The Fourth Law
The DAO of Ken Griffin
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Since we last published in May, some things have changed. Notably: I got a new job.
And while the subject of this newsletter is neither about that job nor investment advice, it is worth clarifying: nothing in this newsletter should be considered investment advice and everything written here reflects solely my personal view.
And now: The Constitution.
Back in February, we wrote:
There are few things I think about more often than Alex Balk’s Three Laws of the Internet.
They are:
Everything you hate about the Internet is actually everything you hate about people.
The worst thing is knowing what everyone thinks about anything.
If you think the Internet is terrible now, just wait a while.
And here we humbly submit a fourth law:
Everything that seems one way on the Internet is actually the opposite.
Perhaps another way to restate the Fourth Law is that opinions, movements, businesses, belief systems, and so forth, that are fostered on and by the Internet tend to protest too much.
We concede that this isn’t much of an insight.
And yet we find use for the Fourth Law time and again.
The context for the post in which the Fourth Law was initially sketched involved a character who again made their presence known this week.
From Bloomberg:
Citadel Founder Ken Griffin bought a first printing of the U.S. Constitution which sold for a record-setting $43.2 million at a Sotheby’s auction, the auction house announced Friday.
The auction Thursday garnered attention after a group of crypto investors under the name of ConstitutionDAO said they raised more than $40 million to purchase the document. In a tweet Thursday, the group said they lost their bid.
We’re guessing some readers of this newsletter followed the saga to various degrees.
For those who were unaware that some chuckleheads with too much time and money were going to “buy” the Constitution, we can just say that the real-time experience of Twitter users adding (📜, 📜) to their username over the last week was more tedious than whatever you’re thinking.
To answer a few anticipated questions here.
“The Constitution” was not for sale; a copy of the original considered one of 13 authentic documents was.
The (📜, 📜) folks were not going to buy this original copy, but instead fundraised for a Decentralized Autonomous Organization (DAO) that offered governance tokens in the DAO which said it would use the money to bid on this copy of the Constitution.
ConstitutionDAO contributors can now get their money back… minus fees.
But our concern here is not DAOs. At least not specifically.
Our concern is the Fourth Law and what it tells us about things that live online.
To the DAO’s ardent believers, this consortium was a group of folks trying to buy a copy of the Constitution — sorry, a governance token in a DAO that was trying to buy a copy of the Constitution, heretofore known as The Copy — to make real the metaphorical promise of Web3 and our certain-future decentralized web: empowering the people.
“We the People.” Get it?
Sending some ETH to the DAO sought to make real the theoretical underpinnings of the Internet’s next phase. These were literal investments (sorry, donations) in a project focused on reifying our coming metaversic moment. Everything will be tokenized, represented digitally, with these digital facsimiles in time usurping the carbon-decaying thing they once represented.
The “verse” in metaverse suggests abundance, a reference to the ever-expanding universe we call home. But NFTs, for instance, are nothing if not technical wrappers through which one can impose false scarcity, and the the metaverse layers new meaning (i.e. financial value) onto these objects. In a physical world that feels increasingly flat and commodified, it seems we can only turn to digital frameworks for the truly unique. To which some might say: touch grass.
But we’re cognizant of not over-defining things like Web3, the metaverse, DAOs, and so forth for our own purposes. How we define the ConstitutionDAO and its goals specifically does not improve the argument that generally this organization turned out to be the opposite of what it stated. And so what a Fourth Law reading of this situation tells us is that Ken Griffin’s purchase of The Copy obviates that the DAO was not returning power to the people but taking it from them.
If we look at the DAOs website, we’re told that for the modest price of just $206.26 we, too, could’ve gotten our seat at the Constitutional table. And if we didn’t? Well, have fun staying poor.
Most people, however, do not have $206.26 to donate to a blockchain-powered homework assignment. As we’ve argued previously, the problem with “personal finance” is not that people don’t understand money, it’s that they don’t have any.
Suggesting that ownership of a copy of the United States’ founding document is worth fundraising against also comes as a pretty considerable insult to the integrity of the document itself. When a single billionaire buys The Copy, it does not pose a threat to the integrity of the document because we now have the whims of a single person pitted against the collective powers outlined therein.
When a thousand, or tens of thousands, or (at some future point) hundreds of thousands of people obtain The Copy, the power in these numbers suggests something that now rivals what is outlined in The Copy. Empowering the people through a DAO empowers specifically whereas The Copy empowers generally.
A critique of this critique might note that right now a small number of moneyed interests effectively direct the course of policy across our nominally representative government. DAOs or other decentralized structures can move these power centers away from a handful of moneyed interests and towards… a larger handful of moneyed interests? There are lots of problems with the present role money plays in politics, but an option for voters right now is to vote and for free. That “nothing is free” suggests our free votes are purchased by lobbyists; we’d argue that votes aren’t purchased, but subsidized. As a voter, I am given the option to vote or not vote and that option costs me nothing. As a DAO participant, I must pay something like $206.26 to exercise the same option.
In theory, the metaverse/Web3 world is trying position itself as a more open, inclusive version of the modern Internet that will level playing fields across digital and physical space; in practice it manages to more quickly exclude non-adherents than our terrestrial society ever could.
We’ve also seen Griffin’s purchase of The Copy described as “frontrunning” the DAO.
Which is funny in that it is the exact opposite of frontrunning. Griffin’s bid on the DAO is, for lack of a better term, backrunning the DAO. The Fourth Law here again at work.
The DAO says: “We raised $43 million to buy [this specific object].” This announcement informs any other potential buyer of the object what the price will be to acquire said object. Frontrunning is the use of customer orders — i.e. trusted information you have explicitly agreed not to use for your own purposes — to gain an advantage. Backrunning is being told what something costs.
The whole payment for order flow situation is unsavory to some folks because it cosmetically appears to be frontrunning. Except in our regulated financial markets you must pay a fee — literally: Payment. For. Order. Flow. — in order to (technically not) frontrun said orders. Payment for order flow turns customer orders into legally obtained actionable insights, similar to any other kind of alternative data set an investor might use to try and gain an advantage.
And since it has been agreed upon that frontrunning is bad, the workaround is you make people pay a big fee to do something that is in the same ballpark, with those fees going back to customers in the form of discounts.
All of which is a too-long windup to say that Griffin did not have to either improperly use customer information or pay another party to legally obtain this information, but was instead given all the information he would’ve ever wanted — publicly and for free — by the DAO itself. Griffin’s bid on The Copy wasn’t frontrun, the order flow wasn’t paid for, and instead the full dollar amount required to tell people that have been mean to him online to fuck off was right out there in the open.
And all it cost was $43.2 million.1
Which brings us to a final Fourth Law quibble with respect to the suggestion that this bid is a troll.
Because Ken Griffin is not trolling.
And moreover, what we call trolling is not trolling. At least not anymore.
Trolls are not mean, trolls provoke. The way your siblings might’ve known to say a specific, empty phrase — “I’m not touching you” is the canonical example; “I’m just stating facts” was a popular choice from my younger brother growing up — that would set you off because you alone knew what the phrase’s design really was? That’s a troll.
An anonymous Twitter user — or, more typically, a person using their actual name on Twitter, Insta, etc., whose online presence is so small as to render it effectively anonymous — being mean is not a troll. That person means it.
The reader who called this post of ours “overly wordy, boring, and wrong” was not trolling; they genuinely disliked it and also probably this entire publication. Do not give assholes on the internet the benefit of the doubt: someone that takes the time to be a dick to you online is being a dick to you online, they are not trolling. And remember: they started it.
And so the idea of trolling or being a troll becoming a catch-all term for describing someone or something that is mean, rude, or degrading online is another example of the Fourth Law — we’ve taken a term of playful endearment and used it to run interference on our ability to accurately describe the cruelest interactions made possible by technology. Telling people not to listen to “trolls” is to excuse behaviors that otherwise would not exist were it not for the very platforms on which these interactions take place.
Ken Griffin is not provoking. Ken Griffin is wielding the power of the platform required for the DAO’s existence and using it against this organization.
Moreover, the invocation of trolls and their close associates “haters and losers”, suggests that what people say online can be cordoned off into a bucket of “digital stuff” which is inseparable from the “real world” we live in. Except the idea that the online and offline worlds can be blissfully separated is one which exists in practice only for the most comfortable among us2 and is being actively ground down by the entire metaverse/Web3 logic that underwrites the precise type of organization which started this whole Constitution mess.
Matthew Ball tells us in his outline of what principles define a metaverse that it must, before anything else, be persistent. In other words, we cannot (or rather, will not be able to) separate online and offline worlds in a true metaverse and we cannot bucket “trolls” into some kind of digital sticks and stones nursery rhyme.
Recall that Balk’s First Law tells us everything we hate about the Internet is just everything we hate about people. The Second Law reminds us the worst part about the Internet is knowing what everyone thinks about anything. Our Fourth Law argues that what everyone says online is not only untrue but in fact the truth’s opposite.
And so let us then part with Balk’s Third Law: if you think this is all tedious and absurd now, just wait a while.
For perhaps a more absurd visual: the DAO empowered Ken Griffin to simply walk down the local “Fuck Off” store and pick The Copy up off the shelf, walk it over the register, and have the cashier — in this case, Sotheby’s! — tell him today’s price was $43.2 million. One imagines he simply whipped out a Black Card.
How many times do we hear about some celebrity or wealthy tech executive doing a “digital cleanse” while the hottest sector in which those same people invest is one that seeks to make as much of our lives as possible accessibly via technology first and foremost?