Episode 9: Money with values Episode Transcript (website) Samantha Yap [00:03]: Hi! I’m Samantha Yap. Welcome to The Story of Money by YAP Cast where we talk about where money is heading. Join me and Kevin Owocki on this episode of The Story of Money by YAP Cast. Is money really only a financial thing — a store of value, a medium of exchange, an indicator of wealth, something to buy things with, and something that we want more of? Or could money be something that represents not value, but our values — what we want the world to be like? It might sound odd, contradictory even, but this week I want to introduce you to someone who believes it’s possible to move money away from its narrow functions to something broader, to something that can fuel the growth of a better society. A future financial system that builds capacity sustainably for the long term. Meet Kevin Owocki, he’s the current CEO of Supermodular a web3 venture studio that’s building the foundations of a regenerative financial world. He is also the author of Greenpilled – How Crypto can regenerate the world. He is best known as the founder of Gitcoin, which is at the forefront of sustainable work on open-source software. Gitcoin is also a funding platform for Web3 projects that are building for the public good. With Gitcoin, kevin on a mission to accelerate funding towards the most impactful world-positive projects. Kevin also hosts the Green Pill Podcast and will talk us through how money can be so much more than just a tool for instant gratification. What does money mean to you? Kevin. Thank you so much for joining us on YAP Cast. Really excited to speak to you today. Kevin Owocki [01:52]: Yeah. Same. Thanks for having me. Samantha Yap [01:00]: Let's start with talking about what does money mean to you, Kevin? Kevin Owocki [01:58]: Yes, well, I mean, I guess I'll start by saying that I'm a software engineer and I think a lot more in bits and logical structures but I've been larping as a economist’s finance person since I joined the Web3 space, just because what we're moving around in the Web3 space is financial value. I mean, I think that the - what I've learned is that money is a medium of exchange. It's a way of transferring value between people but there's different types of moneys that have different attributes. They can be inflationary, deflationary, they can be better at specific things and other things but I'm an American, so to me, money is the US dollar and that's kind of what I grew up with. My ideals and money Samantha Yap [02:35]: Yes, interesting and has money helped or hindered the sort of ideals you're looking to see manifested in crypto? Kevin Owocki [02:45]: Yes. Well, I mean, I think to unpack that we'd probably have to get into some of the ideals that I want to see manifested in crypto. So maybe I'll start there and then, and then we can talk about how money can be used as a means towards that end. How's that sound? Samantha Yap [02:56]: Yes, let's start there. Yes. Kevin Owocki [02:57]: Cool. I wrote a book in a fit of a furious conception early in the year called, GreenPilled: How Crypto Can Regenerate The World, and basically, if you open up the book and you look in the front section, we talk about how do we create systems which--? Samantha Yap [03:15]: I have book in here. Kevin Owocki [03:16]: I am on page 26 right here and for the listener who maybe doesn't have a copy, you can get one at greenpill.party but basically what we're looking to do, and you'll see on page 26, is regenerative crypto economics is all about creating systems that resources-- Resource capacity is built over time and is resilient to shocks. As opposed to extractive economic systems where resource capacities are depleted over time or sustainable, where the resource capacity is constant over time or fragile systems, that if they hit a shock event, like say COVID decreased resource capacity over time, our regenerative system increases resource capacity over time. And so one of the sort of design spaces that we're in in crypto is how do we create crypto economic systems that increase resource capacity over time and are resistant to shock? What were you doing before crypto and how has it changed your views of money? Samantha Yap [04:10]: Yes. I want to go back, again, to the to the beginning. In the back of the book, there's a summary. It talks about how the internet of information which is from the 1990s to the present has changed. Everything society to one that relies on information and then crypto, well, Bitcoin came along in 2009 and that has grown the internet of value that has changed everything in society that relies on value and money is that thing that relies on value. How has the introduction of crypto in 2009 changed your view on money? And maybe this is an opportunity for you to go back to - yes, before what you're doing. You're a computer scientist, but what you were doing before crypto and how that's changed your view on money? Could you-- Yes. Tell us a bit about that? Kevin Owocki [05:00]: Yes, absolutely. Well, I think that there's a real symmetry between the internet of information which changed everything in society that relies on information, news, entertainment media. We didn't even have social media before the internet of information and it's completely changed the way we coordinate with each other with because information can now be sent across the computer network without an intermediary and I see a parallel thing happening in crypto since the dawn of Bitcoin and everything that's been built there. We can now send financial value and scarcity across the computer network because Satoshi Nakamoto solved the Byzantine generals’ problem - this game theoretic problem where it allows you to have scarcity in a digital environment. And so, the parallel I see is, are we going to rewrite banking, finance, insurance, jobs, how we fund our public goods in the over the next 30 years as the internet of value proliferates as a thing in society? And I think that what that's going to mean is that we can now have digital property rights that are secured by credibly neutral foundations. We can now have currencies that can't be inflated by political actors. We can now have access - equal access to these monetary systems from all across the world instead of inside of nation state borders. I know this is me trying to compose an argument from first principles about how crypto is going to change the world and I think that it's our responsibility to guide it towards a more regenerative system now that we've already accepted that it's going to change the world. How does that resonate with you? How crypto has opened me up to things beyond money… Samantha Yap [06:32]: I think it definitely has changed the world and can change the world because it'd be independent of countries and earlier you talked about how money to you as an American is the US dollar but crypto has come in and kind of changed that view of money just being the US dollar. Right? Have you seen that? And has that changed your perception on money too yourself being also very early in Ethereum, as we can say? Kevin Owocki [07:01]: Yes. Well, I mean, I think that most of the transactions that I do day to day are on the Ethereum network and our crypto economic tokens and I wouldn't be eating my own dog food, I wouldn't be participating fully in this ecosystem if I wasn't experimenting with the new forms of money that can come out of this system but I think that like working in Blockchain has opened me up to things that are beyond money. Money is one form of how we can transfer financial value to each other and money - a good money is a medium of exchange, it's stable, it's universally recognized via its network effects but we can also have units of account that are not stable or don't have network effects that are more speculative and can represent different things other than mediums of exchange and I think that that's the design space that Ethereum really has flourished is that you can create all sorts of financial instruments that don't need to be a medium of exchange. They can be tokens that unlock utility in a network. They can be things like Bitcoin where the value is derived from their scarcity and their hardness or any other type of economic system and that's kind of the explosion of the design space. It's almost like, you know in that scene in Wizard of Oz where they're in black and white and all of a sudden, it's in Technicolor and there's like all this beautiful stuff that's happening there. Like, to me, that's what discovering Ethereum and was, like I discovered, oh, there's a bunch of colors and it's not just black and white anymore. Samantha Yap [08:22]: Yes. That's interesting. That's also just changed your view on one form of transferring value which is well, money at the time. For listeners who are not deep into crypto, can you share an example of a way you've exchanged value that's not money or currency - not dollar? Governance and closed loops Kevin Owocki [08:41]: Yes, I mean, I think an example of exchanging value that's not money on a Blockchain network is, for example, getting governance in an application that you use. Basically, if you use Airbnb, or if you use Uber, either as a driver or a user or as a host, or as a user, you're basically paying in US dollars for your stay or your ride and basically there's kind of like 3 main actors in that system. There's the shareholders of that company, there's the management of that company, and there's the users. The management has a fiduciary duty to maximize value for shareholders and so basically, what they're going to be doing is transferring money over time US dollars from the users to the Management Corporation and then issuing a dividend to the shareholders because they have a fiduciary obligation to do that. And I think that the difference in Web3 is a lot of applications are meant to be governed by the community that they serve. Instead of having a linear loop of value transfer from users to management to shareholders, what you could have is if you do an airdrop of governance rights, which is just I'll use the example of Radicle which is a Blockchain network that I'm a part of. If I use their network, they gave me the Rad token and now I now have governance rights over the network that I use which is more of a closed loop. And closed loops are one primitive for creating regenerative value. When I use Radicle as a user, I'm being governed by a protocol and if there's still a management team, if it hasn't decentralized that is still accountable back to me in that closed loop and I think that's what's really exciting to me about Web3 is governance rights is to answer your question. An example of something you can transfer around it isn't really a hard currency. Is crypto just get rich quick? No, it’s an elephant Samantha Yap [10:26]: Very well explained, Kevin. Governance rights. Let's move on to the perception and potential of crypto. Before we delve even more deeper into ReFi, regenerative finance but the image of crypto and DeFi over the years has mainly been one of getting rich quick. Is that unfair? Kevin Owocki [10:45]: I think that the way I answer this question that I think is both fair to crypto and fair to crypto skeptics is, I think of it as like, there's this parable of the blind men and the elephant where you have 5 blind men who are trying to figure out what an elephant is by only feeling it and the person who feels the trunk says, Oh, this is this is a hose. The person who feels the tusks says, Oh, this is a spear. The person who feels the legs as Oh, this is a trunk and the whole point is that none of them are grasping the whole of the elephant as they're trying to grasp because they've limited sensory perception and they can't grasp the whole elephant. I think that like saying that crypto has only been for get rich quick schemes is like the person who feels the trunk and says, Oh, that's a hose. Like, yes, you're feeling an appendage of the hyper object here but you're not grasping the whole elephant. There are get rich quick schemes on in Web3 but there's also things that are fundamentally not get rich quick schemes and so my challenge for that critique is grasp the whole elephant, you're only grasping part of it. Samantha Yap [11:46]: I like that. Where's the parable of the elephant from? Kevin Owocki [11:50]: It's just like an ancient - I think Indian parable. If you Google it, you'll find it. Samantha Yap [11:55]: Oh, cool. I like that. No, that's a good defense of that. Has the events in the past year of crypto and when I say past year, we're speaking at a time where we've just come off with the 2021 to 22 bull market, but then there's been a - Yes, a catastrophic fall with the Terra Luna crash among other hacks and exploits. Has that changed your view on money, per se? Kevin Owocki [12:27]: I mean, I think that all human systems, crypto included, but also traditional financial markets oscillate between the two base human emotions when money is involved. You have fear, which is holy shit, I need to flight to safety, I need to go back to the most safe asset that I can support my family with and then you have greed, which is I want to make a huge return and I've seen financial markets whipsaw between these two emotions growing up in the traditional financial markets but also the crypto markets whipsaw between fear and greed and I think that what you saw with the Terra Luna collapse was a flight to safety that was based off of fear and probably justifiably so because it was a $40 billion collapse of a stable coin and I think that, basically, what you get through this cycle of fear and greed is the financial cycle of how these projects are funded, evolves from that. During a bull market when there's a lot of greed, it's much easier to get a project funded as a founder but it means that investors are skipping out on doing due diligence and someone like Do Kwon can create a $40 billion thing that's going to collapse. In times of fear, it's actually harder to get funded, and therefore there's less innovation and so these market cycles kind of naturally correct themselves and it's what pushes the innovation cycle forward, this oscillation between fear and greed.  But yes, I mean, how has it changed my perception of money? I'm definitely more focused on making sure that my company and my family has enough money in the bank to survive for a couple of years, until there's a cycle where money is easier to come by. My history in crypto Samantha Yap [14:00]: On that point - I mean, you've been in the Ethereum community since like - When did you learn about Ethereum? Or were you there since the beginning? Kevin Owocki [14:08]: I mean, I was – I - My friend Piper, who's now a developer at the Ethereum Foundation told me about Ethereum in 2015. Back when the crowd sale was happening. I was not smart enough to invest in the crowd sale but I learned about it when I was working in tech in 2014- 2015. It wasn't safe then, it's not safe now, but it could be... Samantha Yap [14:24]: As this new financial world is actually forming separate to the traditional financial system. There are people who are holding Bitcoin and Ethereum who are now, in dollar terms, very well off because they were there early and held on to the tokens or maybe sold them at the right time. There's that view world in view of the money. Yes. What's your perception on that? Kevin Owocki [14:46]: Yes. Well, I'm going to guess I'll say that I was smart enough to buy crypto tokens early but I was not smart enough to hold. My relationship with crypto has - early crypto was not really understanding why it's fundamentally valuable and my tokens would go up 20% and I would sell them all and buy like a mountain bike because I'm a Coloradan and I like to mountain bike. But once I learned more about the fundamentals of these networks, basically the fundamental value of Bitcoin and you can see it in the white paper is a cryptocurrency network that cannot be inflated by politics. Basically, if you have a central bank that could through their political mechanisms, has a team of bankers, insiders that can inflate their currency, they're basically devaluing everyone else's currency when they do that and so the idea behind Bitcoin was that there will only be 21 million Bitcoin and no one can really change that and so in a world in which we have inflationary assets because central banks are debasing their currency, the idea with Bitcoin was that if you believe that it has value and that the scarcity has value, then having only 21 million is a valuable thing and so that's a very supply side answer to your question but I think that it's helped me to gain more confidence in the cryptocurrency movement to see the economic policies just being fundamentally better than what fiat currency policies are but everyone's got their own take and I definitely think that what we should not do is say like, if you got rich quick early from crypto, that's a good or a bad thing. You can’t attach moralistic arguments to these things. Like it's really the luck of the draw and you're taking a very risky thing if you're getting involved in crypto in 2012 and probably in 2022, it's still a very risky environment. You have to have a lot of privilege and the ability to stomach volatility if you're going to be involved in crypto but I think it'll mature over time to the point where it'll be less risky than then fiat systems would be my prediction. Samantha Yap [16:29]: That’s Kevin Owocki of supermodular, who sees in DeFi the potential for a better, fairer structuring of economic policies underpinning money, one that goes beyond wealth for wealth’s sake. I’m intrigued by the idea of something that ‘regenerates value’ and how you can programme values into money with crypto. But as Kevin points out, for now, being involved in crypto requires a strong stomach — and the deep pockets to be able to ride these tumultuous times. Next episode we’ll be going deeper into Kevin’s vision, exploring what he’s doing and what he sees needs to happen to get us closer to the idea of a monetary system that emphasizes public good over private gain. More interestingly we’ll get stuck into talking about Regenerative Finance - also known as ReFi. Thanks for tuning in to another episode of YAP Cast. I’m Samantha Yap. For new episodes follow The Story of Money by YAP Cast.