Conversation with Sid Yadav - NFT extravaganza

Cool, man. Well, what do you think would be a good starting point? Uh, maybe one, one idea I had was maybe I could just recap what I wrote to you in the email and, uh, we can go from there.

Yeah, yeah, I'll, I'll, I'll respond with some framing ideas that I think are, are useful because there's some context, and as you, as you, you'll use the term, some meta-context that I think is really powerful for why this conversation, um, has me so interested. And maybe just as a pre— what's it called? An aperitif. One of the reasons why I'm so excited about this conversation, I'm not sure if this is common knowledge, but I've discovered over the years that I don't know what I think. What I mean by that is because my method is so intuitive, I can make choices on the basis of a very strong sense of what's happening and kind of unveil the next piece of it that is necessary to go, but I can't articulate it. It doesn't exist in terms of words and concepts and language that my linguistic processing mind can say back to me. It's actually only in dialogue with another very earnestly, like, astute, precise person that that stuff can actually come out in a fashion that is what I would say well said, and therefore presumably well shared.

I'm the same way. And that's why I write to you sometimes. I'm not expecting a response. It's more that in the writing I can articulate what needs to be articulated, because if I'm just thinking without projecting it out, I'm, I'm confused.

Yeah, yeah, exactly. All right, so preamble.

Okay, uh, so NFTs, non-fungible tokens. So I gather that you've been in the crypto space for quite some time. You've been following all of this stuff for for many, many years now. So this is not new to you.

It's shortly after the Satoshi white paper hit the presses.

Yeah, that's insane. Um, so, so, you know, I read your tweet about NFTs, I, I read your blog post about, I think, contract models, and it got me interested because, you know, I've been thinking a lot about the NFT space myself. I, I come at it from the lens of an entrepreneur in the creator ecosystem, and what's interesting here is just any any new model that's about empowering creators interests me. So not so much from crypto, but more just how do we make creators more successful, right? And in thinking about the NFT space, particularly after having grappled with some of your ideas around Game A, Game B, I've been feeling conflicted. So on the one hand, I fully buy into, let's say, the value for the creator as a, financial instrument, as something that's creative, as an exchange of, let's say, value, something new, that's something more decentralized and native to the internet ecosystem, right? I get all of that. Where I struggle is in two things. One, the definition of value. So one model I heard recently is think of value as a spectrum. The one hand, there's utility. So things like a phone, a laptop, tangible goods, right, things that actually do something. On the other hand, there's signaling. So you own something not so much for the purposes of the thing itself, but for what it signals to others. Let's say a luxury car, right, or an expensive watch. Here's where I struggle with NFTs. I think by design, from everything I'm able to understand about the idea of a non-fungible token, they seem to be more geared towards the signaling side of things, as in trying to capture that end of the value spectrum, as opposed to the utility side of things. And so where it kind of rings bells in my mind is in thinking about, let's say, some of the Game B values we've been talking about of transcendence, infinity, the sacred, the commons. One in my mind, I don't know if it's ever been articulated, is just like the value of value itself as opposed to things that are not of value, right? And so coming back to NFTs, you know, after reading your blog post, I just felt like reaching out to you because you may be one of the only person who can even understand what I'm trying to position here, which is, say, when we zoom out, let's say when 50 years down the line, 100 years down the line, when we look back at NFTs, will we see it as a net positive or net negative? And within the frame of that question is this whole thing about if the tool itself is meant to emphasize more the signaling as opposed to actual value, is that a good thing or not?

OK, great. This is good. Thank you. So, and I imagine much, but much about, much of what I'm about to say is obvious, but I think it's useful to put it out there to have it available. So one is the, I guess it's the metaphor of the acorn in the tree or the child and the man. So when we're asking a question about something which is new, we're asking a question about a trajectory. And in this case, we're asking a question about a trajectory that is bounded by potential and about a particular path that is taken out of that potential. And so in some sense, when I hear your question, what I see is there's a child that I'm seeing, and I'm looking at the child, and the question is, 50 years from now, when we look back, will we look back at this child and say he was a good man? Or he was a bad man? And the answer is going to be, it depends. There's something maybe in the intrinsics. There may be something in the child himself that determines that in a hard way. But there's a lot about the context too. So that's one. Now, of course, when I'm talking about NFTs or any other kind of technical architecture, the intrinsics are pretty real. I could take a look at the design characteristics that are intrinsic in the nature of 4chan and have a lot of ability to predict what kinds of sociocultural dynamics are likely to accumulate in that particular context. Tumblr will have a different set of sociocultural dynamics to accumulate in that context. Wikipedia will have different cultural dynamics that will accumulate in that context. So you can actually take a look at the niche that is defined by the architecture of the techno and use that to give you some sensing as to what is the actual potential. It's not a theoretical potential, because in many cases, many of the things that we might just sort of imagine— I'm now using Johnny V's like the imagine versus the imaginal. It's the imaginal potential, what is really actually going to be able to take root in that environment. So we can have that conversation. I think it's useful. We can also, of course, take a look at the right now. There's no— what's happening right now is important. It's meaningful to give us a sense of diagnosis. And then we can take a look at what are things like, as we zoom out, What are the areas? What are the lines of potential that seem to be present in the architecture itself? And then we can think about our ethical capacity. How might we participate in this so as to shape it in a direction that is more towards the good and more towards a larger and larger impact in that direction? I think it's important, by the way. Each and all of us have a degree of capacity to influence the environment that we're in. And so to kind of be icky, ooh, icky, and step away. Well, maybe, but I don't know if you've ever been in present, you have been present to childbirth. It can be awfully icky. And yet it's, if you step away from it, you've made a big mistake. Other things that come up. So this is now, that was like a high level. Let me zoom in a couple things lower level. One is the use of pattern and pattern discovery. And these are two very distinct modes of sensemaking. Pattern recognition has to do with the looking at patterns that have been experienced in the past and kind of pulling them out and looking at what you're seeing and saying, oh, is this that kind of thing? Oh, is this like GeoCities? Oh, is this like Pets.com? Oh, is this like Friendster? Oh, okay, MP3. Like, are these things, things in the past that, or Craigslist, things in the past that had certain characteristics? You can kind of zoom in on the typology and then pull those old patterns up and take a look at them and kind of compare and see if there's any fit. And then there's pattern discovery, which is the conjugate. In Forrest's language would be like the transcendent. Is there something that is emerging, some new possibility that has not yet shown up in the world? And is there a way to sense into what is emerging from the future that's pulled forth in this place? And is there a way to actually in yourself discover a new kind of pattern? That you've not yet seen? Do you actually learn something in the process of being in relationship with this? Does something awaken in you by witnessing it? And of course, for the most part, most people— and I think even more so in our contemporary cultural contexts— rely on pattern recognition more than pattern discovery. It's more of a paradigmatic mind, right, as a dominant modality. It's kind of beaten into us. Um, And so therefore rarely do we see, which is to say, rarely are we transformed by relationship with novelty. And more often we see something that is new as in fact, actually something that is old and therefore create wrong relationship with it. Actually, that was pretty high level. I meant to be low level, but it ended up crawling up high.

No, that makes sense.

Next, the next one is, À propos, not perfectly new in my mind, but newly presented to me in a beautiful voice, a person who sent me a message in the past week, not about NFTs, but about weeds actually, about forestry and regenerative agriculture, but the metaphor is general purpose and explicitly so. I actually remember watching that beautiful documentary, Biggest Little Farm, where if you haven't seen it, it's really cute. Great. I really quite liked it, but the cinematography is fantastic and the story is quite nice too. Um, but part of the story is they actually talk about they're doing regenerative agriculture and they walk you through the 7-year arc where each year is what's called a trophic cascade, where the, the context of the moment creates a change, right? So it's a change, a certain actuality that has an adjacent possible. Yeah. As the— in this case, the farm, the ecosystem migrates into that adjacent possible, and we can't remember, we've got seasonality, we've got the actual seasons of the world moving through that adjacent possible, winter, spring, there's a new possibility that emerges in the next adjacent possible. It's almost like this cool dynamic of breathing in and out where in the winter, certain things are no longer available in the adjacent possible because the energy in the system isn't there. So what's in the actuality, uh, does what it does in its certain context. And then when the next spring comes, a larger potential energy opens up, and these new pathways that weren't there in the previous season are now available. And the system now migrates along those new pathways through a series of trophic cascades. And it migrates, in this case, from a really despoiled commercial agriculture, dead soil, monocrop, basically dead ecosystem across over 7 years into a living, at least in the story, living ecosystem, which is a permaculture modality. And so that's that. But the point was weeds. And the notion is Weeds come first in that process. And I would say this, weeds come first in two senses. They come first in the regenerative sense, right? So when there is a context or an environment that has become very despoiled, there is a mode of livingness, a mode of exploration of possibility, which we can identify typologically as weed, that is the only thing that can thrive in that context. But there's something about the nature of weed that actually generates trophic cascades that brings the niche back into or into a new level of possible fecundity. Okay. There's a whole lot here having to do with the nature of how ecosystems operate. And so I look at it, if I look at a niche from the point of view of a given weed, given organism, I'm actually not seeing the story. If I see the weed as being almost like an ecosystem from the future that is reaching its most like exploratory piece into the present. And then its action is intrinsically part of an ecosystem in potential, right? So it's changing molecules in the soil, it's changing the physical structure of the actual soil so it can hold water better, like things that are happening that generates a trophic cascade that can migrate this towards the ecosystem that wants to happen, right? In quotes. Very important to think about that, right? A given moment, like, you know, This conversation has reality as a conversation, but also has reality as part of a much larger complex that is from the future that it's part of potentially upregulating. OK, let's see. Weeds, weeds. OK, now shifting. It's a different way of saying something that I think is ultimately part of the same abstract class. And this has to do with legibility. So it is my experience, very much so, that there's a bias, very much a bias, an energetic bias towards legibility for a number of reasons. So now I'm actually shifting from the theory of ecosystems into something more like marketing or late-stage capitalism. So in a given moment now, a given— a market niche opens up. Money, so the resource of the market, money, is by definition— well, not by definition— empirically, and now more so than usually, captured, concentrated in particular locations. So the amount of money in our economy is not evenly distributed by any stretch of the imagination. It's not even Pareto distributed according to what we would expect to be default. It's actually quite concentrated. Into a very small portion of the overall field of— well, the overall field of people. A small number of people have all the money. OK. What that means is that the vectors of potential value that are legible to those people are the vectors that are going to attract a disproportionate amount of value flow, as you say. So Gold-plated Bentleys in an ordinary time wouldn't attract much value. But when you're in a post-oil Saudi Arabia and 5 princes happen to have an unbelievable amount of money and their values are the ones that have the ability to flow money, then the money will flow through those channels. Now, that tells you a lot about your context. Here's where we are. We're in a context where these are the kinds of things that have legibility and have value flows, value reservoirs attached to them. But it doesn't tell you necessarily an enormous amount about the nature of the underlying domain. So let's go with cell phones. If we lived in— actually, quite specifically, so Weeds and this story of legibility, and zoom back on the adoption of any given particular technology. So cell phones. Early, early, even before the cell phone, you had the beeper. Early BEEPER usages, doctors and drug dealers. Why? Well, there's a lot of value reservoir that was above that. A lot of money in medicine, a lot of money in drugs, both drugs actually, just a lot of money in the two modalities of how drugs are dealt. And a legible, which is to say a story that was cognizable within the pattern recognition modality of the individuals who are controlling those flows of value. Hey, you're waiting by the phone when you're on call. That's shitty. You don't want to be tethered to your phone. This is a doctor's experience, right? Back when they were on call, they literally had to be in their house. I think house arrest. You know, hey, if you have this object and you put it on your hip, you can go out and do stuff and then it'll go beep, beep, beep, and you're still on call, right? Well, that's a little, a little, uh, you know, trophic cascade in the, in the niche of their, of their lifestyle, which is highly legible. Like, yeah, I'm freed up. I don't know what the drug dealer's equivalent was. I'm sure there was something that's specifically legible. Maybe you can't— it's much harder for you to get caught by the cops. Like, we'll call this number, then you'll move to some new environment to have a conversation. Does that mean that beepers are intrinsically somehow attached to the drug dealing profession?

No.

It just means that the adjacent possible of that particular cost structure, because technologies tend to be expensive in the beginning and tend to get cheaper as they become more well understood. And they tend to have relatively coarse-grained utility in the beginning and tend to get more subtle and sophisticated as they become more well understood. And the potentials are— the adjacent possible of the technology begins to proliferate out, like a tree branch goes like that. At the beginning, it's just the trunk. So just woodpeckers. As it goes out, you've got all kinds of new possibilities that open up as it expands, as you explore the space of potential of the technology. And this coordinates with stories like the internet is for porn. In the beginning, was it Usenet, alt.* groups on the Usenet, innovating capacities to actually be able to take scanned images of Playboy centerfolds, new technologies of the scanner, wrote— they wrote software to be able to break a GIF into a series of text messages so that you could then post the text messages that were just a bunch of gibberish. But if you gathered them all and put them on software on the other side, it would then take them, convert them back into a GIF, and convert it back into a scanned centerfold, right? Which, by the way, is a really interesting sort of micro exploration. But the point there is that sex has a high degree of legibility. So it's a sort of a general purpose legibility that's happening everywhere. And where there's a potential, it creates a little evolution in the technology and value flows flow through there. All right. So that's a lot of framing, but pretty good scaffolding, I think. So now the question is, where are we? What's happening? What are we witnessing? What is the nature of the child or the acorn that we're seeing in the context of NFT? What are the various trajectories or adjacent possible syntrophic cascades that it might go through for some period of time? What are we seeing that has to do with the legibility of the contemporary context and not really giving us a lot of signal as to the intrinsics of the underlying domain, but has to do with the weeds that are part of its emergence into the larger environment? What has to do with this point of maturity? And if we're seeing the trunk, but we aren't seeing the branches, Can we find a way to sense into where those branches might eventually show up so we get a sense of what we're actually dealing with, as opposed to focusing myopically on the thing that's directly in front of us? And then I guess the last piece, which I haven't brought up, is of course we also have to think about it in terms of its role as context in trophic cascades that could be happening around it, right? Not in NFT, but as NFT shifts something else. So for example, VR. VR is also happening. It's in our environment. And there is a point where NFT and VR connect, and something new happens there. And this is like the point where internet and phone connect, and we have a totally different thing going on. There was a point in time, which I'm sure you remember quite well, where phone and internet were two completely distinct things. Literally conceptually, they had a hard— I remember commentators having a hard time with the joining of them, and they called it mobile internet, or literally thought of the the presence of the internet on the phone as being distinct from the presence of the internet on a computer. Like conceptually, they just had a hard time realizing that no, no, that's all the internet. We've got different technical ways of interfacing with it, which are important, but not distinct.

What comes to mind to me there is the Steve Jobs iPhone keynote where he goes, it's a phone, it's a browser, and it's an iPod, right? And he just keeps repeating that. And like, that's such an aha moment, but like in hindsight, so fucking obvious.

So fucking obvious, right? So let's just like do a little practicum on that last piece. So let's go with VR. So now I'm gonna drop down into like entrepreneur speak. We can do this. VR, where are we? Pattern recognition. It looks to me very much like VR is just entering into the Diamond Rio phase, if you recall that particular moment. MP3, something with which I'm intimately familiar, had the interface problem between hardware and software and content. This is not always the case, but in this particular— in the case of MP3 and in the case of VR, it has that. So VR has a problem of hardware, got these whatever, the interface that causes you to be able to perceive VR, which has its own innovation curve, its own cost structure. But there has to be software, things that actually generate VR experiences and have a capacity for generating quality and flowing across network connections and stuff like that. You got content. People have to actually use that software to produce experiences on the hardware. And that's a three-body problem, right? Because if you don't have content, nobody's going to buy the hardware, which is usually going to be expensive and clunky. But if you don't have hardware, by definition, there's too small a market for anybody to participate in the content. So there's a bootstrapping problem. So when you look at that kind of an ecosystem, the MP3 ecosystem had the same situation. You could do an okay experience on the PC as the hardware. The PC often operates as a migration path because it's so general purpose. You can get some portion of the experience on the PC, which generates enough hardware piece of the modality that content can begin to show up, and it creates a bridge so that new, better hardware can use content that was produced for the PC in a better way, and then people can migrate to that, and then enough energy flows into that that then it becomes— the whole ecosystem flops to that., which is what happened with the iPod. So in the MP3 arc, and of course you can run this on all kinds of things, the modem is another great example. The Diamond Rio. The Diamond Rio was quite successful at the moment that it happened. In the context of the larger market, clearly just a little blip, Bitcoin 1,000, I suppose. But a point where it was like, eh, Bitcoin 1,000. It was a point where it was like, hmm, that seems like it might actually be real. Still a lot of people on the outside like, no, no, not real. But getting to the point where that crossing the chasm, like you're actually getting up to the chasm. There's a bunch of people looking at it going, no, no, I'm going to build a raft and I'm going to cross the chasm on this thing. It's going to be real. And everybody who does, in some sense, does well. And of course, many people don't cross that chasm. OK, so VR. The Oculus— oh, I always get it wrong. It's Oculus Scout or what the hell is it called? Quest. Quest. Thank you. Oculus Quest 2, which I purchased. Um, pretty fucking good. It's nice, you know, fully disconnected from a PC. I just put in my face, I press the button, it turns on. The controllers are pretty sweet. The UI is nice. Facebook did a horrible thing by completely yoking it to their ecosystem, which is definitely going to kill it. But in terms of the presentation layer of cost, right, the cost structure I think is like $500, $600. Which is right smack dab in the middle of that stage of economy, adjusted for inflation. It's like the third-generation DVD player before they hit $100 and started going down the downhill slide towards everybody having them. And it works well. It's very easy to use. The experience is high quality. I don't get a lot of headaches. It's not super heavy. Okay, neat. That's not yet mass market, but definitely right at the process of moving into the late early adopters. Content, lots of content, but not the greatest content. Like, you're still not clearly not there, and there's obvious reasons why that would be. Um, but NFT, interesting things like Decentraland and all these various sort of, uh, VR crypto crossovers. I don't know if you're familiar with any of these guys. They're called like the— I think they call it the metaverse. Metaverse, yeah. The metaverse is an exploration of the potential of VR crossing over with crypto. One of the primary theses of the metaverse is trying to create it like Second Life, creating a finite— just like Second Life, but now connected to crypto, a finite amount of real estate, some notion of a world as a metaphor, and people actually spend crypto, real crypto that has real— you can not trivially, but fluidly, fungibly, and with some liquidity translate from— I could sell my real estate in Decentraland, convert it into MANA, convert the MANA into ETH, convert the ETH into USD. I could probably do the MANA to USD directly, I don't know, and then buy milk or whatever. And inside the context of Decentraland, because there's crypto now there, the idea of a real-world economy trying to find out what its use case is inside of the VR environment, which turns out to be NFT. At least meaningfully. Other stuff too. Gambling's happening, and they're trying all kinds of experiments inside that ecosystem. So keep that in mind. The VR revolution is probably 3 years out in terms of how long hardware lifecycles take and how long it takes an ecosystem of people to focus on a potential, particularly post-COVID, where so much attention got put into this modality of virtual and how do we create relationships and communicate and collaborate and create value that isn't in physical space. So we kind of got pushed over a big hump into a new basin of possibility. And my read of VR is that we're in the run-up to the iPod phase, which is where MP3 went mainstream. Everybody, every subway had guys with the little white earbuds in their ears. Okay, so I can use that to orient on what I see in the NFT space. So now let's take a look at NFT. Now, sorry, that was a lot of talking to create context because a whole lot in just NFT, as you say.

It's very useful.

So let's see, we have a question of something like, hmm, I think we're actually going to have to take your continuum of value. And what I— the visual image I have is actually hitting it with a tuning fork. Or zapping it with a high-energy particle to see what kind of— what's actually like a higher-dimensional structure is actually implicit. Because the question of utility, I think, is simple. If I take a look at a given utility, you know, say a hammer, which is a really nice example because tools replace— a tool by definition is a replacement for another way of solving a problem that is qualitatively more efficient. In principle, I could try to affix a board to another board by, I don't know, taking a rock to whack a nail into the board. But a hammer is a very, very refined version of rock. It has a compression on energy. The utility of a hammer has to do with the fact that it takes the use case that I care about, the value I care about of affixing a board to another board by means of a nail, and it is radically more efficient. So it creates an efficiency compression on a value that I'm looking for, hence the hammer. And so when I buy the hammer, what I'm really buying is the ease, the increased ease and precision of doing this thing that I seek. But notice the derivative, which is— it's strictly a derivative of the value associated with affixing a board to another board by means of a nail, which is itself strictly derivative of whatever the hell I'm trying to build. So these value flows are actually really complex. It's not simple. The notion of utility usually has many, many, many differences, like steps that you're going through. And each step has these qualities to it. But as you say, I think this point, like, if you do run the abstraction, the point of signaling and the utility, the utility of signaling is really interesting. So let's take a look at that. Okay, so the first thing that comes up for me is you've got— I have almost like a historical story. I've got the er like the base case, which is very powerful, right? We're social mammals. And anytime I witness social mammals, I see signaling all over the place. Probably even prior to that, if you read the book by John Holland called Signals and Boundaries, he points out that at the highest level of abstraction, all complex adapted systems are in fact defined by signals and boundaries— signals in the interior, boundaries and the signals in the exterior. So signaling may actually be a primordial phenomenon. In fact, I'm— now I'm thinking about it, probably so. So then what is this question? So maybe it's like almost like signals, boundaries, and then fitness. Like when we're talking about utility, in some sense we're ultimately talking about fitness and some, some derivative of fitness in any arbitrary landscape. So then when we're talking about signals, we're talking about ecosystem, we're talking about relationship, we're talking about how it is that a given instance, a given phenomenon, a given beingness establishes relationality with its larger environment at some kind of qualitative— qualitatively different cost. Vision is a signal. I no longer have to crawl my ass through the slime over to the object in the distance and then feel it with my pseudopods. I can actually see it and engage in some level of evaluation of its fitness relationship with me. Maybe it's a predator, maybe it's food, whatever. So the signal itself is a tool, right? It's a, it's a compression on the underlying fitness gradient of the environment that I happen to be in. Maybe it's the primordial tool. Gosh, we're— if we go here, we may actually get super, super deep pretty fast. I'm not sure if it helps. If it— it may be too much, too deep for the thing that we're looking at, but it's fun. I'm enjoying it.

Can I ask a follow-up there? So are you almost saying like signaling itself has value, or, uh, it's, it's this concept of like perception is reality And the perception, not in your mind, but in the, in others' minds. Right.

Okay. Um, what I noticed is that there's, there's a, like an easy slippage in that statement, which is associated with, I typically Eastern idealist philosophy. All right, and I don't— that's not what I'm saying. It might be true, but it's not what I'm saying. Um, what I'm saying is let's not rush to judgment on the essence or value of signaling just yet. Let's just sort of settle for a moment on what's really happening in signal space and notice like really allow the nuance and subtlety of it to open up.

Ah, that makes sense. So there's a difference in your use of the word signal with signaling.

Yeah. Yeah. And we can actually, so there's virtue, which intrinsically includes a signal. There is no way to have virtue without having a signal. Virtue is something that is intrinsic in a particular behavior in its evaluation in a social context. I would actually argue— I may be wrong, but I would argue that there is no kind of virtue that can be inherent in an organism in and of itself without any other relationality. And I don't mean like predator-prey, I mean like some other collaboration. Virtue shows up only in some kind— in a social animal. Hmm, I'm probably wrong, but it's a it's a good enough thing to throw out there to force thinking about it. Um, so signal signaling. Okay, so what I'm gonna do is I'm gonna jump— I'm finding myself jumping forward into the future now, so I apologize. It's a pretty large shift of context, but I think there's something useful about it that can kind of create a different perspective, and then by virtue of that, get a parallax view. So here it's about the— we humans are— we're on a journey from a landscape, a possibility space in our signaling capacity. So we exist as humans. We are— the thing that makes us interesting as animals is signaling, our ability to modulate a wide variety of potential signals, like a huge proliferation of potential signals with extremely complex densities and styles of modulation, of which language is just one, to generate a whole new level of possibility in terms of coordination, you know, which of course culture is a word to describe that. The emergence of culture, as many people, Greg Heinrichs most notably in my recent experience, identifies as being a— what's he call it— a junction point or a qualitative portal pathway into a level of evolution that is equivalent to the emergence of, say, behavioral, neurological systems in organisms. Has a lot of possibilities. Game A and Game B all happen within the context of culture space. And we're on a journey where, for the most part, for the last 70,000 years, we've been exploring the subset of culture space that could be tagged as Game A. And we're looking for the location in culture space that is being identified as Game B, right? The hypothesis is this location in culture space that we can provisionally tag as Game B. It may be a specific location, it may be a series of poss— of locations in the space that have certain characteristics, but it's distinctly not that territory that is associated with Game A. It may in fact be a higher tone of what we called game indigenous. I'm still not at all clear on how that works. So we're on a journey. We're looking for that. But it's all— that's a subset of signaling. All right, well, as we described, so this whole— this question of utility and signaling, hmm, it may turn out that actually signaling is the thing that we need to be focusing on. The utility we're looking for is a particular quality, capacity, competence, in signaling space that has characteristics that support a trophic cascade in culture to a location that we're gonna call Game B. And notice trophic cascade, right? This is the whole transition B phrasing, right? It doesn't necessarily show up as Game B right now unless you're really, really clairvoyant.. But you might be able to notice that it supports a series of movements. Like we might be in the weed phase of that. NFTs might be the weed phase of the trophic cascade in signaling space towards Game B, maybe. And as we say, and there may be some really interesting bifurcations that are implicit. It might take us towards and away from. Hmm. And it's an interesting problem to realize that, that each human generation, for example, intrinsically contains some arc in terms of culture. Every human generation has a potential of going more this way or more this way. And the bet is on is about what happens with ours and with Generation Z. This is why the parenting question is so powerful. All right, so what's there? So what do we have? What do we see? Proximity. All right, so now, okay, now let's do a nice diagnosis of what's happening now. What are we seeing now in NFT space? One thing we see is an unusually large amount of value flow. The numbers in there are far from trivial, like tens of millions of dollars almost instantaneously. So you've got velocity. It went from— well, that's not true. The notion of a non-fungible token has actually been implicit in crypto, or at least in blockchain, for a very long time, like maybe even from the very beginning. So if you look at the curve, it's like pretty much flat. And there's a bunch of ideas that are trying to focus on things like real estate. How do we get real estate on the blockchain? And any given token that is bound to a distinct piece of actual physical real estate is a non-fungible token. A car would be a non-fungible token. The broad problem of the relationship between the analog and the digital blockchain— the blockchain version of the digital that entire space is the NFT space.

That's a great point, by the way. I just want to pause on that. So you're saying that anything— when we think of the potential of cryptography and non-fungible tokens, anything, any problem which involves mapping something physical into that land essentially involves non-fungible tokens?

By definition, yeah. Yeah. So for example, You may have seen like the Civium piece I did on Civium economy. Yeah. And I talked about— I didn't actually go at length, but I talked about the unit of account is actually a giant database that contains a mapping of all primordial elements, all of their combinations in patterns, and all of their specific locations in space-time and ownership. They're all NFTs. Right. So as soon as I move, an object from the commons, from nature, I extract a gram of copper, that gram of copper now has to be minted as an NFT, because it is unique in very specific characteristics. It's unique in the process by which it got moved in. So it has energetic characteristics and externality characteristics that need to be mapped with precision. And of course, it has a unique location in spacetime. And if I, if I take that gram and I end up turning it into a wire in a phone, to be able to trace that means I'm tracing the flows of NFTs. So I'm actually now looking at, in my mind, when I say I see the NFT space, I see this giant flux, an ecosystem of flows of NFTs that are moving around, and by the way, combining. So if I take a— well, the primordial one, so I've got— what was that, copper?

And what do I—

I actually don't know exactly how you make a wire, but in any event, I take that copper, I plug it into some process known as make wire. I obviously have to plug in other kinds of underlying elements. I presume some sort of non-conductive material. And then there's a process of extruding, and then I produce wire. That whole process is defined by a set of relationships between NFTs. Now, some very powerful conceptual stuff here. Hold that, by the way. I'm going to come up here and then come back down. Fungibility as a concept. Is an artifact of capitalism. Back in the day, when you bought corn, you bought non-fungible corn, which meant that you went to the farmer's market and you actually interact with the actual physical material analog, unique, specific corn that you were going to purchase and buy. You evaluated it on the basis of a set of qualities that were— the signaling possibility was very high. You were present to the corn. You would oftentimes actually negotiate with the farmer on the basis of your intrinsic values and the farmer's specific location. Corn might have quite diverse price points. This particular corn right here, 10 cents a pound. This over here, a dollar a pound. Why? Well, because this has qualities that are more valuable right now in this moment, whatever it might be. Okay?

As someone who grew up in India, by the way, this just harkens back to my upbringing, which is my mom would literally go to the farmer's market and negotiate on the spot, like look at a piece of corn and talk to the seller and negotiate a price down based on what you've seen. There's no concept of like fixed price in a farmer's market in India.

What that is, is that's an exploration of the very large space of actual value that is associated with any real phenomenon. I see my visual image now is I see this kernel of corn as an NFT. I'm like in The Matrix here where your mom's picking it up, and it's got this glow of all these different vectors coming off of it, all the different potential values that it really represents. It could be ground into something. It could be turned into art, like this vast space of potential value. Then you see the interface resonance between the current state of ownership, the farmer who has values that the farmer has. Your mom has values in this complex collapse down to what remains, creates the possibility of trade. And of course, this is the thing that economics at least points to as hopeful is that in that relationship, there actually is a sense of an increase in the actual value, that this has been moved from a place where it has a total value of X to a place that has a total value of greater than X. Synergy would emerge in that trade. If the complex of values is actually well perceived, the more the complex of value is perceived across a larger field of valuing phenomena, and the more smoothly valuable things can be moved to find the locations of global optimality, the more synergy value is unlocked. I think I just recapitulated microeconomics.

Yeah. So it's almost like the value is more legible and there are more values to be comprehended and exchanged. Yep.

Okay, right. Now let's go back to our story. So corn, um, with the introduction of things like trains that had the ability to transport corn over meaningfully large distances without radically degrading its use as food— and it didn't rot because you could move fast enough and you could carry enough volume to make the train useful. So we moved from mode of a horse and a wagon that could travel a certain distance in a day. So you have a city and a market, and the farmers all live within a certain distance. That's as far as you can travel in a fashion that is economically viable given the price of corn and the storage, to a place where you could have corn in Iowa showing up in New York City because the trains could travel and the mass it could carry was appropriate., which then had an impact on the fungibility of corn. Now I need to start buying corn by the kilo or by the ton, and I need to be able to collapse the space of values to a much narrower space of values because I can't actually have the customer who has the valuing capacity on this end has no ability to actually sort and trade. You can't have 30,000 distinct silos, each one of which is a proxy for the potential value that might be living in a customer on that end. This is the whole bureaucracy versus markets epistemology problem. The guy who's buying the corn for the railroad in Iowa is like, look, I can only make like, I got 3 kinds of corn. That's all I got. Your corn's in category 1, 2, or 3, and 4 is I ain't buying it. That's it. This phase space of the qualities of what's happening collapses, and you suddenly convert it into a commodity, which is fungible. Now a pound of category 1 corn equals equals any other pound of category 1 corn, full stop. Of course, the reality is they aren't even vaguely equal. There's no real fungibility there, but they are fungible enough that I can begin to treat them as fungible. It's really interesting to think the evolution in blockchain towards NFTs might in fact be a discovery and an unlocking of this deeper form of value, which is the intrinsic non-fungibility of anything that matters, which replaces— in principle, right— replaces the fungible landscape of tokens. Now, let me do another couple of moves here. One of the other things that I've always witnessed, and I think has actually been reported on quite a bit, is this legibility vector in the context of new media. So I'm not just doing legibility in the context of new text, specifically media. So content and medium. My hand's going this way because there's a sidewaysness of it. So say, for example, early television. Broadly speaking, early television was something that already existed, like a Broadway play with a camera pointed at it. So they took something that already existed and they added the new medium and said, that's now TV. Yeah, it's an exaptation of an existing form of content with very little change. They just slot it over, and it's sort of the minimum viable content that can actually work on TV at all. And then though, it begins to explore. It's enough to activate the TV niche and begins to explore what can happen in TV. And then of course, once you do that, you're like, oh, I can have multiple cameras. I don't have just one camera, I can have two. Well, then that means I have to be able to edit. I have to choose. There's only one screen, but there's two cameras. I have to now start choosing. I have an editor who's choosing which angle actually has effect on the way that I'm telling the story. Oh, I don't actually even— once I've got an editor, I actually notice that I don't have to actually tell the story according to the linearity by which it was recorded. Non-linearity of time is a— you don't have that in a Broadway play. You could tell, you could frame the scenes in a Broadway play, but clearly the watching of it is happening in this fashion. But as I start getting into TV, the ability to cut and paste time and space, and, you know, obviously my camera can jump all over, it's all kinds of new possibilities open up, but the immediate first origin is legible, which is to say, eh, it's a Broadway play with a camera pointed at it, and I'm taking advantage of the fact that you can watch it far away. And that's the thing that I can articulate that is legible to people. It's like I don't have to go to Broadway anymore. I could be sitting in my living room in Iowa and I can watch a Broadway play. How cool is that? Okay. So NFT space and anything by hypothesis tends to have a similar characteristic. There's something going on, which is like people are exploring, well, what can I do? Well, you can buy art. People buy art. Art's a thing. I get it. I want to own something that is art, and there's a value to it. And I can do that in the digital space. It's an example of something that is very— so it's an exaptation of a simple relationship. And what's nice about that simple relationship is, as it turns out, you can imagine like this evolutionary search algorithm on the bottom of NFT space. It's like, is it cars? Is it real estate? What's the thing that we can find? Like, oh man, these are hard. You can't get real estate. It's like, bound up with these legal constructs and getting all these different participants who don't give a fuck to make a move and loans, complex navigating through that. And each one is like, ah. And finally, some guy's like, what was this? ETH Kitties or something like that? Ooh, collectible digital objects. A little value accrued to it. And what's interesting about it is it's not clear to me, how much of that value is described on this, this, uh, continuum, and how much of that value has actually got a vertical dimension. The vertical dimension is like an intuitive sense that the object in front of you represents a potential that is going to be meaningful. So I'm actually— when I'm buying the first whatever it was, I can't remember what they're called anymore. Do you remember? Something kitties? CryptoPunks? CryptoKitties. CryptoKitties predates CryptoPunks, but CryptoPunks. Let's go CryptoKitties though. Or let's run the clock back. When I bought my first Bitcoin, so I mined and bought Bitcoin. I wanted to experiment with both. Obviously, at the moment that I did so, I was not engaging in a value that was present at the moment that I did so. I had no real— I had no utility for it. I wasn't going to buy pizza with Bitcoin. I had no expectation that the object that I was buying was going to appreciate in value. Otherwise, I would have kept them all. But I had a strong intuitive sense that this was the beginning of something that was going to be very significant. So merely participating in it had a value. There's something about just being, ah, like an intuitive hit. Oh, OK, that's going to be an interesting thing. Hmm. Actually, I want to explore that whole concept there. So think about that. Remember the whole pattern discovery piece? Yeah. So now I'm going to get— I'm moving forward a little bit. So zooming in, I've got CryptoKitties, CryptoPunks, then the next wave of art. Somebody begins to see, hmm, there's something here. There's explorations of minor variations on the theme. Obviously, there's a huge compression of value in DeFi and the 5x of Bitcoin that causes a new potential energy that could pressurize the system and explore new modalities. There's a pop here, there's a pouring of energy into it. There's probably the proximity of VR over here that's shifting the boundaries of what's possible. What people are interested in, different, different, um, you know, perspectives in the evolutionary landscape are making different weights on how they're perceiving future possibilities. Um, and then that, that is, that reveals itself in this context as a particular legible digitally transparent metric, which is the price that is associated with the object, which is actually quite interesting. There's something about this entire field, what the whole world can see. What's up? What's the signal? We can't quite discern what the signal tells us, but we can see that there is a signal. Somebody somewhere is willing to trade, let's call it millions. I think, by the way, the very high-digit millions is fraud. These early-stage things, Pardon?

Are you referring to the Beeple one, the artwork?

Yeah, yeah. My heuristic is that somebody somewhere, some whale who has the ability to move a large amount of ETH into something, cut a deal with Beeple whereby the metric shows up as a large number, but the reality is much less.

And it created a market, you could say, in that space.

Yeah. Exactly. Probably an artificial market, probably a pump and dump. There's so much of that parasitic— it's important, by the way, weeds, are weeds. Yeah, they are simultaneously part of a process whereby something becomes something else. And, you know, there's a lot of parasites that swarm into that space. And it's, it's interesting to notice that, like, you can actually say, hmm, the parasites actually play a powerful, useful role, and they're also parasites. I mean, both are true. By the way, I'm not saying that weeds are parasites. I'm just noticing that that happens. So when you look at something like the entire crypto landscape, literally every single generation, every cycle that it's gone through. Let's just use ETH as an example. ETH emerges, and it emerges as this nascent, beautiful, autistic, 20-something possibility space, and then the parasites go, shoop. The first earliest seers just jump on it. Since parasitism is a highly legible thing, —kind of just take potential and immediately convert it into money— kind of take the non-fungible potential and convert it into fungible resources now, that's a viable strategy. There's a lot of that in the current environment. Nonetheless—

Vitalik mentioned this exact point, by the way. And his point was, people buy Bitcoin for Bitcoin. People buy Ethereum for its actual potential future, let's say, usage/ecosystem, right? And one of his points was those parasites are actually important in that they, one, make it legible. Two, they give it like a US dollar amount that others outside the ecosystem can pay attention to. And then eventually when you start attracting, let's say, players into the system, you may get more parasites,, but at the same time, you're actually getting more metallics into the system as well.

Yeah, exactly. Exactly. And so with NFT, the same thing. Like the amount of content that is coming off the bench, you know, all over the place, you know, this flow of orientation, you just see this big bright light, right? Much of that is money grab, but money grab is a coarse-grained, soon, early version. You know, once again, it's kind of like a weed. It's, "Oh, there's potential value there. Let me grab some of it." Well, in the act of me grabbing some of it, I'm also producing value. I'm doing some kind of work. I'm exploring the underlying technology of how NFTs are minted. It's going to get easier and faster, smoother, maybe less— already less energy costs, like less gas cost. I'm obviously going to be building out new markets that create structure and point attention at it. I'm going to have a whole bunch of people who otherwise would have been totally uninterested for pure FOMO greed, which aren't exactly the same but are very related, pour into this new space and begin pouring their attention over it. When the bubble pops, most of them will leave. Some of them will leave with the wrong lessons, but 20% will stick around. Those 20% now become part of the new ecosystem. We've moved now from the weeds to the next stage, and they'll begin working on just searching the potential of what this thing can actually do. In just the next iteration, then there'll be some new capacity, some new infrastructure that will actually be built, some new level, maybe the VR crossover happens, and you start seeing NFTs showing up in the metaverse. You see the Oculus 3, or I don't know, Apple launches a VR headset that is like $200 and totally unlocked. That wouldn't be Apple, but any event. And a million people flow into VR, and all the guys who are sitting in the NFT space are like, oh, I have lots of wares to sell that are have utility in VR. By the way, they could have actually all kinds of different— VR, the question of utility and signaling becomes really interesting to see what that's all about. So, okay, so let's go back to the intrinsics though of NFT. All right, so let's— I want to use the example of a Van Gogh painting and ecosystems associated with Things like noticing, like attention allocation. I want to focus on attention allocation as a very deep characteristic of one of the things that we're looking for. Like if I think about it in terms of the journey in our signaling systems, curation is a fundamental that we do a terrible job at. Our current market doesn't really have a fundamental role in curation. It has a little bit, but not a lot. And Matan Field actually once did an analysis where he showed that curation, like in an equilibrium state, the ratio between content and curation vectors towards 50/50. So the actual value of curation tends to need to be almost exactly the same as the actual value of content. Because if you get an asymmetry, if there's too much content for the curation, the ability to find the content becomes the problem. And you get these terrible matches. But if you actually— if they're in symmetry, there's a— you get an equilibrium state in terms of the value distribution. And by the way, the focus on what value to create. It's like a micro— another microeconomic theory. OK, so Van Gogh painting. I don't know. Let's say it sells for $100 million. And then I have actually a mural, which is a kind of a flat screen painting kind of simulator hanging on my wall. And I have a copy of Van Gogh's Starry Night on my mural. Very high res, high def. From a distance of like 8 to 10 feet, pretty indistinguishable. Like you can kind of look at it and say, oh, that's not really a painting, but it looks pretty close. So call it 98% the same. Um, and it cost me $0 for that picture. I just downloaded it off the internet. I got a zero, zero dollar cost of, uh, well, if I want to do it, the embodied energy of my download off the internet was probably on the order of like 8 to 10 cents. And of course the mural has a depletion cost in terms of how long it operates before it disintegrates or becomes non-functional. But that's a lot less than $100 million, right? So I'm going to step up. Now what I'm going to do is I'm going to hire a painter of some level of skill to create an actual oil painting using real oil paints and a real canvas that looks a lot like Starry Night. And for $2,500, I can get a pretty competent painter to make a pretty good knockoff of Starry Night. So now I'm going to move to like 99%, from 98 to 99, maybe 99.8%. It cost me $2,500. Now I'm going to get a really good painter, pay him like $50 grand. That's a lot. This guy can make a version of Starry Night that to almost anybody's eye is identical. Really take a look at each stroke and the thickness of the paint and the quality of the paint and has skillfulness in being able to simulate it. So only a true expert would be able to discern the difference. And to my eye, no difference. $100 million on one hand, $50,000 on the other hand. From the utility of the sensory, the sensual experience, identical. So now we have the question, what's going on? What's that gradient? You're going to say, well, that gradient is signaling. I am showing one, I got $100 million that I could just fucking throw away. I'm rich as fuck. Peacocking like crazy, or even threatening behavior. I'm sure a lot of that money is actually like bad guys who are actually saying, don't mess with me. I can throw money at that. I can definitely throw money at fighting you. That's one thing for sure. This speaks to is the creates legibility into the actual location of— sorry, it creates visibility into the legibility flows of value reservoirs in our economy. When things like a Van Gogh explode in price, that's a precursor to telling me, oh, the Gini coefficient is getting out of hand. I got money that is sitting in places where far too much of it is sitting in concentrated locations that is being pointed in this direction. That's one signal. That's the thing I'm getting. I'm getting meta signal about my underlying economy. So the fact that somebody might be willing and able to throw $10 million at a Beeple NFT maybe tells me the crypto economy also has a very highly concentrated wealth distribution, or that it's dominated by fraud. Hard to know right now. But there's more to it. A Van Gogh is worth $100 million, but a First edition Jordan Hall is not worth $100 million. There's something— why does it have that signaling implication? And why does the original have that characteristic? Why does provenance matter? I think we've seen some statistical analysis in NFT space that if I can actually show that the artist's wallet is the one that minted the NFT, as opposed to being minted by a a wallet that is not obviously the artist's, that the value differential is real. I'm willing to pay more for one that is more provably coming from the actual artist. Provenance is a very interesting notion. Think about what's the implication. If I go back to the primordial, the deep, why is this signal a signal at all? Even though it may be a sort of hypertrophy beyond all rightness, There's something about that. Why do we care? Why do we value proximity to Van Gogh, to the one that Van Gogh's hand actually touched? And I would say this ties very closely to curation. It ties very closely to the degree to which— I think we had this talk. Did I ever talk about the distinction between prestige and— was it? Well, I guess I'll just have to recapitulate it because I've forgotten. There's a really good book called The Secrets of Our Success. It's probably about 5 years old now, maybe a little longer, but it's a great synthesis of cultural anthropology and biology, biological evolutionary anthropology, and talks about why is it that humans became humans. Like, what's up? How did this happen? If you take a look at lots of different comparisons, chimps, for example, are better at behavioral economics games than we are. They actually do a better job of getting the right answer than we do. Um, the, the thing that we do vastly better is theory of mind and emulation. And so if I point at a cup, you know that I'm pointing at the cup. You can actually empathize with me and see that where my attention is pointed. And you have a very high— like, early, early, almost instantaneously are scanning your social field for what kinds of behaviors to learn from. Learning, learning gradients. Prestige is the word that's used to describe that, right? So a high-prestige individual is an individual that has a large, a disproportionate fraction of attention oriented towards emulation of behaviors of that individual, which is why things like celebrity are such a mess. You know, there's, uh, Kim Kardashian has no particular virtue with regard to, I don't know, pick anything, uh, in some sense anything, but let's pick something arbitrary like driving a race car. But because we are mapped just to not know, by definition, I think as an infant, prestige is a generic indicator. I don't really know. I can't by definition know why or what or in what context. I just pay attention and begin to emulate randomly. So if our prestige gradients are noisy, I'm paying attention to Kim Kardashian and emulating randomly, I'm going to be learning all kinds of useless stuff. And not getting good feedback, right? But if our prestige gradient is really tight, then I'm learning, I don't know, basketball from LeBron James, but I'm learning, you know, poetry from William Blake. I'm, oh, okay, things are being mapped appropriately. I'm actually getting the right kind of context where my teacher— I'm finding the teacher that is the right teacher, by the way, for me. It's important, you know, prestige shouldn't be generic universal. This actually needs to be like a— like a diffraction gradient that helps you orient your attention towards the emulation gradients that are the most helpful for you, where you are, and who you are. I think curation and prestige gradient in that fundamental problem of being able to orient people's attention towards the location of the highest quality value— curation is an extremely high-quality utility in signaling space in the context of the formation of effective collective intelligence. And the proximity value of being able to associate yourself with a source of valuable content. And so why proximity to Van Gogh? Well, the reason why proximity to Van Gogh is there's a perception that Van Gogh as a creator is a source of valuable creation. There's something powerful. There's a latent, like, almost like biological sense of this is good stuff. This is a good hunter. This is a good— this person, if part of my tribe and protected and nurtured and supported, will produce significant fitness advantages for my tribe. That's like the primordial value. And then my job as a member of the tribe is to point that out, give that person prestige. So now what happens is by owning and putting my resources against this particular artifact, what I'm doing is I'm telling the entire tribe that, pay attention to that, that is valuable. I am putting skin in the game.

If I'm a curator, I'm basically looking at a thing, looking at the virtues behind the thing, making it legible, uh, and then sort of, uh, pushing it back out, right?

Yep. And in particular, if you think about it as a process, I'm looking at— I'm taking the legibility of an artifact and the legibility of my, uh, skin in the game, right? The actual real costs, the real costs that I am putting on the on the table vis-à-vis the legibility of the artifact to orient attention towards the process that gave rise to the artifact. And the process is going to be things like the individual creator, potential collaborations, locations and collaboration space. Obviously, huge amounts of global attention right now are being pointed towards NFT, right? The fact that this is— this legibility points attention at it. If by hypothesis, the things that I'm saying are true, if there's something about NFT as an early-stage exploration of particular characteristic capacities to rediscover the implicit complex value that is associated with the non-fungibleness of reality, and that there's deep constructs in NFT space, the necessity of creating highly legible skin in the game as part of being a curator, and the transparency of it at a global level creates a potential for significantly increasing the quality of our collective attention allocation and signaling mechanism to point more and more precisely at sources of value creation and at processes that generate the highest level of value creation. There's multiple different meta-levels of nesting of this exploration of collective intelligence. Then everybody who right now is pointing attention at NFTs is actually doing a good thing. It's coarse-grained. The thing itself, the fucking beep, is irrelevant. What they're actually doing is saying, this right here, something important is happening here, everybody. Don't know what it is right now, but I'm putting my skin in the game. Something about my intrinsic, like the way that I have learned in my life to orient towards what is likely meaningful and valuable and potential is lighting up. And I'm willing to put my hard-won, quite legible, you know, possibility of doing other stuff against it with the expectation that somewhere down the road it'll go up. Now, of course, noise— this is back to the parasites. Unfortunately, the parasites inject noise into the system, and that's a problem. We got to figure out a way to downregulate the noise that comes into the system. But if you watch it, if you see, like, you can watch the gap between when the parasites show up. When the parasites show up, the fact that they show up at all— back to Vitalik— tells us something. There's something going on there that had significant potential value and probably will over time continue to show that potential value. But now we have to be aware of the fact that we're in the parasite phase, and there's going to be stuff that happens as a consequence. Unfortunately, the better we can shorten and decrease— like, see it quickly, see the parasite phase emerging, stop it from happening, and then shift that space into a healthy way of getting what it needs That'd be a really good thing for us to do generically across all possible variations of emergent collective intelligence. And go back, notice, you know, art or whatever, visual, now audio, also to some extent 3D objects in the digital domain is a legible immediate stage exemplar of the larger potential energy latent in NFT space. As we begin to move through this, as energy is pointed at the domain, infrastructure is going to be built, is already being built, content will be pouring in. Creators are already right now in large amounts looking at different ways, right? Oh, the wave of just throwing my shit up on SuperRare and making $10,000 or $100,000, kind of over. Now I've actually got to be more creative. I got to find a niche. I got to find some new thing that will actually explore this possibility space and find where the value gradients are. Now, some of those creators are actually focusing on real creativity, real novelty, real good, you know, pattern discovery of what does that emergent pattern field look like. Some are just better parasites looking for better ways to parasite the value stream, right? Unfortunately, both are happening.

Um, but there's going to be things unlocked. Pattern recognition thing, it's like The television medium is evolving from, uh, the rebroadcast of Broadway plays to something that leads to more originality that's intrinsic to it, its characteristics as a medium. Yep. Yeah, exactly.

Um, and then, you know, in this case, the advertisers show up and they're, hey, how can we parasite that, parasitize that, and explode? And by hypothesis, by the way, who knows? Who knows what happens next? If you look at, like, say, the internet, and we had this huge wave of a similar bubble that happened in the late '90s, and this big explosion— Pets.com and Ice.com and Yahoo, early Amazon, GeoCities. And by the way, we got— Things like Amazon, which as it turns out was a pretty good call. Like, it did— we may not like the consequences, but wow, that was a real, real shift, wasn't it? Um, and some new things that we didn't know yet slid out from the outside, and we didn't know that something like Facebook was in the latent adjacent possible that wasn't available in Generation 1 but was going to become available in Generation 2. We had to get everybody on the internet first. We had to get them spending enough time and get comfortable and have a seeking desire to begin creating durable identities and communicate with each other through this medium as a primary mode. But once you got there, once that trophic cascade had happened, the novelty in the ecosystem gave rise to the possibility of what's now called social media. Take YouTube, which I know intimately. The internet had to be capable of doing video at all before you could do YouTube and have enough people powered with capacities to create and source video. Before inexpensive cameras existed, you couldn't put video on the internet. All that stuff had to happen. Once the infrastructure was in place, we engaged in a trophic cascade to a new potential that unlocked this new thing. Same thing in NFT space. What is happening now may not tell us a whole lot about what the next innovation wave looks like as the infrastructure flows in and changes the shape of the landscape. You get these sort of little feelers going out looking for locations of unlocking a new reservoir of potential over there. Could be something completely new. But one of the things that we have discovered is precisely this notion of the potential value that's associated with signaling and beginning to look at, OK, is there something about that that we can think about? And I'm going to move maybe to the ethical side. Actually, before I get there, I want to do a quick interrupt because there's a meta thing that's going on that I've noticed in the past week, which is really interesting. I have noticed an injection, and that language implies that I think there's something deliberate about it, of a meme, a narrative, that talks about the NFT space as bad, in the context of energy consumption.

I'm sure you've seen this. Yeah, I think I read it in Seth Godin's post. He mentioned that.

Yeah, funny. I don't know. I mean, I know him a little bit as a point of signal, so I think his post titled something like why NFTs are bad or something like that. There you go. All right, so he, he— the fact of that tells me a lot because I've mapped him as being a, uh, what's the term, like a midwit signal? Yeah, like very, very high capacity to produce things that look like they're sophisticated but are in fact not, but are well cultivated to get significant attention. A lot of folks like that. Um, okay, so let's see. So signaling, from my point of view, as far as I can tell, most of that—

hey kiddo!

Oh, you went in the hot tub. Nice. Did you take— did you rinse off afterwards? Good. That means that I won't be going in the hot tub with you. And maybe I'm being told also that our time is coming to an end, which is unfortunate because it's pretty cool. I got 10 more minutes.

I was hoping to be enlightened, by the way, and you have not disappointed.

Well, that's nice. Um, All right, so from what I can tell, most of what we're seeing in that narrative is like unalloyed virtue signaling, which is, hey, we've sort of— we've spent our virtue signaling in a bunch of different locations, and here's a new one, and we're looking for how do we signal that we're on the right side of history, how do we basically— we're on team right side of history, and now that that's been identified If you don't signal that you're on team right side of history, by definition you're on team wrong side of history, and we're creating a new, you know, in-group, out-group dynamic. And that's, as far as I can tell, like, that's 98% of what's going on in that particular environment. Um, what I would do is I would sort of double— single-click and double-click on the inquiry. Single-click has to do with a slightly more robust analysis of the actual cost structure. If you take a look at any two objects that are roughly parallel, so I've got my Van Gogh $2,500 oil painting and I've got my Van Gogh NFT, and I look at the embodied energy and I have to actually do accurate accounting. I have to take a look at the entire supply chain all the way from the bottom up to look at what's manifesting here. I can't take a look at 1% of this and 100% of this, otherwise I'm not doing a ceteris paribus.. But if I look at the whole supply chain, so what does it take to produce the canvas? What does it take to transport the canvas to a location where it can be acquired by an artist? What does it take to produce all of the oil paints and the brushes? All the underlying characteristics have to take that entire multi-variable supply chain, concentrate them into the moment of the artist creating the actual painting, including quite likely a frame, which is a non-trivial economic artifact itself. And then just for the moment, let's just look at the embodied energy. Of that and the externalities associated with the mode of production of that embodied energy, because they're not fungible. The production of oil paints is not the same as the production of electrons. They throw different externalities. If you compare the two, the net-net cost of a canvas instantiation of a painting is on the order of $15 to $20, maybe more depending on a lot of particularities. It ranges a lot. And the embodied energy cost of an NFT is on the order of $2. So 10x cheaper in terms of the actual embodied energy of the footprint now. That's a great point.

So you're basically saying if you look at NFTs as trying to capture the signature of the artist, right, versus the art itself— Yeah, yeah. —thing that can prove that the artist made this thing, sold it to whoever they sold it to, and by the way, the signature is the NFT, the cost of proving the signature in the NFT is just a whole lot cheaper than the production of, let's say, physical good, in your example, the Van Gogh artwork.

Well, that's actually 1.5. So let's do 1 real quick and then go to 2, because there's a lot more to 2. So in 1, I'm just literally talking about, in this case, the digital art, which happens to be maybe even superfluously wrapped in the crypto structure, but it has as a a core benefit that I can prove provenance. And say that's the setter, that's the comparison with the— so I'm buying the art. In principle, I have a lot less use value because I can't hang it on my wall, although of course I could, but let's just for the moment ignore that. So I'm just looking at the analog painting against the digital painting and the NFT wrapper and the signature. And that's that. Ceteris paribus and the embodied energy of producing those two. If I double-click, I have to actually look at the context. The context includes all of the sociocultural artifacts that are associated with this particular object. So when I look at the analog art, I've already talked about things like, okay, I have to— if I buy it, I have to transport it. There's a physicality associated with the movement of it from the place of buying it to the place that I keep it. I also have to store it. There's something about the object, the storage that takes up space. To a meaningful extent, there's some implication of things like the transfer of money. If I'm buying it in US dollars, I'm actually invoking by implication a payment processing system and a banking system that's associated with the economic structure that I'm participating in. I'm engaging in analog economics, which implies late-stage capitalism, implies fiat currency, implies nation-states that police the laws associated with and enforce those laws using military power. Also invoking copyright, right? For the most part, particularly when the price point is anything above strictly labor of the art that I'm purchasing, the gradient of that is entirely associated with the legal regime. If I want to be able to buy, uh, not even my Van Gogh, I'm buying something for like $15,000, and the underlying effort to create it was, call it, $2,000 of time and labor, that gradient is associated with the legal regime of copyright, which the legal regime of copyright invokes the entire judicial and enforcement apparatus associated with copyright that maintains the integrity of that and the cost structure of it. So I have to start taking the aliquot portion of those entire sociocultural infrastructures and the extra knowledge that they throw into the environment if I want to do a ceteris paribus. Because in the NFT space, all of that is tied up in the embodied energy of the Ethereum blockchain. So it's not just providing me with the instantiation of the digital object. It's not just providing me with the crypto signature of the provenance. It's also providing me with the entire payment infrastructure, the entire transportation infrastructure, and the entire whatever legal and stuff infrastructure that I'm going to be dealing with. I don't even need copyright anymore. The whole point of the crypto is it's replacing that. And I can, by the way, if I want to, I can actually go further and start looking at even further instantiations out there, like the art gallery in which the painting must be situated to attract the attention necessary for it to achieve a gradient in value associated with the quality that it has in the marketplace is an embodied energy cost of significant intensity. I took a look at the Bilbao Museum in Spain. By itself, the titanium embodied in the Bilbao Museum is more than the entire embodied energy associated with the Ethereum blockchain, for example. And that's part of the underlying infrastructure of the art world. So to do that double-click requires you actually begin to realize, oh, we're actually looking at two complete— completely distinct civilization visions that are actually co-resonating. This one is late stage. This is an S-curve at the top of its S-curve, and we've rendered most of it unconscious. We tend to not perceive its artifacts as being implicated in the whole. This one is almost entirely conscious. Every moment of it implicates the whole. We actually take and impute the entire cost of the entire Ethereum blockchain to an NFT, partly because it's legible. The gas cost actually is a real thing. But we aren't witness to the degree to which the surface area, or in fact, this case, the volume that is actually being covered in that expansion, and we aren't witness to what that looks like as it expands out further and further and further. So now I'm going to broaden NFT space. Take NFT space and really broaden it, because now we're actually looking at things like smart contract space, which is a piece of— one of the things that makes NFTs work as a thing at all is they're embedded in smart contracts. The implication of crypto as payments, as enforcement, as jurisprudence, as law, all of that, which still, of course, is going to need to be explored. We haven't actually really gotten to the point we've covered the edge, but just think about the evolutionary process of What are some of the characteristic failure conditions in smart contract space? We've already explored many of them. A poorly written smart contract will be hacked and the value will be taken. A poorly written analog contract will be cheated on and we'll have to litigate. These are parallels. We've already gotten to the point where we actually are producing smart contracts in NFT space that are holding millions of dollars of value, which is actually quite a long way Most economic activity can handle— can be handled inside that frontier. So in terms of the evolution of the ability to begin to do economic interactions inside smart contract space, in the NFT phenomenon, has actually begun the process of proving out, exploring, and demonstrating by reality, by actually holding contracts of that value, that Smart contracts are ready to hold contracts of that value, which is potentially a huge migration. So I don't need to have necessarily police forces, for example, at least to a meaningful extent. Large chunks of those begin to go away. I don't need to have banking infrastructure. So that's important. We're actually looking at something. Now, so I'm going to hold that, just say, okay, first order, we're talking about NFT space. What's happening in NFTs is part of a much larger story. And a big part of that much larger story is the migration of the entire sociotechnical infrastructure for governing and running civilization from this one to some new possibility that has very different characteristics. And you have to take the whole accounting of that if you really want to look at it. So you say, oh my God, crypto costs as much electricity as Argentina. Fair enough. And that's a lot. And by the way, there's S-curves in terms of how efficient we can make it and possible phase transitions in the underlying technology that can and will be explored as that becomes a meaningful thing to be explored by that collective intelligence. But if it turns out that at the end of the day, in the migration to a blockchain-mediated civilization infrastructure, the electricity cost of running that infrastructure is, say, the electricity cost of Canada, but it replaces the nation-state, the military-industrial complex, the entire legal and banking infrastructure, that's a good trade. It's a really good trade. The externalities of that can be much more tightly monitored, hydroelectric energy.

The visual in my mind is like I'm stacking the infrastructure, and on the one hand I'm seeing like the stack is like that high, and on the other hand I'm seeing like the stack is this high. It's just a lot simpler, very simple. But in this case, the stack is more legible, which is what would make like a Seth Godin write that blog post. In that case, it's very much not legible, right?

It's been rendered illegible by the fact that it's the water in which we have been born. And it's very complex to track it all out.

Right. So it's almost like there's like hidden middlemen in that other stack kind of cashing in.

Like Seth Godin himself, for example. Yeah. Right. Who's hijacking your attention allocation function, which is a big piece of the hidden cost in this stack. Yeah. Is our attention allocation function has been radically exploited. This is our sense-making problem. We can't actually orient our attention to the right things and get very clear signal of what's really happening that gives us the best— and context to make the most effective choices. Now, uh, let me invoke— oh, let me just mention the meta versus the trans, and then invoke our friend, uh, Nassim Taleb. So meta versus trans— you point that out in your, in your email, that this feels more like a meta move than a trans move, and I think you're probably right, right? And I've got language for that in my own vocabulary, which is Transition B versus Game B. As far as I can tell, this entire crypto infrastructure is actually part of the transition move, not part of the steady state at the end, but maybe a necessary part of the transition move. Adolescence may not be pleasant, but you don't get from kid to adult unless you go through it.

At least it's legible is what comes to my mind. It's very legible. At the very least, it's transparent. Legible, you can see it, there's no hidden moves associated with it.

It's highly trustworthy, right? Right. It's designed to be very difficult to corrupt. In terms of middlemen, how much corruption is currently hidden in the unconscious blind spots of the civilization which we've operated at multiple different levels, like many, many different levels, right? Probably a third of our entire civilization right now, maybe even as much as three-quarters, maybe more. Like, if you think about that measure of how much of our jobs are bullshit jobs And like 80% or 90% of people self-report that their jobs are bullshit jobs, maybe 95% of our entire civilization structure is just corruption. Well, if you move from a system where corruption has lots of places to hide to a system where it's fully transparent and has a full accounting built in intrinsically and legibly and uncorruptibly, perhaps you're able to actually go from a 95% corruption to a 3% corruption., and the energetic cost structure of that may in fact be so tremendous, that's the thing that saves the day, just that, just that gap. In fact, I would propose probably so. In that place, the opening up of the possibility of collective intelligence now that we're not burdened by a 95% corruption tax is what has the possibility then of exploring the real concrete problems that we actually are facing right now, which Tyson calls the 1,000-year regeneration, or maybe he doesn't use those words, but that's, you know, he points in that direction to actually navigate that. So for us to get from here to there, we've got to make this move. Once we've made this move, we're now sitting in a place that has the kind of underlying intrinsics that we can then consciously say, OK, now we're going to make the move to the next place. And it may in fact be a continuous orientation. Game B may always be a point receding in the distance. That we use as a star to steer by, but we never actually get there. But each step we take is a stronger, more, uh, like, healthier, more enduring, more thriving, more fulfilling step. For example, quite— could very well be. Um, thematically, that would be the right place to end.

Yeah, I mean, I'm gonna have to watch all of this again. I think to really digest a lot of what you've said, but a few things have hit home. I think legibility being the big thing that I just was not accounting for or giving it the amount of weight that I think it deserves. The idea that non-fungibility may be more intrinsic to human nature than fungibility. So I think that's big. And the idea that— NFTs may be one thing, but there are other things going on like VR, where once the two meet, there's potential there that we're not even, we can't even grasp really, right? Yeah. We can think about Zuckerberg sort of iterating away on his display technology, but we really can't grasp the importance of something needing to exist at a certain point that will need to be the value denominator in that VR land. Yeah. So I think—

so let me finish on this then, because as you say that, this is— this I think is the key. This goes back to the beginning of— there's a child playing in the sandbox. We look at the child and we inquire, will this child grow up to be a good woman or a bad woman? Right? Part of that's going to be on us. Let those of us who are participating in this at long last take full conscious responsibility for doing everything we can to actually make this emergent possibility a good emergent possibility. Let's not have Mark Zuckerberg be the one who designs Facebook. It could have been otherwise. It didn't have to be the way that it was. Um, you know, Steve Jobs, Bill Gates, and the PC revolution— there's choices they could have made, particularly if there had been a critical mass. And this is one of the challenges. Moloch controls precisely to the degree to which individuals are making choices on the basis of being individuals, not aware of the possibility of becoming part of a larger whole.

Right. It's almost like, let's not get distracted by the, the shiny object itself. It's fun, it's cool, it's amazing. Let's think beyond. At the very least, let's have these conversations where we're trying to think beyond and trying to shape it in the right directions.

Because can we steward this thing, right?

My perception of what went on with, let's say, Facebook, or even with the iPhone, Steve Jobs, is I just don't think there was any thinking involved in the second order, third order sort of realm, right? It was all about just this technology is cool, or in Facebook's case, let's connect the world. Like, that's it. Yeah, nothing— there's nothing beyond that.

And I would say maybe— I don't know about this, but I feel like it's probably a good— how do I say this? To a meaningful extent, Facebook is an externalization of the interior of Zuckerberg. To the degree to which you're thinking about something, one thing, but even more so to the degree to which you literally are something, that essence expresses itself out into the world. Right. So part of this would be something like, if you are participating in producing the future world, one of the ethical requirements on you is to become a person where your thumbprint is a thumbprint that you are proud of decades hence, or that your grandchildren— more importantly, your grandchildren— are proud of decades.

And I don't mean to single out Zuckerberg, but, you know, I've heard him talk about VR for hours, and What I noticed is he's so focused on like the technical, like the display technology. And I don't know if you saw, but they're working on like a neural wristwatch that's going to be able to track your arm movements and all of that stuff. Right. And so as he looks ahead, he's looking at like the blockers, like, I guess that's fair.

If you're technical engineering side. Yeah.

Right. Yeah. But there's just way too much power in his hand for that to be enough. Right. There needs to be this co-evolution of just implication, second-order effects, is going beyond what's, what's visible and legible.

Well, to put it in very clean words, we need to start having more wisdom, right? Not just intelligence. We've got lots of intelligence, and our intelligence has done an incredible job of expanding this, the sphere of what we can do, way beyond our wisdom's capacity to make sure we do a good job with those choices, right?

And as I speak to entrepreneurs, you know, that are my age, I feel like That may be coming about in that I find myself having more of these kinds of conversations, whereas a few years ago, my sense of interacting with other technology people was purely just like, hey, this is awesome. Like, this is cool. Check this out. Here's a link. But now it's more like, what are the implications? You know, that's a question that I think has popped up in the broader cultural space, which, which makes me hopeful.

Yeah, yeah, we can talk about that too because there's some, uh, I've been working on a response to Meditations on Moloch. Um, if I had time, I'd probably be done with it because it's reasonably clear, but it needs to be articulated well because this is a challenge. And if you play the technology entrepreneur game and you're by yourself thinking about the second and third-order implications, then that just makes you a loser, where somebody else who just focuses on winning right now is the winner. We need to find a way to actually generate an approach where those who are thinking about second and third order implications support each other, and the collaboration has enough capacity that it's actually strictly larger than the choice-making possibility of those who are not collaborating on— in that context, right?

Basically a trade union of innovators versus like, let's, let's have discussions, right? The latter just does not seem fun at all, but is what's necessary. Yeah. All right, man.

Thank you.

I look forward to, uh, I really appreciate this, uh, chat.

Yeah, me too. Bye.