Woven Gold: Funny Money
FTX, Venture Capital, Gresham's Law, Billion Dollar Tweets, and The Future of Work
Happy Monday Friends! Lots of crazy things 😂 happened last week.
Thank you for reading as always. Every Monday, I process everything I read and wrote last week to give you just gold. Your time is valuable, so let’s get into it.
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1. FTX: Fraud at the scale of Enron, the speed of Lehman, and at cultural impact of Theranos.
FTX was the second largest Crypto Exchange that went bankrupt overnight. Sam Bankman-Fried (real name),the Founder & CEO of FTX was being heralded as crypto’s golden child. Everyone from Mr. Wonderful from Shark Tank to Sequoia (one of the most prestigious venture capital firms) invested in FTX. There was a new fro in town.
This made Sam worth $16 billion dollars. So he donated to charities, made commercials with Tom Brady, spoke on panels with Bill Clinton, and became the second largest donor to the democratic party after Soros (again, not kidding). Sam was known for his gentle demeanor and generosity. Everyone just chalked him up to be an awkward MIT genius that wanted to make the world a better place. Y’know, game the system for the sole purpose of giving it all away like Warren Buffet. His parents are both law professors from Stanford after all. We can trust him. Right? Nope. It turns out, we had the makings of a next-gen Bernie Madoff. The whole operation was a sham. Everything began to unwind fast when some of their financial holdings were exposed.
Among all the things of this world, information is the hardest to guard, since it can be stolen without removing it.
— Erving Goffman
The company was operating out of the Bahamas, and the story gets a lot weirder. A LOT WEIDER. Trung has all the receipts. It’s highly entertaining. I cannot wait for the movie.
Why it matters and What’s Next
This was a crypto bomb in the middle of a crypto winter. Regulation is going to come harder and faster now. This probably setback the crypto industry by 10 years, and fast forwarded regulation by 10 years. Culturally, we’re going to have to re-examine why we suspend all disbelief for a certain make-up of pedigree. Financially, I believe this is the beginning of a chain reaction of more blow ups and melt downs to come.
2. A Vibe Check on Gen-Z VC’s: Gresham’s Law of Money and Talent
I mentioned in my Alchemy of Money pieces that we’re entering hard mode because for over 30 years the United States has been on easy mode. In that time, we’ve had decades of easy credit and under mentorship. We’ve had generations move from Madison Avenue, to Wall Street, and Silicon Valley without any mastery of anything, but the top layer of the application programming stack to get the most eyeballs and users.
Terry Nguyen wrote a good piece on how Gen-Z culture infiltrated venture capital. Venture capital is a high status industry. It’s easy to see the appeal. Deal flow is important to every firm. So hiring young VCs for social capital makes sense until you realize a couple things. VC is not meant to be industrialized, and there is no way Gen-Z (at least for now) has the pattern recognition to make asymmetric bets on new S-curves.
Why it Matters & What’s Next: Gresham’s Law is the through-line that connects all of these events. Gresham’s law is a money principle that states bad money drives out good. It comes from when coins would progressively become “clipped” (replacing the precious metals with counterfeit base metals), debasing the entire currency all together. This is why they bite gold coins in Middle Earth shows like Game of Thrones. What we’re experiencing in our economy right now is Gresham’s law for both money and talent. Bad money and bad talent is driving out good money and good talent. The tweet below is worth a full read, but in short, tough times create strong men, strong men create easy times. Easy times create weak men, weak men create tough times.
When Jeff Bezos once asked Warren buffet, “You’re the second richest guy in the world. Your investment thesis is so simple. Why doesn’t everyone just copy you?” Buffet said, “Because nobody wants to get rich slow.”
3. The Internet is Undefeated: A Good Tweet is Worth Billions of Dollars.
After Elon laid off more than half of Twitter, the company rolled out its checkmark feature for $8.00 a month. The internet, being full of naughty agents, started signing up for the service as multi-billion dollar companies and started tweeting billion dollar bombs. Just paying attention to Twitter can make you a lot of money on short selling these stocks.
All of the official accounts of these companies had to address these tweets and back track. It was pretty glorious to watch.
Why it Matters
It’s hard to tell how things with Elon and Twitter are going to shake out. Elon at the helm definitely makes Twitter a more interesting place to be, but it also increases both his attack surface and exposure to risk. But then again, in a world of ‘Context Collapse’ having an asset like Twitter might be the one of the best things to own.
4. Book: The Office of Good Intentions. Human(s) Work
This book made me question everything I know about the past, present, and future of our work environments. Idenburg and Suen exposes the relationship between space, work, and people. Exploring the original intentions of work spaces and its unintended consequences. Everything in this book haunted me like a government document from the future I wasn’t supposed to see. I’m going to be shooting a podcast with the authors this week, so be on the lookout for that.
Have a beautiful rest of your week.
Let me know if I can help with anything.