Young Dumb Money

I recently came across Jack Raines through this tweet by Nat Eliason. I had seen his name/profile before on Twitter and LinkedIn, but this time I followed him and took a look at his writing/newsletter. (This is actually how I found out about beehiiv, and started using it. I may write a future post more about this choice and my thoughts on writing a blog/newsletter.)

As I was looking into beehiiv, I read this case study on Jack. That lead me to an article of his: House Money, which is the inspiration for today's post.

In particular, it was one quote that, as soon as I read it, made me think about myself and to write about it.

"How do I know? Because I was the biggest gEnIuS of all. I turned $6k into $400k trading SPACs. Why the hell would I listen to my dad and take some chips off the table? I was up more than 5000%. Another mere 150% gain and I would be a millionaire."

I have been exploring crypto for a while now. During the bull run, I made a decent amount and all my investments were up. Now not $400k or anything, but I still felt like a damn genius. I would think to myself: "How is everyone else so dumb and not just investing everything into crypto? It's free money!" This thought was only supported by witnessing a few friends make millions flipping NFTs - hopefully they got out in time.

But boy, was I an idiot. A fool. An ignorant and arrogant one, as Jack would put it. I started putting close to all my money in crypto and NFTs. No shit coins, only coins or projects I truly felt were legit, and I was thinking long term. I'm still holding all of it right now, and I'm just gonna wait it out. But that could take many years at this point. While I am certainly down, I don't necessarily regret it. I've learned something through this "failure" and there's a chance to still make money down the line (for some assets, definitely not all).

What I did learn was to diversify and listen to people like my dad, who said it's ridiculous to put all your money in one basket like crypto. Oh yeah, he's also spent his entire professional career in finance and investing, so I should probably listen to him. I was lucky enough for him to give me some money to invest for him and I would be getting some of that money, too. I may have said some outrageous things like "free or guaranteed money", which he told me is something I can't say, especially when investing other people's money. I also learned I'm not as smart as I thought I was.

Jack also mentioned Morgan Housel and his essay on getting rich vs. staying rich. He included a quote from this essay about getting rich being an impediment to staying rich. When you get successful, you're convinced you do it the right way, so you're unlikely to change your ways in a changing world. Humility is what you need to stay rich. I agree with this sentiment.

I always hear from YouTubers, and content creators in general, how you want (slow), consistent growth. Some claim the best thing to happen to them is to have not had a video go viral early on. This would lead to some delusion that you're a genius, and you didn't have to keep iterating on your work to improve and grow. But when you don't have immediate success, you have to keep changing and improving, which eventually leads to your consistent success and "staying rich" through this built-up habit.

This is probably why we have and will see TikTok creators come and go, and most won't be around for much longer or be able to replicate success on other platforms. TikTok can create rapid growth and viral content that leads to young people thinking they're geniuses. But they're not, and the more convinced they're doing it right, the less likely they'll change. That being said, there are exceptions, but very few of them.

This general idea of conforming to a changing world to stay rich also makes me think about the wisdom of the crowds. This seems to be in tension with the idea of being different to stand out and be non-consensus (an idea that these types of companies are the big winners in VC). I assume the key is to be early to an idea that seems odd or crazy at the time, but becomes adopted by the masses later on. Or as a content creator, it means staying authentic to yourself and having unique content and ideas, but learning to play the game at the same time (understanding the algorithm, what's currently hot or the new meta, growth hacks, etc.).

But at the end of the day, my takeaways are if you want to stay rich and not be dumb, you need to have humility, consistency, and the ability to change and improve your craft. Have an open mind (and in a similar spirit, work in public and don't be afraid of criticism - or in other words, "work with the door open" so you end up working on "important problems"). This blog/newsletter is one attempt at that - of trying to learn in public, with my door open.

Oh, I'm also still bullish crypto long term and super interested in the space. If I'm honest, I much prefer a bear market for many reasons I can talk about another time.

Originally published on my website.