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This is an audio transcript of the FT News Briefing podcast episode: Investors gear up for ‘gold rush’ in metaverse hardware

Marc Filippino
Good morning from the Financial Times. Today is Monday, January 10th, and this is your FT News Briefing.

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US officials sit down with the Russian diplomats today for high-stakes talks. Voters in Portugal are fed up with corruption, and British regulators are taking a closer look at cloud companies. Plus, the FT’s Leo Lewis says investors are excited about the metaverse — and not just the software developers, but hardware makers too.

Leo Lewis
There’s a lot of hope attached to the idea that Apple might come up with a pair of goggles that do for VR headsets what Apple did back in the mid 2000s for smartphones.

Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.

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Today, US officials are set to meet with Russian diplomats in Geneva. It’s the first of several meetings to address military tensions on the border with Ukraine. There aren’t high expectations that the two sides will come to an agreement though. Russia now has about a hundred thousand troops amassed on Ukraine’s eastern border and it’s threatened military action if the US and Nato ignore Moscow’s demands for new defence agreements. One of those demands would reduce US and Nato capabilities in former communist countries. US and European officials will counter with their own demands. Yesterday, Nato’s secretary-general Jens Stoltenberg said Nato was prepared for “a new armed conflict in Europe” should negotiations fail.

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Voters in Portugal head to the polls later this month, and white-collar crime is a hot-button issue. There’s been a series of corruption scandals in recent years involving judges, top bankers, football club executives and most famously former prime minister José Sócrates. Most of the charges against him were thrown out because of time limits and lack of evidence. Voter frustration isn’t just with the scandals but more with the broader legal system. Here’s our Lisbon correspondent Peter Wise.

Peter Wise
So I think there is a general awareness in Portugal among the political class but also amongst the public itself that Portugal is not dealing effectively with the crime of corruption in its courts, in its investigations. And particularly is not, justice has to be done in reasonable time for it to be seen to be effective. And that I think in the minds of the wider public in Portugal, that’s just not happening at the moment.

Marc Filippino
Peter says parliament did approve a set of anti-corruption reforms last month.

Peter Wise
But experts in the field of dealing with corruption feel that they are focusing too much on the laws rather than on its having effective institutions to deal with it. The effectiveness of the police, of the courts, so they find that their independence and their ability to act swiftly and efficiently is sometimes curtailed and hemmed in by a lack of resources.

Marc Filippino
This public discontent hasn’t been ignored completely, Peter says it’s being harnessed by a rightwing party called Chega.

Peter Wise
The beginning of the debates, there are going to be 20 or more debates on television between the leaders of different parties. And I think one of the smaller parties, which is known as Chega, which is a rightwing populist party, its name means ‘enough’ in Portuguese, and they are focusing a lot on this issue of corruption. They sense a public discontent. So Chega, which in the previous election only elected one deputy, is now hoping to become the third largest party in Portugal. And that would give it considerable weight in the sense that most elections in Portugal, and this one coming up in January is unlikely to produce a majority, an overall majority for a single party. So the third largest party could have considerable influence over formations of coalitions or agreements on supporting a minority government.

Marc Filippino
Peter Wise is the FT’s Portugal correspondent.

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UK financial regulators are preparing to step up scrutiny of cloud computing providers. This comes amid growing fears that an outage or hack could severely disrupt the banking system, which is increasingly reliant on cloud services. Sources tell the FT that the UK’s Prudential Regulation Authority wants to see more data from big providers like Amazon and Google and Microsoft. UK banks have struck deals with these three companies. They see the cloud as a way to reduce IT costs, overhaul old infrastructure and also detect financial crime.

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So if you’re not already spending good chunks of your day in the metaverse, it’s probably because it hasn’t been built yet. There aren’t many good headsets or sensors, for example. But companies are working on it and the FT’s Leo Lewis says investors are really excited about the companies making what are called the picks and shovels of the metaverse.

Leo Lewis
We happen to focus a lot of the piece on Asian companies — Taiwan, Korea, Japan, China — simply because we know that those are already companies that are producing a lot of the tech hardware at the sort of component level, some at the very, very high end, some at the mass produced end. So they’re saying to us, look, imagine that you’re back in the year 2000 and the internet is on its way up and it’s all getting very exciting. The best way of buying the internet story at the time was perhaps not through the companies that have ended up very enormous, like Facebook and Google and so on, but through the companies building the servers and the picks and shovels as they call them. And that’s very much the feeling now that there’s a lot of investable universe where you can buy as it were the infrastructure for the metaverse at this point while everyone’s working out who’s going to be the winners and losers amongst the big kind of software and platform providers.

Marc Filippino
So Leo, are you excited about the metaverse?

Leo Lewis
I am very excited. I do think this, I mean I’m not excited as an investor obviously, but excited as a user because I think that some of the things that we’ve seen and some of the worlds that they would like to introduce consumers to are very, very intriguing and very enticing, really. I mean, I’m somebody that has grown up with video games and see games very much as the entry point to a lot of technology. Do I want to be playing games in these virtual worlds? Yes absolutely, I do. Am I waiting and have I been waiting for the hardware to be just right? Absolutely. And, you know, I’m very much hoping, along with a great number of other people, the big games fans, there will, something will come along. There’s a lot of hope attached to the idea that Apple might come up with a pair of goggles that do for VR headsets or that kind of technology, what Apple did back in the mid 2000s for smartphones, ie, you know, sort of creating a whole new market that’s sort of based on one knockout brilliant product. And I’m, you know, as a potential user, I’m part of the excitement.

Marc Filippino
So what about non-gamers, Leo? I’m not particularly game savvy. What sort of use would the metaverse have for someone like me who’s not into gaming?

Leo Lewis
That’s a very good question. I think the answer is that games are already starting to become environments where the general user, let’s say, can find reasons to come in for, let’s say, more slightly more traditional reasons. So concerts that are taking place within games, you know, Ariana Grande has played concerts within the Fortnite game. Now you may not want at this point to go into Fortnite for, you know, for various reasons. But if you are told that, for example, the Royal Festival Hall is going online, is creating a digital twin of itself that you can visit and go to concerts for the London Philharmonic, and you can do that virtually with a headset. You know, that may end up being the kind of entry point that you find attractive. Others might want to travel to exotic places via virtual reality. I mean, you know, without sounding too kind of Mark Zuckerberg about it, it’s something that is waiting for the right software to come along, as well as the right hardware. But that, I think, is where the non-gamers are going to come into it. It’s going to be music, live concerts, live sport and travel.

Marc Filippino
Leo Lewis is the FT’s Asia business editor.

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And before we go, online retailers looked like they defeated brick and mortar. A couple of years ago the market value of upstart fast-fashion retailer Boohoo overtook that of the venerable Marks and Spencer. But old dogs can learn new tricks. Marks and Spencer is now doing just fine, thank you very much. They’ve not only been upgrading profit forecasts, the 138-year-old store is now more valuable than Boohoo and another big online rival, Asos, combined. To be fair, it’s not that consumers are rushing outside to lug their own shopping bags. One analyst says that many brick and mortar retailers used the pandemic to cut costs. They also figured out how to compete better with their younger online rivals.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

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