[7] We(b 3) Love Sub-Culture
If we find each other, it's not so niche.
Dear Readers,
Today we release our 1st March piece. If you are still here with us, thanks so much. 💛
This is our first long piece: we explore sub-culture and niches under the broader context of Web 3. When writing this piece, we landed somewhere that even surprised us.
Check out: Life in Color Twitter for summary threads of our our pieces there. 🧵🪡
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Pokemon, Magic the Gathering and Sneakers
TL;DR: I was obsessed with Pokemon and Magic the Gathering because I found value in them.
At some point in our lives, the most important thing you value are in the toy / collectibles categories. For most us, this was probably the early pre-teen years to right around “adulthood.”
For me it was mainly trading cards: Pokemon, Yu-gi-Oh and Magic the Gathering… with Magic being the one I was most obsessed about. For others my age it was Jordan Sneakers or Beyblades.
As a kid, most of my teen years revolved around these trading cards.
Every conversation, every free moment, every friend was somehow related to these trading cards. It wasn’t just about collecting, trading or playing the card game, it was the behaviors around the cards.
For example: each card we owned was handled meticulously. We bought card sleeves for each card (protectors for the cards). If the card was slightly bent we would trade our way into a better version of the exact same card because we couldn’t stand the little bent in the corner. The list of quirks goes on and on … but yes … we were obsessed.
As I’ve gotten older, I realized adults have their own version of this with some categories like sneakers spanning all age groups.
At heart, this is just about people finding value in things that they connect with. To some Pokemon cards make no sense, to others it’s an obsession.
But “value” is a loaded word.
If you search online for “value” you get back something like this: “the regard that something is held to deserve; the importance, worth, or usefulness of something.” 😄
If you ask some it’s about “price,” whereas others try to define it through “utility”. Utility is an interesting one, some people only see value in things that have some sort of utility to them. These are the people who buy a pair of shoes solely for the intended purpose of walking.
But the more interesting group is the one willing to spend money on things like trading cards for reasons outside of utility.
They are just toys … is there even a (big) market for these things?
TL;DR: they aren’t just toys and the market for them isn’t small.
Let’s look at a few examples.
Magic the Gathering (or MTG) is a classic I resonate with. MTG made ~$581M in 2020, a 27% increase YoY. Pokemon cards sold 3.7Bn cards in FY 2020-2021. Although we don’t have the actual revenues, we can size this fairly easily. Average cost of a pack of cards is ~$5 and a pack of cards has 10 cards, so we are looking at $0.50 per card. With 3.7Bn cards sold, we are looking at anywhere between $1.5Bn to $2Bn in revenue. Let’s round this out with sneakers. We’ll just focus on a classic: the iconic Jordan Brand. In FY 2020, the Jordan brand generated $4.7Bn in revenue, up 31% YoY.
😱
And it doesn’t stop there. There are also secondary markets for these so called “just toys.” And on the the secondary market, the price is decided by good old supply and demand (i.e. market forces). Some examples just to give us a sense of how big the secondary markets are:
Black Lotus: One of MTG’s rarest cards, sold for ~$511K in 2021 (yes… half a million dollars for one card.)
Charizard: One of the most beloved Pokemon cards fetches anywhere from $10K to $500K depending on the edition of the card.
Sneakers: A pair of Jordans sold for ~$1.5M. Within the sneakers category, there are now even platforms like StockX and Goat adding technology to a secondary market. As of 2021, StockX is valued at $3.8Bn and Goat is valued at $3.7Bn.
Enter Sub-Culture
Okay, there is obviously something going here and it’s not just “something kids play around with that have no value.”
This is about Sub-Culture: a bunch of individuals who find value in the same thing, come together to form a community and all of a sudden you have a market, a niche, a club, all the above and more…
And Sub-Culture is everywhere, from food niches, to the groups we support, to the collectibles we buy in order to bond with other people. I’d even argue that the companies we choose to join, where we are spending most of our waking hours… that’s Sub-Culture on some level.
Sub-Cultures are literally everywhere.
But it can only be everywhere today because the Internet enabled us to connect with each other, at scale. We can connect with people across so many channels and mediums and literally over anything—there is no topic that is too obscure on the internet because you can at least find a few others who are interested in the obscure topic.
As humans, we also cannot run away from the fact that connecting with each other is one of the most, if not the most important thing to us.
The Internet enabled sub-cultures to proliferate by removing friction and barriers for us to connect with others across the world along the lines of our chosen interests. To drive this point home, here is an example:
Say there are 10 individuals in 1,000 different neighborhoods scatter across the country. These individuals all love Pokemon cards.
Before the internet, an individual’s Pokemon community was constrained to the 9 other people in their neighborhood. It’s hard to connect with more Pokemon card lovers without physically leaving your neighborhood and finding those individuals elsewhere.
After the Internet, the 10 individuals in each of the 1,000 neighborhoods can connect with each other on the web, on forums, on marketplaces, on social media, etc. The internet enables a larger community to form, one that is big enough to create a market for Pokemon Card trading.
The internet helped solve the discovery and transaction cost problem, and instead of having the frictions of 1,000 ten-person communities, we gained the efficiency of having 1 ten-thousand-person community.
But the companies on the Internet took the Internet to an extreme. They started monetizing by solving discovery costs for us and created systems that promoted communities to grow from 10,000 people to billions of people. And soon it evolved from communities to a user base.
Scale (e.g. bigger is better) became the name of the game.
Here is the problem: As a Pokemon Card fan, I can now transact with millions of people online … but I have to pay for it. Obvious payments are things like transaction fees. Not so obvious things are giving a platform data that they can be used for further monetization. With scale everything became a bit more top down (i.e. can’t fight the system) as opposed to bottoms up or more grassroots (i.e. my voice matters).
With Scale came power dynamics and a top down system that is structured to have winners and losers. Everyone can create value but not everyone captures that value.
We may have gotten too big to fail and that might make us too complacent to fail.
So What? 🙋🏽♀️🙋🙋🏽♂️
So when a new technology surfaces that can remove friction to connect and belong with the added pitch: if we all create value then we all should capture that value… it gets interesting. This is the pitch that Web 3 is making.
If Web 3 can solve or minimize transaction costs and discovery costs (e.g. remove friction) but with a more bottoms-up, grassroots approach versus the current top-down system riddled with power dynamics … we get a very different world.
In this different world, we have endless sub-cultures and communities. Anyone and everyone who has a shared interest (no matter how obscured) can come together to form a community. In these communities, anyone can contribute, create value and more importantly share in the value they help create.
So… Why is enabling endless sub-cultures / communities and allowing individuals to participate in their sub-culture(s) of choice so important?
Because at heart, humans want to feel and be unique (i.e. I value my quirks and preferences) and connect with others who share those traits (i.e. I want to belong with with others who have similar quirks and preferences as me). We all just want to strike the balance between: being unique and belonging.
So Web 3 is the answer then?
NO… Web 3 CAN be the answer.
In future posts, we will talk about HOW Web 3 might actually be the answer. This post is meant to explore the “Why” to Web 3 because if the outcome of Web 3 is not exciting, then "how might Web 3 get us there” isn’t all that interesting.
Web 3 is mostly uncertainty right now 🕸 3️⃣
Web 3 is going through its endless experimentation phase right now.
Endless experimentation brings uncertainty. Unknown… unknowns…
We don’t know what we might stumble upon in Web 3. Just like we didn’t know what we would stumble upon on the Internet. At some point, all of these technologies were a crazy dream (at best).
But the outcome of uncertainty can also be asymmetric (upside) even if you have no way of imagining what that looks like today.
Uncertainty is different than risk.
Risk can be rationalized / analyzed by our minds. 🧠 🧠 🧠
To bet on uncertainty, you need heart. 💛 💛 💛
To invest (time, money, energy) in something uncertain requires a leap of faith.
The vision for Web 3 is wild, crazy, uncertain, potentially impactful (good or bad), and likely asymmetric.
Web 3 won’t just bring about any shift in society, it’ll bring about some fundamental shift(s) in society… this last part alone makes the leap of faith worth it for many of us.
What you choose to see is what you get
We know there is a lot to digest in this post… the vision seems crazy … you are wondering how all of this will work… etc etc etc.
No one can tell you if Web 3 is the answer or not. Web 3 might be the answer, it might not… hence the uncertainty.
You can be optimistic or you can be pessimistic… the choice is ultimately yours.
We don’t have answers, but we do have one more question:
What do you see in this emoji below?
Many see rock climbers.
We see people preparing for a leap of faith.