The Game Has Changed

  
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This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 120,000 other investors today.


To investors,

The world now knows what many of us have known for awhile — the game has changed. That is my takeaway from what has transpired around Wall Street Bets and Game Stop. This isn’t something that took hold overnight, but rather the culmination of a number of trends that have been evolving and accelerating for a decade.

First, let’s start with the psychology. There is a deep disdain in western society for the hedge funds and banks who constantly profit at the expense of the little guy. Whether it is the 2008 housing crisis, naked short selling, or hedge funds front running trades, the average citizen feels like they are constantly at a disadvantage. Many times they are hurt and don’t even realize they were participating in the game.

Read this Reddit post that was surfaced by Alexis Ohanian:

This feeling of pain manifested itself in 2008 with the Occupy Wall Street movement in Zuccotti Park. The people may have dispersed from the park since then, but that feeling of being screwed by Wall Street never disappeared.

The feeling has actually been exasperated by the Federal Reserve and our elected officials. They continue to intervene in markets and conduct market manipulation via quantitative easing. The dollar is being devalued at an incredible rate, but nobody seems to care about that. This punishes the 45% of Americans who own no investable assets. They feel like they can’t get ahead. They feel like everything is getting more expensive, but they’re not making more money.

Well, they’re right. That is exactly what is happening. People have been screwed from a system structure that is built to reward investors and punish savers. All this market manipulation and intervention inflates asset prices and devalues savings.

So you have millions of people who are psychologically scarred from the past combined with a continued feeling of being left behind. But the internet steps in and creates a lifeline — the access to information, communication tools, and financial markets has suddenly increased significantly in the last decade. You don’t need a Bloomberg terminal and a legacy brokerage account to play the game.

You don’t have to go to Harvard or Wharton to be invited to the hedge fund idea dinners. You don’t need to wear a suit and tie for someone to listen to what you have to say. Instead, you can live anywhere in the world and research and learn on the internet. You can freely communicate with like-minded folks. And the barrier to accessing financial markets has dropped to nearly zero.

When you arm the every day person with information, communication tools, and access to markets, you create a scenario where the crowd can face-off against these institutions that have played a rigged game for so long. Except there is one problem — the second that the tide starts to turn, the game is being shut off.

Quite literally, the hedge funds and financial institutions are crying because they’re losing money. What a joke. They presented themselves as genius stewards of capital, but are currently being exposed by random people on the internet that go by user names “DeepFuckingValue” and “Roaring Kitty.” You absolutely love to see it.

This morning it got even worse. Not only is the legacy financial world up in arms about all this, but Robinhood disabled the ability for most of their users to trade the very stocks that everyone is piling into. Discord kicked Wall Street Bets off their platform last night. Excuse my language, but what the fuck is going on???

As I always say, the pirate either dies or lives long enough to become the establishment. The very companies that prided themselves on being anti-establishment are falling right in line the second that they actually have to prove their courage and conviction. They’re not on retail investors side. They’re on whatever side protects their business. That is their right and we have to respect it. But we don’t have to like it and we don’t have to continue to give them our business.

So where do we go from here?

This is the best marketing campaign for the future digital, decentralized financial system. Bitcoin is throwing the middle finger to central banks. Decentralized exchanges are telling centralized peers to kick rocks. Digital assets that trade 24/7/365 without manipulation or intervention is where we are all heading. Whether you’re rich/poor, American/Chinese, smart/dumb, or informed/uninformed, you will be allowed to participate in the markets.

We aren’t going to be using wealth as a proxy for intelligence anymore. We are going to have free markets where people wager capital on future outcomes of asset prices. If you’re right, you win. If you’re wrong, you lose. That is it. Forget all this market manipulation and intervention. The legacy institutions won’t like it but they don’t have a say in the new world. Welcome to your decentralized future.

There is still a lot of work that needs to be done to realize this vision, but we are well on the way. Robinhood can halt trading of various stocks. Markets can trigger circuit breakers. But no one can shut down Bitcoin. No one can stop decentralized exchanges. It isn’t about hoping that people and companies do the right thing anymore. It is about building technology that can’t do anything but the right thing. The right thing 100% of the time.

Free markets have been a thing of yesteryear for awhile in the United States. The little guy didn’t have a way to fight back. As they have gained access to information, communication tools, and investing, the deck gets more and more stacked against them. That won’t last long though. The new decentralized world is going to be a hell of a sight to see.

Sit back and enjoy today. The internet is doing its thing. And there ain’t anything better than that. Talk to everyone tomorrow.

-Pomp


This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 120,000 other investors today.


THE RUNDOWN:

Silver Lake Co-Founder Tells Davos Cash Is Used Far More in Crime Than Bitcoin: Glenn Hutchins, co-founder of global technology investment firm Silver Lake, countered the widely held view that bitcoin is mostly used for illicit activity when speaking at the World Economic Forum summit in Davos, Switzerland. Hutchins said the belief ignores the immutable nature of the blockchain technology underlying bitcoin, reported Finextra on Tuesday. Read more.

Miami Uploads Bitcoin White Paper to Municipal Website: The city of Miami on Wednesday uploaded a copy of the Bitcoin white paper to its municipal website, joining a growing chorus of governments and companies now hosting bitcoin’s original blueprint. Mayor Francis Suarez emphasized his commitment to "turn Miami into a hub for crypto innovation" in his tweet announcing the upload. He's been pumping the U.S. city's potential as a landing ground for California tech expats for weeks on social media. Read more.

Fed Chair Powell: ‘We’d Welcome Higher Inflation:’ U.S. Federal Reserve officials voted Wednesday to keep monetary conditions at historically loose levels while waiting for the economy to heal. Chairman Jerome Powell said he doesn’t want to put a timeline on tapering the U.S. central bank’s $120 billion-a-month in asset purchases. Read more.

Mark Cuban on Bitcoin, NFTs and What Comes Next: ‘The Upside Is Truly Unlimited:’ Mark Cuban is best known as the billionaire owner of the Dallas Mavericks, a staple on Shark Tank, and – in some circles – an occasional commentator on bitcoin. “Watching the cryptos trade, it’s EXACTLY like the internet stock bubble. EXACTLY,” Cuban tweeted in January, on the heels of BTC’s jump above $40k. Many saw the thread as bearish on bitcoin, or even bitcoin-hostile. Read more.

American Cancer Society Launches $1M Cryptocurrency Fund: The American Cancer Society (ACS) has launched a cryptocurrency fund to support cancer research. The non-profit organization announced Tuesday it has partnered with cryptocurrency donations platform The Giving Block to launch the fund, setting a fundraising target of $1 million by early 2021. Read more.


LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE


Rahul Rana is an Associate at Lux Capital and the Author of “Making Moonshots."

In this conversation, Rahul and I discuss:

  • What a moonshot is

  • Why they are important

  • How the best entrepreneurs go after moonshots

  • Why iterative progress in science and technology is not enough

I really enjoyed this conversation with Rahul. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE


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