That Was The Week 2021, #6
This week my reading seems to have converged on a single theme again - the value of assets. Whether it is Bitcoin, the US dollar, News, SPACs, Silicon Valley private companies with huge valuations, or something else, asset values dominate.
Assets are interesting. Some are tangible, some are theoretical, some represent the present value of the future, some are treated like property, others like stores of value.
Bitcoin is now, as I write, valued at $51,752. A few weeks ago it was valued at less than half that. Rana Foroohar, writing in The Financial Times says that:
But it might better be interpreted as an early signal of a new world order in which the US and the dollar will play a less important role."
The new world order in question has been coming for a long time. It is driven by an inevitability - the decline of great nations. There has never been an empire that did not decline. The reason? Capitalism. Like Covid 19, Capitalism is brutal when it comes to punishing the old. Those who allow their infrastructure to age, and fail to invest in the rebirth of their economies, are destined to be out-competed by newer entrants with modern techniques for extraction, production, distribution. The USA had its peak after World War Two. China, India, Indonesia, Brazil, Africa (especially Nigeria) are at the start of their growth. Roughly where the USA was in the 1920s. The world order reflects the past, with the US dollar as the currency of trade and reserves. But that cannot last.
This built-in obsolescence is compounded by a second trend. Technology has globalized everything and money is next on the list. If the dollar was not already challenged by America's changed world role it would be challenged by the rise of digital money and digital stores of value.
Most commentators expect Bitcoin to double from here, and rapidly. I suspect they are right. I do not own Bitcoin myself, but I do own shares in GBTC, a proxy for Bitcoin. They are up 316% as of today, since I bought them. The dollar has been flat to down in the same time period.
So assets are important. The other discussions this week focus on the value of news. Google has agreed to pay News Corp for its news, Facebook has refused and is now blocking news in Australia, where new laws do not allow it to show news without payment. I fear News Corp and Google are on the wrong side of history here. Facebook's approach - to show the value it delivers to news organizations in Australia (roughly AU$400 m in 2020) is different:
"In fact, and as we have made clear to the Australian government for many months, the value exchange between Facebook and publishers runs in favor of the publishers — which is the reverse of what the legislation would require the arbitrator to assume. Last year Facebook generated approximately 5.1 billion free referrals to Australian publishers worth an estimated AU$407 million. For Facebook, the business gain from news is minimal. News makes up less than 4% of the content people see in their News Feed…[This legislation] seeks to penalise Facebook for content it didn’t take or ask for."
Ben Thompson takes the Google and FaceBook approaches apart in the article included below.
My take, beyond the above, is that assets reflect their real value to people. It is rare for the value of an asset to diverge far from that. America is in decline, as is the "news". SPACs are valuable because of their future prospects. As is Clubhouse. And UI Path, this week's asset of the week, or as we call it "Startup of the Week", delivers 222,000% gain for its early investors because it built a very big business, very fast, using artificial intelligence in place of humans to perform repetitive enterprise tasks.
Understanding assets is a key to understanding the future and how it differs from the past.
Bitcoin and America
Bitcoin’s rise reflects America’s decline
A little over 100 years ago, there was a bubble asset that rose and fell wildly over the course of a decade. People who held it would have lost 100 per cent of their money five different times. They would have, at various points, made huge fortunes, or seen the value of their asset destroyed by hyperinflation.
The asset I’m referring to is gold priced in Weimar marks. If this reminds you of bitcoin, you are not alone. In his newsletter Tree Rings, analyst Luke Gromen looked at the startling similarities in the volatility of gold in Weimar Germany and bitcoin today. His conclusion? Bitcoin isn’t so much a bubble as “the last functioning fire alarm” warning us of some very big geopolitical changes ahead.
I agree. Central bankers have over the past 10 years (or the last few decades, depending on where you put the marker) quashed price discovery in markets with low interest rates and quantitative easing. Whether you see this as a welcome smoothing of the business cycle or a dysfunctional enabling of debt-ridden businesses, the upshot is that it’s now very difficult to get a sense of the health of individual companies or certainly the real economy as a whole from asset prices.
The rise in popularity of highly volatile cryptocurrencies such as bitcoin could simply be seen as a speculative sign of this US Federal Reserve-enabled froth. But it might better be interpreted as an early signal of a new world order in which the US and the dollar will play a less important role.
News Corp, Google and the News
News Corp and Google Agree To Global Partnership On News
Long-term Deal Involves Payment For Premium Content For Google News Showcase;
Will Yield Substantial Benefits For Journalism And Society
New York, NY (February 17, 2021) — News Corp announced today that it has agreed to an historic multi-year partnership with Google to provide trusted journalism from its news sites around the world in return for significant payments by Google.
Google Makes Deal With News Corp, Facebook Blocks News in Australia, Microsoft’s Cynicism
Google gives in in Australia, not to the government, but to News Corp. Facebook, meanwhile, pulls out; they are right on the merits, but terrible at the politics.
SPACs and Bubbles — The New Normal
SPACs used to be a joke in Silicon Valley — now they’re going mainstream
As SPACs attract top-tier public investors, board members at the hottest tech start-ups are seriously considering them as an alternative to the traditional IPO.
Dreams All the Way Up
It Feels Like a Bubble, But It’s Not
Tech is not in a bubble, even if it feels like it is. Compared to the biggest tech companies, the best startups and smaller public companies may actually be undervalued despite record high valuations.
In his classic A Random Walk Down Wall Street, Burton Malkiel wrote, “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.” Were the Princeton economist writing an updated version today, he might say, “A blindfolded monkey throwing darts at Robinhood could select a tech stock that would have doubled over the past year.”
And it’s not just public tech stocks. Private market tech company valuations have soared too, with companies raising seed rounds at $20 million pre-revenue, Series A’s at valuations in the hundreds of millions, and Series B’s worth a billion. Robinhood faced an existential crisis two weeks ago, and then raised $3.4 billion in less time than it takes me to invoice a sponsor with bill.com. It’s as if every venture capitalist has become Masayoshi Son.
Andreessen, Clubhouse, Twitter, Facebook
- Media is Changing
The new media mogul: Andreessen Horowitz
The venture firm is doubling down on content.
One of Silicon Valley's most formidable venture capital firms is doubling down on content, putting some tech media outlets on edge.
Why it matters: Andreessen Horowitz isn't interested in traditional journalism, but, in an era where content and reach is power, it wants to exert more influence over how people think about tech and business issues.
Catch up quick: Andreessen Horowitz (a16z for short) isn't new to content. Some of its partners are veteran bloggers and authors. For years, it's hosted podcasts and produced live events. And its investments have included Facebook, Reddit, Pinterest and Substack.
- The firm also has employed a former Wired editor for the past six years, and has become an omnipresent force on new social chat app Clubhouse (in which it's the largest outside investor).
Clubhouse will do for audio what Twitter, Instagram Stories, and TikTok did for text, images, and video.
The Bull Case For Twitter Spaces
Why Twitter’s Clubhouse clone is poised to give the hottest app on the planet a run for its money.
How Twitter Got Its Groove Back — Not Boring by Packy McCormick
Changing the Narrative on Twitter: Revue, Spaces, and Prof G
Debate rages as Facebook prepares to say whether Trump can return
Controversy over former president’s ban has prompted letters from activists and record 9,000 comments
Facebook is expected to announce imminently whether it will allow Donald Trump to return to the platform after banning him more than a month ago.
The decision will be the most consequential yet made by Facebook’s Oversight Board, a group of 20 members who range from humanitarian activists and religious experts to lawyers and a former prime minister. The board, which launched in late 2020, is meant to function as an independent arm of the social platform, making binding decisions on a selection of its thorniest content moderation issues.
Inside the Making of Facebook’s Supreme Court
The company has created a board that can overrule even Mark Zuckerberg. Soon it will decide whether to allow Trump back on Facebook.
Facebook censors award-winning journalist for criticising the WHO — The Post
It looks like something plucked straight out of another age, a foreign culture where freedom of expression is always subject to a censor’s whims. Not only is it labelled ‘False Information’ but the accompanying image is greyed out, a design no doubt honed by the ‘user response experts’ at Facebook to dissuade users from clicking […]Read More…
Facebook Meets Apple in Clash of the Tech Titans — ‘We Need to Inflict Pain’
CEOs Mark Zuckerberg and Tim Cook are at odds over privacy, power and dueling visions of the internet. Their rivalry is increasingly personal — and public.
In Defense of Politics on Facebook
Political posts on Facebook and other social networks are often divisive, misleading, or just plain false. Social platforms including Facebook and YouTube have played a role in radicalizing people…
Startup of the Week: Waze and UI Path
Why did I leave Google or, why did I stay so long?
It’s been two weeks since I left Google and I keep getting asked “why did I leave now”? I think the better question is “why did I stay for so long”? When Waze was acquired by Google, most of the people who know me did not believe I would last 7 weeks, let alone 7 years…
So the question of why I stayed has many different aspects to it. When we were evaluating the offers to sell the company, we asked ourselves what would really change by being acquired? Due to a bunch of mistakes early on, we did not own substantial amounts of equity and had a pretty bad relationship with some of our board members. I remember the bottom line: “wouldn’t you rather work for Larry Page than our current board”? We were committed to our mission and saw this as a change in the cap table rather than a change of mission. This counted on the fact that Google had promised us autonomy to continue to act as Waze and we believed them.