Fighting fires meant a lot of downtime for Matthew Ball. Stationed at a forward operating base in the woods for two weeks at a time, he spent long hours amongst fellow firefighters with whom he shared little in common except for their love of the outdoors. The skills he gained working towards mutual goals with those he had little else in common with has translated well to his career as a strategist and venture capitalist in the digital media and gaming industries. Ball is a managing partner of EpyllionCo, venture partner at Makers Fund, and author of the anticipated The Metaverse: And How it Will Revolutionize Everything.

Ball joined Tyler to discuss the eventual widespan transition of the population to the metaverse, the exciting implications of this interconnected network of 3D worlds for education, how the metaverse will improve dating and its impacts on sex, the happiness and career satisfaction of professional gamers, his predictions for Tyler’s most frequent uses of the metaverse, his favorite type of entrepreneur, why he has thousands of tabs open on his computer at any given moment, and more.

Watch the full conversation

Recorded July 6th, 2022

Read the full transcript

TYLER COWEN: Hello, everyone, and welcome back to Conversations with Tyler. Today I am extremely honored to be chatting with Matthew Ball. Matthew is the leading thinker on the metaverse and gaming, one of the leading thinkers on media. He started as a firefighter, I believe. He is the CEO of Epyllion, a metaverse-focused holding company. His most impressive achievement, above all, is that he somehow managed to convince The Economist, the magazine, to let him review Star Wars movies for them. Matt, welcome.

MATTHEW BALL: Thank you for the introduction. Nice to be here.

COWEN: A very simple question. I was born into a 3D world. Then, starting about the early 1990s, I spent a lot of my time trying to get into a 2D world because it was better for me to work with online. Why is reintroducing a third dimension so crucial to building out tech?

BALL: I think there are a few different ways to unpack that. First and foremost, I need to emphasize that there’s a misconception that the metaverse means that everything we do will shift to 3D. It’s quite likely that many of the tasks we perform today with devices that are decades old, that are primarily based on 2D interaction, typing in text, will continue to do so.

Much like we would recognize we’re deep into the mobile and cloud era, and yet we still use personal computers, local storage. Most data originates and terminates on a mobile device, and yet it’s transmitted through fixed-line networks. Don’t think of 3D as a replacement overall.

The second point that I’d say is from a design perspective, an intuitive interaction model. We didn’t evolve for thousands of years to tap 2D glass, to stare at a camera through a Zoom screen, not making eye contact with the recipient. Grids of apps are not an intuitive way to interact with information. So, many believe that shifting into 3D is a more natural and better way to express some information in some use cases.

The third thing that I would say is, if you take a look at the arc of what you just mentioned — the 2D internet — it began asynchronous with static files, text, no colors even. It evolved into limited imagery, colors, sound files. Today, in 2022, we embrace synchronous media — such as you and I right now — with rich interactive content.

Younger demographics engage in constant streams of near-live or live content being shared. When you take a look at the youngest demographic today — Gen Alpha and Gen Z — they’re already embracing 3D-based platforms for socializing, increasingly for education at large. When you observe that history, many — myself included — come to that conclusion.

COWEN: You have a new book out this July, The Metaverse: And How It Will Revolutionize Everything, in my opinion, the very best book on its topic. How exactly for us do you define the metaverse? Tell us what that means.

BALL: I actually try to describe the metaverse. You’ll find that a technical definition doesn’t illuminate much. If you look up the definition of the internet, it says the internet protocol suite. A description is more productive. I describe it as a massively scaled and interoperable network of 3D-rendered, real-time virtual worlds, which can be experienced persistently and synchronously by an effectively unlimited number of users, each with an individual sense of presence.

What I am effectively describing is a virtual plane parallel to the physical world, which, in addition to being able to do many things that we can’t do in the real world, replicates it. We all participate at the same time, with no cap to what we can do, and why we can do it, and how many people can participate.

COWEN: What’s the biggest disruptive innovation that we need on the interface side, if any, for the metaverse to become truly mainstream, not just stuck with the head thing on, but my aunt does the metaverse and calls me up and talks to me about it? What is missing?

BALL: This is a great question. Neal Stephenson, who, of course, coined the term metaverse in 1992, had a tweet storm on this the other day. He remarks that it was a reasonable hypothesis, as a technologist, a sci-fi writer in the late ’80s, early ’90s, to assume that 3D existence required XR, extended reality, mixed reality, virtual reality, AR headsets. But we actually have woken up in 2022 to find out hundreds of millions of people per day, billions of people per month, are interacting in virtual space using keyboards — W, A, S, D, forward, back, right, left — or a touch screen.

He makes the point that you would never have bet that, but path dependency is a thing. Humans have trained into these devices. So, we can look at extended-reality devices and assume that they’re required to extend the metaverse or 3D space to enrich some of what we do, but it’s not a technical requirement.

Instead, it’s more likely that bringing your parents or grandparents is much like the internet, which is, they come because of who is there. My parents joined Facebook, not to talk to their friends originally, but to see who my sister and I were friends with, to see our lives. That’s likely here as well.

COWEN: I have an Oculus device. The future version of that — how do we stop it from getting really hot? It’s doing a lot. Energy creates heat — basic laws of physics. How do we solve that problem?

BALL: This is fun. We’ve seen three times this decade, as in over the past two and a half years, that Facebook has kicked out its first consumer release of its augmented reality glasses. In 2015, Mark Zuckerberg said that by the end of that decade, we would replace the portable supercomputer in our pocket with wearables. This technology problem is extraordinary. You’re right. Melting your face is a problem. Battery life is a problem.

Snap Spectacles, their augmented reality devices, last 30 minutes. They augment less than 10 percent of your view at one-quarter of the resolution we think is needed and one-quarter of the frame rate. Just solving for optics and battery currently far exceeds our grasp.

Also, layering in wireless chips, having it be lightweight enough to not break your neck and be comfortable. Also, putting in complex computer processors — we’re far from that. There are many who believe that until we achieve extraordinary advances in battery life that we’re not currently on a trajectory for, and/or solve for quantum computing, the vision of AR glasses won’t happen.

COWEN: Size of device versus field of view — which is more important?

BALL: It depends on the function. If you take a look at industrial AR — the weight of the device, how form-fitting it is — less important versus the functionality. In the fall of last year, Johns Hopkins performed its first-ever live patient surgery using an AR and VR device. Those devices cost several thousand dollars. They often require a physical link to a local computer. They’re not particularly sightly, and of course, they’re cumbersome overall. That function doesn’t matter. The price point doesn’t matter.

Frankly, the fact that it can’t sustain its own battery doesn’t matter either because it’s industrial. It’s not mobile. But when you’re taking a look at consumer wearables, certainly, we assume that aesthetics are going to matter a lot. Smartwatches existed for a long time before the Apple Watch, and the Apple Watch wasn’t just a better interface. It was aesthetics as well.

COWEN: Now, you don’t know me personally, but you’ve read Marginal Revolution for quite some time, so you must know something about me. That blog is a reflection of what I actually do, believe it or not. If you had to make a bet, the metaverse gets truly excellent, what am I most likely to enjoy doing in the metaverse? If you pick right, you get a million dollars. What’s your pick? What’s your guess? I’m a weirdo. I’m not typical. It’s not going to be gaming per se.

BALL: I’m a big believer — having experienced it personally — that the fields of research and education that one struggles with — for the reasons that I mentioned earlier about 3D being a better learning environment — will be one of those places. I’m a terrible chemist. I’m good at math. I’m good at modeling. I could never rock chemistry in high school. I firmly believe that if you’re trying to learn about astrophysics; physics at a primitive level; frankly, language — that finding these created environments for those who are curious will be like nothing we’ve ever experienced before.

That may be too broad, so I’m interested to hear your answer.

COWEN: I don’t know. I would consider a trip to Mars or Antarctica — or for that matter, North Korea if they would allow it — using the metaverse, so places I can’t get to in the normal ways. Maybe, there aren’t many of them, but there are some of them. That would be my bet if it can be done.

BALL: Well, this is a fun example. I’m often asked which categories do you think are most likely to be disrupted and/or which are you personally most excited about? Education is easily that answer, and I spoke about that, and there are three reasons why. First and foremost, it’s of critical importance, not just societally, but of course to the individual. Second, we have long expected fundamental disruption in education like healthcare, but third, it hasn’t happened. You’d know this.

There are no actual measurable improvements in productivity in education since the internet came out. In fact, it’s the single highest-cost category growth in the United States, 1200 to 1400 percent at the high school, and then the secondary level. Why is that? That’s because we haven’t figured out how to teach students with fewer resources. We haven’t figured out how to teach students better with the same resources. We haven’t figured out how to teach faster.

Yet, when you talk about 3D — I’ll get to your moon point in a second — things become interesting. I learned about physics with a textbook. I watched a NASA commander drop a feather and a hammer on the moon and then watched my teacher do the same thing to start to understand how gravity works and what the differences are.

The ability to build, especially with others, a sophisticated Rube Goldberg machine on Earth, then on Mars, in the clouds of Venus and beyond, and then to modulate gravity, is fascinating to me. Dissecting a feral cat was something I got to do that was hard for many, that most people can’t afford to do, but that you can do at no marginal cost in virtual environments. In fact, you can shrink down into the Magic School Bus and travel the circulatory system.

I think we often think about this linear question of I’ll go to a place that I can’t today, but you think of it as you, Tyler, a human roughly 6 feet tall, not what would I do if I were atomic? What if I could be in a place that if I were there for half a second, I would be crushed instantaneously? What that means for education can be a lot.

COWEN: Let’s consider dating. Let’s say nothing’s going to happen, not even a goodnight kiss. What percentage value is a metaverse date compared to a real-world date in meatspace? 70 percent, 10 percent, 120 percent?

BALL: [laughs] I don’t know about the numbers. What we can say is, certainly, I think we’ve been surprised over the past 20 years by the degree of connection that’s achievable just through text on Tinder or Hinge. The idea that extending that into games, which most platforms already have . . . The new CEO of MatchGroup, which owns Tinder and Hinge, is the former COO and president of Zynga.

The idea that you can extend that to games into virtual environments, which bring a sense of safety — especially to those who don’t feel safe going on dates with those they don’t know — use that to explore exactly what you just mentioned: a shared belief, opportunity, whether that’s religious or educational. That all makes sense to me.

Do I think it’s going to supplant physical contact? Certainly not, but of course, extended reality, especially as relates to sex and other wearables and haptics, is going to be a big opportunity for these companies. And that may actually be the answer of, it’s not replacing meatspace in a bar; it might be replacing it elsewhere.

COWEN: As I read your book, The Metaverse, which again, I’ll recommend highly, I have the impression you’re pretty optimistic about interoperability within the metaverse and an ultimate lack of market power. Now, if I look around the internet — I mean, most obviously, the Apple Store but also a lot of gaming platforms — you see 30 percent fees, or something in that neighborhood, all over the place. Will the metaverse have the equivalent of a 30 percent fee? Or is it a truly competitive market where everything gets competed down to marginal cost?

BALL: I think neither/nor. I wouldn’t say that market power diffuses. There’s currently this ethos, especially in the Web3 community, that decentralization needs to win and that decentralization can win.

It’s a question of where on the spectrum are we? The early internet was obviously held back by heavy decentralization. This is one of the reasons why AOL was, for so many people, the primary onboarding experience. It was easy, cohesive, visual, vertically integrated down to the software, the browser experience, and so forth. But we believe that the last 15 years has been too centralized.

At the end of the day, no matter how decentralized the underlying protocols of the metaverse are, no matter how popular blockchains are, there are multiple forms of centralization. Habit is powerful. Brand is powerful — the associated trust, intellectual property, the fundamental feedback loops of revenue and scale that drive better product investment for more engineers.

So I struggle to imagine the future isn’t some form of today, a handful of varyingly horizontal-vertical software and hardware-based platforms that have disproportionate share and even more influence. But that doesn’t mean that they’re going to be as powerful as today.

The 30 percent fee is definitely going to come by the wayside. We see this in the EU, whose legislation dropped yesterday. I have absolute certainty that that is going to go away. The question is the timeline. A lawyer joked yesterday, Apple is going to fight the EU until the heat death of the universe, and that’s probably likely. But Apple will find other ways to control and extract, as is their profit motive.

COWEN: Where is the most likely place for that partial market power or centralization to show up? Is it in the IP rights, in the payment system, the hardware provider, a cross-platform engine, somewhere else? What’s the most likely choke point?

BALL: There seem to be two different answers to that. Number one is software distribution. This is your classic discovery and distribution of virtual experiences. Steam does that. Roblox does that. Google does that, frankly, the search engine. That gateway to virtual experiences typically affords you the opportunity to be the dominant identity system, the dominant payment system, and so on and so forth.

The other option is hardware. We can think of the metaverse as a persistent network of experiences, but as with the internet, it may exist literally and in abstraction, but you can only access it through a device. Those device operators have an ever-growing network of APIs, experiences, technologies, technical requirements, and controls through which they can shape it.

COWEN: Now, you mentioned the EU. If everything or most things are truly interoperable in that world, is there meaning to the right to be forgotten, the right to have data deleted? Because your data, your actions bleed out into all these different places along the metaverse. How do you then control it or call it back? Wouldn’t the metaverse, as you and perhaps I envision it, run counter to current EU regulation?

BALL: Not inherently, but you are getting into some of the technical challenges here. Matthew Prince, who’s the founder and CEO of Cloudflare, believes that the primary role of edge computing in the metaverse is going to be data custody, that governments are going to require important data be forever maintained and held within national borders, and that instead, what you’ll have is anonymized tokens that are basically — I’m simplifying here — be exposed when and where required, opted in by the user with a likely instant obligation by the end platform to then forget, delete, disconnect.

Now, we all know things aren’t that simple, just like deleting a file of a hard drive. It’s there until you essentially rewrite it 10 times. But we certainly see increased scrutiny and, frankly, a lot more investment in this.

Let me give you a good example. Most Oculus devices right now have two or four external-facing cameras. The Apple device, if you pay attention to rumors, says that there will be 12 across multiple spectral bands. They’re going to run constantly. They will see what your eyes don’t because your eyes are going to be obscured. Your vision’s obscured. That means — and my apologies for the example, but I think it’s helpful — if your young son or daughter was running naked through in the living room, it will capture that information, and you might never know.

The amount of investment — and I mean this sincerely — that is happening about what is instantly discarded, what is only available local, is actually pretty significant here. I do think that governments are paying a lot more attention than I expected, but certainly, as much as I hoped.

COWEN: But take email — email is fairly interoperable. You can send all sorts of people emails. If you shouted to the clouds, “Delete all the emails I’ve sent,” nothing’s really going to happen. Maybe the EU would delete the emails you sent to the EU, but it’s out there. Why won’t most of a fairly interoperable metaverse be like email, where there is no right to be forgotten, which by the way, I’m fine with, but the law is the law in the EU. And aren’t they now hindering attempts to build a workable metaverse?

BALL: I wouldn’t say that they’re hindering. I think we’re coming up against the challenges of what’s a desired outcome and what’s a technically realizable outcome. For example, the EU is mandating interoperability of messaging services. They’re saying, “iMessage, and WhatsApp, you have to interoperate.” That’s actually good. The government’s doing exactly what they’re doing with electrical ports — standardizing outlets. They’re now forcing Apple and others to use USB-C instead of Lightning — same thing. Good. Common languages for exchange of information.

The flip side of that is, the EU is also requiring it to meet the same level of encryption and security as your own self-managed system. Most technologists come to the strict answer, which is these two things are not compatible. You fundamentally can’t exchange information, least of all to multiple other parties whose servers you don’t own, with the same level of security. So, we’re seeing some of these tensions right now.

COWEN: Now, I’ve known a few people who don’t have email and don’t have any plausible social media substitute, but it’s really very few people at this point, especially in wealthier countries. What do you think is the most likely year where the same will be true for the metaverse? Like, yeah, some people aren’t in it, but you more or less have to be in it to be doing things. What’s your point estimate?

BALL: I think the more important thing to observe is that they are on the internet. They’re just not actively on it. When you walk into most buildings today, of course, closed-circuit camera television is not working that way anymore — it’s actually on IP. When you badge into a building, your passcode authentication is over IP. The point-of-sale terminal is on the internet. Of course, most things that you do now require some form of digital identity, whether you manage it or not.

This is important because there are many who believe that (a) they’re never going to want to play a game, (b) they’re never going to be interested in a VR headset, © they can’t see the practical applications of the metaverse, but most of it’s going to be behind the scenes. The Hong Kong international airport is now a real-time 3D simulation that is used to shape where you are in the airport. It’s tracking you in real-time. So, that answer is actually 2020 if you went through that airport.

COWEN: But most people don’t go through that airport. The world as a whole, the suburban housewife in southern Ohio, who was once the median voter — when will she just clearly be in the metaverse in a self-conscious way? If you asked her, “Do you have email?” she would say yes. “Are you in the metaverse?” She would say yes. Is that 2080? Is that 2040?

BALL: The median person, I would kick this out more than 15 years. But I will say one of the easy indicators that we can see, without conflating Roblox to the internet — because that would be like saying AOL is the internet — three-quarters of kids in the United States, UK, Canada, New Zealand, Australia, three-quarters between the ages of 9 and 12 use Roblox, a single metaverse-style platform — only organized around consumer leisure — regularly. That is actually just succession, generationally.

COWEN: A few questions about gaming. You must know plenty of gamers. Just observationally, how happy do you think professional gamers are?

BALL: Professional gamers are relatively few. The average income is not particularly high. The number of employees is not very high, but I’ll tell you, most of them treat it like a job. It’s hard. Ninja, for example, used to stream 8 to 10 hours per day, 6 days a week on Twitch. If he stopped streaming for 48 hours, he’d lose tens of thousands of subscribers. He’d see, essentially, minute-by-minute income drops.

Counter-strike players, I’ve seen, will sit in a room for five hours doing drills, not unlike Ronaldo on a soccer pitch. They will constantly turn virtual corners. Then, in milliseconds, shoot with a mouse a specific brick on a wall, 12 feet high, and they will just do drills over and over, incredibly intensive. Are they happy? Well, if they can make ends meet, and they’re pleased with their performance, and they’re happy they’re doing what they’re doing, yes. But it’s a toll, like any professional athlete.

COWEN: Holding real income constant, what’s the number of hours a day, say, for five, six days a week, that you feel maximizes the happiness part of being part of gaming — metaverse, internet, whatever is going on at the moment. Like Nakamura, the chess player — he streams an incredible number of hours, probably more than he wants to, but yes, the income is important, but again, holding his income constant. At what number of streaming hours are these people most happy? Is it three or four? Or they love it at the ninth hour?

BALL: Most of them will say that, ideally, they would do two to three hours, four to five days a week. I think the big hope — and we’re seeing this with a lot of new technologies — is that it’s still a broadcast model, and it’s still on time delay, which is to say, your audience is responding to what you did 5 to 30 seconds ago, and they have no real interaction beyond sending an emoji and cheering you on, perhaps voting on the next game that you play.

There’s some hope that when you start to engage the audience more directly, that that mixes up the variety. Also creates more fun for the individual streamer who is otherwise essentially alone, talking to themselves, reading a scroll.

COWEN: A lot of people do a lot of gaming, as you’ve stressed. Gaming means stories, often wonderful, compelling stories in the most successful games. Politically, how do you feel gaming shapes people’s attitudes? They’re competing a lot more. They’re in environments that are, at least in a micro sense, quite meritocratic. How does it shape their overall worldview?

BALL: Well, I would start by saying that the fundamental innovation/discovery of the past 10 years is that the TAM for what we call games with game-like objectives was low. What’s a game-like objective? Win, kill, shoot, defeat, score, beat. What’s a non-game-like objective? Create, explore, collaborate, identify, express, design. If you ask most people what’s the best-selling exclusive title on the Nintendo Switch — Nintendo’s most successful console in 30 years — they would probably guess the Legend of Zelda, Super Mario.

The answer is Animal Crossing by about 50 percent in sales. It’s nearly 50 percent penetrated in their 90 million user base. It’s virtual gardening. It’s virtual arts and crafts. Roblox alone exceeds the entire de-duplicated size of the PlayStation, Xbox, and Switch universe — just that platform. These games that are focused on socializing and creation are much, much bigger. In hindsight, that seems obvious. How many people want to come home from a long day at work and play a zero-sum game of killing one another, of shooting? But it turns out, most game developers didn’t bet that, and they were wrong. That focus seems more positive.

COWEN: So, it brings out homo ludens, the play in human beings. Then, which attitudes in the real world does that shape, and how? You play a lot more time than you used to because you can do it through the metaverse, and then you step into your normal life, and you’re different in which way because of that?

BALL: Tobi Lütke, who’s the founder of Shopify, talks about his time in StarCraft being one of the most important lessons in being a founder. He actually says it’s more important than anything he learned in school because you have to learn how to make rapid decisions. This is StarCraft — it’s a specific game. You have to play strategically. You have to know how your teammates are likely to operate and what they’re likely to need before you have time to ask. And you also need to understand that some of the things that you do are not for you, but they’re to distract your competitors.

These are pretty good forms of education and learning. If you believe your kids need to become better at listening, at collaborating, at having shared objectives, at perhaps doing not what they prefer to do, nor even what they’re best at, but a secondary role to support their broader team’s objectives, they’re essentially spending hours a day doing that in lieu of what they used to do, which was just watch TV alone, passively disengaged.

COWEN: Some forms of education we’ve gamified for quite a while, like learning chess online. It’s completely gamified. It’s not new; it works extremely well. Not everyone does it, but it’s there. Completely has passed a market test. The fact that it’s possible in some areas — does that imply it’s already maxed out? Are there other areas where you might hope it works? Like, “Oh, we’re going to gamify learning in astronomy.” Maybe that has only modest potential because it’s already succeeded where it can work.

BALL: This is a fun and complex question. I think part of the answer is, of course, we have gamified astronomy education. We have gamified education. To some extent, that’s what letter grades are in school systems where your grades don’t really matter, or at younger grades where that’s not actually how you’re scored at the end of the year. What do we think a gold star or triple gold star or a bronze star is? That’s gamification.

The idea that we have new forums to do so, perhaps new things to award, especially things that have more durability. A gold star — I don’t have my gold stars. I can’t wear my gold stars now, but the idea that that has a little bit more continuity and lifespan to a younger consumer helps.

John Riccitiello, the founder and CEO of Unity, makes the point that gamifying education in a 3D space has all of the benefits of today’s custom AI-based tutorials, which is to say, “Tyler, you’re advanced. You’re learning very quickly. Let’s change the course,” but on another dimension with a lot richer detail.

COWEN: If we take young people who do not game — and I mean do not game at all, really — thinking of yourself as like a product market consultant, what is most typically the relevant obstacle, at the margin, for them not gaming?

BALL: Historically — and we just hit on this a bit — it was that games weren’t designed for them. But if you take a look right now, as I mentioned, if you have 75 percent of children 9 to 12 in most Western markets playing a single title, the answer is, it was what was available. To some extent, it was the tools that were available. Again, Roblox is not just non-game-like, but it’s also organized around both playing things, but also creating your own things to play. That additionally diversifies what’s available.

The other thing that’s important here is, it’s often a question of who, not just what, not just which technology. Network effects or Metcalfe’s Law supposes that you have nonlinear improvements to a product as the number of people who engage with it or use it grows. That might mean that a product, on itself, is not appealing enough to the average 8-year-old or 14-year-old. But if three or four of their friends are now using it, which is the degree of saturation we’re now getting to, the product is technically unchanged, but its relevance and appeal to you might be multiples higher. That seems to be the critical point.

COWEN: Is the internet, on net, good for 12- to 14-year-old American girls right now?

BALL: Tyler, can you say that again?

COWEN: The internet. Use of the internet. Extensive use of the internet. On net, is it a good thing for 12- to 14-year-old American girls right now, or a bad thing, on net?

BALL: On net, I think it’s a good thing, but that doesn’t mean that we aren’t falling terribly short in many different areas. This is actually one of the reasons why I’m optimistic about the changes that might come into play as to which consumer services, platforms, brands are likely to lead in the future rather than the past.

Let’s take, for example, the fact that Microsoft’s most expensive acquisition ever — indeed, the most expensive acquisition in big tech history — is of a gaming company, Activision Blizzard, $75 billion in enterprise value. When they made that acquisition, at the final line of the first draft, CEO Satya Nadella said it’s to provide the building blocks for the metaverse.

So, we know these companies are important, but how are they different? Consider the issues of happiness, toxicity, and the role of algorithms in social media today versus video games. The rule sets are usually very binary around laws: abuse, toxicity, and harassment. I swore at you, I encouraged self-harm, I used a racial term. That’s a bannable offense on a social media platform.

The perspective for gaming companies is very different. Why? Because you’re only going to play a game if you are having fun. You might scroll a newsfeed out of a sense of sick addiction or compulsion, but you’re not going to play a game for hours that makes you feel bad, so they have a different approach to moderation. They call it griefing. The ethos of griefing is whether or not you’re adversely affecting someone else’s sense of fun.

I might reply to every one of your tweets, Tyler, within ToS or terms of service, just to nitpick, just to bother you. I know that I can quibble over and over, point to an old tweet of yours and say, “Look, you were wrong.” That’s going to make you feel bad over time, but it’s not a bannable offense.

COWEN: This is the world, of course. It’s not you doing it, but it happens, yes.

BALL: Yes. But in a video game, they moderate that. That’s a bannable offense. I’m not going to say that moving into a social forum, into politics, into greater economic concerns doesn’t make moderation easier. Of course, it’s going to be harder. Fortnite and Roblox have a relatively easy time because this premise is leisure, not much more.

But their philosophy — what a game designer is trained for culturally for decades, what they optimize for — is actually very distinct from how a relatively static, impersonal algorithm and platform does. That gives me some hope that if the internet’s a force for good, on net, that the philosophies of the companies that seem to be at the forefront of the metaverse will be marginally better.

COWEN: Are you up for a round of overrated versus underrated?

BALL: Let’s do it.

COWEN: I’ll toss it out. RSS feeds — overrated or underrated? Marc Andreessen loves RSS. He still does it. We learned this in a previous podcast. What do you think?

BALL: I know. I listened to it. Interesting question. I would say they’re overrated because, as much as I like them as an open-source technologist — I discovered Marginal Revolution back in the Google Reader days through its social feeds — no one uses them, and consumers seem pretty clear that they don’t want them. That makes them overrated among those who talk about them.

COWEN: The Nick Bostrom argument that probably we are living in a simulation. We’re already part of a game or someone’s metaverse. True or false?

BALL: I’d say false, but every day we get more confirmatory evidence that someone has fallen asleep at the keyboard and the simulation has gone quite, quite wrong.

COWEN: The new Disney+ show, Obi-Wan Kenobi, if you’ve seen it.

BALL: Terrible.

COWEN: Why terrible?

BALL: It shouldn’t exist, and it never justifies its existence and actually seems relatively indifferent in trying to answer that question.

COWEN: In terms of recent Star Wars creations, what’s the one you would recommend, if any?

BALL: The Mandalorian gets closest.

COWEN: What do you like about that?

BALL: It tells, or told, the most stand-alone character, and that’s freeing. It’s a mid-cool, yes, but it’s not really in service of any narrative that we’ve seen before, nor, of course, the same old soap opera of the Skywalkers.

COWEN: There’s a guy on Twitter. I think his name is Carnivore Aurelius. He recommends sunning your genitals. Overrated or underrated?

BALL: Probably underrated, if just because of American stigmas as towards genitalia. I’ll tell you something funny as a producer in TV and film. If you’ve watched most new scripted drama series, you’ll note that the tolerance of violence at a PG level has become quite, quite high. I think of Stranger Things, for example. Have you seen the most recent season of Stranger Things?

COWEN: No, I haven’t, but I know what it is.

BALL: A bunch of high schoolers are possessed, and, quite visibly, all four of their limbs are broken multiple times. Their eyes are shattered, or they explode and they bleed. It’s a PG or PG-13 ranking. There’s actually very, very little you can do in Hollywood violence-wise to get above a PG-13 rating. But you get anywhere close to genitals, and it does not matter, you’re going up in rating.

COWEN: Second Life — the older version of a kind of metaverse. Better or worse than we used to think? Do we look back and it’s like, “Wow, they were so far ahead of their time,” or do we look back and it’s like, “They really didn’t do very much with that one”?

BALL: I would say underrated because the number of strange, emergent behaviors on that platform are undercovered. Why? Because not enough of us used it, and in fact, if you compare it to most metaverse-style platforms today, there was a very laissez-faire approach. The “government” didn’t actually intermediate transactions. You and I could make a direct purchase. You could create a business, and much like the US government, they don’t really know it exists. They just know that you’re paying tax, so to speak.

That led to all of these strange outcomes. There was a point in time in which most of the citizens actually rebelled, claiming that the tax rate was too high. So, because of how open it was, and because of the early adopters to virtual worlds in 2003 to 2006, you had a very strange collective of users. There are a lot of odd lessons that today’s platforms seem actually devolved, not evolved, from.

COWEN: Sex in the metaverse — are we expecting too much or too little from it?

BALL: Too little.

COWEN: Too little. What’s the thing we’re most likely to do that most people haven’t thought of yet? I don’t mean act. You don’t have to describe it graphically, but conceptually, how would you explain it?

BALL: You’re really putting me in a tough spot here, Tyler.

[laughter]

BALL: Well, let’s start from the following. I talk a lot in my book about the way in which the hegemony of Apple and Google adversely affects the digital economy at large. The 30 percent tax or fee is a really clear example of that, but separate is how they legislate the technologies you can and cannot use, the business models you can and cannot deploy, and frankly, a degree of puritanism. We know that, basically, the five most popular pornography sites, including OnlyFans, are among the 50 most visited websites globally in nearly every market.

None of them are allowed an application, not one, because we know that Steve Jobs did not believe in it. Of course, if you’ve read Walter Isaacson’s book on Steve, you know that his personal views are not particularly aligned with his sense of custody over children on the platform, but of course, that’s fine. Pornography videos, images play fine in the web browser.

But if you want to do something in haptics, in sensors, with Bluetooth devices, or you want to do something in 3D, you need an app. Why? Because you need to access local APIs. Notice how you hate watching Netflix in a web browser on your iPhone. You’d rather do it in an app. That’s because apps perform better.

Well, you basically can’t run sophisticated XR hardware or 3D in the browser by design. Actually, what we might or might not want to do in the metaverse when it comes to sex is essentially all blocked right now. It’s not an option, can’t do it, won’t be allowed. It’s partly, to be fair, because the platforms don’t want to take a fee on sex work, as you can understand. But of course, they also don’t want to provide exceptions to more and more business cases, so they just block it outright.

COWEN: Most states, county, city governments — they outlaw prostitution, escort services. Will that still hold for the metaverse, do you think? Just as a legal prediction, not how well they’ll enforce it. Will there be an actual attempt to stop people from trading some kind of haptic sex for money through internet, metaverse, whatever it is we have set up?

BALL: Will there be an attempt? Unquestionable.

COWEN: But a pretty successful attempt? Like 48 of 50 states have passed this law, and they at least try to enforce it a bit.

BALL: Very unlikely.

COWEN: Why is that?

BALL: Well, partly because you come into the fundamental question of what exactly are you blocking? Again, Tyler, you’re putting me in a weird spot here, but of course, there are applications right now that you can use an adult toy that allows you to press a button on your iPhone that sends a sensation to a partner who may be using another device a thousand miles away. That actually doesn’t require a sex act by the person pressing the button.

So, these fundamental questions — it kind of requires a classification of sex act that is very hard to describe, despite prior Supreme Court efforts to do so by abstraction. Extending that into specific instantiation of people thousands of miles apart, using devices that aren’t connected to one another, where the actual motion need not at all correspond to the receiving sensation — I think is going to be challenging.

COWEN: What’s the most underrated city in Canada?

BALL: Most underrated . . .

COWEN: I’ll say it’s Ottawa, which I love, and people forget it.

BALL: That’s where my father’s from.

COWEN: Montreal’s wonderful, but everyone knows it’s wonderful. Toronto’s still underrated, but I’ll say Ottawa. Vancouver’s too beautiful to be underrated. It deserves to be highly rated.

BALL: I think you’re right. What I would do is I would say Atlantic Canada. Every American thinks of Banff because, obviously, Banff is incredible and beautiful. They think of New England — also beautiful. Atlantic Canada is its own peculiar, different, esoteric culture, but absolutely worth visiting. Halifax is a lot of fun.

COWEN: There’s excellent seafood there, I can attest to.

BALL: Quite.

COWEN: Will crypto be the money of the metaverse?

BALL: The money? No. Is it likely to get —

COWEN: A money of significance?

BALL: Probably.

COWEN: Why?

BALL: Because failing absolute bans, it’s likely that there is a meaningful contingent. Now, we might just be talking about several million people who are using it. As we’ve seen over the past year and a half, that several million people can drive a very large amount of trading volume. Now, we can talk about if that TAM doesn’t grow, then the speculation effect eases, and therefore, the interest that is there steeps aside.

But if you were to say that we’re actually talking about tokenomics as opposed to just Bitcoin, which I’m not personally a believer in, then some form of that is likely to be popular and endure.

COWEN: So, there’ll be tokens for games, and the tokens will be liquid, and they’ll be money-like, even if they’re maybe not monies in every single way. Is that the right model?

BALL: Yes, but I would modify to say that I’m not yet convinced that it’s going to have a relevant role within games per se. I think the Marc Andreessen or Chris Dixon perspective of saying that it can be a construct for a new form of LLC — which, of course, many states, most notably Wyoming, which was the first LLC state, is legalizing — that seems more important.

That abstraction — to say we’re actually talking about a smarter digital system for the rapid accumulation of resources, financial and otherwise, which exists in virtual space, predominantly for virtual means — that is likely to endure, whether or not, frankly, it’s using blockchain.

COWEN: Now, you’ve been global head of strategy for Amazon Studios. Why, in your opinion, are Hollywood movies at a nadir today, or would you challenge the premise? To me, they’re mostly boring.

BALL: I think that they have become more boring, at least when it comes to the theatrical box office, but I would say that we only have more and more evidence that this is indeed what the people want. I think it’s funny, especially on the coast — there’s this perspective that Hollywood won’t make what we want anymore.

What’s interesting is, if you go back to the end of the last decade — and I’m not talking about 2010; I’m talking about 2018, 2017 — there were 700, 800 movies coming out per year to more than 25 screens. Most of those screens are in the coastal cities. We had more indie films widely distributed than ever. The screen availability was higher than ever. No one really went to those films.

One of the funny things that’s happening with the Marvel movies right now — we have Thor coming out this weekend with Taika Waititi. We had Chloe Zhao’s Eternals. Last fall, we had Sam Raimi’s Dr. Strange. Marvel seems to be now hiring directors to bring their own visual and creative flair, as opposed to saying, “Just make in the house style.” And audiences are actually rejecting it. They seem least interested in seeing artistic takes on their famous properties. So, boring or not, more anodyne than ever, it does seem to be the audience speaking.

COWEN: Was Top Gun: Maverick any good?

BALL: I haven’t seen it yet.

COWEN: I didn’t love it. It’s okay, but it did not feel creative and vital to me.

Given the whack to the share price of Netflix recently, should we still think they can succeed at gaming?

BALL: Netflix went through what many would argue to be the best-executed disruptive strategy of its scale over a 12-, 13-year history than we’ve essentially ever seen. Yet, if you take a look at what may be their single biggest mistake, it was not spending their equity like a drunken sailor over the past year. They could have gone out and bought Viacom, CBS, or Paramount Global for effectively half of what the current value of Netflix is, but at the time, it would’ve been one-tenth diluter. They could have rolled up two or three of the largest video game publishers on Earth.

All of those options are gone. The reason why I say this is, Netflix’s opportunity in gaming is hard. They don’t have any of the technology systems for social play. They don’t have micro transactions, which are essentially all of the upsides in gaming. They have to do a big technical transformation. That will take a decade or more.

I’m not as concerned about the temporary or even enduring share price compression as the primary problem there. It’s that they’re a late entrant, and they’re used to being an early entrant. But the only flip side is, were the share price much higher — even half of what it was last year — they would be able to do pretty aggressive M&A to ensure relevance, and that’s gone.

COWEN: If I think about the HBO library, there’s a number of shows in it that I haven’t seen, but I could imagine, this year and next year, going back and trying to watch them, like Deadwood. Maybe I’ll love it, I don’t know, but it’s there. If I think of the Netflix library, I couldn’t name a single show of that kind.

Is that a mistake Netflix has made? Or have they actually pursued an optimal strategy to just toss a lot of content out there, get people watching, keep on watching, subscribe to Netflix, and not really care that it depreciates at such a rapid rate in value?

BALL: It’s not a mistake, but it is a problem. I mean that because it’s not an active choice.

I wrote a piece back in 2020 — this is actually when I last held Netflix stock; I missed most of the COVID run-up — called “Content, Cars, and Comparisons.” I was making this esoteric argument that accounting principles did a disservice. Why? Because we don’t have GAAP (Generally Accepted Account Principles) rules to really say how do you depreciate? What’s the useful life of content? And therefore, the average series, whether it was canceled 30 days after its premiere, whether it was outstanding, whether it was IP or not, is effectively amortized the same way.

Yet, we all know that if HBO were to create a space opera, or Disney+ were to create a new spin-off space opera from Star Wars, or Netflix were to create a spin-off at the same budget, we could probably accurately guess different popularity, different relevance in the years to come. So, we had an industry problem, where all of the content spend was being capitalized equivalently. Yet the actual capital assets on a service-by-service basis as your team two were quite different.

When you’re in a period of hypergrowth as we were, it’s easy to overlook that because humans love video. We were excited to have all of it, but over time we are seeing those returns start to play out. HBO would famously make the point that everyone should watch their library but no one did, but we know that Sopranos blew up last year. We know that the Sex in the Cities’ catalog blew up. We know that True Blood blew up. We’re starting to see that actual GAAP failure being proven out in new revenue growth.

But to answer your question, yes, Deadwood you’ll love. Extraordinary.

COWEN: Now, if I think of the Cowen household, we subscribe to Disney, to Hulu, to Apple, HBO, other things. I can’t even name them all. I feel that can’t last forever. Maybe we subscribe to them all because it’s a pain to cancel them. Other households are willing to go through the pain of canceling to save some money, maybe more than we are.

What does the equilibrium look like there? How many streaming services are there going to be? Is there a stable market equilibrium? Or is it like the airlines, where they always just keep on going bankrupt? Or how do you view the economics of that sector?

BALL: Well, the economics are an interesting question. If you go from 2005 to 2015, let’s say the heyday of television financially, it was in the top decile of EBITDA margins nationally. The median was around 12 percent to 15 percent. TV’s EBITDA margin was 40 percent, 45 percent. What was beside it in that stack rank? Renewables, oil and gas, heavy fixed-cost businesses that had really, really high marginal costs, and therefore, EBITDA looks pretty good.

That was never sustainable. There’s no good argument for why television was going to have margins 3X the median. We’re seeing that right now. It had them because there was almost a communitarian approach. Everyone fought together. You and I would compete in the time slot, Tyler, but you could never fail out, and we’d have different cascades of renewals with different providers at different times for different channels. It was a perfect system.

When you’re talking about what the future looks like, it’s likely that those margins stay much, much lower. Most people are thinking 20 percent right now.

But I want to stress that it’s easy to underestimate the TAM in video. There are 300 million Americans who watch video every day. The average American watches five and a half hours of television, streaming or otherwise, but excluding TikTok and YouTube. That is so, so much. We think about this — I subscribe to five services, but you really should be thinking my family watches 250 hours of TV a month.

COWEN: Your earlier career as a firefighter — how has it shaped how you analyze media, gaming, and the metaverse? There’s a unity to it all, right?

BALL: I suppose the best and closest answer would be, look, I did firefighting because I believed that I was going to spend most of my life in an office. I’ve been fortunate that that isn’t true, but I love the outdoors, and I was excited to preserve that time. At the same time, despite that real shared interest in the outdoors, I had very little in common with my colleagues there. I have watched so many episodes of Cops and an old MTV show called Yo Momma, where people met on rooftops in New York City and did rap battles that were really yo momma jokes. That was legitimately horror to fit in.

I would say, when you’re spending 16, 20 hours in a forward operating base, sitting out in the woods, sleeping in a tent — we didn’t have cell phones, and you’re just there for two weeks — learning how to work, get along with, and trust those you have very little in common with is an enduring skill universally applicable.

COWEN: Now that you’re doing so much venture capital, what are you learning about talent? You have discussions with people making pitches to you. Obviously, you want them to be smart, hardworking, know their areas, but what about talent is underrated? What do you look for that’s maybe different than everyone else — what they look for?

BALL: My favorite type of entrepreneur by far are those who were essentially paid to try and solve a problem that matters to the future, but their company was never going to see through because they’re coming out 10 years with so much learning that doesn’t sit on the cap table. You’re coming out with so much pent-up energy. You’re coming up with a little bit of dissatisfaction over what they’ve achieved over the past five years, and they’re usually coming at the future with a network of people with that shared experience.

Their ability to go out and change the world is incredible. I learn a ton from that. I don’t think that I’m the best at spotting a 22-year-old who doesn’t have much work experience but sees clearly. But that crop of first-time entrepreneur, long-time executive who just deeply needs to pull something off that they haven’t — great. Incredible.

COWEN: What’s your favorite unusual interview question to get at those or other qualities?

BALL: My favorite unusual interview question . . . I don’t know, Tyler. Let me ask you if there’s any common thread around the interviews that you’ve done. What type of question usually has the least satisfying answer to you?

COWEN: The two questions I find most useful are, “How ambitious are you?” This is for people who are trying to be leaders, not for ordinary workers, and everyone is thrown off base by that, but it’s hard for them to fake ambition if they don’t have it. Then I like to ask something like, “What are the open browser tabs on your computer right now?” It gives you a sense of how they spend their time and what they really care about. Often people are flustered by that as well.

Someone not doing well on a question, to me, is them doing well because there’s a lot of variation and, thus, a lot of information. The questions that everyone does well on, like, “Tell us about a mistake you made at your previous workplace” — everyone’s prepped for that. Everyone has a decent answer, but it’s nothing. You just learn whether or not they’ve prepared something that’s not bad enough to be self-critical but not too negative.

BALL: Firstly, thank you for that out. I don’t know what the weirdest question I’ve been asked for. The number of tabs I have open are in the hundreds. I have hundreds of open articles on my phone, and then I use a tab extension on my PC so that I can collapse all the open tabs without destroying the RAM on my computer. I can read you that. That list is in the thousands.

But ambitious — not that you directly asked that — the book is a good example. I didn’t have an ambition to be a writer, to ever make a book. I deeply love writing. My ambition is to do the best of what was possible. I really blitzed myself in the fall and early spring writing this book. I deeply underestimated how much time it was going to take, how much time marketing, how many interviews I’d do. The ambition is a desire to not feel like I fell short of something I could pull off, and that has continuously shifted.

COWEN: You seem to me very much like a hundreds-of-open-browser-tabs sort of guy. So, I would, in fact, hire you for the jobs you’ve had or have now. You’re doing polymathic types of things with a lot of references, a lot of learning, but a lot of practical experience across a number of different areas: metaverse, gaming, film, internet, marketing, venture capital, right? All of that. It’s definitely a lot of browser tabs.

BALL: Well, thank you. I don’t know that I could do my job without Twitter, but half the time, Twitter ends up distracting me for days from said job.

COWEN: Last question, and really, I’m asking for a sincere answer here. How do you think about why it is that you wrote this book? Again, it’s The Metaverse: And How It Will Revolutionize Everything. There are so many things you could have done. You have an extensive audience online where you can write. It’s ungated — not always, but typically, everyone can read it. And now you’ve written a book. Why did you write the book? And why should we read the book?

BALL: It is easy to think that the metaverse is a buzzword. We’ve been here before: 3D TVs, autonomous driving, messaging bots, drone internet. We’re familiar with terms that are hyped long before they’re possible or turn out to have been little more than a name change.

Yet, I would argue that what we’re seeing here is unprecedented. No one renamed themselves “3D TV platforms,” not least of all, the seventh-largest company on Earth. This year, McKinsey estimates that the big five tech companies will spend $30 billion on metaverse investments; that venture capital, private equity, and big tech will spend $130 billion.

I believe deeply that this transition is real. I also believe that we’re coming out of 15 years in the mobile and cloud era dissatisfied with many things. Dis- and misinformation, radicalization, harassment, toxicity, happiness, the role of algorithms in our lives, regulation, platform power, data rights, data security, data literacy. And I believe that most of those challenges will become harder in the metaverse.

But I also believe that when these platform shifts occur, we have an unprecedented, or rather, very rare opportunity as users, as voters, consumers, developers, to affect that outcome. We have agency, we pick who leads when, why, and how, with which philosophies.

I wrote this book because I’ve spent five years thinking about the theme — what matters, what doesn’t, what we need, what we want, what will happen automatically and what won’t. And releasing a book nationally that is in bookstores, that reaches those I don’t interact with daily, that hits those who believe it’s a thing but don’t know exactly how, was the best way to have that outcome.

COWEN: Matthew Ball, thank you very much.

BALL: Thank you.