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Resi Wrap - Fear and Loathing in Decentraland
March 2021

Friends of ResiShares -

For the latest evidence that we live in a simulation, we learned this week that “real estate” need not necessarily be “real.” Enter “digital” real estate, which you can learn about here and here.

At first blush, this looks related to the recent craze (word chosen deliberately) in so-called “Non-fungible tokens” (NFTs), in which people pay cash for an ownership certificate of a given tweet, digital artwork, or NBA basketball video clip. As with any collectible, the idea of anyone paying cash for an NFT somewhat breaks classical economic models that assume people are willing to part with their money only in exchange for utility. An NFT, quite explicitly, offers zero utility to its buyer, but does offer two attributes in high demand at the moment: scarcity and perceived liquidity, which theoretically could make it an uncorrelated store of value.

The concepts of fear and greed do a lot of work in the world of investing, from Warren Buffett’s folksy advice to a CNN index. What gets described as greed, however, is often better described as a different kind of fear: fear of missing out. As we tiptoe across the roof of a decades-long bull market in global asset prices, this FOMO is not merely related to social status. From housing to cryptocurrencies, upside asset price volatility creates a real risk of pricing individuals out of the market for goods and services they would like to consume.

Even governments and central banks are starting to catch on that runaway asset price inflation feels a whole lot like CPI to the average consumer (and voter). Here are New Zealand and Canada. The US Fed has not yet hinted that it cares, but one can dream, I suppose.

So is the recent boom in digital land merely another example of late-cycle excess, driven by nervous rich people seeking diversification?

Speaking as someone who knows absolutely nothing about the virtual world, but hopefully a little bit about real estate, I actually don’t think so.

Real estate value is ultimately a socially-driven construct. While a sandy beach or a plot of fertile farmland may hold some obvious human utility, a condo in Manhattan or a billboard on I-405 derive all of their value from the people around them.

Digital properties should be no different. If you believe that there is a secular trend towards people interacting with one another online, there is no reason that digital real estate adjacent to online points of interest should not price themselves similarly to their real-world counterparts. Virtual Santa Monica is going to attract more social (therefore commercial) activity than virtual Barstow at the edge of the virtual desert. As long as the savvy folks creating these worlds can create the same access scarcity in the virtual world as LA traffic and $40 parking garages create in the real one, they will be able to similarly monetize their land investment.

And just like any other new land grab, from the Homestead Act to the various Florida condo booms, for every legitimate fortune that is made in “unreal estate” (We’re copywriting that - don’t even think about stealing it), there will likely be plenty of irrational exuberance and outright scams to dodge. ResiShares will stick to the kind of real estate that hurts when you stub your toe on it.

The Rest of Resi

  • Zumper rent stats: Big cities are bottoming, suburbs are booming, and cheap-for-the-sake-of-cheap destinations are fading.

Here’s a ResiShares victory lap excerpt for you: “Except for Durham, NC and St Petersburg, FL, growth peaked 9 months out from the start of the pandemic in December of 2020, and has declined since.”

Apartment list has slightly different results in its data for NY and SF.

Have a great weekend,

Michael Greene

Co-Founder and CEO

ResiShares |