v1.1. Blowing Bubbles, Building Our Future

Bubbles built the railroads, bubbles built Amazon and how bubbles will continue to fund our future.

Speculative Bubbles gave us the railroads, Amazon & electric cars. These Creative Bubbles fund the innovation that we all demand to solve our most urgent needs. At the forefront of our current needs is to commercialise a green tech ecosystem from extraction, production to ultimate zero CO2 emission. It is one of the primary hyper-growth sectors of the future and there is a green-rush to fund it, to acquire equity in it and hence decide who gets it first and at what price. As with all bubbles; there will be a pop – but with prudent investment we can give ourselves the opportunity to breathe beyond the bubble, to fund the future and to become active stakeholders in how this new technology affects our lives.

Creative Bubbles

Predicting the future is a fool’s errand, yet speculation is intoxicating. Its perpetual uncertainty, promise of great reward and competitive spirit create a tonic perfectly tailored to the human palette. Historically, the stock market has been the amphitheatre of speculative excess, creating bubbles of tremendous size but of varying substance. Yet it is these bubbles and their exuberant speculators that have funded radical new technologies, completely transforming their economies. In her seminal work on Technological Revolution and Financial Capital, Carlota Perez marks Five Successive Technological epochs created possible only by the ‘irrational’ capitalists. Each beginning with a period of technological discovery, then disseminated and installed by the boundless capital of financiers, followed by a crash in value. However, when installed, these technologies, once deemed revolutionary become a routine accessory to national growth.

In the first American railroad boom from 1840 – 1859, individual speculative investment coupled with the use margin trading on the NYSE channelled in excess of $1 billion into private railroad corporations. Capital flew in even from Europe, disseminating through New York’s financial nodes constructing the infrastructure that helped connect a disparate state into a nation. Investors often lost out as their wide eyed optimism created “ a profit free zone… with ruinous competition and unbelievable [financial] burn rates” (J.B. Delong, 2003) however Americans at the time saw direct improvements in their quality of life as well as spontaneous second order effects which a fundamental innovation can bring; the network of new rail-freight commercialised the ‘mail-order’ business model (Janeway, 2018) which contributed to the magic serum of economic growth. The boom, true to Perez’s’ models, culminated in one of the largest foreclosures in its contemporary period, creating enormous mounds of wasted [1] capital in its day. Glaring into our phones today where multibillion-dollar loss-making software companies such as Snapchat, Uber, Lyft reside we note the same intoxicating tonic at work. The same enthusiasm continues to fund new firms that are disrupting pre-existing business models, rewriting social contracts between business, government and consumers. The race for exponential returns ensures bubbles are endogenous in financial capitalism, for how long can you afford to be wrong?

Bubbles of Today Build our Tomorrow

The future is green in all senses; green tech will eat old energy based infrastructure and the CEO’s will celebrate with federally legalised Marijuana sponsored by Mike Tyson and Snoop. It is happening already. Clean electric ecosystem companies like $TSLA are valued more than the entire automotive industry and asset managers and private equity funds are desperate to acquire similar ESG companies. There is a global rush to fund the future and to acquire equity in its growth. Valuations and expectations are sky high, all supported by low rates and perpetual Quantitative Easing by our Central Banks. COVID has only accelerated this transformation from the old economy to the new and birthed creative new sectors that will need funding; the Work from Home and Delivery economy.

Acquiring equity in future growth companies is a bubble that will burst, just like Dot Com, Tulip Mania and the many that came before – expectations will be missed, earnings will be disappointing and fire sales will ignite but there will be nuggets of gold in the ashes. The Roaring 20’s financed aviation, radio and television, Dotcom financed E-commerce, and our post 2008 QE bubble will have financed the companies that will implement the Green New Deal, revolutionised our approach to mental & physical health, turned every bank into a fin-tech app that reduces barriers to money transfer, opened space for human exploration (again) and who knows what else? It is quite simply the most exciting times to be alive.

Just as the speculative capitalists spent billions laying the railways, we are spending billions funding further moon-shot projects; most recently $NPA a blank-cheque acquisition company (SPAC) signed a Definitive Agreement to acquire AST & Science – quite literally a $0 revenue Space Internet company valued at $1.4B Enterprise Value. This is just the start! $QS is a solid state battery company backed by Bill Gates that (as of writing) has a market cap of $30B and $0 revenues expected until…. 2025! Billionaire Bill, retail investors & your pension fund manager are funding the future and god is it exciting.

Without the speculative excess, without the starry-eyed investors who dream of disocevering the next Pfizer, Amazon or Tesla who will fund the future? Bubbles burst but that is not inherently a bad thing, they can leave behind a delightful pop, they can leave behind patents, R&D and fully fledged companies that will create our future.

So lets not fear bubbles, lets embrace them with the optimism and prudence history demands. Let’s not bet the house but lets not ignore them for fear of failure. If we don’t understand and act we are only foresaking our voice in building the future, it will rumble on with or without us.

R.Q. 02/01/2021

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Where this fits in

The future will look nothing like the present. It is our world that will be transformed by the Silicon vallenistas. Zucc, Theil, Cuban & Dorsey are brilliant innovators – but they should not have a monopoly over our future. Technical jargon, financial barriers and fear of the future should not stop us from shaping it – if we don’t, someone else will. Hence the function of this blog is as follows:

Understand – Build a Community – Lead

1.       Understand the macro tech trends in each hyper growth industry; green tech (electric cars, battery storage, LIDAR…), healthcare (tele-health, psilocybin, biotechnology, genomics….), fintech (payments processing, social impact investing, retail trading…), Space (tourism, internet communication, mineral extraction…). We will do deep dives in each sector every week and identify future industry giants.

Individual understanding is only the first page. Our books will be incomplete & full of scribbles until individual perspective is enhanced through community learning and knowledge sharing. An individual is blinded by bias, confused by equations or surprised by supposed irrationality – collectively, understanding is inevitable.

2.       Harvesting community knowledge > learning alone. These industries are large, complex & idiosyncratic. No one alone can understand them however a community of friendly ambitious nerds who can learn from and off each other… that is a library of knowledge unmatched by any textbook. So add comments, enhance the collective perspective, build social media communities that will outlast you.

But even complete understanding is insufficient – being ‘heard’ is not enough, what matters is to have skin in the game, participation backed by equity so you have a real force behind your words.

3.       Identify methods of participation & leadership – how to benefit from and direct the future of these sectors as investors and inventors.

There has never been a more democratic time to invest – to grab equity in the future. We will explore methods of participation from stock investing to ETF coverage. But investing is nothing without involvement; attending share-holder meetings, scrutinising management decisions to ensure the future is shaped for and by us.

If you are interested by any of these proposals or even if you’re just curious and want to stay informed about these exciting future industries – subscribe. It’s literally free.

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[1] Wasted in the Schumpeterian sense where it is not necessarily bad but a by-product of the trial and error / speculation process that is essential to innovation (Janeway, 2018).