The Virtual Reality Spiral

As virtual and augmented reality substitutes for “real world” oriented experiences get better and cheaper over time due to technological progress, the public will be increasingly incentivized to choose these experiences over exclusively real world ones. This will cause downward pressure on the revenues of many traditional companies that provide real world oriented products and services.  In turn this downward revenue pressure is likely to trigger further automation, layoffs and improvements in operational and logistical efficiency as these companies struggle to compete with constantly improving and cheapening virtual and augmented reality substitutes for the experiences they offer.

As corporate demand for human workers falls, the labor force participation rate is likely to drop to alarming levels as more and more jobseekers simply give up on finding new jobs.  Increasing unemployment and underemployment will also incentivize more sharing of real world resources between consumers (and thus drops in consumer demand for those resources), as they clamor to cut living costs by using these resources more efficiently.  Weakening consumer demand for these resources will in turn put more downward pressure on corporate revenues, which will further hamper the competitiveness of traditional companies versus the constantly improving virtual and augmented reality alternatives to their products and services.

I have dubbed this process the “virtual reality spiral” (illustrated below), and in my opinion it is the most important socioeconomic process to be aware of in the decades ahead.  In the long run I expect that the spiral will lead to nearly continuous virtual reality immersion by most people, in conjunction with the nearly complete automation of real world industrial, agricultural and logistical processes.

vr spiral pdf

Along similar lines, I noticed a recent article of interest on Mish’s Global Economic Trend Analysis Blog.  Author Mish Shedlock mentions the opinion of one of his readers (named “DT”) from Brazil, who suggests that Microsoft’s Hololens has “huge deflationary potential” because users will be able to mimic a variety of physical objects in their homes with the technology.

My view is that the virtual reality spiral is going to make many traditional jobs, activities and businesses completely obsolete.  The effects of the spiral will probably be amplified even further in some countries due to public demands for governments to slow the resulting drops in wages and tighten restrictions on layoffs. Such actions will unfortunately make traditional companies in these countries even less competitive, as substitute virtual and augmented reality experiences that are unconstrained by national borders continue to improve and cheapen versus the products and services they offer.

Although this situation may seem very bleak at first glance, I see a relatively positive long-term outcome to all of this if handled properly by society, which I plan to discuss further in future posts.

To better understand why the virtual reality spiral is inevitable though, consider the table below.  Using hypothetical values I illustrate that every human experience can be catalogued at least subjectively by how necessary each of the five senses is for that experience to be replicated reasonably well.

activities diagram pdf

For example, it may be possible to drive a car without feeling the steering wheel against your hands or the vibration of the cabin through your seat, but sight of your surroundings is absolutely essential and hearing is nearly essential, while smell is rarely important and taste is irrelevant. Similarly, the senses of sight and touch are very important in tennis but hearing is less so, while smell and taste are irrelevant. And in typical office meetings, aside from having to shake hands occasionally or move office materials around for example (which both involve the sense of touch), hearing and sight are the essential senses, while smell and taste are irrelevant.

Thus there are numerous “real world” activities for which anywhere from one to three senses could be completely omitted if necessary without significantly reducing the quality of the experienceSo incorporating the ability to mimic visual stimuli alone into our networked technology, in conjunction with our existing skill at mimicking audio stimuli, would lead to dramatically improved simulations of a huge number of activities.

For example, virtually attending a sports game in the future using audiovisual virtual reality apparatus is likely to pose huge competition to live attendance of the same game, even though the senses of smell, taste and touch would be absent from the virtual experience. This competition is likely to become even more fierce as soon as a number of friends can virtually attend the same sports game while socializing with each other in a customized virtual reality environment. The same thing goes for virtually attending office meetings – if an in-person office meeting can be faithfully replicated in a virtual reality environment in every relevant detail except handshakes between participants, the availability of the virtual reality substitute seriously undermines the need for them to waste time and energy commuting to a centralized office for that meeting.

This makes it clear that virtual reality technology, even if it provides only immersive 3D visuals and stereo sound in the near term, is in fact extremely disruptive because it will enable us to create dramatically better substitutes than we can today for a whole host of real world experiences. And of course, any substitute that replicates an experience, however imperfectly, has some economic value. This is precisely why we pay money for telephone calls.

Even though phone calls only replicate the experience of speaking in person with someone for 1 of our 5 senses, this is good enough to have financial value for us.  So can you imagine the power, convenience and value of a technology that can replicate the experience of speaking in person with someone (as well as numerous other experiences) with both immersive 3D visuals and stereo sound?

Although the companies that ultimately deliver great virtual reality experiences to the public are likely to benefit economically, companies that fall behind with respect to the technology will conversely be leaving themselves exposed to significant downside risk.  A quality virtual reality ecosystem is thus inevitable in my view, as very few companies whose industries are exposed to transformation by the technology will be able to ignore it.

Future generations of wearable virtual and augmented reality devices are going to increase personal convenience so dramatically that it will become as unthinkable to leave your home without them as it would be to leave your home without a cellphone today.  Eventually of course, technologies like these (and other supporting technologies) will probably make it unnecessary to leave your home at all.


Molding Versus Mimicking Reality

Experiences trump reality for most human beings. Few users of a technology spend much time contemplating its inner workings, yet all users of a technology care about the experiences that the technology provides them with.

For example, as Jim Blascovich and Jeremy Bailenson point out in their book “Infinite Reality,” a person rarely stops to contemplate that a voice s/he hears on a telephone call is not the literal voice of the person s/he is speaking to but an electronic replica of it. In fact we often literally say when recalling phone conversations to others that we “spoke” with somebody, indicating that we accept the telephone experience as a reasonable substitute for direct person-to-person speech (characterized by sound waves traveling from the speaker’s mouth to the listener’s ear). [1]

Few people take time to ponder the layout of pipes running through the walls of their homes – they care more that water comes out of a faucet when they turn it on or that gas is available to light the stove when they need it.  Few care about the inner circuitry of their cellphones, the roles of each worker in a restaurant’s kitchen, and so on.   In other words, what’s onstage nearly always trumps what’s backstage.

All technological inventions are created to increase convenience for a person or group by making it easier for that person or group to access certain experiences (thereby avoiding other unwanted experiences in the process).  But since experiences trump reality for most of us, it follows that a hypothetical future technology that enables any person to perfectly mimic reality at will could easily be considered as the greatest invention of all time, because it would maximize convenience for everyone.

In the early years of the Industrial Age, we were nowhere close to having an ability to perfectly mimic reality, and so our tools focused instead on molding the real world around us to create the experiences we desired. Since we couldn’t singlehandedly bring huge swaths of experiences directly to ourselves, we created vehicles over time to transport us to them. We also created factories that produced products related to experiences that people desired, and logistical systems to transport these products to various locations around the globe to make the experiences associated with them accessible to wide ranges of people. A lot of human workers were required to ensure that people in various locations could access various experiences reasonably smoothly, which eventually led to the late Industrial Age global economy that we are familiar with today. In short, humanity has streamlined global infrastructure in the Industrial Age around reality molding activities.

On a planetary scale we may thus view our modern Industrial Age economy as a giant tool or machine comprised of billions of human “components” that operate in conjunction with a staggering number of machine components (and some animal “components,” such as when horses are used for transportation, for example).  Our modern economic “machine” functions to provide individual humans with access to certain experiences as quickly and efficiently as possible. However, since the bulk of experiences that the machine provides today require real world resources (and time) to produce and deliver to consumers, society has had to ration individual access to the experiences the “machine” is able to provide by using money. In other words, money can be viewed as an objective indicator of an individual’s ease of access to the various experiences offered by the Industrial Age economic machine.

However we are all well aware that this machine has huge issues and inefficiencies. Firstly, the current version of the machine (i.e. the global economy) is simply the latest iteration of an ancient design that humanity has had to repair and upgrade numerous times as a species (to continue the analogy). Secondly, the quality and availability of the experiences that the machine is able to provide varies widely across the globe due to location specific physical and logistical constraints.  Thirdly, the operation of this machine wastes a great deal of humanity’s waking hours on repetitive tasks and causes a worrying amount of stress on the biosphere.

As with any other machine that a family owns (like a car, for example), sometimes it makes sense for that family to repair or upgrade it, but at other times a disruptive technology comes along that simply renders the old machine obsolete by being both cheaper and better at producing an essentially equivalent experience or end result. Virtual reality represents precisely this kind of disruptive technology for the Industrial Age economic machine.

As mentioned above, humanity has streamlined global infrastructure in the Industrial Age around reality molding activities.  However today we have reached the point as a species where we are reasonably good at mimicking certain aspects of reality. We are highly skilled at electronically reproducing and generating sound, and many are comfortable with being immersed in electronic sound environments such as those provided by headphones or earbuds.  We are gifted at electronically reproducing and generating both static and dynamic 2D images on 2D electronic displays (such as TVs, smartphones, computer monitors, etc.). We have also made solid progress in reproducing and generating both static and dynamic 3D images (as evidenced by the existence of 3D movies, holograms, and virtual retinal displays), but a lot of work of course remains to be done.

What is commonly referred to as “virtual reality” technology today, which audio-visually immerses an individual in a simulated 3D environment with stereo sound, is still in its relative infancy but rapidly improving. What is commonly referred to as “augmented reality,” which overlays virtual objects or scenes over parts of a viewer’s 3D field of view (and may also generate sounds that a user hears), has also made significant strides.  Although these technologies are still considered somewhat niche, a decent number of virtual and augmented reality products intended for the mass market are set to be released over the next year or so.  Although much work remains to be done on refining the consumer products in this space and creating a useful virtual reality ecosystem, the countdown to market saturation is now clearly underway.

The virtual and augmented reality niche is poised to rocket into the mainstream in the not too distant future as the public discovers that virtual and augmented reality experiences are providing better and better substitutes for real world experiences at cheaper and cheaper prices, and begins to respond to this fact with their wallets (the subject of my next post).  Purely real world experiences are going to lose this battle handily in the long run, driving our global infrastructure (and global economic “machine”) to evolve from a focus on reality molding activities to a focus on reality mimicking activities.

[1] Although I independently came up with this telephone example some months ago, I have just begun reading the fascinating book “Infinite Reality” by Jim Blascovich and Jeremy Bailenson, which I was amazed to notice mentions the same example.


This is a blog about the hugely transformative impact that virtual and augmented reality technologies are going to have on society, the economy and humanity’s ecological footprint over the next three decades.  After compiling extensive notes on this fascinating topic, I’ve decided to take the advice of some wise friends and blog about it.

Although still in their relative infancy today, I am convinced that these uniquely disruptive technologies will be key to resolving many modern concerns about technological unemployment and ecological sustainability as their promise unfolds.

To corroborate this unusual view I plan to cover a lot of ground in my posts, exploring topics including the social, economic, philosophical and policy implications of these technologies.

I am grateful to the numerous authors, academics and artists (past and present) whose works have helped inspire me to write about this subject.  The works of Ray Kurzweil, Marshall McLuhan, Jeremy Rifkin, Gene Roddenberry and Martin Ford deserve special praise in this regard.

So without further ado, welcome to the blog and let’s begin!