Hi
I’ve been pretty quiet.
I tend to go quiet when things change, and this year has been full of change.
Timelines are hard, you think you figure out one problem and then another one shows up.
But I promise I have some super cool things on the way.
I’m very excited about them! Can’t wait to share.
Things I’ve Been Thinking About
Pricing models are fucked - this seems true to me across the board (stock valuations, goods, services), except digitally (which won't last, the cracks are already forming)...
Negative externalities are not being priced in at all.
Economies of scale, subsidies, and tariffs distort real costs.
Failure to pay living wages & offshoring devalues human input and delays "utopian innovation".
Demand curves are swinging more violently in either direction throughout the years.
Margin is exploitation (economists want to see competition erode margin, improve quality, speed of delivery, and quantity WHILE capitalists want monopolization and moats (which are false barriers of entry that keep competition away).
Regulation that is often lobbied by the existing market share leaders, low prices due to economies of scale, and ecosystems that entrench the customer prevent effective competition.
Takeaway: expect more pricing volatility, and if you can grab ahold of the pricing situation in your life, focus on benefiting from buying (think Amazon’s Subscribe & Save platform).
Maybe the Fed wants to be "behind the curve" - As a result of my letter The Self-fulfilling Prophecy of Debt is Low-Interest Rates In Perpetuity (Maybe), I learned that reversing the "trend" is one of the main ways we can get away from 0/negative real interest rates. Inflation would be higher in this regime (a cost of doing business, See FFR before 1982). New vehicles for funding would also be considered in order to offset the influence recycled debt has on real interest rates.
Takeaway: We’re either going to see a regime change that will resemble the economic situation of the 1940s - 1970s (and less/no QE in future recessions) OR we’ll see the Fed reverse its current course of stopping QE as soon as the next recession occurs.
Inflation could be one of the best things that ever happened to us - During the era of the Greenspan put, the Fed basically propped up the value of stocks by making money cheap. They were able to do this because inflation was a non-issue. But not anymore.
With money becoming more expensive, putting money to work is going to be harder. There will be more opportunities (alpha) generated by those who spend money on people, such as their employees.
Note: Companies paying their employees with stock is just the modern version of corporate towns.
Simplification of complex concepts - I love when someone can take a concept and explain it in multiple ways. Because everyone's brain works a bit differently, what clicks for one person may not click for another until it's put into terms that they understand/connect with.
Example: “America was founded by people trying to avoid taxes.” - something we know from years of education but when it was put that way, I felt an A-ha moment. It’s so obvious in retrospect. This is what I love about reframing.
Takeaway: When writing, try to explain a concept in a couple of different ways.
Marketing fuckupery for Web3 - Again, just like “Global Warming”, web3’s insistence on decentralization and scarcity as being the core value for end-users is stupid. Fake scarcity isn’t scarcity, digital assets claiming that they’re limited are bullshitting you. How did they get made in the first place? Some lines of code. They can easily make a new version whenever they want.
These are not Features Advantages or Benefits, they’re just functions of the blockchain.
They’re not the reason to get excited about web3. End-users don’t & won’t benefit from this for a long time, but the power of the blockchain is that its functions enable digital ownership, share computational demands over many devices, and the tethering of code to digital things in new/exciting ways.
These functions that are being plastered about as “The Thing” are just infrastructure improvements. These functions are supposed to create resiliency, transparency, and computational improvements.
Resiliency, transparency, and computation improvements are supposed to rise exponentially while costs remain reasonable. It’s the roads and cars that allow developers to set up shop. Builders gonna build (eventually).
As an investor or end-user today, the only thing you want out of web3 assets is utility:
Exchange coins as your poker chips.
Stablecoins for leverage and yield.
Incentive driving coins for new businesses.
Coins for purchasing other types of digital assets.
Digital assets that are tied to a fandom (enduring) and you’re happy to own for ownership’s sake.
Takeaways:
No such thing as diversification
It's the Wild West, laws only hold you back
Don’t get attached
Learn about the devs, not the (intended) end-users.
Surprises are rarely surprises - A lot of issues that bubble up to the surface and make the news cycle are often the result of structural weakness in our existing systems (economic, cultural, political). The “flash crash” of May 9th, 2022 is one such example. Structural weakness in the stock market started showing up in February 2021 (15 months earlier).
Takeaway: Trace surprises back to find their underlying causes.
I hate that most of the political debate has devolved into one false dichotomy after another - It doesn’t have to be this or that.
Example: I am pro-life & pro-choice. I would never infringe on a woman’s choice, I am not a doctor, I am not a scientist. I am not a woman. I think that anyone who has to deal with pregnancy is already dealing with a lot and they don’t need the government to tell them what they must do. They need the government to support them. To help them make the best decision for their situation and feel the presence of a robust support system that's there to catch them no matter what they choose.
Make contraceptives free.
Provide comprehensive education about sex and its implications.
Make pregnancy free. Tests, doctor visits, subsidize purchases.
Improve welfare systems so that no child goes hungry, and so that no child lives in poverty.
If we are the GREATEST country in the world, this is the least we can do. That way we can truly be pro-life while preserving the freedoms and rights we supposedly value in this country.
Takeaway: If a woman and her network of family, friends, and doctors come to any sort of decision… it should not be based on their financial situation. That’s the goal. The only goal.
One Final Thing
Those of you with eagle eyes may have noticed some subtle changes to the substack.
If you haven’t, don’t worry. I’ll make it all clear when its official.
Until then, think of it as a preview of what’s to come.
Thanks for sticking with me.