New Influence by Ste Davies is a podcast covering the new technologies influencing communications, culture and the world today.
The rise of intangible digital assets
Speak with any finance expert and they'll tell you the key to long-term wealth is asset accumulation.
This is for two reasons. First, assets earn you money while you sleep and, second, they usually appreciate the longer you hold on to them.
A house will be worth more in twenty years than it is today if past performance is anything to go by. Likewise, a bar of gold will be too.
Our finance expert should also tell you to invest in assets that pay you income, like a business, rental property or a dividend stock.
Owning an income-paying asset usually requires an upfront investment. To own a piece of a business you either need capital to buy into it or time and sweat equity to build it. Likewise, owning rental property requires either a large cash lump sum or a long-term mortgage.
In other words, acquiring physical assets requires time, effort and/or capital.
Intangible digital assets are a new investing opportunity
We're in a period of accelerated change and are deeply entrenched in the digital revolution which started in the 1990s and has many decades more to play out.
We're in the era of what MicroStrategy CEO, Michael Saylor, calls the "dematerialization of industries." This is where individual products and entire industries are becoming digitised largely because of the iPhone.
"The iPhone has dematerialized everything you can hold in your hand. Books, cameras, wallets, TVs etc have all dematerialized into the Apple network. Every wealthy person I know has an iPhone which means 90% of the wealth on the planet is going to get everything from the multi-trillion dollar Apple network."
Dematerialization is nothing new. The idea of buying a CD to listen to music or a DVD to watch a film seems ridiculous today. And, of course, no-one has sent a letter in decades.
Dematerialization is making intangible digital assets a new investing opportunity. The internet is creating new asset classes that perhaps can benefit everybody not just the wealthy.
Bitcoin is the ultimate digital asset
The current bitcoin narrative is it is the digital version of gold. This is because both gold and bitcoin share similar intangible properties. Tangibly they couldn't be further apart since gold is a lump of metal and bitcoin is lines of code. Intangibly they share qualities such as scarcity and fungibility which help to increase their value.
Michael Saylor believes bitcoin is a better asset than gold and has put his money where his mouth is. Earlier this year, MicroStrategy bought $425 million worth of bitcoin with its cash reserves. The reason being is that the cash was losing value each year - especially in the Covid era of quantitive easing - and bitcoin is proving to be an excellent store of wealth.
This meme video explains his reasons well.
Domain names are one of the oldest digital assets
Saylor obviously understands the long-term value of holding digital assets. MicroStrategy owns several premium domain names which the company has hel...
Wine and DTC marketing with Josh Lachkovic of The Wine List
Josh Lachkovic is the founder & CEO of Wine List. Prior to launching Wine List, Josh had a career in marketing & growth, starting his career in content, SEO, and insights at PR agency Hotwire. He then joined Pact Coffee's growth team to turn his hand to print marketing and partnerships. Following this he went to an education company where he was responsible for breathing startup process into an established business. Before founding The Wine List he spent three years as employee number one at digital health company, Thriva, where he led and built the growth side of the business.
Web 3 and decentralized social media with Dan from 3Speak
Dan is the co-founder of 3Speak.online, a video platform providing a censor-free environment for content creators who have been de-platformed or demonetised by Silicon Valley. Dan is also an entrepreneur, investor and crypto enthusiast.
Bitcoin in the UK with Danny Scott from CoinCorner
Danny is currently the CEO and co-founder of CoinCorner, a bitcoin exchange in the UK. A software developer turned entrepreneur, Danny first heard of bitcoin during University in 2009, but didn't pay attention to it until 2011/12 while working at an internet startup that looked to use it as a competitive advantage. After this company was successfully acquired he went on to co-found a software company in 2012. Providing software solutions, the business worked with clients such as Microsoft and Tunstall Health Care.
Social media's growing influence on the financial markets
"Markets are conversations" is the central theme of the 1999 book, The Cluetrain Manifesto, which predicted that the internet was about to unleash new ways for people to communicate with each other.
This Cambrian explosion of conversations would inevitably allow businesses to be a part of them creating a new dynamic of brand and customer interaction.
The book says as the internet proliferated throughout the world, new channels such as websites, forums, chat groups and email would revolutionise how consumers and businesses interact.
Noticeably the authors failed to predict the rise of blogs, podcasts, online video and social media platforms, as well as the smartphone revolution and its accompanying apps.
They also failed to predict the major cultural and political impact social media would have (and is still having) on society too.
Predicting the future is hard and anything beyond five years is just a guess.
The world was a different place in 1999 yet The Cluetrain Manifesto provided (an underestimated) glimpse into the changing paradigm that was heading our way.
Financial markets are conversations too
Another trend on the horizon is the coming together of mobile, social media and the financial markets.
A perfect storm is brewing between smartphone apps that provide easy access to the markets and the formation of communities and influencers who can collectively manipulate the price of a financial asset like a stock or crypto.
These apps are giving people around the world access to high profile stocks, ETFs and commodities on well-known indexes like the Nasdaq, S&P and FTSE.
You don't have to be rich to use them either. You can buy a fractional share of a stock meaning you don't have to buy a whole one but instead a fraction of one.
For example, a 19-year-old in Europe can invest in Tesla by buying a fraction of a Tesla stock. All within seconds and from the comfort of her home even though Tesla is an US company listed on a US exchange.
What's more, most of these apps don't charge a fee to buy and sell stocks so our budding investor can buy as little as £1's worth without having to pay a charge.
She can then brag to her friends about which 'super brand' stocks she owns such as Nike, Visa, Apple, Amazon and now Tesla, all for as much or as little investment she can afford.
The app that's received the most coverage in recent months is Robinhood. With 13 million users it's had a dramatic rise during the coronavirus pandemic as furloughed Americans invest their hard-earned money in the attempt to make more of it.
The app is not without controversy, of course, but Robinhood has given Americans access to the stock markets that was previously reserved for only a few. The video below outlines the story behind the app and why the founders created it.
The Robinhood story
Financial apps in other countries are providing a similar service too. Trading 212 in the UK, Stake in Australia and INDmoney in India to name a few illustrate this is not just a US phenomenon but a growing global one too.
Why bitcoin could be bigger than the internet
If you've spent any time lurking around the bitcoin community on Twitter or Reddit as I have you may have come across the term 'hyperbitcoinization'.
This is the theory where bitcoin surpasses all global currencies, including the US dollar, to become the world's reserve currency and, ultimately, the world's only currency.
The hyperbitcoinization theory is, of course, just that - a theory. At the time of writing, the dollar is very much still the world's reserve currency and the eleven-year-old bitcoin has a market cap of $183 billion with comparatively low adoption.
If hyperbitcoinization was ever to happen it would require a devaluation of the world's major currencies and thus forcing governments and people to adopt The Bitcoin Standard.
Given we are in the midst of the COVID-19 pandemic, the dollar's position as the world's reserve currency is likely to strengthen in the short-term as investors see it as a safe-haven to temporarily preserve wealth as financial turmoil and trade wars begin to play out in the coming years.
As the Federal Reserve continues to print off trillions of dollars via quantitive easing to prop up the struggling US economy this may eventually devalue the dollar or, worse, destabilise it.
The severity of the situation in the years to come will dictate the odds of bitcoin - or something like it - becoming the global reserve currency.
While this might sound farfetched it is in fact the normal state of play. New currencies have surpassed old ones for thousands of years.
The changing of currencies
The Latin definition of the word currency means 'in circulation' and before the invention of coins shells were the most circulated form of money and traded throughout the world. So too was silver and more recently gold.
Modern paper money was originally backed by the amount of gold stored in a country's vaults known as the gold standard. Today, however, paper money is not backed by anything other than a country's promise to honour it.
The world's reserve currency has also changed throughout history and is usually correlated to the country with the most powerful military.
From 1450 to 1530 the world's reserve currency belonged to the Portuguese. Then from 1530 to 1640 the Spanish, 1640 to 1720 the Dutch, 1720 to 1815 the French, 1815 to 1920 the British and from 1920 to present day the USA.
The connection? The country with the world's reserve currency was (or is) the global superpower at the time.
If history is anything to go by, the US dollar will lose its status as the world's reserve currency eventually. The question is what will dethrone it?
Despite being the world's second largest economy China has little to no interest in making the renminbi the global reserve. As an exporting nation and with cheap labour the Chinese government prefer to keep the renminbi relatively weak alongside other currencies.
It's also worth noting that historically the changing of a world reserve currency usually involves war. The last time followed World War 1.
The function of money
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It’s true to say in this conversational format, a podcast is only as good as its guests. Ste always delivers here and his easy going style brings out the best of them.