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Sunday Reads...Fintech And Fraud On Steroids And Building a Compound Company
Howard Lindzon
November 20, 2022
Happy Sunday everyone.
Last night Elon Musk said Fat Nixon can come back to Twitter. I was wrong, again. about Elon Musk and him bringing back Orange Julius. I will keep using Twitter and still not pay Twitter. I believe this will backfire on Musk but still rooting for Twitter because I like sharing my thoughts and mixing it up.
Last Sunday I was thinking about the mess that Sam Bankman was leaving behind with his sociopathic crimes and fraud. I wrote:
What happens next...
There will be lot's of bankruptcies in the industry, lot's of shutdowns and lot's of resets. FTX and Alameda money is everywhere which means mostly not where it should be.
The innocent bystander taxes and regulations will be significant for people that chose/choose the crypto industry as a place to start and build a business.
But, the next batch of companies will get started and at Social Leverage we are excited about this reset as we look out 8 to 10 years.
This week there will be more bankruptcies and more fallout.
I think Ben Hunt has a terrific explanation of the fraud in his post 'The Story Arc of SBF and FTX'. One riff:
Oh sure, we citizens of Wall Street know full well that of course there’s no such thing as a Magical Money Machine, and when we talk with each other in public we laugh at the idea of a Magical Money Machine, like ‘oh, haha, get a load of these rubes who believe in this nonsense‘. But in private we whisper our heart’s truth, that there is such a device. Because the human truth is that deep down in every single one of us who makes our living in the financial world, we believe that there IS a Magical Money Machine and that if we just look hard enough or get lucky enough we will find it. I know that I do. Intellectually I know that the Magical Money Machine doesn’t exist, that it can’t exist, and yet … this is the MacGuffin that has driven the story arc of my professional career. Actually, that’s not completely true. The truth is that I’ve been searching for the Magical Money Machine for as long as I can remember, ever since I was a child. It is the MacGuffin of my life.
Once upon a time, Sam Bankman-Fried found a Magical Money Machine he called Alameda Research.
Next up...I really liked Alex Johnson's take on the years 2018-2022 in fintech titled 'Fintech's Steroid Era'.
I have been focused on fintech investing and my own startups since 2006 when I started Wallstrip, and reaped a lot of rewards during the last 5 years which Alex calls the fintech steroid area. The last 4 years it has been much harder for me to make investments on behalf of Social Leverage (our fund) because everything started to look the same and valuations got out of hand.
I agree with Alex that this era is ending now, which is good, and also agree that the hangover (which has started). Do read it.
I really enjoyed watching Jon Stewart talk about anti-semitism with Colbert...
'A Few Good Stories' from Morgan Housel was excellent. I especially loved this one about teaching probabilities:
When giving tests, Stanford professor Ronald Howard used to make students put the percentage odds they thought they were correct next to each answer.
If you said you were 100% confident that your answer was correct and it turned out to be wrong, you failed the entire test.
If you said you were 0% confident and your answer happened to be correct, you got no credit.
Everything in between gave you a confidence-adjusted score.
I’ve never heard of a better way to teach people that life is about probabilities, not certainties.
Finally, Parker Conrad was on Patrick O'Shaughnessy's podcast talking about building a Compound Company, something I think a lot about as we build Social Leverage and I work on my new company launch. You can listen here.
Have a great Sunday.
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