A collection of letters encompassing simple insights and recognition of foundational shifts that any bright minds trapped within the old norms of a VC mindset can use to break free, whether they are just starting their journey or reflecting back on what they wish someone had told them in their early days.
Exit strategy.
Who benefits most from timing the right moment, right from the start, to race for the exits?
The hint is in the title of this Letters to a Young VC series. Of course, it’s the finance bros, the institutional financiers, the LARPers of venture capitalism.
That's what it's all built for, after all: the exit, the exit, the exit. Race for the exit!
The most opportune moments of escape from hyper leveraged positions for those running a greater fool Ponzi. Where all they're really ever invested in are the moments when they can dump on the flipside of the market.
Because in their minds, that's all there is. There is no primary wealth creation worth serious attention.
If you believe that, even if you're willing to look at the sources of primary wealth creation at all, you’d think of it from that perspective as power plants and mining and all of the other things that simplistically hearken back to the battle for control over land.
It's just all the same old kind of tribal aristocracy bullshit for leverage over each other.
This complex of different groups, homogenous within themselves and not all that different from each other when you scratch beneath logos and symbols, all scrambling to get a larger slice of a basically limited, mostly unchanging, illiquid, and often diminishing pool of existing resources.
Place your bets on mining rights, drilling exploration, or other ways to identify where there might be a resource you didn't realize was there before, or has new demand in the market — in the conventional casino model of economic thinking it’s all marginal and derivative of the fundamental scramble for control over a relatively static, or even diminishing, set of land rights.
It feeds into continuing this entrenched mental model and worldview of why nations exist, why borders exist, why militant nationalism becomes a necessary sacrifice of personal rights for the public good in the minds of those who adhere to this twisted model. All a function and extension of a civilised, civilising, and even virtuous influence in their convoluted self-justifications. They're not just being exploitative, they say.
These audacious motherfuckers actually believe they are being virtuous, clever, and exercising simple common sense by doing what they do.
This idea that, of course, it's all just contracts.
I mean, look at how far we’ve come.
People reach agreements about entirely subjective disputes over limited and decreasing piles of mana from the heavens of whichever team mythology they’re born into and rep the flags of. And, instead of always fighting violently in shifting factions for control of those lands and resources, whichever third party authority has the most power to sit in as a judge in the market decides who gets what. It’s claimed by adherents of this view that overall this will reduce the amount of violence increasingly over time.
Large groups of tribes join together as nations and in alliances to expand their borders, extend their spheres of influence, and exert their control over as much property as they can. To them this is the original and only source of where wealth comes from – converting what already exists into a great game of who has more capital in stasis, kept from circulating too much or falling into the hands of competing populations.
Everything else can be waved away as centralized concentrations of factories using economies of scale wherever the cheapest pools of labor are available, distribution logistics, marketing psychology, supply and demand curves, and other simplistic nonsense cribbed from an economics or business 101 textbook. That’s about as far as the deep thinking and drunken diatribes go, from those who seem to really believe it’s all so very insightful.
Well, beyond the snark, what’s the truth when we look past the Ozlike curtain?
The beauty of capitalism in their minds being some kind of magical mechanism they can’t explain, that takes all of the above through countless mass market interactions and through the errors that inevitably spring up in an almost evolutionary way produces unpredictable spurts of random asymmetries for them to bet on, eventually somehow leading to leaps in moderate innovation. What if the core premise mainstream economic thinking is all based on is very wrong? How things work, what the origins of capital are, how merchants, traders, consumers, and regulators process information, etc., is misunderstood or misrepresented in very critical ways.
Pause for a moment and consider the implications.
Let’s look at the insight it leads us to with the most far reaching impact:
The end goal of economic activity is not getting out –– it’s not the liquidity needed for an exit or escape from the rest of humanity as bills for bad bets and debts come due. And it’s not sitting on a pile of “good” bets either.
The real source and aim of economic activity is to create more wealth than what existed before, at the origin and through to the looping ends of the full lifecycle of each economic action.
The most direct place to see this better model take flight is to understand what is happening today with globally distributed, personally decentralised manufacturing and fabrication.
We start with the implicit changes that are seen in markets for resources and raw materials that begin to be sourced from increasingly open markets the numbers of creative production oriented merchants vastly expand. With significantly more buying power spread throughout a broadly diversified creator base, leverage is gained to break out the markets in favor of competition for commoditized source materials. The very small number of big players who have previously locked down and limited flexibility in the source material markets lose their ability to maintain cartels. Primary creative production takes newly liquid ingredients into the globally distributed, personally enhanced ability to convert base materials into ever more interesting, useful, customized, and fit to market products, assemblies, and services. It's actually this that then generates a substantial portion of the wealth created overall, going from there as well as it goes into all the different secondary conduits.
By spreading actionable choice across the flows from primary creation production through secondary distribution conduits, real material freedom and prosperity follows.
When you can have an options based approach that takes into account significantly more of the information available, the production capacity within the system, the asymmetric flow of goods throughout supply chains, and gains dynamically from large, sudden shifts in the full expanse of economic assets and sectors, the variance compounds wealth creation and circulation within the system with each interaction between producers, purveyors, and consumers.
Options become better understood and more functional mechanisms that anyone can use. This is where the real explosion to the upside in wealth is fully realized.
Here, exit liquidity is no longer needed.
It’s no longer the most effective option.
Primary creation and optional liquidity generate orders of magnitude greater wealth for all and is far cooler than borrowing, moving around and leveraging up inflated debt.
Become the mint and primary fabricator, with the ability to generate source wealth at any moment. This unleashes the full power of web3 across capital, technology, culture, governance, and the personalization of decentralized fabrication.
Any value brought in from sales of NFTs minted through this article will be used for building out the F₃M Realm treasury, which will eventually be governed and coordinated by the DAO, furthering to decentralise the web3 fashion capital stack.