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Tuesday, June 9th 2020 - Issue #755

Bitcoin will bring back value investing

We often say here at the Bent that Bitcoin will change us more than we change it. The protocol acts as an unyielding beacon of stability built on and enabled by protocol rules that are extremely hard and unlikely to change. The unyielding beacon allows individuals to use the protocol as a place to convene in the digital world to leverage the stability of its assurances so they can coordinate with other individuals to come to an agreement about certain things. Mainly, who has control over particular UTXOs at any given point in time.

This stability provides man with the ability to have a higher degree of certainty when conducting economic activity. This will have profound effects on the nature of business in the Information Age. One of which being that the world will see a resurgence of companies that actually create value as opposed to the VC-enabled companies of today that incentivize high cash burns over actual cash flow and profitability. The opportunity cost of not having Bitcoin on one's balance sheet because of a lack of cash flow will become too high. Companies will be forced to allocate capital more efficiently, run as lean as possible, and actually provide unique value to their customers that results in material cash flow and profitability.

The practice of spray and pray from the SoftBanks of the world who flood certain verticals with capital - funding unnatural competition that drives prices so low that profitability is practically impossible and deprecates quality of service by inducing an overabundance of optionality - are hopefully on their way out. This mentality has overtaken the world of tech investing during the first two decades of the 21st century and has led to a massive misallocation of capital and has perversely skewed business goals. Priorities have moved from being profitable to being able to raise an increasing amount of money from funding round to funding round. Using easily gamed metrics to convince VCs to throw more dollars at startups so they can burn money to pump more vanity metrics.

As Bitcoin becomes more valuable, accepted and predominant throughout our society it will begin to force business owners to shift away from the priorities that exist in a world in which the next raise is the most important goal. Providing actual value and bringing in more cash than you burn will become much more of a priority. Instead of depending and focusing on the next raise, more companies will be able to fund themselves via their cash reserves because their mindsets have shifted away from growth at all costs and towards providing actual value.

Uncle Marty believes this will lead to more manageable growth throughout the economy that culminates in a much stronger business base and less frequent and pronounced boom/bust cycles. Again, bitcoin incentivizes businesses owners to run as lean as possible and pace their growth so that hey do not spread themselves too thin. It may seem counterintuitive, but it's not hard to imagine that this trend will lead to more robust and genuine competition as well. Think many companies with hyper focus on their customers serving local economies instead of mega corporations focused on growth at all costs as they underserve the nation.


This is a future I can get behind.
Final thought...

I miss being forced to drink natty light on the beach at night and inevitably having to run from the cops. 
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