The Breathless Rhetoric (and Prosaic Economics) of Virtual Reality

The reality - whether virtual or actual - is that VR cannot achieve the degree of scale that delivers the productivity growth and economic benefit generated by earlier generations of technology.

And that is true whether the reference is to the smartphone, the internet, electricity or the automobile.

Silicon Valley hypes every innovation it creates. But that does not change the financial reality. JL

David Sax reports in The New Yorker:

We went from typewriters and file cabinets to the modern flat-screen, paperless office. That transformation spurred productivity, and, in turn, growth. V.R. only has the power to incrementally shift existing practices.The business world’s great challenges are challenging because they’re complex in ways that technological solutions cannot adequately address. The problems that businesses and economies face involve a messy nexus of data, culture, circumstances, and human behavior—problems that, for now at least, must still be wrestled with in actual reality.

Walking through the annual South by Southwest Interactive festival in Austin, you got the sense that one segment of the ever-optimistic U.S. tech industry was feeling particularly sunny. With Facebook just weeks away from launching the long-awaited consumer version of the Oculus Rift, which came out this Monday, virtual reality was clearly the belle of the ball. There were demonstrations everywhere, involving the usual suspects (Samsung, Google, cyber-pornographers) and a host of other brands. Budweiser offered V.R. tours of a brewery. McDonald’s allowed guests to paint the inside of a virtual Happy Meal box. Beneath a thirty-foot-tall inflatable rocket, NASA was using the Rift to take virtual tourists to the top of its Space Launch System, the HTC Vive to show them the International Space Station and the moon, and Google Cardboard to get them to Mars.

In a keynote presentation that packed the convention center’s largest ballroom, the Wired co-founder Kevin Kelly singled out virtual reality as one of the inevitable technological forces that will shape our future. “I believed this was going to change everything in five years back in 1989,” Kelly said, displaying a photo of himself wearing a V.R. headset from that era. Though his prediction was off by a few decades, he believes once again that V.R. is ascendant—not because it’s “a thousand times better but because it is a million times cheaper.” An experience that once required expensive hardware and vast processing power can now be delivered by placing a smartphone in a cardboard box (though the Rift will set you back six hundred dollars, and more if you need to upgrade your computer).

The business world appears to share Kelly’s optimism. According to the consultancy Digi-Capital, last year investors poured nearly seven hundred million dollars into V.R. companies, more than double the amount that was invested in 2014. This year, the figure is more than a billion dollars, and Digi-Capital predicts that the market for V.R. and augmented reality (in which images are projected onto a user’s field of view) will grow to a hundred and twenty billion dollars by 2020. Soon, we have heard, V.R. will improve the military, increase real-estate sales, change education, transform journalism, increase fitness, and reinvent fine dining. There have also been claims that it will revitalize the economy generally, for instance by using new collaboration and visualization tools to enhance workplace productivity.

The most memorable V.R. experience I had at the convention came in that last category, courtesy of the massive German enterprise-software company SAP After I strapped on a Samsung Gear smartphone headset and a pair of headphones, a British-accented female voice began to speak. “Welcome to your SAP Digital Boardroom,” she said, as a trio of virtual green screens appeared and quickly filled with bar graphs, pie charts, and other analytic tools. She told me that I could reach and access all the data in my company’s past and present, encouraging me to pull down whatever spreadsheet I desired. At the mention of “spreadsheets,” I ripped off the headset. SAP had somehow created a V.R. experience that was more boring than an actual business meeting.

Nic Smith, the director of product marketing for SAP Analytics, explained his company’s rationale for creating something in V.R. Yes, he acknowledged, they wanted to connect to Silicon Valley’s zeitgeist, which he referred to as its “idea fabric.” But, he said, SAP also believed that V.R. had real potential as a business solution. “Imagine total transparency to data across entire organizations, increasing the ability to make rapid decisions,” he said, describing the ability to reach out and virtually touch an analytic. “Maybe it’ll spur a new generation of executives who’ll opt to skip the meeting to view it in virtual reality. It is the art of the possible.” Perhaps Smith is correct, and virtual-reality boardrooms will replace real ones in the future. His company isn’t alone in seeing possibilities. But then, you hear similar rhetoric whenever Silicon Valley invests in a new technology that promises to change the way we work and live. (Tablets! Google Glass! The Internet of Things!) Often, what we actually get is a solution in need of a problem, even as organizations feel compelled to adopt it in order to stay relevant.

In the short term, at least, the results are often poor. When the iPad came out, in 2010, businesses and organizations, buoyed by rhetoric about the tablet’s world-changing potential, rushed to create tablet strategies. Fundamentally, though, not much changed. The food-service industry, for example, was modestly affected by the introduction of tablet-based cash registers, but attempts to shift to tablet-based ordering did little to transform the dining experience, beyond filling many airports with sticky screens. Schools, governments, and nonprofits that invested heavily in tablets, in the belief that they were the future of education, have mostly seen results ranging from flat to disastrous.

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With V.R. and A.R., the potential for gains clearly exists in some areas, such as video games and entertainment. Possibilities also exist in manufacturing; last year, Boeing presented results of a study that it conducted with researchers at Iowa State University, which suggested that instructions presented in augmented reality led workers to assemble plane wings faster than when the steps were presented in 2-D. But it’s early yet, and most of the proposed benefits are largely unproven, which hasn’t stopped some in the tech industry from making grandiose claims. “Virtual Reality holds the promise to be even more transformative than the flat Web was—reaching into every segment of every market and remaking it to be virtually accessible,” a V.R.-startup C.E.O. wrote in a sponsored post for Wired in 2014. The result, he claimed, will be “radical changes and a new wave of prosperity that will reach around the globe.”

As Robert J. Gordon, an economist at Northwestern University, pointed out in his recent book “The Rise and Fall of American Growth,” past digital panaceas have not even tended to lead to economic progress, let alone to transformative leaps. Though we may view the ability to summon warm cookies to our doors with the tap of a finger as a great advance, in reality, Gordon cautions, the greatest economic benefits Americans are likely to see from digital technology may already be behind us.

Curious, I called Gordon up, to ask whether he thinks virtual reality will be any different. He was predictably skeptical. “We had a period of about thirty years where we went all the way from offices filled with typewriters and reams of paper and file cabinets to the modern flat-screen, paperless office,” he told me. That transformation spurred productivity, and, in turn, growth, in numerous ways, for instance by freeing workers from some repetitive tasks and jobs. “I don’t see V.R. as [bringing the] same kind of productivity gain as that,” Gordon said.

Why not? Because, he argued, V.R. only has the power to incrementally shift existing practices. Gordon cited the steady introduction of new classroom technology in Northwestern’s lecture halls as an example. It has slightly changed the way he teaches, he said, but not what, how, or how much his students learn. “The reality is that students are learning the same material, and getting the same scores on tests as ever before,” he said. He saw little to suggest that the results would be different if his students were learning from home with V.R. goggles on.

The fleshy truth, it would seem, is that the business world’s great challenges are challenging precisely because they’re complex in ways that individual technological solutions cannot adequately address. V.R. may provide a boost to the entertainment industry, or, as Zuckerberg hopes, to social-media platforms, but translating these gains into widespread progress will be another matter. The problems that businesses and economies face involve a messy nexus of data, culture, circumstances, and human behavior—problems that, for now at least, must still be wrestled with in actual reality.