Cryptoshit. This thing is crazy to buy.

Charlie Munger is revered and powerful in finance.

Munger, vice chairman of Berkshire Hathaway, is noted for his wit, no-nonsense attitude to investment, and ability to spot promising firms and markets.

Munger's crypto views have upset some despite his reputation as a straight shooter.

“There’s only one correct answer for intelligent people, just totally avoid all the people that are promoting it.” — Charlie Munger

The Munger Interview on CNBC (4:48 secs)

This Monday, CNBC co-anchor Rebecca Quick interviewed Munger and brought up his 2007 statement, "I'm not allowed to have an opinion on this subject until I can present the arguments against my viewpoint better than the folks who are supporting it."

Great investing and life advice!

If you can't explain the opposing reasons, you're not informed enough to have an opinion.

In today's world, it's important to grasp both sides of a debate before supporting one.

Rebecca inquired:

Does your Wall Street Journal article on banning cryptocurrency apply? If so, would you like to present the counterarguments?

Mungers reply:

I don't see any viable counterarguments. I think my opponents are idiots, hence there is no sensible argument against my position.

Consider his words.

Do you believe Munger has studied both sides?

He said, "I assume my opponents are idiots, thus there is no sensible argument against my position."

This is worrisome, especially from a guy who once encouraged studying both sides before forming an opinion.

Munger said:

National currencies have benefitted humanity more than almost anything else.

Hang on, I think we located the perpetrator.

Munger thinks crypto will replace currencies.

False.

I doubt he studied cryptocurrencies because the name is deceptive.

He misread a headline as a Dollar destroyer.

Cryptocurrencies are speculations.

Like Tesla, Amazon, Apple, Google, Microsoft, etc.

Crypto won't replace dollars.

In the interview with CNBC, Munger continued:

“I’m not proud of my country for allowing this crap, what I call the cryptoshit. It’s worthless, it’s no good, it’s crazy, it’ll do nothing but harm, it’s anti-social to allow it.” — Charlie Munger

Not entirely inaccurate.

Daily cryptos are established solely to pump and dump regular investors.

Let's get into Munger's crypto aversion.

Rat poison is bitcoin.

Munger famously dubbed Bitcoin rat poison and a speculative bubble that would implode.

Partially.

But the bubble broke. Since 2021, the market has fallen.

Scam currencies and NFTs are being eliminated, which I like.

Whoa.

Why does Munger doubt crypto?

Mungers thinks cryptocurrencies has no intrinsic value.

He worries about crypto fraud and money laundering.

Both are valid issues.

Yet grouping crypto is intellectually dishonest.

Ethereum, Bitcoin, Solana, Chainlink, Flow, and Dogecoin have different purposes and values (not saying they’re all good investments).

Fraudsters who hurt innocents will be punished.

Therefore, complaining is useless.

Why not stop it? Repair rather than complain.

Regrettably, individuals today don't offer solutions.

Blind Areas for Mungers

As with everyone, Mungers' bitcoin views may be impacted by his biases and experiences.

OK.

But Munger has always advocated classic value investing and may be wary of investing in an asset outside his expertise.

Mungers' banking and insurance investments may influence his bitcoin views.

Could a coworker or acquaintance have told him crypto is bad and goes against traditional finance?

Right?

Takeaways

Do you respect Charlie Mungers?

Yes and no, like any investor or individual.

To understand Mungers' bitcoin beliefs, you must be critical.

Mungers is a successful investor, but his views about bitcoin should be considered alongside other viewpoints.

Munger’s success as an investor has made him an influencer in the space.

Influence gives power.

He controls people's thoughts.

Munger's ok. He will always be heard.

I'll do so cautiously.

Crypto and blockchain have rebranded as web3. They probably thought it sounded better and didn't want the baggage of scam ICOs, STOs, and skirted securities laws.

It was like Facebook becoming Meta. Crypto's biggest players wanted to change public (and regulator) perception away from pump-and-dump schemes.

After the 2018 ICO gold rush, it's understandable. Every project that raised millions (or billions) never shipped a meaningful product.

Like many crazes, charlatans took the money and ran.

Despite its grifter past, web3 is THE hot topic today as more founders, venture firms, and larger institutions look to build the future decentralized internet.

Supposedly.

How often have you heard: This will change the world, fix the internet, and give people power?

Why are most of web3's biggest proponents (and beneficiaries) the same rich, powerful players who built and invested in the modern internet? It's like they want to remake and own the internet.

Something seems off about that.

Why are insiders getting preferential presale terms before the public, allowing early investors and proponents to flip dirt cheap tokens and advisors shares almost immediately after the public sale?

It's a good gig with guaranteed markups, no risk or progress.

If it sounds like insider trading, it is, at least practically. This is clear when people talk about blockchain/web3 launches and tokens.

Fast money, quick flips, and guaranteed markups/returns are common.

Incentives-wise, it's hard to blame them. Who can blame someone for following the rules to win? Is it their fault or regulators' for not leveling the playing field?

It's similar to oil companies polluting for profit, Instagram depressing you into buying a new dress, or pharma pushing an unnecessary pill.

All of that is fair game, at least until we change the playbook, because people (and corporations) change for pain or love. Who doesn't love money?

belief based on money gain

Sinclair:

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

Bitcoin, blockchain, and web3 analogies?

Most blockchain and web3 proponents are true believers, not cynical capitalists. They believe blockchain's inherent transparency and permissionless trust allow humanity to evolve beyond our reptilian ways and build a better decentralized and democratic world.

They highlight issues with the modern internet and monopoly players like Google, Facebook, and Apple. Decentralization fixes everything

If we could give power back to the people and get governments/corporations/individuals out of the way, we'd fix everything.

Blockchain solves supply chain and child labor issues in China.

To meet Paris climate goals, reduce emissions. Create a carbon token.

Fixing online hatred and polarization Web3 Twitter and Facebook replacement.

Web3 must just be the answer for everything… your “perfect” silver bullet.

Nothing fits everyone. Blockchain has pros and cons like everything else.

Blockchain's viral, ponzi-like nature has an MLM (mid level marketing) feel. If you bought Taylor Swift's NFT, your investment is tied to her popularity.

Probably makes you promote Swift more. Play music loudly.

Here's another example:

Imagine if Jehovah’s Witnesses (or evangelical preachers…) got paid for every single person they converted to their cause.

It becomes a self-fulfilling prophecy as their faith and wealth grow.

Which breeds extremism? Ultra-Orthodox Jews are an example. maximalists

Bitcoin and blockchain are causes, religions. It's a money-making movement and ideal.

We're good at convincing ourselves of things we want to believe, hence filter bubbles.

I ignore anything that doesn't fit my worldview and seek out like-minded people, which algorithms amplify.

Then what?

Is web3 merely a new scam?

No, never!

Blockchain has many crucial uses.

Sending money home/abroad without bank fees;

Like fleeing a war-torn country and converting savings to Bitcoin;

Like preventing Twitter from silencing dissidents.

Permissionless, trustless databases could benefit society and humanity. There are, however, many limitations.

Lost password?

What if you're cheated?

What if Trump/Putin/your favorite dictator incites a coup d'état?

What-ifs abound. Decentralization's openness brings good and bad.

No gatekeepers or firefighters to rescue you.

ISIS's fundraising is also frictionless.

Community-owned apps with bad interfaces and service.

Trade-offs rule.

So what compromises does web3 make?

What are your trade-offs? Decentralization has many strengths and flaws. Like Bitcoin's wasteful proof-of-work or Ethereum's political/wealth-based proof-of-stake.

To ensure the survival and veracity of the network/blockchain and to safeguard its nodes, extreme measures have been designed/put in place to prevent hostile takeovers aimed at altering the blockchain, i.e., adding money to your own wallet (account), etc.

These protective measures require significant resources and pose challenges. Reduced speed and throughput, high gas fees (cost to submit/write a transaction to the blockchain), and delayed development times, not to mention forked blockchain chains oops, web3 projects.

Protecting dissidents or rogue regimes makes sense. You need safety, privacy, and calm.

First-world life?

What if you assumed EVERYONE you saw was out to rob/attack you? You'd never travel, trust anyone, accomplish much, or live fully. The economy would collapse.

It's like an ant colony where half the ants do nothing but wait to be attacked.

Waste of time and money.

11% of the US budget goes to the military. Imagine what we could do with the $766B+ we spend on what-ifs annually.

Is so much hypothetical security needed?

Blockchain and web3 are similar.

Does your app need permissionless decentralization? Does your scooter-sharing company really need a proof-of-stake system and 1000s of nodes to avoid Russian hackers? Why?

Worst-case scenario? It's not life or death, unless you overstate the what-ifs. Web3 proponents find improbable scenarios to justify decentralization and tokenization.

Do I need a token to prove ownership of my painting? Unless I'm a master thief, I probably bought it.

despite losing the receipt.

I do, however, love Web 3.

Enough Web3 bashing for now. Understand? Decentralization isn't perfect, but it has huge potential when applied to the right problems.

I see many of the right problems as disrupting big tech's ruthless monopolies. I wrote several years ago about how tokenized blockchains could be used to break big tech's stranglehold on platforms, marketplaces, and social media.

Tokenomics schemes can be used for good and are powerful. Here’s how.

Before the ICO boom, I made a series of predictions about blockchain/crypto's future. It's still true.

Here's where I was then and where I see web3 going:

My 11 Big & Bold Predictions for Blockchain

In the near future, people may wear crypto cash rings or bracelets.

1. While some governments repress cryptocurrency, others will start to embrace it.

2. Blockchain will fundamentally alter voting and governance, resulting in a more open election process.

3. Money freedom will lead to a more geographically open world where people will be more able to leave when there is unrest.

4. Blockchain will make record keeping significantly easier, eliminating the need for a significant portion of government workers whose sole responsibility is paperwork.

5. Overrated are smart contracts.

6. Tokens will replace company stocks.

7. Blockchain increases real estate's liquidity, value, and volatility.

8. Healthcare may be most affected.

9. Crypto could end privacy and lead to Minority Report.

10. New companies with network effects will displace incumbents.

11. Soon, people will wear rings or bracelets with crypto cash.

Some have already happened, while others are still possible.

Time will tell if they happen.

And finally:

What will web3 be?

Who will be in charge?

Closing remarks

Hope you enjoyed this web3 dive. There's much more to say, but that's for another day.

We're writing history as we go.

Tech regulation, mergers, Bitcoin surge How will history remember us?

What about web3 and blockchain?

Is this a revolution or a tulip craze?

Remember, actions speak louder than words (share them in the comments).

Your turn.

Price Intelligently put out amazing content on pricing your SaaS product. This blog's link to the whole report is worth reading. Our key takeaways are below.

Don't base prices on the competition. Competitor-based pricing has clear drawbacks. Their pricing approach is yours. Your company offers customers something unique. Otherwise, you wouldn't create it. This strategy is static, therefore you can't add value by raising prices without outpricing competitors. Look, but don't touch is the competitor-based moral. You want to know your competitors' prices so you're in the same ballpark, but they shouldn't guide your selections. Competitor-based pricing also drives down prices.

Value-based pricing wins. This is customer-based pricing. Value-based pricing looks outward, not inward or laterally at competitors. Your clients are the best source of pricing information. By valuing customer comments, you're focusing on buyers. They'll decide if your pricing and packaging are right. In addition to asking consumers about cost savings or revenue increases, look at data like number of users, usage per user, etc.

Value-based pricing increases prices. As you learn more about the client and your worth, you'll know when and how much to boost rates. Every 6 months, examine pricing.

Cloning top customers. You clone your consumers by learning as much as you can about them and then reaching out to comparable people or organizations. You can't accomplish this without knowing your customers. Segmenting and reproducing them requires as much detail as feasible. Offer pricing plans and feature packages for 4 personas. The top plan should state Contact Us. Your highest-value customers want more advice and support.

Question your 4 personas. What's the one item you can't live without? Which integrations matter most? Do you do analytics? Is support important or does your company self-solve? What's too cheap? What's too expensive?

Not everyone likes per-user pricing. SaaS organizations often default to per-user analytics. About 80% of companies utilizing per-user pricing should use an alternative value metric because their goods don't give more value with more users, so charging for them doesn't make sense.

At least 3:1 LTV/CAC. Break even on the customer within 2 years, and LTV to CAC is greater than 3:1. Because customer acquisition costs are paid upfront but SaaS revenues accrue over time, SaaS companies face an early financial shortfall while paying back the CAC.

ROI should be >20:1. Indeed. Ensure the customer's ROI is 20x the product's cost. Microsoft Office costs $80 a year, but consumers would pay much more to maintain it.

A/B Testing. A/B testing is guessing. When your pricing page varies based on assumptions, you'll upset customers. You don't have enough customers anyway. A/B testing optimizes landing pages, design decisions, and other site features when you know the problem but not pricing.

Don't discount. It cheapens the product, makes it permanent, and increases churn. By discounting, you're ruining your pricing analysis.

5 VC investment criteria

I reviewed 200 startup business concepts last week. Brainache.

The enterprises sold various goods and services. The concepts were achingly similar: give us money, we'll produce a product, then get more to expand. No different from daily plans and pitches.

Most of those 200 plans sounded plausible. But 10% looked venture-worthy. 90% of startups need alternatives to venture finance.

With the success of VC-backed businesses and the growth of venture funds, a common misperception is that investors would fund any decent company idea. Finding investors that believe in the firm and founders is the key to funding.

Incorrect. Venture capital needs investing in certain enterprises. If your startup doesn't match the model, as most early-stage startups don't, you can revise your business plan or locate another source of capital.

Before spending six months pitching angels and VCs, make sure your startup fits these criteria.

Likely to generate $100 million in sales

First, I check the income predictions in a pitch deck. If it doesn't display $100M, don't bother.

The math doesn't work for venture financing in smaller businesses.

Say a fund invests $1 million in a startup valued at $5 million that is later acquired for $20 million. That's a win everyone should celebrate. Most VCs don't care.

Consider a $100M fund. The fund must reach $360M in 7 years with a 20% return. Only 20-30 investments are possible. 90% of the investments will fail, hence the 23 winners must return $100M-$200M apiece. $15M isn't worth the work.

Angel investors and tiny funds use the same ideas as venture funds, but their smaller scale affects the calculations. If a company can support its growth through exit on less than $2M in angel financing, it must have $25M in revenues before large companies will consider acquiring it.

Aiming for Hypergrowth

A startup's size isn't enough. It must expand fast.

Developing a great business takes time. Complex technology must be constructed and tested, a nationwide expansion must be built, or production procedures must go from lab to pilot to factories. These can be enormous, world-changing corporations, but venture investment is difficult.

The normal 10-year venture fund life. Investments are made during first 3–4 years.. 610 years pass between investment and fund dissolution. Funds need their investments to exit within 5 years, 7 at the most, therefore add a safety margin.

Longer exit times reduce ROI. A 2-fold return in a year is excellent. Loss at 2x in 7 years.

Lastly, VCs must prove success to raise their next capital. The 2nd fund is raised from 1st fund portfolio increases. Third fund is raised using 1st fund's cash return. Fund managers must raise new money quickly to keep their jobs.

Branding or technology that is protected

No big firm will buy a startup at a high price if they can produce a competing product for less. Their development teams, consumer base, and sales and marketing channels are large. Who needs you?

Patents, specialist knowledge, or brand name are the only answers. The acquirer buys this, not the thing.

I've heard of several promising startups. It's not a decent investment if there's no exit strategy.

A company that installs EV charging stations in apartments and shopping areas is an example. It's profitable, repeatable, and big. A terrific company. Not a startup.

This building company's operations aren't secret. No technology to protect, no special information competitors can't figure out, no go-to brand name. Despite the immense possibilities, a large construction company would be better off starting their own.

Most venture businesses build products, not services. Services can be profitable but hard to safeguard.

Probable purchase at high multiple

Once a software business proves its value, acquiring it is easy. Pharma and medtech firms have given up on their own research and instead acquire startups after regulatory permission. Many startups, especially in specialized areas, have this weakness.

That doesn't mean any lucrative $25M-plus business won't be acquired. In many businesses, the venture model requires a high exit premium.

A startup invents a new glue. 3M, BASF, Henkel, and others may buy them. Adding more adhesive to their catalogs won't boost commerce. They won't compete to buy the business. They'll only buy a startup at a profitable price. The acquisition price represents a moderate EBITDA multiple.

The company's $100M revenue presumably yields $10m in profits (assuming they’ve reached profitability at all). A $30M-$50M transaction is likely. Not terrible, but not what venture investors want after investing $25M to create a plant and develop the business.

Private equity buys profitable companies for a moderate profit multiple. It's a good exit for entrepreneurs, but not for investors seeking 10x or more what PE firms pay. If a startup offers private equity as an exit, the conversation is over.

Constructed for purchase

The startup wants a high-multiple exit. Unless the company targets $1B in revenue and does an IPO, exit means acquisition.

If they're constructing the business for acquisition or themselves, founders must decide.

If you want an indefinitely-running business, I applaud you. We need more long-term founders. Most successful organizations are founded around consumer demands, not venture capital's urge to grow fast and exit. Not venture funding.

if you don't match the venture model, what to do

VC funds moonshots. The 10% that succeed are extraordinary. Not every firm is a rocketship, and launching the wrong startup into space, even with money, will explode.

But just because your startup won't make $100M in 5 years doesn't mean it's a bad business. Most successful companies don't follow this model. It's not venture capital-friendly.

Although venture capital gets the most attention due to a few spectacular triumphs (and disasters), it's not the only or even most typical option to fund a firm.

Other ways to support your startup:

• Personal and family resources, such as credit cards, second mortgages, and lines of credit

• bootstrapping off of sales

• government funding and honors

• Private equity & project financing

• collaborating with a big business

• Including a business partner

Before pitching angels and VCs, be sure your startup qualifies. If so, include them in your pitch.