Social tokens are reshaping the way wealth is created. Rather than borrowing money to pursue their dreams, artists and entrepreneurs are investing in themselves.
Alex Masmej idolised Steve Jobs; his favourite shirt featured Apples that changed the world: Adam's, Isaac's, and Steve's. Masmej aspired to move to Silicon Valley and found himself unable to do so due to a lack of funds. In April 2020, as the world struggled to recover from the coronavirus pandemic, he found himself trapped in his native Paris.
As a result, Masmej did something that few 23-year-olds consider: he tokenised himself. That is, he created a financial instrument called a social token, a type of cryptocurrency whose value is determined by the person who created it, in order to sell shares in himself.
$ALEX holders would receive 15% of Masmej's income for the next three years, up to a maximum of $US100,000 ($142,000) per year, and would be able to exchange tokens for special privileges: 10,000 $ALEX purchased a retweet from Masmej on Twitter; 20,000 $ALEX purchased a one-on-one conversation with him; and 30,000 $ALEX purchased an introduction to someone in Masmej's network. Masmej raised $US20,092 in five days, enough money to fly him across the Atlantic to San Francisco to launch his start-up.
I work in Silicon Valley as a venture capitalist and met Masmej in San Francisco. When he shared his story with me, I was struck by the significance of his journey to California. Rather than seeking financing from investors, friends, or family, Masmej made the investment himself.
This may strike some as dystopian, like the plot of a Black Mirror episode. However, social tokens are a subset of a larger and fundamentally beneficial trend: everyone is becoming an investor. Wealth has accrued to a select few – the investing class – over time, while the majority rents time as salaried and hourly workers.
Only about one in every two Americans has any exposure to the stock market, and that exposure is income-related: Only 15% of families in the bottom 20% of income earners own stock, compared to 92% of families in the top 10%.
However, Masmej's and others' actions indicate a shift. The world is becoming increasingly financialised, allowing individuals to invest not only in businesses or government bonds, but also in art, collectibles, and celebrities.
Parallel cultural and technological shifts are establishing a new paradigm. The rules governing how we create and capture economic value are being rewritten, paving the way for previously unattainable forms of wealth creation.
Today's youth are leading this transformation by challenging long-held beliefs: that you should work for a corporation until you are ready to retire; that you should spend your 9 to 5 hours chained to your desk; and that you should work for anyone at all.
Nearly 80% of teenagers aspire to be their own boss, while 40% wish to start their own business. During the Great Recession and again during the pandemic, young people witnessed their parents and grandparents being burned. They are cynical. Why work within a "system" where your upside is limited when you can leverage your hustle and savvy to control your own destiny?
This cultural shift is evident in the 23 million people who use Robinhood to buy stocks and the 46 million Americans who own cryptocurrency. We see it in the NFT craze, in Elon Musk's deification, and in the GameStop phenomenon of last winter. If we broaden the definition of "everyone is an investor" to "everyone is an owner," we see ripple effects in the record-breaking 4.4 million businesses launched in 2020, as well as the 68 million Americans who freelance.
Even this generation's superstars question established conventions. Josh Richards, 19, a TikTok star, had flirted with becoming a Red Bull brand ambassador. When I inquired as to why he passed, he looked at me puzzled – why, he reasoned, should he be the conduit for another's wealth creation? That was the game plan for celebrities of yore. Rather than that, Richards used his 25 million TikTok followers to launch his own energy drink brand, Ani Energy. Ani is now available in over 400 Walmart locations a year later.
A shift in cultural attitudes towards ownership is colliding with emerging technology. We are on the cusp of the web's third era. The early days of the web were about information freely flowing – think of Google providing access to the world's knowledge. In this era, the majority of us were passive consumers.
The second era was characterised by the rise of the social web – Facebook, Instagram, and Twitter. Individuals began creating their own content, which became the lifeblood of the major platforms. We became active participants, but the platforms sucked up all the revenue.
The internet's promise was to eliminate gatekeepers. Rather than waiting to be signed to a record label, you could share your music on Spotify. Rather than requesting that a publication share your words, you could tweet them. Rather than being approached by a studio executive, you could pursue a career as a YouTuber. However, these platforms became the new gatekeepers.
The web's third era is about righting the ship. Social capital is transformed into economic capital. Brokers and intermediaries no longer accrue value.
In practise, what does this mean? Take the music industry as an example. Record labels now control the lion's share of revenue generated by music. Artists walk away with a meagre stipend, and fans receive none. However, in this new era of the internet, anyone can benefit from culture.
We've all had that (slightly annoying) friend who insisted on knowing about so-and-so before they became famous. I am that friend when it comes to Taylor Swift – and I am more than slightly obnoxious about it. I was a Taylor fan years before Kanye interrupted her onstage at the VMAs during her pre-Fearless, full-on country days. However, in our current fandom structure, I am treated the same as the fan who discovered Swift on Saturday Night Live a few weeks ago.
This would all be different, however, if Taylor had followed Masmej's lead and invested in herself. She might have chosen to issue a social token. While non-fungible tokens, or NFTs, are named for their uniqueness, social tokens are fungible. In other words, each $ALEX token can be traded for any other $ALEX token, just as a dollar bill can be exchanged for any other dollar bill. (However, if Barack Obama signs the dollar bill, it ceases to be fungible.)
Taylor Swift's micro-economy
Assume Taylor created her own cryptocurrency – let's call it $SWIFT – and sold it to her biggest fans. Assume I was one of these fans. $SWIFT's value would have appreciated over time as Taylor's popularity increased. As an early supporter, I would have reaped the financial benefits of her growing celebrity. The $100 $SWIFT I purchased in 2007 may be worth $100,000 today.
Taylor Swift's mini-economy would benefit both the singer and her early fans, such as myself. Taylor could have funded her work as an artist by selling $SWIFT. She may not have needed to sell her masters, and she may not have been compelled to rerecord her albums in order to reclaim control of her art.
Taylor's fans, on the other hand, would have been compensated for a decade of support: we are all evangelists for our favourite artists, yet we receive little of the value we contribute. Social tokens are the only type of currency that combines patronage (support for the artist), fandom (a stronger connection to the artist), and investment (financial upside from the appreciation of the digital asset).
We could apply this example to any artist: what if you discovered Billie Eilish on SoundCloud in 2016, or Lil Nas X prior to the viral success of "Old Town Road"? What if you'd been a fan of the Beatles prior to their appearance on The Ed Sullivan Show?
This is not a far-fetched fantasy; enterprising artists are already establishing their own digital economies. $RAC was launched last year by Grammy-winning artist RAC with the caveat that fans cannot purchase it; they must earn it through their fandom. RAC distributed $RAC retroactively to fans based on their support, such as whether they were a Patreon subscriber or had previously purchased merchandise. Fans could then exchange their $RAC for access to the artist.
You can imagine this concept becoming more mainstream over time: what if the best seats at a Taylor Swift concert went to the fan who earned the most $SWIFT through Spotify streams?
To be clear, financialisation of everything is not without drawbacks. The phenomenon is not without its dark side. If everyone becomes an investor, the converse is also true: Everything – and everyone – becomes an investment candidate. Alex Masmej created a "Control My Life" component for $ALEX. Token holders could vote on his life choices, such as whether he should run 5 kilometres daily, abstain from red meat, and wake up at 6 a.m. Masmej obeyed their commands because token holders had a financial stake in his success. (To be fair, he acknowledges that this was merely a "fun experiment.")
We'll need to address two critical questions. To begin, when does human agency cede to financial obligation? Second, when does a relationship devolve into a transaction? Between investment and speculation, as well as between speculation and gambling, there is a fine line. What occurs when an individual loses money on $ALEX or $SWIFT? Financialising life and culture may result in a more equitable distribution of economic value, but the system must include safeguards to prevent us from sacrificing our humanity.
These are challenges, but all innovation entails risks; these risks should not obstruct opportunity. Investing used to be limited to the stock market, which was considered arcane and inaccessible to the majority of people. Almost everything is now investable. Masterworks enables you to invest in fine art by purchasing a portion of a Banksy. Royal enables you to purchase a portion of a song and earn royalties – you could own a piece of the next Bohemian Rhapsody or Hey Jude. Otis bills itself as "the stock market for culture," offering investors the opportunity to invest in LeBron James basketball cards and Air Jordan sneakers.
This new era of cultural liquidity alters the way capital is accessed. The last decade has been about social capital transfer: likes, shares, and retweets. Our social capital fueled Facebook, Google, and Twitter's profit engines.
We are now entering a web-based economic era, one in which everyone is an investor. This is not to say that regulation should be avoided or that businesses and institutions should not exercise caution in determining which safeguards to implement. This does not imply the establishment of a human stock market in which we can buy and sell our friends.
However, this economic era enables everyone to invest – in fine art, iconic songs, and public figures in whom they believe. This era implies that it will be the many who dictate culture, not the few. Finally, popular culture will live up to its moniker.
