Even after all that’s happened with the FTX meltdown and Sam Bankman-Fried so far, Kevin O’Leary (aka “Mr. Wonderful”) still claims that he still “likes the guy”. 🤯 Love is blind, but so is greed - especially so when it comes to the love of money as a thing in itself. There’s something weird going on here that I think is worth diving deeper into.
O’Leary also happens to be a guitar player and you occasionally see him playing in front of the camera - he knows how to play well enough to impress the sycophants around him - but ultimately, he hasn’t developed his musicianship enough to get beyond “acceptable” to “good”. His playing is, by most artistic standards, average and unremarkable.
There’s been a lot of talk about the where the future of NFTs may be heading in the near future, but what’s been holding back the industry so far is the lack of proper understanding of artistic and ethical standards. The secret to unlocking the true potential of NFTs will come only after we realize that the two things are one in the same. And reach a point where we’re able to articulate out how FTX, NFTs, and O’Leary’s guitar playing all relate: the signs were always there, after all.
When it comes to crypto investments, I have a few simple rules that helped me make it through the last few winters. The trick is to invest only in:
Projects that have a real product/service, or at least a working prototype of some sort.
Organic communities that are passionate and dedicated. (Artists, developers, users.)
Things you understand. And only what you can afford to lose.
The early days of Bitcoin, Ethereum, Dogecoin - at least at the time - all had product differentiation and passionate communities which made it seem like their success was “inevitable”. If you were patient enough to wait it out, you’re probably still doing very well, even now. (My best investments thus far has been BTC, ETH, DOGE, and a CryptoPunk that I picked up for a 100 bucks back in the day, for what it’s worth.)
But like a lot of things, once something becomes quasi-popular, it inevitably ends up attracting the posers and grifters looking to make a quick buck. The talk then becomes less about product, but on price: the Bankers have arrived, here to ruin a perfectly good thing.
This pattern is a tale as old as time, but it nonetheless still happens over and over: in a way, the FTX scandal neatly wraps all of the red flags of these sorts of issues all into one. It’s a reminder to all of us that:
There is nothing proprietary about holding other people’s money - anyone can do it. It’s a business model that is brutally competitive/risky as it is uninteresting.
Bankers do not produce anything. Their primary “service” is accounting and moving money around in specific ways, which crypto is still positioned to disrupt.
Arbitrage (how FTX/Alameda made its fortune) is neither clever nor sustainable. Definitely not worthy of the title “genius”, anyway - Bankers have diluted the definition of “creativity” to the point where it doesn’t really mean anything anymore, which we have to be very careful not to get caught up in ourselves.
Bankers typically do not understand what real innovation/creativity looks like. (See #3 above.) When you remove the accounting and protectionist gimmicks from the equation, their failure rate for venture investment is close to 100%.
I’m using the phrase “Bankers” in a very loose way, which is basically defined as an investor who puts the analysis of numbers over the understanding of product as a priority. From the biggest of venture capital firms and hedge funds to the smallest of “technical analysts”, Bankers are everywhere, especially in crypto where the promise of getting rich quick still lives on. (There is also a Banker that lives within all of us, at least a little bit. It’s an archetype.)
Incidentally, the reasons above are why I haven’t touched any exchange-related assets in crypto, despite being in the space since 2014. There isn’t anything inherently special about any of the exchanges out there (holding other people’s money is not a real skill), so there is no rational way for anyone to reliably predict which exchange will do better than others - it’s mostly a political/power play, combined with just plain ol’ dumb luck. The “dumb money” of Web3 have mostly been accumulating around the Bankers who bought into their own hype and (are about to) destroy themselves as a result.
#4 is the reason why we see FTX-esque scandals pop up occasionally: in an industry where you have a concentration of people who doesn’t produce anything - the fantasy of someone creating “something out of nothing” has a much stronger allure to them than it would for most others. (This is why you see a strange collusion and groupthink around stupid venture ideas all the time - it’s a blind spot that’s hard to see for the less self-aware.) It’s important for smart investors to be able to spot these types of psychological traps if they want to maintain real returns: avoiding the allure of money for its own sake - the numerology and overcompensation games that Bankers play with themselves to trick themselves into thinking that they’re actually providing people with tangible value.
These are the sorts of things that the next “market correction” is poised to fix, which is likely to affect both the crypto and fiat worlds at the same time. But at the center of all of it, in my opinion, will be the shift in mentality people have around NFTs, which will change our understanding of…basically everything over the next few years. We may finally arrive at the day where a good understanding of the arts and the humanities becomes…profitable?
The NFT markets is where art, technology, finance, and politics intertwine - and I do think that it will be the place where society itself tries to sort out the “big issues” within it that has been long overdue. But the NFT industry is still in the process of figuring out what “good art” actually means - the PFP hype of 2020-2021 was largely fueled by cheap marketing tactics (money trying to make more money with money) but as promo budgets start to run thin and the hype dies down, all that will be left is the NFT itself and its inherent meaning and value.
For serious art collectors, the whole “Bored Ape Yacht Club” phenomenon was very puzzling - poor aesthetics and sketchy business practices aside, the “message” of buying an NFT in that vein seemed to be that the owner was bored, identified as an primate, and seemed to have stereotypical aspirations of exclusivity that involved being on an nautical device of some sort. It’s confused at best, uninspiring at worse - who in their right mind would even want such a thing? But truth is stranger than fiction: BAYC got extremely popular anyway, just from the sheer amount of money that was floating around it. (And even more bizarre are the copycat projects that came after.)
But taking a few steps back - there is a reason why projects like these were able to override people’s rationality: we were already primed to think this way from a philosophical standpoint for a very long time. Many decades ago, media scholar Marshall McLuhan popularized the idea of “the medium is the message” - which still remains very influential in many political/academic circles, including the tech industry itself. This mantra has been interpreted in many different ways up until now, but the result of it is that it basically absolves creators of the responsibility of having to imbue their works with meaning or coherency: artists are often asked what their works is trying to “say”, but this mantra has given the Bankers a way to avoid having to answer that question entirely.
When you ask Ape holders what their image “says” about them (a fair question, in my opinion, especially since they spent so much money to make it part of their identity) you’ll more often than not be met with silence, confusion, or response that’s largely incoherent. The meaning that the “Bored Apes” have is not subtle - and mostly unflattering, I’d say. It’s more than obvious that most of the buyers of PFPs didn’t put much thought into it what they were actually buying. But this too, was also by design: the medium is the message…and don’t think about what’s underneath it, really. (Just give us your money, 💸.)
When you remove meaning from the artwork itself, the only thing left is the worshipping of the great emptiness - the fungible, the generic, the mediocre - the medium of exchange we call money. I don’t think that a lot of what went on during the NFT hype of last year was even conscious or intentional - it was another iteration of groupthink based on mutual greed.
Back to talking about art: Kevin O’Leary’s guitar playing is not “bad”, per se - he can play the notes mostly correctly, his rhythms are mostly accurate, and his chord progressions are “acceptable”. He can make it sound like what most people would recognize as “music”, and he could probably land a gig playing at parties or public events where the audience isn’t paying too much attention to the music anyway. But his playing is bland and unremarkable - a very common result of not having spent enough time on his instrument to develop his own style or “voice”.
A good teacher probably would have recommended him to spend more time with his instrument - to develop the habits and quirks that would give his playing style he could call his own. (Personally I do believe anyone can achieve this, if they choose to spend the time.) But of course instead of doing that (i.e. developing a personality), he opted to do what most Bankers do - just make more money, and surround themselves with people who will pay him compliments for his mediocrity.
So O’Leary’s playing, in a way, is a metaphor for how he approaches things in general - including his business practices day to day. Keep in mind that the show Shark Tank is, in it of itself, a marketing play: the contestants on there are getting a boost in publicity by default, making it an artificial economy in it of itself. The show often makes it seem like the companies that get funded on there are the only one of its kind, but that’s not always true - they do well for a while due to the publicity from the show, but eventually tapers off. At which point, the Sharks pull out, leaving them out to dry. That is the business model of the show: but the latter parts are what you don’t see since by then everyone has already moved onto the next shiny thing.
If this is the world that he lives in, is it really such a surprise that Kevin couldn’t see the FTX scandal coming a mile away? Is it surprising that his go-to business strategy are basically royalty deals where he leeches off of entrepreneur’s hard work in perpetuity? Not really - his guitar playing says it all - he’s a numbers guy, not a product guy, at the end of the day. He doesn’t really understand what creativity really looks like - he only knows how to fake it.
Once you spot this pattern a few times, you’re probably going to find that this stuff is everywhere: a proper understanding of art and creativity will highlight the warning signs (as well as the opportunities) that exist in every given situation, and is an indispensable skill for any serious investor out there. The biggest returns I’ve gotten as an investor were from the projects that I invested in that I felt had a purity of intension - and this is the strategy that I will continue to employ because it’s what has worked for me thus far. And the ability to spot that “intentionality” is the tangible skill that artistic training actually provides.
But I’ve become very wary of the Banker-classes, who usually come in at a project’s 2nd or 3rd phases (after the hardest parts have already been done) and try to nickel-and-dime everything at the cost of a project’s long-term health. They’re not looking at the product, after all…only the numbers. As an industry, we need to be more aware of this dynamic because it’s a lot more prevalent what we’d like to admit.
One side effect of having been in a 0-interest environment for so long was all the “bailouts” (public or private) that allowed for shaky business ideas to stay alive longer - probably a lot longer than it should have. In the case of FTX, this was an extreme case of everything going wrong - but in a way, it was also the logical conclusion of many of the trends and incentive structures leading up to that point. As we head further into the recession, these types of bad habits and practices are likely to get culled as it becomes more popular to talk about revenue generation rather than fundraising - a big shift in mentality for the economy as a whole.
But first thing’s first: we first need to acknowledge that art has meaning, and start talking about it in a way where it allows us to actually understand what is really going on. That only happens when we come to a proper understanding of NFTs: the nuanced connections between artistic, ethical, and economic standards. That the three things are not separate concepts, but are actually all one in the same.