Letters to a Young VC: Letter Fourteen
March 27th, 2022

A collection of letters encompassing simple insights and recognition of foundational shifts that any bright minds trapped within the old norms of a VC mindset can use to break free, whether they are just starting their journey or reflecting back on what they wish someone had told them in their early days.

Money is a self perpetuating social convention.

It's no more than a token that we trust will hold value in future exchanges. If buyers and sellers, ports and authorities accept textiles as payment then they are money.

Yet, for most of the market, the production, creation, destruction, velocity, portability and visibility of money exists in a separate world. It's an abstract expression sourced from governments and politicians that duplicate pieces of paper to somehow create wealth.

All information on the value of the goods is destroyed.

And, if its underlying economic impetus is far-removed to most in this world, what hope do we have as the transition from the physical counters to the diversely digital metaverse is a movement towards even further abstraction?

How do we better identify the relative value of cloths, fibers and dyes, flows in and out of a business, everyday patterns and money beyond its lineage of paper trails?

How do we apply the science of patterns and usefulness of mathematical programmability to everyday concerns of business, bookkeeping and free markets?

We start with an open enquiry on the primary sources of economic production and wealth creation.

Ultimately, where does the value of money or anything else in an economy come from? While status, speculation, exchange and social signaling and a vast range of secondary market activities are substantial, real primary wealth is created by production capacity. The primary sources of wealth creation matter more than secondary ones.

This is what web3 really gives us all access to.

A radical and unprecedented scale up of social coordination, more effective access to capital, and the bonus benefits of drastic reductions and removal of all kinds of middleman induced friction, leading directly to increased production capacity distributed to every participant in the economy. It also lets us much more easily show off our status, share well defined stories that help us understand the world and our place in it, and literally wear our style more effectively and originally in every environment, physical or digital.

To prevent malicious actors from hijacking the means of production, how do we guarantee personal private and common public access?

In one word: staking.

How does staking secure production capacity?

In short, it removes dependency on the secondary market rationale for abstract money chasing ever more unsubstantiable abstractions of money.

It's far less necessary to debate the nature and relevance of securities, when properly defined and well utilised staking is understood as required as a functional component in growing production capacity. Securities in the sense that’s dominated the discourse of the late industrial era have nothing to do with it.

In fact, staking is absolutely indispensable. It secures our access –– both in the gears doing work and the lock and key senses –– to the tools, mechanisms, devices and symbols for:

  • Production capacity
  • Social coordination
  • Waste reduction
  • Status
  • Story
  • Style

All machines in a sense are made of gears. From cars to watches, even if those gears have been minaturised down to the atomic level, the molecular level. Or in software as blocks of code.

Our economy today operates through the gearwork of digital machines.

Through transistors, digitisation of certain parts, and other gear work mechanisms that route and gate the logic around digital transmission of information, it gears all the way down. All the components of everything that we have is either a gear like structure or a woven structure and some version of a mix between the two of them, with some kind of current flowing through them. That can be heat, cold, electricity, water, air, blood, nerve impulses, or yes, even money.

The digital modern mini factories run by NFTs and other tokens ultimately make, mint, forge and assemble. This is also literally what happens when tokens are produced.

But where can it go wrong, where does it go wrong, whether it is in the industrial economy or the web3 economy?

It can go wrong if there is no record of what is produced or the record can be far too easily forged and faked. It can go wrong if there isn't a secure mechanism in place to ensure broad and open access for anyone who would like to, or chooses to, participate in the direct means of production.

Why is it critically necessary to secure open access to the means of creative production and means of token production? Why is it critically important to ensure open access to the new factories and their use to everyone?

Staking ensures decentralisation of access to the new factories of wealth creation, token production, gear production, fabric production.

Those that don't support open access to the new means of the most base forms of economic activity and wealth production are disqualified from ever making any claims to stand on behalf of the downtrodden, working class or the people at large.

And the urge to outlaw staking or tightly regulate it for only the very few is like the absurdist impulse to ban locks and keys, or to forbid the ability to run your own assembly line or use your own sewing machine.

So, when we talk about securities and securing the protection of people from loss of money, from scams, we must also look at what is actually meant by people losing money. It might seem philosophical but it's actually really important for us to know and recognise that most things in the economy and involved in broader money talk include symbols. Symbols that we agree on and symbols that make storing the work that we do, and trading the work that we store easier and more efficient, more fungible, easier to wrap, that make everything that we do in stories, status and style in ways that reduce waste, improve coordination and most importantly increase our ability to produce stuff.

If we are talking about securities and money, what we are really talking about is the production of stuff, and not getting scammed when we trade what we produce. Well that is actually what tokens, crypto and web3 and blockchain is all about, and is exactly what staking secures for us.

Now, I'm not claiming that everyone who uses web3, talks about crypto or shows up at a gallery event knows what they are talking about, is being honest about what they are doing or isn't trying to pull a fast one on everyone else. Just like I would never claim that someone who has dollars in their pocket isn't doing something stupid, illegal or just you know, wasteful and boring. Or that every book ever printed is an amazing read –– far from it.

Having tools, and access to mechanisms, devices and symbols that can be used in great ways doesn't mean that everyone will use them in those ways. But let's not waste our time here.

What is really interesting is what these things are when they are used correctly. The scammers will be dealt with more effectively through the broad based distribution and decentralization of economic power to larger numbers of market participants in every industry. What web3 is first and foremost is a transparent record that is pretty much impossible to fake, which keeps track of the evidence when people engage in scams. That is something that the traditional economy just doesn't have –– a profound ability to transparently watch the watchers.

And while that is great and revolutionary it's also nowhere near the biggest part of why this is so exciting.

Production production production. It gives us access to the primary sources of economic production.

Nothing about that fits the less useful but more conventionally used definition of a security.

What we need to do is focus on the primary sources of wealth creation and fair distribution of wealth. Ensuring through game theoretical mechanisms, which you should simply understand as checks and balances enforced by code and secured by blockchains, for full decentralisation not just in the underlying smart contracts, but also in the capital, governance, culture and every other element of the stack.

That is what staking does. It decentralises across these other layers at the point of factory production for new token economies. It's how we ensure global open access to the new means of production.

And it's ok if you are more of a speculative financier that just wants to think about what happens in secondary markets. But the combination of primary and secondary sources of capital creation and circulation is so much more interesting and so much more profitable from start to delivery though every turn of these new digital gears.

Any value brought in from sales of NFTs minted through this article will be used for building out the F₃M Realm treasury, which will eventually be governed and coordinated by the DAO, furthering to decentralise the web3 fashion capital stack.

F₃Manifesto (F₃M) is a rally flag for the entire web3 fashion movement. It’s a label and realm that is built for so much than just the digital and physical threads and collections that it will spin up and release.

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