In a 2011 Forbes article, Venkatesh Rao wrote that the best investment class of the future would be developers. He made some interesting points about how companies and individuals could do so, but missed the key one (so did I). He wrote:
..“places to store surplus capital today where it will even be safe and/or not depreciate too fast (let alone generate a return) are getting incredibly hard to find”...”But there is one safe haven, if you know how to invest in it: software developers.”
...“the vast majority of them haven't found a way to use their own scarcity to their advantage”....”The NPV on a strong and positive relationship with a talented developer today is ridiculously high”
Rao’s thesis was that companies would increasingly hunt and compete for developer talent. I remember reading it and thinking it made sense in principle. My problem was that I didn’t have anything that could attract developers and the average person wouldn't have anything either. In fact there was no need to go hunting. A programmer investment fund had already been launched. Bitcoin was the index fund on developer time that anyone could invest in.
People now know the main arguments for why Bitcoin is valuable. Scarce, fungible, transferable, durable, acceptable, divisible. What is less widely discussed is that you are getting access to a limited supply of developer time. George Gilder has touched on this in the Information Theory of Money in which he posits that money is time.
Rao mentions in the article that ‘software talent is extraordinarily nonlinear.’ Meaning that unlike other industries, the best developers are orders of magnitude more productive than the average programmer. Therefore, if money is time, and the most valuable time is that of productive developers, crypto is an investment in the most scarce and valuable form of human time. And it is open to everyone.
Rao correctly predicted that developers would have increasing power to negotiate with companies as the demand for their talent grew. What has actually happened is that they don’t need to negotiate at all. They can now just create or join an independent market for their time and ability.
The article mentions the ways in which companies would try to retain talent, through, competitions, money, security, scholarships, open source projects and other means. At the recent token summit I spoke with a 21 yr old developer who was interested in cryptocurrency but had been offered a job at Google. His plan was to take the Google ‘credential’ in order to hedge his bets and switch to cryptocurrency as soon as possible. I suspect he will leave sooner rather than later. The above mentioned incentives are weak when compared to being involved in the exploratory phase of cryptocurrency.
How far can this go? Could there be an token for every talented developer? Would you take a share in all of Vitalik, Adam Back or Peter Wuille’s further work? The most talented soccer players get valuations on their limbs. Christiano Ronaldo allegedly insured his leg for £90m. How much should Ethereum insure Vitaliks brain for? While this may sound strange, there is a wide consensus that if he left the project it would have an enormous impact on the price.
I suspect that many developers would not like to see this individual focus and so grouping together within a loose band allows them not only to work on interesting projects but to broadly add or remove value without going long or short on individuals. At the moment, many people hold their cryptocurrency as a bet on the future utility of the currencies themselves. What they are in fact betting on is the group of developers.
But what about the economics, business, mining and other elements of crypto you say. You can’t just simplify it down to ‘developer time’. There are entrepreneurs, scientists, miners and other groups that have pushed the project forward. Once Satoshi had made the breakthrough, their involvement became inevitable.
In the beginning, the only miners were developers. There is no scarcity of miners. There is no scarcity of potential node runners. There is no scarcity of businesspeople to run wallets and exchanges. Highly capable developers are the scarce resource in cryptocurrency.
I’ll finish with a 2014 Quora post from Venkatesh Rao, when asked what he thought of Bitcoin:
“Bullish on both Bitcoin in particular and cryptocurrencies in general. Don't really grok it too well yet, but enough to appreciate how big a deal it could be if the Internet of Money vision comes even partly true. Wishing I'd bought in big in 2011 of course, like everyone else."