The incoming meta shift?

Posted on May 1, 2022

Every once in a while the meta changes.

Catching the meta shifts early can pay off big.

Imagine beginning investing in the PFP craze in May last year.

Imho, the Yuga Labs Otherside debacle plays into the next meta shift.

Here’s how.

Now, of course, I don’t know for sure that the meta is changing. I could be wrong. All the disclaimers apply. I’m not betting my lifetime savings on this meta shift. But I have been patiently investing most of my portfolio in this direction.

Time will tell if that’s wise.

Recently, I hinted at the direction things might take in my thread on @moonbirds . It marked a turning point where the space became much more visible to “traditional” entrepreneurs (who are anything but).

For most of the last year, the overarching “meta” of the NFT space has been:

  • Narrative
  • Attention
  • Hype

This is what’s made projects big. It still is, today. It is how you make money in this space: find a project that can get that level of attention and buy into it.

@GiancarloChaux explains how to recognise these projects in this excellent video:

If you’re playing in that meta, the real P2E game is to find those projects early, buy them, hold them until they moon, take profits. That’s how you make money.

So many projects follow this meta, it’s practically become a pattern (that I try to recognise and deliberately avoid). And that meta was largely defined by CryptoPunks first, and then BAYC. It’s the “we’re gonna be the next BAYC” meta.

Everything else is just trading on the edges of this meta, playing with mice while the elephants in the room stomp about.

But things change. And I think the clusterfuck of the Otherside land launch is another marker on the road to this change, imho.

The thing is, narrative/attention/hype is pretty fickle. And though it does build big brands, it doesn’t build the biggest brands.

LVMH is a collection of many brands that have “made it”, and still, all together they’re “only” worth about $300b.

That’s for 75 brands of relatively independent luxury products including Louis Vuitton, Christian Dior, Tag Heuer, Hennessy, Moet, and many others.

Let’s say the top ten of them split the bulk of the pie, that’s $30b per top brand or thereabouts, being generous.

Microsoft has done a relatively shit job of “being a brand”, I think many of its users would agree, with many brand disasters over the years. And they only really manage one mega brand: Microsoft, with everything else being subordinate to it.

Microsoft’s market cap? $2 trillion.

Being a brand, a social movement, etc, can shoot you to a top relatively rapidly, as it has done for Yuga Labs, but it doesn’t shoot you to the top.

And the top that mostly-hype brands can reach is fickle, as they constantly vie to one-up each other, based on attention.

When you buy a brand’s story/narrative/hype… you buy something that will die when the attention moves on. It’s risky. It can turn on a dime.

Eventually, people want lasting value for their money. The luxury market is big, but it’s peanuts compared to the utility market.

This current meta has also been buoyed by more than a little bit of ponzi fumes.

I’ve argued before that the project ponzinomics diagram can be applied to the whole NFT market too, quite plausibly:

In the traditional luxury model, at least most buyers are buying for the flex of owning something expensive. Rich people don’t buy a $20k Gucci handbag to sell it on to a richer person or to get an airdrop of Gucci wallets.

This Get-Rich-Quick-As-A-Service “utility” of NFT projects is naturally unsustainable, and I, imho correctly, identified that this is the game that most of the “NFT brand plays” are playing, which is one of the reasons I tend to stay away from them.

Since then, I noticed a growing number of projects that don’t follow this model, and do deliver real value.

But the “global brand” plays, especially nft brands, tend to be very light on real utility and high on “we’re gonna be the next big thing and make you rich just because”.

Mostly, the poster child for this movement (though B/MAYC did have real club utility) have been Yuga Labs.

To their credit, they have executed flawlessly so far, one hit after another, everything done to perfection, in touch with the market, the vibe, etc.

Until today.

Sure, some of Yuga Labs’ moves might have been debated from time to time, but there was no conclusive “Yuga Labs fucked up” story until this disaster of a gas war, with $100m+ burned through sheer incompetence.

No one, not even their most ardent fans, is defending that.

That they doubled down with a non-apology that makes people wonder if they deliberately fucked up as an
excuse to launch their own chain (which seems unlikely to me) just shows how low they have sunk in people’s esteem.

Given that they fucked up so badly on something so basic as mint mechanics, can you be so sure that Otherside itself won’t be a dud?

Before this mint, trust in Yuga might have been 100%.

Now it’s just that little bit less. Maybe the gods can bleed after all.

Why is that important to the meta shift?

Because every other project that’s trying to be the “next big thing” is riding on Yuga Labs’ coat-tails. Yuga showed what it’s possible. As I put it before, they put up a high ceiling for what’s possible.

Now a piece of burning ceiling has just fallen on our heads.

Yuga Labs is still going to get a lot of leeway, ppl are still going to bet on them doing well, for quite some time.

But the era of “Yuga Labs can do no wrong” is over.

And with that, the goal of being the next BAYC seems just that little bit less credible.

To be clear, I don’t think the hype meta is over as of today. It probably still has many months ahead of it.

I do however think that this is one more step away from it.

NFTs have the potential to revolutionise funding for so many human endeavours, and to make new ones possible that were not previously viable.

“Build a brand with no real utility” has been the lowest hanging fruit, really.

Memes may be an important object in society, and attention is very important… but other less sexy things are important too.

The most expensive da Vinci sold for a whopping $450m.

The Apple Park in Cupertino cost $5b.

“Russian warship, go fuck yourself” was a masterstroke in the geopolitical meme wars. But it’s actual physical hand-held anti-tank missiles in the hands of determined soldiers that are winning the war in Ukraine.

Real utility matters. A lot.

My predictions for this year, and what I’m investing on, is that projects that bring real utility that’s worth paying for will continue to do well. Whilst all but a few of the “hype” projects will go to zero or thereabouts.

I’m no Warren Buffett, so you certainly shouldn’t base your investment strategy on what I say (or on what he says fwiw), but my most important evaluation criteria for any project is:

  • How much would I be willing to pay for this if there was no investment value?

Unless I can see a path to that amount being more than current cost, I don’t invest.

This is why I wouldn’t invest in Otherside. I think 99.99% of buyers bought because they want to make money. Playing the game is a side bonus.

No one pays $20k just to play an RPG game.

I suspect this perspective is going to become more and more important as this years rolls on, if, as I expect, we shift from a hype meta to a utility meta.

And, time will tell. I’m here for the journey anyway.

TL;DR: Otherside fuck-up marks another step away from the hype meta, as Yuga’s erstwhile flawless execution record is now tarnished. I expect the next meta to be more focused on real utility worth paying for.

gm & gl

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