S3T Feb 6: AZ 4 BTC, Crypto Quants, FriesDAO, Music Economics, Value Creation, Biomimicry...

As Bitcoin revisits the 40s, DAOs, Investors and states like AZ race to experiment and learn as fast as they can how to enable communities to create enduring value. Lessons from US history, and US music history remind us how enduring value or enduring damage come from leader choices. The story of a carpet flooring company offers an inspiring example of getting it right.

AZ considers making Bitcoin Legal Tender.

The initial version of the proposed legislation is short and sweet (PDF here). Track the progress on the AZ legislative site here. Why this matters: States are embracing crypto in spite of Fed hesitancy - with some interesting could-be-good could-be-really-bad political possibilities. Will be fascinating to see how Arizona navigates federal and state level regulatory landscape.

Rise of Crypto Quants

F9 a newly launched crypto hedge fund made headlines this week. (Crypto hedge funds focus on trading crypto asset trading strategies vs. investing in crypto startups.) F9's launch - specifically their institutional investors - lends credence to the thesis about how financial engineering will evolve over the next 3-5 years:  

• Financial engineering methods are being implemented in blockchain based architectures (Web3), making the jump from Traditional Finance (TradFi) to Decentralized Finance (DeFi).
• The Web3 versions of these methods will see faster innovation cycles (compared to TradFi) thanks to lower costs/friction, as well as the use of machine learning and automation.
• These Web3 versions of financial engineering methods will get applied to new spaces where they haven't been previously used. One particularly interesting possibility would be crossover into healthcare funding (and insurance) models.

The article notes that the initial crypto hedge funds outperformed other hedge funds in 2021.

Fries w That? Bridging Digital Communities with Real World Businesses

FriesDAO hopes to fund, create and manage a fast food franchise as a Decentralized Autonomous Organization directly governed by its customers. To me its a crazy-fun but sensible experiment that has the right ingredients to be a strong platform for learning and testing new forms of governance:

• Easy to understand, familiar operating space (we all "get" fast food restaurants)
• Widely used product category (we all eat/have eaten fast food)
• Accessible options for participation (NFT member cards, etc)

The question from here will be, can they learn how to navigate the path toward becoming a national, sustainable entity? A path with challenges like:

• How to handle complex decisions (property selection, supply chain partners, etc).
• How to address regulatory and safety requirements.
• How to address the evolving spectrum of preferences or needs related to things like healthy menus, ingredient selection, fair trade, and organic vs non-organic.  

I think this and other initiatives like it has a good chance of enabling our learning toward new and better forms of organization and governance - and not just for fast food chains.

Why the positive outlook? Well, I'm blessed to own the 1897 Messages and Papers of the Presidents, a 12 volume treasury of the speeches and correspondence from George Washington to Grover Cleveland (UPenn's online version here). Reading these, you can't help notice the chaotic  precariousness of the early days of our nation. Today we look back with a sense of predestination. Back then, so much was unknown, unstructured, debated, misunderstood - it must have been impossible to feel any sense of certainty about the outcome.

Learning to make right choices is messy business. We are in a similar new beginning today. The chaos should feel familiar. Here's to making better choices than we did in the past!  

Music, Economics and Equity

I have been learning about the life of Libba Cotten, blues and folk artist born in Chapel Hill in 1893. She was left handed and learned to played the guitar upside down, which led her unique signature picking style. Her songs have been sung by the Grateful Dead, Bob Dylan, Peter Paul and Mary and many others. When she won a Grammy at age 90, she is alleged to have said "I just wish I had my guitar with me so I could play a song for you all."

Cotten is one of the legendary artists featured in the North Carolina Arts Council's excellent review of African American Musicians from North Carolina who made groundbreaking contributions to modern music - often without the support of the established music industry.

These are the heroes who created pathways to success for future generations of artists. The struggle continues today as Desiree Perez explains in her thoughtful challenge to music industry leaders.

One reason the struggle continues is that every new generation of leaders faces a fresh set of temptations - the old choices dressed in new disguises. Temptations to act upon badly flawed assumptions:

• The assumption that the "engine that creates value" is the same thing as the bureaucracy that offers job security (rarely true).
• The assumption that that inequity is sometimes "a business necessity" or is "just being practical" in order to achieve some value (never true).

In the long view, enduring value gets achieved outside of and in spite of, misguided business behaviors. This lesson is applicable to a range of situations today - related to equity as well as environmental responsibility. The story of Interface (in the Outdoor Notes section below) offers reason for hope.

Outdoor Notes

The Patterns of Nature

Biomimicry or Biomemetics refers to the study of nature for the specific purpose of learning patterns or methods that should be applied to the design of human engineered products or systems. Here are 8 examples of biomimicry we already use or are learning to use.

Interface - a transformation story inspired by nature

You might not expect the flooring industry to offer examples of good choices and creation of enduring value. Today, Interface offers nature inspired carbon neutral flooring solutions that embody the biomimicry approach. Here is the fascinating story of how Interface reinvented themselves and evolved from the typical petroleum intensive flooring company to a leading sustainability brand with a superior value proposition.

Final Note

Thank you again for reading! Its ok to forward this to a friend. Hope you have a good week! Continue the conversation on Twitter @RalphPerrine.

Ralph

Opinions mine. Not financial advice. I may hold assets discussed.