 showed more facial expressions than the man in itself. 230 00:14:19,640 --> 00:14:24,000 Reports of what it was like to use Horizon Worlds were not very 231 00:14:24,000 --> 00:14:27,160 encouraging. In February 2022, a 232 00:14:27,160 --> 00:14:30,960 psychotherapist reported being verbally and sexually harassed 233 00:14:30,960 --> 00:14:35,320 within 60 seconds of joining. All of the toxicity from social 234 00:14:35,320 --> 00:14:40,240 media platforms followed users into virtual reality, except now 235 00:14:40,240 --> 00:14:44,200 it was happening to a floating torso rather than to a profile 236 00:14:44,200 --> 00:14:46,480 picture. That's progress for you. 237 00:14:47,280 --> 00:14:50,960 It wasn't just outside users who struggled with the product. 238 00:14:51,160 --> 00:14:54,160 Meta's own employees hated it too. 239 00:14:54,480 --> 00:14:58,240 According to internal memos reported by The Verge, the 240 00:14:58,240 --> 00:15:01,240 company was pushing staff to spend more time in the 241 00:15:01,240 --> 00:15:05,640 metaverse, but VR meetings were described as exhausting and 242 00:15:05,640 --> 00:15:09,960 borderline unusable. The VP of Horizon World sent an 243 00:15:09,960 --> 00:15:14,360 internal memo that was leaked acknowledging the problems, he 244 00:15:14,360 --> 00:15:17,000 wrote. For many of us, we don't spend 245 00:15:17,000 --> 00:15:21,360 that much time in Horizon and our dog fooding dashboard shows 246 00:15:21,360 --> 00:15:23,840 this pretty clearly. Why is that? 247 00:15:23,840 --> 00:15:26,720 He asked. Why don't we love the product 248 00:15:26,720 --> 00:15:29,640 we've built? He went on to ask if we don't 249 00:15:29,640 --> 00:15:32,720 love it, how can we expect our users to love it? 250 00:15:33,160 --> 00:15:37,320 Now I don't know what he means by Dog fooding dashboard and I 251 00:15:37,320 --> 00:15:40,360 refuse to look that up. It probably involves that 252 00:15:40,400 --> 00:15:44,760 unfortunate goat from earlier on, but this is still a 253 00:15:44,760 --> 00:15:48,400 devastating question. Why don't even the engineers 254 00:15:48,400 --> 00:15:50,400 like the product that they've designed? 255 00:15:50,640 --> 00:15:53,320 You might think that the next step would be improving the 256 00:15:53,320 --> 00:15:56,080 product. Instead, the VP followed up by 257 00:15:56,080 --> 00:15:59,640 telling staff to make it their mission to fall in love with 258 00:15:59,640 --> 00:16:02,680 Horizon Worlds. Which is the kind of thing you 259 00:16:02,680 --> 00:16:06,400 say when the product is far beyond saving and you're hoping 260 00:16:06,400 --> 00:16:09,320 that enthusiasm can substitute for quality. 261 00:16:09,920 --> 00:16:13,920 John Carmack, the legendary engineer behind the games Doom 262 00:16:13,920 --> 00:16:17,480 and Quake, had been working at Meta since the Oculus 263 00:16:17,480 --> 00:16:21,400 acquisition. He left in 2022, describing 264 00:16:21,400 --> 00:16:24,840 Meta's VR efforts as inefficient and bloated. 265 00:16:25,160 --> 00:16:29,280 Reports suggested that employees couldn't even agree on what the 266 00:16:29,280 --> 00:16:33,920 metaverse was supposed to be. Was it YouTube, a casual World 267 00:16:33,920 --> 00:16:38,080 of Warcraft, a platform, a social space, or a game? 268 00:16:38,280 --> 00:16:41,720 Nobody was quite sure. This is worrying when you've 269 00:16:41,720 --> 00:16:45,880 renamed the entire company after an undefined concept. 270 00:16:46,400 --> 00:16:48,960 The user numbers tell the real story. 271 00:16:49,200 --> 00:16:53,120 While Zuckerberg had predicted a billion people, Horizon World 272 00:16:53,120 --> 00:16:56,720 peaked at a few 100,000 monthly active users. 273 00:16:57,040 --> 00:17:01,360 By some estimates, daily active users eventually fell to around 274 00:17:01,360 --> 00:17:04,920 900 people. That's roughly the population of 275 00:17:04,920 --> 00:17:08,880 a small village. For context, Second Life, a 276 00:17:08,880 --> 00:17:13,640 virtual world that launched 23 years ago, still attracts around 277 00:17:13,640 --> 00:17:18,319 200,000 people per day. They even manage legs on day 278 00:17:18,319 --> 00:17:22,160 one. Decentraland once reported just 279 00:17:22,160 --> 00:17:26,040 38 active users. Later, they disputed this 280 00:17:26,040 --> 00:17:30,200 figure, saying that the real number was closer to 8000, which 281 00:17:30,200 --> 00:17:33,880 is a lot more than 38. But it is still fewer people 282 00:17:33,880 --> 00:17:37,080 than would pass through a moderately busy supermarket on a 283 00:17:37,080 --> 00:17:39,680 weekday. So let's look at the financial 284 00:17:39,680 --> 00:17:42,480 history. Meta reports the metaverse 285 00:17:42,480 --> 00:17:45,800 business under a division called Reality Labs. 286 00:17:46,040 --> 00:17:49,520 And the reported losses at Reality Labs have increased 287 00:17:49,640 --> 00:17:55,320 every single year. In 2019, they lost $4.5 billion. 288 00:17:55,440 --> 00:18:00,480 In 2026 point 6 billion. In 2021, the year Zuckerberg 289 00:18:00,480 --> 00:18:08,080 renamed the company 10.2 billion 2020 two, 13.7 billion in 2020 290 00:18:08,080 --> 00:18:14,120 three 16.1 billion in 2020 four 17.7 billion. 291 00:18:14,400 --> 00:18:17,680 Last year they lost 19.2 billion. 292 00:18:18,000 --> 00:18:23,400 That is a total of approximately $88 billion in operating losses 293 00:18:23,680 --> 00:18:27,560 over 7 years. To put that number in context, 294 00:18:27,760 --> 00:18:31,880 it's more than NASA's entire annual budget several times 295 00:18:31,880 --> 00:18:34,040 over. It's roughly what it cost to 296 00:18:34,040 --> 00:18:37,520 build the International Space Station, which unlike the 297 00:18:37,520 --> 00:18:41,320 metaverse, is a real place that people occasionally visit. 298 00:18:41,920 --> 00:18:46,120 You could fund the entire Apollo program in inflation adjusted 299 00:18:46,120 --> 00:18:50,960 dollars for less than Meta spent on a virtual world with 900 300 00:18:50,960 --> 00:18:58,000 users and no legs. Meta stock fell 64% in 2022 as 301 00:18:58,000 --> 00:19:01,680 investors started panicking about the metaverse spending. 302 00:19:01,920 --> 00:19:07,240 But then in 2023 and 2024, the stock recovered dramatically and 303 00:19:07,240 --> 00:19:10,280 the recovery had nothing to do with the metaverse. 304 00:19:10,760 --> 00:19:15,160 Metas core advertising business continued to be enormously 305 00:19:15,160 --> 00:19:19,720 profitable, generating over $200 billion in total revenue in 306 00:19:19,720 --> 00:19:23,320 2025. The family of apps Facebook, 307 00:19:23,320 --> 00:19:27,200 Instagram, WhatsApp and Messenger is simply a machine 308 00:19:27,200 --> 00:19:30,600 that prints money. The problem was never that Meta 309 00:19:30,600 --> 00:19:33,320 couldn't make money as a broader business. 310 00:19:33,560 --> 00:19:38,000 The problem was that it decided to set $88 billion of the money 311 00:19:38,000 --> 00:19:42,360 that they were making on fire in a virtual world that fewer 312 00:19:42,360 --> 00:19:45,400 people visited than a village post office. 313 00:19:45,840 --> 00:19:49,680 Late last year, Bloomberg reported that Meta was planning 314 00:19:49,680 --> 00:19:52,880 to cut the metaverse budget by 30%. 315 00:19:53,160 --> 00:19:58,000 Meta stock went up on the news, adding about $60 billion in 316 00:19:58,000 --> 00:20:02,640 market value in a single day. When your stock price rises 317 00:20:02,640 --> 00:20:05,040 because you announced that you're going to stop doing 318 00:20:05,040 --> 00:20:08,320 something, it's a clear signal that investors would have 319 00:20:08,320 --> 00:20:11,040 preferred you hadn't started doing it. 320 00:20:11,560 --> 00:20:16,280 This January, Meta laid off more than 1000 Reality Labs employees 321 00:20:16,480 --> 00:20:19,720 and shuttered several VR game studios. 322 00:20:20,160 --> 00:20:24,440 Zuckerberg told investors on the most recent earnings call that 323 00:20:24,440 --> 00:20:29,720 he expects Reality Labs losses in 2026 to be similar to last 324 00:20:29,720 --> 00:20:32,280 year, but that this will likely be the peak. 325 00:20:32,800 --> 00:20:37,320 So after spending 88 billion, the peak of the losses is almost 326 00:20:37,320 --> 00:20:40,040 behind them, which is probably good. 327 00:20:40,600 --> 00:20:45,040 Last month, Meta delivered what many described as a near death 328 00:20:45,040 --> 00:20:48,560 blow to the metaverse. On March 17th, the company 329 00:20:48,560 --> 00:20:52,400 announced that starting this summer, users would no longer be 330 00:20:52,400 --> 00:20:56,240 able to access Horizon Worlds through VR headsets. 331 00:20:56,360 --> 00:21:00,640 The metaverse, the thing the company was named after, was 332 00:21:00,640 --> 00:21:05,600 being downgraded to a phone app. Then, two days later, Mehta 333 00:21:05,600 --> 00:21:09,040 reversed a decision. The chief technology officer 334 00:21:09,040 --> 00:21:13,560 confirmed that the VR app would stay available after all, 335 00:21:13,840 --> 00:21:18,160 presumably because all 900 of the daily users had complained. 336 00:21:18,760 --> 00:21:23,600 Meta's vice president Samantha Ryan framed the situation as 337 00:21:23,600 --> 00:21:27,800 Meta doubling down on the VR developer ecosystem while 338 00:21:27,800 --> 00:21:32,160 shifting the focus of worlds to be almost exclusively mobile. 339 00:21:32,480 --> 00:21:35,760 When a company describes shrinking something as doubling 340 00:21:35,760 --> 00:21:39,400 down, it's usually not a sign that things are going well. 341 00:21:39,680 --> 00:21:43,400 I imagine Zuckerberg probably said that he was doubling down 342 00:21:43,400 --> 00:21:47,560 on the gold when he drew his hunting knife, Ryan wrote in a 343 00:21:47,560 --> 00:21:50,280 blog post. Sometimes we knock it out at the 344 00:21:50,280 --> 00:21:53,000 park, other times we get things wrong. 345 00:21:53,280 --> 00:21:57,640 This is a diplomatic way of saying we spent 88 billion and 346 00:21:57,640 --> 00:22:01,480 almost nobody used it, so we're doing something else now. 347 00:22:02,000 --> 00:22:05,640 The something else is, of course, artificial intelligence. 348 00:22:05,840 --> 00:22:09,920 Mehta has pivoted aggressively towards AI, and the shift is 349 00:22:09,920 --> 00:22:12,480 visible in everything the company does. 350 00:22:12,880 --> 00:22:17,000 At the September 2025 Connect conference, the same annual 351 00:22:17,000 --> 00:22:20,280 event where Zuckerberg had announced the Meta rebrand in 352 00:22:20,280 --> 00:22:24,440 2021, he used the word metaverse just twice. 353 00:22:24,560 --> 00:22:30,640 While he mentioned AI 23 times. The company's focus is now on AI 354 00:22:30,640 --> 00:22:34,720 powered smart glasses, a product that exists in reality and 355 00:22:34,800 --> 00:22:38,160 appears to be selling. It turns out that making a 356 00:22:38,160 --> 00:22:41,920 product that people want to buy can be quite important when 357 00:22:41,920 --> 00:22:45,800 running a tech company. Meadow was not alone in this. 358 00:22:46,040 --> 00:22:49,480 The metaverse had attracted an extraordinary collection of 359 00:22:49,480 --> 00:22:53,800 fellow travellers who managed to exit before anyone could ask too 360 00:22:53,800 --> 00:22:57,560 many questions. Disney eliminated its entire 361 00:22:57,560 --> 00:23:01,480 division in 2023. Walmart built metaverse 362 00:23:01,480 --> 00:23:05,600 experiences on Roblox and then quietly ended them. 363 00:23:06,160 --> 00:23:10,320 Microsoft shut down its mixed reality feature in Teams. 364 00:23:10,720 --> 00:23:14,320 The chief metaverse officers have all vanished from corporate 365 00:23:14,320 --> 00:23:18,480 org charts, presumably to pursue other opportunities and things 366 00:23:18,480 --> 00:23:22,640 that don't exist. Apple characteristically waited 367 00:23:22,640 --> 00:23:26,440 until everyone else had already embarrassed themselves before 368 00:23:26,440 --> 00:23:29,840 entering the market. In 2024, they released the 369 00:23:29,840 --> 00:23:35,480 Vision Pro headset, a piece of hardware that cost $3500. 370 00:23:35,720 --> 00:23:40,040 A huge number of buyers ended up returning it within the 14 day 371 00:23:40,040 --> 00:23:43,880 returns window. Apple had made the best possible 372 00:23:43,880 --> 00:23:47,240 version of a product that almost nobody wanted. 373 00:23:47,800 --> 00:23:51,760 Now I wanted to return briefly to the consultants and analysts. 374 00:23:52,000 --> 00:23:56,360 McKinsey told us in 2022 that the metaverse was too big for 375 00:23:56,360 --> 00:23:59,960 companies to ignore. They predicted that 15% of 376 00:23:59,960 --> 00:24:04,760 corporate revenue would come from the metaverse by 2027, so 377 00:24:04,960 --> 00:24:07,320 that should be happening anytime soon. 378 00:24:07,840 --> 00:24:11,800 City predicted 5 billion metaverse users, and Jeffrey 379 00:24:11,800 --> 00:24:15,320 said that it would disrupt almost everything in human life. 380 00:24:15,720 --> 00:24:19,320 Sometimes the thing that everyone is laughing at deserves 381 00:24:19,320 --> 00:24:23,320 to be laughed at. The broader question is why so 382 00:24:23,320 --> 00:24:26,120 many intelligent people got this so wrong. 383 00:24:26,640 --> 00:24:30,600 Part of the answer is that the metaverse hype coincided with an 384 00:24:30,600 --> 00:24:33,200 unusual moment in financial history. 385 00:24:33,480 --> 00:24:38,880 Late 2021 was the peak of near 0 interest rates and free capital. 386 00:24:39,200 --> 00:24:43,440 NFTS were selling for millions, crypto was booming, and in that 387 00:24:43,440 --> 00:24:46,840 environment, the idea that people would pay to live inside 388 00:24:46,840 --> 00:24:50,640 a video game didn't seem obviously more insane than 389 00:24:50,640 --> 00:24:53,040 anything else that was going on at the time. 390 00:24:53,680 --> 00:24:57,680 It was only when interest rates rose that people started asking 391 00:24:57,680 --> 00:25:01,440 whether any of this made sense. The answer, as it turned out, 392 00:25:01,440 --> 00:25:04,200 was no. Now, while all of this was 393 00:25:04,200 --> 00:25:07,760 happening, Meadow was also running an entirely different 394 00:25:07,760 --> 00:25:10,760 business, one that people actually used. 395 00:25:10,920 --> 00:25:13,920 And that business is now the subject of what analysts are 396 00:25:13,920 --> 00:25:16,720 calling social media's tobacco moment. 397 00:25:17,280 --> 00:25:22,040 Last week, a jury in Los Angeles found that metas platforms, 398 00:25:22,040 --> 00:25:25,840 Instagram in particular and Googles YouTube have been 399 00:25:25,840 --> 00:25:29,160 designed to be addictive to children and that these 400 00:25:29,160 --> 00:25:32,480 companies had failed to warn users of the dangers. 401 00:25:32,920 --> 00:25:37,680 The jury awarded $6 million in damages, with Meda liable for 402 00:25:37,680 --> 00:25:41,840 70%. Separately, a jury in New Mexico 403 00:25:41,840 --> 00:25:46,000 found Meda liable for failing to protect children from explicit 404 00:25:46,000 --> 00:25:51,680 content and ordered the company to pay $375,000,000 in civil 405 00:25:51,680 --> 00:25:55,920 penalties. Meta's stock lost 280 billion in 406 00:25:55,920 --> 00:26:00,840 market capitalization in March 2026 alone, which is more than 407 00:26:00,840 --> 00:26:04,720 three times the total amount Meta lost on the metaverse over 408 00:26:04,720 --> 00:26:07,680 seven years. Let's be serious here. 409 00:26:07,880 --> 00:26:12,640 Mark Zuckerberg created Facebook not for social connection, but 410 00:26:12,640 --> 00:26:15,200 as a form of revenge against humanity. 411 00:26:15,360 --> 00:26:19,600 He created it because he was rejected by a girl in 2004 and 412 00:26:19,600 --> 00:26:23,520 decided that the only logical response was to dismantle the 413 00:26:23,520 --> 00:26:25,920 concept of human privacy forever. 414 00:26:26,400 --> 00:26:30,440 Instagram isn't a social network or a photo sharing website. 415 00:26:30,600 --> 00:26:35,120 It's a forensic archive of your aunt's descent into Q Anon and 416 00:26:35,120 --> 00:26:37,680 every haircut you've ever had that made you look like a 417 00:26:37,680 --> 00:26:41,160 medieval peasant. What Mark Zuckerberg calls 418 00:26:41,160 --> 00:26:45,400 social media is better described as being a digital Victorian 419 00:26:45,400 --> 00:26:49,120 workhouse where the inmates are forced to mind their own self 420 00:26:49,120 --> 00:26:52,840 esteem for likes. The details that came out of the 421 00:26:52,840 --> 00:26:57,280 trial are worth dwelling on. Zuckerberg testified that he had 422 00:26:57,280 --> 00:27:01,840 personally overruled A proposed ban on Instagram beauty filters, 423 00:27:02,040 --> 00:27:06,280 filters that make users look more attractive, despite 424 00:27:06,280 --> 00:27:09,440 warnings from 18 separate experts that they were 425 00:27:09,440 --> 00:27:12,840 contributing to body dysmorphia in teenage girls. 426 00:27:13,240 --> 00:27:16,160 The reason he gave was free expression. 427 00:27:16,720 --> 00:27:21,040 Internal emails included one from a researcher who wrote that 428 00:27:21,040 --> 00:27:24,880 Instagram is a drug. We're basically pushers and 429 00:27:24,880 --> 00:27:29,520 noted that Instagram chief Adam Masari freaked out when this was 430 00:27:29,520 --> 00:27:32,920 raised. Internal documents showed that 431 00:27:32,920 --> 00:27:36,720 boosting time spent on the platform, including amongst 432 00:27:36,720 --> 00:27:39,600 teenage users, was an explicit goal. 433 00:27:39,840 --> 00:27:43,720 Zuckerberg told the court that Mehta no longer set such 434 00:27:43,720 --> 00:27:47,800 targets, but the jury was then shown the documents in which he 435 00:27:47,800 --> 00:27:52,320 had said exactly those targets. One of the FT journalists 436 00:27:52,320 --> 00:27:56,640 present when Zuckerberg testified observed that he's not 437 00:27:56,680 --> 00:28:00,160 a sympathetic character. The man who decided that the 438 00:28:00,160 --> 00:28:03,680 future of human interaction should be a virtual world 439 00:28:03,680 --> 00:28:08,080 designed by him was now in a courtroom explaining why he had 440 00:28:08,120 --> 00:28:11,800 overruled medical advice about the harm his products were doing 441 00:28:11,800 --> 00:28:15,360 to children. The irony here is so perfectly 442 00:28:15,360 --> 00:28:18,040 constructed it almost seems planned. 443 00:28:18,320 --> 00:28:22,600 Meta spent $88 billion trying and failing to get people 444 00:28:22,600 --> 00:28:26,880 addicted to virtual reality. The products people are actually 445 00:28:26,880 --> 00:28:31,040 addicted to, the ones that generate $200 billion a year, 446 00:28:31,240 --> 00:28:34,160 may now potentially be destroying the company through 447 00:28:34,160 --> 00:28:37,520 litigation. They built an experience machine 448 00:28:37,680 --> 00:28:40,840 that nobody got in, and the machine that they left running 449 00:28:40,840 --> 00:28:43,960 in the corner was the 1 causing all of the damage. 450 00:28:44,280 --> 00:28:48,800 Tobacco's problem was that it's product was too popular, too 451 00:28:48,800 --> 00:28:52,920 addictive, and too harmful. The metaverse's problem was that 452 00:28:52,920 --> 00:28:57,800 it wasn't popular at all. Meta in 2026 had managed to have 453 00:28:57,800 --> 00:29:02,840 both problems at the same time. One division spent $88 billion 454 00:29:03,000 --> 00:29:04,920 building something nobody wanted. 455 00:29:05,200 --> 00:29:08,920 The other built something that almost everyone used and was now 456 00:29:08,920 --> 00:29:11,160 being sued for how well it works. 457 00:29:11,640 --> 00:29:15,000 This is, in its own way, an extraordinary business 458 00:29:15,000 --> 00:29:18,120 achievement. Free cash flow at Mehta is 459 00:29:18,120 --> 00:29:23,520 expected to shrink by 83% this year, even as revenues grow. 460 00:29:23,800 --> 00:29:26,960 The company is laying off hundreds of workers to fund its 461 00:29:27,200 --> 00:29:30,400 AI ambitions. The company will likely be 462 00:29:30,400 --> 00:29:32,880 called Meta for the foreseeable future. 463 00:29:33,160 --> 00:29:37,360 Permanently branded after a product that lasted about four 464 00:29:37,360 --> 00:29:41,240 years, this company has now changed its name twice. 465 00:29:41,400 --> 00:29:44,800 From a website built in a Harvard dorm room to rate the 466 00:29:44,800 --> 00:29:48,560 attractiveness of students to one of the most powerful media 467 00:29:48,560 --> 00:29:52,480 companies in history, to the name of a virtual world that 468 00:29:52,480 --> 00:29:57,320 couldn't render legs, each name has represented a version of 469 00:29:57,320 --> 00:30:00,480 what Mark Zuckerberg believed the future would look like. 470 00:30:00,800 --> 00:30:03,240 Each time, he's been very confident. 471 00:30:03,440 --> 00:30:05,880 Two out of three times, he's been right. 472 00:30:06,280 --> 00:30:10,480 The question nobody can answer is whether $88 billion was a 473 00:30:10,480 --> 00:30:14,600 reasonable price to pay to find out that people didn't want to 474 00:30:14,600 --> 00:30:18,400 live in a cartoon space station. They were speculating with the 475 00:30:18,400 --> 00:30:22,160 kind of confidence usually reserved for people spending 476 00:30:22,160 --> 00:30:25,760 other people's money, and the result was a failure that was 477 00:30:25,800 --> 00:30:28,840 only a surprise to those who were being paid to believe 478 00:30:28,920 --> 00:30:31,480 believe in it. Thanks for tuning into this 479 00:30:31,480 --> 00:30:34,000 week's podcast. The podcast is entirely 480 00:30:34,000 --> 00:30:36,480 supported by viewers like you on Patreon. 481 00:30:36,640 --> 00:30:39,960 If you'd like to support it, you can sign up using the link in 482 00:30:39,960 --> 00:30:42,880 the video description. Have a great week and talk to 483 00:30:42,880 --> 00:30:44,240 you again soon. Bye.