6 min read

A Virtual Reality Check

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Happy Thursday!

And just like that, we’re nearing the end of another year with the Covid Grinch threatening to steal Christmas. Due to everything from inflation to Omicron, there’s concern that the Santa Claus rally (a tendency for the market to rise in the run-up to the new year) is not coming to town as investors contemplate a rocky start to 2022.

At FWIW we’re also looking into the future this week—a little farther into the future, with the metaverse. The big tech giants are changing the way we live, and they’re heavily featured in many of the funds marketed as “ESG.” But their power and influence are worrying, and shareholders can’t pressure many CEOs because of a unique arrangement known as a dual class stock structure. Put simply, this means certain special shares come with much greater voting power than others. So a company founder may own a small part of it but have great control.

This week a group of investors in Facebook, now known as Meta, filed proposals to address some of its problems. Normally, as FWIW readers know, shareholder activism is one of the benefits of stock ownership. But not much is expected to come out of these proposals as founder and CEO Mark Zuckerberg controls a majority (58%) of the vote, making outsider complaints easy to dismiss. This is a corporate governance challenge or one of the elements measured by the “G” in “ESG.” You can get a complete list of dual-class public companies here.

What we’ve been thinking of:

Days after workers at a Starbucks in Buffalo formed the company’s first U.S. union, two Boston outlets have begun pushing for the same, joining another store in Mesa, Arizona. If the trend spreads, changes may be coming for your favorite baristas, something one analyst says that Starbucks is better positioned to handle than its peers.
Harley Davidson says it can be hip and “current” too. The 188-year-old firm’s electric motorcycle division LiveWire is merging with a SPAC to go public under the "LVW" stock symbol. Not your dad’s hog.
With inflation on the rise and the Great Resignation still underway, employers are planning a 3.9% increase in wages next year—the biggest annual hike since 2008. Average pay (including stock sales) of S&P 500 CEOs rose 7% last year to $15.3 million, 291 times that of the median worker.

For the first time in a decade, Silicon Valley is on pace to get less than 30% of venture capital investments made this year. These innovation-driving dollars are going to other cities in the country, like Denver, Seattle, and Philadelphia. Another example of capitalism working for more people in more places.
The latest group of Young Explorers from National Geographic are a dose of inspiration. Ranging in age from 16-26, they are all leading impact-driven efforts to tackle some of the world’s toughest challenges.
For couples tired of splitting expenses but not looking to get a joint account, we’ve been impressed with the Tandem app. It automates the expense-sharing process and removes the need for those awkward Venmo requests. *sponsored content*

Welcome to the Metaverse

An idea that gained popularity during the pandemic—and is proving that it’s here to stay—is the metaverse. “Meta,” which is Greek for “beyond,” was among the top lookups on Merriam-Webster’s online dictionary in 2021. The biggest social media company in the world chose it to be its new name to underscore its new strategy.

So what is it? “Metaverse” as a concept is much older, bigger, and vaguer than Mark Zuckerberg’s vision of the "holy grail of online social experiences.” The term was first used in a 1994 science fiction novel about a dystopian future where humans plugged into a digital universe to escape their bleak reality. Like the Matrix, but without the evil robots.

We’re still in the process of finding out what it’s going to look like in our world, but the basic concept of the metaverse is humans “existing” in an alternate, life-like reality created by technology. It’s being called the successor to the internet or “Web3.”

Culturally we’ve been getting accustomed to the idea for decades. Digital avatars of ourselves have been interacting online since the days of AIM messenger screen names like “rockrgrl4eva” or “Fall0uutboi,” and in present-day with games like Roblox and Fortnite where we interact with people around the world in real-time.

What’s expected to make the metaverse different from what we’ve seen so far is the richness and possibilities of these immersive virtual worlds and that they’ll all be interoperable or seamlessly linked. It will be the amalgamation of all the tech advances, like cryptocurrencies and blockchain, social media, gaming, and virtual and augmented reality. Beyond simply interacting in a playground of sorts, humans will watch concerts, buy clothes, own assets, make money, and have workplaces in these worlds. (Already, you can own land or art that exists online with NFTs or non-fungible tokens. Over $100 million was spent on virtual land in a single week recently.)

Metaverse supporters say it’s a chance to reduce the power of large tech monopolies and banks through decentralized payment systems, users owning their own data, and a broad group of creators. It’s also pegged to be a big part of the shift to remote work; some say virtual worlds can be a part of mental health therapy.

The financial world is already listing stocks expected to win in the future with the metaverse (there’s already an ETF), from hardware like headsets to online platforms. But amid the hype and predictions of a trillion-dollar market, investors should be cautious of marketing ploys similar to the early days of the internet.

There will also likely be user issues cropping up— think privacy and surveillance, harassment, racism and gender bias, addictive qualities, content moderation, and the environmental impact of the extra electricity use (something we covered in a previous edition). How do regulators get involved in a digital realm where power is distributed? These are discussions the investing community and regulators will be having, and we’ll be following them for you.

A stock(ing) stuffer

Giving the gift of stock is a great way to invest in a loved one’s financial future—and nudge them toward more investing.

Stocks that you own can be gifted between any two brokerage accounts—all you need is the recipient’s account info. If you don’t want to give any of your existing shares, you can use an app like Stockpile to purchase a gift card for your recipient to buy stock. Websites like UniqueStockGift and GiveAShare let you gift a single stock and print a stock certificate replica (the real ones are super expensive) to wrap and place under the tree.

A few things to keep in mind: The IRS waives the capital gains tax for you that would normally come from selling off stock—but you can only gift up to $15,000 in stock per year for this to apply. And if you want to gift stock to a child who isn’t yours, you need to involve their grownups: kids can only receive stock gifts through a custodial brokerage account that is set up and controlled by their parents or guardians. If you work for a publicly-traded company, you may be eligible to buy shares in your employer at a discount and thus keep your holiday shopping budget under control.