Community Capitalism: When Users Become Owners
When Customers Become Shareholders: The New Economics of Aligned Incentives
The line between customers and investors is blurring. While scrolling through Twitter recently, I noticed something fascinating: A Tesla owner passionately defending the company's latest software update wasn't just a satisfied customer—their bio proudly proclaimed "TSLA investor since 2019." Similarly, Lemonade insurance customers regularly tweet about both their positive claims experience and their stock holdings in the same breath.
This phenomenon represents something profound happening in markets today. The traditional separation between those who use products and those who own companies is dissolving into something more symbiotic. In his recent book "Read, Write, Own," Chris Dixon explores how blockchain technology fundamentally extends this alignment through token economics, creating systems where early users are automatically early owners.
While many dismiss token models as speculative or faddish, I see them as a potential evolution of a powerful economic alignment already emerging in traditional markets. The mechanism may be changing, but the underlying force—the power of aligned incentives between users and owners—is consistent.
In this first edition of "The Future of Investing," I want to examine how this trend reflects both revolutionary new structures and the unchanging fundamentals of value creation. Because while technologies and mechanisms evolve dramatically, the underlying mathematics of investment returns—calculating the present value of future cash flows—remains the same.
Part 1: A Pattern Emerging Across Markets
The Tesla & Lemonade Phenomenon
Tesla and Lemonade represent early examples of what I call "community capitalism"—where passionate users become equally passionate shareholders.
Tesla's customers don't just drive their cars; they evangelize them. The company has saved billions in traditional advertising precisely because owners so enthusiastically promote the product. More importantly, many of these same customers have become TSLA shareholders, creating a reinforcing loop of loyalty that transcends the traditional customer relationship.
One striking example: When Tesla faced production difficulties in 2018, owners volunteered at delivery centers to help new customers understand their vehicles. These weren't just customers—they were owner-evangelists with financial and emotional investments in the company's success.
Lemonade exhibits similar dynamics on a smaller scale. The insurance disruptor's transparent business model and instant claims process created such customer enthusiasm that many became investors when the company went public. Browse Twitter or Reddit and you'll find countless variations of: "After my amazing claim experience, I bought shares the next day."
This creates a powerful economic flywheel:
Superior product experience creates passionate customers
Passionate customers become shareholders
Customer-shareholders promote the product aggressively
The company gains market share while spending less on acquisition
Growth improves financials, benefiting shareholders
Resources for further product improvements increase
The cycle reinforces itself
The impact on business fundamentals is substantial. Tesla's customer acquisition costs are a fraction of traditional automakers'. Lemonade reports word-of-mouth referrals far exceeding industry norms. This translates directly to financial efficiency—lower customer acquisition costs, higher retention, and stronger unit economics.
The Blockchain Expansion of This Model
Blockchain technology essentially takes this alignment mechanism to its logical conclusion through tokens. Rather than requiring users to separately purchase equity through traditional channels, tokens programmatically distribute ownership to users based on their participation.
This represents both continuity and evolution from companies like Tesla and Lemonade:
Continuity: The fundamental principle remains user-owner alignment creating mutual benefit.
Evolution: The mechanism becomes automatic, programmable, and potentially more inclusive.
Consider Ethereum's early development. Those who supported the network by running nodes, building applications, or simply using the system in its early, less polished days were automatically rewarded with ownership (through ETH) that appreciated as the network grew. This alignment was baked directly into the system's architecture.
What distinguishes sustainable token models from purely speculative ones is precisely this genuine utility and alignment. Projects like Helium (now Nova Labs) demonstrate this distinction. The network provides wireless coverage through user-operated hotspots, rewarding operators with tokens representing real ownership in the network they're building. Early participants took genuine risk by purchasing and operating hardware when success was uncertain—their token rewards aligned compensation with value creation.
Contrast this with many 2017-era ICOs that had no practical utility or genuine alignment between token purchases and value creation. These were purely speculative instruments disconnected from underlying economic activity.
The key insight here isn't that tokens automatically create alignment, but rather that they can programmatically scale the same powerful alignment we see in traditional equity markets when properly designed.
Part 2: Valuation Fundamentals Still Apply
The Timeless Nature of Value Creation
Despite the novel mechanisms, the fundamental mathematics of investment remains unchanged. As Warren Buffett consistently reminds us, the value of any asset ultimately derives from the cash flows it can produce over its lifetime, discounted to present value.
In "Read, Write, Own," Dixon acknowledges this unchanging reality. Even for token networks, he applies a present value analysis of future cash flows to determine fundamental value. The key variables remain the same:
Future cash flows generated by the asset
Growth rate of those cash flows
Risk associated with receiving those cash flows (discount rate)
Terminal value based on sustainable growth
For tokens with genuine economic utility, these calculations remain entirely applicable. The token's claim on future economic activity—whether through transaction fees, governance rights over a treasury, or profit-sharing mechanisms—can be modeled and discounted just like traditional equity.
Take Ethereum post-merge as an example. With transaction fees now accruing to validators, ETH represents a claim on future fee generation. An investor can estimate:
Future network transaction volume
Average fee per transaction
Growth rate of network usage
Appropriate discount rate reflecting network risks
Terminal growth rate assumption
While the inputs may have higher volatility than traditional businesses, the valuation framework remains intact. Just as a Tesla investor must estimate future vehicle deliveries and margins, an Ethereum investor estimates future transaction volume and fees.
The distinction isn't in the mathematics, but in the nature of the underlying cash flow generators and risk profiles.
The Network Value Component
Where token economics becomes particularly interesting is in how it captures network effects in the ownership structure itself.
Metcalfe's Law states that a network's value grows proportionally to the square of the number of users. Traditional equity captures this value creation indirectly—shareholders benefit when companies build valuable networks, but the ownership itself doesn't necessarily scale with network participation.
Token models can directly align network growth with ownership distribution. Early network participants receive proportionally more tokens, which then appreciate as the network grows—exactly when their contribution had maximum marginal value.
This represents a theoretical improvement in capturing the economics of network effects, but creates additional valuation challenges. The discount rate must account for:
Higher uncertainty in network growth trajectories
Potential regulatory uncertainties
Technical risks specific to the implementation
Greater competitive threats from forking or replication
These factors typically justify substantially higher discount rates than traditional equity, often in the 30-50% range compared to the 8-15% commonly used for established businesses. This higher hurdle rate appropriately accounts for the additional risk while still applying traditional valuation frameworks.
Part 3: Investment Implications
Retail's Information Advantage
One fascinating implication of community capitalism is that retail investors who use products may actually possess an information advantage over institutions.
Institutional investors typically excel at analyzing financial statements, conducting market research, and assessing management teams. However, they often lack direct product experience, particularly with consumer-facing innovations. When product quality and user experience drive growth, this creates a potential blind spot.
Consider Tesla again. In 2019, many institutional analysts focused on production challenges and cash burn while missing the fanatical owner enthusiasm that would drive word-of-mouth growth. Retail investors who actually drove the cars understood something that didn't appear in financial statements—that the product experience was so superior it would create sustainable demand despite early production challenges.
This isn't entirely new. Peter Lynch famously advocated for consumers to "invest in what you know." What's changing is the scale and impact of this information asymmetry in an increasingly digital economy where:
Product experiences can be shared globally in real-time
Network effects create winner-take-most dynamics
Community enthusiasm directly impacts growth metrics
Direct ownership paths are increasingly accessible
We may be entering an era where experiential product knowledge provides equal or greater insight than traditional financial analysis for certain companies. When assessing businesses with strong community dynamics, the question "Do users love this product?" may be more predictive than "How do the unit economics look today?"
Finding Tomorrow's User-Owner Successes
For investors looking to identify the next Tesla, Lemonade, or sustainable token network, several indicators distinguish genuine alignment from marketing gimmicks:
1. Organic Enthusiasm Look for unprompted advocacy. Are users spontaneously promoting the product without incentives? Tesla owners convincing friends to test drive, or Ethereum developers voluntarily building on the platform, signal genuine enthusiasm that can translate to sustainable growth.
2. Growth Despite Friction Early versions of transformative products often succeed despite significant limitations. Tesla's early Roadster had clear drawbacks but inspired loyalty anyway. Ethereum's initial versions were slow and expensive but developers remained committed. This indicates the core value proposition is strong enough to overcome temporary limitations.
3. Community Contribution When users voluntarily contribute improvements—whether through Tesla owners creating tutorials or blockchain developers submitting code improvements—it signals alignment between user success and platform success.
4. Improving Unit Economics Genuine community-driven growth should translate to improving unit economics over time. Customer acquisition costs should decline while lifetime value increases. For token networks, key metrics like transaction volume per marketing dollar should show similar improvements.
Warning Signs:
Conversely, several red flags suggest misalignment:
Growth dependent on artificial financial incentives rather than product value
High user churn when promotional incentives end
Community focused primarily on price speculation rather than product utility
Declining unit economics despite user growth
These principles apply equally to evaluating traditional equities with community dynamics and token-based models. The underlying economic reality—sustainable value creation through aligned incentives—remains consistent across mechanisms.
Conclusion: Evolution, Not Revolution
What we're witnessing isn't a complete reinvention of capitalism, but rather its evolution toward greater alignment between users and owners. This trend transcends the specific mechanisms—whether traditional equity in companies like Tesla or token ownership in decentralized networks.
The most successful models will be those that create genuine alignment between:
Those who create value
Those who use the product or service
Those who capture the financial upside
While blockchain tokens represent a novel implementation of this alignment, the underlying economic principle connects directly to traditional investment wisdom. Buffett and Munger have long emphasized businesses with aligned incentives. The mechanisms evolve, but the principles remain.
For investors, this suggests opportunities in identifying models—both traditional and token-based—that create these powerful alignment dynamics. The mathematics of valuation remains unchanged, but the sources of competitive advantage and growth are evolving.
The future of investing will require integrating timeless valuation disciplines with an understanding of how new technologies transform business models and alignment mechanisms. Neither blind enthusiasm for new structures nor dismissive skepticism serves investors well. Instead, applying rigorous analysis to evolving models offers the clearest path to identifying sustainable value creation.
What I'm thinking about:
Which sectors beyond technology might see similar user-owner alignment emerge?
How might traditional companies adopt elements of community ownership without blockchain?
What regulatory frameworks would best balance innovation in ownership models with necessary protections?
What I'm reading:
"Read, Write, Own" by Chris Dixon
"The Cold Start Problem" by Andrew Chen on network effects
I'd love to hear from you. Are you both a customer and shareholder of any companies? Have you participated in any token networks that demonstrated genuine alignment between participation and value creation? Share your experiences in the comments, or reply directly to this email.
In my next edition, I'll be examining how the principles of antifragility developed by Nassim Taleb can be applied to constructing portfolios that benefit from technological disruption rather than merely surviving it.
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