Imagine if the members of your group chat shared more than memes but also shared a bank account, or if the early users of a social media app helped decide how that app grew, made money, and moderated content. How does the group make decisions and make sure everyone is heard? Who decides how the money is spent? These are some of the questions Friends with Benefits (FWB), a decentralized autonomous organization (DAO) has had to answer. Baratunde talks with FWB Mayor Alex Zhang about DAOs, online community-building, and Web3 to find out if the way we citizen online can positively affect how we citizen IRL.
Alex Zhang 0:02
Most things don't need to live on the blockchain. Most things don't need to be crypto based. But in a world where that technology provides real value to that organizing structure, then I think a DAO is a really great thing to explore in terms of how you can create fundamental transparency and value accrual to the people who participate in our network.
Baratunde Thurston 0:24
Welcome to How To Citizen with Baratunde, a podcast that reimagine citizen as a verb, not a legal status. This season is all about how we practice democracy. What can we get rid of? What can we invent and how do we change the culture of democracy itself? We're leaving the theoretical clouds and hitting the ground with inspiring examples of people and institutions that are showing us new ways to govern ourselves. Way back in the year 2021, I tried to buy an original copy of the United States Constitution. Me and thousands of other people tried to buy the Constitution.
I was part of this group called Constitution DAO. DAO stands for Decentralized Autonomous Organization, and it was formed by a few dozen people who wanted to bid on the nation's founding document. It was essentially a crowdfunding campaign where anyone who was interested could pledge cryptocurrency to the bid and by doing so, have a say in what would happen with the document if we won. So, very nerdy, but people got into it. Constitution DAO raised nearly $50 million in a week. We did get beat at the auction, and in hindsight, it was pretty obvious you don't enter an auction with everybody knowing how much money you are willing to pledge. But the energy around it was amazing and it was cool to be a part of this flash moby group purchase of a piece of US history. It's not just constitution loving freaks who are into DAOs. They vary in use, in membership, and in purpose. To me, they give us a way to use digital tools to structure an essentially online cooperative model of self-governance. The thing that makes DAOs different from your typical company or nonprofit or co-op is that they're built on blockchain technology. Yes, blockchain. I'm sorry to have to say this word to you. I know you've heard of it and it probably makes you think of people coming to take your money. I'm not here to steal your money. There's no tokens. There's no FTX schemes. There's nothing like that, okay?
I don't believe we need to financialize all human activity or speculate on fake internet money to feel like we're making progress, but underneath the flashy headlines of fraud, there is a technology worth understanding. Blockchain is a form of relatively secure and radically transparent storage. You can think of it as a database that can be used to store financial transactions, but also transactions like votes or even moves in a video game. There's almost no limit to what you could store in it. When we think about citizen and self-governance, a DAO is an attempt to create this human organizational layer on top of that blockchain with some of the same principles. The blockchain creates transactional transparency and the participation of people through a DAO helps secure and increase trust in the overall operation. The code itself doesn't make those things happen, but it can help ensure collective self-governing groups like neighborhood cooperatives aren't new. But given how much time we're collectively spending in technological spaces, it's worth asking, "Can we design systems in the digital world where we can truly practice collective decision making and resource sharing better than what we've seen done in the physical world?" Alex Zhang has been asking this question for a while. Alex is the mayor of Friends with Benefits.
Now, Friends with Benefits or FWB for short is a DAO that's essentially an online club with thousands of members. Those members decide what those benefits are and how to manage their collective financial resources. Basically, FWB is a chat room with a bank account. Think about a subreddit you really invested in or an old AOL chat room. Think of those structures, but this time, they've got a treasury and some voting mechanisms attached. With those new features, you can do so many more things than just chat, activities like funding projects, supporting artistic innovation, and organizing events and meetups. The list goes on.
DAOs like FWB are a fascinating place for us to learn some of the ways we might citizen in the future and they give me a little hope that when it comes to our digital spaces, we can still define community for ourselves. We don't have to subject ourselves to these manipulative attention extraction platforms. Investing in online spaces doesn't have to mean divesting from our communities and our democracy. In fact, it could mean the opposite. So, I met up with Alex over Zoom along with our virtual audience to learn how we can upgrade our virtual citizening. After the break, Alex Zhang on the benefits of DAOs and the potential of creating digital spaces instead of being consumed by them. We're going to be talking about Web 3.0 and DAOs today. Just very briefly, Web 3.0's like the allegedly new version of the internet, which has users not just being users, but also owners of the platforms that we are a part of. Alex Zhang is an advocate for how Web 3.0 technology can help propel culture and large scale human coordination forward. He's the de facto mayor at Friends With Benefits, a crypto enabled cultural membership and community cited by the New York Times as one of the most interesting uses of DAOs right now. I don't know if the Time's meant to rhyme like that. Formerly, he was the Creative Director and President of Summit Series, a global community and events company, which is where Alex and I met. Alex, welcome to How to Citizen.
Alex Zhang 06:49
What's up? Super happy to be here. Good to see you.
Baratunde Thurston 6:52
It's good to see you too. It's been a while. I want to get your perspective on the big picture before we dive into the world of FWB and possible democracy enhancing skills that we might gain through DAO activities. But by some estimates, there are about 10,000 DAOs. I want to know how you think this structure of a DAO compares to a traditional hierarchical company or to a representative democracy, whereas citizens/members, we elect decision makers to determine our laws and our spending and even what's allowed in terms of our actions. What's the DAO structure offer that's different from what these other structures we're more familiar with offer?
Alex Zhang 7:30
Yeah, that's a great question. First off, thanks for having me. Love to talk everything democracy and in between and incredible to see this community that you've built here. It's really, really fun. Yeah, I think to first take a step back and demystify DAOs, decentralized autonomous organizations, because I think there can be a lot of baggage and different things attached to it, which really is an organization that has assets that live on the blockchain. So, that is my first clarification point is you cannot be a DAO if you don't interact with crypto or the blockchain. It is fundamentally attached to how an organization holds and custodies its assets which are primarily crypto based assets. Then from there, a DAO can be structured as centrally or decentrally as possible.
I call it a spectrum of decentralization or other writers call it being progressively decentralized. No different than you can choose to run your LLC or your C-corp any way you want. I've advised and supported many different DAOs that are completely flat, decentralized, and bottoms up governed all the way to ones that look a little bit more in the middle. I would say how FWB is where we operate as a representative democracy as opposed to a direct democracy. Then you have those that are very tightly knit, tightly coordinated, centralized leaders, which are DAOs of four people and they decide which art to buy and collect and sell and that isn't as say flatly governed by its users.
So, I would offer that there is not one size fits all DAO and DAOs can contain a spectrum of centralization or decentralization, but fundamentally, why DAO is a question many people should be asking because even hearing that there's 10,000 of them is frightening because I believe many of them shouldn't be a DAO. But a DAO should only exist in my opinion if one, you have a cryptocurrency based organization or reason for existence, and two, the need to decide how to allocate those resources should be governed via on chain decision making, voting, and governance. So, really where DAOs become exciting to me as I look across 5 years, 10 years, as the cryptocurrency industry continues to evolve and mature, is that DAOs feel like a really interesting organizational structure and framework for internet-based communities that leverage cryptocurrency as ways to trade, exchange, and create value for its users.
Baratunde Thurston 9:59
Trade, exchange, and create value. So, one, thank you for not telling everyone to go start a DAO. I just appreciate the non-boosterism of that. Maybe right for you, maybe not right for others. This common denominator that is blockchain based, on chain crypto held assets, I don't want to get too much into the rabbit hole, but since we're on the subject now, can you, for those who are not deeply enmeshed, give your ambassador translation of the value of putting an organization of people like this on a blockchain?
Alex Zhang 10:35
Yeah, happy to. So, similar to what I was saying not everything should be a DAO, not everything should be on chain or even a crypto-based organization. What is fundamentally interesting about cryptocurrency and just for even the room here, I got involved with crypto two years ago, fairly recently. I met Baratunde when I still thought crypto was a total scam. I was like, "This makes no sense. Decentralized finance component made no sense or interest to me." I formally worked in art and culture and events and community building. It was only until I started to really peek a little bit behind the curtain when I started to see the fundamental technology of cryptocurrency being interesting.
The idea of a decentralized monetary system that was borderless was really interesting to me. It still boggles my mind that on a national holiday, you can't wire money to somebody when they need to receive money. So, things like that started to became really, really interesting. Then as I started to apply that thinking of the principles and values and tenants of cryptocurrency and how they would relate to other industries like culture, civics, community, I became really interested with two components. One, transparency. I think currently in society, we're all struggling with a lack of transparency from corporate lack of transparency to governmental lack of transparency.
The fact that the blockchain is literally transparent, no one can obfuscate it because it is all recorded on chain and anyone who can go look for the data can go find that data and query that data became really, really interesting to me in perhaps a world in which different organizations... Imagine if you could see how Facebook was spending their money or private companies were spending their money in real time and where they were allocating that capital. So, that became really interesting to me as someone who had been in community-based organizing movements or organizations and seeing, "Oh, as a community-based organization, it would be cool to see how that community is actually deploying its capital." Is it spending its money? Who is it paying? How much are they paying those people? What are they actually doing? So, one was transparency and then two is what I call value accrual. So, previously, I'd worked a lot in various different art and culture entertainment spaces, and I was always really upset by how artists seemed to be creating a lot of value but not capturing a lot of that value, right?
Baratunde Thurston 12:51
Yes, yes. I'm going to interject on that point.
Alex Zhang 12:54
Baratunde Thurston 12:55
So many of us have heard, felt, and lived with the consequences of being the product in a digital perspective on a Twitter, Facebook, corporate owned thing. We're just feeding some economic machine that value's not being returned to us in any tangible way. We can connect with our own friends, yay, but they're monetizing that and making money off of that. Certainly, art has been rife with that exploitation of value and the concentration of it. So, continue with the point. I was just so enthusiastic, I had to jump in there on the value point. All right.
Alex Zhang 13:28
Yeah, no, I totally agree. I mean, we know that whole narrative of the platform monetizing and the advertising models, and I just became really interested in how creators, let's just use that big bucket, whether it's someone writing on social media and creating content to a visual artist or a musician, that value that they're bringing to an organization or to a platform, how that value could actually accrue to the edges of that network versus just the central owners of that specific platform. I saw that in both massive social media platforms, but also community projects that had really great intentions, but seeing how as a community began to grow, ultimately, the organization, the owners were capturing a majority of that value as opposed to the actual contributors of that specific community or movement. So, it became an interesting thought experiment in the beginning of me and my partners where we were all exploring and collaborators of if cryptocurrency could store financial value, could it store cultural value and could that cultural value be translated financially to actually reward people who are bringing their full selves and bringing value to the table as it relates to a social media network or as it relates to a club scene in Bushwick.
It was both similarly interesting to me and that's how Friends With Benefits essentially was created. It was a social network that was community owned and where value could accrue to the people who brought their ideas, their artistic expression, their connections, their full selves into a membership club or network. Could that value be captured equally across the board?
Baratunde Thurston 14:52
Bravo. I am signing up for no longer paying cover charges at a club, but making the club pay me because I'm bringing cool. So, there you go.
Alex Zhang 15:00
That's what I'm saying.
Baratunde Thurston 15:00
Now who's in charge? Let me see your ID, bouncer. Friends with Benefits, it's a great transition. FWB has been called this group chat with a shared bank account, decentralized Soho House, this global VIP private club with a lot of cultural influencers amongst its membership. Can you give me more about the history of it and why you've described it in these ways, especially on this point around cultural compensation as a premise for this particular gathering?
Alex Zhang 15:28
Yeah. So, the origin stories are actually quite experimental and accidental, as I find with most fun scenes or things that weren't too serious in the beginning. I mean, even the name of our organization, FWB, all started as a joke. Trevor McFedries, the founder who I've been friends with for quite some time, has been a really interesting creator and entrepreneur. He's always sat at the interesting intersections of culture, new media, technology. So, he was particularly interested in this concept of cultural capture in terms of value. Over the course of a weekend, he created the FWB token as a joke and sent it out to a bunch of his friends.
I was one of those friends and there was 20 or 30 of us hanging out in this group chat that at the time it was tiny or minuscule. This was all during COVID. So, all of us were locked in at home, all of us were bored, and all of us were asking questions about, "What is crypto? What is Web 3.0? What are NFTs?" This was right when the boom of crypto started to occur and evolve and we were all in this room together essentially making sense of what was happening together. What we started to see was a couple interesting things. One, we saw that people then began to feel a stronger sense of ownership by holding the FWB token and feeling a real sense of pride over the network, that they began to propose ways to evolve and change the network. I had this early saying of when you see trash on the ground, pick it up. We started to see that happen really organically. Hey, well, let's add this channel. Hey, let's remove that channel. Hey, let's put in a code of conduct early so we can avoid issues of X, Y, Z ahead of time. As someone who's been involved in lots of different community projects and also social networking projects, I was like, "This behavior feels different." The early adopters of an online network, that felt very similar, a sense of pride, a sense of identity attached to an online cohort.
But what felt different here was an actual sense of ownership in terms of, "Okay, this actual token, this asset that's mine is custodied by me, is actually both my entrance into this experience and also a thing that gets to grow over time as more value is being created." That collectivism was a thing we wanted to experiment with in a digital space. So, then the story is quite 20 people, 30 people, 100 people, 500 people. Then by then, I was like, "Wait, this is really interesting." I want to step into more of a leadership role here because it was me and seven other people contributing. That was when I stepped into my role as the mayor and elected myself and a core team into this role. The first thing I'll say, which I think is a fun conversation for this group here in terms of its adjacency to urbanism and civics, is wanting to be really clear that my role was not as a CEO, but was as a mayor and that I'm here to represent the people. I thought that fundamental shift in that leadership role would plant the seeds for an online community or social network platform to be actually built people first as opposed to platform first. So, that kicked off how FWB has been governed to date, and now it's a 6,000-person membership community organization. It's a community-owned social network.
We're funding projects across the network within the community. We've thrown hundreds of events all over the world organized by community members who receive tokens as compensation for organizing those events, from gallery tours to coffee tasting, to club nights in Paris, to building our own social software and our own products and our own physical goods like apparel and merchandise and CPG. With all of that value accruing back into that shared bank account, no different than almost like an IP or a franchise where value flows back into that shared treasury.
Baratunde Thurston 19:05
This is a question and checking my own understanding. I pay to join and I pay in the form of these tokens that I hold. So, as I bring value to the community, the value of my holdings, my ownership stake also goes up. Is that the mutually beneficial economic theory behind this?
Alex Zhang 19:25
Baratunde Thurston 19:26
Why do you care so much about the culture part, Mr. Mayor? I want to come back to the mayor in the election point in just a second, but how are you defining it and what does that mean for you in terms of the currency here?
Alex Zhang 19:36
Culture like capital C at large or the community's culture?
Baratunde Thurston 19:40
The idea that FWB itself is built around music, around arts, around these cultural things where there are many DAOs which are built just around the idea of the token itself.
Alex Zhang 19:50
Baratunde Thurston 19:51
Or they're organized to purchase something like that Constitution DAO, which I was also a part of, because I thought it was weird and fun. So, culture's the focus here. Why?
Alex Zhang 19:58
Yeah, I mean I think first off, any community that comes together organically and experimentally often has threads that connect it without it even being an explicit manifesto or mission statement, I think. We all came together because all of us worked in cultural spaces. I think to date, the crypto narrative has been heavily dominated via financialization speculation and via this ICO boom and buy this token and number goes up.
Baratunde Thurston 20:21
Initial coin offerings.
Alex Zhang 20:23
Initial coins, offerings. A lot of us also are technologists. We're interested in technology, not cold, hard technology, but how technology can perhaps enhance human connection and human experiences. While this crypto boom was happening, we all just became interested. Can this actually accentuate these cultural spaces that we all came from? So that's one track that we were interested. Okay, fundamentally, how does this technology impact our industries was where this started.
Then second, I think the more meta angle of it is a lot of us have been frustrated because we've participated in many different cultural spaces from those early nightclubs or bar scenes in certain neighborhoods that then became overly gentrified once high-rise commercial development and real estate agents came in and cue the Williamsburg narrative. We've all been a part of those various different stories and those 15-year movement and we're interested in perhaps new mechanics or ways where those early artists could actually capture some of that value on that gentrification curve and interested in, "Does that same curve apply in digital spaces?" So we were really interested in clearly, there's going to be a role for culture in crypto.
At that moment, there wasn't quite one yet. Everyone participating in crypto was heavily financially oriented and NFTs really became the first framework where culture could enter crypto. Artists could actually create digital artwork and have that be stored on chain. We were just the community layer on top of that movement that saw a need to connect creators, technologists, developers, subject knowledge experts, people who were first-timers, and to create a fun space of camaraderie where folks could learn, share, and exchange knowledge together while also playing with the fundamental technology itself.
Baratunde Thurston 22:10
So yeah, you've got a culturally oriented membership club where the value of that collective is more formally recognized than others and maybe more fairly distributed than the historical analogies we're often familiar with.
Alex Zhang 22:24
Yeah. I'll add the last point, which I think helps click it for a lot of people, is those tokens beyond value accrual are also the fundamental way you vote in the network. So, it's how you're able to put up a proposal to fund an artisan residency program. It's how you're able to vote on how we want to change the network. Recently, community members proposed actually merging two membership tiers because they were unsatisfied with one of the membership tiers and they said, "This is actually a lackluster experience and we want to propose merging these two experiences together."
That was brought up by a community member that went to a very contentious debate and it passed and it's been implemented. So, it's one of those instances where how I think about it is imagine if the first 1,000 users of Facebook could actually weigh in on the advertising model. That's how I approach and think about this. Would that have changed the outcomes? That vote not just being a poll system that actually doesn't carry any weight, like Elon running on Twitter, doing polls all day. That vote is actually the fundamental stock or equity or value accrual of that organization and that entity itself. That became really, really interesting to us.
Baratunde Thurston 23:28
That part fascinates me as well, because merely having money in the system, charging for use of the service can give you a greater sense of wanting to pick up trash, but being an owner is a whole another thing. So, being a subscriber is very different from being an owner and then having say in the decision, even the structure of the thing itself. There's just distributing power in this form of the practice. As you said, there's a big spectrum. What are the other ways that someone experiences that value accrual? I'm a member of this thing, I get to propose, I get to vote, I get to launch external experiments, and overall, the value of my tokens might rise. How else does the value accumulation experience by these participants?
Alex Zhang 24:11
Yeah, I think without being corny.
Baratunde Thurston 24:13
Be corny. It's okay.
Alex Zhang 24:15
Oh, be corny. An inside joke or a meme inside of our community is maybe the benefits are the friends we made along the way.
Baratunde Thurston 24:22
Oh, my goodness.
Alex Zhang 24:24
I didn't write that, I swear.
Baratunde Thurston 24:25
You tried to warn me and against my judgment, I gave you the benefit of the doubt.
Alex Zhang 24:31
But without being corny, I was like, "That's actually true." I think what transcends all of this is it's not really about the money. Currency, financials, money is a weird thing and it makes things interesting. It makes things dark. It makes things exciting. It places value on things that might not need to even have value placed onto them, but we can all agree money is interesting. Ultimately, the community currency is a vehicle for the conversation that ultimately drives the connection. That's what's most interesting to me, full stop, is just the people who have met and connected through Friends with Benefits, who have become co-founders, who have become business partners, who have received funding for their nonprofits to met their life partners. It's been incredible to see.
I think anyone who's in movement building or community building, the ultimate aha moment is always when that compounds over. We've been doing that for two and a half years, not a long time, but to see now full companies that have gone on and built incredible things in the ecosystem because they met in a chat room is always really, really exciting.
Baratunde Thurston 25:33
It's not an open community. There's an application process. There's a cost. How does one become a Friend with Benefits?
Alex Zhang 25:42
So right now, essentially, we think about it as citizenship and tourism. So, there's citizenship as in if you want to become a member, you apply and the community reads your application and votes on it and welcomes you in. Essentially, all we're looking for is that you're here and you want to contribute.
Baratunde Thurston 25:58
Okay. So, step one, application.
Alex Zhang 26:01
Application, then the community votes. Then if that application is accepted, you're then sent instructions in a welcome email, college admission vibes, and you're onboarded. There's all these new member welcome hangs and all this stuff.
Baratunde Thurston 26:14
What's the tuition?
Alex Zhang 26:15
The tuition is 75 tokens, which fluctuates from 500 bucks to 750 bucks. Once you're in, you're able to go float around our digital city. There's hundreds of channels in the Discord. We've actually built our own mobile app and it has its own social feed. So, there's all these digital connections, but that is a portal into the hundreds of events that are organized by the community around the world in your city to be able to interact and connect with people in real life as well as getting access to various different digital and physical goods, products, and services from merchandise, apparel, clothing, whatever the community's making and creating. That's what membership looks like. That's what citizenship looks like. That citizenship allows you to fundamentally vote.
It lets you vote, have a say, put proposals up, and contribute to and evolve the network itself. Tourism is how you participate in FWB. If you don't want to be a member, you can actually participate in various different physical events, digital events, just by holding FWB tokens, much lower threshold, one to five FWB from 10 bucks to 50 bucks. You're able to go to various different things that are all organized by the community. Our hope is that if you like visiting our city, you'll eventually want to move here.
Baratunde Thurston 27:26
Who are these members or the tourists? What kind of people are signing up at this point or have signed up at this point?
Alex Zhang 27:33
Yeah, I think there are people who come from a whole swath of different backgrounds, but mostly cultural backgrounds, art, music, entertainment, technology, et cetera, who are interested in how crypto might affect their industry or their space. It's folks who are asking these kinds of questions, who are interested in the role that this might play in it and are looking to connect with other people in this space, who are here for bigger reasons beyond just making a lot of money or flipping NFTs or buying tokens. It's really people who are fundamentally interested in the technology itself and its implications for culture.
Baratunde Thurston 28:10
That sounds very familiar. That sounds actually pretty attractive. How much money you all got in the bank? You got these tokens, you've raised money. Part of the whole thing is the group chat with the bank account. So, what's the treasury like?
Alex Zhang 28:20
Yeah, what's cool is the treasury's all on chain so everyone can see and view in real time the assets that this community holds. I think it's about 18, 19 million US dollars' worth of various different assets and at its peak was like $50 million in about six, eight months ago based on the fluctuations of the tokens and other tokens that we hold from Ethereum to other community tokens that we hold for sub-communities that have spawned out of FWB. Yeah, the treasury probably holds right around $18 to $20 million right now of value in there.
Baratunde Thurston 28:49
What in your view are a couple of the coolest things to emerge from this community, from this environment, whether it's a product, an app, a relationship, a tool? What might that look like? What has that look like?
Alex Zhang 29:02
Yeah, let's see. I mean earlier this summer, we threw our first community produced festival, which was really rad. We rented out a liberal arts campus outside of Los Angeles. Seven hundred community members came down for that. We threw a three-day symposium that featured music from James Blake, JPEGMAFIA, and Oneohtrix Point Never to talks and discussions and discourse from leading experts in the community and outside of the community with the full culinary program and wellness program. It was absolutely incredible. Half the lineup was community members who offered up their talents or their skills and were compensated in tokens for their contribution.
So, that was just a really incredible highlight of the year for me to see this digital city, which can feel alien or foreign or sterile to then see everyone in real life. It totally felt surprising and refreshing to meet someone that I had shared a digital experience with for the last two years to spend time in person. A lot of us grew up on internet forums. I think that's also another common thread of FWB community members is a lot of us were early music forums, punk forums, AOL, AIM chat rooms. Our average age breakdown is I would say mid-20s to late 30s. So, a lot of folks being very familiar with forum culture and that now spilling into IRL world is an interesting thing that's been explored. So, I would say that's been an amazing highlight. The one I'm most excited about is just us actually building our own social network. So, we're in beta mode right now. We've got about 100 community members on there who are battle testing it right now. We're planning on releasing it Q1 of next year. The idea is essentially, everything to date has been run on top of a Discord. Discord is essentially run platform. It comes with its fair share of challenges. It's very hard to hit that learning curve of how do you filter through hundreds of channels of completely synchronous messages with no seemingly order to the chaos.
Baratunde Thurston 31:05
It's like Slack on cocaine.
Alex Zhang 31:07
It's like Slack on coke. Yeah, exactly. Exactly. You can imagine that with thousands and thousands of people chatting every single day. You get tagged in something and you can't find it. So, after surveying the landscape and trying out a couple different solutions, our community decide to build our own. So, we've been building our own mobile app experience that is actually primarily image-based for now and allows for the community to share almost like an Instagram or TikTok share content within this community that also aggregates all the events happening in our community as well as all the profiles. Everyone can connect and add friends as well as the governance. So, inside of the app itself, you can put proposals up to change and evolve the network itself.
Baratunde Thurston 31:49
For me, it's an easy leap to go from what if that were the experience in my other social networks and it's the missing piece. Those decisions are being made, but by invisible committees that I have really no sway over, more of a binary choice to join or not to join. Okay. Alex, you're the mayor. You've used the word city 30 times. You said you elected yourself, which sounds like a dictator. Just frame this for me about what does it mean for you to be the mayor and do this facilitation that you've described and how does the city metaphor apply in a little bit more detail to FWB?
Alex Zhang 32:26
Yeah. So, it all started when this was being built and we were all in real time asking ourselves, "What is this?" Every day new people were joining. Press loves to put their stamp of approval or disapproval on things. All of a sudden, the narrative was decentralized Soho House, which you can clearly see why a lot of us were eyerolling to that and being like, "That doesn't totally feel like what we're trying to do here." Instead, we were interested in really, "What is an online community on steroids look like?" This felt more like a subreddit that had its own economy than a member's club that was about eating $40 salmons and schmoozing. We were more interested in just, "What is an online community that actually builds its own economies look like?"
Someone in the community actually said, "FWB isn't actually a company or decentralized Soho House. FWB is a city that isn't physically distributed yet." That for some reason clicked. We were on a town hall with hundreds of us. We do town halls every month where we talk about issues in the community. We all asked ourselves, "Wait, this totally is a city just abstract away the physicality of it. We are a city in that if you were to ask what type of person does New York City attract, we could all clearly break down stereotypes or types of people that thrive in New York, but you cannot pinpoint one user of New York City."
Baratunde Thurston 33:47
People who like pain.
Alex Zhang 33:49
People who love pain, exactly. Masochists. So, for us, we were like, "Wait, that is totally how we want to steward and build FWB. We don't have to be open to everybody." Yes, New York City is expensive. Yes, New York City is known for its culture and for its food and for its art, similar to FWB being known for its culture and its art and its cultural proximity, but ultimately, New York City is what you make of it, as is FWB is what you make of it. So, once we started to run through that analogy, then we began to really explore various different urban theory and urban planning frameworks to how we should grow FWB. Things started to make a lot more sense. So, for example, not running FWB like a startup or a company that seeks profit margins.
Baratunde Thurston 34:31
Everybody else does that.
Alex Zhang 34:33
Everybody does that. We weren't interested in that.
Baratunde Thurston 34:35
The premise is that your social network, your digital gathering space, your online community needs to be a business.
Alex Zhang 34:42
Baratunde Thurston 34:43
You said no, it needs to be a city.
Alex Zhang 34:45
Baratunde Thurston 34:45
So, continue on what that difference feels like.
Alex Zhang 34:48
Yeah. So, when you call something a business, a business exists to drive profit and profit comes from hopefully your revenue is more than your expenses and then that extra amount gets distributed to owners.
Cooperatives are interesting because that surplus gets distributed to the entire pie, but we were really interested in a city framework because we thought, "Instead of thinking about pure profit, how do we actually think about GDP? How do we actually think about expanding economic activity of the network? How do we actually think about income per individual? How can we think about generating opportunities for people inside of FWB? How do we think about our import and our export strategy where we can actually import goods and export goods and capture fee on those goods that go back to the treasury and utilize the community as a cooperative to essentially promote and distribute those various different goods or products or services?"
So we began experimenting with a couple things to test that thesis out. Early on, we began to create artwork in the form of NFTs. We had so many artists, visual artists, graphic artists inside the community who were experimenting with NFT technology. Eric Hu, an amazing designer, created a project called Monarchs, which were these beautiful digitally generative butterflies. He was the creative director at Essence and Nike, and he created this amazing butterfly project that generated $3 million in terms of primary sales. He chose to give FWB 10% of that revenue back to the treasury in exchange for the community itself supporting and uplifting that artist. That generated close to half a million, $750,000 within the course of that sale, which then we used to begin to fund various different art programs and other experiences inside of FWB. So, thinking about the idea that, "Okay, how do we actually expand economic activity of a cohort of individuals as opposed to primary business models of communities to date?", which are recurring subscriptions or charging an entry fee and monetizing explicitly on how many users come into your individual network.
Baratunde Thurston 36:57
So, let me pause you there. The example that you gave, my first question was like, "Why would an artist run it through FWB when they can just launch their thing?" But there was a value exchange, promotion, distribution-
Alex Zhang 37:10
Baratunde Thurston 37:10
... which could cost money. Your GDP analogy is really interesting to me, and I saw a comment from Tania Fox in the chat. Hello, Tania. So, I want to plug this one in right now. There's limits to the value of GDP, right? GDP doesn't capture all sorts of things. GDP is a measure of planetary destruction in some ways as well. So, how much does your city metaphor adhere to methods of city management that we're trying to get away from versus more sustainable regenerative ways of managing city collectively that we want to approach and be more like?
Alex Zhang 37:46
Yeah, absolutely. I mean obviously, our city analogy is quite theoretical. We're very much not leaning exclusively on running urban infrastructure play here. I think it's really just looking at really alternatives to running profit-driven businesses in terms of community organized platforms. So, it's really less about like, "Oh, everything we do has to follow the city analogy." It's more borrowing and remixing components that feel more organic to community-driven projects. So, I at least believe that if your primary product are users and people, there should be a way to attribute value and grow value for those individuals as opposed to just purely extracting value from those individuals.
Baratunde Thurston 38:30
After the break, what elections and voting on the blockchain look like and what we can learn about economics from the club. Yes, we're talking nightclubs. It's such a great episode. I'm curious about the decision making structure of FWB. You don't as mayor impose your will in the community. You've talked about people floating proposals and their tokens allow them to vote. But high level view, how are decisions made and how are proposals floated and voted upon?
Alex Zhang 39:07
So right now, I always say the FWB runs much more like a representative democracy as opposed to a direct democracy. So, we've had a lot of roles that have been put up for a vote and election and then the community votes that person in. Because I believe tragedy of the commons, the whole notion that if you have just thousands of people making thousands of decisions, you get a pretty chaotic mess. But if you have a thousand people electing a group of decision makers with the right checks and balances put in place of say impeachment in an extreme scenario to just various different checkpoints along the way, you can actually run a somewhat symbiotic flat leadership structure, because the truth is also a majority of people don't want to lead.
A lot of people just want to be along for the ride. Not everyone wants to necessarily work inside of a cooperative. So, in our instance, I would say a third to half of our roles have been elected in terms of the community as some role, whether there's the city representatives or they're in specific roles. Then other roles are a little bit more evergreen as it's a little bit of just keeping... At the end of the day, a lot of this is theoretical and we are a two-year-old experiment that a lot of it requires just keeping the lights on, our legal team, our operational team, myself, various different folks where if I was just going up for election every single year, I think it would get quite exhausting quite soon. But the goal very much is as FWB continues to decentralize, it was started centrally by one person with a founder. It's now past leadership hands multiple times. I anticipate my involvement in a mayoral capacity for another year or so before another person is able to step in. Once we've hit a couple key legal milestones and operational milestones of how it can function, that FWB can continue to decentralize and be governed by its token holders or its community.
Baratunde Thurston 40:51
What does the town hall feel like? How do those operate? How many people show up?
Alex Zhang 40:55
Baratunde Thurston 40:56
I mean literally because they're on a server.
Alex Zhang 40:59
Exactly, that and figuratively, but they're fun. They're a chance for us to check in, me to check in with the community. We'll throw them on Zoom, no different like this. People are chatting all day and asking questions. We usually have some presentation. It's almost like our board meeting where we'll present to the community of metrics, projects, accomplishments, areas of improvement, and then we open up for questions. So, it's a mix between a town hall to Apple keynote presentation of exciting shiny products and events and things that have emerged from the community. It's very much round robin where we pass the mic around and allow different folks and different team leads who have worked on really great projects to share what they're working on.
We have an editorial platform that covers news and essays across culture and Web 3.0. That has a really interesting perspective and POV. It's definitely more on the more critical side of Web 3.0, which we love in terms of ways it can improve. It's not just rah, rah, rah, crypto, crypto, crypto, but talking about the downsides of Constitution DAO and how it lost its way or issues of diversity and inclusion in Web 3.0 and how that can be improved all the way to our product team providing updates. Yeah, it's very much a fun way where we're able to check in and communicate information as well as create a space where people can just share how their experience is.
Baratunde Thurston 42:16
So, you've used this representative democracy analogy. You even have town halls like physical cities do. I'm wondering if you also see FWB as this sandbox for experiments for ways to practice new methods of communal self-governance.
Alex Zhang 42:33
Yeah, absolutely. I mean the whole thing is a massive experiment every day and we tell ourselves that. Within that experiment is a myriad of micro experiments from quorum based voting to quadratic voting systems. We're really much on the forefront of exploring new forms of voting and mechanics that are beyond one person, one vote or one token, one vote.
Baratunde Thurston 42:52
I do want to get wonky about that because I think part of the spirit of my question is I think so many of us feel collectively uninspired by what small democratic practice actually means. So, we have our ritual voting experience and we have our built-in lack of faith and trust in our representatives, in our representative democracy. We are fatigued by the influence of outside money and all these things. Cool, cool. So, yes, double tap on that one. In terms of the decision making tools you are playing with, can you define the quadratic voting, define the quorum based thing as opposed to just one token, one vote, one person, one vote as we know on the outside world?
Alex Zhang 43:33
Yeah, totally. So, trad voting frameworks, one person, one vote, right? You're a citizen. That's registered to your identification. You can cast one vote. In crypto, that's a little bit more hard because of what it's called civilly resistant, meaning it's actually a very difficult to verify that one person is actually one person, because it's one wallet, one vote. So, someone can create hundreds of ghost wallets and be able to vote because there's no real identification system in cryptocurrency, honestly no different than me being able to spin up dozens of fake Facebook accounts to be able to go, right? Because you just create infinite email addresses, create up new Facebook accounts, and then imagine that tied to a voting heuristic. So, that's one person, one vote, one wallet, one vote. Then there's one token, one vote, which obviously the red flags go off of like, "Well, if you just have more tokens, you get more voting."
Baratunde Thurston 44:23
Which is how our current system feels like it works sometimes.
Alex Zhang 44:27
Exactly. So, then cue quadratic voting, which is a way to de-emphasize one token, one vote, while still giving power to people who have accumulated tokens, because ultimately, accumulating tokens doesn't necessarily have to be singularly a bad thing. Many people in FWB earned their tokens for contributing and working and showing up to events. So, one might posit you deserve more say in the network, because you actively have shown up and you've actively been to town halls and you are a valued member of this network. So, quadratic is essentially a way to create and add weight in voting of those tokens. It allows for you to place a level of confidence quadratically into quadrants to say, "This is how much I actually care about this decision." It condenses the level of voting so that let's say you have 1 token and I have 100 tokens. On a one token, one vote, that would be very stark. In a more quadratic format, that might be truncated a little bit.
Baratunde Thurston 45:28):
Because the weight that you're applying to yours, you might not-
Alex Zhang 45:31
Applying based on your total sum. Exactly. You might be like, "You know what? I actually don't care about this that much, so I'm going to put on a 1 to 10. I'm going to allocate 10% to this, but it'd be cool if it passes, but my life doesn't change if it doesn't." Versus a major proposal and everything is on the line like an election.
Baratunde Thurston 45:49
We explored quadratic polling with Audrey Tang from Taiwan.
Alex Zhang 45:54
Baratunde Thurston 45:54
This infrastructure, which just reveals a different level, I would say a lower level of seeming polarization, because when you ask binary questions, you get binary answers.
Alex Zhang 46:04
Baratunde Thurston 46:04
You ask weighted questions and you get weighted more nuanced answers. So, counting votes in that way is also very interesting. Alex, other than the potential scamming of multiple wallets coordinating vote attacks, what is your incentive to experiment with these methods of digital civic participation? Why are you messing around?
Alex Zhang 46:28
I just think it's fun. I think so much of civics is boring right now and unengaged. Like you said, we're all bored and looking for new outcomes and new ways to engage with those outcomes. I think for us, where overall civic participation is probably waning and the younger kids get, the less they even care it seems. Ultimately, we're interested in shifting that narrative and that perception of civic participation not just equating to voting in a presidential election or voting in a local district election, but instead, voting in spaces you care about. Digital being one of them. Digital being one that our kids are probably spending 80% of their days and lives in.
So, I think creating more interesting ways for people to have a say in their digital spaces that doesn't need to feel so complicated but can feel fun is something that we really, really care about. So, a fun example for that would be we started organizing these events through the community all over the world. We thought, "Wouldn't it be fun if we could actually elect city leads to tap in a little bit more budget to throw bigger and more fun events and almost have a little bit more jurisdiction over a specific city?"
Baratunde Thurston 47:42
Alex Zhang 47:43
Well, yeah, a little bit more autonomy. So, what we ended up seeing was dozens of people apply, submit campaign videos, create campaign strategies to become the LA lead and the New York lead and the London lead and the San Francisco lead. Then all of that was run in a massive election where we had people like postering and going on podcasts. It was so fun to see. All of that to me was just like I hope this encourages people just to even go out and vote in their towns and their cities, because clearly, you can see how fun this is to just give people power and to pick your favorite and to root for someone on a micro level, which I think local is important. That local just drives more engagement because it feels closer to home.
Baratunde Thurston 48:25
Yo, you are singing my tune. I don't know that I've ever shared with you that I was mayor of Foursquare. I won an award for being-
Alex Zhang 48:32
Baratunde Thurston 48:33
... the best mayor in the Foursquare universe and I competed with someone for the mayorship of one venue in New York City. We had campaign rallies and we'd made-
Alex Zhang 48:42
Baratunde Thurston 48:43
... signs. We picketed each other's moments and it made civics fun even though that was a sandbox. We were playing and we had no ownership over the platform we were playing.
Alex Zhang 48:53
It made technology fun. I mean, that sounds so fun, Foursquare back then. Now, we're left with these massive behemoth social networks that don't feel fun anymore.
Baratunde Thurston 49:01
So I want to build on that and I'm seeing a bridge. I hope that this is where it can go. If more people participate in social DAOs like this with the city metaphor rather than the business growth metaphor, it's a chance to play around with democratic culture.
Alex Zhang 49:18
Baratunde Thurston 49:18
It's a chance to use those muscles of not just voting, even quadratically, but contributing what you described about having your civic contributions recognized by attending events, by showing up for town hall meetings, by bringing your offerings to the community to participate even economically in that rather than just keeping it to yourself. So, resource distribution, I want to see that practice replicated beyond the Discord server and beyond the FWB app. Do you see that bridge happening? Do you think that this online civic innovation practice can affect our offline civic innovation practice?
Alex Zhang 49:58
Yeah, absolutely. I think it's all modeled behavior. I think if people can begin to see that these mechanics are fun and they work and they can improve something and might restore faith in the overall system and structure itself, which then might encourage more ripple out effects for people to get involved in their own local organizations or their own local cooperatives or groups. So, our focus at least is to really think about the role that crypto can play in culture. We want to be advocates of crypto. We know crypto has been cursed with a case of really, really bad PR and rightfully so, tons of scammers, tons of charlatans. It's a very muddled space, but for us, we care about being advocates for it.
We threw an event in New York at Good Room, a legendary club in Green Point that was really struggling during COVID, a bar venue that has been a bedrock of Brooklyn for 10 years. We threw a party and we did an auction with all the proceeds to go to that venue and raised 60, 70K in crypto and taught that venue how to set up a wallet, how to custody those assets, how to earn more of those assets that ultimately they said help them achieve 50% of their fundraising goal via Kickstarter. Things like that, we just want to show people that crypto doesn't all have to be bad. It doesn't all have to be about gatekeeping. It doesn't all have to be about scams. There's people building interesting things in this space. It's coming whether we like it or not. We hope to be one of those corners of the internet that uses crypto in an interesting way to show folks that it can accrue different forms of value beyond just financial and can lead to stronger human coordination, can lead to better incentive design, and can hopefully create new digital spaces that are more closely and self or community governed than our existing options.
Baratunde Thurston 51:39
I want to spend three more hours with you. I can't do that. What I can do though is reflect briefly on the crypto comment as a bridge to the role of economics in general. You've cited Wendell Berry, this poet, novelist, environmentalist saying, "A community to be whole must also be an economy." Look, my cards are open. I hold some crypto assets. I'm a member of some DAOs. I'm also deeply critical of the idea that we need to financialize things in order to innovate them while I'm also excited by new models of ownership. So, I'm conflicted, but informally, optimistically skeptical.
Hearing that quote about community to be real must also be an economy, that rubs me a little odd. It sounds a little controversial and I'm like, "Does it though, at least the way we have recognized economy with infinite growth and all the harm that comes along with it?" So can you just explore that a little bit with me? What do you mean by that? Why do you cite that statement and how do you think it means we should practice community truly?
Alex Zhang 52:43
Yeah, I love that question. I think we need to decouple the definition of economy from late stage capitalistic American economy. I think economy as a definition is just an exchange. So, when I say that a community to be whole must also be an economy, I do not mean a community to be whole must be a late stage capitalist profit-driven entity. An economy doesn't even need necessarily be money. It can be an economy of non-financial goods. If you study, I forgot who's the author, but Debt: The First 5000 Years, the first quarter of the book, it's the history of debt and how debt was created.
They study how most of these groups and tribes and organizations of people existed and scaled by trading Lila cloths and seashells and various different goods and currency was just the most effective way to actually create a ledger of one goat equaling six cows or whatever. I can only speak to the experience I know as I'm not an economist and I'm a club kid. Clubs have economies. You're trading and bartering backstage tickets, drugs, drink tickets, experiences, sex. Whatever it might be, there's an economy there. There's an exchange of energy. There's an exchange of experiences, because I think any community that has actually begun to grow an identity, there is always an inherent urge, I believe, to create, to create memes.
I use memes as the broad conceptual thing, to create shared language, to create culture. An economy in exchange of those components, whether those are financial assets or non-financial assets, feel incredibly native and organic and emergent. So, yeah, when I quote Barry, I don't mean that every community needs to have a token or every community needs to be financialized or should exist to drive profit. Any community that has meaning, there are probably ways in which that community exchanges things between each other, whether it's a potluck and they all bring food to a house. That's a form of an exchange, a value being exchanged across one another.
Baratunde Thurston 54:46
Thank you for that update. The book is Debt: The First 5,000 Years by anthropologist, David Graeber. You all did a census, Mayor. You did an FWB census, and we touched on this. One of the pieces of feedback was the Discord was overwhelming, said it was a fire hose. So, you're trying to solve that, right? You already announced this app and that's going to help that out. But do you think in terms of the scale that a DAO could get, how big do you think a DAO could work at the scale of a nation or a major city or something in between, a state?
Alex Zhang 55:22
Yeah, absolutely. I mean, I'm not a huge subscriber of Balaji Network State. I think he can be a little bit too utopian.
Baratunde Thurston 55:28
Alex Zhang 55:30
Balaji Srinivasen who wrote a book called Network State, which is digital cities and digital nation states. Look, yeah, I think DAOs could reach that scale. I think you're seeing DAOs that have now accrued $60, $70, $80 million worth of assets, which could probably become comparable to super, super small towns or cities. It's only a matter of time before some of those DAOs begin to actually connect and trade with each other forming super DAOs. I think that's totally in the world, but I think maybe the question under your question is, "What does that actually look like? What does it take to get there?" I think ultimately, anything that reaches the scale of a nation state will ultimately become a network of DAOs.
There will be sub-DAOs as we call them in our space where you have micro committees or organizations that custody their own assets, that trade and operate with the parent DAO organization in interesting ways that ultimately that network itself, you can call it federalist states versus the nation, however people would want to structure it. Right now, it's still super early and it's still super reflexive based on the larger crypto economy, but I totally see a world in which DAOs can reach very large sets of scale that end up becoming networks or nests of smaller organizations.
Baratunde Thurston 56:42
One thing that I'm intrigued by is I'm concerned about a divestment from the IRL universe in favor of online universes. I think that's what freaks me out so much about Zuckerberg's vision of the metaverse that we're just going to live with goggle strapped to our faces as it eventually just have catheters and feeding tubes and never leave our shelves. We'll be stored inside, but we'll have all this rich life through the screens. I want to see the combination. I want to see us use digital tools to enhance not just our digital lives, but our whole lives.
So, thinking about DAOs, what if we flipped it a little bit and said, "Okay, you're already a member of an apartment complex or a county or a city. As a part of that residential relationship or that physical relationship, you get a DAO membership too to enhance your ability to self-govern with others"? So, you're not trading one for the other. You're hopefully using one to inform the other. Have you seen anything like that? What do you think about that idea of a complimentary DAO or online governance community rather than a substitution for physical community?
Alex Zhang 57:54
I mean, that's by far what's most exciting to us. I think we all don't subscribe to Daddy Zuck's Metaverse link up goggle verse. It's not interesting to us either. We've always said technology should accentuate reality and highlight physicality and be a lot more high fidelity. I always say we live in the metaverse now, right? Our phones are so connected to our lives and I can open it at this exact moment and find 15 things to do in New York City and friends to connect with immediately and jump into it. That to me feels like some liminal space between physical and digital, which is I think the actual definition of the metaverse. In terms of DAOs as applications to real world structures, yeah, I love that.
I think I saw someone in the comment mentioned city DAOs, a way that DAOs can steward land conservation and preservation. I think for us, we're very much coming at it from physical. We're thinking about, "Can a DAO actually govern a decentralized events network? Is there a way where DAOs can actually reward and allocate capital to people who want to throw events all over the world?" That's something that I'm super interested and passionate about. Full loop to the beginning of most things shouldn't be DAOs, I totally still stand by that. Most things don't need to live on the blockchain. Most things don't need to be crypto based, but in a world where that technology provides real value to that organizing structure, then I think a DAO is a really great thing to explore in terms of how you can create fundamental transparency and value accrual to the people who participate in that network.
Baratunde Thurston 59:26
You've mentioned many times that DAOs are not required and that crypto is not required. I want to emphasize that point. In season three of this series, we had on Pia Mancini of Open Collective, which has created this framework for organizations to collaborate around fundraising, legal, administrative, and offer full transparency around all those numbers.
So, they can save money but also show how they're using money, especially if they are decentralized organizations like Mutual Aid Societies, et cetera, and don't have the budgets to hire their own lawyer, their own accountant, et cetera. To what degree is the token of requirement versus money of some kind? Can it be credit cards? Can it be US dollars to still achieve so many of the goals that you want, which is value accrual, transparency, and a sense of participation beyond some concentrated group?
Alex Zhang 1:00:19
I mean for transparency and value accrual, those are the tenants of cryptocurrency. I don't know how you would enforce credit card transparency because those are all managed on centralized servers. You can't really look into that unless the company publishes that data and then there's no way to even verify that what they published is 100% accurate versus on the blockchain. No one can manipulate that. That's all run through smart contracts. So, that to me-
Baratunde Thurston 1:00:44
Baratunde here with an explainer-tunde. Smart contracts were conceptualized by a computer scientist and legal scholar, Nick Szabo, way back in 1994. They've since been incorporated into blockchain networks that cryptocurrencies like Ethereum and Bitcoin run on. To try to be as simple as possible, a smart contract is a computer program written into a blockchain and it automatically executes the term of an agreement or contract when certain conditions are met. In theory, this eliminates the need for intermediaries, like my very trustworthy accountant or lawyers or notaries, and help ensure that all kinds of contract terms are followed transparently and accurately.
Now, smart contracts do have limitations. You've got to be able to express your contract terms in computer code in the first place. That code is tamper-proof, which is good for security, but bad if you make a mistake in the code or need to change the contract because you can't. There's a lack of legal and regulatory clarity on how these contracts are treated by existing authorities. So, overall, smart contracts are a great safeguard in theory, but they're still being worked out in practice. Sound familiar, kind of like democracy? Oh, yeah. Here we go. Anyway, back to Alex. I'm having too much fun.
Alex Zhang 1:02:04
On the blockchain that no one can manipulate that. That's all run through smart contracts. So, that to me addresses transparency. Sure, value accrual can be reflected in equity, which has been done in cooperatives. That totally solves that, but it's very hard to... I've invested and supported a lot of different fractionalized equity companies. We've seen so many of our friends raise companies on micro-equity fundraisers. I think those are great and those are super effective. I just think they're very non-favorable to non-US clients, people who don't have bank accounts, people who want to engage in it. It is a little bit limiting in that capacity as well.
Baratunde Thurston 1:02:40
So there's a large animal in the room that I want us to address, which you've hinted at in terms of the scandals and controversies plaguing this whole crypto space. We've had many, many collapses. The value of overall coins and tokens is down. SBF, FTX, WTF, right? It's wild with the promises that were made and the mismanagement in something that was supposed to be transparent and help people without traditional banking accrue value. The opposites happened in that case, but not just that case. Many others. You're in this world. FWB is a part of this world. What's been the impact of the loss of trust in a system that was supposed to be a solution to the loss of trust in the system?
Alex Zhang 1:03:26
I mean, it's a real shame. I think crypto really has been the subject of really, really bad PR for rightful reasons. I think in any space that's so hyperfinancialized, you had a lot of people who flighted in to make a quick buck. That's the issue with these hypercapitalist environments. It's effect on us luckily hasn't been massive, mostly because we've always operated in more of a social cultural space as opposed to a purely defi financialized space. Sure, it's made people a little bit more hesitant to be like, "Okay, am I about to buy this token right now? Is that actually a real thing?"
I've had a lot of people come up to in the last month and a half, not FWB people, but more just like your aunt at Thanksgiving who is like, "Is crypto going to fully eviscerate? Is it even going to be a thing anymore?" Yes, it'll still be a thing. It is going to continue to exist just as a space for the industry to continue to evolve and step up and improve transparency, its communication, because frankly, what SBF showed and FTX has showed that FTX is actually a case where if it were actually decentralized, that would not have been possible. It would've all been transparent. It would've all been clear. You would've been able to see the movement of funds from various different on chain accounts to different on chain accounts. The issue was he ran a decentralized company incredibly centralized all around him. So, ultimately, while the whole thing is completely disastrous, he was an example of why more decentralized exchanges like Uniswap are literally and technically impervious to what happened. It is impossible for that to occur because it is decentralized. If the entire Uniswap team died, it would continue to run and exist and the exchange would continue to fulfill exchanges of currency. That's really exciting to me.
Baratunde Thurston 1:05:11
What do you think will keep FWB on that side of things, keep it from being phased out for the next shiny thing?
Alex Zhang 1:05:19
We say we're not a crypto community. We're a community that uses crypto. So, I think as long as we keep community at the center of it and we continue to play with the tools in an interesting way that enhances the community and we remain culture first, then we'll be fine. Culture waxes and wanes. Look at a fashion house, you'll have a great season and the next season it'll be irrelevant and then it'll come back. I think of scenes in communities as similar. You can't be the hot community forever. Ultimately, as long as you're creating real value, people are really connecting with each other. It's coming from a place of genuineness. I think we'll continue to evolve.
We actually love bear markets because you actually attract people who are here for the right reasons. After we started in a bear market, we're now seeing more artists join being like, "All right, it's cheaper now and I can actually experiment and the stakes feel less high. I don't need to launch on art project that gets me global press, like all my peers, and instead I can make a stupid little project and share it and have fun with it and not be stressed out." That's what we love. Versus in the bull market, it was everyone joining to jump onto the train, which is fine, but those people aren't the ones defining and creating the culture.
Baratunde Thurston 1:06:31
Well, my motivation and our strong motivation for having you here is to talk about the value of the self-governance experimentation. If the price of experimentation is so high because the market's flooded with people who don't care at all about that, they just care about the financial speculation, then they're actually crowding out our ability to learn from things like this to improve things well beyond this. How has being part of a DAO affected the way you show up as a citizen, as a colleague, as a collaborator, as a member of community?
Alex Zhang 1:07:04
My leadership style in all the organizations I've been fortunate to lead has always been much more of a facilitator. I've never been like a dictatorial do this because I say, I'm the boss. Even in scenarios where I have been the CEO or whatnot, I've always enjoyed being one that distributes power, one that uplifts and creates structures for qualified people to emerge and to lead. Nothing makes me happier as a manager than when someone you're managing excels and exceeds and now is really owning a specific department or category. DAO is that with your users, which is so fun to me.
DAO is that with your community members where anyone who's done community work, social, nonprofit, civil rights work, knows it's about uplifting those people who are showing up to all the various different rallies and events and empowering them and to create that network effect, because they're all volunteers and you're not even actually paying them. So, I think of that as something that's always just been fundamental to my leadership style. DAOs have just now supercharged that because now it's a lot more literal. Now I can actually compensate them in this native currency. Now their work can be recognized on chain through the format of proposals, and that's created this really interesting loop where now I show up in spaces that aren't even crypto spaces from various different communities or nonprofits that I support or advise on and try to bring some of that similar consensus making between directions as opposed to "I'm the boss. Let's do this." That's just not how I lead.
Baratunde Thurston 1:08:40
Yeah. So, it has given you a place to practice more of what you've been preaching.
Alex Zhang 1:08:45
Baratunde Thurston 1:08:46
Alex, we title this show How to Citizen because we believe citizen is a verb, not simply a noun and a legal status. It's something a lot more and it involves action. If you were to interpret citizen as a verb, how would you define it and what does it mean to citizen to you?
Alex Zhang 1:09:04
I think to citizen is to have an opinion and then to feel the sovereignty to be able to put that opinion into action and to collaborate. Citizen is that translation from opinion into action and that forward energy momentum of feeling like you can actually make a difference in a structure. I think many of us have opinions about things, but we keep them to ourselves or we mumble them or we whisper them to a friend. But I think in so many different social structures, digital, physical, the ability to have an opinion on how something could improve or change and then be able to put that into action in a constructive and collaborative way feels like how I would citizen.
Baratunde Thurston 1:09:39
Constructive and collaborative, because yeah, there's definitely no shortage of opinions.
Alex Zhang 1:09:45
That's for sure.
Baratunde Thurston 1:09:46
Moving them to action is another one. Alex, thank you so much for joining me for this conversation.
Alex Zhang 1:09:52
Thanks for having me. This was fun.
Baratunde Thurston 1:09:54
Okay. We are shifting gears into the community. Speaking of community, audience questions. First up, Tania Fox, you got Alex.
Tania Fox 1:10:03
Alex, hi, thank you. I'm Tania Fox in Montreal, Canada. With taking venture capital, how does that affect the weight of other people's voting and how is that distributed in terms of the profitability of the other tokens?
Alex Zhang 1:10:20
So, we raised venture capital back in November. It was about 10% of the supply. That was a proposal actually. So, the community agreed to accept venture funding so that we put together a proposal that outlined all of the terms, and then the community actually had counter points, which was really interesting. Then we actually negotiated. I was almost like a proxy with the investors, and one of those counterpoints was actually decreasing their voting power. Obviously, the venture capitalists wanted more ownership in the network, but the community said, "We don't actually want you to have the equivalent amount of ownership to voting power." So we actually agreed on a 50% decrease in their actual voting stake.
So, while they own 10% of the network, their voting power is equivalently like 5% of the network. So, that was an example of diminishing their governance participation. In terms of profitability, this is an early stage project, so they're just betting on, "Hey, this is the most interesting project we've seen of DAO token usage. If this is the next digital New York City, we just want to own a lot of real estate." So they bought about 10% of that real estate that allowed for the capital to go into the treasury to then fund all these various different community projects and endeavors. So, I think their perspective of profitability is as FWB continues to expand, more people join, more people participate, more goods and services are being created. The DAO holds dozens of various different equities and various different companies that have emerged. It's them owning a percentage in that conglomerate or that holding of all these various different community-owned assets.
Baratunde Thurston 1:11:42
Thank you for that, Alex. We're moving on to Ned. Hit your question, Ned.
Ned Keitt 1:11:47
Hi, I'm Ned calling in from outside Madison, Wisconsin, Ho-Chunk nation territory. So, I'd like to hear more about the mechanisms you have for ensuring, I mean, like what you were saying with the venture capital thing, but more also to ensure that tokens do not equal gatekeeping in terms of who gets the demographics that get to be full participants. That question of we give tokens out to people who do earn them can very subtly and quickly shift to we give tokens out to people we believe deserve them and that we believe becomes a really tricky thing. I'm curious to know how that's worked so far.
Alex Zhang 1:12:27
I mean, I've got maybe a hot take in general in praise of exclusivity and that I think exclusivity actually plays a really important role in society. I just don't think all gatekeeping is necessarily bad. I think if everything were inclusive, I don't think there would be anything at all. I obviously believe in inclusivity inside of a community, but I believe if you can create an organization that has vision, values, and mission and principles, it should turn certain people on and turn certain people off. That's how you actually create a culture. So, I think in terms of the token equaling gatekeeping, we've done as best as we can of making that accessible to the people that we want to attract, which the people we want to attract are creatives, artists, technologists, because FWB isn't for everybody, just like New York City isn't for everybody or various different towns that you choose to live in.
So, our perspective has been ensure that price has various different entry points, ensure that there's always grant programs and scholarship programs for folks who are qualified and are a good fit but don't have the financial means can join, and ensure you have transparency and where those tokens are going to in terms of who's earned them and who hasn't and carry oneself with humility and knowing that we'll continue to evolve it based on real time feedback of how things are going. So, that's been our approach to date. Like I said, we've modeled a lot of it after club culture and club culture definitely isn't perfect, but that's been... What was the Studio 54 quote? Dictatorship at the door, democracy on the dance floor is a thing that we've always resonated with.
Baratunde Thurston 1:13:56
Thanks for that, Alex. I mean in praise of exclusivity, definitely a hot take. I don't think you're advocating for illegal discrimination, of course, but what resonates with me is the idea that you create a culture by having a vision, values, mission and principles. Real quick, I mean, that's what we're trying to do here with How to Citizen, to create a culture of democracy. Now, Ned, in terms of your question about who gets rewarded for contributions and the fairness of that, it sounds like the ability to abuse that system is going to be limited by how transparent the system is. So, thanks for your question, Ned. Okay, now we have Sara Hughes.
Sara Hughes 1:14:33
Hello, Sara Hughes here in Rochester, New York, part of the unceded Haudenosaunee territory. I am curious just because there's been a lot of information coming out recently about the environmental impacts of data mining, of crypto mining, of data farms, of just all of the infrastructure required to maintain blockchain and all of these other technologies online. I'm an oldie. I'm trying to keep up with the tech, but I would like to ask you if you or others in the DAO world that you are aware of are taking that into account in terms of scaling and also what the potential environmental impacts are of this community.
Alex Zhang 1:15:15
So, I can't speak to Bitcoin. There's tons of environmental issues with Bitcoin or the dozens of other chains. But in terms of Ethereum, the main currency that ours has built on top of has made it a top priority to address the environmental issues. The Ethereum community actually put up... It's called the Merge, and it was actually the biggest system upgrade that was run by a decentralized group of developers that is now reduced by 94% the environmental efficiency of Ethereum, which is really exciting for that community.
Baratunde Thurston 1:15:45
Yeah, Ethereum's system upgrade, it changed the way they validate transactions in the Merge back in September 2022. Actually, reports said that the switch reduced its energy usage by over 99%, which is amazing. So, thank you for the question, Sara. All right. We've got one last question and I'm going to ask on behalf of this person who's in a very loud space, Janine de Novais, a repeat contributor here, University of Delaware professor. Circling back to these questions about inclusivity, Janine wrote specifically, "What does the mayor think about issues of inclusion and diversity? What are the demographics? Do you worry about that? Why or why not?"
I just want to tag on, I know the way FWB grew initially was through networks, right? Friends of friends, it was Friends with Benefits, and those can be exclusive in a way that is biased against people who've been excluded already. If you're not in the network, you can never be in the network because no one in the networks knows you and vice versa. So, I'm very curious in terms of that access point, how you're trying to get beyond the inherent bias of that seed community in addition to just tacking on to Janine's question about demographics overall and your own thoughts on the diversity level and inclusion and diversity.
Alex Zhang 1:17:03
From a conceptual level, we care deeply about inclusion and diversity. It's one of our core values. I agree that network growth tends to be relatively homogenous. However, we started in an artistic community, which tends to be much more heterogeneous. Trevor's a Black founder. I'm an Asian American co-founder. Our team from the outset was very focused on creating a network that started with diversity built into the fundamental core of it. Unfortunately, crypto and technology skew heavily male. So, I would say the crypto industry at large, I would say, is 80% male. FWB sits probably closer to 60/40, 70/30.
We're constantly putting out initiatives to attract and create safety and onboarding for more diverse backgrounds that aren't our traditional main mix, but I would say just at its core, we just started from a really diverse community, just from the onset. So many people who joined FWB, it was their first ever cryptocurrency asset. In terms of diversity and inclusion, you can make a ton of arguments that diversity spans obviously beyond just race, from gender to age to socioeconomic background. We probably haven't been great at age. We're all relatively young and we're learning really quickly. We mostly skew towards late 20s, early 30s, mid-30s. Geographic region is pretty global, huge onset in Asia and Europe, but obviously being LA, New York scene and community, 50% of our network, 40% of our network are in those key cities. We believe deeply in diversity. We're constantly improving it, but I would say it's about putting in those mechanisms in place and making sure that your core leadership team is diverse, which I'm really proud that ours is.
Baratunde Thurston 1:18:44
Thank you, Mr. Mayor. Thank you, Janine. Thank you, Sara. Thank you, Ned, and thank you, Tania, for your contributions. I don't have any tokens for you, but I got a lot of love for you. Alex, thanks for taking the time with us. It was really, really what I was hoping for. Appreciate you, bro.
Alex Zhang 1:18:59
Baratunde Thurston 1:19:06
As promised, I didn't pitch you on any crypto tokens in this episode. Honestly, I really appreciate what Alex shared about the possibilities in this space, but I want to be clear, I'm not selling you anything. This is not a call to DAO or to blockchain or to crypto. This is a call to innovate and update our practice of citizening. In the case of Alex and participation DAOs like Friends with Benefits, the questions they're asking apply well beyond blockchain-based communities. They're the same questions we should be asking, whether we're talking about online communities or those offline. Are we valuing people's contributions? Are we fostering a collective economy and are we making decisions about the spaces we care about? We spend so much of our lives existing through online platforms. Just like we care about how we show up in our physical communities and the systems that run them, our digital common spaces demand our citizening too. Now it's time for some actions, starting with an internal reflection. Take a moment and think about your relationship to the digital spaces you spend time in. This could be social media, gaming, or a group chat.
Where do you feel like an active participant where you set the terms and the tone of the environment? Where do you feel passive like someone else is in charge? How might you change that relationship? Our next action is in the category of becoming more informed. We can create a healthier culture of democracy through Web 3.0 beyond starting and joining DAOs. If you're new to this world, the New York Times has a great primer on what Web 3.0 even is, and we've linked to it in the show notes. Once you read that, take a deep dive into the history of squads, a form of social and economic organizing that's shifting power and social dynamics away from an individualistic society.
If our conversation with Alex made you curious, check out our season three conversation with Eli Pariser from New Public. We go deep on how to better design digital public spaces. Last but not least, here's what I want us to try in terms of public participation. You're likely part of a decision making group, a tenants or homeowners association, a parent group, a committee at work. I'm so sorry if you're on a committee at work, by the way. Now, the next time you're at one of your meetings, take note of how the group makes decisions. Who speaks? Who's silent? What areas are open to input and what's considered off the table? Is there even an agenda? See if you can identify the culture the group has, chaotic, deferential, something else.
Can you find any opportunities for the group to make that culture more small democratic by rotating speaking or leadership roles or even just openly acknowledging how decisions are made and how that might shift. We don't always need to find or start new groups and spaces to practice this democracy thing. So, let's start where we are. If you take any of these actions, please brag about it online and use the hashtag #HowtoCitizen. Also tag our Instagram, @howtocitizen. I am always online and I really do see your messages, so send them. Finally, see this episode's show notes for more on these actions and a link to our bookshop.org account where you can find all the books Alex mentioned and any others you've heard about while listening to the show. How To Citizen with Baratunde is a production of iHeartRadio Podcasts and Rowhome Productions. Our Executive Producers are me, Baratunde Thurston and Elizabeth Stewart. Our lead producer is Allie Graham. Our associate producer is Danya AbdelHameid. Alex Lewis is our managing producer, and John Myers is our executive editor. Our mix engineer is Justin Berger, original music by Andrew Eapen with additional music by Blue Dot Sessions. Our audience engagement fellows are Jasmine Lewis and Gabby Rodriguez. Special thanks to Joelle Smith from iHeartRadio and Layla Bina.
Next time on How to Citizen. Alex believes that a community to be whole must also be an economy, but he doesn't mean they need to increase wealth inequality or drive profits at the expense of our humanity. A community economy is just a system that acknowledges the exchange of value, and it can work for all of us. No one believes that more than economist Kate Raworth.
Kate Raworth 1:24:11
What do you think is the shape of economic progress? Because if you listen to an economist, if you listen to a politician, the shape apparently is growth endlessly, right? Always up, always more, because no matter how rich a nation already is, I'm in the UK, you're in the US, we live in two of the richest countries in the history of humanity, and yet our economists, our politicians, think that the solution to all of our problems lie in yet more growth endlessly. There's no end in sight. Now, there's something utterly absurd about that, and I think we really need to take seriously what is the shape of progress.
Baratunde Thurston 1:24:43
Kate Raworth, author of Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, shares how we can create an economy that works for all of us, including our planet. Yay, earth! Rowhome Productions.
Let us know your thoughts about the episode. What did you learn or what surprised you or challenged you?
Share what you’ve learned. Knowledge is power! Tag #howtocitizen so we can reshare!