In 2011, when he was general manager of the National Basketball Associations Houston Rockets, Daryl Morey was searching for ideas. He wanted brainstorming fodder: good ideas, outside-the-box ideas, even goofy ideas. Who has plenty of ideas? Fans of the team. So in a highly unorthodox move, Morey asked the Rockets fan base to email ideas on how to improve the team. They could be ideas on how to recruit free agents, ideas on drafting strategy, ideas on anything.
Then he did something even more unorthodox.
Over Twitter, Morey announced that the fan who pitched the best idea would win a bitcoin.
This was a decade ago, 2011. And whens the last time you heard someone use the phrase a bitcoin? The proof still exists on Twitter, where Morey cheerfully doled out the bitcoin, at the time worth $7.24. Most Rockets fans had no idea what he was talking about. I had to google bitcoin, confessed one Rockets junkie. This was so long ago, the Rockets fans were puzzled by Moreys use of a hashtag, confused by the appearance of #bitcoin in his tweet. Since when did # become hashtag? one fan posted. I always thought it was called pound symbol?
This is vintage Morey. Always three or five steps ahead.
A quick primer for the non-hoops crowd: Morey is widely credited with helping to shape the modern-day NBA, or as Michael Lewis once put it, hes Basketballs Nerd King. Morey loves data. He loves finding an edge. Thanks in large part to Moreys charts and spreadsheets, players now shoot more three-pointers (Morey found theyre statistically a higher value shot) and chuck up fewer mid-range jumpers (statistically, a dogs breakfast).
The phrase game changer is usually a cliche, but Morey literally changed the game. True, Morey is not the only influence see also: Steph Curry but its a copycat league. As other teams followed Moreys blueprint, the average score has jumped from 99.9 in 2007 (Moreys first year as Rockets GM) to 112 today.
How is this relevant to blockchain?
When billionaire investors like Michael Saylor or Paul Tudor Jones share their interest in crypto, the space celebrates it as a kind of validation. I would argue that Morey provides the same kind of imprimatur. Hes good at sniffing out trends. Hes good at spotting whats next. Hes the most forward-thinking GM in the most forward-thinking sports league. If Morey embraces crypto? There are worse mainstream signals. (Disclosure: As a lifelong fan of my hometown Houston Rockets, Ive been on Team Morey for years. Look elsewhere for objectivity.)
On our call, Morey brushes off these kinds of plaudits, modestly saying, Im just always into everything new, probably incorrectly at times, where I waste time or money.
Maybe. But his decade-long enthusiasm for crypto seems deeper than a quick bit of dabbling. Moreys so OG that he was involved in the Mt. Gox bankruptcy case, he bought a CryptoKitty, he both collects and mints non-fungible tokens (NFT), he gamely drops into a podcast with Anthony Pomp Pompliano, he collects CryptoPunks (and even used one as his Twitter avatar), he sells tweets as NFTs (and donates the funds to the American Civil Liberties Union), and he scoops up NBA Top Shot moments. His crypto enthusiasm seems more rooted in principles than making a buck. When retweeting Pomps celebration of Bitcoin Pizza Day, for example, he framed it as, Get delicious pizza and stop authoritarian oppression win/win. (Few can top Moreys anti-authoritarian credentials.)
These days, of course, Morey is the general manager of another NBA team, the Philadelphia 76ers, and once again, of course, his team is deep in the championship hunt. A few weeks before his Sixers entered the playoffs, Morey spoke to CoinDesk about his strategy for investing in NFTs, how he (kind of) almost bought an NFT from Edward Snowden and why NFTs are the start of a major, major trend but that were also primed for a shakeout.
CoinDesk: So I could talk hoops with you for hours but I know our time is limited. Youve been into crypto since waaaaay back. How did that start?
Daryl Morey: Im a big decentralized guy, a big civil liberties guy anything that allows a fundamental thing to happen without a central authority intrigued me. So I had a bunch of bitcoin by 2011, or maybe the end of 2010. And I was giving away bitcoin on Twitter in 2011 as part of a Rockets ideas giveaway. Of course, it was not a $60,000 idea. [Note: Bitcoin was worth $60,000 at the time of our conversation, in what now feels like five years ago.]
Just the whole idea [of bitcoin] appealed to me. And then I went through the roller coaster of getting hacked and being in a Japanese bankruptcy case and just the whole nine yards.
You lost some bitcoin on Mt. Gox, right?
Yeah, I did. Half of it.
My instincts were to not put all of it in any one place. So I had some of it on a wallet on my computer in my house. And then I had half of it on Mt. Gox, which afterwards I felt so dumb about. At the time I was like, Well, now I need to do something with it. Okay, Ill put it on this exchange, Mt. Gox. And because it was so little money at the time, I didnt really think too intentionally about it.
Then I found out that Mt. Gox M-T-G-O-X meant Magic: The Gathering Online eXchange. And Im like, What the hell? I put my bitcoin on a Magic: The Gathering trading card site?! I was laughing and I felt really dumb afterwards. So I lost all of that.
Wait, what happened with your Mt. Gox bitcoin?
I was in the Japanese bankruptcy case. And then Bain Capital did a really smart thing. They went to everyone in that case and offered 10 cents on the dollar. I took it because my wifes cousin a bankruptcy judge in New Jersey was saying, Youre never going to see any of that. Take what you can get. In retrospect, I should have kept it and hoped to get it back because its worth so much more now. But whatever. It is what it is, and Bain Capital is smart for a reason.
And then you were also early into CryptoKitties, right?
So I wish I had been more into it. I was into CryptoKitties, for sure, and I grabbed one. I still have my original, which is only worth around 100 bucks. But I didnt quite get it. Everyone was saying this was a digital collectible, and I got that angle, even though I wasnt really into cats. But I didnt get the scarcity angle. Because with the original CryptoKitties you can breed more and more.
And Im like, 'What the hell? I put my bitcoin on a Magic: The Gathering trading card site?!'
You were worried that because you can just breed cats endlessly breeding and breeding fing cats then there wouldnt be real scarcity?
Right. I didnt see the scarcity angle. I was wrong about that because some of them are worth a lot now. I wish I had dove in deeper. I didnt get that if someone made it scarce, which they did with CryptoPunks shortly thereafter, that it would change the game. And I was skeptical of shysters and hucksters jumping in.
What gave you more confidence in NFTs?
When I found out that NBA Top Shot was licensed, and that Roham [Roham Gharegozlou, Dapper Labs CEO] has a real plan for rolling it out to maintain scarcity and that, [as] with CryptoPunks, only 10,000 would ever be made, then I jumped into it in a big way.
So now youre both an NFT collector and an NFT creator. What was it like to mint your NFT?
Well, its pretty straightforward. People make it sound hard. But I like to describe NFTs as just a unique barcode someone cant copy, that you can put on anything. And when you describe it that way, people get that its not especially hard. Its just a thing.
I love that description. Howd you choose what you minted?
I was trying to make sure I did something that made some sense. And so I thought, yeah, the original formula that I got moderately famous for, Ill do that. [This is the Pythagorean Expectation Formula, which Morey adapted to the NBA.] And Ill do it for charity. To my point on shysters and hucksters, I didnt feel right making money on it. So I gave all the proceeds to the ACLU.
How many NFTs did you mint?
I did five of them. I like five as a nice scarce number. You dont want to do just one. Somewhere between five and 50, I think, is the sweet spot for how many things you mint of something to still get the scarcity element.
So I did five, and people snapped them up pretty quick for around $2,500. Four of them sold immediately.
You should have priced them higher!
When there was still one left, I was like, Oh s**t, I want to keep one! So I kept one. Because Im not going to be someone who, you know, just mints more or something. I would hate that. I also sold a couple of tweets for ACLU charity as well. They didnt quite do as well as Jack Dorseys or Ed Snowdens. Did you see Ed Snowdens tweet? I think he got almost [$]4 million [Editors note: Actually, it was 2,224 ETH, or $5.4 million, on the day of sale.]
I have a funny story. So I know the people around Ed Snowden really well. And Ive talked to Ed, and I think hes an American hero who still needs to be celebrated more. And I thought [Donald] Trump could do the one right thing in his presidency and pardon him. But of course he didnt.
And I hadnt known about the sale today. [Note: We spoke on April 16, the day of Snowdens NFT sale.] I just saw a tweet about it. And 15 minutes from the end of the auction, it was going for 13 Ethereum [around $31K at the time]. I immediately called the people around Ed. I was like, Is this real? Because if its 13 Ethereum, Ill buy it.
And then, I realized I read it wrong. It was going for 1,300 Ethereum. So they were laughing at me. They were, like, No, thats 1,300, Daryl. Im thinking, Okay, Ill let someone else do that one.
Yeah, the random bus drivers NFT goes for 13 ethereum.
Can you describe your NFT investing strategy? Because my understanding is that you look for artists who might be the next bigthing, and are currently undervalued. And this sounds a lot like what you do as a GM, hunting for undervalued players.
On the art side there are some very legitimate artists in the space. But then theres also a lot of nonsense. And theres a shakeout coming. Those [NFTs from the nonsense artists] are going to go to near zero, I think.
I had already been a fan of Beeples digital art. So when I saw Beeples sale go for a crazy amount, I immediately thought, Well, s**t, Ill look for all of my favorite digital artists. Ill see if theyre selling. Shockingly, very few were selling when I first went to look a few months ago.
Unless you're asleep at the wheel, every major organization, sports or not, is looking at how to use the technology in the back end.
Things change pretty quick.
When I first went to look, very few artists were actually selling any NFTs. But every single digital artist whose work I knew and thought was good I just grabbed all of them. Im probably most excited about getting some of Pascal Blanches stuff. Hes just so talented.
And when he did a Dune thing, I thought, Oh my God. I have to get the Dune thing because I love the book. So, yeah, I think Pascal has a chance to be the next Beeple, for example. And so Im just squatting those.
And your strategy for NBA Top Shot?
Im trying to get younger players that I think have a good future, and to get the scarcer ones. For Sorare, same thing, Im trying to grab the younger players that I think have a big future. Because when the shakeout comes, theres going to be a chase to quality.
Thats why I love CryptoPunks. I love the better Top Shot moments of younger players, who are going to be good for 10 to 12 years going forward. I love the Sorare soccer players who are younger and are going to be great later.
Theres going to be a moment when everyone thinks, This was all a huge mistake. That moments coming. It happened with bitcoin when it went back to $3,000. And everyone was like, Bitcoin is dead. Its all bulls**t. Thats going to happen in NFTs. Theres going to be a period where everyone thinks, Anyone who did anything right now is an idiot. Then it goes to quality and the foundation of the idea. And the reality is, theres going to be quality, and the idea is great.
Why do you like the idea so much?
Digital collectibles are superior to physical collectibles. I just moved from Houston to Philly and it was a pain in the ass. I had to move 10,000 comics. I had to move all of my wall art. I had to move all of this s**t, and with digital stuff you just move it. Its definitely superior. And its the start of a major, major trend. So things like CryptoPunks, things like Top Shot, Sorare, all of this early stuff as long as its quality is going to be worth, I think, five to 10 to 100 times in five years. But were going to have to go through a cycle.
It sounds like many players are very Top Shot savvy, and NFT savvy. Theyre into it. Do you see any complications here down the road? Like, what if the players want to mint NFTs or do things that are competitive with Top Shot? And will we have a kind of crypto players empowerment movement that leads to an almost meta-negotiation?
Well, the nice thing is, I think the players union and the league office are on top of this. First off, they can make an NFT now, nothing stops them. Theres no agreement. There may be certain kinds of things like game action where there are rules about what they can make. But just like me, theyre personally going to be able to do whatever they want. So nothings preventing that.
Theyre also benefiting in a big way. I mean, give credit to Michele Roberts [executive director of the NBA Players Association] and Adam [Adam Silver, NBA commissioner] and their whole infrastructure. Everyones making a lot of money in Top Shot at the league, and that flows into BRI [basketball-related income] and its shared 50/50.
The way that Adam and Michele have structured it, where the players and the league office have this partnership, really allows for these kinds of things to flourish. It helped us in the bubble we were the first league back. And thats because of the partnership. And for things like Top Shot and NFTs, that partnership allows these kinds of ideas to flourish.
Players might see a Top Shot moment of themselves selling for $250K, and they wonder how they benefit. Well, they do benefit. How they benefit is a little complicated because you have to look at the licensing flows, but they definitely do benefit. Its really nice how the NBA has done everything.
How much is the NBA to the extent that youre aware looking into other types of NFTs, or fan tokens, or other blockchain concepts, whether for ticketing or other fan engagement tools?
Unless youre asleep at the wheel, every major organization, sports or not, is looking at how to use the technology in the back end. And most of them are probably going to screw it up. [Laughs.] But everyone is looking at it. I think youre going to see tons of announcements from players, the league office, players unions, teams, organizations theres going to be a ton of announcements. And if theyre going to get into it, its important that people really understand the underlying technology and the underlying things that are going to drive value.
Youre most famous for using data and analytics to uncover opportunities and exploit inefficiencies in the market. What are some inefficiencies that you see in the crypto markets, that you think can maybe be exploited?
NFTs are going to be a real dangerous space to put money into for the next year, because theres just going to be a lot of low-quality stuff thats going to go to zero. To me, thats the inefficiency. Its similar to the first explosion of all the different kinds of altcoins and s**tcoins. Theres a flight to quality, and it flew to bitcoin and ethereum and a few others. Its similar here [with NFTs]. The inefficiency is the newly minted stuff that isnt really valuable.
How about a crypto project that youre bullish on?
Im really excited about y.at. Their vision is big. Theres a long way to go, but their fundamental vision is that emojis are universal, hard for governments to control so again, decentralized and every person can have their own three, four, or five emoji moniker. Its your email, its your URL, its whats used to log into sites. Your universal identifier becomes these emojis because language obviously varies from place to place, but globally these emojis are universal. So right now theyre minting all these universal emojis that people can own.
My personal one is the Statue of Liberty and a basketball. The three emoji ones, you can buy right now on their site. The two and one emojis are being auctioned off. Theyre putting in this infrastructure, and Im really bullish on them.
Thanks, Daryl. This was a blast. Best of luck with the rest of the season.
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Daryl Morey on Crypto, NFTs: 'It's the Start of a Major Trend' - CoinDesk - CoinDesk