Oddbean

There will always be people who take more risk to generate a potential gain that is higher than #btc. The question is whether they justify that risk with their savings/investments. On a btc standard, people taking those risks will be the hyper productive who vastly produce more value than they consume. This is in contrast to today's degen gamblers who privatize their profits and socialize their losses through absurd low interest loans and bailouts. How is a yield-bearing stablecoin any different than a run-of-the-mill financial instrument in function (like an etf)? I admit calling it a "stablecoin" is a misnomer though that is the only uniquely suspicious thing that the crypto side brings, and is likely necessary for compliance reasons.

I disagree. I don’t think there are many investments at scale that deliver >25% annual returns based on pure productivity gains. Rather, most gains in the last 50+ years have been through financial engineering and monetary policy manipulation and poorly underwritten debt. The actual productivity of most investments will be reasonably close to the rate of global GDP growth with some variation based on geographic characteristics and local resource density. There might be pockets of greater productivity BUT it won’t be centralized at scale like we have via these massive companies in public markets today. And every venture capital investment intends on flipping out to public markets in the end…same with private equity. The Peter Thiel (Zero to One) thesis for venture capital is completely destroyed in a bitcoin standard.

I agree that Venture Capital as we know it today will not survive a BTC Standard. That being said, there will always be people who make riskier than average investments for a higher return. You are right in saying there are not many investments that deliver >25% in annual returns, which is why many start-ups crash and burn. That doesn't contradict that new companies that provide value to the market will tend to grow at a faster rate, in the early years, than well established companies. Percent growth is larger when starting from nothing. The concept of Venture Capitalism is not the same as the practice of pump and dump schemes. If investors want to be risky and be a part owner in something speculative and doesn't have the cash flow to back it, let them. This is assuming accurate and truthful financial information is provided (not fraudulent). Are you positing that with a BTC Standard there will no longer be investors with a preference for high risk? There will no longer be Investors and Entrepreneurs who want to create something the market didn't know they wanted?

No, I don’t believe investors will throw bitcoin at silly ideas, hoping that the ideas will stick and pay “outsized” returns. A few reasons come to mind: (1) the fund model is obsoleted by bitcoin — people will just choose to save by buying or earning bitcoin, no need to invest in broad public or private securities (2) because of this there will not be exits to public market investors like there are under a fiat standard, (3) the current model of “VC” is asset light (think POS) which won’t be valued in a bitcoin standard where people won’t want to part with their precious bitcoin except for TRUE innovation that materially improves their life, (4) whereas most VC companies are geared towards centralizing services which is counter to the way a POW economy will function where local business and communities will be the ones that provide value to their residents, not big government, big tech, big corporate. Not all inclusive but you get the gist. Further, you can look up data on the performance of venture capital investors for the recent past and the industry is widely missing the mark on delivering the returns their LPs are targeting when they allocate 5-10% of their portfolios to this asset class. Bitcoin is a savings technology. It will enable people to save their work into the future without investment funds, firms, and services that broadly exist today. It is a monumental disruption to many stakeholders who thought “they” could grow and protect their monopoly for decades to come. Bitcoin is spoiling their party, hard. The shift from our existing paradigm will be significant.

I think we're largely on the same page, I'm a Hodler. I agree with the last two paragraphs. Its just the caveat of a certain percentage of people always wanting more "bang for their buck" without the cost of time. Addressing your points: (1) Quality of life improves and everything gets cheaper (deflation) on a BTC standard, though there will still be Capital Markets (Bonds and Equities bought/sold, except priced in BTC).These Capital Markets are an emergent feature of Capitalistic Economies. Economic calculations are difficult, likely more difficult on a BTC Standard due to a more robust economic infrastructure and the Hard Money that is BTC. People will want to invest in those markets, admittingly a smaller percentage of the population due to a deflationary Bitcoin Standard. Regardless there will be funds to address the demand for delegation of effective economic calculation in the Capital Markets. You are right, there isn't a need to invest in broad securities/bonds. We can tell from what is known of situations like BlockFi, people will loan out their Bitcoin for a Bitcoin return (regardless of the actual yield). The same can be said for buying securities priced in Bitcoin for a Bitcoin dividend. (2) As long as there are private companies wanting more funding through selling a portion of their equity, and Capital Markets to facilitate, there will always be exits. (3) There was already a concession on the current normalized "VC" practice of pump and dump being drastically lowered. Anyone who is not Economically literate will still have a non-zero probability of buying the scheme and get rug pulled. A company being "asset light" doesn't mean its analogous to POS Cryptos. The ownership is centralized though it doesn't mean that the company is POS or worthless, just means it shouldn't be used as a money analogue due to counterparty risk. Company ownership is POW, stock splits or issuance of stocks are not the same as centralized cryptos issuing newly minted tokens; Cryptos are companies attempting to be digital banks. Compared to actual R&D, austerity, and meeting a market demand. Digital Banks are is not the same as a general company attempting to make a product or service at a profit. Pre-IPO companies w/o revenue numbers and being propped up by low interest rate loans and hype marketing are POS. An "asset light" flower shop is not POS if its operating at a profit and not fraudulent. (4) Centralization and POW Economies are not mutually exclusive. There seems to be a mix up on the difference between Govt intervention in the markets creating monopolies and a company of 1k employees being more efficient than smaller companies at certain things due to economies of scale. Big this or Big that is only sustainable through Govt intervention, otherwise they'd go bust and assets get liquidated. Every company is centralized, and I have not seen a DAO that has worked. I agree that the practice of "VC" is not performing as intended, and the market for those services will exist as long as there is a demand. As long as there are people who have a more than comfortable amount of savings, there will be a demand. Regardless of a Fiat or Bitcoin standard. Bitcoin is a savings technology, and people won't have to preserve their purchasing power in Capital Markets. This does not negate the fact that there will still be a demand for Capital Markets.

That’s how you make asymmetric bets now. Maximize your exit liquidity by dumping on confused retail investors. VCs have forgotten that they are supposed to play long games and actually help build real businesses.