2/ In a sense, you can look at the internet aggregators as facilitating this in particular industries.
I'm fine hiring someone on Upwork that I don't know b/c I have some ability to rely on Upwork's "judiciary system" to resolve disputes
3/ Ditto on Amazon - I'll buy stuff from a vendor that I don't know anything about because I know that Amazon has standards and I have some recourse (and because reviews are pretty effective as a reputational tool)
4/However, there are certain areas where they don't work, most obviously financial services.
5/ @billbarhydt and @Abra's new stock trading solution on Bitcoin is an obvious example of this - anyone can get micro-exposure to U.S. equities. -
6/ Historically, the transaction costs (mostly in the form of regulatory compliance I think?) made this prohibitively expensive.
If it costs thousands of dollars or high net worths to qualify, then anyone below those levels didn't have access
7/ The internet revealed there was a long tail of latent demand for niche products and services (e.g. laundry detergent for people w/ allergies) that weren't profitable to distribute when you have to pay for shelf space.
The internet had zero marginal cost to shelf space.
8/ In the same way, I suspect there is a lot of latent demand for financial services which just hasn't been able to profitable served yet but can be using blockchain-based smart contracts.
9/ @Uniswap potentially seems like another example of this on Ethereum.
10/ The Uniswap smart contract does not care what jurisdiction you are in - anyone that can access the network can supply liquidity or trade.
11/ Of course, these are not trustless, but they are trust-minimized in some ways and at least have a different set of tradeoffs than the current system.
11/ With Abra they are a centralized entity that must comply with their regulatory jurisdiction (which they seem to be doing) and you are trusting their ability to maintain the peg.
12/ With Uniswap, you are trusting the security guarantees of the Ethereum blockchain
13/ There is some regulatory component as well if your jurisdiction deemed Uniswap illegal (though I'm not clear how this could/would be enforced?)
14/ Would love any criticism or feedback of why I'm wrong about any of this or what I'm missing.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
For my next trick, I will attempt to explain how a misunderstanding from @SBF_FTX of the The St. Petersburg Paradox appears to have been a contributing factor in the (ongoing) blow up of FTX:
(Note: I am setting aside the fact that there are many allegations of fraud in this instance and you don’t really need to resort to the St. Petersburg Paradox to explain why fraud is bad, others have covered and will cover that issue better than I can)
I first heard SBF reference the St. Petersburg Paradox in a March 2022 interview with Tyler Cowen.
At the time, this seemed completely insane to me to the point that I just assumed I had misunderstood some assumption he was making.
After AirBnB closed out their Series C raising $200 million in a round led by Peter Thiel’s Founders Fund, the AirBnB team invited Thiel to the office.
While there, AirBnB CEO Brian Chesky asked Thiel what was the single most important piece of advice he had for us?
You’d think maybe it would be something about gross margins or network effects that you’d hear about in an MBA program. It wasn’t.
He replied, “Don’t fuck up the culture.”
This is perhaps not what you might expect from someone who just wrote a $150M check.
When asked to elaborate on this. He said one of the main reasons he invested in AirBnB was their culture.
Culture is a hard thing to value because it’s mostly invisible or illegible. It doesn’t show up on a balance sheet or exist in the physical world.
Thinking a lot lately about time and path dependance as they appluy to economics and investing.
The whole ergodicity economics literature is obviously a great look at this.
What else should I read on topics like time/path dependance/sensitivity to initial conditions?
I think in 20 years when we look back at what we got wrong about investing/economics, it will center on the notion of time.
Just haven't quite wrapped my head around what that implies 😅
One obvious conclusion a la @MutinyFunds is that path dependance and drawdowns matter tremendously and so thinking carefully about diversification/rebalancing/path is super important.
But I think there's a fair bit more to it than that.
If you run some toy Monte Carlo simulations and compare a diversified Kelly optimal strategy to a variety of other more concentrated strategies then the diversified Kelly strategy will win in the long run.
But....
The long run can be very, very long. Over a single life time, it's likely that some of the agents running the more concentrated strategies are the top strategies.
But these didn't maximize long-term wealth (AKA log wealth), they just got lucky.
Sales call process, onboarding process, call note templates, biz diagnostic (300 checklist for my own reference of potential improvements)
More examples in screenshots.
IMO, large portions of any business (even something highly bespoke) is likely document-able and doing so is likely to improve the long-term profitability of the biz