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Unreal Estate

Scott Galloway@profgalloway

Published on February 11, 2022

The shifting tectonic plates that inspire earthquakes in the markets are interest rates. And for the entirety of Gen Z’s lifetime, they’ve laid still at record lows. In the 1980s, consumers garnered 10% interest on a CD. That’s a “certificate of deposit” for anyone under 30. For anybody 40 to 60 it’s still a “compact disc.” But I digress.

It’s the boring things that make money — software, insurance — and/or kill you. Lawnmowers kill 90 Americans each year, vs. 10 people killed by sharks globally. Interest rates got their close up in Die Hard (1988), in which Hans Gruber plans to fake his own death and murder dozens of people so he can steal Nakatomi Corporation’s interest-bearing bonds. “By the time they work out what went wrong,” says the villain, played by Alan Rickman, “we’ll be sitting on a beach, earning 20%.”

Scant chance of that line getting written today. Bond yields are at all-time lows, a quarter what they were in the 1980s, and “savings” accounts offer comically low “interest rates” that begin with “point oh” and get worse from there. Low interest rates make fixed income investments less appealing and drive up asset values via cheap leverage. The S&P 500’s Shiller P/E ratio, a respected gauge of the relative price of U.S. equities, is flirting with an all-time high.

The American dream of homeownership has become a hallucination — the apparent perception of something not present. Housing, already on a 12-year tear, has now gained the chaser of a pandemic that made everyone’s home feel unbearably small and shabby. Eight out of 10 urban areas in America registered average home price increases of more than 10% in 2021. Fifty years ago, the average home cost two years of the average American household’s income. Today it costs four.

All of which raises a significant question: Where should people put their money? Typically, crises offer buying opportunities for the next generation, as they come into their prime earning years in the wake of a reset. Just as earthquakes relieve geological pressure, decreased asset values are a societal release, birthing a key component of any healthy economy: churn. But this time, our boomer-dominated government employed Covid-19 as cloud cover to protect and extend the wealth of the already rich. Suppressing volatility protects the incumbents; for the first time in U.S. history, a 30-year-old is not doing as well as his/her parents at 30. The result? Young people are creating their own asset classes and volatility. In 2021, these forces manifested in crypto and meme stocks, which offered a mix of volatility, a halo of technology, and a lively cast of aggressive carnival barkers (i.e. evangelists).

But established crypto assets have been bid up, and trade correlated to the stock market. Across the street, the meme-stock trade is unwinding as investors realize they’re not investing in a movement, but a theater chain. It feels as if the era of outsized returns is drawing to a close. However, as Yoda said, there is another. I believe 2022 will bring increased attention, and potentially asymmetric upside to … virtual real estate.


Virtual real estate is simple: plots of land in a digital world (i.e. the metaverse) whose value is determined by factors similar to those that drive the value of physical real estate — namely, how big/cool/developed/proximate to other cool people/events they are. In a virtual platform like Sandbox you can buy a beachfront property, or something next to the mall, or something next to the … Warner Music Group headquarters?

Once you own it, it’s yours and leverages the only utility I can discern from the blockchain — a ledger that keeps awesome records. You can develop the real estate, rent it out, have friends over, host parties, open a store or a (virtual) theme park, whatever you want. You just can’t … live there.


Why do we think metaverse real estate could be the Gamestop of 2022? Answer: Brand. The mythology of real estate is that its value never goes down, and ownership makes you more responsible and attractive to potential mates. Seventy percent of single women in China say if you don’t have a deed, you’re not a viable mate.

Just as Robinhood fomented a myth that staring at a day-trading app is investing or learning vs. gambling, metaverse real estate combines the heavy, comfortable blanket of a boring asset class with the memetastic growth narrative of crypto. Nitro, meet Glycerin.

Money is pouring in, and a flood could follow. Virtual real estate sales exceeded $500 million in 2021. Analysts project that number will double in 2022. A plot of land on Sandbox was recently purchased for $450,000, as it meant … being meta-neighbors with Snoop Dogg. There’s also commercial real estate: Luxury designer Philipp Plein purchased a property on Decentraland for $1.4 million; it will soon become Plein Plaza. And dedicated real estate development: Metaverse real estate firm Republic Realm recently made the largest virtual land purchase in history — $4.3 million.

The upside defies projection — 5x, 10x, 20x? The innovation in web3 assets is that they aren’t benchmarked against any tangible revenues, much less profits. Moving in deep space, void of any giant astrophysical objects, neither time nor relative size/valuation holds any meaning. Instead of downers such as manufacturing, human customers, or anything producing reliable cash flow, this asset class offers the love of credentialed, persistent, and rabid supporters. They recognize the story as the book, not any actual words inside of it.

Similar to crypto, virtual real estate will be awash in pump-and-dumps and artificial inflation. Crypto allows you to operate multiple wallets: What’s to stop you from buying a property, selling it to yourself a dozen times at spiraling valuations, hiring a PR agent to place breathless stories in the press, and then selling it for 5,000 times what you originally paid? BTW, nothing in the system stops you from doing this. Indeed, the anonymity of blockchain encourages it: The most expensive art sale in history was a $532 million NFT that the owner sold to … themself.

The Wild West gestalt of virtual real estate will likely attract more users than it will repel. As in gambling, the odds don’t need to be in your favor to make it worth it, as the upside could be enormous.

OK, but what’s the fundamental value? Pass. There’s no way to know, and it might be zero. [Editor’s Note: It’s probably zero.] When the molly wears off, we may perceive valuations untethered from reality by orders of magnitude. Or we could all look back and claim we “knew this technology would be enduring.” What if it’s 1950, and I’m offering you a chance to buy the Glendenning family farm for $20 an acre?

And why not? Metaverse or not, we live more of our lives virtually every year — we have more conversations on Twitter, more meetings on Zoom. Sex and rock ’n’ roll are increasingly online. (Now, if only they could fit drugs down those tubes …) Don’t we want a place to call home? Fewer people can even afford a starter home on terra firma today, why not a palace in Decentraland? MetaWeWork, anyone? (Prediction: Whatever Adam Neumann is up to buying $1 billion worth of luxury apartments, it’s going to involve NFTs and the metaverse.)

Third Life

There is precedent for this. In 2006, Ailin Graef (nom de meta: Anshe Chung) became a millionaire developing real estate properties on a virtual platform called Second Life. She soon got a profile in BusinessWeek and became the face of economic opportunity in the digital age. Perhaps it was possible to create real value in a virtual world.

By 2007, Second Life’s GDP was larger than those of several small countries. It had a “population” (metaspeak for monthly users) of nearly 2 million. More than $3 billion was spent on in-game transactions within a decade. But then it faltered. There wasn’t much to do in Second Life, once the thrill of customizing your avatar and walking awkwardly around a cartoon landscape wore off. It required more powerful computers and higher bandwidth than most people had access to at the time. Security was feeble; vandals and griefers proliferated. Several competing virtual worlds entered the fold, splintering the already limited community. The value Second Life promised was only real if enough people believed in it. In 2006, it was the predominant virtual world — and we all believed in it. Until we didn’t.


That’s how much of my net worth I’m thinking of putting into virtual real estate, because that’s how much I’m willing to lose. If I were 25, I might invest 10% of my investment capital — an amount I could afford to see go to zero. Let’s be clear: As a standalone investment, this is gambling. But allocating a fraction of your portfolio to the crazy volatile shit that may offer asymmetric upside (i.e., an outsized return) is less irrational than it sounds.

When you get older, real estate becomes the hippocampus of your brain, where memories reside. I remember the two-bedroom 1,100-square-foot apartment in Tarzana I grew up in. I can see myself under my NFL bedspread in the middle of the night, when my nosebleeds wouldn’t stop and my mom would comfort me with math problems.

I remember the entryway in the coop in New York City my dog ruined, so excited when I came home she couldn’t control her bladder. Our home now is alive in the a.m. with one boy claiming he’s too sick to go to school and the other waiting in front of the door with a backpack that looks like it’s wearing him. In the future I’ll remember how quiet the house was, in the middle of the day, without the boys. I’ll remember feeling helpless, knowing a relentless quiet was coming, when they’d leave and find their own real estate.

Life is so rich,

P.S. Data isn’t the future, it’s the present. If you aren’t using it in your role, you’re probably missing out on opportunities for growth. Sign up for the Data & Analytics Essentials Sprint with industry titan Tom Davenport now.



  1. Randy Lange says:

    What does all this really mean? I just can’t make sense of this digital world. I do know, I feel the need to help my kids big time to buy actual analogue real-estate or they’ll never be able to afford it. None of us will live forever so we got to pass the home or the value off to someone. Just a bizarre place in history that we’ve come to.

  2. Catherine says:

    People are living in tents because rents are too high, because land is so pricey that new development has to be at the luxury tier so developers make a profit. That’s what we’re told. Then we read people are spending millions on pretend land in pretend towns. And I just want to cry, go to sleep or both. WTF. What in the actual F.

  3. Kevin Godinez says:

    You mentioned that the average home costs nearly 4 times a persons annual salary today versus two times, 50 years ago. Does this take into account that the average home today has nearly twice the square footage as the average home 50 years ago? Given that, the cost per square foot would be roughly aligned.

  4. W. Kelley says:

    Excellent. My kids are looking for a house after selling thieirs, pandemic job loss and reinvestment in a masters program. The search is increasingly becoming only a dream with hallucinations. At one point we weren’t allowed to see the entire house without an “accepted offer”. Actual Virtual Real Estate!

  5. Craig says:

    Professor really good one…back to orginal ideas love it!

  6. Ian J says:

    It’s always a pleasure & micro-education getting your pieces in my email. I do love the way you ended this. I have a 16 year old. This is soon coming as his world expands daily. I appreciate your incisive mind, & experience and big heart. Gotta go back to listening to Pivot I think. Best to you, my good man.

  7. Charles Slomovitz says:

    Fly out to SF 2/25, I’ll buy you a ticket to War on Drugs at SF Civic.

  8. CD Lopez says:

    I think this is very fascinating information. Thank you Professir Galloway.

  9. William Bell says:

    Scams and flim flams come in all shapes and sizes. It’s just another nonsense attempt to enclose the commons and privatize the digital world in the horrific neo-free market corporate statist image of the world which America now represents.

    Investing is about building a better future. This bullshit is just straight scamming / gambling.

    If you think the next generation are going to live in a better world because they invested in this then the world is truly going to hell.

  10. Neil says:

    So true….as a baby boomer what I don’t know about the metaverse will kill me……eventually

  11. Robert says:

    Please, how does all this relate to real land and housing. And real people…or am I missing something?
    You use a lot of insider jargon that I don’t know. Compared to many of your previous excellent posts, this one I don’t understand. I have sense you have drifted into some far, far place.

  12. Cschaab says:

    Tulips for sale.

  13. Corey says:

    Scott, I think investing 1% would be a terrible idea unless you want to be a cyborg

    • Doug says:

      +1, on this. I work in a Zoom meets “In-person demo” of software as a service world where “what can you do by computer next” has been the watch-word (watch phrase) for about twenty years, BUT… crypto/crypto currency’s stability and virtual real estate are quite esoteric, even when I try to apply “abstract thinking” to them. I can envision both real estate space, turned into into something different, etc… but I don’t see this “virtual property” ending as anything that I can make reasonable investments with, or accept as sensible for we organisms that are self-ambulating, having forethought, introspection, etc.

  14. Nostra Dumbass says:

    As with crypto, imo, this shall end badly….but as to when, who tf knows. Fools leading other fools, etc. I’ve never seen the level of insanity that we’ve seen lately where smart developers can literally write code and create a digital asset out of thin air and mint millions, if not billions. My fear is that the insanity will continue to the point where these digital assets will become weapons of financial mass destruction to those less financially intelligent. Scott, I have a ton of respect for you, but by you “endorsing” this, even at 1% of your assets, others will follow with 10% or 50% or more of theirs. The early ones may get rich if they time it right, but others will cry their hearts out eventually. It may be 5 or 10 years from now, or more, but the tears will surely flow. And if not, I pity all of us.

  15. Mark says:

    Is this really the best that Stanford grads and Ivy League MBAs can come up with? FAKE REALITY for sale? Have fun with it.

  16. Mike says:

    I get that Crypto is succeeding but isn’t more because it is untraceable so Drug cartels use to move their money down south and porn site will use to keep anonymity and avoid taxes. Which explains why it is so volatile. So I can understand crypto currencies now, but had a hard time when it first came out. What is that “catch” with a virtual real estate that gets people saying..ooohhh I might make money? I agree even 1% investment at this point seems kinda like flushing money without the thrill of gambling.

  17. Brian says:

    This is “magazine cover indicator” quality stuff.

  18. jaron hunter says:

    One can’t deny the money being spent by consumers in the examples given in the metaverse timeline, some others to include are the Sim Cities (Billions), Grand Theft Autos ($6 Billion), Star Citizen ($100+ Million), not to mention some have their own in game currency/virtual ecosystem.

    At the end of the day, these are games played by kids who are spending their parents hard earned money to upkeep their virtual endeavors. It’s crazy to think this is translating to grown folks investing in digital land/real estate, I’m on my way to checking these out! lol

  19. Jeff says:

    Calling it “real estate” belies a fundamental betrayal of understanding. In the real world, part of the bedrock of the value of real estate is the cost of transporting people/goods/services to a different location. I’m willing to pay a higher price for things that are near my body. In virtual worlds, I can teleport anywhere for no cost. I don’t see how this ends in anything other than tears for the chumps who fall for it.

  20. Sandeep Bhushan says:

    Fantastic article, Scott. You addressed a lot of curiosities I had on this topic – great education, thank you!

    This line captured my own feeling for his this ends : In 2006, it was the predominant virtual world — and we all believed in it. Until we didn’t.

  21. Pierre Rasputin says:

    Welcome back, Professor! It’s good to see you getting back to your wheelhouse. Thanks for the rundown of the virtual world as it stands, and for leaving Stacy Abrams out of it.

  22. Dave says:

    You sound exactly like me and my 50-something buddies who want to start a podcast called Blockchain Beatdown and just make fun of this stuff, while appreciating the few good things that come from VR. We had our fun with web 1.0, made our money (or not), and now look on in bemusement at all of this while trying to figure out how to short web3 investors. For realz, someone just dropped off the $20,000 VR rig that we built virtual worlds with in 1993. Computer Museum didn’t want it, I guess I could turn it into a cautionary tale-themed halloween costume.

    Datapoints: SecondLife created VR world Sansar. It bombed, they sold it. SL founder Philip Rosedale is pumping money into SL and rejoining as a strategic advisor.

    I think I left my SL avatar in a club jumping up and down to make money as was and is the thing to do in these joints. I haven’t checked that virtual bank account in a decade. Maybe I’m rich and I don’t even know it?

    I thought everyone knew that VR will be a bust and AR is where it’s at, guess the molly is still hitting in waves.

    Keep pulling the curtain back and the rug out from under.

  23. Dan says:

    You addressed my thinking and as usual, put them in far better, succinct words. I am confused about one thing though: after explaining the likely worthlessness of virtual real-estate, you are still considering an investment in it? If it were me, even 1% of my portfolio is too much to risk on something like this. Coming from the Buffet school, I stay away from things I don’t fully understand. It’s not that I don’t fear risk; If I walk up to a craps table, I at least understand the game and the odds, plus I’ll have some fun too.

  24. Jim says:

    Virtual real estate makes a lot of sense to me. It’s a place where geeks where VR goggles can take their imaginary girlfriends in their imaginary cars after their imaginary dates to have imaginary sex.

    • Phillip Soltan says:

      Exactly! It’s taking online porn to the next level. Anything else you do in a virtual world is going to get boring quickly.

    • Doug says:

      At the risk of sounding crude, or gauche, will actual, live, “real” people, who’ve been physically involved in “real”, “person-to-person” intimacy in the past, or present, invest their earnings into this endeavor something different than “in-person” sex? Seriously, I’m not trying to be crude, just trying to understand what I may not have thought about, or comprehended.

  25. Kevin says:

    Thank you — I’m now living in the relentless quiet house and this is beautifully said: “Our home now is alive in the a.m. with one boy claiming he’s too sick to go to school and the other waiting in front of the door with a backpack that looks like it’s wearing him. In the future I’ll remember how quiet the house was, in the middle of the day, without the boys. I’ll remember feeling helpless, knowing a relentless quiet was coming, when they’d leave and find their own real estate.”

    • Marilyn Grant says:

      Me too. I miss them and the people they were, no longer exist. Articulated beautifully.

  26. Jay says:

    There’s no scarcity for virtual real estate. I always thought scarcity drove prices…

    • jaron hunter says:

      great point!!!

    • Liz says:

      There is scarcity – each of the Metaverses will only have a limited number of “plots”. For example Sandbox will have a maximum of 166,464 LANDS available. I think the real gamble is which one of these worlds will be dominant. Reminds me a bit of MySpace and Facebook – except in this case you have to pay to own a space in it, but you can still join for free and visit the spaces and spend real money.

  27. David Sorensen says:

    Dad always said that “the thing about real estate is that they are not making any more of it.” But the reality of virtual real estate is they will always make more.

    Virtual real estate is an oxymoron. But that doesn’t mean morons won’t buy it.
    This is outside of my comfort zone after I invested all my coin on a product that turns belly fat into a hair replacement creme for my avatar.

    • Doug says:

      That …”invested all my coin on a product that turns belly fat… ” comment thread is internet gold and wins this thread.

  28. Bruce G says:

    I doubt young kids now days will ever even know FB, but I can imagine how FB might one day be used in a medical setting to combat Alzheimer’s (relearn your past) or serve as a memory bank for old farts who can’t remember stuff

    • james says:

      Are you referring to Black Mirror’s “San Junipero” where in our dotage we relive our happy youth?

  29. Michael Olsen says:

    Prof, you grew up in Tarzana, as in Edgar Rice Boroughs, Wilbur Avenue and Portola Junior High? Lots of fun takeaways here but I am delighted to see we have that in common, and oversized blue dogs.

  30. Noel says:

    I’ve been in and around game development for 20 years, employed-at or working closely-with companies such as Sierra, Second Life, Pokémon, and others.
    So much of the talk around metaverses, the investment value of single-product successes like Roblox, or the ability to use NFTs to transfer objects between products/worlds comes from people who don’t understand the relationship between consumers and entertainment products, or humans and digital goods. Industry experience is shunted aside for worship at the alter of innovators making big promises just over the horizon, without regard for how people _actually_ behave and relate to these products.
    As one small example: Metaverse boosters often ignore the central struggle in the life-cycle of a live-service or massively-multiplayer game (MMO), where developers must tread a careful middle ground developing new and different content to grow the customer-base (and preserve existing engagement) while simultaneously not alienating the current customers or devaluing their purchases, achievements, and time-investments to-date.
    People’s engagement and emotional investment in digital goods and narrative experiences is just *different* from the way they engage with physical items. In the real world we look at an old/worn object like a toaster – whose dings and creaky hinges directly remind us of the utility we’ve gotten from it – shrug our shoulders and replace it. By contrast, digital goods don’t wear or age the way physical goods do – they never get “old” or lose their utility unless the online game/service is changed by developers. This fundamentally alters the psychological reaction of the owner when the object ceases to be valuable! In the digital world users/owners can always point to another human-being who has made deliberate gameplay or coding changes to the world economy or power-dynamics (aka “balance” or “game meta”). Our monkey brains view actions by other hominids _extremely_ differently than acts of nature/entropy.
    And yet devaluing objects and experiences over time is nigh-unavoidable over the course of a years-long online game/world. Developing new challenges or activities opens up opportunities (or sometimes the necessity) for new and different digital goods & tools (i.e. weapons, armor) to tackle those challenges. It creates opportunity for newer or less-advantaged users/players to gain in power, skill, accomplishment, or influence. These are the digital equivalents to upward social & economic mobility in the real-world; and just the like real world people can tell if you are not providing those opportunities in your digital product! Lacking this mobility means there’s no motivation for new players (customers) and no future growth potential for your product; only the prospect of milking your current (ever dwindling) customer base.
    To be clear, this extends beyond digital goods to even things like narrative experience. Players of a game will become enraged if they play through a narrative section of a game and then later-on new players are able to skip this narrative. Even if they enjoyed the experience, they will feel cheated that others have been able to avoid a time-investment that they were required to complete. And yet, if you have a long-lasting product/franchise you simply cannot require newcomers to play through every experience in the history of the product – that prospect is just too daunting to attract new customers (many of whom would prefer to jump in and quickly achieve the same level of skill or power as their peers who are already enjoying the product). And here’s an interesting contrast to think about: An amazing narrative in book form becomes celebrated and sought-after for years; perhaps decades. Yet an amazing interactive narrative in a game or online service becomes stale at a much different rate, and new/prospective customers dread the idea of having to “go back” and start from the beginning. Would you ever expect someone to say “Oh, Game of Thrones is such a long-running series I’ll just start with Book 5”?
    There is fertile ground here for further exploration & debate, but at some point Scott will look at the length of this comment and say “Hey, get your own show!” 🙂

    • Alan Ivory says:

      And he’d be right. You gave me some excellent insights into the dynamics and problems of game creation and management, and expressed so clearly and succinctly I for one would read your stuff. Many thanks.

      • Noel says:

        Thanks Alan! I don’t know if I’d ever call my writing “succinct”, but I’m glad my explanations landed and provided some insight. 🙂

    • John Logic says:

      Thank you!

    • Peedee says:

      Agree. This comment puts the post to shame. More please!

      • Noel says:

        Thanks Alan, John, and Peedee for the kind words. 🙂
        We’ll see if I feel eloquent in future Galloway posts!
        Someday I’ll start that podcast I’ve always wanted to do, covering the topics I know: IT Operations, the Games/Entertainment industry, and Aviation. It’s the perfect through-line, guaranteed to attract a solid single-digit audience! 😀

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