Everyone is an Investor

Market Mayhem

What a crazy week in the market with the GameStop fiasco. There’s a lot of content out there describing a play-by-play of the events that occurred, which I won’t get into because frankly, it’s not that interesting and in the long-term, I think this will be 6 o’clock news. I try to live my life with long-term horizon so when everyone was trying to make a quick buck buying GameStop stock, or complaining about market manipulation, I was buying Bitcoin.

The way I see it, no one will remember GameStop, Redditor “DeepFuckingValue”, or Melvin Capital in 10 years from now. They had their 15 minutes of fame, and poof they’re gone. But you know what won’t be irrelevant? Bitcoin, full stop. The GameStop phenomena is another proof point that we need a decentralized financial system. Bitcoin was the only winner this week. Bravo.

Capital Allocator

A recent survey asking kids what they wanted to be when they grew up really kind of freaked me out; in the 2020s more kids want to be YouTube stars than athletes or astronauts.

This generation of kids are growing up and seeing internet personalities make far more money than their mom and dad working traditional 9-5 day jobs.

If we were to take a time machine to 2030, I think this survey would look quite different. For one, I think astronauts will have a resurgence as space exploration becomes more mainstream, but more notably, I think there will be another profession at the top of the list – Investor. As I’ve pegged in my previous posts the emergence of the “solo-capitalist” career path, individuals who want to exercise sovereignty over their own financial success. One of the most notably characteristics of a solo-capitalist is their ability to manage money and build wealth on their own – an “Investor” for lack of a better term.

Investor of the Past

Before you start thinking about investors as hedge-funders and wall-streeters, hear me out. Right now, term “investor” is loaded with negative stigmas associated with corruption and greed. This sentiment is based more recently on events in our lifetime, like the 2008 financial crisis.

The “investor” I am envisioning will look different from the wall street archetype of the past decades, it will also look different from the Redditors on Wallstreetbets, an army of internet trolls trying to “break” the system. Neither of these extremes is healthy or net-positive for society. The original purpose of capital markets were to help capitalize businesses and give people the opportunity to be part-owners in other businesses. With the emergence of complex derivatives, high-frequency trading, and the ability to take on massive leverage, the market has become a synthetic casino where the underlying businesses that are constantly being bought and sold in the equity markets, are getting very little upside. In 2020, the derivatives markets traded $120 trillion of notional value, far exceeding the market value of the underlying businesses. That’s trillions of dollars being spent on moving money around in fancy ways that could otherwise be going into businesses to fund innovation and fundamental growth.

Investor of the Future

I think we’re in the early stages of a world where “everyone is an investor,” but most people haven’t embraced it yet.

When you combine the macro conditions of low interest rates, remote working due to COVID lockdowns, and a growing class of independent workers, it’s the perfect storm for an investing boom.

I think there’s an alternative reality for the investors of the future that we can look forward too, more of a peer-to-peer economy akin to the model that funded the Renaissance, lending, borrowing and equity seeking between friends and colleagues rather than through secondary markets.

During the first Renaissance, the Medicis, a wealthy banking family from Florence, became patrons of legendary artists including Michelangelo and Leonardo di Vinci. Reddit Founder Alexis Ohanian believes we’re living in the next Renaissance, but this one is more inclusive, powered by the internet. Instead of the Medici family funding a handful of promising innovators, millions of micro-investors will be able to fund thousands of projects.

As trust degrades in the public secondary markets, as we’ve experienced with the GameStop phenomena, I believe we’re going to see a shift towards private markets and the “tokenization” of assets or securities that people can buy and sell directly with one another.

These are some ways I see it playing out:

  1. People will no longer solely rely on a single job for income. As we move a more independent, individualized and localized economies this is inevitable.
  2. People will allocate their own money, or pick a fund manager to allocate on their behalf. Financial literacy will become imperative in doing this. Picking a fund manager will be like picking an employer.
  3. There will be a return to investing into productive enterprise and innovation, not to unproductive financial transactions, as a result there will be more peer-to-peer capital allocations as trust in traditional systems degrade.
  4. Tokenization may enable more peer-to-peer trading as people can tokenize their own products and services, further developing the future promise of crypto in our everyday society beyond speculation. I can imagine a world where an up and coming musician like Binki creates a personal token for fans and followers. It’s a great way to know your audience, engage them and trigger discussion. A $BINKI token would give owners upside to their career and it would create liquidity for the artist to fund new projects.

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Until next time,
Justin