In our current economic system, despite increased protectionist rhetoric and reduced global trade flows due to COVID-19, capital continues to flow freely across the globe, at least when compared to cross-border labor flows.
When Adam Smith penned Wealth of Nations, he echoed David Ricardo’s belief in the Labor Theory of Value: the value of a commodity was determined by the average number of labor hours necessary to produce it. In a two commodity economy (Smith used the example of Deer and Beaver), when the profitability of producing one commodity over the other increases, labor will shift to producing this commodity until supply increases relative to the other and price drops.
This theory had many flaws, for example, the inability of labor to easily switch industries. If rare earth metals increase in perceived value relative to coal due to the expansion of the smart phone industry, and most rare earth metals reside in China, you will not necessarily see a cross border flow of labor from coal mines in the USA to rare earth mines in China. One reason for this is the restriction of cross border labor flows by governments, another is the cost of moving labor in the physical world.
While technologies like the airplane have improved labor flows since Smith’s time, the Internet made capital even more fluid on a relative basis. Capital allocators who once invested in coal mines in the US, can reallocate their funds to rare earth miners in China, or chip manufacturers in Taiwan, with the click of a button.
However, virtual worlds have created the opportunity for labor flows to once again improve relative to capital flows. Jobs in virtual worlds are on the rise. No matter where a gamer lives in our physical reality, he only needs a mobile phone and a data plan to enter the Metaverse. In blockchain-based games, like Axie Infinity, players are able to earn in-game assets and currencies that they can trade for usable currency in the real world.
If a new metaverse rises with better economics, players are able to move from one game to the next as easily as an investor can move his funds.
In the current Web 2.0 reality, just as governments control the flow of labor in and out of their borders, game developers create walled gardens and other mechanisms to keep players locked into their virtual worlds. For example, they do not allow off-ramps of their in-game currencies. This makes these currencies valueless outside of one specific virtual world (although black markets for in-game currencies have risen as a result).
In the Web 3.0 model of the Open Metaverse, in-game currencies and digital identites can flow freely between worlds without restriction. There is funigiblity between assets from one game to the next and players have more control over their economic opportunities.
Thus, labor becomes more fluid, able to adjust quickly to economic changes in and between virtual worlds. I believe that this increased “labor liquidity” in the Open Metaverse, will help to usher in new and increased economic opportunities and financial equality. It may even help close the massive gap between the haves and the have nots. I discuss this concept in this week’s episode of Look Up! with Gabby Dizon, an individual who has done a great deal to open economic opportunities in the Metaverse for citizens of his home country, the Philippines, during a dire economic situation exacerbated by COVID-19.
Play-to-Earn with Gabby Dizon, Founder of Yield Guild Games
“You start a new country, then there's so much to build and so much to do. You just have to go out there and apply whatever skills you have to help build this new world. It creates an equal playing field in the metaverse, perhaps more so than it is kind of in our physical reality."
As I wrote above, I had a great conversation with Gabby Dizon, the creator of Yield Guild Games, this week. After spending a decade in the mobile gaming world, Gabby has become a pioneer of blockchain-based gaming. Yield Guild is a collective of players who help to bootstrap liquidity of players and volume in games in the metaverse. In doing so, they are able to get into games early to earn quality assets and income. You can also learn more about his work by watching the Play-to-Earn documentary linked below.
What I’m Reading
Ideas
The Rise of Thielists, The New Yorker
Startups
Hustle Fund Launches Angel Squad (I’m a Member), Techcrunch
Why Your Internet Habits are Not As Clean as You Think
Markets
Hedge Fund Giants, Millenium, Matrix, and Point72 Standing Up DeFi Funds, Yahoo Finance
Metaverse, NFTs, and Digital Collectibles
Delphi and GMoney NFT Launch the World’s First On-Chain NFT Fund
Play-to-Earn, NFT Gaming in the Philippines, Documentary
Crypto
Ethereum is About Six Months Away from Proof Of Stake, The Defiant
Ultra Sound Money Thesis with Justin Drake, Bankless
Binance Faces Probe by US Money-Laundering & Tax Sleuths
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