Will the Metaverse Be Worth the Hype?

From buying real estate to visiting your favorite international destination, there's no shortage of things that people could see and do in the metaverse in the years ahead. But will the metaverse really live up to enthusiasts' expectations? In this segment of Backstage Pass, recorded on Jan. 10, Fool contributors Rachel Warren, Jason Hall, and Fool Canada analyst Jim Gillies discuss. 

Rachel Warren: When I was thinking about this, I found this article on NBC and they were talking about something called Web3. It said, "What is Web3? It's Silicon Valley's latest identity crisis. It's on the tip of tongues these days in Silicon Valley, bright engineers are leaving cushy jobs at companies such as Facebook [Meta Platforms] to get in early." The article says "Web 3, it's short for Web 3.0, it's a name spelled with a capital W, but usually not." We have Web 1.0, we had Web 2.0 with the rise of platforms like Facebook.

"Most what mentions of Web3 treated as an umbrella term, a vision of the future of the internet, where ownership and power are more widely distributed. This vision is based on transparent digital ledgers known as blockchains, and it's supposes that big tech will be rivaled by more democratic forms of internet governance where you the user will get a say, maybe even vote."

We're seeing all of these leaders from some of these big tech companies like Facebook rushing to companies that are at the forefront of Web3. I think the appeal of the metaverse, it democratizes experience, it democratizes investing in some ways. Some of the companies we're seeing in this area, I think that's the biggest draw.

I saw another article in the New York Post saying "metaverse clothing, travel and plastic surgery, experts predict what life will look like by 2030."

Essentially the article's saying, by 2030 you could visit the Parthenon in Athens, but you're sitting at home and you're just have maybe your VR headset on and you're visiting through the metaverse.

I think my biggest concern here is not so much the staying power it will have, but more will people start to forfeit real experiences in favor of virtual ones and miss out on, I think, these things that make life really great.

I love that technology it can bring these experiences maybe to people that wouldn't have the opportunity to go to some of these places or experience some of these things. But what if we end up being more focused on what's virtual and not what's real?

Jason Hall: I've seen in some of those dystopian movies. [laughs]

Warren: That's my long answer to that. But I think it's here to stay, but I'm curious how much good it is?

Hall: What are the implications? I'm with you there. Jim, I'm curious to hear what you think here.

Jim Gillies: Couple of thoughts. First, I'm thrilled to know that we apparently need to shorten Web 3.0 down to Web3.

Hall: We lost the decimal point, zero, and the space.

Jim Gillies: I like what Rachel said about this could just be basically investors chasing the latest shiny thing, mainly because I like confirmation bias. [laughs]

I guess this is investors chasing the latest shiny thing. Look, I coined a saying that I'm going to keep on repeating until I hear somebody echo it back at me because I'm not sad and pathetic.

But I generally believe in the concept that the only thing faster than change is investors' expectations of change.

Hall: Totally.

Gillies: Investors have a wonderfully long history of chasing the next big shiny thing.

You get curmudgeons like me who say, "Hey, there's no cash flow, hey, this is horrifically overvalued." What exactly is this? Can you even define it? I get a lot of blank stares back, which I'm used to. I fully admit the problem is probably me.

Hall: Jim, the problem is that you continue to let math get in the way of a good story.

Gillies: I absolutely do. [laughs] Two engineering degrees will do that to your right? But no, that's the thing. Metaverse, this is probably the first time I've actually had that word escape my lips.

Hall: Mission accomplished, Rachel.

Gillies: [laughs] We're really talking about it because Facebook, the android that runs and decided to change his name to Meta and now we're going to run with that. That's cool and that's great. I think there's a really strong case for valuing Facebook as a cash flow investment today.

Yes, I used the term Facebook because I'm old and I'm not going to change using the name. The younger generation stays away from Facebook but my kid is addicted to Instagram. Instagram's owned by who again?

Hall: Meta.

Gillies: Yeah, owned by Meta, thank you. I look at the various scans. We'll move onto something else in a year or two from now. I am a little bit fearful that Rachel's predictions going to come true [laughs] and that we're all going to be locked down into.

I'm in Ontario, we're locked down again so this is why I'm going full mountain man look until we're not locked down anymore.

I think we might very well be visiting the Parthenon and other places virtually because we have to, and maybe that's been the grand plan for all the conspiracy theorists out there.

But really, I think you look at investments based on their valuation and cash flow potentials and potential returns.

I don't think you do it because of potential overarching excitement in these guys, and I am terrible at predicting what's going to be cool and hip anyways, maybe this is just me just protecting my own ego.