Discounted Cash Flows for Catholicism
Twitter without revenue, food stamp sovereign individuals, Saudi princes ignoring Saas multiples, and the value of a layer 1 blockchain token
Would you sell your Twitter shares if Twitter committed to zero revenue forever? If Jack’s protege turned off ads and promoted tweets, would financial markets care about Twitter? The answer is closely tied to the cash value of human lives (and the USD value of the “Boba Network Token” - ticker: BOBA).
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Some investors in network assets like blockchains and software companies price them using revenue models. Others argue in favor of network effect driven valuations, citing Metcalfe’s law that the “value of a network is proportional to the square of its size”. This second group focuses less on what such network value actually consists of.
Network value hides under the cover of cashflows, and peaks out in altered elections, online marriages, encrypted messaging of war secrets, and teen suicides; in short, network value is not limited to the future cashflows to be exploited from the network, and is something newer to financial markets. Consider the following related thought experiment:
There are 1.3 Billion baptized Catholics. If, on average, Catholics earn a global mean income of $18,000 and donate 1% of it to the Church, we arrive at a (very) rough estimate of $234 Billion in annual revenues for The Pope and Associates. Modeling membership and GDP growth and applying a discount rate for the weighted average cost of capital yields… an entirely useless metric for the influence of Catholicism on global affairs.
The participants in markets for internet networks and blockchains are valuing humans and their time, not the movement of resources. Revenue is increasingly a distraction. Revenue prices the flow of cash between nodes in networks of goods and information. If a human life is entirely contained within one network, like that of Alice, who spends 85% of her time on Facebook, then flow outside that network matters less to Alice’s life than the inherent value of the network’s past, present, and future state. Saudi princes don’t care about the latest Saas multiples; they own the whole network (in their case, a state).
Media was the traditional example of financialized soft power outside central banks.
“If code scripts machines, media scripts human beings” - @Balajis.
It is commonly accepted that Facebook, Google, and Fox News are valuable both for the revenue generated from advertisements, and their influence on the thoughts and actions of humans. But as “The Facebook” shifts from a media empire to an all consuming metaverse, revenue may become almost entirely meaningless. Facebook now owns 80-100% of Alice’s life.
We examine this value via negativa; in Web2 infrastructure, by deleting Alice’s metaverse existence, Mark can destroy her social capital (followers, likes, connections) likeness (threads, shitposts, selfies, avatars) and memory (likes, retweets, saved information). What is that state worth to Alice or another participant. in dollars?
The hours upon hours of human life spent in Mark’s network, (and hopefully public censorship resistant networks governed by something resembling republics), may be effectively owned by the shareholders, just as the lives of nation state citizens today are owned by their governments (who can similarly destroy the citizen if they choose). What is this ownership worth? This is how we should price a layer 1 blockchain.
“Wealth, as Mr. Hobbes says, is Power” - Adam Smith
- Michael Scott
Play to Earn is an early example of the new rules - the economics of Axie Infinity pay people to live inside a global video game, instead of participating directly in the economy of their nation state. Axie gives ownership of the network (and thus a percentage of the lives of the players) to token holders and guild owners. As states yield to digital sovereignties and networks, The Sovereign Invdividual has more to say about likely outcomes for wealthy techno-sovereign rulers than the outcomes for… billions of other people , whose lives will likely be controlled in some manner. The common denominator between blockchains, websites, video games, and countries is that we live in them. Capital flowing from state banks to crypto networks is less a shift in cashflows, and more an exit of influence and human attention from physical state owned networks into new digital worlds.
Crypto networks are bundling money and power tighter than before, and it goes beyond disrupting central banks . The real value of 1 SOL on Solana is 1/508,789,963 decision power in the network state. If Alice’s uploaded consciousness and lived experience settles to Ethereum, Ethereum network votes decide the state of her life. On the internet, who will preserve free speech and free thought, execute justice and determine how Alice can spend her conscious days? Absent a better solution, these questions may be decided by the owners of digital networks. Valueless governance tokens indeed.
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