Pt. 2: The collision of financial value, cultural value, community value.

How do financial institutions survive in the age of Community x Capital?

On last week’s episode, we covered how asset ownership has changed. What happens to markets when people have 💎🤲 (diamond hands)?

We ended Part 1 on a cliff hanger, asking how do traditional financial institutions and emerging companies think about underwriting new types of assets in order to enable investor to access liquidity.

In Part 2, we ask the questions about how companies can transition to the world of Web3.

Just like every company had to become a tech company during the Internet Age, is every company of the mindset that they need to become a Web3 company?

How do companies retain talent in the transition to Web3? In a world where there are now job descriptions for “Degen Shitposter,” will we soon see job descriptions for “Degen NFT traders?”

Two things emerge from the conversation:

Web3 is about Proof of Work - someone’s wallet and their activity on the blockchain, is their online identity and the proof of the work they’ve done on chain. This can be used to hire, evaluate their investments, their community memberships and affiliations.

Web3 turns everyone into an investor - not just in terms of their ability to invest dollars or crypto, but in terms of time and community engagement. Those who invest time into Web3 and invest into joining and building communities in Web3 will survive and thrive in this new world - whether they are an individual or an institution.

Pt. 1: The collision of financial value, cultural value, community value.

Worlds are colliding. When culture becomes finance and when community is at the center of culture, the meaning of asset ownership changes.

Financial value, cultural value, and community value have now merged together.

Owning certain assets that have community value or sentimental value, like CryptoPunks or Bored Apes (BAYC) or sports cards, may drive a different type of behavior around asset ownership.

Will holders of a certain rare sports card sell because they can achieve financial returns? Possibly, but now sentimental value must be factored in.

Will holders of a CryptoPunk or Bored Ape (BAYC) sell because they can return meaningful capital? Possibly, but then they forego something that may be hard to put a monetary value on - entry into a community or an online identity (see the pfp phenomenon that we discussed on the “All that glitters gold” podcast).

In a world where 💎🤲 (diamond hands) may feature more going forward, we must think about how investors can utilize those assets in ways where they can hold onto those assets but still gain access to capital to live their lives.

Both traditional financial institutions and emerging companies may do well to think about liquidity and what it means to value new types of assets in the age of Community x Capital.

We pose the questions in Part 1. We’d love to hear your answers. And stay tuned for Part 2 of this discussion coming out soon.

In a world where community-driven investing is now a defining feature of the retail investing world in equities and crypto, how should people create an investment framework?

Perhaps the framework for investing becomes different in a world where any asset in the world can be investable and tradable.

A modern day investment thesis looks a lot different in a world where memes matter and riches are made from primary research on Reddit rather than by roaming retail stores to understand consumer behavior (as many hedge funds would do).

Crypto has unlocked the ability for individuals to create wealth at the same time as institutions. There is power in that. And therefore, the people who may be best suited to invest into many of these community-driven assets may be those who are doing their primary research by spending time in Reddits or Discords.

Welcome to the modern world of investing.

Twitter, Discord, and Time.

When Bitcoin was pushing $20,000 in late December 2017, people asked: “are we late?”

When Ethereum was approaching $4,000 in August 2021, people asked: “are we late?”

When NFT sales hit a record-breaking $900M in the month of August, people asked: “are we late?”

Maybe we are late, but long-term early.

Yes, the early adopters may benefit most from being truly early - buying Bitcoin in 2010 or taking part in the Ethereum pre-sale in 2014 - but there will always be those who are earlier than others. And it doesn’t mean we are late.

In fact, if we think about the history of the internet, we are still so early.

It was less than 30 years ago that the internet existed in any commercial form. And only 14 years since the first supercomputer in our pocket (the iPhone) released its first generation product.

It might have felt late in 1999, when tech stocks were booming. But we were early. Facebook, Twitter, Instagram and many more hadn’t even been created yet.

It might have felt late when Bitcoin was at $20,000 in December 2017, but almost four years later, Bitcoin is at $47,000.

We are so early.

Those who remember the first wave of the internet will remember names like AOL, UUNET, PSINet, CompuServe, BBN, MindSpring, Delphi. While many of these companies (or their infrastructure) may still exist as part of other companies, the majority of the companies created during Internet 1.0 are no longer household names.

For every AOL, there was a Prodigy. For every UUNET, there was a PSINet. For every Amazon there was a Barnes & Noble. For every Instacart, there was a Webvan.

We are so early.

Value takes time to be created. And sometimes it’s hard to comprehend how big markets can truly be until they are created.

The beauty of this wave of the internet is that we’ve never been more interconnected digitally. Access to information has never been easier to come by.

As Alexis said on the podcast, “you are the only thing stopping yourself from spending the time to educate yourself.”

We have “Twitter, Discord, and time.”

Yes, it’s often better to be early than late. But it’s also better to be late than never. Especially when it’s still long-term early.

We want to own what others own, says Rene Girard.

Human desire is based on the desire of others, with no regard.

Why are people willing to pay millions of dollars for a JPEG?

Maybe because it’s more than just a JPEG.

What if it’s a movement? What if it has beauty? What if it has utility?

We’ve reached the point where cultural assets have become financial assets. Art has always had cultural and financial value, but something feels different this time.

Culture has always been built bottom up, but historically, we’ve forced culture into a top-down model. The Mona Lisa theft changed that. And social media platforms - thanks to their ability to create a global, instantaneously interconnected network of community members - have turned markets bottom up.

And a bottom up model means that it’s not always the people at the top who will have the biggest advantage.

The benefit of a community-driven asset is that it’s the community members who spend the time invested in understanding the value of the asset and engaged with the community who will accrue the benefits.

That CryptoPunk?

No, I’m not punch drunk.

CP 7523, Covid Alien, just sold for $11.7 million.

Axie just hit revenue in the billions.

All things that were accessible to the civilian.

Why has gold been valuable for as long as time?

Gold is chemically uninteresting - it barely reacts with other elements. Yes it’s scarce, but not incredibly rare. And yes, unlike silver, it doesn’t tarnish so it will maintain value thousands of years later.

Sure, gold is a store of value and an inflation hedge. But the big reason why gold is so valuable? It’s the stuff of stories.

Gold is beautiful, which is a narrative that has been carried through generations.

It’s aesthetically pleasing nature makes it something that we want to showcase. And, as Alexis attests due to his Armenian heritage, something that certain cultures vibe with (even if his gold chain was hiding underneath his shirt on the podcast).

Flex value cannot be underestimated. Particularly as we enter a world where our mobile phones are now our bank vault and our digital identity may be as important as our physical identity.

Hello PFP - “profile pic” phenomenon of NFTs, and Golden State Warriors star Steph Curry has just entered the chat with his recent Bored Ape Yacht Club purchase and updated Twitter PFP.

So if we are all just status-seeking apes trying to follow the stories and gold has held its value because it’s the stuff of stories perhaps the next forms of gold will be items that create powerful narratives and stories that we can flex digitally.

What are the next forms of flex value? Let us know what you think on @comXcap - or change your Twitter profile pic to flex that value.

The competition for consumers' attention.

The bar has been raised.

As culture collides with finance, the stakes are higher to compete for consumers’ attention.

And in a world where everything has been gamified, and where every platform has to compete for attention, it is user experience that becomes the critical feature.

User experience changes everything.

We have already discussed the first step to creating a better user experience - access. That’s been unlocked as finance has been democratized and investing has gone into the mainstream.

Now, as finance becomes part of culture, the competition is now everything consumer social.

As Alexis said on the podcast, financial products are “competing with Tinder, with Instagram, with Snap. Basically everything else they could be doing in that ten minutes, staring at that device.”

The stakes are now so much higher to create products that engage the consumer.

Who will be the winners?

The ones who start and end with user experience.

We hope you enjoy. Let us know about your favorite companies that create a great user experience @comXcap on Twitter.

It’s time to read the meme leaves.

Doge, GameStop, AMC are but a few recent examples that have proven that the memeification of financial services is real.

Memes, in large part due to their representation of culture, have dramatically influenced how many people invest.

And financial services could do well to learn from powerful features of consumer social. Features that have enabled online communities to be born for people to interact, create online identities, and build trust.

There are features of online communities that make people more comfortable trusting strangers on the internet for everything from low-cost decisions like restaurant recommendations to high-cost decisions like what school to go to, neighborhood to live in, or how to invest your money.

In this episode of Community x Capital, we talk about how to people are finding, trusting, and learning from strangers on the internet.

Arguably, this bottom up approach to building trust through community has its own unique and distinct advantages. And traditional finance (and even FinTech) could do well to learn from communities that have direct and trusted relationships with their followers.

The time is now - we are in the midst of a land grab where the winners will be those who build community, aggregate millions of followers, and own the distribution.

It won’t be long before we see influencers or individuals valued as billion dollar enterprises, who have built a community where they own the distribution to millions of engaged fans and followers.

So how long will it be before a bank acquires a content creator?

“A master in the art of living draws no sharp distinction between his work and his play; his labor and his leisure; his mind and his body; his education and his recreation. He hardly knows which is which. He simply pursues his vision of excellence through whatever he is doing, and leaves others to determine whether he is working or playing. To himself, he appears to be doing both.” - Yvon Chouinard, Let My People Go Surfing: The Education of a Reluctant Businessman.

What is work? What is play?

What if people could live in a world where their play is their work, where their work is their play?

Gaming may crystallize that future.

Thanks in large part to advances in consumer social applications, we have entered the age of the Gamification of Everything.

Companies and platforms are currently competing for everyone’s attention. Because it's all about monetizing engagement. But will that last in a world where the platform vs. participant relationship is being stressed?

We explore different industries where gamification of everything is occurring. And it’s going to create a future world where people want ownership - and monetize that ownership - within the games that they play.

We start with Robinhood - the gamification of investing. We move to Netflix - the gamification of entertainment. We land on gaming platforms Sorare and Axie Infinity - the gamification of work.

We talk about the implications of people playing a game to earn a living. And those implications are profound.

What does it means for the future of work? What does it mean for education? How do we prepare for a future where people can own their life - in a physical or virtual world?

So, now, what’s the distinction between work and play?

The internet has profoundly changed the human experience by bringing us together in ways unimaginable.

Investing might have been later to the party, but now investors are joining the party (rounds).

“Investing has become a team sport that you play with your friends on the internet.” Jesse Walden’s prescient quote kicked off our episode on how community - and the internet - play such an important role in investing.

The big question is how do we get everyone in the stadium?

We talk about traditional financial rails and how the transition to Web3 is what enables creative execution of financial technology in ways that you couldn’t necessarily do with centralization.

We talk about how party rounds, crowdfunding, and DAOs can be a good thing for the world of investing. Because it’s about giving people ownership - and ownership is what makes the intersection of Community and Capital as real as it can possibly be.

And, we talk about how it’s important to always keep it 💯.