The Search for Yield Now Extends to Imaginary Land in the MetaverseTags Financial Markets
Charlie Munger defines old school. The ninety-seven-year old is partners with Warren Buffett at Berkshire Hathaway. He’s lived and invested through a few booms and busts in his nearly a century on earth.
Speaking to the Sohn conference in Sydney, Australia, Munger said “I consider this era an even crazier era than the dotcom era.” Speaking of cryptocurrencies, ““I wish they’d never been invented,” he said.
Munger is a man who has made billions investing in a capitalist economy. Yet, he said, “I admire the Chinese, I think they made the correct decision, which was to simply ban them.”
Joseph A. Schumpeter saw capitalism as a "gale of creative destruction," describing the "process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one." Munger, believing the communists have the answer, said, “I just can’t stand participating in these insane booms, one way or another.”
No mention was made of the Federal Reserve’s monetary policy.
At the moment, Munger and his partner are fans of the US dollar, with Berkshire sitting on a cash hoard of $149.2 billion.
It’s safe to say Munger will not be among investors “[p]reparing for a digital land boom that appears just months away, they are snapping up concert venues, shopping malls and other properties in the metaverse,” Debra Kamin writes in the New York Times.
Mark Twain and Will Rogers are both credited with “Buy land, they're not making it anymore.” Both men have passed. But, has their land wisdom left us as well? Ms. Kamin writes, presumably with a straight face, “real estate investing in the metaverse still is highly speculative.”
Those who see the future believe the metaverse will become a fully functioning economy before we know it, offering digital experiences as integrated into our lives as email and social networking are today.
Transacting will be done in cryptocurrency only. No banks will be required and evidently no government.
Toronto, Canada, Earth–based Metaverse Group has a virtual headquarters in a world called Decentraland in Crypto Valley, the metaverse’s answer to Silicon Valley. Ms. Kamin writes, “Decentraland also has districts for gambling, shopping, fashion and the arts.” Her article doesn’t explain how this zoning was determined or how it will be enforced going forward.
“Rather than try to create a universe like Facebook, I said, ‘Why don’t we go in and buy the parcels of land in these metaverses, and then we can become the landlords?’” said Andrew Kiguel, a cofounder and the chief executive of Tokens.com.
In case you’re wondering, Decentraland is ninety thousand parcels of land, each roughly 50 feet by 50 feet. Among investors, there’s a sense that there’s gold in those pixelated hills, Michael Gord, a cofounder of the Metaverse Group told Kamin (emphasis added).
“Tokens.com has broken digital ground [emphasis added] on a tower in Decentraland,” writes Kamin. “Louis Vuitton, Gucci, Burberry and other luxury brands have already entered the metaverse via NFTs [nonfungible tokens], a move that makes company executives optimistic that the Tokens.com tower will soon generate revenue from leases and advertising for brands like these.” (A nonfungible token is a unique and noninterchangeable unit of data stored on a digital ledger.)
“As more people participate, it’s where you’re going with friends, where you’re having experiences like conferences and concerts,” Mr. Gord said. “It’s inevitable that the metaverse will be the No. 1 social network in the world.”
At least one transaction has been made in earthly government-issued currency. Tokens.com closed on a land deal in Decentraland’s fashion district for roughly $2.5 million. The company claims the purchase was the largest in metaverse history. Nothing like pawn shops or nail salons are planned but “a virtual commerce hub for luxury fashion brands, à la Rodeo Drive or Fifth Avenue.”
The metaverse sounds like it’s only for the rich.
“It’s location, location, location,” Kiguel told the Times. “A parcel of land in the downtown core, which has a lot of visitor traffic, is worth more than a parcel of land in the suburbs. There’s a scarcity value.”
The only scarcity I can imagine in the metaverse is if there’s a lack of imagination. Which seems unlikely.
“You can buy locations that you love, whether it’s Central Park or the pyramids in Egypt,” Hrish Lotlikar, a cofounder and the chief executive of SuperWorld told the NYT. “What you’re buying is the virtual land that covers the earth at those locations.”
Justin Banon calls it the merger of the real and online worlds into one hybrid universe, “where the fungible and the nonfungible intersect at multiple points,” said the cofounder and the chief executive of Boson Protocol.
Meanwhile, in Las Vegas, Nevada, Earth, a 376-unit apartment complex just sold for $135.2 million, or just short of $360,000 per unit. Although not crypto-like appreciation, the seller sold the project for double the $65.35 million it paid in 2016.
This is the third nine-figure apartment sale in Las Vegas this year. The price per unit is close to the $378,000 per unit paid for the Tuscan Highlands project sale in May.
We can’t argue with Mr. Munger concerning speculation; it is running wild, both on earth and beyond.