For the fourth time in a row, the Federal Reserve hiked interest rates by another 0.75% on Wednesday in attempt to bring inflation back down to 2% over time. Although some economists have predicted a deep recession will take place, Bank of America CEO Brian Moynihan has a different opinion.

A recession next year almost has to happen because the rates will slow housing down, cars down, Moynihan said during Fortunes annual CEO Initiative event on Wednesday in Palm Beach. But if you look at the same economists, they predict unemployment not to go much above five [percent], he said. So, its hard to believe you can have a deep recession as people work, he added. Thats the debate. And Moynihan pointed out that consumers are still spending. If you look at customer data through Oct. 24, customers have spent 8.5% more than they spent last year for those three weeks, he said.

In a discussion with Fortune CEO Alan Murray about a more human-centered approach to capitalism that takes into account the needs of all stakeholders, Moynihan, who is also chair of the World Economic Forums International Business Council, emphasized Bank of Americas commitment to sustainability. He has been working with World Economic Forum and the Sustainable Markets Initiative to create a standardized set of stakeholder metrics. And Moynihan has been on a mission to persuade companies to adopt them. He believes profit and purpose are not mutually exclusive.

The world has told us what they want from all of us, he said. Thats the [UN] Sustainable Development Goals. Now, 197 countries said this is good development. If we dont drive good development with capitalismit wont happen. And as a result, whether or not capitalism is the right system gets called into question, Moynihan said. Weve got to simplify what it means to be successful, he said. You need metrics so society can see were making progress.

At the end of the day, were building record profits and record purpose in our company, Moynihan said. He continued, Theres a business attached to this. The brand is the highest its ever been. The company has its highest number of employees and turnover is at its lowest, he said.

Bank of America CFO Alastair Borthwick said on the companys recent Q3 2022 earnings call that employee headcount for the quarter increased by 3,500, including salespeople, specialists, and technology professionals. We continue to make steady investments in our people, technology, marketing, and financial centers, Borthwick said during the call.

Bank of America reported net revenue increased 8% to $24.5 billion for the quarter, beating estimates. Net income decreased to $7.1 billion from $7.7 billion from the same time last year, as profits fell in the wealth management and global banking segments. Investment banking revenue declined 46% in the quarter, but less than the 47% drop analysts were expecting. Borthwick recently told Bloomberg that at this stage, the bank isnt planning to reduce the number of employees in the unit.

Regarding ESG investing and sustainability, there has been some pushback calling it woke capitalism, and critics say bank CEOs like Moynihan should just stick to business. What do you say to those folks? Murray asked him. When you run a large financial institution, with a team, and all we do is transmit capitalism, [for someone to ask] Are you a capitalist? What else could we be? Moynihan said. Driving stakeholder capitalism is about aligning capitalism to what society needs from us, he said.

See you tomorrow.

Sheryl Estrada
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Big deal

Morgan Stanleys E-Trade released data from its monthly sector rotation study. The top three sectors in September and October were consumer discretionary (nonessential goods and services, like cars and entertainment), utilities, and communication services. The results are based on the trading platforms customer notional net percentage buy/sell behavior for stocks that comprise the S&P 500 sectors. All three sectors increased between September and October, with utilities increasing from 2.74% to 8.67%, according to the report.

Courtesy of Morgan Stanleys E-Trade

Going deeper

"As Amazons value drops below $1 trillion, this chart shows how dramatically the biggest tech heavyweights have fallen," a new Fortune report, delves into how "every one of the old Trillion Dollar Club has dropped by at least half a trillion dollars," Shawn Tully writes. 

Leaderboard

Jim Benson was named CFO at Dynatrace (NYSE: DT), a software intelligence company, effective Nov. 15. Benson will succeed Kevin Burns, who announced in May his intention to transition out of Dynatrace by the end of the year. Benson brings to the role more than 30 years of experience. He most recently served as EVP and CFO at Akamai Technologies, a global cloud services, and cybersecurity leader. Before joining Akamai, he spent 20 years at Hewlett Packard Company in various senior finance leadership positions.

Andrew Lazarus was named CFO at Validity, a provider of data management and email marketing success solutions. Lazarus will leverage his experience in finance and investor relations to scale the company for its next stage of growth. Previously, he has served as CFO at several companies, including Electric, Pilot Freight Services, and BAE Systems Applied Intelligence.

Overheard

Even if, as some prognosticators expect, U.S. inflation crests in the first half of 2023 and the Federal Reserve can slow or even stop the pace of rate increases, the U.S. dollar will still have a monetary tailwind to support it.

Former Federal Reserve Chair Alan Greenspan, now a senior economic adviser to Advisors Capital Management, wrote in a commentary dated Wednesday, Fortune reported.

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He wanted to try to buy them on his desktop computer, since the iOS App Store takes a 30% cut. A 38-year-old graphic designer living in Northern Virginia, Clark didnt like the idea of the proceeds going to Apple instead of to independent artists. Unfortunately, the Stripe credit card integration on desktop wasnt working for him, so here he was with his iPhone and PayPal account, ready to snag some NFTs of Reddits custom Snoo mascot designed by internet creators like Rojom and Foustling.

As Clark scrolled and clicked through his favorite collections, his bank called, asking if the purchases were fraudulent. He tried to reassure them as quickly as possible so he could get back to the marketplace. He ended up buying around $300 worth, an amount he figured he could recoup through secondary sales, and that his wife wouldnt yell at him abouta 38-year-old man paying real money for art of online mascots? Really?

The frenzy around the drop, which Reddit named the Spooky Season Collectible Avatars, recalls a rosier era of crypto, circa January 2022, when NFTs were all the rage and people were splashing out millions of dollars, often outbidding each other, to buy pixelated JPEGs of bespectacled primates. 

The Reddit drop defies all logic of Crypto Winter, in which overall NFT trading volumes have collapsed by as much as 99%. By allowing artists to create designs of its signature avatar, mint them on the Ethereum-tied Polygon blockchain, and sell them to users who want them as profile pictures, Reddit has onboarded millions of new wallets into the crypto ecosystem and driven millions of dollars in sales, all while avoiding that dreaded label: non-fungible token.

Widely hated 

Clark encapsulates how the social media platform managed to pull off the unlikely success story. Just a few months ago, he wouldve had the same befuddled reaction as his wife at spending hundreds for illustrated avatars. Hes far from an NFT fanboy. As an artist, he was intrigued by the initial hype, creating an OpenSea account back when NFTs first blew up. Still, he never got too involved.  

I felt the barrier was too high, and it was just such a crapshoot, he said.

Reddit clearly agreed. The platform has been toying with the idea of allowing users to customize its iconic football-shaped alien logo, Snoo, as their avatar for yearsReddit co-founder Alexis Ohanian told Fortune that he first shipped a prototype avatar builder 10 years ago. Reddit introduced a basic builder tool eight years ago and an updated version two years ago. While the most recent one was integrated with Reddits in-platform currency and premium offerings, it was not tied to blockchain technology, which would allow users to trade and sell them on secondary markets, except for a brief trial of four NFTs in June 2021.

That changed in July, when Reddit announced the launch of blockchain-backed collectible avatars, which it described as limited-edition renditions of its Snoo mascot designed by independent artists that users could buy, mixing and matching different elements to create profile pictures. In the nearly 800-word post, Reddit did not use the term NFT once. 

NFTs are widely hated, one Reddit user told Fortune. Just the name itself has a negative reputation. 

It was a shrewd move to make the technology seem more accessible. In the future, we see blockchain as one way to bring more empowerment and independence to communities on Reddit, a spokesperson said. We are exploring tools to help them be even more self-sustaining and self-governed. 

The announcement post detailed the benefits of blockchain in simple terms. Purchasers would have the rights to use the art on and off Reddit, and the avatars would be stored on the Ethereum-compatible Polygon, meaning purchasers would have ownership and portability. In other words, they could sell them on secondary markets like OpenSea. 

Reddit also took steps to avoid some of the jargon and difficulty of NFTs. All purchases could be made with fiat currency, and users wouldnt have to set up crypto wallets. Instead, they would use blockchain-powered wallets built into the Reddit platformbranded vaultsthat already were integrated into other aspects of the platform, like community points. 

Clark has been a Reddit user for over 11 years, but like most people, he didnt notice the July announcement. To spur more traction, Reddit began to airdrop the avatars for free to power users in August, which Clark saw, but he still kept his distance. What caught his attention was the rapid growth of the r/avatartrading subreddit, an unofficial community where users gathered to share tips and make offers for their favorite artwork.  

He began to learn about the different artists involved, even joining the r/avatartrading Discord server so that he could chat with them. His favorite was named Rojom, a Reddit favorite who makes surreal black-and-white versions of Snoo with a blend of body horror patterns and religious iconography. Rojoms avatars initially went for under $100 when listed on Reddits shop, although theyre now selling for thousands on OpenSea. 

You didnt really have to know anything 

Clark liked that he could use different elements from different avatars to make his own. He eyed one by an artist called Le Rock with a guitar that he could use in his profile picturehe plays guitar himself. Best of all, the transaction costs, or gas fees, were low, a barrier that initially turned Clark off from NFTs. He learned how to collect his free avatars and even bought a couple from the first generation that launched in July, which were still available.

Thats the thing that I really loved about what Reddit didthe barrier of entry was minimal, Clark said. You didnt really have to know anything about blockchain or seed phrases or wallets. 

Others took noticeby Oct. 3, the first generation of avatars sold out. Sales volume also was increasing: According to data from Polygon Analytics, total sales passed $1 million on Oct. 3, after hovering around just $40,000 a month before.

The collectible avatar initiative, once slow to take off, was proving a success. Remember when Reddit Avatars were considered a huge fail and everyone was making fun of them? wrote one user on a different subreddit, r/cryptocurrency. Yeah, that aged like milk in an incubator.

Meanwhile, the r/avatartrading subreddit was flourishing. One of the moderators, who asked to be identified as Matt due to the value of his holdings, joined in August because he wanted to figure out how to get his free airdrop. There were only a handful of members. By early October, there were more than 3,500.

According to Matt, the community started because fanfare was growing around some of the early avatar collections, like one called Drip Squad. User numbers were still small enough to where r/avatartrading members could scoop up other collections in hope that they would skyrocket. The bet paid off as the market took off, with some people buying avatars just to flip them immediately.  

Everything exploded with the launch of the second-generation avatars on Oct. 20, with many of the most popular collections selling out in minutes. Sales volume exploded, with the total racing past $10 million on Halloween.  

Its almost like day trading, Matt said. He said has around 60 avatars worth a combined 15 Etherroughly $23,000after putting around $500 into the store.

The question is whether the hype cycle can last. 

Michael Anderson, co-founder of the crypto-focused venture firm Framework, said NFTs need to offer value beyond pure speculation. You have to have core utility built into these NFTs for them to have sustainable value over the long run, he said.

One example is rarity, which can serve as a kind of status symbol, like the Bored Ape avatars, owned by celebrities from Mark Cuban to Paris Hilton. While some of the Reddit avatar collections have fewer mintings, its not a core feature of the project, which has almost 3 million avatars in circulation.  

Another use case could be offering some kind of community value, such as access to different spaces within Reddit, which Anderson described as token-gating. Its also possible Reddits avatars will push new users to interact with other aspects of the crypto ecosystem, where NFTs are still a punchline.  

At a panel at TechCrunch Disrupt on Oct. 18, Reddit Chief Product Officer Pali Bhat revealed that over 3 million Redditors had created a wallet, or Vault, and that 2.5 million Vaults had been used to purchase an avatara figure thats increased to nearly 3 million, according to Polygons data.  

In data provided exclusively to Fortune, OpenSea said it has seen a 75% increase in new users on Polygon since Reddits Oct. 20 drop, with Reddit bringing in nearly three times more new users than any other project in the last six months. Moreover, 20% of Reddit NFT owners who made a transaction on OpenSea have gone on to purchase another NFT on the platform.

Its good, obviously, bringing new people into the space by whatever means necessary, said Framework co-founder Vance Spencer. But how do you get the people who came in for a Starbucks gift card or a Reddit NFT to go off and actually use DeFi? 

Just hung them out to dry 

Matt, the moderator for r/avatartrading, is skeptical that Reddit NFT users will expand beyond the platform, especially given the bleak crypto landscape outside of the social media platform.  

I dont see a lot of talk in our chat and everything about people wanting to venture outside, he said. Why would they? 

The major obstacle now is that Reddit is attracting millions of people who would otherwise never interact with cryptoa dynamic that is reinforced by the fact that Reddit avoids any crypto branding, including warnings about the scams and hacks endemic to the industry.  

Matt said that users of r/avatartrading were targeted by a scammer who tricked them into giving up their recovery phrases, allowing the scammer to drain their NFTs. He said that one user lost thousands of dollars worth of avatars.  

The moderators have taken steps to educate users and invite guests who can give tutorials on safety and security, often pulling all-nighters to offer support. Matt said Reddit has been radio silent after it just onboarded so many new Web3 users and so many NFT users, and they just hung them out to dry.

A Reddit spokesperson said that r/avatartrading is an unofficial community, instead pointing to r/collectibleavatars as the official Reddit-run community where the platform posts news and updates.

Despite its unsanctioned status, on Oct. 25, r/avatartrading passed 10,000 members. Clark, the graphic designer from Virginia, could only watch in amazement.  

The last time I personally saw overnight growth like that, he said, was r/WallStreetBets with the GameStop stuff.