Raconteur and worldwide tech-wealth investigator Ray Blanco called me up the other day.
He’s currently on the other side of the world on a research trip.
At first, I couldn’t tell why Ray was yelling so loudly.
Turns out, Ray was hopping mad. Here’s what had Ray all upset:
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On Friday, March 10 The New York Times reported the SEC had denied the Winklevoss brothers’ request to launch a Bitcoin ETF.
“Tyler and Cameron Winklevoss don’t know how lucky they are,” Ray said. “If you want to make a small fortune investing like the Winklevoss twins, first you start with a large fortune.”
The best part about Bitcoin is the blockchain technology behind it, Ray said. Bitcoin itself is little more than a fascination with essentially no application in the real world.
Blockchain tech could someday make money and data transfer safe and direct. Bitcoin itself, sooner or later, will put a lot of good people in the poorhouse.
Ray was on a roll, so I kept my mouth shut.
If you don’t know what bitcoin is or how it works, or what blockchain tech is by now, don’t worry about learning. Because it’s pointless, Ray said.
The only good thing that would’ve come out of a Bitcoin ETF is the ability for traders to short it aggressively. Then we really would’ve found out quickly what the market thinks about Bitcoin.
I laughed out loud. Ray told me he was just getting started. “The mind reels at the sheer amount of dumb money in the VC world. You remember that line about a fool and his money?” Ray didn’t even give me a chance to respond.
Peak Venture Capital and the $950 Sofa
Ray said it’s possible we’ve reached “Peak VC.”
It isn’t just good ideas that draw VC money these days. Any dumb idea can collect money like flies to honey.
Take a look at the list of holdings at Winklevoss Capital, for instance.
I told Ray to hold on for a moment while I pulled up the site.
They invested in a couch company. The couch sells for $950. It looks like something you’d buy for $279 at Ikea. That’s it. It’s a couch. A sofa. It doesn’t fly to space.
“They also invested in a person-to-person weather app. Honestly. It’s the dumbest thing since the Chia Pet. I don’t need my friends to tell me what the weather is. I can look outside.”
Plus, they’re in on a company that wants to be a social media site, but exists to help people find a person in their area with a truck when they need to move.”
Now Ray started laughing.
“These aren’t businesses,” he said. “These are story-driven pipe dreams. And this is all the rage in the VC world right now. The lunatics are running the asylum.”
Finally, he paused. He was huffing and puffing now.
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“I have to get what we’re talking about here in front of our readers,” I said to Ray. “What’s the take away?”
“Short the Winklevoss twins and everything they touch,” he said.
“No, Ray, seriously.”
“OK, you want seriously, I’ll give you serious. The world faces huge problems like cancer and aging and energy. How about instead of investing in sofas, VC’s turn their attention to moonshot ideas that’ll have a real impact in the world.”
A company needs to exist to solve a real problem, Ray said. That’s No. 1.
If it is a “better mousetrap” type company, it needs to radically reduce costs or increase efficiencies to be a viable business. That’s No. 2.
And that better mousetrap idea had better be important and necessary, Ray said. No more of these ideas that boil down to the 11th different way to get a ride to the airport.
Finally, Ray said, you want ideas that can aggressively go get market share in their field.
Companies with patented ideas. Companies building barriers to entry against their competition. Companies that by their very existence disrupt and cause headaches for other companies. That’s No. 3.
“You get those three points in a company you’re looking at investing in, you’re investing in something real,” Ray said. “You invest in a pie-in-the-sky Bitcoin ETF or some other crackpot idea, you get what you deserve.”
Then Ray said he had to go. He was being called into a meeting and needed to calm down for a few minutes.
We quickly said our goodbyes and after I hung up the phone, I got to thinking about everything Ray had just told me.
No more sofas. No more social media sites. No more talk about Bitcoin.
The real money, the real progress, the real life-changing gain potential… comes from companies working on real problems.
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