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Hi friends 👋,

Happy Monday! I hope everyone had a great Thanksgiving, thanks for letting me have some time off. Y’all are the best bosses.

But just because I wasn’t writing doesn’t mean there was no Not Boring content. On Friday, my friends Ben and David at Acquired dropped a 2 hour 45 minute episode on Not Boring itself!

I am a massive Acquired fan. My brother Dan and I have been for a long time. A lot of their episodes have been foundational to the things I’ve written here. It was surreal to get to go on the pod and to have them give Not Boring the full Acquired treatment. Give it a listen, and if you don’t already, subscribe wherever you listen to podcasts. I’d wager that if you like Not Boring, there’s no way you won’t love Acquired.

That was a lot of fun. Speaking of which…

Let’s get to it.

The Pareto Funtier

Web3 is a vortex for talent, money, culture, and brainspace. I’ve been trying to figure out why, and explain it in the simplest terms. I think I have it, my tailwit explanation:

Web3 pushes out the Pareto Funtier.

Most of the decisions we make can be boiled down to fun and money. 

Granted, that’s a gross oversimplification. I’m using “fun” as a catch-all for a whole lot of things like love, meaning, belonging, enjoyment, challenge, and more, and “money” as some sort of net present value (NPV) of resources acquired as a result of your decisions. 

In my loose definition, going to church might count as fun because it gives you meaning, or studying might count as money because it increases your chances of making more money later. Studying might also be fun if you enjoy it and derive pleasure from the sense of challenge and accomplishment. 

But the point here is to keep things simple, so we’ll go with those two variables: fun and money. 

Let’s do some examples, using a 1-10 scale. 

• Reading a sci-fi book might be a 7 on fun and a 2 on money. 

• Reading a finance textbook might be a 2 on fun and a 6 on money.

• Working in investment banking might be a 1 on fun and a 9 on money. 

• Working at a startup might be a 6 on fun and a 5 on money. 

• Blowing off work to watch your daughter’s soccer game might be an 8 on fun and a -1 on money. 

• Going to a rave is a 10 on fun and a 0 on money. 

• Taking out the trash is like a 0 on fun and a 0 on money, but some things you just need to do to be a functioning human being. 

• Going to an art museum is an 8 on fun and a 1 on money. 

• Playing a video game might be a 9 on fun and a 2 on money. 

• Scrolling Instagram might be a 7 on fun and a 0 on money. 

• Investing in a bond might be a 1 on fun and a 7 on money. 

• Investing in a restaurant might be an 8 on fun and a 2 on money. 

• Watching basketball is a 7 on fun and a 0 on money.

• Being that friend who finds all the good music early is an 8 on fun and a 1 on money.

We’re glossing over nuance on the specifics here, too. A really expensive art museum with a terrible collection might be a 3 on fun and -1 on money. An online course that you’re taking purely to learn about something that fascinates you might be a 9 on fun and a 0 on money. A fast-growing startup with an electric culture solving a problem you want to solve might be an 8 on fun and a 9 on money. 

Each example is also subject to each person’s preferences and situation. Reading sci-fi might be higher on the fun and money scale for me because on the fun side, I’m a nerd, and on the money side, maybe it sparks an idea that helps me write something great. Some people genuinely enjoy working in investment banking. And each person has his or her own opportunity set – that energetic, important, fast-growing startup might only hire people who are in the top 0.1% of people in their respective professions. 

Every decision overlaps, intersects, and influences the others. Maybe you choose to work in investment banking, sacrificing fun for money at work, because you really want to live in a nice place today or because you want to retire early and do only fun things thereafter. 

And finally, that stone in the shoe of economists: humans aren’t as rational as the textbooks would suggest. People often choose to do things that aren’t particularly fun or financially fruitful. Humans gonna human. 

But assuming that we’ve baked everything in correctly, and accounted for and discounted the future implications of our current decisions, for the sake of this thought exercise, we can say that humans make decisions in such a way that maximizes fun and money. 

You wouldn’t choose a job that’s a 2 on fun and a 3 on money when a job that’s a 3 on fun and a 5 on money is available to you. You could, however, choose among options that add up to the same total from different angles. Jobs that are 2 on fun and 6 on money, 3 on fun and 5 on money, and 4 on both fun and money might be equally attractive. These equal choices are Pareto efficient.

Pareto efficiency is “a situation where no individual or preference criterion can be better off without making at least one individual or preference criterion worse off or without any loss thereof.” In our example, you couldn’t get a job that’s 1 point more fun without giving up 1 point of money. The Pareto frontier is the set of all Pareto efficient situations, it’s all the trade-offs that you might rationally be willing to make.  

We’re going to use Pareto Funtier here for a couple of reasons: 

1. We’re talking about optimizing for a combination of money and fun, and the pun fits. 

2. So that you’ll excuse me if I deviate a little from the precise definition of Pareto efficiency. I’m just making a point. Lay off me, economists. 

Anyway, in our case, the Pareto Funtier is the set of options at which you can’t have more fun without making less money or can’t make more money without having less fun. 

Given the existing options, it’s up to participants to choose among options on the funtier based on their preferences, but economically speaking, they’re all fair trade-offs. If you want to make more money, you’ll have to give up a little fun. If you want to have more fun, you’ll need to give up a little money. 

Which brings us back to why web3 is so attractive to so many, why once you go down the rabbit hole, it’s practically impossible to come out. 

There are a lot of reasons – technological, financial, psychological, emotional, and more – that more and more people have been drawn to web3, but I think the simplest is this:

Web3 pushes the Pareto Funtier outwards by baking money into fun things and fun into money things. 

The people who argue that web3 is just a fad, or downright bullshit, by saying that the user experience isn’t good or that there aren’t any “real use cases” aren’t 100% wrong, they’re just missing the forest for the trees. 

For early adopters, the user experience and use cases are good enough. Early adopters might be drawn to particular web3 projects because they’re a more fun way to make money than their job, or because they get to earn money by doing things that they find fun anyway. As web3 grows, more use cases emerge that are appealing to more people on one or both dimensions. 

The most straightforward example here is the play-to-earn gaming movement kicked off by Axie Infinity. Axie is neither the most fun game in the world nor the highest-paying job in the world, but it was able to attract over a million players because it offered more money than the games they were used to playing, and more fun (and often money) than the other jobs available to them. If players’ old games were 7 on fun and 1 on money, and their old jobs were 2 on fun and 4 on money, Axie’s 5 on fun and 6 on money pushed the funtier out. 

Web3 gaming isn’t finished here. The space will evolve along those two dimensions: fun and money. New games, and improvements from Axie itself, will focus on both tokenomic designs that make players more money and game designs that make the games more fun to play. 

In The Financialization of Fun, Mechanism Capital’s Eva Wu wrote that she sees two major categories emerging: 

1) “Play-first” crypto games where the fun gameplay takes centre stage and crypto is used as a competitive edge to engage players further.

2) “Earn-first” crypto games where the main allure, gameplay and fun ultimately come from earning money by participating in crypto game economies.

But if you’ve been reading Not Boring, you know that many of us are playing the Great Online Game, an infinite game playing out across the internet with crypto as the in-game currency. Work, creativity, investing, education, and nearly every aspect of our digital lives are undergoing the same transformation that’s happening in video games: the financialization of fun, and the funancialization of finance. 

Depending on who you are, what you care about, and what you do, that will mean different things. 

Take NFTs. 

If you’re an artist, NFTs are a way to make more money from the thing you find fun (and a new medium with which to have fun). Over the weekend, Murat Pak completed the largest primary sale by a living artist in history when he sold 266,855 pieces for between $400 and $525 each for a total of at least $106 million: 

Merge is both art and a game. Each time a wallet holds two mass NFTs, they “merge” into one thanks to a custom smart contract. Each time you buy, your new mass gets subsumed into your larger one. The name of the game is to get more mass, and theoretically, the longer you wait to sell to a whale with more mass, the more your mass is worth to them. 

All to say, if you’re an investor or collector who’s into this sort of thing, this is a much more fun way to try to make money than you’re probably used to. 

The same might be true for investing in any NFT project and community that resonates with you, from Punks to Apes to ArtBlocks to Wanderers to Aku.

Last week, I was in Miami for Art Basel, and I got to experience the immersive Aku World in person. As an NFT owner and investor in the project, getting to go see the exhibit in person was more fun than my typical equity investment, and more financial than any experience I’ve had in an art gallery. 

Obviously, people have collected art for centuries, but Aku made that experience accessible to a wider audience, many of whom were collecting art or buying an NFT for the first time. And all of us will have both financial upside and fun upside as the Aku story continues to evolve across different media, which isn’t true for someone who owns a static painting. It pushed out the Pareto funtier for a new group of collectors.

The mixture of fun and money helps explain why memes have value in their own right. In an excellent piece, In Praise of Ponzis, my friend Dror Poleg addressed a recent event that, on its face, made absolutely no sense: the $PEOPLE tokens’ explosion in value after ConstitutionDAO’s loss at auction: 

The price of $PEOPLE tokens shot up dramatically. It was worth nearly 100 times more than what original contributors paid at its peak… Why would anyone pay to buy a token that no longer has a purpose?

There are many explanations why $PEOPLE still has a liquid market, but they all boil down to this: It's a good story. People love a good story. And people believe that the value of this story will only increase over time.

We’ve reached a tipping point where the most fun outcome is often the most likely, and even the most financially rewarding. That’s new. Having fun and making money aren’t supposed to go together. There’s a two-part reason for the shift: 

1. All else equal, people would love if the most fun thing they could do would also make them the most money. It’s like wishing for delicious pizza that’s as healthy as broccoli.

2. We’ve hit a point where enough people believe that other people believe that the most fun outcome and the best meme will have the most value, which reflexively makes it come to pass. It’s like Bitcoin having value because enough people believe Bitcoin is valuable, but way more fun. 

You could look at investing in memes as a dumb ponzi that’s bound to lead to disaster, or as a pure distillation of the intersection of money and fun. The truth is probably somewhere in the middle. 

Less controversially, the recent explosion in DAOs has already shown glimpses of a future in which peoples’ passions and financial interests merge. 

• The OG, Friends with Benefits (FWB), is a mix of social club and studio that crosses between online and IRL. Its relatively early adopters have been rewarded by a 10x+ appreciation in the price of $FWB token since the summer. 

• Seed Club is like Y Combinator in DAO form, a community helping develop the next wave of successful communities and sharing in the upside.  

• Six-month-old KrauseHouse recently raised 1,000 ETH (over $4 million) from 1,692 backers through a Mirror crowdfund to kickstart the DAO’s effort to buy an NBA team. 

• OpenAccessDAO launched last month to buy paywalled research papers and make them publicly available in an effort to liberate valuable knowledge.

• A to-be-announced DAO is picking up where ConstitutionDAO left off and building a distributed museum curated and owned by its members. 

These are just five of many examples that are popping up, and each seems to be spawning more, whether directly through SubDAOs or through inspiration via Idea Legos.

If you looked at DAOs today as just less efficient, more chaotic versions of LLCs, you’d once again be missing the point. They’re powering more fun ways to make money, and giving people upside for having fun, curating and creating culture, and funding public goods. That combination is hoovering up a certain type of person who’s attracted to novelty, speed, and experimentation, and those people are rapidly iterating their way to projects that will attract a wider and wider audience with new use cases. 

As more new use cases emerge, the list of trade-offs from earlier in this piece start to look like a list of false dichotomies. What if: 

• Learning finance could be a 5 on fun and a 7 on money (Rabbithole)?

• Applying that knowledge to a project could be an 8 on fun and an 7 on money (Station)?

  Going to a rave could be a 10 on fun and a 5 on money (FWB)?

• Going to an art museum could be an 8 on fun and a 7 on money (Museum TBA)?

• Playing a video game could be a 9 on fun and a 5 on money (Play-to-Earn)?

• Watching basketball could be a 7 on fun and a 6 on money (KrauseHouse)?

• Investing in a restaurant could be an 8 on fun and a 5 on money (TBA)? 

• Being that friend who finds all the good music early could be an 8 on fun and a 5 on money (sound.xyz)? 

When people talk about web3 merging culture and finance, or “financializing culture,” these are some of the many examples they’re talking about. Financializing sounds like a dirty word, but put another way, it’s giving people a chance to earn money while they do what they find fun. 

That doesn’t necessarily mean that everyone is going to quit their jobs to join DAOs and trade NFTs, or that everything that people currently do for fun will be replaced by a money-making equivalent. 

Many people will want the financial stability of a traditional job or the challenge that comes with solving deeply hard problems. There are tons of people in climate, medicine, space, and more to whom, thankfully, the most fun and financially rewarding thing, the Pareto effunciont choice (I’m sorry), is solving those very hard problems. We all need to hope they keep doing those things, and to make it as financially rewarding as possible to do so by supporting the efforts through mechanisms like KlimaDAO and the offshoots it will inspire.

Similarly, most people will continue to pursue hobbies or entertainment just because they’re fun for a long time, with no expectation of monetary reward. Most web3 consumer experiences can’t match their pre-existing counterparts on product funness alone yet, and there won’t be universal adoption until they do. 

Until now, web3 has attracted people who have been willing to deal with often janky experiences for the chance at enormous financial upside, as well as builders and internet explorers who find it genuinely fun to play at the cutting edge, to jump into noisy Discords and Telegrams and just try to keep up, whether or not it makes them any money. Web3 wouldn’t have broken out the way it has over the past year if people weren’t building through the crypto winter because they loved it. Those people on both sides – the speculators and true believers – are necessary to bring about a new Pareto funtier before it smooths itself out. 

Obviously, there is a much bigger swath of the population for whom spending hours and hours in noisy Discords is the least fun thing they could imagine doing. For web3 to pull those people in, it will likely need to meet them in the places they’re already having fun or making money. 

We talk a lot about the Ownership Economy and the Passion Economy, as we should, but for our purposes, it’s instructive to dive into the Experience Economy.

In late 2017, a couple years before in-person experiences became hard to come by, McKninsey published a report, Cashing in on the US experience economy, that showed that Americans, particularly younger ones, were shifting their spend from things to experiences: 

While spending on goods only grew 1.6% per year from 2014-2016, spending on experience-related services grew 6.3%. People were spending more of their money on fun – membership clubs, sports, parks, theater, events, museums, gambling, restaurants, and travel – and then, all of a sudden, they couldn’t. 

A lot of the early rise of web3 can be seen as the continuation of the trend towards experiences, thrown online in a hurry, but instead of straight spending on experiences and trading money for fun, they’re investing in experiences, increasing money and fun and pushing the Pareto Funtier out. 

From here, if web3 is going to get as big as I think it can, it will push out in a few different directions.

First, it will need to integrate more seamlessly into the experiences that people already like doing, both online and IRL.

• What if by going to your favorite restaurant enough times, you got to own a table at that restaurant, automatically? What if your club membership was an NFT that you could sell to the next person when you decide to leave instead of giving up your expensive initiation fees?

• What if sports leagues made it easier for fans to not just own NFTs of highlights, a la Top Shot, but parts of the teams themselves, just for showing up? Attendance is down as the at-home experience keeps getting better, this might be a way to entice people back. 

• What if some of our most important and culturally-relevant non-profits, which have to spend so much time, energy, and ironically, money fundraising, were owned and governed by DAOs? A treasury backed by real-world assets with a token fueled by narrative upside would be an interesting proposition. 

• What if you could gamble on crypto instead of going to a casi… wait, check. 

The intersection of the Ownership and Experience Economies will continue to push the Pareto Funtier out. It won’t replace jobs for everyone, but a knock-on effect might be that people will be able to take jobs that give up a little money for more fun since they’ll be able to earn upside from their hobbies. 

If this seems far-fetched, fantastical, or even dystopian, consider this: a recent The Daily episode highlighted that Amazon hires and churns through hundreds of thousands of warehouse workers each year. If you don’t think it plans to automate those roles ASAP, you don’t know Jeff. People will need new ways to earn money and find meaning, and what better way than by doing the things that they enjoy most. Human creativity and culture will be the last thing the robots can replicate; the more people making money from creativity and culture, the more resilient we are.

On the other end of the spectrum, the people who do like spending their time online, particularly younger people, will learn the skills to create and manage their own, ever-more-niche communities, experiences, and online worlds. More people will be empowered to create experiences that are more fun for certain groups of people and share in the financial upside from doing so. 

If web 1.0 was read-only, and web 2.0 was read-write, then to reach its full potential, web3 will need to become read-write-remix. More people armed with web3 legos and coding literacy will create experiences we can’t yet imagine for the surprisingly large niches of people who will value them most. I wouldn’t be surprised to see web3 make the internet more bespoke. (More on this Thursday 👀).

In either case, it’s unlikely that the absurd returns early adopters have generated will persist. That’s ok. Speculative returns are great at attracting talent and rewarding the earliest adopters with money while the fun catches up. That talent will create more fun experiences, and more people will have access to opportunities to earn money, if not 10,000x returns, doing what they find fun. The Pareto funtier will push out. 

To be fair, so far, we’ve seeded the embryos of some proto-DAOs, sold a bunch of digital art, and pulled a tiny fraction of the world’s financial resources into web3. So I get it if drawing a line from that to this big, fun vision sounds overly utopian or optimistic. But imagine explaining even the past decade to our Stone Age ancestors, or an 18th century American, or even someone alive when I was born in 1987. The long arc of history is bent towards more money and more fun. It’s inevitable.

The challenge will be making sure that as many people have the chance to participate as possible, and that we put even more of our resources towards the really hard problems. 

This is a great time to be alive, and if you’re reading this, you’re one of the early ones. 

If you find it fun to get involved in things before they’re fully formed and to help build the future, as always, my advice is to get involved. You can find a list of DAOs at DAOlist here. If you see something that looks fun, jump in. It will be an experience, and maybe you’ll even make some money. 

If you don’t see anything that aligns with your interests, it’s never been easier to pull together some friends and spin something up.  

If you’re building already, think about how your product can push out the Pareto Funtier for your users or members. 

If nothing else, take a second to think about whether you could be making more money having fun, or having more fun making money. You might be playing at a Pareto ineffuncient point today. What would it take to jump out to your funtier?

This is going to be fun.

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Thanks for reading and see you on Thursday,

Packy