Capitalogix

Doom And Gloom From Charlie Munger

In case inflation wasn't stressing you out enough, Berkshire Hathaway's Vice Chairman, Charlie Munger, channeled Nouriel Roubini in his tirade on the dangers of inflation. 

 

via Yahoo Finance

For context, the CPI has inflation rising at the fastest rate in over 40 years. Meanwhile, Munger's current working hypothesis is that our currency will become worthless over the next hundred years. 

Munger paints a dire picture - but there are a lot of "what-ifs." The infusion of cash into the economy during the pandemic certainly pushed us in a dangerous direction (despite saving the economy). However, 100 years is a long time, and there are many steps we can take as an economy to slow that snowball. One of those includes the continuing scale of innovation. As new technologies arise, and the value chain of industries changes, so does the economics of our nation. 

The Future of Spaceflight

When I talk about exponential technologies, I almost always end up discussing Tesla and SpaceX. 

Elon Musk is an interesting guy.

Whether they end up doing everything they say they're going to, his companies massively accelerate the rate at which capabilities turn into products and platforms for future growth.

I recently shared the Elon quote: "Stop being patient and start asking yourself, how do I accomplish my 10-year plan in 6 months?  You'll probably fail, but you'll be a lot further along than the person who simply accepted it was going to take 10 years!"

I don't know if he really said it.  Nonetheless, it sounds like him ... and I agree with the sentiment.

The New Space Race.

When I was young, the Space Race captured the heart and souls of Americans.  But, for the past few decades, it was in the background.  Recently, that has changed.  The space race is getting hot again.  Resources are pouring into this area, and SpaceX is leading the pack. 

In 2018, I shared excitement that the boosters he used were reusable.  Today, people are talking about how the newest ship, Starship, could render other rocket programs obsolete. 

 

via visualcapitalist

 

While there's always room for competition, I can see many programs falling far behind if they haven't been focusing on reusability.  Assuming Starship delivers on its promises (keeping in mind that Elon is often over-confident about his timeline), it will be cheaper and more versatile than anything out there. 

I think it's naive to assume that other companies aren't doing interesting things ... but by the time they release anything comparable, it's possible that SpaceX will already dominate the market. 

The economics of reusable rocketry isn't yet cost-effective for most potential customers, but Musk is undoubtedly moving the needle in the right direction. 

Hopefully, he can continue to raise the expectations of both consumers and producers.  The results could be out-of-the-world.

Right now, suborbital trips from Virgin Galactic and Blue Origin cost between 250K to 500K per trip - and trips to actual orbit cost over $50 million. 

However, I believe the cost of space travel - and space tourism - will drop radically within my lifetime. 

It's hard to comprehend the scale of the universe and the scale of our potential ... but that's what makes it worth exploring!

Even though we've only been talking about space travel, there are so many other exponential technologies that this applies to just as well.

Onwards!

Here Are Some Links For Your Weekly Reading - February 13th, 2021

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• The Metaverse is Inevitable, and It's Already Changing Product Design as We Know It. (YD)
• The Metaverse Hype Cycle. (Marketoonist)
• DeepMinds's New 'AlphaCode' Can Program at a Competitive Level. (9to5Google)
• Odell Beckham Jr. Has 1,494 Diamonds On His Super Bowl Cleats by the Shoe Surgeon. (FootwearNews)
• Why Your High-Performing Employees May Be Slowly Disengaging from Work. (FastCompany)

 

Trading Links:

• The Winner of this Year's Super Bowl – Money. (Vox)
• Why the Stock Market Doesn't Like High Inflation. (AWealthOfCommonSense)
• AirPods and Beats Make Up Half of the U.S. Headphone Market. (iMore)
• Elon Musk's Net Worth Will Exceed $1 Trillion Thanks to SpaceX. (ZDNet)
• These 3 Companies Could Be the First to Reach an Eye-popping $5 Trillion Market Cap. (FastCompany)

Functional Mapping: Nature's Desired Path

There's a concept in design and transportation called Desire Paths. 

The desired path is the path that users take despite the intended path by the builder of a community or application. 

Here's a great example. 

Reddit via itstartswithani

And, here's a whole community forum focused on desire paths. 

It's often easier to take advantage of human nature ... or just nature ... than fight against it. 

To that effect, I shot a short video on how this relates to your business and tech adoption. I call it functional mapping. Check it out. 

 

Understanding the natural path for both technology and your clients makes it easier to understand and anticipate the capabilities, constraints, and milestones that define your path forward.   That means you actually have to understand the different types of users and what they expect to do.

Each stage is really about the opportunity to scale desired capabilities and automation.

It isn't really about building the technology, rather, it is about supporting the desire.

You don’t have to get it right.  You just have to create momentum in the right direction.   Meaning, if you understand what is coming, you don't have to build it … but you should figure out where you want to build something that will move things in the right direction.

You’ve probably heard me talk about how Capabilities become Prototypes. Then Prototypes become Products.  And, ultimately, Products become Platforms.

This model is fractal.  That means it works on many levels of magnification or iteration.

What first looks like a product is later seen as a prototype for something bigger.

SpaceX's goal to get to Mars feels like their North Star right now ... but once it's achieved, it becomes the foundation for new goals.

This Framework helps you validate capabilities before sinking resources into them. 

It helps you anticipate which potential outcomes you want to accelerate.  Rather than simply figuring out what the easiest next step is … you have to figure out which path is the best next step to your desired outcome.

The world is changing fast! Hope you're riding the wave instead of getting caught in the riptide!

The Future of the Blockchain

Last week, I talked about market performance in 2021.  A decent portion of that article talked about cryptocurrency and the recent downturn (after a stellar 2021).  I'm a skeptic by nature, so it's hard for me to get behind any specific coin (even Bitcoin) at this point in time.

This week, I had a conversation with good friends, including John Raymonds, about the topic as well.  John is much more active in the space and brought up some good points.  Something I noticed was how the level of discussion is starting to elevate and mature. People are beginning to think about secondary and tertiary value propositions. The conversation even made me think about repurposing some of our underutilized hardware in our server room for some crypto-related purposes.

So, today, I want to focus on a different aspect of the equation ... the potential value propositions of cryptocurrency as a technology - and the blockchain. 

To start, I want to talk about Industrial Revolutions.  In part because we're at another inflection point. 

A Look at Industrial Revolutions

The Industrial Revolution has two phases: one material, the other social; one concerning the making of things, the other concerning the making of men. - Charles A. Beard

There are several turning points in our history where the world changed forever.  Former paradigms and realities became relics of a bygone era. 

Tomorrow's workforce will require different skills and face different challenges than we do today.  You can consider this the Fourth Industrial Revolution.  Compare today's changes to our previous industrial revolutions. 

• First industrial revolution - Discovery of the steam engine and creation of factories
• Second industrial revolution - Introduction of the assembly line and mass production
• Third industrial revolution - The world wide web and computers connect the world, enabling the digital age. 

Each revolution shared multiple similarities.  They were disruptive.  They were centered on technological innovation.  They created concatenating socio-cultural impacts.

Since most of us remember the third revolution, let's spend some time on that. 

Here's a map of the entire "internet" in 1973. 

 

Reddit via @WorkerGnome.

Most of us didn't use the internet at this point, but you probably remember Web1 (static HTML pages, a 5-minute download to view a 3Mb picture, and of course ... waiting for a website to load over the dialup connection before you could read it).  It was still amazing.

Then Web 2.0 came, and so did everything else we now associate with the internet; Facebook, YouTube, ubiquitous porn sites, Google.  But, with Web 2.0 also came user tracking, advertising, and we became the "product."  Remember, you're not the customers of those platforms - advertisers are.  And if you're not the customer, you're the product. And when you're not the customer, there's no reason for the platforms not to censor your thoughts to control the narrative. 

Putting You In Control

Web3 (and the blockchain and its reliant technologies) brings the power back to the people. 

Primarily due to decentralized access with equal treatment for everyone.  Governments are already being pressured by Bitcoin and other cryptocurrencies.  But so are banks and brokerages, due to smart contracts and Ethereum.  Soon, even VCs will be impacted due to OHM fork treasuries or initial DEX offerings. 

As Web3 gets more mature, so will decentralized finance.  Meaning, big banks, governments, ISPs, and more will have less control over the applications and uses of the technology. 

If handled correctly, that means competition can discourage the productization of your digital presence.

Removing Barriers

There are many practical ways this would impact your life - but let's look at one that's already happening. 

El Salvador recently made Bitcoin legal tender.  Talking about all the reasons this happened is beyond the scope of this article, but it does make El Salvador an excellent case study for the possibilities. 

To start, it's now easier and quicker to buy a beer there (with Bitcoin) than it is in the US with cash.  It also stabilizes pricing in a civil war, because it's easy to move both in and out of the country. 

Consequently, it also means that their currency holds its value as they travel to other places. 

Let's take this to the extreme.  Let's say someone was to convert all their net worth to Bitcoin, and put it in a hardware wallet.  They could conceivably memorize their seed phrase, throw the wallet in a fire, and fly to El Salvador with only the clothes on their back.  After finding a way to scrounge up the money to buy another hardware wallet through random acts of labor ... they would be in a completely new country with their entire net worth and no other footprint.  It's scary - especially for governments and their taxing authority.  But, it creates a new set of potentials and freedom.

Now, take it a step further.  What would the world look like if you had all your health data, insurance, etc., with you anywhere you travel?  The world becomes your oyster in a way that was almost impossible before. 

And that's only the beginning. 

But, to bring it back to my skepticism again, there are a lot of roadblocks, inferences, and time in between today and the decentralization of the internet and finance.  And for now, that thought experiment only really works if you're willing to move to El Salvador.  The larger countries seem to be doing everything they can to discourage the adoption of cryptocurrencies. Though I think the smaller countries view this as a chance to become one of the new hubs of the world.

However, maybe it's time for this quote by Elon Musk: 

"Stop being patient and start asking yourself, how do I accomplish my 10 year plan in 6 months? You will probably fail but you will be a lot further ahead than the person who simply accepted it was going to take 10 years."

 

 

Here Are Some Links For Your Weekly Reading - February 6th, 2022

Have you paid attention at all to the Spotify controversy?

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• How Emerging Tech Will Influence Freedom, Industry, and Money In the Metaverse. (VentureBeat)
• Here's What Henry Kissinger Thinks About the Future of Artificial Intelligence. (Gizmodo)
• Boston Scientists Create "Robots" that are Capable of Reproduction. (CBS News)
• Eureka Moments Come From Deep Within Subconscious Brain. (GreekReporter)
• Revenge: The Neuroscience of Why It Feels Good In the Moment, But May Be a Bad Idea In the Long Run. (NeuroScienceNews)

 

Trading Links:

• The Tech Sell-Off Has Some Venture Capitalists Worried the Good Times May Be Coming to an End. (CNBC)
• Have We Hit Peak Unicorn? (GeekWire)
• Here's Where the Jobs Are In One Chart. (CNBC)
• Amazon In Talks To Purchase Fitness Equipment Producer Peloton. (AppleInsider)
• Amazon Added More to Its Market Capitalization on Friday Than Any Company Ever Had in a Single Day. (MarketWatch)

 

How Much Electricity Does Bitcoin Use?

Electricity use is one of the common complaints people have when talking about Bitcoin adoption and mining. 

So, how much energy have we been using to mine Bitcoin?

More than you might’ve guessed.

The world is changing.

via Daily Infographic

I know several people that are getting more into mining as cryptocurrency continues to grow in popularity (despite the downturn). 

While this amount of energy usage is startling - and bad for the environment - there are many ways to reduce the consumption of electricity by cryptocurrencies. 

On the other hand, this might be an interesting alternative data source that gives us a different perspective about the ongoing popularity and commitment people have towards a currency.

 

Here Are Some Links For Your Weekly Reading - January 30th, 2021

Here are some of the posts that caught my eye. Hope you find something interesting.

Lighter Links:

• Elon Musk Called Biden a 'Damp Sock Puppet In Human Form' After the President Highlighted EV Production By GM and Ford But Not Tesla. (Insider)
• Behind Meta's Claim of Building World's Fastest AI Supercomputer. (AnalyticsIndia)
• We Finally Have Jetpacks and No One Cares. (Kottke)
• Birth of the Omicron Family: BA.1, BA.2, BA.3. Each As Different As Alpha is From Delta. (Forbes)
• A Master Economist on Increasing Tipping, Strategic Quitting, Maximizing Charitable Fundraising, Baseball Cards, Theory of Mind, and Valuable Decisions On the Margin. (TimFerriss)

 

 

 

Trading Links:

• What the Regime Will Do To Fight Private Digital Currencies. (Mises)
• U.S. SEC Approves New U.S. Exchange With Blockchain Feed, Faster Settlement. (Reuters)
• The Stock Market Slump is Raising Recession Fears But the Actual Data Isn't So 'Ominous,' Analyst Says. (Markets)
• Even Early Enterprise Metaverse Solutions are At Least 3-5 Years Away. (VentureBeat)
• Elon Musk Says Tesla's Humanoid Robot is the Most Important Product It's Working On and Could Eventually Outgrow Its Car Business. (News)

 

 

2022 Predictions

About a month ago, I shared visualcapitalist's 2021 predictions to check how well they fared at the end of the year. 

Honestly, the list was pretty good. It wasn't perfect, but you wouldn't expect it to be. 

In that article, I asked this question: 

What's going to happen as a result of the continuing pandemic, inflation, interest rates, the ongoing supply chain issues, and the growing anxiety and unrest brewing underneath the surface of the new normal? In January, we'll get to see VC's predictions. Before that, what do you expect to happen in 2022? - How'd These 2021 Predictions Fair?

With that, here are visualcapitalist's 2022 predictions: 

via visualcapitalist

Let's be clear - most predictions are either vague and easily guessed (and therefore not helpful) or random conjecture. 

But, there's value in prediction, and there's value in analyzing the data before you. The caveat is that prediction is better when it's applied to human nature and not the machinations of fate, and data can be a distraction if it's not being carefully curated and analyzed to remain relevant to your goals. 

For example, I agree with their general direction for technology. Tech is continuing to grow in influence, and as Web 3.0, the blockchain, and AI mature as platforms for sub-technologies, I think their importance is only going to skyrocket. 

Prediction can also be entertainment. I certainly catch myself looking for patterns and differentiators for everything from whether my meal is going to come to the table correctly, to who's going to win the Super Bowl. 

I know the chances are low, but I still think it's going to be the Cowboys ... 

How Markets Performed in 2021

2020 was a roller coaster of volatility, and while 2021 was as well, most asset classes saw improvements as the world reopened. 

But it wasn't all smooth sailing.  There were significant supply chain struggles and rising inflation ... not to mention the rising cases of COVID. 

Regardless, markets are not the economy, and while there are numerous factors to think about, I've always found markets interesting. 

via visualcapitalist

2021 was a year of rampant speculation, in part because so many systematic traders underperformed.  For example, Renaissance reportedly saw ~15 billion in outflows last year (despite double-digit returns) as their clients likely moved towards more "exciting" opportunities. 

Of course, some of those "exciting" opportunities were cryptocurrency-related.  Moreover, chasing performance like that is often mean-reverting.  Yet, I've seen a massive increase in interest among various business groups in crypto, Web 3.0, and the Blockchain. 

Cryptocurrencies

While crypto generally performed well in 2021, 2022 has seen a drop that erased over $1 trillion in value. 

via visualcapitalist

The reality is that crypto markets matured a lot in 2021.  The thousands of coins are mostly a distraction, but there are many interesting coins from various sectors with interesting technology behind them.  There is increased infrastructure and decreased correlation between coins.  Unfortunately, not enough to keep this drop from affecting the whole space. 

So the question is, is this a "discount" for people to buy into the space, or a sign of future troubles?

It's no secret that I've always been a fan of Blockchain but cautious of cryptocurrencies. 

I think there is a lot of money to be made speculating in cryptocurrencies, but how much of that money being made is attributed to luck vs. skill?

Crypto's are interesting, in part, because they're a digital currency decentralized over a peer-to-peer network.

The more people are willing to accept it as a medium of exchange, the more valuable it becomes (and the more it becomes a stable store of value).

Supposedly, decentralization provides it safety from censorship and government interference - meaning it has value as an international currency and as a currency for black-market transactions.  But, in my opinion, that remains to be seen (and I consider it unlikely for most cryptocurrencies).

However, the worth of a Bitcoin isn't just based on sentiment (on one hand, there are desires to avoid fiat currency vagaries, government interventions, and scrutiny, while having a fair price discovery method, etc.  ... on the other hand, there are also the costs to mine a Bitcoin, transaction fees, etc. and crypto has recently been under fire for its huge environmental impact).

Compared to a reserve currency – whose worth is primarily influenced by trade value and other macroeconomic factors - watching crypto's volatility can be scary. 

That being said, as adoption increases and more businesses enable it, it's possible that it will continue to legitimize.  For the time being, I remain a long-term skeptic because there is too much working against it. 

Many of my initial complaints are centered on coins as currency.  I get that there are already many interesting uses of Blockchain that will also help to bring credibility to coins as a store of value. 

The question for me is, even if cryptocurrency is here to stay long-term (and avoids government control), which coins will it be?  Do they even exist today?

I'm positive there is money to be made related to the Blockchain, NFTs, and cryptocurrencies.  But, at this point, it's a speculators game, and I think the best way to capitalize on this trend sustainably is to sell picks and shovels for the gold rush, instead of trying to stumble upon gold.