To investors,

The past week reminds me of the quote “There are decades where nothing happens, and there are weeks where decades happen.” It feels like chaos and uncertainty are the name of the game. No one knows what will happen next, but there is a lack of good news or positive outlook.

This is because we are being punished for our past sins. What were those sins? I call it “The Great Pandemic Bubble.”

Here is how it breaks down — the pandemic struck in early 2020, markets went into free-fall as governments locked people in their homes, central banks and politicians stepped in with historic monetary and fiscal stimulus, economies and assets recovered in record time, and one of the greatest bull runs in history was topped off with an epic asset bubble at the end of 2021.

They make movies out of this type of stuff.

But as with all great asset bubbles of history, eventually the market has to pay the price for lack of discipline. That is exactly what we have been watching play out in the last 12 months.

There was the initial wave of tech layoffs, followed by a round of margin calls and contagion in crypto, and finally the market seemed to accept that the environment had changed. All good, right? Wrong.

The past week has shown that the pain may just be getting started. There were layoff announcements from Twitter (50%), Stripe (14%), Lyft (13%), Chime (12%), Dapper Labs (22%), and many more. Some of these companies did layoffs in the first half of the year, but many of them didn’t. Obviously the CEOs and Board of Directors believe things are going to get worse.

The reason I say that we are paying for our sins is because many of the issues today were created because of too much money flooding into the financial system and entrepreneurs being unable to predict or plan what would come next. Jack Dorsey said it publicly:

jack @jack

Folks at Twitter past and present are strong and resilient. They will always find a way no matter how difficult the moment. I realize many are angry with me. I own the responsibility for why everyone is in this situation: I grew the company size too quickly. I apologize for that.

3:17 PM ∙ Nov 5, 2022

---

117,208Likes14,839Retweets

Stripe founder Patrick Collison explained the difficulty of planning in his memo to employees as well:

-

In making these changes, you might reasonably wonder whether Stripe’s leadership made some errors of judgment. We’d go further than that. In our view, we made two very consequential mistakes, and we want to highlight them here since they’re important:

• We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.

• We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in.

We are going to correct these mistakes. So, in addition to the headcount changes described above (which will return us to our February headcount of almost 7,000 people), we are firmly reining in all other sources of cost. The world is hard to predict right now, but we expect that these changes will set us up for robust cash flow generation in the quarters ahead.

-

As if these layoffs were not enough, Meta (formerly Facebook) announced today that they were laying off 11,000 employees. 11,000 people is A LOT. It is only 13% of the company, but that is still one of the largest layoffs that I have ever seen announced.

Layoffs don’t tell the full story though.

Next, of course, we have FTX entering into a non-binding agreement to be acquired by Binance yesterday. The agreement itself has surprised many people, but the speed at which it played out is probably even more shocking.

I know there are a lot of hot takes floating around — unfortunately, no one really knows what transpired, nor has a full understanding of the facts. Rightfully so, there are a lot of questions and concerns. As more information comes out, we will get a sense for how bad the situation was and where things went wrong.

In hindsight though, the undisciplined monetary and fiscal policy that fueled companies over-hiring and unable to plan adequately for the future, also drove investors - both retail and institutions - to continue to fund insane strategies with questionable assets. If you have historic inflation, capital holders are going to push further out on the risk curve to seek returns that can outpace the inflation.

That is how it has always worked.

So where does this leave us? Frankly, I don’t know. We have high inflation that doesn’t seem to be coming down in a material way. The Federal Reserve has continued to create tighter financial conditions. Tech companies are preparing for the worst. The bitcoin and crypto industry continues to see companies implode. Crypto assets are taking a beating. Stocks have been suffering. And no one can predict the future.

Wild to see how much can change in a single year.

The good news is that this too shall pass. I don’t know when, but it will pass. The bear market will eventually turn into the next bull market. The recession will eventually subside. The Fed will have to pivot at some point and return to loose monetary policy. Those are all easy predictions to make as long as you aren’t required to put a timeline on them. It could be 1 month, 1 year, 5 years, or 10 years. They will all come true, but no one knows when.

This leads me to what I’m doing at the moment — building, waiting, and learning.

I’m trying to build companies, build a strong balance sheet, and build more knowledge and skills. Each of those assets will serve an individual well when we get to the other side of this mess. But I’m also patiently waiting. In moments of chaos and uncertainty there are a lot of unforced errors. My goal is to simply avoid making mistakes and let time work on my side.

Lastly, I’m spending time learning. There are many events transpiring right now. It is the equivalent of getting a master’s degree in financial markets and economics. Paying attention and trying to understand each development will hopefully pay off over the length of my career.

I hope each of you is doing well. Things are crazy. People are scared, uncertain, and worried. That is not fun. My wish is that each of you finds happiness in your daily work, while also finding time to spend with your family and friends. None of us make it out of this game of life alive. Do your best to enjoy it while you’re here :)

Talk to everyone tomorrow.

-Pomp

SPONSORED: Your Crypto Is Showing.

Your crypto deserves to be *safe and secure* and away from prying eyes in an Arculus crypto cold storage wallet, especially if you spent a pretty penny in fiat to convert to and acquire those assets.

Arculus knows a thing or three about security. Your assets are only accessible to *you* through 3-factor authentication and by using the Arculus Wallet App and Arculus Key Card.

Plus, you can even view your securely stored NFTs in your own personal gallery and enter Web3 via WalletConnect. Keep your digital assets secure and safe from exchange freezes, bankruptcies, and hacks with Arculus.

Save 15% through 10/31 with promo code POMP.

THE RUNDOWN:

CBDCs May Need Global Regulation, EU Commissioner Says: Central bank digital currencies (CBDCs) may require a network of international deals to stop state-backed money from infringing on other countries’ sovereignty, European Union Commissioner Paolo Gentiloni said on Monday. The bloc of 27 nations is considering a digital version of the euro, but needs to resolve issues such as how a digital euro will work for cross-border payments. Read more.

Virgin Orbit raises $25 million from Branson’s conglomerate as cash reserve dwindles: Virgin Orbit raised $25 million, the company announced Monday alongside its third-quarter results, as the alternative rocket launcher faces a dwindling cash reserve. The company disclosed that Richard Branson’s Virgin Group, an existing shareholder, made the additional $25 million investment on Nov. 4. Virgin Orbit emphasized in its report that it will “continue to be opportunistic in the capital markets,” as the company is “focusing on cost and operational efficiency to improve cash flow.” Read more.

US DOJ announces seizure of $3.36 billion in cryptocurrency: The U.S. Department of Justice on Monday announced that law enforcement seized $3.36 billion of bitcoin from a man who “unlawfully obtained” more than 50,000 bitcoin from darkweb market Silk Road over a decade ago. The U.S. Attorney for the Southern District of New York said that James Zhong of Gainesville, Georgia, pleaded guilty on November 4 to committing wire fraud in September 2012. The charge carries a maximum sentence of 20 years in prison. Read more.

Mastodon reaches 1 million monthly active users: Mastodon, the decentralized social network that’s increasingly being positioned as an alternative to Twitter, has eclipsed 1 million active monthly users. That’s according to CEO and lead developer Eugen Rochko, who revealed the milestone in a post on Monday morning. Read more.

Toto Wolff is the Team Principal & CEO of the Mercedes-AMG Petronas F1 Team and Matteo Franceschetti is the Founder & CEO of Eight Sleep.

In this conversation, we talk about the path to excellence and the leadership necessary to build winning teams. We discuss how these two men hire employees, optimize their schedule, and delegate their personal time throughout a week.

Listen on iTunes: Click here

Listen on Spotify: Click here

Earn Bitcoin by listening on Fountain: Click here

Conversation with Toto Wolff & Matteo Franceschetti

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

1. Alto IRA can help you invest in crypto in tax-advantaged ways to help preserve your hard earned money. There are no setup or account fees, and it’s all you need to do to invest in crypto tax free. Open an Alto CryptoIRA to invest in crypto tax-free by clicking here. 

2. Eight Sleep is the most advanced solution on the market for thermoregulation by pairing dynamic cooling and heating with biometric tracking. Click here to check out the Pod Pro Cover and save $150 at checkout. 

3. FTX US is the safe, regulated way to buy digital assets. Trade crypto with up to 85% lower fees than top competitors by signing up at FTX.US today.

4. Amberdata provides the critical data infrastructure enabling financial institutions to participate in the digital asset class. We deliver comprehensive data and insights into blockchain networks, crypto markets, and decentralized finance. Download our Digital Asset Data Guide here today. 

5. SiGMA is the bridge between iGaming, online sports betting, and emerging technology, such as Blockchain, NFTs, fintech, GameFi, metaverse, and AI, is loud and clear. The largest global summit of this kind is heading to Malta from November 15 to 17. Log on to AIBC.WORLD or SiGMA.WORLD to see all our upcoming global summits! 

6. Bullish is a powerful exchange for digital assets that offers deep liquidity, automated market making, and industry-leading security. Click here to learn more. 

7. Valour represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. For more information visit valour.com

8. Unstoppable Domains’ 10 NFT domain endings are now fully integrated with Trust Wallet. Claim your Unstoppable Domain here today.

9. Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Visit compassmining.io to start mining bitcoin today!

10. LMAX Digital is the market-leading solution for institutional crypto trading & custodial services. Learn more at LMAXdigital.com/pomp

11. Exodus is the world’s leading desktop, mobile, and hardware crypto wallets, with over 150 assets. Founded in 2015 to empower people to control their wealth. Visit http://exodus.com/pomp today.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.