The Most Entertaining Outcome is the Most Likely

Dec 2, 2021

Elon Musk is the richest man in the world, worth over $295 billion. Over 18 months into the COVID-19 pandemic, the stock market continues to surge. SaaS multiples are at all time highs. The Fed, initially hawkish on interest rates, is reassessing after the COVID-19 Omicron variant has emerged. Almost all top tier venture capital firms are funding cryptocurrency startups. Some venture capitalists are even suggesting that venture backed companies invest some of their treasury into Bitcoin.

My instinct tells me that this is the top. That the optimism around crypto is too good to be true. But as Charlie Munger says,

Never underestimate the man who overestimates himself

It's incredibly hard to predict the future, so I won't try. Just look at Bill Gates trying to explain the internet in 1995. Gates had written The Road Ahead that year, a book about the future, which barely mentioned the Internet. How many technologists had a more insider view than Gates in 1995?

So I'm starting off by documenting this year while it's still fresh in my mind. So much has happened this year and I find it difficult to look at what's happened outside the bubble of our immediate context. I imagine looking back at these events will have one of two effects in the future: (1) these were unrelated moments that consumed the public discourse, but were ultimately unimportant; or (2) these moments were an important signal of good or bad times to come and a new status quo.

Ray Dalio, founder of the iconic hedge fund Bridgewater, writes down the reasoning behind his trades when he does them, and later uses that as part of his learning (whether he ended up being right or wrong). I haven't quite made any large bets, but I hope to look back and learn from how I made decisions given the context I had.

  • Jan 2021: Meme stocks. A YouTuber/Twitter/Redditor named RoaringKitty, also known as DeepFuckingValue (DFV), is at the center of a short-squeeze of GameStop that caused online broker Robinhood to halt trading of the stock. Allegations that Citadel, who was financially tied to short seller Melvin Capital and Robinhood, asked Robinhood to halt trading. Another main player in the GameStop saga is Ryan Cohen, co-founder of the online dogfood delivery company, Chewy, and now chairman of the GameStop board.

    Hertz, the rental-car company, filed for bankruptcy in May 2020, early in the COVID-19 pandemic. During bankruptcy, the company saw unprecedented trading, appreciating over 1000% and raising an additionally $1b in equity offerings due to its status as a meme stock.
  • June 2021: Tether Investigation begins. Tether, a stable coin tied to the US Dollar, is under investigation from the SEC. Tether hasn't been fully transparent about their US Dollar reserves. Yesterday (Dec 1 2021) SEC Chair Gary Gensler compared Tether and stablecoins to "poker chips at the casino".
  • September 2021: NFTs. 101 pieces of the Bored Ape Yacht Club (BAYC) digital art collection are sold at Soetheby's for $24.4mm. Newsletter writers, creators, and other pop culture icons come out with their own digital art collections sold through non-fungible tokens (NFTs). Most are in the style of pixelated art. Notable ones are BAYC, CryptoPunks. CryptoKittens (2017) are one of the first examples of these collections.
  • October 2021: ENS. Ethereum Name Service (ENS) allows holders to claim a token as it converts to a DAO (Decentralized Autonomous Organization).
  • November 2021: Crowdfunding Craze. A group named the ConstitutionDAO raising $40mm to bid on an original copy of the United States Constitutions. They lost to Citadel CEO, Ken Griffin. Transaction fees for the DAO already have reached $1.2m. The group offered full refunds in addition to the keeping the token for a future purchase. The token has already 10x'd. DAOs are the reincarnation of the 2017 trend of Initial Coin Offerings, but include governance. The ConstitutionDAO was a DAO, but did not give its holders legal rights or governance.
  • November 2021: Dorsey and Crypto. Jack Dorsey leaves Twitter. Yesterday (Dec 1 2021), payment processor Square renamed itself to Block, in reference to its ambitions as a crypto platform.
  • December 2021: Staples Arena in Los Angeles to be renamed Arena on Christmas.