Shelly Palmer Interview Transcript
B.L. Ochman Welcome to Episode 363 of the Beyond Social Media Show the podcast for advertising, marketing, and digital communication specialists. I have the wonderful privilege today of being here with Shelly Palmer. Shelly covers tech and business for Good Day New York; writes a weekly column for Adweek; and he's a regular commentator on CNN and CNBC. He co-hosts the award winning podcast Tech Stream with Shelley Palmer and Seth Everett. He hosts Shelly Palmer Crypto Wednesday live stream. He's the CEO of the Palmer Group, which is a strategic consulting firm that advises fortune 500 companies on technology solutions, media and marketing. He's a totally prolific author.
Along with a daily newsletter that you must subscribe to immediately, his books include the Amazon bestseller, Blockchain, Cryptocurrency, NFTs and Smart Contracts: an executive guide to the world of decentralized finance, and many more books. He's also on the board of the ADL, a leading anti-hate organization and the co-founder of the Gun Safety Alliance. a network of business leaders and committed individuals from across every industry working together to reduce gun deaths in the US by 50% b,y the year 2029. I hope it doesn't take that long.
We should point out that you're not a certified financial planner that you don't give financial advice, we're going to discuss the role that digital currency plays will play and is playing in marketing; talk about what's possible, what some strategies may be, and how the field is likely to evolve. I gotta say, I'm guessing you don't sleep much.
A Crypto Primer
B.L. Ochman So I'm going to ask you, just really quickly to define some basic terms for listeners who aren't familiar with digital currency.
To quote you, the problem is that the world of crypto can be very confusing with all the jargon acronyms and other unfamiliar words. Maybe you're even saying crypto schmitco! Why should I care? And you've written voluminously, and you do webinars and so much more about digital currency and your information is one of the best possible places to get up to speed on the phenomenon. And there's a really thorough Glossary of all the terms you might ever need to know in your book, which everyone needs to rush out and buy immediately. But I'd like to cover a couple of them quickly. So if you'd indulge us on that one, that would be great. So what is DeFi?
Shelly Palmer DeFi is decentralized finance. And it's a catch all phrase for pretty much the technologies and the group of things and I can't call them more than that; that rely on blockchain technology, which is a decentralized or distributed ledger to function.
So decentralized finance are financial instruments, digital applications, decentralized applications that are reliant on Distributed Ledgers, which are the actual technical term for a blockchain.
A blockchain metaphor
Shelly Palmer Let's actually do this in a really simple way. DeFi is interesting, but you need to understand the underpinning, really and let me metaphorically lay it out for you. Imagine a blockchain is a block of granite. And you write on a block of granite You know, there's 3000 year old Egyptian hieroglyphs written on blocks of something and the pyramids, limestone or what have you, you write something in stone, it stays there for a long time, you know, maybe not blockchains won't last 3000 years, but they're gonna last a while. Importantly, you can easily tell if something written in stone has been tampered with. You look at it, you know, immediately someone's messed with it because it's written in stone. If someone messes up at stone, you know, and probably most importantly, the block of stone could care less what you write on it.
So blockchain you can just metaphorically call them writing something in stone because blockchains are theoretically immutable. You can easily tell if they've been altered and they don't care what you write into them. There's some mythology about something being on a blockchain being true. No! Something on a blockchain is verified to be written on all of the blockchain meaning that every node of the blockchain will agree with every other node of the blockchain.
So what you have there is what everyone will see is what's written there, whether it's true or false. That depends on what was written, but it will be the same on every copy of the blockchain, which means it is verified to have been what was written. You can tell if someone's altered it.
Now, in order for DeFi or any cryptocurrencies or NFTs or any of this to exist, you need what's known as a smart contract. That's what drives all of this, the smart contract is pretty much the same as a regular contract. Only difference, it's digital. And because it's digital, when the terms and conditions are met, or when it's executed, you can have it automatically call an action or do something.
So you can imagine a smart contract as a vending machine. To use the vending machine, you decide what you want, you punch in the number, nothing happens. It asks you for money, you put in your dollar and a half. And magically, if that's what it costs, they'll give you your item. And if not, it's gonna ask you for more money. So when the terms and conditions are met, you get it when they aren't, you don't.
And of course, now our little house elf of Harry Potter fame runs over to the block of granite with a chisel and a hammer writes onto the blockchain that transaction and you keep doing that rinse, lather repeat. And what you end up with, is a really interesting record of everything that's ever happened with that vending machine.
Now, instead of having that block of granite in one place near the pyramids, imagine there are 11,000 computers that have a copy of that piece of granite, and they all are exactly the same. Whatever transaction occurred in that vending machine 11,000. People can now say, Yep, that's what happened.
B.L. Ochman And that is missing the centralized banking and centralized regulation that traditional currency has, which also is its beauty, is it not?
Shelly Palmer So I guess, there's the beauty of, if you will, decentralized finance, and all peer to peer networks is that copies of everything go out everywhere, and there is no one actually in charge per se, because once this is set in the wild, everything sort of stays out in the wild. In our normal world, we have gatekeepers, who are central authorities, you might host your website at Amazon Web Services, you might like your email to be hosted by Google or Microsoft These are central authorities, you might keep your money at JPMorgan Chase a central authority, you trust them to hold your money. If you have stocks, maybe you have someone like Goldman Sachs, take digital custody of your stocks and they have your portfolio. When's the last time you had a stock certificate in your hand? That would be never or very, very rarely. Mostly there are people who are in the digital custody business, there are people in the portfolio business, and you're doing everything electronically, but you're doing it through Central authorities.
The difference here is that all of these tools are fully decentralized. There's no one to go see, there's no one to seek permission from. You just meet the terms and conditions of the smart contracts. and off you go. So if you want to start your own bank today, you go ahead and start it
Origin of Blockchain
B.L. Ochman It is really incredible. Actually, I read that the the blockchain initially was started by an anonymous Japanese person whose name I can't recall at the moment,
Shelly Palmer: Satoshi Nakamoto. But yeah, first of all, no one actually knows if Satoshi Nakamoto exists or not. And really, it's not Bitcoin that was started. Blockchain is a technology that has existed for quite some time prior to Bitcoin. All of the components of Bitcoin that made cryptocurrency possible were in the wild already.
What Satoshi Nakamoto did in 2008 2009, is write a white paper that really discussed and demonstrated extraordinary use of ordinary technology. And here you could have a file that could be transferred, that you could be sure was that exact file as opposed to another file.
When you think about digital files, GIF files, JPG files, Word documents, text files, any kind of music, you can right click it and move it from hard drive to hard drive, you can copy and paste it, I can post it, you can download it, pretty much any picture you see on the internet, you can right click your mouse and download it. And you'll just have it on your hard drive. You'll have a copy of it.
Using ordinary technology in an extraordinary way
Shelly Palmer So the idea of having a digital currency - something where a file could not be copied - and if it was copied, you know, it was a copy and therefore not real. This was a little bit unusual. In fact, it was thought to not be possible but using the cryptographic hash and the SHA 256 cryptographic algorithm and the blockchain as described in his paper or her paper, I have no idea if Satoshi Nakamoto is a male, female boy girl Martian or of this earth. For many people, we don't know. There are some people who have some guesses but the identity of Satoshi Nakamoto has not ever been revealed.
Bitcoin: the grandfather of digital currency
Shelly Palmer So I'm using this protocol, the Bitcoin protocol. We have Bitcoin and it was brilliant in a way. It's deflationary. exponentially deflationary. There will only ever be 21 million bitcoins or about 19 million them out there right now. So if you believe supply and demand drive the price, then theoretically they can only go up not down.
I think the number I heard is roughly 20% of bitcoins have been burned meaning they no longer exist. They've been lost or people didn't quite know what to do with them or they're in wallets that are tainted and the coins can't get used. So this is a limited supply of digital currency.
But Bitcoin is the grandfather of this technology. It's not the current technology there. I think everybody says cryptocurrency they immediately think Bitcoin and that is so wrong.
Dozens of different cryptocurrencies
Shelly Palmer There are dozens of different kinds of cryptocurrencies and literally 1000s of examples. So there are utility coins like ETH or Matic. There are meme coins, aka shit coins, like Dogecoin, where they're based on a meme, something that just means nothing and has no real backing. There are privacy coins, like Manero, which go out of their way to be untraceable, whereas Bitcoin is easily traced because Bitcoin is written to a distributed ledger and you can use the Bitcoin Explorer to look at its blockchain.
Bitcoin is not anonymous!
Shelly Palmer When someone charges ransomware with Bitcoin, everybody in the world knows where that ransom was paid. Everybody knows what wallet it's sitting in. And you can best believe the FBI, the Mossad, the NSA, the Mi6 are all watching that wallet, waiting for someone to take that crypto out. You may not know who owns that wallet, but you know exactly where the money is.
The moment someone goes to take it, they're doomed. So it's like, yeah, it's not anonymous, it's just you don't need to associate your name with it necessarily. But that doesn't mean your name won't be associated with it. And if you've any substantive collection of cryptocurrency, a company like Chainalysis knows your wallet, and they can kind of surmise who you are. It's nowhere near as anonymous as you want it to be, unless you're using a coin, like Mineiro, which they've gone out of their way to make that really, really, really hard to trace. There are so many different kinds of coins.
The Government’s View of Crypto
The IRS is Watching
B.L. Ochman You know, I work with a forensic accountant. And he points out that the IRS watches this as well. And it's very interested in it. And he advises that perhaps people might not want to brag about how much money they're making in their digital currency unless they're also paying their taxes.
Shelly Palmer Well, I think everybody is going to have to wait and see if the IRS actually makes their code consistent. Again, this is not financial advice. I'm not a financial adviser. I would highly suggest that two things happen. One, you talk to your accountant about crypto taxes because the new Biden packages that are about to be passed by Congress call out NFTs as assets that can be taxed under capital gains tax laws. And the SEC is a little bit confused about what is and what is not a security right now.
Gary Gensler has not been consistent in what he is calling it. Apparently ETH from Etherium and Bitcoin are not securities but others are considered security so get a financial professional involved. Oh and by the way understand that I mean deeply deeply understand should you decide to make some investments cryptocurrency and again this is one man's opinion not financial advice. This is inherently extraordinarily risky
B.L. Ochman So really it's a casino!
Shelly Palmer Those are safe compared to this!
Types of digital currency
B.L. Ochman What are stable coins?
Shelly Palmer Stable coins and other kinds of crypto that are pegged to a fiat currency - generally a Fiat or something that is more stable than crypto. So, the CBDC (Central Bank Digital Currencies) are being experimented with all over the world right now. Pretty much every central bank is trying to figure out how to do a digital currency they're calling a CBDC or a central bank digital currency. And they're considered stable coins and that they will be pegged dollar for dollar Yuan to Yuan pound for pound, Real to Real to a piece of fiat currency,
So theoretically, they shouldn't be as volatile as a pure digital cryptocurrency. whether that's true or not, we don't know. You don't need to have a stable coin be pegged to a fiat currency you can peg it to gold, you could peg it to titanium, peg it anything you want. But for the most part, they are pegged to fiat currencies from central banks. The United States doesn't actually have a CBDC yet. Janet Yellen promises that by December she'll have an opinion on what that will look like. But there are USDT, USDC, Paxos, Tether I mean, plenty of stable coins that are pegged to the US dollar. What you don't know is if that's true or not, and exactly how well pegged they are. The Winklevoss brothers have a CBDC for US dollars. There's plenty of CBDCs out there. Yeah, it's up to you buyer beware to make sure that you know, they actually have $1 behind each one.
B.L. Ochman Okay, let's have a quick definition NFTs - non fungible tokens
Shelly Palmer Non fungible tokens, so everybody has heard that term - non fungible tokens. So most of the things in our lives are non fungible. Most of the assets we own are non fungible, You're wearing a shirt, I'm wearing a shirt, they are both shirts, but yours is unique to you, it's your size, it's apparently, it's been worn, so it's not new in the package. This is my dress t-shirt. And while they're both shirts, they are not interchangeable for one another, your shirt's probably a lot more expensive than my t-shirt from wherever this is from.
Fungible assets are interchangeable
So, I might have a house, you have a house, I have an apartment or you have an apartment there, they're both apartments, but I can't trade you for mine. And mine for yours differs from a fungible asset like $1, which actually your dollar and my dollar are completely interchangeable for one another. My dollar will buy what your dollar will buy and vice versa. So crypto currencies are fungible, meaning that your Bitcoin and my Bitcoin are interchangeable for one another with no problem whatsoever.
NFTs authenticate ownership
Shelly Palmer But a non fungible token - an NFT - is a unique digital asset, it should be one of a kind, or one of a collection. So you might have a numbered NFT, which would, which would, you know, one of 101 of 1001 of 10,000, like you were buying lithography artwork that was numbered, or it could be a unique single piece of art, like an oil painting. There's only one and this is it. And the difference is that it's a digital file as opposed to a physical thing.
All NFT's are smart contracts. So what makes NFTs fascinating is that they authenticate ownership of whatever it is. So let's say that it's a GIF file or a JPEG file, this is the original. So says the Creator. I've now transferred the ownership to you. But you can have a smart contract, call another smart contract or have terms and conditions for a later date.
So let's say there's a secondary market. The secondary market is where my piece of art that I now bought might be auctioned at a future date to someone else, and Christie's may take this NFT and auction it.
The original creator who originally created NFT, in any subsequent sale, will get 10% of it and that will be automatic. So you may buy it, you only really own 90% of it. Because the original creator was 10% of whatever you're going to get as a royalty. And there'll be a transaction fee to so you might really both of you might not have your full 100% Someone's going to charge a transaction for moving that from place to place that might be an option for you.
But after all is said and done, it allows the original creator to participate in secondary earnings and tertiary earnings and on and on and on
A revolution in music and art
B.L. Ochman This is a sea change in music and art!
Shelly Palmer Yeah, absolutely. Because the artists and musicians have always been on the wrong end of the financial spectrum, when it comes to the exploitation of their own works.
B.L. Ochman So now they have the potential for a new kind of financial freedom, which to me is the most fascinating part of this. And so, I wonder if the era of the starving artist is coming to an end? And how many people will do this?
Imagining new business models
Shelly Palmer I think some of the NFT art is kind of 95% BS. I mean, I think there's a lot of fad here. But there also are ways to imagine new business models and that's the most exciting part.
What you probably don't know is that I started my career as a composer, producer of television advertising and I grew up in a musical household. Mom and dad were music educators, they owned music stores, and that's my childhood and I started writing music at age four. I became a union member of local 802 at age 12 and started playing professionally at that time, for money. I played a out a lot before that. Right out of college, I went to NYU film school and went right into the jingle business. I worked for a guy named Don Elliot and then owned my own music production company and spent the next 20 years writing full time. All of my dearest friends are musicians and singers in the New York area and Los Angeles proper because that's where most of the music I produced, composed and produced was realized. I owned a lot of recording studios, audio video studios on both coasts. During the pandemic. Some of my very dearest dearest friends, lifelong friends were starving.
B.L. Ochman Literally, I know!
Getting through the pandemic
Shelly Palmer Guitarists. Yeah, bass players,singers, trumpet players, trombone players, doesn't matter. If you play a musical instrument, you could not play Broadway. You couldn't play a studio gig. You couldn't sing in a church choir professionally, you couldn't sing at a nightclub. There's nothing you could do. You were landlocked. And best you could come up with to work in a little bit on zoom. Maybe you give a lesson you know on zoom, or possibly you can pull your band together if you are not scared of everybody having COVID and you could do some stuff, but nobody's making a living. And everybody on pure survival - necessity being the mother of invention. Everybody figured out a way to get online. And the creator class figured out a way to get paid for what they do, which is create.
Empowering the creative class
Shelly Palmer I think NFTs play a role in that and I think cryptocurrency plays a role in this. And if I think about the future, I think about decentralized finance as the toolset that's going to empower the creator class to participate in the value they create. Whether you're an artist, or a musician, it really doesn't matter if you create value with an intangible asset like music, where the live performance has a value to someone, and they will pay to be there. And the actual record of that performance, whether you've created or whether you've performed, a recorded performance doesn't matter.
The physical embodiment of that which will now live digitally can have a value long after you've created it, and you can keep part of that value. And I think so can the bass player and so can the drummer. Everybody can participate. This democratizes a lot of the business it takes out the recorded music company, it takes out the middle people, it takes your agent and manager out of there. Now will they do it?
Look, when MTV went on the air, they went on the air with a song "Video killed the radio star" in 1980. And that was a profound kind of ironic piece of art to start MTV with because as everyone knows, prior to MTV, there were bands that just made albums they were studio bands. Steely Dan rarely performed on tour. Walter Becker, Donal Fagan went into the studio, and they came out with these incredible albums and people loved them. But no one ever saw these guys, they weren't going out playing out, you couldn't go to a Steely Dan concert, you bought the record.
A new set of skills needed
Shelly Palmer After MTV launched, you had to be a whole new set of skills, you got to be a completely different kind of artist, you had to be great as a video, videographer and video maker, you had to be great on camera, you had to have this amazing presence. As technology advanced, you know, I'm not telling anybody something they don't know how to become first an internet professional and then a social media professional. Now, you have to be a TikTok star. Because your kids are going to discover music not on the radio. If they're not going to discover you anywhere they're gonna discover you and TikTok you've got to make an interesting Instagram TV and interesting TikTok.
So will you now be an interesting NFT artist? Will you now be an interesting cryptocurrency or DeFi toolset user because if you're not, you will not be able to do what Madonna did with video or what Gaga did with social media or what Taylor Swift is able to do in the world of a post internet kind of TikTok like, where you you can choose the artists one after the other you can search to see the pivotal moment. By the way. This isn't new. Right? We've had to evolve with technology. Have they said that? That Kennedy was the first television president
B.L. Ochman He certainly was
Shelly Palmer When Nixon and Kennedy debated, people who heard it on the radio believe Nixon won. People who saw it on TV believed Kennedy won. Why? Jacqueline had him wear makeup she chose his outfit. Nixon refused to wear makeup. He was flop sweating, so they had close ups. And so when you look at those debates, the kinescope to those debates. You see Nixon like nervous and flipping out and looking like shifty eyes. Kennedy is just smooth and gorgeous. But you listen on the radio to the substance, you kind of go, Oh, wait, I think Nixon has this.
Here comes Web 3.0
But they were totally different. Totally different medium. And you could argue that Obama was the first internet president, you can certainly argue that Trump was the first social media president.
Shelly Palmer So now we're going to have artists, creators and politicians that are decentralized finance or web 3.0. whatever they are, and that's what's coming and it's coming as sure as you and I are sitting here and there's nothing that's going to stop it.
Brands and crypto
Should brands jump in?
B.L. Ochman I think that's wonderful actually. So let's move on to brands. Please explain some of the uses and then let's talk about brands and digital currencies.
You've said the usual "test learn, modify, repeat", that model doesn't apply anymore. Several major companies have jumped in and famous people are issuing NFTs. Coca Cola, Microsoft, Nike, Taco Bell, little NAS X just released his album as in NFT. Time Magazine, Major League Baseball, the NBAl
Are we looking at FOMO or should brands be jumping in?
Shelly Palmer You're looking at FOMOl There are reasons to issue NFT's.
B.L. Ochman When does it make sense?
Shelly Palmer Well, if you can imagine a business model where you want to have first party data from know your customer, where you believe there is some value that you are creating for the user, that justifies their payment for the NFT. Whether they can invest, whether it's investable, or whether there's an investment thesis or whether there's collectible value and digital collectible souvenir value that is up to the brand.
I think it's really difficult to separate out the wheat from the chaff here, for most people, because just some random JPEG file with some art on it does not constitute something of value. But if you're a brand, and you've got a loyalty program or a couponing program, or you've got a program where you can help create value for your audience, or you can bring together a community of passion or a community of interest around your brand, then an NFT is a good way to aggregate that data, it's a good way to collect the people, and it's a good way to create a marketplace for that interchange. If you can't model that out with your marketing. Don't do it.
The widget of 2021?
Shelly Palmer By the way, it is literally the widget of 2021. You know, there was a time when, early on the web where everybody had to have a widget, there was a time when everybody had to have an app. Now people realize, you know, I don't need an app, I need a mobile web experience, I need a way for you to serve as data and get my consumers to easily interface with my tools, so that I can serve them best and give them the best user experience possible.
The best user interface possible that may be an app, but it may not be, you don't need to spend $2 to get someone to download it and have it just live somewhere in their smartphone, they never open it again, what you need to do is have a compelling reason for them to interact with your organization.
Creating community around NFTs
Shelly Palmer So if you have an NFT that is a compelling reason for someone to interact with your organization, you're creating value for them and doing something that's purposeful. One of my clients is is doing something very interesting with retired carbon units, carbon credits, and so the demonstrating that these carbon credits have been retired, they've turned them into NFTs and it's part of the social responsibility they're allowing people to purchase these and they're matching the dollar for dollar and donating to save the environment like that kind of community of passion around some really important ecological and sustainable program is a great use of NFTs.
Ecological impact of crypto?
Shelly Palmer People are gonna go "Wait! Don't NFTs burn a ton of electricity?! Yes, they do if you do them one way.
But they don't if you do it in a different way. And so, you know, depending on how, under the hood you get, if you're just reading the headline, then yeah, these are things that use a lot of electricity. If you look at how it's actually done, you'll realize: Wait a minute, 50% of these plants use renewable energy because it's cheaper, it's in their best interest to use the cheapest electricity and it's in your best interest for them to use renewable energy. So
How crypto mining helps power companies
Shelly Palmer Wow, everybody's got a win win. It's using a lot of electricity, but electricity, is not really contributing to the carbon problem that people believe it is. And more importantly, electricity is not storable so if you don't use electricity - meaning if you don't level out the power grid in every jurisdiction, the power grid gets a little weird. So putting load on the power grid in a programmable way - actually if you ask power companies - is pretty good for the power companies and they'll tell you that since they don't have batteries to store their stuff, it basically let it go out into the ether when they can't use it. So it's a pretty interesting trade off.
It's a more complex story than we can get into right now but energy management is probably benefited in many ways by the renewable energy dollars that have been spent by the people who have been very very into Distributed Ledger's and decentralized finance.
China and El Salvador’s crypto issues
Shelly Palmer China is using the "it's not ecologically sound" argument so that they can gain full control of the currency in their country. They can't make me believe for a second that they have any interest in anything other than that. Every move they've made has been about controlling currency
B.L. Ochman Equally so you have El Salvador saying this is now our fiat currency. that was an insane move. They will lose their banking certifications, all sorts of issues come for them.
Shelly Palmer Maybe, look again, best to talk to a financial professional about this and someone who's deeply steeped in money markets and monetary policy.
What I think I can add to that conversation, which may just be noise to be fair, seriously because what is one man's opinion, this is not, you know, you should really talk to an economist or someone who's really into monetary policy about what this may mean.
Making Bitcoin fungible
Shelly Palmer It makes no sense because they're at best a Bitcoin transaction. If you're at 5 transactions to print 10 transactions a second, they would have to adopt lightning network or some other protocol in order to make Bitcoin fungible to the point where you could use it. For reference the Visa network when you charge on a Visa card, they can handle up to 65,000 transactions per second. On average, they handle 17 to 1800 per second. Christmas Eve is 2500. But that's not five, right? It's not 100 we're talking about. Enough transactions per second where everyone could use it. That's Thing One.
Thing Two is Bitcoin goes up and down somewhere between 30 and 50%, every four or five weeks, and has been doing so for a long time. And once in a while it loses 50 - 70% of its value and stays there for six months or a year. I don't know how anyone can pay someone in Bitcoin, unless they sell it immediately for fiat currency that is pegged to something or stable in a money market, how they could rely on it as a store of wealth.
Now, that's again, just common sense. Exactly. Yes. They could have chosen dozens of other kinds of cryptocurrency. And if you look at a country like Brazil, where cryptocurrency is in, hard, fast, use every day. Oddly enough, it's not in use by rich people. It's in use by poor people. Because the fiat currency in Brazil is not serving them. They're using their own. That's fascinating. Look at 19th century America, Wild West, n the 1850s 1840s. There's hundreds of currencies: banks are issuing their own, towns are issuing their own. We're out in the prairie somewhere, there's no way to get there's no national currency.
B.L. Ochman That's the problem with El Salvador: other countries might not have the same currency, and everybody's got to have a way of dealing with each other.
Shelly Palmer We're in a weird way, though, - and again, best to talk to someone who understands monetary policy better than I do. What they have done is they've said, bring all your currencies on an exchange, transfer them or translate them to Bitcoin. Now you can use your Bitcoin. So you know, in a very strange way, it's great for Bitcoin, it may turn out to be okay for El Salvador. It doesn't seem like it was a brilliant move. But those of us who are long on all cryptocurrency, see it as a net positive. Although, again, I'm not sure it's a net positive for the people who live in El Salvador.
B.L. Ochman What's the word that you use toddler, nodler? long term?
Shelly Palmer Hodler.
B.L. Ochman People who hold on to their currency
Shelly Palmer No one really knows if that's hold on for dear life as an initialism h, o, d L, or if it was a typo, but to hodel or to be a hodler is someone who's long on crypto. It's a slang term.
B.L. Ochman That's a funny word!
Shelly Palmer I think it is a funny word. I think it was originally a typo. Although people think it's an initialism for a hold on for dear life.
Are NFTs risky for brands?
So let's go back to NFTs and brands, what kind of risks are there for brands that invest in NFTs?
Shelly Palmer I don't think the risks are that great. Other than leaving your clients holding the bag.
If you look at the way the world of crypto functions, there are these are foundations. They are democracies that are communities of practice around the idea of cryptocurrency and decentralized finance. That's how all of the coins work. You can look at the Cardano Foundation, which has their Ada coin, Etherium Foundation, which has Eth, you can look at Cosmos which is the Tera foundation.
Tokenomics for brands
Shelly Palmer And if you want to really understand this business, you really should go read the manifestos of these foundations. They have lofty ideals, some of them are about "I don't want the government involved in my wealth and finance" and some are about "I want to make this accessible to people who are unbanked". Some of them are "I want to be able to trade overseas freely." Everyone's got their own kind of way they're thinking about this.
And each one has a different kind of tokenomics. And the tokenomics are really important to you because this is how the initial coin offering was made.
Questions to ask
Shelly Palmer How many people own these coins? Are there a small group of people who are part of the foundation who own the coin, and then some of the coins are in the public? Are there some held by the foundation's Treasury? How many will be released? Is it an inflationary or deflationary currency? Are all the coins already minted? Or can they be mined over time or minted and rewarded? Are they burning coins? Like what are the tokenomics of each foundation?
Because without understanding this, you will never be able to understand the value within NFTs when you ask if a brand can be burned by the NFT. The question is answered with a question. Did you have noble reasons for value creation? Or were you just goofing around for FOMO reasons because if you're goofing around, you better hope it's just considered a fad and that they were either free or really cheap Dollar NFTs or whatever.
Dangers for marketers
Shelly Palmer But if you're charging people real money and you burn them and they're left holding the bag or there's no liquidity in the end, there's no yield management. So they cannot seek yield. They cannot liquidate their assets; there's no market for it. And you charge the money and they blame you. I think that's fairly dangerous for marketers, I wouldn't be messing with this unless you understood fan development value and an audience development value and business development value of this particular toolset.
B.L. Ochman The issue becomes are there marketers who are qualified to advise corporations on this topic? That's a big question. And, you know, right now, it's like, like saying, "Look at our website" was in 1995, you know, "look at our NFT." I mean, it's the same thing! The question becomes one of the sustainability of it .
A war is coming!
B.L. Ochman Jumping ahead to like, 2023, how do you think this will evolve?
Shelly Palmer There's gonna be a war, a real serious war between governments and the world of decentralized finance. People are going that way, people are going to start storing a lot of money. There's a couple trillion dollars there now. By 2023, there's going to be more trillions there.
What is the government? A government is information, the military and currency. So if you have those three things, you can have a government. If I have a landmass, I've got a social contract, I issue currency, I protect them with my military, and I control information. I have a government, that's the definition of every government pretty much on Earth.
The purpose of the government?
Shelly Palmer Well, if you take currency away from the government, this is problematic. Now in practice, they can't take it fully away, because I have a house in a little town called New Milford, Connecticut. And yeah, there we have roads, and they need to be plowed. And we have electricity, and we need to electrify our houses, we have schools and water flows. We need water. And so there is a Commonwealth of New Milford where we pay some taxes to the Commonwealth and the Commonwealth provides police, fire protection, you know, Fire Department, police protection, all these things. A school school system. We don't pay them taxes, they can't do that. And so at a certain level, the social contract I have with my immediate community that can be the physical community I live next to is immutable, and I really can't do much about that.
Now I can be really bummed about the federal government taxing me and I could say, you know, you're making cruise missiles and you're dropping them on people. You're building aircraft carriers, I don't need them. And I don't know how many atomic bombs we need. And I don't think you're doing a good job, blah, blah, blah. So I don't want you taking that, like, you can have that argument with someone. And people do have that argument every day. Right?
Optimism is needed
Shelly Palmer So you know, there are people who are going to say I'm going to take my money, and I'm going to spend it my way. I'm going to do something different. And then this war is going to happen between central banks and and fractionalized lending facilities, regular banks, and cryptocurrency and decentralized finance, this war is coming, and the regulators are going to do their best, and the government's going to do their best and the money is going to do its best, that decentralized money because it's going to be a lot of it. That was gonna happen.
But I think the way you should think about this isn't that. I would say, if I look to the future as a technologist, optimist, and someone who thinks about innovation every day. I think it was 1980. I think it was 1980. It could have been as late as 82. But I think it was 80. I got my first Apple2+ computer.
B.L. Ochman Oh God, they were great.
Shelly Palmer I think it had 140 kilobyte, a five inch floppy disk drive, and a green screen monitor from somewhere. I want to say it had eight kilobytes of RAM. And I think it had a 6500 processor in it, a Motorola processor. And it word processed. It did a database. There was Visicalc, which was an early version of Excel. Nothing's changed from the capability set of a personal computer from that day to today except the speed and capability and of course, the interconnectivity.
Financial democratization is coming
Shelly Palmer But many things have changed because of the democratization of computation and information. Social media is completely about that smartphone we're holding in my pocket is completely about that. Everybody's connection to everybody is completely about that. We democratize connectivity and information with the personal computer and the microchip. If you really want to understand the future of defined decentralized finance, think of it as the democratization of financial instruments.
What would happen if you didn't have to go to the bank if you didn't have to see the government if you didn't have to ask someone's permission if there were no middle person, if you could just invent a new business model, create value and be remunerated for it immediately, by your own innovation and your own ingenuity and your own creativity. What if you could just go do it.
No permission needed
Shelly Palmer And that's really what happens if I want to write a song today. Or if I want to make a video today, I pick up my phone and make a video. And as soon as I'm done with it, it's available to everyone in the world, everyone who may not see it, but the body of knowledge of mankind has increased, because I have put my video out in the wild or music out in the wild or my oration out in the wild or my blog post out in the wild, I can do that with absolutely no one's permission.
Someone may take it down, somebody yell at me, but I can get it out there with no muss or fuss. Now imagine if I could create a business and I imagined if I could control money the same way. That's where this goes. How does it get there? Your guess is as good as mine. But everyone's going to add their own creative contribution to this, their own innovation to it.
The 1995 Metaphor
Shelly Palmer These tools empower and enable that. So your 1995 analogy is exactly right. It's 1995. Someone just invented HTML, the new version of it and DeFi. Marc Andreesen just invented Netscape. And we are just about to get into we're leaving AOL and Prodigy and Compuserve. We're about to get into the world wide web.
That is the metaphor that holds perfectly here, but imagine it with finance, as opposed to with information, and you'll have a good intellectual framework to think about the future.
Here comes the Metaverse
B.L. Ochman I have one more question. What about the metaverse? How will this play into the metaverse?
Shelly Palmer I think it's all part of the same puzzle. The metaverse is going to be fully dependent on people's ability to innovate and create value for people.
Why am I going there? What is the metaverse to me? We're about to enter the transitional age between handsets and extended reality. Our smartphones are going to first be the engine that drive our extended reality through the glasses we put on and then ultimately the technology will miniaturize enough and battery power will be good enough and cloud connectivity will be hardcore enough the low latency high bandwidth networks will be robust enough and ubiquitous enough where our eyeglasses will just be that and ultimately we'll have them probably surgically implanted.
An AI assist for everything
Shelly Palmer But at the moment, we're in a transitional phase between using our handhelds and, and this new extended reality where I have a heads up display for everything where I've got an AI assist for everything. I'm looking at you. I can't remember how you pronounce your first name. It tells me. I can't remember what exactly the formula for this is. I don't remember the recipe for making my grandma's blintzes. No matter what it is. I will be enhanced and augmented by trained AI models that understand me, that belong to me, don't belong to someone else. It's not a third party. And you know, this is the kind of world that we're heading towards right now. The metaverse plays into that.
Will the metaverse truly engage us?
Shelly Palmer Our avatars will live there. Is it going to capture people's imagination for anything more than gameplay? See, in the past, it hasn't. But the technology hasn't been where it is now. So I think if we're honest with ourselves, this is a new shiny object that is yet to be fully explored.
What we are exploring now we know is coming. You got Facebook out with Ray Ban Stories, there's sunglasses with the camera, and then Apple is clearly going to put out somewhere in 22, early 23, extended reality heads up displays that will go in glasses that you can have prescription made.
That is going to be unbelievably cool, or it's going to unbelievably suck. And I don't know which but my experience with Apple is that it's going to be unbelievably cool. And it'll go through its, you know, it'll go through its lifecycle. And then we'll see
I'm very excited about it. Metaverse. Time will tell. Extended reality? Clearly it's a future. Is it THE future? I don't know. But it's a future. And it's one that I kind of can't wait for
It’s time for marketers to pay attention
B.L. Ochman It's both exciting and terrifying at the same time. And so the world is clearly changing. And it's about time that marketers start paying attention to what is happening around them and stop saying “let me know when it becomes mainstream,” because that's already happening.
So Shelly, I will put all the links of all the places that people can find you and links to your social networks, to your books, websites etc. in the show notes. And I thank you so much for your time today. This is fascinating.