Warren Buffet is a legend of value investing, and one part of that legend is his general disdain for the speculative investing that he thinks has fueled the crypto market for the last 15 years. It is coming time to make him eat crow.
But, before we prep his lovely avian meal, let's be fair: the last 15 years of crypto investing basically has been a speculative game of musical chairs. Yes, yes, I know Bitcoin is freedom money and stablecoins are helping people in Turkey and Argentina, but those don't make crypto a trillion dollar market on their own. The real driver is that people are noticing value is accruing into a novel system and want to get their slice of a better future at a discount.
Within the system there is certainly a fair amount of pure some-other-sucker-will-buy this-from-me-for-more-than-my-acquisition-cost-style of speculation but there is also the beginnings of real human value. Maybe this better future has decentralized AGI, cities on hills, and fancy lighter-than-air blimp-based travel,. Or maybe it isn't actually a better future and hindsight will make it look like a flowery hellscape. For the sake of this blog (and all the crypto-bros' egos), let's go ahead and take the following assumption as true: "The crypto ecosystem will deliver real human flourishing", and proceed from there.
Tying together the digital abundance that has helped software eat the world, with a substrate for digital scarcity on which network states will be built, means the revolution of the last 30 years of the anarchy that is The Internet is just getting started. And much to the chagrin of financiers and bankers, this movement will continue to siphon off power from old institutions who have long grown used to being able to extract value from their subjects/users/employees.
We can already see this power siphoning happen in the human capital inflows to the ecosystem, or, what we can call the "what are the smartest people doing on the weekend" signal.
By capturing the attention of this cohort, and then giving them a technology stack that functions faster than the existing infrastructure for balancing supply and demand, it is inevitable that they will find better mechanisms for delivering value to participants in the economic system. Obviously, things like Bitcoin's 21 Million meme, the 2017 ICO boom, DeFi summer, and NFT mania point to there being energy around rethinking ownership, community, and economic participation. But none of these cycles have yet been able to deliver real human value matching their market price because they have only been experimenting with two parts of the formula:
The pain point solved by item one is obvious, and while necessary in a world where nation states have grown far too big for their britches, frankly not that interesting when looked at on it's own. So while I'm sure I'll write more about it in the future, we'll just gloss over it for now by saying: "Nation states are captured by powerful interests that use 'protecting consumers' as a way to keep the little guy out of the game."
The issue with item two is less obvious, but in essence the crypto markets have gotten so hyped up on 'ownership' narratives that they have forgotten an essential lesson of corporate structure: not every customer wants a stake in the potential future value of the organizational undertaking. They might just want a specific result delivered at a specific time, or a specific product delivered at a specific price, and not have to think about the time value of their money, liquidity of the assets they are purchasing, or other complexities of deciding if a capital outflow is an investment or a consumptive expenditure.
It is for this reason that the joint-stock corporation has been such a tremendous lever in the 19th and 20th centuries. Owners, Employees, and Customers are different parties with different interests. Owners take a riskier bet with more upside, employees shoot for a predictable steady state, and customers exchange money for goods or services. Everyone understands and desires their role in these voluntary exchanges and the world sees more human flourishing thanks to it.
Of course, as technology has evolved, so too have these models. The above description leaves out a forth category of economic participant which has come to prominence in the 21st century, though: the User. Originally perceived as someone who gets something for nothing, this role is instead one that is being harvested by megacorps as a data and attention source to service their true customers: advertisers and data aggregators. While the crypto ecosystem has properly identified that people should want to move away from being a User, they have over-indexed on an assumption that everyone wants or should be an Owner. They are missing the third part of the formula:
It is here that the real human value is realized. The point in the system where people will expend rather than invest their finite time/money/energy. This is the difference between the speculation on future potential, and that which can be realized as profitable revenue.
Once we understand this gap, we can easily notice that the industry as a whole has yet to develop a mechanism for the Customer profile. I suspect this is because by expanding item two to experiment with profiles for Employees, Customers, Users, etc, you inevitably have to step into the realm of legacy systems. In doing so, participants immediately lose the benefits of item one, while also losing much of the memetic power that digital sovereignty offers when talking about on-chain data/assets/transactions.
Take, for example, the narratives around 'communities' or 'cryptographic ownership' common to many top NFT projects. While the number go up helps grow hype in a bull run, when dissected the community likely has some obvious leaders (see: Remilia <> Milady) that have incentives different from other 'community members'. Or, where 'cryptographic ownership' grants access to web2 properties where 'sovereign owners' return to being data sources for megacorps that control user identities and are middlemen to the relationships. This isn't to say that these differing incentives are bad, or that communities shouldn't proxy power to their leaders, but rather that the middlemen need to be removed.
And of course, since this blog is served from my urbit, this tends to be the time where I tell you that urbit fixes this. And more specifically than that, this one conceptualization of the problem we hope to solve with what we are building with Vaporware. Giving the crypto world the tools that it needs to grow from a speculative market (a la, late 1990s dot com boom) to a key element of the functioning of every business that you interact with today. That's not to say the speculative games end, but rather to abrogate the regulatory tech tree, and replace it with the possible tech tree.
More on that in my next post.