Welcome to Friday.
I have changed the Recommended section of the newsletter to Random Find. The name suits the section more and will give you all more variety. I hope you enjoy the change.
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Have a great weekend.
Knowledge
Tesla Adopts Bitcoin: A Complicated Story
A big move by Tesla. On Monday, the company disclosed it had taken a $1.5 billion position in Bitcoin as an alternative to a portion of its cash position. The rationale seems justified. Diversify cash reserves while still having the ability to maximize returns on cash that are not essential to company operations. It could be an asymmetric opportunity. If the asset keeps appreciating, Tesla gains in all of the upside. If the new position increases the adoption rate of the cryptocurrency as either a medium of exchange or a speculative treasury holding for companies, Tesla also wins. Musk's purchase represents a first-mover advantage. Tesla takes on the initial price risk of over-paying for the asset but can realize the largest gains if others adopt a similar stance.
Elon’s position can also be seen as an alternative to raising capital. Previously, he would have to mislead and pump his stock price so he could raise capital by issuing more shares. His share issuance was a way to fund company losses. What he has now is an unfettered way to pump his cash position with no SEC oversight. This gives him much more autonomy.
An interesting feature of opportunities that present themselves as asymmetric in their upside is the potential for hidden risk. Tesla's Bitcoin transaction is no different. The volatility (i.e. lack of concrete consensus value) of the cryptocurrency makes Musk's decision to purchase full of negative second-order effects. The largest is the accounting risk to the company. Bitcoin and other cryptocurrencies are considered "indefinite-lived intangible assets" rather than currencies. This means that any decrease in their value below what the company paid for them—even a temporary one—can force a company to write down the value. A sharp decline in the price of Bitcoin could cause a significant deterioration of the companies financial position. The result would be a negative feedback loop that would seriously impair shareholder value.
Maybe this is why companies have been reluctant to adopt cryptocurrencies into their treasury portfolio. Their volatility makes the perceived downside risk far outweigh the potential upside. Widespread adoption becomes dependant on price stability.
Bold moves are often accompanied by unknown outcomes. How Tesla's purchase unfolds will set a precedent.
Wisdom
Beating Hedonic Adaption: A Key to Happiness?
Unhappy people generally find themselves on a satisfaction treadmill. They are unhappy when they detect an unfulfilled desire. They work to fulfill this desire with the belief that on obtaining it, they will gain satisfaction. Once they fulfill the desire, they adapt to its presence in their life. They either stop desiring it or find it not as desirable as they once did. The end result is feeling just as dissatisfied as they were before fulfilling the desire. It is a vicious cycle called hedonic adaption.
How do we prevent this natural tendency?
Forestall the adaption process: We need to take steps to prevent ourselves from taking for granted - once we get them - the things we work so hard to achieve. It is learning how to want the things we already have.
A mental exercise that makes this easier is Negative Visualization. It is the conscious practice of thinking about the loss of what we already have. Analyzing our circumstances not in terms of what is lacking but in terms of how much we have and how much we would miss it if we were to lose it. Take a few times each week to pause and think about how the things you enjoy could suddenly be taken from you.
Negative visualization, in other words, teaches us to embrace whatever life we happen to be living and to extract every bit of delight we can from it. But it simultaneously teaches us to prepare ourselves for changes that will deprive us of the things that delight us. It teaches us, in other words, to enjoy what we have without clinging to it.
- A Guide to the Good Life, William B. Irvine
Negative Visualization is gratitude in motion.
Insight
Blockchain as Systematic Disruption
Whether we like it or not, blockchain will take our world (and its institutions) increasingly digital. It is the ledger updated for the twenty-first century. Understanding how it functions will be essential to navigating our increasingly complex and interconnected world. I believe decentralization will have the same impact as social media had in shaping the last decade. We are going to see a dissolution of intermediaries in many of our current systems.
Here is a short video explaining blockchain technology and where it could be headed:
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Today
Random Find
I had this problem for a long time. Finding interesting articles, but not having the time right there and then to read them. I would always end up losing the article after a while. Instapaper changed this for me. An app that holds all of the articles that you want to read at a later date. This has been a game-changer for me. Check it out if you think you may benefit.
Disclaimer: There is a monthly cost of $2.99/month. I haven’t yet found a free alternative that is as robust.
Notes
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