The future is now

Every time I talked to my far more visionary friends, I feel like that the future is just arriving around the corner and I need to be really vigilant in case that I slip out of the trend. It’s possible that the future has always been around the corner but I was too ignorant to realize that when I was young, but I do feel that things are changing a bit this time.

Why are the changes coming?
As a macro analyst, I think the biggest catalyst is the never-ending fed easing cycle. It drives down the return on investment, pushes equity to look for things that are far risker and drives huge amount of equity to chase private entity. Hence, I hear lots of people want to quit their jobs and do a startup because all of their friends can somehow raise millions right away! A similar period, ie web2.0 was born around the time where the federal reserve bank had lowered the fed fund rate to historical low (back then) due to the emerging market crisis and provided way too much liquidity to the market but with a benign inflation outlook! The same thing happened that all the VC gone crazy, money is so cheap and everyone needs to invest in something to make returns! The similarity between 01 and now are very similar.

There are so many implications from this round of easing cycle:

(1) Clearly, this is going to end one day because Fed is going to hike. The market and Mr Powell is telling us that this cycle is going to be long and slow. However, if the fed fund rate is at 3% at the end, money is getting more expensive and the investors all of a sudden will have another place to park their money other than private venture. When the funding drives up, a lot of startup will not survive, the ones that don’t have a solid business plan, not solving the real problem probably has a lesser chance than those they do. Preserving cash at current moment is probably key. If I have a startup, I would raise money aggressively, preserve my cash and when the crash comes, I can scoop up all the talents.

(2) Inflation. There are two kinds of inflations. Asset inflations, the rising of all financial assets have been around for the past decades. Those are the ones that capital likes because it servers like a suggestion that the party will go on. However, this is a huge problem for the society and is mainly responsible for the increasing wealth gap. I do believe that the rise of bitcoin is one attempt to solve this problem. Ironically, without asset inflation, it is hard to imagine that we will have this level of enthusiasm around crypto. (more on blockchain later!)

And then there are the real world inflation, which we are seeing. We have been massively underinvest our old-economy infrastructure for more than a decade and now it seems that the problems are finally blown up to our face. Ironically, if the real world inflation really picks up more than what the Fed can tolerate, we will face an earlier rate hiking cycle and goodbye party time! So real world inflation is really the killer of the party.

(3) The world is moving forward fast. Because of investors willingness to invest in almost everything, we are pushing a lot of tech way faster forward than what it should have been. Everyone would want a piece of the pie and build upon each others. As a result, there are also going to be incredible amount of waste… for example..this improvement in this tech is totally meaningless. (but that won’t stop me from raising funds!). Of course, if the American capitalism system works properly, then a lot of the inefficiency in the market will be washed away eventually. However, the tech still exists and I suspect that it will take us more than a decade to figure out all the inventions that we’ve made during the past 2 years. A historical period to refer to is during US industrialization period. When train tracks were invented, it was so lucrative and the funding market back then was so easy that practically every private citizen had applied to build a train track connection random places that would have otherwise make no sense at all. By the time the funding bubble bursted, some stats estimated that we had so much train tracks that it covers US twice. Everyone thought that all those built up are wasted, it took about a decade to sort out but as industrialization further pick up, eventually all the infrastructural built around this time was put to good use. In a way, those tracks were simply built too early. I suspect that we are going to have so much treasure to hunt during this cycle.

Future trends:

(1) Blockchain and bitcoin
Every one of my friend is telling me that they want to do something in blockchain. and I do think that blockchain is the biggest invention coming out of the easing funding cycle. As a result, I am expecting some degree of bust and also a tremendous amount of technology and implication coming out of it for the next decade. The most fascinating piece of blockchain for me is about “propertization” of information. Somebody put it well that the old internet is about the distribution of information, and blockchain is about the distribution of value. The historical problem of delivering assets over virtual space is that nobody can be sure that this is a real TRANSFER rather than just a copy of the asset. That’s also where the historical middle man comes in. With blockchain, all of a sudden we can transfer any information as asset itself, in theory. So if inflation has transformed itself to be an asset, then it means that we, meaning every user on the internet, should be able to make money out of the information.

Now another thought as a result of this: We know that eventually someone is going to find a way to allow us, the ultimate user, to make money on any of the data that we are producing going forward, the more interesting question for me is that what happened to that user’s past data? First, I think that not all data is valuable. The tweet about me having a bad day 5 years ago is worthless now (time decaying factor). There are just many trivial data that are going to be worthless.. and many of them. Second, there are valuable data among though! For example, if I mentioned on a social media profile that I am having a mortgage 3 years ago.. THAT is a valuable information for ad agency at least! Other valuable information is about knowledge, which is ultimately what I want to work at. For example, if an upwork worker wants to know how to open a PayPal account in his countries to cut down commission cost even though PayPal doesn’t officially support the financial institution within that country, and a user in some corner of the internet-verse mentioned details about how digital banking in europe works. This information is tremendously valuable to that up-work worker. For me, the web3.0 is all about monetization in the best way possible.

(2) Passion economy & the future of how we entertain ourselves:
TV, or some form of TV, aka video is gonna be with us forever. In the 90s everyone is gluing in front of the TV of shows that are on their local broadcasting channel. And then the cable comes in, HBO of the world that really provide better content by smaller players. And then a user can choose between TV, netflix, amazon prime, and disney+ and hulu as his entertainment choice. The trend is clear. The power of entertainment has migrated from central force to a decentralized format. I think for the next generation, we are going to see more and more time spent on youtube and people will be entertained by other people’s creation rather than on major streaming platform. I think influencers are the result of it, but this is just the beginning. The high school and middle school kids really spend a lot of time on youtube and their future entertainment will have a lot of youtube video by different creators in it. It will come as naturally as TV for the baby boomer. The influencer business is only gonna grow bigger. In the future, majority of the population will spend major times on viewing their favorite youtube entertainer.

Another trend that I see in the future generation, that are users who will start entering the workforce in 5–10 years time, is their attitude towards spending money on their favorite creator. We are already seeing this on twitch. We are not talking about the most famous creators that have the biggest crowd, but rather smaller creators that have a far more intense community base. (aka revenue / fans will be higher and higher). As the demographic group grows wealthier, I think that passion economy is going to only grow exponentially. Patreon is a first attempt. NFT is the perfect example in my mind that sort of combines the two together. It allows the fans to spend money to support their creator. On the other hand, it allows the creator to monetize on their information (theme no.1), as opposed to asking fans for money directly.

All of this sort of fit into blockchain philosophy: there are no more big brother, there are no more centralized force. We can all strive in a market place, although nobody is getting a really big pie. In a way, really the shrinking of the wealth gap.

Now if the future wealth is likely to be distributed more evenly and ad-hocly. This also means that everyone can be a business man of himself. This means that him/her is likely to need the support of a infrastructural, like customer service etc etc. I think Shopify is a super interesting example, stripe and plaid are another examples. It is growing as there are more mom-and-pop and independent shop are set up.

(3) Talents
Working from home is here to stay. While the investors are sticking around silicon valley, more and more engineers are moving out of the states. As a result, more and more tech firms start to offer all their employees wfh and as a result, more engineers decide to move out of SF and hence a vicious(?) cycle. Very soon, when a tech firm realize that most of their employees are not using the office space, then they will opt to move to a different lower cost state and if enough firms are no longer based in SF, the VC there would start coming around about locations. Then the question would be, if location is no longer a constrain, why are we only recruiting in United States? Why not look abroad and scout talents really across the globe? There are no such thing as a global HR firm, but I bet there would be in the future! of course it is not easy. There are no friction when co-workers are no longer in the same physical space. But those are probably the problem that we can alleviate through technology. Hiring globally also has its own problems: language, timezone, culture etc etc. That is probably why it wasn’t picked up initially.

Another real trend that is happening is that the engineers these days take their ideology very seriously. Gone is the days where someone stuck at a firm even if he doesn’t agree with the mission. Gen-Z has the highest percentage of people say that they have quit a job because the vision doesn’t align. Talents are standing up for themselves and what they believe. On one side, as a founder, I really need to think hard about what is the purpose and what is the authentic mission in order to persuade good people to join the journey. On the flip side, it is possible to see the overall compensation package to go down.