Many of these VCs seem to just be grifting into whatever market they can get the most potential capital gains from the 'greater fool theory.' In other words, they don't care what value it generates; they care if there's a good opportunity to cash out capital gains by conning other people to pay much more than what they paid.
A while ago, the Freakonomics podcast interviewed Arianna Simpson, a general partner at Andreessen Horowitz, and who manages some of their crypto investments. The host, Stephen Dubner, asked what is now the classic question of 'what problem does crypto solve?' A question you'd expect a crypto investor to easily anticipate.
Her main response -- and I promise I'm not joking here -- was that you could resell access to your home wifi with crypto tokens, mainly to your neighbors.
When pressed further for a more commercially credible response, she engaged in a remarkable attempt to appeal to authority, saying that "if you were in the meetings I'm in...with top founders, from the top schools...you wouldn't be questioning this." But without any further explanations.
From what I could tell, Arianna frankly didn't care about any utility it could provide. If it did provide some, she couldn't name it. But she recognized a grift, and knew she could likely make some money using other peoples' money to get in on it.
To be fair, Andreessen is not an investor in FTX, though they've lost plenty of LPs money in other crypto investments. But this attitude is reflective of the approach of many VCs, including those at Sequoia.
They don't care about the product, or the value created. What they care about is that there's this masterful story-teller with wild hair, that the press will adore, and with an addressable market that seems unconstrained, which is easiest to do when it is undefined. These stories can be flipped for a hundred or a thousand times their original investment not because they generate that much value but because there is a frenzy of momentum and fear of losing out.
And often this works: the market frenzy begins to crest, and they can sell into it. But eventually the wave does crest and crashes down, and they are caught in it. And in the aftermath we look at the enablers, the funders, and their logic looks preposterous, because we assume they care about building lasting value. And we wonder what exactly it is they do, what their purpose is, what value they leave behind.
A while ago, the Freakonomics podcast interviewed Arianna Simpson, a general partner at Andreessen Horowitz, and who manages some of their crypto investments. The host, Stephen Dubner, asked what is now the classic question of 'what problem does crypto solve?' A question you'd expect a crypto investor to easily anticipate.
Her main response -- and I promise I'm not joking here -- was that you could resell access to your home wifi with crypto tokens, mainly to your neighbors.
When pressed further for a more commercially credible response, she engaged in a remarkable attempt to appeal to authority, saying that "if you were in the meetings I'm in...with top founders, from the top schools...you wouldn't be questioning this." But without any further explanations.
From what I could tell, Arianna frankly didn't care about any utility it could provide. If it did provide some, she couldn't name it. But she recognized a grift, and knew she could likely make some money using other peoples' money to get in on it.
To be fair, Andreessen is not an investor in FTX, though they've lost plenty of LPs money in other crypto investments. But this attitude is reflective of the approach of many VCs, including those at Sequoia.
They don't care about the product, or the value created. What they care about is that there's this masterful story-teller with wild hair, that the press will adore, and with an addressable market that seems unconstrained, which is easiest to do when it is undefined. These stories can be flipped for a hundred or a thousand times their original investment not because they generate that much value but because there is a frenzy of momentum and fear of losing out.
And often this works: the market frenzy begins to crest, and they can sell into it. But eventually the wave does crest and crashes down, and they are caught in it. And in the aftermath we look at the enablers, the funders, and their logic looks preposterous, because we assume they care about building lasting value. And we wonder what exactly it is they do, what their purpose is, what value they leave behind.