Entropy is the scientific concept of chaos, randomness, and uncertainty. It’s also a pretty appropriate word choice to describe a lot of what we’re seeing on a global scale. Israel/Palestine, Ukraine/Russia, Sudan, Myanmar, Iran, Haiti.

Unrest. Volatility. Risk.

As humans - particularly humans of privilege - we naturally avoid risk to achieve stability. The peaks and valleys of volatility are shaved off in an effort to find peace and balance. If we have entropy, we seek order. In Systems Theory or Philosophy of Science, that shift to order is called Syntropy.

My curiosity and understanding of these concepts stems from my research in global economics, technology, and money. I had to start wide and move towards some form of order and organization. For me, it started by brushing up on anthropology, physics, and computer science. History, kinetics, and tech. I was in search of how we got here, our relationship with energy, and the tools that enabled it. Emergence didn’t happen overnight, but it’s currently accelerating with velocity.

Want to see a glaring example of the entropy of privilege? Look no further than modern workplace dynamics among knowledge workers. The American executive with a massive salary talks about thought leadership and workplace strategy. No global experience. Massive financial cushion. Zero understanding of computer science, global economics, or emerging technology. This person is influencing decisions about the validity of returning to a centralized office in hopes of restoring middle management practices in the name of collaboration. Going backward to a construct or ideal that somehow together, and between the hours of precisely 9a-5p between Monday and Friday we do our best work, together. This stems from an ancient employment agreement with a job description that hasn’t been revisited since receiving tenure.

Despite the irony, every two weeks at precisely the same time, a draft of US dollars is automatically deposited into a checking account. Sure, there are a few periodic reviews of this person’s performance, but for the most part, this person is conducting the reviews not receiving them. This is called a salary and the learning part of their career was over years ago.

This is current state. This is not future state.

The construct of the American dream is radically changing. Value is being placed on agency and autonomy. Constraints are giving way to flexibility. We’re no longer willing to miss the baseball game or the dance recital, and we will make massive concessions to ensure we are there. Value and benefit are no longer solely measured in dollars and cents.

We need teachers. We need nurses. We need artists. We need first responders. We need community.

Homeownership? Not on a $60k salary for a $450k house at 5% interest. Car ownership? Not at $35K, 7% interest, and the highest insurance rates in history. Stock market? Hard pass on gambling with the money that’s so difficult to come by. Oh, and tack on the student loans and constant reminders of ballooning healthcare costs.

Even if we have the money invested, it has to work at 7% ARR to break even. The S&P averages 9.95% if you can stomach the risk of moving markets. “Get in now while the timing is right” or “Don’t get caught sleeping during a sell-off”. The reality is that the investment vehicles we have to choose from are all subject to the decisions of the market movers. It’s also no secret the stability of the investments of the 1% depends on the participation from the future generations.

We’ve borrowed the future from the future generations.

Home Ownership

If you follow me on Linkedin, you know I’m focused on building resilient communities. Here is some reasoning behind why I think the appropriate vehicle for a stable middle class is through Pathways communities:

The total cost of owning a home has skyrocketed.

Price:

The inflation-adjusted cost of a home in America increased from $459,810 in 2019 to $570,511 in 2022. +24% since 2019.

Expenses:

Homeowners spend an average of $17,958/yr on non-mortgage expenses such as utilities, maintenance, taxes, and insurance. +26% since 2020. This does not include HOA fees which have also skyrocketed due to rising labor and maintenance costs, capital improvement funds, common area utilities and regulatory changes, and local ordinances.

Price and expense are low-hanging fruit in the current value proposition discussion of homeownership. A wider awareness of currency debasement and total cost of ownership is necessary to get a more accurate picture of these forces. Currency and capital are not the same thing.

Example:

Let’s say I made two parallel investments in 2000. I bought a home for $100,000 and I bought $100,000 of gold bars. Both are hard assets, with differing degrees of utility and value.

In 2020, I decide to sell both.

My $100,000 home is now worth $250,000 - a 150% increase. My TCO is approximately $50,000 (over 20 years) leaving me with a $100,000 net gain not accounting for brokerage fees. There is additional value and benefit in the fact that it afforded me and my family a place to live and afforded us a sense of community.

My $100,000 in gold is now worth $609,900 minus $20,000 in storage fees which nets me $586,900 over the same period.

Now let’s get crazy.

In 2019, I’m introduced to Bitcoin. My gains from gold and housing were lucrative so I decide to invest some of that in something speculative. I don’t know much about stocks but I know it’s difficult to time the market conditions. Bitcoin was introduced to me as a long-term store of value so my strategy is to buy and hold it. I buy 3 BTC at $7,000 and put them on a cold storage wallet.

Today, that $21,000 investment in BTC is worth about $270,000 or +1185%. We didn’t talk about tax obligation on the exit of gold/home investments but even if I pay 20% capital gains ($49,800) on my BTC, I would still net $200K.

This is the tip of the iceberg. It’s also where all the questions, biases, and misinformation start coming in. I’m not an economist. This isn’t financial advice. I am an entrepreneur whose job is to seek and recognize opportunity and I have as many questions as you.

Here’s what I know.

With opportunity comes risk. With opportunity comes volatility. With opportunity comes entropy. Winners and losers. Right and wrong.

This is the future.

I have nothing but respect for the Oracle of Omaha. There is roadmap after roadmap and textbook after textbook out there TELLING you how to invest. There are CPA’s and CFP’s who have built their hard-earned reputation on fundamental truths behind money management. Everyone has something to offer in terms of what worked for them. Listen to them but DYOR. Explorers use compasses, not maps.

Here’s what else I know.

The BTC ETF was approved one year ago. (January 10, 2024) BlackRock Inc’s iShares Bitcoin Trust (IBIT) smashed every industry record. In 11 months, it grew to more than $50B in assets. “Simply put, no ETF has ever had a better debut.”

Bitcoin's market cap grew to just under $2T.

1.3% of the world’s population owns Bitcoin.

The United States is currently in custody of 213,297 BTC valued at $20B.

Sen. Cynthia Lummis R-Wyo promoted her legislation to create a Bitcoin strategic reserve.

At least 13 US states are crafting legislation for Bitcoin reserves, signaling its rising importance in public finance.

And most importantly - the true utility and functionality of Ordinal inscription is yet to be realized. The Script is currently prioritized for security and stability but complex smart contract functionality is not readily available.

So what?!

Well, for one, the future doesn’t look much like the past. It’s important to understand the basics of economics so we can explore new possibilities. When the USA ended the gold standard and took us off Bretton Woods, our monetary system changed forever. When we introduce massive amounts of currency back into our economy to counteract recessionary forces, there are consequences. When we borrow money today, and issue promissory notes for tomorrow, those promissory notes require repayment or (at very least) future participants to trade debt to keep things afloat. Some go so far as calling fiat currency Ponzi. No matter what you believe or what you come to conclude, the US Dollar is still the strongest currency on the planet. Influences like BRICS and ‘dedollarization’ signal the global intent to trade more national currencies. Competition to build alternative financial infrastructure is very, very real.

Final thought for all of my Commercial Real Estate readers….

Trepp reported that CMBS delinquency rates surged in December - Office hit an all-time high (11% up 63bps) and Retail saw the largest respective rate increase. Capital markets are on fire. Ask a bond trader.

Meanwhile, the industry talk is full of speculative talk about the impact office workers have on delis, dry cleaners, and parking decks.

The beat goes on - the question is how long.

I’m Chris Moeller and I help build #resilientcommunities. Ask me how.

Song pairing:

See also - Anthony Pompliano, Jack Mallers, Michael Saylor, Jordi Visser, Tim Bilyeu

Photo by Drew Beamer on Unsplash