Tokenization is something that I am convinced few understand. Even those from the technology arena seem not to grasp it.
There is no doubt Sam Altman, regardless of what you think about him, is one of the brighter tech minds we have. The progress of OpenAi under his leadership is impressive to say the least. We can debate whether it is going to advance, or end humanity, but the track record is clear.
We also should acknowledge that things change over time. What will be referenced in this article is a couple years old. I do not follow Altman close enough to know if he mentioned tokenization or Web 3.0 somewhere along the way. My guess is he hasn't but I have no first hand knowledge either way.
Nevertheless, he understands the problem yet offers up the typical solution that is likely to fail.
This all stems from his article [Moore's Law for Everything](Moore's Law for Everything) which was written in 2021.
According to Altman, we are on a pace where technology is going to destroy many jobs. This is a point of view espoused repeatedly in my articles. Altman believes the solution is to create The American Equity Fund as a means of insuring inclusion and equality.
In a bit we will go into why his thesis is incorrect as well as the solution. Before that, let's see what he is proposing.
This is what he writes:
We could do something called the American Equity Fund. The American Equity Fund would be capitalized by taxing companies above a certain valuation 2.5% of their market value each year, payable in shares transferred to the fund, and by taxing 2.5% of the value of all privately-held land, payable in dollars.
All citizens over 18 would get an annual distribution, in dollars and company shares, into their accounts. People would be entrusted to use the money however they needed or wanted—for better education, healthcare, housing, starting a company, whatever. Rising costs in government-funded industries would face real pressure as more people chose their own services in a competitive marketplace.
It sounds fairly reasonable on the surface. Of course, a bit of analysis shows how this is quickly negated.
To start, notice how it is an American fund. Here is one of the leading tech minds still buying into the geographic idea. Technology is global and impacts the entire world. If his product, ChatGPT, affects workers in Malaysia, how does this help them? Do we believe that these technologies will only have an impact within the United States?
Then we have the reverse. It is not only American companies that are going to cause the disruption. What happens if a company develops software that crushes an industry and it is located in China, Japan, or South Korea? The entity might have no association with U.S jurisdiction, hence outside the taxing zone.
Finally, as usual, the government is part of the process. Here we get on the slippery slope of politics. If we learned anything from the last few years it is that bureaucrats and politicians cannot be trusted. Whether it is corruption or ignorance, they excel at the law of unintended consequences.
It is ironic because Altman was talking about Web 3.0 without being aware.
We have a couple points that we have to stress.
Altman nailed it when it comes to wealth and the progress of society. Here is what he wrote:
The best way to increase societal wealth is to decrease the cost of goods, from food to video games. Technology will rapidly drive that decline in many categories. Consider the example of semiconductors and Moore’s Law: for decades, chips became twice as powerful for the same price about every two years.
The title of the article is "Moore's Law for Everything". For those who understand the history of semiconductors, they basically saw a 50% annual reduction in the cost per performance. It is a trend that occurred over the last half century.
It is also why we are seeing sensors going into everything. The massive amount of data being generated is due to the fact that we have hundreds of billions of sensors.
The path of the digital world is clear. But what about the physical?
As we are seeing with the development of these humanoid robots, this is likely going to be standard over the next decade. This is going to disrupt the cost of labor. Few take the time to think about how this affects things.
Let us use ChatGPT as our example.
What is the traditional cost of an article? What I mean is, for a magazine or newspaper, what would each article cost? If we broke it down, it might be $50 for the journalist when we factor in the number of articles written versus the salary. Whether this is accurate or not, we will use it as an example.
If we apply the capabilities of ChatGPT, we can see an article no longer costs $50. While some might question the tech today, in another year or two, we know these chatbots will write articles as well as humans. That takes the cost from $50 to basically zero.
Another example is AI generated video.
Have you ever watched one of these on YouTube? Naturally, there is no comparison to one done by the major movie studios. The quality, today, simply is not there. However, did you spend 10 minutes watching it? If the answer is yes, what was the cost for that information/entertainment?
The point being, throughout the digital world, we see the same cost curves. This is going to be extending to the physical. Which means, if his Moore's Law for everything holds true, technology is going to eliminate what he perceives as a problem.
After all, is there a chip inequality between the rich and poor. What Altman is effectively saying is the "commoditization of everything".
When things get commoditized, they drop in price and available becomes widespread. In short, there are few noticeable differences.
Chatbots are, once again, showing us this. Unless someone lives an area where it is blocked, all are open to use to anyone online. The differences, for the average person, aren't evident. Sure, the major techies can talk about the tokens used, speed, and amount of data processed. Few of us are going to upload a full novel and ask the chatbot to summarize it.
If the robotics people are correct, we are going to see the same thing mirrored in the physical world.
Now onto the good stuff.
All of this, no matter how it unfolds, is going to be tied to networks. Everything we are dealing with is a network of some type. So what Altman is proposing simply overlooks the most fundamental of these concepts.
Networks are tokenized.
We actually see that with these chatbots. Notice how the people exploring them are not talking about tokens/sec and what the system can process. It is nothing more than a measurement unit.
Of course, with cryptocurrency, we know this is completely different. Web 3.0 is capable of altering the ownership structure of everything.
When Altman proposed the American Equity Fund, he is trying to replicate, on a national level, a tokenized network. I agree with his sentiment. On a number of occasions I pointed out the flaw in the social networks simply offering a piece of the ad revenue. The idea of income distribution is a Web 2.0 idea.
Web 3.0 deals with equity distribution.
Here is where I agree with Altman. He is proposing a way to distribute equity, thus enabling people to enjoy the increase in value presented by technological advancement. Unfortunately, he focuses upon the same old failed methods.
Tokenization already has the solution in place. Since we are dealing with networks, the ability to replace labor income is presented. The future, in my opinion, is going to be staking income in lieu of labor. When people are involved in different networks or digital platforms, their stake will offer income opportunities.
As those systems grow in value, that is captured in the coin or token. One major feature, unlike Altman's proposal, this is global. Anyone with an Internet connect and a wallet can have stake. Ironic that Altman talks about inclusion yet potentially excludes 95% of the global population.
Web 3.0 is the opposite.
It all boils down to this:
**The tokenization of everything is the way to facilitate the commoditization of everything."
This is exactly what Web 3.0 looks to do.
