Note — Dec 04, 2022

Web3, the Metaverse, and the Lack of Useful Innovation

This is a bit of a weird one. In some parts the authors talk about current bubbles but not AI, then in others provide examples, including AI. If Web3, the Metaverse, and AI had been treated equally all along, that would have been more interesting. Then again, their thesis of current bubbles not being on pace to create any lasting value would have been wrong. Maybe.

If you enjoyed last week’s A Great Leap Forward in AI, which was specifically about AI showing “it has a story, and utility,” then this one can provide useful context and further details on the economics of those three trends/hypes/bubbles.

🤖 Summary This document examines the lack of useful innovation in new technologies like the Metaverse, Web3, and blockchain, despite the high investment in them. It looks at the differences between the successes of the dot-com bubble and the lesser success of the 2010s, and attributes this to the decline of basic and applied research at companies and the focus on publishing papers at universities instead of developing new technologies. It argues that a new research system is needed to focus on practical improvements and useful technologies, rather than simple metrics pushed by bureaucrats.

If we are correct that the newest wave of hot technologies will do almost nothing to improve human welfare and productivity growth, then elected officials, policymakers, leaders in business and higher education, and ordinary citizens must begin to search for more fundamental solutions to our current economic and social ills. […]

In the following year, an analysis by a pro-blockchain organization, the British Blockchain Association, showed that a vast majority of the blockchain projects they surveyed had no well-described rationale, no predetermined criteria for achievement, and no analysis of success or failure. In other words, they were merely pie-in-the-sky ideas, based on hype rather than detailed analysis or justification. And none of the projects benchmarked themselves against existing, proven technologies. […]

To summarize, when the dot-com bubble deflated, we were left with lasting improvements such as e-commerce, digital media, and enterprise software, but our current bubble has involved investors running up the stock prices of firms working on technologies that have produced demonstrably less value. When the air goes out of this bubble, we very well may be left with hardly anything of value at all.