How to navigate the hype vs. value curve of the metaverse

In this episode of the Better Innovation Podcast, host Jeff Saviano interviews EY Global Chief Innovation Officer Jeff Wong about the Metaverse.

Related topics

Jeff Wong, EY’s Global Chief Innovation Officer and technology enthusiast joins Better Innovation host Jeff Saviano for a fascinating and fluid conversation about the Metaverse.

Some predict the Metaverse could soon become a $1 trillion+ industry. Jeff Wong explains the importance of distinguishing between hype and value curves when assessing emerging technology trends.

The pair of Jeffs explore helpful definitions of the Metaverse and discuss the current limitations of VR/AR, the alignment to De-Fi (decentralized finance) and digital currencies, and the likely increased regulation for related Web3.0 tech solutions.

Listen-in as Jeff Wong shares his belief in the Metaverse’s incredible potential for good, ultimately transcending commercial applications to help solve humanity’s biggest challenges – from climate change to social justice.

For your convenience, full text transcript of this podcast is also available.

Introduction

Jeff Saviano

Welcome back. Better Innovation listeners. It's Jeff. I am so glad to be here doing what I love to do. Talking about innovation. I think you're really going to love today's episode. We've got a prominent metaverse voice in the world with us in the studio.
He happens to be an innovation colleague of mine at EY. Jeff Wong is the EY Global Chief Innovation Officer. Jeff works across the entire organization to help discover, share and ultimately scale the most innovative ideas at EY. Jeff has had a rich innovation career. He's built new businesses across many different industries. This includes time spent in a key innovation position at eBay during its hyper growth years.
Outside of his work at EY, Jeff sits on the Foundry Board at Oxford University, and he's also a member of the Forbes Technology Council. Jeff has an A.B. in Economics, a master’s degree in Industrial Engineering and an MBA, all from Stanford University, a triple Stanford guy. I'm recording this intro right after our discussion. Jeff was terrific. He breaks down what the metaverse is, the hype versus value curve of new technology, like the metaverse and rich opportunities that the metaverse affords for tomorrow.
Without any further ado, let's take a trip into the metaverse with Jeff Wang. Jeff, welcome to Better Innovation.

Jeff Wong

Thanks for having me. I'm excited to be here.

Jeff

It is so nice, Jeff, to finally get you on the show. I have to say, we have been carrying this idea for a Jeff Long episode across a couple of seasons. We're in season five and we're hoping we're really hoping that this could have been a live interview, but just couldn't pull that together. With COVID,
that just wasn't in the cards.

Jeff. W

Well, Jeff, I'm so happy to be here, and I'm sad that I wasn't able to be a part of this earlier in your seasons. But I think it says how successful this has been that you're on your fifth season, sixth season?

Jeff

It's our fifth season. And we saw some statistic like 90 plus percent of our podcast are in season one.
So, we have a great team and we've had great guests, and we have a continuation of that today. But, you know, Jeff, I had it all planned. I was coming out to visit you in Palo Alto. I was going to start the day at my favorite coffee shop that, you know, it's just around the corner from your office, maybe go for a run on campus at Stanford.
I had the whole day planned for us, but we'll do that again sometime soon.

Jeff. W

Now, please welcome you any time you want out here, I'll buy you the coffee. But I have to tell you, Jeff, I don't like running, so I'll let you do that part. Perhaps I'll just walk behind nicely carrying the cups of coffee so that when you're done or take a break it'll be there waiting for you nice and hot.

Jeff

Oh, that would be nice. Oh, I like that. That would be excellent. I would appreciate that. Well, Jeff, our conversations over boy! over many years now, we've touched on so many different facets of innovation. So, let's start with a bit of a setup today. What were your experiences like prior to coming EY, to coming to the firm?
Jeff, you remember that. You remember what life was like before you?

Jeff. W

Oh! It was so long ago Jeff. No, but I do remember what life was like. So, for the audience I grew up in and around Silicon Valley. I went to school at Stanford. So, when you go for a run now, at least know where you're running and the and the path and the route, even though I won't run with you.
So back then, you know, I studied economics, math, engineering. I went back for my MBA after that, I did a growth equity and venture capital out here in the valley. And then I spent ten years at eBay or as I like to say, on the Internet. And there I was working on, you know, building new marketplaces and new concepts and products for them.
So, I've been in around this idea of inventing new things for a very long time.

Jeff

And perhaps that's entirely consistent with the university. Multiple degrees from Stanford. Did you gravitate towards entrepreneurship, Jeff, as an undergrad at one point? I'm just so curious. I don't think you and I have ever really talked about that what do you think is the origin of your passion for entrepreneurship and innovation? Where did that come from?

Jeff. W

Well, Jeff, that's actually a really good question. And nobody's really asked me that before. I think it hearkens back to my grandfather and grandmother on my mom's side. They had a series of small businesses out of Hong Kong that supported the family. And these weren't technology businesses back in the day. There was a watering proofing business, an import export business and a whole series of things.
And I just really loved the idea that they were inventing new things over time and new concepts and new little things. And nothing was ever giant or big. But the idea that they got to do that was, I think, the beginning of the model of success or fun, really, that that I saw. And then I realized, you know, as I reflected on it, both my father and my father in law started small businesses, and they both work to varying degrees, but they were both able to support their families.
And as immigrants raise a family and support them through our educations. And so, it just really struck me that I actually have this a lot more in my heritage than I thought that the idea of entrepreneurship and building new things has just been part of the family story. So, I think that's really where it started. Then going to Stanford was, you know, you get steeped in it. You're surrounded by it. I got just this wonderful opportunity to be there at a time of great invention. The early days of the Internet, the early days of some of the satellite things that were going on, and just to be in and around campus where that was a perfectly normal idea, was starting new things as a perfectly normal idea was just so great, a great cultural fit for me.

Jeff

And how exciting. You must have so many great family stories of the joy of entrepreneurship, but also the tribulations. And starting a business is not easy. I just very recently learned my great grandfather immigrating from Italy, opened up a general store in Boston. It was their first. And there was there was an opportunity to be an entrepreneur. And, you know, as my dad tells me, the story is how difficult that is and how hard it was for immigrants. The immigrant story and importance of raising families and starting something new.

Jeff: W

Yeah, Jeff, you know, as I like to tell our teams, as you know, as I told other teams that I've led, you got to love the grind, right? You have to love the in between. Everybody loves the moment of making the idea on the whiteboard. Everyone loves the ‘we sold it’ or ‘we launched it’.
Those are really the fun moments. And you should celebrate those. But to be an entrepreneur, to think about inventing new things, you have to love the in between when it's hard, when you're trying to figure it out. It has to be for you this idea that you're solving this complex amazing problem and the game of it is just a joy.
If you don't have that, it's just really hard to be entrepreneurial or an entrepreneur. The amazing thing these days, Jeff, is I think that whether you're actually starting a new company or running something that's large and existing has existed for a while. It's kind of the character respect you need these days with everything changing so quickly.

Jeff

You need to love the journey.
It's such a great message for this audience. And then perhaps it's hard not to test the entrepreneurship waters when you're in the valley. You're spending so much time as you did at Stanford that it's all around you. We've had we've had just great, great luck to get guests like Steve Blank. Steve Blank has been on the show a few times.
As you know, one of the godfathers of entrepreneurship in the Valley, and he talked about something similar. You got to love it. I love how you put it. You got to love the grind. If you don't if you don't love that journey, you can't just enjoy all of the upsides from it because there's some there's some real barriers that come up along the way, aren't there?

Jeff. W

Now you're making me nervous by throwing names around like Steve Blank. I mean, the veritable godfather of lean thinking and lean startups like this is you've upped the game, you've upped the bar Jeff.

Jeff

I think it's going to be we'll have a great discussion today. And just to go back to one of your prior jobs that you had at eBay, and you were there during these rapid years of growth, and what was that like?
It must have been so exciting to be part of an organization during those intense growth years, new business model to see it live happening right in front of you.

Jeff. W

It was really amazing to be around a group of people who were so incredibly talented where we had to invent to gather new things all the time. Because it hadn't been done before.
Just the joy in that experience, the joy in, you know, the mission driven joy of trying to do this, invent a new industry and being a part of it. And fortunately for there is seeing a lot of success at that, seeing a lot of the numbers go up and up and up. It was just a really remarkable moment.
But reflecting on that, you also realize something else that sometimes that success doesn't teach you all the lessons that you need to learn and you end up thinking you're smarter than maybe you are. You actually are. So, you know, when I think about entrepreneurship and the sort of going back to that, you got to love the grind. You really have to take on those moments where things don't work as well or as easily as sometimes when there's a lot of momentum behind your business, because I do find that's where you learn the most.
That's where the lessons burn in deep. I like to say that having done this for a long time, you and I together have done this for a long time. We do both know are the bumps in the bruises are we can show the scars or the broken bones, but you have to have that. You have to go through that if this is something you want to do for a long time. And I think you and I both have done this for a long time and imagine we're going to be doing it for a long time. And you have to take some joy out of it and understanding that those bumps and bruises are just about learning that pathway.
There's another fun insight into this, Jeff, that I thought I might hit on, which is a lot of people say, ‘boy! inventing it, eBay must be really different from inventing at EY.’ And you know what? There's actually a lot of things that are very similar We have an incredibly talented group of people, incredibly talented and mission focused and purposeful.
So intelligent in terms of what they what their coverage is. It happens to be a lot more broad here. We have a lot more people. We've been around for a little bit longer. So, we have opportunities had off in a number of different directions and some of the barriers to look the same to. When you have a remarkably successful business and you say maybe things should be a little bit different or we should have a slightly different direction.
Some of the typical barriers that get thrown up here were the same barriers that get thrown up in any successful business. So, the funniest part for me was not necessarily how different these experiences have been, but how similar they've been.

Jeff

So well said, Jeff, and those test and learn patterns that you experienced firsthand at eBay to test a hypothesis.
And I think I've shared with you one of the great pieces of advice that I got is spending more time in the innovation space was to debate less and test more and look to test your hypothesis. And in being part of eBay during those years and to take that now to our teams. So, you lead innovation at EY.
We are one of the largest professional service firms in the world. We are not one of the four big tech companies. We are not a consumer product business. Some in our audience may be asking the question, Jeff, why does a professional service firm like EY need innovation teams?

Jeff. W

Well, Jeff, that's an excellent question. I like to look at it as the remarkable, an amazing opportunity in front of us.
But I'll start at the challenges that sit in front of us first. When we look at the world as it evolves, we recognize that we are a 100 plus year old firm. 150 year old years old. If you go back to all the predecessor firms of EY and we've been successful throughout that time and you don't get to last 150 years without being able to change and evolve over that time.
But I think what we recognized that there was something different about this time in one of the most remarkable things that's different is that the pace, the pace at which change is happening was happening at a speed that hadn't been seen before throughout history. So, when you when you look back, people talk about things as generational changes. There's a generational change, this is a generational shift which gives large established companies the time to evolve, the time to consider and be thoughtful about it with their systems and processes can keep up with that change.
Now we have change that's happening intergenerational or even multiple times within a generation Training that we do for our staff. The joke that one of the very senior tax partners told me is like the training I had when I joined 30 years ago last me 30 years. The training we give our staff now won't last six months. Everything's changing so quickly.
And that's really, I think, what at EY we recognize, we are large we are established, we have leading leadership and leading thoughts across a number of areas of the world, but we need to rethink our capabilities around decision making, around process, around speed so that we can respond and act to changes that are happening in the marketplace that we see and want to reflect to our client base as well.
So, I think that that's really the challenge. Now, on the flip side, if you look at the opportunity here, now, as any good entrepreneur wants to do, they want to have an impact on the world. And I got to tell you, Jeff, when I was approached about coming to EY, the opportunity here is truly remarkable. If the audience takes a pause for a second and considers setting aside the legal rights but considers the amount and type of data that crosses our desktops and I'm quoting for the audience, and I know you can't see desktops, our servers, our computers every single day.
The depth of information and the categories of information, every sector, every country, every size of company in the world, the moment to moment to access that. We have the timeliness of that information. When you think a cost in particular our two largest businesses, our assurance and our tax businesses, you realize that if we have that type of intent, if you could look at that data and sort of evaluate understand it, we could tell you how the world was working to the moment and we have a pretty good idea of where the world was headed as well.
That is a remarkable opportunity in a remarkable statement about our position in the world. Now, we do everything right here. So legal rights do matter. Safety and security do matter to us at a level and degree that matches any company I've seen in the world. So, we're being thoughtful and careful about it. But when you do take a step back and look at it from that 30,000 view standpoint, the opportunity in front of us is almost unlimited.
And as big as anything I've ever seen in my lifetime.

Jeff

It is in many cases, it is by necessity the need, the need for us to innovate as a large professional service firm. A few years ago, we embarked on an exercise to estimate the percentage of our services that may become obsolete in any year. And it was higher than perhaps many leaders wanted to recognize that that as we go into every new year, there's a percentage of the business that just won't repeat.
And there is a quest, there has to be a quest to innovate. Forget about growth for a minute. But just to just to sort of stay flat. There's a need to replenish, replenish services that become obsolete. So, this this constant motion and to see the investments we and your teams in particular have made with emerging technologies, we went through an experience just the past six months of scanning the firm and discovering new solutions across ESG, just as an example.
And to see that happen at scale and how fast can mobilize, I think is just amazing. And Jeff, your latest area of interest, one of many areas of interest has been the metaverse. And I have to say, as somebody looking after innovation for tax and trade and part of our business, it is a keen interest of ours here as well.
But you in particular, you have written about it. You've spoken to many teams about it. You very recently had a piece published in Fast Company, which was so terrific in outlining the issues for our clients to consider I'm so interested, Jeff, in the signals that perhaps you see in the market that made you think that this is something that you personally need to become more knowledgeable about and along the way helping teams along the process.
Just one other guest we had this season, Rita McGrath, came on the show just last month, and she wrote a book last year called Seeing Around Corners. And it was such great advice in the book. And when she came on the show, very systematic approach to put it in terms of I think it's a New York City subway slang, see something, say something.
But a methodology for looking in the world at big trends and what's happening. So curious what you saw in the world to tell you to spend some time and energy focusing in this area.

Jeff. W

Oh, Jeff, that's a great question. And actually, first, I'll start with the strength of EY in that regard. One of the remarkable things with our over 300,000 people, every major country, every major city in the world is that we have access to what's going on, on the ground.
We hear what client questions are, what client issues are, what trends are, and we are allowed to see what the tea leaves tell us before they actually happen and become popular in the media. And that's our great inside advantage, Jeff, that I think you and I both share. And so, one of the things was as we listened to the different listening posts we have around the world, to recognize that this is a concept that lots and lots of people are talking about.
So that's the first thing. The second thing is to when you look broadly at the market, you could see the investments made by very large companies even before the public announcements. We've been tracking a lot of those. We understood the significant percentages of certain employee bases at large tech companies that were being invested in the metaverse, whether it's the hardware side of it or the software side of it, etc. And so, when we started looking at what we should be thinking about, because we're constantly looking at what the trends are for the future, we recognize that. Boy, when we hear this happening, coming up from the ground and we see these large investments happening at these major tech companies, that there's a movement here that looking ahead a little bit, we need to be involved with.
Now, the thing that I will I think I've been trying to be clear with the market about is there are two curves that we really watch. One is this hype curve. And one is the value creation curve. Because with anything new, we recognize that particularly early on, there's a pretty steep, high curve. And people like to talk about it.
And we love to talk about things that are in that hype curve. But we also recognize that behind them there's a value curve. What is the real value being created in the world? And again, to our unique insight, because we have so many teams on the ground and we do a lot of this work for our clients, we are able to see both of those curves and in different circumstance and situations those hype curve in the valley curve is close together. And in certain circumstances, circumstances it takes a little longer. I'd say here we're pretty early on and understanding that, so we're paying a lot of attention to see how close is that value curve to that hype curve. And what we do is we hear a lot of stories about that value curve, which are driving the hype curve.
But what we need to really understand it on behalf of ourselves, but on behalf of our clients as well.

Jeff

And Jeff, so many nuggets in what you just said that I think will be particularly relevant for the audience. I think there is incredible buzz about the metaverse. Personally, I think some of it perhaps is in the hype category.
Maybe, maybe even a bit overhyped. Oftentimes we find when new technologies become hyped that, you know, there's some confusion about the actual state of development. One, you know, one other great piece of advice that, you know, we've received over the years is to look for the markers, like look for important fact based markers that tell us that a new opportunity, a trend, is worth investing and could be here.
For example, the number of users and early adopters and how fast the, something I've learned from you is the velocity, the velocity mass matters. What are some of the velocity measures for adoption of new solution that sends a signal that is something that you want to perhaps invest in. So, let's stick with some of the basics about the metaverse.
I suspect many in our audience may be listening to us saying, what the heck are these guys talking about? What is the metaverse? Jeff, give us a working definition. I'm going to come back with a couple of definitions that we have heard in the market. But I'm really interested in how you would define the metaverse.

Jeff. W

Yeah. So,I'll tell you first how I look at it. First of all, we refer to the metaverse, but in my mind, there's a lot of different metaverse a lot of these different areas, lands, digital lands that you can visit and they're different. And you can't take an object from one, a car from one game environment and move it to another game.
Right. At least not yet. So, when I look at it, there's a lot of different metaverse. Each metaverse is a fully immersive environment, 3D environment for me. It's an environment that you can move around in and I think an important part of that perspective is that it's personalized meaning in each of these environments. I'm seeing it from my perspective, my view, and the fact is its sort of magical about it is because of what I can do in the metaverse - move objects around, buy and sell things, build things, and everybody else can do it. That metaverse that I'm existing or that land that I'm in, can change and evolve. And I get to see this magical world that we all build together. And I think that some of the magic of it is that you're able to see these things that other people can do.
And there's a real creator aspect to it. There's a personal, personalized aspect to it. And there's a sense that the control of the world that you're seeing is in the hands of the people. And I think that that's what a lot of people like about that concept, is that it's in the hands of the people.

Jeff

I particularly like the reference point and we've heard others explain that there are three vantage points.
You are a creator who is creating the metaverse. There's a platform view of what is the platform from, and we'll talk a bit about the technology stack and why that's relevant and then who's using it, you know, who, who is part of it in terms of a simple definition for our audience. This is one that was actually in a wired magazine article, had said that if you mentally replace the phrase metaverse in a sense with cyberspace, 90% of the time, you probably won't substantially change the meaning.
And I kind of like that because many in our audience may have some semblance of what cyberspace was. They probably have a mental model of what that is. Another definition that I think really aligns with how you articulated it earlier, Jeff, is it is a collective virtual shared space. And it's this notion of the convergence. I think the convergence is important of virtually enhanced physical reality with physically persistent virtual space.
So, there's this combination of virtual worlds with augmented reality and the Internet as we know it today. And from our standpoint, from a firm like why we're so focused on commerce and what transactions may occur on the metaverse of tomorrow versus what is happening today. I'm just curious if you have any thoughts on those definitions and it'll help our audience understands what exactly are we talking about?

Jeff. W

No, I think those definitions are great conceptualizations of what we see. I do think that that the metaverse sometimes in those definitions or I do think that the definition of the metaverse sometimes gets co-opted, confounded with some other concepts as well, which I think we'll talk about other technologies that are related but separate.
So, when we start talking about DeFi, Davos and NFTs, those are part of the metaverse world, but they can also exist on their own separate from the metaverse world. So, I do think there some what does that metaverse contain versus some other concepts contain and how are they coming together at times that I think people. It's part of what's driving the hype cycle is people break them together.
But to your point about numbers, the traction that we see are pretty remarkable. Right? We think in a couple of years this will be an $800 billion industry pushing the numbers even higher, close to $1,000,000,000,000. Now, a lot of that's driven by gaming The gaming metaverse is and I think everybody knows the names of the big games. But when you talked about following the numbers, when you look at that gaming universe, you measure used monthly active users in that quarter billion users’ range.
And with some of the new lands, you're only measuring in the quarter million range. Right. So that's where I think you're starting to see this tear between. There is definitely an industry here and it's definitely real. There's definitely a promise about where it can go. It's not necessarily where the hype is yet in terms of the value and hype coming together. But there is definitely a potential there that's very, very exciting that I think people are looking at, which is why we're paying attention.

Jeff

Let's really drill down a bit on this this framework just that we've been using to describe the metaverse, define it of what is it today versus the promise of what this can be tomorrow. So, this this today versus tomorrow concept.
Let's stick with the today for a minute. There's been a wide adoption from gamers in the metaverse and world building games where players involved in online economies, buying digital goods Talk a bit about what is the metaverse today from gaming, entertainment and the other first generation of metaverse users.

Jeff. W

So, the primary usage we see right now is around that gaming universe, as you just said.
And they are doing all the socialization activities, trade activities that people are reflecting on when they think about the future. But to start today, yes, a lot of the attraction, all the users are around different game concepts They are there's a lot of trade happening on those games. They tend to be around things like armor, weaponry, etc. And that's fantastic and that's wonderful.
I think that what people are also starting to see is the social and community aspect of those games where people are developing friendships, purposefully going on missions together and doing a lot of things that as we reflect on in the older age demographics as community building, right? They're really just building community and having conversations and having something that they're observing and doing together. They're just doing in a different way than we had done in the past. And I think that that's what's driving a lot of the excitement as we start to begin to reflect on the future, is when you look at that demographic, there's a recognition that that demographic gets older. And as they get older, a lot of their behaviors, the trade, the commerce, that community building probably translates into the next phase.
And the next phase may no longer being going on missions inside of a game. The next phase might be just community building, socializing at a bar or watching a game together with in this universe, you know, meeting people, meeting spouses and dating on this metaverse. Right. That there's, as this demographic gets older, they become a part of it.
The additional excitement is the question of how much do the again, older demographics, gaming still tends to be a bit younger demographic. How much does the power in the concepts behind the metaverse sort of penetrate the current massive user base in business, in commerce and in, frankly, entertainment?

Jeff

And what's exciting for us as we see even in this, if we call it this first generation of what the metaverse is, that there are some early signs of business to business activity, commerce that may someday be at a considerably higher volume.
But we have some early commerce that's happening. Just to give you some examples of that, that in at least one of the more popular metaverse is called Decentraland, that all of a sudden, you're seeing the corporate. So here come the corporates. There are consumer product companies. Yesterday, I got invited to go into a bar in the metaverse at one of the large beer companies as open the bar in the metaverse. I took a tour through it. There were about 30 people in there. I learned about their products and socialized a bit and it was it was an experience. You're seeing consumer products. Companies can learn more about products and services. There's there are virtual meetings today. Some are a combination. It could be through a video platform call that we've all been experiencing for the past few years mix with avatars.
We're starting to see a little bit of that mixed together, but it's that even in these early days, we're starting to see the corporates and business to business community coming. Do you think that that's that that's fair, Jeff, and does that tell you anything of what the future may look like?

Jeff. W

Jeff, I'd say that's more than fair. We have a joke internally that the speed from the early hype curve around the metaverse and the articles that showed up in all the popular publications to our CEOs, our clients, CEOs wanting us in the room on Monday to talk about what our best ideas are about the metaverse and how it applies to their particular company, their particular industry was as fast as we've seen anything. We see a lot of examples, particularly in the consumer space, consumer product space, where people are wanting to take advantage of the fact that there's a lot of fun traction here and there's a lot of money that's been made here. There are handbags that are sold for more dollars in the metaverse than they are in real life, which always is a very funny

Jeff

Digital everybody version. A digital handbag.

Jeff. W

more expensive than and sometimes a multiple more expensive than the offline. Offline. I'm laughing here. The real version, the one that you can touch and bring around in real life shoe companies, the beer companies throwing out all the designs of their old cans and selling NFTS around that, that there is actually an extension to a lot of business that can happen here.
There's also the early mover examples that we see where people want you to come and explore their wares and goods and basically open a different storefront, a different pathways, a storefront, a more 3D pathway to their storefront and these early experiments are garnering a lot of buzz, a lot of fun and a lot of consumer interest. And so, I do think we're seeing this happening particularly in the consumer sector.
But what's also remarkable is and I'll just say, I personally have been pinged about the banking sector, how is this going to change banking and finance and the power and utility sector? How should we think about empowering utilities? There was something in the health sector where a group did a training of surgery through a metaverse environment, a 3D online environment that allowed them to train other surgeons around the world throughout this environment.
So, there are all these use cases that are out there that are being experimented with. So, I think that's why the hype curve is so high is because you're seeing so many experiments happening in terms of value creation that some of them for probably going to work. And that's really what we want to follow, is to figure out which one of these are really going to work or not.
And we're being invited to a lot of rooms, a lot of the rooms with the C-suite to talk about this. And that's also an interesting trend. It's one of the topics on the mind of the CEO.

Jeff

These opportunities appear boundless in and again, back to your own personal experiences. You lived through the creation of a new TWO-SIDED market from back from your eBay days.
You saw that develop. And, you know, that's not all of what the metaverse may be, but there is a marketplace component. We're seeing it today. With the purchase and sale of NFTs and other digital assets. And that is important. It's an important part of what you know, we from a tax and from an audit standpoint. And one of the opportunities you and I have talked quite a bit about is the opportunities with greater transparency and programmability with digital currencies that that, you know, the one aspect of an exchange of value, a digital currency as an exchange of value of an opportunity to track and trace and program and influence transactions in new ways.
And so, it's not just that the metaverse is an accelerant in some ways. It's accelerating development in certain areas but offering entirely new marketplaces and opportunities for buyers and sellers. Would you agree with that, Jeff? Do you think that's fair?

Jeff. W

Absolutely. There is a massive buying, selling trading marketplace concept that supports this. And in fact, it's been around for a long time. You know, at eBay, we did. We had a physical goods marketplace site that you exchange of goods. And we had a payment mechanism called PayPal underneath it. And both sides were quite successful in their own right. Similarly, on the metaverse, we've seen this. With gaming, this idea of exchange of digital coins and people wanting to inland or offline exchange value for goods.
You know, sometimes historically we saw the gold or the value of money being held within that metaverse system. And what we're seeing now is the potential and possibility of a lot of the cryptocurrencies, things along those lines where the gold I'm quoting and ‘gold, the value creation or the value storage in NFTs or dollar or cryptocurrency is just held by entirely different mechanisms.
And I think that that's why people are talking about these things in the same breath. If you're going to have an exchange of goods, you're going to have to have a payment mechanism, historically a lot of that payment mechanism was done by the platforms themselves. They would define it. And what we're seeing now is that there are payment mechanisms in the world that they're starting to use around these, around the trade of goods in this and these metaverse and it's really fascinating to see that development.
But those payment mechanisms work offline, too. They work for the exchange of other things as well. So that's the again, that's what we saw with PayPal. There is a great business on eBay. There was a great business that was outside of eBay. Exchange of dollars and value. I think you'll see that here, too. Cryptocurrencies will be used certainly for metaverse.
It will help grease the skids in Greece, commerce. There's going to be a big usage of those types of currencies off metaverse as well.

Jeff

And you know, Jeff, maybe that's one distinction as we look at the adoption curve of and the innovation curves of what the metaverse could be, that of course, it's not a single technology. And we'll pivot and talk a bit about the technology stack in a minute.
But as we look to historic adoption curves, whether it's A.I. or blockchain or the Internet itself, I was reminded of this from somebody on my team earlier in the week that I love the description and depiction of how some technologies are adopted. It happens slowly, then quickly right I think that's that is such an important concept happened slowly.
But then all that, like there is a day or there is a moment in time when you see the hockey stick of the adoption curve just go way up. And what's so just to give you one other example like that, you could look at augmented and virtual reality. There's been a promise of AR and VR. It's sort of been happening slowly.
I don't think it's really that we've seen the quickly yet with AR. We may see it now. Perhaps this would be the impetus. But I'm curious to your point of view on the adoption curve of the metaverse. Maybe this is an introduction to the description of what is the underlying technology itself? Because the technology stack in each of these each of these different, in some cases, emerging technologies have been evolving over some period of time, anyway, with or without the metaverse. Frankly, some of them would continue and they would evolve as they have been. But can you talk a bit about what may be different about the innovation and adoption curves of what we call the metaverse compared to curves of other technologies in the history of the world? How's that?

Jeff. W

Jeff, you're right. There are some technologies that are more linear in their value creation, right?
Conceptually, they will just they're good technology. They'll serve value. They'll get increasing usage because they have clear value. The metaverse is more similar to the marketplace concept. So, it's a curve I'm very familiar with. And there's a lot of joy for me in these curves because they're remarkable and they're fascinating and they're really fun to be a part of.
And I think that's why there's a lot of hype here in the metaverse that is can translate to value in reality. So, what you see with these network effects curves is and it bumps along for a while. There's not that many people on it. It's not that much fun. To be a part of it. And then it slowly grows and slowly grows.
And you're right, it hits some tipping point, a tipping point where it sort of hits the minds of the users that, ‘hey, there's a lot of people here.’

Jeff

Right.

Jeff. W

And you can see that change over where you have this increasing number of people that are in there. And it just becomes more and more fun. The academic examples are the fax machines, right?
It's not fun to be the only person with the fax machine The more current example, I'll laugh and use it. What you just said you attended a virtual bar. Bars are fun when there's a lot of people there. So, you can make a lot of different connections. And so early days of a usage of a bar, you're there's not many people there.
There's not many connections to make. But if you look at the mathematics of how many connections can be made with each additional person, it gets a lot more fun very quickly with each additional person. But you have to get to some sort of critical mass to get there. These meta verses have that similar effect. These are a lot more fun when there's more people with you on it.
And so, we're going to see that same curve in each individual metaverse. And some will take off and some won't. Some bars become popular; some bars don't make it. So that's really the fascinating part about this. And in sort of the joyful part for me, this is fun. This is just fun stuff.

Jeff

And we've been living some of this, of course, with our blockchain development. By definition, many would say blockchain is a team sport and the value, as you said, is in the network effect. I think it would be really helpful Jeff, and useful for our audience. Let's just do a quick tour of the underlying technology. I think still it is. I find this we've talked to many clients and governments who are also very interested in the metaverse that that in order for them to really understand it, we need to do a quick tour of the underlying technology itself.
So, let's just do kind of rapid fire and go through a couple. What about DeFi? What is defi and why is that relevant in the metaverse?

Jeff. W

DeFi decentralized finance. We use it broadly as a concept of exchange of value. So, you might include cryptocurrency on it. I like to keep them a little bit separate, but you would potentially cryptocurrency on, it's the Greece kids, right?
You need to exchange, the way to exchange value and you can use these currencies using these methods to exchange value. So, you need DeFi and you need cryptocurrencies in order to be able to do that.

Jeff

That's really important. A platform payment mechanisms, cryptocurrencies, digital currencies themselves. And we've, we had the CEO of Circle Financial on the show a few months ago, Jeremy Allaire talked about the explosive growth of Stablecoins and USDC in particular.
I think they just I just saw a few weeks ago they hit 40 billion and then I saw the other day that they just had 50 billion. So, it's happening. It’s starting to happen really quickly. But the importance of digital currencies, we probably won't be swiping our credit cards in the metaverse, perhaps to purchase other digital currencies, but from an exchange of value as we see governments that are investing in central bank digital currency and you know, from our standpoint, Jeff, and for many of our clients, this new legal regulatory layer that has to exist in the world, just in the U.S. alone, there was a president's working group on Stablecoins.
They issued a report in November and these are important steps in the legislative regulatory path that we believe will provide the rails of what the metaverse may look like.

Jeff. W

Jeff, it's an important layer that I think people don't always think about that. You just mentioned that the regulatory layer, we do expect there to be regulatory layers around the world. Put forward by different governments to regulate the exchange of value, whether you call it in the metaverse or DeFI or cryptocurrencies more broadly. You're going to see governments. You are seeing governments getting into the game with their stablecoins. So how do they balance between being a participant in this? By putting their stablecoins out there and blessing and managing them in some way?
And how do you look at it from a pure regulatory aspect? Right. I want to make sure that taxes are paid, that fraud is at a minimum, that the consumers are protected. So do the basic things that governments typically get themselves involved That is a layer in the stack of layers that will be surrounding the metaverse and associated technologies an important one.

Jeff

Let's head on just a few others and I think it'll help our audience. Why is augmented and virtual reality important for the metaverse?

Jeff. W

Oh, that's the fun of it all, isn't it? Augmented and virtual reality, particularly virtual reality. That's how you think about your entrance into the game. That gives you the different perspective than sitting in front of a computer and looking at it in 2D is the idea that you can look at things in 3D that you can put on a headset of some sort and walk around with it.
Now, it's interesting you talked about state of the art technology. So, for those of you who have experienced it directly and I would encourage everyone in the audience who hasn't experienced it directly to try entering different metaverse or metaverse concepts through different means, and you'll start to see where the technology works and where it works less well and where you see the physical hardware improvements that need to be made.
If you're on a device that's a little bit older, whether it's a tablet type device that's a few years old, you'll see that sometimes you won't be able to see quite everything that's going on in your metaverse because the processing power can't quite handle it. The laptop is true as well. If you're on an older laptop, sometimes a processing power can't handle it.
How do you set up your Wi-Fi network in order to be able to handle the bandwidth it's required? Think about what's going on there. Rendering a view. Every time you turn your head even slightly, that's completely personal to you. That might have to be changing dynamically in the background through somebody else walking around through the metaverse, touching things, moving objects.
That's an incredible processing power. That's incredible bandwidth power. It is really remarkable what they're doing. But there's an entire set of hardware, and I'm just doing the consumer side that that needs to change. And the last thing I'll say is I don't know if everybody owns or not. Everybody I'm sure owns the numbers will tell us that not everyone owns the latest headsets.
So, if you want to actually put on a goggles on top of this, but they're a little heavy on your head. They're not necessarily great to wear for a long time and they're working on it. They're making them lighter, better, more comfortable. So, we're seeing looking at some hardware improvements there that will really improve the user experience around this.
And that's the other interesting thing about the metaverse, there's some network effects that are purely digital, purely can you get more users involved in this? This one? I think there's a hardware aspect to it as well to make the experience really great. Sorry, Jeff, I think I touched on a few layers of the stack instead of just the just the one you're talking about.

Jeff

And it's very helpful. And just to stick with augmented and virtual reality as we've been talking to clients and others about it, that in many cases it is the medium. It is the way that you are accessing the metaverse doesn't always have to be that way. And we're in the process. We're planning a big session for our leadership team.
And we just did a round of evaluating different goggles and what to do and how to experience it. And there are no shortage of options and devices all the way down to $7 cardboard option where you put your phone in and you put it up to your face and you look through it and you get some 3D effects. So, it doesn't mean that it has to be, you know, a $500 goggles for everyone to access it. If people are interested, if you look, there was a great video that posted last week, a Wall Street Journal technology reporter. Jeff, I don't know if you caught this, but she spent 24 hours in the metaverse and so they created a bit of a video of that experience. And I think it was really important in a nice way for people to see that it could be hard, let's say having your goggles on for 24 hours. So, the innovation around the comfort and how to how to work within the metaverse for extended periods of time, that's still evolving. Is that fair?

Jeff. W

That's still evolving but I'll say there's a generational difference there. I saw the video. I don't know her. I know some of the other folks over there, but it was really fun to watch her try and do it. It's not something I would ever endeavor to do. But you do see the demographic that games a lot and that tends to be early teenager demographic who can wear their goggles for four five hours at a time and game with their friends and think it's great.
And that's a normal experience. And I think that this is, you know, touching on one of our previous topics. This is the difference that people are seeing is that that generation will probably think much less putting on goggles for 5 hours, 6 hours a day. It may not be healthy for anybody to put on any sort of form of screen for 6 hours a day, but that generation will be much more used to it.
Much like in our generation, different from the generation above us. We're used to sitting in front of screens for most of our day. The generation above us wasn't. They probably think we're nuts for sitting in front of monitors doing video calls or a machine and looking at emails the whole day. You know, it's it may be hard for us to see in this generation, but that next generation, it'll be much more seamless.
And I think that's, again, what the companies are seeing is the opportunity.

Jeff

It was just a few years ago we had a few air VR startups in our lab and they were showing what they perceive was the future where you didn't have, I'm looking at you through a monitor right now. There was no monitor. Instead, I had the goggles on and there was sort of a virtual monitor that is just imagine a spreadsheet to your right and you look to the left in the room and there's PowerPoints and word documents and you can with your hands, you can sort of move things around.
And it was still a little bit clunky, but, you know, again, back to the entrepreneur, they were convinced there was there was no vision of the future that didn't have those technologies in it that clearly the screens that we're looking at and these monitors wouldn't be around in just a few years, it perhaps take time.
Maybe this will be the impetus for that. Perhaps. Okay. We've talked, Jeff, about how the metaverse can be both an accelerant for innovation and some of the older business models, but really driving force in creating entirely new business models. Talk about one thing. Just give us an example of something that's new about the metaverse, not just accelerating or shifting marketplaces from one digital marketplace to another.
But something that you think may be an entirely new opportunity that may result either from a user perspective or platform creator, is there something that that you could highlight that is truly something new about the metaverse and not just shifting from another marketplace to a new one. So, one thing that I think is big, I actually mentioned it before when I joked about these new bags that can be created digitally versus physically and how much people are paying for it for a lot of the businesses that we clients that we consult with.
There's two aspects right. There is the extension of the current method and things that they're doing, a storefront that exists in the metaverse so they can sell the shoes, the bags, their goods in different ways. But the extension of their business to be able to have new design fashions that they put out. I just I love this. The designer concepts around here, the ability to test out new bag designs, new shoe designs in this market, the ability to make money from it in a new and different way, I think is just one of those new things that people right now are chuckling at those examples.
Whenever I give them, they chuckle, “Oh, who's so silly to pay more for a digital bag than a physical bag?” You know, all the requisite questions. ‘Can't you just replicate that bag, you know, an infinite number of times? Why does it matter?’ And what you're seeing is that it does matter, right? That people do care how they represent themselves there. It's just a mental leap from how we represent ourselves now. We wear clothes of a certain type. We wear watches of a certain type. You have a beautiful headset and microphones set up as of a certain type. Right now, in your podcast, people should if they could see it, they should see it. It's a remarkably professional looking set up.
But people are representing themselves in different ways. And to recognize that as you look down through the generations of how you represent yourself, you know, it's started. I think the older generations are used to the physical manifestations. What car, what jacket, what watch what jewelry do you buy and show. The next generation is actually already used to a very digital manifestation of that.
What do you show on your social media? What angle of your life are you representing the experiences that you're showing? And they should see that as a translation just to the next stage in the metaverse of what digital handbag is a very similar need in humans, right. To represent themselves in different ways. So that's a big market that I think a lot of current designers, current established companies, but frankly, new and up and coming designers can start to think about new and up and companies up and coming companies, particular brand companies can start to think about how to get into this world and establish themselves in a in a way they hadn't before.

Jeff

It's a great example, and for the audience to really pick up on that, they're a new asset classes that are resulting the NFTs of today, perhaps in some respects like the trading cards of yesterday. And, you know, these are entirely new asset classes that weren't around even a few years ago. I also think it's exciting, Jeff and in hype cycles, hype value cycles, as you described it like this to look back and see certain signals or semblance of what the future may look like. I was reminded of this just the other day. You and I haven't talked about this, but you go back to 2008 and during Obama's campaign, he was advertising in online games back in 2008. There were hope banners and vote Obama banners that were part of games. And it's interesting there's a flurry now of you know there was an online concert with over 10 million people in it and you know this product placement and other average of course you have 10 million people doing anything and you're going to see a swarm of business models around it.
But you know it doesn't look so dissimilar to what Obama did back in 2008. And I think it's always interesting to see that there were some early shoots of innovation even back then. I think that was one of the first instances of really you know quote advertising in a virtual environment.

Jeff. W

That's what you actually see with that network effects concept actually.

Jeff

Yeah, you do.

Jeff. W

is that the signals of that change happened far before becomes popular and hits the height curve hyper curve far before it actually hits that curve and you start to see the rocket ship ride and everyone hangs on so everyone looks at it as there's a sudden appearance, right?
‘Oh, this, this, these things came out of nowhere.’ I mean, on occasion. That's true. But most of the times you see the signals happening for a while. And again, that's a benefit of being an in EY and seeing everything happening around the world or being able to see lots of things happening around the world. Yeah, you can see those early signals if you're paying attention.
And then it's really about hype versus value like we started with. Right. Making sure that you're following the value creation from an investment perspective, even though you may be mentally following it from a high perspective, that separation of those two concepts is really important whenever you're dealing with something emerging and new, because the signals for lots of things that are out there have been on the Internet was around a lot earlier than its popularity drive now. It was one of the relatively quick ones to get popular, but it had been around for a while you know, that that before it sort of hit that curve of growth and called the nineties-ish right, the beginning seeds of the concept in the potential forward had been around for well before that.

Jeff

It's a great point just to anchor on as we as we take our conversation today to a close and I'm just so curious, is there one aspect of the metaverse that that you're really jazzed up about like what aspect of what we just talked about, whether it's from our standpoint at EY or personally or for, you know, frankly the benefit of the world that you're really excited about that we can all watch for and see it develop?

Jeff. W

So, what I love about the concept of the metaverse, if I if I look at it with the rose colored glasses on and purely as opportunity and purely without any of the, you know, some of the rightful hesitations that are out there about the traction is the amazing new platform and way for people to interact with in the world. And the usage of these new technologies to answer some big questions like, you know, I mean, let's put out the climate change calls for social justice, things like that.
And we've seen sort of that ingenuity happen over time. And I know I may be stretching a bit for folks in the audience saying like, how could you use the metaverse against those some big concepts like that? Well, I think early on, the days of Social Network and the Internet and things like that, you didn't quite see the usage happening in those patterns, like how can we coordinate and come together and think about you? Didn't these call for change? So, I'm so grateful for this progress in technology that allows for people to help think about the world in different ways, a new way for us to collaborate, a new way for us to have conversations with people around the world to help us understand each other better. To me, that's the bigger implication of this than the commerce. Of course, the things are you know, our clients are rightfully interested in revenues and profits and commerce and things we've spent a lot of time about.

Jeff

The games are fun.

Jeff. W

Yeah, these are fun. But in commerce is great. But the ability to drive change, the ability for, you know, those people, those 30 people in the bar, maybe they were from all over the world in the 30 people in these communities that can coordinate. It's just really another pathway, another magnificent opportunity to focus our time and attention on the big issues that really matter for the world and a new way for people to find each other who are passionate about the same things. And I'm just hopeful and I recognize that the rose colored glasses and there's a there could be a downside to it, but I'm hopeful that the goodness of the world will come together and use these technologies for the positive ways that they can be used.

Jeff

It is such an important point. Perhaps there Rose-Colored VR goggles, perhaps we'll see that as the games are fun, concerts 10 million people going to a concert online is a crazy experience. But the opportunity to, as you said Jeff, impact communities and society and we have an episode coming out. I think it's going to be the next few days that by the time this episode airs our audience would have heard we have one of the innovation leaders of the UK government came on the show and we talked about opportunities of these digital technologies to impact the social contract.
And at the core of it the citizen state relationship and an opportunity to improve societies. And these are not just lofty words, but there really is the promise of not just what we call the metaverse, but the underlying advancement of technologies that are in it that I'm personally excited about. Well, Jeff, before we wrap up, we have a regular feature on better innovation, as if we haven't had enough fun already.
We finish each of our episodes with three quick questions and quick answers. What do you say? You up for it?

Jeff. W

I'm up for it.

Jeff

Let's do it. All right. First question, what book do you have on your nightstand?

Jeff. W:

Oh, on my nightstand. It's the latest one by Klaus Schwab and Timothy Mallory. I'm friends with Terry.

Jeff

So, it is a plug for your friends.

Jeff. W

That's all three books. It's all the world economic forum books. They talk about sort of across the set of three. They talk about the challenge of the world. They talk about how we might change in this latest one is how the conversation might progress forward. Looking at it from the view of many different leading thinkers from around the world.
And I think that it's a wonderful sort of set of three, everyone should have. And perhaps that's a nice alternative where there was no real World Economic Forum in Davos this January. So that could give someone our audience their fill of some of the ideas. Okay, Jeff. No. To tell us a historic figure whom you admire.

Jeff. W

So historic figure. You know, I'm thinking about a number of different things. One thing whose story, one person that comes to mind historically who's whose stories come to the forefront was really Katherine Johnson. I think everybody saw, everybody at least has heard of the movie Hidden Figures as a nice NASA scientist with those incredible math capabilities and was a central figure and underappreciated central figure for so long historically.
But if I might offer it, not a historical figure, but in addition, not a historical figure, but somebody who is growing in fame, but perhaps not in the popular discussion yet. I really respect a lot of what Fifi Lee is doing. She's a one of the leading A.I. scientists around the world. She works happens to work here at Stanford.
She runs she's one of the co people who run the Human-Centered AI Institute. She's doing incredible work on AI and medicine and health, really doing a lot of the farther reaching examples, not just the examples. Everyone is heard of the X rays and, you know, better evaluation of that, doing farther, even farther, reaching research. I think she'll end up being one of the people who hopefully will be appreciated by the world. But not just that. Being a female leader in a space that isn't as diverse as people are hoping it will become. For me, she's a fantastic example of somebody in the world doing something meaningful with her life, but also just a great example, having young daughters for kids and having one come up to me who is very interested in the AI come up to me and say, boy, seeing Feifei speak was fantastic because finally there's someone that looks like me was just a meaningful thing for me. So, I want to put her name out there, even though she's not a historical figure by any means, she's doing it right now.

Jeff

Boy! that is that is so inspiring. It made me think Jeff back. I think it was season two. We had a surgeon on the show, Dr. Daniel Hashimoto, who was one of the early pioneers of using AI in surgeries.
And he talked about performing gallbladder surgery, which can be a bit tricky. One out of 100 or so, if I remember the conversation could be challenging and, you know, using videos, multiple, multiple videos of surgeries to guide surgeons and for and reducing the risk. And just early application of AI systems being used for a variety of purposes. And that was one I find that that's so inspiring.
Okay, Jeff, you're doing great. Last question. What do you see as our greatest opportunity to build back stronger when we finally emerge from the pandemic?

Jeff. W

Well, Jeff, when you look back at the pandemics over the centuries, that pandemics have happened what you see is a remarkable burst of creativity, invention and innovation that comes at the back ends of pandemics as you come out of it.
And so, I'm just so excited to see how the world expresses that burst of creativity, of energy and innovation as it comes back here. So, my hope is that we take that moment of great opportunity and that great burst of creativity to address some of the biggest challenges that we've talked briefly about here as well, which we could spend whole podcast on, the concepts around climate change, well, the humans impact on the world, the pull apart of different nations so that we see particularly east and west from a technology basis, can we use the technologies at hand, this burst of creativity to find ways to make sure we still have great conversations and better understanding of each other around the world, even the pull apart, whether it's the East and West or again, what I say is the rightful calls for social justice, equality around the world.
To me, this great burst of creativity will be best spent on finding ways to address those big problems as much as they are is finding the next unicorn or decade corn or corn is people definitely are flowing capital to right now. So that's my great hope is we're going to see this great burst of energy, creativity and invention.
I'm just hopeful that they're wonderful people, good people in the world who are going to come together against these big problems that provide us an opportunity to change the trajectory of mankind, humankind. Excuse me, as we look forward.

Jeff

it is so well, such as a human race. We are a resourceful bunch and the opportunity faced with incredible adversity to truly change the world. I just want to thank you, Jeff, for coming on the show today. I can't wait to get back out to Palo Alto. Seems like that that day is coming very close where we'll be fully opened up and really look forward to seeing you again. Thank you for spending some time. Our audience is all the richer because of your insights. So, thanks very much.

Jeff. W

Well, thank you for having me. And I look forward to when we can get in person and the world is opening up. And so, I'd say let's start looking forward.

Jeff

Terrific. Thank you, Jeff.

Presenters

Jeffrey Saviano

EY Global Emerging Technology Strategy & Governance Leader

Podcast

Episode 5

Duration

1h 11m 17s

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.