1/24 Why do I have so much conviction on NFTs? Most of the biggest tech successes of the last 20 years have come from unlocking frozen assets, and NFTs do just that. For investors and entrepreneurs, this is a super important mental model. Some examples 👇:
2/24 AirBnB unlocked underused residential real estate. The original insight was that if you own a house or an apartment with a couch, every night that it’s empty between 10pm and 6am is like taking a fifty-dollar bill and lighting it on fire. Extra room? At least a Benjamin.
3/24 Uber unlocked underused time. Have a couple hours in the middle of the day? Uber uses location-aware mobile devices to offer you a temporary gig as a taxi driver or courier.
4/24 Facebook actually leveraged two different frozen assets. The first was the social graph. Perhaps surprisingly, people on social are mainly interested in connecting with those they already know.
5/24 So the first frozen asset was pre-existing human relationships that hadn’t yet been digitized. The second was behavioral residue. Facebook observes your interactions both on and off the platform, and uses this data to automatically generate content.
6/24 Every time you like a post or are tagged in a photo, the data from these interactions is used to generate new content for your followers. FB is better at repurposing this data than anyone else, which is why they are the biggest platform.
7/24 And of course Google didn’t invent backlinks, they just scraped the data that was already there and used it to drive a 10x improvement in search. Learning how to identify frozen assets that can be thawed is the best way to get rich in tech.
8/24 So what assets can NFTs unlock? The most obvious answer is digital art talent, so let’s start there.
9/24 The three basic innovations behind NFTs are that 1) artists can create limited runs of digital products 2) they make art trivial to authenticate 3) artists can earn revenue from secondary sales.
10/24 Until now, to make it as an artist you’ve needed to convince a gatekeeper with a gallery to hype up the primary. With NFTs, artists can instead give their work away for cheap or free and earn their living solely from secondary sales as their works appreciate in value.
11/24 Once artists can get paid in proportion to the impact their work is having on the world, there is a new class of folks who will be able to earn a living and shape our collective culture. NFTs give control and power to the creators.
12/24 Lots of folks have already spent years or decades developing the skills and ability to create art that makes others see the world differently. NFTs give them the ability to do this full time and earn a living as artists. New technology unlocking a frozen asset.
13/24 I suspect there may be more frozen assets in play here as well; for example, new goods and services that already exist, but that now become economically viable due to accurate and transparent price discovery. We can go deeper on this another day.
14/24 So where are we right now? Businesses built around frozen assets typically have some unique quirks, and we can use these quirks to benchmark where we might be in the technology adoption lifecycle.
15/24 First, most people with frozen assets don’t believe they have frozen assets. Convincing them otherwise is the key to success. It took AirBnB years to convince folks that extra unused rooms could be monetized.
16/24 Unlike more straightforward SaaS businesses that grow X% each month, businesses built around frozen assets can go from having no demand for months or years to experiencing explosive growth overnight.
17/24 People by default believe that the proverbial dollar bills on the sidewalk are fake, but as soon as a couple people figure it out then everyone else instantly picks up on the signal and fights tooth and nail to get them.
18/24 This is exactly what we’re seeing right now, where every artist and celebrity now understands that there is a ton of money to be made from NFTs, and now they’re all trying to figure out how to do it.
19/24 These celebrity creators all talk with each other, and by now they all know that launching an NFT project is a good idea. They’re just trying to figure out the technology, and how they can launch projects in a way that isn’t going to damage their brands.
20/24 From an investor perspective, a bet on a company should always be a bet on the asset, not on a specific tactic. When Uber black cars weren’t profitable, they switched to providing taxis. If they hadn’t worked, they would have just launched Uber Eats. Or Instacart.
21/24 All of these businesses revolve around the same frozen asset (time and location) and leverage the same technology, so it’s cheap to go from one use case to the next until you strike oil. (Another classic frozen asset story, this time from ~1859.)
22/24 Much like Uber, NFT technology can be repurposed for a lot of different use cases. This can be done quickly and cheaply. People will keep running experiments, and things are going to hit. My favorite example this week is from @punk6529’s thread:
https://twitter.com/punk6529/status/1438042185207799812
23/24 I don’t know who will be the most commercially successful artist in the NFT era. I don’t even know if art will be the biggest use case. What I do know is that there are a ton of extremely talented folk who are now going to be able to create digital content for a living.
24/24 For every Zaha Hadid, there are 100 folks in the gen art space who are just as talented, but who aren’t able to monetize their work by convincing others to turn their drawings into buildings. Now they too can have wildly successful careers. This is the way.
xx SerS
xx SerS
Bonus: What other frozen assets can be unlocked by recent tech, or tech that's coming in the next few years? Which ones do you most want to see unlocked, and which could be the most profitable?
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