Ownership and the American Dream
Getting America its Swagger Back
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Hi friends 👋,
I am not a political economist or a political scientist. I wasn’t even that good at economics when I studied it in college. Everything I’m going to write might fall apart under more rigorous academic scrutiny. I’m sure there are tons of research papers out there on these topics; I haven’t read them.
I realize that I’m going out too far over my skis. So as you read this, pretend that we’re just talking at a party after one too many drinks about one of those big intractable problems to which there are probably no solutions but about which everyone has an opinion.
I’m also writing this from the perspective of an American, because that’s what I am and the context with which I’m most familiar. I’d assume that some of the same thoughts apply to other countries, as well.
Anyway, I said that I don’t want to stop writing about things I’m not an expert in just because there are more than 100,000 of you here. I’m thinking aloud, and welcome your loud thoughts in response.
Let’s get to it.
Ownership and the American Dream
I turned 35 last month. The bad news is that I’m now officially old. The good news is that I can now officially run for President of the United States of America.
I can hear some of you screaming already: Packy, don’t do it! You’re an idiot! You don’t know what it takes to run a country!
To which I would respond: Stop it. We all know that’s not a prerequisite anymore.
Anyway, I’ve been thinking a little bit about the platform I’d run on and how I’d do it.
Among my limited credentials are the fact that I invest in technology companies and write a newsletter about technology and business strategy, so I’d lean into that.
I’d point out that America feels a lot like an industry-leading incumbent that’s trying to play defense and protect its profits. I’d question if maybe countries aren’t subject to the Innovator's Dilemma, too.
There are all the tell-tale signs. In-fighting instead of focusing on how to serve customers and how to stay ahead of feisty competitors. Political jockeying for its own sake. Growing red tape. Zero-sum thinking.
We used to be a country that celebrated the risk-takers and those who achieved success, because their success showed us what was possible for us, too. I mean, look at us now. I didn’t even know the Olympics were happening right now until yesterday.
Politicians openly antagonize our most successful entrepreneurs. We take one of our own, Facebook, to court for monopolistic practices as its foreign competitor Bytedance grows unimpeded.
We force DAOs to issue governance tokens 😉 instead of giving members real ownership. We know and care who Gary Gensler is.
We say “wild west” as if exploring beyond the frontier is a bad thing. John Wayne is fucking crying right now.
Long story short: the American Dream is on life support.
How’d we get like this?
Inequality has gotten completely out of control. We are using tools designed for a linear age in an exponential one. Even tripling wages won’t make a dent in the gap.
To win votes, politicians ignore the facts and opt to turn labor against capital, instead of trying to make everyone capital.
So here’s my slogan: American Owned. (Or Make Americans Owners, or something, we’re working on it.)
We need to make America the place where everyone is an owner, and everyone acts like an owner. We need to make it the place where hard work and risk taking are applauded and rewarded.
The point is this: we need to stop focusing so much time worrying about protecting peoples’ downsides and start spending more time working on getting more people more upside.
Put another way, there is more relative downside to not participating in upside than there is to the actual downside. As any equity investor will tell you, you can only lose 1x your money, but your upside is uncapped.
We’re thinking like a bunch of fixed income investors, worrying about what can go wrong, instead of thinking like venture capitalists, dreaming of what can go right! That needs to change.
From Main Street to the bleeding edge of the internet, we need to make sure that Americans of all incomes are able to not just work for capital, but to put capital to work for them. We need to protect their digital property rights like their physical ones, and make it easy for them to earn upside in the projects in which they participate.
Obviously, we need to make sure that people are well-compensated for their labor, that they’re able to put food on the table, a roof over their heads, an education in their brains, and that they can pay their medical bills without fear of bankruptcy.
But a person’s labor can’t grow exponentially, it can’t possibly keep up with exponential growth, so we need to make sure that it’s as easy as possible for Americans to become owners.
We did it once, with home ownership, and we need to do it again with diversified portfolios of assets that mean that all Americans do well when any of our fellow Americans do really well. (Although redlining and other exclusionary policies and biases made it much easier for some people than others to own homes; that needs to change this time around.) Markets are global, consumer bases are global, potential outcomes are bigger than ever before: we should orient ourselves to ensure that as much ownership as possible ends up in the hands of as many Americans as possible.
And yes, their pensions or retirement plans might own assets. That’s great. But this is as much about the feeling of upside as the upside itself. If America can get its swagger back, there’s no problem we can’t solve.
The old America would have treated COVID like a war to win together instead of squabbling over basic facts. The old America would welcome the opportunity to lead the world on climate, recognizing the huge financial and societal upside in doing so. The old America would make damn sure that web3 startups weren’t domiciling abroad to avoid restrictive regulation. Our country’s strongest competitor is a bastion of centralized control; we should be using that to our advantage, counter-positioning, and making America the home of democratized ownership.
We need to push upside and ownership to the edges. People who create value should be rewarded in assets whose value appreciates in-line with the value created. We need to fight capitalism with capitalism, and financialization with hyperfinancialization.
We can revive the American Dream by making ownership an explicit economic strategy.
The Ownership Economy isn’t just a nice-to-have; it’s an imperative. And luckily, it’s happening. We just need to get out of our own way: web3 regulation, accredited investor rules, onerous registration requirements. All of these need to change to match the modern era.
But that’s all a little abstract, and I need to bring a broader audience under the tent. If I’m playing Presidential candidate here, you know I’m starting on Main Street.
withco and the Main Street Dream
Why is ownership important? Let’s start with an example we’re all familiar with: small business.
Last week, my friend Kevin Song’s company, withco, came out of stealth and announced itself to the world. There were articles in TechCrunch, Forbes, and even an Alexis Ohanion short. The most powerful part of the announcement, though, was the founder’s letter that Kevin wrote: Recapturing the American Dream.
I first met Kevin for a drink in New York in 2019. I wanted to leave Breather. Kevin was starting a company. Our mutual friend Ed Walters thought we should meet. When we did, Kevin told me his parents’ story: entrepreneurs start a small business, grow it, and get it pulled out from under them when the landlord jacks up the rent.
Rising retail rents are one major factor contributing to a general decline in Main Street small business ownership. In New York, it’s so brutal that Danny Meyer, who helped transform Union Square from an open air crackhouse into one of the most vibrant neighborhoods in the city, had to move his Union Square Cafe from its original location to a new one a few blocks uptown. Two blocks away, the legendary Coffee Shop was replaced by yet another Chase branch (there are 4,800 nationwide) thanks to rising rents.
It’s a clearly shitty situation. There are almost no winners beside the landlord. I bet if you polled all of the neighborhood’s residents, over 99% would have voted for Coffee Shop (and the 1% of Chase voters could be consoled by the fact that there is another Chase branch exactly one block south and one avenue west). And yet, today, Chase is there, Coffee Shop is not.
But what do you do?
So you do my favorite thing: fight capitalism with capitalism.
In Kevin’s words (and my emphasis):
Here’s how it works.
We identify amazing small businesses all over the country.
Then we find a way to buy the building they’re operating out of.
The business owners give us two things. Rent and an open line of communication.
Once they’ve completed a lease term, we gift them the down payment and the building is theirs.
Along with full control of their shop’s future. Not to mention their family’s.
Imagine, for example, if Danny Meyer had been able to use his rent payments to buy the retail space at 21 E 16th Street when he opened the doors to Union Square Cafe in 1985, back when Union Square and the space looked, respectively, like this and this…
Instead of this and this…
Danny Meyer has done just fine (and he’s now an investor in withco), but his story is a glaring example of an all-too-familiar scenario that plays out over and over, day after day, across the country. Small business owners create value in a neighborhood, but they don’t capture most of it.
withco exists to fix that by making small business owners property owners, too.
Of course, working with withco doesn’t guarantee that small business owners will succeed. It doesn’t make finding customers any easier, or make supplies cost less, or make Amazon and Walmart disappear, or smooth over any of the millions of business-specific things that make running a small business challenging (yet). Owning your own real estate comes with its own set of problems!
withco simply removes platform risk – the risk that they could get everything right and still get kicked out, gives them full ownership of their business, and allows them to capture more of the upside if they succeed. It helps push ownership and upside to the edges.
withco is a perfect example to start with here, because the value proposition and societal benefit is so clear. Main Street small business ownership is as American as apple pie. If small business owners can own their space, upside, and destiny, that’s good.
When I’m arguing for things that seem a little more out there in the rest of the piece, think back to withco. It’s the same idea: let people capture value and potentially upside for their contributions.
We need to use financialization to bring back the American Dream.
The American Dream
The American Dream is the belief that anyone in America can achieve success and upward social mobility through hard work.
It made sense in a more linear era; it no longer makes sense in an exponential one. Even the opening paragraph of the American Dream Wikipedia page ends thusly:
The American Dream has been questioned by researchers and political spokespeople, arguing that it is a misplaced belief that contradicts reality in the present-day United States.
That’s a tragedy. How did we get here?
In his excellent piece synthesizing everything that’s happened in the American economy since WWII, How This All Happened, Morgan Housel wrote, “Consumption became an explicit economic strategy in the years after World War II.”
Consumerism pushed the American Dream into its golden years.
The government did three main things to encourage consumption:
Kept interest rates low.
Introduced the GI Bill, leading to a boom in home ownership.
Loosened Depression-era consumer credit regulations.
Pent up demand met easy money, and BOOM: “[Returning soldiers] were going to buy stuff, with money earned from their jobs making new stuff, helped by cheap borrowed money to buy even more stuff.”
Importantly, more demand for stuff meant more demand for labor to make stuff, which meant better wages. And according to Housel, gains were shared more equally than ever before. “The gap between rich and poor narrowed by an extraordinary amount.”
America emerged from the war as the world leader and approached its new role with a confident, aggressive vigor. It built and consumed. It was, as its name implied, united.
Then a bunch of stuff happened – stagflation, rising rates, expensive and unsuccessful wars, global financial crisis, bada bing bada boom (you should go read the piece) – and we are where we are today, with dramatic inequality, social unrest, widening disunity, and a global leadership position that sits somewhere between “strongly threatened” and “non-existent.” We elected fucking Donald Trump President. Democrats seem intent on fumbling that gift:
We went from playing offense to playing defense, and it shows.
The point here isn’t to get political. Neither side is doing well. There’s something bigger at play:
But they’re symptomatic of the bigger thing that’s happened since the early 1980s: The economy works better for some people than others. Success isn’t as meritocratic as it used to be and, when success is granted, is rewarded with higher gains than in previous eras.
Housel argues that expectations take a long time to change, and that people are still expecting to go back to the way things were in the 1950s, when working hard meant a good house, a good car, and social status. Trump leans into that, and Warren leans into that, but it’s a fairy tale. There’s no going back.
In absolute terms, Housel points out, things are actually pretty good! Unemployment is historically low. Humanity has made an absurd amount of progress in critical areas like healthcare, communication, and transportation. Wages are growing faster for low-income workers than the rich.
But in possibly humans’ weirdest quirk, relative success matters more than absolute success. The gap is still widening. And that last point in the last paragraph, the one about relative wages, is practically meaningless: rich people don’t get rich from their wages. As Karl Marx could have told you nearly two centuries ago, they get rich from their capital.
Saving Sam and Investing Ingrid
Let’s take this super simple example. Say there are two friends, Sam and Ingrid. Sam and Ingrid earn the same wage and each ends up with $10,000 after taxes and paying for all of the things they need to pay for each year. Sam saves that $10,000 under his mattress, Ingrid invests hers in the S&P 500. They’ve done this for the past 30 years, during which period the S&P 500 has grown at about 10% per year.
At the end of 30 years, here’s what the difference looks like:
It’s not even close. Despite the same wage and spending, Sam ends up with a net worth that’s only 18% as high as Ingrid’s. Wildly, Ingrid’s net worth is in the top 5% of all Americans. Sam’s is in the bottom 50%.
The Old American Dream would say that if Sam just works harder, he will make more and end up better off than Ingrid. Well guess how much Sam would need to save each year to match the net worth Ingrid achieves by investing $10k every year…
Not even $50,000
Sam would have had to take home more than 5.5x as much as Ingrid each year to match the net worth she achieves just putting her money in the market. That’s a lot of fucking elbow grease.
And this assumes that Sam and Ingrid are starting in the same place. In reality, some people have been investing for the past 30 years, some have been saving, and some are starting from zero (or lower, thanks to student debt, medical bills, credit card bills, you name it).
If the graph above represents the past 30 years from Sam and Ingrid, what do the next 30 years look like?
Ingrid’s curve gets so steep that Sam’s looks like a flat line. She ends up with 51x as much money as Sam does. What’s wilder: over this 30 year period, even if Sam took home $1 million per year and Ingrid continued to take home $10k – if Sam made 100x more than Ingrid – Ingrid would still have more money than Sam at the end of the period!
Minimum wage increases are important, but they’re a bandaid. Better jobs are important, but they’re a band-aid. If we could somehow recreate the post-World War II period and dramatically increase the demand for physical things, and increase the demand and price of labor in-line with that demand, it would only be a band-aid.
The game has moved on. Consumerism can no longer be the primary economic strategy. The labor market is pretty much maxed out, and the gap isn’t closing.
To bring back the American Dream, America needs to make ownership an explicit economic strategy.
Making Ownership the Explicit Economic Strategy
Labor will never catch up with capital. Rising wages are necessary but not sufficient. The gap will keep getting wider.
Technology accelerates the widening of the gap between the returns to capital and the returns to labor. Successful technology companies can reach global audiences at miniscule marginal costs with dramatic returns to scale. There’s no putting the genie back in the bottle, and any policy that seeks to do so will just limit upside or push the winners and their money abroad.
Instead, America needs to make ownership an explicit economic strategy. This should be the easiest place in the world for a company to distribute ownership to its stakeholders, and the easiest place in the world for people to capture the value from their contributions. It should be a place where everyone cheers for companies and protocols to be as successful as possible, because their success is our success. It should be a place that leans into and facilitates the financialization of everything.
Financialization seems like a dirty word, like things are moving in the wrong direction, to a place where all we care about are dollars and not each other. It’s a little dystopian.
But when you hit a patch of ice and spin out, you need to turn the wheel in the direction of the spin. When you’re going around a sharp turn, you accelerate into it.
Same here. We need to financialize everything with more granularity, because everything is already fuzzily financialized. The lack of granularity and ease around financialization just means that everything is financialized in favor of larger players.
If small business owners don’t have cash for a down payment, they just need to pay rent to landlords.
If the value of my raw Spotify data is only $0.20, Spotify can just keep it.
If there’s no easy way to track the ownership of my Fortnite skin outside of Fortnite, Epic can keep it.
If there’s no easy way for Uber to give me equity for referring people, they just give me a discount and keep the upside.
The Sam and Ingrid scenario plays out over and over again. People accept things with no upside – like free services, discounts, or even cash – for things that companies and more sophisticated investors use to generate upside. The gap widens.
It’s like the scene in Office Space where Peter talks about pilfering tiny fractions of a penny that become really big in aggregate:
The lack of granularity and legibility means that all those little fractions of a cent, over billions of people, accrue to the center. And the center invests, turning those cents into dollars. That’s great, that’s the trade we’ve had no choice but to accept, and it’s exactly what companies are supposed to do.
Hyperfinancialization done right just means tracking those pennies better and making sure that they end up in the hands of the people who earned them, ideally in the form of ownership. It means that those people can build portfolios of mini-ownership positions where they can generate upside instead of constantly stuffing assets under their mattress, when they receive assets in return for their efforts at all.
I’ve made it this far without focusing on web3. That’s intentional. I care a lot more about people getting ownership and capturing the value they create than I care about how they do it. There’s a lot to do to increase ownership and upside before even discussing web3.
withco is helping small business owners become property owners without a token in sight. We need hundreds of businesses like withco that turn renters into owners.
Companies like Alt, Rally, AngelList, Masterworks, and others that I wrote about in Software is Eating the Markets make it easier for people to invest in alternative assets that were traditionally only accessible to ultra high net worth investors. AltoIRA lets people invest in those assets with their self-directed retirement funds. More of these please.
Accredited investor rules need to change. They may have been well-intentioned at some point, but today, they’re patronizing and destructive.
It is wild to me that we live in a country in which state governments run lotteries, which have a negative expected value (EV) and have long been called a “poor tax,” while the federal government limits who can put their money into positive EV vehicles like venture capital funds. Personally, I would love nothing more than to be able to invest on behalf of thousands of people for whom fund outperformance would be truly meaningful.
The tax treatment of employee options should be much simpler and more employee-friendly. It’s a travesty that a company’s lowest paid employees often don’t have the funds to buy their options within the 90 day window from their departure, or to fund the taxes they might have to pay before seeing a dollar of returns.
America should be the place where people are rewarded to the maximum extent possible for taking smart risks and, of course, working hard.
And yes, there’s web3.
One of the things that web3 is best at is doing what withco does – remove platform risk and push ownership and upside to the edges – on a much wider range of assets and transaction sizes. It makes it possible to reward people with ownership for even microinteractions.
Take community ownership. Most projects reserve over half of their tokens for the users. We discussed some of the benefits last week when we talked about Braintrust, but the implicit calculation that founders are making here is pretty cool: I think that my tokens will be worth more if I give away half of my ownership to the community.
Those tokens can incentivize users in ways that mean lower payments to companies like Facebook and Google. Putting tokens in users’ wallets instead of putting dollars through AdWords is a fantastic way to push ownership and upside to the edges.
“But people can buy shares in Facebook and Google,” you object, smugly. As soon as Facebook and Google give users shares for free just for using their products, as soon as they reward them for the attention that makes their platforms valuable with financial instruments that have upside potential, I will concede that point.
People should be able to own and monetize their own data. They should be rewarded for their attention. They should be able to be rewarded for backing the right projects early, whether with their dollars or their activity, like venture capitalists are.
This obviously doesn’t mean that the government should require companies to give ownership for usage. It means that we should put frameworks in place that make it as easy as possible for American companies and protocols to reward users with ownership
Many companies and protocols are already choosing to do this. As more do, and as some of the messiness of web3 gets abstracted away, consumers should be able to build up a diversified ownership portfolio based on their activities, in the background.
Often, these portfolios will perform in line with the market. That’s fine; it means they’re not being left behind. Occasionally, there will be life-changing or at least year-improving upside outcomes, like getting airdropped Uniswap or ENS tokens. Those gains can be re-invested. They can compound. Everyone can be a little more like Ingrid.
Of course, sometimes, they’ll go to zero too. That’s the market.
America should treat its citizens like adults and make it as easy as possible for these scenarios to play out.
There’s precedent. Home ownership was a big part of the American economic story post WWII and quickly became a cornerstone of the American Dream. Home ownership is great, if not always financially better than renting. Sometimes, peoples’ homes appreciate and make them wealthier than they could have ever imagined. Sometimes, people can’t keep up with a mortgage and the mortgage wipes them out. The government puts guardrails in place, but it doesn’t stop people from buying homes. It encourages home ownership, risks and all.
But home ownership is not enough on its own. You would be hard pressed to find a professional investor with a portfolio that consisted of one asset and a bunch of debt to finance it.
Professional investors hold portfolios of diversified assets, which gives them better risk-adjusted returns. It should be easy for Americans to do the same – through a mixture of investment and earned ownership.
Today, accumulating ownership isn’t as easy as it should be. There are thousands of entrepreneurs who want to give away ownership in their projects to their users and are told that they can’t.
We’re talking, of course, about DAOs.
While DAOs are popular and exciting, critics rightly point out that a DAO’s tokens don’t confer ownership or a right to profit from the success of the DAO. They’re just “governance” tokens, not securities.
Let’s say I wanted to decentralize Not Boring and issue $NB tokens to the most loyal readers. In order to not trip securities law, I could let token holders do things like vote on topics, but I couldn’t give them ownership rights over any revenue generated through the newsletter. If I wanted to give away my revenue to readers via tokens, I could not.
Or, and this is a real example, say I wanted to give readers carry in Not Boring Capital via tokens as a sign of my acknowledgment that Not Boring Capital doesn’t work without them. Nope, can’t do it. I wanted to give ownership and upside to thousands of people for free, and was told that doing so would be illegal. That’s embarrassing, and it needs to change.
In web3, American citizenship is actually a detriment. It makes it harder to invest and harder to raise:
Laws surrounding DAOs are actually quite established. While the SEC has brought very few actions against DAOs, they make it clear that if there is an expectation of profits, that they will consider the token a security, it is just a matter of them taking action on it. You will notice that any DAO that you place money into will confer you governance over an item/business but not actual ownership rights. Why? Because, in general, ownership of a restaurant, corporation, piece of land or artwork comes with the expectation that if that business were to generate profits or were the item/land to be sold for more than it was purchased for, that profits would be distributed.
Think about that…DAOs are FORCED to confer loosely related governance rights instead of real ownership. As a result a lot of potential businesses formed as DAOs are being stifled and founders who follow the rules transparently are actually made to appear less trustworthy to the public and DAO token holders as a result. DAOs are not going away and people will continue to push the boundaries of what is possible under the current laws. When laws that were meant to protect investors actually provide them with less ownership, while bringing greater confusion and distrust to the marketplace, it is time to consider whether there needs to be a change.
By attempting to protect peoples’ downside, regulators are leaving the downside wide open while limiting upside and forcing everyone involved to feel like quasi-criminals!
There are obviously ways to avoid that situation. Every DAO that wants to confer ownership could register its tokens as securities, for example. But that adds mountains of red tape, cost, and friction. It slows down innovation. It makes it more onerous to share upside. And ultimately, it forces many DAOs to register elsewhere, in the Cayman Islands or Switzerland or one of many other countries taking advantage of America’s antipathy.
But DAOs are just an example that’s top of mind. Their challenges are symptomatic of a larger issue – that we are trying to protect Americans’ downsides instead of maximizing their upsides.
When we stop a DAO from giving away free ownership to Americans, when we stop someone from investing in a promising startup or alternative asset because they don’t have $1 million in their bank account already… we’re killing the American Dream.
That’s not to say that there shouldn’t be regulation. There should! Historically, America’s smart and forward-looking regulation is part of what got us here in the first place. We need regulation that once again looks forward, not backward, that treats Americans like pioneers instead of invalids, and that puts more ownership into the hands of more people.
I have the benefit of being totally ignorant on what it takes to actually make any of what I’ve written a reality. I’m ot a politician. I didn’t study poli sci. I know there are gargantuan challenges and that smart people will rip me apart on the details.
The biggest hole in my platform – the biggest missing plank – is how to get ownership to the people who aren’t actively looking for it. Li Jin’s Universal Basic Capital is an interesting idea that’s directionally right: give people upside instead of straight cash. Smarter people than me will need to work to figure that out.
What I do know is that we’re never going to climb out of this hole through wage growth or taxes or breaking up big tech. Those ships have sailed. And I know that Americans need to feel that pride in ownership again. We need to get our swagger back. We need to bring back the American Dream.
Making America a country of owners is the best place I can think of to start.
God bless you, and God bless the United States of America.
How did you like this week’s Not Boring? Your feedback helps me make this great.
Thanks for reading and see you on Thursday,
Disclaimer: I may be an investor in certain companies discussed in this piece, either personally or through Not Boring Capital.
*See important disclosures from Masterworks