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Letters to a Young VC: Letter Two
December 29th, 2021

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.

How do you spot a fake in culture, in tech, and in markets of all kinds?

A great place to start is corporate simpdom and the symptoms of central control.

Before the heavy spoilers ahead, let's start with some tldr definitions:

What’s an NFT really?

Symbolic devices that spread instant culture. They are collectible, tradable, usable as access keys for group belonging, give exclusive entry to special places, events, or experiences, and represent your beliefs and status.

What’s web3 really?

Devices, practices, and protocols that deliver real solutions to the decentralisaton trilemma — across culture, capital, and tech.

Central control is the total domination of the means of production, economies of scale, and points of exchange by a few well positioned players at the expense of everyone else.

They use mass produced psychology to make us believe cultural knockoffs have meaningful economic value secured by technology beyond our reach or understanding. It is Orwellian doublespeak with a friendly face to make us believe up is down, bad is good, and fake is authentic.

Here’s the alpha: There are two ways of looking at the appeal of NFTs and web3.

Take the positive. The upside gain. NFTs as instant culture, collectible, tradable, usable as an access key for group belonging, exclusive entry to special places, events, or experiences, and rep for your beliefs and status.

The upside of web3 is how it advances itself with each use.

In each device, in each practice, in each protocol it delivers the real power and independence needed to grow through deeply decentralised technical, cultural, and capital coordination. It takes the tools of the very big and makes them simple for anyone to use in ways that are too well incentivized to easily shut down.

When countering the downside risk of new technologies and all kinds of social interaction, NFTs & web3 turn it up a notch. When well understood and well used, they give protection and recovery from loss. They are devices and mechanisms that offer freedom from the wealth and humanity destroying mediocrity of central control.

Tell me if you recognize the rough outlines of this story: There’s a bunch of Kafkaesque bullies wandering around looking for every opportunity to destroy wealth and humanity for their own gain, or for no particular reason at all, besides inertia alone. Why? Because they can. It’s a dark forest, and we can’t do anything about it. Or so they would have us believe. And we usually do.

Anything that saves or protects us from a substantial loss of that kind, from banking fees to time stuck in traffic to opportunity costs of every other arbitrary kind across every aspect of our lives, is a simple and obvious good. It’s hard to relate to or wrap our heads around the financial, cultural, and technical gains from loss reduction that are strongest in network effects, economies of scale, and exponential reductions in friction, but the impact on “number go up” in our personal accounts and in markets is impossible to ignore.

Whether you understand options and variance swaps in detail or your eyes glaze over, when you need an indisputable example of the economic value of NFTs and web3, savings from commonplace losses that are otherwise written off as sunk costs are a great place to start.

But why can’t we just remove all the parts and still have it work somehow?

Here’s the thing… The minimum number of nodes needed for a network is 3 –– any less and you literally don’t have a network. Feel free to look it up and DYOR about why that ELI2 is true. Take as much time as you need. Ultimately, network less than 3 = just not possible and would be kind of useless anyway.

In a similar oversimplification for the sake of broader understanding and utility, the minimum requirement for real decentralisation is also 3. In this case it’s 3 layers that each need to be decentralised in order for “decentralisation” or “web3” or “NFT'' to mean anything useful.

To really be decentralised, to really be web3, you have to be decentralised at least three times over, through the tech, culture, and capital coordination layers.

It’s the real decentralisation trilemma.

In order to actually be free from system capture by centralized forces, it isn’t enough to be technically decentralised across one layer alone.

Tech decentralisation on its own is still highly inclined towards group capture, primarily via the cultural and capital layers. Same for any of the other corners of the triangle as attack vectors.

This is the actual playbook for how VCs have gotten away so far with pretending to be web3 — funding the fakes.

To defend decentralisation of each individual layer against capture from these kinds of wolves LARPing in sheep’s clothing, the minimum number of core layers of a system that must also be decentralised is the same as the minimum number of nodes in a network.

We know this in theory from the same logical principles as the general Satoshi model set of solutions for byzantine consensus. We know it in practice from the obvious demonstrated evidence of the results from the broken centralized systems we have lived under the control of for all of relevant human history.

To truly unleash the free and open potential for creativity, wealth production, and network coordinated self determination we must all have open and antifragile access to the root tools of personal decision making, programmable open currencies and creative production. Decentralised tech, decentralised culture, and decentralised capital coordination are bare minimum for that radical economic independence and personal freedom to finally become real for all.

But funding the fakes is a powerful thought that deserves a lot more attention.

Why does it matter if corporate NFTs are just fake web3? And just what kind of game are VCs playing when they pump concentrated capital into fake web3?

We’ve lived for centuries in markets where some external authority persuaded and even violently forced us to conform to engineered beliefs telling us what is authentic, what is valuable, what is meaningful, and what is not.

Now, that corporate centralized factory model is exposed as the mass producer of fakes it’s always been. Specifically, this is because we now have the power to verify, record, create, and trade without anyone’s permission –– without robber baron middlemen –– directly between each other.

They are trying to continue funding the fake versions of web3 because that’s what they’ve been doing the entire time. It’s the only racket they’ve ever known. Find a culturally appealing label, pump it full of borrowed cash, extract the cream from the froth, rinse and repeat. Greater fools be damned.

But now because of the decentralistion in triplicate of web3 we can catch them every time they do it, and front run their gains by building on the real kind instead. We can spot the fakes. We can spot the ambushes. And gain from our own authentic works each time the central control cartels and corporate simps try to pull a fast one.

You might ask yourself, where does the funding come from if not from the corporate simpdom fake funders?

Direct to market, my frens. Primary economic activity and radical protection from losses in secondary financial tooling. We flood the market with the real thing, including the actual power to create from high quality sources.

What exactly is high quality source material?

The TLDR: We’re talking CC0 here. Commoditize the complements to unlock radical economic independence.

We do this by commoditizing what the IP cartels see as their core product mechanisms that drive and control the flows of capital into their concentrated vaults. We transform those mechanisms into an unavoidable realization that they’ve actually always been complements, not products.

This might seem like geeking out about categorization, but it’s actually right to the heart of not just everything web3, but the core technology of economics: well accounted for information in accurately categorized records that can be verified by anyone. It’s what we mean when we talk about ledgers and bookkeeping.

By relentlessly moving to make the cost of the complements that corporate fake producers claim as their core sources of capital into positive sum content devices, it cleans up their books and redirects those sources of capital away from the cartels and towards all authentic market participants.

This is most easily and directly done by the mass scale, uniquely custom, massive multiplayer production of a flood of high quality original works and limitless derivatives that are adamantly CC0 to the core.

In short, wearing Prada doesn’t make you Prada. Funding the fakes won’t make you bigger than Nike, either. It’s cool to collect content of all kinds, even fakes, but far cooler to create and trade authentic web3 works with limitless capacity and value.

We now have an easy way to tell the difference between real and fake thanks to web3 – we have the receipts, and they’re immutable.

And if you’re wondering how you get in on more of this real good stuff, permissionless funding models are already here and more are on their way.

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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