Rec Room shutdown and VR economics

Lucas Rizzotto is one of the most distinctive artists working at the intersection of technology and human experience. He built Where Thoughts Go, a VR piece that proved genuine connection was possible inside a headset when everyone said it wasn't. He followed it with Pillow, a mixed reality app designed around the bedroom. He then spent months letting an AI algorithm run his life — wearing Mantra smart glasses, building a surveillance and memory system on himself, and documenting it as an ongoing series on Instagram and TikTok. Now he's making a live cinematic experience called Escape the Internet, which he calls Broadway crossed with a video game crossed with standup comedy. It premiered as a ghost debut at South by Southwest this year.

Mike Boland, analyst and founder of AR Insider, sits in for Rony Abovitz in this episode. The conversation opens on the Rec Room shutdown — $250 million raised, a $3.5 billion valuation, and now a wind-down. The panel connects the collapse to a pattern: VR has always been an exotic pursuit sold as a mainstream one, and the unit economics of concurrent immersive social spaces are nearly impossible. The discussion moves to OpenAI shutting down Sora, the AI video generation race between Google VO3 and Kling, the rise of AI slop in social feeds, and Lucas confirming he quit LinkedIn because it's unreadable.

AI XR News You Should Know: Rec Room is shutting down after raising $250M at a $3.5B peak valuation. Snapchat is acquiring its remaining assets. OpenAI closed down Sora, overwhelmed by competition from Google VO3 and Kling. AI-only social feeds from Meta and Grok are not gaining traction — users are tuning them out.

Key Moments:

• [05:37] – Ted's thesis: VR is an exotic pursuit that was never going to be mainstream, and Rec Room would have been healthier if it accepted that early
• [07:33] – Lucas: Ready Player One was the worst thing to happen to XR — it gave executives a fictional roadmap to fund
• [18:38] – Ted asks whether Apple can do for mixed reality what it did for the smartphone — and the panel is skeptical
• [27:42] – Mike on physics as the hard ceiling: Moore's Law doesn't apply to waveguides and optics the way it applies to chips
• [29:02] – Lucas explains why he dropped display glasses for his wearable AI experiment — they increase engineering complexity by 50x
• [32:17] – Lucas's AI-controlled life series: a complex algorithm watches him, mines personal data, and tells him what to do to find happiness — including an unplanned trip to Lithuania
• [34:12] – Ted asks if the experiment is a net positive or negative. Lucas: neutral if you're in control, net negative if Meta or OpenAI are running the system
• [37:52] – Lucas on convenience as a death by a thousand cuts: he optimized his life in Berlin to have everything within three minutes and became miserable
• [41:00] – Charlie on Where Thoughts Go: assigned it to students every semester; it only works if you surrender to it
• [47:15] – Escape the Internet: hundreds of people in a movie theater, all on their phones, playing a shared cinematic narrative. Lucas calls it a modern version of church
• [53:40] – The standup model applied to software: Lucas tested Escape the Internet at SXSW and cut 50% of the material that didn't get a reaction

This conversation sits at the intersection that the AI XR Podcast lives for: technology as creative material, not just commercial tool. Lucas's view that we've been building things people use all the time when we should be building things that blow their minds for two hours and then get out of the way is one of the sharper critiques of the attention economy you'll hear this year.

This episode is brought to you by Zappar and Mattercraft — the leading visual development environment for building immersive 3D web experiences on mobile, headsets, and desktop. Mattercraft now includes an AI assistant that helps you design, code, and debug in real time, right in your browser.

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