Bankless - 101 - The Ownership Economy | Li Jin

Starting point is 00:00:07 Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Guys, we have a fantastic episode talking about the ownership economy, the creator economy, both of those things. A few things to take a look out for. The first is the creator economy versus the ownership economy. What is the difference between these two terms? We go through it with Lee Jen. Second, the original sin of the internet.

Starting point is 00:00:41 What was that sin? What did it cost us? Third, four things that will actually fix the original sin and usher us into the ownership economy. Number four, the Web 3 Renaissance. What that is, what that means? Number five, how crypto can actually fix wealth inequality. Lee Jen gives her opinion on how that could be the case,

Starting point is 00:01:03 how we might come up with a fix for some of the wealth inequality issues. And finally, number six, what this means for you, how to set yourself up in the ownership economy, how to be your own boss, how to take advantage of the Web 3 Renaissance that is coming. All of this unpacked on the show today. David, what were your thoughts on this episode? Gosh, Lee Jen is such a clear, articulate thinker. And she really does a very fantastic job of taking us from the very beginning of the story at the dawn of the internet, while the founding people of the internet were really thinking

Starting point is 00:01:37 about what happens next now that we have this internet thing, taking us all the way to where we are today and then also extrapolating into the future about what it means to create content on the internet. And I think one of my favorite things about Lee and her interest in the creator economy, in the owner economy, is that she's very pragmatic. She wants to see creators and creativity blossom. And that is her goal. Her goal, I don't think, is really to get crypto to take over the world. She sees crypto as a means to an end for what she wants to see in the world, which is inspiring creativity and everyone being able to be their own boss by unlocking and unleashing their internal creativity kernel that we all have inside of us. She's not like you or me, and we're,

Starting point is 00:02:22 like, we are focused on crypto and we want crypto to take over the world. She wants creativity to take over the world, and she sees crypto as a viable way to get that done. And I think she even hints in the show that she used to be very, very pragmatic about intersecting, like, here, we can use Web 2 for this and we can use Web 3 for this, but she said she's recently capitulated and says that it's only Web 3 here on out, and it's actually through Web 3 that we can fully unleash creativity to its maximum degree in a way that we've never seen before out of humanity. Yeah, absolutely.

Starting point is 00:02:54 I think that's a great insight. I also think this is almost the sister episode to our episode with Chris Dixon, where we went through five mental models of Web3. And I think the idea of the creator economy, their ownership economy, is a mental model that all bankless listeners should have locked in their brains for 2022. Because once you understand this, you start to see different areas. You can invest in your time, your money, your skills, your jobs, and the world kind of opens up. Web 3 and crypto really is going to usher a new type of economy.

Starting point is 00:03:26 It's going to create a new business model for the Internet. and we tap into all of that here. So stay tuned for this episode. As always, like, subscribe, review. If you're watching this on YouTube, make sure you subscribe. Give us a podcast review. If you're listening to this on your podcast player,

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Starting point is 00:06:30 She is a co-founder, general partner at Variant Fund previously worked at A16Z. Her thesis, I think the thesis of Variant Fund writ large, is that next generation networks will grow faster and bigger because they are owned and operated by their users. This is called the ownership Economy, Web 3, as you can imagine. Crypto, as you can imagine, has a huge role to play here. She's also a writer on Substack, fantastic writer, by the way, and a hobbyist painter, Lee Jen. Welcome back to Bankless. It's great to have you on again. Thank you so much for having me, guys. It's a delight to be here. I think last time you were on, you're on a panel. And we enjoyed that panel so much.

Starting point is 00:07:09 We're like, we've got to bring Lee back to talk about the ownership economy in more depth, the creator economy. And actually, I want to ask you that question. Do you like the term creator economy or ownership economy better when you define this thing? So I think those two things are actually slightly distinct. They're overlapping. It's like a Venn diagram. There's creator economy, non-ownership economy version. There's creator economy ownership economy overlap. And then there's other ownership economy stuff that is outside of the creator economy. Oh, I like that. Could you get into the detail there? So creator economy, I'm imagining is, well, Well, yeah, why don't you describe the Venn diagrams for us?

Starting point is 00:07:48 Yeah, sure. So the creator economy is really this economy that exists online marked by this proliferation of individual content creators who are uploading user-generated content and monetizing that in a host of different ways. And essentially, ever since, like, for as long as the internet has existed, there have been creators on the internet, ranging from people starting blogs and posting on forums to today, you know, posting on YouTube, making podcasts like we are right now. And the way that people have monetized their independent creations have varied over the years. It really used to be banner ads

Starting point is 00:08:28 and then programmatic advertising. And in the last couple of years, I think the resurgence or the increased attention the creator economy has gotten has really been around the potential for direct monetization of one's audience, spanning from writing a subscription newsletter to starting a Patreon to starting, you know, any sort of like direct fan monetization type of business. And so the creator economy has been around for, I would say, like, over a decade. And it's gone through multiple phases and its history, which we talked about on the panel with Cooper and Jesse. And I think we're right now in the third phase of the creator economy, which is that they regard themselves as independent businesses in and of themselves in their own right.

Starting point is 00:09:19 They used to be people who helped other businesses to grow by selling sponsorship placements or doing advertising on behalf of other brands. But today, I think the mental shift that a lot of creators have made is that they think of themselves as businesses and brands as individuals, as personas. And where that starts to overlap with the idea of the ownership economy, which is the idea that all next generation internet products and services are going to be owned by their users and go through the progressive decentralization playbook, is that I think there's really this convergence where there has been the broad recognition that creators have been responsible for creating a lot of the value on the Web 2 internet, but have not really been the beneficiary. of that value creation. Instead, it's gone to the owners of the platforms that they're working on. So a creator on YouTube or create on Facebook, et cetera, they are earning income on the side for sure, and they can find external ways to monetize their audience, but they haven't been

Starting point is 00:10:26 owners of the underlying platforms that they're posting content on and actually contributing value to. And that comes in the form of both economic ownership as well as any sort of governance, rights. And so we're really seeing this overlap and this flourishing of the creator economy and ownership economy today, wherein people are having the conversation of, well, creators should actually be owning more of the value that they create. They should be the beneficiaries of the value creation that they're doing. And they should become just as other users in the community owners of these platforms too. So the creator economy then obviously predates crypto, but was maybe uniquely enabled by the internet. We'll get into that. But is the ownership economy? Is that sort of

Starting point is 00:11:10 a product of crypto? And how does this term Web3 do you think relate? Are Web 3 in the ownership economy part of the same? Would you bucket the ownership economy under Web 3? Or do you think it's its own thing following its own path and trajectory that's just related somehow? Yeah, we have this internal debate all the time among the variant team as to what all of these different terms mean. crypto, Web 3, ownership economy, how do we diff them and where are the boundaries? I think, frankly, like, it's still such a nascent area of technology that no one can really say conclusively what is one thing versus another and the terms have sort of taken on lives of their own. My personal feeling and the way that I personally define them is I think the ownership

Starting point is 00:12:00 economy is actually a bigger like umbrella phenomenon in which users and participants of platforms are becoming owners. And there was a Web 2 version of the ownership economy in which companies were trying to utilize traditional equity and legal structures in order to give ownership to their users. That was like the weak form of the ownership economy and the strong form of the ownership economy is enabled by crypto and tokens which represent ownership. And then as for Web 3, I think most people are using it synonymously with crypto. But I think the ownership economy is bigger than all of that.

Starting point is 00:12:40 Lee, in order to fully explain the creator economy and the ownership economy, we're going to take a second to go all the way back to the dawn of the internet. But before we do that, can you just explain or illustrate the arc that I think exists with the trend of the creator economy? You already illustrated it a little bit where creators used to create for others. now they are creating for themselves. And then you also think there's another phase coming. Can you just summarize the trend of the creator economy, kind of where it started and where it's going and what it arcs into over time? Absolutely. So I described the creator economy in terms of different

Starting point is 00:13:14 phases and the evolution of the phases that we've gone through over the past decade or so. So creator economy 1.0, which was the dawn of the creator economy, I think of as existing as long as the internet has existed. So initially, people were uploading content online. They were doing so on their own independent websites or blogs that they set up. And then as the social network started to come out, people also utilize those for content creation. So in those days, I would consider everyone to have been a content creator as long as they

Starting point is 00:13:49 were posting content. But it was very nascent in terms of the economy piece of the content creation. So there were creators, but less so an economy actually. happening. Creator Economy 2.O, I think, was really the burgeoning economy around people who built up fame and influence on all of those channels. So gradually, you had people who accumulated audiences by posting content on the internet, and they were kind of like digitally native celebrities. And this influential class, who we typically refer to now as the creator class, then began to receive monetization, usually in the form of advertising or brand sponsorships. So they monetize

Starting point is 00:14:31 the eyeballs and the reach that they got from their total audience. And that was a game that really rewarded reach and scale. And now we've shifted, I think, just in the last couple of years or so, to the phase that we're in now, which is creator economy 3.0, which is this phase in which creators are no longer just conduits for selling other people's products and plugging other people's businesses and brands, but instead are regarding themselves as the brand, as the business, and they are trying to monetize their own persona in different ways. And they're doing so increasingly by using lots of different tools and platforms that have flourished in the last couple of years, all really based on direct monetization of their super fans. So that's the phase

Starting point is 00:15:19 where I'm now, creator economy 3.0, which is creators as their own independent businesses, I think NFTs actually, I would bucket under that third phase of like it's another tool in the toolkit that creators are using today for direct monetization of fans. Where I see this all going in the future is eventually the next phase of the creator economy will be the dissolution of boundaries between who is a creator versus who is an audience member. And so, it becomes much less clearly delineated the creator versus the fan. And instead, it moves towards this world in which creators co-create with their audience. And they're all part of a community that is helping to drive value back to the collective output that they put out. And in that

Starting point is 00:16:08 world, I think everyone is compensated with, you know, a reward proportional to how much value they drove to the community. And I call that evolution from the creator economy to the community economy. And that is really the supercharged version of the creator economy and where we go. That's really cool. From the individual creators to entire communities and creators co-creating with their fans and fans creating with the creators as well, this is super interesting. And I think that definitely dovetails into the ownership economy as well because that provides maybe the underlying alignment or incentive mechanism. Yes.

Starting point is 00:16:48 But like I don't want to we jump ahead of ourselves yet because this has almost been like a tease so far of everything we're going to unpack in this episode, I think. I want to go back to a post that you wrote recently, a fantastic post called the Web 3 Renaissance, a golden age for content. And let's go back, as David was saying, to like the founding of the internet. And there was this essay, I believe, in 1996. I guess this was a little bit after, you know, the internet came on board. But this famous essay from Bill Gates entitled, people have probably heard this phrase,

Starting point is 00:17:25 content is king, right? You've heard that mean propagated around. And Bill Gates said at that time in that essay, one of the exciting things about the internet is that anyone with a PC and a modem can publish whatever content they create. For the internet to thrive, content providers must be paid for their work. The long-term prospects are good, but I expect a lot of disappointment in the short term. You go in your post on to unpack that. But can you really put us back in the shoes of Bill Gates when he wrote that in 1996?

Starting point is 00:17:58 What did he see in the Internet at that point in time? And why did he expect this disappointment in the short term? Are we still kind of living in that disappointment? Talk us through that. Sure. So firstly, I would say when this article was published, it was very, very early days of the internet. This was 1996. I think globally there were like 30 million users total on the internet.

Starting point is 00:18:25 Today it's like three and a half billion. So at the time, it was less than 1% of the world population. So this was very, very early days. Also, I would just say that at the time I was five or six years old. And so I was not an active internet user. I was probably playing with Barbies or something. And so a lot of what I know about that era is not from my firsthand experience of using the internet, but rather from reading and talking to friends who are older than me, more mature than me.

Starting point is 00:18:55 But regardless, so I think putting ourselves into the shoes of Bill Gates in that era, the internet was really nascent. It was nascent in terms of user adoption. not to mention the revenue element of what existed in terms of businesses on the internet. At that point in time, people really regarded the internet as this kind of like toy or interesting novelty, but didn't really see a viable place for businesses to get built. In his article, he outlines that right now the internet is predominantly used by businesses to drive purchases offline. So you kind of give a tease or a look at like your offerings and ways.

Starting point is 00:19:37 and then hopefully some of those users go offline and purchase your magazine or your book or your content thing. It's kind of the internet is a static catalog idea. It's not really dynamic. You don't really interact with it so much. Yeah, exactly. It wasn't dynamic at the time. And at the time, yeah, there were very few options for actually collecting payments or monetizing users directly. Advertising was also really early. He states in the article that advertising might be promising in the future, but today the total amount of advertising revenue that's being collected on the internet is nearly zero. And so this is really the basis for why he predicted a lot of short-term pain in terms of content creators online was because there was just

Starting point is 00:20:25 very little there. There was very little users. There was very little monetization happening. And so he had this optimistic view of, well, the internet is really powerful, hypothetically, because it's permissionless and anyone can go online and post content and the barriers to entry are much lower. And I think that has proven out to be true. Like we have had this flourishing of content creation on the internet. Everyone can become a creator. But the second part of his prediction was that there would be, it was challenging to actually make money from being a content creator on the internet. And I think that was true up until we saw the Web 2 platforms and the aggregators who obviously were very profitable and did make money from the content creation that they facilitated,

Starting point is 00:21:15 but that revenue, ultimately a large portion of it, did not actually end up in the hands of the individual content creators. So Bill Gates, the disappointment that he predicted, he wasn't predicting the frustration that we often talk about today with Web2 platforms. His predicted disappointment was coming just from the fact that there was no money flowing through the internet in the early days of the internet. There was just, as Ryan and you said, so, you know, static pages just to disseminate information. There was no passing of credit card information or not even to mention cryptocurrency. So like being a content producer in the early days just had, it was only intrinsic. There was no extrinsic value flows. Is this all correct? Yeah, that is my understanding

Starting point is 00:21:55 from what I've read is like at the time there was basically like two types of businesses that actually worked on the internet. One was e-commerce. Amazon got started in 1994, and the way that they accepted payments usually was someone mailing them a check and them getting mailed the product. So e-commerce was happening, so physical products. And then there was porn. And then beyond that, there was basically nothing else. People were very reticent in those days to enter their credit card information onto a webpage. And it was also very difficult on the supply side for publishers. or web page creators to even accept credit card payments. And so direct payment was really not a thing.

Starting point is 00:22:37 Advertisers had not yet moved online. And so the whole landscape of revenues online was just very, very early. So from the perspective of this early days of the internet, the Web 2 platforms, Facebook, YouTube, etc., was probably actually viewed as probably a very good thing if they could have seen that on the horizon because these things, these platforms made it very easy for content creators or easier for content creators to actually monetize themselves in the first place.

Starting point is 00:23:03 Would you agree with that statement? I would agree with that statement. I think that in the early days of these Web 2 aggregators or platforms, they were viewed in a much more positive light, both from the consumer perspective as well as from the supply side perspective of the content creator. So on the consumer perspective, I think their early days of the Internet were marked by this belief, that the internet is this really overwhelming place, and it's awash in this, like, sea of all sorts of different types of content. And I, like, as a user, I can't make sense of it.

Starting point is 00:23:41 There's, like, headlines from the New York Times at that period of time where people are calling the internet, this overwhelming sea of websites that, like, can't possibly be navigated. Search, also, by the way, was really early in these days. And so I think on the consumer side, like the aggregators played a really important role in helping consumers to make sense of all of that information, putting into one place, having an algorithm that ranked it and surfaced up what was most interesting and help users to basically sift through everything that was out there. And then on the content creator side, I think in the early days, the challenge was like, okay, I've published my blog online, now what? Like, how do I actually get connected to audiences and users? There's not really, there's no Google yet. Search engines, don't really exist, the internet had all of these closed ecosystems like AOL and MSN, how do you actually get connected to end consumer? That was really difficult too, let alone, the difficulty in those days of like setting up your own website and getting your own server. So I think the dawn of the Web 2 platforms was actually a really positive thing. It was regarded

Starting point is 00:24:49 as really enabling the vision that Bill Gates set out, which was facilitating this flourishing of content creation and making it possible for people to reach the people who would connect with their content. I'm really blown away by this. You said in 1996, Bill Gates' concern in the Content-Inging article is that there's not a business model for content creators. He saw the potential, but he's like, there's no way for them to make money. There's no way for individuals to find them. As probably one of the more elder millennials on this podcast, I do remember when Facebook actually came to my university. And I was like, it was the coolest freaking thing ever. Like Facebook is here. Okay. Now we have a way to like socially connect with our friends and peers. This was like a revolution

Starting point is 00:25:39 in the internet. It's like all of the Microsofts in the world, they were kind of the old guard of computing. But like the Facebooks and Google, this was the revolution. This was giving creators an aggregation point, a connection point to their audience, creating a business model for them. It's so funny how quickly that happened, right? So you chart like 10 years from 1996 to 2006, and then you have the beginnings of Facebook and you have Google and you have an underlying business model of the web. But something from that point on, a little bit after maybe, like turn towards a dark path, right? And now the Googles and the Facebooks of the world aren't necessarily perceived as our friends.

Starting point is 00:26:20 I'm wondering if you could talk about this, because this is in your article as well, Lee, the original sin of the internet. I think this is a term from Mark Andresen, if I'm not mistaken. Can you tell us about the original sin of the internet and why that led to the outcomes that we have today, and maybe the business model that the internet operates on today? Yeah, sure. So the phrase, the original sin of the internet, it's from this fireside chat that took place a couple of years ago between Mark Andreessen and Katie Hahn, who are two of the general

Starting point is 00:26:53 partners at 816Z, I think they were talking at one of their crypto regulatory summits about crypto and the future of the internet. And Mark was talking about his experience building Netscape in the early days of the internet. And he calls the fact that browsers did not incorporate payments natively into the browser. He calls this the original sin of the internet. And he said that this, they tried to do this, but conversations with banks and credit card companies didn't go anywhere. And so they sort of gave up on embedding payments directly into the browser. And this is the original sin. He says, because it's created all of these downstream problems that we have today that stem from the fact that advertising then became the prevalent business model online,

Starting point is 00:27:43 because it didn't require payments. And because of advertising, you have issues around privacy and data collection and the misalignment of incentives between all of these content platforms and what users actually want to see. And so the way that he frames it is it stems really from the fact that the internet didn't have this native ability to transfer value. And I think it was a really interesting conversation. And he goes into a few implications for what could have had. in otherwise if payments had been built into the browser. He talks about how there might have been

Starting point is 00:28:25 this parallel transaction system outside of the hands of a few centralized gatekeepers. He talks about how it would have been, you could have had aligned incentives between the platforms and their users. And then he also talks about how maybe the internet economy would actually be much bigger if there had been this direct payments model instead of just advertising. And I think when I, when I probe into all of these points through the lens of the creator economy, I do think that things would have turned out really differently had there been payments from day one. Because essentially, like, the trajectory that we took with the creator economy, wherein, as you recall, like in phase two of the creator economy, everyone was basically acting as a conduit to sell other types of products and to

Starting point is 00:29:13 show other brands and help other companies advertise their wares, like, I think that really skewed. a lot of the incentives of content creators themselves. They had to grow their audience to be as big as possible so that they could actually monetize to a larger extent. They had to make their content really aspirational and make people feel like they were lacking something in order to drum up the desire to purchase. And yeah, they had to go for reach and skill.

Starting point is 00:29:42 And in order to get that, you kind of have to create kind of like vanilla surface level mass appeal. content versus niche in-depth, like passion-driven content. And I think you see that across the internet where it's impacted the incentives of these content creators. And as we know, incentives drive everything. And so you have social networks that are full of content that is really mass, surface level, shallow, aspirational. It results in people feeling bad about their lives and what they have and a lack of real expert-driven or passion-driven type of content creation. I find this part of the conversation fascinating because it's an interesting thought experiment

Starting point is 00:30:25 to go back towards the dawn of the internet and talk about if we had only included payments natively in the browser, what could have been? What utopia did we accidentally miss by not integrating that in the early days of the internet? But I'm wondering if we might accidentally be being naive about other problems we might have also missed. Because if we had incorporated native payments into the browser, I'm not technical enough to understand how this might have worked. But a worry that I have is that if we had just done that, well, then we might have actually set up intermediaries,

Starting point is 00:30:57 payment intermediaries, that we actually couldn't really predict today because it didn't happen. And so my question to you is, is the native payment of the internet, could that have even been possible without crypto? Or is crypto really the secret sauce that unlocks the truly native internet payment means that actually does allow the creator economy to fully unpack? And so do you think that we actually did as a society accidentally miss a grand utopia? Or do you think really it needed to be crypto at the end of the day regardless?

Starting point is 00:31:32 Yeah, it's really hard to explore the counterfactuals since they never actually happened. but there were, I mean, there were definitely a number of attempts to facilitate transactions over the internet. There was a protocol that a bunch of different companies and browser companies were also working on called set protocols, secure electronic transaction, which was this protocol for securing credit or debit card payments over the internet. And they needed to partner with a whole bunch of stakeholders like merchants, issuing banks, credit card companies, all of the browsers, et cetera. And so they never really got any traction. But regardless of that, like, I think hypothetically,

Starting point is 00:32:19 I'm not entirely sure if we could have bypassed the Web 2 internet if we had just only built in payments into the browser. I think that is perhaps a little bit unrealistic. And the reason why I say that is, if we look at the state of the internet today, it is much easier to accept payments on the internet, like any sort of publisher or content creator or person who sets up any website

Starting point is 00:32:45 can much more easily accept payments now. Credit card penetration is also really high in the U.S. So let's just say, like, it is actually very easy now to facilitate transactions online. And yet we still have all of the problems of the internet that we're facing now. We still have all of these like walled garden, platforms that control a bunch of user data that we can't pour out of. We still have content creators

Starting point is 00:33:09 who are going for scale and reach. And so I think like the internet evolved in the way that it did for a number of different reasons, not just the business model. I think like it needed to be aggregated because it was a huge wild west of all of this type of content, as mentioned, like and creators were craving aggregation. So I think the aggregation. So I think the aggregated. needed to emerge, whether a different monetization model for the aggregators would have changed the type of content that they surface or changed the way that they built their algorithms, I think that is a possibility. But I still think we would have had the centralized businesses that emerged during the last

Starting point is 00:33:49 decade because, frankly, that was what consumer behavior gravitated to. And so could we have just leapfrog from Internet 1.0 to Web 3? I think that's a little bit naive. Yeah, it's definitely hard to know. And to go back counterfactually is almost impossible. They were in their early days, there were a ton of benefits to, I guess, this economy that we created, including onboarding so many people at very low costs and distributing it to a wide audience.

Starting point is 00:34:19 We often talk about kind of the aggregators as sort of the evil ones. And I think that story has been told many times on bankless. But I'm super curious about what you just were talking about with the creators that have arisen in this type of internet era. You know, that quote, show me the incentive and I'll show you the outcome, right? And it strikes me that creators today, it's very much, it's mass produced, right? It's like they're all competing for these little bits of attention that people find in the internet. And so we get mass produced, somewhat shallow creators, all competing for attention. This is kind of a perverse incentive system in that it's not necessarily the best or the smartest

Starting point is 00:35:01 content that gets rewarded. It's kind of the lowest common denominator type content. My favorite example is like, you ever see, and people who like crypto shows will see, you ever see your favorite crypto YouTuber and like the goofy faces they make in thumbnails? It's always like this like, do you guys do that too? I'm screen capping now. We will now for this one. That's a perfect example. And why do they do it? It's because the system, the algorithm in place is incented towards, you know, attention. Right. And so they have to make this goofy surprised face. in order to get clicks. The other outcome of this, too, is, like,

Starting point is 00:35:35 creators don't really own anything. It's the aggregators that own everything. And so, like, bankless YouTube channel, like, we don't own it. YouTube could de-platform us at any time. Like, we don't own our Twitter presence. We can't export that file. So there's all sorts of weird things, outcomes that have come as a result of this. And that's why I want to get to, like, the second piece of what you wrote.

Starting point is 00:35:57 Because I think what you are talking about is a transition. that is happening in the creator economy and to the fabric of the internet from this business model that is solely based on attention, this attention economy that we have right now, to something that we were talking about earlier, which is the ownership economy. And the ownership is not just for creators, that's a piece of it, but it also strikes me it for community members. And you outlined four different ways we get from the attention economy to the ownership economy. I'm wondering if we could go through these four right now, Lee. Does that sound good? Yeah, that sounds good to me. I'm going to throw these out there and kind of list them, and then we'll strike them off one by one.

Starting point is 00:36:42 So the first way we get from the attention economy to the ownership economy, you talk about the introduction of digital scarcity, all right? Digital scarcity. It's like NFTs as an example of that. That's number one. The second is patronage. So that's supporting creators actually becoming an investment and not just this active altruism. Patronage plus is what I caught. It's Jesse Walton coined that. Yeah. And we'll get into what that means. The third is new economic models. These are programmatic, programmable economic models. And the fourth is this idea of Dow's and community ownership. So one, two, three, and four, we'll go through them all. Let's start with that first one. Okay. And this is where maybe crypto enters the story a bit more. The introduction of digital scarcity, how does that take us from

Starting point is 00:37:28 the attention economy to the ownership economy, Lee? Right. So up till when the blockchain was introduced and crypto, there was no scarcity in terms of digital content. Like everything could be reproduced. There was no concept of the original or the canonical version of a piece of digital content. And that really undermines the ability for creators to be able to sell things, sell digital goods and content if there is no scarcity, if everything can be reproduced. This is why we got a ton of pirating in the early internet days when people were just trying to transpose the offline monetization model to online and sell like CDs on the internet or movies on the internet. Like that, the marginal cost of reproducing that is zero, and people could just, therefore, pirate it,

Starting point is 00:38:20 copy and paste it, and download it to their own computers. And so the fact that the blockchain enables there to be scarcity dynamics introduced to the internet is really powerful for creators, because all of a sudden that means you shift from selling this fake version of scarcity. There's a lot of faux scarcity products. I bucket them as faux scarcity because they're trying to like create scarcity but like the forces of the internet are just trying to undermine that. So like a faux scarcity model would be paywold content or creating or they would proxy for scarcity with their time. They would sell their time, i.e. through consulting, offering one-on-one consulting or doing personalized cameo videos or something

Starting point is 00:39:09 like that because time is the only scarce thing that you have to sell on the internet. And so we move from that world where they are very limited in terms of how they can monetize to being able to sell scarce digital goods or NFTs and tokens, social tokens. And so when you have scarcity, that introduces supplier power. In this case, the suppliers are the creators. And so they're able to monetize through this new economy of scarce goods. it's in a way that was never possible before. And this, you know, ties into a piece that I wrote a couple of years ago around the 100

Starting point is 00:39:48 True Fans thesis and how you could make a living off of far fewer fans than you needed to before if you could manage to monetize them to a greater extent. There's a few things to unpack there. I want to come back to the 100 True Fans thesis and your idea there. But before we do, so you use this term faux scarcity, okay? And this is what some critics think NFTs really are. is like right-click-savable, faux-scarce things. But you're saying that NFTs and actually, like, the digital properties of NFTs

Starting point is 00:40:18 are actually the thing that's real scarcity on the internet. How can you make that claim? Like, how do you defend against people who are like, that's also faux-scarcity? I mean, anybody can mint an NFT and I can right-click save. What's your feedback there? Well, I think this is, it gets quite philosophical in terms of what's real and what's I think Real is in this case, we're talking about things around which there's social consensus. And so for NFTs, there is a digital record of ownership on chain that everyone can agree

Starting point is 00:40:56 is the canonical version of that piece of content. Whereas faux scarcity is, I think, a world in which there is no social consensus around which version is the original or edition number one, two, three, et cetera. And instead, people are trying to proxy for scarcity by imposing, yeah, paywalls that you hit upon and have to unlock with a credit card or saying that there's only going to be 100 versions of this sold for an ebook or whatever. But, you know, in reality, they could generate many more. And there wouldn't be a way to tell whether you. yours was one of the original. I think this same energy comes out of Bitcoiners who are very proud about how easy it is to audit the Bitcoin supply. That's one of the features of the Bitcoin

Starting point is 00:41:46 blockchain is it's super easy to run your own note and it's super easy to audit who owns what Bitcoins. And that same energy can be applied to NFTs. The nature of an NFT when it's minted on Ethereum or any other smart contract blockchain comes with a very, very specific address that cannot be duplicated or replicated or faked. And so then Lee, it's going to, you're saying where there is some sort of social agreement as to what is the real NFT. But as soon as that social agreement happens, it's extremely easy to verify which is the real NFT because if I have a crypto punk on my wall, I can absolutely verify with complete ease that I own the real crypto punk to that, even though somebody could take that same JPEG

Starting point is 00:42:25 minted brand new NFT and have a same NFT of a new JPEG. But I have the real one because it's as simple as copying and pacing a string of letters into something like EtherScan and verify. it. And so that's something that could not have been brought about before crypto, just the ease of verifying the true ownership. And so sure, while there is plenty of faux scarcity with NFTs, we can spend up infinite new numbers of NFTs that doesn't dilute, just like how we can fork Bitcoin 10,000 times. That doesn't actually dilute the value of actual Bitcoin. So wanted to add that color in there. Would you add anything? Yeah, I agree with that completely. And the reason why

Starting point is 00:43:01 your canonical Cryptopunk or whatever has value is because people acknowledge that it is the real version. They can inspect ether scan and see that this was minted by the original creator or whatever, and there's consensus

Starting point is 00:43:17 around that. And that just had never before existed prior to crypto. There was no consensus over which version was real. Like if you downloaded from iTunes, was this the real one? Or did you pirate it off of some torrenting service? or whatever. Another way that I am starting to describe this as using the analogy from economics

Starting point is 00:43:39 is crypto introduces a digital goods economy when there had historically only existed a digital services economy. So in the real world, we have both goods and services that go into the entire GDP. Over time, over the decades, America has shifted to more of a services economy wherein more people are employed in services versus goods manufacturing, but goods still represent a huge portion of GDP, something like 40%. And the distinction that economists place between what is a good versus what is a service is that a good is something that is tangible, that you can return, you can exchange, you can resell to other people, you have property rights with goods versus that's not the case with services.

Starting point is 00:44:24 And so moving that to the internet version. So historically, I think a lot of internet-based businesses and creators have had to monetize things as services when they would actually be more naturally monetized as goods. But because there were no property rights, they had to actually create a service around it. So an example of this would be software as a service. instead of selling software as a license, it moved to the SaaS model because that was actually the more feasible monetization model. Same with all types of content. We've all shifted towards streaming content versus buying content and downloading it because there are no digital property

Starting point is 00:45:12 rights prior to crypto. And so historically, it's been really challenging for there to be a digital goods economy. It's primarily things as a service, like content as a service, movies as a service, music as a service streaming. And what's exciting is now there can be a digital goods economy because there are now digital property rights. And so the implication of that, if we go back to the real world, is that there can be, that can be the basis of entirely new types of jobs and income that hadn't existed before online. And I think the topic of digital scarcity, internet native digital scarcity, just leads right into what we were hinting at earlier with patron Plus, because I think you need digital scarcity in order to have that plus side of patronage plus.

Starting point is 00:46:00 Can you elaborate on patronage plus and how digital scarcity is involved? Absolutely. So everyone's familiar with the idea of patronage. It's existed for as long as there have been artists. It's really just the concept of you want to support someone. You feel affinity for this person. You want to contribute and financially support them. And this has been a model online for a while in the creator.

Starting point is 00:46:22 economy, there's tipping, you can go to any sort of live streaming app, there's digital gifts that you can buy them, or you can subscribe to someone's Patreon and support them. But the underlying motivation has always been altruism. Fans don't really get all that much in return for tipping someone besides maybe a shout-out or they get to unlock some extra piece of content. But really, I think the primary motivation behind patronage is a softer type of motivation. It's altruism. It's the desire for status. It's the ability to say, like, I really care about this person and I'm a better fan than you. But the plus and patronage plus really refers to the fact that there is a tangible benefit to the fan from supporting the creator. And that takes the form of a financial benefit

Starting point is 00:47:09 potentially if the thing that the fan decides to purchase, let's say an NFT, appreciates in price. and the fan is able to benefit from that price appreciation. So you go from this world in which the motivation for supporting a creator economically goes from altruism to this actually self-beneficial rationale. And I think when you move from one motivation and introduce this new motivation, it actually dramatically increases the potential number of people in the world who would actually support creators, not that many people are willing to just donate out of altruistic purposes, but everyone is

Starting point is 00:47:51 interested in making more money, or mostly everyone in the world is interested in making more money. It's funny to think of that as like a scalability technology, right? It's kind of the difference between like if there were only nonprofits versus, you know, the corporation, right? Nonprofits can scale, but they have some limitations. And a corporation, I mean, our world is composed of all sorts of for-profit capital formation. It's kind of the difference between nonprofit and something that is for-profit.

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Starting point is 00:50:45 talking about fans get to purchase an NFT or maybe some sort of token that loosely resembles some sort of vehicle for upside, this is when we get into the conversation of SEC regulations. And this is the conversation I think that we're currently having in the crypto space with our frustration at some of the securities regulations, not just in the United States, but also abroad, where some sort of creator, just being doing their creative stuff, expressing their creativity, issue some sort of token. And then that might just accidentally be a security because it has the potential of upside in it. Lee, can you kind of just unpack the difficulties of really unleashing the full potential

Starting point is 00:51:25 of the creator economy and the securities regulations that hinder it? So I would definitely say that I'm not a securities law expert. So my understanding is today in the offline world, a lot of the creative work that people do treat as investments are not actually regulated as securities. So things that we would buy like collectibles or march at a concert or even paintings, those are not securities. I think where it does start to come into question is when people are expecting to receive a portion of revenues on maybe like an ongoing basis or they're marketed in terms of, you can expect a return in the future. And in that case, I think it potentially could get classified as a security, which would mean that investors who purchase these things would have to be accredited or they have to be

Starting point is 00:52:17 registered with the SEC. And I think that would just be tremendously challenging for the entire space and limit participation to a very small tam of consumers. So I'm really like of the camp that I think we should increase opportunities for as many people as possible to build wealth and to participate in the ownership of assets that will appreciate and value. That is the whole reason for the ownership economy thesis. And so I really hope that we can still treat all of these content creator products,

Starting point is 00:52:52 the digital content as akin to merch or collectibles. We tease this a little bit, but why don't we dive into it in the topic of patronage plus still? So there's this idea that all you need is a thousand true fans to kind of spin up a business or kind of become a creator. But you have a thesis that maybe you need far fewer than that, maybe in order of magnitude less. So maybe 100 true fans? Can you explain that concept and how that relates to patronage plus? Absolutely. So my piece called 100 True Fans was published, I think, in 2019 or so, very much inspired by reading Kevin Kelly's original 1,000 True Fans Post, which he published almost, I think, more than 10 years ago.

Starting point is 00:53:41 So Kevin Kelly's piece, he was a wired editor, and he was writing this, I think, in 2009, about how the internet is going to be really great for content creators because it means. that you don't need to be a mass famous celebrity, you actually just need a thousand true fans in order to make a living because he was doing some back-up-the-envolent math. If you could get a thousand fans who pay you $10 per month and cut out the middleman, which the internet enables you to do, then you could actually make a full-time living just being a creator with that small fan base. And I really loved that idea, and I took it a step further, an order of magnitude further, and said, actually, all you need is 100 true fans, because if you can have 100 people,

Starting point is 00:54:28 say, paying you $1,000 per year, then you can make a full-time living off of that and earn $100,000. And the recipe to do this, I outlined, was comprised of giving fans more than just appealing to their altruism. It really needed to be about fan benefit rather than creator benefit. And so creators needed to give them content or community that they were unable to find elsewhere, appeal to fans' desire for status and feeling special. Like, fans were willing to pay those kinds of amounts for results or transformation. Like, there were all these different components that I listed out of the 100 True Fans' playbook. But at the time, NFTs had not really taken off. And so I put this thesis out there.

Starting point is 00:55:16 And when NFTs took off, I was like, oh, my God, this is what enables 100 true fans for many, many more creators. Because the powerful thing about what's possible with NFTs is that you can basically, like, segment all of your fan base. Fans are very heterogeneous. Like when we look at our follower number, I think that number is actually quite meaningless. And instead, we should think of them as fan segments where you have the super fans, the casual fans, and then the, I forgot what I called it. Like, it's like active fan and then passive fan. And there's going to be a segment of people who are willing to pay a lot, who are willing to really pay anything and are really price and sensitive, as long as it gets them a closer relationship with this person that they have a ton of affinity for. And so NFPs enable that kind of price discrimination and being able to charge up to the fan's full willingness to pay and therefore enables much more powerful monetization of super fans.

Starting point is 00:56:16 So there's a number of dynamics in the web two world that I think really get in the way of that 100 true fans model. I think the most obvious one that comes to mind is that Spotify, for example, treats all streams by all users equally. And so, you know, one stream from one person is going to net some artist one tenth of a penny. And Spotify doesn't differentiate between a casual fan that is just listening to a song via Spotify radio versus a hardcore. fan that only listens to the same band day in, day out, and is willing to die for that band that they really, really love. Spotify doesn't enable any sort of segregation with this sort of behavior. And so what you're saying is that in this whole Patron's Plus model, we actually have ways of allowing fans to express a $1,000 a year or $10,000 a year interest in a specific

Starting point is 00:57:11 a creator and allow that one particular fan to differentiate themselves from somebody that is just randomly stumbling upon another artist through like, you know, a radio mix or some sort of, you know, random curation algorithm that we see all the way throughout Web 2. Am I onto something here? Yeah, I think you hit the nail on the head. The way that I usually describe it is like fans are very heterogeneous and they all have like different willingnesses to pay. You can like maybe plotted out and sort of envision there's like spikes in the curve of how much they're willing to pay for something. And existing Web 2 business models that are advertising based or I guess even subscription based business models that basically just charge a flat price, what they do is they flatten

Starting point is 00:57:55 that entire variation. And so instead of charging everyone up to their full willingness to pay, instead everyone is monetized the same as each other. Every eyeball is fungible. Every play is fungible. And what you have as a result of that is the inability to charge these superfans, but also on the superfan side, the inability to express your fandom in a way that would distinguish you from other people out there. So it's not only leaving money on the table from the behalf of the creator, but it's also leaving creativity on the table as well. The creator could have created more had they had a more viable monetization path than just whatever Spotify does, which is using the least common denominator of what people will pay.

Starting point is 00:58:42 Yeah, exactly. An example that comes to mind, which I think really paints the picture for this, is a company that I invested in, or we invested in a variant called Sound, which is a music NFT platform. When I checked with them a while ago, they had just launched and they had done seven drops so far with pretty small indie artists, honestly. And they had all sold out immediately in under a minute. And the revenue that these seven artists collectively generated was equivalent to the streaming revenue that would have been earned

Starting point is 00:59:13 if they had gotten 21 million streams. 21 million streams for seven artists is like mega famous level. That was not the case for the initial artist that launched on sound. But because they were selling NFTs and this was denominated in ETH and the sale prices were relatively high,

Starting point is 00:59:35 Or, yeah, I think it was like a collectibles level of price point. As a result of that, like, they didn't need to be super famous in order to be able to monetize effectively. And not only that, the example you just gave is that the artist actually gets to know who those fans are, especially when we talk about using this through a crypto platform where you can go look at the address that holds your NFT, where Spotify, you don't get the email addresses of your listeners. it's a black box. But with NFTs and with, you know, traceable transparent blockchains, you actually as an artist have a direct connection towards who the hell is paying you $10,000 for your song or whatever. And so that identity aspect is, I think, also very, very empowering

Starting point is 01:00:21 towards the creators. Yeah, that's definitely true. I think there's a lot of potential there. We still obviously lack a lot of the infrastructure to make use of that identity in terms of being able to message and reach out to them and tie it to, you know, their public profiles that might be out there. But I agree that there is a lot of potential there. Okay. So this is such an interesting conversation because what we're actually talking about here is ripping out the guts, the business model of the internet and replacing it with an entirely new engine. And when people hear the example that you gave of sound and these artists selling, you some of them will dismiss it and say, oh, that's just like the NFT bubble or they got lucky or something like this.

Starting point is 01:01:00 But I think what we're doing right here, Lee, the way you've laid it out is it's like very methodical. Like you can see exactly how we're going to cross this chasm from the attention economy to the ownership economy. And we've only gone down, I guess, two of the trigger points, right? So the first is, just by way of recap, we've got this new digital good product. So crypto invented digital goods. And we can now sell them on the internet. The second with patronage plus is all people who are supporting. traders, they actually become investors. So your fans become investors. That's the second. Now let's get

Starting point is 01:01:35 to the third. So this is new programmable economic models. That sounds like a bit of a mouthful, but tell us what you mean by that. How is this going to transition us from the attention economy to the ownership economy? Right. So this third point gets to be a little bit more future facing, and I would say it doesn't quite yet exist, but I think we'll get there. And I think a lot of people are building in this direction. So what I meant by new programmable business models is, essentially like today a lot of content creation is collaborative, all sort of content that we create draws upon past information sources or inspirations that have led us to create the thing that we're creating. And yet none of that revenue is flowing back to all of the sources of inspiration,

Starting point is 01:02:18 all of the people who perhaps contributed to a piece of work. And so you can imagine that eventually in the future, once more of our content creation moves on chain and all work becomes tokenized, that people can draw on this universal content library to mix and match and remix in order to put together whatever they're putting together. And by attributing it back to this universal content library, perhaps all of those different contributors to that piece of content could also be economically rewarded for their contributions. I think this is like a pretty futuristic idea that a few writers have talked about. You're starting to see, I think, hints of this being implemented when you look at the splits feature on a few different NFT

Starting point is 01:03:06 platforms. So an example of this is like on mirror, writers are actually splitting the revenue that they get in an automated way between really like any one of their choosing, but usually people who collaborated to a piece or proofread it or edited it or whatever. And then I think on foundation as well, as a creator, you can split the revenue that you earn from NFTs as well as secondary sales with other addresses. And so the vision that I was really laying out here is this world in which everyone becomes linked, both in terms of content creation, as well as the economic reward for how they're being compensated for that. That's fascinating, shared reward. So with the MIR platform, for example, if we, you, myself and David, we co-authored a piece together, right? And we listed

Starting point is 01:03:53 that and somebody bought it for, you know, say, three-Eath, and we were all, you know, splitting it a third, a third, a third, we'd all receive the proceeds from that. The ability to partake and share in some of the upside of these digital products in new economic ways, and probably to program them in all sorts of interesting ways in defy is just super nascent. That hasn't fully been tapped into yet. Yeah, I agree. And I think this is really powerful because this kind of like splitting of revenue and taking the value that you get and giving a portion of that to all of the influences and contributors, this has been a pain point in the Web2 internet for a while. I hear from YouTube creators that it's challenging to sit down every month, calculate their ad sense revenue on a video and

Starting point is 01:04:39 calculate how much should be split to every single person who collaborated with them on that video. And that just compounds over time because you're earning revenue on a continuous basis and yet the platform really treats it as like a one channel, one creator, one revenue account model. And then there's definitely like a huge trust component to trusting that the person who has the login credentials to that channel and that AdSense account is going to actually properly split it with you and represent accurately like what they earned. And so yeah, I think there's lots of issues around revenue sharing and attribution today that I'm hopeful blockchain can be part of.

Starting point is 01:05:20 the solution for. Okay, let's talk about the fourth one. And I think we sort of alluded to this when we were talking about creators starting to co-create with their communities, with their fan base. And the fourth one is Dow's and community ownership. So talk about that. How is that going to usher us into the ownership economy from the tension economy? Right. So this is really the future of the creator economy, as I mentioned, is the community economy. It's this world in which we shift from creators creating content at their fans or for their fans to a world in which they're co-creating with each other, and everyone is driving value back to the community in some way. That could be commenting on their posts, retweeting things, amplifying their content, leading marketing efforts or whatever it might be.

Starting point is 01:06:09 I think everyone in a creator's community is actually driving value in some way. but they're just not getting compensated for that work. And so this fourth point was really around moving to this community ownership model in which everyone becomes part owner of the community that they're in, and their membership state can be tokenized and represented on chain. We're seeing this with DAOs, where every member of a DAO is actually part owner of the DAO itself and stands to benefit from all of the revenue and the value. that they create. I think creators are going to implement this model with their fans and with each other

Starting point is 01:06:49 and drive value back to this community treasury and share it with all of the people who created value for them. That's fascinating. Are you seeing any examples of this? Like, you know, our story around the bankless Dow has been somewhat of an example where we just sort of, you know, seeded this idea of some people in the bankless community kind of starting a Dow. And now they're off and David and I barely participate, right? We're not active participants in terms of the day-to-day governance, but this vision of like, let's go make the world bankless. Now this Dow has spun up, which originated as fans of the bankless podcast and the newsletter, and they're creating all sorts of things, like their own podcasts, their own educational centers.

Starting point is 01:07:30 There's like a bankless university spinning up, and the community's doing this completely on their own, and it provides David and I a way to kind of scale the bankless movement and start the vision and let the community take it away. So we've certainly seen that. Are there other examples that you can point to around communities co-creating with their fans that you like? Yeah, absolutely. So, yeah, I think bankless doubt is actually a really great example of this kind of community-driven content creation model. I think there's other experiments that are running that are really fascinating.

Starting point is 01:08:03 Kyle Cheka, who is a, I think New Yorker writer, started a publication about NFTs, and he crowdfunded that by selling NFTs and airdrop tokens back to those crowd funders. And the idea is that the crowdfunders would then have a stake in the publication and have an incentive to help with content creation or amplification of what gets published. I think even something like Nouns Dow could be thought of as a creator community ownership sort of organization, wherein all of the values being driven back to this community treasury. Everyone who has bought in is able to determine what that treasury is going to be used for. They could use it on different initiatives to support the ecosystem, to publicize the work that they're doing, et cetera. And then I would also point to this musician

Starting point is 01:09:03 who recently has done a lot of really successful NFT drops. His name is Daniel Allen. He is a really active participant in the Web3 community. He's a music artist. I think a couple of things to note about him. He raised a crowd fund on Mirror a few months ago, in which he raised something like over $100,000 in ETH through selling NFTs. The plan is to then air drop tokens to all of those NFT holders. He's also done a lot of music NFT drops in recent weeks.

Starting point is 01:09:36 And so all of those people are going to also have tokens represented. their membership stake in this DAO. And then going forward, you could imagine that everyone who has ownership in his community is going to be that much more incentivized to contribute to his success, potentially create content themselves, and rise up as creators in that community. So I think we're really early days, but I think this like community-driven model is what I see as the future, because otherwise we are recreating this world in which creators are essentially the new platforms and fans are the people who are creating value.

Starting point is 01:10:09 but not benefiting from their contributions. And instead, I think the realistic state of the world is that everyone is contributing in their own ways to the success of all the projects they're involved in and all of the projects that they patronize. And they should have ownership in that. I want to integrate all of these different components that we've been talking about in this new creator economy Web3 world. We have significantly lower barriers towards creating, coming with increasing financial

Starting point is 01:10:37 rewards to creating. And we also have a changing creative process where it's no longer just the creator towards the fan, but it's a by conversation where the creator create something, the fans then also create and respond to that. And then it's an iterative conversation of creation between the creator and the fans. So when you put this all together, what comes out of this? What is the resulting impact upon society? Are we getting a boom of art and creativity? is this the roadmap for a brand new renaissance of human creativity? What is the long-term impact of all of these new paradigm shifts that are seemingly all happening at once? I'm really optimistic

Starting point is 01:11:19 about the future of the creator economy. I titled the blog post, the Web 3 Renaissance. So clearly, I think that we're due for this period in which many more creators can flourish and make a living and many more fans can also benefit from the contributions that they're making. So I think we go from the state of the world that we're in today, wherein there's about 50 million creators in total, and the entire market size of the creator economy is estimated to be something like $100 billion, to a world in which everyone is earning some income and ownership through their contributions to the internet. So everyone becomes a part creator. Like, I think literally, every single person who uses the internet is a creator in their own unique ways.

Starting point is 01:12:13 I think what changes in the future is that they're able to financially benefit from that. So I very much see, like, yeah, another renaissance on the horizon that will be enabled from that. I think people might think that I'm quite optimistic and maybe too optimistic or utopian. But I really do think all of the foundational elements are there. And it's really up to us. and all of the builders in the ecosystem to make that vision of reality. This is not the first time that a guest on bankless has predicted a renaissance. One of our general community's favorite previous episodes is episode 63,

Starting point is 01:12:49 the crypto renaissance. And historian Josh Rosenthal takes us through the argument about how the technologies that are specifically enabling crypto are the same iterations of technologies that enable the original Renaissance. So taking it for granted that a renaissance does actually come. do you have an opinion as to the magnitude of such a renaissance in comparison to the last one that happened in the 1400s? Are we thinking smaller than that one, equal to that one, greater than that one? It's a ridiculous question, but I want to ask it anyways.

Starting point is 01:13:21 Well, actually, I think this is the third renaissance. People often talk about the New Deal as the Second Renaissance, the New Deal in the Post-D Depression. The 30s? Yeah, exactly, in the U.S. that has been informally dubbed as the Second Renaissance because that was a period in which the government essentially paid the salaries of a bunch of artists and creators to go out there and create art for the public or create documentaries and write books, etc. So sometimes that is described as the Second Renaissance.

Starting point is 01:13:50 So if that is the Second Renaissance, then we're headed for a third. And I think it's going to be bigger than the prior to combined because this is now reaching internet scale. This is happening online versus the prior to internets were bounded to IRL. They were scoped geographically. They had geographical boundaries. Very few people could actually participate in terms of patronizing artists in the first one. And then in the second one, it was like, you know, tax revenue being fed into supporting artists as part of like a government plan. And now I think we're moving into with this third Renaissance, the difference is that everyone is able to participate as both a content creator as well as a patron, patron plus.

Starting point is 01:14:38 And so, like, I think it'll truly be internet scale. A renaissance at the scale of the internet is something to be optimistically bullish on, if ever I've heard it. No one's ever accused us, David, of not being optimistically bullish, though. So it's how every bankless podcast goes. Lee, now that we've kind of uncovered your mental model for the creator economy and the ownership economy. I'm wondering if you could take us through some implications here, maybe in some of your recent tweets that we picked out and we really liked. The first is something you tweeted,

Starting point is 01:15:08 the passion economy is the what? The ownership economy is the how. What do you mean by that? Yes. So the passion economy thesis, which I spearheaded when I was working at A16C a few years ago and started writing about a few years ago is this idea that new platforms and tools could help people to earn an income from their individuality. The idea was monetizing individuality by leveraging their creative skills or their non-commonetized knowledge and packaging that into different products and services that you could sell online. What I meant by this tweet, the passion economy is the what, the ownership economy is the how, is that I think the ultimate vision for me and for a lot of folks in the space is we still very much want to realize a world.

Starting point is 01:15:58 in which people are able to do what they love for a living and achieve financial stability through doing that. But the how of how we accomplish that is rather than just giving people income in bits and pieces here and there from these platforms that they're contributing to, instead they become the owners of the underlying internet products and services. So I think by giving people ownership, that really turbocharges how financially empowered they are. And so the ownership economy is the how of how we actually realize the vision of the passion economy. You also said this. The biggest opportunity of our time is to reconfigure the relationship

Starting point is 01:16:39 between capital and labor. To reconfigure the relationship between capital and labor. What do you mean by that? And how does that relate to our discussion? That was quite a controversial one. Yeah. So what I meant by that is economists divide up the share of national income into income that is derived from labor, i.e. working, like wages, salaries, tips, whatever, versus income that is earned from capital, i.e., things that you own that earn a return for you. This could be factories or real estate, whatever it might be, capital income. And the trend over time in developed economies has been that the capital share of income is growing and the labor share of income is shrinking. And what that means is that people who have existing resources, existing

Starting point is 01:17:37 capital, are just getting wealthier and earning more versus the people who are working for their living. And so the implication of that is exacerbated income inequality because that means if you have more to start with, you'll actually be able to outpace and earn more than the people who are just working with their time for wages. And so what I meant by this tweet, the biggest opportunity of our time is to reconfigure the relationship between capital and labor is, I think that that dynamic is just fundamentally broken. A world in which what people have is a bigger contributor to their wealth than what they have to actually contribute with their energy and effort, I think that forbodes really badly for our society and just puts us on a path to even more extreme

Starting point is 01:18:24 income inequality and income inequality that will be exacerbated through multiple generations too. And so what I hope to see is that we basically make them one and the same. People who are contributing labor are able to earn capital through that effort, through that work. And so it becomes indistinguishable that relationship between labor and capital. And I think that is the vision of crypto, by the way, is that people can not just by ownership of potentially valuable assets with their money, that they can actually earn them by participating in these new projects and networks. Why was this controversially?

Starting point is 01:19:07 Because anytime you talk about capital and labor, I've noticed, yes. Those two words have actually become quite touchy in society, yes. So, I mean, Marx wrote a lot about the relationship between capital labor and how capital owners and laborers were stuck in this perennial struggle, this power struggle, where capital owners, people who own factories and all of the means of production, they could exert that ownership and get laborers to essentially bend to their will and to work on their terms because the laborers only had their labor to sell. They couldn't make the end product on their own. And so this idea of class struggle between capital and labor and, like, his prediction

Starting point is 01:19:56 was that ultimately, like, labor was going to overthrow capital and we were going to have this classless society. I think the words capital and labor are just kind of like hot button words now, because a lot of people assume that I'm talking about, like, class struggle and class warfare and abolishing capital period. But instead, I think what I'm describing is something that is net new and hasn't been possible before. There's a frequent conversation in the crypto space about whether or not crypto fixes wealth inequality, wealth inequality being perhaps the biggest problem of our current time, at least definitely up there in the top three or so, I'd say. And the answer to this question definitely should be nuanced. Crypto does not solve the current state of wealth

Starting point is 01:20:42 inequality, at least in my opinion. We are not redistributing wealth. There's nothing about Bitcoin or nothing about the spinning up new L1s that fix wealth inequality. Old capital can just buy the new capital and retain their capital. But I think how crypto does solve, quote unquote, solve wealth inequality is that it generates platforms that are balanced, that don't tilt towards what you are talking about where capital begets more capital faster than labor begets more capital. And I think one of the reasons why people like you and me are so bullish about crypto is that it actually starts to really blur the lines between what labor and capital actually are. And so we are actually starting to integrate these things. And so while crypto is not going to

Starting point is 01:21:25 have some sort of jubilee where the ledgers are wiped clean and wealth is redistributed, it's still, it's not going to fix the current levels of wealth distribution. It can prevent them from getting any worse. And maybe if you're even more optimistic than that, it can actually start to reorient and rebalance the discrepancy between labor. and capital. Do you have any thoughts on that? I have many, many thoughts. I mean, I, this is a big part of the reason why I became a full-time crypto investor. Before October of last year, I had sort of been investing both in Web 2 and Web 3 businesses and sort of straddling both worlds. And I made the decision to go full-time crypto because I felt like this technology

Starting point is 01:22:14 evolution presented the biggest opportunity in my lifetime to help address income inequality. And so I wanted to bet my career in this direction because I was frustrated by, frankly, by the platforms and services that were being created in Web 2, that to me represented kind of incremental band-aid solutions on the current problem. like on the margins they were helping creators become slightly more empowered or you know export a portion of their fans to an email list or whatever but it was very marginal and i wanted to harness a much more powerful tool set for this mission um so what drew me originally to crypto was this potential to create more fairness in the world and to mitigate income inequality and so to go back to your question around like, does crypto solve income inequality? I agree. It's a really complicated question. And I think the answer is really up to us to shape the devil is in the details in terms of how we actually implement these token distributions and how we design all these networks.

Starting point is 01:23:27 It's up to founders to decide how much of their token networks go to the community versus goes to investors and the team. It's up to founders to decide whether. It's up to founders to decide whether their token supplies inflate overtime and create the potential for newcomers to benefit versus tilting it towards the early adopters. And so I think a lot of this is within our control. That's the wonderful thing. But I think for the first time ever, we have this new and powerful tool set to actually, yeah, reconfigure the relationship between labor and capital.

Starting point is 01:24:02 That's incredible if we could pull that one off. You know, this crypto certainly gives surface area to far more. people and provide surface area to far more opportunities. Maybe this is kind of the last tweet we brought in that that kind of links to what you were just saying, Lee, which is if you are a creator first company, you tweeted this, your cap table should reflect that. It seems like that's kind of what you're saying. If you're really a creator first company, then creators should own part of your equity, part of your capital. Is that what you were saying? Precisely. Precisely. Basically, if, if you're a founder and you're beating the drum of creator empowerment and being creator first,

Starting point is 01:24:44 the number one most powerful way to do that is through giving creators ownership. And ownership decomposes into both economic rights as well as governance rights. But at the end of the day, giving ownership over to creators is the most impactful way to actually enable and empower creators. And it's interesting that in this tweet I said, your CAF table should reflect that. I've now obviously pivoted my focus to token tables, and I think this also applies if you replace cap table with token table. I think the challenge with cap tables is that they're heavily regulated as under the current

Starting point is 01:25:21 legal framework. And a lot of founders were kind of really limited in terms of what they could actually do with their equity and how many people could own their equity and how many creators on their platforms they could actually distribute that to. And so I think tokens are this more powerful tool through which to actually distribute ownership to many, many people. It is funny and sad how regulation can actually exacerbate wealth inequality. Very much what we're seeing with the credit investor laws and another topic for another day.

Starting point is 01:25:53 But this is maybe my favorite part of the conversation where we get to turn a little bit of the theory into practice and talk about what someone, the average person listening, to this can actually do with this information to better their lives and to put themselves in the flow of this new trend, this ownership economy, creator economy trend. And it strikes me that right now crypto has too many speculators. Maybe like we have too many speculators in proportion to the amount of creators and entrepreneurs that we have. And I think there are massive opportunities for creators and entrepreneurs in the future that are completely left untouching. at this point in time, right? So we've talked enough in crypto circles about all the opportunities

Starting point is 01:26:40 for speculators. But I love how this conversation really positions the value proposition towards somebody who's trying to create something new and earn income from their community, somebody who has a community and can create a fantastic community in some of these digital products. So let's talk about this and get actionable. What is your recommendation for someone who wants to plug into the creator economy or the ownership economy today. What sorts of things should they do in order to find themselves at the center of this renaissance rather than at the fringes or kind of out in the cold? There are so many different ways to participate. It's almost like too many ideas to list, but I'll just bucket them and quickly suggest a few options. So I think for anyone who

Starting point is 01:27:25 finds themselves with a special skill or creative talent, my number one answer is to actually try and participate in the ecosystem as a creator to try one's hand at being a creator. This is what I did when I started being an investor in the ecosystem is I actually started creating content on the internet. And if, you know, even if you're not that successful as a creator, it definitely helps to cultivate a lot of empathy with other creators out there. So that brings me to my second point, which is to engage in the ecosystem by supporting creators. And supporting creators can take a lot of different forms. It can be financial support, like buy stuff from creators, buy their NFTs, buy their tokens, like join their discords, join their DAWS. But if, you know,

Starting point is 01:28:10 if someone is financially limited, I think there's other ways to show support as well. You can use your social capital to help amplify their work and help them get recognition. And there's also ways to help educate and bring more creators into the Web3 ecosystem. I actually think this is a huge opportunity for anyone who wants to get involved in the creator economy is to learn about different crypto platforms and projects and help actually walk creators through the process of getting started there. And then I would say lastly is to either build a creator-focused company or to support them as an investor or a user. There's so many amazing projects that are getting started today all across the creator economy and ownership economy. There's new music

Starting point is 01:28:58 NFT platforms, new visual NFT platforms, new tooling platforms that help creators to give their social tokens more utility. And so you could work for those companies, help contribute to them, or help start something new that you don't see out there. A lot of people come into this industry and they take one look at it and they say, well, I can't code, so there's nothing I can do. What would you say to these people? I would say to those people that there are a lot more jobs that are in demand in Web3 outside of coding. And recently I published a tweet storm about this topic, this exact topic. The first tweet was like seven steps to get into Web 3 for non-technical people. And so there's a number of really sought after skills, just to list a few of them. One is

Starting point is 01:29:47 community building. I think every single one of my portfolio companies is hiring for a skilled community manager, someone who's able to manage socials, connect different people in the ecosystem, drama of excitement. This is like a really in-demand scarce. There's very little great candidates who are in the ecosystem and everyone is hungry to hire for this position. I think people are also really hungry for folks to engage in governance to propose, like, new governance proposals, to engage in the forums, to drive some of these protocols and projects forward. I think there's also a new job that hadn't existed before in the form of working on tokenomics. A lot of these projects are still in their early days in terms of running the progressive decentralization

Starting point is 01:30:39 playbook and are looking for guidance and support in terms of determining who gets the airdrop and what's the criteria for that and how to design their tokenomics. So that is definitely an opening. And then I would just also say that like all of the other traditional non-technical roles that had existed at startups still exist in Web 3. So design project management, like being the glue person in some of these communities. like just managing like follow-ups and getting everyone to move forward and agree on a set of action items. That is so valuable. Product management, like a ton of Web3 projects are now looking for mass adoption and to reach like normal consumers. And so usability and design really matters.

Starting point is 01:31:28 And so skilled Web 2 product managers are really in demand. So anyways, there's a huge gamut of different jobs out there for people who want to help build the creator economy in Web3. We started off this podcast with this very prescient quote from Bill Gates saying content is king. And I would just like to double down on that because no matter how awesome web through he is, you need to have good content. And I think this ownership economy is really meant to be able to amplify one's skills at producing content more than it is to be able to just, you know, put money in the hands of everyone. And I think what I'm particularly bullish about with the future of crypto, future of Web 3, the future of the creator economy is that everyone has some sort of kernel of creativity inside of them. And it's up to the social structures, the platforms that we use to really unlock and unleash the creativity that's inside of everyone.

Starting point is 01:32:23 So that's what I'm bullish about for the future of the passion economy. Lee, let me ask you this closing question. So we're recording this at the start of 2022. And I think last year was a fantastic year for the creator economy and the ownership economy. Just the surge of NFT interest we saw alone was enough to make it an incredible year. What do you think 2022 is going to bring for us? Is this going to be a big year for the ownership economy? And then what are you most looking forward to in this year and then the years ahead?

Starting point is 01:32:52 I think that it is going to be another banner year for the creator economy. I mean, I think every year is that is the case because the creator economy. is just on a tear. And in general, I think the backdrop of this is that there's a generational shift in how people are thinking about work and how they want to earn income. And more people are gravitating towards being able to be autonomous and independent and doing the things that they want to do more flexibly. And that's driving huge adoption of the creator economy across the board. And so I don't think we're going to see any slowdown in that because that is an underlying human motivation that is prevalent all around the world. In terms of specific themes and predictions

Starting point is 01:33:36 for 2022 as it pertains to maybe some specific areas that I'll be focused on in the creator economy, I think more creators are going to explore Web3 native ways to monetize and add that to their toolkit. Hunter Walk had a really great post about creators being multi-skew. Like most creators are multi-skew. They monetize through a variety of different business models and different types of products. I think this will be the year where a lot of creators go from watching and waiting to actually participating and jumping in. And so what that means is a bunch of new NFT platforms as well that cater to different types of NFTs and different formats of digital content. So whereas last year was really all about collections and really revolved around visual art and that happened on

Starting point is 01:34:25 open sea and foundation and super rare, I think this year we're going to see more musicians participate in NFTs. So there's a bunch of different music NFT platforms that have emerged, like catalog and sound and arpegy. And there's communities like water and music and song camp. And I think photo NFTs are going to be another big trend this year where photographers are able to be more successful with their work. And that's happening on foundation, but that's also happening on new platforms like quantum. And then I think this is also going to be a year of experiments for Web3 Social, which is really a foundational element for the creator economy because it determines how well or how successfully creators are going to be able to connect to audiences and vice versa.

Starting point is 01:35:12 So I think we'll see more social experiences that are built with an eye towards exposing people, exposing users to stuff that's happening on chain that they might not be aware of, that is interesting to them. And so a project that I'm keeping my eye on in this regard is called Context, which is this NFT-focused kind of social network or social feed. There's another interesting one called Backdrop, which is really focused on Dow's and what people are doing inside of Dow's. But yeah, Web3 Social is a theme that I think is really fascinating to. Absolutely. So much should be built. So much to look forward to. Up only for the creator economy is what Legion is predicting in the years to come. Thank you so much for spending time with us. This has been

Starting point is 01:36:01 absolutely fascinating. And I know the bankless community is going to love it. We appreciate you spending the time. Thank you so much for having me. Really love the conversation. Action items for you today. Bankless Community, the first is a panel that we talked about earlier. It's called What is the Creator Economy? Legion was on that panel. So was Justie Walden, one of her partners at Variant Fund. Go check that out. It's a great download on what the creator economy is as well. Also, subscribe to Legion. substack. You could find that in the show notes. We'll link to that. Also, we'll link to her post about 100 true fans. We look that up for you and go click that link and read that post. Risk to disclaimers, guys, as always, this stuff is risky. Crypto is always risky. So is

Starting point is 01:36:44 Eith. So is Bitcoin. So is the creator economy. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot. Thank you.

Bankless - 101 - The Ownership Economy | Li Jin

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