To stand out from the crowd, attendees will try all kinds of gimmicks, including dressing up in bee costumes, as airline stewardesses or wearing sandwich signs. To entice people to visit their booths, they’ll offer fancy snacks, candy, video games. Things that would arouse suspicion if you did near schools or parks.

Seemingly nobody enjoys attending conferences, but there’s a reason they are a ~$500B+ industry. Companies must believe there’s a positive return or they wouldn’t host, sponsor or send their employees to these events. Axon President Josh Isner claims Axon Week, the company's annual customer conference, costs them ~$2M to organize but generates $300-500 Million dollars worth of pipeline.

Results may vary but undoubtedly trying to reach prospects via phone and email has diminishing returns, which is why businesses will pay a premium for in-person interactions. It’s easier to build rapport with somebody over a drink or craps table in an exotic locale compared to over Zoom. As much as technologists like to believe good products sell themselves, buyers will ultimately go with the vendor they trust. Incumbents and market leaders have an advantage because “nobody ever got fired for choosing IBM”, but salespeople are paid handsomely to tilt the buyer to their solution.

Nice haircuts, fancy watches and slick suits/dresses are cool, I guess, but trust is built by spending time together IRL. Would you marry somebody you’d only exchanged emails with? Unless this is a mail-order situation, probably not. You’d want to go on a few dates first. Convincing someone to make a six- or seven-figure financial commitment for the next three years isn’t all that different. Minus the cha-cha slide.

Of course some people have a difficult time distinguishing professional from personal interest. At a recent conference I attended, my colleague was trying to book demos but women were only interested in him for dinner (see Is pretty (male) privilege a thing?)

This is the problem when thousands of salespeople are thrown into the same building and told to manufacture sincerity; everyone starts behaving like cringe weirdos. Don’t be one of those people.

How to Maximize Your Conference Experience

The worst time to figure out what you’re doing at a conference is when you arrive.

Walking around the exhibition hall hoping to accidentally bump into the perfect prospect is like expecting the deer to strap itself onto the hood of your car when you go hunting. It could happen, but it probably won’t.

To avoid circling the conference floor awkwardly, you need to start your prep weeks to months in advance:

A few weeks before the event, announce that you’re attending and be specific about who you want to meet. Search LinkedIn, X or other social media channels for people talking about the conference, including posts from previous years. Look at who liked and commented, identify the people with relevant job titles and start reaching out directly. Some conferences will share attendee lists in advance, which is even easier.

You want your high priority meetings booked in advance of the conference. At a minimum, you want to already be engaging with the people you want to meet with. Once you get to the conference, the scarce resource isn’t access, it’s their attention.

There can be potentially hundreds of vendors competing for the same buyers and profiles. After speaking to 15 Brad, Chad and Thad’s trying to push expense management software, even the most patient buyer doesn’t want to hear your pitch, they’re thinking about how to maximize their per-diem.

Ideally they are already familiar with you in advance, that way you can treat the conference as an excuse to accelerate conversations that would otherwise take months. High level executives (real ones), are difficult to schedule. If you try to get their EA to slot you in for touchpoints, alignment calls etc. you’ll see your deal drag for months and quarters.

Unless your company has crazy money to allocate to events, you’re usually better off skipping the booth. It depends on the event, but the economics rarely make sense. A booth can cost anywhere from 5-20X the price of a conference ticket. Booths can help a bit with brand awareness/visibility and get some foot traffic but if you’re hunting for whales, Shamu probably isn’t coming to your booth.

Just like in a nightclub you’re going to have a tough time approaching random groups admis of conversation. You need to find ways to catch people while they are isolated to have individual conversations. But pick your moment. Accosting people at the urinal is not going to give you a good first impression. Similarly if you see somebody on the phone or trying to grab a quiet moment for lunch, circle back.

If you did your prep well ahead of time, you’ll recognize people and already have things to say if you find yourselves alone with them. You need to be able to convince somebody within 20-30 seconds that you are worth sitting down with for 15-30 minutes. If you can’t, either your pitch sucks or you aren’t targeting the right people.

If your elevator pitch lands and they agree to a longer meeting, make sure the person comes away liking you and believes in what you’re offering them. Try to not come off as a sleazy car salesperson. Everybody knows conferences are transactional but try to not make it seem too obvious that you are making the same pitch 50 times. At least make it seem like you’re genuinely interested in them. This advice would also work for those still trying to meet people at night clubs.

After the meeting itself, make sure you follow up with next steps the very same day, even if it’s after midnight but try to avoid writing emails while still drunk. The person reading it probably won’t be in the same state. Sober or not, they might not respond until after the conference but you want to ensure they don’t forget about your discussion, which after hundreds of conversations crammed into a few days is likely. If they don’t respond to your initial email, give them a few days after the conference, they need time to get settled.

If they give you their phone/WhatsApp number, don’t make them regret it by spamming them with messages. Nobody likes to get unsolicited calls from vendors so use this privilege sparingly. You might need to follow up with them several times and that’s okay but if they aren’t responding to any of your follow-ups after a few weeks at a certain point you need to accept they just might not be that into you. Yes, I’m still talking about conferences.

Don’t book every minute of the day. Conferences are one of the few places where serendipity is possible. The person you came to meet might introduce you to somebody considerably more useful. You might bump into somebody you didn’t expect that invites you to a dinner with good prospects. You might end up next to the CEO of your biggest prospect at the blackjack table (if you play the same stakes). Leave enough slack in your schedule to take advantage of things you couldn’t have planned.

For a few days, thousands of people who would be difficult to reach are suddenly drinking coffee in the same building. Your job is to put yourself in enough of the right situations for something useful to happen.

Prepare aggressively before you arrive, know who you want to meet and make sure people know who you are. Once you’re there, be likeable and be memorable. Listen more than you pitch. Have a few drinks, but not enough to become infamous. Follow up with the people you spoke with and accept your pitch isn’t going to resonate with everyone.

You don’t need a bee costume, a sandwich board or a booth with a Formula 1 simulator to get noticed. In an environment where everyone is desperately trying to manufacture sincerity, behaving like a normal person is the best gimmick of all.

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Even if a good amount was expensed, that’s a lot of money. It’s been my go to ride hailing app for more than a decade and giving Uber Eats to a dude in his early twenties with disposable income should be considered legal entrapment.

When one of my jobs let us expense dinner for working late, I was ordering 5+ times per week. There were occasional delivery mishaps but Uber was reliable enough that I didn’t question my loyalty. I never downloaded Lyft or Doordash despite their aggressive subsidies. I even got their membership Uber One once they released it. I’m an ideal customer. A couple weeks ago, they did something that made me reconsider.

As I was ordering a private car to get a sandwich delivered to me, I decided to add drinks to my order. I didn’t notice they were being fulfilled from a different location, for which I would have to pay another delivery fee. The product designers successfully tricked me, well done. I don’t mind paying for overpriced for delivery but $12 for for 2 cans selling for $4 at the corner Bodega is where I draw the line.

I tried to cancel the order, which used to be an easy thing to do. With their recent changes I had to chat with an agent, which by the time I connected, they said it was too late to cancel since the store accepted the order. These were two cans with no preparation involved or spoilage, they could be re-sold to another customer.

I explained this to two customer service reps but they said too bad. Uber has cancelled orders on me after a merchant had accepted before, this was clearly a choice. They used to be more generous with their refund policy, understanding mistakes happen. The inability to consider the circumstances, shows the bureaucratic group think plaguing the customer service department. A smart customer service rep would have realized it was a $12 charge for somebody who spends thousands per year. It’s better to eat the cost than to risk alienating me. Instead like in many big company’s’ they replaced individual human judgement with broad policies because at scale it’s easier to control. They don’t trust judgment.

That’s unfortunate because while Uber isn’t a luxury product, they should still take a lesson from the way Las Vegas Casinos treat high rollers. In the book Unreasonable Hospitality Will Guidara, who helped turn Eleven Madison Park into one of the world’s best restaurants, argues that the best businesses don’t just deliver the product well. They make customers feel unusually understood and cared for. Sometimes that means spending a little money or breaking from normal procedure to create an outsized emotional return. This creates tremendous brand loyalty, that will keep people returning and share their experience with other customers.

Rules are useful, but rigidly following them can be stupid when an employee sees an opportunity to create more long-term value. The Uber support team is going against the principles of Unreasonable Hospitality, which is a shame because it undermines Uber’s own strategy.

Uber began as a ride hailing application, taking a fee from each ride booked through their platform. More rides = more revenue. They expanded to food and grocery delivery which economically worked the same. All their revenue was transaction based until they launched their membership program, Uber One in late 2021.

Modelled after Amazon Prime, users pay a subscription in exchange for lower fees and other benefits across Uber’s products. The subscription revenue is useful, but not really the point. Uber gives a good part of that money back through discounts to encourage members to increase their use of the platform. They needs this.

Let’s assume the average transaction (gross booking) is $30. Uber only gets about $6 (20%) from that, with the balance going to the driver, restaurant, taxes and other fees. From that $6, $3.40 (60%) goes to incentives for restaurants, drivers, customers and other ecosystem players. This leaves Uber with $2.60, about 9% of the gross booking or 40% gross profit from their cut. This is lower than typical software companies in the 60-90% range depending on what accounting slight of hands they like to pull. Considering Uber has ~35,000 employees and has to spend billions on marketing, the only way their model works is with very high volumes.

Uber One reached 50 million members earlier this year, which at $100 annually generates an extra $5B. This is helpful but on $60B in revenue, the bulk is still coming from transactions. If Uber makes less than $3 per transaction, the membership contributes as much to the bottom line as a user doing 3 monthly transactions.

Yet Uber One is highly successful. Their 50 million members are responsible for half of all Gross Bookings across Mobility and Delivery and spend three times as much as non-members. The more engrained a behavior is in somebody’s routine, the harder it is to break. An Uber One member is more likely to maintain or increase their spend compared to getting a non-user on the platform to become even an infrequent user.

Just like in a Casino, they need to spend a lot of money to get people through the door but they don’t generate profit off people playing one hand then leaving. It gets lucrative if somebody plays for hours and days, at increasingly higher stakes. This is why Vegas is happy to comp suites to high rollers, because missing out on $1,000 from the room is irrelevant if it produces five to six figures of expected gambling revenue.

Uber like a Casino, need more high roller customers. These power users bring the bulk of profits, compared to the long tail of users who only call an Uber a few times per year. They should be doing everything they can to keep the big spenders happy.

Instead Uber’s customer service is more in line with what you would expect from a business who discourages usage, such as Planet Fitness. Planet Fitness is one of the largest gym chains in the world, and their business model works because their members don’t show up.

For decades, big box gym chains would offer promotions to get people to sign up for a membership, usually around new years. These memberships would not be cancellable, locking them in for the year. By the time they can cancel, it’s next January and they’ve deluded themselves into believing they might use it the next year. This worked out great for the gyms. Eventually competitive dynamics drove prices down and allowed flexible cancellation. Planet Fitness was one of the most aggressive, offering memberships as low as $20 per month, low enough that it didn’t make sense to cancel if a member believed they would use the gym once per month.

Beyond dropping prices, Planet Fitness actively targets members unlikely to use the gym and dissuades gym rats. By offering pizza and unhealthy snacks, banning heavy weights, the bench press and other equipment enthusiasts would require they are actively trying to keep their locations empty. Replacing gym equipment is expensive, but if nobody uses it, it lasts longer. Planet Fitness gets the bulk of their revenue from the membership, so as long as people don’t cancel, which they don’t, they can be profitable and not worry about location constraints since nobody is ever there.

Planet Fitness’ operating margins of ~40% are about the same as Uber’s gross profit margin (on Uber’s Revenue, not Gross Bookings), so their model is pretty lucrative when done right. Unfortunately for Uber, they haven’t mastered the art of earning most of their revenue from a membership for something nobody uses.

Uber understands this better than I do, which is why it’s funny their support team discouraged my loyalty. In January, Uber CEO Dara Khosrowshahi told the WSJ that they were scrapping rigid rule-based systems and empowering AI to make judgment calls. “AI guided by context and “common sense” can deliver a better customer service experience rather than sticking to a rigid rule book.”

Either AI is not able to use common sense to provide a better customer service, they decided I am not enough of a high roller or it hasn’t made it to my region and I’m stuck dealing with humans lacking their own common sense or stuck following rigid rule-based systems.

Great businesses understand that losing minor amounts of money on small gestures isn’t an expense, it’s an investment. The Founder of Costco Jim Sinegal threatened to kill his CEO at the idea of raising the price of the hot dog from $1.50. Sinegal understood the hype around the cheap hot dogs and the loyalty it inspired was more valuable than squeezing out a few extra margin points.

Uber’s customer support decision was an expensive one. They saved $12 but I deleted the app off my phone and decided to boycott Eats for at least the rest of the month. With my wife leaving town shortly after this episode, I likely would have ordered a handful of times. As I was doing research for this article, I got a promotion from DoorDash offering 40% off my next two orders. They will happily offer this because if I shift even a small percent of Uber usage to them, this is a positive investment for them.

Perhaps DoorDash or another provider could successfully convince me to abandon Uber permanently, costing Uber thousands of dollars per year. All because their customer support team doesn’t understand what business they’re in.

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*Disclosure: Despite everything I just wrote, I am currently an shareholder. I don’t want to get in more trouble with the CFA Institute (overdue fees).

On the topic of Uber, its’ founder Travis Kalanick appeared on ‘s podcast which is worth checking out. Kalanick discusses his experience scaling Uber, doing business in China, dealing with VCs and his new company among other things.

If you don’t hear from me in a few weeks, it’s either because Uber’s comms team spends their time attacking Substackers with just over a thousand subscribers or the ghost of Travis Kalanick still does everything it can to protect the Uber brand.

If it were to exist, why couldn’t it be in Budva, Montenegro? The town has a population of 17,000 inhabitants but a seemingly endless supply of coastline and delectable seafood. This seems like the correct ratios for the celestial realm.

Peak season in Budva felt far less crowded compared to San Sebastien, Dubrovnik, the Cyclades or the Amalfi coast. It’s not surprising, flight routes make it arduous to get to Montenegro. I needed 2 connections to travel 1,000 KM.

There were, inevitably, a few loud Italian and French tourists. Those are unavoidable. Fortunately, they were spread across different sections of the beach. This is preferable. When these two groups come into contact, dangerous chemical reactions can occur.

The relative lack of distraction allowed me to advance in my reading, which happened to be about the history of speculation and financial bubbles. I couldn’t help but notice the similarities between the way people overcrowd investments and vacation spots. Both offer value at the start, but as more people partake, it quickly erodes.

Tulips are nice if you buy them for a few dollars and plant them in your garden. At thousands of dollars per bulb, nobody is putting them in the ground. The same logic applies to crowded tourist destinations. Santorini and Capri are beautiful. That is unfortunately why everyone is trying to get there.

If you want to find great investments or vacation spots, you can’t look where everyone else is. Consistently making good investments takes time, effort, and a willingness to look slightly off the beaten path. Finding beautiful, affordable places that have not yet been completely ruined by crowds requires the same thing.

Keep reading to learn the link between vacationing well and beating the market.

The Book I was Reading on the Beach:

1. Devil Takes The Hindmost by Edward Chancellor

Cool Book You Probably Haven’t Read:

1. The Gray Lady Winked by Ashley Rindsberg

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Montenegro is a beautiful Country

Despite being the size of Connecticut, Montenegro is seemingly a non-stop collection of beautiful views. Whether you’re into beach, mountains or forest, they have all in great supply. I was in Budva, along the beach, just a short boat ride away from Dubrovnik. Budva feels like a mini version of Dubrovnik, with some similarities to Santorini. Just many more clubs, casinos and shirtless bald men smoking cigarettes at 9AM. No, they did not actually film Casino Royale in Montenegro, although they certainly could have.

Montenegro is the living embodiment of a place benefitting from the end of The Golden Era of Travel. While cruise ships can dock in Kotor, the port of Budva doesn’t have room for them, which limits how busy the town can get. This coupled with difficulty to reach the country via plane, adds enough friction keeping the worst kind of tourists away. The lazy travellers who want everything pre-packaged and booked by their travel agent/LLM before they arrive. God forbid they encounter anything unfamiliar or a language other than English.

In the case of Montenegro, pretty much everyone I encountered spoke English. Although it helps curry favour with the locals if you can speak Montenegrin or another West Balkan language. I suspect locals charge western tourists higher prices.

At the beach, the waiter quoted me 20 euros for a chair, after I sat down his colleague told me it was 30. The group of young local women nearby were charged 15 while the middle aged British couple were charged 40. They said it was 20 yesterday and 10 the previous day.

Initially I didn't like getting overcharged but it confirmed my hypothesis that Pretty (Male) Privilege does exist. It’s just less effective than being a young local girl.

Beyond widespread English and getting charged tourist price for beach chairs, Montenegro is pretty accessible as a travel destination, the difficult part is getting there. Seemingly few people are willing to deal with this inconvenience. Montenegro gets around 2.5 Million visitors each year, which is 5-10% of what Croatia, Portugal, Italy, Greece or France get.

This is consistent with my experience; even amongst regular travellers, I know few people that have been to Montenegro. Or Albania, Bulgaria, pretty much any country that doesn’t have regular direct routes from major Western European capitals.

This doesn’t mean they can’t enjoy their vacation. It’s just that it will be difficult to have a much better experience compared to the average traveler at these common destinations because of tourists traps, high prices, endless crowds and loud noises. This is not unlike the stock market.

It’s Never Different This Time

“The four most dangerous words in investing are: This time it's different.” — Sir John Templeton

There is nothing wrong with investing but when too many people decide they can get rich by trading instead of building something productive, markets become susceptible to bubbles.

What is a bubble? It’s when the asset you didn’t buy grows rapidly over a short time frame. When something you own experiences similar growth, that’s just the wisdom of the market working its magic.

The more asset prices are driven by the belief that some greater fool will pay more than you did, the more markets behave like a casino.

People are lazy and don’t like uncertainty. Finding good stocks, businesses, or assets with the potential to outperform is hard. It requires work, patience, and the humility to accept you could be wrong. There is no shortage of people seeking above-market returns but few willing to do what it takes.

Instead, people gravitate to assets that have already performed well. If something has gone up recently, it becomes easier to believe it will keep going up. These are momentum trades. They are psychologically comforting not requiring much imagination. Investors can outsource their conviction to the crowd. Everyone else believes in it, so maybe they should too.

(^ The average investor during a bull market)

In Thinking Fast and Slow, Daniel Kahneman describes how our brains are constantly searching for patterns, even when they don’t exist. Once something happens, it becomes easier to imagine it happening again. He gives the example of being less surprised the second time he bumps into a friend in a random place. Even if the chances aren’t any greater than seeing anyone else he knows. His brain has decided that friend has become the guy Kahneman sees in unexpected places.

Investors are no exception. SpaceX’s valuation isn’t based on the companies performance but rather the belief that there will be a lot of demand to buy SpaceX shares. It has gone up a lot recently, therefore it will continue so you should get in before you miss the upside. This self perpetuating belief can be reduced to some other fool will pay a higher price than you did, but of course you’re not the fool.

If you want outsized investment returns, you need to be willing to take a chance on something that isn’t already universally accepted as a sure thing yet. The more certain an investment feels, the more competition there will be to own it. This buying pressure increases the entry price and reduces future returns. The best opportunities are usually found in assets that are priced less certain than they actually are. The market expects X, but you strongly belief it will do Y. This is why by knowing an industry or asset better than most people, you will have an advantage.

The not so big secret in investing is that if you want to beat the market, you need to tolerate more boredom, pain, and uncertainty than the average investor. Warren Buffett when asked by a group of students how to become a better investor responded to read 500 pages of annual reports each day. He knew none would follow his advice.

You need to look where other people are not. Anyone can harvest oil if it’s sitting at ground level. To make real money, you need to drill deeper. So I’m told. The closest I’ve been to an oil field was an olive farm.

Investing and finding great vacation places work the same way. The further you get from the herd, the more potential there is for alpha. This does not mean every decision will be a winner. Some obscure stocks are ignored for good reasons. Some off-the-beaten-path destinations are cheap because they are inconvenient, boring, or mildly cursed. That’s okay. The goal is not to look smart every single time. The goal is to win over the long run.

Would you rather visit 20 different countries/cities or return to the same safe tourist destination each year? Some will disappoint but every so often, you end up sitting in an only midly overpriced beach chair in Montenegro, eating fresh seafood, staring at the Adriatic, glad you aren’t fighting for a reservation in Cannes.

If you want interesting vacations, don’t build your itinerary from Instagram influencers, cruise ship routes, or the first page of a travel guide. By the time a place becomes obvious to everyone, the things that made it worth visiting are overbooked and overcrowded.

The stock market is no different. Any stock tips you hear at the hair salon or auto shop, aren’t worth pursuing. By the time an investment feels obvious, safe, and socially validated, much of the return has already been captured by someone else. Like most things in life, the best returns come before the crowd arrives.

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This is by far the biggest IPO in history, and prices SpaceX comfortably within the 10 largest public companies by market capitalization. Higher than Tesla ( $1.6T) META ( $1.5 T), and Berkshire Hathaway ( $BRK-B $1.1T) or JP Morgan ( $1T).

Looking at financials alone, this doesn’t make much sense. SpaceX generates ~$20B in annualized revenue, but has a ~$5B operating loss and -$20B free cash flow. Other trillion dollar companies generate >$100B revenue while being highly profitable.

Investors know this yet still the stock price soared because in the short term the stock market is a voting machine. There are more people wanting to buy than sell shares. There are many reasons why people would want to be a SpaceX shareholder.

Regardless of what you think of his politics or whether billionaires/trillionaires should exist, you are a delusional hater if you don’t think Elon Musk is one of the greatest entrepreneurs ever. Up there with Jobs, Vanderbilt, Edison, Ford and other titans.

For nearly three decades Musk has made doubters look foolish. Whether it’s online payments, electric cars, or rockets, Musk finds a way to win. This inspires a level of patience and devotion amongst employees, investors and customers that few big company CEOs can enjoy. While this is part of what makes SpaceX and his other companies great, it’s also why it makes his companies terrible stocks to buy today.

If your goal is to generate alpha, buying great companies alone won’t do it. You need great stocks. Right now SpaceX trades at an outrageous multiple, with a limited float and buying shares around the time of the IPO is usually an easy way to get rugged.

Keep reading to find out why you should not buy SpaceX right now.

Book I’m Currently Reading:

1. Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor

Book Most Recently Purchased:

1. Confessions of an Advertising Man by David Ogilvy

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Stocks Go Up Because People Want to Buy and Hold Them

Imagine two identical companies. Company A announces they intend to wind down operations at the end of the year. They will honour any existing performance obligations, but not make any new sales. They will sell off all assets, settle any liabilities and distribute the difference to their shareholders at the end of the year. Meanwhile Company B will continue operations for the foreseeable future.

Would you pay more for a one time $250 payout in 6 months or $100 annually for the next 20 years? What if that $100 increased by 10% each year?

If an investor thinks a company will have more earnings to distribute to them in the future, they will pay a higher price to own it. If many investors share this opinion, the market clearing price, where demand meets supply, will rise.

When you see a stock price oscillating, this is a reflection of buying versus selling pressure. The market can be willing to pay up for a stock one day, then shun it the next. This can be driven by investors changing their outlook on the business, shifting preferences between near vs long term cashflows, available liquidity in the financial system etc.

Great companies can perform poorly in the stock market over extended stretches because it doesn’t fit with what investors are looking for. High growth tech companies with negative earnings were in great demand during the Dotcom Boom and ZIRP eras, but out of favour during high interest rate, low liquidity regimes. The time and price you choose to buy a stock along with your holding horizon will have as much if not more of an influence on your investment return than the companies performance.

This is why being a great company doesn’t on its own guarantee a high share price. Does SpaceX qualify as a great company?

SpaceX Is Not a Rocket Company. It’s an Elon Musk Conglomerate.

SpaceX started as a rocket launch/space company 20 years ago, but today you can think of it as three separate but related businesses:

1. Space - Rockets (Falcon, Starship, Dragon etc.)

2. Connectivity - Starlink

3. AI - Compute Business (Grok, Cursor)

The Space division is responsible for decreasing the launch cost by about 85% down to $2,700 per KG (down from $18,500 historical average). This cost reduction has saved US government agencies such as NASA, DoD, NRO along with commercial satellite operators billions of dollars. Beyond the immediate cost savings, it makes it economically feasible to do new things in space, from building data centres and colonies to enabling low-earth orbit broadband and mobile satellites. This segment does about $4B in revenue and has grown 8% year over year (YoY).

The Connectivity division sells secure and high speed internet connections to consumers, enterprises and governments. Starlink is ideal for underserved rural and remote areas, or areas with compromised internet access like Ukraine or Iran. Starlink began in 2020 and generates >$11B in annual revenue, growing 50% YoY.

The AI division (previously xAI) merged with SpaceX in the past year. xAI was the merger of Grok and Twitter and as of March 31st were doing $3B annually growing 22% YoY. They have since secured >$15B in annualized revenue from deals with Anthropic, Google and others. They recently acquired the right to purchase Cursor.

The Space division is launching more rockets per month than every other player combined. Their competitor Blue Origin doesn’t even have a launch pad right now. Starlink has been in business 6 years but generates nearly as much revenue as Canadian telecom giants Bell Canada and Telus. The AI division is getting paid billions per month from competitors, because they have capacity at a time when people are desperately seeking it.

SpaceX is a great company. That doesn’t mean it’s a good stock.

SpaceX’s Greatest Asset Is Also Its Greatest Risk

Greece’s conquest died with Alexander.

Great-man companies inherit the same problem. When the founder is responsible for a disproportionate share of the vision, talent recruitment and investor confidence, succession is not a normal management transition. It’s an existential valuation event.

This is the biggest risk to SpaceX shareholders today. What happens on the day Elon isn’t there? There is no way to justify the IPO valuation without an unwavering belief in its founder.

Based on Friday’s performance, a lot of people believe in Musk to the tune of 100X revenue. This is great for anyone who owned shares pre-IPO but very expensive for somebody buying the stock today.

Compared to other companies at this scale, SpaceX would need at least $100B in annualized revenue to justify a $2T valuation. That’s 10X where they were 3 months ago. Not only would they need to quickly scale their revenue, they would need to show a path to get operating margins in the 30-40% range. None of the trillion market cap companies with >10X revenue have operating margins below 40%. The only exception to this is Tesla, another Musk company.

Most expect SpaceX and Tesla will merge. Taking Friday’s share prices, the entity would have a combined market cap >$3.5T with ~$110B in annualized revenue and operating profits of -$1B (assuming they can’t find any synergies). That’s a more manageable 35X revenue, but still well above any of the other companies.

Until then, investing in SpaceX at 100X revenue, is effectively taking early stage venture capital uncertainty but paying mega cap IPO prices. You need to believe the company can double revenue for the next 3 years just to catch up to where their peers trade today. That leaves no margin for error, which seems like an unnecessary risk.

SpaceX definitely isn’t the first company to go public at a rich premium, but when you look at short term stock performance from recent IPOs, its rarely beneficial to buy within the first day or even week of trading. It’s common to see a stock drop 50% below its IPO price within its first year of trading.

Last year Figma ( ) reached a peak share price of $122 on its first day of trading (3X the initial offering price) but can be bought for below $20 right now. Figma has grown revenue nearly 50% YoY and beat its latest earnings estimates in a major way, but only trades at 10X revenue for a $10B market cap.

Figma and SpaceX aren’t comparable companies but they are part of the recent wave of IPOs that feature a limited float, which makes the price susceptible to large short term pumps. The float is the number of shares that are available to be bought in the open market. Every company has a certain number of shares held by insiders or part of the company’s treasury, that are restricted from being sold. The higher this ratio, the easier it is to distort the share price.

Assume a company has a million shares, but nine hundred thousand are held by the CEO who won’t sell, it doesn’t take much to pump the stock. One whale can make it surge with the purchase of 10,000 shares. The buying pressure wins, which sends the stock to the moon. This is a common feature in crypto coin offerings, most of which are nothing more than orchestrated rug pulls. If you timed it correctly, you could make anywhere from 50-1,000X your money in an hour. Most participants were unfortunately bag holders. In the case of SpaceX, it’s hard not to feel like one.

Only 4-5% of SpaceX shares are part of the public float. Most mature public companies float 60-90% of their shares. SpaceX’s float is slightly more aggressive than recent tech IPOs between 10-15% (such as Circle, Uber, SoFi) but not unprecedented. Figma, Robinhood, and others were between 5-10%. Robinhood’s trading debut wasn’t as explosive as Figma’s but it opened at $38 and reached a peak of $55 after a few weeks before dropping below $10 per share within its first year.

These limited floats aren’t necessarily designed to fleece public share investors. It’s common for founders at VC backed companies to own more shares in their companies compared to most public company CEOs. In the case of SpaceX, Elon Musk owns ~40% . For reference, Jensen Huang from NVIDIA has less than 4% and Mark Zuckerberg has ~14%. Both companies have been public for a while now.

It’s also normal for pre-IPO shareholders to be subject to an 180 day lockup before they can sell their shares. This temporarily suppresses the float. Once it expires, the share price usually takes a hit as early investors and employees look to cash in.

In the case of SpaceX, the lockup is structured differently. Musk and some early investors are subject to a 366 day lockup, whereas other pre-IPO shareholders are locked up for a maximum of 180 days. Some can be released earlier based on certain milestones. In 6 months, the shares that would be eligible to be sold that could contribute to the float could reach up to 60% (if all these investors choose to sell).

Certainly not all of these shareholders will sell, but a 30-60% post-lockup float is pretty normal for new IPOs. With Musk owning such a large number of shares, it places a ceiling on how big the float will get, but the point remains, the way the stock trades during the early days or weeks post-IPO is not really reflective of where the stock will be in a year.

The way the stock trades before the lockup starts to expire, isn’t really reflective of how the broader market views SpaceX stock. Musk successfully convinced NASDAQ to relax their policies around float percentages which means by default many index funds need to buy SpaceX. Since an increasing portion of the market is held in these passive funds, billions of dollars will be directed towards SpaceX shares, and there won’t be any selling pressure for at least the next few months.

This sets the table for SpaceX’s price to support the current valuation, and potentially climb in the short term, but in the long term, the market is a weighing machine. I suspect people will look at META, Microsoft and Alphabet at 10X revenue and 30-40% operating margins, and wonder if it’s worth paying 100X for a moonshot, no matter how much they believe in Elon Musk. SpaceX might very well one day start space colonies and become the most profitable company ever, but in the short term investors are asked to buy into a completed story, that’s only just begun.

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(Check out this great breakdown on the SpaceX S1, from )

There were only two safe outcomes. He could call off the stunt and stay on his side of the canyon, or clear the gap and land on the other side. Anything in between meant falling to his death. His survival only existed at the extremes, ruin sat in the middle.

Most people’s view on risk is that this is something you should try to eliminate. Variance is bad, regardless of the reward. They only focus on the gulley, ignoring the reward waiting for them on the other side. Others are degens who only focus on the reward, the other side of the Canyon, ignoring the very real possibility of dying.

Neither approach is always right, but at times they aren’t wrong. There are cases when people should try to limit variability and others when they should embrace chaos. At times it’s optimal to combine both.

This applies to investment portfolios, career choices, and even dating. Countless people have earned a living referencing Daniel Kahneman and Amos Tversy research showing how bad people are at making decisions. Much of it stems from a misunderstanding around risk taking.

It’s less complex than people realize. Famed investors such as Nassim Taleb have been giving away the solution for years. It’s called the barbell. Like Knievel, you want to avoid the middle. Embrace risk when the potential payoff is worthwhile, otherwise take as little as possible. This approach lets you chase the upside without compromising your chance of survival. Keep reading to learn how.

Book I’m Currently Reading:

1. The Adventures of Herbie Cohen: World's Greatest Negotiator by Rich Cohen

Book I most Recently Gifted:

1. The 38 Letters from J.D. Rockefeller to his son: Perspectives, Ideology, and Wisdom

In case you missed them, here are some other recent articles to check out:

What is Risk?

Most people’s introduction to risk usually comes from games. Parlor games, board games, wagers that sort of thing. Coin flips are easy enough to grasp. The coin has two sides, which guarantees a binary outcome. Heads or tails, one person wins, one person loses. There’s no skill involved so any player has equal odds.

Outside of these games, life doesn’t work this way. Odds and conditions are rarely known ahead of time and performance can play a role. There’s an expected outcome but if actual results can vary, then there is risk. Some risks you can know in advance, like the odds of the coin flip (known-knowns), others you can be aware of but can’t quantify (known-unknowns), others you can’t even fathom (unknown-unknowns).

In the case of the coin flip, if a stranger wagered you $10,000, a mathematician would say your odds are 50-50. That’s the right way to think about your expected payoff but that 50% probability of losing doesn’t capture all of the risks.

This is a stranger so you don’t know enough about them to determine if they can afford to pay you (default risk). Even if they can, they might decide to break your legs and take the money anyway (counterparty risk). These are harder to calculate.

Risk isn’t inherently good or bad, it’s just an acknowledgement of different outcomes. You can think of risk as the umbrella term containing all of the factors that can influence the result. Something is only risk-free if there is only one possible outcome. Examples include forgetting your wife’s birthday or rooting for the Toronto Maples Leafs; both can only end in disappointment.

When you hear terms such as risk, risky or high-risk, this does not mean these are bad things, rather there is a large range of possible outcomes.

Bad Investors Avoid Risk, Good Investors Consider It

(Not Investment Advice)

A common misconception is that classically trained investors try to eliminate risk.

If that were true they wouldn’t be investors. They would be hoarding money under their mattresses. They try to minimize risks that don’t offer enough upside.

Given the choice between an investment with a guaranteed 10% return or another with a 50% chance of -10% with a 50% chance of a 30% return, over the same time period, the classical investor would take the first one. The second investment provides the same expected return but it exposes the investor to the possibility of losing money, without any additional compensation.

Returns are not created equal. According to finance theory, investors that can generate the highest return per the lowest level of quantifiable risk are superior. Returns that are greater than they should be, per the implied level of risk is called alpha. If as an investor you are not seeking alpha, you are a degen.

A degen doesn’t think in terms of risk versus reward. They just look at reward/upside. Meanwhile a bad investor, only focuses on downside risk i.e.. the potential to lose money, without considering the upside.

Imagine a third investment, one that offered a 99% possibility of a 20% return with a 1% of -10% return. A charlatan investor would focus on the 1% chance of losing money and cost themselves major upside. Both the degen and the classically trained investor take the third investment and hope they don’t get hit with that 1% scenario, otherwise the charlatan will never let them hear the end of it.

That’s the most math you’ll need to do this article I promise.

Upside vs Downside Risk

(Not Military Advice)

The examples I’ve given so far rely on the assumption that risks are knowable and quantifiable in advance. In most cases, they’re not.

As much as classically trained investors like to make their pretty Markowitz efficient frontier charts, this only works looking at historical results. The basis of their planning is to hope the future looks like the past. Sometimes it does, until it doesn’t.

When most people think of risk, they usually just focus on downside risk, like the charlatan investor. This is because people experience more pain from a loss than pleasure from an equivalent gain (this is called prospect theory via Daniel Kahneman).

This is a bad way to think about risk. There are many instances where it makes sense to want to increase the range of outcomes, where higher variance is good. When you are badly behind in Backgammon, to increase your odds of winning, you need to play more aggressively, even if it means exposing your own pieces. Your only chance of catching up is to slow your opponent down by putting their pieces in jail.

Similarly in the case of a military conflict, the larger army has the advantage. If the smaller army tried to challenge them head to head in an open field, their chances of winning are poor. To increase their chances, they should try to fight many small skirmishes. It’s harder for the larger military to plan for and the smaller army doesn’t risk their entire army in any individual battle.

Most risk management advice can be deduced into this. When you are leading/have more to lose, try to reduce variance. Avoid anything that can upend the apple cart. The odds are in your favor so you want to narrow the set of outcomes. It’s only when you are behind or the underdog do you want chaos. Act like the charlatan investor when you are ahead, and behave like the degen when you are behind. Otherwise act like the classically trained investor.

What if there was a way that offered better returns and let you sleep well at night?

How Does The Barbell Work

(Still Not Investment Advice)

Your first goal should be survival. You can’t succeed if you’re out of the game.

The barbell focuses on maximizing your odds of survival, while permitting maximal aggression. These sound contrary but they can be complementary.

Imagine somebody gave you a bank account with a hundred thousand dollars but with one caveat. You can’t access it unless you start a business and it fails. It’s not enough money to live off for the rest of your life, but it’s enough to support you long enough to get back on your feet. Would you be more or less likely to start a business?

The more secure people feel, the more risk they can accept. The barbell portfolio is constructed with two buckets. A low return/safe portion, this could include money market funds/short term bonds, gold, maybe regulated utilities. Looking at long term averages, all lag stock market index funds, but the probability of default is low.

The other part of the portfolio consists of high upside/risk positions. Speculative stocks, Crypto, derivatives, options, angel investments etc. They all offer far greater upside but most individual positions lose money. There is a way higher loss rate.

A classically trained investor would avoid most positions belonging to the high upside/risk bucket, because their models would decide the risk is too high for the expected return. The high default rate and other possible risks offset the upside. Meanwhile they would consider the overallocation to the low risk/upside bucket as a drag on returns. Nowadays the consensus view is to buy index funds and avoiding individual positions all together. Finance Substack is calling this strategy The Retardmaxx Portfolio (not my verbiage).

This is the lowest effort way to invest, but it’s not the best to minimize large drawdowns, or preserve high upside. It’s simply just mid. Anybody who bought Bitcoin between 2009-2019 and held to today would have experienced a >1,000% return. Depending on when you bought NVIDIA, or some high flying names, you could be up by a similar amount. If you just bought and held the S&P 500 over the same time span, you’d be up about 200% but still lived through volatile drawdowns, such as the pandemic. Bitcoin and NVIDIA are highly volatile assets, but who with the benefit of hindsight would not have bought them in 2015? Still, sitting around buying highly speculative assets is not a risk strategy, it’s simply degen behavior.

Nassim Taleb looked like a both a degen and a charlatan for most of his investor career. His approach was not about finding the next Bitcoin or NVIDIA. He would buy protection against rare, violent market crashes. These bets usually lost money. In normal years, they looked like an expensive drag on returns. However, when markets broke, they could pay out spectacularly. More than enough to offset his drag years.

The barbell is not designed to make you look smart every quarter. It’s designed to keep you alive when everyone else discovers their supposedly diversified portfolio was one big bet in disguise. The safe portion protects your ability to keep playing. The risky portion gives you exposure to outcomes that can matter disproportionately.

Most people are overly concerned about looking good on a month to month or year to year basis. They lack the nerve to accept frequent small losses in the short term to win in the long term. This is why most people opt for the middle. It keeps them from looking foolish at the expense of being exceptional. The barbell encourages risk taking by building a strong margin of safety.

There are many ways to build a margin of safety. Low debt, high savings, rich experiences, a strong network etc. These are things you can always fall back on if you get unlucky. The more safety you have, the more aggressive you can be and the more variance you can tolerate. This allows for incredible outcomes, like jumping the Grand Canyon.

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I’ve been travelling for work the past week meeting up with colleagues, investors and friends in San Francisco and New York.

In SF you can’t walk two blocks without hearing someone talk about their Clawbot setup or seeing an ad for autonomous agents. Everyone is building something.

New York has plenty of AI talk too, but the conversations also span geopolitics, financial markets and the difficulty of dating in the city.

One city is obsessed with building the future.

The other is obsessed with navigating the present.

There have been a lot of hot takes about SF and NYC being cooked or becoming irrelevant. With the readership of Serviceable Insights spanning many countries and continents, I thought I would share my own observations from the ground.

These two cities sit at the center of global finance, technology and culture, and spending time in both offers a glimpse of where things are heading.

Keep reading to find out why San Francisco feels like a giant startup workshop, why New Yorkers walk like they’re always late and why a city with millions of people somehow struggles to produce stable relationships.

If this week’s article does not interest you, please check out some other recent ones:

San Francisco is Machine City

Many Europeans and East Coast non-tech people don’t realize that San Francisco and Silicon Valley are different places.

When I told people I was heading to San Francisco, several asked how Silicon Valley was. Silicon Valley is actually about an hour south of the city, centered around Palo Alto and Stanford University. It is a great place for startups and venture capital firms, but from what I hear it is otherwise not the most exciting place to spend time. I would not know. I did not go there.

SF itself is buzzing. People who say San Francisco is cooked hasn’’t been there recently. Sure there are still homeless people and occasional piles of human excrement but not to the extent people will have you believe.

If you think AI is getting a lot of attention online or on television, it is nothing compared to walking around the city. Every co-working space seems full of people building something. For a city of roughly 850,000 people, the concentration of technical talent is extraordinary.

Anyone who has lived there for a few years knows someone who joined a startup early and made life changing money. Building a company doesn’t feel like a pipe dream, just a matter of time until it’s your turn.

This draws people from all over the world. It is common to meet professionals in their thirties sharing apartments with two or three roommates just to make the economics work. Housing is extremely expensive because the city has a severe shortage of supply.

This is completely self inflected because the city is notorious for blocking new developments. In their effort to preserve the historic look and charm of their neighbourhoods, they’ve made it impossible to build.

The irony of SF being one of the most tech advanced cities while also unable to build or change anything is not lost on its residents.

In any case, the charm of the city is very nice for tourists but awful if you’re trying to live there and don’t earn as much as employees of OpenAI or Anthropic. Working at either of these places would likely qualify as being a local celebrity in SF, perhaps on par with a reserve player for the Golden State Warriors.

This is because everywhere you look you see AI agent ads. At every restaurant, you know most discussions are about vibe coding, tech stacks etc. This is not to say there isn’t any culture in SF. They have a great art scene including world class museums, good restaurants, access to outdoor activities and plenty of other cool stuff.

Not everyone who lives in SF works in technology but for the people who are serious about making their startup a success, they probably couldn’t imagine themselves living anywhere else. This is because there’s definitely a premium placed on being an SF based company.

SF and other California based companies raise about as much venture capital as the rest of the States combined. Many investors will ask startup founders to move to the Bay Area if they want a term sheet. It makes sense. You are closer to the biggest VC funds, access to talent and can cross pollinate with other founders and companies.

There was a lot of talk about California losing this edge, due to mismanagement by politicians. Investors like Keith Rabois moved to Miami and expected many others to follow. Some opened offices there or expanded their footprint to New York or elsewhere but there’s so far little evidence that SF is losing its footing as the premier city for early stage technology.

There’s something infectious about the atmosphere. You get inspired just walking around the city, which is super hilly (take it seriously when Google Maps says it will take 20 mins to walk 1KM/0.6Miles). If you’ve never seen photos, the streets don’t look real. They look like something out of an Arthur Cobbs dream from Inception. The closest comparable I can think of is Lisbon, but that’s selling it short.

I’m not sure how much people actually walk around San Francisco. I feel like most people opt for the bus, cable cars or Waymo’s, which you get used to seeing, especially around Union Square (where Salesforce tower is).

On the plane everybody had their laptops out working. Most coding. Some doing it without the help of coding agent. This is because status in SF is determined by how well known your startup is or which investor backed your latest round.

Meanwhile in New York, it’s which social club you belong to, even if it’s a run club.

New York is Still The Empire State

Getting into the city was difficult. With Mandani’s mandatory call to prayer on the minute every minute of each day, traffic was a parking lot from JFK to Manhattan.

In all seriousness, the New York City hustle is alive and well and starts the second you step off the plane. Scammers will try to convince you to ignore the yellow taxi cab line and instead get into an unmarked car, they claim to be a taxi that lacks a cab fare meter, driver identification or anything that would indicate that this wasn’t a random persons private automobile. I’m not ashamed to admit they caught me with that trick once, a decade ago, but now I am older.

For all the talk of people fleeing to Miami or elsewhere, it’s not noticeable. The pace of the city is unmatched. It seems like you’re on the move from the second you wake up. I’ve been to the city many times but this was my first time staying in Chelsea and I regret not doing it sooner. I left my hotel at 8AM went to Equinox, grabbed a coffee at Fellini in the meat packing district, did the whole High Line, went to the Little Island, then the Whitney Museum. At about 4PM I realized I had never strayed more than a mile (1.6KM) from my hotel. I still saw only a small part of Chelsea.

Here’s a little gym hack I learnt. At least in New York, many of the Equinox locations stopped offering guest passes. However, one of the people working there told me I could book a 30 minute robot massage (more on that later), then use the gym and/or do one of their classes for $60. That isn’t an insignificant sum of money but with boutique group classes costing up to $50, this is actually a pretty good deal. This way you might also be able to claim it for insurance (tbd).

Walking around the high line, you exclusively see tourists. You can tell they are tourists because they walk unbelievably slowly. If that doesn’t help they’re also stopping every few steps to snap a photo. New Yorkers on the other hand walk like they’re constantly late for something. The reason being, they probably are. I lived through it when I ran to Central Park. It was great but I made the mistake of only looking at the distance to the bottom, not the middle. That extra 3 KMs each way, meant I had to sprint back between red lights all the way down 9th avenue.

I came back for the robot massage and it’s exactly what it sounds like. You get into a massage room and you see these robot arms looking like they belong to Dr. Octavius from Spiderman. You lie facedown, adjust the settings and hope it doesn’t become sentient and kill you for forgetting to thank Chat GPT.

The massage wasn’t bad. It wasn’t as good as a talented masseur/masseuse but it was far from the worst massage I ever received. In 30 minutes it was able to noticeably iron out some knots, so that was good.

After that I met a friend for dinner in the financial district. I walked from Chelsea which takes about 45 minutes. On the way there I noticed at least two or three chicken chain restaurants I had never heard of. How can they sustain this many chicken based restaurants in America?

Besides the abundance of chicken restaurants, I did notice there appear to be way more woman in New York than men. Part of this might be explained by having arrived from San Francisco, but there have been a few articles circulating claiming as much. Apparently they did a singles event where they charged women $100 to attend, men could come for free and women still outnumbered men 3-1.

When I first saw it I assumed it was clickbait nonsense but literally every conversation I overheard at a restaurant, bar or even in line at the Comedy Cellar featured a woman complaining about the lack of men in New York City or wondering why their situationship won’t text them back? These are of course limited, anecdotal observations, I’m sure nobody has ever struggled with dating in big cities.

Still though, it must suck to be a single New Yorker and feel like these Equinox robot masseurs have a more successful dating live than you do. No wonder people are trying to ban AI.

I previously covered this in Is Pretty (Male) Privilege a Thing? but part of the problem is 50-60% of women covet the same 10% of men who are tall, handsome, make a lot of money etc. A couple of years ago an article claimed half of Gen Z women were in relationships while only about 20% of the men were. The natural conclusions were either Gen Z women are dating older guys or some Gen Z men are dating multiple women. It’s creating a K Shaped dating economy.

This isn’t being helped by finance bro photoshoot a couple weeks ago. Just joking, those guys are definitely getting roasted by everyone at their work and will probably be fired if their company didn’t sign off on this. This is definitely a topic of conversation around the city. That along with the volatility in the private credit space.

Whereas in SF, people are mostly just focused on the financial markets related to tech, New York is exposed to the world economy. The price of oil is wreaking havoc across the real economy, they notice this in NY. Bad timing for Blackstone, Blue Owl and other firms trying to convince markets that Private Credit Isn’t in a Bubble.

Yet for now, so long as finance bros can afford Celine suits and there are lines out the door for every pilates studio, wine bar and four dollar sign restaurant, you know New York is in good shape. Regardless of how hard it is to date, there’s a reason why so many people happily put up with the high rents and overcrowded streets.

From John F Kennedy Jr look alike contests to world class cuisine from almost any country imaginable, New York still has it. There is a reason people tolerate the high rents, overcrowded streets and chaotic dating market. The city has an energy that is hard to replicate anywhere else.

San Francisco and New York both have it, but they channel it differently.

Are they the most liveable cities? Unless you’re a very high earner, no.

Yet still there’s a reason so many flock to these cities.

San Francisco feels like a giant laboratory. Everyone is building something. The conversations revolve around products, startups and the future.

New York is still the command center. Technology is just one small part of a broader conversation revolving around markets, geopolitics and competition. The city runs on ambition and capital.

Spend a few days in both places and the contrast becomes obvious.

If you want to build the future, you’ll likely be drawn to San Francisco. If you’d rather compete for power and influence, there’s still only one New York.

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It’s not surprising. Nobody knew what Mortgage Backed Securities (MBS), CDOs and CLOs were until Bear Stearns, Lehman Brothers, Fannie Mae and others collapsed.

Nobody really cared. The housing market was growing, there were conflicts in the Middle East and it was good couple years for films.

The immediate response to the Great Financial Crises (GFC) 2008, was for the Treasury and Federal Reserve provide massive stimulus and slash interest rates among other measures to stabilize the economy.

Later regulators imposed new guardrails to prevent a similar collapse in the future. In the US, they passed Dodd-Frank (2010), internationally there was Basel III, the net effect was they made it more difficult for banks to lend.

Naturally with near zero interest rates for over a decade, investors were seeking a higher yield and there was no shortage of people looking to borrow. They couldn’t go to banks so they looked elsewhere. Capital market investors filled this void.

These are private equity, credit firms, hedge funds, specialized vehicles including Business Development Corporations (BDCs) (more on those later). The net effect is lending from these institutions grew from $300 billion to $3.5 trillion from 2010 to 2025. This growth has not gone unnoticed.

Private credit has been in the headlines a lot in the past year, but not for good reasons. Many private credit funds or BDCs have come under pressure in recent months, some seeing their share prices plummet >30% since the start of the year.

Drops like this are common in the crypto world, but you rarely it with big names like these. There is a lot of skepticism about the business model, given the rise in interest rates, delinquencies and high exposure to Software companies that have seen their multiples compress dramatically.

This prompts the question: Are we in a private credit bubble?

Keep reading to find out!

If this week’s article does not interest you, please check out some other recent ones:

What’s the Hype With Private Credit?

There isn’t a consensus of what is considered private credit, but if you take the most broad definition, that would be any credit investment that doesn’t trade on a public bond market. That would make the private credit asset class around $40 trillion, but naturally that involves a considerable amount of lending from banks.

What people really mean when they talk about private credit, is the $2-3 trillion dollars of loans, made by non-bank lenders. Much of it is considered sub-investment grade, which carries higher perceived risk but also a higher yield.

The post GFC regulations aimed to make the banking sector more secure, which they did by requiring higher levels of liquidity, reducing banks capacity to lend, especially to riskier borrowers. This created a void that private markets filled.

Most would consider this to be a positive development. Banks lend using customer deposits as their capital base, whereas investors use contributed investment capital. Would you rather a bank take losses on deposits or investment firms lose money for their fund? Almost everyone would say, tough luck for the investors. The few that don’t are those investors and maybe their fund manager.

The GFC bailouts were unpopular but they were deemed necessary, because Bernanke and others, convinced congress the broader economy would implode if banks didn’t receive those funds. The justification were big banks were considered Systemically Important Banks/Financial Institutions (SIB/SIFIs). Other banks and financial actors have since been permitted to fail, because they did not reach this bar.

Regulators didn’t need to pay much attention to private credit because they had not risen to the level of a SIFI. It was a relatively small asset class, holding mostly institutional money which are well diversified and able to sustain losses. That was true then, but now that this asset class is in the trillions, and retail investors are involved it’s a different story. Retail investors can access private credit through BDCs.

A BDC is a publicly traded investment vehicle that operates like Real Estate Investment Trusts (REITs) but for private companies. Shares trade on public markets, and shareholders get dividends derived from any net interest and realized gains. Traditional private credit or private equity funds operate differently. They are closed-end partnerships where investors commit capital for a fixed period, often 10+ years and face more restrictions if they want to redeem early.

(Lloyd Blankfein, former Goldman Sachs CEO)

This distinction is important because close end funds get marked quarterly, whereas BDC share prices can be observed daily. When sentiment turns bearish, you can see it in the share price. This is why the attention is focused on BDCs even if they are only a subset of private credit, (~$500B). Their share prices are taking a beating giving investors cause for concern about the entire asset class.

First Brands Group & Blue Owl

First Brands Group, a private equity backed automotive aftermarket parts company, was financed with many tranches of debt, including from BDCs. They filed for bankruptcy in September. It had billions in outstanding loans, and its collapse, put a lot of selling pressure on BDCs.

The actual exposure of BDCs to First Brands was minor. These loans are syndicated across many firms. Even if they got zero from their First Brands positions, this likely only represented max 1-2% of net asset value (NAV) per lender. The BDC share selloff was driven more by fear and uncertainty about the business model.

Investors have concerns that private credit is highly exposed to middle market private equity backed companies that were financed when interest rates and delinquencies were low. Many of these loans were to SaaS companies that have seen their multiples compress to decade lows. Meanwhile, there are broad market concerns around what AI will do to these type of companies .

Markets are going risk off, and they’ve decided private credit is riskier than GPs claim. Big names in the space, such as Blue Owl, Apollo, Ares, Blackstone and others are down more than 30% since the start of the year.

Blue Owl in particular is drawing scrutiny because unlike these other firms, they aren’t active in private equity and other asset classes. They are effectively a pure play private credit with heavy exposure to BDCs and retail investors. The selling pressure prompted them to limit retail investor redemptions, then sell off ~$1.4 billion in assets to return capital to investors and pay down debt.

Halting redemptions is rarely a positive sign. It worked out for in The Big Short but usually it’s more like Bear Stearns. Their collapse began with trouble in a few of their hedge funds heavily exposed to mortgage bonds. These losses shouldn’t have been problematic but the perception of Bear’s pending insolvency caused a rush of redemptions, ultimately making it so.

With more than $800 billion dollars worth of software equity value evaporating in the last three weeks, that’s a lot of lost collateral. Already stretched companies will need to inject more capital, restructure or default. There’s allegedly hundreds of billions in dry powder available, but will GPs want to throw it at failing companies?

Default rates are already creeping up. Ratings agency Fitch reports US Private Credit Default Rates reached 5.8% in January. This is the highest they’ve seen since they began tracking this in August 2024.

Blue Owl and the other GPs are trying to relieve concerns, but the markets aren’t buying it right now. Is this just a temporary sell off or can this be indicative of a bigger problem for the asset class?

Is it a Bubble?

A bubble is when too much money chases too few assets.

Is there too much money and/or too few assets in private credit? Since 2008 we’ve been living in one of the most expansive monetary regime in history.

The M2 money supply in 2008 was $7.7 trillion. Today it’s north of $22 trillion. The US money supply has historically grown 5-7% annually. It grew >20% from 2020-2021 alone in response to COVID.

This stimulus was felt across asset classes. The stock market reached record highs, crypto was soaring. Private equity, venture capital, infrastructure all saw major inflows. Private credit was also a beneficiary; AUM more than doubled since 2019.

A lot of money entered the system in a short time frame, but it’s not a bubble if there are still good assets to invest in. Are there enough good companies to invest in?

There are more large private companies than ever: 90% of American companies with $100M+ revenue are privately held. There’s half as many publicly traded companies as there were in 1996. Private equity as an asset class has AUM in excess of $10 trillion. There are no shortage of companies to lend to.

This is definitely the pitch private credit GPs are making, but why are so many big companies staying private? Private equity has a distribution problem. The gap between realized and unrealized returns for vintages approaching 10 years keeps growing. They can only recycle investments across funds so many times.

PE firms acquired companies at high multiples, the market currently isn’t paying. If they didn’t feel like they could IPO in 2021 and 2022 during the height of the ZIRP era, what market can they go public in?

Many of the loans were taken out when rates were zero. They aren’t anymore. Some of this debt is fixed and will need to be re-financed, if it hasn’t already and the other part is floating. Companies try to avoid paying higher interest, by restructuring or pushing out payments with Payment In Kind (PIK) loans. Some estimates claim more than half of these private credit loans, contain some sort of PIK conversion. This is good for the borrower, less good for the lender unless the alternative is the borrower defaults. Investors don’t want that, because then they must write down asset values. Lower assets values, means lower returns, management fees and carried interest.

GPs need to constantly raise new funds. If not, the firm will close when their last fund winds down. GPs will do anything to avoid that. They need to always find new investors, which is why firms such as Blue Owl courted retail investors.

The idea of major GPs taking retail capital 5-6 years ago, was considered unthinkable. Top funds were oversubscribed from institutional investors, and each fund got successively bigger. Seemingly too big. This is why suddenly across all private markets, there’s increasingly a push to get retail involved. They wouldn’t be doing this if they had sufficient institutional interest. Considering they haven’t yet returned the previous capital these LPs have given them, they’ve had no choice but to pursue these new investors.

It’s much tougher to raise a new fund if you aren’t one of the top performers. GP are resorting to desperate measures. Stonepeak CEO and chairman Dorrell pledged 50% of his unrealized carry to boost his funds returns. This is not common.

It’s more likely than not that private credit is in a bubble. They aren’t alone though. You can say the same for private equity and most other asset classes. The difference is, that private market firms can ride out these losses, provided they can keep raising successive funds. The Blackstones, Oak Tree’s and Apollo’s will be fine, many of the smaller names can’t survive a bad vintage.

Now that private credit is systemically important, you know that regulators, hedge funds and other market participants will pay much more attention searching for signs this could be a repeat of 2008.

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Note to readers: I began writing a more in depth primer on Private Credit then I came across this series of articles by and promptly accepted I couldn’t do better. They go very in-depth for people who want to dig in further. You should also see Private Credit is Lying to You & Private Credit’s Slow-Motion Reckoning by &

Actually, you can extend that to anyone who bought shares since they became public in 2015. Unless they sold during the peak of the 2021 ZIRP era, PayPal is only up 15%.

If you bought and held the S&P over that same period you would be up over 150%. You don’t need to be Warren Buffet to know those PayPal returns aren’t good.

At the current share price, the market is treating PayPal as a relic. A once promising fintech that lost its edge. PayPal isn’t any fintech company though.

They were one of the most important startups of the internet era. It helped invent peer-to-peer payments, defined online checkout, and launched the careers of Peter Thiel, Elon Musk, David Sacks, Reid Hoffman and countless others.

After being acquired by eBay in 2002, clearly nobody who remained at PayPal ever read Zero to One. Instead of aiming to monopolize the online payment space or become the last fintech company, they practically rolled out the red carpet for Stripe, Shopify, Revolut and countless other competitors to eat their lunch.

PayPal’s decline is fascinating because it wasn’t the result of a single bad decision, but a series of incentives, acquisitions, and optimizations that changed the company’s DNA from an innovative fintech pioneer to a boring but secure checkout tool.

Today’s stock chart is the delayed symptom after 20 years of poor choices. It’s a story exemplifies how innovative companies lose their way. PayPal’s fall was avoidable, but the market might be too early to pronounce the company dead.

Keep reading if you want to learn the fascinating PayPal origin story, why eBay’s acquisition might be the most successful botched acquisition of all time, the current payments landscape and if might be a buy at these prices.

If this week’s article does not interest you, please check out some other recent ones:

PayPal’s Fascinating Origin Story:

PayPal could be considered one of the first consumer fintechs and arguably the most consequential startup of the early 21st century.

Founded by Peter Thiel, Max Levchin and Luke Nosek in 1998, with an initial vision of permitting people to send money over their Palm Pilots, they eventually expanded their ambitions to permit people to send and receive money over the internet. What became known as peer-to-peer (P2P) payments. At the time, the main use case for this was eBay, the online auction site that was exploding in transaction volumes. To remove friction, they embedded Merchant checkout buttons (Pay with PayPal) directly onto eBay seller pages (this payments category is called Merchant checkout).

Considering eBay’s own payment options were subpar, they tolerated PayPal at first. PayPal saw rapid growth, but were burning cash quickly. Not only was fraud a big problem, to convince people to fund their accounts PayPal would give them $20. Their margins were thin, so it would take a while to offset this cost to acquire them. This meant, the faster they grew, the more money they lost. This is a lesson most fintech companies continue to ignore.

PayPal soon discovered they weren’t the only one going after this opportunity. Another startup called X, led by Elon Musk, with more funding, was competing for the share of eBay transaction volume. After a few quarters head to head, Thiel and Musk understood that if this continued, the main benefactor to this would be eBay.

They decided to merge the two companies, creating a formidable group. Initially instead of Thiel or Musk leading the combined entity, they brought on former Intuit CEO Bill Harris. There was a clear culture clash, as the PayPal and X people were mostly young developers, while Harris was more of a big company, sales focused guy.

The PayPal and X groups agreed Harris had to go, so Musk replaced him as CEO. Yet this was short lived.

Thiel had stepped away from day to day involvement after the merger but remained a major shareholder and board member. From the PayPal group, Levchin, David Sacks, Reid Hoffman, and several others still played leading roles in the combined entity.

Shortly after Musk replaced Harris as CEO, there were a few seemingly minor but consequential clashes between Musk and the PayPal group. Chief among them were:

1. Musk wanted to discontinue the PayPal brand in favor of X (which he did to Twitter 20 years later). The PayPal group felt they had built good brand equity and X would be associated with elicit content. This could hurt adoption with people skeptical of providing personal information to a website (remember this was early 2000s).

2. The other point was technical. PayPal built on Linux and X was built on Microsoft. Levchin and his team didn’t want to rebuild everything in Microsoft which they felt was slow and clunky and would hurt their release velocity. Musk believed they had to migrate to Microsoft because Linux wouldn’t have scaled.

Neither group was willing to relent, so the PayPal group decided to pull off their second corporate coup within a year. They went to the board to fire Elon and replace him with Thiel. The original X employees were not happy with this but they ultimately stayed on. Musk didn’t like it either but he ultimately accepted it and wasn’t disruptive.

Despite this corporate drama, PayPal continued to grow rapidly and put out great products. Thiel knew the IPO window was closing and decided PayPal needed to go public, which they did in February of 2022 at a valuation of $800 million with annualized revenue of $100M. Only 3 years from launch, not bad.

Their time as a public company was short lived; only a few months later eBay acquired them for $1.5 Billion. There were several reasons why they sold but chief among them was the regulatory uncertainty; they were fine with federal regulators but a rogue state attorney general threatened to bring a lawsuit. They decided the risk of dealing with 50 state regulators would hamper their progress to a meaningful degree. Thiel was already a fervent libertarian, this experience did not temper his views.

By this point, it seemed like he was happy to focus on investing, Musk could use the windfall to launch Tesla and SpaceX and the rest of the PayPal mafia went on to launch most of the key companies of the Web 2.0 era. It worked out.

Few decided to stick around post-acquisition, for reasons that explain the problems PayPal find themselves in today.

(If you want to learn more about early PayPal days I suggest reading The PayPal Wars by Eric Jackson or Founders Fund series by )

The Most Successful Botched Acquisition

PayPal was the exemplary scrappy, nimble startup. Beyond Thiel and Musk who were in their early 30s, mostly everybody else was in their twenties. What they lacked in experience, they made up for in work ethic and willingness to experiment. The team worked seemingly 24/7, and moved quickly. They had to given how fast they were growing. The atmosphere at PayPal was intense, exciting and in full growth mode.

By 2002, eBay was not this. Launched in 1995 by Pierre Omidyar, they quickly became the dominate online marketplace. In 1998, Omidyar stepped down as as CEO and was replaced by Meg Whitman. Whitman had a successful career as an executive at Proctor & Gamble, Bain & Co, Walt Disney and others before joining eBay when they were a 30 person team doing $4M in revenue.

eBay took a big leap forward under Whitman joined, as they expanded globally and become one of the dominant internet companies. Payments were a constant thorn in their side. PayPal’s emergence helped mitigate some of these issues, but eBay didn’t like ceding control to a 3rd party application. eBay tried to introduce a competitive product, but it was bad.

Seemingly eBay was not very good at building products. Shortly after Whitman took over, the priority shifted to platform uptime and stability, not new features. When they acquired PayPal, they didn’t do so with the goal of expanding internet payments but to retain control of their checkout experience. This was felt by the PayPal team.

Instead of quickly iterating on new product or features, they spent their time in meetings going over Powerpoints about work that needed to be done. eBay had a comparatively corporate feel, which felt slow and suffocating compared to what they were used to. Given the choice between supporting eBays product joining one of their friends at a new startup or beginning their own, most of the PayPal employees opted for one of the latter options. Within a year almost everybody from PayPal had left.

While Whitman and eBay achieved their goal from acquisition, they undervalued a critical part of the company: the employees. They acquired a fintech company but let all the people who understood fintech leave. If the PayPal team had stayed together for even a few more years, they likely would have fenced off the market.

Their departure wasn’t immediately felt. eBay’s core business continued to expand along with the internet but as competitive ecommerce offerings emerged, growth began to slow. Whitman left in 2008, to join HP and was replaced by John Donahoe from Bain. By the time Donahoe took over, the belief was that PayPal was more valuable than just an eBay checkout tool but the product was becoming clunky and legacy like. Before leaving in 2015, under pressure from Carl Icahn, Donahoe spun PayPal out as a public company again, which the stock market deemed as valuable if not more than commerce segment. This along with the Braintree acquisition were likely the most memorable highlights of PayPal under his watch.

This is because post acquisition PayPal didn’t release new products. They made some enhancements to existing features and eventually launched a mobile app, but from a user perspective, the product barely changed from 2002 - 2015. Their eventual marquee product came from Braintree: Venmo founded by . Yes the longevity guy. By this time, PayPal was facing stiffer competition across various products from Square, Stripe, Adyen, and even Mastercard & Visa. They had a difficult time building and releasing their own products, forcing them to rely on acquisitions, which they couldn’t integrate into their existing suite.

Former PayPal executive David Marcus, admitted as much in an X post last week. He felt they were quietly starting turning things around between 2012-2014, with the Venmo product being a huge boon for the company. However, after he left, PayPal replaced him with Dan Shulman, who he called a financial operator,. Shulman presided over a number of costly product decisions that would hurt them dearly years later. Basically, they prioritized payment volume over margin or product differentiation at a time where many competitors were innovating.

“The common thread through all of this is incentive design. Once PayPal became independent, short/medium-term predictability beat long-term vision and ambition. Stock performance mattered more than platform risk and network opportunity. Financial optimization replaced product conviction.” —

David Marcus, February 3rd 2026

Despite these struggles, when PayPal went public again in 2015, they did so at a $50B valuation, >30X what they acquired it for 13 years earlier. By this point PayPal was doing $9B in annual revenues, all without meaningfully changing the product in over a decade.

The eBay acquisition was great for the tech ecosystem because of what the PayPal mafia did after leaving, but eBay missed out on the opportunity to dominate the fintech landscape. The combined market cap of the companies started by former PayPal employees exceeds $3 trillion dollars, while eBay’s own core business peaked around 2010.

Fortunately for eBay, PayPal could still grow and command a sizeable valuation in the public markets, reaching a peak share price of $308 for a market cap of $360B in 2021 when fintech companies were commanding premium multiples.

Since then the stock is down more than 80%, trades at barely above 1X revenue and is only slightly above its 2015 IPO price. They just fired their CEO Alex Chriss, also formerly of Intuit and replaced him with former HP CEO Enrique Lores (acting chairman of PayPal). They seem to love ex Intuit and HP employees.

As of early February 2026, the stock is in free fall. The market is valuing PayPal as though revenue has peaked. For some value investors, they look at the stock and see a wonderful opportunity to pick up an established name facing overly bearish sentiment for cheap. Which one is it?

Dead Man Walking or Wolf in Sheep’s Clothing?

PayPal operates in many aspects of financial services but they still generate the bulk of their $32B in annual revenue from transaction volumes. They charge fees to customers or merchants for processing payments. Unlike other fintechs, they have not pursued a bank charter which prevents them from lending off their balance sheet. This allows them to operate an asset light business with less regulatory overhead but it relies on growing transaction volumes and capturing fees. There’s an estimated $2-5 trillion in global payment revenue, but also plenty of competition.

Competition

While PayPal is still one of the most widely downloaded and used financial services apps, they face credible rivals at every layer of the stack.

On the peer-to-peer (P2P) side, PayPal and Venmo compete directly with Cash App and Zelle, both of which benefit from tighter bank integration and faster settlement for domestic transfers.

In online merchant checkout, competition is even more intense. Shop Pay dominates within the Shopify ecosystem, while Stripe has become the default choice for developers and modern internet businesses. Layered on top of checkout are Buy Now, Pay Later (BNPL) providers such as Klarna and Affirm increasingly own the consumer relationship at the moment of purchase, relegating PayPal to a background funding source rather than a front-end brand.

For in-store payments, PayPal has to contend with hardware-plus-software ecosystems like Square, as well as platform-level wallets such as Apple Pay and Google Pay. Not to mention the traditional credit card networks, Visa and Mastercard which still control the rails PayPal relies on.

PayPal is getting squeezed from every direction, and they haven’t been able to respond with enough new and exciting products to maintain payment volume growth. Merchants are starting to abandon them for cheaper and better solutions offered by Stripe, Shopify, Adyen and others.

PayPal still has the leading market share amongst these apps in terms of payment volumes and users but the question is durability. Most estimates say have global TPV grew around 4% in 2025, which is around the same rate PayPal grew. Payments isn’t a fast growing industry, PayPal and these other fintechs are in competition to pull volume away from banks, credit cards and legacy players.

What’s concerning, is that PayPal is increasingly looking like a legacy player. They only had 1% growth on their online branded checkout business, which is a higher margin product. If merchants start abandoning them, their business starts to look weak very quickly. Which begs the question. If their product keeps being viewed as subpar, how much longer can they keep this market share?

Non-Cohesive Product Strategy

The UI needs to be refreshed; the product feels closer to a legacy bank than a modern fintech. I tried using PayPal to send money to a colleague last week and it showed why they are stalling.

It took 8 days to send money from Canada to the US, and I had to abandon the mobile app to send the money via desktop to avoid paying FX conversion fees twice. Not inspiring.

Next time, I’m sending JP the money via a Stablecoin (click here to learn what that is). Stablecoins are a clear threat to cross border payments, which have been a great source of fees for companies such as PayPal, Western Union and banks.

To their credit, PayPal identified this and launched their own a few years ago, PYUSD, but adoption is low. As Marcus claims, “The product is sound but it launched without a compelling transactional reason to exist. PYUSD had distribution, but no organic demand. It was not embedded deeply enough into flows to become a true settlement layer, a cross-border merchant rail, or a programmable money primitive. It sat adjacent to the product instead of inside the core of it.”

PYUSD has a weird value prop. Crypto people don’t want to use a token launched by a fintech. Even for people who don’t mind, it’s less liquid than USDC or USDT, and less widely accepted. As currently construed, it’s not clear why anyone would use it.

If they were focused on driving adoption, they would just embed PYUSD into the background of their product, and use it as their new payment rails for international transfers. They could aggressively cut fees to take a larger share of the market and drive users into a more integrated product stack. This would hurt their own revenues short term but if they aren’t willing to integrate it into the product, why have it all?

This was a common theme with PayPal over the past decade. They would acquire companies for their products but they wouldn’t integrate them. Venmo remains a separate product ten years later. That lack of integration didn’t matter when e-commerce and mobile adoption provided strong tailwinds. It matters now.

(If you want to learn more about payments or the fintech landscape, check out Simon Taylor)

$PYPL Stock Analysis

Today, PayPal is no longer a growth company. In 2025, revenue grew just 4.3%, only slightly above inflation. The stock trades at 1X revenue, which is below most fintech peers at 2.5–4×, and widely below where it was after the sharp multiple compression across the sector since 2021.

From a profitability standpoint, PayPal sits in an interest spot. They have operating margins near 20%, and net income margins of ~15%, which compares favorably against median fintech (8.62% and 4%), but poorly against large banks such as JP Morgan, Goldman Sachs etc., with margins north of 40 and 30%.

You would expect the asset light, tech forward business to be growing faster or have better margins. In the case of PayPal, if they can’t reinvigorate growth, they need to improve their margin and cashflow profile or else they sit in no mans land.

What investor will get excited about holding a low growth, medium profitable fintech that doesn’t pay dividends? At this point, you would only be buying the stock because you think it’s cheap, and it definitely is. PayPal only trades at 6 times operating cash flow, ~5X EBITDA. This trades like a business the market doesn’t think will endure.

Provided their revenue doesn’t immediately start plummeting, at these prices it seems difficult to envision multiples compressing further. At the same time, unless they return to double digit growth, they won’t command multiples close to Shopify or Adyen (~10X sales) either. Those companies can grow 20-30%, with similar or better margins. Therefore, you probably can’t get a great return just waiting for multiples to drift back towards median values.

If you’re buying the stock, you need to have confidence the new regime will find a way to return to growth by driving greater product adoption. Unfortunately, the company has struggled to do this consistently. They have a difficult time launching new products internally and when they acquire companies, it takes too long to integrate them. The constant turnover of executives doesn’t help, and their competitors aren’t going to just let them keep their market share.

Alex Chriss was supposed to be the product focused CEO, but his tenure was short. He promised to shock the world back in January 2024. The world wasn’t shocked, I don’t think anyone even noticed. Now Chriss is being replaced by PayPal Chairman and former HP CEO Enrique Lores. He’s neither a payments or product person.

He might only be temporary but for time being, it seems like they are sticking with a similar executive profile that got them into their current mess. If they are going to turn things around, they need to make some major changes to their product and this won’t happen in a few quarters.

Their other choice is to copy the Private Equity playbook and try to run the business with far fewer than ~27,500 employees to boost profitability. This might help margins but it won’t help growth. Private equity rarely makes products better.

In either case, they can likely keep meaningful share of the market for a few more years, largely because inertia is a powerful thing, but the market won’t reward them with a higher multiple. If you are buying the stock today, it’s not because PayPal has shown anything to deserve it but largely because it’s cheap.

Conclusion

Early PayPal succeeded because it solved a problem no one else could, in a new way. It built a product people needed, that helped propel ecommerce and the internet forward. They prioritized product conviction over short-term financial optimization.

Once acquired, that changed. Preserving existing revenue streams became more important than inventing new ones. PayPal did just enough to defend its position, but not enough to redefine it.

Despite an extended cold streak, PayPal can’t be counted out yet. Scale, distribution, and trust matter in payments, but not forever. Right now, PayPal’s relevance is sustained more by inertia than inspiration.

What happens next will determine whether PayPal becomes a case study in slow decline, or one of the rare incumbents that successfully reinvents itself. That outcome won’t be decided by margins, buybacks, or cost cuts. It will be decided by whether PayPal once again chooses to build something genuinely new, even if it disrupts its own business in the process.

Until then, the stock will probably continue to look cheap.

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The smartest and dumbest people you knew were 100% certain Crypto was inevitable, while everyone in the middle was skeptical.

Since inception, most signals have been on the side of the midwits. Despite massive but volatile price appreciation in Bitcoin, Ethereum and other tokens, there was always the missing killer/wedge use case for Crypto that wasn’t speculating on Crypto. That changed in 2025.

The use case midwits have been asking for arrived. Stablecoins (check here for a primer).

In 2025, Stablecoins moved $33 Trillion in transaction volume all on-chain. That’s ~50% more than Visa and Mastercard combined. There was seemingly endless momentum. Starting with the passing of the GENIUS Act, going public at a market cap of ~$7B and many major banks, payment companies, and asset managers announced pilots, partnerships, and production use cases..

By Q3 2025, Crypto had an estimated $225 Billion dollars in Total Value Locked (TVL). TVL measures the cumulative dollar value of crypto assets deposited into decentralized finance protocols (ex: Lending, Staking, liquidity pools). This only represents 10-15 basis points (0.1%) of global bank deposits. Tiny relative to the traditional off-chain financial system, but an all-time high for crypto.

Despite its relatively insignificant size, there is plenty of reason to expect this won’t be the case for long.

Institutional acceptance has surged to levels not seen in prior crypto cycles. Spot Bitcoin and Ethereum ETFs are now offered by major financial institutions. Banks are accepting BTC and ETH as collateral. Even long-time skeptics like Jamie Dimon have been forced to moderate their stance as clients demand access.

Stablecoins are only the beginning. Prediction markets such as Polymarket are processing billions of dollars using smart contracts on Ethereum. Financial institutions are tokenizing stocks, credit, and money market funds. Many more tools are emerging. The tipping point has been reached.

Not because influencers are going on CNBC or because people are paying six figures for JPEGs. The underlying financial infrastructure of the global economy is being rewired. Regulators are engaging. Institutions are building. Money is moving.

This is not an argument to put your entire net worth into Bitcoin, Ethereum, or whatever token is trending on X this week. It’s evidence crypto is here to stay and the proof is starting to look overwhelming. It’s time to pay attention or have fun staying poor! (I’m sorry I couldn’t help myself).

Keep reading for evidence the future of finance has arrived.

If this week’s article does not interest you, please check out some other recent ones:

Crypto Has Arrived

The main arguments for why Crypto could never compete let alone supplant the existing financial system boiled down to three beliefs:

1. Regulators would never allow it

2. Incumbents would try to block it

3. Consumer won’t trust their money to an anonymous network

For most of Crypto’s existence, these seemed like credible concerns. In 2025, it became clear they no longer are.

Regulators Would Never Allow It

It’s no secret the second Trump administration has taken a markedly different stance toward crypto and digital assets than its predecessor. President Trump started by appointed David Sacks to the newly created role of AI and Crypto Czar, signaling a coordinated federal effort to engage with the industry rather than constrain it.

This represented a sharp departure from the Biden administration, which relied heavily on enforcement actions and informal pressure while declining to provide legislative clarity. Even during Trump’s first term, crypto received little explicit regulatory support. In 2025, it was all systems go!

In January 2025, the SEC rescinded SAB 121 via SAB 122, removing a major accounting and custody obstacle that had discouraged banks from holding crypto on behalf of clients. Its removal materially lowered the barriers for institutional participation.

Shortly thereafter, the Office of the Comptroller of the Currency (OCC) reaffirmed/clarified bank authority for crypto activities. Later guidance confirmed that banks could hold certain crypto assets as principal to pay network fees, explicitly normalizing operational use of so-called gas tokens within regulated institutions.

At the sovereign level, the US federal government proposed a Strategic Bitcoin Reserve and a digital asset stockpile. While largely symbolic, the proposal placed crypto assets into the same strategic conversation as other nationally significant reserves such as Gold and Oil, signaling long-term governmental interest rather than hostility.

This shift has not been limited to the United States. The Dubai Multi Commodities Centre signed a strategic partnership with Crypto.com to accelerate tokenization and global trade infrastructure, embedding blockchain technology into one of the world’s most important commercial hubs.

The most consequential regulatory development, however, was the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins Act, (people just call it the GENIUS Act). Signed into law in July 2025, it established the first federal regulatory framework for payment stablecoins, providing long-sought legal clarity for banks, issuers, and payment companies.

Several other jurisdictions, including Canada, Japan, Singapore and even the EU have since followed with similar regulatory frameworks permitting the issuance and use of stablecoins. Regulators have changed the debate from whether crypto could exist, to how it should be integrated.

Incumbents would try to block it

The establishment made no secret about their dislike of Crypto. Who can blame them? Large banks, asset managers, and market infrastructure providers had too much to lose. Crypto threatened their margins and was born with the ethos to disrupt their centralized business model. They used their considerable economic and political power to stop it.

Yet at the same time, many of these financial players kept a watchful eye on the space. As the technology improved and adoption scaled, there was gradually an opening up and willingness to engage. That’s why it didn’t take long between the shift in regulatory environment to these incumbents willingness to embrace it.

In March 2025, Deutsche Börse’s Clearstream announced custody and settlement services for Bitcoin and Ethereum for institutional clients. This integrated crypto assets directly into regulated European post-trade infrastructure, placing them alongside traditional securities rather than outside the system.

A few months later, Standard Chartered became the first major global bank to offer direct spot Bitcoin and Ethereum trading to institutional clients. By embedding crypto into its existing FX and trading franchise, the bank signaled that digital assets were no longer experimental side products, but instruments worthy of balance sheet support and client-facing distribution.

As market access expanded, crypto also began to scale inside traditional investment vehicles. Throughout 2025, institutional crypto ETFs grew materially, with products such as BlackRock’s Bitcoin ETF attracting large, long-term allocations. Crypto exposure increasingly resembled other allocatable asset classes, held in diversified portfolios rather than traded tactically.

There were seemingly announcements of new pilot projects, Crypto ETF approvals or bank policy changes weekly, each more consequential than the last. Including in October 2025 when JPMorgan announced plans to allow institutional clients to use Bitcoin and Ethereum as collateral for loans. This marked a massive escalation from custody or trading. Crypto was now being treated as financeable collateral, eligible for use in core credit and margin workflows. Not long ago Jamie Dimon was loudly calling Crypto worthless. This goes even further than the bank’s prior acceptance of crypto-linked ETFs as collateral, putting digital assets into traditional lending.

Yet arguably the asset managers were the most eager to embrace the technology either as a tool or as an asset. J.P. Morgan Asset Management launched a tokenized money market fund, MONY, on Ethereum. Meanwhile, Goldman Sachs and BNY Mellon partnered on tokenized money market fund mechanics, bringing blockchain settlement into established asset management and custody workflows. Beyond new products, Bank of America and Morgan Stanley announced their advisors would begin suggesting to its clients to allocate up to 4% of their total assets into Crypto.

These legacy financial players aren’t just allowing Crypto a seat at the table, they are actively trying to partner or leverage it as much as they can.

Consumer won’t trust their money to an anonymous network

The Crypto/Defi user experience in the early days was horrendous. It was everything a person can hate when it comes to using money. The products were unusable at times since transaction fees (gas prices) and speeds were too volatile; you couldn’t be sure how long it would take to send your money and how much it would cost. If you didn’t have enough gas money in your wallet, you wouldn’t be able to execute a transaction. For some chains and tokens you couldn’t receive without gas money. If you had an issue you couldn’t pick up the phone and talk to somebody, you would have to search internet forums or Discord channels for help from FAQ sections. If you sent money to the wrong wallet address, well tough luck. You aren’t getting it back.

I could go on for much longer, but needless to say, this would not work for a mainstream audience. I can’t promise none of these problems exist today, but there has been incredible leaps made in the past few years as products kept improving and Decentralized Apps (Dapps) have proven they aren’t all scams. This has played a key role in making people feel comfortable

Just look at all the capital moving on-chain. Stablecoin usage reached record levels, with roughly $33 trillion in on-chain transaction volume processed during the year. This wasn’t just trading. Real value transfer, settlement, and payments are occurring on public blockchains at a global scale.

At the same time, on-chain participation broadened. Unique wallet activity increased across major networks, with millions of addresses interacting regularly with blockchains for transfers, decentralized finance, and applications. In 2025, there were 246M unique stablecoin sending addresses and 306M receiving addresses. That’s more than just a few drunk Crypto bros on a Friday night.

Trust also showed up through traditional investment channels. Bitcoin and Ethereum ETFs attracted tens of billions of dollars in net inflows with more to come. Seemingly every bank is now trying to launch their own Crypto ETF. These are regulated vehicles held by retail investors, financial advisors, and institutions allocating crypto alongside equities and bonds. ETF holders aren’t just chasing sh*tcoins they see on X.

Now ~30% of U.S. adults claim to own some cryptocurrency, with a much larger share open to owning it in the future. This is massive considering only around 60% of Americans hold stocks. Whatever people agree with the crypto philosophy or not, a growing number are willing to trust it with real money.

This has moved beyond speculation. Meaningful amount of capital is moving on-chain, more wallets are being spun up and an increasing number of people want to hold Crypto.

Although most consumers don’t fully understand how blockchains work, they don’t understand how banks work either (you can find out here). Few people are willing to abandon their banks to go full crypto native but don’t be surprised if an increasing percentage of people’s assets move out of their mobile banking and on-chain. As On and Off-Ramps improve, and Crypto get increasingly integrated with traditional finance products, we won’t know if we are on-chain or not.

This is already happening. Polymarket did around $20B in transaction volume in 2025, the majority of which was settled using smart contracts on-chain. Prediction markets are expected to soar in 2026 and beyond.

All this proves that the original case against crypto rested on three assumptions, and all have failed. What remains is not a speculative experiment, but a financial technology that is increasingly used, regulated, and integrated.

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Nothing shatters that image faster than a humbling moment that forces you to accept you might be less capable than you thought. I had such an experience this weekend.

Our space heater stopped working just before my in-laws were to arrive for the holidays. Eager to get it fixed, my wife called an electrician while I was traveling. He quoted over $1,000 for what he claimed was a ten minute job.

Unwilling to pay that price, she decided to wait until the man of the house returned, expecting I would be up to the task. Nobody would confuse me for blue collar but I’ve accomplished things in my life. How hard could changing a space heater be?

We went to Home Depot and bought a similar unit. While unboxing it, I noticed the instructions were missing, but that didn’t discourage me. I began by removing the old unit from the wall with my bare hands. I tried to gently separate it from the wall mount. I blinked, and suddenly the entire unit, along with the mount, was on the floor, surrounded by a small mound of drywall.

Was I unaware of my own strength? Perhaps it had been poorly installed. In any case, the old unit was off, but now there were some exposed wires. None of them seemed to match the heater we just bought. I consulted ChatGPT. It was unhelpful. So I turned to an even more knowledgeable source. My dad.

My father also spent his career in white collar roles, but he usually knew how to fix things. If not, he knew enough to call a professional when it was needed. He came by the next morning and confirmed a component was missing but after a few hours of work, we managed to install a new heater.

Standing around pleased with ourselves, we then realized the second heater had stopped working. It turned out it was designed to operate in tandem with the unit I ripped off the wall. The replacement was not compatible. The job, it seemed, was less finished than we thought.

Nonetheless, I was grateful for my father’s help. As I reflected on the experience, I wondered who I would have called if he hadn’t been available. The overwhelming majority of my friends are like me, white collar professionals and relatively new homeowners. Those of us that own our homes.

Some are more handy than others, but none would describe ourselves as confident when it comes to home repairs. Some can manage basics, minor installations, hanging paintings, that sort of thing. I have other friends that I genuinely wonder if they’ve ever changed a lightbulb? Some probably think a Phillips screw is a wrestling move.

Is this just my circle, or do Millennial and Gen Z know less about home repair? Ask any old person or the internet and the answer is obvious. My research indicates the answer is less straightforward.

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Are Millennials and Gen Z Less Handy?

The answer is unclear. There is conflicting data and reports but the general anecdotal consensus appears to be that Millennials and Gen Z are less involved in home repair and maintenance compared to Boomers at the same age.

There isn’t one conclusive explanation as to why. Reddit will suggest some combination of lower exposure, confidence and willingness. Whether these are valid or not, the belief is that young people are less likely to be involved in home maintenance compared to previous generations at the same age.

The elderly agree. Ask any grandparent and they’ll probably whine about how young people are overly coddled. While they were forced to walk uphill to and from school each day, their children had to be dropped off by car. After a few whiskeys they might mumble that men haven’t been the same since Vietnam while they drift off in front of a Ken Burns documentary. Who is to say which truth is more valid?

Although I’m not convinced by the data, if we assume this is true, some part of this could be explained by the higher proportion of millennials and Gen Z attending university and working in white collar roles. If fewer people work in professions requiring some type of manual labor, home repair knowledge would have to be self taught or from friends/family members. If each successive generation does less manual work than the previous one, it becomes harder for this information to get passed down. This is why despite vastly more access to information, the average person knows way less about farming than our ancestors.

Although with plenty of Do It Yourself (DIY) Repair sites, Youtube and now ChatGPT, it should be easier to take care of household repairs. Anyone with an internet connection, can access a step by step guide for minor repairs. They just can’t physically stop you if you are about to drill through a pipe or set your house on fire.

That is, if it’s even your place. Young people are far less likely to own their homes than Boomers or Gen Xrs at the same age. Millennials and Gen Z are generations of perpetual renters, and attempting a repair might not be worth the risk. If there’s a problem, it’s technically the responsibility of the landlord. If the renter messes up attempting a repair, they lose their deposit. They take all the downside risk, while saving money for the owner, none of which trickles back to them.

Adam Neumann believes the solution is to make renters feel like owners. Except his version does not include giving them any equity. Following his departure from WeWork, he launched another real estate startup called Flow. Flow acquires and rents out apartments to tenants. They use some buzz words related to technology to justify software valuations but from all intents and purposes, they seem like a commercial residential real estate firm. Where have I seen this before?

In any case, Flow believes by bundling apartments, amenities and the concept of a community, renters will want to make their own repairs.

“If you’re in an apartment building and you’re a renter and your toilet gets clogged, you call the super,” . If you’re in your own apartment, and you bought it and you own it and your toilet gets clogged, you take the plunger. That’s the difference, when feeling like you own something.” — Adam Neumann, 2023

Neumann was mocked when he made this comment a few years ago but whether you believe renters would want to fix their own toilet or not, investors had enough confidence in Neumann to invest $350M. A16z made another follow-on investment earlier this year, bringing Flows valuation to a reported $2.5 Billion.

Before Flow launched, there were already rent to own startups such as Divvy available on the market. They provide renters with ability to build equity or eventually purchase their rental apartments. Divvy was acquired for around $1B earlier this year, well below its peak valuation north of $2B in 2021. Therefore Andreessen must believe Flow’s approach has significant upside.

In any case, virtually everyone will be a renter at some point in their life, but pawning off home repairs on the landlord should only be a temporary solution. Yet the median age of first-time home buyers has climbed from 28 to 38 in the last 30 years. With young people having a more difficult time purchasing homes, and more believing they will never be owners, are they incentivized to ever learn?

What about the people that manage to become homeowners? Surely, it’s too expensive to hire a professional for every small job, why aren’t they willing to fix things like their baby boomer parents/grandparents? Were the boomers built different? I’m sure they would like to think so but perhaps the problem has nothing to do with home repair, but rather a disconnect between the realities of each generation.

Men and women face different challenges, and spend time differently than their elders. With technology we don’t need to spend half of our day maintaining the house; the dishwasher and washing machine save us countless hours. Although your old fashioned Italian Nona might not like it, childcare is no longer exclusively a female responsibility. Men and women are more involved in child rearing than ever before.

Older generations may not view this as work in the traditional sense, but it’s an enormous time commitment. Between spending time with their children or patching drywall, parents prioritize their kids. If something has to give, it’s often the infrequently utilized skill that can be outsourced, delayed, or ignored until it becomes unavoidable.

This creates a distorted comparison. Previous generations remember the skills they developed but forget the time and social structure that made acquiring them easier. Today’s younger homeowners might not know how to repair a wall, but they are navigating dual income households, higher career intensity, longer working hours, and a parenting culture that demands constant engagement. Oh! and how to save a file as a PDF. The skills that get rewarded have changed, even if the nostalgia has not.

Every generation believes it faced tougher circumstances because it lived through them. Everyone else’s struggles are theoretical, filtered through anecdotes and selective memory. It is easier to believe we were uniquely capable than to accept that circumstances shape competence. Skills follow incentives. When the world changes, so do the skills that matter.

So no, young people are not useless. They are simply optimized for a different set of problems. I will continue to call my father when something breaks, and neither he or you should judge me for it. If adulthood is defined by self sufficiency in all domains, then no generation has ever truly qualified.

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Yet millions of copies get sold each year, mostly to sit on somebody’s bookshelf to try to convey to people they are literate. These books could be empty for all these people know, since most remain unopened. In many cases, they are better off that way.

I’ve had to suffer the indignity of taking the time to read them to confirm this was the case. I could have used some of that time instead re-organizing an elaborate book shelf, to convey status during Zoom meetings. I can’t help it though, I like to read.

Last month I released the books I read in 2025, the ratings are good, largely because I’ve started abandoning bad books early, and I don’t include them on my lists. By chance I happened upon a book in a London book store that made this excavation worthwhile.

Roald Dahl is known for Willy Wonka, chocolate factories, and children’s stories. Near the end of his career, he decided to write a novel about erections and artificial insemination. What was meant to be humorous fiction turned out to contain more genuine business insight than most business books or articles (even on Substack). Dahl’s protagonist, Oswald Cornelius understood incentives, product-market fit, pricing power, and strategy better than most venture backed founders today.

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Who is Roald Dahl?

If you don’t think know who Roald Dahl is, you are wrong. If you can read in English, it’s hard to believe you are not familiar with some of his works. Willy Wonka and The Chocolate Factory was not a documentary, it came from Dahl’s imagination. As did The Gremlins, The Fantastic Mr. Fox, The Wonderful Story of Henry Sugar and many more.

Even if you haven’t read his original works, many of his stories have made it to the screen. Wes Anderson alone has adapted several of them. Dahl’s style is dark but mischievous, grotesque and imaginative, yet still sharply observant. His ability to create worlds that mix the fantastic and the realistic, filled with characters you can simultaneously love and hate, is unique. His children’s stories entertain kids and quietly humour parents.

Born in 1916 in Wales to a family of Norwegian immigrants, he lost his father young, but there was enough money left for Roald to attend reputable British boarding schools. He was a fighter pilot in WWII, spending time in different parts of Africa, Egypt, and Greece. He then became a diplomat, living in Washington alongside other British literary figures such as Ian Fleming (of James Bond fame) and David Ogilvy, helping promote British interests and counter the America First mentality of the time.

He began writing seriously during WWII, during his time as a pilot, with “A Piece of Cake” (originally titled Shot Down Over Libya) published in the newspaper in 1942. He didn’t really reach major notoriety in the 1960s with the release of James and The Giant Peach and Charlie and The Chocolate Factory. He was a prolific writer, publishing 50 books and nearly 100 short stories up until his death in 1990.

Despite his prowess as a writer, his legacy took a hit because he was a raging antisemite (and not in a fun way). Over his life time he gradually went from being critical of specific Israeli policies, to hating all Jews. He wasn’t discreet about it either. Looking at some of his quotes from magazine articles, you would have a difficult time discerning if it was Dahl or Kanye West during his latest bi-polar episode. At least that was in the past and jews no longer need to worry about discrimination1.

Beyond his problematic views on Jews, his frequent lack of seriousness, bordering on immature behaviour, cost him other honors, including knighthood. This robbed him of acclaim his incredible talent deserved. Nonetheless, he remains a legendary fiction author with vast range and life experience, which allowed him to write on an extraordinary variety of topics, including those explored in My Uncle Oswald.

Short Book Summary

Spoiler Alert. If you plan to read the book you can skip to the next section which only contains light spoilers.

My Uncle Oswald is presented as Roald Dahl recounting the journal of his fictional uncle, Oswald Hendryks Cornelius. Oswald describes his adventures galivanting across Europe, meeting women, and building a business empire predicated on erections. Yes, you read that correctly. Young Oswald learned early what the modern pharmaceutical industry would later discover: there are billions of dollars to be earned in supporting male reproductive health (and women benefit too).

As a 17-year-old enjoying a gap year in Paris, a chance encounter with an acquaintance of his ambassador father cuts Oswald into a secret. The secret was that if a certain Sudanese insect was consumed, the consumer would be overcome with lust and experience substantial growth in the loin region.

A curious and enterprising lad, Oswald immediately went to Sudan to track down the insect. He procured a major quantity of the powder and brought it back to Paris. After getting it into pill form and testing its potency, he shared samples with a few diplomats. Needless to say, it was a smashing success.

These diplomats were banging down Oswald’s door for more and happy to pay any price. Word spread quickly in their circles, allowing Oswald to amass a sizeable fortune. When his gap year ended, he went to Cambridge, but his education and fun were interrupted by World War I. When it ended, he returned to resume his studies. Before he could continue with his pill business, his professor let him in on another secret: a scientific discovery not yet public. Artificial insemination. His professor planned to use it to help his brother breed good horses. Oswald had far more ambitious breeding plans.

He believed that wealthy women would pay enormous sums for the sperm of world-famous men such as artists, scientists, royalty, and business leaders. The appeal was the hope that their children might inherit the talent or prestige of these men.

His professor was skeptical. With the help of his partner, Yasmin Howcomely, Oswald created a scheme to obtain semen from celebrated men across Europe. Yasmin seduced the targets, Oswald collected the results, and the professor processed the material for future customers. The operation grew quickly, and the team prepared to expand to the United States.

Yet the travel and hard work involved in extracting the semen began to take a toll on Oswald’s partner. She demanded a month-long break before setting off for America. When the month was up, Oswald returned to discover she had stolen the sperm and ran off with the professor, cutting him out of the deal.

Oswald realized he had been had but decided to revert to selling the erection pills, which once again helped him amass a major fortune.

Oswald Cornelius: Europe’s Warren Buffet?

“Every great business is built around a secret that’s hidden from the outside.” — Peter Thiel

Oswald did all the right things for someone looking to start a successful venture. After learning of a secret hidden from the world and understanding how valuable this discovery could be, he did not hesitate. He immediately headed to Sudan to seek it out for himself.

He believed that a product capable of producing such intense lust would be valuable to many men. He first tested it on himself, then validated demand with a small subset of his target market: rich, middle-aged men. The fact that they were banging down his door, completely price insensitive, and telling others about it validated Oswald’s hypothesis. He had found Product Market Fit.

The product was flying off the shelf at any price point. Without advertising, he sold it at outrageous margins, and every buyer tried to purchase as much as possible. He had virtually no overhead and was operating at close to a 90 percent profit margin.

While he never scaled his small venture into a large enterprise, he did not need to. With profits that high, it would not take him long to amass a large fortune. Since everything was done discreetly, he could avoid declaring taxes. If he continued on this trajectory for two or three years, he could have reached a level of wealth that would allow him to live off the interest alone. He was the ultimate solopreneur.

Yet instead of milking this for what it was worth and scaling up the operation, he tried to pivot to a potentially more lucrative endeavor: famous person semen. However, unlike with his first venture, Oswald invested heavily up front before commercializing anything. Galivanting across Europe, staying at the Ritz Carlton, and eating at Michelin-level restaurants for weeks at a time gets expensive. If you do not believe me, try it yourself, just don’t ask me for reimbursement. This is without factoring in storage costs and other operational overhead.

While Oswald was confident there was a market for famous person sperm, he did nothing to validate it or prove willingness to pay. He did all this work without speaking to any customers. For all he knew, the price they would be willing to pay might not justify the effort or investment. In essence, he abandoned a proven and lucrative boner-pill business to pursue a risky and unproven sperm venture long before he needed to.

There was no competition, growth showed no signs of slowing, and he had not come close to saturating the market. Oswald owned a money-printing machine with minimal overhead but temporarily abandoned it for a riskier venture that had similar upside but perhaps a deeper moat. In exchange for this moat, he had to rely on partners, which split the profits, and they eventually decided they did not need him at all. He never had this issue with the pill business. He could run it himself or at least without equal equity partners.

This is the conclusion he eventually reached. Scaling up the pill business made him a very wealthy man, and he did not need to sleep with any kings or poets. Some would call that a plus. Although Oswald did not get to profit from the semen business, his partners did, and he still managed to amass his own fortune. It appears that things worked out best for everyone. It was a perfect capitalist outcome. A group of upper-middle-class bourgeois types extracted money from the very wealthy and became the very wealthy themselves. Roald Dahl understood this and perfectly captured this dynamic in a laugh out loud story, teaching the young and old how to amass a fortune, and have fun while doing it.

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If you regularly blow money on trips to Las Vegas or things you see on TikTok, this is probably a common feeling. Assuming you still bother to look at your bank accounts. However, if you have some income and pay back even a small amount of your outstanding debt, financial institutions will be happy to extend you credit for a while. This does eventually run out though, especially when the economy starts to slow.

These days, governments look more like the person waking up from Vegas benders and TikTok shopping sprees. Even if they will both argue the money was well spent.

Since COVID public-debt burdens have surged to levels previously reserved for major wars. Advanced economies now routinely carry debt-to-GDP ratios exceeding 100 % or more; but continue to run major budget deficits with no end in sight. Emerging markets are also under pressure and their borrowing costs are rising.

The question looms: how will these countries get out of this debt? This isn’t the first time countries have gotten into debt trouble, how did they get out of it? In this article I examine the current debt situation, revisit the last era when debt was this bad (post-World-War II), analyze how countries got out of their financial trouble and what I expect will be the likely outcome.

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The Current Debt Situation

It’s really bad. The longer the wait, the harder it will be to get out of it. Getting debt back to manageable levels will not be easy peezy lemon squeezy. It will be lemon difficult, difficult, difficult.

Virtually every advanced economy is carrying a massive debt burden and running meaningful deficits consistent with a prolonged war. You don’t need to be an economist to understand this a bad combination. Few politicians care. Austerity is unpopular, and it takes courage because even suggesting the notion can cost careers.

Look at France. Earlier this year, former Prime Minster François Bayrou, proposed a budget calling for substantial spending cuts (~€44 billion). France still would have ran a large deficit (5.4%), well above the EUs deficit limit of 3%, but at least it was lower than the 2024 budget (6.1%). His colleagues responded to his proposal with a motion of no-confidence. He lost and resigned. France has yet to pass an updated budget, meaning they will continue to with the an extension of the 2025 budget.

(Canadian net debt appears low because the major pension funds hold over a trillion dollars in assets)

The French aren’t alone in their reluctance to rein in deficit spending. The US is projected to run a deficit above 6% in 2025. Many European countries will exceed the 3% deficit limit. The emerging countries with lower deficits mostly do so because capital markets prevent them from borrowing more. This is a global problem.

(This chart shows estimates for 2024 compiled mid-2025)

Advanced economies have previously carried public-debt to GDP ratios exceeding 200%, but this was usually after events such as WWII. The current debt was used not for war, but for stimulus after The Great Financial Crisis and COVID-19. The low interest rate regime throughout this stretch masked the budgetary burden, but as debt levels and rates have risen, so has interest service costs. Now interest payments on this debt are becoming one of the biggest line item, on par with military/defense, healthcare, social security/retirement pensions, costs people care a lot about.

(This is for the US as of July 2025)

This has been a growing problem for years politicians have tried to ignore or dismiss. Perhaps they can continue with this approach for longer but without some eventual intervention, it won’t be long before major economies enter a debt burden trap, they won’t be able to get out of. This won’t be a country like Greece or Venezuela, this could be multiple G8 countries.

This prompts the question, how have countries previously gotten out of major debts?

What has Worked Before?

After WWII, government debt in advanced economies reached levels that make today’s numbers look like child’s play. In the UK, public debt peaked at roughly 270% of GDP in 1946. By 1971, it had fallen to about 50 percent. The US followed a similar trajectory. American government debt was about 106% of GDP in 1946, but by 1974 it was down to 23 percent.

Modern politicians willing to acknowledge the matter, target “waste.” Elon Musk and DOGE style efficiency campaigns argue that cutting bureaucratic fat can save billions. Maybe so, but even the most generous estimates of their efforts were drowned out by the trillions poured into tax cuts, subsidies, and new spending. Since President Trump began his second term, the deficit has gotten bigger, not smaller.

Argentina proved the same point from the opposite angle. President Milei slashed spending aggressively and still needed a bailout. Cutting spending helps, but it can’t solve debt problems alone.

Even left-leaning governments now pay lip service to waste reduction. In the 2025 Canadian budget, the Carney led Liberal government committed to reduce government spending by tens of billions over the next few years yet they still project a much larger deficit ($78B CAD) than the proposal that got Trudeau ousted last year.

Efficiency is useful, but it can’t fix a structural problem. Most government budgets are tied to programs that cannot be touched without major political fights. Social Security, Medicare, Veterans Affairs, and interest payments make up most of US federal spending. Many countries face similar constraints. Cost reductions can help trim the edges, but strong growth is needed to run sustained surpluses to shrink debt.

The bigger issue is that spending cuts reduce economic activity unless the private sector steps in. That rarely happens on its own. It usually requires new incentives, easier credit, or technological breakthroughs that open new investment opportunities. This was the real engine between 1945 and 1975.

As wartime budgets unwound, government spending as a share of GDP fell sharply. About 38% lower in the US and 30% lower in the UK. Wars are expensive. Avoiding them is the best austerity there is. Redirecting money from weapons toward housing, highways, and education built a much stronger foundation for growth.

Policy helped too. The US passed the Employment Act of 1946, invested heavily in infrastructure, and lifted wartime price controls so markets could function normally. The UK nationalized key industries, created the National Health Service, expanded public education, and phased out rationing.

They also benefited from low real interest rates. Treasury yields stayed below inflation, which quietly reduced the real value of outstanding debt. In 1971, the US ended the gold standard, which gave policymakers more room to manage the economy. Of course, that eventually led to rampant inflation, but that was after.

Most importantly, postwar growth stayed strong. Once the war ended, the US shifted from 10% annual growth to a steady 3-4%. Since growth stayed above the cost of interest, the debt burden became easier to carry. Debt to GDP fell even though the debt kept rising. Ray Dalio refers to this as the beautiful deleveraging (his piece last week touches on some of these points). That relationship is why many economists argue that debt levels only become dangerous when interest rates rise above long term growth. This is one of the reasons central banks get heavily criticized when they try to raise rates. With the current debt levels, even a slight increase in the cost of debt has major budget implications.

The lesson form history, is that spending cuts alone don’t bring down debt. That can only happen when spending grows more slowly than the economy itself. That requires low real rates, steady inflation, and a private sector strong enough to replace emergency era government spending.

What Is Likely To Happen Now

Countries will attempt to solve the debt problem in different ways, but almost all of them rely on the same basic formula. They want strong GDP growth and low interest rates. Technologically advanced economies such as the United States and China are pouring public and private money into AI, data centers, energy infrastructure, and the minerals and manufacturing that support them. China has been building these supply chains for years. Other countries are trying to catch up.

Stock prices and venture funding announcements do not matter unless all this investment eventually turns into higher productivity and higher GDP. After the internet boom of the 1990s, the United States experienced rapid economic expansion, which helped produce its first budget surplus in decades. That surge was not driven by technology alone. The political gridlock of the era forced fiscal discipline, globalization expanded, the Cold War ended, and the country enjoyed several powerful economic tailwinds.

The debt trajectory reversed when the Bush administration financed the War on Terror and later responded to the Great Financial Crisis with large deficits. The Obama administration continued the pattern. Other countries followed a similar path. Cloud computing, smartphones, and social media boosted productivity, but not enough to offset the scale of government spending. With birth rates declining and aging populations, developed countries leaned on higher immigration to keep their labor forces stable. This approach did not generate enough growth to close the gap, and public support for immigration has since weakened. With immigration decelerating, a smaller working population will need to support a larger base of retirees and debt obligations.

These debt levels will rise. These deficits ensure that the outstanding debt keeps climbing. Many of the investments that might raise growth could take decades to pay off. For this to improve the situation, nominal GDP growth needs to exceed interest costs + primary government deficit. For the US and the average OECD country, this threshold is roughly 5-8%. Today, nominal GDP growth sits closer to 3-6%. Sustaining growth above 6% is extremely rare in peacetime. Eventually, deficits have to shrink or inflation has to rise to achieve this reduction.

Unlike post WWII, many countries didn’t have the same pension commitments and universal healthcare coverage. These line items by default make up a large part of the countries budget, anywhere from 10-25% of GDP across the OECD, and are difficult to change. Realistically, retirement ages will need to be pushed back, but this is always met with very hostile opposition from unions and left leaning parties. Healthcare is another main cost which will only rise as the aging population requires more medical attention. Unless humanoid robots and Chat GPT can treat all of these patients, it will be difficult to reduce costs. Canada’s creative solution is to encourage people to die but I’m cautiously pessimistic this will solve the problem. Therefore with higher medical costs, pension contributions unlikely to come down, the options are to try to cut other government programs, find a way to raise taxes without stifling growth or have the money printer go BRRRRRR.

The likely outcome is a mix of everything above. Governments will trim a few programs, then spend the savings somewhere else. Tax revenue will rise, but not because anyone raises tax rates. Inflation pushes salaries higher, which quietly moves people into higher tax brackets even as their purchasing power falls. The same happens with property taxes. When home prices climb on paper, governments collect more revenue even if nothing about the tax rate changes.

None of this will be enough to fix the gap, so policymakers will lean on a familiar tool. They will allow inflation to run hotter than they admit. They will try to avoid the double-digit mistakes of the 1970s and 1980s, but history suggests they will slip at some point. It might not happen this decade or the next, but it is almost inevitable.

The net effect is simple. Expect higher deficits and higher inflation for a long time. If we are lucky, this combination will gently push debt-to-GDP ratios down. While the ratio will improve, the actual debt levels will not actually decrease; they will continue to climb just at a slower rate than nominal GDP grows. This is because countries don’t repay their debts like people or companies, they continue to roll them over indefinitely, putting these obligations on future generations.

This is how countries will unwind their debt problems. In the same way they created them in the first place. Nothing really changes.

(If this topic is of interest to you, I suggest you check out Big Debt Crises by Ray Dalio)

(Here is a great article by of the dangers of these policies and the quiet cost of inflation)

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Most of it exists for engagement farming, to drive clicks and make money. That didn’t start with the internet. Media companies have been serving nonsense for as long as they’ve existed. There’s nothing wrong when it’s purely to entertain.

While not my cup of tea, adults can watch as much bad TV they want. Binging The Kardashians, Selling Sunset, etc. should not change your understanding of the world.

Things get dangerous when nonsense masquerades as credible information. When people take it at face value, it warps their understanding of reality and weakens everyone else’s. Knowledge and truth don’t exist in a vacuum. Either can be disproven at any time and are only useful if people believe them.

Belief is optional. People can ignore mountains of proof, evidence, data and facts. They can shop around until they find anything that confirms their view. It’s even been suggested there is no such thing as the objective truth. Each person has their own lived experiences and truth, which they may consider equally valid to empirical research or well documented facts. The way they see the world will inform how they react to information.

Remember the uproar over “fake news” and “misinformation” during Trump’s first term? Anytime the media attacked the President, his supporters dismissed their claims as lies, while detractors were convinced every word was true (remember the Steele dossier?). Once Biden took office, the outrage flipped sides. This happens every time a new party takes power.

The truth is, most people don’t seek information to understand the world; they seek confirmation. Unfortunately, even the earnest get deceived. It’s not just Russian bots. Journalists, academics, and credentialed experts are just as guilty as spreading misleading, deceiving or straight up wrong information.

How often have you heard somebody start or finish a sentence with “That’s a fact” only for them to accompany those words with something that isn’t actually a fact? Despite more people attending higher education, the population hasn’t gotten better at separating fact from fiction. Universities care more about their rankings and endowments than producing alumni capable of deciphering signal from noise. This is why being able to navigate truth from fiction, you need to learn this on your own. Here are some tools to help:

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What Is The Truth?

“ In a time of universal deceit – telling the truth is a revolutionary act.” — George Orwell

Ask Chat GPT for the definition of the word truth. It returns multiple responses depending on the context. There’s the truth in a general sense. She said it was raining outside, while it was raining at that time1. However, in a philosophical sense, the truth doesn’t have one homogenous definition.

Correspondence theory would align with the general sense. A statement is true if it corresponds to what can be observed in the real world. We can step outside and feel the rain on our skin. Therefore if somebody says it is raining, there is an easily verifiable way to confirm this is the truth. This is the most restrictive definition of the truth, since it’s not always possible or feasible to easily observe each claim.

Coherence theory is slightly less restrictive. Truth is determined by how well a statement fits with a consistent set of beliefs or propositions. We can accept something as true, if it aligns with everything else we accept as true. If we are in a room with no windows but can observe there is no change in moisture, atmospheric pressure etc. we can rule out it’s raining without needing to go outside and verify.

Pragmatic theory is even more expansive. The truth is what works. What proves reliable or useful in practice. Dare I say Serviceable? We can’t prove the sun will rise tomorrow but given this has happened every day as long as the sun and earth have existed, we can safely assume it will. We need assumptions like this to make any decisions for the future.

The most open interpretation of the truth comes from Constructivist theory. The
truth is created through social processes, it’s whatever society agrees is true.

The truth most people believe in, conforms with Constructivist theory. Few people do primary research themselves, they take cues from the people around them. The famous Asch conformity experiments demonstrated an individual will abandon what they believe they know to conform due to social pressure. (This is the line experiment).

(The stooges all confidently called out that B was the longest line, until eventually the innocent participant would start calling out the same answer)

Therefore for all intents and purposes, the truth is the set of facts and beliefs the most people subscribe to. Whether they are true are not, is largely irrelevant since most statements or facts are not as easily disprovable as looking out the window. Few people will verify things on their own, therefore they outsource this work to people they trust. Teachers, journalists, authors, academics & Substack writers etc.

These groups are the designated and self anointed guardians of the truth but many are just as clueless. They claim to be experts with superior knowledge and context to decipher the truth, see fact from fiction but in reality they are the blind leading the blind. Just with more certainty they are right. They have plenty of facts and data to support their believes giving them the utmost confidence they can’t be wrong.

Some will disparagingly refer to this as Liberal Arts Confidence.

People with this illness can be deceived into believing outrageous ideas completely divorced from the reality because somebody they like/trust share a few facts that align wit their world view. They accept this as dogma because people care more about winning arguments, or imposing their beliefs on others than discovering the truth in a correspondence or even coherence manner.

Society encourages this. People will claim to have a truth, to gain trust and power. Politicians will claim to have the truth that will improve their citizens lives. Execs promise investors they know how to lead their company to success. Journalist’s and authors make big claims to get attention, clout and sometimes change.

The verifiable truth doesn’t always align with these people’s agendas, therefore they make their views the truth by making it the consensus belief.

How do they do this? Praying on people’s biases. The modern version of the truth hides behind data and data is the new propaganda medium.

You Don’t Even Know What a Fact Is

“Trust, but verify,” — Russian proverb popularized by President Reagan

It’s easy to convince somebody of something when they want it to be true.

If you believe LeBron James was better than Michael Jordan, you will be more receptive to an article citing advanced statistics like Wins Above Replacement (WAR) that claim to prove LeBron is the greatest of all time. Even if you don’t understand the statistic, you will likely trust that the data is objective and reliable.

Michael Jordan fans, of course, will reject the premise and respond with other statistics such as titles, scoring averages, or playoff records. Both sides are citing facts, but those facts do not necessarily amount to evidence, and evidence is not necessarily proof.

That is because people usually search for proof to justify what they already believe, instead of reviewing proof to form their beliefs. Whether the claim is true or not becomes secondary to whether it feels right.

The statement “Lebron James is better than Michael Jordan” is not a fact. Without anything supporting this, it’s simply somebodies opinion, sure to upset old heads.

“Lebron James had a greater impact on his teams ability to win” could qualify as a fact, if it had data to support it.

“Lebron’s WAR for his career his higher than Jordan’s” would be a data point, but it’s not necessarily evidence, unless WAR can be proven as a good way to compare players.

Even if WAR is accepted as a valid way to compare players, it’s not necessarily proof because there can be alternate explanations or ways to determine which basketball player is best. Such as team performance/titles, playoff performances, individual accolades etc.

In short:

• Statements are not facts.

• Facts are not data unless representative.

• Data is not evidence unless relevant and conclusive.

• Evidence is not proof unless universal.

(This hierarchy and the image below is from Alex Edmans’ book May Contain Lies.)

Numbers Don’t Lie, but People Do

In May Contain Lies, Alex Edmans describes being approached by a major asset manager that wanted to prove a new trading strategy: investing in companies with greater diversity would produce higher returns. Edman could not find any proof or evidence that would indicate such a strategy would work.

Instead of abandoning this quest, the asset manager went to somebody else that used the same data set as Edman, yet claimed it was possible. When Edman investigated, he saw this other researcher manipulated the data to justify the conclusion the asset manager wanted.

The asset manager now had “academic validation.” They used it to market their strategy to institutional investors, raising billions. Other firms copied them. Over time, the claim that diverse companies outperform became consensus truth, despite no statistical proof. The asset manager was not looking for the truth, they wanted the truth that institutional investors already wanted to believe. So they lied.

There might be other valid reasons to invest in diverse companies such as ethics, governance, or culture, but the claim about guaranteed superior returns was false. Most investors did not review the studies themselves, they trusted the credentialed experts. If Edmans did not review the data firsthand, he might have believed it too.

The Limitations of Peer Review

Academics often treat publication and peer review as quality control. In theory, peers play the same role Edmans did, checking whether findings are sound, replicable, and honest.

In practice, this system fails frequently. Researchers shop around for journals with weaker standards. Reviewers may be friends or ideological allies. Critiquing flawed studies can be professionally risky, especially when those studies align with a fashionable or politically popular narrative.

Speaking out against consensus can lead to reputational damage or ostracism. It is easier to stay silent than to be the lone dissenter. That is how Ivor van Heerden, Peter Ridd, Judith Curry and others lost their university positions after challenging dominant views within their fields.

This creates a situation similar to the Asch experiment. If you are the only person seeing flaws with your groups consensus view, few will want to speak out because of insecurity of looking stupid if wrong. Others might decide it’s not worth the ramifications even if they are certain they are right. This is the premise of the story An Enemy of The People: Telling an unpopular truth can make you the enemy of the crowd.

What often happens is that flawed studies go unchallenged but continue to be cited until they become truth by repetition. The researchers begin to win prizes and sell bestselling books, only further adding to their stature and making it more difficult to refute. Once enough people believe something, the burden to convince them becomes increasingly difficult. This problem gets exacerbated by Chat GPT, Google, Wikipedia and others since they prioritize information or articles most heavily cited. Once information makes it onto these platforms they are the Constructivist truth.

Whenever people want or need something to be true, whether it’s that LeBron is the GOAT, that diverse companies outperform, or that a new health trend can fix everything, their ability to doubt disappears. The stronger the desire for something to be true, the more closely you should scrutinize it. When someone makes a claim that runs against their own interests, they are far less likely to be lying.

Our collective understanding of the world is far smaller than we think. Citing facts and studies does not equal knowledge any more than watching sports makes you an athlete. Be skeptical of claims about the world that lack real proof, evidence, data, or facts. The truth is whatever people believes it to be.

Checklist for Smarter Thinking

Alex Edman, author of May Contain Lies was kind enough to include this checklist at the back of his book. These are the type of questions you should ask yourself whenever you see somebody making a claim, whether it’s supported or not.

A. Preliminaries

1. Do you want the conclusion to be true?

2. Is the conclusion extreme? Does it suggest something is always good, bad or applies everywhere?

Ex: You can defeat cancer with diet. Carbs are always bad.

B. Statements

1. Does The Statement Contain a superlative or imply universality?

Ex: “Shareholder value is the dumbest idea in the world. Every company will be a fintech company.

2. If yes, can you come up with a clear counterexample? (can you disprove the hypothesis?)

3. Is the statement backed up evidence? Does this evidence exist and is it publicly available? People often cite studies but can’t name a specific one that can be easily audited.

4. If it does exist, does the evidence and findings from the evidence support the statements?

5. Do the inputs and outputs correspond to the statement? (does the study actually measure the claim in a rigorous way?)

C. Facts

1. Does the study test a hypothesis?

2. Does the study consider a representative sample? (Is the sample size even big enough)

3. Does the study consider a control group? (same characteristics that achieved the same outcome without factor X?)

4. Does the study calculate the average output across the two groups?

5. Does the study check for statistical significance?

   1. Is the difference large enough that it can’t be explained by luck or noise?

D. Data

1. Are there other ways the researchers could have measured the input and output? (Alternate Hypothesis, Data Mining)

2. Is the data chopped up? (did they conveniently omit or structure data in such a way to achieve their desired outcome?)

3. Could the output have caused the input (reverse causation/tail wag the dog)?

4. Are there any common causes that could be driving both the input and output? Have the authors controlled for them in the same regression?

5. Imagine if the study found the opposite result. What alternative explanations would you come up with to try to explain it away? Then ask if these alternative explanations still apply, even though the finding are in the direction you like?

E. Evidence

1. What was the setting studied? Is this the same as the setting for which you’d like to draw conclusions? If not, are there any reasons why the relationship might be different in other settings?

2. What was the population studied? If this the same as the population of interest for which you’d like to draw conclusion? If not, are there any reasons why the relationship might be different in other populations? (the 10,000 hour rule and others)

F. Shortcuts

You can’t review every cited study but here are some questions to filter if they were performed properly:

Studies

1. Is the paper published in a top peer-reviewed journal?

2. What are the credentials of the authors? Do they have a Ph.D or a track record of top peer reviewed publications in the relevant field? Are they affiliated with the leading research institution? If the same study was written by the same authors, with the same credentials but found the opposite results, would you still believe it?

3. What are the authors incentives to claim their result? Would they have published the paper if it had found the opposite result?

4. Do the authors exaggerate their credentials, the rigor of their methodology, or their conclusions?

Books and articles

1. Does the book or article back up its claims with evidence?

2. Can you find informed critiques on the web?

3. Is it balanced? Does it consider evidence or arguments that contradict its core thesis?

4. Do the authors exaggerate their credentials, the rigor of their methodology, or their conclusions?

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After 3.5 years with the company, I resigned on September 30th. There was no dramatic reason, I had simply decided it was time.

As people within the organization learnt of the news, the general reaction was some combination of shock, sadness, and in a few isolated cases, a slight hint of jealousy. Yet none of this resulted in candlelight sigils or hour long moments of silence.

It’s understandable, although I had been with the company since its early days, it’s only natural for people to reconsider their own standing when they learn of this kind of news. I’ve been in their shoes many times as colleagues have left, voluntarily or not. Before long people need to go back to focusing on their jobs.

As you read this week’s newsletter, I am now unemployed. I know what you are thinking and the answer is no. Unfortunately, I do not earn enough money from Serviceable Insights to retire. While I appreciate every one of my 1,000+ subscribers, none of you pay me anything, alas I will eventually need to find employment.

In the meantime, I hope new and existing readers enjoy this week’s article discussing the concept of a “career”. When did it start? What does the average career look like. Is loyalty rewarded or is it better to job hop?

Keep reading if you want to find out!

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What is a Career?

The sequence of jobs, roles, and professional experiences a person pursues over the course of their working life.

The concept is fairly new. For most of civilization most people were farmers, hunters or foragers. None of these roles came with much opportunity for advancement (Assistant to the Chief Forager?).

A handful were born into nobility, which had hierarchy and progressions, but promotions depended on birth order and waiting for someone ahead of you to die. Performance reviews weren’t a thing. If times were good, there wasn’t much to worry about besides gout or dying from a minor infection.

If times were bad, you might have been presiding over a war, an insurrection, or a barbarian invasion. In that case, your main concern was keeping your head but at least you didn’t have to sit through company downsizings.

Most would assume dreaded conversations with the HR department only began during the Industrial Revolution but they started well before that. The army. New recruits, would begin similar to interns. First by training, or holding spears while real soldiers fought until it was their time to stab people. Except the cases when their armies were desperate so they were just thrown into battles without training or guidance. Similar to when startups can’t afford experienced people so they just take anyone willing to join.

If a soldier proved himself and didn’t die, he could climb the ranks and eventually call the shots. That is, until the new emperor got jealous and tried to have him killed by his own men, forcing him to fight for freedom in the gladiator pits.

While there was progression, the high chance of dying in battle made it difficult to make long term career plans. There wasn’t much possibility to change either. Perhaps they would occasionally change legions but I doubt the soldiers had a say.

Even once trades and guilds came around they provided more opportunity but they also restricted people’s ability to change careers (this is why Benjamin Franklin’s father left England for the United States). Therefore the notion of being able to freely pick and decide your own career or easily change likely only started, at least in western countries as late as the 18th century.

That’s when “careers” began: when the average person could have a self-directed, evolving journey across multiple roles or employers. I’m not saying they were good jobs, but for the first time, there was some semblance of choose your own adventure.

What Does The Average Modern Career Look Like?

It’s 2025, so I probably didn’t need to dedicate the opening section explaining what a career is. However, several of my Subscribers made a killing buying Crypto and Meme Stocks at the right time so they’ve never had to grapple with the concept of a job. For the rest of us though, our career plays a meaningful role in our existence; especially since we spend most waking hours during our prime years working.

With anywhere from 50-70% of high school graduates in the west going to university or some sort of trade school, most people start their careers in their early 20’s and retire in their mid sixties. At least that’s what the Boomers and Silent Generation got to do, us millennials and Gen Z will definitely be working into our seventies and eighties, to pay for their pensions and other government programs.

Given that careers span 30 to 50 years, my three-and-a-half-year stint at my firm will ultimately represent only 5% to 10% of my total working life. Still, since I’m only ten years into my career, it feels significant, and it is. The roles you take early on set the foundation for everything that follows.

Titles, growth, and trajectory matter less than the skills and networks you build in those early years. Those things matter especially for people with management ambitions. Only 10-15% of employees will ever reach the level of manager, and well below 1% will reach the executive level at any size company. This does not include people running banana or lemonade stands.

Several studies indicate salaries peak in a worker’s late forties to early fifties, then typically stagnate or decline until retirement. Outside of skills and education, the trajectory of salary growth can also be influenced by a young worker’s a) willingness to relocate and b) readiness to change jobs for higher wages or seniority.

This makes sense. In many cases, the longer someone stays at the same company, the more likely they are to become underpaid. Any company with an HR department will generally standardize pay scales, limiting what workers can earn relative to their seniority. It’s rare for a junior software developer to earn more than a senior developer, even if the junior is far superior. A senior can’t out-earn their manager, who can’t out-earn the VP of Engineering, who can’t out-earn the CTO etc.

Since only so many employees can be promoted, the net effect is that stronger employees at each level earn less than they should, while the beneficiaries are their relatively weaker colleagues or seniors. (I discussed this premise in Benchmarking is Lazy). As such, if you’re a strong employee who isn’t regularly getting promoted or receiving meaningful raises, at least 5% to 10% annually, you’ll likely find yourself getting paid much less than what you could earn elsewhere.

There’s plenty of data that confirms this. Job hoppers, people changing jobs every 1.5 to 3 years, earn on average 10% to 30% more than longer-tenured employees. I haven’t taken the time to review these studies in depth, but this aligns with anecdotal evidence, so let’s assume it’s true.

(Even a 2% difference in wage growth nets out to 22% after 10 years)

Therefore, this would imply to maximize career earnings, a worker should work at least seven-twelve companies before they reach forty. If you’re impatient, you can just pull a Soham Parekh, and work at four Y Combinator backed companies simultaneously.

This sounds nice in theory, but money isn’t everything (I apologize if this offends any of my maxi-capitalist readers). Even if you can consistently find companies willing to hire and pay you more, that approach treats your career like a hedonic treadmill you need to sprint through. Is it crazy to prioritize other factors, like enjoying your work environment, the mission, the people, or some combination of all the above?

At a certain point, lower pay starts bleeding into other aspects of your life, but endless job-hopping can do the same. Some people enjoy starting somewhere new every year, but changing jobs is among the most stressful life events. Up there with marriage and divorce, for good reason. Interviews offer limited visibility into what it’s actually like to work at a new company. You won’t realize what a nightmare your new company is until after you join. This shouldn’t be the reason to never leave a job either.

The right balance is finding an environment you enjoy that you feel pays fairly. This isn’t necessarily about work hours or prestige, it’s about supporting and aligning with your other life objectives. If it means working less hours to be more available to your family, taking a pay cut might make sense. If your personal burn rate is low, you have a lot of options. If your credit card statements look like a set piece from Home Alone 2, you have fewer.

Too much of the career conversation revolves around salary, seniority, and exit opportunities. Not enough attention is given to finding work that lets you enjoy both your job and your life. That might not maximize prestige or earnings, but careers last decades. If you have the chance to make your daily life meaningfully better, both inside and outside of work, you owe it to yourself to take it.

Careers are a relatively new concept. The freedom to change jobs and take chances is a modern luxury that most people throughout history never had. If you are fortunate enough to choose an environment that aligns with your values and goals, you should explore it. You may not find the perfect balance, but the pursuit itself is what makes a career worth having.

So here I am, between jobs, somewhere in the middle of my own “choose your own adventure.” Careers are no longer supposed to be a straight line. It’s a series of choices, chances, and the occasional leap of faith. This just happens to be one of mine.

Let’s see how this turns out, and if it doesn’t work perhaps I might need to start charging for these. Just kidding, Serviceable Insights will continue to operate as a reluctant non-profit for the foreseeable future, and I appreciate your non-monetary support.

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Like many men, I played many home games with friends in my late teens and early 20s. I even briefly tried my hand online. I was decent enough to win at the home games or low stakes online tables but against professionals and people earning a living from poker (grinders) I was overmatched. I could occasionally win a hand against them but over a long session, eventually the talent difference took over.

I sat down at the lowest stakes table available and before long I realized everybody at the table was a grinder. The smart thing would have been to get up and leave but since I didn’t know the next time I would be playing poker in Las Vegas, I decided to stay for the novelty of it and make a kind donation to the grinder fund.

After mostly watching hands unfold, eventually my patience was rewarded with a premium starting hand. I slow played my cards and trapped somebody. I won a large pot, angering him greatly as he didn’t think I had that move in my bag. To quote George W Bush: He misunderestimated me. I should have gotten up and ran but I hadn’t been at the table long so I decided to stick around. A few hands later, I was in a coin flip situation with the same player. I had the flush draw, he had the low pair, putting our odds at around ~50% each. We both went all in, I didn’t get the card I needed so my session ended there.

Poker theory, would have said I made the right move but I still lost. Even if I played perfectly that night, the outcome would have likely been the same. I was at a table against sharks but with a lower bank roll (especially after the pool party) and tolerance for risk.

Now you might be wondering why you should care about my gambling losses and what this has to do with financial markets? While gambling is never investing, sometimes investing looks a lot like gambling. At least in the casino you know your odds.

This article will share a few gambling anecdotes that will hopefully help you make better decisions in financial markets or at a minimum, a slightly more conscious gambler.

Keep reading if you want to try to lose less money!

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Find Games You Can Win

In a casino, not all games are created equal. Some are designed to entertain while slowly emptying your wallet. Others, while still stacked in the house’s favor, give you a fighting chance.

Blackjack, when played correctly, has a house edge of about half a percent. Craps and baccarat are close behind. Roulette takes about five percent of your money before the wheel even spins. Slot machines are the worst, you might as well light your money on fire. The flame might last longer than your playing session.

If your goal is to make money at the casino, your best move is not going. The second best move is to play games with better odds, that you understand. Good gamblers, like good investors, understand one simple truth: you do not have to play every game. You just have to find one where the odds tilt slightly in your favor.

For the average individual with no knowledge of finance or business, their best bet is buying exchange traded funds (ETFs) which will provide returns on par with the general market. Since most retail investors lag the market by 6-8% annually this would be the smarter move. (We discuss this concept and more in:

However, this doesn’t mean you should never buy individual stocks or make other investments. You should invest in areas where you have an edge.

The brilliant minds on Wall Street regularly end up on the losing of a trade. If you tried to go up against a hedge fund on every tradeable asset, you would definitely lose. If you stuck to industries or instruments you know very well, you have more of a chance. Most equity research or hedge fund analysts need to cover dozens, potentially hundreds of stocks, their job requires it. As a retail investor, you can concentrate on a handful and learn everything there is to know about them. It’s not a stretch for a non-professional investor to know more about a company than a full time investor. Gambling is no different. However edges don’t last forever.

How I got banned from betting on hockey

I was early to discover advanced statistics for hockey. Baseball had already gone through its analytics revolution after the Oakland A’s Moneyball success, but in the late 2000s hockey was just getting started. Only a handful of bloggers were writing about it, and the audience was small. As one of their few readers, I could message them directly and they would actually reply. At fifteen, I was far from a statistician, but my love of hockey pushed me to learn enough math to keep up with their work.

Advanced analytics in hockey do not predict single games very well because the sport is too noisy. Over a full season, however, they used to offer an edge. I learned to use that advantage to dominate fantasy hockey pools and long-term prop bets. As an unemployed teenager, my bankroll was tiny, so the money never amounted to much. However in percentage terms, my returns were absurd. For five straight years, I won or finished in the top three of nearly every fantasy league I joined, usually against ten to twenty other people. My prop bets were hitting around thirty-three percent when the odds implied less than a ten percent chance.

I was driven more by pride than money. Still, after a few seasons of crushing the competition, my invitations to hockey pools began to disappear. The final league I joined included several of the analytics bloggers I had followed for years and a few employees from fantasy hockey websites. The competition was too strong. I quickly realized my advantage was gone and decided to retire from fantasy hockey to focus on my homework.

As analytics became mainstream, sportsbooks and fantasy platforms started using the same stats I had been using. My edge vanished overnight. I walked away with a small profit and a much deeper understanding of how you can find an advantage and why you need to pick your opponents wisely. This is why you don’t drop out to gamble fulltime.

Sometimes it’s better to be lucky than good

During that same trip to Vegas, a member of my party turned $200 into $10,000 at the Blackjack table. I was there when it happened. Let’s call this person Greg. Greg was not a regular gambler; he’s normally a fairly straight laced individual. In the night in question, he was not. While a few of us were having dinner, Greg joined, already quite inebriated and impatiently wanted to play Blackjack.

He reluctantly waited for us to finish our dinner then struggled to walk in a straight line between the restaurant, which was located next to the casino floor, and the blackjack table. We were unsure if they would let him play in this state but we quickly realized people like Greg were their ideal customer profile (ICP). If they were licking their chops before he sat down, they certainly weren’t for long.

Greg started hot and never cooled off. Hand after hand went his way. He doubled his bets, then tripled them, even played two spots at once. Sometimes he made the right decisions, other times he didn’t, yet the cards kept rewarding him. He hit endless blackjacks and high hands while the dealer kept busting. Multiple pit bosses came to observe but quickly decided he was far too drunk to be counting cards (or was as good an actor as prime Daniel Day-Lewis). Within an hour, Greg had ten thousand dollars in chips stacked in front of him. He also couldn’t sit upright anymore, which was our cue to call it a night.

By the next morning, Greg woke up next to his mountain of chips and a puddle of his own making, unsure how either got there. His winnings did not come from talent. He rode a streak of pure luck and happened to cash out at the top. Greg won by far the most, but everybody had a profitable session, largely because the dealer kept busting. Greg could benefit because he was by far the most aggressive, which was largely a result of his inebriated state.

Most investors think they are Michael Burry, seeing patterns the world misses. In reality, many are closer to Greg. A few lucky streaks can feel like skill until the cards stop falling your way.

Don’t Invest Like a Gambler. If you do, be smart about it

Like our friend Greg, many people try to earn outsized returns by being aggressive during a bull market. I know plenty of people who boast about triple or even quadruple-digit gains from trading crypto or leveraged ETFs on margin. Sometimes those trades work. When they don’t, the same aggressiveness that creates wealth can erase it overnight. Just the other week, many crypto whales got margin called liquidating years of investment gains. You can think of this as Greg betting his $10,000 in winnings, borrowing another $10,000 from the casino, and losing it all on the next hand.

If Greg had another $100,000 sitting in savings, he could afford to be aggressive. Losing ten or twenty thousand would sting, but it wouldn’t ruin him. If that original $200 was all he had, he would be finished. Investing works the same way. If you trade on margin without enough capital behind you, one bad swing can end the game.

Aggression in investing is not inherently bad, but it must be calibrated. If you want to take big swings, you need to design your portfolio so that one mistake cannot bankrupt you. Nassim Taleb popularized what he calls the barbell strategy: keep one part of your portfolio extremely safe and the other part aggressively risky. This approach lets you pursue large upside while protecting yourself from total ruin.

Taleb is a trader, not a gambler, but he has seen countless traders blow up because they behaved like gamblers. The difference between the two is not luck or confidence; it is risk management.

Conclusion

Every gambler believes they can beat the odds until the cards stop going their way. Investors are no different. The smartest ones know the game is never about winning every hand, it is about surviving long enough for the math to work in their favor.

You cannot control luck, but you can control your exposure to it. Whether you are sitting at a poker table or watching your portfolio, the same rule applies: protect your bankroll, play the games you understand, and leave the table before the house reminds you who is in charge.

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As his films have earned more praise and awards, Anderson’s willingness to experiment has only grown. He plays with framing, light, pacing, surrealism, and sometimes pure absurdity. On the spectrum between Marvel and Terrence Malick, he has leaned closer to the latter. His movies are strange, funny, and unmistakably precise.

His latest, The Phoenician Scheme, is no exception. It is less outlandish than Asteroid City or The French Dispatch and more in line with The Grand Budapest Hotel. The story follows Anatole “Zsa-Zsa” Korda, a wealthy industrialist wanted by global authorities. His latest venture, a sweeping infrastructure overhaul of Phoenicia, promises enormous profits for his partners and ruin for everyone else.

The plot unfolds around Korda’s schemes, family tensions, and fragile alliances. I will not spoil the details, but it is excellent.

What caught my attention were the books Anatole keeps reading throughout the film. Each title is bizarre, precise, and perfectly Andersonian. As it turns out, these are entirely fictional creations. So I decided to imagine what these books might be about, their real-life parallels, and what they reveal about Korda’s mindset.

You do not need to have seen the movie to enjoy this, but you should. It is Wes Anderson, after all.

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The Anatole “Zsa-Zsa” Korda Reading List

1. Great Botanical Collections of Western Europe
   A richly illustrated compendium cataloguing the eccentric gardens and forgotten greenhouses of Europe’s aristocrats, from medicinal herbs grown in Venetian courtyards to the sprawling orchid mania of Victorian England.
   Closest real-life parallel: The Brother Gardeners by Andrea Wulf (on Britain’s 18th-century plant collectors) or Orchid Fever by Eric Hansen.

For those who intend to one day amass sizeable fortunes, it comes in handy to have a working knowledge of botanical gardens. Whether this is to donate a public trust or to set one up in one of your properties. When you own a lot of land, you will need to do something with it after all. You may scoff at this but it’s one thing to manage a small patch of grass on your front lawn, a botanical garden is an entire different ordeal.

2. Important Patrons of the High Renaissance
   Profiles of wealthy bankers, dukes, and cardinals whose commissions reshaped art history and whose vanity projects occasionally rivaled the masterpieces themselves.
   Closest real-life parallel: The Agony and the Ecstasy by Irving Stone (a biographical novel of Michelangelo) or Patronage in Renaissance Italy by Mary Hollingsworth.

Closely related to Great Botanical Collections of Western Europe, Anatole is likely seeking inspiration from other great philanthropists of their day. Already wealthy at the start of the film, and expecting to add further to his fortune, he has begun planning how to use the proceeds from his venture. A man can only spend so much during his lifetime, and it is difficult to trust what will become of any money left to charity or the state. Naturally, he settles on becoming a patron of the arts, following in the rich tradition of the Borgias and Medicis. At this point, belief in the success of his mission is still high.

3. Fragments of Antiquity: Noteworthy Scraps, Shavings, and Rubble
   A serious-minded survey of the minor relics archaeologists trip over: broken amphora handles, chipped mosaics, and the world’s most celebrated pile of marble dust.
   Closest real-life parallel: Fragments: Lost Words of the Ancient World by Tony Harrison or Lives of the Ancient Greeks by François Chamoux, with sections on archaeology’s smaller finds.

Anatole reads this book during a quieter, more introspective stretch of the film. His plan has run into complications, and the path forward looks uncertain. The book’s focus on broken relics and forgotten pieces mirrors his attempt to make sense of a plan now in shambles. It also reflects the literal excavation required as part of his scheme. In a way, the act of reading becomes a metaphor for self-excavation: studying the ruins to understand what went wrong.

4. Fleas of the Americas
   A pioneering entomological atlas of New World fleas, complete with intricate engravings and overly in depth detail on everything there is to be known about everyone’s favorite Siphonaptera.

Closest real-life parallel: The Flea: The Amazing Story of Leo Messi by Michael Part (unintentionally!) or more seriously, Fleas: Biology and Control by K. Mehlhorn.

Michael Cera’s character, Bjørn, is first hired as a tutor to Korda’s children and later becomes his administrative assistant. Bjørn is a trained entomologist, which might seem like an irrelevant quirk, but it serves as a quiet commentary on Anatole and his associates.

Fleas are parasites that occupy hosts without their knowledge or consent. Korda’s scheme does the same to the people of Phoenicia. He and his partners feed on the land and its resources, enriching themselves at the expense of those who live there. The book functions as both a metaphor and a mirror, hinting at the predatory nature of Anatole’s world.

5. Depictions of Blasphemy in Gouache (Vol. III: 16th Century)
   An illustrated catalogue of religious controversies, spotlighting forgotten painters who dared smear heresy in opaque watercolor across Europe’s church walls and tavern ceilings.
   Closest real-life parallel: Art and Heresy in Renaissance Siena by Fabrizio Nevola or The Forbidden Image by Alain Besançon (on iconoclasm and blasphemy in art).

This book is a reflection of Sister Liesl, Korda’s daughter (played by Mia Threapleton) current dilemma. She is a devout believer, now faced with the choice whether to live like an ordinary nun or to become her father’s heir and beneficiary to his estate. On one hand, the trappings of wealth goes against her teaching but she could do a lot of good with this money.

The book’s subject is about artists who defied doctrine in pursuit of higher truth. This parallels Sister Liesl crisis. Like those painters, Liesl risks being seen as a heretic if she acts on conviction rather than dogma. To accept her inheritance might feel like blasphemy, yet refusing it could waste an opportunity to do genuine good. In both art and faith, purity and corruption are not easily separated, and this ambiguity defines her struggle.

5. Questionable Authenticity: Masterworks, Forgeries, and the Dilemmas of Attribution
   An exposé on the shadowy middlemen and clever forgers who blurred the line between genius and counterfeit, with entire chapters devoted to paintings now hanging in respectable museums.
   Closest real-life parallel: Provenance by Laney Salisbury & Aly Sujo (on one of the biggest art frauds) or The Forger’s Spell by Edward Dolnick.

Anatole is a world-renowned arms dealer, forever balancing alliances with partners, suppliers, and rivals. He is accomplished, but his success depends on maintaining appearances. To make the Phoenician scheme work, he must stay one step ahead of both the CIA and his own associates. The risks are growing, and one misstep could expose everything.

This book reflects Anatole’s dual nature. Like the forgers it profiles, he operates in the gray zone between authenticity and deception. His life, built on negotiation and illusion, is its own masterpiece of controlled deceit. He reads not to learn how to lie, but to understand the psychology of those who do it best. Even after years of survival and near-death encounters, he continues to study, convinced that mastery requires constant refinement. Reading, for him, is both education and confession.

6. Arms and Armour: Princely Works from Around the Globe
   Lavishly detailed portraits of jeweled swords, ceremonial shields, and impractically ornate helmets designed less for battle than for dazzling rival monarchs at banquets.
   Closest real-life parallel: Arms and Armor of the Medieval Knight by David Edge & John Miles Paddock or Swords and Swordsmen by Mike Loades.

Anatole’s fascination with this book reflects his obsession with power, image, and legacy. The ornate weapons described here are not tools of war but symbols of status, precision, and intimidation. Like the princes who commissioned these works, Anatole treats business as both spectacle and combat. He’s already very wealthy but continues to engage in these schemes despite the many assassination attempts against his life.

It’s not just about amassing wealth. It’s about leaving an enduring legacy that will persist for centuries. Evidentially his many children alone are not enough.

7. Pavement Engineering in the Post-Roman Era
   A technical yet oddly lyrical history of medieval road-making, complete with diagrams of cobblestones, trade routes, and the political collapse caused by potholes left unrepaired.
   Closest real-life parallel: On the Road to the Ancient World by Etruscan scholar John Haywood, or Roman Roads: A Study of Infrastructure and Society by Raymond Laurence.

Anatole reads this near the end of the film, when his empire begins to show cracks. The book’s focus on infrastructure and decay mirrors his growing awareness that every system, no matter how sophisticated, eventually erodes. Roads once built to unify kingdoms crumble under neglect; so too do his alliances and ambitions.

It is a fitting choice for a man who profits from rebuilding nations he helped destabilize. In studying ancient roads, Anatole seems to understand, perhaps for the first time, that foundations matter more than façades. Whether that realization comes too late is left for the viewer to decide.

Although these books are fictional, I hope you enjoyed these summaries and how I think Anderson was trying to use them to signal what was happening in the film. If you haven’t seen The Phoenician Scheme yet, you definitely should. If you aren’t a fan of Wes Anderson’s movies, please re-evaluate your life choices. For those interested in a reading list containing real books, I will release mine in December but in the meantime, here’s a collected list of titles I’ve previously shared.

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Nobody can confidently predict how the economy will look 12 or 18 months from now. Economies are highly complex systems with many players involved and indicators are generally lagging, which is why macroeconomic forecasters have a poor record in predicting recessions.

I won’t claim to be any better, I’ve predicted 10 of the last 2 recessions.

However, right now the data is showing a clear and widening split in how different groups experience the economy. Some are thriving while others are barely holding on. This is not healthy nor a sign of a thriving economy, this is what’s known as a K-shaped economy.

Look, I’m all in favor of the affluent finally getting the respect they so richly deserve but when this has happened before, it rarely ended well. Recent examples include the Post-2008 Great Financial Crisis and the Post-Covid Zero Interest Rate Period (ZIRP) from 2020-2022. The ensuing government response in both cases was to slash interest rates and pump plenty of money into the system. This was great for asset holders (the rich) but the ensuing inflation was very bad for everyone but especially those with less.

We are currently on a similar path, which should concern everyone. This article will explain what is a K-shaped economy, how it develops, when has it happened before and its ramifications.

Keep reading if you want to what a K-shaped economy might mean for you and your loved ones!

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What is a K-Shaped Economy?

A K-shaped economy describes when there is a substantial gap in how different groups of people or sectors perceive or perform financially. The “K” shape comes from the different plots on a graph: one rising upward (those benefiting) and one sloping downward (those worse off).

This indicates growing fragility because economies are interconnected, weakness will eventually spread which harms healthy parts of the economy at a more rapid and greater magnitude than healthy economies can save struggling parts. As an economy becomes increasingly reliant on a small handful of industries or consumer groups for growth, the less robust it becomes. This is what’s currently happening right now.

Higher-income households ($100k+) are feeling increasingly optimistic (black line rising), while lower-income households (<$50k) show worsening sentiment (blue line declining).

Meanwhile, the stock market is increasingly concentrated on technology and artificial intelligence. We covered in last week’s article The 3 Biggest Lies in Investing how the “Magnificent 7” (NVIDIA, Microsoft, Tesla, META, Alphabet, Apple & Amazon) now represent more than 30% of the S&P 500 market cap and forward earnings growth. Does that feel diversified or safe to you? How did this happen?

What Causes a K-Shaped Economy?

A K-shaped split happens when an economic shock or government policy disproportionately benefits some groups while harming others.

Imagine your town’s entire economy is built on exporting Hawaiian pizza. Then one day, Taylor Swift declares pineapple on pizza disgusting, and suddenly demand collapses. Your town suffers, while the rival city of Pepperoniopolis booms.

The government steps in with subsidies and loans to keep Hawaiian Pizza Town afloat. To entice people to buy your pizza you slash prices in half, Pepperoniopolis needs to respond in a similar way. This sudden pizza war drives up the price of raw materials like cheese and dough making the suppliers a fortune, while both towns get squeezed from the higher costs on one side, lower prices on the other.

The suppliers are buying table service in Ibiza while the pizza competition drives one town out of business leading to mass unemployment. Their lost spending starts to hurt other industries, until a full blown recession is underway.

The government following Keynesian economics and non-sensical Modern Monetary Theory (MMT) respond by higher spending, cutting interest rates and printing money to inject more liquidity in the system until spending levels stabilize.

This helps stop the bleeding but the ensuing stock market rally and lower borrowing costs disproportionally help industries sensitive to interest rates: Real Estate, early stage technology, commodities etc. Suddenly startup CEOs are dating Kardashians and getting facetime with prominent politicians while people in industries with stagnant wage growth are struggling to make ends meet.

This leads to increased polarization between haves and have nots, leading to a thirst for political change, but not moderate change. They want extreme nationalism or socialism but hopefully not both at the same time.

Does any of this sound familiar?

When has this happened before?

K-shaped economies aren’t new. Whenever shocks, policy choices, or structural imbalances tilt the playing field, the result eventually causes some groups to thrive while others sink. Some recent and historical examples exemplify this:

Post–COVID Recovery (2020–2022):
Unless you were born after 2023, you just lived through this. The pandemic’s aftermath saw tech stocks and crypto soar while housing prices broke records. White-collar workers were logging into Zoom in their underwear while low-wage service workers faced layoffs, delayed rehiring, and wage pressure that lagged inflation. The government’s firehose of stimmy checks and zero-rate policies pushed asset prices predictably euphoric levels. Once inflation reared its head, those without assets paid the steepest price. Politicians and central bankers continued to tell us inflation would be transitory while every day people were struggling to pay their bills. This had some influence in President Trump’s re-election, and his administrations embracement of nationalist policies upending the established world order of globalization via tariffs and anti-immigration policies.

Post–2008 Global Financial Crisis:
Like during the pandemic, Hank Paulson, Timothy Geithner, Ben Bernanke, Mario Draghi and others were resolute in their belief the only way to rescue the financial system was for extreme quantitative easing (QE) and near-zero interest rates. The economy did recover, although very slowly but eventually there was a massive run-up in asset prices that rewarded capital owners while leaving many families behind. Millions lost homes to foreclosure. Wage growth stagnated. Graduates entering the job market in the early post GFC years took a big hit to their earnings potential. The stock market embarked on one of the longest bull runs in history, widening the wealth gap and resulting in greater political polarization. This played a role in the electorate embracing political outsiders such as then Nominee Trump and Bernie Sanders.

The Gilded Age / Industrial Revolution (late 19th century):
An often cited example by inequality skeptics. While industrialists and financiers accumulated extraordinary fortunes, agricultural and factory workers labored in increasingly harsh conditions with no real protections. No five day work week, regulated hours. Pretty much you had to just be grateful for the job. Kind of like investment banking but without the glamorous pay or expensable Uber Eats.

There was a great period of expansion but the economic growth was uneven and eventually culminated into labor unrest, violent strikes, and the Progressive Era reforms: antitrust laws, income taxes, and the introduction of labor rights.

I am not saying all of these are necessarily bad things but in all of these cases, the K-shaped growth persisted for a while, until the economy crashed or the have nots revolted leading to massive change.

Does it always lead to recession or political change?:

No. Like most things in economics, a K-shaped economy does not always result in a recession or political upheaval. It’s happened a few times where the split could persist for years without triggering an immediate crisis.

Examples include the United States after World War II, several Asian economies in the 1980s and 1990s, and the mid-to-late 1980s in the U.S. In these cases, growth was strong and persistent enough to cover for weakness elsewhere. The crucial factor is persistence. If growth is broad and sustainable, it can eventually lift lagging sectors.

The danger comes when growth is manufactured through government stimulus, loose monetary policy, or aggressive fiscal expansion. These measures can prop up the system in the short run but often create bubbles that form the basis for the next downturn. (We discussed this in detail in Nobody Understands Interest Rates).

This is essentially what happened after the dot-com bust. The government’s response shortened the recession, but the flood of cheap credit set the stage for the far larger mortgage crisis a few years later.

For a K-shaped economy to endure without unraveling, three conditions need to hold:

1. The underlying growth must be sustainable

2. The benefits must eventually reach the underperforming parts of the economy

3. Policymakers must resist the temptation to overstimulate

Hitting all three conditions at once is rare, which is why K-shaped economies so often end in recession or political unrest.

Conclusion.

Right now we are in a K-shaped economy. This is usually not a good sign for future economic or political prospects. In the short term, it’s great to be rich. They are euphoric, which is why they are spending $17M on Honey Deuces at the US Open. Meanwhile many Americans are falling behind on their mortgages and accumulating billions in credit card debt.

The stock market is being propped up by AI hype and expectations of lower interest rates. That mix suggests today’s K-shape is unlikely to be sustainable. Weakness will eventually spread into other parts of the economy, forcing the Federal Reserve to walk a narrow path if it wants to stabilize growth without sparking another crisis.

If the economy avoids recession, those with assets and those positioned to benefit from AI will likely continue to thrive. Everyone else will face growing challenges. That divergence almost always brings political consequences, either through aggressive government intervention or the public demanding it.

Of course, nobody can confidently predict what the economy will look like 12 to 18 months from now. Maybe everything will work out fine. Book that trip to Japan. Buy more crypto. Keep reading Serviceable Insights.

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If you want to learn more, Ray Dalio has spoken extensively on this topic.

The truth is most investors don’t know what they are doing. They can’t explain why they bought something, why they sold it, or what caused the price to move. This is long before getting into more complicated concepts like rebalancing or when to cut losses. People aren’t thoughtful with their investments.

This is why “dumb money” retail investors only average about 3 percent annual returns. That’s less than you earn just parking cash in government bonds or a high-interest savings account. Professional investors aren’t much better. Most lag simple index funds they are paid to beat like the S&P 500 or FTSE Global 1000, which deliver closer to 8 to 10 percent annual returns. At least these professionals get to charge handsome fees for their efforts.

Personal finance gurus give the same advice: avoid stock picking, buy index funds and forget about it. For most people this is good advice. Picking stocks takes time, resolve, and discipline. Something in short supply. Even with this success isn’t guaranteed.

Academics will tell you beating the market is impossible. They’ll come up with all types of rationalizations but plenty of investors do it. They’ll say you need to be diversified, however concentrated portfolios often do the best. Experts will tell you to stay fully invested since you can’t time the market, but can you handle the swings?

I can’t guarantee you good returns but here are a few concepts to prevent you from being among the worst if you want to try to beat the market.

Keep reading if you want to learn why conventional investment advice is flawed and what to do instead.

Disclaimer: this is not investment advice, I am not a licensed advisor, insert legal boilerplate language yourself here. Serviceable Insights is a reluctant not-for profit operating without in-house legal counsel.

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Are you Investing or Trading?

You’ll often see the terms trading and investing used interchangeably but they are different. Trading is generally short term in nature, with traders taking positions based on how they expect the market to move. Investing on the other hand is longer term, and investors take positions based on how they expect the underlying asset to perform over a certain holding period.

Many people consider themselves to be investors, but behave more like traders. If you buy a stock for an AI or Crypto company because you think the price will rocket once other people hear about it, this is not investing. If you decide whether to buy or sell based on price movement charts, you are trading. This type of price movement research is known as technical analysis and it’s about as effective as horoscope predictions. Just like with astronomy, the people who believe in it, will insist on its accuracy no matter what evidence they see to the contrary.

On the other hand if you decide whether to invest or not by reviewing a company’s financial statements, economic data and other information that can impact performance, this is fundamental research and its consistent with investing.

Of course, the line isn’t always clean. A good investor might avoid a stock they like because of recent price action and only revisit it after another big move. Likewise, traders might also do fundamental research and hold positions long enough to look like investors. For the purposes of this article, we’re going to focus on investing and the myths associated with it. This is largely targeted at public equities but can apply to bonds or private market investments as well.

Myth# 1 — It’s Impossible to Beat the Market Over The Long-term

Through two finance degrees and three levels of CFA exams the message never changed. “You cannot consistently beat the market.” At the time the irony was clear. We were dedicating thousands of hours of studying finance to be told try as we might, we won’t do better than the average market return. This is because markets are efficient and all publicly available information is already factored in. “Priced in”. As such, the only way you can consistently beat the market, is if you have an information advantage. Translation. Insider trading. (For you nerds out here, this is known as the semi-strong efficient market hypothesis)

Even if you don’t know much about finance, surely reading this, you have to question how these academics can say things like this. There are countless examples of financiers, hedge fund and mutual fund managers that beat the market for decades. Looking past Warren Buffet, investors such as Peter Lynch, Stanley Druckenmiller and many more have far exceeded the broad based market return for decades. If they couldn’t, investment firms surely wouldn’t still exist could they? Don’t answer that.

Any time one of these academics gets challenged with this evidence they generally dismiss it one of the following ways:

1. Law of large numbers: With such a large sample size, there are bound to be exceptions, outliers etc. If you put enough monkeys in front of a type writer, one will eventually produce Shakespeare.

2. It ignores risk: They will concede that some investors may have outperformed the market over a long time horizon but they will argue they failed to do so on a risk adjusted basis (more on that in a subsequent article perhaps).

So to recap their argument. It’s impossible to beat the market long term, however some will do it because with so many people trying, some will get lucky and if more than a few people do it, it’s because they just took on more risk.

That last part is key. Most finance gurus you see on TikTok probably didn’t get that deep into their textbooks, so they stopped at “you can’t beat the stock market”. Now if your goal is to beat the stock market returns of 8-10% historically, the solution is actually pretty simple. Take on more risk.

How do you do that though? Buying lottery tickets won’t help you beat the market. Risk can be measured a few ways but a commonly used measure is Beta. Beta is how an asset changes relative to a market index. If historically when the market goes up 10%, an asset goes up by 20%, it would have a Beta of 2.

High-Beta assets tend to swing harder than the market. In theory, if you want to beat the market, you’d build a portfolio with a Beta greater than 1 when markets are rising, and less than 1 when they’re falling. A perfectly diversified portfolio of every stock would have a Beta of 1. Tilt the weights or exclude certain stocks, and you’ll push that Beta above or below 1. On paper, if your Beta is consistently greater than 1 in bull markets, you should always outperform. Of course, you don’t.

That’s because Beta is measured based on historical price movements. This helps you build a portfolio that will do great on backtests but since we are concerned about the future, this isn’t as helpful. You need to invest based on what you expect will happen.

You need to build a portfolio of position’s that will in aggregate outperform the broader market. This isn’t as difficult as it sounds. Anybody who has been invested in technology stocks since the Great Financial Crisis will have beaten the overall broad market return. Compare the Nasdaq 100 versus the S&P 500 since 2010 and tech has outperformed the broader market index by at least 4-5% annually. If you were slightly more exposed to tech than the broader market, you would have outperformed. If you were long oil stocks from 2000-2007, you would have also crushed the market benchmark.

Eventually winning strategies will get overbought but you can outperform the market for extended stretches without having to rely on insider trading. Just the willingness to accept higher risk and more concentrated bets. Which brings us to our next myth.

Myth# 2 — Diversification is King

“Diversification is the only free lunch in investing.” — Harry Markowitz, founder of Modern Portfolio Theory (MPT).

After reading about how efficient markets are, if you haven’t already dropped out, you will next be told as an investor you need to maximize return for every unit of risk. In order to do this, you need to find the optimal point on the risk/return curve, where the risk of any individual stock is diversified out, so all that remains is a positions exposure to market risk (Beta).

The idea is simple enough: don’t put all your eggs in one basket and get wrecked in an Enron or Lehman scenario.

Markowitz and his followers argued against concentrated portfolios, recommending at least 20–30 stocks to eliminate company-specific risk. ETFs didn’t exist when he wrote this, but mutual funds and firms like BlackRock, Vanguard, and Fidelity built vehicles that apply these principles. They hold hundreds of stocks and rebalance to keep concentration down. Does this actually lead to better returns?

Given a choice, would you prefer 50 uncorrelated stocks or 5–10 you’re convinced will crush the market? MPT leans toward the former, but history shows the latter often wins. FAANG (Facebook, Amazon, Apple, Netflix & Google) dominated the 2010s, and the Magnificent Seven (Tesla, Nvidia, Alphabet, Meta, Amazon, Microsoft, Apple) has massively outperformed in recent years.

Of course, hindsight is easy. If you’d gone all in on FAANG, you’d have missed Nvidia, Microsoft, or Tesla. Not every tech darling keeps soaring. Check out the stock chart for Cisco or Yahoo!.

Plenty of investors have also blown up chasing the “next Nvidia.” Just owning more names doesn’t guarantee better returns. It often just ensures mediocrity. No one can follow 30 companies closely. Broaden too much and you dilute conviction. Buffett once said to invest as if you had a 20-slot punch card for life. With so few bets, you’d research harder and size positions meaningfully. If you knew a coin landed heads 80% of the time, why waste money betting tails just to be “diversified”?

If you’ve found a genuine edge, you shouldn’t just want its market exposure (Beta), you should want the company-specific risk too. Diversifying for its own sake pulls you toward market-like returns. If your goal is outperformance, pick your best ideas with conviction. If not, just buy the index.

Ironically as I write this in 2025, The MAG 7 represents more than 30% of the entire S&P 500 market cap. Therefore this really begs the question. Is diversification really the free lunch we think it is, or just a way to prevent you from ever crushing the index? If the index funds themselves aren’t even that diversified anymore are they even worth holding? Whatever could you do…

Myth# 3 — Stay Fully Invested or Miss Out on Returns

Many experts will tell you it’s impossible to time the market. Nobody can confidently predict where the S&P 500 will be 12 months from now, and if you’re a long-term investor, it supposedly shouldn’t matter. Stay invested, let compounding work, and don’t pull out.

The logic behind this can make sense but keep in mind, finance professionals get paid based on their Assets Under Management (AUM), therefore if their clients don’t commit or deploy capital, they won’t get paid. So they don’t want you to pull out.

It’s true you can’t know the exact market level a year from now, but you can judge conditions and decide whether they look favorable. The bigger problem for most investors isn’t analysis but their psychology. Investors are not the rational decision makers economists believe them to be. People swing between euphoria and panic at the drop of a hat. When markets rise, they believe they’ll never fall. When markets fall, they panic-sell and miss the rebound.

Realistically the best you can hope for is to save you from yourself. Instead of sitting in front of your screen watching the ticker like a crazy person, you are better off making pre-determined decisions when you are in a calm rational state. We discussed this in our recent series How To (Actually) Think Clearly & How To Build Mental Strength.

When you aren’t liking the look of things, there is no shame in taking a step back, take some gains, cut some losers and re-base. Instead of having your entire portfolio invested during uncertain times, keep a portion invested, the rest in cash (or money market funds) and re-deploy into your preferred positions over a pre-determined set of months (6, 12, 18 whatever). This method is called Dollar Cost Averaging (DCA). The premise is pretty simple; if the market climbs, your earlier positions will go up and your newer deployments will be at a higher price. You would have missed out on some gains but the market is up so you can’t be too upset.

If the market drops, your new positions will be lower. By the time your deployment period is over, with luck your positions will be rallying or at least down less if you fully deployed before the selloff. Critics will counter over the long term the difference between DCA and full deployment nets out, but this claim can be easily data mined, since entry position matters.

You might not know this, but generally you should try to buy low and sell high (this is why you Subscribe to Serviceable Insights). In a perfect world you will know exactly when the low and high-point will be but unless you have a crystal ball you probably don’t have that luxury. DCA is at least a way to calm your nerves and reduce timing risk.

(This is a real chart Apollo put out this week )

Another tool you should use are stop loss orders. You can think of a stop as a trip wire; once a certain price point is reached, your market or limit order to buy or sell gets activated. Stop loss orders should be used in conjunction with a few other decisions such as:

1. Starting entry price

2. Exit price if you’re right

3. Exit price if you’re wrong

4. How long you’re willing to wait for either scenario

Start your stop loss near entry, then raise it as gains build. On volatile names, you might set it slightly below entry to avoid getting shaken out too quickly. Yes, stop losses can sometimes lock in pain before a rebound, but they also prevent catastrophic drawdowns.

If you are a believer in the asset you hold, an occasional selloff shouldn’t shake your resolve, but at the same time accept despite your confidence you might be wrong. You need a mechanism to control when things don’t go your way. Especially if you are holding a concentrated portfolio ripe with company specific risk. In Avoid Ruin with The Precautionary Principle: An Introduction To Nassim Taleb, we introduced some of Nassim Talebs risk principles. As an investor you want to ensure you don’t expose yourself to the risk of blowing up. This is why you should avoid trading on margin, writing derivatives, going short or leaving positions open without any stop losses to avoid losing all or your money.

You don’t need to master exotic strategies. You just need to structure positions so you’ll never lose more than you can stand. Sometimes that means not being fully invested, and that’s okay.

Conclusion

This article discussed why the biggest myths in investing are exactly that, myths. You can’t beat the market, you must always diversify and you should never hold cash are comforting stories that really only benefit investment advisors that gain from their clients who believe this. If your goal is to beat the market, you can’t invest like the market.

You need to think differently: accept risk when you have an edge, focus your bets instead of spraying them everywhere, and protect yourself from ruin with rules you set in advance. Most people won’t do this. They’ll keep chasing hot tips, diversifying into mediocrity, and holding through crashes with no plan.

That’s why most investors will never beat the market. There’s no shame just investing in index funds but if you decide to try to beat the market, you should learn to do it right.

“You've got to know when to hold 'em, know when to fold 'em,
Know when to walk away, know when to run.
You never count your money when you're sittin' at the table.
There'll be time enough for countin' when the dealin's done.”

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If you want to check out real investment experts on Substack, I suggest

Among others.

This was a decent-sized company with entire sales and marketing teams hired to do exactly that. Yet despite all their efforts and large sums of money, no one was buying.

Being naturally curious, I asked why. My friend listed several possibilities, noting it might be a mix of factors. They tried different tactics: offering discounts, launching sales performance incentive plans (SPIFs), applying more pressure across departments. Nothing worked. The more these initiatives failed, the greater the pressure mounted. He was starting to worry the company might not make it. Until one day, they finally identified the real problem, and suddenly customers went from ignoring them to banging down the door.

Fortunately, my friend’s company turned things around. Many do not. There is endless content about how to initially find “product market fit” (PMF), the point where there are clear signals of demand and willingness to pay, but far less about what happens when momentum stalls.

This can happen to anyone. A multi-billion dollar company disrupted by a new competitor or technology. A Substack writer wondering why paid subscriber growth has flatlined.

Past success does not guarantee future success. Just because something worked before does not mean it will continue. Sales rarely vanish overnight. There are usually signals, breadcrumbs, warning you it is happening. Ideally, you make adjustments before things stall, but if you are already staring at flat or declining customer growth, there are steps you can take.

Keep reading if you want to learn what to do when nobody wants to buy from you!

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Why Isn’t Anyone Buying?

Every day more than $300 billion changes hands. If you can’t capture any portion of this spending, the problem is you.

Your inability to land new customers likely stems from a failure in at least one of the following areas:

1. Offering (the Product/Service you provide)

2. Marketing (awareness & perception)

3. Sales (How you acquire customers)

To gain initial traction, you need to be at least competent in all three, especially if you operate in a competitive market. As a new entrant, you start at a disadvantage in sales and marketing because nobody knows you.

Even without being best-in-class, you can usually win some customers if the market is big enough. However, as you try to scale from a handful to many, competition intensifies and prospects get harder to close. If you fail to maintain an edge in one or more areas, you will gradually bleed out until your sales grind to a halt.

Normally this doesn’t happen overnight. There are signs or breadcrumbs indicating there’s an issue in one of your functions.

Here’s how to gauge whether you’re doing well, just okay, or badly across each department:

Product: Offer A Product People Need

Are you offering something somebody needs?

You probably read this question, thought yes of course and skipped to this sentence. But pause. There’s a difference between a want and a need. The difference is simple: you can live without a want.

People want plenty of things, but wants are impulse-driven and fleeting. Sometimes they give in, but when money is tight or they think rationally, those purchases can wait.

Needs are different. When people actually need something, they will not wait. They will defer other payments and change their behavior until the need is met. Everyone needs food and shelter, but beyond that, needs vary. For some people being a member of Soho House, owning a Rolex or a Hermes handbag is non-negotiable because it’s a key part of their personality. They will downsize to a smaller house, skip meals or even go into debt if they need to.

Seriously. When I worked at a luxury gym, I often saw people pull up in six-figure cars only to have their credit cards declined for a $200 monthly membership. They’d rather bankrupt themselves than admit they couldn’t afford the lifestyle.

Credit card lending props this up, but even shopaholics eventually hit a limit. At some point, they must prioritize. That could mean choosing between Pilates, spin, cardio boxing, or the trampoline fitness class they only tried once.

This is why your product must feel indispensable. If customers believe they can live without it, they probably will. Everyone assumes their product is essential, but most are actually nice-to-haves.

There are ways to evaluate this. Investors will cite metrics such as Daily or Weekly Active Users (DAUs & WAUs), activation rates, page views etc. but there’s a simple way to know if people need your product or not. Magnetism, stickiness, and evangelism.

Regardless of the state of the economy or their own financial situation, if people are scouring the earth looking for what you offer and active customers spend more money with you over time, this means you’ve become ingrained into their default behaviors. We previously discussed why inertia is a powerful thing. The longer a customer uses a product, the less likely they are to change. Software giants such as or have managed to keep clients for decades, and most will remain, since they’ve built most of their IT infrastructure on these companies.

These are great companies, but there are many viable alternatives. Just because customers aren’t actively looking to leave, this doesn’t mean the product/service is good. They might just be waiting for somebody else to come along, that actually understands and gives them what they want. On top of their purchasing behavior, if they are actively recommending your product and singing your praises, without paid sponsorships or affiliate codes, they probably really like your product. A friend of mine discovered the bidet toilet while in Japan and now that’s all they talk about. They installed one in their home. They proudly show it off anytime people are over. Perform demonstrations. Comment dismissively anytime they see toilet paper. I can confidently say this person needs a bidet.

They key thing for you to determine is how do you build a product your target audience can’t live without? How do you make your customers love you as much as my friend loves their bidet?

Marketing: Do The Right Prospects Know You?

Contrary to what prime Kevin Costner taught us in Field of Dreams just because you build it, they will not come. Peter Thiel discussed this in Zero to One but the belief amongst engineers in Silicon Valley used to be that sales & marketing was mostly fluff and all that mattered was the quality of the product.

While engineers might still believe marketing is inferior, startups have accepted that they won’t reach billions in revenue without a functional go to market strategy. When most people think of marketing, their mind goes to Don Draper and Mad Men pitching ideas for commercials while drunk off scotch in the middle of the afternoon. Marketing is much more than that though.

I could talk to you about the 4 Ps of Marketing (Product, Place, Price & Promotion) but I will allow you to discover the joys of Marketing 101 for the first time yourself. You can judge the efficiency of your marketing efforts in a much more simply way.

Do the best potential customers for your product:

1. know who you are

2. know what you offer

3. Have a positive impression

If the answer is yes to all, your marketing efforts at a minimum are serviceable. Speaking of serviceable, please Subscribe to Serviceable Insights so I don’t need to fire my marketing and product departments.

If your ideal customers are not even aware of you, then your marketing efforts are insufficient. If they know who you are but have no idea what you do or think you suck, then your marketing effort needs improvement.

Perhaps you are targeting the wrong customers to begin with. If an exotic animal dealer tried to sell to people in an apartment with a zero pet policy, they would have a difficult time. Spending more money on Google Ads and TV commercials might increase awareness but it won’t translate to more sales (more on that later).

Before going wild on fancy jingles and expensive logos, identifying the right customers is essential. This isn’t a marketing initiative alone. It’s normally a joint function involving product, sales, customer success and other departments. Regardless of who owns this decision, marketing needs to know what the Ideal Customer Profile (ICP) is to base their efforts around.

If you think your ideal customer is anybody/everybody, then you don’t know the problem you are trying to solve. The need to satisfy. As such your marketing efforts are reduced to tossing darts against the wall. In the dark. Blindfolded.

Figure out which person has the greatest burning need for your product, make sure they know who you are, what you offer and why you’re the best solution. It might be too much to ask for marketing to convince prospects your best solution but at least they can create a sense of urgency and FOMO, compelling them to act.

Cuing it up for…

Sales: Hunt or be Hunted

When I used to frequent night clubs I noticed two dating strategies: Spray & Pray or Stand & Wait.

Approaching somebody in a nightclub is similar to a salesperson contacting a warm lead; by visiting such an establishment they have performed an opt-in activity, indicating they could be potentially interested in what you have to offer. In some cases though, they might only be looking for men that are at least 6 foot 4 inches tall, making at least 7 figures per year, with midnight navy blue eyes and a vacation home in Mallorca (we discussed this phenomena in Is pretty (male) privilege thing.)

Men with weaker offerings could outperform by employing the Spray & Pray approach. They might have faced a lot of rejection but all it took was one yes. I saw one of these gentlemen get rejected by 6 women in the span of 10 minutes, but by the end of the night he had the more phone numbers than anyone. Compare that with the other dudes standing around, spending $50 on gin and tonics, to not approach a single female and declare the night to be a movie in the Uber ride home.

This might seem like a silly example but this highlights the difference between organizations with sales versus those with non-existent or weak sales functions. You can have the best product in the world, but you won’t win many customers or land dates if you don’t have an effective way to approach them.

It’s a silly example, but the point stands. You can have the best product in the world, but without an active, effective sales function, you will not win customers.

I’m not advocating pure Spray & Pray, but between the two, most companies would be better off leaning that way. Sales teams should pursue every qualified lead. If marketing has done its job, they won’t waste time on the wrong prospects.

Too many salespeople, however, act like the guys standing around in clubs. They wait for marketing or BDRs to hand them perfectly warmed-up leads. They also probably expect hunting to be as easy as deer tying themselves to the roof of their car.

I go more in detail in How To Not Suck At Sales but it is sales’ job to understand a prospect’s needs, connect the current state to their desired future state, and show why your solution is the best way to get there. Ideally the product delivers, and marketing has primed the lead. Even then, sales must connect the dots, overcome competitors (including the “do nothing” option), and reinforce the customer’s decision.

It’s not an easy job and even when they are hunting it doesn’t always yield. You can try forcing them to wear a shock collar and give them a zap anytime their activity levels drop but this alone won’t fix things. They need support from across the entire organization, or they will be heading into a knife fight with a banana.

This is why when growth stalls when your product, marketing, or sales lose their edge. Fix one and you may get back on track, fix all three and customers will come knocking. The real winners are the ones who keep earning product-market fit every day, so the next time you see weakness, ask yourself:

1. “Are you selling something people want, or something they can’t live without?” How can you be sure?

2. Are you targeting the right customers? Are they aware of you and have a positive perception of what you do?

3. “Are your sales people hunting or waiting to be fed?

If you can’t answer these questions, you shouldn’t wonder why nobody is buying.

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These innovations helped spur more financial activity by reducing barriers and enabling greater participation. Let’s face it, heading to work with just your phone or wallet is more convenient than trying to squeeze an apple cart on the city bus. When all it takes is a couple health influencers to turn people off an entire food group, you wouldn’t want to put all your eggs in one basket.

Since the United States abandoned the gold standard more than 50 years ago, the U.S. dollar has been backed not by gold but by the global community’s confidence in the U.S. government, its economy, and its role in world trade and finance.

Now I know what you are thinking. Not everybody has confidence in the very stable genius(es) running the US government or the astronomical debt burden that’s increasingly being financed by monetization (money printing). These are valid concerns. The intellectuals among you might point out this is happening in most other countries too.

This has prompted some to seek alternatives from government issued fiat currencies. They found this in cryptocurrencies. Bitcoin, Ethereum and other coins reached market caps in the trillions, without a clear use case or value proposition, other than speculation. This view has been espoused by many high profile figures including Warren Buffett, Jamie Dimon and Eugene Fama.

Yet in recent years, on‑chain economic activity has picked up. Now over $27 trillion worth of transactions are processed each year which is more than Visa or Mastercard. One of the main catalysts for this: Stablecoins.

If you don’t know what they are, you probably should since they will soon become a meaningful part of the financial system. This is why today’s article will explain what they are, what they enable and the ramifications on the global financial system.

Continue reading to learn why crypto is evolving beyond pure speculation

If you barely understand how fiat currencies work, you might want to check out my previous articles Nobody Understands Interest Rates and Why Does Literally Everyone Hate Banks.

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What Are Stablecoins?

Digital coins with values pegged to real-world assets.

If you’ve made it this far, you now know more about stablecoins than 90% of the population.

Pegging is a common practice. Fiat currencies historically were pegged to gold, or other currencies. This was the standard practice until most countries opted to allow their currencies to float and have their value be dictated by market forces. Bitcoin and Ethereum float, which is why their prices are so volatile. This volatility discourages people to transact in these currencies, since neither the sender nor the receiver can know what these coins will be worth within a few days.

If you saw the price of bananas fluctuate 30% during your trip to the grocery store, you would probably choose something else. The crypto community acknowledged this was a barrier to adoption, so they created stablecoins to give users the benefits of decentralized finance (DeFi) without the volatility of cryptocurrencies.

Basically think of stablecoins as digital IOUs. $100 USD worth of a stablecoin to be converted for $100 USD.

There are a few different types:

1. Fiat-collateralized: The simplest and most common. Companies like Circle (USDC) or Tether (USDT) hold traditional assets such as cash, Treasury bills, bank deposits to back the digital coins they issue. For every token in circulation, there should be a corresponding dollar (or near-dollar asset) in reserve. For an oversimplification, think of them as the fiat custodian bank enabling any stablecoin denominated on-chain activity.

2. Crypto-collateralized: Instead of dollars in a bank account, they use other cryptocurrencies locked up in smart contracts. The poster child is DAI, which uses Ethereum and other tokens as collateral. Since crypto is volatile, they often need to be over-collateralized. To mint $100 DAI, you might need to deposit $150 worth of ETH. You can think of it like borrowing against the value of your home or stock portfolio. Just with much more volatility.

3. Algorithmic: These coins try to maintain their peg using code, supply adjustments, and incentives instead of collateral. Some believe this could work in theory. In practice, this turned into one of crypto’s biggest disasters: Terra’s UST, lost $40 billion in value almost overnight when the math stopped working. The founder Do Kwon faces up to 25 years in jail after pleading guilty. So nobody is talking about Algorithmic stablecoins right now.

So now you know what stablecoins are.

What Do Stablecoins Enable?

So far, we’ve established that stablecoins are digital IOUs pegged to real-world assets. That’s neat, now what do they actually do? Why should anyone outside the crypto world care? In the great words of Daft Punk, they make money move faster, cheaper, and better across borders than traditional finance.

Since stablecoins allow near-instant transfers of value across the globe, 24/7. No bank holidays, wire cutoffs, or 3–5 business day delays. If you’ve ever been hit with a $45 wire fee or waited a week for an international transfer, you get it. Stablecoins reduce the cost and time to move money.

In countries with unstable currencies such as Argentina or Nigeria, stablecoins make a lot of sense. People want to protect their purchasing power from local inflation but can’t access USD or Euros. With stablecoins they can convert to USDC, or the currency of their choice. All they need is a smartphone and an internet connection.

Realistically, in the near term stablecoins won’t benefit the average Canadian or American consumer much. Americans can Venmo or Cash App each other USD, Canadians have Interac e-transfer. Both happen instantly at no cost. Now if they tried to send money to South America or Africa… not as easy. There is nearly a trillion dollars in remittances sent each year; more than $60B from the US to Mexico alone. A handful of legacy players such as Western Union or MoneyGram charge 5–10% fees to move that money. With stablecoins, they lose their oligopoly.

The $150 trillion worth of global cross-border payment flows, earns the financial services industry >$3 trillion in annual revenue. This gives stablecoins a pretty sizeable market to disrupt.

First & Second Order Effects

1. Bad For Banks & TradFi Players

   Today, most money flows through a web of commercial, correspondent and central banks. Every international transfer touches multiple intermediaries who clip a fee along the way. Stablecoins cut these out so a foreign exporter can accept USDC directly from a U.S. buyer, without routing it through two commercial banks and a SWIFT message.

   A couple of years ago, my company based in Canada, sent a payment to a contractor in France. The money left our account but her bank never received it. After considerable back and forth, we learnt the intermediary bank changed. This was a considerable waste of time and money (thank you Anthony).

   Stablecoins have the potential to make experiences like this a thing of the past and further

2. Increased Dollar dominance
   Contrary to popular belief, in the short term stablecoins should help the US dollar more than threaten it. Since stablecoins are overwhelmingly dollar-pegged, it gives access to people in countries such as Argentina or Nigeria, that can’t easily access USD. USDC effectively extends dollarization into places the Federal Reserve can’t reach, further strengthening the dollar’s role as the default global currency.

   

   On the other hand, it would reduce the monetary sovereignty of weaker states, which they won’t like. This will lead to…

3. The TradFi-cation of Crypto
   Despite the friction and inefficiency associated with TradFi, they are heavily regulated and subject to strict compliance measures. While Crypto has matured considerably over the past decade, it’s still comparatively the wild west. The current administration has provided more regulatory clarity with the GENIUS act but crypto is still far less stable.

   Crypto is supposed to be decentralized but right now stablecoins are reliant on two players: Tether (65-70% Stablecoin market share) and Circle (20-25%). If one of them failed to honor their redemptions, the stablecoin and potentially crypto markets would be dead. If stablecoins are to become a major part of the global financial system, they will attract incredible levels of scrutiny due to their concentrated nature.

   

   As much as businesses and consumers might be ready to abandon the crappy TradFi experience, regulators might not be as quick to accept this. The net effect is, stablecoins will need to accept higher levels of compliance requirements if they want widespread adoption. Their challenge will be how to navigate these requirements without having the same undesirable characteristics of banks.

Conclusion

Crypto has finally proven the tangible use case skeptics have long denied existed. With trillions of dollars moving on their networks, central bankers and regulators cannot ignore them anymore.

Circle ( ) IPO’d earlier this year and quickly reached a $30B+ market cap. Digital asset platform Bullish, is going public today and keeping their proceeds in stablecoins and Stripe acquired Bridge for $1B. Even Western Union is weighing issuing their own stablecoin. There is plenty of momentum.

While they may not be applicable to your daily life today, don’t be surprised if in the near future you begin to see faster money movement, lower bank fees and easier access to foreign markets.

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