7investing advisor recently attended the SXSW conference in Austin, TX. Psychedelics, the Metaverse, and Quantum Computing are three important opportunities he sees developing for investors.
March 31, 2022
– Advisor: Simon Erickson
Austin’s SXSW Conference offers a unique window into the future. It involves hundreds of thousands of entrepreneurs, techies, musicians, and artists from around the world, descending on the city to share their innovative new ideas and ventures.
It’s also a great place to be a growth-style investor. We get a glimpse of the cutting-edge technologies that aren’t yet appreciated by the broader stock market or its institutions.
Between the breakfast tacos and the barbeque, I took notes on three intriguing movements that I believe will have a profound future impact: the Metaverse, psychedelic therapeutics, and quantum AI. (If you’d like to chime with your own thoughts about any of these, please bring them to our 7investing Community Forum.)
Key Presenter: Mark Zuckerberg, CEO of Meta Platforms
I took two trips into the Metaverse during this SXSW trip. In one, I was dancing as an illuminated figure with someone in the United Kingdom. In the other, I was a bystander on a pirate ship watching a dramatic confrontation play out in front of me.
These were both kind of neat, though I wouldn’t say they were life-changing. There are big expectations and a ton of hype surrounding the Metaverse. Several high-profile entrepreneurs truly believe it’s going to redefine social media, digital advertising, and even the internet.
One of those high-profile entrepreneurs is Meta Platforms (Nasdaq: FB) founder Mark Zuckerberg. Mark believes the Metaverse will become the next chapter of the internet; following its previous evolutions from desktop text to mobile and then to video.
While there are plenty of other projects Facebook will be dedicating resources to, it is very clearly making the Metaverse its number one priority.
Here are a few other lighted-edited notes from the conversation with Mark.
Mark kept coming back to the word “presence” in describing the Metaverse. It isn’t a thing that any one company builds, but Facebook’s goal is to offer the fundamental tech that brings the Metaverse to life.
The “mass-creator economy” is their current focus. VR headsets and processing are one part; but even bigger than that is the expression from creators who build experiences. This is the key to creating a massive new economy.
The way people experience social media has shifted and is further shifting. 2004 was text. A few years later was photo/visuals (i.e. phones with cameras). Video is primary way to share experiences today. The next step will be an immersive medium where you’re there with other people.
Games have been the first focus of content creation in the Metaverse. Now ‘Horizon’ social experiences next and fitness are next. VR will become a ‘general computing’ environment that is different things to different people.
The clothing or avatars you use in Meta are transferable via NFTs. You can self-select who you want to be and how you are perceived. It is fully-inclusive, for people from anywhere in the world and of any demographic. This is the fundamental promise of the Metaverse, and Mark and his team are spending a lot of time to get it right.
“There’s still a lot more work to be done with Facebook, Instagram, and WhatsApp. Social experiences, integrating video, etc. But the Meta vision is ‘thrusting the flag even further into the future’. We didn’t want this to become lost, as a secondary-priority to all of the existing social media stuff. Meta is the more important thing over the long term. We need to commit to that.”
One of the key reasons Facebook changed its name to Meta Platforms was to energize a lot of people who are internal to the company.
Three other great quotes from Mark in the conversation:
There are a ton of technical challenges involved in creating the Metaverse. These include VR/AR problems, social presence/avatar problems, and backend computing problems.
VR rendering needs to be 5-10ms before your eye re-focuses. Needed a mobile chip to decouple from a wire to a computer (evolution of headset). Next will be remotely doing the computing, decoupled almost entirely from the headset.
AR headsets aren’t really socially-acceptable and fashionable yet. 5mm thick glasses that can display a supercomputer + hologram projection + speakers + lasers to track eye/focus movement + be affordable. This is one of the biggest tech challenges of the next decade. “Miniaturizing things is actually really hard.”
Meta follows a 10-15 year roadmap, with a product launch schedule that ships every couple of years to get there and achieve that.
The Metaverse is not primarily about games. It’s about connecting and being social. Zoom doesn’t really allow you to make eye contact, which is kind of weird. There’s a lot of work between companies to set industry standards and interoperability. It’s exciting.
Key Presenters: Roland Griffiths (Johns Hopkins research) and Tim Ferriss (Author and investor)
Another excellent session at SXSW was related to the use of psychedelic drugs as therapeutics. No longer just recreational mushrooms, these compounds are now going through clinical trials to treat a variety of medical conditions.
LSD was first formally introduced to the world at a conference in 1957. In the nearly 7 decades since then, they have largely been used for recreational purposes. Now, they’re becoming an evidence based solution to psychiatric diseases.
Ketamine (an injection) was previously used be vets as an animal tranquilizer, to alleviate pain and suffering in horses. It could serve a similar purpose for humans.
Psilocybin (ingested, often as mushrooms) are now being prescribed for depression. Can often be used for PTSD, because it often suppresses painful experiential or memory elements. It may also be possible to be used for other conditions too, like getting people to kick the habit of smoking or nicotine additions or potentially even alcoholism.
It’s very interesting to the researchers on the panel that a single drug can treat multiple conditions effectively. Two companies are now progressing drugs through FDA trials using psilocybin.
One of those companies is Compass Pathways (Nasdaq: CMPS). It’s progressing a clinical trial of 230+ people, who are using 1-25mg of psilocybin for treatment-resistant depression. Thus far, the data shows a 24% treatment response rate after 24 weeks.
In a similar small cohort at Johns Hopkins study for major depressive disorder (outside of the Compass Pathways trial), data showed a 75% response rate at 12 months. A third study is being done at Imperial College in London, also for depression.
Serotonin 2A receptor is the primary binding site for molecular structure of psychedelics, which includes profound emotional changes in a person’s perception of reality. This is also common in tryptomines (LSD, psilocybin) and ethyl-amines (MDMA, peyote). Ketamine and MDMA have some elements in common, though they have distinct differences in their neuro-biological pathways.
Structural neuroplastic changes — such as dendritic spines or the architecture of neurons — cause the interconnectivity within the brain. Several of the panelists describe the interaction as “psychedelics are rewiring the brain, fundamentally’.
Default networks are believed to be a way that drugs rewire one’s self-identity. This is great for those who suffer from depression, to decrease the emotional response. (Tim Ferriss confirms this from a personal encounter with psychedelics; he felt he didn’t focus on his own depression so heavily).
The “rewriting the narrative of our compulsive behaviors” continues to fascinate researchers in this field. They are excited to see commercialized opportunities in the future for depression or anorexia.
Key Presenters: Hartmut Neven and Erik Lucero (Google Quantum AI)
The race for quantum AI is on. Researchers, companies, and countries are all charging full-speed ahead to develop and manufacturing computers that will give them a competitive edge. Quantum computers offer the potential of a step-change though, with an ability to complete tasks and solve problems that classical computers simply are not able to.
Along with several other tech companies like IBM (NYSE: IBM) and Microsoft (Nasdaq: MSFT), Google (Nasdaq: GOOGL) is very interested in developing a quantum computer. Two of Google’s senior researchers shared updates on the progress Google is making and its forward strategy and timeline.
Technical AI systems can outperform humans in specialized applications, such as playing Go or translating languages. There are multiple potential paths to intelligence. It’s possible the AI designed for computers can look different than the biological, human brain.
The laws of physics govern informational processing, namely Newton & Maxwell’s computing laws. Perhaps it’s time to upgrade AI’s computing that follows quantum mechanics.
A quantum computer (QC) replaces the language of Boolean 0s and 1s with quantum mechanics. It arms us with new tools that can allow algorithms to solve problems with significantly fewer steps. It moves from an AI inspired by the brain to one inspired by the fundamentals of nature. “We move from brain AI to mind AI”.
Quantum Machine Learning involves a training set + a neural network to modify inputs and outputs based on the training set. Classical systems are recording what we see. But quantum systems will have new capabilities to see things we were blind to before. One example of this is looking through a telescope with your naked eye, versus looking through a telescope with sensors that could detect dark matter or gravity; things we can’t see with our eyes.
Google is developing its “Sycamore” quantum computer as the proof of concept for Quantum machine learning.
Quantum Simulations could involve Richard Feynmann’s “Killer App”, which would simulate systems where quantum mechanics really matter.
One of the most challenging problems to solve today is climate change, primarily breaking away from our current way of producing power and energy for the world. QCs could be useful for making more efficient solar cells. Nuclear fusion is another opportunity, or inertial confinement fusion that gives off less radiation and with no potential for a fission meltdown. QC could hasten the design of a fusion reactor. Battery design iteration is another application that could be accelerated.
Google is building Fault-tolerant + error correcting quantum computer.
Superpositions are prepared on Sycamore. All QCs involve a combination of both quantum + classical hardware, and they require an entire team to design and to build. There are a ton of control electronics, cables, and wires – to keep the temperature at below that of outer space and also in a vacuum. There can be absolutely zero outside interference.
Qubits are resonators – like strings on a guitar – that resonate at a single tone. Quantum gates use control instruments to produce electrical waves that can ultimately be read and understood by an interface.
A great quote from Erik is “The QC team is the band, and the qubits resonate when they dance. But they only respond when the band plays in-key. And the performance is completing operations of calculations for algorithms.” In other words, the QC team can tune the qubits to resonate at the right frequencies. And they can also entangle them with other systems as well.
In 2019, Google wrote the ‘song’ [by now, you can likely tell the influence of Austin on this presentation] and put it externally on display. The definition of a project is very important, and it must be done in a language that the QC can understand.
Quantum computers offer the biggest advantage over classical computers when there are a ton of inputs.
One of the most important factors limiting the adoption of quantum computing today is error correction. Any interaction, such as the Earth’s magnetic fields or solar rays, causes problems. There is a need to reduce the current error rates by a factor of 10x. Qubit have only a short, finite coherence time in the system before they destabilize. Ideally, QC should have qubits with as long of a lifetime as possible and also as many qubits as possible.
Google’s next step is to create two, error-corrected qubits that form a “quantum transistor”. And their ultimate goal is creating a fault-tolerant, error-corrected QC by the end of the decade.