It’s been a month of strange twists and turns for some of the world’s richest people. Yet many of them have shown that no matter how rich they are or how many sycophants they surround themselves with, the truth reveals itself sooner or later.
I can’t think of a more ironic case than that of FTX and it’s former CEO and founder Sam Bankman Fried, or SBF as he has been come to be known. Despite my long held deep skepticism of crypto, NFT’s, DeFi and all the other ephemeral assets, pitched by questionable hypemen with serious conflicts of interest, SBF seemed to at least understand the notion that an altruistic billionaire can be rich and admired for his perceived deeds at the same time. SBF was a strong proponent of effective altruism, essentially making the maximum impact on the world from his charitable activities.
Yet in the end it was all a mirage. In this article the once fawned upon entrepreneur blatantly lays out how it was all an act, that he didn’t really care about charity and helping people at all. Read behind the lines of what he’s saying in the article, and you can see pretty clearly an entitled quasi cult leader that only paid lip service to improving the lot of others.
But is anyone surprised that a 30 year old with billions and the world’s most powerful people hanging on his every word would feel anything but entitled to do whatever he wanted? SBF likely learned to play to pleasing people’s scrutiny of his moral intentions by manipulating his own parents, both legal scholars who have helped draft legislation for powerful Democratic politicians.
When I wrote The Tether Hustle about a year ago, I thought it would be the stable coins that would provide the match to light the dumpster fire crypto was going to combust into, but apparently the scam was even bigger and surprisingly, more simple than even I anticipated.
The inherent problem with crypto hasn’t changed one bit since inception: there isn’t anything remarkable about any particular “coin” to distinguish its value from another. Other than programmers who debate the beauty of its underlying code, which is a tiny population of people, there is nothing economically unique about Bitcoin to distinguish it from Ether or Dodge-coin or Shiba-Inu or Litecoin or any other of the millions of imaginary tokens out there.
The same goes for NFT’s. Much of what was created and hyped as valuable art with secure ownership was essentially kitschy, unremarkable, hastily and cheaply made media art that was hyped by a few celebrities to make a buck on the backs of their fans and the product cult followers. I don’t believe anyone who tells me with a straight face that “Bored Ape Yacht Club” consisted of groundbreaking pieces of art that will be treasured for generations to come.
The stories emerging now seem very similar to how the late fashion designer Virgil Abloh is purported to have made his original fashion brand so successful: create something simple and unique on top of a cheap canvas and get a celebrity to be seen with it. Soon the buy orders will come pouring in.
None of this is to say that crypto or NFT’s or smart contracts don’t have a future, it’s just likely their future won’t be how we know them in their current form. At the end of the day, stable coins solve a problem of being able to move money and take advantage of arbitrage on an international scale while retaining a peg to a real world currency. The underlying technology of blockchain may one day enable central banks to revolutionize money and banking. Something I talked about in my post on CBDC’s about a year and a half ago.
With the recently announced bankruptcy on BlockFi, it seems this isn’t the last domino to fall, nor will SBF likely be the only billionaire to be humbled by the downturn we seem to be hurdling towards.
Billionaires Know What’s Best
The cases of Elon Musk and Mark Zuckerberg and their choices recently could be mistaken for a fictional Harvard Business School case study on the pitfalls leadership for an MBA class.
First there is Mr. Zuckerberg. What started out as a lucky strike by an eccentric yet gifted college student in the creation of Facebook, morphed into an advertising colossus which made some prescient acquisitions along the way. Having seen the experience of its own upending of MySpace, Facebook acquired the up and coming Instagram in order to maintain its social media dominance.
The threat of Vine was swiftly handled by creating Instagram Reels but upstart social media firms like Snap were able to resist the temptation to let Facebook take them over and go public on their own accord.
Yet now, Facebook seems battered and drifting. The decision by Apple to boost privacy choice and allow users to limit tracking across apps has dealt a major blow to Facebook’s data collection efforts. The foray into hardware in order to access the Metaverse now seems like a questionable dive into an unknown and untested market. It puts the company in the hardware business and pivots Facebook from the advertising business that has rewarded shareholders for so long now. This is speculated as the reason behind why COO Sheryl Sandberg, who helped orchestrate the push into advertising, left Meta earlier this year.
Much of this seems to be solely based on the vision of Mr. Zuckerberg, who has stubbornly maintained his grip over the company through special voting rights. This is highly irregular for a company of the size and scale of Meta. After rapid growth of the size and reach of Apple, founder Steve Jobs recognized that that a professional manager was the way to best leave things, rather than try and hit another product home run.
But just because Zuckerberg and his advisors were right in on the big decisions in the past, does it mean they are going to be right on the Metaverse? There is no guarantee and personally, I have my doubts. Does anyone else see a little bit of the same hubris in Zuckerberg’s decision as that of SBF thinking he knows what’s best to do with other people’s money.
Of course we can’t mention billionaires without leaving out the recent travails of Mr. Elon Musk, the man who thinks he can effectively run 3 multi-billion dollar companies at the same time. Between Tesla, Spacex and Twitter, there is just too much going on for 1 person to steer all the ships in the right direction.
Musk’s decision to buy Twitter now looks like a rash decision based on emotion. His firing of half the workforce before having a chance to understand what exactly they all do, confirmed it and seems spiteful at that. There’s no productive workplace that has half of its staff laid off and the rest happily go back to work toiling at their desks.
Although I generally agree with Musk’s stance that the internet needs to be a place safer for free speech, he seems to suffer from the same delusion that too many billionaires these days are suffering from: because they made a lot of money, they know best.
Maybe Billionaires Don’t Know Best
There’s actually a pretty good case to be made as to why a billionaire many not be the best person to run a company. The ascendant billionaire maybe but the established billionaire actually may be a big risk to a large and influential company.
To start to understand why, it helps to be a little empathetic. Society lauds billionaires and the ultra wealthy as new age gurus and media hangs on their every word. They exhibit massive influence through their well known products, political donations and perhaps their social commentary. People fawn over them as quasi god like creatures, which in some sense makes sense, because the money they control can wield immense influence and power.
But if we get past their money and think about the day to day life of a billionaire CEO, it actually may be an incredibly lonely experience. When everyone around you is a sycophant, it becomes difficult to trust people and know people’s intentions. Just like a child can be spoiled by getting everything they want, an established billionaire isn’t likely told “no” very often by anyone around them. This may actually be to their detriment: every idea is so good, every notion is so profound and limits don’t exist.
With a cushion of money to protect them from bad decisions, they may lend themselves to not having to see the full repercussions of bad decisions. It’s no wonder that many billionaires find themselves getting divorced after they have been wealthy for some time as relationships require communication and compromise, which they may be no longer accustomed to having to do.
Take for example, the litigation that ensued when Musk balked at the offer he had signed up for to take Twitter private. Court documents later revealed 150 pages of text messages from Musk’s phone and many readers were taken aback by how bootlicking and obtuse so many of his friends and fellow billionaires were. This adds to the argument that who a leader surrounds themselves with is just as important if not more important than many of the decisions they make.
If a CEO continually surrounds themselves with yes people, they are much more prone to make bad decisions leading to big mistakes. There are those who think that Musk’s venture into Twitter will be revolutionary or that Zuckerberg’s pivot to the Metaverse will prove visionary. As sBF and FTX showed though, today’s hero can easily become tomorrow’s zero. Billionaires have the same risk of failure and reading the tea leaves wrong as everyone else, they just do it in more comfort.
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