Transcript
Speaker: This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
Speaker: Join us as we hear from industry leaders and HSBC experts on the latest insights and opportunities for your business.
Speaker: Thank you for listening.
Speaker: Welcome everyone to this HSBC Global Research Live Insights.
Speaker: I'm Piers Butler, Head of Global Research Direct, and I'll be your host today.
Speaker: So every month we interview one of our analysts live to answer your questions, covering everything from the economy through to ESG.
Speaker: And today we're going to be looking at one of our key global themes, disruptive technologies, and more specifically, the metaverse.
Speaker: And to help me do this, I'm delighted to welcome my friend and colleague, Davy Jost.
Speaker: Davy is a thematic analyst and lead of the disruptive technology theme.
Speaker: Davy, welcome.
Speaker: Thank you for having me here.
Speaker: So Davy, you and I have been talking about this theme for quite a while.
Speaker: In fact, ever since you wrote a report back in 2016 entitled The Virtual Reality Age Begins.
Speaker: So six years later, can we say we are at the end of the beginning?
Speaker: Absolutely, PS.
Speaker: No, exactly.
Speaker: I remember writing this many, many years ago about the virtual reality age beginning.
Speaker: So now we've written a new book called the metaverse age.
Speaker: So what's happened before was virtual reality technology was a very specific niche technology, but now it's become a more broader based thing called the phrase called the metaverse.
Speaker: And what that effectively means is it's kind of an array of immersive technologies all the way from 2D screens to fully immersive 3D.
Speaker: So the expansion of the terminology of virtual reality has expanded into the subset of the world of what we call the metaverse.
Speaker: So you and I in the run up to this live event have been sharing quite a few articles.
Speaker: It seems to be really a trending topic.
Speaker: And obviously there are a lot of enthusiasts about virtual reality and augmented reality.
Speaker: One of the things we were looking at was there are skeptics.
Speaker: Some people are saying it's all just about gaming, wearing a heavy headset is not really a very viable proposition.
Speaker: What's your answer to that?
Speaker: So I think with any sort of technology cycle, PS, it all starts very early on.
Speaker: So for example, if you look at the first sort of computers back in the early 80s, maybe late 70s, or if you look at the early smartphones in the 90s, even 80s, it starts off very big, bulky, expensive,
Speaker: with all early adopters.
Speaker: And maybe that was where virtual reality was six, seven years ago.
Speaker: But now, as progress, innovation happens, the technology stack becomes smaller, lighter, and cheaper.
Speaker: For example, VR headsets about six, seven years ago would cost you around roughly $2,000 to start up.
Speaker: That would include your $1,000 headset.
Speaker: plus your $1,000 PC plugged into the main socket.
Speaker: But now, for example, you can buy, you know, through the shops, you can buy a virtual reality headset costing around $299 and it would weigh only between 300 to 500 grams.
Speaker: And of course, this is not the end.
Speaker: It's going to continue improving as we make breakthroughs in technologies.
Speaker: In fact, one of the latest articles we were looking at was this article in the New York Times about Apple getting involved in the space and, in fact, trying to bridge this divide between
Speaker: full virtual reality and augmented reality.
Speaker: Can you just explain a little more about that?
Speaker: Absolutely.
Speaker: So within the metaverse itself, there are different ways to display the technologies.
Speaker: One is sort of your 2D screens, such as mobile phones, tablets, and PCs.
Speaker: But the more immersive way to enter the metaverse will be through things like virtual reality and augmented reality.
Speaker: So virtual reality means you wear a headset, which basically takes over your visual system completely.
Speaker: So you can't see the real world at all.
Speaker: But what augmented reality is, it is a kind of a pair of headset or a pair of glasses, like a glasses you could wear, and it sort of has digital elements in your view.
Speaker: So which means you can be aware of your surroundings, but at the same time have digital elements.
Speaker: For example, early versions of this is, for example, you have
Speaker: filters on your smartphone, whether you use Instagram or Snapchat or whatever you use, you can see sort of the filters on that.
Speaker: And so imagine that being projected on your glasses.
Speaker: So that's the primary difference between augmented reality PS and full virtual reality PS.
Speaker: So let's come back to that sort of skeptical view about virtual reality and the fact that it's all about gaming.
Speaker: But in fact, isn't gaming the sort of the sort of pathfinder?
Speaker: And have we have we sort of seen in gaming the development of money in the metaverse?
Speaker: Can you explain the significance of that?
Speaker: Yeah, so, you know, for example, the reason people call gaming platforms an early version of the metaverse is because of multiple things.
Speaker: So if you think about the fully immersive VR, it's got to be sort of 3D graphics based.
Speaker: And if you look at it, what's 3D graphics based?
Speaker: Computer games and video games, right?
Speaker: So it's a case of just putting that software, or it's a bit more technical than that, putting the software into the headset or the augmented reality headset.
Speaker: So that's kind of the premise of that, why people call that.
Speaker: The other thing is there's a social element within the metaverse, right?
Speaker: And that has already been happening in the gaming sector for many, many years now.
Speaker: And one of the other things that's been happening is there's a thriving commerce economy
Speaker: happening within gaming systems.
Speaker: People buying widgets, you know, avatar skins and items so they're creators and there are consumers.
Speaker: And so this is kind of thing where we think the metaverse is going.
Speaker: Just like you make real products in the real world and you sell, you can do that in the metaverse.
Speaker: And that, you know, could potentially happen through things like NFTs, which is sort of digital items which you can own,
Speaker: or sell or create that is backed by blockchain technology.
Speaker: So that's the kind of broad definition of Piers.
Speaker: Okay, the questions are starting to come through.
Speaker: So here we go.
Speaker: Will esports and digital TC entertainment put more content into the metaverse?
Speaker: So what was the question again, Piers?
Speaker: Will?
Speaker: So will esports and digital TC entertainment put more content into the metaverse?
Speaker: Absolutely.
Speaker: So, you know, e-sports and digital content is part of the metaverse.
Speaker: So part of our broader definition of the metaverse includes all things like digital content, right?
Speaker: We talk about music, movies, games, all those things that are part of the metaverse.
Speaker: Because if you think about it,
Speaker: Within the metaverse, content will be king or queen, right?
Speaker: It's going to be important.
Speaker: So all these things that we already create with an eSports and digital download content will be transferred to the metaverse itself.
Speaker: As in, there'll be some content people need to... People will be using the metaverse to experience something.
Speaker: And what is that thing?
Speaker: And that is all the digital content we've created in 3D and more.
Speaker: So when we talked about this in the concept of the killer app, the question is what will it take and how long will it take to have mass adoption of the metaverse?
Speaker: I know that in your research reports, you made a number of long term sort of forecasts about it.
Speaker: And there's another question that ties into that is what are the daily applications that a metaverse can help fix bridge?
Speaker: I guess it's kind of saying everybody can recognize the metaverse and gaming
Speaker: When do we get this crossover point where it starts to become more part of our daily lives?
Speaker: Yeah, that's an excellent question, Pierre.
Speaker: So the point is, you know, whenever new technology comes along, people always talk about what is the killer app.
Speaker: So in terms of the full immersive multipart, whether it's augmented reality or virtual reality, what's the difference between
Speaker: using Zoom to interface with someone who are seeing the full metaverse.
Speaker: So one thing you could say is that when we're using Zoom, we can sort of lovingly call it pancake technology, where we're sort of flat screen.
Speaker: But what VR and augmented reality metaverse does, it allows you to feel like you are in a different place.
Speaker: You're basically in existing in us or transported to a different world, whatever that world is.
Speaker: So that's the feeling of presence.
Speaker: You actually feel like you are with somebody there.
Speaker: So that's one of the key things that differentiates the 2D screens we have now and the metaverses.
Speaker: So in terms of that's the premise of the killer app, maybe.
Speaker: So in terms of when does it go mainstream?
Speaker: So at the moment, we have maybe like single-digit or double-digit millions of VR headsets in circulation.
Speaker: And by the end of the decade, we have estimated around 700 million headsets in circulation globally.
Speaker: So yeah, for example, Meta, which is run by Mark Zuckerberg, he sort of estimated that they would like to get a billion users into the virtual reality metaverse.
Speaker: at some point.
Speaker: So it's still a long way off, but you know, we'll have incremental improvements over the years in terms of compelling reasons why people should spend time in the metaverse.
Speaker: And so the more content you have, the more reasons people have to go into the metaverse.
Speaker: Some great questions coming through, so keep them coming.
Speaker: Thank you very much.
Speaker: We're hearing about crazy prices for metaverse properties and for skins, whatever that is.
Speaker: I think I do know what that is.
Speaker: Do these hold real value?
Speaker: And this is the important question.
Speaker: Would there be a risk of one platform becoming the main platform and leaving the rest in the dust, like DVD versus Laserdisc?
Speaker: So that's a really good and really tough question.
Speaker: So when it comes to digital goods, for example, if you look at the, so basically when you think about technology, just look at what's happened in the past.
Speaker: So history isn't a map, but it's a guide to what could happen in the future as well.
Speaker: For example, if you think about when we had physical media, VHS, DVDs, and things like that, and Blu-ray.
Speaker: So you would have to go to the physical shop, you'd buy it, and then you bring it back.
Speaker: But then what happened is over the last decade or so, physical media
Speaker: has been replaced by digital streaming.
Speaker: So you no longer own physical DVDs or even books, you can sort of stream them online.
Speaker: So that means we still value digital items, right?
Speaker: We play things like Netflix, Amazon films or Disney plus or whatever we go out by.
Speaker: For example, in the metaverse, when you have digital items, they are replacing things like possibly.
Speaker: So in the metaverse, our real clothes may not be very useful, but our digital skins is the one that we take pride upon, how our avatars are represented.
Speaker: So that can have value within the metaverse.
Speaker: So I don't know about pricing or how the pricing works.
Speaker: That's all supply and demand, right?
Speaker: and branding.
Speaker: But in terms of digital goods, yes, if you look at the past, digital goods have had value and digital goods will probably likely to have value within the metaverse, just like we have for digital content in real life today, Pierce.
Speaker: The questions are coming thick and fast.
Speaker: It's a bit like the metaverse, it's sort of exploding now, but where do we expect intersection of banking and the metaverse?
Speaker: Well, that's a really interesting question.
Speaker: So, for example, if you think about
Speaker: the late 90s, right, when the internet was taking off, you know, what was the reason for a bank or any company to have a.com domain name?
Speaker: Nobody knew, but companies, you know, would buy whatever company name.com.
Speaker: But, you know, eventually, if you think about how banking happened, it's normally a physical thing, right?
Speaker: You go to a branch, you take out a loan, you take out a mortgage, whatever it is.
Speaker: But now, as we know, we can do all that things on the web, and now we can do it even on apps.
Speaker: So think about if you're living in this kind of metaverse world, maybe these companies can offer the similar services, but in a more immersive world.
Speaker: So imagine you are buying a property, real estate, for example.
Speaker: Maybe the company providing you the money can show you what the apartment or house
Speaker: or property looks like through virtual reality, you can walk in and have a look.
Speaker: So these kind of companies already exist.
Speaker: So there are companies that basically have virtualized the homes and send the headset to clients.
Speaker: So in the future, you could potentially look at these houses and visit it virtually before you basically step foot on a plane or a car or your bicycle or walk to the property.
Speaker: So these are some of the ways that can happen to us.
Speaker: Okay, here's a good question that sort of is bringing us back down to earth after all this enthusiasm.
Speaker: Hey David, given the bad press around the metaverse and the inclusion of commerce tokenization, what are your thoughts around regulation and what are you seeing beginning to transpire?
Speaker: So regulation is a very hot topic right up here because, you know, technology has embedded itself into all aspects of life, right?
Speaker: Before technology, if you remember back in the 80s and 90s, it was kind of a niche maybe, occupied some time, some space of your time.
Speaker: But now, you know, that incredible amount of data
Speaker: companies have about your life and what they can know about you has increased exponentially.
Speaker: And so because of that, lots of issues to do with privacy and data, you know, data understanding comes into play.
Speaker: For example, in around the world, governments have put increasingly sort of regulatory oversight in these technology domains, for example.
Speaker: GDPR in the UK, you've got data restriction laws in the US.
Speaker: So the metaverse is not going to be immune to that piece.
Speaker: And so, as you know, for example, in
Speaker: when we wrote the report on the metaverse, on the virtual reality, a number of years ago, I mean, there were senators in the US already writing to Facebook asking, okay, you're gonna have this virtual reality headset, what are you gonna do with the data?
Speaker: So already people are asking questions about data privacy.
Speaker: And so with the metaverse,
Speaker: I think it's going to be an ongoing burning question.
Speaker: How do you regulate the metaverse environment?
Speaker: For example, some of our analysts in Asia have said that possibly in Asia, the regulations may be easier to enable the metaverse because many parts of the internet infrastructure is already highly regulated.
Speaker: whereas Europe and the US, it's been light touch because, you know, if you think about the early 90s when the internet was first deregulated by the Clinton administration, the reason the internet has grown so fast is because it's been light touch regulation.
Speaker: But as we've seen, the internet is all-encompassing in all our lives today.
Speaker: And so we've gone from very light touch regulation to now more understanding the importance data and technology plays in our lives and how that should have some regulatory oversight.
Speaker: What about, and you've written separately on this, but what about cybersecurity in the context of the metaverse?
Speaker: Absolutely.
Speaker: So, Piers, what we've seen over the pandemic is the amount of... because people have been working from home and now basically you're using bring your own devices and what that is growing.
Speaker: Criminals have moved online because this is where the eyeballs are.
Speaker: This is where all the value is kept, right?
Speaker: So we've seen an increase in ransomware globally.
Speaker: And so the point is, if the metaverse exists on the Internet, and as long as we know it will exist on the Internet, so, you know, cybercrime and cybersecurity will be equally important within the metaverse because it exists on the Internet by definition.
Speaker: A question that is sort of linked initially to tourism, but perhaps broader, which is, and it is obviously that your theme, which is disruptive technologies, what industries is the metaverse likely to disrupt?
Speaker: Okay, this is another excellent question.
Speaker: We have no crystal ball, but funnily enough, PS, we did write a report a number of years ago called Transport Shock, Autonomous Today, Virtual Tomorrow.
Speaker: In it, we sort of did a sort of blue sky thinking about what areas, what sectors in society would be disrupted by the advent of, for example, the metaverse or virtual reality.
Speaker: And so, for example, you know, in a way it's already materialized, for example, because of the pandemic, we are all sort of embraced the Zoomification of society.
Speaker: So which means rather than having to travel for certain meetings, we have more willing to do it over Zoom.
Speaker: Of course, Zoom technologies have existed before, but the pandemic sort of accelerated the adoption of that, right?
Speaker: Our sort of culture of embracing that.
Speaker: So virtual reality means, you know, imagine that, but sort of slightly accelerated because it allows you to be more and more immersive.
Speaker: So, you know, it doesn't necessarily mean you will not go to your, you know, book your holiday flights, right?
Speaker: That's very different.
Speaker: But for, you know, for a 20-minute meeting, you would have to travel two or three hours.
Speaker: You'd have to rethink that meeting.
Speaker: Oh, let me do it over Zoom.
Speaker: But in the future, you can do it over the metaverse as well, Piers.
Speaker: And it hasn't come to me in the questions, but I'm going to abuse of my privilege as the host to ask you the question anyway, which is the ESG aspect of the metaverse.
Speaker: I guess there's a positive side, which is in a way people will perhaps travel less and therefore there's less of a carbon footprint associated with that travel.
Speaker: But to power the metaverse, is there a negative ESG consequence?
Speaker: No, 100%, Piers, it's a very good question.
Speaker: And so in terms of the traveling, for example, Microsoft held an education conference in their platform called All Space VR during the pandemic because of restrictions.
Speaker: And what they said was that because of holding it in the metaverse, I think the estimate is unlike,
Speaker: a couple of million driven miles were taken off the road.
Speaker: So that's obviously positive for road traffic and road pollution and all that kind of stuff.
Speaker: But on the other side, the metaverse uses sort of high resolution graphics being rendered.
Speaker: I don't know whether it's 190 to 120 frames per second or whatever it is.
Speaker: And that is obviously connected to data centers.
Speaker: So already we've seen sort of stats of things like, okay, an hour of streaming consumes this amount of carbon or this amount of energy, right?
Speaker: So if you imagine the data being multiplied many fold for sort of full immersive metaverses, that's going to put pressure on sort of data centers and energy demand.
Speaker: In fact, before the pandemic, we actually did a study looking into this.
Speaker: And sort of at the time we estimated that if there are no technological breakthroughs in data center energy efficiency, which obviously there could be, we estimate in the worst case scenario, by the end of this decade, 20% of global power could be utilized, could be used by digitization, which includes things like metaverse and VR and things like cryptocurrencies.
Speaker: So yeah, that is a very big ESD issue.
Speaker: A fun question.
Speaker: And having read the book and watched the movie, I'm going to ask you, it's how far are we from starring in our own Ready Player One?
Speaker: I mean, obviously, it's a Spielberg film and perhaps some of you have read the book, but it's all about, you know, a whole story that takes place in virtual reality.
Speaker: I mean, how far do you think, how far away is that from happening?
Speaker: So, you know, it's funny when I was watching the movie many years ago, in some sense, we're kind of already there in terms of what it's capable of, because if you think about the headsets in the Ready Player One Steven Spielberg movie, the headsets are bigger than the headsets we have today.
Speaker: In some sense, it's full factor.
Speaker: We already get there.
Speaker: But in terms of full immersion, the movie is obviously much, much better.
Speaker: But yeah, I'm guessing, for example, in the next decade, you'll see lots of exciting sort of metaverses created and then, you know, eventually to look like that kind of world.
Speaker: I know in the film he has a headset and he's walking on a treadmill.
Speaker: You know, I used to be terrified that he'd fall off the treadmill.
Speaker: But anyway, it's like, you know, yes, as you say, the headsets are actually definitely smaller now.
Speaker: Great question here on quantum computing.
Speaker: Will powerful quantum computing be the future of the immersive metaverse?
Speaker: And and it's something that you have written about brain to computer interfaces in a way where we eventually dispense from headsets and be connected directly into our brains.
Speaker: Yeah, that's a beautiful futuristic question.
Speaker: In terms of quantum computing, this is exactly one of the things we hypothesized that essentially if you're having computer graphics rendering these immersive worlds, so imagine a computer that can do faster calculations, quicker calculations, and imagine that it's quantum-based computing, right?
Speaker: It can do computation which traditional computers can't do, which would mean, in theory, you could make
Speaker: the metaverse simulation look indistinguishable from real life.
Speaker: And then obviously, if that is connected directly to your brain using things like brain computer interfaces, for example, you know, Elon Musk's Neuralink or something like that, then you would basically be living in some sort of matrix type world.
Speaker: I don't know whether it's a utopia or dystopia, but, you know, science fiction definitely has a view on this.
Speaker: There was a question on health, which I overlooked.
Speaker: I'm just going to come back to it.
Speaker: What are the health effects of life in the metaverse?
Speaker: What will be the effects on eyes wearing headsets all day?
Speaker: We have blue light specs to protect it.
Speaker: Currently, one in front of the 2D flat screen.
Speaker: Has any research been done on that?
Speaker: Yeah, so no, that is a good point, you know.
Speaker: So there are no, there haven't been any extremely long-term studies on the impact of wearing goggles all day long.
Speaker: But I do know on the upside, that at the moment, these VR goggles, for example, your eyes are fixed, a vision is fixed like eight feet in front of you.
Speaker: But they are inventing lenses which basically will change as you move around in the metaverse.
Speaker: So which will mean your eyes will be able to focus short distance and long distance.
Speaker: And so there are breakthroughs coming along with lens technology, which eventually will enable you to spend all day in the metaverse.
Speaker: Now, we've only got five minutes left, everyone on the call.
Speaker: So get your questions in.
Speaker: I'll try and put them to Devi.
Speaker: Meta-economy, what will power the economy in the metaverse?
Speaker: Will it be ads?
Speaker: Will it be virtual services?
Speaker: So that's a very good question.
Speaker: You just have to look at what's happening on the internet today, right?
Speaker: We have free services, but that is backed by advertisements.
Speaker: But because of that, there's a kind of, shall we say, society doesn't necessarily agree with
Speaker: kind of how that sort of model is working.
Speaker: But the other model that exists is also we pay for services.
Speaker: So that's going to be dependent on what the consumer wants, right?
Speaker: We use the services.
Speaker: Will we want services that we pay for or will we prefer services that are free, which means we become the data?
Speaker: So that's a question for society.
Speaker: Both models will be offered to us.
Speaker: Now, a question on life in the metaverse.
Speaker: This is somebody who's really thinking big.
Speaker: Can I be present in multiple meta worlds?
Speaker: And with AI, will I be able to interact in different meta worlds at the same time?
Speaker: Wow, that's very futuristic.
Speaker: You should be writing science fiction novels now, you know.
Speaker: But no, absolutely.
Speaker: In theory, for example, if an AI was able to scan your body, it could create, you could analyze your personality, reading your emails, your Facebooks, Instagrams, and then basically pretend to be you in multiple universes.
Speaker: And then when you make a decision, it puts you in the ear, like, do you want to do this or do that?
Speaker: So absolutely, you can have multiple lives at the same time.
Speaker: Why not?
Speaker: Actually, this brings up a more serious point which you've raised, which is interoperability.
Speaker: So we have these different developers of metaverse universes
Speaker: And the real crossover will happen when they all start to inter-operate.
Speaker: Is that likely?
Speaker: You know, there was an earlier question about maybe somebody becoming a dominant player.
Speaker: Is that the way it will happen or will people kind of work together?
Speaker: Yeah, no, that's a very real question.
Speaker: For example, you know, if you buy an item in one metaverse, can you use it in another metaverse?
Speaker: At the moment, it's very difficult to do so.
Speaker: But for example, you know, leaders like Mark Zuckerberg have mentioned over the last six, seven months that, for example, the one example he gave was that if you buy a shirt in some stadium in the US, right, if you couldn't take it to another stadium and wear it,
Speaker: then the value of it is not much.
Speaker: So if you buy some item in one metaverse, you should be able to take it to another world.
Speaker: So companies are trying to work out how to do this.
Speaker: Interoperability will be paramount to the future of the metaverse.
Speaker: Now, one thing we didn't cover, and I think just as we finish, I think it'd be great to just share this with the audience, is your disruptive framework and where the metaverse kind of situates itself.
Speaker: So maybe very quickly, just give us the sort of key highlights of that.
Speaker: Yeah, so HSBC disruptive framework, we made it to show our wide stakeholders how commercial technology is.
Speaker: And today we put the metaverse technologies in kind of the real applications all the way towards kind of like the hype mania, which means that loads of companies are
Speaker: are pushing the technology as real products today.
Speaker: So it doesn't make significant amounts of revenue necessarily for all companies, but lots of companies are putting out pilots and test programs and selling actual products you can get.
Speaker: So it's not the real application.
Speaker: The final stage would be we would look for it to go into the new normal when it becomes like the internet because everybody uses it today.
Speaker: But we're a little bit far off from that normal.
Speaker: Now, a personal question maybe to finish.
Speaker: How many virtual reality headsets have you owned, Devi?
Speaker: Oh, if I said a number, I'd be too embarrassed online.
Speaker: I'm sorry.
Speaker: It's embarrassing.
Speaker: Right.
Speaker: Well, I think we're pretty much up to time.
Speaker: Thank you, everyone, for taking part and for all the many and varied questions.
Speaker: Thank you, Devi, for joining us today.
Speaker: With that, thank you very much all for joining and look forward to seeing you on the next one.
Speaker: Thank you for listening today.
Speaker: This has been HSBC Global Viewpoint, Banking and Markets.
Speaker: For more information about anything you heard in this podcast or to learn about HSBC's global services and offerings, please visit gbm.hsbc.com.
