The age of imaginary money is ending


The metaverse may be little more than a safe space for people who don’t need to worry about the cost of anything.

I remember attending a conference ten years ago, at a point when internet technologies were fully moving away from web-as-information towards web-as-functionality. The mood was not one of excitement: there was a foreboding overtone to many of the presentations and discussions. Much of what had already happened, such as the rapid rise of social networks and other technology giants, painted a more bleak future than had been anticipated. In a hall of progressive folks, this contrast from previous years’ optimism was conspicuous.

Something was ending. An age of innocence, perhaps. In turning the web into a place where ‘regular people’ could ‘do things’, something intangible was being lost. I remember feeling guilty for sharing these curmudgeonly thoughts. After all, these technologies are revolutionary precisely because they are open to all. But now I realise the problem wasn’t the people, it was the money. It was all that imaginary Californian money.

Web3 is a term used to fool us into thinking a next technical generation is both ready and inevitable. It is not. It’s merely an economic adjustment.

The movement towards what was then called Web 2.0 came about because the existing digital-era business models—with only a handful of exceptions—had failed. Those first enterprises depended on founders stumping up their own money and trying not to run out of it before the demand for their idea finally took off. Individually they failed, collectively they crashed.

Then there was an inflection, whereby founders would raise eye-watering sums from venture capitalists. There were two outcomes: either these models failed too—with only a handful of exceptions—or the deep pockets of venture-capital subsided the product until consumers’ habits were formed and competitors were quashed. But the sums were so big that eventually the VCs were unwilling or more likely unable to keep backing mad, unviable online business simply on the strength of it becoming the ‘next’ big thing.

For the past decade, people like me—youngish, urbanish, professionalish—got a sweetheart deal from Uber, the Uber-for-X clones, and that whole mosaic of urban amenities in travel, delivery, food, and retail that vaguely pretended to be tech companies. Almost each time you or I ordered a pizza or hailed a taxi, the company behind that app lost money. In effect, these start-ups, backed by venture capital, were paying us, the consumers, to buy their products.

It was as if Silicon Valley had made a secret pact to subsidize the lifestyles of urban Millennials. As I pointed out three years ago, if you woke up on a Casper mattress, worked out with a Peloton, Ubered to a WeWork, ordered on DoorDash for lunch, took a Lyft home, and ordered dinner through Postmates only to realize your partner had already started on a Blue Apron meal, your household had, in one day, interacted with eight unprofitable companies that collectively lost about $15 billion in one year.

The next round of superhype therefore doesn’t rely upon either founders’ investment or VC. Instead, an even darker style of funding has emerged: doing whatever social engineering it takes to get a massive number of people to put their money into a scheme that appears to be a market. It’s no such thing, of course, and no returns will come. The term Web3 is core to manufacturing the newsworthiness needed to make it all convincing.

The reality is quite different. Many people who previously enjoyed some sense of financial comfort are now finding their costs are rising. Perhaps that makes them more susceptible to ‘investing’ in mad scams. But that particular digital behaviour is secondary. The key differentiator is that the era of Web2.0, it didn’t matter what anything costed. Consumers were happy to buy, VCs were happy to invest, and tech firms were happy in a non-profit model providing some apparently higher-order corporate purpose was being met. No more.

Mark Zuckerberg has issued a chilling message to Meta Platforms Inc. employees: The company faces one of the “worst downturns that we’ve seen in recent history,” which will necessitate a scaling back of hiring and allocation of resources.

This new era is not defined by magical currencies or tokens of ownership that you can’t touch. A metaverse in which nobody has to worry about the cost of things sure does sound attractive, particularly to those already wealthy enough not to worry about the cost of things already, but a more likely occurrence is a microverse of cost-consciousness. A world where VC money isn’t forthcoming, consumers are less willing to spend and already-weak trust in digital enterprises is bombarded. It’ll be challenging for those immune from rising costs to persuade everyone else to get excited about the possibilities of the next digital era, one the imaginary money has gone.

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