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  • Reflecting on Ponzi Schemes and Investing When It Surrounds Us...

Reflecting on Ponzi Schemes and Investing When It Surrounds Us...

Good morning...

The word 'Ponzi scheme' is everywhere right now. Here is Wikipedia on the subject.

My friend Brad Feld just covered the topic on his blog with 'Reflecting on Ponzi Schemes'.

I really liked his comment to his own blog:

The best part of the Madoff Ponzi was showing how low tech the Ponzi scheme was. The contrast between the 19th floor and the 17th floor was stunning.

I completely agree that "the Ponzi is not in the technology." However, the technology has definitely made it easier for many more people to participate in a particular Ponzi

There's a timeless narrative about technology which goes something like this. "We were right, but just too early." Gartner popularized it in their hype cycle construct. In the Internet bubble, Jerry Colonna and I would talk about "the analog analogue" - basically anything analog could be digitized, by analogy, by the Internet.

20 years later, many of the ideas from the Internet bubble worked. But there are still many that didn't. And, there is an entirely new cycle of them that seemed to work for a while, but now are not working (or not going to work.)

Ironically, crypto was one of them in the Internet bubble. It was just called something else. Digicash. First Virtual. Flooz, Cybercash, ... Ah, micropayments, how I miss thee.

I have long ago taken the attitude/assumption in my public market investing that everything is rigged. It means I yell less at my screens, own less stocks, watch less TV, read less news and when I do invest large amounts of capital, invest early and try to set up the cap table. It is not perfect and not for everyone, but knowing that the Ponzi is all around us all the time, it is a a strategy that has worked to keep me invested and fulfilled.

Investing involves trusting people and investing in a world flush with technology is not something that is going to slow down.

It is up to each of us to find a strategy that helps us participate...or not.

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