Category: Finance

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Finance Startups

Day 146 and Gossip

Gossip drive the world. The stories we tell about other people reflect a lot. Even if we claim we don’t care what others think what others think moves the world around us. And I would posit that this actually isn’t a bad thing. It can drive closer bonds and increased connection.

There is a concept in evolutionary psychology called indirect reciprocity. Natural selection favors strategies that base the decision to help on the reputation of the recipient. Social interactions in which one actor helps another and is then benefited by a third party are key to cooperative reputations.

This isn’t just a systemic population level issue either. People who are more helpful are more likely to receive help. It’s uneven obviously and people can obscure their reputation. Depending on if you are up or downstream of helping or being helped, you make different calculations. Some people help more but they feel it’s worth the cost. They are downstream. Others accept more help because they are upstream. We are all making trades based on our position and arguably they are fair market trades.

How we decide to cooperate and with whom is driven considerably by reputations and shared value beliefs. Relaying reputation signals to bolster your capacity to connect to others is actually a key part of empathy. We need to establish psychological safety to partner with each other. Gossip helps us find suitable relationships. This is especially true in disciplines which require creativity. Quoting myself on the topic of psychological safety in venture capital.

If entrepreneurs are solving entirely new problems with high chances of failure feeling like they can trust their financial partners should be a top priority. Yet the atmosphere of distrust is pervasive. Venture capitalist and entrepreneur are constantly managing the information flow between each other.

Managing the information flow is a key component of gossip. Showing you understand their context, their fears and their reputations concerns helps you. An act we denigrate in popular culture actually helps you to deepen the relationships as each signifier breaks down space between two people and builds trust. So don’t knock gossip. It has evolutionary, societal and individual benefit. Just remember the ultimate outcome is about bringing people closer.

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Finance

Day 145 and HODL

If I like something I want to commit. I don’t get folks who get panicked at bumps in the road. Hype cycles for cryptocurrency trading have been unappealing to me. I’ve never been one to watch things like FOREX trades so why would I want to do it but with Bitcoin? Like I have fantasies about being a trader but I am absolutely not. If I believe in an opportunity I am not a short term thinker or investor. I want to see where it goes.

The real excitement to me in crypto is the potential to impact larger more broad based systems. Changes that occur over time and with significant collaboration are more interesting than any narrative blip. A libertarian monetary policy implications was obviously particularly exciting. As business person the potential to change the middle man fee structure that makes financialization and banking a scourge was equally appealing. As a technologist the possibility of building applications on an entire new protocol is enticing.

The bigger picture is the only thing that matters. Go in the right direction over time and ignore the noise. That’s why we’ve slowly moved up our allocation into Bitcoin over the years. And that’s why I’m excited for my husband Alex to be working as the new COO for Hiro.

Any angle you take on the big picture implications for building new systems is an opportunity for innovation and wealth creation. That’s why I’m HODL. HODL is a mindset. Sure it came out of a misspelling of “hold” when someone was drunk but who can’t relate to the desire to really commit to a bigger vision? Participation in the creation of something bigger is the ultimate HODL value. Hold on for dear life or just hold on. Either way you are in for the long haul.

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Finance Politics

Day 141 and Double Indignity

I’ve always been interested macroeconomics. Even as a child I got very excited about trading and markets eating up movies & books with political themes. Precocious snot that I was I quoted the Economist in my high school year book. So was primed to be interested in Bitcoin from the start. I even had a physical copy of the ur-conspiracy theory of monetary policy “Creature from Jekyll Island” in college. Yes it’s embarrassing. Point being if you are a fiat freak you probably have some opinions about the Fed, a few of which sound utterly wild.

I’d been exposed to questions about money and what drives people to build and create. I was skeptical that we could continue printing currency because I was introduced to economics through the basics. I also had an intuition that this system was making bigger winners of the already advantaged and short term interests, while taking away from long term interests who need their time & money maintain its value on the horizon. Basically I think inflammation sucks for the young. And if you are young and poor it’s a double indignity.

This is why I find Bitcoin so appealing philosophically. The idea that those already in power can inflate their interests over those who come after them offends me. Dynastic societies become ossified. I found Steven Ross’s Stone Ridge investor letter to be a particularly compelling argument for why Bitcoin is a moral good for equity.

Money is, and has always been, technology. Specifically, money is technology for making our wealth today available for consumption tomorrow. Modern Americans with a ‘What’s water?’ mindset about money – virtually all of us – assume there is a sharp line of distinction between what is money and what is not. That’s false. Instead, throughout history, various monies (note: plural) have always existed1 – simultaneously – along a continuum of soundness, subject to competitive monetary network effects. Sound money – along with language – were the first, and have forever been the most important, human networks responsible for human flourishing. Imagine life without them.

I think Americans especially the monied elite interests are simply becoming too entrenched to the detriment of freedom here but most critically around the works. We have no incentive to let the rest of the world compete so we are rigging the game in our favor. I don’t like it morally even if it benefits me personally (though arguably not as much as it does Boomers and the old). I’d rather Earth compete as one as this drives our progress. Anything less is serving a double indignity to the least privileged among us.

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Finance

Day 140 and Gaming The System

I’m extremely envious of people who enjoy explicit rule based games. People who find points structures exciting have a tactical advantage in our current moment. In America financialization, the trend of financial services generating wealth instead of making goods or selling services, dominates our economy. Gamers make the best traders and bankers in post industrial capitalism because they love gaming the rules.

I’ve never been the sort to scour rules looking for exploits in individual levels. I’m a gut player that wraps their head around the basic directions of a system and moves to be aligned for final bosses or big game or infinite play. I’ve never been particularly excited about quirks, loopholes or exploits. As long as I think I have a decent overview I’ll just throw myself into gameplay with an intuition of what looks like enjoyable continuous play. I don’t need to be rewarded with discrete wins I am happy to just play and build.

I’ve got friends who relish the day to day optimization stuff. They run the gamut from professional mathematicians to gamblers and full time gamers. The thing they all have in common is a love for the individual wins. They solve problems. They will rack up wins in short games but are less motivated by building towards dominance in any given system or game over time. They respond positively to the kinds of short loops that makes level play so much fun.

I’m more of a long loop than a distinct arc player. I like mental maps and models that don’t always give an immediate or measurable reward sets but rather engaging me in nested, dependent loops that yield unexpected dynamics. While I love games that have economies that have immediate yields I’m so much more turned on by ones that have distinctive world level macroeconomic game play. Nothing gets me more invested than causality you can’t see or map immediately.

But I’m envious of people that are good gamers because they have the skills and intuition for financial games. I want to be a winner at stuff like like yield farming that mimic the kind of play to win whale games. I can defend all the kinds of games I am good and how they are worth a lot too but for the moment I’ll just let my envy sit and admire the player of games.

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Finance Internet Culture

Day 136 and The Ease of Centralization

We are a few days into a news cycle where Elon Musk’s corporate socialism interests and/or environmentalism has pushed the Bitcoin discourse to a fever pitch. I don’t begrudge Elon because it’s hard out there for someone who takes government subsidies and we’ve all got to lean into our economic interests. The renewable energy credit system is a policy choice and my neoliberal friends would argue it’s a good one. It’s also one that currently pay’s Tesla’s bills.

Tesla makes most of its $ from RECs, not cars. Last year, it made $1.58bn from sales of RECs to gas-powered auto companies (which must buy to offset their CO2 emissions). Tesla has never been profitable without REC sales to bolster its auto margins.

That’s about to change. Last week, @Stellantis (i.e. PSA Group + Fiat Chrysler) told @LePoint it’ll meet carbon emission rules this year. That means it won’t need to buy RECs from $TSLA anymore.
Fiat Chrysler accounts for $2.4bn of Tesla REC sales from 2019 to date and 55% of Tesla sales since 2008.

What I think is really interesting is that Elon DOES know a lot about money, in particular the benefits of a centralized trusted player. Which he himself points out since you know PayPal. Centralization has been pretty crucial to fast efficient financialization especially in modernity. Of course that has some downsides as institutional power tends to accrete. Good and bad amirite?

The exciting thing about cryptocurrencies is that they may offer us they same scale as global institutions but without the whole plutocrats and fossilized bureaucracy part. Not that I’m advocating for Ethereum or Consyns.us but they put it well in the below quote.

Whereas our traditional financial system runs on centralized infrastructure that is managed by central authorities, institutions, and intermediaries, decentralized finance is powered by code that is running on a decentralized infrastructure

We’ve got a couple decades of experience in computing on the challenges of decentralized infrastructure. It’s not easy and it has costs. The costs are both significant in time and money but the benefits are significant as well. I personally find the argument that systems which are not centralized are less fragile and it is worth diversification into systems that are less fragile. I often chose convenience and speed but I also put significant effort into having systems that can withstand crisis and disasters as well. Security has always been about trade offs. And cryptocurrencies, especially Bitcoin, is about making some trade offs in efficiency for the sake of hardening of financial system. I’m philosophically inclined towards this. If I’m trying to solve global warming and getting to Mars I might find this less compelling as I’d rather focus on efficiency. This is also why environmentalists make great villains as they decide on that choice for you. I’m not saying Elon explicitly going for Bond villain but it’s an aesthetic.

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Finance Politics

Day 135 and 4 Quadrants of Crypto

I’m on my own this weekend so I had some time to listen to podcasts on my daily walk. I stupidly decided to listen to a podcast entitled “best crypto debate ever” which was vastly overselling both participants capacity to engage in productive debate. Not because either wasn’t smart but simply because they were both approaching the topic from entirely different vantage points. One had reasonably well founded concerns about about the how existing powers will fight to preserve their interests and the other was too fixated on proving that the market was the only player that matters. I am beginning to think that crypto, and in particular Bitcoin, is having a “blind men and the elephant problem” that makes discourse challenging.

I’m not pretending to have a full understanding of the future of cryptocurrencies or Bitcoin, merely articulating to myself as an exercise (it’s my blog after all but maybe my thinking helps you too) the four expertises required to wrap one’s mind around how cryptocurrency will evolve and what consequences we need to consider. Because there are no “right” answers at the moment merely different vantage points to consider as we stumble into the future.

1. Macroeconomic: understanding central banking, treasuries, monetary policy and macroeconomic actors is a specialized skill set. I studied it at arguably the best university on the planet for the subject and I still find the ins and outs to be heady stuff. Who decides what money is worth? When do we change those valuations? How does one country’s currency impact another’s? You hear a lot of buzzwords tossed around like “rules not rulers” but the practicalities of it are in fact hard problems. Just tossing off that you think “fiat currency” is bad isn’t enough.

2. Geopolitical: governments need money to provide services and security which makes them economic actors in addition to being political ones. America’s political ambitions are distinct from China’s. How we make make our money and how we spend it both at home and abroad will affect how we perceive other currencies. You need to understand things like how the dollar’s reserve currency status operates (ideally it’s history) to even begin to understand the geopolitical implications of cryptocurrency. Much hay was made of Peter Thiel suggesting Bitcoin could be weaponized by China against the US. Clearly any currency, especially one not run by Americans, will have geopolitical consequences. That anyone got hysterical about it suggested to me that our understanding of monetary policy and its political implications is limited in the general population. One needs to understand how the many actors on the political stage intersect their interests, political and economic, to even begin to comprehend how a cryptocurrency, particularly a decentralized one like Bitcoin, might evolve. In other words you have to understand how it works before you can do any predictive work.

3. Technical: concepts like distributed ledgers, hash rates, decentralized computing, and cryptographic keys are all crucial subjects for understanding the mechanics of a cryptocurrency, who owns it, and how it’s transacted. The chances that you understand the above geopolitical and macroeconomic problems and also understand how to code say your own token or have the wherewithal to acquire and set up hardware for a mining rig are slim. Maybe you grok it but being an expert in all is vanishingly slim. Computer science, political science and economics are all separate disciplines. Sure Bitcoin mining basically operates like loot crates in a game and who am I to say whether it’s a better system to have dorks with a lot of hardware run our money instead of Steven Mnuchin.

4. Microeconomics: the final area expertise is how markets and all the different players in them will value a currency and use it both as an asset and as a payment system. The elaborate financial systems that exist to determine what you think something is worth versus what someone else does is elaborate. We’ve got Byzantine financial products that decide everything from your mortgage to your salary to the cost of a sandwich. And while it’s not intuitive the folks that work on currencies, monetary policies and macroeconomic issues are not equipped with the same skill sets at all as the folks who trade on financial markets, cut deals between market participants or work out balance sheets. I’m much more studied in the macroeconomic issues than the financial ones and I wish that weren’t true. It’s a lot more lucrative to work in futures, arbitrage and market making.

When it comes down to it these four quadrants all require distinct skills and very different areas of study. Much of the debate and disagreement may simply come about because we are seeing different possibilities. Wrapping your head around the whole is difficult and no matter how brilliant you are having exposure to all areas is a lifetime of work.

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Aesthetics Finance Internet Culture

Day 128 and Financial Aesthetics

Humans have imbued money with so much significance over the centuries that financial spaces (merchants, traders, banks, trading floors, brokers, hedge funds) show us the style of their times better than almost anywhere else. Even when power centers have shunned money directly (democracies), and sometimes even because of it, money has dictated the soft powers of perception and relevance.

This makes investigating the styles of finance particularly fun as their signifiers tend to hum with unsaid anger, greed and resentment. Sexy stuff generally as we fixate on ever finer granular details to indicate that our taste shows us to be worthy of holding power (and hopefully money).

There is a reason popular culture loves the Hollywood treatment of Wall Street. Even if some of the most iconic touchstones like American Psycho were meant as dark comedies we didn’t perceive them at way. We were supposed to laugh at the business card scene not get turned on. When Gordon Gecko bellowed “Greed is Good” we were supposed to know he was the villain. We didn’t. We don’t particularly like watching these heros get their comeuppance. Giovanni Ribisi in Boiler Room ratting out the pump and dump scheme doesn’t leave a very satisfied audience but oh how we loved the second act when the gambling prodigy finds a way to go “legitimate” and become a millionaire. Just ignore the crash at the end.

Americans in particular love to fetishize our villains. Our media is littered with anti-heroes that over time become our actual heroes. We throw jealous narratives at the preppy alpha males but love it when their power is subsumed by someone who plays their games better than them. We are riveted when a protagonist emerges that knows how to best the alphas at their own game and emerges victorious. Just be careful you don’t overplay your hand and remain a villain (sorry Martin Shkreli you deserved better) as we need you to be seen as the good guy. It’s a delicate tension.

Think poor savant Bobby Axelrod in Billions becoming the titan of industry. Sure you know he didn’t start out as a classic alpha male (that hard knock upbringing) but I doubt you could tell at the end as he styles himself in the cashmere of his former enemies. Sure now it’s a hoodie but that’s a small inversion of the original sweater. The WSJ has an extensive shoppable feature on the style of the show. Now that’s cultural relevance. Turns out we do want cosplay Carl Icahn or Bill Ackman.

I’m particularly excited about the aesthetics of the next phase of financial heroes emerging from the financialization of cryptocurrency. Scrappy upstarts that want to make a more just and free financial system free of cronyism and accessible to the entire world is a beautiful narrative arc. The chaos of outsiders making the system their own has an ending we all know. You might start out in a tee-shirt and hoodie like Axe but beware the creeping encroachment of luxury goods looking to ride on your newfound wealth.

Turning doge gains into jokey NFT art is just a hop skip and a jump away from getting subsumed into the Art Basel scene. Lest you one day turn up and wake up in a new Bugatti. And while right now it may seem funny to buy a Lamborghini remember the narrative the world wants. You may just claim the mantle of a new kind of power. Or the Feds will come for you. Have fun out there!

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Finance Internet Culture Startups

Day 119 and Status Narratives

I’ve mostly worked inside insular industries. There is something about disdaining a club and then slowly forcing it to adapt to me that I find appealing. My handle on Twitter “AlmostMedia” wasn’t actually meant to be a joke about the ephemeral nature of timeline driven content (though it is now) but was an inside joke about my first personal blog.

I wasn’t as comfortable being an outsider when I was younger so a common theme on my blog was about how I “almost” achieved insider totems and status but never quite did it right. I never felt like I was stylish enough, cool enough, rich enough or had enough status symbols. Now I kinda laugh at myself as I realize semiotics is as driven by the out group as the in group. I always had the power to be enough.

But thanks to this insecurity about being “almost” but not quite right I’ve achieved a pretty valuable skill set. I’m able to see what is coming, what will resonate, and most importantly what will have status. I’m not always great at the timing (I’m often too early) but I am very good at nudging narratives into the popular conception. I call this the Thursday Styles problem. Timing what is next is as much about knowing what is coming as when it will hit and doing what you can to control the pace.

I particularly like fashion and startups as as success is often a Thursday Style problem. Status narratives are driven by people who like to show off that they knew something cool was coming. Think of the trope of venture capitalists publishing a post about when they first met a founder timed with a company’s IPO. Music used to be like this too with snobs insisting “I knew them before they were cool” when a band blew up.

Status narratives often revolve around being first. Much of crypto is obsessed with showing off how early they were while also insisting to everyone that “it’s never too late” as they need to drive a status narrative that brings in more adoption. Being early generally only matters if you are also still around when it’s “late” and you always need more people to push you further into early. Even if most of the benefits are seen by late adoption we all want to feel like we won the status game of being early. But it’s important to remember we are all a little too early or too late. We are almost right. Which is enough for plenty of success.

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Finance Startups

Day 96 and Founders Who Don’t Want to Be CEO

My Twitter has been going viral with reply guy friendly topics like taxing high earners and public vaccine demand so I needed to get some niche startup content in today to clear my palette of the reply guys. So I’m going to think about founders, professional management teams and venture’s role in supporting founders. You know, a topic that won’t have strong feelings.

A non zero number of my founder. friends would probably pay to be extracted from certain stages of startup growth, especially later stage scaling, but somehow being founder friendly has come to mean keeping these founders in charge all the way through. Many excellent zero to one founders have to actively change their entire style, skill set and value proposition once they get a company past about employee 25. Obviously there are many inflection points in startup growth and many founders relish the opportunity for constant skill growth. But plenty of early stage founders hate stuff like Human Resources and operations. Shit a good chunk hate sales and marketing too.

Early stage work is a speciality. It’s a professional niche and hard to train folks for as it’s part personality and part dysfunction. I think we should value early stage founding for its disproportionate impact on value creation instead of forcing these early stage specialists to train to become generalists, great managers or scaling operators. Of course it’s more likely they will fail once you take them away from the stage where they are genius.

Recently a friend of mine who works in venture said of another investor “oh that VC is old school” and clarified it meant they like to bring in executive teams for their B rounds companies. Which honestly sounds like a dream to me. There has to be a middle ground between firing visionary but scattered founders once they’ve raised and trying to coach a mediocre manager into great growth CEO.

I think we should normalize founders being churned in on new ideas rapidly and churned out on scaling quickly. Let them get back to founding. Let them create more faster. Great scaling venture funds can provide more value by bringing in a scaling leadership team and easing the founder out to areas where they can focus on vision and direction. I say let the professionals run your team.

Obviously some founders dream of going from idea all the way to IPO but I don’t know if it’s the dominant path they desire. It could just be one of many. I have very little interest personally in shit like operations, process and scaling. I literally married a COO rather get good at it (insert joke about literally anything to avoid therapy). However it shakes out the “founder friendly” venture firm will remain. What it means to be founder friendly may need to be rethought.

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Aesthetics Chronicle Finance Internet Culture

Day 89 and The Real Fake Fendi

What is real? Do originals exist? Can we determine the source of creative genesis when we stew in the folklore of cultural memetics? A knockoff has its own reality steeped in the accretion of culture.

I was once was asked by a tourist for direction’s to find “a real fake Fendi” when I lived in Manhattan’s Chinatown. I was honestly stumped by this inquiry. Was there a fake that had inherent realness that other knockoffs did not possess? Was there a vendor who sold the most authentic mimicry of Fendi which the tourist wished to find? I had no clue how to answer. Did they mean the realness one sees on the catwalks overseen by RuPaul? But which kind of realness? The creation that evokes the spirit of its inspiration? A realness so over the top and yet absolutely true to its essence. Or perhaps the blunt direct feedback that no construction no matter how convincing is the original artifact. Is is serving realness? I honestly didn’t know. I just told them Canal was one block north.

But perhaps authenticity isn’t the issue. In drag authenticity is manufactured. In fashions’ knockoff districts the question of authenticity is a layered confect of replication adhering to the aesthetics of the original. In some cases it actually is the original conveniently lost from some faraway inventory count. The real fake Fendi might in fact be real.

I bring this all up because in Illegal.Auction’s second collection we have curated a selection of the most outrageous instances of authenticity being the commodity sold in the NFT space. None of what we have posted are originals. They are all knockoffs. But like the real fake Fendi how can you tell? What makes something original in digital spaces. All is perfectly replicable. And no we have no new answers from Benjamin’s Art in the Age of Mechanical Reproduction either. But maybe you will. You can buy a token of these real fake NFTs. Like the real Fake Fendi realness is in the eye of the beholder.