What could bloom in the metaverse winter

Presented by TikTok: How the next wave of technology is upending the global economy and its power structures

Mar 29, 2023 View in browser   By Derek Robertson Presented by TikTok The Walt Disney Company shuttered its metaverse division this week. | John Raoux, File/AP Photo It looks like kind of a bad week for the metaverse. The Walt Disney Company laid off the roughly 50 employees of its metaverse division yesterday, sparking a renewed bout of hand-wringing about the nascent virtual world’s fate. The Wall Street Journal dubbed it the “Meh-taverse.” We’ve covered the metaverse winter here in DFD, as the economic crunch facing the tech sector has led to tough layoffs at Meta, Microsoft and other firms that were leading the charge into VR. In the short term, it’s not surprising that the capital-intensive project of building an entirely new computing platform from the ground up — and one that requires inelegant, expensive new hardware to boot — was bound to take a major hit. But is it really so “meh?” There’s a case that the pullback by corporate giants could have the opposite effect. Assuming that some kind of 3D internet is developing (which it is already), it might ultimately owe its widespread adoption to the kind of grassroots enthusiasm that drives most new technologies’ adoptions (like the internet itself!) One of these more grassroots uses, as we have written, is gaming. In an interview with The Verge last week, Epic Games CEO and founder Tim Sweeney doubled down on his vision of an interoperable metaverse, one where users can freely port their virtual identity across different companies’ 3D worlds. He argued that beyond the up-and-down headline hype, the slow, grinding process of building a real shared digital infrastructure for it is underway. “There were a bunch of different networks, a bunch of different network protocols, and over time, they moved away from the proprietary ones to standard ones… We don’t see this as replacing today’s game companies’ ecosystems with new ones but enabling everybody to go to a much more connected future,” Sweeney said. As that happens, the rule-setting contest is also well underway. As of right now that’s all happening under the penumbra of groups like the Metaverse Standards Forum, launched last year to establish communication around potential technical standards for a 3D internet and including heavyweights like Epic, Meta and Nvidia. The XR Association has begun to throw its not-inconsiderable weight around on the Hill, helping enshrine “immersive technology” as one of the “key focus areas” in last year’s CHIPS and Science Act. And the European Commission is already running a research initiative to explore the metaverse’s potential regulatory frontiers. As all this early dialogue and position-jockeying takes place, that means there are real stakes for the companies involved in the nuts-and-bolts building of the metaverse. When it comes to the big corporate players, there’s also another way to look at the recent news. When companies like Disney shutter their official “metaverse division,” that doesn’t mean they’ve abandoned the technology altogether, but simply pivoted to using it a different way. “Disney’s parks have been deploying [augmented reality] and [location-based entertainment] experiences for a few years,” Matthew Ball, author of “The Metaverse: And How It Will Revolutionize Everything,” told me via Twitter after that news broke. “We know the Marvel and Star Wars seasons in Fortnite, which were done in collaboration with Marvel Studios and LucasFilm, predate Disney’s metaverse division and are Fortnite’s most successful IP integrations… We also know [CEO Bob] Iger is personally interested in metaverse avatars, where Disney’s IP will doubtlessly lead.” Rather than push into the metaverse, giants like Disney might be just as comfortable letting it come to them. (Ball also noted that Disney’s Pixar created the so-called “HTML of the metaverse,” and Industrial Light and Magic remains the world’s leader in visual rendering.) The technical underpinnings of the metaverse are being driven by devoted techies, but its main attractions might still end up being plenty familiar to the “casual users” among us. Yonatan Raz-Fridman, co-founder and CEO of the Roblox-focused gaming company Supersocial, saw it similarly when I spoke with him this morning: “With a company like Disney, and definitely with Iger, they understand there are fundamental shifts happening with these emerging technologies,” he told me. “They’re just going to be more thoughtful and strategic on what that means over the next 10 or 20 years, versus doubling down on any new tech buzzword that comes along.” With apologies to the chief metaverse officers whose spines that might send a chill down, that could mean a mass retrenching toward “core strengths” for companies that went out on a limb during more robust economic times. And for companies whose entire raison d’etre is building that virtual world, work continues apace on the unpredictable hit games, weird AI integrations, and wonky digital scaffolding that will make it actually functional and livable.   A message from TikTok: TikTok is building systems tailor-made to address concerns around data security. What’s more, these systems will be managed by a U.S.-based team specifically tasked with managing all access to U.S. user data and securing the TikTok platform. It’s part of TikTok’s commitment to securing personal data while still giving the global TikTok experience people know and love. Learn more at http://usds.TikTok.com.   not too big to fail Security guards let individuals enter the Silicon Valley Bank's headquarters in Santa Clara, Calif., March 13, 2023. When two tech-linked U.S. banks failed this month, the investors who lost millions included public-sector pension funds responsible for ensuring the retirements of teachers, firefighters and other government workers. | Benjamin Fanjoy/AP Photo POLITICO’s Morning Money took a closer look today at how the fast-and-loose venture capital ecosystem helped spark the Silicon Valley Bank collapse. Taking the occasion of Sen. J.D. Vance (R-Ohio) — a former VC himself — putting the bank on blast during a hearing Tuesday, POLITICO’s Sam Sutton described how SVB’s unusual level of exposure to venture-backed businesses made the bank especially vulnerable to the macroeconomic forces that pushed it over the edge. “Most venture-backed businesses fail — sometimes even after funding rounds that pump their valuations, at least on paper, into the billions,” Sam wrote. “If the value of those shares goes 'poof' — which becomes more likely as interest rates rise and investor appetite for venture diminishes — those loans can turn into a problem.” Tyler Gellasch, a former SEC official who now runs the investor advocacy group Healthy Markets Association, told him that “It’s clear that Silicon Valley Bank was extraordinarily unique in its willingness to offer custom tailored solutions for entrepreneurs to essentially take advantage of their enormous private valuations without having to affirmatively cash out.”   A message from TikTok:   the u.k.'s middle way Having gone its own way from the European Union, the U.K. is also staking out its own regulatory approach to AI. In a policy paper published today by the country’s Department of Science, Innovation, and Technology, that department’s secretary Michelle Donelan describes a “flexible” approach somewhere between the EU’s formidable AI Act and the U.S.’ more hands-off approach. “Initially, we do not intend to introduce new legislation,” Donelan writes. “By rushing to legislate too early, we would risk placing undue burdens on businesses. But alongside empowering regulators to take a lead, we are also setting expectations.” What exactly are those expectations? The five principles the paper lays out as its foundation will be pretty familiar to anyone who’s been following standards-setting for AI across the globe: “Safety, security and robustness, Appropriate transparency and explainability, Fairness, Accountability and governance,” and “Contestability and redress.” More notable is the country’s stated, two-step plan to implement them: First in a non-statutory manner through existing agencies, then after a non-specified feedback period, Parliament’s “introducing a statutory duty on regulators requiring them to have due regard to the principles.”   GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat.     tweet of the day the future in 5 links AI is already transforming the world of campaign emails. The run on SVB bubbled up in private VC chats before social media. Google’s Bard chatbot is boring on purpose. A massive group of skittish notables is asking for an AI development pause. Why did so many people fall for the fake puffy-coat Pope photo? Stay in touch with the whole team: Ben Schreckinger (bschreckinger@politico.com); Derek Robertson (drobertson@politico.com); Mohar Chatterjee (mchatterjee@politico.com); Steve Heuser (sheuser@politico.com); and Benton Ives (bives@politico.com). Follow us @DigitalFuture on Twitter. If you’ve had this newsletter forwarded to you, you can sign up and read our mission statement at the links provided.   A message from TikTok: TikTok has partnered with a trusted, third-party U.S. cloud provider to keep all U.S. user data here on American soil. These are just some of the serious operational changes and investments TikTok has undertaken to ensure layers of protection and oversight. They’re also a clear example of our commitment to protecting both personal data and the platform's integrity, while still allowing people to have the global experience they know and love. Learn more at http://usds.TikTok.com.     JOIN POLITICO ON 4/5 FOR THE 2023 RECAST POWER LIST: America’s demographics and power dynamics are changing — and POLITICO is recasting how it covers the intersection of race, identity, politics and policy. Join us for a conversation on the themes of the 2023 Recast Power List that will examine America’s decision-making tables, who gets to sit at them, and the challenges that still need to be addressed. REGISTER HERE.       Follow us on Twitter Ben Schreckinger @SchreckReports Derek Robertson @afternoondelete Steve Heuser @sfheuser Benton Ives @BentonIves   Follow us

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