Sharp Tech with Ben Thompson - New Metaverse Dreams and Old Metaverse Questions

Episode Date: October 11, 2022

Reactions to Mark Zuckerberg’s keynote at Meta Connect 2022, why it makes sense for Meta to partner with Microsoft in the virtual reality space, the aspects of the VR pitch that still feel underwhelming, and whether Zuckerberg is the right person to lead this era of Facebook.

Hello and welcome back to another episode of Sharp Tech. I'm your host, Andrew Sharp, and on the other line, we're back to recording remotely. Ben Thompson. Ben, how you do it? I'm doing well. I miss being on the couch, recording in person. But you know what? We do it for the fans. What can we say? That's right. Our intimate fireside chats, how's the valley treating you? It is fine. It is fine. I am in a dark hotel room. because I'm close to a road, and so I have every curtain drawn to to drown out road noise.

The struggle is real. I was going to say, you look like you're in a closet right now. So I hope you're able to get out and breathe some fresh air after we record this podcast. But I'm excited here. We're talking about the latest virtual reality announcements from Mark Zuckerberg and meta this week. And I will state up front, I'm going to do my very best to not be a. wise ass about all this. No, no, this is this is your coming out party. This is the podcast we have been waiting for. You know, when I broached the topic of doing a tech podcast with you,

leaving aside the running joke on greatest of all talk that you are not even aware that technology exists or much less how it works. I believe your stated goal was I just need one episode where I can dump on VR. And the episode is here. So why would you want to live at yourself? The episode is here. But again, I come in peace. to all the diehard Ben Thompson fans, I don't want to ruffle any feathers. I am pretty skeptical that VR is ever actually going to take root among the mainstream. But we'll see where we end up in the next 20 or 30 years.

And we can start with the news this week, or I guess we can go back to 2021. In 2021, Facebook had a $46.5 billion operating profit and reported a $10 billion loss from its VR division. And this week we got, on Monday, the New York Times wrote a big takeout feature on where things stand with Facebook's VR play and how dysfunctional it's been internally. And then at his MetaConnect keynote on Tuesday, Mark Zuckerberg unveiled the Meta Quest Pro, among other things, and announced a partnership with Microsoft. The Quest Pro was described as a high-end device. device that will cost $1,500 a piece and begin shipping on October 25th.

Now, before we get to exactly what was announced as someone who sat through all 90 minutes of this MetaConnect keynote, my first question, who was the intended audience for Zuckerberg and the rest of the meta gang that put this together? Well, we could start by saying who the intended audience was not, in which I think was you. But everyone is impressed. You sat through a 90 minute keynote, which was kind of rough. I'm just going to be,

I'm going to be totally honest. It's interesting because how do you make a sort of presentation about virtual reality that's not in virtual reality, right? It's like going on TV and talking about the quality of like your display, which is by definition gated by whatever TV, everyone else is sort of looking at it on, right? It's kind of a tough thing.

And I do think the announcement itself, the keynote, was kind of in two parts. The first part was just, you know, a lot of the consumer stuff and the software stuff that they're doing. And the second part was this new headset and a lot of the enterprise stuff. And I think that gets here a question. Number one, it's like a developer conference. So it's for people who are building VR apps on like the Facebook platform. Like so there's a few times where Zuckerberg is addressing the eye and says, you believe in this. you do this. And that's definitely who he's speaking to, not even though the fact that obviously,

you know, the price is watching it and is going to write about it and all those sorts of things. So it is, it is a developer keynote. I think that is sort of important context. I do highlight, though, these two parts because, and this might be my own bias coming in play as someone who has an opinion about how this is going to develop and has written about this. My take is that consumer applications of VR, everyone just sort of assume. that's where it would start because that's where the phone started, right? Like the phone was first and foremost consumer play and only later really broke into the enterprise, the iPhone in particular.

But it's important to remember that traditionally that's not how tech worked. Tech, particularly in the PC era, was in Enterprise First. And you go back to like the 80s and no one really wanted personal computers. I mean, one of the reasons why the Mac, the original Mac sort of struggled relative to Windows is that the Mac was like targeted at consumers and consumers didn't even know what a computer was. And so what happened was one of the reasons that Windows got so much traction

was they were built on top of IBM. The original Windows computer or DOS computer was an IBM computer. And enterprises bought it because this would make sort of their employees more productive. Then what happened was you had employees that had this cool contraption at work and then they kind of wanted one at home.

And that's, you know, the reason why Microsoft and Windows was successful consumer product was not because they were necessarily great at serving the consumer, but because they wanted the same computer that they had at work. And so it was an enterprise sort of product first and foremost. And I think that's important because I wrote a piece

at the end of last year. Basically, I thought that Microsoft was the most interesting company when it came to sort of VR. And because, for this reason, like VR is a very hard thing. to grok. It's hard to demo. It's hard to talk about unless you actually try it, but how are you going to actually try it, you know, if you don't, you're not going to outweigh the money to sort of, you know, get the devices. And meanwhile, sorry, I'm going to sort of jumping right in,

but I think this is like my big context on this, the more that people are working distributed or not at work or a hybrid arrangement, wherever it might be, there is, in my estimation, as someone that's used this, the sort of idea of presence, this idea that, you feel like you're in the same place as someone when you're both in VR, it's a real thing. Like it really does sort of... Really? Okay. I wish I could give you truth serum to have a good gauge of exactly how much you believe that it's a real thing. Because I find it hard to believe that it actually makes a difference and you do feel like you're in the same room.

I mean, one of the go-to examples, there's reason for skepticism for sure. I'll get to that in a moment. but I got I have a Facebook Oculus Quest or Quest 2 or whatever it's called now. Oculus, unfortunately, is no longer a name that exists, which is too bad because that was an awesome name. But and I actually got it for a few members of my team that are building passport. And we were doing like meetings in there. And there was this sort of big decision we had to make. We'd made a core, you know, architectural decision early on.

Actually, we had kind of changed it to accommodate a potential partner and that that fell through, but we kept it. and we were doing all these workarounds and fixes. And we're in this meeting and we're like, look, we're wasting all our time on these workarounds. Should we just tear this all out and put in sort of like the database that we were thinking about previously? And, you know, the developers like, yeah, that would kind of fix our problems. So we ended up doing it this big momentous thing.

It was the right choice for sure. Once we actually did that, then passport development has sort of moved on much more quickly. But what's interesting about this is the way my memory works is I can remember where I was when things happened, right? And I sort of picture of the surrounding, I have sort of like a spatial memory in that regard. And when I think back to that decision, I don't picture myself sitting in my office at home,

which is where I was. I can see the VR room that we were in when we did it. Like, it felt like you're there. And was it with the disembodied avatars that don't have legs? Yes, it was. Was there like no real facial expressions? Because that didn't exist yet. And that's, you know,

it's one of the features of the new one. There weren't any facial expressions. but there was spatial audio, which worked very, very well. Like you kind of, you're the voices of people come from the direction of like where they're sitting around a table. And you felt like you were in a different place than where you were.

And now, the downside is we kind of stopped using it for a while because one guy was moving and then we've never started using it again. So there's definite skepticism, but there is something real there. Like for a meeting, for like a brainstorming sort of thing, it's definitely better than sitting on a Zoom chat.

It just, it really is. Yeah, I mean, I guess my question is marginally, how much better is it than a Zoom chat? And is it worth the upfront investment of, you know, $1,500 devices for however many members of your team? For you, there aren't that many members of the development team. But if you're like, there are also much cheaper devices. Yeah, exactly. So it gets into some dicey territory. But that, I, again, I'm coming in with an open mind.

So maybe it does help to be in the same virtual room. And the reason I ask about who the keynote was for, it sort of feels like we're watching them figure this out as they go. And I don't want to penalize them for being open about it as they try different things. I mean, figuring out as they go is like a nice way to say grasping for straws. Is that what you're a little bit? Throwing stuff at the wall, see what sticks. I mean, maybe the Microsoft move is a smarter strategy to your point.

than trying to make this work among consumers right out of the gate. Yeah, to go back to the Microsoft thing. So I wrote up, you know, because last year of the Metaverse was all the thing, and I was kind of right up before Facebook's name change, because it was just kind of sort of sort of sort of sort of sort of last piece that I wrote about was like, look, I think this is really going to be an enterprise thing to the extent it is. And to the extent it is an enterprise thing, the obvious company to win the space is Microsoft.

And they had talked about it. They had presentations about it. But the sort of missing piece from the Microsoft perspective was the hardware. And it's like, oh, hey, are we going to partner with sort of OEMs? Like HGC makes a device. But even those, like you have to connect them to a computer and the operating, like what operating system do use, like Steam has, has something that's related. Microsoft has a sort of thing.

And that was sort of like the, it's like, well, I think like if there is an opportunity here, I think it's an enterprise. If it's an enterprise, Microsoft is the obvious. candidate to sort of win, but they need to sort of shift their strategy and how they're thinking about it. And so in many respects, I think this partnership, which is by far in my estimation, the most interesting thing from this announcement, it kind of feels like Microsoft's like, look, Mark, if you want to be a crazy person, spend $10 billion sort of doing all the hard work here, and yeah, we can help it succeed because we'll be good at enterprise. And you could imagine,

and like you look up like 15 years later and Microsoft is dominant in VR and Facebook basically did all the work of bootstrapping the whole thing for them. Because if Microsoft, they have this partnership and assuming it works, I doubt Microsoft is exclusive to like Facebook sort of thing. Right? And so from Microsoft's perspective, you know, I would have guessed this means that their work with halo lens, which they have this contract to US Army. I'm sure it's not going anywhere per se.

And that's also AR. augmented reality more than sort of VR. It seems like a massive win sort of from their perspective. And it's funny that you say that because I had the same thought midway through the keynote where it's not an altruistic endeavor, but they are, I mean, they're lighting money on fire to the benefit of like the entire tech industry because they're figuring out some of these problems and coming up with solutions earlier than people who are going to enter this space 10 years from now.

And they have the capital to sort of experiment and screw around for the next couple of years. And that could end up benefiting everybody. It could. I mean, I think this gets into the biggest question, which is, you know, is this like too early? Yeah. I mean, there is this company.

I wrote about, you know, daily update. But, um, because I, I, I spoke in to Tony Fidel, who the inventor of like the iPod and designer of the, you know, he led the, the hardware. for the first iPhone. And he worked for this company called General Magic that was making an iPhone-like device, but they were trying to do it in the 1990s, like basically just a decade too early.

And one of the things you talked about was they were inventing everything. They had to invent a new chip. They had to invent a new communication stack. They had to invent new software. They had invent new user interfaces, a new touchscreen. They just had to invent so many things

that it would kind of collapse of its own weight. And there wasn't like the market. pull for it. And so the iPhone comes along a decade later. And yes, Apple's magic was in putting all the pieces together, but those pieces existed, right? Like they took an arm processor that already existed. They took, you know, various concepts. They took the guts of OS 10, which already existed. They took cellular networking, which existed and was shifting to 3G, which would make it, you know, this internet communicator aspect much more compelling. They took the iPod and the iTunes

ecosystem, which already existed. And then they sort of put it all together into something new and was truly revolutionary. This is not to diminish the iPhone at all. But there's an aspect of breakthrough products and new paradigms that are right place, right time. Like timing matters. And to me, it's fair to question will VR ever be a thing, right? Will people want to put, you know, things on their head and sort of like do XYZ?

I think there's a good chance once they're really good, it'll be sort of an obvious sort of win. But it's also like, is it the right time now? And if you're sort of a meta shareholder, that's a very pressing question as they're spending all this money and trying to do almost everything. Yeah, I mean, that's the question that recurs throughout is, all right, so we're headed to this place where, you know, social networks are going to look completely different. and e-commerce is going to be completely different. And the way we manage workplaces is going to be completely different.

But I don't know what happens to meta if that's a 30-year process as opposed to a 10-year process. And I'm not sure meta has a good answer there other than we're going to continue pouring money into this to try to make it work as quickly as possible. But even the Microsoft announcement, at least from the keynote, it wasn't clear to me exactly what. they're going to be doing together or when it might be a viable product for businesses. And like, did I miss something there? Or is that announcement going to come later? Well, Microsoft has been working on this sort of software, like teams in VR, for example, and they have sort of meetings in that. And I think like Facebook's, the meeting software that I use was the Facebook's Horizon Workrooms to be distinguished from the

Horizon Social Network, which is the one that was sort of getting dumped on over the weekend. Yeah. So it on Twitter's like, oh, I thought. you said this was really good. I'm like, yeah, it was a different product. But it's called for Horizon. I'm like, I'm pretty sure I know what I was talking about. It was not that product, I swear. There's going to be like a team's integration for workrooms.

And so you can like, you know, jump into it. I think that part's actually fairly close. And the Accenture bit was kind of interesting as well. I mean, this is the second keynote that in our short history with Sharp Tech that has involved highlighting a consulting company being a part of it. Invidia claimed Deloite and meta has claimed Accenture. But you do that when you feel like stuff's ready and people like companies just need someone to build it for them. And this bit about how Accenture has been doing it for their own employees and using it for their own employees to onboard.

And now so they have experiencing sort of extended to other companies. It's a plausible. It's a plausible story. I actually thought the Accenture CEO was quite good. This kid. She was a nest. Yeah. Yeah.

She was a great. She had a great spirit, great presenter. It was seemed genuinely excited about it. So, hey, if she's excited, I'm excited. Well, we're team Accenture in my house. My wife is an Accenture employee, and Julie Sweet, the CEO, is like a celebrity around here. So, yes, it was cool to see her pop up. One of the questions I had, though, there's this unstated premise that VR is going to make everyone more productive and help businesses be more efficient.

I think in practice, the idea that everybody has to learn how to communicate, on VR. Even in the New York Times article, there were descriptions of Facebook meetings that went awry because of the tech with VR not really working as intended. I think that might have been Horizon workrooms or whatever. No, no, no, no, the other horizon, the bad horizon. Oh, okay. So that was the bad horizon. But do you know what I mean? Like, I think everyone looks at even video conferencing. I think that when people start talking about remote work and the transformation of the economy, Zoom, you know, the reality with remote work is that it was successful because so much of the white color economy is about writing and analysis and research and design. And all of that stuff can be handled individually and distributed immediately thanks to the internet. and it's really not that different than doing all of it in person.

But the one aspect of remote work that actually is worse than being together in a conference room is getting everyone together on a Zoom call. That's where being in person actually makes a real difference. And I think that's the same hurdle is going to exist if you're talking about virtual reality too, where like it's the one thing that you kind of can't replicate. Well, there's two parts to that. Number one is people have been talking about like video calls and video conferencing being a solution for decades. Right. Like it's not a new concept. The reason why Zoom was so successful is because it was the first one that like worked.

It like worked pretty consistently and without people needing to be like, you know, jump through a bunch of hoops and just it just working. Right. Now that doesn't change the fact that at the end of the day looking at a two-d picture on a screen, it kind of sucks. And at least for me, it's like hard to focus. and it's very easy to start looking at something else. And it's just hard to like stay engaged. And it's very tiring. Like at least for me,

like maybe just because you're, you know, cutting your own image helps to an extent. But. Well, and it's credited with being the catalyst that made remote work possible when in fact, it was the aspect of remote work that everyone found most annoying. It's remote work was feasible because that's just how we work these days. Yeah,

no, it's a good point. I think that's a really good point. And it's well made. I do think like the meetings invite VR, again, assuming everything works, that the software is fine and XYZ, they are better. I really think they are better. Again, this is my subjective evaluation. I just think it's much better than a Zoom call.

It's much more engaging, much more. Again, the presence thing is real. Like you feel like you're in the same place as other people who can be halfway around the world. Now, one of the big problems is you have to go get your headset. and you have to go put it on and you have to do it. Like there's a whole rigmarole attached to getting into it. Whereas Zoom, you just click a button and then you're in the Zoom call, right? Yep.

I think where this would really be compelling is if these, and they talked about this a little bit, one of the products that they announced here, but if these headsets get to be really good and the resolution is really high and the battery life is good enough and all these sorts of things where instead of, you know, I mean, you laugh at me because when I travel for an extent time. If I'm in one place for writing, I'll bring an extra monitor with me. But if you could have a headset and you could have like your entire workspace and then jumping in a meeting is back to just clicking a button or just, you know, like like opening a virtual door or whatever and going into it, that's pretty compelling. But that's an issue again. Are we just too

early? Like our headset's actually good enough where you're going to be able to do that. We're not getting seasick. You're not getting like all these sort of downsides that come with it. And so I'm long-term optimistic, but I think it's fair to, and there's other things like, I mean, actually, one thing that was interesting was this, you can see around the edges of this new headset by default. So it kind of like fixes the drinking coffee while in a meeting sort of problem. But I don't know, I think just because that presence thing is real, that's why I am somewhat optimistic about this, but I do get the skepticism for sure. Yeah, well, so we got this question from Cameron and people, as usual, you can email us questions

at email at sharptech.fm. And this one came in on Monday morning, right before we were going to record here. Cameron said on the most recent episode of Sharp Tech, Ben said, we don't even know if VR is going to be a thing. Wait, did I say that or did you say that? You said that. We got a question about Facebook selling ads

on its VR headsets like 10 years down the line. Oh, okay, fine. You qualify. We're not even really sure. Anyways, Cameron says this feels analogous to someone in 2005 saying, we don't even know if the mobile internet is going to be a thing. As someone with a few thousand hours in VR, Cameron writes,

I can only roll my eyes and shake my head when I hear things like that. Even with today's expensive, low-res, uncomfortable headsets, millions of people are using them on a monthly basis. In five to 10 years, when display resolutions are higher, comfort is improved and processing power has increased by an order of magnitude, I find it incredibly difficult to believe that there won't be at least one headset in every single household in the developed world. Okay, this is an accelerated timeline that Cameron is envisioning here five to ten years for a headset in every home. Why are you, Ben, currently skeptical

that mainstream VR will happen to the point where you're still framing it as an if, not a when? So I think this overstates your skepticism. But I'm curious for your answer here. If it doesn't work and it doesn't take hold in the mainstream the way we're imagining, why do you think that might be? The question is do people want to put a headset on, right? The tradeoff of being present in virtual reality is that you're not present in the place that you are. and if you're in a home office and, you know,

the kids are screaming in the other room and, you know, maybe that's a, maybe that's an upside. And yeah, I do think this is a little unfair to my position. I'm sorry, I misspoke on one phrase. I think my,

my consistent position on VR is because I've experienced that aspect of presence, I do think there's something real there. The thing with mobile and the mobile internet is, so there's, there's two types of technology. There's like two tracks. Track number one is like the immersive technology. And I would put things like watching a movie, right?

Or like even watching TV or playing video games. This is stuff where your attention is 100% devoted to the thing at hand. And those can be big sort of expansive, large businesses for sure. The second sort of technology is technology that's just sort of with you, right? It could be the clock on the wall. Like you just look at it when you need to see it. It could be sort of the PC that you go to and you check stuff and then you do something else or you're multitasking. The most obvious manifestation of that is a phone that's with you everywhere and it can notify you and it can ping you and then you can put in your pocket and you can go on your way, but it's always there.

That second category is the larger, more valuable, usually more compelling category because it's with you all the time. even though it's something that doesn't need your attention all the time, but it's with you all the time. And I think the reason to be skeptical of VR being in the same lane as like the mobile internet is because it's actually that first type of technology. It's something you go into and it's not accompanying you. It's demanding your entire attention sort of by definition. Now, again, that doesn't mean it's a failure of a business. but that also means it's not necessarily something of the scale of sort of an iPhone. This does get to why I think it's the work thing's more compelling than consumer.

Like consumer, you have a lot of stuff going on and you want to do stuff. And yeah, video games are a market, but it's not nearly as big of a market as mobile games, for example, which you can do on the bus. You could do on the pot. You can do like wherever you want to. But work is a big thing where there's still 200 million PCs sold this year, as Facebook kept saying during the presentation or meta, whoever, what they're called now. We've been alternating. every few minutes they're meta and then we go back to Facebook. But I mean, I do, I do find it a more useful name than like the alphabet Google thing

because like you do have to differentiate your like the Facebook app and Instagram and stuff like that. Sure. Yeah, the name stuff could be tough. We need to work with them on differentiating the various horizon apps that they're offering because we're running in circles here on the podcast. But no, that's a really astute observation in terms of the potential limits of, of how much is actually reshaped by this technology. Because I look at it and it's hard because Facebook sort of puts a target on its back

by hyping it as this technology that's going to totally revolutionize social interaction and e-commerce and everything else that we do as individuals. In the face of all that hype, it's really difficult not to sit back and just sort of sneer. And obviously most of the media has sneer. at what Facebook's trying to do over the last 12 months. But the big society reshaping technologies usually solve a problem that we didn't realize we had and their utility is like immediately self-evident as soon as they hit the market, really, and mainstream users start to use it.

And I think most people have a different reaction to using virtual reality, where it's like, this is kind of a cool novelty and could be really great for video games. but it's not necessarily going to displace, like, actual reality. I mean, Facebook is now trying to compete with, like, actual reality. And that's just a much harder battle to win. Well, I mean, sometimes, sometimes reality stinks, though. I mean, like, you know, I mean, the other thing I would say is you just said, oh, it's an obvious win to consumers.

Again, that's the case in the last, like, 10 to 15 years. Like, the iPhone was pretty obviously a cool thing. Even then, it still took a while for the iPhone to get, major traction. I think actually the right analogy is the iPod. The second you had an iPod, you were like, wow, why did this exist 10 years ago? And man, oh man, this is so convenient, I'm never going to buy a CD again. That's good. Yeah, that's good call. That's revolutionary technology. And I just have never had that experience with VR. But maybe five or 10 years from now, the technology will be further along. Yeah, that's why I think the PC analogy is interesting back in the 80s.

No one understood why you'd want a computer. But then you used it for work because your employer mandated it. And then you're like, wow, this is actually pretty nifty. And there's lots of other stuff I could do with this if I had one at home. And I think that that's why, I mean, it's kind of hard to analyze this aspect of the presentation because I wrote this a year ago. This is the way it should go to market. And it feels like now Facebook and Microsoft, like, yes, let's do that. Let's go to market.

So there's a high risk of confirmation vise here for me to be enthusiastic about this. But again, go back to that presentation. The first half was brutal. Like all this consumer-oriented stuff, I mean, part of it was the presenters. I don't think were very good. Like, go back to please presentations on stage where the presenter is actually like talking to you because there's like an audience there. This whole like I'm looking to the side and talking and presenting like this camera just

happens to be looking in on this interesting conversation about VR. are. It's brutal. I mean, it's so robotic. And again, like having someone there, just having a conversation with Mark Zuckerberg would be so much more compelling than him having these staged conversations with various underlings or just talking directly to the camera, neither of which worked very well in the way they were presenting it. But I think, but just to jump and finish my point, I think part of the reason the first half was so rough was not just because the presentation was rough and it was rough. but because it's not very compelling.

Like, I think the consumer aspect of this outside of games just isn't there. And whereas, again, like, if I'm right and the one thing that is compelling is that meetings really can be better in this way, like, I mean, I like hanging out with the boys, but I'm not going to be having any VR meetings, right?

And so, like, you can understand, like, there's these fantastical visions of, like, imagine you could be sitting courtside and be a game with your very, you know,

through VR and you look next to you and someone's next to you. Like that's, that's kind of cool. Like, imagine if we watched the game together and we could talk and it felt like we were there. It wouldn't be cool. It would be cool. That's still a few years away, right? But what is to hear now is sitting on crappy Zoom calls and getting, you know, barely

being able to focus on the screen. So, I mean, I don't know. Like, you're, again, though, it's one of those things where I'm glad they're going this direction. It makes sense. That's like, wait, Facebook, aren't you the social network company? How'd you end up making enterprise hardware so that the ultimate enterprise like Godzilla of all can just sort of like, thank you. Thank you for doing that for us.

That's very nice. We're going to be great partners. I'm not sure that's a little dangerous. Yeah, I want to come back to the hardware question in a minute. I will just say, though, as far as the consumer side of this, the low point of the video for me was after they had introduced the Microsoft partnership, after they had introduced Julie Sweet to talk about what Accenture would try to do in combination with Microsoft and Meta. All of that was pretty interesting to me.

And then they went into the avatar discussion where Mark Zuckerberg at a Facebook employee, they spent like 10 minutes talking about creating these photorealistic avatars and then a store where you could buy customized clothes for your avatar and a new fashion release. that was coming from Netflix in the avatar clothing store later that year. It all said it like complete nonsense to me. Is there any case for it not being complete nonsense or like an incredibly niche market? I just don't understand how that can even be like enough of the vision to be included in the keynote. I mean, you're claiming all the fun and popular positions and leaving me to be like the Facebook spokesman here.

It's a little unfair. So I think that the argument is So one thing that's been super interesting In the gaming world has been the rise Of what are called free to win games And so there's been like free to play games And you can play and there's in-app purchases And you have to you know

And there's like pay to win You have to like actually buy stuff to succeed And like you know Not great but they make a lot of money But these sort of free to win games You can get like League of Legends or something Or Fortnite And you can play

it and get the full experience and you can win. There's no, like, there's nothing you can buy that will make you more or less successful as far as winning goes. What you can buy, though, is you can buy things like clothes and you can sort of like decorate your avatar and you can get dances in the case of Fortnite or whatever it might be. And on one hand, it seems absolutely ridiculous, right? Like who's spending money on this sort of stuff?

On the other hand, you can spend an insane amount of money on like a luxury bag or like a brand name t-shirt or in your case like, you know, instant. Instagram t-shirts about like random. Listen, I don't want to talk about how much I've wasted on customized Nike shoes over the last year and a half of my life. I wish I had never discovered that you could just design your own Nike shoes. So yeah, people waste money on lots of different stupid things out there. And I know that the market for the in-app purchases with like the Kardashians and stuff is just like way bigger than any of us would be, any normal person would imagine. But the idea, though, even with these, I think the game one's particularly interesting because what they're doing is they're creating a world and an environment and an economy that is like self-contained in many respects.

And so you go in there and if you spend a lot of time there and you're hanging out with your friends there, suddenly these sort of items that, yeah, you pay money for, but if they get a good laugh from your friends or, you know, you stand out, like it's worth it. And if you take it not as like, what's the marginal value of this item, like at least a shoe exists, right? You're like, well, that shoe in the virtual world doesn't exist anywhere. But if you take it as like, what percentage of your life are you spending in this space and, you know, is spending a bit on something that makes you feel good, is that worth it? You can sort of see the argument there. And I think that's, that would be the argument for this sort of avatar and clothes. Like, if you're spending a lot of time in this virtual world, then why do you? you just want to be looked the same as everybody else?

What do you want to be identical? You can have the full experience. You know, like, I'm doing my best here. I'm not, I'm not buying virtual goods. This is an admirable job spinning it. And yeah, I mean, the thing is, I mean, there are other games. Like, Robox is as they spent a ton of time, they had a keynote a few weeks ago on their avatar system.

And like, and how you can have different, like, you know, Robox is most well known for these sort of like blocksy type characters. But they now have like full like 3D characters. and they have a whole system where you buy like clothing for one, it can automatically change the different shapes depending on the type of avatar or what it is and all these sorts of things. And they're very enthusiastic about it and very excited. And so it's a little hard for me to talk about because I can never imagine myself

buying, you know, the hot avatar clothes. But Facebook's not the only company that's excited about and investing in this concept. I'll just say that. Okay. That's very fair. And I don't deny that there's a market now and I can easily see that market growing. I just, well,

I'm not sure there's a market for the VR stuff yet. I mean, you have to have people spending a lot of time there. Because you, you like, but there's an analogous market. Yeah, within the apps and within games,

people do spend money on, on stuff that doesn't really exist in the physical world, but it exists in the metaverse of a given mobile game. And so I can see the leap from here to where Facebook is selling people, Netflix clothes. I'm not trying to do that. Yeah. I mean,

nothing says like you're like a big old boring company. Like here's our cool partnership with another big old boring company. Really confusing stuff. It's like the, the, um, the gift, you know, how do you, you know, oh, man, I'm butchering it. How do your kids or whatever? How do you do fellow kids? Yes, exactly right. That's meta and Netflix teething up for metaverse fashion.

Yeah, I, I think where I, where I am curious is like, how to, this supposedly lead to world domination? And it seems like world domination is the light at the end of the tunnel as Facebook's lighting billions of dollars on fire in the short term. And speaking of which, speaking of world domination, and back to the hardware question here, how much of the metaverse push is a reaction to Apple and Google owning the mobile hardware and Facebook looking to have have its own physical infrastructure one day. Yeah, I think the Occam's razor explanation is this is by far the most important explanation.

Like Facebook wants to own their platform, their own platform. They felt the pain of not owning a platform. Microsoft's in a similar place. They missed out on mobile, despite, you know, trying for it. They feel the pain of not owning it. And one does wonder to what extent that's a driving motivation for them to work together. Like, you know, let's team up and broadly speaking, we may not succeed. Let's at least try to make sure Apple doesn't succeed.

I think that that's sort of the bigger one. And I mean, it's interesting because Facebook's, Mark Zuckerberg, like, owning a platform has always been like the goal. Like, that's the dream in tech, right? And Mark Zuckerberg has always wanted a platform. And they tried to do a mobile thing. And it was a total mess. And it's funny because you hear some recycled language, which is Mark Zuckerberg was like, oh, finally we have a platform where it can be people at the center instead of apps or whatever.

That was also their pitch for the Facebook phone at like 2013, which never made any sense because you use your phone for a lot. Obviously, communication is the most important thing you use it for, and not just talking in the phone, but also group chats and, you know, messaging and all those sorts of things. But you use your phone for a bunch of other stuff too. And having people as the organizing principle of your phone does not make sense. Does it make sense for VR? Maybe.

I mean, I'm kind of skeptical just because I was very skeptical of that language the first time around. I'm not sure if it's sort of changed this time around. I mean, this is kind of the big Facebook question. It's like, why should Facebook be doing this? Why should they be building hardware? They're not a hardware company. And it's hard to escape the, look, we missed on the phone. We want to have her own thing and come hell or high water.

and how many billions of dollars it costs, we're going to get it, darn it. And I can understand from like a meta shareholder perspective, it's like, look, you're good at something. Can you stick to that, please? Can you fix your advertising issues? Like, you know, go do a startup if you want to build this whole thing. Then it's like, well, we wouldn't have this much money as a startup.

And it's like, well, maybe you're wasting a lot of that money because you don't have good like cost controls and all sort of stuff. I mean, those are my two biggest questions as I sit there and think about the next 20 years of meta like number one are they doing this strictly as part of their thousand year war with apple and number two are they doing this in part because they're making so much money from ads that they don't have anything else to spend it on and so why not just sink it into this market and see see what you can build over the next four or five years but i'm well i think for a shareholder perspective would be that's our money right like like if you have nothing better to do that's the

line with your business, then you should return it to shareholders and we can fund the next startup that wants to build the R. Like that that would sort of be be the approach. But I mean, this is comes with Mark Zuckerberg being, he doesn't answer to anyone. He doesn't answer to the shareholders. He doesn't answer to the board. Like he gets to do what he wants to do. And I don't know. It like it's it's the it's interesting to think about what are the big questions around meta is would they be better off if someone else's CEO? And not because like there's a lot of advantage that come from someone like Mark Zuckerberg's CEO. Like founders can do things that they can make investments like this.

They can push for things. And there's been a lot of times over the years where Zuckerberg was doubted and he was right. And I think that that's had a cultural impact where there's not a very tight feedback loop, I think, between sort of external criticism of Facebook and then necessarily responding in part because they have been right, especially in their early days. And they've dealt with a lot of unfair criticism. So I can sort of understand where they would just.

try to shut out all of the external noise and focus on their own internal vision and trust themselves. But that's one of the things that I find difficult. Like, I don't want to join the pile on. But at the same time, like some of those criticisms probably have merit and the dysfunction internally is probably a little bit real. Well, I mean, just to finish the thought, though, I mean, and it ties into the criticism point, which is a founder also makes a really easy target, particularly when that founder is Mark Zuckerberg. And like there's an aspect where Google, I think, has skated by to a much greater extent.

YouTube even more so because like, Andrew, who's the CEO? Oh, look at this. Who's the head of YouTube? I couldn't. Sundar Pichai is the head of Google, correct? Good job. You got one out of two. Head of YouTube is Susan Logiski, who's been there a long time.

And no one really knows who she is. from the beginning, I think, actually. But like there's some aspect just in this modern media environment, everyone knows who Mark Zuckerberg is, right? And he's a villain in many quarters and he's a hero in other quarters. And like it just is Facebook just at this stage in its existence where it just, it needs to figure out this ad thing. It needs to figure out this TikTok thing.

And, you know, that ought to be its focus and sort of be under the radar more than it is. And I don't know, like there's a bit, it's almost like a tragedy. It's like, you know, it's Varz Zuckerberg, nope, he's soldiering on and he's going to make VR work. It's really interesting because look, he starts out the video. I wrote this quote down and he's, he's talking about this year's Meta Connect and this keynote. He says, this one's for you, the true believers, the people who always thought that this is where technology should go, but who know that the future doesn't just happen. You have to build it with your bare hand. And there are several impassioned digressions where you can tell Mark Zuckerberg really believes

in this being the right next step for meta and where technology as a whole is going to go. But if he's that invested in the mainstream adoption of the metaverse and virtual reality technology, I just wonder whether there's anyone at Facebook who can say, you have become so polarizing that to the degree you're synonymous with this technology, you're actually going to be an impediment to people embracing it, as opposed to just sort of receding to the background and letting the technology stand on its own. Like, he was in almost every frame of this keynote, and I don't know that that's going to help people embrace where things might go

and what this technology might be. and I don't know that he's aware of that. It's an interesting point. I think that if Mark Zuckerberg had been Steve Jobs, I don't think that would have stopped people from adopting the iPhone in mass, right? Like there's some aspect where if it's a great product, it's a great product,

and that's sort of going to be enough. I mean, you know, Elon Musk is a very polarizing figure these days. They're also not having any trouble selling Teslas. You know, so it's, maybe you're right, though. I mean, I think the bigger worry I have about men, generally is that has always been a growing company like they just always been up into the right for a long time and when you're a growing company that papers over a lot of challenges that can come you know with your workforce like like you know dealing with underperformers or

having lots of perks or doing XYZ it's like it doesn't matter for wasting money on whatever because it's still going up and as they are sort of doing this belt tightening you know and they've really gotten nailed by this ATT thing on top of a recession that, you know, all these sorts of things. And TikTok, yep. And dude, that's the biggest one. And that's the, that's the most pressing one for sure. Is that a culture that's really willing and able to sort of cut court, you, cut, you know, save pennies, right?

And dial things back and really buckle down and make it work. Like, Amazon is a company that, number one, started out being. quite frugal and then they almost die in the dot com era. And so they had to learn to do it. And they've been able to, I think, to maintain that to a certain degree. Microsoft never really learned to be frugal, but they were up in Redmond and all their engineers had kids in school and didn't want to go work for Amazon because they were crazy people.

And so they retained their talents, right? And so when Microsoft, when Satchindal came back, there was a talent base there where Microsoft could sort of make a comeback. You see a lot of Silk and Valley companies that's. stop growing. And one of the reasons they go into the gutter is because there's a million other jobs there and they lose other great employees and they get stuck with all the crappy ones. And particularly when you're letting people go and like people are, you know, they see it coming. They go for the exit first. And my worry is like if we're going to be, we're going to belt tighten

and we're going to really buckle down and we're going to, you know, make this work. I worry you're going to end up losing all the employees that really make a difference and just holding onto the ones that can't get a job elsewhere. And that's a big problem when you're trying to build the future, right? Right. It's a tough thing to do. Yeah. Well, and it's funny because as easy a target as Facebook slash meta makes itself and even Zuckerberg to some degree,

you do have to respect the audacity to look at the market and say, all right, we're great over here, but we want to reshape the way people use the internet. And we're just going to, we're not just going to dip our toes in the VR pool, but we're going to like throw our full weight behind this for however many years it takes to work. Like, I don't think it's going to work, but I respect that they're audacious enough to go for it.

Yeah, I mean, it's funny because I think I, from an investor perspective, right? Well, you're actually, your core business isn't doing that well. Can you please really focus your attention I'm fixing this. And it's funny because I think, you know, Cameron's grumpy note notwithstanding, I do, I still maintain, I think there's something, there's something there. I've always thought Microsoft was sort of the right entity to pursue it.

And it's just like, is it is the opportunity there for Facebook specifically? I think that's kind of the, that's kind of the open question. And it will be fascinated to look, you know, in 10 years, if we look back and Facebook's in this dominant position in the space, it will. have been one of, if not the sort of gutsyest CEO calls of all time. Like, like, like, we're going to spend all this money. I'm going to stay here. I'm not going to take the easy route and then retire and let someone else run in, you know,

go with my compound in Hawaii. Like, I believe this is the future. I'm going to make it happen by sheer force of will. And voila, it happened. It would be incredible if it turns out that way. It will also in a different way be incredible. If it's like, yeah, face, you know, meta peaked in what, 20, you know, the name change was the beginning of the end.

Well, yeah, I want to come back to the second half of that thought. But the first half, as far as the bet here, the analogy is Facebook betting huge on the mobile internet 10 or 15 years ago and Zuckerberg leading that charge also. So I'm curious for somebody who was watching the company a lot closer than I was back then. Like, was that call based on evidence? or just sort of intuition of the Facebook leadership? Because it feels like this isn't really based on that much evidence

that users, at least at an individual level, actually want this. Yeah, it was based on evidence. They were late. I mean, like mobile was taking over the world. They had a sort of mobile web sort of based solution. And there were, you know, reasons to favor that, that are, you know, complicated to get into. But it turned out that having a native app experience that was much more

performance, was much more engaging, uh, was, was a much better way to do it. And then as part of that, being mobile was really great for Facebook because being just, like they had this, again, they had these, they wanted to be a platform. And remember all the like farmville, they got all this, this whole ecosystem on there. And they try to take over the money, like they have Facebook credits and all this sort of bit. And when you're just an app, you can't do all that stuff. Because you, you only have 3.5 inches. It's obviously much bigger now. But you don't have much space. All you can do is feature content. And in that context, this feed concept where you're just scrolling through and then some of them are ads.

You can insert. It's a very sort of native experience. And it's actually, instead of the old day where you had content and an ad on the side, your whole screen could be an app. Because it, but that felt natural. It didn't even feel bad that the whole thing was an ad. It was just part of the sort of experience. It was transformative. And it made the company what it is.

But it was also super obvious that was where. that was where they needed to go. I'm not sure that, I mean, the analogy I always talk about is people are like talking about the iPhone. It's like, wow, Apple disrupted themselves.

They had the iPod business. And it's like, well, they sold a device that cost more money that had higher margins that did all the iPod stuff and did a whole bunch more. I'm not sure that's really disruption. That's like a sort of obvious thing to do. And I think that probably applies to the mobile advertising thing.

And I'm not, or mobile, I should say in general. So I'm not sure it's quite analogous to this, where it's uncertain. Is this market going to be a thing? And if it's a thing, is going to be a consumer thing, is going to be an enterprise thing, what's the model, all these sorts of pieces. Yeah, it was cited by the times.

And it didn't really make sense to me because as someone who was alive in 2010 and 2011, like everybody was saying, it's all about mobile. You have to tailor your websites to iPads and all sorts of different things like that. And so this seems a lot more speculative on Facebook's part. And again, that's an easy opportunity to criticize them, but also you have to respect the Cajones. All right. Last question here. Matthew Ball in the New York Times.

The pressures meta's business is facing in 2022 are acute, significant, and not metaverse related. And there is a risk that almost everything Mark has outlined about the metaverse is right, except the timing is farther out than he imagined. So you talked about Facebook potentially peaking, and we look back and look at this as the time when Facebook swung for the fences and didn't make contact. What does that actually look like if we're imagining? Like how much of the company has been bet on this idea working? I think that that might be a bit of an overstatement to say that they bet the company on this.

At the end of the day, they are making all their money from their apps business. I think the much greater risk to Facebook is TikTok's emblematic of it, but just basically apps that take attention away from Facebook and thus make their advertising sort of less compelling. Obviously, that's all compounded by Apple and their disruption of sort of the advertising ecosystem. And to the extent that VR is a problem there, it's that it's distracting the leadership from fixing those problems. So to the extent Facebook peaks, it's because all that stuff is kind of all hitting the fan right now. Like TikTok is a big problem right now.

Apple is a big problem right now. And also Mark Zuckerberg spending all his time in the metaverse. So it's like that's, I think from like an investor perspective, that's is the bit that's sort of kind of unnerving. I do like this quote, though, from Matthew, who's a huge metaverse sort of advocate. He's been writing about it for years. He just had a book that came out about it. And I think this is the question, which he will admit to, like, what's the timing for this?

Even if you believe in this, is it really sort of that soon? And I don't know. It's kind of a philosophical question. How much can Facebook really pull the future forward, right? Like, can a company do that? or is there a bit like General Magic versus the iPhone, where all the pieces have to come together from multiple dimensions. And yes, you want to be the company that gets it all right.

But getting it all right, again, is a function of being in the right place at the right time, as opposed to making the time happen on your own sort of, just because you tried harder than anybody else. And I think that's sort of the Facebook question. And I don't know. I really like the Facebook Microsoft announcement, but I really like it for Microsoft. And that sort of like captures the unease about this sort of bit.

It's like, what if we look back and Facebook was like the IBM all over again for Microsoft? And they make the hardware and they get the ecosystem set up and do that sort of stuff. And then Microsoft just takes it to the bank. Well, but of course, IBM didn't have this gargantuan advertising business alongside side, it's hardware business. So like, does Facebook have enough cushion so that on some level, it doesn't necessarily matter what happens here? Well, the walk in, though, the walk in for any of this stuff is software.

And I guess actually, that's a good question, because this sort of crystallized in my head what I was trying to say. The enterprise angle is exciting to me because Microsoft is involved in the Microsoft software approach makes sense to me as a natural place. Like teams, having a VR component, you can have them. meeting partially some people are on video and some people are on headsets. And that makes sense. Like it's sort of an obvious how from here to there sort of thing. You go back to the first half that presentation, which was all about Facebook software for the consumer and it all stunk. And,

or it was at least very boring. I think it's the most generous way to put it. Underwhelming. Yeah. Yeah. And so that's kind of always been the question here. Like, what's the Facebook software angle? Again, Mark Zuckerberg would tell you that VR is about presence. It's about feeling like you're with other people and that's something that Facebook does. But then you add on the fact that so much of the spin around this, look, we're all doing this together. We, us, Microsoft, Accenture, that will Adobe, you have an auto desk and really framing it as like us versus, yeah, the whole speech at the end about like, no, like in every generation,

there's the open alternative and the close alternative. And clearly saying we don't want Apple to win just like they won the last one because it's not good for anyone. But my question for Facebook is, if that's all true and they win, where's the moat? Where's the actual business value? I mean, I guess you can sell ads in the Metaverse per the question last week. But, you know, they're like, I don't know. Like you wonder if they, if they succeed by virtue of being open, by virtue of being

partnerships, does that also mean they just gave away all the value to everyone else? Okay, well, we'll leave it with that question. My question is, why didn't you hire a host to make Mark Zuckerberg's life easier during that keynote? But we'll come back. Maybe they can answer that. That's why I hired a host for this podcast. Exactly. Exactly.

Take your cues from Ben Thompson and Stratory. Actually, it sort of sounds like they already are taking their cues from Stratory with the Microsoft partnership. Who knows? Well, I mean, I will admit, I didn't see this partnership coming. like just because I assume Microsoft would sort of want to do their own thing and they obviously had Halo going on and they talked about VR and the context of teams.

So it's funny because if you go back and read that article, we'll put a link in the show notes. Like it definitely ties directly into one of the stuff they said, but it did not at all envision them actually being a partnership. That was definitely a big surprise. Well, here we are, if you have questions about any of this, email at sharptech.fm,

we are going to come back later in the week with a mailbag episode, and I'm sure we'll continue talking about virtual reality for years to come here. And again, I mean, it's a great thing. The more that it doesn't become something, the more podcasts we can do about it.

Oh, man. I'm going to keep an open mind, but yes, color be skeptical. All right, Ben, go enjoy the valley. Get some fresh air. Get out of that closet.

And I will talk to you later in the week. Talk to you later.