What Happens When You’re the Investment

Social capital is becoming economic capital.

A man's silhouette in front of a background made up of repeating zeroes and ones
Getty; The Atlantic

About the author: Rex Woodbury is an investor at Index Ventures and the author of the Digital Native newsletter.

Alex Masmej revered Steve Jobs—his favorite shirt was emblazoned with Apples that changed the world: Adam’s, Isaac’s, Steve’s. Masmej dreamed of moving to Silicon Valley to start his own company, but he just didn’t have the money. In April 2020, as the world reeled from the coronavirus pandemic, Masmej found himself stuck in his home city of Paris.

So Masmej did something few 23-year-olds would think to do: He tokenized himself. That is, he created a financial instrument known as a social token, a form of cryptocurrency whose value revolves around a person, to sell shares in himself. Holders of $ALEX would receive 15 percent of Masmej’s income for the next three years, capped at $100,000 overall, and would be able to exchange tokens for special privileges: 10,000 $ALEX bought a retweet from Masmej on Twitter; 20,000 $ALEX, a one-on-one conversation with him; 30,000 $ALEX, an introduction to someone in his network. In five days, Masmej raised $20,092, enough to send him across the Atlantic to San Francisco to launch his start-up.

I work as a venture capitalist in Silicon Valley, and I met Masmej in San Francisco. When he shared his story with me, I was struck by what Masmej’s path to California signaled. Rather than borrow money from investors, friends, or family, Masmej made himself the investment.

This may sound dystopian to some, the plotline of a Black Mirror episode. But social tokens are part of a broader and fundamentally positive phenomenon: everyone is becoming an investor. Over time, wealth has accumulated with a select few—the investing class—while the rest of America rents time as salaried and hourly workers. Only one in two Americans has any exposure to the stock market, and that exposure is stratified by income: Just 15 percent of families in the bottom 20 percent of income earners hold stock, compared with 92 percent of families in the top 10 percent.

But moves by Masmej and others like him point to a shift. More and more of the world is becoming financialized, allowing people to invest not just in companies or government bonds but also in art, collectibles, and celebrities. Parallel shifts in culture and technology are forging a new paradigm. The rules around how we create and capture economic value are being rewritten, opening up new roads to the kind of wealth creation previously limited to a select few.

Today’s youth are leading this transformation by rejecting long-held beliefs: that you should stay with a corporation until you’re ready to collect your pension; that you should spend the hours of 9 to 5 chained to your desk; that you should work for anyone at all. Nearly 80 percent of teenagers say they want to be their own boss; 40 percent aspire to start their own business. Young people watched their parents and grandparents get burned during the Great Recession and again during the pandemic. They harbor a certain cynicism: One 16-year-old mocked me recently for denoting laughter with 😂, rather than with 💀 or ⚰️. Gen Z humor is gallows humor. But this pragmatism breeds first-principles thinking. Why work within the “system” with a capped upside when you can use your hustle and savvy to dictate your own fortune?

We see this cultural shift in the 23 million people buying stocks on Robinhood and in the 46 million Americans who own cryptocurrency. We see it in NFT mania, in the deification of Elon Musk, in the GameStop phenomenon of last winter. If we expand “everyone is an investor” to “everyone is an owner,” we see ripple effects in the record-breaking 4.4 million businesses started in 2020, or in the 68 million Americans who freelance.

Even this generation’s superstars rethink old norms. The 19-year-old TikTok star Josh Richards had flirted with being a brand ambassador for Red Bull. When I asked him why he passed, he looked at me quizzically—why, he wondered, should he be the vessel for someone else’s wealth creation? That’s the playbook for celebrities of yesteryear. Instead, Richards launched his own energy-drink brand, Ani Energy, off the back of his 25 million TikTok followers. A year later, Ani is in over 400 Walmart stores.

A new cultural mindset around ownership is colliding with new technology. We’re on the precipice of the third era of the web. The web’s first era was about information flowing freely—think Google giving you access to the world’s knowledge. Most of us were passive consumers in this era. The second era was the social web—Facebook, Instagram, Twitter. People began to create their own content, and that content became the lifeblood of the big platforms. We became active participants, but the platforms devoured all the profits.

The promise of the internet was to erase the gatekeepers. Instead of waiting for a record label to sign you, you could share your music on Spotify. Instead of asking a publication to share your words, you could tweet. Instead of being tapped by a studio exec, you could become a YouTuber. But what happened is that these platforms became the new gatekeepers.

The third era of the web is about righting the ship. Social capital becomes economic capital. Value no longer accumulates to brokers and intermediaries.

What does this mean in practice? Consider the music industry. Today, record labels capture the lion’s share of the money in music. Artists walk away with a little, and fans certainly don’t get any. But in this new era of the web, everyone can profit from culture.

We all have the (slightly annoying) friend who insists that she knew about so-and-so before they were even famous. When it comes to Taylor Swift, I’m that friend—and I’m more than slightly annoying about it. I was a Taylor fan in her pre-Fearless, full-on country days, years before Kanye interrupted her onstage at the VMAs. But in our current construct of fandom, I’m treated no differently than the fan who discovered Swift on SNL a few weeks back.

This would all be different, though, if Taylor had done what Masmej did and turned herself into an investment. She could have issued a social token. Whereas non-fungible tokens, or NFTs, are so called because of the uniqueness of a digital asset, social tokens are fungible. In other words, each $ALEX token is interchangeable with every other $ALEX token, just like a dollar bill can be traded for any other dollar bill. (If the dollar bill were signed by Barack Obama, though, it would become non-fungible.)

Say Taylor had issued her own token—let’s call it $SWIFT—and say she had sold $SWIFT to her biggest fans. Say I was one such fan. Over time, as Taylor’s popularity grew, the value of $SWIFT would have appreciated. As an early believer, I would have shared in the financial upside of her growing fame. The $SWIFT I’d bought for $100 in 2007 might be worth $100,000 today.

The Taylor Swift mini-economy would serve both the singer and early fans like me. As an artist, Taylor could have funded her work by selling $SWIFT. She might not have needed to sell ownership of her masters, and she might not have been forced to rerecord her albums to take back control over her art. Taylor’s fans, for their part, would have been rewarded for a decade of patronage: We’re all evangelists for our favorite artists, and yet we capture little of the value we help create. Social tokens uniquely combine elements of patronage (support for the artist), fandom (closer connection to the artist), and investment (financial upside from the appreciation of the digital asset).

We can extend this example to any artist: What if you had discovered Billie Eilish on SoundCloud in 2016, or Lil Nas X before “Old Town Road” went viral? What if you’d loved the Beatles before they performed on The Ed Sullivan Show?

This isn’t some far-off vision; enterprising artists are already taking steps to build their own digital economies. The Grammy-winning artist RAC launched $RAC last fall with the caveat that fans can’t buy $RAC—they can only earn it through their fandom. RAC distributed $RAC retroactively to fans based on their support: whether they’d been a Patreon subscriber, whether they’d bought merchandise in the past, and so on. Fans could then cash in the $RAC they’d earned for exclusive access to the artist. You can envision this concept becoming more mainstream over time: What if the best seats at a Taylor Swift concert went not to the fan who has the most money but to the fan who has earned the most $SWIFT by racking up Spotify streams?

To be clear, the financialization of everything isn’t an unalloyed benefit. The phenomenon has a dark side. If everyone becomes an investor, the inverse is also true: Everything—and everyone—becomes a potential investment. As part of $ALEX, Alex Masmej designed a “Control My Life” component. Token-holders could vote on his life decisions—whether he should run three miles every day, stop eating red meat, wake up at 6 a.m. Token-holders had a financial stake in his success, so Masmej followed through on their commands. (To be fair, Masmej admits this was just “a fun experiment.”)

We’ll have to answer two key questions. First, at what point does human agency give way to financial obligation? And second, at what point does a relationship become a transaction? There’s a fine line between investment and speculation, and between speculation and gambling. What happens when someone loses money on $ALEX or $SWIFT? Financializing life and culture could distribute economic value more evenly and equitably, but the system must be designed with guardrails to ensure that we don’t sacrifice our humanity.

These are challenges, but all innovation brings challenges; these challenges shouldn’t prevent opportunity. Investing used to be limited to the stock market, something arcane and inaccessible to many Americans. Now nearly everything is investable. Masterworks lets you invest in fine art, owning a share of a Banksy. Royal lets you buy a share of a song and earn royalties—you could own a piece of the next “Bohemian Rhapsody” or “Hey Jude.” Otis calls itself “the stock market for culture,” letting you invest in LeBron James basketball cards and Air Jordan sneakers.

This new era of cultural liquidity reorients access to capital. The past decade was about transferring social capital: likes and shares and retweets. Our social capital powered the profit engines of Facebook, Google, and Twitter. We’re now shifting to an economic era of the web, one in which everyone is an investor. This doesn’t mean that there shouldn’t be regulation, that companies and institutions shouldn’t think carefully about what safeguards to put in place. It doesn’t mean that there will be a human stock market where we buy and sell our friends. But this economic era does mean that everyone can invest—in fine art, in iconic songs, in public figures they believe in. This era means that it won’t be the few who are dictating culture, but the many. Popular culture will finally live up to its name.