An “aggregated thoughts” piece. I also publish on TikTok, Youtube, and Twitter!
YouTube/podcast up soon (please subscribe for updates heh)
Sections:
Regulation and Validation?
Curators vs Creators
Semiconductors
Is the market just a 36-year, zero-coupon bond?
Regulation and Validation?
So this week, Brian Armstrong, the CEO of Coinbase, @’ed the SEC on Twitter. He did a storytime - basically explaining that Coinbase wanted to release a lend feature (for ex, investors would pool their Bitcoin, those Bitcoin would be lent to borrowers, investors get paid interest on that pool)
But the problem was the SEC was like “whoa, Coinbase that Lend feature? That’s a security. Therefore, we must regulate you.” But in Brian Armstrong’s eyes, the SEC wasn’t transparent as to ~what it all meant~.
The SEC said that they would sue if Coinbase went through with the Lend feature. (they also tweeted out a “what is bonds” video in an expert level troll to ~lending is a security~ q that Brian posted)
So a few things here:
Yep, lending is a security. The SEC will regulate this. Matt Levine spoke.
Regulation hasn’t been super transparent. The SEC has done kind of a bad job at telling the crypto world what’s going on. I don’t have a complete theory as to why (perhaps because crypto is moving at the speed of light) but I don’t think they are ~anti-crypto~. Gary Gensler taught classes at MIT about crypto. He states several times that he is technology-neutral, but passionate about investor protection. But they still haven’t been clear as to what the parameters are for the crypto world.
This is probably why they are suing (or plan to). The SEC sues to figure out what to do. It’s not entirely uncommon (they did it with HFTs back in the day). So the lawsuit isn’t a net negative, it’s just so the SEC can figure stuff out faster.
The Game Theory: The SEC is going to want to regulate! That is what they do. But Brian Armstrong clearly knows what he is doing (hopefully). I put together a VERY flawed decision tree, but I think it helps to illustrate the probabilities that Coinbase was calculating here.
Brian wants to get to the gold start (his highest payoff point) - through his POV:
Tweet at SEC: I’ll put it together in a thread that will get ~14k likes. People are already angry at regulators. Let’s make them angrier.
Crypto community goes up against SEC: I will rally the ARMY behind me. If the SEC comes after crypto, they are going to have to deal with these ~degens~, and their ire alone will push things into the favor of crypto (plus lobbying dollars)
SEC creates meaningful regulation: This is what Coinbase wants (to an extent). And if that comes through a community rallying behind them (and with crypto lobbyist input (however that works)) that’s going to be so much more valuable.
“Meaningful regulation” = regulation that allows crypto to still thrive but would probably put some guardrails around some of the current operations + volatility.
The main thing is yes, regulation does bring validation. But if the regulation is 1) taking a long time or 2) not transparent, there is now the Internet to tell, which is what Brian did. I’ve written before on legislation and validation - legislation not a bad thing, but it needs to be done in a transparent way to be truly impactful (probably maybe).
So Brian Armstrong took the gamble with a thread on Twitter to take some beef with the (understaffed) SEC. We will see what the crypto community does. There is already a movement because of what happened with the Infrastructure Bill, but all signs point to it - regulation follows the flows. And you can use Twitter to pick a fight with a regulatory body - and that might make a difference in the payoff of the final outcome.
Curators vs Creators and the Content Economy
Alright, so this.
I am a ~creator~. I make finance videos on TikTok, write this newsletter, do YouTube, and have a podcast.
People are bullish on creators - the ~creator economy~ is really just beginning in my opinion. But there is a signal vs noise problems that is going on - we all want to watch the things, read the things, and do the things, but it is physically impossible to do ALL of that. (Gaby has a great piece diving into this more here)
So the question then becomes - how do you sort through it all? With all the content out there, how do you make sure the best rises to the top?
The answer would be some sort of curator - someone who organizes the noise into a signal (Gaby’s examples: Morning Brew, Everything Bundle, LetterDrop, Femstreet, Brain Pickings, etc)
When you think of the creator interface and content stack it looks something like this:
The Creator Interfaces the Platform
Creators are the interface of the platform (and if you tweet on Twitter, you are a creator - this is a very broad group). Creators make the content that make the platforms, and the audience consumes that content.
But the issue is that there are a LOT of creations being created. Which is GOOD. But you also need a way to curate for the limited time that we all have.
The Curator Interfaces the Creator
So it might end up looking something like this, above - with curators as an interface between the audience and creators. They organize the creators content in a way that the algorithms aren’t right now.
Or is might look something like this below - creators become curators too, because they have a very good tap on the space that they create in - they separate signal from noise in MAKING the content. Make content, organize content, go forth (I am revamping my resource library, for example).
The Creator Becomes the Curator
Creators already have to sift through a lot of noise - perhaps they become a double-armed force of nature OR perhaps we enter into the “content (?) economy” where creators and curators exist side by side in a symbiotic relationship.
Regardless, the creator economy is increasingly gaining speed - and the highway is being built as we drive along it. Through curation we can leverage the existing content out there and turn it into something even more powerful than it already is.
Semiconductors
!!!! WHY ARE WE NOT BUILDING HERE !!!!!
The Acquired Podcast had an excellent show on TSMC and Morris Chang that dove deep into Taiwan Semiconductor Manufacturing Company (TSMC), the world’s first and largest silicon foundry. Odd Lots also had an episode on semis recently (and a whole series on it last fall).
But the question is - what’s going to happen?
There is a massive shortage of chips, to which you might be like ???okay??? big deal! But it is a BIG deal because we use chips in everything - toasters, TOOTHBRUSHES, cars, computers, etc.
So if there is a chip shortage, the luxuries of modern life become a lot harder to obtain.
See, semiconductors are the brain of electronics - they cannot operate without them.
All the car companies are pulling back on production, Apple warned that a chip shortage WOULD affect sales of their products, and supply is still running low.
The chip shortage is the result of a perfect storm:
The pandemic shut factories down for a bit there, and you can’t produce if the factory isn’t running
Also a lot of the chip factories went through natural disasters - Texas winter storm forced some plants to stop production and Taiwan’s drought has impacted production too
The pandemic also shut ports down, and you can’t ship chips if you can’t get through the ocean.
Then the supply chain went into wack because there was such a high demand for the chips as the economy reopened
Also there is the increasing geopolitical tension between China and Taiwan - and Taiwan is the world's leading chip producer
Resulting in the current shortage that we have now.
A lot of tech companies are starting to build in-house (Apple with the M1 instead of Intel, Tesla’s Dojo chip, etc) and there are plans for TSMC and Intel to scale and build in American factories (this will take a lot of time), but it’s still a bit messy and confusing as to what will happen.
The shortage isn’t expected to be solved until 2023ish, and I imagine it will be solved at some point (necessity breeds innovation) - but it’s a vulnerability in the system that could put a lot of the everyday products we use into a crunch.
Inflation might be transitory to an extent, but if you have a shortage of chips - a core component of almost every piece of technology that we use - that’s going to push prices higher. Cost-push inflation.
Would be cool to see more money go towards these spaces -
Is the market just a 36-year, Zero-coupon Bond?
I just thought this was kind of funny.
Savita Subramanian is saying that basically any move in the anything could spook the market. Rates move, data gets weaker, consumers get pessimistic, etc - could put the whole thing into a tail spin.
The market has ticked upward despite a lot of negative forces (inflation data, Afghanistan, delta etc) so it’s almost gotten to the point - when will it fall?
Why would it ever fall again? (it will eventually I think)
The market does exist in cycles - but I wonder if there is something compressing the cycles (like passive flows or other disruptions in market mechanics, for example 🙂) and skewing the market completely out of wack. Flows before pros, as Tracy Alloway would say.
Other things I’m thinking about:
Uranium ?? wtf is going on here
Solana ?? see above
Identity as data architecture
Baseball bat shortage
Also! I will be shifting my publishing to Monday and Thursday (with the YouTubes / audio versions coming out on the ~same day~ can u imagine!). So see you then :)
Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Cool, really enjoyed your video chat with Mike, Harley and Sri! Looking forward to reading more of your work.
Great read!!