Epistle 2
Henlo, VC looking for Eternal Return
You have made us for yourself, O Lord, and our heart is restless until it rests in you.
St Augustine, confessions
I’ve just landed back in New Mexico from a week long fact finding trip through California. I’m still learning how to get into the right rhythm of accountability and self-discipline to produce a measly bi-weekly newsletter. Just 10.5 months out of the Corporate Game, and my ability to do something with a deadline is eroding. Hence the self-assigned job. However, having no boss, these things can be of unboundedly poor quality, which should lower the barrier to action.
I left the Bay Area in late summer 2022 making my final drive out from San Francisco in my 2008 Toyota Sienna minivan after spending a miserable Bay Area summer living in my friend’s basement in Bernal Heights. It was one last attempt to make it work with my girlfriend at the time.
I had bought a house in Albuquerque New Mexico in 2021 and was erratically trying to establish a stable shelter outside of the failing state of California amidst post-covid collapse and an Ego destroying bitcoin bear market (the asset in which I hold most my net worth). Watching it wick down to $16K sitting on the futon mat in my damp room behind the garage, I saw over half the value of the windfall from a tech IPO I participated in the year prior, get wiped out.
“She’s not going to want to stay with me thru the next couple years waiting for this thing to come back, she’s not going to want to do what it takes to nurse this bag back to health and survive with me”. She of course didn’t. However she did come with me on that last road trip out to New Mexico just for good times. Girls are always down for a good time. Before they fly back to their turbo-normie apartment life in an email-job city just in time for drinks with their childless friends on a Friday night at that one place that plays vinyls sometimes.
Now, a little over 2 years later (or has it been two centuries?), the bag is back and bigger than ever, the house is up, the memes paid off, and My SMV is 10Xing as you read this CANT YOU TELL OMG STOP MAKING FUN OF MY VAN DON’T YOU KNOW I HAVE BITCOIN!
The Bay Area dream life: a house in Berkeley or Marin County, a cute vintage BMW to drive around, and some inbred-poodle mix; I can afford it all now, in cash (this is when G*d vaporizes my portfolio into dust to punish me pride). However, there is an asset I would still have to acquire to make that work: a Bay Area Job (if you’re going to sit in the house all day reading Evola with no Office Maximalism or income, just go back to the hut on the Rez Anon). What’s the cost of such an asset, and the expected return compared other assets of comparable cost?
You Give me Your Time, Your Vitality, Your Lower Back Health, That Glint in Your Eye 👁️, and I Give You Some Illiquid Shares in Your Carta Account
I worked at two pre-IPO startups between 2016 and 2020. Though I did not exercise options from the first 💀, they both had very successful exits. Exchanging labor for tech startup equity or options was overall a good trade during that period. I have serious questions about whether the same holds true now and going forward. Though I make no conclusion based off of one observation, I do have a directional bias. And if correct it would predict where new entrants into the technology labor market might want to allocate their labor, which would have big implications for where capital and attention goes through the rest of the decade.
Me friends have a generative voice AI startup. Tokens to speech; simple. They took seed capital over three years ago, prior to ChatGPT and the current wave of AI companies. This should’ve given them a head start. Unfortunately it just means that they now have countless, well funded and rather motivated competitors doing functionally the same thing. Supply glut.
While we sit in the SOMA office on grey San Francisco winter morning, we discuss the recent arrest of Luigi Mangione (another zoomer CS grad lost 😢). Various jaded-millenial post-irony takes were passed around. “They’re trying to smear him with the Ted K Good reads”. I interrupted: “you’re all wrong. The right answer to the question is: look at Dex screener”. Sure enough we had faded a 10Xer that morning while talking about “the implications.”
This company is not going to get another round before the end of the year. A bankruptcy is very possible. This would mean they wind down the company. The investors write off the loss. And the founding team goes home with nothing. Shitcoin went to zero.
The bare minimum exit of a 1X sale would allow the founders to take home a couple million, but the investors would just be getting their money back.
The expected value of this trade (years of your time for shares in the company you found) feels like it’s essentially 0.
Suppose you had the skill set required to either be a founder or an early engineer in VC funded tech startup. You’d probably be able to learn the basics of trading and crypto asset analysis, execute a straightforward strategy, and master your emotions enough to take profits responsibly. What would be the expected value of just trading crypto for the next 12 months with a modest amount of principal (say $100k)? Again this isn’t even a back of the envelope calculation, it’s just a vibe I got sitting in that SOMA office while watching Luigi coin 10-50X over the course of it’s first 4 hours of life, but my guess is … ten million dollars. Why not.
Another consideration: what will the value of those “software engineering skills” you develop along the way be? Will Google be hiring SWE’s when you have close up your failed startup in 2-5 years when 99% of their production code is written by Quantum powered AI? No. The answer is No they won’t be hiring you. You’d be better off just going to Hawaii to join an intentional living community and learn to surf, and maybe do a little plant medicine and try to find yourself… wait.
Meanwhile, down the street in the Mission, my friend the Gay yoga studio owner is secretly fed up (and has been for 20 years) with the homo-leftistm of the bay and just wants to get rid of the street vermin so the city can become attractive to office-makers and high earners again. Go short Bay Area trad-VC-tech equity, go long crypto-funded GAY-MAGA San Francisco Revivalism.
On the flight back, I sat next to Zach Horowitz’ mom. She said her son had fallen on hard times, and was in prison. I.e., he was the fall guy for ponzi scheme in Hollywood and is now living in FCI Terminal Island with a view of the ocean. I think he has a bright future for him when he gets out. My brother, different paths, same journey.
Actually, You Did Tick the Top Sir
In the last letter I said
If you were to start a “fund” over the past few weeks, were you early or late to the party? Is your own hubris in thinking you could “beat $WIF” itself the top signal?
Update from the P&L sheets of our so-called fund, we are not beating WIF. While there were moments where we were performing better than if we had just held our lil doggie coin, ultimately we did the ceremonial round trip back, then some principal loss just to make sure the signal was clear. So now the question is: as people finally sink into Winter blues and have withdrawals from lack of market pump induced dopamine hits, wdyd. This YOU KEEP RUNNING THE FUND.
While the Meme coin meta might be maxxing out, there are still gains in that market. And at the end of the day everything that’s not Bitcoin is a memetics coin. Bitcoin might be partially excused due to it’s continued reliance on proof of work.
Market Forecasts
Retro on Previous predictions
Last week I said
By the end of the week we’ll have and ATH about $100K, but COIN will press up against its own recent high of $340. I plan on liquidating at that point.
I called it perfectly. Bitcoin crossed $100K for the first time on December 4, 2024, and Coinbase topped out at $349 a couple days later.
My claims about $CHILLGUY ($0.3146) and inauguration day bitcoin price have yet to be played out.
Looking Forward
I expect it to be pretty quiet through the middle of January, which means a great opportunity to research, take some profits when we get to a new tax year, and rotate them into new position. Bitcoin will chop from here till end of year, ending slightly above 100K.
January will see next big move of bitcoin 15-25% around the inauguration.
In my personal account, I am considering selling off ~10% of my bitcoin stack and allocating after-tax cash to a mix of Solana, Sui (which I know absolutely nothing about) and some small positions in some potential big gainers. The goal being to capture bigger gains than if I had held Bitcoin, sell them off sometime next year, and rotate profits back into Bitcoin over time. If I end up with more Bitcoin than when I started the rotation, that’s a win, if I end up with less, I fucked up.
See you next time Holy Fools.