The Breakdown

Second order effects are things that happen as unexpected outcomes of something else happening. These effects can create surprising causal chains.  Take this for example: A pandemic makes everyone need to work from home leads to an increase in video calling leads to Walmart reporting that people are buying more shirts, but not pants.  Emerson Spartz is one of the world’s foremost thinkers on virality and the internet. He founded Mugglenet - the world’s biggest Harry Potter fan site - as a middle school drop out, and would later found and raise tens of millions for Dose.  In the past weeks, Emerson started an open crowdsourced document on the Coronavirus’ second order effects that has, itself, gone viral, especially among venture capitals and other investor circles trying to understand what the world looks like on the other side of this.  Emerson brings a surprisingly optimistic perspective on where this could lead a generation of people who are now more fully plugged in to the internet than ever before.

The full week's episode, in one convenient file. Monday | Bitcoin, Stablecoins, DeFi and Privacy: How COVID-19 is Changing Key Crypto Narratives Tuesday | ‘If You’re Not Radicalized, You’re Not Paying Attention’ Feat. Nic Carter Wednesday | How Coronavirus Is Accelerating the End of Globalism, Feat. Peter Zeihan Thursday | 5 Reasons For Cautious Optimism In Crypto Friday | Will DeFi Even Matter In A Post-Corona World? Feat. Matt Luongo  

Matt Luongo got his start in bitcoin in 2013. In 2016, he watched a pivotal moment where the sound money, digital gold narrative subsumed the payments use case for bitcoin. While he agreed, ultimately, with the important of bitcoin as a new reserve asset, he still wanted to build and found his way to Ethereum.  Now his company is launching tBTC, a trust-minimized bridge between bitcoin and ethereum. Among other uses, it is a new solution to enabling bitcoin to be used as collateral in DeFi applications.  In this conversation, Matt and @NLW discuss these narrative shifts, as well as what the role and narrative for DeFi might be in a post-Covid crisis world. 

The economic outlook is grim. The jobless claims keep piling up and even the most intransigent states are shutting down business. There isn’t - yet - a realistic plan - for returning to any sort of economic normalcy.  Yet in this bleak view, there are a handful of crypto indicators that suggest for cautious optimism. In this episode, @NLW discusses: The crypto community’s volatility resilience  A significant uptick in Stablecoin issuance  Proof that bitcoiners have been buying the dip  Evidence that new audiences are finding their way to bitcoin (and perhaps with a sound money narrative in mind)  Binance’s acquisition of CMC and the power of M&A signals

“Some countries just aren’t going to emerge from the Coronavirus.” Peter Zeihan is one of the world’s foremost geopolitical experts. In his new book “Disunited Nations: The Scramble for Power in an Ungoverned World,” Zeihan argues that we’re at the end of the largest expansionary period in human history. As America withdraws from global leadership, a totally new (and for most parts of the world, more painful) ‘normal’ will emerge.  On this episode of The Breakdown, Zeihan joins @NLW to discuss why the Coronavirus crisis is rapidly accelerating the end of the era of globalization.  How the American-led global order used the dollar as the tool to keep the world together  Why geopolitics and demography are coinciding to end the era of globalization  Why Covid-19 will spark a massive return of American manufacturing  Why, when it comes to the dollar’s status as the world’s reserve currency “Never before has the “exorbitant privilege” of being the world’s reserve currency felt more exorbitant or more like a privilege.  Why the crisis could spell the end for the Euro  Why China isn’t nearly as well positioned in the post globalization era as many assume  Why the best positioned countries in the coming era are the US, Japan, Argentina, France and Turkey

In this wide-ranging discussion, Castle Island Ventures founding partner and Coin Metrics co-founder Nic Carter joins @NLW to discuss: Why corporations weren’t adequately prepared for any serious economic trouble, much less a global pandemic  Why government backstopping the corporations leads to inappropriate risk-taking  How stock buybacks became a boogeyman of the current crisis  Why the crisis is actually four crises in one: health, economic, financial, and geopolitical How Covid-19 could accelerate the US’ withdrawal from the world and China stepping into the void  Why the response to the handling of Covid-19 could lead some to authoritarianism  How stablecoins are allowing global market exposure to the world’s most in-demand currency: the USD  Why stablecoins and central bank digital currencies look the same but are functionally opposite  Why a ‘naive safe haven’ narrative was never correct for bitcoin Why bitcoin was designed for exactly this type of moment.

On January 28th, Bloomberg’s Joe Weisenthal tweeted “Notable overlap on here between the most alarmist people tweeting about the virus and those who are obsessed with the size of the Fed balance sheet.”  There is no doubt that the bitcoin and crypto community broadly were far earlier in recognizing the potential significance of the Covid-19 crisis than most professional communities. Today, America preps for at least another month of lockdown and social distancing. The markets continue their chaotic swing as investors are simply unable to price in such a once in a lifetime event.  A question for the crypto community becomes: how is this impacting narratives about our own industry?  In this episode, @NLW looks at the impact of the Covid-19 crisis on narratives around: Bitcoin Stablecoins Digital Dollars and Central Bank Digital Currencies DeFi  Privacy

The full week's episode, in one convenient file.  Monday | Unlimited QE and Why Markets Can’t Price In COVID19 Tuesday | Cronyism, Zombie Companies and the True Cost of the Corona Crisis, Feat. Morgan Creek's Mark Yusko Wednesday | How the U.S.' $2 Trillion Stimulus Will Expose the Monetary System’s Flaws Thursday | How BlackRock Ended Up on Both Sides of the Bailout, Feat. Meltem Demirors Friday | From Corporate Socialism to Dying for the Dow: 7 Themes That Defined the Week  

In this episode of The Breakdown, @NLW reflects on the themes that defined an absolutely wild week in global markets and society.  Those themes include: Unlimited QE - broad new powers (corporate bond buying anyone?) and an unlimited checkbook for the Fed  Digital Dollars - a surprise inclusion of a digital dollar in an early Stimulus draft shifts the Overton window Narrative Shift to “Grandma Dies For The Dow” - narrative analysis that suggests that the “just the flu” of two weeks has become “business closures will kill more than COVID” Stimulus as Corporate Socialism - a huge bailout for businesses explained away by something that Taleb says is decidedly NOT a Black Swan The Last Break of Institutional Trust - jobless claims were 4x higher than the previous record on the same day the stock market went bull again - trust in leadership is dead Surveillance - a growing concern with surveillance - such as the new CDC program earmarked in the Stimulus package Bitcoin difficulty adjustment - as Preston Pysh put it “this thing is so resilient it’s almost laughable”     

The Senate passed $2T in Stimulus. That includes a one time $1,200 check to impacted individuals and….you guessed it, billions and billions for corporate relief. Included in that are hundreds of billions of dollars in corporate bond buying programs. The Federal Reserve has recruited asset management giant BlackRock to administer three of those programs.  Here’s the kicker. As Bloomberg describes it: “under the arrangement [BlackRock] could buy some of its own funds on behalf of the central bank.”  Outrage is running rampant, and to help listeners sort through it, @NLW is joined by Meltem Demirors, Chief Strategy Officer at CoinShares. In this conversation, they discuss: The government mechanics behind the “money printer go brrr” meme  The unfathomable failure of US intelligence in seeing the pandemic coming  The deficit of leadership across the political spectrum  What Blackrock means and why “they’re not even pretending anymore”  Why Twitter memes on their own can’t change the world Why bitcoin can and should be a gateway and tool for evangelizing more systemic change