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’¨ń–ł£ņŻ Matters Podcast

Episode 5 | How Will the Metaverse Further Transform Human Life?

A technology realist says the metaverse opens a new world of potential - and risks

We are witnessing the beginning of another information technology transformation. The infrastructure of the metaverse, though nascent, is in place: cryptocurrency, blockchain, 5G, immersive technologies like augmented reality and virtual reality and other elements of this next wave are here. The metaverse has the potential to further transform just about every aspect of human life, just as radio did a century ago, television 50 years ago and the rise of the internet 25 years ago, perhaps even more so. Why?

Because it brings with it the promise previous media technologies did not, namely, broader decentralization and the empowerment of the individual.

But it‚Äôs not without its risks, according to Ben Hoster, Director of Transformative Technologies at ’¨ń–ł£ņŻ McLennan. ‚ÄúI don't like to think of myself as a technology evangelist,‚ÄĚ he said. ‚ÄúI'm more of a technology realist.‚ÄĚ It‚Äôs a world he describes as a new era in how humans will socialize, learn, entertain and conduct business.

In Episode 5 of our ’¨ń–ł£ņŻ Matters podcast series, hosted by¬†’¨ń–ł£ņŻ McLennan Chief Public Affairs Officer Erick Gustafson, Hoster provides a candid assessment from a business perspective about the realities and risks of the metaverse.

TRANSCRIPT:

Ben Hoster:

I'm one that's amazed by technology and continually interested in where it will go next. I've spent my entire career in this space, but the story about me, that's interesting. Well, really, it's not even my story. My mother-in-law found a different path to technology. She was a refugee fleeing a war zone, and she brought with her daughters, one of which was four weeks old. And she came to this country, not really knowing where she was going to go or what she was going to do. And she was given a choice whether she wanted to move to Chicago or move to Austin. And she said, which place is warm? And so, Austin it was. She came at a very fortuitous time when Austin was becoming the Silicon Hills ‚Äď a sister of Silicon Valley and where semiconductors were a very big technology industry. She was ultimately able to work in a wafer fabrication facility. So, she worked as a wafer fab tech. What makes this story profound, at least for me, is that I see my mother-in-law come to a new country, an unfamiliar place, and she found a way to transform the lives of her and her family, getting into this first wave of technological innovation that transformed our lives and brought us the internet. And here we are now as a society at this next jumping off point into the metaverse where this is going to transform our lives in ways that are hard to predict. If I had a crystal ball, I would be able to tell you, but it's going to be a different world.

Erick Gustafson:

The story of the metaverse is just being written. It's easy to think that story is about technology and the future. That's part of it. But as Ben Hoster just conveyed, it's really about people. Ben calls himself a technology realist. He started his career as a computer engineer and was immersed in web 1.0 during the dot com boom and web 2.0 during the rise of social media. Today, he's the director of transformative technologies at ’¨ń–ł£ņŻ McLennan. And he's my guest on ’¨ń–ł£ņŻ Matters as we unpack the metaverse.¬† I'm Erick Gustafson. You might expect that we're going to ask Ben what the metaverse is, and then he'll say what it is and that's the show. But there are actually uncertainties about the metaverse. So, if you feel there are things about it¬†you don't get, there's a good chance you're not alone. In the interview we'll define terms, explore Ben's background and hear his insights on the risks in the metaverse. But the question I started with was, how can someone put forward real assets in a virtual world?

Ben Hoster:

When I think about this futuristic virtual metaverse world, the real difference between what you and I are accustomed to today and what this future state world might look like is this idea of permanence. Like, you know, we think about all of the value of data. You can back it up on hard drives. You can do other things - big data, accumulators and aggregators and how that data's used, how it's monetized, how it's packaged up and sold, and also how it's vulnerable to a cyber intrusion or a cyber event. And what usually happens in those events is that the data is still there. But it's monetized in some way, it's ransomed, it's held hostage, it's used for other purposes. The scary thing about the future, where this could go, is that now this data has a singular entity. It is one thing. It is a Bitcoin. It is an NFT attached to a valuable piece of art, which has made this one-of-a-kind or a one-of-10 or one-of-a-few. And part of that scarcity is what creates that value. But if somebody takes that from you, it's gone, you've lost everything. And there are other kinds of failure modes when they're all hosted on platforms. We've seen the market change in crypto and overnight multiple cryptocurrencies go underwater, go out of business. The same could happen for some of the major platforms as well. So, there's risk there.

Erick Gustafson:

I think if I were to buy a piece of art, or I were to have an investment, I would feel more confident in both of those things, if it was tangible and therefore, maybe protectable. When you're looking at the regulatory environment around banking or any investment that you're likely to make, it's pretty rigorous. With cryptocurrency, it's not clear what the regulatory environment is. What's missing? What needs to be strengthened and developed whether Washington, Brussels, or London, in order to make those assets feel a little bit safer for investors. I'm sure people who are developing cryptocurrencies are interested in seeing some measure of regulation grow in order to make potential investors feel more confident in the product.

Ben Hoster:

It's hard to regulate what doesn't fully exist yet. As more and more value is created in this marketplace, the need for regulation will become increasingly imperative. But even if you think about our laws in the physical world, real estate law, for example, has had to evolve with different types of models and for hundreds of years. And so, I do see there's an existing base, whether you're talking about the California consumer privacy act or the general data protection regulation, the EU has been doing a lot of work recently, and towards the end of the year, there will be an AI act that's proposed, and there's even a follow-on AI liability act. So, there's a body of regulation. You can see that that regulation has had to keep up with the trends in technology development from the time that the internet was established, and jurisdictions were set around certain things. It's one of those things that we don't know what we don't know, but we can make some pretty intelligent forecasts based on what we're seeing now in terms of web 2.0 platforms and social media and privacy concerns. And so, I think making existing regulations extensible to a metaverse world is quite important. And then recognizing that there are certainly going to be some curve balls, some gaps, especially as we start to try to wrap our minds and our business models around some of these things that are genuinely new, that have not been part of
the prior wave of internet commerce. Those instances will need specific focus because challenges will arise that we haven't thought about before.

Erick Gustafson:

As the technology evolves and the commerce that it enables also evolves, we've seen the so-called web platform 1.0 to 2.0, to now 3.0. You’ve just given an example in real estate. But what are some other examples?

Ben Hoster:

You know, one I would argue, I don't even know that we're on the cusp of web 3.0 or whether it's web 2.1. Let me try to, to give you a feel for how this evolution has worked. I mean, we're all familiar with the advents of the information superhighway and web 1.0, and we've all lived the evolution to web 2.0, which truly was transformative. And I think of web 2.0 as platforms, platforms, platforms whether it's a social media platform or e-commerce platform, but you see these massive technology organizations that aggregate large amounts of information and data and find ways to monetize it. A side effect of a lot of this data accumulation is that it's created some power disparities across the ecosystem of participants, whether it's a large video sharing or music sharing platform. When we start to think about web 3.0, and there are a lot of underlying technologies, but the real web 3.0 promise is decentralization, which theoretically could re-equilibrate this power disparity across the value chain. Now that decentralization is predicated upon certain technologies that create this notion of what I think of as distributed trust, which means we can have a contract. We can have a currency, we can have any number of things between the two of us that I don't necessarily need to know who you are, what you are. If we have an agreement around orchestrating a certain transaction, then I'm protected by some of these technologies. I can trust you without having to know exactly who you are, what you are.

Erick Gustafson:

And in the pre-internet age, I walk into a market, I'm going to buy some eggs and I hand you a scrap of paper that the government that we both live under agrees there's value in that piece of paper. And so, there's a shared assumption the gain from exchange is there. You get a dollar, I get an egg or two, whatever the number is, you move that into a digital environment, the transactions are sort of like a digital version of one that is still familiar. It's a credit card transaction, or then ultimately it becomes sort of a PayPal Venmo type thing, perhaps. And you're starting to try to take these large institutions out of the equation and make it a straight individual to individual transaction that is valid because there's a shared agreement that there's value in the cryptocurrency that's moving forward, or there is understood scarcity in the NFT that's moving between participants. Is that a fair summary of it?

Ben Hoster:

That's an excellent summary. The only thing I would add to that, Erick, is that there's now a sense of permanence, whether it's an NFT-tagged piece of artwork, a digital avatar, a virtual space, these have all been defined across the blockchain. They can be assessed, verified, audited from any number of sources. And this idea of digital permanence now exists. So, a little fun fact. If you roll it back a few generations, one in three gen Z today believe that their online identity is their most authentic self, one in three. If you look at later generations like mine, gen X, that number is like one in 10. So clearly there's a generational divide and a disparity in how much value some are already willing to place in this virtual world.

Erick Gustafson:

So, let's talk a little bit about the various terms that an individual needs to know in order to try and understand what the metaverse is and can possibly become. We've already covered a couple of them: NFTs, crypto. Blockchain is a pretty important concept since it underrides so much of it, but then there are other terms that are out there: smart contracts, XR, augmented reality, mixed reality, et cetera. What's the glossary people need?

Ben Hoster:

I think for this conversation, it's important to say there are so many technologies that are involved, you and I could talk about it for hours. So, acknowledging before I start that this is an oversimplification, let's go with that simplified view. I think about technologies in two layers, if you will. There's functional tech, which enables the types of transactions, the types of things that you would build in the metaverse and then there's immersion technologies. These technologies that bring you into the experience and make you feel the presence of the experience. And this can be all of your senses - your sight, your hearing, your feeling - with technologies that interact with your body. And so, we can step through the functional tech first. Blockchain is the most important of them, because the others are derived from blockchain. The way that I think about blockchain, just imagine when the personal computer came out in the early eighties. The first personal computer was worse at almost every single metric than the tried-and-true mainframe at the time, except for one, you could take a personal computer to your home. Blockchain is no different. Blockchain is basically a database or ledger technology that records transactions in a way that's inferior in most ways to existing technology and processes, except for one. And that one is this notion of a distributed ledger or a distributed trust. Blockchain is a digital record keeping system where information, once it's recorded, it's immutable. It can't be modified or deleted. That permanence is so critical to making digital products, whether it's a cryptocurrency or a piece of artwork or a virtual space permanent and having them be worth more money than just what you might draw on a web 2.0 platform. So blockchain is the core of that. And from blockchain, we can derive cryptocurrencies like Bitcoin, like Ethereum, and those cryptocurrencies can be used to consummate transactions in the digital space. But it's important to recognize that these aren't the end all be all way of orchestrating financial transactions. There's still traditional fiat currency and credit cards the way we've always used them. And there's an in-between state, which is a stable coin, which is pegged to a fiat currency, like the US dollar. You've mentioned NFTs or non-fungible tokens. These are essentially the Bitcoin equivalent of fixing this unique modifier to a piece of artwork, a piece of music, a piece of digital real estate, whatever that then can make that one of a kind or one of very few create some of that scarcity and allow the creator of that product to sell it for whatever folks are willing to pay for it. So that's the first layer of technology. The next is what I call these immersion technologies. So, this is augmented reality, virtual reality, mixed reality, internet of things, edge computing, artificial intelligence, and all of these technologies that can help bring you into that screen, into that virtual headset. Imagine what we could do if we all had our headsets on and how we could be engaging with one another virtually but feeling like we were actually there together.

Erick Gustafson:

Talk to me a little bit about avatars. My kids have them. I don't really understand them. Every time I
try and create one for myself, my hair doesn't look right, or it's got some goofy cartoon thing that just doesn't feel like me. And so naturally I either have no avatar or some horribly business-driven photo of myself with a suit. And it's the least authentic thing. Right. But I'm told that they're really important. Why are they, how should I be thinking about them? How should everybody else be thinking about them?

Ben Hoster:

It's funny, Erick, you and I have touched on this generational divide. It depends upon who you ask, what's important about an avatar. If you ask my son, he will say that it's absolutely about being goofy and different than who you are in the physical world. If I described his avatar to you, you'd just start laughing. I laugh just looking at it, but let's bring more of a business lens on this. I think it's a combination of a few things. It's having an avatar virtual representation of yourself and then the environment that you put that avatar in. We've all hit the pandemic fatigue zone of sitting on a zoom call with a four-by-four fishbowl of faces staring back at us. We've all attended virtual conferences and recognized that the opportunities for networking, the opportunities for real Q & A, the opportunities for having off-the-cuff conversations don't exist in those virtual environments. Or even when you're trying to manufacture them on Zoom calls, they don't work as well. It's not as seamless as showing up at South by Southwest in Austin, Texas, and being able to just organize spontaneous conversations with people at booths that you find interesting. There's something really different about taking your avatar and putting it in a virtual space where you can interact with others on whiteboards, in conference rooms, in different formats than you can just when you're confined to pointing and clicking from here to there. And there are ways, too, through mixed reality and augmented reality that you can also still interact with the physical world. You could have your hands on a keyboard typing. You could have your hand on a dry erase marker on a whiteboard still working, but everybody else, regardless of where they are, can see what you're doing. And so, I think it's that presence that really changes things, that takes things from the web 2.0 world that we've been living in for the last decades, into a new space where we can now interact with individuals, other colleagues and professionals, an ocean way in ways that bring us together and make us feel like we're actually in the same room. And that virtual presence can go even farther than just how we interact with one another. It can help us design things, think about things and build things.

Erick Gustafson:

Ben is Texan born and raised. His great, great, great grandfather was one of the first Supreme court justices of Texas, back when Texas was a country. His grandmother was the first female superintendent of schools in the state of Texas. In college he studied biochemistry, which he put to use as a chemist in the computer chip manufacturing business, working in areas like photolithography and plasma chemistry. I asked Ben how he came to Oliver Wyman, the paths that have taken him from the nuts and bolts of tech to today, advising people about cutting edge information technologies.

Ben Hoster:

It all started in semiconductors. That's where I got bit with the technology bug. I worked as a semiconductor engineer and, in the first phase of my career, I went back to school, got my MBA, and ultimately went into technology consulting. And, as you mentioned, with Oliver Wyman in our digital practice for quite some time. Very focused on family, as you can tell from some of my other examples, and I really wanted to travel less and focus on technology in a bit of a different way, which is how I landed in my role today looking across all of ’¨ń–ł£ņŻ McLennan businesses, thinking about the implications of transformative technologies, the applied research that I do, all at the intersection of risk, strategy and people. I've seen firsthand the power of technology to transform lives. And I was always wide-eyed amazed at how, back then, 60 million-plus transistors could fit on a small piece of silicon. And now that number has changed orders, a magnitude over. And these technologies are now enabling incredible use cases or business models that I could have never, none of us could have, imagined back in our analog days. And while I've seen all of this, I also, and especially when I think about the metaverse, I really try to apply a lens of realism to it. Because if we think about semiconductors, yes, it can create a lot of jobs, but sometimes those jobs have different skills. Sometimes those jobs move overseas, offshore. Yes, all of this technology creates the power to really connect with other human beings in very meaningful ways, but it also creates the power to isolate. And I really worry about what that might look like in a metaversian world. And as these technologies become essential to everything, they also mean that everything is vulnerable to cyber threats, cyber intrusion, and the like, and I think these will only become more amplified in the metaverse. And so, it's probably worth talking about those for a bit.

Erick Gustafson:

So, is the question essentially, where's the risk in this? We've talked a good bit about the strategy, looking across the core strengths of ’¨ń–ł£ņŻ McLennan, that's a pretty important part. And as the world and the business world in particular turns to new technologies, blockchain, the metaverse and the like, there are new risks. How are you thinking about the risks and what advice do you have for our listeners?

Ben Hoster:

Things can go wrong. If I really want to dive headfirst into the metaverse and get my avatar set up just the way I want and have a cryptocurrency or a digital wallet. Essentially establish a virtual me. Things can be stolen from you. If somebody finds a way to get your NFT encryption, you're done, you've just lost. If something's stolen, if something's gone, it's gone. There are other risks as well around mental wellbeing and how we spend time with our virtual selves versus our physical selves. And there's also risk for all of the technology providers, retail providers and companies, because as more and more of these stories come to be there's brand risk, there's reputational risk for not helping protect consumers and customers, there's personal data privacy risk. So, lots of things that we really have to think about in this future state world. Cyber is even more critical than you might think of it today. Today, when I think about a cyber threat, I'm usually thinking about what will be done with that information, will it be held ransom, will it be sold  and then misused with ill intent, but now the threats are multifold. So, with more technology, with edge devices, with other facets that all have to come together to make this virtual reality feel real, there are many, many more entry points, many more threat vectors, if you will, that become exposed. And back to the permanence conversation, it's no longer how my data will be used. It's when it's gone, it's gone. There's no hard drive backup that works for this. If someone steals something, you can't reproduce it. I'm not saying don't jump in with both feet. It's this balance between technology evangelism and technology realism. And I'm a realist. The same way that when the information superhighway first came out and there were all of these struggles that we were having with whether or not we felt comfortable putting our credit cards online, whether they were secure and then, again, later as platforms came out, we struggled with misinformation and disinformation. There are going to be a new set of risks in this new world. This world's coming one way or another. And it's really about how to prepare for those risks and how to manage them in a way that that's secure and healthy.

Erick Gustafson:

So, Ben, we understand a little bit more about the glossary and some of the potential future vision for a metaversian environment. How do we bring that into the business world in a really quantifiable way so that there's true investment flowing into all of these technologies, both to enhance the technologies, but also as you were mentioning a moment ago to really draw people into the metaverse, what needs to change?

Ben Hoster:

It's interesting that there's this fundamental need to balance and enable innovation while also preventing harm. Let's just take an example in real estate. Because once we start to figure out how to strike that balance, you'll start to see even more investment than you see now, and you'll see real businesses come in and start to participate in this environment. And if I think about real estate, a lot of examples in the physical world are somewhat extensible into the virtual world, property rights and transferability. What are the similarities between the two realms? You may need a virtual architect - somebody has to design the property, right? And while you might be using wood and nails in the physical world, you're using one zeros and 3D rendering in the metaverse. The key questions are still there - who owns property rights, who owns the right to the design of the property, who owns the actual product, the virtual space, what are your rights whether or not you want to rent it or what if you want to renovate or upgrade it, and how are these transferable? And the answer to that is, you know, with the NFTs that we are talking about earlier, and you can sell those when they're affixed to a certain thing, there are even more questions. Today we have fair use doctrine that governs how imagery and different types of representations of physical space are used. How does that work in the metaverse? Where does liability lie for, say, unlawful or illegal content policing on NFT sales platforms? If somebody tries to misrepresent your virtual real estate or maybe counterfeit it by changing a couple pixels, what is the legal recourse for those threats?

Erick Gustafson:

What do you think is the most important of them? What's the public policy or the legal precedent that we have to set now, get right now, in order for more investment to flow in this space?

Ben Hoster:

I think the first thing is to have a concrete starting point for regulation. There are so many unanswered questions, and they're not necessarily easily answered. But a good starting point would be, how do we treat these concepts in the physical world today? Because many, probably 75-80%, of the future cases are extensible into the metaverse. I think that's the most important first step.

Erick Gustafson:

Ben is the Director of Transformative Technologies at ’¨ń–ł£ņŻ McLennan. He spoke to us from his home
in Austin, Texas. ’¨ń–ł£ņŻ Matters is produced by ’¨ń–ł£ņŻ McLennan with Connected Social Media. I'm Erick Gustafson. Thanks for listening.