Hiveminds and Money

Hiveminds and Money

I've been thinking a ton about community hiveminds the past few months. The term "hivemind" feels like one of those old Web 2.0 monikers that was trendy for as long as the TED Talk expounding upon it lasted, but as these collective conciousnesses begin to interact with money and markets, the effects of this once left for dead concept is becoming more real.

While I spent over a decade building one, I started to actually think about the concept again more formally after listening to the Modern Finance Podcast Episode with Flamingo DAO. They referred to DAO's as hiveminds, but what really resonated with me was when they called them "Subreddits with a Bank Account".

When we started out building Stocktwits years back we inherently understood the power of such a social community, but like many at the time we saw it as more of a "democratization" (to use another trope) of voice and access to ideas - "social Bloomberg" or "trading floor for the people". It wasn't like the idea of creating a powerful collective intelligence that would affect markets was something we didn't believe was possible, rather it would be a ridiculous idea to have at the time and one that I know would have made me feel uncomfortable, as it should.

Looking back I'm not so sure we didn't create such a hivemind. Many people over the years would reach out to me asking how best to use Stocktwits or complain that it was too noisy or ask how to use it to find ideas. I remember telling people I thought of Stocktwits as a thermometer. You could always go in and take the temperature of the market. I watched as so many people tried to "short" what was trending or fade Stocktwits which may have worked from time to time, but wasn't really a great profitable play more globally. You can't really "short" a thermometer in a vacuum. It's never wrong. It just is. Even worse, those that tried to focus on one message or one person found it very difficult. The truely succesful people are those who were willing to become a ball of mercury themselves and join the thermometer - gaining both new insight and control over the readings.

Since then then I have looked back at what has happened with Gamestop and more recently with what I've been investing in at Art Blocks, and the idea of hiveminds attaached to money feels underappreciated at large. At one time it was thought as futile that retail traders could compete with "the machines" that hedge funds possessed but a highly networked, adaptive, collective intelligence can be much powerful than an artificial one. In both cases you may look at what is happening on an atomic level of one trade, one message, or one jpeg, and see it all as somewhat silly. Even at a higher level you may look at one Gamestop or one Chromie Squiggle and inherently understand that something is going one, but still find it kind of dumb. In fact, outside of the hivemind you would - and should!

Yet, as wealth gets more concentrated, and political hiveminds too easily controlled, perhaps hiveminds with money are a naturally evolving counter reaction - with blockchains as their battlefield.

It always struck me as funny when people would say that crypto is a Ponzi scheme - not because it's false but just in the way that it's true. Going forward I'm going to drop Ponzi scheme because it's often misused, and go with "Pyramid". Most traditional finance is pyramid in nature. You have an business idea, you sell shares and raise capital from seed investors, build value, sell shares and raise more capital from more investors, build more value, sell shares and raise more money from more investors, build more value, until finally you go public and raise a lot more money but from many, many, many more investors. In traditional finance the average investors is designed to be "the bagholder" in the purest sense, as they get to hold the bags last. This is not meant to infer any sort of judgement. Historically it's still be great, and profitable to hold those bags.

In crypto, it's pyramid in nature as well but designed much more bottoms up. Most crypto markets are designed more like social networks than financial markets where you need to raise people in order to raise money, or to be money. It gives people the ability to have ownership early on and while it's possible to for concentrated pools of money to participate early on, it's hard for that to happen at scale and have it result in a successful crypto project. The obsession over trust and decentralization is what makes this so difficult. They are designed for the ultrawealthy to be the bagholders, and just like with stocks it could also be great to hold those bags.

No matter what happens the idea of hiveminds attached to money is interesting to me, and becoming more interesting as I see it being applied to art and cultural assets, where hiveminds have already created value on the internet but not yet been able to own the value they create.