Long Take: Getting ahead in Facebook's Metaverse by earning the Harvard of NFTs

Hi Fintech futurists --

This week, we cover the following:

  • Thesis: Facebook is building towards a Metaverse version of the Internet, in both its hardware and software efforts. What are the implications? And further, how does one acquire status, work, and social capital in such a world? We explore the recent NFT avatar projects through the lens of Ivy League universities and CFA exams to understand some timeless cultural trends.

  • Topics: Metaverse, attention economy, creator economy, education, signalling, NFTs, blockchain, big tech

  • Tags: Facebook, Oculus, Harvard, Ivy League, YCombinator, CFA, CryptoPunks, Bored Apes Yacht Club, Hashmasks, Mooncats, Wicked Craniums, Cool Cats, Dead Heads

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Long Take

While Elon Musk, Jeff Bezos, and Richard Branson are trying to get off the Earth, Mark Zuckerberg has his sights set on a different escape.

In an interview with the Verge, he tells us of Facebook’s plans to contribute to the *Metaverse* — a development rooted in their Oculus virtual reality division, but also connected to the DNA of social networks and identity. For prior reading, see our essay here, interview with Outlier Ventures here or their full thesis, and Matthew Ball’s essays here. The full discussion is worth reading, but here are some of the juiciest bits for us:

“One lesson that I’ve taken from running Facebook over the last five years is that I used to think about our job as building products that people love to use. But you know, now I think we just need to have a more holistic view of this. It’s not enough to just build something that people like to use. It has to create opportunity and broadly be a positive thing for society in terms of economic opportunity, in terms of being something that, socially, everyone can participate in, that it can be inclusive…. This isn’t just a product that we’re building. It needs to be an ecosystem. So the creators who we work with, the developers, they all need to be able to not only sustain themselves, but hire a lot of folks.”

“And this is something that I hope eventually millions of people will be working in and creating content for — whether it’s experiences, or spaces, or virtual goods, or virtual clothing, or doing work helping to curate and introduce people to spaces and keep it safe. I just think this is going to be a huge economy and frankly, I think that that needs to exist. This needs to be a rising tide that lifts a lot of boats. We can’t just think about this as a product that we’re building.”

According to Zuck, the Metaverse is a more integrated media-Internet. Instead of living inside your small phone or staring at a flat Zoom screen, you embody and inhabit social spaces that are rendered in your mind by technology. These spaces are places you *are*, augmented with interfaces, or places you *go*, teleporting your avatar into work and play environments.

To any sci-fi reader, all this is familiar stuff. And we are getting there very slowly through gaming, with about 3 million headsets connected to Steam in mid 2021.

There is no discussion of the Internet of value, of blockchain-based money and software. Given that Libra/Diem ended up as a collateralized USD bank money, perhaps deeper fintech and DeFi metaverse platforms are still under wraps. Or perhaps this is something for those other, non-Facebook Metaverse participants to bring to the table. And this is also key — a global community must be open source and interoperable, connected to thousands of third party actors, and it can and will not be built by a single player alone. It is multiplayer by default. Zuck continues —

“Well, I think that there will be a number of different layers to this. I think a good vision for the metaverse is not one that a specific company builds, but it has to have the sense of interoperability and portability. You have your avatar and your digital goods, and you want to be able to teleport anywhere. You don’t want to just be stuck within one company’s stuff. So for our part, for example, we’re building out the Quest headsets for VR, we’re working on AR headsets. But the software that we build, for people to work in or hang out in and build these different worlds, that’s going to go across anything. So other companies build out VR or AR platforms, our software will be everywhere. Just like Facebook or Instagram is today.”

Here are the key component diagrams from Outlier Ventures and Matthew Ball.

For the cryptonauts out there, the interesting bits are the infrastructure plumbing. Something has to compute all that digital world. Something else has to deliver permissionless identity, financial services, and exchange. Something else has to store all the data and serve it up to a billion people and a trillion robots. If you understand Ethereum, you understand where all this is going from an economic perspective.

For Facebook, however, it is about the mushy human psyche at scale — connected into tribes through social networking and pictures of sunsets and evening dinners. In that slice of the world, the company mediates identity through logins, battles the monsters of misinformation with over 30,000 staff and who knows how many advanced machine learning algorithms, and sells the Oculus hardware bundled with modern entertainment experiences. If Facebook lives on a digital, decentralized blockchain in the future — likely not of its own making — then the least it can do is continue to own distribution and the human dopamine receptors.

“People will hang out, you’ll be able to really feel like you’re present with other people, you’ll be able to do all kinds of different work, there’ll be new jobs, new forms of entertainment. Whether it’s gaming or incredibly complex scavenger hunts like you’re talking about, or more and more enjoyable ways of doing fitness or concerts, or getting together at the comedy show that we talked about. I just think that there’s a ton here, and I think we can do this in a way that creates a lot of economic opportunity where millions of people around the world can be doing creative work that they really enjoy, building experiences or virtual items or art or different things that are more inspiring to them than whatever the jobs are that they may feel like they can do today. “

If you are hearing Andrew Yang or other universal-basic-income (UBI) advocates in that logic, you are right. The story supposes that as the robots automate both blue collar and white collar work, such that only the worst, most menial, frustrating, and low value emotional work remains. People will simply go nuts. Social inequality will continue to rise as capital accrues to robot owners (this part is pretty true), and the government will have no path but to print out UBI. BRRRR! This is certainly the direction we are heading.

What’s a bit more novel is to notice how the alternative to work is beginning to form. The VC bingo euphemism for making money in virtual worlds is called “the creator economy” — you can see our recent write up on it here, or check out The Intersection of Fintech & the Creator Economy by Rex Woodbury. The brightest example of virtual worlds crashing through the legacy physical one is Axie Infinity, a crypto based Pokemon-like video game. Since the end of last year, if you lived in the Philippines, or likely much of the world, your local minimum wage paid you less than playing Axie.

If you want another example, take a deep look at the monetary policies of Eve Online — a non-crypto game with a complex galactic economy that was launched in 2003 and persists as a bizarre virtual world for space faring nerds. Perhaps somewhere in its rendered infinite borders, a virtual Elon Musk shoots lasers at a virtual Jeff Bezos.

Getting your credentials

We’ve established the economic Metaverse — a place where people will express themselves through social, relational, and creative labor. What comes next is establishing the social hierarchy. There is no way to get around it.

In the traditional economy, the best signal you could get was a college education. Since the 1970s, college attendance doubled to about 6% of the population of the United States, or 20 million students. However, going to any college is a low quality signal. It is not sufficiently hard to achieve to differentiate into the top-paying careers.

Therefore, you’ve got the Ivy League — a gold star of prestige. Demand for Ivy League diplomas continues to increase, with the most recent admission rate of 7%, down by over a third from an 11% admission rate ten years ago. If you subscribe to the theory that much of undergraduate education in the US is signaling rather than learning, as we do, then it makes sense that the 20,000 top school spots in the US are badges of selection filtering, and that they are getting more scarce relative to the availability and commodification of the education “good” itself.

Let’s take another traditional example — certifications. Behold, the modest Chartered Financial Analyst Program:

CFA applicants have to pass three rounds of grueling exams, administered annually, which cover a variety of financial and investment topics. On average, each test takes 300 hours of preparation, or two months of full time work. Unlike the licensing regimes of FINRA of the FCA, which are meant to allow financial workers to behave responsibly, CFA program candidates are trying to differentiate against others of their kind. They are trying to send a signal to competitive finance professionals that they are willing to outcompete them in depth and over a long period of time. The CFA is as much a knowledge-base as it is an outfit you wear to scare off competition, or gain respect and resources.

We could tell the same story for YCombinator, and how it creates a badge for early stage start-ups in Silicon Valley with a 2% admission rate.

But instead, let’s switch to credentials of the Metaverse.

Let’s say your community ethos is to reject traditionalism and invent your own online nation. You are allergic to people in suits. Your millions have been minted in Internet forums, hacker jobs, and DeFi speculation. You care about being early and right, and this has been rewarded through access and capital gains. Your team can move markets, shallow as those markets are, and your gang collectives are called DAOs. Together, you combine assets from all over the world to build a web free from Silicon Valley monopoly, nodes networked to compute software, twitchy Twitter tweets at the ready.

You select a banner of 10,000 crypto punks — there aren’t that many of you yet anyway. Each one is an avatar, a certificate of authenticity from a community in which your economic self is instantiated. It starts as a game, because all of life is a game.

Like Harvard degrees, Punks are limited in supply. For early adopters they were affordable and democratic; but we are not early anymore. Prices for the cheapest Punks are at $50,000. The most expensive has sold for over $10 million, but price has no limit. Unlike Harvard degrees, which are at least inflated every year to accommodate new students, Punks have no inflation. There is no room but for the OGs. Supply is fixed and demand increases — everyone in the Metaverse needs a flag.

But wait! Like colleges, we can make more flags. There are only 20,000 Ivy League spots, but 20 million students.

The next flag is Masks.

And Apes.

And Dogs.

And cats.

And other cats.

And skulls.

And other skulls.

By now you get the picture. The formula is pretty clear — a 10,000 generative print of digital avatars that look good on a Twitter profile, cost ETH 0.1 to mint, and very quickly appreciate in value, leading to a speculative run-up. Everyone is buying the signal of participation in the NFT game. In fact, it is the price of admission. Check out, as just a random example, the Twitter avatars in this thread:

If you show up to this conversation wearing a suit and tie, you will be rejected. In order to participate in this economy of rebels, you’ve got to pay to fit in. A collective game to build social capital in the Metaverse is well under way.

Key Takeaway

To be clear, we are not throwing shade at anyone, whether it is getting an Ivy League degree through years of toil, doing math and more math to get the CFA, or clever investing in early NFTs by taking on frontier technology risk. Rather, we want to frame the story so that you see the connective thread between people wanting to go to Harvard or get a CryptoPunk. It’s not about the art or the money — it’s about belonging and the social, cultural signal to other people.

Of course Facebook wants in. They digitize, mechanize, and weaponize our connection to each other.

As for the rest of us, it is important to understand the shape that social capital is taking in the coming innovation cycle, and how we — and our children — are likely to compete to acquire it.

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