Don't sleep with your own sister.

70% of lottery winners go broke within five years. You've heard the last one. People who got rich quickly without setbacks and hard work often lose it all. My father said, "Easy money is easily lost," and a wealthy friend who owns a family office said, "The first generation makes it, the second generation spends it, and the third generation blows it."

This is evident. Corrupt politicians in developing countries live lavishly, buying their third wives' fifth Hermès bag and celebrating New Year's at The Brando Resort. A successful businessperson from humble beginnings is more conservative with money. More so if they're atom-based, not bit-based. They value money.

Crypto can "feel" easy. I have nothing against capital market investing. The global financial system is shady, but that's another topic. The problem started when those who took advantage of easy money started affecting other businesses. VCs did minimal due diligence on FTX because they needed deal flow and returns for their LPs. Lenders did minimum diligence and underwrote ludicrous loans to 3AC because they needed revenue.

Alameda (hence FTX) and 3AC made "easy money" Genesis and DCG aren't. Their businesses are more conventional, but they underestimated how "easy money" can hurt them.

Genesis has been the victim of easy money hubris and insolvency, losing $1 billion+ to 3AC and $200M to FTX. We discuss the implications for the broader crypto market.

Here are the quick takeaways:

• Genesis is one of the largest and most notable crypto lenders and prime brokerage firms.

• DCG and Genesis have done related party transactions, which can be done right but is a bad practice.

• Genesis owes DCG $1.5 billion+.

• If DCG unwinds Grayscale's GBTC, $9-10 billion in BTC will hit the market.

• DCG will survive Genesis.

What happened?

Let's recap the FTX shenanigan from two weeks ago. Shenanigans! Delphi's tweet sums up the craziness. Genesis has $175M in FTX.

Cred's timeline: I hate bad crisis management. Yes, admitting their balance sheet hole right away might've sparked more panic, and there's no easy way to convey your trouble, but no one ever learns.

By November 23, rumors circulated online that the problem could affect Genesis' parent company, DCG. To address this, Barry Silbert, Founder, and CEO of DCG released a statement to shareholders.

• A few things are confirmed thanks to this statement.

• DCG owes $1.5 billion+ to Genesis.

• $500M is due in 6 months, and the rest is due in 2032 (yes, that’s not a typo).

• Unless Barry raises new cash, his last-ditch efforts to repay the money will likely push the crypto market lower.

• Half a year of GBTC fees is approximately $100M.

• They can pay $500M with GBTC.

• With profits, sell another port.

Genesis has hired a restructuring adviser, indicating it is in trouble.

Rehypothecation

Every crypto problem in the past year seems to be rehypothecation between related parties, excessive leverage, hubris, and the removal of the money printer. The Bankless guys provided a chart showing 2021 crypto yield.

In June 2022, @DataFinnovation published a great investigation about 3AC and DCG. Here's a summary.

• 3AC borrowed BTC from Genesis and pledged it to create Grayscale's GBTC shares.

• 3AC uses GBTC to borrow more money from Genesis.

• This lets 3AC leverage their capital.

• 3AC's strategy made sense because GBTC had a premium, creating "free money."

• GBTC's discount and LUNA's implosion caused problems.

• 3AC lost its loan money in LUNA.

• Margin called on 3ACs' GBTC collateral.

• DCG bought GBTC to avoid a systemic collapse and a larger discount.

• Genesis lost too much money because 3AC can't pay back its loan. DCG "saved" Genesis, but the FTX collapse hurt Genesis further, forcing DCG and Genesis to seek external funding.

bruh…

Learning Experience

Co-borrowing. Unnecessary rehypothecation. Extra space. Governance disaster. Greed, hubris. Crypto has repeatedly shown it can recreate traditional financial system disasters quickly. Working in crypto is one of the best ways to learn crazy financial tricks people will do for a quick buck much faster than if you dabble in traditional finance.

Moving Forward

I think the crypto industry needs to consider its future. This is especially true for professionals. I'm not trying to scare you. In 2018 and 2020, I had doubts. No doubts now. Detailing the crypto industry's potential outcomes helped me gain certainty and confidence in its future. This includes VCs' benefits and talking points during the bull market, as well as what would happen if government regulations became hostile, etc. Even if that happens, I'm certain. This is permanent. I may write a post about that soon.

Sincerely,

M.

It’s only a loss if you sell, right?

Nayib Bukele proclaimed himself “the world’s coolest dictator”.

His jokes aren't clear.

El Salvador's 43rd president self-proclaimed “CEO of El Salvador” couldn't be less presidential.

His thin jeans, aviator sunglasses, and baseball caps like a cartel lord.

He's popular, though.

Bukele won 53% of the vote by fighting violent crime and opposition party corruption.

El Salvador's 6.4 million inhabitants are riding the cryptocurrency volatility wave.

They were powerless.

Their autocratic leader, a former Yamaha Motors salesperson and Bitcoin believer, wants to help 70% unbanked locals.

He intended to give the citizens a way to save money and cut the country's $200 million remittance cost.

Transfer and deposit costs.

This makes logical sense when the president’s theatrics don’t blind you.

El Salvador's Bukele revealed plans to make bitcoin legal tender.

Remittances total $5.9 billion (23%) of the country's expenses.

Anything that reduces costs could boost the economy.

The country’s unbanked population is staggering. Here’s the data by % of people who either have a bank account (Blue) or a mobile money account (Black).

According to Bukele, 46% of the population has downloaded the Chivo Bitcoin Wallet.

In 2021, 36% of El Salvadorans had bank accounts.

Large rural countries like Kenya seem to have resolved their unbanked dilemma.

An economy surfaced where village locals would sell, trade and store network minutes and data as a store of value.

Kenyan phone networks realized unbanked people needed a safe way to accumulate wealth and have an emergency fund.

96% of Kenyans utilize M-PESA, which doesn't require a bank account.

The software involves human agents who hang out with cash and a phone.

These people are like ATMs.

You offer them cash to deposit money in your mobile money account or withdraw cash.

In a country with a faulty banking system, cash availability and a safe place to deposit it are important.

William Jack and Tavneet Suri found that M-PESA brought 194,000 Kenyan households out of poverty by making transactions cheaper and creating a safe store of value.

2016 Science paper

Mobile money, a service that allows monetary value to be stored on a mobile phone and sent to other users via text messages, has been adopted by most Kenyan households. We estimate that access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty.

The impacts, which are more pronounced for female-headed households, appear to be driven by changes in financial behaviour — in particular, increased financial resilience and saving. Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labour, resulting in a meaningful reduction of poverty in Kenya.

Currently, El Salvador has 2,301 Bitcoin.

At publication, it's worth $44 million. That remains 41% of Bukele's original $105.6 million.

Unknown if the country has sold Bitcoin, but Bukeles keeps purchasing the dip.

It's still falling.

This might be a fantastic move for the impoverished country over the next five years, if they can live economically till Bitcoin's price recovers.

The evidence demonstrates that a store of value pulls individuals out of poverty, but others say Bitcoin is premature.

You may regard it as an aggressive endeavor to front run the next wave of adoption, offering El Salvador a financial upside.

Sketch or Figma?

Designers are pissed.

The beast ate the beauty.

Figma deserves $20B.

Do designers deserve Adobe?

Adobe devours new creative tools and spits them out with a slimy Adobe aftertaste.

• Frame.io — $1.3B

• Magento — $1.7B

• Macromedia — $3.6B

Nothing compares to the risky $20B acquisition.

If they can't be beaten, buy them.

And then make them boring.

Adobe's everywhere.

Like that friend who dabbles in everything creatively, there's not enough time to master one thing.

Figma was Adobe's thigh-mounted battle axe.

• a UX design instrument with a sizable free tier.

• a UX design tool with a simple and quick user interface.

• a tool for fluid collaboration in user experience design.

• a web-based UX design tool that functions well.

• a UX design tool with a singular goal of perfection.

UX design software that replaced Adobe XD.

Adobe XD could do many of Figma's things, but it didn't focus on the details. This is a major issue when working with detail-oriented professionals.

UX designers.

Design enthusiasts first used Figma. More professionals used it. Institutions taught it. Finally, major brands adopted Figma.

Adobe hated that.

Adobe dispatched a team of lawyers to resolve the Figma issue, as big companies do. Figma didn’t bite for months.

Oh no.

Figma resisted.

Figma helped designers leave Adobe. Figma couldn't replace Photoshop, but most designers used it to remove backgrounds.

Online background removal tools improved.

The Figma problem grew into a thorn, a knife, and a battle ax in Adobe's soft inner thigh.

Figma appeared to be going public. Adobe couldn’t allow that. It bought Figma for $20B during the IPO drought.

Adobe has a new issue—investors are upset.

The actual cause of investors' ire toward Adobe

Spoiler: The math just doesn’t add up.

According to Adobe's press release, Figma's annual recurring revenue (ARR) is $400M and growing rapidly.

The $20B valuation requires a 50X revenue multiple, which is unheard of.

Venture capitalists typically use:

• 10% to 29% growth per year: ARR multiplied by 1 to 5

• 30% to 99% growth per year: ARR multiplied by 6 to 10

• 100% to 400% growth per year: ARR multiplied by 10 to 20

Showing an investor a 50x multiple is like telling friends you saw a UFO. They'll think you're crazy.

Adobe's stock fell immediately after the acquisition because it didn't make sense to a number-cruncher.

Designers started a Tweet storm in the digital town hall where VCs and designers often meet.

Adobe acquired Workfront for $1.5 billion at the end of 2020. This purchase made sense for investors.

Many investors missed the fact that Adobe is acquiring Figma not only for its ARR but also for its brilliant collaboration tech.

Adobe could use Figmas web app technology to make more products web-based to compete with Canva.

Figma's high-profile clients could switch to Adobe's enterprise software.

However, questions arise:

• Will Adobe make Figma boring?

• Will Adobe tone down Figma to boost XD?

• Would you ditch Adobe and Figma for Sketch?

There’s a funny part of ‘Steve Jobs’ by Walter Isaacson where Jobs says that Bill Gates was more a copier than an innovator:

“Bill is basically unimaginative and has never invented anything, which is why I think he’s more comfortable now in philanthropy than technology. He just shamelessly ripped off other people’s ideas….He’d be a broader guy if he had dropped acid once or gone off to an ashram when he was younger.”

Gates lacked flavor. Nobody ever got excited about a Microsoft launch, despite their good products. Jobs had the world's best product taste. Apple vs. Microsoft.

A CEO's core job functions are all driven by taste: recruiting, vision, and company culture all require good taste. Depending on the type of company you want to build, know where you stand between Microsoft and Apple.

How can you improve your product judgment? How to acquire taste?

Test and refine

Product development follows two parallel paths: the ‘customer obsession’ path and the ‘taste and iterate’ path.

The customer obsession path involves solving customer problems. Lean Startup frameworks show you what to build at each step.

Taste-and-iterate doesn't involve the customer. You iterate internally and rely on product leaders' taste and judgment.

Creative Selection by Ken Kocienda explains this method. In Creative Selection, demos are iterated and presented to product leaders. Your boss presents to their boss, and so on up to Steve Jobs. If you have good product taste, you can be a panelist.

The iPhone follows this path. Before seeing an iPhone, consumers couldn't want one. Customer obsession wouldn't have gotten you far because iPhone buyers didn't know they wanted one.

In The Hard Thing About Hard Things, Ben Horowitz writes:

“It turns out that is exactly what product strategy is all about — figuring out the right product is the innovator’s job, not the customer’s job. The customer only knows what she thinks she wants based on her experience with the current product. The innovator can take into account everything that’s possible, but often must go against what she knows to be true. As a result, innovation requires a combination of knowledge, skill, and courage.“

One path solves a problem the customer knows they have, and the other doesn't. Instead of asking a person what they want, observe them and give them something they didn't know they needed.

It's much harder. Apple is the world's most valuable company because it's more valuable. It changes industries permanently.

If you want to build superior products, use the iPhone of your industry.

How to Improve Your Taste

I. Work for a company that has taste.

People with the best taste in products, markets, and people are rewarded for building great companies. Tasteful people know quality even when they can't describe it. Taste isn't writable. It's feel-based.

Moving into a community that's already doing what you want to do may be the best way to develop entrepreneurial taste. Most company-building knowledge is tacit.

Joining a company you want to emulate allows you to learn its inner workings. It reveals internal patterns intuitively. Many successful founders come from successful companies.

Consumption determines taste. Excellence will refine you. This is why restauranteurs visit the world's best restaurants and serious painters visit Paris or New York. Joining a company with good taste is beneficial.

2. Possess a wide range of interests

“Edwin Land of Polaroid talked about the intersection of the humanities and science. I like that intersection. There’s something magical about that place… The reason Apple resonates with people is that there’s a deep current of humanity in our innovation. I think great artists and great engineers are similar, in that they both have a desire to express themselves.” — Steve Jobs

I recently discovered Edwin Land. Jobs modeled much of his career after Land's. It makes sense that Apple was inspired by Land.

A Triumph of Genius: Edwin Land, Polaroid, and the Kodak Patent War notes:

“Land was introverted in person, but supremely confident when he came to his ideas… Alongside his scientific passions, lay knowledge of art, music, and literature. He was a cultured person growing even more so as he got older, and his interests filtered into the ethos of Polaroid.”

Founders' philosophies shape companies. Jobs and Land were invested. It showed in the products their companies made. Different. His obsession was spreading Microsoft software worldwide. Microsoft's success is why their products are bland and boring.

Experience is important. It's probably why startups are built by generalists and scaled by specialists.

Jobs combined design, typography, storytelling, and product taste at Apple. Some of the best original Mac developers were poets and musicians. Edwin Land liked broad-minded people, according to his biography. Physicist-musicians or physicist-photographers.

Da Vinci was a master of art, engineering, architecture, anatomy, and more. He wrote and drew at the same desk. His genius is remembered centuries after his death. Da Vinci's statue would stand at the intersection of humanities and science.

We find incredibly creative people here. Superhumans. Designers, creators, and world-improvers. These are the people we need to navigate technology and lead world-changing companies. Generalists lead.

His regular regimen teaches stress management.

In 1995, an Indian graduate visited the US. He obtained a scholarship to Stanford after graduating from IIT with a silver medal. First flight. His ticket cost a year's income. His head was full.

Pichai Sundararajan is his full name. He became Google's CEO and a world leader. Mr. Pichai transformed technology and inspired millions to dream big.

This article reveals his daily schedule.

Mornings

While many of us dread Mondays, Mr. Pichai uses the day to contemplate.

A typical Indian morning. He awakens between 6:30 and 7 a.m. He avoids working out in the mornings.

Mr. Pichai oversees the internet, but he reads a real newspaper every morning.

Pichai mentioned that he usually enjoys a quiet breakfast during which he reads the news to get a good sense of what’s happening in the world. Pichai often has an omelet for breakfast and reads while doing so. The native of Chennai, India, continues to enjoy his daily cup of tea, which he describes as being “very English.”

Pichai starts his day. BuzzFeed's Mat Honan called the CEO Banana Republic dad.

Overthinking in the morning is a bad idea. It's crucial to clear our brains and give ourselves time in the morning before we hit traffic.

Mr. Pichai's morning ritual shows how to stay calm. Wharton Business School found that those who start the day calmly tend to stay that way. It's worth doing regularly.

And he didn't forget his roots.

Afternoons

He has a busy work schedule, as you can imagine. Running one of the world's largest firm takes time, energy, and effort. He prioritizes his work. Monitoring corporate performance and guaranteeing worker efficiency.

Sundar Pichai spends 7-8 hours a day to improve Google. He's noted for changing the company's culture. He wants to boost employee job satisfaction and performance.

His work won him recognition within the company.

Pichai received a 96% approval rating from Glassdoor users in 2017.

Mr. Pichai stresses work satisfaction. Each day is a new canvas for him to find ways to enrich people's job and personal lives.

His work offers countless lessons. According to several profiles and press sources, the Google CEO is a savvy negotiator. Mr. Pichai's success came from his strong personality, work ethic, discipline, simplicity, and hard labor.

Evenings

His evenings are spent with family after a busy day. Sundar Pichai's professional and personal lives are balanced. Sundar Pichai is a night owl who re-energizes about 9 p.m.

However, he claims to be most productive after 10 p.m., and he thinks doing a lot of work at that time is really useful. But he ensures he sleeps for around 7–8 hours every day. He enjoys long walks with his dog and enjoys watching NSDR on YouTube. It helps him in relaxing and sleep better.

His regular routine teaches us what? Work wisely, not hard, discipline, vision, etc. His stress management is key. Leading one of the world's largest firm with 85,000 employees is scary.

The pressure to achieve may ruin a day. Overworked employees are more likely to make mistakes or be angry with coworkers, according to the Family Work Institute. They can't handle daily problems, making the house more stressful than the office.

Walking your dog, having fun with friends, and having hobbies are as vital as your office.