Hi friends, this is the week under review.
Last week, I dove into Apple and Facebook's AR maneuvers and what it means for the future of the web. This week, I'm aiming to tap into the stock meme phenomenon that has dominated the American news cycles this week and see if there's anything to learn from it, with an eye to the future web.
If you're reading this on the ProWellTech site, you can get it in your inbox every Saturday morning since newsletter pageand follow my tweets .
The big thing
This week was what you wanted it to be. A revolt of the proletariat. A case of armed disinformation. A rally for regulation ... or perhaps financial market deregulation. Choose your adventure with the starting point being a flavor of chaos leading to a slightly more populist blend of chaos.
In the end, many longtime financiers are confused, many Internet users use rent to buy stock in Tootsie Roll, many billionaires are discovering how intoxicating it is to adopt a "for-the-little-guy!" Person on Twitter can be. , and here I am staring at the ceiling wondering if there is any institution in the world that is reliable enough that it cannot be turned into a lie by the Internet.
This week, my little diddy is all about meme stocks, but more about the idea that once you take away the need to wonder why you really trust something, it can become easier to blindly put that faith in more unreliable places. All the better if those places are adjacent to areas in which others place their trust.
The Dow Jones has had its worst week since October as retail investors, organized in part on Reddit, have turned the American financial markets into the real front page of the Internet. Boring and serious stocks like Facebook and Apple reported their earnings and the markets adjusted accordingly, but in addition to serious news, the Wall Street page was inundated with earnings broken by "meme stocks." While rising junk stocks are nothing new, the idea that a stock can make outrageous gains based on nothing and then possibly maintaining that value based on newly formed shared trust is newer and far more alarming.
The most infamous of these titles was GameStop. (If you're curious about GameStop week, there are at least 5 million stories across the web to grab your attention, here's one. Side note: Collectively it looks like we have longer attention spans after Trump.)
So, Americans don't already have too much institutional faith. Looking at some long-standing Gallup research, since the turn of the century, belief in organized religion, the media, most wings of government, large corporations, and banks has declined somewhat. The outliers in what Americans seem to trust more than they did about 20 years ago are small businesses and the military.
That's all to say that it's probably not great that people don't trust anything, and I think the internet could probably disrupt every trusted institution except the military probably just shows my lack of creative thinking when it comes to how the web it could democratize the Department of Defense. As you can guess from this statement, I think democratizing access to certain institutions can be bad. I say this with a thousand asterisks leading to footnotes you will never find. Also, I don't think the web has stopped destroying institutional trust in the long run, for better or for worse.
Democratizing financial systems sounds a lot better from a populist ascendancy, until you realize that the guys your users compete against are playing a different game for other people's money. This saga will change many lives but will not end particularly well for most people exposed to "infinite upside" day trading.
Up until this week, Robinhood was reckless in my mind just because it exposed (or "democratized access to" - their words) consumers to risk in a way that most of them probably couldn't handle. Now, I think they're reckless because they didn't expect O how democratized access could lead to so many potential doomsday scenarios and Robinhood's failure. This week they quietly raised a $ 1 billion liquidity lifeline after having to temporarily suspend meme trading, a move that essentially set their brand on fire and left them the most hated institution on the web. (Facebook had a quiet week)
This kind of all feed back into this idea that I fed that scale can be very dangerous. The platforms seem to need a certain number of employees to manage a global audience, and almost all of them do not have sufficient staff. Facebook announced this week in its earnings call that it has nearly 60,000 employees. This is a company that now has its own Supreme Court; it is too big. If your institution is going to be massive and centralized, chances are you need a lot of people to moderate it. It is something in contrast to most of the existing internet platforms. Realistically, the internet would probably be happier with fewer overwhelming institutions and more intimate bubbles that are loosely connected. This is something that the network effects of the past two decades have made more difficult, but regulation on data portability could help.
Writing this newsletter, something that often comes to mind is that while it seems like everything is always changing, few things are completely new. This awesome 2001 NYT profile written by Michael Lewis is a great reminder of it, telling a 15-year-old who scammed the markets using a network of fictitious accounts and was hounded by the SEC but still walked away with $ 500k. Great reading.
Eventually, things will likely calm down in Robinhood. There's also a distinct possibility that they won't and those meme traders have just sparked a revolution that will bankrupt the company and set the global markets on fire, but you know things are likely to return to normal.
Until next week,
Lucas Matney
Other things
The SEC is pissed
I'll try to keep these free updates for GameStop, but a quick note from the peanut gallery. The SEC is not very happy with what's happening in the market this week and they are angry, probably especially with Robinhood. They have become quite concise with their statement. More
Facebook's supervisory board wants YOU
The Zuckerberg Supreme Court wants public comment as it decides whether Facebook should return his Instagram and Facebook accounts to Trump. I'm sure any of Facebook's executives would have stopped building the platform in the years following its founding had they known how complicated moderation would be for them, but you could probably have changed your mind back by showing them the market cap. More
Apple's adtech-killing update drops this spring
After delaying its launch, Apple made a commitment this week to roll out its "App Tracking Transparency" feature this week that pissed off much of the adtech world. The update will force apps to essentially ask users if they want to be tracked between apps. More
Robert Downey Jr. bets on startups
Celebrity investing has always been popular, but in recent years, it has become much more common in the corporate world. The transfer of reputation coupled with the fact that money is so easy for top founders to find means that if you choose between a tier two fund or The Chainsmokers, you might choose The Chainsmokers. On that note, actor Robert Downey Jr. raised a mobile fund to support climate tech startups, we have all the details. More
WeWork SPAC
Ah poor Adam Neumann, poor SoftBank. If only they had kept their little "tech company" under wraps for another couple of years and left the S-1 for a kinder market with less distaste for creative framing. It looks like WeWork is the next target to get SPAC and be brought to public markets via acquisition. I'm sure everything will be fine. More
Tim Cook and Zuckerberg fight
Big tech is a gentleman's game, big tech CEOs generally do well in public and spare their insults for the political party that just fell from power. This week, Tim Cook and Mark Zuckerberg have been a little less friendly. Zuckerberg called Apple by name in its earnings investor call and pitched some potential unfair advantages Apple may have. Their fighting words. Cook was more circumspect as usual and gave a speech that was at times hilarious and direct in the most indirect way possible about how much he hates Facebook. More
Extra things
Chunks from our paywalled Extra Crunch content:
The 5 biggest mistakes I made as a startup founder for the first time
"Me and the rest of the management team worked 12 hours a day, seven days a week. And this spread to many other employees doing the same. I haven't thought twice about sending emails, messages or pants at night and on weekends. As with many startups, the monstrous hours were simply part of the deal. "
Fintechs could see $ 100 billion in cash in 2021
"For the fourth consecutive year, publicly traded fintechs massively outperformed historical financial service providers and all traditional equity indices. While the underlying performance of these companies was strong, the pandemic further bolstered the results as consumers avoided showing up in person for both purchases and banks. Instead, they looked for - and found - digital alternatives. "
Rising risk investing in Africa fuels fintech and clean tech betting in 2020
"What is driving the generally positive venture capital results for Africa over the past few quarters? Giuliani told ProWellTech in a follow-up email that "investments in Africa are driven on the one hand by an expanding base for early stage ecosystem support organizations, including accelerators, seed funds, unions. and angel investing "and" consolidation "which is helping both" growth deals and a thriving M&A market. "
