The base of contributors to the NEAR project has increased over the past several months and the global macro picture is obviously in chaos so I wanted to use this opportunity to provide the first of a regular series of updates on the project as a whole. I’ll start by addressing the macro environment and will then provide project-specific notes.
Obviously, the star of this act is COVID-19 but it is sufficiently well-introduced that I won’t re-state the current crisis other than to say that I hope you’re safe and taking proper precautions.
The Macro Environment
“Only when the tide goes out do you discover who's been swimming naked.” -- Warren Buffett I run the NEAR Foundation now but my early career took a somewhat turbulent path. I joined the trading floor of a bank in New York City in mid-2007 and had a front-row seat for the global financial crisis during the following two years before joining BP Energy just in time for the Deepwater Horizon oil spill. While each crisis has its own flavor, echoes of both experiences reverberate in today’s environment. This is where luck, preparation, and strategy combine to forge the next generation of success stories and to expose the cracks in the poorly constructed foundations of others. After spending the last decade enjoying one of the longest and steadiest economic expansions in history, both people and institutions are not well set up right now to handle a deleveraging and slowdown. There has been too much yield chasing, too much operational leveraging and too much picking up speculative nickels before metaphorical bulldozers. The effects of this unwind could be felt in a series of bear waves over the next couple of years before we finally reconfigure our social, operational and financial expectations properly to handle the new macro reality. Even a V-shaped recovery will leave lasting effects because attitudes towards risk don’t shift on a dime. Some effects are obvious but worth restating:- Back to “risk-off”: Risk tolerance will be reduced and the funding environment will be lean, not just for protocol projects but for all of the smaller teams that make up these ecosystems. It’s possible that massive government spending and money printing will prop up asset prices and slosh into a new bubble soon but the default reality will still be tighter.
- You must create tangible value: Everyone’s focus has shifted lower down on Maslow’s Hierarchy and abstract vision-oriented pitches will no longer resonate (though they were getting old in this market already). Creating tangible near-term value will be king, whether for end-users or projects or purchasers.
- Startups will fail: In the short term, lean companies will have significant pressure to shut down operations as their revenue sources higher up the food chain call-off contracts and stop sending in new business. Every startup that relies on continuous funding to meet its growth trajectory is going to have a lot more difficulty finding that and we will see a lot of empires fall due to that pressure. While the worst outcomes will only affect a minority of projects overall, the perception it creates will make it more challenging for everyone else.
- Remote first/digital is king: The world just got a sharp wake-up call to move remote-first with everything from enterprise teams to government entitlement programs. It’s a trend that already had product/market fit and now just got a massive influx of new trial users and a reduction in red tape.
- Community: It has been a very challenging market for the attention of talented contributors over the last few years and the above factors will certainly loosen this. We expect that our core teams will have an easier time hiring, contracting or otherwise soliciting help from very talented individuals.
- Openness to change: People typically only change habits, behaviors, and brands during a series of small windows in their lives -- graduation, marriage, physical moves, parenthood, etc -- and otherwise prefer what’s consistent. This crisis has created the biggest global change event since the world wars and will absolutely create windows for introducing new behaviors and products. While the value proposition has to be much more tangible to succeed, people are in a rare state of collective openness to new ideas.
- Quality rises: The signal-to-noise ratio will further clarify to support high-quality projects as weaker hands let go and potential competition for airtime and mindshare shut down. It will still be challenging to pitch as an alternative to incumbent projects and behaviors but there will be less foolish salesmanship to compete against.
