The Breakdown - Everything You Need to Know About Facebook’s ‘Meta’ Metaverse Play

Episode Date: October 30, 2021

This episode is sponsored by NYDIG. Facebook announced yesterday it is changing its corporate name to Meta. The name change reflects the company’s growing focus on virtual reality, augmented reality and a new version of the internet that people are calling the metaverse. In this episode, NLW looks at the reactions to the news, from those who think it represents a huge mainstreaming opportunity for crypto and non-fungible tokens to those who see it as potentially devastating for the future of the internet.  NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: David Paul Morris/Bloomberg/Getty Images, modified by CoinDesk.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Friday, October 29th, and you know we are discussing Facebook's Metaverse play today. We've known for a while that Mark Zuckerberg is super interested in the idea of the metaverse and what comes next on the internet. Last week, we started to hear rumors that Facebook was, in fact, going to change its corporate name.

Some of the rumors, by the way, of what they were going to change their name to were stupendously stupid. But here we are a week later, and it actually happened. The announcement came yesterday at Facebook Connect, and basically, Facebook is doing the Google Alphabet rebrand thing. The corporate entity will be known now as meta, appropriately, and the rest of the apps will retain their names. so it's really about reorganizing the entire frame of the company versus any of the specific apps. It is, in fact, about what comes next, not changing the things that already are. As part of this, they will start to break out the financial results from their new division called Reality Labs, that includes Oculus and other VR, AR, etc. types of efforts.

The goal here is to let investors see those specific efforts on their own terms, rather than just have their results, which are going to be in the red for some time, according to Zuckerberg, dragging down the rest of the company. They also noted that they will invest $10 billion into reality labs and so that Facebook's overall operating profit is similarly going to come down by at least that $10 billion. Facebook's stock ticker will change to MRVS starting on December 1st. There is a ton to get into here, but I think as a whole,

you have to say that the TLDR is that the reception of the meta announcement shows to which Facebook and Mark Zuckerberg have lost to. trust to the extent they ever had it. Given that, I'm going to at least start by letting Zuckerberg present the project in his own words. During his Facebook Connect presentation, he said right now our brand is so tightly linked with one product that can't possibly represent everything we're doing today, let alone in the future. The Metaverse is the next frontier. From now on, we're going to be Metaverse first, not Facebook first. He went on in an interview with Ben Thompson from stratitory saying, I care about this existing, not just virtual and augmented reality existing,

but it getting built out in a way that really advances the state of human connection and enables people to be able to interact in a different way. That's sort of what I dedicated my life's work to. I'm not sure. I don't know that if we weren't investing so much in this, that it would happen or that it would happen as quickly, or that it would happen in the same way. I think we're going to kind of shift the direction of that. Finally, from his annual 2021 note, the Metaverse will not be created by one company. It will be built by creators and developers making new experiences and digital items that are interoperable and unlock a massively larger creative economy than the one constrained by today's platforms and their policies. Our role in this journey is to accelerate the development

of the fundamental technologies, social platforms, and creative tools to bring the metaverse to life, and to weave these technologies through our social media apps. We believe the metaverse can enable better social experiences than anything that exists today, and we will dedicate our energy to helping achieve its potential. Our hope is that within the next decade, the metiverse will reach a billion people, host hundreds of billions of digital commerce, and support jobs for millions of creators and developers. From now on, we will be Metaverse first, not Facebook first, and that means over time you won't need a Facebook account to use our other services. As our new brand starts showing up in our products, I hope people around the world come to know the meta brand

and the future we stand for. I'm dedicating our energy to this, more than any other company in the world. If this is the future you want to see, I hope you'll join us. The future is going to be beyond anything we can imagine. So let's start as we dig into the reception of this news. With the mainstream FU takes, let's get those out of the way first, because they are expected, they are numerous, and they're relevant, but again, they're very expected. An example comes from Vice, which writes Zuckerberg announces fantasy world where Facebook is not a horrible company. The subheadline on that one is Facebook's new name is Meta, and its new mission is to invent a Metaverse that will make us all forget what it's done to our existing reality. Andy Slavitt,

a former White House advisor, says meta accomplishes only one thing. It allows Mark Zuckerberg to say he's not the CEO of Facebook. He will now do less controversial things like building a new virtual universe where he can be king while running Facebook. AOC, always pulling punches as she does, says meta, as in we are a cancer to democracy, metastasizing into a global surveillance and propaganda machine for boosting authoritarian regimes and destroying civil society. For profit. And finally, Louis Villa Lobos of the USA Today Opinion page said, so Facebook has a new name. I'm pretty sure they're going to keep the same practices. Can we just be honest about Facebook and social media in general? Things aren't going to get

better. We don't, on a global level, really care about our privacy. Tech companies know all this. We're a couple of weeks into pearl clutching and hand-wringing about how shady Facebook has been and about just how little they plan to change that. Now you're going to hear reaction to the announcement that Facebook isn't Facebook anymore. We're now asked to refer to the company as meta because, you know, there's more intrusion coming. None of that angst and concern will translate into change, though. Maybe I'm wrong. Maybe humans will rise up against big tech in a meaningful way and demand we we get control of our data and push for better protection, right? Perhaps there will be a straw that breaks the digital camel's back and we can regress a little to a time when we rebelled against

increased surveillance instead of welcoming it. Until then, please share this column on Facebook. I could use the likes. And obviously that is just the tip of the iceberg of mainstream, very frustrated, very skeptical takes. But let's shift now to another dimension of this. Obviously, Facebook is the poster child for big tech. So let's look at someone who understands big tech about as well as anyone, Ben Thompson from Stratitri. He makes a bunch of different comparisons to other big tech companies. First, the obvious one, to Alphabet, where Google changed its name from Google to Alphabet, and that was meant to have an overarching banner that could have any of the numerous types of projects that they wanted underneath it. Now, he points out that

Alphabet didn't really mean anything. It intentionally was a word that was chosen not to really mean anything, whereas meta is explicit. It shows exactly the direction the company wants to move in. He also made a number of comparisons to leadership models. Alphabet was in many ways about letting Larry and Sergei do whatever they wanted to and not have to worry about the core Google business as much, while Zuck is very much staying in control of both their Web 2 and their future Web 3 properties. He also makes a favorable comparison to what happened with Microsoft, effectively arguing that Microsoft was basically constrained by Windows until its new CEO, Satya Nadella, came in and broke that monopoly. Thompson writes, meta seems like Zuckerberg's opportunity to make the same break.

Facebook benefited from being just an app until it didn't, but until today, Facebook was also the company. and as long as that was the case, the Metaverse vision was going to be fundamentally constrained by what already exists. However, Thompson pretty much argues that the best comparison is actually to Apple and Steve Jobs. Quote, the iPhone gave Steve Jobs the ability to break out of the constraint of the PC, of the Mac. It created a new product category mobile that allowed for the things that the old product category simply couldn't do. Zuckerberg is similarly making a bet that this is a new frontier, and he doesn't want to constrain the new world of what that might look like, into Web 2 modalities, even once he owns lots of. Ben Thompson also flags lots of concerns that are

going on right now, grumbling about the margins from investors with this huge investment into this new area, the concern that Zuckerberg just wants to own the platform, numerous DC issues, etc. But still, I think it's worth at least noting that from a company efficacy and leadership standpoint, Ben points out some interesting comparisons. NIDIG sponsors this podcast, and they're helping CFOs, traders, and risk managers safely and securely integrate Bitcoin into their operations. Learn more about what NIDIG does and how they do it at nidig.com slash NLW. That's nydig.com slash NLW.

Now let's get into the take specifically from the crypto industry. Obviously, this is in a huge way, the biggest way since Facebook announced Libra, that this huge Web2 company is coming and trying to take. a stake in something that the crypto industry is currently trying to build. One version of the take from this space is the you may not like it, but this is adoption take. Hunter Horsley, the CEO of Bitwise, writes, you may not like Facebook, but a $1 trillion company with 2.5 billion users, 80 billion in revenue and 60,000 brilliant employees just committed itself to pushing the Metaverse forward. This is incredibly bullish for crypto and Web3.

Rao Paul had a whole thread that was pretty similar. He writes, The Zuck video today for Meta might have well been cheesy, but it was incredibly important, maybe one of the most important things I have seen in years. Basically, Facebook is the largest amalgamation of communities on Earth, and it is moving to the Metaverse. Make no mistake, meta slash Facebook with DM and the Metaverse experience is a way to onboard billions of people into this world of distributed ledger technology. You might not like their model, you might be biased as to their actual model. It's too early to tell. But it is adoption. This is what adoption looks like. It maybe is not what you want, but it is what it is. Again, we have the choice.

to participate or not. This is very different to the physical world. Your opinion of meta is just a matter of where you hang out. If you think crypto has no value, you are wrong. They are the entire building blocks for this new society. If you think NFTs have no value, you are wrong. They are everything. If you think that social tokens have no value, you are wrong, they are the money for these societies. Be less cynical and realize that today the world shifted on its axis. The metaverse is an entire new layer of GDP and has endless possibilities, whichever metaverse experience you choose. There is no one metaverse, like there is no one community, society, or country. This is something that is truly exponential. It is the future of everything, but you can choose your future and your society that most

aligns with you. This is the game changer. Don't use your cynicism about Facebook. See the change. Now, there's a lot more to that thread if you want to dig into it. I edited it briefly for the sake of this show, but you get it. You may not like this, but it does represent adoption take. Now let's shift to the takes that are about the epic battles that are looming, that maybe build on something that Raul was talking about, but put it in slightly more dramatic and confrontational terms. Now, one of those that is fun and sort of glorious Greshon psychodrama is the idea that this is somehow a continuation of the battle between Zuckerberg and the Winklewise. Chris Back writes, Mark Zuckerberg made $125 billion on Web 2. The Winklevoss twins made zero on Web 2. But Mark Zuckerberg

made zero on Web 3, and the Winklevoss twins made $10 billion on Web 3. And Zuck woke up this morning and said, that ends today. I think that's fun, but obviously I think it's slightly less important than some of the other things going on. For a more serious take, let's turn over to Evan Greer, who's the director of Fight for the Future, who has been hugely active this year fighting for crypto, particularly in the case of the infrastructure battle. Evan writes, thread, it's tempting to view Facebook's rebranding as nothing more than a cynical attempt by the company to distance itself from endless scandals and the real world harm caused by its surveillance capitalist business model. But it's actually much more sinister than this.

that. With this announcement, Mark Zuckerberg revealed his endgame. He's making a play to control the future of the internet. MyOrg Fight for the Future has long advocated for decentralized community-driven alternatives to big tech monopolies and their abusive business practices. Decentralized tech projects ranging from Matrix to Filecoin are often broadly referred to as Web 3 at the next iteration of the web. With his push for Facebook to build and dominate the metaverse and colonizing forays into digital currencies and NFTs, Zuckerberg is co-opting the terminology of decentralization and attempting to solidify his stranglehold on the future of human attention and an interaction. Evan then goes on to write a couple of specific policy proposals that could impact, and then she says, but most importantly, we need to stop looking backward and recognize that the internet is changing.

We are heading towards Web 3, where we want to or not, and we need to fight tooth and nail to ensure that the policies governing this next generation of the internet are carefully crafted to protect vulnerable communities, free expression in human rights, and that they don't undermine the potential of truly decentralized technologies, which could help finally end. the era of big tech surveillance capitalism. There is no guarantee that the next iteration of the internet is better than the last. It's fun to dunk on Zuck and laugh about overpriced NFTs and dogecoin bros, but if those who care about human rights and democracy don't engage with the transition to the next generation of the web in a serious way, it's almost guaranteed that Web3 will be worse, not better for humanity. We're at a crossroads. It's time to decide what we want the future of the internet to look like. And then it's time to fight for that vision before it's too late. of other folks made similar points. DC Investor wrote, I watched enough of Zuck's keynote where he

repeatedly talks about true ownership of digital items and I'll make this guess. Facebook is going to re-attempt a launch of its own blockchain, but this time it won't focus on money. Instead, it'll focus on NFTs. I'd be pleasantly surprised if they chose an Ethereum layer too, but I doubt it. My guess is that they'll support some degree of interoperability for Ethereum-based assets, but they'll also try to funnel all newly created assets towards their own, federated chain controlled by trusted parties. Why does this matter? Because whatever becomes the de facto metaverse asset rail also becomes the metaverse economy layer will be worth trillions. I doubt Zuck will give up a chance at controlling that versus Ethereum which he couldn't control. Brendan from

Dharma puts it more succinctly. So basically it's Ethereum versus Facebook and a race to create a compelling metaverse. Open versus closed, transparent versus opaque, permissionless versus permission, community owned versus Zuck owned. My bets are placed. Let's build a better future together. Loomdart writes, the war for the metaverse isn't something we can f*** around in. If we lose, we don't get a second shot, it's over. We have an open Metaverse people can easily access and use with zero pitfalls, or it's fine, it's crypto, they'll get over at moments. Or we lose. People won't stick around to see the Open Metaverse improve. Facebook's Metaverse will be more than enough for them. There is an extension of this take, and this is a lot where I find myself. I call it sort of the,

of course they should be allowed to or they can build it, but they'll lose. JPEG James Dean writes, They absolutely miss the point of the metaverse, but we will build the betterverse. Web2 companies make implicit product decisions based on user data. Web3 products have user owners where product decisions are explicit. No chance they pull this off. Clean up in Isle-Zuck. Suu of Three Arrow's Capital writes, I think it's trivial that Facebook, Meta, and Zuckerberg will lose. His advantage is not on culture or product, but on real politic, acquiring competitors and lobbying

for moats where there should be none, all propped by Fat Cat investors. His methods wield no power in the Metaverse. Ryan Selkis writes, Meta and Crypto are similar in that they are both attempting to build and settle new virtual lands. We should have the right to exit to virtual worlds independent of state oversight on a voluntary basis. And to be honest, Meta should have the right to build the virtual world it wants to. Meta is building an opt-in dictatorship. Benevolent or evil is a subjective distinction,

but it's easier to see tech companies as dictatorships when they go from webpages to immersive VR. On the other hand, crypto is building new opt-in republics of all different types. This is a redux of how I felt with Libra DM-Novi versus defy and stablecoin adoption. Meta will once again take all the arrows and run unintentional interference for crypto. During their battle, we'll build the open metaverse and see who values republics versus dictatorships. Let's wrap this up with my take. First, this is massively validating to the builders of Web3. This is something that through sheer force of will will become a thing.

that people interact with. Even if they end up not liking it, even if it ends up not being anything like we imagine it now, this is validating. Second, I believe that this greatly increases the speed with which these new types of experiences will be brought to the mainstream. Like him or love him or loathe him, Zuckerberg is a catalytic force. There will be attention focused here, and Facebook's presence in this space will speed up everyone else. It will get more investors off the sidelines and into the projects they think best able to compete with and outflank Facebook. Third, this was absolutely and entirely inevitable. There was always something that was going to come after Web 2. Worlds organized around the people that we know and interact with

in the virtual world already are obvious and will seem obvious in retrospect. And even if that's not what Web 3 becomes, there will be something that is called a Web 3 because it's what comes next after Web 2. Fourth, whatever that Metaverse becomes, it should not be owned by one company. It cannot be owned by one company for the good of the world. Fifth, this will bring regulators and regulatory discussions to the metaverse. We've seen this movie before. The reason that there is such a concerted effort and attention around stable coins now was the introduction of Libra years ago. Stable coins that mimic U.S. dollars are one type of scary. Stable coins that mimic U.S. dollars or other foreign currencies that are owned by Mark Zuckerberg are a whole different

level, and I believe that virtual universes, virtual polities, will be the same. Sixth, now is absolutely the time to fight for the values that you want to see put into this metaverse. These are worlds in which you will spend meaningful amounts of your time. And the best way to fight is by building better experiences. When a company like Facebook tries to do something new, there are inherent biases as well as inherent constraints that they bring with them. They do have immense regulatory pressure already. They do have immense investor pressure already. Even Zuckerberg is not immune to that. And at the end of the day, the metaverse is to a network affects business. But don't forget, network shift. The social graph that

Facebook owns isn't the social graph of the metaverse. Facebook may be better resourced, but I believe that many of the builders now are better equipped. Finally, instead of a take may be a question, is there a place for Facebook in the metaverse that you want? And if so, what is it? What are the ways in which this $10 billion of investment into this new type of universe that people are so invested in building now would actually be seen as a boon, as something exciting? I think that's a really good thing for people to explore, because the reality is that it's not going to be just Facebook. It's going to be every big internet company that starts to explore this space. If the answer is there's no place for them, there's no opportunity, there's no ledge for them to perch on and figure out what to do, they're just going to try to take it over. I don't have a good answer to that, but I would encourage us to think about it.

Until tomorrow, guys, be safe and take care of each other. Peace.