Today I want to discuss megatrends that may change the global order, and how they are connected to the Metaverse. I base the article on two different views, one which is purported by the geopolitical strategist Peter Zeihan and one by Alvin Graylin, China President of HTC VR.
In Mr. Zeihan’s future, only the US will thrive
According to Mr. Zeihan, the present world order, which was designed by the US, will collapse, and most countries will suffer, the US itself being a notable exception. Simply put, for most of the people apart from the 4% living in the US life will only get worse and worse from now on. China will be one of the major victims of this development.
The other view I present — that by Mr. Alvin Graylin — is that the Metaverse will help create a more prosperous world, and China will inspire this development. I myself tend to believe more in the future Graylin is painting, but I think we can learn from both of these world views, and those lessons can prove invaluable if you want to understand better how to position yourself in a dramatically changing world.
The Metaverse does not exist yet, but we know it is coming and many of the leading companies in the IT industry are investing huge amounts of money in developing the necessary technologies to realise this next generation of the Internet. Even today we can see how some aspects of virtual reality are changing how we communicate. Mark Zuckerberg, CEO of Meta (previously known as Facebook) is literally betting his company on this technology. I am convinced he is right and that he has realized just how powerful this technology will be, in particularly in combination with AI.
While we don’t know what the Metaverse eventually will look like, the most important at this point is to try to understand the factors that may shape its development. Although this will be a world that only exist in the digital realm, it will be influenced by developments in the real world, and the real world will change as the Metaverse takes shape. Recently the views on China in this context has caught my attention, and I want to present two conflicting views on the role of China and on the development of globalization.
How the world will collapse according to Mr. Zeihan
Mr. Peter Zeihan is very popular speaker and consultant for large and powerful organizations, such as oil companies and the US military. I will try to explain his view of the future here very briefly.
What we call the Global Order, or Pax Americana, was proposed by the US, and has been in place since the end of the Second World War. After the war, a new enemy of the West entered the scene — the Soviet Union. In order to secure peace and prosperity for the free world, the US promised to guarantee the safety of commercial ships so that international trade could be conducted without disturbances. In return, the Western nations joined a military alliance with the US, to counter the threat from the Soviets. This was the beginning of globalization, and is the fundament of our peace and prosperity.
However, over time, the US has begun to lose interest in this arrangement. It was not meant to serve US economic interests, but to help it protect itself from the Soviet Union militarily. Eventually the Soviet Union imploded. With this threat gone, why would the US continue to invest money and resources in this expensive security arrangement? The US does not depend on foreign trade for its prosperity. According to Mr. Zeihan, less than 10% of its GDP comes from foreign trade. The country has plenty of natural resources within its borders. It has a comparatively young population that consume goods. It’s close neighbour Mexico and South American countries are also more attractive economic partners than Europe and other distant countries.
“All the US has to do to destroy China is to go home”.
In short, the US does not any longer need the rest of the Western world economically, and in particular it does not need China. While many US industries outsourced work to China over the last decades, it now is beginning to look more and more attractive to return the factories to America. The pandemic showed how vulnerable the long supply lines are, and salaries in China are rising. As Zeihan puts it, “all the US has to do to destroy China is to go home.”
When the US decides to stop protecting the global trade routes, China will suffer. In fact, the US is already incapable of acting as the policeman of the world, since it’s navy is far too small to be able to do so.
“Donal Trump,” says Zeihan, “was right. The Global Order does no longer serve America’s interests. But he was wrong in the sense that it should serve Americas economic interests better, because that was never the intent from the beginning.”
Zeihan builds his view on the future of the world entirely on existence of the physical movement of people and goods around the world.
To sum up, the prosperity that stemmed from the Global Order and globalization will end, and few will survive. Strangely, Zeihan believes Japan will be one of the few survivors, because it has a powerful navy. As you can see, he builds is view on the future of the world entirely on existence of the physical movement of people and goods around the world, and how well that movement can be protected.
I believe this view is outdated, and that is the key point of this article.
How the world will prosper according to Mr. Graylin
There seems to be a glaring hole in Zeihan’s logic. The premise is that global trade will work the same way in the future as it has all the way back to the end of the Second World War. But since then, we have seen the Internet be invented and grow into a huge network with its own economy. In fact, it was invented as a result of the cold war. This is why we have routers, that can redirect traffic if an atom bomb drops on the cable between two points. This network was the embryo of a digital economy that is now evolving further, from green text on a black screen, to simple graphics, then video, online games, and lately even VR online games with multiple players and budding business markets and meeting places for professionals and corporations.
This Internet is now adding a new dimension to become three dimensional, so that people can truly experience in-personal meetings in a very similar fashion to the real world. After all, the real world too has three dimensions, not two as is the case of a PC or mobile phone screen. This is more important than one might think, because according to some sources 90% of human communication is non-verbal. To communicate naturally, involving your whole body, you need to be present in a three-dimensional space with other people. This is a key feature of the Metaverse — the three-dimensional Internet. People will be able to meet and build the trust necessary for friendship and business as naturally as in the real world, even if they are located on different continents. The intimacy of meetings in the three-dimensional Metaverse is in my view the most fundamental building block for the new digital economy.
Now, Mr. Graylin’s point is that this will only be possible if the new version of the Internet — the Metaverse — works like the old. Not only must we be able to share spaces with other people, but we must also be able to move freely between those spaces. It must be as simple to move from one three-dimensional world to the next as it is to move from one web page to another today. This is, according to some, the fundamental meaning of the Metaverse. It is a single infrastructure that enables people and objects to traverse the whole universe of three-dimensional worlds because there are standards in place that makes this possible. Those standards are still not established, which is why we still only have many islands, or proto-metaverses, in which people can use their avatar and interact with objects, but they can not travel with their avatar, objects or wallets between the worlds.
China’s role in the future global economy
So where does China come into this picture? Well, according to Mr. Graylin, China has a huge advantage because as a nation it can put policies — and the resulting standards — in place very swiftly and uniformly, unlike in the US or the rest of the West. In the Western world, interests of different nations clash and the standardization process is extremely slow. Companies invent their own standards, and try to impose them on Internet users, but there is much resistance from their competitors. We see this in the world of electric vehicles as well. Will Tesla’s charging system win over the others? Only time can tell.
The question is, will other nations accept the standards that are invented in China? I asked Graylin about this. He replied that while it may seem strange that the rest of the world would look to China to develop the Metaverse, market forces will pick up the best pieces of the Chinese Metaverse and integrate them into a global version.
This does not mean that the rest of the world will adopt Chinese technical standards and protocols to enable interoperability between the different worlds in the Metaverse. Instead, his point is that China will be the first proto-Metaverse to reach one billion users. At that scale it can serve as a prototype for the global Metaverse — the next generation of the Internet. It will serve as “an ecosystem [that] will be a great guide […] for the West to learn from and [adopt] the successful pieces. The scale of business […] with the Chinese marketplace and network effects will [encourage standardisation] and create a global market.”
In other words, the Chinese proto-metaverse can serve as an extremely useful case study to learn from in order to create a global Metaverse. We can hope that this will give birth to a global digital economy in which anyone, wherever they may be located, can sell and deliver goods and services to anybody anywhere. The reason for this is that the goods and services will be digital. There will in other words be no need for physical protection to move goods and services to other parts of the world.
Mr. Graylin has many other interesting things to say about the Metaverse, and I shall come back to them in a future article.
Which of these two alternative futures will win?
If a global Metaverse with effective standards becomes a reality — and I think it will — some believe it will grow into a massive economy, possibly larger than the economy of the physical world. The big difference is that distance is not a factor in the Metaverse. Even on a personal level, this is a dream come true for many. People will be able to live where they like, do the work they like, and work with the people they like, irrespective of where they are located in the world.
Now it does not matter anymore whether the US navy can protect commercial vessels around the world. Goods and services in the Metaverse may be completely digital, or may be printed out wherever there is a 3d printer. This will not mean that world trade in this new Global Order of the Metaverse will be completely secure. We already know that theft and fraud is very common in the world of nfts and crypto currency. Regulations to make these systems secure needs to be hammered out. There are also malignant activities in the digital world, such as cyber attacks. Cyber warfare is a reality even today.
Still, given what we have learned in the age of the pandemic, as well as the economic effects of the war in Ukraine, seeing how nations like Sri Lanka are vulnerable and even defaults in the physical globalized world, the merits of a digital world economy seem undeniable. The digital economy should make opportunities of all kinds available to people in developing countries. We have for example seen how Indians have been successful in Second Life, the grandfather of the Metaverse.
The question is, will people like Zeihan be right, and all is doom and gloom for most of the world in the future, or is there hope that we will see a standardized Metaverse economy that bypasses many of the difficulties we face in the real world? Moreover, the Metaverse may also help alleviate the worst effects of global warming, since it eliminates unnecessary physical movement of people and goods, and thereby much of the pollution that ruins the climate.
I find it interesting that in most of Zeihan’s presentations I have heard so far, there is no mention of this digital economy and how it may effect the globalization. But in one podcast, at the very end, the question came up: “Will the old way of international trade even be a factor in the future?” he was asked. “Nation states as we know them today may not even exist then. New technologies may make them obsolete.” “Well, in this matter, Zeihan replied, I have to agree absolutely.” He did not elaborate further, but if you think about it, if he believes this his prediction of a future where export dependent nations collapse will not come to pass.
The demographics problem
Another matter is how much demographics will affect economic activity in the Metaverse. Zeihan claims that China is doomed because of the rapid aging of its society. Again, interestingly enough, he thinks Japan can handle this problem better, because the Japanese started aging much earlier and the country has been working for a long time to tackle the problem. Furthermore, robotic technology is advanced in Japan, and Zeihan therefor thinks the Japanese society is flexible enough to overcome this problem. But, Zeihan claims, most other countries will lose much of the prosperity they enjoy today, and it will only get worse over time.
I feel this perspective is the most popular in the US, and a world in which only America can prevail enforces the belief in what is called American exceptionalism. Some argue that Zeihan’s books are written the way they are because they sell well to an American readership.
If the Metaverse materializes and your location in the world no longer is a consideration, you may live in an aging society and still work with people located on other continents, producing products for people who are also located physically far away from where you and your work colleagues.
Will the Chinese proto-Metaverse be the beginning of a new globalization?
Considering the above, I think China may not implode in spite of the demise of safe global trade routes and an aging population. Perhaps, if the regulators will allow it, the Chinese will become less of corporate work forces in the export industry, and more like individual free-lancers or family businesses dispersed around the Metaverse. This is how the Chinese have thrived in other countries in the physical world. Human behaviour will not change over night in the digital world. Maybe in a few years we will go to a Chinese restaurant in the Metaverse to have a bowl of digital noodles, and pay in a digital currency that works in the physical China. By contrast, in Mr. Zeihan’s future, the Chinese will become jobless and impoverished when America “goes home” and the physical export industry grinds to a halt.
Meta (formerly known as Facebook) CEO Zuckerberg predicted in the Connect Conference 2021 that the Metaverse “will be mainstream in 5–10 years.” If that is true, we have 5 years at a minimum and 10 years at most to build a strategy for personal or business success in the Metaverse. During that time it’s possible that some islands in the proto-Metaverse will become compatible with each other. Or maybe it will come with a big bang in China, like Mr. Graylin predicts.
What will happen then? Will platforms in other countries start to scurry to become compatible with that large Chinese island, and will this process speed up exponentially as more and more join the fray? China is culturally and linguistically isolated from the West, which may make that large island less attractive from a Western perspective. Perhaps AI, a field where China is strong, will come to the rescue and provide at least basic automatic translation. Some platforms, such as Spatial, already provide basic automatic translation, where a translated text appear above the avatar that speaks.
I think we should all be alert to the development of regulation and standards for communication, commerce and travel in the Metaverse. These may be some of the best indicators for how close the Metaverse is. In particular, if we are to believe Mr. Graylin, the emergence of a giant Chinese Metaverse with interoperability within its borders will signal the next phase towards a global Metaverse.
Individuals and companies should also start as soon as possible to explore the possibilities in one of the proto-metaverses that exist today. The early movers will be the winners, just like when the present version of the Internet began to take shape.