August 1, 2023

Hair Is Money


From Degen Science

To New Cures Our high-level DeSci thesis explains why we think the future of scientific research & development could be addressed by decentralized tech. Crypto could contribute with:

  1. Ease of capital formation
  2. Incentive alignment
  3. On-chain governance

This ties also to an online tribe future:

“It will be interesting to see once tribes take on the meatspace, its rivalry with governments becoming more apparent. Through Web 3 online tribes are likely to re-emerge from the digital and do things only governments (and Elon Musk) are supposed to do.

I expect that these movements will aspire to send rockets to Mars, fund nuclear fusion research, invest in biotech, and do all what is deemed unthinkable or foolish by the boomers.”

Today, with efforts like HairDAO in its infancy, this early movement of DeSci is much more a Degen rather than Decentralized Science. It may sound scary but the history of scientific discovery is full of individual degens trying outlandish experiments and then relaying to other degen scientists in the degen scientist community.

The good old Victorian DeSci degen scientist-tinkerer

While degen may sound derogatory, in this sense we redefine degen as someone who gambles on the outcome of scientific experiments. These are at times risky endeavors. Sometimes that’s what it takes to achieve breakthroughs. Sir William Crookes, Sir Oliver Lodge, and Michael Faraday were degening by not shying away from a risky experiment.

While DeSci indirectly celebrates the experimental nature of Victorian-era tinkering, it also acknowledges the advancements and rigor of modern scientific methods. The movement embraces a blend of creativity, ingenuity, and respect for scientific principles to go after unexplored and potentially overlooked territories to uncover new knowledge and deliver solutions.

Welcome to the era of a new class of online users.

Finding A Cure On Reddit

Maybe you too have suffered from a problem to which modern medicine offers limited or no solutions. Often, this leads to people taking online to find answers. The higher level concepts such as “scientific community” and “pharmaceutical industry” do not feel the urgency individuals do.

When people with the same ailment meet online, they share the desire to address it. They discuss tips, remedies, and the overall knowledge of the topic at stake. Most of the time they are not qualified to do it, and occasionally the tips and remedies are misguided. But what can you do when medicine gives you no answer?

We just don’t know” is not good enough if one suffers.

The reasons for “not knowing” are different in each case. In a Deutschian way, suppose that there are no inherent limits to what the human mind can comprehend or achieve. While certain problems may appear unsolvable or the scope of knowledge may seem limited, let’s argue that these limitations are temporary rather than fundamental.

Some areas of research suffer from being overlooked and underexplored. There are probably far too many of these. But if a couple of motivated people can come together and fund research (based on scientific principles) in a more laissez-faire fashion, suddenly the incentive vacuum is filled with tinkering.

“Fine, I’ll figure it out myself” is the vibe.

Hard to believe that this guy is the rebirth of a Victorian scientist-tinkerer

What Do You Know About Hair Loss?

Recently Pfizer had a hair loss drug approved by the FDA that seemingly cures a very niche disease Alopecia Areata (AA) which is apparently ∼3% of hair loss cases (other big pharma pursuing this).

The main hair loss culprit that appears unaddressed is androgenic alopecia (AGA), responsible for 95% of cases (1,2,3). AA is considered an autoimmune disease, whereas AGA is considered a cosmetic condition (so AA is an insured disease; AGA isn’t). As a consequence, AA gets significantly more funding than AGA, even though it impacts far fewer people.

AGA currently receives only $5M globally in government grant funding, from organizations in which hair expertise is not represented. It’s likely that more money was invested in AA clinical trials over the past 3 years than AGA early-stage research in the last two decades.

Apparently, a lot of the already small funding doesn’t even go directly into hair loss prevention, but instead into wound healing or cancer analysis on hair cells. The NIH (the largest funder of early-stage biomedical research in the world) funds its hair loss research through the National Institute of Arthritis and Musculoskeletal and Skin Diseases–hair loss receives no direct representation. The bottom line is: AGA is underfunded and thus under-researched. - Why?

I’ll give $3BN to find immortality while the mortality of my hair follicles does not concern me.

For many, hair loss is a big issue that leads to worsening mental health and potentially lowering chances for mating opportunities (especially with the commoditization of dating). How big is this issue? - It is reported that the hair transplant market will grow to $53BN in 2028 (from $17BN in 2022)

There will be no bald man on Mars. Not on my watch. But a hair transplant is not an option.

Hair loss lies at the intersection of a big market and small R&D for a potentially solvable problem given enough funding and research. In that sense, it is the ideal problem for people coming together online, to fund and participate in the research of the cure for their ailment. What makes it ideal is that a sizable portion of TAM are tech-savvy motivated young men.

Our hypothesis is that there is a massive supply and demand gap between the available solutions for hair loss and the products that the androgenic alopecia community wants to be developed*. HairDAO believes that fixing the incentives changes the outcome.

Hair Is Money

The research and development of the cure will unfortunately not happen on Reddit (or related forums). There are 150k people on the most popular subreddit for hair loss. But the thread is more of a shitposting equivalent. HairDAO is introducing the building element into the online hair loss community.

HairDAO Discord today counts 1300 people. A large community could be good at armchair researching, providing ideas or direction (à la Reddit), but they are not compelled to execute. HairDAO has around 100 people who could be considered core - individuals who risk taking drugs and self-report their treatment data pseudonymously on the internet.

It will be the core team that will lead the endeavor. The $HAIR token is used to coordinate and incentivize them. But the biggest incentive is seeing their hair follicles spring to life. Unlike in DeFi or GameFi, the motivation to participate does not lie in self-referential monetary incentives.

The high-level ambition here is to transform an online tribe into a functional organization, something that very few DAOs have been able to achieve. The small core team will run the project with the goal of full verticalization from early-stage research (IP generation) to partnering for distribution (product delivered to the patient).

Ultimately, HairDAO would resemble a drug company owned by the patients who consume its products. Unlike big pharma, HairDAO would be lean, nimble, and living online. This type of economy relies heavily on outsourcing and incentivization, while its activity is underpinned by the token. For people in HairDAO - $HAIR is money.

If HairDAO is able to find a cure for hair loss, the IP takes the form of NFT (via Molecule). $HAIR token holders operate the DAO, both through direct voting and their representation via elected working groups, which oversee specific operations of the DAO. The token is intended to align the incentives within the organization.

Flipping The Unit Economics On Its Head

The cost of getting a drug through trials is extremely high.): “Overall, the estimated cost of trials supporting the approval of 101 approved drugs was a median of US$48 million (IQR US$20 million–US$102 million) [...] Each individual pivotal trial cost a median of US$19 million (IQR US$12 million–US$33 million). The estimated cost per patient was US$41,413 (IQR US$29,894–US$75,047), and each patient visit to the study clinic cost an estimated median of US$3,685 (IQR US$2,640–US$5,498).”

Although “token solves this” may sound too handwavy, HairDAO allows for its members to self-report treatment data for any drug. The DAO can then award its members for self-reporting verifiable datasets of the DAO’s interest.

This does not bypass the traditional clinical trials but enables bootstrap benchmarked safety and efficacy data from the community before going through trials. Self-experimentation is entirely legal, as is the aggregation of a large group of self-experimenters’ data.

HairDAO is in the position to secure the unofficial equivalent of Phase 2 clinical trial data for free, whereas normally Phase 2 would cost around $8M.

Currently, the DAO works with substances that are already FDA-approved but for other uses (currently experimenting with topical application of T3/T4). So long as HairDAO’s dose falls under what is currently approved, these drugs do not have to go through formal trials, while HairDAO could claim the IP for their specific formulation or use.

The hypothesis goes that even if the DAO works with unapproved substances, getting them through the trial could get much cheaper than the conventional way. While trying to understand what the cost structure of drug development looks like, we came across a paper from 2017 stating:

“Despite a clear need to understand the costs of drug development and the factors responsible, there has been a surprising gap in the data relating to how much it actually costs to conduct clinical trials.”

The paper collected data from 7 major pharma companies and came up with the following cost breakdown for Phase 3 studies.

They concluded that there are 3 areas to improve cost performance: “choices for trial design parameters (such as the size of the study, number of end points and treatment duration), operational choices (such as outsourcing and use of emerging markets) and cycle-time reductions.”

We believe that HairDAO is in a position to dramatically reduce the costs associated with:

  1. Clinical Trial Protocol Development
  2. Patient Recruitment and Retention
  3. Monitoring and Data Collection
  4. Data Analysis
  5. Site Compensation and Administration
  6. Insurance of Patients

While a DAO is unlikely to drive FDA process cost to 0, it can unlock significant savings by tapping into a hardcore user group that is more eager with results and thus more lenient with the process. It’s not the pharma company looking for patients—it’s the patients looking for a pharma company-equivalent.

This bottom-up approach means some of the costs will be shouldered by the patients (e.g. travel), and some aspects of the process might not be up to the standards of regular clinical trials (e.g. insurance coverage). Not recommending this, but the dedication is proven by HairDAO members already buying substances from Alibaba to try on themselves.

Seizing The Memes Of Production

As investors, we believe that to start something truly great you don’t need a big TAM. You need a market that most think does not even exist but you have found 10-100 truly passionate people who care about it deeply. HairDAO has wedged itself into a niche market that could grow explosively.

While no one is raising the question of why bald men are unrepresented as emojis, few are bracing themselves to make sure no one in the world will ever need such an emoji. Those brave 100 core users are proof that crypto might offer solutions to under-researched areas that will serve as a PoC for many other problems that will follow.

The advancement of the HairDAO brand is by itself an awareness of the issue of hair loss. Ready PlayHair One is gamifying member performance, which is a novel approach to creating awareness and incentives in drug development.

The reflexive nature of memetic tokens could bootstrap $HAIR’s global reputation. The token should be deriving its value from fundamental propositions and revenue generated from the potential IP (and HAIR/ETH Uniswap LP position lol). If successful, the token will probably be subjected to a memetic premium. This could be both good and bad, as it seems this is not a bug but a feature of magic internet (non)money.

Despite good memes, HairDAO banks on the fundamental value derived from operating a vertical chain of drug development, from IP generation to distribution. IP is the most defensible moat in biotech. Community is the most defensible moat online. Formalizing online allegiances with a token is potentially a powerful phenomenon that could bootstrap the most defensible organizations in the world.

Up For A Challenge

As Josh Wolfe puts it; failure comes from a failure to imagine failure. DAOs have proven themselves to be difficult operations to manage, and incorporating real-world operations in an inefficient market can only add more layers of complexity.

Finding a treatment

The most daunting thing is that looking for a hair loss treatment is akin to trying to find a needle in the haystack. It’s hard to pick a direction, and it’s hard to put a timeline on it. That being said, HairDAO has a pipeline of research studies that it’s looking to test and pursue. It’s a result of collective intelligence; the more people are involved, the more directions can be tested.

For how long can HairDAO afford to fail? We like to think for as long as people will be balding. Even if no treatment is found, every error provides valuable information for the next experiment, and this idea lies at the core of DeSci.

Professionalizing the DAO to verticalize the business

The end-state for HairDAO is a fully vertically integrated pharma business that includes drug manufacturing and distribution. HairDAO has to move from a chaotic Discord group with a thousand people to a solid enterprise that can both onboard tens or hundreds of thousands of people (for data gathering) and can outsource operations in the physical world (for approvals, patenting, manufacturing, distribution, etc).

A Discord group will not run a manufacturing plant and will not handle the delivery logistics—at least today—so partnerships in the physical world will have to be established. HairDAO now has several tools to develop these partnerships–fractionalized IP shares, HAIR tokens, and cash.We can already see how HairDAO would claim IP ownership and sell fractionalized IP shares with the IP-NFT model designed by Molecule.

Winning over the bureaucrats

If HairDAO comes up with its own treatment that would go through the FDA approval—which would be a success on its own merit—we simply don’t know what we don’t know about the costs. The existing information is obscure. To what extent can a DAO make FDA approval less expensive?

If the costs are in the tens of millions of dollars, and it’s highly unclear if IP will be valuable, how would a DAO fund such a sizable expenditure upfront? Regardless, the ability to derisk clinical trials with self-reported data is a significant innovation.

The current plan in regards to the study of combined T3 and T4 use—both drugs are FDA approved—is to claim the IP over a combination of two drugs and use of a method.

HairDAO has filed a provisional patent with US Patent and Trademark Office

Anyone who would try to sell T3/T4 for hair loss treatment would need to license the IP from HairDAO. While that’s the aspiration, we have no way of measuring the likelihood of success with the Patent office.

Making $HAIR the megaultrasound money

$HAIR token’s memetic premium could also become a double-edged sword. Bootstrapping itself to economic activity as data-to-earn is an improvement over last cycle’s ponzinomics of x-to-earn, but a path to token sustainability will require more than that. There is a possibility if the value accrual of IP to $HAIR materializes it might as well be challenged by regulators.

Bald men are used to being rugged by regulators

Although we are very excited about the real prospects of HairDAO underpinned by the tinkering nature of DeSci, we are well aware of the risks that are monumental here. In the past we have been wrong in instances where we thought a noble idea coupled with tokens could actually solve markets’ inadequate equilibria.

We do NOT recommend buying $HAIR. But if you’re fascinated by the topic, we encourage you to join HairDAO.

*For deeper market analysis see HairDAO whitepaper.

Disclosure: Zee Prime has invested in HairDAO and Molecule