Daryl Morey on Crypto and NFTs: 'It's the Start of a Major, Major Trend'
The 76ers exec (aka "Basketball’s Nerd King”) is known for promoting 3-point shots. Less well known: his fascination with all things crypto.
In 2011, when he was general manager of the National Basketball Association's 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 when’s 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 Morey’s 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, he’s “Basketball’s Nerd King.” Morey loves data. He loves finding an edge. Thanks in large part to Morey’s charts and spreadsheets, players now shoot more three-pointers (Morey found they’re statistically a higher value shot) and chuck up fewer mid-range jumpers (statistically, a dog’s 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 it’s a copycat league. As other teams followed Morey’s blueprint, the average score has jumped from 99.9 in 2007 (Morey’s 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. He’s good at sniffing out trends. He’s good at spotting what’s next. He’s 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, I’ve been on Team Morey for years. Look elsewhere for objectivity.)
On our call, Morey brushes off these kinds of plaudits, modestly saying, “I’m 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. Morey’s 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 Pomp’s celebration of Bitcoin Pizza Day, for example, he framed it as, “Get delicious pizza and stop authoritarian oppression – win/win.” (Few can top Morey’s 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 we’re also primed for a shakeout.
CoinDesk: So I could talk hoops with you for hours but I know our time is limited. You’ve been into crypto since waaaaay back. How did that start?
Daryl Morey: I’m 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, I'll put it on this exchange, Mt. Gox.” And because it was so little money at the time, I didn’t 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 I’m 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 wife’s cousin – a bankruptcy judge in New Jersey – was saying, “You’re 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 it’s 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 didn’t quite get it. Everyone was saying this was a “digital collectible,” and I got that angle, even though I wasn’t really into cats. But I didn’t get the scarcity angle. Because with the original CryptoKitties you can breed more and more.
You were worried that because you can just breed cats – endlessly breeding and breeding f’ing cats – then there wouldn’t be real scarcity?
Right. I didn't 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 didn’t 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 you’re both an NFT collector and an NFT creator. What was it like to mint your NFT?
Well, it's pretty straightforward. People make it sound hard. But I like to describe NFTs as just a unique barcode someone can't copy, that you can put on anything. And when you describe it that way, people get that it’s not especially hard. It's just a thing.
I love that description. How’d 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, I’ll do that. [This is the Pythagorean Expectation Formula, which Morey adapted to the NBA.] And I’ll do it for charity. To my point on shysters and hucksters, I didn't 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 don't 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 $2,500. Four of them sold immediately.
You should have priced them higher!
When there was still one left, I was like, “Oh s**t, I want to keep one!” So I kept one. Because I’m not going to be someone who, you know, just mints more or something. I would hate that. I also sold a couple of tweets for ACLU charity as well. They didn't quite do as well as Jack Dorsey’s or Ed Snowden’s. Did you see Ed Snowden’s tweet? I think he got almost [$]4 million … [Editor’s note: Actually, it was 2,224 ETH, or $5.4 million, on the day of sale.]
Oh I’m sure.
I have a funny story. So I know the people around Ed Snowden really well. And I've talked to Ed, and I think he’s 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 didn’t.
And I hadn't known about the sale today. [Note: We spoke on April 16, the day of Snowden’s 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 it's 13 Ethereum, I'll 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, that's 1,300, Daryl." I'm thinking, “Okay, I'll let someone else do that one."
Yeah, the random bus driver’s 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 there’s also a lot of nonsense. And there's 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 Beeple’s digital art. So when I saw Beeple’s sale go for a crazy amount, I immediately thought, “Well, s**t, I'll look for all of my favorite digital artists. I'll see if they're selling." Shockingly, very few were selling when I first went to look a few months ago.
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. I'm probably most excited about getting some of Pascal Blanche's stuff. He's 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 I’m just squatting those.
And your strategy for NBA Top Shot?
I’m trying to get younger players that I think have a good future, and to get the scarcer ones. For Sorare, same thing, I’m trying to grab the younger players that I think have a big future. Because when the shakeout comes, there's going to be a chase to quality.
That’s 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.
There’s going to be a moment when everyone thinks, “This was all a huge mistake.” That moment’s coming. It happened with bitcoin when it went back to $3,000. And everyone was like, “Bitcoin is dead. It’s all bulls**t.” That’s going to happen in NFTs. There’s 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, there’s 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. It's definitely superior. And it’s the start of a major, major trend. So things like CryptoPunks, things like Top Shot, Sorare, all of this early stuff – as long as it’s quality – is going to be worth, I think, five to 10 to 100 times in five years. But we’re going to have to go through a cycle.
It sounds like many players are very Top Shot savvy, and NFT savvy. They’re 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. There's 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, they’re personally going to be able to do whatever they want. So nothing’s preventing that.
They're 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. Everyone’s making a lot of money in Top Shot at the league, and that flows into BRI [basketball-related income] and it’s 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 that’s 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. It’s really nice how the NBA has done everything.
How much is the NBA – to the extent that you’re aware – looking into other types of NFTs, or fan tokens, or other blockchain concepts, whether for ticketing or other fan engagement tools?
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. And most of them are probably going to screw it up. [Laughs.] But everyone is looking at it. I think you're going to see tons of announcements from players, the league office, players' unions, teams, organizations – there’s going to be a ton of announcements. And if they’re going to get into it, it’s important that people really understand the underlying technology and the underlying things that are going to drive value.
You’re 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 there’s just going to be a lot of low-quality stuff that’s going to go to zero. To me, that’s the inefficiency. It’s similar to the first explosion of all the different kinds of altcoins and s**tcoins. There’s a flight to quality, and it flew to bitcoin and ethereum and a few others. It’s similar here [with NFTs]. The inefficiency is the newly minted stuff that isn’t really valuable.
How about a crypto project that you’re bullish on?
I’m really excited about y.at. Their vision is big. There’s 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. It’s your email, it’s your URL, it’s what’s 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 they’re minting all these universal emojis that people can own.
Do you have one yet?
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. They’re putting in this infrastructure, and I’m really bullish on them.
👍💯🏀 Thanks, Daryl. This was a blast. Best of luck with the rest of the season.
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