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The Wrath of Razzlekhan
Forget the arguments against crypto, minting virtual stars, Facebook superusers are the new editors, lessons from Peter Chernin and how to find satisfaction.
Welcome to People vs Algorithms 17.
I look for patterns in media, business and culture. My POV is informed by 30 years of leadership in media and advertising businesses, most recently as global President of Hearst Magazines, one of the largest publishers in the world.
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I thought the Super Bowl Halftime show was entertaining. The philosopher (now officially a reoccurring newsletter character) agreed. But his kids, who recognized most of the tracks from the philosopher's “dad’s cringe hip hop playlist”, didn’t. Notably absent were contemporary rap stars. “It’s depressing” his daughter demured, "to admit we don’t have anyone to represent and I have to listen to my parents' rappers." Overheard on Twitter: "If you are stoked about this halftime show, it's time to book a colonoscopy." FWIW, I thought Dre, Snoop, Dre, Mary J. Blige, Eminem and the rest of the crew were aging well. At least it wasn’t Coldplay or Springsteen.
Generational tensions were exactly what I had called the professor about, so this was a good start to our conversation.
On the topic, the philosopher said university faculty have a tendency to get too close to graduate students, a practice he discourages. "Deep down they all want to kill you and take your job," he said. "Ultimately you are an obstacle to career advancement." He referred to it as “the Oedipal aspect of intergenerational relations.” Even academics have homicidal tendencies according to the philosopher.
Crypto had a bad few weeks. Canadian cultural critic and YouTuber, Dan Olsen delivered a stinging 2 hour NFT / Web3 takedown which covered most of the things critics hate about crypto: the tech just doesn't work that well. it uses too much energy, it's prone to scams, is not actually that secure or private, it brings out the worst in us by financializing all aspects of existence, it makes some wildly rich, it’s hardly the wealth democratizing force it claims to be. And NFTs are mostly ugly cartoon art. Most of what he says is hard to challenge other than to say "we are working on it", so the rebuttals were surprisingly thin. The video has now been viewed 5.3M times and we have a new Canadian to add to the "there are lots of notable Canadians" list.
If that body blow was not enough, the arrest of Heather Morgan and her partner Ilya Lichtenstein, who go by aliases Razzlekhan and Dutch, did not add confidence to the Web3 movement. The couple are accused of conspiring to launder $3.6 billion worth of cryptocurrency stolen in a 2016 hack of virtual cryptocurrency exchange Bitfinex. Razzlekhans hip hop persona, “Genghis Khan, but with more pizzazz”, did much, however, to add to the treasury of surreal internet culture and anti-crypto sentiment. Detractors had found the perfect grifter persona.
Science fiction author and Boing Boing impresario Cory Doctorow (also Canadian) piled on Tuesday with a summary of a thoughtful lecture from technologist David Ronsenthal, criticizing the overwhelming externalities of blockchain. I will quickly summarize: decentralized systems demand a ton of energy to engineer trust through a proof of work mechanism, the system is hugely resource intensive and requires a cryptocurrency to compensate the validators, this leads to speculation and ultimately, counter intuitively, the ultimate centralization of resources to reduce risk and create efficiency. Moreover Rosenthal reminds us that the billions being invested in the realization of blockchains potential are bets on market dominance and scale, precisely the opposite outcome that we set out to create.
Crypto pros and cons can be endlessly debated, BUT, none of that really matters. Punk rock is a much a better analogy for what is going on. Punk rejected the perceived excesses of mainstream 1970's rock, embraced a DIY ethic, championed anything anti-establishment. Crypto is a galvanizing force against what came before. It’s a new generation's punk rock moment. The difference this time is the punk rockers are equity holders. HODL!
Most of what came before are big platforms run by big, powerful, data hungry companies — social platforms, search platforms, shopping platforms, financial platforms. What we are witnessing is a generational line being drawn between the Crypto Economy and the Platform Economy. It’s energy source runs deeper than dissatisfaction with a technical architecture or legacy financial systems. Nextgen angst lives in a world where buying a home feels unattainable, where doing better than your parent’s generation seems unlikely, where political common ground is a Marvel movie. Covid feels like an epilogue to a story about a deeply dysfunctional system. Why not ignore it all and get rich quick?
It’s worth digging a little deeper to unearth more specific use cases that make blockchain actually worth fighting for. To get some perspective, let’s look back at its short history, starting with a really good New York Times Magazine Story from 2018 entitled, "Beyond the Bitcoin Bubble". It starts by framing the promise of the early internet and that how that idea produced something less utopian:
Once the inspiration for utopian dreams of infinite libraries and global connectivity, the internet has seemingly become, over the past year, a universal scapegoat: the cause of almost every social ill that confronts us. Russian trolls destroy the democratic system with fake news on Facebook; hate speech flourishes on Twitter and Reddit; the vast fortunes of the geek elite worsen income equality. For many of us who participated in the early days of the web, the last few years have felt almost postlapsarian. The web had promised a new kind of egalitarian media, populated by small magazines, bloggers and self-organizing encyclopedias; the information titans that dominated mass culture in the 20th century would give way to a more decentralized system, defined by collaborative networks, not hierarchies and broadcast channels. The wider culture would come to mirror the peer-to-peer architecture of the internet itself. The web in those days was hardly a utopia — there were financial bubbles and spammers and a thousand other problems — but beneath those flaws, we assumed, we assumed, there was an underlying story of progress.
The blockchain is seen as antidote to mistakes made when foundational open protocols of Web1 gave way to corporate controlled protocols of Web2:
The open, decentralized web turns out to be alive and well on the InternetOne layer. But since we settled on the World Wide Web in the mid-’90s, we’ve adopted very few new open-standard protocols. The biggest problems that technologists tackled after 1995 — many of which revolved around identity, community and payment mechanisms — were left to the private sector to solve. This is what led, in the early 2000s, to a powerful new layer of internet services, which we might call InternetTwo.
Underneath all of everything is a generation that believes in a do-over:
The blockchain evangelists behind platforms like Ethereum believe that a comparable array of advances in software, cryptography and distributed systems has the ability to tackle today’s digital problems: the corrosive incentives of online advertising; the quasi monopolies of Facebook, Google and Amazon; Russian misinformation campaigns. If they succeed, their creations may challenge the hegemony of the tech giants far more effectively than any antitrust regulation. They even claim to offer an alternative to the winner-take-all model of capitalism than has driven wealth inequality to heights not seen since the age of the robber barons.
The anti-platform sentiment finds kinship with the libertarian progenitors, rooted in crypto embodied culture of 1970's Silicon Valley and cypherpunks who sought social and political change through cryptography and privacy-enhancing technologies.
It wasn't until 2008, shortly after the financial crisis, that the technology moved beyond the technological fringe with an ambitious white paper that sought to upend a sovereign financial system with a new decentralized system for exchange.
On Nov 1, 2008 bitcoin founder, Satoshi Nakamoto, wrote an email to a cryptography mailing list: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party. The paper is available at bitcoin.org/bitcoin.pdf." Satoshi was dissatisfied with the central bank's handling of the financial crisis: “The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." When he pushed the first bitcoin transaction live on Jan 3, 2009, the transaction contained an embedded message. It read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".
So blockchain’s first use case emerged as opposition to what was perceived as a broken system of centralized financial control. A decentralized system for trusted transactions was the answer.
In reality, while the bitcoin alone has amassed over $800 billion in market cap, it’s utility as fiat replacement has been slow to evolve. For the most part, the market is sustained by speculative activity and a token economy whose purpose, much like an emergent city, is building itself, not a meaningful platform for value exchange.
But technology rarely evolves in predictable or foreseeable ways. The next evolution, not anticipated by Satoshi, has been much more important in popularizing the technology. Some five years later on May 3, 2014 a digital artist named James McCoy minted the first NFT, Quantum, a video clip of colorful octagons made by his wife Jennifer (James and Jennifer are noted digital artists whose work belong to the Met's permanent collection. On November 28. 2021, the one-of-a-kind Quantum art piece sold for over $1.4 million in a Sotheby auction.)
NFTs emerged after a bunch of experimentation with "colored coins", tokens that represented real world assets on the bitcoin blockchain and were popularized as a way of trading nerdy gaming assets and collectibles. But it wasn't until people started trading the meme Rare Pepes in 2016 that interest started to grow. By 2017 the first Etherium based NFT marketplaces emerged as places to trade memes. Cryptopunks followed later in 2017.
As @JasonYanowitz noted on Twitter the other day, "People are pulled by culture, not finance. This is why DeFi sits in the shadows while NFTs have gone mainstream."
Memes may have popularized NFTs and lit a fire that activated imaginations of the cultural community extending from gaming to music to Hollywood. But the idea that the blockchain could host executable code to memorialize relationships in code (smart contracts) is a disruptive idea across virtually every industry. Massive investment is being deployed to rethink how NFT enabled “smart contracts” streamline relationships between invested entities, with disruptive potential across huge swaths of the economy from financial services to insurance, real estate and beyond.
And while the obvious consequence to a system where value can be quantified and fractionalized is one in which all human activity devolves into a token-driven, speculative game-like hell, advocates see something more promising, a world in which the virtues of ownership and financial gain benefit a far bigger part of the population. It's too early to see if this is actually working, and pundits will point to a massive concentration of wealth, the optimists see something revolutionary. An important aside here, but 23% of African-Americans own cryptocurrency, compared to 11% of white Americans and 17% of Hispanics according to a 2021 Harris Poll conducted for USA Today.
Packy McCormick, author of the hugely popular Not Boring newsletter, thinks it’s important enough to anchor a presidential platform. In "Ownership and the American Dream," Packy argues that we need to do much more to broaden ownership in America so everyone can benefit from the upside.
Technology accelerates the widening of the gap between the returns to capital and the returns to labor. Successful technology companies can reach global audiences at miniscule marginal costs with dramatic returns to scale. There’s no putting the genie back in the bottle, and any policy that seeks to do so will just limit upside or push the winners and their money abroad.
Instead, America needs to make ownership an explicit economic strategy. This should be the easiest place in the world for a company to distribute ownership to its stakeholders, and the easiest place in the world for people to capture the value from their contributions. It should be a place where everyone cheers for companies and protocols to be as successful as possible, because their success is our success. It should be a place that leans into and facilitates the financialization of everything.
Financialization seems like a dirty word, like things are moving in the wrong direction, to a place where all we care about are dollars and not each other. It’s a little dystopian.
But when you hit a patch of ice and spin out, you need to turn the wheel in the direction of the spin. When you’re going around a sharp turn, you accelerate into it.
Naturally McCormick’s argument extends back to platforms and a need to reinvent the economics of media:
Those tokens can incentivize users in ways that mean lower payments to companies like Facebook and Google. Putting tokens in users’ wallets instead of putting dollars through AdWords is a fantastic way to push ownership and upside to the edges.
“But people can buy shares in Facebook and Google,” you object, smugly. As soon as Facebook and Google give users shares for free just for using their products, as soon as they reward them for the attention that makes their platforms valuable with financial instruments that have upside potential, I will concede that point.
People should be able to own and monetize their own data. They should be rewarded for their attention. They should be able to be rewarded for backing the right projects early, whether with their dollars or their activity, like venture capitalists are.
This obviously doesn’t mean that the government should require companies to give ownership for usage. It means that we should put frameworks in place that make it as easy as possible for American companies and protocols to reward users with ownership.
So to recap, the crypto world is about to take a lot of heat. It will come from all sides. Technologists who see claims of decentralization as fraud, left leaning pundits who think the ownership economy is rigged and a front for right wing agendas, casual observers who don't understand why you would ever want to own a NFT of a frog, a Lebron dunk or fractional rights of your favorite song. Even worse will be the sad reality that troglodytes like Razzelskhan become the mascot of a movement.
Earlier, I likened it to a generation's punk rock moment, but it's obviously much, much broader and more complex. But it does share a generation's need to make a mark on the world, even if it is simply in opposition to what came before. To judge blockchain too narrowly or dismiss its long term disruptive potential is a misread of its Oedipal nature. It seems to me, that oppositional thing is the Platform Economy, a construct that despite offering wild improvements over Web1 and the core functional protocols that make up the internet, has robbed people of agency over their attention, personal data and the ultimately a loss of control of the media and political systems that depend on them.
Have a great weekend... / Troy
(Thanks to Brian M. for the title suggestion.)
7 other good things
1: Angelbaby is sign of things to come, a NFT brought to life as virtual pop star. The project is a co-production between NFT Fluf the Hume Collective, a virtual media studio creating “virtual artists” who perform, release content, and engage with the masses like any other artist. Listen to a podcast from the Hume guys here.
2: In the old media world, discerning editors and gatekeepers shaped what we read and watched. The Atlantic shows how a small group of superusers control what is seen on Facebook.
They’re superusers. And because Facebook’s algorithm rewards engagement, these superusers have enormous influence over which posts are seen first in other users’ feeds, and which are never seen at all. Even more shocking is just how nasty most of these hyper-influential users are. The most abusive people on Facebook, it turns out, are given the most power to shape what Facebook is.
3: I loved hearing from Peter Chernin on his terrific Betting on Passion interview on the Invest Like the Best podcast:
We are not in the mass market business in the ways that the broadcast networks are. The broadcast networks, up until that point, had been defined by, there was a very famous acronym, arguably, the single best television programmer of all time was a guy named Fred Silverman, was the only person to have run all three traditional broadcast networks, CNN, CBS, ABC, and NBC. And he coined this acronym, probably in the late ‘70s early ‘80s, called, LOP, least objectionable programming.
His thought was, if you only have three choices, there's only three networks, the person who has the least objectionable program is going to win. And that was really the way broadcast television worked, is you really wanted to not offend people, and not annoy people and not turn anybody off. And so I got to Showtime over this tiny little platform, and I woke up one day and said, “Wait a second, this is exactly the opposite. I'm in the opposite business, I'm in a noise business.”
4: You make a good point Ben…
5: What are you up to Elon? An enterprising young dev creates a Twitter account that tracks the movement of Elon’s jet. Elon tries to pay him off to take it down. He refuses and the community wants to help.
6: You might remember the gem Hell & Back from London based R&B artist Bakar. Next week he releases his new album “Nobody’s Home.” The single NW3 was just released and it’s groovy.
“NW3” is the third single from Bakar’s 2022 album “Nobody’s Home.” NW3 is the UK postcode for Hamsptead, London. Hampstead is known for its intellectual, liberal, artistic, musical, and literary associations. It has some of the most expensive housing in the London area. Hampstead has more millionaires within its boundaries than any other area of the United Kingdom.
Bakar says of the song, “I had moved to Hampstead, a nicer area. I had gone from the bottom of the hill in Camden, Chalk Farm, to being at the top of the hill. That’s a crazy thing to do from where I’m from. I guess the whole concept is me saying to a girl, ‘I think I’ve found the spot. There’s a whole new world up here, the top of the hill it looks different. Come see it.’”
7: How to Want Less, from the Atlantic. The secret to satisfaction, has nothing to do with money.
Each of us can ride the waves of attachments and urges, hoping futilely that someday, somehow, we will get and keep that satisfaction we crave. Or we can take a shot at free will and self-mastery. It’s a lifelong battle against our inner caveman. Often, he wins. But with determination and practice, we can find respite from that chronic dissatisfaction and experience the joy that is true human freedom.