Building Wealth 101

(Friday Filosophy 12/16/22)

Happy Freakin’ Friday!

Welcome back to another edition of Friday Filosophy, the weekly newsletter that Bob Burg once said is, “the most insightful, mind-bending, stroke of genius updates ever put out since the earth’s crust cooled.”  Steve Keating also said, “Randy’s Friday Filosophy is undoubted the best writing since Marcus Aurelias.” (Okay they didn’t actually say those things, but they could have been thinking them.)  Each week I challenge you with a question, idea, or topic you may want to think about. Today the subject is one we explore frequently: building wealth.

One of the things I often tell the softball players I coach is what a simple game it is.  At its essence, it’s a game of see ball, hit ball. But everything is predominantly mental, and we sometimes make up all kinds of stories that distract us.  Earning money and building wealth is a lot like that for many people.  They make up stories that sabotage their chances: You need money to make money, you need the right education, you have to be born on the right side of the tracks, etc.

The reality is much different.  Think how many millionaires and even billionaires never went to college. The huge number of gatekeepers and challenges that are now eliminated by the Internet and technology in general. In terms of building wealth, there has never been a better time to be alive in human history.

In softball, the mantra is: See ball, hit ball.

In building wealth, the mantra is: Solve problems, add value.

You can try to guess what the next trendy NFT or shit coin is going to be, or you can find an actual problem to solve.  If you can make someone’s problem go away, they’ll gladly trade you money for that.  And the amount of money is relative to the size of their problem that you make go away.  People will pay a manicurist to make a hangnail go away, pay a dentist more to cure an excruciating toothache, and pay a surgeon yet more to remove a tumor.

You can attempt to guess this week’s lottery numbers or find a way to add value to something. Any time you add value to an equation, someone or something will reward you for doing so.  That might mean simplifying a process, improving results, or lowering costs.  If you can show Amazon how to save 20 cents on every package they ship, the total number is significant, so they would pay you a lot to learn what you know.

The sooner you stop ascribing prosperity to luck, accident, or chance – and proactively find ways to solve problems or add value – the sooner you will manifest more prosperity in your life.

CRYPTO UPDATE: In November I told you I was moving out of all crypto investments and promised you an update with the reasoning behind the move.  Because of all the chaotic disruption happening in the space this week, I moved up the process. I did an extensive essay you can read here: RIP BITCOIN

Or if you prefer the TL;DR on the podcast: Why I Left Crypto

Apple: ow.ly/fQ2k50M3Fp7

Spotify: ow.ly/9HvF50M3Fp8

Anchor: ow.ly/3euH50M3Fp6

YouTube: http://ow.ly/sOsi50M3SZI

Please be nice to yourself today and enjoy the weekend.

Peace,

-RG

Previous Post: RIP Bitcoin

RIP Bitcoin

Dearly beloved…

We are gathered here today to mourn the passing of our cherished friend, Bitcoin.  A friend who came to this world full of promise and hope, seeking to protect us from inflation, fraud, and worthless printing press money.

Alas, Bitcoin is dead.

Bitcoin came into our world as a precocious but brilliant child, brightened our lives for a moment, and tragically left us too soon.  Now it’s time to put a wreath on the coffin and move on with our lives.

Not because cryptocurrency wasn’t a brilliant idea.  It was and still is… 

Not because cryptocurrency couldn’t have succeeded. It should have... 

No, it’s time to move on because crypto will miss its Overton window – its moment of opportunity when it could have broken through the forces of inertia, navigated through the hellscape of government regulation, and overcome sabotage from the legacy money system – to become the worldwide electronic cash that Satoshi Nakamoto envisioned – and we all desperately hoped it could become.

Now that we have the breathless clickbait lede out of the way, allow me to get serious and explain my hypothesis...  

I don’t believe Bitcoin is actually dead, but I believe it and other cryptocurrencies are facing a fate far worse than death: irrelevance.  Before sharing my reasoning for making this (what many will label as insane) prognostication – please note these three disclaimers:

On the other hand, I have earned more money in my life than 99 percent of the people on this planet.  Everything I share is my self-taught, real-world experience on the principles of prosperity and how you apply them in your day-to-day life.  As part of that work, I sometimes evaluate things like cryptocurrencies, NFTs, and the blockchain, in terms of how they operate from a prosperity standpoint.  This essay is presented under that premise, and that premise only.

Before you write off everything I say, you should know that I wasn’t one of the cynics who dismissed cryptocurrencies as an impossible to achieve pipe dream, or an unscrupulous sketchy scam. Quite the opposite.  I’ve been touting and investing in crypto since my Risky Is the New Safe book in 2012.

At that time, I was no longer confident cryptocurrencies would be viable in the foreseeable future and for the sake of transparency, announced that and promised to create a longer post explaining the rationale behind my decision.  This is that post.

So why have I jettisoned all my crypto investments? 

(Yes, if you’re wondering, this applies to all cryptocurrencies, including Bitcoin, which I consider to be the gold standard of cryptos.)

You should know, my reasoning is not the conventional anti-crypto arguments: Bitcoin or other cryptocurrencies haven’t achieved status as a hedge against inflation, aren’t being used as actual currencies, not become a true store of value, etc.  Even though those potential benefits haven’t transpired yet, they didn’t factor in my decision-making process.  You should never judge a new development by how janky, inconvenient, or bulky it is in version one.  Remember that lovely Motorola DynaTac 8000X mobile phone that Gordon Gekko carried around in Wall Street?  Compare that brick (which cost $3,995) to the elegant supercomputer you’re probably reading this post on right now.  Compare that authentic calling from inside a garbage can sound of the early Skype calls to the brilliantly functional Zoom rooms you host today.  With developing technologies, you have to project out how they will work at scale when the bugs are ironed out. Like most early crypto investors, I was willing to bet that those issues could be overcome.

Let’s go back to Satoshi’s actual vision for Bitcoin:

But is that really how most people view and interact with Bitcoin?  Obviously not, or we would never have gotten all these other pseudo cryptocurrencies, pump & dump schemes, and bored apes.  If we were actually developing Bitcoin as envisioned, Dogecoin, Three Arrows Capital, Alameda, FTX, and Sam Bankman-Fried would have never existed.  (Okay SBF would have existed, but you would have never heard of him.)

We got seduced by the dark side of the Force…

Cryptocurrencies have reproduced like rabbits, offering dozens of coins and tokens claiming to be currencies.  Exactly zero of them have become accepted currencies.  Real people are not using them to buy real things.  (Note: Horny Crypto Bro drunks paying 100k with Bitcoin for bottle service at Club E11EVEN in Miami does not meet this criterion.)  For all practical purposes, we’ve just opened a new marketplace bazaar for gambling and trading.  But instead of offering Persian rugs, these markets buy, sell, and trade digital currencies.  If you don’t like the bazaar analogy, think of the current crypto space as a currency-only version of the stock market, or even Las Vegas casinos.

Theres lots of speculation going on, fortunes are being made, and fortunes are being lost.  But no one is actually using cryptocurrencies as, you know, cryptocurrencies.  Furthermore, most bazaars, stock markets, and casinos have some degree of oversight, regulation, and a way to adjudicate disputes.  The crypto space has none of that. 

If your concept of crypto is like the above, seeing it not as a cryptocurrency but an instrument you can be a ninja day trader with, riding the cycles, looking for new levels to buy low, sell high – stop reading here.  You’ve found your adrenaline rush and far be it from me to tell you how to have fun. Mazel tov, plunge your lungs out.

 The two principal reasons I’ve bailed on crypto are because I believe:

The last few months are exposing how systemically corrupted the entire crypto support structure really is.  There are security holes in the system that you could sail an aircraft carrier through.  Cryptos have eliminated the conventional financial institutions that Satoshi spoke about, but for the most part they’ve been replaced with options that are far worse: exchanges, farming, and storage operations.  (This is akin to firing Bill Cosby as your babysitter but replacing him with Jeffrey Dahmer.)

Many of these operations are run by well-meaning but incompetent people, and others are controlled by outright criminals.  The amount of fraud taking place is astounding.  Yes, you can keep your crypto in cold storage, and hopefully you do.  But even if blockchains were 100 percent secure (which they’re not), in order for cryptocurrency to be viable on a mass market scale, you need a safe marketplace.  This means platforms where it can be bought, traded, sold, and accrue interest.  For now, that means these sketchy operations.

And right now, those entities represent a cesspool of bad actors and fraud, devoid of any regulation, and without any effective means to redress wrongdoing.  The recent developments taking place at Three Arrows Capital, Alameda, FTX, Voyager, Celsius, BlockFi, and Gemini have demonstrated undeniably that crypto trading is still in the wild, wild, west stage of development.  (Before the days even of town marshals.) In reality, even exchanges thought to be reputable by the smartest names in the space have wretched cybersecurity and no credible oversight.  They’re often funded with worthless shit coins based on fantasy blockchains, have dangerous levels of illiquidity, are frequently insolvent, and use client’s assets to borrow against or even outright steal them.  Of the ones left standing, the largest, most credible one is Binance, a decentralized company with no actual headquarters.  All cryptocurrencies are still embryonic enough to be vulnerable to pump and dump price manipulation from insider whales or even sketchy social media influencers.  Ex: FEG, Dogecoin, Luna and literally hundreds of others.

Of course, you can still transfer crypto direct to someone in a one-on-one exchange. This works for bartering between evangelical Bitcoin maximalists, but it’s not enough traction to create credible mass adoption.  Every time you see someone breathlessly tweeting their excitement for discovering a dog groomer who accepts Bitcoin, it shows how insignificant the adoption rate really is.

Even the legitimate cryptos like Bitcoin or ETH have to navigate through the existing network of sleaze, grift, and criminality.  It’s like owning a Lamborghini, but the only route from home to work and back every day is through a crime-ridden neighborhood controlled by narco-traffickers.  At some point, you ditch the Lambo and buy a Toyota.   Toss in the blatantly corrupt MLM crypto scams like OneCoin, OmegaPro, Xifra/Decentra, and Evorich – and you have millions more gullible people victimized.

This entire ecosystem is fraudulent AF and I believe it is likely to collapse at any moment, in a domino progression of bankruptcies, hacks, and criminality.

But this isn’t the biggest challenge.  It’s timing…

To understand this issue, we must begin with the question of why is it better to be a pirate than join the Navy?  In the case of new breakthrough developments in technology, the Navy represents the existing incumbents in the space.  They’re very rich, very powerful, and will do anything and everything they can to kill off any innovation that can threaten their monopolistic marketplaces.  The dream of every start up is to begin as the swashbuckling pirate, defeat the imperial power, and then become the new Navy.  In business school they call this disruption.

To create a successful disruption in a space, it comes down to two factors:

You have to start under the radar and capitalize on the laziness, inertia, and cockiness of the incumbents.  The way Uber did this to the taxi industry, Airbnb did to hotels, and Amazon did to bookstores (and now essentially retailers).  I would argue that there is no disruption challenge more David vs Goliath than the one cryptocurrency is attempting now.  The crypto “industry” is attempting an end run around the entire worldwide financial system.  And because that financial system controls virtually all governments, crypto has to take on those governments as well.

This takes us back to the Overton window…

When Travis and his band of pirates started Uber, they were virtually illegal in every market they launched.  But they moved fast building their customer base, hooking them on the drug of a car service that was monumentally better than the shady taxi monopolies. Municipalities such as San Francisco would then send in inspectors, impound cars, and even arrest drivers.  Uber would respond by sending alerts to all their delighted customers beseeching them to contact their mayor and city council demanding that Uber be left alone.  They had enough critical mass of evangelical thrilled customers to overpower the Navy.  Now in many places, Uber is the Navy, taxies are an afterthought, and disruption is complete. It was a similar scenario with Airbnb.  Most localities tried to regulate them as hotels requiring licensing, inspection, and other government protection or shakedowns, depending on your perspective.  The Rebel Alliance of zealous, enchanted customers fought hard to get the company legitimatized.

This is exactly the game plan that needs to happen for crypto to make the jump from pirate to Navy.  Until recently, the crypto community was working quietly behind the scenes, trying to work with lawmakers to enact a minimal amount of legislation to prevent wholesale fraud, but not enough to be so onerous to negate the benefits of being outside the traditional finance system.

But Sam Bankman-Fried and pirates like him got too greedy, too fast... 

(Editor note: Bankman-Fried was arrested just before this post went live.)  Now the entire crypto eco-system is in meltdown mode, creating two problems. The first is that millions of people have been scammed and more are becoming victimized daily, causing the shellshocked masses to flee the space.  Wavering trust turned to skepticism, and now that skepticism has transformed into cynicism.  We’re not quite at the cynical bottom yet, but I believe we will be soon. Very soon. The investors left are walking on eggshells, waiting for the next rug-pull, bankruptcy, fake ICO, pump and dump, or MLM crypto.  Most people with a room temperature IQ or higher are coming to the conclusion the crypto ecosystem is a dumpster fire of exploding supernova proportions.

The reason that timing and public perception are so important here is because all forms of money, physical or digital, are simply memes (mind viruses). 

We like to believe that we are protected with safeguards in place to protect our financial system.  But the whole banking and finance system is simply performance art of kabuki theater based upon herd thinking trust.  (Can we stop all the bullshit and just admit that no one is a bigger Ponzi scheme than supposedly democratic governments?) We all mutually agree on the concept of currencies because it’s a lot more convenient than trading oranges for massages, fish for computer repair, or radishes for the new Beyonce album. But there is no intrinsic value in any currency, whether it’s doubloons, wampum, US dollar, or crypto.

Currencies hold their value only when there is broad-based public acceptance – a shared hypnosis that all willingly agree to. 

The bolivar from Venezuela was perceived as valuable until it wasn’t.  Everyone in that country knows the government will devalue it day after day, so no one believes in it as a viable currency any longer.  This process has been happening for all currencies since the very first one. Most fiat currencies have no competition which provides forced acceptance.  The new cryptocurrencies don’t enjoy this monopoly, so they have a much higher bar to reach mass adoption.  And what has happened in the space until now hasn’t helped the situation…

The Mt. Gox hack in 2014 stole seven percent of all outstanding Bitcoin at the time.  The UST/Luna debacle evaporated about $40 billion more. Toss in another $40 billion gone with FTX and Alameda, $18 billion from the Three Arrows Capital meltdown, $5 billion Genesis bankruptcy, four and a half billion each from the Celcius and BlockFi blowups, $3 billion plus from Voyager, and the Ronin, Wormhole, Nomad, Beanstalk and Wintermute hacks come in at over a billion dollars more.  Think of all these (and plenty more) in terms of crypto’s total market cap. Has there ever been a theft or similar fiat currency fraud that has consequences even remotely as severe?

I’m positing that we missed the timing window on crypto because the meltdowns are becoming too public and too frequent before the masses got hooked on the future ultimate benefits that could be realized.

The second problem is that this crypto ecosystem meltdown has provided the legacy banking system with the perfect opportunity to swoop in and use the most powerful weapon in their arsenal to destroy it: their puppet politicians and governments. Not to mention, cryptocurrencies threaten a lot more entrenched entities than the banking system and governments. It’s a direct competitor to precious metals, crowdfunding, wire transfers, and all the payment apps.  This means crypto is going to have to face the Navy, Air Force, Army, Space Force and Marines.  (And as Balaji Srinivasan points out, the blockchains that drive crypto could be viewed as competition against the cloud, search engines, operating systems, or even social media.  So then crypto wouldn’t just be fighting the Navy, Air Force, Army, Space Force and Marines, but also Emperor Palpatine and the Galactic Republic.)

There’s been much made about the large political donations made by FTX and its executives. This is pretty much the standard game plan of every pirate that wants to become the Navy. They give money to any politician in any party who could help them kill off any upstart that threatens their honey pot.  Where crypto went off the track here is the political bribes were paid, but FTX and some of these other Ponzi schemes collapsed before they had time to build a moat around the company with regulatory protection against the next round of pirates coming up through the ranks. Cryptocurrencies needed to achieve a large degree of mass adoption before politicians could figure out how they could co-opt it. Here in the U.S., Senator Elizabeth Warren’s office released a statement saying, “As Senator Warren has already said publicly, she’s working on crypto legislation and believes that financial regulators, including the SEC, have broad existing authority to crack down on crypto fraud and illegal money laundering.”  On November 6, the EU announced that crypto transactions of more than 1k euros will be “under surveillance.”  This is why we can’t have nice things. Do I really need to tell you where this goes next???

“How do we know that these crypto transactions aren’t being used for child pornography, sex trafficking, and drug dealer money laundering?  Why do you need privacy if you have nothing to hide?  Isn’t this just a scheme for the rich to avoid taxes?

And all the other usual tropes the government uses when they want to spy on you and reach into your bank account.

Crypto is an entirely different dynamic than taxis, hotels, and bookstores.  Taxis, hotels, and bookstores don’t create money to replace governments fiat currencies.  Cryptos do.  What the Bitcoin maximalists view as progress (pandering words from a few central bankers, governments developing crypto regulations, El Salvador accepting BTC as official currency, etc.) are actually the opposite of what needed to take place for Bitcoin to become viable.

Cryptos seeking validation from governments is like a bunch of mice working together to build their own cat.

The only reason governments show any pretense of supporting or accepting cryptocurrencies is so they can manipulate, control, and tax them.  Or learn enough about how they work so they can create their own versions to usurp them.  If we ever are able to reach a state where a cryptocurrency gains worldwide acceptance, I believe it will be outside the reach of government, independent of all fiat currencies. In 2018 I predicted that if one cryptocurrency emerged to become THE global accepted currency, it would need to be a rogue currency – outside the constraints of any government.  Nothing since then has changed my view, in fact, it has only gotten stronger.

If governments have any participation in a cryptocurrency, they will eventually resort to manipulation, devaluation, monitoring your purchases, taxing your transactions, and seizing your assets.  That’s just what governments do. Governments can never create prosperity.  At best they can facilitate it.  Usually, they destroy it.

And that, boys and girls and non-binaries…is why I’m out of crypto.  Thanks for attending my TED talk. 

I’m proud to have earned a reputation as a thought leader, not a thought repeater.  To develop that kind of status requires having the balls to take risks, make predictions, and be willing to be proven wrong in public.  No one calls everything right. If they do, they’re just regurgitating the conventional beliefs of herd thinking.  You can expect this essay to be resoundingly criticized, trolled, and ridiculed.  (You may want to bookmark this page, so you can come back to post how much money you earned and troll me every time the price of your favorite crypto jumps.)  But my overall body of work over a few decades has shown a remarkable degree of prescience. Because of the current bloodbath taking place in crypto (which I predicted in June 2021 btw) – and the likelihood the bloodbath has only just begun – I’m putting these thoughts in the public square for discussion.

Here are a few important, final clarifications…

I’m not telling you not to invest in crypto or to sell any crypto assets you have. Like I told you, I don’t do investment advice, this essay is simply explaining the reasoning for my personal decision.  I’m not a typical investor.  If you’re looking to make the most profit from everything you invest in, I’m a terrible role model to follow. I’m at a place in my life where I want my investments to be congruent with the principles that are important to me. Those principles include investing in companies where the executive team has integrity, character, and talent – and they have a mission that involves solving problems and adding value.  Right now, cryptocurrencies are creating problems and decreasing value to society.

I’m not suggesting cryptocurrencies are actually going to literally die.  They won’t. They’ll still be around and the people with laser eyes in their avatars will still tout them, attend conventions around them, and promote them with breathless sensationalism.  (When I announced that I was getting out of crypto, someone in the comments wrote that crypto will be around long after I’m gone. As I pointed out to him, I’m very old, so this is a pretty low bar to reach.  It’s also true that Ponzi schemes, cockroaches, and Hot Tub Time Machine will also survive me.  That doesn’t mean they’re good.)

I’m not saying traders won’t continue to make money on cryptos.  They will.  You can be sure every time someone’s shit coin hits a new high-water mark, they’ll be back here to crow in the comments about it.  People will also continue to make large amounts of money robbing banks, participating in human trafficking, and becoming narco-traffickers.  That doesn’t mean you should do those things.

What I am saying is that I don’t believe Bitcoin or any other current cryptocurrency will reach the status of THE global currency that Satoshi envisioned.  They won’t offer freedom from government regulation, taxation, and manipulation we were hoping for.  And they won’t offer the security and privacy we were hoping for either.  They’ll be co-opted and corrupted by governments and the legacy banking system.

Right now, buying cryptos is like playing poker in a game with hustlers.  If you understand the game, are fairly cognizant of math, and you know the best ways to spot cheaters, you have a better than average chance to make some dosh.  But ultimately, each potential cryptocurrency will navigate to one of three potential paths:

  1. It becomes worthless.
  2. It pivots to another use.
  3. It becomes accepted and used as an actual currency.

If option three occurs (Ex: when all the bitcoins are mined) and people begin using it as a currency, it will become simply another medium for exchange, a commodity serving the same function as the dollar, euro, or yen.  The value can’t go up forever.  Too many people in the crypto cults can’t seem to grasp this reality.

Cryptos may have missed their window and never prosper, or they may simply need a 10- or 15-year “timeout” to rise again with a new generation under different perceptions.  Or more likely another flavor: a black-market version with better safeguards and infrastructure against potential theft and insolvency.  Because Bitcoin or even cryptocurrency in general aren’t the real draw here.  The sexiest part of the whole scenario is the blockchain concept. (Personally, I’m much more excited about the future of smart contract programs run on the Ethereum blockchain. Unfortunately, the potential of these is being drowned out right now by all the people and companies whoring out their names by issuing worthless NFTs.)  There will be a plethora of ways blockchains can be used without all the luggage it currently has with crypto.

If and when a crypto begins working as a viable digital currency, I’ll jump at the opportunity to use it.  And I may come back into the game as an investor at some point. (If so, I’ll be the first to tell you.) But right now, the entire space feels too skeezy and is not the kind of game I want to play.  When I’m dead and gone, hopefully my tombstone will read:

Here Lies the Body of Randy Gage

He never sold anyone a shit coin or sketchy NFT

It’s easier to give birth than resurrect the dead.  Instead of trying to revive a concept that’s been poisoned in the minds of millions, I’d rather back something fresh, innovative, and pristine.  It’s much more rewarding to invest in people: Founders who have a dream, are willing to work their face off building that dream, and they’ve got a concept that truly solves a problem, adds value, or envisions a superior possibility.  If that’s you, holler!

Peace,

- RG

Previous Post: Savor the Moments

 

IMPORTANT DISCLAIMER: FTX, Bitcoin, ETH, and Crypto

As I predicted back in June 2021, the crypto bloodbath has begun.  As you know, I am NOT an investment advisor.  My work is dedicated to the principles of prosperity and how you apply them in your day-to-day life.  As part of that work, I sometimes analyze things like cryptocurrencies, NFTs, and the blockchain, in terms of how they operate from a prosperity standpoint.  There have been three instances of this:

Blog post: Bitcoin, Shitcoin, Memes, and Monopoly Money

Blog post:  Losing My Religion for Bitcoin

Video:  The Prosperity Case for Bitcoin & Cryptocurrency

Nothing is more sacred to me than the relationship I have with each of you.  I don't claim to be a guru or know all the answers about anything. I'm just a high school dropout who by most standards, has reached a solid level of wealth and success.  Along the way, I share what's working for me, and what isn't working.   So for the sake of transparency, you should know that on November 19, 2022, I sold all cryptocurrencies in my portfolio, and am no longer confident they are viable in the long-term. 

You won’t see me deleting old posts and pretending they never happened. That’s not how I roll. Thus, this update. I would much prefer to announce this with my reasoning behind the decision.  But since I expect to be resoundingly criticized, trolled, and ridiculed, I’d rather take my time better articulating the logic behind the decision, and that could require another week or two until it’s ready.  There is much pumping and dumping going on in the space and that’s not my agenda.  So I’m putting this disclaimer out on November 22nd, and will insert a link when I have finished authored the essay listing that rationale.

For the record, I’ve never been an anti-crypto evangelist. I’ve been touting and investing in crypto since my Risky Is the New Safe book in 2012.  Now I believe the last few months (and the next month or two) are exposing how corrupted the crypto eco-system is.  There are security holes in the system that you can sail an aircraft carrier through.  Even if blockchains were 100 percent secure (which they’re not), you still need exchanges to buy and sell your crypto assets and those exchanges are a cesspool of wretched cybersecurity, funded with shitcoins based on imaginary blockchains, insider whale manipulation, dangerous illiquidity, and obvious insolvency.  I believe the entire infrastructure stands a very high chance of collapsing at any moment, in a domino progression of bankruptcies, hacks, and criminality.  That’s why I’m all out and want you to hear it direct.  Like I said earlier, I’ll post an essay soon detailing my rationale for this decision.

Peace,

- RG

Previous Post: Happy Old Year!

Losing My Religion for Bitcoin

[Editor’s Note: For the sake of transparency, before you read or re-read this post – you should know that on November 19, 2022, I sold all cryptocurrencies in my portfolio, and am no longer confident they are viable in the long-term.  Would prefer to announce this with my reasoning behind the decision, but since I expect to be resoundingly criticized, trolled, and ridiculed, I’d rather take my time explaining the logic and that could be a week or two until it’s ready.  There is much pumping and dumping going on in the space and that’s not my agenda.  So I’m putting this disclaimer out on November 22nd, and will insert a link when I have finished authored the essay listing the rationale.]

Let’s take a quick snapshot of the planet right now: The Covid-19 pandemic is still roiling the world, inflation is running rampant, and the cumulative value of global stocks has declined by $25 trillion dollars this year. (And we’re not even finished with June.)  Investment and retirement portfolios have been shredded.  Millions of people have lost jobs and many of those jobs are not coming back.  (Pretty much exactly what I predicted one year ago.)

Tragically, I believe the real wave of layoffs, true economic fallout, and collateral societal damages are just about to start….  

Recently I did an essay on the opportunities in chaos.  In the post, I shared that my confidence in cryptocurrencies and NFTs was declining rapidly and I was pulling back from the digital space and promised to write a follow up post explaining my rational.  This essay is it.

IMPORTANT NOTE: I am not a banker, investment advisor, or financial planner.  This post is not meant to provide investment advice.  It’s designed to look at cryptocurrencies and NFTs from the perspective of how they comply with the principles of prosperity – or don’t.

Thus far, cryptocurrencies have shown little substantial progress to achieving the benefits they promised.  The allure of cryptos were:

We’re 13 years in now, how we doing on all that?

We’ve been inundated with dozens of digital coins and tokens.  Theoretically coins have their own blockchain and tokens don’t, but most people speculating on them right now have no idea of the distinction.  In addition to Bitcoin and ETH, we’ve got a Cheesecake Factory-size menu of shitcoins.   Let’s breakdown the four benefit categories above and evaluate how they have delivered:

A pure peer-to-peer version of electronic cash that would allow payments to be sent without involving a financial institution, reducing the risk for fraud.

Ah…no.

The bottom line (for now) is that cryptocurrencies haven’t become viable cryptocurrencies.  They’ve just reproduced like rabbits, offering dozens of coins and tokens claiming to be currencies.  Exactly zero of them have become accepted currencies.  Real people are not using them to buy real things.  (Note: Horny drunks paying 100k in Bitcoin for bottle service at Club E11EVEN does not meet this criterion.)

For all practical purposes, we’ve just opened a new marketplace bazaar for gambling and trading.  But instead of offering Persian rugs, these markets buy, sell, and trade digital currencies. (Or NFTs.) If you don’t like the bazaar analogy, think of the current crypto space as a currency-only version of the stock market, or even Las Vegas casinos. There is lots of speculation going on, fortunes are being made, and fortunes are being lost, but no one is actually using cryptocurrencies as, you know, cryptocurrencies.

At the moment, cryptocurrencies are the equivalent of a risky, high flying tech stock, but without any underlying product or service, and virtually no regulation. Most blockchain and crypto-related technologies are still in the experimental stages and vulnerable to becoming compromised.  The number of hacked wallets, exit scams, and fraudulent coin/token launches happening in the space is astonishing.  And how much market manipulation is being done by the insiders and whales in the space will never be known.

Cryptos have eliminated the “financial institutions,” but those central banks have for the most part been replaced with exchanges, farming, and storage operations.  Unfortunately, many are run by well-meaning but incompetent people, and others are controlled by outright criminals, intent on exploiting you.  The amount of fraud taking place is astounding.

The promise of a peer-to-peer transaction without the middleman hasn’t materialized.  Instead, we’ve just changed the nature of the middleman, and not necessarily for the better.  At the time I’m typing these words, there are a lot of people with a lot of money in the hands of these alternative institutions – and they’re very nervous. And with the financial meltdown happening, expect to see a lot more of these sketchy deals getting exposed.

They would offer a system for non-reversable electronic transactions that doesn’t rely on trust:

See answer above.

I would add that this promise of not having to rely on trust is really supposed to be the superpower for all cryptos, and blockchains was supposed to ensure that.  If we’re being lucid, we have to admit that what’s going on in the crypto and NFT space today forces us to need more trust not less.

There are now hundreds of worthless shitcoins being promoted by Ponzi and pyramid schemes. These scams use the publicity and interest about cryptocurrencies, to prey on the multitudes who aren’t that cognizant of developing technologies – and lead them to believe they are investing in the next Amazon, Yahoo or Twitter.

There are no cryptocurrencies that meet the criteria to be a product for a legitimate direct selling company. ZERO.

To start a network marketing company and build the product line around a cryptocurrency, is simply a laughable idea. It would be like starting an MLM company and announcing that the product line was the U.S. dollar or the Japanese Yen. What would be the business model?

“Buy this $20 bill for $27 and maybe next year it is worth $30.”

Whether we use the dollar, euro, yen, peso, bitcoin, or any cryptocurrency - none of them are a value producing asset. They are simply a form of exchange, or a trading play. You can bet they go up, or bet they go down.  These pyramid schemes masquerading as multi-level marketing models are the perfect example of the “greater fool theory.”  At this point, anyone who participates in a cryptocurrency MLM is a fool, criminal, or both.

Ability to conduct transactions without government spying taxation, and seizures:

You’re kidding me, right?

We must begin by accepting that the privacy ideal has been slippery at best.  The transparency of the blockchain is a double-edged sword.  As a result, protection from government spying and seizures has been a huge disappointment in my view.  (Which was probably quite naive.)

What the Bitcoin maximalists view as progress (encouraging words from central bankers, governments developing crypto regulations, El Salvador accepting BTC as official currency, blah, blah, blah...) are actually the opposite of what needs to take place for Bitcoin to become viable.  Cryptos seeking validation from governments is like a bunch of mice working together to build their own cat.

The only reason governments show any pretense of supporting or accepting cryptocurrencies is so they can manipulate, control, and tax them.  Or learn enough about how they work so they can create their own versions to usurp them. 

If we ever are able to reach a state where a cryptocurrency gains worldwide acceptance, I believe it will be outside the reach of government, independent of all fiat currencies. If government have any participation in a cryptocurrency, they will eventually resort to currency manipulation, devaluation, monitoring and taxing your transactions. (Or seizing your assets.)   That’s just what governments do.

Not only is it more fun to be a pirate than join the navy – but in the crypto space – it’s the only way you’re going to survive the high seas.

Special note to everyone with laser eyes in their Twitter profile that responded with breathless sensationalism when El Salvadorian president Nayib Bukele declared Bitcoin as legal tender there: The man prides himself on making dictators cool again FFS. (#ProTip People who use the title “His Excellency” before their name are not generally known as advocates for the common folk.) Talk to real people who live in El Salvador, and you’ll discover what a corrupt, abject failure the acceptance program there has actually turned out to be.  And if you believe there’s going to be a magic Bitcoin city on the volcano, I have some oceanfront property in Wisconsin I want to sell you.

Cryptos would serve as a hedge against inflation and the worthless “printing press money” that governments produce:

This is one of those ideas that sounds good, looks good, and looks good on paper, but hasn’t actually worked in the real world.  As the current financial situation has demonstrated, none of these cryptocurrencies have served as a store of value that have shown stability against collapsing fiat currencies, and the general financial meltdown.  They’ve pretty much mirrored the violent up and down swings exactly.  We were promised that stable coins pegged to traditional currencies were a safer option, but the Luna shit show (imploding from a $34 billion market cap to worthless in about a week), certainly detonated that fantasy.  Terra is probably the biggest blockchain failure yet and the ripple effects are going to be felt for a long time.

This is not to say that a cryptocurrency will never become a hedge against fiat currency.  I believe it’s highly likely that one will ultimately serve as a true store of value and be divorced from stock market and fiat currency instabilities.  But don’t be foolish by thinking Bitcoin or any other crypto has achieved this position yet.

What about NFTs?

Glad you asked.  We would be remiss if we didn’t also discuss the current state of the marketplace for NFTs.  Billions of dollars are being invested in NFT projects right now.  Celebrities and influences, companies and sporting leagues are falling all over themselves seeking partners who can help them exploit their fame and credibility for a fast cash windfall by creating NFTs as collectables.  They’ve collectively raked in billions of dollars from gullible followers.  But the loss they ultimately take to their credibility will dog them forever.

Just how depraved has it become?

Anna Sorokin, who you probably know from the Netflix series that showed how she scammed hundreds of thousands of dollars from friends and businesses posing as a German heiress, announced she’s now launching a collection of NFTs.  Sorokin said in the announcement, “I’m trying to move away from this like, quote unquote scammer persona.”  Of course, the statement was released from the Orange County Correctional Facility in upstate New York where she is currently in custody.  FFS!

There is simply too much worthless shit being hyped as collectables and fine art in the NFT space. In my mind, somewhere between 99.7 and 100 percent of the NFTs being offered today will wind up being worthless.  They’re a stupid tax on day traders. Las Vegas has much better odds right now.

So where does all this take us?  Well, if you’re up for it, let’s conduct a fun little thought experiment.  Let me propose a thesis for the ultimate cryptocurrency.  A concept so bold, innovative, and brilliant that you’re going to wonder how you never thought of it yourself!

ANNOUNCING:

The launch of SemenCoin

Satoshi Nakamoto’s vision of electronic cash and programmable money with contracts will finally become realized with the launch of SemenCoin. Unlike other cryptos, SemenCoin will also be represented in the physical world by physical token verified by a chain-around-my-block.  This is a literal chain linking together the physical versions of the 21 million SemenCoins I am authorizing to be mined, which is being built surrounding the block my condo is located on.

Here’s how it works…

In order to be registered as a SemenCoin miner, individuals must follow me on Twitter.  That gives them the right to mine SemenCoins.  The actual mining is accomplished by the following process: The raw material for the tokens consists of two elements.

Element one is the clay used for the pitching mounds in major league baseball stadiums.  This can only be acquired from the DuraEdge Products Soil Farm in Slippery Rock, Pennsylvania.  It must then be mixed with my personal ejaculate.  (Because my semen can be verified by DNA testing, providing proof of stake, finite inventory, and authenticity.)  These two elements are mixed in the required ratio to create a mud mixture, which is then poured in an official plastic SemenCoin mold and microwaved on the “high” setting for exactly four minutes and twenty seconds, in the microwave located in the in-store dining section at the Whole Foods Market location at 12150 Biscayne Boulevard, North Miami, FL 33181.  (Providing transparency in the mining process that other cryptos can’t even touch.)

Following microwaving, the mixture solidifies into solid coin form and is assigned a number.  Each coin is then added to the chain-around-the-block surrounding my condo.  The dimensions of the coin have been designed so it takes exactly 21 million of them to create this chain-around-my-block. Once a coin is attached to this physical chain, the number is listed on my blog, forming a record that cannot be changed without redoing the proof-of-work.  Because the average man is only capable of thinking about sex and masturbating ten thousand times a day, this means the hard cap of supply of 21 million tokens will be reached in approximately 2,100 days. This creates a runway to build acceptance and pace demand.  At that point, I will undergo gender reassignment surgery and the number of coins in circulation will remain fixed at that level permanently.  Miners will still be rewarded, but only through transaction fees, and not from newly minted coins.

Unlike Bitcoin, which can only be verified by very clever computer programmers, SemenCoin can be verified by any mouth breather with a day trading account.  That’s because this new coin is verified in both the digital plane (my blog) and physical plane (the chain-around-my-block).  That makes SemenCoin far safer and superior to those other so-called legitimate cryptocurrencies.

But wait, there’s more…

You’ve heard all the hype about non-fungible tokens (NFTs) and probably wondered how you can cash in on this exploding marketplace.  Now with SemenCoin, you don’t have to choose between a token for buying/selling or a collectable one!  That’s because the SemenCoin token is a new class of coin securities known as a Bi-Sensory, or B.S. for short.  That’s because each physical coin comes with a free digital collectable from the Amorous Aardvark Motorcycle Club collection.  Each is an original cocktail napkin sketch done by yours truly, digitized for posterity.

Because of its decentralized nature, SemenCoin doesn’t follow the monetary policy of governments, and it’s not backed by any underlying asset or government.  If you are skeptical and cannot see the obvious value offered by the SemenCoin opportunity, it may be because you:

Back to Reality…

Okay now that I’ve had my demented fun, I’d like to challenge you to turn off your laser eyes, divorce from your emotions, and override your confirmation biases for a moment to consider the following possibilities...

What makes a Bored Ape Yacht Club NFT any more valuable than my Amorous Aardvark Motorcycle Club works of art?  How much of the value of NFTs in general is dependent on internet hype, rah-rah, whale manipulation, or fraud?

True prosperity is created by solving problems, adding value, and envisioning superior possibilities.  Obviously, it’s challenging to quantify how my imaginary cryptocurrency meets that criteria.  But ask yourself what makes Dogecoin, Samoyed Coin, and Magic Internet Money any more feasible.

There are a lot of smart people who believe the cryptocurrency concept can’t fail.  There were also a lot of smart people who thought WeWork was a tech company.  In 1999, the smart people at Excite turned down the chance to buy Google for $750,000.  Who’s smarter than rocket scientists? Yet NASA lost a $125 million Mars orbiter because they used metric measurements while Lockheed was using English ones.  Smart people are wrong all the time.

There is a prevalent mind virus in the Bitcoin cult that BTC will always go up, each time it drops it’s at a higher floor, and it would be impossible for it to fail completely.   Admittedly, Bitcoin is operating on a higher level than the legions of shitcoins that followed them.  But it is not bulletproof.  It could become worthless in the right (wrong) scenario.

That’s because all forms of money, physical or digital, are mind viruses.  We all agree on the concept of a currency because it’s a lot more convenient than trading oranges for massages, fish for computer repair, or radishes for the new Beyonce album. But there is no intrinsic value in any currency, whether it’s doubloons, wampum, US dollar, or crypto.

Currencies hold their value only when there is broad-based public acceptance – a shared hypnosis that all willingly agree to. 

The bolivar from Venezuela was perceived as valuable until it wasn’t.  Everyone in that country knows the government will devalue it day after day, so no one believes in it as a viable currency any longer.  This process has been happened for all currencies since the very first one.  Perhaps blockchain technology breaks this cycle, perhaps it doesn’t.

You may want to bookmark this next sentence, so you can come back and mock me in ten years.  At this point, I’m becoming extremely doubtful that Bitcoin is going to end up as the global mass adoption cryptocurrency.  (Mainly because of what I said earlier about how a truly viable cryptocurrency, one that becomes accepted for use as a cryptocurrency and not a gambling or investment play, has to be divorced from any government or other currency.)  I’m not even certain that any cryptocurrency will ultimately become a globally accepted store of value.  Remember that currencies of every kind only work if everyone drinks the Kool-Aid.  I could easily write another essay of this same length arguing that Bitcoin only works as a mass hypnosis anomaly, and there is no there there.  For Bitcoin to work, there has to be mass consensus that is it’s a store of value, readily exchangeable, safe, hedges against fiat currency collapses, protects against inflation – and – is a new monetary system, “digital gold,” and “the future of money.”  That’s a pretty big ask, and it isn’t looking too good at the moment. One massive hacking incident or some type of electromagnetic pulse attack could be enough to send the masses shrieking toward the exits forever.  Really.

More food for thought: The Mt. Gox hack in 2014 stole seven percent of all outstanding Bitcoin at the time.  The Terra debacle evaporated about three percent of crypto’s total market cap.  Has there ever been a theft or similar fiat currency fraud that has consequences even remotely as severe?

More, more food for thought: Imagine this scenario. You want to buy a used car.  You find a vehicle you like, and they agree to sell it to you for $12,000 cash.  You have that much in your bank account because you’ve been saving up for this.  You stop by the branch office to pick up the money and find the door locked with a sign that says:

“Due to extreme market conditions, today we are announcing that we pausing all withdrawals, Swap, and transfers between accounts.  We are taking this action today to put the bank in a better position to honor, over time, its withdrawal obligations.”

You’d probably be apoplectic. You'd send out a mean tweet, which would go viral and start a run on the bank.  Eyewitness News would show up to interview you.  The FDIC would race over with men in blue windbreakers and guns who would take possession of the bank.  Yet this exact scenario happened in the crypto space last week and people are powerless to do anything about it.  (Again).  They cannot withdraw their own money and may lose some, most, or all of it.  How many keyboard warriors with trading accounts who are gambling with their rent and grocery money, really understand how unprotected they are?

For obvious reasons, these days I keep my finances extremely private.  But since I’m making these posits about the space, it’s only fair to be transparent about my own actions in this arena. And reminder, this isn’t investment advice, just sharing my thoughts and what I’m doing personally.  I own a few (less than ten) Bitcoin and ETH tokens.  I own zero of any other type of shitcoins and zero EFTs.  I believe the best investments in my portfolio are, in order:

Good idea to add the following caveats: As you can see, Bitcoin is literally the last item on my list.  The amount of money I have in digital assets would not impact my daily lifestyle or threaten my retirement security if it all evaporated tomorrow.  Also, remember that the horizon in front of me is closer than the one behind me.  At this stage of my life, it’s more about preserving wealth, than growing it.  My priority mix was much different when I was 30, 50, etc., and yours should be too.

If we’re being sane and rational, we must admit that NFTs and cryptocurrencies simply have not delivered on the promises they offered.  That doesn’t mean they never will.  It’s entirely conceivable they will. The current economic meltdown and the ways in which governments are reacting to it demonstrate beyond any doubt the value a true, decentralized digital currency could offer.  The blockchain may be the greatest development of the last century and it will add value in millions of applications.  Tokenization allows latent values to be trackable and tradable.  The smart contract technology that NFTs bring will be a game changer in many different applications.

Savvy investors, VCs, and visionaries understand that you should never judge a new technology or development in its early stages.  Version 1.0 of anything is always a hot mess. They’re usually janky with a lot of friction at first.  You have to imagine how they will perform at scale once the bugs are weeded out.  The blockchain, cryptocurrencies, and smart contracts hold absolutely mind-boggling potential.  Just don’t conflate potential with reality…

If you’re Bobby Axelrod with a multibillion-dollar hedge fund, or simply an experienced, savvy investor with money to play with, the crypto space offers some exciting potential to make a killing.  But I’m not writing this for you.  This essay is for people who aren’t professional gamblers who want to manifest a prosperous life.  My advice for you is please don’t attempt to use crypto or NFTs as your primary source of income right now. Don’t count on them heavily for your retirement just yet. (My suggestion: definitely not more than 20 percent of your nest egg.)

Buying a few Bitcoin or ETH right now – if you have the disposable income – is like placing a bet in Vegas that the Kansas City Royals are going to win the World Series this year.  It a great asymmetrical bet that could end up paying off huge, and whatever happens, it will be a fun ride.  But if you don’t have the disposable income right now, there are more prudent uses for your money. If you’re investing in crypto on a larger scale, it should be because you’re working to create legacy security for your children or grandchildren.

Keep your eyes on the horizon. We’re attempting to build a financial utopia of sorts.  It will take decades, not years.  Don’t lose sight of the principles of prosperity. If you desire to get in on all these things, do it not as a day trader hopped up on Red Bull, but as a critical thinker looking at the big picture for the long-term.

Back away from the laser eyes crack pipe and evaluate things from a prosperity perspective: Are they adding value, solving problems, and/or envisioning superior possibilities?  Only then should you be clicking the “BUY” button.

Peace,

- RG

Previous post: Avoid Calcified Thinking

WARNING: Opportunity Alert

Debatable: What the long-term effects of lockdowns and quarantines will be. The role of government in relief programs.  What percentage of the trillions of dollars spent in assistance programs was wasted by graft, corruption, and mismanagement.

Not debatable: When governments print trillions of dollars of money that they don’t have and throw it out of helicopters, payment will come due at some point.  It doesn’t matter if the intent is well-meaning and actually provide a level of relief or not.  At some point, the bill still has to be paid.

Right now, we are witnessing a stock market meltdown the likes of which have never been seen before.  There are individual companies losing literally tens of billions of dollars a day. The seven largest cap companies have lost $2 trillion in their market capitalization since the beginning of 2022. The last time this happened was never.  Credit is tightening and the cost is going up.  Venture capital funding for new projects has almost disappeared.  Inflation is heating up.  Cryptocurrency, which in theory should have served as a refuge from fiat currency fluctuations, did nothing of the sort.

What we’re experiencing now can’t be called it a Black Swan event, because this type of reckoning was perfectly predictable.  But I believe there are extenuating factors which are also producing a vortex of dramatic and unexpected unpredictability.

As is normally the case in times of extreme volatility, people look to the past for clues.  But I don’t believe you’ll find the answers in Black Monday, 2008, or even the Great Recession.  Because what we’re seeing now has never occurred in human history.  Yes, we’ve seen all kinds of recessions and a depression, bear and bull markets, even pandemics.  There are lessons to be learned from each. But what we’re going through now, and about to go through soon, is a “one of” scenario that has never happened before.  Factor in the following elements:

Throw all these elements in the crockpot, let simmer, and you have the recipe for something devastating.

Winter is coming…

There’s no way to predict what’s about to happen.  But it would be prudent to plan for some very damaging consequences.  This might be the worst metaphorical winter we’ve ever seen. But winter is always followed by spring.

Every challenge holds the seeds of an equal or sometimes greater opportunity.  Even the horrific pandemic was actually an economic boom for businesses like e-commerce, online meeting platforms, home exercise equipment, and streaming entertainment.  The companies that were in a position to handle the growth prospered and others that weren’t disappeared. I believe a time like this calls for a back-to-fundamentals approach.  Yes, there will be some once-in-a-lifetime growth opportunities.  But they will be outnumbered 10,000 to one by monumental collapses.  Tune out the hype and live within the realm of reality.  I don’t give investment advice.  But I will share some thoughts on what I’m doing myself to make prudent decisions congruent with the laws of prosperity.

1) Demolish Your Debt

One of the shrewd moves right now may be paying off credit lines and becoming debt-free. Stay liquid for the better opportunities ahead.

2) Boring is the New Sexy

Go back to the basics.  Look for real products that solve real needs and add tangible value.  Your brother-in-law’s restaurant is never going to 100X your investment.  But if it’s well-managed and serving great food with excellent service, it could provide a nice place to park some money.  Real estate is still real estate.  Income producing property doesn’t get the sexy publicity speculating in NFTs does, but businesses built on the fundamentals can be a good return on your investment while the crazy shit shakes out.

3) Dial Down Dumb

It should go without saying (but won’t) – don’t buy status signaling items like jewelry, cars, or a too-big house to impress others.  These are always stupid decisions, but much more foolish and possibly dangerous now. If you want to posture for everyone how wealthy and clever you are, the best way to do that right now just might be not having your house foreclosed on, or your Lambo hooked up by the repo man.

4) Rejoin the Physical Realm

I expect to be mercilessly mocked for this, but personally I’m staying away from all cryptocurrencies and NFTs for the foreseeable future.  If we’re being brutally honest, Bitcoin has not brought any real value to the world as yet.  The issues around security haven’t been satisfactorily resolved still, and it’s not serving as a store of value.  At the moment, it’s simply one more potential high-risk, high-reward potential investment, but without any underlying product or service, and no regulation.  At this point, I’m becoming extremely doubtful that Bitcoin is going to end up as the mass adoption cryptocurrency. (I’ll probably do a follow up post with how my rationale is evolving on this.)

5) Diversify Both Assets and Risk Levels

Don’t have all your assets in one currency.  Don’t keep them all in one country.  Don’t have everything in one category.  Put 50 percent of your portfolio in low-risk/low-reward investments, 30 percent of your portfolio in moderate-risk/moderate-reward investments and 20 percent of your portfolio into high-risk/high reward scenarios. Even if the high reward options do great, don't take everything out of the other two categories.  Pigs get fat. Hogs get slaughtered.  Most people today shun the less rewarding but solid investments, and just want to chase the unicorns and 100X.  But that’s why so many got wiped out with worthless NFTs and shitcoins like Dogecoin or Luna.

6) Take Charge of Your Own Prosperity

Governments – even the well-meaning ones – are inherently corrupt and mismanaged. They never create prosperity.  At best, they can only facilitate it.  More often they squander or obstruct it. Don’t outsource your prosperity to anyone, especially governments.  Take charge of your own prosperity by developing your prosperity consciousness. And that is a mindset.  A mindset driven by abundance, not lack.  Not the fear of loss mindset that most people have, but a mindset of possibilities. Remember that every challenge presents a corresponding opportunity, often in disguise.

Dial down the media and social media influences.  Go back to the foundation of abundance.  All true prosperity is created by:

It may not seem like it on the surface, but you live in the greatest time in human history to be alive, and manifest prosperity.  Make the most of it.  You deserve it.

Peace,

- RG

Previous post: Overcome Information Overload

Bitcoin, Shitcoin, Memes, and Monopoly Money

[Editor’s Note: For the sake of transparency, before you read or re-read this post – you should know that on November 19, 2022, I sold all cryptocurrencies in my portfolio, and am no longer confident they are viable in the long-term.  Would prefer to announce this with my reasoning behind the decision, but since I expect to be resoundingly criticized, trolled, and ridiculed, I’d rather take my time explaining the logic and that could be a week or two until it’s ready.  There is much pumping and dumping going on in the space and that’s not my agenda.  So I’m putting this disclaimer out on November 22nd, and will insert a link when I have finished authored the essay listing the rationale.]

Why the next generation on the Internet could be the greatest wealth-creating opportunity of your lifetime… 

To reach the higher levels of success in business and life, you need the ability to peer around the corner and see what’s coming next.  That’s not nearly as hard as it sounds.  Any good futurist will tell you that the future is already here, it’s just not evenly distributed yet.  Therein lies your greatest opportunity.

Contrary to popular belief, there is no mysterious process or closely guarded secret for wealth building.  It’s actually quite simple.  True and lasting wealth is created by the people who can look around that corner and envision possibilities. Usually, possibilities that can solve problems and add value, thinking one step ahead, zigging when everyone else is zagging.  (Or zagging when everyone else is zigging.)    

Frequently, this involves determining what is coming next (based on the already available clues) then speculating what growing pains, challenges, and problems will be created.  Once you have an idea of at least some of these growing pains, challenges, and problems – you can get to work on:

To that end, in recent posts I’ve been sharing some of the advice I’m providing to my Breakthrough U Coaching Program clients on grave challenges the world is facing – and the corresponding opportunities they provide. Post one was on Pandemic Winners & Losers and number two was The Development of the Matrix.   Now let me share what I believe is the paramount challenge/opportunity the world will face in the next 20 years….

Web 3.0, the next generation of the Internet

There aren’t many institutions you can name that affect the world right now more than the Internet.  It has a massive impact on every area of our lives, and that impact is growing stronger.  And it’s about to get bloody.  Real bloody. 

What we think of as Web 1.0 was the development of the worldwide web from roughly ‘97 through 2004 when the Internet was basically people surfing around looking at content on unrelated webpages.   In Web 2.0, software applications were built on the web not the desktop, things became more interconnected and hyperlinked. Web 2.0 was the beginning of social networking and social media with the advent of platforms like blogs, wikis, YouTube, Flickr, and Myspace. This was user generated content in social communities, and I would argue this was the big breakthrough that allowed e-commerce to develop. People went from fear of entering a credit card online to a point they had no compunction about having their most private information stored on at least a dozen different websites. Web 2.0 was juiced along by the explosion of smartphones and mobile apps, which amplified and accelerated all the disruptions the Internet was creating.

I would argue that Web 2.0 was arguably one of the ten most impactful developments in human history. (Ranking up there with the Agricultural Revolution, Renaissance, invention of the wheel, alphabet, and printing press, discovery of fire, space travel, and of course, the cheesy gordita crunch.)  The Internet connected you to everyone in your life who mattered and introduced you to new vistas you hadn’t even imagined.  It forever changed the face of marketing, education, entertainment, commerce, communication, relationships, government, and a hundred other important elements of daily life.

Words like disruption and innovation have become such cliches that they don’t carry enough juice to describe the level of cataclysmic commotion that is about to happen as Web 3.0 blows up, tears down, and reconstructs some of the most important aspects of our daily lives. 

I posit that the development of Web 3.0 will impact humanity greater than any previous event in human history.

You might believe this is a pretty breathtaking hot take. (And it is.) But before you dismiss it as hype or delusion, let me challenge you to do the following: Read or re-read the Risky Is the New Safe book that I wrote in 2012 and Mad Genius from 2016.  Analyze how many things I predicted, including the streaming entertainment wars, Brexit, gene editing, rideshare services, and cryptocurrencies that have come to fruition.  (Those positions may seem weary now, but at the time I was doing the book tours, many media interviewers speculated whether I had escaped from a psychiatric ward or beamed in from an alternate universe.) Then evaluate what I’m suggesting with the appropriate level of consideration. 

Then also take into consideration, I am not a tech expert and if we’re being totally honest here, am still struggling to become fluent in emoji.  (And nothing you read here should be construed as investment advice.)  At this point, I understand these concepts better than 97.4289 percent of the population – which means I am still extremely ignorant and know just enough to be dangerous. As I did in the two books mentioned, let’s explore this technology from the aspect of how it will impact the layperson and how it follows (or doesn’t follow) the laws of prosperity. 

Human nature seems to have a default setting when it comes to new, innovative developments.  Anything in existence when you were born (no matter how stunning of a quantum advancement it was) just seems ordinary and natural to you. Anything new developed when you’re in your teens and twenties (and smarter than everyone else in the world) is breathtaking and revolutionary, and you usually become an evangelical proponent of it. And anything developed after you’re 40 is just fucking irritating and evil, because it means you have to change a belief or behavior you already possess.  I’ll do my dead level best not to fall prey to this way of thinking. I’m not the cranky old guy who dismisses cryptocurrencies as vaporware superstition, nor am I a member of the Bitcoin cult who gets orgasmic every time a football player puts laser eyes on his Twitter pic.  Everything I share next is presented in the following context:

So, what’s all the Web 3.0 fuss about?

Some of the most pressing challenges humanity will ever face – and likewise, some of the most lucrative opportunities humanity will ever face – will come about as Web 3.0 unfolds over the next two decades.  Web 3.0 will have a cataclysmic impact on everything.  The way we build, market, sell, communicate, educate, date, learn, wage war, and forge the peace.  I cannot emphasize enough how transformational Web 3.0 will be upon the world: Colossal fortunes will be made, and lives will be enriched in extraordinary ways. I predict that in the distant future, the development of Web 3.0 will be considered as integral to the evolution of humanity as the Agricultural and Industrial Revolutions.  And…

Before we reach the promised land, there is going to be a bloodbath that will make the dotcom meltdown look like a friendly game of checkers.  (We’ll come back to that in a bit.) 

For now, let’s set the stage by taking measure of where we are at in the developmental process.  I hear lots of analogies like we’re in the first quarter of the football game, or the 3rd inning of a baseball game.  If you want to use a sports analogy, where we are now is a group of owners and players are first mulling around the possibility of even starting a league.  No actual games have even been played yet.  Right now, the stage of Web 3.0 technology development is the evolutionary equivalent of biology’s primordial soup.  But that doesn’t mean you can check out now and tune in two years from now to catch the action.  The land grabs and market share are getting divvied up now and a great deal more will get locked up over the next five years. 

The catalyst for Web 3.0 is blockchain technology. More specifically, what the tech allows to come into existence.  Blockchain will impact virtually every area of human life. This technology can host cryptocurrencies, improve election security, provide digital IDs, facilitate better healthcare, enable the Internet of Things, protect royalties for creators, provide verifiable smart contracts, and literally millions of other uses we haven’t thought of yet. 

If you’re new to all this and not sure what a blockchain is, it is a specific type of database.  Unlike most databases, a blockchain stores data in blocks and they’re connection along a chain. (In this case, a chain of computers.)  In essence a server spanning the world is created by linking hundreds or thousands of computers.  This combined computational power and storage capacity allows millions of users to access the database simultaneously.  As new data comes in it is entered in a new block.  Once that block is full, it is chained to the previous block in chronological order.  Many kinds of data can be stored on a blockchain, but in most of the cases we’re looking at, the chain is a public ledger (viewable and verifiable) of transactions.  (Most people in the space also posit that it is immutable, but I’m not willing to go that far.)

Think of a blockchain like a pearl necklace.  Each pearl is connected on a chain, and you would know right away if one or two of the pearls were missing or damaged.  Each individual pearl is valuable, but the necklace holding all the pearls is more valuable and now has a utility. (In this case, to impress people at galas.) 

Eventually the whole world may run on the blockchain. Arguably it could be the most important invention in half a century. Some of the most tantalizing uses at the moment, and the ones I believe will most impact your prosperity, include:

None of these four uses are fads. I believe all are here to stay, and will have bright, bold, and brilliant futures.  But these developments are not going to be a steady, measured progression where everyone gets rich and lives happily ever after. The process is going to be a wild, sketchy, molar-jarring, motion-sickness-inducing, rollercoaster ride from the heights of the atmosphere to the depths of hell.  Some will make fortunes; others will be wiped out. 

Which takes us back to the bloodbath I promised you earlier…

While these developments should shake out to be highly beneficial for society, there will be a great deal of collateral damage along the way.  I’m not too concerned with the expansion of De-Fi and DAOs.  Both are macro movements that won’t offer much risk to the average person and are likely to improve their lives in ways both subtle and significant.  

In my view, the more the financial system gets decentralized, the better it is for consumers, and the sooner, the better.  Take a look at what I wrote about banks in Mad Genius:

“The banking industry is easy to pick on because large institutions like Wells Fargo and Citi operate in an alternate universe (called ‘the past’) where they think they’re so big and indispensable they can dictate terms and make their customers jump through hoops to meet their ever-growing need for bureaucracy. But those days (and those types of organizations) won’t last. We have to question if there really is any purpose for banks in the new economy.”

The reason rideshare platforms overcame all of the systemic, overwhelming forces conspiring to shut them down is at the end of the day, they’re a better idea than taxis.  By the same token, decentralizing finance is better than the corrupt, incumbent system of banking, finance, and government manipulation, so it will ultimately prevail. 

As for DAOs, they will definitely empower some communities and great things can happen through them.  But if you’ve ever tried to get something brilliant done through a committee, you can imagine the challenges that will be created for an organization with no boss, a very fluid structure, and thousands of people trying to influence the decisions.  If you’ve ever served on a condo board, you’re probably already experiencing PTSD just reading the last sentence.

Some people in the space are predicting DAOs will replace corporations and others suggest they will take the place of governments, but I don’t see either happening.  Still the concept itself is brilliant and there certainly are lots of possible iterations that can happen.  DAOs around specific blockchains, cryptocurrencies, or NFT communities make total sense.  And like a lot of Web 3.0, there will be many other beneficial aspects and uses we haven’t even thought of yet. 

Where I see the imminent bloodbath coming is in the cryptocurrency and NFT categories... 

As is frequently the case, to really grasp the complexity of this issue, we must resort to simplicity.  To that end, let’s circle back to the three ways prosperity is manifested that I mentioned earlier and apply them to this space right now. Blockchain tech, cryptocurrencies, and even NFTs are certainly cases of envisioning possibilities.  But for those possibilities to reach the next step – manifesting prosperity – they have to solve problems and add value. 

At this stage of the game, there isn’t enough solving real problems or adding actual value.  There is a HUGE amount of potential here, but at the moment, much more ambitious talk and goals versus actual implementation.  (And alarming levels of hype, mindless FOMO mentality, mining the miners, and downright fraud.) 

The long-term wealth created in the Web 3.0 space won’t be the profits created when coin, token, or NFT prices fluctuate, but the value created when the tech is used to solve real problems in the real world. 

We were told that cryptocurrencies were developed to be used as (checks notes) currency.  But at this stage of the game, virtually no one is using cryptocurrencies as currencies, no matter what the hype tells you otherwise. (And if you are using them as currencies, that's very foolish and shortsighted right now.) If you buy Bitcoin for $20k and sell it two weeks later for $40k, you’ve manifested $20k worth of cash for yourself (provided you convert it into fiat currency or other tangible value) – but you’ve solved no problems or created any value for the universe.  Likewise, if you snatched up a CryptoPunks EFT and watched it accelerate in value.  You may have solved your problem of not being rich enough and added value (allegedly) to your net worth, but once again, you haven’t solved any problem or created any value for the world at large. In prosperity terms, you’ve created no more value than if you won an equal amount of money at a slot machine.  It was entertaining and you can use the cash, but you haven’t dented the universe in any way. In the future, NFTs will offer a profound menu board of benefits.   But at least 98 percent of the projects being promoted on your Facebook and Twitter feeds right now, are the prosperity equivalent of empty calories.

We can argue that Bitcoin can be used as a store of value.  But only if we’re honest enough to admit it hasn’t happened yet and might not settle into that role for a few years or even a decade or two.  (And tougher to do since the price dropped more than 30 percent in the short time I spent writing this.)

Right now, buying Bitcoin is like playing poker.  If you understand the game and are fairly cognizant of math, you have a great chance to see your investment go up.  But at some point, all the bitcoins will be mined, and it will settle into use as a currency.  When that happens, it’s simply another medium for exchange, serving the same function as the dollar, euro, or yen.  (Update 7/09/21: If you think I'm crazy to suggest that once BTC is a currency it holds no inherent value, I'm no longer alone. Check out the video that Nassim Taleb put out on July 2nd. He's making the argument that the inherent value of BTC is zero, for a different but similar reason.) You can argue that it is a better store of value than fiat currencies (and I’d agree with you), because it can’t be devalued as easily as the printing press currency.

Ultimately each potential cryptocurrency will have to navigate this process.  One of three paths will be taken:

  1. It becomes worthless.
  2. It pivots to another use.
  3. It becomes accepted and used as an actual currency. 

If option three occurs and people begin using it as a currency, it will become commodity like, because it will just be used for payments.  The value can’t go up forever.  Too many people in the crypto cults can’t seem to grasp this reality.

That doesn’t mean you can’t buy a crypto low and sell it high.  Of course you can.  Just as you might have bought Apple or Amazon at $50 a share.  But don’t lose sight of the principles of prosperity.  Look for investments where the platform is solving real problems and adding real value, and don’t conflate them with simple gambling gains that can occur.

The ETH token really isn’t trying to be a currency.  The developers in the Ethereum blockchain community are moving rapidly to solve real problems and add real value.  Personally, I think the future here is even brighter than Bitcoin.  But after these two, we fall off the cliff very quickly…

It just seems like other cryptos wanting to be currencies don’t really understand what Bitcoin is meant to be: safe money.  They look at things people use it for (getting money out of Venezuela, helping unbanked people in El Salvador make transactions, etc.), then they create coins to do those functions but they don’t do the actual work to make safe money as the Bitcoin community is doing.  There won’t be one in a hundred thousand of these meme coins that actually create and hold value. 

Another reality of life is that governments use money and the banking system to control their citizens.  They won’t give up this control without a bloody fight.  Strong decentralized developer communities like Bitcoin and ETH have a fighting shot to exit from the carnage intact and even stronger.  (And DAOs will likely be helpful here.) Most of the meme coins being flogged in your social media feed right now will be vaporized. 

Every idiot who invested $50 in Dogecoin before the spike now believes they are the next crypto savant billionaire.  Day traders have mortgaged their homes, depleted their kid’s college fund, and maxed out their credit cards to buy scores of cryptocurrencies and NFTs that will quickly (or already have) become worthless.  Do not do this.  And if you already did, take corrective action now.  

At this point the majority of entities in the crypto/NFT space are simply shitcoins, memes, and Monopoly money.  Most of the “blockchains” being promoted today aren’t even developed or they’re complete frauds propped up by a Whitepaper bought on Fivver for $50.  Dogecoin is a fucking (and literal) joke, and everyone promoting doge knows it, but is waiting to see how much they can cash out before they bail. Right now, 99.99999999999 percent of the NFTs available are shit.  In fact, they’re worth less than shit, because shit is useful for fertilizer.  The Bitcoin cult believes the currency is immune to reality and will always end each fluctuation at a higher floor.  That will be true until it isn’t. 

There is simply too much worthless shit being hyped as collectables and fine art in the NFT space.  At some point, the NFT market is going to crash big time.  There will be margin calls, millions wiped out, and scads of negative publicity, which will induce investor panic.  When that happens, don’t expect people to make distinctions between all the shit flooding the zone and legitimate players like Bitcoin and ETH.  You could see the equivalent of a bank run in the digital space.  If so, it wouldn’t surprise me to see Bitcoin settle below $5K for a while.  I’m not saying this will happen, but I am saying it’s not crazy to prepare as if it might.  I do think ultimately Bitcoin rebounds and goes much higher, so it’s a solid long-term hold. 

In 2018 I predicted that when things ultimately shake out, there will be two major cryptocurrencies in use on earth. (One “white sheep” accepted as legal tender with many governments and finance entities subject to higher regulation, and another “black sheep” less regulated one, servicing the most fervent libertarians and privacy seekers.)  Nothing that has happened thus far has changed my opinion on this.  But all investments are like alligators. If you don’t have enough money to feed them, they eventually eat you.  The people who are buying big now on margins and other credit will likely get slaughtered during the shake out. 

The other relevant dangers to be aware of in the crypto/NFT space right now are:

Now here’s the thing about these dangers.  They are the same fucking dangers that virtually every new innovation faces.  You could have said the same warnings for the stock market, bond markets, fiat currencies, the traditional banking system, fine art, and collectibles. I only bring them up here because in this new developing crypto world, as in most disruptions, the technology develops a lot faster than its ability to be analyzed, regulated, or protected against.  The vast amount of poser blockchains, worthless meme coins, and dead-on-arrival NFTs is staggering and millions of people will be victimized.  

Having said all that, please don’t take any of this to mean that I am against De-Fi, blockchains, cryptocurrencies, or NFTs.  I’m a proponent (and closet raving fan) of all of them.  They will ultimately prevail.  But what you should be cognizant of is that they all will look exponentially different than they do now, and there will be some massive mountains, valleys, and even some blackholes along the journey.  The vast majority of cryptocurrencies that launch will fail and a vast majority of NFTs will return to the nothingness they were born from.  The real problem-solving benefits of NFTs (tracking ownership, verifiable smart contracts, and possible royalties, etc.) are just beginning to be explored. 

You should never judge a new development by how janky, inconvenient, or bulky it is now.  Remember that lovely Motorola DynaTac 8000X mobile phone that Gordon Gekko carried around in Wall Street?  Compare that brick (which cost $3,995) to the elegant supercomputer you’re probably reading this post on right now.  Compare that authentic “calling from inside a garbage can” sound of the first Skype calls to the brilliantly functional Zoom calls you can do today.

When you’re looking at potential disruption at the scale we’re about to experience with Web 3.0, there are three good questions to ask:

  1. How can this add value or solve problems?
  2. How will this work when that glitches get sorted out?
  3. How large is the potential addressable market?

We can argue that the most pressing problems facing the world right now are centered around money and the financial system: poverty, access to capital, income inequality, and inflation.  And the one constant in all of these areas is government.  More specifically the corrupt, incompetent, and unfair ways they use their financial powers to control and hold back citizens. 

The most lethal part of their behavior is printing worthless money.  Just here in the U.S., the government has created more than $5 trillion from thin air in the last year.  Toss in the trillions more created by other governments in Europe, Asia, LatAm, etc. and the number are simply too astounding to be comprehended by you, me, or anyone on earth. 

The only free cheese is in the mousetrap.

If you ask me whether Dogecoin or the recent $5 trillion stimulus program is a bigger scam, I’d have to rate it a tie.  Elon Musk suggested that for Doge to be viable, it needs to speed up block time 10X, increases block size 10X and reduce fees 100X.  I’d have to say there is a better chance of the Dogecoin developer community making those reforms than there is a chance the U.S. government stops printing worthless money.  I believe within 10 years the dollar will be replaced by a cryptocurrency as the global reserve and NFTs will revolutionize content creation, royalties, and contracts.  My intrigue with NFTs comes not so much from the art world, but how they will impact financial and legal agreements. In this realm, the things that aren't either currencies or equities probably will be NFTs. I believe there's a good chance all financial assets will get tokenized eventually and things like your term life insurance, car title, and home deed will be NFTs. Just as millennials’ generational investment strategy moved from offline to online, the following generations will migrate from centralized finance to decentralized finance. 

So, big picture, for those of you keeping score at home…

Blockchains ✔️

De-Fi ✔️

DAOs ✔️

Cryptocurrencies ✔️

NFTs ✔️

Get in on all these things, not as a day trader, but for the long haul.  Step back from the laser eyes crackpipe and evaluate things from the prosperity perspective: adding value, solving problems, envisioning possibilities.  And know that these all are integral pieces of a much bigger and more important movement, the world’s migration to Web 3.0.

Schedule some time, shut off all your devices and do some critical thinking about how Web 3.0 will impact your job or business, and the industry or profession you’re in.  How will it change the way you raise and educate your children?  What will it mean for your relationships, where you choose to live, and how you communicate with those you love? How will it impact the ways you buy and sell?  How would you use the tools that Web 3.0 provides to disrupt your own business?  How will De-Fi, DAOs, cryptocurrencies, NFTs, and other blockchain-based technologies impact your day-to-day life just five years from now?  Give this all some serious thought, because all this is…is the seminal moment in human history thus far. 

Peace,

- RG

HT: I would be remiss if I didn’t thank Art Jonak for his generosity in allowing me to bounce ideas and sections of this thesis off him, and then giving his advice.

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