Capitalism, Communism, and the Metaverse

Freedom must rule the metaverse

The optimal ideology to rule the metaverse should be one part Reagan, one part Xi. Funny combination, right? Let me explain. 

Shortly before becoming President of China in 2013, Xi Jinping gave a speech outlining what socialism means. Early in that speech, Xi makes an important observation: “Which ideological system a country implements depends on one crucial issue: Can this ideology resolve the historical problems facing the country?” No matter one’s feelings about China and socialism, Xi’s observation is profound. 

That simple statement offers insight into any pairing of country and ideology you might question. In the United States, where our nation was born out of dissatisfaction about foreign rule and taxation, a capitalist mindset is the only sensible ideology. We fought for the sovereignty of our nation, and once earned, an ideological system that optimizes for freedom is a natural match.

As companies and creators build the metaverse, I can’t help but return to Xi’s question. What ideology resolves the historical problems facing the Internet? 

Unleashing Genius

In exploring this question, I also can’t help but see the parallel between the metaverse and the United States of the Revolutionary period. Those building Web 3 are fighting for freedom from taxation by the corporate dominated Web 2 era. 

And here’s where Reagan comes in. 

At his first Inauguration in 1981, President Reagan offered one of my favorite quotes: 
“If we look to the answer as to why, for so many years, we achieved so much, prospered as no other people on Earth, it was because here, in this land, we unleashed the energy and individual genius of man to a greater extent than has ever been done before. Freedom and the dignity of the individual have been more available and assured here than in any other place on Earth. The price for this freedom at times has been high, but we have never been unwilling to pay that price.”

Freedom and the dignity of the individual were natural outputs of the capitalist mentality born from America’s history. America formed as a nation where individual energy and genius were not directed by the state, but rather by the opportunities presented by the free market. As we enter the Web 3 era, Reagan’s imperative should serve as similar inspiration for the metaverse.

The metaverse that maximizes freedom will ultimately win. 

Freedom Begets Creativity

Reagan imperative’s matches the historical progression of individuals over corporations in the transition from Web 2 to Web 3. It’s also the only way for the metaverse to function in an optimal way.

I’ve previously defined the metaverse in three parts: 

1. An immersive digital world. 

2. A universal system of property ownership. 

3. A functional economy that participants can live on.  

Given this definition, there’s a further assertion we can make: The economy of the metaverse must rely on intellectual contributions of its inhabitants, not physical ones. Therefore, the metaverse will be built on the ownership of intellectual property not physical property. Unique and valuable intellectual property is built on creativity, and freedom begets creativity. 

Here, then, is the concern with established tech companies creating the metaverse. Any system where a centralized authority holds power over what can be said — which is related to what can be thought and thus created — can only be as creative as the centralized authority allows. 

Facebook and the other social companies have been mired in a year’s long conundrum over governing what happens on its system. What can be said and who can say it have been unresolvable issues. The result has been unclear policies that are poorly enforced by leaders not elected by the people. No one is happy, and no one will ever be happy under the centralized structure. 

The problem with social is an inherent problem with the ideology of Web 2 where worlds were not built on the imperative of freedom, but rather on evolving power dynamics between users and corporations. As Chris Dixon has noted, Web 2 companies align early on with users, but as users get locked into the platform, the power dynamic shifts to one of lock in and competition. 

Chris Dixon @cdixon

They do this to strengthen their network effect. As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows.

The Web 2 ideology fails to maximize creativity, the currency of the Web 3/metaverse economy.

As we enter Web 3, the playing field is level-ish. No true metaverse exists. Some have a head start, but efforts are being formed by big companies and small ones. In this digital land of opportunity, the freest metaverse should naturally gain the most users by virtue of having the most unique and creative experiences.

As part of that ideological and functional reality, it seems clear that decentralized systems built on censorship resistance are the basis for the freest system. 

Balaji Srinivasan has described a global framework about the future being a battle between Communist Capital vs Woke Capital vs Crypto Capital. Per his framework, Communist Capital is capitalism checked by the power of the state (eg. China). Woke Capital is capitalism that enables decentralized censorship, cancel culture, and American empire. Crypto capital is capitalism without states or corporations with decentralized censorship-resistance. 

Balaji Srinivasan @balajis

The future is Communist Capital vs Woke Capital vs Crypto Capital.

By its very description, Crypto Capital maximizes around the freest structure for participants, and thus the most creative environment. Crypto Capital is the natural structure for the metaverse. To invest in the metaverse, we should invest in the context of a Crypto Capital future. 

Placing Bets

In the past several weeks since Facebook announced its focus on creating the metaverse, along with its name change to Meta, any public companies that talk about the metaverse have been on fire. Unity, Roblox, and Nvidia all benefited from their possible roles in the metaverse. Outside of the public markets, crypto projects like Decentraland and Sandbox have also seen strong price appreciation. 

Companies and crypto communities, like countries, are built on foundational ideologies, and Xi’s observation is relevant here for investment purposes. It’s worth carefully considering the ideological alignment of said companies and communities relative to the winning ideology of the metaverse. Those companies and communities that embrace the ideal of freedom as an outgrowth to resolve their own historical challenges will be naturally positioned to win. Those that attempt to adopt freedom as a convenient marriage for profit probably won’t.