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.

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.

Introduction

Markets rely on knowledge.

The internet provided practically endless knowledge and wisdom. Humanity has never seen such leverage. Technology's progress drives us to adapt to a changing world, changing our routines and behaviors.

In a digital age, people may struggle to live in the analogue world of their upbringing. Can those who can't adapt change their lives? I won't answer. We should teach those who are willing to learn, nevertheless. Unravel the modern world's riddles and give them wisdom.

Adapt or die . Accept the future or remain behind.

This essay will help you comprehend Bitcoin better than most market participants and the general public. Let's dig into Bitcoin.

Join me.

Ascension

Bitcoin.org was registered in August 2008. Bitcoin whitepaper was published on 31 October 2008. The document intrigued and motivated people around the world, including technical engineers and sovereignty seekers. Since then, Bitcoin's whitepaper has been read and researched to comprehend its essential concept.

I recommend reading the whitepaper yourself. You'll be able to say you read the Bitcoin whitepaper instead of simply Googling "what is Bitcoin" and reading the fundamental definition without knowing the revolution's scope. The article links to Bitcoin's whitepaper. To avoid being overwhelmed by the whitepaper, read the following article first.

Bitcoin isn't the first peer-to-peer digital currency. Hashcash or Bit Gold were once popular cryptocurrencies. These two Bitcoin precursors failed to gain traction and produce the network effect needed for general adoption. After many struggles, Bitcoin emerged as the most successful cryptocurrency, leading the way for others.

Satoshi Nakamoto, an active bitcointalk.org user, created Bitcoin. Satoshi's identity remains unknown. Satoshi's last bitcointalk.org login was 12 December 2010. Since then, he's officially disappeared. Thus, conspiracies and riddles surround Bitcoin's creators. I've heard many various theories, some insane and others well-thought-out.

It's not about who created it; it's about knowing its potential. Since its start, Satoshi's legacy has changed the world and will continue to.

Block-by-block blockchain

Bitcoin is a distributed ledger. What's the meaning?

Everyone can view all blockchain transactions, but no one can undo or delete them.

Imagine you and your friends routinely eat out, but only one pays. You're careful with money and what others owe you. How can everyone access the info without it being changed?

You'll keep a notebook of your evening's transactions. Everyone will take a page home. If one of you changed the page's data, the group would notice and reject it. The majority will establish consensus and offer official facts.

Miners add a new Bitcoin block to the main blockchain every 10 minutes. The appended block contains miner-verified transactions. Now that the next block has been added, the network will receive the next set of user transactions.

Bitcoin Proof of Work—prove you earned it

Any firm needs hardworking personnel to expand and serve clients. Bitcoin isn't that different.

Bitcoin's Proof of Work consensus system needs individuals to validate and create new blocks and check for malicious actors. I'll discuss Bitcoin's blockchain consensus method.

Proof of Work helps Bitcoin reach network consensus. The network is checked and safeguarded by CPU, GPU, or ASIC Bitcoin-mining machines (Application-Specific Integrated Circuit).

Every 10 minutes, miners are rewarded in Bitcoin for securing and verifying the network. It's unlikely you'll finish the block. Miners build pools to increase their chances of winning by combining their processing power.

In the early days of Bitcoin, individual mining systems were more popular due to high maintenance costs and larger earnings prospects. Over time, people created larger and larger Bitcoin mining facilities that required a lot of space and sophisticated cooling systems to keep machines from overheating.

Proof of Work is a vital part of the Bitcoin network, as network security requires the processing power of devices purchased with fiat currency. Miners must invest in mining facilities, which creates a new business branch, mining facilities ownership. Bitcoin mining is a topic for a future article.

More mining, less reward

Bitcoin is usually scarce.

Why is it rare? It all comes down to 21,000,000 Bitcoins.

Were all Bitcoins mined? Nope. Bitcoin's supply grows until it hits 21 million coins. Initially, 50BTC each block was mined, and each block took 10 minutes. Around 2140, the last Bitcoin will be mined.

But 50BTC every 10 minutes does not give me the year 2140. Indeed careful reader. So important is Bitcoin's halving process.

What is halving?

The block reward is halved every 210,000 blocks, which takes around 4 years. The initial payout was 50BTC per block and has been decreased to 25BTC after 210,000 blocks. First halving occurred on November 28, 2012, when 10,500,000 BTC (50%) had been mined. As of April 2022, the block reward is 6.25BTC and will be lowered to 3.125BTC by 19 March 2024.

The halving method is tied to Bitcoin's hashrate. Here's what "hashrate" means.

What if we increased the number of miners and hashrate they provide to produce a block every 10 minutes? Wouldn't we manufacture blocks faster?

Every 10 minutes, blocks are generated with little asymmetry. Due to the built-in adaptive difficulty algorithm, the overall hashrate does not affect block production time. With increased hashrate, it's harder to construct a block. We can estimate when the next halving will occur because 10 minutes per block is fixed.

Building with nodes and blocks

For someone new to crypto, the unusual terms and words may be overwhelming. You'll also find everyday words that are easy to guess or have a vague idea of what they mean, how they work, and what they do. Consider blockchain technology.

Nodes and blocks: Think about that for a moment. What is your first idea?

The blockchain is a chain of validated blocks added to the main chain. What's a "block"? What's inside?

The block is another page in the blockchain book that has been filled with transaction information and accepted by the majority.

We won't go into detail about what each block includes and how it's built, as long as you understand its purpose.

What about nodes?

Nodes, along with miners, verify the blockchain's state independently. But why?

To create a full blockchain node, you must download the whole Bitcoin blockchain and check every transaction against Bitcoin's consensus criteria.

What's Bitcoin's size? 

In April 2022, the Bitcoin blockchain was 389.72GB.

Bitcoin's blockchain has miners and node runners.

Let's revisit the US gold rush. Miners mine gold with their own power (physical and monetary resources) and are rewarded with gold (Bitcoin). All become richer with more gold, and so does the country.

Nodes are like sheriffs, ensuring everything is done according to consensus rules and that there are no rogue miners or network users.

Lost and held bitcoin

Does the Bitcoin exchange price match each coin's price? How many coins remain after 21,000,000? 21 million or less?

Common reason suggests a 21 million-coin supply.

What if I lost 1BTC from a cold wallet?

What if I saved 1000BTC on paper in 2010 and it was damaged?

What if I mined Bitcoin in 2010 and lost the keys?

Satoshi Nakamoto's coins? Since then, those coins haven't moved.

How many BTC are truly in circulation?

Many people are trying to answer this question, and you may discover a variety of studies and individual research on the topic. Be cautious of the findings because they can't be evaluated and the statistics are hazy guesses.

On the other hand, we have long-term investors who won't sell their Bitcoin or will sell little amounts to cover mining or living needs.

The price of Bitcoin is determined by supply and demand on exchanges using liquid BTC. How many BTC are left after subtracting lost and non-custodial BTC? 

We have significantly less Bitcoin in circulation than you think, thus the price may not reflect demand if we knew the exact quantity of coins available.

True HODLers and diamond-hand investors won't sell you their coins, no matter the market.

What's UTXO?

Unspent (U) Transaction (TX) Output (O)

Imagine taking a $100 bill to a store. After choosing a drink and munchies, you walk to the checkout to pay. The cashier takes your $100 bill and gives you $25.50 in change. It's in your wallet.

Is it simply 100$? No way.

The $25.50 in your wallet is unrelated to the $100 bill you used. Your wallet's $25.50 is just bills and coins. Your wallet may contain these coins and bills:

2x 10$ 1x 10$

1x 5$ or 3x 5$

1x 0.50$ 2x 0.25$

Any combination of coins and bills can equal $25.50. You don't care, and I'd wager you've never ever considered it.

That is UTXO. Now, I'll detail the Bitcoin blockchain and how UTXO works, as it's crucial to know what coins you have in your (hopefully) cold wallet.

You purchased 1BTC. Is it all? No. UTXOs equal 1BTC. Then send BTC to a cold wallet. Say you pay 0.001BTC and send 0.999BTC to your cold wallet. Is it the 1BTC you got before? Well, yes and no. The UTXOs are the same or comparable as before, but the blockchain address has changed. It's like if you handed someone a wallet, they removed the coins needed for a network charge, then returned the rest of the coins and notes.

UTXO is a simple concept, but it's crucial to grasp how it works to comprehend dangers like dust attacks and how coins may be tracked.

Lightning Network: fast cash

You've probably heard of "Layer 2 blockchain" projects.

What does it mean?

Layer 2 on a blockchain is an additional layer that increases the speed and quantity of transactions per minute and reduces transaction fees.

Imagine going to an obsolete bank to transfer money to another account and having to pay a charge and wait. You can transfer funds via your bank account or a mobile app without paying a fee, or the fee is low, and the cash appear nearly quickly. Layer 1 and 2 payment systems are different.

Layer 1 is not obsolete; it merely has more essential things to focus on, including providing the blockchain with new, validated blocks, whereas Layer 2 solutions strive to offer Layer 1 with previously processed and verified transactions. The primary blockchain, Bitcoin, will only receive the wallets' final state. All channel transactions until shutting and balancing are irrelevant to the main chain.

Layer 2 and the Lightning Network's goal are now clear. Most Layer 2 solutions on multiple blockchains are created as blockchains, however Lightning Network is not. Remember the following remark, as it best describes Lightning.

Lightning Network connects public and private Bitcoin wallets.

Opening a private channel with another wallet notifies just two parties. The creation and opening of a public channel tells the network that anyone can use it.

Why create a public Lightning Network channel?

Every transaction through your channel generates fees.

Money, if you don't know.

See who benefits when in doubt.

Anonymity, huh?

Bitcoin anonymity? Bitcoin's anonymity was utilized to launder money.

Well… You've heard similar stories. When you ask why or how it permits people to remain anonymous, the conversation ends as if it were just a story someone heard.

Bitcoin isn't private. Pseudonymous.

What if someone tracks your transactions and discovers your wallet address? Where is your anonymity then?

Bitcoin is like bulletproof glass storage; you can't take or change the money. If you dig and analyze the data, you can see what's inside.

Every online action leaves a trace, and traces may be tracked. People often forget this guideline.

A tool like that can help you observe what the major players, or whales, are doing with their coins when the market is uncertain. Many people spend time analyzing on-chain data. Worth it?

Ask yourself a question. What are the big players' options?  Do you think they're letting you see their wallets for a small on-chain data fee?

Instead of short-term behaviors, focus on long-term trends.

More wallet transactions leave traces. Having nothing to conceal isn't a defect. Can it lead to regulating Bitcoin so every transaction is tracked like in banks today?

But wait. How can criminals pay out Bitcoin? They're doing it, aren't they?

Mixers can anonymize your coins, letting you to utilize them freely. This is not a guide on how to make your coins anonymous; it could do more harm than good if you don't know what you're doing.

Remember, being anonymous attracts greater attention.

Bitcoin isn't the only cryptocurrency we can use to buy things. Using cryptocurrency appropriately can provide usability and anonymity. Monero (XMR), Zcash (ZEC), and Litecoin (LTC) following the Mimblewimble upgrade are examples.

Summary

Congratulations! You've reached the conclusion of the article and learned about Bitcoin and cryptocurrency. You've entered the future.

You know what Bitcoin is, how its blockchain works, and why it's not anonymous. I bet you can explain Lightning Network and UTXO to your buddies.

Markets rely on knowledge. Prepare yourself for success before taking the first step. Let your expertise be your edge.

This article is a summary of this one.

900K impressions, 8K clicks, and $$$ orders…

I recently started dropshipping. Now that I own my business and can charge it as a business expense, it feels less like money wasted if it doesn't work. I also made t-shirts to sell. I intended to open a t-shirt store and had many designs on a hard drive. I read that Tiktok advertising had a high conversion rate and low cost because they were new. According to many, the advertising' cost/efficiency ratio would plummet and become as bad as Google or Facebook Ads. Now felt like the moment to try Tiktok marketing and dropshipping. I work in marketing for a SaaS firm and have seen how poorly ads perform. I wanted to try it alone.

I set up $250 and ran advertising for a week. Before that, I made my own products, store, and marketing. In this post, I'll show you my process and results.

Setting up the store

Dropshipping is a sort of retail business in which the manufacturer ships the product directly to the client through an online platform maintained by a seller. The seller takes orders but has no stock. The manufacturer handles all orders. This no-stock concept increases profitability and flexibility.

In my situation, I used previous t-shirt designs to make my own product. I didn't want to handle order fulfillment logistics, so I looked for a way to print my designs on demand, ship them, and handle order tracking/returns automatically. So I found Printful.

I needed to connect my backend and supplier to a storefront so visitors could buy. 99% of dropshippers use Shopify, but I didn't want to master the difficult application. I wanted a one-day project. I'd previously worked with Big Cartel, so I chose them.

Big Cartel doesn't collect commissions on sales, simply a monthly flat price ($9.99 to $19.99 depending on your plan).

After opening a Big Cartel account, I uploaded 21 designs and product shots, then synced each product with Printful.

Developing the ads

I mocked up my designs on cool people photographs from placeit.net, a great tool for creating product visuals when you don't have a studio, camera gear, or models to wear your t-shirts.

I opened an account on the website and had advertising visuals within 2 hours.

Because my designs are simple (black design on white t-shirt), I chose happy, stylish people on plain-colored backdrops. After that, I had to develop an animated slideshow.

Because I'm a graphic designer, I chose to use Adobe Premiere to create animated Tiktok advertising.

Premiere is a fancy video editing application used for more than advertisements. Premiere is used to edit movies, not social media marketing. I wanted this experiment to be quick, so I got 3 social media ad templates from motionarray.com and threw my visuals in. All the transitions and animations were pre-made in the files, so it only took a few hours to compile. The result:

I downloaded 3 different soundtracks for the videos to determine which would convert best.

After that, I opened a Tiktok business account, uploaded my films, and inserted ad info. They went live within one hour.

The (poor) outcomes

As a European company, I couldn't deliver ads in the US. All of my advertisements' material (title, description, and call to action) was in English, hence they continued getting rejected in Europe for countries that didn't speak English. There are a lot of them:

I lost a lot of quality traffic, but I felt that if the images were engaging, people would check out the store and buy my t-shirts. I was wrong.

• 51,071 impressions on Day 1. 0 orders after 411 clicks

• 114,053 impressions on Day 2. 1.004 clicks and no orders

• Day 3: 987 clicks, 103,685 impressions, and 0 orders

• 101,437 impressions on Day 4. 0 orders after 963 clicks

• 115,053 impressions on Day 5. 1,050 clicks and no purchases

• 125,799 impressions on day 6. 1,184 clicks, no purchases

• 115,547 impressions on Day 7. 1,050 clicks and no purchases

• 121,456 impressions on day 8. 1,083 clicks, no purchases

• 47,586 impressions on Day 9. 419 Clicks. No orders

My overall conversion rate for video advertisements was 0.9%. TikTok's paid ad formats all result in strong engagement rates (ads average 3% to 12% CTR to site), therefore a 1 to 2% CTR should have been doable.

My one-week experiment yielded 8,151 ad clicks but no sales. Even if 0.1% of those clicks converted, I should have made 8 sales. Even companies with horrible web marketing would get one download or trial sign-up for every 8,151 clicks. I knew that because my advertising were in English, I had no impressions in the main EU markets (France, Spain, Italy, Germany), and that this impacted my conversion potential. I still couldn't believe my numbers.

I dug into the statistics and found that Tiktok's stats didn't match my store traffic data.

Looking more closely at the numbers

My ads were approved on April 26 but didn't appear until April 27. My store dashboard showed 440 visitors but 1,004 clicks on Tiktok. This happens often while tracking campaign results since different platforms handle comparable user activities (click, view) differently. In online marketing, residual data won't always match across tools.

My data gap was too large. Even if half of the 1,004 persons who clicked closed their browser or left before the store site loaded, I would have gained 502 visitors. The significant difference between Tiktok clicks and Big Cartel store visits made me suspicious. It happened all week:

• Day 1: 440 store visits and 1004 ad clicks

• Day 2: 482 store visits, 987 ad clicks

• 3rd day: 963 hits on ads, 452 store visits

• 443 store visits and 1,050 ad clicks on day 4.

• Day 5: 459 store visits and 1,184 ad clicks

• Day 6: 430 store visits and 1,050 ad clicks

• Day 7: 409 store visits and 1,031 ad clicks

• Day 8: 166 store visits and 418 ad clicks

The disparity wasn't related to residual data or data processing. The disparity between visits and clicks looked regular, but I couldn't explain it.

After the campaign concluded, I discovered all my creative assets (the videos) had a 0% CTR and a $0 expenditure in a separate dashboard. Whether it's a dashboard reporting issue or a budget allocation bug, online marketers shouldn't see this.

Tiktok can present any stats they want on their dashboard, just like any other platform that runs advertisements to promote content to its users. I can't verify that 895,687 individuals saw and clicked on my ad. I invested $200 for what appears to be around 900K impressions, which is an excellent ROI. No one bought a t-shirt, even an unattractive one, out of 900K people?

Would I do it again?

Nope. Whether I didn't make sales because Tiktok inflated the dashboard numbers or because I'm horrible at producing advertising and items that sell, I’ll stick to writing content and making videos. If setting up a business and ads in a few days was all it took to make money online, everyone would do it.

Video advertisements and dropshipping aren't dead. As long as the internet exists, people will click ads and buy stuff. Converting ads and selling stuff takes a lot of work, and I want to focus on other things.

I had always wanted to try dropshipping and I’m happy I did, I just won’t stick to it because that’s not something I’m interested in getting better at.

If I want to sell t-shirts again, I'll avoid Tiktok advertisements and find another route.

Would you abandon your bank for Apple?

Banks are struggling.

• not as a result of inflation

• not due to the economic downturn.

• not due to the conflict in Ukraine.

But because they’re underestimating Apple.

Slowly but surely, Apple is looking more like a bank.

An easy new savings account like Apple

Apple has a new savings account.

Apple says Apple Card users may set up and manage savings straight in Wallet.

• No more charges

• Colorfully high yields

• With no minimum balance

• No minimal down payments

Most consumer-facing banks will have to match Apple's offer or suffer disruption.

Users may set it up from their iPhones without traveling to a bank or filling out paperwork.

It’s built into the iPhone in your pocket.

So now more waiting for slow approval processes.

Once the savings account is set up, Apple will automatically transfer all future Daily Cash into it. Users may also add these cash to an Apple Cash card in their Apple Wallet app and adjust where Daily Cash is paid at any time.

Apple Pay and Apple Wallet VP Jennifer Bailey:

Savings enables Apple Card users to grow their Daily Cash rewards over time, while also saving for the future.

Bailey says Savings adds value to Apple Card's Daily Cash benefit and offers another easy-to-use tool to help people lead healthier financial lives.

Transfer money from a linked bank account or Apple Cash to a Savings account. Users can withdraw monies to a connected bank account or Apple Cash card without costs.

Once set up, Apple Card customers can track their earnings via Wallet's Savings dashboard. This dashboard shows their account balance and interest.

This product targets younger people as the easiest way to start a savings account on the iPhone.

Why would a Gen Z account holder travel to the bank if their iPhone could be their bank?

Using this concept, Apple will transform the way we think about banking by 2030.

Two other nightmares keep bankers awake at night

Apple revealed two new features in early 2022 that banks and payment gateways hated.

• Tap to Pay with Apple

• Late Apple Pay

They startled the industry.

Tap To Pay converts iPhones into mobile POS card readers. Apple Pay Later is pushing the BNPL business in a consumer-friendly direction, hopefully ending dodgy lending practices.

Tap to Pay with Apple

iPhone POS

Millions of US merchants, from tiny shops to huge establishments, will be able to accept Apple Pay, contactless credit and debit cards, and other digital wallets with a tap.

No hardware or payment terminal is needed.

Revolutionary!

Stripe has previously launched this feature.

Tap to Pay on iPhone will provide companies with a secure, private, and quick option to take contactless payments and unleash new checkout experiences, said Bailey.

Apple's solution is ingenious. Brilliant!

Bailey says that payment platforms, app developers, and payment networks are making it easier than ever for businesses of all sizes to accept contactless payments and thrive.

I admire that Apple is offering this up to third-party services instead of closing off other functionalities.

Slow POS terminals, farewell.

Late Apple Pay

Pay Apple later.

Apple Pay Later enables US consumers split Apple Pay purchases into four equal payments over six weeks with no interest or fees.

The Apple ecosystem integration makes this BNPL scheme unique. Nonstick. No dumb forms.

Frictionless.

Just double-tap the button.

Apple Pay Later was designed with users' financial well-being in mind. Apple makes it easy to use, track, and pay back Apple Pay Later from Wallet.

Apple Pay Later can be signed up in Wallet or when using Apple Pay. Apple Pay Later can be used online or in an app that takes Apple Pay and leverages the Mastercard network.

Apple Pay Order Tracking helps consumers access detailed receipts and order tracking in Wallet for Apple Pay purchases at participating stores.

Bad BNPL suppliers, goodbye.

Most bankers will be caught in Apple's eye playing mini golf in high-rise offices.

The big problem:

• Banks still think about features and big numbers just like other smartphone makers did not too long ago.

• Apple thinks about effortlessness, seamlessness, and frictionlessness that just work through integrated hardware and software.

Let me know what you think Apple’s next power moves in the banking industry could be.

Higher startup valuations are often favorable for all parties. High valuations show a business's potential. New customers and talent are attracted. They earn respect.

Everyone benefits if a company's valuation rises.

Founders and investors have always been incentivized to overestimate a company's value.

Post-money valuations were inflated by 2021 market expectations and the valuation model's mechanisms.

Founders must understand both levers to handle a normalizing market.

2021, the year of miracles

2021 must've seemed miraculous to entrepreneurs, employees, and VCs. Valuations rose, and funding resumed after the first Covid-19 epidemic caution.

In 2021, VC investments increased from $335B to $643B. 518 new worldwide unicorns vs. 134 in 2020; 951 US IPOs vs. 431.

Things can change quickly, as 2020-21 showed.

Rising interest rates, geopolitical developments, and normalizing technology conditions drive down share prices and tech company market caps in 2022. Zoom, the poster-child of early lockdown success, is down 37% since 1st Jan.

Once-inflated valuations can become a problem in a normalizing market, especially for founders, employees, and early investors.

the reason why startups are always overvalued

To see why inflated valuations are a problem, consider one of its causes.

Private company values only fluctuate following a new investment round, unlike publicly-traded corporations. The startup's new value is calculated simply:

(Latest round share price) x (total number of company shares)

This is the industry standard Post-Money Valuation model.

Let’s illustrate how it works with an example. If a VC invests $10M for 1M shares (at $10/share), and the company has 10M shares after the round, its Post-Money Valuation is $100M (10/share x 10M shares).

This approach might seem like the most natural way to assess a business, but the model often unintentionally overstates the underlying value of the company even if the share price paid by the investor is fair. All shares aren't equal.

New investors in a corporation will always try to minimize their downside risk, or the amount they lose if things go wrong. New investors will try to negotiate better terms and pay a premium.

How the value of a struggling SpaceX increased

SpaceX's 2008 Series D is an example. Despite the financial crisis and unsuccessful rocket launches, the company's Post-Money Valuation was 36% higher after the investment round. Why?

Series D SpaceX shares were protected. In case of liquidation, Series D investors were guaranteed a 2x return before other shareholders.

Due to downside protection, investors were willing to pay a higher price for this new share class.

The Post-Money Valuation model overpriced SpaceX because it viewed all the shares as equal (they weren't).

Why entrepreneurs, workers, and early investors stand to lose the most

Post-Money Valuation is an effective and sufficient method for assessing a startup's valuation, despite not taking share class disparities into consideration.

In a robust market, where the firm valuation will certainly expand with the next fundraising round or exit, the inflated value is of little significance.

Fairness endures. If a corporation leaves at a greater valuation, each stakeholder will receive a proportional distribution. (i.e., 5% of a $100M corporation yields $5M).

SpaceX's inherent overvaluation was never a problem. Had it been sold for less than its Post-Money Valuation, some shareholders, including founders, staff, and early investors, would have seen their ownership drop.

The unforgiving world of 2022

In 2022, founders, employees, and investors who benefited from inflated values will face below-valuation exits and down-rounds.

For them, 2021 will be a curse, not a blessing.

Some tech giants are worried. Klarna's valuation fell from $45B (Oct 21) to $30B (Jun 22), Canvas from $40B to $27B, and GoPuffs from $17B to $8.3B.

Shazam and Blue Apron have to exit or IPO at a cheaper price. Premium share classes are protected, while others receive less. The same goes for bankrupts.

Those who continue at lower valuations will lose reputation and talent. When their value declines by half, generous employee stock options become less enticing, and their ability to return anything is questioned.

What can we infer about the present situation?

Such techniques to enhance your company's value or stop a normalizing market are fiction.

The current situation is a painful reminder for entrepreneurs and a crucial lesson for future firms.

The devastating market fall of the previous six months has taught us one thing:

1. Keep in mind that any valuation is speculative. Money Post A startup's valuation is a highly simplified approximation of its true value, particularly in the early phases when it lacks significant income or a cutting-edge product. It is merely a projection of the future and a hypothetical meter. Until it is achieved by an exit, a valuation is nothing more than a number on paper.
   

2. Assume the value of your company is lower than it was in the past. Your previous valuation might not be accurate now due to substantial changes in the startup financing markets. There is little reason to think that your company's value will remain the same given the 50%+ decline in many newly listed IT companies. Recognize how the market situation is changing and use caution.
   

3. Recognize the importance of the stake you hold. Each share class has a unique value that varies. Know the sort of share class you own and how additional contractual provisions affect the market value of your security. Frameworks have been provided by Metrick and Yasuda (Yale & UC) and Gornall and Strebulaev (Stanford) for comprehending the terms that affect investors' cash-flow rights upon withdrawal. As a result, you will be able to more accurately evaluate your firm and determine the worth of each share class.
   

4. Be wary of approving excessively protective share terms.
   The trade-offs should be considered while negotiating subsequent rounds. Accepting punitive contractual terms could first seem like a smart option in order to uphold your inflated worth, but you should proceed with caution. Such provisions ALWAYS result in misaligned shareholders, with common shareholders (such as you and your staff) at the bottom of the list.