Harvard Business Professor Explains Investing in NFTs

24:14Instead of creating a new account for each website you log into, you take your wallet, your digital account, and connect it to each website, and it loads information from there. And so one thing that's very special about it is it means once you acquire your first NF ticket or something like this, right? If you're attending a concert for which the tickets happen to be NFTs, you set up one of these accounts, you set up a wallet, and now at least in principle, you have an account that can be used throughout other Web3 applications later. And so there actually is sort of like a potential for a much stronger flywheel there on some dimension because, you know, Steve and I just wrote an article about this in Project Syndicate recently, that once you join into one of these Web3 applications, you know, so if you acquire an NFT for some reason, now suddenly you can have and use NFTs for other reasons.

25:05And indeed, you know, that ticket you have, you can start engaging in all sorts of various activities built on top of it. If, you know, some fan creates an online fan channel for everyone who holds, you know, a season ticket pass, you can take your season ticket pass and just like directly port it over there without having to do any additional effort. You just, you know, basically use your wallet login to log into the chat channel. To make an analogy on that, it's like, I used to work with Nestle and Hot Pockets is one of our brands. And one of my favorite examples is Hot Pockets, unsurprisingly, targets gamers.

25:35They want to talk to gamers. They sponsor NRG, which is this big gaming team, which is like a giant sponsorship approach. And they would still certainly do that. But imagine if Hot Pockets wanted to know people were absolutely positively gamers. Well, what if they said everybody who bought the most recent Fortnite skin can connect that wallet, because that's where the Fortnite skin exists to their website and get a 20 % discount. Like it's that like simple for the brand building to say, now we can with certainty say the person making this purchase is into gaming. Cause we know for a fact, rather than, Hey, this person might be having to stumble upon the gaming team, or maybe they'll see it.

26:11Maybe they won't. It's, we know that they're gaming right now actively and spending money in the ecosystem, but Scott, I'll let you continue. No, you're exactly right. So as Steve saying, like hot pockets, if they're trying to market to gamers, what they have to do right now is very abstract, right? They like go to a web platform like Facebook and they say, look, we're trying to market to gamers. And Facebook will tell them something like, okay, you're looking for, you know, 20 to 35 year olds in these demographics. And they'll tell you something that lets you sort of target the gamers in this very abstract and indirect way.

26:43Or if you're really lucky, Facebook will know, oh, this person's active in these gaming groups. But wouldn't it be nicer if Hot Pockets could just say, look, if you're an active gamer, come to our site, connect your gaming account, and we're going to give you rewards based on the stuff you've collected. That would be so much more direct, no intermediary, and actually answering the question that they're trying to answer in the first place rather than having to vector into it in this abstract way. But okay, so if it has all this value, why are people doing it? So there are a bunch of challenges.

27:13First of all, and we talk about this a lot in the book. First of all, Web3 technology is currently very early. And you're like, well, you know, it's been around for 10 years, hasn't it? But the internet 10 years in was also early, right? If we think about relative to what people do with the internet now, and like all the ways it's embedded in our lives, right? The internet preceded smartphones by a wide margin, and smartphones are how a lot of us interact with much of the internet today. Web3 tech is early, and in particular, for many people and for many applications that exist on the technology today, you have to interact very close to the rails of the system.

27:52It's very inaccessible to the average user because you have to understand the technology of what's going on. You have to sort of understand how the blockchain works and how you interact with it. How do you basically, in effect, send a message to the ledger telling it to do an update and so forth. You're not writing computer code to do this, but you're still interacting with things that come out in binary strings and stuff. It's confusing. using. We're like in the Linux era right now? Yeah, we're sort of in a Linux era. By the way, remember, Linux is actually, there was a Linux era, but we also live in the Linux era today, right?

28:24The open source Linux platform basically won a lot of the server and platform wars. And so there's a sense in which it was the domain of people who were really into these open source and rails of the system projects. But actually, the fact that it was this big open source ecosystem actually enabled it to create a lot of value. And then we're sort of in the Linux era. And there's a second challenge on top of that. Oh, and especially as a side note, so much of crypto to this point has been financialized, that there's also, you know, sort of an accessibility problem on that dimension, right? Like a lot of the early experimental NFT products were things that were very, you know, by design, like sort of were, were very small supply.

29:04They were, and they were, became very quickly expensive, right? For better or worse, right? And so not only did you need a lot of technical understanding and savvy and experience to be able to interact with this market, but for many people also, you needed a fair amount of financial capital. All of these things made it very hard to access. But we also think, at least Steve and I hope, that these are all very non-equilibrium phenomena. And when we talk in the book, what are digital goods really? What are the digital goods we mostly like to collect. We collect, you know, songs, you know, song tracks and souvenirs, you know, and we're imagining that like people will get NFTs when they go to national parks, right?

29:43Those like national park stamp passports. This is like a digitally native version of that. And you'll be paying a dollar or two for them. And we're already seeing the market starting to move towards these like much more mass market digital collectible products and so forth. And then there's one other big challenge here, which is that a lot of, in part because the technology is running so close to the rails, it lacks a lot of the protections that currently lacks a lot of the protections that consumers are used to for other consumer internet products, right? Like if I transfer an NFT to the wrong address, and I go to like an NFT platform and I want to like send an NFT to someone, I will often get like a warning, like warning, NFT transfer to wrong address cannot be recovered.

30:19It's like you put a thing in the mail with the wrong address on it. And like, you know, it's probably gone. Those sorts of things are totally, you know, account recovery is hard. These are things that we're not used to at all from the consumer internet, right? If you lose access to even a very secure account, there's some mechanism at some, at the end of the day, there's like a human somewhere who can like help you solve it. Typically, the accounts people use to interact with blockchains by and large do not yet have those sorts of consumer protections built in, but all of that is changing. Like there are like new layers being built on top that abstract away a lot of the technological rails and implement a lot of those consumer protections.

30:57I think even the Linux era, as you said, that was a great way of explaining it to the point of like, when I think about like, again, as someone who's 40 years old, I remember I saw Nate Bergetzi, a comedian I love, made a joke where he was like, when I was a kid, someone's like, do you have a computer in your home? He's like, what are you, a zillionaire? Because there are these tech and cost barriers to do it. And it's like when I was building websites in 95, 96, 97, like as a middle schooler, if I had a line of code off, the whole webpage turned into code. If my sister got a phone call, it kicked me offline because everything was through the internet.

31:28And I think a lot of times we have short memories to think about in the 90s, the idea of banking online, you would never do that. Now I never bank offline. When you look about cell phones, 20 years ago, the iPhone didn't exist. Now this morning, I ran an entire radio show off my phone. One of our favorite anecdotes we see is David Letterman giving Bill Gates a hard time. He's explaining the internet. And David Letterman says, you know, he says, well, you can listen to your baseball game on the internet. Dave, you're a baseball fan. He says, have you heard of a radio? And he goes, yeah, but you can listen to it anytime.

32:01And he says, have you heard of a tape recorder? And the concept of a tape recorder and a radio replacing the internet is wild, but this is how these technologies tend to evolve. And I think sooner than we think, we'll see this thing sort of move forward. So it's just early. I mean, there was time when the cost and tech barrier of the internet was way too high. And now it's, you know, at the palm of our hands in a six inch screen. You know, there's something we'll drop in the show notes, but there's a image that I have of a print newspaper article that was written right around the year 2000. The headline said internet may just be a passing fad.

32:35You can find that about video games too, by the way, people said video games were a passing fad and streaming wasn't going to be a thing, right? Until it was. Now I'm going to repeat back some of the things I've heard to make sure that I'm understanding it correctly. So as you talk about the fact that this is right now a little bit inaccessible, you need to be technical, you need to be close to the rails of it. What that reminds me of is before blogging became what it is today, or really, you know, the heyday of blogging was probably 2008, 2010, right? And that was largely because there were programs like WordPress that made blogging accessible to people like me who are not tech savvy.

33:15In the personal finance space, one of the biggest and earliest personal finance bloggers is a guy by the name of J.D. Roth, very, very good friend of mine. But part of the reason that he was early to personal finance blogging is because he started doing it in the days when you had to hard code every blog post. Few people were blogging back then. is that essentially what's going on right now? We're in the days when you had to hard code a blog post. That's a great analogy. Again, it's like, you know, Yeah, like really incredible at these. Yeah. Yeah. It's like you do it for a living. Yeah. It's exactly how it is, right?

33:52It's like hard coding and doing the blogging. By the way, JD sounds like my people then. Hard coding and the blogging is there versus like now, you know, the three of us could go get a Squarespace and spin up a website tonight, right? And that, you know, that out of the box software and those out-of-the-box picks and shovels are going to be so huge for moving things forward when you can tell a small business, take this software, use it, and now it's accessible to you to build an entire loyalty NFT program to help level up your business versus right now, some of the bigger brands, the Nikes, the Starbucks, et cetera, are really kind of looking into, you see Disney legging in a little bit because they can, because they're able to do it right now.

34:32Right, so basically we're waiting for more plug and play that non-technically savvy people can intuitively use. And that stuff's being deployed in real time right now. The first really intuitive, no-code platforms for launching various NFT assets that I was sort of exposed to came out in the period we were working on this book. And suddenly now people were able to deploy NFTs without writing code, but there's still a need to understand. But these platforms, even just the decisions they have you make as you're launching your NFT collection, you still have to understand a lot about what's going on under the hood in order to make those sorts of decisions.

35:10And so like, and then yet just very recently, we're seeing like a whole nother layer of abstraction being built on top of it. So, so I do think it's the blogging analogy, very apt, you know, there was sort of write your, you write your blog by, by hand that, you know, sort of via HTML, then it was like WYSIWYG editors and then there's, you know, WordPress and so forth. And so we're, we're maybe now in the WYSIWYG era and hoping to get to WordPress soon. to the second thing that you talked about which is the lack of security you know i bought a few years ago i got a cold storage uh wallet for some cryptocurrency that i held and for the people who are listening that just means that it's a digital wallet that is disconnected from the internet and i remember when i read the terms and conditions it essentially said like if you lose the password, may God have mercy on your soul.

36:00Right? I mean, those were basically the cheese and seeds that I had to agree to. And I remember talking to my best friend who is a software programmer. And I know we're talking about NFTs and not crypto specifically. But in this conversation, she was saying, I don't think crypto will ever be part of our daily lives because the only way to keep it truly secure is by putting it in cold storage. And if you lose this physical, I lose physical things all the time. I can barely keep track of, I mean, I lost my aura ring this morning and it is literally supposed to be on my finger. You know, like, so given that that's where the market is right now, how can the security problem be improved?

36:53I think there's a couple of things. And I think there are like certain softwares being built, like there's a software called WalletGuard, for example, that it's an extension you in the current like existing, you know, market where you install on your computer. And when you go to make a transaction, it will warn you if things seem malicious, it will warn you if things seem wrong. So it's like just an extra layer of security to slow you down and say, hey, you think this is a real link, but it's not. We've actually seen recently some people getting hacked and some and pushing supposedly to a platform called NBA Top Shot, which is a digital collectible for sort of basketball, almost digital basketball cards, but they're live moments.

37:30And these people have been getting hacked and sending people there. Well, if you were connecting a wallet to that and you had WalletGuard, it would warn you that this is a malicious site. Don't connect your wallet to it. So things like that exist. You mentioned the cold storage. That is a example of a key where you need to be physically present to approve something in your hand before you do it. And I think these sorts of levels of security will improve, but also there are custodial options where you can hold cryptocurrency. You know, Coinbase says, hey, hold it here. And yes, you still have to trust Coinbase the same way you would trust a bank with your money.

38:00But, you know, there are ones like that and others that exist the same way. So I'll actually be curious to get Scott's thought on this because I don't know what we've ever talked about. it is I think most people are more comfortable with a custodial option where if you're, say, Nestle and you set up a program like this or your DiGiorno pizza and you do, I think most people aren't going to want to say, I want to set up my own non-custodial wallet where I control all these assets and need a cold wallet. I think they're going to say, Nestle, we trust you to find a custodial partner who can hold those, say, on your website without having to think about it because I think the goal, generally speaking, is the blockchain disappears into the background and it becomes the software that powers it much like a QR code.

38:42As I mentioned earlier, I mean, that just powers the ticket. You don't say, let me go to the football game and grab my QR code. You say, let me go get my ticket. And I think similarly, you'll just call the asset what it is and say, you know, oh, I just am part of, you know, DiGiorno, you know, I'm a DiGiorno pizza head or whatever they call. And you'll just be in their platform using it and they'll set up a custodial option. So my inclination is that's the direction things go more so than the self custody option, even if that is an option. But Scott, I wonder if you kind of are aligned on that.

39:09No, I totally agree. Also, I think it's important to note that on the evolution path, we're imagining and for NFTs, the need for self custody goes down for two reasons. One is you're using these assets sort of like in the ordinary course of business. And again, you're using them as tickets to events, you're using them as, you know, sort of coupons, You're using them as digital wearables and like metaverse games and things like that. And so, you know, having that, you know, wrapped in a custodial platform of your choice, right? The power of Web3 is that that account can be connected to many different places.

39:43You don't even have to self-custody the account to make it accessible to many other platforms. And moreover, you know, ownership of your assets in the same way you can take money out of a bank, right? You can sort of take your money out of a bank and move it to a new bank account. You know, it's possible to enable a custodial, like a managed wallet system that still enables you to take out all of your assets and move it to a different managed wallet system in the same way. Or even really sort of like move the underlying. It's even a little bit more precise than that. It's like you're sort of moving the underlying account pointers somehow.

40:12And so the uses we're going to see for these things are ones in which that type of architecture is often going to be, you know, optimal, even just from a design perspective. And again, from the user experience perspective, I think also like very important. And moreover, as we see digital assets evolve into these broader and sort of like much more like everyday application domains, I think the concerns around, you know, so, you know, both the concerns around security are less because like you're not invested in the same way and nor are people necessarily going to, you know, be as interested in trying to capture your stamps from your national park passport or something like that, right?

40:51It's like, this is, again, sort of a phenomenon that is, you know, sort of very present in this, you know, sort of very unstable equilibrium with a lot of people holding very large value assets of, you know, that sort of move around a lot. As these become sort of much more part of everyday applications, we're going to see them being managed through wallet platforms that look like a lot of the types of consumer applications we see today. they're going to be custodial, they're going to be intuitive, and they're going to have sort of better account recovery back-end options than sort of what you were describing for a hardware wallet.

41:25And then again, there are going to be types of assets that are much more native and intuitive for that interaction type. As a footnote, there's also a lot of evolution, and neither Steve nor I are cryptographers, so we shouldn't really speak to this, but my understanding is that there's also a lot of evolution in questions like how do you do account recovery? How do you do various forms of protection, even in these self-custody solutions? As more people use the infrastructure and it needs to become more broadly accessible, even the hardened base versions of these technologies, people understand you have to figure out ways to make them more usable for the ordinary consumer.

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43:38With a custodial option, one risk is the risk that the underlying entity might collapse. And we saw Voyager, for example, collapse. We've seen a lot of these custodians collapse. And when that happens, the depositors who had deposits in custodians that collapsed lost their deposits, right? Well, Voyager being a perfect example. What we've also seen is that there is generally mistrust of the banks. And so a couple of years ago, when Silicon Valley Bank collapsed, and then First Republic, there's, you know, Signature Bank and First Republic, when all of that went down, I remember at that time, I've started hearing from people in this audience who had deposits at very secure, well-established major banks like Chase Bank saying, hey, should I withdraw everything?

44:30People were panicking and people were ready to make bank runs, even with the collapse of just a couple of regional banks that were FDIC insured. So given the lack of FDIC protection, given the risk of custodial collapse, and given what that would mean to any depositors who are unlucky enough to be holding the bag, how do we safeguard against all of that? That's a great question. Neither Steve nor I are regulatory experts either. So we're not really qualified to speak to the precise details of how this should work. But at a high level, banks are regulated and insured. These sort of centralized or quasi-centralized entities dealing in the Web3 space, many of the centralized entities have actually sort of been on the edge of regulation.

45:23Um, but you know, a common, a common misconception about, you know, the concept of a free market is that a free market is a market without rules, right? Like even Hayek didn't think a free market was a market without rules, right? To the contrary, Hayek thought the idea is to design the market so that the rules enable the market to be as free as possible in the sense that people can engage in the types of transactions and interactions they want. regulation and disclosure and probably some degree of insurance, all of these things are going to be very important for custodial solutions to become broad and mainstream, especially to the extent that this borders on financial technology applications.

46:03I'm sure Ticketmaster is subject to some sort of rules around what happens if tickets evaporate or somehow get extracted from the system. In all of these contexts, I think we need regulatory rules that make the system easier and better for consumers to use. And that's actually a necessary step. Talking about this mass adoption, that's a necessary step to making this technology accessible and usable by everyone. The other thing that's kind of cool about it, like related to NFT specifically is in theory. So let's say that Jeep released NFTs to everybody who owned Jeep to sort of showing they're a Jeep owner because Jeep people love their Jeeps, right?

46:38And it's like figuring out how they can all get together. And let's say Jeep says, you know what, we don't want to build anything on top of this or maintain it. Well, if it's built on a blockchain that is publicly accessible, in theory, they could say, does anybody else want to pick this up? And it's very easy to transfer over and Jeep doesn't lose anything. They continue to get the brand equity of having those out in the wild. And the person who's taking it over can take it over quite easily if they're willing to relinquish that sort of brand control, which is something that's not a super big ask if they're going to sunset it anyway to say, hey, just prove your ownership tokens, it makes it a little bit easier for people to say, hey, we're shutting this thing down.

47:13But if anybody wants to take control of these tokens, they're on a public blockchain. So it actually makes it a little more accessible than, say, a program that's in a current digital scenario, where it's like, let's say Jeep had a digital program completely built on a closed server, and they shut it down. Transferring that to someone else would be a tremendous lift. Transferring a set of tokens that are on a blockchain to another group, well, it's not easy. I don't want to underplay that right now. It's a little bit easier and more realistic to say somebody saying, I am the biggest Jeep fan in the world.

47:38I own 74 Jeeps and I'm a multimillionaire. I want to run this thing. Someone could do that and then run the Jeep program all the same. So they actually have a little bit more ability to survive. And once they're on the blockchain, if they're not removed from the safe face of the earth, because they're immutably there, someone theoretically could always build on top of them, even if the company gives up. So it's a unique property of NFTs that we've seen brands where they haven't done particularly well. And then a really intrepid sort of, you know, person comes and picks it up and takes it over and brings us a new success.

48:07Like we've already seen this in Web3. So it's certainly a doable thing where somebody could could spin those off, even if a brand or a company goes with NFT. So it has a different, unique property there. Yes. Let me jump in for one more second, if you don't mind. So Steve raises a really important point, which is that these digital assets have a form of persistence that exists. and this is separate from the like, what happens if, you know, your custodial solution, like, like Voyager is like fundamentally mismanaging or misrepresenting what they're doing with the digital assets, but just the digital assets themselves, right?

48:37Like in web two incarnations of digital goods, right? If you have a book on Kindle or, you know, sort of a song on iTunes, that asset lives inside the platform. And if for some reason the platform goes down, right? Like, you know, iTunes like pushes an update that bricks the system for a day. Like now you can't listen to your music, or if Apple, you know, sort of God forbid should fold, then, you know, everything you've stored in that platform, you know, sort of no longer exists, right? You're sort of, it's, it's a bunch of records in a database that just sort of goes down. It doesn't exist anymore.

49:11I'm sure Apple would do something to try and like transfer, you know, information out or whatever, but, but fundamentally the digital assets live in the platform. Pokemon Go is maybe a better example. The Pokemon you've collected, uh, my brother's a huge Pokemon Go player. Yeah. If Pokemon Go were to sunset tomorrow, those Pokemon would disappear, right? There's no life of them outside of the platform. But with NFTs, the digital asset, right, the record lives on a public interoperable, you know, decentralized ledger. and so if the creator like leaves the picture or whatever you know the company that produced you know if you had pokemon nfts and and the pokemon company went out of business people would still be able to like play games with their pokemon they'd still be able to do things with them just like you can with pokemon cards right if you have the pokemon card and indeed you know pokemon cards still going strong but a different collectible card game from my childhood you know sort of um star trek you know tcg any any star trek tcg fans out there let's go um you You know, still a fan.

50:10The game is no longer being produced. But of course, you can still play the game with the cards because you have the cards. And so blockchains give these assets a sort of, you know, persistence that's very much like what we're used to with physical assets. And that means it's possible to wrap them with new platforms, even if the original creator goes out of business or stops innovating on them. I want to define a term that we've been using throughout this conversation that we haven't actually caused to define, and that is Web3. So what is Web3? How does it differ from Web2? And also, was there ever a Web1?

50:46I should shout out a second book by one of my A16C crypto colleagues, Chris Dixon, called Read, Write, Own, that is really sort of like this history of the internet that I'm about to like, you know, borrow from a little bit here. So there definitely was a Web1. There definitely was a Web2. And we're sort of still in the middle of it. And there's this Web3. And these are often organized in what are called the read, write, and own heroes. So read the early internet, web one, you know, basically what did you have the ability to do as like an ordinary consumer on the internet? You could go around and like read stuff, right?

51:19You would go to a webpage and see things that were on it. You could look up your, um, you know, or your favorite finance blogger, your personal finance blogger or something. You can read their finance blog. Um, but primarily the interaction was, was purely sort of consumption of information, unless you were the person, you were a business or the person creating the information that others were consuming. But it was, it was sort of the web was a platform for accessing information. The right phase, W R I T. So the writing phase was when you suddenly now had the ability to, to write content into it as well.

51:53It isn't read only. It's, it's also now you can, you can add. And so the consumer experience becomes sort of modern message boards and so forth. You interact with the sort of the content that you're that you're consuming in some way. And you can sort of like write and communicate with others through the Internet. And then own sort of this Web 3 era is, you know, characterized by these sort of wallet accounts that we've been talking about. And you yourself own your digital assets. So in the right era, so in web two, what you created, all this content that individuals were creating on the internet typically lived inside of walled garden platforms, platforms that sort of walled themselves against others and to try and aggregate as much information inside of them as possible as a way of, you know, making their business models grow, right?

52:38Sort of leveraging network effects to make the consumer experience think Facebook, they can show you better and better content and things you more want to see. And also they can show you better and better ads. And their competitive advantage in doing so is from having aggregated lots of people and learn lots of things about them, train predictive models to figure out what you should show whom. And that gets better the more people join. That's a network effect. As more people join the platform, the platform's ability to create value for each individual consumer goes up. But the competitive advantage comes from locking in all of those users and locking in all of that information and sort of growing their platforms relative to their competitors so that their network effects are stronger and they can sort of always continue to provide the best version of these services.

53:24My former student and frequent co-author, Chad Esber, who's now a Web3 founder, founded a company called Kudos Labs, uses this metaphor that in Web2, it's like you rent an apartment, right? You sort of create an account on Facebook or on Twitter or something. You've rented an apartment. You put a bunch of posters on the wall. You form memories too, right? Those are your likes and all of the content that people and reputation you've built up there. You form your memories, you put up your posters, and then if you want to move to another platform, you have to leave all that stuff behind. You leave your posters, all your memories drop out of your head.

54:01You can't take anything you've built in a platform with you. Whereas in Web3, you own all of that. When you post something, that post lives in a digital account that you control. And when someone says, I like it, that interaction sort of also sort of lives in a interoperable, transferable account. Now you can move from platform to platform, taking all your posters with you. And so that's the sort of the transformations from a world of walled garden platforms with individual accounts on each platform and locked in users. Right. The more you've embedded yourself in a platform, the harder it is to leave.

54:35in web three, the hope at least is that you get to much more competitive environments across these platforms because the users can vote with their feet. They can just take all of their content and move it to a platform that offers better terms. And we've seen that happen in many different contexts in web three already. Yeah. Steve, you have a, you have a great metaphor for this. So let me hand it to you. No, I always, I always kind of looked at it like this, right? It's like the read, write, own, it goes kind of as follows, you know, in web one, you were the consumer, right? You could buy things, you could kind of read, you were the consumer.

55:03In web two, like, let's not mince words, you're the product, right? They're using your information, they're selling your data, that's what you are. In web three, you are part of the brand. And it's a huge distinction that allows people to be participatory and create aligned incentive structures. Because let's face it, like, if you are enjoying that, and the brand's building on top of it, you're going to continue to interact with it more because of that level of ownership, identity and community you build around it. So it's, you know, from going from being the consumer to the product, the brand is a massive step forward.

55:32And to Scott's point, I can't recommend read, write, own enough by Chris Dixon to people because it really sort of lays that out in a very thoughtful way. Yeah. Are there any ideas on what might come next? It is, can we predict what web four might be or is it what comes after own?

55:52Uh, to infinity and beyond. Maybe we skip straight. Maybe it's like windows and we, We skipped to like, you know, Web 10 or something. I think what's really an interesting concept to me that I'm hearing more and more from Web 3 native brands, and I think this is going to have to have like an evolution to it, is the concept of participatory brand-based storytelling that's always on. Meaning like if you own an asset, a persistent asset in an ecosystem, like let's say you own a character in a universe, you can build a story around it. I was talking to someone from a company called Truth Labs this morning.

56:23this person, Process Gray, who's created an incredible ecosystem. And the idea of somebody being able to have an asset in the ecosystem, build a story, and then be inserted into it, to me, that actually goes even beyond the ownership category. Even though it's part of Web3 and something that I think I see as evolving, I could see that becoming a new category where you imagine being somebody who was deployed a character that becomes a character in the Marvel Universe because you build a story around it, you create a character around it, whatever that is. To me, I don't know what that's called or if that's an entirely new category, but it's a different way that you're going to be able to interact with ownership that I think to me seems like at least a half step above what we see with Web3 in its current form.

57:08And so that would probably be my thought is like you can become the Jeep person who then becomes like a spokesperson or representative from Jeep like never before. And so I think maybe there's something to be said about that. I don't know how to put my finger on it because it's hard. I think that participation with a brand is something that we see coming from web three, but becoming a next iteration of how you interact with them. Possibly would be the next iteration of the internet. Yeah. I like that a lot. We might call it like read, write, own, immerse, right? That somehow, you know, your digital and physical experiences, your ability to interact with your favorite brands, teams, whatever.

57:49The ownership technology of Web3 evolves and transforms that. It puts you into sort of bi-directional communication with your favorite brand. Incidentally, on the brand side, it gives them the ability to have a longer and more extended interaction with the customer. One of the things we did with some copies of the book is we put these chips in them that have an attached NFT. When you tap the chip in the book, it gives you an NFT that's attached specifically to your special copy of the book. So they were different themes. We did them with various NFT communities. We did some for friends. But like this idea that now we have a digital imprint of people who have read the book and they can interact with us and we can interact with them and other people, if they want, can innovate around.

58:34If someone else were launching a book on web four, you know, maybe they would like look to these people as potential early readers and commenters. That I think is like very novel and it lets the brand continue the interaction with the customer past the point of sale, which has always been something that was potentially high value for both the customer and the brand. But as Steve says, it also unlocks this possibility of immersive interaction, right? That you can actually have a character in a story universe, or you can actually like, you know, be a part of the, like, of the design of future products and so forth.

59:14Um, and maybe, you know, as once we, once we all have our VR glasses on or something of the sort, like that will be like a truly immersive experience in the sense that when you're thinking things about a brand, like you can, you can sort of experience and add those into the brand or like, you know, sort of submit them directly. Sorry. Like we were now we're in like really scary tech, you know, tech space, where we're running this podcast and discussion about like, you know, VR and brain reading and wherever it's totally cyberpunk. Realistically, like, you know, we're talking about tickets to shows, but.

59:42No, no, but like, but like what makes web one, web two and web three unique is that they are general purpose and they're widespread technologies. And I think an immerse just to give like one more quick example of that, like, well, maybe you're not a storyteller, but maybe you're somebody who really likes Nike and you wear their clothes. And I'm giving an example. Nike's not saying this, but like looking at any clothing brand in theory, they could chip that and say, hey, like you're a billboard to the world for us. So if you attend a concert in our clothes, we could give you some sort of credit or loyalty against it.

1:00:09So you're immersed in the brand in the sense that they could reward back to you for showing up to a show because there's a chip. They know there are 60 ,000 people there, right? Like it's an immersive example where maybe you're not telling stories, but maybe you're immersed as a, you know, like people underestimate being a billboard to the world for every brand and everything they wear, both online and offline. And there is potentially an immersion there that happens. It isn't necessarily tied to storytelling, but yeah, I like the idea of rewrite own immerse as potentially the next one, because there can be built and it makes sense because each iteration of the internet is built on the last.

1:00:39And I think that this one would be built on top of that in that way. That, and that makes a lot of sense as well, especially as, as AR becomes more and more developed and more integrated with our lives. I mean, the Apple vision pro has already taken off in a way that, uh, Google glasses from a few years ago, never did. I still have my Google glass. And so, yeah, and it's clear even that the Apple Vision Pro is just version one of, you know, what the gap between version one and version 10 is going to be worlds apart. So we're coming to the end of our time. Are there any final takeaways that you would like to impart on this audience?

1:01:22I mean, on my end, I just appreciate your line of questioning and your, you know, sort of grasp of the concepts in a very understandable way. Like you very largely do our job as well or better than we do. So we appreciate like all the analogies you kind of put in throughout and your line of questioning. So, you know, I appreciate anybody going out and grabbing the book. And if you're on a social media platform, my big ask is if you grab the everything token, please tag us so we can thank you personally. We have had thousands of people tag us online and we are thanking every single one of them because it means the world to us.

1:01:54Because our goal is just to spread these ideas. And, you know, whether you are somebody who is super tech savvy or you're just somebody who wants to learn and understand it, it's a, you know, if you listen to Audible, I think it's a five and a half hour listen on regular speed. So fairly short, easy listen if you're looking to understand it. We really just want to move this technology forward so that, you know, we can enhance the lives of brands and consumers by getting it in the right hands and the right ideas. So I appreciate you having us and hope that, you know, more people will check it out.

1:02:22Let me let me say a second. Thank you. You've been an incredible host and to the audience listening like you're you're awesome. And we're so excited that you're curious and want to learn more about this technology. And again, I mean, I think this is a space where intellectual curiosity has a lot of dividends because there's so much new and novelty being explored in Web3. You know, sort of it's it's a totally different paradigm for how we could have our interactions on the Internet that in many ways, you know, Steve and I sort of believe and hope will make the sort of our experience as consumers and sort of better and more aligned.

1:03:04Right. Sort of like the the experience of of being a consumer on the Internet, you know, with the platforms and brands you interact with, like more alignment, more opportunity for value creation for all. um and so you know we'd love you know we'd love to hear from you we'd love your thoughts uh please push us on our ideas right it's like it's it's great to hear from people like oh my gosh we loved your book like you know every single part of that was perfect like absolutely wonderful but it's in many ways even better to have people come and challenge and say like you know okay like we you know this thing on page 12 like i don't really get it like you know sort of like let's let's talk about it because that's how we keep learning too right like you know sort of and and you know i privilege as a teacher, right?

1:03:41I get every year, all these students who, you know, push me on really hard ideas, right? And that's how we like to sort of level up and like sort of build forward to, you know, Web3 and 3.1 and 5 and whatever else is next. So thank you so much. Thank you for having us. Thank you for tuning in and QED.

1:04:02Thank you to Harvard Business School professor Scott Duke Commoners, as well as Web3 expert Steve Kaczynski. What are three key takeaways that we got from this discussion? Number one, for the sake of financial literacy, you need to know what an NFT is. And the primary takeaway of this interview was to facilitate a foundational understanding of the root question, what is an NFT? The term stands for non-fungible token. Non-fungible in the sense that each one is individually distinct. A non-fungible token is a way of creating essentially like a ledger record that is a token. It represents ownership.

1:04:48It's a thing that can be passed from one person to the other, to another, or stored in your personal account. And you can verify consistently who owns it. Whoever owns this digital record, they have a computer account that controls the record and can determine how it's used and can verify that they are the owner. So it's a digital deed to an associated image, or it could be a physical good. And so an understanding of the fundamental root question, what is an NFT? That is the first key takeaway. Now, the second key takeaway. As a beginner, you hear a lot of terms, decentralized finance, cryptocurrency, digital ledger, Bitcoin, blockchain, NFTs, and it can be hard to parse through all of this new vocabulary.

1:05:34In the second key takeaway, Scott and Steve describe how NFTs are an application of blockchain technology. I'm not sure we would say they differ. They're actually an application of this ledger technology. So a blockchain is a large digital and decentralized, typically, ledger. So it's a system of record keeping that keeps track of who owns what in digital space, exactly the same way you might maintain like a bank ledger or something of the sort. Except modern blockchains are often very generalizable. You can do more with them, like, you know, run your store software and like execute the software as part of the ledger.

1:06:11And NFTs are one particular category of record. Two very common record types are fungible tokens and non-fungible tokens. Fungible tokens, most cryptocurrencies are of this format. Any two units are sort of exchangeable and interchangeable. Non-fungible tokens, you sort of instantiate an individual record for each type of ownership or item or instance of ownership you want to track. And then the ledger, indeed, exactly as you say, keeps track of who owns it. And so refining that understanding is the second key takeaway. Finally, key takeaway number three. In this final key takeaway, we discuss aspects of cryptocurrency security that are geared around making this investment more secure.

1:06:54There are like certain softwares being built. Like there's a software called WalletGuard, for example, that it's an extension you in the current like existing market where you install on your computer. And when you go to make a transaction, it will warn you if things seem malicious. It will warn you if things seem wrong. These sorts of levels of security will improve, but also there are custodial options where you can hold cryptocurrency. You know, Coinbase says, hey, hold it here. And yes, you still have to trust Coinbase the same way you would trust a bank with your money. But, you know, there are ones like that and others that exist the same way.

1:07:24So I think most people are more comfortable with a custodial option where, you know, if you're, say, Nestle and you set up a program like this or your DiGiorno Pizza and you do, I think most people aren't going to want to say, I want to set up my own non-custodial wallet where I control all these assets and need a cold wallet. I think they're going to say, Nestle, we trust you to find a custodial partner who can hold those, say, on your website. Those are three key takeaways from our conversation with Harvard Business School professor Scott Duke Commoners and Web3 expert Steve Kaczynski. Thank you for tuning into the Afford Anything podcast.

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