Chart via Noah Smiths Substack
Here's an essay with an interesting new twist on the Metaverse conversation -- or rather, a rebooted twist. Economy journalist Noah Smith argues that a growing Metaverse can grow GDP without necessarily growing production of real life goods. Curiously -- based on the chart above that accompanies his thesis -- United States' GDP grew rapidly in the 2000s during the explosion of social media and online gaming, while energy consumption remained relatively flat. (GDP amusingly spikes right around when Second Life launches in 2003, which I'm totally sure is a causal correlation.)
Anyway, as Smith writes:
Think of the classic movie American Graffiti. George Lucas depicts his memories of a 1950s world where young people have fun, hook up, and get social status by driving around in cars all day and all night. This is hugely resource intensive. Nowadays, kids can have fun with their friends by chatting, sharing stories, and playing video games online. They can use Tinder to hook up instead of cruising around. And they can get social status by accumulating Facebook likes, TikTok views, and Twitter follows. Thus, young people have been ditching cars for smartphones. That means less gasoline burned, less steel and aluminum used, and so on. But more fun ultimately to be had. And, as long as capitalists find ways to make people pay for that fun, it means more GDP too...
The Metaverse is just that process taken one step further. The more fun or useful stuff you can do in VR — games, business meetings, vacations, hangouts — the less you’ll have to suck up physical resources to do it in meatspace.
Again, any assumption that we'll do any of this in VR per se has to factor in VR's very much unproven mass market appeal, but the basic point -- doing useful stuff on our screens, versus meatspace -- remains.
I said this point is a reboot, because it echoes something virtual world economy pioneer Ed Castronova noted over a decade ago -- but he attributed the virtualization of useful stuff with the recession:
Let’s construe the notion of “virtual economy” quite broadly: If you receive an experience by yourself through a machine that runs on digital technology, without doing or buying anything physical (other than press a few buttons), it’s virtual... People who spend time online don’t have to worry about what they are wearing. Suppose that some percent of a given day can be spent in pajama’s, the rest must be spent in decent clothes. For decent clothes, you need a whole and varied wardrobe. For PJ’s, you need a few comfy ones. Now increase the amount of time that can be spent in PJ’s. The demand for decent clothes falls, if ever so slightly.
What Castronova may have missed, if Smith's argument is right, is just how much virtual content -- and the hardware it runs on, and the cloud architecture that deploys it, and so on -- has contributed to the economy.
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