Abstract
Metaverse architects face challenges akin to urban planners developing a new city: multiple stakeholders must coordinate on technical standards for interoperability and establish social consensus around specific choices. The article presents an analogy between the metaverse and the Las Vegas Strip in the unincorporated town of Paradise, NV, which arose in the mid-twentieth century as a focal destination for immersive entertainment delivered by eclectic interconnected resorts. It integrates this case study of the Las Vegas Strip with theories of technology management to derive practical insights for building the metaverse: focusing social momentum around a new destination and governing cooperation among de facto competitors.
Technologists, executives, and sci-fi enthusiasts envision the metaverse as an immersive 3D world where users work, play, and interact. Amidst the fanfare, however, the path to realizing the metaverse is far from clear. The economic and social implications of building a functioning metaverse will be massive, akin to the impact of the internet. However, little consensus exists on how to get there: top executives from Meta, Electronic Arts, Epic Games, Nvidia, Microsoft, and others express very different visions for what the metaverse would look like and thus pursue different strategies for building toward the metaverse. Further complicating the success of any of those strategies is fierce competition to control the ownership rights and interface standards that will make up the metaverse, in part to justify the billions in risky investments being made today.
Despite the lack of consensus amidst competing incentives in building the metaverse, our view is that the metaverse can still succeed, but it might call for a shift in mindset and an openness to learning from seemingly distant domains of knowledge. The key challenges managers face in launching the metaverse correspond to dilemmas that urban planners face when developing a new city. We draw on the revelatory case of Paradise, Nevada, the unincorporated town that is home to the Las Vegas Strip, to examine how organic and emergent governance structures allow a vibrant economy to thrive in the middle of a desert. The Las Vegas Strip today has strong parallels to a future metaverse, and we draw on this analogy by looking at the historical rise of the Las Vegas Strip to generate prescriptive recommendations for how competing managers might lead the creation of a single, consensus metaverse in a way that is ultimately collaborative and profitable at the same time.
This article is aimed, first and foremost, at the thought leaders, executives, and stakeholders who are engaged in designing and building the present-day building blocks of the future metaverse. We refer to this group as metaverse architects because of the similarities between metaverse design and urban planning. We address the challenges of cooperation and coordination among rival proto-metaverses—the presently siloed virtual spaces such as Fortnite, Second Life, and Meta Horizon Worlds—that could, in principle, amalgamate into a single consensus metaverse. Viewing the metaverse as an urban setting draws attention to the value creation that arises from user interactions that are highly concentrated in time and space. From this premise, we propose two complementary strategic approaches toward catalyzing such interactions. First, metaverse architects should borrow from the linear geometry of the city street to focus interactions spatially and use festivals and conventions to focus interactions temporally. Furthermore, just as resorts in Las Vegas cooperate with direct competitors to establish shared resources and governance, proto-metaverses can make bilateral or multilateral agreements to establish interoperability and shared standards for spatial and temporal design. We intend for these two contributions to serve as a guidepost for metaverse architects as they build toward the broader long-term vision of the metaverse.
In addition to reaching metaverse architects, this article is also aimed at researchers studying platform orchestration. The cooperation and coordination challenges in the context of the metaverse also apply to other emerging technologies. The mechanisms for solving these challenges can inform research on platform orchestration more broadly. Platforms in nascent ecosystems compete to achieve focality by catalyzing socially rich interactions among strangers. Meanwhile, consensus around a platform technology can emerge when decentralized ecosystem participants agree on a superordinate governance structure.
Defining the Metaverse
There is an intense, ongoing debate over how to define the metaverse.
1
In his 2022 book, The Metaverse: and How it Will Revolutionize Everything, Matthew Ball defined it as: The metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users, each with an individual sense of presence, while supporting continuity of data such as history, identity, communications, payments, entitlements, and objects.
2
Several facets of this definition are germane to our thinking. First, we view “the metaverse” as a single consensus platform, akin to the internet. As building blocks for that vision of the metaverse, today there are siloed and largely firm-specific virtual spaces that lack inter-connectivity—like Fortnite, Roblox, Second Life, and Meta Horizon Worlds—and we refer to these as proto-metaverses. Table 1 describes several examples of major proto-metaverses to date. 3 Second, while the metaverse is rendered in 3D, virtual reality headsets are not essential to the definition of the metaverse. Third, like the internet, the metaverse is “default open,” although private spaces—akin to paywalled content—can be inherited into or constructed within it.
Illustrative Proto-Metaverses.
Note: User Count consists of available information on Daily Active Users (DAU), Monthly Active Users (MAU), and total registered users (Total) as reported by the organization or third parties; reporting standards and definitions vary. Assembled by the authors from various sources.
Even within the bounds of this definition, executives have proposed and pursued several paths along which the metaverse could emerge. The metaverse could emerge when some coalition of proto-metaverses decides to interconnect with each other. Epic Games CEO Tim Sweeney, whose company owns Fortnite, one of those proto-metaverses, said, “I hope that we can, a decade from now, have players playing Minecraft, Roblox, and Fortnite clients and be in the same world with the same social connections to each other.” 4 The metaverse could emerge as the result of a community-led open-source software project with a critical mass of developers and users, as proposed by blockchain advocates like the Decentraland Foundation. Or it could arise when a single firm of sufficient scale gives a broader set of participants access to its metaverse by licensing technology and governing standards: Meta CEO Mark Zuckerberg’s public comments suggest that he envisions a metaverse primarily accessible through an app store that he controls and can charge for, and he likely needs to achieve a winner-take-all (or most) outcome over the metaverse to recoup his tens of billions invested already.
A major part of the complexity of working to bring the metaverse into being is that today’s proto-metaverse operators need to compete both within and across these different paths. Technology strategy researchers liken this intense ambiguity to “maneuvering with poor visibility.” 5 Metaverse thought leaders identify a broad array of challenges that metaverse developers face. The challenge of managing a virtual economy using cryptocurrencies and non-fungible tokens has received substantial recent attention. 6 Additional challenges include technical issues (e.g., hardware needs, network bandwidth, and latency requirements) to social and governance issues (e.g., ensuring user safety). There are two interrelated issues where technical and social considerations overlap. The social challenge of convincing other participants and users to get on board with the metaverse architect’s solution is a problem known in platform economics as achieving focality, and there is the technical challenge of achieving compatibility among virtual worlds made by decentralized developers. 7
Primer on the Las Vegas Strip
The focality challenge and the compatibility challenge have intriguing parallels with the central problems urban planners face when laying out designs for a new city on greenfield land. And so, we focus on the unusual but instructive case of Paradise, Nevada, an unincorporated town that few of its visitors are even aware of when they visit, and the world-famous Las Vegas Strip that lies within its boundaries. In many ways, the Las Vegas Strip exemplifies what many metaverse proponents hope it will become: A vibrant, 24-hour environment that offers an eclectic range of immersive entertainment and commerce to a global audience. Just like the metaverse, there is no special rhyme or reason for why the Las Vegas Strip exists where it does: it is simply the result of a consensus that has emerged that this is the place you go to have fun or meet people. The case study of Paradise provides lessons relevant to how metaverse architects might solve both the compatibility and focality challenges.
Spanning just 4.2 miles largely on a single street, the modern Las Vegas Strip stands as a testament to human ingenuity and penchant for entertainment. Its over 30 major resorts collectively boast more than 100,000 hotel rooms—more than major cities like New York or Los Angeles. 8 It attracts tens of millions of visitors every year from around the world, 9 contributing many billions in revenue. Just on a single street, visitors can experience many “simulated” worlds and visit distinct spaces, that is, individual resorts that replicate features of Paris, New York, Venice, ancient Rome, ancient Egypt, a medieval castle, Hollywood, Southeast Asia, and even a pirate ship.
The Las Vegas Strip arose cumulatively due to the emergence and eventual integration of various resorts that chose, beyond any basic sense of logic, to locate in the middle of the desert alongside the then-barren Highway 81. The modern Las Vegas Strip dates back to at least 1941 with the construction of its first full-service resort, the El Rancho Vegas. 10 The success of the El Rancho inspired the opening of other competing resorts up and down the portion of Highway 81 that would eventually be known as Las Vegas Boulevard.
An important detail about the Las Vegas Strip is that it lies outside the formal boundaries of the City of Las Vegas, in the town named Paradise. The City of Las Vegas—known colloquially as “Downtown Las Vegas”—hosts an entertainment district called Fremont Street that historically used to outshine and rival the Strip. Part of what is interesting about the success of the Strip is that, by many measures, downtown Las Vegas may have been a logical place for resorts to invest, yet many chose to locate in Paradise instead, at a time when it was sparsely populated and lacked much infrastructure. Situating themselves on greenfield land in the Nevada desert meant the resorts were starting with a clean slate: it provided the freedom to experiment with creative formats, but at the same time created a major challenge in attracting customers to their unusual location.
The Las Vegas Strip was not born as a single, integrated entertainment district. It initially consisted of separate, competing hotels that patrons would have to drive between. Today’s Las Vegas Strip arose through the gradual addition and integration of the various resorts over several decades. The most likely path toward the metaverse follows a similar trajectory. Today, there is no single consensus metaverse; there is, instead, a set of rival proto-metaverses. Proto-metaverses are analogous to the resorts in Las Vegas. Just as the resorts were initially separate, but later linked into a contiguous whole, the clearest path to a consensus metaverse will be through the integration of today’s proto-metaverses. Table 2 lays out our core analogy, identifying how elements of the present-day Las Vegas Strip map to elements of a future hypothetical metaverse.
Comparison of Las Vegas Strip and Metaverse.
The Focality Challenge: Becoming the Default Choice
When new technologies emerge, there are often multiple variants of the technology that prospective users choose between. Over time, a social consensus emerges about which technology is going to become the mainstream one. The term “focality” is used by economists to refer to that social consensus. 11 Because technologies in general—and platforms in particular—exhibit network effects, the benefits of adopting a given platform rise with the number of other users already on the platform. As a result, merely propagating the belief that a given platform will become dominant helps make that platform become dominant, in a kind of self-fulfilling prophecy. 12 The work of building a coalition to make a given technology standard dominant is not just a technical task but also a social one. Platform evangelists compete to make theirs the “focal” technology. Technically inferior technologies—such as the QWERTY keyboard and VHS video tapes—have at times achieved dominance through strong network effects and an early lead in user adoption. 13
Selecting a location for building a new, planned city involves a similar kind of coordination as launching a new technology. Urban economists refer to this as “agglomeration,” an important phenomenon that has received research attention since the work of Alfred Marshall in the 1920s. 14 Prospective new residents of the city need a reason to choose to go there. Some planned cities fail to thrive because their urban planners simply assumed “the people would come” rather than create compelling reasons to move there. The planned administrative capital of Naypyidaw in Myanmar is often referred to as a ghost city, while in China, uninhabited skyscrapers in planned communities have regularly been demolished. South Korea’s planned metropolis of Songdo was hailed as the template for smart cities, but it was slow to attract arrivals. 15
In comparison, other new cities arose in unusual places. In the twentieth century, Paradise emerged as a new city in the middle of a desert, and it thrives today as a focal destination for commerce, socializing, and entertainment. It achieved “default” status as a destination for corporate conferences, bachelor parties, family holidays, sports fans, music fans, and foodies. While visitors arrive for their own eclectic reasons, many visitors enjoy the “buzz” and energy that the city maintains. Just like the positive network effects of joining a thriving digital platform, the Las Vegas Strip creates a network effect where it is a desirable place to be simply because so many other people are there. The density of people visiting allows for spontaneous and serendipitous social interactions, which turn into stories—which themselves accumulate into a cultural mythos surrounding the city that keeps new generations of visitors attracted to it.
Two notable attributes of the Las Vegas Strip that contribute to its success in achieving focality are its geometric layout and its focus on hosting temporary events. These attributes translate into lessons for metaverse architects who are trying to grow a critical mass of adopters for the metaverse standard they are promoting.
Focality through Geometry
Within a town or city, having a spatial focal point helps a crowd to organize themselves in one place. A central market located in a town square allows people to buy and sell goods—acting as a “platform,” yet predating eBay by thousands of years. The game theorist Thomas Schelling pointed out that a focal point can help solve a social coordination game without explicit communication; he illustrates the idea by asking: You are to meet somebody in New York City. You have not been instructed where to meet; you have no prior understanding with the person on where to meet; and you cannot communicate with each other. You are simply told that you will have to guess where to meet and that he is being told the same thing and that you will just have to try to make your guesses coincide.
16
Schelling showed that people pick the same locations surprisingly often. In the case of New York City, out-of-towners nearly always answer with the Empire State Building. 17
However, organizing around a focal point such as a town square only works for groups that can fit within that space. While a focal point can solve the coordination problem, it is not a “scalable” solution: a single focal point can only fit as many people as can stand in a circle and still have a conversation. Practitioners of Agile and scrum management suggest that a stand-up meeting is effective with up to ten people. 18 A key quality required of the metaverse is that it will be scalable: it needs to work whether the visitors number in the thousands, hundreds of thousands, or tens of millions. The obvious solution would be to expand radially outwards by densely populating an ever-larger circle, but then the location loses its sense of focality as people end up distant from the center of the circle.
The geometrically elegant solution to this is to organize spatially around a focal line rather than a focal point. Organizing around a focal line leaves vacant space for future expansion at either end. Moreover, notable boulevards have emerged as iconic features in many cities, from La Rambla in Barcelona to Broadway in New York, from the Champs-Élysées in Paris to Orchard Road in Singapore. The Las Vegas Strip is the epitome of achieving spatial focality through linear geometry. An important aspect of the design of Paradise is that the economic activity is concentrated not on a point or across a grid like most cities, but rather grew along a line: the Las Vegas Boulevard running north-south. Even today, developers of new large resorts like Resorts World and the Fontainebleau continue to fight for locations on that line, but far north and south. In theory, they could pursue locations east and west of the road that would be closer to the “center” of activity, but they choose not to.
This linear geometry will play a similar role in focusing activity in the metaverse, a feature intuited by Neal Stephenson’s Snow Crash. 19 In his novel, Stephenson describes the heart of the metaverse as “The Street,” a 65,536 km geodesic main street, accessible by a monorail with 256 express ports (spaced 256 km apart, with local ports every kilometer). 20 In comparison with the linear layout, the main approaches to the spatial layout used in today’s proto-metaverses are suboptimal. Some proto-metaverses (e.g., Fortnite and Second Life) consist of non-contiguous islands that users teleport between. Other proto-metaverses (e.g., The Sandbox) have a contiguous spatial layout that is diffusely spread out over two dimensions. The proto-metaverse Decentraland is designed with nine “plazas” in a star configuration, providing focal points for activity in its landscape. However, this solution provides less scalability than focusing activity on a linear geometry.
Any number of aspects of the metaverse that require focality, ranging from front-end advertising to back-end technical specifications, could grow and establish themselves in a linear geometry. For instance, consider Stephenson’s use of the term port to describe the stops on his imagined monorail: computer networks are already organized through a linear sequence of port numbers (e.g., TCP), and the metaverse could build on that logic. The essence of Stephenson’s insight here has not yet been properly appreciated by would-be metaverse architects, which may be one reason why no existing project has yet achieved focality.
Focality through Temporality
Just as a focused spatial layout can help a city achieve a critical mass, focusing activities temporally can also make interactions more concentrated and thus catalyze more serendipitous interactions. In agrarian societies, towns’ farmers’ markets would not operate 24/7; they would take place on a periodic schedule once or twice per week—and the markets work because all the participants know to show up on the right days. 21 Nowadays, temporary gatherings in the form of annual festivals act as a major tourist draw in many cities, from Mardi Gras in Rio de Janeiro to Oktoberfest in Munich. Burning Man Festival even results in a whole temporary city—referred to as Black Rock City—being assembled in the Nevada desert for the duration of the nine-day-long festival.
Las Vegas achieves a big part of its vibrancy by regularly hosting large-scale temporary gatherings. The Las Vegas Strip hosts more than 20,000 conventions and business meetings each year, 22 including the annual corporate conferences of Oracle and Salesforce, and the Consumer Electronics Show (CES)—the flagship trade show in consumer electronics. It also hosts high-profile sporting events such as the NBA Summer League. In November 2023, the Las Vegas Strip was transformed into a racetrack for the Formula 1 Grand Prix—an effort that took a massive amount of coordination between the resorts situated on the Strip.
Real-world temporary gatherings can help digital platforms achieve focality. In a notable example outlined by Parker, Van Alstyne, and Choudary, Twitter helped achieve critical mass by advertising on a pair of flat-panel screens at the SXSW festival in 2007. 23 By leveraging the physical presence and excitement of the festival, Twitter was able to attract new users and expand its reach. This strategic move capitalized on the shared interests and social dynamics of the event, translating the festival’s energy into increased online engagement and laying the foundation for the platform’s eventual global success. Another example is the Pokémon GO app, which organized special events and gatherings, encouraging players to congregate in public spaces to capture rare Pokémon and participate in team battles. These real-world gatherings created a sense of community, increased player engagement, and contributed to the app’s widespread popularity.
A natural parallel of this will be that virtual temporary gatherings will help the metaverse reach critical mass. Virtual conferences and trade shows will likely become one of the first commercial use cases for the metaverse. The interactions that will create the most value in the metaverse are highly spatially and temporally localized. They arise from being in the presence of a stranger, rather than an existing connection, and in an environment conducive to commencing a conversation. Von Hippel and Von Krogh provide an illustrative example of an employee at a trade show learning about a new payroll solution; they decide to adopt the solution even though they had not previously viewed their previous software as deficient. 24 The serendipitous interaction between an employee and a vendor—which arose because they were face-to-face in an environment conducive to talking with strangers—helped solve a business problem. We refer to the value created by these spatially and temporally localized interactions, orchestrated by an intermediary such as a trade show or a platform, as serendipitous network effects. The ability to catalyze serendipitous network effects in the metaverse will play a big role in determining which proto-metaverses become successful in achieving focality.
Virtual music shows have already been pioneered by Epic Games, who hosted concerts by Ariana Grande, Marshmello, and Travis Scott inside the game Fortnite, reaching up to 12 million viewers for a single show. 25 Similarly, Decentraland hosted a festival featuring deadmau5 and Paris Hilton as star attractions. 26 While impressive from a technical standpoint, the virtual conferences taking place via Zoom and virtual music concerts taking place in Fortnite have thus far lacked the infrastructure for organic-feeling serendipitous socializing. Once that part of the temporary gathering’s value proposition is added, the attractiveness of virtual temporary gatherings will increase dramatically.
The Compatibility Challenge: Reaching Alignment with Competitors
One characteristic of the metaverse imagined by science fiction writers is that users can move seamlessly between numerous virtual worlds. In contrast, today’s proto-metaverses are almost entirely self-contained virtual spaces siloed from one another. To integrate these virtual spaces and achieve the grand vision for the unified metaverse, the developers of the proto-metaverses will need to agree on a common set of standards for interoperability. Kaplan and Haenlein predict “a transition toward open source, standardization, and, ultimately, a connection between all single individual virtual worlds that transforms them into one big Metaverse.” 27 Consensus standards will be needed for rendering 3D graphics, depicting avatars, and linking virtual spaces together. If these standards existed today, software developers could already amalgamate the existing proto-metaverses into a single shared metaverse. The emergence of consensus standards for coding web pages (HTML) and navigating between them (HTTP) laid the foundation for the world wide web. In the same way, the metaverse will be based on a corresponding set of standards that extend the logic of web pages—which are one- or two-dimensional—into three dimensions. 28
Long before digital technologies called for the standardization of information in streams of zeroes and ones, the emergence of cities required humans to coordinate on many physical interfaces. Nowadays, we take for granted that train tracks have a standardized width, but in the nineteenth-century United States, there were 20 different incompatible gauges. 29 In Europe, four different gauges are still in use today, and in 2022, the European Commission proposed codifying a single standard track gauge in law. 30 As cities build out shared infrastructure, they need to agree on standards for road and rail infrastructure, water distribution, sewerage disposal, electricity distribution, and telephone lines. A city’s infrastructure has much in common with a technological platform: the city allows positive network effects to arise from the interactions of people within it, and the shared infrastructure on which it is built facilitates this.
Compatibility requires agreeing on the specification of the interfaces that link parts of the system—whether as an encoding standard at a digital interface or a track gauge at a physical interface. At a more abstract level, compatibility also requires reaching an agreement on a governance structure that determines who controls the interface, that is, who has the right to change it. Getting a competing firm to adopt a common standard is difficult because it means ceding control today over dictating the interface (as Apple likes to do) and thus forfeiting some potential value capture potential in the future. In telecoms and information technology, Standards Setting Organizations such as INCITS provide a governance structure that aggregates the preferences of member organizations through voting on committees. 31 In cities, property owners have much autonomy to manage their private spaces, but the physical interfaces that link private and public infrastructure—such as utility hookups or even doorways onto the street—must abide by rules set by local councils or regulators.
The hotel resorts on the Las Vegas Strip have achieved a high level of compatibility, which allows visitors to stroll through their private spaces in a free and seamless way. This mirrors the kind of experience users will desire in the metaverse. The Las Vegas resorts provide insight into an unusual type of hybrid space: a mixture of intermingled public and private spaces. Moving through the resorts is as easy as walking around in public, even while the visitors remain on private property throughout much of their trip. To achieve this, the hotel resorts cooperate bilaterally and multilaterally on key infrastructure and governance issues.
Compatibility through Bilateral Coordination
Las Vegas resorts have a lot of autonomy to manage their own spaces—they are analogous to today’s proto-metaverses. Each resort on the Las Vegas Strip has its own internal property management department managing the complex operations that keep the hotel rooms, casinos, restaurants, and nightclubs operational. While its internal infrastructure is managed independently, each resort also has multiple key interfaces with shared local infrastructure such as a power supply, water supply, and road connections.
The hotel resorts form alliances to address bilateral coordination problems. An interesting example is the pedestrian infrastructure on the Strip. Since the Las Vegas Strip arose around a highway, for decades it was only possible to get around by automobile. Today, the Las Vegas Boulevard is fully accessible to pedestrians, with multiple elevated footbridges and even multiple trains running parallel to the Strip allowing pedestrians to easily travel between the (competing) resorts.
But how did the boulevard become pedestrian-friendly? At face value, the competing resorts would ideally want to make “switching costs” high by making it hard for their customers to walk over to another resort. This would force customers to focus their spending at the resort where they are staying. But instead, the resorts cooperated with one another to build footbridges connecting competing resorts, thereby reducing the switching cost of walking to another resort. Consider the Caesars Palace and the Bellagio: these two resorts are in direct competition with one other, both targeting a high-end clientele with similar aesthetics (both inspired by Italian art and design) and comparable amenities. Yet they collaborated to put up private funding to construct a footbridge directly connecting the two resorts. To a passive visitor, it would not be clear where one resort starts and the other one ends, as the bridge’s theme resembles that of both resorts. In another example, the Las Vegas Monorail, which today connects multiple competing resorts, dates back to a bilateral partnership between the competing resorts MGM Grand and Bally’s in 1995.
One significant reason for this cooperation is the understanding that the overarching benefits of interoperability for potential patrons of both resorts outweigh the drawbacks of losing a marginal current customer. In other words, drawing people to the Strip is more important than keeping people in your resort. This can be thought of in terms of network effects: allowing people from one resort to meet up with others in another resort would improve direct network effects, and allowing people from one resort to see a show in another resort would increase indirect network effects.
The analogy of the Las Vegas Strip can be applied to the eventual metaverse, where growth could be achieved through a sequence of bilateral coordination agreements between existing proto-metaverses. The Strip footbridge in this analogy represents the interoperability of data, people, assets, currency, and more across different proto-metaverses. Two proto-metaverses that are in competition with each other could potentially see the long-term benefits of allowing interoperability by agreeing to use common standards. As the CEO of Epic Games Tim Sweeney has expressed interest in having Fortnite work with Roblox and/or Minecraft, this path toward interoperability continues to gain traction. With enough bilateral coordination, the cumulative development of standards and protocols can facilitate this interoperability more generally beyond just two parties.
Compatibility through Multilateral Governance Structures
Sitting above the resorts is a layer of local governance institutions, which resorts are subservient to but also have ways of influencing. In many cases, the resorts played a critical role in forming those institutions and today, they still decide a great deal of what those institutions do.
Recall that the Las Vegas Strip exists in Paradise, NV, which does not actually have a city government. While legally the town is accountable to the Clark County government and the Nevada state government, in practice to this day, a huge degree of governance is autonomously managed amongst the resorts themselves. In contrast, consider the distinct City of Las Vegas: while the city with its actual city government predates the Las Vegas Strip, with multiple resorts before the first resort on the Strip, it is clear today that the Strip dominates the city by any measure. As it grew, it became clear the Strip would also need its own multilateral governance institutions.
The need for these institutions arises because not all things can be dealt with through bilateral cooperation. The Las Vegas Monorail began as a bilateral arrangement with just two resorts, but its expansion to multiple resorts would lead to its eventual sale to the Las Vegas Convention and Visitors Authority, a local government agency funded in large part by the resorts themselves and controlled by a board with several members appointed to represent the interests of the resorts.
In terms of public safety, the vast majority of security on the Strip is provided by private resort security, who share knowledge amongst each other about known criminals as well as other undesirables (e.g., blackjack card counters 32 ). The Las Vegas Security Chiefs Association (LVSCA) brings together security directors, managers, and executives from various properties on the Strip for monthly meetings 33 to discuss emerging security concerns, share resources, and exchange ideas. Some resorts also share real-time surveillance data with law enforcement agencies.
The resorts of the Strip and throughout Nevada also played a critical role in the election of State Governor Grant Sawyer in 1958, who campaigned on the basis of recognizing gaming as vital to the state’s economy while recognizing the need for regulation and licensing to ensure public trust in the gaming industry. Governor Sawyer implemented the Gaming Control Act in 1959, which established the Nevada Gaming Commission and the State Gaming Control Board, two entities that work together to regulate and enforce gaming laws. To this day, the rules of gaming are tightly regulated by state agencies, and the resorts largely cooperate with all their investigations and regulations to protect their industry.
To agree on a governance structure for the metaverse, it seems likely that the proto-metaverses that amalgamate into a larger structure will need to agree to be governed by a higher-level authority. Initially, we would expect to see joint ventures and trade associations (like the LVSCA) arise to address issues of common interest that the proto-metaverses can agree upon. In some cases, we may ultimately need the creation and intervention of (quasi-)governmental authorities (like the Las Vegas Convention and Visitors Authority or the Nevada Gaming Commission), particularly with regard to addressing the underfunding of public goods or the governance of bad behavior by proto-metaverse operators.
Given how politically powerful the likes of Google, Amazon, and Microsoft have become, it might seem unimaginable that today’s technology giants would voluntarily cede authority to a third party. However, in the evolution of technology, this is not without precedent: the web as we know it emerged because, in the late 1980s, computing and telecom giants IBM, DEC, and AT&T and online service providers such as CompuServe and America Online (AOL) agreed to defer to standards set by the Internet Engineering Task Force (IETF) and the Internet Assigned Numbers Authority (IANA).
In a similar fashion, if the proto-metaverses that exist today agree to defer to a standard-setting organization—conceivably either a government-led initiative, an open-source software project, or a non-profit founded by a coalition of competing firms—then a technical standard for interoperability might follow soon thereafter. The companies betting on the metaverse need to recognize soon that, while they may be able to govern spaces within the metaverse, they will not be able to govern the whole thing.
Discussion
Contributions to Metaverse Design Discourse
We propose several concrete recommendations for metaverse architects. The most promising path toward a single, consensus metaverse is the amalgamation of existing proto-metaverses through bilateral agreements or multilateral coalitions. Integrating this argument with our observation about the linear geometry of the city street, a critical aspect of standard setting for the metaverse will be agreement on the spatial design of a consensus “hub space” where metaverse users can centrally congregate. The hub space will also provide access points to each individual proto-metaverse. The hub space acts like the Las Vegas Strip. The proto-metaverses are analogous to the resorts on Las Vegas Boulevard: a visitor can enjoy a lively, engaging experience simply by walking between resorts along the main Strip, or they can choose to dive into one resort and enjoy its distinctive attractions. A linear geometry in the hub space allows both focality and scalability, such as adding later proto-metaverses beyond the founding coalition.
In addition to permitting coordination and subsequent growth, a linear layout has the advantage that there is no clear status hierarchy among the resorts spread out along the street. Coalitions for launching emerging industries fail when participants disagree over their relative status and power in the coalition. 34 In a space organized around a single focal point (e.g., at the intersection of two streets, such as Times Square in New York) a clear status hierarchy is established by the proximity to the focal point. In contrast, an organically evolving line that can grow at both ends lacks a single “central point.” The Las Vegas Strip has grown over time, with resorts being added at both its north and south ends, and so there is no single focal point on the Strip for resorts to fight over. Thus, a linear geometric layout in the hub space can reduce conflict among the coalition’s members, as well as provide a focused space where users can interact with one another.
Contributions to Network Effects Research
We contribute to network effects research by helping to conceptualize serendipitous network effects. Traditional network effects take on two main forms: rich, “strong tie” interactions with existing acquaintances—as in telephone calls with family or catching up with friends on social networking sites—and transactive, “weak tie” interactions with strangers—as in matchmaking between buyers and sellers on an auction site or a ride-sharing platform. 35 Network effects in the metaverse have a more socially complex form (as illustrated in Table 3). With serendipitous network effects, the onus is on the platform to facilitate rich and meaningful interactions among strangers. The platform takes on the role of what urbanists call a “third place”—a setting apart from home life or work life where strangers mingle, interact, and form social ties. 36 Coffee houses and neighborhood pubs are classic examples of third places where people from different walks of life congregate. Just as online dating services are supplanting in-person third places for making romantic connections, digital platforms in general—and the metaverse in particular—have significant potential to affect how people form meaningful, strong tie relationships.
Network Effects Taxonomy: Tie Strength and Interaction Substance.
Note: The upper right quadrant refers to what we conceptualize as serendipitous network effects.
To catalyze serendipitous network effects, platforms need to manage not just network size, but also the behavior of participants toward one another and the establishment of a critical mass of positive emotional energy. 37 Remarkable results often arise when a cohort of strangers is brought together for a temporally focused period of creative ideation under mutually understood cooperative norms. Historically, hackathons and academic conferences have most clearly embodied this positive, generative emotional energy, though recent research shows that organizations can harness it through agile processes and strategic deadline setting. 38 Platforms can use spatial and temporal design to generate the positive emotional energy that goes into realizing serendipitous network effects. Like other forms of complexity, orchestrating a socially complex network of serendipitous interactions is deeply challenging, which has no doubt contributed to the slow speed with which the metaverse has emerged thus far. 39
Contributions to Decentralized Ecosystem Governance Research
We contribute to decentralized ecosystem governance research by providing a novel domain—urban planning—from which to draw governance mode analogies. The rapid growth of blockchain-based organizing over the past decade has stimulated scholarly interest in the fundamental processes through which autonomous and decentralized collectives of actors self-govern. 40 Research on this topic often draws inspiration from open-source software governance where a community of contributors provides voluntary labor to build a collective good. 41 While extant research on blockchain and open-source software is an important foundation for understanding the metaverse, 42 the interests of large technology firms have to also be taken into account. Large technology firms value architectural control for its promise of facilitating value capture, but this is often in tension with the ecosystem-level goal of value creation. 43 A successful coalition for a consensus metaverse could agree on a set of standards that allows blockchain-based and corporate proto-metaverses to co-exist.
A unitary, consensus metaverse could be jointly governed by a pluralistic coalition of competing stakeholders (i.e., today’s proto-metaverses). Our analogy between urban spaces and decentralized technology ecosystems has been somewhat overlooked in past research. 44 The analogy helps us identify new directions for studying ecosystem emergence: for example, one could study how ecosystems emerge from the accumulation of bilateral compatibility agreements between “neighbors” in technology space or how competing actors consensually cede authority to a quasi-governmental institution—the equivalent of an elected council in an unincorporated township. 45
Contributions to Game-Theoretic Solutions to Coordination Problems
We contribute to game-theoretic research on coordination problems. As Simcoe and Watson cogently lay out in a recent paper, emerging industries are often characterized by the co-existence of multiple competing technology standards. 4 The decentralized actors in the system have partially overlapping incentives: they value being on the same technology standard as other actors, but some actors may prefer a different technology than others. These incentives can generate various forms of miscoordination that lead to fragmentation or splintering in the nascent industry, delaying its growth. Temporal and spatial tactics can help solve these coordination problems. 46 Specifically, spatially organizing around a line—as opposed to a single focal point—provides a scalable solution to achieving geometric focality. Periodically scheduling temporary gatherings provides a similarly scalable solution to achieving temporal focality.
Conclusions: Viva El Metaverse
To turn the vision of the metaverse into a reality, firms can overcome the focality challenge by leveraging geometric and temporal affordances, and they can overcome the compatibility challenge through bilateral and multilateral cooperation. The path to the metaverse will require the arrival of consensus on shared standards for interoperability, which will allow existing proto-metaverses to interconnect. As with any other new innovation platform, we cannot predict the ultimate use cases for the metaverse, but we are certainly excited to see what gets built within the metaverse, and we are confident that its time will come.
Footnotes
Notes
Author Biographies
David R. Clough is an Assistant Professor in the Organizational Behaviour and Human Resources Division and the Entrepreneurship and Innovation Group at the University of British Columbia’s Sauder School of Business (
Andy Wu is the Arjun and Minoo Melwani Family Associate Professor of Business Administration in the Strategy Unit at the Harvard Business School and a Senior Fellow at the Mack Institute for Innovation Management at the Wharton School of the University of Pennsylvania (